Radian posts higher third-quarter profit, grows business
Mortgage insurer Radian Group Inc. (RDN) posted a third-quarter profit of $183.6 million, or $1.37 per share on Tuesday, while reporting significant growth in its mortgage insurance business. That compares to a 2010 third-quarter profit of $112.2 million, or 84 cents per share. The most recent third-quarter profit included pre-tax gains from the change in fair value of derivatives and other financial instruments. Those items alone provided $206.6 million in added value. In a statement, Radian said, "This unrealized gain resulted mainly from a widening of Radian’s credit spread that significantly reduced the fair value of the company’s derivative liabilities." The company continued to write new insurance contracts even as its major competitor, The PMI Group (PMI), stopped accepting new mortgage insurance business. PMI also was seized by its primary regulator, the Arizona Department of Insurance, giving remaining insurers a strategic advantage in terms of attracting new business. Teresa Bryce Bazemore, president of Radian Guaranty Inc., said it's difficult for Radian's mortgage insurance business to calculate its exact growth in terms of market share. But she does believe Radian's mortgage insurance business is benefiting from PMI's decision to halt its writing of new mortgage insurance. Radian, in third quarter alone, wrote $4.1 billion in mortgage insurance, up from $2.3 billion in the second quarter and $3.2 billion a year ago. The company also is expecting fewer losses on insured mortgage loans, with the firm now setting aside $276.6 million in insurance provisions for losses, compared to $347.8 million last year. However, the third-quarter figure is up slightly when compared to the $270 million set aside in the second quarter. The company's mortgage insurance loss reserves in the third quarter hit $3.2 billion, down from $3.5 billion last year. Meanwhile, Radian Guaranty's risk-to-capital ratio hit 21.4-to-1, which is up significantly from a 17.2-to-1 ratio in 2010. Write to Kerri Panchuk.