Shares of MGIC Investment Corp.(NYSE:MTG)are among one of the most volatile stocks in Thursday’s session as the stock is now up 9% at $3.05 after gapped down by 16% earlier. The stock justed reached session high of $3.11, recovering almost 32% from session low of $2.36.
MGIC Investment Corp. who are mortgage insurers have recently reported that there has been a sharp drop in its ability to pay its fourth quarter claims and has also posted its tenth subsequent quarterly loss. This is a result of the company losing all the money on loans that were insured during the housing boom. The shares of MGIC took a dip of 15% to $2.37 during early trading. Before there was a burst in the housing bubble, in the year 2007, they traded as much as $70.
Organizations like Radian Group, MGIC and Genworth Financial Inc. offer protection to lenders when buyers of homes pay down payments that are below a certain limit. The company has been trying to recover its losses after foreclosures rose and the housing bubble burst which further burdened them with claims in large amount on unpaid home loans as well as thin capital cushions. As far as MGIC’s combined insurance operations are concerned, the ratio of risk-to-capital was 47.8 to 1 as of the 31st of December. Regulators of mortgage insurance usually allow for risk-to-capital ratio of 25 to 1 at the maximum.
The mortgage insurer also stated that it hoped that its risk would rise above the level of December 31st in 2013. The rising risk ratio is a matter of great concern. The Triad Guaranty Insurance Corp. stopped the selling of new mortgage insurance in the year 2008. This company had a risk ratio of 42.7 to 1.
MGIC is trailing behind its rivals in new written insurance and what makes it weaker is its rising risk. Radian on the other hand expects its risk-capital ratio to stay within the limits of regulation this year. It also hopes that in the year 2013, it will also return to profitability.