Genworth Mortgage Insurance posted underwriting income of $ 34.8 million in the first quarter as high home prices and a robust economy boosted home loan underwriting and improved the outlook for claims.
Australia’s leading mortgage insurance provider (LMI) for lenders said gross written premiums (GWP) jumped 25% to $ 142.7 million in the first three months of the year, homeowners and the first home buyers who supported the rise in the national housing market.
“This has been a great start to the year for us,” said CEO and Managing Director Pauline Blight-Johnston, adding that there was “a lot of underlying momentum in the business” and Genworth is hopeful that the trends economic and housing prices will continue.
âRising asset prices are contributing to the economic recovery and is good for our business,â she said during an investor briefing today.
During the quarter, house prices in Australia saw the biggest increase in almost 18 years. Sydney and Canberra recorded the fastest quarterly increases in nearly three decades, while house and house prices in Melbourne hit a new record, with the median house price expected to exceed $ 1 million in the quarter in Classes.
Australians are profiting from cheap mortgages as the demand for housing has been unmet for many years, said Ms Blight-Johnston, and “Genworth has’ every hope that growth will continue”.
“First-time buyers and valuers are taking advantage of the low interest rate environment to get their little piece of Australia,” she said. âAlthough interest rates are low and house prices are within reach, we do not see any change in these underlying trends (GWP),â she said.
Ms Blight-Johnston said there was some risk that mortgage insurance sales would slow if the continued rise in home prices put the property too far out of reach for buyers.
Genworth’s first-quarter loss ratio was 41.8%, up from 47.1% a year earlier, an improvement it said reflects high property values ââand the economy, offset by its additional reserves.
The switch to black comes after a loss of $ 234 million in 2020 as Genworth bolstered its war reserve with a refined delinquency reserve of $ 109.1 million in anticipation of claims spurred by mortgage defaults. This has not materialized so far due to support programs which they say “have interrupted the typical incidence patterns of malfunctions and complaints.”
The delinquency rate for the first trimester was little changed at 0.58%. Genworth paid 186 claims for net claims incurred of just $ 35.9 million in the first quarter, compared to $ 138 million in the fourth quarter.
Struggling borrowers for the most part had their loans restructured, which ended all active deferrals of repayments at Genworth’s lending clients at the end of March. There had been 8,162 at the end of 2020 and 31,139 three months earlier.
âAs of March 31, 2021, these agreements have effectively ended, with arrears reset or loans restructured,â Genworth said.
Genworth is working closely with lender clients to fully understand their loan restructuring and determine the most appropriate hardship solutions to mitigate potential losses and has maintained a cautious reserve to offset the continued lagging effects of COVID-19 moratoria on properties, as well as the potential impact of storms and flooding in New South Wales and South East Queensland.
Genworth said today it will closely monitor bank lending data during this year as uncertainty persists over the outlook for a claim.
âWe still have to see what happens in the loan portfolio when the loan has to work again and that’s when we can really refine those assumptions (claims),â Ms. Blight-Johnston told investors. .
After Genworth Financial Inc sold its entire 52% stake in Genworth Mortgage Insurance Australia in March, Genworth is moving to semi-annual reporting and will make an upcoming update in August.
“We’ll know more then,” Blight-Johnston said of the mortgage difficulties and the outlook for claims.
Genworth said the impacts of reduced support programs are not yet rippling through the economy and that it “will remain vigilant to signals from economic indicators and data on delinquent loans.”
“With the conclusion of these support programs, we are working closely with our lender clients to understand the performance of loans that were previously deferred,” said Ms. Blight-Johnston. âOver the next few periods, it will become increasingly evident how many insured loans may continue to struggle.
âWe look forward to a clearer picture of the ultimate impact of COVID-19 on Genworth’s business that will emerge during the year. “