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Press Release

MGIC Investment Corporation Reports Third Quarter 2022 Results

Nov 2, 2022

Third Quarter 2022 Net Income of $249.6 million or $0.81 per Diluted Share

Third  Quarter 2022 Adjusted Net Operating Income (Non-GAAP) of $264.2 million or $0.86 per Diluted Share

MILWAUKEE, Nov. 2, 2022 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) today reported operating and financial results for the third quarter of 2022. Net income for the quarter was $249.6 million, or $0.81 per diluted share, compared with net income of $158.0 million, or $0.46 per diluted share, for the third quarter of 2021. 

Adjusted net operating income for the third quarter of 2022 was $264.2 million, or $0.86 per diluted share, compared with $157.1 million, or $0.46 per diluted share, for the third quarter of 2021. 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.

Tim Mattke, CEO of MTG and Mortgage Guaranty Insurance Corporation ("MGIC"), stated "I am pleased to report that we had another strong quarter, building upon the solid financial results we delivered in the first half of the year. During the quarter, we remained focused on executing our business strategies and again demonstrated the benefits of our capital position by growing insurance in force, increasing and paying a common stock dividend, decreasing our leverage ratio, repurchasing stock, and producing an annualized 21.8% return on equity. In addition, the credit quality and performance of our insurance in force portfolio remains strong."

"While the combination of rising interest rates, decelerating home prices, and other macroeconomic concerns have resulted in increased risks and uncertainties, our financial strength and capital flexibility position us to navigate the changing economic cycle." concluded Mattke.  

Third Quarter Summary

  • New insurance written was $19.6 billion, compared with $24.3 billion in the second quarter of 2022 and $28.7 billion in the third quarter of 2021, primarily reflecting a decrease in the origination markets in the current year compared with the same period in the prior year.
  • Persistency, or the percentage of insurance remaining in force from one year prior, was 75.7% at September 30, 2022, compared with 71.5% at June 30, 2022, and 59.5% at September 30, 2021.
  • Insurance in force of $293.6 billion at September 30, 2022 increased by 2.4% during the quarter and 9.4% compared with September 30, 2021.
  • Primary delinquency inventory of 25,878 loans at September 30, 2022 decreased from 26,855 loans at June 30, 2022, and 37,379 loans at September 30, 2021.
    • The percentage of loans insured with primary insurance that were delinquent at September 30, 2022 was 2.17%, compared with 2.28% at June 30, 2022, and 3.20% at September 30, 2021.
  • The loss ratio for the third quarter of 2022 was (41.7)%, compared with (38.7)% for the second quarter of 2022 and 8.1% for the third quarter of 2021.
  • The underwriting expense ratio associated with our insurance operations for the third quarter of 2022 was 24.6%, compared with 22.4% for the second quarter of 2022 and 21.9% for the third quarter of 2021.
  • Net premium yield was 34.7 basis points in the third quarter of 2022, compared with 36.2 basis points for the second quarter of 2022 and 38.4 basis points for the third quarter of 2021.
  • Book value per common share outstanding as of September 30, 2022, decreased to $15.16, or 0.1%, from $15.18 as of December 31, 2021 and increased by 2.4% from $14.81 as of September 30, 2021. (September 30, 2022 book value per common share outstanding includes ($1.50) in net unrealized gains (losses) on securities, compared with $0.47 at December 31, 2021, and $0.59 at September 30, 2021).
    • The decrease in the fair value of our investment portfolio is primarily due to the increase in market interest rates. The decrease is reflected in Accumulated Other Comprehensive Income and resulted in a modest decrease in book value per share for the current period compared with December 31, 2021. The increase for the book value per share for the current period compared with the same period in the prior year is primarily due to the cumulative impact of share repurchases year-over-year.
  • We paid a dividend of $0.10 per common share to shareholders during the third quarter of 2022.
  • We repurchased 6.1 million shares of common stock at an average cost of $13.90 per share.
  • We repurchased $14.0 million in aggregate principal amount of our 9% Convertible Junior Debentures due 2063, reducing potentially dilutive shares by 1.1 million.
  • We redeemed $242.3 million of aggregate principal outstanding on our 2023 Senior Notes for $248.4 million, plus accrued interest.

Fourth Quarter 2022 Activities

  • In October, we repurchased an additional 2.6 million shares of our common stock at an average cost of $12.96 per share.
  • We declared a dividend of $0.10 per common share to shareholders payable on November 23, 2022 to shareholders of record at the close of business on November 10, 2022.
  • We have elected to terminate our 2015 QSR and 2019 QSR Transactions effective December 31, 2022.
  • MGIC paid a $400 million dividend to our holding company.

Revenues

Total revenues for the third quarter of 2022 were $292.8 million, compared with $295.7 million in the third quarter last year. The decrease primarily reflects a change in net gains (losses) on investments and other financial instruments and a decrease in net premiums earned, partially offset by an increase in investment income. Premiums earned in the third quarter of 2022 were $252.1 million compared with $254.8 million for the same period last year. Net premiums written for the quarter were $242.3 million, compared with $247.6 million for the same period last year. The decrease in net premiums written and earned in the current period compared with the same period the prior year was primarily due to an increase in ceded premiums and a decrease in our premium yield.

Losses and expenses

Losses incurred   

Net losses incurred in the third quarter of 2022 were $(105.1) million, compared with $20.8 million in the same period last year primarily due to favorable loss development and continuing decreases in delinquency inventory. While new delinquency notices added approximately $36 million to losses incurred in the third quarter of 2022, our re-estimation of loss reserves resulted in favorable development of approximately $141 million primarily related to a decrease in the estimated claim rate on delinquencies. In the third quarter of 2021, our re-estimation of reserves on previous delinquency notices resulted in $18 million of favorable loss development.

Underwriting and other expenses

Net underwriting and other expenses were $61.7 million in the third quarter of 2022 compared with $57.2 million in the same period last year primarily due to an increase in expenses related to our investments in technology and data and analytics infrastructure.

Interest expense

Interest expense decreased to $10.3 million in the third quarter of 2022 from $18.0 million in the same period last year. The decrease is due to the repurchase of a portion of our 9% Convertible Junior Debentures and repayment of our 2023 Senior Notes and our Federal Home Loan Bank Advance.

Loss on debt extinguishment

The third quarter 2022 loss on debt extinguishment of $11.6 million reflects the repurchase of our 2023 Senior Notes and the repurchase of $14.0 million in aggregate principal amount of our 9% Convertible Junior Debentures in excess of their carrying value.

Capital

  • Total consolidated shareholders' equity was $4.5 billion as of September 30, 2022, and compared with $4.9 billion as of December 31, 2021 and September 30, 2021. The decrease from December 31, 2021 and September 30, 2021 primarily reflects a decrease in the fair value of our investment portfolio and additional stock repurchases, offset by net income.
  • MGIC's PMIERs Available Assets totaled $5.9 billion, or $2.6 billion above its Minimum Required Assets as of September 30, 2022, compared with PMIERs Available Assets of $5.7 billion, or $2.2 billion above its Minimum Required Assets as of December 31, 2021, and PMIERS Available Assets of $5.8 billion, or $2.6 billion above its Minimum Required Assets as of September 30, 2021.

Other Balance Sheet and Liquidity Metrics

  • Total consolidated assets were $6.2 billion as of September 30, 2022, compared with $7.3 billion as of December 31, 2021, and $7.5 billion as of September 30, 2021. The decrease from December 31, 2021, and September 30, 2021 primarily reflects a decrease in the fair value of our consolidated investment portfolio due to the increase in market interest rates.
  • The fair value of our consolidated investment portfolio, cash and cash equivalents was $5.7 billion as of September 30, 2022, compared with $6.9 billion as of December 31, 2021, and $7.1 billion as of September 30, 2021.
  • The fair value of investments, cash and cash equivalents at the holding company was $352 million as of September 30, 2022, compared with $663 million as of December 31, 2021, and $716 million as of September 30, 2021.
  • Consolidated debt was $663 million as of September 30, 2022, compared with $1.1 billion as of December 31, 2021, and $1.2 billion as of September 30, 2021.

Conference Call and Webcast Details

MGIC Investment Corporation will hold a conference call November 3, 2022, at 10 a.m. ET to allow securities analysts and shareholders the opportunity to hear management discuss the company's quarterly results. Individuals interested in joining by telephone should register for the call at https://edge.media-server.com/mmc/p/9sqqqpf3 to receive the dial-in number and unique PIN to access the call. It is recommended that you join the call at least 10 minutes before the conference call begins. The call is also being webcast and can be accessed at the company's website at http://mtg.mgic.com/ under "Newsroom." A replay of the webcast will be available on the company's website through December 5, 2022.

About MGIC

Mortgage Guaranty Insurance Corporation (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 through the use of private mortgage insurance. At September 30, 2022, MGIC had $293.6 billion of primary insurance in force covering more than 1.1 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 all 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 rates, 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.

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 and losses on debt extinguishment 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 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)

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

September  30,


Nine Months Ended
September  30,


(In thousands, except per share data)


2022


2021


2022


2021












Net premiums written


$  242,307


$   247,610


$  729,293


$   730,846


Revenues










Net premiums earned


$  252,111


$   254,844


$  763,048


$   761,428


Net investment income


42,549


38,282


121,116


117,304


Net gains (losses) on investments and other financial instruments


(3,258)


612

(1)

(8,776)


5,773

(1)

Other revenue


1,397


2,008

(1)

5,143


7,050

(1)

Total revenues


292,799


295,746


880,531


891,555


Losses and expenses










Losses incurred, net


(105,054)


20,766


(223,426)


89,566


Underwriting and other expenses, net


61,654


57,237


175,557


164,779


Loss on debt extinguishment


11,632



40,130



Interest expense


10,300


18,011


38,673


53,993


Total losses and expenses


(21,468)


96,014


30,934


308,338


Income before tax


314,267


199,732


849,597


583,217


Provision for income taxes


64,642


41,755


175,691


122,168


Net income


$  249,625


$   157,977


$  673,906


$   461,049


Net income per diluted share


$        0.81


$        0.46


$        2.15


$        1.33


(1) Certain amounts have been reclassified to conform with the current year presentation

 

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)


2022


2021


2022


2021

Net income


$          249,625


$           157,977


$          673,906


$           461,049

Interest expense, net of tax:









9% Convertible Junior Subordinated Debentures due 2063


620


3,712


2,851


11,135

Diluted net income available to common shareholders


$          250,245


$           161,689


$          676,757


$           472,184










Weighted average shares - basic


302,622


335,938


309,097


338,045

Effect of dilutive securities:









Unvested restricted stock units


1,902


1,834


1,848


1,651

9% Convertible Junior Subordinated Debentures due 2063


2,670


15,785


4,084


15,785

Weighted average shares - diluted


307,194


353,557


315,029


355,481

Net income per diluted share


$                0.81


$                0.46


$                2.15


$                1.33

 

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,



2022


2021

(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


$  314,267


$    64,642


$     249,625


$  199,732


$    41,755


$     157,977

Adjustments:













Loss on debt extinguishment


11,632


2,443


9,189




Net realized investment losses (gains)


6,854


1,439


5,415


(1,115)


(234)


(881)

Adjusted pre-tax operating income / Adjusted net
operating income


$  332,753


$    68,524


$     264,229


$  198,617


$    41,521


$     157,096














Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share

Weighted average shares - diluted






307,194






353,557

Net income per diluted share






$          0.81






$           0.46

Loss on debt extinguishment






0.03






Net realized investment losses (gains)






0.02






Adjusted net operating income per diluted share






$          0.86






$           0.46















Reconciliation of Income before tax / Net income to Adjusted pre-tax operating income / Adjusted net operating income



Nine Months Ended September 30,



2022


2021

(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


$  849,597


$  175,691


$     673,906


$  583,217


$  122,168


$     461,049

Adjustments:













Loss on debt extinguishment


40,130


8,427


31,703




Net realized investment losses (gains)


7,435


1,561


5,874


(5,665)


(1,190)


(4,475)

Adjusted pre-tax operating income / Adjusted net
operating income


$  897,162


$  185,679


$     711,483


$  577,552


$  120,978


$     456,574














Reconciliation of Net income per diluted share to Adjusted net operating income per diluted share

Weighted average shares - diluted






315,029






355,481














Net income per diluted share






$          2.15






$           1.33

Loss on debt extinguishment






0.10






Net realized investment losses (gains)






0.02






(0.01)

Adjusted net operating income per diluted share






$          2.26

(1)





$           1.32

(1) Does not foot due to rounding

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)










September 30,


December 31,


September 30,

(In thousands, except per share data)


2022


2021


2021

ASSETS







Investments (1)


$      5,415,717


$       6,606,749


$       6,916,195

Cash and cash equivalents


241,982


284,690


176,426

Restricted cash and cash equivalents


7,776


20,268


9,486

Reinsurance recoverable on loss reserves (2)


46,384


66,905


107,029

Home office and equipment, net


44,206


45,614


45,303

Deferred insurance policy acquisition costs


19,975


21,671


22,284

Other assets


378,076


279,111


234,586

Total assets


$      6,154,116


$       7,325,008


$       7,511,309








LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities:







Loss reserves (2)


$         603,370


$          883,522


$          932,909

Unearned premiums


207,935


241,690


256,517

Federal home loan bank advance



155,000


155,000

Senior notes


641,357


881,508


880,976

Convertible junior debentures


21,296


110,204


208,814

Other liabilities


140,097


191,702


199,673

Total liabilities


1,614,055


2,463,626


2,633,889

Shareholders' equity


4,540,061


4,861,382


4,877,420

Total liabilities and shareholders' equity


$      6,154,116


$       7,325,008


$       7,511,309

Book value per share (3)


$             15.16


$             15.18


$             14.81








(1) Investments include net unrealized gains (losses) on securities


$        (569,478)


$          190,153


$          247,799

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


$         556,986


$          816,617


$          825,880

(3) Shares outstanding


299,478


320,336


329,335

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - NEW INSURANCE WRITTEN
















2022


2021


Year-to-date


Q3


Q2


Q1


Q4


Q3


2022


2021

New primary insurance written (NIW) (billions)

$      19.6


$      24.3


$      19.6


$      27.1


$      28.7


$      63.5


$      93.1















Monthly (including split premium plans) and
annual premium plans

19.0


23.4


18.3


25.5


26.5


60.7


85.8

Single premium plans

0.6


0.9


1.3


1.5


2.2


2.8


7.3















Product mix as a % of primary NIW














FICO < 680

6 %


5 %


5 %


5 %


5 %


5 %


5 %

>95% LTVs

11 %


14 %


11 %


10 %


13 %


13 %


11 %

>45% DTI

24 %


20 %


17 %


15 %


14 %


21 %


13 %

Singles

3 %


4 %


7 %


6 %


8 %


4 %


8 %

Refinances

1 %


2 %


6 %


7 %


10 %


3 %


24 %















New primary risk written (billions)

$5.2


$6.5


$5.2


$7.2


$7.4


$16.9


$23.1

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - INSURANCE IN FORCE and RISK IN FORCE












2022


2021


Q3


Q2


Q1


Q4


Q3

Primary Insurance In Force (IIF) (billions)

$          293.6


$          286.8


$          277.3


$          274.4


$          268.4

Total # of loans

1,184,365


1,173,001


1,158,521


1,164,984


1,161,907

Flow # of loans

1,157,032


1,144,971


1,129,509


1,134,414


1,130,056











Premium Yield










In force portfolio yield (1)

39.0


39.4


40.0


40.7


41.8

Premium refunds (2)

0.3


0.2


(0.2)


(0.4)


(1.0)

Accelerated earnings on single premium

0.5


1.1


1.7


2.6


2.5

Total direct premium yield

39.8


40.7


41.5


42.9


43.3

Ceded premiums earned, net of profit commission and
assumed premiums (3)

(5.1)


(4.5)


(4.6)


(5.6)


(4.9)

Net premium yield

34.7


36.2


36.9


37.3


38.4











Average Loan Size of IIF (thousands)

$          247.9


$          244.5


$          239.3


$          235.5


$          231.0

Flow only

$          250.5


$          247.1


$          242.0


$          238.2


$          233.6











Annual Persistency

75.7 %


71.5 %


66.9 %


62.6 %


59.5 %











Primary Risk In Force (RIF) (billions)

$            75.7


$            73.6


$            70.6


$            69.3


$            67.2

By FICO (%) (4)










FICO 760 & >

42 %


42 %


42 %


42 %


42 %

FICO 740-759

18 %


18 %


18 %


17 %


17 %

FICO 720-739

15 %


14 %


14 %


14 %


14 %

FICO 700-719

11 %


11 %


11 %


11 %


11 %

FICO 680-699

8 %


8 %


8 %


8 %


8 %

FICO 660-679

3 %


3 %


3 %


3 %


3 %

FICO 640-659

2 %


2 %


2 %


2 %


2 %

FICO 639 & <

1 %


2 %


2 %


3 %


3 %











Average Coverage Ratio (RIF/IIF)

25.8 %


25.7 %


25.5 %


25.3 %


25.1 %











Direct Pool RIF (millions)










With aggregate loss limits

$             197


$             198


$             199


$             206


$             207

Without aggregate loss limits

$               84


$               88


$               94


$               99


$             106



(1)

Total direct premiums earned, excluding accelerated premiums from premium refunds and single premium policy cancellations divided by average primary insurance in force.

(2)

Premium refunds and our estimate of refundable premium on our delinquency inventory divided by average primary insurance in force.

(3)

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 0.3 bps at September 30, 2022 and 0.4 bps in 2021.

(4)

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. We are aware of an issue of inaccurate reporting of FICO credit scores by a third-party occurring in late Q1 2022 and into the beginning of Q2 2022 and do not expect it to have a material impact on our business.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION - DELINQUENCY STATISTICS
















2022



2021




Q3


Q2


Q1



Q4


Q3


Primary IIF - Delinquent Roll Forward - # of
Loans













Beginning Delinquent Inventory


26,855


30,462


33,290



37,379


42,999


New Notices


10,990


9,396


10,703



10,523


9,862


Cures


(11,494)


(12,677)


(13,200)



(13,995)


(14,813)


Paid claims


(337)


(319)


(322)



(267)


(298)


Rescissions and denials


(11)


(7)


(9)



(15)


(11)


Other items removed from inventory (1)


(125)





(335)


(360)


Ending Delinquent Inventory (2)


25,878


26,855


30,462



33,290


37,379















Primary IIF Delinquency Rate


2.17 %


2.28 %


2.61 %



2.84 %


3.20 %


Primary claim received inventory included in
ending delinquent inventory


244


254


217



211


154















Primary IIF - # of Delinquent Loans - Flow
only


22,010


22,961


26,295



29,108


33,271


Primary IIF Delinquency Rate - Flow only


1.89 %


1.99 %


2.31 %



2.55 %


2.93 %















Composition of Cures













Reported delinquent and cured
intraquarter


3,035


2,442


3,147



2,766


2,727


Number of payments delinquent prior to
cure













3 payments or less


3,964


4,390


4,187



3,939


3,346


4-11 payments


2,486


2,809


2,608



2,977


4,075


12 payments or more


2,009


3,036


3,258



4,313


4,665


Total Cures in Quarter


11,494


12,677


13,200



13,995


14,813















Composition of Paids













Number of payments delinquent at time
of claim payment













3 payments or less



1


1




2


4-11 payments


8


11


8



9


10


12 payments or more


329


307


313



258


286


Total Paids in Quarter


337


319


322



267


298















Aging of Primary Delinquent Inventory













Consecutive months delinquent













      3 months or less


7,825

30 %

6,791

25 %

7,382

24 %


7,586

23 %

6,948

19 %

      4-11 months


7,619

30 %

7,946

30 %

8,131

27 %


7,990

24 %

9,371

25 %

      12 months or more


10,434

40 %

12,118

45 %

14,949

49 %


17,714

53 %

21,060

56 %














Number of payments delinquent













      3 payments or less


10,137

40 %

9,198

35 %

9,586

31 %


9,529

28 %

8,911

24 %

      4-11 payments


7,831

30 %

8,138

30 %

8,803

29 %


9,208

28 %

11,165

30 %

      12 payments or more


7,910

30 %

9,519

35 %

12,073

40 %


14,553

44 %

17,303

46 %



(1)

Items removed from inventory are associated with commutations of coverage on non-performing policies.

(2)

As of September 30, 2022, 22% of the loans in our delinquency inventory were reported to us as subject to forbearance plan, down from a high of 67% at June 30, 2020. We believe substantially all represent forbearances related to COVID-19.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES





ADDITIONAL INFORMATION - RESERVES and CLAIMS PAID





















2022


2021



Year-to-date


Q3


Q2


Q1


Q4


Q3



2022


2021

Reserves (millions)















Primary Direct Loss Reserves

$            599


$            722


$            845


$            877


$            926






Pool Direct loss reserves

4


5


6


6


7






Other Gross Reserves




1







Total Gross Loss Reserves

$            603


$            727


$            851


$            884


$            933





















Primary Average Direct Reserve 
Per Delinquency

$       23,128


$       26,890


$       27,538


$       26,156


$       24,597





















Net Paid Claims (millions) (1)

$              11


$              14


$              11


$              20


$              20



$              36


$              49

Total primary (excluding
settlements)

8


9


9


9


11



26


34

Rescission and NPL settlements

1


4



7


7



5


7

Pool








Reinsurance


(1)




(1)



(1)


(2)

Other

2


2


2


4


3



6


10

Reinsurance Terminations (1)




(36)




















Primary Average Claim Payment
(thousands) (2)

$           23.5


$           27.4


$           27.7


$           32.7


$           36.1



$           26.1


$           35.6

Flow only (2)

$           21.7


$           21.3


$           22.8


$           29.8


$           32.0



$           21.9


$           33.1
















(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




















2022


2021


Year-to-date


Q3


Q2


Q1


Q4


Q3


2022


2021

Quota Share Reinsurance














% NIW subject to reinsurance

88.0 %


87.7 %


87.5 %


88.2 %


85.0 %


87.8 %


80.0 %

Ceded premiums written and earned (millions)

$  19.3


$  15.0


$  22.4


$  28.2

(1)

$  22.9


$  56.7


$  90.3

Ceded losses incurred (millions)

$  (7.4)


$ (10.4)


$   (2.0)


$   (3.8)


$  (3.6)


$ (19.8)


$  13.7

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

$  13.3


$  12.7


$  12.3


$  13.8


$  13.7


$  38.3


$  39.7

Profit commission (millions) (included in
ceded premiums)

$  47.2


$  48.8


$  39.0


$  45.8


$  45.1


$  135.0


$ 108.0















Excess-of-Loss Reinsurance














Ceded premiums earned (millions)

$  19.8


$  19.3


$  11.8


$  12.1


$  12.1


$  50.9


$  32.4



(1)

Includes $5 million termination fees paid to terminate our 2017 and 2018 QSR Transactions.

 

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES

ADDITIONAL INFORMATION: BULK STATISTICS AND MI RATIOS
















2022


2021


Year-to-date


Q3


Q2


Q1


Q4


Q3


2022


2021

Bulk Primary Insurance Statistics














Insurance in force (billions)

$3.8


$3.8


$4.0


$4.2


$4.4





Risk in force (billions)

$1.1


$1.1


$1.1


$1.2


$1.2





Average loan size (thousands)

$138.0


$136.3


$137.4


$138.4


$139.5





Number of delinquent loans

3,868


3,894


4,167


4,182


4,108





Delinquency rate

14.15 %


13.89 %


14.36 %


13.68 %


12.90 %





Primary paid claims (excluding settlements)
(millions)

$2


$3


$4


$2


$3


$9


$8

Average claim payment (thousands)

$29.9


$47.3


$39.5


$44.1


$60.2


$39.1


$46.6















Mortgage Guaranty Insurance Corporation - Risk to
Capital

9.4:1

(1)

9.7:1


9.2:1


9.5:1


9.0:1





Combined Insurance Companies - Risk to Capital

9.4:1

(1)

9.7:1


9.2:1


9.5:1


9.0:1



















GAAP loss ratio (insurance operations only)

(41.7) %


(38.7) %


(7.6) %


(9.9) %


8.1 %


(29.3) %


11.8 %

GAAP underwriting expense ratio (insurance
operations only)

24.6 %


22.4 %


23.0 %


18.2 %


21.9 %


23.3 %


21.3 %















(1)

Preliminary

Risk Factors

As used below, "we," "our" and "us" refer to MGIC Investment Corporation's consolidated operations or to MGIC Investment Corporation, as the context requires; and "MGIC" refers to Mortgage Guaranty Insurance Corporation.

Risk Factors Relating to Global Events

The COVID-19 pandemic may materially impact our future financial results, business, liquidity and/or financial condition.

The COVID-19 pandemic materially impacted our 2020 financial results. While the initial impact of COVID-19 on our business has moderated, the extent to which COVID-19 may materially impact our future financial results, business, liquidity and/or financial condition is uncertain and cannot be predicted. The magnitude of any future impact could be influenced by various factors, including the length and severity of the pandemic in the United States, efforts to reduce the transmission of COVID-19, the level of unemployment, government initiatives and actions taken by Fannie Mae and Freddie Mac (the "GSEs") (including mortgage forbearance and modification programs), and the overall effects of  COVID-19 on the economy.

The COVID-19 pandemic may impact our business in various ways, including the following which are described in more detail in the remainder of these risk factors:

  • Our incurred losses will increase if loan delinquencies increase. 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 received (which are included in "IBNR"). In addition, our estimates of the number of delinquencies for which we will ultimately 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 negatively impacted.

The Russia-Ukraine war and/or other global events may adversely affect the U.S. economy and our business.

Russia's invasion of Ukraine has increased the already-elevated inflation rate, added more pressure to strained supply chains, and has increased volatility in the domestic and global financial markets. The war has impacted, and may impact, our business in various ways, including the following which are described in more detail in the remainder of these risk factors:

  • The terms under which we are able to obtain excess-of-loss ("XOL") reinsurance through the insurance-linked notes ("ILN") market have been negatively impacted and terms under which we are able to access that market in the future may be less attractive.
  • The risk of a cybersecurity incident that affects our company may have increased.
  • An extended or broadened war may negatively impact the domestic economy, which may increase unemployment and inflation, or decrease home prices, in each case leading to an increase in loan delinquencies.
  • The volatility in the financial markets may impact the performance of our investment portfolio and our investment portfolio may include investments in companies or securities that are negatively impacted by the war.

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, changes in family status, and decreases in home prices that result in the borrower's mortgage balance exceeding the net value of the home. 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.

High levels of unemployment may result in an increasing number of loan delinquencies and an increasing number of insurance claims; however, unemployment is difficult to predict given the uncertainty in the current market environment, including as a result of global events such as the COVID-19 pandemic, the Russia