MGIC Investment Corp. (MTG, Financial) filed Quarterly Report for the period ended 2009-03-31.
MGIC Investment Corporation is a holding company which through its wholly owned subsidiary Mortgage Guaranty Insurance Corporation is the leading provider of private mortgage insurance coverage in the United States to the home mortgage lending industry. Private mortgage insurance covers residential first mortgage loans and expands home ownership opportunitiesby enabling people to purchase homes with less than 20% down payments. If the home owner defaults private mortgage insurance reduces and in some instances eliminates the loss to the insured institution. MGIC Investment Corp. has a market cap of $694.7 million; its shares were traded at around $5.56 with and P/S ratio of 0.4.
Interest expense reflects the interest associated with our outstanding debt obligations. Our long-term debt obligations at March 31, 2009 include our $300 million of 5.375% Senior Notes due in November 2015, approximately $169 million of 5.625% Senior Notes due in September 2011, $200 million outstanding under a credit facility expiring in March 2010 and $390 million in convertible debentures due in 2063 (interest on these debentures accrues even if we defer the payment of interest), as discussed in Notes 2 and 3 of our Notes to Consolidated Financial Statements and under Liquidity and Capital Resources below. Also as discussed in Note 1 of the Consolidated Financial Statements, we adopted FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), on a retrospective basis, and our interest expense now reflects our non-convertible debt borrowing rate on the convertible debentures of approximately 19%. At March 31, 2009, the convertible debentures are reflected as a liability on our consolidated balance sheet at the current amortized value of $277 million, with the unamortized discount reflected in equity.
During the first quarter of 2009 the premium deficiency reserve on Wall Street bulk transactions declined by $165 million from $454 million, as of December 31, 2008, to $289 million as of March 31, 2009. The decrease in the premium deficiency represents the net result of actual premiums, losses and expenses as well as a $119 million change in assumptions primarily related to lower estimated ultimate losses, offset by lower estimated ultimate premiums. The $289 million premium deficiency reserve as of
Direct primary insurance in force was $223.9 billion at March 31, 2009 compared to $227.0 billion at December 31, 2008 and $221.4 billion at March 31, 2008.
Our direct pool risk in force was $1.8 billion, $1.9 billion and $2.7 billion at March 31, 2009, December 31, 2008 and March 31, 2008, respectively. These risk amounts represent pools of loans with contractual aggregate loss limits and in some cases those without these limits. For pools of loans without these limits, risk is estimated based on the amount that would credit enhance the loans in the pool to a AA level based on a rating agency model. Under this model, at March 31, 2009, December 31, 2008 and March 31, 2008, for $2.5 billion, $2.5 billion and $4.0 billion, respectively, of risk without these limits, risk in force is calculated at $149 million, $150 million and $475 million, respectively
In June 2008 we entered into a reinsurance agreement that was effective on the risk associated with up to $50 billion of qualifying new insurance written each calendar year. The term of the reinsurance agreement began on April 1, 2008 and was scheduled to end on December 31, 2010, subject to two one-year extensions that could have been exercised by the reinsurer. Due to our rating agency downgrades in the first quarter of 2009, under the terms of the reinsurance agreement we ceased being entitled to a profit commission, making the agreement less favorable to us. Effective March 20, 2009, we terminated this reinsurance agreement. The termination resulted in a reinsurance fee of $26.4 million as reflected in our results of operations for the three months ended March 31, 2009. There are no further obligations under this reinsurance agreement.
Read the The complete ReportMTG is in the portfolios of Martin Whitman of Third Avenue Value Fund, Third Avenue Management, Richard Snow of Snow Capital Management, L.P..
MGIC Investment Corporation is a holding company which through its wholly owned subsidiary Mortgage Guaranty Insurance Corporation is the leading provider of private mortgage insurance coverage in the United States to the home mortgage lending industry. Private mortgage insurance covers residential first mortgage loans and expands home ownership opportunitiesby enabling people to purchase homes with less than 20% down payments. If the home owner defaults private mortgage insurance reduces and in some instances eliminates the loss to the insured institution. MGIC Investment Corp. has a market cap of $694.7 million; its shares were traded at around $5.56 with and P/S ratio of 0.4.
Highlight of Business Operations:
At March 31, 2009, MGICs policyholders position exceeded the required minimum by approximately $1.2 billion, and we exceeded the required minimum by approximately $1.3 billion on a combined statutory basis. (The combined figures give effect to reinsurance with subsidiaries of our holding company.) At March 31, 2009 MGICs risk-to-capital was 14.2:1 and was 16.1:1 on a combined statutory basis. For additional information about how we calculate risk-to-capital, see Liquidity and Capital Resources Risk to Capital below.Interest expense reflects the interest associated with our outstanding debt obligations. Our long-term debt obligations at March 31, 2009 include our $300 million of 5.375% Senior Notes due in November 2015, approximately $169 million of 5.625% Senior Notes due in September 2011, $200 million outstanding under a credit facility expiring in March 2010 and $390 million in convertible debentures due in 2063 (interest on these debentures accrues even if we defer the payment of interest), as discussed in Notes 2 and 3 of our Notes to Consolidated Financial Statements and under Liquidity and Capital Resources below. Also as discussed in Note 1 of the Consolidated Financial Statements, we adopted FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), on a retrospective basis, and our interest expense now reflects our non-convertible debt borrowing rate on the convertible debentures of approximately 19%. At March 31, 2009, the convertible debentures are reflected as a liability on our consolidated balance sheet at the current amortized value of $277 million, with the unamortized discount reflected in equity.
During the first quarter of 2009 the premium deficiency reserve on Wall Street bulk transactions declined by $165 million from $454 million, as of December 31, 2008, to $289 million as of March 31, 2009. The decrease in the premium deficiency represents the net result of actual premiums, losses and expenses as well as a $119 million change in assumptions primarily related to lower estimated ultimate losses, offset by lower estimated ultimate premiums. The $289 million premium deficiency reserve as of
Direct primary insurance in force was $223.9 billion at March 31, 2009 compared to $227.0 billion at December 31, 2008 and $221.4 billion at March 31, 2008.
Our direct pool risk in force was $1.8 billion, $1.9 billion and $2.7 billion at March 31, 2009, December 31, 2008 and March 31, 2008, respectively. These risk amounts represent pools of loans with contractual aggregate loss limits and in some cases those without these limits. For pools of loans without these limits, risk is estimated based on the amount that would credit enhance the loans in the pool to a AA level based on a rating agency model. Under this model, at March 31, 2009, December 31, 2008 and March 31, 2008, for $2.5 billion, $2.5 billion and $4.0 billion, respectively, of risk without these limits, risk in force is calculated at $149 million, $150 million and $475 million, respectively
In June 2008 we entered into a reinsurance agreement that was effective on the risk associated with up to $50 billion of qualifying new insurance written each calendar year. The term of the reinsurance agreement began on April 1, 2008 and was scheduled to end on December 31, 2010, subject to two one-year extensions that could have been exercised by the reinsurer. Due to our rating agency downgrades in the first quarter of 2009, under the terms of the reinsurance agreement we ceased being entitled to a profit commission, making the agreement less favorable to us. Effective March 20, 2009, we terminated this reinsurance agreement. The termination resulted in a reinsurance fee of $26.4 million as reflected in our results of operations for the three months ended March 31, 2009. There are no further obligations under this reinsurance agreement.
Read the The complete ReportMTG is in the portfolios of Martin Whitman of Third Avenue Value Fund, Third Avenue Management, Richard Snow of Snow Capital Management, L.P..
