MGIC Rallies as Mortgage Insurer Weighs Raising Capital

MGIC Investment Corp. reversed a slide and rallied after Chief Executive Officer Curt Culver said the unprofitable mortgage insurer may raise capital to cut a risk measure that breached regulatory limits.

MGIC advanced 6.4 percent to $2.98 in New York, after falling as much as 16 percent. The stock has declined 34 percent in the past year.

Culver said MGIC is evaluating ways to cut the level of risk relative to capital, including raising external cash, after the insurer reported a fourth-quarter loss that was wider than a year earlier. Rival Radian Group Inc. raised $689 million in a sale of stock and senior notes this week that was larger than originally planned. Radian jumped 4.3 percent to $8.81, and hit a two-year high earlier today.

“There is a significant amount of capital interested in our industry,” Chief Financial Officer Michael Lauer said on a conference call. “We’ve got new competitors coming in, they have attracted capital. We had the offering this week that was well received.”

The CFO’s remarks were in response to a question from Craig Perry of Panning Capital Management LP about how MGIC would raise external capital. Panning is one of the largest holders of Radian’s debt, according to data compiled by Bloomberg.

“Please keep us in mind at Panning when you think about external capital,” Perry said on the call.

Loss Widens

MGIC’s net loss widened to $386.7 million, or $1.91 a share, from $135.3 million, or 67 cents, a year earlier, the Milwaukee-based company said in a statement today. The measure of risk relative to capital at the main insurance unit was 44.7 to 1 as of Dec. 31, exceeding the 25-to-1 limit set by some regulators, and MGIC said it expects the ratio to climb.

Mortgage insurers cover lenders’ losses when homeowners default and foreclosures fail to recoup costs. Sliding housing prices pressured results at guarantors such as MGIC and Radian, and mounting losses have pushed some firms from the business. MGIC hasn’t had a full-year profit since 2006.

Fourth-quarter results include a previously disclosed cost of $267.5 million tied to the settlement of a coverage dispute with Freddie Mac.

(Correct attribution to CFO in the fourth paragraph of story published Feb. 28.)
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