Radian Inc (RDN.N) said its main mortgage insurance unit's risk ratio had increased from the previous quarter, sending the mortgage insurer's shares down more than 8 percent before the bell.
The company has been pumping in money into Radian Guaranty to ensure that its risk ratio does not breach the 25:1 level, the most common measure of permissible risk.
Radian Guaranty's risk-to-capital ratio rose to 21:1 as of June 30, from 20.6:1 at the end of the last quarter.
Radian Asset Assurance, which sells financial guarantee products, paid a dividend of $54 million to Radian Guaranty in July, and expects to pay another dividend of about $40 million in 2013 to boost its capital levels.
Mortgage insurers like Radian, MGIC Investment Inc (MTG.N) and life insurer Genworth's (GNW.N) mortgage unit, protect lenders in cases where homebuyers make down payments below a certain threshold.
These mortgage insurers have been struggling to recoup their losses after the housing bubble burst and foreclosures soared, leaving them with large claims on unpaid home loans.
Radian wrote $8.3 billion in new insurance in the quarter, more than double the amount it wrote a year earlier.
The company has been steadily gaining market share as some mortgage insurers have stopped writing new insurance due to falling capital levels and regulators shut down some competitors.
Radian's former rival PMI Group Inc PPMIQ.PK went bankrupt last year, while Old Republic Inc (ORI.N) was forced to stop writing new insurance.
Genworth reported narrowing losses from its U.S. mortgage insurance unit on Tuesday and said its primary insurance regulator extended its capital waiver by another two years.
Mortgage insurers have been struggling to meet capital adequacy benchmarks and have time and again sought waivers to continue writing business in many states in the United States.
THIRD STRAIGHT QUARTERLY LOSS
Radian's net loss for the second quarter was $119.3 million, or 90 cents per share, compared with net income of $137.1 million, or $1.03 per share, a year earlier.
The loss for the quarter included combined losses from the change in fair value of derivatives and other financial instruments of $95.0 million.
The total number of primary delinquent loans fell 12 percent from a year earlier.
Radian's shares, which traded at more than $67 before the housing meltdown in 2007, closed at $2.80 on Tuesday on the New York Stock Exchange. They were down almost 4 percent at $2.70 before the bell.
(Reporting by Sharanya Hrishikesh in Bangalore; Editing by Supriya Kurane)