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HLI - Helia Group

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Thanks, another great short for me again. GMA is built on a house of cards, but the cards have no sound fundamentals.

Unless we go negative interest, then I am am long safes and guns
 
Another mortgage company that has gone gangbusters after the last Fed election shock Lib Coalition result. This is a note to mention that today is the last day to earn the special div (0.242). It goes XD 13/11/19.



This chart shows perfect setups for me. Break of long consolidation (post Fed election) and several BO-NH setups as price made new yearly highs.
Disclosure: I've sold today as the price will fall when it goes XD.
 
peter2 said:
This is a note to mention that today is the last day to earn the special div (0.242). It goes XD 13/11/19.
Click to expand...
I look forward to being showed in cash from all those people who didn't save up a 20% deposit for their house. I hope GMA has provided you...er...your lender an excellent service.
 
Getting smashed, I wonder why, as the fall out is going to hit them very very hard, expect to be under a dollar with 3 months, current $1.53
 
peter2 said:
.. price made new yearly highs
.
Disclosure: I've sold today as the price will fall when it goes XD.
Click to expand...
Probably an exit that couldn't be bettered. Spot on about the election boost, too!



Genworth is in the process of launching a new 5 year Subordinated Debt (T2) Bond that will pay BBSW + 5%, or about 5.38%pa. Part of the note sheet has the following:

"Genworth is one of the main players in the mortgage insurance market, providing cover for lenders against non-payment of mortgages by their borrowers. The company is very well capitalised, with a Prescribed Capital Ratio (PCR) of about 1.69x under their worst case Covid-19 assumptions (10% unemployment by Dec 2020, 2 year recovery). This measure of insurer solvency is comfortably above the minimums set by APRA to ensure the business has the necessary capital to meet expected claims.


Genworth has a sound balance sheet of good quality, liquid investments to meet payment obligations to policyholders and creditors. As of 31Mar20, it had cash and investments of AUD3.1bn, of which more than 80% was held in cash and highly rated fixed-interest securities (rated A and above). The company also benefits from strong earning capacity within its insurance operations, and had an insurance margin of more than 35% in 2019.

Addressing fears of a housing downturn triggering an increase in defaults, some commentary includes:

The risk to the business is large defaults and sale prices below the loaned amount in the residential housing market. My view is the key risk to this is therefore unemployment, as borrowers tend to pay the mortgage before any other cost and if they are still employed then will continue to do so. Job losses from the COVID pandemic seem to be concentrated in the young and lower income demographics, not those most likely to own a house.


Therefore I would suggest that the actual fallout from the virus will not be as detrimental to Genworth as might be initially assumed. Additionally, the figures above already include the company's provisions for COVID losses. As a listed entity, Genworth also has the ability to raise equity capital to support the balance sheet.

It's not all good news:
Genworth have just lost NAB as a major customer (approx. 12% of gross written premiums/GWP). This leaves CBA as their only major bank client with approx. 60% of GWP, so a heavy reliance on one customer. However it is important to understand the insurance business when thinking about this � if they lose their new business, then all that happens is the old policies continue until expiry and their risk is of loss on those policies. They are, as above, very well capitalised to support this, and the business would slowly wind down until all policies are complete, and then the excess capital will be returned, i.e. the bonds will be paid off.
 
Ah, my market darling that has fallen on hard times.


Glad, I didn't buy into this one at the start of the year, 50% drop, oh crap I did, actually that was a short.
 
i look at this , and look at this , and wonder when ( or if ) the property bubble will burst ,

sadly this company will be a plaything in the greater government policy swings , but that might be fantastic for skilled traders ( and i ain't one of them )
 
On November 18th, 2022, Genworth Mortgage Insurance Australia Limited (GMA) changed its name and ASX code to Helia Group Limited (HLI).
 
Helia Group has delivered 129 per cent over the past three calendar years. The shares spiked a further 10 per cent on Tuesday, as CEO Pauline Blight-Johnston delivered a 7 per cent increase in underlying profits and yet another special dividend.


While Helia is battling a few headwinds, including subdued credit growth and competition from the federal government’s First Home Guarantee Scheme, its delinquency rate remains historically low. Blight-Johnston says the pain out there is real, but homeowners are making sacrifices to meet repayments. A growing cohort is working two jobs to stay afloat.

Blight-Johnston says the resilience of her book also underscores the way banks have changed their approach in the wake of the Hayne royal commission and COVID-19.

“With the advent of more data, it’s enabled lenders to work with borrowers to provide more nuanced solutions for individual borrowers, and find better ways to keep them in their homes, which has also been helpful for our business,” she says
 
Not Held

Afternoon report from Market Matters:
  • Helia (HLI) -20.85% was hit hard after CBA put them on notice, their contract that expires in 2025 = accounts for 53% of HLI’s gross written premium and it will go to tender. No guarantees they’ll get it, however, the SP reaction is big.
  • HLI sits on our Hitlist for the Income Portfolio, and we’ll work through what this could mean for the mortgage insurer (ex-Genworth) over the coming days. Might be an opportunity.
 
I am back in this stock at $3.73. I have been in and out of this stock for years and have made good money on it - but it can be very volatile.

Just in relation to CBA putting out a tender, I think the risk is not that CBA will go to another insurer, but that it will self-insure in one way or another. Either way, the loss of CBA would be huge - more than 50% of GWP. While CBA remains HLI's biggest client, that risk is guaranteed to keep a lid on HLI's gains.
 
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