MGIC Leads Mortgage Insurers' Rally as U.S. Adds More Jobs Than Forecast

MGIC Investment Corp., the biggest mortgage guarantor, led a rally by U.S. home-loan insurers in New York trading after a report showed companies added more jobs than forecast in August.

MGIC rose 7.4 percent to $8.57 at 4:06 p.m. in New York Stock Exchange composite trading after jumping as much as 12 percent. Radian Group Inc. of Philadelphia, the second-largest mortgage insurer, advanced as much as 7 percent to $7.62 before closing at $7.51. No. 3 PMI Group Inc. gained 9.7 percent to $3.62, after climbing as much as 12 percent.

Private payrolls that exclude government agencies climbed 67,000 in August, Labor Department figures in Washington showed today. The median estimate of economists surveyed by Bloomberg News was for a gain of 40,000. Shares of mortgage insurers, which pay lenders when homeowners default and foreclosure fails to recoup costs, have surged this year amid speculation the economic recovery would ease the pace of delinquencies.

“The fact that the employment report was a little better than expected today is probably what’s driving them,” said Jim Ryan, a Chicago-based analyst with Morningstar Inc. “Foreclosures will only be cured by more jobs.”

MGIC of Milwaukee reported today that its primary delinquent inventory in August shrank to 225,310 from 229,012 at the beginning of the month. Mortgage insurers have tightened underwriting standards and raised prices to recover from losses than began in 2007. MGIC posted its first profit in 12 quarters in July as the cost of claims from mortgage defaults fell by more than half.

PMI Raised

Standard & Poor’s raised its outlook on shares of Walnut Creek, California-based PMI today to a “sell” from a “strong sell.” PMI’s loss estimate for 2010 was narrowed by 15 cents to $4.55 a share on a forecast for fewer delinquencies and “less aggressive” reserve building, according to Rafay Khalid, an analyst at S&P.

PMI has posted 12 straight quarterly losses. John Paulson, the hedge-fund manager who became a billionaire by betting against the U.S. mortgage markets, bought 5 million shares of PMI in the second quarter, according to a filing with the U.S. Securities and Exchange Commission in August.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.

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