MGIC to Expand Sales Team, Shares Move Up - Analyst Blog

Shares of MGIC Investment Corp. MTG gained 2.6% and closed at $8.81 per share on May 13, following its announcement the day before that it would expand its sales team. The team expansion reflects the company's efforts to increase its share in the improving mortgage market. 

 

The bigger team would include new appointees Tim Makoutz, and Gregg Maske, both specialists from the mortgage industry with respectively 20 and 28 years of experience. 

 

MGIC is a niche player in the mortgage insurance market which is now picking up, after suffering the subprime crisis that hit hard in 2006, on the ongoing recovery in the American housing sector.  MGIC's business activity perked up with $29.8 billion primary new insurance written in 2013, up from $24.1 billion in 2012 and $14.2 billion in 2011.

 

The improvement was backed by larger origination volume as well as increased share in the private mortgage insurance industry. A larger sales team will enable MGIC to keep pace with the growth trend. 

 

According to Inside Mortgage Finance, till 2010, MGIC Investment was the largest private mortgage insurer (as measured by new insurance written) for more than 10 years. The company fell to the third position in 2013, but its place among the top three firms proved its resilience when many companies failed to tide over the crisis.  

 

Management at MGIC Investment is encouraged by the growing demand for home purchases. Moreover, as the majority of purchases involving mortgage do not have 20% down payment, the company anticipates to benefit from this market opportunity.

 

After suffering losses for over six years, the industry is now gradually recovering. The current market structure presents a good opportunity for stronger players, which have a sturdy capital position and can tolerate regulation. Moreover, due to the exit of some companies during the housing market crisis, supply is limited. Mortgage insurers with a differentiated financial profile can therefore benefit from the current market conditions.

 

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

 

However, some companies under the Zacks coverage are well poised to gain from the changing trends in the mortgage industry. Old Republic International Corp. ORI with a Zacks Rank #1 (Strong Buy) and Radian Group Inc. RDN, with a Zacks Rank # 2 (Buy) are among those. Insurance company Horace Mann Educators Corp. HMN is also a good investment option with its Zacks Rank #1.