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Summary: This company provides credit-related insurance coverage and financial services in the United States and internationally.
Quantitative Evaluations
S&P Quality Ranking : C
D C BB B+ AA A+
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5
Highest
RDN scored higher than 69% of all companies for which an S&P Report is available.
Volatility: High
Low Average High
Vol. Mil. 30 20 10 0 F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S 119
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Options: P
Investment Strategy
Key financial variables to consider in assessing the investment merits of a financial company are the following: Net Interest Margin: What is the trend? Widening margin, which is the difference between yield on earning assets and rate paid on funds, can indicate more successful management of assets and liabilities, lead to greater contribution to net interest income from a given level of loan growth. Return on Assets: Rising ROA can indicate improving margins, lower loss rates. Given relatively large base of assets, most banks tend to have low ROA's (0.6% to 1.5%) compared with industrial companies. % Reserve for Loan Losses: The amount of reserve generally rises over time to account for loan growth. A higher percentage can indicate a riskier lending portfolio or an expected weakening of credit quality. % Return on Equity: Key perfomance measurement of capital efficency assesses what investment returns management can earn on a company's existing capital base. A sustained percentage above 20% is considered above average.
Revenues/Earnings Data
Revenues (Million Can. $) 2011 1Q 603.3 2Q -3Q -4Q -Year 417.5
Fiscal year ending Dec. 31 2009 11.46 577.4 331.6 392.9 1,313 2008 486.2 471.8 452.2 378.5 1,808 2008 2.44 -4.91 0.46 -3.11 -5.12 2007 341.5 243.2 -104.4 -130.3 201.1 2007 1.42 0.26 -8.82 -9.03 -16.22 2006 353.7 304.6 321.8 347.9 1,328 2006 1.96 1.79 1.36 1.96 7.08
Earnings per Share ($) 2011 2010 2009 1Q 0.77 -3.77 -2.69 2Q --4.31 2.82 3Q -0.84 -0.86 4Q --8.55 -1.12 Year --15.74 -1.80 Next earnings report expected: Early August
Historical GAAP earnings are as reported.
Please read the required disclosures and Reg. AC certification on the last page of this report.
This report was prepared by Standard & Poor's Quantitative Services.
Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies, Inc.
Radian Group
S&P Quality Ranking: C Wall Street Opinions/Average (Mean) Opinion: Buy/Hold
Buy Buy/Hold Hold Weak Hold Sell No Opinion Total No. of Ratings 2 5 3 1 0 0 11 % of Total 18 45 27 9 0 0 100 1 Mo. Prior 2 5 3 1 0 0 11 3 Mo. Prior 1 4 3 1 0 0 9
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Insider Moves
Insider Buys Insider Sells Price History 40
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0 Aug Sep Oct Nov Dec Jan '11 Feb Mar Apr May Jun RDN
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YTD Return One Year Return Three Year Return (% Annualized) Five Year Return (% Annualized) Value of $10,000 Invested 5 Years Ago
Company(%) Industry(%) S&P 1500(%) -41.5 -14.9 7.3 -40.4 -7.5 26.9 40.6 -34.8 2.5 -40.0 -39.4 1.7 $775 $816 $10,879
Company Financials
Tangible Book Value Operating Earnings Earnings Dividends Payout Ratio Prices:High Prices:Low P/E Ratio:High P/E Ratio:Low
Income Statement Analysis (Million $) Premium Income Net Investment Income Other Revenue Total Revenue Pretax Income Net Operating Income Net Income Balance Sheet & Other Financial Data (Million $) Cash & Equivalent Premiums Due Investment Assets:Bonds Investment Assets:Stocks Investment Assets:Loans Investment Assets:Total Deferred Policy Costs Total Assets Debt Common Equity Property & Casualty:Loss Ratio Property & Casualty:Expense Ratio Property & Casualty Combined Ratio % Return on Revenue % Return on Equity
Office: 1601 Market Street, Philadelphia, PA, 19103 Tel: 215-231-1000 Email: finance.department@radianmi.com Website: http://www.radiangroupinc.com Chrmn: H. Wender
Data as orig. reptd; bef. results of disc opers/spec. items. Per share data adj. for stk. divs. as of ex-div date. NA-Not Available. NM-Not Meaningful. NR-Not Ranked. CEO: S. A. Ibrahim Dirs: D. C. Carney, H. B. Culang, L. W. Hess, S. T. Hopkins, S. A. Ibrahim, J. W. Jennings, R. W. Moore, J. Nicholson, R. W. Richards, A. Schweiger, N. J. Spiegel, H. Wender EVP & CFO: C. R. Quint Secy & General Counsel: E. J. Hoffman Cntlr, Chief Acctg Officer & SVP: C. M. Jackson Investor Contact: Mona Zeehandelaar(215-231-1674) Founded: 1991 Domicile: Delaware Employees: 767
Source: S&P, I/B/E/S International, Inc. Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies,Inc.
Radian Group
S&P Quality Ranking: C Sub-Industry Outlook
Our neutral fundamental outlook for the thrifts and mortgage finance sub-industry reflects our view that the U.S. economy will gradually improve in 2011. Loan growth, widening spreads, and a gradual recovery of the housing market will likely take place in 2011. Overall loan growth in 2011, though improving, will be mixed, reflecting our outlook for slightly higher mortgage rates offset by our view of stricter lending criteria. We also believe charge-offs and loan loss provisions reached a peak in mid-2010 and will continue to decline gradually in 2011. However, we think the housing and economic recoveries are weak, and more susceptible to reversal than prior recoveries; thus our neutral stance on this sub-industry group. As of late June 2011, the yield on the 10-year Treasury note was 3.14%, down from a 2011 high of 3.75% in early February, while the current yield on the three-month Treasury bill was just 0.02%, a positive spread of 312 basis points, down from a high of 360 basis points in February. The decline since early February is due to investors' perceptions that the U.S. economic recovery is losing steam. However, we think many of the weak economic readings lately may have been related to natural disasters and weather-related slowdowns, and may rebound. Going forward, we expect a slight widening of the positively sloped yield curve, as short-term and long-term rates will likely both increase from their current levels. In our view, this should have a positive effect on industrywide net interest margins and profits during the rest of 2011. Year to date through June 30, the S&P Thrift and Mortgage Finance Index was down 15.1%, versus a 6.9% increase in the S&P 1500 Index. In 2010, the sub-industry group was up 2.1%, compared to a 14.2% increase for the S&P 1500 Index. --Erik Oja
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Sector
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NOTE: All Sector & Sub-Industry information is based on the Global Industry Classification Standard (GICS)
NA-Not Available NM-Not Meaningful NR-Not Rated. *For Peer Groups with more than 15 companies or stocks, selection of issues is based on market capitalization.
Source: S&P. Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies,Inc.
Radian Group
S&P Quality Ranking: C S&P Analyst Research Notes and other Company News
May 31, 2011 11:51 am ET ... S&P DROPS ANALYTICAL COVERAGE ON SHARES OF RADIAN GROUP (RDN 4.8): We are dropping analytical coverage on the shares of this provider of private mortgage insurance to residential mortgage lenders due to a shift in our investor focus. Our most recent recommendation on the stock was hold (RDN 4.80***). /RKhalid, CFA May 27, 2011 11:51 am ET ... S&P DROPS ANALYTICAL COVERAGE ON SHARES OF RADIAN GROUP (RDN 4.8): We are dropping analytical coverage on the shares of this provider of private mortgage insurance to residential mortgage lenders due to a shift in our investor focus. Our most recent recommendation on the stock was hold (RDN 4.80***). /RKhalid, CFA May 5, 2011 09:59 am ET ... S&P MAINTAINS HOLD OPINION ON SHARES OF RADIAN GROUP (RDN 5.98***): Q1 earnings per share of $0.77, vs. a $3.77 loss, is well better than our $1.17 loss estimate, reflecting the positive change in fair value of derivatives and other financial instruments. While we see delinquency levels stabilizing, we think loss provisions will gradually decline in '11 and '12. As a result, we are narrowing our '11 loss estimate by $0.85 to a $3.50 loss and '12's by $0.93 to a $0.79 loss. We are raising our 12-month target price by $1.00 to $7.00, on a historical discount price-to-sales ratio of 1.00X our '11 sales per share forecast of $7.36. /R.Khalid,CFA April 21, 2011 02:27 pm ET ... S&P RAISES OPINION ON SHARES OF RADIAN GROUP TO HOLD FROM SELL (RDN 5.42***): Since January 1, RDN shares have declined 33%, compared to an increase of 6% for the S&P 500. While we think the company will generate losses in 2011 and 2012, we believe they will gradually narrow. We maintain our '11 estimate of a $4.35 loss and '12's of a $1.72 loss. We also keep our 12-month target price of $6.00, on a historical discount price-to-sales ratio of 1.11X our '11 sales per share forecast of $5.45. We are raising our opinion to hold, from sell, as we believe RDN shares now have modest upside potential to our target price. /RKhalid, CFA February 14, 2011 Radian Group Inc. announced that it has increased the size of its board of directors from ten to twelve members and appointed Lisa W. Hess and Noel J. Spiegel as members of the Board. Ms. Hess has been president and managing partner of SkyTop Capital Management LLC since 2010. Mr. Spiegel is a retired partner with Deloitte & Touche, LLP and has more than 40 years of auditing experience working with senior management and audit committees of public and privately-held companies. February 11, 2011 UP 0.94 to 8.02... RDN, peers including MGIC INVESTMENT, PMI GROUP and GENWORTH FINL seen higher as newswire reports the Obama administration proposed reforms to revamp the ailing mortgage market that will give private mortgage players a bigger role in the housing market. February 4, 2011 Radian Group Inc. reported unaudited consolidated earnings results for the fourth quarter and full year ended December 31, 2010. For the quarter, the company posted net loss of $1,132,617,000 or $8.55 per diluted share compared to net loss of $91,867,000 or $1.12 per diluted share for the same period a year ago. Pre-tax loss was $519,695,000 compared to $148,292,000 for the same period a year ago. Total revenues were negative at $45,905,000 against positive total revenues of $392,860,000 for the same period a year ago. For the year, the company posted net loss of $1,805,867,000 or $15.74 per diluted share compared to net loss of $147,879,000 or $1.80 per diluted share for the same period a year ago. Book value per share at December 31, 2010 was $6.46 compared to $24.22 at December 31, 2009. Pre-tax loss was $1,579,678,000 compared to $242,280,000 for the same period a year ago. Total revenues were positive at $417,465,000 against $1,313,378,000 for the same period a year ago. The results for 2010 included the impact of a non-cash, GAAP accounting charge of $841.5 million, or $6.35 per share in the fourth quarter of 2010, related to establishing a valuation allowance
Source: S&P. Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies,Inc.
against substantially all of the company's net deferred tax asset (DTA) and also includes a pre-tax loss from the change in fair value of derivatives of $185.9 million for the quarter and $558.7 million for the year. February 3, 2011 DOWN 0.64 to 6.71... RDN posts $8.55 Q4 loss vs. $1.12 loss. Posts 24% decline in net premiums written. Results include GAAP accounting charge of $841.5M, or $6.35 per share, related to establishing a valuation allowance against substantially all of co.'s net deferred tax asset (DTA) and a pre-tax loss from the change in fair value of derivatives of $185.9M. February 3, 2011 10:54 am ET ... S&P LOWERS OPINION ON SHARES OF RADIAN GROUP TO SELL FROM HOLD (RDN 7.12**): Q4 loss per share of $8.55, vs. a $1.12 loss, is well below our $0.18 EPS estimate, reflecting lower than expected revenues. We believe revenues will be hurt by the change in fair value of derivatives during the year, as we think RDN's credit spread will tighten. We are widening our '11 loss estimate by $3.89 to a $4.35 loss. We are reducing our 12-month target price by $2.00 to $6.00, on a historical discount price-to-sales ratio of 1.11X our '11 sales per share forecast of $5.45. We are lowering our opinion to sell, from hold, as RDN shares are trading above our target price. /RKhalid, CFA
Radian Group
S&P Quality Ranking: C
Analysts' Recommendations
Monthly Average Trend Buy
B
Standard & Poor's Fair Value Rank : 1Wall Steet Consensus Opinion
Buy/Hold
BH
Hold
H
Weak Hold
WH
Sell S
No Opinion
RDN Trend
BUY/HOLD Companies Offering Coverage Barclays Capital Compass Point RES & Trdg LLC Credit Suisse - North America Dowling & Partners Securities, LLC FBR Capital Markets & Co. Goldman Sachs & Co. Keefe, Bruyette & Woods, Inc. Macquarie Research Northland SEC Piper Jaffray Susquehanna Financial Group
20
10
2009
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2011
Of the total 11 companies following RDN, 11 analysts currently publish recommendations. No. of Ratings 2 5 3 1 0 0 11 % of Total 18 45 27 9 0 0 100 1 Mo. Prior 3 Mos. Prior 2 1 5 4 3 3 1 1 0 0 0 0 11 9 Wall Street Consensus vs. Performance
2011 2012 2010 Actual $-15.74
Buy Buy/Hold Hold Weak Hold Sell No Opinion Total Wall Street Consensus Estimates
Estimates 10 0 -10 -20
M A M J J A S
2010
For fiscal year 2011, analysts estimate that RDN will earn $-2.11. For the 1st quarter of fiscal year 2011, RDN announced earnings per share of $0.77, representing -36% of the total annual estimate. For fiscal year 2012, analysts estimate that RDN's earnings per share will grow by 99% to $-0.02.
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Fiscal Years 2012 2011 2012 vs. 2011 Q2'12 Q2'11 Q2'12 vs. Q2'11
# of Est. 5 5 0% 5 5 0%
Est. P/E NM NM NM NM NM NM
A company's earnings outlook plays a major part in any investment decision. Standard & Poor's organizes the earnings estimates of over 2,300 Wall Street analysts, and provides their consensus of earnings over the next two years. This graph shows the trend in analyst estimates over the past 15 months.
Source: S&P,I/B/E/S International, Inc. Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies,Inc.
Radian Group
S&P Quality Ranking: C Glossary
S&P Quality Ranking - Growth and stability of earnings and dividends are deemed key elements in establishing S&P's quality ranking for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted that, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings, The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of rankings: A+ Highest B Lower A High BBelow Average AAbove Average C Lowest B+ Average D In Reorganization NR Not Ranked S&P Fair Value Rank - Using S&P's exclusive proprietary quantitative model, stocks are ranked in one of five groups, ranging from Group 5, listing the most undervalued stocks, to Group 1, the most overvalued issues. Group 5 stocks are expected to generally outperform all others. A positive (+) or negative (-) Timing Index is placed next to the Fair Value ranking to further aid the selection process. A stock with a (+) added to the Fair Value Rank simply means that this stock has a somewhat better chance to outperform other stock with the same Fair Value Rank. A stock with a (-) has a somewhat lesser chance to outperform other stocks with the same Fair Value Rank. The Fair Value rankings imply the following: 5-Stock is significantly undervalued; Fair Value Rank. A stock with a (-) has a somewhat lesser chance to outperform other stocks with the same Fair Value Rank. The Fair Value rankings imply the following: 5-Stock is significantly undervalued; 4-Stock is moderately undervalued; 3-Stock is fairly valued; 2-Stock is modestly overvalued; 1-Stock is significantly overvalued. Funds From Operations (FFO) - FFO is Funds from Operations and equal to a REIT's net income, excluding gains or losses from sales of property, plus real estate depreciation. Fair Value Calculation - The current price at which a stock should sell today as calculated by S&P's computers using our quantitative model based on the company's earnings, growth potential, return on equity relative to the S&P 500 and its industry group, price to book ratio history, current yield relative to the S&P 500, and other factors. Investability Quotient (IQ) - The IQ is a measure of investment desirability. It serves as an indicator of potential medium-to-long-term return and as a caution against downside risk. The measure takes into account variables such as technical indicators, earnings estimates, liquidity, financial ratios and selected S&P proprietary measures. Standard & Poor's IQ Rationale: Radian Group Raw Score Max Value Proprietary S&P Measures 1 115 Technical Indicators 4 40 Liquidity/Volatility Measures 15 20 Quantitative Measures 74 75 IQ Total 94 250 Volatility - Rates the volatility of the stock's price over the past year. Technical Evaluation - In researching the past market history of prices and trading volume for each company, S&P's computer models apply special technical methods and formulas to identify and project price trends for the stock. Relative Strength Rank - Shows, on a scale of 1 to 99, how the stock has performed versus all other companies in S&P's universe on a rolling 13-week basis. Global Industry Classification Standard (GICS) - An industry classification standard, developed by Standard & Poor's in collaboration with Morgan Stanley Capital International (MSCI). GICS is currently comprised of 10 Sectors, 24 Industry Groups , 67 Industries, and 147 Sub-Industries. Dividends on American Depository Receipts (ADRs) and American Depository Shares (ADSs) are net of taxes (paid in the country of origin).
Disclaimer
This material is based upon information that we consider to be reliable, but neither SPQS nor its affiliates warrant its completeness or accuracy, and it should not be relied upon as such. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale so any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.
Source: S&P, Company Reports. Redistribution or reproduction is prohibited without written permission. Copyright 2011 The McGraw-Hill Companies,Inc.