Bermuda-based insurer Arch appears to be the party engaged in exclusive talks with Commonwealth Bank over replacing Helia as sole provider of lenders mortgage insurance.
Helia yesterday morning did not exactly surprise the market with the disclosure that Helia has been informed by CBA that “it has entered into exclusive negotiations with an alternative provider for the provision of LMI services to the CBA group.
“If those negotiations are successful Helia anticipates that Helia’s current Supply and Service contract with CBA will not be renewed beyond the current expiry on 31 December 2025” Helia said.
Helia – founded as the Housing Loans Insurance Corp in the 1960s – has continuously provided lenders mortgage insurance to CommBank since then.
QBE Group’s LMI division is the only other mortgage insurance business that might, notionally, have been in the running for the Commonwealth Bank contract. But QBE lacks the firepower to have been seriously considered and QBE has been ambivalent around LMI for some years.
There’s an outside chance CommBank is resolved on a self-insurance model for LMI, laying off the risks through global reinsurers.
But since Helia have said CBA have told them they are in exclusive negotiations with another party, that seems to rule out this scenario.
Thus Arch it is.
Investors, inevitably, hammered the Helia share price yesterday, and the insurer’s shares closed down $1.24 or 26 per cent to $3.61.
This makes Helia one of the sad sacks of the ASX, even though for now it has a market cap of $980 billion.
When Helia IPO’d – as Genworth – in 2014, it counted Commonwealth Bank, NAB and Westpac as clients. Now it has none of them.
Leaving Helia to service lots of little banks and non-bank lenders and the massive headache of retooling its operating model for much lower volumes.