Genworth MI Canada Inc. Price Target Update
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Genworth MI Canada Inc., has been the leading Canadian private residential mortgage insurer since 1995, providing mortgage insurance services to Canadian chartered banks, trust companies and other lending institutions. Genworth MI Canada Inc. went public in Jul-09 with Genworth Financial Inc., (GNW-NYSE), a US company with $108B in assets retaining 57% ownership. Genworth Financial mainly provides mortgage insurance in Canada, the US and Australia and life insurance in the US. On Oct-23-2016, Genworth Financial Inc., the Company's major shareholder agreed to be purchased by China Oceanwide Holdings Group Co., Ltd. The transaction is still subject to regulatory approval. China Oceanwide Holdings Group is a private company founded in 1985 by Mr. Lu Zhiqiang. He is also a member of standing committee of 12th Chinese People's Political Consultative Conference.. This transaction is subject to regulatory approval and expected to close in mid-2017.
Genworth Canada underwrites mortgage insurance for residential properties in all provinces and territories of Canada and has the leading market share among private mortgage insurers. By province approximately 43% of mortgages insured are in Ontario, Quebec-20%, BC-14%, Quebec -13%, Prairies – 5% and 5% in other Canadian province. The Canada Mortgage and Housing Corporation (CMHC) a crown corporation, is their main competitor.
Their mortgage business focuses primarily on high ratio (transactional) mortgages. Approximately 87% of mortgages in Canada are originated with a loan-to-value ratio of greater than 80%, considered high loan-to-value mortgages. Lenders may also obtain mortgage insurance for mortgages with loan-to-value ratios of 80% or less, known as low loan-to-value or portfolio mortgages. High loan-to-value mortgages typically represent about 80% of the gross premiums written, and low loan-to-value mortgage insurance represents 20%. To the extent that home prices appreciate over time and/or the principal amount of the loan is paid down, the effective loan-to-value of the insurance written in a given year decreases. The value of mortgages to total home value is estimated at 60%. High loan-to-value new insurance written is comprised of approximately 65% of five year fixed rate mortgages or terms of longer duration and 35% are variable rate mortgages.
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