FBR Touts PMI, Radian, MGIC

A report from Friedman, Billings, Ramsey & Co., Arlington, Va., says the company continues to recommend that investors purchase the stocks of PMI Group, Walnut Creek, Calif., Radian Group, Milwaukee, and MGIC Investment Corp., Milwaukee.FBR cited data from the September 2006 Mortgage Insurance Companies of America report [see previous item] that show a 1.0% gain in primary insurance in force, making it 11 straight months of growth. The MICA data do not include information from Radian, which is not a member of the trade group. "Year to date, insurance in force has increased an impressive 5%," FBR said. "Persistency also improved from 68.7% to 69.8%. Despite the continue growth in the top-line revenue drivers, investors' concerns remain focused on the credit side of the story, and 3Q06 earnings results did not provide much comfort." Another positive factor, FBR said, was the 72.3% cure/default ratio for September, down slightly from what it termed a "surprisingly strong" 74.4% in August and slightly higher than the 72.1% recorded in September 2005. The MIs have also been regaining market share from piggyback loan products. FBR noted that investors have shunned the stocks. But trading at 1.1 times tangible book value, "we believe that the stocks offer an attractive opportunity," the company said.