NEW YORK - Mortgage Insurer Radian Group posted a massive $1.1 billion dollar loss on Thursday, an amount higher than their current market capitalization of $906 million. The company took a write down of its after tax assets which only sent the stock down 7% on Thursday and Friday combined. The company lost $1.8 billion, or $15.74 per share in 2010. The significant event in the fourth quarter was a revaluation of $841.5 against substantially all of the company's deferred tax assets. The company's operating mortgage business continued to remain very unprofitable as the company once again posted negative revenues due to derivative losses.
Radian cryptically wrote “While Radian continues to expect a return to profitability in the long-term, this remains uncertain based on macroeconomic factors such as the slower-than-expected pace of the economic recovery as well as the ultimate timing and magnitude of losses. If the company returns to a period of sustained profitability, as it currently expects, all or a portion of this valuation allowance would be reversed.”
Though us here at the Markets Are Open have been valuing the company as if the deferred tax assets did not exist, it does seem puzzling that a company is allowed to not count these assets. It is essentially telling the market we are going bankrupt. If its long term future is so poor that their accounting records have to assume they will never be profitable again.
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