All Conditions to Freddie Mac Approval of MGIC Subsidiary Satisfied
PR Newswire Association LLC
MILWAUKEE, Nov. 30, 2012 /PRNewswire/ -- MGIC Investment Corporation (NYSE: MTG) announced today that on December 3, 2012 it will be transferring $100 million to its subsidiary Mortgage Guaranty Insurance CorporationMGIC Indemnity Corporation (MIC), as a limited mortgage insurer through December 31, 2013 have been satisfied. MIC is also an approved mortgage insurer for Fannie Mae.
Curt Culver, Chairman and CEO of MGIC Investment Corporation and MGIC, said "I am very pleased that the implementation of our plan, designed over three years ago, to write new business through a combination of MGIC and MIC, can continue to be implemented. I want to express my thanks to our business partners at Freddie Mac and Fannie Mae, to the FHFA, and to MGIC's principal regulator, the Wisconsin OCI, for its efforts in concluding this matter." Culver added "I appreciate the trust that our customers continue to place in MGIC for their mortgage insurance solutions and want to thank them for their business."
MGIC, Freddie Mac and the Federal Housing Finance Agency (FHFA), Freddie Mac's conservator, are entering into the previously announced agreement to settle the pool insurance dispute between MGIC and Freddie Mac/FHFA. Under that agreement, MGIC is to pay Freddie Mac a total of $267.5 million in satisfaction of all obligations under the policies at issue. Of the total, $100 million will be paid by December 11, 2012 and the remaining $167.5 million will be paid in 48 equal installments beginning on January 2, 2013. In the fourth quarter MGIC is recording a charge of $267.5 million to reflect the settlement agreement. Partially offsetting this negative effect on statutory capital is the $100 million transfer to MGIC and any realized gains on the sale of investments during the quarter.
On November 29, 2012, the Office of the Commissioner of Insurance of the State of Wisconsin (OCI) issued an order establishing a procedure for MIC to pay a dividend to MGIC if either of the following two events occurs: (1) an OCI exam determines MGIC is reasonably likely to be unable to honor its claim obligations during the five years after the exam, or (2) MGIC fails to honor its claim obligations for claims that it in good faith believes are valid. If one of these events occurs, the OCI is to conduct a review (to be completed within 60 days after the triggering event) to determine the maximum single dividend MIC could prudently pay to MGIC for the benefit of MGIC's policyholders. Upon completion of the review, the OCI will authorize MIC to pay such a dividend within 30 days.
On November 30, 2012, Freddie Mac gave conditional approval to MIC to write new business in any jurisdiction in which MGIC is unable to write new business because MGIC does not meet any specific regulatory capital requirements for mortgage insurers, after considering any waiver that may be granted, or for jurisdictions without such requirements, because of that jurisdiction's view of MGIC's financial condition. However, under the applicable Freddie Mac conditions, MIC is not eligible to write business in Wisconsin, and if MGIC cannot write business in Wisconsin, MIC is not eligible to write business in any jurisdiction.
In January 2012, Fannie Mae approved MIC through December 31, 2013 to write new business in 16 specified jurisdictions that have specific regulatory capital requirements when MGIC is unable to write new business because MGIC does not meet those capital requirements, after considering any waiver that may be granted. On November 30, 2012, Fannie Mae also conditionally approved MIC to write business in each jurisdiction without specific regulatory capital requirements if MGIC becomes unable to do so because of that jurisdiction's view of MGIC's financial condition. This approval is for 60 days from the date MGIC is prohibited from writing in the jurisdiction while Fannie Mae evaluates approving MIC in such jurisdiction for a longer period but not beyond December 31, 2013. However, under the applicable Fannie Mae conditions, MIC is not eligible to write business in Wisconsin, and if MGIC cannot write business in Wisconsin, MIC is not eligible to write business in any jurisdiction.