Genworth Mortgage Insurance posted a 2020 underwriting loss of $234 million as it shored up its reserve war chest in anticipation of “sustained pressure on claims” this year.

Government stimulus measures, along with mortgage deferrals granted by banks, delayed claims but that assistance would taper off this year, leaving many home buyers with loans exposed.

“COVID-19 is expected to result in sustained pressure on claims throughout 2021,” Genworth said today.

Australia’s leading provider of lenders mortgage insurance (LMI) said Gross Written Premium (GWP) jumped 30% to $561.7 million last year while new insurance written rose 18% to $31.6 billion.

The large underwriting loss reflected a $181.8 million write down and refined delinquency reserving of $109.1 million, for a reported loss ratio of 92.9%, versus 50.6% in 2019.

Excluding the write-down, Genworth’s combined ratio was 72.4% in the fourth quarter.

Genworth paid 1,254 claims last year worth $120.8 million. Net claims incurred came to $289.8 million against net earned premium of $312 million.

CEO and MD Pauline Blight-Johnston says Genworth has worked closely with its mortgage-lender customers to support their borrowers while “prudently managing portfolio risk and maintaining strong business quality”.

“Importantly, Genworth remains in a strong capital position, able to withstand a wide range of future claims outcomes,” said Ms Blight-Johnston, who took the role early last year as the pandemic broke.

Genworth received fewer claims than it expected over 2020 as support packages “interrupted the typical incidence patterns of delinquencies and claims”.

At the end of last year, most borrowers on repayment deferral arrangements had either opted out or had their loans restructured, lowering the number of active repayment deferrals remaining from Genworth’s lender customers to 8,162, from 31,139 three months earlier.

The reported delinquency rate still increased though as a result of higher policy cancellations.

Genworth said recent economic indicators have been encouraging though uncertainty remains as government stimulus measures are phased out and localised coronavirus outbreaks and lockdowns continue, with Victoria announcing a snap five-day hard lockdown today.

Genworth says its strong LMI volume flow growth - the main driver of its GWP growth - over the second half of 2020 reflected a low interest rate environment.

New insurance written (NIW) increased as owner occupiers and first-home buyers underpinned the national housing market and mortgage lenders achieved strong growth rates.

New business underwriting quality remained strong, it said, as Genworth and banks applied greater scrutiny. That growth would partially offset the impact on 2021 GWP of the loss of Genworth’s contract with NAB, which was not renewed late last year.

Genworth’s strengthened provisioning includes upping the outstanding claims risk margin and bringing forward the average timing for recognising the liability for expected losses.

More than $800 million of loss reinsurance coverage was renewed at the start of this month.