MGIC Posts 10th Straight Loss on Record Foreclosures (Update1)
By Joel Schectman
January 26, 201
Jan. 26 (Bloomberg) -- MGIC Investment Corp., the largest U.S. mortgage insurer, reported a 10th straight unprofitable quarter, posting a $280.1 million loss after a record number of homeowners proved unable to make payments on their loans.
The fourth-quarter loss widened to $2.25 a share from $275.6 million, or $2.23, in the same period a year earlier, the Milwaukee-based company said today in a statement. Excluding investment gains, the company lost $2.42 a share, beating the $3.18 loss estimate of seven analysts surveyed by Bloomberg.
Mortgage insurers, which pay lenders when homeowners default and foreclosure fails to recoup costs, have faced increased claims as housing prices fall and job losses mount. Lenders repossessed a record 2.82 million houses in 2009 and are expected to foreclose on 3 million more this year, according to RealtyTrac Inc. Borrowers initially judged to be among the more creditworthy make up a growing percentage of defaults.
"Non-prime borrowers went delinquent out of the gate," said Matt Howlett, an analyst at Macquarie Group Ltd. "It takes longer for prime borrowers to go delinquent. But those guys are now losing their jobs and they are driving the new delinquencies."
The $1.32 billion loss for all of in 2009 means the insurer has lost more than $3.5 billion since its streak of unprofitable quarters began in 2007.
MGIC Chief Executive Officer Curt Culver won a waiver from the company's primary regulator in Wisconsin last month allowing the insurer to continue selling policies as losses cut into reserves. Culver had earlier warned that mounting claims by existing customers could cause a capital shortfall by the end of 2009, preventing the sale of new coverage.
Policy sales fell 20 percent to $286.9 million. The insurer covered $3 billion of new mortgages, compared with $5.5 billion in the same quarter last year.
Bank of America Corp.'s Countrywide unit sued MGIC last month, saying the insurer has denied millions of dollars of valid claims for defaulted mortgages by relying on an "unreasonable" interpretation of its policies.
MGIC "faces the reality of steep financial losses because of a significant economic downturn," the lender said in the complaint. MGIC said in a filing with the U.S. Securities and Exchange Commission that it intends to defend itself against the bank's allegations.
MGIC gained 66 percent in New York Stock Exchange composite trading in 2009. Radian Group Inc., the second-largest mortgage insurer, rose 99 percent. No. 3 PMI Group Inc. rose 29 percent. None has reported a profitable year since 2006.
MGIC, which lost a combined $2.19 billion in 2007 and 2008, remains more than 90 percent below its all-time high of $78.95 from 2004.
Until 2007, private mortgage policies had been among the
most profitable types of coverage sold by property and casualty
insurers. From 2004 to 2006, members of the Mortgage Insurance
Companies of America reported a profit margin of at least 35
cents for every dollar they collected in premiums. Auto insurers
made less than 5 cents on every dollar in 2006, according to
A.M. Best Co.
Click here to return to FBIC homepage