Fourth quarter earnings show Genworth is bullish on bulk insurance – and that’s great news for brokers trying to satisfy self-employed clients.
Genworth’s portfolio insurance numbers for October, November and December reveal a windfall following the restrictions placed on CMHC’s bulk loan insurance, with total new insurance written in the fourth quarter increasing by a third to $8.5 billion as compared to $6.2 billion the previous year. That appears to have been largely driven by higher volumes of portfolio insurance policies.
"In 2012, we continued to deliver strong profitability including higher premiums written and loss ratio improvement," said Brian Hurley, chairman and CEO. "This momentum, combined with stronger lender relationships and improved borrower quality, positions us well for 2013."
The increase was offset in part by lower high loan-to-value volumes resulting from the changes in mortgage insurance eligibility rules in July.
A total of $117 million in net premiums were written in the fourth quarter, $61 million lower than the prior quarter and $6 million below the prior year – a quarterly drop of 34 per cent, and a five per cent drop in the year over year.
The sequential decrease was primarily driven by typical seasonality resulting in lower mortgage volumes in the fourth quarter in combination with that shrinking high loan-to-value mortgage market.
CMHC’s announcement last spring that it would restrict lender access to its own portfolio insurance fund allowed private insurers Genworth and Canada Guaranty to step up and grow their books, as lenders have turned to them to insure their conventional loans.
Genworth, including Canada Guaranty, taps into another government-backed fund capped at $250 billion – and not CMHC’s $600 billion pool, which has been capped by Ottawa.
Genworth’s overall fourth quarter net operating income of $89 million was $8 million, or 10 per cent higher than the previous quarter, and 13 per cent higher than the same period in 2011.
The $89 million does not include the $137 million from the reversal of previously accrued federal government guarantee fund exit fees.