Genworth has upgraded its net earned premium guidance and says claims will remain below historical averages this year, though gross written premium (GWP) will sit below 2021 levels.

Australia’s top provider of lenders mortgage insurance (LMI) expects full-year GWP to lessen as fewer new home loans are agreed, particularly for first home buyers and other higher loan-to-value-ratio (LVR) lending.

However, the insurer says it will "take some time” for changes in the economy such as higher borrowing rates and inflationary pressures to flow through to mortgage delinquencies.

Net incurred claims would range from $0-to-50 million this year, Genworth says, while net earned premium (NEP) is expected to rise to be within a range of $375-435 million. That is up from a previous forecast of $315-375 million and compares with $371 million in 2021.

In the first half, NEP jumped 27%, reflecting strong new business growth and refinancing which brought forward around $60 million of additional premium revenue compared to a year ago.

GWP fell 35%, reflecting fewer loans over 90% LVR which have higher insurance requirements.

“The portfolio is well seasoned and there are substantial dwelling value buffers, with only 1.5 % of policies estimated to have an effective LVR above 90%,” CEO and MD Pauline Blight-Johnston said.

“While net incurred claims are expected to begin to normalise, it will take some time for changes in the economy to flow through to delinquencies, which combined with the low starting point is likely to result in second half claims remaining below historical averages.”

Closing delinquencies of 5228 were the lowest since 2014, benefiting from very low levels of unemployment.

In an unusually low claims environment, net claims incurred were negative $3 million in the first half, equating to a loss ratio of -1.4%, reflecting strong borrower finances, with high savings, a strong labour market and record low interest rates. Closing delinquencies fell 24% for a 9 basis point improvement in the delinquency rate compared to a year earlier.

Genworth says it has been selected as the exclusive provider of LMI to Bendigo and Adelaide Bank and is jointly developing a deposit gap loan product with blockchain startup OSQO for homebuyers without a 20% deposit which supports co-funding by friend and family investors.

Genworth announced an on-market share buy-back for shares up to $100 million, commencing in August, representing 9.2 % of the Company’s issued share capital or around 34.7 million shares. Genworth recently received shareholder approval to buy back up to 60 million shares.

Genworth’s claims reserving assumptions were increased by $11.2 million to allow for potential future house price depreciation.