Radian posts 1st-qtr profit on accounting change

NEW YORK (Reuters) - Mortgage insurer Radian Group Inc (RDN.N: Quote, Profile, Research, Stock Buzz) reported a higher quarterly profit on Monday as derivative gains offset higher loss reserves, sending its shares up nearly 5 percent.

Chief Executive S.A. Ibrahim said the company was still considering "a range of alternatives to strengthen our capital position," as well as alternatives for the company's financial guaranty business.

"We have seen the continuation of weak housing and credit markets and these conditions have impacted results in our mortgage insurance and financial guaranty businesses," Ibrahim said.

Radian's first-quarter net income was $195.6 million, or $2.44 a share, compared with $113.5 million, or $1.42 a share, a year earlier, largely as the result of the gain.

Radian recorded a gain of $707.8 million from the change in value of its derivatives, significantly up from the $48.4 million, recorded in the year-ago quarter. The gain stemmed from a change in methodology required under provisions of an accounting measure that Radian said it had prospectively adopted.

Excluding one-time items, the Philadelphia-based company posted an operating loss of $2.69 a share. On that basis, analysts' average forecast was a loss of $2.13, according to Reuters Estimates.

Premiums earned rose to 13 percent to $241.9 million, while provision for bad loans increased more than five-fold to $582.7 million. The company recorded an $18 million provision for second-lien premium deficiency, something it had not recorded in the same period a year earlier.

Private mortgage insurance enables people to buy homes with downpayments of less than 20 percent. The insurance guarantees that lenders will be repaid even if borrowers default.

Radian's shares were 4.6 percent higher at $5.68 on the New York Stock Exchange.

(Reporting by Lilla Zuill and Sweta Singh in Bangalore; editing by Maureen Bavdek)