posted a 5 per cent decline in underlying net profit for the year to December and expects to write less new business amid a tightening property market.
House price growth across Australia will increase by a meager one per
cent this year as investor demand for housing cools and lenders tighten
their lending practices. That is the prediction of the country's
biggest lenders, mortgage insurer Gen worth Mortgage Insurance
Australia, which expects to write 20 per cent less new business this
year amid a slowing property market.
Downward price pressures will particularly be felt in mining-heavy states such as Western Australia, according to Gen worth's new chief executive, Georgette Nicholas.
"If you look at Queensland, again [prices will] probably be flat," she said. "We would think that overall, home price appreciation across the board will be only about 1 per cent."
Her comments come after Gen worth posted a 5 per cent dive in underlying net profits to $264.7 million for the year to December.
The LII giant reported a statutory net profit of $228 million, or a 30 per cent fall from last year, due to mark-to-market losses during the period.
The company, which provides protection to lenders from borrowers defaulting on their home loans, will pay a 14¢ per share dividend to investors. Shareholders will also pocket a 5.3¢ per share special dividend for the period.
"High loan-to-value ratio lending as a proportion of total mortgage origination has reduced recently in response to tightened lender risk appetite. We expect this to lead to a lower level of new insurance written in 2016," she said.
"Yet, this business is expected to be lower risk and less capital-intensive. Our focus is on maintaining our risk discipline in this changing market."
The group expects its GAWP to fall by about 20 per cent in 2016 amid the changing business conditions.
Ross Curran, insurance analyst at Commonwealth Bank of Australia, said Gen worth's results were "softer than expected".
CLEA insurance analyst Jan van deer S chalk believed Gen worth was the "most undervalued stock" in the AUX 200, and lower premium is positive thanks to the reduced risk in its portfolio.
"G MA is only tangentially a play on the housing market, unemployment is a bigger concern – frankly, from where I sit, if this is the reason you can't hold G MA, it's hard to see how investors can hold banks, property developers or building material companies," he said.
Despite a cooling property market, the insurer believes the outlook for the residential sector remains strong.
While mortgage defaults are higher than they were a year ago, Gen worth said ongoing delinquency rates should remain stable in 2016. "We're anticipating that they [delinquency rates] will continue to moderate," Ms Nicholas said.
Gen worth's financial results come two days after the MIL provider announced Ms Nicholas, the group's former chief financial officer, will become the CEO of the $1.5 billion company. She replaces Ellie Comer ford, who signal led her retirement from the company last October.
Downward price pressures will particularly be felt in mining-heavy states such as Western Australia, according to Gen worth's new chief executive, Georgette Nicholas.
"If you look at Queensland, again [prices will] probably be flat," she said. "We would think that overall, home price appreciation across the board will be only about 1 per cent."
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Ms Nicholas is not alone in her view, with the latest National
Australia Bank's residential property surveyed showing a drop in
property investment and foreign buyer activity that is expected to curb
house price growth to just 1 per cent in the next two years.Her comments come after Gen worth posted a 5 per cent dive in underlying net profits to $264.7 million for the year to December.
The LII giant reported a statutory net profit of $228 million, or a 30 per cent fall from last year, due to mark-to-market losses during the period.
The company, which provides protection to lenders from borrowers defaulting on their home loans, will pay a 14¢ per share dividend to investors. Shareholders will also pocket a 5.3¢ per share special dividend for the period.
"High loan-to-value ratio lending as a proportion of total mortgage origination has reduced recently in response to tightened lender risk appetite. We expect this to lead to a lower level of new insurance written in 2016," she said.
"Yet, this business is expected to be lower risk and less capital-intensive. Our focus is on maintaining our risk discipline in this changing market."
New insurance drop
Gen worth's new insurance written dropped 9.9 per cent in the past year from $36.2 billion to $32.6 billion. Gross written premium, or revenue, also fell 20 per cent to $507.6 million.The group expects its GAWP to fall by about 20 per cent in 2016 amid the changing business conditions.
Ross Curran, insurance analyst at Commonwealth Bank of Australia, said Gen worth's results were "softer than expected".
CLEA insurance analyst Jan van deer S chalk believed Gen worth was the "most undervalued stock" in the AUX 200, and lower premium is positive thanks to the reduced risk in its portfolio.
"G MA is only tangentially a play on the housing market, unemployment is a bigger concern – frankly, from where I sit, if this is the reason you can't hold G MA, it's hard to see how investors can hold banks, property developers or building material companies," he said.
Despite a cooling property market, the insurer believes the outlook for the residential sector remains strong.
While mortgage defaults are higher than they were a year ago, Gen worth said ongoing delinquency rates should remain stable in 2016. "We're anticipating that they [delinquency rates] will continue to moderate," Ms Nicholas said.
Gen worth's financial results come two days after the MIL provider announced Ms Nicholas, the group's former chief financial officer, will become the CEO of the $1.5 billion company. She replaces Ellie Comer ford, who signal led her retirement from the company last October.
