Latest housing victim: Mortgage insurers

PMI Group saw its quarterly U.S. claims rise 49 percent to $92.6 million. And the insurer Radian Group Inc. posted a loss of $703.9 million in the third quarter after getting hit by writedowns and losses at a subprime mortgage joint venture with MGIC.

The industry's woes pressured MGIC to back out of a deal to buy Philadelpia-based Radian in September. The companies saw mounting losses in their joint venture and figured it was in each other's best interest to concentrate on staying afloat.

Radian chief executive officer S.A. Ibrahim likened the turmoil to "an industrywide scramble to survive."

The whole industry will most likely continue to lose money next year, break even by 2009 and possibly return to profit the following year, said Geoffrey M. Dunn, an analyst with Keefe, Bruyette & Woods. Even with those losses, the insurers should have enough in reserves to survive. He estimated MGIC has access to about $2 billion in capital to pay out claims.

"I think these companies are very well capitalized. At this point, I don't see any of these companies going under," he said.

As losses mount at the insurers, though, investors have suffered. MGIC shares are down 66 percent this year, PMI shares are off 69 percent and Radian shares are down 77 percent.

But Wall Street was buoyed Friday by the Old Republic news. PMI Group's stock jumped $3.77, or 34 percent, to $14.88 and shares of MGIC rose $2.94, or 16 percent, to $21.30. Sares of Radian Group increased $2.42, or 24 percent, to $12.62.

Shares of Old Republic initially slipped to their lowest level in more than four years before recovering. The stock rose 90 cents, or 6 percent, to $15.07.

"The sentiment has been so poor on mortgage insurance and the data keeps coming out worse than the last time it came out," said Thane Bublitz, an equity analyst for Thrivent Investment Management Inc. "That's a hard environment for these stocks to gain any positive momentum."

But he thinks the companies will survive, too, because of the extra cash they've stored in their reserves. And they'll have to make shifts in their business, Bublitz said, such as charging more for certain types of loans, as MGIC plans to do.

Several analysts noted an upside to the crisis, though — more business as consumers and lenders seek to get more loans insured. The total number of policies written through September this year was up 41 percent to 1,498,132, from the same period last year, the industry's trade group reported.

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