MGIC INVESTMENT CORPORATION

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

PARENT COMPANY ONLY

December 31, 2013 and 2012

	2013			2012
	(In thousands)
ASSETS

Fixed maturities (amortized cost, 2013 – $548,528; 2012 – $137,330)	$	539,124		$	139,019
Cash and cash equivalents		20,725			175,880
Investment in subsidiaries, at equity in net assets		1,475,956			709,946
Accounts receivable - affiliates		380			669
Income taxes receivable		17,958			17,955
Accrued investment income		3,629			1,018
Other assets		18,943			7,431
Total assets	$	2,076,715		$	1,051,918

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Senior notes	$	82,773		$	99,910
Convertible senior notes		845,000			345,000
Convertible junior debentures		389,522			379,609
Accrued interest		14,882			30,459
Total liabilities		1,332,177			854,978

Shareholders' equity
Common stock, (one dollar par value, shares authorized 1,000,000; shares issued 2013 – 340,047; 2012 – 205,047; shares outstanding 2013 – 337,758; 2012 – 202,032)		340,047			205,047
Paid-in capital		1,661,269			1,135,296
Treasury stock (shares at cost, 2013 – 2,289; 2012 – 3,015)		(64,435	)		(104,959	)
Accumulated other comprehensive loss, net of tax		(117,726	)		(48,163	)
Retained deficit		(1,074,617	)		(990,281	)
Total shareholders' equity		744,538			196,940
Total liabilities and shareholders' equity	$	2,076,715		$	1,051,918

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, 2013, 2012 and 2011

	2013			2012			2011
	(In thousands)
Revenues:
Investment income, net of expenses	$	5,033		$	6,921		$	15,693
Realized investment gains, net		830			9,895			4,724
Other income		-			17,775			27,688
Total revenues		5,863			34,591			48,105

Expenses:
Operating expenses		511			2,227			(133	)
Interest expense		79,663			99,344			103,271
Total expenses		80,174			101,571			103,138
Loss before income taxes		(74,311	)		(66,980	)		(55,033	)
Benefit from income taxes		-			-			(6,872	)
Equity in undistributed net income (loss) of subsidiaries		24,463			(860,099	)		(437,731	)
Net loss		(49,848	)		(927,079	)		(485,892	)
Other comprehensive (loss) income, net		(69,563	)		(78,287	)		7,988
Total comprehensive loss	$	(119,411	)	$	(1,005,366	)	$	(477,904	)

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, 2013, 2012 and 2011

	2013			2012			2011
	(In thousands)
Cash flows from operating activities:
Net loss	$	(49,848	)	$	(927,079	)	$	(485,892	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity in undistributed net (income) loss of subsidiaries		(24,463	)		860,099			437,731
Other		21,693			23,765			7,378
Change in certain assets and liabilities:
Accounts receivable - affiliates		289			(753	)		770
Income taxes receivable		(3	)		5,909			(2,452	)
Accrued investment income		(2,611	)		2,702			1,890
Accrued interest		(15,577	)		17,288			(2,438	)
Net cash used in operating activities		(70,520	)		(18,069	)		(43,013	)

Cash flows from investing activities:
Transactions with subsidiaries		(800,000	)		(100,000	)		(200,000	)
Purchase of fixed maturities		(563,968	)		(120,181	)		(130,503	)
Sale of fixed maturities		148,608			409,601			551,493
Net cash (used in) provided by investing activities		(1,215,360	)		189,420			220,990

Cash flows from financing activities:
Repayment of long-term debt		(17,235	)		(53,107	)		(178,721	)
Net proceeds from convertible senior notes		484,625			-			-
Common stock shares issued		663,335			-			-
Net cash provided by (used in) financing activities		1,130,725			(53,107	)		(178,721	)

Net (decrease) increase in cash and cash equivalents		(155,155	)		118,244			(744	)
Cash and cash equivalents at beginning of year		175,880			57,636			58,380
Cash and cash equivalents at end of year	$	20,725		$	175,880		$	57,636

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 in Item 8 of 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 Office of the Commissioner of Insurance of the State of Wisconsin 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 senior notes, convertible senior notes and convertible debentures, discussed in Note 8 – “Debt” to our consolidated financial statements in Item 8, are obligations of MGIC Investment Corporation, our holding company, and not of its subsidiaries. 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. In 2014, MGIC cannot pay any dividends to our holding company without approval from the OCI.

In the fourth quarter of 2008, we suspended the payment of dividends to shareholders.