MGIC Investment Corporation Reports Third Quarter 2022 Results
Third Quarter 2022 Net Income of
Third Quarter 2022 Adjusted Net Operating Income (Non-GAAP) of
Adjusted net operating income for the third quarter of 2022 was
"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% atJune 30, 2022 , and 59.5% atSeptember 30, 2021 . - Insurance in force of
$293.6 billion atSeptember 30, 2022 increased by 2.4% during the quarter and 9.4% compared withSeptember 30, 2021 . - Primary delinquency inventory of 25,878 loans at
September 30, 2022 decreased from 26,855 loans atJune 30, 2022 , and 37,379 loans atSeptember 30, 2021 . - The percentage of loans insured with primary insurance that were delinquent at
September 30, 2022 was 2.17%, compared with 2.28% atJune 30, 2022 , and 3.20% atSeptember 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 ofDecember 31, 2021 and increased by 2.4% from$14.81 as ofSeptember 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 atDecember 31, 2021 , and$0.59 atSeptember 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 onNovember 23, 2022 to shareholders of record at the close of business onNovember 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
Losses and expenses
Losses incurred
Net losses incurred in the third quarter of 2022 were
Underwriting and other expenses
Net underwriting and other expenses were
Interest expense
Interest expense decreased to
Loss on debt extinguishment
The third quarter 2022 loss on debt extinguishment of
Capital
- Total consolidated shareholders' equity was
$4.5 billion as ofSeptember 30, 2022 , and compared with$4.9 billion as ofDecember 31, 2021 andSeptember 30, 2021 . The decrease fromDecember 31, 2021 andSeptember 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 ofSeptember 30, 2022 , compared with PMIERs Available Assets of$5.7 billion , or$2.2 billion above its Minimum Required Assets as ofDecember 31, 2021 , and PMIERS Available Assets of$5.8 billion , or$2.6 billion above its Minimum Required Assets as ofSeptember 30, 2021 .
Other Balance Sheet and Liquidity Metrics
- Total consolidated assets were
$6.2 billion as ofSeptember 30, 2022 , compared with$7.3 billion as ofDecember 31, 2021 , and$7.5 billion as ofSeptember 30, 2021 . The decrease fromDecember 31, 2021 , andSeptember 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 ofSeptember 30, 2022 , compared with$6.9 billion as ofDecember 31, 2021 , and$7.1 billion as ofSeptember 30, 2021 . - The fair value of investments, cash and cash equivalents at the holding company was
$352 million as ofSeptember 30, 2022 , compared with$663 million as ofDecember 31, 2021 , and$716 million as ofSeptember 30, 2021 . - Consolidated debt was
$663 million as ofSeptember 30, 2022 , compared with$1.1 billion as ofDecember 31, 2021 , and$1.2 billion as ofSeptember 30, 2021 .
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 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 |
Nine Months Ended |
||||||||
(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 |
Nine Months Ended |
|||||||
(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 |
||||||||||||
2022 |
2021 |
|||||||||||
(In thousands, except per share amounts) |
Pre-tax |
Tax Effect |
Net |
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 |
$ 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 |
||||||||||||
2022 |
2021 |
|||||||||||
(In thousands, except per share amounts) |
Pre-tax |
Tax Effect |
Net |
Pre-tax |
Tax Effect |
Net |
||||||
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 |
$ 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) |
||||||
|
|
|
||||
(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 |
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) |
|
|
|
|
|
|
|
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 |
(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 |
(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 |
||||||||||||
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 |
244 |
254 |
217 |
211 |
154 |
|||||||
Primary IIF - # of Delinquent Loans - Flow |
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 |
3,035 |
2,442 |
3,147 |
2,766 |
2,727 |
|||||||
Number of payments delinquent prior to |
||||||||||||
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 |
||||||||||||
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 |
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 |
$ 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 |
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 |
$ 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) |
|
$ (2.0) |
$ (3.8) |
$ (3.6) |
|
$ 13.7 |
||||||
Ceding commissions (millions) (included in |
$ 13.3 |
$ 12.7 |
$ 12.3 |
$ 13.8 |
$ 13.7 |
$ 38.3 |
$ 39.7 |
||||||
Profit commission (millions) (included in |
$ 47.2 |
$ 48.8 |
$ 39.0 |
$ 45.8 |
$ 45.1 |
$ 135.0 |
|
||||||
Excess-of-Loss Reinsurance |
|||||||||||||
Ceded premiums earned (millions) |
$ 19.8 |
$ 19.3 |
$ 11.8 |
$ 12.1 |
$ 12.1 |
$ 50.9 |
$ 32.4 |
(1) |
Includes |
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES |
|||||||||||||
ADDITIONAL INFORMATION: BULK STATISTICS AND |
|||||||||||||
2022 |
2021 |
Year-to-date |
|||||||||||
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
2022 |
2021 |
|||||||
Bulk Primary Insurance Statistics |
|||||||||||||
Insurance in force (billions) |
|
|
|
|
|
||||||||
Risk in force (billions) |
|
|
|
|
|
||||||||
Average loan size (thousands) |
|
|
|
|
|
||||||||
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) |
|
|
|
|
|
|
|
||||||
Average claim payment (thousands) |
|
|
|
|
|
|
|
||||||
|
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 |
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
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 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
- 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
The seasonally-adjusted Purchase-Only
The future impact of COVID-19-related forbearance and foreclosure mitigation activities is unknown.
Forbearance for federally-insured mortgages (including those delivered to or purchased by the GSEs) whose borrowers were affected by COVID-19 allows mortgage payments to be suspended for a period generally ranging from 6 to 18 months. 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. Whether a loan delinquency will cure, including through modification, when forbearance ends will depend on the economic circumstances of the borrower at that time. The severity of losses associated with delinquencies that do not cure will depend on economic conditions at that time, including home prices.
Foreclosures on mortgages purchased or securitized by the GSEs were suspended through
We may not continue to meet the GSEs'