Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Investor Presentation (May 2018)
29 slides from Mgic Investment's investor presentation, May 22, 2018
Slide 1: Investor Presentation May 2018
Exhibit 99 Investor Presentation May 2018 MGIC Investment Corporation (NYSE: MTG)
Slide 2: Forward Looking Statements
Forward Looking Statements 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 statem
Slide 3: Key Financial Metrics Q1 2018
MGIC Investment Corporation Key Financial Metrics Q1 2018 ▪ $143.6 million GAAP net income in Q1 18; $144.6 million adjusted net operating income(1) in Q1 18 ▪ Benefited from positive primary loss reserve development, lower new notice activity and lower claim rate on those notices, and reduced feder
Slide 4: Key Financial Metrics: Quality NIW and Steady Market Share
MGIC Investment Corporation Key Financial Metrics Quality NIW and Steady Market Share Increasing Persistency and Growing IIF $16.0 25.0% $210.0 84% 83% $14.0 $200.0 20.0% 82% $12.0 $190.0 81% $10.0 15.0% $180.0 80% $8.0 $170.0 79% $6.0 10.0% 78% Insurance Insurance Forcein $4.0 $160.0 Annual Persist
Slide 5: Return on Equity Being Driven by Quality NIW, Growing IIF
Return on Equity Being Driven by Quality NIW, Growing IIF and Improved Credit Profile 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Q4 15 Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 GAAP Return on Equity Annualized Adjusted Return on Equity Annualized 1. GAAP Return on Equity Annualized is the ratio of GAAP net i
Slide 6: Capital Management Objectives
Capital Management Objectives ▪ Enhance holding company liquidity; ▪ Target low to mid 20s leverage ratio; ▪ Retain flexibility to pursue new business opportunities; ▪ Continue positive ratings trajectory; ▪ Cover claim obligations arising from our underlying mortgage insurance activities; ▪ Maintai
Slide 7: Strong Balance Sheet: Investment Portfolio Overview
Strong Balance Sheet Investment Portfolio Overview At March 31, 2018 Commentary Invested Assets By Type 3% 3% Corporates Tax-Exempt Munis 9% • $5.1 billion of cash and investments (consolidated) Taxable Munis Loan Backed 13% 42% − Includes $257 million at holding company GNMA Treasury/Gov't Agency •
Slide 8: Strong Statutory Capital Position
Strong Statutory Capital Position MGIC Risk-to-Capital Ratio MGIC Statutory Capital (in millions) (for periods ending)) $3,394 $1,654 $1,773 15.8 14.6 $1,181 $691 12.1 10.7 $0 $247 9.5 9.4 $1,521 $1,518 $1,574 $1,505 $1,620 $1,621 2013 2014 2015 2016 2017 Q1 18 2013 2014 2015 2016 2017 Q1 18 Policyh
Slide 9: PMIERs 1.0 Asset Trends
PMIERs 1.0 Asset Trends Declining Required Assets for Legacy and Non-Performing Risk Partially Offset by Increased Required Assets For NIW 2009 and > PMIERs Minimum Required Assets Pool/Other (Millions) Non Perfroming Reinsured $4,464 $3,950 $3,900 $6,000 6,000 Non Performing $5,000 5,000 Performing
Slide 10: Debt Outstanding
Debt Outstanding As of March 31, 2018 • MGIC: • $155 million 1.91% Fixed Rate Advance from FHLB due in Feb-2023 • MTG: • $425 million of 5.75% Senior Notes due in Aug-2023 • $257 million 9% Junior Subordinated Debentures due in Apr-2063 (1) •Debt to Total Capital(2) ratio ~20% at March 31, 2018 •Deb
Slide 11: Key Drivers of MGIC's Strategy
Key Drivers of MGIC’s Strategy • Largest customer base in industry (~5,000 lenders/servicers) Continued MI Leadership • Established market player positioned to take advantage of current environment • Exceptional customer service with industry-leading low expense ratio • Focus on increasing holding c
Slide 12: Good Progress on Executing Business Strategies
Good Progress on Executing Business Strategies At March 31, 2018 Prudently grow Pursue new business Preserve and expand Develop and diversify the Manage and insurance in force opportunities that the role of MGIC and talents of co-workers deploy capital to leverage our core Private MI in housing opti
Slide 13: Summary
Summary • Enables private investment in mortgage credit risk • Established market player positioned to take advantage of current environment Unique Company • Solid capital position and positive ratings momentum • Proven track record of execution with strong management team • Growing Insurance in for
Slide 14: MGIC at a Glance
MGIC at a Glance as of March 31, 2018 Ready, willing and able to expand our role in a robust mortgage finance system Credit trends continue to $197.5 bn Insurance in force develop favorably Experienced sales and Exceptional customer service operations staff supporting while being low cost provider ~
Slide 15: Appendix
MGIC Appendix
Slide 16: MGIC Investment Corporation Overview
MGIC Investment Corporation Overview ✓ Who we are • The nation’s oldest private mortgage insurer, with insurance in force of $197.5 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
Slide 17: Solid Demographic Trends Are Positively Influencing Housing Markets
Solid Demographic Trends Are Positively Influencing Housing Markets ✓ Increasing household formations ✓ Increase in owner-occupied partially offset by a decline in renters ✓ ~45 million households between ages 25 and 34 ✓ (Homeownership rate is ~35% for < 35 year olds and ~60% for 35 – 44 year olds)
Slide 18: Mortgage Origination Outlook
$ in billions $1,200 $1,600 $2,000 Source: As of April 2018; Fannie Mae, Freddie Mac, and MBAand Mac, FreddieMae, Fannie 2018; April of As Source: $800 $400 $0 Fannie Mae $1,192 $498 $1,690 Freddie Mac $1,290 $430 $1,720 2018 MBA $1,168 $443 $1,611 Forecasts Origination Purchase Fannie Mae $1,248 $4
Slide 19: High LTV Lending Trends
High LTV Lending Trends Private MI Market Share of Insured Loans (2) Private and Government Insured Loans (1) Total Primary as % of Total Origination Market MI ($bn): $454 $387 $565 $588 $458 $644 $763 $719 100% 4% 4% 3% 4% 4% 3% 2% 3% 40% 90% 80% 35% 33% 39% 36% 43% 39% 70% 53% 27% 66% 60% 24% 50%
Slide 20: Solid Market Share Leads to Growing Insurance in Force
Solid Market Share Leads to Growing Insurance in Force Market Share by NIW (1) • Ready, willing and able to expand our role in a robust mortgage finance system • Solid market share position of ~18% • $197.5 billion Insurance in force is up ~8% year over year for quarter ending March 31, 2018 MGIC Pr
Slide 21: Well Positioned to Serve the Market
Well Positioned to Serve the Market MGIC’s Strong Positioning Increasing Risk in Force and Improving Credit Profile $55.0 12.0% • Exceptional customer service with industry- $50.9 leading low expense ratio $50.0 10.0% 8.0% $45.0 6.0% $40.0 • Growing risk in force and improving credit 4.0% performanc
Slide 22: Well Positioned to Serve the Market (Risk in Force)
Well Positioned to Serve the Market (as of March 31, 2018) Primary Risk in Force Risk in Force By FICO Score at Time of Origination $50.9 Billion (as of quarter ending) ~88% of RIF is >2008 or HARP 100.00% 16% 3% 27% 760 & > 80.00% 10% 37% 11% 740-759 10% <2005 12% 720-739 60.00% 7% 12% 15% 2005-200
Slide 23: Positive Credit Trends
Positive Credit Trends (as of March 31, 2018) New Notices as Percent of Primary Loans Insured Cures as Percent of Primary Delinquent Inventory 6.0% New Notices as % of Beginning Total 42% 5.5% 38% 5.0% New Notices as % of Beginning Current 34% 4.5% 30% 4.0% 3.5% 26% 2017 hurricane impact 3.0% 22% 2.
Slide 24: Delinquency Trends
Delinquency Trends (as of March 31, 2018) 24
Slide 25: High Quality Business Leads to Lower Losses and Solid Returns
High Quality Business Leads to Lower Losses and Solid Returns Ever to Date Loss Ratio of Individual Book Years (1), (2) 13.7% 6.7% 5.7% 5.6% 4.3% 3.8% 3.0% 2009 2010 2011 2012 2013 2014 2015 Through March 31, 2018 the 2009 – 2015 books have generated a cumulative ~$3.4 billion in earned premium and
Slide 26: Illustrative Impact of 2018 Premium Change on Net Premium Yield
Illustrative Example of Impact of 2018 Premium Change On Net (After Reinsurance) Premium Yield Average Net Premium Yield Declines as Books with Higher Yields Runoff and are Replaced with Books with Lower Yields This example is not a forecast or guidance and is meant for illustrative purposes only Re
Slide 27: Reconciliation of GAAP Net Income to Adjusted Net Operating Income
Reconciliation of GAAP Net Income to Adjusted Net Operating Income (Millions) Q4 15 Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 GAAP Net Income $ 102.42 $ 69.19 $ 109.22 $ 56.62 $ 107.49 $ 89.80 $ 118.62 $ 120.03 $ 27.31 $ 143.64 Change in deferred tax asset valuation allowance $ (25.35) Additional income t
Slide 28: Summary of Risk Factors
Summary of Risk Factors The below is a brief summary of some of the risk factors that could cause the issuer’s results to differ materially from those expressed in, or implied by, the forward looking statements included in this presentation. Before investing in the issuer’s securities, investors sho
Slide 29: Company Contact
Company Contact: Michael Zimmerman Senior Vice President - Investor Relations Direct: (414) 347-6596 mike_zimmerman@mgic.com 29