Mgic Investment Corporation · NYSE:MTG
Mgic Investment — Q4 2019 Earnings Presentation
29 slides from Mgic Investment's earnings presentation, January 2020
Slide 1: Investor Presentation Q4 2019
Investor Presentation Q4 2019 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 2019
MGIC Investment Corporation Key Financial Metrics Q4 2019 ▪ $177.1 million GAAP net income in Q4 19; $176.1 million adjusted net operating income(1) in Q4 19 ▪ Benefited from positive primary loss reserve development and a lower estimated claim rate on new notices ▪ Increase in net premiums earned p
Slide 4: Key Financial Metrics YTD 2019
MGIC Investment Corporation Key Financial Metrics YTD 2019 ▪ $673.8 million GAAP net income YTD 2019; $669.7 million adjusted net operating income(1) YTD 2019 ▪ Benefited from positive primary loss reserve development, although less than 2018, and lower estimated claim rate on those notices ▪ Increa
Slide 5: Key Financial Metrics: NIW, Market Share, Persistency and IIF
MGIC Investment Corporation Key Financial Metrics NIW and Market Share Persistency and IIF $20.0 $19.3 B $230.0 $222.3 B 84.0% 21.0% $209.7 B Insurance in Force (Billions) 18.0% $210.0 82.0% Quarterly Market Share Quarterly NIW (Billions) $15.0 $194.9 B Annual Persistency $12.8 B $12.8 B $12.2 B 15.
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% 23.4% 21.8% 20.5% 20% 18.8% 18.4% 18.0% 18.3% 17.7% 17.6% 17.0% 17.2% 16.9% 16.3% 16.7% 16.1% 15% 13.6% 10% 5% 0% Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 Q3 Q4 GAAP return on beginning shareholder
Slide 7: Capital Management Objectives
Capital Management Objectives • Influence and ensure compliance with capital requirements • Maintain access to capital and reinsurance markets • Manage our capital to support business strategies and the competing priorities of relevant stakeholders • Support business opportunities by enabling capita
Slide 8: Strong Balance Sheet Investment Portfolio Overview
Strong Balance Sheet Investment Portfolio Overview At December 31, 2019 Commentary Invested Assets By Type • $5.9 billion of cash and investments (consolidated) Corporates 8% Tax-Exempt Munis − Includes $325 million at holding company 15% 48% Taxable Munis • 99.7% Investment Grade 10% Loan Backed −
Slide 9: Strong Statutory Capital Position
Strong Statutory Capital Position MGIC Statutory Capital (in millions) MGIC Risk-to-Capital Ratio (1) $5,000 15.8:1 $4,582 $4,500 14.6:1 $4,000 12.1:1 $3,500 10.7:1 $2,963 9.5:1 9.7:1 $3,000 9.0:1 $2,138 $2,500 $1,654 $2,000 $1,181 $691 $0 $247 $1,500 $1,000 $1,521 $1,518 $1,574 $1,505 $1,620 $1,682
Slide 10: PMIERs Asset Trends
PMIERs Asset Trends ($ in millions) Pool/Other $5,250 PMIERs 2.0 $4,464M Non performing $4,500 $4,055M 1,462 reinsured 1,638 $3,977M 1,029 938 937 Non performing 980 939 $3,750 2,087 Performing reinsured Minimum Required Assets $3,000 $3,449M $3,453M Components of PMIERs $3,348M $3,413M $3,306M HARP
Slide 11: Debt Outstanding
Debt Outstanding As of December 31, 2019 Company Issuance Par Value Interest Rate Maturity MGIC FHLB Advance $155.0 million 1.91% Fixed Rate February 2023 MTG (HoldCo) Senior Notes $425.0 million 5.75% Fixed Rate August 2023 MTG (HoldCo) Convertible Jr. $256.9 million 9.00% Fixed Rate April 2063 Sub
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 • Established market player positioned to take advantage of current environment Leadership • 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, 2019 Prudently grow Pursue new business Preserve and expand Develop and diversify the Manage and insurance in force opportunities that meet our the role of MGIC and talents of co-workers deploy capital to 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, 2019 Ready, willing and able to expand our role in a robust mortgage finance system Credit trends continue to $222.3 bn Insurance in force develop favorably Experienced sales and Exceptional customer service operations staff supporting while being low cost provider ~5,0
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 $222.3 billion • In 1957 Max Karl founded the modern MI industry and MGIC in Milwaukee, WI • ~750 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 (in Billions) Commentary $2,400 $2,184 $2,107 $2,068 $2,060 ✓ 2020 mortgage origination forecasts ~$2.0 trillion $1,983 $1,914 $2,000 $1,757 ✓ Overall market volume considered healthy $918 $846 $690 $796 $650 $1,600 $609 ✓ GSEs and MBA all forecasti
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) PMI VA FHA USDA 50.0% 100.0% 41.4% 90.0% 38.7% 29.9% 27.8% 40.0% 36.3% 36.2% 36.4% 80.0% 32.4% 34.2% 33.9% 43.4% 39.1% 39.3% 34.0% 31.2% 70.0% 53.4% 65.7% 30
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) 9.8% 8.1% 8.8% 10.0% • Ready, willing and able to expand our role 14.6% 11.1% 14.2% 12.4% 13.4% 11.6% 12.6% 11.9% 15.4% 16.1% 16.4% 16.0% in a robust mortgage finance system 16.1% 16.0% 16.7% 16.5% 16.0% 18.3% 15.8% 18.6%
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 $70 8.0% • Exceptional customer service with low level $57.2 7.0% $60 of expenses $Risk In Force (Billions) Loss Reserves as % of RIF 6.0% $50 5.0% $40 • Growing risk in force and impr
Slide 23: Well Positioned to Serve the Market
Well Positioned to Serve the Market (as of December 31, 2019) Primary Risk in Force Risk in Force By FICO Score at Time of Origination (as of period ending) $57.2 Billion 91% of RIF is >2008 or HARP 100% 19% 1% 31% 760 & > 80% 39% 11% 740-759 7% 4% 11% 13% 720-739 60% >2008 12% 12% 17% 700-719 2005-
Slide 24: Positive Credit Trends
Positive Credit Trends (as of December 31, 2019) New Notices as Percent of Primary Loans Insured Cures as Percent of Beginning Primary Delinquency Inventory New Notices as % of Beginning Total New Notices as % of Beginning Current 5.5% 50% 5.0% 45% 4.5% 40% 35% 4.0% 30% 3.5% 25% 3.0% 20% 2.5% 15% 2.
Slide 25: Flow Primary Risk in Force
Flow Primary Risk in Force December 31, 2019 Static Pool Delinquency Rates Based on Loan Count 18% 1.5% 17% 16% 15% 14% 13% 1.0% 12% 11% 10% 9% 8% 7% 0.5% 6% 5% 4% 3% 2% 0.0% 1% Q1 Q3 Q5 Q7 Q9 Q19 Q11 Q13 Q15 Q17 Q21 Q23 Q25 Q27 Q29 Q31 Q33 Q35 Q37 Q39 Q41 Q43 0% Q1 Q3 Q5 Q7 Q9 Q13 Q31 Q49 Q11 Q15 Q
Slide 26: High Quality Business Leads to Lower Losses and Solid Returns
High Quality Business Leads to Lower Losses and Solid Returns Ever to Date Loss Ratio of Individual Book Years (1), (2) 13.8% 6.9% 4.4% 4.7% 3.9% 4.1% 3.3% 2.6% 2009 2010 2011 2012 2013 2014 2015 2016 1. Ever to date loss ratio is the sum of paid losses plus established primary loss reserves (not in
Slide 27: Reconciliation of GAAP Net Income to Adjusted Net Operating Income
Reconciliation of GAAP Net Income to Adjusted Net Operating Income ($ in millions) Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 Q3 Q4 GAAP Net Income $ 69.19 $ 109.22 $ 56.62 $ 107.49 $ 89.80 $ 118.62 $ 120.03 $ 27.31 $ 143.64 $ 186.81 $ 181.90 $ 157.75 $151.94 $167.78 $176.93 $177.11 Effec
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