Captive insurer retards Wide Bay profit

The captive lenders mortgage insurance subsidiary of Wide Bay Australia will be a drag on profit for the Bundaberg-based lender, the company said yesterday.

Net profit will fall six per cent to $17.2 million though, ignoring the investment losses from the insurer, Wide Bay said net profit increased 10 per cent to $20.3 million.

The final dividend will be cut by three cents to 30 cents. Wide Bay will not publish full financials until next week.

Wide Bay has had to mark down some investments (with impairments of $4.9 million) and realise actual investment losses (of $800,000) within Mortgage Risk Management, the wholly owned LMI operated for years by the bank.

In a media release to the ASX yesterday Wide Bay disclosed a few details over what is otherwise a rather opaque corner of its business.

One detail is the reinsurance arrangements for MRM, which were through US insurer Radian. Wide Bay said it commuted those arrangements.

Wide Bay will now insure riskier home loans with Genworth Financial and QBE LMI.