After crashing a painful 21.4% on Wednesday, Helia Group Ltd (ASX: HLI) shares are clawing back some of those losses today.
Shares in the S&P/ASX 200 Index (ASX: XJO) lenders mortgage insurance (LMI) provider closed yesterday trading for $4.31. As we head into the Thursday lunch hour, shares are swapping hands for $4.34 apiece, up 0.7%.
Still, Helia shares have a long way to go before recouping their closing highs of $6.15 apiece, posted on 3 March.
We'll take a look at what the analysts at Macquarie Group Ltd (ASX: MQG) expect from the ASX 200 insurer for the year ahead below.
But first…
Why did ASX investors dump Helia shares yesterday?
Helia shares came under heavy selling pressure yesterday after the company announced that ING Bank (Australia) would not be renewing its LMI supply and service contract.
While the ING contract runs through to 30 June 2026, the bank has the right to terminate it with just three months' notice.
ASX investors will have noted that the ING contract represents around 17% of Helia's 2024 Gross Written Premium (GWP).
And this news came just three months after Helia reported (in late March) that it did not expect Commonwealth Bank of Australia (ASX: CBA) to renew its contract when that expires at the end of December this year.
However, the impact from the loss of the ING contract won't be felt immediately.
According to Helia:
The financial impact of ceasing to write new business from ING will emerge gradually over time and the absence of new business from ING will likely increase the level of organic capital generation and scope for further capital management activity.
So, how does Macquarie rate Helia shares now?
Is the ASX 200 insurance company now a buy?
In a research report analysing Helia's shares following yesterday's announcement, Macquarie noted. "After recent events, we estimate a third of GWP will remain."
However, the broker added that Helia's "back-book continues to generate capital as claims remain low, and we upgrade to neutral after [Wednesday's] share price reaction."
According to Macquarie:
Notably, the loss of the contract does not impact capital generation on the back-book, which is increasingly what investors are focused on. Claims remain low, and we continue to see opportunities to return capital (we forecast capital returns to FY28). As a result, we no longer see the shares as expensive after [Wednesday's] share price result.
Macquarie upgraded its outlook for Helia's earnings per share (EPS) by 4% in FY 2025, 7% in FY 2026, and 6% in FY 2027. It said the earnings upgrade was "driven by mark-to-market of yield curves, and lower reinsurance costs. We also incorporate extra capital returns over the next few years".
The broker concluded:
Despite question marks on its long-term business outlook, we see continued capital generation and returns in the near-term, underpinned by low claims and falling interest rates supporting house prices.
Macquarie increased its 12-month price target for Helia shares to $3.35, up from the prior $3.25. Despite the boosted target price and upgrade to neutral, that's still some 23% below current levels.
