* Second-qtr profit 4 cents per share vs expected 15 cent loss
* First quarterly profit since second quarter of 2010
* Net premiums earned fall 2 pct to $237.8 mln
* Shares up 16 pct in premarket trading
By Ashutosh Pandey
July 23 (Reuters) - Mortgage insurer MGIC Investment Corp posted its first quarterly profit in three years as fewer people defaulted on their home loans, sending its shares up as much as 16 percent in premarket trading.
A recovering housing market has helped MGIC, the second-largest U.S. mortgage insurer by market capitalization, as foreclosures have fallen and homeowners have been able to make timely repayments on new loans.
Chief Executive Curt Culver said he was encouraged by MGIC’s recent credit performance, given that the number of delinquent loans fell 24 percent in the second quarter to their lowest in the last five years.
Mortgage insurance protects lenders in cases where homebuyers fall behind in their mortgage payments. MGIC’s rivals include Radian Group Inc and life insurer Genworth Financial Inc’s mortgage unit.
Shares of Radian, which reports second-quarter earnings on Wednesday, were up 5.3 percent in premarket trading. Genworth’s stock was up 4.2 percent.
Milwaukee, Wisconsin-based MGIC has reported a loss in each of the last six fiscal years, with an aggregate net loss for 2007-2012 of $5.3 billion. Before its latest earnings, it had last reported a quarterly profit in the second quarter of 2010.
On Tuesday, the company reported a net profit of $12.4 million, or 4 cents per share, for the second quarter, compared with a loss of $273.9 million, or $1.36 per share, a year earlier.
Excluding realized gains, MGIC’s quarterly net profit was 3 cents per share. Analysts on average were expecting a loss of 15 cents per share, according to Thomson Reuters I/B/E/S.
More timely repayments are helping mortgage insurers to recoup some of the losses incurred after the housing bubble burst and foreclosures soared.
The housing market recovery has also attracted the interest of investors such as John Paulson, who has this year bought 17 million shares in MGIC, tripled his holdings in Radian and raised his holdings in Genworth.
The percentage of MGIC’s loans that were delinquent, excluding bulk loans, fell to 10.16 percent as of June 30, from 12.51 percent a year earlier.
Insurance losses incurred in the second quarter more than halved to $196.3 million, reflecting fewer new delinquencies during the quarter.
New insurance written in the second quarter was $8 billion, up a third from $5.9 billion a year earlier. But net premiums earned fell 2 percent to $237.8 million.
MGIC shares were up 10 percent in premarket trading. They have risen about a third in last three months, outperforming the broader S&P 500 Index, which has risen about 9 percent in the same period.