Radian Group Inc. · NYSE:RDN
Radian — Merger or Acquisition (March 2007)
29 slides from Radian's merger presentation, Mar 16, 2007
Slide 1: Creating a Preeminent Mortgage and Credit Risk Insurer
Exhibit 99.2 MGIC Radian Financial Group Creating a Preeminent Mortgage and Credit Risk Insurer February 6, 2007 MGIC Radian Financial Group
Slide 2: Forward Looking Statement
Forward Looking Statement Discussions made in this press release that are not statements of historical fact (including statements that include terms such as “will,”“may,” “should,” believe,” “expect,” anticipate,” “estimate,” “intend,” and “plan”) are forward-looking statements that involve risks an
Slide 3: Additional Information
Additional Information The proposed merger will be submitted to shareholders of MGIC Investment Corporation and Radian Group Inc. for their consideration. Shareholders are urged to read the joint proxy statement/prospectus regarding the proposed merger when it becomes available because it will conta
Slide 4: Compelling Strategic Transaction
Compelling Strategic Transaction Leadership and Scale Enhanced Operating Platform Financially Compelling Synergistic Transaction Creating Shareholder Value MGIC Radian Financial Group 3
Slide 5: Compelling Strategic Transaction
Compelling Strategic Transaction A premier mortgage insurer – $290bn of combined insurance in-force; $98bn of NIW in 2006 Leadership Experienced and strong combined management team and Scale Increased financial strength and flexibility from larger size Complementarybusinesses – mortgage insurance, f
Slide 6: Overview of Transaction Terms
Overview of Transaction Terms Structure 0.9658 MGIC shares per Radian share Market-for-market exchange (based on February 2, 2007 market close) Consideration 100% Stock MGIC Radian Financial Group Name – Mortgage Insurance business: MGIC – Financial Guaranty business: Radian Guaranty Headquarters: M
Slide 7: Highly Experienced Management Team
Highly Experienced Management Team Organization Chart Post-Closing Industry Experience Title Post-Closing (Years) Chief Executive Officer Curt Culver 31 President / Chief Operating Officer S.A. Ibrahim 25 Mortgage Insurance Company Pat Sinks 28 Financial Guaranty Company Stephen Cooke 23 Chief Finan
Slide 8: Pro Forma Franchise and Earnings
Pro Forma Franchise and Earnings Combined Businesses Pro Forma Net Income Mix (1) Mortgage insurance franchise $290bn of insurance in force $98bn of 2006 NIW Financial guaranty business Sherman 11.3% Strong AA franchise $104bn of net par outstanding C-BASS Financial services businesses 9.7% C-BASS:
Slide 9: MGIC Radian Mortgage Insurance Business
MGIC Radian Mortgage Insurance Business Scale provides significant operating efficiencies Increasing MI Penetration Rates Best practices of both companies Single technology platform for MI business Maintain sound risk profile Leading product capabilities 2007E Capital market solutions Source: Inside
Slide 10: Increased Scale and Operating Efficiencies
Increased Scale and Operating Efficiencies Combination of MGIC and Radian Creates Greater Operating Efficiencies and Financial Strength Increased Scale (1) Statutory Expense Ratio 40.6% $290 billion of insurance-in-force $2.8 billion of revenue 29.2% 27.4% 23.8% $1.1 billion of net income 22.5% 21.8
Slide 11: Primary Mortgage Insurance Risk Profile
Primary Mortgage Insurance Risk Profile Maintains Excellent Risk Dispersion FICO Distribution Original LTV < 575 575 – 619 < 80 80s 4% 9% 6% 100s 7% 19% 85s 700 & > 7% 45% 95s 90s 620 – 699 29% 32% 42% Product Type Geographic Dispersion ARM – Neg Am 4% ARM No Neg Am % of RIF 17% 17.8% % of RIF % of
Slide 12: Mortgage Risk Origination Capabilities
Mortgage Risk Origination Capabilities Providing Solutions Across Credit Spectrum Lender Capital Solutions Markets AAA Flow Flow and Pool Plus: Pool — Bulk AA Contract — Second liens Products Underwriting — NIMs — Credit default A swaps BBB Lower cost to Increased liquidity originate Balance sheet a
Slide 13: Residential Mortgage Market
Residential Mortgage Market Strong Sector Growth Dynamics Single Family Mortgage Originations ($tn) $15.0 $8.8 $2.9 $1.0 1970's 1980's 1990's 2000-2005 Total Residential Originations Source: Inside Mortgage Finance, FNMA, MBAA December Outlook. MGIC Radian Financial Group 12
Slide 14: Mortgage Demand Continues to Grow
Mortgage Demand Continues to Grow 16 15 72% Household Growth (millions) 14 Homeownership Rate 70% 12 11 68% 10 8 66% 6.6 6 64% 4 62% 2 0 60% 1980’s 1990’s 2000 – 2010 Source: U.S. Department of Commerce, U.S. Census Bureau for 1980 through June 2002 data; Fannie Mae 2005 Statistical Summary data. MG
Slide 15: Market Opportunities
Market Opportunities MGIC Radian Has the Size and Scale to Dynamically Target Attractive Opportunities Opportunities New products and services Mortgage Debt Outstanding: Credit default swaps $10 trillion as of 4Q06 NIMs (source: MBA) Second-to-pay pool MI Industry Insurance Flow MI In Force: Bulk MI
Slide 16: Financial Guaranty Overview
Financial Guaranty Overview Portfolio Product Lines (As of 31-Dec-06) Public Finance Direct writer of credit enhancement for municipal Sector Sector % bonds, asset-backed obligations and structured Education 4.1% General obligations 16.8 products Healthcare 10.6 Housing 0.8 Provider of reinsurance t
Slide 17: C-BASS Overview
C-BASS Overview Purchases, services and securitizes Pre-tax Net Income ($mm) "credit sensitive" residential mortgage assets Invests where servicing makes a $291 difference Built servicing portfolio to more than $56 $241 billion at December 31, 2006 $208 80% of revenues are recurring from servicing,
Slide 18: Sherman Financial Group Overview
Sherman Financial Group Overview Consolidated Pre-tax Net Income ($mm) Originates, purchases and services consumer debt Pre-tax Income Purchases of distressed debt made at deep discounts to their original face $347 value from national financial institutions and major retail $288 corporations CreditO
Slide 19: Enhanced Strategic Opportunities
Enhanced Strategic Opportunities Combination of MGIC and Radian Creates a Stronger Platform for Growth Combination will accelerate MGIC Radian’s ability to expand operations internationally, experienced management team already in place London-based European Canadian expansion in progress operations
Slide 20: Significant Achievable Cost Savings
Significant Achievable Cost Savings Cost Savings Opportunities Estimated Cost Savings % of Consolidation of mortgage insurance Total operations and technology platform $mm Savings Direct MI $ 41 32 % Elimination of duplicative corporate Expenses staff functions and related overhead Direct and 41 32
Slide 21: Substantial Capital Generation
Substantial Capital Generation ($ in millions) Potential Uses $1,053 Support growth in core businesses Financial / strategic flexibility Ability to invest in business initiatives $919 International Other $134 Return excess capital to shareholders 2008E Pro Dividend Net Capital Forma Net Generation I
Slide 22: Integration Plan
Integration Plan Best of both companies Talent, analytics, systems and processes Communication with constituencies Ratings agencies, regulators, employees, investors and customers Integration timetable: 1Q – 3Q 2007 4Q 2007 1Q 2008 2H 2008 1H 2009 Detailed Transaction close Integration Integration T
Slide 23: Pro Forma Assumptions
Pro Forma Assumptions Transaction Close: th 4 Quarter 2007 Consideration / Structure: 100% Stock Radian to receive 0.9658 shares of MGIC common stock for each Radian share Synergies: Pre-tax cost savings — $128mm phased in 75% / 100% in 2008 / 2009, respectively No revenue synergies assumed Estimate
Slide 24: Pro Forma Financial Analysis Earnings Impact
Pro Forma Financial Analysis Earnings Impact To MGIC Shareholders GAAP Current (I/B/E/S) Pro Forma % Change 2008 $7.63 $7.85 2.8% 2009 8.39 8.92 6.3 Cash 2008 $7.63 $8.14 6.7% 2009 8.39 9.19 9.5 To Radian Shareholders GAAP Current Pro Forma % Change 2008 $7.24 $7.58 4.7% 2009 7.96 8.62 8.2 Cash 2008
Slide 25: Compelling Strategic Transaction
Compelling Strategic Transaction Leadership and Scale Enhanced Operating Platform Financially Compelling Synergistic Transaction Creating Shareholder Value MGIC Radian Financial Group 24
Slide 26: Appendix
Appendix MGIC Radian Financial Group 25
Slide 27: Pro Forma Income Statement
Pro Forma Income Statement ($ in millions) 2008 2009 MGIC Standalone GAAP Net Income (Based on I/B/E/S) $ 578 $ 612 Radian Standalone GAAP Net Income (Based on I/B/E/S) 567 601 Pro Forma Net Income – Before Adjustments $1,144 $ 1,213 After-tax Adjustments Cost Savings $ 66 $ 92 Transaction Identifie
Slide 28: Balance Sheet Summary
Balance Sheet Summary As of December 31, 2006 ($ in millions) MGIC Radian Cash and Investments $5,546 $6,446 Deferred Policy Acquisition Costs 13 222 Other Assets 1,063 1,261 Total Assets $6,622 $7,929 Unearned Premiums $190 $944 Reserve for Losses 1,126 842 Debt 781 748 Other Liabilities 229 1,327
Slide 29: Pro Forma Financial Analysis Capital Impact
Pro Forma Financial Analysis Capital Impact MGIC Radian Pro Forma GAAP Debt / Capital (2007E) 15.4 % 15.9 % 18 - 20 % Rating Agency Debt / Capital (2007E) 15.4 % 15.9 % 12 - 15 % MI Risk-in-Force / Statutory Capital 7.4 x 10.4 x 8.3x (2006A) MGIC Radian Financial Group 28