MGIC Investment Corporation (MTG – Free Report) has been gaining momentum on the back of higher volumes of new insurance written, fewer delinquency notices and a robust capital position.
Northbound Estimate Revision
The stock has seen its estimates for 2022 and 2023 move up nearly 8.6% and 2.3%, respectively in the past 30 days, reflecting investor optimism.
Earnings Surprise History
MGIC Investment has a decent surprise history, beating earnings estimates in five of the last seven reported quarters and meeting the same twice.
Return on Equity
MTG’s return on equity for the trailing 12 months is 14.6%, better than the industry average of 9.3%. It expanded 460 basis points (bps) 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 6.6% compared with the industry’s decline of 14%.
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Increased persistency rate along with higher volumes of new insurance written is likely to boost insurance in force. MTG expects the insurance-in-force portfolio to continue to grow in 2022.
Net premium written of MGIC Investment is likely to gain from higher insurance in force, decreased ceded premiums under quota share reinsurance transactions as well as higher premium yield.
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, which have continued through April.
Considering higher investment yields and a decrease in the investment portfolio, net investment income is likely to improve.
By virtue of fewer delinquency notices, reflecting the high quality of insurance in force, and favorable loss reserve development that indicates better-than-expected cure rates, the loss ratio is likely to improve.
The Zacks Consensus Estimate for MGIC Investment’s 2022 earnings per share is pegged at $2.27, indicating year-over-year growth of 18.8%.
Sturdy Balance Sheet
At first-quarter end, MGIC Investment’s capital exceeded the target level, which was bolstered by the ILN transaction that closed in April. The insurer’s balanced approach to maintain a strong capital position provides flexibility to maximize the long-term value of both the writing company and the holding company.
MTG expects to approach a longer-term debt-to-capital ratio in the low to mid-teens. At quarter-end, the holding company had $409 million of liquidity. MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Mar 31, 2022 MGIC Investment had $372 million remaining under a share repurchase program approved by its board in 2021. In April 2022, MTG repurchased additional shares for $39.7 million under the remaining authorization that expires at year-end 2023.
Other Stocks to Consider
Some other top-ranked stocks in the insurance industry are W.R. Berkley Corporation (WRB – Free Report) , RLI Corp. (RLI – Free Report) and HCI Group, Inc. (HCI – Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley’s stock has increased 36.2%.
The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.3% and 6.2% north, respectively, in the past 60 days.
RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 13.9%.
The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.
The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 14.3%.
The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.