Radian Group Inc. Friday reported a loss of $618 million for the fourth quarter, and $1.2 billion on the year, driven primarily by write-downs related to the firm's failed merger with MGIC Investment Corp. as well as credit and mark-to-market losses.
"2007 was a year of great change for Radian, and I am proud that our team was able to overcome the challenges of unwinding the merger with MGIC while maintaining a solid balance sheet," said S.A. Ibrahim, chief executive officer for Radian in the earnings release. "Our claims-paying resources in both business segments are strong and we stand to benefit from a stable and well-capitalized financial guaranty business."
Radian is the parent of financial guaranty company, Radian Asset Assurance Inc.
During the quarter, Radian Asset wrote $41.3 million of financial guaranty net premiums, the company's measure of new business production. This figure was down from the $61.1 million of net premiums written during the same period of 2006.
The financial guaranty sum included $11.5 million of direct public finance net premiums, down from $30.3 million during the year-ago quarter. Radian's public finance reinsurance business fell slightly to $19.7 million in net premiums, down from $20.5 million in muni reinsurance it wrote during the fourth quarter of 2006.
For the year, net premiums written fell to $186.7 million, down 7.9% from the $202.8 million the public finance department wrote in 2006. Financial guaranty for the year included $60.1 million of direct public finance net premiums, down from $79.7 million in 2006. Reinsurance business increased in the year to $86.8 million, an 7% increase over the 2006 total of $81.1 million.
"We saw a lot of activity in the latter part of the fourth quarter," said Stephen Cooke, president of Radian Asset. "That in part was tied into efforts of some of the primary triple-As to seek capital relief of certain portions of their portfolio and we were able to respond to that."
Earlier this week, Standard & Poor's lowered its rating on Radian Group, to A-minus on negative watch, but highlighted the distinction between it and the financial guarantor. The rating agency said the ratings downgrade would not affect the bond insurer, unless the ratings on the mortgage insurance part of Radian's business falls even farther.
"The AA rating and stable outlook on Radian Asset Assurance Inc. remains unchanged, as Radian Asset's capital position and operating capabilities are largely independent of those of the mortgage insurance company," Standard & Poor's said in a report. "Management has also stated that it is willing to take whatever reasonably practicable steps necessary to protect Radian Asset from the weaker holding company and affiliates."
Radian is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and A-plus by Fitch Ratings.
As some of the triple-A bond insurers suffer further downgrades, Radian may find its peers at similar ratings levels for the foreseeable future. Despite this relatively new development, Cooke said he likes Radian's business prospects as one of only three stable bond insurers.
"We are AA by design," Cooke said. "Unlike others that find themselves in the AA space, this is the place we have always wanted to be."
