Fitch Ratings has cut its outlook for Helia Group to negative from stable, saying its share of gross written premium in the lenders’ mortgage insurance market looks poised to drop to 21% from 38% last year. 

The ratings agency also says Helia’s “competitive positioning will be tested in contract renewals with existing lender customers”. Its rating of A (Strong) has been affirmed. 

The LMI specialist this week announced its lucrative contract with the Commonwealth Bank of Australia is unlikely to be renewed. 

CBA, which represents 44% of Helia’s GWP, is in negotiations with an alternative LMI provider. 

"We believe there is a reasonable likelihood that Helia’s current supply and service contract with CBA will not be renewed beyond its current expiry on December 31,” Fitch said. “The outlook revision reflects heightened pressure on [its] competitive positioning ... and earnings after announcing that its main lender customer is unlikely to renew its contract.” 

Fitch has also changed Helia’s company profile ranking to “moderate” from “favourable”.  

“Our assessment considers the industry-wide top-line pressure that will now be accentuated by the potential loss of the CBA business. In addition, we expect [Helia’s] expense ratio to rise as revenue declines.” 

The ratings agency says weaker competitive positioning or inability to renew contracts with other key mortgage lenders could lead to further negative rating action. 

Positive action may follow if Helia achieves stability in business volume and maintenance of customer relationships. 

Helia is the largest LMI provider by in-force business and its liability for remaining coverage accounts for half of the industry. 

Fitch says Helia’s capitalisation will remain “very strong” over the medium term.  

Westpac stopped doing business with Helia, formerly Genworth, in 2015. 

In 2021, NAB switched to an exclusive LMI deal with QBE, ending a relationship worth about 12% of Helia’s GWP.