UPDATE 3-MGIC shares sink on quarterly loss, $1 bln offering

* Q1 loss/shr $1.42 vs est $1.20: Thomson Reuters I/B/E/S

* Sees substantial losses in 2010

* To offer $1 bln in stock, notes

* Shares down 14 pct

(Adds details from conference call, background, updates
share movement)

BANGALORE, April 20 (BestGrowthStock) – Largest U.S. mortgage
insurer MGIC Investment Corp (MTG.N: ) said it will sell $1
billion in stock and notes to repay debt, after posting its
eleventh straight quarterly loss.

Shares of the company sank as much as 14 percent and were
the top percentage losers Tuesday on the New York Stock
Exchange. Rival Radian Group (RDN.N: ) and PMI Group (PMI.N: )
shares also took a beating and were down 7 percent and 8
percent, respectively, following MGIC’s announcement.

The company said it will offer $700 million of common stock
and $300 million of senior convertible notes due 2017.

The proceeds from the offering will be used to fund the
repayment of debt maturing in 2011 and improve liquidity at its
primary insurance unit, the company said.

Goldman Sachs & Co. will act as sole book-running manager
for both offerings.

At Dec. 31, 2009, MGIC’s risk-to-capital ratio was 19.4 to
1 and based upon internal estimates, it is likely that the
ratio over the next few years will materially exceed 25 to 1,
the company said.

MGIC, like Radian and PMI, has been struggling with
increasing losses that have eroded its balance sheet and
threatened its stability.

The offering could provide the company with a much needed
credit protection and liquidity.

Milwaukee-based MGIC expects to incur substantial losses in
2010 and losses in declining amounts thereafter.

Net paid claims stood at $519 million, up from $356 million
in the year-ago period.

MGIC expects claim payments to be at this level or higher
through the end of the year.

YET ANOTHER LOSS

Net loss for the first quarter was $150.1 million, or $1.20
a share, compared with a loss of $184.6 million, or $1.49 a
share, in the year-ago period.

The company posted a loss of $1.42 a share, wider than
analysts’ estimate of $1.20 a share, according to Thomson
Reuters I/B/E/S.

“Clearly we are not out of the woods yet, as evidenced by
our financial results which continue to be impacted by the high
level of delinquencies and low level of cures,” the company
said in a statement.

Investment income for the quarter was $69 million, compared
with $77 million in the first quarter of 2009.

At March 31, the percentage of loans that were delinquent,
excluding bulk loans, was 15.38 percent, compared with 15.46
percent at Dec. 31, 2009.

LOAN MODIFICATION WILDCARD

Loan modification and other similar programs may not
provide material benefits to the company and losses on loans
that re-default can be higher than what the company would have
paid had the loan not been modified, MGIC said in its earnings
release.

“The levels of loan modifications and their performance
remain the wildcard,” company executives said on a post
earnings call with analysts.

However, MGIC said it is beginning to see a few signs of
encouragement, namely a higher level of cures, fewer new
notices, and increased modifications.

Loan modifications is a part of the U.S. government’s plan
to reduce defaults and let homeowners keep their homes and is
expected to benefit mortgage insurers as it will lower the
claims that they pay out on defaults.

MGIC said Home Affordable Modification Program (HAMP) trial
period has begun for about 43,100 loans in its primary
delinquent inventory at March 31, 2010, and about 11,600
delinquent primary loans have cured their delinquency after
entering HAMP.

Shares of the company were trading down $1.60 percent at
$10.93 in morning trade on the New York Stock Exchange. They
earlier touched a low of $10.71. Close to 12.2 million shares
changed hands by 11:30 ET, significantly above the company’s
50-day moving average of five million shares.

Stock Market

(Reporting by Sweta Singh in Bangalore; Editing by Aradhana
Aravindan and Anil D’Silva)

UPDATE 3-MGIC shares sink on quarterly loss, $1 bln offering