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OUTPERFORMING OPER. METRICS FOR MGIC TO CONTINUE IN Q3 2019
MGIC HAS OUTPERFORMED ALL THE PUREPLAY PMI COMPANIES OVER THE LAST FEW YEARS IN CAPITALIZATION AND VALUATIONS, THAT TREND
SHOULD CONTINUE.
IN Q2 2019 MGIC ESTIMATED A DIVIDEND FOR SHAREHOLDERS AND CREATED A $200 MILLION SHARE REPURCHASE PROGRAM.
CAPITAL AND PRICE TO BOOK RATIOS OF PMI COS. vs S&P 500 COMPANIES
These are the Combined RISK TO CAPITAL RATIOS of the Pureplay Private Mortgage Insurance Companies as of June 30, 2019 from best to worst:
MGIC . . 10.0 to 1
RADIAN . 13.3 to 1
ESSENT . 13.6 to 1
NMI HLDS. 15.8 to 1
These are the current stock valuations using the STOCK PRICE TO BOOK RATIO from best to worst:
MGIC . . 1.10 to 1
RADIAN . 1.22 to 1
ESSENT . 1.72 to 1
NMI HLDS. 2.23 to 1
THE S&P 500 Companies average STOCK PRICE TO BOOK RATIO is 2.81 to 1, higher than all the PMI COMPANIES.
Summary: Based on the above statistical numbers, The PMI COMPANIES have "room to run" higher in STOCK price. .
The PMI COMPANIES all have better STOCK price to book ratios than The S&P 500 COMPANIES.
FIVE ITEMS POSITIVELY ADDING TO EARNINGS IN Q3 2019
The most significant item increasing NET OPERATING INCOME in Q3 will be shares repurchased, reduced CLAIMS cost of $3.3 million and an expense savings of $6.8 million from a partial termination of the 2015 QUOTA SHARE REINSURANCE Agreement. Those items that are quantifiable will add in excess of $3 cents to NET INCOME PER SHARE.
I don't believe most of these items were used in the analyst's estimates because, the items came out after their estimates were made.
This is a complete list of positive items impacting EARNINGS:
1) INSURANCE IN FORCE increased to $218.1 BILLION, a $4.2 BILLION INCREASE. Rising INSURANCE IN FORCE is the main driver of Premiums Revenue.
2) The amended 2015 QUOTA SHARE agreement will INCREASE Net Premiums Earned. The amended 2015 QSR Agreement will decrease the ceding rate from 30% to 15%.
3) MGIC paid a partial termination fee to the QUOTA SHARE AGREEMENT reinsured who didn't want to participate in the amended 2015 QSR agreement.
4) A $3.3 million approximate benefits of reduced CLAIMS paid.
5) Reduced diluted share count from shares repurchased with "share repurchase program.
MGIC is well capitalized and is looking for ways to INCREASE their return on equity so, we'll see if, any progress was made in that area as well.
CLAIMS AND COST DECLINE SEQUENTIALLY AND YoY FOR Q3 2019
Using the latest MGIC INVESTMENT press releases for July, August and September 2019 to tabulate CLAIMS cost paid and total CLAIMS paid for Q3 2019 compared to the amounts to previous quarters; claim fell SEQUENTIALLY and YoY.
Both, the number of CLAIMS and COST declined. In addition, the claim cost that was accrued for the "lawsuit for claims paying practices" at $23 million was settled with the total estimate made in the first quarter of 2019.
The total number of CLAIMS were 1045 for Q3 2019 vs 1374 for Q3 2018 and 1112 for Q2 2019. The total claim cost is estimated at $51.7 million for Q3 2019 vs $87 million for Q3 2018 and $55 million in Q2 2019 2019, a total reduction of $3.3 million.
**REVISITED**$14.26 TARGET PRICE MTG- PMI PRICE/EARNINGS RATIOS *UPDATES*
MGIC INVESTMENT stock price should rise to $14.26 approximately as market precepts are actualized.
MTG IS UNDERVALUED. In addition, MGIC HAS A PMIERS CUSHION OF $1.1 BILLION IN EXCESS OF REQUIRED AVAILABLE ASSETS. IF, MGIC WAS TO APPROXIMATE IT'S CUSHION TO MATCH OTHER PMI COMPANIES, IT WOULD HAVE APPROXIMATELY $500 MILLION FOR INVESTMENT, STOCK BUYBACKS OR OTHER STRATEGIES FOR ENHANCING SHAREHOLDER EQUITY.
Using Radian's price/ratio because, it is the next lowest, estimated current price for MTG would be $14.26.
Using NMI HOLDINGS price/earnings ratio of 14.29 times(×) analyst's average earnings estimates for 2019 = $24.58 current market price for MTG.
MGIC'S P/E RATIO of 7.24 is a full point(100 basis points) below RADIAN'S PE, THE LOWEST OF THE OTHER PMI COMPANIES SHOWN HERE:
NAME ...PE ...FWD PE PRICE/BOOK
MGIC.... 7.35. 7.66 .. 1.12
RADIAN. 8.29. .7.55. . 1.28
ESNT..... 9.54 . 8.28. . 1.80
NMIH . 14.29. .9.24. . 2.34
NMI HOLDINGS price is selling stock at nearly twice the PE ratio of what the other companies are and, it's selling at over twice what it is worth. The point is "MTG IS UNDERVALUED".
**ANALYSTS HAVE UNDER ESTIMATED MGIC'S EARNINGS EACH QUARTER FOR A WHOLE YEAR**
The earnings surprises were 12 cents, 4 cents, 3 cents and 4 cents for Q3 2018, Q4 2018, Q1 2019 and Q2 2019, respectively for a total of 23 cents. 23 cents is not a lot until you multiply it times MGIC'S PE RATIO of 7.35, then it's $1.69.
CAPITAL AND PRICE TO BOOK RATIOS OF PMI COS. vs S&P 500 COMPANIES
These are the Combined RISK TO CAPITAL RATIOS of the Pureplay Private Mortgage Insurance Companies as of June 30, 2019 from best to worst:
MGIC . . 10.0 to 1
RADIAN . 13.3 to 1
ESSENT . 13.6 to 1
NMI HLDS. 15.8 to 1
These are the current stock valuations using the STOCK PRICE TO BOOK RATIO from best to worst:
MGIC . . 1.10 to 1
RADIAN . 1.22 to 1
ESSENT . 1.72 to 1
NMI HLDS. 2.23 to 1
THE S&P 500 Companies average STOCK PRICE TO BOOK RATIO is 2.81 to 1, higher than all the PMI COMPANIES.
Summary: Based on the above statistical numbers, The PMI COMPANIES have "room to run" higher in STOCK price. .
The PMI COMPANIES all have better STOCK price to book ratios than The S&P 500 COMPANIES.
MGIC TERMINATES SOME QSR TO INCREASE PREMIUM REVENUE
The effect of the termination of the QSR agreement will be reflected in premiums revenue in the Q3 2019 Financial Results.
MGIC is loaded with capital and, they searching for ways to improve return on equity(ROE). So, one of the ways they have identified is to terminate or terminate portions of QUOTA SHARE REINSURANCE agreements thereby, increasing their "PREMIUM YIELD" from their insurance portfolio.
"2015 QSR Transaction.
We terminated a portion of our 2015 QSR Transaction effective June 30, 2019 and entered into an amended quota share
reinsurance agreement with certain participants from the existing reinsurance panel that effectively reduces the quota share cede rate from 30% to 15% on
the remaining eligible insurance."(see SEC 10Q JUNE 2019 QUARTER)
As of Q2 2019, 78.2% of MGIC INSURANCE IN FORCE is covered by reinsurance. When MGIC reinsure their insurance portfolio, they pay a portion of the premiums to the reinsurer but, they also limit their loss percentage in the event of a claim.
MGIC INSURANCE IN FORCE UP $4.2 BIL. IN Q3 TO $218.1 BIL.
Today MGIC published September 2019 monthly statistics that indicated defaults are down, while they continue increasing their insurance portfolio.
September 2019 . September 2018 Change
Insurance in force (billions)
$218.1. . . . $205.8. . .6.0%
Flow only
$212.1. . . . .$198.8. . .6.7%
Beginning Primary Delinquent Inventory (# of loans)
30,276. . . .33,748. . . .(10.3)%
Plus: New Delinquency Notices
4,393. . . .4,576. . . .(4.0)%
Less: Cures
4,398 . . . .4,510. . .(2.5)%
Less: Paids
323. . . .405. . . . (20.2)%
Less: Rescissions and Denials
8. . . .11. . . . .(27.3)%
Ending Primary Delinquent Inventory (# of loans) (1)
29,940. . . 33,398. . . (10.4)%
VALUATIONS SHOW MGIC(MTG) UNDERVALUED vs OTHER PMI COMPANIES
MGIC INVESTMENT APPEARS TO BE A GEM AMONGST PEBBLES
These are recent price/earnings ratios and price/book value ratios. Price to book ratio is calculated by dividing the market price of a stock by it's accounting book value on it's Financial Statements issued annually or quarterly:
NAME ...PE ...FWD PE PRICE/BOOK*
MGIC.... 7.35. 7.66 .. 1.12
RADIAN. 8.29. .7.55. . 1.28
ESNT..... 9.54 . 8.28. . 1.80
NMIH . 14.29. .9.24. . 2.34
*S&P 500 AVERAGE PRICE TO BOOK VALUE IS 2.80
MGIC'S P/E ratio is the lowest of the four companies presented here. NMI HOLDINGS has the highest because, analysts expect NMI HOLDINGS to grow it's net income higher in a few years and lower it's P/E ratio, at least that's the ASSUMPTION!
In addition, NMI HOLDINGS also has the highest PRICE/BOOK RATIO. Once again analyst expect, that NMI HOLDINGS'S book price of $11.88 Will grow to $27.33 on it's FINANCIAL Statements in a few years, at least that's the assumption!
The implications of a high price/book value is there is no cash or capital on the balance sheet to back up the inflated price. So, if some financial need arises in the way of liabilities, OH WELL!
Consider putting some money into MGIC, who has been in business for 62 years. They have $1.1 billion in excess cash assets over PMIERS REQUIREMENTS, which theoretically adds $3.11 to it's book vale for a total of $15.82 in book value.
MGIC started the PMI business in 1957 and has the highest net operating income at $660 million annually as of FYE 2018 in the industry.
MGIC(MTG) IS UNDERVALUED RELATIVE TO OTHER PMI COMPANIES
Most PRIVATE MORTGAGE INSURANCE(PMI) COMPANIES have attractive valuation metrics, when compared to the average valuation of The S&P 500 INDEX of companies.
MGIC INVESTMENT(MTG) is particularly attractive and is undervalued, presenting a good opportunity for investors.
These are recent price/earnings ratios and price/book value ratios. Price to book ratio is calculated by dividing the market price of a stock by it's accounting book value on it's Financial Statements issued annually or quarterly:
NAME ...PE ...FWD PE PRICE/BOOK*
MGIC.... 7.35. 7.66 .. 1.12
RADIAN. 8.29. .7.55. . 1.28
ESNT..... 9.54 . 8.28. . 1.80
NMIH . 14.29. .9.24. . 2.34
*S&P 500 PRICE TO BOOK VALUE 2.80
MGIC'S P/E ratio is the lowest of the four companies presented here. NMI HOLDINGS has the highest because, analysts expect NMI HOLDINGS to grow it's net income higher in a few years and lower it's P/E ratio, at least that's the ASSUMPTION!
In addition, NMI HOLDINGS also has the highest PRICE/BOOK RATIO. Once again analyst expect, that NMI HOLDINGS'S book price $11.88 Will grow to $27.33 on it's
FINANCIAL Statements in a few years, at least that's the assumption!
The implications of a high price/book value is that is no cash or capital on the balance sheet to back up the inflated price. So, if some financial need arises in the way of liabilities, OH WELL!
Consider putting some money into MGIC, who has been in business for 62 years. They have $1.1 billion in excess cash assets over PMIERS REQUIREMENTS, which theoretically adds $3.11 to it's book vale for a total of $15.82 in book value.
MGIC started the PMI business in 1957 and has the highest net operating income at $660 million annually as of 2018 in the industry.
MTG BOOK VALUE $13.26 BASED ON PROFORMA ANALYSIS
MGIC is expected to end 2019 with a book value of $12.02 according to CREDIT SUISSE ANALYSTS.
CASH FLOW/POSITION: 'As of June 30, 2019, we had approximately $333 million in cash and, investments at our holding company. These resources are maintained
primarily to service our debt interest expense."(FROM SEC 10Q JUNE 2019)
If, MGIC WAS TO maintain a cash cushion of available assets EQUAL to 20% in excess of PMIERS REQUIREMENTS, they would have a book value of $13.26 per share. MTG current market price is $12.53 per share.
"Capital Adequacy
PMIERs
As of June 30, 2019, MGIC’s Available Assets under PMIERs totaled
approximately $4.4 billion, an excess of approximately $1.1 billion over its
Minimum Required Assets; and MGIC is in compliance with the requirements of the PMIER REQUIREMENTS."
Data from SEC 10Q JUNE 2019
MGIC(MTG) GOOD OPPORTUNITY/ALTERNATIVE TO NMIH
MGIC is expected to end 2019 with a book value of $12.02 according to CREDIT SUISSE ANALYSTS. While NMIH is trading at 2.3 times it's book value. MTG PRICE EARNINGS RATIO IS 7.28 VS 14 for NMIH.
MGIC PAYS A 2% DIVIDEND. MGIC has the highest net operating income of 4 PMI PUREPLAY COMPANIES. They ended 2018 at $660 million NOI.
CASH FLOW/POSITION: 'As of June 30, 2019, we had approximately $333 million in cash and, investments at our holding company. These resources are maintained
primarily to service our debt interest expense."(FROM SEC 10Q JUNE 2019)
If, MGIC WAS TO maintain a cash cushion of available assets EQUAL 20% in excess of requirements, they would have a book value of $13.26.
Capital Adequacy
PMIERs
As of June 30, 2019, MGIC’s Available Assets under PMIERs totaled
approximately $4.4 billion, an excess of approximately $1.1 billion over its
Minimum Required Assets; and MGIC is in compliance with the
requirements of the PMIERs and eligible to insure loans delivered to or
purchased by the GSEs.
Maintaining a sufficient level of Available Assets will allow MGIC to remain in compliance with the PMIERs financial
requirements, including, we believe, to the extent they are revised. Our
reinsurance transactions provided an aggregate of approximately $1.3
billion of PMIERs capital credit as of June 30, 2019.
MGIC(MTG) GOOD OPPORTUNITY/ALTERNATIVE TO NMIH
MGIC is expected to end 2019 with a book value of $12.02 according to CREDIT SUISSE ANALYSTS. While NMIH is trading at 2.3 times it's book value. MTG PRICE EARNINGS RATIO IS 7.28 VS 14 for NMIH.
MGIC PAYS A 2% DIVIDEND. MGIC has the highest net operating income of 4 PMI PUREPLAY COMPANIES. They ended 2018 at $660 million NOI.
CASH FLOW/POSITION: 'As of June 30, 2019, we had approximately $333 million in cash and, investments at our holding company. These resources are maintained
primarily to service our debt interest expense."(FROM SEC 10Q JUNE 2019)
If, MGIC WAS TO maintain a cash cushion of available assets EQUAL to 20% in excess of requirements, they would have a book value of $13.26 per share. MTG current market is $12.49 per share.
"Capital Adequacy
PMIERs
As of June 30, 2019, MGIC’s Available Assets under PMIERs totaled
approximately $4.4 billion, an excess of approximately $1.1 billion over its
Minimum Required Assets; and MGIC is in compliance with the requirements of the PMIERs and eligible to insure loans delivered to or purchased by the GSEs."
Data from SEC 10Q JUNE 2019
MORTGAGE APPS JUMP HIGHER
BOTH PURCHASE APPS MOVE UP AND, REFIS UP 133%
"BY: JANN SWANSON
Mortgage Apps Jump Back Up, Borrowers Rush to Refi
MORTGAGE NEWS DAILY
Oct 2 2019, 3:16AM
The volume of mortgage applications rebounded sharply last week as homeowners rushed to refinance in response to another drop in mortgage rates. The Mortgage Bankers Association (MBA) said its seasonally adjusted Market Composite Index, a measure of that volume jumped 8.1 percent during the week ended September 27, recovering from a 10.1 percent decline the prior week. The unadjusted index rose 8.0 percent.
The Refinance Index increased 14 percent from the previous week and was 133 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 58.0 percent of total applications from 54.9 percent the previous week.
Both the adjusted and the unadjusted Purchase Indices rose 1 percent from the previous week. The unadjusted Purchase Index was 10 percent higher than the same week one year ago."
MORTGAGE RATES DROP
MORTGAGE NEWS DAILY
BY: MATTHEW GRAHAM
Mortgage Rates Lowest in Weeks
Sep 30 2019, 4:35PM
Mortgage rate movement was fairly uneventful last week. But, now their falling.
Over theToday's Most Prevalent Rates
30YR FIXED -3.75%
FHA/VA - 3.375%
15 YEAR FIXED - 3.375%
5 YEAR ARMS - 3.25-3.75% depending on the lender.
Over the past few business days, the sideways momentum gradually began to give way to modest improvements. Lenders have been slow to adjust their rate sheet offerings, but as of today, the average lender is back in line with its lowest rates since September 9th. More than a few lenders offered mid-day improvements today. Those who didn't will be able to catch up tomorrow morning, as long as the underlying bond market hasn't moved too much by then.
MTG SHOULD QUICKLY MOVE BACK TO $13 THEN HIGHER
Borrowed shares used to SHORT MTG will be paid back after REPURCHASE.
This especially is true as we approach possible good news.
NMIH MAYBE A LITTLE OVERVALUED
I did some research and found that NMIH maybe A Little overvalued at this point in housing economic cycle.
Here's some valuation metrics when compared to the other PUREPLAY PMI COMPANIES.
NAME ...PE ...FWD PE PRICE/BOOK
MGIC.... 7.35. 7.66 .. 1.12
RADIAN. 8.29. .7.55. . 1.28
ESNT..... 9.54 . 8.28. . 1.80
NMIH . 14.29. .9.24. . 2.34
The PRICE/EARNINGS RATIO IS twice the lowest company MGIC, which pays a two percent dividend yield.
In addition, NMIH is selling at 2.3 times it's book value as of June 30, 2019 second quarter.
RADIAN PRICE/EARNINGS RATIO IS TOO LOW, RDN IS UNDERVALUED
RADIAN'S net operating income is growing so fast, that I believe the stock is too low priced, when compared to the so called growth PMI COMPANIES.
These PE RATIOS ARE THE PUREPLAY PMI COMPANIES.
Here's the current P/E RATIOS:
Name. . PE....FWD PE
MGIC . .7.22 . .7.25
ESSENT .9.39 . .8.15
RADIAN .8.18 . .7.45
NMIH . .14.05. .8.98
Data from:
Etrade Financial
YAHOO FINANCE
OLD.NASDAQ
MTG AFFECTED BY SHORT INTEREST ATTACK
According to evidence gathered, on or around September 12, 2019, market players purchased approximately 3.7 -4.0 million shares from brokers. They sold those shares in the open market on September 12-13, 2019 thus driving down the price of MTG from $13.26 to $12.72.
At the time of of the "short interest ATTACK(SIA) on MTG was trading at a price of $13.26. Selling nearly 4 million shares in just two days could affect IN A LARGE WAY BECAUSE, MTG generally TRADES less than 4 million shares DAILY.
It is believed that the SIA was done to bring down the price of MTG prior to the "options expiration, thus the SIA was done by "CALL OPTION WRITERS" intent on protecting option premiums and the lost of shares that could be called away.
According to a SHORT INTEREST report for period ending September 13, 2019, short interest outstanding rose 70% TO 9 million from 5.28 million two weeks earlier, that was the highest level in over a year on September 14, 2018, when short interest was 7.76 million.
The options expiring in September of each year are sold beginning a year earlier so, there is usually large amounts of open interest.
This year there was 5700 call writers in open interest for call writers to protect.
$14.26 TARGET PRICE MTG- PMI PRICE/EARNINGS RATIOS *UPDATES*
MGIC INVESTMENT stock price should rise to $14.26 approximately as market precepts are actualized.
MTG IS UNDERVALUED. In addition, MGIC HAS A PMIERS CUSHION OF $1.1 BILLION IN EXCESS OF REQUIRED AVAILABLE ASSETS. IF, MGIC WAS TO APPROXIMATE IT'S CUSHION TO MATCH OTHER PMI COMPANIES, IT WOULD HAVE APPROXIMATELY $500 MILLION FOR INVESTMENT, STOCK BUYBACKS OR OTHER STRATEGIES FOR ENHANCING SHAREHOLDER EQUITY.
Using Radian's price/ratio because, it is the next lowest, estimated current price for MTG would be $14.26.
Using NMI HOLDINGS price/earnings ratio of 14.29 times(×) analyst's average earnings estimates for 2019 = $24.58 current market price for MTG.
MGIC'S P/E RATIO of 7.24 is a full point(100 basis points) below RADIAN'S PE, THE LOWEST OF THE OTHER PMI COMPANIES SHOWN HERE:
NAME ...PE ...FWD PE PRICE/BOOK
MGIC.... 7.35. 7.66 .. 1.12
RADIAN. 8.29. .7.55. . 1.28
ESNT..... 9.54 . 8.28. . 1.80
NMIH . 14.29. .9.24. . 2.34
NMI HOLDINGS price is selling stock at nearly twice the PE ratio of what the other companies are and, it's selling at over twice what it is worth. The point is "MTG IS UNDERVALUED".
**ANALYSTS HAVE UNDER ESTIMATED MGIC'S EARNINGS EACH QUARTER FOR A WHOLE YEAR**
The earnings surprises were 12 cents, 4 cents, 3 cents and 4 cents for Q3 2018, Q4 2018, Q1 2019 and Q2 2019, respectively for a total of 23 cents. 23 cents is not a lot until you multiply it times MGIC'S PE RATIO of 7.35, then it's $1.69.
MTG MOVING HIGHER "SOON" HAS TO BE IN THE CARDS
All the elements seem to be in place...
FORECLOSURES HIT 18 YEAR LOWS
"ANN SWANSON
Foreclosures at an 18 Year Low
Sep 23 2019, 12:40PM
Foreclosure starts hit an 18-year low in August and were down 23 percent compared to the previous August. Black Knight, in its First Look at August loan performance data, said there were 36,200 starts during the month, a 7.65 percent month-over-month decline. It was the fewest foreclosure starts since December 2000.
Starts were only one indication of the general improvement in mortgage delinquencies. The number of loans in active foreclosure, i.e. the foreclosure inventory, fell to 253,000, slightly less than a half percent of all mortgaged properties. This is 5,000 fewer than in July and down 28,000 loans from the level in August 2018. The inventory is now the smallest it has been since 2005.
The number of mortgages that were 30 or more days past due but not in foreclosure rose by 6,000 from July and was up 4,000 year-over-year. Black Knight notes that the number of outstanding mortgages nationally increased over the relevant time periods, therefore the delinquency rate fell 0.15 percent and 1.49 percent from the two earlier periods to a rate of 3.45 percent.
The number of serious delinquencies, loans 90 or more days past due but not in foreclosure, was unchanged at 444,000. This is 62,000 fewer serious delinquencies than a year earlier.
States with the highest percentage of non-current mortgages were Mississippi at 10.31 percent followed by Louisiana at 7.71 percent. Alabama, West Virginia, and Arkansas round out the top five, all with rates between 6 and 7 percent.
Black Knight calls the most recent prepayment rate the "latest sign of lower interest rates' impact on the market." Those prepayments, technically the Single Month Mortality (SMM) rate, rose by 5.45 percent compared to July, reaching a three-year high. The rate, 1.5 percent of all outstanding mortgages, is up 61.77 percent from the same time last year and is more than twice the 18-year-low rate in January of this year. Assuming 30 to 45 days to close a loan, the August prepayment activity reflects interest rates in June and July. Rates did not fall to recent lows until August and September which would indicate the SMM rate will fall still further."
MGIC MGMT SHOULD REPURCHASE MTG BEFORE WE HIT $14
Otherwise their new excuse for not executing the "SHARE REPURCHASE PROGRAM" will be: we let an opportunistic opportunity pass us by.
I can almost see the president saying "we didn't know it was going to be so much volatility".
MTG'S PRICE EARNINGS RATIO IS SO LOW, THAT EVEN A BLIND MAN COULD SEE IT'S AN OPPORTUNISTIC OPPORTUNITY.
The "ECONOMIC BACKDROP IS SO POSITIVE FOR THE PMI BUSINESS", I see MGIC surprising ANALYST ESTIMATES WHEN THEY REPORT Q3 2019 EARNINGS RESULTS for the 5th quarter consecutively.
INSURANCE IN FORCE GROWTH, DEFAULTS AND FORECLOSURES LOWS ARE ALL AT DECADE LEVELS.
$14.38 EST. FOR MTG AS FACTORS CONVERGE ON VALUE
MGIC INVESTMENT stock price should rise to $14.38 approximately as market precepts realized.
Recently, on September 18, 2019 was Affirmed by AM BEST: "AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of certain operating subsidiaries of MGIC Investment Corporation, which are Mortgage Guaranty Insurance Corporation, MGIC Indemnity Corporation, MGIC Assurance Corporation and MGIC Reinsurance Corporation of Wisconsin (collectively referred to as MGIC). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Milwaukee, WI."
MGIC'S P/E RATIO of 7.24 is a full point below the other 3 companies presented here:
NAME . .PE . FWD PE PRICE/BOOK
MGIC . 7.24 . 7.66 . 1.12
RADIAN 8.37 . 8.06. . 1.30
ESNT. . 9.92 . 9.04. . 1.87
NMIH . 14.51. 9.26. . 2.34
NMI HOLDINGS price is selling stock at nearly twice the PE ratio of what the other companies are and, it's selling at over twice what it is worth. Anyway, my point is "MTG IS UNDERVALUED".
**ANALYSTS HAVE UNDER ESTIMATED MGIC'S EARNINGS EACH QUARTER FOR A WHOLE YEAR**
The earnings surprises were 12 cents, 4 cents, 3 cents and 4 cents for Q3 2018, Q4 2018, Q1 2019 and Q2 2019, respectively for a total of 23 cents. 23 cents is not a lot until you multiply it times MGIC'S PE RATIO of 7.24, then it's $1.67.
BLOCK TRADE PURCHASE 2.75MM MTG, VOLUME
SPIKING HIGHER
MTG VOLUME UP ON HIGHER PRICES. Average daily volume is 3.85 million.
At 1:15PM a block trade was completed for 2.75 million at $13.06/price .
WHY IS MGIC'S P/E RATIO THE LOWEST? MTG S/B=$14.00
In March of this year MGIC INVESTMENT'S stock price diverged from Radian's and Essent's.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=MTG&time=8&startdate=1%2F4%2F1999&enddate=7%2F22%2F2019&freq=2&compidx=aaaaa%3A0&comptemptext=RDN+%2C+esnt&comp=RDN+%2C+esnt&ma=1&maval=0&uf=0&lf=268435456&lf2=16&lf3=2&type=64&style=350&size=2&x=52&y=12&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=15
TIM MATTKE, MGIC CEO, stated at the "BARCLAYS CONFERENCE" that MGIC'S STOCK PRICE IS VOLATILE BUT, IT'S no different than the other PMI COMPANIES.
In the past, when there has been a divergence in Radian and MGIC'S stock price over the last 10 years, a material event has occurred ie. an unusual expense, mainly in claims payments.
Unfortunately, i believe that this divergence, was due primarily to an erroneous perception in perceived claims. In the first quarter MGIC MANAGEMENT accrued a liability for $23 million for a small dispute about "claims paying" on few relatively small number of loans.
The market overreacted, causing approximately a 10% rift on the low end, between MGIC'S stock price vs ESSENT'S AND RADIAN'S STOCK PRICE. The $23 million liability has not hurt MGIC'S EARNINGS.
Here's the current P/E RATIOS:
Name. . PE....FWD PE
MGIC . .7.22 . .7.25
ESSENT .9.39 . .8.15
RADIAN .8.18 . .7.45
NMIH . .14.05. .8.98
Using Radian's 8.18 PE time(×) MGIC expected 2019 INCOME per share $1.72 = $14 price tag for MTG.
Data from:
Etrade Financial
YAHOO FINANCE
OLD.NASDAQ
IT'S A GOOD DAY TO BE IN THE PMI BUSINESS
?MORTGAGE APPLICATIONS ARE UP FOR HOME
PURCHASE
?BUILDERS CONFIDENCE IS RISING
?MORTGAGE RATES ARE SCHEDULED TO GET HELP
FROM THE FEDERAL RESERVE BANK
"MORTGAGE NEWS DAILY
Sep 18 2019, 5:46AMBY:
JANN SWANSON
Higher Mortgage Rates Didn't Deter Purchase Loan Activity
There was a jump in purchase mortgage applications during the week ended September 14 even as interest rates moved higher.
The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of applications volume, ticked down 0.1 percent on a seasonally adjusted basis, as the increase in its Purchase Index offset a significant decline in refinance activity. The Index was up 10 percent on an unadjusted basis, bouncing back from a 9 percent decline the prior week which was shortened by the Labor Day holiday.
The Purchase Index increased 6 percent on a seasonally adjusted basis, posting its third consecutive week of gains. The unadjusted index was 16 percent higher than the week before and up 15 percent compared to the same week in 2018. The average loan for a purchase mortgage was $327,400."
MY MESSAGES ARE BEING **HACKED** FROM TIME TO TIME.
IN REFERENCE TO THE LAST PARAGRAPH OF THE PREVIOUS POST: "RADIAN board of directors unauthorized"
Radian board of directors has authorized an additional REPURCHASE of shares for $200 million on August 14, 2019 to be executed by July 2020.
(YOU SEE RADIAN MANAGEMENT DOESN'T DELAY EXECUTION TIME WITH THEIR SHARE REPURCHASE PROGRAMS, THEY EXECUTE)
"Radian Declares Regular Quarterly Dividend on Common Stock and Approves New Share Repurchase Authorization
PHILADELPHIA--(BUSINESS WIRE)--Aug. 14, 2019-- Radian Group Inc. (NYSE: RDN) announced today that the company?s Board of Directors approved a regular quarterly dividend on its common stock in the amount of $0.0025 per share, payable on September 6, 2019, to stockholders of record as of August 26, 2019.
In addition, the Board of Directors has approved a new share repurchase program that enables the company to repurchase its common stock. The shares may be purchased in the open market or in privately negotiated transactions. The company's previous $250 million share repurchase program was fully utilized on July 23, 2019.
The new authorization provides Radian the flexibility to repurchase shares opportunistically from time to time and spend up to $200 million, based on market and business conditions, stock price and other factors. The authorization is effective immediately and expires on July 31, 2020.
Radian plans to utilize a Rule 10b5-1 plan, which would permit the company to purchase shares, at pre-determined price targets, when it may otherwise be precluded from doing so."
MGIC SHARE REPURCHASE STRATEGY IS NOT WORKING
Even though, MGIC INVESTMENT CORPORATION generates in excess of $600 MILLION in net operating income, the highest of the PUREPLAYER PMI COMPANIES, their stock price is being left behind by RADIANS $23 and NMI HOLDINGS $27.
On July 1, 2016 NMIH stock price was $5.67, RDN was $10.46 and MTG was $6.01. Now, MTG is $12.72, RADIAN'S is $23.17 and NMIH is $26.42.
The stock price over last 3 years indicates the lack of performance relative to it's peers based on the strategy in place. MGIC is a strong income producing company but, the stock doesn't reflect it.
The CEO of MGIC, TIMOTHY MATTKE, tried to explain away the lack of performance as being hampered by market volatility but, it appears to be affected by lack of effort. Radian's and NMI HOLDINGS' stocks are both impacted by the same stock market volatility.
Historically, MGIC MANAGEMENT had told analysts at the EARNINGS CONFERENCE, that when PMIERS 2.0 was implemented, they would deploy capital in excess of a 10% cushion, they haven't.
Radian on other hand has put $500 million in excess of their cushion into the holding company Radian Group. Radian has vigorously pursued share repurchase.
Excerpt from Radian SEC 10Q JUNE 2019:
"On August 16, 2018, Radian Group’s board of directors approved a share repurchase program that authorized the Company to repurchase up to $100 million of its common stock in the open market or in privately negotiated transactions,
based on market and business conditions, stock price and other factors.
On March 20, 2019, Radian Group’s board of directors approved a $150 million increase in authorization for this program, bringing the total authorization to repurchase shares up to $250 million, excluding commissions.
Radian operated this program pursuant to a trading plan under Rule 10b5-1 of the
Exchange Act, which permitted the company to purchase shares, at pre-determined price targets, when it may have otherwise
been precluded from doing so. During the three and six months ended June 30, 2019, the Company purchased 7,470,332 and
9,017,006 shares, respectively, at an average price of $22.20 and $21.92 per share, respectively, including commissions.
As of June 30, 2019, purchase authority of up to $52.5 million remained available under this program. In July 2019, the Company completed the repurchase authorization under this share repurchase program by purchasing an additional 2,241,568 shares of its
common stock at an average price of $23.43 per share, including commissions. Over the course of this program, the Company
repurchased a total of 11,258,574 shares, or 5.3% of the shares outstanding at the beginning of the program."
RADIAN'S BOARD UNAUTHORIZED $200 MILLION FOR SHARE REPURCHASE BY JULY 2010.
BARCLAYS FINANCIAL SVCS. CONFERENCE- KEY TAKEAWAYS
**DEBT TO CAPITAL NOW 17 TO 1, BELOW 20 TO 1 TARGET RATIO
**RESTABLIHED DIVIDEND WITH EXCESS CAPITAL
**SHARE REPURCHASE PROGRAM OF $200 MILLION ESTABLISHED
**SHARE REPURCHASED IN H1 2019 AVERAGED $13.88/SHARE, SHARES REPURCHASED AS OF AUGUST 5, AVERAGED $12.78
**FUTURE SHARE REPURCHASES WILL BE A FUNCTION OF OPPORTUNITY TO GET FAVORABLE PRICES
**REPURCHASE OF SHARES ARE NOT BASED ON WHAT WE THINK THE PRICE/VALUE SHOULD BE
**WE CURRENTLY HAVE A CUSHION OF $1.1 BILLION IN EXCESS OF PMIERS COMPLIANCE (HIGHEST IN PMI INDUSTRY) ie, RADIAN HAS $.6 BILLION AS OF JUNE 30, 2019
MTG TECHNICAL ANALYSIS INDICATES BULLISH TRENDS
MACD MOVING INTO BULLISH TERRITORY , WHILE RELATIVE STRENGTH INDICATOR IS FLASHING FULL SPEED AHEAD.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=MTG&x=51&y=16&time=3&startdate=1%2F4%2F1999&enddate=7%2F22%2F2019&freq=6&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=1&maval=20&uf=8&lf=16&lf2=512&lf3=268435456&type=4&style=350&size=2&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=14ttps://stockcharts.com/h-sc/ui
MTG CHARTSCHOOL
https://stockcharts.com/h-sc/ui
TRUMP APPROVES HOUSING REFORM PLAN, THE PLAN HAS WIDESPREAD SUPPORT
**The PROPOSED AND NOW APPROVED HOUSING REFORM PLAN is widely believed to benefit The PMI INDUSTRY by several analysts and industry executives
**PRIVATE CAPITAL IN THE INSURANCE COMPONENT IS FAVORED VS. A LARGER ROLE BY THE FHA AND, THAT WILL INCREASE MARKET SHARE FOR THE PRIVATE MORTGAGE INSURERS
"Treasury Secretary Mnuchin says Trump has approved reform plan for Fannie Mae and Freddie Mac
CNBC
PUBLISHED 2 HOURS AGO UPDATED AN HOUR AGO
Diana Olick
@DIANAOLICK
Treasury Secretary Steven Mnuchin said President Donald Trump “has approved” the Treasury’s plan to reform mortgage giants Fannie Mae and Freddie Mac.
Mnuchin appeared before the Senate Banking Committee Tuesday and refused to confirm that when asked then, but said he had since confirmed it.
Secretary Mnuchin also said that negotiations were underway to end the Treasury sweep of Fannie Mae and Freddie Mac’s profits.
“We are actively negotiating an amendment try to get it done by the end of the month,” he said in an interview on CNBC’s “Squawk Box.”
Watch CNBC’s full interview with Treasury Secretary Steven Mnuchin
The Treasury released a plan last week designed to recapitalize the two, which currently back about half of the $10 trillion U.S. mortgage market, and to release them from government conservatorship. The deal is being negotiated with their regulator, the FHFA. The Treasury plan would require some kind of payment for continued government backing.
Mnuchin said “what we’re negotiating is making sure the taxpayers receive compensation for that.”
Housing reform is quickly picking up speed in Congress, and Secretary Mnuchin recognized that, saying, “There was a lot of bipartisan support for many of the issues. Issues like affordable housing.”
MORTGAGE APPS UP ON 169% YOY INCREASE IN REFI ACTIVITY
MORTGAGE NEWS DAILY
BY: JANN SWANSON
Mortgage Apps Found Gains in a Holiday-Shortened week
Sep 11 2019, 5:58AM
Although the week ended September 7 was shortened by the Labor Day holiday, mortgage application volume managed an increase. It was the first week-over-week gain since Early August. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, rose 2.0 percent on a seasonally adjusted basis from one week earlier although it fell 9 percent before adjustment.
As interest rates continue to fall the pace of refinancing has become less frenetic, but that MBA index was still up 0.4 percent from the previous week and was 169 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 60.0 percent of total applications from 60.4 percent the previous week.
The seasonally adjusted Purchase Index increased 5.0 percent from one week earlier but was 8.0 percent lower on an unadjusted basis. Activity was 9.0 percent above the level the same week a year earlier.
INSURANCE IN FORCE UP $217.1 BIL./DEFAULTS DOWN IN AUGUST
As MGIC INVESTMENT CONTINUES REPURCHAING SHARES OF STOCK OUTSTANDING , the OPERATIONAL FUNDAMENTALS CONTINUE IMPROVING IN AUGUST 2019.
INSURANCE IN FORCE rose to $217.1 billion from $215.7 billion in July, up $1.4 billion.
SLIDES FROM TODAY'S "BARCLAYS FINANCIAL SERVICES CONFERENCE " confirm share repurchased as of August 5, 2019. I am hoping to get incite into other share repurchased in Q3 2019. MGIC INVESTMENT MANAGEMENT is scheduled to present around noon today.
Meanwhile, today's press release indicated that delinquenties continue down in levels not seen since the late 1990s, ending August at 30,276 loans, a 10.3% reduction year-over-year.
$12.78/AVG.PRICE MGIC ACTIVELY REPURCHASING SHARES IN Q3
$12.78 per share is a full $1 below the $13.79 average price repurchased in the first half of 2019. MGIC MANAGEMENT HAS OPPORTUNISTIC IN GETTING BETTER REPURCHASE PRICES.
IN THE BEGINNING of July 2019 MGIC had $200 MILLION available under "SHARE REPURCHASE PROGRAM". SINCE THEN, MGIC has used $23 million to repurchase shares.
"Share repurchase programs
On March 19, 2019, our board of directors authorized an additional share
repurchase program under which we may repurchase up to $200 million of
our common stock through the end of 2020.
During the second quarter of
2019, we repurchased approximately 1.8 million shares of common stock for $25 million, which used the remaining authorization on the program announced in April 2018.
Repurchases may be made from time to time on the open market or through privately negotiated transactions. The
repurchase programs may be suspended for periods or discontinued at any
time.
Since the end of the second quarter of 2019, through August 5, 2019, we
repurchased approximately 1.8 million shares of our common stock for
approximately $23 million."
PMI MARKET SHARE UP TO 47% IN Q2 2019 vs. FHA 29%
°FHA MARKET SHARE SHRINKING
PRIVATE MORTGAGE INSURERS MARKET SHARE INCREASING TO 47% FROM 39% TWO YEARS AGO.
°FHA ROLE WILL BE SMALLER UNDER REFORM PLANS.
HOUSING WIRE
"PMI gains as fewer first-time homebuyers use FHA
Most young buyers aren’t waiting to save for a 20% down payment
August 27, 2019 Kathleen Howley
The share of first-time homebuyers using conventional mortgages that require private mortgage insurance, or PMI, to compensate for low down payments increased in the second quarter while the use of FHA loans fell.
Fannie Mae and Freddie Mac typically require buyers to purchase PMI if they’re using down payments smaller than 20% of a home’s value. While PMI allows buyers to get into a property earlier than if they waited to save for a larger down payment, it can add hundreds of dollars to a monthly mortgage bill. FHA loans also charge a monthly insurance premium which can be lower than PMI, depending on a borrower’s credit score.
SoftWorks AI's mortgage automation software stems from computer vision research
Sponsored by SoftWorks AI
The share of first timers using conventional mortgages with low down payments requiring PMI rose 6% from a year earlier, while the share using FHA mortgages fell 5%, according to a report from Genworth, one of the nation’s largest providers of PMI.
Overall, purchases of single-family homes by first-time buyers dropped 4% to 559,000 in the second quarter, the report said. The total share of first timers using some form of low down payment mortgages was about 80%, Genworth said.
Young buyers are finding it hard to save enough money to make a 20% down payment because home prices are rising so quickly, said Tian Liu, Genworth’s chief economist. The median price for a starter home was $237,700 in the second quarter, according to the National Association of Realtors. That’s up from $200,200 in 2016.
“Low down payment mortgages remain at the core of mortgage financing for first-time homebuyers, and we’re continuing to watch the shift away from government loan programs toward conventional loans with low down payments,” said Liu.
The market share for FHA mortgages has been shrinking as private mortgage insurers capture more business. In the first two quarters of 2019, 29% of the total insured market was FHA loans, down from 34% two years ago, while the share for loans using PMI increased to 47% from 39%, according to data from the U.S. Mortgage Insurers, a trade group."
KBW SAYS GSE REFORM PLAN BENEFIT PRIVATE MORTGAGE INSURERS
"GSE reform plan holds some positives for MIs, mortgage REITs, KBW says
Sept. 6, 2019 12:10 PM ET
The Trump administration's proposal for housing finance reform contain some positives for private mortgage insurers and mortgage REITs, write Keefe, Bruyette & Woods equity researchers in note.
One is the Treasury's recommendation for additional taxpayer protections through expanding the use of credit risk transfers.
Another positive for mortgage insurers is the Department of Housing and Urban Development's (HUD) recommendation that the Federal Housing Administration should focus on its core mission, which, according to KBW, implies that FHA premiums are unlikely to be reduced.
There could be an opportunity for banks, too. HUD recommends that the FHA and the Department of Justice clarify the False Claims Act, which, "if successful, could lure some banks back to the FHA market as it could decrease the risk of large monetary settlements," the analysts wrote.
Overall, the analysts say little new information was included in the government reports and there were no clear timelines for achieving the reforms.
"We can envision a scenario where the sweep and the conservatorships last into 2020 and possibly beyond," they wrote."
DORIAN ENDS UP BEING A DUD IN THE UNITED STATES
AFTER DEVASTATING THE BAHAMAS WITH A CATEGORY 5, HURRICANE DORIAN HARDLY MAKES CATEGORY 1 AT SURF CITY, NORTH CAROLINA.
THE MAYOR OF SURF CITY, NC SAYS: we're open for business....
"Surf City escapes Hurricane Dorian with very little damage
by Annette Weston
Friday, September 6th 2019
Greg Payne, NewsChannel 12
SURF CITY, Pender County — Officials in Surf City say the area escaped Hurricane Dorian with very little, if any, damage.
In assessing the island, they found that the beach and dune structure held and they may have actually gained some sand from this storm.
Water services have been restored on the island already and sewer is on hold for areas due to power outages but officials say it will be up once power is restored."
PRIVATE MORTGAGE INSURERS TO BENEFIT FROM TRUMP PROPOSAL FOR MORE PRIVATE CAPITAL IN US REAL ESTATE INSURANCE MARKET
**MGIC INVESTMENT IN PARTICULAR WILL BENEFIT ADVANTAGEOUSLY DUE TO IT'S STRONG CAPITAL BASE, #1 IN RISK TO CAPITAL AND LOW DEBT TO CAPITAL RATIOS**
"MARKETWATCH
Personal Finance
Real Estate
Trump administration plan to overhaul housing finance system calls for more private sector involvement
By Jacob Passy
Published: Sept 6, 2019 8:58 a.m. ET
Priorities include recapitalizing Fannie Mae and Freddie Mac and ending their conservatorship
Bloomberg
If the Trump administration is successful, the era of conservatorship for Fannie Mae and Freddie Mac could draw to a close soon.
The Trump administration’s vision for housing finance reform is now much clearer.
The Treasury Department and the Department of Housing and Urban Development, in coordination, each released plans Thursday detailing how the two agencies believe the housing finance system should be reformed. The much-anticipated plans fulfilled President Trump’s request, made back in March through a presidential memorandum, directing Treasury Secretary Steven Mnuchin to create a blueprint for housing finance reform.
The Treasury Department’s plan includes a series of 49 recommendations focused primarily on ending the conservatorship of Fannie Mae and Freddie Mac, while still guaranteeing support for single- and multifamily lending and affordable housing initiatives.
Fannie Mae
FNMA, -5.39% and Freddie Mac FMCC, -0.36% have now been under conservatorship for 11 years after the wave of foreclosures that preceded the Great Recession put the two so-called government-sponsored enterprises in dire straits."
MTG CALL OPTION VOLUME FOR SEPT IS UP EXPONENTIALLY
Investors are snapping up call options for MGIC INVESTMENT, betting on price expansion in MTG stock price.
Over 3,000 call options in the $12 strike for Sept 2019 have been purchased over the last few days. 2,664 $12 call option strikes were purchased today, a 437% increase.
The $13 strike for Sept 2019 saw a 25% increase in volume on Wednesday.
THE AFFORDABILITY INDEX CONTINUES IMPROVING FOR NEW HOME BUYERS
"NAR REPORTS: At the national level, housing affordability is up from last month and up from a year ago. Mortgage rates were down from last month at 3.84% this June, and down nearly one percentage point compared to 4.77% a year ago.
"Purchase applications increased 1 percent last week and were 5 percent higher than a year ago. Purchase mortgage volume does appear to be responding to declining mortgage interest rates, rising for the first time in three weeks.
The Purchase Index was 4.0 percent higher than the prior week on an adjusted basis and 1 percent higher unadjusted. Purchase applications were 5 percent higher than during the comparable week in 2018.
Despite lower borrowing costs, refinances were down from its recent peak two weeks ago, but still remained over 150 percent higher than last August, when rates were almost a percentage point higher."
Data compiled from "MORTGAGE NEWS DAILY" reports.