NEW YORK (Dow Jones)--Mortgage insurance stocks were in the red Monday, weighed down by continued worries about the economy, though the rest of the insurance sector managed to buck the trend as Sandler O'Neill issued a positive second-quarter outlook for property/casualty insurers.
Among the insurance sector's worst performers Monday was mortgage insurer Radian Group Inc. (RDN), which fell 10% recently to $2.49. Fox-Pitt analyst Matthew Howlett noted in an interview, "mortgage insurers are more levered to economic fundamentals" such as jobs and housing. "People are getting more skeptical on housing and the default cycle," Howlett said.
Among other mortgage insurers, PMI Group Inc. (PMI) slid 3.7%, to $1.80, and MGIC Investment Corp. (MTG) dropped 1.7%, to $3.97. Struggling insurance giant American International Group Inc. (AIG), which has mortgage insurance operations, dropped 12%, to $16.03.
Several bond insurers were also down Monday, as Amabac Financial Group Inc. (ABK) fell 3%, to 85 cents, and Assured Guaranty Ltd. (AGO) slumped 2.2%, to $11.79. But MBIA Inc. (MBI) rose 1.8% to $4.03.
Most other insurers were also in the black. The Dow Jones U.S. Insurance Index was recently up 1.2%.
Sandler O'Neill issued a note to clients Monday predicting second-quarter book values for most of the insurers it covers will have had "significantly positive book value growth during the quarter." The firm projected the property/casualty group will show average growth of 9.4%, thanks to equity and bond market increases during the quarter.
The firm also said it expects "a fairly positive" earnings season for the property/casualty insurers. However, the firm noted there is a big unknown for the quarter: how much in favorable reserves will have been released. Noting 2008 and first-quarter 2009 results benefited from favorable reserve releases, the firm said "we believe that these favorable reserve releases can't last forever and expect favorable development to decline significantly over the course of 2009."
As for the mortgage insurers, Motley Fool analyst James Early told Dow Jones Newswires "we still have had a lot of negative housing news and a lot of negative employment news, which can morph into negative housing news. That's a negative from a business perspective; if the money's not coming in the door for those insurers, and they're paying out more, that's not good."
