Mortgage Insurer MGIC Loses $1.3bn in 2009
MGIC Investment Corp. (MTG), parent of Mortgage Guaranty Insurance Corp. (MGIC), posted a $280.1m net loss - $2.25 per share - for the fourth quarter 2009. The Wisconsin-based mortgage insurer posted a total $1.3bn net loss in all of 2009, more than double the $525.4m net loss in all of 2008. Rising unemployment and falling house prices led to a growing delinquent inventory and higher incurred losses in the year, according to MGIC chairman and CEO Curt Culver. At the same time, the company received a declining number of new notices. New insurance written since the implementation of underwriting guidelines in early 2008 seem to be performing better compared with past business, as the guidelines have improved the overall credit risk profile of MGIC's insurance-in-force. MGIC said new insurance written for all of 2009 was $19.9bn, less than half the $48.2bn written in the previous year. Q409 was not exempt from this slowdown, with $3bn of new insurance written, compared with $5.5bn in the year-ago quarter. The US Treasury Department's Home Affordable Modification Program accounted for $630.1m of insurance not counted as new business in 2009, but a modification of existing coverage. MGIC incurred $880.9m of losses in Q409, down from $903.4m a year earlier, due to a decrease in default inventory and estimated severity. As of year-end 2009, 15.46% of MGIC-insured loans were delinquent compared with 9.51% a year earlier. The Office of the Commissioner of Insurance (OCI) in Wisconsin recently waived until Dec. 31, 2011 a requirement that the company maintain a certain minimum regulatory capital to write new mortgage guaranty policies. It was part of MGIC’s plan to continue to write new business partly through wholly-owned subsidiary MGIC Indemnity Corp. (MIC), which was recently capitalized by MGIC with $200m. MGIC finished a tough 2009, recently sued by Bank of America's (BAC) Countrywide Home Loans unit over allegedly denying millions of valid insurance claims. Credit-rating agency Standard & Poor's previously downgraded MGIC's financial strength rating to single-B plus from double-B on the heels of losses in 2009. Write to Diana Golobay. Disclaimer: The author holds no relevant investment positions.