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MGIC Investment Corp. Message Board

  • liv4ever66 liv4ever66 Mar 8, 2013 5:00 PM Flag

    Did some homework - stay away

    1) Pre-crisis these guys ran a loss ratio of 50 and made great money

    2) In the 4th quarter 2012 they pulled in $260M of premiums

    3) In Feb 2013 they had 9,000 new notices which I extrapolate to 27,000 for Q1. They say 1 in 4 goes to paid and average paid is $50K. That calculates to a loss of $338M.

    4) These guys are still running way over 100% loss ratio (338M/261M).

    5) To get to pre-crisis loss ratio of 50 they need to be down around 3,500 notices a month.

    6) Last Feb they had 11,200 notices...this Feb 9,000. At this rate they are at least 3 years away from a profitable loss ratio.

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    • Moody's said it has placed Mortgage Guaranty Insurance Corp.'s junk-grade "B2" financial strength rating and the debt ratings of its parent corporations on review for possible upgrade. The rating agency also affirmed the "Ba3" financial strength rating of MGIC Indemnity Corp. and changed its outlook to "Stable" from "Negative" as a result of the offering. EOA

    • Even with all of this, they had $371M in revenue for the past quarter. They've got some other expenses like debt service, operational costs, settlements, etc... but even with, say, an extra $100M in expenses on top of the $338M, they're still only a measly ~$50M away from a net profit.

      Adding to that, claims are going down, cures are up, and NIW and marketshare is continuing to increase.

      It's all about momentum.

      In short... I would go short Apple (which is falling apart with mediocre products, a panicking CEO, and decreasing marketshare) if I were you guys... NOT this stock.

      If you short at even this price (~$4.5), and it reports good news, it could go to $6 again in just a few days, an instant 50% loss for you.

      Just use your common sense.

      Sentiment: Buy

    • You better away from here, but don't cry in 3 months time !!!

    • I think they reserve about $27k per paid loan, mate. Not $50k. That cuts your calculated loss into half at about $169M.

      Sentiment: Buy

      • 2 Replies to mikejones698
      • They pay $48K per paid claim. According to their CEO 1 in 4 notices goes to paid. For their inventory they have an average of $27K reserved per claim in their inventory.

        These guys will be bleeding for a long time. There is another capital raise in their future once they blow through this $1.2B.

        Also in their hay day they had a big surplus that was throwing off large investment returns. The surplus is gone and so are good investment yields.

      • thats the average for all loans, what the oP is saying is that 27,000*50k*.25 = 337.5, what the OP missed is that their investment yield in the past was much higher, now, it is under 2%, so they need to run a lower loss ratio to make up for the lost investment income.

    • A Barclays spokesperson said the high rating for the two rival companies MTG and Radion RDN was issued because each of these organizations have much better access than they’ve had in the past to capital needed to absorb any additions to loss reserves.

 
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