Mortgage insurers followed last year's record performance with double-digit earnings growth in this year's first half.
On average, net income of the four public mortgage insurance companies rose 24% in the second quarter and 25% in the half, both compared with a year earlier. (See chart.) 
The four wrote 95% more new insurance in the second quarter, on average, and 103% more in half. The biggest of them, MGIC Mortgage Insurance, a unit of MGIC Investment Corp., wrote $22.4 billion in the quarter, for a jump of 111%. Its total for the half, up 118%, was $39.2 billion - versus a full-year record of $47 billion in 1999.
Ron Kessinger, the chief financial officer of Triad Guaranty Inc., predicted "another all-time record year for writings" for the industry.
"We see a very positive demand for our product, as well as persistency, which has been hurt by the refinancing but will improve in the second half of the year," he said. Triad's second-quarter earnings rose 15.8%, to $9.8 million.
Radian Group Inc., the last mortgage insurer to report, said Thursday that its second-quarter earnings rose almost 50%, to $92.7 million, and its first-half 43%, to $172.8 million.
Radian officials stressed that the second-quarter results include contributions from its February acquisition of Enhance Financial.
Though the insurers' strength is no shock, since the mortgage markets is the strongest in decades, the business is still generally considered countercyclical to the broader mortgage industry.
For example, the insurers made a killing last year, when production plummeted, but lenders, brokers, and other origination-sensitive businesses suffered.
But plunging mortgage rates have brought a surge of applicants this year, and insurers have profited from the feast.
Most observers said the huge origination market, which the Mortgage Bankers Association expects to be the largest on record, has helped the insurers, but so have new business lines.
Specifically, bulk mortgage insurance transactions, which first emerged in the market in late 1998, exploded in the first half of this year, and several executives say they are now driving the growth of the mortgage insurance business.
MGIC wrote $400 million of bulk transactions in 1998, $2.2 billion in 1999, and $7.7 billion last year, according to Jim McGinnis, it vice president of investor relations. In the first half of this year alone it wrote more than $13 billion.
"It's just hitting the radar screen now, but it's become evident to us that this is a market that's here to stay," Mr. McGinnis said. "Bulk transactions have provided and will continue to provide incremental growth opportunity for the industry and for MGIC."
Mr. Kessinger said there has been tremendous growth in the bulk transactions over the last 12 months. "We see that continuing to grow - not only at the current pace but much more."
Through bulk transactions, the companies provide insurance, or "credit enhancement," to a portion of the market they did not touch before: pools of nonconforming loans that Fannie Mae and Freddie Mac cannot purchase.
Investment firms such as Lehman Brothers purchase these loans - which include subprime, jumbo, or alternative-A loans - pool them together, and then sell mortgage-backed securities.
When the loans are bundled in these securities, they receive a rating from credit agencies, and insuring the pools draws a better rating - and a higher price, Mr. Kessinger said. "Credit enhancement elevates the rating of the security. That enhances the security's execution and value in the market place."
Glenn Corso, a spokesman for PMI Group Inc., said the bulk transaction market could be worth between $100 billion or $150 billion a year in new insurance business. "The strength of the bulk market has been a key factor and will continue to be a factor," he said. "At least through the first half of the year, we're on track to the biggest year ever."
Frank P. Filipps, chairman and chief executive officer of Radian, said it took a conservative, disciplined approach to bulk transactions in the first half.
During Thursday's conference call on earnings, he said the Philadelphia company had the opportunity to bid on $20 billion of business. However, it wrote just $807 million of bulk transactions in the second quarter and $1.9 billion in the first half, because he was concerned about the credit quality of the loans being offered, Mr. Filipps said.
Nonetheless, Radian is now moving quickly to snap up the business, he said - in the first three weeks of this month it won $4.5 billion of bulk deals.
Mr. Corso said PMI's cancellations are rising, but at the same time it is writing a lot new policies. Because it is much more expensive to write new business than to collect from old policies, he said, its earnings growth has been good but not spectacular.
If interest rates rise and most of this year's loans stay on the books, the company's future should be strong, he said. "Once the refinance wave tapers off, we'll realize the benefits."
Jonathan E. Gray, an analyst with Sanford C. Bernstein & Co., said the mortgage and mortgage insurance industries are booming. PMI and Radian's stocks are "table-pounding buys," he said.
All the mortgage players have the wind at their backs, but the insurer are doing the most with it, he said. "The mortgage insurance managements are excellent. As a group, I have not seen an industry with stronger management."
The insurers have been entrepreneurial, and they have reaped the benefits of their sound diversification, Mr. Gray said. "Whether they've moved overseas, bought a new company, or moved into new markets, they've scored stunning successes."
