Investors had a strong positive reaction to The Radian Group's announcement of a third quarter profit of $112 million as they drove the company's stock price up nearly 15% on Tuesday morning.
The profit was the result of a change in the fair value of derivatives by nearly $230 million as credit spreads tightened. One year ago, Radian lost $70.5 million.
Radian's mortgage insurance segment lost $75 million for the quarter, an improvement over the loss of $83 million for the third quarter 2009.
While S.A. Ibrahim, chief executive, prefaced his remarks during a conference call by saying it is a challenging and uncertain environment, he went on to say Radian had "a promising increase in new insurance written," going from $2.7 billion in the second quarter to $3.2 billion in the third, with the company maintaining its 21% market share.
However, market share is not the company's "driving objective." Rather, it is the writing of high quality business, he said. He also noted that in achieving its market share, Radian maintained its pricing discipline.
During the call, Ibrahim noted that October was the 10th consecutive month Radian saw a decline in its delinquency inventory.
He did address the foreclosure moratorium issue, echoing comments of his competitors, noting it is an issue of timing. It should not have either a positive or negative affect on Radian, he feels.
Radian chief financial officer Bob Quint said the company would be looking to reduce operating expenses by 10%. Ibrahim commented that the wide variation in projections for loan volume next year is a contributing factor to this, but also the company is looking to operate more efficiently.
For the first half of the day, Radian had a $1.09 increase in its common stock price to $8.54 per share. Also reporting some gains in price were PMI, up 16% or $0.19 to $3.35 and MGIC, up nearly 2% to $8.66.
