MGIC (MTG) Up 0.8% Since Last Earnings Report: Can This Continue?

A month has passed since the last report on the results of MGIC Investment (MTG). Shares rose about 0.8% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MGIC headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to better understand the important catalysts.

MGIC Investment’s top earnings in the first quarter, revenues not in line with estimates

MGIC Investment Corporation reported first-quarter 2024 net operating earnings per share of 65 cents, beating the Zacks Consensus Estimate by 8.3%. The better-than-expected profits resulted from higher net income from investing activities and lower insurance and other costs. The insurer continues to benefit from favorable credit trends and the resilience of the housing market. The financial result improved by 20.3% year on year.

MGIC Investment reported total operating revenues of $303 million, up 3.8% year-over-year due to higher net investment income. However, the top line was below the consensus by 0.4%.

Operational update

Insurance in force decreased 0.5% from the year-ago quarter to $290.9 billion. The company missed our estimate of $292.6 billion. The insurer saw primary delinquency decline by 2.5% to 24,142 loans.

Net premiums earned decreased 2.5% year-over-year to $242.6 million. This amount was lower than our estimate of $252 million. Net investment income increased 21.4% year-over-year to $61 million. The company exceeded our estimate of $52.7 million.

Persistence, or the percentage of coverage remaining in force from the prior year, was 85.7% as of March 31, 2024, compared to 84.5% in the prior-year quarter.

New insurance written was $9.1 billion, up 11% year-over-year, driven by favorable credit trends and a resilient housing market. Net insurance and other costs totaled $561 million, down 15.9% year-over-year. In the analyzed quarter, the loss ratio was 1.9% compared to 2.7% in the first quarter of 2023.

Financial update

Book value per share, a measure of net worth, increased 1.9% from the end of 2023 to $18.97 as of March 31, 2023. Shareholders’ equity was $5.1 billion as of March 31, 2024, an increase of 0.5% compared to the end of 2023

MGIC’s total available PMIER assets were $5.9 billion, or $2.5 billion, above the minimum required assets as of March 31, 2024. Assets were $6.5 billion as of March 31, 2024, unchanged status compared to the end of 2023. As of March 31, the debt amounted to USD 650 million, compared to USD 643.2 million at the end of 2023.

Capital deployment

In the first quarter of 2024, MGIC Investment paid a dividend of 11.50 cents per common share to shareholders. The Board also approved a dividend of 11.50 cents to be paid on May 21, 2024 to shareholders of record as of May 9.

The company bought back 4.7 million shares in the first quarter, and another 2.7 million shares in the second quarter. In April, the board of directors approved an additional $750 million share repurchase program through December 31, 2026.

How have estimates changed since then?

It turns out that new estimates have been trending upwards over the past month.

VGM results

Currently, MGIC has a nice B growth score, a rating with the same momentum score. Following exactly the same trajectory, the stock is rated B for value, putting it in the second quintile within this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. Notably, MGIC carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

MGIC is part of the Zacks Insurance – Multi line industry. Over the past month, shares in the same industry The Hartford (HIG) have gained 3.9%. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Hartford reported revenue of $4.34 billion, a year-over-year change of +10.8%. EPS of $2.34 in the same period compared to $1.68 a year ago.

For the current quarter, The Hartford is expected to report earnings per share of $2.36, representing a change of +25.5% from the prior-year quarter. The Zacks Consensus Estimate has changed -1.8% over the past 30 days.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for The Hartford. The stock also has a VGM Rating of A.

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