RADIAN GROUP INC (RDN): what the price assumes

In the published model solve dated 2026-Q2, anchored at $39.17, RADIAN GROUP INC (RDN) is priced for 9.6% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-10 · Exported: 2026-08-12 · Source: https://boothcheck.com/report/RDN

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 9.2% cost of equity with 4% terminal growth over a 10-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.1pp.

How unusual the bet is: within-range

Valuation X-Ray

The price is supported by asset-based and earnings-power value, while growth-DCF lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings Families that call it expensive: Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=5)

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Radian trades around $34.67, just below its tangible book value (price-to-book near 0.96), while earning a return on equity in the low-double-digits against a cost of equity near 9.2 percent. A business that out-earns its own capital cost and still changes hands under book is the setup value investors look for.

The share count is shrinking about 6 percent a year. Management is buying its own stock below book value and has guided buybacks up to roughly $200 million in the second quarter, which mechanically lifts per-share book and earnings without needing the business to grow.

The price is supported by asset value, earnings power, and peer multiples; only the growth-DCF lens calls it expensive. That pattern says the market is paying for what Radian already earns, not for a future it has to deliver.

Bull Case

Start with the balance sheet, because that is where Radian's confidence shows. The reserve for losses and loss adjustment expense stood at $399.9 million at year-end 2025, up from $354.4 million a year earlier, of which $378.3 million is primary case reserve set against loans already in default (FY2025 10-K, accession 0001193125-26-061383). For a mortgage insurer, a steady, well-covered reserve through a high-rate housing market is the tell that underwriting discipline held. The mortgage book ran a 30.2 percent combined ratio in the first quarter of 2026, meaning roughly seventy cents of every premium dollar dropped past claims and expenses before investment income. That is the engine, and it is running clean.

Management is treating its own stock as the best asset it can buy. The company repurchased shares through the fourth quarter of 2025 and has guided second-quarter 2026 buybacks toward $200 million, explicitly on the view that the shares are undervalued (FY2025 10-K share repurchase disclosure, accession 0001193125-26-061383). The share count is contracting about 6 percent a year. When a company buys stock below tangible book value, every dollar spent adds more book value per share than it costs, so per-share metrics compound even if the underlying business merely holds steady. Pair that with thirty-two straight years of dividends and five straight years of dividend increases, and the capital-return story is not a promise, it is a track record.

The valuation methods agree the price is conservative. The bank-style price-to-tangible-book model, anchored on tangible book of about $34 (June 28, 2026).73 per share and an ROE that comfortably clears the cost of equity, lands near $54.66. Relative valuation at a sector P/E of about 11x lands near $51. Excess-return models land in the $44 to $49 range. The price sits below all of them. Only the perpetual-growth DCF, which a regulated insurer is the wrong tool for, calls the stock rich. The shape of that disagreement is the bull case: you are buying earnings power and book value at a discount, with the growth optionality from the February Inigo acquisition thrown in rather than paid for.

Bear Case

The variable with the most leverage over Radian's thesis is the housing and rate cycle, and the current price does not fully reflect how that cycle can turn. Radian earns its living insuring lenders against mortgage default. Persistency, the rate at which insured loans stay on the books, sat in the high-twenties to low-eighties depending on the rate band at year-end 2025 (FY2025 10-K, accession 0001193125-26-061383), which means the in-force book churns with refinancing waves. New insurance written jumped 42 percent year over year to $13.5 billion in the first quarter, but that volume is a function of mortgage origination, which is hostage to mortgage rates and home affordability. A sharp move in either direction reshapes the franchise: lower rates trigger refinancing that runs off the high-quality back book, higher rates choke origination volume. Neither is in the operator's control.

The second risk is regulatory capital, the only solvency frame that matters for a financial. Mortgage insurers operate under minimum capital and PMIERs asset requirements set by the GSEs and state regulators (FY2025 10-K, accession 0001193125-26-061383). Those requirements are not static. A stress event that pushes defaults higher forces reserves up and available capital down at the same moment buybacks and dividends are competing for that capital. The case reserve of $378.3 million looks comfortable against a benign 2025, but reserve adequacy is only ever tested in a downturn that has not yet arrived. The combined ratio that looks like thirty cents of cost today can move fast when delinquencies rise.

The third concern is that Radian is mid-transformation, and transformations carry execution risk the multiples do not price. The February 2026 Inigo acquisition turns a focused U.S. mortgage insurer into a multi-line specialty insurer underwriting at Lloyd's, while the company simultaneously exits its Mortgage Conduit, Title, and Real Estate Services businesses as discontinued operations. Specialty insurance at Lloyd's is a different risk discipline with its own reserving and cycle dynamics, and the new segment contributed only a partial quarter of results so far. The market is being asked to underwrite an integration it cannot yet observe. If the specialty book reserves worse than expected, the asset-supported valuation that anchors the bull case loses its anchor.

Valuation

Radian is valued the way a financial should be: off book value and return on equity, not off a discounted-cash-flow projection. The current price near $34.67 implies a price-to-tangible-book of about 0.96, set against a trailing ROE in the high-elevens to low-twelves and a cost of equity near 9.2 percent. A business earning above its capital cost should trade above book, so the sub-book price is the central tension the methods try to resolve.

Four applicable methods cluster well above the price. The bank price-to-tangible-book model lands near $54.66, using tangible book of about $34.73 per share and a multiple driven by the ROE-to-cost-of-equity spread (FY2025 10-K reserve and capital disclosures, accession 0001193125-26-061383). Relative valuation at a sector-median P/E near 11x lands around $51. The simple and two-stage excess-return models, which start from book value and add the present value of returns earned above the cost of equity, land near $44 and $49. The growth-DCF and dividend-discount lenses are the outliers, and for a regulated insurer with float-funded economics they are the wrong frame, not a real warning.

The priced-in read is that the market is paying for asset value, earnings power, and peer multiples, while only the growth lens objects. The honest caveat is that every one of these methods leans on book value and reserve adequacy holding, so the valuation is only as good as the next downturn lets it be. What the market is not paying for here is the Inigo specialty platform, which arrives as optionality rather than as a number already in the price.

Catalysts

First-quarter 2026 results, reported in early May, beat on both lines. Revenue rose 46 percent year over year to $466.3 million and adjusted EPS rose 22 percent to $1.27, with the mortgage segment posting a 30.2 percent combined ratio and new insurance written up 42 percent to $13.5 billion. The result was flattered by the new Specialty segment but the core mortgage engine carried it.

The defining event is the February 2026 acquisition of Inigo, which adds a Lloyd's-based specialty insurance platform and reframes Radian as a multi-line specialty insurer. The new Specialty segment contributed $180.4 million of revenue and $5.7 million of net income in a partial first quarter. In parallel, Radian is exiting its Mortgage Conduit, Title, and Real Estate Services businesses, now classified as discontinued operations, sharpening the company to two engines: mortgage insurance and specialty.

Capital return is the near-term lever. Management guided second-quarter buybacks toward roughly $200 million, citing the view that the stock is undervalued, on top of a dividend the company has paid for thirty-two consecutive years and raised for five. The next catalysts to watch are the second-quarter print for the first fuller read on Inigo's contribution and reserve behavior, any PMIERs or regulatory-capital commentary that bears on buyback capacity, and the trajectory of mortgage origination as rates move. Analyst sentiment is a Buy consensus with an average price target in the low-to-mid $40s.

Peer Cohorts (Per Segment, With Filing Citations)

Mortgage Insurance (reported)

• MTG (MGIC Investment Corp)
• FY2025 10-K: …However, there can be no assurance that the higher premium rates adequately reflect the risks associated with higher coverage percentages. In accordance with GAAP for the mortgage insurance industry, loss reserves are only established for policies covering delinquent loans. Historically, because relatively few…
• FY2025 10-K: Insurer Eligibility Requirements issued by each of Fannie Mae and Freddie Mac to set forth requirements that an approved insurer must meet and maintain to provide mortgage guaranty insurance on loans delivered to or acquired by Fannie Mae or Freddie Mac, as applicable Premium Rate The contractual rate charged for…
• NMIH (NMI Holdings, Inc.)
• FY2025 10-K: …and services (including training and loan review services), financial strength, customer relationships, name recognition and reputation, the strength of management teams and sales organizations, the effective use of technology, and innovation in the delivery and servicing of insurance products. We expect the MI…
• FY2025 10-K: …is placed; • annual - premiums are paid in advance for a subsequent twelve-month period over the life of a policy; • monthly - premiums are paid in advance on a monthly basis over the life of the policy; and • Monthly Advantage ® - premiums are billed upon our receipt of notice of a mortgage close and then paid in…
• ESNT (ESSENT GROUP LTD.)
• FY2025 10-K: …coverage are typically made by the borrower. Mortgage insurance paid directly by the borrower is referred to as borrower-paid mortgage insurance ("BPMI"). If the borrower is not required to pay the premium, then the premium is paid by the lender, who may recover the premium through an increase in the note rate on the…
• FY2025 10-K: …insurance, as well as for loans that do not require private mortgage insurance. Under the terms of our contract underwriting agreements with customers and subject to contractual limitations on liability, we agree to indemnify the customer against losses incurred in the event that we make an underwriting error which…
• ACT (Enact Holdings, Inc.)
• FY2025 10-K: …coverage percentage. Generally, our risk across all policies written is approximately 25% of the underlying primary insurance in-force ("IIF"), but may vary from policy to policy, typically between 6% and 35% coverage. We file our premium rates, as required, with insurance departments of U.S. States and the District…
• FY2025 10-K: …GSEs enter into risk sharing transactions with financial institutions designed to reduce the risk of their mortgage portfolios. Competition also comes from portfolio lenders that are willing to hold credit risk on their balance sheets without credit enhancement. In addition, investors can make use of risk-sharing…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.