Radian Group Inc. declined in New York trading after Barron’s said the mortgage insurer may eventually incur costs for claims that it denied.
Radian dropped 10 percent to $4.83 at 4:15 p.m. in New York. The Philadelphia-based company has more than doubled this year as Chief Executive Officer S.A. Ibrahim purchased reinsurance and booked investment gains that helped meet regulators’ capital standards. That compares with a 50 percent decline at MGIC Investment Corp., which breached regulatory limits.
Radian may be more aggressive than Milwaukee-based MGIC in refusing to pay claims, sometimes citing missing paperwork, Barron’s said Nov. 3. The benefit from turning down claims may be short-lived, according to the weekly publication, which said Radian’s mortgage unit also benefits from ties with a bond insurer. Emily Riley, a Radian spokeswoman, said in an e-mail that the Barron’s article is “negatively biased” and “based on inaccuracies.”
“Radian is propping up its balance sheet by rejecting claims and effectively double-pledging assets,” Barron’s said. “When these short-term fixes run out, the shares could tumble.”
Radian’s cumulative rescission and denial rate has been about 20 percent over the past several years, Riley said. Barron’s said the insurer has recently refused to pay out on about half the claims submitted, by dollar amount.
The company’s mortgage-insurance subsidiaries had $3.2 billion in cash and investments as of Sept. 30, Riley said. Reserves to cover incurred and not reported losses were $223 million.
Barron’s stands by the story, Ashley Huston, a company spokeswoman, wrote in an e-mail.
Mortgage insurers agree to cover losses when homeowners default and foreclosures fail to recoup costs. Companies including Old Republic International Corp., PMI Group Inc. and Triad Guaranty Inc. have been pushed from selling mortgage insurance by mounting losses.