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Radian Group (RDN) Expands Share Repurchase Authorization

Zacks Equity Research
Strong growth of Imbruvica and Mavyret are expected to drive AbbVie (ABBV) first-quarter sales. Declining ex-U.S. Humira sales are likely to be an overhang on the top line.

The board of directors of Radian Group Inc. RDN has approved a share buyback program, which takes the total authorization to $250 million. The company may buy back the shares through Jul 31, 2020.

The latest approval of $150 million is in addition to the company’s existing share repurchase, taking the total authorization to $250 million from 100 million.

On Aug 16, 2018, the board of directors had approved a share buyback program under which the company could repurchase up to $100 million shares by July 2019. As of Dec 31, 2018, the full authorization was available.  

A sturdy financial position backed by solid core operations enables the company to generate enough capital. In its effort to optimize capital and liquidity position, the Zacks Rank #3 (Hold) insurer bought back more than 3 million shares in 2018, exhausting the $50 million buyback authorization approved on Aug 9, 2017. The company had about 218.6 million shares outstanding as of 2018 end.

Radian Group’s liquidity increased after Radian Guaranty returned $450 million in December 2018, as approved by the Pennsylvania Insurance Department. This distribution of capital is part of the company’s long-term capital plan intended to improve its financial flexibility and capital position.

Share repurchases benefit the company’s earnings per share, book value as well as shareholder equity.  

Shares of Radian Group have gained 14.4% in a year’s time against the industry’s decline of 2.5%. Improvement in the quality and size of mortgage insurance in force, declining claim payments and healthy risk-based capital ratio will continue to drive the stock.

Recently, the board of directors of another mortgage insurer MGIC Investment Corp. MTG approved a share repurchase authorization of $200 million.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Berkshire Hathaway Inc. BRK.B and Arch Capital Group Ltd. ACGL.

Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance besides operating railroad systems in North America. The company came up with positive surprise in three of the preceding four reported quarters, with the average beat being 4.31%. The company is a Zacks #1 (Strong Buy) Ranked player. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprise in all the last four reported quarters, with the average being 14.72%. The company has a Zacks Rank of 2 (Buy).

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