KBW says mortgage insurers nearing fair value, downgrades two

Keefe Bruyette analyst Bose George downgraded both Essent Group (ESNT) and Radian Group (RDN) to Market Perform from Outperform with unchanged price targets of $50 and $27.50, respectively. Despite market concerns about an impending recession, the mortgage insurers have been the best-performing subsector in the residential mortgage industry in 2023, the analyst tells investors in a research note. While the firm expects book value growth to continue in the second of the year and support share price growth, it believes near-term multiple expansion is unlikely as investors are more likely to wait for more attractive entry points given the risk of an economic downturn. Keefe remains “fairly constructive” on the sector, but says the mortgage insurers are nearing fair value. It consolidated its Outperform-rated names in the sector to MGIC Investment (MTG) and Enact Holdings (ACT).