MGIC Investment Corp. (MTG)’s Fourth Quarter 2014 Earnings Call Trasncript

Operator
Our next question comes from Eric Beardsley with Goldman Sachs. Your line is open.

Q: Hi, thank you. Just a follow-up on your commentary on the FHA premium cut impact. How much volume did you write in 2014 in those FICO LTV buckets where the FHA would now be cheaper than PMI?

Timothy J. Mattke – EVP and CFO
Well, if you look at the through the end of the year 5% of the business that we wrote had a payment, FHA had a payment advantage. So we won 5% of that business. You expand out to the new criteria you could probably add maybe about 15%, so cumulative about 20%. But again keep in mind we win business where we have payment differential to deal along the way, but that’s how much it would be technically, if you will out of the money.

Q: Great, thank you. And just on your reinsurance agreements do you anticipate any cost to extend the reinsurance or is this something that you don’t expect an impact from?

Timothy J. Mattke – EVP and CFO
I guess what I’d say is that we expect that the economic terms would be similar to where they are right now. And so the cost would be more as far as what the size of the reinsurance is and then obviously if we extend it those additional years would have a cost associated with them. But from a cost to capital perspective we think it’s similar or better terms to where we are right now.

Q: And then just lastly if the PMIERs were to be implemented as they are currently written would you expect it to have to take on new reinsurance or are you really just looking to extend your existing agreements?

Timothy J. Mattke – EVP and CFO
Well we’re looking to extend with the current panel. Part of the reason for that is to make sure we don’t have any [inaudible] cuts from the PMIER capital calculation, but we have had dialogue with the existing panel of reinsurers, depend upon the finalization of PMIERs to whether we would have additional amounts that we would feed. And as Curt said that could be a significant component of eliminating any deficit or I guess making us net positive from a PMIERs perspective we would hope.

Q: Okay. In terms of $300 million shortfall that you initially disclosed you wouldn’t be able to just fill that just with cash at the HoldCo. and the assets that you have at subsidiaries you might consider looking outside of that as well?

Timothy J. Mattke – EVP and CFO
I think all of those are in play, I think from cash from a subsidiary perspective we have said before that we have about $100 million that are in subsidiaries that are accounted under the PMIERs. We should be able to get a majority of that to be able to count and then with the combination of cash at the holding company as well as potential increase in the cede on the reinsurance or the volume that would be ceded we think we’d be able to get through those methods.