MGIC Investment Upped to Strong Buy as Estimates Raise

On Jan 14, Zacks Investment Research upgraded MGIC Investment Corp. (MTG) by a notch to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

MGIC Investment has experienced upward earnings estimate revisions on the back of consistent improvement in its operating earnings. The Zacks Consensus Estimate for 2014 has risen 13.3% to 60 cents in the last 90 days.

Additionally, this leading mortgage insurer delivered positive surprises in three of the trailing four quarters, with an average beat of 43.2%.

MGIC Investment’s growth impetus stemmed from improved core fundamentals throughout last year, with support from strong operating leverage and a decent capital position. The company has been consistently reporting favorable operating trends such as rising new premium written and a decline in delinquency levels.

Its Dec 2014 monthly operating numbers released last week also reflected its strong business. Primary new insurance written for the month was $3.3 billion, up 57.1% year over year and 13.8% sequentially while delinquency loans (loans that failed to pay back) was 79,901, down 22.7% year over year and 0.3% sequentially.

The prospects of the company also look bright on its growing book of high-credit-quality business written since 2009. The company is expected to gain from improving market conditions characterized by a larger origination volume following a rebound in the housing market in the second half of 2014.

The company has also improved its balance sheet position via capital contribution and reinsurance transaction.

Other Stocks to Consider

Investors interested in the insurance industry may also consider other favorably-ranked stocks like Radian Group Inc. (RDN), CNO Financial Group, Inc. (CNO) and Cigna Corp. (CI), each sporting a Zacks Rank #2 (Buy).