Piper Jaffray Looks For Credit to Improve (AGO, MTG, RDN)

Piper Jaffray is out with a research report this morning, where it looks for credit to improve this month. They said, “Looking ahead to earnings for the mortgage insurance and financial guaranty space, results hinge on June's credit performance within the portfolios of risk at each of the companies.” The PJ analysts noted, “More specifically, revenues, for the most part, are known or predictable given the in-force books, unearned premium schedules and origination volumes of both mortgages and municipal bonds. However, the loss side of the equation offers more of a challenge, driving uncertainty into the quarter.” They also said, “For the MI's, MTG and RDN, premium yield likely experiences a modest improvement against an in-force book of business that we expect displays continued contraction. Though persistency remains high, the contraction issue stems from a weaker mortgage origination market and a continued low insurance penetration rate. Net-net, the question on premium earned becomes how much improvement in premium yield will MGIC Investment Corp. MTG and Radian Group RDN experience versus in-force contraction. For Assured Guaranty AGO, the company lays out the premium earned schedule for the quarters and years ahead, and, with municipal finance underwritings known and little to no structured being written, the amount of premium earned anticipated appears to be fairly straightforward.”