Rising Defaults, Derivative Trades Lead Radian Losses
Private mortgage insurer Radian Group (RDN) posted a $217.4m net loss, or $2.69 per share, for Q109. "Our net loss in the first quarter was primarily attributable to unrealized mark to market losses on derivatives and the continued increase in mortgage insurance defaults," CEO S. A. Ibrahim said in the company's earnings statement. "Despite facing difficult operating conditions, we believe that our mortgage insurance franchise remains strong with sufficient capital to continue writing quality new business throughout 2009." Additionally, unrealized losses on derivatives represented $284.4m of the total pre-tax loss of $334.4m, according to the statement. The mortgage insurance provision for losses of $322m reflects the continued increase in the primary first lien default rate, which rose to 13.2% at quarter-end. First quarter paid mortgage insurance claims, however, came in below expectations at $152m for first liens and $88m for second liens. Radian said it expects an increase in paid claims on first liens through 2009 as new and existing defaults move into the claim stage and various foreclosure freezes and moratoriums expire. The company said it wrote $5.6bn in new mortgage insurance in the quarter. Radian expects second-quarter paid mortgage insurance claims of $300m and the full-year paid claim range of $1.2bn to $1.4bn. Read the earnings statement. Write to Diana Golobay at firstname.lastname@example.org. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.