No Magic for MGIC

MGIC Investment Corp.’s (MTG - Analyst Report) third-quarter loss of $4.44 per share was wider than the Zacks Consensus Estimate of a loss of $1.64 per share. Last year, the company had reported a loss of $1.06 per share. Increasing delinquent inventory and consequently higher incurred losses drained the results.
 
The company’s loss stood at $971 million from $788.3 million reported for the same period last year, primarily due to an increase in delinquencies. Net underwriting and other expenses were $59.1 million as compared to $62.4 million reported for the same period last year.
 
Total revenues were $413.3 million, compared with $461.6 million in the third quarter last year. Net premiums written were $278.3 million, compared with $365.0 million for the same period last year. New insurance written was $4.6 billion, compared to $9.7 billion in the third quarter of 2008. Investment income was $75.5 million, down 3.9% year over year.
 
Persistency − the percentage of insurance remaining in force from a year earlier − was 85.2% at Sep 30, 2009, compared with 82.1% at Sep 30, 2008.
 
MGIC's primary insurance in-force increased to $216.8 billion, compared to $228.2 billion last year.
 
Net paid claims totaled $417 million, up $37 million on a linked quarter and $87 million year over year.
 
The percentage of delinquent loans (excluding bulk loans) was 13.97%. The level was up from 7.54% recorded last year.
 
Book value decreased 38.9% year over year to $13.18 per share.
 
We continue to remain concerned over the prospects for MTG. Increased delinquencies due to increased unemployment, lower home prices and the ongoing recession caused losses. The deteriorating position of the company was aggravated by yet another rating cut by Fitch as well as Standard and Poor’s. We believe that MTG will be unable to write new insurance until the new subsidiary starts operating, which is awaiting approval from Fannie Freddie as well as from various state insurance commissioners. We are unsure as to new business prospects. Pending further positive developments we will continue to rate the shares as a Hold.