MGIC Investment Corp., the No. 3 U.S. mortgage insurer, rallied after posting its largest profit since 2007, helping ease concerns that slowing home lending would weigh on results.
The insurer had declined 1.3% this year before today amid signs that rising interest rates and climbing home prices were slowing mortgage lending. Wells Fargo & Co. and JPMorgan Chase & Co. reported this month that loan volumes plunged in the first quarter. MGIC’s profit of $60 million, or 15 cents a share, was driven by improvements in loans backed in prior periods, even as the Milwaukee-based firm sold 20% less mortgage coverage than a year earlier.
"The credit story continues to drive upside to earnings estimates," Jack Micenko, an analyst at Susquehanna International Group, said in a research note. He estimated MGIC would post earnings of 8 cents a share.
Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. MGIC and rivals Radian Group Inc. and Genworth Financial Inc. are rebounding from financial crisis-era losses as home prices rise.
Losses incurred at MGIC narrowed to $122.6 million from $266.2 million in the first three months of 2013. That helped cushion the decline in premium revenue, which fell to $214.3 million from $247.1 million.
Existing-home sales slowed 0.2% to a 4.59 million pace in March, the lowest level since July 2012, the National Association of Realtors reported. The decline was smaller than estimated in a Bloomberg survey.
Radian, the top seller of mortgage insurance last year, climbed 3.7% and Genworth jumped 4.7%.
MGIC was unprofitable for 23 of the past 27 quarters. The profit reported today compares with a loss of $72.9 million in the first quarter of 2013.