Helia Group Limited · ASX:HLI
Helia — Investor Presentation (February 2023)
48 slides from Helia's investor presentation, Feb 24, 2023
Slide 1: 2022 Full Year Results Investor Presentation
2022 Full Year Results Investor Presentation 24 February 2023
Slide 2: Disclaimer
Disclaimer 2 This presentation contains general information in summary form which is current as at the date of this presentation. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Repo
Slide 3: Agenda
3 Agenda 1 Overview 2 FY22 Financial 3 Closing results comments Pages 4 – 13 Pages 14 - 30 Pages 31 - 33 4 Supplementary 5 Glossary information Pages 34 - 43 Pages 44 - 46
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director 2022 Full Year Results
Slide 5: FY22 highlights
5 FY22 highlights Strong earned Strategic Capital strength & Strong profitability premium and low momentum shareholder returns claims Underlying NPAT1 NEP Investment in Pro forma PCA coverage $288m $428m Household Capital ratio 1.93x3 Statutory NPAT Net claims incurred2 Two new exclusive Total FY22
Slide 6: Key performance measures
6 Key performance measures Statutory NPAT ($ millions) Underlying NPAT ($ millions) 288.4 192.8 186.8 237.8 120.1 97.0 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 (107.6) (104.3) Underlying diluted EPS (cps) Underlying ROE (%) 18.7 16.3 75.4 186.8 192.8 57.6 6.0 23.1 97.0 FY19 FY20 FY21 FY22 FY19 FY20 F
Slide 7: Key performance measures
7 Key performance measures Net earned premium ($ millions) Loss ratio (%) 427.7 92.9 370.5 298.2 312.0 50.6 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 (2.2) (8.1) PCA coverage ratio (x) Capital management ($ millions) 368.6 2.22 322.1 2.03 1.91 1.931 1.65 120.9 FY19 FY20 FY21 FY22 Ordinary Special Buy-
Slide 8: Economic environment changing
8 Economic environment changing Interest rates rising Dwelling values declining Labor force resilient Average variable rates approaching previous 2022 National Home Dwelling values down 5.3% with 3.5% unemployment rate as at 31 December 2022, lowest combined capitals and regionals -8.6% and -6.6% si
Slide 9: Residential mortgage market growth has slowed
9 Residential mortgage market growth has slowed Industry new housing loan commitments ($ billions) 1 HLVR ADI new housing loans funded ($ billions) 2 37 8 120 32 100 7 27 80 6 22 60 17 5 40 12 4 7 20 2 3 0 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H2
Slide 10: Mortgage refinancing driving higher NEP due to cancellations
10 Mortgage refinancing driving higher NEP due to cancellations External refinancing, seasonally adjusted ($ billions) Projected expiration of fixed-rate loans (%) 20 20 18 16 14 15 12 10 10 8 6 5 4 2 0 0 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Source: A
Slide 11: Despite recent falls in dwelling values, portfolio LVRs remain good
11 Despite recent falls in dwelling values, portfolio LVRs remain good Effective LVR by book year1 % policies in negative equity2 100% 5% 90% 80% 4% 70% 60% 3% 50% 40% 2% 30% 20% 1% 10% 0% 0% -10% 2011 & 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 P
Slide 12: Positive strategic momentum
12 Positive strategic momentum Enhance Evolve Extend Top 10 Home Lenders1 1. CBA Helia 2. WBC Peer 2 New offerings 3. NAB Peer 1 • Monthly premium 4. ANZ Captive • Family assistance 5. MQG Captive • SMSF 6. BOQ Helia2 Tic:Toc: 3.0% shareholding 7. BEN Helia2 8. ING Helia 9. SUN Peer 1 10. HSBC Peer
Slide 13: Our approach to sustainability
13 Our approach to sustainability Driving Financial Wellbeing Demonstrating Good Corporate Enhancing Climate Resilience & Housing Accessibility Citizenship • Helping to elevate the level of home • Understanding and responding to • Integrating ESG considerations into our ownership climate risk invest
Slide 14: Ongoing capital management
14 Ongoing capital management FY22 • Completed $181m on-market share buy-back (15.6% of shares on issue) • Total FY22 ordinary and special dividends of 53.cps fully franked • Pro forma PCA coverage ratio of 1.93x, above board targeted range of 1.4 – 1.6x FY23 • New $100m on-market share buy-back com
Slide 15: FY22 Financial results
FY22 Financial results Michael Cant Chief Financial Officer 2022 Full Year Results
Slide 16: FY22 Income Statement
16 FY22 Income Statement Income Statement FY21 v ($ millions) 1H21 2H21 FY21 1H22 2H22 FY22 FY22 (%) Gross written premium 289.7 259.9 549.6 188.6 131.3 319.9 (41.8%) FY22 commentary: Movement in unearned premium (84.6) (26.0) (110.6) 59.7 108.6 168.3 N.M.1 • Very strong underlying NPAT, with statut
Slide 17: GWP down reflecting industry, but NEP up due to cancellations
17 GWP down reflecting industry, but NEP up due to cancellations New Insurance Written ($ billions) FY22 commentary: 0.0 0.1 • NIW fell as new industry loan commitments fell, a lower proportion of >80% LVR loans were written, and impact of expanded Federal Government First 0.0 Home Guarantee Scheme
Slide 18: Claims paid remain very low
18 Claims paid remain very low Mortgages in possession and paid claims (number of) FY22 commentary: 800 691 • Mortgages in possession (MIP) increased but remain low relative to history, 700 600 577 563 benefiting from property sales prior to MIP without a claim 500 • The number of paid claims fell a
Slide 19: Negative claims incurred driven by low delinquencies
19 Negative claims incurred driven by low delinquencies Delinquencies (number of) FY22 commentary: 8,000 7,614 6,964 • Low delinquency experience due to strong employment and savings buffers 7,000 6,853 5,826 for borrowers, with interest rate rises yet to have a major impact 6,000 4,988 5,228 5,000
Slide 20: Bond prices stabilising in 2H22 with higher reinvestment yields
20 Bond prices stabilising in 2H22 with higher reinvestment yields Annual return on total investments 5% FY22 commentary: 4% • Investment income negative due to rising bond rates causing mark to market 3% losses 2% • Net interest and dividend income rose as the portfolio running yield increased to 4
Slide 21: FY22 impact of interest rate changes
21 FY22 impact of interest rate changes Government bond rates (%) Impact of investment movements on FY22 (pre-tax) 1 4.5 Impact on profit Impact on capital ($ millions) 4.0 3.5 Equities and infrastructure 0.2 0.2 3.0 2.5 Cash and bonds (145.9) (145.9) 2.0 1.5 Liabilities - 94.0 1.0 0.5 Total (145.7)
Slide 22: Balance Sheet
22 Balance Sheet Balance Sheet as at 31 December 2022 ($ millions) 31 Dec 21 30 Jun 22 31 Dec 22 FY22 commentary: Assets Cash 76.7 19.0 23.8 • Investments fall primarily reflects unrealised Accrued investment income 16.8 21.4 21.8 investment losses, dividends and share buy-backs Investments 3,627.1
Slide 23: $3.3bn cash and investment portfolio mix largely unchanged
23 $3.3bn cash and investment portfolio mix largely unchanged Technical funds 3% Commonwealth FY22 commentary: 36% Technical funds 28% State Gov't • Average duration 3.1 years1 Corporate / Other • 100% fixed interest • Duration match with expected claims profile Fixed 100% Cash & Short Term 33% Depo
Slide 24: Outstanding claims down due to lower delinquencies
24 Outstanding claims down due to lower delinquencies Outstanding claims reserve ($millions) 1 600 540 FY22 commentary: 480 500 416 • Reserve reduction primarily driven by lower level of delinquencies 400 361 • Reserves include allowance for a further ~10% fall in house prices 300 • Average reported
Slide 25: Regulatory capital
25 Regulatory capital Regulatory capital ($ millions) 31 Dec 21 30 Jun 22 31 Dec 22 FY22 commentary: Capital base • Net assets reduction driven by dividends and on- Common equity Tier 1 capital – net assets 1,557.3 1,381.6 1,421.1 market share buy-backs Ineligible assets (APRA) (15.5) (14.5) (13.4)
Slide 26: Significant organic capital generation
26 Significant organic capital generation PCA coverage ratio walk (x) 1 0.18 0.32 0.03 2.22 0.10 0.03 2.03 0.19 0.19 0.22 1.93 0.19 0.19 0.19 0.15 0.19 0.22 0.17 0.19 0.19 0.19 0.12 0.22 0.22 0.32 0.02 1.85 Tier 1 Tier 2 1.99 1.71 Dec-21 Statutory Dividend & Assumption In-force runoff New business R
Slide 27: Reinsurance programme moving to book year coverage from 2023
27 Reinsurance programme moving to book year coverage from 2023 Reinsurance capital credit as a % of PML Book year transition1 50% 45% 40% 35% 30% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Back book Book year • Reinsurance programme drives efficient capital credit and allows f
Slide 28: Delinquencies expected to increase in 2023, portfolio well positioned
28 Delinquencies expected to increase in 2023, portfolio well positioned Insurance in-force distribution Delinquencies (number of) 80% 9,000 70% 8,000 60% 7,000 50% 6,000 40% 5,000 4,000 30% 3,000 20% 2,000 10% 1,000 0% 0 <=70.00% 70.01-80.00% 80.01-90.00% 90.01-95.00% > 95% 1H19 2H19 1H20 2H20 1H21
Slide 29: Sensitivity of losses to economic conditions
29 Sensitivity of losses to economic conditions Economic forecasts1 Financial sensitivity2,3 Cumulative net Outstanding claims + ($ millions) claims incurred premium liabilities4,5 (2023-25) Property price Mortgage rates Unemployment rates HPA +5% (35) (35) HPD of ~10% over RBA cash rate to be Incre
Slide 30: Book years since 2015 are meeting targeted returns
30 Book years since 2015 are meeting targeted returns Loss ratio to date by underwriting year Future embedded profit by book year ($ millions) 80% 350 70% 300 60% 250 200 50% 150 40% 100 30% 50 20% 0 10% -50 0% -100 2008 - 2009 2010 - 2014 2015 - 2020 2009 & Prior 2010 - 2014 2015 - 2020 2021 - 2022
Slide 31: Summary of AASB 17 impacts and timeline
31 Summary of AASB 17 impacts and timeline Balance Sheet Income Statement Regulatory Capital • Liability for Remaining Coverage (LRC) • Insurance revenue recognition includes • APRA updating regulatory capital replaces Unearned Premium Liability CSM release and is later requirements to align with AA
Slide 32: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director 2022 Full Year Results
Slide 33: Outlook and FY23 guidance
33 Outlook and FY23 guidance • GWP growth is expected to remain subdued, reflecting soft industry new loan commitments and the impact of the Federal Government First GWP & NEP Home Guarantee Scheme • NEP will be driven by previous book year GWP as well as the level of cancellations, which remain ele
Slide 34: Accelerating financial wellbeing through homeownership
34 Accelerating financial wellbeing through homeownership Australia’s leading Large and growing Positioned for Ongoing capital Delivering strong LMI provider addressable market profitable growth management TSR LMI market share1 Industry new Underlying ROE (%) ($ millions) housing loan 3 124.2% 36% 3
Slide 35: Supplementary information
Supplementary information 2022 Full Year Results
Slide 36: Australian key economic indicators
36 Australian key economic indicators Change in dwelling values 3 months 6 months 12 months Rental vacancies Dec 21 Jun 22 Dec 22 Sydney 2.6% 1.6% 1.8% Sydney (4.03%) (9.91%) (12.14%) Melbourne 3.2% 1.7% 1.7% Melbourne (2.86%) (6.48%) (8.05%) Brisbane 1.3% 0.6% 1.1% Brisbane (5.35%) (9.43%) (1.10%)
Slide 37: Residential mortgage lending market
37 Residential mortgage lending market Originations and HLVR penetration 1 Industry loan approvals: Investment vs. owner occupied ($ billions, %) Helia NIW: Investment vs. owner occupied ($ billions, %) 2 40% 37% 24% 27% 34% 25% 33% 31% 30% 30% 29% 29% 20% 19% 14% 14% 12% 14% 179.8 8.6 3.7 4.2 8.4 1
Slide 38: Insurance in-force
38 Insurance in-force As at 31 December 2021 As at 31 December 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 75.8 29 82.0 30.6 98 2011 9.2 3 84.1
Slide 39: Delinquency trends
39 Delinquency trends Delinquency roll 1H20 2H20 FY20 1H21 2H21 FY21 1H22 2H22 FY22 Opening balance 7,221 7,614 7,221 6,964 6,853 6,964 5,826 5,228 5,826 New delinquencies 4,988 4,380 9,368 4,384 3,082 7,466 3,315 2,713 6,028 Cures (3,904) (4,467) (8,371) (4,170) (3,910) (8,080) (3,706) (3,219) (6,9
Slide 40: Insurance ratio analysis
40 Insurance ratio analysis Expense ratio1 Loss ratio2 117.1% 147.9% 35.6% 36.1% 33.1% 32.6% 32.1% 67.0% 67.0% 30.4% 25.2% 49.4% 24.6% 20.5% 19.8% 21.7% 28.9% 28.9% 1H20 2H20 1H21 1H22 -15.0% -15.0% 1H20 2H20 1H21 2H21 1H22 2H22 -1.4% -1.4% -28.8% -28.8% 2H22 Expense ratio Adjusted expense ratio 2H2
Slide 41: Cash and investment portfolio
41 Cash and investment portfolio Portfolio positioned for a rising yield environment Cash and investment portfolio1 ($m) 31 Dec 21 % 30 Jun 22 % 31 Dec 22 % Commonwealth2 532.8 34.5% 480.2 36.8% 476.1 35.8% State Gov't 514.6 33.4% 460.7 35.3% 436.0 32.8% Corporate / Other 430.2 27.9% 348.9 26.7% 379
Slide 42: Reinsurance programme from January 2023
42 Reinsurance programme from 1 January 2023 2023 book year coverage by layer (% of PML) 1 Back book coverage by layer 140% 3,000 120% % of Probable Maximum Loss (PML) 2,500 APRA 1 in 200 Net Paid Claims ($ millions) 100% 225 Consortium 6 3rd layer Retained 2,000 Retained 75 2nd layer 150 Consortium
Slide 43: Reconciliations
43 Reconciliations Statutory NPAT to underlying NPAT Total equity and underlying equity ($ millions) 1H21 2H21 FY21 1H22 2H22 FY22 ($ millions), as at 1H21 2H21 FY21 1H22 2H22 FY22 Statutory net profit after tax 59.4 133.5 192.8 18.9 167.9 186.8 Total equity 1,446.7 1,557.3 1,557.3 1,381.6 1,421.1 1
Slide 44: History of strong Total Shareholder Return (TSR) delivery
44 History of strong Total Shareholder Return (TSR) delivery 1 TSR May 2014 to 22 February 2023 379.5% 124.2% 91.8% 72.7% 56.1% 55.9% 40.6% 23.9% 20.8% 7.6% Bank HLI Bank Insurer Insurer Bank Bank Insurer Bank Bank Bank (1.3%) 1. FactSet. 2022 Full Year Results
Slide 45: Glossary
Glossary 2022 Full Year Results
Slide 46: Glossary
46 Glossary As at 31 December 2022 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a delinquent state (3+ months of missed IFRS International Financial Reporting Standards payments or Mortgage In Possession) Insurance in-force The original principa
Slide 47: Glossary
47 Glossary As at 31 December 2022 Term Definition Term Definition Underlying NPAT Underlying NPAT excludes the after-tax impact of unrealised gains/(losses) on the investment portfolio, RBA Reserve Bank of Australia the impact of foreign exchange rates on Helia’s investment portfolio and separation
Slide 48: Investor materials can be found at: Helia.com.au
Investor materials can be found at: Helia.com.au For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Head of Investor Relations D: +61 499 088 640 E: investorrelations@helia.com.au The release of this announcement was authorised by the Board. 24 Feb