Mortgage issuer MGIC posts huge loss; shares slide
MILWAUKEE: The mortgage insurer MGIC Investment said Wednesday that it lost almost $1.5 billion for the last three months of 2007 on higher home delinquencies and payouts. It also said it was looking for ways to improve its capital.
The chairman and chief executive Curt Culver said the company still does not expect to make money this year, if delinquencies and losses continue to rise and fewer homeowners get back on track with payments.
Its shares tumbled $2.16, or 15.2 percent, to $12.01 Wednesday. Its shares are near the lower end of their 52-week range of $10.40 to $67.41.
The Milwaukee-based company said it lost $1.47 billion, or $18.17 per share, in the fourth quarter compared with a profit of $121.5 million or $1.47 per share in the same period a year ago.
A survey by Thomson Financial indicates Wall Street analysts had expected the company to lose, on average, $6.77 per share. Those estimates typically exclude one-time items.
The company said it had hired an advisor to assist it in exploring alternatives for increasing its capital, though Culver said MGIC had enough money to pay claims.
The company announced late last month that it could pay $2 billion in claims this year, up from previous estimates of up to $1.5 billion. It finished 2007 paying out $870 million in claims, up from $611 million in 2006.
Home buyers typically must get mortgage insurance when they put down less than 20 percent of their homes value. When they miss payments, the insurers pay lenders. If homes end up in foreclosure, both lenders and insurers lose money.
Revenue for the fourth quarter was $399.1 million, up 8.7 percent from $367.2 million in the last three months of 2006. The company increased its net premiums written for the quarter nearly 25 percent to $380.5 million, up from $367.1 million in the same quarter in 2006.
MGIC finished 2007 with a loss of $1.67 billion, or $20.54 a share. In 2006, MGIC earned $564.7 million, or $6.65 a share. For the year, revenue rose to $1.69 billion, from $1.47 billion in 2006. New insurance written was $76.8 billion, compared to $58.2 billion in 2006.
MGIC had $211.7 billion primary insurance in force at the end of 2007, compared with $176.5 billion the previous year.
The company has been limiting its exposure to weaker housing markets by demanding higher credit scores and larger down payments.
Starting March 3, MGIC said it would require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas like Washington, D.C., Detroit, Chicago, Boston and Atlanta.
Culver told analysts on a conference call that the changes will reduce losses but they wont get rid of them.
“We feel they are not enough to help us return to profitability in a market where real estate values are declining,” he said.
