MGIC Investment Corporation
) gained 1.2% to close at $8.72 on Thursday, May 8, after the
company reported a decline in delinquency level and a sequential
increase in new business written.
Primary new insurance written for the month of April 2014 was
$2.3 billion, down 4.2% year over year but up 15.0%
Despite a year-over-year decline in new business written, MGIC
Investment witnessed a consistent improvement in delinquency
levels. Delinquent inventory for April 2014 was 87,987, down 28%
year over year and 4.2% sequentially.
MGIC - a niche player in the mortgage insurance market - is
enjoying improving market conditions with a rebound in the housing
market. Primary new insurance written at MGIC Investment was $29.8
billion in 2013, up from $24.1 billion in 2012 and $14.2 billion in
2011. The increase was attributable to larger origination volume as
well as an increase in the private mortgage insurance industry's
According to Inside Mortgage Finance, till 2010, MGIC Investment
was the largest private mortgage insurer (as measured by new
insurance written) for more than 10 years. In 2013, MGIC Investment
had the third-largest market share (as measured by new insurance
Management at MGIC Investment is encouraged by growing demand
for home purchases. Moreover, as the majority of purchases
involving mortgage do not have 20% down payment, the company
anticipates to benefit from this market opportunity.
After suffering losses for the past six years due to the
subprime crisis, the industry is now recovering gradually. The
current market structure presents a good opportunity for stronger
players, which have a sturdy capital position and can
tolerate regulation. 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 conditions.
MGIC Investment currently carries a Zacks Rank #3 (Hold).
Some of the companies under the Zacks coverage are well poised
to gain from the changing trends in the mortgage industry and
Old Republic International Corp.
) with a Zacks Rank #1 (Strong Buy) is one of them.
Another new entrant -
Arch Capital Group Ltd.
) - a favorable Zacks Rank # 2 (Buy), announced plans to enter the
U.S. mortgage insurance market last year by acquiring the assets of
bankrupt insurer PMI Group Inc. for $300 million.
Another Zacks Rank # 2 stock,
Genworth Financial Inc.
), is also a good investment option.
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