MGIC has smaller-than-expected loss

By Lilla Zuill

NEW YORK (Reuters) - MGIC Investment Corp (MTG.N: Quote, Profile, Research), the largest U.S. mortgage insurer, posted a smaller-than-expected quarterly loss on Thursday and said net premiums and new insurance rose, sending its shares up as much as 20 percent.

The company also said it was buying more reinsurance to protect against future losses and expected the mortgage market to deteriorate further this year before stabilizing in 2009.

MGIC said its first-quarter net loss was $34.4 million, or 41 cents a share, compared with year-earlier net income of $92.4 million, or $1.12 a share.

Analysts, on average, had expected a loss of $1.69 a share, according to Reuters Estimates.

"It is back to underwriting 101," said Chief Executive Curt Culver, on the company's investor call. MGIC said it had strengthened underwriting guidelines and discontinued writing Wall Street bulk transactions, or loans bundled into securities.

MGIC shares traded as high as $12.65 before paring their gains to be up 14.95 percent to $12.07 in afternoon trading on the New York Stock Exchange. The stock has fallen sharply from a high of $67.05 set last year on May 23.

Losses incurred in the first quarter rose to $691.6 million from $181.8 million a year earlier as the rate of delinquent loans rose sharply. Like many mortgage insurers, MGIC has been battered as borrowers have missed more payments.

A benefit of $236.7 million from a change in premium deficiency reserves offset the losses.