Growth in Private Mortgage Insurers Not Enough: American International Group Inc (AIG), Genworth Financial Inc (GNW), Arch Capital Group Ltd. (ACGL)

Genworth Financial

Genworth Financial Inc (NYSE:GNW)  reported EPS of $0.34 for the fourth quarter, well above the consensus estimate of $0.27. The earnings were positively impacted by a 16 cent benefit from the new Government Guarantee framework. Another 2 cents were contributed by favorable taxes in the US mortgage insurance and 1 cent each from three different onetime items. Excluding the onetime items, I arrive at the core earnings of 17 cents for the quarter. The weakness in the latest results was driven by a miss in the Long Term Care business segment, where the company took a small reserve charge amounting to $5 million. The segment also experienced unfavorable underwriting. The company also experienced misses in the US MI and Canada, partially offset by better than expected results in International Protection and Australia MI.

MGIC Investment Corporation

For the latest quarter of 2012 MGIC Investment Corp. (NYSE:MTG) posted operating EPS of $2.34 vs the reported EPS of $1.91. During the quarter the risk-to-capital levels declined further to 44.7 times. Operating revenues totaled $286 million, 5% below the linked quarter’s revenues. Net premiums earned during the quarter also came down 2% from a quarter ago. Net premiums as a percentage of average insurance in force remained flat at 64 bps quarter over quarter.

American International Group

American International Group (NYSE:AIG) reported a net loss of $4 billion or $2.68 per share for the fourth quarter of 2012. The reported operating earnings came in at $290 million or $0.2 per share. The results included $2 billion of pretax losses from Sandy storm. The bottom line included a $4.4 billion net loss on the same from discontinued operations. The underlying business trends at American International remained strong. Strong operating earnings in the Life Insurance business, better than expected underwriting margins in the Property & Casualty business and higher investment income well supported the operating results.

Radian Group

Higher than expected US MI segment losses drove an earnings miss at Radian Group Inc (NYSE:RDN). The group reported a fourth quarter loss per share of $1.24. The risk-to-capital ratio for the group decreased 0.4 times during the quarter to 20.8 times. At the quarter end, Radian Group Inc (NYSE:RDN) held $336 million in cash. The company generated operating revenues of $194 million, while the net premiums earned remained flat compared to the previous quarter.


Based on the above analysis, I believe you can expect the private mortgage industry to deliver NIW (new insurance written) growth despite the decline in the overall mortgage market volumes.

The article Growth in Private Mortgage Insurers Not Enough originally appeared on and is written by Adnan Khan.

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