MGIC Investment Corp (MTG): what the price assumes

In the published model solve dated 2026-Q2, anchored at $30.59, MGIC Investment Corp (MTG) is priced for 10.8% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/MTG

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 9.5% cost of equity with 4% terminal growth over a 10-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.3pp.

How unusual the bet is: within-range

Valuation X-Ray

The price is supported by asset-based and earnings-power value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=4)

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• MGIC is a leading private mortgage insurer, taking the first-loss risk on low-down-payment home loans, and it is currently earning a return on equity around 14% while the price assumes something closer to 10%.
• The biggest risk is the credit cycle: losses are low today, with a loss ratio near 14% and delinquency at 2.44%, but mortgage insurance is built to absorb a housing downturn the current benign numbers do not reflect.
• Watch the capital return, where MGIC repurchased $192.6 million of stock last quarter and added a fresh $750 million authorization, shrinking the share count nearly 10% a year.

Bull Case

What the standard valuation lenses understate here is how cheaply MGIC trades relative to the return it actually earns. An insurer is worth the return it generates on its capital, and MGIC has been earning a return on equity around 14%, well above its roughly 9% cost of equity. Yet the stock trades at about 1.1x book value, near the bottom of its peer group's price-to-book, a multiple that implies a return closer to 10%. When a business earns 14% and is priced for 10%, the gap is the opportunity. Tangible book value sits near $23 per share against a price of $26 (June 27, 2026), so a buyer is paying barely above the company's net worth for a franchise generating mid-teens returns.

The operating momentum is genuine. In the first quarter MGIC grew new insurance written 41% year over year, its largest first quarter of new business since 2022, writing $14.4 billion of new primary insurance and ending with $302.7 billion of insurance in force. That in-force book is the company's recurring revenue engine: each policy generates premium for years, and a growing book of low-loss, high-credit-quality insurance compounds quietly. Credit performance is strong, with the loss ratio at 14.1% and the delinquency rate at 2.44%, which for a mortgage insurer reflects a healthy housing market and disciplined underwriting.

Capital allocation is the clearest expression of management's confidence. MGIC repurchased 7.2 million shares for $192.6 million in the quarter and announced a fresh $750 million buyback authorization, alongside its dividend, and the share count has been shrinking nearly 10% a year. Buying back stock at barely above book value, while earning a mid-teens return on that book, is highly accretive: it retires capital cheaply and concentrates every remaining holder's claim on the franchise. The bull case is a well-capitalized, high-return insurer trading near book and returning capital aggressively into its own undervaluation.

Bear Case

The bear case is best read through the disagreement among the methods, because they split on a single question: is today's mid-teens return durable, or is it a peak-cycle number? The methods that capitalize the current 14% return reach well above the price, with the price-to-tangible-book method landing near $50. The methods that assume the return fades, the two-stage excess-return approach and the future-market-cap method, land much closer to or below the price. That split is the whole bear thesis. Mortgage insurance is a cyclical credit business, and the conservative methods that fade the return toward the cost of capital are likely the more honest read, because no mortgage insurer sustains peak returns through a housing downturn.

The cyclicality is structural, not hypothetical. MGIC takes the first-loss position on low-down-payment mortgages, which means its losses are benign in good times and concentrated precisely when housing turns down and borrowers default. The current loss ratio of 14.1% and delinquency of 2.44% are the numbers of a healthy market; delinquency already ticked up modestly in the quarter, and a recession that lifts unemployment would push both sharply higher. The company's own 10-K flags that capital requirements scale with stress: an increase in loan delinquencies generally requires it to hold "significantly more Minimum Required Assets" under its regulatory framework. The capital that funds today's buyback is the same capital that absorbs tomorrow's losses.

The second structural drag is pricing. The 10-K is candid that MGIC's "premium yield is expected to decline over time as older insurance policies with premium rates that are generally higher run off and new insurance policies with premium rates that are generally lower remain on our books". In plain terms, the profitable older book is rolling off and being replaced by lower-priced new business, a slow margin headwind baked into the model. Competition is intense: MGIC competes against other private insurers and the government's FHA and VA programs on "premium rates, underwriting requirements, financial strength" and more, which limits its ability to raise prices to offset the yield decline. The low multiple is not purely a gift; it reflects the market's reluctance to capitalize peak-cycle returns from a credit-cyclical business with a structural pricing fade.

Valuation

An insurer is valued on the return it earns on its capital, so the lens here is price-to-book, not an operating multiple. MGIC trades at about 1.1x book, which embeds an assumed sustainable return on equity of roughly 10%. The company has recently been earning about 14.3%, so unusually, the price assumes a return below what the business has demonstrated. That is the opposite of a stretched valuation: the market is pricing in a fade from the current return, and within its peer group MGIC sits in the lower half of price-to-book.

The methods cluster mostly above the price, which is what a value-supported insurer looks like. The excess-return methods, which build value from book plus the spread between return on equity and cost of equity, land near $36 to $44. The relative P/E method, at an 11x sector multiple, lands near $35, and the Graham Number near $40. The price-to-tangible-book method, capitalizing the current 14.3% return against the cost of equity, reaches near $50. The methods that land at or below the price are the ones that fade the return or extrapolate weak revenue growth, and they are the genuine bear input: if the return mean-reverts toward 10%, the price-to-book the stock supports does not rise much from here. The spread between the fade methods and the capitalize-current-return methods is the valuation debate in one picture.

The peer cohort is the right one to weigh against: Essent, NMI Holdings, and Radian are the other private mortgage insurers, and MGIC trades at a discount to where its return would justify within that group. The balance-sheet frame for an insurer is capital adequacy and reserve strength, not net debt or cash burn, and MGIC holds capital comfortably above its regulatory minimums, which is what funds both the buyback and the cushion against a downturn. The decisive variable is the credit cycle: whether the mid-teens return holds, in which case the stock is cheap on nearly every method, or whether a housing downturn lifts losses and forces capital to be held against delinquencies rather than returned, the scenario the conservative methods are built to price.

Catalysts

The first-quarter 2026 results were a strong start to the year. MGIC posted net income of $165.3 million on revenue of $297.1 million, with EPS of $0.76 narrowly beating estimates while revenue came in light. The standout was new business: new insurance written rose 41% year over year to $14.4 billion, the largest first quarter since 2022, lifting insurance in force to $302.7 billion. A growing in-force book is the recurring-revenue foundation of the franchise, so a strong new-business quarter compounds into future premium.

The credit metrics stayed healthy, which is the gating item for the thesis. The loss ratio was 14.1% and the primary delinquency rate was 2.44% on roughly 27,000 loans, with net losses incurred of $33.2 million. Delinquency ticked up modestly, the metric to watch in any softening of the housing market, but the levels remain consistent with a benign credit environment.

Capital return was the headline catalyst. MGIC repurchased 7.2 million shares for $192.6 million in the quarter, paid a $0.15 per-share dividend, and announced a new $750 million buyback authorization. That authorization is the clearest forward signal of how management intends to deploy excess capital while the stock trades near book. The next quarterly print, and the trajectory of the delinquency rate as the housing cycle evolves, are what move the story from here.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• ESNT (ESSENT GROUP LTD.)
• FY2025 10-K: …the title insurance and settlement services industry may adversely affect our business, financial condition, and results of operations. Competition in the title insurance and settlement services industry is intense, particularly with respect to price, service and expertise. Although we provide title and settlement…
• FY2025 10-K: …mortgage insurers may seek increased market share from government-supported insurance programs, such as those sponsored by the FHA, or from other private mortgage insurers by reducing pricing, loosening their underwriting guidelines or relaxing their risk management practices, which could, in turn, improve their…
• NMIH (NMI Holdings, Inc.)
• FY2025 10-K: …each of which sells substantially similar products to ours. We may experience increased competition due to consolidation among our existing competitors or the emergence of new private MI companies. One or more of our competitors may seek to capture increased market share from the government MIs or from other private…
• FY2025 10-K: …the individual underwriting review or validation of the vast majority of the loans we insure, utilizing our proprietary Rate GPS ® pricing platform to dynamically evaluate risk and price our policies, and foster a culture of collaboration and excellence that helps us attract and retain experienced industry leaders.…
• RDN (RADIAN GROUP INC)
• FY2025 10-K: …primarily on the basis of price, underwriting guidelines, overall service, customer relationships, perceived financial strength (including comparative credit ratings) and reputation. Overall customer service-related competition in our Mortgage Insurance business is based on, among other things, effective and timely…
• FY2025 10-K: …merger and acquisition activity in the specialty insurance/reinsurance sector in recent years, which may continue. We have experienced increased competition as a result of such consolidation. Increased competition could result in a reduction of the business we write, lower premium rates, less favorable policy terms…
• ACT (Enact Holdings, Inc.)
• FY2025 10-K: …Price remains a leading competitive driver. We monitor various competitive, risk and economic factors while seeking to balance both profitability and market share considerations in developing our pricing strategies. We have and may again in the future reduce certain of our rates, which may reduce our premium yield…
• FY2025 10-K: …uncertain. Competitive environment. The U.S. private mortgage insurance industry is highly competitive. Our market share is influenced by the execution of our go to market strategy, including but not limited to, pricing competitiveness relative to our peers and our selective participation in forward commitment…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.