SOURCE: Five Star Equities

Five Star Equities

November 02, 2012 08:20 ET

MGIC Investment and Radian Group Shares Rise After Preliminary Deal Between MGIC and Freddie Mac Announced

Five Star Equities Provides Stock Research on MGIC Investment and Radian Group

NEW YORK, NY--(Marketwire - Nov 2, 2012) - Mortgage insurers have experienced a resurgence in 2012 as the U.S. housing market has continued its steady recovery. Recent data from the Commerce Department has shown that home sales in the U.S. are at its fastest annual pace in over two years. Five Star Equities examines the outlook for companies in the Property & Casualty Insurance Industry and provides equity research on MGIC Investment Corp. (NYSE: MTG) and Radian Group Inc. (NYSE: RDN).

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"All the things that were really holding back housing are finally starting to lift," said Guy Berger, a U.S. economist at RBS Securities Inc. "It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013."

Mortgage guarantors have also received a lift from a preliminary deal between MGIC Investment and Freddie Mac resolving a coverage dispute, which would have prevented the insurer from backing some loans. As was the case with MGIC, soured home loans have caused some insurers to breach the 25-to-1 ratio of risk relative to capital preventing them from selling new coverage.

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Under the agreement MGIC will make payments to Freddie Mac over the next four years. "While there can be no guaranty the open matters can be successfully resolved, I am hopeful we will continue to make progress," CEO Curt Culver said in a statement. For the first half of the year the company had recorded a net loss of $293.4 million. The company is scheduled to release third quarter results on November 9, 2012.

Radian Group is a credit enhancement company with a focus on domestic, first-lien residential mortgage insurance. Shares of the company jumped sharply after reporting a profit for the first time in 2012. For the third quarter of 2012 Radian reported a net income of $14.3 million, or 11 cents per share, analysts had estimated a loss of $0.59 per share according to FactSet.

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