Shares in Helia Group dropped 28% this morning as the lenders’ mortgage insurer announced its lucrative contract with the Commonwealth Bank of Australia is unlikely to be renewed.

CBA, which represents 44% of Helia’s gross written premium, is in negotiations with an alternative LMI provider. The contract with Helia expires at the end of the year.

“We are disappointed in this development,” CEO Pauline Blight-Johnston said in a statement to the stock exchange. “If those negotiations are successful Helia anticipates that Helia’s current supply and service contract with CBA will not be renewed.”

Ms Blight-Johnston says Helia made the bank a strong offer that “balanced the strategic importance of its relationship with CBA with the need to maintain adequate returns on equity for our shareholders.  

“Together, CBA and Helia have helped hundreds of thousands of Australians to buy homes over the past 50 years. Given our long-standing and successful relationship with CBA ... we would have welcomed the opportunity to continue our partnership.”