Credit Deterioration Slowed in April: April ABX remittance released on Friday showed a slowdown in the pace of credit deterioration. Overall the increase in serious day delinquencies (60+ day) was down from its six-month average and below our projection for the month. This was the second consecutive month where the pace of credit deterioration has slowed. While seasonality (borrowers are historically better payers in the first part of the year) is undoubtedly a contributing factor, the extent of its influence is unknown. Moreover, borrower burnout and/or lower interest rates could be helping. A continuation of current trends would most likely result in flatter tails to current delinquencies curves, and ultimately lower losses relative to our expectations.
You get two or three years of anomaly and weather it through and then you usually write at combined ratios in the mid 60's. Now that you are a much bigger company and if you write $800 $900 $1 billion you are setting yourself up to earn $300 million plus or so out a couple of years, on 81 million shares, you have significant earnings power. You've got to imagine 2008 will be one of the most profitable years ever written unless we go into a serious recession/ depression. You've got Ford turning around (Auto states), you've got B of A moving to Calabas meaning they are going to really close Countrywide and setting up a plan to help with $40 billion in refinancings. You'll pay out $1 billion plus in claims this year but mostly replenish with new premiums written. Lets say you add another $1 billion to LAE for 2008 as we go along, you still have a book value of $18 or so with really good earnings power. Am I so wrong on what the combined will be for 08, can someone please help me on the bear case scenario for PMI at $5.50 a share, I don't get it. If they can reinsure out Guarantee and close it down and have $200 mill or so from that little NJ business or sell it at 90 cents on the dollar, I am pretty sure they could drive over to Moody's Fitch and S&P and shove most of that money up their collective you know whats as well. Can one of these shorts present a case how this stock isnt anything but undervalued?
My only question for Steve Smith et al is if the stock does rebound to $9 $10 whatever, are they going to be more pissed at themselves for not buying 10% 15% 20% of the company back in way down here than they are pissed at themselves for buying the stock back in 07 at $45 $40 and $35????