For the second consecutive quarter, Triad Guaranty Inc., the Winston-Salem N.C.-based mortgage insurer in run-off, reported a profit, this time because of an extraordinary item. But the company said it remains unlikely that it will be able to cover all of its policyholder obligations by the time business winds down.
Its third quarter net income of $54 million includes a $29.6 million gain because Triad repurchased all of its outstanding long-term debt at less than face value in July. Another $14.7 million of the net income is due to realized investment gains.
For the third quarter last year, Triad lost $102 million.
Ken Jones, president and chief executive, said "Persistency, the key driver of our earned premiums, remained high, while the number of defaults and the corresponding risk in default continued their decline as cure rates and rescission rates remained consistent with the prior quarter. The decline in our risk in default once again led to a decrease in reserves, making this the fifth consecutive quarter that we have reported a decrease in reserves."
There was a slowdown in settled claims at Triad as it dealt with fewer foreclosures. Jones commented, "At this time, we are unsure what impact, if any, the current documentation issue surrounding foreclosures will have on our future financial results."
But even with a second quarter of profitability, Triad faces a daunting hole to climb out of. The company remains operating at a deficit in assets, over $595 million at the end of the third quarter.
In order to overcome that, Jones said the company would have to earn at least $596 million during the remaining run-off period.
"We believe that, absent significant positive changes in the economy and the residential real estate market, our existing assets and future premiums may not be sufficient to meet our current and future policyholder obligations," Jones said.
