Helia Group Limited · ASX:HLI
Helia — Investor Presentation (July 2020)
43 slides from Helia's investor presentation, Jul 30, 2020
Slide 1: 1H20 Financial Results Presentation
30 JULY 2020 1H20 FINANCIAL RESULTS PRESENTATION ©2020 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 July 2020. 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: Overview, Financial result, Summary, Supplementary slides
01 Overview 02 Financial result 03 Summary 04 Supplementary slides 3 1H 2020 financial results – produced by Genworth.
Slide 4: Overview
Overview Pauline Blight-Johnston, CEO and Managing Director
Slide 5: Focus on our customers and our people
Focus on our customers and our people Well positioned and prepared to manage the impacts of COVID-19 1H20 result • Statutory net loss after tax of $90m. impacted by • $181.8m DAC write-down & $35.5m IBNR reserves for future COVID-19 claims. COVID-19 • Home loan repayment deferrals: ~48,000 or ~4% in
Slide 6: 1H20 results overview
1H20 results overview Business growth underpinned by prudent underwriting • Strong growth in New insurance written and Gross ($ millions) 1H19 1H20 Change written premium due to low interest rates and the strong LMI flow performance across lender Gross written premium (GWP) $184.1m $239.3m 30.0% cus
Slide 7: 1H20 macroeconomic environment
1H20 macroeconomic environment Key economic indicators broadly consistent with Genworth assumptions Unemployment rate Cash rate Source: ABS 6206.0 Labour Force, July 2020 Source: RBA A02, Monetary Policy Changes House prices – YoY growth Annualised national GDP Source: CoreLogic Housing Index, July
Slide 8: Economic outlook remains highly uncertain
Economic outlook remains highly uncertain Extended government and lender stimulus will moderate impacts Consumer sentiment • Federal Government JobKeeper / JobSeeker and lender repayment deferrals supporting individuals and businesses impacted by COVID-19. • Lender home loan repayment deferrals: 485
Slide 9: Responding to evolving customer needs
Responding to evolving customer needs Customer-led approach underpins business growth Value driven Support Harnessing partnerships + through new insights COVID-19 opportunities • Over 50 years experience. • Prudent underwriting whilst • Economic change will • 73 lender partnerships, managing higher
Slide 10: 1H20 Financial Result
1H20 Financial Result Michael Bencsik, Chief Financial Officer
Slide 11: 1H20 Income statement
1H20 Income statement Solid underlying business performance impacted by COVID-19 (A$ millions) 1H19 2H19 1H20 1H20 v 1H19 (%) Gross written premium 184.1 249.1 239.3 30.0% Movement in unearned premium (1.2) (63.6) (54.0) (N.M.)1 Gross earned premium 182.9 185.5 185.3 1.3% Outwards reinsurance premiu
Slide 12: New insurance written and gross written premium
New insurance written and gross written premium Strong LMI flow performance across lender customers GWP walk GWP and average price1 of flow business $m $m, % 30.0% 1.82% 1.81% 1.81% 1.75% 1.81% 1.82% 1.65% 1.56% 1.45% 266.8 249.1 239.3 189.8 192.1 186.7 193.4 184.1 182.3 1H16 2H16 1H17 2H17 1H18 2H1
Slide 13: Net claims incurred
Net claims incurred Higher loss ratio due to increase in reserves (A$ millions unless otherwise stated) 1H19 2H19 1Q20 2Q20 1H20 Number of paid claims (#) 615 737 333 358 691 Average paid claim ($’000) 94.2 98.6 92.7 97.0 94.9 Claims paid 57.9 72.7 30.9 34.7 65.6 Movement in reserves 21.9 (1.7) 4.7
Slide 14: Loss development
Loss development Increased reserves for COVID-19 impacting loss experience Delinquency roll 1Q19 2Q19 1H19 3Q19 4Q19 2H19 1Q20 2Q20 1H20 Opening balance 7,145 7,490 7,145 7,891 7,713 7,891 7,221 7,274 7,221 New delinquencies 2,662 2,853 5,515 2,622 2,277 4,899 2,326 2,662 4,988 Cures (1,998) (2,156)
Slide 15: Liability adequacy test (LAT) movement
Liability adequacy test (LAT) movement LAT surplus at 30 June 2020 Liability adequacy test ($ millions) 31 Mar 20 30 Jun 20 • Liability adequacy assessment conducted at each reporting period. Unearned premium 1,302.2 1,334.8 Less: Deferred acquisition costs (DAC) (183.8)1 (16.5) • Central estimate s
Slide 16: Balance sheet
Balance sheet Strong balance sheet with $3.2b in cash and investments Balance sheet as at 30 June 2020 ($ millions) 31 Dec 19 30 Jun 20 Total assets as at 30 June 2020 of $3,462.9m: Assets • Cash and investment portfolio of $3.2b, of which Cash 87.3 80.9 81% is held in cash and fixed interest securi
Slide 17: Regulatory capital
Regulatory capital Well-capitalised above Board targets and APRA requirements ($ millions) 31 Mar 20 30 Jun 20 NIW1 by original LVR band and probable Capital base maximum loss Common equity Tier 1 capital 1,199.2 1,298.1 $b Tier 2 capital 200.0 200.0 Regulatory capital base 1,399.2 1,498.1 Capital r
Slide 18: Summary
Summary Pauline Blight-Johnston, CEO and Managing Director
Slide 19: Well positioned to support customers through the economic uncertainty and recovery
Well positioned to support customers through the economic uncertainty and recovery Sound business fundamentals and strong customer focus • Ongoing GWP and NIW growth. • Regular lender customer engagement regarding data insights on hardships. • Continue to adapt and evolve in response to changing mar
Slide 20: Supplementary slides
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Slide 21: Supplementary slides 1H 2020 contents
Supplementary slides 1H 2020 Contents Section Slide Key performance measures 22 Reconciliations 27 Insurance-in-force and new insurance written 28 Portfolio evolution 29 Loan to value ratios 30 Delinquency development 31 Delinquency population 33 Claims severity 34 Claims frequency 35 Cash and inves
Slide 22: Key performance measures
Key performance measures This section contains selected operating performance measures which are commonly used in the insurance industry as measures of operating performance. These operating performance measures enable the Company to compare its operating performance across periods. All measures in
Slide 23: Key performance measures
Key performance measures (A$ millions) 1H19 2H19 1Q20 2Q20 1H20 (%) Gross written premium 184.1 249.1 114.1 125.3 239.3 30.0% Movement in unearned premium (1.2) (63.6) (21.4) (32.6) (54.0) (N.M.)1 Gross earned premium 182.9 185.5 92.7 92.7 185.3 1.3% Outwards reinsurance expense (35.3) (34.9) (17.2)
Slide 24: Key performance measures
Key performance measures Primary insurance 30 Jun 2018 31 Dec 2018 30 Jun 2019 31 Dec 2019 30 Jun 2020 Insured loans in-force (#) 1,354,614 1,332,906 1,308,811 1,290,216 1,236,657 Insured delinquent loans (#) 7,306 7,145 7,891 7,221 7,614 Insured delinquency rate (%) 0.54% 0.54% 0.60% 0.56% 0.62% Fl
Slide 25: Key performance measures
Key performance measures 31 Mar 2019 30 Jun 2019 30 Sep 2019 31 Dec 2019 31 Mar 2020 30 Jun 2020 % of % of % of % of % of % of primary Primary primary Primary primary Primary primary Primary primary Primary primary Primary risk in delq rate risk in delq rate risk in delq rate risk in delq rate risk
Slide 26: Key performance measures
Key performance measures 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 Paid claim1 ($ millions), quarterly analysis Flow 30 28 35 37 131 31 35 Bulk - - - - - - - Total 30 28 35 37 131 31 35 Average paid claim1 ($ thousands) 94.2 94.1 97.9 99.1 96.5 92.7 97.0 Average reserve per delinquency ($ thousands) 46.7 4
Slide 27: Reconciliations
Reconciliations Total equity and underlying equity ($ millions), as at 30 Jun 18 31 Dec 18 30 Jun 19 31 Dec 19 30 Jun 20 Total Equity 1,821.9 1,737.3 1,722.3 1,527.5 1,405.5 Adjustment for life to date unrealised (gains) and FX (31.0) (18.5) (83.1) (51.6) (45.0) Adjustment for tax credit on life to
Slide 28: Insurance-in-force and new insurance written
Insurance-in-force and new insurance written Insurance-in-force (IIF)1 by original LVR2 band IIF1 by product type, as at 30 June 2020 as at 30 June 2020 HomeBuyer 95.01%+ <60% Plus 1% 8% 2% Other Low Doc 1% 60.01-70% 4% 5% 90.01-95% 26% 70.01-80% 15% 80.01-85% 9% Standard 85.01-90% 93% 36% Flow NIW1
Slide 29: Portfolio evolution
Portfolio evolution Annual NIW1 by LVR NIW: Investment vs. owner-occupied 3 (Genworth) $b $b, % Annual GWP and average flow price2 Annual number of New Policies1 plus policies $m outstanding1 1,468,773 Note: Prior periods have been restated in line with market updates. Note: New policies are those p
Slide 30: Loan to value ratios
Loan to value ratios As at 31 December 2019 As at 30 June 2020 Insurance in force LVR Change in Insurance in force LVR Change in house price house price Book year $ billions % Original Effective % Book year $ billions % Original Effective % 2011 & prior 98.7 35% 78.6% 38.3% 71% 2011 & prior 101.7 36
Slide 31: Delinquency development
Delinquency development Delinquencies Delinquencies Jun 19 % Dec 19 % Jun 20 % Jun 19 % Dec 19 % Jun 20 % by book year by geography 2011 and prior 4,423 0.54% 3,952 0.50% 4,060 0.55% New South Wales 1,425 0.45% 1,320 0.42% 1,495 0.51% 2012 728 1.11% 585 0.95% 595 1.01% Victoria 1,397 0.45% 1,258 0.4
Slide 32: Delinquency development
Delinquency development Source: Genworth • Portfolio delinquencies moved as per seasonal trends. • 2006 and prior book years performances affected by higher proportion of low doc lending which reduced significantly in 2009 following policy changes and decommissioning of the low doc product in the la
Slide 33: Delinquency population
Delinquency population By month in arrears1 2 7,891 8,000 7,713 50% 7,614 7,490 7,285 7,306 7,350 8% 7,274 7,146 7,145 9% 7,221 8% 6,926 6,958 8% 45% 7,000 6,696 10% 10% 10% 12% 9% 10% 12% 11% 13% 23% 40% 13% 23% 26% 6,000 23% 20% 21% 19% 19% 22% 25% 24% 35% 20% 20% 20% 5,000 No. of arrears 30% 27%
Slide 34: Claims severity
Claims severity Source: Genworth • The chart shows the claims severity by original book year and associated development period for each book year. ‒ Claim severity for each year refers to the size of claims paid as a proportion of the original residential mortgage loan amount. ‒ Claims paid excludes
Slide 35: Claims frequency
Claims frequency By book year (%) as at 30 June 2020 Source: Genworth Note: 1. The claims frequency for each book year is calculated as the number of claims from policies written in the book year divided by the total number of policies in the same book year which is gross of cancelled policies. 2. P
Slide 36: Cash and investments portfolio
Cash and investments portfolio Conservative, well-diversified portfolio with average maturity of 4.3 years1 Portfolio by maturity Portfolio by rating Portfolio by issuer type 3% 1% 3% 3% 3% 0% 10% 3% 13% 16% 37% 46% 17% 19% 31% 47% 26% 15% 7% AAA AA C'wealth State Gov't 0 - 1 yr 1 - 3 yr 3 - 5 yr 5
Slide 37: 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 38: Reinsurance
Reinsurance Well-diversified panel with flexibility, continues to drive efficient capital credit Reinsurance program as at 30 June 2020 • As at 30 June 2020, $800m of excess of loss cover with varying durations depending on the layer. • Well diversified panel with over 20 different reinsurers partic
Slide 39: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $m, % $m, % Expense ratio: divide sum of acquisition costs and other underwriting expenses Combined ratio: loss ratio + expense ratio. by net earned premium. Net of ceding commissions. Earnings curve change 4Q17. Insurance margin Trailing 12-month ROE
Slide 40: Glossary
Glossary As at 30 June 2020 Term Definition Term Definition ASX ASX Limited ABN 98 008 624 691 or Australian Securities Expense ratio The expense ratio is calculated by dividing the sum of the Exchange acquisition costs and the other underwriting expenses by the net earned premium Average reserve Av
Slide 41: Glossary
Glossary As at 30 June 2020 Term Definition Term Definition Lapsed policy A strategic initiative which involves identifying and securing new ROE Return on equity – ROE is NPAT divided by the average of the initiative data sources that enables refinanced or discharged loans to be opening and closing
Slide 42: For more information, analysts, investors and other interested parties should contact
For more information, analysts, investors and other interested parties should contact: Iwona Falkiner Head of Corporate Affairs and Investor Relations D: +61 428 059 965 The release of this announcement was authorised by the Board. Genworth Mortgage Insurance Australia Limited | Level 26, 101 Miller
Slide 43: NIA
NIA Genworth > Fysxe