Good old Al ...bargain shopping in the discount bin and coming out with some cheap deals ... I like it ... I like it ALOT
MGIC, PMI Surge After Old Republic Becomes Top Holder (Update1)
By Josh P. Hamilton
Nov. 9 (Bloomberg) -- MGIC Investment Corp. and PMI Group Inc., the two largest U.S. mortgage insurers, rose in New York trading after insurer Old Republic International Corp. disclosed it became the biggest investor in each company.
Old Republic bought 15 percent of the outstanding shares of Walnut Creek, California-based PMI and 11 percent of Milwaukee- based MGIC, according to regulatory filings today.
Mortgage insurers plunged as the worst housing slump in 16 years deepened in the third quarter, leading to record foreclosures and losses for MGIC and PMI. The companies help lenders recoup losses when borrowers don't pay. Old Republic, based in Chicago, owns the sixth-largest U.S. mortgage insurer.
``They certainly know the mortgage insurance business because of their Republic Mortgage subsidiary,'' John Gwynn, an analyst at Morgan Keegan Inc. in Memphis, Tennessee, said in an interview. ``The guy that's CEO of this company, Al Zucaro, is one of the most respected insurance managers in the country.'' Gwynn rates Old Republic stock ``market perform.''
PMI jumped $2.36, or 21 percent, to $13.47 at 1:40 p.m. in New York Stock Exchange composite trading. MGIC, the largest mortgage insurer, climbed 99 cents, or 5.4 percent, to $19.35. Old Republic rose the most in five years, gaining 93 cents, or 6.6 percent, to $15.10.
Mortgage insurers are selling more coverage as lenders seek to lower their risk and make their loans more attractive to investors. Members of Washington-based Mortgage Insurance Companies of America, including PMI, MGIC and Republic, issued policies to 151,355 homeowners in September, 59 percent more than a year earlier.
Still, the number of insured borrowers in the U.S. falling more than 60 days behind on their payments climbed 22 percent to 54,699, according to the group.
PMI's third-quarter premium revenue rose 20 percent to $256.8 million as the number and size of loans it insured increased. The company had a net loss of $86.8 million, its first ever as a publicly traded company, at claims costs increased fivefold. MGIC's loss was $372.5 million as costs to bail out lenders tripled and the company said it didn't expect to be profitable in 2008. Premium revenue rose 8.4 percent to $321 million.
``I'm sure they are looking at this as something over, say, three to seven years,'' Morgan Keegan's Gwynn said of Old Republic. ``They assume they are not zeros as some people on the Street do.''
MGIC and PMI each lost more than 70 percent of their market value this year through yesterday.
The shares of MGIC and PMI were purchased ``strictly as passive investments'' and not to influence the companies or take control of them, Old Republic said in a filing. The holdings were obtained in the open market over the past 11 weeks, the company said.
MGIC spokeswoman Katie Monfre declined to comment. PMI spokeswoman Beth Haiken wasn't immediately available to comment.
Do you guys remember whee PMI and MTG were at 11 weeks ago? 20's and 30's as I remember, didn't really take the big dump until mid October.
So ORI probably paid WAY above even yesterday's inflated prices for these shares whioh were purchased "strictly as passive investments." and "not to influence the companies, or to take control of them."
Now I can understand how it might be profitable to take control of these companies - lots of cash and decent securities out of which to pay expenses, bonuses or just outright loot before the inevitable claims overwhelm them.
But a passive minority interest? I don't get it.
Can anybody here give me some good reasons why I shouldn't initiate a short position monday morning?