Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Barclays Global Financial Services Conference 2022
27 slides from Mgic Investment's conference presentation, Sep 13, 2022
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference September 13, 2022 1 CONFIDENTIAL FOR INTERNAL USE ONLY
Slide 2: Safe harbor statements
MGIC Investment Corporation Presentation contains forward-looking information Safe harbor 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 Mort
Slide 3: Company overview
MGIC Investment Corporation (NYSE: MTG) Company overview Mortgage Guaranty Insurance Corporation (MGIC) is the principal subsidiary of MTG. MGIC was established in 1957 by Max Karl, the founder of the modern form of private mortgage insurance (PMI). We are based in Milwaukee, WI and serve lenders th
Slide 4: Our business strategies position us to succeed in a highly competitive environment
Our business strategies position us to succeed in a highly competitive environment Focused on executing our business strategies to provide uninterrupted support to the housing market Be the best-in-class mortgage credit enhancement provider Maximize the value we create through our 1 mortgage credit
Slide 5: Our views on housing
Our views on housing On balance we believe housing fundamentals will remain Tailwinds Headwinds constructive • The unemployment rate remains low • Housing inventory will help balance the supply / demand equation • Demographics expected to continue to deliver homebuying demand over time, however dema
Slide 6: MGIC is well-hedged to rising interest rates
MGIC is well-hedged to rising interest rates Key implications Impact on our Revenues: Impact on our Expenses: New insurance written should decline as Delinquencies have interest fixed at origination activity slows, primarily from generally lower rates, but loss mitigation decreased refinancing activ
Slide 7: Delivered exceptional financial results for the first half of the year
Delivered exceptional financial results for the first half of the year while continuing to return capital to our shareholders Financial Highlights - As of and for the six months ended June 30, 2022 $286.8 Billion 9.5% increase compared with $424.3 Million Loss ratio – (38.7%) Primary Insurance In $2
Slide 8: Return on equity driven by new insurance written and high-quality growing in force
Return on equity driven by new insurance written and high- quality growing in force Delinquency rate 22.1% 21.6% 16.6% 15.9% 14.3% 14.4% 13.9% 13.7% 13.7% 13.4% 13.2% 12.8% 12.6% 12.9% 12.8% 12.9% 12.8% 11.9% 1.3% 0.9% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 R
Slide 9: Consistently delivering shareholder value
Consistently delivering shareholder value Book value per share steadily increasing $18.00 $17.00 $16.00 $16.04 $15.00 $14.97 $14.00 Book Value Per Share $13.00 $12.00 Tangible Book Value $12.53 $12.53 $11.00 Per Share $10.00 Accumulated Dividends $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00
Slide 10: Our focus on customer experience, and digital and analytical capabilities is winning
Our focus on customer experience, and digital and analytical capabilities is winning in the marketplace Established market leader with a large, diverse, customer base Quarterly Market Share 25% 20% MGIC Arch Essent 15% Genworth NMI g: Radian MGIC Low • Current risk / reward equation is MGIC High att
Slide 11: Our growing, high-quality, insurance in force drives our financial results and returns
Our growing, high-quality, insurance in force drives our financial results and returns Growing portfolio of insurance in force contains favorable underlying credit characteristics Insurance in Force - 5 yr trend Premiums Insurance in Force for the quarter ending $300 286.8 ✓ Portfolio growth maintai
Slide 12: Premiums and premium yields
Premiums and premium yields Premiums and premium yield $255 $256 Yield (bps) $252 $255 $253 Premiums ($M) 60 Direct* 55 50 Net 45 40 35 39.1 Q2 Q3 Q4 Q1 Q2 36.2 2021 2021 2021 2022 2022 30 Jun Sep Dec Mar Jun 2021 2021 2021 2022 2022 NIW ( $ bn ) $33.6 $28.7 $27.1 $19.6 $24.3 CONFIDENTIAL 12
Slide 13: Delinquencies resolving as cures outpace notices
Delinquencies resolving as cures outpace notices and the delinquency rate declining to pre-pandemic levels Trends in new notice and cure activity, and overall delinquency rate New notice trends back to pre-pandemic levels while pandemic notices cure Delinquent inventory peaked in June 2020 For the q
Slide 14: Capital management priorities remain flexible to the operating environment
Capital management priorities remain flexible to the operating environment Share 1 Capitalization 2 Growth 3 Dividends 4 Repurchase Diverse, flexible sources Deploy capital against Return capital and seek Increase shareholders of capital return objectives to grow the dividend ‘share’ of earnings ▪ M
Slide 15: Solid capital strength and flexibility
Solid capital strength and flexibility Target capital and liquidity levels are dynamic and change as the operating environment changes Holding Company – MTG Operating Company - MGIC • Investment portfolio of $690M as of June 2022 • $650M Senior Notes due August 2028 • Statutory Capital Excess of $3.
Slide 16: Principled capital strategy and risk management sustain our business
Principled capital strategy and risk management sustain our business across economic environments PMIERs capital excess increasing over time while required assets have remained relatively stable PMIERs Sufficiency PMIERs capital over $2.5 billion in excess of the required capital Ratio: $8B $8B $17.
Slide 17: Statutory capital position remains robust
Statutory capital position remains robust while providing capital to the Holding Company Mortgage Guaranty Insurance Corporation Rating Agency Current Rating Outlook MGIC Statutory Capital S&P BBB+ Stable ($ in millions) Moody’s A3 Stable Surplus Contingency Reserves (1) RTC A.M. Best A- Stable $5,4
Slide 18: Managing and distributing residential mortgage credit risk
Managing and distributing residential mortgage credit risk Comprehensive and diverse reinsurance program efficiently manages mortgage credit risk Reduces Retained Risk Evaluation of structures Financially Compelling Significantly reduces the capital that Certainty and amount of capital credit Quota-
Slide 19: Programmatic risk distribution reduces retained risk exposure
Programmatic risk distribution reduces retained risk exposure PMIERs Minimum Required Assets - June 30, 2022 Book year vintage $2.0B $1.5B Excess of Loss Insurance-linked notes Quota-share $1.0B Retained $0.5B $0.0B <2009 2009-2018 2019 2020 2021 2022 MGIC balance sheet $630 $711 $266 $516 $555 $463
Slide 20: Reinsurance program overview as of June 30, 2022
Reinsurance program overview as of June 30, 2022 ~94% (1) of our primary risk in force was covered to some extent by reinsurance transactions Graphs are for illustrative purpose only, they do not represent the actual proportions MGIC Retained Risk QSR Ceded 12.5% QSR, 22.5% Margin ILN Ceded 17.5% QS
Slide 21: Investment portfolio
Investment portfolio High-Level Executive Overview Our investment Holding company portfolios are primarily ❑ Provide liquidity with minimized realized losses managed by two external ❑ Maintain highly liquid, low volatility assets asset managers under ❑ Maintain high credit quality the investment ❑ D
Slide 22: Consolidated investments and cash
Consolidated investments and cash $6.1 billion diversified portfolio of fixed income securities and cash Investment Portfolio allocations by sector As of the period ended PORTFOLIO METRICS 100% PORTFOLIO OVERALL CREDIT 90% 80% 70% 60% Sectors Other Utility Industrial A+ Finance FIXED INCOME AVERAGE
Slide 23: Non-GAAP financial measures
Non-GAAP financial measures Book value per share and adjusted book value per share Reconciliation of Book Value Per Share to Tangible Book Value Per Share ($ in 000's, except per share amounts) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Ending Shareholders' Equit
Slide 24: Non-GAAP financial measures
Non-GAAP financial measures GAAP return on equity and adjusted return on equity Reconciliation of Return on Equity to Adjusted Return on Equity ($ in 000's) Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 GAAP Net Income $149,805 $14,047 $130,811 $151,430 $150,021 $15
Slide 25: Summary of Risk Factors
MGIC Investment Corporation Summary of Risk Factors 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. Risk Factors Relating to th
Slide 26: Summary of Risk Factors Continued
MGIC Investment Corporation Summary of Risk Factors Continued Risk Factors Relating to Our Business Generally The premiums we charge may not be adequate to compensate us for our liabilities for losses and as a result any inadequacy could materially affect our financial condition and results of opera
Slide 27: Company Contact
Company Contact: Dianna Higgins Senior Vice President Investor Relations (414) 347-2635 dianna_higgins@mgic.com CONFIDENTIAL
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