Investors shouldn't overreact to the first-quarter shift in private mortgage insurer market share, said the CEO of the company that benefited most from the change.
Mark Casale, Essent's chairman, president and CEO, downplayed the shift while speaking at the Keefe, Bruyette & Woods Real Estate Finance and Asset Management Conference. "I wouldn't read too much into quarterly market share trends," emphasizing that
"In general, the industry is a lot more rational than investors give it credit for," when it comes to things that could distort market share like policy pricing.
But with all six players
Even though Arch remained at the top in terms of new insurance written — a position it has held nearly every quarter after it purchased former No. 1 United Guaranty from American International Group — it lost share during the quarter. Essent Group — one of two companies that entered the business after the housing crisis — gained the most.
Arch had an 18.8% market share in the first quarter, down from 24.1% in
But the shift in share benefited Essent, which leapfrogged Radian and MGIC to second overall at 18.4%. Genworth also added significant share, going to 16.1% from 13.4%, while National MI grew to 11.6% from 10%.
Mortgage insurers have not made any across-the-board policy price reductions, said MGIC CEO Patrick Sinks during that company's presentation. Rather, the companies "will pick their spots" and cut premiums for particular niches they would like to concentrate on.
Black box pricing allows National MI to "directly express our risk appetite to our customers," Pollitzer said. Given the dynamics of the system, including the number of variables (National's Rate GPS considers 30), it can help the company see new business opportunities as they emerge, he said.
National took a step back from growing NIW in the second quarter of 2018 when it
When it comes to long-term growth, "we don't manage to a market share target," said Pollitzer. But given that there are only six MI underwriters, an equal market share would be at 16.7%, and he sees the industry in a tighter band around that number in the future.
Consolidation among the six players is not likely, Sinks said, because all are adding insurance-in-force. "As long as the books of business are growing, I don't see anything happening soon."
When it comes to market share, "one plus one does not equal two" for internal combinations because mortgage lenders like to diversify counterparty risk, he said.
From outside the industry, some firms from the property and casualty field might be "kicking the tires," Sinks said. However, the high barriers to entry, including being a capital intensive business and its ties to the future of the government-sponsored enterprises, are likely to discourage such activity.
Mortgage insurers used insurance linked note issuances to reduce the risk on their books and that is a way for outside firms to get involved, said Casale. "It is the only market where you can buy mortgage credit loan risk on a stand-alone basis," he said.
Even though the GSEs'