Genworth Financial has swung back into profit in Australia, but the mortgage insurer continues to be pressured by a high level of payouts.
US-based Genworth shelved the partial stockmarket listing of its Australian arm earlier this year after a surge in payouts against soured Australian mortgages pulled the insurer into a loss during the March quarter.
But latest accounts lodged by its US parent show Genworth’s Australian arm returned a profit of $US44 million for the June quarter. This was a rebound from a $US21 million loss in the March quarter.
Still, profit was down 18.5 per cent from the June quarter last year due higher claims, Genworth said. Sales were up 8 per cent on the first quarter helped by refinancing activity among borrowers, Genworth said.
The loss ratio in Australia during the second quarter was 54 per cent, suggesting Genworth was paying out a little less than $1 for every $2 it generates from sales.
Genworth’s entire global operations – including the flagship US business – posted a profit of $US76 million for the second quarter. This rebounded from a loss of $US136 million a year earlier.
Lenders’ mortgage insurance is designed to protect banks or other lenders against a loss should the borrower default on their loan. Insurance is paid out if there is a shortfall in funds from the forced sale of a property.
Genworth is Australia’s largest player in the mortgage insurance market. It and second-placed QBE Lenders’ Mortgage Insurance hold a combined 75 per cent share of the market.
While Genworth has declined to discuss its troubled March quarter in detail, it is believed the insurer’s exposure to tourism hot spots in Queensland caused a hike in payouts. Some banks, including regional lender Bank of Queensland, also took a more aggressive accounting stance against some if its Gold Coast exposures.
Earlier this year Genworth said it would delay the planned sale of a 40 per cent stake in its Australian offshoot until 2013. At the time it was estimated that the sharemarket listing of a 40 per cent stake in Genworth Australia could have raised between $700 million and $800 million.
Last calendar year Genworth’s main Australian business posted a profit of $250.9 million. This was up from $182.6 million a year earlier.
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