Radian beats estimates on lower-than-expected loan losses

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Radian Group's second-quarter earnings beat consensus estimates because of lower loan loss provisions than forecast, along with record new mortgage insurance written.

The $74 million tax benefit the company received from its settlement with the Internal Revenue Service also helped the bottom line.

Radian reported net income of $208.9 million for the second quarter, compared with a net loss of $27.3 million one year prior. The second-quarter 2017 loss was driven by a $131 million charge related to its Clayton Holdings' subsidiary restructuring.

Its earnings per share of $0.96 and adjusted net operating EPS of $0.69 beat consensus estimates of $0.60 per share.

Radian Guaranty's NIW of $16.4 billion beat B. Riley FBR's projection of $15.1 billion; in the second quarter last year, its NIW was $14.3 billion. Policies on purchase loans made up 95% of the second-quarter NIW, up from 89% in the first quarter.

The mortgage insurance provision for losses was $19.4 million, compared with $37.4 million in the first quarter and $17.7 million in the prior-year quarter.

Radian Guaranty's excess of available assets over minimum required assets under the latest proposed PMIERs 2.0 should be "substantially the same" as with the existing standard, the company said.

Combined with MGIC's statement in its first-quarter earnings on PMIERs 2.0, Radian's comment "furthers our view that the new PMIERs rules will be manageable for the PMIs," said B. Riley FBR analyst Randy Binner in a flash report.

Title insurance underwriter First American Financial Corp. earned $155.1 million in the second quarter, up from $122.3 million for the same period last year.

"The company's performance this year continues to be strong, as demonstrated by the 15.3% pretax title margin we achieved in the second quarter,” said CEO Dennis J. Gilmore in a press release. "Our purchase and commercial businesses more than offset the impact of the decline in refinance transactions, resulting in revenue growth of 3% this quarter."

Refis averaged 30% of First American's open orders per day during the quarter, down from 37% in the first quarter and 36% in the second quarter of 2017.

Old Republic International's title insurance segment reported a 6.3% year-over-year decline in pretax operating income, as the 7.6% increase in operating expenses outpaced the 6% rise in operating revenue. It had pretax operating income of $60.9 million for the quarter, compared with $65 million one year earlier.

The private mortgage insurance business, which only pays claims and does not write any new policies, had pretax operating income of $13.8 million, down 28.4% from the second quarter of 2017's 19.3 million.

Net premiums earned fell 33.9% to $19.2 million, but claims costs fell by 39.2% to $6.2 million.

Previously, Stewart Information Services Corp. reported net income of $22.4 million per share, up from $18.6 million for the same quarter last year.

"Stewart delivered a solid second quarter of title revenue growth in the face of tighter residential inventories and rising interest rates," stated CEO Matthew Morris in a press release. "Continued commercial strength, home price appreciation and further agency traction helped to offset residential headwinds."

The nation's fourth largest title underwriter is being acquired by Fidelity National Financial.

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