Radian writes more business as housing recovers

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(Global Markets) - Radian Group Inc (RDN.N) said its unit Radian Guaranty wrote new business worth $6.5 billion in the fourth quarter, as the housing market shows signs of recovery and the mortgage insurer benefits from fewer players in the market.

The U.S. housing downturn caused mortgage insurers PMI Group PPMIQ.PK and Triad Guaranty (TGIC.OB) to go bust and led others like Old Republic (ORI.N) to stop writing new insurance.

However, better capitalized insurers like Radian, MGIC Investment Corp (MTG.N) and Genworth Financial (GNW.N) could expand their underwriting.

As of December 31, Radian Guaranty is expected to maintain its risk-to-capital ratio below the allowed limit of 25 to 1, with about $500 million of holding company liquidity, the company said in a statement.

"The increase (in writing more business) is driven by the fact that we have invested steadily in expanding sales force," Chief Executive S.A. Ibrahim told Global Markets. "We have also benefited from gaining market share from a couple of players who are no longer writing business."

The $6.5 billion in new insurance tops the company's previous estimate of more than $5 billion in new underwriting in the fourth quarter. It wrote $4.1 billion in new mortgages in the third quarter.

Radian's robust capital position and low risk ratios are helping it be more aggressive in its quest for new business.

"Radian's capital position is strong entering into 2012, where we expect losses to be significantly lower than a year ago," Macquarie analyst Matthew Howlett told Global Markets.

At end-September, the company was able to keep its risk-to-capital ratio at 21.4 to 1, below the maximum level.

"I feel pretty good that the company can maintain risk-to-capital ratio at or below the limit. They are on page to turn profitable," Howlett said.

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Starmine dataset: r.reuters.com/dap95s

Graphic on U.S. Housing market: r.reuters.com/gyq93s

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SEEKING WAIVERS

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.

Of the 16 states that impose risk-based capital requirements in the United States, Radian has received waivers to write new business from Arizona, Illinois, Kentucky and Wisconsin, and has applications pending in 10 other states.

Kansas has declined to grant waivers to mortgage insurers at present, the company said in a statement.

Radian has also applied to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) for approval of a separate mortgage insurance unit, Radian Mortgage Assurance Inc, to write insurance in the states where waivers are not available or approved, the company said.

U.S. mortgage insurers have been creating new units to write more business and find a way around soaring risk ratios.

"We believe, given our financial position, our case should be equally compelling for waivers as those of our peers who have successfully shown that they can get waivers," Ibrahim said.

(Reporting by Satyanarayan Iyer and Aman Shah in Bangalore; Editing by Roshni Menon, Supriya Kurane)