MGIC Investment Corporation Reports Third Quarter 2013 Results

        MGIC Investment Corporation Reports Third Quarter 2013 Results

PR Newswire

MILWAUKEE, Oct. 16, 2013

MILWAUKEE, Oct. 16, 2013 /PRNewswire/ --MGIC Investment Corporation (NYSE:
MTG) today reported net income for the quarter ended September 30, 2013 of
$12.1 million, compared with a net loss of $246.9 million for the same quarter
a year ago. Diluted earnings per share was $0.04 for the quarter ending
September 30, 2013, compared to diluted loss per share of $1.22 for the same
quarter a year ago. The net loss for the first nine months of 2013 was $48.4
million, compared with a net loss of $540.4 million for the same period last
year.

Curt S. Culver, CEO and Chairman of the Board of Mortgage Guaranty Insurance
Corporation ("MGIC") and MTG, said "I am pleased to report that the favorable
economic trends we have been benefiting from relative to home price
appreciation and employment over the last several quarters have continued."
He also said "I am encouraged by the progress we have made this year regarding
new business writings and am pleased with the quality and performance of the
business written since 2009." 

Total revenues for the third quarter were $254.4 million, compared with $306.2
million in the third quarter last year. Net premiums written for the quarter
were $234.3 million, compared with $263.5million for the same period last
year. Other revenue was $2.5 million compared to $3.2 million in the same
quarter last year.

New insurance written in the third quarter was $8.6 billion, compared to $7.0
billion in the third quarter of 2012. In addition, the Home Affordable
Refinance Program ("HARP")accounted for $2.3 billion of insurance that is not
included in the new insurance written total due to these transactions being
treated as a modification of the coverage on existing insurance in force
compared to $3.7 billion in the third quarter of 2012. New insurance written
for the first nine months of 2013 was $23.1 billion compared to $17.1billion
for the same period last year. HARP activity for the first nine months of
2013 totaled $8.6 billion compared to $7.7 billion in the same period last
year. Persistency, or the percentage of insurance remaining in force from one
year prior, was 78.3 percent at September 30, 2013, compared with 79.8 percent
at December 31, 2012, and 80.2percent at September 30, 2012.

As of September 30, 2013, MGIC's primary insurance in force was $159.2
billion, compared with $162.1 billion at December31, 2012, and $164.9 billion
at September 30, 2012. The fair value of MGIC Investment Corporation's
investment portfolio, cash and cash equivalents was $5.5 billion at September
30, 2013, compared with $5.3billion at December 31, 2012, and $5.7 billion at
September 30, 2012.

At September 30, 2013, the percentage of loans that were delinquent, excluding
bulk loans, was 9.69 percent, compared with 11.87 percent at December 31,
2012, and 12.34 percent at September 30, 2012. Including bulk loans, the
percentage of loans that were delinquent at September 30, 2013 was 11.51
percent, compared to 13.90 percent at December 31, 2012, and 14.51 percent at
September 30, 2012.

Losses incurred in the third quarter were $180.2 million, compared to $490.1
million in the third quarter of 2012, reflecting fewer new delinquency notices
received, a lower claim rate and favorable development in severity. Net
underwriting and other expenses were $48.0 million in the third quarter,
compared to $50.7 million reported for the same period last year.

Conference Call and Webcast Details

MGIC Investment Corporation will hold a conference call today, October 16,
2013, at 10 a.m. ET to allow securities analysts and shareholders the
opportunity to hear management discuss the company's quarterly results. The
conference call number is 1-866-847-7859. 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 November 16, 2013 under Investor Information.

About MGIC

MGIC (www.mgic.com), the principal subsidiary of MGIC Investment Corporation,
is the nation's largest private mortgage insurer as measured by $159.2 billion
primary insurance in force covering approximately 1.0 million mortgages as of
September 30, 2013. 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.

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, Press Releases or
Presentations/Webcasts.

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.comunder Investor Information.

Safe Harbor Statement

Forward Looking Statements and Risk Factors:

As used below, "we," "our" and "us" refer to MGIC Investment Corporation's
consolidated operations or to MGIC Investment Corporation, as the context
requires; "MGIC" refers to Mortgage Guaranty Insurance Corporation; and "MIC"
refers to MGIC Indemnity Corporation.

Our actual results could be affected by the risk factors below. These risk
factors should be reviewed in connection with this press release and our
periodic reports to the Securities and Exchange Commission. These risk factors
may also cause actual results to differ materially from the results
contemplated by forward looking statements that we may make. Forward looking
statements consist of statements which relate to matters other than historical
fact, including matters that inherently refer to future events. Among others,
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.

In addition, the current period financial results included in this press
release may be affected by additional information that arises prior to the
filing of our Quarterly Report on Form 10-Q for the quarter ended September
30, 2013.

Capital requirements may prevent us from continuing to write new insurance on
an uninterrupted basis.

The insurance laws of 16 jurisdictions, including Wisconsin, our domiciliary
state, require a mortgage insurer to maintain a minimum amount of statutory
capital relative to the risk in force (or a similar measure) in order for the
mortgage insurer to continue to write new business. We refer to these
requirements as the "Capital Requirements." While they vary among
jurisdictions, the most common Capital Requirements allow for a maximum
risk-to-capital ratio of 25 to 1. A risk-to-capital ratio will increase if the
percentage decrease in capital exceeds the percentage decrease in insured
risk. Therefore, as capital decreases, the same dollar decrease in capital
will cause a greater percentage decrease in capital and a greater increase in
the risk-to-capital ratio. Wisconsin does not regulate capital by using a
risk-to-capital measure but instead requires a minimum policyholder position
("MPP"). The "policyholder position" of a mortgage insurer is its net worth or
surplus, contingency reserve and a portion of the reserves for unearned
premiums.

During part of 2012 and 2013, MGIC's risk-to-capital ratio exceeded 25 to 1.
In March 2013, our holding company issued additional equity and convertible
debt securities and transferred $800 million to increase MGIC's capital. At
September 30, 2013, MGIC's preliminary risk-to-capital ratio was 20.0 to 1,
below the maximum allowed by the jurisdictions with Capital Requirements, and
its preliminary policyholder position was $190 million above the required MPP
of $1.2 billion. At September 30, 2013, the preliminary risk-to-capital ratio
of our combined insurance operations (which includes reinsurance affiliates)
was 22.7 to 1. A higher risk-to-capital ratio on a combined basis may indicate
that, in order for MGIC to continue to utilize reinsurance arrangements with
its subsidiaries or subsidiaries of our holding company, additional capital
contributions to the reinsurance affiliates could be needed. These reinsurance
arrangements permit MGIC to write insurance with a higher coverage percentage
than it could on its own under certain state-specific requirements.

At this time, we expect MGIC to continue to comply with the current Capital
Requirements, although we cannot assure you of such compliance. You should
read the rest of these risk factors for information about matters that could
negatively affect such compliance.

If MGIC fails to meet the Capital Requirements and is unable to obtain a
waiver of them from the Office of the Commissioner of Insurance of the State
of Wisconsin ("OCI"), MGIC could be prevented from writing new business in all
jurisdictions. If MGIC were prevented from writing new business in all
jurisdictions, our insurance operations in MGIC would be in run-off (meaning
no new loans would be insured but loans previously insured would continue to
be covered, with premiums continuing to be received and losses continuing to
be paid on those loans) until MGIC either met the Capital Requirements or
obtained a waiver to allow it to once again write new business.

If MGIC fails to meet the Capital Requirements and is unable to obtain a
waiver of them from a jurisdiction other than Wisconsin, MGIC could be
prevented from writing new business in that particular jurisdiction. New
insurance written in the jurisdictions that have Capital Requirements
represented approximately 50% of our new insurance written in the first nine
months of 2013. Depending on the level of losses that MGIC experiences in the
future, it is possible that regulatory action by one or more jurisdictions,
including those that do not have specific Capital Requirements, may prevent
MGIC from continuing to write new insurance in such jurisdictions.

The National Association of Insurance Commissioners ("NAIC") is reviewing the
minimum capital and surplus requirements for mortgage insurers, although it
has not established a date by which it must make proposals to change such
requirements. Depending on the scope of proposals made by the NAIC, MGIC may
be prevented from writing new business in the jurisdictions adopting such
proposals. Fannie Mae and Freddie Mac (the "GSEs"), in conjunction with the
Federal Housing Finance Agency ("FHFA"), are also developing new capital
standards for mortgage insurers. See our risk factor titled"— We may not
continue to meet the GSEs' mortgage insurer eligibility requirements."

A possible future failure by MGIC to meet the Capital Requirements will not
necessarily mean that MGIC lacks sufficient resources to pay claims on its
insurance liabilities. While we believe MGIC has sufficient claims paying
resources to meet its claim obligations on its insurance in force on a timely
basis, we cannot assure you that events that may lead MGIC to fail to meet
Capital Requirements would not also result in it not having sufficient claims
paying resources. Furthermore, our estimates of MGIC's claims paying resources
and claim obligations are based on various assumptions. These assumptions
include the timing of the receipt of claims on loans in our delinquency
inventory and future claims that we anticipate will ultimately be received,
our anticipated rescission activity, premiums, housing values and unemployment
rates. These assumptions are subject to inherent uncertainty and require
judgment by management. Current conditions in the domestic economy make the
assumptions about when anticipated claims will be received, housing values,
and unemployment rates highly volatile in the sense that there is a wide range
of reasonably possible outcomes. Our anticipated rescission activity is also
subject to inherent uncertainty due to the difficulty of predicting the amount
of claims whose policies will be rescinded and the outcome of any legal
proceedings or settlement discussions related to rescissions. You should read
the rest of these risk factors for additional information about matters that
could negatively affect MGIC's claims paying resources.

We have in place a longstanding plan to write new business in MIC, a direct
subsidiary of MGIC, in the event MGIC cannot meet the Capital Requirements of
a jurisdiction or obtain a waiver of them. MIC is licensed to write business
in all jurisdictions and, subject to certain conditions and restrictions, has
received the necessary approvals from the OCI and the GSEs to write business.
During 2012, MIC began writing new business in the jurisdictions where MGIC
did not have waivers of the Capital Requirements. Because MGIC again meets the
Capital Requirements, MGIC is again writing new business in all jurisdictions
and MIC has suspended writing new business. As of September 30, 2013, MIC had
statutory capital of $455 million and risk in force of approximately $950
million.

The OCI and GSE approvals of MIC expire at the end of 2013 and we do not
expect to need an extension of such approvals. Fannie Mae's approval of MIC,
including certain conditions and restrictions to its continued effectiveness,
is summarized more fully in, and included as an exhibit to, our Form 8-K filed
with the Securities and Exchange Commission (the "SEC") on November 30, 2012.
Freddie Mac's approval of MIC, including certain conditions and restrictions
to its continued effectiveness, is summarized more fully in, and included as
an exhibit to, our Form 8-K filed with the SEC on November 30, 2012. Freddie
Mac's approval of MIC provides that an adverse action by Freddie Mac against
MIC may also subject MGIC to an adverse action.

We cannot assure you that the OCI or GSEs will approve or continue to approve
MIC to write new business in all jurisdictions in which MGIC may become unable
to do so. If one GSE does not approve MIC in all jurisdictions in which MGIC
becomes unable to write new business, MIC may be able to write insurance on
loans that will be sold to the other GSE or retained by private investors.
However, because lenders may not know which GSE will purchase their loans
until mortgage insurance has been procured, lenders may be unwilling to
procure mortgage insurance from MIC. Furthermore, if we are unable to write
business in all jurisdictions utilizing a combination of MGIC and MIC, lenders
may be unwilling to procure insurance from us anywhere. In addition, a
lender's assessment of the financial strength of our insurance operations may
affect its willingness to procure insurance from us. In this regard, see our
risk factor titled "— Competition or changes in our relationships with our
customers could reduce our revenues or increase our losses."

The amount of insurance we write could be adversely affected if the definition
of Qualified Residential Mortgage results in a reduced number of low down
payment loans available to be insured or if lenders and investors select
alternatives to private mortgage insurance.

The financial reform legislation that was passed in July 2010 (the "Dodd-Frank
Act" or "Dodd-Frank") requires lenders to consider a borrower's ability to
repay a home loan before extending credit. In 2013, the Consumer Financial
Protection Bureau ("CFPB") issued and amended a final rule defining "Qualified
Mortgage" ("QM"), in order to implement the "ability to pay" law. There is a
temporary category of QMs for mortgages that satisfy the general product
feature requirements of QMs and meet the GSEs' underwriting requirements (the
"temporary category"). The temporary category will phase out when the GSEs'
conservatorship ends, or if sooner, after seven years. In May 2013, the FHFA
directed the GSEs to limit their mortgage acquisitions to loans that meet the
requirements of a QM, including those that meet the temporary category, and
loans that are exempt from the "ability to repay" requirements. We may insure
loans that do not qualify as QMs, however, we are unsure whether lenders will
make non-QM loans because they will not be entitled to the presumptions about
compliance with the "ability to pay" requirements, or if lenders would
purchase private mortgage insurance for loans that cannot be sold to the GSEs.

In September 2013, the U.S. Department of Housing and Urban Development
("HUD") proposed a definition of QM that will apply to loansthe Federal
Housing Administration ("FHA")insures. HUD's QM definition is less
restrictive than the CFPB's definition in certain respects, including that (i)
it has no limit on the debt-to-income ratio of a borrower, and (ii) it has a
higher pricing threshold for loans to fall into the "safe harbor" category of
QM loans, instead of the "rebuttable presumption" category of QM loans. It is
possible that lenders will prefer FHA-insured loans to loans insured by
private mortgage insurance as a result of the FHA's less restrictive QM
definition.

Given the credit characteristics presented to us, we estimate that 87.5% of
our new risk written in the first nine months of 2013 was for mortgages that
would have met the CFPB's general QM definition. We estimate that 98.9% of our
new risk written in the first nine months of 2013 was for mortgages that would
have met the CFPB's QM definition, when giving effect to the temporary
category. In making these estimates, we have not considered the limitation on
points and fees because the information is not available to us. We do not
believe such limitation would materially affect the percentage of our new risk
written meeting the QM definitions. The QM rule is scheduled to become
effective in January 2014.

The Dodd-Frank Act requires a securitizer to retain at least 5% of the risk
associated with mortgage loans that are securitized, and in some cases the
retained risk may be allocated between the securitizer and the lender that
originated the loan. This risk retention requirement does not apply to
mortgage loans that are Qualified Residential Mortgages ("QRMs") or that are
insured by the FHA or another federal agency. In 2011, federal regulators
released a proposed risk retention rule that included a definition of QRM.In
response to public comments regarding the proposed rule, federal regulators
issued a revised proposed rule in August 2013. The revised proposed rule
generally defines QRM as a mortgage meeting the requirements of a QM. The
regulators also proposed an alternative QRM definition ("QM-plus") which
utilizes certain QM criteria but also includes a maximum loan-to-value ratio
("LTV") of 70%. Neither of the revised definitions of QRM considers the use of
mortgage insurance. While substantially all of our new risk written in the
first nine months of 2013 was on loans that met the QM definition (and,
therefore, the proposed general QRM definition), none of our new insurance
written met the QM-plus definition. The public comment period for the revised
proposed rule expires on October30, 2013.

The final timing of the adoption of any risk retention regulation and the
definition of QRM remains uncertain. Because of the capital support provided
by the U.S. Government, the GSEs satisfy the Dodd-Frank risk-retention
requirements while they are in conservatorship. Therefore, lenders that
originate loans that are sold to the GSEs while they are in conservatorship
would not be required to retain risk associated with those loans.

The amount of new insurance that we write may be materially adversely affected
depending on, among other things, (a) the final definition of QRM and its LTV
requirements, (b) the extent to which the presence of private mortgage
insurance with certain premium plans may adversely affect the ability of a
loan to qualify as a QM and therefore as a QRM, and (c) whether lenders choose
mortgage insurance for non-QRM loans. In addition, changes in the final
regulations regarding treatment of GSE-guaranteed mortgage loans, or changes
in the conservatorship or capital support provided to the GSEs by the U.S.
Government, could impact the manner in which the risk-retention rules apply to
GSE securitizations, originators who sell loans to GSEs and our business. For
other factors that could decrease the demand for mortgage insurance, see our
risk factor titled "— If the volume of low down payment home mortgage
originations declines, the amount of insurance that we write could decline,
which would reduce our revenues."

Alternatives to private mortgage insurance include:

  olenders using government mortgage insurance programs, including those of
    theFHA and the Veterans Administration,
  olenders and other investors holding mortgages in portfolio and
    self-insuring,
  oinvestors (including the GSEs) using risk mitigation techniques other than
    private mortgage insurance, such as credit-linked note transactions
    executed in the capital markets; using other risk mitigation techniques in
    conjunction with reduced levels of private mortgage insurance coverage; or
    accepting credit risk without credit enhancement, and
  olenders originating mortgages using piggyback structures to avoid private
    mortgage insurance, such as a first mortgage with an 80% loan-to-value
    ratio and a second mortgage with a 10%, 15% or 20% loan-to-value ratio
    (referred to as 80-10-10, 80-15-5 or 80-20 loans, respectively) rather
    than a first mortgage with a 90%, 95% or 100% loan-to-value ratio that has
    private mortgage insurance.

The FHA substantially increased its market share beginning in 2008, and
beginning in 2011, that market share began to gradually decline. We believe
that the FHA's market share increased, in part, because private mortgage
insurers tightened their underwriting guidelines (which led to increased
utilization of the FHA's programs) and because of increases in the amount of
loan level delivery fees that the GSEs assess on loans (which result in higher
costs to borrowers). In addition, federal legislation and programs provided
the FHA with greater flexibility in establishing new products and increased
the FHA's competitive position against private mortgage insurers. We believe
that the FHA's current premium pricing, when compared to our current
credit-tiered premium pricing (and considering the effects of GSE pricing
changes), has allowed us to be more competitive with the FHA than in the
recent past for loans with high FICO credit scores. We cannot predict,
however, the FHA's share of new insurance written in the future due to, among
other factors, different loan eligibility terms between the FHA and the GSEs;
future increases in guaranty fees charged by the GSEs; changes to the FHA's
annual premiums; and the total profitability that may be realized by mortgage
lenders from securitizing loans through Ginnie Mae when compared to
securitizing loans through Fannie Mae or Freddie Mac.

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.

Substantially all of our insurance written is for loans sold to Fannie Mae and
Freddie Mac. The business practices of the GSEs affect the entire relationship
between them, lenders and mortgage insurers and include:

  othe level of private mortgage insurance coverage, subject to the
    limitations of the GSEs' charters (which may be changed by federal
    legislation), when private mortgage insurance is used as the required
    credit enhancement on low down payment mortgages,
  othe amount of loan level delivery fees and guaranty fees (which result in
    higher costs to borrowers) that the GSEs assess on loans that require
    mortgage insurance,
  owhether the GSEs influence the mortgage lender's selection of the mortgage
    insurer providing coverage and, if so, any transactions that are related
    to that selection,
  othe underwriting standards that determine what loans are eligible for
    purchase by the GSEs, which can affect the quality of the risk insured by
    the mortgage insurer and the availability of mortgage loans,
  othe terms on which mortgage insurance coverage can be canceled before
    reaching the cancellation thresholds established by law,
  othe programs established by the GSEs intended to avoid or mitigate loss on
    insured mortgages and the circumstances in which mortgage servicers must
    implement such programs,
  othe terms that the GSEs require to be included in mortgage insurance
    policies for loans that they purchase,
  othe extent to which the GSEs intervene in mortgage insurers' rescission
    practices or rescission settlement practices with lenders. For additional
    information,see our risk factor titled "— Our losses could increase if
    we do not prevail in proceedings challenging whether our rescissions were
    proper or we enter into material resolution arrangements," and
  othe maximum loan limits of the GSEs in comparison to those of the FHA and
    other investors.

The FHFA is the conservator of the GSEs and has the authority to control and
direct their operations. The increased role that the federal government has
assumed in the residential mortgage market through the GSE conservatorship may
increase the likelihood that the business practices of the GSEs change in ways
that have a material adverse effect on us. In addition, these factors may
increase the likelihood that the charters of the GSEs are changed by new
federal legislation. The Dodd-Frank Act required the U.S. Department of the
Treasury to report its recommendations regarding options for ending the
conservatorship of the GSEs. This report was released in February 2011 and
while it does not provide any definitive timeline for GSE reform, it does
recommend using a combination of federal housing policy changes to wind down
the GSEs, shrink the government's footprint in housing finance, and help bring
private capital back to the mortgage market. Since then, Members of Congress
introduced several bills intended to scale back the GSEs, however, no
legislation was enacted. As a result of the matters referred to above, it is
uncertain what role the GSEs, FHA and private capital, including private
mortgage insurance, will play in the domestic residential housing finance
system in the future or the impact of any such changes on our business. In
addition, the timing of the impact of any resulting changes on our business is
uncertain. Most meaningful changes would require Congressional action to
implement and it is difficult to estimate when Congressional action would be
final and how long any associated phase-in period may last.

The GSEs have different loan purchase programs that allow different levels of
mortgage insurance coverage. Under the "charter coverage" program, on certain
loans lenders may choose a mortgage insurance coverage percentage that is less
than the GSEs' "standard coverage" and only the minimum required by the GSEs'
charters, with the GSEs paying a lower price for such loans. In the first nine
months of 2013, nearly all of our volume was on loans with GSE standard or
higher coverage. We charge higher premium rates for higher coverage
percentages. To the extent lenders selling loans to the GSEs in the future
choose lower coverage for loans that we insure, our revenues would be reduced
and we could experience other adverse effects.

We may not continue to meet the GSEs' mortgage insurer eligibility
requirements.

Substantially all of our insurance written is for loans sold to Fannie Mae and
Freddie Mac, each of which has mortgage insurer eligibility requirements to
maintain the highest level of eligibility, including a financial strength
rating of Aa3/AA-. Because MGIC does not meet such financial strength rating
requirements (its financial strength rating from Moody's is Ba3 (with a stable
outlook) and from Standard & Poor's is B (with a positive outlook)), MGIC is
currently operating with each GSE as an eligible insurer under a remediation
plan. We believe that the GSEs view remediation plans as a continuing process
of interaction with a mortgage insurer and MGIC will continue to operate under
a remediation plan for the foreseeable future. The GSEs may include new
eligibility requirements as part of our current remediation plan. There can be
no assurance that MGIC will be able to continue to operate as an eligible
mortgage insurer under a remediation plan. In particular, the GSEs are
currently in discussions with mortgage insurers regarding their standard
mortgage insurer eligibility requirements. The GSEs, in conjunction with the
FHFA, are each developing mortgage insurer capital standards that would
replace the use of external credit ratings. Revised capital standards are
expected to be released in 2013. Freddie Mac has disclosed that it believes
certain mortgage insurance counterparties may be unable to meet its expected
new capital requirements within the timeframes for doing so. We have not been
informed of the revised capital requirements or their timeframes for
effectiveness. We have various alternatives available to improve our existing
risk-to-capital position, including contributing additional funds that are on
hand today from our holding company to MGIC, entering into additional external
reinsurance transactions, seeking approval to write business in MIC and
raising additional capital. While there can be no assurance that MGIC would
meet Freddie Mac's revised capital requirements by their effective date, we
believe we could implement one or more of these alternatives so that we would
continue to be an eligible Freddie Mac mortgage insurer after the revised
capital requirements are fully effective. MIC's financial strength rating from
Moody's is Ba3 (with a stable outlook) and from Standard & Poor's is B (with a
positive outlook). Therefore, MIC also does not meet the current financial
strength rating requirements of the GSEs and had previously operated with each
GSE as an eligible insurer under the approvals discussed above. See our risk
factor titled "— Capital requirements may prevent us from continuing to write
new insurance on an uninterrupted basis." If MGIC (or MIC, under certain
circumstances) ceases to be eligible to insure loans purchased by one or both
of the GSEs, it would significantly reduce the volume of our new business
writings.

We have reported net losses for the last six years and cannot assure you when
we will return to annual profitability.

We have reported a net loss in each of the last six fiscal years, with an
aggregate net loss for 2007-2012 of $5.3 billion. For the first nine months of
2013, we reported a net loss of $48.4 million. The size of any future losses
will depend primarily on the amount of our losses incurred from our business
written prior to 2009, which will depend on new notices of defaulted loans,
cures of defaulted loans in our delinquency inventory and the average severity
on claims paid. Therefore, such losses are dependent on factors that make
prediction of their amounts difficult and any forecasts are subject to
significant volatility. Although we currently expect to return to
profitability on an annual basis, we cannot assure you when, or if, this will
occur. Conditions that could delay our return to annual profitability include
high unemployment rates, low cure rates, low housing values and unfavorable
resolution of legal disputes. You should read the rest of these risk factors
for additional information about factors that could increase our net losses in
the future.

Our losses could increase if we do not prevail in proceedings challenging
whether our rescissions were proper or we enter into material resolution
arrangements.

Prior to 2008, rescissions of coverage on loans were not a material portion of
our claims resolved during a year. However, beginning in 2008, our rescissions
of coverage on loans have materially mitigated our paid losses. In 2009
through 2011, rescissions mitigated our paid losses in the aggregate by
approximately $3.0 billion; and in 2012 and the first nine months of 2013,
rescissions mitigated our paid losses by approximately $0.3 billion and $100
million, respectively (in each case, the figure includes amounts that would
have either resulted in a claim payment or been charged to a deductible under
a bulk or pool policy, and may have been charged to a captive reinsurer). In
recent quarters, less than 5% of claims received in a quarter have been
resolved by rescissions, down from the peak of approximately 28% in the first
half of 2009.

Our loss reserving methodology incorporates our estimates of future
rescissions and reversals of rescissions. Historically, reversals of
rescissions have been immaterial. A variance between ultimate actual
rescission and reversal rates and our estimates, as a result of the outcome of
claims investigations, litigation, settlements or other factors, could
materially affect our losses. See our risk factor titled "— Because loss
reserve estimates are subject to uncertainties and are based on assumptions
that are currently very volatile, paid claims may be substantially different
than our loss reserves." We estimate rescissions mitigated our incurred losses
by approximately $2.5 billion in 2009 and $0.2 billion in 2010. In 2011, we
estimate that rescissions had no significant impact on our losses incurred.
All of these figures include the benefit of claims not paid in the period as
well as the impact of changes in our estimated expected rescission activity on
our loss reserves in the period. In 2012, we estimate that our rescission
benefit in loss reserves was reduced by $0.2 billion due to probable
rescission settlement agreements. We estimate that other rescissions had no
significant impact on our losses incurred in 2012 or in the first nine months
of 2013.

If the insured disputes our right to rescind coverage, the outcome of the
dispute ultimately would be determined by legal proceedings. Under our
policies, legal proceedings disputing our right to rescind coverage may be
brought up to three years after the lender has obtained title to the property
(typically through a foreclosure) or the property was sold in a sale that we
approved, whichever is applicable, although in a few jurisdictions there is a
longer time to bring such an action. As of September 30, 2013, the period in
which a dispute may be brought has not ended for approximately 32% of our
post-2008 rescissions that are not subject to a settlement agreement. Until a
liability associated with a settlement agreement or litigation becomes
probable and can be reasonably estimated, we consider a rescission resolved
for financial reporting purposes even though legal proceedings have been
initiated and are ongoing. Although it is reasonably possible that, when the
proceedings are completed, there will be a determination that we were not
entitled to rescind in all cases, we are sometimes unable to make a reasonable
estimate or range of estimates of the potential liability. Under ASC 450-20,
an estimated loss from such proceedings is accrued for only if we determine
that the loss is probable and can be reasonably estimated. Therefore, when
establishing our loss reserves, we do notgenerally include additional loss
reserves that would reflect an adverse outcome from ongoing legal proceedings.

In 2011, Freddie Mac advised its servicers that they must obtain its prior
approval for rescission settlements, Fannie Mae advised its servicers that
they are prohibited from entering into such settlements and Fannie Mae
notified us that we must obtain its prior approval to enter into certain
settlements. Since those announcements, the GSEs have consented to our
settlement agreements with two customers, one of which is Countrywide, as
discussed below, and have rejected other settlement agreements. We have
reached and implemented settlement agreements that do not require GSE
approval, but they have not been material in the aggregate.

As noted in our risk factor titled "— We are involved in legal proceedings and
are subject to the risk of additional legal proceedings in the future," in
April 2013, we entered into two agreements to resolve our dispute with
Countrywide Home Loans ("CHL") and its affiliate, Bank of America, N.A., as
successor to Countrywide Home Loans Servicing LP ("BANA" and collectively with
CHL, "Countrywide") regardingrescissions. Implementation of the agreement
with BANA is scheduled to begin on November 1, 2013. Implementation of the
agreement with CHL remains subject to approval by the non-GSE investors in the
loans covered by that agreement and is not expected to begin prior to the
first quarter of 2014. The resolutions of the Countrywide and other
disputesmay encourage other customers to seek remedies against us. We
continue to be involved in legal proceedings with other customers with respect
to rescissions that we do not consider to be collectively material in amount.
We also continue to discuss with customers their objections to rescissions
that are material when all such discussions are considered in the aggregate.
In connection with some of these settlement discussions, we have suspended
rescissions related to loans that we believe could be included in potential
settlements. As of September 30, 2013, approximately 85 rescissions,
representing total potential claim payments of approximately $5 million, were
affected by our decision to suspend such rescissions. These amounts do not
include loans covered by the two Countrywide agreements referred to above nor
do they include loans for customers for which we consider settlement
agreements probable, as defined in ASC 450-20. Although it is reasonably
possible that, when the discussions or legal proceedings with customers
regarding rescissions are completed, there will be a conclusion or
determination that we were not entitled to rescind in all cases, we are unable
to make a reasonable estimate or range of estimates of the potential
liability.

The benefit of our net operating loss carryforwards may become substantially
limited.

As of September 30, 2013, we had approximately $2.6 billion of net operating
losses for tax purposes that we can use in certain circumstances to offset
future taxable income and thus reduce our federal income tax liability. Our
ability to utilize these net operating losses to offset future taxable income
may be significantly limited if we experience an "ownership change" as defined
in Section382 of the Internal Revenue Code of 1986, as amended (the "Code").
In general, an ownership change will occur if there is a cumulative change in
our ownership by "5-percent shareholders" (as defined in the Code) that
exceeds 50percentage points over a rolling three-year period. A corporation
that experiences an ownership change will generally be subject to an annual
limitation on the corporation's subsequent use of net operating loss
carryovers that arose from pre-ownership change periods and use of losses that
are subsequently recognized with respect to assets that had a built-in-loss on
the date of the ownership change. The amount of the annual limitation
generally equals the value of the corporation immediately before the ownership
change multiplied by the long-term tax-exempt interest rate (subject to
certain adjustments). To the extent that the limitation in a
post-ownership-change year is not fully utilized, the amount of the limitation
for the succeeding year will be increased.

While we have adopted a shareholder rights agreement to minimize the
likelihood of transactions in our stock resulting in an ownership change,
future issuances of equity-linked securities or transactions in our stock and
equity-linked securities that may not be within our control may cause us to
experience an ownership change. If we experience an ownership change, we may
not be able to fully utilize our net operating losses, resulting in additional
income taxes and a reduction in our shareholders' equity.

We are involved in legal proceedings and are subject to the risk of additional
legal proceedings in the future.

Consumers continue to bring lawsuits against home mortgage lenders and
settlement service providers. Mortgage insurers, including MGIC, have been
involved in litigation alleging violations of the anti-referral fee provisions
of the Real Estate Settlement Procedures Act, which is commonly known as
RESPA, and the notice provisions of the Fair Credit Reporting Act, which is
commonly known as FCRA. MGIC's settlement of class action litigation against
it under RESPA became final in October 2003. MGIC settled the named
plaintiffs' claims in litigation against it under FCRA in December 2004,
following denial of class certification in June 2004. Since December 2006,
class action litigation has been brought against a number of large lenders
alleging that their captive mortgage reinsurance arrangements violated
RESPA.Beginning inDecember2011, MGIC, together with various mortgage
lenders and other mortgage insurers, has been named as a defendant in twelve
lawsuits, alleged to be class actions, filed in various U.S. District Courts.
Five of those cases have previously been dismissed by the applicable U.S.
District Courts without any further opportunity to appeal, and two additional
cases have been dismissed by the applicable U.S. District Court, but are on
appeal to the U.S. Court of Appeals. The complaints in all of the cases allege
various causes of action related to the captive mortgage reinsurance
arrangements of the mortgage lenders, including that the defendants violated
RESPA by paying excessive premiums to the lenders' captive reinsurer in
relation to the risk assumed by that captive. MGIC denies any wrongdoing and
intends to vigorously defend itself against the allegations in the lawsuits.
There can be no assurance that we will not be subject to further litigation
under RESPA (or FCRA) or that the outcome of any such litigation, including
the lawsuits mentioned above, would not have a material adverse effect on us.

In April 2013, the U.S. District Court approved a settlement with the CFPB
that resolved a federal investigation of MGIC's participation in captive
reinsurance arrangements in the mortgage insurance industry. The settlement
concluded the investigation with respect to MGIC without the CFPB or the court
making any findings of wrongdoing. As part of the settlement, MGIC agreed that
it would not enter into any new captive reinsurance agreement or reinsure any
new loans under any existing captive reinsurance agreement for a period of ten
years. MGIC had voluntarily suspended most of its captive arrangements in 2008
in response to market conditions and GSE requests. In connection with the
settlement, MGIC paid a civil penalty of $2.65 million and the court issued an
injunction prohibiting MGIC from violating any provisions of RESPA.

We remain subject to various state investigations or information requests
regarding captive mortgage reinsurance arrangements, including (1) a request
received by MGIC in June 2005 from the New York Department of Financial
Services for information regarding captive mortgage reinsurance arrangements
and other types of arrangements in which lenders receive compensation; and
(2)requests received from the Minnesota Department of Commerce (the "MN
Department") beginning in February 2006 regarding captive mortgage reinsurance
and certain other matters in response to which MGIC has provided information
on several occasions, including as recently as May 2011. On August 28, 2013,
MGIC and several competitors received a draft Consent Order from the MN
Department containing proposed conditions to resolve its investigation,
including unspecified penalties. We expect to meet with the MN Department in
the near future to discuss the draft Consent Order. Other insurance
departments or other officials, including attorneys general, may also seek
information about or investigate captive mortgage reinsurance.

Various regulators, including the CFPB, state insurance commissioners and
state attorneys general may bring actions seeking various forms of relief in
connection with violations of RESPA. The insurance law provisions of many
states prohibit paying for the referral of insurance business and provide
various mechanisms to enforce this prohibition. While we believe our practices
are in conformity with applicable laws and regulations, it is not possible to
predict the eventual scope, duration or outcome of any such reviews or
investigations nor is it possible to predict their effect on us or the
mortgage insurance industry.

We are subject to comprehensive, detailed regulation by state insurance
departments. These regulations are principally designed for the protection of
our insured policyholders, rather than for the benefit of investors. Although
their scope varies, state insurance laws generally grant broad supervisory
powers to agencies or officials to examine insurance companies and enforce
rules or exercise discretion affecting almost every significant aspect of the
insurance business. Given the recent significant losses incurred by many
insurers in the mortgage and financial guaranty industries, our insurance
subsidiaries have been subject to heightened scrutiny by insurance regulators.
State insurance regulatory authorities could take actions, including changes
in capital requirements or termination of waivers of capital requirements,
that could have a material adverse effect on us. As noted above, in early
2013, the CFPB issued rules to implement laws requiring mortgage lenders to
make ability-to-pay determinations prior to extending credit. We are uncertain
whether the CFPB will issue any other rules or regulations that affect our
business. Such rules and regulations could have a material adverse effect on
us.

We understand several law firms have, among other things, issued press
releases to the effect that they are investigating us, including whether the
fiduciaries of our 401(k) plan breached their fiduciary duties regarding the
plan's investment in or holding of our common stock or whether we breached
other legal or fiduciary obligations to our shareholders. We intend to defend
vigorously any proceedings that may result from these investigations. With
limited exceptions, our bylaws provide that our officers and 401(k) plan
fiduciaries are entitled to indemnification from us for claims against them.

Since December 2009, we havebeen involved in legal proceedings with
Countrywide in which Countrywide alleged that MGIC denied valid mortgage
insurance claims. (In our SEC reports, we refer to insurance rescissions and
denials of claims collectively as "rescissions" and variations of that term.)
In addition to the claim amounts it alleged MGIC had improperly denied,
Countrywidecontended it was entitled to other damages of almost $700 million
as well as exemplary damages. Wesought a determination in those proceedings
that we were entitled to rescind coverage on the applicable loans. From
January 1, 2008 through September 30, 2013, rescissions of coverage on
Countrywide-related loans mitigated our paid losses on the order of $445
million. This amount is the amount we estimate we would have paid had the
coverage not been rescinded. In addition, in connection with mediationwe were
holding with Countrywide, we voluntarily suspended rescissions related to
loans that we believed could be covered by a settlement.

On April 19, 2013, MGIC entered into separate settlement agreements with CHL
and BANA, pursuant to which the parties will settle the Countrywide litigation
as it relates to MGIC's rescission practices (as amended on September 24, 2013
by amendments that were technical in nature, the "Agreements"). The original
Agreements are described in our Form 8-K filed with the SEC on April 25, 2013.
The original Agreements are filed as exhibits to that Form 8-K and amendments
to the Agreements will be filed with our Form 10-Q for the quarter ended
September 30, 2013, although in each case, certain portions of the Agreements
are (or will be) redacted and covered by a confidential treatment request that
has been granted (or will then be pending). Both GSEs have consented to the
agreement with BANA and implementation is scheduled to begin November 1, 2013.
As of September 30, 2013, rescissions of coverage on approximately 2,100 loans
under the agreement with BANA, representing total potential claim payments of
approximately $150million, had been suspended. We expect to process the
suspended rescissions beginning in November 2013 and expect most of the
associated claims will be paid in accordance with our practice. The agreement
with CHL covers loans that were purchased by non-GSE investors, including
securitization trusts (the "other investors").The agreement with CHL will be
implemented only as and to the extent that it is consented to by or on behalf
of the other investors, and such implementation is expected to occur no
earlier than the first quarter of 2014. As of September 30, 2013, rescissions
of coverage on approximately 800 loans under the agreement with CHL,
representing total potential claim payments of approximately $70million, had
been suspended. While there can be no assurance that the agreement with CHL
will be implemented, we have determined that its implementation is probable.
We recorded the estimated impact of the Agreements, including the payments of
claims associated with the suspended rescissions to be made beginning in
November 2013 (and another probablesettlement) in our financial statements
for the quarter ending December 31, 2012. If we are not able to implement the
agreement with CHL, we intend to defend MGIC against any related legal
proceedings, vigorously.

In addition to the suspended Countrywide rescissions, as of September 30,
2013, coverage on approximately 540 loans, representing total potential claim
payments of approximately $38million, was affected by our decision to suspend
rescissions for customers for which we consider settlement agreements
probable.

The flow policies at issue with Countrywide are in the same form as the flow
policies that we used with all of our customers during the period covered by
the Agreements, and the bulk policies at issue vary from one another, but are
generally similar to those used in the majority of our Wall Street bulk
transactions. The settlement with Countrywide may encourage other customers to
pursue remedies against us. From January 1, 2008 through September 30, 2013,
we estimate that total rescissions mitigated our incurred losses by
approximately $2.9billion, which included approximately $3.0billion of
mitigation on paid losses, excluding $0.6billion that would have been applied
to a deductible. At September 30, 2013, we estimate that our total loss
reserves were benefited from anticipated rescissions by approximately
$0.1billion.

Before paying a claim, we review the loan and servicing files to determine the
appropriateness of the claim amount. All of our insurance policies provide
that we can reduce or deny a claim if the servicer did not comply with its
obligations under our insurance policy, including the requirement to mitigate
our loss by performing reasonable loss mitigation efforts or, for example,
diligently pursuing a foreclosure or bankruptcy relief in a timely manner. We
call such reduction of claims submitted to us "curtailments." In 2012 and the
first nine months of 2013, curtailments reduced our average claim paid by
approximately 4.1% and 5.5%, respectively. In addition, the claims submitted
to us sometimes include costs and expenses not covered by our insurance
policies, such as mortgage insurance premiums, hazard insurance premiums for
periods after the claim date and losses resulting from property damage that
has not been repaired. These other adjustments reduced claim amounts by less
than the amount of curtailments.

After we pay a claim, servicers and insureds sometimes object to our
curtailments and other adjustments. We review these objections if they are
sent to us within 90 days after the claim was paid. Historically, we have not
had material disputes regarding our curtailments or other adjustments.

The Agreements referred to above do not resolve assertions by Countrywide that
MGIC has improperly curtailed numerous insurance coverage claims. As of the
fourth quarter of 2012, Countrywide asserted that the amount of disputed
curtailments approximated $40 million. MGIC and Countrywide have agreed to
mediate this matter and to enter into arbitration if the mediation does not
resolve the matter. We do not believe a loss is probable regarding this
curtailment dispute and have not accrued any reserves that would reflect an
adverse outcome to this dispute. We intend to defend vigorously our position
regarding the correctness of these curtailments under our insurance policy.
Although we have not had other material objections to our curtailment and
adjustment practices, there can be no assurances that we will not face
additional challenges to such practices.

A non-insurance subsidiary of our holding company is a shareholder of the
corporation that operates the Mortgage Electronic Registration System
("MERS").Our subsidiary, as a shareholder of MERS, has been named as a
defendant (along with MERS and its other shareholders) in eight lawsuits
asserting various causes of action arising from allegedly improper recording
and foreclosure activities by MERS. One of those lawsuits remains pending and
the other seven lawsuits have been dismissed without any further opportunity
to appeal.The damages sought in the remaining case are substantial. We deny
any wrongdoing and intend to defend ourselves vigorously against the
allegations in the lawsuits.

In addition to the matters described above, we are involved in other legal
proceedings in the ordinary course of business. In our opinion, based on the
facts known at this time, the ultimate resolution of these ordinary course
legal proceedings will not have a material adverse effect on our financial
position or results of operations.

Resolution of our dispute with the Internal Revenue Service could adversely
affect us.

The Internal Revenue Service ("IRS") completed examinations of our federal
income tax returns for the years 2000 through 2007 and issued assessments for
unpaid taxes, interest and penalties related to our treatment of the
flow-through income and loss from an investment in a portfolio of residual
interests of Real Estate Mortgage Investment Conduits ("REMICs"). This
portfolio has been managed and maintained during years prior to, during and
subsequent to the examination period. The IRS indicated that it did not
believe that, for various reasons, we had established sufficient tax basis in
the REMIC residual interests to deduct the losses from taxable income. The IRS
assessment related to the REMIC issue is $190.7 million in taxes and
penalties. There would also be applicable interest which, when computed on the
amount of the assessment, is substantial. Depending on the outcome of this
matter, additional state income taxes along with any applicable interest may
become due when a final resolution is reached and could also be substantial.

We appealed these assessments within the IRS and, in 2007, we made a payment
of $65.2 million to the United States Department of the Treasury related to
this assessment. In August 2010, we reached a tentative settlement agreement
with the IRS which was not finalized. We currently expect to receive a
statutory notice of deficiency (commonly referred to as a "90-day letter") for
the disputed amounts later in the fourth quarter of 2013. Upon receipt of the
notice, we will have 90 days to pay the assessed tax liabilities, penalties
and interest ("deficiency amount") or petition the U.S. Tax Court to litigate
the matter. If we choose to pay the deficiency amount, we could pursue a full
refund of such amount through litigation in either U.S. District Court or the
U.S. Court of Federal Claims. Any such litigation could be lengthy and costly
in terms of legal fees and related expenses. We continue to believe that our
previously recorded tax provisions and liabilities are appropriate. However,
we would need to make appropriate adjustments, which could be material, to our
tax provision and liabilities if our view of the probability of success in
this matter changes, and the ultimate resolution of this matter could have a
material negative impact on our effective tax rate, results of operations,
cash flows and statutory capital. In this regard, see our risk factor titled
"— Capital requirements may prevent us from continuing to write new insurance
on an uninterrupted basis."

Because we establish loss reserves only upon a loan default rather than based
on estimates of our ultimate losses on risk in force, losses may have a
disproportionate adverse effect on our earnings in certain periods.

In accordance with accounting principles generally accepted in the United
States, commonly referred to as GAAP, we establish loss reserves only for
loans in default. Reserves are established for insurance losses and loss
adjustment expenses when notices of default on insured mortgage loans are
received. Reserves are also established for insurance losses and loss
adjustment expenses for loans we estimate are in default but for which notices
of default have not yet been reported to us by the servicers (this is often
referred to as "IBNR"). We establish reserves using estimated claim rates and
claim amounts. Because our reserving method does not take account of losses
that could occur from loans that are not delinquent, such losses are not
reflected in our financial statements, except in the case where a premium
deficiency exists. As a result, future losses on loans that are not currently
delinquent may have a material impact on future results as such losses emerge.

Because loss reserve estimates are subject to uncertainties and are based on
assumptions that are currently very volatile, paid claims may be substantially
different than our loss reserves.

We establish reserves using estimated claim rates and claim amounts in
estimating the ultimate loss on delinquent loans. The estimated claim rates
and claim amounts represent our best estimates of what we will actually pay on
the loans in default as of the reserve date and incorporate anticipated
mitigation from rescissions. We rescind coverage on loans and deny claims in
cases where we believe our policy allows us to do so. Therefore, when
establishing our loss reserves, we do not include additional loss reserves
that would reflect a possible adverse development from ongoing dispute
resolution proceedings regarding rescissions and denials unless we have
determined that a loss is probable and can be reasonably estimated. For more
information regarding our legal proceedings, see our risk factor titled "— We
are involved in legal proceedings and are subject to the risk of additional
legal proceedings in the future."

The establishment of loss reserves is subject to inherent uncertainty and
requires judgment by management. Current conditions in the housing and
mortgage industries make the assumptions that we use to establish loss
reserves more volatile than they would otherwise be. The actual amount of the
claim payments may be substantially different than our loss reserve estimates.
Our estimates could be adversely affected by several factors, including a
deterioration of regional or national economic conditions, including
unemployment, leading to a reduction in borrowers' income and thus their
ability to make mortgage payments and a drop in housing values that could
result in, among other things, greater losses on loans that have pool
insurance, and may affect borrower willingness to continue to make mortgage
payments when the value of the home is below the mortgage balance. Changes to
our estimates could result in material impact to our results of operations,
even in a stable economic environment, and there can be no assurance that
actual claims paid by us will not be substantially different than our loss
reserves.

We rely on our management team and our business could be harmed if we are
unable to retain qualified personnel.

Our industry is undergoing a fundamental shift following the mortgage crisis:
long-standing competitors have gone out of business and two newly capitalized,
privately-held start-ups that are not encumbered with a portfolio of
pre-crisis mortgages, have been formed. Former executives from other mortgage
insurers have joined these two new competitors. In addition, in February 2013,
a worldwide insurer and reinsurer with mortgage insurance operations in Europe
announced that it was purchasing CMG Mortgage Insurance Company. Our success
depends, in part, on the skills, working relationships and continued services
of our management team and other key personnel. The departure of key personnel
could adversely affect the conduct of our business. In such event, we would be
required to obtain other personnel to manage and operate our business, and
there can be no assurance that we would be able to employ a suitable
replacement for the departing individuals, or that a replacement could be
hired on terms that are favorable to us. We currently have not entered into
any employment agreements with our officers or key personnel. Volatility or
lack of performance in our stock price may affect our ability to retain our
key personnel or attract replacements should key personnel depart.

Loan modification and other similar programs may not continue to provide
benefits to us and our losses on loans that re-default can be higher than what
we would have paid had the loan not been modified.

Beginning in the fourth quarter of 2008, the federal government, including
through the Federal Deposit Insurance Corporation and the GSEs, and several
lenders have adopted programs to modify loans to make them more affordable to
borrowers with the goal of reducing the number of foreclosures. During 2010,
2011, 2012, and the first nine months of 2013, we were notified of
modifications that cured delinquencies that had they become paid claims would
have resulted in approximately $3.2 billion, $1.8 billion, $1.2 billion and
$760 million, respectively, of estimated claim payments. As noted below, we
cannot predict with a high degree of confidence what the ultimate re-default
rate on these modifications will be. Although the recent re-default rate has
been lower, for internal reporting and planning purposes, we assume
approximately 50% of these modifications will ultimately re-default, and those
re-defaults may result in future claim payments. Because modifications cure
the defaults with respect to the previously defaulted loans, our loss reserves
do not account for potential re-defaults unless at the time the reserve is
established, the re-default has already occurred. Based on information that is
provided to us, most of the modifications resulted in reduced payments from
interest rate and/or amortization period adjustments; less than 5% resulted in
principal forgiveness.

One loan modification program is the Home Affordable Modification Program
("HAMP"). Some of HAMP's eligibility criteria relate to the borrower's current
income and non-mortgage debt payments. Because the GSEs and servicers do not
share such information with us, we cannot determine with certainty the number
of loans in our delinquent inventory that are eligible to participate in HAMP.
We believe that it could take several months from the time a borrower has made
all of the payments during HAMP's three month "trial modification" period for
the loan to be reported to us as a cured delinquency.

We rely on information provided to us by the GSEs and servicers. We do not
receive all of the information from such sources that is required to determine
with certainty the number of loans that are participating in, or have
successfully completed, HAMP. We are aware of approximately 8,000 loans in our
primary delinquent inventory at September 30, 2013 for which the HAMP trial
period has begun and which trial periods have not been reported to us as
completed or cancelled. Through September 30, 2013 approximately 49,500
delinquent primary loans have cured their delinquency after entering HAMP and
are not in default. In 2012 and the first nine months of 2013, approximately
17% and 16%, respectively, of our primary cures were the result of a
modification, with HAMP accounting for approximately 70% of those
modifications in each of those periods. By comparison, in 2010, approximately
27% of our primary cures were the result of a modification, with HAMP
accounting for approximately 60% of those modifications. Although the HAMP
program has been extended through 2015, we believe that we have realized the
majority of the benefits from HAMP because the number of loans insured by us
that we are aware are entering HAMP trial modification periods has decreased
significantly since 2010.

In 2009, the GSEs began offering the Home Affordable Refinance Program
("HARP"). HARP, which has been extended through 2015, allows borrowers who are
not delinquent but who may not otherwise be able to refinance their loans
under the current GSE underwriting standards, to refinance their loans. We
allow the HARP refinances on loans that we insure, regardless of whether the
loan meets our current underwriting standards, and we account for the
refinance as a loan modification (even where there is a new lender) rather
than new insurance written. To incent lenders to allow more current borrowers
to refinance their loans, in October 2011, the GSEs and their regulator, FHFA,
announced an expansion of HARP. The expansion includes, among other changes,
releasing certain representations in certain circumstances benefitting the
GSEs. We have agreed to allow these additional HARP refinances, including
releasing the insured in certain circumstances from certain rescission rights
we would have under our policy. While an expansion of HARP may result in fewer
delinquent loans and claims in the future, our ability to rescind coverage
will be limited in certain circumstances. We are unable to predict what net
impact these changes may have on our incurred or paid losses. Approximately
15% of our primary insurance in force has benefitted from HARP and is still in
force.

The effect on us of loan modifications depends on how many modified loans
subsequently re-default, which in turn can be affected by changes in housing
values. Re-defaults can result in losses for us that could be greater than we
would have paid had the loan not been modified. At this point, we cannot
predict with a high degree of confidence what the ultimate re-default rate
will be. In addition, because we do not have information in our database for
all of the parameters used to determine which loans are eligible for
modification programs, our estimates of the number of loans qualifying for
modification programs are inherently uncertain. If legislation is enacted to
permit a portion of a borrower's mortgage loan balance to be reduced in
bankruptcy and if the borrower re-defaults after such reduction, then the
amount we would be responsible to cover would be calculated after adding back
the reduction. Unless a lender has obtained our prior approval, if a
borrower's mortgage loan balance is reduced outside the bankruptcy context,
including in association with a loan modification, and if the borrower
re-defaults after such reduction, then under the terms of our policy the
amount we would be responsible to cover would be calculated net of the
reduction.

Eligibility under certain loan modification programs can also adversely affect
us by creating an incentive for borrowers who are able to make their mortgage
payments to become delinquent in an attempt to obtain the benefits of a
modification. New notices of delinquency increase our incurred losses.

If the volume of low down payment home mortgage originations declines, the
amount of insurance that we write could decline, which would reduce our
revenues.

The factors that affect the volume of low down payment mortgage originations
include:

  orestrictions on mortgage credit due to more stringent underwriting
    standards, liquidity issues and risk-retention requirements associated
    with non-QRM loans affecting lenders,
  othe level of home mortgage interest rates and the deductibility of
    mortgage interest for income tax purposes,
  othe health of the domestic economy as well as conditions in regional and
    local economies,
  ohousing affordability,
  opopulation trends, including the rate of household formation,
  othe rate of home price appreciation, which in times of heavy refinancing
    can affect whether refinance loans have loan-to-value ratios that require
    private mortgage insurance, and
  ogovernment housing policy encouraging loans to first-time homebuyers.

As noted above, in early 2013, the CFPB issued rules to implement laws
requiring mortgage lenders to make ability-to-pay determinations prior to
extending credit. We are uncertain whether this Bureau will issue any other
rules or regulations that affect our business or the volume of low down
payment home mortgage originations. Such rules and regulations could have a
material adverse effect on our financial position or results of operations.

A decline in the volume of low down payment home mortgage originations could
decrease demand for mortgage insurance, decrease our new insurance written and
reduce our revenues. For other factors that could decrease the demand for
mortgage insurance, see our risk factor titled "— The amount of insurance we
write could be adversely affected if the definition of Qualified Residential
Mortgage results in a reduced number of low down payment loans available to be
insured or if lenders and investors select alternatives to private mortgage
insurance."

Competition or changes in our relationships with our customers could reduce
our revenues or increase our losses.

As noted above, the FHA substantially increased its market share beginning in
2008 and beginning in 2011, that market share began to gradually decline. It
is difficult to predict the FHA's future market share due to, among other
factors, different loan eligibility terms between the FHA and the GSEs, future
increases in guaranty fees charged by the GSEs, changes to the FHA's annual
premiums, and the total profitability that may be realized by mortgage lenders
from securitizing loans through Ginnie Mae when compared to securitizing loans
through Fannie Mae or Freddie Mac.

In recent years, the level of competition within the private mortgage
insurance industry has been intense as many large mortgage lenders reduced the
number of private mortgage insurers with whom they do business. At the same
time, consolidation among mortgage lenders has increased the share of the
mortgage lending market held by large lenders. During 2012 and the first nine
months of 2013, approximately 10% and 8%, respectively, of our new insurance
written was for loans for which one lender was the original insured, although
revenue from such loans was significantly less than 10% of our revenues during
each of those periods. Our private mortgage insurance competitors include:

  oGenworth Mortgage Insurance Corporation,
  oUnited Guaranty Residential Insurance Company,
  oRadian Guaranty Inc.,
  oCMG Mortgage Insurance Company (whose owners have agreed to sell it to a
    worldwide insurer and reinsurer),
  oEssent Guaranty, Inc., and
  oNMI Holdings, Inc.

Until 2010 the mortgage insurance industry had not had new entrants in many
years. In 2010, Essent Guaranty, Inc. began writing mortgage insurance. Essent
has publicly reported that one of our customers, JPMorgan Chase, is one of its
investors. Another new company, NMI Holdings Inc., began writing mortgage
insurance in the second quarter of 2013. In addition, in February 2013, a
worldwide insurer and reinsurer with mortgage insurance operations in Europe
announced that it was purchasing CMG Mortgage Insurance Company. The perceived
increase in credit quality of loans that are being insured today, the
deterioration of the financial strength ratings of the existing mortgage
insurance companies and the possibility of a decrease in the FHA's share of
the mortgage insurance market may encourage additional new entrants.

Our relationships with our customers could be adversely affected by a variety
of factors, including tightening of and adherence to our underwriting
requirements, which have resulted in our declining to insure some of the loans
originated by our customers and insurance rescissions that affect the
customer. We have ongoing discussions with lenders who are significant
customers regarding their objections to our rescissions.

We believe many lenders consider a mortgage insurer's financial strength
rating and risk-to-capital ratio as important factors when they select
mortgage insurers. As a result of MGIC's less than investment grade financial
strength ratings and its risk-to-capital ratio level beinghigher than that of
other mortgage insurers, MGIC may be competitively disadvantaged with these
lenders. MGIC's financial strength rating from Moody's is Ba3 (with a stable
outlook) and from Standard & Poor's is B (with a positive outlook). It is
possible that MGIC's financial strength ratings could decline from these
levels. While we expect MGIC's risk-to-capital ratio to continue to comply
with the current Capital Requirements, its level will depend primarily on the
level of incurred losses, any settlement with the IRS, and the volume of new
risk written. Our incurred losses are dependent upon factors that make
prediction of their amounts difficult and any forecasts are subject to
significant volatility. Conditions that could negatively affect the
risk-to-capital ratio include high unemployment rates, low cure rates, low
housing values and unfavorable resolution of ongoing legal proceedings. In
addition, the NAIC and the GSEs are each expected to propose revised capital
standards for mortgage insurers. While there can be no assurance that MGIC
would meet such revised capital requirements, we believe we could implement
one or more alternative strategies to continue to write new business. For more
information, see our risk factor titled "— Capital requirements may prevent
us from continuing to write new insurance on an uninterrupted basis" and "— We
may not continue to meet the GSEs' mortgage insurer eligibility requirements."

Downturns in the domestic economy or declines in the value of borrowers' homes
from their value at the time their loans closed may result in more homeowners
defaulting and our losses increasing.

Losses result from events that reduce a borrower's ability to continue to make
mortgage payments, such as unemployment, and whether the home of a borrower
who defaults on his mortgage can be sold for an amount that will cover unpaid
principal and interest and the expenses of the sale. In general, favorable
economic conditions reduce the likelihood that borrowers will lack sufficient
income to pay their mortgages and also favorably affect the value of homes,
thereby reducing and in some cases even eliminating a loss from a mortgage
default. A deterioration in economic conditions, including an increase in
unemployment, generally increases the likelihood that borrowers will not have
sufficient income to pay their mortgages and can also adversely affect housing
values, which in turn can influence the willingness of borrowers with
sufficient resources to make mortgage payments to do so when the mortgage
balance exceeds the value of the home. Housing values may decline even absent
a deterioration in economic conditions due to declines in demand for homes,
which in turn may result from changes in buyers' perceptions of the potential
for future appreciation, restrictions on and the cost of mortgage credit due
to more stringent underwriting standards, liquidity issues and risk-retention
requirements associated with non-QRM loans affecting lenders, higher interest
rates generally or changes to the deductibility of mortgage interest for
income tax purposes, or other factors. The residential mortgage market in the
United States had for some time experienced a variety of poor or worsening
economic conditions, including a material nationwide decline in housing
values, with declines continuing into early 2012 in a number of geographic
areas. Although housing values have recently been increasing in most markets,
they often remain significantly below their early 2007 levels. Changes in
housing values and unemployment levels are inherently difficult to forecast
given the uncertainty in the current market environment, including uncertainty
about the effect of actions the federal government has taken and may take with
respect to tax policies, mortgage finance programs and policies, and housing
finance reform.

The mix of business we write also affects the likelihood of losses occurring.

Even when housing values are stable or rising, mortgages with certain
characteristics have higher probabilities of claims. These characteristics
include loans with loan-to-value ratios over 95% (or in certain markets that
have experienced declining housing values, over 90%), FICO credit scores below
620, limited underwriting, including limited borrower documentation, or higher
total debt-to-income ratios, as well as loans having combinations of higher
risk factors. As of September 30, 2013, approximately 22.6% of our primary
risk in force consisted of loans with loan-to-value ratios greater than 95%,
7.0% had FICO credit scores below 620, and 7.2% had limited underwriting,
including limited borrower documentation, each attribute as determined at the
time of loan origination. A material portion of these loans were written in
2005 — 2007 or the first quarter of 2008. In accordance with industry
practice, loans approved by GSEs and other automated underwriting systems
under "doc waiver" programs that do not require verification of borrower
income are classified by us as "full documentation." For additional
information about such loans, see footnote (1) to the Additional Information
at the end of this press release.

From time to time, in response to market conditions, we change the types of
loans that we insure and the requirements under which we insure them.
Beginning in August 2013, we adjusted our underwriting requirements to allow
loans that receive certain approvals from a GSE automated underwriting system
to be automatically eligible for our mortgage insurance, provided such loans
comply with certain credit overlays, as described in our underwriting
requirements. Our underwriting requirements are available on our website at
http://www.mgic.com/underwriting/index.html. We make exceptions to our
underwriting requirements on a loan-by-loan basis and for certain customer
programs. Together, the number of loans for which exceptions were made
accounted for fewer than 2% of the loans we insured in 2012 and the first nine
months of 2013.

During the second quarter of 2012, we began writing a portion of our new
insurance under an endorsement to our master policy (the "Gold Cert
Endorsement"). If a borrower makes payments for three years, our Gold Cert
Endorsement limits our ability to rescind coverage except under certain
circumstances, which circumstances include where we demonstrate the lender had
knowledge of inaccurate information in the loan file. In addition, our Gold
Cert Endorsement limits our ability to rescind on loans for which the borrower
makes payments on time for one year with his own funds, if we are provided
with certain documents shortly after we insure the loan and we fail to
discover that the loan was ineligible for our insurance. We believe the
limitations on our rights to rescind coverage under the Gold Cert Endorsement
will materially reduce rescissions on such loans. As of September 30, 2013,
less than 12% of our insurance in force was written under our Gold Cert
Endorsement. However, we estimate that approximately 63% of our flow, primary
new insurance written in the first nine months of 2013, was written under this
endorsement. The Gold Cert Endorsement is filed as Exhibit 99.7 to our
quarterly report on Form 10-Q for the quarter ended March 31, 2012 (filed with
the SEC on May 10, 2012).

We are completing the process of drafting a new master policy that will comply
with various requirements the GSEs have communicated to the industry. These
requirements contain limitations on rescission rights that differ from the
limitations in our Gold Cert Endorsement including (i) that we must satisfy
certain requirements if we want to provide rescission relief after the
borrower has made one year of timely payments, and (ii) in certain cases,
rescission relief is more restrictive than provided by our Gold Cert
Endorsement. This new policy could be effective for loans insured as early as
mid-2014.

As of September 30, 2013, approximately 1.9% of our primary risk in force
written through the flow channel, and 22.1% of our primary risk in force
written through the bulk channel, consisted of adjustable rate mortgages in
which the initial interest rate may be adjusted during the five years after
the mortgage closing ("ARMs"). We classify as fixed rate loans adjustable rate
mortgages in which the initial interest rate is fixed during the five years
after the mortgage closing. In the current interest rate environment, interest
rates resetting in the near future are unlikely to exceed the interest rates
at origination. If interest rates should rise between the time of origination
of such loans and when their interest rates may be reset, claims on ARMs and
adjustable rate mortgages whose interest rates may only be adjusted after five
years would be substantially higher than for fixed rate loans. In addition, we
have insured "interest-only" loans, which may also be ARMs, and loans with
negative amortization features, such as pay option ARMs. We believe claim
rates on these loans will be substantially higher than on loans without
scheduled payment increases that are made to borrowers of comparable credit
quality.

Although we attempt to incorporate these higher expected claim rates into our
underwriting and pricing models, there can be no assurance that the premiums
earned and the associated investment income will be adequate to compensate for
actual losses even under our current underwriting requirements. We do,
however, believe that given the various changes in our underwriting
requirements that were effective beginning in the first quarter of 2008, our
insurance written beginning in the second quarter of 2008 will generate
underwriting profits.

The premiums we charge may not be adequate to compensate us for our
liabilities for losses and as a result any inadequacy could materially affect
our financial condition and results of operations.

We set premiums at the time a policy is issued based on our expectations
regarding likely performance over the long-term. Our premiums are subject to
approval by state regulatory agencies, which can delay or limit our ability to
increase our premiums. Generally, we cannot cancel mortgage insurance coverage
or adjust renewal premiums during the life of a mortgage insurance policy. As
a result, higher than anticipated claims generally cannot be offset by premium
increases on policies in force or mitigated by our non-renewal or cancellation
of insurance coverage. The premiums we charge, and the associated investment
income, may not be adequate to compensate us for the risks and costs
associated with the insurance coverage provided to customers. An increase in
the number or size of claims, compared to what we anticipate, could adversely
affect our results of operations or financial condition.

In January 2008, we announced that we had decided to stop writing the portion
of our bulk business that insures loans included in Wall Street
securitizations because the performance of such loans deteriorated materially
in the fourth quarter of 2007 and this deterioration was materially worse than
we experienced for loans insured through the flow channel or loans insured
through the remainder of our bulk channel. As of December 31, 2007 we
established a premium deficiency reserve of approximately $1.2 billion. As of
September 30, 2013, the premium deficiency reserve was $57 million, which
reflects the present value of expected future losses and expenses that exceeds
the present value of expected future premium and already established loss
reserves on these bulk transactions.

We continue to experience material losses, especially on the 2006 and 2007
books. The ultimate amount of these losses will depend in part on general
economic conditions, including unemployment, and the direction of home prices,
which in turn will be influenced by general economic conditions and other
factors. Because we cannot predict future home prices or general economic
conditions with confidence, there is significant uncertainty surrounding what
our ultimate losses will be on our 2006 and 2007 books. Our current
expectation, however, is that these books will continue to generate material
incurred and paid losses for a number of years. There can be no assurance that
an additional premium deficiency reserve on Wall Street Bulk or on other
portions of our insurance portfolio will not be required.

It is uncertain what effect the extended timeframes in the foreclosure process
will have on us.

Over the past several years, the average time it takes to receive a claim
associated with a defaulted loan has increased. This is, in part, due to new
loss mitigation protocols established by servicers and to changes in some
state foreclosure laws that may include, for example, a requirement for
additional review and/or mediation processes.

Unless a loan is cured during a foreclosure delay, at the completion of the
foreclosure, additional interest and expenses may be due to the lender from
the borrower. In some circumstances, our paid claim amount may include some
additional interest and expenses.

We are susceptible to disruptions in the servicing of mortgage loans that we
insure.

We depend on reliable, consistent third-party servicing of the loans that we
insure. Over the last several years, the mortgage loan servicing industry has
experienced consolidation. The resulting reduction in the number of servicers
could lead to disruptions in the servicing of mortgage loans covered by our
insurance policies. In addition, recent housing market trends have led to
significant increases in the number of delinquent mortgage loans requiring
servicing. These increases have strained the resources of servicers, reducing
their ability to undertake mitigation efforts that could help limit our
losses, and have resulted in an increasing amount of delinquent loan servicing
being transferred to specialty servicers. The transfer of servicing can cause
a disruption in the servicing of delinquent loans. Future housing market
conditions could lead to additional increases in delinquencies. Managing a
substantially higher volume of non-performing loans could lead to increased
disruptions in the servicing of mortgages.

If interest rates decline, house prices appreciate or mortgage insurance
cancellation requirements change, the length of time that our policies remain
in force could decline and result in declines in our revenue.

In each year, most of our premiums are from insurance that has been written in
prior years. As a result, the length of time insurance remains in force, which
is also generally referred to as persistency, is a significant determinant of
our revenues. The factors affecting the length of time our insurance remains
in force include:

  othe level of current mortgage interest rates compared to the mortgage
    coupon rates on the insurance in force, which affects the vulnerability of
    the insurance in force to refinancings, and
  omortgage insurance cancellation policies of mortgage investors along with
    the current value of the homes underlying the mortgages in the insurance
    in force.

Our persistency rate was 78.3% at September 30, 2013, compared to 79.8% at
December 31, 2012 and 82.9% at December 31, 2011. During the 1990s, our
year-end persistency ranged from a high of 87.4% at December 31, 1990 to a low
of 68.1% at December 31, 1998. Since 2000, our year-end persistency ranged
from a high of 84.7% at December 31, 2009 to a low of 47.1% at December 31,
2003.

Our persistency rate is affected by the level of current mortgage interest
rates compared to the mortgage coupon rates on our insurance in force, which
affects the vulnerability of the insurance in force to refinancing. Due to
refinancing, we have experienced lower persistency on our 2009 through 2011
books of business. This has been partially offset by higher persistency on our
older books of business reflecting the more restrictive credit policies of
lenders (which make it more difficult for homeowners to refinance loans), as
well as declines in housing values. Future premiums on our insurance in force
represent a material portion of our claims paying resources.

Your ownership in our company may be diluted by additional capital that we
raise or if the holders of our outstanding convertible debt convert that debt
into shares of our common stock.

Any future issuance of equity securities may dilute your ownership interest in
our company. In addition, the market price of our common stock could decline
as a result of sales of a large number of shares or similar securities in the
market or the perception that such sales could occur.

We have $389.5 million principal amount of 9% Convertible Junior Subordinated
Debentures outstanding. The principal amount of the debentures is currently
convertible, at the holder's option, at an initial conversion rate, which is
subject to adjustment, of 74.0741 common shares per $1,000 principal amount of
debentures. This represents an initial conversion price of approximately
$13.50 per share. On April 1, 2013, we paid all interest that we had
previously elected to defer on these debentures.We continue to have the
right, and may elect, to defer interest payable under the debentures in the
future. If a holder elects to convert its debentures, the interest that has
been deferred on the debentures being converted is also convertible into
shares of our common stock. The conversion rate for such deferred interest is
based on the average price that our shares traded at during a 5-day period
immediately prior to the election to convert the associated debentures. We may
elect to pay cash for some or all of the shares issuable upon a conversion of
the debentures. We also have $345 million principal amount of 5% Convertible
Senior Notes and $500 million principal amount of 2% Convertible Senior Notes
outstanding. The 5% Convertible Senior Notes are convertible, at the holder's
option, at an initial conversion rate, which is subject to adjustment, of
74.4186 shares per $1,000 principal amount at any time prior to the maturity
date. This represents an initial conversion price of approximately $13.44 per
share. The 2% Convertible Senior Notes are convertible, at the holder's
option, at an initial conversion rate, which is subject to adjustment, of
143.8332 shares per $1,000 principal amount at any time prior to the maturity
date. This represents an initial conversion price of approximately $6.95 per
share. We do not have the right to defer interest on our Convertible Senior
Notes.

Our debt obligations materially exceed our holding company cash and
investments

At September 30, 2013, we had approximately $594 million in cash and
investments at our holding company and our holding company's debt obligations
were $1,317 million in aggregate principal amount, consisting of $83 million
of Senior Notes due in November 2015, $345 million of Convertible Senior Notes
due in 2017, $500 million of Convertible Senior Notes due in 2020 and $390
million of Convertible Junior Debentures due in 2063. Annual debt service on
the debt outstanding as of September 30, 2013, is approximately $67 million.

The Senior Notes, Convertible Senior Notes and Convertible Junior Debentures
are obligations of our holding company, MGIC Investment Corporation, and not
of its subsidiaries. Our holding company has no material sources of cash
inflows other than investment income. The payment of dividends from our
insurance subsidiaries, which other than raising capital in the public markets
is the principal source of our holding company cash inflow, is restricted by
insurance regulation. MGIC is the principal source of dividend-paying
capacity.Since 2008, MGIC has not paid any dividends to our holding company.
Through 2013, MGIC cannot pay any dividends to our holding company without
approval from the OCI. In connection with the approval of MIC as an eligible
mortgage insurer, Freddie Mac and Fannie Mae have imposed dividend
restrictions on MGIC and MIC through December 31, 2013. Any additional capital
contributions to our subsidiaries would decrease our holding company cash and
investments.

We could be adversely affected if personal information on consumers that we
maintain is improperly disclosed.

As part of our business, we maintain large amounts of personal information on
consumers. While we believe we have appropriate information security policies
and systems to prevent unauthorized disclosure, there can be no assurance that
unauthorized disclosure, either through the actions of third parties or
employees, will not occur. Unauthorized disclosure could adversely affect our
reputation and expose us to material claims for damages.

Our Australian operations may suffer significant losses.

We began international operations in Australia, where we started to write
business in June 2007. Since 2008, we are no longer writing new business in
Australia. Our existing risk in force in Australia is subject to the risks
described in the general economic and insurance business-related factors
discussed above. In addition to these risks, we are subject to a number of
other risks from having deployed capital in Australia, including foreign
currency exchange rate fluctuations and interest-rate volatility particular to
Australia.



MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
                              Three Months Ended      Nine Months Ended
                              September 30,           September 30,
                              2013       2012         2013          2012
                              (Unaudited)
                              (In thousands, except per share data)
Net premiums written          $       $         $          $ 757,096
                              234,278    263,505      719,400
Net premiums earned           $       $         $          $ 771,465
                              231,857    266,432      716,693
Investment income             20,250     30,394       59,461        99,980
Realized gains, net           189        6,184        3,933         110,356
Total other-than-temporary    (328)      -            (328)         (339)
impairment losses
Portion of loss recognized in
other comprehensive           -          -            -             -

income (loss), before taxes
Net impairment losses         (328)      -            (328)         (339)
recognized in earnings
Other revenue                 2,481      3,209        7,735         25,530
 Total revenues              254,449    306,219      787,494       1,006,992
Losses and expenses:
Losses incurred               180,189    490,121      642,671       1,378,617
Change in premium deficiency  (3,813)    (9,144)      (16,746)      (50,685)
reserve
Underwriting and other        47,970     50,678       145,544       149,931
expenses, net
Interest expense              17,653     24,478       62,001        74,017
 Total losses and expenses   241,999    556,133      833,470       1,551,880
Income (loss) before tax     12,450     (249,914)    (45,976)      (544,888)
Provision for (benefit from)  336        (2,972)      2,465         (4,500)
income taxes
Net Income (loss)             $      $          $          $(540,388)
                              12,114     (246,942)    (48,441)
Diluted weighted average      339,426    202,014      302,996       201,851
common shares outstanding
Diluted earnings (loss) per   $      $       $        $  
share                           0.04   (1.22)       (0.16)       (2.68)

NOTE: See "Certain Non-GAAP Financial Measures" for diluted earnings per share
contribution from realized gains and losses.



MGIC INVESTMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF
                                September 30,   December 31,    September 30,
                                2013            2012            2012
                                (Unaudited)
                                (In thousands, except per share data)
ASSETS
Investments (1)                 $  5,020,172  $  4,230,275  $  4,926,764
Cash and cash equivalents       518,418         1,027,625       730,404
Reinsurance recoverable on loss 70,621          104,848         117,859
reserves (2)
Prepaid reinsurance premiums    8,815           841             1,174
Home office and equipment, net  26,411          27,190          26,891
Deferred insurance policy       12,518          11,245          10,451
acquisition costs
Other assets                    200,583         172,300         195,347
                                $  5,857,538  $  5,574,324  $  6,008,890
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities:
 Loss reserves (2)             $  3,352,994  $  4,056,843  $  4,004,001
 Unearned premiums             149,369         138,840         140,137
 Premium deficiency reserve    57,035          73,781          84,132
 Senior notes                  82,758          99,910          99,891
 Convertible senior notes      845,000         345,000         345,000
 Convertible junior debentures 389,522         379,609         370,164
 Other liabilities             277,814         283,401         297,589
 Total liabilities             5,154,492       5,377,384       5,340,914
Shareholders' equity            703,046         196,940         667,976
                                $  5,857,538  $  5,574,324  $  6,008,890
Book value per share (3)        $         $         $      
                                2.08            0.97            3.31
(1) Investments include net
unrealized gains (losses) on    (60,927)        41,541          130,330
securities
(2) Loss reserves, net of
reinsurance recoverable on loss 3,282,373       3,951,995       3,886,142
reserves
(3) Shares outstanding          337,758         202,032         202,032

CERTAIN NON-GAAP FINANCIAL MEASURES
                              Three Months Ended        Nine Months Ended
                              September 30,             September 30,
                              2013         2012         2013         2012
                              (Unaudited)
                              (In thousands, except per share data)
Diluted earnings per share
contribution from realized
gains (losses):
Realized gains and impairment $       $       $       $ 
losses                         (139)     6,184        3,605      110,017
Income taxes at 35% (1)       -            -            -            -
After tax realized gains     (139)        6,184        3,605        110,017
Weighted average shares       339,426      202,014      302,996      201,851
Diluted EPS contribution from
realized gains and
impairment losses             $       $       $       $    
                                 -      0.03       0.01      0.55



 (1) Due to the establishment of a valuation allowance, income taxes provided
     are not currently affected by realized gains or losses.
     Management believes the diluted earnings per share contribution from
     realized gains or losses provides useful information to investors because
     it shows the after-tax effect of these items, which can be
     discretionary.



             Additional Information
             Q2 2012     Q3 2012     Q4 2012     Q1          Q2          Q3
                                                       2013        2013        2013
New primary
insurance    $         $         $         $         $         $   
written      5.9          7.0          7.0          6.5         8.0         8.6
(NIW)
(billions)
New primary  $         $         $         $         $         $   
risk written 1.5          1.8          1.7          1.6         2.0         2.2
(billions)
Product mix
as a % of
primary flow
NIW
 >95%     3%            3%            3%            4%           5%           5%
LTVs
 ARMs     1%            1%            1%            1%           1%           1%
          32%           32%           41%           46%          30%          18%
Refinances
Primary
Insurance In $           $           $           $           $           $ 
Force (IIF)  166.7        164.9        162.1        159.5       158.6       159.2
(billions)
(1)
 Flow   $           $           $           $           $           $ 
             148.6        147.5        146.2        144.7       144.4       145.5
 Bulk   $          $          $          $          $          $  
             18.1         17.4         15.9         14.8        14.2        13.7
 Prime   $           $           $           $           $           $ 
(620 & >)    142.3        141.7        140.4        139.3       139.3       140.7
 A minus $         $         $         $         $         $   
(575 - 619)  8.9          8.5          8.2          7.8         7.5         7.2
         $         $         $         $         $         $   
Sub-Prime (< 2.4          2.3          2.3          2.2         2.1         2.0
575)
 Reduced $          $          $          $          $         $   
Doc (All     13.1         12.4         11.2         10.2        9.7         9.3
FICOs)
Annual       81.4%         80.2%         79.8%         78.7%        78.0%        78.3%
Persistency
Primary Risk
In Force     $          $          $          $          $          $  
(RIF)        42.9         42.5         41.7         41.1        40.9        41.1
(billions)
(1)
 Prime   $          $          $          $          $          $  
(620 & >)    36.2         36.1         35.8         35.5        35.6        36.0
 A minus $         $         $         $         $         $   
(575 - 619)  2.4          2.3          2.2          2.2         2.1         2.0
         $         $         $         $         $         $   
Sub-Prime (< 0.7          0.7          0.7          0.6         0.6         0.6
575)
 Reduced $         $         $         $         $         $   
Doc (All     3.6          3.4          3.0          2.8         2.6         2.5
FICOs)
RIF by FICO
 FICO 620 91.9%         92.1%         92.2%         92.4%        92.7%        93.0%
& >
 FICO 575 6.3%          6.1%          6.0%          5.8%         5.6%         5.4%
- 619
 FICO <   1.8%          1.8%          1.8%          1.8%         1.7%         1.6%
575
Average
Coverage
Ratio
(RIF/IIF)
(1)
 Total   25.8%         25.8%         25.7%         25.7%        25.8%        25.8%
 Prime   25.5%         25.5%         25.5%         25.5%        25.5%        25.6%
(620 & >)
 A minus 27.4%         27.4%         27.4%         27.5%        27.5%        27.5%
(575 - 619)

Sub-Prime (< 28.9%         29.0%         29.0%         28.9%        29.0%        29.0%
575)
 Reduced
Doc (All     27.2%         27.2%         27.0%         26.9%        26.8%        26.9%
FICOs)
Average Loan
Size
(thousands)
(1)
 Total   $            $            $            $ 161.59     $ 162.50     $ 164.21
IIF          159.59       160.70       161.06
 Flow    $            $            $            $ 162.27     $ 163.39     $ 165.32
             159.20       160.62       161.42
 Bulk    $            $            $            $ 155.25     $ 153.93     $ 153.29
             162.80       161.38       157.85
 Prime   $            $            $            $ 163.34     $ 164.48     $ 166.40
(620 & >)    160.26       161.69       162.45
 A minus $            $            $            $ 128.39     $ 127.92     $ 127.78
(575 - 619)  129.86       129.43       128.85
         $            $            $ 
Sub-Prime (< 120.65       120.01       119.63       $ 119.54     $ 119.21     $ 118.98
575)
 Reduced $            $            $ 
Doc (All     192.23       191.18       188.21       $ 185.21     $ 183.74     $ 183.50
FICOs)
Primary IIF
- # of loans 1,044,342     1,026,200     1,006,346     987,123      976,063      969,561
(1)
 Prime   887,967       875,953       864,432       852,527      846,867      845,369
(620 & >)
 A minus 68,538        65,878        63,438        61,098       58,825       56,544
(575 - 619)

Sub-Prime (< 20,003        19,371        18,805        18,183       17,652       17,112
575)
 Reduced
Doc (All     67,834        64,998        59,671        55,315       52,719       50,536
FICOs)
Primary IIF
- Delinquent
Roll Forward
- # of Loans

Beginning    160,473       153,990       148,885       139,845      126,610      117,105
Delinquent
Inventory
 New     32,241        34,432        31,778        27,864       25,425       27,755
Notices
 Cures  (26,368)      (27,384)      (29,352)      (31,122)     (25,450)     (24,105)
 Paids
(including
those        (11,738)      (11,344)      (10,750)      (9,445)      (9,051)      (8,659)
charged to a
deductible
or captive)

Rescissions  (618)         (809)         (716)         (532)        (429)        (509)
and denials
(5)
 Ending
Delinquent   153,990       148,885       139,845       126,610      117,105      111,587
Inventory
Primary
claim
received
inventory
included in  13,421        12,508        11,731        10,924       10,637       9,858
ending
delinquent
inventory
(5)
Composition
of Cures
 Reported
delinquent   7,104         8,097         7,819         9,324        6,172        7,067
and cured
intraquarter
 Number of
payments
delinquent
prior to
cure
 3
payments or  11,875        10,593        11,651        12,811       11,015       9,504
less
 4-11   5,349         5,433         5,476         5,430        5,697        4,866
payments
 12
payments or  2,040         3,261         4,406         3,557        2,566        2,668
more
 Total
Cures in     26,368        27,384        29,352        31,122       25,450       24,105
Quarter
Composition
of Paids
 Number of
payments
delinquent
at time of
claim
payment
 3
payments or  50            71            55            38           34           57
less
 4-11   1,840         1,771         1,584         1,576        1,268        1,205
payments
 12
payments or  9,848         9,502         9,111         7,831        7,749        7,397
more
 Total
Paids in     11,738        11,344        10,750        9,445        9,051        8,659
Quarter
Aging of
Primary
Delinquent
Inventory

Consecutive
months in
default
 3
months or    24,488    16% 25,593    17% 23,282    17% 17,973   14% 18,760   16% 20,144   18%
less
 4-11   38,400    25% 35,029    24% 34,688    25% 32,662   26% 26,377   23% 24,138   22%
months
 12
months or    91,102    59% 88,263    59% 81,875    58% 75,975   60% 71,968   61% 67,305   60%
more
 Number of
payments
delinquent
 3
payments or  33,677    22% 35,130    24% 34,245    24% 28,376   23% 27,498   24% 28,777   26%
less
 4-11   39,744    26% 36,359    24% 34,458    25% 32,253   25% 27,299   23% 25,089   22%
payments
 12
payments or  80,569    52% 77,396    52% 71,142    51% 65,981   52% 62,308   53% 57,721   52%
more
Primary IIF
- # of       153,990       148,885       139,845       126,610      117,105      111,587
Delinquent
Loans (1)
 Flow    116,798       113,339       107,497       97,317       89,822       85,232
 Bulk    37,192        35,546        32,348        29,293       27,283       26,355
 Prime   98,447        95,517        90,270        81,783       75,310       71,376
(620 & >)
 A minus 22,428        21,865        20,884        18,946       17,682       17,311
(575 - 619)

Sub-Prime (< 8,175         7,999         7,668         6,993        6,676        6,519
575)
 Reduced
Doc (All     24,940        23,504        21,023        18,888       17,437       16,381
FICOs)
             Q2 2012     Q3 2012     Q4 2012     Q1          Q2          Q3
                                                       2013        2013        2013
Primary IIF
Delinquency  14.75%        14.51%        13.90%        12.83%       12.00%       11.51%
Rates (1)
 Flow    12.51%        12.34%        11.87%        10.91%       10.16%       9.69%
 Bulk    33.50%        32.97%        32.10%        30.78%       29.58%       29.44%
 Prime   11.09%        10.90%        10.44%        9.59%        8.89%        8.44%
(620 & >)
 A minus 32.72%        33.19%        32.92%        31.01%       30.06%       30.62%
(575 - 619)

Sub-Prime (< 40.87%        41.29%        40.78%        38.46%       37.82%       38.10%
575)
 Reduced
Doc (All     36.77%        36.16%        35.23%        34.15%       33.08%       32.41%
FICOs)
Reserves
 Primary
 Direct
Loss         $           $           $           $           $           $ 
Reserves     3,934        3,855        3,744        3,558       3,334       3,109
(millions)

Average      $            $            $ 
Direct       25,547       25,890       26,771       $ 28,100     $ 28,473     $ 27,858
Reserve Per
Default
 Pool
 Direct
Loss         $         $         $         $         $         $   
Reserves     168           144           140           127          113          104
(millions)
 Ending
Delinquent   25,178        9,337     (6) 8,594         7,890        7,006        6,821
Inventory
 Pool
claim
received
inventory    1,154         255           304           325          253          185
included in
ending
delinquent
inventory

Reserves
related to   -             -             167           157          147          136
Freddie Mac
settlement
(6)
 Other
Gross        $         $         $         $         $         $   
Reserves       7          5          6          6          5          4
(millions)
(4)
Net Paid
Claims       $         $         $         $         $         $   
(millions)   636           587           628           469          433          414
(1) (2)
 Flow    $         $         $         $         $         $   
             466           430           425           370          332          333
 Bulk    $         $         $         $         $         $   
             113           115            98           78          78          63
 Pool -
with         $         $         $         $         $         $   
aggregate     64           42            9         11          12           8
loss limits
 Pool -
without      $         $         $         $         $         $   
aggregate      6          7          7          6          8          6
loss limits
 Pool -
Freddie Mac  $         $         $         $         $         $   
settlement      -          -       100            10          10          11
(6)
         $         $         $         $         $         $   
Reinsurance  (25)         (21)         (20)         (15)        (18)        (17)
 Other   $         $         $         $         $         $   
(4)           12           14            9          9         11          10

Reinsurance  $         $         $         $         $         $   
terminations    -          -        (6)         (3)         -         -
(2)
 Prime   $         $         $         $         $         $   
(620 & >)    402           378           370           329          292          288
 A minus $         $         $         $         $         $   
(575 - 619)   63           57           51           49          47          44
         $         $         $         $         $         $   
Sub-Prime (<  18           16           13           14          14          13
575)
 Reduced $         $         $         $         $         $   
Doc (All      96           94           89           56          57          51
FICOs)
Primary
Average
Claim        $          $          $          $          $          $  
Payment      49.3         48.0         48.6         47.4        45.3        45.7
(thousands)
(1)
 Flow    $          $          $          $          $          $  
             46.8         44.8         45.8         45.0        42.9        43.9
 Bulk    $          $          $          $          $          $  
             63.2         65.4         66.4         64.1        59.8        58.3
 Prime   $          $          $          $          $          $  
(620 & >)    47.6         45.9         46.7         46.2        43.7        44.3
 A minus $          $          $          $          $          $  
(575 - 619)  44.6         42.5         43.1         44.6        43.5        43.4
         $          $          $          $          $          $  
Sub-Prime (< 44.4         46.2         44.6         45.6        46.3        44.8
575)
 Reduced $          $          $          $          $          $  
Doc (All     64.3         65.6         65.9         60.3        58.1        59.4
FICOs)
Risk Sharing
Arrangements
 %
insurance
inforce      11.3%         10.9%         10.2%         9.6%         13.8%        18.2%
subject to
risk
sharing
 %
Quarterly
NIW subject  5.6%          5.6%          4.6%          3.1%         97.3%        96.2%
to risk
sharing
 Premium  $         $         $         $         $          $  
ceded        8.7          8.2          7.3          7.1         11.8        13.5
(millions)
 Captive
trust fund   $         $         $         $         $         $   
assets       360           350           328           314          276          259
(millions)
(2)
Direct Pool
RIF
(millions)
 With     $         $         $         $         $         $   
aggregate    508           469           439           425          410          392
loss limits
 Without  $           $         $         $         $         $   
aggregate    1,024        945           879           812          745          682
loss limits
Mortgage
Guaranty
Insurance    27.8:1        31.5:1        44.7:1        20.4:1       20.2:1       20.0:1   (7)
Corporation
- Risk to
Capital
MGIC
Indemnity
Corporation                0.3:1         1.2:1         1.8:1        2.1:1        2.0:1    (7)
- Risk to
Capital
Combined
Insurance
Companies -  30.0:1        34.1:1        47.8:1        23.1:1       23.0:1       22.7:1   (7)
Risk to
Capital
GAAP loss
ratio
(insurance   227.3%        184.0%        263.1%        107.8%       82.5%        77.7%
operations
only) (3)
GAAP
underwriting
expense
ratio        16.6%         13.6%         14.2%         18.0%        17.7%        18.1%
(insurance
operations
only)

Note: The FICO credit score for a loan with multiple borrowers is the lowest
of the borrowers' "decision FICO scores." A borrower's "decision FICO score"
is determined as follows: if there are three FICO scores available, the middle
FICO score is used; if two FICO scores are available, the lower of the two is
used; if only one FICO score is available, it is used.
Note: The results of our operations in Australia are included in the
financial statements in this document but the additional information in this
document does not include our Australian operations, unless otherwise noted,
which are immaterial.
Note: During the fourth quarter of 2012 and the first quarter of 2013, 941
and 933 loans, respectively, were cured as a result of the aggregate loss
limits on certain policies being reached. These policies are not related to
the recently disclosed Freddie Mac settlement.
(1) In accordance with industry practice, loans approved by GSE and other
automated underwriting (AU) systems under "doc waiver" programs that do not
require verification of borrower income are classified by MGIC as "full doc."
Based in part on information provided by the GSEs, MGIC estimates full doc
loans of this type were approximately 4% of 2007 NIW. Information for other
periods is not available. MGIC understands these AU systems grant such doc
waivers for loans they judge to have higher credit quality. MGIC also
understands that the GSEs terminated their "doc waiver" programs in the second
half of 2008. Reduced documentation loans only appear in the reduced
documentation category and do not appear in any of the other categories.
(2) Net paid claims, as presented, does not include amounts received in
conjunction with termination of reinsurance agreements. In a termination, the
agreement is cancelled, with no future premium ceded and funds for any
incurred but unpaid losses transferred to us. The transferred funds result in
an increase in the investment portfolio (including cash and cash equivalents)
and there is a corresponding decrease in reinsurance recoverable on loss
reserves. This results in an increase in net loss reserves, which is offset
by a decrease in net losses paid.
(3) As calculated, does not reflect any effects due to premium deficiency.
(4) Includes Australian operations
(5) Refer to our risk factors titled "Our losses could increase if we do not
prevail in proceedings challenging whether our rescissions were proper or we
enter into material resolution arrangements" and "We are involved in legal
proceedings and are subject to the risk of additional legal proceedings in the
future" above for information about our suspension of certain rescissions and
the number of rescissions suspended as of September 30, 2013.
(6) During the third quarter of 2012, approximately 15,600 pool notices were
removed from the pool notice inventory due to the exhaustion of the aggregate
loss on a pool policy we have with Freddie Mac. See our Form 8-K filed with
the Securities and Exchange Commission on November 30, 2012 for a discussion
of our settlement with Freddie Mac regarding this pool policy.
(7) Preliminary



SOURCE MGIC Investment Corporation

Website: http://www.mgic.com
Contact: Investor Contact: Michael J. Zimmerman, Investor Relations, (414)
347-6596, mike_zimmerman@mgic.com, or Media Contact: Katie Monfre, Corporate
Communications, (414) 347-2650, katie_monfre@mgic.com