MGIC Projecting $1.3B in 4Q Incurred Losses

MGIC Investment Corp., Milwaukee, is projecting incurred losses for the fourth quarter of around $1.3 billion. This is more than double what Friedman, Billings, Ramsey analysts Steve Stelmach and Paul Miller Jr. had previously estimated, the pair say in a new report. MGIC blamed a continued deterioration in cure rates, leading to a higher percentage of loans that became claims. In addition, average claim size continues to increase. For 2008, MGIC is projecting paid losses in the area of $1.8 billion to $2.0 billion. The company said it decided during the fourth quarter to stop writing bulk business insuring loans in Wall Street securitizations. In their report, the FBR analysts forecast that MGIC will have a tangible book value of $2.6 billion by year-end 2008, down from $4.5 billion at the end of the first quarter of 2007. "This will bring MGIC uncomfortably close to breaching its minimum net worth requirement of $2.0 billion," the analysts said. "As a result, we view rating agency risk as growing, as well as the need for a potential capital raise. Also, we do not view other MIs as immune from the troubles seen at MGIC and would expect the group to trade lower in sympathy." MGIC can be found on the Internet at http://www.mgic.com.