MGIC Investment Corp., the largest mortgage insurer, posted its first profit in 12 quarters as claims costs dropped on a decline in delinquencies in home loans.

The second-quarter profit of $24.6 million, or 13 cents a share, compares with a loss of $339.8 million, or $2.74, in the year-earlier period, the Milwaukee company said Tuesday. The loss excluding the results of some investments was 4 cents a share, beating by 74 cents the average estimate of seven analysts.

"They stopped the bleeding in terms of delinquencies," said Matthew Howlett, an analyst in New York at Macquarie Group Ltd. "The defaulting borrowers have already left the pool. That's driving the numbers."

Mortgage insurers have tightened underwriting standards and raised prices to recover from losses that began in 2007.

MGIC's stock has surged 35% this year through Monday amid speculation the economic recovery and government programs like the Home Affordable Modification Program would ease the pace of delinquencies.

MGIC's cost of claims from mortgage defaults fell by more than half, to $320.1 million from $769.6 million a year earlier.

New delinquencies dropped 24%, to 48,181 from 63,067.

The number of borrowers who became current on overdue payments climbed 29%, to 47,290.

At the end of the second quarter, 17.6% of loans were delinquent, compared with 18.4% at Dec. 31.

Premium revenue fell 11% year over year, to $309.2 million from $347.1 million on tighter underwriting.

MGIC recorded an investment gain of $31.7 million, compared with $14.5 million.

Book value rose 6.7%, to $9.84 from $9.22 at March 31.

MGIC spent $1.19 on claims and expenses at its mortgage business for every dollar it collected in premiums in the second quarter.

That was down from $2.37 in the year earlier period as more borrowers caught up on overdue mortgages.

Industrywide, borrowers caught up on overdue mortgages faster than new delinquencies were reported on insured home loans in February for the first time in almost four years as the economy improved.

That trend continued in March, April and May.

The ratio of cures to defaults on guaranteed loans was 1.08 in May compared with 0.60 a year earlier, according to data from the Mortgage Insurance Companies of America.

MGIC in April sold $805 million of shares and $300 million of notes to bolster capital.

Competitors Radian Group Inc. and PMI Group Inc. have also sold shares and debt this year.

Stricter standards have left fewer new policyholders to supplement the riskier policies sold in previous years that are still on the books.

Until 2007, private mortgage policies had been among the most profitable types of coverage sold by 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.

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