Helia Group Ltd (ASX: HLI) shares are having a day to forget on Monday.
In early trade, the ASX 200 share is down a whopping 29% to $3.44.
This follows news that the lender mortgage insurance (LMI) company has been dealt a massive blow from Commonwealth Bank of Australia (ASX: CBA).
What's going on with this ASX 200 share?
Investors have been rushing to the exits today after the company revealed that almost half of its gross written premium (GWP) is about to disappear.
This morning, Helia Group provided an update on its supply and service contract with Commonwealth Bank.
Back in 2024, the banking giant issued a request for proposal relating to its external LMI requirements.
Unfortunately, the ASX 200 share has now been informed by CBA that as part of this process it has entered into exclusive negotiations with an alternative provider for the provision of LMI services to the CBA group.
If those negotiations are successful, Helia anticipates that its current supply and service contract with CBA will not be renewed beyond the current expiry on 31 December 2025.
Commenting on the shock news, CEO and managing director, Ms Pauline Blight-Johnston, said:
Together, CBA and Helia have helped hundreds of thousands of Australians to buy homes over the last 50 years. Given our longstanding and successful relationship with CBA, we are disappointed in this development. We would have welcomed the opportunity to continue our partnership.
Helia presented CBA with a strong offer that balanced the strategic importance of its relationship with CBA with the need to maintain adequate returns on equity for our shareholders. We will continue to work closely with CBA to ensure that we are supporting both CBA and its borrowers by maintaining our high service standards through to December 2025 and beyond.
What's next?
The ASX 200 share advised that it will continue to generate GWP from CBA until the end of FY 2025 and will recognise revenue associated with inforce policies over the next 15 years. This is in accordance with the AASB 17 timing of insurance revenue recognition.
As a result, it notes that the financial impact of ceasing to write new business from CBA from FY 2026 will emerge gradually over time.
The LMI business underwritten under this contract represented approximately 44% of GWP in FY 2024.
Helia advised that its previously issued guidance remains unchanged. It also maintains its commitment to deliver market-leading LMI services and continues to see attractive partnership opportunities with new and existing lender customers.
Plans for Helia to adapt to the expected reduction in the level of future GWP will be progressively implemented, positioning Helia to continue to support Australia's home buyers and lenders into the future.
Furthermore, the absence of new business from CBA from FY 2026 will likely increase the level of organic capital generation and scope for further capital management activity.
