Genworth MI’s sensitivity to unemployment rates

Genworth MI took a dive today because of the rise of unemployment in the Statistics Canada March release of the labour profile. Employment of full-time workers went down 54,000 workers.

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A rise in unemployment will increase the frequency of claims on mortgage insurance, while a decrease in property value will result in an increase in the severity of claims.

I believe the market is over-reacting to this news, but it is true that the default and delinquency rates for Canadian mortgages at present is quite low compared to historical norms.

On the brighter side, a lower share price makes the share buyback option more attractive.