Riding the wave of a strong homebuying market, mortgage insurers posted double-digit earnings increases in the first quarter. But the insurers also saw defaults increase.

MGIC Investment Corp., Milwaukee, the largest mortgage insurer, reported a net profit of $58.5 million, 29% more than in the year-earlier period.

PMI Group, San Francisco, posted earnings of $37 million, for a 24% increase, and Triad Guaranty, based in Winston-Salem, N.C., earned $2.5 million, a 47% gain.

Industry analysts said the results topped expectations and indicate that the housing market is showing strength.

The quarter was "great," said David Hochstim, who follows mortgage insurance companies for Bear, Stearns & Co.

The insurers' "very strong" earnings growth was coupled with more capital set aside to safeguard against possible loan defaults, Mr. Hochstim said.

The momentum should continue for the rest of the year, he said. "There should be no sharp corrections in home prices" to waylay the companies. Declines in home prices can lead to defaults when the value of the home falls below the value of the mortgage.

Mortgage insurance companies guarantee a portion of loans when borrowers make a down payment of less than 20%. In doing so, insurers assume the first losses if the borrower defaults.

In the first quarter, MGIC had 1.70% of its loans in default, compared with 1.64% a year earlier. William H. Lacy, president, attributed the increase primarily to greater risks for loans written in 1995 and 1994.

The company has tightened its underwriting standards in response, and expects to fare better in coming quarters, Mr. Lacy said.

At the end of the first quarter, 2.07% of loans were in default at PMI, compared to 1.93% a year earlier.

W. Roger Haughton, president, said defaults had showed signs of slowing in recent months. He added that PMI, recognizing that borrowers' credit quality has been slipping over the past two years, had tried to be very careful about the loans it underwrote.

Triad Guaranty said 0.38% of its loans were in default at the end of the first quarter, compared with 0.36% for the same period last year.

David W. Whitehurst, chief financial officer, attributed the modest percentages to careful underwriting. "We don't relax our standards to build market share," Mr. Whitehurst said.

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