Mortgage insurer MGIC InvestmentCorp posted its first quarterlyprofit in three years as fewer people defaulted on their homeloans, sending its shares up as much as 16 percent in premarkettrading.

A recovering housing market has helped MGIC, the second-largestU.S. mortgage insurer by market capitalization, as foreclosureshave fallen and homeowners have been able to make timely repaymentson new loans.

Chief Executive Curt Culver said he was encouraged by MGIC'srecent credit performance, given that the number of delinquentloans fell 24 percent in the second quarter to their lowest in thelast five years.

Mortgage insurance protects lenders in cases where homebuyersfall behind in their mortgage payments. MGIC's rivals includeRadian Group Inc and life insurer Genworth Financial Inc's mortgageunit.

Shares of Radian, which reports second-quarter earnings onWednesday, were up 5.3 percent in premarket trading. Genworth'sstock was up 4.2 percent.

Milwaukee, Wisconsin-based MGIC has reported a loss in each ofthe last six fiscal years, with an aggregate net loss for 2007-2012of $5.3 billion. Before its latest earnings, it had last reported aquarterly profit in the second quarter of 2010.

On Tuesday, the company reported a net profit of $12.4 million,or 4 cents per share, for the second quarter, compared with a lossof $273.9 million, or $1.36 per share, a year earlier.

Excluding realized gains, MGIC's quarterly net profit was 3cents per share. Analysts on average were expecting a loss of 15cents per share, according to Thomson Reuters.

More timely repayments are helping mortgage insurers to recoupsome of the losses incurred after the housing bubble burst andforeclosures soared.

The housing market recovery has also attracted the interest ofinvestors such as John Paulson, who has this year bought 17 millionshares in MGIC, tripled his holdings in Radian and raised hisholdings in Genworth.

The percentage of MGIC's loans that were delinquent, excludingbulk loans, fell to 10.16 percent as of June 30, from 12.51 percenta year earlier.

Insurance losses incurred in the second quarter more than halvedto $196.3 million, reflecting fewer new delinquencies during thequarter.

New insurance written in the second quarter was $8 billion, up athird from $5.9 billion a year earlier. But net premiums earnedfell 2 percent to $237.8 million.

MGIC shares were up 10 percent in premarket trading. They haverisen about a third in last three months, outperforming the broaderS&P 500 Index, which has risen about 9 percent in the sameperiod.