Helia Group Limited · ASX:HLI
Helia — Investor Presentation (August 2022)
45 slides from Helia's investor presentation, Aug 3, 2022
Slide 1: 2022 Half Year Results Investor Presentation
2022 Half Year Results Investor Presentation 3 August 2022
Slide 2: Disclaimer
Disclaimer This presentation contains general information in summary form which is current as at 30 June 2022. 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: Agenda
Agenda 01 Overview 02 1H22 Financial 03 Closing result comments Pauline Blight-Johnston Michael Cant Pauline Blight-Johnston CEO & MD CFO CEO & MD Pages 4 – 12 Pages 13 – 27 Pages 28 – 32 04 Supplementary 05 Glossary information Pages 33 – 41 Pages 42 – 44
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director
Slide 5: 1H22 highlights
1H22 highlights Strong underlying Strong earned Well positioned for Strategic momentum Capital strength & profit premium and low changing economic shareholder returns claims environment 1H22 Underlying NPAT 1H22 NEP Underwriting settings 1H22 wins: Pro-forma PCA ratio tightened BEN $134m $217m BOQ/
Slide 6: Key performance measures
Key performance measures Continued business momentum Net earned premium ($millions) Loss Ratio 216.5 67.0% 170.9 54.1% 147.6 150.8 28.9% (1.4%) 1H19 1H20 1H21 1H22 1H19 1H20 1H21 1H22 Statutory NPAT ($millions) Underlying NPAT ($millions) 88.1 134.3 59.4 76.4 18.9 43.1 1H19 1H20 1H21 1H22 1H19 1H20
Slide 7: Key performance measures cont.
Key performance measures cont. Continued business momentum Underlying Diluted EPS (cps) Underlying Annualised ROE 33.6 17.5% 11.0% 18.5 10.0 5.1% 1H19 1H20 1H21 1H22 1H19 1H20 1H21 1H22 (20.7) (11.9%) PCA Coverage Ratio Capital Management ($millions) 191.4 142.9 2.08x 2.11x 1.77x 1.74x 20.6 1H19 1H2
Slide 8: Economic environment
Economic environment Interest rates rising Dwelling values moderating Labor force resilient Rising rates highlight importance of YTD dwelling values +2.2% nationally. Unemployment rate of 3.5% serviceability buffers. Modest declines in Sydney (-2.5%) and lowest since 1974 with record Melbourne (-1.7
Slide 9: Historical dwelling price experience
Historical dwelling price experience Periods of depreciation commonly followed by strong recoveries March 1960 – June 2022 1,000 40% Change in HPI (YoY) 900 35% HPI‐Index 800 30% 700 25% 600 20% 500 15% 400 10% 300 5% 200 0% 100 ‐5% 0 ‐10% Mar‐60 Jun‐61 Sep‐62 Dec‐63 Mar‐65 Jun‐66 Sep‐67 Dec‐68 Mar‐
Slide 10: Well positioned for a changing economy
Well positioned for a changing economy Original and Effective LVRs Underwriting criteria progressively tightened 100.0% 1.5% of the portfolio has an effective LVR above 90% 80.0% Sizeable repayment buffers for most households 60.0% Very low delinquencies – total and new. 40.0% 20.0% 0.0% <= 70 (70;8
Slide 11: Strategy is delivering
Strategy is delivering 1H22 Achievements Top 10 Home Lenders1 Exclusive LMI provider to BEN and BOQ (including ME Bank) CBA Genworth2 1 Australian Broker Magazine 2022 5-Star Mortgage Innovator award WBC Peer 2 2 OSQO expect to have product in market within 12 months NAB Peer 1 3 Continued developme
Slide 12: Continued responsible capital management
Continued responsible capital management FY22 YTD Initiatives Completed remaining $100m on-market share buy-back Declared interim ordinary dividend of 12 cents per share fully franked New $100m on-market share buy-back commencing August 2022 Pro-forma PCA ratio post buy-back: 1.94x Future Capital Ma
Slide 13: 1H22 Financial result
1H22 Financial result Michael Cant Chief Financial Officer
Slide 14: 1H22 income statement
1H22 income statement ($ millions) 1H21 2H21 FY21 1H22 1H22 v 1H21 (%) 1H22 commentary: Gross written premium 289.7 259.9 549.6 188.6 (34.9%) GWP fall primarily relates to lower Movement in unearned premium (84.6) (26.0) (110.6) 59.7 N.M.1 industry volumes of new high LVR Gross earned premium 205.1
Slide 15: GWP falling but NEP growth
GWP falling but NEP growth New Insurance Written ($billions) 1H22 commentary: NIW fall primarily relates to lower industry new loan 0.0 0.1 commitments for high LVR lending 15.4 14.5 0.0 GWP fall driven by lower NIW and mix (less >90% LVR) 11.1 NEP up due to past GWP growth and high cancellations Ca
Slide 16: Claims paid very low
Claims paid very low Mortgages in possession and paid claims 1H22 commentary: 800 Modest increases in MIP (but still very low) 700 600 Number of paid claims has remained at a low level 500 number Average size of paid claims well below historical levels 400 reflecting HPA impact. 300 200 100 - 1H19 2
Slide 17: Net claims incurred very low
Net claims incurred very low Delinquencies 1H22 commentary: 9,000 Closing delinquencies lowest since 2014 and new 8,000 delinquencies also very low 7,000 6,000 Ageing very light and cures steady, driven by prior HPA, number 5,000 strong labour market and healthy borrower finances 4,000 Other adjustm
Slide 18: Unrealised investment losses, increasing yields
Unrealised investment losses, increasing yields Annual return on total investments 1H22 commentary: 3.5% Unrealised losses due to mark to market impact of 3.0% rising bond yields 2.5% 2.0% Net interest and dividend income yield steady but 1.5% benefit of higher reinvestment rates expected in 2H22 1.
Slide 19: Big rise in interest rates led to investment losses
Big rise in interest rates led to investment losses Matching provides offset in economic value of liabilities Impact on 1H22 (pre-tax) 1H22 commentary: Technical liabilities are closely matched by fixed interest 1H22 assets ($ millions) Impact on Impact on profit capital Accounting treatment does no
Slide 20: Balance sheet
Balance sheet Balance sheet as at 30 June 2022 1H22 commentary: ($ millions) 30 Jun 21 31 Dec 21 30 Jun 22 Assets Cash down mainly due to timing of tax Cash 89.6 76.7 19.0 Investments fall primarily reflects Accrued investment income 22.2 16.8 21.4 unrealised investment losses, Investments 3,493.3 3
Slide 21: Investment portfolio
Investment portfolio Technical funds (average duration 3.3 years)1 1H22 commentary: Commonwealth Technical funds 1% State Gov't 27% Corporate / Other 100% invested in fixed interest Cash & Short Term Deposits Duration matched with expected 37% claims profile 100% Fixed 35% Shareholder funds (average
Slide 22: Outstanding claims
Outstanding claims Outstanding Claims Reserve ($millions) 1H22 commentary: 540 480 Outstanding claims down due to lower delinquencies 464 361 199 IBNR and redelinquency reserves similar to prior periods 9 190 181 73 57 Average reported delinquency reserve broadly stable 62 64 285 Reserves set using
Slide 23: Regulatory capital
Regulatory capital Regulatory capital 1H22 commentary: ($ millions) 30 Jun 21 31 Dec 21 30 Jun 22 Net assets reduction driven by 2H21 Capital base dividends and share buy-back Common equity Tier 1 capital – net assets 1,446.7 1,557.3 1,381.6 Probable maximum loss lower due to Ineligible assets (APRA
Slide 24: Movement in capital
Movement in capital Pro-forma PCA ratio (times)1 1H22 commentary: 2.0 In-force run off continues to exceed new business strain 1.8 1.6 Pro-forma PCA (1.94 times) remains above board 1.4 targeted range of 1.4 to 1.6 times 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1. Board target range of 1.40-1.60x PCA. PCA ratio
Slide 25: Sensitivity of losses to economic conditions
Sensitivity of losses to economic conditions Economic forecasts1 Losses will vary based on economic environment and other factors Base scenario incorporates property Property Price Mortgage Rates Unemployment Rates price, mortgage rates and unemployment forecasts as outlined HPD of RBA cash rate Inc
Slide 26: Historical GWP drives future NEP
Historical GWP drives future NEP Unearned premium (UEP) ($billions) 1H22 commentary: 1.6 1.4 Earnings curve sees GWP recognized over a 12-year period, with the 1.2 majority recognized over the first 4 1.0 years 0.8 $b 2019 and subsequent book years 0.6 account for 82% of unearned premium 0.4 1H22 re
Slide 27: Recent book years showing good profitability
Recent book years showing good profitability Loss ratio to date by underwriting year1 1H22 commentary: 80% 70% 2008-09 cohorts impacted by GFC, 60% after which there was an industry reset 50% of pricing and underwriting standards 40% 30% 2010-14 cohorts significantly impacted 20% by mining claims 10
Slide 28: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director
Slide 29: 2022 Outlook – Positioned for less benign environment
2022 Outlook – Positioned for less benign environment Changing Dwelling values economic Cash rate rising Unemployment low moderating environment GWP slowing but NEP remaining high FY22 NEP guidance of $375m to $435m Claims low in 1H22 but expected to increase in 2H22 Implications FY22 net incurred c
Slide 30: Medium term outlook – Delivering profitable growth
Medium term outlook – Delivering profitable growth Top line GWP linked to new residential loan commitments FY20 and FY21 GWP to underpin NEP Customer acquisition and expansion opportunities Claims Subject to economic cycles Underwriting criteria progressively tightened Back book well positioned with
Slide 31: History of strong Total Shareholder Return delivery
History of strong Total Shareholder Return delivery Total Shareholder Return May 2014 to 29 July 20221 280% 150% 140% 130% 110% 90% 69% 70% 50% 36% 33% 31% 30% 24% 20% 10% 5% 5% 0% -10% Bank GMA Bank Bank Bank Insurer Insurer Insurer Bank Bank Bank
Slide 32: Accelerating financial wellbeing through homeownership
Accelerating financial wellbeing through homeownership Australia’s leading LMI provider Large and growing addressable market Positioned for profitable growth Ongoing capital management Delivering strong TSR 32 2022 Half Year Results – produced by Genworth
Slide 33: Supplementary information
Supplementary information xy Genworth =, =.
Slide 34: Australian key economic indicators
Australian key economic indicators Rental vacancies Jun 21 Dec 21 Jun 22 Change in dwelling values 3 months 6 months 12 months Sydney 2.8% 2.6% 1.6% Sydney (2.8)% (2.5)% 5.9% Melbourne 3.5% 3.2% 1.7% Melbourne (1.8)% (1.7)% 3.1% Brisbane 1.3% 1.3% 0.6% Brisbane 2.7% 9.2% 25.6% Perth 0.9% 0.6% 0.6% A
Slide 35: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 Industry loan approvals: Investment vs. owner occupied ($billions, %) Genworth NIW: Investment vs. owner occupied ($billions, %)2 800.0 40% 37% 24% 27% 25% 34% 33% 40% 30% 31% 19% 19% 700.0 30% 29% 29% 14% 14% 12% 14% 30% 600.0 8
Slide 36: Insurance in-force
Insurance in-force As at 31 December 2021 As at 30 June 2022 Original Effective Change in Original Effective Change in Book year $ billions % Book year $ billions % LVR LVR house price % LVR LVR house price % 2010 & Prior 80.1 28% 80.1 28.9 113% 2011 & Prior 81.0 30% 81.2 29.2 111% 2011 9.2 3% 84.1
Slide 37: Delinquency trends
Delinquency trends Delinquency roll 1H19 2H19 FY19 1H20 2H20 FY20 1H21 2H21 FY21 1H22 Opening balance 7,145 7,891 7,145 7,221 7,614 7,221 6,964 6,853 6,964 5,826 New delinquencies 5,515 4,899 10,414 4,988 4,380 9,368 4,384 3,082 7,466 3,315 Cures (4,154) (4,832) (8,986) (3,904) (4,467) (8,371) (4,17
Slide 38: Insurance ratio analysis
Insurance ratio analysis Expense ratio1 Loss ratio2 147.9% 117.1% 34.7% 34.7% 35.9% 35.9% 35.6% 36.1% 33.1% 32.6% 30.4% 67.0% 67.0% 54.1% 54.1% 49.4% 24.6% 47.1% 47.1% 20.5% 21.7% 19.8% 28.9% 28.9% (1.4%) (1.4%) 1H19 2H19 1H20 2H20 1H21 2H21 1H22 (28.8%) (28.8%) 1H19 2H19 1H20 2H20 1H21 2H21 1H22 ex
Slide 39: Cash and investment portfolio
Cash and investment portfolio Portfolio positioned for a rising yield environment Cash and investment portfolio1 ($m) 30 Jun 21 31 Dec 21 30 Jun 22 Commonwealth2 584.9 35.3% 532.8 34.5% 480.2 36.8% State Gov't 589.9 35.6% 514.6 33.4% 460.7 35.3% Corporate / Other 459.4 27.7% 430.2 27.9% 348.9 26.7%
Slide 40: Reinsurance programme
Reinsurance programme 3,000 APRA 1 in 200 Net Paid Claims ($ millions) 2,500 Designed to drive efficient economic 300 capital credit, whilst also allowing for 2,000 100 200 Retention risk management in severe stress 200 Consortium 6 scenarios only Consortium 5 1,500 Consortium 4 Structured on a paid
Slide 41: Reconciliations
Reconciliations Statutory NPAT to Underlying NPAT Total equity and underlying equity ($ millions) 1H21 2H21 FY21 1H22 ($ millions), as at 1H21 2H21 FY21 1H22 Statutory net profit / (loss) after tax 59.4 133.5 192.8 18.9 Total Equity 1,446.7 1,557.3 1,557.3 1,381.6 Unrealised (gains) / losses and FX
Slide 42: Glossary
Glossary As at 30 June 2022 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a Delinquency Any insured loan which is reported as three or more months of delinquent state (3+ months of missed payments or Mortgage In repayments in arrears Possession)
Slide 43: Glossary
Glossary As at 30 June 2022 Term Definition Term Definition Level 2 A term defined by APRA under GPS 001 referring to a consolidated RBA Reserve Bank of Australia insurance group Regulatory capital The regulatory capital base is the sum of Tier 1 Capital and Tier 2 LMI Lenders mortgage insurance bas
Slide 44: Glossary
Glossary As at 30 June 2022 Term Definition Underlying diluted Underlying NPAT divided by the weighted average number of shares earnings per share outstanding for the period, adjusted for the effects of all dilutive potential ordinary shares Underlying equity Underlying Equity is defined as total eq
Slide 45: For more information, analysts, investors and other interested parties should contact:
For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Head of Investor Relations D: +61 499 088 640 The release of this announcement was authorised by the Board.