MGIC Investment Corporation
) gained 1.65% to close at $9.24 on Jul 10, after the company
reported robust monthly operating statistics for Jun 2014. The
results reflected a decline in delinquency level and an improvement
in new business written.
Primary new insurance written for Jun 2014 was $3.2 billion, up
14.3% both on a sequential as well as year-over-year basis.
MGIC Investment witnessed consistent improvement in delinquency
levels. Delinquent inventory for Jun 2014 was 85,416, down 27.1%
year over year and 1.2% sequentially.
Established in 1957, MGIC Investment is the nation's oldest private
mortgage insurer, with $159.2 billion insurance in force. The
company which was devastated in the aftermath of the 2008 financial
crisis is chugging back. The company's fortunes have been aided by
declining delinquencies and improving cure rates on claims from its
legacy business. Prospects for a brighter future are also being
boosted, in turn, by the company's growing book of
high-credit-quality business written since 2009.
We expect MGIC Investment to gain from improving market conditions,
especially a rebound in the housing market. In 2013, primary new
insurance written at MGIC Investment was worth $29.8 billion, up
24% year over year and double the figure reported in 2011. The
increase was attributable to larger origination volume and improved
share in the in private mortgage insurance market.
According to Inside Mortgage Finance, till 2010, MGIC Investment
was the largest private mortgage insurer (in terms of new insurance
written) for more than a decade. In 2013, the company had the
third-largest market share (in terms of new insurance written).
Management at MGIC Investment is encouraged by the growing demand
for home purchases. Moreover, as the majority of purchases
involving mortgage do not have a 20% down payment, the company
expects to benefit from this opportunity.
After suffering losses for the past six years due to the subprime
crisis, the industry is now on its path to recovery. The
transformed market structure with characteristics such as better
credit quality of loans that are being insured now, wipe out of the
portfolio of pre-crisis mortgages, and the possibility of a
decrease in the Federal Housing Administration share of the
mortgage insurance market may encourage more new entrants.
For many years until 2010, the mortgage insurance industry had seen
sluggish new entries. In 2010,
Essent Guaranty, Inc.
) began writing mortgage insurance; in 2013, National Mortgage
Insurance Corporation, began writing mortgage insurance; and in
January 2014, Bermuda-based
Arch Capital Group Ltd.
) announced that its U.S.-based subsidiaries - Arch U.S. MI- had
completed the purchase of a competitor, CMG Mortgage Insurance
Company, and that it had received approval as an eligible mortgage
insurer from Fannie Mae and Freddie Mac.
MGIC Investment currently carries a Zacks Rank #3 (Hold).
A better-ranked mortgage insurer is
Radian Group Inc.
). The stock sports a Zacks Rank #1 (Strong Buy).
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