With 1998 just behind us, it is interesting to size up how big a year it was from a slightly different perspective. Take the viewpoint of the mortgage insurance business, which also enjoyed a banner year on the strength of the whole mortgage market.
Consolidation also hit the MI industry late last year, making it mirror other trends in the residential mortgage business. Amerin Corporation, Chicago, and CMAC Investment Corporation, Philadelphia, announced a deal to merge, which will create the second largest mortgage insurance company in the country.
The new company will serve more than 3,500 lending customers, including 21 of the top 30 mortgage originators, according to a press release announcing the deal in late November. So how does the emergence of this new powerhouse in the MI business look to a direct (and much smaller) competitor? It looks like an opportunity, says Darryl Thompson, president and chief executive officer of Triad Guaranty Insurance Corporation, Winston-Salem, North Carolina.
Mergers are notorious for not always working just as planned. Two combined companies have not always been able to perfectly retain the customer base that each separately brings to the new company. So Thompson is hoping to capture some of the potential customer fallout from the new, bigger Amerin/CMAC. He cautiously says, "There might be an opportunity for others to grab some of the business that might be lost."
Triad is a relative newcomer to the MI business (launched in 1987). It considers itself the only niche player now that Amerin has joined forces with CMAC, a more traditional MI company. Triad is also the smallest MI company, with just under 3 percent market share at year-end 1998. As of year-end 1997, Triad had about 2.3 percent to 2.4 percent share of the market.
Thompson says his company posted record writings of mortgage insurance in 1998 - a boom year in the home mortgage business. The company opened two offices in California in 1998. California may end up being the company's largest state for writing new insurance in 1999, Thompson says.
We asked him what's driving the consolidation between MI companies. Thompson says the landscape has changed in the MI business, and some of the consolidation is resulting from the fact there are five public companies in the MI industry that are under constant shareholder pressure to perform. In addition, he cites some pressure from the government sponsored enterprises (GSEs) that may result in a change...