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):
 
October 17, 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 October 17, 2018 announcing its results of operations for the quarter ended September 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 October 17, 2018 press release is furnished as Exhibit 99 and is not filed.





Exhibit Index

 
 
 
Exhibit No.
 
Description
 
 
 
 
Press Release dated October 17, 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:
October 17, 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=12500994&doc=3
MGIC Investment Corporation Reports Third Quarter 2018 Results
Third Quarter 2018 Net Income of $181.9 million or $0.49 per Diluted Share
Third Quarter 2018 Adjusted Net Operating Income (Non-GAAP) of $180.9 million or $0.48 per Diluted Share


MILWAUKEE (October 17, 2018) - MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the third quarter of 2018. Net income for the quarter was $181.9 million, or $0.49 per diluted share, compared with net income of $120.0 million, or $0.32 per diluted share for the third quarter of 2017.
    
Adjusted net operating income for the third quarter of 2018 was $180.9 million, or $0.48 per diluted share, compared with $120.7 million, or $0.32 per diluted share for the third 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.

Third Quarter Summary
New Insurance Written of $14.5 billion, compared to $14.1 billion in the third quarter of 2017.
Insurance in force of $205.8 billion at September 30, 2018 increased by 2.5% during the quarter and 7.7% compared to September 30, 2017.
Primary delinquent inventory of 33,398 loans at September 30, 2018 decreased from 46,556 loans at December 31, 2017. Our primary delinquent inventory declined 19.0% year-over-year from 41,235 loans at September 30, 2017.
The 2008 and prior books accounted for approximately 18% of the September 30, 2018 primary risk in force but accounted for 72% of the new primary delinquent notices received in the quarter.
The percentage of primary loans that were delinquent at September 30, 2018 was 3.19%, compared to 4.55% at December 31, 2017, and 4.07% at September 30, 2017. The percentage of flow primary loans that were delinquent at September 30, 2018 was 2.52%, compared to 3.70% at December 31, 2017, and 3.19% at September 30, 2017.
Persistency, or the percentage of insurance remaining in force from one year prior, was 81.0% at September 30, 2018, compared with 80.1% at December 31, 2017 and 78.8% at September 30, 2017.
The loss ratio for the third quarter of 2018 was (0.6%), compared to (5.4%) for the second quarter of 2018 and 12.5% for the third quarter of 2017.
The underwriting expense ratio associated with our insurance operations for the third quarter of 2018 was 17.6%, compared to 16.4% for the second quarter of 2018 and 15.7% for the third quarter of 2017.
Net premium yield was 49.3 basis points in the third quarter of 2018, compared to 49.6 basis points for the second quarter of 2018 and 50.1 basis points for the third quarter of 2017.
Book value per common share outstanding increased by 5.4% during the quarter to $9.64.

_______________
Patrick Sinks, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC"), said, "In the third quarter we again saw an increase of insurance in force, a reduction in new primary delinquent notices, and a decline of the primary delinquent inventory.  The current operating environment enables us to report another quarter of strong earnings."  Sinks added that, "MGIC is, and expects to remain, in a strong capital position following the finalization of the revised PMIERs financial requirements and paid a $60 million dividend to the holding company in the third quarter."
_______________






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



Revenues

Total revenues for the third quarter of 2018 were $290.4 million, compared to $270.4 million in the third quarter last year. Net premiums written for the quarter were $251.9 million, compared to $255.9 million for the same period last year. Net premiums earned for the quarter were $250.4 million, compared to $237.1 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 reserve development resulted in a decrease in ceded losses, and a decrease in ceded premiums earned which were driven by a higher profit commission. The positive loss reserve 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 third quarter of 2017. Investment income for the third quarter increased to $36.4 million, from $30.4 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 third quarter of 2018 were ($1.5) million, compared to $29.7 million in the third quarter of 2017. During the third quarter of 2018 there was a $59 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 $38 million in the third quarter of 2017. Losses incurred in the quarter associated with delinquent notices received in the quarter reflect the 15% 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 $46.8 million in the third quarter of 2018, compared to $42.9 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.

Provision for income taxes
The effective income tax rate was 21.6% in the third quarter of 2018, compared to 34.9% in the third quarter of 2017. The decrease reflects the reduction to the statutory income tax rate.

Capital

As of September 30, 2018, total shareholders' equity was $3.49 billion and outstanding principal on borrowings was $837 million.
MGIC paid a dividend of $60 million to our holding company during the third quarter of 2018.
Preliminary Consolidated Risk-to-Capital was 9.8:1 as of September 30, 2018, compared to 11.1:1 as of September 30, 2017.
MGIC's PMIERs Available Assets totaled $4.8 billion, or $1.0 billion above its Minimum Required Assets as of September 30, 2018.


Other Balance Sheet and Liquidity Metrics

Total assets were $5.7 billion as of September 30, 2018, compared to $5.6 billion as of December 31, 2017, and $5.7 billion as of September 30, 2017.
The fair value of our investment portfolio, cash and cash equivalents was $5.2 billion as of September 30, 2018, compared to $5.1 billion as of December 31, 2017, and $5.0 billion as of September 30, 2017.
Investments, cash and cash equivalents at the holding company were $261 million as of September 30, 2018, compared to $216 million as of December 31, 2017, and $182 million as of September 30, 2017.






Conference Call and Webcast Details
MGIC Investment Corporation will hold a conference call today, October 17, 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 November 17, 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 September 30, 2018, MGIC had $205.8 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, and via postings on MGIC’s website for information related to underwriting and pricing, and intends to continue to do so in the future. Such postings include corrections of previous disclosures, and may be made without any other disclosure. 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 for MGIC Investment Corporation alerts can be found at https://mtg.mgic.com/shareholder-services/email-alerts. Enrollment information for MGIC alerts can be found https://www.mgic.com/ClearRates/index.html.
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 September 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 September 30,
 
Nine Months Ended September 30,
 
(In thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
$
251,883

 
$
255,896

 
$
744,225

 
$
738,432

 
Revenues
 
 
 
 
 
 
 
 
 
Net premiums earned
 
$
250,426

 
$
237,083

 
$
729,497

 
$
697,322

 
Net investment income
 
36,380

 
30,402

 
103,003

 
89,595

 
Net realized investment gains (losses)
 
1,114

 
(50
)
 
(1,112
)
 
(227
)
 
Other revenue
 
2,525

 
2,925

 
6,827

 
7,862

 
Total revenues
 
290,445

 
270,360

 
838,215

 
794,552

 
Losses and expenses
 
 
 
 
 
 
 
 
 
Losses incurred, net
 
(1,518
)
 
29,747

 
8,877

 
84,705

 
Underwriting and other expenses, net
 
46,811

 
42,873

 
140,160

 
126,963

 
Interest expense
 
13,258

 
13,273

 
39,737

 
43,779

 
Loss on debt extinguishment
 

 

 

 
65

 
Total losses and expenses
 
58,551

 
85,893

 
188,774

 
255,512

 
Income before tax
 
231,894

 
184,467

 
649,441

 
539,040

 
Provision for income taxes
 
49,994

 
64,440

 
137,090

 
210,593

 
Net income
 
$
181,900

 
$
120,027

 
$
512,351

 
$
328,447

 
Net income per diluted share
 
$
0.49

 
$
0.32

 
$
1.36

 
$
0.86

 







MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
EARNINGS PER SHARE (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands, except per share data)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
181,900

 
$
120,027

 
$
512,351

 
$
328,447

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

 

 

 
907

5% Convertible Senior Notes due 2017
 

 

 

 
1,709

9% Convertible Junior Subordinated Debentures due 2063
 
4,566

 
3,757

 
13,698

 
11,270

Diluted net income available to common shareholders
 
$
186,466

 
$
123,784

 
$
526,049

 
$
342,333

 
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
362,180

 
370,586

 
367,190

 
359,613

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Unvested restricted stock units
 
1,697

 
1,473

 
1,547

 
1,367

2% Convertible Senior Notes due 2020
 

 

 

 
11,119

5% Convertible Senior Notes due 2017
 

 

 

 
4,743

9% Convertible Junior Subordinated Debentures due 2063
 
19,028

 
19,028

 
19,028

 
19,028

Weighted average shares - diluted
 
382,905

 
391,087

 
387,765

 
395,870

Net income per diluted share
 
$
0.49

 
$
0.32

 
$
1.36

 
$
0.86

 
 
 
 
 
 
 
 
 

(1) 
Interest expense for the three and nine months ended September 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 September 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
 
$
231,894

 
$
49,994

 
$
181,900

 
$
184,467

 
$
64,440

 
$
120,027

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax benefit (provision) related to IRS litigation
 

 
154

 
(154
)
 

 
(619
)
 
619

Net realized investment (gains) losses
 
(1,114
)
 
(234
)
 
(880
)
 
50

 
18

 
32

Adjusted pre-tax operating income / Adjusted net operating income
 
$
230,780

 
$
49,914

 
$
180,866

 
$
184,517

 
$
63,839

 
$
120,678

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
Weighted average shares - diluted
 
 
 
 
 
382,905

 
 
 
 
 
391,087

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
0.49

 
 
 
 
 
$
0.32

Additional income tax (benefit) provision related to IRS litigation
 
 
 
 
 

 
 
 
 
 

Net realized investment (gains) losses
 
 
 
 
 

 
 
 
 
 

Adjusted net operating income per diluted share
 
 
 
 
 
$
0.48

(1) 
 
 
 
 
$
0.32

(1) For the Three Months Ended September 30, 2018, the Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share does not foot due to rounding of the adjustments.
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income
 
 
Nine Months Ended September 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
 
$
649,441

 
$
137,090

 
$
512,351

 
$
539,040

 
$
210,593

 
$
328,447

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax provision related to IRS litigation
 

 
(1,477
)
 
1,477

 

 
(28,402
)
 
28,402

Net realized investment losses
 
1,112

 
234

 
878

 
227

 
79

 
148

Loss on debt extinguishment
 

 

 

 
65

 
23

 
42

Adjusted pre-tax operating income / Adjusted net operating income
 
$
650,553

 
$
135,847

 
$
514,706

 
$
539,332

 
$
182,293

 
$
357,039

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
Weighted average shares - diluted
 
 
 
 
 
387,765

 
 
 
 
 
395,870

 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
1.36

 
 
 
 
 
$
0.86

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
 
 
 
 
 
$
1.36

 
 
 
 
 
$
0.93








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
 
 
 
 
 
 
 
September
 
December 31,
 
September
(In thousands, except per share data)
 
2018
 
2017
 
2017
ASSETS
 
 
 
 
 
 
Investments (1)
 
$
4,980,432

 
$
4,990,561

 
$
4,717,392

Cash and cash equivalents
 
266,997

 
99,851

 
250,701

Reinsurance recoverable on loss reserves (2)
 
33,281

 
48,474

 
45,878

Home office and equipment, net
 
50,055

 
44,936

 
43,157

Deferred insurance policy acquisition costs
 
18,665

 
18,841

 
19,024

Deferred income taxes, net
 
111,613

 
234,381

 
416,167

Other assets
 
196,065

 
182,455

 
183,549

Total assets
 
$
5,657,108

 
$
5,619,499

 
$
5,675,868

 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Loss reserves (2)
 
$
721,046

 
$
985,635

 
$
1,105,151

Unearned premiums
 
407,614

 
392,934

 
370,816

Federal home loan bank advance
 
155,000

 
155,000

 
155,000

Senior notes
 
419,425

 
418,560

 
418,271

Convertible junior debentures
 
256,872

 
256,872

 
256,872

Other liabilities
 
207,620

 
255,972

 
239,609

Total liabilities
 
2,167,577

 
2,464,973

 
2,545,719

Shareholders' equity
 
3,489,531

 
3,154,526

 
3,130,149

Total liabilities and shareholders' equity
 
$
5,657,108

 
$
5,619,499

 
$
5,675,868

Book value per share (3)
 
$
9.64

 
$
8.51

 
$
8.45

 
 
 
 
 
 
 
(1) Investments include net unrealized (losses) gains on securities
 
$
(72,399
)
 
$
37,058

 
$
44,027

(2) Loss reserves, net of reinsurance recoverable on loss reserves
 
$
687,765

 
$
937,161

 
$
1,059,273

(3) Shares outstanding
 
362,155

 
370,567

 
370,562








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Year-to-date
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
2018
 
2017
New primary insurance written (NIW) (billions)
$
14.5

 
$
13.2

 
$
10.6

 
$
12.8

 
$
14.1

 
$
38.3

 
$
36.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (including split premium plans) and annual premium plans
12.2

 
11.1

 
8.5

 
10.1

 
11.4

 
31.8

 
29.8

Single premium plans
2.3

 
2.1

 
2.1

 
2.7

 
2.7

 
6.5

 
6.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct average premium rate (bps) on NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (1)
51.3

 
54.6

 
55.8

 
56.3

 
55.5

 
53.7

 
55.3

Singles
153.5

 
165.6

 
167.4

 
170.5

 
176.8

 
161.8

 
175.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product mix as a % of primary NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO < 680
7
%
 
6
%
 
7
%
 
8
%
 
7
%
 
7
%
 
7
%
>95% LTVs
17
%
 
15
%
 
13
%
 
13
%
 
12
%
 
16
%
 
10
%
>45% DTI
20
%
 
19
%
 
20
%
 
19
%
 
9
%
 
20
%
 
10
%
Singles
16
%
 
16
%
 
19
%
 
21
%
 
20
%
 
17
%
 
18
%
Refinances
5
%
 
6
%
 
12
%
 
13
%
 
9
%
 
7
%
 
11
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New primary risk written (billions)
$
3.7

 
$
3.3

 
$
2.6

 
$
3.2

 
$
3.5

 
$
9.6

 
$
9.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) Excludes loans with split and annual payments































MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
 
 
 
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
 
 
 
Primary Insurance In Force (IIF) (billions)
$
205.8

 
$
200.7

 
$
197.5

 
$
194.9

 
$
191.0

 
 
 
 
Total # of loans
1,048,088

 
1,033,323

 
1,026,797

 
1,023,951

 
1,014,092

 
 
 
 
Flow # of loans
999,382

 
982,208

 
973,187

 
968,649

 
956,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Loan Size of IIF (thousands)
$
196.4

 
$
194.2

 
$
192.3

 
$
190.4

 
$
188.4

 
 
 
 
Flow only
$
198.9

 
$
196.8

 
$
195.0

 
$
193.0

 
$
190.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Persistency
81.0
%
 
80.1
%
 
80.2
%
 
80.1
%
 
78.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Risk In Force (RIF) (billions)
$
53.1

 
$
51.7

 
$
50.9

 
$
50.3

 
$
49.4

 
 
 
 
By FICO (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO 760 & >
38
%
 
37
%
 
37
%
 
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
3
%
 
4
%
 
3
%
 
4
%
 
4
%
 
 
 
 
FICO 639 & <
5
%
 
5
%
 
6
%
 
6
%
 
6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Coverage Ratio (RIF/IIF)
25.8
%
 
25.8
%
 
25.8
%
 
25.8
%
 
25.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct Pool RIF (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
With aggregate loss limits
$
232

 
$
233

 
$
233

 
$
236

 
$
238

 
 
 
 
Without aggregate loss limits
$
199

 
$
210

 
$
222

 
$
235

 
$
251

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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
 
 
 
 
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
 
 
 
Primary IIF - Delinquent Roll Forward - # of Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Delinquent Inventory
36,037

 
41,243

 
46,556

 
41,235

 
41,317

 
 
 
 
New Notices
13,569

 
12,159

 
14,623

 
22,916

 
15,950

 
 
 
 
Cures
(14,197
)
 
(15,350
)
 
(18,073
)
 
(15,712
)
 
(13,546
)
 
 
 
 
Paids (including those charged to a deductible or captive)
(1,374
)
 
(1,501
)
 
(1,571
)
 
(1,803
)
 
(2,195
)
 
 
 
 
Rescissions and denials
(56
)
 
(76
)
 
(68
)
 
(80
)
 
(82
)
 
 
 
 
Items removed from inventory
(581
)
 
(438
)
 
(224
)
 

 
(209
)
 
 
 
 
Ending Delinquent Inventory
33,398

 
36,037

 
41,243

 
46,556

 
41,235

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF Delinquency Rate
3.19
%
 
3.49
%
 
4.02
%
 
4.55
%
 
4.07
%
 
 
 
 
Primary claim received inventory included in ending delinquent inventory
766

 
827

 
819

 
954

 
1,063

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF - # of Delinquent Loans - Flow only
25,130

 
27,250

 
31,621

 
35,791

 
30,501

 
 
 
 
Primary IIF Delinquency Rate - Flow only
2.52
%
 
2.77
%
 
3.25
%
 
3.70
%
 
3.19
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Cures
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported delinquent and cured intraquarter
3,938

 
3,447

 
5,530

 
5,520

 
4,347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent prior to cure
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
5,671

 
7,204

 
8,285

 
6,324

 
6,011

 
 
 
 
4-11 payments
3,896

 
4,000

 
3,501

 
2,758

 
2,374

 
 
 
 
12 payments or more
692

 
699

 
757

 
1,110

 
814

 
 
 
 
Total Cures in Quarter
14,197

 
15,350

 
18,073

 
15,712

 
13,546

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Paids
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent at time of claim payment
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
7

 
3

 
2

 
6

 
13

 
 
 
 
4-11 payments
140

 
147

 
184

 
181

 
222

 
 
 
 
12 payments or more
1,227

 
1,351

 
1,385

 
1,616

 
1,960

 
 
 
 
Total Paids in Quarter
1,374

 
1,501

 
1,571

 
1,803

 
2,195

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aging of Primary Delinquent Inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
Consecutive months delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 months or less
9,484

28
%
8,554

24
%
8,770

21
%
17,119

37
%
11,331

27
%
 
 
 
      4-11 months
9,564

29
%
12,506

35
%
16,429

40
%
12,050

26
%
11,092

27
%
 
 
 
      12 months or more
14,350

43
%
14,977

41
%
16,044

39
%
17,387

37
%
18,812

46
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 payments or less
14,813

44
%
14,178

39
%
16,023

39
%
21,678

46
%
16,916

41
%
 
 
 
      4-11 payments
9,156

28
%
11,429

32
%
13,734

33
%
12,446

27
%
10,583

26
%
 
 
 
      12 payments or
      more
9,429

28
%
10,430

29
%
11,486

28
%
12,432

27
%
13,736

33
%
 
 
 






MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
 
 
 
 
ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Year-to-date
 
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
2018
 
2017
 
Reserves (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Direct Loss Reserves
$
707

 
$
799

 
$
910

 
$
971

 
$
1,090

 

 

 
Pool Direct loss reserves
13

 
13

 
14

 
14

 
15

 

 

 
Other Gross Reserves
1

 
1

 

 
1

 

 

 

 
Total Gross Loss Reserves
$
721

 
$
813

 
$
924

 
$
986

 
$
1,105

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Direct Reserve Per Delinquency
$21,184
 
$22,178
(1)
$22,060
(1)
$20,851
(1)
$26,430
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Paid Claims (millions) (3)
$
87

 
$
91

 
$
82

 
$
91

 
$
113

 
$
260

 
$
414

 
Total primary (excluding settlements)
65

 
75

 
80

 
89

 
101

 
220

 
357

 
Rescission and NPL settlements
19

 
14

 
7

 

 
9

 
40

 
54

 
Pool
2

 
1

 
2

 
2

 
2

 
5

 
8

 
Reinsurance
(3
)
 
(3
)
 
(11
)
 
(5
)
 
(3
)
 
(17
)
 
(18
)
 
Other
4

 
4

 
4

 
5

 
4

 
12

 
13

 
Reinsurance terminations (3)

 
(2
)
 

 

 

 
(2
)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Claim Payment (thousands)
$
47.2

(2)
$
50.2

(2)
$
51.1

(2)
$
49.2

 
$
46.4

(2)
$
49.6

(2)
$
48.3

(2)
Flow only
$
42.0

(2)
$
45.2

(2)
$
45.2

(2)
$
45.1

 
$
43.7

(2)
$
44.2

(2)
$
44.7

(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
 
Q3
 
Q2
 
Q1
 
Q4
 
Q3
 
2018
 
2017
Quota Share Reinsurance
 
 
 
 
 
 
 
 
 
 
 
 
 
% insurance inforce subject to reinsurance
77.6
 %
 
78.2
 %
 
77.9
%
 
78.2
 %
 
78.3
%
 

 

% NIW subject to reinsurance
75.4
 %
 
75.9
 %
 
73.3
%
 
77.0
 %
 
86.1
%
 
75
%
 
86.8
%
Ceded premiums written and earned (millions)
$
25.2

 
$
21.4

 
$
33.0

 
$
32.3

 
$
30.9

 
$
79.6

 
$
88.7

Ceded losses incurred (millions)
$
(0.5
)
 
$
(3.7
)
 
$
7.8

 
$
7.3

 
$
5.9

 
$
3.6

 
$
15.0

Ceding commissions (millions) (included in underwriting and other expenses)
$
13.0

 
$
12.6

 
$
12.6

 
$
12.6

 
$
12.5

 
$
38.2

 
$
36.7

Profit commission (millions) (included in ceded premiums)
$
39.7

 
$
41.8

 
$
30.2

 
$
30.6

 
$
31.6

 
$
111.7

 
$
95.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bulk Primary Insurance Statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance in force (billions)
$
7.0

 
$
7.4

 
$
7.7

 
$
8.0

 
$
8.3

 

 

Risk in force (billions)
$
2.0

 
$
2.1

 
$
2.2

 
$
2.2

 
$
2.4

 

 

Average loan size (thousands)
$
145.4

 
$
144.5

 
$
143.8

 
$
144.6

 
$
145.4

 

 

Number of delinquent loans
8,268

 
8,787

 
9,622

 
10,765

 
10,734

 

 

Delinquency rate
16.98
 %
 
17.19
 %
 
17.95
%
 
19.47
 %
 
18.73
%
 

 

Primary paid claims (millions)
$
18

 
$
22

 
$
24

 
$
25

 
$
26

 
$
64

 
$
90

Average claim payment (thousands)
$
69.6

 
$
67.7

 
$
72.8

 
$
64.4

 
$
56.1

 
$
70.1

 
$
63.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Guaranty Insurance Corporation - Risk to Capital
9.0:1

(1)
9.1:1

 
9.4:1

 
9.5:1

 
10.1:1

 
 
 
 
Combined Insurance Companies - Risk to Capital
9.8:1

(1)
10.0:1

 
10.3:1

 
10.5:1

 
11.1:1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP loss ratio (insurance operations only)
(0.6
)%
 
(5.4
)%
 
10.3
%
 
(13.1
)%
 
12.5
%
 
1.2
%
 
12.1
%
GAAP underwriting expense ratio (insurance operations only)
17.6
 %
 
16.4
 %
 
19.5
%
 
15.9
 %
 
15.7
%
 
17.8
%
 
16.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 


(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 that may be adjusted more frequently within certain parameters (commonly referred to as “black-box” pricing); and (iii) use of customized rates (discounted from standard rates) that are made available to many, but not all, lenders. Because the industry is currently experiencing relatively low levels of mortgage insurance losses and acceptable returns on new business, we expect price competition to remain strong.
We monitor various competitive and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies. In 2018, we continued to evolve our pricing from a standard rate card approach, where prices vary based on relatively few attributes, to a more granular approach, where more attributes are considered. We reduced certain of our rates in the second through fourth quarters of 2018. Those changes will reduce our premium yield (net premiums earned divided by the average insurance in force) over time as older insurance policies with higher premium rates run off and new insurance policies with lower premium rates are written. We continue to develop our “black-box” pricing approach and expect to release it in 2019. As noted above, black-box pricing allows for formulaic, risk-based pricing that may be adjusted more frequently.







There can be no assurance that our premium rates adequately reflect the risk associated with the underlying mortgage insurance policies. For additional information, see our risk factors titled “The premiums we charge may not be adequate to compensate us for our liabilities for losses and as a result any inadequacy could materially affect our financial condition and results of operations" and "If our risk management programs are not effective in identifying, or adequate in controlling or mitigating, the risks we face, or if the models used in our businesses are inaccurate, it could have a material adverse impact on our business, results of operations and financial condition." 
Our relationships with our customers, which may affect the amount of our new business written, could be adversely affected by a variety of factors, including if our premium rates are higher than those of our competitors, our underwriting requirements result in our declining to insure some of the loans originated by our customers, or our insurance policy rescissions and claim curtailments affect the customer. Regarding the concentration of our new business, our largest customer accounted for approximately 4% of our new insurance written in each of 2017 and the first nine months of 2018.
Certain of our competitors have access to capital at a lower cost of capital than we do (including, as a result of off-shore reinsurance vehicles, which are also tax-advantaged). As a result, they may be better positioned to compete outside of traditional mortgage insurance, including by participating in the pilot programs referred to above and other alternative forms of credit enhancement pursued by the GSEs. In addition, because of their tax advantages, certain competitors may be able to achieve higher after-tax rates of return on their new insurance written ("NIW") compared to us, which could allow them to leverage reduced pricing to gain market share.
Substantially all of our insurance written since 2008 has been for loans purchased by the GSEs. The current private mortgage insurer eligibility requirements ("PMIERs") of the GSEs require a mortgage insurer to maintain a minimum amount of assets to support its insured risk, as discussed in our risk factor titled “We may not continue to meet the GSEs’ private mortgage insurer eligibility requirements and our returns may decrease as we are required to maintain more capital in order to maintain our eligibility.” The PMIERs do not require an insurer to maintain minimum financial strength ratings; however, our financial strength ratings can affect us in the following ways:
A downgrade in our financial strength ratings could result in increased scrutiny of our financial condition by the GSEs and/or our customers, potentially resulting in a decrease in the amount of our new insurance written.
Our ability to participate in the non-GSE mortgage market (which has been limited since 2008, but may grow in the future), could depend on our ability to maintain and improve our investment grade ratings for our mortgage insurance subsidiaries. We could be competitively disadvantaged with some market participants because the financial strength ratings of our insurance subsidiaries are lower than those of some competitors. MGIC's financial strength rating from Moody’s is Baa2 (with a stable outlook) , from Standard & Poor’s is BBB+ (with a stable outlook) and from A.M. Best is A- (with a stable outlook).
Financial strength ratings may also play a greater role if the GSEs no longer operate in their current capacities, for example, due to legislative or regulatory action. In addition, although the PMIERs do not require minimum financial strength ratings, the GSEs consider financial strength ratings to be important when utilizing forms of credit enhancement other than traditional mortgage insurance, including the pilot programs referred to above, and as discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors