Radian swings to 3rd-quarter profit, stock soars

PHILADELPHIA - Mortgage insurer Radian Group Inc. posted a third-quarter profit Wednesday, reversing a year-ago loss and coming in well ahead of the sharp loss forecast by Wall Street. The company's stock soared on the results.

For the three months ended Sept. 30, Radian said it earned $36.7 million, or 46 cents per share, compared with a loss of $703.9 million, or $8.82 per share, in the prior-year quarter.

The company posted $418.7 million in revenue, compared with a revenue loss of $104.4 million, which reflected a big decline in the fair value of derivative instruments last year.

Analysts polled by Thomson Reuters, on average, expected a loss of $1.93 per share, on revenue of $347.9 million.

Chief Executive S.A. Ibrahim said elevated mortgage insurance losses continued in the quarter, but were offset by a reduction in its first-lien premium deficiency reserve.

Radian increased its loss provision by 6.5 percent to $544.9 million. First-lien primary mortgage insurance defaults rose 16 percent to 9.71 percent. The company said "strong efforts in loss mitigation remain a critical priority to its capital preservation," and it is involved in a number of programs to improve loss management.

The company had total reserves of $3 billion on Sept. 30, including first-lien premium deficiency reserves of $150.1 million and second-lien premium deficiency reserves of $181.3 million.

Because of reduced mortgage origination volume, total primary new mortgage insurance written was $7.5 billion, a 22 percent decrease from the prior quarter. In what the company called a "dramatic shift during the past year," about 98.4 percent of mortgage insurance business production in the third quarter of 2008 was prime, a trend Radian said it expects will continue into 2009.

In midday trading, Radian shares shot up $1.60, or 45.3 percent, to $5.13. The stock has traded between 70 cents and $14.46 in the past year.

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