Genworth Mortgage Insurance Australia (ASX: GMA) is one of the biggest gainers in the ASX200 today. The stock is up 3.9% to $2.38, following an upgrade from UBS.
The Australian Financial Review reports that the broker changed its rating for the lenders mortgage insurance firm from sell to neutral, with a price target of $2.30, still below the stock's current price.
Genworth's share price fell nearly 30% in the past 52 weeks, as the company saw its profit decline amidst moderating house price growth. Genworth's net earned premium (NEP) – the share of underwritten policy premiums the insurer can consider as earned, depending on how much time has passed on the policy relative to its duration – decreased 18% in FY2017 and is expected to decline another 25% to 30% in FY 2018.
The contraction was mostly due to the company adopting a new way of calculating earnings, but was considered a potential source of operational challenges. Analysts at UBS now believe the share price largely reflects those challenges, leaving limited scope for further downside.
