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Why Is MGIC (MTG) Down 3.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for MGIC Investment (MTG - Free Report) . Shares have lost about 3.9% in that time frame, outperforming 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 Q2 Earnings Top, Revenues Miss Estimates

MGIC Investment Corporation reported second-quarter 2022 operating net income per share of 81 cents, which beat the Zacks Consensus Estimate by 50% and our estimate of 52 cents. The reported figure increased 84% year over year. The insurer witnessed higher premiums, offset by higher expenses.

Operational Update

Insurance in force increased 9.5% from the prior-year quarter to $286.8 billion. However, it compared unfavorably with our estimate of $303.2 billion.

The insurer witnessed a 37.5% decrease in primary delinquency to 26,885 loans.

MGIC Investment recorded total operating revenues of $297.9 million, which increased 0.7% year over year on higher premiums earned. The top line missed the consensus mark by 2.7%. Net premiums written increased 1.7% year over year to $244.3 million. The increase was due to an increase in insurance in force.

Net investment income decreased 2% year over year to $40.3 million. Persistency — the percentage of insurance remaining in force from one year prior — was 71.5% as of Jun 30, 2022, up from 57.1% in the year-ago quarter. It compares favorably with our estimate of 68.7%.

New insurance written was $24.3 billion, down 27.7% year over year due to a decrease in the refinance market. It compares unfavorably with our estimate of $34.9 billion. Net underwriting and other expenses totaled $56.4 million, down 0.7% year over year. For the quarter under review, the loss ratio was (38.7)% compared with 11.6% for the second quarter of 2021.

Financial Update

Book value per share, a measure of net worth, declined 1% from 2021-end to $14.97 as of Jun 30, 2022. Shareholder equity was $4.6 billion as of Jun 30, 2022, down 61% from 2021 end.

MGIC's PMIERs Available Assets totaled $5.8 billion, or $2.6 billion above its Minimum Required Assets as of Jun 30, 2022. Assets were $6.6 billion as of Jun 30, 2022, down 9.6% from 2021 end. Debt was $918 million as of Jun 30, 2022, down 23.5% from 2021 end.

Capital Deployment  

MGIC Investment paid out dividends of $400 million to its holding company. It paid 8 cents in dividend per common share to shareholders during second-quarter 2022. It bought back shares worth $93.6 million in the second quarter and another $28 million worth in July.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, MGIC has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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.

Performance of an Industry Player

MGIC belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, The Hartford (HIG - Free Report) , has gained 3.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

The Hartford reported revenues of $3.77 billion in the last reported quarter, representing a year-over-year change of +5.5%. EPS of $2.15 for the same period compares with $2.33 a year ago.

For the current quarter, The Hartford is expected to post earnings of $1.49 per share, indicating a change of +18.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.5% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for The Hartford. Also, the stock has a VGM Score of B.


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