Radian Group Inc.
) reported first quarter 2012 net loss of $1.28 per share, wider
than the Zacks Consensus Estimate of a loss of 58 cents per share.
The disappointing results were largely the result of a decline in
the fair value of derivative instruments. In the year-ago period,
Radian reported earnings of 77 cents on a per-share basis.
Despite a volatile mortgage insurance market, Radian managed to
write new business of $6.5 billion, up 2.5 times compared with the
year-ago comparable period. Radian gained from the loss of business
suffered by other mortgage insurers, translating into new business
wins for the company.
Its close rival
MGIC Investment Corp.
) reported a 40% drop in new business written in the reported
quarter. One of its other peers, PMI Group, filed for bankruptcy
last year and exited the market.
Radian continued to record a decline in the number of mortgage
insurance defaults. Total number of primary delinquent loans
decreased 12% in the reported quarter.
Total mortgage insurance net claims paid were $218.2 million,
down 40% year over year. The company expects to pay net claims of
$1.1 billion for full year 2012.
The holding company has approximately $350 million of capital.
Risk-to-capital ratio, a measure of capital strength among mortgage
insurers, improved to 20.6:1 from 21.5:1 as of December 31, 2011.
The maximum permissible limit for risk-to-capital ratio is
The company is trying hard to improve the ratio and has adopted
a number of measures in this regard. These include the Assured
Guaranty transaction and the quota share reinsurance agreement. A
dividend of approximately $50 million from Radian Guaranty in
mid-2012 will also contribute to the capital and lower the
Book value per share improved modestly to $7.65 per share from
$7.31 as of March 31, 2011.
Another mortgage insurance provider
Genworth Financial Inc.
) reported first quarter 2012 earnings of 6 cents, lagging the
Zacks Consensus Estimate by 6 cents primarily due to the recurrent
losses faced by its U.S. Mortgage Insurance division.
Mortgage insurers have been suffering since the onset of the
housing market downturn, incurring significant claims expenses. The
performance of the sector is dependent on the housing market, which
in turn is governed by the fluctuations in the economy. Therefore,
the performance of the sector will hardly see any improvement until
there is a complete economic recovery.
Radian currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the shares.
GENWORTH FINL (GNW): Free Stock Analysis Report
MGIC INVSTMT CP (MTG): Free Stock Analysis
RADIAN GRP INC (RDN): Free Stock Analysis
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