MGIC Losses $73M in 1Q13 But Regains Risk-to-Capital Compliance

MGIC Investment Corp. lost $73 million in 1Q13, compared with a loss of $387 million in 4Q12 and $20 million in 1Q12. However, that 4Q12 loss included set-asides for settlements of disputes with Freddie Mac and Bank of America/Countrywide.

Most importantly, the company’s primary mortgage insurance underwriting unit, Mortgage Guaranty Insurance Corp., is back in compliance with risk-to-capital ratio limits. At the end of last year, it had a 44.7-to-1 risk-to-capital ratio, far exceeding the 25-to-1 standard in the states that require it.

But the successful capital raise through debt and equity offerings allowed the parent company to provide $800 million in capital to the underwriting unit, bringing the risk-to-capital ratio down to 20.4-to-1. Wisconsin, the state where the company is domiciled, uses a different measure called minimum policyholder position; MGIC is now $168 million above the minimum MPP of $1.2 billion.

As a result of MGIC regaining compliance with the risk-to-capital ratio requirements, MGIC Indemnity Corp.—established to write policies in the eight jurisdictions where MGIC did not have a waiver of the capital requirements—will suspend writing new business.

Primary insurance-in-force at the end of the quarter is $159.5 billion, down from $162.1 billion on Dec. 31, 2012.

New insurance written in 1Q13 is $6.5 billion, compared with $7 billion in 4Q12 and $4.2 billion in 1Q12. This does not include an additional $3 billion of coverage written as a result of the Home Affordable Refinance Program. MGIC treats this as a modification of existing coverage, rather than NIW.