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Stock Strategist Industry Reports

Specialty Insurers on the Ropes

Mortgage and bond insurance industries are a wreck, but title insurance offers some opportunities.

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While most attention in the insurance industry centers on life, property-casualty, and reinsurance stocks, Morningstar also covers a smaller subset that we refer to as specialty insurance. Within this category the major industries are title, mortgage, and bond insurance. All three have fallen on hard times these days, suffering from the ill effects of the housing crisis. Still, out of the ashes opportunity may sometimes arise, causing us to revisit our assumptions now that it appears the worst of the recession has passed.

Mortgage Insurers
Mortgage insurers continue to report rising delinquencies, with the contagion spreading to prime mortgages. An average of two industry leaders ( MGIC (MTG) and  Radian Group (RDN)) shows that the subprime delinquency rate increased by 44% from last year's third quarter, while the prime delinquency rate doubled to 11.5%. Add  PMI Group (PMI) to the averages and the average delinquency rate of all insured mortgages for the three leading mortgage insurers ended the third quarter at a startling 15.8%.

Jim Ryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.