2017 looks like being a horrible year for lenders mortgage insurer, Genworth Mortgage Insurance Australia (GMA). Not only is it facing a sharp slide in new business, premiums and revenues, but a near doubling in its loss ratio and a continuing slide in the number of lenders mortgage insurance contracts it writes falls.
Genworth Mortgage Insurance Australia (GMA) says it may continue returning capital to its shareholders after unveiling another special dividend, and another forecast of a slide in premium income as the high Loan to Valuation ratio home lending market continues to cool.
Further to our recent warnings about the risks to residential property prices, additional insight has been provided by the release of March quarter results from Genworth (ASX: GMA). Genworth is the largest (dominant) provider of mortgage insurance in Australia.
The fall in its recent and future levels of new business because of the housing slow down, has seen local lenders mortgage insurer, Genworth Mortgage Insurance, reveal plans to hand back up to $250 million of surplus capital to its shareholders.
UBS remains cautious about a gradual housing market correction but believes operating challenges that were posed by the decline in net earned premium have now played out and are widely appreciated. The broker now regards a Sell thesis as less compelling and upgrades to Neutral.
UPS re-visits assumptions after the September quarter update. The broker has supported the company’s proactive approach to returning capital but its Neutral rating continues to reflect the view that the stock is unlikely to outperform in a period of deteriorating delinquency trends.