Mortgage insurers flat versus 2Q23 — and that's good news

August 5, 2024 5:00 AM

The six private mortgage insurers had the smallest year-over-year decline in new business in almost three years during the second quarter of 2024, with all underwriters coming in with similar market shares.

During the quarter, the industry produced $79.8 billion of new insurance written, a 2% drop from one year ago, when they did $81.7 billion, according to data compiled by Keefe, Bruyette & Woods.

The last time the six companies reported annual increase of NIW was in the second quarter of 2021. Since then, largely in conjunction with the decline in mortgage origination volumes, NIW dropped off by double-digit percentages for each period until now.

Compared with the first quarter, NIW rose 37%, from $58.2 billion.

Meanwhile, in an industry where maintaining market share has become volatile in the era of "black box" risk-based pricing, all of the underwriters were remarkably similar in their production during the second quarter.

The gap between the No. 1 underwriter and the No. 6 was $1.4 billion. In the first quarter, it was $3.2 billion, in the fourth quarter, it was $2.1 billion (on NIW of $59 billion) and the year prior, the gap was $5.4 billion.

Here is a look at the second quarter earnings reports at the six active underwriters:

Radian gives up share, but still No. 1

If industry market share equalizes, some companies have to cede some, and the biggest loser was Radian, down by 3.3% from the second quarter of 2023. It was also down 2.4% compared with the first quarter.

At $13.9 billion, the company had the most volume produced, but that was down from $16.9 billion a year ago.

Its net income of $152 million was flat with the first quarter and up from $146 million for the second quarter of 2023.

Radian Group changed its financial reporting in the first quarter and now just puts out information for the mortgage insurance business and for all other business. That last segment had a $6.1 million adjusted pretax operating loss for the quarter.

After the quarter ended, Radian Mortgage Capital, its conduit, closed its first prime jumbo mortgage securitization, with a balance of $348.9 million supported by 359 loans.

"We view this business as a natural extension of our successful model for aggregating, managing and distributing mortgage credit risk and a strategic opportunity to leverage our brand known for quality underwriting for the benefit of capital markets investors," CEO Rick Thornberry said on the conference call. "Strategically, we also believe this business provides a growth opportunity by expanding and deepening our relationships with our mortgage lender customers, which has been demonstrated by the strong response from large and small originators."

It expects to be a regular issuer of non-agency securitizations going forward, Thornberry continued.

Arch Capital picks up the most market share

Gaining 2.2%, the U.S. mortgage insurance business of Arch Capital Group gained the largest percentage in market share and moved to No. 2 by NIW for the second quarter.

Its volume of $13.8 billion compared with $9.3 billion in the first quarter, which ranked it fourth, and $12.3 billion one year prior (No. 5).

Underwriting income for Arch Capital's mortgage insurance segment (which also includes international and reinsurance business) was $287 million, compared with $271 million in the first quarter and $253 million for the second quarter of 2023.

"MI underwriting has been solid across the industry since 2009, and the current environment is one that rewards the MI companies underwriting the risk," Marc Grandisson, Arch Capital CEO, said on the earnings call.

It was during the period that Arch closed on its purchase of Republic Mortgage Insurance Co. from Old Republic International. "Although no new business comes with this run-up block, it is emblematic of our ongoing pursuit of finding profitable opportunities in which we can deploy capital," Grandisson said.

Because RMIC has been in run-off status, the deal added only $3.6 billion or 1.2% to Arch's insurance-in-force.

Arch's U.S. MI business was built on acquisitions, first of CMG Mortgage Insurance (formerly a joint venture between PMI Group and CUNA Mutual), then of United Guaranty.

Enact lost 10% share YOY although gained versus 1Q

Enact's new insurance written for the second quarter of $13.6 billion came in above KBW's forecast of $11.8 billion.

It was an increase of 29% from the first quarter's $10.5 billion, but down 10% from $15.1 billion one year prior.

On the earnings call, Rohit Gupta, president and CEO, noted the closeness in NIW versus Enact's peers. Essent had yet to report at that time but was also in the same range.

"The way we think about market participation is you almost have to look at trailing 12 months of market share and market participation, not that market share is a goal, it's more of an outcome for us," Gupta said. "But if you look at the last four quarters, I think you see some volatility in our participation, but generally in a pretty tight range."

Enact is comfortable where it is in the MI market, the amount of NIW it wrote and it is really happy with the pricing it is getting for new policies, Gupta said.

It earned net income of $184 million during the second quarter. That is compared with $161 million for the first quarter and $168 million for the second quarter of 2023.

Enact contributed $165 million in adjusted operating income to its majority owner Genworth Financial.

"Since Enact's IPO, Genworth has received approximately $738 million in capital from Enact, including $63 million in the second quarter," said Tom McInerney, Genworth's president and CEO, during that company's earnings call. "We are very satisfied with our approximately 81% ownership stake in Enact as it continues to generate significant earnings and cash flows that support our capital allocation priorities of share repurchases, opportunistic debt reduction and growth investments in CareScout."

MGIC jumps back in to the market

Like Arch, MGIC Investment also reported a 48% gain in new insurance written versus the first quarter. On a year-over-year comparison, NIW was up by 9%; only Arch had a larger percentage gain.

The oldest company in the business did $13.5 billion of new business during the quarter, compared with $9.1 billion in the first quarter and $12.4 billion one year ago. This quarter's number beat KBW's $12.2 billion estimate.

MGIC management focuses on getting the right return for its capital, Tim Mattke, CEO, said on the earnings call.

"I feel good about this quarter, just like we felt good about last quarter as well," Mattke continued. "I think as we move through the year here, we have a wide customer base that gives us an opportunity to really be able to get business when we want to be able to win the business and deploy the capital at good returns."

MGIC reported net income of $204.2 million for the second quarter, up from $174.1 million in the first quarter and $191.1 million in the second quarter of 2023.

Essent leads industry in quarterly share gain

Essent Guaranty had the largest percentage gain in market share versus the first quarter at 50% and also beat the KBW estimate for new insurance written. But it did 7% less business than one year ago.

During the period, it produced $12.5 billion, up from $8.3 billion in the first quarter. KBW expected $11.2 billion.

In the second quarter of 2023, however, it did $13.5 billion.

Essent's net income of $203.6 million compared with $181.7 million in the first quarter and $172.2 million for the quarter ended June 30, 2023.

When Essent talks with lenders today about doing business, it tells them they should work with all six companies, Mark Casale, chairman, president and CEO said on the earnings call.

Every MI has a "different pocket" and "different credit appetites," and that is great for both the borrower and lender, Casale said.

"We give every single borrower our best price," he explained. "That doesn't mean it's the lowest price. It's the best price that we feel for the borrower, and we think about it in terms of unit economics and all those sorts of things."

When it comes to the title insurance business it purchased from Finance of America/Incenter, Essent is looking at where it wants to be in five years.

"Our goal on title is to position ourselves to take advantage when the market does come back," Casale said. "If it comes back a little quicker and we don't take advantage of it as much as we could have, that's fine, we're in this for the long haul."

In the near-term, however, the title unit will not have any meaningful impact on Essent's earnings.

National MI also gained business year-over-year

While National MI also posted higher NIW numbers versus the prior periods, its $12.5 billion volume put it at the bottom of the table with Essent.

In the first quarter it posted a NIW of $9.4 billion, while in the second quarter 2023, National MI produced $11.5 billion, representing gains of 33% and 9% respectively.

Parent company NMI Holdings did net income of $92.1 million for the second quarter, versus $89 million for the quarter ended March 31, and $80.3 million for the period ended June 30, 2023.

"An increasing number of borrowers need MI support for their down payment," said Adam Pollitzer, president and CEO on the earnings call. "Industry NIW in 2023 was around $285 billion and we expect that we'll have a similarly attractive environment when all is said and done this year."