Yes, I recall the $110m adjustment they made to their...

Yes, I recall the $110m adjustment they made to their outstanding claims reserves at December 2020. It is standard practice for management to try to make results look as bad as possible when there is bad news, so they can look like superstars in the good times. This unsurprisingly happened during COVID.

Genworth took the opportunity to redefine when a claim is deemed to have occurred – a power I didn’t realise they had. At December 2020, they changed their methodology to hold claims reserves against non-delinquent policies that had been delinquent at any time during the policy. That meant they were able to hold additional reserves against all the loans that elected to take COVID-19 related repayment deferrals.

It does seem a bit absurd to be holding such vast amounts in outstanding claims reserves against policies that are non-delinquent. Seems to be a contradiction in terms. I’m disappointed the external auditor signed off on this, but they were crazy times in 2020.

This creative accounting allowed Genworth to declare a large paper loss in 2020, by getting this allowance for future claims onto the balance sheet. One upshot is that the potential for claims arising from the unearned premium is materially lower, as those future claims are now allowed for in the outstanding claims.

So as you say, very conservative reserves. This conservatism will be unwound, but it will take a few years.