July 30 (Bloomberg) -- MGIC Investment Corp. and Radian Group Inc. said turmoil in the subprime mortgage market may require the companies to write off their combined $1.03 billion stake in a venture that invests in subprime mortgages. Shares of MGIC fell as much as 9.8 percent in after-hours trading. Radian dropped as much 3.6 percent.

The market for loans to risky home buyers started deteriorating in February, with ``dislocations accelerating to unprecedented levels'' in mid-July, Milwaukee-based MGIC said in a statement today. The venture, Credit-Based Asset Servicing and Securitization LLC, buys mortgages with overdue payments, aiming to improve collection rates before selling packages of the debt at a profit.

MGIC planned to sell a portion of C-Bass to fund a share buyback later this year, once it completes its planned acquisition of Radian, a smaller mortgage insurer. MGIC Chief Executive Officer Curt Culver said as recently as July 19 that he was encouraged by the list of potential bidders.

MGIC's second-quarter profit plunged 49 percent to $76.7 million on higher claims costs as borrowers defaulted at high levels in California and Florida, the company said July 18.

Through the close of regular trading, MGIC stock has fallen 27 percent this year, while Radian is down 25 percent.

MGIC and Radian said they hadn't determined the range of their writedowns, though each said the upper boundary may be the entire investment. MGIC's investment in C-Bass was approximately $516 million as of June 30. Radian's was $518 million, the Philadelphia-based company said in a separate statement.

To contact the reporter on this story: Dan Kraut in New York at Dkraut2@bloomberg.net

Last Updated: July 30, 2007 20:10 EDT