MGIC Investment Corp. reported net income of $109.2 million for the second quarter, a slight decline of 4% from the $113.7 million earned in the same quarter last year.
New insurance written grew by nearly 7% year-over-year to $12.6 billion from $11.8 billion, while insurance-in-force was up 5.5% to $177.5 billion from $168.8 billion.
In the quarter MGIC took a tax provision of $56 million, compared with $1.3 million for the same period last year. The increase in the provision was a result of a
Persistency, the percentage of insurance policies which remain on the books from one year prior, slipped to 79.6% as of June 30 from 80.4% on the same day one year prior.
"We do expect to see a modest increase in refinances in the second half of the year, which could put some pressure on persistency, but that will be highly dependent on the future level of rates," said CEO Patrick Sinks during the conference call. In a low interest rate environment persistency tends to decline as prepayments rise and the mortgage insurance policy is cancelled. Persistency is important because when a monthly premium policy is cancelled, MGIC will lose the future revenue stream.
For the most recent quarter, single-premium policies made up 21% of new insurance written.
But on the good news side for MGIC and its competitors in the mortgage insurance business, projections still call for increased home purchase activity in the future, "which is a net positive for our company and our industry. We estimate that our industry's market share is approximately three to four times higher for purchased loans compared to refinances and MGIC tends to be at the higher end of that range," Sinks said.
MGIC's inventory of delinquent mortgage loans as of June 30 was at 52,558, a nearly 21% decline from the previous year.
The company received 16,080 new delinquency notices during the quarter, down from 17,451 for the second quarter of 2015. "The pre-2009 legacy books, especially chronic delinquencies, will continue to dominate the new notice activity for the foreseeable future. In the quarter those books generated nearly 90% of the new delinquent notices received, while comprising just over 33% of the risk-in-force. Additionally, nearly 86% of the notices received had been reported delinquent previously," said Tim Mattke, chief financial officer, during the call.
Company executives were asked about the early success
"Clearly with the banks, the depositories, we have all seen that migration away from FHA into these types of programs. But nonbanks are filling the void within the FHA, so I think it's a little too early to tell if there's a long-term shift in market share away from the government to the private sector. But clearly, with the depositories doing it and purchased business, we feel that's to our advantage," said Mike Zimmerman, senior vice president of investor relations.
