Morningstar | Genworth Australia is a high-risk play on the Australian housing market.
Genworth Australia is Australia's largest lenders mortgage insurer, with around 35% market share. Banks typically use LMI on residential home loans with loan/value ratios over 80% to manage credit risk. The insurer is a high-risk play on the Australian housing market, given the exposure to the riskiest housing loans. The U.S. housing crash illustrates the leverage of LMI to a severe economic downturn. Following a long period of economic growth and a benign credit environment in Australia, we expect increasing earnings pressure from lower new business volumes and higher delinquencies, but do not expect Australia to suffer the same fate as the U.S. The prospects of further capital management initiatives remain, underpinned by Genworth Australia’s strong balance sheet and surplus regulatory capital position. The key risk is that delinquencies could deteriorate at a faster pace and persist for longer than expected.Genworth Australia is a provider of lenders mortgage insurance (LMI) under authorisation from Australian Prudential Regulation Authority. Co. provides three LMI products: Standard LMI, Homebuyer Plus and Business Select/Low Doc. Co. maintains commercial relationships with over 105 lender customers across Australia.
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