<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-39890
PROSPECTUS SUPPLEMENT
OCTOBER 17, 2000
(TO PROSPECTUS DATED SEPTEMBER 27, 2000)
$200,000,000
MGIC INVESTMENT CORPORATION
7 1/2% SENIOR NOTES DUE 2005
------------------------------------
MGIC INVESTMENT CORPORATION
- We are a holding company and, through our subsidiary Mortgage Guaranty
Insurance Corporation, we are the leading provider of private mortgage
insurance coverage in the United States to the home mortgage lending industry.
- MGIC Investment Corporation
MGIC Plaza
250 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
(414) 347-6480
THE OFFERING
- Use of Proceeds: We intend to use the net proceeds from the sale of the notes
to repay indebtedness outstanding under our credit facilities and for other
general corporate purposes.
- Delivery: The notes will be ready for delivery in book-entry form only through
The Depository Trust Company on or about October 20, 2000.
THE NOTES
- Maturity: October 15, 2005.
- Interest Payments: Semi-annually on April 15 and October 15 of each year,
commencing April 15, 2001.
- Redemption: We can redeem some or all of the notes at our option on at least
30 days' notice at the redemption prices described under the heading
"Description of Notes -- Optional Redemption."
- Ranking of Notes: The notes will rank equally with all of our other existing
and future unsecured and unsubordinated indebtedness, junior to any of our
secured indebtedness to the extent of the security for that indebtedness and
senior to any of our subordinated indebtedness. All of our operating assets
are in our subsidiaries and, therefore, the notes will be effectively
subordinated to all indebtedness of those subsidiaries.
- Trading: The notes will not be listed on any securities exchange or included
in any automated quotation system.
BEFORE MAKING ANY INVESTMENT IN THE NOTES, YOU SHOULD CAREFULLY CONSIDER
THE RISKS THAT ARE DESCRIBED IN THE "RISK FACTORS" SECTION OF THE ACCOMPANYING
PROSPECTUS BEGINNING ON PAGE 4.
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<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ------------
<S> <C> <C>
Public offering price (1)................................... 99.609% $199,218,000
Underwriting discount....................................... 0.600% $ 1,200,000
Proceeds to us before expenses.............................. 99.009% $198,018,000
</TABLE>
------------
(1) Plus accrued interest from October 20, 2000, if settlement occurs after that
date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
------------------------------------
BANC OF AMERICA SECURITIES LLC
LEHMAN BROTHERS
BANC ONE CAPITAL MARKETS, INC.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN
RAUSCHER INCORPORATED
ROBERT W. BAIRD & CO.
<PAGE> 2
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MGIC Investment Corporation................................. S-3
Use of Proceeds............................................. S-6
Capitalization.............................................. S-7
Selected Consolidated Financial Information................. S-8
Description of Notes........................................ S-9
Underwriting................................................ S-13
PROSPECTUS
MGIC Investment Corporation................................. 2
Use of Proceeds............................................. 3
Ratios of Earnings to Fixed Charges......................... 3
Risk Factors................................................ 4
Description of Debt Securities.............................. 7
Plan of Distribution........................................ 15
Where You Can Find More Information......................... 17
Legal Matters............................................... 17
Experts..................................................... 18
</TABLE>
------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION OR TO MAKE ANY
ADDITIONAL REPRESENTATIONS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE RESPECTIVE DATES OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS.
S-2
<PAGE> 3
MGIC INVESTMENT CORPORATION
Our Mortgage Guaranty Insurance Corporation subsidiary, also referred to as
MGIC, is the leading provider of private mortgage insurance coverage in the
United States. Private mortgage insurance covers residential first mortgage
loans and expands home ownership opportunities by enabling people to purchase
homes with less than 20% down payments. Loans with down payments of less than
20% are referred to as low down payment mortgage loans. If the home owner
defaults, private mortgage insurance reduces and, in some instances, eliminates
the loss to the insured institution.
Private mortgage insurance also facilitates the sale of low down payment
mortgage loans in the secondary mortgage market, principally to Fannie Mae and
Freddie Mac. Fannie Mae and Freddie Mac are government sponsored enterprises
chartered to increase liquidity in the secondary mortgage market. In addition to
mortgage insurance on first liens, we insure residential second mortgages and
provide lenders with various underwriting and other services and products
related to home mortgage lending through other subsidiaries.
MGIC is licensed to write insurance in all 50 states, the District of
Columbia and Puerto Rico. MGIC has written mortgage insurance since 1985. One of
our subsidiaries founded the modern private mortgage insurance industry in 1957
and wrote mortgage insurance until 1985. The insurance written by MGIC beginning
in 1985 is called the MGIC Book in this prospectus supplement. Our headquarters
are located at MGIC Plaza, 250 East Kilbourn Avenue, Milwaukee, Wisconsin.
Our business is subject to various risks, including those described under
"Risk Factors" in the accompanying prospectus.
PRIVATE MORTGAGE INSURANCE
There are two principal types of private mortgage insurance: "primary" and
"pool."
PRIMARY INSURANCE
Primary insurance generally applies to first mortgage loans on owner
occupied, single-family homes. A single-family home is a one-to-four family
home, including a condominium. Primary insurance provides mortgage default
protection on individual loans and covers unpaid loan principal, delinquent
interest and specified expenses associated with the default and subsequent
foreclosure. The total of the unpaid principal, interest and expenses is called
the claim amount. The insurer generally pays the coverage percentage of the
claim amount specified in the primary policy, but has the option to pay 100% of
the claim amount and acquire title to the property. The claim amount averages
about 115% of the unpaid principal balance of the loan.
MGIC provides primary insurance on prime quality mortgage loans, as well as
subprime mortgage loans. In general, subprime loans do not meet the standard
underwriting guidelines of Fannie Mae and Freddie Mac for prime mortgages due to
credit quality, documentation or other factors.
The lender determines the coverage percentage to be provided for any
specified mortgage loan. For loans lenders sell to Fannie Mae or Freddie Mac,
the coverage percentage must comply with the requirements established by the
particular government sponsored enterprise to which the loan is delivered.
MGIC's premium rates vary with the coverage percentage and also vary with
the perceived risk of a claim on the insured loan. As a result, the rates take
into account the loan-to-value ratio, whether the loan has fixed or adjustable
payments, and the term of the loan. For subprime loans, the premium also varies
with the borrower's credit score within specified ranges. Premium rates cannot
be changed after the issuance of coverage. Because we believe that over the long
term each region of the United States is subject to similar factors affecting
risk of loss, MGIC generally uses a national, rather than a regional or local,
premium rate policy.
At June 30, 2000 and December 31, 1999, MGIC Book direct insurance in force
was $151.9 billion and $147.6 billion, respectively, and direct primary risk in
force was $36.9 billion and $35.6 billion, respectively.
S-3
<PAGE> 4
The insurance in force is the principal amount of the mortgages at the time they
became insured. The risk in force is the principal amount of the mortgages at
the time they became insured multiplied by the coverage percentages of the
mortgages. Direct means before giving effect to any reinsurance.
POOL INSURANCE
Pool insurance is generally used as an additional credit enhancement for
some secondary market single-family mortgage transactions in which multiple
loans are pooled for resale or securitization. Pool insurance generally covers
the loss on a defaulted mortgage loan that exceeds the primary insurance
coverage, if primary insurance is required on that mortgage loan, as well as the
total loss on a defaulted mortgage loan that did not require primary insurance.
In each case, the pool insurance provides coverage only to a stated aggregate
loss limit. The aggregate loss limit on agency pool insurance, which is
discussed below, generally does not exceed 1% of the aggregate original
principal balance of the mortgage loans in the pool. Beginning in 1997, almost
all of the pool insurance written by MGIC has generally covered fixed-rate,
30-year, single-family mortgage loans delivered to Freddie Mac or Fannie Mae.
This type of pool insurance is called agency pool insurance.
At June 30, 2000 and December 31, 1999, MGIC Book direct pool risk in
force, which also includes other types of pool insurance, was $1.7 billion and
$1.6 billion, respectively. The risk in force is the principal amount of the
mortgages in the pool multiplied by the aggregate loss limit.
GEOGRAPHIC DISPERSION
The following table reflects the percentage of primary risk in force in the
top 10 states and top 10 metropolitan statistical areas, or MSAs, for the MGIC
Book at December 31, 1999.
DISPERSION OF PRIMARY RISK IN FORCE
<TABLE>
<CAPTION>
TOP 10 STATES
-------------
<S> <C> <C>
1. California.................. 10.9%
2. Texas....................... 6.6
3. Illinois.................... 5.4
4. Michigan.................... 5.4
5. Florida..................... 5.2
6. Ohio........................ 4.6
7. New York.................... 4.4
8. Pennsylvania................ 4.3
9. Georgia..................... 3.3
10. New Jersey.................. 3.2
----
Total....................... 53.3%
====
<CAPTION>
TOP 10 MSAS
-----------
<S> <C> <C>
1. Chicago..................... 4.1%
2. Los Angeles................. 3.0
3. Boston...................... 2.9
4. Washington, DC.............. 2.9
5. Atlanta..................... 2.6
6. Philadelphia................ 2.1
7. Detroit..................... 2.1
8. Houston..................... 1.7
9. Phoenix..................... 1.7
10. Dallas...................... 1.6
----
Total....................... 24.7%
====
</TABLE>
CUSTOMERS
Originators of residential mortgage loans, for example, mortgage bankers,
savings institutions, commercial banks and mortgage brokers, have historically
determined the placement of mortgage insurance. To obtain primary insurance from
MGIC, a mortgage lender must first apply for and receive a mortgage guaranty
master policy from MGIC. MGIC had approximately 11,000 master policyholders at
December 31, 1999. This figure does not include policies issued to branches and
affiliates of large lenders. In 1999, MGIC issued coverage on mortgage loans for
approximately 4,500 of its master policyholders. MGIC's top 10 customers
generated 32.5% of its new insurance written in 1999. The top ten customers
generated 33.7% of new insurance written in 1998 and 27.0% in 1997. New
insurance written is the principal balance of loans insured during a period.
S-4
<PAGE> 5
SALES AND MARKETING
MGIC sells mortgage insurance through its own employees, located throughout
the United States. At June 30, 2000, MGIC had 27 underwriting service centers
located in 19 states and Puerto Rico.
COMPETITION
The private mortgage insurance industry consists of eight active mortgage
insurers. Beginning in 1995, MGIC has been the largest private mortgage insurer
based on new primary insurance written. According to the trade association for
the private mortgage insurance industry, MGIC's market share, measured on this
basis, was 24.0% in the first half of 2000 and was 24.3% in 1999, 23.1% in 1998
and 26.6% in 1997.
MGIC and other private mortgage insurers also compete directly with federal
and state governmental and quasi-governmental agencies, principally the Federal
Housing Administration and, to a lesser degree, the Veterans Administration.
These federal agencies sponsor government-backed mortgage insurance programs,
which during 1999 accounted for approximately 48%, compared to approximately 44%
during 1998, of the total low down payment residential mortgages which were
subject to governmental or private mortgage insurance.
DEFAULTS AND CLAIMS
A variety of factors, including the level of borrower income, unemployment,
divorce, illness, the level of interest rates and general borrower
creditworthiness, affect the incidence of default. Borrowers may cure defaults
by making loan payments necessary to bring their account current or by a sale of
the property and the satisfaction of all amounts due under the mortgage.
DEFAULT STATISTICS FOR THE MGIC BOOK
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Primary Insurance
Insured loans in
force.............. 1,396,543 1,321,866 1,370,020 1,320,994 1,342,976 1,299,038 1,219,304
Loans in default...... 28,120 25,573 29,761 29,253 28,493 25,034 19,980
Percentage of loans in
default............ 2.01% 1.93% 2.17% 2.21% 2.12% 1.93% 1.64%
Pool Insurance
Insured loans in
force.............. 1,279,217 1,063,685 1,181,512 899,063 374,378 19,123 20,427
Loans in default...... 13,250 8,015 11,638 6,524 2,174 855 1,053
Percentage of loans in
default............ 1.04% 0.75% 0.99% 0.73% 0.58% 4.47% 5.15%
</TABLE>
Claims result from defaults that are not cured. Whether a claim results
from an uncured default principally depends on the borrower's equity in the home
at the time of default and the borrower's or the lender's ability to sell the
home for an amount sufficient to satisfy all amounts due under the mortgage.
Various factors, including local housing prices and employment levels, and
interest rates, also affect claims.
Claim activity is not evenly spread throughout the coverage period of a
book of primary business. Relatively few claims are received during the first
two years following issuance of coverage on a loan. This is followed by a period
of rising claims, which, based on industry experience, has historically reached
its highest level in the third through fifth years after the year of loan
origination. Thereafter, the number of claims received has historically declined
at a gradual rate, although conditions in the economy, including lower housing
price appreciation, can also affect the rate of decline. This historical pattern
of claims could change in the future. Also, the pattern of claims frequency for
a new loan resulting from a refinancing may be different from the historical
pattern.
S-5
<PAGE> 6
LOSS RESERVES
A significant period of time may elapse between the occurrence of the
borrower's default on a mortgage payment, the reporting of the default to MGIC
and the eventual payment of the claim related to the default if it is not cured.
The number of outstanding reported defaults is known as the default inventory.
To recognize the liability for unpaid losses related to the default inventory,
we establish loss reserves, representing the estimated percentage of defaults
which will ultimately result in a claim and the estimated severity of each claim
that will arise from the defaults included in the default inventory. We also
establish reserves to provide for the estimated costs of settling claims,
including legal and other fees, and the general expenses of administering the
claims settlement process. We also establish reserves to provide for defaults
that have occurred, but that have not yet been reported to us. In accordance
with industry accounting practices, we do not establish loss reserves for future
claims on insured loans that are not currently in default.
Our process for establishing reserves is based upon the assumption that
past experience, adjusted for the anticipated effect of current economic
conditions and projected future economic trends, provides a reasonable basis for
estimating future events. However, estimating loss reserves is a difficult
process, involving a high degree of judgment. In addition, economic conditions
that have affected the development of the loss reserves in the past may not
necessarily affect development patterns in the future, in either a similar
manner or degree.
INVESTMENT PORTFOLIO
Our current investment policies emphasize preservation of capital, as well
as total return. About 99% of our investment portfolio consists of fixed-income
investments. At December 31, 1999, based on amortized cost, about 98.8% of our
total fixed-income investment portfolio was invested in securities rated "A" or
better, with 64.6% rated "AAA" and 26.2% rated "AA," in each case by at least
one nationally recognized securities rating organization.
At December 31, 1999, consolidated book value, which is equal to market
value of our investment portfolio, was approximately $2.8 billion. At December
31, 1999, municipal securities represented 77% of the book value of the total
investment portfolio. Securities due within one year, within one to five years,
within five to ten years and after ten years, represented 4.2%, 16.7%, 31.8% and
47.3%, respectively, of the total book value of our fixed-income investments at
December 31, 1999.
RECENT DEVELOPMENTS
On October 10, 2000, we reported net income for the quarter ended September
30, 2000, of $146.4 million, an increase of 19% over the $122.9 million in net
income we reported for the third quarter of 1999. New insurance written for the
third quarter of 2000 was $12.7 billion, compared to $13.1 billion in the third
quarter of 1999. New insurance written in the third quarter of 2000 included
$2.6 billion from a one-time transaction.
For the first nine months of 2000, our net income was $409.7 million, as
compared to $336.3 million last year, an increase of 22%.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the offering of
approximately $197,600,000. We expect to use the net proceeds to repay
approximately $197,600,000 aggregate principal amount of indebtedness under our
1997 and 1998 credit facilities, which mature in June 2002 and June 2003,
respectively, and at June 30, 2000 had a weighted-average annual interest rate
of 6.49%. To the extent we do not use the net proceeds for repayment of notes
payable under our credit facilities, we will use the net proceeds for general
corporate purposes.
S-6
<PAGE> 7
CAPITALIZATION
The following table sets forth our unaudited consolidated short-term debt
and capitalization as of June 30, 2000 and as adjusted for the offering of the
notes and the use of the estimated net proceeds to repay indebtedness under our
credit facilities. You should read this table in conjunction with our unaudited
consolidated financial statements and the related notes contained in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Short-term debt............................................. $ -- $ --
========== ==========
Long-term debt
Notes payable under 1997 credit facility.................. $ 175,000 $ --
Notes payable under 1998 credit facility.................. 200,000 177,400
Notes payable under 1999 credit facility.................. 45,000 45,000
Notes offered hereby...................................... -- 200,000
---------- ----------
Total long-term debt................................... 420,000 422,400
Shareholders' equity:
Common Stock, $1 par value, 300,000,000 shares authorized;
121,110,800 shares issued; 106,085,818 shares
outstanding............................................ 121,111 121,111
Paid-in surplus........................................... 206,840 206,840
Treasury stock (shares at cost, 15,024,982)............... (653,204) (653,204)
Accumulated other comprehensive income --
unrealized depreciation in investments, net of tax..... (10,522) (10,522)
Retained earnings......................................... 2,407,760 2,407,760
---------- ----------
Total shareholder's equity............................. 2,071,985 2,071,985
---------- ----------
Total capitalization...................................... $2,491,985 $2,494,385
========== ==========
</TABLE>
S-7
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information for each of the years in
the five-year period ended December 31, 1999 has been derived from our audited
consolidated financial statements. The selected consolidated financial
information for the six months ended June 30, 2000 and 1999 has been derived
from our unaudited consolidated financial statements, and include, in our
opinion, all adjustments, which are normal and recurring accruals in nature,
necessary for a fair presentation of the financial information. You should read
the following information in conjunction with the information set forth under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements, including the
related notes, incorporated by reference in this prospectus supplement and the
accompanying prospectus. See "Where You Can Find More Information" in the
accompanying prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues:
Net premiums written....... $ 420,134 $ 380,385 $ 792,345 $ 749,161 $ 690,248 $ 588,927 $ 480,312
========== ========== ========== ========== ========== ========== ==========
Net premiums earned........ $ 428,538 $ 388,747 $ 792,581 $ 763,284 $ 708,744 $ 617,043 $ 506,500
Investment income, net..... 83,340 75,542 153,071 143,019 123,602 105,355 87,543
Realized investment gains,
net...................... 163 3,353 3,406 18,288 3,261 1,220 1,496
Other revenue.............. 23,296 28,956 47,697 47,075 32,665 22,013 22,347
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues........... 535,337 496,598 996,755 971,666 868,272 745,631 617,886
---------- ---------- ---------- ---------- ---------- ---------- ----------
Losses and expenses:
Losses incurred, net....... 45,155 75,173 97,196 211,354 242,362 234,350 189,982
Underwriting and other
expenses................. 93,206 104,256 198,147 187,103 154,138 142,460 132,674
Interest expense........... 13,673 10,042 20,402 18,624 6,399 3,793 3,821
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total losses and
expenses............... 152,034 189,471 315,745 417,081 402,899 380,603 326,477
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before tax............ 383,303 307,127 681,010 554,585 465,373 365,028 291,409
Provision for income tax..... 119,980 93,775 210,809 169,120 141,623 107,037 83,844
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................... $ 263,323 $ 213,352 $ 470,201 $ 385,465 $ 323,750 $ 257,991 $ 207,565
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA
Total investments............ $3,060,969 $2,823,430 $2,789,734 $2,779,706 $2,416,740 $2,036,234 $1,687,221
Total assets................. 3,397,294 3,118,336 3,104,393 3,050,541 2,617,687 2,222,315 1,874,719
Loss reserves................ 625,655 686,634 641,978 681,274 598,683 514,042 371,032
Notes payable................ 420,000 417,000 425,000 442,000 237,500 -- 35,799
Shareholders' equity......... 2,071,985 1,775,641 1,775,989 1,640,591 1,486,782 1,366,115 1,121,392
INSURANCE OPERATING RATIOS
(GAAP)
Loss ratio................... 10.5% 19.3% 12.3% 27.7% 34.2% 38.0% 37.5%
Expense ratio................ 18.7% 21.6% 19.7% 19.6% 18.4% 21.6% 24.6%
---------- ---------- ---------- ---------- ---------- ---------- ----------
Combined ratio............... 29.2% 40.9% 32.0% 47.3% 52.6% 59.6% 62.1%
========== ========== ========== ========== ========== ========== ==========
RISK-TO-CAPITAL RATIOS
(STATUTORY)
Combined insurance
subsidiaries............... 11.9:1 12.8:1 12.9:1 13.6:1 16.4:1 18.8:1 19.9:1
MGIC......................... 11.1:1 11.9:1 11.9:1 12.9:1 15.7:1 18.1:1 19.1:1
</TABLE>
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<PAGE> 9
DESCRIPTION OF NOTES
We have summarized provisions of the notes below. This summary supplements
and, to the extent inconsistent with, replaces the description of the general
terms and provisions of the debt securities under the caption "Description of
Debt Securities" in the accompanying prospectus.
GENERAL
We will issue the notes as a separate series of securities under an
indenture between us and Bank One Trust Company, National Association, as
trustee. This indenture is described in the accompanying prospectus.
We are initially offering the notes in the principal amount of
$200,000,000. We may, without the consent of the holders, issue additional notes
and thereby increase that principal amount in the future, on the same terms and
conditions and with the same CUSIP number as the notes we offer by this
prospectus supplement.
The notes will mature on October 15, 2005 and will bear interest at a rate
of 7 1/2% per annum. Interest on the notes will accrue from October 20, 2000, or
from the most recent interest payment date to which interest has been paid or
duly provided for. We:
- will pay interest on the notes semi-annually on April 15 and October 15
of each year, commencing April 15, 2001;
- will pay interest to the person in whose name a note is registered at the
close of business on the April 1 or October 1 preceding the interest
payment date;
- will compute interest on the basis of a 360-day year consisting of twelve
30-day months;
- will make payments on the notes at the offices of the trustee; and
- may make payments by wire transfer for notes held in book-entry form or
by check mailed to the address of the person entitled to the payment as
it appears in the notes register.
If any interest payment date or maturity or redemption date falls on a day
that is not a business day, then the payment will be made on the next business
day without additional interest and with the same effect as if it were made on
the originally scheduled date. "Business day" means any day other than a
Saturday, Sunday or other day on which banking institutions in The City of New
York are authorized or required to close.
We will issue the notes only in fully registered form, without coupons, in
denominations of $1,000 and multiples of $1,000. The notes will not have the
benefit of any sinking fund.
OPTIONAL REDEMPTION
We may redeem the notes at any time in whole or from time to time in part
at a redemption price equal to the sum of 100% of the principal amount of the
notes being redeemed, accrued interest on the notes to the redemption date and
the make-whole amount, if any, with respect to these notes. We will, however,
pay the interest installment due on the interest payment date which occurs on or
before any redemption date to those holders of the notes who were registered
holders as of the close of business on the record date immediately preceding
such interest payment date.
We will give notice of any redemption of any notes to holders of the notes
to be redeemed at their addresses, as shown in the security register for the
notes, not more than 60 nor less than 30 days prior to the date fixed for
redemption. The notice of redemption will specify, among other items, the
redemption price and the aggregate principal amount of the notes to be redeemed.
If less than all of the outstanding notes are to be redeemed, then the
trustee will select the notes to be redeemed in principal amounts of $1,000 or
integral multiples of $1,000 by lot, pro rata or by another method the trustee
considers fair and appropriate.
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<PAGE> 10
"Make-whole amount" means, in connection with any optional redemption, the
excess, if any, of:
- the aggregate present value as of the date of the redemption of each
dollar of principal being redeemed and the amount of interest, exclusive
of interest accrued to the date of the redemption, that would have been
payable in respect of each such dollar if the redemption had not been
made, determined by discounting, on a semi-annual basis, such principal
and interest at the reinvestment rate, as determined on the third
business day preceding the date the notice of redemption is given, from
the respective dates on which such principal and interest would have been
payable if the redemption had not been made to the date of redemption,
over
- the aggregate principal amount of the notes being redeemed.
"Reinvestment rate" means .300% plus the arithmetic mean of the yields
under the heading "Week Ending" published in the most recent statistical release
under the caption "Treasury Constant Maturities" for the maturity, rounded to
the nearest month, corresponding to the remaining life to maturity, as of the
payment date of the principal amount of the notes being redeemed. If no maturity
exactly corresponds to such maturity, then yields for the two published
maturities most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the reinvestment rate will be
interpolated or extrapolated from these yields on a straight-line basis,
rounding in each of the relevant periods to the nearest month. For the purposes
of calculating the reinvestment rate, the most recent statistical release
published prior to the date of determination of the make-whole amount will be
used. If the format or content of the statistical release changes in a manner
that precludes determination of the Treasury yield in the above manner, then the
Treasury yield will be determined in the manner that most closely approximates
the above manner, as reasonably determined by us.
"Statistical release" means the statistical release designated "H.15(519)"
or any successor publication that is published weekly by the Federal Reserve
System and that reports yields on actively traded United States government
securities adjusted to constant maturities, or, if this statistical release is
not published at the time of any required determination under the indenture,
then another reasonably comparable index, which will be designated by us.
RANKING
The notes will be our senior unsecured obligations and will rank equally in
right of payment with all of our other unsecured and unsubordinated
indebtedness. Indebtedness or debt means our obligations for money that we
borrowed. As of June 30, 2000, giving effect to repayment of indebtedness under
our 1997 and 1998 credit facilities described under "Use of Proceeds," we had
$222.4 million of indebtedness outstanding at the holding company level that
would have ranked equally in right of payment with the notes.
The indenture does not limit the amount of debt that we or our subsidiaries
may incur. However, the indenture does restrict our ability and our
subsidiaries' ability to incur secured debt. See "Description of Debt
Securities -- Certain Restrictions -- Limitations on Liens on Stock of
Designated Subsidiaries" in the accompanying prospectus. "Subsidiaries" is used
in this section as it is defined in the indenture and means an entity of which
more than 50% of the interests entitled to vote in the election of directors or
managers is owned by any combination of us and our subsidiaries.
In addition, we conduct our operations through subsidiaries, which generate
a substantial portion of our operating income and cash flow. As a result,
distributions or advances from our subsidiaries are a major source of funds
necessary to meet our debt service and other obligations. Contractual
provisions, insurance and other laws and regulations, as well as our
subsidiaries' financial condition and operating requirements, may limit our
ability to obtain the cash required to pay our obligations, including payments
on the notes. The notes will be effectively subordinated to the obligations of
our subsidiaries, including claims with respect to trade payables. This means
that holders of the notes will have a junior position to the claims of creditors
of our subsidiaries on their assets and earnings. As of June 30, 2000, our
subsidiaries had no indebtedness outstanding, although one of our subsidiaries
was guaranteeing 50% of a $50 million credit facility for a joint venture of
ours that is not a subsidiary.
S-10
<PAGE> 11
NOTICES
We will mail notices and communications to a holder's address as shown on
the notes register.
PAYING AGENTS AND TRANSFER AGENTS
The trustee will be the paying agent and transfer agent for the notes.
THE TRUSTEE
Bank One Trust Company, National Association is the trustee under the
indenture. We and our subsidiaries maintain banking relationships in the
ordinary course of business with affiliates of the trustee. An affiliate of the
trustee is a customer of our Mortgage Guaranty Insurance Corporation subsidiary.
In addition, an affiliate of the trustee is also one of the underwriters for the
notes.
BOOK-ENTRY DELIVERY AND SETTLEMENT
We will issue the notes in the form of one or more permanent global notes
in definitive, fully registered form. The global securities will be deposited
with or on behalf of The Depository Trust Company, referred to as DTC, and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the trustee in accordance with the FAST Balance Certificate Agreement
between DTC and the trustee.
DTC has advised us that:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934;
- DTC holds securities that its direct participants deposit with DTC and
facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in direct
participants' accounts, thereby eliminating the need for physical
movement of securities certificates;
- Direct participants include securities brokers and dealers, trust
companies, clearing corporations and other organizations;
- DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc.;
- Access to the DTC system is also available to indirect participants such
as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct participant,
either directly or indirectly; and
- The rules applicable to DTC and its direct and indirect participants are
on file with the SEC.
We have provided the following descriptions of the operations and
procedures of DTC solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by
them from time to time. Neither we, the underwriters nor the trustee take any
responsibility for these operations or procedures, and you are urged to contact
DTC or its participants directly to discuss these matters.
We expect that under procedures established by DTC:
- Upon deposit of the global securities with DTC or its custodian, DTC will
credit on its internal system the accounts of direct participants
designated by the underwriters with portions of the principal amounts of
the global securities; and
- Ownership of the notes will be shown on, and the transfer of ownership of
the notes will be effected only through, records maintained by DTC or its
nominee, with respect to interests of direct
S-11
<PAGE> 12
participants, and the records of direct and indirect participants, with
respect to interests of persons other than participants.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of those securities in the form of a certificate. For that
reason, it may not be possible to transfer interests in a global security to
those persons. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in a global security to
pledge or transfer that interest to persons or entities that do not participate
in DTC's system, or otherwise to take actions in respect of that interest, may
be affected by the lack of a physical definitive security in respect of that
interest.
So long as DTC or its nominee is the registered owner of a global security,
DTC or that nominee will be considered the sole owner or holder of the notes
represented by that global security for all purposes under the indenture and
under the notes. Except as described below, owners of beneficial interests in a
global security will not be entitled to have notes represented by that global
security registered in their names, will not receive or be entitled to receive
the notes in the form of a physical certificate and will not be considered the
owners or holders of the notes under the indenture or under the notes, and may
not be entitled to give the trustee directions, instructions or approvals. For
that reason, each holder owning a beneficial interest in a global security must
rely on DTC's procedures and, if that holder is not a direct or indirect
participant in DTC, on the procedures of the DTC participant through which that
holder owns its interest, to exercise any rights of a holder of notes under the
indenture or the global security.
Neither we nor the trustee will have any responsibility or liability for
any aspect of DTC's records relating to the notes or relating to payments made
by DTC on account of the notes, or any responsibility to maintain, supervise or
review any of DTC's records relating to the notes.
We will make payments on the notes represented by the global securities to
DTC or its nominee, as the registered owner of the notes. We expect that when
DTC or its nominee receives any payment on the notes represented by a global
security, DTC will credit participants' accounts with payments in amounts
proportionate to their beneficial interests in the global security as shown in
DTC's records. We also expect that payments by DTC's participants to owners of
beneficial interests in the global security held through those participants will
be governed by standing instructions and customary practice as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. DTC's participants will be responsible for those
payments.
Payments on the notes represented by the global securities will be made in
immediately available funds. Transfers between participants in DTC will be made
in accordance with DTC rules and will be settled in immediately available funds.
CERTIFICATED NOTES
We will issue certificated notes to each person that DTC identifies as the
beneficial owner of notes represented by the global securities upon surrender by
DTC of the global securities only if:
- DTC notifies us that it is no longer willing or able to act as a
depository for the global securities, and we have not appointed a
successor depository within 90 days of that notice;
- An event of default has occurred and is continuing; or
- We decide not to have the notes represented by a global security.
Neither we nor the trustee will be liable for any delay by DTC, its nominee
or any direct or indirect participant in identifying the beneficial owners of
the related notes. We and the trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee, including
instructions about the registration and delivery, and the respective principal
amounts, of the notes to be issued.
S-12
<PAGE> 13
UNDERWRITING
We are selling the notes to the underwriters named below under an
underwriting agreement among us and the underwriters named below. The
underwriters and the principal amount of notes each of them has severally agreed
to purchase from us are as follows:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Banc of America Securities LLC.............................. $120,000,000
Lehman Brothers Inc. ....................................... 50,000,000
Banc One Capital Markets, Inc. ............................. 20,000,000
Dain Rauscher Wessels a division of Dain Rauscher
Incorporated.............................................. 5,000,000
Robert W. Baird & Co. Incorporated.......................... 5,000,000
------------
Total.................................................. $200,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to conditions precedent and that when these conditions
are satisfied the underwriters will be obligated to purchase all of the notes.
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any national securities
exchange. We have been advised by the underwriters that they intend to make a
market in the notes, but they are not obligated to do so and may discontinue
market making at any time without notice. We can give no assurance as to the
liquidity of, or any trading market for, the notes.
The underwriters initially propose to offer the notes to the public at the
public offering price set forth on the cover of this prospectus supplement and
to some dealers at a price that represents a concession not in excess of .350%
of the principal amount of the notes. Any underwriter may allow, and any of
these dealers may reallow, a concession not in excess of .275% of the principal
amount of the notes to some other dealers. After the initial offering of the
notes, the underwriters may, from time to time, vary the offering price and the
selling terms.
We have agreed to indemnify the several underwriters against, or contribute
to payments that the underwriters may be required to make in respect of, some
liabilities, including liabilities under the Securities Act of 1933.
We estimate that we will spend approximately $418,000 for expenses of the
offering.
In connection with the offering of the notes, the underwriters may engage
in transactions that stabilize, maintain or otherwise affect the price of the
notes. Specifically, the underwriters may overallot in connection with the
offering of the notes, creating a syndicate short position. In addition, the
underwriters may bid for, and purchase, the notes in the open market to cover
short positions or to stabilize the price of the notes. Finally, the
underwriters may reclaim selling concessions allowed for distributing the notes
in the offering, if the underwriters repurchase previously distributed notes in
transactions to cover short positions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market prices
of the notes above independent market levels. The underwriters are not required
to engage in any of these activities at any time.
In the ordinary course of their respective businesses, some of the
underwriters and/or their affiliates have engaged, and expect in the future to
engage, in investment banking, commercial banking, financial advisory and/or
general financing transactions with us, for which they have received, and may in
the future receive, customary fees and commissions for these services. Bank One
Trust Company, National Association is the trustee under the indenture for the
notes. An affiliate of the trustee is a customer of our Mortgage Guaranty
Insurance Corporation subsidiary. In addition, an affiliate of the trustee is
also one of the underwriters for the notes. The Northwestern Mutual Life
Insurance Company, which has two representatives on our board of directors and
as of September 30, 2000 beneficially owned 9.8% of our common stock, owns
approximately
S-13
<PAGE> 14
80% of the outstanding capital stock of Baird Financial Corporation, which is
the parent of Robert W. Baird & Co. Incorporated. Affiliates of Banc of America
Securities LLC and Banc One Capital Markets, Inc. are lenders under our credit
facilities, and each will receive its proportionate share of the net proceeds of
the offering used to repay a portion of the outstanding balance under the credit
facilities. Because the amount to be repaid to these affiliates will exceed 10%
of the net proceeds from the sale of the notes and because of the relationship
with Robert W. Baird & Co. Incorporated, this offering is being conducted in
compliance with the provisions of Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers, Inc.
S-14
<PAGE> 15
PROSPECTUS
$500,000,000
MGIC INVESTMENT CORPORATION
SENIOR DEBT SECURITIES
------------------------
We may offer our senior debt securities from time to time. We will provide
the specific terms of these securities in supplements to this prospectus. We may
also describe in the supplements the manner in which the senior debt securities
will be offered. You should read this prospectus and any supplement carefully
before you invest.
The senior debt securities are a new issue of securities. Unless we
otherwise specify in a prospectus supplement, we will not list the senior debt
securities on any securities exchange and we will not establish a trading market
for the senior debt securities.
THE RISKS DISCUSSED IN THE "RISK FACTORS" SECTION OF THIS PROSPECTUS AT
PAGE 4 MAY MATERIALLY AFFECT OUR REVENUES, LOSSES AND EXPENSES. WE MAY UPDATE
THESE RISKS UNDER THE "RISK FACTORS" SECTION IN OUR LATEST QUARTERLY REPORT ON
FORM 10-Q OR ANNUAL REPORT ON FORM 10-K. We incorporate these reports by
reference in this prospectus and they are available for your review as described
in the "Where You Can Find More Information" section of this prospectus.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is September 27, 2000.
<PAGE> 16
MGIC INVESTMENT CORPORATION
MGIC Investment Corporation is a holding company which, through our wholly
owned subsidiary, Mortgage Guaranty Insurance Corporation is the leading
provider of private mortgage insurance coverage in the United States to the home
mortgage lending industry. Private mortgage insurance covers residential first
mortgage loans and expands home ownership opportunities by enabling people to
purchase homes with less than 20% down payments. If the homeowner defaults,
private mortgage insurance reduces and, in some instances, eliminates the loss
to the insured institution.
Private mortgage insurance also facilitates the sale of low down payment
mortgage loans in the secondary mortgage market, principally to the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation. In
addition to mortgage insurance on first liens, through other subsidiaries, we
insure residential second mortgages and provide lenders with various
underwriting and other services and products related to home mortgage lending.
The private mortgage insurance industry currently consists of eight active
mortgage insurers and their affiliates. In addition to Mortgage Guaranty
Insurance Corporation, the seven other active private mortgage insurers are:
- PMI Mortgage Insurance Co.
- GE Capital Mortgage Insurance Corporation
- United Guaranty Residential Insurance Company
- Radian Guaranty Inc.
- Republic Mortgage Insurance Company
- Triad Guaranty Insurance Corporation
- CMG Mortgage Insurance Company
This list does not include affiliates of these companies. The Annual Report on
Form 10-K for the year ended December 31, 1999 of the parent company of PMI
Mortgage Insurance Co. says that PMI Mortgage Insurance Co. owns 50% of the
common stock of CMG Mortgage Insurance Company.
For 1995 and subsequent years, Mortgage Guaranty Insurance Corporation has
been the largest private mortgage insurer based on new primary insurance written
with a market share of 24.3% in 1999, 23.1% in 1998 and 26.6% in 1997. At
December 31, 1999, MGIC also had the largest book of direct primary insurance in
force.
Mortgage Guaranty Insurance Corporation is licensed in all 50 states of the
United States, the District of Columbia and Puerto Rico. We are a Wisconsin
corporation. Our principal office is located at MGIC Plaza, 250 East Kilbourn
Avenue, Milwaukee, Wisconsin 53202 and our telephone number is 414-347-6480.
2
<PAGE> 17
USE OF PROCEEDS
Unless we otherwise specify in a prospectus supplement, we will use the net
proceeds we receive from the sale of the debt securities offered under this
prospectus and the accompanying prospectus supplement for general corporate
purposes. These purposes may include repayment of a portion of notes payable
under our credit facilities. We may temporarily invest or apply to repay
short-term debt the net proceeds until we use the net proceeds for their stated
purpose.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed charges for
the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
25.3 29.2 25.6 47.5 54.2 44.3
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
represent net income less income or loss from equity investees, plus applicable
income taxes and fixed charges. Fixed charges include all interest expense,
amortization of debt expense and the proportion deemed representative of the
interest factor of rent expense.
3
<PAGE> 18
RISK FACTORS
Our revenues and losses could be affected by the risk factors discussed
below.
IF THE VOLUME OF LOW DOWN PAYMENT HOME MORTGAGE ORIGINATIONS DECLINES, THE
AMOUNT OF INSURANCE THAT WE WRITE COULD ALSO DECLINE, WHICH COULD RESULT IN
DECLINES IN OUR FUTURE REVENUES.
The factors that affect the volume of low down payment mortgage
originations include:
- the level of home mortgage interest rates,
- the health of the domestic economy as well as conditions in regional and
local economies,
- housing affordability,
- population trends, including the rate of household formation,
- the rate of home price appreciation, which in times of heavy refinancing
affects whether refinance loans have loan-to-value ratios that require
private mortgage insurance, and
- government housing policy encouraging loans to first-time homebuyers.
For the first six months of 2000, our volume declined 26% compared to the same
period in 1999 and we expect our volume for all of 2000 to be lower than it was
in 1999. Our volume was lower in 2000 because many borrowers refinanced their
mortgages during the first six months of 1999 due to a lower interest rate
environment. While our volume was higher in 1999, lenders also cancelled
insurance on loans due to borrowers refinancing. There has been substantially
less refinancing activity in 2000. As a result, lenders have cancelled our
insurance at a lower rate than in 1999. Also, due to generally favorable home
mortgage interest rates in 2000, home purchase activity by first time
homebuyers, who are more likely to need private mortgage insurance, continued to
be strong. As a result of these factors, our premium revenues increased during
the first six months of 2000 compared to 1999. While we have not experienced
lower volume in recent years other than as a result of refinancing activity, one
of the risks we face is that substantially higher interest rates will
substantially reduce purchase activity by first time homebuyers and that the
decline in cancellations of insurance that in the past have accompanied higher
interest rates will not be sufficient to offset the decline in premiums from
loans that are not made.
IF LENDERS AND INVESTORS SELECT ALTERNATIVES TO PRIVATE MORTGAGE INSURANCE,
THE AMOUNT OF INSURANCE THAT WE WRITE COULD DECLINE, WHICH COULD RESULT IN
DECLINES IN OUR FUTURE REVENUES.
The alternatives to private mortgage insurance include:
- lenders using government mortgage insurance programs, including those of
the Federal Housing Administration and the Veterans Administration,
- investors holding mortgages in portfolio and self-insuring,
- investors using credit enhancements other than private mortgage insurance
or using other credit enhancements in conjunction with reduced levels of
private mortgage insurance coverage, and
- lenders structuring mortgage originations to avoid private mortgage
insurance, such as a first mortgage with an 80% loan-to-value ratio and a
second mortgage with a 10% loan-to-value ratio, which is referred to as
an 80-10-10 loan, rather than a first mortgage with a 90% loan- to-value
ratio.
We believe lenders and investors are self-insuring and making 80-10-10 loans at
about the same percentage as they did over the last several years. During 1999,
the last year for which information is available, lenders made loans with
Federal Housing Administration and Veterans Administration mortgage insurance
with somewhat more frequency than they did in 1997. Investors are using reduced
mortgage insurance coverage on a somewhat higher percentage of loans that we
insure than they had over the last several years.
4
<PAGE> 19
BECAUSE MOST OF THE LOANS MGIC INSURES ARE SOLD TO FANNIE MAE AND FREDDIE
MAC, CHANGES IN THEIR BUSINESS PRACTICES COULD REDUCE OUR REVENUES OR INCREASE
OUR LOSSES.
The business practices of Fannie Mae and Freddie Mac affect the entire
relationship between them and mortgage insurers and include:
- the level of private mortgage insurance coverage, subject to the
limitations of Fannie Mae and Freddie Mac's charters, when private
mortgage insurance is used as the required credit enhancement on low down
payment mortgages,
- whether Fannie Mae or Freddie Mac influence the mortgage lender's
selection of the mortgage insurer providing coverage and, if so, any
transactions that are related to that selection,
- whether Fannie Mae or Freddie Mac will give mortgage lenders an
incentive, such as a reduced guarantee fee, to select a mortgage insurer
that has a "AAA" claims-paying ability rating to benefit from the
proposed lower capital requirements for Fannie Mae and Freddie Mac when a
mortgage is insured by a company with that rating,
- the underwriting standards that determine what loans are eligible for
purchase by Fannie Mae or Freddie Mac, which thereby affect the quality
of the risk insured by the mortgage insurer and the availability of
mortgage loans,
- the terms on which mortgage insurance coverage can be canceled before
reaching the cancellation thresholds established by law, and
- the circumstances in which mortgage servicers must perform activities
intended to avoid or mitigate loss on insured mortgages that are
delinquent.
We do not have a "AAA" rating. If the proposed capital rules of the Office of
Federal Housing Enterprise Oversight are adopted in a form that gives greater
capital credit to private mortgage insurers with "AAA" ratings, we may need to
obtain a "AAA" rating. While we believe we can obtain this rating, we would need
to dedicate capital to the mortgage insurance business that we might use in
other ways and we would also have additional costs that we would not otherwise
incur.
BECAUSE WE PARTICIPATE IN AN INDUSTRY THAT IS INTENSELY COMPETITIVE, OUR
REVENUES COULD DECLINE AS WE RESPOND TO COMPETITION.
Competition for private mortgage insurance premiums occurs not only among
private mortgage insurers but increasingly with mortgage lenders through captive
mortgage reinsurance transactions. In these transactions, a lender's affiliate
reinsures a portion of the insurance written by a private mortgage insurer on
mortgages originated by the lender. The low level of losses that has recently
prevailed in the private mortgage insurance industry has encouraged competition
to assume default risk through captive reinsurance arrangements, self insurance,
80-10-10 loans and other means. In 1996, we reinsured under captive reinsurance
arrangements virtually none of our primary insurance. We reinsured 32% of the
new primary insurance that we wrote in 1999. The level of competition within the
private mortgage insurance industry has also increased as many large mortgage
lenders have reduced the number of private mortgage insurers with whom they do
business. At the same time, consolidation among mortgage lenders has increased
the share of the mortgage lending market held by large lenders. Our top ten
customers generated 27.0% of the new primary insurance that we wrote in 1997
compared to 32.5% in 1999. Our private mortgage insurance competitors include:
- PMI Mortgage Insurance Co.
- GE Capital Mortgage Insurance Corporation
- United Guaranty Residential Insurance Company
- Radian Guaranty Inc.
- Republic Mortgage Insurance Company
- Triad Guaranty Insurance Corporation
- CMG Mortgage Insurance Company
5
<PAGE> 20
IF INTEREST RATES DECLINE, HOUSE PRICES APPRECIATE OR MORTGAGE INSURANCE
CANCELLATION REQUIREMENTS CHANGE, THE LENGTH OF TIME THAT OUR POLICIES REMAIN IN
FORCE COULD DECLINE AND RESULT IN DECLINES IN OUR REVENUE.
In each year, most of MGIC's premiums are from insurance that has been
written in prior years. As a result, the length of time insurance remains in
force is an important determinant of revenues. The factors affecting the length
of time our insurance remains in force include:
- the level of current mortgage interest rates compared to the mortgage
coupon rates on the insurance in force, which affects the vulnerability
of the insurance in force to refinancings, and
- mortgage insurance cancellation policies of mortgage investors along with
the rate of home price appreciation experienced by the homes underlying
the mortgages in the insurance in force.
While it is difficult to measure the extent of the decline, in recent years, the
length of time that our policies remain in force has declined somewhat. Due to
this decline, our premium revenues were lower than they would have been if the
length had not declined.
IF THE DOMESTIC ECONOMY DETERIORATES, MORE HOMEOWNERS MAY DEFAULT AND OUR
LOSSES MAY INCREASE.
Losses result from events that reduce a borrower's ability to continue to
make mortgage payments, such as unemployment, and whether the home of a borrower
who defaults on his mortgage can be sold for an amount that will cover unpaid
principal and interest and the expenses of the sale. Favorable economic
conditions generally reduce the likelihood that borrowers will lack sufficient
income to pay their mortgages and also favorably affect the value of homes,
thereby reducing and in some cases even eliminating a loss from a mortgage
default. In recent years, due in part to the strength of the economy, we have
had low losses by historical standards. A significant deterioration in economic
conditions would probably increase our losses.
WE ARE SUBJECT TO LITIGATION THAT COULD RESULT IN A LARGE DAMAGE AWARD
AGAINST US.
Our MGIC subsidiary is a defendant in a lawsuit alleging that MGIC violated
the Real Estate Settlement Procedures Act by entering into transactions with
lenders that were not properly priced, in return for the referral of mortgage
insurance. The complaint seeks damages of three times the amount of the mortgage
insurance premiums that have been paid and that will be paid at the time of
judgment for the mortgage insurance found to be involved in a violation of the
Real Estate Settlement Procedures Act. The complaint also seeks injunctive
relief, including prohibiting MGIC from receiving future premium payments. MGIC
has answered the complaint and denied liability. However, we cannot predict the
ultimate outcome of litigation. It is possible there could be a large damage
award against us.
BECAUSE WE EXPECT THE PACE OF CHANGE IN OUR INDUSTRY AND IN HOME MORTGAGE
LENDING TO REMAIN HIGH, WE WILL BE DISADVANTAGED UNLESS WE ARE ABLE TO RESPOND
TO NEW WAYS OF DOING BUSINESS.
We expect that the processes involved in home mortgage lending will
continue to evolve through greater use of technology. This evolution could
effect fundamental changes in the way home mortgages are distributed. Affiliates
of lenders who are regulated depositary institutions gained expanded insurance
powers under financial modernization legislation and the capital markets may
emerge as providers of insurance in competition with traditional insurance
companies. These trends and others increase the level of uncertainty in our
business, demand rapid response to change and place a premium on innovation.
6
<PAGE> 21
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the senior debt securities
describes general terms that apply to the senior debt securities. We will
describe the particular terms of any debt securities more specifically in each
prospectus supplement and, where applicable, pricing supplement relating to
those debt securities. We will also indicate in the prospectus supplement
whether the terms and provisions described in this prospectus apply to a
particular series of debt securities.
We will issue the debt securities under an indenture between us and Bank
One Trust Company, National Association, as trustee.
We summarize the indenture below. Since this is only a summary, it does not
contain all of the information that may be important to you. A copy of the
entire form of indenture is an exhibit to the registration statement of which
this prospectus is a part. When we make parenthetical section references in this
prospectus, those are references to sections of the indenture. We incorporate
the entire indenture by reference, and we encourage you to read the indenture.
GENERAL
The indenture does not limit the aggregate principal amount of debt
securities that we may issue and provides that we may issue debt securities
under the indenture from time to time in one or more series. (Section 3.1). The
indenture does not limit the amount of other indebtedness or debt securities,
other than some secured indebtedness as described below, which we or our
subsidiaries may issue. Under the indenture, the terms of the debt securities of
any series may differ and we, without the consent of the holders of the debt
securities of any series, may reopen a previous series of debt securities and
issue additional debt securities of the series or establish additional terms of
the series. (Section 3.1).
Unless we otherwise provide in a prospectus supplement, the debt securities
will be our unsecured obligations and will rank equally with all of our other
unsecured and unsubordinated indebtedness.
We are a holding company and our principal source of cash is dividends from
our Mortgage Guaranty Insurance Corporation subsidiary. Under applicable state
insurance law, the amount of cash dividends and other distributions Mortgage
Guaranty Insurance Corporation may pay is restricted. We describe these
restrictions in general terms in the note to our consolidated financial
statements that discusses dividend restrictions. We also discuss in this note
the differences between generally accepted accounting principles and statutory
insurance accounting principles. One of the insurance law dividend restriction
tests is based on statutory policyholders' surplus, which is computed under
statutory accounting principles by counting items as liabilities that are not
counted as liabilities under generally accepted accounting principles. In our
consolidated financial statements for the year ended December 31, 1999, we
discuss these restrictions and differences in note 11. Our Annual Report on Form
10-K contains our consolidated financial statements and the related notes and is
one of the documents we incorporate by reference into this prospectus. See
"Where You Can Find More Information." Also, because we are a holding company,
our rights and the rights of our creditors, including the holders of debt
securities, and shareholders to participate in any distribution of assets of any
subsidiary upon the subsidiary's liquidation or reorganization or otherwise is
subject to the prior claims of the subsidiary's creditors, except to the extent
that we may be a creditor with recognized claims against the subsidiary.
Terms. We will describe in each prospectus supplement the following terms
of the debt securities offered by us:
- the title of the debt securities and the series in which these debt
securities are included;
- any limit on the aggregate principal amount of the debt securities or the
series of which they are a part;
- the currency or currencies, or composite currencies, in which the debt
securities will be denominated and in which we will make payments on the
debt securities;
7
<PAGE> 22
- the date or dates on which we must pay principal;
- the rate or rates at which the debt securities will bear interest or the
manner in which interest will be determined, if any interest is payable;
- the date or dates from which any interest will accrue, the date or dates
on which we must pay interest and the record date for determining who is
entitled to any interest payment;
- the place or places where we must pay the debt securities and where any
debt securities issued in registered form may be sent for transfer or
exchange;
- the terms and conditions on which we may, or may be required to, redeem
the debt securities;
- the terms and conditions of any sinking fund;
- if other than denominations of $1,000 and integral multiples thereof, the
denominations in which we may issue the debt securities;
- the amount we will pay if the maturity of the debt securities is
accelerated;
- whether we will issue the debt securities in the form of one or more
global securities and, if so, the identity of the depositary for the
global security or securities;
- any addition to or changes in the events of default or covenants that
apply to the debt securities;
- whether the debt securities will be defeasible; and
- any other terms of the debt securities and any other deletions from or
modifications or additions to the indenture in respect of the debt
securities. (Section 3.1).
Payments. Unless we otherwise state in the prospectus supplement, we will
pay principal, premium, interest and additional amounts, if any, on the debt
securities at the office or agency we maintain for that purpose, initially the
corporate trust office of the trustee. We may pay interest on debt securities we
issue in registered form by check mailed to the address of the persons entitled
to the payments or we may pay by transfer to their U.S. bank accounts. We will
pay interest on debt securities issued in registered form on any interest
payment date to the registered owners of the debt securities at the close of
business on the regular record date for the interest payment date. We will name
in the prospectus supplement all paying agents we initially designate for the
debt securities. We may designate additional paying agents, rescind the
designation of any paying agent or approve a change in the office through which
any paying agent acts, but we must maintain a paying agent in each place where
payments on the debt securities are payable. (Sections 3.7 and 10.2).
Registration, Transfer and Exchange. Unless we otherwise state in the
prospectus supplement, holders of debt securities may present debt securities
for transfer or exchange debt securities for other debt securities of the same
series containing identical terms and provisions, in any authorized
denominations, and in the same aggregate principal amount at the office or
agency we maintain for that purpose. That office will initially be the corporate
trust office of the trustee. The debt securities must be duly endorsed or
accompanied by a written instrument of transfer if we or the security registrar
so require. We will not require any service charge for any transfer or exchange,
but we may require payment sufficient to cover any tax or other governmental
charge or other expenses payable in connection with the transfer or exchange. We
will not be required to issue, register the transfer of, or exchange, debt
securities during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of any debt securities and ending
at the close of business on the day of the mailing or register the transfer of,
or exchange, any debt security selected for redemption in whole or in part,
except the unredeemed portion of any debt security being redeemed in part. We
have appointed the trustee as the initial security registrar. (Section 3.5). If
we elect to replace the security registrar of any series of debt securities,
then we will name the new security registrar in the prospectus supplement.
(Section 3.1). We may designate additional transfer agents, rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, but we must maintain a transfer agent in each
place where any payments on the debt securities are payable. (Section 10.2).
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Denominations; Global Securities. Unless we otherwise state in the
prospectus supplement, we will issue the debt securities only in fully
registered form, without coupons, in minimum denominations of $1,000 and
integral multiples of $1,000. (Section 3.2). The debt securities may be
represented in whole or in part by one or more global debt securities. We will
register each global security in the name of a depositary or its nominee. The
global security will bear a legend regarding the restrictions on exchanges and
registration of transfer. Interests in a global security will be shown on
records maintained by the depositary and its participants, and transfers of
those interests will be made as described below.
U.S. Federal Income Tax Considerations. We may issue the debt securities as
original issue discount securities, bearing no interest or bearing interest at a
rate, which, at the time of issuance, is below market rates, to be sold at a
substantial discount below their principal amount. We will describe some special
U.S. federal income tax and other considerations applicable to any debt
securities that are issued as original issue discount securities in the
applicable prospectus supplement.
If the purchase price of any debt securities is payable in one or more
foreign currencies or composite currencies, if any debt securities are
denominated in one or more foreign currencies or composite currencies or if any
payments on the debt securities are payable in one or more foreign currencies or
composite currencies, we will describe the restrictions, elections, some U.S.
federal income tax considerations, specific terms and other information about
the debt securities and the foreign currency or composite currencies in the
prospectus supplement.
Purchases at the Option of Holders. We will comply with Section 14(e) under
the Securities Exchange Act of 1934 and any other tender offer rules under the
Securities Exchange Act of 1934 that may then be applicable in connection with
any obligation to purchase debt securities at the option of the holders. We will
describe any obligation to purchase debt securities at the option of the holders
applicable to a series of debt securities in the related prospectus supplement.
Limited Restrictions on Additional Indebtedness. Unless we otherwise state
in the prospectus supplement and other than as described below under "--
Limitation on Liens on Stock of Subsidiaries," the indenture does not limit our
ability to incur debt or give holders of debt securities protection in the event
of a sudden and significant decline in our credit quality or a takeover,
recapitalization or highly leveraged or similar transaction involving us.
Accordingly, we could in the future enter into transactions that could increase
the amount of indebtedness outstanding at that time or otherwise affect our
capital structure or credit rating. You should refer to the prospectus
supplement relating to a particular series of debt securities for information
regarding any changes in the events of default described below or covenants
contained in the indenture, including any addition of a covenant or other
provisions providing event risk or similar protection.
GLOBAL SECURITIES
We may issue the debt securities of a series in whole or in part in the
form of one or more global debt securities that we will deposit with a
depositary or its nominee that we identify in the applicable prospectus
supplement.
We will describe the specific terms of the depositary arrangement covering
debt securities in the prospectus supplement relating to that series. We
anticipate that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a global security, the depositary for the global
security or its nominee will credit to accounts in its book-entry registration
and transfer system the principal amounts of the debt securities represented by
the global security. The underwriters or agents with respect to the debt
securities or we, if the debt securities are offered and sold directly by us,
will designate these accounts. Only institutions that have accounts with the
depositary or its nominee, and persons, who hold beneficial interests through
those participants, may own beneficial interests in a global security. Ownership
of beneficial interests in a global security will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary, its nominee or any participants of the depositary
or its nominee, as the case may be. The laws of some states require that some
purchasers of securities take physical delivery of
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securities in definitive form. These laws may prevent you from transferring your
beneficial interest in a global security.
As long as the depositary or its nominee is the registered owner of a
global security, the depositary or nominee will be considered the sole owner or
holder of the debt securities represented by the global security. Except as
described below, owners of beneficial interests in a global security will not be
entitled to have debt securities registered in their names and will not be
entitled to receive physical delivery of the debt securities in definitive form.
We will make all payments of principal of, any premium and interest on, and
any additional amounts with respect to, debt securities issued as global
securities to the depositary or its nominee. Neither we nor the trustee, any
paying agent or the security registrar assume any responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in a global security.
We expect that the depositary for a series of debt securities or its
nominee, upon receipt of any payment with respect to the debt securities, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interest in the principal amount of the global
security for the debt securities as shown on the records of the depositary or
its nominee. We also expect that payments by participants to owners of
beneficial interests in the global security held through participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of the participants.
The indenture provides that if
- the depositary notifies us that it is unwilling or unable to continue as
depositary for a series of debt securities, or if the depositary is no
longer legally qualified to serve in that capacity, and we have not
appointed a successor depositary within 90 days of written notice,
- we determine that a series of debt securities will no longer be
represented by global securities and we execute and deliver an order to
that effect to the trustee, or
- an event of default with respect to a series of debt securities occurs
and continues, the global securities for that series may be exchanged for
registered debt securities in definitive form. (Section 3.5). The
definitive debt securities will be registered in the name or names with
which the depositary instructs the trustee. We expect that these
instructions may be based upon directions the depositary receives from
participants with respect to ownership of beneficial interests in global
securities.
CERTAIN RESTRICTIONS
For purposes of the lien limitation and sales of capital stock restrictions
described below and this definition, a "subsidiary" is an entity of which more
than 50% of the interests entitled to vote in the election of directors or
managers is owned by any combination of us and our subsidiaries.
Limitations on Liens on Stock of Designated Subsidiaries. Neither we nor
any of our subsidiaries will be permitted to create, assume, incur or permit to
exist any indebtedness secured by any lien on the capital stock of any
designated subsidiary unless the debt securities, and if we so elect, any other
indebtedness of ours that is not subordinate to the debt securities and with
respect to which the governing instruments require, or pursuant to which we are
otherwise obligated, to provide such security, are secured equally and ratably
with this indebtedness for at least the time period this other indebtedness is
so secured. (Section 10.5).
"Designated subsidiary" means any present or future consolidated subsidiary
of ours, the consolidated shareholder's equity of which constitutes at least 15%
of our consolidated shareholders' equity. As of June 30, 2000, our designated
subsidiaries were Mortgage Guaranty Insurance Corporation and MGIC Reinsurance
Corporation of Wisconsin.
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"Indebtedness" means, with respect to any person, for purposes of this
covenant:
- the principal of, and any premium and interest on, indebtedness of the
person for money borrowed and indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
that person is responsible or liable;
- all capitalized lease obligations of that person;
- all obligations of that person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations
under any title retention agreement;
- all obligations of that person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction,
other than obligations with respect to some letters of credit securing
obligations entered into in the ordinary course of business;
- all obligations of the type referred to above of other persons and all
dividends of other persons of which, that person is responsible or liable
as obligor, guarantor or otherwise;
- all obligations of the type referred to above of other persons secured by
any lien on any property or asset of that person, the amount of this
obligation being deemed to be the lesser of the value of the property or
assets or the amount of the obligation so secured; and
- any amendments, modifications, refundings, renewals or extensions of any
indebtedness or obligation described above. (Section 1.1).
Limitations on Sales of Capital Stock of Designated Subsidiaries. Neither
we nor any of our designated subsidiaries will be permitted to issue, sell,
transfer or dispose of capital stock of a designated subsidiary, except to us or
one of our subsidiaries that agrees to hold the transferred shares subject to
the terms of this sentence, unless we dispose of the entire capital stock of the
designated subsidiary at the same time for cash or property which, in the
opinion of our board of directors, is at least equal to the fair value of the
capital stock. (Section 10.6).
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person or convey or
transfer or lease our properties and assets substantially as an entirety to any
person, and we may not permit any other person to consolidate with or merge into
us, unless:
- if we consolidate with or merge into another corporation or convey or
transfer our properties and assets substantially as an entirety to any
person, the successor is organized under the laws of the United States or
any state and assumes our obligations under the debt securities;
- immediately after the transaction, no event of default occurs and
continues; and
- we meet other conditions specified in the indenture. (Section 8.1).
MODIFICATION AND WAIVER
We and the trustee may modify and amend the indenture with the consent of
the holders of a majority in aggregate principal amount of the outstanding debt
securities of each affected series. However, without the consent of each holder,
we cannot modify or amend the indenture in a way that would:
- change the stated maturity of the principal of, or any premium or
installment of interest on or payment of any additional amounts under,
any debt security;
- reduce the principal amount of, or the interest rate on, any debt
security;
- reduce the principal payable upon acceleration, or provable in
bankruptcy, of any debt security issued with original issue discount;
- change the redemption provisions or adversely affect the right of
prepayment of any debt security;
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- change the place or currency of payment of principal or interest on any
debt security;
- impair the right to sue to enforce any payment on any debt security after
it is due;
- reduce the percentage in principal amount of outstanding debt securities
necessary to modify or amend the indenture, to waive compliance with some
requirements of the indenture or some defaults or reduce the quorum
requirements of meetings of holders of debt securities;
- modify the provisions of the indenture summarized in this paragraph; or
- make any changes that adversely affects the rights to convert or exchange
any debt securities. (Section 9.2).
The holders of a majority in aggregate principal amount of outstanding debt
securities of any series may waive our compliance with some restrictive
covenants of the indenture with respect to the outstanding debt securities of
that series. (Section 10.8). The holders of a majority in principal amount of
the outstanding debt securities of any series may waive any past default under
the indenture with respect to outstanding debt securities of that series. This
waiver will be binding on all holders of debt securities of that series.
However, these holders may not waive a default in the payment of principal or of
premium or interest on any debt security of that series or in respect of a
provision of the indenture that cannot be modified or amended without each
holder's consent. (Sections 5.8 and 5.13).
EVENTS OF DEFAULT
Each of the following will be an event of default:
- default for 30 days in the payment of any interest;
- default in the payment of principal or any premium;
- default in the deposit of any sinking fund payment;
- default in the performance of any other covenant in the indenture that
continues for 60 days after written notice of the default;
- a failure to pay when due at maturity or a default that results in the
acceleration of maturity of any other debt of ours or our designated
subsidiaries in an aggregate amount of $40 million or more, unless the
acceleration is rescinded, stayed or annulled, or, in the case of debt we
are contesting in good faith, we set aside a bond, letter of credit,
escrow deposit or other cash equivalent sufficient to discharge the debt
within 30 days after written notice of default is given to us by the
trustee or holders of not less than 25% in principal amount of the
outstanding debt securities of the series in default; and
- specified events in bankruptcy, insolvency or reorganization. (Section
5.1).
We are required to furnish the trustee annually a statement as to our
fulfillment of our obligations under the indenture. (Section 10.9). The trustee
may withhold notice of any default to the holders of debt securities of any
series, except a default on principal or interest payments on debt securities of
that series, if it considers it in the interest of the holders to do so.
(Section 6.3).
If an event of default occurs and continues, then either the trustee or the
holders of not less than 25% in principal amount of the outstanding debt
securities of the series in default may declare the principal amount immediately
due and payable by written notice to us and, if given by the holders, to the
trustee. Upon any declaration of default, the principal amount will become
immediately due and payable. However, the holders of a majority in principal
amount of the outstanding debt securities of that series may, under some
circumstances, rescind and annul the acceleration. (Section 5.2).
Except for some duties in case of an event of default, the trustee is not
required to exercise any of its rights or powers at the request or direction of
any of the holders unless the holders offer the trustee reasonable security or
indemnity. (Section 6.2). If the holders provide this security or indemnity,
then the
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holders of a majority in principal amount of the outstanding debt securities of
a series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee, or exercising any trust or powers conferred
on the trustee with respect to the debt securities of that series. (Section
5.12).
No holder of a debt security may bring any lawsuit or other proceeding with
respect to the indenture or for any remedy under the indenture unless the holder
first gives the trustee written notice of a continuing event of default, the
holders of at least 25% in principal amount of the outstanding debt securities
of the series in default give the trustee a written request to bring the
proceeding and offer the trustee reasonable security or indemnity and the
trustee fails to institute the proceeding for 60 days after the written request
and has not received from holders of a majority in principal amount of the
outstanding debt securities of the series in default a direction inconsistent
with that request. (Section 5.7). However, the holder of any debt security has
the absolute right to receive payment of the principal of and any premium or
interest on the debt security on or after the stated due dates and to take any
action to enforce any payment of principal of and any interest on the debt
security. (Section 5.8).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We may discharge some obligations to holders of any series of debt
securities that have not already been delivered to the trustee for cancellation
and that either have become due and payable, will become due and payable within
one year or are scheduled for redemption within one year by depositing with the
trustee, in trust, funds in U. S. dollars or in the foreign currency in which
the debt securities are payable in an amount sufficient to pay the principal and
any premium, interest and additional amounts on the debt securities to the date
of deposit, if the debt securities have become due and payable, or to the
maturity date, as the case may be. (Section 4.1).
Unless we state in the applicable prospectus supplement that the following
provisions do not apply to the debt securities of that series, we may elect
either:
- to defease and be discharged from all obligations with respect to the
debt securities, except for, among other things, the obligation to pay
additional amounts, if any, upon the occurrence of some events of
taxation, assessment or governmental charge with respect to payments on
the debt securities and other obligations to register the transfer or
exchange of the debt securities, to replace temporary or mutilated,
destroyed, lost or stolen debt securities, to maintain an office or
agency with respect to the debt securities and to hold moneys for payment
in trust, also referred to as defeasance; or
- to be released from our obligations under the indenture with respect to
the debt securities under some covenants as we describe in the prospectus
supplement, and our failure to comply with these obligations will not
constitute an event of default with respect to the debt securities, also
referred to as covenant defeasance. (Section 4.2).
Defeasance or covenant defeasance is conditioned on our irrevocable deposit
with the trustee, in trust, of an amount in cash or government securities, or
both, sufficient to pay the principal of, any premium and interest on, and any
additional amounts with respect to, the debt securities on the scheduled due
dates. (Section 4.2).
Such a trust may be established only if, among other things:
- the applicable defeasance or covenant defeasance does not result in a
breach or violation of, or constitute a default under, the indenture or
any other material agreement or instrument to which we are a party or by
which we are bound;
- no event of default, or event which with notice or lapse of time would
become an event of default, has occurred and continues on the date the
trust is established and, with respect to defeasance only, at any time
during the period ending on the 123rd day after that date; and
- we have delivered to the trustee an opinion of counsel to the effect that
the holders of the debt securities will not recognize income, gain or
loss for U. S. federal income tax purposes as a result of the defeasance
or covenant defeasance and will be subject to U. S. federal income tax on
the same
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amounts, in the same manner and at the same times as would have been the
case if the defeasance or covenant defeasance had not occurred. This
opinion, in the case of defeasance, must refer to and be based upon a
letter ruling we have received from the Internal Revenue Service, a
revenue ruling published by the Internal Revenue Service or a change in
applicable U. S. federal income tax law occurring after the date of the
indenture. (Section 4.2).
GOVERNING LAW
The indenture and the debt securities are governed by and will be
interpreted under the laws of the State of New York. (Section 1.13).
INFORMATION CONCERNING THE TRUSTEE
Subject to the provisions of the Trust Indenture Act of 1939, the trustee
is under no obligation to exercise any of the powers vested in it by the
indenture at the request of any holder of debt securities unless the holder
offers the trustee reasonable indemnity against the costs, expenses and
liabilities which might result. The trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in performing its
duties if the trustee reasonably believes that it is not reasonably assured of
repayment or adequate indemnity. (Section 6.2).
We and our subsidiaries maintain banking relationships in the ordinary
course of business with affiliates of Bank One Trust Company, National
Association. An affiliate of the trustee is a customer of our Mortgage Guaranty
Insurance Corporation subsidiary. In addition, an affiliate of the trustee may
be one of the underwriters, agents or dealers through whom we sell debt
securities.
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PLAN OF DISTRIBUTION
We may sell debt securities through agents, to or through underwriters,
through dealers or directly to purchasers. We will state in the applicable
prospectus supplement the terms of the offering of the debt securities,
including the name or names of any underwriters, dealers or agents, the purchase
price of the debt securities and the proceeds we will receive from the sale, any
underwriting discounts and commissions and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, and any securities exchange
on which the debt securities may be listed. We may change the initial public
offering price, discounts or concessions allowed or reallowed or paid to dealers
from time to time.
We may offer the debt securities in one or more transactions at a fixed
price or prices, which we may change, at market prices prevailing at the time of
sale, at prices related to the prevailing market prices or at negotiated prices.
We may authorize agents to solicit offers to purchase debt securities from
time to time. We will identify any agent who offers or sells debt securities
described in this prospectus, and we will describe any commissions payable by us
to the agent, in the applicable prospectus supplement. Unless we otherwise
indicate in the applicable prospectus supplement, any such agent will be acting
on a reasonable best efforts basis for the period of its appointment. Any agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act of 1933, of the debt securities so offered and sold.
If debt securities are sold by means of an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters, and we
will state the names of the specific managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, in the prospectus supplement used by the underwriters to resell
the debt securities. If we use underwriters to sell debt securities, the
underwriters will purchase the debt securities for their own account and the
underwriters may resell the debt securities from time to time in one or more
transactions, including negotiated transactions, at fixed public offering prices
or at varying prices determined by the underwriters at the time of sale. Debt
securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or directly by the managing underwriters.
If we use any underwriter or underwriters to sell the debt securities, unless we
otherwise indicate in the applicable prospectus supplement, the underwriters'
obligations will be conditioned on some matters and the underwriters must
purchase all the debt securities of the offered series if they purchase any.
If we use a dealer to sell the debt securities, we will sell the debt
securities to the dealer as principal. The dealer may then resell those debt
securities to the public at varying prices to be determined by the dealer at the
time of resale. Any dealer may be deemed to be an underwriter, as that term is
defined in the Securities Act of 1933, of the debt securities it offers or
sells. We will state the name of the dealer and the terms of the transaction in
the related prospectus supplement.
We may directly solicit offers to purchase debt securities and we may sell
them directly to institutional investors or others, who, with respect to the
resale of those securities, may be deemed to be underwriters within the meaning
of the Securities Act of 1933. We will describe the terms of any direct sales in
the related prospectus supplement.
Agents, underwriters and dealers may be entitled under agreements with us
to be indemnified by us against some civil liabilities, including liabilities
under the Securities Act of 1933 that may arise from any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
to state a material fact in this prospectus, any supplement or amendment hereto,
or in the registration statement of which this prospectus forms a part, or to
contribution with respect to payments which the agents, underwriters or dealers
may be required to make.
If we so indicate in the prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by some
institutions to purchase debt securities from us pursuant to contracts providing
for payments and delivery on a future date. Institutions with which these
contracts may be made
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include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but in
all cases we must approve these institutions. Purchaser obligations will be
subject to the condition that the purchase is not prohibited under the laws of
the jurisdiction to which the purchaser is subject at the time the debt
securities are delivered. The underwriters and other agents will not have any
responsibility for the validity or performance of these contracts.
Each series of debt securities will be a new issue and will have no
established trading market. We may elect to list any series of debt securities
on an exchange but, unless we otherwise state in the applicable prospectus
supplement, we are not required to do so. You cannot be assured that there will
be a liquid trading market for any of the debt securities.
Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for, us and our subsidiaries in the
ordinary course of business.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file with the SEC
at its public reference facilities in Washington, D.C., New York, New York or
Chicago, Illinois. You can also obtain copies of the documents at prescribed
rates by writing to the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities. Our SEC filings
are also available at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. For further information on obtaining copies of
our SEC filings at the NYSE, you should call (212) 656-5060.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the debt securities. This prospectus does
not contain all of the information set forth in the registration statement, some
portions of which have been omitted in accordance with the rules and regulations
of the SEC. For further information, please refer to the registration statement.
We are allowed to "incorporate by reference" the information we file with
the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file subsequently
with the SEC will automatically update and supersede the information included
and/or incorporated by reference in this prospectus. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the initial filing of the registration statement that contains this prospectus
and prior to the time that the offering of the securities is completed:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000; and
- Our Current Report on Form 8-K dated May 19, 2000.
You may request a copy of these filings, other than exhibits, unless that
exhibit is specifically incorporated by reference into that filing, at no cost,
by writing or calling us at the following address:
MGIC Investment Corporation
MGIC Plaza
250 East Kilbourn Avenue
Milwaukee, Wisconsin 53202
(414) 347-6480
Attention: Secretary
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the state does not permit an offer.
You should not assume that the information in this prospectus or any prospectus
supplement is accurate other than as of any dates of this prospectus and any
prospectus supplement, regardless of the time of delivery of this prospectus and
any prospectus supplement or any sale of the debt securities.
LEGAL MATTERS
Foley & Lardner, Milwaukee, Wisconsin, will pass upon the validity of the
debt securities for us. Mayer, Brown & Platt, Chicago, Illinois, will pass upon
certain legal matters for the underwriters, dealers or agents, if any. Mayer,
Brown & Platt will rely on the opinion of Foley & Lardner with respect to
matters of Wisconsin law.
17
<PAGE> 32
EXPERTS
Our consolidated financial statements at December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999, incorporated
by reference in our Annual Report on Form 10-K for the year ended December 31,
1999, have been incorporated by reference into this prospectus and the
registration statement and have been audited by PricewaterhouseCoopers LLP,
independent auditors, as stated in their report thereon also incorporated by
reference in our Annual Report on Form 10-K and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
18
<PAGE> 33
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$200,000,000
MGIC INVESTMENT CORPORATION
7 1/2% SENIOR NOTES DUE 2005
------------------------
PROSPECTUS SUPPLEMENT
OCTOBER 17, 2000
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BANC OF AMERICA SECURITIES LLC
LEHMAN BROTHERS
BANC ONE CAPITAL MARKETS, INC.
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER WESSELS INCORPORATED
ROBERT W. BAIRD & CO.
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