Mortgage insurer's earnings down 31%

Radian Group Inc., a Philadelphia mortgage-insurance provider, said yesterday that its first-quarter earnings had dropped 31 percent, in part because of an operating loss at a partly owned subsidiary that buys distressed home mortgages.

Net income at Radian, which in February announced a $4.9 billion merger with MGIC Investment Corp. of Milwaukee, fell to $113.5 million, or $1.42 per share, from $163.7 million, or $1.96 per share, a year earlier.

S.A. Ibrahim, chief executive officer, said in a news release that Radian's core business "was not significantly affected by the disruptions in the subprime business in recent months."

However, Radian's portion of the results at C-Bass, which Radian owns with MGIC, plummeted from a profit of $30 million last year to a loss of $6.8 million this year. Radian owns 46 percent of C-Bass, formally known as Credit-Based Asset Servicing & Securitization L.L.C.

C-Bass buys high-risk mortgage loans and repackages them into securities for sale to investors. Many such companies have run into trouble this year as default rates for subprime mortgages have skyrocketed.

Revenue at C-Bass dropped to $39 million in the first quarter from $171 million a year earlier.

The overall pullback from lending to people with poor credit was evident in Radian's results, which showed that less than 5 percent of new mortgage insurance written was issued to subprime, compared with 13 percent in last year's first quarter.

Radian's shares closed yesterday at $57.86, down 46 cents, or less than 1 percent, on the New York Stock Exchange. Since the announcement Feb. 6 of the merger with MGIC, Radian's shares are down 13 percent, and MGIC's shares are down 12 percent.

Shareholder votes on the deal are scheduled for next month.