The Genworth Mortgage Insurance Australia Ltd (ASX: GMA) share price is jumping after delivering a profit recovery in its HY21 report.
Genworth is Australia’s leading provider of lenders mortgage insurance (LMI) in the Australian residential mortgage lending market.
Genworth’s FY21 result
The insurance business reported that its gross written premium (GWP) increased 21.1% to $289.7 million.
Genworth said the growth reflected improved home buyer confidence and affordability as property buyers took advantage of low interest rates. It said that the higher business flows will underpin earnings growth over future years.
Genworth’s underwriting result saw an improvement from a loss of $173.4 million last year to $87.7 million. The insurance profit improved from a $128.1 million loss to $71.5 million of profit.
Net claims incurred were down 51.2%. The moratoriums continued to constrain the number of mortgages in possession and claims paid. Average paid claim amounts remain below historic levels due to borrower sales and house price appreciation. Whilst there has been lower than anticipated incurred claims to date, the company expects higher delinquencies to emerge after the expiry of the latest repayment deferrals and moratoriums.
Statutory profit went from a loss of $90 million last year to $59.4 million profit in the first six months of 2021.
Underlying net profit was actually a loss of $85.5 million last year, but it recovered to a profit of 76.4 million in HY21.
Dividends reinstated
After generating 18.5 cents of profit/earnings per share (EPS), Genworth’s board decided to declare a dividend of 5 cents per share.
Genworth said the decision to pay an interim dividend reflect the growth in the company’s earnings and the strength of its capital base.
Thoughts on the Genworth share price
It said that it remains in a strong capital position and is able to withstand a wide range of future claims outcomes.
I’m sure shareholders are happy to see a return to profit and dividends. But as 2020 showed, there can be some rough times, so it’s not one I’d look at for consistent dividends. There are other ASX dividend shares on my watchlist for that.
