MGIC Provides Investor Update

MILWAUKEE, Jan. 22 /PRNewswire-FirstCall/ -- MGIC Investment Corporation
(NYSE: MTG) announced today that year-end 2007 delinquency inventory was
107,120 loans, an increase of approximately 16,000 loans from the end of the
third quarter. Cure rates have continued to deteriorate, resulting in a
higher percentage of delinquent loans that become claims, and average claim
size has also continued to increase. As a result, the Company expects
incurred losses for the fourth quarter of 2007 to approximate $1.3 billion.
The Company said its insurance in force at year-end 2007 was $211.7 billion.
The Company also said it is increasing its paid loss forecast for 2008 to
$1.8 - $2.0 billion.
During the fourth quarter, the Company made a decision to stop writing the
portion of its bulk business that insures loans which are included in Wall
Street securitizations. The Company is analyzing the accounting implications
of that decision on its fourth quarter results.
The Company is issuing this press release to provide current information
to all investors in advance of its February 13, 2008 earnings call. The
Company is not undertaking any obligation to update any information in this
press release regarding the Company's expectations or any forward-looking
statements. No investor should rely on the fact that such information is
current at any time other than the time at which this press release was
issued.
About MGIC Investment Corporation
Mortgage Guaranty Insurance Corporation, the principal subsidiary of MGIC
Investment Corporation (http://www.mgic.com), is the nation's leading provider
of private mortgage insurance coverage with $197.0 billion primary insurance
in force covering 1.3 million mortgages as of September 30, 2007. MGIC serves
5,000 lenders with locations across the country and in Puerto Rico, Guam and
Australia, helping families achieve homeownership sooner by making affordable
low-down-payment mortgages a reality.
Safe Harbor Statement

Forward-Looking Statements and Risk Factors:
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Our revenues and losses could be affected by the risk factors discussed
below that are applicable to us, and our income from joint ventures could be
affected by the risk factors discussed below that are applicable to Sherman.
These risk factors should be reviewed in connection with this press release
and our periodic reports to the Securities and Exchange Commission. These
factors may also cause actual results to differ materially from the results
contemplated by forward-looking statements that we may make. Forward-looking
statements consist of statements which relate to matters other than historical
fact. Among others, statements that include words such as we "believe",
"anticipate" or "expect", or words of similar import, are forward looking
statements. We are not undertaking any obligation to update any
forward-looking statements we may make even though these statements may be
affected by events or circumstances occurring after the forward looking
statements were made.
Deterioration in home prices in the segment of the market we serve, a
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downturn in the domestic economy or changes in our mix of business may result
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in more homeowners defaulting and our losses increasing.
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Losses result from events that reduce a borrower's ability to continue to
make mortgage payments, such as unemployment, and whether the home of a
borrower who defaults on his mortgage can be sold for an amount that will
cover unpaid principal and interest and the expenses of the sale. Favorable
economic conditions generally reduce the likelihood that borrowers will lack
sufficient income to pay their mortgages and also favorably affect the value
of homes, thereby reducing and in some cases even eliminating a loss from a
mortgage default. A deterioration in economic conditions generally increases
the likelihood that borrowers will not have sufficient income to pay their
mortgages and can also adversely affect housing values. Housing values may
decline even absent a deterioration in economic conditions due to declines in
demand for homes, which in turn may result from changes in buyers' perceptions
of the potential for future appreciation, restrictions on mortgage credit due
to more stringent underwriting standards or other factors.
The mix of business we write also affects the likelihood of losses
occurring. In recent years, the percentage of our volume written on a flow
basis that includes segments we view as having a higher probability of claim
has continued to increase. These segments include loans with LTV ratios over
95% (including loans with 100% LTV ratios), FICO credit scores below 620,
limited underwriting, including limited borrower documentation, or total
debt-to-income ratios of 38% or higher, as well as loans having combinations
of higher risk factors.
As of September 30, 2007 approximately 6.0% of our primary risk in force
written through the flow channel, and 72% of our primary risk in force written
through the bulk channel, consists of adjustable rate mortgages in which the
initial interest rate may be adjusted during the five years after the mortgage
closing ("ARMs"). (We classify as fixed rate loans adjustable rate mortgages
in which the initial interest rate is fixed during the five years after the
mortgage closing.) We believe that during a prolonged period of rising
interest rates, claims on ARMs would be substantially higher than for fixed
rate loans. Moreover, even if interest rates remain unchanged, claims on ARMs
with a "teaser rate" (an initial interest rate that does not fully reflect the
index which determines subsequent rates) may also be substantially higher
because of the increase in the mortgage payment that will occur when the fully
indexed rate becomes effective. In addition, we believe the volume of
"interest-only" loans (which may also be ARMs) and loans with negative
amortization features, such as pay option ARMs, increased in 2005 and 2006 and
have remained at these levels during the first half of 2007, before declining
in the second half of 2007. Because interest-only loans and pay option ARMs
are a relatively recent development, we have no meaningful data on their
historical performance. We believe claim rates on certain of these loans will
be substantially higher than on loans without scheduled payment increases that
are made to borrowers of comparable credit quality.
The amount of insurance we write could be adversely affected if lenders
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and investors select alternatives to private mortgage insurance.
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These alternatives to private mortgage insurance include:
-- lenders originating mortgages using piggyback structures to avoid
private mortgage insurance, such as a first mortgage with an 80%
loan-to-value ("LTV") ratio and a second mortgage with a 10%, 15% or
20% LTV ratio (referred to as 80-10-10, 80-15-5 or 80-20 loans,
respectively) rather than a first mortgage with a 90%, 95% or 100%
LTV ratio that has private mortgage insurance,
-- lenders and other investors holding mortgages in portfolio and
self-insuring,
-- investors using credit enhancements other than private mortgage
insurance, using other credit enhancements in conjunction with
reduced levels of private mortgage insurance coverage, or
accepting credit risk without credit enhancement, and
-- lenders using government mortgage insurance programs, including
those of the Federal Housing Administration and the Veterans
Administration.

While no data is publicly available, we believe that in recent years
piggyback loans have been a significant percentage of mortgage originations in
which borrowers make down payments of less than 20%, although their use has
declined in 2007. We also believe that their use is primarily by borrowers
with higher credit scores. We have a program designed to recapture business
lost to these mortgage insurance avoidance products. This program accounted
for 9.5% of flow new insurance written through the first three quarters of
2007 and 9.1% and 6.5% of flow new insurance written in 2006 and 2005,
respectively.
Competition or changes in our relationships with our customers could
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reduce our revenues or increase our losses.
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Competition for private mortgage insurance premiums occurs not only among
private mortgage insurers but also with mortgage lenders through captive
mortgage reinsurance transactions. In these transactions, a lender's affiliate
reinsures a portion of the insurance written by a private mortgage insurer on
mortgages originated or serviced by the lender. As discussed under "The
mortgage insurance industry is subject to risk from private litigation and
regulatory proceedings" below, we provided information to the New York
Insurance Department and the Minnesota Department of Commerce about captive
mortgage reinsurance arrangements. Other insurance departments or other
officials, including attorneys general, may also seek information about or
investigate captive mortgage reinsurance.
The level of competition within the private mortgage insurance industry
has also increased as many large mortgage lenders have reduced the number of
private mortgage insurers with whom they do business. At the same time,
consolidation among mortgage lenders has increased the share of the mortgage
lending market held by large lenders.
Our private mortgage insurance competitors include:

-- PMI Mortgage Insurance Company,
-- Genworth Mortgage Insurance Corporation,
-- United Guaranty Residential Insurance Company,
-- Radian Guaranty Inc.,
-- Republic Mortgage Insurance Company,
-- Triad Guaranty Insurance Corporation, and
-- CMG Mortgage Insurance Company.

If interest rates decline, house prices appreciate or mortgage insurance
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cancellation requirements change, the length of time that our policies remain
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in force could decline and result in declines in our revenue.
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In each year, most of our premiums are from insurance that has been
written in prior years. As a result, the length of time insurance remains in
force (which is also generally referred to as persistency) is an important
determinant of revenues. The factors affecting the length of time our
insurance remains in force include:
-- the level of current mortgage interest rates compared to the mortgage
coupon rates on the insurance in force, which affects the
vulnerability of the insurance in force to refinancings, and
-- mortgage insurance cancellation policies of mortgage investors
along with the rate of home price appreciation experienced by the
homes underlying the mortgages in the insurance in force.

During the 1990s, our year-end persistency ranged from a high of 87.4% at
December 31, 1990 to a low of 68.1% at December 31, 1998. At September 30,
2007 persistency was at 74.0%, compared to the record low of 44.9% at
September 30, 2003. Over the past several years, refinancing has become easier
to accomplish and less costly for many consumers. Hence, even in an interest
rate environment favorable to persistency improvement, we do not expect
persistency will approach its December 31, 1990 level.
If the volume of low down payment home mortgage originations declines, the
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amount of insurance that we write could decline which would reduce our
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revenues.
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The factors that affect the volume of low-down-payment mortgage
originations include:
-- the level of home mortgage interest rates,
-- the health of the domestic economy as well as conditions in regional
and local economies,
-- housing affordability,
-- population trends, including the rate of household formation,
-- the rate of home price appreciation, which in times of heavy
refinancing can affect whether refinance loans have LTV ratios
that require private mortgage insurance, and
-- government housing policy encouraging loans to first-time homebuyers.

In general, the majority of the underwriting profit (premium revenue minus
losses) that a book of mortgage insurance generates occurs in the early years
of the book, with the largest portion of the underwriting profit realized in
the first year. Subsequent years of a book generally result in modest
underwriting profit or underwriting losses. This pattern of results occurs
because relatively few of the claims that a book will ultimately experience
occur in the first few years of the book, when premium revenue is highest,
while subsequent years are affected by declining premium revenues, as
persistency decreases due to loan prepayments, and higher losses.
If all other things were equal, a decline in new insurance written in a
year that followed a number of years of higher volume could result in a lower
contribution to the mortgage insurer's overall results. This effect may occur
because the older books will be experiencing declines in revenue and increases
in losses with a lower amount of underwriting profit on the new book available
to offset these results.
Whether such a lower contribution would in fact occur depends in part on
the extent of the volume decline. Even with a substantial decline in volume,
there may be offsetting factors that could increase the contribution in the
current year. These offsetting factors include higher persistency and a mix of
business with higher average premiums, which could have the effect of
increasing revenues, and improvements in the economy, which could have the
effect of reducing losses. In addition, the effect on the insurer's overall
results from such a lower contribution may be offset by decreases in the
mortgage insurer's expenses that are unrelated to claim or default activity,
including those related to lower volume.
Changes in the business practices of Fannie Mae and Freddie Mac could
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reduce our revenues or increase our losses.
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The business practices of the Federal National Mortgage Association
("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"),
each of which is a government sponsored entity ("GSE"), affect the entire
relationship between them and mortgage insurers and include:
-- the level of private mortgage insurance coverage, subject to the
limitations of Fannie Mae and Freddie Mac's charters, when private
mortgage insurance is used as the required credit enhancement on
low down payment mortgages,
-- whether Fannie Mae or Freddie Mac influence the mortgage lender's
selection of the mortgage insurer providing coverage and, if so,
any transactions that are related to that selection,
-- whether Fannie Mae or Freddie Mac will give mortgage lenders an
incentive, such as a reduced guaranty fee, to select a mortgage
insurer that has a "AAA" claims-paying ability rating to benefit
from the lower capital requirements for Fannie Mae and Freddie Mac
when a mortgage is insured by a company with that rating,
-- the underwriting standards that determine what loans are eligible
for purchase by Fannie Mae or Freddie Mac, which thereby affect
the quality of the risk insured by the mortgage insurer and the
availability of mortgage loans,
-- the terms on which mortgage insurance coverage can be canceled
before reaching the cancellation thresholds established by law, and
-- the circumstances in which mortgage servicers must perform
activities intended to avoid or mitigate loss on insured mortgages
that are delinquent.

The mortgage insurance industry is subject to the risk of private
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litigation and regulatory proceedings.
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Consumers are bringing a growing number of lawsuits against home mortgage
lenders and settlement service providers. In recent years, seven mortgage
insurers, including MGIC, have been involved in litigation alleging violations
of the anti-referral fee provisions of the Real Estate Settlement Procedures
Act, which is commonly known as RESPA, and the notice provisions of the Fair
Credit Reporting Act, which is commonly known as FCRA. MGIC's settlement of
class action litigation against it under RESPA became final in October 2003.
MGIC settled the named plaintiffs' claims in litigation against it under FCRA
in late December 2004 following denial of class certification in June 2004.
Since December 2006, class action litigation was separately brought against a
number of large lenders alleging that their captive mortgage reinsurance
arrangements violated RESPA. While we are not a defendant in any of these
cases, there can be no assurance that MGIC will not be subject to future
litigation under RESPA or FCRA or that the outcome of any such litigation
would not have a material adverse effect on us.
In June 2005, in response to a letter from the New York Insurance
Department (the "NYID"), we provided information regarding captive mortgage
reinsurance arrangements and other types of arrangements in which lenders
receive compensation. In February 2006, the NYID requested MGIC to review its
premium rates in New York and to file adjusted rates based on recent years'
experience or to explain why such experience would not alter rates. In March
2006, MGIC advised the NYID that it believes its premium rates are reasonable
and that, given the nature of mortgage insurance risk, premium rates should
not be determined only by the experience of recent years. In February 2006, in
response to an administrative subpoena from the Minnesota Department of
Commerce (the "MDC"), which regulates insurance, we provided the MDC with
information about captive mortgage reinsurance and certain other matters. We
subsequently provided additional information to the MDC. Other insurance
departments or other officials, including attorneys general, may also seek
information about or investigate captive mortgage reinsurance.
The anti-referral fee provisions of RESPA provide that the Department of
Housing and Urban Development ("HUD") as well as the insurance commissioner or
attorney general of any state may bring an action to enjoin violations of
these provisions of RESPA. The insurance law provisions of many states
prohibit paying for the referral of insurance business and provide various
mechanisms to enforce this prohibition. While we believe our captive
reinsurance arrangements are in conformity with applicable laws and
regulations, it is not possible to predict the outcome of any such reviews or
investigations nor is it possible to predict their effect on us or the
mortgage insurance industry.
In October 2007, the Division of Enforcement of the SEC requested that we
voluntarily furnish documents and information primarily relating to C-BASS,
the now-terminated merger with Radian and the subprime mortgage assets "in the
Company's various lines of business." We are in the process of providing
responsive documents and information to the SEC.
The Internal Revenue Service has proposed significant adjustments to our
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taxable income for 2000 through 2004.
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The Internal Revenue Service ("IRS") has been conducting an examination of
our federal income tax returns for taxable years 2000 though 2004. On June 1,
2007, as a result of this examination, we received a Revenue Agent Report
("RAR"). The adjustments reported on the RAR would substantially increase
taxable income for those tax years and resulted in the issuance of an
assessment for unpaid taxes totaling $189.5 million in taxes and accuracy
related penalties, plus applicable interest. We have agreed with the IRS on
certain issues and paid $10.5 million in additional taxes and interest. The
remaining open issue relates to our treatment of the flow through income and
loss from a portfolio of investments in the residual interests of Real Estate
Mortgage Investment Conduits ("REMICs"). This portfolio has been managed and
maintained during years prior to, during and subsequent to the examination
period. The IRS has indicated that it does not believe that, for various
reasons, that we have established sufficient tax basis in the REMIC residual
interests to deduct the losses from taxable income. We disagree with this
conclusion and believe that the flow through income and loss from these
investments was properly reported on our federal income tax returns in
accordance with applicable tax laws and regulations in effect during the
periods involved and have appealed these adjustments. The appeals process may
take some time and a final resolution may not be reached until a date many
months or years into the future. On July 2, 2007, the Company made a payment
on account of $65.2 million with the United States Department of the Treasury
to eliminate the further accrual of interest. We believe, after discussions
with outside counsel about the issues raised in the RAR and the procedures for
resolution of the disputed adjustments, that an adequate provision for income
taxes has been made for potential liabilities that may result from these
notices. If the outcome of this matter results in payments that differ
materially from our expectations, it could have a material impact on our
effective tax rate, results of operations and cash flows.
Net premiums written could be adversely affected if the Department of
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Housing and Urban Development reproposes and adopts a regulation under the
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Real Estate Settlement Procedures Act that is equivalent to a proposed
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regulation that was withdrawn in 2004.
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HUD regulations under RESPA prohibit paying lenders for the referral of
settlement services, including mortgage insurance, and prohibit lenders from
receiving such payments. In July 2002, HUD proposed a regulation that would
exclude from these anti-referral fee provisions settlement services included
in a package of settlement services offered to a borrower at a guaranteed
price. HUD withdrew this proposed regulation in March 2004. Under the proposed
regulation, if mortgage insurance were required on a loan, the package must
include any mortgage insurance premium paid at settlement. Although certain
state insurance regulations prohibit an insurer's payment of referral fees,
had this regulation been adopted in this form, our revenues could have been
adversely affected to the extent that lenders offered such packages and
received value from us in excess of what they could have received were the
anti-referral fee provisions of RESPA to apply and if such state regulations
were not applied to prohibit such payments.
We could be adversely affected if personal information on consumers that
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we maintain is improperly disclosed.
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As part of our business, we maintain large amounts of personal information
on consumers. While we believe we have appropriate information security
policies and systems to prevent unauthorized disclosure, there can be no
assurance that unauthorized disclosure, either through the actions of third
parties or employees, will not occur. Unauthorized disclosure could adversely
affect our reputation and expose us to material claims for damages.
The implementation of the Basel II capital accord may discourage the use
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of mortgage insurance.
----------------------

In 1988, the Basel Committee on Banking Supervision (BCBS) developed the
Basel Capital Accord (the Basel I), which set out international benchmarks for
assessing banks' capital adequacy requirements. In June 2005, the BCBS issued
an update to Basel I (as revised in November 2005, Basel II). Basel II, which
is scheduled to become effective in the United States and many other countries
in 2008, affects the capital treatment provided to mortgage insurance by
domestic and international banks in both their origination and securitization
activities.
The Basel II provisions related to residential mortgages and mortgage
insurance may provide incentives to certain of our bank customers not to
insure mortgages having a lower risk of claim and to insure mortgages having a
higher risk of claim. The Basel II provisions may also alter the competitive
positions and financial performance of mortgage insurers in other ways,
including reducing our ability to successfully establish or operate our
planned international operations.
Our international operations will subject us to numerous risks.
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We have committed significant resources to begin international operations,
initially in Australia, where we started to write business June 2007. We plan
to expand our international activities to other countries, including Canada.
Accordingly, in addition to the general economic and insurance
business-related factors discussed above, we are subject to a number of risks
associated with our international business activities, including:
-- risks of war and civil disturbances or other events that may limit or
disrupt markets;
-- dependence on regulatory and third-party approvals;
-- changes in rating or outlooks assigned to our foreign subsidiaries by
rating agencies;
-- challenges in attracting and retaining key foreign-based employees,
customers and business partners in international markets;
-- foreign governments' monetary policies and regulatory requirements;
-- economic downturns in targeted foreign mortgage origination markets;
-- interest-rate volatility in a variety of countries;
-- the burdens of complying with a wide variety of foreign regulations
and laws, some of which may be materially different than the
regulatory and statutory requirements we face in our domestic
business, and which may change unexpectedly;
-- potentially adverse tax consequences;
-- restrictions on the repatriation of earnings;
-- foreign currency exchange rate fluctuations; and
-- the need to develop and market products appropriate to the various
foreign markets.

Any one or more of the risks listed above could limit or prohibit us from
developing our international operations profitably. In addition, we may not be
able to effectively manage new operations or successfully integrate them into
our existing operations.
Downgrades in the financial strength ratings of MGIC below Aa3 (or its
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equivalent) could have a material adverse affect on us.
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The financial strength ratings of our wholly owned subsidiary Mortgage
Guaranty Insurance Corporation ("MGIC") are 'AA-' (Standard & Poors Rating
Services), 'Aa2' (Moody's Investors Service) and 'AA' (Fitch Ratings). Fitch
Ratings has announced that its rating is under review with negative
implications. In assigning financial strength ratings, in addition to
considering the adequacy of the mortgage insurer's capital to withstand
extreme loss scenarios under assumptions determined by the rating agency,
rating agencies review a mortgage insurer's historical and projected operating
performance, business outlook, competitive position, management, corporate
strategy, and other factors. We believe a financial strength rating of at
least Aa3/AA- is critical to a mortgage insurer's ability to continue to write
new business. Any downgrade below such level could have a material adverse
affect on us.
Our income from our Sherman joint venture could be adversely affected by
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competition or other factors affecting its business.
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Sherman Financial Group LLC ("Sherman") is engaged in the business of
purchasing and servicing delinquent consumer assets, and in originating and
servicing subprime credit card receivables. Sherman's results are sensitive
to its ability to purchase receivable portfolios on terms that it projects
will meet its return targets. While the volume of charged-off consumer
receivables and the portion of these receivables that have been sold to third
parties such as Sherman has grown in recent years, there is an increasing
amount of competition to purchase such portfolios, including from new entrants
to the industry, which has resulted in increases in the prices at which
portfolios can be purchased.
SOURCE MGIC Investment Corporation

media, Katie Monfre, +1-414-347-2650, katie_monfre@mgic.com, or investors,
Michael J. Zimmerman, +1-414-347-6596, mike_zimmerman@mgic.com, both of MGIC
Investment Corporation