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  • Shares in Genworth Mortgage Insurance Australia (GMA) have declined today despite a profit increase over 2019
  • In the company’s latest annual report, it revealed profits rose over the past year compared to 2018, though earnings declined slightly
  • Moreover, the final dividend for the period was reduced from nine cents per share to 7.5 cents per share
  • However, Genworth has just appointed a new CEO in Pauline Blight-Johnston, who started in the role just two weeks ago
  • As such, investors might be waiting for Pauline to prove her mettle
  • Nevertheless, shares in Genworth declined just under three per cent today to $3.80 each

Despite posting some profit growth over 2019, shares in Genworth Mortgage Insurance Australia (GMA) have stumbled slightly after the company released its annual report today.

Genworth is a mortgage insurer. The company provides a type of insurance known as lenders mortgage insurance, or LMI, which is essentially an extra level of protection for those lending to high-risk borrowers. LMI protects the lender if a borrower defaults on their home loan.

A highlight from Genworth’s financial results for January-to-December 2019 was a 58.7 per cent increase in statutory net profit after tax. For 2018, the company posted a profit of $75.7 million, which was bumped up to $120.1 million for 2019.

However, the company’s underlying profit was only $3.1 million up from 2018, coming in at $97 million compared to the previous year’s $93.9 million. While this is still an increase, the 3.3 per cent rise is much smaller than the statutory figure.

The profit increase comes in spite of Genworth’s 5.9 per cent decline in gross written premium — from $460.2 million in 2018 to $433.2 million in 2019.

Perhaps what didn’t bode as well with investors, however, is Genworth’s decreased final dividend payment for the year. Over the same period in 2018, Genworth paid shareholders a fully franked dividend of nine cents per share. In 2019, this figure was 7.5 cents per share.

The decreased earnings and dividend payments are likely contributors to the company’s slight share price decline today.

Yet, importantly, this is the first annual report released under new CEO and Managing Director Pauline Blight-Johnston, who took over the top position at the company in late January.

This means two things: firstly, it’s likely the company is simply being cautious in its spending and dividends during the transition period between CEOs.

Secondly, the results of today’s announcement — both the good and the bad — were not achieved under the leadership of Pauline. As such, investors are likely holding off on buy orders as Pauline takes the reins and proves her mettle.

Nevertheless, Genworth shares declined 2.81 per cent today to close at $3.80 per share. The company has a $1.57 billion market cap.

GMA by the numbers
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