Shares of Radian Group Inc. RDN have rallied 32.9% in the past year, outperforming the industry’s 26.9% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 30% and 30.9%, respectively, in the past year. With a market capitalization of $5.04 billion, the average volume of shares traded in the last three months was 1.03 million. Currently priced at $33.86, the stock is a little below its 52-week high of $37.86.
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The rally was largely driven by an improving mortgage insurance portfolio, declining claims, a solid capital position and effective capital deployment.
This multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 17.65%.
This Zacks Rank #2 (Buy) multi-line insurer is trading above its 200-day simple moving average (SMA) of $32.45, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
Return on invested capital in the trailing 12 months was 7.8%, better than the industry average of 2.5%, reflecting RDN’s efficiency in utilizing funds to generate income.
The insurer has intensified its focus on the core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream.
New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
Radian Group has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
Radian Group expects that the private mortgage insurance market will be approximately $300 billion in 2024, consistent with the prior year. It expects a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in large and valuable insurance in-force portfolio.
The multi-line insurer has been strengthening its capital position with capital contribution, reinsurance transactions and cash position. This, in turn, aids the insurer to engage in wealth distribution.
The 9% increase in quarterly dividend in the first quarter of 2024 marks the fifth consecutive year in which RDN has increased the quarterly dividend, with a total increase of 96% over the past four years. Its current dividend yield of 2.8% betters the industry average of 2.2%, making it an attractive pick for yield-seeking investors.
Radian Group shares are trading at a price-to-book multiple of 1.08, lower than the industry average of 2.37.
Investors interested in the multi-line insurance industry may look at some better-ranked players like EverQuote, Inc. EVER, CNO Financial Group, Inc. CNO and Horace Mann Educators Corporation HMN, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EverQuote’s 2024 and 2025 earnings implies year-over-year growth of 144.8% and 16.1%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 149.58%. In the past year, shares of EVER have skyrocketed 124.8%.
The Zacks Consensus Estimate for CNO Financial’s 2024 and 2025 earnings implies year-over-year growth of 20.7% and 0.6%. It beat earnings estimates in three of the past four quarters while missing in one, with an average surprise of 24.51%. In the past year, shares of CNO have gained 51.4%.
The Zacks Consensus Estimate for Horace Mann’s 2024 and 2025 earnings implies year-over-year growth of 69.4% and 43.3%, respectively. It beat earnings estimates in two of the past four quarters, while matched in one and missed in one, with an average surprise of 4.57%. In the past year, shares of HMN have gained 24.6%.
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