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 23, 2019
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 23, 2019 announcing its results of operations for the quarter ended June 30, 2019 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 23, 2019 press release is furnished as Exhibit 99 and is not filed.





Exhibit Index

 
 
 
Exhibit No.
 
Description
 
 
 
 
Press Release dated July 23, 2019. (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 23, 2019
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=13017660&doc=3
MGIC Investment Corporation Reports Second Quarter 2019 Results
Second Quarter 2019 Net Income of $167.8 million or $0.46 per Diluted Share
Second Quarter 2019 Adjusted Net Operating Income (Non-GAAP) of $167.6 million or $0.46 per Diluted Share


MILWAUKEE (July 23, 2019) - MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the second quarter of 2019. Net income for the quarter was $167.8 million, or $0.46 per diluted share, compared with net income of $186.8 million, or $0.49 per diluted share for the second quarter of 2018.
    
Adjusted net operating income for the second quarter of 2019 was $167.6 million, or $0.46 per diluted share, compared with $189.2 million, or $0.50 per diluted share for the second quarter of 2018. 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.

Patrick Sinks, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC") said, "We continue to benefit from favorable employment and housing trends which contributed to an increase of insurance in force, a low level of new primary delinquency notices received, a decline of the primary delinquency inventory, and additional positive primary loss reserve development."  Sinks added that, "During the quarter the holding company received a $70 million dividend from MGIC and repurchased $25 million of common stock under the share repurchase program which was announced in April 2018."
Second Quarter Summary
New Insurance Written of $14.9 billion, compared to $13.2 billion in the second quarter of 2018.
Insurance in force of $213.9 billion at June 30, 2019 increased by 1.2% during the quarter and 6.6% compared to June 30, 2018.
Primary delinquency inventory of 29,795 loans at June 30, 2019 decreased from 32,898 loans at December 31, 2018. Our primary delinquency inventory declined 17.3% year-over-year from 36,037 loans at June 30, 2018.
Insurance written in 2008 and before accounted for approximately 14% of the June 30, 2019 primary risk in force but accounted for 66% of the new primary delinquency notices received in the quarter.
The percentage of primary loans that were delinquent at June 30, 2019 was 2.80%, compared to 3.11% at December 31, 2018, and 3.49% at June 30, 2018. The percentage of flow primary loans that were delinquent at June 30, 2019 was 2.17%, compared to 2.47% at December 31, 2018, and 2.77% at June 30, 2018.
Persistency, or the percentage of insurance remaining in force from one year prior, was 80.8% at June 30, 2019, compared with 81.7% at December 31, 2018 and 80.1% at June 30, 2018.
The loss ratio for the second quarter of 2019 was 8.8%, compared to 15.6% for the first quarter of 2019 and (5.4%) for the second quarter of 2018.
The underwriting expense ratio associated with our insurance operations for the second quarter of 2019 was 17.6%, compared to 18.9% for the first quarter of 2019 and 16.4% for the second quarter of 2018.
Net premium yield was 46.5 basis points in the second quarter of 2019, compared to 47.4 basis points for the first quarter of 2019 and 49.6 basis points for the second quarter of 2018.
MGIC paid a dividend of $70 million to our holding company during the second quarter of 2019.
Repurchased 1.8 million shares of common stock at an average cost per share of $13.79.
Book value per common share outstanding increased by 6% during the quarter to $11.39. A $70.8 million after-tax change in net unrealized gains (losses) increased book value per common share outstanding by $0.20, or 2%, during the quarter.

_______________
    



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



Revenues

Total revenues for the second quarter of 2019 were $292.3 million, compared to $282.0 million in the second quarter last year. Net premiums written for the quarter were $243.6 million, compared to $255.4 million for the same period last year. Net premiums earned for the quarter were $247.1 million, compared to $247.0 million for the same period last year. Net premiums written and earned reflect an increase in ceded premiums compared to the same period of last year, which offset an increase in premiums from a higher average insurance in force and a decrease in premium refunds from lower claim activity. The increase in ceded premiums was due to a $6.8 million non-recurring termination fee related to our 2015 quota share reinsurance transaction, premiums ceded under our excess-of-loss reinsurance transactions (insurance-linked notes), and a lower profit commission due to higher ceded losses. Net premiums earned also reflect an increase in premiums from single premium policy cancellations. Investment income for the second quarter increased to $42.4 million, from $34.5 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 2019 were $21.8 million, compared to ($13.5) million in the second quarter of 2018. During the second quarter of 2019 there was a $30 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 $70 million in the second quarter of 2018. Losses incurred in the quarter associated with delinquency notices received in the quarter reflect a lower estimated claim rate when compared to the same period of last year.

Underwriting and other expenses
Net underwriting and other expenses were $45.7 million in the second quarter of 2019, compared to $44.7 million in the same period last year.

Capital

As of June 30, 2019, total shareholders' equity was $4.0 billion and outstanding principal on borrowings was $837 million.
Preliminary Consolidated Risk-to-Capital was 10.0:1 as of June 30, 2019.
MGIC's PMIERs Available Assets totaled $4.4 billion, or $1.1 billion above its Minimum Required Assets as of June 30, 2019.


Other Balance Sheet and Liquidity Metrics

Total assets were $6.1 billion as of June 30, 2019, compared to $5.7 billion as of December 31, 2018, and $5.6 billion as of June 30, 2018.
The fair value of our investment portfolio, cash and cash equivalents was $5.7 billion as of June 30, 2019, compared to $5.3 billion as of December 31, 2018, and $5.1 billion as of June 30, 2018.
Investments, cash and cash equivalents at the holding company were $333 million as of June 30, 2019, compared to $248 million as of December 31, 2018, and $191 million as of June 30, 2018.






Conference Call and Webcast Details
MGIC Investment Corporation will hold a conference call today, July 23, 2019, 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 1-866-834-4126. 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 23, 2019 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, 2019, MGIC had $213.9 billion of primary insurance in force covering over 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. For information about our underwriting and rate changes, see https://www.mgic.com/underwriting.
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, 2019.

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%.
    
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)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Net premiums written
 
$
243,598

 
$
255,436

 
$
487,879

 
$
492,342

Revenues
 
 
 
 
 
 
 
 
Net premiums earned
 
$
247,102

 
$
246,964

 
$
496,863

 
$
479,071

Net investment income
 
42,423

 
34,502

 
83,008

 
66,623

Net realized investment gains (losses)
 
307

 
(1,897
)
 
(219
)
 
(2,226
)
Other revenue
 
2,485

 
2,431

 
4,315

 
4,302

Total revenues
 
292,317

 
282,000

 
583,967

 
547,770

Losses and expenses
 
 
 
 
 
 
 
 
Losses incurred, net
 
21,836

 
(13,455
)
 
60,899

 
10,395

Underwriting and other expenses, net
 
45,720

 
44,687

 
94,138

 
93,349

Interest expense
 
13,550

 
13,246

 
26,783

 
26,479

Total losses and expenses
 
81,106

 
44,478

 
181,820

 
130,223

Income before tax
 
211,211

 
237,522

 
402,147

 
417,547

Provision for income taxes
 
43,433

 
50,708

 
82,428

 
87,096

Net income
 
$
167,778

 
$
186,814

 
$
319,719

 
$
330,451

Net income per diluted share
 
$
0.46

 
$
0.49

 
$
0.87

 
$
0.87








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)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
167,778

 
$
186,814

 
$
319,719

 
$
330,451

Interest expense, net of tax (1):
 
 
 
 
 
 
 
 
9% Convertible Junior Subordinated Debentures due 2063
 
4,566

 
4,566

 
9,132

 
9,132

Diluted net income available to common shareholders
 
$
172,344

 
$
191,380

 
$
328,851

 
$
339,583

 
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
355,734

 
368,578

 
355,694

 
369,736

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Unvested restricted stock units
 
1,841

 
1,275

 
1,913

 
1,472

9% Convertible Junior Subordinated Debentures due 2063
 
19,028

 
19,028

 
19,028

 
19,028

Weighted average shares - diluted
 
376,603

 
388,881

 
376,635

 
390,236

Net income per diluted share
 
$
0.46

 
$
0.49

 
$
0.87

 
$
0.87


(1) 
Interest expense for the three and six months ended June 30, 2019 and 2018 has been tax effected at a rate of 21%.







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,
 
 
 
2019
 
2018
 
(In thousands, except per share amounts)
 
Pre-tax
 
Tax Effect
 
Net
(after-tax)
 
Pre-tax
 
Tax Effect
 
Net
(after-tax)
 
Income before tax / Net income
 
$
211,211

 
$
43,433

 
$
167,778

 
$
237,522

 
$
50,708

 
$
186,814

 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax provision related to IRS litigation
 

 

 

 

 
(923
)
 
923

 
Net realized investment (gains) losses
 
(217
)
 
(46
)
 
(171
)
 
1,897

 
398

 
1,499

 
Adjusted pre-tax operating income / Adjusted net operating income
 
$
210,994

 
$
43,387

 
$
167,607

 
$
239,419

 
$
50,183

 
$
189,236

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
 
Weighted average shares - diluted
 
 
 
 
 
376,603

 
 
 
 
 
388,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
0.46

 
 
 
 
 
$
0.49

 
Additional income tax provision related to IRS litigation
 
 
 
 
 

 
 
 
 
 

(1) 
Net realized investment (gains) losses
 
 
 
 
 

 
 
 
 
 

(1) 
Adjusted net operating income per diluted share
 
 
 
 
 
$
0.46

 
 
 
 
 
$
0.50

 
(1) For the three months ended June 30, 2018, the individual adjustments are each less than $0.01 per diluted share, but collectively aggregate to $0.01 per diluted share.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income
 
 
 
Six Months Ended June 30,
 
 
 
2019
 
2018
 
(In thousands, except per share amounts)
 
Pre-tax
 
Tax Effect
 
Net
(after-tax)
 
Pre-tax
 
Tax Effect
 
Net
(after-tax)
 
Income before tax / Net income
 
$
402,147

 
$
82,428

 
$
319,719

 
$
417,547

 
$
87,096

 
$
330,451

 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional income tax provision related to IRS litigation
 

 

 

 

 
(1,631
)
 
1,631

 
Net realized investment losses
 
403

 
85

 
318

 
2,226

 
467

 
1,759

 
Adjusted pre-tax operating income / Adjusted net operating income
 
$
402,550

 
$
82,513

 
$
320,037

 
$
419,773

 
$
85,932

 
$
333,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share
 
Weighted average shares - diluted
 
 
 
 
 
376,635

 
 
 
 
 
390,236

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per diluted share
 
 
 
 
 
$
0.87

 
 
 
 
 
$
0.87

 
Additional income tax provision related to IRS litigation
 
 
 
 
 

 
 
 
 
 

(1) 
Net realized investment losses
 
 
 
 
 

 
 
 
 
 

(1) 
Adjusted net operating income per diluted share
 
 
 
 
 
$
0.87

 
 
 
 
 
$
0.88

 
(1) For the six months ended June 30, 2018, the the individual adjustments are each less than $0.01 per diluted share, but collectively aggregate to $0.01 per diluted share.
 






MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
 
 
 
 
 
 
 
June 30,
 
December 31,
 
June 30,
(In thousands, except per share data)
 
2019
 
2018
 
2018
ASSETS
 
 
 
 
 
 
Investments (1)
 
$
5,512,037

 
$
5,159,019

 
$
4,933,395

Cash and cash equivalents
 
218,908

 
151,892

 
191,894

Restricted cash and cash equivalents
 
6,275

 
3,146

 

Reinsurance recoverable on loss reserves (2)
 
18,402

 
33,328

 
37,051

Home office and equipment, net
 
51,607

 
51,734

 
49,461

Deferred insurance policy acquisition costs
 
17,669

 
17,888

 
18,807

Deferred income taxes, net
 
20,932

 
69,184

 
161,488

Other assets
 
209,707

 
191,611

 
199,920

Total assets
 
$
6,055,537

 
$
5,677,802

 
$
5,592,016

 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Loss reserves (2)
 
$
621,902

 
$
674,019

 
$
813,015

Unearned premiums
 
400,999

 
409,985

 
406,159

Federal home loan bank advance
 
155,000

 
155,000

 
155,000

Senior notes
 
420,290

 
419,713

 
419,136

Convertible junior debentures
 
256,872

 
256,872

 
256,872

Other liabilities
 
164,809

 
180,322

 
227,959

Total liabilities
 
2,019,872

 
2,095,911

 
2,278,141

Shareholders' equity
 
4,035,665

 
3,581,891

 
3,313,875

Total liabilities and shareholders' equity
 
$
6,055,537

 
$
5,677,802

 
$
5,592,016

Book value per share (3)
 
$
11.39

 
$
10.08

 
$
9.15

 
 
 
 
 
 
 
(1) Investments include net unrealized gains (losses) on securities
 
$
147,387

 
$
(44,795
)
 
$
(57,111
)
(2) Loss reserves, net of reinsurance recoverable on loss reserves
 
$
603,500

 
$
640,691

 
$
775,964

(3) Shares outstanding
 
354,177

 
355,371

 
362,150








MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
Year-to-date
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2019
 
2018
New primary insurance written (NIW) (billions)
$
14.9

 
$
10.1

 
$
12.2

 
$
14.5

 
$
13.2

 
$
25.0

 
$
23.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (including split premium plans) and annual premium plans
12.6

 
8.5

 
10.2

 
12.2

 
11.1

 
21.1

 
19.6

Single premium plans
2.3

 
1.6

 
2.0

 
2.3

 
2.1

 
3.9

 
4.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct average premium rate (bps) on NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
Monthly (1)
45.6

 
49.1

 
50.2

 
51.3

 
54.6

 
47.0

 
55.1

Singles
129.6

 
141.5

 
147.0

 
153.5

 
165.6

 
134.5

 
166.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product mix as a % of primary NIW
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO < 680
6
%
 
7
%
 
8
%
 
7
%
 
6
%
 
6
%
 
7
%
>95% LTVs
16
%
 
18
%
 
17
%
 
17
%
 
15
%
 
17
%
 
14
%
>45% DTI
15
%
(2)
18
%
(2)
19
%
(2)
20
%
 
19
%
 
16
%
 
20
%
Singles
16
%
 
16
%
 
16
%
 
16
%
 
16
%
 
16
%
 
17
%
Refinances
11
%
 
8
%
 
6
%
 
5
%
 
6
%
 
10
%
 
9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New primary risk written (billions)
$
3.8

 
$
2.5

 
$
3.1

 
$
3.7

 
$
3.3

 
$
6.3

 
$
5.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 


(1) Excludes loans with split and annual payments

(2) In the fourth quarter of 2018 we changed our methodology for calculating DTI ratios for pricing and eligibility purposes to exclude the impact of mortgage insurance premiums. As a result, loan originators may have changed the information they provide to us, and therefore we cannot be sure that the DTI ratio we report for each loan includes the related mortgage insurance premiums in the calculation.





























MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
 
ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
 
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
 
 
 
Primary Insurance In Force (IIF) (billions)
$
213.9

 
$
211.4

 
$
209.7

 
$
205.8

 
$
200.7

 
 
 
 
Total # of loans
1,065,893

 
1,059,720

 
1,058,292

 
1,048,088

 
1,033,323

 
 
 
 
Flow # of loans
1,022,157

 
1,013,291

 
1,010,944

 
999,382

 
982,208

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Loan Size of IIF (thousands)
$
200.7

 
$
199.5

 
$
198.2

 
$
196.4

 
$
194.2

 
 
 
 
Flow only
$
203.2

 
$
202.0

 
$
200.7

 
$
198.9

 
$
196.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annual Persistency
80.8
%
 
81.7
%
 
81.7
%
 
81.0
%
 
80.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Risk In Force (RIF) (billions)
$
55.2

 
$
54.5

 
$
54.1

 
$
53.1

 
$
51.7

 
 
 
 
By FICO (%)
 
 
 
 
 
 
 
 
 
 
 
 
 
FICO 760 & >
38
%
 
38
%
 
38
%
 
38
%
 
37
%
 
 
 
 
FICO 740-759
16
%
 
16
%
 
16
%
 
15
%
 
15
%
 
 
 
 
FICO 720-739
14
%
 
14
%
 
14
%
 
14
%
 
14
%
 
 
 
 
FICO 700-719
11
%
 
11
%
 
11
%
 
11
%
 
11
%
 
 
 
 
FICO 680-699
9
%
 
9
%
 
8
%
 
9
%
 
9
%
 
 
 
 
FICO 660-679
5
%
 
5
%
 
5
%
 
5
%
 
5
%
 
 
 
 
FICO 640-659
3
%
 
3
%
 
3
%
 
3
%
 
4
%
 
 
 
 
FICO 639 & <
4
%
 
4
%
 
5
%
 
5
%
 
5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Coverage Ratio (RIF/IIF)
25.8
%
 
25.8
%
 
25.8
%
 
25.8
%
 
25.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct Pool RIF (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
With aggregate loss limits
$
215

 
$
216

 
$
228

 
$
232

 
$
233

 
 
 
 
Without aggregate loss limits
$
178

 
$
186

 
$
191

 
$
199

 
$
210

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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 - DELINQUENCY STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
 
 
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
 
 
 
Primary IIF - Delinquent Roll Forward - # of Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Delinquent Inventory
30,921

 
32,898

 
33,398

 
36,037

 
41,243

 
 
 
 
New Notices
12,915

 
13,611

 
14,097

 
13,569

 
12,159

 
 
 
 
Cures
(12,882
)
 
(14,348
)
 
(12,891
)
 
(14,197
)
 
(15,350
)
 
 
 
 
Paid claims
(1,112
)
 
(1,188
)
 
(1,304
)
 
(1,374
)
 
(1,501
)
 
 
 
 
Rescissions and denials
(47
)
 
(52
)
 
(67
)
 
(56
)
 
(76
)
 
 
 
 
Other items removed from inventory

 

 
(335
)
 
(581
)
 
(438
)
 
 
 
 
Ending Delinquent Inventory
29,795

 
30,921

 
32,898

 
33,398

 
36,037

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF Delinquency Rate
2.80
%
 
2.92
%
 
3.11
%
 
3.19
%
 
3.49
%
 
 
 
 
Primary claim received inventory included in ending delinquent inventory
630

 
665

 
809

 
766

 
827

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary IIF - # of Delinquent Loans - Flow only
22,227

 
23,483

 
24,919

 
25,130

 
27,250

 
 
 
 
Primary IIF Delinquency Rate - Flow only
2.17
%
 
2.32
%
 
2.47
%
 
2.52
%
 
2.77
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Cures
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported delinquent and cured intraquarter
3,735

 
4,884

 
4,081

 
3,938

 
3,447

 
 
 
 
Number of payments delinquent prior to cure
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
6,221

 
6,506

 
5,623

 
5,671

 
7,204

 
 
 
 
4-11 payments
2,401

 
2,419

 
2,616

 
3,896

 
4,000

 
 
 
 
12 payments or more
525

 
539

 
571

 
692

 
699

 
 
 
 
Total Cures in Quarter
12,882

 
14,348

 
12,891

 
14,197

 
15,350

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composition of Paids
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent at time of claim payment
 
 
 
 
 
 
 
 
 
 
 
 
 
3 payments or less
4

 
2

 
6

 
7

 
3

 
 
 
 
4-11 payments
121

 
149

 
125

 
140

 
147

 
 
 
 
12 payments or more
987

 
1,037

 
1,173

 
1,227

 
1,351

 
 
 
 
Total Paids in Quarter
1,112

 
1,188

 
1,304

 
1,374

 
1,501

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aging of Primary Delinquent Inventory
 
 
 
 
 
 
 
 
 
 
 
 
 
Consecutive months delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 months or less
8,970

30
%
8,568

28
%
9,829

30
%
9,484

28
%
8,554

24
%
 
 
 
      4-11 months
8,951

30
%
9,997

32
%
9,655

29
%
9,564

29
%
12,506

35
%
 
 
 
      12 months or more
11,874

40
%
12,356

40
%
13,414

41
%
14,350

43
%
14,977

41
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of payments delinquent
 
 
 
 
 
 
 
 
 
 
 
 
 
      3 payments or less
14,071

47
%
14,129

46
%
15,519

47
%
14,813

44
%
14,178

39
%
 
 
 
      4-11 payments
8,194

28
%
8,833

28
%
8,842

27
%
9,156

28
%
11,429

32
%
 
 
 
      12 payments or
      more
7,530

25
%
7,959

26
%
8,537

26
%
9,429

28
%
10,430

29
%
 
 
 






MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
 
 
 
 
ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
Year-to-date
 
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2019
 
2018
 
Reserves (millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Direct Loss Reserves
$
610

 
$
642

 
$
660

 
$
707

 
$
799

 

 

 
Pool Direct loss reserves
11

 
12

 
13

 
13

 
13

 

 

 
Other Gross Reserves
1

 
1

 
1

 
1

 
1

 

 

 
Total Gross Loss Reserves
$
622

 
$
655

 
$
674

 
$
721

 
$
813

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Direct Reserve Per Delinquency
$19,684
 
$20,014
 
$20,077
 
$21,184
 
$22,178
(1)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Paid Claims (millions) (3)
$
55

 
$
57

 
$
75

 
$
87

 
$
91

 
$
112

 
$
173

 
Total primary (excluding settlements)
52

 
52

 
62

 
65

 
75

 
104

 
155

 
Rescission and NPL settlements

 

 
10

 
19

 
14

 

 
21

 
Pool

 
1

 
1

 
2

 
1

 
1

 
3

 
Reinsurance
(2
)
 
(3
)
 
(2
)
 
(3
)
 
(3
)
 
(5
)
 
(14
)
 
Other
5

 
7

 
4

 
4

 
4

 
12

 
8

 
Reinsurance terminations (3)
(14
)
 

 

 

 
(2
)
 
(14
)
 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Average Claim Payment (thousands)
$
46.9

 
$
43.9

 
$
48.0

(2)
$
47.2

(2)
$
50.2

(2)
$
45.4

 
$
50.6

(2)
Flow only
$
40.0

 
$
37.6

 
$
41.6

(2)
$
42.0

(2)
$
45.2

(2)
$
38.8

 
$
45.2

(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
Year-to-date
 
Q2
 
Q1
 
Q4
 
Q3
 
Q2
 
2019
 
2018
Quota Share Reinsurance
 
 
 
 
 
 
 
 
 
 
 
 
 
% insurance inforce subject to reinsurance
78.2
%
 
77.8
%
 
77.5
%
 
77.6
 %
 
78.2
 %
 

 

% NIW subject to reinsurance
83.0
%
 
84.0
%
 
75.5
%
 
75.4
 %
 
75.9
 %
 
83.4
%
 
74.7
%
Ceded premiums written and earned (millions)
$
36.5

(1)
$
28.2

 
$
28.6

 
$
25.2

 
$
21.4

 
$
64.7

 
$
54.4

Ceded losses incurred (millions)
$
3.4

 
$
1.7

 
$
3.0

 
$
(0.5
)
 
$
(3.7
)
 
$
5.1

 
$
4.1

Ceding commissions (millions) (included in underwriting and other expenses)
$
13.4

 
$
13.4

 
$
12.9

 
$
13.0

 
$
12.6

 
$
26.8

 
$
25.2

Profit commission (millions) (included in ceded premiums)
$
37.0

 
$
38.9

 
$
36.0

 
$
39.7

 
$
41.8

 
$
75.9

 
$
72.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excess-of-Loss Reinsurance
 
 
 
 
 
 
 
 
 
 

 

Ceded premiums earned (millions)
$
4.5

 
$
2.5

 
$
2.8

 
 
 
 
 
$
7.0

 
$

Ceded losses incurred (millions)
$

 
$

 
$

 
 
 
 
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bulk Primary Insurance Statistics
 
 
 
 
 
 
 
 
 
 
 
 
 
Insurance in force (billions)
$
6.2

 
$
6.7

 
$
6.8

 
$
7.0

 
$
7.4

 

 

Risk in force (billions)
$
1.7

 
$
1.9

 
$
1.9

 
$
2.0

 
$
2.1

 

 

Average loan size (thousands)
$
141.8

 
$
144.1

 
$
144.8

 
$
145.4

 
$
144.5

 

 

Number of delinquent loans
7,568

 
7,438

 
7,979

 
8,268

 
8,787

 

 

Delinquency rate
17.31
%
 
16.02
%
 
16.86
%
 
16.98
 %
 
17.19
 %
 

 

Primary paid claims (millions)
$
16

 
$
18

 
$
19

 
$
18

 
$
22

 
$
34

 
$
46

Average claim payment (thousands)
$
74.6

 
$
65.1

 
$
73.2

 
$
69.6

 
$
67.7

 
$
69.3

 
$
70.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage Guaranty Insurance Corporation - Risk to Capital
10.1:1

(2)
8.9:1

 
9.0:1

 
9.0:1

 
9.1:1

 
 
 
 
Combined Insurance Companies - Risk to Capital
10.0:1

(3)
9.6:1

 
9.8:1

 
9.8:1

 
10.0:1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP loss ratio (insurance operations only)
8.8
%
 
15.6
%
 
11.3
%
 
(0.6
)%
 
(5.4
)%
 
12.3
%
 
2.2
%
GAAP underwriting expense ratio (insurance operations only)
17.6
%
 
18.9
%
 
19.1
%
 
17.6
 %
 
16.4
 %
 
18.3
%
 
17.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Includes a $6.8 million termination fee paid to terminate a portion of our 2015 quota share reinsurance agreement.

(2) Preliminary. A reinsurance agreement in effect between Mortgage Guaranty Insurance Corporation and an affiliate was terminated during the quarter.

(3) 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. 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 these statements being 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.
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 premium rates, 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 of a spectrum of filed rates to allow for formulaic, risk-based pricing that may be adjusted more frequently within certain parameters (referred to as "loan level pricing systems"); and (iii) use of customized rates (discounted from standard rates) that are made available to lenders that meet certain criteria.

We monitor various competitive and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies. The reduction of our rates 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.

In the first quarter of 2019, we introduced MiQ™, our loan level pricing system that establishes our premium rates based on more risk attributes than were considered in 2018. The widespread use of loan level pricing systems by the private mortgage insurance industry will make it more difficult to compare our rates to those offered by our competitors. We may not be aware of industry changes until we observe that our volume of new insurance written ("NIW") has changed and our volume may fluctuate more as a result.
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 5% and 8% of our NIW, and our top ten customers accounted for approximately 24% and 28% of our NIW, in each of 2018 and the first half of 2019, respectively.
Certain of our competitors have access to capital at a lower cost than we do (including, through off-shore reinsurance vehicles, which are tax-advantaged). As a result, they may be able to achieve higher after-tax rates of return on their NIW compared to us, which could allow them to leverage reduced premium rates to gain market share, and they may be better positioned to compete outside of traditional mortgage insurance, including by participating in alternative forms of credit enhancement pursued by Fannie Mae and Freddie Mac (the "GSEs") discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance."






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 A.M. Best is A- (with a stable outlook), from Moody’s is Baa2 (with a stable outlook) and from Standard & Poor’s is BBB+ (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 using forms of credit enhancement other than traditional mortgage insurance, as discussed in our risk factor titled "The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage insurance."