Westpac dump Genworth's LVR insurance agreement

Westpac Banking Corp has told Genworth Mortgage Insurance Australia that it will be cutting short its lenders mortgage insurance (LMI) agreement with Genworth.

It provided 90 days written notice yesterday. The company’s shares are down today more than 20% to around $3.34.

The termination provisions of the agreement were set out in the IPO Prospectus of the recently listed company.

WBC recently completed a strategic review of residential mortgage loans with a Loan to Value Ratio (‘LVR’) of greater than 90%.

The LMI business underwritten under this contract represented 9.5% of Genworth’s New Insurance Written in 2014. Genworth suggests a 14% fall in gross written premiums, which totalled $634.2 million in 2014.

The full effect is more likely to be felt in the 2016 financial year and beyond, the company advised. 

Westpac have not indicated if they will insure the loans with LVRs over 90% or take the additional risk itself,or go to the rival, QBA.