Genworth Mortgage Australia has suffered a steep sell-off, after reporting a 10.9 per cent drop in net profit, hurt by bad loans, a rise in higher-cost insurance claims and less new high loan-to-value ratio lending.

Genworth's net profit after tax fell to $203.1 million for the year ended 31 December 2016, down from $228 million in the prior year.

Bad loans jumped 21 per cent from the previous year to number 6,731 in Genworth's portfolio.

Chief executive Georgette Nicholas noted "challenging market dynamics", which included lower loan-to-value ratios on new lending, amid a regulator crackdown on riskier loans, and a rise in mortgage delinquencies, or late payments on loans.

"From a strategic perspective, we are beginning a program of work to redefine our core business model," she wrote in a statement to the ASX.

There was a reported loss ratio of 35.1 per cent, compared to 24 per cent a year earlier, and Genworth said that was due to the rise in delinquent loans, which were higher than to a year ago, also with higher average paid claim amounts.

A slowdown in Queensland and Western Australia has also crippled Genworth's bottom line, with a higher rate of delinquencies because of a slowdown in regional and metropolitan areas that had previously benefitted immensely from the mining boom.

Genworth said it expects its full-year loss ratio for 2017 to increase further to between 40 and 50 per cent.

Western Australia continues to have the worst performing economy in the nation, according to CommSec, with house prices tumbling in the state, while economic growth and investment contracts.

Genworth also posted lower sales over the year, with gross written premiums dropping 24.8 per cent.

Lenders mortgage insurance is generally compulsory for all borrowers who do not have a 20 per cent deposit. Genworth estimates it had around 34 per cent of the Australia LMI market in 2016.

However, a banking regulator crackdown on risky lending has seem the proportion of high loan-to-value ratio, or low deposit, loans drop over the past two years.

Last year, an ABC investigation found struggling homebuyers are being forced into bankruptcy over mortgage insurance policies that many consumers believe are designed to protect borrowers.

Australia's two big mortgage insurance providers QBE and Genworth, launched bankruptcy proceedings in the Federal Court against dozens of homebuyers over the past decade to recover debts from mortgage defaults.

Shares in Genworth dumped 13.2 per cent to $2.92, around a two-month low, by 12:40pm (AEDT).

Genworth listed on the ASX in 2014 with an IPO priced at $2.64 per share.