KBW Lowers Earnings Estimates for MIs

The mortgage insurance industry should survive, declared analysts at Keefe, Bruyette & Woods, but any fundamental recovery is still well down the road. Meanwhile, the second quarter spike in interest rates has made estimated volumes for the rest of the year at the title insurers "more tenuous" and as a result, KBW is lowering its earnings estimates and price targets for those companies. For Fidelity National Financial, it lowered its second quarter 2009 earnings estimate to $0.37 per share from $0.48 per share primarily due to lower fee-per-file expectations, slightly higher expenses and reduced commercial activity. The EPS estimate for First American Corp. was cut from $0.87 to $0.73 and for Stewart Information Services Corp. from $0.52 to $0.39 for the same reasons. As for the mortgage insurers, the KBW analysts "expect the second quarter will see an increase in the sequential growth rate in delinquencies, likely returning to the mid-teens percent range rather than the single-digit growth rates seen in the first quarter." The analysts increased their estimates for the loss at Old Republic (which operates in both segments, but which was grouped with the MI companies) to $0.18 per share from 0.13 per share on lower orders and lower fee per file in the title segment. For MGIC, KBW's second-quarter operating EPS estimate was increased to a loss of $1.28 from a loss of $0.74 primarily on the elimination of the tax benefit from operating losses due to the establishment of a valuation allowance. PMI had its loss estimate increased by $0.01 per share to $1.62, while KBW held its estimates for Radian at a loss of $1.19 per share. For the mortgage insurance segment at Genworth, analysts Nathaniel Otis and William Clark predict it will lose $23.0 million or $0.05 per share for the second quarter.