Why Is MGIC (MTG) Up 2.5% Since Last Earnings Report?
A month has gone by since the last earnings report for MGIC Investment (MTG). Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MGIC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MGIC Investment Q3 Earnings Top, Insurance in Force Rises
MGIC Investment Corporation reported third-quarter 2023 operating net income per share of 6 cents, which beat the Zacks Consensus Estimate by 12.3%. The better-than-expected earnings were driven by higher insurance in force, premiums and net investment income, partially offset by an increase in expenses. However, the bottom line declined 25.6% year over year.
MGIC Investment recorded total operating revenues of $297 million, which increased 0.3% year over year on higher net investment income, partially offset by a decrease in net premiums earned. The top line missed the consensus mark by 0.5%.
Operational Update
Insurance in force increased 0.2% from the prior-year quarter to $294.3 billion. The Zacks Consensus Estimate was $301 billion. Our estimate was $300.7 billion. The insurer witnessed a 4.5% decrease in primary delinquency to 24,720 loans.
Net premiums written increased 3.2% year over year to $234.5 million. The figure was lower than our estimate of $249.32 million. Net investment income increased 30.4% year over year to $55.4 million. Our estimate was $43.1 million. The Zacks Consensus Estimate was pegged at $48.8 million.
Persistency — the percentage of insurance remaining in force from one year prior — was 86.3% as of Sep 30, 2023, up from 78.3% in the year-ago quarter.
New insurance written was $14.6 billion, down 25.5% year over year due to a decline in origination markets. Net underwriting and other expenses totaled $52.9 million, down 14.3% year over year.
For the quarter under review, the loss ratio was 0% compared with 41.7% for the third quarter of 2022.
Financial Update
Book value per share, a measure of net worth, increased 10% from 2022-end to $17.37 as of Sep 30, 2023. Shareholder equity was $4.9 billion as of Sep 30, 2023, up from $4.5 billion at 2022-end.
MGIC's PMIERs Available Assets totaled $5.9 billion, or $2.6 billion above its Minimum Required Assets as of Sep 30, 2023. Assets were $6.3 billion as of Sep 30, 2023, up from $6.2 billion at 2022-end. Debt was $643 million as of Sep 30, 2023, down 3% from the 2022-end level.
Capital Deployment
MGIC Investment paid 11.50 cents in dividends per common share to shareholders during third-quarter 2023. The company bought back 3.9 million shares in the third quarter and another 2.2 million shares in the fourth quarter to date. The board also declared a dividend of 11.50 cents per common share to be paid on Nov 28, 2023 to shareholders of record as of Nov 9, 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, MGIC has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise MGIC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
MGIC belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, The Hartford (HIG), has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
The Hartford reported revenues of $4.21 billion in the last reported quarter, representing a year-over-year change of +10%. EPS of $2.29 for the same period compares with $1.44 a year ago.
For the current quarter, The Hartford is expected to post earnings of $2.29 per share, indicating a change of -0.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for The Hartford. Also, the stock has a VGM Score of A.
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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
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