do you understand the mortgage insurance market even a little? i think anyone who makes that comment isn't reading the balance sheet. most mutual fund managers on wallstreet have CFA designations - a CFA designation does not qualify them to understand Radian's revenue model or the mortgage insurance market in general - and so the stock is automatically sold and questions are asked later.
radian states that alt-a exposure is limited to but 8% of their book. even if all their alt-a loans went under, radian would still make money as they don't insure the full value of a default - at maximum 35%. and so the book defaults. they write off the loss - they've already written off the full value of the loss - that doesn't mean they're losing that money - it means they're setting up their books for improved gain when the market improves.
and so the book defaults - what then? they then act as partners with their insuring lender in selling the home. they then receive a proceed for the sale.
for example, they insure a $100,000 note, 100% of the purchase price. the borrower stops paying. the house goes into foreclosure. radian writes off $35,000, their total loss exposure, the bank (and/or Fanniemae or Freddie Mac, etc) retains the other loss exposure. the bank and radian then act as the selling agent for the property. the house is dumped for $80,000 in a down market. Radian recoups a large portion of their loss (50%)which then becomes 'black' on their ledger as the full loss of the risk of the home has already been declared.
it appears to me that this remains a typical bond swap bs for large banks to take substantial (some warranted) write-offs, pay no taxes on earnings going forward, readjust their book value for another swing into the black when all cools down, and achieve lower interest all the while going long the bond. i think they've played this game before. it has new names, that is all.
for radian to suffer bankruptcy the fixed rate programs they insure would also need to fall apart at a rate of about 20%...but, even then, they survive because their partner in business, Fannie Mae and Freddie Mac, both sponsored by the US Govt. won't go under - and it is doubtful that the US Govt. will allow their partners to go under - this in turn has a positive impact on companies like Radian and MGIC.
MGIC is partially bsing money mangers with their constant diatribe about overexposure; they are underwriting and insuring more homes in the history of their organization...and radian's insuring business is also increasing and a similar rate...how do you account for this increasing business in a very credit crappy market? i know where it is coming from...do you?
in fact MGIC and Radian are acting as their own underwriters for most of their banking partners now - they are deciding which loans they want and which they don't which further decreases their exposre. plus they get paid underwriting fees by these same banking institutions.
if radian declares bankruptcy and does not follow through relative to their past news coference and financial data - then Bush will likely come out of the closet, leave his wife and declare himself gay.
You forget about the $700MM of NIM exposure they have on the books, and I think they only wrote down $200MM of it so far. I would estimate they have another $200MM yet to write down, at least, on that position. And that is a real cash loss, by the way, not just a mark-to-market housecleaning. Real cash out the door.
Then there are the second lien transactions. Not sure how much loss is left to recognize there.
Another wildcard is their FG business, don't know much about that, hope they did not wrap any CDOs.
Where they really took on some major risk though is some of the mezzanine pool deals they did on subprime deals. Those are a ticking time bomb.
Their standard MI book should be slightly worse than everyone else's, since they tended to deal with shadier originators, but not enough to kill them. Those structured finance deals, though, definitely have the potential to put them under.
By the way, you won't find much information about some of the deals in their disclosures, you need to look into the SEC filings of the deals they insured. Luckily the SEC has a free website where you can search for these things, if you know where to look.
I do agree about MGIC, accordin to Curt Culver the sky is perpetually falling, that guy is such a dufus.
But don't be so happy that they are insuring so much more business, most of it is crap that the banks started backing away from a year ago. The MIs are always late to react to markets, both good and bad. No doubt they got stuck with a lot of crappy borrowers.