Mortgage insurer Genworth lifted its gross written premium by almost a third in the first quarter but is now readying for home loan defaults with a $181.8 million writedown.

The ASX-listed company is bracing for higher claims as property sales stall and unemployment rises due to the impact of COVID-19 on the economy. The large writedown was based on a “central estimate” of a peak unemployment rate of 8.2% and property prices falling 5.4% this year

Genworth’s core Lenders Mortgage Insurance (LMI) business has enjoyed volume growth and improved claims experience in the first three months of the year, with gross premium revenue up 32% from a year earlier to $114 million.

“The outlook for future LMI claims has materially changed, with claims expected to increase towards the end of 2020,” CEO Pauline Blight-Johnston said.

Ms Blight-Johnston stepped into the role just 10 days before COVID-19 was declared a pandemic by the World Health Organisation on March 12.

“These certainly are unusual times,” she said. “This was not the start I had anticipated when joining Genworth.”

Genworth reported a first-quarter statutory loss of $125.6 million, after a $47.8 million profit in the same period last year. The company says predicting future claims is very difficult and it will depend on the length of the downturn and the role of banks' repayment deferrals.

Newer policies have benefitted from higher pricing and tighter underwriting standards and so are expected to remain profitable, Genworth says.

Ms Blight-Johnston says the extent of the increase in claims is difficult to predict and will depend on the length and depth of the economic downturn in Australia, as well as the influence of government stimulus and lender initiatives.

“The level of increased claims we experience will largely be determined by the pace of the ensuing economic recovery following the repayment holidays,” she said. “We are closely watching economic indicators and ensuring we have the necessary financial and capital flexibility to navigate through this period.”

Genworth’s first-quarter loss ratio was 47.1 %, benefiting from favourable ageing of delinquencies due to rising house prices.

The company has $800 million of excess of loss reinsurance cover with a well-diversified panel of over 20 reinsurers with a minimum rating of ‘A-’.

Genworth’s portfolio contains 1.3 million policies with more than $300 billion of underwritten residential mortgages. Last year it issued more than 66,000 insurance policies on home loans valued at $26.7 billion.