The strength of the residential property market helped boost Genworth Mortgage Insurance Australia’s new insurance written and net earned premium in the six months to June, while COVID stimulus and deferral measures resulted in a lower level of claims and delinquencies.
But the company says the latest lockdowns have delayed ultimate claims outcomes, while it is uncertain about the renewal of its biggest contract and it is separating from its former parent.
Genworth released its results for its June 2021 half-year yesterday, reporting a net profit of A$59.4 million for the half. The result is a turnaround from a loss of $90 million in the previous corresponding period, when the company wrote off $181.8 million of deferred acquisition costs following a liability adequacy assessment and added $35.5 million to claims reserves.
The lenders mortgage insurer preferred to focus on its underlying profit of $76.4 million, which excluded unrealised losses of $23.5 million from fixed income assets in its investment portfolio.
The board declared a dividend of 5 cents a share, after not paying any dividends in 2020.
New insurance written (the total loan amount that is insured) rose 14.7 per cent to $15.5 billion during the half and net earned premium (premium earned over the period less reinsurance costs) rose 13.3 per cent to $170.9 million.
The number of claims paid during the half was 325,000 – down from 691,000 during the previous corresponding period. The average claim fell from 94,900 to 74,700 over the same period. Total claims paid was $24.3 million – down from 65.6 million in the June half last year.
The value of new delinquencies during the half was $69.5 million – down from $78.9 million in the previous corresponding period.
Genworth Mortgage Insurance Australia chief executive Pauline Blight-Johnston said top line volume growth will flow through to future earnings.
However, the latest lockdowns have created renewed uncertainty. “The latest round of borrower support programs will extend the duration of the subdued delinquency behaviour we have been experiencing, pushing out the timeframe over which we will obtain increased clarity regarding ultimate claims outcomes,” Blight-Johnson said.
Another uncertainty for the company is the renewal of its contract with Commonwealth Bank. In June, Genworth disclosed that CBA had advised it that it would issue a request for proposal relating to its lenders mortgage insurance requirement following the expiry of its current exclusivity arrangement with Genworth on December 31.
The CBA LMI contract accounted for around 57 per cent of Genworth’s gross written premium in 2020.
Blight-Johnson said yesterday that the process would play out during the second half of the year.
In March, US insurer Genworth Financial sold its 53 per cent stake in Genworth Australia
All rights and obligations under a shareholder agreement between the companies ceased 90 days after the settlement of the share sale. Genworth Australia is independently capitalised and the sale had no balance sheet implications.
Other commercial arrangements will cease after a transition period. These include a trademark licensing agreement, IT services agreement and shared services agreement.
In an update on the transition, Blight-Johnson said most of the key