Genworth Mortgage Insurance Australia Ltd
Weak First quarter 2018 results and a new on market buy-back program: Genworth Mortgage Insurance Australia Ltd.’s (ASX: GMA) stock initially fell 2.73% on May 02, 2018 before settling almost flat (down 0.42%) after the company announced weak first quarter 2018 results and a new on market buy-back program. GMA in the 1Q 2018 has delivered 83.9% fall in the statutory net profit after tax (NPAT) to $8.4 million and 70.9% fall in the underlying NPAT to $19.9 million. In the 1Q 2018, Net Earned Premium fell by 37.5% and was adversely impacted by 2017 Earnings Curve Review. New Insurance Written (NIW) fell by 36.8% to $4.3 million in 1Q18 compared with $6.8 million in 1Q17. Gross Written Premium (GWP) has increased by 97.4% to $174.1 million in 1Q18. This includes the new business written through Genworth’s Bermudan entity and the new Micro Markets LMI business.
Moreover, GMA has announced an on-market share buy-back of up to a value of $100 million. It is subject to shareholder approval at the Annual General Meeting (AGM) on 10th May 2018. Additionally, for 2018, GWP is expected to increase and NEP is expected to fall by approximately 25% to 30%. Net Incurred Claims are expected to be lower in 2018 than in 2017, and the lower NEP means the full year loss ratio is expected to be between 40% and 50%. GMA continues to target an ordinary dividend payout ratio range of 50% to 80% of underlying NPAT. While GMA stock has fallen 18.49% in three months as on May 01, 2018, we give a “Hold” recommendation on the stock at the current price of $ 2.370.
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First Quarter 2018 Financial Performance (Source: Company Reports)
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