FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________ [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 1-10816 MGIC INVESTMENT CORPORATION (Exact name of registrant as specified in its charter) WISCONSIN 39-1486475 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 250 E. KILBOURN AVENUE 53202 MILWAUKEE, WISCONSIN (Zip Code) (Address of principal executive offices) (414) 347-6480 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ---------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OF STOCK PAR VALUE DATE NUMBER OF SHARES - -------------- --------- ---- ---------------- Common stock $1.00 3/31/98 114,105,616 PAGE 1
MGIC INVESTMENT CORPORATION TABLE OF CONTENTS Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet as of March 31, 1998 (Unaudited) and December 31, 1997 3 Consolidated Statement of Operations for the Three Months Ended March 31, 1998 and 1997 (Unaudited) 4 Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1998 and 1997 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14-15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17 INDEX TO EXHIBITS 18 PAGE 2
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MGIC INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET March 31, 1998 (Unaudited) and December 31, 1997 March 31, December 31, 1998 1997 --------- ------------ ASSETS (In thousands of dollars) - ------ Investment portfolio: Securities, available-for-sale, at market value: Fixed maturities $2,315,903 $2,185,954 Equity securities 4,221 116,053 Short-term investments 222,631 114,733 ---------- ---------- Total investment portfolio 2,542,755 2,416,740 Cash 5,988 4,893 Accrued investment income 34,007 35,485 Reinsurance recoverable on loss reserves 24,762 26,415 Reinsurance recoverable on unearned premiums 7,934 9,239 Home office and equipment, net 33,370 33,784 Deferred insurance policy acquisition costs 26,211 27,156 Investment in unconsolidated subsidiary 31,320 29,400 Other assets 28,653 34,575 ---------- ---------- Total assets $2,735,000 $2,617,687 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Liabilities: Loss reserves $ 617,734 $ 598,683 Unearned premiums 183,666 198,305 Notes payable (note 2) 242,500 237,500 Income taxes payable 50,656 27,717 Other liabilities 62,532 68,700 ---------- ---------- Total liabilities 1,157,088 1,130,905 ---------- ---------- Contingencies (note 3) Shareholders' equity (note 4): Common stock, $1 par value, shares authorized 150,000,000; shares issued 121,110,800; shares outstanding, 3/31/98 - 114,105,616; 1997 - 113,791,593 121,111 121,111 Paid-in surplus 218,397 218,499 Treasury stock (shares at cost, 3/31/98 - 7,005,184; 1997 - 7,319,207) (242,115) (252,942) Unrealized appreciation in investments, net of tax (note 6) 73,193 83,985 Retained earnings 1,407,326 1,316,129 ---------- ---------- Total shareholders' equity 1,577,912 1,486,782 ---------- ---------- Total liabilities and shareholders' equity $2,735,000 $2,617,687 ========== ========== See accompanying notes to consolidated financial statements. PAGE 3
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 1998 and 1997 (Unaudited) Three Months Ended March 31, ------------------ 1998 1997 ---- ---- (In thousands of dollars, except per share data) Revenues: Premiums written: Direct $177,797 $155,289 Assumed 1,969 2,794 Ceded (3,279) (2,477) -------- -------- Net premiums written 176,487 155,606 Decrease in unearned premiums 13,334 14,686 -------- -------- Net premiums earned 189,821 170,292 Investment income, net of expenses 34,389 29,508 Realized investment gains, net 10,295 89 Other revenue 9,461 5,202 -------- -------- Total revenues 243,966 205,091 -------- -------- Losses and expenses: Losses incurred, net 59,438 63,194 Underwriting and other expenses 45,158 38,213 Interest expense 3,630 319 Ceding commission (337) (542) -------- -------- Total losses and expenses 107,889 101,184 -------- -------- Income before tax 136,077 103,907 Provision for income tax 42,030 31,471 -------- -------- Net income $ 94,047 $ 72,436 ======== ======== Earnings per share (notes 4 and 5): Basic $ 0.83 $ 0.61 ======== ======== Diluted $ 0.81 $ 0.61 ======== ======== Weighted average common shares outstanding (shares in thousands, notes 4 and 5) 115,741 119,323 ======== ======== Dividends per share (note 4) $ 0.025 $ 0.02 ======== ======== See accompanying notes to consolidated financial statements. PAGE 4
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended March 31, 1998 and 1997 (Unaudited) Three Months Ended March 31, -------------------- 1998 1997 ---- ---- (In thousands of dollars) Cash flows from operating activities: Net income $ 94,047 $ 72,436 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred insurance policy acquisition costs 4,564 7,317 Increase in deferred insurance policy acquisition costs (3,619) (6,117) Depreciation and amortization 1,892 2,017 Decrease in accrued investment income 1,478 4,790 Decrease in reinsurance recoverable on loss reserves 1,653 1,028 Decrease in reinsurance recoverable on unearned premiums 1,305 1,605 Increase in loss reserves 19,051 22,932 Decrease in unearned premiums (14,639) (16,291) (Increase) decrease in investment in unconsolidated subsidiary (1,920) 500 Other 28,653 15,226 -------- -------- Net cash provided by operating activities 132,465 105,443 -------- -------- Cash flows from investing activities: Purchase of equity securities (3,886) - Purchase of fixed maturities (242,572) (165,998) Proceeds from sale of equity securities 106,223 - Proceeds from sale or maturity of fixed maturities 104,837 109,782 -------- -------- Net cash used in investing activities (35,398) (56,216) -------- -------- Cash flows from financing activities: Dividends paid to shareholders (2,850) (2,361) Net increase (decrease) in notes payable 5,000 (35,424) Reissuance of treasury stock 9,776 9,090 -------- -------- Net cash provided by (used in) financing activities 11,926 (28,695) -------- -------- Net increase in cash and short-term investments 108,993 20,532 Cash and short-term investments at beginning of period 119,626 143,975 -------- -------- Cash and short-term investments at end of period $228,619 $164,507 ======== ======== See accompanying notes to consolidated financial statements. PAGE 5
MGIC INVESTMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (Unaudited) Note 1 - Basis of presentation The accompanying unaudited consolidated financial statements of MGIC Investment Corporation (the "Company") and its wholly-owned subsidiaries have been prepared in accordance with the instructions to Form 10-Q and do not include all of the other information and disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 1997 included in the Company's Annual Report on Form 10-K for that year. The accompanying consolidated financial statements have not been audited by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring accruals, necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three months ended March 31, 1998 may not be indicative of the results that may be expected for the year ending December 31, 1998. Note 2 - Notes payable During 1997, the Company repurchased 4,655,985 shares of its outstanding common stock from a financial intermediary at a cost of approximately $248 million. Funds to repurchase the shares were primarily provided by borrowings under a credit facility evidenced by notes payable. The weighted average interest rate on the notes at March 31, 1998 was 5.92% per annum. The interest rate on borrowings under the facility is variable. The credit facility provides for up to $250 million of availability which decreases by $25 million each year beginning June 20, 1998 through June 20, 2001. Any outstanding borrowings under the facility mature on June 20, 2002. The Company has the option, on notice to the lenders, to prepay any borrowings subject to certain provisions. At March 31, 1998 outstanding borrowings under the credit facility were generally for terms of less than one year. Under the terms of the credit facility, the Company must maintain shareholders' equity of at least $900 million and MGIC must maintain a claims paying ability rating of AA- or better with Standard & Poor's Corporation ("S&P"). At March 31, 1998, the Company had shareholders' equity of $1,578 million and MGIC had a claims paying ability rating of AA+ from S&P. During 1998 MGIC guaranteed one half of a $50 million credit facility for C-BASS, a 48% owned unconsolidated subsidiary. The facility matures in January 1999. PAGE 6
Note 3 - Contingencies The Company is involved in litigation in the ordinary course of business. In the opinion of management, the ultimate disposition of the pending litigation will not have a material adverse effect on the financial position of the Company. In addition to the litigation referred to above, Mortgage Guaranty Insurance Corporation ("MGIC") is a defendant in a lawsuit commenced by a borrower challenging the necessity of maintaining mortgage insurance in certain circumstances, primarily when the loan-to-value ratio is below 80%. The lawsuit purports to be brought on behalf of a class of borrowers. This case appears to be based to some degree upon guidelines issued by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association to their respective mortgage servicers under which the mortgage servicers may be required in certain circumstances to cancel borrower-purchased insurance upon the borrower's request. The plaintiff alleges that MGIC has a common law duty to inform a borrower that the insurance may be cancelled in these circumstances. The relief sought is equitable relief as well as the return of premiums paid after the insurance was cancellable under the applicable guidelines. The Company believes that MGIC has a meritorious defense to this action in that, in the absence of a specific statute (no statutory duty other than under a general consumer fraud statute is alleged), there appears to be no legal authority requiring a mortgage insurer to inform a borrower that insurance may be cancelled. Summary judgment was granted to MGIC in another case involving similar issues. Similar cases are pending against other mortgage insurers, mortgage lenders and mortgage loan servicers. Note 4 - Shareholders' equity On June 2, 1997 the Company effected a two-for-one stock split of the Company's common stock in the form of a 100% stock dividend. The prior year share, per share and certain equity amounts set forth in the accompanying financial statements have been adjusted to take into account the stock split. PAGE 7
Note 5 - Earnings per share The Company's basic and diluted earnings per share ("EPS") have been calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). The following is a reconciliation of the weighted-average number of shares used for basic EPS and diluted EPS. Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- (Shares in thousands) Weighted-average shares - Basic EPS 113,989 118,108 Common stock equivalents 1,752 1,215 ------- ------- Weighted-average shares - Diluted EPS 115,741 119,323 ======= ======= Earnings per share for 1997 has been restated to reflect the provisions of SFAS 128. Previously reported EPS for 1997, after adjustment for the stock split, equaled diluted EPS under SFAS 128. Note 6 - New accounting standards Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). The statement establishes standards for the reporting and display of comprehensive income and its components in annual financial statements. The Company's total comprehensive income, as calculated per SFAS 130, was as follows: Three Months Ended March 31, ---------------------------- 1998 1997 ---- ---- (In thousands of dollars) Net income $ 94,047 $ 72,436 Other comprehensive loss (10,792) (22,851) -------- --------- Total comprehensive income $ 83,255 $ 49,585 ======== ======== The difference between the Company's net income and total comprehensive income for the three months ended March 31, 1998 and 1997 is primarily the change in unrealized appreciation on investments, net of tax. PAGE 8
Note 7 - Subsequent events On May 7, 1998, the Company's Board of Directors authorized the repurchase of shares of the Company's common stock with an aggregate purchase price of up to $250 million. The Company's previous $250 million stock repurchase program was completed during 1997. The Company expects to fund the repurchase program through a bank loan facility, which the Company is in the process of arranging, and from operating cash flow. At the Company's May 7, 1998 annual shareholders' meeting, shareholders approved an increase in the number of authorized shares of common stock from 150 million to 300 million shares and approved a class of preferred stock of 10 million shares. PAGE 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Consolidated Operations Three Months Ended March 31, 1998 Compared With Three Months Ended March 31, 1997 Net income for the three months ended March 31, 1998 was $94.0 million, compared to $72.4 million for the same period of 1997, an increase of 30%. After giving effect to the Company's two-for-one stock split, effective June 2, 1997, diluted earnings per share for the three months ended March 31, 1998 was $0.81 compared to $0.61 in the same period last year, an increase of 33%. See notes 4 and 5 to the consolidated financial statements. The amount of new primary insurance written by Mortgage Guaranty Insurance Corporation ("MGIC") during the three months ended March 31, 1998 was $8.5 billion, compared to $6.5 billion in the same period of 1997. Refinancing activity accounted for 35% of new primary insurance written in the first quarter of 1998, compared to 17% in the first quarter of 1997. New insurance written for the first quarter of 1998 reflected an increase in the usage of the monthly premium product to 95% of new insurance written from 92% of new insurance written in the first quarter of 1997. New insurance written for adjustable-rate mortgages decreased to 13% of new insurance written in the first quarter of 1998 from 26% of new insurance written in the same period of 1997. Also, mortgages with loan-to-value ratios in excess of 90% but not more than 95% decreased to 34% of new insurance written in the first quarter of 1998 from 42% of new insurance written in the same period of 1997. The $8.5 billion of new primary insurance written during the first quarter of 1998 was offset by the cancellation of $8.7 billion of insurance in force, and resulted in a net decrease of $.2 billion in primary insurance in force, compared to new primary insurance written of $6.5 billion, the cancellation of $5.1 billion, and a net increase of $1.4 billion in insurance in force during the first quarter of 1997. Direct primary insurance in force was $138.3 billion at March 31, 1998 compared to $138.5 billion at December 31, 1997 and $132.8 billion at March 31, 1997. In addition to providing primary insurance coverage, the Company also insures pools of mortgage loans. New pool risk written during the three months ended March 31, 1998 was $144 million, which was virtually all agency pool insurance. The Company's direct pool risk in force at March 31, 1998 was $730.7 million compared to $261.3 million at March 31, 1997 and is expected to increase during the remainder of 1998 as a result of outstanding commitments to write additional agency pool insurance. PAGE 10
Cancellation activity increased during 1997 and the first quarter of 1998 due to favorable mortgage interest rates which resulted in a decrease in the MGIC persistency rate (percentage of insurance remaining in force from one year prior) to 78.4% at March 31, 1998 from 82.7% at March 31, 1997. Cancellation activity could increase due to factors other than refinances and home sales if proposed legislation regarding cancellation of mortgage insurance is enacted. Net premiums written were $176.5 million during the first quarter of 1998, compared to $155.6 million during the first quarter of 1997, an increase of 13%. Net premiums earned were $189.8 million for the first quarter of 1998, an increase of 11% over the $170.3 million for the same period in 1997. The increases were primarily a result of the growth in insurance in force since March 31, 1997 and renewal premiums on mortgage loans with deeper coverages. Investment income for the first quarter of 1998 was $34.4 million, an increase of 17% over the $29.5 million in the first quarter of 1997. This increase was primarily the result of an increase in the amortized cost of average invested assets to $2.4 billion for the first quarter of 1998 from $2.0 billion for the first quarter of 1997, an increase of 17%. The portfolio's average pre-tax investment yield was 5.8% for the first quarter of 1998 and 5.9% for the same period in 1997. The portfolio's average after-tax investment yield was 4.9% for the first quarter of 1998 and 5.0% for the same period in 1997. The Company realized gains of $10.3 million during the three months ended March 31, 1998 resulting primarily from the sale of equity securities compared to minimal realized gains on investments during the same period in 1997. Other revenue was $9.5 million for the first quarter of 1998 compared to $5.2 million for the same period in 1997. The increase is primarily the result of $1.9 million of equity earnings from C-BASS, the Company's joint venture with Enhance Financial Services Group Inc. and an increase in fee-based services for underwriting. Net losses incurred decreased 6% to $59.4 million during the first quarter of 1998 from $63.2 million during the first quarter of 1997. Such decrease was primarily attributed to a decrease in the primary insurance notice inventory during the first quarter as compared to an increase in the primary insurance notice inventory during the comparable period of 1997, along with improvements in certain high-cost geographic regions. At March 31, 1998, 59% of MGIC's insurance in force was written during the preceding thirteen quarters, compared to 63% at March 31, 1997. The highest claim frequency years have typically been the third through fifth year after the year of loan origination. However, the pattern of claims frequency for refinance loans may be different from the historical pattern of other loans. Underwriting and other expenses increased to $45.2 million in the first quarter of 1998 from $38.2 million in the first quarter of 1997, an increase of 18%. This increase was primarily due to an increase in expenses associated with the fee-based services for underwriting and an increase in premium tax due to higher premiums written. PAGE 11
Interest expense increased to $3.6 million in the first quarter of 1998 from $.3 million during the same period in 1997. Interest expense in the current period is the result of debt incurred to fund the stock repurchase program. Interest expense for the first quarter of 1997 represents interest prior to the repayment in January 1997 of the mortgages payable. See note 2 to the consolidated financial statements. The consolidated insurance operations loss ratio was 31.3% for the first quarter of 1998 compared to 37.1% for the first quarter of 1997. The consolidated insurance operations expense and combined ratios were 19.9% and 51.2%, respectively, for the first quarter of 1998 compared to 21.1% and 58.2% for the first quarter of 1997. The effective tax rate was 30.9% in the first quarter of 1998, compared to 30.3% in the first quarter of 1997. During both periods, the effective tax rate was below the statutory rate of 35%, reflecting the benefits of tax-preferenced investment income. The higher effective tax rate in 1998 resulted from a lower percentage of total income before tax being generated from tax-preferenced investments. Liquidity and Capital Resources The Company's consolidated sources of funds consist primarily of premiums written and investment income. The Company generated positive cash flows from operating activities of $132.5 million for the three months ended March 31, 1998, as shown on the Consolidated Statement of Cash Flows. Funds are applied primarily to the payment of claims and expenses. The Company's business does not require significant capital expenditures on an ongoing basis. Positive cash flows are invested pending future payments of claims and other expenses; cash flow shortfalls, if any, could be funded through sales of short-term investments and other investment portfolio securities. Consolidated total investments were $2.5 billion at March 31, 1998, compared to $2.4 billion at December 31, 1997, an increase of 5%. This increase is due primarily to positive cash flow from operations. The investment portfolio includes unrealized gains on securities marked to market at March 31, 1998 and December 31, 1997 of $112.6 million and $129.2 million, respectively. As of March 31, 1998, the Company had $222.6 million of short-term investments with maturities of 90 days or less. In addition, at March 31, 1998, based on amortized cost, the Company's total investments, which were primarily comprised of fixed maturities, were approximately 98% invested in "A" rated and above, readily marketable securities, concentrated in maturities of less than 15 years. Consolidated loss reserves increased 3% to $617.7 million at March 31, 1998 from $598.7 million at December 31, 1997. Consistent with industry practices, the Company does not establish loss reserves for future claims on insured loans which are not currently in default. PAGE 12
Consolidated unearned premiums decreased $14.6 million from $198.3 million at December 31, 1997 to $183.7 million at March 31, 1998, primarily reflecting the continued high level of monthly premium policies written, for which there is no unearned premium. Reinsurance recoverable on unearned premiums decreased $1.3 million to $7.9 million at March 31, 1998 from $9.2 million at December 31, 1997, primarily reflecting the reduction in unearned premiums. Consolidated shareholders' equity increased to $1.6 billion at March 31, 1998, from $1.5 billion at December 31, 1997, an increase of 6%. This increase consisted of $94.0 million of net income during the first three months of 1998 and $10.7 million from the reissuance of treasury stock offset by a decrease in net unrealized gains on investments of $10.8 million, net of tax, and dividends declared of $2.8 million. MGIC is the principal insurance subsidiary of the Company. MGIC's risk-to-capital ratio was 15.1:1 at March 31, 1998 compared to 15.7:1 at December 31, 1997. The decrease was due to MGIC's increased policyholders' reserves, partially offset by the net additional risk in force of $77.1 million, net of reinsurance, during the first three months of 1998. The Company's combined insurance risk-to-capital ratio was 15.7:1 at March 31, 1998, compared to 16.4:1 at December 31, 1997. The decrease was due to the same reasons as described above. See note 7 for discussion regarding the Company's stock repurchase program. Year 2000 Compliance Almost all of the Company's computer systems, including all of the systems which are integral to its business, either have been originally developed to be Year 2000 compliant or have been reprogrammed. The Company plans to reprogram the remaining systems and to complete tests of all systems for Year 2000 compliance by the end of 1998. All costs incurred through the first quarter of 1998 for systems for Year 2000 compliance have been expensed and were immaterial. The costs of the remaining reprogramming and testing are expected to be immaterial. Some of the Company's computer systems integral to its business interface with computer systems of third parties. Virtually all transactions with systems operated by third parties involve nationally recognized service bureaus, Fannie Mae, Freddie Mac or other companies that were among the top 50 mortgage servicers in 1997. The Company is assuming that these third parties will successfully address Year 2000 compliance for their own systems and is planning to work with many of these third parties in 1998 to coordinate testing of Year 2000 system interfaces. As a result, the Company does not anticipate Year 2000 compliance arising from interfaces with third-party systems will have a material impact on its operations. PAGE 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK At March 31, 1998, the Company had no derivative financial instruments in its investment portfolio. The Company places its investments in instruments that meet high credit quality standards, as specified in the Company's investment policy guidelines; the policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. At March 31, 1998, the average duration of the Company's investment portfolio was 5.7 years. The effect of a 1% increase/decrease in market interest rates would result in a 5.7% decrease/increase in the value of the Company's investment portfolio. The Company's borrowings under the credit facility are subject to an interest rate that is variable. Changes in market interest rates would have minimal impact on the value of the note payable. See note 2 to the consolidated financial statements. SAFE HARBOR STATEMENT The following is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995, which applies to all statements in this Form 10-Q, which are not historical facts and to all oral statements that the Company may make from time to time relating thereto which are not historical facts (such written and oral statements are herein referred to as "forward looking statements"): Actual results may differ materially from those contemplated by the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to, the following risks: - that demand for housing generally or in MGIC's market segment may be adversely affected by changes in interest rates, adverse economic conditions, or other reasons; - that government housing policy may change, including changes in Federal Housing Administration ("FHA") loan limits, and changes in the statutory charters and coverage requirements of Freddie Mac and Fannie Mae; that MGIC's market share of new insurance written or the amount of new insurance written may be adversely affected as a result of factors affecting housing demand, government housing policy and Freddie Mac and Fannie Mae discussed above; or as a result of underwriting changes by the Company; actions taken by the Company's competitors, including their underwriting criteria, pricing or products offered; decisions by lenders to originate low down payment loans using substitutes for mortgage insurance, including self-insurance, or to the extent legally permissible, to provide insurance themselves; or for other reasons; PAGE 14
- that cancellations may increase and persistency may decrease due to refinancings, changes in Freddie Mac or Fannie Mae cancellation policies or legislation regarding mortgage insurance cancellation, or due to other factors; and - that delinquencies, incurred losses or paid losses may increase as a result of adverse changes in regional or national economies which affect borrowers' incomes or housing values. The foregoing "Safe Harbor" Statement also identifies certain material risks of the Company's business. PAGE 15
PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - The exhibits listed in the accompanying Index to Exhibits are filed as part of this Form 10-Q. (b) Reports on Form 8-K - No reports were filed on Form 8-K during the quarter ended March 31, 1998. PAGE 16
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on May 14, 1998. MGIC INVESTMENT CORPORATION /s/ J. Michael Lauer ------------------------------ J. Michael Lauer Executive Vice President and Chief Financial Officer /s/ Patrick Sinks ------------------------------ Patrick Sinks Vice President, Controller and Chief Accounting Officer PAGE 17
INDEX TO EXHIBITS (Item 6) Exhibit Number Description of Exhibit - ------- ---------------------- 11.1 Statement Re Computation of Net Income Per Share 27 Financial Data Schedule PAGE 18