Radian Group Inc. said Monday that it plans to fold Radian Asset Assurance Inc., its bond insurance unit, into Radian Guaranty Inc., its mortgage insurance unit, this quarter to satisfy the objectives of a capital offering it had planned.
Sanford A. Ibrahim, the Philadelphia parent company's chief executive, had said in May that it intended, "subject to market conditions and other factors, to raise capital in the near term primarily by issuing equity."
During a conference call on its second-quarter results Monday, Mr. Ibrahim said that Radian Group does not believe it needs "additional capital in the near term," though it remains "opportunistically open to raising capital to further strengthen us in dealing with prolonged economic uncertainties, as well as new mortgage insurance opportunities."
The bond insurance unit "is writing minimal new business, and this means that more excess capital will likely be released over time," he said.
Last quarter the parent company invested 93% of a $107.5 million dividend from its bond insurance business to its mortgage insurance business.
Radian Group reported a net loss of $392.5 million, or $4.91 a share, for the quarter, compared with a profit of $21.1 million for the second quarter of last year. The loss was two and a half times larger than the average analyst estimate.
The provision for loan losses fell 21.3% from the first quarter but increased 163.8% from a year earlier, to $458.9 million.
Radian Group also established a "premium deficiency reserve" of $421.8 million, representing the amount it expects lifetime losses on its book of first-lien mortgage coverage at June 30 to exceed premiums. It said it expects its recognition of claims costs to peak this year.
