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Why You Should Hold MGIC Investment (MTG) in Your Portfolio

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MGIC Investment Corporation’s (MTG - Free Report) solid insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and a solid capital position make it worth retaining in one’s portfolio.

MTG has a decent track record of beating earnings estimates in the last five quarters. Earnings of this largest private mortgage insurer in the United States have risen 16% over the last five years, better than the industry average of 6.2%.

Return on Equity

MTG’s trailing 12-month ROE was 19.7%, which expanded 610 basis points year over year and came ahead of the industry average of 8.4%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Zacks Rank & Price Performance

MTG currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 1.5% against the industry’s decline of 15.4%.

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Growth Drivers

MGIC Investment has been witnessing an increase in new business written, banking on solid persistency, favorable credit trends and refinances. The insurer expects new business, combined with increasing annual persistency, to result in the continued growth of the insurance-in-force portfolio.

As MTG has been witnessing a declining pattern of claim filings, we expect paid claims to decrease further. A decline in loss and claims should continue to strengthen the balance sheet and hence improve its financial profile.

MTG has been improving its capital position, on the strength of capital contribution, reinsurance transaction and cash position. Both leverage and times interest earned ratio have improved.

Riding on a solid capital position, MTG returned about $500 million of capital to shareholders through a combination of shares repurchases and dividends. In January 2023, MTG repurchased additional shares for $28 million.

Also, MTG expects operating expenses will be down modestly in 2023, in the range of $235-$245 million, aiding margins.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Primerica (PRI - Free Report) , Voya Financial (VOYA - Free Report) , and Brighthouse Financial (BHF - Free Report) .

Primerica’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters. PRI sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for PRI’s 2023 and 2024 earnings per share indicates year-over-year increases of 18.3% and 8.9%, respectively.  Year to date, PRI shares gained 18.5%.

Voya Financial’s earnings surpassed the Zacks Consensus Estimate in all the last four quarters, the average earnings surprise being 38.68%. VOYA carries Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for VOYA’s 2023 and 2024 earnings per share indicates year-over-year increases of 6.1% and 14%, respectively. Year to date, VOYA shares gained 16.3%.

Brighthouse Financial’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, the average beat being 2.07%. BHF carries Zacks Rank #2.

The Zacks Consensus Estimate for BHF’s 2023 and 2024 earnings per share indicates year-over-year increases of 29.4% and 12.6%, respectively.  Year to date, BHF shares lost 17.3%.

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