Thursday, August 2, 2012

Two Big Slump: MGIC Investment (NYSE:MTG) & Knight Capital Group (NYSE:KCG)

MGIC Investment Corp.(NYSE:MTG) reported a loss for the eighth straight quarter with an increase in claims on late stage delinquencies.

MGIC's second-quarter loss widened to $273.9 million, or $1.36 per share, from a loss of $151.7 million, or 75 cents per share, a year earlier.

Losses incurred rose 20 percent to $551.4 million.

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The company's risk-to-capital ratio also fell to a level of 30 to 1, below the level of 25 to 1 considered safe by regulator, The Wisconsin Insurance Commissioner.

It will have to add another $200 million in capital in order to continue writing insurance throughout the United States as the mortgage insurer's risk ratios continue to climb.

The company said it would use its new unit MIC to write insurance in places where it had received capital waivers. Mortgage insurers have been creating new units to find a way around soaring risk ratios.

MGIC also failed on the health parameter of minimum policyholder position (MPP) at $211 million below the required level of $1.3 billion. MPP is the minimum amount that an insurer needs to hold to meet claims.

In the last four years the company has reported profit only once.

On the NYSE its shares were down more than 55 percent in after-hours trading.

Trading firm and market maker Knight Capital Group Inc.(NYSE:KCG)  has estimated the losses from Wednesday's technical glitch that led to unusual trades in some 140 stocks, at $440 million,

Shares of the company shaved off about half their value in early trades on Wall Street. It was trading down 56 percent at $3.03 in after noon session after having fallen about 33 percent on the previous day.

The company continued its trading and market making activities even as it said that it would look at other alternatives especially with regard to shoring up its capital base.

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A problem with its trading software resulted in numerous orders being places at wildly fluctuating prices, sending some stocks skyrocketing while others nose-dived.

The estimated loss is several times higher than the $115.2 million net income reported by the company in 2011, on revenue of $1.4 billion.

The NYSE has cancelled the trades in those stocks which saw a price swing of 30 percent either way in the initial 45 minutes of trade.

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