Is Genworth Mortgage Insurance Australia Limited’s (ASX:GMA) CEO Pay Fair?

Georgette Nicholas has been the CEO of Genworth Mortgage Insurance Australia Limited (ASX:GMA) since 2016. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Genworth Mortgage Insurance Australia

How Does Georgette Nicholas’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Genworth Mortgage Insurance Australia Limited has a market cap of AU$1.2b, and is paying total annual CEO compensation of AU$2.0m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$858k. When we examined a selection of companies with market caps ranging from AU$579m to AU$2.3b, we found the median CEO total compensation was AU$1.5m.

Thus we can conclude that Georgette Nicholas receives more in total compensation than the median of a group of companies in the same market, and of similar size to Genworth Mortgage Insurance Australia Limited. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see a visual representation of the CEO compensation at Genworth Mortgage Insurance Australia, below.

ASX:GMA CEO Compensation, July 29th 2019
ASX:GMA CEO Compensation, July 29th 2019

Is Genworth Mortgage Insurance Australia Limited Growing?

Genworth Mortgage Insurance Australia Limited has reduced its earnings per share by an average of 28% a year, over the last three years (measured with a line of best fit). Its revenue is up 3.2% over last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.

Has Genworth Mortgage Insurance Australia Limited Been A Good Investment?

Most shareholders would probably be pleased with Genworth Mortgage Insurance Australia Limited for providing a total return of 37% over three years. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We examined the amount Genworth Mortgage Insurance Australia Limited pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

On the other hand, returns have been good, so the company is doing something right. So on this analysis we’d stop short of criticizing the level of CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Genworth Mortgage Insurance Australia shares (free trial).

Important note: Genworth Mortgage Insurance Australia may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.