Genworth Mortgage Insurance says a shift in policy cancellation behaviour may see its annual net earned premium drop to more typical levels in the current year after jumping 19% to $370.5 million in 2021 as homebuyers chased lower mortgage rates.

Australia’s leading provider of lenders mortgage insurance (LMI) says unprecedented mortgage re-financing led to higher than normal annual policy cancellations, adding a $75.5 million windfall to its 2021 premium revenue.

Genworth, which has a 43% share of the market, forecast 2022 net earned premium of $315-375 million, representing a fall or much lower growth than last year.

“We’re conscious that it is a wide range. The volatility in the outlook is really all related to one variable, which is the level of cancellations,” CFO Michael Cant told analysts and media today. “The last 12 months was extremely high on cancellations and we are a little cautious around the potential range for that in the year ahead.”

Genworth reported a 2021 underwriting profit of $295.8 million and said gross written premium was $549.6 million, down 2% due to the loss of a contract with NAB in 2020.

Net claims incurred were unusually low last year due to high property price appreciation, and this resulted in a $8.3 million contribution to the bottom line on a loss ratio of -2.2% in the full year and -28.8% in the second half.

“New delinquencies remained well below historical levels reflecting borrower finances that have been assisted by stimulus measures and lower spending levels, contributing to a 16.3% fall in closing delinquencies and a 6 basis point improvement in the delinquency rate,” Genworth said.

Genworth has been boosted by a stronger economy, a large jump in house prices and covid support measures such as mortgage repayment deferrals and customer repossession moratoriums, though new insurance written slowed in the second half as housing affordability constraints slowed new loan commitments.

Genworth’s adjusted combined ratio, which excludes a large write down, was 3.8% in the second half, compared with 85.6% a year earlier. It said paid claims continue to reflect the low level of mortgages in possession.

“Momentum is growing in the business as evidenced by our strong financial results,” Genworth CEO and MD Pauline Blight-Johnston said.

“Underlying premium volumes grew and underwriting quality was good. This was accompanied with an unusually favourable claims environment driven by high dwelling value price growth, falling delinquencies and low numbers of mortgages in possession.”

Claims are not expected to return to normal levels until after June, helped by improved borrower equity arising from price growth which is expected to provide a “helpful buffer” to any downward movement in dwelling values.

“We expect premiums to return to more normal levels, and the current benign claims environment to continue potentially through the first half of 2022 before returning to more normal levels later in the year,” Ms Blight-Johnston said.

Genworth’s Annual General Meeting will be held on May 12.