Bigger Pie
The industry can grow by taking business from the government, Ibrahim said. U.S. programs, led by the Federal Housing Administration, accounted for about a quarter of the market in 2005 through 2007, according to data from Inside Mortgage Finance.
As private companies retreated in the crisis, the proportion of insured loans backed by the FHA and Department of Veterans Affairs reached almost 85 percent in 2009. The figure fell to 63 percent in the three months ended June 30.
“Everybody has an opportunity to get bigger because the whole size of the pie will get bigger with the FHA pullback,” Ibrahim said.
Insurers including Genworth Financial Inc. and Milwaukee- based MGIC also have been loosening terms to bring in more business as home prices rise.
“There’s a lot more capital, there’s a lot more competition for each loan,” said Jason Stewart, an analyst at Compass Point Research & Trading LLC. “It’s going to start impacting returns.”
15% Return
Essent said in the filing that it targets an unlevered return on capital of 15 percent on new coverage, after taxes.
Profit was $30.8 million at Essent in the first six months of 2013, compared with a loss of $12.5 million in the same period of 2012. MGIC posted net income of $12.4 million in the second quarter, its first profitable period since 2010, while Radian recorded a loss in the quarter tied to investments. Genworth’s U.S. mortgage insurer was profitable in the six months ended June 30. That’s the first time it recorded a half- year profit since 2007.
Competition is good for the industry, said Donna DeMaio, United Guaranty’s CEO, in an e-mailed statement. She declined to comment on Essent.