Radian Group Inc. (RDN) stunned analysts and investors Wednesday by posting a third quarter profit of $36.7 million, or $.46/share, reversing a year-ago loss of $703.9 million, or $8.82/share. Analysts had expected a huge loss; shares jumped more than 35 percent in afternoon trading, despite a broader drop in benchmark financial indices. The insurer said its third-quarter results were affected by elevated mortgage insurance losses -- not exactly a surprise -- but that it also saw losses offset by a reduction in first-lien premium deficiency reserve. Radian also said its expenses fell by 29 percent. The company also benefited by re-focusing on its U.S. mortgage insurance business, contributing capital from its financial guaranty business to insurance operations. "We are focused on growing our core MI business and taking advantage of opportunities to write profitable, new business that will better position us as we move through and beyond these uncertain economic times," said CEO S. A. Ibrahim. It further saw help come from its 29 percent stake in consumer debt purchaser Sherman Financial, which contributed $16 million in dividends during the third quarter; the company said continuing dividends or a potential sale of Radian's stake would continue to cushion the blow from a U.S. housing market gone south and rising MI claims. First-lien primary MI defaults were at 9.71 percent by the end of Q3, Radian said, a 16 percent increase over the prior quarter. Much of that jump came from significantly worse performance in Alt-A loan insured by the company: primary defaults on Alt-A loans rose from 9.74 percent of loans to start this year to just under 20 percent by the end of the third quarter. Paid claims rose to $277.4 million for the quarter, up sharply from the $136 million in claims booked in during Q3 one year ago. Interestingly, nearly $100 million of the Q3 total came from claims on prime mortgages, underscoring the equal-opportunity nature of the nation's current housing woes. And if delinquency trending is any indication, paid claims will likely continue to rise: Alt-A may be seeing the sharpest rise (see graph with this story), but even subprime delinquencies are back on the rise, as well. Write to Paul Jackson at paul.jackson@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.