Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Q4 2018 Earnings Presentation
29 slides from Mgic Investment's earnings presentation, February 2019
Slide 1: Investor Presentation Q4 2018
Investor Presentation Q4 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 Q4 2018
MGIC Investment Corporation Key Financial Metrics Q4 2018 $157.7 million GAAP net income in Q4 18; $154.0 million adjusted net operating income(1) in Q4 18 Benefited from positive primary loss reserve development, lower new notice activity and lower estimated claim rate (excl. 2017 estimated hur
Slide 4: Key Financial Metrics Full Year 2018
MGIC Investment Corporation Key Financial Metrics Full Year 2018 $670.1 million GAAP net income in 2018; $668.7 million adjusted net operating income(1) in 2018 Benefited from positive primary loss reserve development, lower new notice activity and lower estimated claim rate on those notices, an
Slide 5: Primary Components of Net Losses Incurred
MGIC Investment Corporation Key Financial Metrics Quality NIW and Steady Market Share Increasing Persistency and Growing IIF Net Premium Yield (1) Declines as Higher Premium and Loss Content of Legacy Book is Favorable Trends for New Delinquent Notices Received and A Steady Improvement in the Replac
Slide 6: Return on Equity Being Driven by Quality NIW, Growing IIF and Improved Credit Profile
Return on Equity Being Driven by Quality NIW, Growing IIF and Improved Credit Profile 25.0% 23.4% 21.8% 20.5% 20.0% 18.8% 18.4% 18.0% 18.3% 17.7% 16.3% 16.7% 16.1% 15.0% 14.3% 13.6% 10.0% 5.0% 0.0% Q4 15 Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 GAAP return on beginning shareholders' equity (1) A
Slide 7: Capital Management Objectives
Capital Management Objectives Influence and ensure compliance with capital requirements; Manage relationships to foster access to capital and reinsurance markets; Size the level of capital to balance competitive needs, handle contingencies, and create shareholder value, including analyzing the
Slide 8: Strong Balance Sheet Investment Portfolio Overview
Strong Balance Sheet Investment Portfolio Overview At December 31, 2018 Commentary Invested Assets By Type Corporates • $5.3 billion of cash and investments (consolidated) 6% Tax-Exempt Munis 14% − Includes $248 million at holding company Taxable Munis 47% 11% • 99.7% Investment Grade Loan Backed −
Slide 9: Strong Statutory Capital Position
Strong Statutory Capital Position MGIC Statutory Capital (in millions) MGIC Risk-to-Capital Ratio (December 31,) (December 31,) $3,820 15.8:1 $2,138 14.6:1 $1,654 12.1:1 $1,181 10.7:1 $691 9.5:1 9:1 $0 $247 $1,574 $1,620 $1,682 $1,521 $1,518 $1,505 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2
Slide 10: Components of PMIERs 1.0
PMIERs 1.0 Asset Trends (1) Declining Required Assets for Legacy and Non-Performing Risk Partially Offset by Increased Required Assets For NIW 2009 and > PMIERS 1.0 Minimum Required Assets Pool/Other (in millions) $3,449 Non Perfroming Reinsured $5,500 Non Performing Minimum Required Assets $5,000 C
Slide 11: Debt Outstanding
Debt Outstanding As of December 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% Convertible Junior Subordinated Debentures due in Apr-2063 (1) •Debt to Total Capital(2) ratio ~19% •Debt s
Slide 12: 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 13: Good Progress on Executing Business Strategies
Good Progress on Executing Business Strategies December 31, 2018 Prudently grow Pursue new business Preserve and expand Develop and diversify the Manage and insurance in force opportunities that meet the role of MGIC and talents of co-workers deploy capital to our return objectives Private MI in hou
Slide 14: Summary
Summary • Enables private investment in mortgage credit risk Unique • Established market player positioned to take advantage of current environment Company • Solid capital position and positive ratings momentum • Proven track record of execution with strong management team • Growing Insurance in for
Slide 15: MGIC at a Glance
MGIC at a Glance December 31, 2018 Ready, willing and able to expand our role in a robust mortgage finance system Credit trends continue to $209.7bn Insurance in force develop favorably Experienced sales and Exceptional customer service operations staff supporting while being low cost provider ~5,00
Slide 16: Appendix
Hd [oxe) el MGIC Appendix 16
Slide 17: MGIC Investment Corporation Overview
MGIC Investment Corporation Overview Who we are • The nation’s oldest private mortgage insurer, with insurance in force of $209.7 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 18: 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 19: Mortgage Origination Outlook
Mortgage Origination Outlook Origination Forecasts 2019 origination forecasts ~$1.6 trillion 2019 2020 2021 Overall market volume expected to be relatively flat $1,740 $2,000 $1,683 $1,681 $1,679 $1,664 $1,614 $1,613 GSEs and MBA all forecasting modest increases $1,600 $432 in purchase activit
Slide 20: High LTV Lending Trends
High LTV Lending Trends Private and Government Insured Loans Private MI Market Share of Insured Loans (2) as % of Total Origination Market (1) 50.0% PMI VA FHA USDA 41.4% 38.7% 100.0% 40.0% 36.3% 36.2% 90.0% 34.0% 29.9% 31.2% 80.0% 32.4% 34.2% 33.9% 29.3% 39.1% 39.3% 43.4% 30.0% 27.8% 26.6% 70.0% 53
Slide 21: 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 • $209.7 billion Insurance in force is up ~8% year over year at December 31, 2018 $220.0 $209.7 $200.0 MGIC Pr
Slide 22: Well Positioned to Serve the Market
Well Positioned to Serve the Market MGIC’s Strong Positioning Increasing Risk in Force and Improving Credit Profile • Exceptional customer service with low expense $60.0 12.0% $54.1 ratio $55.0 10.0% $Risk In Force (Billions) Loss Reserves as % of RIF $50.0 8.0% • Growing risk in force and improving
Slide 23: Well Positioned to Serve the Market
Well Positioned to Serve the Market (as of December 31, 2018) Primary Risk in Force Risk in Force By FICO Score at Time of Origination $54.1 Billion (as of period ending) 89% of RIF is >2008 or HARP 100% 19% 3% 31% 760 & > 80% 38% 11% 740-759 9% 5% 11% 13% 720-739 60% >2008 12% 16% 12% 700-719 2005-
Slide 24: Positive Credit Trends
Positive Credit Trends (as of December 31, 2018) New Notices as Percent of Primary Loans Insured Cures as Percent of Beginning Primary Delinquent Inventory New Notices as % of Beginning Total New Notices as % of Beginning Current 42% 6.0% 40% 38% 5.5% 36% 34% 5.0% 32% 4.5% 30% 28% 4.0% 26% 24% 3.5%
Slide 25: Delinquency Trends
Delinquency Trends Static Pool Analysis (as of December 31, 2018) Static Pool Delinquency Rates = (total number of delinquent loans at the end of the stated reporting period) / (original number of loans insured in the annual periods shown) 25
Slide 26: High Quality Business Leads to Lower Losses and Solid Returns
High Quality Business Leads to Lower Losses and Solid Returns Ever to Date Loss Ratio of Individual Book Years (1), (2) 13.8% 6.9% 5.2% 4.3% 4.4% 4.4% 3.4% 2.8% 2009 2010 2011 2012 2013 2014 2015 2016 1. Represents ever-to-date primary incurred losses as a percentage of net premiums earned 26 2 2017
Slide 27: Reconciliation of GAAP Net Income to Adjusted Net Operating Income
Reconciliation of GAAP Net Income to Adjusted Net Operating Income ($ in millions) Q4 15 Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 GAAP Net Income $ 102.42 $ 69.19 $ 109.22 $ 56.62 $ 107.49 $ 89.80 $ 118.62 $ 120.03 $ 27.31 $ 143.64 $ 186.81 $ 181.90 $ 157.75 Effect of change in deferred $ (25.35
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