Genworth loses another major contract

Genworth Mortgage Insurance Australia announced in its full year 2016 financial results earlier this year that the contract with its second largest customer was due to expire in February.

In a trading update today, Genworth advised that this customer, who was not named but is understood to be a non-major bank, has provided the company with 30 days’ written notice that they are terminating the exclusivity agreement for the provision of LMI with effect from 8 April 2017.

“The company remains in discussions with this customer about managing default risk in the context of other insurance alternatives,” Genworth said in a statement.

“The LMI business underwritten under this contract represented 14 per cent of Gross Written Premium (GWP) in 2016.

“The termination of this contract does not change the Company’s guidance provided in February 2017 that GWP will be down 10 to 15 per cent in 2017.”

The LMI giant managed to renew its contract with CBA late last year following the loss of Westpac in 2015, one of its biggest clients.

Following the release of its full-year results in February, Genworth revealed that it will redefine its core business model amid challenging market conditions and the potential loss of major clients.

“From a strategic perspective, we are beginning a program of work to redefine our core business model, to further address our customers’ capital and risk management needs and to deliver a sustainable return on equity for shareholders,” Genworth CEO Georgette Nicholas said.

“In particular, we are focused on improving our underwriting efficiency, enhancing our product offerings and where appropriate, leveraging our data and partnerships along the mortgage value chain,” she said.

The company has also advised that the current supply and service contract with its third largest customer is due to expire on 20 November 2017 and that this customer may, or may not, issue a Request For Proposal prior to that time.

[Related: LMI giant rethinks business model as profits plummet]