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MGIC, Radian stand to lose $1 billion in subprime investments

C-BASS subsidiary struggling to meet margin calls

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Two mortgage insurance giants that plan to merge -- MGIC Investment Corp. and The Radian Group Inc. -- say they could lose their entire $1 billion investment in a subsidiary, C-BASS LLC, that's heavily invested in credit risk of subprime mortgages. The news prompted Fitch Ratings to downgrade the senior debt rating of MGIC Investment Corp. from A+ to A, and the insurer's financial strength of subsidiaries Mortgage Guaranty Insurance Corp. and MGIC Australia Pty Ltd. from AA+ to AA. Fitch said the downgrades reflect the reduced financial and earnings strength of the company that would result from its potential C-BASS losses. "That said, MGIC continues to maintain a leading market position in the mortgage insurance industry and a strong capital base more than capable of absorbing risk at an 'AA' IFS rating level," Fitch analysts said in a press release. MGIC claims its subsidiary Mortgage Guaranty Insurance Corp. is the leading U.S. provider of private mortgage insurance coverage, wi...