Genworth's NAB Broker contract on the line

Mortgage insurer Genworth has entered into a request for proposal with National Australia Bank regarding NAB's existing lenders mortgage insurance contract for the NAB Broker business. The contract runs until the end of November.

The LMI business underwritten under the NAB Broker contract represented around 11 per cent of Genworth's gross written premium in 2014.

In a statement included in its March quarter financial report, issued yesterday, Genworth said it was "committed to working closely with NAB to ensure ongoing recognition of the long-standing partnership and Genworth's product offering and capital strength."

The NAB request for proposal comes two months after Westpac gave notice that it was terminating its LMI agreement with Genworth. The business written under the agreement represented 14 per cent of Genworth's gross written premium in 2014.

Having a big contract up in the air was not the only bad news Genworth delivered yesterday.

Business volumes were down during the quarter, with new insurance written down 16 per cent on the previous corresponding period and gross written premium down 20 per cent.

The company said there were three reasons for the fall: the continued reduction in mortgage originations with loan-to-valuation ratios above 90 per cent (which attract higher premiums); the lower percentage of owner-occupied mortgage originations in the market (compared with investor loans); and lower levels of mortgage origination growth experienced by Genworth's customer base.

Net profit for the quarter was A$89.5 million - a 29.2 per cent increase over the previous corresponding period.

After adjusting for gains on investments, underlying profit was unchanged at $69.7 million.