Radian Group Reports 4th-Quarter Loss of $250 Million

Radian Group Inc. yesterday reported a fourth-quarter 2008 loss of $250.4 million, compared to a fourth-quarter 2007 loss of $721 million.

The company reported a mortgage insurance loss provision of $551 million and a fair-value loss of $218 million, with losses offset partially by a significant reduction in the premium deficiency reserve.

Radian lost $410.6 million on the year, better than its $1.3 billion net loss in 2007, it said.

Despite a recent downgrade to its mortgage subsidiaries to Ba3 from A2 by Moody's Investors Service, Radian said yesterday it is adequately capitalized and retains a strong business position.

The company says its financial guaranty portfolio is relatively better off than many of its competitors because it had a proportionally lower exposure to impaired mortgaged-backed asset securities. Radian said it should also benefit from the federal government's attempts to help stabilize the housing market.

"The private mortgage insurance industry remains a vital component of the U.S. housing finance system," said chief executive officer S.A. Ibrahim. "While Radian and our industry experienced a difficult year, we believe that we have sufficient capital and liquidity to pay all anticipated claims, maintain a strong market position, and continue to write new mortgage insurance business throughout 2009."

Radian Group last year transferred its bond insurance subsidiary Radian Asset Assurance Inc. to mortgage insurer Radian Guaranty Inc. Radian Asset provides capital support to the mortgage insurer, which will continue to write new business. Radian Asset has $965 million in statutory capital and $2.8 billion in claims-paying resources, the company said.

In the meantime, its financial guaranty business is focusing on reducing its credit risk exposures and its insurance in force. It reduced its net par outstanding to $100.7 billion at the end of 2008 from $116 billion at the end of 2007.

It reduced its net reinsurance par to $36.9 billion from $49.9 billion, its direct public finance to $17.8 billion from $18.2 billion, and its direct structured finance to $46.0 billion from $47.9 billion. Overall, $49.44 billion of its financial guaranty product line is related to public finance credits.

Radian Asset, which operated with a double-A rating business model, became the first downgraded bond insurer when Fitch Ratings in September 2007 lowered it to A-plus after a planned merger with MGIC Investment Corp. collapsed.

"While we expect that some Financial Guaranty transactions will have losses over time, we still believe the capital base in Radian Asset is solid and will ultimately be largely accessible to Radian Guaranty," Radian Group chief financial officer Bob Quint said in a conference call with analysts and investors.

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