MGIC Investment Corporation Reports Third Quarter 2021 Results
Adjusted net operating income for the third quarter of 2021 was
Mattke further stated, "Reflecting our robust capital position, the long-term confidence in our transformed business model and our market position, we repurchased 3.0% of shares outstanding in the third quarter totaling
Third Quarter Summary
- New insurance written was
$28.7 billion , compared to$33.6 billion the second quarter of 2021 and$32.8 billion in the third quarter of 2020, reflecting a decrease in the refinance market. - Persistency, or the percentage of insurance remaining in force from one year prior, was 59.5% at
September 30, 2021 , compared with 57.1% atJune 30, 2021 and 64.5% atSeptember 30, 2020 . - Insurance in force of
$268.4 billion atSeptember 30, 2021 increased by 2.4% during the quarter and 12.3% compared toSeptember 30, 2020 . - Primary delinquency inventory of 37,379 loans at
September 30, 2021 decreased from 42,999 loans atJune 30, 2021 , and 64,418 loans atSeptember 30, 2020 . - As of
September 30, 2021 , 48% of the loans in our delinquency inventory were reported to us as subject to forbearance plans. We believe substantially all of the reported forbearance plans are COVID-19 related. - The percentage of loans insured with primary insurance that were delinquent at
September 30, 2021 was 3.20%, compared to 3.71% atJune 30, 2021 , and 5.79% atSeptember 30, 2020 . - The loss ratio for the third quarter of 2021 was 8.1%, compared to 11.6% for the second quarter of 2021 and 15.9% for the third quarter of 2020.
- The underwriting expense ratio associated with our insurance operations for the third quarter of 2021 was 21.9%, compared to 22.3% for the second quarter of 2021 and 20.2% for the third quarter of 2020.
- Net premium yield was 38.4 basis points in the third quarter of 2021, compared to 39.1 basis points for the second quarter of 2021 and 43.6 basis points for the third quarter of 2020.
- We paid a dividend of
$0.08 per common share to shareholders during the third quarter of 2021. - Book value per common share outstanding increased by 6.7% from
December 31, 2020 to$14.81 and increased by 11.1% fromSeptember 30, 2020 . (September 30, 2021 book value per common share outstanding includes$0.59 in net unrealized gain on securities, compared to$0.80 atDecember 31, 2020 and$0.72 atSeptember 30, 2020 ). - We repurchased 10.0 million shares of common stock at an average cost of
$15.01 per share. - MGIC paid a
$150 million dividend toMGIC Investment Corporation . - In
August 2021 , MGIC entered into a$398.4 million excess of loss reinsurance agreement (executed through an insurance linked notes transaction) that covers the vast majority of policies issued fromJanuary 1, 2021 throughMay 28, 2021 .
_______________
Fourth Quarter 2021 Activities
- In October, we repurchased an additional 1.1% shares outstanding totaling
$60 million under the remaining authorization that expires at year end 2021. - Our Board of Directors authorized an additional
$500 million common stock repurchase program through the end of 2023. - We declared a dividend of
$0.08 per common share to shareholders payable onNovember 23, 2021 , to shareholders of record at the close of business onNovember 11, 2021 . - MGIC elected to terminate its 2017 and 2018 QSR Transactions effective
December 31, 2021 , and will incur an early termination fee of$5 million atDecember 31, 2021 .
Revenues
Total revenues for the third quarter of 2021 were
Losses and expenses
Losses incurred
Net losses incurred were
Underwriting and other expenses
Net underwriting and other expenses were
Interest expense
Interest expense was
Loss on debt extinguishment
In the third quarter of 2020, the
Provision for income taxes
The effective income tax rate was 20.9% in the third quarter of 2021 and 20.4% in the third quarter of 2020.
Capital
- Total consolidated shareholders' equity was
$4.9 billion as ofSeptember 30, 2021 , compared to$4.7 billion as ofDecember 31, 2020 and$4.5 billion as ofSeptember 30, 2020 . - MGIC's PMIERs Available Assets totaled
$5.8 billion , or$2.6 billion above its Minimum Required Assets as ofSeptember 30, 2021 , compared to PMIERs Available Assets of$5.3 billion , or$1.8 billion above its Minimum Required Assets as ofDecember 31, 2020 and PMIERs Available Assets of$5.0 billion , or$1.4 billion above its Minimum Required Assets as ofSeptember 30, 2020
Other Balance Sheet and Liquidity Metrics
- Total consolidated assets were
$7.5 billion as ofSeptember 30, 2021 , compared to$7.4 billion as ofDecember 31, 2020 , and$7.1 billion as ofSeptember 30, 2020 . - The fair value of our consolidated investment portfolio, cash and cash equivalents was
$7.1 billion as ofSeptember 30, 2021 , compared to$7.0 billion as ofDecember 31, 2020 , and$6.8 billion as ofSeptember 30, 2020 . - The fair value of investments, cash and cash equivalents at the holding company was
$716 million as ofSeptember 30, 2021 , compared to$847 million as ofDecember 31, 2020 , and$871 million as ofSeptember 30, 2020 . - Total consolidated debt as of
September 30, 2021 ,December 31, 2020 andSeptember 30, 2020 was$1.2 billion .
Conference Call and Webcast Details
About MGIC
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 all available on the Company's website at https://mtg.mgic.com/ under "Newsroom."
From time to time
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
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
Adjusted pre-tax operating income (loss) is defined as GAAP income (loss) before tax, excluding the effects of net realized investment gains (losses), gain and losses on debt extinguishment, net impairment losses recognized in earnings 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 and losses on debt extinguishment, net impairment losses recognized in earnings, 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. Items that 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 |
Nine Months |
|||||||||||||||
(In thousands, except per share data) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
Net premiums written |
$ |
247,610 |
$ |
227,954 |
$ |
730,846 |
$ |
695,346 |
||||||||
Revenues |
||||||||||||||||
Net premiums earned |
$ |
254,844 |
$ |
256,113 |
$ |
761,428 |
$ |
760,576 |
||||||||
Net investment income |
38,282 |
37,252 |
117,304 |
118,278 |
||||||||||||
Net realized investment gains |
1,009 |
2,259 |
5,397 |
10,851 |
||||||||||||
Other revenue |
1,611 |
380 |
7,426 |
7,160 |
||||||||||||
Total revenues |
295,746 |
296,004 |
891,555 |
896,865 |
||||||||||||
Losses and expenses |
||||||||||||||||
Losses incurred, net |
20,766 |
40,686 |
89,566 |
319,016 |
||||||||||||
Underwriting and other expenses, net |
57,237 |
48,528 |
164,779 |
140,482 |
||||||||||||
Loss on debt extinguishment |
— |
26,736 |
— |
26,736 |
||||||||||||
Interest expense |
18,011 |
15,725 |
53,993 |
41,580 |
||||||||||||
Total losses and expenses |
96,014 |
131,675 |
308,338 |
527,814 |
||||||||||||
Income before tax |
199,732 |
164,329 |
583,217 |
369,051 |
||||||||||||
Provision for income taxes |
41,755 |
33,518 |
122,168 |
74,388 |
||||||||||||
Net income |
$ |
157,977 |
$ |
130,811 |
$ |
461,049 |
$ |
294,663 |
||||||||
Net income per diluted share |
$ |
0.46 |
$ |
0.38 |
$ |
1.33 |
$ |
0.85 |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
||||||||||||||||
EARNINGS PER SHARE (UNAUDITED) |
||||||||||||||||
Three Months |
Nine Months Ended |
|||||||||||||||
(In thousands, except per share data) |
2021 |
2020 |
2021 |
2020 |
||||||||||||
Net income |
$ |
157,977 |
$ |
130,811 |
$ |
461,049 |
$ |
294,663 |
||||||||
Interest expense, net of tax: |
||||||||||||||||
9% Convertible Junior Subordinated Debentures due 2063 |
3,712 |
4,161 |
11,135 |
13,293 |
||||||||||||
Diluted net income available to common shareholders |
$ |
161,689 |
$ |
134,972 |
$ |
472,184 |
$ |
307,956 |
||||||||
Weighted average shares - basic |
335,938 |
338,598 |
338,045 |
340,408 |
||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Unvested restricted stock units |
1,834 |
1,377 |
1,651 |
1,492 |
||||||||||||
9% Convertible Junior Subordinated Debentures due 2063 |
15,785 |
17,220 |
15,785 |
18,489 |
||||||||||||
Weighted average shares - diluted |
353,557 |
357,195 |
355,481 |
360,389 |
||||||||||||
Net income per diluted share |
$ |
0.46 |
$ |
0.38 |
$ |
1.33 |
$ |
0.85 |
NON-GAAP RECONCILIATIONS |
||||||||||||||||||||||||
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income |
||||||||||||||||||||||||
Three Months Ended |
||||||||||||||||||||||||
2021 |
2020 |
|||||||||||||||||||||||
(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 |
$ |
199,732 |
$ |
41,755 |
$ |
157,977 |
$ |
164,329 |
$ |
33,518 |
$ |
130,811 |
||||||||||||
Adjustments: |
||||||||||||||||||||||||
Loss on debt extinguishment |
— |
— |
— |
26,736 |
5,615 |
21,121 |
||||||||||||||||||
Net realized investment gains |
(1,115) |
(234) |
(881) |
(2,624) |
(551) |
(2,073) |
||||||||||||||||||
Adjusted pre-tax operating income / Adjusted |
$ |
198,617 |
$ |
41,521 |
$ |
157,096 |
$ |
188,441 |
$ |
38,582 |
$ |
149,859 |
||||||||||||
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share |
||||||||||||||||||||||||
Weighted average shares - diluted |
353,557 |
357,195 |
||||||||||||||||||||||
Net income per diluted share |
$ |
0.46 |
$ |
0.38 |
||||||||||||||||||||
Loss on debt extinguishment |
— |
0.06 |
||||||||||||||||||||||
Net realized investment gains |
— |
(0.01) |
||||||||||||||||||||||
Adjusted net operating income per diluted |
$ |
0.46 |
$ |
0.43 |
||||||||||||||||||||
Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income |
||||||||||||||||||||||||
Nine Months Ended |
||||||||||||||||||||||||
2021 |
2020 |
|||||||||||||||||||||||
(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 |
$ |
583,217 |
$ |
122,168 |
$ |
461,049 |
$ |
369,051 |
$ |
74,388 |
$ |
294,663 |
||||||||||||
Adjustments: |
||||||||||||||||||||||||
Loss on debt extinguishment |
— |
— |
— |
26,736 |
5,615 |
21,121 |
||||||||||||||||||
Net realized investment gains |
(5,665) |
(1,190) |
(4,475) |
(10,773) |
(2,262) |
(8,511) |
||||||||||||||||||
Adjusted pre-tax operating income / Adjusted |
$ |
577,552 |
$ |
120,978 |
$ |
456,574 |
$ |
385,014 |
$ |
77,741 |
$ |
307,273 |
||||||||||||
Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share |
||||||||||||||||||||||||
Weighted average shares - diluted |
355,481 |
360,389 |
||||||||||||||||||||||
Net income per diluted share |
$ |
1.33 |
$ |
0.85 |
||||||||||||||||||||
Loss on debt extinguishment |
— |
0.06 |
||||||||||||||||||||||
Net realized investment gains |
(0.01) |
(0.02) |
||||||||||||||||||||||
Adjusted net operating income per diluted |
$ |
1.32 |
$ |
0.89 |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
||||||||||||
|
|
|
||||||||||
(In thousands, except per share data) |
2021 |
2020 |
2020 |
|||||||||
ASSETS |
||||||||||||
Investments (1) |
$ |
6,916,195 |
$ |
6,682,911 |
$ |
6,365,878 |
||||||
Cash and cash equivalents |
176,426 |
287,953 |
380,056 |
|||||||||
Restricted cash and cash equivalents |
9,486 |
8,727 |
8,755 |
|||||||||
Reinsurance recoverable on loss reserves (2) |
107,029 |
95,042 |
83,143 |
|||||||||
Home office and equipment, net |
45,303 |
47,144 |
47,546 |
|||||||||
Deferred insurance policy acquisition costs |
22,284 |
21,561 |
21,238 |
|||||||||
Other assets |
234,586 |
211,188 |
242,894 |
|||||||||
Total assets |
$ |
7,511,309 |
$ |
7,354,526 |
$ |
7,149,510 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||||||
Liabilities: |
||||||||||||
Loss reserves (2) |
$ |
932,909 |
$ |
880,537 |
$ |
840,449 |
||||||
Unearned premiums |
256,517 |
287,099 |
315,071 |
|||||||||
Federal home loan bank advance |
155,000 |
155,000 |
155,000 |
|||||||||
Senior notes |
880,976 |
879,379 |
878,838 |
|||||||||
Convertible junior debentures |
208,814 |
208,814 |
208,814 |
|||||||||
Other liabilities |
199,673 |
244,711 |
237,716 |
|||||||||
Total liabilities |
2,633,889 |
2,655,540 |
2,635,888 |
|||||||||
Shareholders' equity |
4,877,420 |
4,698,986 |
4,513,622 |
|||||||||
Total liabilities and shareholders' equity |
$ |
7,511,309 |
$ |
7,354,526 |
$ |
7,149,510 |
||||||
Book value per share (3) |
$ |
14.81 |
$ |
13.88 |
$ |
13.33 |
||||||
(1) Investments include net unrealized gains on securities |
$ |
247,799 |
$ |
345,124 |
$ |
307,591 |
||||||
(2) Loss reserves, net of reinsurance recoverable on loss reserves |
$ |
825,880 |
$ |
785,495 |
$ |
757,305 |
||||||
(3) Shares outstanding |
329,335 |
338,573 |
338,573 |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||||||||
ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN |
|||||||||||||||||||||||||||
2021 |
2020 |
Year-to-date |
|||||||||||||||||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
2021 |
2020 |
|||||||||||||||||||||
New primary insurance written (NIW) (billions) |
$ |
28.7 |
$ |
33.6 |
$ |
30.8 |
$ |
33.2 |
$ |
32.8 |
$ |
93.1 |
$ |
78.9 |
|||||||||||||
Monthly (including split premium plans) and annual premium plans |
26.5 |
31.4 |
27.9 |
31.3 |
30.6 |
85.8 |
70.7 |
||||||||||||||||||||
Single premium plans |
2.2 |
2.2 |
2.9 |
1.9 |
2.2 |
7.3 |
8.2 |
||||||||||||||||||||
Product mix as a % of primary NIW |
|||||||||||||||||||||||||||
FICO < 680 |
5 |
% |
5 |
% |
4 |
% |
4 |
% |
4 |
% |
5 |
% |
4 |
% |
|||||||||||||
>95% LTVs |
13 |
% |
12 |
% |
8 |
% |
9 |
% |
9 |
% |
11 |
% |
9 |
% |
|||||||||||||
>45% DTI |
15 |
% |
13 |
% |
12 |
% |
11 |
% |
11 |
% |
13 |
% |
11 |
% |
|||||||||||||
Singles |
8 |
% |
7 |
% |
9 |
% |
6 |
% |
7 |
% |
8 |
% |
10 |
% |
|||||||||||||
Refinances |
10 |
% |
21 |
% |
40 |
% |
34 |
% |
31 |
% |
24 |
% |
36 |
% |
|||||||||||||
New primary risk written (billions) |
$ |
7.4 |
$ |
8.5 |
$ |
7.2 |
$ |
7.9 |
$ |
7.9 |
$ |
23.1 |
$ |
18.9 |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||
ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE |
|||||||||||||||||||
2021 |
2020 |
||||||||||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
|||||||||||||||
Primary Insurance In Force (IIF) (billions) |
$ |
268.4 |
$ |
262.0 |
$ |
251.7 |
$ |
246.6 |
$ |
238.9 |
|||||||||
Total # of loans |
1,161,907 |
1,151,692 |
1,130,362 |
1,126,079 |
1,111,910 |
||||||||||||||
Flow # of loans |
1,130,056 |
1,118,713 |
1,096,132 |
1,090,877 |
1,075,794 |
||||||||||||||
Premium Yield |
|||||||||||||||||||
Inforce portfolio yield (1) |
41.8 |
42.6 |
43.9 |
45.0 |
46.3 |
||||||||||||||
Premium refunds |
(1.0) |
(0.2) |
(0.8) |
(0.3) |
(0.6) |
||||||||||||||
Accelerated earnings on single premium |
2.5 |
3.1 |
4.4 |
5.3 |
5.5 |
||||||||||||||
Total direct premium yield |
43.3 |
45.5 |
47.5 |
50.0 |
51.2 |
||||||||||||||
Ceded premiums earned, net of profit commission and |
(4.9) |
(6.4) |
(6.6) |
(6.9) |
(7.6) |
||||||||||||||
Net premium yield |
38.4 |
39.1 |
40.9 |
43.1 |
43.6 |
||||||||||||||
Average Loan Size of IIF (thousands) |
$ |
231.0 |
$ |
227.5 |
$ |
222.7 |
$ |
219.0 |
$ |
214.9 |
|||||||||
Flow only |
$ |
233.6 |
$ |
230.1 |
$ |
225.2 |
$ |
221.5 |
$ |
217.3 |
|||||||||
Annual Persistency |
59.5 |
% |
57.1 |
% |
56.2 |
% |
60.5 |
% |
64.5 |
% |
|||||||||
Primary Risk In Force (RIF) (billions) |
$ |
67.2 |
$ |
65.3 |
$ |
62.6 |
$ |
61.8 |
$ |
60.4 |
|||||||||
By FICO (%) (3) |
|||||||||||||||||||
FICO 760 & > |
42 |
% |
41 |
% |
41 |
% |
40 |
% |
40 |
% |
|||||||||
FICO 740-759 |
17 |
% |
17 |
% |
17 |
% |
17 |
% |
17 |
% |
|||||||||
FICO 720-739 |
14 |
% |
14 |
% |
14 |
% |
14 |
% |
14 |
% |
|||||||||
FICO 700-719 |
11 |
% |
11 |
% |
11 |
% |
11 |
% |
11 |
% |
|||||||||
FICO 680-699 |
8 |
% |
8 |
% |
8 |
% |
8 |
% |
8 |
% |
|||||||||
FICO 660-679 |
3 |
% |
4 |
% |
4 |
% |
4 |
% |
4 |
% |
|||||||||
FICO 640-659 |
2 |
% |
2 |
% |
2 |
% |
3 |
% |
3 |
% |
|||||||||
FICO 639 & < |
3 |
% |
3 |
% |
3 |
% |
3 |
% |
3 |
% |
|||||||||
Average Coverage Ratio (RIF/IIF) |
25.1 |
% |
24.9 |
% |
24.9 |
% |
25.1 |
% |
25.3 |
% |
|||||||||
Direct Pool RIF (millions) |
|||||||||||||||||||
With aggregate loss limits |
$ |
207 |
$ |
208 |
$ |
209 |
$ |
210 |
$ |
211 |
|||||||||
Without aggregate loss limits |
$ |
106 |
$ |
114 |
$ |
122 |
$ |
130 |
$ |
139 |
(1) |
Total direct premiums earned, excluding accelerated premiums from premium refunds and single premium policy cancellations divided by average |
(2) |
Ceded premiums earned, net of profit commissions and assumed premiums. Assumed premiums include our participation in GSE Credit Risk Transfer programs, of which the impact on the net premium yield was 0.4 bps for the first nine months of 2021 and 0.5 bps in 2020. |
(3) |
The FICO credit score at the time of origination 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 |
||||||||||||||||
2021 |
2020 |
|||||||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
||||||||||||
Primary IIF - Delinquent Roll Forward - # of |
||||||||||||||||
Beginning Delinquent Inventory |
42,999 |
52,775 |
57,710 |
64,418 |
69,326 |
|||||||||||
New Notices |
9,862 |
9,036 |
13,011 |
15,193 |
20,924 |
|||||||||||
Cures |
(14,813) |
(18,460) |
(17,628) |
(21,584) |
(25,446) |
|||||||||||
Paid claims |
(298) |
(346) |
(312) |
(312) |
(375) |
|||||||||||
Rescissions and denials |
(11) |
(6) |
(6) |
(5) |
(11) |
|||||||||||
Other items removed from inventory (1) |
(360) |
— |
— |
— |
— |
|||||||||||
Ending Delinquent Inventory (2) |
37,379 |
42,999 |
52,775 |
57,710 |
64,418 |
|||||||||||
Primary IIF Delinquency Rate |
3.20 |
% |
3.71 |
% |
4.65 |
% |
5.11 |
% |
5.79 |
% |
||||||
Primary claim received inventory included in |
154 |
159 |
151 |
159 |
172 |
|||||||||||
Primary IIF - # of Delinquent Loans - Flow only |
33,271 |
38,715 |
47,880 |
52,459 |
58,933 |
|||||||||||
Primary IIF Delinquency Rate - Flow only |
2.93 |
% |
3.44 |
% |
4.35 |
% |
4.80 |
% |
5.48 |
% |
||||||
Composition of Cures |
||||||||||||||||
Reported delinquent and cured intraquarter |
2,727 |
2,334 |
3,452 |
3,304 |
4,405 |
|||||||||||
Number of payments delinquent prior to cure |
||||||||||||||||
3 payments or less |
3,346 |
5,378 |
5,547 |
6,425 |
13,954 |
|||||||||||
4-11 payments |
4,075 |
7,075 |
8,166 |
11,471 |
6,683 |
|||||||||||
12 payments or more |
4,665 |
3,673 |
463 |
384 |
404 |
|||||||||||
Total Cures in Quarter |
14,813 |
18,460 |
17,628 |
21,584 |
25,446 |
|||||||||||
Composition of Paids |
||||||||||||||||
Number of payments delinquent at time |
||||||||||||||||
3 payments or less |
2 |
— |
— |
3 |
1 |
|||||||||||
4-11 payments |
10 |
14 |
25 |
28 |
49 |
|||||||||||
12 payments or more |
286 |
332 |
287 |
281 |
325 |
|||||||||||
Total Paids in Quarter |
298 |
346 |
312 |
312 |
375 |
|||||||||||
Aging of Primary Delinquent Inventory |
||||||||||||||||
Consecutive months delinquent |
||||||||||||||||
3 months or less |
6,948 |
19% |
6,513 |
15% |
9,194 |
17% |
11,542 |
20% |
15,879 |
25% |
||||||
4-11 months |
9,371 |
25% |
12,840 |
30% |
29,832 |
57% |
34,620 |
60% |
37,702 |
58% |
||||||
12 months or more |
21,060 |
56% |
23,646 |
55% |
13,749 |
26% |
11,548 |
20% |
10,837 |
17% |
||||||
Number of payments delinquent |
||||||||||||||||
3 payments or less |
8,911 |
24% |
8,619 |
20% |
11,440 |
22% |
14,183 |
25% |
18,541 |
29% |
||||||
4-11 payments |
11,165 |
30% |
14,894 |
35% |
25,016 |
47% |
35,977 |
62% |
38,999 |
60% |
||||||
12 payments or more |
17,303 |
46% |
19,486 |
45% |
16,319 |
31% |
7,550 |
13% |
6,878 |
11% |
(1) |
Items removed from inventory are associated with commutations of coverage on non-performing policies. |
(2) |
As of |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||||||||
ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID |
|||||||||||||||||||||||||||
2021 |
2020 |
Year-to-date |
|||||||||||||||||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
2021 |
2020 |
|||||||||||||||||||||
Reserves (millions) |
|||||||||||||||||||||||||||
Primary Direct Loss Reserves |
$ |
926 |
$ |
928 |
$ |
905 |
$ |
871 |
$ |
831 |
|||||||||||||||||
Pool Direct loss reserves |
7 |
7 |
7 |
8 |
8 |
||||||||||||||||||||||
Other Gross Reserves |
— |
1 |
1 |
2 |
1 |
||||||||||||||||||||||
Total Gross Loss Reserves |
$ |
933 |
$ |
936 |
$ |
913 |
$ |
881 |
$ |
840 |
|||||||||||||||||
Primary Average Direct |
$ |
24,597 |
$ |
21,147 |
$ |
17,147 |
$ |
15,100 |
$ |
12,907 |
|||||||||||||||||
Net Paid Claims (millions) (1) |
$ |
20 |
$ |
14 |
$ |
15 |
$ |
18 |
$ |
18 |
$ |
49 |
$ |
96 |
|||||||||||||
Total primary (excluding settlements) |
11 |
11 |
12 |
12 |
15 |
34 |
86 |
||||||||||||||||||||
Rescission and NPL settlements |
7 |
— |
— |
— |
— |
7 |
— |
||||||||||||||||||||
Pool |
— |
— |
— |
1 |
— |
— |
1 |
||||||||||||||||||||
Reinsurance |
(1) |
— |
(1) |
(1) |
— |
(2) |
(3) |
||||||||||||||||||||
Other |
3 |
3 |
4 |
6 |
3 |
10 |
12 |
||||||||||||||||||||
Primary Average Claim Payment |
$ |
36.1 |
(2) |
$ |
34.1 |
$ |
36.7 |
$ |
40.4 |
$ |
40.6 |
$ |
35.6 |
(2) |
$ |
44.5 |
|||||||||||
Flow only |
$ |
32.0 |
(2) |
$ |
34.8 |
$ |
32.3 |
$ |
31.2 |
$ |
37.2 |
$ |
33.1 |
(2) |
$ |
39.0 |
|||||||||||
(1) |
Net paid claims, as presented, does not include amounts received in conjunction with terminations or commutations of reinsurance agreements. |
(2) |
Excludes amounts paid in settlement disputes for claims paying practices and/or commutations of policies. |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||||||||||||||||
ADDITIONAL INFORMATION - REINSURANCE |
|||||||||||||||||||||||||||
2021 |
2020 |
Year-to-date |
|||||||||||||||||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
2021 |
2020 |
|||||||||||||||||||||
Quota Share Reinsurance |
|||||||||||||||||||||||||||
% NIW subject to reinsurance |
85.0 |
% |
81.6 |
% |
73.7 |
% |
74.9 |
% |
76.0 |
% |
80.0 |
% |
74.2 |
% |
|||||||||||||
Ceded premiums written and earned (millions) |
$ |
22.9 |
$ |
34.0 |
$ |
33.4 |
$ |
36.2 |
$ |
43.5 |
$ |
90.3 |
$ |
131.7 |
|||||||||||||
Ceded losses incurred (millions) |
$ |
(3.6) |
$ |
8.9 |
$ |
8.4 |
$ |
12.5 |
$ |
20.7 |
$ |
13.7 |
$ |
65.5 |
|||||||||||||
Ceding commissions (millions) (included in |
$ |
13.7 |
$ |
12.9 |
$ |
13.1 |
$ |
12.6 |
$ |
12.1 |
$ |
39.7 |
$ |
35.5 |
|||||||||||||
Profit commission (millions) (included in |
$ |
45.1 |
$ |
31.0 |
$ |
31.9 |
$ |
26.6 |
$ |
17.1 |
$ |
108.0 |
$ |
45.9 |
|||||||||||||
Excess-of-Loss Reinsurance |
|||||||||||||||||||||||||||
Ceded premiums earned (millions) |
$ |
12.1 |
$ |
10.0 |
$ |
10.3 |
$ |
8.0 |
$ |
3.7 |
$ |
32.4 |
$ |
12.8 |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||
ADDITIONAL INFORMATION: BULK STATISTICS AND |
|||||||||||||
2021 |
2020 |
Year-to-date |
|||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
2021 |
2020 |
|||||||
Bulk Primary Insurance Statistics |
|||||||||||||
Insurance in force (billions) |
|
|
|
|
|
||||||||
Risk in force (billions) |
|
|
|
|
|
||||||||
Average loan size (thousands) |
|
|
|
|
|
||||||||
Number of delinquent loans |
4,108 |
4,284 |
4,895 |
5,251 |
5,485 |
||||||||
Delinquency rate |
12.90% |
12.99% |
14.30% |
14.92% |
15.19% |
||||||||
Primary paid claims (excluding settlements) |
|
|
|
|
|
|
|
||||||
Average claim payment (thousands) |
|
|
|
|
|
|
|
||||||
|
9.0:1 |
(1) |
8.9:1 |
8.8:1 |
9.2:1 |
9.4:1 |
|||||||
Combined Insurance Companies - Risk to Capital |
9.0:1 |
(1) |
8.9:1 |
8.8:1 |
9.1:1 |
9.4:1 |
|||||||
GAAP loss ratio (insurance operations only) |
8.1% |
11.6% |
15.5% |
17.5% |
15.9% |
11.8% |
41.9% |
||||||
GAAP underwriting expense ratio (insurance |
21.9% |
22.3% |
19.8% |
19.4% |
20.2% |
21.3% |
19.1% |
||||||
(1) |
Preliminary |
Risk Factors
As used below, "we," "our" and "us" refer to
Risk Factors Relating to the COVID-19 Pandemic
The COVID-19 pandemic may continue to materially impact our financial results and may also materially impact our business, liquidity and financial condition.
The COVID-19 pandemic had a material impact on our 2020 financial results. While uncertain, the future impact of the COVID-19 pandemic on the Company's business, financial results, liquidity and/or financial condition may also be material. The magnitude of the impact will be influenced by various factors, including the length and severity of the pandemic in
The COVID-19 pandemic may continue to impact our business in various ways, including the following, each of which is described in more detail in the remainder of these risk factors:
- Our incurred losses will increase if the number of insured mortgages in our delinquency inventory increases. We establish reserves for insurance losses when delinquency notices are received on loans that are two or more payments past due and for loans we estimate are delinquent prior to the close of the accounting period but for which delinquency notices have not yet been reported to us (this is often referred to as "IBNR"). In addition, our current estimates of the number of delinquencies for which we will receive claims, and the amount, or severity, of each claim, may increase.
- We may be required to maintain more capital under the private mortgage insurer eligibility requirements ("PMIERs") of the GSEs, which generally require more capital to be held for delinquent loans than for performing loans and require more capital to be held as the number of payments missed on delinquent loans increases.
- If the number of delinquencies increases, the number of claims we must pay over time will generally increase.
- Our access to the reinsurance and capital markets may be limited and the terms under which we are able to access such markets may be less attractive than the terms of our previous transactions.
Risk Factors Relating to the Mortgage Insurance Industry and its Regulation
Downturns in the domestic economy or declines in home prices may result in more homeowners defaulting and our losses increasing, with a corresponding decrease in our returns.
Losses result from events that reduce a borrower's ability or willingness to make mortgage payments, such as unemployment, health issues, family status, and whether the home of a borrower who defaults on a mortgage can be sold for an amount that will cover unpaid principal and interest and the expenses of the sale. A deterioration in economic conditions, including an increase in unemployment, generally increases the likelihood that borrowers will not have sufficient income to pay their mortgages and can also adversely affect home prices, which in turn can influence the willingness of borrowers with sufficient resources to make mortgage payments when the mortgage balance exceeds the value of the home. The seasonally-adjusted Purchase-Only
The unemployment rate rose from 3.5% as of
Forbearance for federally-insured mortgages (including those delivered to or purchased by the GSEs) allows for mortgage payments to be suspended for up to 18 months: an initial forbearance period of up to six months; if requested by the borrower following contact by the servicer, an extension of up to six months; and, for loans in a COVID-19 forbearance plan as of
Historically, forbearance plans have reduced the incidence of our losses on affected loans. However, given the uncertainty surrounding the long-term economic impact of COVID-19, it is difficult to predict the ultimate effect of COVID-19 related forbearances on our loss incidence. At
Foreclosures on mortgages purchased or securitized by the GSEs were suspended through
We may not continue to meet the GSEs' private mortgage insurer eligibility requirements and our returns may decrease if we are required to maintain more capital in order to maintain our eligibility.
We must comply with a GSE's PMIERs to be eligible to insure loans delivered to or purchased by that GSE. The PMIERs include financial requirements, as well as business, quality control and certain transaction approval requirements. The financial requirements of the PMIERs require a mortgage insurer's "Available Assets" (generally only the most liquid assets of an insurer) to equal or exceed its "Minimum Required Assets" (which are generally based on an insurer's book of risk in force and calculated from tables of factors with several risk dimensions, reduced for credit given for risk ceded under reinsurance agreements).
Based on our interpretation of the PMIERs, as of
The PMIERs generally require us to hold significantly more Minimum Required Assets for delinquent loans than for performing loans and the Minimum Required Assets required to be held increases as the number of payments missed on a delinquent loan increases. For delinquent loans whose initial missed payment occurred on or after