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No Magic for MGIC – Analyst Blog

Zacks Market Commentaries — Mon, 02 Nov 2009 18:19:01 +0000

MGIC Investment Corp.’s (MTG) third-quarter loss of $4.44 per share was wider than the Zacks Consensus Estimate of a loss of $1.64 per share. Last year, the company had reported a loss of $1.06 per share. Increasing delinquent inventory and consequently higher incurred losses drained the results.

The company’s loss stood at $971 million from $788.3 million reported for the same period last year, primarily due to an increase in delinquencies. Net underwriting and other expenses were $59.1 million as compared to $62.4 million reported for the same period last year.

Total revenues were $413.3 million, compared with $461.6 million in the third quarter last year. Net premiums written were $278.3 million, compared with $365.0 million for the same period last year. New insurance written was $4.6 billion, compared to $9.7 billion in the third quarter of 2008. Investment income was $75.5 million, down 3.9% year over year.

Persistency − the percentage of insurance remaining in force from a year earlier − was 85.2% at Sep 30, 2009, compared with 82.1% at Sep 30, 2008.

MGIC's primary insurance in-force increased to $216.8 billion, compared to $228.2 billion last year.

Net paid claims totaled $417 million, up $37 million on a linked quarter and $87 million year over year.

The percentage of delinquent loans (excluding bulk loans) was 13.97%. The level was up from 7.54% recorded last year.

Book value decreased 38.9% year over year to $13.18 per share.

We continue to remain concerned over the prospects for MTG. Increased delinquencies due to increased unemployment, lower home prices and the ongoing recession caused losses. The deteriorating position of the company was aggravated by yet another rating cut by Fitch as well as Standard and Poor’s. We believe that MTG will be unable to write new insurance until the new subsidiary starts operating, which is awaiting approval from Fannie Freddie as well as from various state insurance commissioners. We are unsure as to new business prospects. Pending further positive developments we will continue to rate the shares as a Hold.
Read the full analyst report on "MTG"
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Government Bailout For Fannie Freddie

Daniel Shepard — Fri, 05 Sep 2008 22:48:29 +0000

A Wall Street Journal article released after the stock market closed on Friday, is sending financial stocks higher in after hours trading. According to the article which is entitled “Treasury Is Close to Finalizing Plan to Backstop Fannie, Freddie”, while actual details are not yet known, the plan would include a management reshuffle at the [...]

News You Can Use for Monday — Bank Failure Extravaganza

Sean Brodrick — Mon, 14 Jul 2008 15:39:13 +0000

Today, the big news that could move commodities is not in China or the Middle East -- it's right here at home. US banks are failing and the Federal Government is going to bail out Fannie Mae and Freddie Mac. I think this has big implications for the US dollar, and not in a good way. I'll be writing more about this in Wednesday's Money and Markets. For now, here is some news of interest ...

Fannie, Freddie Too Critical to Fail, Lawmakers Say
A government takeover of one or both companies is among several options that have been considered by White House officials, according to a person familiar with the discussions who spoke on condition of anonymity. Senior Bush administration officials are considering placing either or both firms in a conservatorship if their problems get worse, the person said.

Paulson Puts Treasury Behind Fannie Mae, Freddie Mac in Bid to Calm Market
Paulson, speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence. The Federal Reserve separately authorized the firms to borrow directly from the central bank. Fannie and Freddie shares surged in Frankfurt trading.

After IndyMac, Who's Next?
Thornberg says, â€œWeâ€™re still early in this cycle.â€ He says regional banks donâ€™t suffer the bulk of their problems until late in a credit downturn. We can expect to see home loan delinquencies to continue to spread to personal loans, car loans and student loans. He also says the next big shoe to drop is regional banks with a lot of exposure to builders, including commercial builders who are building condos or other projects that will fail.

Oil Brings Americans Closer to OPEC Debtor Dependence Supplanting Japanese

Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.

Sean's Special Comment ...

Jerry Bowyer is a right-wing hack. As long as Mr. Bowyer is blaming Sen. Schumer for causing IndyMac's failure -- a blatant impossibility -- let's call Mr. Bowyer what he is: A right-wing hack who would blame Democrats for a rainy day.

Both parties, Republican and Democrat, are culpable for the crisis in our financial system, but it's not due to what Bowyer and other hack-ologists are blaming Schumer, who pointed out IndyMac's shortcomings. It's the way Congress covered for and enabled the "Casino Mentality" in the financial sector, where banks made bad loans and pawned them off on investors with reckless abandon, not worried if any of those particular loans came up snake eyes.

If you gamble recklessly and continually, eventually, you'll lose.

Now, America is going to foot the bill for Wall Street's losing streak. Here's an idea: Let's go after the pay packages over the last 10 years of all the top executives and board members of banks and lenders that fueled this insane mortgage mess. That might be a lesson that Wall Street will remember the next time it decides to head to the Big Casino with your money.

And there will probably be a lot of money to collect. More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150.

That said, I don't think garnishing the wages of Wall Street bankers is a solution that Washington will actually pursue (it's too logical). But when the house is on fire, it's time to find workable solutions -- and quickly -- and not waste time trying to place blame on those who raised the alarm.

Natural Gas Producers Surging Again; Fannie is a Disaster

Trader Mark — Tue, 06 May 2008 14:20:00 +0000

If you overlay the natural gas stocks over the coal stocks, it's the identical pattern since last Thursday, only with about half the gains... still some very nice moves for 3 days of work. Since my natural gas stake (3 positions, about 6%) is smaller ...