StockCall Insight Into MGIC and Radian: Understanding How Property & Casualty Insurance Works

StockCall Insight Into MGIC and Radian: Understanding How Property & Casualty
                               Insurance Works

PR Newswire

LONDON, February 11, 2013

LONDON, February 11, 2013 /PRNewswire/ --

Insurance companies make money from two sources - from the premiums they
collect and from the investments they make. Low interest rates and weak
returns from investments over prolonged periods force property and casualty
insurers to improve underwriting margins, which is not always easy. Organic
growth remains a challenge for international as well as domestic property and
casualty insurance companies like MGIC Investment Corp. (NYSE:MTG) and Radian
Group Inc. (NYSE:RDN). StockCall has issued technical analysis and charting
reports on MGIC and Radian. Download these free researches now at

Property and Casualty a 'Soft' Industry

During the late 1990s there was a substantial decline in property and casualty
premiums, which is why the industry is considered as "soft". This is nothing
new for the industry as the last time the property and casualty market was
really "hard" was way back in 1985. There are however always exceptions
related to geographies (major catastrophes) and some particular types of
property and casualty insurance. 

As the property and casualty insurance companies struggle with challenges
posed by increased competition, uncertainty surrounding scope and timing of
regulatory changes and gradual increase in claims including weather related
claims of enormous proportions such as with the recent super storm Sandy. The
encouraging factor, however, is that new companies are not showing up with the
same speed as before. What the industry needs to do is to adopt a holistic
approach to opportunities and the challenges it faces.

MGIC Investment Corp. and Radian Group Inc. Brief Description

Mortgage Guaranty Insurance Corporation, the principal subsidiary of MGIC
Investment Corp. is a private mortgage insurer that is licensed in all 50
states, the District of Columbia, Guam and Puerto Rico and offers an
alternative to federal government insurance programs. As of September 30,
2012, the company covered 1 million mortgages with $164.9 billion primary
insurance in force. Download the free research on MGIC today by registering
now at

Radian Group is a credit enhancement company that focuses on first-lien
residential mortgage insurance in the domestic market. The company operates in
two segments - mortgage insurance and financial guaranty. Recently, the
company announced availability of mortgage insurance rates through an
application, Radian Rates, for Android devices on Google Play. Radian Rates is
a mobile version of its existing online rate finder that allows lenders to
access mortgage insurance rates on the go. Sign up and have access to our free
report on Radian at

A Quick Comparison

In the first nine months of 2012 there was a difference of $8 billion between
new insurance written by the two companies. While RDN wrote new insurance
worth $25.4 billion, MTG could manage only $17.1 billion.

Under normal conditions, the profit margin of both companies is expected to be
similar, which means that it is safe to presume that the difference between
profits of both companies will be in the same proportion as the premiums
collected by them. Going by that logic, profit of MTG should be roughly
one-third of RDN's profit.

That, however, is a very primitive way of assessing the long-term effect of
new insurances written by the two companies. The fact is that in an effort to
boost its cash flows, Radian has been undercutting competitors in single
premium policies, which form 35% of the new insurance it writes. For a fair
comparison, single premium business needs to be removed from new insurance
written by Radian.

Radian will be releasing its earnings today (data were not available at the
time this article was completed).

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