Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Investor Presentation (February 2016)
25 slides from Mgic Investment's investor presentation, Feb 3, 2016
Slide 1: Investor Presentation February 2016
Investor Presentation February 2016 MGIC Investment Corporation (NYSE: MTG) Exhibit 99
Slide 2: Forward Looking Statements and Risk Factors
2 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. This presentation may contain forward looking statements. Our actual results
Slide 3: Table of Contents
3 • Private Mortgage Insurance Industry Overview • MGIC Investment Corporation • Q4 2015 Financial Overview • Full Year 2015 Financial Overview • Statutory Capital Position • New Business • Improved Credit Performance • Cost Advantage • Investment Portfolio Overview • Growth Opportunities • Regulato
Slide 4: Private Mortgage Insurance Is Prepared for the Future
Private Mortgage Insurance Is Prepared for the Future Tested • In a home price decline worse than the Great Depression, mortgage insurers served their role as the absorber of first-loss risk, paying over $50 billion in claims since 2007 Strengthened • $6.5 billion new capital raised by existing comp
Slide 5: Who we are
5 Who we are • The nation’s oldest private mortgage insurer, with insurance in force of $174.5 billion • In 1957 Max Karl founded the modern MI industry and MGIC in Milwaukee, WI • ~800 employees, including an experienced sales and underwriting team covering the U.S. and other locations What we
Slide 6: Q415 Financial Overview
MGIC Investment Corporation Q415 Financial Overview $102.4 million net income Excluding adjustment to reversal of DTA valuation allowance net income was $113.9 million Risk to capital improves to 12.1:1 2H15 market share ~20% $9.8 billion NIW in Q4 >2008 vintages and HARP are ~75% of tot
Slide 7: Full Year 2015 Financial Overview
MGIC Investment Corporation Full Year 2015 Financial Overview $1.2 billion net income Excluding reversal of DTA valuation allowance net income was $485.3 million 2015 market share ~20% NIW increased 29% IIF increased 6% MGIC is compliant with PMIERs Minimum Required Assets ~$4.5 billon
Slide 8: Statutory Capital Position
Statutory Capital Position $1,521 $1,518 $1,574 $247 $691 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 $2,500 2013 2014 2015 MGIC Statutory Capital Policyholder Surplus Contingency Reserve 8 •Statutory net income is reduced by the amount of contingency reserves built in the reporting period a
Slide 9: Purchase Market Share is Estimated To be ~3.5 - 4x Refinance Market Share
9 Purchase Market Share is Estimated To be ~3.5 - 4x Refinance Market Share Private MI purchase and refinance percentages estimated using Arch, Essent, Genworth, Radian and MGIC press release information as a proxy for the industry which is then multiplied by the total private mortgage insurance wri
Slide 10: New Business Written
10 New Business Written 1) Source: MGIC and Inside Mortgage Finance, not including HARP $12 $14 $24 $30 $33 $43 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2010 2011 2012 2013 2014 2015 MGIC Market Share Within PMI Industry(1) Total NIW (Billions) 16.8% 20.0% 20.1% 16% 17% 18% 19% 20% 21% 22% Q1 13 Q2
Slide 11: Risk in Force as of 12/31/2015
11 Risk in Force as of 012/31/2015 Total Flow Total RIF: $42.5 billion Total RIF: $45.5 billion >2008 + HARP Now ~75% of In Force Source: Company filings Source: Company data Note: Risk in force is before reinsurance. Includes bulk in force, which has been in run-off since 2008. 3% 18% 12% 67% <2005
Slide 12: Positive Credit Trends
12 Approximately 84% of Q4 2015 new notices are prior delinquencies Default inventory declined 22% y/o/y @ 12/31/15 Full year paid losses down 26% y/o/y @ 12/31/15 Positive Credit Trends (1) Trailing 12 month cure/default ratio is the sum of the last 12 month’s cures / the sum of the last 12 m
Slide 13: 2009 and Forward Generating Low Level of Delinquencies
23.3% 12.6% 18.9% 31.9% 8.7% 4.6% Primary Default Inventory Q4 2015 < 2005 2005 2006 2007 2008 > 2008 22.6% 11.2% 17.1% 30.8% 9.0% 9.3% New Notices Received in Q4 2015 < 2005 2005 2006 2007 2008 > 2008 13 Source: Company filings ~5% of Inventory from 2009 -15 Books ~9% of New Notices from 2009-15 Bo
Slide 14: High Quality Business Contained in 2009 and Forward Books
High Quality Business Contained in 2009 and Forward Books 13.6% 6.8% 4.3% 2.7% 2009 2010 2011 2012 14 Static Pool Delinquency Rates (1) Based on Loan Count Ever to Date Loss Ratio (2) 1) Static Pool Delinquency Rates = (total number of delinquent loans at the end of the stated reporting period) / (o
Slide 15: Highly Efficient and Low Cost Platform
15 Highly Efficient and Low Cost Platform (1) MGIC is Maintaining a Low Expense Ratio 1) GAAP Expense Ratio for MGIC is for insurance operations only 16.3% 16.0% 15.2% 18.6% 14.7% 14.9% 0% 5% 10% 15% 20% 25% 2010 2011 2012 2013 2014 2015
Slide 16: Investment Portfolio Overview
MGIC Investment Corporation Investment Portfolio Overview • $4.8 billion as of December 31, 2015 including $402 million at holding company • 99.9% Investment Grade, – ~83% with an underlying rating of “A” or better • Effective Duration of 4.7 years (excludes cash and cash equivalents) • Imbedded pre
Slide 17: Mortgage Origination Outlook
Mortgage Origination Outlook Housing remains affordable 2016 origination forecasts range from $1.4 to $1.6 trillion 2017 GSEs and MBA all forecasting an increase in purchases offset by decrease in refinances Decreasing distressed and cash sales Good environment for Private MI 17 Source: As
Slide 18: Demographic Drivers of Demand
18 Demographic Drivers of Demand Source: Joint Center for Housing Studies Harvard University, Baseline Household Projections for the Next Decade and Beyond March 2014 Pent up demand Household formations slowed between 2007 and 2012 Forecasts estimate that between 1.1 – 1.3 million households w
Slide 19: Millennials are Transitioning into Prime Home Buying Age
19 Millennials are Transitioning into Prime Home Buying Age Sources: National Assoc of Realtors, Joint Center for Housing Studies, Harvard, PEW Research Center and FBR Research Sources: Goldman Sachs
Slide 20: Millennials Are Increasing Home Purchases
20 Millennials Are Increasing Home Purchases Sources: National Assoc of Realtors, Joint Center for Housing Studies, Harvard, PEW Research Center and FBR Research Sources: National Association of REALTORS® Confidence Index December 2015
Slide 21: Many Purchasers Require High LTV Loans
21 Many Purchasers Require High LTV Loans • Down payment cited as one of the main obstacles to home ownership • ~76% of home purchases are financed • ~50% of ALL home buyers use a down payment of less than 20% • ~30% of home purchasers are 1st time home buyers who typically lack a 20% down payment •
Slide 22: Regulatory Environment
Regulatory Environment • New Master Policy in effect – Standardization provides consistent terms of coverage across carriers – Provides assurances about the consistent handling and payment of claims – Brings greater transparency to contractual protections for lenders and investors • New Financial Re
Slide 23: Summary
23 • Financial position – Solid statutory capital position – 2009 – 2015 or “new” books are very profitable – New books plus HARP account for ~75% of Primary RIF – Generating GAAP profits – Growing insurance in force and premiums – Declining losses – Reinsurance increases capital strength and financ
Slide 24: Summary of Risk Factors
24 Summary of Risk Factors • Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and / or increase our losses. • The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortga
Slide 25: Company Contact
Company Contact: Michael Zimmerman Senior Vice President Investor Relations Direct: (414) 347-6596 mike_zimmerman@mgic.com
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