Most Mortgage Insurers Do Well Despite Portfolio Persistency Problem
While the nation's largest mortgage insurer reported a decline in net income between 2001 and 2002, its other three publicly traded competitors all said their net income increased during that time.
While refinancing has made it difficult to keep policies on the books, new business has been rising.
Philadelphia's Radian Group Inc. reported net income of $427.2 million or $4.41 per share, up 19% from the $360.4 million or $3.88 per share earned in 2001.
Chairman and chief executive Frank Filipps said the company's diversified business platform was responsible for the increase.
"Our mortgage insurance operations were challenged by an uncertain economic climate in 2002. But Radian's balanced business model allowed us to take advantage of an outstanding environment for our financial guaranty business - which grew 66% in net income over the year - while maintaining our stringent ROE criteria and disciplined approach to writing new business," he said.
Fourth-quarter earnings at Radian increased 12%, from $96.1 million or $1 for last three months of 2001 to $107.8 million or $1.14 per share in the most recent period.
The PMI Group Inc., San Francisco, had net income of $346.2 million or $3.79 per share vs. $307.2 million or $3.39 per share one year ago.
W. Roger Haughton, chairman and chief executive of PMI, was another executive who said his company's success was due to diversification. PMI's strategy includes overseas business, title insurance and Fairbanks Capital, which does mortgage servicing.
Net earnings at Triad Guaranty Inc., Winston-Salem, N.C., increased by 9% from $41.1 million in 2001 to $45.1 million.
"We are pleased to report a 25% increase in earned premium for 2002 compared to a year ago and a 17% growth in insurance in force from a year ago. The excellent growth in earned premium and in force is a strong demonstration of the success of our strategic initiatives to expand our relationships and market penetration with targeted national lenders, especially considering that this growth occurred during a period of record low persistency levels for our company and the industry," explained Darryl W. Thompson, president and chief executive.
Old Republic International, Chicago, breaks out the earnings of each line of business, including its mortgage guaranty unit, Republic Mortgage Insurance Co., Winston-Salem. For the full year, pretax operating income was $267.9 million, compared with $261.9 million in 2001.
However in the fourth quarter, pretax operating income declined 20% from the previous year, down to $55 million from $68.8 million.
A statement from the company said RMIC's earnings "would have reflected better comparisons were it not for the posting of certain special operating charges.
"In the fourth quarter 2002, the Mortgage Guaranty Group ceased the development and marketing of a loan portfolio evaluation service aimed at existing and potential mortgage guaranty insurance customers and re-evaluated certain class-action litigation exposures in light of late emerging developments."
An additional $15.7 million of charges were recorded in addition to third-quarter charges of $4.8 million to cover the costs of the class action litigation.
For the full year, the Milwaukee-based company earned $629.2 million, down from $639.1 million in 2001.
Persistency remains a problem for all mortgage insurers.
As of Dec. 31, 2002, Triad's was 60.9%, down from 67.6% one year earlier. At PMI it fell from 62.0% to 56.2% while at Radian the decline was from 63.3% down to 57%.
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