Although the nation's largest mortgage insurer, MGIC, continues to lose money, FBR Capital Markets Monday issued a report calling the firm a "buy," saying it is "relatively better positioned" than its peers.
In particular, FBR is pleased with the announcement that its parent holding company will contribute $200 million of capital to the operating MI subsidiary, providing it "with a better cushion against the 25:1 risk-to-capital threshold."
Although most MI companies continue to lose money, FBR notes that the current new business environment is "extremely favorable for the industry," adding that "credit quality is very strong, net premiums are generally better (thanks to the lack of captive reinsurance), collateral values are better (i.e., the homes purchased today incorporate double-digit depreciation from their peak), and competitors are being forced from the market."
But the analytics firm cautions that MI firms are not yet in a position to fully take advantage of these positives, given their constrained capital positions and continued losses.
Last week MGIC Investment Corp., the parent of the MI unit, posted a net loss of $165 million in the third quarter while revenue and new policies written continued to slide amid a depressed housing market. It took in revenues of $337 million in 3Q, a 12% decline from 3Q 2010.
The firm wrote $3.9 billion of new coverage, compared to $3.5 billion in 3Q10.
Meanwhile, in other MI news, PMI Group, which late last week had its chief MI subsidiary seized by Arizona regulators, announced that it has hired Evercore Partners Inc., to explore a possible restructuring.
PMI has retained the law firms Sullivan & Cromwell LLP and Young Conaway Stargatt & Taylor LLP, according to a new regulatory filing.
