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IPO watch: Genworth Australia prepares for listing on the Australian Securities Exchange
Genworth Australia is putting the pieces in place for its planned listing on the Australian Securities Exchange later this year. Over the past month the company has announced the appointment of a new non-executive chairman and a new board member.
Genworth is yet to announce details of its initial public offering, which is likely to see 40 per cent of the equity in the Australian business sold to investors. However, a recent report on the mortgage insurance sector by the Australian Prudential Regulation Authority shows that the industry is in good shape.
Richard Grellman has been appointed non-executive chairman of Genworth Australia. Grellman has plenty of finance sector experience. He was a director of AMP Ltd between 2000 and 2011, chairman of medical services company Cryosite Ltd between 2002 and 2008, and a director of Centennial Coal between 2008 and 2010.
Genworth has also appointed former NAB executive Ian MacDonald to its board. MacDonald also serves on the boards of Arab Bank and Rural Bank.
In a financial report issued in February, Genworth reported that net premiums written in 2011 increased 90 per cent (in US dollar terms) to US$347 million. The level of new loans insured in 2011, however, increased by only nine per cent, to US$32 billion. The revenue line, which includes investment income, increased 23 per cent, to US$612 million.
Net profit eased to US$200 million in 2011, from US$205 million in 2010. The firm said it expected earned premium income - that is, premiums recognised in the profit and loss from loans insured in the prior year - would decline in 2012.
The annual report confirms a rise in problem loans for the mortgage insurer. Genworth put delinquencies at 0.55 per cent at December 2011, up from 0.48 per cent at the end of 2010. The loss ratio increased to 47 per cent in 2011, from 40 per cent in 2010, but was down from a loss ratio of 50 per cent in 2009.
The increased loss ratio is due to lenders' conduct as much as to borrowers' delinquency, as lenders have "accelerated" mortgage insurance claims.
Despite this softening in earnings last year, APRA's report on the sector paints a picture of an industry in good shape. Mortgage insurers earned a total of A$999 million of premium income in the year to June last year and incurred claims of just $177 million.
No other class of general insurance comes close to the margin that mortgage insurers earn. Domestic motor vehicle is the biggest class, with $6.6 billion of premiums in 2010/11 and $6 billion of claims incurred.
Home-owners' insurance generated $5.4 billion of premiums and $4.5 billion of claims. Fire and industrial special risks' insurance generated premium income of $3.3 billion and incurred claims of the same amount.
Compulsory third-party motor vehicle insurance generated premiums of $2.7 billion and incurred claims of $2.4 billion.
