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Here's Why Investors Should Retain MGIC Investment (MTG) Stock

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Zacks Equity Research
·4 min read
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MGIC Investment Corporation MTG has been gaining momentum on the back of higher average insurance in force and average investment portfolio balance as well as solid capital position.

The stock has seen its estimates for 2022 move up 0.6% in the past 30 days, reflecting analyst optimism.

Backed by rise in net premium yield, higher premium rates on insurance in force (IIF), increase in profit commission, higher average insurance in force and a jump in accelerated premiums from single premium policy cancellations, the insurer’s premium income is likely to grow. The company expects new insurance written, the primary driver of IIF, of 2021 to be robust and of high credit quality.

Considering higher average investment portfolio balance, investment income is expected to improve amid the current low interest rate environment. The metric witnessed a five-year CAGR (2015-2020) of 8.3%.

At present, the strong housing market contributes to high levels of new insurance writings and the level of delinquencies. The insurer remains focused on providing critical support to the current housing market, especially low and moderate-income and first-time homebuyers.

The multi-line insurer boasts a solid balance sheet with cash and investments of $847 million and has low debt-to-capital ratio. Its debt to capital of 20.9% is better than the industry average of 28.7%. Its next debt maturity is $242 million, due in 2023. Riding on lower level of losses and taxes paid and higher net premium written, it continues to generate solid operating cash flows.

Furthermore, its times interest earned, a measure to identify the company ability to service debt, is 10.4 compared with the industry’s average of 3.4, implying that its earnings are sufficient to cover interest obligations.

Declining loss and claims also boost MGIC Investment’s balance sheet. The company expects claim payments to remain modest for several quarters due to the effects of both the moratoriums and the forbearance plans that are in place.

At present, it has $291 million remaining in share repurchase authorization. However, due to the global pandemic, it had temporarily suspended stock repurchase, but may resume it in the future.

Moreover, return on equity (ROE), reflecting the company’s efficient utilization of its shareholders’ funds to generate earnings, has been increasing over the past several years. Its trailing 12 months ROE of 10.2% is higher than the industry average of 7.5%.

Shares of this Zacks Rank #3 (Hold) mortgage insurer have gained 95.1% in the past year compared with the industry’s rise of 101.9%.



The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $1.61 and $1.75, indicating year-over-year increase of 21.9% and 8.7%, respectively.

Key Players

Some better-ranked players in the multi-line insurance industry are Old Republic International Corporation ORI, James River Group Holdings Ltd. JRVR and SelectQuote, Inc. SLQT. While Old Republic International sports a Zacks Rank #1 (Strong Buy), James River Group and SelectQuote carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Old Republic International delivered a trailing four-quarter earnings surprise of 65.77%, on average.

James River Group surpassed estimates in three of the last four quarters (while missing in one), with the average being 11.63%.

SelectQuote surpassed estimates in three of the last four quarters (while missing in one), with the average being 121.53%.

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

Old Republic International Corporation (ORI) : Free Stock Analysis Report

James River Group Holdings, Ltd. (JRVR) : Free Stock Analysis Report

SelectQuote, Inc. (SLQT) : Free Stock Analysis Report

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Zacks Investment Research