MGIC Investment Corporation · NYSE:MTG
MGIC Investment — Q2 2019 Earnings Presentation
29 slides from MGIC Investment's earnings presentation, July 2019
Slide 1: Investor Presentation Q2 2019
Investor Presentation Q2 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 Q2 2019
MGIC Investment Corporation Key Financial Metrics Q2 2019 ▪ $167.8 million GAAP net income in Q2 19; $167.6 million adjusted net operating income(1) in Q2 19 ▪ Benefited from positive primary loss reserve development and a lower estimated claim rate on new notices ▪ $0.46 net income per diluted shar
Slide 4: Key Financial Metrics YTD 2019
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 5: 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 6: Return on Equity 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% 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 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 June 30, 2019 Commentary Invested Assets By Type • $5.7 billion of cash and investments (consolidated) Corporates 8% Tax-Exempt Munis − Includes $333 million at holding company 15% 48% Taxable Munis • 99.7% Investment Grade 10% Loan Backed − ~75%
Slide 9: Summary
Summary • Enables private investment in mortgage credit risk Unique • Established market player positioned to take advantage of current environment Company • Solid capital position and positive ratings momentum • Proven track record of execution with strong management team • Growing Insurance in for
Slide 10: Components of PMIERs
PMIERs Asset Trends ($ 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 11: 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 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 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 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 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 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 $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 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 ✓ 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 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% 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 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% 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 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 ratio $Risk In Force (Billions) Loss Reserves as % of RIF • Growing risk in force and improving credit performance • Strong relationship
Slide 23: 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) $55.2 Billion 90% of RIF is >2008 or HARP 100% 19% 2% 31% 760 & > 80% 38% 11% 740-759 8% 11% 13% 720-739 5% 60% >2008 12% 16% 12% 700-719 2005-2008
Slide 24: Positive Credit Trends
Positive Credit Trends (as of June 30, 2019) New Notices as Percent of Primary Loans Insured Cures as Percent of Beginning Primary Delinquent Inventory New Notices as % of Beginning Total New Notices as % of Beginning Current 5.5% 46% 5.0% 43% 40% 4.5% 37% 4.0% 34% 31% 3.5% 28% 3.0% 25% 2.5% 22% 19%
Slide 25: Delinquency Trends
Delinquency Trends Static Pool Analysis (as of June 30, 2019) 19.5 16.5 13.5 10.5 7.5 4.5 1.5 1 0.5 0 Q37 Q1 Q3 Q5 Q7 Q9 Q11 Q13 Q15 Q17 Q19 Q21 Q23 Q25 Q27 Q29 Q31 Q33 Q35 Q39 Q41 Q43 Q45 Q47 Q49 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Static Pool Delinquency Rates = (total
Slide 26: High Quality Business Leads to Lower Losses and Solid Returns
High Quality Business Leads to Lower Losses and Solid Returns Ever to Date Loss Ratio of Individual Book Years (1), (2) 1. Ever to date loss ratio is the sum of paid losses plus established primary loss reserves (not including IBNR) divided by net premiums earned for each book year shown as of June
Slide 27: Reconciliation of GAAP Net Income to Adjusted Net Operating Income
Reconciliation of GAAP Net Income to Adjusted Net Operating Income ($ in millions) Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 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 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 [email protected]