MGIC Gets Fannie OK On New Insurer; 3Q Loss Widens

MGIC Investment Corp. (MTG) announced Fannie Mae (FNM) has approved its plan to recapitalize its mortgage-guaranty unit so it could continue writing new policies.

The news came as the company said its third-quarter loss widened sharply on higher claims and a prior-year reserve change as the mortgage insurer continued to struggle amid a massive restructuring effort.

MGIC, which last summer outlined a $1 billion recapitalization of the mortgage-guaranty unit, has been waiting for the business to be approved as an eligible mortgage insurer for Fannie Mae (FNM) and Freddie Mac (FRE). MGIC Chairman and Chief Executive Curt Culver said Freddie approval is hoped to happen soon. Also needed is approval from Wisconsin's insurance commissioner.

MGIC is shifting its underwriting to the new unit on fears MGIC won't meet regulatory capital requirements to write new business.

Mortgage insurers have seen claims skyrocket for more than a year as the credit crunch made it more difficult for borrowers to refinance and for lenders to resell foreclosed properties at a profit.

MGIC posted a third-quarter loss of $517.8 million, or $4.17 a share, compared with a year-earlier loss of $115.4 million, or 93 cents a share. Revenue fell 10% to $413.3 million as net premiums earned dropped 14% amid a 53% slump in new policies written.

Analysts polled by Thomson Reuters forecast a per-share loss of $1.62 and revenue of $437 million.

Delinquency rates among insured loans increased to 16.9% from 10.2% a year ago and 15% in the second quarter. Paid claims rose to $417 million from $330 million and $380 million, respectively.

MGIC's shares closed Thursday at $7.32 and were inactive premarket. The stock has more than doubled the past three months as investors become optimistic the housing crisis has bottomed.

-By Melissa Korn and Kevin Kingsbury, Dow Jones Newswires; [e-mail]; 212-416-2354