MGIC INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended June 30 Six Months Ended June 30 2007 2006 2007 2006 (in thousands of dollars, except per share data) Net premiums written $ 320,988 $ 305,280 $ 625,022 $ 605,752 Net premiums earned $ 306,451 $ 294,503 $ 605,472 $ 594,170 Investment income 61,927 59,380 124,897 117,344 Realized losses (9,829) (1,838) (12,839) (1,751) Other revenue 10,490 11,459 21,151 22,773 Total revenues 369,039 363,504 738,681 732,536 Losses and expenses: Losses incurred 235,226 146,467 416,984 261,352 Underwriting, other expenses 76,433 72,417 152,465 147,769 Interest expense 8,594 8,843 19,553 18,158 Ceding commission (1,103) (925) (2,063) (2,012) Total losses and expenses 319,150 226,802 586,939 425,267 Income before tax and joint ventures 49,889 136,702 151,742 307,269 Provision for income tax 5,073 34,479 28,616 80,645 Income from joint ventures, net of tax (1) 31,899 47,616 45,952 86,668 Net income $ 76,715 $ 149,839 $ 169,078 $ 313,292 Diluted weighted average common shares outstanding (Shares in thousands) 82,309 86,259 82,349 86,753 Diluted earnings per share $ 0.93 $ 1.74 $ 2.05 $ 3.61 (1) Diluted EPS contribution from C-BASS $ 0.18 $0.34 $ 0.13 $ 0.56 Diluted EPS contribution from Sherman $ 0.20 $0.21 $ 0.42 $ 0.42
NOTE: See "Certain Non-GAAP Financial Measures" for diluted earnings per share contribution from realized losses.
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF June 30, December 31, June 30, 2007 2006 2006 (in thousands of dollars, except per share data) ASSETS Investments (1) $ 5,396,863 $ 5,252,422 $ 5,272,521 Cash and cash equivalents 183,387 293,738 106,442 Reinsurance recoverable on loss reserves (2) 12,809 13,417 13,236 Prepaid reinsurance premiums 8,636 9,620 10,481 Home office and equipment, net 33,309 32,603 32,261 Deferred insurance policy acquisition costs 11,692 12,769 15,449 Other assets 1,152,211 1,007,102 852,872 $ 6,798,907 $ 6,621,671 $ 6,303,262 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Loss reserves (2) 1,188,248 1,125,715 1,087,337 Unearned premiums 208,247 189,661 172,277 Short- and long-term debt 646,602 781,277 631,104 Other liabilities 356,238 229,141 222,601 Total liabilities 2,399,335 2,325,794 2,113,319 Shareholders' equity 4,399,572 4,295,877 4,189,943 $ 6,798,907 $ 6,621,671 $ 6,303,262 Book value per share $ 53.68 $ 51.88 $ 48.90 (1) Investments include unrealized gains on securities marked to market pursuant to FAS 115 37,306 128,752 19,753 (2) Loss reserves, net of reinsurance recoverable on loss reserves 1,175,439 1,112,298 1,074,101 CERTAIN NON-GAAP FINANCIAL MEASURES Three Months Ended June 30, Six Months Ended June 30, 2007 2006 2007 2006 Diluted earnings per share contribution from realized losses: Realized losses $ (9,829) $ (1,838) $ (12,839) $ (1,751) Income taxes at 35% (3,440) (643) (4,494) (613) After tax realized losses (6,389) (1,195) (8,345) (1,138) Weighted average shares 82,309 86,259 82,349 86,753 Diluted EPS contribution from realized losses $ (0.08) $ (0.01) $ (0.10) $ (0.01)
Management believes the diluted earnings per share contribution from realized losses provides useful information to investors because it shows the after-tax effect that sales of securities from the Company's investment portfolio, which are discretionary transactions, had on earnings.
OTHER INFORMATION New primary insurance written ("NIW") ($ millions) $ 19,007 $ 16,100 $ 31,700 $ 26,132 New risk written ($ millions): Primary $ 4,697 $ 4,434 $ 7,989 $ 7,159 Pool (1) $ 45 $ 89 $ 87 $ 157 Product mix as a % of primary flow NIW > 95% LTVs 45% 32% 43% 30% ARMs 3% 10% 4% 11% Refinances 23% 22% 24% 25% (1) Represents contractual aggregate loss limits and, for the three and six months ended June 30, 2007 and 2006, for $7 million and $15 million, $11 million and $30 million, respectively, of risk without such limits, risk is calculated at $0.4 million and $0.7 million, $0.9 million and $2 million, respectively, the estimated amount that would credit enhance these loans to a 'AA' level based on a rating agency model. Additional Information Q1 2006 Q2 2006 Q3 2006 New insurance written (billions) Total $10.0 $16.1 $16.6 Flow $7.9 $10.1 $10.8 Bulk $2.1 $6.0 $5.8 Insurance in force (billions) Total $166.9 $169.8 $173.4 Flow $128.6 $129.5 $131.9 Bulk $38.3 $40.3 $41.5 Annual Persistency 62.0% 64.1% 67.8% Primary IIF (billions) $166.9 $169.8 $173.4 Prime - (620 & >) $124.5 $124.8 $126.3 A minus (575 - 619) $14.1 $13.9 $13.5 Sub-Prime () $32.1 $32.3 $32.8 A minus (575 - 619) $4.0 $3.9 $3.8 Sub-Prime () 84.8% 85.1% 86.0% % (FICO 575 - 619) 10.6% 10.4% 9.8% % (FICO ) 25.8% 25.9% 26.0% A minus (575 - 619) 28.3% 28.3% 28.3% Sub-Prime () $125.88 $127.09 $128.36 A minus (575 - 619) $125.18 $126.51 $126.19 Sub-Prime () 989,147 981,983 983,749 A minus (575 - 619) 112,923 110,113 106,754 Sub-Prime () 36,114 34,268 35,838 A minus (575 - 619) 18,109 17,575 18,063 Sub-Prime () 3.65% 3.49% 3.64% A minus (575 - 619) 16.04% 15.96% 16.92% Sub-Prime () $57 $67 $62 A minus (575 - 619) $28 $32 $33 Sub-Prime () $26.4 $26.6 $28.3 A minus (575 - 619) $27.1 $27.8 $29.9 Sub-Prime () $128.3 $130.3 $137.2 A minus (575 - 619) $14.0 $14.0 $14.5 Sub-Prime () $33.3 $33.9 $35.5 A minus (575 - 619) $4.0 $4.0 $4.1 Sub-Prime () 85.8% 86.2% 86.7% % (FICO 575 - 619) 10.0% 9.9% 9.7% % (FICO ) 26.0% 26.0% 25.9% A minus (575 - 619) 28.5% 28.4% 28.1% Sub-Prime () $129.70 $131.07 $133.79 A minus (575 - 619) $129.12 $129.72 $130.78 Sub-Prime () 989,111 994,504 1,025,658 A minus (575 - 619) 108,143 108,081 110,905 Sub-Prime () 36,727 35,436 36,712 A minus (575 - 619) 18,182 17,047 17,943 Sub-Prime () 3.71% 3.56% 3.58% A minus (575 - 619) 16.81% 15.77% 16.18% Sub-Prime () $65 $67 $75 A minus (575 - 619) $32 $34 $36 Sub-Prime () $27.7 $29.1 $30.6 A minus (575 - 619) $29.1 $30.6 $33.5 Sub-Prime (< 575) $27.3 $27.8 $31.3 Reduced Doc (All FICOs) $37.9 $40.8 $43.4 Risk sharing Arrangements - Flow Only % insurance inforce subject to risk sharing (1) 47.6% 47.3% % Quarterly NIW subject to risk sharing (1) 48.3% 45.6% Premium ceded (millions) $35.4 $36.7 $36.6 Other: Direct Pool Risk in Force (millions) (2) $3,063 $3,029 $3,029 Mortgage Guaranty Insurance Corporation - Risk to Capital 6.4:1 6.4:1 6.7:1 Shares repurchased # of shares (thousands) 216.9 - 1,115.1 Average price $58.00 $ - $60.67 C-BASS Investment (millions) $449.5 $442.9 $466.0 Sherman Investment (millions) $163.8 $138.2 $164.6 GAAP loss ratio (insurance operations only) 63.0% 60.8% 76.7% GAAP expense ratio (insurance operations only) 17.2% 17.8% 16.7% (1) Latest Quarter data not available due to lag in reporting (2) Represents contractual aggregate loss limits and, at June 30, 2007, December 31, 2006 and June 30, 2006, respectively, for $4.3 billion, $4.4 billion and $4.7 billion of risk without such limits, risk is calculated at $474 million, $473 million and $471 million, the estimated amounts that would credit enhance these loans to a 'AA' level based on a rating agency model.
Source: MGIC Investment Corporation
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