MGIC Investment Corporation Reports First Quarter 2008 Results

MILWAUKEE, April 17 /PRNewswire-FirstCall/ -- MGIC Investment Corporation
(NYSE: MTG) today reported a net loss for the quarter ended March 31, 2008 of
$34.4 million, compared with net income of $92.4 million for the same quarter
a year ago. Diluted loss per share was $0.41 for the quarter ending March 31,
2008, compared to diluted earnings per share of $1.12 for the same quarter a
year ago.
Curt S. Culver, chairman and chief executive officer of MGIC Investment
Corporation and Mortgage Guaranty Insurance Corporation (MGIC), said that the
company's financial results continued to be impacted by increases in both the
number of delinquent loans and foreclosures that have resulted as home prices
declined further and the economy slowed. In addition, higher loss severities
and lower cure ratios, especially in California and Florida, also negatively
impacted results. Culver was pleased that the improvements in business
fundamentals, including higher persistency, insurance in force growth and
improved credit standards are developing as expected and should benefit the
company financially over the long-term. Culver added that in response to the
unprecedented market conditions we are experiencing, the company has taken
numerous actions designed to bolster its financial strength including
increasing its already strong capital resources by approximately $840 million
through recent sales of securities, significantly changing its underwriting
guidelines, discontinuing writing Wall Street bulk transactions, increasing
pricing, pursuing reinsurance options and negotiating the possible sale of its
interest in Sherman Financial Group LLC back to Sherman.
Total revenues for the first quarter were $423.9 million, compared with
$369.6 million in the first quarter of 2007. Net premiums written for the
quarter were $368.5 million, compared with $304.0 million in the first quarter
last year.
New insurance written in the first quarter was $19.1 billion, compared to
$12.7 billion in the first quarter of 2007. New insurance written for the
quarter included $1.0 billion of non-Wall Street bulk transactions compared
with $2.3 billion, including $0.2 billion of non-Wall Street transactions, in
the same period last year.
Persistency, or the percentage of insurance remaining in force from one
year prior, was 77.5 percent at March 31, 2008, compared with 76.4 percent at
December 31, 2007, and 70.3 percent at March 31, 2007.
As of March 31, 2008, MGIC's primary insurance in force was
$221.4 billion, compared with $211.7 billion at December 31, 2007, and
$178.3 billion at March 31, 2007. The book value of MGIC Investment
Corporation's investment portfolio, cash and cash equivalents was $7.3 billion
at March 31, 2008, compared with $6.2 billion at December 31, 2007, and $5.6
billion at March 31, 2007.
At March 31, 2008, the percentage of loans that were delinquent, excluding
bulk loans, was 5.19 percent, compared with 4.99 percent at December 31, 2007,
and 3.89 percent at March 31, 2007. Including bulk loans, the percentage of
loans that were delinquent at March 31, 2008 was 7.68 percent, compared to
7.45 percent at December 31, 2007, and 5.92 percent at March 31, 2007.
Losses incurred in the first quarter were $691.6 million, up from
$181.8 million reported for the same period last year. Underwriting expenses
were $79.0 million in the first quarter, including $3.3 million of one-time
consulting fees associated with the common stock offering and private
placement of the junior subordinated convertible debenture as compared to
$76.0 million reported for the same period last year.
Wall Street Bulk transactions, as of March 31, 2008, included
approximately 137,000 loans with insurance in force of approximately
$23.3 billion and risk in force of approximately $6.9 billion. During the
quarter the premium deficiency reserve declined by $264 million from
$1,211 million, as of December 31, 2007, to $947 million as of March 31, 2008.
The $947 million premium deficiency reserve as of March 31, 2008 reflects the
present value of expected future losses and expenses that exceeded the present
value of expected future premium and already established loss reserves. Within
the premium deficiency calculation, our expected present value of expected
future paid losses and expenses was $3,397 million, offset by the present
value of expected future premium of $874 million and already established loss
reserves of $1,576 million. The premium deficiency reserves as of December
31, 2007 reflected expected present value of expected future paid losses and
expenses of $3,561 million, offset by the present value of expected future
premium of $901 million and already established loss reserves of
$1,449 million.
Income from joint ventures, net of tax, in the quarter was $10.0 million
down from $14.1 million for the same period last year.
About MGIC
MGIC (http://www.mgic.com), the principal subsidiary of MGIC Investment
Corporation, is the nation's leading provider of private mortgage insurance
coverage with $221.4 billion primary insurance in force covering 1.5 million
mortgages as of March 31, 2008. MGIC serves over 3,300 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.
Webcast Details
As previously announced, MGIC Investment Corporation will hold a webcast
today at 10 a.m. ET to allow securities analysts and shareholders the
opportunity to hear management discuss the company's quarterly results. The
call is being webcast and can be accessed at the company's website at
http://mtg.mgic.com. The webcast is also being distributed over CCBN's
Investor Distribution Network to both institutional and individual investors.
Investors can listen to the call through CCBN's individual investor center at
http://www.companyboardroom.com or by visiting any of the investor sites in
CCBN's Individual Investor Network. The webcast will be available for replay
on the company's website through May 17, 2008 under Investor Information.
This press release, which includes certain additional statistical and
other information, including non-GAAP financial information and a supplement
that contains various portfolio statistics are both available on the Company's
website at http://mtg.mgic.com under Investor Information.
Safe Harbor Statement

Forward.Looking Statements and Risk Factors
-------------------------------------------

We intend that certain matters discussed in this press release are
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements consist of statements which relate to matters other
than historical fact. Among others, statements that include words such as we
"believe," "will," "anticipate" or "expect," or words of similar import, are
forward-looking statements. Forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those anticipated as of the date of this release. Certain of such risks
and uncertainties are described below. Shareholders, potential investors, and
other readers are cautioned not to place undue reliance on forward-looking
statements. The forward-looking statements made in this press release are made
as of the date of the press release only and should not be relied upon as not
having changed as of any subsequent date, and we are not undertaking any
obligation to update them even though these statements may be affected by
events or circumstances occurring after the date of this press release.
Our business, including our revenues and losses, could be affected: (i) by
a downturn in the domestic economy or deterioration in home prices in the
segment of the market we serve; (ii) by the mix of business we write; (iii) by
disproportionate losses in certain periods, which could occur because, among
other reasons, we establish loss reserves only upon a loan default rather than
based on estimates of our ultimate losses; (iv) if our paid claims
substantially exceed our loss reserves, which are based on estimates that are
subject to significant uncertainties; (v) by decreases in our shareholders'
equity, including if our shareholders' equity falls below the minimum amount
required under our bank credit facility; (vi) if the premiums we charge are
not adequate to compensate us for our liabilities for losses; (vii) if
investors select alternatives to private mortgage insurance; (viii) by further
downgrades in our financial strength rating below Aa3/AA- by rating agencies
other than Standard and Poor's or by Standard and Poor's recent downgrade of
our insurance financial strength rating to A; (ix) by competition or changes
in our relationships with our customers or with Fannie Mae and Freddie Mac;
(x) by declines in interest rates, appreciation in house prices or changes in
mortgage insurance cancellation requirements; (xi) if the volume of low down
payment home mortgage originations declines; and (xii) by risks associated
with of private litigation and regulatory proceedings.
The foregoing risks and uncertainties should be reviewed in connection
with this press release and our other filings with the Securities and Exchange
Commission, including our prospectus filed with the Securities and Exchange
Commission on March 25, 2008, which includes additional information about
these and other risks and uncertainties in the "risk factors" included
therein.

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS

Three Months Ended March 31,
2008 2007
(in thousands of dollars, except per share data)

Net premiums written $368,454 $304,034

Net premiums earned $345,488 $299,021
Investment income 72,482 62,970
Realized losses (1,194) (3,010)
Other revenue 7,099 10,661
Total revenues 423,875 369,642

Losses and expenses:
Losses incurred 691,648 181,758
Change in premium deficiency reserves (263,781) -
Underwriting, other expenses 78,993 76,032
Interest expense 10,914 10,959
Ceding commission (2,007) (960)
Total losses and expenses 515,767 267,789

(Loss) income before tax and joint
ventures (91,892) 101,853
(Credit) provision for income tax (47,521) 23,543
Income from joint ventures, net of tax (1) 9,977 14,053

Net (loss) income $(34,394) $92,363
Diluted weighted average common shares
outstanding (Shares in thousands) 84,127 82,354

Diluted (loss) earnings per share $(0.41) $1.12

(1) Diluted EPS contribution from C-BASS $- $(0.05)

Diluted EPS contribution from Sherman $0.11 $0.22

NOTE: See "Certain Non-GAAP Financial Measures" for diluted earnings
per share contribution from realized (losses) gains.

MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF

March 31, December 31, March 31,
2008 2007 2007
(in thousands of dollars, except per share data)
ASSETS
Investments (1) $6,176,989 $5,896,233 $5,327,871
Cash and cash equivalents 1,087,243 288,933 255,043
Reinsurance recoverable on
loss reserves (2) 89,235 35,244 13,621
Prepaid reinsurance premiums 8,598 8,715 9,122
Home office and equipment, net 33,772 34,603 32,126
Deferred insurance policy
acquisition costs 10,978 11,168 11,925
Other assets 1,261,582 1,441,465 997,982
$8,668,397 $7,716,361 $6,647,690

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Loss reserves (2) 3,017,331 2,642,479 1,141,566
Premium deficiency reserves 947,060 1,210,841 -
Unearned premiums 296,067 272,233 194,175
Short- and long-term debt 798,309 798,250 607,886
Convertible debentures 365,000 - -
Other liabilities 257,907 198,215 248,647
Total liabilities 5,681,674 5,122,018 2,192,274
Shareholders' equity 2,986,723 2,594,343 4,455,416
$8,668,397 $7,716,361 $6,647,690
Book value per share (3) $23.90 $31.72 $53.64

(1) Investments include unrealized
gains on securities marked to
market pursuant to FAS 115 47,604 101,982 119,733
(2) Loss reserves, net of
reinsurance recoverable on
loss reserves 2,928,096 2,607,235 1,127,945
(3) Shares outstanding 124,949 81,793 83,067

CERTAIN NON-GAAP FINANCIAL MEASURES

Three Months Ended March 31,
2008 2007
(in thousands of dollars, except per share data)

Diluted earnings per share contribution
from realized losses:
Realized losses $(1,194) $(3,010)
Income taxes at 35% (418) (1,054)
After tax realized losses (776) (1,956)
Weighted average shares 84,127 82,354
Diluted EPS contribution from realized
losses $(0.01) $(0.02)

Management believes the diluted earnings per share contribution from
realized gains (losses) provides useful information to investors because
it shows the after-tax effect on earning of these items, which can be
discretionary.

OTHER INFORMATION

New primary insurance written ("NIW")
($ millions) $19,067 $12,693
New risk written ($ millions):
Primary $4,679 $3,292
Pool (1) $57 $39
Product mix as a % of primary flow NIW
> 95% LTVs 30% 40%
ARMs 1% 5%
Refinances 35% 27%

(1) Represents contractual aggregate loss limits and, for the three
months ended March 31, 2008 and 2007, for $10 million and $29 million,
respectively, of risk without such limits, risk is calculated at
$0.6 million and $0.5 million, respectively, the estimated amount that
would credit enhance these loans to a 'AA' level based on a rating
agency model.

Additional Information

Q3 2006 Q4 2006 Q1 2007 Q2 2007
New insurance written
(billions)
Total $16.6 $15.5 $12.7 $19.0
Flow $10.8 $10.4 $10.4 $17.3
Bulk $5.8 $5.1 $2.3 $1.7

Insurance in force
(billions)
Total $173.4 $176.5 $178.3 $186.1
Flow $131.9 $134.4 $137.6 $147.2
Bulk $41.5 $42.1 $40.7 $38.9

Annual Persistency 67.8% 69.6% 70.3% 72.0%

Primary IIF (billions) $173.4 $176.5 $178.3 $186.1
Prime (620 & >) $126.3 $128.3 $130.3 $137.2
A minus (575 - 619) $13.5 $14.0 $14.0 $14.5
Sub-Prime (< 575) $5.8 $5.8 $5.5 $5.3
Reduced Doc (All FICOs) $27.9 $28.5 $28.4 $29.1

Primary RIF (billions) $46.2 $47.1 $47.5 $49.2
Prime (620 & >) $32.8 $33.3 $33.9 $35.5
A minus (575 - 619) $3.8 $4.0 $4.0 $4.1
Sub-Prime (< 575) $1.7 $1.7 $1.6 $1.5
Reduced Doc (All FICOs) $7.9 $8.1 $8.0 $8.1

Risk in force by FICO
% (FICO 620 & >) 86.0% 85.8% 86.2% 86.7%
% (FICO 575 - 619) 9.8% 10.0% 9.9% 9.7%
% (FICO < 575) 4.2% 4.2% 3.9% 3.6%

Average Coverage Ratio
(RIF/IIF)
Total 26.6% 26.7% 26.6% 26.4%
Prime (620 & >) 26.0% 26.0% 26.0% 25.9%
A minus (575 - 619) 28.3% 28.5% 28.4% 28.1%
Sub-Prime (< 575) 28.7% 29.1% 29.2% 28.3%
Reduced Doc (All FICOs) 28.5% 28.4% 28.3% 27.9%

Average Loan Size
(thousands)
Total IIF $135.93 $137.57 $138.74 $141.16
Flow $127.99 $129.32 $130.82 $134.17
Bulk $169.29 $172.83 $174.47 $175.57
Prime (620 & >) $128.36 $129.70 $131.07 $133.79
A minus (575 - 619) $126.19 $129.12 $129.72 $130.78
Sub-Prime (< 575) $125.16 $127.30 $126.29 $127.21
Reduced Doc (All FICOs) $200.65 $202.98 $204.58 $207.53

Primary IIF - # of loans 1,275,822 1,283,174 1,284,926 1,318,318
Prime (620 & >) 983,749 989,111 994,504 1,025,658
A minus (575 - 619) 106,754 108,143 108,081 110,905
Sub-Prime (< 575) 46,429 45,633 43,480 41,665
Reduced Doc (All FICOs) 138,890 140,287 138,861 140,090

Primary IIF - # of
Delinquent Loans 76,301 78,628 76,122 80,588
Flow 41,130 42,438 40,911 43,328
Bulk 35,171 36,190 35,211 37,260

Prime (620 & >) 35,838 36,727 35,436 36,712
A minus (575 - 619) 18,063 18,182 17,047 17,943
Sub-Prime (< 575) 12,150 12,227 11,246 11,679
Reduced Doc (All FICOs) 10,250 11,492 12,393 14,254

Primary IIF Delinquency Rates 5.98% 6.13% 5.92% 6.11%
Flow 3.99% 4.08% 3.89% 3.95%
Bulk 14.33% 14.87% 15.11% 16.80%

Prime (620 & >) 3.64% 3.71% 3.56% 3.58%
A minus (575 - 619) 16.92% 16.81% 15.77% 16.18%
Sub-Prime (< 575) 26.17% 26.79% 25.86% 28.03%
Reduced Doc (All FICOs) 7.38% 8.19% 8.92% 10.17%

Net Paid Claims (millions) $157 $157 $166 $188
Flow $67 $72 $71 $82
Bulk $69 $65 $75 $84
Other $21 $20 $20 $22

Prime (620 & >) $62 $65 $67 $75
A minus (575 - 619) $33 $32 $34 $36
Sub-Prime (< 575) $20 $17 $19 $23
Reduced Doc (All FICOs) $21 $23 $26 $32

Primary Average Claim
Payment (thousands) $29.6 $29.3 $30.8 $33.2
Flow $28.5 $27.4 $28.9 $30.1
Bulk $30.8 $31.7 $33.0 $36.9

Prime (620 & >) $28.3 $27.7 $29.1 $30.6
A minus (575 - 619) $29.9 $29.1 $30.6 $33.5
Sub-Prime (< 575) $28.3 $27.3 $27.8 $31.3
Reduced Doc (All FICOs) $35.2 $37.9 $40.8 $43.4

Risk sharing Arrangements
- Flow Only
% insurance inforce
subject to risk
sharing (1) 47.5% 47.6% 47.3% 46.7%
% Quarterly NIW
subject to risk
sharing (1) 46.5% 48.3% 45.6% 49.7%
Premium ceded (millions) $33.0 $35.4 $36.7 $36.6
Captive trust fund assets
(millions)

Other:

Direct Pool Risk in Force
(millions) (2) $3,071 $3,063 $3,029 $3,029

Mortgage Guaranty
Insurance Corporation -
Risk to Capital 6.4:1 6.4:1 6.4:1 6.7:1
Combined Insurance
Companies - Risk to
Capital 7.4:1 7.5:1 7.5:1 7.7:1

Shares repurchased
# of shares (thousands) 2,697.0 216.9 - 1,115.1
Average price $58.88 $58.00 $- $60.67

C-BASS Investment
(millions) (3) $430.1 $449.5 $442.9 $466.0
Sherman Investment
(millions) (3) $124.9 $163.8 $138.2 $164.6

GAAP loss ratio (insurance
operations only) (4) 55.7% 63.0% 60.8% 76.7%
GAAP expense ratio (insurance
operations only) 16.4% 17.2% 17.8% 16.7%

Q3 2007 Q4 2007 Q1 2008
New insurance written (billions)
Total $21.1 $24.0 $19.1
Flow $19.7 $21.6 $18.1
Bulk $1.4 $2.4 $1.0

Insurance in force (billions)
Total $196.6 $211.7 $221.4
Flow $159.6 $174.7 $185.4
Bulk $37.0 $37.0 $36.0

Annual Persistency 74.0% 76.4% 77.5%

Primary IIF (billions) $196.6 $211.7 $221.4
Prime (620 & >) $146.8 $161.3 $171.7
A minus (575 - 619) $15.1 $15.9 $15.9
Sub-Prime (< 575) $5.0 $4.7 $4.4
Reduced Doc (All FICOs) $29.8 $29.9 $29.4

Primary RIF (billions) $51.8 $55.8 $58.0
Prime (620 & >) $38.0 $41.9 $44.4
A minus (575 - 619) $4.2 $4.4 $4.3
Sub-Prime (< 575) $1.4 $1.4 $1.3
Reduced Doc (All FICOs) $8.2 $8.2 $8.0

Risk in force by FICO
% (FICO 620 & >) 87.5% 88.4% 89.1%
% (FICO 575 - 619) 9.3% 8.8% 8.4%
% (FICO < 575) 3.2% 2.8% 2.5%

Average Coverage Ratio (RIF/IIF)
Total 26.4% 26.3% 26.2%
Prime (620 & >) 25.9% 26.0% 25.9%
A minus (575 - 619) 27.8% 27.4% 27.2%
Sub-Prime (< 575) 29.1% 28.9% 28.9%
Reduced Doc (All FICOs) 27.6% 27.4% 27.3%

Average Loan Size (thousands)
Total IIF $143.46 $147.31 $149.79
Flow $137.74 $142.26 $145.58
Bulk $174.82 $177.00 $175.71
Prime (620 & >) $136.74 $141.69 $145.05
A minus (575 - 619) $131.58 $133.46 $133.89
Sub-Prime (< 575) $125.03 $124.53 $123.57
Reduced Doc (All FICOs) $208.69 $209.99 $209.54

Primary IIF - # of loans 1,370,426 1,437,432 1,478,336
Prime (620 & >) 1,073,219 1,138,300 1,184,006
A minus (575 - 619) 114,792 119,057 118,353
Sub-Prime (< 575) 39,754 37,894 35,729
Reduced Doc (All FICOs) 142,661 142,181 140,248

Primary IIF - # of Delinquent Loans 90,829 107,120 113,589
Flow 50,124 61,352 66,055
Bulk 40,705 45,768 47,534

Prime (620 & >) 41,412 49,333 52,571
A minus (575 - 619) 19,918 22,863 22,748
Sub-Prime (< 575) 12,186 12,915 12,267
Reduced Doc (All FICOs) 17,313 22,009 26,003

Primary IIF Delinquency Rates 6.63% 7.45% 7.68%
Flow 4.33% 4.99% 5.19%
Bulk 19.25% 21.91% 23.19%

Prime (620 & >) 3.86% 4.33% 4.44%
A minus (575 - 619) 17.35% 19.20% 19.22%
Sub-Prime (< 575) 30.65% 34.08% 34.33%
Reduced Doc (All FICOs) 12.14% 15.48% 18.54%

Net Paid Claims (millions) $232 $284 $371
Flow $89 $108 $141
Bulk $121 $154 $210
Other $22 $22 $20

Prime (620 & >) $87 $103 $137
A minus (575 - 619) $43 $48 $68
Sub-Prime (< 575) $26 $33 $39
Reduced Doc (All FICOs) $54 $78 $107

Primary Average Claim Payment
(thousands) $39.0 $43.8 $51.2
Flow $31.8 $34.6 $37.8
Bulk $46.9 $53.8 $67.1

Prime (620 & >) $34.1 $36.5 $42.2
A minus (575 - 619) $37.5 $40.1 $48.4
Sub-Prime (< 575) $35.7 $40.2 $49.4
Reduced Doc (All FICOs) $56.6 $67.8 $75.5

Risk sharing Arrangements - Flow Only
% insurance inforce subject to
risk sharing (1) 46.9% 46.9%
% Quarterly NIW subject to risk
sharing (1) 47.3% 47.6%
Premium ceded (millions) $43.4 $47.6 $53.6
Captive trust fund assets (millions) $637 $687

Other:

Direct Pool Risk in Force (millions) (2) $3,036 $2,800 $2,727

Mortgage Guaranty Insurance
Corporation - Risk to Capital 7.9:1 10.3:1 10.1:1
Combined Insurance Companies - Risk
to Capital 9.1:1 11.9:1 11.7:1

Shares repurchased
# of shares (thousands) 150.0 - -
Average price $53.40 $- $-

C-BASS Investment (millions) (3) $- $- $-
Sherman Investment (millions) (3) $104.1 $115.3 $129.2

GAAP loss ratio (insurance operations
only) (4) 187.6% 400.6% 200.2%
GAAP expense ratio (insurance operations
only) 15.4% 13.6% 16.0%

(1) Latest Quarter data not available due to lag in reporting

(2) Represents contractual aggregate loss limits and, at March 31,
2008, December 31, 2007 and December 30, 2006, respectively, for
$4.0 billion, $4.1 billion and $4.4 billion of risk without such
limits, risk is calculated at $475 million, $475 million and
$473 million, the estimated amounts that would credit enhance these
loans to a 'AA' level based on a rating agency model.

(3) Investments in joint ventures are included in Other assets on the
Consolidated Balance Sheet.

(4) As calculated, does not reflect any effects due to premium
deficiency.

SOURCE MGIC Investment Corporation

Investors, Michael J. Zimmerman, Investor Relations, +1-414-347-6596,
mike_zimmerman@mgic.com, or Media, Katie Monfre, Corporate Communications,
+1-414-347-2650, katie_monfre@mgic.com, both of MGIC Investment Corporation