Essent Group Ltd.NYSE
Thu, May 19, 11:29 AM
- Talk of consolidation in the private mortgage insurance industry is nothing new, says BTIG's Mark Palmer, but the potential for action may be higher after the announcement of the pending retirement of Radian's (RDN -1.7%) CEO S.A. Ibrahim.
- Since the company has no successor in place, it makes sense to think the board might be a little more likely to entertain offers than otherwise, says Palmer.
- Who might be the best fit? Essent Group (ESNT -1.9%), he says. First, Essent trades at 1.58x book value vs. Radian at 0.96x, thus giving Essent highly valued currency to use, even as Radian's market cap of $2.56B compares to Essent's at $1.83B.
- There is overlap between the two's client bases, so the combined company would have market share just in the mid-20% area vs. Radian's current 19.5% and Essent's 12.6%. Still, with one less competitor, pricing issues in the industry might fade a bit.
- Palmer reminds Radian and MGIC investment (MTG -1%) had agreed to merge just before the housing market blew up.