The No. 2 US mortgage insurer said it expects new delinquencies to fall in 2011, but did not see its mortgage insurance operations being profitable this year. Primary delinquent loans fell 4 percent in the fourth quarter.

"We believe that a key future driver for return to profitability will be a further reduction in new delinquencies beyond what occurred in 2010," Chief Financial Officer Robert Quint said on a post-earnings call.

BLEAK 2011 FOR INDUSTRY

Radian, which has a market value of about $1 billion, said it expects mortgage insurance claims paid to rise to $1.7 billion in 2011. Its total claims payout in 2010 was $1.26 billion.

Radian's forecast was in-line with larger rival MGIC Investment Corp's expectation of claim payouts remaining high in 2011, signaling a potentially tepid year ahead for mortgage insurers. Radian and its peers MGIC and PMI Group , which pay claims in case of a default or foreclosure, have been hurt as Americans continue to struggle to make mortgage payments.

Over a million US homes were foreclosed by banks in 2010, topping the 918,000 homes seized in 2009.

Any improvement in the performance of mortgage insurers would depend on improvements in the overall economy, Piper Jaffray's Michael Grasher said.

BILLION DOLLAR LOSS

Radian's massive fourth-quarter loss included a $841.5 million charge related to establishing a valuation allowance on its net deferred tax assets and a pre-tax loss of $185.9 million from the change in fair value of derivatives.

"We believe revenue will be hurt by the change in fair value of derivatives during the year, as we think Radian's credit spread will tighten," said S&P Equity Research analyst Rafay Khalid, who cut his rating on the stock to "sell" from "hold."

CEO S.A. Ibrahim said setting up the valuation allowance does not have any impact on Radian's capital ratios.

The Philadelphia-based company posted a fourth-quarter net loss of $1.1 billion, or $8.55 a share, compared with a loss of $91.9 million, or $1.12 a share, a year ago.

Radian's shares were down 4 percent in mid-day trade on Thursday on the New York Stock Exchange. They touched a low of $6.58 earlier in the day.

MGIC and PMI shares were trading slightly down.