Arch's capital cushion grew even after increased delinquencies

Register now

Arch Capital Group's mortgage insurance subsidiary increased its cushion under the secondary market capital standards in the fourth quarter even as its delinquent inventory grew.

Capital sufficiency at some companies under the Private Mortgage Insurer Eligibility Standards had become a question after a proposed revision from Fannie Mae and Freddie Mac showed signs of being much tougher than what is now in effect.

That was on top of an industrywide increase in delinquent loans because of Hurricanes Harvey, Irma and Maria.

Arch's PMIERs Sufficiency Ratio — available assets divided by minimum required assets — was at 130% at the quarter's end, up from 122% for the first three quarters of the year and 116% one year prior.

During the quarter, Arch MI received 14,097 new notices, compared with 9,028 in the third quarter, but 3,700 of those were from areas impacted by the storm. There were 9,737 cures and 1,062 claims paid during the quarter, of which 3,200 came from those areas.

Arch's underwriting income was $172.3 million for the quarter, down from $186.4 million in the third quarter. In the fourth quarter of 2016, Arch MI had $48.1 million of underwriting income, but that did not include any business from United Guaranty Corp., which it acquired on Dec. 31, 2016.

New insurance written was $14.39 billion, down from $17.7 billion in the third quarter and $8.8 billion one year ago. Arch barely edged out Radian for the top spot; the Philadelphia-based company had $14.38 billion of NIW for the quarter.

Separately, Genworth Financial started syndicating a $450 million term loan to help pay a May debt maturity. This was originally announced on Feb. 6 as part of Genworth's earnings release.

Genworth and China Oceanwide refiled their application before the Committee on Foreign Investment in the United States. But since the deal is not expected to be finalized before the debt is due, Genworth is seeking this senior secured loan.

China Oceanwide is interested in being a lender for the term loan, a press release said.

Genworth will pledge its holdings in Genworth MI Canada as part of the security for the loan.

Its U.S. mortgage business had adjusted operating income of $74 million for the fourth quarter, up from $73 million in the third quarter and $61 million in the fourth quarter of 2016.

But NIW fell to $10.2 billion from $11.3 billion in the third quarter and $11.1 billion one year ago.

Essent Group, which passed Genworth to become the third largest in terms of NIW, earned $162.6 million in the fourth quarter, up from $62.7 million one year prior. The most recent quarter includes an $85 million tax benefit because of corporate tax reform.

New insurance written for the fourth quarter was $11.2 billion, compared to $13.2 billion in the third quarter of 2017 and $10.5 billion in the fourth quarter of 2016.

For reprint and licensing requests for this article, click here.
Earnings Mortgage defaults GSEs Hurricane Harvey Hurricane Irma Hurricane Maria Fannie Mae Freddie Mac Arch Mortgage Insurance Co. Radian