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Mortgage insurer MGIC Investment reported a wider quarterly loss and said it will stop writing new business as losses mount in the battered housing sector, sending its shares down 14 percent in premarket trade.
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AP |
The largest U.S. mortgage insurer [MTG
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] said it will wind down its business and try to capitalize a fresh enterprise that would write new loans beginning next year.
It said it hopes to win a capital investment from the U.S. Treasury but "cannot predict whether we will be successful in obtaining capital from any external source."
MGIC aims to begin to capitalize the new company with $500 million by the end of July and intends to have the new business, Mortgage Indemnity Corp, replace MGIC.
"When MIC is fully operational, MGIC will stop writing new business, i.e., it will go into run-off," the company said in a statement. The specialty insurance company saw its business prosper during a five-year housing boom that ended in 2006, but lately investors have shunned MGIC as record defaults have threatened the company's stability.
The stock has fallen 64 percent since June 1 last year, when it was trading at $11.
Milwaukee-based MGIC reported a second-quarter net loss of $339.8, or $2.74 a share, compared with a loss of $99.9 million, or 81 cents a share, a year earlier.
MGIC wrote $5.9 billion of new insurance in the quarter, compared with $14.0 billion a year ago.
The company said it has more-than-adequate resources to pay all of its insured claim obligations on insurance in force.
MGIC shares were down 14 percent at $3.40 in premarket trade. They closed at $3.49 on Wednesday on the New York Stock Exchange.
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