MGIC Expands Executive Team, Shares Gain - Analyst Blog

Shares of MGIC Investment Corp. MTG gained 0.75% and closed at $9.45 per share on Jun 18, after it announced plans to expand its executive team. The move reflects the company's efforts to increase its share in the improving mortgage market.

The company will appoint two specialists– William Todd Pittman and Geoffrey Cooper – from the mortgage industry. Both industry experts boast vast experience in the field and will now work toward developing the overall business of the company.  

MGIC – a niche player in the mortgage insurance market – is experiencing improving market conditions in a recovering American housing  sector. The company has consequently witnessed an increase in business activity, with primary new insurance written at MGIC Investment being $29.8 billion in 2013, up from $24.1 billion in 2012 and $14.2 billion in 2011. This shows a marked improvement from declining business activity since 2006 when the subprime crisis hit hard. The increase was attributable to larger origination volume as well as an increase in the private mortgage insurance industry's market share. The  expanded sales team will enable the company to maintain the 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. In 2013, MGIC Investment had the third-largest market share (as measured by new insurance written).

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 huge gains from this market opportunity.

After suffering losses for the past six years due to the subprime crisis, the industry is now on recovery mode. 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 firms 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 #2 (Buy).

Some other companies under the Zacks coverage that are poised to gain from the changing trends in the mortgage industry include Old Republic International Corp. ORI and Radian Group Inc. RDN with a Zacks Rank #1 (Strong Buy).  Horace Mann Educators Corp. HMN also with a Zacks Rank #1 is worth considering as well.
 

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