Capital Mortgage Insurance Corporation (CMI) sells insurance to lenders protecting against mortgage default losses. They are a wholly owned subsidiary of Northwest Equipment Corporation. Following their acquisition in 1978, CMI’s goal has been to rebuild their business and diversify their services. Mortgage insurance is used to protect mortgage lenders (ie originators and/or underwriters) by transferring mortgage risk, and notably tail risk, from lenders to insurers. Insurers by their nature provide services for events in the tail of distributions, whereas the banking sector tends to provide services closer to the mean of distributions. U.S.-based insurers are also significant participants in the global financial markets. As of year-end 2012, the L/H and P/C sectors reported $7.3 trillion in total assets – roughly half the size of total assets held by insured depository institutions. Of the $7.3 trillion in total assets, $6.8 trillion were invested assets. Insurers in the United States rank among the largest purchasers of corporate, sovereign, state, and local bonds. Insurer investment portfolios also include short-term commercial paper, asset backed securities, and other financial instruments. Some U.S. insurers are significant participants in other institutional markets, such as the derivatives and securities lending markets. Framework
It is worthwhile considering four extreme cases, and then considering how migrations are likely to occur between the situations. The four situations are where the originator/lender has strong or weak underwriting, and the mortgage insurer has strong or weak insurance underwriting standards. This can be shown in a matrix as follows, together with a high level summary of the expectations under each of the four circumstances.
The insurance industry plays a vital role in the economy of the United States. Insurance premiums in the life and health (L/H) and property and casualty (P/C) insurance sectors totaled more than $1.1 trillion in 2012, or approximately 7 percent of gross domestic product. In the United States, insurers directly employ approximately 2.3 million people, or 1.7 percent of nonfarm payrolls. Separately, more than 2.3 million licensed insurance agents and brokers hold more than 6 million licenses. The financial performance and condition of U.S. insurers continued to show recovery and improvement from the decline during the financial crisis. In 2012, the U.S. insurance industry reported record aggregate premium levels. Net written premiums in the United States were approximately $645 billion in the life and health (L/H) sector and approximately $460 billion in the property and casualty (P/C) sector.
Tables 1 and 2 provide a snapshot of the L/H sector marketplace, listing the largest ten L/H insurance groups by 2012 direct premiums written and the concentration in terms of premium volume for life insurance (i.e., non-A&H) and for A&H lines of business, respectively.
Major Employee Relocation Services Companies
Estimated 1978 Home Purchase
Estimated Value of Home Purchase
Estimated Gross Fee Income
Merrill Lynch Relocation
Peterson, Howell, & Heather
Equitable Life Insurance
Chicago Title and Trust
Relocation Realty Corporation
Control Data Corporation
Growth of variable annuity premiums is generally correlated with changes in the performance of equity markets. For example, as markets declined in 2008 and early 2009, sales of variable annuities decreased and surrenders increased....
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