Q2 income before taxes of $29.7M vs. $23.5M in Q1, $13.4M a year ago.
Insurance in force as of June 30 of $39.4B vs. $34.8B at end of Q1, $22.6B a year ago.
New insurance written of $5.9B, up from $3.6B in Q1, down from $5.9B a year ago.
Net premiums earned of $50.3M vs. $44.8M in Q1, $27.5M a year ago.
Combined ratio of 48.9% vs. 54.4% in Q1, 58.7% a year ago.
Subsequent to quarter's end, Essent's (NYSE:ESNT) reinsurance unit insured a portion of Freddie Mac's most recent issuance. Essent also won the bidding to be sole insurer on a $1.5B Fannie Mae pool of mortgages.
An update on the mortgage insurers as a premarket slump in their stock prices has turned into a rout in the wake of proposed new rules from the FHFA which would force sizable capital raises. MGIC Investment (MTG) -15%, Radian (RDN) -7.2%, Genworth (GNW) -4.8%. Also worth keeping an eye on is Old Republic (ORI).
There's no action in newer mortgage insurers National MI (NMIH) and Essent Group (ESNT), but neither are burdened by any legacy issues and both welcome the new rules, with Essent saying it's already in compliance.
Unlike Radian, Genworth, and MGIC which all would apparently need to boost capital to be in compliance with new rules proposed last night by the FHFA, Essent Group (ESNT) says it's already there based on financial information as of the end of Q1.
"We believe that the proposed risk-based capital adequacy framework in the PMIERs is fundamentally sound." Radian's different take is here.
A check of the mortgage insurers the morning after the FHFA released the proposed Private Mortgage Insurer Eligibility Requirements (PMIERs) finds Radian (RDN) lower by 2.8%, MGIC (MTG) by 2.6%, and no action in Genworth (GNW), Essent Group (ESNT), and NMI Holdings (NMIH). The revised PMIERs would require higher capital standards on the mortgage insurers Fannie Mae (FNMA) and Freddie Mac (FMCC) do business with.
The new rules are open for comment until September 8, and Radian expects to give the FHFA an earful, including noting the new capital requirements "are more onerous than the company's historical default experience suggests would be needed to withstand a severe stress event." The proposed PMIERs, says Radian, are also not consistent with the FHFA's goal of expanding access to mortgage credit by boosting the role of private capital in the mortgage market.
Radian also notes it is likely to be January 2017 before compliance with any new rules would be required.
The amount that lenders originated in mortgage loans plunged 58% on year Q1 to a 14-year low of $235B, almost entirely due to drop in refinancing. The figures are from industry newsletter Inside Mortgage Finance.
Loans for acquisitions were flat on year and lower than in Q4.
The trend is the latest indication that increasing interest rates are hampering the housing recovery. The average 30-year fixed-rate mortgage was 4.5% last week, up from 3.6% in May last year, when rates spiked after the Fed indicated it would scale back its QE program.
A check of action in the mortgage insurers today following MGIC Investment's (MTG +7.3%) Q1 results finds them accentuating the positive. MGIC's earnings came in ahead of expectations as legacy issues continue to fade, but the mortgage/housing slowdown is also leaving a mark. New insurance written fell from a year ago, as did revenue and net premiums written.
CEO Curt Culver notes the "significant decline in refinance transactions compared to last year and the slow start in home sales."
Genworth (GNW +4.7%), Radian (RDN +3.7%), Old Republic (ORI +2.1%), NMI Holdings (NMIH +1.1%), Essent Group (ESNT +0.2%).
A check of the earnings call transcript finds neither KBW's Bose George nor JMP's Christine Worley hinting at any displeasure with results. New to business, Essnet is more growth play than improving credit play and the mortgage business has slowed significantly. George did question whether management had a feel for if market share (12% in 2013) was improving of late (company isn't able to say yet). Management also expects continued shrinkage in the origination market this year, with industry NIW to be around $150B-$160B.
Investors sell the news following Essent Group's (ESNT -7%) earnings beat this morning, but BTIG's Mark Palmer reminds the newish company - unencumbered by legacy losses - is a growth play in the mortgage insurance sector rather than a play on improving credit.
Primary insurance in force of $32B as of Dec. 31 is up 135% from a year ago. New insurance written of $4.5B compares to $4B a year ago. For the full year, NIW of $21.2B vs. $11.2B in 2012.
Net premiums earned of $40.3M compares to $16.5M a year ago. The expense ratio of 55.3% compares to 100.2%.
Homebuilders and private mortgage insurers are partying thanks to incoming FHFA chief Mel Watts' weekend move to postpone an increase in fees which would have raised significantly raised mortgage costs for those with good, but not stellar credit and less than 20% to put down.
"This is a victory for the housing finance industry," says FBR's Edward Mills. "We believe that this is the first of a series of decisions by incoming Director Watt to preserve/expand mortgage credit availability ... We view this announcement as positive for housing generally, but specifically for private mortgage insurers, originators, and homebuilders."
Mortgage insurers: Radian (RDN +4.1%), MGIC (MTG +1.1%), Genworth (GNW +1.6%), Old Republic (ORI +0.7%), NMI Holdings (NMIH +1.1%). Essent Group (ESNT -0.6%) is off a hair, but up 29% since its late-October IPO.
Not showing much reaction today, but potentially set up to disappoint if the GSEs do not allow any private oxygen in mortgage finance are Redwood Trust (RWT -0.2%) and PennyMac Financial (PFSI +1.2%).
A continuing absence of refinancing activity could have mortgage origination volumes off as much as 30% in 2014, say KBW's Bose George and Jade Rahmani, even as purchase volumes rise more than 10%. Their forecast of $1.15T in total activity next year is $50B less than the MBA's estimate, and against about $1.8T in 2013.
For the mortgage sector: Decline earnings from originators and title insurers, stability for the servicers, and increasing earnings for the insurers.
The mortgage insurers - RDN, MTG, ORI, ESNT, NMIH, GNW - will benefit not only from the rise in purchase activity, but from an FHA continuing to cede more market share to the private players.
The team is also bullish on owners of MSRs like Home Loan Servicing Solutions (HLSS) and New Residential (NRZ -0.3%), but neutral on Ocwen (OCN +0.7%) after a big run this year.
KBW also continues to believe the common stock of Fannie (FNMA -0.4%) and Freddie (FMCC +0.8%) is worthless and reform of the GSEs isn't coming until at least 2015.