MGIC Crashes and Burns: Are Peers Far Behind?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It's been a struggle for mortgage insurers since the housing crisis hit, but for a while it looked as if survivors MGIC Investment (NYSE: MTG  ) , Radian Group (NYSE: RDN  ) , and Genworth Financial (NYSE: GNW  ) were on the road to recovery. Very recently, however, that road got a whole lot bumpier.

MGIC has investors in panic mode, after the insurer posted a $274 million loss for Q2, $122 million more than the net loss reported this time last year. Revenues were also down, despite the company's having nearly doubled the value of newly originated policies over the past year. Still, MGIC wrote only $2.2 billion in new insurance for June, compared with Radian's $3 billion. At the end of June, the company's risk-to-capital ratio was 30:1 -- quite a bit higher than the acceptable level of 25:1. The company admits that it may be prevented from issuing new insurance policies "on an uninterrupted basis."

Rivals are having their own problems
Radian has been working hard to hold back the acceptable risk ratio, but it crept up to 21:1 as of June 30, compared with 20.6:1 at the end of Q1. The company has been writing new insurance at top speed, increasing its business by 261% year over year. Radian posted a loss of $119 million, versus net income of $137 million last year. The company blamed lower premiums earned, as well as losses from financial products like derivatives. Investment gains were dinged, too -- $26 million compared with $44 million one year ago.

Genworth, stymied in its efforts to unload its mortgage insurance arm, also reported lower investment income as well as decreased premium income. Despite a decline in revenue of 5% year over year, the company did report net income of $76 million, a big improvement over last year's loss of $136 million.

Still, the company is between a rock and a hard place with the mortgage unit, which continues to drag the insurer down. CEO Martin Klein recently seemed to lean against spinning off the unit, citing lack of shareholder enthusiasm, while noting that just stopping writing new policies isn't a fix, either.

Genworth finds itself in the same rut as Old Republic (NYSE: ORI  ) , which also jettisoned recent plans to sell of its mortgage insurance section after shareholder objections. Moody's dropped Old Republic's debt rating soon after the cancelled spin-off; the insurer has stopped writing new mortgage insurance.

Fool's take
The headwinds are strong against the industry, and it seems likely that things would be worse still if not for the decent mortgage-refinance market. The risk-to-capital issue weighs on all of these companies, and all have been forced to obtain waivers in various states to continue conducting business. How regulators handle MGIC's recent setback will no doubt be something competitors and investors alike will watch closely.

These embattled insurers may not be in the best position to help you retire rich, but our retirement experts know of three stocks that can. I invite you to read this special report, which is jammed full of great saving and investment tips to help you plan a comfy retirement. Interested? It's free.

Fool contributor Amanda Alix owns no shares in the companies mentioned above. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1972307, ~/Articles/ArticleHandler.aspx, 10/27/2016 7:31:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:02 PM
MTG $8.45 Down -0.08 -0.94%
MGIC Investment CAPS Rating: ***
GNW $4.44 Down -0.13 -2.84%
Genworth Financial CAPS Rating: ****
ORI $18.45 Up +0.13 +0.71%
Old Republic Inter… CAPS Rating: ****
RDN $14.35 Down -0.01 -0.07%
Radian Group CAPS Rating: ***