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Key points
- Genworth is cruising today following a company announcement
- The company has been selected as the exclusive provider of lenders mortgage insurance to Commonwealth Bank
- The agreement is set to run for a period of 3 years starting 1 January 2023
- In the last 12 months the Genworth share price has climbed by less than 4%
The Genworth Mortgage Insurance Australia Ltd (ASX: GMA) share price is soaring today and is now trading 12.39% in the green.
At the time of writing, shares in the provider of lenders mortgage insurance (LMI) are changing hands at $2.45, after rallying as high as $2.50 from the open today.
Investors are rewarding Genworth today following a company announcement regarding a new service contract.
What was announced?
The Genworth share price is on the rise after the company advised it has been selected as the exclusive provider of LMI to the Commonwealth Bank of Australia (ASX: CBA) for its CBA and Residential Mortgage Group (RMG) businesses.
Genworth says the current supply and service contract it holds with the bank will "expire at the end of the current exclusivity agreement on 31 December 2022".
As such, the new agreement is set to run for a period of 3 years starting 1 January 2023 and expiring on 31 December 2025.
The contract will include a "provision of LMI for a minimum proportion of new high loan to value ratio (LVR) residential mortgage loans". It is designed for the CBA and RMG businesses only, not Bankwest.
Today's gain is a welcome relief for shareholders, who have endured a rough period of wide-stretching volatility in the Genworth share price in the last 3 months.
The last time we heard from the company was back in November, when it stated intentions for an on-market share buyback from 8 December.
However, amid the market-wide sell-off during the past 2 weeks, the Genworth share price collapsed and bottomed at $2.18 on Tuesday.
Speaking on the announcement, Genworth CEO Pauline Blight-Johnston said:
For more than 50 years, CBA and Genworth have partnered to help Australians build financial and emotional security through home ownership. We are delighted to continue our relationship, supporting CBA and its borrowers. The renewed contract will support the strategic business goals of both CBA and Genworth, as well as delivering additional value to CBA's customers and appropriate returns for Genworth's shareholders.
Genworth share price snapshot
In the last 12 months, the Genworth share price has climbed by less than 4%. However, it has crept up 6% this year to date amid today's gains.
Nonetheless, the company lags the benchmark S&P/ASX 200 Index (ASX: XJO)'s return in the past year. At the time of writing, Genworth has a market capitalisation of $897 million.
