LMI profits in the shadows

Lenders mortgage insurance helped prop up the wider general insurance business of QBE Insurance Group in 2009, but the details will have to wait for publication of better data by QBE's LMI subsidiary or APRA.

The annual report for QBE, published on Friday, includes a number of references to the "excellent underwriting profit" of QBE Lenders Mortgage Insurance, with greater premium growth and lower defaults and the unsurprising conclusion that the business "performed substantially better than expectations during 2009."

QBE acquired the business formerly known as PMI Lenders Mortgage Insurance in late 2008.

Along with its only real competitor, Genworth Financial, QBE has steered through increases in premiums on new business over the last year. Claims have moderated in line with lower levels of home loan arrears, thanks to the fiscal stimulus and more accommodating monetary policy.

QBE reported a slight drop in its combined operating ratio (one measure of profitability) to 90 per cent in 2009 and a slight rise in the insurance margin to 21.4 per cent.

The insurer said the mortgage insurance profits helped offset higher claims from bushfires in Victoria and also claims under trade credit insurance and other financial indemnities.