i don't look at reserves at all when valuing these companies, they are pure fantasy, i look at cash sources vs cash uses over a 15 year run off period, giving credit for a few more years of niw, and taking into consideration debt costs, etc, the hardest thing with rdn is the fg sub, but even being conservative there, there is no way mtg deserves such a premium to rdn, in some ways rdn is doing a better job of maintaining iif which helps with runoff premiums, i think mtg has a bit of a halo in this sector which is far from justified.
I think the most relevant comparable statistic between MTG and RDN would be their respective reserve divided by their enterprise value. even though both are under-reserving by anywhere from 30 to 50% I think that stat gives the best indication of relative value.
MTG has an EV of approx. $2.6 billion and a reserve of I believe $5.2 billion or 50%. Where is RDN and I guess we should give them book value on the FG if you could subtract that from EV.
By the way, the pair trade is to get long GNW vs MTG short or possibly ORI although GNW's discount to book is much nicer.
I did buy back to May ones, but I was stupid enough to sell the June ones. However, fortunately I did sell the $5 and $6 naked. However, even with that, I'm still bleeding. So freaking pathetic! I'm thinking of selling naked calls on MTG. Paid might be right. MTG hasn't been hit nearly as hard as RDN.
as you know i have been watching these stocks a long time and even i find it odd the difference between pmi+rdn and mtg, if pmi and rdn are worth 40% less than a few months ago, why is mtg still at a 1.5B+ market cap, it's not like their exposures are that different, if i were holding mtg long i would be very, very nervous the selling wave will hit me next.