TWGP Heading Up With the Rest of the Insurance Sector
MGIC Investment Corporation, through its subsidiaries, provides mortgage insurance to lenders and government sponsored entities in the United States. MGIC Investment Corp (MTG) shares exploded upwards 14.74 percent after the mortgage insurer posted surprise third-quarter profits, leading competitors Radian Group (RDN) and Genworth Financial (GNW) in an industry rally. MGIC has seen six years of annual losses since the housing crises of 2007 and 2008.
For the third quarter ended September 30, MGIC reported earnings of 4 cents a share on net income of $12.1 million, compared to a loss of $1.22 a share on a net loss of $246.9 million, for the year-ago quarter.
For the nine months to September, MGIC reported a net loss of $48.4 million compared to a net loss of $540.4 million for the same period in 2012. Losses incurred dropped to $180.2 million from $490.1 million a year earlier, indicating fewer delinquency notices received and a lower claim rate.
Shares of Radian Group and Genworth Financial also gained, up 7.7% and 3.6% respectively. Both companies are expected to report at the end of October.
Bottom line... If a company such as MGIC with 6 years of losses and a current 9 month loss gains 14.74 percent over a $0.04 profit for the quarter, and is trading at $8.33 with a $2.81 billion market cap, $2.02 book value per share, $1.69 cash and equivalents per share, and $1.32 billion in debt, Tower Group (TWGP) should be trading at a much higher price per share than MGIC.
In comparison, TWGP reported a $0.56 per share profit last quarter, is trading at under $4.50 per share with a $246.44 million market cap, $20.85 book value per share, $4.51 cash and equivalents per share, and only $459 million in debt. Enterprise value of TWGP is $457.77 million on a market cap of $246.44 million, while the enterprise value of MTG (MGIC Investment Corp) is $3.28 billion on a market cap of $2.81 billion. Based upon valuation, TWGP should be worth $392.17 million, or $6.82.