Milwaukee mortgage insurer MGIC saw its shares jump 19% in recent trade, while those of Philadelphia-based Radian Group edged up 5% as Barclay's lifted them to “overweight” from “underweight.”
The U.K brokerage pointed to recent developments that it says have “all but eliminated” the risk those companies could be forced into “run-off.”
Barclay’s analyst Mark DeVries said the focus has shifted “from how much downside there could be to how much upside there still is despite the big move since bottoming in August.”
DeVries also hiked their prices targets, to $8 from $1 for MGIC and $14 from $4 for Radian.
Given the profitability of new businesses and the gradual run-off of the high loss legacy business, Barclay’s says the industry could return to “normalized earnings” by 2015.
However, the brokerage sees more potential upside and risk for MGIC than Radian given its greater capital needs.