Environment Remains Difficult for MI Firms.

New York -- Based on what preliminary indications show, the fourth quarter of 2007 was another financial disaster for the mortgage insurance industry.

First, MGIC Investment Corp., Milwaukee, is projecting incurred losses for the fourth quarter of 2007 in the area of $1.3 billion. This is more than double what Friedman Billings Ramsey analysts Steve Stelmach and Paul Miller Jr., had previously estimated, the pair said in a report.

Then Old Republic International Corp., Chicago, said its mortgage guaranty business, and to a lesser extent, its title insurance business, contributed to a fourth-quarter net operating income loss for the company. Old Republic was profitable for the quarter only because of realized investment gains recorded for the period.

In what it called an investor update, MGIC blamed a continued deterioration in cure rates, leading to a higher percentage of loans becoming 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 billion.

MGIC also decided to stop writing bulk business insuring loans included in Wall Street securitizations during the fourth quarter. The company said it is analyzing the accounting implications, which this move will have for its fourth-quarter results.

In their report, the FBR analysts said they forecast MGIC to 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 2007.

"This will bring MGIC uncomfortably close to breaching its minimum net worth requirement of $2 billion. 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," the analysts said.