MGIC Investment Corp. swung to a huge fourth quarter loss, as it pumped $1.2 billion into reserves for future losses — and said there was more to come. The mortgage insurer reported a quarterly net loss of $1.47 billion, $18.17/share, compared to earnings of $121.5 milion, $1.47/share, in the year-ago period. That loss was nearly triple what analysts had expected, with the Wall Street Journal reporting Wednesday that a Thomson Financial poll had pegged expectations at a loss of $6.77 per share. The $1.2 billion reserve, called a “pre-tax premium deficiency reserve,” is essentially the insurance equivalent of a loss provision charge recorded by a mortgage lender. It reflects the present value of expected future losses and expenses that exceed current loss reserves — which means that MGIC is now expecting to lose much more money on certain loans that it had originally thought. Citing low cure rates, greater loss severity and quickly increasing borrower defaults, CEO Curt Culver said that MGIC doesn’t expect to report a profit in 2008, and will look for ways the company can raise capital going forward. Cure rates are a problem in California and Florida, Culver said, while economic weakness in the Midwest is pushing overall delinquency rates higher as well; HW has been calling attention to low cure rates for the past four months. As expected, fourth quarter paid losses were $1.35 billion, slightly above the $1.3 billion the company had warned of in late January. Delinquencies rose to 107,120 insured loans, MGIC said, up from 90,829 at the end of the third quarter and 78,628 one year earlier. A look at the financials, however, underscores that deliquencies are increasing universally: prime loans, where the borrower had a FICO above 620, saw delinquencies rise 47 basis points from 3.86 percent to 4.33 percent between the third and fourth quarters of last year. Reduced doc loans, spanning all credit classes, saw delinquencies jump to 15.48 percent in Q4, compared to 12.14 percent one quarter earlier. In a new break-out of its bulk insurance business — where a mortgage insurer underwrites policies in bulk for loan pools as a form of credit enhancement for securitization — MGIC said that “Wall-Street-based bulk insurance” in particular was proving to be problematic, for both current and future losses. As a result, MGIC said it had ceased writing that portion of its bulk business; it will still provide insurance on bulk transactions with the GSEs or where the lender will hold the loans, it said. That’s not a small decision. To put it into perspective, “Wall Street bulk transactions” represented 41 percent of all new insurance written in 2007, so this exit will be particularly painful for MGIC. The hit to revenue will likely be especially strong when combined with recently-announced policy changes that will see the insurer pull back from its more traditional flow insurance in key states, as well. For more information, visit http://www.mgic.com.