Radian Group Inc. Chief Executive Officer S.A. Ibrahim said he’s still optimistic for the mortgage insurer’s outlook, after highlighting challenges the company faces on a conference call today.
“All we wanted to do was be realistic and tell the market that the environment in the housing market has changed,” Ibrahim said in an interview. “It was intended to be more a realistic expectation-setting, rather than a downer.”
Radian shares tumbled as much as 9.2 percent after Ibrahim said the Philadelphia-based company faces increased competition and a decline in mortgage originations. He said in the subsequent interview the company is on track to show the potential for sustained earnings in 2015, which would let Radian benefit from tax assets tied to past losses. The company today posted a third-quarter loss of $12.7 million.
“Nothing in today’s call was supposed to say we’re not going to get there,” Ibrahim said. “We’re still comfortable that we’ll get there.”
Rising interest rates have increased borrowing costs for consumers this year, threatening to slow the housing recovery that’s boosted shares of mortgage insurers such as Radian and MGIC Investment Corp. Both companies have more than doubled this year in New York trading.
The housing rebound has drawn newcomers such as Essent Group Ltd. and NMI Holdings Inc. to the market. Essent, backed by JPMorgan Chase & Co. and Goldman Sachs Group Inc., sold shares last month in an initial public offering.
Ibrahim said on the call that Radian had reduced rates by five basis points to match competitors’ price decreases. Rival Genworth Financial Inc. has said it is cutting prices for the coverage.
Radian fell 8.6 percent to $13.27 at 4:05 p.m. in New York. Milwaukee-based MGIC dropped 6.4 percent. Essent slipped 3.6 percent to $21.31 after trading as low as $20.80.