SYDNEY, Feb 17 (Reuters) - Genworth Mortgage Insurance Australia Ltd said Westpac Banking Corp, the country's second-biggest lender, has cancelled a sales agreement after a review of its riskier loans, a move that will hit the insurer's 2016 earnings.
The Australian affiliate of United States Genworth Financial Inc said on Tuesday Westpac gave the company 90 days' notice that it was ending the sales accord. The cancellation came after the bank reviewed all new residential loans with a loan-to-value ratio of more than 90 percent.
Australian banks, which typically lend 80 percent of a property's value, have been under pressure by regulators to cut back on loans deemed risky because the purchaser has a relatively small deposit.
Genworth, one of Australia's most valuable stock listings of 2014 and now worth A$2.8 billion by market value, didn't provide further details explaining the Westpac decision.
The Westpac contract represented 14 percent of Genworth Mortgage Insurance Australia's gross written premiums in 2014, Genworth said. On Feb. 11, Genworth's Australia business reported A$634.2 million ($494 million) in gross written premium for the year to Dec. 31.
Westpac officials weren't immediately available for comment.
Genworth said the contract cancellation will not change its earnings guidance for the 2015 financial year, of up to 5 percent growth, but said "the full effect...is more likely to be felt in the 2016 financial year and beyond".
The insurer's Sydney-listed shares have risen 62 percent from their issue price since listing in May 2014, while the broader share market has risen 8 percent. The shares closed down 0.5 percent on Tuesday, in line with the broader market, before Genworth said it lost the Westpac contract.
$1 = 1.2834 Australian dollars Reporting by Byron Kaye; Editing by Kenneth Maxwell