Genworth (ASX:GMA) share price dives 17% after CBA contract update

The Genworth share price has plummeted after a contract update with the Commonwealth Bank of Australia

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Shares in Genworth Mortgage Insurance Australia Ltd (ASX: GMA) plummeted 17% to 8-month lows in early trade this morning.

At the time of writing, the lenders mortgage insurance provider’s share price is down 15.16%, trading at $2.15.

Let’s take a look at what may be impacting the Genworth share price today.

What did Genworth announce?

In today’s statement, Genworth said the Commonwealth Bank of Australia (ASX: CBA) advised that it intended to issue a request for proposal “relating to its Lenders Mortgage Insurance (LMI) requirements” after the current exclusivity agreement with Genworth expires on 31 December 2022.

Genworth has a range of lender customers across Australia including major and regional banks, building societies, credit unions and non-bank mortgage originators. The company said it had provided CBA with its LMI services for more than 50 years, including an exclusive arrangement since 2006.

Genworth added that its CBA LMI contract represented approximately 57 per cent of the company’s FY20 gross written premiums.

Management commentary

Genworth CEO and managing director Pauline Blight-Johnston said:

We welcome the opportunity to submit a proposal to CBA to extend our agreement for the supply of LMI beyond 2022, building on the strong foundations of our long-standing relationship.

A core part of our strategy is to work with our lender customers to continue to improve the efficiency and competitiveness of LMI as we look to reimagine LMI for a new generation of home buyers.

Genworth share price in 2021

Despite having a strong exposure to Australia’s red hot property market through its LMI products, the Genworth share price has struggled to outperform the broader market.

Genworth shares have now tumbled ~12% year-to-date and are down almost 25% in June. This compares to the S&P/ASX 200 Index (ASX: XJO), which has run about ~9.3%.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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