Genworth MI has posted its quarterly report. The company continues to fire on all cylinders – specifically the loss ratio, at 20%, is lower than it has been in a very, very long time. This is a function of record low mortgage delinquency rates (0.12%).
Everything appears to be humming along and the company continues to be a cash generation machine.
Tangible book value is $33.36 per share (which includes other accumulated comprehensive income, but excludes deferred acquisition costs) which is up since the previous quarter.
Written premiums are level from the quarter in the previous year. The revenues are expected to increase 15% due to the increase in pricing of mortgage insurance.
The company’s reinsurance bet on a property market crash not happening in Australia over the next three years seems to be a $6 million dollar bet with a maximum risk of AUD$30 million – they recognized $510,000 in this quarter, I am making a straight line estimate of their premium recognition curve.
There is really not much else to report other than the rather pleasant state of the Canadian real estate loan market. Looking ahead I would expect the company to increase its dividend in the third quarter and perhaps give off a one-time special dividend once the regulatory requirements for minimum capital are set in stone later this year. It remains a mystery whether management will buy back its own shares at current levels (approximately 12% premium to tangible book value), but we will see.
I am long Genworth MI equity from significantly lower costs, but have trimmed the position recently due to portfolio concentration. The business is doing well and it is priced that it will continue to do well.