MGIC posts second profit in a row as U.S. housing market recovers

Reuters

* Third quarter profit of $0.04/shr

* Percentage of delinquent loans fell to 9.69 pct

* New insurance written rose 23 pct to $8.6 bln

* Shares rise as much as 16 pct

By Varun Aggarwal

Oct 16 (Reuters) - Mortgage insurer MGIC Investment Corp posted its second straight quarterly profit as arecovery in the U.S. housing market lowered the number ofdefaulters, sending its shares up as much as 16 percent.

Rising house prices means fewer home owners have loans thatexceed the value of their property, cutting delinquencies.

The company's losses from claims and defaults during thethird quarter fell sharply to $180.2 million from $490.1million.

The percentage of MGIC's loans that were delinquent,excluding bulk loans, fell to 9.69 percent as of Sept. 30 from12.34 percent a year earlier.

"We believe the bigger story is the second consecutivequarter of materially lower-than-expected incurred losses whichenabled (MGIC) to generate two quarters of operating profit muchsooner than we had expected," Barclays analyst Mark DeVries saidin a client note.

MGIC reported its first quarterly profit in about threeyears in the second quarter this year. The company has postedannual losses for six years.

MGIC and larger rival Radian Group Inc have alsoboosted their market share after the Federal HousingAdministration (FHA), their main competitor, raised premiums toreplenish dwindling cash reserves.

"The opportunity presented by FHA's problems certainly is awonderful opportunity," Chief Executive Curt Culver said on aconference call.

Culver estimated the company's market share at about 13percent in the third quarter compared with 10 percent in thesecond quarter.

Private mortgage insurers accounted for 36 percent of U.S.mortgage insurance written in the second quarter, their biggestquarterly share of the market since 2008, according to a RoyalBank of Scotland report published in August.

MGIC said it did not expect profit to be hurt by a rise ininterest rates due to a potential tapering of Fed's stimulusprogram.

The recent rise in interest rates has not slowed the demandfor houses, but has reduced the incentive to refinancemortgages, CEO Culver said.

The company posted a profit of $12.1 million, or 4 cents pershare, for the third quarter ended Sept. 30, compared with aloss of $246.9 million, or $1.22 per share, a year earlier.

New insurance written jumped 23 percent to $8.6 billion.

MGIC shares were up 14 percent at $8.29 in early afternoontrading on the New York Stock Exchange.

The stock gained more than 20 percent in the third quarter,outperforming the broader S&P 500 Index, which was upabout 5 percent in the same period.

Radian shares were up more than 5 percent at $14.15, whileshares of Genworth Financial Inc rose 3 percent to$13.32 on the New York Stock Exchange.

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