Magazine article American Banker

Insurer Profits Keep Rising; How Long Can It Last?

Magazine article American Banker

Insurer Profits Keep Rising; How Long Can It Last?

Article excerpt

Insuring mortgages continues to be more profitable than originating and servicing them.

But as lenders increasingly demand insurance products that let them share premiums, some analysts worry that insurers' big profit margins will shrink.

Four mortgage insurers reported their earnings this week. MGIC Investment Corp., Milwaukee, the largest mortgage insurance company, earned $84.2 million in the third quarter, 28% more than a year earlier.

Earnings per share came to 72 cents, slightly exceeding analysts' estimates.

PMI Group, San Francisco, reported net income of $41.9 million. The rise was only 1%., but earnings per share were up 14%, to $1.25, in line with analysts' expectations.

CMAC Investment Corp.'s net income increased 21%, to $19.3 million.

Earnings per share for the Philadelphia insurer rose 22%, to 79 cents, beating the consensus estimate by a penny.

And net income for the smallest mortgage insurer, Triad Guaranty Inc., soared 64%, to $4.7 million.

Amerin Corp. is scheduled to report its earnings next week. GE Capital Mortgage Insurance, Republic Mortgage Insurance Co., and United Guaranty Residential Insurance are the only other companies in the business.

Some analysts are beginning to doubt the insurers' prosperity can last much longer.

One concern is new competition.

"Things have been so good for so long that lenders want to get a piece of the premiums," said Edwin Ciskowski, an analyst with Equitable Securities, Nashville.

To stay competitive insurers quickly match others' discounts or new products, analysts said.

"There is no reason to suggest pricing will go higher. …

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