Mortgage insurers' earnings probably will grow rapidly in the next few years, said Chad Yonker, an analyst at Fox-Pitt, Kelton Inc.
Mr. Yonker said the publicly traded mortgage insurance business is not as sensitive to interest rates.
Mr. Yonker initiated coverage on four mortgage insurance companies, recently, assigning "buy" ratings to PMI Group and Amerin Corp. and an "attractive" rating to CMAC Investment Corp.
Mr. Yonker said PMI is taking more aggressive moves to gain market share. Concern over declining market share is a main reason why PMI's stock performance has lagged other mortgage insurers, Mr. Yonker said.
Despite his prediction for Amerin's earnings, he said the company's reliance on a small group of customers for the bulk of its business is a concern.
Although Mr. Yonker rated MGIC Investment Corp.-the industry's largest company-a "hold," he has a 12-month target price of $70 for the stock, which closed at $58.4375 Tuesday.
Mr. Yonker is not following the only other publicly traded mortgage insurer, Triad Guaranty.