Despite what CEO S.A. Ibrahim described as the stagnant housing market affecting his company's mortgage insurance business, Radian Group reported a 1Q11 net profit of $103 million. This profit was driven by $319 million of fair market gains on derivatives.

There also remains plenty of uncertainty regarding the aging inventory of delinquent loans, he said.

Although fewer new delinquencies are being received, the percentage of loans with missed payments of 12 months or more is now 52% of the inventory, with another 31% in the four-to-11 month bucket.

During the conference call, Ibrahim added that in recent months Radian is seeing a slight increase in claims received as mortgage servicers are beginning to resume foreclosure activities. The company expects $1.7 billion in paid claims this year.

Ibrahim also noted the company's and industry's efforts in regaining market share from the Federal Housing Administration. Its new insurance written during the "traditionally weak" first quarter was $2.6bn, up from $1.9 billion in the same period last year.

But besides the recent hike in FHA premiums, Ibrahim said the industry is benefiting from the Fed's loan officer compensation rule because it eliminates incentives for originators to choose an FHA-insured loan vs. an MI loan.

Radian Guaranty, the mortgage insurance subsidiary, has a risk-to-capital ratio of 20.3:1. Ibrahim said the parent company could contribute capital to this unit if needed. Radian Asset Assurance is expected to pay a $53 million dividend to Radian Guaranty during the second quarter; that is down from previous expectations due to reduced investment income.

When asked under what conditions would the company make a capital contribution, he replied that all Radian said is that it was maintaining the flexibility to do so. The fact that some of the competition is now over the 25:1 mark gives the company more room in this area.

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