MGIC Investment Corp., the nation's largest mortgage insurer, reported that its second-quarter earnings rose 18%, to $95.2 million.

Earnings per share increased 22%, to 82 cents a share, beating the Wall Street consensus estimate of 79 cents.

Brisk refinancing activity inhibited the company from expanding its portfolio. Persistency-the percentage of insurance remaining in force from the previous year-declined to 74.7% at the end of the second quarter, from 83% the same time last year.

MGIC underwrote $10.7 billion of new primary insurance in the second quarter, down from $7.7 billion last year. MGIC's primary insurance in force fell to $137.5 billion, from $138.5 billion at the end of 1997.

"The book shrank, and you'd prefer not to have that happen," said Edwin Ciskowski, analyst at SunTrust Equitable Securities Corp.

Despite the reduction in MGIC's portfolio, analysts were impressed by the credit performance of the insured loans. The percentage of MGIC's insured loans in default fell to 2.02% at the end of the second quarter, from 2.12% at the end of last year.

"What drives the earnings of these companies is credit development, and the development of MGIC's insured portfolio is extremely favorable," said Mark Constant, analyst at Merrill Lynch & Co. "These guys insure risk, not the dollar amounts of principal balance," he said, noting that risk in force actually increased to $32.35 million, from $32.18 million.

MGIC's report bodes well for other mortgage insurers, who are scheduled to release their earnings in the next week, Mr. Ciskowski said. "You'll see very similar results across the board: lower growth in portfolio and high credit quality."

PMI Mortgage Insurance Co. and Commonwealth Mortgage Assurance Co. are expected to release their second-quarter earnings today. Amerin Guaranty Corp. is scheduled to release its earnings next Wednesday.

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