Radian Group Inc. lost $475 million during the second quarter as it took a pre-tax loss of $525 million on the fair value of derivatives. The loss resulted from an improved market perception of Radian's credit risk that resulted in a tightening of Radian's credit spread and the widening of general corporate credit spreads.
S.A. Ibrahim, Radian's chief executive, said the fair value adjustment does not impact the company's statutory capital. The risk-to-capital ratio for Radian Guaranty as of June 30 is 17.9:1, compared with 16.9:1 at the end of the first quarter.
In the second quarter 2009, Radian had net income of $232 million.
The mortgage insurance provision for losses was $428 million, which Ibrahim termed as a "modest increase" but added claims paid remain in line with the company's previous guidance. Claims paid during the quarter totaled $337 million.
A bright spot was a large increase in new mortgage insurance written. The company had volume of $2.7 billion during the quarter, up from $1.9 billion in the first quarter.
Furthermore, Ibrahim pointed out, Radian had a market share among private mortgage insurers of 21%, where historically, its market share is 12-13%.
However it is not competition from the other private mortgage insurers he is worried about right now, he said it was competition from the Federal Housing Administration.
Rescissions during the period resulted in $203 million of losses avoided. The company has decreased its estimate for future rescissions as both Ibrahim and Radian Guaranty president Teresa Bryce said lenders are increasing their rebottles of loans submitted for rescission, with some firms just doing blanket rebottles.
This is stretching out the process but the majority of those loans, Bryce said, do go to final rescission.
