Helia Group, formerly known as Genworth Mortgage Insurance Australia, specialises in lenders mortgage insurance (LMI). This insurance helps mitigate risks for lenders by covering losses in high loan-to-value ratio residential mortgage loans, primarily in Australia. There are a few moving parts here when we think about HLI’s exposure to falling interest rates. Lower rates may put upward pressure on property prices, forcing more buyers into taking out LMI, while lower rates reduce the stress across their existing policy holders reducing default rates on insured loans – both positive consequences.
Further, HLS offers an attractive yield at over 7% fully franked and has excess capital residing on their balance sheet which has led to special dividends in the last 5-years! The variable for HLI comes from their major customer Commonwealth Bank (CBA) with their contract expiring on the 31 December 2025, and CBA is tendering the business which accounts for more than 50% of HLI’s gross written premium.
- We like HLI for its yield and have it on our Active Income Portfolio Hitlist, though the CBA contract situation has kept us on the sidelines for now.
MM likes HLI for Income
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