Helia (ASX:HLI) has announced it is likely to lose a cornerstone contract with the Commonwealth Bank of Australia, following CBA’s decision to enter exclusive negotiations with an alternative provider of lenders mortgage insurance (LMI) services.
The existing supply and service agreement between Helia and CBA, which expires on 31 December 2025, now appears unlikely to be renewed. If the ongoing negotiations are finalised, Helia will cease writing new LMI business for CBA from the start of FY26.
Helia CEO and Managing Director Pauline Blight-Johnston expressed disappointment, citing a five-decade relationship with CBA.
“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,” Blight-Johnston said.
She added that Helia had submitted “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”.
While new business from CBA is expected to cease at the end of FY25, Helia will continue to generate gross written premium (GWP) from the current agreement until then. Revenue from in-force policies will be recognised over the next 15 years under the AASB 17 insurance accounting standard.
The CBA contract represented approximately 44% of Helia’s GWP in FY24. However, the company reaffirmed that its previous guidance remains unchanged.
Helia said it will implement plans to adapt to the anticipated drop in future GWP and continues to pursue new partnerships across the lender market. It also flagged that the absence of new CBA business may increase organic capital generation, opening up further scope for capital management initiatives. The company continues to target a capital coverage ratio of between 1.40 and 1.60 times the prescribed capital amount.
Shares in Helia are trading 25.15% lower at $3.63.
