In the same quarter a year earlier, the Milwaukee-based company lost $165 million.
In the company’s earnings conference call, CEO Curt Culver provided new details of the settlement in its pool insurance dispute with Freddie Mac. Its primary mortgage insurance subsidiary will pay the GSE $266 million, of which $100 million is due when the deal is signed, with the rest payable over four years.
Culver said that MGIC is not willing to sign the agreement unless the subsidiary it established to write new policies once Mortgage Guaranty Insurance Corp. exceeded the 25-to-1 risk-to-capital ratio is approved by both Freddie Mac and Fannie Mae. That unit, MGIC Insurance Co., is approved by Fannie Mae to do business until the end of 2013.
At the end of the third quarter, MGIC’s risk-to-capital ratio was 34-to-1 for all of its underwriting units. Culver said Wisconsin state regulators know “our forecast calls for the risk to capital ratio of MGIC to continue to rise for some time to come.” He continued that management believes that there are no liquidity issues at its insurance operations.
New insurance written in the third quarter came to $7 billion, an 80% jump from the same period last year and a 19% improvement from last quarter. This includes roughly $600 million done through the ‘clean sheet’ underwriting unit. But the total excludes $3.7 billion in HARP transactions, which MGIC considers as a modification of existing coverage.
Total losses in 3Q came to $490 million, up 6% from 3Q11, but down 11% from 2Q12. Culver said the increase is due to the number of new delinquent notices received, which remain at elevated levels compared to historic performance.
Separately, MGIC released its October new insurance written and delinquent loan inventory numbers. During the month MGIC wrote $2.6 billion of policies. One of its competitors, Radian, wrote $4 billion.
The MI reported that it once again saw significant movement in its delinquent loan inventory. It started the month with 148,885 loans and added 10,937 new notices of delinquency. But ‘cures’ removed 9,401 loans from the inventory, plus paid claims took out 3,780. Rescissions and denials removed another 359, bringing it down to 146,282.