Genworth Reports Weak Earnings, but Premium Growth and Reserves Support Future Earnings

Genworth’s fiscal 2020 loss of AUD 104 million is better than the AUD 120 million loss we expected. It is far from a clean result though. The insurance loss of AUD 174 million was dragged down by movements in reserves. We estimate profits would have increased to AUD 177 million excluding reserves, compared with profits of AUD 108 million in 2019, the former driven by strong premium growth and fewer claims. Reserve movements were associated with expected coronavirus claims in future and changes to reserving policies for loans that have been delinquent at any stage. The loan-loss ratio increased to 93% from 53% in 2019, despite actual claims paid in fiscal 2020 falling 8%.