Genworth Mortgage Insurance posted an underwriting profit of $88 million in the first half, up from $53 million a year earlier, boosted by a stronger economy, a jump in house prices and COVID support measures aimed at relieving borrower stress.

Mortgage repayment deferrals, customer repossession moratoriums and a 12% rise in national home values all boosted Genworth’s performance.

Australia’s leading provider of lenders mortgage insurance (LMI) saw its gross written premium (GWP) surge 21% to $289.7 million in the first six months of the year, driven by higher new insurance written volumes as well as a small positive rate contribution.

“We have had a good start to the year and it has been very pleasing to report a good profit. The results reflect the strength in the economy we enjoyed in the first half and the actions we took throughout 2020 to be able to position us to be able to participate in that economic recovery,” CEO and MD Pauline Blight-Johnston said during an investor briefing today.

“Clearly the latest lockdowns create a little bit more uncertainty although we have seen the economy bounce back well and we are hopeful we will see the same thing again. Either way, we are well-positioned to be able to manage any more volatility that comes.”

Genworth’s average paid claim amounts remain below historic levels and net claims incurred plunged 51% from a year earlier to $49.3 million, with lower levels of new mortgage delinquencies producing a loss ratio of 28.9%, versus 67% a year earlier. The second quarter loss ratio was 15.8%.

The swing to the black comes after a loss of $234 million in 2020 as Genworth shored up its reserve war chest with refined delinquency reserving of $109.1 million in anticipation of claims spurred by mortgage delinquencies.

This has not materialised so far due to support packages which it says interrupted the typical incidence patterns of delinquencies and claims.

Borrowers in hardship mostly had their loans restructured and this closed out all active repayment deferrals at Genworth’s lender customers. There had been 8162 at the end of 2020 and 31,139 three months prior to that.

Recent COVID-19 restrictions have renewed uncertainty over the economy, though Genworth says the latest borrower support initiatives are expected to have a positive impact on its ultimate claims experience, which has been delayed further still.

Genworth’s adjusted combined ratio, which excludes a large write down, was 62.5% in the first half, compared with 102.6% a year ago.

“Low levels of reported delinquencies, and the ongoing moratoriums on owner-occupied foreclosures, as well as the strong economic recovery, have led to lower than usual paid claims,” Genworth said.

During the half, an Australian household saving ratio of 11.6% was well above the first quarter last year’s rate of 7.9%.

“The latest round of borrower support programs will extend the duration of the subdued delinquency behaviour we have been experiencing, pushing out the timeframe over which we will obtain increased clarity regarding ultimate claims outcomes,” Ms Blight-Johnston said.

Last month, Genworth revealed it must submit a new proposal to the Commonwealth Bank – its biggest customer - ahead of the expiry of an exclusive LMI supply agreement, which is worth around $320 million a year, at the end of next year.

Ms Blight-Johnston said today the matter should be resolved by the end of the year.