Radian posts $65M net income in 3Q after Clayton, other charges

Radian Group Inc. reported third-quarter net income of $65 million after taking $57.8 million in pretax charges — $12 million of which is related to the Clayton Holdings restructuring.

This was a 21% drop from net income of $82.8 million for the same period last year.

Radian's operating earnings per share of $0.46 beat consensus estimates of $0.40 per share and FBR Capital Market's estimate of $0.42 per share.

"The beat versus our model came from lower loss provisions, which appear to have included a reserve release, as well as good expense control and investment income," said a report from FBR Analyst Randy Binner.

"Premium production was also in line, with somewhat lower new insurance written offset by good persistency. Restructuring charges in the services segment were in line with expectations, and core EPS would have been $0.48 if we back out these charges."

Radian had new insurance written of $15.1 billion for the quarter, up from $14.3 billion in the second quarter but down 3% from the $15.7 billion written one year ago.

There was $131.5 million in claims paid during the quarter, but $55 million were a result of commutations and captive terminations.

The mortgage services segment had an adjusted pretax operating loss of $4.7 million for the quarter versus income of $4.8 million one year prior. FBR had estimated income of $1.4 million for the quarter.

Separately, Arch Capital Group Ltd.'s mortgage insurance business had underwriting income of $186.4 million, up 352.9% from $41.2 million one year prior. Most of the gain is related to the acquisition of United Guaranty Corp. from American International Group at the start of the year.

Arch's mortgage insurance segment results also included its reinsurance business.

Arch MI U.S. generated $17.7 billion of NIW during the third quarter, compared to $17.3 billion during the second quarter. The sequential growth reflected seasonality and an increase in purchase market activity.

In last year's third quarter, Arch did $8.7 billion of NIW, while UGC wrote $15 billion. Some loss in market share after the acquisition was expected as lenders look to spread risk among their counterparties.

However, Arch Capital had a $52.8 million third-quarter net loss because of $319.8 million of estimated net losses in its other insurance lines related to the exposure to Hurrricanes Harvey, Irma and Maria, the earthquakes in Mexico and other natural disasters.