SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

12 Months Ended

Dec. 31, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

PARENT COMPANY ONLY

	December 31,
(In thousands)	2017			2016
ASSETS
Fixed income (amortized cost, 2017 – $195,846; 2016 – $247,396)	$	194,061		$	245,435
Cash and cash equivalents	22,247			37,666
Investment in subsidiaries, at equity in net assets	3,567,034			3,150,671
Accounts receivable - affiliates	1,414			780
Income taxes - current and deferred	192,570			289,703
Accrued investment income	1,941			1,749
Other assets	1,275			80
Total assets	$	3,980,542		$	3,726,084
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Senior notes	$	418,560		$	417,406
Convertible senior notes	—			349,461
Convertible junior subordinated debentures	389,522			389,522
Accrued interest	17,934			20,853
Total liabilities	826,016			1,177,242
Shareholders’ equity:
Common stock, (one dollar par value, shares authorized 1,000,000; shares issued 2017 – 370,567; 2016 – 359,400; outstanding 2017 – 370,567; 2016 – 340,663)	370,567			359,400
Paid-in capital	1,850,582			1,782,337
Treasury stock (shares at cost 2016 – 18,737)	—			(150,359		)
Accumulated other comprehensive loss, net of tax	(43,783		)	(75,100		)
Retained earnings	977,160			632,564
Total shareholders’ equity	3,154,526			2,548,842
Total liabilities and shareholders’ equity	$	3,980,542		$	3,726,084

See accompanying supplementary notes to Parent Company condensed financial statements.

MGIC INVESTMENT CORPORATION

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS

PARENT COMPANY ONLY

	Years Ended December 31,
(In thousands)	2017			2016			2015
Revenues:
Investment income, net of expenses	$	3,177		$	3,807		$	7,586
Net realized investment (losses) gains	(13		)	646			357
Total revenues	3,164			4,453			7,943
Expenses:
Operating expenses	642			1,409			582
Interest expense	65,972			64,598			68,932
Loss on debt extinguishment	65			82,234			507
Total expenses	66,679			148,241			70,021
Loss before tax	(63,515		)	(143,788		)	(62,078		)
Provision for (benefit from) income taxes	95,517			(52,575		)	(125,487		)
Equity in net income of subsidiaries	514,793			433,730			1,108,591
Net income	355,761			342,517			1,172,000
Other comprehensive income (loss), net of tax	41,739			(14,220		)	20,461
Comprehensive income	$	397,500		$	328,297		$	1,192,461

See accompanying supplementary notes to Parent Company condensed financial statements.

MGIC INVESTMENT CORPORATION

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS

PARENT COMPANY ONLY

	Years Ended December 31,
(In thousands)	2017			2016			2015
Cash flows from operating activities:
Net income	$	355,761		$	342,517		$	1,172,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in net income of subsidiaries	(514,793		)	(433,730		)	(1,108,591		)
Dividends received from subsidiaries	110,145			64,000			6,500
Deferred tax benefit	96,741			(55,988		)	(125,532		)
Loss on debt extinguishment	65			82,234			507
Other	18,716			16,722			31,701
Change in certain assets and liabilities:
Accounts receivable - affiliates	(634		)	158			(626		)
Income taxes receivable	297			3,602			(8,308		)
Accrued investment income	(192		)	1,951			(265		)
Accrued interest	(2,819		)	6,811			(652		)
Net cash provided by (used in) operating activities	63,287			28,277			(33,266		)
Cash flows from investing activities:
Capital distributions from subsidiaries	—			51,987			32,000
Capital contributions to subsidiaries	—			(36,025		)	—
Purchase of fixed income	(97,091		)	(194,751		)	(295,010		)
Sale of fixed income	176,960			330,142			386,385
Net cash provided by investing activities	79,869			151,353			123,375
Cash flows from financing activities:
Proceeds from revolving credit facility	150,000			—			—
Repayment of revolving credit facility	(150,000		)	—			—
Net proceeds from issuance of long-term debt	—			418,094			—
Repayment of long-term debt	—			—			(61,953		)
Repurchase of convertible senior notes	(150,124		)	(426,191		)	(12,004		)
Repurchase of common stock	—			(147,127		)	—
Payment of debt issuance costs	(1,630		)	(1,127		)	—
Payment of withholding taxes related to share-based compensation net share settlement	(6,821		)	(5,030		)	(7,242		)
Net cash used in financing activities	(158,575		)	(161,381		)	(81,199		)
Net (decrease) increase in cash and cash equivalents	(15,419		)	18,249			8,910
Cash and cash equivalents at beginning of year	37,666			19,417			10,507
Cash and cash equivalents at end of year	$	22,247		$	37,666		$	19,417

See accompanying supplementary notes to Parent Company condensed financial statements.

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

PARENT COMPANY ONLY

SUPPLEMENTARY NOTES

Note A

The accompanying Parent Company financial statements should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements appearing this annual report.

Note B

Our insurance subsidiaries are subject to statutory regulations as to maintenance of policyholders’ surplus and payment of dividends. The maximum amount of dividends that the insurance subsidiaries may pay in any twelve-month period without regulatory approval by the OCI is the lesser of adjusted statutory net income or 10% of statutory policyholders’ surplus as of the preceding calendar year end. Adjusted statutory net income is defined for this purpose to be the greater of statutory net income, net of realized investment gains, for the calendar year preceding the date of the dividend or statutory net income, net of realized investment gains, for the three calendar years preceding the date of the dividend less dividends paid within the first two of the preceding three calendar years.

The payment of dividends from our insurance subsidiaries is the principal source of cash inflow for MGIC Investment Corporation, our holding company, other than investment income and raising capital in the public markets. The payment of dividends by our insurance subsidiaries is restricted by insurance regulation as discussed above. MGIC is the principal source of dividend-paying capacity and, in 2017, it paid a total of $140 million in dividends in cash and securities to our holding company, and we expect MGIC to continue to pay quarterly dividends. During 2016, MGIC paid a total of $64 million in dividends to our holding company and distributions of $52 million were paid to our holding company from other insurance subsidiaries. These distributions were completed in conjunction with the transfer of risk and the final dissolution of those insurance entities during 2016. Our holding company subsequently contributed the majority of the funds, approximately $36 million, to MGIC in relation to the transfer of risk. During 2015, distributions of $38.5 million, which includes dividends of $6.5 million, were paid to the holding company from other insurance subsidiaries. No contributions were made to our insurance subsidiaries in 2017 or 2015.

Note C

The senior notes and convertible junior subordinated debentures ("9% Debentures"), discussed in Note 7 – “Debt” to our consolidated financial statements, are obligations of MGIC Investment Corporation, our holding company, and not of its subsidiaries. In February 2016, MGIC purchased $132.7 million in aggregate principal of the 9% Debentures. The details of this transaction are discussed in Note 7 – “Debt” to our consolidated financial statements. The 9% Debentures owned by MGIC remain obligations of our holding company. The carrying amount outstanding of the 9% Debentures of $389.5 million is reported on the Parent Company only condensed balance sheet. For GAAP accounting purposes, the 9% Debentures owned by MGIC are eliminated in our consolidated financial statements.