Genworth, the Lenders Mortgage Insurer released their third quarter results today. Their statutory net profit after tax (NPAT) in 3Q19 was $25.1 million (3Q18: $19.6 million) and their underlying NPAT2 of $26.5 million (3Q18: $20.4 million).
Genworth said 3Q19 financial performance was “solid” with gross written premium up 24.4% from growth in our traditional lenders mortgage insurance (LMI), driven by increasing volumes in high loan to value lending by our lender customers.
The Delinquency Rate increased from 0.55% in 3Q18 to 0.60% in 3Q19. This was driven primarily by an increase in delinquency rates across most states (particularly in Western Australia, New South Wales and Queensland).
The increase also reflects the continued extended ageing of delinquencies due to slower loss management processing by lenders first called out in FY18. Encouragingly, signs of faster processing by some lenders has emerged this quarter. The Delinquency Rate remained flat between 2Q19 and 3Q19.
New Delinquencies was down slightly (3Q19: 2,622 versus 3Q18: 2,742) and in line with favourable trends usually experienced in the third quarter as new delinquencies reduced from 2,853 in 2Q19. Cures improved from 2,378 in 3Q18 to 2,439 in 3Q19 as lender customers started to emphasise remediation of aging delinquencies. However the cure rate is still lower than back in 2017.
The number of Paid Claims was up (3Q19: 361 versus 3Q18: 320) although the average paid per claim decreased from $115,700 in 3Q18 to $97,900 in 3Q19. This decrease is a result of the stabilisation of mining regions. However, the average paid per claim remains elevated as challenging market conditions remain across areas such as Perth and its specific sub-regions.
The aging also highlights the length of time it takes to get into difficulty, see the peak in loans written back in 2013-14.
Portfolio delinquency performance remained relatively steady quarter on quarter, following seasonal trends. Despite the overall stability, impacts from ageing delinquencies continue, but early signs of faster loss mitigation processing by lenders are emerging.
2006 and prior book years performances were affected by higher proportion of low doc lending which reduced significantly in 2009 following policy changes and decommissioning of the low docs product in the latter part of 2009.
Historical performance of 2008 09 book year was affected by the economic downturn experienced across Australia and heightened stress experienced among self employed borrowers, particularly in Queensland, which has been exacerbated by recent natural disasters.
2010 12 book year delinquencies at lower levels driven by stronger credit policies
Deterioration in 2013 14 book years reflect downturn in mining regions resulting in ongoing economic and housing market challenges.
But the most obvious issue ahead is the rising levels of delinquency in NSW. This will be one to watch in coming quarters, alongside a potential rise in the proportion of high loan to value loans being written now (thanks to the APRA loosening).
