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Triad Guaranty posts loss
It reports 3rd quarter of negative earnings
Journal Graphic by Nicholas Weir
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Published: August 6, 2008
Triad Guaranty Inc.'s exposure to the languishing housing markets in four states contributed to another major quarterly loss.
The company, a mortgage insurer based in Winston-Salem, reported late Monday that it had a net loss of $198.8 million in the second quarter, compared with net income of $12 million a year ago.
It reported an earnings loss of $13.36 a share, compared with diluted earnings of 80 cents a share a year ago.
Coupled with a $75 million loss in the fourth quarter of 2007 and a $150 million loss in the first quarter of 2008, the company has posted a combined loss of $423.8 million in its past three quarters.
"The size of our second-quarter loss reflects the depth and breadth of the collapse of the housing and mortgage markets," said William Ratliff III, Triad Guaranty's recently named CEO.
"The continued growth in the number of defaults and foreclosures during the quarter required a significant increase in reserves. The distressed markets of California, Florida, Arizona and Nevada continue to be adversely impacted by declining home prices, and reserves for defaults in these states comprised approximately 68 percent of the increase in our reserves for the quarter."
The Mortgage Insurance Companies of America said Thursday that defaults on privately insured U.S. mortgages rose 64 percent in June, to 67,908, compared with June 2007. The rate has increased for 18 consecutive months.
Triad Guaranty said on June 19 that it would discontinue writing new mortgage-insurance business on July 15 and conduct "an orderly transition of its business to runoff." That means that the company's revenue will come from existing policies that eventually will expire. The company has said that it expects to exist for another seven to 12 years.
The company also said on June 19 that it is cutting 40 percent of its work force, or 100 jobs, as part of the change in its business model. Ratliff said yesterday that its work force has been reduced by 45 percent. Most of its remaining work force of about 140 employees is in Winston-Salem.
The negative earnings news deflated a recent rally in Triad Guaranty's stock, whose share price more than doubled from 90 cents on Thursday to $2.28 on Monday. Its 52-week low is 42 cents on June 14 and its 52-week high is $31.65 on Aug. 17, 2007.
The share price closed at $1.84 yesterday, down 44 cents.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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