RADIAN GROUP INC (RDN) stock intrinsic value fair value estimate & owner earnings analysis

Radian Group insures U.S. mortgages against borrower default -- when a homebuyer puts down less than 20%, the lender typically requires private mortgage insurance, and Radian's subsidiary Radian Guaranty writes that coverage. It ended 2025 with $282.5 billion of insurance in force across roughly 986,000 policies, most heavily concentrated in Texas (about 10-11% of the book), and earned $618 million, or $4.39 per diluted share, from continuing operations. The company is mid-transformation. It completed the $1.67 billion purchase of Inigo, a Lloyd's of London specialty insurer, on February 2, 2026, moving from a single-line U.S. housing-credit insurer toward a global multi-line specialty underwriter operating through Lloyd's Syndicate 1301. At the same time, Radian is selling its Mortgage Conduit, Title and Real Estate Services businesses, which lost money in each of the last three years; that sale is targeted for completion no later than the third quarter of 2026 but was not yet confirmed complete as of the most recent filing. We valued Radian on the cash the ongoing insurance business produces, using continuing-operations figures for the years affected by the conduit sale. Our earnings anchor is $4.33 per share, the median across 2019-2025, spanning a full credit cycle: the pandemic reserve build that cut 2020 earnings to about $2.02, the release of those reserves that lifted 2022 to about $4.72, and calmer years since. A specific finding shaped our near-term assumptions: Radian's own filing shows the boost from releasing prior-year reserves -- which drove much of the strong 2022-2024 earnings -- has shrunk two years running, even as new defaults have been rising with the portfolio's growth. That tailwind hasn't disappeared, but it is fading, so our base case starts slightly below last year's level rather than assuming the recent run continues. Base case (~$86/share): the mortgage insurance book holds up -- most insured loans carry rates below today's market, so refinancing is unattractive and the book keeps earning. Credit erodes gradually as reserve releases keep fading and new defaults keep rising with the seasoning book, cushioned by a growing reinsurance program. Share buybacks, paused since July 2025 to help fund the Inigo purchase, stay paused for three to five years under a regulatory restriction, then resume modestly. Inigo contributes a growing but still-modest amount as it scales. Bear case (~$48/share): a real U.S. housing downturn hits, defaults climb well above the current 2.6% rate for several years, and the reserve cushion flips to reserve strengthening. Radian Guaranty's regulatory capital cushion tightens further, buybacks stop, and Inigo -- never tested through a full loss-reserve cycle -- disappoints with adverse reserve development and a large catastrophe year. Bull case (~$129/share): credit stays benign, persistency remains high since most borrowers have no refinancing incentive, Radian's reinsurance-driven capital efficiency keeps growing, Inigo performs to its own filed record, and buybacks resume in force once the regulatory restriction lifts. Given how much of the outcome depends on a housing cycle and on a $1.67 billion acquisition completed only months ago, the margin-of-safety price sits at a meaningful discount -- around $50 a share -- and assumes the pending disposals actually close and a couple of clean quarters of Inigo results before the acquisition is treated as proven.