Should You Hold MGIC Investment (MTG) In Your Portfolio?

MGIC Investment Corporation (NYSE:MTG) has successfully lived up to the ever-changing demands and expectations of its clients, building a solid service and product portfolio over the years. The company remains focused on maintaining this streak to further upgrade the overall results.

MGIC Investment has kept its target intact on growing insurance in force. However, given the current market environment, the company anticipates to write approximately the same amount of new insurance as 2016. Nonetheless, the company estimates writing new business of about $48 billion in 2017. Therefore, such level of new business along with an expected increase in persistency is anticipated to drive growth in insurance in force in 2017.

Also, MGIC Investment witnessed a substantial decline in paid claims over a considerable period of time. Banking on lesser claim filings, this Multi line insurer estimates a further fall in the metric in the near term. A decrease in loss and claims will in turn brace the company’s balance sheet, improving its financial profile.

This apart, the Zacks Rank #3 (Hold) Multi line insurer’s growing private mortgage market share continues to boost insurance in force, driving future revenues. The company with a current 18% market share, expects to gain 19–20% of the same in the industry it operates.

Additionally, a strong capital position will allow the company to repurchase some of the convertible debt in order to lower its interest burden as well as facilitate margin expansion.

Shares of MGIC Investment have rallied 15.01% year to date, significantly outperforming the industry’s increase of 4.68%. We expect bottom-line growth, improving new insurance written, higher net investment income as well as a robust capital position to drive the stock higher in the near term.

However, increased premium rate changes, which will put pressure on the company’s top line, will remain a headwind. Plus, increasing total loss and expenses will continue to hamper the company’s overall results.

Nonetheless, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.43 over a period of a year, a 2.9% discount to the industry average of 1.39.

Furthermore, MGIC Investment has a trailing 12-month return on equity (ROE) of 16.6%, way higher than the industry average of 7.7%. The company’s expected long-term earnings growth is pegged at an impressive 5.00%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are American Financial Group, Inc. (NYSE:AFG) , CNO Financial Group, Inc. (NYSE:CNO) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial provides property and casualty insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 17.03%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

One Simple Trading Idea

Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.

This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.

Learn more >>