Stock Analysis & Valuation MGIC Investment Corporation (MTG)

• Previous Close: $26.92
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	47.46	76
Intrinsic value (DCF)	24.13	-10
Graham-Dodd Method	26.86	0
Graham Formula	36.53	36

Strategic Investment Analysis

Company Overview

MGIC Investment Corporation (NYSE: MTG) is a leading provider of private mortgage insurance (PMI) and mortgage credit risk management solutions in the U.S., Puerto Rico, and Guam. Founded in 1957 and headquartered in Milwaukee, Wisconsin, MGIC offers primary mortgage insurance that protects lenders against defaults on residential mortgage loans, covering unpaid principal, delinquent interest, and foreclosure-related expenses. The company also provides contract underwriting and reinsurance services, catering to a diverse clientele of savings institutions, commercial banks, mortgage brokers, and credit unions. Operating in the specialty insurance sector under the broader financial services industry, MGIC plays a critical role in facilitating homeownership by enabling low-down-payment mortgages while mitigating lender risk. With a market capitalization of approximately $6.17 billion, MGIC is a key player in the U.S. housing finance ecosystem, supporting lenders and government-sponsored entities with innovative risk management solutions.

Investment Summary

MGIC Investment Corporation presents a compelling investment case due to its strong market position in the private mortgage insurance industry, consistent profitability (net income of $763 million in the latest fiscal year), and robust operating cash flow ($725 million). The company benefits from a stable U.S. housing market and regulatory tailwinds supporting low-down-payment mortgages. However, risks include exposure to economic cycles, potential increases in mortgage defaults during downturns, and competitive pressures from other PMI providers. With a beta of 0.905, MGIC exhibits lower volatility than the broader market, making it a relatively defensive play within financial services. The dividend yield, while modest (dividend per share of $0.52), adds to total return potential. Investors should monitor housing market trends and credit performance metrics closely.

Competitive Analysis

MGIC Investment Corporation maintains a competitive advantage through its long-standing industry expertise (founded in 1957), strong relationships with mortgage lenders, and efficient risk assessment capabilities. The company's focus on private mortgage insurance allows it to specialize in credit risk management, differentiating it from broader insurers. MGIC's underwriting discipline and proprietary analytics enable it to price risk accurately, contributing to consistent profitability. The company's reinsurance strategies further mitigate risk exposure. However, the PMI industry is highly competitive, with pricing pressure and capital requirements influencing margins. MGIC's scale and brand recognition help it compete effectively, but it must continuously innovate to maintain its position against larger diversified insurers and newer entrants leveraging technology. The company's financial strength (evidenced by $229 million in cash and equivalents) supports its competitive positioning, though its $645 million in total debt warrants monitoring in rising rate environments.

Major Competitors

• Radian Group Inc. (RDN): Radian Group is a major competitor in the private mortgage insurance space, with a similar market cap and product offerings. Radian differentiates itself through its diversified revenue streams, including mortgage and real estate services. While MGIC has slightly higher revenue, Radian's broader service portfolio may provide more stability during housing market downturns. Radian's underwriting standards are similarly rigorous, but its geographic concentration differs slightly.
• Essent Group Ltd. (ESNT): Essent Group is a pure-play mortgage insurer with a strong focus on technology-driven underwriting. While smaller than MGIC in market cap, Essent has grown rapidly due to its efficient operations and lower expense ratio. Essent's Bermuda domicile provides some tax advantages, but MGIC's longer operating history gives it an edge in lender relationships and brand recognition.
• NMI Holdings, Inc. (NMIH): NMI Holdings operates in the same PMI market but with a more concentrated lender base. The company has shown strong growth in recent years but lacks MGIC's scale and diversification. NMIH's underwriting profitability metrics are competitive, though its smaller size may limit its ability to absorb large claims during economic downturns compared to MGIC.
• American International Group, Inc. (AIG): AIG is a diversified insurance giant that competes in mortgage insurance through its subsidiary. While AIG's vast resources and global presence give it advantages in capital allocation, its mortgage insurance segment lacks the focus and specialization of MGIC. AIG's PMI business is smaller relative to its overall operations, potentially making it less agile in the U.S. mortgage market.