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Radian Group (RDN) and Arm See Ratings Upgrade by Moody's
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Radian Group Inc. (RDN - Free Report) and its unit, Radian Guaranty Inc., recently received rating actions from credit rating giant Moody’s Investor Service. The rating agency has upgraded Radian Group’s senior debt ratings to Ba2 from Ba3. Concurrently, the insurance financial strength (IFS) rating of the Multi line insurer’s subsidiary is raised to Baa2 from Baa3. The outlook of these ratings remained stable.
Ratings Representation
The insurer’s strong and constantly improving financial portfolio, comprising the company’s progress in lowering its financial leverage and boosting its debt maturity profile in the last few quarters, is represented by the ratings upgrade.
The company is anticipated to continue boosting its financial leverage throughout next year with the help of organic capital generation amid an operating environment that proves to be favorable for mortgage credit.
The aforementioned ratings represent the Multi line insurer’s consistent improvement in financial flexibility, wide customer base, solid standing in the US mortgage insurance market as well as its comfortable position pertaining to its compliance with the government sponsored enterprises’ (GSEs) capital standards (PMIERs).
Possibility of stiff competition when it comes to pricing in the US mortgage insurance market, commodity-like nature of the mortgage insurance product along with the sensible nature of the mortgage insurance business model to economic conditions can hamper the strengths reflected by the ratings upgrade.
Factors Resulting in Ratings Upgrade/Downgrade
The Multi line insurer’s ratings can witness an upgrade, driven by steady progress in the company's debt laddering structure, adjusted financial leverage in the 20% range, comfortable cushion related to its compliance with GSEs’ capital standards (PMIERs) as well as its improved profitability with returns on capital consistent with those of its peers.
On the flip side, non-compliance with the aforementioned PMIERs, adjusted financial leverage of more than 30%, more than 10% decline in shareholders’ equity (including share buybacks) over a rolling 12-month period plus Radian Group’s inability to meet its debt service requirements might cause a ratings downgrade.
It is important to note that rating affirmations or upgrades from credit rating agencies play an instrumental role in retaining investor confidence as well as maintaining credit worthiness of a stock. Whereas rating downgrades not only hamper the respective company’s business but also increase its cost of future debt issuances. We believe, such ratings will help Radian Group retain investors’ trust and write more businesses going forward.
Shares of this Zacks Rank #2 (Buy) Multi line insurer have lost 0.7% year to date, narrower than the industry’s decline of 4.4%. We expect declining claim payments, sustained rise in insurance in force and a robust capital position to turn the stock around and drive it higher in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can also consider Alleghany Corporation , RenaissanceRe Holdings Ltd. (RNR - Free Report) and The Navigators Group, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the trailing four quarters with an average beat of 17.61%.
RenaissanceRe Holdings provides reinsurance and insurance coverages in the United States and globally. The company pulled off positive surprises in three of the previous four quarters with an average positive surprise of 31.16%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States as well as globally. The company came up with positive surprises in three of the preceding four quarters with an average earnings surprise of 19.54%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Radian Group (RDN) and Arm See Ratings Upgrade by Moody's
Radian Group Inc. (RDN - Free Report) and its unit, Radian Guaranty Inc., recently received rating actions from credit rating giant Moody’s Investor Service. The rating agency has upgraded Radian Group’s senior debt ratings to Ba2 from Ba3. Concurrently, the insurance financial strength (IFS) rating of the Multi line insurer’s subsidiary is raised to Baa2 from Baa3. The outlook of these ratings remained stable.
Ratings Representation
The insurer’s strong and constantly improving financial portfolio, comprising the company’s progress in lowering its financial leverage and boosting its debt maturity profile in the last few quarters, is represented by the ratings upgrade.
The company is anticipated to continue boosting its financial leverage throughout next year with the help of organic capital generation amid an operating environment that proves to be favorable for mortgage credit.
The aforementioned ratings represent the Multi line insurer’s consistent improvement in financial flexibility, wide customer base, solid standing in the US mortgage insurance market as well as its comfortable position pertaining to its compliance with the government sponsored enterprises’ (GSEs) capital standards (PMIERs).
Possibility of stiff competition when it comes to pricing in the US mortgage insurance market, commodity-like nature of the mortgage insurance product along with the sensible nature of the mortgage insurance business model to economic conditions can hamper the strengths reflected by the ratings upgrade.
Factors Resulting in Ratings Upgrade/Downgrade
The Multi line insurer’s ratings can witness an upgrade, driven by steady progress in the company's debt laddering structure, adjusted financial leverage in the 20% range, comfortable cushion related to its compliance with GSEs’ capital standards (PMIERs) as well as its improved profitability with returns on capital consistent with those of its peers.
On the flip side, non-compliance with the aforementioned PMIERs, adjusted financial leverage of more than 30%, more than 10% decline in shareholders’ equity (including share buybacks) over a rolling 12-month period plus Radian Group’s inability to meet its debt service requirements might cause a ratings downgrade.
It is important to note that rating affirmations or upgrades from credit rating agencies play an instrumental role in retaining investor confidence as well as maintaining credit worthiness of a stock. Whereas rating downgrades not only hamper the respective company’s business but also increase its cost of future debt issuances. We believe, such ratings will help Radian Group retain investors’ trust and write more businesses going forward.
Shares of this Zacks Rank #2 (Buy) Multi line insurer have lost 0.7% year to date, narrower than the industry’s decline of 4.4%. We expect declining claim payments, sustained rise in insurance in force and a robust capital position to turn the stock around and drive it higher in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can also consider Alleghany Corporation , RenaissanceRe Holdings Ltd. (RNR - Free Report) and The Navigators Group, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the trailing four quarters with an average beat of 17.61%.
RenaissanceRe Holdings provides reinsurance and insurance coverages in the United States and globally. The company pulled off positive surprises in three of the previous four quarters with an average positive surprise of 31.16%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States as well as globally. The company came up with positive surprises in three of the preceding four quarters with an average earnings surprise of 19.54%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>