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17-440MR Genworth changes recognition of premium revenue
ASIC notes the decision by Genworth Mortgage Insurance Australia Limited (Genworth) to change the recognition of premium revenue in its upcoming financial report for the year ending 31 December 2017.
Genworth has announced that the change will negatively impact net earned premium by approximately $40 million and as a result net earned premium for the 2017 year is expected to be approximately 17-19% per cent lower than the 2016 year, instead of previous guidance of a 10 to 15 percent reduction. The change affects the recognition of revenue for the fourth quarter of 2017 and subsequent reporting periods. The unearned premium liability at 30 September 2017 remains unchanged.
ASIC had raised concerns about the basis used by Genworth to recognise premium revenue in the financial reports for the year ended 31 December 2016 and the half-year ended 30 June 2017 having regard to the pattern of historical claims experience in earlier underwriting years.
As outlined in ASIC media release 17-423MR ASIC calls on preparers to focus on financial report quality and new requirements, revenue recognition remains a focus area of our financial reporting surveillances.