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MGIC Investment's (MTG) Q4 Earnings Top, Revenues Fall Y/Y

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MGIC Investment Corporation (MTG - Free Report) reported fourth-quarter 2020 adjusted net operating income per share of 43 cents, which beat the Zacks Consensus Estimate by 10.3%. The bottom line declined 12.2% year over year.

The fourth-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 10.9% to $246.6 billion, primarily attributable to new business writings, partly offset by lower persistency.

The company witnessed a surge of 92.2% in primary delinquency to 57,710 loans due to the adverse economic impact of COVID-19.

MGIC Investment reported total operating revenues of $299 million, which declined 3.5% year over year on lower net investment income and net premiums earned.

Net premiums earned fell 1.8% year over year to $261.4 million in the quarter. The downside was mainly due to an increase in accelerated premiums earned from single premium policy cancellations.

Net investment income decreased 12.6% year over year to $36.1 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 60.5% as of Dec 31, 2020, down 1530 basis points (bps) year over year.

New insurance written was $33.2 billion, up 72% 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 $48.3 million, which decreased 7.6% year over year.

In the quarter under review, loss ratio was 17.5%, which deteriorated 860 bps year over year.

MGIC Investment Corporation Price, Consensus and EPS Surprise

Full-Year Highlights

Adjusted net earnings of $1.32 per share beat the Zacks Consensus Estimate of $1.28. The bottom line declined 28.3% year over year.

Operating total revenues were $2.5 billion, down 1.9% year over year. The top line beat the Zacks Consensus Estimate of $2.2 billion.

New insurance written was $112.1 billion in 2020, up 76.8% over 2019.

Financial Update

Book value per share, a measure of net worth, grew 11.8% to $13.88 as of Dec 31, 2020 from 2019 end.

MGIC Investment had $874 million in investments, cash and cash equivalents, up from $325 million as of 2019 end. Debt was $1.2 billion as on Dec 31, 2020, up from $0.8 billion as on Dec 31, 2019.

Total assets were $7.4 billion, up 19.4% from 2019-end level.

PMIERs available assets were $5.3 billion, $1.8 billion above its minimum required assets as of Dec 31, 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. It had $291 million remaining under its authorization as on 2020 end.

Zacks Rank & Performance of Other Insurers

MGIC Investment currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other insurance industry players, which have reported fourth-quarter earnings so far, the bottom lines of Prudential Financial (PRU - Free Report) and Old Republic International (ORI - Free Report) beat the Zacks Consensus Estimate while that of Assurant (AIZ - Free Report) missed estimates.

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