The Genworth Mortgage Insurance Australia (ASX: GMA) share price rose almost 15% in reaction to its it half year result.

Genworth is an insurer of mortgages. It offers the product called “LMI” to banks for borrowers who are perceived to be riskier or can’t come up with an adequate deposit for a home.

Genworth’s HY19 Result

Genworth reported that its statutory net profit after tax (NPAT) was $88.1 million, which was an increase of 110% compared to last year. Underlying NPAT fell by 15% to $43.1 million.

New insurance written (NIW) was up 20.7% to $12.5 billion, reflecting growth of its traditional LMI flow and bulk business.

The company said this result was in line with full year guidance, with net earned premium (NEP) up 3% and a loss ratio of 54.1%. Genworth said the loss ratio reflects the traditional seasonal uptick in delinquencies historically experienced in the first half of the year.

Genworth also announced the option of a regular monthly premium LMI to lenders as opposed to the current upfront single premium to offer borrowers the flexibility for borrowers to pay the LMI in instalments, leaving more money for the purchase of the property.

The company reminded investors of the $100 million on-market share buy-back that commenced in February 2019. At the end of June 2019, $63.9 million had been utilised to acquire shares.

Genworth Dividend

The company declared a fully franked interim ordinary dividend of 9 cents per share.

The Genworth Board also declared an unfranked special dividend of 21.9 cents per share.

Genworth Management Comments

Genworth CEO and Managing Director Ms Georgette Nicholas said: “Over this period we have maintained the momentum of our strategic program of work, particularly around product innovation and enhancement and have delivered growth in our traditional lenders mortgage insurance business despite the prevailing tight credit and moderating market conditions.”

Is Genworth A Buy?

Genworth is still expecting net earned premium to be between -5% to +5% and the full year loss ratio to be between 45% and 55%.

It seems to have positively surprised the market, so I wouldn’t think there is much to be gained from jumping in now. Indeed, I’m quite cautious on a business like Genworth because a bad turn in the property market could be painful. I think there are easier businesses to evaluate, like the reliable shares in the FREE report below.


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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.