MGIC Investment Posts Feb Biz Stats, Shares Fall - Analyst Blog

Shares of MGIC Investment Corporation MTG declined by 2.7% to close at $8.96 on Mar 11, after the company reported lower primary new insurance for Feb 2014 on Mar 10. Primary new insurance written for the month of February was $1.5 billion, down 21.0% year over year and 11.8% sequentially.

Though MGIC Investment  did not register any increase in new business, improvement was witnessed in delinquency levels. Delinquent inventory for Feb 2014 was 97,588, down 27% year over year and down 4.6% sequentially.

Primary new insurance written at MGIC Investment was $29.8 billion in 2013, up from $24.1 billion in 2012 and $14.2 billion in 2011. The increase was due to larger origination volume as well as an increase in the private mortgage insurance industry's market share.

According to Inside Mortgage Finance, till 2010, MGIC Investment had been the largest private mortgage insurer (as measured by new insurance written) for a span of more than ten years. In 2013, MGIC Investment had the third largest market share (as measured by new insurance written), with market share decreasing to an estimated 17.0%, from 18.4% in 2012 and 20.3% in 2011, in each case excluding HARP refinances.

Management at MGIC Investment is encouraged by the recovering demand for home purchases. It anticipates that since the majority of purchases that need a mortgage do not have a 20% down payment, the company is poised to benefit from this market opportunity.

After suffering from losses for the past six years due to the subprime crisis, the industry is now recovering gradually. The current market structure thus presents a good opportunity for stronger players, who enjoy 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 current market conditions.

Some of the companies under the Zacks coverage are well poised to gain from the changing trends in the mortgage industry and Old Republic International Corporation ORI with a Zacks Rank #1 (Strong Buy) is one of them.  

Another new entrant – Arch Capital Group Ltd. ACGL, also with a favorable Zacks Rank #2 (Buy), entered the the U.S. mortgage insurance market by completing the acquisition of CMG Mortgage Insurance Company (CMG MI) from CUNA Mutual Group and PMI Mortgage Insurance Co. (PMI) in Jan 2014.

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