MGIC Investment Corporation · NYSE:MTG
MGIC Investment — Barclays Global Financial Services Conference 2019
37 slides from MGIC Investment's conference presentation, Sep 10, 2019
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference September 10, 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 Takeaways
Key Takeaways 1. Growing insurance in force 2. Benign credit environment for residential mortgage credit risk 3. Meaningful investment income 4. Active capital management 5. Meaningful returns on shareholders’ equity being generated 3
Slide 4: Drivers of Growing Insurance in Force
Drivers of Growing Insurance in Force ✓ Increasing household formations ✓ ~45 million households between ages 25 and 34 ✓ Homeownership rate is ~35% for < 35 year olds and ~60% for 35 – 44 year olds ✓ Homeownership rates off of lows and rising ✓ 2019 mortgage originations estimated at $1.8 trillion
Slide 5: Transforming and Growing Risk/Insurance in Force
Transforming and Growing Risk/Insurance in Force (as of June 30, 2019) Primary Risk in Force Risk in Force By FICO Score at Time of Origination (as of period ending) $55.2 Billion ~90% of RIF is >2008 or HARP MGIC Insurance in Force (Billions) $220.0 $209.7 $213.9 $194.9 $200.0 $182.0 $180.0 $174.5
Slide 6: Benign Credit Environment
Benign Credit Environment (as of June 30, 2019) New Notices as Percent of Primary Loans Insured Ever to Date Loss Ratio of Individual Book Years (1), (2) 6.0% New Notices as % of Beginning Current 5.5% 5.0% 4.5% 4.0% 2017 3.5% hurricane 3.0% impact 2.5% 2.0% 1.5% 1.0% ✓Home Price Appreciation remain
Slide 7: Investment Portfolio Overview
Investment Portfolio Overview At June 30, 2019 • $5.7 billion of cash and investments (consolidated) − Includes $333 million at holding company • 99.7% Investment Grade − ~75% with an underlying rating of “A” or better • Effective Duration of 4 years (excludes cash and cash equivalents) • Embedded p
Slide 8: Significant Capital Generation
Significant Capital Generation MGIC Statutory Capital (in millions) Ratio of PMIERs Available Assets to Minimum Required Assets $4,303 $4,500 $4,000 $3,500 $3,000 $2,670 $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 $1,633 $500 $0 2013 2014 2
Slide 9: Debt Outstanding
Debt Outstanding As of June 30, 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 • $333 million cash and investments at MTG (HoldCo) Convertible Jr. $257.0 mill
Slide 10: Significant Capital Generation Creates Options and Flexibility
Significant Capital Generation Creates Options and Flexibility Uses Of Capital MGIC Dividends to MTG • New insurance writings • Net of falloff of legacy books Millions $300 • New business opportunities $250 • Credit risk transfer transactions with the GSEs $220 $200 $140 $150 $140 • Capital manageme
Slide 11: Returns on Shareholders' Equity
Returns on Shareholders’ Equity Increasing IIF + Growing Investment Income + Benign Credit = Strong Returns 25.0% 23.4% 21.8% 20.5% 20.0% 18.8% 18.4% 18.0% 18.3% 17.7% 17.6% 16.7% 17.0% 16.3% 16.1% 15.0% 13.6% 10.0% 5.0% 0.0% Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 GAAP return on begin
Slide 12: Appendix
Hd oo il MGIC Appendix 12
Slide 13: MGIC Investment Corporation Key Financial Metrics
MGIC Investment Corporation Key Financial Metrics YTD 2019 ▪ $319.7 million GAAP net income YTD 2019; $320.0 million adjusted net operating income(1) YTD 2019 ▪ Benefited from positive primary loss reserve development, lower new notice activity and lower estimated claim rate on those notices ▪ $0.87
Slide 14: Key Financial Metrics: Primary Components of Net Income
MGIC Investment Corporation Key Financial Metrics Quality NIW and Steady Market Share Strong Persistency and Growing IIF $14.5B $14.9B $213.9 $15.0 $12.6B $12.9B 25.0% $220.0 84.0% $11.8B $200.7 $210.0 Insurance in Force (Billions) $12.0 20.0% 82.0% Quarterly NIW (Billions) $200.0 Quarterly Market S
Slide 15: Return on Equity Driven by Quality NIW, Growing IIF
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% 17.6% 16.7% 17.0% 16.3% 16.1% 15.0% 13.6% 10.0% 5.0% 0.0% Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 GAAP return on beginning shareholders' equ
Slide 16: 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 17: Strong Balance Sheet Investment Portfolio Overview
Strong Balance Sheet Investment Portfolio Overview At June 30, 2019 Commentary Invested Assets By Type • $5.7 billion of cash and investments (consolidated) − Includes $333 million at holding company • 99.7% Investment Grade − ~75% with an underlying rating of “A” or better 1 • Effective Duration of
Slide 18: Strong Statutory Capital Position
Strong Statutory Capital Position MGIC Statutory Capital (in millions) MGIC Risk-to-Capital Ratio • Solid capital position enhanced by quota share and excess-of-loss (insurance-linked notes) reinsurance agreements • $2.7 billion of statutory capital in excess of state requirement 1. A reinsurance ag
Slide 19: PMIERs Asset Trends
PMIERs Asset Trends ($ in millions) PMIERs 2.0 Minimum Required Assets Components of PMIERs ($ in millions) PMIERs 2.0 Percent excess of PMIERs Minimum Required Components of PMIERs Available Assets Assets 1. Revised PMIERs became effective March 31, 2019. The decrease in our available assets at Mar
Slide 20: Debt Outstanding
Debt Outstanding As of June 30, 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 • $333 million cash and investments at MTG (HoldCo) Convertible Jr. $257.0 mill
Slide 21: 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 22: Good Progress on Executing Business Strategies
Good Progress on Executing Business Strategies June 30, 2019 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 housing
Slide 23: 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 24: MGIC at a Glance
MGIC at a Glance June 30, 2019 Ready, willing and able to expand our role in a robust mortgage finance system Credit trends continue to $213.9bn Insurance in force develop favorably Experienced sales and Exceptional customer service operations staff supporting while being low cost provider ~5,000 le
Slide 25: MGIC Investment Corporation Overview
MGIC Investment Corporation Overview ✓ Who we are • The nation’s oldest private mortgage insurer, with insurance in force of $213.9 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 26: 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 27: Mortgage Origination Outlook
Mortgage Origination Outlook Origination Forecasts (in Billions) Commentary ✓ 2019 mortgage origination forecasts ~$1.8 trillion ✓ Overall market volume expected to be relatively flat ✓ GSEs and MBA all forecasting modest increases in purchase activity over next few years ✓ Good environment for Priv
Slide 28: 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% 40.6% 100.0% 40.0% 38.7% 36.3% 36.2% 36.5% 90.0% 34.0% 29.9% 31.1% 80.0% 32.4% 39.3% 34.2% 33.9% 31.2% 43.4% 39.1% 30.0% 27.8% 70.0% 53.4% 26.6% 25.7%
Slide 29: 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% 15.4% 16.1% 16.4% in a robust mortgage finance system 16.1% 16.0% 16.7% 16.5% 16.0% 18.3% 18.6% 18.4% 16.4% 17.5%
Slide 30: 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 ratio $Risk In Force (Billions) Loss Reserves as % of RIF • Growing risk in force and improving credit performance • Strong relationship
Slide 31: Well Positioned to Serve the Market
Well Positioned to Serve the Market (as of June 30, 2019) Primary Risk in Force Risk in Force By FICO Score at Time of Origination (as of period ending) $55.2 Billion 90% of RIF is >2008 or HARP New Notices Received in Q2 2019 Primary Delinquent Inventory 2009 – 2019 books account for 86% of risk in
Slide 32: Positive Credit Trends
Positive Credit Trends (as of June 30, 2019) New Notices as Percent of Primary Loans Insured Cures as Percent of Beginning Primary Delinquent Inventory New Notices as % of Beginning Total New Notices as % of Beginning Current 5.5% 46% 5.0% 43% 40% 4.5% 37% 4.0% 34% 31% 3.5% 28% 3.0% 25% 2.5% 22% 19%
Slide 33: Delinquency Trends
Delinquency Trends Static Pool Analysis (as of June 30, 2019) Static Pool Delinquency Rates = (total number of delinquent loans at the end of the stated reporting period) / (original number of loans insured in the annual periods shown) 33
Slide 34: High Quality Business Leads to Lower Losses and Solid Returns
High Quality Business Leads to Lower Losses and Solid Returns Ever to Date Loss Ratio of Individual Book Years (1), (2) 1. Ever to date loss ratio is the sum of paid losses plus established primary loss reserves (not including IBNR) divided by net premiums earned for each book year shown as of June
Slide 35: Reconciliation of GAAP Net Income to Adjusted Net Operating Income
Reconciliation of GAAP Net Income to Adjusted Net Operating Income ($ in millions) Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 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 Effect of change in deferre
Slide 36: 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 37: Company Contact: Michael Zimmerman
Company Contact: Michael Zimmerman Senior Vice President - Investor Relations Direct: (414) 347-6596 [email protected] 37
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