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MGIC Investment (MTG) Posts Solid June Business Statistics

Zacks

MGIC Investment Corp. MTG has recently announced its Jun 2017 operating business statistics. Insurance in force for the month was $187.3 billion, up 5.5% year over year. Delinquency loans (loans that failed to pay back) at MGIC Investment declined on a year-over-year basis. Delinquent inventory for the month under review decreased 21.4% year over year to 41,317.

MGIC Investment was severely affected by the 2008 financial crisis. However, the company is steadily recovering on the back of declining delinquencies and improving cure rates on claims from its legacy business. The prospects of the company also look bright in terms of growing book of high-credit-quality business written since 2009.

MGIC Investment has been witnessing improvement in new business written, owing to larger origination volume as well as an increase in the private mortgage insurance industry’s market share. Given the current market environment, the company anticipates to write approximately the same amount of new insurance as last year’s. New business written as well as an expected increase in its persistency are anticipated to increase insurance in force in 2017.

Given the declining pattern of claim filings, we expect paid claims to decrease further. Also, a decline in loss and claims will strengthen the company’s balance sheet and improve its financial profile.

MGIC Investment expects the number of loans in delinquent inventory as well as claim rate applied to new delinquent notices to decline in 2017. However, based on seasonal factors, the company anticipates the claim rate for new notices received in subsequent periods of 2017 to be modestly higher than the rate used in the first quarter but lower than the rates used in comparable quarters, last year.

Shares of MGIC Investment have rallied 14.72% year to date, outperforming the Zacks categorized Multiline Insurance industry’s increase of 5.70%. We expect the improving housing market and the declining delinquency to boost the company’s earnings in the coming quarters and help the shares retain momentum.


MGIC Investment is set to report second-quarter results on Jul 20. The Zacks Consensus Estimate is pegged at 25 cents, reflecting a year-over-year decline of 3.85%. Our proven model does not conclusively show that the company is likely to beat on earnings this time. While a Zacks Rank #3 (Hold) increases the predictive power of ESP, an Earnings ESP of 0.00% makes prediction difficult. The company delivered positive surprises in the last four quarters, with an average beat of 33.38%.

Stocks to Consider

Some better-ranked insurers are Cigna Corp CI, FBL Financial Group, Inc. FFG and Progressive Corp. PGR.

Progressive provides personal and commercial property-casualty insurance, plus other specialty property-casualty insurance and related services primarily in the United States. The company has delivered positive surprises in two of the last four quarters with an average beat of 4.95%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

FBL Financial sells individual life insurance and annuity products. The company has delivered positive surprises in two of the last four quarters with an average beat of 1.98%. The stock holds a Zacks Rank #2 (Buy).

Cigna provides health care and related benefits, the majority of which offered through workplace. The company has delivered positive surprises in three of the last four quarters with an average beat of 1.35%. The stock carries a Zacks Rank #2.

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