CMHC released its second quarter results on Wednesday reporting a quarterly profit of $255 million. The crown corporation is well on its way to generating another $1 billion in annual profits. The Canadian government doesn’t usually do well running profitable businesses, but this is one cash cow that we’d be foolish to privatize.
Mortgage insurance claims for the quarter were $168 million, up from $144 million in the same period in 2011, but the nominal increase appears to be a blip on the radar. “Fewer borrowers are in arrears and severity is coming down, which should translate into lower claims losses in future periods,’ said CIBC analyst Paul Holden.
CMHC has been forced to limit the number of new policies issued as it nears the $600 billion Ottawa imposed limit. Although Canadians pay-off about $60 billion annually in insured mortgages, this limit will hamper CMHC’s ability to continue contributing to the Canadian coffers. This is music to the ears of Genworth Canada and Canada Guaranty, the private sector competition. Perhaps a profitable government business is too good to last.