Today, Genworth Mortgage Insurance Australia Ltd (ASX:GMA) released its third quarter earnings report for the quarter ended on September 30, 2018.
GMA has come up with healthy financials amidst volatility in the investment markets. Earnings update includes current financials along with outlook by the management. Third quarter experienced the same trend in housing market moderation as second quarter, largely driven by falls in house prices and volumes in Melbourne, Sydney, Perth and Darwin. Company expects the same trend to continue for the remaining year, indicating pressure on lending due to increased levels of new housing supply, strict credit conditions.
The company remained well on plan in the implementation of the strategic programs all through the third quarter. In early October, Company remained focused towards effective utilization of the technology. Company has successfully launched its new automated underwriting decision platform and new data-only submission channel called “eLMI” portal. This will enable Lender mortgage insurance approval decisions to be made in real time.
Third quarter financial performance posted 7.3% drop in new business volume to $5.1 billion from $5.5 billion in 3Q17. New insurance written recorded 8.5% rise in 3Q18. 3.6% rise in the gross written premium up to $92.1 in 3Q18 was noted as compared to $88.9 million in 3Q17. This excludes any excess business loss written by Genworth’s Bermudan entity. Group’s statutory net profit after tax was noted around $19.6 million.
32% fall in the net earned premium up to $68.1 million in 3Q18 as compared to $100.1 million in 3Q17 was recorded. Third quarter reported $1.2 billion under unearned premium reserve. 0.55% rise in 3Q18 from 0.5% in 3Q17 was posted under the delinquency rate. The first quarter of the year 2018 reported delinquency rate of 0.54%. With the signs of improvement across the mining regions, new delinquencies were down in the third quarter up to 2742 as compared to 2887 during 3Q17. Western Australia and New South wales experienced the largest increase in delinquencies and Queensland and Victoria experienced a decrement in the number of delinquencies.
Third quarter reported 3.2% fall in the net claims up to $35.8 million from $37 in 3Q17. Loss ratio reported 52.6% increase during the third quarter 3Q18 in comparison to 37% during 3Q17, reflecting the impact of lower net earned premium due to the 2017 earnings curve review. Loss ratio will stand at 38.6% if the impact of 2017 earnings curve review is excluded.
Expense ratio showed a rise of approximately 9% up to 32.5% during the quarter in comparison to 29.7% in 3Q17. Investment income posted 38% rise to $21.5 million in 3Q18 as compared to $15.6 in 3Q17. Pre-tax mark –to-market unrealized loss of $1.2 million during 3Q18 in comparison to $12 million in 3Q17 was also noted. This pre –tax mark-to market unrealized loss was included in the calculation of the investment income for the third quarter 3Q18. The value of GMA investment portfolio stands at $3.2 billion as on September 30, 2018, with cash and highly rated fixed interest contributing to 90% of the portfolio. Around $169 million is invested in Australian equities well in line with the Companies low volatility strategy. Investment returns posted 2.8% p.a. in 3Q18 in comparison to 2.88% during 3Q17. Regulatory solvency ratio of 1.85 times was recorded as on September 30, 2018. The ratio remained above Board’s target capital range of 1.32-1.44 times. Cure rates remained softened during the quarter in the non –mining regions. Net tangible assets of approximately $3.91 per share was reported as on September 30.
With the release of the third quarter earnings data, GMA made a high of $2.24 during opening session and then traded at the levels of $2.23, up 2.3% on October 31, 2018 (1:50 PM AEST) as the results came out better than market’s expectations.
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