The Wall Street Journal-20080216-Earnings Digest- Radian Seeks Solutions to Woes- Insurer Posts Loss Due to High Costs And Write-Downs

Return to: The_Wall_Street_Journal-20080216

Earnings Digest: Radian Seeks Solutions to Woes; Insurer Posts Loss Due to High Costs And Write-Downs

Full Text (301  words)

Mortgage insurer Radian Group Inc., which has been pounded by credit losses amid increasing defaults, swung to a steep fourth-quarter loss as it recorded sharply higher credit costs, securities losses and $298 million in write-downs.

The Philadelphia company also said it is evaluating various alternatives to deal with the ongoing woes in the mortgage-insurance business. It expects its losses to exceed the loss projections it gave in September, "although it is unclear to us at this point by how much, given the prevailing uncertainty in the market," said Chief Financial Officer Robert Quint.

Mortgage insurers, who cover potential lender losses on loans to borrowers, have seen claims skyrocket over the past year, as the lack of liquidity in the housing market makes it difficult for borrowers to refinance or for lenders to resell foreclosed properties at profitable prices.

"We have come through a difficult year and the environment continues to be very challenging," said Chief Executive S.A. Ibrahim. "These challenges will remain with us for the near-term and may intensify, so we are looking at various scenarios and responses."

In addition to the write-downs, Radian recorded $410 million in mortgage-insurance losses. The company said the percentage of its insured loans in default rose to 6.8% from 5.4% a year earlier. The company's provision for losses soared to $687.9 million from $84.4 million. Radian also added a $40.5 million provision for second-lien premium deficiency, an item it didn't record in the prior year.

Claims paid more than doubled to $164.7 million. The company expects to pay $200 million in claims in the current quarter and about $1 billion for the year.

The company said the percentage of loans it insured that had down payments of less than 5% rose to 32% from 24%. Total net premiums written rose 11% to $309.6 million.