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MGIC offers shares, senior notes to boost capital reserve
March 5, 2013 / 10:04 PM / 5 years ago

MGIC offers shares, senior notes to boost capital reserve

March 5 (Reuters) - Mortgage insurer MGIC Investment Corp said it would offer 135 million shares and $350 million principal amount of convertible senior notes to boost its capital reserve.

The company said it intends to use net proceeds from the offerings for general corporate purposes, increasing capital in its insurance subsidiary Mortgage Guaranty Insurance Corporation (MGIC), and improving liquidity by providing funds for debt service.

The company, which was the largest mortgage insurer in the United States before the financial crisis, has been under the scanner for its extremely high risk-to-capital ratio (RTC), a key metric in the insurance business.

The preliminary risk-to-capital ratio at MGIC’s combined insurance operations was 47.8 to 1 as of Dec. 31. Mortgage insurance regulators commonly allow for a maximum risk-to-capital ratio of 25 to 1.

The company said on its post-earnings conference call last month that it was evaluating a number of options to address the high RTC ratio, including raising capital.

Rival Radian Group Inc recently said it raised $700 million through a sale of stock and bonds, prompting ratings agency Moody’s to upgrade the stock.

Barclays raised its target price on MGIC’s stock on Tuesday to $8 from $1 and said it expects the insurer to raise capital without much trouble, given Radian’s successful offering.

Goldman Sachs & Co will be the book-running manager for both offerings, the company said in a statement.

Shares of MGIC were up marginally after the bell. They closed at $5.34 on Tuesday on the New York Stock Exchange.

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