MGIC Losses Mash Mortgage Sector
MGIC Investment (MTG) plunged 11% after the mortgage insurer reported a big third-quarter loss and said it doesn't expect to return to profitability in the fourth quarter or 2008.
The comments spurred a ratings downgrade and sent shares across the mortgage insurance sector tumbling. Shares in Radian (RDN), MGIC's partner in a merger that failed to close earlier this year, fell 11%, while MGIC and Triad Guaranty (TGIC) each fell 10% and PMI (PMI) slid 8%.
For the three months ended Sept. 30, Milwaukee-based MGIC reported a loss of $372.5 million, or $4.60 a share, compared to a profit of $130 million, or $1.55 a share, in the year-ago quarter. Analysts had expected MGIC to earn 61 cents a share in the quarter.
MGIC attributed the loss to an after-tax writedown of $303 million from an impairment on its equity investment in Credit-Based Asset Servicing and Securitization, or C-Bass. C-Bass is a joint venture with Radian that invested in subprime mortgages. But the business swooned as the housing downturn worsened this summer and investors shunned mortgage-backed securities.The company also recorded $11.3 million in pretax expenses over its failed merger with Radian, which was terminated in September, due to a decline in business and the C-Bass writedown. Offsetting the charges was a $106 million gain from MGIC's sale of a portion of its stake in a debt-recovery firm during the quarter.
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