The future of Helia Insurance’s position in the Australian mortgage insurance market has been called into question following the loss of a major contract with the Commonwealth Bank of Australia (CBA). S&P Global Ratings expressed concerns that the loss could impact the company’s ability to compete effectively in the market.
Helia’s contract with CBA, one of Australia’s largest mortgage originators, is set to expire on January 1, 2026. This agreement previously gave Helia significant access to one of the country’s most extensive mortgage origination channels.
With the contract loss, Helia will now rely more on smaller banks and non-bank lenders, as the Australian market is largely dominated by the big four banks. This shift raises concerns about Helia’s ability to maintain its competitive edge.
Although Helia is expected to retain approximately 21% of gross premiums written after the CBA contract expires, S&P warned that the company’s future in the lenders mortgage insurance market depends on its ability to secure new clients and strengthen existing relationships. Failure to maintain or grow its market share could lead to a downgrade of its rating in the next one to two years.
Despite the contract loss, Helia’s earnings are expected to remain strong through fiscal 2025. This is mainly due to favorable macroeconomic conditions, including falling interest rates, rising property values, and low unemployment.
In addition, because of the way Helia recognizes its premiums, the immediate financial impact of the CBA loss is expected to be limited. The company books revenue over a 15-year period, which helps buffer short-term losses.
S&P forecasts that Helia’s capital adequacy will remain well above the 99.95% confidence level over the next three years, despite reduced capital requirements due to a decline in new business and portfolio runoff.
The company is likely to adapt its capital management strategy, potentially increasing dividend payouts and selectively repurchasing shares. As a result, Helia’s financial risk profile was adjusted from “strong” to “very strong,” reflecting its disciplined asset-liability management, conservative reserving, and a robust reinsurance program.
Although Helia’s immediate financial outlook remains stable, S&P has adopted a cautious stance due to the anticipated challenges following the loss of its major distribution contract. The agency’s decision to downgrade the company’s business risk profile reflects ongoing concerns about its future competitiveness in a shifting market.
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