MGIC Provides Additional Comment on Impact of Draft GSE Mortgage Insurer Eligibility Requirements

MILWAUKEE, July 11, 2014 /PRNewswire/ -- Yesterday MGIC, the principal subsidiary of MGIC Investment Corporation (MTG), said its preliminary assessment of the draft private mortgage insurer eligibility requirements released by FHFA for public input (Draft PMIERs) was that MGIC's Available Assets would be materially less than its Minimum Required Assets at both the projected effective date and two years thereafter and that we had alternatives to mitigate the shortfall.  Using the factors and definitions in the Draft PMIERs, MGIC believes that its Available Assets, at December 31, 2014, would be approximately $5.3 billion and the Minimum Required Assets would be approximately $5.9 billion, resulting in a shortfall of approximately $600 million.  MGIC believes this shortfall would be reduced through operations so that at the end of the two-year transition period it would be approximately $300 million.  The shortfall projections at both dates include receiving full credit for MGIC's existing reinsurance (approximately $500 million of credit at December 31, 2014, increasing to $600 million of credit two years later).  However, we do not expect to receive full credit for our current reinsurance.  As a result, we are beginning discussions with the reinsurance market to modify our existing reinsurance so that any reduction for reinsurance credit would be minimized.

As of June 30, 2014, MGIC Investment had approximately $515 million of cash and investments, a portion of which we believe may be available for future contribution to MGIC.  Furthermore, there are regulated insurance affiliates of MGIC that have approximately $100 million of assets as of June 30, 2014. We expect that, subject to regulatory approval, we would be able to use a material portion of these assets to increase the Available Assets of MGIC.  Additionally, if the Draft PMIERs become effective in their current form, we would consider seeking additional reinsurance and/or non-dilutive debt capital to mitigate the shortfall.

For these reasons, we believe we will be able to use a combination of the alternatives outlined above, so that MGIC expects it would meet the requirements of the Draft PMIERs even if they become effective in their current form.

Forward Looking Statements

This press release contains forward looking statements. Among others, statements regarding the potential impact of the Draft PMIERs or alternatives that MGIC could pursue were the Draft PMIERs implemented in their current form, and statements that include words such as "believe," "anticipate," "will" or "expect," or words of similar import, are forward looking statements. We are not undertaking any obligation to update any forward looking statements or other statements we may make even though these statements may be affected by events or circumstances occurring after the forward looking statements or other statements were made. No investor should rely on the fact that such statements are current at any time other than the time at which this press release was issued.

Our actual results could differ materially from those anticipated in these forward looking statements as a result of the following factors:

• Changes in the actual PMIERs adopted from the Draft PMIERs may increase the amount of the Minimum Required Assets or reduce our Available Assets, with the result that our projected excess of Minimum Required Assets over our projected Available Assets could increase (the shortfall).
• We may not obtain regulatory approval to transfer assets from our affiliated insurance companies to the extent we are assuming because regulators project higher losses than we project or require a level of capital be maintained in these companies higher than we are assuming.
• We may not be able to access the non-dilutive debt markets due to market conditions, concern about our creditworthiness, or other factors, in a manner sufficient to provide the funds we are assuming.
• We may not be able to achieve modifications in our existing reinsurance arrangements necessary to minimize the reduction in the credit for reinsurance under the Draft PMIERs.
• We may not be able to obtain additional reinsurance necessary to further reduce the Minimum Required Assets due to market capacity, pricing or other reasons.
• Economic conditions, competition, changes in our relationships with our customers or other factors could reduce our revenues or increase our losses, thereby reducing our Available Assets and increasing the shortfall.
• The amount of insurance we write could be adversely affected if final rules defining "Qualified Residential Mortgage" result in a reduced number of low down payment loans available to be insured or if lenders and investors select alternatives to private mortgage insurance, which could reduce our Available Assets and increase the shortfall.
• Changes in the business practices of the GSEs, federal legislation that changes their charters or a restructuring of the GSEs could reduce our revenues or increase our losses, which could reduce our Available Assets and increase the shortfall.
• We may not have a successful outcome to the legal proceedings in which we are currently involved and we are subject to the risk of additional legal proceedings in the future, which could reduce our Available Assets and increase the shortfall.
• Resolution of our dispute with the Internal Revenue Service could reduce our Available Assets and increase the shortfall.
• Because paid loss estimates are subject to uncertainties and are based on assumptions that are volatile, paid claims may be substantially higher than we are assuming and could increase the shortfall.
• The mix of business we write could require more Minimum Required Assets than we are assuming and could increase the shortfall.

For a more detailed description regarding certain of the factors listed in the bullet points above, you should refer to the Risk Factors detailed in our Quarterly Report on Form 10‑Q filed with the SEC on May 9, 2014.

About MGIC

MGIC (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, is a private mortgage insurer with $159.7 billion primary insurance in force covering approximately one million mortgages as of March 31, 2014.  MGIC serves lenders throughout the United States, Puerto Rico, and other locations helping families achieve homeownership sooner by making affordable low-down-payment mortgages a reality.

From time to time MGIC Investment Corporation releases important information via postings on its corporate website without making any other disclosure and intends to continue to do so in the future. Investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings.  Enrollment information can be found at http://mtg.mgic.com under Investor Information.

SOURCE MGIC