MGIC turns in stellar quarter

Increases new insurance written by 30%

MGIC headquarters
The MGIC headquarters in downtown Milwaukee.

MGIC Investment Corp. today reported a successful quarter that significantly exceeded analyst expectations.

MGIC headquarters
The MGIC headquarters in downtown Milwaukee.

The Milwaukee-based mortgage insurance company reported fourth quarter net income of $107.5 million, or 28 cents per diluted share, up from $102.4 million, or 24 cents per share, in the fourth quarter of 2015. The profit beat analyst Seeking Alpha analyst consensus estimates by 6 cents.

Revenue totaled $266.5 million in the fourth quarter, up from $258.4 million in the fourth quarter of 2015. It was $1.1 million higher than analysts predicted.

During the fourth quarter, MGIC wrote $12.8 billion in new insurance, up 30.6 percent from $9.8 billion in the fourth quarter of 2015. At the same time, MGIC reduced its delinquent inventory by 19.7 percent. As of Dec. 31, the company had $182 billion of insurance in force, up from $174.5 billion at the same time in 2015.

Full-year earnings totaled $342.5 million, or 86 cents per diluted share, down from $1.2 billion, or $2.60 per share, in 2015. The company attributed the difference to $847.8 million included in 2015’s profits due to a deferred tax asset valuation allowance.

MGIC’s 2016 net operating income, which excludes the tax asset valuation allowance, was $395.6 million, or 99 cents per diluted share, compared with net operating income of $306.1 million, or 75 cents per diluted share, in 2015.

Full-year revenue was $1.1 billion, up from $1 billion in 2015.

“I am pleased to report that in 2016 we achieved strong financial results and continued to position our company for further success,” said Patrick Sinks, chief executive officer of MGIC Investment Corp. and its subsidiary, Mortgage Guaranty Insurance Corp. “Specifically, our insurance in force continued to grow as we added $48 billion of high-quality new insurance, the newer books of business continue to generate low levels of new delinquent notices, the legacy books continue to runoff and we maintained our traditionally low expense ratio.”

But Sinks struck a cautious tone looking forward to 2017, predicting MGIC would write less new insurance this year due to market conditions and a smaller origination market.

“We will continue to focus on maintaining our industry leading expense ratio and further improving our capital structure for the betterment of shareholders,” he said. “Further we anticipate that the number of new mortgage delinquency notices, claims paid and delinquency inventory will continue to decline and we are well positioned to provide credit enhancement and low down payment solutions to lenders, GSEs and borrowers, now and in the future.”

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Molly Dill, former BizTimes Milwaukee managing editor.

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