US-based insurer Genworth Financial has said it is 'very disappointed' with the performance of its Australian arm after it reported a US$21m first quarter loss this week.
In April, the business was forced to postpone its slated Australian initial public offering (IPO) until early 2013 as it dealt with this decline in profits, down from US$53m in the prior year.
In an investor conference call last night, Genworth's told Australian investors and media the level of delinquencies converting to claim had been at a higher rate and severity than expected.
Genworth blamed this primarily on coastal areas of Queensland, which were affected by natural disasters last year. A regional downturn in property markets had also affected small business owners and self-employed borrowers, particularly those who borrowed in 2007 and 2008.
However, Genworth said the majority of the loss was driven by an US$82m reserve adjustment.
In February, Genworth flagged that it would be increasing its LMI premiums by 7%, in a move that the group said was a price adjustment due to inflation, and not connected with the loss.
At the time the IPO was shelved, ratings agency Moody's put the insurer on alert for a possible downgrade. However, Standard & Poor's yesterday came out to reassure the market of Genworth's strength, saying that its reserve strengthening was an 'isolated event'.
The modest net loss after tax of US$21m for the first quarter of 2012 is nominal in proportion to the company’s capital resources of A$2bn, and we expect Genworth Australia to return to profitability in the second quarter of 2012," a statement from Standard & Poor's read.
At the time of the profit announcement, the insurer announced the resignation of its US-based CEO Michael Fraizer with chief financial officer Martin Klein stepping into the role on an acting basis.