MGIC Investment Corp., the country's largest mortgage insurer, said Tuesday that it will raise $1 billion through the sale of stock and notes and remain unprofitable into next year.
The Milwaukee company said its net loss narrowed in the first quarter to $150.1 million, or $1.20 a share, from $184.6 million, or $1.49, a year earlier. It was MGIC's 11th straight loss.
"We currently expect to incur substantial losses for 2010 and losses in declining amounts thereafter," the company said.
MGIC said it began an offering of $700 million of its stock, which will dilute the holdings of existing investors.
The company is also selling $300 million of senior notes, due in 2017 and convertible into shares of common stock. Proceeds may be used to repay debt maturing next year and may help boost capital levels at the primary mortgage insurance subsidiary. Goldman Sachs Group Inc. is managing both offerings.
MGIC and rivals Radian Group Inc. and PMI Group Inc. have been selling assets and seeking capital injections as losses accumulate.
The insurers have turned to regulators for relief, and MGIC's chief executive officer, Curt Culver, had earlier warned that mounting claims could cause a capital shortfall.
MGIC raised $483 million selling stock in March 2008 at $11.25 a share.
At midday Tuesday, MGIC shares were off 13%, at $10.83. Other mortgage insurers' stocks slid as well.
At the end of the first quarter, 18.14% of MGIC's loans were delinquent, compared with 18.41% on Dec. 31 and 13.51% a year earlier. Revenue for the first quarter fell 15%, to $370.8 million, the company said.
MGIC spent $1.86 on claims and expenses at its mortgage business for every dollar it collected in premiums in the first quarter. That's down from $3.02 in the last three months of 2009 as more borrowers caught up on overdue mortgages. Such loans are called cures.
"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 that occurred over the last two years and the current level of new insurance written," Culver said in a conference call Tuesday.
"For the first time in a long time we are beginning to see a few signs of encouragement, mainly a higher level of cures" and more borrowers modifying loan terms with lenders.
Until 2007, private mortgage policies had been among the most profitable types of coverage sold by property and casualty insurers. From 2004 to 2006, members of the Mortgage Insurance Companies of America reported a profit margin of at least 35 cents for every dollar they collected in premiums. Auto insurers made less than 5 cents on every dollar in 2006, according to A.M. Best Co.