MGIC Investment Upgraded to Strong Buy - Analyst Blog

On Mar 26, 2014, Zacks Investment Research upgraded U.S. private mortgage insurer MGIC Investment Corp. MTG to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

MGIC has been experiencing improving industry fundamentals of late after suffering losses for several years owing to the subprime crisis. The company broke even in the fourth quarter of 2013, beating the Zacks Consensus Estimate of a loss of 2 cents. The result compared favorably with an operating loss of $1.91 per share reported in the year-ago quarter.  

The improving demand for home purchases will add to the company's top line going forward. The company increased new primary insurance written to $29.8 billion in 2013 from $24.1 billion in 2012 and $14.2 billion in 2011.

MGIC Investment is also witnessing lower paid claims as well as an improvement in delinquency rates, which will aid the bottom line.  

MGIC Investment has been the largest private mortgage insurer (as measured by new insurance written) for more than 10 years. In 2013, MGIC Investment had the third largest market share, which is expected to increase given the efforts made by the company to revamp its business.

The company's efforts towards improving its capital position through the $1.15 billion capital raised in Mar 2013,as well as through the strategic use of external reinsurance are also commendable. A strong capital position will enable it to comply with regulations along with pursuing new business opportunities.

Other Stocks to Consider

Some better-ranked players worth considering in the sector include FBL Financial Group Inc. FFG, ING U.S. Inc. VOYA, and Kemper Corp. KMPR. All these stocks hold a Zacks Rank #2 (Buy).