A month has gone by since the last earnings report for MGIC Investment (MTG Quick QuoteMTG - Free Report) . Shares have added about 19.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MGIC due for a pullback? 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's Q3 Earnings Beat, Revenues Fall Y/Y

MGIC Investment Corporation reported third-quarter 2020 adjusted net operating income per share of 43 cents, which beat the Zacks Consensus Estimate by 30.3%. The bottom line declined 10.4% year over year.

The third-quarter performance was aided by strength of the purchase mortgage market and the refinance market as well as the company’s solid market presence. However, annual persistency remained low while primary delinquency inventory increased.

Operational Update

Insurance in force improved 9.5% to $238.9 billion, primarily attributable to new business writings, partly offset by lower persistency.

The company witnessed a surge of 114.5% in primary delinquency to 64,418 loans due to the adverse economic impact of COVID-19.

MGIC Investment reported total operating revenues of $296 million, which declined 7% year over year on lower net investment income and net premiums earned.

Net premiums earned fell 4.4% year over year to $256.1 million in the third quarter. The downside was mainly due to lower premium rates on insurance in force and a decrease in profit commission resulting from higher ceded incurred losses, partially offset by higher average insurance in force.

Net investment income decreased 12.8% year over year to $37.3 million, attributable to lower investment yields, partially offset by an increase in the consolidated investment portfolio.

Persistency, the percentage of insurance remaining in force from one year prior, was 64.5% as of Sep 30, 2020, down 1410 basis points (bps) year over year.

New insurance written was $32.8 billion, up 71.7% year over year. The surge clearly highlights strength of the purchase mortgage market and the refinance market as well as the company’s solid market presence.

Net underwriting and other expenses totaled $48.5 million, which increased 0.4% year over year.

In the quarter under review, loss ratio was 8915.9%, which deteriorated 320 bps year over year.

Financial Update

Book value per share, a measure of net worth, grew 7.4% to $13.33 as of Sep 30, 2020 from 2019 end.

MGIC Investment had $380.1 million in investments, cash and cash equivalents, up from $165.4 million as on 2019 end. Debt was $1.2 billion as on Sep 30, 2020, up from $0.8 billion as on Dec 31, 2019.

Total assets were $7.1 billion, up 14.5% from 2019-end level. PMIERs available assets were $5 billion, which is $1.4 billion above its minimum required assets as of Sep 30, 2020.

Capital Deployment

MGIC Investment paid out quarterly cash dividend of 6 cents per share in the reported quarter. The company also did not buy back shares during the quarter under review.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, MGIC has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

MGIC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.