Radian 2Q Profit Drops Due to Debt Restructuring

Radian Group earned net income of $50 million during the second quarter of 2015, down from $175 million a year ago due primarily to debt restructuring costs.

The restructuring, which replaced convertible notes that were due in 2017 with debt that's now due in 2020, was recorded as a loss of nearly $92 million. However, the move increased the holding company's liquidity by $23 million to $730 million as of March 31.

With the additional liquidity, the company's Radian Guaranty subsidiary would be able to meet Fannie Mae and Freddie Mac's new private mortgage insurer capital requirements as of the end of the second quarter. The new rules go into effect at the end of 2015.

Radian Guaranty's liquidity position would be accomplished by funneling $330 million from the holding company to the unit, according to a press release. The compliance assumption also includes the conversion of $80 million of liquid assets, the cash surrender value of Radian company-owned life insurance policies into available assets as defined by the Private Mortgage Insurer Eligibility Requirements, plus Radian Guaranty getting the full benefit of $145 million in quota share reinsurance policies.

The mortgage insurance business contributed adjusted pre-tax income of $145 million, almost double the nearly $75 million reported for the second quarter of 2014. At the same time, Clayton Holdings, which Radian acquired on June 30, 2014, had revenue of $45 million, compared with $36 million one year earlier.

Radian Guaranty did $11.8 billion of new insurance written in the quarter, up from $9.3 billion in the second quarter 2014.

Claims submitted have fallen to 2,492 for the three month period, down from 3,382 in the second quarter of 2014; 5,752 for the same period in 2013; and 8,090 for the same period in 2012.

It paid $212 million in claims during the second quarter, down from $240 million in the second quarter of 2014.