Four mortgage insurers reported their earnings for 1996 last week, and by all accounts it was a banner year for the industry.
The PMI Group, CMAC Investment Corp., Amerin Corp., and Triad Guaranty Inc. all posted double-digit earnings gains for the year.
These results come on the heels of a 24% earnings gain for 1996 reported earlier this month by the industry leader MGIC Investment Corp.
San Francisco-based PMI, the nation's third-largest mortgage insurer, reported net income of $157.9 million for 1996, up 17% from 1995. PMI's fourth-quarter earnings increased 14%.
W. Roger Haughton, PMI's president and chief executive officer, said his company's market share may have declined from the third quarter to the fourth.
Jonathan Gray, an analyst with Sanford C. Bernstein, New York, said price competition began to intensify toward the end of the year and this caused some mortgage insurers to lose market share.
Edwin C. Ciskowski, an analyst with Cleary Gull Reiland & McDevitt in Milwaukee, said that though it was too early to tell which companies gained or lost market share, it was likely MGIC, CMAC, and Amerin were among the gainers.
CMAC, PMI, and Amerin had slight decreases from the year-earlier period in new insurance written, while Triad, the smallest player in the industry, saw that category increase 16%.
Triad said its new-insurance market share for the quarter was 1.9% and estimated its share for all of 1996 was 1.7%, up from 1.5% in 1995.
The Winston-Salem, N.C., company saw its earnings increase 44% in 1996 to $11.2 million. In the fourth quarter, net income increased 49% to $3.1 million.
For the year, Philadelphia-based CMAC's net income rose 22% to $62.2 million. CMAC's earnings in the fourth quarter increased 19% to $16.6 million.
Amerin's net income for 1996 was $28.2 million. The company lost $22.8 million in 1995 as a result of charges associated with its initial public offering that year. Amerin earned $8.3 million in the fourth quarter of 1996.
Mr. Ciskowski said that the companies beat Wall Street's earnings expectations slightly.
One concern for the industry is that mortgage originations are likely to decrease from 1996's total. If that happens, insurance written would likely also decline.
But Mr. Ciskowski said that new insurance is only part of the picture. Even though he is expecting growth in new insurance written to be stagnant in 1997 and 1998, Mr. Ciskowski said that the mortgage insurers can maintain their levels of earnings growth because of persistency-the percentage of insurance that remains in force from a year earlier.
The stocks of the four companies all rose following the earnings releases, ending what had been a two-week decline for most of the mortgage insurance group's shares. CMAC's and PMI's stock had both fallen about 10% since early January. But none was hit harder than Amerin, which declined 17% between Jan. 10 and Jan. 22.
Amerin filed for a secondary public offering on Jan. 14. The offering includes shares owned by the venture capital firms that helped bring the company public and by Gerald L. Friedman, Amerin's chairman and chief executive officer.
Mr. Ciskowski said that investors overreacted to the news of the secondary offering. He added that the Comptroller of the Currency's approval of Chase Manhattan Bank's application to set up a mortgage reinsurance subsidiary bodes well for Amerin. Chase will reinsure loans that are originally insured by Amerin.
Mr. Gray said that the OCC's approval could bolster Amerin's market share in the short term but that other insurers will most likely enter into reinsurance arrangements with other banks. He added that the price competition already evident in the industry is likely to increase as the industry seeks banking partners for reinsurance agreements.
