FBR Cuts Radian EPS

FBR Capital Markets increased its projected net loss for this year at The Radian Group, Philadelphia, as it believes credit losses will have a more significant near-term impact on the mortgage insurer. "While we expect Radian to benefit from the same loss mitigation efforts (rescissions, denials and modifications) that will also benefit MGIC, the outlook for credit losses and the associated capital relief coming from the financial guaranty subsidiary remains an open question for us," said analysts Steve Stelmach and Amy DeBone. FBR maintained its "outperform" rating on MGIC even after the large loss it reported. It rates Radian at "market perform." FBR increased its projected loss estimate for this year at Radian from $1 per share to $1.87 per share and its 2010 EPS estimate from a profit of $0.50 to a loss of $0.52. It is the financial guaranty business at Radian that concerns the analysts, who said their view of Radian's MI business is fairly consistent with the positive outlook they have for MGIC. Radian's fourth-quarter results will be negatively impacted by losses associated with trust preferred CDO exposure at the company's financial guaranty unit. "Until we gain some comfort that the financial guaranty book has avoided significant losses, we'll likely remain on the sidelines. Debt maturities are also a near-term hurdle," FBR added.