RDN Radian Group Inc

Blaylock Initiates Coverage of the Mortgage Insurance Industry With a 'Buy' Rating on Radian Group and 'Hold' Ratings on MGIC Investment and PMI Group NEW YORK, Nov. 14 /PRNewswire/ -- Blaylock & Partners' equity analysts Joshua Shanker and Harry Fong have initiated coverage on the mortgage insurance industry with a "Buy" rating on Radian Group and "Hold" ratings on MGIC Investment Corp. and PMI Group . In a sector overview titled "Lender's Paradise: Mortgage Insurance 101," Messrs. Shanker and Fong state that the mortgage industry now straddles the fence between a mature industry and a growth sector. Private mortgage insurers have achieved 20% top line growth over the past decade, consolidation has been robust, and there have been numerous new entrants and new products. And though loss ratios are trending up, stock prices have come in to reflect the new claims heavy environment. Radian Group: Messrs. Shanker and Fong rank Radian Group a "Buy" as they believe the stock is undervalued despite a recent run-up in its stock price. The company is transitioning into a diversified enhancement company, which may lead to reduced cyclicality in earnings and provide new sources of ROE expansion. Though mortgage defaults and weakening claims are likely to continue, Radian Group has the strongest geographic focus in its peer group, and Radian is currently reaping the benefit of high new business premiums. MGIC Investment Corp.: Messrs. Shanker and Fong rate MGIC a "Hold," as they believe it likely will experience losses exceeding industry averages due to the company's expansion into higher-yielding non-prime mortgage loans and participation in higher default markets. Indeed, MGIC dominates in the manufacturing-focused Midwest where mortgage defaults are edging higher into the 5-6% range. If the current mortgage default environment persists, Messrs. Shanker and Fong believe that MGIC's decision to stop writing deep-cede, risk-sharing agreements could backfire. This company's recent stock run-up is based on a level of optimism that the analysts believe has arrived too soon. PMI Group: Messrs. Shanker and Fong also rate PMI Group a "Hold" as the investment community observes how PMI digests its upcoming acquisition of FGIC. High loss trends and other macro factors will continue to impede the stock's appreciation despite the resolution of a HUD investigation that had been one of the stock's principal overhangs. Messrs. Shanker and Fong grant that PMI is adequately capitalized to endure mortgage insurance industry losses, but believe investor sentiment is not yet behind the company. Though the company appears to be undervalued, investors will be slow to embrace it until the company successfully diversifies its revenues streams. Institutional investors interested in receiving more information should contact Mr. Shanker at 212/715-3310 () or Mr. Fong at 212/715-6640 (). Reporters interested in receiving copies of the abovementioned research should contact J.Todd Smith at . Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P. is a member of the National Association of Securities Dealers, CRD number 35669. DATASOURCE: Blaylock & Partners CONTACT: J.Todd Smith of Starkman & Associates, +1-212-252-8545 x24,

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