Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Barclays Global Financial Services Conference 2020
25 slides from Mgic Investment's conference presentation, Sep 15, 2020
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference September 15, 2020
Slide 2: Forward Looking Statements
Forward Looking Statements As used in this presentation, “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
Slide 3: MGIC Investment Corporation Overview
MGIC Investment Corporation Overview ✓ Who we are ❖The nation’s oldest private mortgage insurer, with insurance in force of $230.5 billion as June 30, 2020 ❖In 1957 Max Karl founded the modern MI industry and MGIC in Milwaukee, WI ❖~750 employees, including an experienced sales and underwriting team
Slide 4: Overview of MGIC Strategy
Overview of MGIC Strategy Pursue new business Preserve and expand Manage and Foster an environment that Prudently grow opportunities that improve the role of MGIC and deploy capital to maximize best positions our people to insurance in force our competitive position in Private MI in housing our long
Slide 5: Organizational Structure
Organizational Structure MGIC Investment Corp. (HoldCo) • Cash and Liquid Assets: $530mm at June 30, 2020 • Capital actions in August of 2020 added approximately $400mm Mortgage Guaranty Insurance Corporation Other Subsidiaries “MGIC” • Flagship Writing Company that collects premiums and pays credit
Slide 6: Strong Capital Position
Strong Capital Position • Mortgage insurance capital requirements are governed by PMIERs (Private Mortgage Insurance Eligibility Requirements) • As of June 30, 2020 MGIC maintained a PMIERs ratio of 132%, reflecting excess capital of $1.1 billion • As of June 30, 2020, MGIC had statutory capital of
Slide 7: Capital Requirements on New Risk Written
Capital Requirements on New Risk Written Higher FICO and lower LTV characteristics have driven lower initial PMIERs Capital Requirements on NIW PMIERs Capital Requirement on Risk Written was ~110 bps higher in December 2018 than in June 2020 ❑ Provides significant leverage to increase new risk writt
Slide 8: Risk Management Strategy
Risk Management Strategy Comprehensive reinsurance coverage through quota share and ILN transactions Optimize our retained exposure Evaluation of distribution opportunities and structures - Significantly reduces the capital that would otherwise be needed to support the risk Leverage multiple forms o
Slide 9: Summary
Summary ❖Established market player with significant scale and a low expense ratio ❖High quality in-force portfolio with attractive risk characteristics Unique Company ❖Strategy focused on prudent long-term growth and capital deployment ❖Well-positioned in COVID environment with attractive new busine
Slide 10: Appendix
Appendix
Slide 11: COVID-19 Implications and MGIC’s Positioning (1/2)
COVID-19 Implications and MGIC’s Positioning (1/2) ❖ In mid-March, MGIC’s Crisis Management Team activated a Remote Work protocol ✓ The bulk of the Company’s operations continue to be performed remotely Operational Health and Safety ✓ All business operations are functioning and new insurance written
Slide 12: COVID-19 Implications and MGIC’s Positioning (2/2)
COVID-19 Implications and MGIC’s Positioning (2/2) ❖ Industry forbearance rates have been flattening as of June 30, 2020 ❖ MGIC delinquency rate was 6.4% as of June 30, 2020, substantially better than initially anticipated and with ~67% of delinquency inventory in forbearance programs. At August 31,
Slide 13: Mortgage Insurance Market Overview
Mortgage Insurance Market Overview Sizing the 2019 MI Market ❖Mortgage insurance protects lenders / investors against losses Total Mortgage Originations that result from defaults on home mortgages $2.0 trillion ❖Freddie Mac's and Fannie Mae's federal charters prohibit them from purchasing a low down
Slide 14: Primary Risk in Force (“RIF”)
Primary Risk in Force (“RIF”) June 30, 2020 Original Loan-to-Value (“LTV”) Original FICO 15.0 % 18.7 % 29.9 % 39.5 % 10.7 % 11.1 % 51.6 % 29.8 % 11.7 % 17.1 % 11.6 % 14.0 % 10.1 % 29.8 % 11.1 % 8.5 % 27.4 % 8.2 % 17.6 % 4.0 % 10.6 % 2.7 % 6.0 % 3.5 % 2008* 2020 2008* 2020 639 & < 640 - 659 660 - 679
Slide 15: Our Market Position
Our Market Position Established market leader with a large, diverse, customer base MGIC at a Glance 1H 2020 Market Share by New Insurance Written (“NIW”) ❖ MGIC has a leading industry presence amongst private mortgage insurers NMIH ❖ Strong relationships with a large, diverse base of originators and
Slide 16: Strong Pre-COVID Underwriting Performance and Earnings
Strong Pre-COVID Underwriting Performance and Earnings Net Income As of June 30, 2020 % PMIERs % of Loans Minimum $ 670 $ 674 Covered by Insurance in Insurance in Required % of % Risk-in- Reinsurance Force Force from Delinquent Book Year Force ² FICO DTI Reinsurance Risk-in-Force 2008 & Prior¹ 11.0
Slide 17: June 2020 YTD Highlights
June 2020 YTD Highlights Q2 YTD Financial Summary Commentary Q2 %Δ ❖ $164 million net income in 1H 2020 2019 2020 Key Metrics ❖ Large in-force book continues to provide meaningful premiums and New Insurance Written $25.0bn $46.1bn 84.4% revenue growth to the business Insurance In Force $213.9bn $230
Slide 18: High Quality Investment Portfolio
High Quality Investment Portfolio Investment Portfolio Sector Weightings Investment Portfolio Credit Ratings ❑ Pre-tax Book Yield: 2.81% Corporate Municipal AAA AA A BBB¹ ❑ After-tax Book Yield: 2.31% Taxable Muni Loan-Backed ❑ Duration: 4.00 years Agency Government ❑ ~$69 million (book value) of se
Slide 19: Debt Outstanding
Debt Outstanding June 30, 2020 • $530 million cash and investments at holding company • ~$60 million annual debt service on a cash basis August 2020 Debt Issuance Summary • $650mm 5.25% 8 Year senior notes were issued • $182.7mm of 5.75% Senior Notes were tendered in exchange $1,223.0M for cash $1,1
Slide 20: Strong Holding Company Liquidity Supported
Strong Holding Company Liquidity Supported ❖ MGIC’s strong statutory capital and PMIERs excess capital position has supported durable and increasing dividends to the Holding Company ❖ In 2019, MTG received $70 million of dividends from its operating subsidiaries each quarter ❖ In early 2020, MGIC re
Slide 21: Statutory Capital Position
Statutory Capital Position MGIC Statutory Capital (in millions) MGIC Risk-to-Capital Ratio (1) 14.6:1 $5,000 $4,374 $4,500 12.1:1 $4,000 10.7:1 10.2:1 $3,500 9.5:1 9.7:1 9.0:1 $3,000 $2,963 $2,138 $3,106 $2,500 $1,654 $2,000 $1,181 $247 $691 $1,500 $1,000 $1,518 $1,574 $1,505 $1,620 $1,682 $1,619 $1
Slide 22: Capital Position Under PMIERs
Capital Position Under PMIERs 1. Revised PMIERs became effective March 31, 2019. The decrease in our available assets at 2019 was primarily due to the elimination of any credit for future premiums that had previously been allowed for certain 22 insurance policies. 2. See page 25 for a discussion of
Slide 23: Risk Distribution Strategy
Risk Distribution Strategy Ability to Proactively Manage the Credit Cycle Under Changing Capital Market and Under writing Conditions ❑ Reinsurance reduces the capital that would otherwise be required to support the risk while providing 1st loss protection and “tail-risk” protection in severe stress
Slide 24: MGIC’s PMIERS Excess Can Support a Significant Increase in Delinquencies
MGIC’s PMIERS Excess Can Support a Significant Increase in Delinquencies • Under PMIERs, delinquent loans are subject to risk charges based on missed payments and whether a claim has been received. • For loans with 2-3 missed payments the required asset factor is 55% of the risk in force (“RIF”) and
Slide 25: Risk Factors
Risk Factors ❖ The COVID-19 pandemic may continue to materially impact our financial results and may also materially impact our business, liquidity and financial condition. ❖ Downturns in the domestic economy or declines in the value of borrowers’ homes from their value at the time their loans close
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