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Genworth MI Canada Inc. Q3-2017 Earnings & Price Target Update

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Genworth MI Canada Inc., has been a leading Canadian private residential mortgage insurer since 1995, providing mortgage insurance services to Canadian chartered banks, trust companies and other lending institutions. Federally regulated lenders are required to purchase transactional mortgage insurance in respect of a residential mortgage loan whenever the loan-to-value ratio exceeds 80%. They also provide portfolio mortgage insurance to lenders for loans with loan-to-value ratios of 80% or less. Transaction mortgage insurance comprises about 90% of revenues. The investment portfolio contributes approximately 40% of income before tax, the balance primarily from transactional insurance. Profits are earned from the premiums earned mortgage insurance, and the investment income from investing funds that are not immediately required to pay for operating expenses, regulatory reserves, interest and costs of foreclosures. Genworth invests the premiums earnings in an actively managed portfolio that was $6.1B as at Sept-30-2017 compared to (6B as at Dec-31-2016) earning and approximate 3% annualized rate. The portfolio is mainly comprised of highly rated fixed income securities and preferred shares.

Genworth MI Canada Inc. went public in Jul-09 with Genworth Financial Inc., (GNW-NYSE), a US company with $104B in assets retaining 57% ownership. Genworth Financial Inc. mainly provides mortgage insurance in Canada, the US and Australia, life and medical insurance in the US and insurance for corporate acquisitions. Profits are earned from the premiums earned mortgage insurance, and the investment income from investing funds that are not immediately required to pay for operating expenses, regulatory reserves, interest and costs of foreclosures. Genworth invests the premiums earnings in an actively managed portfolio that was $6.1B as at Sept-30-2017 compared to (6B as at Dec-31-2016) earning and approximate 3% annualized rate. The portfolio is mainly comprised of highly rated fixed income securities and preferred shares.

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 was expected to close in mid-2017. The closing deadline for China Oceanwide Holdings has been extended for a second time, to Apr-1-2018. The $2.7B transaction, announced more than a year ago, has been held up by the Committee on Foreign Investment in the United States (CFIUS). Securing a takeover is important for Genworth with $600M or about 15% of long term debt maturing in May-2018.

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