MGIC (MTG) Down 10.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for MGIC Investment (MTG). Shares have lost about 10.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is MGIC due for a breakout? 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 get a better handle on the important catalysts.

MGIC Q4 Earnings & Revenues Beat Estimates, Up Y/Y

MGIC Investment reported fourth-quarter 2019 operating net income per share of 49 cents, which beat the Zacks Consensus Estimate by 16.7% and was also up by the same magnitude year over year.

Insurance in force increased 6% to $222.3 billion, despite lower persistency.

The company witnessed 9% decline in primary delinquency to 30,028 loans.

Operational Update

MGIC Investment recorded total operating revenues of $311.6 million, which increased 9.1% year over year on higher net investment income (up 7.8%) and net premiums earned (up 8.4%). The same beat the Zacks Consensus Estimate by 1.44%

The increase was due to higher average insurance in force and a rise in premiums from single premium policy cancellations, partially offset by the effect of lower premium rates.

Persistency, the percentage of insurance remaining in force from one year prior, was 75.8% as of Dec 31, 2019, down 590 basis points (bps) year over year.

New insurance written was $19.3 billion, up 58.2% year over year.

Net paid claims amounted to $73 million, down 2.7% year over year.

Net underwriting and other expenses totaled $52.3 million, up 4.6% year over year.

In the quarter under review, loss ratio was 8.9%, which improved 240 basis points year over year.

Financial Update

Book value per share, a measure of net worth, grew 23.1% year over year to $12.41 as of Dec 31, 2019.

MGIC Investment had $325 million in cash and investments, up 31% year over year.

Total assets were $6.2 billion, up 8.8% year over year.

Risk-to-capital ratio was 9.6:1 as of Dec 31, 2019 compared with 9.8:1 as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, MGIC has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, MGIC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.