Shares in ASX-listed mortgage insurer Genworth rallied on Wednesday after the company issued an upbeat commentary on its December quarter performance.
The country’s largest mortgage insurer told investors in a market filing its insurance book experienced falling delinquencies and low numbers of paid claims during the quarter that led to “favourable net claims incurred”.
The company also indicated that the claims experience might have been sufficiently strong to result in a release of up to A$15 million for the 12 months to the end December.
“Given this environment the company expects FY 21 net claims incurred to be between $5 million and ($15) million, with the final amount being subject to a full review of claims reserving by the appointed actuary,” the company told the ASX.
The positive commentary induced a rally in the company’s share price, which touched a seven-month high of $2.66 before closing up 10 cents or 4 percent to $2.58.
Brokers have turned bullish towards the stock, citing the company’s large capital surplus and the recent decision by CBA to renew its longstanding partnership with Genworth.
Goldman Sachs analyst Andrew Lyons believes the company is poised to return up to $410 million of surplus capital to shareholders in coming years.
“In our view, Genworth remains the best way to get exposure to the still strong Australian housing market, particularly now risk around its largest contract is behind it,” Lyons told clients in a report.
“Beyond this, we would remind investors that as at 31-Dec-21, we estimate Genworth has circa A$410 million of surplus capital above the top end of its target range.
“Coupling this with our estimate that reserves still remain circa A$75 million above pre-Covid (i.e. Dec 19) levels, shareholders appear well-placed to enjoy further capital returns over the next few years.”
Genworth also noted in the market update that the mark-to-market value of its investment portfolio would show an annual loss of $10.6 million, largely reflecting recent rises in government bond rates.
The company is scheduled to report its full year results on 25 February.