Radian Group, which controls the nation's third largest mortgage insurance company, posted strong third quarter earnings of $183.6 million, but attributed those gains to changes in the "fair value" of "derivatives and other financial instruments" — to the tune of almost $207 million.
Its mortgage insurance business, however, lost $78.2 million during the period.
Radian booked MI related loss provisions of $276.6 million in the quarter, compared to $270 million in 2Q, and $347.8 million in 3Q 2010. Mortgage insurance loss reserves fell to $3.2 billion as of September 30, 2011, a decrease from $3.3 billion in the second quarter of 2011, and $3.5 billion a year ago.
In 3Q of last year, all of Radian earned $112.2 million while reporting fair value changes on derivatives and other financial instruments of $234.7 million.
Discussing 3Q derivatives the company said, "This unrealized gain resulted mainly from a widening of Radian's credit spread that significantly reduced the fair value of the company's derivative liabilities."
Meanwhile, its new policy business is booming. The company reported that it wrote $4.1 billion of new business in 3Q — almost double what it wrote in the second quarter.
"Our top priorities at Radian are to grow our mortgage insurance business and to effectively manage our legacy risk," said chief executive S.A. Ibrahim. "We are encouraged by our ability to significantly increase Radian's volume of profitable new business while maintaining our sharp focus on loss mitigation."
In an earnings statement released Tuesday morning the Philadelphia-based company noted that it has a risk-to-capital ratio of 21.4:1 and $600 million of holding company liquidity.
It reported that its Book value per share at September 30, 2011, was $9.67.
