View:
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-10816
MGIC INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1486475
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 E. KILBOURN AVENUE 53202
MILWAUKEE, WISCONSIN (Zip Code)
(Address of principal executive offices)
(414) 347-6480
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------- --------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OF STOCK PAR VALUE DATE NUMBER OF SHARES
- -------------- --------- ---- ----------------
Common stock $1.00 10/31/99 105,707,534
PAGE 1
MGIC INVESTMENT CORPORATION
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of
September 30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statement of Operations for the Three and Nine
Month Periods Ended September 30, 1999 and 1998 (Unaudited) 4
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
INDEX TO EXHIBITS 24
PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1999 (Unaudited) and December 31, 1998
September 30, December 31,
1999 1998
-------------- -----------
ASSETS (In thousands of dollars)
- ------
Investment portfolio:
Securities, available-for-sale, at market value:
Fixed maturities $2,624,203 $2,602,870
Equity securities 18,241 4,627
Short-term investments 118,294 172,209
---------- ----------
Total investment portfolio 2,760,738 2,779,706
Cash 6,766 4,650
Accrued investment income 41,135 41,477
Reinsurance recoverable on loss reserves 39,467 45,527
Reinsurance recoverable on unearned premiums 6,918 8,756
Home office and equipment, net 33,270 32,400
Deferred insurance policy acquisition costs 22,625 24,065
Investments in joint ventures 106,583 75,246
Other assets 55,321 38,714
---------- ----------
Total assets $3,072,823 $3,050,541
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Loss reserves $ 673,040 $ 681,274
Unearned premiums 181,081 183,739
Notes payable (note 2) 411,000 442,000
Other liabilities 88,044 102,937
---------- ----------
Total liabilities 1,353,165 1,409,950
---------- ----------
Contingencies (note 3)
Shareholders' equity:
Common stock, $1 par value, shares authorized
300,000,000; shares issued 121,110,800;
shares outstanding, 9/30/99 - 105,491,534;
1998 - 109,003,032 121,111 121,111
Paid-in surplus 215,505 217,022
Treasury stock (shares at cost, 9/30/99 - 15,619,266;
1998 - 12,107,768) (627,486) (482,465)
Accumulated other comprehensive income - unrealized
(depreciation) appreciation in investments,
net of tax (7,904) 94,572
Retained earnings 2,018,432 1,690,351
---------- ----------
Total shareholders' equity 1,719,658 1,640,591
---------- ----------
Total liabilities and shareholders' equity $3,072,823 $3,050,541
========== ==========
See accompanying notes to consolidated financial statements.
PAGE 3
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three and Nine Month Periods Ended September 30, 1999 and 1998
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars,
except per share data)
Revenues:
Premiums written:
Direct $214,997 $192,107 $604,332 $557,637
Assumed 308 2,190 1,912 6,327
Ceded (7,723) (3,730) (18,277) (10,247)
-------- -------- -------- --------
Net premiums written 207,582 190,567 587,967 553,717
(Increase) decrease in
unearned premiums (7,540) 499 822 16,418
-------- -------- -------- --------
Net premiums earned 200,042 191,066 588,789 570,135
Investment income, net of
expenses 39,303 36,461 114,845 106,175
Realized investment gains, net 48 2,639 3,401 13,880
Other revenue 10,990 10,708 39,946 32,676
-------- -------- -------- --------
Total revenues 250,383 240,874 746,981 722,866
-------- -------- -------- --------
Losses and expenses:
Losses incurred, net 19,533 51,487 94,706 163,439
Underwriting and other expenses 48,289 46,498 153,471 137,188
Interest expense 4,788 5,308 14,830 12,394
Ceding commission (813) (839) (1,739) (2,105)
-------- -------- -------- --------
Total losses and expenses 71,797 102,454 261,268 310,916
-------- -------- -------- --------
Income before tax 178,586 138,420 485,713 411,950
Provision for income tax 55,677 41,928 149,452 126,199
-------- -------- -------- --------
Net income $122,909 $ 96,492 $336,261 $285,751
======== ======== ======== ========
Earnings per share (note 4):
Basic $ 1.13 $ 0.87 $ 3.09 $ 2.52
======== ======== ======== ========
Diluted $ 1.11 $ 0.86 $ 3.06 $ 2.49
======== ======== ======== ========
Weighted average common shares
outstanding - diluted (shares
in thousands, note 4) 110,261 112,695 109,993 114,728
======== ======== ======== ========
Dividends per share $ 0.025 $ 0.025 $ 0.075 $ 0.075
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
PAGE 4
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
Nine Months Ended
September 30,
---------------------
1999 1998
---- ----
(In thousands of dollars)
Cash flows from operating activities:
Net income $336,261 $285,751
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred insurance policy
acquisition costs 12,064 16,569
Increase in deferred insurance policy
acquisition costs (10,624) (14,078)
Depreciation and amortization 8,783 5,470
Decrease (increase) in accrued investment income 342 (1,988)
Decrease in reinsurance recoverable on loss
reserves 6,060 5,048
Decrease in reinsurance recoverable on unearned
premiums 1,838 2,375
(Decrease) increase in loss reserves (8,234) 45,432
Decrease in unearned premiums (2,658) (18,795)
Equity earnings in joint ventures (10,750) (7,420)
Other 32,500 (12,215)
-------- --------
Net cash provided by operating activities 365,582 306,149
-------- --------
Cash flows from investing activities:
Purchase of equity securities (13,770) (3,886)
Purchase of fixed maturities (928,418) (689,255)
Additional investment in joint ventures (20,587) (15,926)
Proceeds from sale of equity securities - 116,164
Proceeds from sale or maturity of fixed maturities 748,264 348,027
-------- --------
Net cash used in investing activities (214,511) (244,876)
-------- --------
Cash flows from financing activities:
Dividends paid to shareholders (8,180) (8,521)
Net (decrease) increase in notes payable (31,000) 182,500
Interest payments on notes payable (16,619) (11,075)
Reissuance of treasury stock 2,929 14,220
Repurchase of common stock (150,000) (231,205)
-------- --------
Net cash used in financing activities (202,870) (54,081)
-------- --------
Net (decrease) increase in cash and short-term
investments (51,799) 7,192
Cash and short-term investments at beginning of period 176,859 119,626
-------- --------
Cash and short-term investments at end of period $125,060 $126,818
======== ========
See accompanying notes to consolidated financial statements.
PAGE 5
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
Note 1 - Basis of presentation
The accompanying unaudited consolidated financial
statements of MGIC Investment Corporation (the "Company") and
its wholly-owned subsidiaries have been prepared in accordance
with the instructions to Form 10-Q and do not include all of
the other information and disclosures required by generally
accepted accounting principles. These statements should be
read in conjunction with the consolidated financial statements
and notes thereto for the year ended December 31, 1998
included in the Company's Annual Report on Form 10-K for that
year.
The accompanying consolidated financial statements have
not been audited by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of
management such financial statements include all adjustments,
consisting only of normal recurring accruals, necessary to
summarize fairly the Company's financial position and results
of operations. The results of operations for the nine
months ended September 30, 1999 may not be indicative of the
results that may be expected for the year ending December 31,
1999.
Note 2 - Notes payable
At September 30, 1999, the Company's outstanding balance
of the notes payable on the 1997 and 1998 credit facilities
were $200 million and $211 million, respectively, which
approximated market value. The interest rate on the notes
payable varies based on LIBOR and at September 30, 1999 and
December 31, 1998 the rate was 6.13% and 5.80%, respectively.
The weighted average interest rate on the notes payable for
borrowings under the 1997 and 1998 credit agreements was 5.38%
per annum for the nine months ended September 30, 1999. In
addition to the 1997 and 1998 credit facilities, the Company
entered into a $100 million credit facility in November 1999.
Currently, there are no outstanding borrowings under this
facility.
During the nine months ended September 1999, the Company
utilized three interest rate swaps each with a notional
amount of $100 million to reduce and manage interest rate risk
on a portion of the variable rate debt under the credit
facilities. With respect to all such transactions, the
notional amount of $100 million represents the stated
principal balance used as a basis for calculating payments.
On the swaps, the Company receives a floating rate based on
various floating rate indices and pays fixed rates ranging
from 3.93% to 4.13%. Two of the swaps renew monthly and one
expires in October 2000. Earnings during the nine months ended
September 1999 on the swaps of approximately $3.0 million are
netted against interest expense in the Consolidated Statement
of Operations.
PAGE 6
Note 3 - Contingencies
The Company is involved in litigation in the ordinary
course of business. In the opinion of management, the
ultimate disposition of the pending litigation will not have a
material adverse effect on the financial position of the
Company.
Note 4 - Earnings per share
The Company's basic and diluted earnings per share ("EPS")
have been calculated in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
The following is a reconciliation of the weighted-average
number of shares used for basic EPS and diluted EPS.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(Shares in thousands)
Weighted-average shares
- Basic EPS 108,533 111,417 108,863 113,184
Common stock equivalents 1,728 1,278 1,130 1,544
------- ------- ------- -------
Weighted-average shares
- Diluted EPS 110,261 112,695 109,993 114,728
======= ======= ======= =======
Note 5 - Comprehensive income
The Company's total comprehensive income, as calculated
per Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars)
Net income $122,909 $ 96,492 $336,261 $285,751
Other comprehensive
(loss) gain (27,666) 35,885 (102,476) 29,281
-------- -------- -------- --------
Total comprehensive
income $ 95,243 $132,377 $233,785 $315,032
======== ======== ======== ========
The difference between the Company's net income and total
comprehensive income for the three and nine months ended
September 30, 1999 and 1998 is due to the change in
unrealized appreciation on investments, net of tax.
PAGE 7
Note 6 - New accounting standards
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which will be effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The
statement establishes accounting and reporting standards for
derivative instruments and for hedging activities.
Management does not anticipate the adoption of SFAS 133 will
have a significant effect on the Company's results of
operations or its financial position due to its limited use of
derivative instruments. (See note 2.)
PAGE 8
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Consolidated Operations
Three Months Ended September 30, 1999 Compared With Three
Months Ended September 30, 1998
Net income for the three months ended September 30, 1999
was $122.9 million, compared to $96.5 million for the same
period of 1998, an increase of 27%. Diluted earnings per share
for the three months ended September 30, 1999 was $1.11
compared to $0.86 in the same period last year, an increase of
29%. The percentage increase in diluted earnings per share was
favorably affected by the lower adjusted shares outstanding at
September 30, 1999 as a result of common stock repurchased by
the Company during the fourth quarter of 1998 and in September
1999. See note 4 to the consolidated financial statements.
As used in this report, the term "Company" means the Company
and its consolidated subsidiaries which do not include joint
ventures in which the Company has an equity interest.
The amount of new primary insurance written by Mortgage
Guaranty Insurance Corporation ("MGIC") during the three
months ended September 30, 1999 was $13.1 billion, compared to
$11.8 billion in the same period of 1998. Refinancing activity
accounted for 16% of new primary insurance written in the
third quarter of 1999, compared to 24% in the third quarter of
1998.
The $13.1 billion of new primary insurance written during
the third quarter of 1999 was offset by the cancellation of
$8.2 billion of insurance in force, and resulted in a net
increase of $4.9 billion in primary insurance in force,
compared to new primary insurance written of $11.8 billion,
the cancellation of $11.5 billion, and a net increase of $0.3
billion in primary insurance in force during the third quarter
of 1998. New insurance written for the third quarter of 1999
includes $1.9 billion related to a structured transaction.
Direct primary insurance in force was $145.1 billion at
September 30, 1999 compared to $138.0 billion at December 31,
1998 and $137.8 billion at September 30, 1998. In addition to
providing direct primary insurance coverage, the Company also
insures pools of mortgage loans. New pool risk written during
the three months ended September 30, 1999 and September 30,
1998, which was virtually all agency pool insurance, was $125
million and $154 million, respectively. The Company's direct
pool risk in force at September 30, 1999 was $1.5 billion
compared to $1.1 billion at December 31, 1998 and is expected
to increase.
Cancellation activity has historically been affected by
the level of mortgage interest rates. Rising mortgage interest
rates resulted in a decrease in cancellations during the third
quarter of 1999 and an improvement in the MGIC persistency
rate (percentage of insurance remaining in force from one
year prior) to 69.1% at September 30, 1999 from 66.6% at
June 30, 1999. However, due to the high number of
cancellations during the fourth quarter of 1998 and first half
of 1999, the persistency rate at September 1999 is below the
71.5% persistency rate of a year ago. Future cancellation
PAGE 9
activity could also be affected as a result of legislation
that went into effect in July 1999 regarding cancellation of
mortgage insurance.
New insurance written for adjustable rate mortgages
("ARMs") increased to 20% of new insurance written during the
third quarter of 1999 from 9% of new insurance written during
the same period in 1998 as a result of higher mortgage
interest rates on fixed rate mortgage loans. New insurance
written for mortgages with loan-to-value ("LTV") ratios in
excess of 90% but not more than 95% ("95%") were 42% of new
insurance written during the third quarter of 1999 compared to
33% and 38% in the first and second quarters respectively, as
a result of declining refinancing activity during 1999.
New insurance written for mortgages with LTV ratios in
excess of 85% but not more than 90% ("90%") and coverage of
25% was 33% of new insurance written in the third quarter of
1999 compared to 38% for the same period a year ago. New
insurance written for 95% LTV ratios and coverage of 30% was
33% in the current quarter compared to 37% in the third
quarter of 1998. These decreases are generally the result of
changes in mortgage insurance requirements by Fannie Mae and
Freddie Mac described below.
Net premiums written were $207.6 million during the third
quarter of 1999, compared to $190.6 million during the third
quarter of 1998. Net premiums earned were $200.0 million for
the third quarter of 1999 compared to $191.1 million for the
same period in 1998. The increase was primarily a result of a
higher percentage of renewal premiums on mortgage loans with
deeper coverages and the growth in insurance in force from a
year ago.
During the first quarter of 1999, Fannie Mae and Freddie
Mac ("GSEs") changed their mortgage insurance requirements for
certain mortgages approved by their automated underwriting
services. The changes permit lower coverage percentages on
these loans than the deeper coverage percentages that went
into effect in 1995. MGIC's premium rates vary with the
depth of coverage. While lower coverage percentages result in
lower premium revenue, lower coverage percentages should also
result in lower incurred losses at the same level of claim
incidence. MGIC's results could also be affected to the
extent the GSEs are compensated for assuming default risk that
would otherwise be insured by the private mortgage insurance
industry. The GSEs have programs under which a delivery fee
is paid to them, with mortgage insurance coverage reduced
below the coverage that would be required in the absence of
the delivery fee. In partnership with mortgage insurers, the
GSEs are also beginning to offer programs under which, on
delivery of an insured loan to a GSE, the primary coverage is
converted to an initial shallow tier of coverage followed by a
second tier that is subject to an overall loss limit and,
depending on the program, some compensation may be paid to the
GSE for services related to the loans.
In March 1999, the Office of Federal Housing Enterprise
Oversight ("OFHEO") released a proposed risk-based capital
stress test for the GSEs. One of the elements of the proposed
stress test is that future claim payments made by a private
mortgage insurer on GSE loans are reduced below the amount
provided by the mortgage insurance policy to reflect the risk
that the insurer will fail to pay. Claim payments from an
insurer whose claims-paying ability rating is "AAA" are
PAGE 10
subject to a 10% reduction over the 10-year period of the
stress test, while claim payments from a "AA" rated insurer,
such as MGIC, are subject to a 20% reduction. The effect of
the differentiation among insurers is to require the GSEs to
have additional capital for coverage on loans provided by a
private mortgage insurer whose claims-paying rating is less
than "AAA." As a result, if adopted as proposed, there is an
incentive for the GSEs to use private mortgage insurance
provided by a "AAA" rated insurer. The Company does not
believe there should be a reduction in claim payments from
private mortgage insurance nor should there be a distinction
between "AAA" and "AA" rated private mortgage insurers. The
proposed stress test covers many topics in addition to capital
credit for private mortgage insurance. The stress test as a
whole has been controversial in the home mortgage finance
industry and is not expected to become final for some time.
The Company cannot predict whether the portion of the stress
test discussed above will be adopted in its present form.
Mortgages (newly insured during the nine months ended
September 1999 or in previous periods) equal to approximately
38% of MGIC's new insurance written during the third quarter
of 1999 were subject to captive mortgage reinsurance and
similar arrangements compared to 14% during the same period in
1998. Such arrangements entered into during a quarter
customarily include loans newly insured in a prior quarter. As
a result, the percentages cited above would be lower if only
the current quarter's newly insured mortgages subject to such
arrangements were included. The percentage of new insurance
written subject to captive mortgage reinsurance arrangements
is expected to increase during the remainder of 1999 as
new transactions are consummated. At September 30, 1999
approximately 13% of MGIC's risk in force was subject to
captive reinsurance and similar arrangements compared to 7% at
December 31, 1998. In a February 1999 circular letter, the New
York Department of Insurance said it was in the process of
developing guidelines that would articulate the parameters
under which captive mortgage reinsurance is permissible under
New York insurance law.
Investment income for the third quarter of 1999 was $39.3
million, an increase of 8% over the $36.5 million in the third
quarter of 1998. This increase was primarily the result of an
increase in the amortized cost of average invested assets to
$2.8 billion for the third quarter of 1999 from $2.5 billion
for the third quarter of 1998, an increase of 12%. The
portfolio's average pre-tax investment yield was 5.5% for the
third quarter of 1999 and 5.7% for the same period in 1998.
The portfolio's average after-tax investment yield was 4.7%
for the third quarter of 1999 and 4.9% for the same period in
1998. The Company's net realized gains were immaterial
during the three months ended September 30, 1999 compared to
net realized gains of $2.6 million during the same period in
1998 resulting primarily from the sale of fixed maturities.
Other revenue was $11.0 million for the third quarter of
1999, compared with $10.7 million for the same period in 1998.
The increase is primarily the result of an increase in equity
earnings from Credit-Based Asset Servicing and
Securitization LLC and Litton Loan Servicing LP
(collectively, "C-BASS"), a joint venture with Enhance
Financial Services Group Inc., offset by a decrease in
contract underwriting revenue. In accordance with generally
accepted accounting principles, each quarter C-BASS is
required to estimate the value of its mortgage-related assets
and recognize in earnings the resulting net unrealized gains
and losses. Including open trades, C-BASS's mortgage-related
PAGE 11
assets were $689 million at September 30, 1999 and are
expected to increase in the future. Substantially all of C-
BASS's mortgage-related assets do not have readily
ascertainable market values and as a result their value for
financial statement purposes is estimated by the management of
C-BASS.
Net losses incurred decreased 62% to $19.5 million during
the third quarter of 1999 from $51.5 million during the third
quarter of 1998. Such decrease was primarily attributed to an
increase in the redundancy in prior year loss reserves, a
decline in losses paid, continued improvement in California
and generally strong economic conditions throughout the
country. The redundancy results from actual claim rates and
actual claim amounts being lower than those estimated by the
Company when originally establishing the reserve at December
31, 1998. The primary notice inventory increased from 25,573
at June 30, 1999 to 27,102 at September 30, 1999. The pool
notice inventory increased from 8,015 at June 30, 1999 to
10,030 at September 30, 1999, attributable to defaults on new
agency pool insurance written during 1997 and 1998. At
September 30, 1999, 62% of MGIC's insurance in force was
written during the preceding eleven quarters, compared to 55%
at September 30, 1998. The highest claim frequency years have
typically been the third through fifth year after the year of
loan origination. However, the pattern of claims frequency for
refinance loans may be different from the historical pattern
of other loans.
Underwriting and other expenses increased to $48.3
million in the third quarter of 1999 from $46.5 million in the
third quarter of 1998, an increase of 4%. This increase was
primarily due to increases associated with field office
underwriting expenses.
Interest expense decreased to $4.8 million in the third
quarter of 1999 from $5.3 million during the same period in
1998 primarily due to a lower weighted average outstanding
notes payable balance during the three months ended September
30, 1999 compared to the comparable period in 1998.
The Company utilized financial derivative transactions
during the third quarter of 1999 consisting of interest rate
swaps to reduce and manage interest rate risk on its notes
payable. During the third quarter of 1999, earnings on such
transactions aggregated approximately $1.2 million and were
netted against interest expense. See note 2 to the
consolidated financial statements.
The consolidated insurance operations loss ratio was 9.8%
for the third quarter of 1999 compared to 26.9% for the third
quarter of 1998. The consolidated insurance operations expense
and combined ratios were 17.9% and 27.7%, respectively, for
the third quarter of 1999 compared to 18.8% and 45.7% for the
third quarter of 1998.
The effective tax rate was 31.2% in the third quarter of
1999, compared to 30.3% in the third quarter of 1998. During
both periods, the effective tax rate was below the statutory
rate of 35%, reflecting the benefits of tax-preferenced
investment income. The higher effective tax rate in 1999
resulted from a lower percentage of total income before tax
being generated from the tax-preferenced investments.
PAGE 12
Nine Months Ended September 30, 1999 Compared With Nine
Months Ended September 30, 1998
Net income for the nine months ended September 30, 1999
was $336.3 million, compared to $285.8 million for the same
period of 1998, an increase of 18%. Diluted earnings per share
for the nine months ended September 30, 1999 was $3.06
compared to $2.49 in the same period last year, an increase of
23%. The percentage increase in diluted earnings per share was
favorably affected by the lower adjusted shares outstanding at
September 30, 1999 as a result of common stock repurchased by
the Company during the fourth quarter of 1998 and in September
1999. See note 4 to the consolidated financial statements.
The amount of new primary insurance written by MGIC during
the nine months ended September 30, 1999 was $37.2 billion,
compared to $31.1 billion in the same period of 1998.
Refinancing activity accounted for 28% of new primary
insurance written during the nine months ended September 30,
1999 compared to 30% during the comparable period of 1998.
The $37.2 billion of new primary insurance written during
the nine months ended September 1999 was offset by the
cancellation of $30.1 billion of insurance in force, and
resulted in a net increase of $7.1 billion in primary
insurance in force, compared to new primary insurance written
of $31.1 billion, the cancellation of $31.8 billion, and a net
decrease of $0.7 billion in primary insurance in force during
the same period of 1998. Direct primary insurance in force
was $145.1 billion at September 30, 1999 compared to $138.0
billion at December 31, 1998 and $137.8 billion at September
30, 1998. In addition to providing direct primary insurance
coverage, the Company also insures pools of mortgage loans.
New pool risk written during the nine months ended September
30, 1999 and September 30, 1998, which was virtually all
agency pool insurance, was $499 million and $446 million,
respectively. The Company's direct pool risk in force at
September 30, 1999 was $1.5 billion compared to $1.1 billion
at December 31, 1998 and is expected to increase.
Cancellation activity has historically been affected by
the level of mortgage interest rates and remained high during
the nine months ended September 1999 due to favorable mortgage
interest rates which resulted in a decrease in the MGIC
persistency rate (percentage of insurance remaining in force
from one year prior) to 69.1% at September 30, 1999 from
71.5% at September 30, 1998. However, the number of
cancellations decreased during the second and third quarters
resulting in the persistency rate increasing from 65.8% at
March 31, 1999. Future cancellation activity could also be
affected as a result of legislation that went into effect in
July 1999 regarding cancellation of mortgage insurance.
Net premiums written were $588.0 million during the first
nine months of 1999, compared to $553.7 million during the
same period of 1998. Net premiums earned were $588.8 million
for the nine months ended September 1999 compared to $570.1
million for the same period in 1998. The increase was
primarily a result of a higher percentage of renewal premiums
on mortgage loans with deeper coverages and the growth in
insurance in force from a year ago.
PAGE 13
For a discussion of certain programs with the GSEs
regarding mortgage insurance and for a discussion of proposed
capital regulations for the GSEs, see third quarter
discussion.
Mortgages (newly insured during the nine months ended
September 1999 or in previous periods) equal to approximately
31% of MGIC's new insurance written during the nine months
ended September 1999 were subject to captive mortgage
reinsurance and similar arrangements compared to 17% during
the same period in 1998. Such arrangements entered into
during a reporting period customarily include loans newly
insured in a prior reporting period. As a result, the
percentages cited above would be lower if only the current
reporting period's newly insured mortgages subject to such
arrangements were included. The percentage of new insurance
written subject to captive mortgage reinsurance arrangements
is expected to increase during the remainder of 1999 as
new transactions are consummated. At September 30, 1999
approximately 13% of MGIC's risk in force was subject to
captive reinsurance and similar arrangements compared to 7% at
December 31, 1998. In a February 1999 circular letter, the New
York Department of Insurance said it was in the process of
developing guidelines that would articulate the parameters
under which captive mortgage reinsurance is permissible under
New York insurance law.
Investment income for the nine months ended September 1999
was $114.8 million, an increase of 8% over the $106.2 million
in the comparable period of 1998. This increase was primarily
the result of an increase in the amortized cost of average
invested assets to $2.7 billion for the nine months ended
September 1999 from $2.4 billion for the same period in 1998,
an increase of 12%. The portfolio's average pre-tax investment
yield was 5.5% for the nine months ended September 1999 and
5.7% for the same period in 1998. The portfolio's average
after-tax investment yield was 4.7% for the nine months ended
September 1999 and 4.9% for the same period in 1998. The
Company realized gains of $3.4 million during the nine months
ended September 30, 1999 resulting primarily from the sale of
fixed maturities compared to realized gains of $13.9 million
during the same period in 1998 resulting primarily from the
sale of equity securities.
Other revenue was $39.9 million for the nine months ended
September 1999, compared with $32.7 million for the same
period in 1998. The increase is primarily the result of an
increase in equity earnings from C-BASS, a joint venture with
Enhance Financial Services Group Inc. and an increase in
contract underwriting revenue. In accordance with generally
accepted accounting principles, each quarter C-BASS is
required to estimate the value of its mortgage-related assets
and recognize in earnings the resulting net unrealized gains
and losses. Including open trades, C-BASS's mortgage-related
assets were $689 million at September 30, 1999 and are
expected to increase in the future. Substantially all of C-
BASS's mortgage-related assets do not have readily
ascertainable market values and as a result their value for
financial statement purposes is estimated by the management of
C-BASS.
Net losses incurred decreased 42% to $94.7 million during
the nine months ended September 1999 from $163.4 million
during the comparable period in 1998. Such decrease was
primarily attributed to an increase in the redundancy in prior
PAGE 14
year loss reserves, a decline in losses paid, continued
improvement in California and generally strong economic
conditions throughout the country. The redundancy results
from actual claim rates and actual claim amounts being lower
than those estimated by the Company when originally
establishing the reserve at December 31, 1998. The primary
notice inventory declined from 29,253 at December 31, 1998 to
27,102 at September 30, 1999. The pool notice inventory
increased from 6,524 at December 31, 1998 to 10,030 at
September 30, 1999, attributable to defaults on new agency
pool insurance written during 1997 and 1998. At September 30,
1999, 62% of MGIC's insurance in force was written during the
preceding eleven quarters, compared to 55% at September 30,
1998. The highest claim frequency years have typically been
the third through fifth year after the year of loan
origination. However, the pattern of claims frequency for
refinance loans may be different from the historical pattern
of other loans.
Underwriting and other expenses increased to $153.5
million in the nine months ended September 1999 from $137.2
million in the same period of 1998, an increase of 12%. This
increase was primarily due to increases associated with
contract and field office underwriting expenses.
Interest expense increased to $14.8 million in the nine
months ended September 1999 from $12.4 million during the same
period in 1998 due to a higher weighted average outstanding
notes payable balance during the nine months ended September
30, 1999 compared to the comparable period in 1998.
The Company utilized financial derivative transactions
during the nine months ended September 1999 consisting of
interest rate swaps to reduce and manage interest rate risk on
its notes payable. During the nine months ended September
1999, earnings on such transactions aggregated approximately
$3.0 million and were netted against interest expense. See
note 2 to the consolidated financial statements.
The consolidated insurance operations loss ratio was 16.1%
for the nine months ended September 1999 compared to 28.7% for
the comparable period in 1998. The consolidated insurance
operations expense and combined ratios were 20.3% and 36.4%,
respectively, for the nine months ended September 1999
compared to 19.2% and 47.9% for the comparable period in 1998.
The effective tax rate was 30.8% during the nine months
ended September 1999, compared to 30.6% for the comparable
period in 1998. During both periods, the effective tax rate
was below the statutory rate of 35%, reflecting the benefits
of tax-preferenced investment income. The higher effective tax
rate in 1999 resulted from a lower percentage of total income
before tax being generated from tax-preferenced investments.
Liquidity and Capital Resources
The Company's consolidated sources of funds consist
primarily of premiums written and investment income. The
Company generated positive cash flows from operating
activities of $365.6 million for the nine months ended
September 30, 1999, as shown on the Consolidated Statement of
Cash Flows. Funds are applied primarily to the payment of
claims and expenses. The Company's business does not require
PAGE 15
significant capital expenditures on an ongoing basis. Positive
cash flows are invested pending future payments of claims and
other expenses; cash flow shortfalls, if any, could be funded
through sales of short-term investments and other investment
portfolio securities.
Consolidated total investments were $2.8 billion at both
September 30, 1999 and December 31, 1998. The investment
portfolio includes unrealized losses on securities marked to
market at September 30, 1999 of $12.2 million and unrealized
gains on securities marked to market at December 31, 1998 of
$145.5 million. As of September 30, 1999, the Company had
$118.3 million of short-term investments with maturities of 90
days or less. In addition, at September 30, 1999, based on
amortized cost, the Company's total investments, which were
primarily comprised of fixed maturities, were approximately
99% invested in "A" rated and above, readily marketable
securities, concentrated in maturities of less than 15 years.
The Company's investments in C-BASS, Sherman Financial
Group LLC, and Customers Forever, LLC ("joint ventures") were
$106.6 million in aggregate at September 30, 1999, which
includes the Company's share of the joint ventures' earnings
since their inception. MGIC had guaranteed one half of a $50
million credit facility for C-BASS that was repaid in July
1999. Sherman Financial Group LLC, another joint venture with
Enhance Financial Services Group Inc., is engaged in the
business of purchasing, servicing and securitizing delinquent
unsecured consumer assets such as credit card loans and
Chapter 13 bankruptcy debt. MGIC is guaranteeing one half of a
$50 million Sherman credit facility that is scheduled to
expire in December 1999. Customers Forever, LLC, a joint
venture with Marshall & Ilsley Corporation, established in
August 1999, is an Internet-focused transaction services
company dedicated to helping large residential mortgage
servicers retain and enhance relationships with their
customers nationwide. The Company expects that it will
provide additional funding to the joint ventures.
Consolidated loss reserves decreased to $673.0 million at
September 30, 1999 from $681.3 million at December 31, 1998
reflecting a decrease in primary loss reserves partially
offset by an increase in pool loss reserves. Consistent with
industry practices, the Company does not establish loss
reserves for future claims on insured loans which are not
currently in default.
Consolidated unearned premiums decreased $2.6 million from
$183.7 million at December 31, 1998 to $181.1 million at
September 30, 1999, primarily reflecting the continued high
level of monthly premium policies written, for which there is
no unearned premium offset by an increase in unearned premiums
for agency pool insurance written. Reinsurance recoverable on
unearned premiums decreased $1.9 million to $6.9 million at
September 30, 1999 from $8.8 million at December 31, 1998,
primarily reflecting the reduction in unearned premiums.
Consolidated shareholders' equity increased to $1.7
billion at September 30, 1999, from $1.6 billion at December
31, 1998, an increase of 5%. This increase consisted of
$336.3 million of net income during the first nine months of
1999 and $3.5 million from the reissuance of treasury stock
offset by approximately $150.0 million for the repurchase of
approximately 3.6 million shares of the Company's outstanding
PAGE 16
common stock, a decrease in net unrealized gains on
investments of $102.5 million, net of tax, and dividends
declared of $8.2 million.
In September 1999, the Company repurchased approximately
3.6 million shares of its outstanding common stock from a
financial intermediary at a total cost of approximately $150.0
million, subject to a market price adjustment provision.
Funds to repurchase the shares were provided from internal
sources. The Company's Board of Directors has authorized the
repurchase of approximately 2.3 million additional shares.
Funds to purchase these shares are expected to be provided by
cash flow and bank borrowings.
MGIC is the principal insurance subsidiary of the Company.
MGIC's risk-to-capital ratio was 12.5:1 at September 30, 1999
compared to 12.9:1 at December 31, 1998. The decrease was due
to MGIC's increased policyholders' reserves, partially offset
by the net additional risk in force of $1.9 billion, net of
reinsurance, during the first nine months of 1999.
The Company's combined insurance risk-to-capital
ratio was 13.4:1 at September 30, 1999, compared to 13.6:1 at
December 31, 1998. The decrease was due to the same reasons
as described above.
The risk-to-capital ratios set forth above have been
computed on a statutory basis. However, the methodology used
by the rating agencies to assign claims-paying ability ratings
permits less leverage than under statutory requirements. As a
result, the amount of capital required under statutory
regulations may be lower than the capital required for rating
agency purposes. In addition to capital adequacy, the rating
agencies consider other factors in determining a mortgage
insurer's claims-paying rating, including its competitive
position, business outlook, management, corporate strategy,
and historical and projected operating performance.
For certain material risks of the Company's business, see
"Risk Factors" below.
Risk Factors
The Company and its business may be materially affected by
the factors discussed below. These factors may also cause
actual results to differ materially from the results
contemplated by forward looking statements that the Company
may make.
Reductions in the volume of low down payment home mortgage
----------------------------------------------------------
originations may adversely affect the amount of private
- --------------------------------------------------------------
mortgage insurance (PMI) written by the PMI industry. The
- --------------------------------------------------------
factors that affect the volume of low down payment mortgage
originations include:
- the level of home mortgage interest rates,
PAGE 17
- the health of the domestic economy as well as
conditions in regional and local economies; housing
affordability; population trends, including the rate of
household formation,
- the rate of home price appreciation, which in times of
heavy refinancing affects whether refinance loans have
loan-to-value ratios that require PMI, and
- government housing policy encouraging loans to first-
time homebuyers.
By selecting alternatives to PMI, lenders and investors
---------------------------------------------------------
may adversely affect the amount of PMI written by the PMI
- --------------------------------------------------------------
industry. These alternatives include:
- ---------
- government mortgage insurance programs, including
those of the Federal Housing Administration and the
Veterans Administration,
- holding mortgages in portfolio and self-insuring,
- use of credit enhancements by investors, including
Fannie Mae and Freddie Mac, other than PMI or using
other credit enhancements in conjunction with reduced
levels of PMI coverage, and
- mortgage originations structured to avoid PMI, such as
a first mortgage with an 80% loan-to-value ratio and a
second mortgage with a 10% loan-to-value ratio (referred
to as an 80-10-10 loan) rather than a first mortgage
with a 90% loan-to-value ratio.
Fannie Mae and Freddie Mac have a material impact on the
---------------------------------------------------------
PMI industry. Because Fannie Mae and Freddie Mac are the
- --------------
largest purchasers of low down payment conventional mortgages,
the business practices of these GSEs have a direct effect on
private mortgage insurers. These practices affect the entire
relationship between the GSEs and mortgage insurers and
include:
- the level of PMI coverage, subject to the limitations
of the GSE's charters when PMI is used as the required
credit enhancement on low down payment mortgages,
- whether the GSE influences the mortgage lender's
selection of the mortgage insurer providing coverage
and, if so, any transactions that are related to that
selection,
- whether a GSE will give mortgage lenders an incentive
to select a mortgage insurer which has a "AAA" claims-
paying ability rating to benefit from the lower capital
required of the GSE under OFHEO's proposed stress test
when a mortgage is insured by a "AAA" company,
PAGE 18
- the underwriting standards that determine what loans
are eligible for purchase by the GSEs, which thereby
affect the quality of the risk insured by the mortgage
insurer, as well as the availability of mortgage loans,
- the terms on which mortgage insurance coverage can be
canceled before reaching the cancellation thresholds
established by law, and
- the circumstances in which mortgage servicers must
perform activities intended to avoid or mitigate loss on
insured mortgages that are delinquent.
The Company expects the level of competition within the
---------------------------------------------------------
PMI industry to remain intense. Competition for PMI premiums
- --------------------------------
occurs not only among private mortgage insurers but
increasingly with mortgage lenders through captive mortgage
reinsurance transactions in which a lender's affiliate
reinsures a portion of the insurance written by a private
mortgage insurer on mortgages originated by the lender. The
level of competition within the PMI industry has also
increased as many large mortgage lenders have reduced the
number of private mortgage insurers with whom they do business
at the same time as consolidation among mortgage lenders has
increased the share of the mortgage lending market held by
large lenders.
Changes in interest rates, house prices and cancellation
---------------------------------------------------------
policies may materially affect persistency. In each year,
- ---------------------------------------------
most of MGIC's premiums are from insurance that has been
written in prior years. As a result, the length of time
insurance remains in force is an important determinant of
revenues. The factors affecting persistency of the insurance
in force include:
- the level of current mortgage interest rates compared
to the mortgage coupon rates on the insurance in force,
which affects the vulnerability of the insurance in
force to refinancings, and
- mortgage insurance cancellation policies of mortgage
investors along with the rate of home price appreciation
experienced by the homes underlying the mortgages in the
insurance in force.
The strong economic climate that has existed throughout
---------------------------------------------------------
the United States for some time has favorably impacted losses
- --------------------------------------------------------------
and encouraged competition to assume default risk. Losses
- ------------------------------------------------------
result from events that adversely affect a borrower's ability
to continue to make mortgage payments, such as unemployment,
and whether the home of a borrower who defaults on his
mortgage can be sold for an amount that will cover unpaid
principal and interest and the expenses of the sale.
Favorable economic conditions generally reduce the likelihood
that borrowers will lack sufficient income to pay their
mortgages and also favorably affect the value of homes,
thereby reducing and in some cases even eliminating a loss
from a mortgage default. A significant deterioration in
PAGE 19
economic conditions would adversely affect MGIC's losses. The
low level of losses that has recently prevailed in the private
mortgage insurance industry has encouraged competition to
assume default risk through captive reinsurance arrangements,
self-insurance, 80-10-10 loans and other means.
Litigation against mortgage lenders and settlement service
----------------------------------------------------------
providers has been increasing. In recent years, consumers
- --------------------------------
have brought a growing number of lawsuits against home
mortgage lenders and settlement service providers seeking
monetary damages. There can be no assurance that the Company
will not be subject to litigation or that any litigation will
not be material. The Real Estate Settlement Procedures Act
gives home mortgage borrowers the right to bring lawsuits
seeking damages of three times the amount of the charge paid
for a settlement service involved in a violation of this law.
Under rules adopted by the United States Department of Housing
and Urban Development, "settlement services" are services
provided in connection with settlement of a mortgage loan,
including services involving mortgage insurance.
The pace of change in the home mortgage lending and
---------------------------------------------------------
mortgage insurance industries will likely accelerate. The
- --------------------------------------------------------
Company expects the processes involved in home mortgage
lending will continue to evolve through greater use of
technology. This evolution could effect fundamental changes
in the way home mortgages are distributed. Lenders who are
regulated depositary institutions could gain expanded
insurance powers if financial modernization proposals become
law. The capital markets are beginning to emerge as providers
of insurance in competition with traditional insurance
companies. These trends and others increase the level of
uncertainty attendant to the PMI business, demand rapid
response to change and place a premium on innovation.
Year 2000 Compliance
All of the Company's information technology systems ("IT
Systems"), including all of its "business critical" IT
Systems, have been assessed, reprogrammed, if necessary, and
tested for Year 2000 compliance. The Company completed
internal testing of all IT Systems for Year 2000 compliance in
the third quarter of 1999. All reprogrammed systems have been
implemented, i.e., are currently in use at the Company. In
order to provide additional assurance that Year 2000
compliance has been maintained, the Company retested critical
systems in October 1999 and will exercise control over system
changes for the remainder of the year.
Some of the Company's "business critical" IT Systems
interface with computer systems of third parties. The
Company, Fannie Mae, Freddie Mac and many of these third
parties participated in the Mortgage Bankers Association Year
2000 Readiness Test (the "MBA Test"). The MBA Test, conducted
during the first half of 1999, was designed to help mortgage
industry participants evaluate interaction of their computer
systems in a Year 2000 environment. Through the MBA Test and
additional independent testing efforts, the Company has
completed the Year 2000 readiness evaluation of its key
automated interfaces with customers representing more than 90%
of the Company's in-force policies.
PAGE 20
All costs incurred through September 1999 for IT Systems
for Year 2000 compliance have been expensed and were
immaterial. The costs of the remaining quality control and
implementation are expected to be immaterial.
Telecommunications services and electricity are essential
to the Company's ability to conduct business. The Company's
long-distance voice and data telecommunications suppliers and
the local telephone company serving the Company's owned
headquarters and warehouse facilities have written to the
Company to the effect that their respective systems will be
Year 2000 compliant. The electric company serving these
facilities has given the Company assurance that it will also
be Year 2000 compliant. In addition, the Company has made
arrangements to acquire back-up power for its headquarters.
The Company has received written assurance regarding Year 2000
compliance from landlords of the Company's underwriting
service centers and local telephone companies.
The Company has long practiced contingency planning to
address business disruption risks and has procedures for
planning and executing contingency measures to provide for
business continuity in the event of any circumstance that
results in disruption to the Company's headquarters, warehouse
facilities and leased workplace environments, including lack
of utility services, transportation disruptions, and service
provider failures. The Company has developed additional plans
for the "special case" of business disruption due to Year 2000
compliance issues. These plans address continuity measures in
five areas: physical building environment, including
conducting operations at off-site facilities; business
operations units, as discussed below; external factors over
which the Company does not have control but can implement
measures to minimize adverse impact on the Company's business;
application system restoration priorities for the Company's
computer systems; and contingencies specifically targeted
towards monitoring Company facilities and systems at year-end
1999.
The business unit recovery plans address resumption of
business in the worst case scenario of a total loss to a
Company facility, including the inability to utilize
computerized systems.
In view of the timing and scope of the MBA Test and other
testing, the Company's contingency planning does not include
developing special procedures with individual third parties if
they are not themselves Year 2000 compliant. If the Company
is unable to do business with such third parties
electronically, it would seek to do business with them on a
paper basis. Without knowing the identity of non-compliant
third parties and the amount of transactions occurring between
the Company and them, the Company cannot evaluate the effects
on its business if it were necessary to substitute paper
business processes for electronic business processes with such
third parties. Among other effects, Year 2000 non-compliance
by such third parties could delay receipt of renewal premiums
by the Company or the reporting to the Company of mortgage
loan delinquencies and could also affect the amount of the
Company's new insurance written.
The foregoing statements are designated as a Year 2000
Readiness Disclosure pursuant to the Year 2000 Information
Readiness Disclosure Act.
PAGE 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
At September 30, 1999, the Company's derivative financial
instruments in its investment portfolio were immaterial. The
Company places its investments in instruments that meet high
credit quality standards, as specified in the Company's
investment policy guidelines; the policy also limits the
amount of credit exposure to any one issue, issuer and type of
instrument. At September 30, 1999, the effective duration of
the Company's investment portfolio was 6.2 years. The effect
of a 1% increase/decrease in market interest rates would
result in a 6.2% decrease/increase in the value of the
Company's investment portfolio.
The Company's borrowings under the credit facilities are
subject to interest rates that are variable. Changes in
market interest rates would have minimal impact on the value
of the notes payable. See note 2 to the consolidated
financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits - The exhibits listed in the
accompanying Index to Exhibits are filed as part of
this Form 10-Q.
(b)Reports on Form 8-K - No reports were filed on
Form 8-K during the quarter ended September 30,
1999.
PAGE 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized, on
November 11, 1999.
MGIC INVESTMENT CORPORATION
\s\ J. Michael Lauer
-------------------------------
J. Michael Lauer
Executive Vice President and
Chief Financial Officer
\s\ Patrick Sinks
-------------------------------
Patrick Sinks
Vice President, Controller and
Chief Accounting Officer
PAGE 23
INDEX TO EXHIBITS
(Item 6)
Exhibit
Number Description of Exhibit
- ------- ----------------------
11.1 Statement Re Computation of Net Income
Per Share
27 Financial Data Schedule
PAGE 24
EXHIBIT 11.1
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
Three and Nine Month Periods Ended September 30, 1999 and 1998
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands of dollars,
except per share data)
BASIC EARNINGS PER SHARE
Average common shares outstanding 108,533 111,417 108,863 113,184
======== ======== ======== ========
Net income $122,909 $ 96,492 $336,261 $285,751
======== ======== ======== ========
Basic earnings per share $ 1.13 $ 0.87 $ 3.09 $ 2.52
======== ======== ======== ========
DILUTED EARNINGS PER SHARE
Adjusted shares outstanding:
Average common shares outstanding 108,533 111,417 108,863 113,184
Net shares to be issued upon
exercise of dilutive stock
options after applying
treasury stock method 1,728 1,278 1,130 1,544
-------- -------- -------- --------
Adjusted shares outstanding 110,261 112,695 109,993 114,728
Net income $122,909 $ 96,492 $336,261 $285,751
======== ======== ======== ========
Diluted earnings per share $ 1.11 $ 0.86 $ 3.06 $ 2.49
======== ======== ======== ========
7 1,000 9-MOS DEC-31-1999 SEP-30-1999 2,624,203 0 0 18,241 0 0 2,760,738 125,060 0 22,625 3,072,823 673,040 181,081 0 0 411,000 0 0 121,111 1,598,547 3,072,823 588,789 114,845 3,401 39,946 94,706 1,440 152,031 485,713 149,452 336,261 0 0 0 336,261 3.09 3.06 0 0 0 0 0 0 0