Housing Recovery Helps MGIC Earnings


MGIC Investment Corporation (MTG) reported second quarter 2013 operating profit of 4 cents per share, in contrast to the Zacks Consensus Estimate of a loss of 16 cents per share. MGIC had reported an operating loss of $1.36 per share in the year-ago quarter.
Quarterly Operational Update
Total revenue for the quarter came in at $263.9 million, down 18% year over year. 
Net premiums written were $236.6 million, down 0.8% year over year. The company’s new insurance written soared 36% year over year to $8.0 billion in the quarter. 
Losses incurred in the second quarter were $196 million, down 64% from last year and down 26% from last quarter. Paid claims in the second quarter were $433 million, down 32% from last year and down 8% from last quarter.
Total expenses in the quarter declined 58% year over year to $250.5 million.
Investment income in the quarter declined 35% year over year to $20.8 million.
As of Jun 30, 2013 persistency (the percentage of insurance remaining in force from the previous year) was 79.8%, down 160 basis points year over year.
As of Jun 30, 2013, MGIC’s investment portfolio, cash and cash equivalents was $5.6 billion, down 1.7% year over year.
Total assets of MGIC were $6.0 billion, down 1.5% year over year.
At Jun 30, 2013 MGIC’s risk-to-capital ratio was 20.2 to 1, lower than the maximum allowed by the jurisdictions with capital requirements, and its policyholder position was $175 million above the required minimum of $1.2 billion.
Book value per share as of Jun 30, 2013 declined 53.0% year over year to $2.02.
This second quarter 2013 earnings was  the first quarterly profit reported by MGIC, since the second quarter of 2010 and the lowest incurred loss ratio since the second quarter of 2007. Results were helped by lower claim rate on early-stage delinquencies, combined with a decreasing level of new notices. An improving housing market, along with the outstanding credit quality of the company’s new business and its industry's growing share of business from the FHA, offers an environment for gradual growth at MGIC.
Other players Radian Group Inc. (RDN), Genworth Financial Inc. (GNW) are scheduled to report second quarter earnings shortly. 
MGIC carries a Zacks Rank #3 (Hold). Another player Assured Guaranty Ltd. (AGO) with Zacks Rank #1 (Strong Buy) is worth considering.
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