Genworth MI Canada Inc. - BMO Fixed Income Conference

June, 2013Genworth MI Canada Inc. 1
PHILIP
MAYERS,
CFO

BMO
Fixed
Income
Conference

June
13,
2013

Forward-‐looking
and
non-‐IFRS
statements

This
presenta8on
includes
certain
forward-‐looking
statements.
These
forward-‐looking
statements
include,
but
are
not
limited
to,

statements
with
respect
to
the
Company’s
future
opera8ng
and
financial
results,
expecta8ons
regarding
premiums
wriDen,

capital
expenditure
plans,
dividend
policy
and
the
ability
to
execute
on
its
future
opera8ng,
inves8ng
and
financial
strategies,
and

other
statements
that
are
not
historical
facts.
These
forward-‐looking
statements
may
be
iden8fied
by
their
use
of
words
such
as

“may,”
“would,”
“could,”
“will,”
“expects,”
“an8cipates,”
“contemplates,”
“intends,”
“plans,”
“believes,”
“seeks,”
“es8mates,”
or

words
of
similar
meaning.
These
statements
are
based
on
the
Company’s
current
assump8ons,
including
assump8ons
regarding

economic,
global,
poli8cal,
business,
compe88ve,
market
and
regulatory
maDers.
These
forward-‐looking
statements
are

inherently
subject
to
significant
risks,
uncertain8es
and
changes
in
circumstances,
many
of
which
are
beyond
the
control
of
the

Company.
The
Company’s
actual
results
may
differ
materially
from
those
expressed
or
implied
by
such
forward-‐looking

statements,
including
as
a
result
of
changes
in
the
facts
underlying
the
Company’s
assump8ons,
and
the
other
risks
described
in

the
Company’s
Annual
Informa8on
Form
dated
March
29,
2013,
its
Short
Form
Base
Shelf
Prospectus
dated
May
31,
2012,
the

Prospectus
Supplements
thereto
and
all
documents
incorporated
by
reference
in
such
documents.
Other
than
as
required
by

applicable
laws,
the
Company
undertakes
no
obliga8on
to
publicly
update
or
revise
any
forward-‐looking
statement,
whether
as
a

result
of
new
informa8on,
future
developments
or
otherwise.

To
supplement
its
financial
statements,
the
Company
uses
select
non-‐IFRSs
financial
measures.
Non-‐IFRSs
measures
used
by
the

Company
to
analyze
performance
include
underwri8ng
ra8os
such
as
loss
ra8o,
expense
ra8o
and
combined
ra8o,
as
well
as

other
performance
measures
such
as
net
opera8ng
income
and
return
on
net
opera8ng
income.
The
Company
believes
that
these

non-‐IFRSs
financial
measures
provide
meaningful
supplemental
informa8on
regarding
its
performance
and
may
be
useful
to

investors
because
they
allow
for
greater
transparency
with
respect
to
key
metrics
used
by
management
in
its
financial
and

opera8onal
decision
making.
Non-‐IFRSs
measures
do
not
have
standardized
meanings
and
are
unlikely
to
be
comparable
to
any

similar
measures
presented
by
other
companies.
These
measures
are
defined
in
the
Company’s
glossary,
which
is
posted
on
the

Company’s
website
at
hDp://investor.genworthmicanada.ca.
A
reconcilia8on
from
non-‐IFRSs
financial
measures
to
the
most

readily
comparable
measures
calculated
in
accordance
with
IFRSs
can
be
found
in
the
Company’s
most
recent
financial

statements,
which
are
posted
on
the
Company’s
website
and
are
also
available
at
www.sedar.com.

Leading
private
mortgage
insurer

§  Providing
residen8al
mortgage
insurance
since
1995

§  ADrac8ve
mortgage
market

§  Proven
track
record
of
success

§  Long
standing
rela8onships
with
the
Canadian
lenders

§  High
quality
and
diversiﬁed
insurance
porolio

§  Proac8ve
risk
management
plaorm

§  High
quality
investment
porolio

§  Seasoned
management
team

Driving
consistent
ﬁnancial
performance

Solid
Q1
2013
results

$
MM
Q1
2013
Full
Year

2012

UnderwriNng
Results

Premiums

wriDen
$84

$560

Loss
ra8o
31%
33%

Underwri8ng
income
(pre-‐tax)
$74
$291

Proﬁtability

Net
opera8ng
income
1
$
85
$339

Shareholders’
Equity
(Incl.
AOCI)
$3,104
$3,037

Opera8ng
Return
on
equity
12%
13%

Debt
Outstanding
$425
$425

1
(Note:
2012
net
opera8ng
income
excludes
posi8ve
adjustment
for
reversal
of
government
guarantee
fund
exit
fees)

Risk
management
framework

Risk Framework Key Focus Areas
§  Unemployment rate
§  Home prices
§  Housing market trends
Assessment of
macro-economic environment
§  Underwriting fundamentals
§  Risk-based collateral adjudication
§  Avoid risk concentrations
Disciplined approach to
new business origination
§  Portfolio analytics
§  Identifying emerging trends
§  Dynamic underwriting policies
Portfolio Risk Management

Performance
drivers

§  Housing market headed for soft
landing
§  Home prices expected to be flat in
coming years
Source: Canadian Real Estate Association
Unemployment Rate (UE, right axis)
and Mortgage Arrears (left axis)
Frequency Severity
Average Price ($000s)
200
250
300
350
400
07 08 09 10 11 12 13F
4%
6%
8%
10%
12%
0.0%
0.3%
0.5%
0.8%
1.0%
89 91 93 95 97 01 03 05 07 09 11
Unemployment

Mortgage
arrears

Sources:
Unemployment: Statistics Canada
Mortgage Arrears: Canadian Bankers Association
§  Unemployment is the major driver of
mortgage defaults & frequency of loss
§  Unemployment rate moderating
towards historical level of 7%
Expected
stability
in
Canadian
housing
market

Canada
housing
market

200
300
400
500
600
700
07 08 09 10 11 12 13
Average Sales Price
(CAD $000s)
National
Ontario
Alberta
Quebec
Pacific
§  Low
rates
and
healthy
employment

levels
con8nues
to
support
market

§  Balanced
market
keeping
prices

rela8vely
ﬂat

§  Market
adap8ng
to
lower
but

sustainable
level
of
housing
ac8vity

Source:
Canadian
Real
Estate
Associa8on

Mortgage
origina8ons
outlook

§  Goal
of
homeownership
a
strong

influencing
factor

§  Mortgage
rule
changes
impac8ng

demand

§  New
to
Canada
a
key
component
to

growth

§  Affordability
supported
by
low

interest
rates
&
flat
home
prices

Stable
housing
demand…
Mortgage
insurance
penetraNon
rate
~32%

Source:
Canadian
Real
Estate
Associa8on
and

Canadian
Housing
Observer

2009 2010 2011 2012 2013F
466 448 459 454 441
176 187 176 180 179
Resales Completions
Housing Resales and Completions
(units in thousands)

Served
market
trends

720 726 727 727 730 731
08 09 10 11 12 Q1'13
08 09 10 11 12 Q1'13
256 266 284 296 301 307
23 22
24 25 24 24
08 09 10 11 12 Q1'13 Source:
Company
data

Average
credit
score

§  Improving
quality

§  “A”
quality
borrowers
only

Average
home
price

§  First-‐8me
borrower
segment

§  Modest
increase
in
home
prices

§  Flat
home
price
outlook
for
the
balance
of

2013

Average
gross
debt

§  Interest
rate
shock
built
in

§  Fixed
rate
mortgages
>
85%
of
approved

mortgages

Smaller
market,
but
higher
quality
…
focused
on
ﬁrst
Nme
homebuyers

§  Lower
number
of
delinquencies

reﬂect
improving
employment
trend

§  Declining
trend
in
all
regions

§  Alberta
down
by
48%
YoY

§  Ontario
down
by
21%
YoY

§  Quebec
down
by
18%
YoY

§  BC
down
by
18%
YoY

Stable
employment
is
posiNve
for
delinquency
trend

Source:
Company
Data

Q1 '12 Q2 '12 Q3 '12 Q4' 12 Q1 '13
2623

2408

2183

2153

1963

Number
of
Reported
Delinquencies

Delinquency
trends

25%
Decline
YoY

Ontario

BC

Alberta

Quebec

Other

Premiums
cover
losses
during
stress

2011 Book Example Full Cycle Scenario
Stress Scenario
(Early 90’s recession)
New Insurance in Force $22 B $22 B
Claim Severity 27% 35%
Gross Exposure $6 B $8 B
Claim Frequency 3% 6%
Loss Exposure $181 MM $480 MM
Premiums Written $514 MM $514 MM
Loss Ratio 35% 92%
Unemployment rose from 8 to 11%
and home prices declined by 15%
from 1991 to 1994
Target
35-‐40%
loss
raNo
over
an
economic
cycle

Strategic
priori8es

§  Con8nue
to
strengthen
market
posi8on

§  Proac8ve
risk
management

§  Maintain
strong
government
rela8ons

§  Rigorous
capital
management

§  Drive
posi8ve
and
powerful
customer
experience

§  ADract,
retain
and
engage
top
talent

Focused
on
strong
business
execuNon

Underwri8ng
performance
scorecard

`2009 `2010 `2011 `2012
355
536 514 473
359
552 533 550
HLTV Portfolio Insurance
$MM
Premiums Written Premiums Earned
`2009 `2010 `2011 `2012
42 33 37 33
14
17 17 18
Loss Ratio Expense Ratio
Combined Ratio
`2009 `2010 `2011 `2012
257
311 287 291
Underwriting Profit
`2009 `2010 `2011 `2012
610 621 612
589

Underwri8ng
performance
scorecard

0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1 2 3 4 5 6 7
Earnings Curve Premiums Earned
`2009 `2010 `2011 `2012

610

621

612

589

1. Excludes $100 MM impact of change to the premium recognition curve in 2009
Q4
§ Single
upfront
premium
results
in
signiﬁcant
unearned
premiums
of
$1.7
Billion

§ Unearned
premiums
include
embedded
future
underwri8ng
proﬁts

1

Cash
5%
Federal
35%
Provincial
14%
Corporates
40%
Common Equity
6%
Investment
porolio
remains
high
quality

§  Balanced

high
quality
porolio

•  49%
federal
&
provincial
bonds

•  40%
corporate
bonds

•  96%

of
bonds
‘A’
or
higher

§  $324
million
posi8ve
mark-‐to-‐market

Total

$5.3
billion

1Pre-‐tax
equivalent
book
yield
aoer
dividend
gross-‐up
of
general

porolio
(as
at
March
31,
2013)

$
Billion
Por]olio

Assets
(MV)

$5.3

Pre-‐tax
yield1
3.7
%

Dura8on
3.6
years

2009 2010 2011 2012

120

124

126

142

$ MM
After Tax Investment Income
Excluding gains and losses

2010 2011 2012 Jan. 1,
2013
Mar. 31,
2013
145% 145% 145%
185% 185%
11% 17% 25%
25% 31%
156%

162%
170%

210%
216%

§  Focused
on
maintaining
strong
credit

ra8ngs

§  Modest
leverage
with
staggered
debt

maturi8es

§  $275
million
5.68%
June
15,
2020

§  $150
million
4.59%
Dec
15,
2015

§  Holding
company
cash
&
investments

§  Interest
coverage
ra8o
20
8mes

§  Debt
to
total
capital
ra8o
of
13%

Strong
capital
posi8on
with
ﬂexibility

Minimum
Capital
Test
RaNo

Buﬀer

Internal

Target

DBRS S&P
Senior unsecured
debentures
AA (low)
stable
A-
stable

Disciplined
execuNon

Proven
business
model

Solid
ﬁnancial
foundaNon

Strategic
priori8es
remain
the
same!
Proﬁtability
remains
a
key
focus

Genworth MI Canada Inc. - BMO Fixed Income Conference

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (19)

En vedette

En vedette (16)

Similaire à Genworth MI Canada Inc. - BMO Fixed Income Conference

Similaire à Genworth MI Canada Inc. - BMO Fixed Income Conference (20)

Plus de genworth_financial

Plus de genworth_financial (9)

Dernier

Dernier (20)

Genworth MI Canada Inc. - BMO Fixed Income Conference