MGIC Posts Sixth Straight Loss on Mortgage Insurance Claims

MGIC Investment Corp. (MTG), the mortgage insurer that injected $200 million into a subsidiary last month to keep writing policies, posted its sixth straight loss as borrowers struggled to make home-loan payments.

The fourth-quarter net loss narrowed to $135.3 million, or 67 cents a share, from $186.7 million, or 93 cents, a year earlier, the Milwaukee-based company said today in a statement.

The pace of defaults is “simply not coming down fast enough,” Matt Howlett, an analyst with Macquarie Group Ltd., said in a phone interview before results were announced. He rates the company “outperform.”

The worst U.S. housing crash in seven decades drained capital at mortgage insurers and prompted regulators to order PMI Group Inc. (PMI) and Triad Guaranty Inc. to halt sales of new coverage. MGIC, which pays lenders when homeowners default and foreclosures fail to recoup costs, said today it will get the waivers it sought from the Wisconsin regulator and Fannie Mae that will allow the firm to continue to write new policies.

MGIC said its risk-to-capital ratio will probably exceed the maximum 25-to-1 allowed by some state regulators in the second half of this year. The ratio was 20.3-to-1 on Dec. 31 compared with 22.2-to-1 on Sept. 30.

Share Slump

The insurer advanced 9 cents to $4.15 at 4 p.m. in New York. MGIC, which has been unprofitable for 17 of the last 18 quarters, plunged 54 percent in the 12 months. Radian Group Inc. (RDN), the Philadelphia-based mortgage insurer, has declined 62 percent.

Book value per share, a measure of assets minus liabilities used by analysts and investors, slipped to $5.95 from $6.90 as of Sept. 30. The annual net loss for 2011 widened to $485.9 million from $363.7 million in 2010. MGIC said it expects to continue to report yearly losses.

MGIC’s cost of claims from mortgage defaults rose to $482.1 million from $448.4 million in the year-earlier period. The company spent $1.90 on claims and expenses at its mortgage business for every dollar it collected in premiums in the quarter. That’s up from $1.69 in the year-earlier period.

Policy sales slipped 2.8 percent to $263.8 million from $271.4 million a year earlier. The operating loss, which excludes some investment results, was $1.19 a share, missing by 30 cents the average estimate of six analysts surveyed by Bloomberg.

About 87 insured borrowers caught up on overdue payments in November for every 100 who defaulted, compared with a so-called cure ratio of 95 a year earlier, according to the most recent industrywide data from the Mortgage Insurance Companies of America. Borrowers tend to catch up on loan payments in the second quarter after receiving tax refunds then slip behind in the last six months of the year, said Howlett.

To contact the reporters on this story: Andrea Ludtke in New York at aludtke@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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