Mortgage insurers' business mostly flat or down in 1Q

May 6, 2024 4:00 AM

Private mortgage insurers had a weaker first quarter compared to one year ago, as new insurance written fell by 9%, but it was flat from volumes seen in the last three months of 2023.

In comparison, between the fourth quarter of 2023 and last year's first quarter, NIW activity dropped off by 15%.

Moreover, between the two most recent quarters, MGIC again ceded market share (as it did one year prior), slipping 1.8 percentage points. This time around that primarily benefited Radian, up 1.5 percentage points to 19.5% and No. 1 overalls, and National MI, 0.8 percentage points higher, based on data compiled by Keefe, Bruyette & Woods.

Industry-wide NIW for the first quarter was $59.1 billion, compared with $59 billion in the fourth quarter and $64.6 billion on a year-over-year basis.

Meanwhile, total mortgage production was lower quarter-to-quarter, according to Mortgage Bankers Association estimates, $377 billion for the period ended March 31 versus $399 billion three months earlier. But this was still higher than the first quarter 2023 volume of $333 billion.

Private MI is typically used as credit enhancement for loans sold with loan-to-value ratios over 80% to Fannie Mae and Freddie Mac, and competes with government programs such as the Federal Housing Administration.

Here is a look at first quarter results for the six active mortgage insurance underwriters:

MGIC retrenches, citing pricing discipline

MGIC Investment, which ended last year as the most prolific MI company, slipped to No. 5 for the first quarter, as management indicated on its earnings call it was part of the company's strategy.

Its first quarter NIW was reflective of the pricing environment during November, December and January, said Tim Mattke, CEO.

"But from our perspective, good return, we want to remain disciplined on price," Mattke continued. "We haven't lost any access to customers…and so for us, we look at it over the long run and aren't overly concerned about that dip from a Q1 perspective."

Mortgage Guaranty Insurance Corp. reported NIW of $9.2 billion for the first quarter, down from $10.9 billion in the fourth quarter, but more than the $8.2 billion one year prior.

Meanwhile, its primary delinquent loan inventory shrank to 24,142 as of March 31, compared with 25,650 on Dec. 31, 2023.

Radian moves up to the top

Radian Group's mortgage insurance business did NIW of $11.5 billion, which is a gain compared with both the prior quarter's $10.6 billion and $11.3 billion one year ago.

First quarter net income was $152 million, up from $143 million three months prior but lower than the $158 million earned in the first quarter of 2023.

The company made a reporting change in the first quarter, moving its Homegenius title, real estate technology and real estate services segment into the all other category.

The Radian Guaranty MI business had pretax income of $210 million in the first quarter, down from $215 million one year prior. But Radian Group's all other segment had a lower pretax loss of $7 million versus $15 million over the same time frame.

"The title business has gone through meaningful expense reductions during the cycle, a very challenging cycle, as you know," CEO Rick Thornberry said during the earnings call. "But it maintains a really solid market position and has been adding customers along the way, really expanding the base of the customers significantly and getting great feedback from the customers we do business with."

National MI 1Q volume beats estimate

National MI, the underwriting unit of NMI Holdings, did $9.4 billion of new insurance written in the first quarter, which beat Keefe, Bruyette & Woods' estimate of $8.9 billion, according to a report from Bose George.

It was also an improvement over $8.9 billion for the fourth quarter and $8.7 billion done in the first quarter of 2023.

"All in all, we view this as a solid quarter for NMIH," another analyst, Soham Bhonsle of BTIG, wrote, pointing not just to the NIW change, but also growth in insurance-in-force and a lower loss ratio.

The increased NIW after National MI partially reversed a business decision to curtail insuring 97% LTV mortgages.

As the home purchase market recalibrated to accept higher mortgage rates, however, "we were going to be comfortable accepting a modest amount of incremental 97 LTV volume into the portfolio," Adam Pollitzer, president and CEO said on the earnings call.

"We still meaningfully under-index the broader MI market for 97 LTV concentrations," Pollitzer said. "The rest of the market last quarter was at around 15% compared to our 11% this quarter."

NMI Holdings had net income of $89 million, up 7% compared with $83.4 million in the fourth quarter, and 20% higher than the first quarter 2023's $74.5 million.

Enact's NIW flat versus 4Q but down 20% year-over-year

Enact Holdings finished the first quarter with the second-most NIW written, at $10.5 billion, similar to the fourth quarter's volume.

But when looked at versus the first quarter of last year, Enact had the second-highest percentage decline in volume, at 20%, from $13.9 billion.

"I would just emphasize, is when we think about our NIW, we like the profile of the $10.5 billion we wrote," Rohit Gupta, Enact's president and CEO said on the earnings call. "We saw pricing in the market being constructive, and we took several pricing actions in the market to make sure that from a risk selection perspective and return perspective, we were actually driving the right book."

So Enact might have lost some market share, but Gupta said he doesn't see that as an issue with the company's strategy.

The holding company, which is majority-owned by former parent Genworth Financial, earned $161 million in the first quarter. This was compared with $157 million in the fourth quarter and $176 million for the first quarter of 2023.

Essent's market share remains No. 6

Essent Guaranty was only private MI with a larger NIW percentage loss compared with last year's first quarter than Enact, down 35%.

The company did just $8.3 billion of new insurance written, compared with $8.8 billion in the fourth quarter, and $12.9 billion in the first quarter of 2023. In the year ago period, Enact wrote the most new insurance and Essent was second.

But for the second consecutive quarter, Essent had the least amount of NIW written.

Essent's gross premium yield actually increased in the first quarter, Mark Casale, chairman, president and CEO said during the Essent Group earnings call.

"Given the small market, it's probably not the time to reach for share and you rent share anyway, you don't really own it. It's quarter to quarter," Casale said. "But I think kind of from a unit economic basis with the increased yield, we were probably increasing price a little bit more than others throughout 2023."

In the second quarter of 2023, Essent Group acquired the title insurance agency and underwriting businesses from Finance of America's Incenter subsidiary.

For the first quarter, the title business had a pretax loss of approximately $4 million, similar to the third and fourth quarters of 2023.

With the post-acquisition integration complete, we have begun the build-out of Essent Title, which should enable us to leverage our strong operational infrastructure, lender network and risk analytics," Casale said.

He compared the news around the title industry in general to much of the chatter about mortgage insurance when Essent entered that business in the post-financial crisis period.

"I think the same way with title insurance, it's such a valuable product, and I think it's misunderstood," Casale said. "And so I think what we're going to try to do, working with counterparts in the industry is to do a better job of educating key constituencies on the value of title insurance and how it's used and its role to protect borrowers and help lenders and improve the housing finance system."

He called attorney opinion letters as well as the title waiver pilot "workarounds" that came about because the industry is not putting the borrower first.

"Until the industry really tries to solve that problem, there's always going to be workarounds," Casale said.

Essent Group earned $181.7 million in the first quarter, up from $175.4 million three months prior and $170.8 million in the year ago period.

Arch also managing flow of incoming business

Underwriting income for Arch Capital Group's mortgage insurance operations increased 11% year-over-year; the unit also includes international and reinsurance business.

This line produced $271 million of underwriting income, down from $286 million three months prior but up from $243 million one year ago.

But its U.S. new insurance written slipped to $9.3 billion from $9.4 billion in the fourth quarter and $10.4 billion in the first quarter of 2023.

Its NIW is in line with Arch Capital's appetite for this product given mortgage market conditions, Marc Grandisson, CEO of the holding company said on the earnings call.

"When the mortgage market picks up again, we're prepared to increase our production," he said. "However, if the status quo persists, we're content with our current situation that has extended the duration over which we earn mortgage insurance premiums."

Arch Capital's net income, inclusive of all its business segments, of $1.1 billion was up from $705 million one year prior.