QBE LMI's Latest Survey
- Thread starter Token Funder
- Start date
Hi all,
I was at a lender meeting the other week with a bunch of brokers. One of the presenters was a lady from Genworth. She had a few graphs showing claims as a percentage of policies written since before the GFC and up till last month. The graphs however didnt have the scale on the upright access showing what % of policies had actually gone to claims. One of the brokers pushed back on this as we were all thinking yeah but what does it all mean if we don't know how many have you actualy lost money on etc etc. Finally she divulged that they paid out on about 0.4% of all policies on average. Not that big of a number!!
Considering the 2 insurers underwrite 1 in 5 loans.
So say 50,000 loans a month settled x 12 months x 20% of all deals are LMI deals x 0.4%claim rate = 480 claims a year. Of those claims how much would they loose on avergae per loan? say $30,000? Probably less?
So pay outs are say $14,400,000 pa.
Now compare to revenue pa.
50,000 x 12 x 20% x $5000 average LMI clip? = $600,000,000 does that sound right!!
I realise they have to put aside plenty in case there is a big drop in home values but this seems extradordinary..
Thoughts?
I was at a lender meeting the other week with a bunch of brokers. One of the presenters was a lady from Genworth. She had a few graphs showing claims as a percentage of policies written since before the GFC and up till last month. The graphs however didnt have the scale on the upright access showing what % of policies had actually gone to claims. One of the brokers pushed back on this as we were all thinking yeah but what does it all mean if we don't know how many have you actualy lost money on etc etc. Finally she divulged that they paid out on about 0.4% of all policies on average. Not that big of a number!!
Considering the 2 insurers underwrite 1 in 5 loans.
So say 50,000 loans a month settled x 12 months x 20% of all deals are LMI deals x 0.4%claim rate = 480 claims a year. Of those claims how much would they loose on avergae per loan? say $30,000? Probably less?
So pay outs are say $14,400,000 pa.
Now compare to revenue pa.
50,000 x 12 x 20% x $5000 average LMI clip? = $600,000,000 does that sound right!!
I realise they have to put aside plenty in case there is a big drop in home values but this seems extradordinary..
Thoughts?
sounds about right - 75% net profit.
Good value that report. ran my eyes over it
It is worth remembering that the % claims rate is a number, but the $ claims paid is the key number. In addition, the capital requirements imposed on the insurers means they have to make a pretty significant underwriting profit to make a decent return.
Having seen some very large numbers paid, I can say from personal experience that the claims are not rats and mice numbers. This, of course, would be surprising for some given the fascination with median price movements, but as I have pointed out ad nauseum, no-one here is investing in the median national, state or suburb measure...they own indvidual addresses with all the attendant volatility of same.
And individual properties drop in value. If LMIs only paid claims based movement in median measures, rather than, you know, actual houses, they'd be the most profitable business on earth.
Yeah I realise they don't just pocket the funds as profit but wouldn't they get a market return on the funds they hold as per the liquidity requirements which would be many years worth. The interest on that would be huge! Risky business no doubt but geez good business model. Customers are forced to pay, no third line forcing rules apply, only one competitor and wholesalers ie the lenders can't really change supplier as is too complicated with existing policies! Nice work if you can get it.
