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Arch MI wrote $6.42B in mortgage insurance in the second quarter

Net income hits $205.6 million

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Arch Mortgage Insurance, the mortgage segment of Arch Capital Group, wrote $6.42 billion of new insurance, covering American homes, during the second quarter of 2016.

From this amount, 76% was from banks and other non-credit union mortgage originators.  

Net income available to Arch common shareholders for the 2016 second quarter was $205.6 million, or $1.65 per share, compared to $110.3 million, or $0.88 per share, for the 2015 second quarter.

The earnings included losses for current year catastrophic events of $36.3 million, net of reinsurance and the effects of reinstatement premiums, with $20.6 million from the insurance segment and $15.7 million from the reinsurance segment. Events in the 2016 second quarter included the Texas hailstorms and floods, Fort McMurray wildfires, the company said in its earnings.

This compares to net income for the 2016 first quarter at $149.3 million, or $1.20 per share, compared to $277.9 million, or $2.16 per share, for the 2015 first quarter.

Arch MI recorded that gross premiums written by the mortgage segment in the second quarter were 72.7% higher than in the second quarter of 2015, while net premiums written were 80.7% higher than in the second quarter of 2015.

However, it is important to note that while gross premiums written by the mortgage segment in the second quarter were higher, it was mostly driven by Arch MI’s Australian mortgage reinsurance business.

Arch MI explained in its earnings report that approximately two thirds of the increase was in Australian mortgage reinsurance business with the remainder split between U.S. primary business, primarily from banks and other non-credit union originators, and in GSE credit risk-sharing transactions receiving insurance accounting treatment.

Net premiums earned for the second quarter of 2016 came in 26.8% higher than in the second quarter of 2015, reflecting the growth in insurance in force, Arch MI stated.

As of the second quarter, Arch MI’s mortgage segment’s risk-in-force consisted of $8.40 billion from Arch MI U.S.  

Due to continued lower than expected claim rates, Arch MI said its loss ratio for the second quarter of 2016 reflected estimated net favorable development in prior year loss reserves, before related adjustments, of 16.6 points, compared to 2.1 points in the 2015 second quarter.

Although, looking ahead, Arch MI explained that the mortgage segment’s underwriting expense ratio is expected to stay at an elevated level until Arch MI U.S. reaches scale.

In addition, Arch MI said that other underwriting income, which is primarily related to GSE risk-sharing transactions receiving derivative accounting treatment, reached $4.1 million for the 2016 second quarter, compared to $3.7 million for the 2015 second quarter.

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