Even the MIs themselves are saying that based on their underwriting changes alone, up to 50% of the business they wrote in 2007 is no longer eligible, add to that the impact of the Freddie adds, and you are looking at a decline in NIW of about 70-80%, I have an idea, why don't you get on the earnings call next week and ask them yourself what they think the prospects are for NIW, and see what kind of answer you get, with what kind of assumptions.
That is not an apples-to-apples comparison, MTG took a premium deficiency reserve because they discontinued a line of business, it seems clear the PMI will not be taking the same type of reserve, probably because they are not discontinuing that business, that is bad for two reasons, one, PMI will continue to suffer losses from that business going forward, and two, PMI intends to continue to write that kind of business, which, by the way, was structured deals for Wall Street issuers, the true test for this stock will be what kind of capital will PMI have to raise, and at what cost to the common equityholder, also, what kind of new business do they expect to write, or are these companies in quasi-runoff mode?
Well, technically again you can't compare MTG and PMI bulk business. MTG was facing upwards of 20% delinquency in Q3 which went up another 2% in Q4 of this year. On the other hand, PMI was facing an 12% delinquency rate on the bulk line. Obviously that is higher than the flow line, but presumably they received compensation for that.
I think the whole structured business is quite risky. It's a bit like a game of hot potato but the insurer loses no matter who is holding it at the end.
In any case, I think your last two questions have been answered by the performance in Q3 and the performance of MTG et al in Q4. The mortgage insurance industry in general will see higher revenues from their flow business going forward. These companies are still operating, and there is no danger of quasi-runoff mode. Unlike the bond insurers, they can still operate even with a ratings downgrade (which I don't believe will happen to PMI).