Essent Group Ltd. may have an opportunity to buy Radian Group Inc., the rival mortgage insurer whose chief executive officer is stepping down, an analyst at BTIG LLC said.
“Radian has no clear successor,” for S.A. Ibrahim, who said last week that he will retire at the end of 2017, BTIG’s Mark Palmer wrote in a report Thursday. “It would be logical to surmise that the company’s board of directors may be more inclined to entertain approaches from interested suitors.”
Essent, the mortgage insurer backed by Goldman Sachs Group Inc. and billionaire George Soros before it went public in 2013, “could fit the bill” as a buyer even though it’s a smaller company, Palmer wrote. Essent trades at a higher multiple to book value than Philadelphia-based Radian, and it could use shares to help fund the purchase, he said.
Ibrahim steered Radian through the financial crisis that felled other rivals. In more recent years, the emergence of newcomers such as Radnor, Pennsylvania-based Essent and NMI Holdings Inc. increased competition, pressuring Radian’s returns. Ibrahim’s company has dropped 11 percent this year in New York trading after declining 20 percent in 2015.
“In addition to providing the benefits from enhanced scale, market presence and economies of size, an Essent-Radian combination would provide significant opportunities for expense savings,” Palmer said in the report. He also said that the companies’ geographic proximity would “help to minimize the disruption for employees at both firms.”
Radian said Tuesday that it hired search firm Spencer Stuart to help seek a successor, and will consider internal and external candidates. Essent CEO Mark Casale previously was an executive at Radian.
Mortgage insurers cover losses when homeowners default and foreclosure fails to recoup costs. Essent doesn’t comment on rumors or speculation, the company said in an e-mail. A representative of Radian had no immediate comment.
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