Radian Swings to Profit in Q3; Sherman Stake Contributes $16 million

Mortgage insurance company Radian Group, Inc. (NYSE: RDN) announced early Wednesday that it turned a profit in the third quarter of 2008 with help from dividend contributions from its stake in debt buying giant Sherman Financial Group.

Radian reported net income of $36.7 million, or $0.46 per share, for the third quarter, up dramatically from the net loss of $703.9 million it reported in the third quarter of 2007.

The company, like most involved in the U.S. mortgage market has been hammered this year by deterioration in the real estate market and the ensuing credit crunch. Radian is a risk management company focused on mortgage insurance.

Radian also owns a 29 percent stake in Sherman Financial, one of the largest accounts receivable management companies in the U.S. In the third quarter of 2008, radian said that Sherman contributed $16 million in dividends to the company’s earnings. In the first nine months of 2008, Sherman has contributed a total of $35.5 million to Radian.

Sherman was joint-owned by Radian and fellow mortgage insurer MGIC Investment Corp. But MGIC sold the last of its stake in Sherman in August for $209 million (“Minority Owner Sells Stake in Sherman Financial for $209 Million,” Aug. 15). After the transaction, Radian increased its stake in Sherman.

But Radian noted in its earnings press release that the company still has the “flexibility to pursue a sale of its stake in Sherman” should it need additional capital.