04.01.08
Surety, Title and Mortgage -Dregs of the Insurance Industry
An interesting article at Insurance News Net called “Understanding the Financial Sector: Insurance Companies” talks about Title Insurers and PMI Companies, and states:
Surety, Title and Mortgage: With the risks associated with mortgage-backed securities and the housing bust, this is the dreg of the insurance industry right now.
If you been paying attention to the insurance business at all, the just the mention of MBIA (MBI:NYSE), MGIC (MTG:NYSE) or Ambac (ABK:NYSE) will probably give you shivers down your spine.
These insurers are referred to as the “monoline” insurers. Had they remained in the monoline business of insuring tax-exempt bonds, then they would have remained strong and viable companies. However, they morphed into “duoline” companies and began to insure mortgage-backed securities, in addition to their conventional business of insuring municipal securities.
As a result, these insurers are now taking huge write-downs and are capital constrained.
Then there are the PMI (private mortgage insurance) companies which are feeling the pinch from mortgage delinquencies. These include Radian Group (RDN:NYSE), PMI Group (PMI:NYSE) and Triad Guaranty (TGIC:NYSE).
Again, because of the complex pricing of mortgage-backed securities, it’s hard to know what is lurking underneath the surface of these companies’ financial numbers, so be very careful.
Read the complete Insurance article at http://www.insurancenewsnet.com/article.asp?n=1&innID=766470935 and let us know your thoughts.