Underwriters sold 37.3 million shares of MGIC for $11.25 each, and the company also agreed to sell $325 million in debt, the Milwaukee-based company said in statements today. MGIC had estimated it would sell about $350 million of shares.
MGIC needs to bolster capital to avoid a downgrade of its claims-paying ability after a $1.47 billion quarterly loss, Fitch Ratings said Feb. 25. Mortgage insurers, which reimburse lenders when borrowers don't repay, are facing a surge in claims amid the worst housing slump in at least 25 years. They've also raised prices and tightened underwriting standards as demand for the coverage has increased.
MGIC said it will use the new capital "to expand the volume of its new business and for MGIC's general corporate purposes.''
Rivals including PMI Group Inc. and Radian Group Inc., the No. 2 and No. 3 mortgage insurers, have also said they are seeking to raise new capital.
MGIC and Radian both reported an increase in premium revenue while claims costs increased in the fourth quarter. The Mortgage Insurance Companies of America in Washington said premiums from new policies rose 66 percent in January from a year earlier as banks, weary of record foreclosures, forced more borrowers to buy policies.