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Radian Surges as Mortgage Insurer Posts $175M Profit

AUG 7, 2014 11:44am ET
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Radian Group Inc. jumped in New York trading after the mortgage insurer posted a second-quarter profit as the housing market improved.

The insurer climbed 55 cents, or 4.3%, to $13.30 at 9:34 a.m. Net income was $175 million, or 78 cents a share, compared with a loss of $33.2 million, or 19 cents, a year earlier, as the provision for losses fell by about half, Philadelphia-based Radian said today in a statement.

Improving earnings will help reassure investors after the stock slumped 15% last month amid concerns that tighter U.S. standards for mortgage insurers will lower returns, according to Jack Micenko, an analyst at Susquehanna International Group.

"We expect quarterly results to serve as a catalyst to move shares higher, given recent weakness, as investors are reminded of the embedded earnings power," Micenko wrote in a research note today.

Mortgage insurers cover losses when homeowners default and foreclosures fail to recoup costs. The firms have benefited from an improving economy as the jobless rate declines and home prices rise.

Federal regulators last month proposed tighter standards for mortgage guarantors that do business with Fannie Mae and Freddie Mac. Radian said at the time that it would need about $850 million to immediately comply with the rules, and that it expected to be able to meet the standard within a two-year transition period.

Second-quarter results also improved at U.S. mortgage insurers run by Genworth Financial Inc. and American International Group Inc. While profit also climbed at MGIC Investment Corp., second quarter earnings at the Milwaukee-based firm fell short of analysts' estimates.

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