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What: Shares of Radian Group (NYSE:RDN) dropped 11% after shareholders dissected its weaker-than-anticipated earnings report for the third quarter.

So what: Radian Group posted adjusted diluted net operating income per share of $0.31, well below analysts' expectations of $0.36 per share in the third quarter. New mortgage insurance written was $11.2 billion for the quarter, in line with premiums written last year.

On the call, executives pointed out that the company has chosen not to be as competitive for new business, given the relative pricing and discounts offered by other insurers. Radian Group's loss ratio in the third quarter rose to 28.2%, a significant jump from the year-ago reading of 22.5%, though results in mortgage insurance are inherently more lumpy than in other insurance products.

Now what: Radian Group's report sent shares of other mortgage insurers lower for the day. In what may have been the result of some "sympathy selling," MGIC Investment Corp. (NYSE:MTG) also dropped by nearly 8%. Interestingly, MGIC's third-quarter results were met with investor approval on Oct. 15: Shares jumped 5% on the day it reported.

Radian Group's credit metrics are improving. The company's results indicated that its total number of primary delinquent loans fell 5% quarter over quarter and 23% year over year. In addition, delinquency rates fell to 4.1% from 5.4% last year. For today, though, all focus seems to be on its top-line challenges and concerns about competition whittling away at its pricing going forward. At an investor and analyst presentation last month, 69% of those in the audience viewed "competitive pricing pressure" as the biggest risk to the business.

 

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.