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Radian Group's Mortgage Insurance Profile to Drive Growth
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On Jun 6, 2016, we issued an updated research report on Radian Group Inc. (RDN - Free Report) .
The multi line insurer’s first-quarter 2016 earnings surpassed the Zacks Consensus Estimate and also improved year over year on higher revenues. The first quarter witnessed outstanding credit trends. Revenues too fared well on both counts driven by higher premiums earned and net investment income.
Radian Group remains focused in the improvement of its mortgage insurance portfolio, which is the main catalyst of long-term earnings growth. The company has been witnessing an increasing trend in new mortgage business written and the momentum continued into the first quarter as well. The company also estimates net insurance written to increase in the second and third quarters and to be about $41 billion in 2016.
Also, Radian Group remains focused on controlling costs. The company expects to save approximately $12 billion in 2016.
In addition, Radian Group’s insurance in force has grown substantially over the last few years and maintained the momentum in the first quarter with a 2% improvement to $174.5 million. Given the higher mix of purchase volume relative to refinance, Radian Group expects insurance in force to rise further in 2016.
The company’s strategic initiatives are anticipated to add diversity to its revenue stream and deepen its focus on the core business. Notably, in the first quarter, Radian Group entered into a quota share reinsurance program, which focuses solely on single premium business. This move will help the company to improve return on required capital, enhance financial flexibility and prudently manage its mortgage insurance business mix.
Further, the company’s improving risk-based capital ratio is another positive, which should support long-term growth.
The company has been experiencing significant reduction in its claim payments over the past couple of years and the first quarter was no exception. Further, the company anticipates claims paid between $400 million and $450 million in 2016. Given the strong credit characteristics of the new loans insured, the multi-line insurer is expected to see fewer claims than before.
However, exposure to rising mortgage insurance rates has resulted adversely affected the company’s new business written. Moreover, the company should carry an insurance financial strength rating of at least AA- or Aa3 in order to be competitive. The current below-standard ratings could pose risks for the insurer in terms of new business.
Zacks Rank and Stocks to Consider
Currently, Radian Group carries a Zacks Rank #3 (Hold). Some better-ranked stocks are FBL Financial Group Inc. , James River Group Holdings, Ltd. (JRVR - Free Report) and ageas SA/NV (AGESY - Free Report) . Each of the stocks holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Radian Group's Mortgage Insurance Profile to Drive Growth
On Jun 6, 2016, we issued an updated research report on Radian Group Inc. (RDN - Free Report) .
The multi line insurer’s first-quarter 2016 earnings surpassed the Zacks Consensus Estimate and also improved year over year on higher revenues. The first quarter witnessed outstanding credit trends. Revenues too fared well on both counts driven by higher premiums earned and net investment income.
Radian Group remains focused in the improvement of its mortgage insurance portfolio, which is the main catalyst of long-term earnings growth. The company has been witnessing an increasing trend in new mortgage business written and the momentum continued into the first quarter as well. The company also estimates net insurance written to increase in the second and third quarters and to be about $41 billion in 2016.
Also, Radian Group remains focused on controlling costs. The company expects to save approximately $12 billion in 2016.
In addition, Radian Group’s insurance in force has grown substantially over the last few years and maintained the momentum in the first quarter with a 2% improvement to $174.5 million. Given the higher mix of purchase volume relative to refinance, Radian Group expects insurance in force to rise further in 2016.
The company’s strategic initiatives are anticipated to add diversity to its revenue stream and deepen its focus on the core business. Notably, in the first quarter, Radian Group entered into a quota share reinsurance program, which focuses solely on single premium business. This move will help the company to improve return on required capital, enhance financial flexibility and prudently manage its mortgage insurance business mix.
Further, the company’s improving risk-based capital ratio is another positive, which should support long-term growth.
The company has been experiencing significant reduction in its claim payments over the past couple of years and the first quarter was no exception. Further, the company anticipates claims paid between $400 million and $450 million in 2016. Given the strong credit characteristics of the new loans insured, the multi-line insurer is expected to see fewer claims than before.
However, exposure to rising mortgage insurance rates has resulted adversely affected the company’s new business written. Moreover, the company should carry an insurance financial strength rating of at least AA- or Aa3 in order to be competitive. The current below-standard ratings could pose risks for the insurer in terms of new business.
Zacks Rank and Stocks to Consider
Currently, Radian Group carries a Zacks Rank #3 (Hold). Some better-ranked stocks are FBL Financial Group Inc. , James River Group Holdings, Ltd. (JRVR - Free Report) and ageas SA/NV (AGESY - Free Report) . Each of the stocks holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>