Ratings agency S&P has affirmed its A+ rating on Genworth Australia and New Zealand, with the outlook remaining negative.

An A- rating on Genworth Australia’s subordinated debt was affirmed.

“Genworth Australia’s competitive position has weakened somewhat, in our view, as indicated by a continued decline in its earnings in recent years, although this is largely the result of industry-wide impacts,” S&P says.

Genworth Australia maintains a very strong competitive position in the Australian lenders’ mortgage insurance (LMI) market, where it is the leading underwriter, although this is under pressure, the ratings agency says.

S&P expects Genworth Australia’s profitability to stabilise over the next 1-2 years and then improve as the residential mortgage market regains momentum.

Retention of major clients is a key credit factor, because the ratings agency notes a degree of concentration in Genworth’s client base.

The direction the LMI market takes depending on the outcome of legislative and regulatory proposals will help clarify earnings forecasts for Genworth, it says.

S&P says there is a one-in three chance it will lower Genworth’s ratings over the next year.