MGIC Investment (MTG)

Mortgage insurer MGIC Investment (NYSE:MTG) missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $298.7 million. Its non-GAAP profit of $0.75 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 1957 when the modern mortgage insurance industry was in its infancy, MGIC Investment (NYSE:MTG) provides private mortgage insurance that protects lenders when homebuyers default on their loans, enabling borrowers to purchase homes with smaller down payments.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

MGIC Investment's main competitors include other private mortgage insurers such as Essent Group (NYSE:ESNT), Radian Group (NYSE:RDN), and National Mortgage Insurance (NASDAQ:NMIH), as well as government agencies like the Federal Housing Administration (FHA) that offer mortgage insurance programs.

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Unfortunately, MGIC Investment struggled to consistently increase demand as its $1.21 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. MGIC Investment’s annualized revenue growth of 2.5% over the last two years is above its five-year trend, but we were still disappointed by the results. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, MGIC Investment missed Wall Street’s estimates and reported a rather uninspiring 0.9% year-on-year revenue decline, generating $298.7 million of revenue.

Net premiums earned made up 82.7% of the company’s total revenue during the last five years, meaning MGIC Investment barely relies on non-insurance activities to drive its overall growth.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

MGIC Investment’s net premiums earned has declined by 1.1% annually over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

When analyzing MGIC Investment’s net premiums earned over the last two years, we can see a sliver of stabilization as income was flat. Since two-year net premiums earned underperformed total revenue over this period, it’s implied that insurance policies were a detractor of consolidated growth.

MGIC Investment’s net premiums earned came in at $236 million this quarter, down 2.2% year on year and short of Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

Combined ratio sums operating costs (salaries, commissions, overhead) with what is paid out in claims (losses) and divides this by net premiums earned. Combined ratios under 100% means profits while ones over 100% mean losses on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, MGIC Investment’s combined ratio has swelled by 37.8 percentage points, going from 33.1% to 24.2%. However, fixed cost leverage was muted more recently as the company’s combined ratio was flat on a two-year basis.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

MGIC Investment’s EPS grew at a remarkable 19.2% compounded annual growth rate over the last five years, higher than its flat revenue. However, this alone doesn’t tell us much about its business quality because its combined ratio didn’t improve.

Diving into the nuances of MGIC Investment’s earnings can give us a better understanding of its performance. As we mentioned earlier, MGIC Investment’s combined ratio improved by 37.8 percentage points over the last five years. On top of that, its share count shrank by 36.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For MGIC Investment, its two-year annual EPS growth of 11.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, MGIC Investment reported adjusted EPS of $0.75, up from $0.72 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects MGIC Investment’s full-year EPS of $3.15 to stay about the same.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float – premiums collected but not yet paid out – are invested, creating an asset base supported by a liability structure. Book value captures this dynamic by measuring:

• Assets (investment portfolio, cash, reinsurance recoverables) - liabilities (claim reserves, debt, future policy benefits)

BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

MGIC Investment’s BVPS grew at an impressive 11.1% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 12.3% annually over the last two years from $18.61 to $23.47 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

MGIC Investment currently has $646.1 million of debt and $5.15 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.1×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on Equity, or ROE, ties everything together and is a vital metric. It tells us how much profit the insurer generates for each dollar of shareholder equity entrusted to management. Over a long period, insurers with higher ROEs tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, MGIC Investment has averaged an ROE of 15.2%, healthy for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This is a bright spot for MGIC Investment.

We struggled to find many positives in these results. Its revenue missed and its EPS was only in line with Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $27.54 immediately after reporting.

Updated: February 2, 2026 at 11:20 PM EST

Before deciding whether to buy MGIC Investment or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

MGIC Investment’s business quality ultimately falls short of our standards. First off, its revenue growth was weak over the last five years. And while its improving combined ratio shows the business has become more productive, the downside is its projected EPS for the next year is lacking. On top of that, its net premiums earned has declined over the last five years.

MGIC Investment’s P/B ratio based on the next 12 months is 1x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $28.75 on the company (compared to the current share price of $26.92).