MGIC Investment Corp.
) suffered an operating loss of $1.49 per share owing to higher
claim costs and lower premiums written. The reported loss was much
wider than the Zacks Consensus Estimate loss of 53 cents.
Operating loss was significantly higher than the prior-year
quarter's loss of 86 cents per share. The results reflected
repercussions faced by the company due to the housing market
Total revenues for the reported quarter came in at $321.1
million, compared with $367.0 million recorded in the prior-year
quarter, due to lower premiums earned and lower investment income,
partially offset by higher realized investment gains.
Net premiums written dropped 12% year over year to $255.0
million due to adherence to stricter loan payout requirements that
caused an overall decline in business for mortgage insurers
insuring these loans.
New insurance written was $5.9 billion, compared with $3.1% in
the year-ago quarter. Persistency, which measures the percentage of
insurance remaining in force since the previous year, was 81.4% as
of June 30, 2012, down 190 basis points year over year.
MGIC incurred losses or claim costs of $551.4 million, up 20.0%
year over year attributable to a rise in claim rate.
Net underwriting and other expenses were $48.9 million down 9.4%
year over year.
Combined risk to capital ratio for the company increased to
27.8:1 at the end of the second quarter, exceeding the regulatory
limit of 25:1. We are concerned about the steep capital to risk
ratio, which poses a significant regulatory seizure risk for the
company. MGIC's close rival, PMI Group Inc. (PMI), had suffered on
the same ground. The main insurance subsidiary of PMI Group, PMI
Mortgage Insurance Co., faced regulatory seizure as it breached its
risk to capital ratio limit.
Book value per share, measuring the net worth of a company,
decreased 43% year over year to $4.29 as of June 30, 2012.
Another mortgage insurer,
Radian Group Inc.
) reported second quarter net loss of 90 cents per share, compared
with net income of $1.03 per share in the year-ago quarter.
MGIC INVSTMT CP (MTG): Free Stock Analysis
RADIAN GRP INC (RDN): Free Stock Analysis
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