MGIC Slumps After Adding Capital to Mortgage Insurance Unit
MGIC Investment Corp. (MTG), the largest U.S. mortgage insurer, slumped 3.9 percent after putting $200 million of capital into an underwriting subsidiary to continue writing new policies nationwide.
MGIC contributed funds to a subsidiary to help fund new business, the company said in a Dec. 30 statement. The unit’s capital waiver from the Office of the Commissioner of Insurance for the State of Wisconsin was scheduled to expire at the end of 2011. A separate deal with Fannie Mae, the U.S.-owned mortgage finance company, was also set to end then.
The worst U.S. housing crash in seven decades has pressured mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs. MGIC has dropped more than 90 percent since the end of 2006, the last year it posted a profit. During that time, mortgage defaults drained capital at rivals including Triad Guaranty Inc. and PMI Group Inc., which were forced by regulators to stop writing policies.
“We expect MGIC’s capital to diminish in 2012 and thereafter,” the Milwaukee-based insurer said in the statement. “Thus, we remain in discussions” with Fannie Mae and the Wisconsin regulator.
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