MGIC Investment Corporation · NYSE:MTG
MGIC Investment — Investor Presentation (February 2016)
25 slides from MGIC Investment's investor presentation, February 2016
Slide 1: Investor Presentation February 2016
Investor Presentation February 2016 MGIC Investment Corporation (NYSE: MTG)
Slide 2: Forward Looking Statements and Risk Factors
Forward Looking Statements and 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. This presentation may contain forwa
Slide 3: Table of Contents
Table of Contents • Private Mortgage Insurance Industry Overview • MGIC Investment Corporation • Q4 2015 Financial Overview • Full Year 2015 Financial Overview • Statutory Capital Position • New Business • Improved Credit Performance • Cost Advantage • Investment Portfolio Overview • Growth Opportun
Slide 4: Private Mortgage Insurance Is Prepared for the Future
Private Mortgage Insurance Is Prepared for the Future • In a home price decline worse than the Great Depression, mortgage insurers served their role as the absorber of first-loss risk, paying over $50 billion in claims since 2007 Tested • $6.5 billion new capital raised by existing companies beginni
Slide 5: MGIC Investment Corporation Overview
MGIC Investment Corporation Overview Who we are • The nation’s oldest private mortgage insurer, with insurance in force of $174.5 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 6: Q415 Financial Overview
MGIC Investment Corporation Q415 Financial Overview ` 3 Months Ending % Change $102.4 million net income Dec-14 Dec-15 y/o/y Excluding adjustment to reversal of (All Amounts Shown in Millions Except Where Indicated) DTA valuation allowance net NIW (billions) $ 9.5 $ 9.8 3.1% income was $113.9 mi
Slide 7: Full Year 2015 Financial Overview
MGIC Investment Corporation Full Year 2015 Financial Overview ` Year % Change $1.2 billion net income Dec-14 Dec-15 y/o/y (All Amounts Shown in Millions Except Where Indicated) Excluding reversal of DTA valuation allowance net NIW (billions) $ 33.4 $ 43.0 28.7% income was $485.3 million Net Prem
Slide 8: Statutory Capital Position
Statutory Capital Position Millions MGIC Adjusted Net Statutory Income (1) $500 $444 •Statutory net income is reduced by the amount of contingency reserves built in the reporting period as $400 $366 prescribed by the Commissioner of Insurance for the State of $300 $239 Wisconsin (OCI) $247 $200 •Sta
Slide 9: Purchase Market Share is Estimated To be ~3.5 - 4x Refinance Market Share
Purchase Market Share is Estimated To be ~3.5 - 4x Refinance Market Share Private MI purchase and refinance percentages estimated using Arch, Essent, Genworth, Radian and MGIC press release information as a proxy for the industry which is then multiplied by the total private mortgage insurance writt
Slide 10: New Business Written
New Business Written MGIC Market Share Within PMI Industry(1) Total NIW (Billions) 22% $50 21% $45 $43 20.1% $40 20.0% 20% $35 $33 $30 $30 19% $24 $25 18% $20 $14 $15 $12 17% 16.8% $10 $5 16% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 13 14 15 $0 2010 2011 2012 2013 2014 2015 1) Source: MGIC and Inside Mortga
Slide 11: >2008 + HARP Now ~75% of In Force
>2008 + HARP Now ~75% of In Force Risk in Force as of 012/31/2015 Flow Total Total RIF: $42.5 billion Total RIF: $45.5 billion 3% 5% 18% 20% 12% 63% 12% 67% <2005 2005-2008 2005-2008 HARP >2008 <2005 2005-2008 2005-2008 HARP >2008 Source: Company filings Source: Company data Note: Risk in force is b
Slide 12: Positive Credit Trends
Positive Credit Trends 30,000 Monthly New Notices Ending Default Inventory 25,000 270,000 250,000 20,000 230,000 210,000 15,000 190,000 170,000 10,000 150,000 130,000 5,000 110,000 90,000 70,000 50,000 62,633 New Notices 110.0% Trailing 12 Month Cure/Default Ratio 105.0% 100.0% 95.0% 90.0% Approxi
Slide 13: 2009 and Forward Generating Low Level of Delinquencies
2009 and Forward Generating Low Level of Delinquencies Primary Default Inventory Q4 2015 New Notices Received in Q4 2015 ~5% of Inventory 4.6% from 2009 -15 Books 8.7% 9.3% ~9% of New Notices 23.3% from 2009-15 Books 22.6% 9.0% 31.9% 12.6% 11.2% 30.8% 17.1% 18.9% < 2005 2005 2006 2007 2008 > 2008 <
Slide 14: High Quality Business Contained in 2009 and Forward Books
High Quality Business Contained in 2009 and Forward Books Static Pool Delinquency Rates (1) Ever to Date Loss Ratio (2) Based on Loan Count 13.6% 6.8% 4.3% 2.7% 2009 2010 2011 2012 1) Static Pool Delinquency Rates = (total number of delinquent loans at the end of the stated reporting period) / (orig
Slide 15: MGIC is Maintaining a Low Expense Ratio
MGIC is Maintaining a Low Expense Ratio Highly Efficient and Low Cost Platform (1) 25% 20% 18.6% 16.3% 16.0% 15.2% 14.9% 14.7% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 1) GAAP Expense Ratio for MGIC is for insurance operations only 15
Slide 16: Investment Portfolio Overview
MGIC Investment Corporation Investment Portfolio Overview • $4.8 billion as of December 31, 2015 including $402 million at holding company • 99.9% Investment Grade, – ~83% with an underlying rating of “A” or better • Effective Duration of 4.7 years (excludes cash and cash equivalents) • Imbedded pre
Slide 17: Mortgage Origination Outlook
Mortgage Origination Outlook Origination Forecasts 2016 2017 $2,000 $1,396 $1,580 $1,380 $1,397 $1,460 $1,309 Housing remains affordable $1,500 553 2016 origination forecasts range from 350 $1.4 to $1.6 trillion $ in billions 450 454 393 331 $1,000 2017 GSEs and MBA all forecasting an $500 102
Slide 18: Demographic Drivers of Demand
Demographic Drivers of Demand Pent up demand Household formations slowed between 2007 and 2012 Forecasts estimate that between 1.1 – 1.3 million households will be formed annually through 2024 Majority of growth from minority groups that are typically first-time homebuyers By 2025, minorit
Slide 19: Millennials are Transitioning into Prime Home Buying Age
Millennials are Transitioning into Prime Home Buying Age Sources: National Assoc of Realtors, Joint Center for Housing Studies, Harvard, PEW Research Center and FBR Research Sources: Goldman Sachs 19
Slide 20: Millennials Are Increasing Home Purchases
Millennials Are Increasing Home Purchases Sources: National Assoc of Realtors, Joint Center for Housing Studies, Harvard, PEW Research Center and FBR Research Sources: National Association of REALTORS® Confidence Index December 2015 20
Slide 21: Many Purchasers Require High LTV Loans
Many Purchasers Require High LTV Loans • Down payment cited as one of the main obstacles to home ownership • ~76% of home purchases are financed • ~50% of ALL home buyers use a down payment of less than 20% • ~30% of home purchasers are 1st time home buyers who typically lack a 20% down payment • ~6
Slide 22: Regulatory Environment
Regulatory Environment • New Master Policy in effect – Standardization provides consistent terms of coverage across carriers – Provides assurances about the consistent handling and payment of claims – Brings greater transparency to contractual protections for lenders and investors • New Financial Re
Slide 23: Summary
Summary • Financial position • Significant growth opportunities – Solid statutory capital position – Purchase market remains strong/Pent up demand – 2009 – 2015 or “new” books are very profitable – Need and demand for low down-payment lending – New books plus HARP account for ~75% of – Possible risk
Slide 24: Summary of Risk Factors
Summary of Risk Factors • Competition or changes in our relationships with our customers could reduce our revenues, reduce our premium yields and / or increase our losses. • The amount of insurance we write could be adversely affected if lenders and investors select alternatives to private mortgage
Slide 25: Company Contact
Company Contact: Michael Zimmerman Senior Vice President Investor Relations Direct: (414) 347-6596 [email protected]
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