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Genworth & Seven Group Update

Genworth

Yesterday Genworth Mortgage Insurance Australia Limited released half yearly results that show a 33% decrease in its Gross Written Premium (GWP) from the previous year. This was even greater than the company’s predicted fall of 20% at the beginning of the period. In particular, the company’s portfolios in QLD and WA contributed to higher rates of delinquencies as challenges with post mining boom transition occurs.

 

Although the subordinated notes broadly align within the same industry as other financial institutions such as IAG and QBE, the issuer itself is far different from the former companies. Specifically, Genworth is largely dependent on the residential housing & loan market and risks associated with this industry. Out of its current portfolio, Genworth has the largest exposure in NSW, QLD and VIC which account for approximately 75% of its loan portfolio. As of 30th June 2016 Genworth has seen its regulatory capital ratio at 1.56x the Prescribed Capital Amount (“PCA”) and at 1.43x the Common Equity Tier 1 (“CET1”) ratio. Both of these ratios exceed the internally targeted range.

 

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Seven Group

Seven Group Holdings Limited has posted mixed results for the 2016 financial year. It’s underlying EBITDA and net profit both declined by 10% to $341 and $184 million respectively despite a 2% revenue growth. The company has been undergoing an extensive capital management process and this is likely to continue into the future in line with their strategy of maximising shareholder value.

 

The group possesses a diversified operating portfolio with a majority of exposure in the mining & construction equipment and media industries. Geographically, the exposure lies largely within the Australian market with a minor position in the Chinese market. As such, the group will be dependent on the performance within the industries associated with mining, and whether the industry outlook is likely to improve in the future. The company’s recent strategic direction has been to better its capital management and as such has resulted in 5% of on-market shares being repurchased. With the chairman Kerry Stokes holding approximately 70% of the shares available, it is in the company’s interests to retain a stable payout of dividends in the near future. This should benefit the TELYS4 hybrid.

 

Click here for the full report.