Helia Group Limited · ASX:HLI
Helia — Investor Presentation (July 2019)
52 slides from Helia's investor presentation, Jul 31, 2019
Slide 1: 1H19 Financial Results Presentation
31 JULY 2019 1H19 FINANCIAL RESULTS PRESENTATION Illustration by Sydney based artist and illustrator, Mike Watt ©2019 Genworth Mortgage Insurance Australia Limited. All rights reserved.
Slide 2: Disclaimer
Disclaimer This presentation contains general information in summary form which is current as at 30 June 2019. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IF
Slide 3: Introduction
Introduction Georgette Nicholas, CEO and MD
Slide 4: 1H19 results overview
1H19 results overview Summary Change 1H19 result in line with guidance (A$ millions) 1H18 1H19 % • New insurance written (NIW) of $12.5 billion, up 20.7% (1H18: $10.3 billion) Gross written premium 266.8 184.1 (31.0%) • GWP decreased 31.0%. Reflects 1H18 GWP including a bespoke transaction written t
Slide 5: Macroeconomic conditions
Macroeconomic conditions Interest rates House values – capital city dwellings 8.0% NSW VIC QLD SA WA ACT Australia Cash Rate Standard Variable Mortgage Rate 200 7.0% 180 6.0% 160 Home value Index 5.0% 4.0% 140 3.0% 120 2.0% 100 1.0% 0.0% 80 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun
Slide 6: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 A$ bn 34% 33% 31% 31% 27% 27% 24% 22% 22% 21% 20% 371 385 376 359 335 31 28 300 37 24 40 52 54 262 256 51 49 240 242 40 49 46 26 31 36 41 43 47 50 43 200 202 187 200 139 166 102 99 98 111 72 5 93 101 99 11 71 68 63 66 80 80 83 37
Slide 7: Detailed financial performance
Detailed financial performance
Slide 8: 1H19 income statement
1H19 income statement (A$ millions) 1H18 2H18 1H19 1H19 v • GWP in 1H18 included a bespoke transaction written through Genworth’s Bermudian insurance 1H18 (%) entity. Excluding this transaction, GWP increased Gross written premium 193.4 184.1 (31.0%) 6.4% in 1H19. Movement in unearned premium 266.8
Slide 9: New insurance written
New insurance written NIW1 by original LVR2 band NIW1 by product type $ bn, % $ bn 87% 86% 87% 86% 18.9 17.7 86% 84% 84% 84% 82% 82% 18.9 28% 14.9 17.7 25% 14.0 12.6 13.1 14.9 21% 12.5 16% 11.9 14.0 17% 10.9 12.6 13.1 12.5 18% 10.3 18% 11.9 20% 10.9 21% 10.3 49% 20% 51% 48% 52% 49% 99.1% 99.3% 55% 6
Slide 10: Gross written premium
Gross written premium GWP and average price1 of flow business GWP walk $ m, % $m 1.78% 1.82% 1.81% 1.81% 1.75% 1.65% 1.55% 1.56% 1.45% 266.8 0.7 (75.8) 285.4 266.8 222.2 (7.5) 184.1 189.8 192.1 182.3 186.7 193.4 184.1 3 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 1H18 Flow LVR Volume 3 Other 1H19 G
Slide 11: Net claims incurred
Net claims incurred (A$ millions unless otherwise stated) 1Q18 2Q18 1H18 3Q18 4Q18 2H18 1Q19 2Q19 1H19 Number of paid claims (#) 365 301 666 320 325 645 319 296 615 Average paid claim1 ($’000) 117.8 115.2 116.7 115.7 102.1 108.9 94.2 94.1 94.2 Claims paid1 43.0 34.7 77.7 37.0 33.2 70.2 30.1 27.8 57.
Slide 12: Loss development
Loss development Delinquency roll and incurred loss drivers Delinquency roll 1Q18 2Q18 1H18 3Q18 4Q18 2H18 1Q19 2Q19 1H19 Opening balance 6,696 6,958 6,696 7,306 7,350 7,306 7,145 7,490 7,145 New delinquencies 2,701 2,864 5,565 2,742 2,390 5,132 2,662 2,853 5,515 Cures (2,074) (2,215) (4,289) (2,378
Slide 13: Balance sheet
Balance sheet Strong balance sheet with $3.3bn in cash and investments Balance sheet as at 30 June 2019 (A$ in millions) 31 Dec 18 30 Jun 19 Total assets as at 30 June 2019 of $3,648.2 million. The 1.6% increase Assets of $58.1 million from 31 December 2018 includes: Cash and cash equivalents 141.5
Slide 14: Unearned premium reserve
Unearned premium reserve Unearned premium by year as at Movement in UPR by book year 30 June 20192 Book As at GWP GEP As at Total UPR $1.2bn 31 Dec 18 30 Jun 19 year ($ millions) ($ millions) 2011 2012 ($ millions) ($ millions) 1% 1% 2010 3.6 - (1.2) 2.4 2013 2019 3% 2014 2011 8.9 - (2.8) 6.1 15% 6%
Slide 15: 1H 2019 regulatory capital position
1H 2019 regulatory capital position (A$ in millions) 31 Dec 18 30 Jun 19 NIW1 by original LVR band and Probable Capital Base Maximum Loss1 Common Equity Tier 1 Capital 1,748.1 1,697.2 $ bn Tier 2 Capital 200.0 200.0 2.60 2.59 2.51 Regulatory Capital Base 1,948.1 1,897.2 2.36 2.28 Capital requirement
Slide 16: Reinsurance
Reinsurance Program continues to drive efficiency Reinsurance program1 Observations 2,500 • As at 30 June 2019, $800 million of excess of loss cover with varying durations depending on the layer Consortium 6 2,000 100 100 100 Consortium 5 • Well diversified panel with over 20 different reinsurers 10
Slide 17: Ongoing program of capital management
Ongoing program of capital management Recent actions Genworth dividends • Since listing in 2014, Genworth has paid out 100% of after tax profits by way of ordinary and special dividends to shareholders 32 • In 1H19 the Board declared: 100% 28 ‒ Interim ordinary dividend of 9.0 cps fully franked Ordi
Slide 18: Summary and conclusion
Summary and conclusion we Genworth %, <.
Slide 19: Genworth economic outlook and FY19 guidance
2019 Genworth economic outlook and FY19 guidance Economic growth in 1H19 continued to Foundational support to economy expected slow reflecting subdued household from RBA cash rate cuts, APRA changes to consumption, tight credit conditions, serviceability, Federal Government tax cuts ongoing slow hou
Slide 20: Conclusion
Conclusion Good progress in Track record of Strategic work to implementing Business is well delivering profits deliver profitable strategic initiatives capitalised and strong capital growth over the that broaden returns medium term product offerings Unique set of Excess capital and competencies that
Slide 21: Questions
Questions 44 Genworth =<.
Slide 22: Supplementary slides
Supplementary slides we Genworth %, <.
Slide 23: Supplementary slides contents
Supplementary slides Contents Section Slide Section Slide Reconciliations 24 Claims severity 47 Quarterly financial information 26 Claims frequency 48 Delinquency development 27 Genworth corporate structure 49 Key performance measures 28 Glossary 50 Effective LVR 34 Graph: Residential mortgage lendi
Slide 24: Reconciliations
Reconciliations Statutory NPAT and Underlying NPAT ($ millions) 1H17 2H17 1H18 2H18 1H19 Statutory NPAT 88.7 60.5 41.9 33.8 88.1 Adjustment for change in unrealised (gains)/losses and 35.5 (4.2) 12.0 14.1 (64.4) foreign currencies Adjustment for tax (expense)/credit on change in unrealised (10.7) 1.
Slide 25: Reconciliations
Reconciliations Underlying ROE 12 mths to 12 mths to 12 mths to 12 mths to 12 mths to ($ millions) Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Underlying NPAT 212.8 171.1 107.9 93.9 86.7 Underlying equity1 1,954.2 1,903.5 1,878.0 1,807.6 1,732.2 Underlying ROE (%) 10.9% 9.0% 5.7% 5.2% 5.0% Source: Genworth D
Slide 26: Quarterly financial information
Quarterly financial information Financial ratios Key financial measures 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Loss ratio 55.9% 50.9% 52.6% 48.2% 55.3% 53.0% Expense ratio 33.5% 32.4% 32.5% 36.1% 34.0% 35.3% Combined ratio 89.5% 83.3% 85.0% 84.3% 89.3% 88.4% Insurance margin 20.3% 27.5% 24.4% 40.8% 56.0% 48.
Slide 27: Delinquency development
Delinquency development Delinquency composition Delinquencies by Delinquencies by Jun 18 Dec 18 Jun 19 Jun 18 Dec 18 Jun 19 book year geography 2010 and prior 4,085 3,805 4,012 0.52% New South Wales 1,224 1,254 1,425 0.45% 2011 427 416 411 0.80% Victoria 1,368 1,296 1,397 0.45% 2012 671 667 728 1.11
Slide 28: Key performance measures
Key performance measures This section contains selected operating performance measures which are commonly used in the insurance industry as measures of operating performance. These operating performance measures enable the Company to compare its operating performance across periods. All measures in
Slide 29: Key performance measures
Key performance measures (A$ millions) 1Q18 2Q18 1H18 3Q18 4Q18 2H18 1Q19 2Q19 1H19 1H19 v 1H18 (%) Gross written premium 174.1 92.7 266.8 92.1 101.3 193.4 86.3 97.8 184.1 (31.0%) Movement in unearned premium (84.7) 0.8 (83.9) (6.5) (13.4) (19.9) 3.9 (5.1) (1.2) 98.6% Gross earned premium 89.4 93.5
Slide 30: Key performance measures
Key performance measures 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun Primary insurance 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 Insured loans in-force (#) 1,443,836 1,438,100 1,422,501 1,416,525 1,407,431 1,354,614 1,335,133 1,332,906 1,323,172 1,308,811 Insured de
Slide 31: Key performance measures
Key performance measures 30 Jun 2017 30 Sep 2017 31 Dec 2017 31 Mar 2018 30 Jun 2018 30 Sep 2018 31 Dec 2018 31 Mar 2019 30 Jun 2019 % of % of % of % of % of % of % of % of % of Primary Primary Primary Primary Primary Primary Primary Primary Primary primary primary primary primary primary primary pr
Slide 32: Key performance measures
Key performance measures 1Q17 2Q17 3Q17 4Q17 Total 17 1Q18 2Q18 3Q18 4Q18 Total 18 1Q19 2Q19 Total 19 Paid claim1 ($M), quarterly analysis Flow 33 40 42 51 166 43 35 37 33 148 30 28 58 Bulk - - - 1 1 - - - - - - - - Total 33 40 42 52 166 43 35 37 33 148 30 28 58 Average paid claim ($ thousands) 92.5
Slide 33: Key performance measures
Key performance measures 30 Sep 2017 31 Dec 2017 31 Mar 2018 30 Jun 2018 Primary Flow Bulk Primary Flow Bulk Primary Flow Bulk Primary Flow Bulk Risk in force ($M) by LVR 95.01% and above 18,017 18,016 1 17,728 17,728 - 17,390 17,390 - 16,527 16,527 - 90.01% to 95.00% 30,297 30,289 8 30,529 30,521 8
Slide 34: Effective LVR
Effective LVR As at 31 Dec 18 As at 30 Jun 19 Insurance in force LVR Change in Insurance in force LVR Change in house price house price Book year $ billion % Original Effective % Book year $ billion % Original Effective % 2009 & prior 86.9 31% 78.4% 37.4% 74% 2010 & prior 93.7 34% 78.4% 40.7% 62% 20
Slide 35: Residential mortgage lending market
Residential mortgage lending market NIW: Investment vs. owner-occupied (APRA statistics for ADI)1 NIW: Investment vs. owner-occupied2 (Genworth) $ bn, % $ bn, % 40% 27% 36% 37% 34% 34% 24% 25% 32% 33% 33% 23% 23% 29% 30% 29% 21% 20% 20% 19% 128 127 136 109 136 14% 14% 109 8.7 76 84 81 78 6.7 8.0 8.6
Slide 36: Insurance-in-force and new insurance written
Insurance-in-force and new insurance written Insurance in force (IIF)1 by original LVR2 band, as at 30 June 2019 IIF1 by product type, as at 30 June 2019 Low HomeBuyer Plus Total IIF $307 bn 2% Doc Other 95.01%+ 4% 1% 60.01-70% 1% 6% <60% 8% 90.01-95% 27% 70.01-80% 15% Standard 85.01-90% 80.01-85% 9
Slide 37: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ m, % $ m, % 76.7% 86.2% 84.6% 88.8% 33.7% 32.9% 34.2% 34.7% 64.3% 60.6% 25.9% 57.3% 26.3% 26.7% 25.7% 27.1% 48.8% 51.4% 24.4% 44.7% 144.2 125.6 131.2 128.3 131.0 121.8 123.5 62.8 116.7 59.8 60.2 60.8 110.1 55.8 54.7 53.6 101.5 60.8 47.1 47.2 51.2 55
Slide 38: Delinquency development
Delinquency development 1.40% 2005 2006 2007 1.20% 2008 2009 2010 1.00% 2011 2012 Delinquency rate (%) 0.80% 2013 2014 2015 0.61% 0.62% 2016 0.60% 0.61% 0.51% 2017 0.47% 2018 0.43% 0.40% 0.39% 0.43% 2019 0.29% 0.28% 0.23% 0.20% 0.20% 0.12% 0.04% 0.00% 103 109 115 121 127 133 139 145 151 157 163 169
Slide 39: Delinquency population
Delinquency population By month in arrears1, 2 7,891 8,000 50% 39.79% 7,490 7,285 7,146 7,306 7,350 7,145 8% 42.64% 6,958 45% 7,000 6,844 6,731 6,926 6,696 10% 10% 8% 43.27% 12% 9% 6,413 12% 11% 40.70% 13% 40% 14% 14% 13% 23% 37.46% 6,000 13% 23% 19% 20% 21% 22% 40.84% 19% 35% 20% 17% 20% 38.38% 19%
Slide 40: Portfolio evolution
Portfolio evolution Annual NIW1 by LVR Annual NIW1 by product type $bn $bn 44.7 44.7 41.6 41.6 35.4 36.2 36.2 36% 33.8 15% 35.4 31.8 32.6 35% 33.8 1% 30.8 31.8 2% 32.6 46% 30.8 3% 1% 36% 26.6 5% 3% 24% 36% 23% 26.6 1% 29% 39% 23.9 1% 23.9 20% 17% 22.2 22.2 1% 19% 0% 20% 41% 45% 51% 85% 97% 98% 99% 3
Slide 41: Insurance in force
Insurance in force IIF1 by book year (as at 30 Jun 19) IIF1 by book year (as at 30 Jun 18) 2017 2018 7% 2018 2019 7% 4% 3% 2017 2016 7% 8% 2008 & 2009 & Prior 2016 Prior 2015 39% 37% 7% 8% 2015 2014 8% 9% 2014 2013 7% 2009 2010 7% 2013 2012 6% 6% 2012 2011 4% 2011 2010 5% 6% 5% 5% 5% Source: Genwort
Slide 42: Insurance in force
Insurance in force IIF1 by state (as at 30 Jun 19) IIF1 by state (as at 30 Jun 18) ACT NT NZ ACT NT NZ 3% 1% 2% 3% 1% 2% TAS TAS 2% 2% SA SA 6% NSW 6% NSW 28% 28% WA WA 12% 12% QLD QLD 23% VIC 23% VIC 23% 23% Source: Genworth Source: Genworth 1.IIF includes capitalised premium. Excludes excess of lo
Slide 43: Investment performance
Investment performance The primary investment objective is to manage the portfolio of securities to pay claims as they become due, whilst achieving return and income targets with an acceptable level of volatility. The asset allocation and asset management strategy was expanded in FY18 to include exp
Slide 44: Investment portfolio
Investment portfolio Conservative, well-diversified portfolio with average maturity of 3.7 years1 Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type 3% 2% 3% 3% 8% 26% 14% 27% 15% 41% 46% 16% 2% 19% 11% 29% 24% 11% Corporate State Gov't Cash Equiv. 0
Slide 45: Investment portfolio – Technical funds
Investment portfolio – Technical funds1 Genworth technical funds were $1.3 billion Investment assets by term to maturity Investment assets by source 6% 15% 28% 26% 23% 1% 30% 71% Source: Genworth Source: Genworth 0 - 1 yr 1 - 3 yr 3 - 5 yr 5 - 10 yr 10 yr + State Gov't Cash and cash equiv. C'wealth
Slide 46: Investment portfolio – Shareholder funds
Investment portfolio – Shareholder funds Genworth shareholder funds were $2.0 billion Investment assets by term to maturity Investment assets by source 4% 4% 9% 3% 7% 36% 17% 12% 76% 32% 0 - 1 yr 1 - 3 yr 3 - 5 yr 5 - 10 yr >10 yr Equities Corporate Cash Equiv. Cash Equities Derivatives (0%) Source:
Slide 47: Claims severity
Claims severity 40% 37% 35% 32% 32% 30% 26% 26% 26% 25% 24% 23% 23% 20% 17% 15% 15% 15% 10% 5% 4% 0% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Genwort
Slide 48: Claims frequency
Claims frequency By book year (%) as at 30 June 2019 2.0% 1.8% 1.83% 1.6% 1.4% 1.40% 1.26% 1.2% 1.07% 1.0% 0.8% 0.66% 0.6% 0.52% 0.59% 0.56% 0.4% 0.32% 0.2% 0.16% 0.02% 0.06% 0.0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 2006 2007 2008 20
Slide 49: Genworth corporate structure
Genworth corporate structure As at 30 June 2019 Public 412,514,184 ordinary shares (100%) Genworth Financial, Inc1 198,197,347 ordinary shares (48.0%) 214,316,837 ordinary shares (52.0%) Genworth Mortgage Insurance Australia Limited ABN 72 154 890 730 Genworth Financial Mortgage Insurance Pty Limite
Slide 50: Glossary
Glossary As at 30 June 2019 Term Definition Term Definition AIFRS Australian equivalent to International Financial Reporting Standards Expense ratio The expense ratio is calculated by dividing the sum of the acquisition costs and the other underwriting expenses by the ASX ASX Limited ABN 98 008 624
Slide 51: Glossary
Glossary As at 30 June 2019 Term Definition Term Definition Investment The investment return is calculated as the interest income on Return on equity The ROE is calculated by dividing NPAT by the average of the return technical funds plus the interest income on shareholder funds (ROE) opening and cl
Slide 52: NVA
NVA Genworth > Sse