Mortgage insurer, Genworth Australia has joined companies large and small in preparing itself for a battering from the impact of the COVID-19 lockdown measures.
The company reported a surprise loss for the three months to the end of March of $125.6 million which was driven by a need to build provisions for bad debts ahead of a likely jump in mortgage insurance claims.
At the same time, the company joined other companies in the financial sector (such as the ANZ and Westpac, for example) in moving to preserve the outflow of cash by deferring its half-year results later in the year (August).
Genworth provides cover to banks against losses on home loans with a high LVR (Lona to Valuation Ratio, usually above 80%). It made a statutory loss of $125.6 million in the second quarter, down from a $47.8 million profit in the first quarter of 2019.
After assessing scenarios of rising unemployment and higher claims facing the insurer, Genworth wrote down its deferred acquisition costs by $181.8 million, which put its bottom line into the red.
The company said it still had surplus capital of $267 million and a solvency ratio of 1.78 times, which was above the board’s target. It also has $800 million in reinsurance cover at its disposal, it said.
Chief executive Pauline Blight-Johnston said yesterday: “Genworth’s solvency ratio along with the flexibility we have built with our reinsurance programs, positions the business well in this COVID-19 environment.”
“Given the current economic uncertainty and APRA guidance encouraging insurers to seriously consider deferring decisions on dividends and capital returns until the outlook is clearer, we believe it is sensible to preserve capital at this time to sustain our strong capital position.”
Genworth shares rose 1.9% to $2.08.
