MGIC Investment Corp., one of the U.S. mortgage guarantors that survived the financial crisis, posted the biggest intraday gain in 11 weeks as third-quarter operating profit advanced on lower costs tied to soured home loans.
MGIC's third-quarter operating profit advanced on lower costs tied to soured home loans. Operating income rose to $102.2 million from $83.2 million a year earlier, the Milwaukee-based company said in a statement Tuesday.
"As the legacy portfolio runs off and is replaced by new high-quality mortgages, we expect operating results to improve," Mihir Bhatia, an analyst at Bank of America Corp., said Monday in a note, advising investors to buy MGIC shares. "A supportive housing and macroeconomic backdrop also provides a tailwind for mortgage insurance."
The insurer spent only 25.7 cents on claims costs for every premium dollar in the third quarter, an improvement from 32 cents a year earlier. Premium revenue slipped less than 1% to $237.4 million.
Net income was $56.6 million, compared with $822.9 million a year earlier when results included a one-time tax benefit. The third quarter this year also included costs tied to extinguishment of debt.