2 Groups Betting Big on MGIC; California Mutual Fund Group, Chicago Firm Buy Over 10% Each of Its Shares

By AVRUM D. LANK

A California mutual fund group and a Chicago insurance company each have purchased more than 10% of the shares of Milwaukee’s MGIC Investment Corp. in recent weeks, according to regulatory filings.

Capital Research & Management Co. of Los Angeles owns 10,107,000 shares of MGIC, or 12.3%, while the Old Republic International Corp. has 8,979,409, or 11%.

That makes them the two largest holders of MGIC shares, according to information compiled by Bloomberg News. Third-largest holder is the Fidelity mutual funds group of Boston, with 8,296,672 shares, or 10.1%.

MGIC shares have been pounded in recent weeks because of problems in the housing industry. In February, its stock traded at $70.10 before falling to a closing low of $17.11 Nov. 1. On Friday, it closed at $21.30, up $2.94. That makes Capital’s stake worth about $215.3 million and Old Republic’s worth $191.3 million.

Capital Research is the investment adviser for the American Funds. A spokesman declined to comment on why the MGIC shares were purchased. The filing did not provide details of exactly when the shares were bought.

Old Republic, which has its own mortgage insurance operation, also purchased 12.2 million shares, or 15% of the outstanding stock, of PMI Group Inc. of Walnut Creek, Calif., another mortgage insurer.

In an SEC filing, Old Republic said both investments were made “strictly as passive investments and not for the purpose of or with the effect of changing or influencing the control of either” company.

Old Republic bought the shares “because we think the current market prices of these stocks substantially understate their long- term values and we think the markets have overreacted to what is happening with residential mortgage loans,” Al C. Zucaro, chairman and chief executive officer of Old Republic, said in an interview.

Zucaro did not say when Old Republic bought the shares of MGIC or how much it paid for them.

Also, late Friday, MGIC said it had to postpone filing its quarterly report with the U.S. Securities and Exchange Commission. In a separate filing with the SEC, MGIC said it “has not received financial statements from C-BASS for the quarter ending September 30, 2007″ and that without them it could did not have the information it needed to file the quarterly report, which was due Friday.

In July, MGIC said it might have to write off as much as $500 million of its investment in C-BASS, a sub-prime mortgage company in New York City.

An MGIC spokeswoman said that the filing made Friday gives MGIC until Wednesday to make the quarterly filing.

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