GMA +7.55%: The Mortgage Insurer released 1H21 results this morning that showed improvement and importantly a strong capital position. We’ve owned GMA in the past for the income portfolio and made money, however it’s a notoriously difficult business to asses. In simple terms, this result was largely inline in terms of half year profit which came in at $76.4m while the dividend of 5c was welcome but below expectations. The capital position in GMA is very strong with $320m worth of excess capital on the balance sheet over and above the boards stated targets, this sets up an opportunity for further capital management post Covid.
There was a very low claims expense (-51%) given banks are deferring mortgage repayments for anyone in distress while low rates and high property prices have supported demand for lender mortgage insurance (LMI). GMA is now on our radar as an income play as and when more clarity emerges around their important contract with CBA (GMA had an exclusive LMI agreement in place with CBA that accounted for more than 50% of their written premiums in FY20 which has now been opened up for wider tender).
MM is now neutral/bullish GMA
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