MBIA & Radian Group Face Significant Downside Pressure
04 Février 2011 - 5:25PM
Marketwired
The Surety & Title Insurance sector has struggled early in
2011. Insurers hold as much as two-thirds of their assets in bonds,
and as such are highly sensitive to credit market conditions.
Analysts expect that weak investment portfolios and reduced income
from the variable annuities, in addition to weak underwriting, will
make for downside pressure on these companies in the coming months.
The Bedford Report examines the outlook for companies in the Surety
& Title Insurance Industry and provides research reports on
Radian Group, Inc. (NYSE: RDN) and MBIA, Inc. (NYSE: MBI). Access
to the full company reports can be found at:
www.bedfordreport.com/2011-02-RDN
www.bedfordreport.com/2011-02-MBI
Yesterday shares of Radian Group fell close to 4 percent after
the mortgage insurer said that it lost $1.1 billion last quarter.
Though the company says that its core business continued to
improve, Radian does not see its mortgage insurance operations
being profitable this year. The company expects mortgage insurance
claims paid to rise to $1.7 billion in 2011. Its total claims
payout in 2010 was $1.26 billion.
The Bedford Report releases regular market updates on the Surety
& Title Insurance Industry so investors can stay ahead of the
crowd and make the best investment decisions to maximize their
returns. Take a few minutes to register with us free at
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Maintaining a high credit rating is critical to the success of a
bond insurer as these companies rely on a high credit rating to
allow themselves to guarantee lower rated debt. After experiencing
catastrophic losses following the 2007 subprime mortgage crisis,
bond insurers began to lose their AAA ratings and were forced to
stop selling new guarantees. S&P announced that there are nine
new categories and that companies will likely have to raise
additional capital and lower risk if they want to achieve high
investment grades. This change comes in response to the bout of
companies that lost AAA investment grades during the financial
crisis. In fact, MBIA was forced into pursuing a restructuring of
their business when the crisis took place. S&P also changed its
criteria for mortgage-backed bonds and other securities after
assigning top ratings to financial instruments that later collapsed
in value during the credit crisis.
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