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Why Is MGIC (MTG) Down 0.1% 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 0.1% 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 catalysts.

MGIC Investment Q3 Earnings Beat Estimates, Revenues Rise Y/Y

MGIC Investment reported third-quarter 2019 operating net income per share of 48 cents, which beat the Zacks Consensus Estimate by 12.4% but remained flat year over year.

Insurance in force increased largely driven by favorable persistency and the addition of $19.1 billion of high-quality new insurance writings.

The company witnessed lower delinquency attributable to a favorable operating environment, driven by better employment, wage growth and higher housing demand.

Operational Update        

MGIC Investment recorded total operating revenues of $318.4 million, which increased 9.6% year over year on higher net investment income (up 17.4%) and net premiums earned (up 7%).

Net premiums earned reflect increase in average insurance in force and an increase in premiums from single premium policy cancellations, partially offset by the effect of lower premium rates.

Insurance in force was $218.1 billion as of Sep 30, 2019, up 6% year over year.

Persistency, the percentage of insurance remaining in force from one year prior, was 78.6% as of Sep 30, 2019, down 240 basis points (bps) year over year.

New insurance written was $19.1 billion, up 31.7% year over year.

Net paid claims amounted to $55 million, down 36.8% year over year.

Net underwriting and other expenses totaled $48.3 million, up 3.2% year over year. Total loss and expenses surged 62.7% due to higher losses, underwriting and other expenses incurred.

In the quarter under review, loss ratio was 12.7% compared with (0.6%) in the year-ago quarter. Underwriting expense ratio of 17.7% deteriorated 10 bps year over year.

Financial Update

Book value per share, a measure of net worth, grew 23.7% year over year to $11.93 as of Sep 30, 2019.

MGIC Investment had $308 million in cash and investments, up 18% year over year.

Total assets were $6.1 billion, up 7% year over year.

Risk-to-capital ratio was 9.9:1 as of Sep 30, 2019 compared with 9.0:1 as of Sep 30, 2018.

The company paid out $70 million in dividend to the holding company. Also, the company repurchased shares worth $70 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, MGIC has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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

MGIC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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