RDN just caught up (or rather MTG fell down enough) that the market cap as of writing is virtually equal, at around 2.68 billion dollars.
I fully blame MTG management for this, they should have been way better prepared for the PMIERS, and failed miserably on their communication skills.
What I've been thinking, they must have known in advance what the new rules would be, from good management, I would have expected them for example to have announced increased reinsurance agreements at the time the PMIERS became public, to show that they are in control and will handle the new rules, even if they are draft.
Instead, the way MTG management communicated, was as if they got caught with their pants down, completely helpless. Unbelieveable.
There is no coincidence whatsoever on Culver being replaced, surely the BOD was pretty #$%$ as well on how things were managed. Culver was great for a turnaround, now we need someone who can elevate us to the next level.
Been long MTG for long time, but now starting to consider moving my money over to RDN.
Wow, that's insane! MTG is literally a time bomb. At what point will these shorts be satisfied?
They must really be counting on a massive market crash. MTG already said it won't need to dilute to adhere to the GSE requirements so that can't be it.
Blown away by the number, any good news on the FHFA proposals and this thing could be explosive.
Sentiment: Strong Buy
May? We are August by now. Shorts are not in "control" per sé, but they do seem to have the upper hand right now. This is just to blame on MGIC management, and also on FHA with their overly strict proposed regulations. Has little to do with what homeprices did in May.
Zeke, Tommie, thanks for your replies. This confirms largely how I've interpreted the situation, in that there is no cash flow impact, but in essence it is "dead money" as it has to be kept in storage (whatever way you classify it, as reserves or otherwise), it is money that can't be spend, such as on stock buy backs or dividends. This is a big change from before the draft rules, too bad.
However, that has no bearing on operational performance of MGIC, which continues to get better, so I still see greener pastures, but I was really hoping MGIC would release a billion of reserves within a year, to initiate a stock buy back, since we have so many shares outstanding, it is a real drag on PPS appreciation. At the minimum I'd like them to buy back all that convertible debt, which made our potential shares outstanding jump from 340 ish to 420 ish million shares, which is way too much for me. EPS beat would have been much bigger without it, for Q1.
Let's see what management has to say tomorrow, hoping for the best.
it is my understanding that MGIC will not be releasing reserves in the next years, as given the new draft rules, they now need to hold more funds in liquid than they even have today. So those reserves would stay where they are, and not count as profit, right? I think they need to keep around 5.9 billion in liquid assets available, of which they said they have around 5.3 right now, this current amount includes the reserves right?
Sentiment: Strong Buy
My expectation is that price will not move significantly in either direction, until during/after the ER. At this stage, unfortunately MGIC management has set themselves up in a situation where the Q2 results are completely irrelevant. Price direction, I believe, will be driven by management comments on the GSE PMI proposals, and nothing else. It is not a given that we will go up tomorrow, depending on management comments, we may go down as well. I hope not.
Don't get me wrong, 20% upside would be great, but have we ever had such a big move in one day since Q1 2013? Prefer to stay realistic. Helps prevent massive disappointment.
Sentiment: Strong Buy
That's what I'm doing right now, let's put some pressure on these guys, they made a huge cockup last week, which was completely unnecessary. First time I'm disappointed in management, since Q1 2013 when I got into this stock.
Sentiment: Strong Buy
Fully agree I'm sending a mail to the IR person right now. Very very disappointed with how they handled this. Radian clearly handled it much better.
Because MGIC management is very conservative, they could have been a bit more subtle in their communication.
They have to act like this is the end of the world, as this is part of the negotiation, to get to a set of rules that works for everyone. Where Radian took more of the approach "we can manage and we'll see", MGIC went with the approach: this is horrible and we will not be able to comply.
I regard today as an enormous gift, to be able to buy in at this price level.
Most people know, that eventually, the rules implemented will be more somewhere in the middle, something MGIC will be able to comply with. Like they said, if they can take into account future income from their insurance written, they would already be in compliance.
Basically, nothing to worry about for the time being, looks like we're gonna be just fine!
Key takeaway from their comments:
If the Draft PMIERs were modified to consider expected future contractual premiums on all in force policies, MGIC's preliminary assessment indicates that it would have no shortfall in its Available Assets on either measurement date...
If the Draft PMIERs were adopted in the form released for public input, MGIC could pursue various alternatives to mitigate the shortfall in its Available Assets, including, subject to any applicable limitations, contributing additional funds from the holding company to MGIC, modifying existing or entering into new external reinsurance transactions, raising additional capital to contribute to MGIC, and seeking approval from the GSEs to write all of our business in MIC (which we estimate has sufficient Available Assets to meet the financial requirements of the Draft PMIERs for approximately one year at current volumes of new insurance written, and assuming no changes to our existing external reinsurance arrangements, which also cover business written by MIC)
Ok, I'm going a bit too fast there myself. I think we all need to digest this news and see what it really means.
I see MGIC just issued a statement, and they are flagging they would not be meeting certain requirements.
We need to see what this means.
In any case, it's a proposal asking for input, not final, and there will be a long time to implement. Let's digest.
My statement to you, dndn, still stands, stop spreading fear, we don't know what the final rules will be, so talking about UBS and $6 target etc is irrelevant.
You're full of it, and you don' know what you are talking about. RDN has released a statement they will not need to raise capital and are able to comply with the new standards. Given that MTG's risk to capital ratio is much better than RDN, there will be no such thing needed for MTG to raise capital.
Stop trying to spread fear and uncertainty to help your short position.
Slips? I don't think you understand what the delinquent inventory is about. The lower the better. Ignore the after hours action, it's meaningless. Shorts are trying to manipulate. Q2 results are gonna be great!
Nope, I doubt they would do that, given that I could trade on that data before it's released to the public.
Investor relations just told me they will release them before the Q2 results, they said they were running a bit behind because of the holiday last week. Should be today or tomorrow.
Hey Pepsi, don't forget to enjoy life a little, must be tiring always having this negative perspective on things, no? It will be what it will be, no one can predict the future in the very short term, everyone can predict the distant future, as eventually corrections do happen, question is when. Charts are not everything in life. Cheers
Hi Tommie, do you have a comparison of paids Q1 vs Q2 ? That will mostly drive the results I believe. I find it very bullish that they put the ER so early, I think it's a sign of confidence.
Yesterday's volume, and today's volume so far does not agree with the statement that shorts are not concerned. Don't tell me that a considerable part of yesterday's action was not driven by short covering.