MGIC Investment Corp., the nation's largest mortgage insurer, said Thursday it lost nearly $100 million in the previous quarter, but its shares soared almost 40 percent amid optimism over its long-term outlook.
Mortgage delinquencies and home foreclosures remain high, the Milwaukee-based company said, leading to a loss of $97.9 million in the quarter ended June 30. That translates to a loss of 79 cents per share.
In the same quarter last year, MGIC reported profits of $76.7 million, or 93 cents per share.
MGIC had previously warned that it doesn't expect to turn a profit until at least next year.
But it has taken steps to raise its operating standards, including demanding higher credit scores and larger down payments in harder-hit housing markets such as California and Florida. That means the company is issuing fewer new polices, but those written are more likely to be profitable, chairman and chief executive Curt S. Culver said.
MGIC began tightening its underwriting standards months ago. The company is still dogged by policies written before then, Culver said, but the number of delinquencies should start dropping by next year.
"We would anticipate the delinquencies to peak possibly this year or into the first quarter of next year," he said, reaffirming his predictions from last quarter.
Culver told analysts Thursday the cost of claims paid this year may not be as high as initially feared. The company had said the total would be $1.8 billion to $2 billion, but "it now looks like we will be at the lower end of the range," Culver said.
Shares soared $1.60, or 39.0 percent, to close at $5.70 amid a rally in the shares of other mortgage insurers. Radian Group Inc. gained 30 cents, or 31.6 percent, to end trading at $1.25, and shares of PMI Group Inc. added 48 cents, or 25.5 percent, to close at $2.36.
The entire industry has been hit hard by the deteriorating mortgage and housing markets. As more Americans default on mortgages, the holders of those mortgages turn to insurers such as MGIC, making claims to recoup their losses.
Howard Shapiro, an analyst for Fox-Pitt Kelton Cochran Caronia Waller, said the earnings were "reassuring" despite the overall loss.
"I guess the way to say it is, it was less bad than the market was anticipating," Shapiro said. "And in this market, less bad is enough to send your stock price up."
Another positive sign for MGIC was that its net premiums written in the quarter were $371.8 million, a 16 percent increase from the $321.0 million in the same quarter last year.
That helped boost overall revenue, although not enough to compensate for the heavy losses. Revenue was $424.5 million, in line with analyst expectations. The figure is a 15 percent increase from $369.0 million in the last-year quarter.
___
On the Net:
MGIC: http://www.mgic.com
Terms & Conditions
RSS Headlines
Fool UK