Fueled by a strong housing market and scorching economy, Radian Group Inc. posted big numbers in its third quarter, reflecting the strength of the mortgage insurance business.

The Philadelphia-based Radian, formed in June of last year when Amerin Guaranty and Commonwealth Mortgage Insurance merged, boosted net income a whopping 40% in the third quarter, to $64.1 million, or $1.66 a share, beating analysts’ consensus by 5 cents. For the first nine months, net income jumped almost 46%, to $184.5 million.

Frank P. Filipps, chairman and chief executive officer, credited high credit quality in the business and fundamental economic conditions in the housing market for Radian’s performance.

“We’ve been able to drive operational expense savings from the synergies that we derived from putting the two companies into one,” he said. “It’s all really come together for us.”

And Radian is not alone in its double-digit growth; the current housing market has been kind to most players in the mortgage insurance business. PMI Group of San Francisco reported earnings rose 27% in the third quarter, to $69.3 million, and MGIC Investment Corp. of Milwaukee, the largest mortgage insurer, said its earnings jumped 19%, to $146.4 million.

“Radian is enjoying a superb environment, as are most companies that insure credit risk,” said Jonathan E. Gray, an analyst at Sanford C. Bernstein & Co. “It’s Nirvana.”

Mr. Gray said several factors have contributed to the tremendous housing and mortgage insurance market, including rising premium yields and investment income, declining claims, and improving credit quality.

Gary Gordon, an analyst at PaineWebber Inc., agreed. “This has been one of a string, not only for Radian but for the entire industry,” he said. “This is a powerful, powerful housing market.”

Nonetheless, Mr. Gray expressed frustration with Radian’s market valuation, arguing that the company is not getting credit for consistent earnings growth and strong overall performance. “They’re traded like a second-class citizen, even amongst the mortgage finance companies,” he said. Radian’s shares traded recently at $62.5625, off almost 13% from their 52-week high.

Both Mr. Gordon and Mr. Gray praised Radian’s new effort to insure unconventional loans — such as manufactured-housing loans, home equity lines of credit, and high-LTV products — through a subsidiary created in September. The new unit, Radian Insurance, wrote $1.2 billion worth of policies in the third quarter, its first quarter in existence.

“We think that that could hold great opportunities for us in the near term to continue to grow our revenues and to continue to increase our insurance,” said Mr. Filipps. “We’re looking forward to capitalizing on that opportunity.”

But not all the news was good. Radian Guaranty Inc., the company’s main subsidiary, wrote $7 billion of new insurance, almost 20% less than the year earlier. And for the nine months ended Sept. 30, insurance written fell by 34%.

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