MGIC Investment Corp. (MTG - Analyst Report) reported third-quarter 2016 operating net income per share of 25 cents, which outpaced the Zacks Consensus Estimate of 17 cents by 47%. The bottom line also surged 25% year over year.
Net income, including net realized investment gains of 1 cent and loss on debt extinguishment of 12 cents, was 14 cents per share. The quarterly figure came in substantially below $1.78 per share earned in the year-ago quarter.
The stock gained about 5.1% in the trading session on Oct 18. We wait to see if the momentum continues going forward.
MGIC Investment recorded total operating revenue of $268.7 million, almost flat year over year. This was because the increase in investment income and other income was offset by lower-than-expected premiums earned. Also, the top line surpassed the Zacks Consensus Estimate of $258 million.
New insurance written was $14.2 billion in the reported quarter, up 14.4% from $11.8 billion in third-quarter 2015.
As of Sep 30, 2016, the company’s primary insurance in force was $180.1 billion, up 4.3% year over year.
Persistency, or the percentage of insurance remaining in force from the year before, was 78.3% as of Sep 30, 2016 compared with 80.0% as of Sep 30, 2015.
Percentage of delinquent loans, including bulk loans, was 5.2% as of Sep 30, 2016 compared with 6.3% as of Jun 30, 2015.
Primary delinquent inventory plunged 20.4% year over year to $51.4 billion.
Net underwriting and other expenses totaled $40.4 million, down 16.5% year over year.
Losses incurred in the quarter narrowed to $60.9 million from $76.5 million. A $38 million reduction in losses in the third quarter was due to the positive development on the company’s primary loss reserve. This apart, the company witnessed a lesser new delinquent notices received and a lower claim rate. MGIC Investment had recorded positive development of around $39 million in the second quarter of 2015.
Total losses and expenses decreased 33.6% year over year to $190.1 million. Underwriting and other expenses, net was down 16% year over year, while interest expenses decreased 22% year over year. All these factors contributed to the decline in total loss and expense.
Book value per share, a measure of net worth, jumped nearly 18.2% year over year to $7.48 as of Sep 30, 2016 from $6.33 as of Sep 30, 2015.
As of Sep 30, 2016, MGIC Investment had approximately $4.9 billion in cash and investments, up 2.1% year over year.
In the third quarter, the company repurchased $292.4 million 2% convertible senior notes, due 2020. The repurchase was funded through the issue of $425 million of 5.75% 2023 Senior Notes.
Performance of Another Insurer
Like MGIC Investment, another insurance company too managed to post better-than-expected third-quarter earnings. Progressive Corp.’s (PGR - Analyst Report) operating net income of 36 cents beat the Zack Consensus Estimate by 3 cents.
Zacks Rank and Other Stocks
Currently, MGIC Investment carries a Zacks Rank #3 (Hold). Some better-ranked insurers include Prudential Financial Inc. (PRU - Analyst Report) and Radian Group Inc. (RDN - Analyst Report) . Both these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radian Group, a credit enhancement company which supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services, is due to report third-quarter results on Oct 27. The Zacks Consensus Estimate is currently pegged at 38 cents.
Prudential Financial, a financial products and services including life insurance, annuities, retirement-related services, mutual funds, investment management and real estate services, is due to report third-quarter results on Nov 2. The Zacks Consensus Estimate is currently pegged at $2.50.
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