COVID crisis triggers slide in Genworth earnings

Genworth Mortgage Insurance Australia has released its earnings result for the first half of its reporting period in 2020 (1H20), posting an underlying loss of $85.5 million, down almost 300 per cent from a net profit of 43.1 million in the previous corresponding period.

The result was underpinned by a $181-million write-down of deferred acquisition costs over the first quarter (1Q20) and an additional $35.5 million in loss reserving in anticipation of the “economic impacts of COVID-19”.

The $35.5 million increase in loss lifted Genworth’s loss ratio to 67 per cent, up from 54.1 per cent in the previous corresponding period.  

Genworth’s underlying loss came despite a 30 per cent increase in gross written premium, from $184.1 million in 1H19 to $239.3 million in 1H20, which Genworth attributed to a pre-COVID recovery in the residential property market.

Net earned premium also increased over the half, up 2.2 per cent from $147.6 million to $150.8 million.

Genworth managing director and CEO Pauline Blight-Johnston said she was pleased with the result, given the expected earnings impact from COVID-19.

“Genworth’s first-half performance reflects the sound fundamentals of our business, which, along with a strong capital base and leading market position, has set us up well to manage the impacts of COVID-19,” she said.

“We responded quickly to the pandemic and have adapted our ways of operating in a manner that prioritises the wellbeing of our people and supports our lender customers and their borrowers in these challenging times.”

Ms Blight-Johnston acknowledged that while the COVID-19 impact on the group’s performance were “broadly in line” with expectations, there remains “a long road ahead”.

“The strengthening of reserving for the first half reflects this, and we will continue to consider the adequacy of our reserves as more information comes to hand,” she added.

“Notwithstanding early encouraging signs in Australia, significant global economic uncertainty remains, and the risk of deterioration in Australia’s health and economic position is ever present.”

The Genworth CEO concluded: “We continue to respond with appropriate loss mitigation activities to work in tandem with the various stimulus packages, income support and repayment deferrals to ensure that the company is able to assist lenders and borrowers both at this time of need and over the longer term.

“Genworth’s capital strength, along with the flexibility we have built with our reinsurance programs, positions the business well at this time.

“We will continue to work closely with our lender customers to support Australian borrowers to stay in their homes wherever possible.”

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