MGIC Investment Corporation (MTG) reported primary new insurance for Nov 2013 of $2.2 billion, unchanged year-over-year but down 8.3% sequentially.
For the first nine months of 2013 primary new insurance written at MGIC Investment was $23.1 billion, up 35% year over year. The increase was due to larger origination volume as well as an increase in the private mortgage insurance industry’s market share.
Though MGIC Investment did not register any increase in new business written because of seasonality, improvement in delinquency levels was seen. Delinquent inventory for Nov 2013 was 104,637, down 27% year over year.
The private mortgage industry continues to regain market share from the Federal Housing Authority but the pace of that recovery is slower.
Management at MGIC Investment remains encouraged about the recovering demand for home purchases. It anticipates that since the majority of purchases that need a mortgage do not have a 20% down payment, the company is poised to benefit from this market opportunity.
After suffering from losses for the past six years from the subprime crisis, MGIC Investment is recovering gradually along with the industry. The current market structure thus presents a good opportunity for stronger players, who have sturdy capital position and can tolerate regulation. Moreover, due to the exit of some firms during the housing market crisis, supply is limited. Mortgage insurers with a differentiated financial profile can therefore benefit from current market conditions.
Some of the companies under the Zacks coverage are well poised to gain from the changing trends in the mortgage industry and Old Republic International Corporation (ORI) with Zacks Rank # 1(Strong Buy) is one of them. This company is planning to raise fresh funds from capital markets to restart its mortgage insurance unit early next year, after mounting losses from the collapse of the housing market pushed the firm out from the mortgage insurance business.
Another new entrant, Arch Capital Group Ltd. (ACGL), also with a Zacks Rank # 2, announced plans to enter the U.S. mortgage insurance market earlier this year by acquiring the assets of previously bankrupt insurer PMI Group Inc. in a $300 million deal.
MGIC Investment Corporation carries a Zacks Rank # 2 (Buy). Another stock Assurant Inc. (AIZ) with a similar Zacks Rank is worth considering.
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