Mortgage Insurance

Mortgage Insurance

Private mortgage insurance (PMI), also known as mortgage guaranty insurance, guarantees that, in the event of a default, the insurer will pay the mortgage lender for any loss resulting from a property foreclosure, up to a specific amount. PMI, which is purchased by the borrower but protects the lender, is sometimes confused with mortgage life insurance, a life insurance product that pays off the mortgage if the borrower dies before the loan is repaid. Banks generally require PMI for all borrowers with down payments of less than 20 percent. The industry’s combined ratio, a measure of profitability, deteriorated (i.e., rose) significantly in 2007 and 2008, reflecting the economic downturn and the subsequent rise in mortgage defaults, and remains at high levels.

MORTGAGE GUARANTY INSURANCE, 2004-2013

($000)

Year Net premiums written (1) Annual percent change Combined ratio (2) Annual point change (3)
2004 $4,323,071 0.9% 75.6 8.0 pts.
2005 4,454,711 3.0 75.2 -0.4
2006 4,565,899 2.5 71.0 -4.2
2007 5,192,104 13.7 129.0 58.1
2008 5,371,878 3.5 219.8 90.8
2009 4,564,406 -15.0 201.9 -17.9
2010 4,248,798 -6.9 198.4 -3.6
2011 4,242,340 -0.2 219.0 20.7
2012 3,965,896 -6.5 189.7 -29.4
2013 4,329,947 9.2 98.0 -91.7

(1) After reinsurance transactions, excludes state funds.
(2) After dividends to policyholders. A drop in the combined ratio represents an improvement; an increase represents a deterioration.
(3) Calculated from unrounded data.

Source: SNL Financial LC.

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TOP TEN WRITERS OF MORTGAGE GUARANTY INSURANCE BY DIRECT PREMIUMS WRITTEN, 2013

($000)

Rank Group/company Direct premiums written (1) Market share (2)
1 Radian Group Inc. $1,032,326 22.7%
2 American International Group 994,646 21.9
3 MGIC Investment Corp. 989,915 21.8
4 Genworth Financial Inc. 583,010 12.8
5 PMI Group Inc. 375,545 8.3
6 Old Republic International Corp. 285,062 6.3
7 Essent US Holdings Inc. 186,201 4.1
8 Arch Capital Group Ltd. 99,245 2.2
9 NMI Holdings Inc. 3,541 0.1
10 ACE Ltd. 138 (3)

(1) Before reinsurance transactions.
(2) Based on U.S. total, includes territories.
(3) Less than 0.1 percent.

Source: SNL Financial LC.

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