Lenders’ mortgage insurer Helia Group says the Federal Government’s First Home Guarantee scheme is having a “material impact” on its business. 

First-half new insurance written (NIW) contracted 45% to $6.2 billion from a year earlier and gross written premium (GWP) declined 49% to $96.6 million. 

The Commonwealth-backed First Home Guarantee program helps Australians to purchase their first home with deposits as low as 5% and removes the usual requirement for them to take out lenders’ mortgage insurance (LMI). Mortgage providers usually require LMI if the deposit is less than 20% of a property’s purchase price or value. 

“Top line NIW and GWP fell 45% and 49% respectively on the prior corresponding period and continued to be impacted by the low level of industry new housing loan commitments, especially for loans above an 80% loan to value ratio,” Helia says. 

“The Federal Government First Home Guarantee scheme also continues to have an ongoing negative impact on LMI industry volumes.” 

Helia’s first-half results are reported in accordance with the new AASB 17 Insurance Contracts standard. 

Statutory net profit after tax for the six months to June 30 rose sharply to $147.5 million from $57.7 million a year earlier, lifted by $16.7 million in pre-tax unrealised mark to market investment gains. 

Insurance revenue crept up 2% to $219.8 million and total incurred claims were a negative $40.9 million, equating to a total incurred claims ratio of 18.6% – which is within the previously advised range of negative $30 million to negative $45 million. 

Helia says during the first half it was successful in winning a large customer-owned bank as a new exclusive customer, the company’s third new exclusive customer over the past 12 months. 

The business also successfully renewed contracts for all existing customers that were up for renewal.

 For this financial year Helia says insurance revenue is expected to be within a range of $420 million to $460 million. 

Over the course of the second-half and next year total incurred claims are expected to increase toward long term average levels, as delinquencies respond to expected modest increases in unemployment and higher interest rates, which may also impact dwelling values.