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Wider-than-Expected Loss at MGIC

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Mortgage insurer, MGIC Investment Corporation (MTG - Free Report) reported third quarter 2012 operating loss of $1.25 per share, substantially wider than the Zacks Consensus Estimate of a loss of 59 cents. The company had reported an operating loss of 88 cents in the prior-year quarter.

MGIC’s GAAP net loss was $1.22 a share, compared with loss per share of 82 cents for the year-ago quarter. The disappointing results came on the back of elevated delinquency.

Total revenue for the quarter came in at $306.2 million, down 9.2% year over year. Net premiums written were reported at $263.5 million, up 3.1% year over year. The company’s new insurance written soared 80% year over year to $7.0 billion in the quarter.

MGIC's primary insurance in force stood at $164.9 billion as of September 30, 2012, compared with $172.9 billion as of December 31, 2011, and $179.0 billion as of September 30, 2011.

Losses incurred were $490.1 million, up 6% year over year, primarily due to an increase in the claim rate. 

Paid claims declined to $587 million, plummeting 22% year over year. The average claim placement declined marginally to $48,000. Management expects the current claim filing patterns to continue, which will drag the claim payments lower in the rest of 2012 and in 2013.

Net underwriting and other expenses were $50.7 million, down 3.4% year over year. Investment income plunged 38.0% year over year to $30.4 million.

Persistency (the percentage of insurance remaining in force from the previous year) was 80.2% as of September 30, 2012, compared with 83.7% as of September 30, 2011 .

Overall, effects of the sluggish economy continue to challenge MGIC’s financial results as well as its capital. Also, we do not expect any reversal in the situation in the near term.

Peer Radian Group Inc. (RDN - Free Report) , posted third quarter net income of 11 cents per share, substantially declining from a profit of $1.37 per share in the year-ago quarter


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