Radian Group CEO S.A. Ibrahim said the company should return to operating profitability "at some time in the future." But when, he told the FBR Capital Markets Fall Conference, will be more of a function of when the company is able to deal with its portfolio of late stage delinquencies.
Those late stage delinquencies are what are driving the company's level of reserves.
However, the book of business Radian Guaranty has underwritten in 2009 and so far this year is of such strong credit quality, Ibrahim declared, "I wish we had more of this." This vintage is profitable for the company, with $77 million in premiums earned and so far just $5 million in incurred losses.
For comparative purposes, the book of business from 2004 and prior lost $1.3 million. There were $121 million in losses associated with the 2005 book, $221 million in losses in the 2006 book and $452 million in losses with the 2007 book. The 2008 book had $47 million in losses.
Ibrahim spoke about the opportunity for the private mortgage insurance business to recapture market share from the Federal Housing Administration program.
A slide shows the MI business had a market penetration of less than 5% for the third quarter. But by dropping the credit score floor from 720 to 680 and raising the loan-to-value ratio criteria to over 95%, the potential market share for private MI, Ibrahim said, was 12.3% for the period.
Later, in response to a question, Ibrahim said even though the private MI business is looking (and FHA is willing to cede) for market share, the private MIs would not underwrite loans with the same credit characteristics as they did before the crisis.
He said he was encouraged by FHA Commissioner David Stevens’ desire to reduce FHA's market share. Another good sign is that a Republican-led House of Representatives could have a "greater sentiment" for the role of private capital, Ibrahim said.
The company's marketing efforts right now are concentrated at loan officers, looking to show them the value of a conforming execution as opposed to FHA.
