UPDATE 3-Radian shares fall on Q1 loss, stock offering

Tue May 4, 2010 11:05am EDT

* Q1 loss/shr $3.77 vs $2.69 yr-ago

* Provision for bad loans up 66 pct

* Shares down as much 11 pct

* Rivals MGIC, PMI down in morning trade (Recasts; adds details from conference call, updates share movement)

By Sweta Singh

BANGALORE, May 4 (Reuters) - Radian Group Inc (RDN.N) reported its third straight quarterly loss on higher provision for mortgage insurance losses, and said it will sell $550 million in stock to fund capital needs, sending its shares down 11 percent Tuesday morning.

Proceeds from the offering will be used to fund working capital, provide additional capital for its mortgage insurance business and buy back debt, the company said.

Radian joins largest rival MGIC Investment (MTG.N) and PMI Group PMI.N, which both reported quarterly losses in late April and announced capital-raising plans to increase liquidity at their principal operating units [ID:nSGE63J0J8].

Radian's capital-raise plan also pulled down shares of MGIC 6 percent and PMI shares 7 percent.

"We continue to believe that private capital is essential to the recovery of success of the housing finance system," Chief Executive Ibrahim said on a post-earnings call.

Mounting losses from increasing defaults have long plagued the balance sheets of mortgage insurers and have forced them to seek capital from investors. Keefe Bruyette & Woods Inc and Morgan Stanley & Co Inc will act as joint book-running managers for the offering, Radian said.

The second-largest mortgage insurer, however, reported a decrease in delinquencies, its first in nearly four years, and said it expects delinquencies at the end of 2010 to be lower than 2009.

Radian will have sufficient liquidity to cover all its needs through 2012, including full repayment of $160 million debt, finance chief Bob Quint said on the call.

NET LOSS WIDENS

The company reported net loss for the first quarter of $310.4 million, or $3.77 a share, compared with $217.4 million, or $2.69 a share, in the year-ago period.

The company posted a loss of $3.56, significantly more than analysts' estimates of 90 cents a share, according to Thomson Reuters I/B/E/S. Mortgage insurance provision for losses rose 64 percent to $529.1 million.

Total mortgage insurance claims paid rose to $357.3 million from $240.1 million. For 2010, the company continues to expect mortgage insurance claims paid to be about $1.5 billion.

Radian sold its remaining stake in consumer asset and servicing firm Sherman Financial and expects to record a pre-tax gain of about $70 million in the second quarter.

Shares of the Philadelphia, Pennsylvania-based Radian were trading down $1.47 at $13.15 in morning trade on the New York Stock Exchange. The stock has doubled in value since the beginning of the year. (Reporting by Sweta Singh in Bangalore; Editing by Unnikrishnan Nair)