First Monetary earns an 18% premium cede for the 2002 thru 2007 books of business and a 25% premium cede for the 2008 book of business under an Excess Layer type of structure. Effective January 1, 2009 a Quota Share type of structure was entered into. Under the Quota Share agreement, First Monetary receives a 25% premium cede, less an 18% ceding commission, and is responsible for 25% of each claim.

Under the First Monetary reinsurance treaty with MGIC, gross written mortgage insurance premiums through the quarter ending March 31, 2013, continued strong. From inception through the end of the current reporting period, MGIC has ceded net written premiums totaling over $1.5 Million.

In 2012, the First Monetary book of new insurance written with MGIC decreased from $25.5 Million in 2011 to $18.4 Million in 2012. From inception through the run-off date of March 8, 2013, the MGIC treaty has generated $360.7 Million of new insurance written. As of March 31, 2013 the in force book was $112.2 Million compared with $126.5 Million a year ago.

The First Monetary book continues to perform significantly better than the rest of the industry. As of March 31, 2013 there have still not been any losses paid under the reinsurance treaty.

During 2012, the housing market finally started showing signs of life. New household formations, after averaging about 500,000 per year from 2008 through 2010, grew to 1.1 million in 2011 and 1.2 million in 2012. Interest rates at near record low levels and the current level of home prices combine to make housing the most affordable it has been in decades. The housing market is very active: as of December 2012, there is only a four month supply of houses, down from a high of 12 months in 2010. National mortgage delinquency rates fell to 7.1% in the fourth quarter of 2012 from a high of 10.1% two years ago. And home prices rose, up 7.3% in 2012, which helped decrease the number of underwater mortgages to 6.6 million at December 31, 2012, down from 10.5 million a year ago. All of these factors bode well for the industry.

2012 was a year in which MGIC experienced disappointing financial results but accomplished numerous operational goals which improved our position for future earnings. In March 2013, MGIC was able to raise net proceeds of more than $1.1 billion through concurrent offerings of common stock and convertible senior notes. MGIC believes that the success of this capital raise positions our company well for a better future.

MGIC will continue to be committed to the partnership with First Monetary and looks forward to a continuing strong working relationship over the next 10 years as the reinsurance treaty winds down.