From time to time, I always find it funny looking at articles like this.. Article that is very much focus on the negative history of the business and left out the rest of the facts.
Nowadays, Genworth has learnt its lesson and they no longer provide LMI for loans with LVR > 95%. That reduces the risk in their portfolio significantly. QBE still does offer LMI for loans with LVR > 95%. I know friend of mine whose loan is rejected by Genworth due to 97% LVR, but accepted by QBE.
The most important fact that the writer didn't mention is the fact that people refinance their loans from time to time. A lot of people who started out the loan with 95% LVR will keep paying down until they get it down to 80% LVR and refinance it. What that means is, the new loan won't pay LMI and as a result of that, the property is taken off from Genworth books. That means if another GFC happened, Genworth is no longer responsible to cover that property.
The banks won't easily change their LMI provider. They need to have 100% assurance that the LMI provider has enough capital to cover the risk. So they won't just go to 'any' LMI providers. Now, if the banks has to choose between Genworth and QBE (two biggest LMI providers in Australia), I think we know who the clear winner is.. QBE has been into a lot of trouble in the past few years and their outlook isn't getting any better.
The writer mention that GFC could wipe out your entire shareholding. This is utter rubbish! Genworth has built enough capital to cater for this sort of event. Look at their parent company.. During the GFC the stock went down massively (who doesn't!).. But since then, it has gone a massive restructuring and reduction of their risk profile. In 2012, their stock was hovering around $5.. Last year, it was around $10. And now it's around $18 with a lot of analysts slapping 'Buy' recommendation.
The banks at the current level is very expensive and more exposed to the downturn of economy than Genworth. The way I see it, there is an upside to Genworth Australia.
