MGIC Investment (MTG) Beats on Q4 Earnings; Shares Gain

MGIC Investment Corp. MTG reported fourth-quarter 2016 operating net income per share of 28 cents, which outpaced the Zacks Consensus Estimate of 22 cents by 27%. The bottom line also surged 47% year over year.

Operational Update

MGIC Investment recorded total operating revenue of $266 million, up 3.5% year over year. The upside was driven by higher premiums earned, investment income and other income. Also, the top line surpassed the Zacks Consensus Estimate of $256 million.

New insurance written was $12.8 billion in the reported quarter, up 30.6% from $9.8 billion in fourth-quarter 2015.

As of Dec 31, 2016, the company’s primary insurance in force was $182 billion, up 4.3% year over year.

Persistency, or the percentage of insurance remaining in force from the year before, was 76.9% as of Dec 31, 2016 compared with 79.9% as of Dec 31, 2015.

Percentage of delinquent loans, including bulk loans, was 4.05% as of Dec 31, 2016 compared with 5.2% as of Sep 30, 2015.

Primary delinquent inventory plunged 19.7% year over year to $50.3 billion.

Net underwriting and other expenses totaled $40.6 million, up 9.7% year over year.

Losses incurred in the quarter narrowed to $47.7 million from $95.1 million. The $43 million reduction in losses in the fourth quarter was due to the positive development on the company’s primary loss reserve. This apart, the company witnessed a lesser new delinquent notices received and a lower claim rate.

Total losses and expenses decreased 30% year over year to $104.5 million on lower loss incurred and 3.6% decline in interest expenses. However, a 9.7% increase in underwriting and other expenses, net was a partial offset.

2016 Highlights

For 2016, net operating income came in at 99 cents, outpacing the Zacks Consensus Estimate of 86 cents.

Operating revenues were $1.1 billion, up 4% year over year.

New insurance written of $47.9 billion improved 11% from 2015. The insurer expects to write lower new insurance in 2017 than 2016 due to the current market conditions and a smaller origination market.

Financial Update

Book value per share, a measure of net worth, jumped nearly 13.7% year over year to $7.48 as of Dec 10, 2016 from $6.58 as of Dec 31, 2015.

As of Dec 31, 2016, MGIC Investment had approximately $4.8 billion in cash and investments, almost flat year over year.

Risk-to-capital ratio was 12:1 as of Dec 31, 2016 compared with 13:6.1 as of Dec 31, 2015.

Share Price Impact

The stock gained about 1.7% in the trading session on Jan 19, after the company reported its earnings. We wait to see if the momentum continues.

MGIC Investment Corp. Price, Consensus and EPS Surprise

MGIC Investment Corp. Price, Consensus and EPS Surprise | MGIC Investment Corp. Quote

Zacks Rank and Other Stocks

Currently, MGIC Investment carries a Zacks Rank #3 (Hold). Some better-ranked insurers include Lowes Corp. L Prudential Financial Inc. PRU and Radian Group Inc. RDN. All these companies carry a Zacks Rank #2 (Buy).

Loews is a commercial property and casualty insurer that offers its service through its subsidiaries in the United States, Canada, the United Kingdom, Continental Europe, and Singapore. The company is due to report fourth-quarter results on Feb 6. The Zacks Consensus Estimate is currently pegged at 63 cents. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Radian Group is a credit enhancement company that supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. It is slated to report fourth-quarter results on Jan 26. The Zacks Consensus Estimate is currently pegged at 40 cents. The stock sports Zacks Rank #1.

Prudential Financial offers financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services. It is likely to report fourth-quarter results on Feb 8. The Zacks Consensus Estimate is currently pegged at $2.31. The stock carries Zacks Rank #2.

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