FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

           [ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                   For the fiscal year ended December 31, 1998

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to ________________

                         Commission file number 1-10816

                           MGIC Investment Corporation
             (Exact name of registrant as specified in its charter)

             Wisconsin                                   39-1486475   
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
   incorporation or organization)

 MGIC Plaza, 250 East Kilbourn Avenue, Milwaukee, Wisconsin            53202 
      (Address of principal executive offices)                      (Zip Code)


  Registrant's telephone number, including area code  (414) 347-6480 

      Securities Registered Pursuant to Section 12(b) of the Act:

          Title of Each Class:     Common Stock, Par Value $1 Per Share

          Name of Each Exchange
          on Which Registered:     New York Stock Exchange

          Securities Registered Pursuant to Section 12(g) of the Act:

          Title of Class:          None


<PAGE>


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes [X]   No [ ]

State the aggregate market value of the voting stock held by  non-affiliates  of
the Registrant as of February 1, 1999: $3.6 billion.*

- ---------------

* Solely for purposes of computing such value and without thereby admitting that
such persons are affiliates of the Registrant,  shares held by The  Northwestern
Mutual Life  Insurance  Company and by directors and  executive  officers of the
Registrant  are deemed to be held by affiliates of the  Registrant.  Shares held
are  those  shares  beneficially  owned for  purposes  of Rule  13d-3  under the
Securities Exchange Act of 1934.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of February 1, 1999: 109,002,358.

The following  documents have been  incorporated by reference in this Form 10-K,
as indicated:

                                              Part and Item Number of
                                              Form 10-K Into Which
Document                                      Incorporated
- --------                                      ------------
1. Information from 1998 Annual Report to     Item  1 of Part I
   Shareholders (for Fiscal Year              Items 5 through 8 of Part II
   Ended December 31, 1998) 

2. Proxy Statement for the 1999 Annual        Items 10 through 13 of Part III
   Meeting of Shareholders


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [  ]


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                                     Part I


Item 1.  Business.

A.  General

         MGIC Investment Corporation (the "Company") is a holding company which,
through its  indirect  wholly  owned  subsidiary,  Mortgage  Guaranty  Insurance
Corporation  ("MGIC"),  is the leading  provider of private  mortgage  insurance
coverage in the United States to the home  mortgage  lending  industry.  Private
mortgage  insurance  covers  residential  first  mortgage loans and expands home
ownership  opportunities by enabling people to purchase homes with less than 20%
down payments.  If the home owner defaults,  private mortgage  insurance reduces
and, in some instances, eliminates the loss to the insured institution.  Private
mortgage  insurance also facilitates the sale of low down payment mortgage loans
in the secondary  mortgage market,  principally to the Federal National Mortgage
Association  ("Fannie  Mae")  and the  Federal  Home Loan  Mortgage  Corporation
("Freddie Mac") (Fannie Mae and Freddie Mac are collectively  referred to as the
"GSEs"). In addition to mortgage insurance on first liens, the Company,  through
other  subsidiaries,  insures  residential second mortgages and provides lenders
with  various  underwriting  and other  services  and  products  related to home
mortgage lending.

         MGIC is licensed in all 50 states of the United States, the District of
Columbia and Puerto Rico. The Company is a Wisconsin corporation.  Its principal
office is located at MGIC Plaza, 250 East Kilbourn Avenue, Milwaukee,  Wisconsin
53202 (telephone number (414) 347-6480).

         The Company and its business may be materially  affected by the factors
discussed  in  "Management's  Discussion  and Analysis -- Risk  Factors" in
Exhibit 13 to this  Annual  Report on Form 10-K.  These  factors  may also cause
actual results to differ  materially  from the results  contemplated  by forward
looking statements that the Company may make.

B.  The MGIC Book

      Types of Product

         There are two principal  types of private  mortgage
insurance: "primary" and "pool."


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         Primary   Insurance.   Primary  insurance   provides  mortgage  default
protection on  individual  loans and covers  unpaid loan  principal,  delinquent
interest  and  certain  expenses  associated  with the  default  and  subsequent
foreclosure  (collectively,  the "claim amount"). The insurer generally pays the
coverage percentage of the claim amount specified in the primary policy, but has
the option to pay 100% of the claim  amount and acquire  title to the  property.
The claim  amount  averages  about 114% of the unpaid  principal  balance of the
loan.  Primary  insurance  generally  applies to owner occupied,  first mortgage
loans on one-to-four family homes, including condominiums.  Primary coverage can
be used on any type of  residential  mortgage  loan  instrument  approved by the
mortgage insurer. References in this document to amounts of insurance written or
in force,  risk written or in force and other  historical data related to MGIC's
insurance  refer only to direct  (before giving effect to  reinsurance)  primary
insurance, unless otherwise indicated.

       The following table shows, on a direct basis,  primary insurance in force
(the unpaid  principal  balance of insured loans) and primary risk in force (the
coverage percentage applied to the unpaid principal balance), for insurance that
has been written by MGIC (the "MGIC Book") as of the dates indicated:

                       Primary Insurance and Risk In Force

                                                 December 31,
                              -------------------------------------------------
                               1998      1997       1996      1995       1994
                               ----      ----       ----      ----       ----
                                       (In millions of dollars)
Direct Primary
Insurance In Force.........  $137,990  $138,497   $131,397  $120,341   $104,416

Direct Primary
Risk In Force..............  $ 32,891  $ 32,175   $ 29,308  $ 25,502   $ 20,756


         The coverage  percentage  provided by MGIC is determined by the lender.
For loans sold by lenders to Fannie Mae or Freddie Mac, the coverage  percentage
must comply with the requirements established by the particular GSE to which the
loan is  delivered.  Effective  in the first  quarter of 1995,  Freddie  Mac and
Fannie Mae increased  their coverage  requirements  for, among other loan types,
30-year  fixed rate  mortgages  with  loan-to-value  ratios,  determined at loan
origination  ("LTVs"), of 90.01-95.00% ("95s") from 25% coverage to 30% coverage
and for such mortgages with LTVs of 85.01-90.00% ("90s") from 17% to 25%.

      As a result of these deeper coverage requirements, coverage percentages on
new insurance  written in 1995-1998  were higher than coverages on loans insured
in prior years. The following table shows new insurance  written during the last
three years for 95s with 30% coverage and for 90s with 25% coverage:


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          Coverage Categories as a Percentage of New Insurance Written

                               Year Ended December 31,
          LTV/
          Coverage                    1998          1997           1996
        --------------------          ----          ----           ----
          95 /30%                     33.9%         38.7%          38.4%
          90 /25%                     38.6%         39.1%          38.9%

         Effective  March 1, 1999,  Fannie Mae  changed its  mortgage  insurance
requirements for fixed rate mortgages on owner occupied  properties having terms
greater than 20 years when the loan is approved by Desktop  Underwriter  (Fannie
Mae's automated underwriting service). Lenders may deliver these loans to Fannie
Mae with the coverage  requirements in effect immediately prior to March 1, 1999
(30% for a 95 and 25% for a 90),  or in the  case of 95s,  with  either  (i) 25%
coverage or (ii) 18%  coverage  and the payment of a delivery fee to Fannie Mae,
and in the case of 90s,  with either (i) 17%  coverage or (ii) 12%  coverage and
the payment of a delivery fee to Fannie Mae. Fannie Mae has publicly stated that
it intends to purchase supplemental private mortgage insurance coverage on those
loans delivered for which it is paid a delivery fee. In March 1999,  Freddie Mac
introduced comparable mortgage insurance  requirements for loans approved by its
Loan Prospector automated underwriting service, except that in addition to fixed
rate  mortgages  having terms  greater than 20 years,  other loan types (such as
adjustable  rate  mortgages  ("ARMs") and  mortgages  in which the  amortization
period  exceeds the term of the loan (balloon  mortgages))  are eligible for the
18%/12% coverage with the payment of a delivery fee to Freddie Mac.

         In response to Fannie Mae's new coverage  options,  MGIC introduced new
premium  plans that  provide 25%  coverage on 95s and 17% coverage on 90s (these
coverages  satisfy GSE  requirements on loans described  above) when an up-front
premium is paid to MGIC.

     MGIC charges  higher  premium  rates for higher  coverages,  and the deeper
coverage  requirements  imposed by the GSEs  beginning in 1995 have  resulted in
higher earned premiums for loans with the same characteristics  (such as LTV and
loan type).  MGIC believes  depth of coverage  requirements  have no significant
impact on frequency of default.  Higher coverage percentages generally result in
increased  severity  (which is the amount paid on a claim),  and lower  coverage
percentages  generally result in decreased severity. In accordance with industry
accounting  practice,  reserves  for  losses are only  established  for loans in
default.  Because  relatively few defaults occur in the early years of a book of
business (see "Past Industry Losses;  Defaults; and Claims--Claims"  below), the
higher  premium  revenue from deeper  coverage is  recognized  before any higher
losses  resulting from that deeper coverage may be incurred.  On the other hand,
while a decline in coverage  percentage will result in lower premium revenue, it
should  also  result in lower  incurred  (and paid)  losses at the same level of
claim incidence. However, given the historical pattern of


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claims,  the decline in revenue will  precede the benefits of reduced  severity.
MGIC's premium  pricing  methodology  generally  targets  substantially  similar
returns on capital regardless of the depth of coverage. However, there can be no
assurance  that  changes in the level of premium  rates  adequately  reflect the
risks associated with changes in the depth of coverage.

         Mortgage insurance coverage cannot be terminated by the insurer, except
for non-payment of premium,  and remains  renewable at the option of the insured
lender, generally at the renewal rate fixed when the loan was initially insured.
Lenders may cancel  insurance at any time at their option or because of mortgage
repayment,  which may be accelerated because of the refinancing of mortgages. In
the case of a loan  purchased  by Freddie Mac or Fannie Mae, a borrower  meeting
certain  conditions may require the mortgage  servicer to cancel  insurance upon
the borrower's  request when the principal balance of the loan is 80% or less of
the  home's  current  value and in  certain  circumstances  when such  principal
balance is 80% or less of the home's original value.

         Under the federal  Homeowners  Protection  Act (the "HPA"),  enacted in
July 1998, a borrower has the right to stop paying premiums for private mortgage
insurance on loans closed after July 28, 1999 secured by a property comprised of
one dwelling  unit that is the  borrower's  primary  residence  when certain LTV
ratio  thresholds  determined by the value of the home at loan  origination  and
other  requirements  are met. In general,  a borrower  may stop making  mortgage
insurance  payments  when the LTV ratio is  scheduled to reach 80% (based on the
loan's amortization schedule established at loan origination) if the borrower so
requests and if certain requirements  relating to the borrower's payment history
and the  absence of junior  liens and a decline in the  property's  value  since
origination are satisfied. In addition, a borrower's obligation to make payments
for private mortgage  insurance  terminates  regardless of whether a borrower so
requests when the LTV ratio reaches 78% of the unpaid  principal  balance of the
mortgage and the  borrower is (or  thereafter  becomes)  current in his mortgage
payments. For loans within the conforming loan limit that are classified as high
risk by Fannie Mae and Freddie Mac and for loans above the conforming loan limit
that are so classified by the originating  lender,  the borrower's right to stop
paying  for  private  mortgage  insurance  occurs  at a later  point in time.  A
borrower's right to stop paying for private mortgage insurance does not apply to
lender paid mortgage  insurance.  The HPA requires  that lenders give  borrowers
certain notices with regard to the cancellation of private mortgage insurance.

         In addition,  some states require that mortgage servicers  periodically
notify  borrowers  of the  circumstances  in which  they may  request a mortgage
servicer to cancel private mortgage insurance and some states allow the borrower
to require the mortgage  servicer to cancel  private  mortgage  insurance  under
certain  circumstances or require the mortgage servicer to cancel such insurance
automatically  in  certain  circumstances.  Under the HPA,  states  having  laws
regarding any requirements  relating to private mortgage  insurance that were in
effect on January 2, 1998 may provide for mortgage  insurance  cancellation  and
notice  requirements  that are more favorable to borrowers than under the HPA if
such provisions are enacted by July 29, 2000.

         Coverage tends to continue in areas experiencing  economic  contraction
and  housing  price  depreciation.  The  persistency  of  coverage in such areas
coupled with cancellation of coverage in


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areas  experiencing  economic  expansion  and  housing  price  appreciation  can
increase  the  percentage  of the  insurer's  portfolio  comprised  of  loans in
economically weak areas. This development can also occur during periods of heavy
mortgage  refinancing  because  refinanced loans in areas of economic  expansion
experiencing  property value  appreciation  are less likely to require  mortgage
insurance at the time of  refinancing,  while  refinanced  loans in economically
weak areas not  experiencing  property  value  appreciation  are more  likely to
require  mortgage  insurance  at the  time of  refinancing  or not  qualify  for
refinancing at all and, thus, remain subject to the mortgage insurance coverage.

         When a borrower  refinances an MGIC-insured  mortgage loan by paying it
off in full with the proceeds of a new mortgage,  the insurance on that existing
mortgage is cancelled, and insurance on the new mortgage is considered to be new
primary  insurance  written.  Therefore,  continuation of MGIC's coverage from a
refinanced  loan to a new loan results in both a  cancellation  of insurance and
new insurance  written.  Reflecting the historically low level of interest rates
that  prevailed  throughout  1998,  the  percentage of primary risk written with
respect to loans representing  refinances was 25.6% in 1998 as compared to 12.2%
in 1997 and 13.7% in 1996.

         In addition to varying with the  coverage  percentage,  MGIC's  premium
rates vary depending upon the perceived risk of a claim on the insured loan and,
thus,  take into account the LTV, the loan type (fixed payment versus  non-fixed
payment)  and  mortgage  term and for MGIC's  program  to insure A minus  loans,
MGIC's evaluation of the borrower's credit  worthiness.  Premium rates cannot be
changed after the issuance of coverage.  Because the Company  believes that over
the long term each  region of the United  States is  subject to similar  factors
affecting  risk  of  loss  on  insurance  written,  MGIC  generally  utilizes  a
nationally based, rather than a regional or local, premium rate policy.

         The  borrower's  mortgage loan  instrument  may require the borrower to
fund the mortgage  insurance  premium  ("borrower  paid mortgage  insurance") or
there may be no such  requirement  imposed  on the  borrower,  in which case the
premium is funded by the lender, usually through an increase in the note rate on
the mortgage  ("lender paid mortgage  insurance").  Almost all of MGIC's primary
insurance and new insurance written is borrower paid mortgage insurance.

      Under the monthly  premium plan, a monthly premium payment is made to MGIC
to provide only one month of coverage, rather than one year of coverage provided
by the  annual  premium  plan.  To offset the  reduced  initial  cash flow,  the
annualized  premium  rates for the  monthly  premium  plan are  higher  than the
premium rates for the annual plan for comparable loans. Under the annual premium
plan, the initial  premium is paid to MGIC in advance,  and earned over the next
twelve  months  of  coverage,  with  annual  renewal  premiums  paid in  advance
thereafter and earned over the subsequent twelve months of coverage.  The annual
premiums  can be paid with either a higher  premium rate for the initial year of
coverage and lower  premium rates for the renewal  years,  or with premium rates
which are equal (level) for the initial year and subsequent renewal years. Under
the single premium plan, a single payment is made to MGIC,  covering a specified
term exceeding 12 months.


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         During 1998 and 1997, the monthly  premium plan  represented  93.9% and
92.8%,  respectively,  of MGIC's new insurance written.  The annual premium plan
represented substantially all of the remaining new insurance written.

         Pool  Insurance.  Pool  insurance  is generally  used as an  additional
"credit  enhancement" for certain secondary market mortgage  transactions.  Pool
insurance  generally covers the loss on a defaulted  mortgage loan which exceeds
the claim payment under the primary  coverage,  if primary insurance is required
on that mortgage  loan,  as well as the total loss on a defaulted  mortgage loan
which did not require primary  insurance,  in each case up to a stated aggregate
loss limit.

         During the first  quarter  of 1997,  the  Company  began  writing  pool
insurance  generally  covering  fixed-rate,  30-year mortgage loans delivered to
Freddie Mac and Fannie Mae ("agency pool  insurance").  The aggregate loss limit
on agency pool insurance  generally does not exceed 1% of the aggregate original
principal  balance  of the  mortgage  loans in the pool.  New pool risk  written
during 1998 was $618 million and was $394 million in 1997. New pool risk written
during these years was virtually all agency pool  insurance,  with the remaining
risk written associated with loans insured under state housing finance programs.
Net  (giving  effect to  external  reinsurance)  MGIC Book pool risk in force at
December 31, 1998 was $927 million  compared to $530 million and $181 million at
December 31, 1997 and 1996, respectively.

         In a letter  received by MGIC in January 1998,  the U.S.  Department of
Housing  and Urban  Development  ("HUD")  wrote to MGIC  seeking an  analysis of
MGIC's  agency pool  insurance  transactions  under the Real  Estate  Settlement
Procedures  Act of 1974  ("RESPA").  In February  1998,  MGIC  provided HUD with
MGIC's  analysis,  which  set forth  MGIC's  opinion  that  MGIC's  agency  pool
transactions  comply with RESPA.  There can be no assurance  that HUD will agree
with MGIC's  analysis.  In March 1998,  HUD wrote to the other private  mortgage
insurers  and offered  them an  opportunity  to submit their views in writing on
agency pool insurance under RESPA.  HUD's publicly  announced  regulatory agenda
for 1999 includes the issuance of a statement that will set forth HUD's views on
the  application of RESPA to agency pool  insurance.  Among other things,  RESPA
generally  prohibits  any person from giving or  receiving  any "thing of value"
pursuant to an agreement or understanding to refer  settlement  services.  Among
other  remedies,  there is civil  liability for  violation of this  provision of
RESPA in an amount  equal to three  times the amount of any charge  paid for the
settlement service involved in the violation.  Under regulations adopted by HUD,
"settlement  services" are services  provided in connection with settlement of a
mortgage loan, including services involving mortgage insurance.

         In a February  1, 1999  circular  addressed  to all  mortgage  guaranty
insurers  licensed in New York,  the New York  Department of Insurance  ("NYID")
advised that "signficantly  underpriced" agency pool insurance would violate the
provisions of New York insurance law that prohibit  mortgage  guaranty  insurers
from providing  lenders with inducements to obtain mortgage  guaranty  business.
The NYID circular does not provide  standards under which the NYID will evaluate
whether  agency  pool  insurance  is  "significantly  underpriced."  The Company
understands  that  during  1998  the  California  Department  of  Insurance  was
reviewing for compliance with California


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insurance  law  agency  pool  insurance  as well as  products,  such as  captive
mortgage reinsurance, offered by private mortgage insurers.

         Captive Mortgage Reinsurance.  MGIC's products include captive mortgage
reinsurance in which an affiliate of a lender reinsures a portion of the risk on
loans  originated or purchased by the lender which have MGIC primary  insurance.
Approximately 16% of MGIC's new insurance written in 1998 was subject to captive
mortgage reinsurance and other similar structures. In an August 1997 letter, HUD
set  forth  tests  to  determine  whether,   in  HUD's  view,  captive  mortgage
reinsurance  programs  comply with RESPA.  Certain of the tests involve  complex
judgments  regarding  premium and risk ceded and there can be no assurance  that
MGIC's  captive  program  complies  with RESPA.  In a February 1, 1999  circular
addressed to all mortgage  insurers  licensed in New York, the NYID said that it
was in the process of developing guidelines that would articulate the parameters
under which captive mortgage reinsurance is permissible under New York insurance
law.

         Other Reinsurance. At December 31, 1998, disregarding reinsurance under
captive  structures,  less than 5% of MGIC's  insurance in force was  reinsured.
Reinsuring  against  possible loan losses does not discharge MGIC from liability
to a  policyholder;  however,  the  reinsurer  agrees to indemnify  MGIC for the
reinsurer's share of losses incurred.

      Customers

         Originators  of residential  mortgage  loans such as mortgage  bankers,
savings  institutions,  commercial banks,  mortgage  brokers,  credit unions and
other lenders have historically  determined the placement of mortgage  insurance
and as a result are the  customers of MGIC.  To obtain  primary  insurance  from
MGIC,  a mortgage  lender must first  apply for and receive a mortgage  guaranty
master policy ("Master Policy") from MGIC. MGIC had approximately  10,000 master
policyholders  at December 31, 1998 (not including  policies  issued to branches
and  affiliates of large  lenders).  In 1998,  MGIC issued  coverage on mortgage
loans  for  approximately   4,600  of  its  master   policyholders.   Reflecting
consolidation among large residential lenders, MGIC's top 10 customers generated
33.7% of its new insurance written in 1998,  compared to 27.0% in 1997 and 20.0%
in 1996.

      Sales and Marketing and Competition

         Sales and Marketing.  MGIC sells its insurance products through its own
employees,  located throughout the United States. At December 31, 1998, MGIC had
30 underwriting service centers located in 21 states and in Puerto Rico.

         Competition.  MGIC and other private mortgage insurers compete directly
with federal and state governmental and quasi-governmental agencies, principally
the FHA and, to a lesser  degree,  the  Veterans  Administration  ("VA").  These
agencies sponsor  government-backed  mortgage insurance  programs,  which during
1998 accounted for approximately 44% (compared to approximately 46% during 1997)
of the total low down  payment  residential  mortgages  which  were


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subject to  governmental  or  private  mortgage  insurance.  See  "Regulation  ,
Indirect Regulation" below. In October 1998, the maximum loan amounts that could
be insured by the FHA and the VA were increased as a result of legislation  that
set the limit as a higher  percentage of the  conforming  loan limit than in the
past.  For 1999,  the maximum loan amount in "high cost" counties may be as high
as $208,800.

         In  addition  to  competition  from the FHA and the VA,  MGIC and other
private  mortgage  insurers  face  competition  from  state-supported   mortgage
insurance funds in several states, including California,  Illinois and New York.
From time to time, other state legislatures and agencies consider  expansions of
the authority of their state governments to insure residential mortgages.

         Private  mortgage  insurers  may also be  subject to  competition  from
Fannie Mae and Freddie Mac to the extent the GSEs are  compensated  for assuming
default risk that would otherwise be insured by the private  mortgage  insurance
industry. During 1998, Fannie Mae and Freddie Mac each introduced programs under
which for certain loans an up-front  delivery fee is paid to the GSE and primary
mortgage  insurance  coverage is substantially  reduced compared to the coverage
requirements  that would apply in the absence of the  program.  During the first
quarter  of 1999,  Fannie  Mae and  Freddie  Mac  implemented  changes  in their
mortgage insurance requirements which use an equivalent structure. See "Types of
Product--Primary  Insurance"  above. In October 1998,  Freddie Mac's charter was
amended (and the amendment immediately repealed) to give Freddie Mac flexibility
to use protection  against default in addition to private mortgage insurance and
the two other types of credit  enhancement  required by the charter for low down
payment mortgages purchased by Freddie Mac. In addition,  to the extent up-front
delivery fees are not retained by the GSEs to compensate for their assumption of
default  risk,  and are used  instead to  purchase  supplemental  coverage  from
mortgage insurers, the resulting  concentration of purchasing power in the hands
of the GSEs could increase competition among insurers to provide such coverage.

         The capital markets may also develop as competitors to private mortgage
insurers. During 1998, a newly-organized off-shore company funded by the sale of
notes to institutional  investors provided  "reinsurance" to Freddie Mac against
default on a specified pool of mortgages owned by Freddie Mac.

         MGIC  and  other  mortgage  insurers  also  compete  with  transactions
structured to avoid mortgage  insurance on low down payment mortgage loans. Such
transactions  include  self-insuring  and originating  loans comprised of both a
first and a second mortgage, with the LTV ratio of the first mortgage below what
investors require for mortgage insurance, instead of originating a loan in which
the  first  mortgage  covers  the  entire  borrowed  amount.   Captive  mortgage
reinsurance  and  similar  transactions  also  result  in  mortgage  originators
receiving a portion of the premium and the risk.

         The private  mortgage  insurance  industry  currently  consists of nine
active mortgage insurers  (including a joint venture in which a mortgage insurer
is one of the joint venturers). For 1995 and subsequent years, MGIC has been the
largest private mortgage insurer based on new primary


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insurance  written  (with a market share of 23.1% in 1998 and 26.6% in 1997) and
at December 31, 1998, MGIC also had the largest book of direct primary insurance
in force. The parent companies of mortgage  insurers ranked fifth and seventh in
market share of new insurance written in 1998 are parties to a definitive merger
agreement. The combined companies would have had the second largest market share
of new  insurance  written  in 1998  if  their  individual  market  shares  were
aggregated.  The  source  of the  market  share  information  in this  paragraph
regarding the fifth and seventh ranked companies is Inside Mortgage  Finance,  a
mortgage industry trade publication.

         The private mortgage  insurance  industry is highly competitive and, in
recent years, the dynamics of industry  competition  have undergone  significant
change.  The Company believes MGIC competes with other private mortgage insurers
principally on the basis of programs  involving  agency pool insurance,  captive
reinsurance and other similar  structures  involving  lenders;  the provision of
contract  underwriting and related fee-based services to lenders;  the provision
of other  products and services  that meet lender  needs for  underwriting  risk
management,  affordable housing,  loss mitigation,  capital markets and training
support; the strength of MGIC's management team and field organization;  and the
effective  use of  technology  and  innovation  in the delivery and servicing of
MGIC's insurance  products.  The Company believes MGIC's additional  competitive
strengths,  compared to other private insurers, are its customer  relationships,
name recognition and reputation.

         Certain  private  mortgage  insurers  compete by offering lower premium
rates than other companies, including MGIC, either in general or with respect to
particular classes of business. MGIC on a case-by-case basis will adjust premium
rates,  generally  depending on the risk  characteristics,  loss  performance or
class of business of the loans to be insured, or the costs associated with doing
such business.

      Contract Underwriting and Related Services

         The Company  performs  contract  underwriting  services  for lenders in
which the Company  judges whether the data relating to the borrower and the loan
contained  in the  lender's  mortgage  loan  application  file  comply  with the
lender's loan underwriting guidelines. The Company also provides an interface to
submit  such data to the  automated  underwriting  systems  of the  GSEs,  which
independently judge the data. These services are provided for loans that require
private  mortgage  insurance  as well as for loans that do not  require  private
mortgage insurance. A material portion of the Company's new insurance written in
recent years involved loans for which the Company provided contract underwriting
services.

      Risk Management

         Risk  Management  Approach.   MGIC  evaluates  four
major elements of risk:

         .  Individual  Loan and  Borrower.  Except to the extent its  delegated
            underwriting  program is being utilized or for loans approved by the
            automated   underwriting   services  of  the  GSEs  (see  "Delegated
            Underwriting and GSE Automated Underwriting  Approvals" below), MGIC
            evaluates  insurance  applications  based  on  its  analysis  of the
            borrower's   ability   to


                                       11

<PAGE>


            repay the  mortgage  loan and the  characteristics  and value of the
            property.  The  analysis  of the  borrower  includes  reviewing  the
            borrower's  housing and total debt ratios as well as the  borrower's
            FICO credit score, as reported by credit reporting agencies.  In the
            case of delegated  underwriting,  compliance with program parameters
            is monitored by periodic audits of delegated business.

         .  Geographic Market. MGIC places significant emphasis on the condition
            of  the  housing  markets  around  the  nation  in  determining  its
            underwriting policies.

         .  Product.  The type of mortgage  instrument that the borrower selects
            and the purpose of the loan are important factors in MGIC's analysis
            of mortgage default risk. MGIC analyzes four general characteristics
            of the product to quantify this risk evaluation: (i) LTV ratio; (ii)
            type of loan instrument; (iii) type of property; and (iv) purpose of
            the loan. In addition to its underwriting guidelines (as referred to
            below),  pricing is MGIC's  principal  method  used to manage  these
            risks. Loans with higher LTV ratios generally have a higher premium,
            as do instruments such as ARMs and loans with a maturity longer than
            fifteen years.

         .  Mortgage  Lender.  MGIC  evaluates  from  time  to  time  its  major
            customers  and the  performance  of their  business  which  MGIC has
            insured.

         Based on historical  performance,  the Company  believes that the claim
incidence for 95s is  substantially  higher than for 90s or loans with lower LTV
ratios;  for ARMs during a prolonged  period of rising  interest  rates would be
substantially  higher than for fixed rate loans; for loans in which the original
loan  amount  exceeds  $200,000  is higher  than for loans  where such amount is
$200,000 or less; and for loans with FICO credit scores below 620 is higher than
for loans with FICO credit scores of 620 and above. While there is no meaningful
data on claim  incidence  for loans with LTVs in excess of 95%  ("97s")  because
this  product  has only been  recently  offered  by the  industry,  the  Company
anticipates that claim incidence on 97s will be higher than on 95s. MGIC charges
higher  premium rates for insuring  95s,  97s, ARMs and A minus loans.  However,
there  can be no  assurance  that  such  higher  rates  adequately  reflect  the
increased risk associated with those types of loans, particularly in a period of
economic recession.


                                       12

<PAGE>

         There are also  other  types of loan  characteristics  relating  to the
individual  loan or borrower  which affect the risk  potential  for a loan.  The
presence  of a  number  of  higher-risk  characteristics  in a  loan  materially
increases  the  likelihood  of a claim on such a loan  unless  there  are  other
characteristics to lower the risk.

         Underwriting  Process.  To  obtain  primary  insurance  on  a  specific
mortgage loan, a master policyholder typically submits an application to an MGIC
underwriting  service  center,  supported by various  documents,  if required by
MGIC. MGIC utilizes national  underwriting  guidelines to evaluate the potential
risk of default on  mortgage  loans  submitted  for  insurance  coverage.  These
guidelines generally are consistent with Fannie Mae and Freddie Mac underwriting
guidelines  and take into account the  applicable  premium rates charged by MGIC
and the loss experience of the private mortgage insurance  industry,  as well as
the initiatives to expand home ownership opportunities  undertaken by Fannie Mae
and Freddie Mac.  MGIC's  underwriters  have  discretionary  authority to insure
loans which deviate in one or more respects from MGIC's underwriting guidelines.
In most such cases, offsetting underwriting strengths must be identified.

         In order to react to local or regional  economic  conditions,  MGIC has
also developed for use by its  underwriting  staff certain  modified  guidelines
which attempt to address particular regional or local market developments. These
"special  market  underwriting  guidelines"  are  updated  from time to time and
deviate in varying  degrees  from  MGIC's  national  guidelines  based on MGIC's
analysis of area housing markets and related economic indicators and conditions.
The special market  underwriting  guidelines are more liberal than the published
national guidelines in some markets, but in other markets are more restrictive.

         To assist its staff of underwriters,  MGIC utilizes a computer-assisted
underwriting  system  which  analyzes and approves  certain  mortgage  insurance
applications  based on  MGIC's  underwriting  standards,  but  without  personal
underwriter  intervention,  thereby allowing MGIC's underwriting staff to devote
additional attention to evaluating more difficult underwriting  decisions.  MGIC
audits a representative sample of applications approved by the system.

         Delegated  Underwriting  and  GSE  Automated  Underwriting   Approvals.
Delegated  underwriting  is a program  whereby  approved  lenders are allowed to
commit  MGIC  to  insure  loans  utilizing  their   MGIC-approved   underwriting
guidelines  and  underwriting  evaluation.  While MGIC does not  underwrite on a
case-by-case  basis the credit of the borrower,  the value of the  property,  or
other factors which it normally considers in its underwriting  decision, it does
audit on a regular basis a sample of the loans insured.


                                       13

<PAGE>

         At December 31, 1998,  MGIC's delegated  underwriting  program involved
approximately 625 lenders,  including all of MGIC's top twenty customers.  Loans
insured under MGIC's delegated  underwriting program accounted for approximately
33.6% of MGIC's total risk in force at December 31, 1998.  The percentage of new
risk written by delegated  underwriters decreased to 36.2% in 1998 from 36.8% in
1997 and 41.0% in 1996. The Company believes that the decreases in 1997 and 1998
are  attributable  to MGIC's  introduction  in mid-1996 of a program under which
MGIC approves a loan for  insurance if the borrower  satisfies  certain  minimum
criteria for credit  scores and debt ratios.  The  performance  of loans insured
under  the  delegated   underwriting  program  has  been  comparable  to  MGIC's
non-delegated  business,  although  performance of that program has not yet been
tested in a period of severe economic stress.

         Beginning  in  1998,  loans  approved  by  the  automated  underwriting
services of the GSEs are deemed  acceptable for MGIC mortgage  insurance without
MGIC itself underwriting the loan.

      Past Industry Losses; Defaults; and Claims

         Past  Industry  Losses.  The  private  mortgage   insurance   industry,
including  the WMAC Book (see "The WMAC Book"  below),  experienced  substantial
unanticipated  incurred  losses in the mid-to-late  1980s.  From the 1970s until
1981,  rising  home  prices in the United  States  generally  led to  profitable
insurance  underwriting  results for the  industry and caused  private  mortgage
insurers  to  emphasize  market  share.  To  maximize  market  share,  until the
mid-1980s,  private mortgage insurers employed liberal  underwriting  practices,
and charged  premium rates which,  in  retrospect,  generally did not adequately
reflect  the risk  assumed  (particularly  on pool  insurance).  These  industry
practices compounded the losses which resulted from changing economic and market
conditions  which occurred during the early and mid-1980s,  including (i) severe
regional  recessions and attendant  declines in property  values in the nation's
energy  producing  states;  (ii) the  development  by  lenders  of new  mortgage
products to defer the impact on home buyers of double  digit  mortgage  interest
rates;  and (iii)  changes in  federal  income tax  incentives  which  initially
encouraged the growth of investment in non-owner occupied properties.


                                       14

<PAGE>

         Defaults. The claim cycle on private mortgage insurance begins with the
insurer's  receipt of  notification  of a default  on an  insured  loan from the
lender.  Lenders are  required to notify MGIC of defaults  within 130 days after
the initial  default,  although  most  lenders do so earlier.  The  incidence of
default is  affected by a variety of  factors,  including  the level of borrower
income growth,  unemployment,  divorce and illness,  the level of interest rates
and general borrower  creditworthiness.  Defaults that are not cured result in a
claim  to MGIC.  Defaults  may be cured by the  borrower  bringing  current  the
delinquent  loan payments or by a sale of the property and the  satisfaction  of
all amounts due under the mortgage.

         The following  table shows the number of primary and pool loans insured
in the MGIC Book,  the related  number of loans in default and the percentage of
loans in default (default rate) as of the dates indicated:


<TABLE>

                                        Default Statistics for the MGIC Book
<CAPTION>

                                                                      December 31,
                                    ----------------------------------------------------------------------------------
                                          1998             1997            1996             1995            1994
                                          ----             ----            ----             ----            ----
<S>                                     <C>              <C>             <C>              <C>             <C>
PRIMARY INSURANCE
     Insured loans in force ...         1,320,994        1,342,976       1,299,038        1,219,304       1,080,882
     Loans in default .........            29,253           28,493          25,034           19,980          15,439
     Percentage of loans in
     default (default rate) ...             2.21%            2.12%           1.93%            1.64%           1.43%

POOL INSURANCE
     Insured loans in force ...           899,063          374,378          19,123           20,427          23,242
     Loans in default .........             6,524            2,174             855            1,053           1,097
     Percentage of loans in
     default (default rate) ...             0.73%            0.58%           4.47%            5.15%           4.72%

</TABLE>



         The default rate for primary loans has  increased  since 1994 due to an
increase in the risk profile of loans insured in late 1994 and the first half of
1995 and the continued  maturation of MGIC's  insurance in force.  The number of
pool  insurance  loans in force  increased  at  December  31, 1998 and 1997 as a
result of agency pool insurance writings, and the number of pool insurance loans
in default at those dates  increased  due to the  increase in pool  insurance in
force. The percentage of pool insurance loans in default  decreased from 1996 to
1997 as a result of the increase in pool  insurance in force and increased  from
1997 to 1998 due to the aging of the underlying loans in earlier pools.


                                       15

<PAGE>

         Regions of the United States may experience different default rates due
to varying localized economic  conditions from year to year. The following table
shows the  percentage of the MGIC Book's primary loans in default by MGIC region
at the dates indicated:


                 Default Rates for Primary Insurance By Region*


                                  Dec. 31         Dec. 31        Dec. 31,
                                   1998            1997           1996
                                   ----            ----           ----

     MGIC REGION:
     New England.............      1.78%           1.89%          2.09%
     Northeast...............      3.05            3.03           2.74
     Mid-Atlantic............      2.28            2.23           1.96
     Southeast...............      2.23            2.13           1.83
     Great Lakes.............      1.89            1.75           1.57
     North Central...........      1.91            1.72           1.49
     South Central...........      2.00            1.86           1.56
     Plains..................      1.40            1.27           0.97
     Pacific.................      2.73            2.69           2.70

      National...............      2.21%           2.12%          1.93%

- --------------------
*   The  default  rate is affected by both the number of loans in default at any
    given date as well as the number of insured loans in force at such date.


         Claims.  Claims  result from  defaults  which are not cured.  Whether a
claim  results from an uncured  default  principally  depends on the  borrower's
equity in the home at the time of default and the  borrower's  (or the lender's)
ability to sell the home for an amount  sufficient  to satisfy  all  amounts due
under the  mortgage.  Claims are affected by various  factors,  including  local
housing prices and employment levels, and interest rates.

         Under the terms of the Master Policy,  the lender is required to file a
claim for primary  insurance with MGIC within 60 days after it has acquired good
and marketable title to the underlying property through  foreclosure.  Depending
on the  applicable  state  foreclosure  law,  an  average  of  about  12  months
transpires from the date of default to payment of a claim on an uncured default.
The claim amount generally averages about 114% of the unpaid principal amount of
the loan.


                                       16

<PAGE>

         Within 60 days after the claim has been  filed,  MGIC has the option of
either (i) paying the  coverage  percentage  specified  for that loan,  with the
insured  retaining  title to the underlying  property and receiving all proceeds
from the  eventual  sale of the property or (ii) paying 100% of the claim amount
in exchange  for the lender's  conveyance  of good and  marketable  title to the
property to MGIC, with MGIC then selling the property for its own account.

         Claim activity is not evenly spread throughout the coverage period of a
book of primary  business.  Relatively few claims are received  during the first
two years following issuance of coverage on a loan. This is followed by a period
of rising claims which, based on industry  experience,  has historically reached
its  highest  level in the  third  through  fifth  years  after the year of loan
origination. Thereafter, the number of claims received has historically declined
at a gradual rate, although the rate of decline can be affected by conditions in
the  economy,  including  lower  housing  price  appreciation.  There  can be no
assurance  that this  historical  pattern of claims will continue in the future.
Moreover,  when a loan is refinanced,  because the new loan  replaces,  and is a
continuation  of, an earlier loan, the pattern of claims  frequency for that new
loan may be different from the historical pattern of other loans. As of December
31,  1998,  59.6% of the MGIC Book  primary  insurance in force had been written
during 1996, 1997, and 1998, although a portion of such insurance arose from the
refinancing of earlier originations.

         In addition to the increasing  level of claim activity arising from the
maturing of the MGIC Book,  another  important factor affecting MGIC Book losses
is the amount of the average claim paid, which is generally referred to as claim
severity. The main determinants of claim severity are the amount of the mortgage
loan and coverage percentage on the loan. The average claim severity on the MGIC
Book  primary  insurance  was  $20,705  for 1998 as compared to $21,669 in 1997,
reflecting  the  decline in the  number of claims  paid from  certain  high cost
regions of the country.  Although prior to 1995 the coverage percentage remained
relatively constant on the MGIC Book, claim severity may increase for books with
higher coverage percentages (generally written beginning in 1995).

      Loss Reserves

         A significant  period of time may elapse  between the occurrence of the
borrower's  default on a mortgage  payment  (the event  triggering  a  potential
future  claim  payment by MGIC),  the  reporting of such default to MGIC and the
eventual payment of the claim related to such uncured default.  To recognize the
liability for unpaid losses related to outstanding  reported  defaults (known as
the default inventory), the Company (similar to other private mortgage insurers)
establishes  loss reserves,  representing  the estimated  percentage of defaults
which will ultimately result in a claim (known as the claim rate), and estimates
of the severity of each claim which will arise from the defaults included in the
default inventory. In accordance with industry accounting practices, the Company
does not  establish  loss  reserves for future claims on insured loans which are
not currently in default.


                                       17

<PAGE>

         The Company  also  establishes  reserves  to provide for the  estimated
costs of settling  claims,  including legal and other fees, and general expenses
of administering the claims settlement process ("loss adjustment expenses"), and
for losses and loss adjustment  expenses from defaults which have occurred,  but
which have not yet been reported to the insurer.

         The Company's  reserving process is based upon the assumption that past
experience,  adjusted for the anticipated effect of current economic  conditions
and projected future economic trends, provides a reasonable basis for estimating
future  events.  However,  estimation of loss  reserves is a difficult  process,
especially in light of the rapidly  changing  economic  conditions over the past
few years in  certain  regions  of the  United  States.  In  addition,  economic
conditions  that have affected the  development of the loss reserves in the past
may not  necessarily  affect  development  patterns in the  future,  in either a
similar manner or degree.

         For  a  further  description  of  loss  reserves,  see  Note  6 to  the
consolidated financial statements of the Company, included in Exhibit 13 to this
Annual Report on Form 10-K.

      Geographic Dispersion

         The following table reflects the percentage of primary risk in force in
the top 10 states and top 10  metropolitan  statistical  areas  ("MSAs") for the
MGIC Book at December 31, 1998:

                       Dispersion of Primary Risk in Force

          Top 10 States                     Top 10 MSAs

      1.  California       11.7%         1. Chicago            4.1%
      2.  Texas             6.8          2. Los Angeles        3.2
      3.  Illinois          5.5          3. Boston             3.1
      4.  Michigan          5.2          4. Washington, DC     3.0
      5.  Florida           4.7          5. Atlanta            2.5
      6.  Ohio              4.6          6. Philadelphia       2.2
      7.  New York          4.5          7. Detroit            2.0
      8.  Pennsylvania      4.3          8. Dallas             1.7
      9.  New Jersey        3.5          9. Houston            1.7
     10.  Massachusetts     3.3         10. Seattle            1.6
                           -----                              -----
            Total          54.1%              Total           25.1%
                           =====                              =====

      The  percentages  shown above for various MSAs can be affected by changes,
from time to time, in the federal government's definition of an MSA.


                                       18

<PAGE>

      Insurance in Force by Policy Year

         The  following  table  sets  forth the  dispersion  of  MGIC's  primary
insurance  in force as of December 31,  1998,  by year(s) of policy  origination
since MGIC began operations in 1985:

                    Primary Insurance In Force by Policy Year

                                  Primary
                                Insurance in              Percent of
       Policy Year                  Force                   Total
                          (In millions of dollars)

       1985-1992                  $ 14,498                  10.5%
       1993                         14,635                  10.6
       1994                         12,433                   9.0
       1995                         14,230                  10.3
       1996                         18,516                  13.4
       1997                         24,781                  18.0
       1998                         38,897                  28.2
                                  --------                 -----
       Total                      $137,990                 100.0%
                                  ========                 =====

      Product Characteristics of Risk in Force

         At December 31, 1998 and 1997, 96.7% and 98.2%, respectively, of MGIC's
risk in force was primary  insurance  and the  remaining  risk in force was pool
insurance.  The following  table  reflects at the dates  indicated the (i) total
dollar amount of primary risk in force for the MGIC Book and (ii)  percentage of
such primary risk in force (as determined on the basis of information  available
on the date of mortgage origination) by the categories indicated.


                                       19

<PAGE>

                    Characteristics of Primary Risk in Force

                                                      December 31,  December 31,
                                                          1998          1997    
                                                      -----------   ------------

Direct Risk in Force (Dollars in Millions):......       $32,891       $32,175

Lender Concentration:
    Top 10 lenders...............................          26.4%         20.5%
    Top 20 lenders...............................          37.3%         31.0%

LTV:(1)
    95s(2).......................................          48.3%         46.6%
    90s(3).......................................          51.6          53.2
    80s..........................................           0.1           0.2
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
Loan Type:
    Fixed(4).....................................          80.4%         73.6%
    ARM(5).......................................          17.5          23.4
    Balloon(6)...................................           2.0           2.9
    Other........................................           0.1           0.1
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
Original Insured Loan Amount:
    $200,000 and less ...........................          86.6%         87.0%
    Over $200,000 ...............................          13.4          13.0
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
Mortgage Term:
    15-years and under...........................           4.4%          4.4%
    Over 15-years................................          95.6          95.6
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
Property Type:
    Single-family(7).............................          93.8%         93.6%
    Condominium..................................           5.8           6.0
    Other(8).....................................           0.4           0.4  
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
Occupancy Status:
    Primary residence............................          98.2%         98.6%
    Second home..................................           1.2           1.0
    Non-owner occupied...........................           0.6           0.4
                                                         ------        ------
       Total.....................................         100.0%        100.0%
                                                         ======        ======
- --------------------

(1) Loan-to-value represents the ratio (expressed as a percentage) of the dollar
    amount of the  mortgage  loan to the value of the  property  at the time the
    loan became insured. They are


                                       20

<PAGE>

    identified  as in excess of 90% LTV ("95s");  in excess of 80% LTV and up to
    90% LTV ("90s"); and equal to or less than 80% LTV ("80s").

(2) Includes 97% LTV loans, which were 3.4% and 2.3%,  respectively,  of primary
    risk in force at December 31, 1998 and 1997.

(3) MGIC includes in its classification of 90s, loans where the borrower makes a
    down payment of 10% and finances the associated  mortgage  insurance premium
    payment as part of the mortgage  loan.  At December 31, 1998 and 1997,  3.1%
    and 3.2%,  respectively,  of the primary  risk in force  consisted  of these
    types of loans.

(4) Includes fixed rate mortgages with temporary  buydowns (where in effect, the
    applicable  interest  rate is  typically  reduced  by one or two  percentage
    points during the first two years of the loan).

(5) Includes ARMs where  payments  adjust fully with interest rate  adjustments.
    Also includes ARMs with  negative  amortization,  which at December 31, 1998
    and 1997, represented 1.5% and 2.1%, respectively, of primary risk in force.
    As of  December  31,  1998  and  1997,  ARMs  with  LTVs  in  excess  of 90%
    represented 7.5% and 9.5%, respectively, of primary risk in force.

(6) Balloon payment mortgages are loans with a maturity, typically five to seven
    years, that is shorter than the loans' amortization period.

(7) Includes townhouse-style attached housing with fee simple ownership.

(8) Includes cooperatives and manufactured homes deemed to be real estate.


C.  The WMAC Book

         In  1985,  the  Company  acquired  certain  assets  and  businesses  of
Wisconsin Mortgage Assurance  Corporation ("WMAC") and WMAC's parent,  including
the MGIC  name and  offices  of WMAC,  and  hired  substantially  all of  WMAC's
employees  ("Acquisition").  WMAC retained substantially all of its insurance in
force,  net of  domestic  reinsurance  (the "WMAC Book" and  sometimes  in other
documents  referred  to as the  "Old  Book").  Effective  as of the  time of the
Acquisition,  WMAC  reinsured  100% of the WMAC Book with several  international
reinsurers (the "WMAC Reinsurers").  As a result of subsequent transactions,  at
December 31, 1998,  approximately  33.6% of the WMAC Book was reinsured with the
WMAC Reinsurers and the remainder was reinsured by a subsidiary of the Company.

         On December 31,  1998,  MGIC  purchased  WMAC from a third party for $2
million. MGIC contributed an additional $13 million of capital to WMAC to comply
with minimum regulatory capital  requirements.  The acquisition had no impact on
the Company's  earnings during 1998.  WMAC's direct primary  insurance in force,
direct  primary  risk in force and direct  pool risk in force was  approximately
$3.5 billion, $.9 billion and $.4 billion, respectively, at December 31, 1998.

D.  Other Business

         The Company,  through subsidiaries,  provides various mortgage services
for the  mortgage  finance  industry,  such as  contract  underwriting,  premium
reconciliation  and  claims  administration  for  HUD and  the  Federal  Deposit
Insurance  Corporation  (as  successor  to the  Resolution  Trust  Corporation),
respectively,  and secondary marketing of  mortgage-related  assets. The Company
also


                                       21

<PAGE>

owns  approximately 48% of Credit-Based  Asset Servicing and  Securitization LLC
and Litton Loan  Servicing  LP  (collectively,  "C-BASS").  C-BASS,  which began
operations in mid-1996,  is  principally  engaged in the  acquisition,  sale and
servicing of delinquent and other  residential  mortgage  assets.  For a further
description of C-BASS,  see Note 8 to the consolidated  financial  statements of
the  Company,  included  in Exhibit 13 to this Annual  Report on Form 10-K.  The
revenues recognized from these mortgage services operations, other non-insurance
services  and C-BASS  represented  4.8% and 3.8% of the  Company's  consolidated
revenues in 1998 and 1997, respectively.

         In 1997,  the Company,  through  subsidiaries,  began  insuring  second
mortgages,  including  home  equity  loans.  New  insurance  written  on  second
mortgages in 1998 was immaterial.

E.  Investment Portfolio

      Policy and Strategy

         Cash  flow  from  the  Company's   investment   portfolio   represented
approximately   34%  of  its  total  cash  flow  from  operations  during  1998.
Approximately 87% of the Company's long-term  investment portfolio is managed by
a subsidiary of The  Northwestern  Mutual Life Insurance  Company,  although the
Company maintains overall control of investment policy and strategy. The Company
maintains direct management of the remainder of its investment portfolio.

         The Company's current policies  emphasize  preservation of capital,  as
well as total return.  Therefore,  the Company's  investment  portfolio consists
almost entirely of high-quality,  fixed-income investments.  Liquidity is sought
through  diversification  and  investment  in publicly  traded  securities.  The
Company  attempts  to  maintain  a level  of  liquidity  commensurate  with  its
perceived  business  outlook and the expected  timing,  direction  and degree of
changes in  interest  rates.  The  Company's  investment  policies  in effect at
December 31, 1998  limited  investments  in the  securities  of a single  issuer
(other than the U.S.  government  and its agencies) and generally did not permit
purchasing fixed income securities rated below "A."

         At December 31, 1998, based on amortized cost,  approximately  98.9% of
the Company's total fixed income investment portfolio was invested in securities
rated "A" or better,  with 61.5%  which  were rated  "AAA" and 27.7%  which were
rated "AA," in each case by at least one nationally recognized securities rating
organization.

         The Company's  investment policies and strategies are subject to change
depending upon  regulatory,  economic and market  conditions and the existing or
anticipated  financial condition and operating  requirements,  including the tax
position, of the Company.


                                       22

<PAGE>

      Investment Operations

         At December 31, 1998,  the  consolidated  book value (which is equal to
market  value) of the Company's  investment  portfolio  was  approximately  $2.8
billion.  At December 31, 1998,  municipal  securities  represented 77.3% of the
book value of the total  investment  portfolio.  Securities due within one year,
within  one to five  years,  within  five to ten  years,  and after  ten  years,
represented 6.3%, 11.2%, 38.5% and 44.0%, respectively,  of the total book value
of the  Company's  investment  in debt  securities.  The  Company's  net pre-tax
investment  income was $143.0  million  for the year ended  December  31,  1998,
representing  an  after-tax  yield of 4.9% for the year, a decline from 5.0% for
1997,  resulting  from a decline in the average  interest rate on investments in
1998 as compared to 1997.

         For further information concerning investment operations, see Note 4 to
the consolidated financial statements of the Company,  included in Exhibit 13 to
this Annual Report on Form 10-K.

F.  Regulation

      Direct Regulation

         The Company and its insurance subsidiaries, including MGIC, are subject
to regulation, principally for the protection of policyholders, by the insurance
departments of the various states in which each is licensed to do business.  The
nature and extent of such regulation  varies,  but generally depends on statutes
which  delegate  regulatory,  supervisory  and  administrative  powers  to state
insurance commissioners.

         In general, such regulation relates, among other things, to licenses to
transact  business;  policy forms;  premium  rates;  annual and other reports on
financial condition; the basis upon which assets and liabilities must be stated;
requirements  regarding  contingency  reserves equal to 50% of premiums  earned;
minimum   capital  levels  and  adequacy   ratios;   reinsurance   requirements;
limitations  on the  types of  investment  instruments  which  may be held in an
investment  portfolio;  the size of risks and limits on coverage  of  individual
risks which may be insured; deposits of securities; limits on dividends payable;
and claims handling.  Most states also regulate  transactions  between insurance
companies and their parents or affiliates and have  restrictions on transactions
that have the effect of inducing lenders to place business with the insurer. For
a discussion of a February 1, 1999 circular  letter from the NYID, see "The MGIC
Book-Types of Product-Pool Insurance" and "-Captive Mortgage Reinsurance." For a
description  of limits on  dividends  payable,  see Note 11 to the  consolidated
financial  statements  of the  Company,  included  in Exhibit 13 to this  Annual
Report on Form 10-K.

         Mortgage  insurance  premium rates are also subject to state regulation
to protect policyholders against the adverse effects of excessive, inadequate or
unfairly  discriminatory  rates and to encourage  competition  in the  insurance
marketplace.  Any increase in premium rates must be justified,  generally on the
basis of the insurer's loss experience,  expenses and future trend analysis. The
general  mortgage default  experience may also be considered.  Premium rates are
subject to


                                       23

<PAGE>

review and  challenge  by state  regulators.  

         A number of states  generally  limit the amount of insurance risk which
may be written by a private  mortgage  insurer to 25 times the  insurer's  total
policyholders' reserves, commonly known as the "risk-to-capital" requirement.

         MGIC is required to contribute to a contingency  loss reserve an amount
equal to 50% of earned  premiums.  Such amounts cannot be withdrawn for a period
of 10 years, except under certain circumstances.

         Mortgage insurers are generally  single-line  companies,  restricted to
writing residential mortgage insurance business only. This essentially prohibits
MGIC from using its capital  resources in support of other types of insurance or
non-insurance  business.  Although the Company, as an insurance holding company,
is prohibited from engaging in certain transactions with MGIC without submission
to and, in some instances,  prior approval of applicable insurance  departments,
the Company is not subject to insurance company  regulation on its non-insurance
businesses.

         As the most significant purchasers and sellers of conventional mortgage
loans and  beneficiaries of private mortgage  insurance,  Freddie Mac and Fannie
Mae impose  requirements on private mortgage insurers in order for such insurers
to be eligible to insure  loans sold to such  agencies.  These  requirements  of
Freddie Mac and Fannie Mae are  subject to change from time to time.  Currently,
MGIC is an approved  mortgage  insurer  for both  Freddie Mac and Fannie Mae. In
addition,  to the extent  Fannie Mae or Freddie  Mac  assumes  default  risk for
itself  that  would  otherwise  be  insured,   changes  current   guarantee  fee
arrangements,  allows  alternative  credit  enhancement,  alters or  liberalizes
underwriting  guidelines  on  low  down  payment  mortgages  they  purchase,  or
otherwise  changes its  business  practices  or  processes  with respect to such
mortgages, private mortgage insurers may be affected.

         Fannie  Mae  has  issued  primary  mortgage   insurance  master  policy
guidelines applicable to MGIC and all other Fannie Mae-approved private mortgage
insurers,  establishing certain minimum terms of coverage necessary in order for
an insurer to be eligible to insure loans  purchased by Fannie Mae. The terms of
MGIC's Master Policy comply with these guidelines.

         MGIC's  claims-paying  ability  is  rated  "AA+" by  Standard  & Poor's
Corporation  and "Aa2" by  Moody's  Investors  Service,  Inc.  Maintenance  of a
claims-paying  ability  rating of at least  AA-/Aa3  is  critical  to a mortgage
insurer's ability to continue to write new business. In assigning  claims-paying
ability  ratings,  rating  agencies  review  a  mortgage  insurer's  competitive
position and business, management,  corporate strategy, historical and projected
operating and underwriting performance, adequacy of capital to withstand extreme
loss scenarios  under  assumptions  determined by the rating agency,  as well as
other factors.  The rating agency issuing the  claims-paying  ability rating can
withdraw or change its rating at any time.


                                       24

<PAGE>

      Indirect Regulation

         The Company and MGIC are also indirectly,  but significantly,  impacted
by regulations  affecting  purchasers of mortgage loans, such as Freddie Mac and
Fannie Mae, and regulations affecting governmental insurers, such as the FHA and
VA, and lenders. Private mortgage insurers, including MGIC, are highly dependent
upon federal  housing  legislation  and other laws and regulations to the extent
they affect the demand for private  mortgage  insurance  and the housing  market
generally.  From time to time,  those laws and regulations  have been amended to
affect  competition from government  agencies.  In 1998, the FHA's authority was
expanded by legislation to permit it to insure mortgages having higher principal
balances.  Proposals  are  discussed  from time to time by Congress  and certain
federal  agencies  to  reform  or  modify  the FHA and the  Government  National
Mortgage Association, which securitizes mortgages insured by the FHA.

         Subject to certain exceptions,  in general,  RESPA prohibits any person
from  giving or  receiving  any "thing of value"  pursuant  to an  agreement  or
understanding to refer settlement services. Among other remedies, there is civil
liability for  violation of this  provision of RESPA in an amount equal to three
times the amount of any charge paid for the settlement  service  involved in the
violation.  Under regulations adopted by HUD, "settlement services" are services
provided in connection  with settlement of a mortgage loan,  including  services
involving  mortgage  insurance.  In  recent  years,  RESPA  has been a source of
substantial  uncertainty  and litigation for the home mortgage  lending and real
estate settlement services industries.

         The OTS, the OCC, the Federal  Reserve Board,  and the Federal  Deposit
Insurance  Corporation have uniform guidelines on real estate lending by insured
lending  institutions  under their  supervision.  The guidelines  specify that a
residential  mortgage loan  originated with an LTV of 90% or greater should have
appropriate  credit  enhancement  in the form of mortgage  insurance  or readily
marketable collateral,  although no depth of coverage percentage is specified in
the guidelines.

         Lenders  are  subject  to various  laws,  including  the Home  Mortgage
Disclosure  Act, the  Community  Reinvestment  Act and the Fair Housing Act, and
Fannie Mae and Freddie Mac are subject to various laws,  including laws relating
to government  sponsored  enterprises,  which may impose  obligations  or create
incentives  for  increased  lending to low and moderate  income  persons,  or in
targeted areas.


                                       25

<PAGE>

         There can be no  assurance  that  other  federal  laws and  regulations
affecting  such   institutions  and  entities  will  not  change,  or  that  new
legislation or regulations (including legislation or regulation that expands the
permissible insurance activities of affiliates of depositary  institutions) will
not be  adopted  which will  adversely  affect the  private  mortgage  insurance
industry.

G.  Employees

         At  December  31,  1998,  the  Company  had 1,200  full- and  part-time
employees,  of  whom  approximately  one-half  were  assigned  to its  Milwaukee
headquarters  and the other half  assigned to its field  offices.  The number of
employees  given  above  does not  include  "on-call"  employees.  The number of
"on-call" employees can vary substantially,  primarily as a result of changes in
demand for contract underwriting services.


I
tem 2.  Properties.

         At December 31, 1998, the Company leased office space in various cities
throughout  the United  States under leases  expiring  between 1999 and 2006 and
which required annual rentals of $2.1 million in 1998.

         The  Company  owns  its   headquarters   facility  and  an   additional
office/warehouse  facility, both located in Milwaukee,  Wisconsin, which contain
an aggregate of approximately 340,000 square feet of space.


Item 3.  Legal Proceedings.

         The  Company  is  involved  in  litigation  in the  ordinary  course of
business. No pending litigation is expected to have a material adverse affect on
the financial position of the Company.


                                       26

<PAGE>


Item  4.  Submission  of  Matters  to a Vote  of  Security Holders.

         None

                               Executive Officers

         Certain information with respect to the Company's executive officers as
of March 1, 1999 is set forth below:

Name and Age                                  Title

William H. Lacy, 54........... Chairman of the Board and Chief Executive Officer
                               of the Company and Chairman of the Board of MGIC;
                               Director of the Company and MGIC

Curt S. Culver, 46............ President of the Company and President and Chief
                               Executive Officer of MGIC; Director of the
                               Company and MGIC

J. Michael Lauer, 54.......... Executive Vice President and Chief Financial
                               Officer of the Company and MGIC

James S. MacLeod, 51.......... Executive Vice President-Field Operations of MGIC

Lawrence J. Pierzchalski, 46.. Executive Vice President, Risk Management of MGIC

Gordon H. Steinbach, 53....... Executive Vice President, Credit Policy of MGIC

Lou T. Zellner, 48............ Executive Vice President-Corporate Development
                               of MGIC

Jeffrey H. Lane, 49........... Senior Vice President, General Counsel and
                               Secretary of the Company and MGIC

         Mr. Lacy has served as Chief  Executive  Officer of the  Company  since
October 1987 and as Chairman of the Board of the Company  since January 1999. He
has been  Chairman  of the Board of MGIC since May 1996 and was Chief  Executive
Officer of MGIC from the  beginning  of its  business  operations  in March 1985
until January 1999.


                                       27

<PAGE>

         Mr.  Culver  has  served  as  President  of the  Company  and as  Chief
Executive  Officer of MGIC since  January  1999.  He has been  President of MGIC
since May 1996 and was Chief  Operating  Officer  of MGIC from May 1996 until he
became Chief  Executive  Officer.  Mr. Culver has been a senior  officer of MGIC
since 1988 having  responsibility  at various  times during his career with MGIC
for field operations,  marketing and corporate  development.  From March 1985 to
1988, he held various  management  positions with MGIC in the areas of marketing
and sales.

         Mr. Lauer has served as Executive  Vice  President and Chief  Financial
Officer of the Company and MGIC since March 1989.

         Mr. MacLeod has served as Executive Vice President-Field  Operations of
MGIC since January 1998 and was Senior Vice  President-Field  Operations of MGIC
from May 1996 to January  1998.  Mr.  MacLeod has been a senior  officer of MGIC
since 1987 having  responsibility  at various  times during his career with MGIC
for sales, business development and marketing.  From March 1985 to 1987, he held
various  management  positions with MGIC in the areas of  underwriting  and risk
management .

         Mr. Pierzchalski has served as Executive Vice President-Risk Management
of MGIC  since  May  1996  and  prior  thereto  as  Senior  Vice  President-Risk
Management or Vice President-Risk Management of MGIC from April 1990. From March
1985 to April 1990, he held various management  positions with MGIC in the areas
of market research, corporate planning and risk management.

         Mr. Steinbach has served as Executive Vice  President-Credit  Policy of
MGIC  since  October  1996.  He served as  Executive  Vice  President-Affordable
Housing and Claims of MGIC from July 1992 to October 1996 and prior  thereto was
a senior officer of MGIC since March 1985 having responsibility at various times
during his career with MGIC for risk management and underwriting.

         Mrs.   Zellner  has  served  as  Executive   Vice   President-Corporate
Development of MGIC since January 1999. Prior thereto,  she was a senior officer
of MGIC since 1986 having responsibility at various times during her career with
MGIC  for   corporate   development,   non-insurance   operations,   claims  and
reinsurance.  From 1983-1986,  Mrs. Zellner was Wisconsin Deputy Commissioner of
Insurance.

         Mr.  Lane has served as Senior  Vice  President,  General  Counsel  and
Secretary of the Company and MGIC since  August  1996.  For more than five years
prior to his joining the Company,  Mr. Lane was a partner of Foley & Lardner,  a
law firm headquartered in Milwaukee, Wisconsin.


                                       28

<PAGE>



                                     PART II



Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         The  information set forth under the caption "MGIC Stock" in Exhibit 13
         to this Annual Report on Form 10-K is incorporated herein by reference.


Item 6.  Selected Financial Data.

         The  information  set forth in the tables under the caption  "Five-Year
         Summary of Financial  Information"  in Exhibit 13 to this Annual Report
         on Form  10-K is hereby  incorporated  by  reference  in answer to this
         Item.


Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.

         The  information set forth under the caption  "Management's  Discussion
         and  Analysis"  in  Exhibit  13 to this  Annual  Report on Form 10-K is
         hereby incorporated by reference in answer to this Item.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
       
         The  information  set  forth in the third to last  paragraph  under the
         caption  "Management's  Discussion and Analysis-Results of Consolidated
         Operations - 1998  Compared with 1997," in the second  paragraph  under
         the caption "Management's Discussion and Analysis-Financial  Condition"
         and in Note 5 of the Notes to the  consolidated  financial  statements,
         all in  Exhibit  13 to this  Annual  Report  on Form  10-K,  is  hereby
         incorporated by reference in answer to this Item.


Item 8.  Financial Statements and Supplementary Data.

         The consolidated statements of operations,  of shareholders' equity and
         of cash  flows for each of the  years in the  three-year  period  ended
         December 31, 1998,  and the related  consolidated  balance sheet of the
         Company as of  December  31, 1998 and 1997,  together  with the related
         notes thereto and the report of independent accountants, as well as the

         unaudited quarterly financial data, all set forth in Exhibit 13 to this
         Annual  Report on Form 10-K,  are hereby  incorporated  by reference in
         answer to this Item.


                                       29

<PAGE>


Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.

         None.


                                       30

<PAGE>


                                    PART III



Item 10. Directors and Executive Officers of the Registrant.

         The  information  on the Directors of the Registrant is included in the
         Company's Proxy Statement for the 1999 Annual Meeting of  Shareholders,
         and  is  hereby  incorporated  by  reference.  The  information  on the
         Executive  Officers of the  Registrant  appears at the end of Part I of
         this Form 10-K.


Item 11. Executive Compensation.

         This  information is included in the Company's  Proxy Statement for the
         1999 Annual Meeting of Shareholders  (other than information covered by
         Instruction (9) to Item 402 (a) of Regulation S-K of the Securities and
         Exchange Commission), and is hereby incorporated by reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

         This  information is included in the Company's  Proxy Statement for the
         1999 Annual  Meeting of  Shareholders,  and is hereby  incorporated  by
         reference.


Item 13. Certain Relationships and Related Transactions.

         This  information is included in the Company's  Proxy Statement for the
         1999 Annual  Meeting of  Shareholders,  and is hereby  incorporated  by
         reference.



                                       31

<PAGE>


                                     PART IV



Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         (a)1.    Financial  statements.  The financial statements listed in the
                  accompanying  Index to Consolidated  Financial  Statements and
                  Financial  Statement  Schedules are filed as part of this Form
                  10-K.

            2.    Financial   statement   schedules.   The  financial  statement
                  schedules  listed in the  accompanying  Index to  Consolidated
                  Financial  Statements  and Financial  Statement  Schedules are
                  filed as part of this Form 10-K.

            3.    Exhibits.  The accompanying  Index to Exhibits is incorporated
                  by  reference  in answer to this  portion of this Item and the
                  Exhibits  listed in such  Index are filed as part of this Form
                  10-K.

         (b)1.    Reports on Form 8-K

                  No  reports on Form 8-K were filed  during the  quarter  ended
                  December 31, 1998.


                                       32

<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

                              [Item 14(a) 1 and 2]


Consolidated  Financial  Statements  (all contained in Exhibit 13 to this Annual
Report on Form 10-K)

Consolidated  statement of operations  for each of the three years in the period
ended December 31, 1998

Consolidated balance sheet at December 31, 1998 and 1997

Consolidated  statement of  shareholders'  equity for each of the three years in
the period ended December 31, 1998

Consolidated  statement  of cash flows for each of the three years in the period
ended December 31, 1998

Notes to consolidated financial statements

R
eport of independent accountants

Financial Statement Schedules (all contained immediately following the signature
page to this Annual Report on Form 10-K)

Report of independent accountants on financial statement schedules

Schedules at and for the specified years in the three-year period ended December
31, 1998:

   Schedule I - Summary of investments, other than  investments in related
   parties

   Schedule II -  Condensed  financial  information  of Registrant

   Schedule IV - Reinsurance

All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedules,  or
because the  information  required is  included  in the  consolidated  financial
statements and notes thereto.


                                       33

<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 30, 1999.

MGIC INVESTMENT CORPORATION


By    /s/ William H. Lacy                   
      William H. Lacy
      Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below as of the date set forth above by the following persons on
behalf of the registrant and in the capacities indicated.

Name and Title

  /s/ William H. Lacy                    /s/ David S. Engelman
William H. Lacy                        David S. Engelman, Director
Chairman, Chief Executive Officer
 and Director
                                         /s/ James D. Ericson
  /s/ J. Michael Lauer                 James D. Ericson, Director
J. Michael Lauer
Executive Vice President and             /s/ Daniel Gross
 Chief Financial Officer               Daniel Gross, Director
 (Principal Financial Officer)
                                         /s/ Kenneth M. Jastrow, II
  /s/ Patrick Sinks                    Kenneth M. Jastrow, II, Director
Patrick Sinks
Vice President, Controller and           /s/ Sheldon B. Lubar
 Chief Accounting Officer              Sheldon B. Lubar, Director
 (Principal Accounting Officer)
                                         /s/ William A. McIntosh
  /s/ James A. Abbott                  William A. McIntosh, Director
James A. Abbott, Director
                                         /s/ Leslie M. Muma
  /s/ Mary K. Bush                     Leslie M. Muma, Director
Mary K. Bush, Director
                                         /s/ Peter J. Wallison
  /s/ Karl E. Case                     Peter J. Wallison, Director
Karl E. Case, Director
                                         /s/ Edward J. Zore
  /s/ Curt S. Culver                   Edward J. Zore, Director
Curt S. Culver, Director



                                       34

<PAGE>



                      Report of Independent Accountants on
                          Financial Statement Schedules


To the Board of Directors
of MGIC Investment Corporation


Our audits of the consolidated  financial  statements  referred to in our report
dated  January 6, 1999  appearing in the 1998 Annual Report to  Shareholders  of
MGIC Investment  Corporation (which report and consolidated financial statements
are  incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial  Statement Schedules listed in Item 14(a) of this Form
10-K. In our opinion, these Financial Statement Schedules present fairly, in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated financial statements.




PRICEWATERHOUSECOOPERS LLP

Milwaukee, Wisconsin
January 6, 1999



                                       35

<PAGE>


<TABLE>

                           MGIC INVESTMENT CORPORATION

                      SCHEDULE I - SUMMARY OF INVESTMENTS -
                    OTHER THAN INVESTMENTS IN RELATED PARTIES

                                December 31, 1998
<CAPTION>
                                                                                                        Amount at
                                                                  Amortized           Market          which shown in
             Type of Investment                                      Cost             Value           the balance sheet
                                                               --------------      -------------      -----------------
                                                                          (In thousands of dollars)
<S>                                                            <C>                <C>                 <C>  
Fixed maturities:
   Bonds:
       United States Government and government
           agencies and authorities                            $       65,811     $       71,416      $      71,416
       States, municipalities and political subdivisions            2,030,847          2,149,590          2,149,590
       Foreign governments                                             15,884             17,256             17,256
       Public utilities                                                56,600             60,263             60,263
       All other corporate bonds                                      291,276            304,345            304,345
                                                               ---------------    ---------------     ---------------
           Total fixed maturities                                   2,460,418          2,602,870          2,602,870

Equity securities:
   Common stocks:
       Banks, trust and insurance companies                             1,333              4,377              4,377
       Industrial, miscellaneous and all other                            250                250                250
                                                               ---------------    ---------------     ---------------
           Total equity securities                                      1,583              4,627              4,627
                                                               ---------------    ---------------     ---------------

Short-term investments                                                172,209            172,209            172,209
                                                               ---------------    ---------------     ---------------
           Total investments                                   $    2,634,210     $    2,779,706      $   2,779,706
                                                               ===============    ===============     ===============

</TABLE>



                                       36

<PAGE>

<TABLE>

                           MGIC INVESTMENT CORPORATION

           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                CONDENSED BALANCE SHEET AND COMPREHENSICE INCOME
                               PARENT COMPANY ONLY
                           December 31, 1998 and 1997
<CAPTION>

                                                                                      1998                1997
                                                                                      (In thousands of dollars)
<S>                                                                             <C>                 <C>
ASSETS
Investment portfolio, at market value:
   Fixed maturities                                                             $        1,056      $       11,487
   Short-term investments                                                               21,983               5,411
                                                                                ---------------     ---------------
       Total investment portfolio                                                       23,039              16,898

Cash                                                                                         5                   -
Investment in subsidiaries, at equity in net assets                                  2,072,944           1,693,879
Income taxes receivable - affiliates                                                       259              18,912
Accrued investment income                                                                   27                 224
Other assets                                                                               848                   9
                                                                                ---------------     ---------------
        Total assets                                                            $    2,097,122      $    1,729,922
                                                                                ===============     ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Notes payable                                                                $      442,000      $      237,500
   Accounts payable - affiliates                                                        11,009               3,057
   Other liabilities                                                                     3,522               2,583
                                                                                ---------------     ---------------
        Total liabilities                                                              456,531             243,140
                                                                                ---------------     ---------------

Shareholders' equity (note B):
   Common stock, $1 par value, shares authorized
       300,000,000; shares issued 121,110,800;
       outstanding 1998 - 109,003,032; 1997 - 113,791,593                              121,111             121,111
   Paid-in surplus                                                                     217,022             218,499
   Treasury stock (shares at cost, 1998 - 12,107,768;
       1997 - 7,319,207)                                                              (482,465)           (252,942)
   Accumulated other comprehensive income - unrealized
       appreciation in investment portfolio of subsidiaries, net of tax                 94,572              83,985
   Retained earnings                                                                 1,690,351           1,316,129
                                                                                ---------------     ---------------
       Total shareholders' equity                                                    1,640,591           1,486,782
                                                                                ---------------     ---------------
       Total liabilities and shareholders' equity                               $    2,097,122      $    1,729,922
                                                                                ===============     ===============


See  accompanying  supplementary  notes to Parent  Company  condensed  financial statements.

</TABLE>


                                       37

<PAGE>


<TABLE>

                                           MGIC INVESTMENT CORPORATION

                           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
                                               PARENT COMPANY ONLY
                                   Years Ended December 31, 1998, 1997 and 1996

<CAPTION>

                                                                         1998              1997             1996
                                                                             (In thousands of dollars)
<S>                                                               <C>               <C>              <C> 
Revenue:
   Equity in undistributed net income of subsidiaries             $       368,242   $     304,434    $     240,631
   Dividends received from subsidiaries                                    28,394          22,143           16,349
   Investment income, net                                                   1,117           1,576            1,256
   Realized investment gains (losses), net                                    334             233              (32)
   Other income                                                                 9               -                3
                                                                  ----------------  --------------   --------------
       Total revenue                                                      398,096         328,386          258,207
                                                                  ----------------  --------------   --------------

Expenses:
   Operating expenses                                                         180             374              216
   Interest expense                                                        18,624           6,080                -
                                                                  ----------------  --------------   --------------
       Total expenses                                                      18,804           6,454              216
                                                                  ----------------  --------------   --------------
Income before tax                                                         379,292         321,932          257,991
Credit for income tax                                                      (6,173)         (1,818)               -
                                                                  ----------------  --------------   --------------
Net income                                                                385,465         323,750          257,991
                                                                  ----------------  --------------   --------------
Other comprehensive income - unrealized
   investment gains (losses), net                                          10,587          43,300          (14,052)
                                                                  ----------------  --------------   --------------
Comprehensive income                                              $       396,052   $     367,050    $     243,939
                                                                  ================  ==============   ==============



See  accompanying  supplementary  notes to Parent  Company  condensed  financial statements.

</TABLE>



                                       38

<PAGE>


<TABLE>

                                           MGIC INVESTMENT CORPORATION

                           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                        CONDENSED STATEMENT OF CASH FLOWS
                                               PARENT COMPANY ONLY
                                   Years Ended December 31, 1998, 1997 and 1996

<CAPTION>

                                                                         1998            1997            1996
                                                                               (In thousands of dollars)
<S>                                                               <C>               <C>              <C> 
Cash flows from operating activities:
   Net income                                                     $       385,465   $     323,750    $     257,991
   Adjustments to reconcile net income to net cash
       provided by operating activities:
           Equity in undistributed net income of subsidiaries            (368,242)       (304,434)        (240,631)
           Decrease (increase) in income taxes receivable                  18,653          (6,824)          (6,443)
           Decrease in accrued investment income                              197              36               18
           Increase (decrease) in accounts payable - affiliates             7,952          (9,299)           1,413
           Increase in other liabilities                                      939           2,583                -
           (Increase) decrease in other assets                               (839)              6              (16)
           Other                                                           17,845           3,516            3,840
                                                                  ----------------  --------------   --------------
Net cash provided by operating activities                                  61,970           9,334           16,172
                                                                  ----------------  --------------   --------------

Cash flows from investing activities:
   Increase in investment in subsidiaries                                       -          (5,000)         (10,000)
   Purchase of fixed maturities                                              (500)         (8,650)          (7,232)
   Sale of fixed maturities                                                10,901          17,756            4,600
   Sale of equity securities                                                    -               -               30
                                                                  ----------------  --------------   --------------
Net cash provided by (used in) investing activities                        10,401           4,106          (12,602)
                                                                  ----------------  --------------   --------------

Cash flows from financing activities:
   Dividends paid to shareholders                                         (11,243)        (11,029)          (9,425)
   Net increase in notes payable                                          204,500         237,500                -
   Interest payments on notes payable                                     (17,665)         (3,836)          (3,793)
   Reissuance of treasury stock                                            15,454          13,072           10,209
   Repurchase of common stock                                            (246,840)       (248,426)               -
                                                                  ----------------  --------------   --------------
Net cash (used in) provided by financing activities                       (55,794)        (12,719)          (3,009)
                                                                  ----------------  --------------   --------------
Net increase in cash and short-term investments                            16,577             721              561
Cash and short-term investments at beginning of year                        5,411           4,690            4,129
                                                                  ----------------  --------------   --------------
Cash and short-term investments at end of year                    $        21,988   $       5,411    $       4,690
                                                                  ================  ==============   ==============


See accompanying notes to Parent Company condensed financial statements.

</TABLE>



                                       39

<PAGE>


                           MGIC INVESTMENT CORPORATION

           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                               PARENT COMPANY ONLY

                               SUPPLEMENTARY NOTES

Note A

      The accompanying  Parent Company  financial  statements  should be read in
conjunction with the Consolidated Financial Statements and Notes to Consolidated
Financial  Statements  appearing  on pages 14 through 31 of the MGIC  Investment
Corporation 1998 Annual Report to Shareholders.

Note B

      The Company's insurance  subsidiaries are subject to statutory regulations
as to  maintenance  of  policyholders'  surplus  and payment of  dividends.  The
maximum  amount of  dividends  that the  insurance  subsidiaries  may pay in any
twelve-month   period  without   regulatory   approval  by  the  Office  of  the
Commissioner  of  Insurance  of the State of Wisconsin is the lesser of adjusted
statutory  net  income  or 10% of  statutory  policyholders'  surplus  as of the
preceding  calendar year end. Adjusted  statutory net income is defined for this
purpose to be the greater of statutory  net income,  net of realized  investment
gains, for the calendar year preceding the date of the dividend or statutory net
income, net of realized investment gains, for the three calendar years preceding
the date of the  dividend  less  dividends  paid  within  the  first  two of the
preceding  three  calendar  years.  In 1999, the Company's  principal  insurance
subsidiary,  Mortgage  Guaranty  Insurance  Corporation can pay $49.4 million of
dividends  and the other  insurance  subsidiaries  of the  Company  can pay $4.5
million of dividends without such regulatory approval.

      Certain of the Company's non-insurance subsidiaries also have requirements
as to  maintenance  of net  worth.  These  restrictions  could  also  affect the
Company's ability to pay dividends.

      In 1998, 1997 and 1996, the Company paid dividends of $11.2 million, $11.0
million  and $9.4  million,  respectively  or $.10 per share in 1998,  $.095 per
share in 1997 and $.08 per share in 1996.


                                       40

<PAGE>

                           MGIC INVESTMENT CORPORATION

                            SCHEDULE IV - REINSURANCE

                       MORTGAGE INSURANCE PREMIUMS EARNED
                  Years Ended December 31, 1998, 1997 and 1996

                                                 Assumed              Percentage
                                    Ceded to      From                 of Amount
                          Gross      Other        Other       Net     Assumed to
                          Amount    Companies    Companies   Amount      Net
                         --------  -----------  ----------- --------  ----------
                                     (In thousands of dollars)

Year ended December 31,
       1998              $770,775   $ 17,161     $ 9,670    $763,284      1.3%
                         ========   =========    ========   ========

       1997              $712,069   $ 15,990     $12,665    $708,744      1.8%
                         ========   =========    ========   ========

       1996              $623,148   $ 19,350     $13,245    $617,043      2.1%
                         ========   =========    ========   ========



                                       41

<PAGE>


                                INDEX TO EXHIBITS

                                  [Item 14(a)3]

Exhibit
Numbers                Description of Exhibits

3.1      Articles of Incorporation, as amended.(1)

3.2      Amended and Restated Bylaws.

4.1      Article 6 of the Articles of  Incorporation  (included  within  Exhibit
         3.1)

4.2      Amended and Restated Bylaws (included as Exhibit 3.2) 

         [The Company is a party to separate  Credit  Agreements  with different
         groups of financial institutions. These Credit Agreements are not being
         filed  pursuant  to Reg.  S-K Item  602(b) (4) (iii) (A).  The  Company
         hereby  agrees  to  furnish  a copy of such  Credit  Agreements  to the
         Commission upon its request.]

10.1     Common   Stock   Purchase   Agreement   between  the  Company  and  The
         Northwestern Mutual Life Insurance Company ("NML"),  dated November 30,
         1984(2)

10.2     Tax Agreement between NML, the Company and certain  subsidiaries of the
         Company, dated January 1, 1986, including amendment thereto dated as of
         August 2, 1991(3)

10.3     Tax  Sharing   Agreement   between  the   Company,   MGIC  and  certain
         subsidiaries of MGIC, dated January 22, 1986(4)

10.4     Amendment to Tax Agreement, dated as of August 14, 1991, by and between
         NML, the Company, and its subsidiaries(5)

10.5     Amended  and  Restated  Investment  Advisory  and  Servicing  Agreement
         between the Company and Northwestern Mutual Investment  Services,  Inc.
         ("NMIS"),  dated December 5, 1997.(6)  [Northwestern  Mutual Investment
         Services, LLC has succeed to NMIS as a party to such Agreement.]



<PAGE>

Exhibit
Numbers                Description of Exhibits

10.6     MGIC Investment Corporation Amended and Restated 1989 Stock Option Plan
         (including forms of option agreement).(7)

10.7     MGIC Investment Corporation 1991 Stock Incentive Plan.

10.8     Form of Stock Option  Agreement under 1991 Stock Option Plan (now known
         as the 1991 Stock Incentive Plan).(8)

10.9     Form of Stock Option  Agreement  under 1991 Stock  Incentive Plan (1997
         Form 1).(9)

10.10    Form of Restricted  Stock Award  Agreement  under 1991 Stock  Incentive
         Plan.

10.11    Executive Bonus Plan 

10.12    Supplemental Executive Retirement Plan.(10)

10.13    MGIC Investment Corporation Deferred Compensation Plan for Non-Employee
         Directors.(11)

10.14    MGIC Investment Corporation 1993 Restricted Stock Plan for Non-Employee
         Directors.(12)

10.15    Two forms of Award  Agreement under MGIC  Investment  Corporation  1993
         Restricted Stock Plan for Non-Employee Directors.(13)

10.16    Form of MGIC Mortgage  Guaranty Master Policy,  in effect generally for
         insurance  commitments  issued  beginning March 1, 1995,  including the
         Master    Policy    Program    Endorsement    relating   to   delegated
         underwriting.(14)

11       Statement re: computation of per share earnings

13       Information  from the 1998 Annual Report of the Company to Shareholders
         which is incorporated by reference in this Annual Report on Form 10-K.

21       List of Subsidiaries

23       Consent of Price Waterhouse LLP

27       Financial Data Schedule



<PAGE>

      Supplementary  List of the  above  Exhibits  which  relate  to  management
contracts or compensatory plans or arrangements.

Exhibit
Numbers                Description of Exhibits

10.6     MGIC Investment Corporation Amended and Restated 1989 Stock Option Plan
         (including forms of option agreement).

10.7     MGIC Investment Corporation 1991 Stock Incentive Plan.

10.8     Form of Stock Option  Agreement under 1991 Stock Option Plan (now known
         as the 1991 Stock Incentive Plan).

10.9     Form of Stock Option  Agreement  under 1991 Stock  Incentive Plan (1997
         Form 1).

10.10    Form of Restricted  Stock Award  Agreement  under 1991 Stock  Incentive
         Plan.

10.11    Executive Bonus Plan

10.12    Supplemental Executive Retirement Plan.

10.13    MGIC Investment Corporation Deferred Compensation Plan for Non-Employee
         Directors

10.14    MGIC Investment Corporation 1993 Restricted Stock Plan for Non-Employee
         Directors.

10.15    Two forms of Award  Agreement under MGIC  Investment  Corporation  1993
         Restricted Stock Plan for Non-Employee Directors.



<PAGE>


         The following  documents,  identified in the footnote references above,
are  incorporated  by  reference,  as  indicated,  to:  the  Company's  Form S-1
Registration  Statement (No.  33-41289),  which became  effective in August 1991
(the "1991 S-1");  the Company's Annual Reports on Form 10-K for the years ended
December 31, 1991, 1993, 1994, 1996 or 1997 (the "1991 10-K," "1993 10-K," "1994
10-K," "1996 10-K," and "1997 10-K"  respectively);  or to the Quarterly Reports
on Form 10-Q for the  Quarters  ended June 30,  1994 or 1998 (the "June 30, 1994
10-Q" and  "June 30,  1998  10-Q,"  respectively).  The  documents  are  further
identified by cross-reference to the Exhibits in the respective  documents where
they were originally filed:

 (1)   Exhibit 3 to the June 30, 1998 10-Q.

 (2)   Exhibit 10.1 to the 1991 S-1.

 (3)   The Tax  Agreement  is Exhibit  10.8 to the 1991 S-1 and the  amendment
       thereto is Exhibit 10.21 to the 1991 S-1.

 (4)   Exhibit 10.9 to the 1991 S-1.

 (5)   Exhibit 10.10 to the 1991 10-K.

 (6)   Exhibit 10.5 to the 1997 10-K.

 (7)   Exhibit 10.16 to the 1991 S-1.

 (8)   Exhibit 10.19 to the 1991 10-K.

 (9)   Exhibit 10.9 to the 1997 10-K.

 (10)  Exhibit 10.16 to the 1996 10-K

 (11)  Exhibit 10.23 to the 1993 10-K.

 (12)  Exhibit 10.24 to the 1993 10-K.

 (13)  Exhibits 10.27 and 10.28 to the June 30, 1994 10-Q.

 (14)  Exhibit 10.26 to the 1994 10-K.









                                                                     EXHIBIT 3.2

                           AMENDED AND RESTATED BYLAWS

                                       OF

                           MGIC INVESTMENT CORPORATION

                               ARTICLE I. OFFICES

         1.01.  Principal and Business  Offices.  The  corporation may have such
principal  and other  business  offices,  either  within or without the State of
Wisconsin,  as the Board of  Directors  may  designate or as the business of the
corporation may require from time to time.

         1.02.  Registered  Office.  The  registered  office of the  corporation
required by the Wisconsin Business Corporation Law to be maintained in the State
of Wisconsin may be, but need not be, identical with the principal office in the
State of Wisconsin, and the address of the registered office may be changed from
time to time by the Board of Directors or by the registered  agent. The business
office of the  registered  agent of the  corporation  shall be identical to such
registered office.

                            ARTICLE II. SHAREHOLDERS

         2.01. Annual Meeting.  The annual meeting of the shareholders  ("Annual
Meeting")  shall be held on the  first  Monday  in May,  at such time or on such
other day as may be  designated  by  resolution  of the Board of  Directors.  In
fixing a  meeting  date for any  Annual  Meeting,  the  Board of  Directors  may
consider such factors as it deems relevant within the good faith exercise
 of its
business judgment.

         2.02.  Purposes  of  Annual  Meeting.  At  each  Annual  Meeting,   the
shareholders  shall  elect  directors  and  transact  any other  business as may
properly come before the Annual Meeting.  If the election of directors shall not
be held on the date  designated  herein,  or fixed as herein  provided,  for any
Annual Meeting, or any adjournment  thereof,  the Board of Directors shall cause
the  election  to be held at a  special  meeting  of  shareholders  (a  "Special
Meeting") as soon thereafter as is practicable.

         2.03. Special Meetings. A Special Meeting, for any purpose or purposes,
unless otherwise  prescribed by the Wisconsin Insurance  Corporation Law, may be
called by the Board of  Directors,  the Chairman of the Board or the  President.
The corporation shall call a Special Meeting in the event that the holders of at
least 10% of all of the votes  entitled  to be cast on any issue  proposed to be
considered  at the  proposed  Special  Meeting  sign,  date and  deliver  to the
corporation one or more written  demands for the meeting  describing one or more
purposes for which it is to be held.


<PAGE>

         2.04.  Place of Meeting.  The Board of  Directors,  the Chairman of the
Board, the President or the Secretary may designate any place,  either within or
without the State of Wisconsin,  as the place of meeting for any Annual  Meeting
or for any Special Meeting or for any postponement or adjournment thereof. If no
designation is made, the place of meeting shall be the principal business office
of the  corporation  in the State of Wisconsin.  Any meeting may be adjourned to
reconvene  at any place  designated  by vote of the Board of Directors or by the
Chairman of the Board, the President or the Secretary.

         2.05.  Notice of Meeting.  Written or printed  notice stating the date,
time and place of any Annual  Meeting or Special  Meeting shall of delivered not
less than  three  days  (unless a longer  period is  required  by the  Wisconsin
Business  Corporation Law) nor more than 60 days before the date of such meeting
either  personally  or by mail,  by or at the  direction  of the Chairman of the
Board, the President or the Secretary, to each shareholder of record entitled to
vote at such meeting and to such other shareholders as required by the Wisconsin
Business Corporation Law. If mailed,  notice pursuant to this Section 2.05 shall
be deemed to be effective when deposited in the United States mail, addressed to
the  shareholder  at his address as it appears on the stock  record books of the
corporation,  with postage thereon  prepaid.  Unless  otherwise  required by the
Wisconsin  Business  Corporation  Law or the  articles of  incorporation  of the
corporation, a notice of an Annual Meeting need not include a description of the
purpose for which the meeting is called. In the case of any Special Meeting, the
notice of meeting  shall  describe the purpose or purposes for which the Special
Meeting is called.  If an Annual  Meeting or Special  Meeting is  adjourned to a
different  date, time or place,  the  corporation  shall not be required to give
notice  of the new  date,  time or  place  if the new  date,  time or  place  is
announced at the meeting before adjournment;  provided,  however,  that if a new
Meeting Record Date (as defined in Section 2.06) for an adjourned  meeting is or
must be fixed,  the  corporation  shall give notice of the adjourned  meeting to
persons who are shareholders as of the new Meeting Record Date.

         2.06.  Fixing of Record Date. The Board of Directors may fix in advance
a date not less than 10 days and not more than 70 days  prior to the date of any
Annual  Meeting  or  Special  Meeting  as the  record  date for the  purpose  of
determining  shareholders  entitled to notice of, and to vote at,  such  meeting
("Meeting  Record Date").  The shareholders of record on the Meeting Record Date
shall be the  shareholders  entitled to notice of, and to vote at, the  meeting.
Except as provided by the Wisconsin Business Corporation Law for a court-ordered
adjournment,  a determination of shareholders entitled to notice of, and to vote
at, any Annual  Meeting or Special  Meeting is effective for any  adjournment of
such  meeting  unless the Board of  Directors  fixes a new Meeting  Record Date,
which it shall do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.  The Board of Directors may also fix in
advance a date as the record  date for the purpose of  determining  shareholders
entitled  to take any other  action or  determining  shareholders  for any other
purpose.  Such  record  date shall be not more than 70 days prior to the date on
which the particular action, requiring such determination of shareholders, is to
be  taken.  The  record  date  for  determining   shareholders   entitled  to  a
distribution  (other than a  distribution  involving a purchase,  redemption  or
other acquisition of the  corporation's  shares) or a share dividend is the date
on which the Board of



<PAGE>


Directors  authorizes the  distribution or share  dividend,  as the case may be,
unless the Board of Directors fixes a different record date.

         2.07.  Voting Records.  After a Meeting Record Date has been fixed, the
corporation  shall  prepare  a list  of  the  names  of all of the  shareholders
entitled to notice of the meeting. The list shall be arranged by class or series
of shares,  if any,  and show the address of, and number of shares held by, each
shareholder.  Such list shall be available for  inspection  by any  shareholder,
beginning  two business  days after notice of the meeting is given for which the
list  was  prepared  and  continuing  to  the  date  of  the  meeting,   at  the
corporation's principal office or at a place identified in the meeting notice in
the city where the  meeting  will be held.  A  shareholder  or his agent may, on
written demand, inspect and, subject to the limitations imposed by the Wisconsin
Business  Corporation  Law, copy the list,  during regular business hours and at
his expense,  during the period that it is available for inspection  pursuant to
this Section 2.07. The corporation shall make the  shareholders'  list available
at the meeting and any shareholder or his agent or attorney may inspect the list
at any time during the meeting or any adjournment thereof. Refusal or failure to
prepare or make available the  shareholders'  list shall not affect the validity
of any action taken at a meeting of shareholders.

         2.08.  Quorum and Voting Requirements;  Postponements; Adjournments.

         (a) Shares  entitled to vote as a separate voting group may take action
on a matter at any Annual  Meeting or Special  Meeting only if a quorum of those
shares exists with respect to that matter. If the corporation has only one class
of stock  outstanding,  such class shall  constitute a separate voting group for
purposes of this Section 2.08.  Except as otherwise  provided in the articles of
incorporation of this corporation or the Wisconsin  Business  Corporation Law, a
majority  of the votes  entitled  to be cast on the matter  shall  constitute  a
quorum  of the  voting  group  for  action  on  that  matter.  Once a  share  is
represented for any purpose at any Annual Meeting or Special Meeting, other than
for the purpose of objecting to holding the meeting or  transacting  business at
the meeting,  it is  considered  present for purposes of  determining  whether a
quorum exists for the remainder of the meeting and for any  adjournment  of that
meeting,  unless a new Record Date is or must be set for the adjourned  meeting.
If a quorum exists, except in the case of the election of directors, action on a
matter shall be approved if the votes cast within the voting group  favoring the
action  exceed the votes cast  opposing  the  action,  unless  the  articles  or
incorporation  of the  corporation  or the Wisconsin  Business  Corporation  Law
requires a greater number of affirmative votes. Unless otherwise provided in the
articles of incorporation of the corporation,  each director shall be elected by
a plurality of the votes cast by the shares  entitled to vote in the election of
directors at any Annual Meeting or Special Meeting at which a quorum is present.

         (b) The  Board of  Directors  acting by  resolution  may  postpone  and
reschedule  any previously  scheduled  Annual  Meeting or Special  Meeting.  Any
Annual Meeting or Special Meeting may be adjourned from time to time, whether or
not there is a quorum, (i) at any time, upon a resolution of shareholders if the
votes cast in favor of such  resolution  by the holders of shares of each voting
group  entitled to vote on any matter  theretofore  properly  brought before the
meeting  exceed the number of votes cast against such  resolution by the holders
of shares of each



<PAGE>

such voting group or (ii) at any time prior to the  transaction  of any business
at such meeting,  by the Chairman of the Board or the President or pursuant to a
resolution  of the  Board of  Directors.  No  notice  of the  time and  place of
adjourned  meetings need be given except as required by the  Wisconsin  Business
Corporation Law. At any adjourned  meeting at which a quorum shall be present or
represented,  any business may be transacted which might have been transacted at
the meeting as originally notified.

         2.09.  Conduct of  Meetings.  The  Chairman  of the  Board,  and in his
absence, the Vice Chairman of the Board, and in his absence, the President,  and
in their absence, a Vice President in the order provided under Section 4.08, and
in their absence,  any person chosen by the shareholders  present shall call any
Annual  Meeting or Special  Meeting to order and shall act as  chairman  of such
meeting,  and the  Secretary  of the  corporation  shall act as secretary of all
Annual Meetings and Special Meetings,  but in the absence of the Secretary,  the
presiding  officer  may  appoint  any other  person to act as  secretary  of the
meeting.

         2.10.  Proxies.  At  all  Annual  Meetings  and  Special  Meetings,   a
shareholder  entitled to vote may vote in person or by proxy. A shareholder  may
appoint a proxy to vote or  otherwise  act for the  shareholder  by  signing  an
appointment form, either personally or by his  attorney-in-fact.  An appointment
of a proxy is effective when received by the Secretary or other officer or agent
of the  corporation  authorized to tabulate  votes.  An appointment is valid for
eleven  months  from  the  date of its  signing  unless a  different  period  is
expressly provided in the appointment form. Unless otherwise  provided,  a proxy
may be revoked any time before it is voted,  either by written notice filed with
the Secretary or the acting  secretary of the meeting or by oral notice given by
the shareholder to the presiding  officer during the meeting.  The presence of a
shareholder who has filed his proxy does not of itself  constitute a revocation.
The  Board of  Directors  shall  have the  power  and  authority  to make  rules
establishing presumptions as to the validity and sufficiency of proxies.

         2.11.  Voting of Shares.

         (a) Each  outstanding  share  shall be  entitled  to one vote upon each
matter submitted to a vote at any Annual Meeting or Special  Meeting,  except to
the  extent  that the voting  rights of the  shares of any class or classes  are
enlarged,  limited or denied by the Wisconsin  Business  Corporation  Law or the
articles of incorporation of the corporation.

         (b)  Shares  held by another  corporation,  if a  sufficient  number of
shares  entitled to elect a majority of the directors of such other  corporation
is held  directly or indirectly  by this  corporation,  shall not be entitled to
vote at any Annual  Meeting or Special  Meeting,  but shares held in a fiduciary
capacity may be voted.

         2.12. Acceptance of Instruments Showing Shareholder Action. If the name
signed on a vote, consent,  waiver or proxy appointment  corresponds to the name
of a shareholder, the corporation, if acting in good faith, may accept the vote,
consent,  waiver  or  proxy  appointment  and  give  it  effect  as the act of a
shareholder.  If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of a shareholder, the



<PAGE>

corporation may accept the vote,  consent,  waiver or proxy appointment and give
it effect as the act of the shareholder if any of the following apply:

         (a) The  shareholder  is an entity and the name  signed  purports to be
that of an officer or agent of the entity.

         (b)  The  name  purports  to  be  that  of a  personal  representative,
administrator,  executor,  guardian or conservator  representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation  is  presented  with respect to the vote,  consent,  waiver or proxy
appointment.

         (c) The name  signed  purports  to be that of a receiver  or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status  acceptable  to the  corporation  is presented  with respect to the vote,
consent, waiver or proxy appointment.

         (d) The name signed purports to be that of a pledgee, beneficial owner,
or  attorney-in-fact  of  the  shareholder  and,  if the  corporation  requests,
evidence acceptable to the corporation of the signatory's  authority to sign for
the shareholder is presented with respect to the vote, consent,  waiver or proxy
appointment.

         (e)  Two  or  more  persons  are  the   shareholder  as  co-tenants  or
fiduciaries  and the name signed  purports to be the name of at least one of the
co-owners  and  the  person  signing  appears  to be  acting  on  behalf  of all
co-owners.

         The corporation may reject a vote, consent, waiver or proxy appointment
if the Secretary or other officer or agent of the  corporation who is authorized
to tabulate votes,  acting in good faith,  has reasonable  basis for doubt about
the validity of the signature on it or about the  signatory's  authority to sign
for the shareholder.

         2.13  Waiver of Notice by  Shareholders.  A  shareholder  may waive any
notice  required by the  Wisconsin  Business  Corporation  Law,  the articles of
incorporation  of the  corporation  or these Bylaws before or after the date and
time  stated in the  notice.  The waiver  shall be in writing  and signed by the
shareholder entitled to the notice, contain the same information that would have
been  required  in the  notice  under  applicable  provisions  of the  Wisconsin
Business  Corporation Law (except that the time and place of meeting need not be
stated) and be  delivered to the  corporation  for  inclusion  in the  corporate
records. A shareholder's attendance at any Annual Meeting or Special Meeting, in
person or by proxy, waives objection to all of the following: (a) lack of notice
or defective  notice of the meeting,  unless the shareholder at the beginning of
the  meeting  or  promptly  upon  arrival  objects  to  holding  the  meeting or
transacting  business at the  meeting;  and (b)  consideration  of a  particular
matter at the meeting  that is not within the purpose  described  in the meeting
notice,  unless the  shareholder  objects to  considering  the matter when it is
presented.


<PAGE>


                         ARTICLE III. BOARD OF DIRECTORS

         3.01  General Powers; Number and Classification; Vacancy.

         (a) All  corporate  powers shall be exercised by or under the authority
of, and the business and affairs of the  corporation  shall be managed under the
direction of, the Board of Directors.

         (b) The number of directors of the corporation shall be not less than 7
nor more than 17,  as  determined  from time to time by the Board of  Directors,
divided into three  substantially equal classes and designated as Class I, Class
II and Class  III,  respectively.  Commencing  at a Special  Meeting  to be held
promptly  after the  adoption of these  Bylaws,  a class of  directors  shall be
elected to Class I for a term to expire at the 1992 Annual  Meeting,  a class of
directors  shall be elected to Class II for a term to expire at the 1993  Annual
Meeting  and a class of  directors  shall be  elected to Class III for a term to
expire at the 1994 Annual Meeting and, in each case,  until their successors are
duly qualified and elected.  At each Annual Meeting thereafter the successors to
the class of  directors  whose term shall  expire at the time of Annual  Meeting
shall be elected to hold office until the third succeeding  Annual Meeting,  and
until  their  successors  are duly  qualified  and  elected or until  there is a
decrease in the number of directors  that takes effect after the  expiration  of
their term.

         (c) Any  vacancy  occurring  in the  Board of  Directors,  including  a
vacancy  created by an increase in the number of  directors,  shall be filled by
the affirmative vote of a majority of the directors then in office,  though less
than a quorum of the Board of Directors,  or by a sole remaining  director.  Any
director so elected  shall serve until the next  election of the class for which
such  director  shall  have been  chosen and until his  successor  shall be duly
qualified and elected.

         3.02.  Resignations  and  Qualifications.  A director may resign at any
time by delivering  written  notice which  complies with the Wisconsin  Business
Corporation  Law to the Board of Directors,  the Chairman of the Board or to the
corporation.  A director's resignation is effective when the notice is delivered
unless  the notice  specifies  a later  effective  date.  Directors  need not be
residents of the State of Wisconsin or shareholders of the corporation.

         3.03.  Regular  Meetings.  A regular  meeting of the Board of Directors
shall be held without other notice than this Bylaw  immediately after the Annual
Meeting. The place of such regular meeting shall be the same as the place of the
Annual  Meeting  which  precedes  it,  or such  other  suitable  place as may be
announced to directors at or before such Annual Meeting.  The Board of Directors
may provide,  by resolution,  the date, time and place, either within or without
the State of Wisconsin,  for the holding of additional  regular  meetings of the
Board of Directors without other notice than such resolution.

         3.04. Special Meetings.  Special meetings of the Board of Directors may
be  called  by or at the  request  of the  Chairman  of  the  Board,  President,
Secretary or any two directors.  The Chairman of the Board, the President or the
Secretary  may  designate  any  place,



<PAGE>

either  within or without the State of  Wisconsin,  as the place for holding any
such special  meeting.  If no designation is made, the place of meeting shall be
the principal business office of the corporation in the State of Wisconsin.

         3.05 Notice;  Waiver.  Notice of each meeting of the Board of Directors
(unless  otherwise  provided in or  pursuant to Section  3.03) shall be given to
each  director  not less than 24 hours  prior to the  meeting  by  giving  oral,
telephonic  or  written  notice to a  director  communicated  in  person,  or by
telegram, facsimile or other form of wire or wireless communication, or not less
than 48 hours prior to a meeting by  delivering,  sending by private  carrier or
mailing  written  notice to the  business  address  or such  other  address as a
director shall have  designated in writing filed with the Secretary.  If mailed,
such notice shall be deemed to be effective  when deposited in the United States
mail so addressed with postage thereon prepaid.  If notice be given by telegram,
such notice  shall be deemed to be effective  when the telegram  addressed as in
case of notice by mail is delivered to the telegraph company. If notice is given
by private carrier,  such notice shall be deemed to be effective when the notice
addressed  as in case of notice by mail is  delivered  to the  private  carrier.
Whenever  any notice  whatever is  required  to be given to any  director of the
corporation under the articles of incorporation of the corporation, these Bylaws
or any provision of the Wisconsin Business  Corporation Law, a waiver thereof in
writing,  signed  at any  time,  whether  before  or after  the date and time of
meeting, by the director entitled to such notice,  shall be deemed equivalent to
the giving of such notice.  The corporation shall retain any such waiver as part
of its permanent corporate records, but only for so long as such other permanent
corporate records are maintained.  A director's  attendance at, or participation
in, a meeting  waives  any  required  notice to him of the  meeting  unless  the
director at the beginning of the meeting or promptly upon his arrival objects to
holding  the  meeting  or  transacting  business  at the  meeting  and  does not
thereafter  vote for or assent  to  action  taken at the  meeting.  Neither  the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice,  or waiver of notice,
of such meeting.

         3.06.  Quorum.  Except as otherwise  provided by the Wisconsin Business
Corporation  Law,  the articles of  incorporation  of the  corporation  or these
Bylaws,  a majority  of the  number of  directors  fixed in  Section  3.01 shall
constitute a quorum for the  transaction of business at any meeting of the Board
of  Directors,  but a majority of the directors  present  (though less than such
quorum)  may  adjourn any  meeting of the Board of  Directors  or any  committee
thereof, as the case may be, from time to time without further notice. Except as
otherwise  provided by the Wisconsin  Business  Corporation Law, the articles of
incorporation  or by these  Bylaws,  a quorum of any  committee  of the Board of
Directors created pursuant to Section 3.12 hereof shall consist of a majority of
the number of directors  appointed to serve on the committee,  but a majority of
the members  present  (though  less than a quorum) may adjourn the meeting  from
time to time without further notice.

         3.07.  Manner  of  Acting.  The act of the  majority  of the  directors
present at a meeting at which a quorum is present  shall be the act of the Board
of  Directors,  unless the act of a greater  number is required by the Wisconsin
Business  Corporation  Law, the articles of incorporation of this corporation or
these Bylaws.



<PAGE>


         3.08.  Conduct of  Meetings.  The  Chairman  of the  Board,  and in his
absence, the Vice Chairman of the Board, and in their absence, the President and
in their absence, a Vice President in the order provided under Section 4.08, and
in their  absence,  any director  chosen by the  directors  present,  shall call
meetings of the Board of  Directors,  but in the absence of the  Secretary,  the
presiding  officer may appoint any  Assistant  Secretary  or any director or any
other person present to act as secretary of the meeting.  Minutes of any regular
or special  meeting of the Board of Directors  shall be prepared and distributed
to each director.

         3.09.  Compensation.  The  Board  of  Directors,  irrespective  of  any
personal interest of any of its members, may establish  reasonable  compensation
of all  directors  for services to the  corporation  as  directors,  officers or
otherwise, or may delegate such authority to an appropriate committee. The Board
of Directors also shall have authority to provide for, or to delegate  authority
to an appropriate  committee to provide for, reasonable pensions,  disability or
death  benefits,  and other  benefits or payments,  to  directors,  officers and
employees  and to their  estates,  families,  dependents,  or  beneficiaries  on
account of prior services rendered by such directors,  officers and employees to
the corporation.

         3.10.  Unanimous  Consent  Without  Meeting.  Any  action  required  or
permitted by the articles of incorporation  of the corporation,  these Bylaws or
any provision of the Wisconsin Business Corporation Law to be taken by the Board
of Directors (or any committee  thereof  created  pursuant to Section 3.12) at a
meeting may be taken  without a meeting if a consent in writing,  setting  forth
the action so taken, shall be signed by all members of the Board of Directors or
of the  committee,  as the case may be, then in office.  Any such consent action
may be signed in  separate  counterparts  and shall be  effective  when the last
director or committee member signs the consent,  unless the consent  specifies a
different effective date.

         3.11.  Presumption  of Assent.  A director  of the  corporation  who is
present at a meeting of the Board of Directors or any committee thereof of which
he is a  member  at which  action  on any  corporate  matter  is taken  shall be
presumed  to have  assented  to the action  taken  unless  any of the  following
occurs:  (a) the  director  objects at the  beginning of the meeting or promptly
upon his arrival to holding the meeting or transacting  business at the meeting;
(b) the director's dissent or abstention from the action taken is entered in the
minutes  of the  meeting;  or (c) the  director  delivers  written  notice  that
complies  with  the  Wisconsin  Business  Corporation  Law  of  his  dissent  or
abstention to the presiding  officer of the meeting before its adjournment or to
the  corporation  immediately  after  adjournment of the meeting.  Such right to
dissent  or  abstain  shall not apply to a  director  who voted in favor of such
action.

         3.12.  Committees.

         (a) (i) An Executive  Committee  consisting of three or more members of
the Board of  Directors  be and it hereby is created.  The Board of Directors by
the  affirmative  vote of a majority of the number of directors fixed in Section
3.01, shall designate the members of the Executive Committee,  one of whom shall
be designated by the Board of Directors as Chairman of the Executive  Committee.
The Executive  Committee  shall have and may exercise all powers of the Board of
Directors in the management of the business and affairs of the corporation  when



<PAGE>


the Board of Directors is not in session; provided,  however, that the Executive
Committee shall have no power or authority to take action on behalf of the Board
of  Directors  to the extent  limited in Section  3.12(b) of these Bylaws or the
Wisconsin Business  Corporation Law. The Board of Directors shall have the power
at any time to fill  vacancies  in, to change the members of, or to dissolve the
Executive  Committee by the affirmative vote of a majority of the directors then
in office,  though  less than a quorum of the Board of  Directors,  or by a sole
remaining director.

         (ii) Notice of each meeting of the Executive  Committee  shall be given
to each member  thereof in  accordance  with Section  3.05.  The  attendance  or
participation  of a committee  member at a meeting shall  constitute a waiver of
required  notice to him of such  meeting,  unless  the  committee  member at the
beginning  of the  meeting or promptly  upon his arrival  objects to holding the
meeting or transacting  business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.  Neither the business to be transacted
at, not the purpose of, any meeting of the Executive Committee need be specified
in the notice, or waiver of notice, of such meeting.

         (iii) The act of the  majority of the  members  present at a meeting at
which a quorum is present  shall be the act of the Executive  Committee,  unless
the act of a greater  number is required by the Wisconsin  Business  Corporation
Law or by the articles incorporation of the corporation or these Bylaws.

         (iv) The Chairman of the Executive Committee,  and, in his absence, any
member  chosen by the members  present,  shall call  meetings  of the  Executive
Committee  to order and shall act as  chairman  of the  meeting.  The  presiding
officer may appoint any member or other  person  present to act as  secretary of
the meeting.  Unless otherwise  provided by the Wisconsin  Business  Corporation
Law, the articles of  incorporation  of the  corporation  or these  Bylaws,  the
Executive  Committee  shall  fix its own  rules  governing  the  conduct  of its
activities and shall keep and report to the Board of Directors  regular  minutes
of the  proceedings of the Executive  Committee for  subsequent  approval by the
Board of Directors.

         (b) The Board of Directors  by  resolution  adopted by the  affirmative
vote of a  majority  of the  number  of  directors  fixed  in  Section  3.01 may
designate  one or  more  other  committees,  appoint  members  of the  Board  of
Directors to serve on the committees and designate other members of the Board of
Directors to serve as alternates.  Alternate  members of a committee  shall take
the place of any absent member or members at any meeting of such  committee upon
request of the  Chairman of the Board or the  President  or upon  request of the
chairman of such meeting.  Each committee  (other than the Executive  Committee)
shall consist of two or more directors  elected by, and to serve at the pleasure
of, the Board of  Directors.  A committee  may be  authorized  to  exercise  the
authority  of the Board of  Directors,  except that a committee  (including  the
Executive   Committee)  may  not  do  any  of  the   following:   (a)  authorize
distributions;  (b) approve or propose to shareholders action that the Wisconsin
Business  Corporation  Law  requires to be approved  by  shareholders;  (c) fill
vacancies on the Board of Directors or,  unless the Board of Directors  provides
by resolution  that vacancies on a committee  shall be filled by the affirmative
vote of the remaining committee members,  on any Board committee;  (d) amend the
articles of incorporation of the corporation;  (e) adopt,  amend or repeal



<PAGE>

these Bylaws; (f) approve a plan of merger not requiring  shareholder  approval;
(g) authorize or approve  reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares,  or determine  the  designation
and relative rights, preferences and limitations of a class or series of shares,
except that the Board of  Directors  may  authorize a committee  to do so within
limits  prescribed by the Board of Directors.  Unless otherwise  provided by the
Board of  Directors  in  creating  the  committee,  a committee  (including  the
Executive  Committee) may employ counsel,  accountants and other  consultants to
assist it in the exercise of its authority.  Notices of committee meetings shall
be given to  committee  members  in  compliance  with  Section  3.05.  Each such
committee  shall fix its own rules  governing the conduct of its  activities and
shall make such reports to the Board of Directors of its activities as the Board
of Directors may request.

         3.13.   Telephonic   Meetings.    Except   as   herein   provided   and
notwithstanding  any  place  set forth in the  notice  of the  meeting  or these
Bylaws,  members of the Board of Directors (and any committees  thereof  created
pursuant to Section 3.12) may participate in regular or special  meetings by, or
through the use of, any means of  communication  by which all  participants  may
simultaneously hear each other, such as by conference telephone. If a meeting is
conducted by such means,  then at the commencement of such meeting the presiding
officer shall inform the participating  directors that a meeting is taking place
at which official  business may be transacted.  Any  participant in a meeting by
such means shall be deemed present in person at such meeting. If action is to be
taken at any meeting held by such means on any of the  following:  (a) a plan of
merger or share exchange;  (b) a sale,  lease,  exchange or other disputation of
substantial property or assets of the corporation;  (c) a voluntary  dissolution
or the  revocation  of voluntary  dissolution  proceedings;  or (d) a filing for
bankruptcy,  then the identity of each  director  participating  in such meeting
must be verified by the disclosure at such meeting by each such director of each
such director's  social security number to the secretary of the meeting before a
vote may be taken on any of the foregoing matters. For purposes of the preceding
clause  (b),  the  phrase  "sale,  lease,   exchange  or  other  disposition  of
substantial  property or assets" shall mean any sale,  lease,  exchange or other
disposition  of  property or assets of the  corporation  having a net book value
equal  to 10% or  more  of the  net  book  value  of  the  total  assets  of the
corporation  on and as of the close of the fiscal  year last ended  prior to the
date of such meeting and as to which  financial  statements  of the  corporation
have been prepared.

                              ARTICLE IV. OFFICERS

         4.01.  Number.  The  principal  offices of the  corporation  shall be a
President,  one or more Vice Presidents,  as authorized from time to time by the
Board of  Directors,  a  Controller,  a Secretary and a Treasurer and such other
officers  and agents as the Board of Directors  may from time to time  determine
necessary,  each of whom shall be chosen by the Board of Directors. The Board of
Directors  may also from time to time elect or  appoint a Chairman  of the Board
and a Vice Chairman of the Board.  The Board of Directors may also authorize any
duly authorized  officer to appoint one or more officers or assistant  officers.
Any number of offices may be held by the same person.



<PAGE>


         4.02.  Election and Term of Office.  The officers of the corporation to
be elected by the Board of  Directors  shall be  elected  annually  at the first
meeting  of the Board of  Directors  held  after  each  Annual  Meeting.  If the
election of officers  shall not be held at such meeting,  such election shall be
held as soon thereafter as practicable. Each officer shall hold office until his
successor  shall have been duly chosen or until his prior death,  resignation or
removal.

         4.03.  Removal.  The Board of  Directors  may remove any  officer  and,
unless  restricted  by the Board of  Directors or these  Bylaws,  an officer may
remove any officer or assistant officer appointed by that officer,  at any time,
with or without cause and  notwithstanding  the contract rights,  if any, of the
officer  removed.  The election or  appointment of an officer does not of itself
create contract rights.

         4.04.  Resignations and Vacancies.

         (a) An  officer  may  resign  at any time by  delivering  notice to the
corporation  that  complies  with the Wisconsin  Business  Corporation  Law. The
resignation  shall be effective when the notice is delivered,  unless the notice
specifies a later effective date and the corporation accepts the later effective
date.

         (b) A vacancy in the office of President,  Secretary or Treasurer shall
be filled by the Board of  Directors  for the  unexpired  portion of the term. A
vacancy in any other office may also be filled by the Board of Directors, should
it deem it necessary to do so. If a resignation  of an officer is effective at a
later date as contemplated by this Section 4.04, the Board of Directors may fill
the pending vacancy before the effective date if the Board of Directors provides
that the successor may not take office until the effective date.

         4.05.  Chairman  of the Board.  The  Chairman of the Board shall be the
Chief Executive  Officer of the  corporation,  and subject to the control of the
Board of Directors,  shall,  in general,  supervise and control the business and
affairs of the corporation and shall determine  long-range,  strategic direction
and objectives and shall formulate major corporate policies. The Chairman of the
Board  shall  preside at all Annual  Meetings  and Special  Meetings  and at all
meetings of the Board of Directors.  He shall also in general perform such other
duties  and  functions  as may be  assigned  herein and as may be  delegated  or
assigned to him by the Board of Directors from time to time. The Chairman of the
Board shall have  authority,  subject to such rules as may be  prescribed by the
Board of  Directors,  to appoint  and remove such  agents and  employees  of the
corporation as he shall deem necessary,  to prescribe  their powers,  duties and
compensation  and to  delegate  authority  to  them.  The  Chairman  shall  have
authority to sign,  execute and acknowledge,  on behalf of the corporation,  all
deeds, mortgages, bonds, stock certificates,  contracts, leases, reports and all
other  departments  or  instruments  necessary  or proper to be  executed in the
course of the corporation's  regular  business,  or which shall be authorized by
the Board of Directors.

         4.06.  Vice Chairman of the Board.  The Vice Chairman of the Board,  if
one shall be elected or  appointed,  shall in the absence of the Chairman of the
Board,  perform the duties and functions of the Chairman of the Board.  He shall
also in general  perform such other duties



<PAGE>

and  functions  as may be delegated or assigned to him by the Board of Directors
or the Chairman of the Board.

         4.07.  President.  The  President  shall  perform such duties as may be
delegated to or assigned to him by the Chief  Executive  Officer or by the Board
of Directors  from time to time.  The  President  shall have  authority to sign,
execute and  acknowledge,  on behalf of the corporation,  all deeds,  mortgages,
securities,  contracts,  leases,  reports and all other  documents  necessary or
proper to be executed in the course of the corporation's  regular  business,  or
which shall be authorized by the Board of  Directors,  and,  except as otherwise
provided by law or the Board of Directors,  he may authorize any Vice  President
or other officer or agent of the  corporation to sign,  execute and  acknowledge
such documents or instruments in his place and stead.

         4.08. The Vice  Presidents.  The Board of Directors  shall elect one or
more Vice  Presidents  as it shall deem  necessary  for the  carrying out of the
corporation's  business,  some of  whom  may be  designated  as  Executive  Vice
Presidents and some of whom may be designated as Senior Vice Presidents.  In the
absence of the  President or in the event of his death,  inability or refusal to
act, the Vice President (or, in the event there be more than one Vice President,
giving  priority to any Executive Vice  Presidents,  and then to any Senior Vice
Presidents (in the order of their respective  priorities),  but otherwise in the
order  designated  by the  Board  of  Directors  or in the  absence  of any such
designation,  then in  order  of  choosing)  shall  perform  the  duties  of the
President  and,  when so acting,  shall have all the powers of and be subject to
all  restrictions  upon the  President.  Any Vice  President  shall perform such
duties and have such  authority,  as,  from time to time,  may be  delegated  or
assigned to him by the President, or by the Board of Directors. The execution of
any  instrument of the  corporation  by any Vice  President  shall be conclusive
evidence  as to  third  parties  of his  authority  to act in the  stead  of the
President.

         4.09. The Secretary.  The Secretary  shall: (a) keep the minutes of the
Annual  Meetings  and  Special  Meetings  and  other  meetings  of the  Board of
Directors in one or more books provided for that purpose  (including  records of
consent  actions  taken  by the  shareholders  or the  Board  of  Directors  (or
committees  thereof) without a meeting;  (b) see that all notices are duly given
in  accordance  with  the  provisions  of these  Bylaws  or as  required  by the
Wisconsin  Business  Corporation Law; (c) be custodian of the corporate  records
and of the seal of the  corporation  and see that the seal of the corporation is
affixed to all  documents  the  execution of which on behalf of the  corporation
under its seal is duly authorized;  (d) maintain a record of the shareholders of
the corporation,  in a form that permits  preparation of a list of the names and
addresses of all shareholders, by class or series of shares, if any, and showing
the number and class or series of shares, if any, held by each shareholder;  (e)
sign with the President,  or a Vice  President,  certificates  for shares of the
corporation,  the issuance of which shall have been  authorized by resolution of
the Board of Directors;  (f) have general  charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him by the President, any Vice President or
the Board of Directors.



<PAGE>


         4.10. The Treasurer.  The Treasurer  shall: (a) have charge and custody
of and be  responsible  for all funds and  securities  of the  corporation;  (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such  banks,  trust  companies  or other  depositories  as shall be  selected in
accordance  with the provisions of Section 5.04; and (c) in general  perform all
of the duties incident to the office of Treasurer and have such other duties and
exercise such other  authority as from time to time may be delegated or assigned
to him by the  President,  any Vice  President  or the  Board of  Directors.  If
required  by the Board of  Directors,  the  Treasurer  shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the Board of Directors shall determine.

         4.11.  Controller.  Subject to the control and supervision of the Board
of Directors,  the  Controller  shall have charge of the books of account of the
corporation  and maintain  appropriate  accounting  records and he shall perform
such other duties and exercise such other  authority as from time to time may be
delegated  or assigned to him by the Board of  Directors,  the  President or the
Vice President responsible for financial matters.

         4.12. Assistant  Secretaries and Assistant  Treasurers.  There shall be
such number of Assistant  Secretaries  and Assistant  Treasurers as the Board of
Directors may from time to time  authorize.  The Assistant  Secretaries may sign
with  the  President  or  a  Vice  President  certificates  for  shares  of  the
corporation, the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors  shall  determine.
The Assistant  Secretaries and Assistant Treasurers,  in general,  shall perform
such duties and have such  authority  as shall from time to time be delegated or
assigned to them by the  Secretary  or the  Treasurer,  respectively,  or by the
President, any Vice President or the Board of Directors.

         4.13.  Other  Assistants  and Acting  Officers.  The Board of Directors
shall have the power to appoint,  or to authorize any duly appointed  officer of
the corporation to appoint, any person to act as assistant to any officer, or as
agent for the corporation in his stead, or to perform the duties of such officer
whenever for any reason it is impracticable  for such officer to act personally,
and such assistant or acting officer or other agent so appointed by the Board of
Directors  or an  authorized  officer  shall have the power to  perform  all the
duties of the office to which he is so appointed to be assistant, or as to which
he is so  appointed  to act,  except as such power may be  otherwise  defined or
restricted by the Board of Directors or the appointing officer.

         4.14.  Salaries.  The salaries of the principal officers shall be fixed
from  time to time by the  Board  of  Directors  or,  except  in the case of the
Chairman  of the  Board,  the  Vice  Chairman  of the  Board,  President  or any
Executive Vice President, by a duly authorized committee thereof, and no officer
shall be prevented  from  receiving such salary by reason of the fact that he is
also a director of the corporation.



<PAGE>


                       ARTICLE V. CONTRACTS, LOANS, CHECKS
                      AND DEPOSITS; SPECIAL CORPORATE ACTS

         5.01.  Contracts.  The Board of Directors  may authorize any officer or
officers,  agent or agents, to enter into any contract or execute or deliver any
instrument  in  the  name  of  and  on  behalf  of  the  corporation,  and  such
authorization may be general or confined to specific  instances.  In the absence
of other  designation,  all deeds,  mortgages and  instruments  of assignment or
pledge made by the corporation  shall be executed in the name of the corporation
by the  President  or any Vice  President  and by the  Secretary,  an  Assistant
Secretary,  the  Treasurer  or  an  Assistant  Treasurer;  the  Secretary  or an
Assistant Secretary,  when necessary or required, shall affix the corporate seal
thereto;  and when so executed no other  party to such  instrument  or any third
party shall be required to make any inquiry  into the  authority  of the signing
officer or officers.

         5.02.  Loans. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness  shall be issued in its name unless  authorized
by or under  the  authority  of a  resolution  of the Board of  Directors.  Such
authorization may be general or confined to specific instances.

         5.03. Checks,  Drafts, Etc. All checks,  drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the  corporation  and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.

         5.04.  Deposits.  All funds of the corporation  not otherwise  employed
shall be deposited  from time to time to the credit of the  corporation  in such
banks,  trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.

         5.05. Voting of Securities Owned by the Corporation.  Subject always to
the specific directions of the Board of Directors,  any share or shares of stock
or other securities  issued by any other  corporation and owned or controlled by
the  corporation  may be voted at any meeting of security  holders of such other
corporation  by the  President  or by any  Vice  President  who may be  present.
Whenever,  in the  judgment of the  President  or of any Vice  President,  it is
desirable for the  corporation to execute a proxy or written  consent in respect
to any  share  or  shares  of  stock or other  securities  issued  by any  other
corporation  and  owned  by the  corporation,  such  proxy or  consent  shall be
executed in the name of the  corporation  by the  President or by any one of the
Vice  Presidents  and, if  required,  should be attested by the  Secretary or an
Assistant   Secretary  under  the  corporate  seal  without   necessity  of  any
authorization by the Board of Directors. Any person or persons designated in the
manner above stated as the proxy or proxies of the  corporation  shall have full
right,  power and  authority to vote the share or shares of stock issued by such
other  corporation and owned by the corporation the same as such share or shares
might be voted by the corporation.



<PAGE>


         5.06. No Nominee Procedures.  The corporation has not established,  and
nothing in these Bylaws shall be deemed to  establish,  any procedure by which a
beneficial owner of the corporation's  shares that are registered in the name of
a nominee is  recognized by the  corporation  as the  shareholder  under Section
180.0723 of the Wisconsin Business Corporation Law.

             ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER

         6.01. Certificates for Shares.  Certificates representing shares of the
corporation  shall  be in such  form  consistent  with  the  Wisconsin  Business
Corporation  Law,  as shall  be  determined  by the  Board  of  Directors.  Such
certificates  shall be signed by the  President or a Vice  President  and by the
Treasurer  or  an  Assistant  Treasurer  or by  the  Secretary  or an  Assistant
Secretary.  All  certificates  for shares  shall be  consecutively  numbered  or
otherwise  identified.  The name and  address  of the  person to whom the shares
represented  thereby  are  issued,  with the number of shares and date of issue,
shall be  registered  upon the  stock  transfer  books of the  corporation.  All
certificates  surrendered to the  corporation for transfer shall be canceled and
no new  certificate  shall be issued  until the  former  certificate  for a like
number of shares shall have been surrendered and canceled, except as provided in
Section 6.06.

         6.02.  Facsimile Signature and Seal. The seal of the corporation on any
certificates  for shares may be a facsimile.  The signatures of the President or
Vice  President and the Treasurer or Assistant  Treasurer or the Secretary or an
Assistant  Secretary upon a certificate  may be facsimiles if the certificate is
manually countersigned (a) by a transfer agent other than the corporation or its
employee, or (b) by a registrar other than the corporation or its employee.

         6.03. Signature by Former Officers. The validity of a share certificate
is not affected if a person who signed the  certificate  (either  manually or in
facsimile)  no longer  holds  office  when the  certificate  is  issued.  If any
officer,  who has signed or whose  facsimile  signature has been placed upon any
certificate for shares, has ceased to be such officer before such certificate is
issued,  it may be issued by the corporation  with the same effect as if he were
such officer at the date of its issue.

         6.04. Transfer of Shares. Prior to due presentment of a certificate for
shares for  registration  of transfer the  corporation  may treat the registered
owner of such  shares as the person  exclusively  entitled  to vote,  to receive
notifications  and  otherwise to exercise all the rights and powers of an owner.
Where a certificate for shares is presented to the corporation with a request to
register for transfer,  the corporation  shall not be liable to the owner or any
other person suffering loss as a result of such  registration of transfer if (a)
there  were  on  the  certificate  the  necessary  endorsements,   and  (b)  the
corporation  had no duty to inquire into adverse  claims or has  discharged  any
such  duty.  The  corporation  may  require   reasonable   assurance  that  such
endorsements   are  genuine  and  effective  and  compliance   with  such  other
regulations as may be prescribed under the authority of the Board of Directors.

         6.05.  Restrictions  on  Transfer.  The  face or  reverse  side of each
certificate  representing  shares  shall  bear  a  conspicuous  notation  of any
restriction imposed by the corporation upon the transfer of such shares.



<PAGE>


         6.06. Lost,  Destroyed or Stolen  Certificates.  The Board of Directors
may  direct a new  certificate  or  certificates  to be  issued  in place of any
certificate or certificates  theretofore  issued by the  corporation  alleged to
have been lost,  stolen or  destroyed,  upon the making of an  affidavit of that
fact by the  person  claiming  the  certificate  of stock to be lost,  stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its  discretion  and as a condition  precedent to the
issuance  thereof,  require  the  person  requesting  such  new  certificate  or
certificates, or his or her legal representative, to give the corporation a bond
in such sum as it may  direct as  indemnity  against  any claim that may be made
against the  corporation  with respect to the  certificate  alleged to have been
lost, stolen or destroyed.

         6.07.  Consideration  for Shares.  The Board of Directors may authorize
shares to be issued for  consideration  consisting of any tangible or intangible
property  or benefit  to the  corporation,  including  cash,  promissory  notes,
services  performed,  contracts for services to be performed or other securities
of the corporation. Before the corporation issues shares, the Board of Directors
shall determine that the consideration received or to be received for the shares
to be  issued is  adequate.  The  determination  of the  Board of  Directors  is
conclusive  insofar as the adequacy of consideration  for the issuance of shares
relates to whether the shares are validly issued,  fully paid and nonassessable.
The  corporation  may  place in escrow  shares  issued in whole or in part for a
contract for future services or benefits,  a promissory  note, or other property
to be issued in the future, or make other  arrangements to restrict the transfer
of the shares,  and may credit  distributions  in respects of the shares against
their purchase price, until the services are performed, the benefits or property
are received or the promissory  note is paid. If the services are not performed,
the benefits or property are not  received or the  promissory  note is not paid,
the  corporation  may  cancel,  in whole  or in part,  the  shares  escrowed  or
restricted and the distributions credited.

         6.08.  Stock  Regulations.  The Board of Directors shall have the power
and authority to make all such further rules and  regulations  not  inconsistent
with the statues of the State of Wisconsin as it may deem  expedient  concerning
the issue, transfer and registration of certificates  representing shares of the
corporation.

                                ARTICLE VII. SEAL

                  7.01.  The Board of Directions  shall provide a corporate seal
for the  corporation  which shall be  circular in form and shall have  inscribed
thereon  the name of the  corporation,  and the state of  incorporation  and the
words, "Corporate Seal."

                          ARTICLE VIII. INDEMNIFICATION

                  8.01. Certain Definitions.  All capitalized terms used in this
Article VIII and not  otherwise  hereinafter  defined in this Section 8.01 shall
have the meaning set forth in Section  180.0850 of the  Statute.  The  following
terms  (including  any plural forms  thereof) used in this Article VIII shall be
defined as follows:



<PAGE>


         (a) "Affiliate"  shall include,  without  limitation,  any corporation,
partnership,  joint venture,  employee  benefit plan,  trust or other enterprise
that directly or indirectly through one or more  intermediaries,  controls or is
controlled by, or is under common control with, the Corporation.

         (b)  "Authority"  shall mean the entity  selected  by the  Director  or
Officer to  determine  his or her right to  indemnification  pursuant to Section
8.04.

         (c)  "Board"  shall mean the entire then  elected and serving  Board of
Directors of the  Corporation,  including all members thereof who are Parties to
the subject Proceeding or any related Proceeding.

         (d)  "Breach of Duty" shall mean the  Director  or Officer  breached or
failed to perform his or her duties to the  Corporation and his or her breach of
or failure to perform those duties is  determined,  in  accordance  with Section
8.04, to constitute  misconduct  under Section  180.0851 (2) (a) 1, 2, 3 or 4 of
the Statute.

         (e)  "Corporation,"  as used  herein and as defined in the  Statute and
incorporated  by reference  into the  definitions  of certain other  capitalized
terms used herein, shall mean this Corporation,  including,  without limitation,
any  successor  corporation  or entity  to this  Corporation  by way of  merger,
consolidation or acquisition of all or substantially all of the capital stock or
assets of this Corporation.

         (f)  "Director  or  Officer"  shall have the  meaning  set forth in the
Statute;  provided,  that,  for  purposes  of this  Article  VIII,  it  shall be
conclusively  presumed  that any  Director  or Officer  serving  as a  director,
officer, partner, trustee, member of any governing or decision-making committee,
employee  or agent of an  Affiliate  shall be so serving  at the  request of the
Corporation.

         (g) "Disinterested Quorum" shall mean a quorum of the Board who are not
Parties to the subject Proceeding or any related Proceeding.

         (h) "Party" shall have the meaning set forth in the Statute;  provided,
that, for purposes of this Article VIII, the term "Party" shall also include any
Director or Officer or  employee  who is or was a witness in a  Proceeding  at a
time when he or she has not otherwise been formally named a Party thereto.

         (i)  "Proceeding"  shall  have the  meaning  set forth in the  Statute;
provided,  that,  in  accordance  with  Section  180.0859 of the Statute and for
purposes of this  Article  VIII,  the term  "Proceeding"  shall also include all
Proceedings  (i) brought under (in whole or in part) the Securities Act of 1933,
as amended,  the Exchange Act, their respective state  counterparts,  and/or any
rule or regulation  promulgated under any of the foregoing;  (ii) brought before
an Authority or otherwise to enforce rights  hereunder;  (iii) any appeal from a
Proceeding;  and (iv) any  Proceeding  in which the  Director  or  Officer  is a
plaintiff or  petitioner  because he or she is a



<PAGE>

Director or Officer;  provided,  however,  that any such  Proceeding  under this
subsection (iv) must be authorized by a majority vote of a Disinterested Quorum.

         (j) "Statute" shall mean Sections 180.0850 through 180.0859, inclusive,
of the Wisconsin  Business  Corporation Law as the same shall then be in effect,
including any amendments thereto,  but, in the case of any such amendment,  only
to the extent such  amendment  permits or requires  the  Corporation  to provide
broader  indemnification  rights than the  Statute  permitted  or  required  the
Corporation to provide prior to such amendment.

         8.02  Mandatory  Indemnification.  To the fullest  extent  permitted or
required by the Statute,  the Corporation  shall indemnify a Director or Officer
against all Liabilities  incurred by or on behalf of such Director or Officer in
connection with a Proceeding in which the Director or Officer is a Party because
he or she is a Director or Officer.

         8.03.  Procedural Requirements.

         (a) A Director or Officer who seeks  indemnification under Section 8.02
shall make a written  request  therefor to the  Corporation.  Subject to Section
8.03 (b),  within 60 days of the  Corporation's  receipt  of such  request,  the
Corporation shall pay or reimburse the Director or Officer for the entire amount
of  Liabilities  incurred  by the  Director  or Officer in  connection  with the
subject Proceeding (net of any Expenses  previously advanced pursuant to Section
8.05).

         (b) No indemnification  shall be required to be paid by the Corporation
pursuant to Section 8.02 if,  within such 120-day  period,  (i) a  Disinterested
Quorum,  by a majority  vote  thereof,  determines  that the Director or Officer
requesting  indemnification  engaged in misconduct constituting a Breach of Duty
of (ii) a Disinterested Quorum cannot be obtained.

         (c) In either case of nonpayment pursuant to Section 8.03(b), the Board
shall  immediately  authorize by resolution  that an  Authority,  as provided in
Section 8.04,  determine whether the Director's or Officer's conduct constituted
a Breach  of Duty  and,  therefore,  whether  indemnification  should  be denied
hereunder.

         (d) (i) If the Board does not  authorize an Authority to determine  the
Director's or Officer's right to  indemnification  hereunder within such 120-day
period and/or (ii) if  indemnification of the requested amount of Liabilities is
paid by the Corporation, then it shall be conclusively presumed for all purposes
that a Disinterested  Quorum has  affirmatively  determined that the Director or
Officer did not engage in misconduct  constituting  a Breach of Duty and, in the
case of subsection (i) above (but not subsection (ii)),  indemnification  by the
Corporation of the requested amount of Liabilities shall be paid to the Director
or Officer immediately.

         8.04. Determination of Indemnification.

         (a) If the Board  authorizes  an Authority to determine a Director's or
Officer's right to  indemnification  pursuant to Section 8.03, then the Director
or Officer  requesting



<PAGE>

indemnification shall have the absolute discretionary authority to select one of
the following as such Authority:

                  (i) An independent legal counsel;  provided, that such counsel
        shall be mutually selected by such Director or Officer and by a majority
        vote of a Disinterested  Quorum or, if a Disinterested  Quorum cannot be
        obtained, then by a majority vote of the Board; or

                  (ii) A panel of three arbitrators  selected from the panels of
        arbitrators  of  the  American  Arbitration  Association  in  Milwaukee,
        Wisconsin;  provided,  that (A) one arbitrator shall be selected by such
        Director  or  Officer,  the second  arbitrator  shall be  selected  by a
        majority vote of a Disinterested  Quorum or, if a  Disinterested  Quorum
        cannot be obtained,  then by a majority vote of the Board, and the third
        arbitrator shall be selected by the two previously selected arbitrators,
        and (B) in all other  respects,  such  panel  shall be  governed  by the
        American Arbitration  Association's then existing Commercial Arbitration
        Rules.

         (b) In any such  determination  by the selected  Authority  there shall
exist a rebuttable  presumption that the Director's or Officer's conduct did not
constitute  a Breach  of Duty and that  indemnification  against  the  requested
amount of Liabilities is required. The burden of rebutting such a presumption by
clear and convincing  evidence  shall be on the  Corporation or such other party
asserting that such indemnification should not be allowed.

         (c) The Authority shall make its determination  within 60 days of being
selected and shall submit a written opinion of its conclusion  simultaneously to
both the Corporation and the Director or Officer.

         (d)  If the  Authority  determines  that  indemnification  is  required
hereunder,  the Corporation shall pay the entire requested amount of Liabilities
(net of any Expenses  previously  advanced pursuant to Section 8.05),  including
interest thereon at a reasonable rate, as determined by the Authority, within 10
days of receipt of the Authority's opinion;  provided, that, if it is determined
by the  Authority  that a Director  or Officer is  entitled  to  indemnification
against Liabilities' incurred in connection with some claims, issues or matters,
but  not as to  other  claims,  issues  or  matters,  involved  in  the  subject
Proceeding,  the Corporation  shall be required to pay (as set forth above) only
the amount of such requested Liabilities as the Authority shall deem appropriate
in light of all of the circumstances of such Proceeding.

         (e) The determination by the Authority that indemnification is required
hereunder  shall  be  binding  upon  the  Corporation  regardless  of any  prior
determination that the Director or Officer engaged in a Breach of Duty.

         (f) All  Expenses  incurred  in the  determination  process  under this
Section 8.04 by either the  Corporation  or the Director or Officer,  including,
without limitation, all Expenses of the selected Authority, shall be paid by the
Corporation.



<PAGE>


         8.05.  Mandatory Allowance of Expenses.

         (a) The Corporation  shall pay or reimburse from time to time or at any
time,  within 10 days after the receipt of the  Director's or Officer's  written
request  therefor,  the  reasonable  Expenses of the Director or Officer as such
Expenses are incurred; provided, the following conditions are satisfied:

                  (i) The Director or Officer  furnishes to the  Corporation  an
         executed  written  certificate  affirming  his or her good faith belief
         that he or she has not engaged in misconduct which constitutes a Breach
         of Duty; and

                  (ii) The Director or Officer  furnishes to the  Corporation an
         unsecured  executed written  agreement to repay any advances made under
         this Section 8.05 if it is ultimately  determined by an Authority  that
         he or she is not entitled to be indemnified by the Corporation for such
         Expenses pursuant to Section 8.04.

         (b) If the  Director  or  Officer  must repay any  previously  advanced
Expenses  pursuant to this Section  8.05,  such Director or Officer shall not be
required to pay interest on such amounts.

         8.06.  Indemnification and Allowance of Expenses of Certain Others.

         (a) The Board  may,  in its sole and  absolute  discretion  as it deems
appropriate,  pursuant  to a majority  vote  thereof,  indemnify  a director  or
officer of an Affiliate (who is not otherwise  serving as a Director or Officer)
against all Liabilities,  and shall advance the reasonable Expenses, incurred by
such director or officer in a Proceeding to the same extent hereunder as if such
director or officer incurred such  Liabilities  because he or she was a Director
or Officer,  if such director or officer is a Party thereto because he or she is
or was a director or officer of the Affiliate.

         (b) The  Corporation  shall indemnify an employee who is not a Director
or  Officer,  to the  extent  he or she has been  successful  on the  merits  or
otherwise  in  defense  of a  Proceeding,  for  all  Expenses  incurred  in  the
Proceeding  if the employee was a Party because he or she was an employee of the
Corporation.

         (c) The Board  may,  in its sole and  absolute  discretion  as it deems
appropriate,  pursuant to a majority vote thereof,  indemnify (to the extent not
otherwise provided in Section 8.06(b) hereof) against  Liabilities  incurred by,
and/or  provide for the  allowance  of  reasonable  Expenses  of, an employee or
authorized agent of the Corporation acting within the scope of his or her duties
as such and who is not otherwise a Director or Officer.

         8.07. Insurance. The Corporation may purchase and maintain insurance on
behalf of a Director or Officer or any  individual  who is or was an employee or
authorized  agent of the Corporation  against any Liability  asserted against or
incurred by such  individual  in his or her capacity as such or arising from his
or her status as such,  regardless  of whether  the 



<PAGE>


Corporation  is required or permitted to  indemnify  against any such  Liability
under this Article VIII.

         8.08.  Severability.  If any  provision  of this  Article VIII shall be
deemed  invalid  or  inoperative,  or  if  a  court  of  competent  jurisdiction
determines  that any of the  provisions of this Article VIII  contravene  public
policy,  this Article VIII shall be construed so that the  remaining  provisions
shall not be affected,  but shall remain in full force and effect,  and any such
provisions  which are invalid or inoperative or which  contravene  public policy
shall  be  deemed,  without  further  action  or  deed  by or on  behalf  of the
Corporation,  to be modified,  amended  and/or  limited,  but only to the extent
necessary to render the same valid and enforceable;  it being understood that it
is the  Corporation's  intention to provide the  Directors and Officers with the
broadest  possible  protection  against personal  liability  allowable under the
Statute.

         8.09. Nonexclusively of Article VIII. The rights of a Director, Officer
or employee (or any other  person)  granted under this Article VIII shall not be
deemed exclusive of any other rights to indemnification  against  Liabilities or
allowance  of Expenses  which the  Director,  Officer or employee (or such other
person) may be entitled to under any written agreement,  Board resolution,  vote
of shareholders of the Corporation or otherwise,  including, without limitation,
under the  Statute.  Nothing  contained  in this Article VIII shall be deemed to
limit the Corporation's  obligations to indemnify  against  Liabilities or allow
Expenses to a Director, Officer or employee under the Statute.

         8.10.  Contractual  Nature of Article  VIII;  Repeal or  Limitation  of
Rights.  This  Article  VIII  shall  be  deemed  to be a  contract  between  the
Corporation  and each Director,  Officer and employee of the Corporation and any
repeal or other  limitation  of this Article VIII or any repeal or limitation of
the  Statute  or any  other  applicable  law  shall  not  limit  any  rights  of
indemnification  against  Liabilities  or allowance of Expenses then existing or
arising  out of events,  acts or  omissions  occurring  prior to such  repeal or
limitation,  including, without limitation, the right to indemnification against
Liabilities or allowance of Expenses for Proceedings commenced after such repeal
or  limitation  to enforce this  Article VIII with regard to acts,  omissions or
events arising prior to such repeal or limitation.

                             ARTICLE IX. FISCAL YEAR

         9.01. The fiscal year of the corporation shall be the calendar year.

                              ARTICLE X. AMENDMENTS

         10.01. By Shareholders. Except as otherwise provided in the articles of
incorporation  of the corporation or these Bylaws,  these Bylaws may be altered,
amended or  repealed  and new Bylaws may be adopted by the  shareholders  at any
Annual Meeting or Special Meeting at which a quorum is in attendance.



<PAGE>


         10.02.  By Directors.  Except as otherwise  provided in the articles of
incorporation  of the  corporation  or these  Bylaws,  these  Bylaws may also be
altered,  amended  or  repealed  and new  Bylaws  may be adopted by the Board of
Directors by affirmative  vote of a majority of the number of directors  present
at any  meeting  at which a quorum is in  attendance;  provided,  however,  that
notice of any  proposal  to take any such  action  shall have been given to each
director  not less than 72 hours  prior to the meeting by one of the methods set
forth  in  Section  3.05;  but no Bylaw  adopted  by the  shareholders  shall be
amended,  repealed or readopted  by the Board of  Directors  unless the Bylaw so
adopted so permits.

         10.03. Implied Amendments. Except as otherwise provided in the articles
of  incorporation  of the  corporation  or these  Bylaws,  any  action  taken or
authorized  by the  shareholders  or by the Board of  Directors,  which would be
inconsistent  with the  Bylaws  then in  effect  but is taken or  authorized  by
affirmative  vote of not  less  than the  number  of  shares  or the  number  of
directors  required to amend the Bylaws so that the Bylaws  would be  consistent
with such  action,  shall be given the same effect as though the Bylaws had been
temporarily  amended or  suspended  so far,  but only so far, as is necessary to
permit the specific action so taken or authorized.






                                                                    EXHIBIT 10.7

                           MGIC INVESTMENT CORPORATION
                      1991 STOCK INCENTIVE PLAN, AS AMENDED

         1. Purpose.  The purpose of the MGIC Investment  Corporation 1991 Stock
Incentive  Plan,  as  amended  to March 6, 1997 and as  proposed  to be  further
amended in  accordance  with  amendments  adopted  by the Board (as  hereinafter
defined) on March 6, 1997 (the "Amended Plan"), is to secure for MGIC Investment
Corporation  (the "Company") and its subsidiaries the benefits of the additional
incentive  inherent in the  ownership of the Company's  Common Stock,  $1.00 par
value (the "Common Stock"),  by certain key employees and executive  officers of
the Company and its subsidiaries and directors of the Company, who are important
to the  success  and the growth of the  business  of the Company and to help the
Company secure and retain the services of such persons.  In addition to granting
stock options ("Options"), the Amended Plan provides for a deposit share program
("Deposit Share Program") and for the award of Common Stock,  subject to certain
terms,  conditions and restrictions  ("Restricted  Stock").  It is intended that
certain of the  Options  issued  pursuant to the  Amended  Plan will  constitute
incentive  stock  Options  ("Incentive  Stock  Options")  within the  meaning of
Section
 422 of the Internal  Revenue Code of 1986, as amended (the "Code"),  and
the remainder of the Options issued pursuant to the Amended Plan will constitute
nonstatutory  Options. The Options and Restricted Stock are hereinafter referred
to collectively as "Awards".

         2. Administration.

                  (a)  Stock  Award   Committee.   The  Amended  Plan  shall  be
         administered  under the  supervision  of the Board of  Directors of the
         Company (the "Board"),  which shall exercise its powers,  to the extent
         herein  provided,  through the agency of the Stock Award Committee (the
         "Committee"),  which shall consist of at least two members and shall be
         appointed  from  among the  members  of the  Board.  Any  member of the
         Committee  may resign or be removed by the Board and new members may be
         appointed  by  the  Board.   Additionally,   the  Committee   shall  be
         constituted  so as  to  satisfy  at  all  times  the  outside  director
         requirement  of Code Section 162(m) and the  regulations  thereunder or
         any substitute provision therefor.

                  (b) Rules and Regulations.  The Committee,  from time to time,
         may adopt rules and  regulations  for carrying out the  provisions  and
         purposes of the Amended Plan. The  interpretation  and  construction of
         any  provision  of the Amended  Plan by the  Committee  shall be final,
         conclusive and binding on all interested parties. In order to carry out
         its  responsibilities,  the  Committee  may execute such  documents and
         enter into such agreements and make all determinations deemed necessary
         or advisable to effectuate the purposes of the Amended Plan.


 
<PAGE>

                  (c) Authority.  The Committee shall have all the powers vested
         in it by  the  terms  of the  Amended  Plan,  such  powers  to  include
         exclusive  authority  (subject  to the  terms of the  Amended  Plan and
         applicable  law) to select the persons to be granted  Awards  under the
         Amended  Plan,  to determine  the type,  size and terms of Awards to be
         made to each person selected, to determine the time when Awards will be
         granted and to establish  objectives and conditions for earning Awards.
         The Committee  shall  determine which Options are to be Incentive Stock
         Options and which are to be nonstatutory Options and shall in each case
         enter into a written Option  agreement  with the recipient  thereof (an
         "Option Agreement") setting forth the terms and conditions of the grant
         and the exercise of the subject Option,  as determined by the Committee
         in  accordance  with the Amended Plan. To the extent that the aggregate
         fair market value of Common Stock with respect to which Incentive Stock
         Options  under the  Amended  Plan and any other plans of the Company or
         its  subsidiaries  are  exercisable  by  an  Employee  (as  hereinafter
         defined) for the first time during any calendar year exceeds  $100,000,
         such Options shall be treated as Options which are not Incentive  Stock
         Options. To the extent the Code is amended from time to time to provide
         additional  or different  limitations  on the grant of Incentive  Stock
         Options,  the  foregoing  limitation  shall be considered to be amended
         accordingly.  The  Committee  shall  have full power and  authority  to
         administer  and  interpret  the  Amended  Plan and to adopt such rules,
         regulations,   agreements,   guidelines   and   instruments   for   the
         administration  of the Amended Plan and for the conduct of its business
         as  the  Committee  deems  necessary  or  advisable.   The  Committee's
         interpretation   of  the  Amended  Plan,  and  all  actions  taken  and
         determinations  made by the Committee  pursuant to the powers vested in
         it, shall be conclusive and binding on all parties concerned, including
         the Company,  its  subsidiaries,  its  shareholders,  Participants  (as
         defined  in  Section 4 below) and any  employee  of the  Company or its
         subsidiaries.  The  Committee  may  delegate  duties  to any  person or
         persons;  provided,  that, no  delegation  of duties is permitted  with
         respect to (i) any grant,  award or other  acquisition from the Company
         if the person or persons to whom duties are delegated would not satisfy
         the standard of Rule 16b-3(d)(1)  under the Securities  Exchange Act of
         1934,  as  amended,  or  any  substitute   provision  therefor  or  the
         requirements  of Section 162(m) of the Code and (ii) any disposition to
         the Company if the person or persons to whom duties are delegated would
         not satisfy the standard of Rule 16b-3(d)(1).

                  (d) Records.  The Committee shall maintain a written record of
         its proceedings. A majority of the Committee members shall constitute a
         quorum for any meeting.  Any  determination  or action of the Committee
         may be made or taken by a majority of the  members  present at any such
         meeting,  or without a meeting by a  resolution  or written  memorandum
         concurred in by all of the members then in office.


                                       2

<PAGE>


         3. Stock Subject to Awards.  The  aggregate  number of shares of Common
Stock for which  Awards may be granted  under the Amended  Plan shall not exceed
7,000,000 shares,  subject to adjustment as provided in Section 8 below. If, and
to the extent that,  Options  granted under the Amended Plan terminate or expire
without having been exercised,  or shares of Restricted  Stock under the Amended
Plan are forfeited,  the shares covered by such terminated or expired Options or
forfeited  Restricted  Stock,  as the case may be, may be the subject of further
grants under the Amended Plan.  Restricted  Stock granted under the Amended Plan
and shares issued upon the exercise of any Option granted under the Amended Plan
may be, at the Company's  discretion,  shares of authorized and unissued  Common
Stock,  shares  of  issued  Common  Stock  held  in the  Company's  treasury  or
reacquired shares or any combination thereof. The foregoing notwithstanding, the
maximum number of shares of Restricted  Stock for which Awards may be granted is
400,000 shares.

         4. Persons Eligible.  Under the Amended Plan, (i) Awards may be granted
to any key  employee or  executive  officer of the Company who is an employee of
the Company or its subsidiaries,  including any employee who is also a member of
the Board (an "Employee")  and (ii) shares of Restricted  Stock shall be awarded
to each  Non-Employee  Director  under the Deposit  Share  Program,  as provided
herein.  "Non-Employee  Director"  means a  member  of the  Board  who is not an
employee of the Company or of any person,  directly or indirectly,  controlling,
controlled  by or under  common  control with the Company and is not a member of
the Board  representing  a holder of any class of securities of the Company.  In
determining  the  Employees  to whom  Awards are to be granted and the number of
shares to be covered by an Award,  the Committee  shall take into  consideration
the Employee's present and potential  contribution to the success of the Company
and such other  factors  as the  Committee  may deem  proper  and  relevant.  An
Employee  receiving an Award,  and a Non-Employee  Director  receiving shares of
Restricted Stock under the Amended Plan are individually hereinafter referred to
as a "Participant". In no event may Awards be granted to any one Participant for
more than twenty percent (20%) of the aggregate number of shares of Common Stock
for which  Awards may be granted  under the  Amended  Plan,  including  for this
purpose Awards granted to such  Participant  which are  subsequently  cancelled,
forfeited or otherwise terminated.

         5. Provisions Applicable to Options.

                  (a)  Price and Type of  Options.  The  purchase  price of each
         share of Common Stock under any Option  granted  under the Amended Plan
         shall be as  determined by the  Committee in its sole  discretion,  but
         shall not be less than the Fair Market Value thereof  (determined  in a
         manner  equivalent to the  determination  under Section 6(e), unless in
         the case of  Incentive  Stock  Options,  the Code  requires a different
         method, in which case the method required by the Code shall be followed
         for Incentive  Stock Options) on the date of grant.  The type of Option
         granted  shall be as  determined  by the  Committee,  but any Incentive
         Stock Options  granted shall be subject to such terms and conditions as
         are required for the  qualification  as such by the Code on the date of
         grant.  Any Options


                                       3

<PAGE>


         granted under the Amended Plan shall be clearly identified as Incentive
         Stock Options or nonstatutory stock Options.

                  (b)  Exercisability of Options.  The Committee shall determine
         when and to what extent an Option shall be vested;  and may provide for
         Options to be vested based upon such  performance  related goals as the
         Committee  in  its  sole  discretion  deems  appropriate  ("Performance
         Goals").  The Committee may, in its sole discretion,  also provide that
         some  or  all  Options  granted  shall  immediately  become  vested  or
         exercisable  as of a date  fixed  by the  Committee  upon a  change  in
         control of the Company as defined by the Committee or in the event of a
         sale,  lease or transfer of all or  substantially  all of the Company's
         assets,  equity securities or businesses,  or merger,  consolidation or
         other business combination of the Company. The Committee may also if it
         so elects  make any such action  contingent  upon  consummation  of the
         event which prompted the action.

                  (c)  Termination of Options.  The  unexercised  portion of any
         Option granted under the Amended Plan shall  automatically  and without
         notice  terminate  and become null and void at the time of the earliest
         to occur of the following:

                           (i)  Thirty  (30) days after the  termination  of the
                  Participant's employment with the Company and all subsidiaries
                  thereof  for  any  reason  (including,   without   limitation,
                  disability, or termination by the Company and all subsidiaries
                  thereof,  with or without  cause)  other than by reason of the
                  Participant's  death,  retirement  from  the  Company  and all
                  subsidiaries  thereof  after  reaching age 55 and after having
                  been employed by the Company or any subsidiary  thereof for at
                  least  seven (7) years or a leave of absence  approved  by the
                  Company;

                           (ii) Three  Hundred  Sixty-Five  (365) days after the
                  termination of the  Participant's  employment with the Company
                  and all  subsidiaries  thereof by reason of the  Participant's
                  death, or by reason of the  Participant's  retirement from the
                  Company and all subsidiaries thereof after reaching age 55 and
                  after  having been  employed by the Company or any  subsidiary
                  thereof for at least seven (7) years;

                           (iii)Thirty (30) days after expiration or termination
                  of a leave of  absence  approved  by the  Company  unless  the
                  Participant   becomes  reemployed  with  the  Company  or  any
                  subsidiary  prior to such  30-day  period  in which  event the
                  Option shall continue in effect in accordance with its terms;

                           (iv)  The   expiration   of  the  Option  Period  (as
                  hereinafter defined); or


                                       4

<PAGE>


                           (v) In whole or in part, at such earlier time or upon
                  the  occurrence  of such earlier event as the Committee in its
                  discretion may have provided upon the granting of such Option.

                  (d) Term of Options. The term of each Option granted under the
         Amended Plan will be for such period (herein referred to as the "Option
         Period")  of not less  than  seven (7) years and not more than ten (10)
         years as the Committee shall determine. With respect to Incentive Stock
         Options,  such term may not  exceed  ten (10)  years or such other term
         provided  in  the  Code.  Each  Option  shall  be  subject  to  earlier
         termination as described under "Termination of Options" in subparagraph
         (c)  above.  An  Option  shall be  considered  granted  on the date the
         Committee  acts to grant  the  Option or such  date  thereafter  as the
         Committee shall specify.

                  (e)  Exercise of Options.  Options  granted  under the Amended
         Plan  may be  exercised  by the  Participant,  as to all or part of the
         shares  covered   thereby,   in  accordance  with  the  terms  of  such
         Participant's Option Agreement. A partial exercise of an Option may not
         be made with  respect to fewer than ten (10)  shares  unless the shares
         purchased are the total number then  available  for purchase  under the
         Option. A Participant shall exercise such Option by delivering ten (10)
         days'  (or such  shorter  period as the  Company  shall  permit)  prior
         written  notice of the  exercise  thereof on a form  prescribed  by the
         Company  to the  Secretary  of the  Company  at its  principal  office,
         specifying the number of shares to be purchased.  The purchase price of
         the shares as to which an Option  shall be  exercised  shall be paid in
         full in cash or its equivalent at the time of exercise.

                  The   Participant   shall  be   responsible   for  paying  all
         withholding  taxes,  if any,  applicable to any Option exercise and the
         Company  shall  have the right to take any action  necessary  to insure
         that the Participant pays the required  withholding taxes. Upon payment
         of the Option purchase price and the required  withholding  taxes,  the
         Company  shall cause a  certificate  for the shares so  purchased to be
         delivered to the Participant.

                  (f)   Stock   Withholding.   Notwithstanding   the   terms  of
         subparagraph (e) above, a Participant shall be permitted to satisfy the
         Company's  withholding tax requirements by electing to have the Company
         withhold shares of Common Stock  otherwise  issuable to the Participant
         or to  deliver  to the  Company  shares of Common  Stock  having a fair
         market value on the date income is recognized  pursuant to the exercise
         of an Option equal to the amount required to be withheld.  The election
         shall be made in writing and shall be made  according to such rules and
         in such form as the Committee may determine.

                  (g) Exercise of Options  following  Participant's  Death. If a
         Participant  dies ("Deceased  Participant")  while in the employ of the
         Company,  and if the Deceased  Participant's  death occurs prior to the
         date the Option terminates, regardless of whether the Option is subject
         to exercise  under the terms of the Option,  such Option  shall  become


                                       5

<PAGE>


         immediately  vested and exercisable by the personal  representative  of
         the   Deceased   Participant   or  the  person  to  whom  the  Deceased
         Participant's  rights under the Option would be  transferred  by law or
         applicable  laws of descent and  distribution.  The  Committee may also
         provide as to Options  outstanding as of January 1, 1994 for a right to
         surrender the Option to the Company at a price equal to the  difference
         between  the  aggregate  Option  price and the fair value of the Common
         Stock subject to the Option as of the Deceased Participant's death. The
         surrender  shall also be subject  to such terms and  conditions  as are
         determined by the Committee and set forth in the Option Agreement.

                  (h)  Non-Transferability  of Options.  Except to the extent as
         may be permitted under rules established by the Committee, an Option or
         any right evidenced thereby shall not be transferable otherwise than by
         will or the laws of descent and distribution,  and shall be exercisable
         during the  Participant's  lifetime  only by him or by his  guardian or
         legal representative.

                  (i) Rights of Participant.  The Participant shall have none of
         the rights of a  shareholder  of the Company with respect to the shares
         subject  to  any  Option   granted  under  the  Amended  Plan  until  a
         certificate or certificates for such shares shall have been issued upon
         the exercise of any Option.

         6. Restricted Stock Awards. The Committee may make awards of Restricted
Stock ("Restricted  Stock Awards") to Participants who are Employees,  and shall
make Awards to Non-Employee Directors, subject to the provisions of this Section
6.

                  (a) Restricted Stock Agreements. Restricted Stock Awards shall
         be  evidenced  by  Restricted  Stock  agreements   ("Restricted   Stock
         Agreements")  which shall  conform to the  requirements  of the Amended
         Plan and may contain such other  provisions (such as provisions for the
         protection of Restricted Stock in the event of mergers, consolidations,
         dissolutions  and  liquidations  affecting  either the Restricted Stock
         Agreement or the Common Stock issued thereunder) as the Committee shall
         deem advisable.

                  (b)  Payment of  Restricted  Stock  Awards.  Restricted  Stock
         Awards  shall be made by  delivering  to the  Participant  or an Escrow
         Agent (as defined below) a certificate or certificates  for such shares
         of  Restricted  Stock of the Company,  as  determined  by the Committee
         ("Restricted  Shares"),  which Restricted Shares shall be registered in
         the name of such  Participant.  The  Participant  shall have all of the
         rights of a holder of Common  Stock  with  respect  to such  Restricted
         Shares  except  as to such  restrictions  as  appear on the face of the
         certificate.  The Committee may designate the Company or one or more of
         its employees to act as custodian or escrow agent for the  certificates
         ("Escrow Agent").


                                       6

<PAGE>


                  (c) Terms,  Conditions  and  Restrictions.  Restricted  Shares
         shall be subject to such terms and  conditions,  including  vesting and
         forfeiture provisions, if any, and to such restrictions against resale,
         transfer or other  disposition  as may be provided in this Amended Plan
         and,  consistent  therewith,  as may be  determined by the Committee at
         such time as it grants a Restricted  Stock Award to a Participant.  Any
         new or different  Restricted Shares or other securities  resulting from
         any adjustment of such  Restricted  Shares pursuant to Section 8 hereof
         shall be subject to the same terms,  conditions and restrictions as the
         Restricted  Shares prior to such  adjustment.  The Committee may in its
         discretion, remove, modify or accelerate the release of restrictions on
         any  Restricted  Shares  as it deems  appropriate.  In the event of the
         Participant's  death, all transfers or other  restrictions to which the
         Participant's  Restricted Shares are subject shall  immediately  lapse,
         and the Deceased Participant's legal representative or person receiving
         such Restricted Shares under the Deceased  Participant's  will or under
         the laws of descent and distribution  shall take such Restricted Shares
         free of any such transfer or other restrictions.

                  (d) Dividends and Voting Rights.  Except as otherwise provided
         by the Committee,  during the restricted  period the Participant  shall
         have the right to receive  dividends from and to vote the Participant's
         Restricted Shares.

                  (e) Deposit Share Program. Subject to the provisions set forth
         below and subject to rules  established by the  Committee,  pursuant to
         the Company's Deposit Share Program, (1) Employees may elect to acquire
         shares of Common  Stock  with a Fair  Market  Value up to a  percentage
         designated  by the  Committee  of  cash  bonuses  under  the  Company's
         incentive  compensation  programs designated by the Committee,  and (2)
         Non-Employee  Directors  shall be entitled to acquire  shares of Common
         Stock with a Fair Market  Value equal to up to 50% of the  compensation
         of such Non-Employee Director for service as a director of the Company,
         including  for service as a member of a Committee of the Board,  during
         the preceding calendar year (in each case,  "Deposit Shares").  Deposit
         Shares shall be issued in an amount which the Deposit Share Participant
         (as defined in Section  6(e)(i)  below) elects to use to acquire Common
         Stock (subject to limits  provided in this Section 6(e)) divided by the
         Fair  Market  Value of a share of Common  Stock on the  Award  Date (as
         defined in Section 6(e)(ii) below). For purposes hereof, the term "Fair
         Market  Value" shall be as  determined  by the  Committee,  except that
         during any period the Common Stock is traded on a recognized  exchange,
         Fair  Market  Value  shall be based upon the last sales price of Common
         Stock on the principal  securities exchange on which the same is traded
         on the Award Date or if no sales of Common  Stock  have taken  place on
         such date,  the last sales price on the first date  following the Award
         Date on which  sales  occur.  Deposit  Share  Participants  electing to
         deposit Deposit Shares with the Company under the Deposit Share Program
         and receive Restricted Stock Awards in connection therewith shall do so
         as follows:


                                       7

<PAGE>


                           (i) The Committee  shall notify each  Participant who
                  is an Employee  selected to  participate  in the Deposit Share
                  Program and each  Non-Employee  Director  (such  Employees and
                  Non-Employee  Directors together referred to as "Deposit Share
                  Participants")  of the maximum amount which they are permitted
                  to use to acquire Common Stock to be deposited with the Escrow
                  Agent,  and Deposit Share  Participants  may choose to deposit
                  any number of Deposit  Shares  they are  permitted  to deposit
                  under the  Committee  rules  (Deposit  Shares so acquired  and
                  deposited  are herein  sometimes  referred to as the "Original
                  Deposit").

                           (ii)  Deposit  Share  Participants  must  make  their
                  irrevocable  election on or before the date  designated by the
                  Committee  or if no date is  designated,  then at least thirty
                  (30) days  prior to the Award  Date.  The Award  Date  ("Award
                  Date") for each year in which a Deposit Share  Participant  is
                  eligible to receive  Deposit  Shares  shall be February 15, or
                  the Monday following February 15 in any year in which February
                  15  falls  on a  Saturday  or  Sunday,  unless  the  Committee
                  designates  a  different   Award  Date.  The  Award  Date  for
                  Employees and Non-Employee Directors need not be the same. The
                  Committee  shall  have the  discretion  to  waive  any date or
                  deadline  established  pursuant to this section. The Committee
                  may also allow a Deposit Share  Participant who is an Employee
                  to acquire  Deposit Shares in lieu of a bonus, or to deliver a
                  check  equal to the  dollar  amount of  bonuses  for which the
                  Deposit Share  Participant  may purchase  Deposit  Shares,  in
                  which case the full amount of the cash bonus (less  applicable
                  withholding)  will be paid to the  Employee  and the  Employee
                  shall  deliver  a  check  to  the  Company,   subject  to  the
                  limitations established by the Committee.

                           (iii) All  elections  shall be in  writing  and filed
                  with the Committee or its  designee.  Such  elections  may, if
                  permitted by the Committee,  also specify one of the following
                  alternatives  regarding the manner in which dividends are paid
                  on all  deposited  stock  (including  Deposit  Shares,  shares
                  purchased  with  dividends,  if any, and  matching  Restricted
                  Shares (but only if the  Committee  allows  dividends  on such
                  Restricted Shares to be paid and credited)):

                                    (1) Dividends  shall be  accumulated  by the
                           Escrow  Agent for the purchase of  additional  shares
                           for the Deposit Share Participant's account; or

                                    (2) Dividends shall be paid currently to the
                           Deposit Share Participant.

                  A Deposit  Share  Participant  shall be deemed to have elected
                  Alternative (1) unless or until the Deposit Share  Participant
                  delivers written notice to the Company  selecting  Alternative
                  (2) as the  method  by  which  dividends  are to be  paid  and
                  credited.


                                       8

<PAGE>

                           (iv) As soon as  practicable  following  an  Original
                  Deposit,  the Company shall match the Deposit Shares deposited
                  with the  Escrow  Agent for the  Deposit  Share  Participant's
                  account  by  depositing  (1)  for an  Employee,  up to one (1)
                  Restricted  Share  for  each  Deposit  Share  in the  Original
                  Deposit,  as  determined  by  the  Committee,  and  (2)  for a
                  Non-Employee  Director,  one and one-half  (1-1/2)  Restricted
                  Share  for  each  Deposit  Share  in  the  Original   Deposit.
                  Restricted  Shares shall be  distributed  to the Deposit Share
                  Participant  entitled thereto as promptly as practicable after
                  they vest.

                           (v) With respect to Employees,  the Restricted Shares
                  deposited  by the Company  shall vest in  accordance  with the
                  schedule   determined  by  the  Committee.   With  respect  to
                  Non-Employee  Directors,  the Restricted  Shares shall vest on
                  the  third  anniversary  of the date of the  Award.  Awards of
                  Restricted  Stock that are not vested shall be forfeited  upon
                  the  Non-Employee  Director  ceasing to be a  director  of the
                  Company  for any  reason,  except  in the  case of  death,  as
                  hereinafter provided in Section 6 (e) (ix), except in the case
                  of a Permissible  Event (as hereinafter  defined) or except as
                  otherwise  provided  by  the  Committee.   If  a  Non-Employee
                  Director  ceases to be a director  by reason of a  Permissible
                  Event, the Restricted Shares shall continue to vest during the
                  balance of the three-year  vesting period if (1) no later than
                  the date on which  the  Non-Employee  Director  ceases to be a
                  director of the Company, the Non-Employee Director enters into
                  an  agreement  approved  by  the  Committee  under  which  the
                  Non-Employee  Director  agrees not to compete with the Company
                  or its subsidiaries  during the balance of such period and (2)
                  the  Non-Employee  Director  complies with the agreement.  Any
                  Restricted  Shares that do not vest by reason of a Permissible
                  Event  shall be  forfeited  unless  otherwise  provided by the
                  Committee.  A Permissible  Event shall be any  termination  of
                  service as a director of the Company by reason of:

                                    (1)   the   Non-Employee    Director   being
                           ineligible for continued service as a director of the
                           Company under the Company's retirement policy; or

                                    (2) the  Non-Employee  Director's  taking  a
                           position   with   or   providing    services   to   a
                           governmental,  charitable or educational  institution
                           whose  policies  prohibit  continued  service  on the
                           Board or due to the fact that continued  service as a
                           director would be a violation of law.

                  The Company may, in its sole discretion,  provide that some or
                  all Restricted  Stock shall  immediately  become vested in the
                  circumstances  with  respect to  immediate  vesting of Options
                  contemplated by Section 5(b).


                                       9

<PAGE>

                           (vi)  Shares   purchased   with   dividends  paid  on
                  deposited stock  (Original  Deposit,  Restricted  Stock or any
                  shares  purchased  with  dividends)  may be  withdrawn  from a
                  Deposit Share Participant's account at any time.

                           (vii) A Deposit Share Participant's  interests in the
                  Original  Deposit  or the  Restricted  Stock  may not be sold,
                  pledged,  assigned or transferred in any manner, other than by
                  will or the laws of descent and distribution,  so long as such
                  shares  are  held by the  Escrow  Agent,  and any  such  sale,
                  pledge,  assignment or other  transfer shall be null and void;
                  provided, however, a pledge of the Deposit Share Participant's
                  interest  in  the  Original  Deposit  or a  transfer  of  such
                  Participant's  interest in the Original Deposit (any permitted
                  transfer not being  considered  a  withdrawal  of the Original
                  Deposit)  or in  the  Restricted  Stock  may be  permitted  in
                  accordance  with rules which the Committee may  establish.  To
                  the extent  Restricted  Shares become vested, at the same time
                  as  Restricted  Shares are released by the Escrow  Agent,  the
                  Escrow Agent shall also release a percentage  (computed to the
                  nearest  whole  percent) of the Original  Deposit equal to the
                  number of Restricted  Shares then being  released,  divided by
                  the number of Restricted  Shares deposited by the Company with
                  respect to the Original Deposit.

                           (viii)  Any or all of  the  Original  Deposit  may be
                  withdrawn  at  any  time.  Such   withdrawal   shall  cause  a
                  forfeiture of any non-vested Restricted Shares attributable to
                  the  Deposit  Shares  being  withdrawn.   Any  Deposit  Shares
                  withdrawn shall be deemed to have been withdrawn under Section
                  6(e)(vi)  to the extent  there are any such  shares,  and then
                  under this Section 6(e)(viii).

                           (ix) In the event the employment  with the Company or
                  its  subsidiaries  of a Deposit  Share  Participant  who is an
                  Employee is terminated  during the vesting period by reason of
                  the   Deposit   Share   Participant's   death,   the   vesting
                  requirements  shall be deemed  fulfilled upon the date of such
                  termination  of  employment.   In  the  event  a  Non-Employee
                  Director's  service as a director of the Company is terminated
                  during  the  vesting  period  by  reason  of the  Non-Employee
                  Director's death, the vesting  requirements shall be deemed to
                  be fulfilled on the date of such termination of service.

                           (x) In the event the employment  with the Company and
                  its  subsidiaries  of a Deposit  Share  Participant  who is an
                  Employee  is  terminated  during  the  vesting  period for any
                  reason other than death, the Restricted  Shares, to the extent
                  not otherwise  vested,  shall  automatically  be forfeited and
                  returned to the Company  unless the  Committee  shall,  in its
                  sole discretion, otherwise provide.


                                       10

<PAGE>

         7. Right to Terminate Employment. Nothing in the Amended Plan or in any
Award granted under the Amended Plan to a Participant  who is an Employee  shall
confer upon any such  Participant the right to continue in the employment of the
Company or affect the right of the  Company to  terminate  such a  Participant's
employment at any time,  nor cause any Award granted to become  exercisable as a
result of the  election by the Company of its right to terminate at any time the
employment  of such a Participant  subject,  however,  to the  provisions of any
agreement of employment between the Company and such Participant. Nothing in the
Amended  Plan or in any Award of  Restricted  Stock under the Amended  Plan to a
Participant  who is a Non-Employee  Director shall confer upon such Director the
right to continue as a member of the Board.

         8.  Dilution and Other  Adjustments.  In the event of any change in the
outstanding  shares  of  the  Company  ("capital  adjustment")  for  any  reason
including,   but  not   limited   to,   any   stock   split,   stock   dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event,  an adjustment in the number or kind of shares
of  Common  Stock  subject  to,  the  Option  price  per  share  under,  and (if
appropriate)  the terms and  conditions  of,  any  outstanding  Award,  shall be
modified or  provided  for by the  Committee  in a manner  consistent  with such
capital adjustment, and the shares reserved for issuance under this Amended Plan
shall likewise be modified.  The  determination  of the Committee as to any such
adjustment shall be conclusive and binding for all purposes of the Amended Plan.

         9. Form of Agreements with  Participants.  Each Option Agreement and/or
Restricted Stock Agreement to be executed by a Participant shall be in such form
as the Committee shall in its discretion determine.

         10. Legend on Certificates;  Restrictions on Transfer. The Company may,
to the extent  deemed  necessary or  advisable,  endorse an  appropriate  legend
referring  to any  restrictions  imposed by state law or the  Securities  Act of
1933, as amended,  upon the certificate or certificates  representing any shares
issued or transferred to the Participant pursuant to Awards.

         11.  Securities Act  Compliance.  Notwithstanding  any provision of the
Amended Plan to the contrary,  the Committee  shall take whatever  action it may
consider  necessary or appropriate to comply with the Securities Act of 1933, as
amended,  or any other then applicable  securities law,  including  limiting the
granting and exercise of Options or the issuance of shares thereunder.

         12.  Amendment,  Expiration and Termination of the Amended Plan.  Under
the Amended Plan, Awards may be granted at any time and from time to time before
the  tenth  anniversary  date of  adoption  of  amendments  to this  Plan by the
Company's  Board of  Directors  on January 27, 1994 (the date on which this Plan
was last previously amended) at which time the Amended Plan will expire,  except
as to Awards then outstanding. The foregoing notwithstanding, no Incentive Stock
Options may be granted  after  January 1, 2001.  The


                                       11

<PAGE>


Amended Plan will remain in effect with respect to outstanding Awards until such
Awards have been exercised or have expired, as the case may be. The Amended Plan
may be terminated  or modified at any time by the Board of Directors  before the
expiration  of  the  Amended  Plan,  except  with  respect  to any  Awards  then
outstanding  under the Amended  Plan,  provided that any increase in the maximum
number of shares subject to Awards specified in Section 3 or in Section 4 hereof
shall be subject to the  approval  of the  Company's  shareholders  unless  made
pursuant to the provisions of Section 8 hereof. No amendment of the Amended Plan
shall adversely  affect any right of any  Participant  with respect to any Award
theretofore granted under the Amended Plan.

         13.  Effective  Date.  If  the  Amended  Plan  is not  approved  by the
Company's   shareholders  prior  to  September  1,  1997,  the  MGIC  Investment
Corporation 1991 Stock Incentive Plan as in effect immediately prior to March 6,
1997 shall remain in effect and shall not be deemed to have been amended.

         14.  Governing  Law. The Amended Plan and any Option  Agreement  and/or
Restricted Stock Agreement shall be governed by and construed in accordance with
the internal  substantive laws, and not the choice of law rules, of the State of
Wisconsin.


                                       12




                                                                   EXHIBIT 10.10

                           MGIC INVESTMENT CORPORATION

                        RESTRICTED STOCK AWARD AGREEMENT

         THIS AGREEMENT is made and entered into as of the date set forth on the
signature page hereof by and between MGIC  INVESTMENT  CORPORATION,  a Wisconsin
corporation (the "Company"),  and the non-employee director of the Company whose
signature  is  set  forth  on  the  signature  page  hereof  (the  "Non-Employee
Director").

                              W I T N E S S E T H:

         WHEREAS,  the MGIC  Investment  Corporation  1991 Stock  Incentive Plan
(hereinafter  referred  to, as amended,  as the "Plan"),  permits  shares of the
Company's common stock,  $1.00 par value per share (the "Stock"),  to be awarded
under its Deposit  Share  Program to  non-employee  directors of the Company who
elect to participate in the Program; and

         WHEREAS,  the  Non-Employee  Director has elected to participate in the
Program.

         NOW,  THEREFORE,  in consideration of the premises and of the covenants
and agreements  herein set forth, the parties hereby mutually covenant and agree
as follows:

         1. Award of Restricted  Stock.  Subject to the terms and conditions set
forth herein, the Company hereby awards the Non-Employee  Director the number of
shares of Stock set forth on the signature page hereof (the "Restricted Stock").

         2.  Restrictions.  Except as otherwise
  provided herein, the Restricted
Stock may not be sold,  transferred or otherwise alienated or hypothecated until
the date set forth on the signature page hereof (the "Release Date").  Shares of
Restricted  Stock may be transferred by gift pursuant to the "Rules for Transfer
of Awards Under the 1991 Stock  Incentive  Plan"  attached to this  Agreement as
Exhibit A (the  "Rules").  Any  person to whom  shares of  Restricted  Stock are
transferred  pursuant  to  the  Rules  is  herein  referred  to as a  "Permitted
Transferee."

         3. Escrow.  Certificates for shares of Restricted Stock shall be issued
as soon as  practicable  in the name of the  Non-Employee  Director but shall be
held  in  escrow  by the  Company,  as  escrow  agent.  Upon  issuance  of  such
certificates, (i) the Company shall give the Non-Employee Director a receipt for
the Restricted Stock held in escrow which will state that the Company holds such
Stock in escrow for the  account of the  Non-Employee  Director,  subject to the
terms of this  Agreement,  and (ii) the  Non-Employee  Director  shall  give the
Company a stock  power for such Stock duly  endorsed in blank which will be held
in escrow  for use in the event  such  Stock is  forfeited  in whole or in part.
Unless forfeited as provided herein,  Restricted Stock shall cease to be held in
escrow and  certificates  for such Stock  which have not been  transferred  to a
Permitted Transferee shall be delivered to the Non-Employee  Director, or in the
case of his



<PAGE>


death, to his  Beneficiary (as hereinafter  defined) on the Release Date or upon
any other termination of the restrictions imposed by Paragraph 2 hereof.

         4. Transfer After Release Date; Securities Law Restrictions.  Except as
otherwise   provided   herein,   Restricted  Stock  shall  become  free  of  the
restrictions  of  Paragraph  2 and be freely  transferable  by the  Non-Employee
Director on the Release Date.  Notwithstanding  the foregoing or anything to the
contrary herein, the Non-Employee  Director agrees and acknowledges with respect
to any Restricted Stock that has not been registered under the Securities Act of
1933, as amended (the "Act"),  that (i) the Non-Employee  Director will not sell
or otherwise dispose of such Stock except pursuant to an effective  registration
statement  under  the Act and any  applicable  state  securities  laws,  or in a
transaction  which,  in the opinion of counsel for the  Company,  is exempt from
such registration,  and (ii) a legend will be placed on the certificates for the
Restricted Stock to such effect.

         5.  Termination  of  Directorship  Due to  Death.  If the  Non-Employee
Director  ceases to be a director of the  Company by reason of the  Non-Employee
Director's  death,  (a)  the  restrictions  of  Paragraph  2  applicable  to the
Restricted  Stock  shall  terminate  and (b) the  vesting  requirements  for the
Restricted  Shares  shall  be  deemed  to  be  fulfilled  on  the  date  of  the
Non-Employee Director's death.

         6.  Forfeiture.  Awards of  Restricted  Stock  hereunder  that have not
vested shall be forfeited by the  Non-Employee  Director and shall revert to the
Company upon the  Non-Employee  Director ceasing to be a director of the Company
for any reason other than the  Non-Employee  Director's  death or a "Permissible
Event,"  unless  otherwise  provided by the  Committee.  A Permissible  Event is
termination  of  service  as a  director  of the  Company  by  reason of (a) the
Non-Employee  Director being  ineligible for continued  service as a director of
the Company  under the  Company's  retirement  policy,  or (b) the  Non-Employee
Director's  taking a position  with or  providing  services  to a  governmental,
charitable or educational  institution whose policies prohibit continued service
on the Company's Board of Non-Employee Directors or under circumstances in which
that continued service as a director of the Company would be a violation of law.
If the Non-Employee Director ceases to be a director of the Company by reason of
a Permissible  Event,  the  Restricted  Stock shall  continue to vest during the
balance  of the  Restricted  Period  if (1) no later  than the date on which the
Non-Employee  Director ceases to be a director of the Company,  the Non-Employee
Director  enters into an  agreement  approved by the  Committee  under which the
Non-Employee Director agrees not to compete with the Company or its subsidiaries
during the balance of such  period and (2) the  Non-Employee  Director  complies
with  the  agreement.  All  Restricted  Stock  that  does  not so vest  shall be
forfeited to the Company, unless otherwise determined by the Committee.

         7. Beneficiary. (a) The person whose name appears on the signature page
hereof  after the  caption  "Beneficiary"  or any  successor  designated  by the
Non-Employee Director in accordance herewith (the person who is the Non-Employee
Director's  Beneficiary  at the  time of his  death  herein  referred  to as the
"Beneficiary")  shall be entitled to receive the vested  Restricted  Stock to be
released to the Beneficiary under Paragraphs 3 and 5 as a result of the death of
the  Non-Employee  Director.  The  Non-Employee  Director  may from time to time
revoke or change the Beneficiary without the consent of any prior Beneficiary by
filing a new designation with the



<PAGE>


Committee.  The  last  such  designation  received  by the  Committee  shall  be
controlling;  provided,  however,  that no designation,  or change or revocation
thereof,  shall be  effective  unless  received  by the  Committee  prior to the
Non-Employee  Director's  death,  and  in no  event  shall  any  designation  be
effective as of a date prior to such receipt. If no such Beneficiary designation
is  in  effect  at  the  time  of an  Non-Employee  Director's  death,  or if no
designated Beneficiary survives the Non-Employee Director or if such designation
conflicts  with law,  the  Non-Employee  Director's  estate shall be entitled to
receive the Restricted Stock upon the death of the Non-Employee Director.

                  (b) A Permitted  Transferee  shall be entitled to  designate a
         Beneficiary with respect to the shares of Restricted Stock  transferred
         to the Permitted  Transferee by completing the  appropriate  portion of
         the  election  form  contemplated  by  Paragraph  5 of the  Rules  (the
         "Election  Form").  Such  Beneficiary  shall be entitled to receive the
         vested  Restricted  Stock to be released under  Paragraphs 3 and 5 as a
         result of the death of the  Non-Employee  Director or  otherwise  to be
         released  hereunder if, in either case, the Permitted  Transferee dies,
         prior to such release.  The Permitted  Transferee may from time to time
         revoke or change  such  Beneficiary  without  the  consent of any prior
         Beneficiary by filing a new  designation  with the Committee.  The last
         such  designation  received  by the  Committee  shall  be  controlling,
         provided,  however,  that  no  designation,  or  change  or  revocation
         thereof,  shall be effective  unless received by the Committee prior to
         the  Non-Employee   Director's   death,  and  in  no  event  shall  any
         designation be effective as of a date prior to such receipt. If no such
         designated   Beneficiary  survives  the  Permitted   Transferee,   such
         Beneficiary's  estate,  of if such designation  conflicts with law, the
         Permitted  Transferee's  estate,  shall  be  entitled  to  receive  the
         Restricted Stock released hereunder.

                  (c) If the Committee is in doubt as to the right of any person
         to receive such  Restricted  Stock,  the Company may retain such Stock,
         without  liability  for  any  interest  thereon,  until  the  Committee
         determines the person entitled thereto, or the Company may deliver such
         Restricted  Stock to any  court of  appropriate  jurisdiction  and such
         delivery shall be a complete  discharge of the liability of the Company
         therefor.

         8.   Certificate   Legend.   In  addition  to  any  legends  placed  on
certificates for Restricted Stock under Paragraph 4 hereof, each certificate for
shares of Restricted Stock shall bear the following legend:

         "The sale or other transfer of the shares of stock  represented by this
         certificate,  whether voluntary,  or by operation of law, is subject to
         certain restrictions set forth in the MGIC Investment  Corporation 1991
         Stock  Incentive  Plan,  as  amended,  and  a  Restricted  Stock  Award
         Agreement between MGIC Investment  Corporation and the registered owner
         hereof. A copy of such Plan and such Agreement may be obtained from the
         Secretary of MGIC Investment Corporation."

When the  restrictions  imposed by Paragraph 2 hereof  terminate,  the foregoing
legend  shall be  removed  from the  certificates  representing  such Stock upon
request of the  Non-Employee  Director  or a Permitted  Transferee  for whom the
shares have been transferred.


<PAGE>


         9. Voting  Rights;  Dividends  and Other  Distributions.  (a) While the
Restricted  Stock is subject to restrictions  under Paragraph 2 and prior to any
forfeiture  thereof,  the Non-Employee  Director may exercise full voting rights
for the Restricted Stock registered in his name and held in escrow hereunder.

                  (b) While the Restricted  Stock is subject to the restrictions
         under Paragraph 2 and prior to any forfeiture thereof, the Non-Employee
         Director   shall  be  entitled  to  receive  all  dividends  and  other
         distributions  paid with respect to the Restricted  Stock.  If any such
         dividends  or  distributions  are paid in Stock,  such shares  shall be
         subject to the same restrictions as the shares of Restricted Stock with
         respect  to which  they  were  paid,  including  the  requirement  that
         Restricted Stock be held in escrow pursuant to Paragraph 3 hereof.

                  (c)  Subject  to  the  provisions  of  this   Agreement,   the
         Non-Employee Director shall have, with respect to the Restricted Stock,
         all other rights of holders of Stock.

         10. Adjustments in Event of Change in Stock. In the event of any change
in the  outstanding  shares  of Stock  ("capital  adjustment")  for any  reason,
including   but  not   limited   to,   any   stock   splits,   stock   dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event which, in the judgment of the Committee,  could
distort the implementation of the Plan or the realization of its objectives, the
Committee may make such adjustments in the shares of Restricted Stock subject to
this Agreement, or in the terms, conditions or restrictions of this Agreement as
the Committee deems equitable.

         11.  Change  in  Control.  (a)  If a  change  in  control  occurs,  the
restrictions  of Paragraph 2 applicable to the Restricted  Stock shall terminate
on the date of the change in  control.  For this  purpose,  "change in  control"
shall mean any event which results in the legal or  beneficial  ownership in one
person or group of persons  acting in  concert  of shares of Stock  representing
more  than  fifty  percent  (50%) of the  outstanding  Stock on the date of such
event. It is understood that if a change in control occurs, this Paragraph 11(a)
shall apply even if the  transaction  by which such change in control  occurs is
also described in Paragraph 11(b).

                  (b) In the  event  of a  sale,  lease  or  transfer  of all or
         substantially  all  of  the  Company's  assets,  equity  securities  or
         business,  or  merger,  consolidation  or  other  business  combination
         involving the Company, the Committee may in its discretion provide that
         all or any portion of the restrictions of Paragraph 2 applicable to all
         or any portion of the Restricted Stock shall terminate, contingent upon
         the  consummation of such event or not so contingent,  and may take all
         such action as it deems necessary in connection therewith.

         12.  Powers of Company Not Affected.  The  existence of the  Restricted
Stock  shall  not  affect in any way the  right or power of the  Company  or its
stockholders   to  make   or   authorize   any   combination,   subdivision   or
reclassification  of the  Stock or any  reorganization,  merger,  consolidation,
business  combination,  exchange  of shares,  or other  change in the  Company's
capital  structure or its business,  or any issue of bonds,  debentures or stock
having rights or preferences  equal,  superior or affecting the Restricted Stock
or the rights thereof, or dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business,



<PAGE>


or any other  corporate  act or  proceeding,  whether of a similar  character or
otherwise. The determination of the Committee as to any such adjustment shall be
conclusive and binding for all purposes of this Agreement.  Nothing herein shall
confer upon the  Non-Employee  Director the right to continue as a member of the
Company's Board of Directors.

         13. Interpretation by Committee.  The Non-Employee Director agrees that
any dispute or  disagreement  which may arise in connection  with this Agreement
shall  be  resolved  by the  Committee,  in its  sole  discretion,  and that any
interpretation  by the Committee of the terms of this  Agreement or the Plan and
any determination  made by the Committee under this Agreement or the Plan may be
made in the sole  discretion of the Committee and shall be final,  binding,  and
conclusive.  Any  such  determination  need  not be  uniform  and  may  be  made
differently among Non-Employee Directors awarded Restricted Stock.

         14.  Miscellaneous.  (a) This Agreement shall be governed and construed
in  accordance  with the laws of the State of Wisconsin  applicable to contracts
made and to be performed therein between residents thereof.

                  (b)  The  waiver  by the  Company  of any  provision  of  this
         Agreement  shall not operate or be construed to be a subsequent  waiver
         of the same provision or waiver of any other provision hereof.

                  (c) The Restricted  Stock shall be deemed to have been awarded
         pursuant  to the  Plan  and is  subject  to the  terms  and  conditions
         thereof.  In the event of any conflict between the terms hereof and the
         provisions  of the Plan,  the terms and  conditions  of the Plan  shall
         prevail.  Any and all terms used herein,  unless  specifically  defined
         herein shall have the meaning ascribed to them in the Plan.

                  (d) Any notice,  filing or delivery  hereunder or with respect
         to  Restricted  Stock  shall be given to the  Non-Employee  Director at
         either his or her address as indicated in the records of the Company to
         which  communications  are generally sent to him or her; shall be given
         to a Permitted  Transferee  at his address as indicated in the Election
         Form;  and shall be given to the  Committee  or the Company at 250 East
         Kilbourn  Avenue,  Milwaukee  53202,  Attention:  Secretary.  All  such
         notices  shall be given by first class mail,  postage  pre-paid,  or by
         personal delivery.

                  (e) This  Agreement  shall be  binding  upon and  inure to the
         benefit of the  Company  and its  successors  and  assigns and shall be
         binding upon and inure to the benefit of the Non-Employee Director, any
         Permitted    Transferee,    the    Beneficiary    and   the    personal
         representative(s) and heirs of the Non-Employee  Director,  except that
         the  Non-Employee  Director  may  not  transfer  any  interest  in  any
         Restricted  Stock prior to the release of the  restrictions  imposed by
         Paragraph 2 other than as provided in Paragraph 2.

                  (f) The term  "certificate"  as used  herein  with  regard  to
         shares of Restricted  Stock,  includes  electronic  registration in the
         system of the Company's transfer agent for the Stock.



<PAGE>


         15. Deposit Share Program.  If any of the Original  Deposit (as defined
in the Plan) is withdrawn  prior to the release of any of the Restricted  Stock,
the Restricted  Stock  attributable  to the shares  withdrawn shall first be the
Restricted  Stock to be released on the first Release Date and shall then be the
Restricted  Stock to be released on the Second  Release Date, as both such Dates
are specified on the signature page hereof. In the event of any conflict between
the terms  hereof  and the  terms and  conditions  of  Section  6(e) of the Plan
relating to the Deposit Share Program,  the terms and conditions of Section 6(e)
shall prevail.

         16. Permitted  Transferee.  In the event Shares of Restricted Stock are
transferred to a Permitted Transferee, (i) the provisions of Paragraphs 3, 4, 9,
and 13 shall apply  mutatis  muntandis to the shares so  transferred  and to the
Permitted Transferee; (ii) the provisions of Paragraphs 5, 8, 10, 11, 12, 14 and
15 shall  continue to apply  without  any change  with  respect to the shares so
transferred;  and (iii) the  provisions  of Paragraph 6 shall  continue to apply
without any change with  respect to the shares so  transferred,  except that the
shares to be forfeited  shall be those shares of Restricted  Stock that have not
vested and which are held by the Permitted Transferee.

         IN WITNESS  WHEREOF,  the  Company  has caused  this  instrument  to be
executed by its duly authorized officer and its corporate seal hereunto affixed,
and the Non-Employee Director has hereunto affixed his hand and seal, all on the
day and year set forth below.

MGIC INVESTMENT CORPORATION


By:------------------------------     ----------------------------------------
      
                                      No. of Shares of Restricted Stock:_______

                                      Date of Agreement: _____________________

                                      Award Date:    _________________________

                                      Release Date:  _________________________

                                      Beneficiary: ___________________________

                                      Address of Beneficiary:

                                      _________________________________________
                                      _________________________________________
                                      Beneficiary's Tax Identification
                                      Number:__________________________________






                                                                  Exhibit 10.11


                             EXECUTIVE BONUS PLAN OF
                           MGIC INVESTMENT CORPORATION
                                 (the "Company")


The  Executive  Bonus  Plan of the  Company  in  effect  for 1999  (which is not
contained  in a formal  plan  document),  applies  to  certain  officers  of the
Company,  including the executive officers of the Company identified in the Form
10-K for the year ended  December 31, 1998.  Under the Executive  Bonus Plan, if
the  Company  achieves  a minimum  level of net income  for 1999,  an  executive
officer will be eligible for a bonus,  depending  upon the  executive  officer's
performance with regard to the achievement of individual  goals,  within various
ranges of up to 100% of such executive  officer's base salary,  depending on the
range applicable to the executive officer.








                                                                    EXHIBIT 11

                  MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
               STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1)
              For The Years Ended December 31, 1998, 1997 and 1996


                                                 1998        1997        1996
                                           (In thousands, except per share data)
BASIC EARNINGS PER SHARE
Average common shares outstanding               112,135     116,332    117,787
                                               ========    ========   ========
Net income                                     $385,465    $323,750   $257,991
                                               ========    ========   ========
Net income per share                           $   3.44    $   2.78   $   2.19
                                               ========    ========   ========
DILUTED EARNINGS PER SHARE
Adjusted shares outstanding:
   Average common shares outstanding            112,135     116,332    117,787
   Net shares to be issued upon exercise of
       common stock equivalents                   1,447       1,592      1,259
                                               --------    --------   --------
   Adjusted shares outstanding                  113,582     117,924    119,046
                                               ========    ========   ========
Net income                                     $385,465    $323,750   $257,991
                                               ========    ========   ========
Net income per share                           $   3.39    $   2.75   $   2.17
                                               ========    ========   ========


(1) Per  Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
Share".








                                                                     EXHIBIT 13

<TABLE>

               MGIC INVESTMENT CORPORATION & SUBSIDIARIES - YEARS ENDED DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
                                             FIVE-YEAR SUMMARY OF FINANCIAL INFORMATION
<CAPTION>

                                                   1998             1997            1996            1995            1994
                                               --------------   -------------   -------------   --------------  --------------
                                                              (In thousands of dollars, except per share data)
<S>                                            <C>              <C>             <C>             <C>             <C>    
Summary of Operations
Revenues:
   Net premiums written......................  $     749,161    $    690,248    $    588,927    $    480,312    $    410,296
                                               ==============   =============   =============   ==============  ==============

   Net premiums earned.......................        763,284         708,744         617,043         506,500         403,990
   Investment income, net....................        143,019         123,602         105,355          87,543          75,233
   Realized investment gains, net............         18,288           3,261           1,220           1,496             336
   Other revenue.............................         47,075          32,665          22,013          22,347          22,667
                                               --------------   -------------   -------------   --------------  --------------
     Total revenues..........................        971,666         868,272         745,631         617,886         502,226
                                               --------------   -------------   -------------   --------------  --------------

Losses and expenses:
   Losses incurred, net......................        211,354         242,362         234,350         189,982         153,081
   Underwriting and other expenses...........        190,031         157,194         146,483         137,559         136,027
   Interest expense..........................         18,624           6,399           3,793           3,821           3,856
   Ceding commission.........................         (2,928)         (3,056)         (4,023)         (4,885)         (7,821)
                                               --------------   -------------   -------------   --------------  --------------
     Total losses and expenses...............        417,081         402,899         380,603         326,477         285,143
                                               --------------   -------------   -------------   --------------  --------------

Income before tax............................        554,585         465,373         365,028         291,409         217,083
Provision for income tax.....................        169,120         141,623         107,037          83,844          57,565
                                               --------------   -------------   -------------   --------------  --------------
Net income...................................  $     385,465    $    323,750    $    257,991    $    207,565    $    159,518
                                               ==============   =============   =============   ==============  ==============

Weighted average common shares
   outstanding (in thousands) (1)............        113,582         117,924         119,046         118,567         117,955
                                               ==============   =============   =============   ==============  ==============

Diluted earnings per share (1)...............  $        3.39    $       2.75    $       2.17    $       1.75    $       1.35
                                               ==============   =============   =============   ==============  ==============

Dividends
 per share (1)......................  $         .10    $       .095    $        .08    $        .08    $        .08
                                               ==============   =============   =============   ==============  ==============

Balance sheet data
   Total investments.........................  $   2,779,706    $  2,416,740    $  2,036,234    $  1,687,221    $  1,292,960
   Total assets..............................      3,050,541       2,617,687       2,222,315       1,874,719       1,476,266
   Loss reserves.............................        681,274         598,683         514,042         371,032         274,469
   Long-term notes payable...................        442,000         237,500               -          35,799          36,147
   Shareholders' equity......................      1,640,591       1,486,782       1,366,115       1,121,392         838,074
   Book value per share......................          15.05           13.07           11.59            9.56            7.18


(1)      In May 1997, the Company declared a two-for-one  stock split of the common stock in the form of a 100% stock dividend.  The
         additional  shares were issued on June 2, 1997.  Prior year  shares,  dividends  per share and earnings per share have been
         restated to reflect the split.

- -----------------------------------------------------------------------------------------------------------------------------------

A brief description of the Company's business is contained in Note 1 to the Consolidated  Financial Statements of the Company,  page
eighteen.

</TABLE>


                                       Two

<PAGE>



<TABLE>

               MGIC INVESTMENT CORPORATION & SUBSIDIARIES - YEARS ENDED DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994
                                             FIVE-YEAR SUMMARY OF FINANCIAL INFORMATION

<CAPTION>

                                                   1998*            1997            1996            1995            1994
                                               --------------   -------------   -------------   --------------  --------------
<S>                                            <C>              <C>             <C>             <C>             <C>    
New primary insurance written ($ millions)...  $      43,697    $     32,250    $     32,756    $     30,277    $     34,419
New primary risk written ($ millions)........         10,850           8,305           8,305           7,599           7,042
New pool risk written ($ millions)...........            618             394               2               1              27

Insurance in force (at year-end) ($ millions)
   Direct primary insurance..................        137,990         138,497         131,397         120,341         104,416
   Direct primary risk.......................         32,891          32,175          29,308          25,502          20,756
   Direct pool risk..........................          1,133             590             232             254             295

Primary loans in default ratios
   Policies in force.........................      1,320,994       1,342,976       1,299,038       1,219,304       1,080,882
   Loans in default..........................         29,253          28,493          25,034          19,980          15,439
   Percentage of loans in default............          2.21%           2.12%           1.93%           1.64%           1.43%

Insurance operating ratios (GAAP)
   Loss ratio................................          27.7%           34.2%           38.0%           37.5%           37.9%
   Expense ratio.............................          19.6%           18.4%           21.6%           24.6%           28.1%
                                               --------------   -------------   -------------   --------------  --------------
   Combined ratio............................          47.3%           52.6%           59.6%           62.1%           66.0%
                                               ==============   =============   =============   ==============  ==============

Risk-to-capital ratios (statutory)
   Combined insurance subsidiaries...........         13.6:1          16.4:1          18.8:1          19.9:1          20.6:1
   MGIC......................................         12.9:1          15.7:1          18.1:1          19.1:1          19.6:1






*        The above  information for 1998 and the 1998 information  under "Financial  Highlights"  excludes the activity of Wisconsin
         Mortgage Assurance  Corporation  ("WMAC") acquired on December 31, 1998. For further description of WMAC, see Note 1 to the
         Consolidated Financial Statements of the Company, page eighteen.

</TABLE>



                                                               Three

<PAGE>



                      Management's Discussion and Analysis

Results of Consolidated Operations
1998 Compared with 1997

Net income for 1998 was $385.5 million, compared with $323.8 million in 1997, an
increase of 19%.  Diluted  earnings per share for 1998 was $3.39,  compared with
$2.75 in 1997, an increase of 23%. The percentage  increase in diluted  earnings
per share was favorably  affected by the lower  adjusted  shares  outstanding in
1998 as a result of common stock  repurchased  by the Company in the second half
of 1997 and during 1998.

The amount of new  primary  insurance  written by  Mortgage  Guaranty  Insurance
Corporation ("MGIC") during 1998 was $43.7 billion,  compared with $32.2 billion
in 1997.  Reflecting  the  favorable  mortgage  interest rate  environment  that
prevailed throughout 1998, refinancing activity accounted for 31% of new primary
insurance written in 1998, compared to 15% in 1997.

The $43.7 billion of new primary insurance written during 1998 was offset by the
cancellation  of $44.2  billion of  insurance  in force,  and  resulted in a net
decrease of $0.5 billion in primary insurance in force,  compared to new primary
insurance  written of $32.2 billion,  cancellation  of $25.1 billion,  and a net
increase of $7.1  billion in insurance  in force  during  1997.  Direct  primary
insurance in force was $138.0  billion at December 31, 1998,  compared to $138.5
billion at December 31, 1997. In addition to providing direct primary  insurance
coverage,  the  Company  also  insures  pools of mortgage  loans.  New pool risk
written during 1998 and 1997, which was virtually all agency pool insurance, was
$618.1 million and $394.4 million,  respectively.

The  Company's  direct pool risk in force at December  31, 1998 was $1.1 billion
compared to $590.3  million at December  31, 1997 and is expected to increase in
1999 as a result of  outstanding  commitments  to write  additional  agency pool
insurance.

Cancellation  activity has  historically  been affected by the level of mortgage
interest  rates and  increased  during 1998 due to favorable  mortgage  interest
rates which resulted in a decrease in the MGIC  persistency  rate (percentage of
insurance remaining in force from one year prior) to 68.1% at December 31, 1998,
from 80.9% at December  31, 1997.  Future  cancellation  activity  could also be
affected  as a result  of  legislation  that  will go into  effect  in July 1999
regarding cancellation of mortgage insurance. 

Net premiums written increased 9% to $749.2 million in 1998, from $690.2 million
in 1997. Net premiums earned increased 8% to $763.3 million in 1998, from $708.7
million in 1997. The increases were primarily a result of a higher percentage of
renewal premiums on mortgage loans with deeper coverages.

Effective March 1, 1999, Fannie Mae changed its mortgage insurance  requirements
for certain fixed-rate mortgages approved by Fannie Mae's automated underwriting
service.  The changes permit lower coverage  percentages on these loans than the
deeper  coverage  percentages  that went into  effect  in 1995.  In March  1999,
Freddie Mac announced that it was implementing  similar changes.  MGIC's premium
rates vary with the depth of coverage.  While lower coverage  percentages result
in lower premium revenue, lower coverage percentages should also result in lower
incurred losses at the same level of claim


                                      Four

<PAGE>


incidence.  MGIC's premium  revenues could also be affected to the extent Fannie
Mae and  Freddie  Mac are  compensated  for  assuming  default  risk that  would
otherwise  be  insured  by  the  private  mortgage  insurance  industry.   These
Government  Sponsored  Enterprises  (GSEs) introduced  programs in 1998 and 1999
under  which a  delivery  fee  could be paid to them,  with  mortgage  insurance
coverage reduced below the coverage that would be required in the absence of the
delivery fee.

Approximately 16% of MGIC's new insurance written in 1998 was subject to captive
mortgage reinsurance and similar  arrangements.  The percentage of new insurance
written  subject to captive  mortgage  reinsurance  arrangements  is expected to
increase  in  1999 as new  transactions  are  consummated.  In a  February  1999
circular letter, the New York Department of Insurance said it was in the process
of  developing  guidelines  that would  articulate  the  parameters  under which
captive mortgage reinsurance is permissible under New York insurance law.

Investment  income  for 1998 was $143.0  million,  an  increase  of 16% over the
$123.6 million in 1997. This increase was primarily the result of an increase in
the amortized cost of average  investment  assets to $2.5 billion for 1998, from
$2.1 billion for 1997, an increase of 16%. The increase was partially  offset by
a decrease in the portfolio's  average pre-tax  investment yield to 5.6% in 1998
from 5.8% in 1997. The portfolio's  average after-tax  investment yield was 4.9%
for 1998 compared to 5.0% for 1997. The Company  realized gains of $18.3 million
during 1998  compared to $3.3 million in 1997.  The  increase is  primarily  the
result of the sale of equity securities in 1998.

Other  revenue was $47.1  million in 1998,  compared with $32.7 million in 1997.
The  increase is  primarily  the result of an increase in contract  underwriting
revenue of $11.8 million and an increase of $5.3 million in equity earnings from
Credit-Based Asset Servicing and Securitization LLC and Litton Loan Servicing LP
(collectively,  "C-BASS"), a joint venture with Enhance Financial Services Group
Inc., offset by a $2.7 million reduction in fee-based  services under government
contracts.  In accordance with generally accepted accounting principles,  C-BASS
is required to mark to market its mortgage-related  assets which, including open
trades,  were $550  million at December 31, 1998 and are expected to increase in
the future.  Market  valuation  adjustments  could impact the Company's share of
C-BASS's results of operations.

Net losses incurred decreased 13% to $211.4 million in 1998, from $242.4 million
in  1997.  Such  decrease  was  primarily  attributable  to an  increase  in the
redundancy in prior year loss reserves,  generally favorable economic conditions
throughout  the  country  and only a moderate  increase  in the  primary  notice
inventory  from 28,493 at December 31, 1997 to 29,253 at December 31, 1998.  The
redundancy  results from actual claim rates and actual claim amounts being lower
than those estimated by the Company when originally  establishing the reserve at
December 31, 1997.  The pool notice  inventory  increased from 2,098 at December
31, 1997 to 6,524 at December 31, 1998,  attributable  to defaults on new agency
pool  insurance  written  during 1997 and 1998. At December 31, 1998, 60% of the
primary insurance in force was written during the last three years,  compared to
57% at December 31, 1997. The highest claim  frequency years have typically been
the third through fifth years after the year of loan origination.  However,  the
pattern


                                      Five

<PAGE>


of claims  frequency for refinance  loans may be different  from the  historical
pattern of other loans.

Underwriting  and other  expenses  increased 21% in 1998 to $190.0  million from
$157.2 million in 1997. This increase was primarily due to increases  associated
with contract and field office underwriting  expenses and an increase in premium
tax due to higher premiums written.

Interest  expense in 1998  increased to $18.6  million from $6.4 million in 1997
due to higher  outstanding  notes  payable,  the  proceeds of which were used to
repurchase common stock.

The Company entered into financial derivative  transactions in 1998,  consisting
of interest rate swaps and put-swaptions to reduce and manage interest rate risk
on its notes  payable.  In 1998,  earnings on an interest  rate swap and premium
income on three  put-swaptions  aggregating  approximately  $0.5 million for all
such transactions were netted against interest expense.

The consolidated  insurance operations loss ratio was 27.7% for 1998 compared to
34.2% for 1997.  The  consolidated  insurance  operations  expense and  combined
ratios were 19.6% and 47.3%, respectively, for 1998 compared to 18.4% and 52.6%,
respectively, for 1997.

The  effective tax rate was 30.5% in 1998,  compared with 30.4% in 1997.  During
both  years,  the  effective  tax  rate was  below  the  statutory  rate of 35%,
reflecting  the  benefits  of  tax-preferenced  investment  income.  The  higher
effective  tax rate in 1998  resulted  from a lower  percentage  of total income
before tax being generated from tax-preferenced investments in 1998.


1997 Compared with 1996

Net income for 1997 was $323.8 million, compared with $258.0 million in 1996, an
increase of 25%. After giving effect to the Company's  two-for-one  stock split,
effective June 2, 1997, diluted earnings per share for 1997 was $2.75,  compared
with $2.17 in 1996, an increase of 27%.

The  amount of new  primary  insurance  written  by MGIC  during  1997 was $32.2
billion compared with $32.8 billion in 1996.  Refinancing activity accounted for
15% of new primary insurance written in 1997 compared to 17% in 1996.

The $32.2 billion of new primary insurance written during 1997 was offset by the
cancellation  of $25.1  billion  of  insurance  in force and  resulted  in a net
increase of $7.1 billion in primary insurance in force,  compared to new primary
insurance  written of $32.8 billion,  cancellation  of $21.7 billion,  and a net
increase of $11.1  billion in insurance in force  during  1996.  Direct  primary
insurance in force was $138.5  billion at December 31, 1997,  compared to $131.4
billion at December 31, 1996. In addition to providing direct primary  insurance
coverage,  the  Company  also  insures  pools of mortgage  loans.  New pool risk
written during 1997, which was virtually all agency pool insurance, and 1996 was
$394.4 million and $1.5 million, respectively. The Company's direct pool risk in
force at December  31,  1997 was $590.3  million  compared to $232.3  million at
December 31, 1996.

Cancellation  activity  increased during 1997 due to favorable mortgage interest
rates  which  resulted in a decrease  in the MGIC  persistency  rate to 80.9% at
December 31, 1997, from 82.0% at December 31, 1996.

                                      Six

<PAGE>


Net  premiums  written  increased  17% to $690.2  million in 1997,  from  $588.9
million in 1996.  Net premiums  earned  increased 15% to $708.7 million in 1997,
from $617.0  million in 1996.  The increases were primarily a result of a higher
percentage of renewal  premiums on mortgage loans with deeper  coverages and the
growth in insurance in force.

Investment  income  for 1997 was $123.6  million,  an  increase  of 17% over the
$105.4 million in 1996. This increase was primarily the result of an increase in
the amortized cost of average  investment  assets to $2.1 billion for 1997, from
$1.8 billion for 1996, an increase of 19%. The increase was partially  offset by
a decrease in the portfolio's  average pre-tax  investment yield to 5.8% in 1997
from 5.9% in 1996. The portfolio's  average after-tax  investment yield was 5.0%
for 1997 compared to 5.1% for 1996.

Other  revenue was $32.7  million in 1997,  compared with $22.0 million in 1996.
The increase is primarily  the result of $7.1  million of equity  earnings  from
C-BASS and an increase in contract underwriting revenue.

Ceding commission for 1997 was $3.1 million, compared to $4.0 million in 1996, a
decrease of 23%.  The decrease  was  primarily  attributable  to  reductions  in
premiums ceded under quota share reinsurance agreements.

Net losses incurred  increased 3% to $242.4 million in 1997, from $234.4 million
in 1996. Such increase was primarily due to an increase in the primary insurance
notice  inventory  from  25,034 at December  31, 1996 to 28,493 at December  31,
1997,  resulting  from higher  delinquency  levels on insurance  written in 1994
through 1996, the continued  higher level of loss activity in certain  high-cost
geographic  regions,  a higher level of defaults  which  resulted  from a higher
percentage  of the Company's  insurance in force  reaching its peak claim paying
years  and  an  increase  in the  number  of  defaults  with  deeper  coverages.
Offsetting this increase were favorable developments in prior-year loss reserves
resulting  from actual  claim rates and actual  claim  amounts  being lower than
those  estimated  by the Company  when  originally  establishing  the reserve at
December 31, 1996. At December 31, 1997,  57% of the primary  insurance in force
was written  during the last three years,  compared to 61% at December 31, 1996.
The highest claim  frequency  years have  typically been the third through fifth
years  after  the year of loan  origination.  However,  the  pattern  of  claims
frequency for refinance  loans may be different from the  historical  pattern of
other loans.  A substantial  portion of the  insurance  written in 1992 and 1993
represented  insurance on the refinance of mortgage loans  originated in earlier
years.

Underwriting  and other  expenses  increased  7% in 1997 to $157.2  million from
$146.5  million in 1996.  This  increase in  expenses  was  primarily  due to an
increase in expenses associated with the fee-based services for underwriting and
an increase in premium tax due to higher premiums written.

The consolidated  insurance operations loss ratio was 34.2% for 1997 compared to
38.0% for 1996.  The  consolidated  insurance  operations  expense and  combined
ratios were 18.4% and 52.6%, respectively, for 1997 compared to 21.6% and 59.6%,
respectively, for 1996.

The  effective tax rate was 30.4% in 1997,  compared with 29.3% in 1996.  During
both  years,  the  effective  tax  rate was  below  the  statutory  rate of 35%,
reflecting  the  benefits  of  tax-preferenced  investment  income.  The  higher
effective  tax rate in 1997  resulted  from a lower  percentage  of total


                                      Seven

<PAGE>


income before tax being generated from tax-preferenced investments in 1997.

Financial Condition

Consolidated total investments were $2.8 billion at December 31, 1998,  compared
with $2.4  billion at  December  31,  1997,  an increase  of 15%.  The  increase
includes an increase of $16.3 million in unrealized  gains on securities  marked
to  market.  The  Company  generated  consolidated  cash  flows  from  operating
activities of $420.9 million during 1998,  compared to $371.9 million  generated
during 1997.  The increase in operating  cash flows during 1998 is due primarily
to an increase in renewal  premiums and investment  income offset by an increase
in  underwriting  expenses.  As of  December  31,  1998,  the Company had $172.2
million of short-term investments with maturities of 90 days or less, and 76% of
the  portfolio  was invested in  tax-preferenced  securities.  In  addition,  at
December 31, 1998,  based on book value,  the Company's fixed income  securities
were  approximately  99%  invested  in "A" rated and above,  readily  marketable
securities,  concentrated  in maturities of less than 15 years.  At December 31,
1998 the Company had $4.6 million of investments in equity  securities  compared
to $116.1 million at December 31, 1997.

At December 31, 1998, the Company had no derivative financial instruments in its
investment  portfolio.  The Company places its  investments in instruments  that
meet high credit  quality  standards,  as specified in the Company's  investment
policy  guidelines;  the policy also limits the amount of credit exposure to any
one issue,  issuer and type of  instrument.  At December 31,  1998,  the average
duration of the Company's investment portfolio was 5.8 years. The effect of a 1%
increase/   decrease  in  market   interest   rates  would   result  in  a  5.8%
decrease/increase in the value of the Company's fixed income portfolio.

The Company's  investments in joint ventures  increased $45.9 million from $29.4
million at December  31, 1997 to $75.3  million at December 31, 1998 as a result
of additional investments of $33.5 million and equity earnings of $12.4 million.

Consolidated loss reserves  increased 14% to $681.3 million at December 31, 1998
from $598.7  million at December 31, 1997,  reflecting an increase in the number
of both  primary  and pool loans in  default.  The  Company's  loss  reserves at
December 31, 1998 reflect  credit  quality  concerns on defaults from  insurance
written in 1994 through  1996, an increase in the number of defaults with deeper
coverages and the growth in pool insurance.  Consistent with industry practices,
the Company does not establish  loss reserves for future claims on insured loans
which are not  currently in default.  Reinsurance  recoverable  on loss reserves
increased to $45.5  million at December 31, 1998 from $26.4  million at December
31,  1997 as a result  of  third-party  reinsurance  on the  insurance  in force
written by Wisconsin Mortgage Assurance  Corporation,  which was acquired by the
Company on December 31, 1998.

Consolidated  unearned  premiums  decreased $14.6 million from $198.3 million at
December 31, 1997, to $183.7  million at December 31, 1998,  reflecting the high
level of  monthly  premium  policies  written  in 1998,  for  which  there is no
unearned premium.

Consolidated  shareholders'  equity  increased  to $1.6  billion at December 31,
1998,  from $1.5 billion at December 31, 1997, an increase of 10%. This increase
consisted of $385.5  million of


                                      Eight

<PAGE>

net income during 1998, $15.8 million from the reissuance of treasury stock, and
an  increase  in net  unrealized  gains  on  investments,  net of tax,  of $10.6
million, offset by the repurchase of $246.8 million of outstanding common shares
and dividends declared of $11.2 million.

Liquidity and Capital Resources

The  Company's  consolidated  sources of funds  consist  primarily  of  premiums
written and  investment  income.  Funds are applied  primarily to the payment of
claims  and   expenses.   Approximately   74%  of   underwriting   expenses  are
personnel-related costs, most of which are considered by the Company to be fixed
costs over the short term.  Approximately  6% of  operating  expenses  relate to
occupancy  costs,  which are fixed  costs.  Substantially  all of the  remaining
operating expenses are considered by the Company to be variable in nature,  with
data processing costs and taxes, licenses and fees representing approximately 3%
and 9%,  respectively,  of  total  operating  expenses.  The  Company  generated
positive cash flows of approximately  $420.9 million,  $371.9 million and $386.1
million  in 1998,  1997 and  1996,  respectively,  as shown on the  Consolidated
Statement  of Cash  Flows.  Positive  cash  flows are  invested  pending  future
payments of claims and other expenses.  Cash-flow  shortfalls,  if any, could be
funded through sales of short-term  investments and other  investment  portfolio
securities.

During 1997 and 1998, the Company repurchased  approximately 4.7 million and 5.3
million  shares,  respectively,  of its  outstanding  common  stock at a cost of
approximately  $248 and $247  million,  respectively.  Funds to  repurchase  the
shares were primarily  provided by borrowings under credit facilities  evidenced
by notes payable.

The 1997 and 1998 credit facilities provide up to $225 million and $250 million,
respectively,  of  availability  at December 31, 1998. The 1997 credit  facility
will  decrease by $25 million each year through June 20, 2001.  Any  outstanding
borrowings under this facility mature on June 20, 2002. The 1998 credit facility
decreases by $25 million each year  beginning June 9, 1999 through June 9, 2002.
Any  outstanding  borrowings  under this  facility  mature on June 9, 2003.  The
Company has the option, on notice to lenders, to prepay any borrowings under the
facilities subject to certain provisions.

In January 1997, the Company repaid  mortgages  payable of $35.4 million,  which
were  secured by the home  office and  substantially  all of the  furniture  and
fixtures of the Company.

The Company has a 48% investment in C-BASS and is guaranteeing one-half of a $50
million credit facility as part of C-BASS's funding  arrangements.  The facility
matures in July 1999.

MGIC  is  the   principal   insurance   subsidiary   of  the   Company.   MGIC's
risk-to-capital  ratio was 12.9:1 at  December  31,  1998  compared to 15.7:1 at
December 31,  1997.  The  decrease  was due to MGIC's  increased  policyholders'
reserves,  partially  offset  by the net  additional  risk in  force  of  $349.2
million, net of reinsurance, during 1998.

The Company's  combined insurance  risk-to-capital  ratio was 13.6:1 at December
31, 1998,  compared to 16.4:1 at December 31, 1997.  The decrease was due to the
same reasons as described above.

The  risk-to-capital  ratios set forth  above have been  computed on a statutory
basis.   However,  the  methodology  used  by  the  rating  agencies  to  assign
claims-paying  ability  ratings  permits  less  leverage  than  under  statutory
requirements.  As a result,


                                      Nine

<PAGE>


the amount of capital required under statutory regulations may be lower than the
capital  required for rating agency purposes.  In addition to capital  adequacy,
the rating agencies  consider other factors in determining a mortgage  insurer's
claims-paying  rating,  including its competitive  position,  business  outlook,
management,   corporate   strategy,   and  historical  and  projected  operating
performance.

For certain material risks of the Company's business, see "Risk Factors" below.

Risk Factors

The Company and its business may be materially affected by the factors discussed
below. These factors may also cause actual results to differ materially from the
results contemplated by forward looking statements that the Company may make.

Reductions  in the volume of low down payment  home  mortgage  originations  may
adversely affect the amount of private  mortgage  insurance (PMI) written by the
PMI  industry.  The factors that affect the volume of low down payment  mortgage
originations include:

o    the level of home mortgage interest rates,

o    the health of the domestic  economy as well as  conditions  in regional and
     local economies,

o    housing affordability,

o    population trends, including the rate of household formation,

o    the rate of home price  appreciation,  which in times of heavy  refinancing
     affects whether refinance loans have loan-to-value ratios that require PMI,
     and

o    government housing policy encouraging loans to first-time homebuyers.

By selecting alternatives to PMI, lenders and investors may adversely affect the
amount of PMI written by the PMI industry. These alternatives include:

o    government  mortgage  insurance  programs,  including  those of the Federal
     Housing Administration and the Veterans Administration,

o    holding mortgages in portfolio and self-insuring,

o    use of credit  enhancements by investors,  including Fannie Mae and Freddie
     Mac, other than PMI or using other credit  enhancements in conjunction with
     reduced levels of PMI coverage, and

o    mortgage  originations  structured to avoid PMI,  such as a first  mortgage
     with  an  80%  loan-to-value  ratio  and  a  second  mortgage  with  a  10%
     loan-to-value  ratio  (referred to as an 80-10-10 loan) rather than a first
     mortgage with a 90% loan-to-value ratio.

Fannie Mae and Freddie Mac have a material  impact on the PMI industry.  Because
Fannie  Mae and  Freddie  Mac are the  largest  purchasers  of low down  payment
conventional  mortgages,  the  business  practices  of these  GSEs have a direct
effect  on  private  mortgage  insurers.   These  practices  affect  the  entire
relationship between the GSEs and mortgage insurers and include:


                                      Ten

<PAGE>


o    the level of PMI coverage, subject to the limitations of the GSE's charters
     when PMI is used as the  required  credit  enhancement  on low down payment
     mortgages,

o    whether  the  mortgage  lender  or the GSE  chooses  the  mortgage  insurer
     providing coverage,

o    the  underwriting  standards  that  determine  what loans are  eligible for
     purchase by the GSEs,  which thereby affect the quality of the risk insured
     by the mortgage insurer, as well as the availability of mortgage loans,

o    the terms on which  mortgage  insurance  coverage  can be  canceled  before
     reaching the cancellation thresholds established by law, and

o    the  circumstances  in which  mortgage  servicers  must perform  activities
     intended  to  avoid  or  mitigate  loss  on  insured   mortgages  that  are
     delinquent.

The Company  expects the level of competition  within the PMI industry to remain
intense.  Competition  for PMI premiums  occurs not only among private  mortgage
insurers  but  increasingly  with  mortgage  lenders  through  captive  mortgage
reinsurance  transactions in which a lender's  affiliate  reinsures a portion of
the insurance  written by a private mortgage insurer on mortgages  originated by
the lender.  The level of competition within the PMI industry has also increased
as many large  mortgage  lenders  have  reduced  the number of private  mortgage
insurers  with whom they do  business  at the same time as  consolidation  among
mortgage  lenders has increased the share of the mortgage lending market held by
large lenders. Changes in interest rates, house prices and cancellation policies
may materially  affect  persistency.  In each year,  most of MGIC's premiums are
from insurance that has been written in prior years. As a result,  the length of
time insurance  remains in force is an important  determinant  of revenues.  The
factors affecting persistency of the insurance in force include:

o    the level of current  mortgage  interest  rates  compared  to the  mortgage
     coupon rates on the insurance in force,  which affects the vulnerability of
     the insurance in force to refinancings, and

o    mortgage insurance  cancellation  policies of mortgage investors along with
     the rate of home price appreciation experienced by the homes underlying the
     mortgages in the insurance in force.

The strong  economic  climate that has existed  throughout the United States for
some time has favorably  impacted  losses and  encouraged  competition to assume
default  risk.  Losses  result from events that  adversely  affect a  borrower's
ability to continue to make mortgage payments, such as unemployment, and whether
the home of a borrower  who  defaults on his  mortgage can be sold for an amount
that will cover  unpaid  principal  and  interest  and the expenses of the sale.
Favorable  economic  conditions  generally  reduce the likelihood that borrowers
will lack sufficient income to pay their mortgages and also favorably affect the
value of homes,  thereby reducing and in some cases even eliminating a loss from
a mortgage  default.  A significant  deterioration in economic  conditions would
adversely  affect  MGIC's  losses.  The low  level of losses  that has  recently
prevailed in the private mortgage insurance industry has encouraged  competition
to assume default risk through captive reinsurance arrangements, self-insurance,
80-10-10  loans  and  other  means.


                                      Eleven

<PAGE>


Litigation  against mortgage lenders and settlement  service  providers has been
increasing. In recent years, consumers have brought a growing number of lawsuits
against home mortgage lenders and settlement  service providers seeking monetary
damages. The Real Estate Settlement Procedures Act gives home mortgage borrowers
the right to bring  lawsuits  seeking  damages of three  times the amount of the
charge paid for a settlement  service involved in a violation of this law. Under
rules adopted by the United States Department of Housing and Urban  Development,
"settlement  services" are services  provided in connection with settlement of a
mortgage loan, including services involving mortgage insurance.

The  pace  of  change  in the  home  mortgage  lending  and  mortgage  insurance
industries will likely accelerate. The Company expects the processes involved in
home mortgage lending will continue to evolve through greater use of technology.
This evolution  could effect  fundamental  changes in the way home mortgages are
distributed.  Lenders  who are  regulated  depositary  institutions  could  gain
expanded insurance powers if financial  modernization  proposals become law. The
capital markets are beginning to emerge as providers of insurance in competition
with traditional insurance companies. These trends and others increase the level
of  uncertainty  attendant to the PMI business,  demand rapid response to change
and place a premium on innovation.

Year 2000 Compliance

Almost all of the  Company's  information  technology  systems  ("IT  Systems"),
including all of its "business critical" IT Systems, either have been originally
developed to be Year 2000 compliant or have been reprogrammed. The Company plans
to reprogram the remaining IT Systems (the "Remaining  Systems") and to complete
internal  testing of all IT Systems for Year 2000  compliance  by the end of the
second  quarter of 1999.  In general,  the  Remaining  Systems  have either been
developed and maintained by the Company's  Information  Technology Department or
use off-the-shelf  software from national software vendors such as Microsoft and
IBM who have publicly announced that their software is Year 2000 compliant.  All
of the IT  Systems  developed  and  maintained  by  the  Information  Technology
Department have already been internally  tested for Year 2000 compliance and all
IT Systems using  off-the-shelf  software have been assessed.  If the Company is
unable to complete  any required  reprogramming  of the  Remaining  Systems on a
timely basis, the efficiency of certain of the Company's business processes will
likely  decline  but this  consequence  is not  expected  to be  material to the
Company.

Some of the Company's  "business  critical" IT Systems  interface  with computer
systems of third parties. The Company, Fannie Mae, Freddie Mac and many of these
third parties are  participating in the Mortgage  Bankers  Association Year 2000
Inter-Industry  Work  Group  (the  "MBA  Work  Group").  The MBA Work  Group has
scheduled  compliance  testing  among  participants  for the  first  and  second
quarters of 1999 and is continuing  efforts to attract  additional  participants
for compliance testing. The Company and one national service bureau have already
conducted certain successful Year 2000 compliance testing and it is possible the
Company will conduct  additional  Year 2000  compliance  testing with individual
companies  in  advance  of the MBA Work  Group  testing.  However,  the  Company
understands  it is the position of a number of larger  companies in the MBA Work
Group not to engage in any testing with third  parties in advance of the testing
sponsored by the MBA Work Group.  Not all companies  with which the Company's IT
Systems  interface  will be  participating  in the MBA Work Group  testing.


                                      Twelve

<PAGE>


The Company is contacting the larger companies not participating in the MBA Work
Group testing to determine  interest in one-on-one  testing.

All costs incurred through December 1998 for IT Systems for Year 2000 compliance
have been expensed and were immaterial. The costs of the remaining reprogramming
and testing are expected to be immaterial.

Telecommunications  services and  electricity  are  essential  to the  Company's
ability  to  conduct  business.  The  Company's  long-distance  voice  and  data
telecommunications  suppliers  and  the  local  telephone  company  serving  the
Company's  owned  headquarters  and  warehouse  facilities  have  written to the
Company to the effect that their respective systems will be Year 2000 compliant.
The  electric  company  serving  these  facilities  has given the  Company  oral
assurance that it will also be Year 2000 compliant.  In addition, the Company is
planning to acquire back-up power for its headquarters. The Company has received
written assurance regarding Year 2000 compliance from landlords of the Company's
underwriting service centers and local telephone companies.

The  Company  has  long  practiced  contingency  planning  to  address  business
disruption  risks and has  procedures  for  planning and  executing  contingency
measures to provide for  business  continuity  in the event of any  circumstance
that results in disruption to the Company's  headquarters,  warehouse facilities
and  leased  workplace   environments,   including  lack  of  utility  services,
transportation  disruptions,  and  service  provider  failures.  The  Company is
developing additional plans for the "special case" of business disruption due to
Year 2000 compliance issues. These plans, which are scheduled to be ready by the
end of the first  quarter of 1999,  will  address  continuity  measures  in five
areas:  physical  building  environment,   including  conducting  operations  at
off-site  facilities;  business  operations units, as discussed below;  external
factors over which the Company does not have control but can implement  measures
to  minimize  adverse  impact  on the  Company's  business;  application  system
restoration  priorities for the Company's  computer  systems;  and contingencies
specifically  targeted  towards  monitoring  Company  facilities  and systems at
year-end 1999.

The business  unit recovery  plans  address  resumption of business in the worst
case scenario of a total loss to a Company facility,  including the inability to
utilize computerized systems.

In view of the  timing and scope of the MBA Work  Group and other  testing,  the
Company's  contingency  planning does not currently include  developing  special
procedures  with  individual  third parties if they are not themselves Year 2000
compliant.  If the  Company is unable to do  business  with such  third  parties
electronically, it would seek to do business with them on a paper basis. Without
knowing  the  identity  of  non-compliant   third  parties  and  the  amount  of
transactions occurring between the Company and them, the Company cannot evaluate
the effects on its business if it were  necessary to substitute  paper  business
processes for electronic business processes with such third parties. Among other
effects,  Year 2000  non-compliance by such third parties could delay receipt of
renewal premiums by the Company or the reporting to the Company of mortgage loan
delinquencies  and could also affect the amount of the  Company's  new insurance
written.


                                      Thirteen

<PAGE>


<TABLE>

                                             MGIC INVESTMENT CORPORATION & SUBSIDIARIES
                                            YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                                Consolidated Statement of Operations
<CAPTION>

                                                                     1998                1997               1996
                                                                 --------------     ---------------    ---------------
<S>                                                              <C>                <C>                <C> 
REVENUES:                                                          (In thousands of dollars, except per share data)
   Premiums written:
     Direct....................................................  $     755,620      $     692,134      $     587,626
     Assumed...................................................          8,352             11,597             16,912
     Ceded (note 7)............................................        (14,811)           (13,483)           (15,611)
                                                                 --------------     ---------------    ---------------

   Net premiums written........................................        749,161            690,248            588,927
   Decrease in unearned premiums...............................         14,123             18,496             28,116
                                                                 --------------     ---------------    ---------------

   Net premiums earned (note 7)................................        763,284            708,744            617,043

   Investment income, net of expenses (note 4).................        143,019            123,602            105,355
   Realized investment gains, net (note 4).....................         18,288              3,261              1,220
   Other revenue...............................................         47,075             32,665             22,013
                                                                 --------------     ---------------    ---------------

     Total revenues............................................        971,666            868,272            745,631
                                                                 --------------     ---------------    ---------------

LOSSES AND EXPENSES:
   Losses incurred, net (notes 6 and 7)........................        211,354            242,362            234,350
   Underwriting and other expenses.............................        190,031            157,194            146,483
   Interest expense............................................         18,624              6,399              3,793
   Ceding commission (note 7)..................................         (2,928)            (3,056)            (4,023)
                                                                 --------------     ---------------    ---------------

     Total losses and expenses.................................        417,081            402,899            380,603
                                                                 --------------     ---------------    ---------------

Income before tax..............................................        554,585            465,373            365,028
Provision for income tax (note 10).............................        169,120            141,623            107,037
                                                                 --------------     ---------------    ---------------

Net income.....................................................  $     385,465      $     323,750      $     257,991
                                                                 ==============     ===============    ===============

Earnings per share (note 11):
   Basic.......................................................  $        3.44      $        2.78      $        2.19
                                                                 ==============     ===============    ===============
                                                                 

   Diluted.....................................................  $        3.39      $        2.75      $        2.17
                                                                 ==============     ===============    ===============
                                                                 


                                    See accompanying notes to consolidated financial statements.
</TABLE>



                                      Fourteen

<PAGE>


<TABLE>

                                             MGIC INVESTMENT CORPORATION & SUBSIDIARIES
                                                     DECEMBER 31, 1998 AND 1997

                                                     Consolidated Balance Sheet

<CAPTION>

                                                                                    1998                  1997
                                                                               ----------------     -----------------
                                                                                       (In thousands of dollars)
<S>                                                                            <C>                  <C>  
ASSETS 
Investment portfolio (note 4):
   Securities, available-for-sale, at market value:
     Fixed maturities........................................................  $     2,602,870      $      2,185,954
     Equity securities.......................................................            4,627               116,053
     Short-term investments..................................................          172,209               114,733
                                                                               ----------------     -----------------

       Total investment portfolio............................................        2,779,706             2,416,740

Cash ........................................................................            4,650                 4,893
Accrued investment income....................................................           41,477                35,485
Reinsurance recoverable on loss reserves (note 7)............................           45,527                26,415
Reinsurance recoverable on unearned premiums (note 7)........................            8,756                 9,239
Home office and equipment, net...............................................           32,400                33,784
Deferred insurance policy acquisition costs..................................           24,065                27,156
Investments in joint ventures (note 8).......................................           75,246                29,400
Other assets.................................................................           38,714                34,575
                                                                               ----------------     -----------------

       Total assets..........................................................  $     3,050,541      $      2,617,687
                                                                               ================     =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Loss reserves (notes 6 and 7).............................................  $       681,274      $        598,683
   Unearned premiums (note 7)................................................          183,739               198,305
   Notes payable (note 5)....................................................          442,000               237,500

   Income taxes payable (note 10)............................................           31,032                27,717
   Other liabilities.........................................................           71,905                68,700
                                                                               ----------------     -----------------

       Total liabilities.....................................................        1,409,950             1,130,905
                                                                               ----------------     -----------------

Contingencies (note 13)

Shareholders' equity (note 11):
   Common stock,  $1 par value,  shares  authorized  300,000,000;
    shares issued 121,110,800; outstanding 1998 - 109,003,032;
    1997 - 113,791,593.......................................................
                                                                                       121,111               121,111
   Paid-in surplus...........................................................          217,022               218,499
   Treasury stock (shares at cost 1998 - 12,107,768;
     1997 - 7,319,207).......................................................         (482,465)             (252,942)
   Accumulated other comprehensive income - unrealized
     appreciation in investments, net of tax (note 2)........................           94,572                83,985
   Retained earnings (note 11)...............................................        1,690,351             1,316,129
                                                                               ----------------     -----------------

     Total shareholders' equity..............................................        1,640,591             1,486,782
                                                                               ----------------     -----------------

     Total liabilities and shareholders' equity..............................  $     3,050,541      $      2,617,687
                                                                               ================     =================


                                    See accompanying notes to consolidated financial statements.

</TABLE>



                                                               Fifteen

<PAGE>


<TABLE>

                                             MGIC INVESTMENT CORPORATION & SUBSIDIARIES
                                            YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                           Consolidated Statement of Shareholders' Equity
<CAPTION>


                                                                               Accumulated
                                                                                  other
                                       Common       Paid-in        Treasury    comprehensive     Retained     Comprehensive
                                       stock        surplus         stock      income(note 2)    earnings        income
                                    ------------  ------------   ------------  --------------  ------------  -------------
                                                               (In thousands of dollars)
<S>                                 <C>           <C>            <C>           <C>             <C>           <C>
Balance, December 31, 1995......... $   121,111   $   198,874    $   (8,172)   $      54,737   $   754,842

Net income.........................           -             -             -                -       257,991   $    257,991
Unrealized investment losses, net..           -             -             -          (14,052)            -        (14,052)
                                                                                                             -------------
Comprehensive income...............           -             -             -                -             -   $    243,939
                                                                                                             =============
Dividends declared.................           -             -             -                -        (9,425)
Reissuance of treasury stock.......           -         9,110         1,099                -             -
                                    ------------  ------------   ------------  --------------  ------------

Balance, December 31, 1996.........     121,111       207,984        (7,073)          40,685     1,003,408

Net income.........................           -             -             -                -       323,750   $    323,750
Unrealized investment gains, net...           -             -             -           43,300             -         43,300
                                                                                                             -------------
Comprehensive income...............           -             -             -                -             -   $    367,050
                                                                                                             =============
Dividends declared.................           -             -             -                -       (11,029)
Repurchase of outstanding
  common shares....................           -             -      (248,426)               -             -
Reissuance of treasury stock.......           -        10,515         2,557                -             -
                                    ------------  ------------   ------------  --------------  ------------

Balance, December 31, 1997.........     121,111       218,499      (252,942)          83,985     1,316,129

Net income.........................           -             -             -                -       385,465   $    385,465
Unrealized investment gains, net...           -             -             -           10,587             -         10,587
                                                                                                             -------------
Comprehensive income...............           -             -             -                -             -   $    396,052
                                                                                                             =============
Dividends declared.................           -             -             -                -       (11,243)
Repurchase of outstanding
  common shares....................           -             -      (246,840)               -             -
Reissuance of treasury stock.......           -        (1,477)       17,317                -             -
                                    ------------  ------------   ------------  --------------  ------------

Balance, December 31, 1998......... $   121,111   $   217,022    $ (482,465)   $      94,572   $ 1,690,351
                                    ============  ============   ============  ==============  ============


              See accompanying notes to consolidated financial statements.

</TABLE>



                                                               Sixteen

<PAGE>


<TABLE>

                                             MGIC INVESTMENT CORPORATION & SUBSIDIARIES
                                            YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                                Consolidated Statement of Cash Flows

<CAPTION>

                                                                           1998               1997               1996
                                                                      ----------------   ----------------   ----------------
                                                                                    (In thousands of dollars)
<S>                                                                   <C>                <C>                <C>  
Cash flows from operating activities:
   Net income.......................................................  $      385,465     $       323,750    $       257,991
   Adjustments to reconcile net income to net cash provided by
     operating activities:
       Amortization of deferred insurance policy
         acquisition costs..........................................          20,717              21,373             26,772
       Increase in deferred insurance policy acquisition costs......         (17,626)            (16,573)           (20,772)
       Depreciation and other amortization..........................           7,742               8,187              8,969
       Increase in accrued investment income........................          (5,992)             (2,122)            (4,150)
       (Increase) decrease in reinsurance recoverable on
         loss reserves..............................................         (19,112)              3,412              4,029
       Decrease in reinsurance recoverable on unearned premiums.....             483               2,506              3,740
       Increase in loss reserves....................................          82,591              84,641            143,010
       Decrease in unearned premiums................................         (14,566)            (21,002)           (31,856)
       Equity (earnings) loss in joint ventures.....................         (12,420)             (7,100)               800
       Other........................................................          (6,336)            (25,186)            (2,478)
                                                                      ----------------   ----------------   ----------------

Net cash provided by operating activities...........................         420,946             371,886            386,055
                                                                      ----------------   ----------------   ----------------

Cash flows from investing activities:
   Purchase of equity securities....................................          (3,886)           (112,780)                 -
   Purchase of fixed maturities.....................................        (916,129)           (685,217)        (1,095,559)
   Investments in joint ventures....................................         (33,426)             (7,350)           (15,750)
   Proceeds from sale of equity securities..........................         116,164               9,971                  -
   Proceeds from sale or maturity of fixed maturities...............         529,358             447,284            782,349
                                                                      ----------------   ----------------   ----------------

Net cash used in investing activities...............................        (307,919)           (348,092)          (328,960)
                                                                      ----------------   ----------------   ----------------

Cash flows from financing activities:
   Dividends paid to shareholders...................................         (11,243)            (11,029)            (9,425)
   Net increase in notes payable....................................         204,500             202,076               (375)
   Interest payments on notes payable...............................         (17,665)             (3,836)            (3,793)
   Reissuance of treasury stock.....................................          15,454              13,072             10,209
   Repurchase of common stock.......................................        (246,840)           (248,426)                 -
                                                                      ----------------   ----------------   ----------------

Net cash used in financing activities...............................         (55,794)            (48,143)            (3,384)
                                                                      ----------------   ----------------   ----------------

Net increase (decrease) in cash and cash equivalents................          57,233             (24,349)            53,711
Cash and cash equivalents at beginning of year......................         119,626             143,975             90,264
                                                                      ----------------   ----------------   ----------------

Cash and cash equivalents at end of year............................  $      176,859     $       119,626    $       143,975
                                                                      ================   ================   ================


                                    See accompanying notes to consolidated financial statements.

</TABLE>



                                                              Seventeen

<PAGE>


MGIC INVESTMENT CORPORATION & SUBSIDIARIES -- DECEMBER 31, 1998, 1997 AND 1996

                   Notes to Consolidated Financial Statements

1.   Nature of business

    MGIC Investment Corporation  ("Company") is a holding company which, through
Mortgage Guaranty Insurance Corporation ("MGIC") and several other subsidiaries,
is principally engaged in the mortgage insurance business.  The Company provides
mortgage  insurance to lenders  throughout the United States to protect  against
loss from  defaults on low down  payment  residential  mortgage  loans.  Through
certain other  non-insurance  subsidiaries,  the Company also  provides  various
services  for the  mortgage  finance  industry,  such as contract  underwriting,
premium reconciliation and portfolio analysis.

    At December  31,  1998,  the  Company's  direct  primary  insurance in force
(representing  the  current  principal  balance of all  mortgage  loans that are
currently  insured)  and  direct  primary  risk in  force,  excluding  Wisconsin
Mortgage Assurance  Corporation  ("WMAC"),  was approximately $138.0 billion and
$32.9 billion,  respectively.  In addition to providing direct primary insurance
coverage, the Company also insures pools of mortgage loans. The Company's direct
pool risk in force at December 31, 1998 was approximately $1.1 billion.

    On December 31, 1998,  the Company  purchased WMAC from a third party for $2
million. MGIC contributed an additional $13 million of capital to WMAC to comply
with minimum regulatory capital  requirements.  WMAC wrote mortgage insurance on
first mortgages  collateralized by one-to-four-family  residences until February
28, 1985 at which time it ceased writing new business.  The  acquisition  had no
impact on the Company's earnings during 1998. WMAC's direct primary insurance in
force,  direct  primary  risk  in  force  and  direct  pool  risk in  force  was
approximately  $3.5  billion,  $.9 billion  and $.4  billion,  respectively,  at
December 31, 1998. (See note 7.)

    The Company's largest  shareholder,  The Northwestern  Mutual Life Insurance
Company ("NML"),  held  approximately  11% of the common stock of the Company at
December 31, 1998.

2.   Basis of presentation and summary of significant accounting policies

    The  preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Principles of consolidation
    The  consolidated   financial   statements  include  the  accounts  of  MGIC
Investment  Corporation  and its  wholly-owned  subsidiaries.  All  intercompany
transactions have been eliminated. The Company's 48% investments in Credit-Based
Asset   Servicing  and   Securitization   LLC  and  Litton  Loan   Servicing  LP
(collectively,  "C-BASS"),  joint ventures with Enhance Financial Services Group
Inc.,  are  accounted for on the equity method and recorded on the balance sheet
as investment in joint ventures.  The Company's  equity earnings from C-BASS are
included in other revenue. (See note 8.)

Investments
    The Company  categorizes its investment  portfolio  according to its ability
and intent to hold the  investments to maturity.  Investments  which the Company
does not have the ability and intent to hold to maturity  are  considered  to be
available-for-sale  and must be recorded at market and the  unrealized  gains or
losses  recognized as an increase or decrease to  shareholders'  equity.  During
1996, 1997 and 1998, the Company's entire investment portfolio was classified as
available-for-sale.  Realized investment gains and losses are reported in income
based upon specific identification of securities sold. (See note 4.)

Home office and equipment
    Home  office  and  equipment  is carried  at cost net of  depreciation.  For
financial  statement  reporting  purposes,   depreciation  is  determined  on  a
straight-line basis for the home office,  equipment and data processing hardware
over  estimated  lives  of 45,  5 and 3  years,  respectively.  For  income  tax
purposes, the Company uses accelerated depreciation methods.

    Home office and equipment is shown net of accumulated  depreciation of $45.2
million and $40.9 million at December 31, 1998 and 1997, respectively.


                                      Eighteen

<PAGE>


Deferred insurance policy acquisition costs
    The cost of acquiring insurance policies,  including  compensation,  premium
taxes and other underwriting  expenses,  is deferred, to the extent recoverable,
and  amortized as the related  premiums are earned.  No expenses are deferred on
monthly premium policies.

Loss reserves
    Reserves are established for reported  insurance  losses and loss adjustment
expenses  based on when  notices  of  default  on  insured  mortgage  loans  are
received. Reserves are also established for estimated losses incurred on notices
of default not yet reported by the lender.  Consistent with industry  practices,
the Company does not establish  loss reserves for future claims on insured loans
which are not currently in default. Reserves are established by management using
estimated  claims rates and claims  amounts in  estimating  the  ultimate  loss.
Amounts for salvage  recoverable  are  considered  in the  determination  of the
reserve  estimates.  Adjustments  to  reserve  estimates  are  reflected  in the
financial  statements  in the  years in which  the  adjustments  are  made.  The
liability for reinsurance assumed is based on information provided by the ceding
companies. (See note 6.)

Income recognition
    The insurance  subsidiaries  write policies  which are guaranteed  renewable
contracts at the insured's option on a single,  annual or monthly premium basis.
The  insurance  subsidiaries  have no ability to  reunderwrite  or reprice these
contracts.  Premiums  written on a single  premium  basis and an annual  premium
basis are  initially  deferred as unearned  premium  reserve and earned over the
policy  term.  Premiums  written  on  policies  covering  more than one year are
amortized  over the  policy  life in  accordance  with the  expiration  of risk.
Premiums  written on annual  policies  are earned on a monthly  pro rata  basis.
Premiums written on monthly policies are earned as the premiums are due.

    Fee income of the  non-insurance  subsidiaries is earned as the services are
provided.

Income taxes
    The Company and its  subsidiaries  file a  consolidated  federal  income tax
return.  A formal tax  sharing  agreement  exists  between  the  Company and its
subsidiaries. Each subsidiary determines income taxes based upon the utilization
of all tax  deferral  elections  available.  This assumes Tax and Loss Bonds are
purchased  and held to the extent they would have been  purchased  and held on a
separate  company  basis  since  the tax  sharing  agreement  provides  that the
redemption  or  non-purchase  of such bonds  shall not  increase  such  member's
separate taxable income and tax liability on a separate company basis.

    Federal tax law permits mortgage guaranty insurance companies to deduct from
taxable income, subject to certain limitations, the amounts added to contingency
loss  reserves.  Generally,  the amounts so deducted must be included in taxable
income in the tenth subsequent year. The deduction is allowed only to the extent
that U.S. government  non-interest  bearing Tax and Loss Bonds are purchased and
held in an amount equal to the tax benefit  attributable to such deduction.  The
Company  accounts  for these  purchases as a payment of current  federal  income
taxes.

    Deferred  income  taxes  are  provided  under  the  liability  method  which
recognizes  the future tax  effects of  temporary  differences  between  amounts
reported  in the  financial  statements  and the tax bases of these  items.  The
expected  tax effects are  computed at the current  federal tax rate.  (See note
10.)

Benefit plans
    The Company has a  non-contributory  defined  benefit  pension plan covering
substantially all employees.  Retirement  benefits are based on compensation and
years of service. The Company's policy is to fund pension cost as required under
the Employee Retirement Income Security Act of 1974. (See note 9.)

    The Company accrues the estimated costs of retiree medical and life benefits
over the period during which  employees  render the service that  qualifies them
for benefits.  The Company  offers both medical and dental  benefits for retired
employees and their spouses.  Benefits are generally  funded on a  pay-as-you-go
basis. (See note 9.)

Reinsurance
    Loss  reserves and unearned  premiums are reported  before taking credit for
amounts ceded under reinsurance  treaties.  Ceded loss reserves are reflected as
"Reinsurance  recoverable  on  loss  reserves".   Ceded  unearned  premiums  are
reflected as "Reinsurance recoverable on unearned premiums". The Company remains
contingently liable for all reinsurance ceded. (See note 7.)


                                      Nineteen

<PAGE>


Earnings per share
    The  Company's  basic  and  diluted  earnings  per share  ("EPS")  have been
calculated in accordance  with Statement of Financial  Accounting  Standards No.
128,  Earnings Per Share ("SFAS 128").  The Company's net income is the same for
both basic and diluted EPS. Basic EPS is based on the weighted-average number of
common shares outstanding.  Diluted EPS is based on the weighted-average  number
of common shares outstanding and common stock equivalents which would arise from
the  exercise  of  stock  options.  The  following  is a  reconciliation  of the
weighted-average  number of shares used for basic EPS and diluted EPS. (See note
11.)

                                   Years Ended December 31,
                               ---------------------------------
                                 1998        1997       1996
                                 ----        ----       ----
                                    (shares in thousands)
Weighted-average shares -
   Basic EPS                    112,135     116,332    117,787
Common stock equivalents          1,447       1,592      1,259
                               ----------  ---------  ----------
Weighted-average shares -
   Diluted EPS                  113,582     117,924    119,046
                               ==========  =========  ==========

    Earnings per share for 1996 has been  restated to reflect the  provisions of
SFAS 128. Previously reported EPS for 1996, after adjustment for the stock split
(see note 11), equaled diluted EPS under SFAS 128.

Statement of cash flows
    For  purposes  of the  consolidated  statement  of cash  flows,  the Company
considers  short-term   investments  to  be  cash  equivalents,   as  short-term
investments have original maturities of three months or less.

Recent accounting pronouncements
    Effective  January 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 130, Reporting  Comprehensive Income ("SFAS 130"). The
statement  establishes  standards for the reporting and display of comprehensive
income and its components in annual  financial  statements.  The Company's other
comprehensive  income  consists  of the  change in  unrealized  appreciation  on
investments,  net of tax, and as permitted  under the provisions of SFAS 130, is
presented in the Consolidated Statement of Shareholders' Equity. The adoption of
SFAS 130 had no impact on total shareholders' equity.  Realized investment gains
of $18.3  million  in 1998  include  sales of  securities  which had  unrealized
appreciation of $19.0 million at December 31, 1997.

    Effective  January 1, 1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 132,  Employers'  Disclosures about Pensions and Other
Postretirement  Benefits  ("SFAS  132").  The  statement  provides  new employer
disclosure  requirements  regarding pension plans and other postretirement plans
and does not address the measurement or recognition of such benefits.  (See note
9.)

    In June 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities  ("SFAS  133"),  which will be effective  for all fiscal
quarters  of all fiscal  years  beginning  after June 15,  1999.  The  statement
establishes  accounting and reporting  standards for derivative  instruments and
for hedging activities. Management does not anticipate adoption of SFAS 133 will
have a  significant  effect  on  the  Company's  results  of  operations  or its
financial position due to its limited use of derivative instruments.  (See notes
4 and 5.)

Reclassifications
    Certain  reclassifications  have  been  made in the  accompanying  financial
statements to 1997 and 1996 amounts to allow for consistent financial reporting.

3.   Related party transactions

    The Company contracts with Northwestern Mutual Investment Services,  Inc., a
subsidiary of NML, for investment  portfolio management and accounting services.
The Company incurred  expense of $1.0 million,  $1.1 million and $.9 million for
these services in 1998, 1997 and 1996, respectively.

    The  Company  provided  certain  services  to  C-BASS  in  exchange  for  an
immaterial amount of fees during 1998, 1997 and 1996.


                                      Twenty

<PAGE>
4.   Investments

    The following  table  summarizes  the Company's  investments at December 31,
1998 and 1997:


<TABLE>
<CAPTION>
                                                                                                         Financial
                                                                     Amortized           Market          Statement
                                                                        Cost             Value             Value
                                                                   ---------------   ---------------   ---------------
                                                                                (In thousands of dollars)
<S>                                                                <C>               <C>                <C>
At December 31, 1998:
   Securities, available-for-sale:
     Fixed maturities............................................. $   2,460,418     $    2,602,870     $   2,602,870
     Equity securities............................................         1,583              4,627             4,627
     Short-term investments.......................................       172,209            172,209           172,209
                                                                   ---------------   ---------------    --------------
   Total investment portfolio..................................... $   2,634,210     $    2,779,706     $   2,779,706
                                                                   ===============   ===============    ==============
At December 31, 1997:
   Securities, available-for-sale:
     Fixed maturities............................................. $   2,069,133     $    2,185,954     $   2,185,954
     Equity securities............................................       103,670            116,053           116,053
     Short-term investments.......................................       114,733            114,733           114,733
                                                                   ---------------   ---------------    --------------
   Total investment portfolio..................................... $   2,287,536     $    2,416,740     $   2,416,740
                                                                   ===============   ===============    ===============
</TABLE>


    The amortized  cost and market value of investments at December 31, 1998 are
as follows:


<TABLE>
<CAPTION>

                                                                                     Gross             Gross
                                                                  Amortized        Unrealized        Unrealized          Market
December 31, 1998:                                                   Cost            Gains             Losses            Value
- ------------------                                              ---------------  ---------------   ---------------   ---------------
                                                                                  (In thousands of dollars)
<S>                                                             <C>              <C>               <C>               <C>  
U.S. Treasury securities and obligations of U.S. government
   corporations and agencies..................................  $      65,811    $       5,746     $        (141)    $       71,416
Obligations of states and political subdivisions..............      2,030,847          120,033            (1,290)         2,149,590
Corporate securities..........................................        518,965           16,819              (100)           535,684
Mortgage-backed securities....................................          1,120               16                (3)             1,133
Debt securities issued by foreign sovereign governments.......         15,884            1,372                 -             17,256
                                                                ---------------  ---------------   ---------------   ---------------
   Total debt securities......................................      2,632,627          143,986            (1,534)         2,775,079

Equity securities.............................................          1,583            3,044                 -              4,627
                                                                ---------------  ---------------   ---------------   ---------------
   Total investment portfolio.................................  $   2,634,210    $     147,030     $      (1,534)    $    2,779,706
                                                                ===============  ===============   ===============   ===============
</TABLE>


The amortized  cost and market value of  investments at December 31, 1997 are as
follows:


<TABLE>
<CAPTION>
                                                                                      Gross            Gross
                                                                  Amortized         Unrealized       Unrealized         Market
December 31, 1997:                                                   Cost             Gains            Losses           Value
                                                                ---------------   ---------------  ---------------  ---------------
                                                                                     (In thousands of dollars)
<S>                                                             <C>               <C>              <C>              <C>
U.S. Treasury securities and obligations of U.S. government
   corporations and agencies..................................  $      60,972     $       3,573    $          (2)   $       64,543
Obligations of states and political subdivisions..............      1,620,660           102,915             (555)        1,723,020
Corporate securities..........................................        487,711             9,984              (42)          497,653
Mortgage-backed securities....................................            437                32                -               469
Debt securities issued by foreign sovereign governments.......         14,086               916                -            15,002
                                                                ---------------   ---------------  ---------------  ---------------
   Total debt securities......................................      2,183,866           117,420             (599)        2,300,687
Equity securities.............................................        103,670            14,582           (2,199)          116,053
                                                                ---------------   ---------------  ---------------  ---------------
   Total investment portfolio.................................  $   2,287,536     $     132,002    $      (2,798)   $    2,416,740
                                                                ===============   ===============  ===============  ===============

</TABLE>



                                      Twenty-one

<PAGE>

    The  amortized  cost and market  values of debt  securities  at December 31,
1998, by contractual maturity, are shown below. Debt securities consist of fixed
maturities  and short-term  investments.  Expected  maturities  will differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                  Amortized         Market
                                    Cost            Value
                                -------------    ------------
                                  (In thousands of dollars)
Due in one year or less........ $   175,430      $   175,572
Due after one year through
  five years...................     298,734          311,433
Due after five years through
  ten years....................   1,000,720        1,066,596
Due after ten years............   1,156,623        1,220,345
                                -------------    ------------
                                  2,631,507        2,773,946
Mortgage-backed securities.....       1,120            1,133
                                -------------    ------------
Total at December 31, 1998..... $ 2,632,627      $ 2,775,079
                                =============    ============

    Net investment income is comprised of the following:

                            1998         1997        1996
                        -----------  -----------  ----------
                             (In thousands of dollars)
Fixed maturities....... $  133,307   $  117,448   $  99,832
Equity securities......      1,133          485         240
Short-term investments.      9,603        6,813       6,223
Other .................         79           65          82
                        -----------  -----------  ----------
Investment income......    144,122      124,811     106,377
Investment expenses....     (1,103)      (1,209)     (1,022)
                        -----------  -----------  ----------
Net investment income.. $  143,019   $  123,602   $ 105,355
                        ===========  ===========  ==========

    The net realized  investment  gains  (losses)  and change in net  unrealized
appreciation (depreciation) of investments are as follows:

                                  1998        1997        1996
                              ----------   ----------   ---------
                                   (In thousands of dollars
Net realized investment gains
  (losses) on sale of
  investments:
    Fixed maturities........  $   8,349    $   3,734    $   1,252
    Equity securities.......      9,941         (472)         (30)
    Short-term investments..         (2)          (1)          (2)
                              ----------   ----------   ---------
                                 18,288        3,261        1,220
                              ----------   ----------   ---------
Change in net unrealized 
   appreciation (depreciation):

    Fixed maturities........     25,631       56,934      (22,064)
    Equity securities.......     (9,339)       9,677          233
    Short-term investments..          -            -            -
                              ----------   ----------   ---------
                                 16,292       66,611      (21,831)
                              ----------   ----------   ---------

Net realized investment
  gains (losses) and change
  in net unrealized
  appreciation (depreciation) $  34,580    $  69,872    $ (20,611)
                              ==========   ==========   =========

    The  gross  realized  gains  and the  gross  realized  losses  on  sales  of
available-for-sale  securities were $22.7 million and $4.4 million, respectively
in 1998 and $5.7 million and $2.4 million, respectively in 1997.

    The tax  expense  (benefit)  of the changes in net  unrealized  appreciation
(depreciation) was $5.7 million, $23.3 million and ($7.6) million for 1998, 1997
and 1996, respectively.

5.  Notes payable

    During 1997 and 1998, the Company repurchased  approximately 4.7 million and
5.3 million shares,  respectively,  of its outstanding common stock at a cost of
approximately  $248 and $247  million,  respectively.  Funds to  repurchase  the
shares were primarily  provided by borrowings under credit facilities  evidenced
by notes payable.

    The 1997 and 1998  credit  facilities  provide up to $225  million  and $250
million,  respectively,  of  availability  at December 31, 1998. The 1997 credit
facility  will  decrease by $25 million each year  through  June 20,  2001.  Any
outstanding  borrowings  under this facility  mature on June 20, 2002.  The 1998
credit  facility  decreases  by $25  million  each year  beginning  June 9, 1999
through June 9, 2002. Any outstanding  borrowings  under this facility mature on
June 9, 2003.  The Company  has the option on notice to  lenders,  to prepay any
borrowings under the agreements subject to certain provisions.

    At December 31, 1998, the Company's outstanding balance of the notes payable
on the 1997 and 1998  credit  facilities  were $210  million  and $232  million,
respectively,  which  approximated  market value. The interest rate on the notes
payable varies based on LIBOR and at December 31, 1998 and December 31, 1997 the
rate was 5.80% and 6.01%,  respectively.  The weighted  average interest rate on
the notes payable for borrowings  under the 1997 and 1998 credit  agreements was
5.86% per annum for the year ended December 31, 1998.

    Under  the  terms  of the  credit  facilities,  the  Company  must  maintain
shareholders'  equity of at least $1  billion  and MGIC must  maintain  a claims
paying  ability  rating  of AA- or better  with  Standard  & Poor's  Corporation
("S&P").  At December 31, 1998, the Company had  shareholders'  equity of $1,641
million and MGIC had a claims paying ability rating of AA+ from S&P.

                                   twenty-two

<PAGE>


    In January 1997,  the Company  repaid  mortgages  payable of $35.4  million,
which were secured by the home office and substantially all of the furniture and
fixtures of the Company.

    The Company entered into financial  derivative  transactions,  consisting of
interest rate swaps and  put-swaptions  to reduce and manage interest rate risk.
With  respect  to all such  transactions,  a  notional  amount  of $100  million
represents  the  stated  principal  balance  used  as a  basis  for  calculating
payments.

    During the fourth quarter of 1998,  the Company  entered into a $100 million
interest  rate swap to  convert a portion  of the  variable  rate debt under the
credit  facilities to fixed rate. On the swap,  the Company  receives a floating
rate based on LIBOR and pays a fixed rate of 4.67%.  The swap expires October 6,
2001.  In addition,  during the fourth  quarter of 1998,  the Company sold three
successive  $100  million  put-swaptions  for  investment  purposes.  All  three
put-swaptions  expired  unexercised,  the last  expiring  on  January  6,  1999.
Earnings in 1998 on the swap of approximately  $.2 million and premium income on
the  put-swaptions  of  approximately  $.3 million are netted  against  interest
expense in the Consolidated Statement of Operations.

6.  Loss reserves

    Loss reserve activity was as follows:

                             1998            1997            1996
                          ------------    ------------    ------------
                                    (In thousands of dollars)
Reserve at beginning                                    
  of year.............    $  598,683      $  514,042      $  371,032
Less reinsurance                                        
  recoverable.........        26,415          29,827          33,856
                          ------------    ------------    ------------
Net reserve at                                          
  beginning of year...       572,268         484,215         337,176
Reserve transfer (1)..           538             537          35,657
                          ------------    ------------    ------------
Adjusted reserve at                                     
  beginning of year...       572,806         484,752         372,833
                                                        
Losses incurred:                                        
  Losses and LAE                                        
    incurred in                                         
    respect of default                                  
    notices received                                    
    in:                                                 
      Current year....       377,786         360,623         312,630
      Prior years (2).      (166,432)       (118,261)        (78,280)
                          ------------    ------------    ------------
        Subtotal......       211,354         242,362         234,350
                          ------------    ------------    ------------
Losses paid:                                          
  Losses and LAE paid
    in respect of
    default notices
    received in:
      Current year....       8,752        15,257        16,872
      Prior years.....     139,661       139,589       106,096
                        ------------  ------------  ------------
        Subtotal......     148,413       154,846       122,968
                        ------------  ------------  ------------

Net reserve at end of      
year..................     635,747       572,268       484,215
Plus reinsurance
  recoverables........      45,527        26,415        29,827
                        ------------  ------------  ------------
Reserve at end of year  $  681,274    $  598,683    $  514,042
                        ============  ============  ============

(1) Received  in  conjunction  with  the  cancellation  of  certain  reinsurance
    treaties.  (See note 7.) 
(2) A negative  number for a prior year indicates a redundancy of loss reserves,
    and a positive  number  for a prior  year  indicates  a  deficiency  of loss
    reserves.

    The top portion of the table above shows losses  incurred on default notices
received in the current  year and in prior  years,  respectively.  The amount of
losses  incurred  relating  to default  notices  received  in the  current  year
represents the estimated  amount to be ultimately paid on such default  notices.
The amount of losses  incurred  relating  to default  notices  received in prior
years  represents an adjustment made in the current year for defaults which were
included in the loss reserve at the end of the prior year.


                                  twenty-three


<PAGE>



    Current year losses incurred  increased from 1997 to 1998 due to an increase
in the primary  insurance  notice  inventory from 28,493 at December 31, 1997 to
29,253  at  December  31,  1998 and an  increase  in the pool  insurance  notice
inventory  from 2,098 at December 31, 1997 to 6,524 at December  31,  1998.  The
Company's loss reserves at December 31, 1998 reflect credit quality  concerns on
defaults from insurance  written in 1994 through 1996, an increase in the number
of defaults with deeper  coverages and the growth in pool insurance.  Offsetting
this increase were favorable  developments  in prior years' loss reserves,  with
the net effect of total losses  incurred  decreasing from $242.4 million in 1997
to $211.4 million in 1998.

    The  favorable  development  of the  reserves  in  1998,  1997  and  1996 is
reflected  in the prior year line,  and results  from the actual claim rates and
actual  claim  amounts  being lower than those  estimated  by the  Company  when
originally  establishing  the  reserve  at  December  31,  1997,  1996 and 1995,
respectively.

    The lower portion of the table above shows the breakdown between claims paid
on default notices  received in the current year and default notices received in
prior years. Since it takes, on average, about twelve months for a default which
is not cured to develop  into a paid  claim,  most losses paid relate to default
notices received in prior years.

7.  Reinsurance

    The Company cedes a portion of its business to reinsurers and records assets
for reinsurance recoverable on estimated reserves for unpaid losses and unearned
premiums.  Business  written  between 1985 and 1993 is ceded under various quota
share  reinsurance  agreements with several  reinsurers.  The Company receives a
ceding commission in connection with this  reinsurance.  There is no quota share
reinsurance on business written subsequent to December 31, 1993.

    In September  1996,  the Company  signed an  agreement  with WMAC and a WMAC
reinsurer to assume all of the reinsurer's  interest in WMAC mortgage  insurance
writings,  which had been previously ceded to that reinsurer.  As a result,  the
portion of WMAC's  insurance in force  reinsured by the Company  increased  from
approximately  21 percent to  approximately  65 percent.  The  Company  received
approximately  $40 million as payment for its  assumption  of existing  loss and
unearned  premium  reserves related to the insurance in force being assumed from
WMAC. In 1997 and 1998,  the Company  signed  similar  agreements  with WMAC and
other  WMAC  reinsurers  resulting  in an  increase  in the  portion  of  WMAC's
insurance in force reinsured by the Company to  approximately  66 percent and 67
percent, respectively. (See note 1.)

    As a result  of the  purchase  of WMAC on  December  31,  1998,  reinsurance
recoverable on loss reserves as shown in the Consolidated Balance Sheet includes
approximately $26 million of reinsured loss reserves.

    The effect of  reinsurance  on  premiums  earned and losses  incurred  is as
follows:

                               1998             1997             1996
                            ------------     ------------     ------------
                                      (In thousands of dollars)
Premiums earned:                                           
  Direct.................   $  770,775       $  712,069       $  623,148
  Assumed................        9,670           12,665           13,245
  Ceded .................      (17,161)         (15,990)         (19,350)
                            ------------     ------------     ------------
  Net premiums earned....   $  763,284       $  708,744       $  617,043
                            ============     ============     ============
Losses incurred:                                           
  Direct.................   $  216,340       $  247,137       $  226,702
  Assumed................       (3,234)           3,683           17,073
  Ceded .................       (1,752)          (8,458)          (9,425)
                            ------------     ------------     ------------
  Net losses incurred....   $  211,354       $  242,362       $  234,350
                            ============     ============     ============
                                                         
8.  Investment in C-BASS

    C-BASS engages in the acquisition and resolution of delinquent single-family
residential  mortgage loans ("mortgage loans").  C-BASS also purchases and sells
mortgage-backed  securities  ("mortgage  securities"),  interests in real estate
mortgage  investment conduit residuals and performs mortgage loan servicing.  In
addition,  C-BASS  issues  mortgage-backed  debt  securities  collateralized  by
mortgage loans and mortgage  securities.  All such  mortgage-related  assets are
recorded  at  fair  value  and as a  result  are  exposed  to  market  valuation
adjustments  which  could  impact the  Company's  share of  C-BASS's  results of
operations.

                                  twenty-four



<PAGE>



    At December 31, 1998 the Company had contributed  approximately  $56 million
of capital to C-BASS.  Total combined assets of C-BASS at December 31, 1998 were
approximately   $623  million,   of  which   approximately   $550  million  were
mortgage-related   assets,   including  open  trades.   Total  liabilities  were
approximately  $468 million,  of which  approximately  $459 million were funding
arrangements,  including accrued interest. For the year ended December 31, 1998,
revenues of approximately  $70 million and expenses of approximately $44 million
resulted in income before tax of approximately $26 million.

    The Company is  guaranteeing  one half of a $50 million  credit  facility as
part of C-BASS's funding arrangements. The facility matures in July 1999.

9.  Benefit plans

    The following tables provide  reconciliations  of the changes in the benefit
obligation, fair value of plan assets and funded status of the pension and other
postretirement benefit plans:

<TABLE>
<CAPTION>

                                                                                              Other Postretirement
                                                                   Pension Benefits                 Benefits
                                                               --------------------------   --------------------------
                                                                   1998          1997          1998          1997
                                                               ------------   -----------   ------------  ------------
                                                                             (In thousands of dollars)
Reconciliation of benefit obligation:
<S>                                                            <C>            <C>           <C>           <C>        
Benefit obligation at beginning of year......................  $   51,190     $   42,844    $   19,364    $    17,815
   Service cost..............................................       4,064          3,569         1,612          1,379
   Interest cost.............................................       3,959          3,169         1,357          1,267
   Amendments................................................           -          3,447             -              -
   Actuarial loss (gain).....................................       7,908         (1,181)          883           (872)
   Benefits paid.............................................        (841)          (658)         (206)          (225)
                                                               ------------   -----------   ------------  ------------
Benefit obligation at end of year............................  $   66,280     $   51,190    $   23,010    $    19,364
                                                               ============   ===========   ============  ============

Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year...............  $   57,578     $   46,256    $    8,632    $     6,248
   Actual return on plan assets..............................       9,895          8,864         1,141          1,270
   Employer contributions....................................       7,190          3,116         1,272          1,114
   Benefits paid.............................................        (841)          (658)            -              -
                                                               ------------   -----------   ------------  ------------
Fair value of plan assets at end of year.....................  $   73,822     $   57,578    $   11,045    $     8,632
                                                               ============   ===========   ============  ============

Reconciliation of funded status:
Benefit obligation at end of year............................  $  (66,280)    $  (51,190)   $  (23,010)   $   (19,364)
Fair value of plan assets at end of year.....................      73,822         57,578        11,045          8,632
                                                               ------------   -----------   ------------  ------------
Funded status at end of year.................................       7,542          6,388       (11,965)       (10,732)
   Unrecognized net actuarial gain...........................      (4,741)        (7,485)       (3,145)        (3,753)
   Unrecognized net transition obligation....................          63             95         7,419          7,949
   Unrecognized prior service cost...........................       2,542          2,725             -              -
                                                               ------------   -----------   ------------  ------------
Prepaid (accrued) benefit cost...............................  $    5,406     $    1,723    $   (7,691)   $    (6,536)
                                                               ============   ===========   ============  ============
</TABLE>


                                  twenty-five

                                       

<PAGE>
    The following table provides the components of net periodic benefit cost for
the pension and other postretirement benefit plans:

<TABLE>
<CAPTION>
                                                                                                    Other Postretirement
                                                           Pension Benefits                               Benefits
                                               -----------------------------------------  -----------------------------------------
                                                  1998          1997           1996          1998           1997          1996
                                               ------------  ------------   ------------  ------------   ------------  ------------
                                                                            (In thousands of dollars)
<S>                                            <C>           <C>            <C>           <C>            <C>           <C>        
Service cost.................................  $    4,064    $     3,569    $    3,378    $     1,612    $    1,379    $     1,208
Interest cost................................       3,959          3,169         2,777          1,357         1,267          1,171
Expected return on plan assets...............      (4,674)        (3,521)       (3,026)          (696)         (506)          (388)
Recognized net actuarial gain................           -              -             -           (170)          (67)             -
Amortization of transition obligation........          32             32            32            530           530            530
Amortization of prior service cost...........         183            (20)          (62)             -             -              -
                                               ------------  ------------   ------------  ------------   ------------  ------------
Net periodic benefit cost....................  $    3,564    $     3,229    $    3,099    $     2,633    $    2,603    $     2,521
                                               ============  ============   ============  ============   ============  ============

    The assumptions  used in the measurement of the Company's  pension and other
postretirement benefit obligations are shown in the following table:
<CAPTION>
                                                                                                      Other Postretirement
                                                             Pension Benefits                               Benefits
                                                 -----------------------------------------  ---------------------------------------
                                                    1998          1997           1996          1998           1997          1996
                                                 ------------  ------------  -------------  ------------   ------------  ----------
Weighted-average interest rate assumptions
 as of December 31:
<S>                                                  <C>           <C>           <C>            <C>           <C>           <C> 
     Discount rate.............................      7.0%          7.5%          7.5%           7.0%          7.5%          7.5%
     Expected return on plan assets............      7.5%          7.5%          7.5%           7.5%          7.5%          7.5%
     Rate of compensation increase.............      6.0%          6.0%          6.0%            N/A           N/A           N/A

</TABLE>


    Plan assets consist of fixed maturities and equity  securities.  The Company
is amortizing the unrecognized transition obligation for postretirement benefits
over 20 years.  The assumed  health care cost trend rate used in  measuring  the
accumulated  postretirement benefit obligation is 7.5% decreasing to 6% for 2000
and  remaining  level  thereafter.  A 1% change in the  health  care  trend rate
assumption would have the following effects:

                                       1-Percentage     1-Percentage
                                          Point           Point
                                         Increase         Decrease
                                     --------------  ---------------
                                        (In thousands of dollars)
Effect on total service and
  interest cost components......       $     678    $     (562)
Effect on postretirement
  benefit obligation............           4,912         (4,082)

    The Company has a profit sharing and 401(k)  savings plan for employees.  At
the discretion of the Board of Directors,  the Company may make a profit sharing
contribution  of up  to  5% of  each  participant's  compensation.  The  Company
provides  a  matching  401(k)  savings  contribution  on  employees'  before-tax
contributions  at a rate of 80% of the first $1,000  contributed  and 40% of the
next  $2,000  contributed.  Profit  sharing  costs  and the  Company's  matching
contributions  to the 401(k)  savings plan were $5.0  million,  $3.8 million and
$3.6 million in 1998, 1997 and 1996, respectively.

10. Income taxes

    The components of the net deferred tax liability as of December 31, 1998 and
1997 are as follows:
                                            1998         1997
                                         ----------   ----------
                                        (In thousands of dollars)
Unearned premium reserves.............. $   (16,897)   $  (18,337)
Deferred policy acquisition costs......       8,423         9,504
Loss reserves..........................     (11,688)       (6,622)
Unrealized appreciation in             
  investments..........................      50,923        45,221
Other .................................      (2,227)       (3,957)
                                        ------------   ----------
Net deferred tax liability............. $    28,534    $   25,809
                                        ============   ==========
                                   
    At December 31, 1998, gross deferred tax assets and liabilities  amounted to
$60.4  million and $88.9  million,  respectively.  Management  believes that all
gross  deferred  tax assets at  December  31, 1998 are fully  realizable  and no
valuation reserve has been established.

                                   twenty-six


<PAGE>
    The following summarizes the components of the provision for income tax:

                               1998          1997          1996
                           -----------   ----------   -----------
                                (In thousands of dollars)
Federal:               
  Current................  $  171,244    $ 147,983    $  116,160
  Deferred...............      (4,198)      (7,833)      (10,325)
State   .................       2,074        1,473         1,202
                           -----------   ----------   -----------
Provision for income tax   $  169,120    $ 141,623    $  107,037
                           ===========   ==========   ===========
                     
    The  Company  paid $160.6  million,  $151.1  million  and $103.9  million in
federal income tax in 1998, 1997 and 1996, respectively.

    The  reconciliation of the tax provision computed at the federal tax rate of
35% to the reported provision for income tax is as follows:

                                     1998            1997            1996
                                 -----------     -----------     -----------
                                         (In thousands of dollars)
Tax provision computed                                        
  at federal tax rate.......     $  194,105      $ 162,881       $ 127,760
(Decrease) increase in tax                                    
provision resulting from:                                     
  Tax exempt municipal bond                
   interest.................        (28,973)       (24,926)        (22,114)
    Other, net.........               3,988          3,668           1,391
                                 -----------     -----------     -----------
Provision for income tax         $  169,120      $ 141,623       $ 107,037
                                 ===========     ===========     ===========
                                                              
    The Internal  Revenue Service has completed  examining the Company's  income
tax returns  through  1994.  The results of these  examinations  had no material
effect on the financial statements.

11. Shareholders' equity and dividend restrictions

    The Company's insurance subsidiaries are subject to statutory regulations as
to maintenance of policyholders'  surplus and payment of dividends.  The maximum
amount of dividends that the insurance  subsidiaries may pay in any twelve-month
period  without  regulatory  approval  by  the  Office  of the  Commissioner  of
Insurance of the State of Wisconsin ("OCI") is the lesser of adjusted  statutory
net  income  or 10% of  statutory  policyholders'  surplus  as of the  preceding
calendar year end. Adjusted  statutory net income is defined for this purpose to
be the greater of statutory net income,  net of realized  investment  gains, for
the calendar  year  preceding  the date of the dividend or statutory net income,
net of realized  investment  gains,  for the three calendar years  preceding the
date of the dividend less  dividends  paid within the first two of the preceding
three calendar  years.  In 1999, MGIC can pay $49.4 million of dividends and the
other  insurance  subsidiaries  of the Company can pay $4.5 million of dividends
without such regulatory approval.

    Certain of the Company's  non-insurance  subsidiaries also have requirements
as to  maintenance  of net  worth.  These  restrictions  could  also  affect the
Company's ability to pay dividends.

    In 1998,  1997 and 1996, the Company paid dividends of $11.2 million,  $11.0
million  and $9.4  million,  respectively  or $.10 per share in 1998,  $.095 per
share in 1997 and $.08 per share in 1996.

    The principles used in determining  statutory  financial amounts differ from
generally accepted accounting  principles ("GAAP"),  primarily for the following
reasons:

    Under statutory accounting practices,  mortgage guaranty insurance companies
    are required to maintain  contingency loss reserves equal to 50% of premiums
    earned. Such amounts cannot be withdrawn for a period of ten years except as
    permitted  by  insurance  regulations.  Contingency  loss  reserves  are not
    reflected as liabilities under GAAP.

    Under statutory accounting practices, insurance policy acquisition costs are
    charged against operations in the year incurred. Under GAAP, these costs are
    deferred and amortized as the related premiums are earned  commensurate with
    the expiration of risk.

    Statutory  financial  statements only include a provision for current income
    taxes  due,  and  purchases  of Tax and  Loss  Bonds  are  accounted  for as
    investments.  GAAP financial  statements  provide for deferred income taxes,
    and  purchases  of Tax and Loss Bonds are  recorded  as  payments of current
    income taxes.

    Under statutory accounting practices,  fixed maturity investments are valued
    at amortized cost. Under GAAP, those  investments which the Company does not
    have the  ability  and  intent  to hold to  maturity  are  considered  to be
    available for sale and are recorded at market,  with the unrealized  gain or
    loss  recognized,  net of tax, as an  increase or decrease to  shareholders'
    equity.
                                  twenty-seven

<PAGE>

    The statutory net income,  equity and the contingency  reserve  liability of
the  insurance  subsidiaries  (excluding  the  non-insurance  companies)  are as
follows:

 Year Ended           Net                    Contingency
December 31,         Income       Equity      Reserves
- --------------     -----------  ------------ ------------
                         (In thousands of dollars)
    1998           $  187,535   $  585,280   $  1,939,626
    1997              144,963      394,274      1,625,810
    1996               67,094      274,118      1,317,438
                                            
    The differences  between the statutory net income and equity presented above
for the  insurance  subsidiaries  and the  consolidated  net  income  and equity
presented on a GAAP basis primarily  represent the differences  between GAAP and
statutory  accounting  practices,  and the  effect  of the  treasury  shares  on
consolidated equity.

    The Company has two stock  option plans which  permit  certain  officers and
employees to purchase common stock at specified prices. A summary of activity in
the stock option plans during 1996, 1997 and 1998 is as follows:

                                    Average         Shares
                                    Exercise      Subject to
                                     Price          Option
                                   ----------     -----------
Outstanding, December 31, 1995...  $    9.15       3,312,566

   Granted.......................      30.57          61,334
   Exercised.....................       4.80        (636,654)
   Canceled......................      15.41        (132,620)
                                   ----------     -----------

Outstanding, December 31, 1996...      10.40       2,604,626

   Granted.......................      37.04       1,592,000
   Exercised.....................       9.08        (532,332)
   Canceled......................      31.19         (29,420)
                                   ----------     -----------

Outstanding, December 31, 1997...      22.09       3,634,874

   Granted.......................      62.28         109,500
   Exercised.....................      10.99        (478,848)
   Canceled......................      33.99         (70,002)
                                   ----------     -----------
Outstanding, December 31, 1998...  $   24.87       3,195,524
                                   ==========     ===========

    The exercise price of the options  granted in 1996,  1997 and 1998 was equal
to the  market  value  of the  stock  on the  date of  grant.  The  options  are
exercisable  between one and ten years after the date of grant.  At December 31,
1998,  3,678,915  shares were  available for future grant under the stock option
plans.

    The Company adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards No. 123,  Accounting for Stock-Based  Compensation  ("SFAS
123").  Had  compensation  cost  for  the  Company's  stock  option  plans  been
determined  based on the fair value method  described by SFAS 123, the Company's
net  income and  earnings  per share  would  have been  reduced to the pro forma
amounts indicated below (in thousands, except per share data):

                               Year Ended December 31,
                        --------------------------------------
                           1998         1997          1996
                        -----------   ----------   -----------
Net income              $  381,689    $ 320,416    $  257,807

Earnings per share:
   Basic                $     3.40    $    2.75    $     2.19
   Diluted              $     3.36    $    2.72    $     2.17

    The fair  value of these  options  was  estimated  at grant  date  using the
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions for each year:

                                Year Ended December 31,
                          -------------------------------------
                             1998         1997         1996
                          -----------  -----------  -----------
Risk free interest rate      6.37%        6.44%        6.73%
Expected life..........   6.82 years   6.88 years   5.63 years
Expected volatility....     27.98%       28.07%       28.60%
Expected dividend yield      0.17%        0.16%        0.21%

    The  following  is a summary of stock  options  outstanding  at December 31,
1998:

                    Options Outstanding            Options
                                                 Exercisable
                ----------------------------- ---------------------
                          Remaining   Average            Average
Exercise                  Average     Exercise           Exercise
Price Range      Shares   Life (yrs.)  Price    Shares    Price 
- --------------- --------- ----------   -------- --------- ---------
$2.50-$3.45      621,200     1.8        $3.27    621,200   $ 3.27
                                      
$9.63-$20.88     936,714     4.9        15.33    876,876    15.28
                                      
$26.69-$41.00   1,512,110    8.0        36.29    253,649    35.92
                                      
$60.25-$68.63    125,500     9.7        65.36          -       -
                ---------  ---------   -------- --------- ---------
Total           3,195,524    6.0       $24.87   1,751,725 $ 14.01
                =========  =========   ======== ========= =========
                                     
    At December 31, 1997 and 1996, option shares of 1,540,076 and 1,683,700 were
exercisable at an average exercise price of $8.56 and $7.12,  respectively.  The
Company  also  granted an  immaterial  amount of equity  instruments  other than
options during 1997 and 1998.

                                  twenty-eight



<PAGE>



    On June 2,  1997 the  Company  effected  a  two-for-one  stock  split of the
Company's  common  stock in the form of a 100%  stock  dividend.  Per  share and
certain equity amounts set forth in the  accompanying  financial  statements and
notes have been adjusted to take into account the stock split.

12. Leases

    The Company leases certain office space as well as data processing equipment
and autos  under  operating  leases  that  expire  during the next eight  years.
Generally, all rental payments are fixed.

    Total rental expense under operating  leases was $5.4 million,  $5.3 million
and $5.1 million in 1998, 1997 and 1996, respectively.


    At December 31, 1998, minimum future operating lease payments are as follows
(in thousands of dollars):

1999...........................  $     4,312
2000...........................        2,897
2001...........................        1,818
2002...........................        1,180
2003...........................          579
2004 and thereafter............          418
                                 -------------
   Total.......................  $    11,204
                                 =============

13. Contingencies

    The Company is involved in litigation in the ordinary course of business. In
the opinion of management,  the ultimate  disposition of the pending  litigation
will not  have a  material  adverse  effect  on the  financial  position  of the
Company.

                                  twenty-nine



<PAGE>

 
                      Report of Independent Accountants

To the Board of Directors & Shareholders of MGIC Investment Corporation

         In our opinion,  the  accompanying  consolidated  balance sheet and the
related  consolidated  statements of operations,  of shareholders' equity and of
cash flows present fairly, in all material  respects,  the financial position of
MGIC  Investment  Corporation and  Subsidiaries  (the "Company") at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended  December 31, 1998,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards which require that we plan and perform the audit to obtain  reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/
Milwaukee, Wisconsin
January 6, 1999



                                     thirty


<PAGE>

<TABLE>
<CAPTION>


                                           Unaudited Quarterly Financial Data

                                                                      Quarter                                     
                                           ---------------------------------------------------------------        1998
                       1998                   First            Second           Third           Fourth            Year
- ----------------------------------------   -------------    -------------    -------------   -------------    -------------
                                                          (In thousands of dollars, except per share data)

<S>                                        <C>              <C>              <C>             <C>              <C>         
Net premiums written.....................  $    176,487     $    186,663     $    190,567    $    195,444     $    749,161
Net premiums earned......................       189,821          189,248          191,066         193,149          763,284
Investment income, net of expenses.......        34,389           35,325           36,461          36,844          143,019
Losses incurred, net.....................        59,438           52,514           51,487          47,915          211,354
Underwriting and other expenses..........        45,158           45,532           46,498          52,843          190,031
Net income...............................        94,047           95,212           96,492          99,714          385,465
Earnings per share (a):
   Basic.................................           .83              .83              .87             .91             3.44
   Diluted...............................           .81              .82              .86             .91             3.39
<CAPTION>

                                                                      Quarter                                    
                                           ---------------------------------------------------------------        1997
                       1997                   First            Second           Third           Fourth            Year
- ----------------------------------------   -------------    -------------    -------------   -------------    -------------
                                                          (In thousands of dollars, except per share data)

<S>                                        <C>              <C>              <C>             <C>              <C>         
Net premiums written.....................  $    155,606     $    170,916     $    184,003    $    179,723     $    690,248
Net premiums earned......................       170,292          173,479          180,542         184,431          708,744
Investment income, net of expenses.......        29,508           30,372           31,548          32,174          123,602
Losses incurred, net.....................        63,194           58,251           60,785          60,132          242,362
Underwriting and other expenses..........        38,213           37,920           39,907          41,154          157,194
Net income...............................        72,436           80,615           84,175          86,524          323,750
Earnings per share (a), (b):
   Basic.................................           .61              .68              .73             .76             2.78
   Diluted...............................           .61              .67              .72             .75             2.75

(a) Due to the use of  weighted  average  shares  outstanding  when  calculating
    earnings per share,  the sum of the  quarterly  per share data may not equal
    the per share data for the year.

(b) Amounts have been restated to reflect the provisions of SFAS 128.

</TABLE>


                                   thirty-one

<PAGE>


MGIC Stock
- ----------
MGIC  Investment  Corporation  Common  Stock is  listed  on the New  York  Stock
Exchange  under the symbol MTG. At December  31, 1998,  109,003,032  shares were
outstanding.  The  following  table sets forth for 1997 and 1998 by quarter  the
high and low sales  prices of the  Company's  common stock on the New York Stock
Exchange Composite Tape.

                      1997                      1998
            -------------------------  ------------------------
Quarters       High         Low           High         Low

1st         $  40.7500  $   35.3750    $ 74.5000   $  62.0000
2nd            50.2500      35.2500      69.0000      55.3750
3rd            59.7500      46.1250      65.4375      36.8750
4th            66.9375      55.6250      48.2500      24.2500

In 1997 and 1998 the Company declared and paid the following cash dividends:

Quarters          1997                1998
            -----------------   ------------------
1st           $   .020             $   .025
2nd               .025                 .025
3rd               .025                 .025
4th               .025                 .025
              -------------        ------------
              $   .095             $   .100
              =============        ============

Dividend and stock price per data have been restated where applicable to reflect
the June 1997 two-for-one stock split.

See Note 11 to the Consolidated Financial Statements for information relating to
restrictions  on the  payment of cash  dividends.  As of January 31,  1999,  the
number of shareholders of record was 364. In addition,  there were approximately
29,000 beneficial owners of shares held by brokers and fiduciaries.




                                                                      EXHIBIT 21

                           MGIC INVESTMENT CORPORATION

        DIRECT AND INDIRECT SUBSIDIARIES OF MGIC INVESTMENT CORPORATION1


                1.               MGIC Assurance Corporation

                2.               MGIC Credit Assurance Corporation

                3.               MGIC Insurance Services Corporation

                4.               MGIC Investor Services Corporation

                5.               MGIC Mortgage Insurance Corporation

                6.               MGIC Mortgage Marketing Corporation

                7.               MGIC Mortgage Reinsurance Corporation

                8.               MGIC Mortgage Securities Corporation

               9.                MGIC Reinsurance Corporation

               10.               MGIC Reinsurance Corporation of Wisconsin

               11.               MGIC Residential Reinsurance Corporation

               12.               MGIC Surety Corporation

               13.               Mortgage Guaranty Insurance Corporation

               14.               Mortgage Guaranty Reinsurance Corporation

               15.               Wisconsin Mortgage Assurance Corporation

- --------
    1 All  subsidiaries  listed are 100%  directly  or  indirectly  owned by the
registrant and all are incorporated in Wisconsin.





                                                                      EXHIBIT 23


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statements  listed  below of MGIC  Investment  Corporation  of our report  dated
January 6, 1999  appearing in the 1998 Annual  Report to  Shareholders  which is
incorporated by reference in this Annual Report on Form 10-K. We also consent to
the  incorporation  by  reference  of  our  report  on the  Financial  Statement
Schedules, which appears in this Form 10-K.

         1.  Registration Statement on Form S-8 (Registration No. 33-42120)

         2.  Registration Statement on Form S-8 (Registration No. 33-43543)


PRICEWATERHOUSECOOPERS LLP


Milwaukee, Wisconsin
March 29, 1999





<TABLE> <S> <C>


<ARTICLE>                                           7
<LEGEND>
THIS SCHEDULE  CONTAINS  SUMMARY  INFORMATION  EXTRACTED  FROM FORM 10-K FOR THE
TWELVE  MONTHS  ENDED  DECEMBER  31, 1998 AND IS  QUALIFIED  IN ITS  ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                              DEC-31-1998
<PERIOD-END>                                   DEC-31-1998
<DEBT-HELD-FOR-SALE>                           2602870
<DEBT-CARRYING-VALUE>                          0
<DEBT-MARKET-VALUE>                            0
<EQUITIES>                                     4627
<MORTGAGE>                                     0
<REAL-ESTATE>                                  0
<TOTAL-INVEST>                                 2779706
<CASH>                                         176859
<RECOVER-REINSURE>                             0
<DEFERRED-ACQUISITION>                         24065
<TOTAL-ASSETS>                                 3050541
<POLICY-LOSSES>                                681274
<UNEARNED-PREMIUMS>                            183739
<POLICY-OTHER>                                 0
<POLICY-HOLDER-FUNDS>                          0
<NOTES-PAYABLE>                                442000
<PREFERRED-MANDATORY>                          0
<PREFERRED>                                    0
<COMMON>                                       121111   
<OTHER-SE>                                     1519480  
<TOTAL-LIABILITY-AND-EQUITY>                   3050541  
<PREMIUMS>                                     763284   
<INVESTMENT-INCOME>                            143019   
<INVESTMENT-GAINS>                             18288    
<OTHER-INCOME>                                 47075    
<BENEFITS>                                     211354   
<UNDERWRITING-AMORTIZATION>                    3091     
<UNDERWRITING-OTHER>                           186940   
<INCOME-PRETAX>                                554585   
<INCOME-TAX>                                   169120   
<INCOME-CONTINUING>                            385465   
<DISCONTINUED>                                 0        
<EXTRAORDINARY>                                0        
<CHANGES>                                      0        
<NET-INCOME>                                   385465   
<EPS-PRIMARY>                                  3.44     
<EPS-DILUTED>                                  3.39     
<RESERVE-OPEN>                                 0
<PROVISION-CURRENT>                            0
<PROVISION-PRIOR>                              0
<PAYMENTS-CURRENT>                             0
<PAYMENTS-PRIOR>                               0
<RESERVE-CLOSE>                                0
<CUMULATIVE-DEFICIENCY>                        0
        

</TABLE>