Radian Group Inc. posted a net loss for 2Q13 of $33.2 million, but that loss includes $130 million of losses from investments only partially offset by gains in the fair value of its investments of $88 million. More importantly, said CEO S.A. Ibrahim during a conference call, its private mortgage insurance business was profitable without having any fair value gains added in.
However, a table in the company’s press release shows the mortgage insurance segment with a pretax loss of $67.1 million.
A message left with the company for an explanation regarding the difference has not yet been returned.
During the quarter, Radian had $13.4 billion of primary new insurance written, up from $10.9 billion in 1Q13 and $8.3 billion for 2Q12. Home Affordable Refinance Program production added another $2.4 billion to that total.
Ibrahim said that July’s NIW is on track to equal or surpass the $4.76 billion the
More important for the company’s profitability going forward, because of its program to increase market share, the book of business written between 2009 and June 30 of this year is now 53% of its primary risk in force.
As for the rising interest rate environment and the shift to a purchase market, Ibrahim noted that the mortgage insurance penetration for purchase loans is three to four times that of refinancings. Rising rates also help to increase persistency.
Chief financial officer Bob Quint commented on the company’s single premium business going forward. He noted pricing remains in line with the competition for the product and Radian will continue to offer it as an alternative.
But with the shift to a purchase market, he also expects a shift in share towards the monthly premium product.
MGIC CEO Curt Culver
The total amount of single premium policies represents 30% of Radian’s business, with borrower-paid single premium representing 9%. The borrower-paid product is expected to go away once the qualified mortgage definition goes into effect, Quint said.
Radian Guaranty president Teresa Bryce Bazemore added that a higher percentage of single premium coverage is written for refis, so there would be a reduction in the use of that product on that basis alone.
Radian Guaranty’s risk-to-capital ratio is 19.7-to-1 and Quint said the parent company plans to actively manage that to keep it below the 20-to-1 threshold. And it has the funds at the holding company level to do so, with $816 million of liquidity currently available.
As a result of the continued growth in insurance in force, Radian Group will have to make a capital contribution to Radian Guaranty. Quint did not provide an exact amount, only saying it will be based on the amount of insurance in force and the level of persistency.
Ibrahim said Radian will continue to grow and diversify its customer base, noting in the past couple of years it has added 117 new customers. Approximately 25% of its 1H13 NIW came from customers added in the past couple of years.
Radian paid $326 million in claims in 2Q13, up from $310 million in 1Q13 and $263 million in 2Q12. It expects to have net claims paid for this year of $1.4 billion.
