Genworth Mortgage Insurance has reaffirmed its full-year guidance despite facing challenging market conditions that it says could lead to increased stress in home loan repayments.
The insurer expects subdued wage growth and underemployment will likely lead to higher rates of mortgage delinquencies, particularly in Queensland and Western Australia.
Chief executive Georgette Nicholas has told shareholders that employment growth across the country is being primarily driven by an increase in part-time work, even as wage growth remains subdued, in part due to the transition away from mining-led activity.
"These labour market dynamics are increasing the instance of mortgage stress in certain regional economies and we expect these trends to drive elevated mortgage delinquencies in these regions in 2017," she said at the company's annual general meeting in Sydney on Thursday.
The recent round of interest rate increases by lenders, particularly for investor loans, may also impact price growth this year, she added.
Genworth posted a 10.9 per cent decline in 2016 profit as its loss ratio - the proportion of claims to net earned premium - jumped from 24.0 to 35.1 per cent because of an increase in delinquencies, most notably in mining regions.
The company warned in February that the 2017 full-year loss ratio is expected to widen to 40-50 per cent.
Genworth last week reported overall March quarter net profit of $52.2 million and Ms Nicholas said the results were in line with expectations.
She confirmed that Genworth still expects full-year net earned premium to decline by about 10 to 15 per cent, following a 3.6 per cent fall in 2016.
There is considerable variation in economic activity across the country, with continued growth in NSW and Victoria offset by weaker activity in Queensland and WA, the company said.
At 1155 AEST, Genworth shares down 0.33 per cent to $3.05 each in a strong Australian market.
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