MGIC Posts First Loss, Predicts No Profit Next Year

Sour grapes...

MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss in 16 years and said it won't be profitable in 2008 as foreclosures increase from record levels.

Mortgage insurers help reimburse home lenders when borrowers don't pay. Lenders often require homeowners to buy private mortgage insurance if they put down less than 20 percent in cash or if their credit rating is weak.

The number of borrowers more than 60 days behind on privately insured loans jumped 30 percent from year-earlier levels in August, the most recent data from Washington-based Mortgage Insurance Companies of America showed.

``Things are going to get worse from here,'' said Rob Haines, an analyst at CreditSights Inc. in New York. ``We've got a couple of scary quarters ahead of us.''

Fitch Ratings said it may downgrade MGIC's claims-paying ability because mortgages insured in 2007 appear to be performing at least as badly as 2006 loans.

``We have modeled in, I think, very draconian loss estimates,'' Culver said during the call. ``We have got more than enough capital to pay those.''

The company will probably end the year with about $300 million in cash, enough to weather current conditions, he said. MGIC also has $200 million available on a line of credit that requires it to maintain a minimum market value of $2.25 billion, the company said. MGIC was worth $2.14 billion at today's closing price.

The risk of owning MGIC's bonds rose, according to credit- default swap traders. The contracts, used to speculate on the company's ability to repay its debt or hedge against the risk it won't, rose 45 basis points to 210 basis points, according to broker Phoenix Partners Group. An increase suggests deterioration in investor confidence.

``It's a huge miss,'' said Geoffrey Dunn, an analyst at KBW Inc. in Hartford, Connecticut. ``Our fears that 2008 might be even worse than we forecast are being realized.''

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