On Dec 30, we issued an updated research report on Radian Group Inc. RDN.
The insurer’s earnings in the last reported quarter missed the Zacks Consensus Estimate and also declined year over year due to a higher expense level. With respect to the surprise trend, Radian Group posted negative surprises in two of last four quarters, with an average negative surprise of 4.81%.
Radian Group faced the brunt of an increase in mortgage interest rates, which impacted home sales. Intensifying competition in the private mortgage insurance industry resulted in a decrease in Radian Group’s market share. These continue to weigh on the operational results of the insurer.
Additionally, reduction of the annual premium of Federal Housing Administration and new stricter regulations continue to pose headwinds for the company.
The Zacks Consensus Estimate moved down 6% to $1.40 for 2015 and 7% to $1.67 for 2016 in the last 90 days. In fact, the expected long-term earnings growth is currently pegged at -1.2%.
Counting on the positives, improvement in the quality and size of mortgage insurance in force and declining claim payments raise optimism. While the mortgage insurance portfolio is expected to create a strong foundation for future earnings, the company currently expects between $600 million and $700 million claims paid in 2015.
Radian has also been restructuring its business to diversify revenue sources and heighten focus on the core business.
Radian Group presently carries a Zacks Rank #4 (Sell). Some better-ranked multiline insurers are Assured Guaranty Ltd. AGO, FBL Financial Group Inc. FFG and Kemper Corporation KMPR. Each of these stocks carries a Zacks Rank #2 (Buy).
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