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MGIC Income Increases on Lower Claims and Expenses

JUL 16, 2014 4:37pm ET
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MGIC Investment (MTG) in Milwaukee reported a nearly fourfold jump in income for the second quarter driven primarily by lower incurred losses as new insurance increased.

MGIC's profit more than tripled to $45.5 million, from $12.4 million in the same quarter a year earlier. Earnings per share increased from 4 cents to 12 cents, missing by 2 cents the average estimate of analysts polled by Bloomberg.

Losses incurred in the second quarter declined 28%, to $141 million, primarily due to fewer new notices of default and a lower claim rate on new delinquency notices, the company said in a press release Wednesday. The percentage of delinquent loans, excluding loans insured in bulk, was 7.3% on June 30, down from 10.16% a year earlier.

Net underwriting and other expenses also declined nearly 29%, to $33.9 million as the company ceded fewer commissions related to reinsurance. Interest expenses also dropped 3.16% to $17.4 million.

In addition, the company reported positive operating trends. New insurance written in the second quarter increased 3.7%, to $8.3 billion. MGIC's primary insurance in force increased 0.4%, to $159.3 billion. Persistency, or the percentage of insurance remaining in force from a year earlier, also increased to 82.4%, up from 78% the prior year.

At June 30, MGIC Investment's main insurance subsidiary, Mortgage Guaranty Insurance Corp., had $159.3 billion primary insurance in force covering approximately one million mortgages.

The nation's top insurers, including MGIC, are facing new regulatory compliance challenges in 2014 and beyond. As an approved mortgage insurer with Fannie Mae and Freddie Mac, Culver said in the release, MGIC plans to comply with the recently proposed mortgage insurance standards, "even if they become effective in their current form," he said.

Nonetheless, MGIC plans to file comments to the Federal Housing Finance Agency and the government sponsored enterprises "to reflect the appropriate changes required to the proposed standards," to ensure they promote a liquid, affordable and stable housing market that reduces taxpayer risk, and promotes private investing, Culver added.

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