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Why Is MGIC (MTG) Down 3.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for MGIC Investment (MTG - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MGIC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MGIC Investment Corporation reported third-quarter 2018 operating net income per share of 48 cents, surpassing the Zacks Consensus Estimate by 33.3%. The bottom line soared 50% year over year on higher revenues, lower loss and reduction in tax.
Shares of the company gained 2.6% in the last trading session reflecting outperformance.
The quarter witnessed favorable operating environment including better employment, wage growth, higher housing demand and low credit losses of recently written business.
Operational Update
MGIC Investment recorded total operating revenues of $289.3 million, increasing nearly 7% year over year on higher net investment income (up 19.7%) and higher premiums earned (up 5.6%). Moreover, the top line beat the Zacks Consensus Estimate by 10.6%.
Insurance in force increased 7.7% on higher annual persistency and the addition of new business.
New insurance written was $14.5 billion, up 2.8% year over year.
As of Sep 30, 2018, the company’s primary insurance in force was $205.8 billion, up 7.7% year over year.
Persistency or the percentage of insurance remaining in force from the preceding year was 81% as of Sep 30, 2018, expanding 220 basis points (bps) year over year.
Primary delinquent inventory declined 19% year over year to 33,398 loans on Sep 30, 2018.
Net underwriting and other expenses totaled $46.8 million, up 9.1% year over year. Total loss and expenses declined 31.8% year over year to $58.6 million, primarily owing to reduced losses.
Loss ratio was 0.6% in the quarter under review compared with 12.5% a year ago. Underwriting expense ratio of 17.6% deteriorated 190 bps year over year. MGIC Investment expects new business worth $50 billion in 2018 on a strong purchase mortgage market and a potential share gain from the Federal Housing Administration.
Financial Update
Book value per share, a measure of net worth, grew nearly 5.4% year over year to $9.64 as of Sep 30, 2018.
As of Sep 30, 2018, MGIC Investment had $261 million in cash and investments, up 43.3% year over year.
Risk-to-capital ratio was 9.8:1 as of Sep 30, 2018 compared with 11.1:1 as of Sep 30, 2017.
Debt to total capital ratio was 20% at the end of the quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, MGIC has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, MGIC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is MGIC (MTG) Down 3.1% Since Last Earnings Report?
It has been about a month since the last earnings report for MGIC Investment (MTG - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MGIC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MGIC Investment (MTG - Free Report) Q3 Earnings, Revenues Beat Estimates
MGIC Investment Corporation reported third-quarter 2018 operating net income per share of 48 cents, surpassing the Zacks Consensus Estimate by 33.3%. The bottom line soared 50% year over year on higher revenues, lower loss and reduction in tax.
Shares of the company gained 2.6% in the last trading session reflecting outperformance.
The quarter witnessed favorable operating environment including better employment, wage growth, higher housing demand and low credit losses of recently written business.
Operational Update
MGIC Investment recorded total operating revenues of $289.3 million, increasing nearly 7% year over year on higher net investment income (up 19.7%) and higher premiums earned (up 5.6%). Moreover, the top line beat the Zacks Consensus Estimate by 10.6%.
Insurance in force increased 7.7% on higher annual persistency and the addition of new business.
New insurance written was $14.5 billion, up 2.8% year over year.
As of Sep 30, 2018, the company’s primary insurance in force was $205.8 billion, up 7.7% year over year.
Persistency or the percentage of insurance remaining in force from the preceding year was 81% as of Sep 30, 2018, expanding 220 basis points (bps) year over year.
Primary delinquent inventory declined 19% year over year to 33,398 loans on Sep 30, 2018.
Net underwriting and other expenses totaled $46.8 million, up 9.1% year over year. Total loss and expenses declined 31.8% year over year to $58.6 million, primarily owing to reduced losses.
Loss ratio was 0.6% in the quarter under review compared with 12.5% a year ago. Underwriting expense ratio of 17.6% deteriorated 190 bps year over year. MGIC Investment expects new business worth $50 billion in 2018 on a strong purchase mortgage market and a potential share gain from the Federal Housing Administration.
Financial Update
Book value per share, a measure of net worth, grew nearly 5.4% year over year to $9.64 as of Sep 30, 2018.
As of Sep 30, 2018, MGIC Investment had $261 million in cash and investments, up 43.3% year over year.
Risk-to-capital ratio was 9.8:1 as of Sep 30, 2018 compared with 11.1:1 as of Sep 30, 2017.
Debt to total capital ratio was 20% at the end of the quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, MGIC has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, MGIC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.