The percentage decline in new private mortgage insurance policies written during the first quarter compared to Q4 2021 was less than the change in loan originations over those quarters.
The six active insurers wrote $104.1 billion for the three months ended March 31, down 20% from thefourth quarter's $129.5 billion and 30% for the first quarter of 2021, with a total new insurance written of $148.6 billion, according to data aggregated by Keefe, Bruyette & Woods.
Estimated total mortgage originations in the first quartertotalled $689 billion, the Mortgage Bankers Association said. That was down 22% compared with the fourth quarter's $893 billion and 37% from $1.09 trillion produced in the first quarter of 2021.
However, the situation is different when compared with purchase production, which makes up the majority of new insurance written.
Purchase volume of $381 billion was down just 10% from the fourth quarter's total of $424 billion, and it was higher than one year ago, when $320 billion was produced.
Industry growth to slow in 2022 and 2023
Insurance-in-force grew by 8% in the first quarter, but KBW expects that to slow down to 7% for the full year of 2022 and 6% next year. "For context, IIF had been growing at an annual pace of 9-to-11% from 2016 through 2019, before moderating to 7-to-8% in 2020 and 2021," a report from Bose George said.
KBW also projects new insurance written for the second quarter to be flat compared with the prior three months at $104.6 billion before falling to $95.2 billion in the third quarter and $80.2 billion in the fourth.
Its full year 2022 NIW outlook of $384 billion would be a 30% decline from $584 billion in 2021, the industry's second best year ever (the best being $600 billion in NIW in 2020). For 2023, KBW expects new insurance written to be down a scant 2% to $374.9 billion.
Yet, all five stand-alone companies reported higher net income on a year-over-year basis; Arch's mortgage insurance business had increased underwriting income.
Meanwhile, volatility in market share, a condition that's existed since the industry adopted black box pricing, continued, with Arch moving back to No. 1 from fourth in the prior quarter.
Arch benefitted from strong housing demand
Arch MI, a subsidiary of Arch Capital Group, recorded a 45.5% year-over-year increase in underwriting income to $285.3 million in the first quarter, from $200.3 million in 2021. This was also an improvement over the fourth quarter's $268.6 billion.
"The mortgage segment…once again delivered excellent underwriting results as we continue to benefit from strong housing demand and excellent credit conditions," Arch Capital CEO Marc Grandisson said on the company's earnings call. "Delinquency rates on our MI portfolio continue to trend to historically low levels and cures on delinquent mortgages in our portfolio resulted in favorable prior development in the quarter."
New insurance written fell to $20 billion, from $22.5 billion in the fourth quarter and $27.0 billion in the first quarter of 2021. Arch was the only private mortgage insurer whose NIW topped $20 billion in the first quarter.
Meanwhile, the percentage of first lien mortgage defaults in Arch's portfolio trended lower to 2.09% at March 31, compared with 2.36% at Dec. 31, 2021 and 3.86% on March 31, 2021.
MGIC has the largest quarter-to-quarter drop in new insurance written
MGIC Investment's net income grew to $175 million in the first quarter, from $173.9 million quarter-over-quarter and $150 million year-over-year.
"We have deliberately constructed a strong and durable capital base that we believe improves our ability to deliver on our business strategies regardless of where we are in the economic cycle," CEO Tim Mattke said in a press release. "While the tragic geopolitical events occurring in Ukraine have added increased risks to a domestic economy that was contending with higher inflation and interest rates, we believe that our financial strength and capital flexibility, combined with our quality offerings and superior customer experience, put us in the best position to achieve success."
However, MGIC had the largest percentage drop among the six underwriters in new insurance written from fourth quarter. It was down 28%, to $19.6 billion from the fourth quarter's $27.1 billion. In the first quarter of 2021, its NIW was $30.9 billion.
Its delinquency inventory ended the first quarter at 30,462 loans compared with 33,290 units at Dec. 31, 2021, and 52,775 loans at March 31, 2021. The percentage of loans insured delinquent on March 31, was 2.61%, versus on 2.84% at Dec. 31, 2021, and 4.65% on March 31, 2021.
Enact shows strong results for the second quarter after its IPO
Enact, formerly known as Genworth Mortgage Insurance, had the second smallest quarter-to-quarter decline in NIW (behind Arch), at 12%.
It ended the quarter with $19 billion of NIW, compared with $21 billion for the fourth quarter and $25 billion in the first quarter of 2021.
But net income grew to $165 million from $154 million in the fourth quarter and $125 million in the first quarter of last year. Genworth Financial sold 15.3 million shares of Enact inan initial public offering on Sept. 16, 2021. Bayview Asset Management purchased an additional 14.7 million shares. Genworth still owns nearly 82% of Enact.
The percentage of loans in default at quarter end was 2.4%, compared with 2.65% at the end of last year and 4.48% on March 31, 2021, as cures — loans resuming payments as scheduled — continued to outpace new delinquency reports from servicers.
"We had an excellent first quarter and a very strong start to our first full year as a public company," said Rohit Gupta, president and CEO of Enact, in a press release. "Through execution of our growth and risk management strategy and benefits of our differentiated competitive position, we delivered strong financial results, including record insurance in force and favorable loss performance." Enact announced it will pay its first dividend out to shareholders for the second quarter at 14 cents per share.
Lower quarter-to-quarter results at Radian
Radian Group bucked the earnings trend, reporting lower quarter-to-quarter earnings. It had net income of $181.1 million, compared with $193.4 million in the fourth quarter and $125.6 million in the first quarter of 2021.
However, unlike the other four stand-alone MI companies, Radian operates in other portions of the real estate transaction, including title insurance, through its homegenius business.
First quarter adjusted pretax operating income for the MI unit was $277.8 million, compared with $246.6 million in the fourth quarter and $175.7 million in the first quarter of 2021.
Meanwhile, homegenius reported increased pretax operating losses of $13.5 million in the first quarter, versus losses of $2.1 million in the fourth quarter and $10.4 million one year ago.
Radian's NIW was $18.7 billion in the first quarter, compared with $23.7 billion in the fourth quarter and $20.2 billion in the first quarter of 2021.
The percentage of insured loans in default fell to 2.6% in the first quarter, from 2.9% quarter-to-quarter and 4.9% year-over-year. Radian's delinquent inventory ended the quarter at 25,510 loans, compared with 29,061 in the fourth quarter, and 50,106 as of March 31, 2021.
National MI's business shrinks 46% year-over-year
National MI had the largest year-over-year percentage drop in NIW and the second largest decline compared with the fourth quarter.
Still, parent company NMI Holdings reported net income of $67.7 million for the first quarter. In the fourth quarter, it reported $60.5 million, while in the first quarter of 2021, it had net income of $52.9 million.
It accomplished this as its new insurance written fell by 23% from the fourth quarter, to $14.2 billion from $18.3 billion. Compared with the first quarter of 2021, it was down by 46%, from $26.4 billion.
Essent's management still managing market share
Essent Group's net income continues to grow, even as its new insurance written share shrinks.
"Essent is taking a more cautious approach to NIW given macro uncertainty," Ryan Gilbert, an analyst at BTIG, said in a report. "Essent's pricing has been relatively stable for the past year and management noted pricing boosts by competitors."
For the full year 2020, Essent had an 18% market share. For the first quarter, that was down to 12.8%.
It ended the first quarter with NIW of $12.8 billion, down from $16.4 billion in the fourth quarter and $19.3 billion in the first quarter of 2021.
Essent's default rate on March 31 was 1.93%, compared with 2.16% three months earlier and 3.7% one year prior.
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