Thursday, February 14, 2008

Mortgage Insurers' Mess, Buyout Barrier, Rio's Profit: Timshel

U.S. mortgage-insurance companies
are in better form financially than chemical bond insurers, whose plight
led to a bailout offering from Robert Penn Warren Buffett. You wouldn't cognize it
from their stock performance.

The country's three biggest mortgage insurance companies -- MGIC
Investment Corp., PMI Group Inc. and Radian Group Inc., inch that
order -- have got fallen by an norm of 42 percentage this year. The
comparable figure for MBIA Inc., Ambac Financial Group Inc. and
five other chemical bond insurance companies is just one per centum point worse.

That's the lawsuit even though MBIA, the biggest company in
its field, and Ambac, the second-biggest, both had considerably
wider losings for the 4th one-fourth than the $1.47 billion that
MGIC reported yesterday.

MGIC also doesn't look to be as apprehensive for support as
MBIA, which sold $1 billion of shares last hebdomad at a 14 percent
discount, or Ambac, which tried a similar sale in January before
rejecting Buffett's command to presume its municipal-bond guarantees.

Along with coverage earnings, the Milwaukee-based company
disclosed the hiring of an advisor ''to help it in exploring
alternatives for increasing its capital.'' The house picked for
that duty assignment wasn't identified.

Even so, MGIC's shares sank 11 percent. The loss was the
biggest since October 2001, when federal regulations went into effect
that increased the cost to Fannie Mae and Freddie Macintosh -- the two
largest U.S. suppliers of mortgage money -- of doing business
with private insurers.

Seeing Black Holes

Anticipation of more than bad news from fourth-quarter reports
touched off a 14 percentage diminution in PMI, based in Walnut Creek,
California. Radian, based in Philadelphia, drop 10 percent.

PMI's consequences are owed on Feb. Twenty-Six and Radian's are put for
tomorrow. Analysts see losings of less than $100 million at both
companies, based on the norm estimation in Bloomberg surveys.

Then again, MGIC's loss was more than than twice as big as
analysts projected. And the stock-market reaction signalings that
many investors position the mortgage-insurance industry as another
financial achromatic hole, opened by the collapse of the subprime-
mortgage marketplace last year.

There's good ground for taking that attitude. Defaults on
privately insured U.S. place loans rose 37 percentage in December,
according to information from the Mortgage Insurance Cos. of America. For the year, about 625,000 mortgages went bad.

Higher default rates addition the fiscal loads on
insurers, who have got to pay off loans when householders can't or
won't make so. MGIC put aside $1.2 billion before taxations in the
fourth one-fourth to cover future losings on mortgages.

Determination 'Persistency'

Companies are curtailing some of their concern as losses
mount. MGIC is offering fewer policies in Arizona, California,
Florida and Nevada, four of the states hit hardest by falling
house prices. PMI's U.S. unit of measurement have stopped covering place loans
with down payments of less than 3 percent.

MGIC's net income statement even singled out some benefits
from the subprime-related upheaval: ''increased usage of mortgage
insurance, higher insurance premiums for certain sections of concern and
improved recognition standards.'' The company also cited higher rates
of ''persistency,'' Oregon policies staying in consequence after a year.

None of this really counters the concern that a crumbling
mortgage marketplace may make just as much harm to MGIC, along with
its peers, as it have to the chemical bond insurers.

* * *

Buyout funding is so difficult to obtain that houses may have
to go through up multibillion-dollar deals until adjacent year, according
to Henry Martin Robert Easton, one of Thomas Carlyle Group Inc.'s managing
directors. A reappraisal of the greatest pending coup d'etats shows what
he's telling.

Bids for Alliance Data Systems Corp., BCE Inc., Clear
Channel Communications Inc., Hunter Corp., William Penn National
Gaming Inc. and Puget Energy Inc. exceeded their marketplace prices
by an norm of 28 percentage as of yesterday's close, according
to information compiled by Bloomberg.

Alliance Data had the widest gap, 47 percent, even though
Carl Icahn came on the scene this week. The billionaire investor
has a 2.73 percentage interest in the credit-card processor, based in
Dallas, and may speak with its direction about Blackstone Group
LP's $6.6 billion buyout offer.

The terms difference on each of these trades was at least
twice the median value spread, 5.1 percent, on 101 projected takeovers
of U.S. companies. The least was 11 percentage for Puget Energy,
the proprietor of American Capital state's biggest utility.

* * *

Rio De Janeiro Tinto Group's acquisition of Alcan Inc. inch November has
met all of the company's investing assumptions, Head Executive
Officer Uncle Tom Albanese said yesterday. Even so, Rio De Janeiro Tinto's profit
report for 2007 shows the unit of measurement is nowhere near as moneymaking as
its other businesses, at least so far.

Alcan's post-takeover net income before interest, taxes,
depreciation and amortisation amounted to 11 percentage of sales,
according to information in yesterday's consequences from its London-based
owner. For the residual of Rio De Janeiro Tinto's aluminium business, the
so-called Ebitda border was 37 percentage last year.

The retarding force from Alcan contributed to a seven-percentage-point
drop, to 43 percent, in last year's border for all of Rio De Janeiro Tinto. Profitableness also slipped in Cu and Fe ore, its highest-
margin merchandises -- to 68 percentage and 53 percent, respectively.

Rio De Janeiro Tinto became the world's biggest aluminium manufacturer by
buying Alcan for $38.1 billion in November. The company can ill-
afford any slip-ups resulting from the purchase as it fends off
an unwanted coup d'etat command from BHP Billiton.

(David Harriet Wilson is a Bloomberg News columnist. The opinions
expressed are his own.)

To reach the author of this column:
David Harriet Wilson in New House Of York at

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