Why Is MGIC (MTG) Down 3.8% Since Last Earnings Report?
A month has gone by since the last earnings report for MGIC Investment (MTG). Shares have lost about 3.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MGIC due for a breakout? 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 Q4 Earnings Top, Revenues Lag Estimates
MGIC Investment Corporation reported fourth-quarter 2022 operating net income per share of 64 cents, which beat the Zacks Consensus Estimate by 8.5% and our estimate of 59 cents. The reported figure increased 4.9% year over year.
The insurer witnessed higher insurance in force and net investment income, offset by higher expenses and lower premiums.
Operational Update
Insurance in force increased 7.6% from the prior-year quarter to $295.3 billion. The figure was higher than our estimate of $294.9 billion. The insurer witnessed a 20.7% decrease in primary delinquency to 26,387 loans.
MGIC Investment recorded total operating revenues of $291 million, which decreased 0.6% year over year on lower premiums earned. The top line missed the consensus mark by 12.9% and our estimate of $334.1 million.
Net premiums written decreased 2.8% year over year to $231.4 million. The figure was lower than our estimate of $260.1 million. Net investment income increased 18.5% year over year to $46.4 million. The figure was higher than our estimate of $44.3 million.
Persistency — the percentage of insurance remaining in force from one year prior — was 79.8% as of Dec 31, 2022, up from 62.6% in the year-ago quarter. It compares favorably with our estimate of 66.3%. New insurance written was $12.9 billion, down 52.4% year over year due to a decline in origination markets. The figure was lower than our estimate of $37.2 billion.
Net underwriting and other expenses totaled $73.5 million, up 58.9% year over year. The increase was primarily due to higher expenses related to investments in technology and data and analytics infrastructure. For the quarter under review, the loss ratio was (12.8%) compared with (9.9%) for the fourth quarter of 2021.
Full-Year Highlights
Operating net income per share of $2.79 missed the Zacks Consensus Estimate as well as our estimate of $2.86. The reported figure increased 50.9% year over year. Total operating revenues of $1.2 billion increased 0.3% year over year. The top line missed the consensus mark by 12.9% and was almost in line with our estimate.
Financial Update
Book value per share, a measure of net worth, increased 4% from 2021-end to $15.82 as of Dec 31, 2022. Shareholder equity was $4.6 billion as of Sep 30, 2022, down 6.1% from 2021 end. MGIC's PMIERs Available Assets totaled $5.7 billion, or $2.3 billion above its Minimum Required Assets as of Dec 31, 2022. Assets were $6.2 billion as of Dec 31, 2022, down 15.1% from 2021 end. Debt was $663 million as of Sep 30, 2022, down 39.7% from 2021 end.
Capital Deployment
MGIC Investment paid 10 cents in dividend per common share to shareholders during fourth-quarter 2022. It bought back shares worth $80 million in the fourth quarter and another $28.2 million worth in January 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -9.94% due to these changes.
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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise MGIC has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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