Auswide to wind up captive insurer

John Kavanagh
Auswide Bank will wind up its captive lenders mortgage insurance company and return about A$10 million of capital to the bank.

The subsidiary, Mortgage Risk Management, will be wound up on September 30. Provisions will be transferred to the ASX-listed bank as a buffer against write-offs.

Auswide managing director Martin Barrett said in a statement that the return of capital would lift the bank's regulatory capital above 15 per cent.

Auswide committed a large part of the MRM portfolio to QBE LMI in 2012 and QBE has continued to provide cover.

Operating a captive insurer, an unusual move for a small financial institution, has not always been smooth sailing for Auswide. In 2013 Wide Bay (as it was then) cut its profit forecast after it had to increase MRM's provisions.

MRM was started in 2002, but after the financial crisis changing capital rules made it uneconomic.