The need for cash of its US parent saw control of Genworth Mortgage Insurance Australia move on Monday to a bunch of major fund managers and institutions.
Genworth Australia revealed in a notice to the ASX yesterday that its US parent, Genworth Financial had sold off its majority stake in the ASX-listed insurer for almost $488.6 million.
US-based Genworth Financial (GFI) had until this sale owned 52% of ASX-listed Genworth Mortgage, which provides insurance to banks against the risk of mortgage defaults.
GFI said it had agreed to sell all of its 214.3 million shares in Genworth to other investors through an underwritten agreement, and it was selling the shares to improve its liquidity position.
The chief executive of the ASX-listed Genworth, Pauline Blight-Johnston, said: “We are pleased with the strong investor interest in the sale of GFI’s shares and welcome the new institutional investors onto our register.
“We look forward to working with all our investors in supporting more Australians to achieve financial security through home ownership.”
Genworth Mortgage Australia revealed a 2020 statutory loss of $107 million against a statutory profit of $120 million the year before.
The company incurred a 2020 underwriting result of a $234.0 million loss which was impacted by the coronavirus pandemic. Genworth said Covid, which led to a write-down of deferred acquisition costs of $181.8 million (pre-tax) as at 31 March 2020, and the 18 December 2020 reserving review of $109.1 million (pre-tax).
The increased level of reserving during the year in response to anticipated future claims arising due to COVID-19 increased Genworth’s loss ratio to 92.9% in 2020, up from 50.6% in 2019.
Statutory and underlying NPAT losses were also impacted by lower investment income from falling interest rates, which was offset by higher realised gains on sales of fixed interest securities.
Genworth’s underlying loss came despite a 29.7% increase in gross written premium, from $433.2 million in 2019 to $561.7 million in 2020. Genworth attributed the rise to higher lender’s mortgage insurance (LMI) flow volumes across lender customers over the second half of 2020. It said that underwriting quality remained strong.
The LMI volume flow growth was driven by a low interest rate environment, with new insurance written (NIW) increasing as owner-occupiers and first home buyers (FHB) continuing to underpin national housing market growth, while Genworth’s lender customers achieved above market lending growth rates, it said.
First home buyers using the federal government’s assistance package do not need LMI when buying their homes.
Genworth shares fell 5.8% to $2.43.
