Helia Group – formerly known as Genworth Mortgage Insurance Australia – has posted a rise in annual profit but says net claims incurred will increase going forward in the face of higher interest rates, falling property values and a modest uptick in unemployment.

Helia, Australia’s top provider of lenders mortgage insurance (LMI), says closing delinquencies were down 22% at just 4569 last year – the lowest level since it listed on the ASX in 2014 – for a 5 basis point improvement to 0.47% in the delinquency rate compared to a year earlier.

New delinquencies fell 19% and remain “well below” historical levels, reflecting savings accumulated during the covid pandemic, a strong labour market and low interest rates in the first half.

“Our expectation is that continued economic pressures will lead to increased claims over the course of 2023,” CEO and MD Pauline Blight-Johnston said. “The business is well prepared for this changing backdrop.”

Helia’s overall portfolio has an average effective loan-to-value-ratio (LVR) of 48%, she said.

Net claims incurred were negative $35 million last year, equating to a loss ratio of -8.1%, driven by a release of reserves as high levels of cancellations from refinancing brought forward the recognition of approximately $72 million of additional premium revenue.

Helia’s 2022 underlying net profit rose to $288.4 million, up from $237.8 million a year earlier. Helia posted an underwriting result of $362.1 million.

“We are pleased to report another strong financial result driven by a continuing low claims environment and high net earned premiums,” Ms Blight-Johnston said.

After “extraordinarily high” volume in 2021, gross written premium (GWP) fell “significantly” last year to be down 42%. Helia had flagged in November that GWP would decline on fewer new home loans – particularly for first home buyers and other higher LVR lending which are more likely to trigger required LMI.

New housing loans were down 19% last year, and down 26% in the second half.

“GWP growth is expected to remain subdued, reflecting soft industry new loan commitments and the impact of the Federal Government First Home Guarantee Scheme,” Helia said.

Helia’s statutory net profit was $186.8 million, dented by unrealised mark-to-market investment losses of $140.3 million resulting from rising bond yields.

Helia, which released a new self-managed superannuation fund (SMSF) in December, announced a special dividend and will start a $100 million on-market share buy-back next month. Its share price rocketed by more than a quarter last week.

Helia’s annual shareholder meeting will be held on May 11.