Radian Group (RDN), mcap=$3.9bn, price $22.31 vs $20.50

– Mortgage insurer at 86% of TBV with pending large capital releases that will significantly increase TBV/share.
– The company is scheduled to start releasing contingency reserves that it had to hold for 10 years.
– Starting in 2024 $400m+ will be released annually and could be used for dividends buybacks without any further approval from regulators.
– Scheduled releases over 10 years equate to 115% of $RDN’s market cap.
– On top of that, the company is set to generate $600m/year from operations (17% yield).

Valuation: Assuming investors are willing to pay a 12-month-out-book value taking into account reserve leases and earnings from operations, RDN is worth $30/share of fwd TBV.

Exp. gain: +50% to $30/share.

Full $RDN write-up (free guest account required):

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