Radian Group wins price target raise at Roth

Roth Capital Markets analyst Harry Fong raised his target price for Radian Group (Radian Group Stock Quote, Chart, News, Analysts, Financials NYSE:RDN) to $45 from $40 while reiterating a “Buy” rating, following the company’s $1.7-billion all-cash agreement to acquire Lloyd’s specialty insurer Inigo Limited.

The acquisition is expected to close in the first quarter of 2026 and will be funded entirely with internal resources. To streamline its focus, Radian also plans to divest its “all other” businesses. Management projects the deal will generate mid-teens earnings-per-share accretion in 2026 and lift return on equity by roughly 200 basis points.

Founded in 2020, Inigo began underwriting in 2021 and is on pace to write about $1.6-billion in gross premiums in 2025, up from $1.3-billion this year. Its 2025 combined ratio is expected to be around 87%, similar to its 2024 level of 87.4%, while return on equity is projected at 21%. The acquisition values Inigo at 1.5 times expected tangible book value at year-end 2025.

“Inigo currently writes about 10 lines of (re)insurance, split 64% in insurance and 36% in reinsurance,” Fong said in his Sept. 19th report. “The lines include property, casualty, catastrophe, excess of loss and other specialty lines. About 70% of total premiums is U.S.-based business, with the balance spread globally.”

He added that its top four founding executives were previously senior leaders at Hiscox.

Radian expects the transaction to double its premium base and provide significant long-term growth potential. Funding will come from roughly $1.1-billion of available assets, including a $275-million revolving credit facility, and a $600-million, 10-year inter-company note to its regulated insurance subsidiary already approved by Pennsylvania regulators. The company expects to repay any short-term borrowing by the end of 2026, avoiding the need for new equity issuance.

Fong raised his 2026 earnings estimate for Radian to $5.00 per share from $4.30, noting the increase is at the low end of management’s guidance for mid-teens accretion.

“Based on the company’s preliminary guidance, the acquisition appears to be an excellent financial transaction, valuing the company at about 1.5x projected 2025 tangible equity. Founded in 2021, it has no tail risk. The valuation paid seems reasonable to us,” he said.

While Radian will suspend share repurchases in the near term to fund the transaction, it will continue to pay dividends. Longer term, Fong said the company may benefit from capital optimization strategies, similar to diversification credits seen in peers such as Arch Capital.

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