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Why the Genworth Mortgage Insurance Australia share price climbed 4% higher today

Genworth Mortgage Insurance Australia (ASX: GMA) is one of the biggest gainers in the ASX200 today. The stock is up 3.9% to $2.38, following an upgrade from UBS.

The Australian Financial Review reports that the broker changed its rating for the lenders mortgage insurance firm from sell to neutral, with a price target of $2.30, still below the stock’s current price.

Genworth’s share price fell nearly 30% in the past 52 weeks, as the company saw its profit decline amidst moderating house price growth. Genworth’s net earned premium (NEP) – the share of underwritten policy premiums the insurer can consider as earned, depending on how much time has passed on the policy relative to its duration – decreased 18% in FY2017 and is expected to decline another 25% to 30% in FY 2018.

The contraction was mostly due to the company adopting a new way of calculating earnings, but was considered a potential source of operational challenges. Analysts at UBS now believe the share price largely reflects those challenges, leaving limited scope for further downside.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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