Old Republic's earnings announcement on Thursday showed that the company's mortgage insurance business was essentially break even in the first quarter despite having been in run-off since August 31, 2011. It's safe to say that should the company have continued writing business at a decent clip, the unit would have been profitable. Likewise, extrapolating the results to Radian and Genworth shows that those companies should be profitable in the first quarter, while MGIC could be close. Radian and Genworth have the most new (post-2008) profitable business and strongest reserves, respectively.
Reserves per default are set to spike at all of the MI companies. Our darling, Radian is set to see the primary reserve per default increase by as much as $2m to $3m depending on the level of provisioning. That will bring the total above $30m.
The level of profits at these companies will not result in P/E levels that justify the current stock price. But that's not what this earnings season is all about. This season should be when the industry's financial trajectory becomes clear to the guru watchers and serious "home gamers" rather than just the obsessed industry-following clowns.
More and more capital is recognizing that the fix is in financially (Post 11/6/12 rebuttal to Barron's). There is plenty of room to run on that path as normalized profits begin in 2015 with record profits possible for some shortly thereafter. After that, the next leg of the run would come from housing finance reform, but that's a whole other story.