Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
Date of Report (Date of Earliest Event Reported):
 
July 18, 2018
MGIC Investment Corporation
__________________________________________
(Exact name of registrant as specified in its charter)
 
 
 
Wisconsin
1-10816
39-1486475
_____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation)
File Number)
Identification No.)
  
 
 
250 E. Kilbourn Avenue, Milwaukee, Wisconsin
 
53202
________________________________
(Address of principal executive offices)
 
___________
(Zip Code)
 
 
 
Registrant’s telephone number, including area code:
 
414-347-6480
 
Not Applicable
 
 
Former name or former address, if changed since last report
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
[  ]  Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]





Item 2.02 Results of Operations and Financial Condition.
The Company issued a press release on July 18, 2018 announcing its results of operations for the quarter ended June 30, 2018 and certain other information. The press release is furnished as Exhibit 99.

Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Pursuant to General Instruction B.2 to Form 8-K, the Company's July 18, 2018 press release is furnished as Exhibit 99 and is not filed.





Exhibit Index

 
 
 
Exhibit No.
 
Description
 
 
 
 
Press Release dated July 18, 2018. (Pursuant to General Instruction B.2 to Form 8-K, this press release is furnished and is not filed.)






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
MGIC INVESTMENT CORPORATION
 
 
 
 
 
 
Date:
July 18, 2018
By: \s\ Julie K. Sperber
 
 
 
 
 
Julie K. Sperber
 
 
Vice President, Controller and Chief Accounting Officer



Exhibit

Exhibit 99


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12359841&doc=3
MGIC Investment Corporation Reports Second Quarter 2018 Results
Second Quarter 2018 Net Income of $186.8 million or $0.49 per Diluted Share
Second Quarter 2018 Adjusted Net Operating Income (Non-GAAP) of $189.2 million or $0.49 per Diluted Share


MILWAUKEE (July 18, 2018) - MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the second quarter of 2018. Net income for the quarter was $186.8 million, or $0.49 per diluted share, compared with net income of $118.6 million, or $0.31 per diluted share for the second quarter of 2017.
    
Adjusted net operating income for the second quarter of 2018 was $189.2 million, or $0.49 per diluted share, compared with $119.3 million, or $0.31 per diluted share for the second quarter of 2017. We present the non-GAAP financial measure "Adjusted net operating income" to increase the comparability between periods of our financial results. See “Use of Non-GAAP financial measures" below.

Second Quarter Summary
New Insurance Written of $13.2 billion, compared to $12.9 billion in the second quarter of 2017.
Insurance in force of $200.7 billion at June 30, 2018 increased by 1.6% during the quarter and 7.2% compared to June 30, 2017.
Primary delinquent inventory of 36,037 loans at June 30, 2018 decreased from 46,556 loans at December 31, 2017. Our primary delinquent inventory declined 12.8% year-over-year from 41,317 loans at June 30, 2017.
As of June 30, 2018, the primary delinquent inventory includes 7,828 loans from the areas impacted by major hurricanes in 2017, compared to 12,446 loans as of December 31, 2017 and 5,958 loans as of June 30, 2017.
The 2008 and prior books accounted for approximately 19% of the June 30, 2018 primary risk in force but accounted for 74% of the new primary delinquent notices received in the quarter.
The percentage of primary loans that were delinquent at June 30, 2018 was 3.49%, compared to 4.55% at December 31, 2017, and 4.11% at June 30, 2017. The percentage of flow primary loans that were delinquent at June 30, 2018 was 2.77%, compared to 3.70% at December 31, 2017, and 3.23% at June 30, 2017.
Persistency, or the percentage of insurance remaining in force from one year prior, was 80.1% at June 30, 2018, compared with 80.1% at December 31, 2017 and 77.8% at June 30, 2017.
The loss ratio for the second quarter of 2018 was (5.4%), compared to 10.3% for the first quarter of 2018 and 11.8% for the second quarter of 2017.
The underwriting expense ratio associated with our insurance operations for the second quarter of 2018 was 16.4%, compared to 19.5% for the first quarter of 2018 and 15.6% for the second quarter of 2017.
Net premium yield was 49.6 basis points in the second quarter of 2018, compared to 47.3 basis points for the first quarter of 2018 and 49.9 basis points for the second quarter of 2017.
Repurchased 9.2 million shares of common stock at an average price of $10.88.
Book value per common share outstanding increased by 5.2% during the quarter to $9.15.

_______________
Patrick Sinks, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC"), said, “The favorable employment and housing trends we have been experiencing continued, and contributed to an increase of insurance in force, a reduction in new primary delinquent notices, a decline of the primary delinquent inventory, and additional positive primary loss reserve development that materially reduced net losses incurred.”  Sinks added that, “During the quarter the holding company received a $50 million dividend from MGIC and repurchased $100 million of common stock under the share repurchase program which was announced in April 2018.”
_______________




Investor Relations: Michael J. Zimmerman | (414) 347-6596 | mike_zimmerman@mgic.com





Revenues

Total revenues for the second quarter of 2018 were $282.0 million, compared to $263.3 million in the second quarter last year. Net premiums written for the quarter were $255.4 million, compared to $245.8 million for the same period last year. Net premiums earned for the quarter were $247.0 million, compared to $231.1 million for the same period last year. The increase was primarily due to the positive primary loss reserve development during the quarter. The positive loss development resulted in a decrease of ceded losses, and a decrease in ceded premiums earned which were driven by a higher profit commission. The positive development also resulted in a decrease of the accrual for premium refunds as we expect to pay fewer claims on the delinquent inventory. This benefit was partially offset by a lower premium yield on the higher average insurance in force in the quarter compared to the second quarter of 2017. Investment income for the second quarter increased to $34.5 million, from $29.7 million for the same period last year, resulting from an increase in the consolidated investment portfolio as well as higher yields.
    
Losses and expenses
    
Losses incurred    
Losses incurred in the second quarter of 2018 were ($13.5) million, compared to $27.3 million in the second quarter of 2017. During the second quarter of 2018 there was a $70 million reduction in losses incurred due to positive development on our primary loss reserves, before reinsurance, for previously received delinquent notices, compared to a reduction of $52 million in the second quarter of 2017. Losses incurred in the quarter associated with delinquent notices received in the quarter reflect the 16% decline in delinquent new notices received and a lower estimated claim rate when compared to the same period last year.

Underwriting and other expenses
Net underwriting and other expenses were $44.7 million in the second quarter of 2018, compared to $41.1 million in the same period last year. The increase in expenses was primarily due to higher stock based compensation, which resulted from a higher stock price at the grant date, and non-executive compensation. Interest expense was $13.2 million in the second quarter of 2018, compared to $14.2 million in the same period last year. The decrease was a result of the retirement of our 5% Senior Notes and conversion of our 2% Convertible Senior Notes.

Provision for income taxes
The effective income tax rate was 21.3% in the second quarter of 2018, compared to 34.3% in the second quarter of 2017. The decrease reflects the reduction to the statutory income tax rate.

Capital

As of June 30, 2018, total shareholders' equity was $3.31 billion and outstanding principal on borrowings was $837 million.
MGIC paid a dividend of $50 million to our holding company during the second quarter of 2018.
Preliminary Consolidated Risk-to-Capital was 10.0:1 as of June 30, 2018, compared to 11.3:1 as of June 30, 2017.
MGIC's PMIERs Available Assets totaled $4.8 billion, or $1.0 billion above its Minimum Required Assets as of June 30, 2018.


Other Balance Sheet and Liquidity Metrics

Total assets were $5.59 billion as of June 30, 2018, compared to $5.62 billion as of December 31, 2017, and $5.60 billion as of June 30, 2017.
The fair value of our investment portfolio, cash and cash equivalents was $5.1 billion as of June 30, 2018, compared to $5.1 billion as of December 31, 2017, and $4.8 billion as of June 30, 2017.
Investments, cash and cash equivalents at the holding company were $191 million as of June 30, 2018, compared to $216 million as of December 31, 2017, and $149 million as of June 30, 2017.






Conference Call and Webcast Details
MGIC Investment Corporation will hold a conference call today, July 18, 2018, at 10 a.m. ET to allow securities analysts and shareholders the opportunity to hear management discuss the company’s quarterly results. The conference call number is 1-844-231-8825. The call is being webcast and can be accessed at the company's website at http://mtg.mgic.com/. A replay of the webcast will be available on the company’s website through August 18, 2018 under “Newsroom.”
About MGIC
MGIC (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, serves lenders throughout the United States, Puerto Rico, and other locations helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality. At June 30, 2018, MGIC had $200.7 billion of primary insurance in force covering approximately one million mortgages.

This press release, which includes certain additional statistical and other information, including non-GAAP financial information, and a supplement that contains various portfolio statistics are both available on the Company's website at https://mtg.mgic.com/ under “Newsroom.”
    
From time to time MGIC Investment Corporation releases important information via postings on its corporate website without making any other disclosure and intends to continue to do so in the future. Investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information can be found at https://mtg.mgic.com under “Newsroom.”
Safe Harbor Statement
Forward Looking Statements and Risk Factors:
Our actual results could be affected by the risk factors below. These risk factors should be reviewed in connection with this press release and our periodic reports to the Securities and Exchange Commission (“SEC”). These risk factors may also cause actual results to differ materially from the results contemplated by forward looking statements that we may make. Forward looking statements consist of statements which relate to matters other than historical fact, including matters that inherently refer to future events. Among others, statements that include words such as “believe,” “anticipate,” “will” or “expect,” or words of similar import, are forward looking statements. We are not undertaking any obligation to update any forward looking statements or other statements we may make even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. No investor should rely on the fact that such statements are current at any time other than the time at which this press release was delivered for dissemination to the public.

In addition, the current period financial results included in this press release may be affected by additional information that arises prior to the filing of our Form 10-Q for the quarter ended June 30, 2018.

While we communicate with security analysts from time to time, it is against our policy to disclose to them any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report, and such reports are not our responsibility.







Use of Non-GAAP financial measures
We believe that use of the Non-GAAP measures of adjusted pre-tax operating income (loss), adjusted net operating income (loss) and adjusted net operating income (loss) per diluted share facilitate the evaluation of the company's core financial performance thereby providing relevant information to investors. These measures are not recognized in accordance with accounting principles generally accepted in the United States of America (GAAP) and should not be viewed as alternatives to GAAP measures of performance.

Adjusted pre-tax operating income (loss) is defined as GAAP income (loss) before tax, excluding the effects of net realized investment gains (losses), gain (loss) on debt extinguishment, net impairment losses recognized in income (loss) and infrequent or unusual non-operating items where applicable.
    
Adjusted net operating income (loss) is defined as GAAP net income (loss) excluding the after-tax effects of net realized investment gains (losses), gain (loss) on debt extinguishment, net impairment losses recognized in income (loss), and infrequent or unusual non-operating items where applicable. The amounts of adjustments to components of pre-tax operating income (loss) are tax effected using a federal statutory tax rate of 21% in 2018 and 35% in 2017.
    
Adjusted net operating income (loss) per diluted share is calculated in a manner consistent with the accounting standard regarding earnings per share by dividing (i) adjusted net operating income (loss) after making adjustments for interest expense on convertible debt, whenever the impact is dilutive, by (ii) diluted weighted average common shares outstanding, which reflects share dilution from unvested restricted stock units and from convertible debt when dilutive under the "if-converted" method.

Although adjusted pre-tax operating income (loss) and adjusted net operating income (loss) exclude certain items that have occurred in the past and are expected to occur in the future, the excluded items represent items that are: (1) not viewed as part of the operating performance of our primary activities; or (2) impacted by both discretionary and other economic or regulatory factors and are not necessarily indicative of operating trends, or both. These adjustments, along with the reasons for their treatment, are described below. Trends in the profitability of our fundamental operating activities can be more clearly identified without the fluctuations of these adjustments. Other companies may calculate these measures differently. Therefore, their measures may not be comparable to those used by us.

(1)
Net realized investment gains (losses). The recognition of net realized investment gains or losses can vary significantly across periods as the timing of individual securities sales is highly discretionary and is influenced by such factors as market opportunities, our tax and capital profile, and overall market cycles.
(2)
Gains and losses on debt extinguishment. Gains and losses on debt extinguishment result from discretionary activities that are undertaken to enhance our capital position, improve our debt profile, and/or reduce potential dilution from our outstanding convertible debt.
(3)
Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles, individual issuer performance, and general economic conditions.
(4)
Infrequent or unusual non-operating items. Our income tax expense includes amounts related to our IRS dispute and is related to past transactions which are non-recurring in nature and are not part of our primary operating activities.








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
(In thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
$
255,436

 
$
245,834

 
$
492,342

 
$
482,536

 
Revenues
 
 
 
 
 
 
 
 
 
Net premiums earned
 
$
246,964

 
$
231,136

 
$
479,071

 
$
460,239

 
Net investment income
 
34,502

 
29,716

 
66,623

 
59,193

 
Net realized investment losses
 
(1,897
)
 
(52
)
 
(2,226
)
 
(177
)
 
Other revenue
 
2,431

 
2,512

 
4,302

 
4,937

 
Total revenues
 
282,000

 
263,312

 
547,770

 
524,192

 
Losses and expenses
 
 
 
 
 
 
 
 
 
Losses incurred, net
 
(13,455
)
 
27,339

 
10,395

 
54,958

 
Underwriting and other expenses, net
 
44,687

 
41,095

 
93,349

 
84,090

 
Interest expense
 
13,246

 
14,197

 
26,479

 
30,506

 
Loss on debt extinguishment
 

 
65

 

 
65

 
Total losses and expenses
 
44,478

 
82,696

 
130,223

 
169,619

 
Income before tax
 
237,522

 
180,616

 
417,547

 
354,573

 
Provision for income taxes
 
50,708

 
61,994

 
87,096

 
146,153

 
Net income
 
$
186,814

 
$
118,622

 
$
330,451

 
$
208,420

 
Net income per diluted share
 
$
0.49

 
$
0.31

 
$
0.87

 
$
0.55

 







MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
EARNINGS PER SHARE (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
186,814

 
$
118,622

 
$
330,451

 
$
208,420

Interest expense, net of tax (1):
 
 
 
 
 
 
 
 
2% Convertible Senior Notes due 2020
 

 
84

 

 
907

5% Convertible Senior Notes due 2017
 

 
427

 

 
1,709

9% Convertible Junior Subordinated Debentures due 2063
 
4,566

 
3,757

 
9,132

 
7,514

Diluted net income available to common shareholders
 
$
191,380

 
$
122,890

 
$
339,583

 
$
218,550

 
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
368,578

 
366,918

 
369,736

 
354,035

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Unvested restricted stock units
 
1,275

 
1,140

 
1,472

 
1,314

2% Convertible Senior Notes due 2020
 

 
3,827

 

 
16,771

5% Convertible Senior Notes due 2017
 

 
3,557

 

 
7,154

9% Convertible Junior Subordinated Debentures due 2063
 
19,028

 
19,028

 
19,028

 
19,028

Weighted average shares - diluted
 
388,881

 
394,470

 
390,236

 
398,302

Net income per diluted share
 
$
0.49

 
$
0.31

 
$
0.87

 
$
0.55

 
 
 
 
 
 
 
 
 

(1) 
Interest expense for the three and six months ended June 30, 2018 and 2017 has been tax effected at a rate of 21% and 35%, respectively.







NON-GAAP RECONCILIATIONS
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income
 
 
Three Months Ended June 30,
 
 
2018
 
2017
(In thousands, except per share amounts)
 
Pre-tax
 
Tax provision (benefit)
 
Net
(after-tax)
 
Pre-tax
 
Tax provision (benefit)
 
Net
(after-tax)
Income before tax / Net income
 
$
237,522

 
$
50,708

 
$
186,814

 
$
180,616

 
$
61,994

 
$
118,622

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax provision related to IRS litigation
 

 
(923
)
 
923

 

 
(559
)
 
559

Net realized investment losses
 
1,897

 
398

 
1,499

 
52

 
18

 
34

Loss on debt extinguishment
 

 

 

 
65

 
23

 
42

Adjusted pre-tax operating income / Adjusted net operating income
 
$
239,419

 
$
50,183

 
$
189,236

 
$
180,733

 
$
61,476

 
$
119,257

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
Weighted average shares - diluted
 
 
 
 
 
388,881

 
 
 
 
 
394,470

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
0.49

 
 
 
 
 
$
0.31

Additional income tax provision related to IRS litigation
 
 
 
 
 

 
 
 
 
 

Net realized investment losses
 
 
 
 
 

 
 
 
 
 

Loss on debt extinguishment
 
 
 
 
 

 
 
 
 
 

Adjusted net operating income per diluted share
 
 
 
 
 
$
0.49

 
 
 
 
 
$
0.31

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income
 
 
Six Months Ended June 30,
 
 
2018
 
2017
(In thousands, except per share amounts)
 
Pre-tax
 
Tax provision (benefit)
 
Net
(after-tax)
 
Pre-tax
 
Tax provision (benefit)
 
Net
(after-tax)
Income before tax / Net income
 
$
417,547

 
$
87,096

 
$
330,451

 
$
354,573

 
$
146,153

 
$
208,420

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax provision related to IRS litigation
 

 
(1,631
)
 
1,631

 

 
(27,783
)
 
27,783

Net realized investment losses
 
2,226

 
467

 
1,759

 
177

 
62

 
115

Loss on debt extinguishment
 

 

 

 
65

 
23

 
42

Adjusted pre-tax operating income / Adjusted net operating income
 
$
419,773

 
$
85,932

 
$
333,841

 
$
354,815

 
$
118,455

 
$
236,360

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
Weighted average shares - diluted
 
 
 
 
 
390,236

 
 
 
 
 
398,302

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
0.87

 
 
 
 
 
$
0.55

Additional income tax provision related to IRS litigation
 
 
 
 
 

 
 
 
 
 
0.07

Net realized investment losses
 
 
 
 
 

 
 
 
 
 

Loss on debt extinguishment
 
 
 
 
 

 
 
 
 
 

Adjusted net operating income per diluted share
 
 
 
 
 
$
0.87

 
 
 
 
 
$
0.62








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
 
 
 
 
 
 
 
June
 
December 31,
 
June
(In thousands, except per share data)
 
2018
 
2017
 
2017
ASSETS
 
 
 
 
 
 
Investments (1)
 
$
4,933,395

 
$
4,990,561

 
$
4,708,420

Cash and cash equivalents
 
191,894

 
99,851

 
127,908

Reinsurance recoverable on loss reserves (2)
 
37,051

 
48,474

 
44,783

Home office and equipment, net
 
49,461

 
44,936

 
42,212

Deferred insurance policy acquisition costs
 
18,807

 
18,841

 
18,677

Deferred income taxes, net
 
161,488

 
234,381

 
481,389

Other assets
 
199,920

 
182,455

 
176,779

Total assets
 
$
5,592,016

 
$
5,619,499

 
$
5,600,168

 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Loss reserves (2)
 
$
813,015

 
$
985,635

 
$
1,187,089

Unearned premiums
 
406,159

 
392,934

 
352,010

Federal home loan bank advance
 
155,000

 
155,000

 
155,000

Senior notes
 
419,136

 
418,560

 
417,983

Convertible junior debentures
 
256,872

 
256,872

 
256,872

Other liabilities
 
227,959

 
255,972

 
236,153

Total liabilities
 
2,278,141

 
2,464,973

 
2,605,107

Shareholders' equity
 
3,313,875

 
3,154,526

 
2,995,061

Total liabilities and shareholders' equity
 
$
5,592,016

 
$
5,619,499

 
$
5,600,168

Book value per share (3)
 
$
9.15

 
$
8.51

 
$
8.08

 
 
 
 
 
 
 
(1) Investments include net unrealized (losses) gains on securities
 
$
(57,111
)
 
$
37,058

 
$
26,274

(2) Loss reserves, net of reinsurance recoverable on loss reserves
 
$
775,964

 
$
937,161

 
$
1,142,306

(3) Shares outstanding
 
362,150

 
370,567

 
370,557








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Year-to-date
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2018
 
2017
New primary insurance written (NIW) (billions)
$
13.2

 
$
10.6

 
$
12.8

 
$
14.1

 
$
12.9

 
$
23.8

 
$
22.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (including split premium plans) and annual premium plans
11.1

 
8.5

 
10.1

 
11.4

 
10.6

 
19.6

 
18.4

Single premium plans
2.1

 
2.1

 
2.7

 
2.7

 
2.3

 
4.2

 
3.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct average premium rate (bps) on NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (1)
54.6

 
55.8

 
56.3

 
55.5

 
55.1

 
55.1

 
55.3

Singles
165.6

 
167.4

 
170.5

 
176.8

 
177.4

 
166.5

 
175.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product mix as a % of primary NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO < 680
6
%
 
7
%
 
8
%
 
7
%
 
7
%
 
7
%
 
7
%
>95% LTVs
15
%
 
13
%
 
13
%
 
12
%
 
10
%
 
14
%
 
9
%
>45% DTI
19
%
 
20
%
 
19
%
 
9
%
 
6
%
 
20
%
 
10
%
Singles
16
%
 
19
%
 
21
%
 
20
%
 
18
%
 
17
%
 
17
%
Refinances
6
%
 
12
%
 
13
%
 
9
%
 
9
%
 
9
%
 
12
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New primary risk written (billions)
$
3.3

 
$
2.6

 
$
3.2

 
$
3.5

 
$
3.2

 
$
5.9

 
$
5.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) Excludes loans with split and annual payments































MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
 
 
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
 
 
 
Primary Insurance In Force (IIF) (billions)
$
200.7

 
$
197.5

 
$
194.9

 
$
191.0

 
$
187.3

 
 
 
 
Total # of loans
1,033,323

 
1,026,797

 
1,023,951

 
1,014,092

 
1,006,392

 
 
 
 
Flow # of loans
982,208

 
973,187

 
968,649

 
956,772

 
946,435

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Loan Size of IIF (thousands)
$
194.2

 
$
192.3

 
$
190.4

 
$
188.4

 
$
186.1

 
 
 
 
Flow only
$
196.8

 
$
195.0

 
$
193.0

 
$
190.9

 
$
188.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Persistency
80.1
%
 
80.2
%
 
80.1
%
 
78.8
%
 
77.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Risk In Force (RIF) (billions)
$
51.7

 
$
50.9

 
$
50.3

 
$
49.4

 
$
48.5

 
 
 
 
By FICO (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO 760 & >
37
%
 
37
%
 
36
%
 
36
%
 
36
%
 
 
 
 
FICO 740-759
15
%
 
15
%
 
15
%
 
15
%
 
15
%
 
 
 
 
FICO 720-739
14
%
 
14
%
 
14
%
 
14
%
 
14
%
 
 
 
 
FICO 700-719
11
%
 
11
%
 
11
%
 
11
%
 
11
%
 
 
 
 
FICO 680-699
9
%
 
9
%
 
9
%
 
9
%
 
9
%
 
 
 
 
FICO 660-679
5
%
 
5
%
 
5
%
 
5
%
 
5
%
 
 
 
 
FICO 640-659
4
%
 
3
%
 
4
%
 
4
%
 
4
%
 
 
 
 
FICO 639 & <
5
%
 
6
%
 
6
%
 
6
%
 
6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Coverage Ratio (RIF/IIF)
25.8
%
 
25.8
%
 
25.8
%
 
25.9
%
 
25.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct Pool RIF (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
With aggregate loss limits
$
233

 
$
233

 
$
236

 
$
238

 
$
239

 
 
 
 
Without aggregate loss limits
$
210

 
$
222

 
$
235

 
$
251

 
$
267

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Note: The FICO credit score for a loan with multiple borrowers is the lowest of the borrowers’ “decision FICO scores.” A borrower’s “decision FICO score” is determined as follows: if there are three FICO scores available, the middle FICO score is used; if two FICO scores are available, the lower of the two is used; if only one FICO score is available, it is used.















MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
ADDITIONAL INFORMATION - DEFAULT STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
 
 
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
 
 
 
Primary IIF - Delinquent Roll Forward - # of Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Delinquent Inventory
41,243

 
46,556

 
41,235

 
41,317

 
45,349

 
 
 
 
New Notices
12,159

 
14,623

 
22,916

 
15,950

 
14,463

 
 
 
 
Cures
(15,350
)
 
(18,073
)
 
(15,712
)
 
(13,546
)
 
(14,708
)
 
 
 
 
Paids (including those charged to a deductible or captive)
(1,501
)
 
(1,571
)
 
(1,803
)
 
(2,195
)
 
(2,573
)
 
 
 
 
Rescissions and denials
(76
)
 
(68
)
 
(80
)
 
(82
)
 
(100
)
 
 
 
 
Items removed from inventory
(438
)
 
(224
)
 

 
(209
)
 
(1,114
)
 
 
 
 
Ending Delinquent Inventory
36,037

 
41,243

 
46,556

 
41,235

 
41,317

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF Delinquency Rate
3.49
%
 
4.02
%
 
4.55
%
 
4.07
%
 
4.11
%
 
 
 
 
Primary claim received inventory included in ending delinquent inventory
827

 
819

 
954

 
1,063

 
1,258

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF - # of Delinquent Loans - Flow only
27,250

 
31,621

 
35,791

 
30,501

 
30,571

 
 
 
 
Primary IIF Delinquency Rate - Flow only
2.77
%
 
3.25
%
 
3.70
%
 
3.19
%
 
3.23
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Cures
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported delinquent and cured intraquarter
3,447

 
5,530

 
5,520

 
4,347

 
3,854

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent prior to cure
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
7,204

 
8,285

 
6,324

 
6,011

 
6,803

 
 
 
 
4-11 payments
4,000

 
3,501

 
2,758

 
2,374

 
2,964

 
 
 
 
12 payments or more
699

 
757

 
1,110

 
814

 
1,087

 
 
 
 
Total Cures in Quarter
15,350

 
18,073

 
15,712

 
13,546

 
14,708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Paids
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent at time of claim payment
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
3

 
2

 
6

 
13

 
8

 
 
 
 
4-11 payments
147

 
184

 
181

 
222

 
279

 
 
 
 
12 payments or more
1,351

 
1,385

 
1,616

 
1,960

 
2,286

 
 
 
 
Total Paids in Quarter
1,501

 
1,571

 
1,803

 
2,195

 
2,573

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aging of Primary Delinquent Inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
Consecutive months delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 months or less
8,554

24
%
8,770

21
%
17,119

37
%
11,331

27
%
10,299

25
%
 
 
 
      4-11 months
12,506

35
%
16,429

40
%
12,050

26
%
11,092

27
%
11,018

27
%
 
 
 
      12 months or more
14,977

41
%
16,044

39
%
17,387

37
%
18,812

46
%
20,000

48
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 payments or less
14,178

39
%
16,023

39
%
21,678

46
%
16,916

41
%
15,858

38
%
 
 
 
      4-11 payments
11,429

32
%
13,734

33
%
12,446

27
%
10,583

26
%
10,560

26
%
 
 
 
      12 payments or
      more
10,430

29
%
11,486

28
%
12,432

27
%
13,736

33
%
14,899

36
%
 
 
 






MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Year-to-date
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2018
 
2017
 
Reserves (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Direct Loss Reserves
$
799

 
$
910

 
$
971

 
$
1,090

 
$
1,165

 

 

 
Pool Direct loss reserves
13

 
14

 
14

 
15

 
21

 

 

 
Other Gross Reserves
1

 

 
1

 

 
1

 

 

 
Total Gross Loss Reserves
$
813

 
$
924

 
$
986

 
$
1,105

 
$
1,187

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Direct Reserve Per Delinquency
$22,178
(1)
$22,060
(1)
$20,851
(1)
$26,430
 
$28,206
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Paid Claims (millions) (3)
$
91

 
$
82

 
$
91

 
$
113

 
$
173

 
$
173

 
$
301

 
Total primary (excluding settlements)
75

 
80

 
89

 
101

 
126

 
155

 
256

 
Rescission and NPL settlements
14

 
7

 

 
9

 
45

 
21

 
45

 
Pool
1

 
2

 
2

 
2

 
4

 
3

 
6

 
Reinsurance
(3
)
 
(11
)
 
(5
)
 
(3
)
 
(6
)
 
(14
)
 
(15
)
 
Other
4

 
4

 
5

 
4

 
4

 
8

 
9

 
Reinsurance terminations (3)
(2
)
 

 

 

 

 
(2
)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Claim Payment (thousands)
$
50.2

(2)
$
51.1

(2)
$
49.2

 
$
46.4

(2)
$
49.1

(2)
$
50.6

(2)
$
49.1

(2)
Flow only
$
45.2

(2)
$
45.2

(2)
$
45.1

 
$
43.7

(2)
$
45.0

(2)
$
45.2

(2)
$
45.1

(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) Excluding our estimate of delinquencies resulting from hurricane activity and their associated loss reserves, the average direct reserve per delinquency was approximately $24,000.

(2) Excludes amounts paid in settlement disputes for claims paying practices and/or commutations of non-performing loans.

(3) Net paid claims, as presented, does not include amounts received in conjunction with terminations or commutations of reinsurance agreements.








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
ADDITIONAL INFORMATION - REINSURANCE, BULK STATISTICS and MI RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Year-to-date
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2018
 
2017
Quota Share Reinsurance
 
 
 
 
 
 
 
 
 
 
 
 
 
% insurance inforce subject to reinsurance
78.2
 %
 
77.9
%
 
78.2
 %
 
78.3
%
 
77.6
%
 

 

% NIW subject to reinsurance
75.9
 %
 
73.3
%
 
77.0
 %
 
86.1
%
 
88.2
%
 
74.7
%
 
87.2
%
Ceded premiums written and earned (millions)
$
21.4

 
$
33.0

 
$
32.3

 
$
30.9

 
$
28.9

 
$
54.4

 
$
57.8

Ceded losses incurred (millions)
$
(3.7
)
 
$
7.8

 
$
7.3

 
$
5.9

 
$
4.4

 
$
4.1

 
$
9.1

Ceding commissions (millions) (included in underwriting and other expenses)
$
12.6

 
$
12.6

 
$
12.6

 
$
12.5

 
$
12.2

 
$
25.2

 
$
24.2

Profit commission (millions) (included in ceded premiums)
$
41.8

 
$
30.2

 
$
30.6

 
$
31.6

 
$
32.3

 
$
72.0

 
$
63.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bulk Primary Insurance Statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance in force (billions)
$
7.4

 
$
7.7

 
$
8.0

 
$
8.3

 
$
8.7

 

 

Risk in force (billions)
$
2.1

 
$
2.2

 
$
2.2

 
$
2.4

 
$
2.5

 

 

Average loan size (thousands)
$
144.5

 
$
143.8

 
$
144.6

 
$
145.4

 
$
144.9

 

 

Number of delinquent loans
8,787

 
9,622

 
10,765

 
10,734

 
10,746

 

 

Delinquency rate
17.19
 %
 
17.95
%
 
19.47
 %
 
18.73
%
 
17.92
%
 

 

Primary paid claims (millions)
$
22

 
$
24

 
$
25

 
$
26

 
$
31

 
$
46

 
$
64

Average claim payment (thousands)
$
67.7

 
$
72.8

 
$
64.4

 
$
56.1

 
$
67.7

 
$
70.3

 
$
67.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Guaranty Insurance Corporation - Risk to Capital
9.1:1

(1)
9.4:1

 
9.5:1

 
10.1:1

 
10.2:1

 
 
 
 
Combined Insurance Companies - Risk to Capital
10.0:1

(1)
10.3:1

 
10.5:1

 
11.1:1

 
11.3:1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP loss ratio (insurance operations only)
(5.4
)%
 
10.3
%
 
(13.1
)%
 
12.5
%
 
11.8
%
 
2.2
%
 
11.9
%
GAAP underwriting expense ratio (insurance operations only)
16.4
 %
 
19.5
%
 
15.9
 %
 
15.7
%
 
15.6
%
 
17.9
%
 
16.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) Preliminary







Risk Factors
As used below, “we,” “our” and “us” refer to MGIC Investment Corporation’s consolidated operations or to MGIC Investment Corporation, as the context requires; and “MGIC” refers to Mortgage Guaranty Insurance Corporation.
Our actual results could be affected by the risk factors below. These risk factors should be reviewed in connection with this press release and our periodic reports to the Securities and Exchange Commission (“SEC”). These risk factors may also cause actual results to differ materially from the results contemplated by forward looking statements that we may make, including forward looking statements in these risk factors. Forward looking statements consist of statements which relate to matters other than historical fact, including matters that inherently refer to future events. Among others, statements that include words such as “believe,” “anticipate,” “will” or “expect,” or words of similar import, are forward looking statements. We are not undertaking any obligation to update any forward looking statements or other statements we may make even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. No investor should rely on the fact that such statements are current at any time other than the time at which this press release was delivered for dissemination to the public.
Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and / or increase our losses.
Our private mortgage insurance competitors include:
Arch Mortgage Insurance Company,
Essent Guaranty, Inc.,
Genworth Mortgage Insurance Corporation,
National Mortgage Insurance Corporation, and
Radian Guaranty Inc.
The private mortgage insurance industry is highly competitive and is expected to remain so. We believe that we currently compete with other private mortgage insurers based on pricing, underwriting requirements, financial strength (including based on credit or financial strength ratings), customer relationships, name recognition, reputation, the strength of our management team and field organization, the ancillary products and services provided to lenders and the effective use of technology and innovation in the delivery and servicing of our mortgage insurance products.
Much of the competition in the industry in the last few years has centered on pricing practices which have included: (i) reductions in standard filed rates for borrower-paid mortgage insurance policies ("BPMI"); (ii) use by certain competitors of a spectrum of filed rates to allow for formulaic, risk-based pricing (commonly referred to as “black-box” pricing); and (iii) use of customized rates (discounted from published rates) that are made available to many, but not all, lenders. We changed our BPMI premium rates with effective dates in the second and third quarters of 2018. Based on the mix of our new primary insurance written ("NIW") in the first quarter of 2018, the chang