Mortgage insurers have strong 2Q, helped by origination volume
August 6, 2021 4:21 PM
The private mortgage insurance business continued its rebound during the second quarter from the depths of the pandemic one year prior.
At that time, due to CARES Act-granted forbearances, these companies had to make large provisions in order to comply with the secondary market capital requirements.
Now, helped bystrong origination activity in the second quarter, five of the six companies wrote more business than they had in the first quarter. Compared with one year prior, three companies wrote less insurance on a dollar basis.
With the threat of a foreclosure tsunami — in which MIs would have to deal with large numbers of claims — nowdiminished , and growing activity among first time home buyers , the outlook for the sector has improved.
Below are the highlights of earnings reports from Genworth Financial, MGIC, Arch and Radian’s mortgage and title insurance business as well as Q2 reports from Fidelity and Investors Title.
At that time, due to CARES Act-granted forbearances, these companies had to make large provisions in order to comply with the secondary market capital requirements.
Now, helped by
With the threat of a foreclosure tsunami — in which MIs would have to deal with large numbers of claims — now
Below are the highlights of earnings reports from Genworth Financial, MGIC, Arch and Radian’s mortgage and title insurance business as well as Q2 reports from Fidelity and Investors Title.
Genworth says Enact IPO is still on the table
Genworth Financial still plans to sell 19.9% of its Enact mortgage insurance company in an initial public offering.
"As we have considered various options for Enact over the past several years, our objective has been to protect and ultimately unlock its value, enabling us to maximize value for general shareholders in any potential transaction," Genworth's President and CEO Tom McInerney said during its conference call. "We maintain our positive long-term outlook for the MI sector based on the strong positive trends in the U.S. housing market and expected tailwinds as the economy continues to recover from COVID-19."
Enact reported adjusted operating income of $135 million for the second quarter, up from $126 million inthe first quarter and a $3 million loss for the pandemic-affected second quarter of last year.
New insurance written increased on a quarter-to-quarter basis to $26.7 billion from $24.9 billion in the first quarter. One year ago, the company wrote $28.4 billion.
"The improvement in results was primarily driven by lower new delinquencies compared to the prior quarter," said Daniel Sheehan, chief financial officer. "New delinquencies of approximately 7,000 during the quarter were down 30% sequentially with 45% reported in new forbearance plans."
Enact's loss ratio fell to 12% for the second quarter, down from 22% in the first quarter and 94% in the second quarter of 2020.
"As we have considered various options for Enact over the past several years, our objective has been to protect and ultimately unlock its value, enabling us to maximize value for general shareholders in any potential transaction," Genworth's President and CEO Tom McInerney said during its conference call. "We maintain our positive long-term outlook for the MI sector based on the strong positive trends in the U.S. housing market and expected tailwinds as the economy continues to recover from COVID-19."
Enact reported adjusted operating income of $135 million for the second quarter, up from $126 million in
New insurance written increased on a quarter-to-quarter basis to $26.7 billion from $24.9 billion in the first quarter. One year ago, the company wrote $28.4 billion.
"The improvement in results was primarily driven by lower new delinquencies compared to the prior quarter," said Daniel Sheehan, chief financial officer. "New delinquencies of approximately 7,000 during the quarter were down 30% sequentially with 45% reported in new forbearance plans."
Enact's loss ratio fell to 12% for the second quarter, down from 22% in the first quarter and 94% in the second quarter of 2020.
Arch MI's underwriting income up 326% from year ago
Arch Capital Group's mortgage insurance segment in the second quarter recorded underwriting income of $250.1 million, compared with $200.3 million in the first quarter and $76.4 million in the second quarter last year.
Net premiums written were 3.3% higher on a year-over-year basis due to growth in Australian single premium mortgage insurance and the benefit of premiums it received from the exercise of early redemption options by Fannie Mae and Freddie Mac for certain seasoned callable credit risk transfer contracts. However, it was partially offset by lower U.S. primary mortgage insurance in force from monthly premium policies leaving its books because continued high levels of refinancing activity.
The U.S. mortgage insurance business did $28.4 billion in NIW for the second quarter, up from $27 billion in the first quarter and $24.5 billion for the second quarter of 2020.
Arch's IIF, including mortgage reinsurance policies, ended the quarter at $422 billion, down from $427 billion as of March 30.
Net premiums written were 3.3% higher on a year-over-year basis due to growth in Australian single premium mortgage insurance and the benefit of premiums it received from the exercise of early redemption options by Fannie Mae and Freddie Mac for certain seasoned callable credit risk transfer contracts. However, it was partially offset by lower U.S. primary mortgage insurance in force from monthly premium policies leaving its books because continued high levels of refinancing activity.
The U.S. mortgage insurance business did $28.4 billion in NIW for the second quarter, up from $27 billion in the first quarter and $24.5 billion for the second quarter of 2020.
Arch's IIF, including mortgage reinsurance policies, ended the quarter at $422 billion, down from $427 billion as of March 30.
Essent gains most market share during 2Q
Essent Group picked up the most market share on a quarter-to-quarter basis, as its NIW increased to $25 billion, compared with $19.7 billion in the first quarter, representing a 3-percentage-point gain. This was still lower than the $28.2 billion written for the same period in 2020.
The company's second quarter net income rose to $159.8 million, from $135.6 million in the first quarter and $15.4 million one year ago. It ended the quarter with IIF of $203.6 billion, compared with $197.1 billion on March 31 and $174.6 billion on June 30, 2020.
"Our results reflect a favorable operating environment as credit continues to normalize and housing demand remains elevated," Mark Casale, chairman and CEO, said in a press release.
The provision for losses and loss adjusted expenses was $9.7 million for the second quarter. This is less than the first quarter's provision of $32.3 million in the first quarter of 2021 and significantly lower than the $175.9 million provision in the second quarter of 2020.
The company's second quarter net income rose to $159.8 million, from $135.6 million in the first quarter and $15.4 million one year ago. It ended the quarter with IIF of $203.6 billion, compared with $197.1 billion on March 31 and $174.6 billion on June 30, 2020.
"Our results reflect a favorable operating environment as credit continues to normalize and housing demand remains elevated," Mark Casale, chairman and CEO, said in a press release.
The provision for losses and loss adjusted expenses was $9.7 million for the second quarter. This is less than the first quarter's provision of $32.3 million in the first quarter of 2021 and significantly lower than the $175.9 million provision in the second quarter of 2020.
MGIC remains No. 1 underwriter
MGIC Investment was the only mortgage insurer to do over $30 billion of NIW in the most recent period, with $33.6 billion, up from $30.8 billion in the first quarter and $28.2 billion one year prior.
That led to an increase in IIF to $262 billion on June 30, compared with $251.7 billion three months prior and $230.5 billion in the second quarter of 2020.
MGIC's NIW was 24% ahead of BTIG's estimate as the company benefits from a strong purchase market, said analyst Ryan Gilbert. That was responsible for also beating his outlook for its IIF.
"Our quarterly financial results benefited from the credit quality of our insurance in force, a strong housing market, a decreasing number of new delinquencies, and improving economic conditions as many local economies return to pre-pandemic levels of activity," CEO Tim Mattke said in a press release.
Persistency, which measures the percentage of insurance remaining in force from one year prior, was 57.1% at June 30, compared with 56.2% and 68.2% at June 30, 2020.
"We expect healthy IIF growth and NIW in 2021, although we do expect some share loss relative to the gains in 2020," BTIG’s Gilbert said. "Default statistics improved in the second quarter and July, and we expect the trend to continue in 2021."
MGIC's primary delinquency inventory consisted of 42,999 loans at quarter-end, down from 52,775 loans at March 31, and 69,326 loans at June 30, 2020.
The company provided a July update, with a nearly $4 billion increase in IIF to $265.8 billion and a 1,588 decrease in the delinquent inventory to 41,411.
That led to an increase in IIF to $262 billion on June 30, compared with $251.7 billion three months prior and $230.5 billion in the second quarter of 2020.
MGIC's NIW was 24% ahead of BTIG's estimate as the company benefits from a strong purchase market, said analyst Ryan Gilbert. That was responsible for also beating his outlook for its IIF.
"Our quarterly financial results benefited from the credit quality of our insurance in force, a strong housing market, a decreasing number of new delinquencies, and improving economic conditions as many local economies return to pre-pandemic levels of activity," CEO Tim Mattke said in a press release.
Persistency, which measures the percentage of insurance remaining in force from one year prior, was 57.1% at June 30, compared with 56.2% and 68.2% at June 30, 2020.
"We expect healthy IIF growth and NIW in 2021, although we do expect some share loss relative to the gains in 2020," BTIG’s Gilbert said. "Default statistics improved in the second quarter and July, and we expect the trend to continue in 2021."
MGIC's primary delinquency inventory consisted of 42,999 loans at quarter-end, down from 52,775 loans at March 31, and 69,326 loans at June 30, 2020.
The company provided a July update, with a nearly $4 billion increase in IIF to $265.8 billion and a 1,588 decrease in the delinquent inventory to 41,411.
National MI's new insurance written drops from 1Q
National MI reported a 14% quarter-to-quarter decrease in NIW, to $22.8 billion from $26.4 billion in the first quarter. This is still a 73% increase over last year's $13.1 billion.
That is still a beat over Gilbert's expectations of $16.7 billion for the period. And he is bullish about further growth.
"We believe market share gains will resume in 2021 as National MI deploys the capital raised in 2020, maximizes the benefit of new accounts opened in 2020, and further expands customer relationships in 2021," Gilbert said in a report.
Parent company NMI Holdings' net income of $57.5 million for the second quarter was up from $52.9 million in the first quarter and $26.8 million one year prior.
"We delivered strong operating performance, significant growth in our high-quality insured portfolio and record financial results in the second quarter," CEO Claudia Merkle said in a press release. "Our credit performance continued to trend in a favorable direction, and we remain optimistic about the broad strength of the economic recovery and resiliency of the housing market."
That is still a beat over Gilbert's expectations of $16.7 billion for the period. And he is bullish about further growth.
"We believe market share gains will resume in 2021 as National MI deploys the capital raised in 2020, maximizes the benefit of new accounts opened in 2020, and further expands customer relationships in 2021," Gilbert said in a report.
Parent company NMI Holdings' net income of $57.5 million for the second quarter was up from $52.9 million in the first quarter and $26.8 million one year prior.
"We delivered strong operating performance, significant growth in our high-quality insured portfolio and record financial results in the second quarter," CEO Claudia Merkle said in a press release. "Our credit performance continued to trend in a favorable direction, and we remain optimistic about the broad strength of the economic recovery and resiliency of the housing market."
Radian's earnings, cures beat estimate, but NIW misses
Radian Group reported net income of $155.2 million, up from $125.6 million in the first quarter and a pandemic-driven loss of $30 million one year ago.
A much lower than expected loss ratio drove the beat to Gilbert's estimate, "as better than expected second quarter cures led Radian to release a portion of its 2020 reserves."
NIW declined year-over-year, to $21.6 billion from $25.5 billion in the second quarter of 2020. This was a miss to BTIG's expectations of $22.5 billion. But it was still an increase from the first quarter's $20.2 billion.
Refinances accounted for 22.9% of second quarter NIW, versus 40.9% in the first quarter and 43.6% in the second quarter of 2020.
Insurance in force as of June 30, declined to $237.3 billion, from $238.9 billion on March 31, and $241.3 billion one year prior. Persistency was 57.7%, a slight increase from the end of the first quarter's 57.2%. One year earlier, it was 70.2%.
Its delinquent loan inventory ended the quarter at 40,464 compared with 50,106 as of March 31, and 69,742 as of June 30, 2020.
A much lower than expected loss ratio drove the beat to Gilbert's estimate, "as better than expected second quarter cures led Radian to release a portion of its 2020 reserves."
NIW declined year-over-year, to $21.6 billion from $25.5 billion in the second quarter of 2020. This was a miss to BTIG's expectations of $22.5 billion. But it was still an increase from the first quarter's $20.2 billion.
Refinances accounted for 22.9% of second quarter NIW, versus 40.9% in the first quarter and 43.6% in the second quarter of 2020.
Insurance in force as of June 30, declined to $237.3 billion, from $238.9 billion on March 31, and $241.3 billion one year prior. Persistency was 57.7%, a slight increase from the end of the first quarter's 57.2%. One year earlier, it was 70.2%.
Its delinquent loan inventory ended the quarter at 40,464 compared with 50,106 as of March 31, and 69,742 as of June 30, 2020.
Radian's title underwriting revenues increase from 1Q
Meanwhile, revenues for Radian Title Insurance grew to $17.1 million in the second quarter from $15.3 million in the first quarter. Title is a part of what Radian Group is now branding as its "homegenius" segment, which also includes its property valuation and asset management businesses, among others.
Total homegenius segment revenues were $33.5 million, compared with $25.8 million for the first quarter of 2021. Segment net premiums earned were $7.7 million, compared with $7.2 million in the first quarter and $4.7 million in the second quarter of 2020.
The closed order count for Radian Title Insurance increased to 12,000 in the second quarter from 10,000 three months prior.
Adjusted pretax operating loss, which is what Radian uses as the primary measure of profitability for the homegenius segment, was $9.2 million, compared with $10.5 million for the quarter ended March 31, and $3.9 million for the quarter ended June 30, 2020.
"As a company that offers products and services across the mortgage and real estate spectrum, we are encouraged by the continued positive momentum in the housing market, as well as the favorable credit trends within our insured portfolio," said Radian Group CEO Rick Thornberry in a press release. "Year-over-year we successfully increased book value per share by 11%, grew PMIERs excess available assets to $1.9 billion, increased monthly premium mortgage insurance in force by 8% and grew revenues in our homegenius segment by 48%."
Total homegenius segment revenues were $33.5 million, compared with $25.8 million for the first quarter of 2021. Segment net premiums earned were $7.7 million, compared with $7.2 million in the first quarter and $4.7 million in the second quarter of 2020.
The closed order count for Radian Title Insurance increased to 12,000 in the second quarter from 10,000 three months prior.
Adjusted pretax operating loss, which is what Radian uses as the primary measure of profitability for the homegenius segment, was $9.2 million, compared with $10.5 million for the quarter ended March 31, and $3.9 million for the quarter ended June 30, 2020.
"As a company that offers products and services across the mortgage and real estate spectrum, we are encouraged by the continued positive momentum in the housing market, as well as the favorable credit trends within our insured portfolio," said Radian Group CEO Rick Thornberry in a press release. "Year-over-year we successfully increased book value per share by 11%, grew PMIERs excess available assets to $1.9 billion, increased monthly premium mortgage insurance in force by 8% and grew revenues in our homegenius segment by 48%."
Fidelity's order count slips nearly 10% quarter-to-quarter
The nation's largest title underwriter, Fidelity National Financial, reported a 9.7% drop in open order counts for the second quarter to 695,000 from 770,000 in the first quarter. This was only 2,000 more than the second quarter of 2020. Among its largest competitors, Old Republic and Stewart also reported higher year-over-year open order counts.
However, the business mix shifted on a year-over-year basis; for the most recent period, 53% of the open orders were for purchase versus 37% a year ago. That led to an overall average fee per file of $2,444 in the second quarter. This is a 29% increase from the second quarter of 2020.
FNF had net earnings from continuing operations of $546 million for the second quarter, compared with $600 million in the first quarter and $304 million in the second quarter of 2020.
The title underwriting business generated record adjusted pre-tax title earnings of $688 million and an adjusted pre-tax title margin of 22.7%, compared to adjusted pre-tax title earnings of $378 million and an adjusted pretax title margin of 18.4% one year prior.
"Our second quarter margins matched our record margins from the fourth quarter of 2020 and were driven, in part, by our investments in technology, operations and automation over the years," said Chairman William Foley in a press release. "Total commercial revenues reached record levels of $347 million for the quarter, compared to $184 million in the second quarter of 2020, as total commercial orders closed increased 65%, as compared to the year-ago quarter. "
However, the business mix shifted on a year-over-year basis; for the most recent period, 53% of the open orders were for purchase versus 37% a year ago. That led to an overall average fee per file of $2,444 in the second quarter. This is a 29% increase from the second quarter of 2020.
FNF had net earnings from continuing operations of $546 million for the second quarter, compared with $600 million in the first quarter and $304 million in the second quarter of 2020.
The title underwriting business generated record adjusted pre-tax title earnings of $688 million and an adjusted pre-tax title margin of 22.7%, compared to adjusted pre-tax title earnings of $378 million and an adjusted pretax title margin of 18.4% one year prior.
"Our second quarter margins matched our record margins from the fourth quarter of 2020 and were driven, in part, by our investments in technology, operations and automation over the years," said Chairman William Foley in a press release. "Total commercial revenues reached record levels of $347 million for the quarter, compared to $184 million in the second quarter of 2020, as total commercial orders closed increased 65%, as compared to the year-ago quarter. "
Investors Title notches record results
Investors Title, which is the smallest of the stand-alone publicly traded underwriters, set all-time quarterly records for total revenues, net premiums written and net income during the second quarter.
The Chapel Hill, N.C.-based company reported net income of $19.8 million, compared with $14.5 million for the prior year period. Net premiums written increased over 42% to $67.5 million from $47.5 million.
For the rest of 2021, the outlook is positive because low interest rates are offsetting the effect of higher home prices, J. Allen Fine, chairman, said in a press release.
Furthermore, "the economy overall is showing clear signs of recovery amid strong government stimulus measures, with more than half of the population receiving vaccinations, more establishments reopening, and unemployment levels continuing to fall," Fine continued. "With these trends in mind, we believe 2021 will be another record year for the industry."
The Chapel Hill, N.C.-based company reported net income of $19.8 million, compared with $14.5 million for the prior year period. Net premiums written increased over 42% to $67.5 million from $47.5 million.
For the rest of 2021, the outlook is positive because low interest rates are offsetting the effect of higher home prices, J. Allen Fine, chairman, said in a press release.
Furthermore, "the economy overall is showing clear signs of recovery amid strong government stimulus measures, with more than half of the population receiving vaccinations, more establishments reopening, and unemployment levels continuing to fall," Fine continued. "With these trends in mind, we believe 2021 will be another record year for the industry."
