Mortgage Insurers Fall as MGIC's Results Leave Investors Rattled
(Bloomberg) -- MGIC Investment Corp., the mortgage insurer that triggered double-digit share declines among peers when it cut borrower-paid premiums last week, deepened its decline after its first-quarter earnings report failed to restore investors’ confidence.
The stock tumbled as much as 5.6 percent, extending the decline to 21 percent since the company announced the premium reductions on April 9. Radian Group Inc. slumped 4.8 percent. Essent Group Ltd. sank 5.3 percent. NMI Holdings Inc. slipped 1.9 percent. The S&P Banks Select Industry Index declined 0.1 percent.
MGIC shares sold for $10.29 at 11:58 a.m. in New York. A close at that level would be the lowest in a year. Trading volume was about 1.2 times the 30-day average at that time. The move lower came after the company reported first-quarter net operating earnings per share that exceeded the average analyst estimate, while revenue trailed estimates.
“Credit performance continues to be a positive tailwind for MGIC; however, we expect shares to be weak today because of lower than expected premium revenue,” Compass Point analyst Chris Gamaitoni wrote in a research note after the results were released. Given the price reduction, investors will be looking for more clarity on where premium yields will be headed, he said.
The drop in MGIC has pushed its 50-day moving average below the 200-day line, a pattern, known as a death cross that is used in technical analysis to predict when a security may continue falling. It last emerged in October 2015 and preceded a prolonged slump in the shares that bottomed out eight months later.
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