Genworth reports LMI-driven profit boost

Genworth Mortgage Insurance has released its financial results for the first half of its 2019 reporting year (1H19), recording a statutory net profit after tax of $88.1 million, up $46.2 million from $41.9 million in 1H18.

The profit spike was driven by a sharp increase in new insurance written, up 20.7 per cent to $12.5 billion.  

Genworth noted that the overall improvement in insurance settlements reflected growth in its traditional lenders mortgage insurance (LMI) flow and bulk business.

Reflecting on the results, Genworth managing director and CEO Georgette Nicholas said she was pleased with the result given that volume growth was reported against a backdrop of subdued demand for housing credit.  

“Our 1H19 financial performance is in line with our full year guidance,” she said.

“Over this period, we have maintained the momentum of our strategic program of work, particularly around product innovation and enhancement and have delivered growth in our traditional lenders mortgage insurance (LMI) business despite the prevailing tight credit and moderating market conditions.”

Ms Nicholas added that Genworth is continuing to manage its capital position, making reference to the insurer’s $100 million share buy-back, which as at 30 June, acquired 25 million shares for a consideration of $63.9 million.

“Given the time taken to complete the buy-back, the board has declared the remaining $36.1 million as part of the unfranked special dividend announced today,” she said.

“We remain committed to continuing to evaluate uses for our excess capital and to returning excess capital to shareholders in the most effective and timely manner.”

Genworth to launch new LMI offering

Ms Nicholas also noted the group’s strategic vision, which she said seeks to strengthen Genworth’s position as a customer-focused risk and capital management solutions provider in the Australian residential mortgage market.

The strategy has involved the launch of new offerings that complement Genworth’s traditional LMI business, while also leveraging technology and data to deliver risk management insights and operational efficiencies to its customers.

As part of its revamp, Genworth has announced that it will be introducing the option of regular (monthly) premium LMI to lenders, as an alternative to the current upfront single premium.

“The introduction of regular (monthly) premium LMI offers borrowers flexibility in how they pay for LMI while continuing to support a reduction in the deposit they need to purchase a home,” Ms Nicholas said.

The new offering provides borrowers with the option of not capitalising the premium into the loan or paying the entire LMI premium upfront. Instead, borrowers would be permitted to pay the LMI premium in instalments over time.

“This means a greater portion of their loan can be utilised to support the purchase of the property,” she said.

The Genworth CEO added the new offering would also enable borrowers to refinance at a later date, without the need for a refund of LMI premium, while also providing lenders with the option of structuring the offering to enable borrowers to cease paying the LMI premium when their loan hits a certain LMI target.

[Related: Mortgagors continue benefiting from rate cuts]