Mortgage insurer Radian loses $618M in quarter

Radian Group Inc., a Philadelphia insurer of mortgages and bonds, said today it lost $618 million in the fourth quarter as the credit condition of American households worsened.

Claims paid for mortgage defaults more than doubled in the quarter to $164.67 million from $81.14 million in the 2006 quarter. The increase included prime mortgages, which climbed to $53.2 million from $28.9 million.

Those payments are expected to reach $200 million in the current quarter and $1 billion for all of 2008, C. Robert Quint, Radian's chief financial officer, said during a conference call.

The company threw out its September projection of $2.16 billion in cumulative losses on mortgage defaults. "We now believe that losses will exceed those projections, although it's unclear to us at this point by how much given the prevailing uncertainty in the market," Quint said.

Recently, Radian started a program to help mortgage services reduce losses by advancing up to 15 percent of the claim to deal with a default.

In the company's riskiest lines of insurance, it has put aside reserves to cover significant losses, including $434 million to cover 72 percent of so-called net-interest-margin securities and $323 million to cover 68 percent of two second-lien deals.

Radian's subsidiary that sells municipal bond insurance and other forms of credit enhancement accounted for $265.05 million of the quarter's loss, driven by a nearly $400 million decline in the value of derivatives.

As is the case with the entire financial services industry with exposure to subprime mortgages, conditions for Radian have gotten much worse than expected since last summer.

In September, right after Radian's proposed merger with MGIC Investment Corp. fell through, company officials estimated that its book value per share would be $46.90 at the end of the year. Instead, it had fallen to $35.10, as the market continued to deteriorate.

Nevertheless, Radian's shares, which have been whipsawed by market volatility, gained $1.20, or 17 percent, to close $8.12 on the New York Stock Exchange.

Perhaps the best news in the report was that Radian said it does not need additional capital right now to support its commitments, though it is looking at possibilities just to be safe.

The fourth-quarter loss of $618 million amounted to $7.74 per share. In the fourth quarter of 2006, Radian earned $158.37 million, or $1.96 per share.

For all of 2007, Radian lost $1.2 billion, or $14.92 per share, driven by the write-down of a finance subsidiary, credit losses, increased reserved for anticipated losses, and losses on securities. In 2006, Radian earned $582.17 million, or $7.08 per share.