BTIG Positive on Radian Group (RDN) Following Management Meetings; Affirms at 'Buy'
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BTIG affirms Radian Group (NYSE: RDN) with a Buy rating and $22 price target following recent meetings with management.
Analyst Mark Palmer noted the following key takeaways:
- While RDN shares are essentially flat YTD and they are now trading at a premium to the company's book value as of June 30, the stock traded at a discount during much of the year even as the company's new insurance written (NIW) is tracking to be at least flat with if not up from the $41bn it posted in FY15. Management attributed the declines in RDN's valuation to a few factors, with undue concerns about the company's legacy insured exposures at the top of that list despite the fact that the legacy book is a positive contributor to its earnings.
- Management suggested that some investors may question whether RDN has posted sufficient reserves against the non-performing loans it insured, but they countered that some loans have been non-performing for a long time such that it is not clear whether they will ever go into foreclosure. They added that some investors may be concerned about the potential for defaults within its performing legacy book to increase, but that would imply that they would suddenly miss payments now after not doing so during the worst financial crisis since the Great Depression.
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