MGIC Posts $19.6 Million Loss as Borrowers Struggle on Loans

MGIC Investment Corp. (MTG), the mortgage insurer that requested waivers from its regulator to keep writing new policies, was unprofitable for a seventh straight period as homeowners struggled to make their payments.

The first-quarter net loss narrowed to $19.6 million, or 10 cents a share, from $33.7 million, or 17 cents, a year earlier, as results improved on investments, the Milwaukee-based company said today in a statement.

Mortgage insurers have “stressed capital positions” after defaults drained funds amid the deepest housing slump in seven decades, Moody’s Investors Service said last month. Home prices have fallen 34 percent since their peak in 2006 through January, according to the S&P/Case-Shiller index of property values in 20 U.S. cities. Mortgage insurers pay lenders when homeowners default and foreclosures fail to recoup costs.

“They’re still dealing with books that were written before the crisis,” Bose George, an analyst at KBW Inc. in New York, said by phone before results were announced. “Home prices were 30 plus percent higher and a lot of the buyers from the 2006 to 2007 books are significantly underwater.”

The inventory of delinquent loans fell to 160,473 from 175,639 on Dec. 31 and 195,885 at the end of last year’s first quarter. MGIC slumped 6.8 percent to $3.43 at 4:05 p.m. in New York.

Risk Ratio

The risk-to-capital ratio was unchanged at 20.3-to-1 on March 31, the insurer said. Some states require mortgage insurers to keep the ratio below 25 and the company reiterated that it may miss that standard in the second half of this year.

Policy sales fell 7.1 percent to $255 million from $274.5 million a year earlier. MGIC’s cost of claims from mortgage defaults rose to $337.1 million from $310.4 million.

The insurer spent $1.45 on claims and expenses at its mortgage unit for every dollar it collected in premiums in the quarter. The ratio is up from $1.24. Units of Old Republic Inc. and PMI Group Inc. have stopped selling policies and been ordered by regulators to pay only a portion of claims.

MGIC’s operating loss, which excludes some investment results, was 48 cents a share, missing by 10 cents the average estimate of seven analysts surveyed by Bloomberg. Investment gains jumped to $77.6 million, compared with $5.8 million a year earlier. Book value per share, a measure of assets minus liabilities, slipped to $5.60 from $5.95 as of Dec. 31.

MGIC was unprofitable for 18 of the last 19 quarters and plummeted by half in the past 12 months through April 20 in New York. The insurer said last month that it cut Chief Executive Officer Curt Culver’s bonus by more than 40 percent to $743,300 from $1.3 million for 2010.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

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

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