Mortgage insurer 3Q earnings soar even as originations declined

Earnings at four of the private mortgage insurers increased significantly over last year's third quarter even as total mortgage origination volume shrunk during the same time frame.

At three of the four, new-insurance-written volume improved compared with the third quarter of 2017.

During the third quarter, there was an estimated $457 billion of originations, with $346 billion coming from purchases, according to the Mortgage Bankers Association. Total volume in the third quarter last year was $471 billion, but only $320 billion came from purchases.

Net income at Radian Group increased 119% to $142.8 million from $65.1 million one year ago. The year-ago results were affected by charges related to the Clayton Holdings restructuring.

The NIW at its mortgage insurance subsidiary increased 4% to $15.8 billion from $15.1 billion.

The mortgage insurance business had adjusted pretax operating income of $204.6 million, compared with $168.5 million in the prior year. But its services business lost $7.9 million, which was an improvement over the prior year's $12.9 million loss.

Separately, Radian entered into an agreement for an insurance-linked note offering, where it expects to purchase $410 million of reinsurance for policies issued during 2017 and then issue a like amount of unregistered securities.

Previously, MGIC, Arch Capital, NMI and Essent Group announced or completed similar deals in the past year.

MGIC previously reported earnings of $181 million, up from $120 million in the third quarter of 2017.

Arch Capital Group's mortgage insurance unit had a 23.7% year-over-year increase in underwriting income in the third quarter.

This segment, which also includes Arch's international and reinsurance businesses, had $230.6 million of underwriting income for the quarter, up from $186.4 million for the second quarter of 2017.

Arch MI had $21.4 billion of NIW during the quarter, up over 21% from $17.4 billion one year earlier. Increased purchase market activity more than offset a reduction in single premium policies written.

The mortgage segment's underwriting expense ratio was 21.4%, compared to 20.6% in the 2017 third quarter. Arch had increased acquisition expenses due to higher NIW and a lower level of other operating expenses.

NMI Holdings had net income of $24.8 million in the third quarter, more than double the $12.3 million earned one year prior.

"National MI delivered record third-quarter financial results, including record new insurance written of $7.4 billion, record net premiums earned of $65.4 million, record adjusted net income of $31.8 million, and record adjusted return-on-equity of 19.7%," Chairman and CEO Bradley Shuster in a press release.

"We continued to grow our high-quality-insured portfolio at an industry-leading rate and achieved broad success with Rate GPS, our granular risk selection and pricing engine. Customers have quickly recognized the value that Rate GPS offers them and their borrowers, and we have seen an immediate benefit in the credit quality and volume of new business coming through the platform."

National MI's NIW increased 20% from the third quarter of 2017, to $7.1 billion versus $6.1 billion.

Genworth's MI unit is the only underwriter so far to report a year-over-year decline in NIW. The company's market share has declined since it announced the China Oceanwide agreement.

Its NIW declined to $10.3 billion from $11.3 billion a year ago.

The unit had adjusted operating income of $118 million, up from $73 million in the third quarter of 2017. Aiding the results was a favorable $28 million pretax loss reserve adjustment, as well as a lower corporate tax rate and higher premiums.

"There were no material incremental incurred losses in the quarter from areas impacted by the fourth-quarter 2017 hurricanes, and delinquencies in those areas are curing in line with the company's original loss expectations," Genworth's press release said. "The risk-in-force exposure to the recent hurricanes (Florence and Michael) is much lower and therefore the company does not expect any material impact from these events."

Genworth's acquisition by China Oceanwide took one more step closer to completion as the Delaware Department of Insurance scheduled a hearing for Nov. 28. The hearing covers Genworth's life insurance unit which are domiciled in that state.

"The scheduling of the hearing with Delaware is a significant milestone in our regulatory review process and a major step towards closing the transaction with Oceanwide," Tom McInerney, president and CEO of Genworth, said in the press release. "Given the timing of the hearing and subsequent expected review period, we are targeting closing the transaction by year-end."

The U.S. mortgage insurance business (Genworth also owns stakes in MI companies in Canada and Australia) is the most profitable business. Genworth Financial had net income of $146 million, compared with $107 million one year ago.