Q1 Earnings at MGIC Investment Keeps Surprise Streak Alive - Analyst Blog

MGIC Investment Corp. MTG reported earnings of 15 cents per share in the first quarter of 2014, outpacing the Zacks Consensus Estimate by nearly 67%. The results rebounded significantly from the year-ago loss of 31 cents per share.

The outperformance was driven by low level of incurred losses.

The reported quarter marks three straight quarters of positive earnings surprises and represents the highest level of quarterly profitability since 2007.

Following another solid quarter, shares of MGIC Investment gained 7.2% to close at $8.93 yesterday.
    
Behind the Headlines

Total revenue of MGIC Investment for the first quarter came in at $235.1 million, down 12.7% year over year and also missing the Zacks Consensus Estimate of $246 million. The year-over-year decline was primarily due to lower premiums and realized losses in the company's investment portfolio.

Net premiums written for the quarter were $218 million, down 12.3% year over year.

New insurance written in the first quarter was $5.2 billion, down 20% year over year, attributable to decrease in refinance transaction.

Persistency, or the percentage of insurance remaining in force since a year, was 81.1% as on March 31, 2014, up 240 basis points year over year.

MGIC Investment incurred losses of $122.6 million in the quarter, down 54% year over year driven by fewer new notices of default being received and a lower claim rate on new and previously received delinquencies.

Total loss and expense of MGIC Investment declined 48% year over year to $174.4 million, led primarily by lower losses incurred, interest expense and underwriting and other expenses.

Financial Update

MGIC Investment exited the first quarter with cash and cash equivalents of $314.3 million, substantially lower than $1.6 billion at year-ago quarter end.

Total asset declined 16% year over year to $5.46 billion at first-quarter end.

Loss reserve was $2.83 billion as on March 31, 2014, down from $3.84 billion as on March 31, 2013.

Shareholders equity increased 8.1% year over year to $840.7 million as on March 31, 2014.

Book value per share as on March 31, 2014 was $2.48, up 7.8% year over year.

Zacks Rank

MGIC Investment carries a Zacks Rank #3 (Hold).

Performance of other insurers

RLI Corporation RLI posted first-quarter 2014 operating earnings of 57 cents per share, exceeding the Zacks Consensus Estimate by 5.6% and the year-ago quarter's earnings by 9.6%.

The Travelers Companies Inc.'s TRV first-quarter net income of $2.95 per share outperformed the Zacks Consensus Estimate by 38% and improved 28% year over year.

W.R. Berkley Corp. WRB reported first-quarter 2014 core operating earnings of $1.00, handily beating the Zacks Consensus Estimate of 79 cents per share. Earnings also surged 35.1% year over year.