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Genworth reports strong Q1, prepares to unveil new name

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Genworth says its first-quarter underwriting profit was “very strong” as it plans to reveal a new name later this year in a rebranding to “mark a new chapter” after NYSE-listed Genworth Financial Inc (GFI) sold its entire 52% stake.

GFI listed Genworth on the ASX in 2014.

“The link to GFI was cut on March 5 this year,” Chairman Ian MacDonald told shareholders today at the annual general meeting.

“Later this year we will be presenting you with a new name and brand for Genworth. This formally concludes the transition and marks an exciting new chapter for our business.”

Australia’s leading provider of lenders mortgage insurance (LMI) expects mortgage delinquencies to gradually increase this year and claims incurred to rise to more normal levels, though it says improved borrower equity from a jump in house prices should provide a “helpful buffer” for the insurer.

Genworth, which wrote 72,000 new LMI polices last year and has a 43% share of the market, based its forecast on interest rates continuing to rise, house price growth slowing and possibly declining in some markets, and employment staying strong.

CEO and MD Pauline Blight-Johnston says 2021 was an exceptional year for the core LMI business and early 2022 has seen a continued subdued claims environment in which first-quarter delinquencies and paid claims remained low.

Net earned premium remained strong in the first quarter due to high gross written premium in recent years and continuing high levels of cancellations, though gross written premium was dragged by slower mortgage lending growth in Australia.

Last year, unprecedented mortgage re-financing as homebuyers chased low mortgage rates led to unusually high annual policy cancellations - adding a $75.5 million windfall to Genworth’s 2021 premium revenue. Gross written premium volumes grew 9.3% when adjusted for loss of the National Australia Bank contract in 2020, helped by a supportive economic environment and unusually strong housing market.

Genworth recently successfully pitched to continue a 50-year-plus exclusive LMI provider relationship with its largest customer, CBA, through to December 2025.

It is now considering innovating with a shared deposit gap funding product and hopes to have a proof of concept this year, and is also exploring opportunities for Australians to use the equity in their homes.

Genworth has bought back $59.4 million worth of its shares and plans an additional on market share buy-back of up to 60 million ordinary shares as it brings its solvency ratio to meet a new target capital range announced today of 1.4-1.6 times APRA’s Prescribed Capital Amount, from a previous 1.32–1.44 times.

Mr MacDonald says Genworth assisted almost 80,000 borrowers experiencing hardship in the past decade by working with lenders on loan deferrals and restructures, approving 8134 hardship requests to assist borrowers who were experiencing difficulties in the past year.

He says Australian lenders are increasingly focused on climate-related risks and opportunities, especially potential impacts on insurance claims and affordability, and Genworth is committed to working with customers and stakeholders, to better manage the physical and transition risks of climate change.

"We are making genuine steps forward in prioritising sustainability,” he said.

Genworth had more than 1.1 million policies with insurance in-force of $304.5 billion at the end of last year. It has previously forecast 2022 net earned premium of $315-375 million, representing a fall or much lower growth after it jumped 19% last year to $371 million.