Mortgage insurer MGIC Investment Corp. reported Q1 net income declined 43.5% to $92.4 million, or $1.12/share, missing analysts' average estimate of $1.71/share. MGIC said losses incurred in Q1 totaled $181.8m (+58% y-o-y). Delinquent loans however, were lower than the year ago period and compared to the end of '06. Ex-bulk loans, delinquencies were 3.89% as of Mar. 31, vs. 4.08% as of Dec. 31, and 4.0% on Mar. 31, '06. MGIC said income from joint ventures fell 64% to $14.1m, primarily impacted by an operating loss at C-BASS (described as "a leading issuer, servicer, and investor specializing in credit-sensitive residential mortgage assets" on its website). Revenues were up less than 0.2% to $369.6m, but also came up short of analysts' expectations of $380 - $383m. MGIC's chairman and CEO commented, "The short-term financial results masked the long term improvements in our business fundamentals, such as improving mortgage insurance penetration and policy persistency as well as a renewed respect for credit quality and the value of our product." Reuters reports MGIC has said "it has limited exposure in [subprime] lending to the riskiest home borrowers." At the time of publishing, MGIC was trading down 5.5% to $54.00 in pre-market activity on volume of 27,500.
Sources: Press release, Reuters
Commentary: Today's MGIC Investment Earnings Report: Subprime Reckoning Day • Legg Mason's Bill Miller: Buys, Sells, Portfolio • MGIC Investment: Living on Borrowed Time -- Barron's [Nov. '06]
Stocks/ETFs to watch: MGIC Investment Corp. (NYSE:MTG). Competitors: PMI Group Inc. (PMI), Genworth Mortgage Insurance Corp., subsidiary of Genworth Financial (NYSE:GNW), United Guaranty Corp., subsidiary of American Int'l Group (NYSE:AIG)
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