Radian shares now trade at about 1.5 times book value, compared with less than half of book value for MGIC and a quarter of book value for Genworth, which also has a life insurance business.
Mortgage insurers took severe losses following the bursting of the subprime mortgage bubble, forcing PMI Group into bankruptcy, while Old Republic International had to stop writing new insurance. On the other hand, as the U.S. government tries to find a way to shift more of the housing market into the private sector, many investors and policymakers envision a larger role for private mortgage insurers. That has spurred some new privately held entrants into the space. Among publicly traded insurers, Radian, MGIC and Genworth have all received waivers to continue writing new business even though their risk-to-capital ratios have exceeded regulatory requirements in many states.Radian shares got an upgrade Wednesday from Susquehanna Financial Group's Jack Micenko, who set a $14 price target on the stock representing a nearly 100% gain. Shares were up 2.8% to $8.17 in trading Monday. Micenko argues Radian's improvement says more about its own financial health than that of the markets in which it operates, according to an Associated Press report. (Micenko's report couldn't be obtained.) Other analysts, however, argue investors would be wise to turn their attention elsewhere in the sector. "Many investors are very bulled up on the U.S. mortgage insurance space right now, especially given the opportunity created by the U.S. government's retreat from the space," wrote BTIG analyst Mark Palmer in an email to TheStreet last week. He notes "the improvement in Radian's financial picture and its relatively low risk-to-capital figure," but worries about "the company's high frequency of claim denials." He argues Genworth's mortgage insurance unit "is in better shape than its peers," adding that it "is very well-positioned to return to profitability at some point in 2013 and to claim a meaningful portion of the market share that the government is ceding." Palmer says Genworth's mortgage insurance business "should provide a boost" to the company's shares. -- Written by Dan Freed in New York Follow @dan_freed
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