November 1, 2012 / 12:20 PM / in 5 years

UPDATE 1-Radian posts first profit in 2012 as new business jumps

By Sharanya Hrishikesh

Nov 1 (Reuters) - Mortgage insurer Radian Inc posted its first quarterly profit this year, as it wrote more new insurance and recorded net gains on investments in a recovering housing market.

The upbeat result came as mortgage insurers such as Radian, MGIC Investment Inc and life insurer Genworth’s mortgage unit struggle to recoup losses after the housing bubble burst and foreclosures soared, leaving them with large claims on unpaid home loans.

Mortgage insurers, which protect lenders in case home loans turn bad, 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.

The company wrote $10.6 billion of new mortgage insurance in the third quarter, more than double the $4.1 billion written a year earlier.

Radian has gained market share as some rivals have been shut down by regulators and others have stopped writing new insurance due to falling capital levels.

A stabilization in home prices this year, along with a rise in sales and tighter inventories, has pointed to a housing market that is finally turning the corner, six years after its far-reaching collapse.

However, Radian’s third-quarter net income fell to $14.3 million, or 11 cents per share, from $183.6 million, or $1.37 per share, a year earlier, reflecting much lower gains on financial assets.

The quarterly profit included net gains on investments of $84.7 million, up from $81.6 million -- but in the third quarter last year Radian recorded gains from the change in fair value of derivatives and other financial instruments of $206.6 million.

Radian Guaranty’s risk-to-capital ratio improved to 20.1:1 as of the end of the September quarter from 21:1 as of the end of June. Most U.S. states allow a maximum risk-to-capital ratio of 25 to 1.

Radian’s gains in market share came after one rival, PMI Group Inc, went bankrupt last year, while Old Republic Inc was forced to stop writing new insurance.

Genworth posted a third-quarter profit on Tuesday as losses narrowed at its U.S. mortgage insurance unit.

Radian’s shares closed at $4.69 on Wednesday on the New York Stock Exchange.

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