Deutsche Sees Radian As A 'Top Pick,' Waiting On The Sidelines In MGIC

Deutsche Bank’s Phil Stefano launched coverage of Private Mortgage Insurers, expressing optimism regarding the prospects of the segment’s operating environment. The analyst commented, “Operating results will benefit from burn-off of “troubled vintages” and strength of the recent vintages.”

Although the growth outlook for New Insurance Written [NIW] is bearish, Insurance in Force [IIF] would continue. The segment’s results are tied to US macroeconomic trends, analyst Phil Stefano noted, while adding that trends in GDP, unemployment, housing prices and housing sales were “all poised to be a tailwind to mortgage insurance results.”

Radian

Stefano has a Buy rating for Radian Group Inc RDN, with a price target of $16. The analyst identified the company as the Top Pick. He expressed optimism regarding Radian’s earnings growth, which should be boosted by positive credit trends and the US macro environment.

“Operating cash flow growth should mitigate need for regulatory capital while facilitating capital management strategic initiatives,” the Deutsche Bank report stated, while adding, “Services segment is a best in class consulting portfolio with a differentiated source of growth.”

MGIC

Stefano has a Hold rating for MGIC Investment Corp. MTG, with a price target of $8. The company continues to suffer a significant over-hang from convertible notes. The analyst believes that the company would be able to meet expectations, suggesting “limited upside and downside surprises.”