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Why Is MGIC (MTG) Down 7.1% 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 7.1% 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 drivers.

MGIC Investment Q3 Earnings In Line, Revenues Rise Y/Y

MGIC Investment reported third-quarter 2021 adjusted net operating income per share of 46 cents, which matched the Zacks Consensus Estimate. The bottom line increased about 7% year over year.

The quarterly results reflect a high quality of increased insurance in force, which benefited from a strong housing market, decreased new delinquencies, and improved economic conditions.

Operational Update

Insurance in force improved 12.3% from the prior-year quarter to $268.4 billion. The company witnessed a decline of about 42% in primary delinquency to 37,379 loans.

MGIC Investment reported total operating revenues of $295 million, which increased 0.3% year over year on higher net investment income and other income.

Net premiums written were $247.6 million, up 8.6% year over year, driven by an increase in insurance in force and profit commission, partially offset by a decrease in the premium yield and an increase in ceded premiums written.

Net investment income rose 2.8% year over year to $38.3 million due to an increase in the consolidated investment portfolio. It was partially offset by lower investment yields.

Persistency, the percentage of insurance remaining in force from one year prior, was 59.5% as of Sep 30, 2021, down 500 basis points (bps) year over year.

New insurance written was $28.7 billion, down 12.5% year over year, reflecting a decrease in the refinance market.

Net underwriting and other expenses totaled $57.2 million, up 17.9% year over year attributable to increases in professional and consulting services related to investments in infrastructure as well as increases in employee compensation costs.

In the quarter under review, the loss ratio was 8.1%, which improved 780 bps year over year.

Financial Update

Book value per share, a measure of net worth, grew 6.7% to $14.81 as of Sep 30, 2021 from 2020 end.

MGIC Investment had $716 million in investments, cash and cash equivalents, down 15.5% from the figure at 2020 end.

Total assets were $7.5 billion, up 1.4% from the 2020-end level.

PMIERs available assets were $5.8 billion, which were $2.3 billion above its minimum required assets as of Sep 30, 2021.

Capital Deployment

MGIC paid $150 million dividend to MGIC Investment Corporation and bought back shares worth $150 million in the reported quarter.

In October, the company bought back another $60 million worth shares.

Its board of directors authorized an additional $500 million share repurchase program through the end of 2023.

The board of directors declared a dividend of 8 cents per share to be paid out on Nov 23, 2021, to shareholders of record as of Nov 11, 2021.

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.

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