MGIC Investment: Solid Results Appear To Be In The Price

MGIC Investment (MTG), the largest U.S. provider of private mortgage insurance, delivered solid first-quarter 2025 results, with net income rising to $0.75 per share, up from $0.64 a year earlier. Yet, despite these positives, the stock’s muted reaction—rising only 2.5% after hours—suggests investors may already have factored in the company’s strengths, leaving limited upside unless risks subside.

Financial Performance: Steady, But No Surprises

MGIC’s Q1 results highlighted disciplined capital management and consistent underwriting:
- Net income grew to $185.5 million, driven by a $243.7 million net premiums earned, while book value per share rose to $21.40, a 13% year-over-year jump.
- Share repurchases accelerated, with $224 million spent in Q1 alone, and a new $750 million repurchase program announced in April.
- Loss ratios remained contained at 3.9%, though they edged higher from 1.9% in Q1 meidenclency inventory rose to 25,438 loans (2.3% of insured loans), up from 24,142 loans (2.15%) in Q1 2024.

Valuation: Cheap on Metrics, but Risks Are Priced In

MGIC’s stock trades at a P/E ratio of 8.7, well below its five-year average of 12, suggesting the market is skeptical about its long-term growth prospects. The price-to-book ratio of 1.15 (vs. 1.5 historically) further implies investors are discounting the company’s equity value.

While low multiples reflect concerns about macro risks—such as rising delinquencies and home price declines—the company’s $2.6 billion in excess PMIERs capital and $824 million in holding company liquidity provide a buffer. However, the stock’s 23.8% one-year return—within its $20–$26.56 trading range—hints at limited enthusiasm.

The Risks Lurking Beneath

• Delinquency Trends: Primary delinquencies rose 5% year-over-year, with over 28% of overdue loans stuck in limbo for 12+ months. This could signal deeper borrower distress.
• Loss Reserves: Gross reserves hit $465 million, up from $429 million in 2024, as MGIC prepares for potential claim spikes.
• Regulatory Uncertainty: The FHFA’s pending reforms to GSE underwriting standards could disrupt MGIC’s $10.2 billion in Q1 new insurance written, which relies on Fannie/Freddie.

CEO Tim Mattke noted geopolitical and macroeconomic risks but emphasized “continued strong performance.” Yet, with $261 million in unrealized investment losses (due to rate hikes), the company isn’t immune to broader market headwinds.

Conclusion: A Fair Price, but Not a Buy

MGIC’s Q1 results confirm its operational resilience and capital strength, but the stock’s valuation already reflects these positives. At $24.91, the shares trade near their book value and at a P/E discount to peers, suggesting limited upside unless delinquencies reverse or the housing market stabilizes.

Investors should note:
- Upside Catalysts: A drop in delinquency rates, or a rebound in home prices, could reaccelerate NIW and lift margins.
- Downside Risks: A recession or further rate hikes could strain borrowers, pushing loss ratios higher.

For now, the stock appears fairly priced—a hold for most investors, with cautious optimism reserved for those betting on a housing recovery.

In short, MGIC’s results are solid, but the market has already baked in the good news. The next move hinges on whether the housing sector’s soft patch deepens—or if it finds a bottom.