MGIC Investment Corporation
) gained 1.6% to close at $9.28 on Jun 10, after the company
reported robust monthly operating statistics for May 2014. The
results reflected a decline in delinquency level and an improvement
in new business written.
Primary new insurance written for May was $2.8 billion, flat year
over year but up 21.8% sequentially.
MGIC Investment witnessed a consistent improvement in delinquency
levels. Delinquent inventory for May 2014 was 86,415, down 27.4%
year over year and 1.8% sequentially.
MGIC - a niche player in the mortgage insurance market - is gaining
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 improvement in private mortgage
insurance industry's market share.
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 with 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 current
market structure presents a good opportunity for stronger players
with a stable capital position and tolerance for regulations.
Moreover, due to the exit of some firms during the housing market
crisis, supply is limited. Mortgage insurers with a differentiated
financial profile can therefore benefit from the current market
MGIC Investment currently carries a Zacks Rank #2 (Buy).
Another player that is well poised to gain from the changing trends
in the mortgage industry is
Old Republic International Corp.
) with a Zacks Rank #1 (Strong Buy). A new entrant -
Arch Capital Group Ltd.
) - with a Zacks Rank #2 (Buy) - is also worth considering. The
company ventured into the mortgage insurance market with the CMG
Mortgage Insurance Company acquisition
Another Zacks Rank #1 stock,
Radian Group Inc.
) is also a good investment option.
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