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MGIC Investment (MTG) Beats on Q3 Earnings & Revenues


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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 INVSTMT CP Price, Consensus and EPS Surprise


MGIC INVSTMT CP Price, Consensus and EPS Surprise | MGIC INVSTMT CP Quote

Operational Update

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.

Financial Update

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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