Genworth earnings dragged into negative territory

Genworth Mortgage Insurance Australia has released its results for the first quarter of the 2020 financial year (1Q20), reporting that its statutory net profit after tax (NPAT) has fallen from $47.8 million in 1Q19 to a loss of $125.6 million.

The result was impacted by a $181.8 million write-down in deferred acquisition costs (DAC), with Genworth expecting a sharp increase in mortgage insurance claims off the back of the COVID-19 crisis.

“We are now operating in a new environment created by the COVID-19 pandemic, and our priority is the wellbeing of our people, customers and the stakeholders we interact with,” Genworth CEO and managing director Pauline Blight-Johnston said.

This follows the release of the major bank’s 1H20 results, in which the lenders collectively reported a 227 per cent increase in credit impairment charges, costing the big four a combined $5.2 billion.  

Ms Blight-Johnston said the group would work with its lender partners over the coming months and leverage relief support to manage the deterioration in credit quality.

“We continue to respond with appropriate loss mitigation activities to work in tandem with the various stimulus packages, income support and home loan repayment deferrals, to ensure that the company is able to support lenders and borrowers both at this time of need and over the longer term,” she added.

Genworth’s 1Q20 result was offset by an increase in new insurance written, up 18.5 per cent to $6.4 billion.

The insurer attributed the increase in insurance volumes over the quarter to the rebound in demand for housing finance in response to low interest rates and an improvement in property market sentiment prior to the COVID-19 crisis.

When excluding the COVID-19 impact, Genworth’s underlying NPAT increased from $22.3 million in 1Q19 to $24.1 million.

Ms Blight-Johnston concluded: “Genworth entered this crisis with a strong capital base, leading market position, robust operational processes and an experienced team.

“We are well positioned to work together with our lender customers to support Australian borrowers, helping as many people as possible through this crisis and beyond to realise their dream of home ownership.”

[Related: Loan loss charges cost big banks $6.2bn]