Basis of presentation	9 Months Ended
Sep. 30, 2012
Basis of presentation [Abstract]
Basis of presentation	Note 1 - Basis of Presentation MGIC Investment Corporation is a holding company which, through Mortgage Guaranty Insurance Corporation ("MGIC"), MGIC Indemnity Corporation ("MIC") and several other subsidiaries, is principally engaged in the mortgage insurance business. We provide mortgage insurance to lenders throughout the United States and to government sponsored entities ("GSEs") to protect against loss from defaults on low down payment residential mortgage loans. The accompanying unaudited consolidated financial statements of MGIC Investment Corporation and its wholly-owned subsidiaries have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission ("SEC") for interim reporting and do not include all of the other information and disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in our Annual Report on Form 10-K. As used below, "we," "our" and "us" refer to MGIC Investment Corporation's consolidated operations or to MGIC Investment Corporation, as the context requires. In the opinion of management the accompanying financial statements include all adjustments, consisting primarily of normal recurring accruals, necessary to fairly state our financial position and results of operations for the periods indicated. The results of operations for the interim period may not be indicative of the results that may be expected for the year ending December 31, 2012. Capital 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." New insurance written in the jurisdictions that have Capital Requirements represented approximately 50% of new insurance written in 2011 and the first nine months of 2012. While formulations of minimum capital vary among jurisdictions, the most common formulation allows 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. At September 30, 2012, MGIC's preliminary risk-to-capital ratio was 31.5 to 1, exceeding the maximum allowed by many jurisdictions, and its preliminary policyholder position was $344 million below the required MPP of $1.3 billion. We expect MGIC's risk-to-capital ratio to increase and to continue to exceed 25 to 1. At September 30, 2012, the preliminary risk-to-capital ratio of our combined insurance operations (which includes reinsurance affiliates) was 34.1 to 1. A higher risk-to-capital ratio on a combined basis may indicate that, in order for MGIC or MIC 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 and MIC to write insurance with a higher coverage percentage than they could on their own under certain state-specific requirements. Under Statement of Statutory Accounting Principles No. 101 ("SSAP No. 101"), which became effective January 1, 2012, MGIC received no benefit to statutory capital at June 30, 2012 for deferred tax assets because MGIC's risk-to-capital ratio exceeded 25 to 1 before considering those assets. The exclusion of deferred tax assets at June 30, 2012, negatively impacted our statutory capital. Under a permitted practice effective September 30, 2012 and until further notice, the Office of the Commissioner of Insurance of the State of Wisconsin ("OCI") has approved MGIC to report its net deferred tax asset as an admitted asset in an amount not to exceed 10% of surplus as regards policyholders, notwithstanding contrary provisions of SSAP No. 101. At September 30, 2012, pursuant to the permitted practice, deferred tax assets of $90 million were included in statutory capital. Although MGIC does not meet the Capital Requirements of Wisconsin, the OCI has waived them until December 31, 2013. In place of the Capital Requirements, the OCI Order containing the waiver of Capital Requirements (the "OCI Order") provides that MGIC can write new business as long as it maintains regulatory capital that the OCI determines is reasonably in excess of a level that would constitute a financially hazardous condition. The OCI Order requires MGIC Investment Corporation, beginning January 1, 2012 and continuing through the earlier of December 31, 2013 and the termination of the OCI Order (the "Covered Period"), to make cash equity contributions to MGIC as may be necessary so that its "Liquid Assets" are at least $1 billion (this portion of the OCI Order is referred to as the "Keepwell Provision"). "Liquid Assets," which include those of MGIC as well as those held in certain of our subsidiaries, excluding MIC and its reinsurance affiliates, are the sum of (i) the aggregate cash and cash equivalents, (ii) fair market value of investments and (iii) assets held in trusts supporting the obligations of captive mortgage reinsurers to MGIC. As of September 30, 2012, "Liquid Assets" were approximately $5.1 billion. Although we do not expect that MGIC's Liquid Assets will fall below $1 billion during the Covered Period, we do expect the amount of Liquid Assets to continue to decline materially after September 30, 2012 and through the end of the Covered Period as MGIC's claim payments and other uses of cash continue to exceed cash generated from operations. For more information about factors that could negatively impact MGIC's Liquid Assets, see Note 5 – "Litigation and Contingencies" and Note 11 – "Income Taxes." MGIC applied for waivers in the other jurisdictions with Capital Requirements and, at this time, has active waivers from eight of them, two of which allow a maximum risk-to-capital ratio that we expect to exceed in the fourth quarter of 2012. Four jurisdictions have either denied our request for waivers, have laws that do not allow for waivers or have granted waivers allowing risk-to-capital ratios that MGIC has exceeded. We are awaiting a response from three other jurisdictions, some of which may deny our request. As part of our longstanding plan to write new business in MIC, a direct subsidiary of MGIC, and pursuant to the OCI Order, MGIC has made capital contributions to MIC, with $200 million contributed in January 2012. As of September 30, 2012, MIC had statutory capital of $443 million. In the third quarter of 2012, we began writing new mortgage insurance in MIC on the same policy terms as MGIC, in those jurisdictions where we did not have active waivers of Capital Requirements for MGIC. In the third quarter of 2012, MIC's new insurance written was $587 million, which includes business from certain jurisdictions for which new insurance is again being written in MGIC after it received the necessary waivers, but excludes business in certain jurisdictions in which we expect MIC to write new insurance in the fourth quarter of 2012, after MGIC exceeds the risk-to-capital ratio limit included in the jurisdictions' waivers. With the $443 million of statutory capital in MIC, we have the capacity to write 100% of our new insurance written in MIC for at least five years at current quality and volume levels of new insurance written if we obtained GSE approval to do so. We are currently writing new mortgage insurance in MIC in Florida, Idaho, New Jersey, New York, Ohio, Puerto Rico and Texas. MIC is licensed to write business in all jurisdictions and, subject to the conditions and restrictions discussed below, has received the necessary approvals from Fannie Mae and Freddie Mac (the "GSEs") and the OCI to write business in all of the jurisdictions that have not waived their Capital Requirements for MGIC. Under an agreement in place with Fannie Mae, MIC will be eligible to write mortgage insurance through December 31, 2013, only in those jurisdictions (other than Wisconsin) in which MGIC cannot write new insurance due to MGIC's failure to meet Capital Requirements and to obtain a waiver of them. The agreement with Fannie Mae contains certain conditions and restrictions to its continued effectiveness including the continued effectiveness of the OCI Order and the continued applicability of the Keepwell Provision of the OCI Order. Under a letter dated January 23, 2012, Freddie Mac approved MIC to write business only in certain jurisdictions where MGIC does not meet the Capital Requirements and does not obtain waivers of them. The January 23, 2012 approval from Freddie Mac, contains certain conditions and restrictions to its continued effectiveness, which remain in effect, including requirements that while MIC is writing new business under the Freddie Mac approval, MIC may not exceed a risk-to-capital ratio of 20:1 (at September 30, 2012, MIC's preliminary risk-to-capital ratio was 0.3 to 1), MGIC and MIC comply with all terms and conditions of the OCI Order, the OCI Order remain effective, and that MIC provide MGIC access to the capital of MIC in an amount necessary for MGIC to maintain sufficient liquidity to satisfy its obligations under insurance policies issued by MGIC. As requested by the OCI, we have notified Freddie Mac that the OCI has objected to this last requirement and others contained in the Freddie Mac approval because those requirements do not recognize the OCI's statutory authority and obligations. In this regard, see the third condition to the September 28, 2012 Freddie Mac letter referred to in the next paragraph. Under a letter dated August 1, 2012, as amended by a letter dated September 28, 2012 (collectively, the "September Freddie Mac Letter"), Freddie Mac expanded the jurisdictions in which MIC is approved to cover all of the 15 jurisdictions besides Wisconsin that have Capital Requirements when MGIC is not able to write new business in a jurisdiction because MGIC would not meet those Requirements, after considering any waiver that may be granted. The approval in the September Freddie Mac Letter is subject to the following conditions: (1) a $100 million capital contribution to MGIC by our holding company be made on or before December 1, 2012 (the "Contribution Condition"); (2) substantial agreement to a settlement of our dispute with Freddie Mac regarding the interpretation of certain pool policies be reached on or before October 31, 2012 (such condition is the "Settlement Condition"; for more information about this dispute, see Note 5 "Litigation and Contingencies"); and (3) agreement by the OCI by December 31, 2012 that MIC's capital will be available to MGIC to support MGIC's policyholder obligations without segregation of those obligations (the "OCI Condition"). The approval in the September Freddie Mac Letter may be withdrawn at any time, ends December 31, 2013 and is also subject to compliance with the conditions and restrictions in Freddie Mac's January 23, 2012 letter. The Settlement Condition has been met, and with the exception of drafting issues that we consider minor, MGIC and Freddie Mac have agreed on the terms and text of a definitive settlement agreement, subject to approval by the Boards of Directors of MGIC and Freddie Mac and by the FHFA. Under the settlement agreement, MGIC is to pay Freddie Mac $267.5 million in satisfaction of any further obligations under the policies in dispute, of which $100 million is to be paid upon effectiveness of the settlement and the remaining $167.5 million is to be paid in 48 equal monthly installments thereafter. The settlement will become effective if and when the definitive settlement agreement is signed by all parties, including the FHFA. MGIC does not intend to sign the settlement agreement unless MIC is approved by Freddie Mac and Fannie Mae, for a period that MGIC and the GSEs need to agree on, to write business in jurisdictions in which MGIC cannot due to failure to meet the Capital Requirements (the "Further MIC Approvals"). If the Further MIC Approvals are obtained, and there is a satisfactory resolution of the OCI Condition (which is completely beyond our control), we are willing to satisfy the Contribution Condition and MGIC is willing to sign the settlement agreement. While we are hopeful of making further progress regarding the settlement, there are substantial risks the settlement will not be concluded. We have not made any loss provision for a settlement and are unable to predict if and when a signed and effective settlement will be reached. Effectiveness of the settlement would negatively impact our statutory capital and materially worsen the current non-compliance with Capital Requirements. Absent a settlement, such an effect could also occur from changed circumstances that lead us to conclude a loss is probable in litigation. If one GSE does not approve MIC in all jurisdictions that have not waived their Capital Requirements for MGIC, 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 on a nationwide basis utilizing a combination of MGIC and MIC, lenders may be unwilling to procure insurance from us anywhere. In addition, new insurance written can be influenced by a lender's assessment of the financial strength of our insurance operations and the matters in the September Freddie Mac Letter. Insurance departments, in their sole discretion, may modify, terminate or extend their waivers of Capital Requirements. If an insurance department other than the OCI modifies or terminates its waiver, or if it fails to grant a waiver or renew its waiver after expiration, depending on the circumstances, MGIC could be prevented from writing new business in that particular jurisdiction. Also, 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 some or all of the jurisdictions in which MIC is not eligible to insure loans purchased or guaranteed by Fannie Mae or Freddie Mac. If this were to occur, we would need to seek the GSEs' approval to allow MIC to write business in those jurisdictions. The OCI, in its sole discretion, may modify, terminate or extend its waiver, although any modification or extension of the Keepwell Provision requires our written consent. If the OCI modifies or terminates its waiver, or if it fails to renew its waiver upon expiration, depending on the circumstances, MGIC could be prevented from writing new business in all jurisdictions if MGIC does not comply with the Capital Requirements. 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 necessary waiver to allow it to once again write new business. Furthermore, if the OCI revokes or fails to renew MGIC's waiver, MIC's ability to write new business would be severely limited because the GSEs' approval of MIC is conditioned upon the continued effectiveness of the OCI Order. We cannot assure you that the OCI or any other jurisdiction that has granted a waiver of its Capital Requirements will not modify or revoke the waiver, or will renew the waiver when it expires; that the GSEs will approve MIC to write new business in all jurisdictions in which MGIC is unable to do so; or that MGIC could obtain the additional capital necessary to comply with the Capital Requirements. At present the amount of additional capital we would need to comply with the Capital Requirements would be substantial. For more information about factors that could negatively impact MGIC's compliance with Capital Requirements, which depending on the severity of adverse outcomes could exacerbate materially the current non-compliance with Capital Requirements, see Note 5 – "Litigation and Contingencies" and Note 11 – "Income Taxes." As discussed above, we have not accrued an estimated loss in our financial statements to reflect the satisfaction of the Settlement Condition. In addition, as discussed below, in accordance with Accounting Standards Codification ("ASC") 450-20, we have not accrued an estimated loss in our financial statements to reflect possible adverse developments in other litigation or other dispute resolution proceedings. An accrual, if required and depending on the amount, could exacerbate materially MGIC's current non-compliance with Capital Requirements. In addition to the factors listed above, our statutory capital and compliance with Capital Requirements could be negatively affected by an unfunded pension liability. An unfunded pension liability for statutory capital purposes may result from increases in pension benefit obligations due to a lower discount rate assumption or decreases to the fair value of pension plan assets due to poor asset performance, as well as changes in certain other actuarial assumptions. Since mid-2011, two of our competitors, Republic Mortgage Insurance Company ("RMIC") and PMI Mortgage Insurance Co. ("PMI"), ceased writing new insurance commitments, were placed under the supervision of the insurance departments of their respective domiciliary states and are subject to partial claim payment plans with the remaining claim amounts deferred. (PMI's parent company subsequently filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code.) In addition, in 2008, Triad Guaranty Insurance Corporation ceased writing new business and entered into voluntary run-off. It is also subject to a partial payment plan ordered by its domiciliary state. MGIC's failure to meet the Capital Requirements to insure new business does not necessarily mean that MGIC does not have sufficient resources to pay claims on its insurance liabilities. While we believe that MGIC has sufficient claims paying resources to meet its claim obligations on its insurance in force on a timely basis, even though it does not meet Capital Requirements, we cannot assure you that the events that led to MGIC failing 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, future housing values and future 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 that will be rescinded and the outcome of any legal proceedings or settlement discussions related to rescissions that we make, including those with Countrywide. (For more information about the Countrywide legal proceedings, see Note 5 - "Litigation and Contingencies.") Prior to 2008, rescissions of coverage on loans for which claims have been submitted to us were not a material portion of our claims resolved during a year. However, beginning in 2008, our rescission of coverage on loans has materially mitigated our paid losses. In each of 2009 and 2010, rescissions mitigated our paid losses by approximately $1.2 billion; in 2011, rescissions mitigated our paid losses by approximately $0.6 billion; and in the first nine months of 2012, rescissions mitigated our paid losses by approximately $0.2 billion (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, 8% to 13% of claims received in a quarter have been resolved by rescissions, down from the peak of approximately 28% in the first half of 2009. As discussed in Note 5 – "Litigation and Contingencies" we are in mediation in an effort to resolve our dispute with Countrywide. In connection with that mediation, we have voluntarily suspended rescissions of coverage related to loans that we believe could be included in a potential resolution. As of September 30, 2012, coverage on approximately 1,700 loans, representing total potential claim payments of approximately $125 million, that we had determined was rescindable was affected by our decision to suspend such rescissions. Substantially all of these potential rescissions relate to claims received beginning in the first quarter of 2011 or later and, had we not suspended rescissions, most of these rescissions would have been processed in the first nine months of 2012. In addition, as of September 30, 2012, approximately 350 rescissions, representing total potential claim payments of approximately $23 million, were affected by our decision to suspend rescissions for customers other than Countrywide. Although the loans with suspended rescissions are included in our delinquency inventory, for purposes of determining our reserve amounts, it is assumed that coverage on these loans will be rescinded. The decision to suspend these potential rescissions does not represent the only reason for the recent decline in the percentage of claims that have been resolved through rescissions and we continue to expect that our rescissions will continue to decline. Our loss reserving methodology incorporates the effects we expect rescission activity to have on the losses we expect to pay on our delinquent inventory. Historically, the number of rescissions that we have reversed has been immaterial. A variance between ultimate actual rescission and reversal rates and these estimates, as a result of the outcome of claims investigations, litigation, settlements or other factors, could materially affect our losses. We estimate rescissions mitigated our incurred losses by approximately $2.5 billion in 2009 and $0.2 billion in 2010. In 2011 and the first nine months of 2012, 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. At September 30, 2012, we had 148,885 loans in our primary delinquency inventory; a significant portion of these loans will cure their delinquency or be rescinded and will not involve paid claims. 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. For the majority of our rescissions since the beginning of 2009 that are not subject to a settlement agreement, this period in which a dispute may be brought has not ended. 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 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 not include additional loss reserves that would reflect an adverse outcome from ongoing legal proceedings, including those with Countrywide. For more information about these legal proceedings, see Note 5 – "Litigation and Contingencies." In addition to the proceedings involving Countrywide, we are involved in legal proceedings with respect to rescissions that we do not consider to be collectively material in amount. Although it is reasonably possible that, when these discussions or proceedings 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. In 2010, we entered into a settlement agreement with a lender-customer regarding our rescission practices. In April 2011, Freddie Mac advised its servicers that they must obtain its prior approval for rescission settlements and Fannie Mae advised its servicers that they are prohibited from entering into such settlements. In addition, in April 2011, Fannie Mae notified us that we must obtain its prior approval to enter into certain settlements. We continue to discuss with other lender-customers their objections to material rescissions and have reached settlement terms with several of our significant lender-customers. 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, 2012, approximately 350 rescissions, representing total potential claim payments of approximately $23 million, were affected by our decision to suspend rescissions for customers other than Countrywide. Any definitive agreement with these customers would be subject to GSE approval under announcements they made last year. Both GSEs approved our proposed settlement agreement with one customer. We considered the terms of the proposed agreement when establishing our loss reserves at September 30, 2012. This agreement did not have a significant impact on our established loss reserves. Neither GSE has approved our other settlement agreements, which were structured in a different manner than the one that was approved by the GSEs, and the terms of these other agreements were not considered when establishing our loss reserves at September 30, 2012. We have also reached settlement agreements that do not require GSE approval, but they have not been material in the aggregate. Reclassifications Certain reclassifications have been made in the accompanying financial statements to 2011 amounts to conform to 2012 presentation. Subsequent events We have considered subsequent events through the date of this filing.

Note 1 - Basis of Presentation

MGIC Investment Corporation is a holding company which, through Mortgage Guaranty Insurance Corporation ("MGIC"), MGIC Indemnity Corporation ("MIC") and several other subsidiaries, is principally engaged in the mortgage insurance business. We provide mortgage insurance to lenders throughout the United States and to government sponsored entities ("GSEs") to protect against loss from defaults on low down payment residential mortgage loans.

The accompanying unaudited consolidated financial statements of MGIC Investment Corporation and its wholly-owned subsidiaries have been prepared in accordance with the instructions to Form 10-Q as prescribed by the Securities and Exchange Commission ("SEC") for interim reporting and do not include all of the other information and disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in our Annual Report on Form 10-K. As used below, "we," "our" and "us" refer to MGIC Investment Corporation's consolidated operations or to MGIC Investment Corporation, as the context requires.

In the opinion of management the accompanying financial statements include all adjustments, consisting primarily of normal recurring accruals, necessary to fairly state our financial position and results of operations for the periods indicated. The results of operations for the interim period may not be indicative of the results that may be expected for the year ending December 31, 2012.

Capital

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." New insurance written in the jurisdictions that have Capital Requirements represented approximately 50% of new insurance written in 2011 and the first nine months of 2012. While formulations of minimum capital vary among jurisdictions, the most common formulation allows 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.

At September 30, 2012, MGIC's preliminary risk-to-capital ratio was 31.5 to 1, exceeding the maximum allowed by many jurisdictions, and its preliminary policyholder position was $344 million below the required MPP of $1.3 billion. We expect MGIC's risk-to-capital ratio to increase and to continue to exceed 25 to 1. At September 30, 2012, the preliminary risk-to-capital ratio of our combined insurance operations (which includes reinsurance affiliates) was 34.1 to 1. A higher risk-to-capital ratio on a combined basis may indicate that, in order for MGIC or MIC 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 and MIC to write insurance with a higher coverage percentage than they could on their own under certain state-specific requirements.

Under Statement of Statutory Accounting Principles No. 101 ("SSAP No. 101"), which became effective January 1, 2012, MGIC received no benefit to statutory capital at June 30, 2012 for deferred tax assets because MGIC's risk-to-capital ratio exceeded 25 to 1 before considering those assets. The exclusion of deferred tax assets at June 30, 2012, negatively impacted our statutory capital. Under a permitted practice effective September 30, 2012 and until further notice, the Office of the Commissioner of Insurance of the State of Wisconsin ("OCI") has approved MGIC to report its net deferred tax asset as an admitted asset in an amount not to exceed 10% of surplus as regards policyholders, notwithstanding contrary provisions of SSAP No. 101. At September 30, 2012, pursuant to the permitted practice, deferred tax assets of $90 million were included in statutory capital.

Although MGIC does not meet the Capital Requirements of Wisconsin, the OCI has waived them until December 31, 2013. In place of the Capital Requirements, the OCI Order containing the waiver of Capital Requirements (the "OCI Order") provides that MGIC can write new business as long as it maintains regulatory capital that the OCI determines is reasonably in excess of a level that would constitute a financially hazardous condition. The OCI Order requires MGIC Investment Corporation, beginning January 1, 2012 and continuing through the earlier of December 31, 2013 and the termination of the OCI Order (the "Covered Period"), to make cash equity contributions to MGIC as may be necessary so that its "Liquid Assets" are at least $1 billion (this portion of the OCI Order is referred to as the "Keepwell Provision"). "Liquid Assets," which include those of MGIC as well as those held in certain of our subsidiaries, excluding MIC and its reinsurance affiliates, are the sum of (i) the aggregate cash and cash equivalents, (ii) fair market value of investments and (iii) assets held in trusts supporting the obligations of captive mortgage reinsurers to MGIC. As of September 30, 2012, "Liquid Assets" were approximately $5.1 billion. Although we do not expect that MGIC's Liquid Assets will fall below $1 billion during the Covered Period, we do expect the amount of Liquid Assets to continue to decline materially after September 30, 2012 and through the end of the Covered Period as MGIC's claim payments and other uses of cash continue to exceed cash generated from operations. For more information about factors that could negatively impact MGIC's Liquid Assets, see Note 5 – "Litigation and Contingencies" and Note 11 – "Income Taxes."

MGIC applied for waivers in the other jurisdictions with Capital Requirements and, at this time, has active waivers from eight of them, two of which allow a maximum risk-to-capital ratio that we expect to exceed in the fourth quarter of 2012. Four jurisdictions have either denied our request for waivers, have laws that do not allow for waivers or have granted waivers allowing risk-to-capital ratios that MGIC has exceeded. We are awaiting a response from three other jurisdictions, some of which may deny our request.

As part of our longstanding plan to write new business in MIC, a direct subsidiary of MGIC, and pursuant to the OCI Order, MGIC has made capital contributions to MIC, with $200 million contributed in January 2012. As of September 30, 2012, MIC had statutory capital of $443 million. In the third quarter of 2012, we began writing new mortgage insurance in MIC on the same policy terms as MGIC, in those jurisdictions where we did not have active waivers of Capital Requirements for MGIC. In the third quarter of 2012, MIC's new insurance written was $587 million, which includes business from certain jurisdictions for which new insurance is again being written in MGIC after it received the necessary waivers, but excludes business in certain jurisdictions in which we expect MIC to write new insurance in the fourth quarter of 2012, after MGIC exceeds the risk-to-capital ratio limit included in the jurisdictions' waivers. With the $443 million of statutory capital in MIC, we have the capacity to write 100% of our new insurance written in MIC for at least five years at current quality and volume levels of new insurance written if we obtained GSE approval to do so. We are currently writing new mortgage insurance in MIC in Florida, Idaho, New Jersey, New York, Ohio, Puerto Rico and Texas. MIC is licensed to write business in all jurisdictions and, subject to the conditions and restrictions discussed below, has received the necessary approvals from Fannie Mae and Freddie Mac (the "GSEs") and the OCI to write business in all of the jurisdictions that have not waived their Capital Requirements for MGIC.

Under an agreement in place with Fannie Mae, MIC will be eligible to write mortgage insurance through December 31, 2013, only in those jurisdictions (other than Wisconsin) in which MGIC cannot write new insurance due to MGIC's failure to meet Capital Requirements and to obtain a waiver of them. The agreement with Fannie Mae contains certain conditions and restrictions to its continued effectiveness including the continued effectiveness of the OCI Order and the continued applicability of the Keepwell Provision of the OCI Order.

Under a letter dated January 23, 2012, Freddie Mac approved MIC to write business only in certain jurisdictions where MGIC does not meet the Capital Requirements and does not obtain waivers of them. The January 23, 2012 approval from Freddie Mac, contains certain conditions and restrictions to its continued effectiveness, which remain in effect, including requirements that while MIC is writing new business under the Freddie Mac approval, MIC may not exceed a risk-to-capital ratio of 20:1 (at September 30, 2012, MIC's preliminary risk-to-capital ratio was 0.3 to 1), MGIC and MIC comply with all terms and conditions of the OCI Order, the OCI Order remain effective, and that MIC provide MGIC access to the capital of MIC in an amount necessary for MGIC to maintain sufficient liquidity to satisfy its obligations under insurance policies issued by MGIC. As requested by the OCI, we have notified Freddie Mac that the OCI has objected to this last requirement and others contained in the Freddie Mac approval because those requirements do not recognize the OCI's statutory authority and obligations. In this regard, see the third condition to the September 28, 2012 Freddie Mac letter referred to in the next paragraph.

Under a letter dated August 1, 2012, as amended by a letter dated September 28, 2012 (collectively, the "September Freddie Mac Letter"), Freddie Mac expanded the jurisdictions in which MIC is approved to cover all of the 15 jurisdictions besides Wisconsin that have Capital Requirements when MGIC is not able to write new business in a jurisdiction because MGIC would not meet those Requirements, after considering any waiver that may be granted. The approval in the September Freddie Mac Letter is subject to the following conditions: (1) a $100 million capital contribution to MGIC by our holding company be made on or before December 1, 2012 (the "Contribution Condition"); (2) substantial agreement to a settlement of our dispute with Freddie Mac regarding the interpretation of certain pool policies be reached on or before October 31, 2012 (such condition is the "Settlement Condition"; for more information about this dispute, see Note 5 "Litigation and Contingencies"); and (3) agreement by the OCI by December 31, 2012 that MIC's capital will be available to MGIC to support MGIC's policyholder obligations without segregation of those obligations (the "OCI Condition"). The approval in the September Freddie Mac Letter may be withdrawn at any time, ends December 31, 2013 and is also subject to compliance with the conditions and restrictions in Freddie Mac's January 23, 2012 letter.

The Settlement Condition has been met, and with the exception of drafting issues that we consider minor, MGIC and Freddie Mac have agreed on the terms and text of a definitive settlement agreement, subject to approval by the Boards of Directors of MGIC and Freddie Mac and by the FHFA. Under the settlement agreement, MGIC is to pay Freddie Mac $267.5 million in satisfaction of any further obligations under the policies in dispute, of which $100 million is to be paid upon effectiveness of the settlement and the remaining $167.5 million is to be paid in 48 equal monthly installments thereafter.

The settlement will become effective if and when the definitive settlement agreement is signed by all parties, including the FHFA. MGIC does not intend to sign the settlement agreement unless MIC is approved by Freddie Mac and Fannie Mae, for a period that MGIC and the GSEs need to agree on, to write business in jurisdictions in which MGIC cannot due to failure to meet the Capital Requirements (the "Further MIC Approvals"). If the Further MIC Approvals are obtained, and there is a satisfactory resolution of the OCI Condition (which is completely beyond our control), we are willing to satisfy the Contribution Condition and MGIC is willing to sign the settlement agreement.

While we are hopeful of making further progress regarding the settlement, there are substantial risks the settlement will not be concluded. We have not made any loss provision for a settlement and are unable to predict if and when a signed and effective settlement will be reached. Effectiveness of the settlement would negatively impact our statutory capital and materially worsen the current non-compliance with Capital Requirements. Absent a settlement, such an effect could also occur from changed circumstances that lead us to conclude a loss is probable in litigation.

If one GSE does not approve MIC in all jurisdictions that have not waived their Capital Requirements for MGIC, 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 on a nationwide basis utilizing a combination of MGIC and MIC, lenders may be unwilling to procure insurance from us anywhere. In addition, new insurance written can be influenced by a lender's assessment of the financial strength of our insurance operations and the matters in the September Freddie Mac Letter.

Insurance departments, in their sole discretion, may modify, terminate or extend their waivers of Capital Requirements. If an insurance department other than the OCI modifies or terminates its waiver, or if it fails to grant a waiver or renew its waiver after expiration, depending on the circumstances, MGIC could be prevented from writing new business in that particular jurisdiction. Also, 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 some or all of the jurisdictions in which MIC is not eligible to insure loans purchased or guaranteed by Fannie Mae or Freddie Mac. If this were to occur, we would need to seek the GSEs' approval to allow MIC to write business in those jurisdictions.

The OCI, in its sole discretion, may modify, terminate or extend its waiver, although any modification or extension of the Keepwell Provision requires our written consent. If the OCI modifies or terminates its waiver, or if it fails to renew its waiver upon expiration, depending on the circumstances, MGIC could be prevented from writing new business in all jurisdictions if MGIC does not comply with the Capital Requirements. 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 necessary waiver to allow it to once again write new business. Furthermore, if the OCI revokes or fails to renew MGIC's waiver, MIC's ability to write new business would be severely limited because the GSEs' approval of MIC is conditioned upon the continued effectiveness of the OCI Order.

We cannot assure you that the OCI or any other jurisdiction that has granted a waiver of its Capital Requirements will not modify or revoke the waiver, or will renew the waiver when it expires; that the GSEs will approve MIC to write new business in all jurisdictions in which MGIC is unable to do so; or that MGIC could obtain the additional capital necessary to comply with the Capital Requirements. At present the amount of additional capital we would need to comply with the Capital Requirements would be substantial.

For more information about factors that could negatively impact MGIC's compliance with Capital Requirements, which depending on the severity of adverse outcomes could exacerbate materially the current non-compliance with Capital Requirements, see Note 5 – "Litigation and Contingencies" and Note 11 – "Income Taxes." As discussed above, we have not accrued an estimated loss in our financial statements to reflect the satisfaction of the Settlement Condition. In addition, as discussed below, in accordance with Accounting Standards Codification ("ASC") 450-20, we have not accrued an estimated loss in our financial statements to reflect possible adverse developments in other litigation or other dispute resolution proceedings. An accrual, if required and depending on the amount, could exacerbate materially MGIC's current non-compliance with Capital Requirements. In addition to the factors listed above, our statutory capital and compliance with Capital Requirements could be negatively affected by an unfunded pension liability. An unfunded pension liability for statutory capital purposes may result from increases in pension benefit obligations due to a lower discount rate assumption or decreases to the fair value of pension plan assets due to poor asset performance, as well as changes in certain other actuarial assumptions.

Since mid-2011, two of our competitors, Republic Mortgage Insurance Company ("RMIC") and PMI Mortgage Insurance Co. ("PMI"), ceased writing new insurance commitments, were placed under the supervision of the insurance departments of their respective domiciliary states and are subject to partial claim payment plans with the remaining claim amounts deferred. (PMI's parent company subsequently filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code.) In addition, in 2008, Triad Guaranty Insurance Corporation ceased writing new business and entered into voluntary run-off. It is also subject to a partial payment plan ordered by its domiciliary state.

MGIC's failure to meet the Capital Requirements to insure new business does not necessarily mean that MGIC does not have sufficient resources to pay claims on its insurance liabilities. While we believe that MGIC has sufficient claims paying resources to meet its claim obligations on its insurance in force on a timely basis, even though it does not meet Capital Requirements, we cannot assure you that the events that led to MGIC failing 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, future housing values and future 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 that will be rescinded and the outcome of any legal proceedings or settlement discussions related to rescissions that we make, including those with Countrywide. (For more information about the Countrywide legal proceedings, see Note 5 - "Litigation and Contingencies.")

Prior to 2008, rescissions of coverage on loans for which claims have been submitted to us were not a material portion of our claims resolved during a year. However, beginning in 2008, our rescission of coverage on loans has materially mitigated our paid losses. In each of 2009 and 2010, rescissions mitigated our paid losses by approximately $1.2 billion; in 2011, rescissions mitigated our paid losses by approximately $0.6 billion; and in the first nine months of 2012, rescissions mitigated our paid losses by approximately $0.2 billion (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, 8% to 13% of claims received in a quarter have been resolved by rescissions, down from the peak of approximately 28% in the first half of 2009.

As discussed in Note 5 – "Litigation and Contingencies" we are in mediation in an effort to resolve our dispute with Countrywide. In connection with that mediation, we have voluntarily suspended rescissions of coverage related to loans that we believe could be included in a potential resolution. As of September 30, 2012, coverage on approximately 1,700 loans, representing total potential claim payments of approximately $125 million, that we had determined was rescindable was affected by our decision to suspend such rescissions. Substantially all of these potential rescissions relate to claims received beginning in the first quarter of 2011 or later and, had we not suspended rescissions, most of these rescissions would have been processed in the first nine months of 2012. In addition, as of September 30, 2012, approximately 350 rescissions, representing total potential claim payments of approximately $23 million, were affected by our decision to suspend rescissions for customers other than Countrywide. Although the loans with suspended rescissions are included in our delinquency inventory, for purposes of determining our reserve amounts, it is assumed that coverage on these loans will be rescinded. The decision to suspend these potential rescissions does not represent the only reason for the recent decline in the percentage of claims that have been resolved through rescissions and we continue to expect that our rescissions will continue to decline.

Our loss reserving methodology incorporates the effects we expect rescission activity to have on the losses we expect to pay on our delinquent inventory. Historically, the number of rescissions that we have reversed has been immaterial. A variance between ultimate actual rescission and reversal rates and these estimates, as a result of the outcome of claims investigations, litigation, settlements or other factors, could materially affect our losses. We estimate rescissions mitigated our incurred losses by approximately $2.5 billion in 2009 and $0.2 billion in 2010. In 2011 and the first nine months of 2012, 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. At September 30, 2012, we had 148,885 loans in our primary delinquency inventory; a significant portion of these loans will cure their delinquency or be rescinded and will not involve paid claims.

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. For the majority of our rescissions since the beginning of 2009 that are not subject to a settlement agreement, this period in which a dispute may be brought has not ended. 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 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 not include additional loss reserves that would reflect an adverse outcome from ongoing legal proceedings, including those with Countrywide. For more information about these legal proceedings, see Note 5 – "Litigation and Contingencies."

In addition to the proceedings involving Countrywide, we are involved in legal proceedings with respect to rescissions that we do not consider to be collectively material in amount. Although it is reasonably possible that, when these discussions or proceedings 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.

In 2010, we entered into a settlement agreement with a lender-customer regarding our rescission practices. In April 2011, Freddie Mac advised its servicers that they must obtain its prior approval for rescission settlements and Fannie Mae advised its servicers that they are prohibited from entering into such settlements. In addition, in April 2011, Fannie Mae notified us that we must obtain its prior approval to enter into certain settlements. We continue to discuss with other lender-customers their objections to material rescissions and have reached settlement terms with several of our significant lender-customers. 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, 2012, approximately 350 rescissions, representing total potential claim payments of approximately $23 million, were affected by our decision to suspend rescissions for customers other than Countrywide. Any definitive agreement with these customers would be subject to GSE approval under announcements they made last year. Both GSEs approved our proposed settlement agreement with one customer. We considered the terms of the proposed agreement when establishing our loss reserves at September 30, 2012. This agreement did not have a significant impact on our established loss reserves. Neither GSE has approved our other settlement agreements, which were structured in a different manner than the one that was approved by the GSEs, and the terms of these other agreements were not considered when establishing our loss reserves at September 30, 2012. We have also reached settlement agreements that do not require GSE approval, but they have not been material in the aggregate.

Reclassifications

Certain reclassifications have been made in the accompanying financial statements to 2011 amounts to conform to 2012 presentation.

Subsequent events

We have considered subsequent events through the date of this filing.