Old Republic International Corp., the insurer that stopped selling home-loan guarantees in 2011, advanced the most in a year after announcing a plan to raise fresh capital and revive the business
Old Republic jumped 4.3 percent to $16.16 at 4:15 p.m. in New York, the highest close since 2008. The Chicago-based company has rallied 52 percent this year.
The company said it plans to raise fresh funds from capital markets to restart its mortgage insurance unit early next year, after mounting losses from the collapse of the housing market pushed the firm from the business. Chief Executive Officer Aldo Zucaro announced a plan to spin off the unit last year that was later withdrawn. Mortgage insurers have been raising funds this year as investors bet on a housing rebound and results improve.
“The substantial year-over-year improvement in mortgage guaranty operating results was due to significantly lower claim provisions,” Old Republic said today in a statement announcing third-quarter results. The company saw “further drops in newly reported defaults and a rising rate at which previously reported defaults have cured.” The insurer still collects premiums and pays claims on policies sold before its withdrawal.
Old Republic’s mortgage insurer and consumer-credit guaranty business posted operating profit of $24 million in the quarter, compared with a loss of $86.6 million a year earlier, the company said today. Net income for the parent company was $102.9 million, compared with a loss of $14.8 million a year earlier.
Mortgage insurance is typically paid for by borrowers, and required for debt exceeding 80 percent of a property’s value. The policies cover losses when homeowners default and foreclosures fail to recoup costs. Old Republic also sells products like title insurance and commercial-liability coverage.
Essent Group Ltd. and NMI Holdings Inc., mortgage insurers started after the housing crash, filed for initial public offerings this year. Radian Group Inc. and MGIC Investment Corp. sold stock and debt to investors this year to replenish capital drained in the crisis.
Old Republic said it will contribute as much as $50 million of the new capital to its mortgage-guaranty subsidiary for a minority equity interest. The plan requires approvals from the North Carolina Department of Insurance, Fannie Mae and Freddie Mac, Old Republic said.