PMI Pmi Grp. (The) Common Stock

MGIC Investment Corp. (MTG) reported a first-quarter 2011 operating loss of 20 cents per share; wider than the Zacks Consensus Estimate of a loss of 10 cents. However, the loss narrowed from the year-ago quarter's loss of $1.42 per share. Operating loss totaled $38.8 million compared with a loss of $177 million in the prior-year quarter.

Including a realized gain of $5.8 million or 3 cents a share, MGIC reported a loss of $33 million, compared with a loss of $150.1 million or $1.20 per share.  The year-ago quarter included a realized gain of $26.9 million or 22 cents a share.

Operational Update

Total revenue for the quarter came in at $353.1 million, up 5% year over year. Results modestly exceeded the Zacks Consensus Estimate of $352 million in revenue.

Net premiums written increased 7.2% to $274.5 million. New insurance written at $3.4 billion grew for the fourth straight quarter. On a year-year-year basis, new insurance written grew a whopping 67%.

Investment income was $56.5 million, down 18% year over year.

Net underwriting and other expenses were $57.6 million, down 3.8% year over year. The decrease reflected lower contract underwriting volume as well as a focus on expense control in difficult market conditions.

Persistency (the percentage of insurance remaining in force from the year-earlier period) was 88.3% as of March 31, 2011, compared with 85.6% in the prior-year period. MGIC’s primary insurance in force fell 9.8% year over year to $186.9 billion.

In the first quarter, net claims paid totaled $687 million, sharply up 32% year over year.

As of March 31, 2011, MGIC’s risk-to-capital ratio was 19.7:1 compared with 20.1:1 as of March 31, 2010. MGIC ended the quarter with cash and cash equivalents of $1.1 billion, up 36% from $818 million at the first quarter 2010 end.

Book value per share declined 13% year over year to $8.00 as on March 31, 2011.

Going forward, we expect the company to benefit from improving credit trends. Also, a normal operating environment, expected in 2011, will fuel an increase in new insurance written. We also expect lower levels of loan modifications under the Home Affordable Mortgage Program as the company has realized significant benefits from it.

The quantitative Zacks #5 Rank (short term Strong Sell rating) on the stock indicates downward pressure on the shares over the near term.

Based in Milwaukee, Wisconsin, MGIC Investment Corp. is the parent company of Mortgage Guaranty Insurance Corporation, the largest private mortgage insurer in the U.S., offering its products across the country, the District of Columbia, and in Puerto Rico. It competes with Genworth Financial Inc. (GNW), PMI Group Inc. (PMI) and Radian Group Inc. (RDN).

 
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