UPDATE: MGIC Investment Swings To 2Q Loss As Mortgage Losses Jump
19 7월 2011 - 4:41AM
Dow Jones News
Shares of MGIC Investment Corp. (MTG) tumbled Monday after the
company swung to a second-quarter loss as the private-mortgage
insurer reported it incurred sharply higher losses on mortgages it
insures.
MGIC, the largest mortgage insurer for both Fannie Mae (FNMA)
and Freddie Mac (FMCC), had recorded a string of narrower losses
recently as its claims losses declined, and investors had expected
this trend to continue into the second quarter. Instead, new
defaults jumped, average paid claims increased sequentially and the
company's reserve for future claims increased by much more than
analysts and investors anticipated.
Despite the disappointing numbers, Chief Executive Curt Culver
said on the company's conference call that claim payments will
begin declining.
"Assuming normal foreclosure patterns, we believe that the
second quarter marks the peak quarter of claim payments," Culver
said on the call.
Still, shares fell 24% Monday, to $4.57, down more than 55%
year-to-date.
"Investors are questioning the visibility anyone has to the
inflection point in losses," said Jack Micenko, analyst at
Susquehanna International Group. Susquehanna had estimated that
MGIC would take $5.7 billion in losses over about a four-year
period. In just the past quarter, MGIC took about $1.2 billion in
losses and reserves for future losses. "Either they're doing a good
job accelerating losses, or else we were modeling it incorrectly,"
he said.
MGIC covers lender losses on loans typically given to borrowers
who can't make a 20% down payment. Shares of companies that also
offer mortgage insurance took a hit Monday, too, as MGIC is the
first of the group to report results this earnings season. PMI
Group Inc. (PMI) fell 13% to $1.11, Radian Group Inc. (RDN)
declined 15% to $3.46 and Genworth Financial Inc. (GNW), which has
a mortgage insurance unit even though its larger businesses include
life insurance and asset management, lost 8% to $9.03.
"There are fears that they'll have similarly high paid losses --
and they will," said Michael Grasher, analyst at Piper Jaffray. "If
you look at their [mortgage insurance] portfolios, they're all
pretty much the same."
MGIC reported a loss of $151.7 million, or 75 cents a share,
compared with a prior-year profit of $24.6 million, or 13 cents a
share. The current period included an 11-cent per-share realized
gain, while the prior-year results included a 17-cent gain. Revenue
slid 9.7% to $367 million amid lower net premiums.
Analysts polled by Thomson Reuters most recently estimated
earnings of 2 cents a share on $346 million in revenue.
The percentage of delinquent loans was 15.8%, compared with
17.59% a year earlier. Claims losses were $459.6 million, up
sharply from $320.1 million a year ago.
Still, there were some positives in the results -- net insurance
written was $3.1 billion for the second quarter, up from $2.7
billion during the same period last year. And Grasher said he sees
MGIC turning profitable in 2012.
"Investors are so caught up in considering they may not be a
survivor," Grasher said. "We see profitability in 2012. Are we too
soon for that? Maybe, but I don't think so."
-By Corrie Driebusch, Dow Jones Newswires; 212-416-2143;
corrie.driebusch@dowjones.com
--Mia Lamar contributed to this article.
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