Genworth Mortgage Insurance (ASX:GMA)

Georgette Nicholas
Market Cap (AUD): 1.6B
Sector: Financials
Last Trade (AUD): 3.83 -0.06 (-1.54%)
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1. About

Genworth Australia is a leading provider of lenders mortgage insurance (LMI) in the Australian LMI market. Genworth Australia is a residential mortgage loan insurance specialist with extensive expertise in the Australian residential mortgage market, actively engaging on residential mortgage policy development with the key lending institutions, government bodies, local and international regulators and industry bodies. Genworth Australia has commercial relationships with over 100 lender customers across Australia, including three of the four major banks.

2. Business model


The Company operates as a single entity:[1]



Revenue ($’000)

% of Revenue

% of Profit (before Tax)

Profit drivers[2]

Gross written premium




Market dynamics continued to be challenging during the year with reduced high LVR lending as a proportion of total mortgage originations. In response to these trends, New Insurance Written declined 10.2% to $23.9 B and Gross Written Premium was down 3.4% at $369.0 M. New delinquencies decreased in both mining and non-mining areas

Movement in unearned premium



Outward reinsurance premium expense



3. Strategy


Key strategies include:[3]


Genworth’s primary business activity is the provision of LMI to its lender customers. Genworth’s mission is to support Australian homeownership by providing capital and risk management solutions to its customers in residential mortgage lending. In 2017, Genworth made significant progress toward its goal to reinvigorate profitable growth.


2018 Priorities

In 2018 Genworth will deliver core capabilities in underwriting efficiencies, product flexibility and expense management – capabilities which are foundational to meeting the changing needs of its Australiabased customers and to future growth


A refined strategic plan to re-ignite profitable growth over the medium-term

Value Proposition:

Innovation and technology will underpin Genworth’s value proposition


To be a leading provider of customer-focused capital and risk management solutions in residential mortgage markets and deliver sustainable shareholder returns


Immediate and ongoing initiatives  (2017–2018)

1. Redefine core business model

  • Cost efficiency
  • Underwriting efficiency
  • Product enhancement
  • Leverage data and partnerships
  • Regulator and policymaker advocacy


Longer-term initiatives  (2019+)

2. Leverage data and technology to add value to the mortgage value chain

  • Product innovation
  • Loss management solutions
  • Leverage high LVR experience  and expertise


Strategic enablers

  • People, organization, and cultural change
  • Data and analytics
  • Technology
  • Stakeholder management

4. Markets



Industry (Australia)

Industry Revenue

Growth rate  (annual 2013-18)

General Insurance

$68 billion (2017)


Mortgage Brokers

$2 billion (2018)


Insurance Brokerage

$12 billion (2017)


5. Competition


Major competitors include:[5]


  • QBE Insurance Group (ASX: QBE)
  • Insurance Australia Group (ASX: IAG)
  • Suncorp Group (ASX: SUN)

6. History



Housing Loans Insurance Corporation (HLIC) started by the Australian Government



GE purchased HLIC from the Australian Government and begun GE mortgage insurance Australia



GE sold its LMI businesses globally, and Genworth was born through the largest IPO of the year on the New York Stock Exchange



Having successfully completed its initial public offering in May 2014, Genworth Australia began life as a publicly listed company while Genworth Financial, Inc. retained a majority shareholding



Renewed its supply and service contract with National Australia Bank(NAB) for the provision of Lenders Mortgage Insurance for NAB’s broker business



GFI announced acquisition by China Oceanwide



Genworth extended LMI contract for NAB's broker business

7. Team


Board of Directors[7]


Ian MacDonald – Chairman, Independent

Georgette Nicholas – Chief Executive Officer and Managing Director, Genworth Financial designee

Gai McGrath – Director, Independent

Gayle Tollifson – Director, Independent

David Foster – Director, Independent, Genworth Financial designee

Stuart Take – Director, Genworth Financial designee

Jerome Upton – Director, Genworth Financial designee

Duncan West – Non-Executive Director[8]

Christine Patton – Non-Executive Director[9]


Management Team


Georgette Nicholas – Chief Executive Officer & Managing Director

William Milner – Acting Chief Financial Officer

Andrew Cormack – Chief Risk Officer

Tobin Fonseca – Chief Operations Officer

Steven Degetto – Chief Commercial Officer

Kate Svoboda – Chief Human Resources Officer

Prudence Milne – General Counsel and Company Secretary

Scot Garner – Head of Strategy & Innovation

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8. Financials


2018 Half Year Results Presentation


Financial Year 2017/18 (ended 31 December):[10]



Revenue ($’000)

% Change

Profit (after Tax) ($’000)

% Change

Gross written premium





Movement in unearned premium





Outward reinsurance premium expense










9. Risk


Major risks include:[11]


Key Risks

Evolving LMI and mortgage default risk landscape

Evolving market for mortgage default risk solutions may result in a reduction in new insurance written


Changing customer dynamics

Lenders increasingly searching for diverse risk and capital management solutions


Adverse or neutral regulatory changes have the potential to impact Genworth’s business model and medium-term profitability

Adverse regulation may impact Genworth’s business model and/or profitability


Macroeconomic deterioration and potential deterioration in financial and capital performance of Genworth

A deterioration in macroeconomic conditions or outlook may result in a flow on impact to the financial and capital profile of Genworth


Changes in financial strength ratings

Genworth’s financial strength rating may be downgraded


Reinsurance renewals

Failure to renew reinsurance contracts as and when they fall due for renewal


Risks related to supply and service contracts with customers

Termination before the expiry of the contractual term or a change of control of a customer or a ratings downgrade may result in loss or partial loss of a customer


Change in interest rate cycle and risk of mark-to-market loss exposure

Lower yield environment continues to pressure both financial and pricing returns. Mark-to-market adjustments may have an adverse impact on profitability and financial position


Market risk

Market risk is the risk that the market price of assets change and the potential for such change to result in the actual market value of Genworth’s assets being adversely impacted.


Currency Risk

Currency risk is the risk of loss arising from an unfavourable movement in market exchange rates. The Group is exposed to currency risk on its investments in receivables and payables denominated in a currency other than Australian dollars and the net investment in foreign branch operations. The currency giving rise to the risk is New Zealand dollars. The NZ currency risk exposure to the Group is not material.


Cash flow and fair value interest rate Risk

The Group is exposed to interest rate risk primarily arising from interest bearing assets. Assets with floating rate interest expose the Group to cash flow interest rate risk. Fixed interest rate assets expose the Group to fair value interest rate risk.


Equity price risk

Price risk is the risk that the fair value of a financial asset will fluctuate because of changes in market prices, rather than changes in interest rates and/or exchange rates. These price movements may be caused by factors specific to the individual financial asset or its issuer, or factors affecting all similar financial assets traded on the market. The Group has exposure to equity price risk through investment in equities.


Credit risk exposures

Credit risk is the risk of default by borrowers and transactional counterparties as well as the loss of value of assets due to deterioration in credit quality. The Group’s credit risk arises predominantly from investment activities and the amounts are as indicated by the carrying amounts of the financial assets.


Liquidity risk

Liquidity risk is the risk that there are insufficient cash resources to meet payment obligations to policyholders and creditors without affecting the daily operations or the financial condition of the Group.