Magazine article American Banker

MGIC Posts Rise, but Wall Street Stays Skeptical

Magazine article American Banker

MGIC Posts Rise, but Wall Street Stays Skeptical

Article excerpt

MGIC Investment Corp.'s better-than-expected third-quarter profit increase was not enough to assuage Wall Street's worries that credit quality in the mortgage industry will worsen with the economy, analysts said.

The parent of the Milwaukee mortgage insurer Mortgage Guaranty Insurance Corp. said its earnings rose 6.2% from a year earlier, to $142.2 million. Earnings per share of $1.55 topped analysts' average estimate by 3 cents, according to Thomson Financial.

Insurance in force fell 5.33%, to $170.2 billion, and the persistency rate, the percentage of insurance remaining in force from a year earlier, rose 0.8 percentage points, to 60.2%.

During MGIC's conference call Tuesday, executives gave a positive credit outlook for next year.

Curt Culver, the company's president and chief executive, also said it is "starting to feel vibes that credit spreads may widen ... in which case we think we will probably not only write more business, but also at maybe slightly higher premium rates."

Nonetheless, some analysts focused on MGIC's releasing of about $11 million of reserves, which boosted earnings by 9 cents a share, and worsening credit quality -- the percentage of delinquent loans in its portfolio rose 15 basis points, to 5.95%.

MGIC's shares fell below $57 in Wednesday morning trading but rose to $58.50 by mid-afternoon, a drop of 1.96% for the day.

The thinking on the Street is that "you don't want a company with a lot of credit risk releasing reserves when you could be going into a poorer credit situation," said Paul Miller, a Friedman, Billings, Ramsey & Co. …

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