RDN
RDN
Accumulate 2026-03-31
Model
DDM
Price at Report
$33.09
Base IV
$38.93
Bear IV
$25.59
Bull IV
$53.11
Entry Zone: 27-36 · Sell Above: 45
Bore Family Office
Valuation Report — Radian Group (RDN) • March 31, 2026
3-Stage DDM (Ke) • Discount Rate: 9.93% • Current Price: $33.09
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Radian Group is a leading US private mortgage insurance (MI) provider that recently transformed into a global multi-line specialty insurer through its $1.7B acquisition of Inigo Limited (Lloyd's of London). Founded in 1977, Radian provides private MI on residential first-lien mortgages, enabling borrowers to purchase homes with less than 20% down payment. The company serves banks, credit unions, and mortgage originators nationwide with ~900 employees.
FY2025 net income was $583M (EPS $4.14, +5.6% YoY) with an ROE of 12.6%. The company has undergone a remarkable capital transformation: eliminating all $1.5B+ of debt while simultaneously returning $1.59B via buybacks over 4 years (shares outstanding: 190M → 141M, -26%). The Inigo acquisition diversifies earnings away from the US housing cycle into global specialty insurance lines (property, casualty, marine, aviation) — a strategic pivot that could justify re-rating from the current 7.5x P/E.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Mortgage Insurance | $980M | 82% | -3.0% | — | Private MI on residential mortgages; $275B insurance-in-force; declining as book runs off |
| Homegenius (Title/Real Estate) | $80M | 7% | +5.0% | — | Title insurance, appraisal, and real estate technology services |
| Inigo (Specialty Insurance) | $136M | 11% | +15.0% | — | Lloyd's of London syndicate; property, casualty, marine, aviation; acquired FY2025 |
| Blended Growth Rate | — | 100% | -0.5% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 12.6% | ≥12% strong |
| Debt / EBITDA | 0.0x | ≤2x conservative |
| Revenue Trend | Declining 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $1,309 | $1,529 | $1,219 | $1,209 | $1,130 |
| Rev YoY Growth | — | +16.8% | -20.3% | -0.8% | -6.5% |
| Gross Margin | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| EBITDA ($M) | $75 | $77 | $58 | $62 | $46 |
| EBITDA Margin | 5.7% | 5.0% | 4.8% | 5.1% | 4.1% |
| Operating Income ($M) | $600 | $743 | $603 | $604 | $583 |
| Operating Margin | 45.8% | 48.6% | 49.5% | 50.0% | 51.6% |
| Net Income ($M) | $601 | $743 | $603 | $604 | $583 |
| Net Margin | 45.9% | 48.6% | 49.5% | 50.0% | 51.6% |
| EPS (diluted) | $3.16 | $4.35 | $3.77 | $3.92 | $4.14 |
| Free Cash Flow ($M) | $545 | $371 | $521 | $-665 | $116 |
| Annual DPS | $0.560 | $0.720 | $0.880 | $0.970 | $1.020 |
| Total Debt ($M) | $1,409 | $1,569 | $1,537 | $0 | $0 |
💹 Capital Return & Share Count Analysis
Net Share Change
-25.9% (2021→2025)
📉 Net reduction — buybacks exceed issuances
EPS Amplification
EPS grew +31.0% vs net income -3.0% over the period — +34.0pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 190.2M | — | $399 | 6.3% |
| 2022 | 170.5M | -10.4% | $400 | 7.1% |
| 2023 | 160.2M | -6.0% | $133 | 2.5% |
| 2024 | 154.0M | -3.9% | $225 | 4.4% |
| 2025 | 141.0M | -8.4% | $432 | 9.3% |
RDN's buyback program is one of the most aggressive in the financial sector. Shares outstanding declined 25.8% from 190.2M (2021) to 141.0M (2025) — a 7.2%/yr reduction pace. Total buybacks over 2021-2025: $1.59B. The program has been active every year, though amounts vary ($133M to $432M). FY2025 saw the largest buyback ($432M) despite simultaneously funding the $1.7B Inigo acquisition. EPS growth has been materially amplified by share reduction: FY2025 NI was down 3.6% ($604M → $583M) but EPS grew 5.6% ($3.92 → $4.14) — 9.2pp of per-share amplification from buybacks.
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.760 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 9.93% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$26
🔴 Bear
$39
📊 Base
$53
🚀 Bull
$33.09
Current Price
$40
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 0.0% | 1.0% | 2.0% | 9.93% | $26 | ▼22.7% |
| 📊 Base | 7.0% | 4.0% | 2.5% | 9.93% | $39 | ▲17.7% |
| 🚀 Bull | 12.0% | 6.0% | 3.0% | 9.93% | $53 | ▲60.5% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 0.0% | Stage 2: 1.0% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.230 | $2.029 | $2.03 |
| Year 2 | Stage 1 | $2.230 | $1.845 | $3.87 |
| Year 3 | Stage 1 | $2.230 | $1.679 | $5.55 |
| Year 4 | Stage 1 | $2.230 | $1.527 | $7.08 |
| Year 5 | Stage 1 | $2.230 | $1.389 | $8.47 |
| Year 6 | Stage 2 | $2.252 | $1.276 | $9.74 |
| Year 7 | Stage 2 | $2.275 | $1.173 | $10.92 |
| Year 8 | Stage 2 | $2.298 | $1.077 | $11.99 |
| Year 9 | Stage 2 | $2.321 | $0.990 | $12.98 |
| Year 10 | Stage 2 | $2.344 | $0.909 | $13.89 |
| Terminal | — | TV=$30.15 | PV(TV)=$11.70 (46% of IV) | $25.59 |
| Intrinsic Value | — | — | PV(Divs) $13.89 + PV(TV) $11.70 | $25.59 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.93%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $30.15. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $11.70). Intrinsic value = PV of all dividends ($13.89) + PV of terminal value ($11.70) = $25.59 per share.
Base Scenario
Stage 1: 7.0% | Stage 2: 4.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.386 | $2.171 | $2.17 |
| Year 2 | Stage 1 | $2.553 | $2.113 | $4.28 |
| Year 3 | Stage 1 | $2.732 | $2.056 | $6.34 |
| Year 4 | Stage 1 | $2.923 | $2.002 | $8.34 |
| Year 5 | Stage 1 | $3.128 | $1.948 | $10.29 |
| Year 6 | Stage 2 | $3.253 | $1.843 | $12.13 |
| Year 7 | Stage 2 | $3.383 | $1.744 | $13.88 |
| Year 8 | Stage 2 | $3.518 | $1.650 | $15.53 |
| Year 9 | Stage 2 | $3.659 | $1.561 | $17.09 |
| Year 10 | Stage 2 | $3.805 | $1.476 | $18.56 |
| Terminal | — | TV=$52.50 | PV(TV)=$20.37 (52% of IV) | $38.93 |
| Intrinsic Value | — | — | PV(Divs) $18.56 + PV(TV) $20.37 | $38.93 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.93%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $52.50. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $20.37). Intrinsic value = PV of all dividends ($18.56) + PV of terminal value ($20.37) = $38.93 per share.
Bull Scenario
Stage 1: 12.0% | Stage 2: 6.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.498 | $2.272 | $2.27 |
| Year 2 | Stage 1 | $2.797 | $2.315 | $4.59 |
| Year 3 | Stage 1 | $3.133 | $2.358 | $6.95 |
| Year 4 | Stage 1 | $3.509 | $2.403 | $9.35 |
| Year 5 | Stage 1 | $3.930 | $2.448 | $11.80 |
| Year 6 | Stage 2 | $4.166 | $2.360 | $14.16 |
| Year 7 | Stage 2 | $4.416 | $2.276 | $16.43 |
| Year 8 | Stage 2 | $4.681 | $2.195 | $18.63 |
| Year 9 | Stage 2 | $4.962 | $2.116 | $20.74 |
| Year 10 | Stage 2 | $5.259 | $2.041 | $22.78 |
| Terminal | — | TV=$78.17 | PV(TV)=$30.33 (57% of IV) | $53.11 |
| Intrinsic Value | — | — | PV(Divs) $22.78 + PV(TV) $30.33 | $53.11 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.93%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $78.17. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $30.33). Intrinsic value = PV of all dividends ($22.78) + PV of terminal value ($30.33) = $53.11 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.9% | $49 | $51 | $54 | $58 | $62 |
| 8.4% | $45 | $47 | $49 | $52 | $56 |
| 8.9% | $42 | $43 | $45 | $48 | $51 |
| 9.4% | $39 | $40 | $42 | $44 | $46 |
| 9.9% | $36 | $38 | $39 | $41 | $43 |
| 10.4% | $34 | $35 | $37 | $38 | $39 |
| 10.9% | $32 | $33 | $34 | $35 | $37 |
| 11.4% | $31 | $31 | $32 | $33 | $34 |
| 11.9% | $29 | $30 | $30 | $31 | $32 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | P/B | Div Yield | ROE | Note |
|---|---|---|---|---|---|
| RDN (current) | 7.5x | 0.95x | 3.13% | 12.6% | MI + Lloyd's specialty; zero debt |
| MTG (MGIC) | 7.2x | 1.10x | 2.8% | 15.5% | Pure MI peer; active buybacks |
| ESNT (Essent) | 7.8x | 1.25x | 1.9% | 16.2% | MI peer; lower payout, higher growth |
| NMI (NMI Holdings) | 6.5x | 1.30x | 0.0% | 19.8% | MI peer; no dividend, all buybacks |
| AGO (Assured) | 10.5x | 0.60x | 2.1% | 5.8% | Financial guaranty; different model |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.020 |
| Current Yield | 3.13% |
| Consecutive Growth Years | 6 |
| 1-yr DPS CAGR | +3.0% |
| 3-yr DPS CAGR | +12.3% |
| 5-yr DPS CAGR | +12.8% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 24.7% |
| FCF Payout Ratio | 0.0% |
| Sustainability Verdict | Safe |
RDN's cash dividend of $1.02/yr is extremely well-covered at a 24.7% payout ratio. With net income of $583M and dividends of $146M, the coverage ratio is 4.0x — one of the highest among financial companies. The 6-year growth streak (quarterly DPS: $0.14 → $0.255, +82% cumulative) shows steady commitment to cash dividend increases despite the bulk of capital return occurring via buybacks.
Total capital return is the real story: RDN returned $578M in FY2025 (99% of NI) via dividends ($146M) + buybacks ($432M). The buyback program has been active every year since 2021, reducing shares from 190M to 141M (-26%). With zero debt and strong statutory capital, the total return program is sustainable at $400-500M/yr as long as MI claims remain benign. In a severe housing downturn, expect buybacks to be curtailed first, with the cash dividend remaining safe.
Total capital return is the real story: RDN returned $578M in FY2025 (99% of NI) via dividends ($146M) + buybacks ($432M). The buyback program has been active every year since 2021, reducing shares from 190M to 141M (-26%). With zero debt and strong statutory capital, the total return program is sustainable at $400-500M/yr as long as MI claims remain benign. In a severe housing downturn, expect buybacks to be curtailed first, with the cash dividend remaining safe.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $3.16 | — | — | — | Actual |
| 2022 | $4.35 | — | — | — | Actual |
| 2023 | $3.77 | — | — | — | Actual |
| 2024 | $3.92 | — | — | — | Actual |
| 2025 | $4.14 | — | — | — | Actual |
| 2026 | $4.34 | $5.00 | $5.59 | 6 | Estimate |
| 2027 | $5.27 | $5.45 | $5.68 | 5 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $1.3B | — | — | — | Actual |
| 2022 | $1.5B | — | — | — | Actual |
| 2023 | $1.2B | — | — | — | Actual |
| 2024 | $1.2B | — | — | — | Actual |
| 2025 | $1.1B | — | — | — | Actual |
| 2026 | $1.0B | $1.0B | $1.0B | 5 | Estimate |
| 2027 | $1.0B | $1.0B | $1.1B | 5 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $40.00 | Range $37–$45
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Harry Fong | Roth Capital | Strong Buy | $45 | +36.0% |
| Bose George | KBW | Buy | $42 | +26.9% |
| Douglas Harter | UBS | Hold | $39 | +17.9% |
💡 Investment Thesis
- Extraordinary Capital Return: RDN returns virtually all earnings to shareholders — $578M out of $583M NI (99%) in FY2025 via dividends ($146M) and buybacks ($432M). Share count has declined 26% since 2021. With zero debt, the balance sheet is pristine and capital return capacity is maximized. Total shareholder yield: 11.8%.
- Strategic Diversification via Inigo: The $1.7B Inigo acquisition transforms RDN from a pure MI play into a global specialty insurer. This reduces housing cycle dependence and could justify P/E expansion from 7.5x toward 9-10x over time as the market recognizes the diversified model.
- Zero Debt + Pristine Credit: RDN eliminated all $1.5B+ of debt by FY2025 — the cleanest balance sheet among US mortgage insurers. This provides maximum financial flexibility and eliminates interest expense (~$70M/yr previously).
- Strong EPS Growth Ahead: Analyst consensus projects EPS of $5.00 in FY2026 (+21%) driven by Inigo earnings contribution and continued share count reduction. At 6.6x forward earnings, the stock is deeply undervalued if the growth materializes.
- Key Risk — Housing Cycle: Despite diversification, MI remains ~82% of revenue. A severe housing downturn with 10%+ home price declines would spike claim rates and crush new insurance written. The 7.5x P/E reflects this embedded risk. Secondary risk: Inigo integration execution in an unfamiliar Lloyd's market.
⚖️ DDM Verdict: Accumulate — Radian Group (RDN)
Current price: $33.09 | Analyst Avg PT: $40.00
$26
🔴 Bear
$39
📊 Base
$53
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$36 | Begin position |
| Tier 2 — Add | ≤$32 | Add on weakness |
| Tier 3 — Full | ≤$27 | Full allocation |
| Sell Alert | ≥$45 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
RDN at $33.09 is an Accumulate with a Base Shareholder Yield DDM target of ~$37-39. The stock trades at just 6.6x forward earnings with an 11.8% total shareholder yield — an extraordinary capital return proposition backed by a pristine zero-debt balance sheet. The Inigo acquisition adds strategic diversification that could drive P/E re-rating over the next 2-3 years.
The SY DDM uses a total base of $2.23/share (cash DPS $1.02 + haircut buyback yield $1.21) with a 9.93% Ke (CAPM + 1.5% MI cyclicality premium). All three SY DDM conditions are met: zero debt, systematic multi-year buybacks (26% share reduction), and total payout >60%.
Action: Accumulate at current levels ($32-34). Add on pullbacks to $28-30 (Bear case zone). Full position below $25 (deep value for zero-debt MI franchise). Take profits above $42 (analyst high PT zone).
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Shareholder Yield DDM — Why Not Cash-Only | Total base = $2.23/share (cash DPS $1.02 + buyback yield $1.21). All three SY DDM conditions met: (1) zero debt — cleanest possible balance sheet, (2) systematic multi-year buybacks — shares down 26% in 4 years with buybacks every year, and (3) total capital return = 99% of NI (well above 60% threshold). A cash-only DDM at $1.02 base would produce IV of ~$10-15 — structurally impossible given $33 market price and $40 analyst PT. The market prices the full capital return program. Buyback base includes a 35% haircut to 3yr average to account for post-Inigo capital needs. |
| Ke — MI Cyclicality Premium | CAPM Ke = 4.25% + 0.76 × 5.5% = 8.43%. Added 1.5% mortgage insurance cyclicality premium (total Ke = 9.93%). Rationale: MI earnings are highly correlated with housing cycles and can approach zero in severe downturns (e.g. PMI Group bankruptcy in 2011). The 7.5x market P/E implies a much higher required return than CAPM alone suggests. The premium compensates for binary risk: if housing prices decline 15%+, the MI business experiences severe stress. |
| Inigo Acquisition Impact | The $1.7B Inigo acquisition (Lloyd's of London specialty insurer) is transformative. It adds ~$136M in specialty insurance revenue (property, casualty, marine, aviation) and diversifies earnings away from the US housing cycle. This should justify P/E re-rating over time from 7.5x toward 9-10x. However, integration risk in an unfamiliar market (Lloyd's) is the key near-term uncertainty. |
| FCF Warning for Insurance Companies | Operating cash flow for insurance companies includes investment portfolio flows, claim payments, and reserve changes — making traditional FCF analysis misleading. FY2024 reported -$665M FCF while NI was $604M — the discrepancy reflects investment portfolio timing, not operating deterioration. For RDN, net income is the better proxy for distributable earnings. DCF was rejected for this reason. |
| Sanity Check | Base IV ~$37-39 is within 3-8% of analyst consensus PT of $40 — excellent alignment. Cross-check: at 8x forward EPS ($5.00 × 8) = $40, matching analyst PT. The current 6.6x forward P/E discount reflects housing risk premium that should compress as Inigo diversification reduces earnings cyclicality. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.