DaveJ

Eight Notes on Insurance, Economics, and Value Investing

I agree that mortgage insurance is in trouble. The stand alone mortgage insurers that you mention (MTG,RDN,PMI,TGIC) could fail. However AIG and ORI which are diversified will not. In fact they will gain market shares. AIG could dominate this business if they want to. The others will be credit downgraded at the least whereas AIG's United Guarantee has the full backing of AIGs balance sheet (if AIG doesn't want to let it fail).

In addition, piggyback loans are going the way of the crop and buggy since banks don't want to take on this risk. This gives MI a larger part of a declining market. The declining price environment will increase payouts but raise persistence which is good for MI companies.

This is just reason that I am long AIG. They also benefit from world growth, have a great reputation for underwriting and inovation. They can grow at 12-15% and pay dividends and buy back shares. In addition they benefit from a declining dollar since half their revenue is from oversees. They at P/E of 10 which is an all time low.

PMI Group and MGIG Investment: Subprime Mortgage Storm Brewing

I agree that this is not the time for value investors to jump in. The downside is still quite a long way down. See my blog posting on PMI companies

certainruin.blogspot.c...

However, I think your being a bit selective in what you post. If your going to mention massive insider selling at PMI you had better point out the massive insider buying at MTG
www.secform4.com/insid...

Insider buying is more significant anyway so is more relevant. MTG has as a board member Karl Case who is an economist who started the Case-Shiller index with Yale's Robert Shiller. Note that Karl is not buying shares in MTG and has even sold some last April. He still has about half a million dollars invested in MTG which is a lot for an academic (maybe he is a rich academic for all I know). I think this means that he doesn't see doom for MTG.
www.secform4.com/insid...