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1. Company Snapshot

1.a. Company Description

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance, other mortgage credit risk management solutions, and ancillary services to lenders and government sponsored entities in the United States, Puerto Rico, and Guam.The company offers primary mortgage insurance that provides mortgage default protection on individual loans, as well as covers unpaid loan principal, delinquent interest, and various expenses associated with the default and subsequent foreclosure.It also provides contract underwriting services, as well as reinsurance.


The company serves originators of residential mortgage loans, including savings institutions, commercial banks, mortgage brokers, credit unions, mortgage bankers, and other lenders.MGIC Investment Corporation was founded in 1957 and is headquartered in Milwaukee, Wisconsin.

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1.b. Last Insights on MTG

The recent 3-month performance of MGIC Investment Corporation was driven by several positive factors. The company's impressive earnings surprise history, with a likely beat in its next quarterly report, sets a strong foundation for its performance. Additionally, the Q1 2025 earnings release exceeded expectations, with a net income of $185.5 million or $0.75 per diluted share, surpassing the Zacks Consensus Estimate of $0.66 per share. The company's adjusted net operating income (Non-GAAP) also reached $185.2 million or $0.75 per diluted share. Furthermore, MGIC Investment Corporation announced an additional $750 million share repurchase program, demonstrating its commitment to returning value to shareholders. The company's insurance in force rose, and new insurance written increased, while persistency decreased, indicating a strong performance in the quarter.

1.c. Company Highlights

2. MGIC Beats Earnings Expectations on Strong Underwriting Performance

MGIC reported a net income of $191 million for the third quarter, translating to an annualized return on equity of 14.8%. Earnings per diluted share came in at $0.83, beating analyst estimates of $0.72. The company's adjusted net operating income was also $0.83 per diluted share, up from $0.77 in the same period last year. Revenue growth was driven by the company's leadership in the private mortgage insurance market, with a robust capital position and disciplined underwriting.

Publication Date: Nov -02

📋 Highlights
  • Net Income Growth: Q3 net income of $191 million with 14.8% annualized ROE
  • Earnings Per Share: $0.83/share (vs $0.77/share in Q3 2022)
  • Capital Efficiency: Reinsurance program reduced PMIERs required assets by $2.5B (43% reduction)
  • Capital Returns: $400 million dividend to holding company due to $6 billion balance sheet capital
  • Provision Adjustments: $47 million favorable reserve development offset new claim notices (7.5% rate)

Capital Position and Reinsurance

The company's reinsurance program reduced its PMIERs required assets by $2.5 billion, or approximately 43%. MGIC's capital structure remains robust, with $6 billion in balance sheet capital. The company paid a $400 million dividend to the holding company, reflecting capital levels above its target. As Nathaniel Colson, CFO, noted, "Our approach has been pretty consistent over time, which is really around maintaining the right financial strength at the operating company."

Market Outlook and Competition

The company is seeing modest improvements in home affordability driven by easing mortgage rates and slower national home price appreciation. Despite potential new entrants into the private mortgage insurance market, MGIC remains confident in its competitive position. As Timothy Mattke, CEO, stated, "We're aware that someone is looking at potentially entering the market... but it's tough to say" whether they will ultimately join the market.

Valuation

MGIC's shares trade at a Price-to-Book Ratio of 1.22, indicating a relatively modest premium to its book value. The company's Dividend Yield is 1.97%, providing a stable source of return for investors. With analysts estimating revenue growth of 3.5% next year, the stock appears reasonably valued, with a P/E Ratio of 8.34. The company's strong underwriting performance and robust capital position support its current valuation.

3. NewsRoom

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Capital Fund Management S.A. Acquires 47,189 Shares of MGIC Investment Corporation $MTG

Dec -01

Source: defenseworld.net

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Ballast Asset Management LP Trims Stake in MGIC Investment Corporation $MTG

Dec -01

Source: defenseworld.net

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MGIC Investment Trades Near 52-Week High: Time to Hold the Stock?

Nov -27

Source: zacks.com

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American Century Companies Inc. Purchases 25,371 Shares of MGIC Investment Corporation $MTG

Nov -26

Source: defenseworld.net

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MGIC Investment: A High-Yield Opportunity in the Housing Market

Nov -24

Source: gurufocus.com

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MGIC Investment (NYSE:MTG) vs. AXA (OTCMKTS:AXAHY) Head-To-Head Analysis

Nov -19

Source: defenseworld.net

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MTG or ZURVY: Which Is the Better Value Stock Right Now?

Nov -11

Source: zacks.com

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MTG vs. ZURVY: Which Stock Is the Better Value Option?

Nov -10

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.00%)

6. Segments

Mortgage Insurance

Expected Growth: 3.0%

MGIC Investment Corporation's 3.0% growth in Mortgage Insurance is driven by increasing demand for private mortgage insurance, expansion into new markets, and a favorable regulatory environment. Additionally, the company's strong risk management practices, diversified product offerings, and strategic partnerships contribute to its growth momentum.

7. Detailed Products

Private Mortgage Insurance

MGIC Investment Corporation provides private mortgage insurance to lenders and investors, protecting them from default-related losses on residential mortgage loans.

Mortgage Guaranty Insurance

MGIC offers mortgage guaranty insurance, which provides coverage to lenders and investors in the event of borrower default.

Risk Management Solutions

MGIC provides risk management solutions to lenders and investors, helping them to identify and manage credit risk in their mortgage portfolios.

Portfolio Retention

MGIC's portfolio retention services help lenders to retain mortgage servicing rights and manage their portfolios more effectively.

8. MGIC Investment Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for MGIC Investment Corporation is medium due to the presence of alternative mortgage insurance providers. However, the company's strong brand recognition and established relationships with lenders mitigate this threat to some extent.

Bargaining Power Of Customers

The bargaining power of customers is low for MGIC Investment Corporation, as the company's products are essential for lenders to manage risk. Additionally, the company's large market share and established relationships with lenders reduce the bargaining power of customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low for MGIC Investment Corporation, as the company is not heavily reliant on a single supplier. The company's diversified supply chain and strong relationships with suppliers reduce the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants is low for MGIC Investment Corporation, as the mortgage insurance industry has high barriers to entry. The company's strong brand recognition, established relationships with lenders, and regulatory requirements create significant obstacles for new entrants.

Intensity Of Rivalry

The intensity of rivalry is medium for MGIC Investment Corporation, as the company operates in a competitive industry with several established players. However, the company's strong market position, diversified product offerings, and established relationships with lenders help to mitigate the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 11.25%
Debt Cost 7.26%
Equity Weight 88.75%
Equity Cost 10.11%
WACC 9.79%
Leverage 12.68%

11. Quality Control: MGIC Investment Corporation passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Yield: 7.0

Momentum: 6.0

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MGIC

A-Score: 6.7/10

Value: 6.0

Growth: 6.6

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Yield: 4.0

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A-Score: 6.0/10

Value: 6.8

Growth: 7.7

Quality: 9.1

Yield: 0.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.99$

Current Price

27.99$

Potential

-0.00%

Expected Cash-Flows