Radian Group's Revenues Decline, Stiff Competition A Drag

On Aug 17, 2016, we issued an updated research report on Radian Group Inc. (NYSE:RDN) .

Radian Group’s second-quarter 2016 earnings missed the Zacks Consensus Estimate and also deteriorated year over year. Lower revenues resulted in the downside. Moreover, the multi line insurer’s total revenue also dipped year over year, primarily due to lower premiums earned and net investment income.

Radian Group has been experiencing rising mortgage insurance rates, which in turn have impacted home sales. This in turn makes new business written of the company volatile. Intense competition in the private mortgage insurance industry resulted in a decrease in the company’s market share.

In addition, stricter regulatory hurdles and a competitive market raise concerns for the multi line insurer.

The Zacks Consensus Estimate for 2016 and 2017 went down as most of the estimates were revised lower over the last 30 days. While the estimate for 2016 declined 3.8% to $1.52 per share, the one for 2017 decreased 3.9% to $1.72.

However, the company’s quality and size of mortgage insurance in force has improved considerably over the years. In the second quarter too, the company witnessed year-over-year growth of 3% in insurance in force. Hence, Radian Group continues to remain optimistic about the growth of its insurance in force, which will strengthen the foundation for its future earnings.

Further, the company is likely to witness long-term growth in expansive mortgage and real estate services offerings, declining delinquency, and lower levels of paid claims. Notably, during the second quarter, the company was able to redeem the entire $325 million at the earliest possible date, thereby boosting the liquidity position of its holding company.

Zacks Rank and Stocks to Consider

Currently, Radian Group carries a Zacks Rank #4 (Sell). Some better-ranked stocks include James River Group Holdings, Ltd. (NASDAQ:JRVR) , Swiss Re Ltd. (OTC:SSREY) and Allianz (DE:ALVG) SE (OTC:AZSEY) . Each of these stocks holds a Zacks Rank #2 (Buy).

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