Commentary - 11/12/2007

The Real Players Behind Mortgage Insurers

Unless you really know the players behind the facade, how can you possibly understand what's really taking place? There was a very good article written a few days ago, entitled Private Mortgage Insurers Dragged Down. But business writers can't give all the details and keep their jobs. First, they are not allowed the time, and second, their real bosses have no inclination to provide you with the details. The business writers are allowed to provide the WHEN, WHERE and WHAT, but you've got to figure out the real WHO and WHY.

To demonstrate, I'll quote from the article and will insert the proper links to the real players. Don't hesitate to drill down through the links to see the inter-connections of the Major Holders.

"And at least one competitor is making a big bet on the industry's survival. Shares of MGIC and PMI Group Inc. surged Friday after mortgage insurer Old Republic International Corp. disclosed in a Securities and Exchange Commission filings that it had accumulated a 15 percent stake in PMI Group and an 11 percent stake in MGIC."
Kinda interesting that the same Major Holders keep showing up in ALL the companies. For instance, the TOP 10 holders, making up only 3% of the total number of institutional investors, control 81.53% of MGIC. So what control do the other 97% have with only 18.47% of MGIC? And one might consider how much control that one related group, that I call Barclays/Associates, has with 32.27%. That's almost 40% of the TOP 10's control of MGIC.

Now compare that with PMI Group, in which the TOP 10 [4%] control 61.89% of the company, and Barclays/Associates control 30.92%. That's almost half of the TOP 10's share. Notice how the Barclay/Associates dominate the PMI Group in much the same way as MGIC.

Finally, 4.4% of Old Republic's institutional investors control 56.47% of the company, while Barclays/Associates have 41.11%. That's 71% of the TOP 10. So when you consider these relationships exist also within the largest Money Center Banks, you can begin to see how and why these movements of "investments" are possible. There's more:

PMI Group saw its quarterly U.S. claims rise 49 percent to $92.6 million. And the insurer Radian Group Inc. posted a loss of $703.9 million in the third quarter after getting hit by writedowns and losses at a subprime mortgage joint venture with MGIC.

The industry's woes pressured MGIC to back out of a deal to buy Philadelpia-based Radian in September. The companies saw mounting losses in their joint venture and figured it was in each other's best interest to concentrate on staying afloat.

Radian chief executive officer S.A. Ibrahim likened the turmoil to "an industrywide scramble to survive."

Guess there wasn't much sense trying to collect merger fees when neither firm is doing well. Kinda makes things a little to obvious to the layman and we can't have that. In my opinion, the only reason for doing such a deal would be to take over what's left of the insider's ownership and make the firm a true plantation. That means 0% owned by insiders and majority-owned by outsiders. Note that MGIC is representative of that type of place. Radian insiders still have 14%.
But Wall Street was buoyed Friday by the Old Republic news. PMI Group's stock jumped $3.77, or 34 percent, to $14.88 and shares of MGIC rose $2.94, or 16 percent, to $21.30. Shares of Radian Group increased $2.42, or 24 percent, to $12.62.

Shares of Old Republic initially slipped to their lowest level in more than four years before recovering. The stock rose 90 cents, or 6 percent, to $15.07.

Kinda like the old shell game, but moving the same money instead of the same pea. Only when you don't know the REAL players will folks fall for that game.

Hope this helps you in some way to avoid being conned.


2007 by Edward Ulysses Cate

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