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MGIC sells insurance that pays the mortgage lender if a homeowner defaults, mainly on loans with small down payments.
MGIC Investment Corporation is a mortgage insurer. That sounds dull until you realize it sits behind millions of American homes. When a buyer puts down only 3% or 5%, the lender worries that if the buyer stops paying, selling the house won't cover the loan. So MGIC steps in: for a monthly premium, it promises to pay the lender part of the loss if the borrower defaults. Who pays MGIC? The borrower, usually rolled into the monthly mortgage payment. The lender is the one protected, but the homeowner funds the safety net. Almost all of MGIC's money comes from these premiums, plus a smaller slice from investment income on the cash it holds.
Think of it as a seatbelt the bank insists on buying, but the passenger quietly pays for. That is essentially the whole business: roughly 90%+ of revenue is net premiums earned, with the rest from investments. The company writes loans across the country, mostly for first-time buyers and moderate-income households, and it sells its coverage through a few thousand lenders rather than directly to consumers. Its customers — the lenders — choose MGIC because it pays claims fast, handles a lot of paperwork for them, and has been around since 1957. Its size and reputation matter, because lenders want an insurer that will still be there in a housing crash.
What makes MGIC interesting right now is what it does with the cash. It takes in far more in premiums than it pays out during good times, so it builds a big cushion and returns money to shareholders. Over the past several years it has bought back a large chunk of its own stock — roughly half its shares in under a decade — while paying a growing dividend. That shrinking share count lifts earnings per share even when profit is flat. Credit quality has been excellent, with very few claims compared to the 2008 crisis, and the company has added new products covering loans sold to Fannie Mae and Freddie Mac. The main risks are obvious and simple: a bad recession means more defaults and bigger payouts, and falling mortgage volume means fewer new policies. Until then, MGIC is a quiet money machine built on homeowners' small down payments.
Saved answer · last researched 11 Oct 2026