MGIC Investment CorporationMTG

Morningstar Rating

Stock Research and Analysis

by Jim Ryan

On the basis of fundamentals, things should be looking up for MGIC Investment. After all, penetration into new mortgage originations is on the rise as lenders seek mortgage insurance in lieu of creative financing schemes for borrowers with low down Read more

Bulls Say

MGIC has one of the largest market shares--consistently 20%-25%--in the very concentrated private mortgage insurance industry.

Government and private homeowner rescue programs will cut down on claims payouts.

MGIC has the oldest and most detailed mortgage history database, which adds a considerable advantage in underwriting skill. Lenders prefer to be insured by successful underwriters.

U.S. housing prices are on the decline. MGIC's book of business lasts longer in this environment.

Lender-captive reinsurance arrangements are finally paying off. This year and next, lenders will have to absorb some losses from claims. Read more

Bears Say

Alt-A mortgage delinquencies are rising at an alarming rate. MGIC's Alt-A delinquency rate was more than 40% at the end of the second quarter of 2009.

Foreclosures lag mortgage delinquencies by at least a year, sometimes more. MGIC has yet to experience the brunt of the housing crisis.

Government-sponsored entities Fannie Mae FNM and Freddie Mac FRE control more than 40% of the mortgage market, which lets them dictate terms to mortgage insurers.

Subprime mortgage exposure will have a crippling effect on MGIC's profitability.

A sharp increase in defaults in California and Florida will inflict pain on MGIC's bottom line. Read more

Strategy

MGIC intends to become a global insurer of mortgages and credit-enhancement products if it can survive the current avalanche of mortgage foreclosures. Read more

Management

Our Stewardship Grade for MGIC is C, which was our second downgrade in the past year. Our first downgrade--last summer from A to B--resulted from the loss of shareholder value occasioned by the C-BASS impairment. Although we believed management at MGIC Read more

Profile

With more than $220 billion of insured loans, MGIC Investment is the largest U.S. mortgage insurer. MGIC's client base includes more than 13,900 master policyholders, and Read more

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