By Walden Siew NEW YORK (Reuters) - MGIC Investment Corp (MTG.N), the
largest U.S. mortgage insurer, recorded another losing quarter
on Wednesday, as the bond insurance industry continues to
grapple with rising defaults in the U.S. subprime mortgage
market. Meanwhile turnaround specialist Wilbur Ross cast doubt on a
bid by billionaire investor Warren Buffett on Tuesday to
reinsure $800 billion of municipal bonds guaranteed by U.S.
bond insurers. “I don’t think it will happen,” Ross said on CNBC
television, referring to the Buffett plan. MGIC reported a larger-than-expected $1.47 billion fourth
quarter loss as more homeowners fell behind on payments, and
claims increased sevenfold. The company, which said it also
hired an adviser to help raise capital, expects to lose money
this year unless the credit environment improves. Its shares
fell $1.77, or 12.5 percent, to $12.39. “Obviously, these financial results are unacceptable,”
Chief Executive Curt Culver said on a conference call. Deteriorating U.S. mortgages resulted in MGIC and rivals
Radian Group Inc (RDN.N) and PMI Group Inc (PMI.N) posting
their first-ever losses in the third quarter last year. For all
of 2007, MGIC lost $1.67 billion, or $20.54 per share, as
claims nearly quadrupled to $2.37 billion from $613.6 million. Milwaukee-based MGIC has been battered as borrowers have
missed payments and investors have stopped buying a wide
variety of debt perceived to carry too much credit risk. “It now seems inevitable that the company will have to
raise significant amounts of dilutive capital to preserve its
‘double-A’ (credit) rating and the long-term viability of the
business,” wrote Bruce Harting, an analyst at Lehman Brothers
Inc. He rates MGIC “underweight.”
ROSS AND BUFFETT Buffett’s offer to reinsure muni debt guaranteed by three
bond insurers came under more criticism as Wilbur Ross said in
a CNBC television interview he did not expect the proposal to
go forward. Buffett’s bid has already been rejected by two of the three
bond insurers he targeted, including Ambac Financial Group Inc
(ABK.N), the No. 2 bond insurer. Still, Ross said the offer by Berkshire Hathaway Inc’s
(BRKa.N) chief executive to reinsure $800 billion of municipal
debt guaranteed by bond insurers could put pressure on
regulators and others to find another solution. Ross said he will offer another plan in coming weeks that
bond insurers may find more attractive, he said. “We’re making progress. We’re getting through the due
diligence,” he said. “Municipal bondholders need a solution,
and they will get a solution.” Bond insurer MBIA Inc (MBI.N) also plans to urge lawmakers
and regulators to curtail short sellers in testimony in
Washington on Thursday. In the testimony, prepared for a February 14 hearing before
the subcommittee of the U.S. House Committee on Financial
Services, MBIA says the practice and dissemination of
“half-truths and misleading information” should be
“investigated and curtailed,” according to a copy of written
testimony obtained by Reuters. “MBIA notes that Mr. William Ackman is appearing on the
hearing on February 14th as an ‘industry expert.’ Mr. Ackman is
in fact not involved in the industry in any capacity except as
that of a short-seller, and, accordingly, MBIA questions the
characterization of Mr. Ackman’s expertise,” the testimony
says. (Additional reporting by Jonathan Stempel, Dan Wilchins,
Christian Plumb and Joseph A. Giannone)
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