Comment: Investors warned on Westpac in Genworth IPO

It's easy - with the benefit of hindsight - to have predicted the  "surprise " move by Westpac to remove its reinsurance business, along with the lenders mortgage insurance provided to its subsidiaries, away from incumbent Genworth Australia.

Investors saw things differently, instantly wiping 20-plus per cent off the mortgage insurer's market capitalisation.

Back in May last year it was made clear in Genworth's initial share offer prospectus that its Lender Customers "may introduce systems that would permit them to acquire LMI from a number of different providers on an interchangeable loan-by-loan basis, including from an LMI Subsidiary. "

"At least one of Genworth Australia's key Lender customers is currently upgrading its systems to give it this functionality," Genworth said, in a reference to Westpac and its multi-branded subsidiaries under the St George banner. (The Genworth IPO prospectus acknowledged it had ceased providing LMI to the "Westpac" brand in 2013.)

Westpac and NAB may not be the only banks giving their LMI settings a much needed makeover, although Genworth's largest Lender Customer, CBA, seems well locked in until December 2016.

"System enhancements may require LMI Providers such as Genworth Australia to adapt their systems to the systems of specific Lender Customers," the prospectus cautioned.

"The introduction by Lender Customers of such system enhancements could reduce the volume of LMI purchased by those Lender Customers from Genworth Australia or require Genworth Australia to reduce the commercial rates at which it provides LMI to those Lender Customers.

"This could have an adverse impact on Genworth Australia's profitability or financial condition," the section concludes.