Reuters: Regulatory News: UPDATE 1-Old Republic plays down liquidity concerns

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UPDATE 1-Old Republic plays down liquidity concerns Jun 26th 2012, 17:29 Tue Jun 26, 2012 1:29pm EDT * Co says does not have funds to recapitalize MI unit * Does not see possibility of receivership arising * Says on a GAAP basis, MI unit has no capital June 26 (Reuters) - Old Republic International played down the possibility of a liquidity crisis and said it was unlikely regulators would seize its money-losing mortgage insurance business, after the company abandoned plans to spin off the unit. The insurer had planned to separate the unit and had even entered into a deal to sell a fifth of the business in a leveraged buyout but it shelved the plan following stakeholders objections. The company's North Carolina regulators have already placed the unit under supervision. It is now only allowed to pay claims at 50 cents on the dollar to preserve capital, leading to investor fears that the unit would be seized, triggering a default under the company's debt covenants. Old Republic eased those concerns on a conference call to discuss the canceled spinoff. "We're comfortable, based on our discussions, that receivership is not in play," Chief Executive Aldo Zucaro said. Zucaro said he was confident that the company would be able to either refinance its debt or amend the terms. Old Republic said the mortgage insurance unit, which stopped writing new business when its capital levels cratered last year, would continue to lose money for the next two years. "By (2014), our total loss since 2007 will have been $1.7 billion, versus the total accumulated profit of $1.8 billion booked in the first 26 years ... of our mortgage insurance journey," Zucaro said. The company said almost all its statutory capital -- the standard claims-paying metric -- comes from deferred claim payments ordered by regulators. Deferred payments count as a liability under generally accepted accounting principles. On a reported basis, the company said its mortgage insurance unit has no capital and that it does not have the funds to add to the business. "To just keep the company solvent, you'd have to come up with $250 million, which we are not committed to doing," a company executive said. The company said it does not have the more than $400 million needed to write new business, leaving it out of the mortgage insurance market for the near future. The company's shares, which had fallen on news of the canceled spinoff, were up nearly 3 percent at $8.55 in mid-day trade on the New York Stock Exchange. Link this Share this Digg this Email Reprints

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