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Reasons Why MGIC Investment (MTG) Stock is a Solid Pick Now
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MGIC Investment Corporation (MTG - Free Report) should continue to gain from higher insurance in force, favorable loss reserve development, higher persistency and prudent capital deployment.
Northbound Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 12.1% and 0.4%, respectively, in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
MGIC Investment has a solid earnings surprise history. It beat estimates in each of the last four quarters, the average being 36.34%.
Return on Equity
MTG’s return on equity for the trailing 12 months is 19.7%, better than the industry average of 8.3%. Return on equity expanded 710 basis points year over year. This reflects efficiency in utilizing shareholders’ funds.
Zacks Rank & Price Performance
MGIC Investment currently carries a Zacks Rank #2 (Buy). In the past year, the stock has lost 10.6% compared with the industry’s decline of 2.3%.
Image Source: Zacks Investment Research
Business Tailwinds
The Zacks Consensus Estimate for 2022 earnings per share is pegged at $2.86, indicating a year-over-year increase of 49.7%.
MGIC Investment expects new business, combined with increasing annual persistency, to result in the continued growth of the insurance-in-force portfolio. It also expects refinances to remain on the low end of the spectrum in 2022.
The new business rewriting, combined with the increasing annual persistency, will likely boost the insurance in force portfolio.
Persistency and insurance in-force are two long-term drivers of revenues. The Zacks Consensus Estimate for 2022 and 2023 revenues is pegged at $1.22 billion and $1.26 billion, indicating year-over-year increases of 3.75% and 3.35%, respectively.
The loss ratio is likely to improve, riding on fewer delinquency notices, reflecting the high quality of insurance in force and favorable loss reserve development that indicate better-than-expected cure rates.
Given a lower level of new delinquency notices, the credit performance of insurance in force is likely to improve. MTG continues to gain from the current business environment, the quality of new business rights and the low level of new delinquency notices.
In the third quarter of 2022, the capital levels at MTG and liquidity levels at the holding company were above the targets. The leverage ratio decreased from nearly 17% to approximately 12%, which is in line with the target debt-to-capital level. The multi-line insurer expects to retain higher levels of liquidity at the holding company. MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Sep 30, 2022, MTG had $194 million remaining under the share repurchase program approved by the board of directors in 2021, which will expire at year-end 2023. In October 2022, the insurer repurchased additional shares for $32.2 million under the remaining authorization.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average being 15.16%. In the past year, Kinsale Capital has gained 41.9%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings implies a respective year-over-year rise of 27.5% and 21.9%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.10%.
The Zacks Consensus Estimate for RDN’s 2022 earnings has moved 12.7% north in the past 30 days. In the past year, the insurer has lost 9.9%.
Allianz’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 12.96%. In the past year, the insurer has lost 6.8%.
The Zacks Consensus Estimate for ALIZY’s 2022 and 2023 earnings has moved 4.4% and 3.8% north, respectively, in the past 30 days.
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Reasons Why MGIC Investment (MTG) Stock is a Solid Pick Now
MGIC Investment Corporation (MTG - Free Report) should continue to gain from higher insurance in force, favorable loss reserve development, higher persistency and prudent capital deployment.
Northbound Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 12.1% and 0.4%, respectively, in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
MGIC Investment has a solid earnings surprise history. It beat estimates in each of the last four quarters, the average being 36.34%.
Return on Equity
MTG’s return on equity for the trailing 12 months is 19.7%, better than the industry average of 8.3%. Return on equity expanded 710 basis points year over year. This reflects efficiency in utilizing shareholders’ funds.
Zacks Rank & Price Performance
MGIC Investment currently carries a Zacks Rank #2 (Buy). In the past year, the stock has lost 10.6% compared with the industry’s decline of 2.3%.
Image Source: Zacks Investment Research
Business Tailwinds
The Zacks Consensus Estimate for 2022 earnings per share is pegged at $2.86, indicating a year-over-year increase of 49.7%.
MGIC Investment expects new business, combined with increasing annual persistency, to result in the continued growth of the insurance-in-force portfolio. It also expects refinances to remain on the low end of the spectrum in 2022.
The new business rewriting, combined with the increasing annual persistency, will likely boost the insurance in force portfolio.
Persistency and insurance in-force are two long-term drivers of revenues. The Zacks Consensus Estimate for 2022 and 2023 revenues is pegged at $1.22 billion and $1.26 billion, indicating year-over-year increases of 3.75% and 3.35%, respectively.
The loss ratio is likely to improve, riding on fewer delinquency notices, reflecting the high quality of insurance in force and favorable loss reserve development that indicate better-than-expected cure rates.
Given a lower level of new delinquency notices, the credit performance of insurance in force is likely to improve. MTG continues to gain from the current business environment, the quality of new business rights and the low level of new delinquency notices.
In the third quarter of 2022, the capital levels at MTG and liquidity levels at the holding company were above the targets. The leverage ratio decreased from nearly 17% to approximately 12%, which is in line with the target debt-to-capital level. The multi-line insurer expects to retain higher levels of liquidity at the holding company. MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Sep 30, 2022, MTG had $194 million remaining under the share repurchase program approved by the board of directors in 2021, which will expire at year-end 2023. In October 2022, the insurer repurchased additional shares for $32.2 million under the remaining authorization.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , Radian Group Inc. (RDN - Free Report) and Allianz SE (ALIZY - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average being 15.16%. In the past year, Kinsale Capital has gained 41.9%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings implies a respective year-over-year rise of 27.5% and 21.9%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.10%.
The Zacks Consensus Estimate for RDN’s 2022 earnings has moved 12.7% north in the past 30 days. In the past year, the insurer has lost 9.9%.
Allianz’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 12.96%. In the past year, the insurer has lost 6.8%.
The Zacks Consensus Estimate for ALIZY’s 2022 and 2023 earnings has moved 4.4% and 3.8% north, respectively, in the past 30 days.