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Mortgage Insurers Enact Holdings, Radian Post Strong 2Q Results

David Krechevsky
Aug 02, 2022
Enact and Radian

Enact reports 24% gain in net income from first quarter; Radian's net income up 11%

It was a good quarter for mortgage insurance companies.

Enact Holdings Inc., parent of Enact Mortgage Insurance Corp., today reported a 24% increase in net income in the second quarter from the previous quarter, and a 56% increase from the same quarter last year.

At the same time, Radian Group Inc. today posted an 11.1% increase in second-quarter income from the previous quarter, and a 29.6% from the same quarter last year. 

Enact reported its net income for the second quarter of 2022 was $205 million, or $1.25 per diluted share, up 24% from $165 million, or $1.01 per diluted share, for the first quarter of 2022. Second-quarter results were also 56% above the $131 million, or 80 cents per diluted share, in net income reported for the second quarter of 2021. The company attributed the gain primarily to lower losses from favorable reserve development. 

"This was another strong quarter for Enact in which we delivered record results,” said Rohit Gupta, president & CEO of Enact. “Our performance reflects the continued execution of our strategy, the strength and resiliency of our business model, and the sustained performance of our outstanding team.”

“While economic uncertainty has increased and mortgage rates have come off historically low levels,” Gupta added, “overall market conditions and the longer-term drivers of demand remain constructive, and we believe we are well positioned to execute on our strategy in a dynamic environment. Going forward, we remain committed to our goal of increasing the accessibility and affordability of home ownership and to driving value creation for all stakeholders.”

New insurance written (NIW) was $17 billion, down 7% compared to $19 billion in the first quarter of 2022, and down 35% compared to $27 billion in the second quarter of 2021. The decline was driven by lower estimated originations because of the recent increase in interest rates, the company said.

The company said 93% of NIW in the second quarter were monthly premium policies, and that 96% were purchase originations.

Persistency for the second quarter of 2022 was 80%, up from 76% in the first quarter of 2022 and 63% in the second quarter of 2021. Persistency refers to the percentage of clients an insurer has retained. Enact said the continued increase in persistency to approximate historical norms was primarily driven by an increase in mortgage rates and an continuing decline in the percentage of its in-force policies with mortgage rates above current rates.

Primary Insurance-In-Force was $238 billion, up 2% from $232 billion in the first quarter and up 9% from $217 billion in the second quarter of 2021, driven by strong NIW and increasing persistency.

Net premiums earned were $237 million, up 1% from $234 million in the first quarter of 2022 but down 2% from $242 million in the second quarter of 2021. Net earned premium yield was down from the first quarter of 2022 and the second quarter of 2021, driven by the lapse of older, higher-priced policies as compared to new insurance written, lower single-premium cancellations, and higher ceded premiums, the company said.

Operating expenses in the current quarter were $61 million and the expense ratio was 26%, compared to $57 million and 24%, respectively, in the first quarter of 2022, driven by higher general and administrative costs, Enact said. Current quarter expenses compared favorably to results of the second quarter of 2021 of $67 million and 27%, respectively, driven by lower costs allocated by Enact’s parent, Genworth Holdings Inc., partially offset by higher general and administrative expenses in the current quarter.

Enact also said that, on June 30, 2022, it entered into a five-year, $200 million senior unsecured revolving credit facility, which it may use for working capital needs and general corporate purposes, including capital contributions to its insurance subsidiaries.

Meanwhile, Radian reported second-quarter net income of $201.2 million, or $1.15 per diluted share, up 11.1% from $181.1 million in the first quarter, or $1.01 per diluted share, and up 29.6% from $155.2 million, or 80 cents per diluted share, in the second quarter last year.

Radian's NIW totaled $18.9 billion, up 1.1% from $18.7 billion in the first quarter but down 13.8% from the second quarter of last year. Purchase NIW increased 7.8% from the first quarter, and was up 10% compared to the second quarter of 2021. Refinances accounted for 2.9% of total NIW in the quarter, compared to 8.6% in the first quarter and 22.9% in the second quarter of 2021.

Radian CEO Rick Thornberry said that, "Despite the slowdown in our refinance title volumes, we are seeing growing interest in our home equity products and services from some of the largest financial institutions as they ramp up their home equity lending business," 

Radian also noted that, of the $18.9 billion in NIW in the second quarter, 95.4% was written with monthly and other recurring premiums, compared to 94.5% in the first quarter of 2022, and 93.1% in the second quarter of 2021.

Primary insurance in force totaled $254.2 billion, up 2.1% from $249 billion as of March 31, and an increase of 7.1% from $237.3 billion as of June 30, 2021. Radian said the year-over-year change reflects a 12.6% increase in monthly premium policy insurance in force and a 15.1% decline in single premium policy insurance in force.

Net mortgage insurance premiums earned were $246.9 million for the second quarter, up slightly from $245.2 million for the first quarter but down from $247.1 million in the second quarter last year.

Thornberrry expressed optimism about the housing market despite its current headwinds. "We believe that ... the foundation for the overall market remains strong. This is due to the positive dynamics in terms of high credit-quality borrowers, low housing supply, and continuing demand coming from first time home buyers."

Radian also reported on its homegenius segment, which offers title, real estate, and technology products and services to consumers, mortgage lenders, mortgage and real estate investors, GSEs, real estate brokers, and agents.

homegenius posted an adjusted pretax operating loss for the quarter of $17.7 million, compared to $13.5 million for the quarter ended March 31, 2022, and $9.2 million for the quarter ended June 30, 2021.

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