NEW YORK (Reuters) - MGIC Investment Corp (MTG.N: Quote, Profile, Research), the largest U.S. mortgage insurer, said on Thursday it sold its stake in Sherman Financial Group LLC for a total of $209.5 million.

MGIC, which owned 24.25 percent of Sherman, is selling the stake back to Sherman, a debt recovery firm.

MGIC, hit hard by the U.S. mortgage crisis, said in a filing with the U.S. Securities and Exchange Commission the sale includes $124.5 million in cash and an $85 million promissory note. It could also qualify for an additional payment next year, subject to certain conditions.

MGIC said it would disclose how much of a gain it makes from the sale when it reports third-quarter results.

The sale comes on the heels of smaller rival PMI Group Inc (PMI.N: Quote, Profile, Research) earlier on Thursday saying it would sell its Australia, New Zealand and Asian businesses to Australia's QBE Insurance Ltd (QBE.AX: Quote, Profile, Research).

Mortgage insurance policies cover U.S. lenders when borrowers who put down less than 20 percent default on home loans. Claims have soared as the mortgage crisis has worsened, at the same time that demand for the policies has fallen while banks have tightened their lending practices.

In that environment, mortgage insurers have been seeking ways to shore up capital.

No. 2 U.S. mortgage insurer Radian Group Inc (RDN.N: Quote, Profile, Research) and MGIC had both invested in Sherman, and another New York company, C-Bass, which invested in subprime loans. The two companies wrote off much of their $1.03 billion investment in the latter, and called off a planned $5 billion tie-up.

(Reporting by Lilla Zuill; Editing by Braden Reddall)

ISTANBUL (Reuters) - Turkish lender Vakifbank VAKBN.IS said on Thursday its second quarter net profit stood at 473 million lira ($400 million).

The bank, Turkey's seventh largest listed bank by market capitalisation, did not provide last year's comparative figures for the first half. However, it previously announced net profit in the first half of 2007 rose 32 percent to 479 million lira.

WASHINGTON (Reuters) - Connecticut has requested information from bond insurer Financial Security Assurance (FSF.N: Quote, Profile, Research) as part of its lawsuit against major credit rating agencies, according to a report the company filed on Thursday with the Securities and Exchange Commission.

The state sent the company subpoenas as well as interrogatories, or questionnaires, that "related to antitrust concerns associated with the municipal rating scales employed by Moody's and a proposal by Moody's to assign corporate equivalent ratings to municipal obligations," the quarterly report said.

In July, Connecticut Attorney General Richard Blumenthal said the state was suing Moody's Corp's (MCO.N: Quote, Profile, Research) Moody's Investors Service, McGraw-Hill Co's (MHP.N: Quote, Profile, Research) Standard and Poor's and Fimalac SA's (LBCP.PA: Quote, Profile, Research) Fitch Ratings over the way they assign ratings to municipal bonds.

Connecticut contends the agencies artificially rated the bonds lower than corporate debt issuance with the same chance of default. The lower a bond's rating, the more interest must be paid to attract investors.

Issuers bought insurance from companies such as FSA to effectively use the insurers' higher credit ratings. When the agencies downgraded or threatened to downgrade the insurers, many bond issuers were left paying higher interest.

"What Moody's did not tell many public bond issuers or buyers, however, was that Moody's knew the bond insurer's true credit risk was already no better, or in many cases, much worse than the public issuer purchasing bond insurance," Blumenthal wrote in the complaint for the suit.

He was not immediately available to comment on what he asked of FSA, but Blumenthal has stated he will subpoena insurers as part of the suit, a spokeswoman said.

In June, Moody's proposed rating municipal bonds on the scale it uses for private companies and held a comment period that ended June 30. A spokesman told Reuters it would announce the next step for the proposal some time in August.

Moody's could not immediately comment on the subpoenas.  Continued...