Genworth Mortgage Insurance Australia (ASX: GMA) shares sunk like a rock on the release of its full-year results this morning.
Genworth Mortgage Share Price
Here are the key stats from the Genworth Mortgage result:
- Gross written premium fell 24.8% to $382 million
- Profit fell 11% to $228 million (it fell 20% on an underlying basis)
- Its insurance margin fell to 48%, down from 58%
- A fully franked dividend of 14 cents per share was declared
Genworth, a mortgage insurance company, attributed the lower gross written premium "to a number of factors including reduced high loan-to-value (LVR) penetration".
Genworth stated that it incurred higher net claims during the period, with the average claim amount also increasing compared to the year prior. It described Queensland and Western Australia as "challenging".
But despite the relatively poor result, Genworth's board declared a fully franked dividend of 14 cents per share payable 8 March 2017.
"Our 2016 results were in line with our guidance," Genworth CEO, Georgette Nicholas, said. "Despite some challenging market dynamics, including a smaller high loan-to-value ratio (LVR) market and a rise in mortgage delinquencies in resources-exposed regional economies, our profitability is strong, our business model is resilient and we are strongly capitalised."
Looking ahead in 2017, the company said house price growth would moderate but Sydney and Melbourne would continue to outperform. It believes gross written premium would fall by another 10% to 15%.
The board intends to pay a dividend between 50% and 80% of underlying profit.
Buy, Hold or Sell
Genworth shares fell heavily upon the release of today's result for obvious reasons.
However, the company plays in a market that makes investors nervous, especially with high property prices. That much is evident from the company's below-market share valuation.
Personally, Genworth is outside my wheelhouse of knowledge so I won't be buying its shares today.
