Take away the deferred tax asset write down and the mark-to-market of derivatives that Radian Group took in the fourth quarter, its results for the period were consistent with its competitors, said an analyst at FBR Capital Markets.
Private mortgage insurers have had their results affected by higher-than-expected incurred losses, noted Steve Stelmach. He had projected Radian to lose $0.76 per share; the company, minus the above items, lost $1.04 per share.
"Once Radian approaches profitability, we see many points of leverage for shares, including residual value of the MI business that management pegs at $1.5 billion, a reversal of the DTA, and eventual mark-to-market gains," said Stelmach.
In its report, FBR questioned the timing of Radian's proposed purchase of Municipal and Infrastructure Assurance Corp., a municipal bond insurer. MIAC is a shell that has not written any business, but has obtained licenses in 36 states and the District of Columbia.
"We do question the timing of the deal when S&P is putting additional ratings pressure on the bond insurance business model and when Radian presumably still has much work to do to repair its current operations," Stelmach wrote.
