Sector Snap: Mortgage Insurers

NEW YORK (AP) -- Mortgage insurers continued to plunge Monday as a major insurer reported steep costs for protecting debt and an analyst predicted Citigroup Inc. will write off a big chunk of its portfolio over the next six months.

Mortgage insurers are at the heart of the firestorm engulfing credit this year. Stocks in the sector have plummeted in the past few months as borrowers miss payments on their home loans more frequently. Mortgage insurers write insurance policies that promise to repay a lender when a mortgage borrower defaults.

Swiss Reinsurance Co., the biggest reinsurer, reported more than $1 billion in losses on contracts known as credit default swaps, which are essentially insurance protecting various kinds of debt.

When borrowers are perceived as less likely to repay, Swiss Re's exposures to credit default swaps become more costly.

While the major mortgage insurers have varying degrees of exposure to credit default swaps, Swiss Re's charge heightened angst in the market that credit quality continues to deteriorate.

Contributing further to that angst was a research report by Goldman Sachs analyst William F. Tanona, who predicted Citigroup will in the next two quarters write $15 billion off its portfolio of debt because of decaying credit.

He downgraded Citigroup's stock to "Sell" from "Neutral."

Shares of MGIC Investment Corp. slipped 79 cents, or 3.6 percent, to $21.05. Shares of Radian Group Inc. lost 84 cents, or 6.7 percent, to $11.60. The stocks in both of these companies, which earlier this year abandoned a plan to merge, are down more than 65 percent this year.

Moody's Investors Service, the credit-ratings agency, downgraded four tranches of debt backed by home loans securitized by C-Bass, which was a $1 billion partnership between MGIC and Radian that imploded and became a sticking point preventing a combination of the two companies.

Shares of Triad Guaranty Inc. fell 77 cents, or 7.7 percent, to $9.15. Triad's stock is down more than 80 percent this year.