The Genworth Mortgage Insurance Australia (ASX: GMA) share price has been on watch today after the company announced its FY19 results.
The Genworth share price closed the day down by 2.81% with shares last trading at $3.80. Over the past 12 months, Genworth shares have risen tremendously by around 90%.
FY19 financial results
Genworth reported New Insurance Written (NIW) of $26.7 billion, up 20.3% compared to $22.2 billion in FY18.
Gross Written Premium (GWP) decreased 5.9% to $433.2 million. However, excluding the bespoke transaction written through Genworth's Bermudian insurance entity in 1Q18, GWP increased 17.1% in FY19.
Net Earned Premium (NEP) was up 6% on the prior year to $298.2 million. This result was slightly above guidance, largely due to continued seasoning of FY17 and FY18 book years and policy cancellation initiatives in FY19.
Statutory net profit after tax (NPAT) came in at $120.1 million, up by 58.7%. This includes an after tax unrealised gain of $24.6 million on Genworth's investment portfolio. In comparison, the company recorded an after tax unrealised loss of $18.3 million in FY18.
Underlying NPAT was $97 million, up by 3.3%, which includes an after tax realised gain of $20.1 million.
Genworth also reported a loss ratio of 50.6% which was in line with the company's FY19 guidance.
Strategic update
As detailed in Genworth's FY19 investor presentation, the company is enhancing its customer experience by leveraging data and technology capability to deliver operating and underwriting efficiencies. Additionally, Genworth continues to develop capital and risk management solutions, implement monthly premium lenders mortgage insurance (LMI) offering and pursue opportunities to grow and diversify revenue streams.
Capital management update
With regard to capital management, Genworth completed an on-market share buyback in FY19. Through this, the company purchased 25 million shares for a consideration of $63.9 million.
In FY19, Genworth declared a total ordinary dividend of 16.5 cents per share (cps), fully franked, and a total unfranked special dividend of 46.1 cps. This equates to yield of 17.2% based on Genworth's share price of $3.65 as at 31 December 2019.
Since listing in 2014, Genworth has returned to shareholders 100% of after-tax profits by way of ordinary and special dividends.
Economic outlook and FY20
Genworth commented that the Australian economic environment remains sound.
According to the company, historically low cash rate, tax cuts, continued infrastructure investment, recovering metropolitan housing markets, and a brighter outlook for resources sector provides positive momentum for 2020.
Genworth further commented that counterbalancing these factors may be geopolitical uncertainty and the impact of trade and geopolitical tensions on global economic growth. The company believes that house prices are expected to continue to recover, led by strong growth in metropolitan Sydney and Melbourne.
FY20 guidance key figures were NEP of between -5% to +5%; full-year loss ratio of 45% to 55%, and an ordinary dividend payout ratio of 50% to 80%.
