MGIC Investment Corp., the Milwaukee mortgage insurer, continues to post impressive results.
Last week MGIC, the industry's market share leader, reported fourth- quarter net income of $86.5 million, a 22% increase from the fourth quarter of 1996. Earnings per share rose 25%, to 75 cents. This exceeded analysts' estimates by a penny.
For the year, MGIC reported net income of $323.8 million and earnings per share of $2.75, increases of 25% and 27% from 1996.
MGIC's chief executive officer, William H. Lacy, said the company is poised to gain even more business if interest rates remain low.
Mr. Lacy, who spoke during a conference call to analysts, said some larger mortgage companies will face "great pressure" to replenish their portfolios as rates continue to fall and borrowers refinance.
"With increased refinancing, there will be an additional emphasis on wholesale lending to replace runoff," Mr. Lacy said. "Brokers will become a very important deliverer of mortgages and mortgage insurance."
He said "megaservicers" such as Norwest Mortgage and HomeSide Inc. will need to buy more loans from wholesale origin-ators-brokers and correspondents.
Norwest, the largest mortgage originator and servicer, gets about 50% of its production from wholesale channels and has a $200 billion portfolio. HomeSide is almost exclusively a wholesale lender, buying many of its loans from smaller correspondents.
"That puts the mortgage insurance decision-making pro-cess at a very fragmented level," Mr. Lacy said.
Analysts said MGIC will be able to capitalize on a pickup in wholesale lending more than other insurers because it has more salespeople. "Because of the breadth of MGIC's sales force and marketing, it tends to do particularly well in low-rate environments," said Mark L. Constant, an analyst at Merrill Lynch & Co.
Other mortgage insurers could reap benefits from a refinancing boom as well, analysts said.
Chad Yonker, an analyst at Fox-Pitt, Kelton Inc., said MGIC will pick up more wholesale business, but some mortgage companies could direct more of their retail originations to another insurer, Amerin Corp. Amerin focuses on the retail arms of larger mortgage lenders and does not have a huge sales force.
Mr. Yonker added that Amerin and CMAC Investment Corp. stand to gain the most from a refinancing boom because most of their business is newly written. If the older loans on other insurers' books are refinanced and run off, CMAC and Amerin could capture more of the new business that comes from the replacement loans.
The other four publicly traded mortgage insurance companies are expected to report earnings next week.
Analysts said they expect market share for PMI Group to decline slightly and for CMAC, Amerin, and Triad Guaranty to increase.
Mr. Constant said all the mortgage insurers will benefit from recovering real estate markets, especially in California.
According to First Call, analysts are expecting PMI's fourth-quarter earnings to rise 15% from the fourth quarter of 1996, to $1.27 a share, and CMAC's to increase 19%, to 81 cents.
Analysts are predicting that Amerin's fourth-quarter earnings will show a gain of 39% from the fourth quarter of 1996, to 43 cents a share. At Triad, the smallest mortgage insurer, they predict a gain of 56%, to 35 cents.
