MGIC Investment Corp. (MTG), the No. 3 U.S. mortgage insurer, rallied after posting its largest profit since 2007, helping ease concerns that slowing home lending would weigh on results.
MGIC gained 7.2 percent to $8.93 at 4:15 p.m. in New York, the most in the 24-company KBW Insurance Index.
The insurer had declined 1.3 percent this year before today amid signs that rising interest rates and climbing home prices were slowing mortgage lending. Wells Fargo & Co. and JPMorgan Chase & Co. reported this month that loan volumes plunged in the first quarter. MGIC’s profit of $60 million, or 15 cents a share, was driven by improvements in loans backed in prior periods, even as the Milwaukee-based firm sold 20 percent less mortgage coverage than a year earlier.
“The credit story continues to drive upside to earnings estimates,” Jack Micenko, an analyst at Susquehanna International Group, said in a research note. He estimated MGIC would post earnings of 8 cents a share.
Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. MGIC and rivals Radian Group Inc. (RDN) and Genworth Financial Inc. (GNW) are rebounding from financial crisis-era losses as home prices rise.
Losses incurred at MGIC narrowed to $122.6 million from $266.2 million in the first three months of 2013. That helped cushion the decline in premium revenue, which fell to $214.3 million from $247.1 million.
Existing-home sales slowed 0.2 percent to a 4.59 million pace in March, the lowest level since July 2012, the National Association of Realtors reported today. The decline was smaller than estimated in a Bloomberg survey.
Radian, the top seller of mortgage insurance last year, climbed 3.7 percent and Genworth jumped 4.7 percent. The second-largest U.S. mortgage guarantor was American International Group Inc.’s United Guaranty Corp., according to data compiled by Inside Mortgage Finance.
MGIC was unprofitable for 23 of the past 27 quarters. The profit reported today compares with a loss of $72.9 million in the first quarter of 2013.
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