MGIC Investment Corp., the largest provider of private mortgage insurance, said today it lost $273.3 million during the fourth quarter, compared to a quarterly loss of $1.47 billion a year earlier.
But though losses have decreased, the company doesn’t expect profitability during 2009, and worse, warned that it may need additional capital to continue writing new business.
Not that business is booming anyways. New mortgage insurance written during the quarter totaled just $5.5 billion, down from $24 billion a year earlier.
For all of 2008, new insurance written totaled $48.2 billion, off from $76.8 billion last year.
Meanwhile, 12.37 percent of the company’s insured loans were delinquent, up from 7.45 percent last year and 6.13 percent at the end of 2006.
The Milwaukee-based insurer noted that the mortgage industry is experiencing material losses on 2006 and 2007 books, which could push MGIC’s risk-to-capital ratio beyond levels necessary to meet regulatory demands.
“Because we cannot predict future home prices or general economic conditions with confidence, we cannot predict with confidence what our ultimate losses will be on our 2006 and 2007 books,” the company said in its earnings release.
“Our current expectation, however, is that these books will continue to generate material incurred and paid losses for a number of years.”
“As a result, we are considering options to obtain capital to write new business, which could occur through the sale of equity or debt securities and/or reinsurance. We cannot predict whether we will be successful in obtaining capital from any source but any sale of additional securities could dilute substantially the interest of existing shareholders.”
The company made a series of underwriting changes over the last year and change to mitigate losses, but continues to experience painful losses on the high-risk loans it insured during the tail end of the housing boom.
Their outlook certainly doesn’t bode well for mortgage insurers, much less the industry as a whole.
I wouldn’t be surprised to see a few more follow down that path this year.