Genworth chief executive Pauline Blight-Johnston warned of “sustained pressure on claims” this year as government and bank COVID support measures are withdrawn.

Despite all the talk of how the Australian economy is doing better than expected, the lenders mortgage insurer built up its reserves in the December quarter last year in anticipation of higher claims in 2021 and took a hit to its bottom line in 2020 as a result.

Blight-Johnston pointed to some worrying trends. In May last year, 51,000 of the 1.2 million mortgages on Genworth’s books were on deferral. At the end of December the number had fallen to 8000.

However, 1246 (or 3 per cent) of the loans that have exited deferral are delinquent. Genworth’s historical delinquency rate is around 60 basis points. The company released its 2020 results on Friday, reporting a loss of A$107.6 million for the 12 months to December. That loss was largely due to the company’s decision to strengthen reserves and also lower returns on invested funds.

Blight-Johnston said government support measures and loan deferrals made 2020 an atypical year, delaying claims that would otherwise have been expected. The number of paid claims fell from 1352 in 2019 to 1254 last year.

She said the company would have to see how the year plays out before deciding whether to increase reserves further.

The company’s business performance was strong, with gross written premium increasing by 29.7 per cent over the previous year to $561.7 million and net earned premium increasing by 4.6 per cent to $312 million.

Blight-Johnston said the higher volume of business did not come at the cost of any deterioration in underwriting quality.

Genworth’s loss ratio increased from 50.6 per cent to 92.9 per cent but this was also a reflection of higher reserves.