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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

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