Mortgage insurer reports big loss

The crisis in the US mortgage market has hit insurers hard

US mortgage insurer MGIC has reported quarterly losses of $1.47bn (£750m) after being hit by the housing slump and resulting high levels of bad debt.

The loss for the last three months of 2007 compares with a profit of $121.5m for the equivalent quarter in 2006.

MGIC said a growing number of its policy holders had either fallen behind on their mortgage payments or had their homes repossessed.

In both cases, insurers such as MGIC have to pay out to mortgage lenders.

Failed merger

MGIC's losses were more than twice as high as market expectations.

While the firm said it had "adequate" funds to make continuing penalty payments to mortgage lenders, it added it was now seeking a fresh capital injection.

MGIC said it had to pay out $870m in bad debt penalties for 2007 as a whole, and added this could increase to $2bn this year.

Last February, MGIC had agreed to a $5bn merger with its mortgage insurance rival Radian, but the deal collapsed in September after the full extend of bad US mortgage debt led to a plunge in the companies' shares.