Helia Group Limited · ASX:HLI
Helia — Investor Presentation (August 2024)
47 slides from Helia's investor presentation, Aug 20, 2024
Slide 1: 2024 Half Year Results Investor Presentation
2024 Half Year Results Investor Presentation 20 August 2024
Slide 2: Disclaimer
Disclaimer 2 This presentation contains general information in summary form which is current as at 30 June 2024. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (
Slide 3: Agenda
3 Agenda 1. Overview 4 2. 1H24 Financial results 14 3. Closing comments 31 4. Supplementary information 35 5. Glossary 44
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director 2024 Half Year Results
Slide 5: 1H24 highlights
5 1H24 highlights Strong financial Capital Key financial drivers Strategic progress results management Underlying NPAT1 Insurance revenue Top 10 lender PCA coverage $107m $195m renewed ratio 2.08x Statutory NPAT Total claims incurred2 MFAA award for Best 1H24 dividend of Support – Large $97m ($10m)
Slide 6: Key performance measures
6 Key performance measures Statutory NPAT ($ millions) Underlying diluted EPS (cps) Insurance revenue ($ millions) PCA coverage ratio1 216.2 219.8 2.10 2.08 194.8 1.96 147.5 40.6 35.8 97.0 26.0 57.7 1H22 1H23 1H24 1H22 1H23 1H24 1H22 1H23 1H24 1H22 1H23 1H24 Underlying NPAT ($ millions) Annualised u
Slide 7: Economic environment
7 Economic environment Labor force resilient Dwelling values rising Interest rates remain steady 4.1% unemployment rate remains low and participation 1H24 national home dwelling values up 3.7% RBA cash rate target unchanged at 4.35% rate close to historical highs Qld and WA dwelling values up 7.0% a
Slide 8: New loans recovering but high LVR share remains subdued
8 New loans recovering but high LVR share remains subdued Industry housing new loan commitments ($ billions)1 High LVR residential lending ($ billions) 70 50% 37 60 32 40% 50 27 40 30% 22 30 20% 17 20 12 10% 10 7 0 0% 2 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Sou
Slide 9: Government schemes and lender self-insurance impacting GWP
9 Government schemes and lender self-insurance impacting GWP Industry quarterly GWP ($ millions)1 Government Guarantees allocated and take up2 350 50,000 300 40,000 250 30,000 200 150 20,000 65% 100 10,000 67% 50 85% 68% 0 0 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-2
Slide 10: Industry delinquencies slightly higher but remain low
10 Industry delinquencies slightly higher but remain low Industry 90+ day arrears Helia delinquencies (number of) 9,000 1.0% 8,000 0.8% 7,000 6,000 0.6% 5,000 0.4% 4,000 3,000 0.2% 2,000 0.0% 1,000 Mar-20 Dec-20 Mar-21 Dec-21 Mar-22 Dec-22 Mar-23 Dec-23 Mar-24 Jun-19 Sep-19 Jun-20 Jun-21 Jun-22 Jun-
Slide 11: Capital management
11 Capital management Dividend per share (cps) Principles 40 • Deploy capital at attractive returns for shareholders 30 30 • Return to and then operate within Board target range of 1.40 – 1.60x PCA 27 over time 20 • Target stable fully franked ordinary dividend 10 14 14 15 15 • Declare special divid
Slide 12: Progress on sustainability commitments
12 Progress on sustainability commitments Driving financial wellbeing Demonstrating good corporate Enhancing climate resilience & housing accessibility citizenship • 12,673 families helped with home • Maintained net zero for Scope 1 & 2 • WGEA Employer of Choice for Gender ownership emissions Equali
Slide 13: Helia strategy
13 Helia strategy Our purpose Accelerate financial wellbeing through home ownership, now and for the future Our vision Be the unparalleled leader in LMI Objectives and 2024 priorities Grow and defend our LMI Grow the market for LMI Drive operational agility and Deliver results through market share r
Slide 14: 1H24 Financial results
1H24 Financial results Michael Cant Chief Financial Officer 2024 Half Year Results
Slide 15: Income Statement
15 Income Statement 1H24 v 1H24 commentary: ($ millions) 1H23 2H23 FY23 1H24 1H23 (%) • Insurance revenue down pcp due to lower in-force volumes, Insurance revenue 219.8 207.4 427.3 194.8 (11.4) and experience variations on top-up premium credits Insurance service expense (5.0) (22.5) (27.5) (41.7)
Slide 16: Insurance revenue
16 Insurance revenue 1H24 commentary: ($ millions) 1H23 2H23 FY23 1H24 • Insurance revenue down 11% on pcp Expected insurance service expenses incurred 76.0 88.1 164.1 75.4 • Expected incurred and risk adjustment reduced modestly on pcp due to lower in-force book Risk adjustment recognised in revenu
Slide 17: Gross written premium (GWP)
17 Gross written premium (GWP) GWP ($ millions) GWP walk ($ millions) 322.4 289.7 259.9 (1.5) 2.3 1.5 249.1 239.3 (13.0) 184.1 188.6 131.4 96.6 85.9 96.6 88.6 85.9 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 2H23 1H24 1H23 Mix Volume Rate Bulk 1H24 1H24 commentary: • GWP down 11% on pcp, and simila
Slide 18: Insurance service expense
18 Insurance service expense ($ millions) 1H23 2H23 FY23 1H24 Incurred claims from current period 44.7 19.9 64.6 35.7 Changes to liabilities for prior incurred claims (85.6) (46.2) (131.8) (45.6) Total incurred claims (40.9) (26.3) (67.2) (9.9) Insurance expenses 22.2 27.0 49.2 27.2 Amortisation of
Slide 19: Claims paid and delinquencies
19 Claims paid and delinquencies Mortgages in possession and paid claims (number of) 1H24 commentary: 800 700 • Number of paid claims down 25% and number of MIPs down 18% on pcp 600 500 • New deliquencies up 23% due to higher rates and cost-of-living pressures 400 300 • Delinquency rate up 11 bps to
Slide 20: Incurred claims
20 Incurred claims ($ millions) 1H23 2H23 FY23 1H24 ($ millions) 1H23 2H23 FY23 1H24 Incurred claims for current period (A) 44.7 19.9 64.6 35.7 Opening LIC balance 386.7 336.8 386.7 307.9 Sold no claim / cancellations (38.7) (32.9) (71.6) (30.6) Incurred claims from current period 44.7 19.9 64.6 35.
Slide 21: Insurance service result
21 Insurance service result ($ millions) 1H23 2H23 FY23 1H24 1H24 commentary: Contractual service margin recognised 73.1 65.7 138.8 74.4 • Expected insurance service result up due to lower Risk adjustment recognised in revenue 23.9 25.2 49.1 20.0 reinsurance expense Net expense from reinsurance cont
Slide 22: Net investment revenue
22 Net investment revenue Annualised return on total investments 5% 1H24 commentary: 4% • Interest and dividend / distribution revenue up due to maturing bonds being 3% reinvested at higher average rates 2% • Unrealised losses reflect mark to market movements due to rising bond 1% rates (up ~40 bps)
Slide 23: Net insurance finance expense
23 Net insurance finance expense ($ millions) 1H23 2H23 FY23 1H24 Interest accreted to liabilities (28.5) (32.7) (61.2) (31.9) Changes in interest rates (0.3) (28.3) (28.7) 7.2 Insurance finance income expense (28.8) (61.1) (89.9) (24.7) Reinsurance finance income 0.3 0.4 0.6 0.1 Net insurance and r
Slide 24: Balance Sheet
24 Balance Sheet ($ millions) 30 Jun 23 31 Dec 23 30 Jun 24 1H24 commentary: Assets • Cash and financial assets down hoh due to payment of Cash 29.0 57.0 35.0 dividends and on-market share buy-back Accrued investment income 23.9 26.7 32.6 • New tax legislation has reduced DTA and other payables, Fin
Slide 25: Cash and financial assets
25 Cash and financial assets Technical funds ($ millions) 30 Jun 23 % 31 Dec 23 % 30 Jun 24 % Commonwealth1 377.3 31.4 360.8 32.1 318.6 31.3 • Average duration 3.8 years2 State Gov't 427.1 35.5 404.4 36.0 349.9 34.4 • 100% fixed interest and cash Corporate / other 397.3 33.0 356.7 31.8 348.6 34.3 Ca
Slide 26: Insurance and reinsurance contract liabilities
26 Insurance and reinsurance contract liabilities 1H24 commentary: ($ millions unless otherwise stated) 30 Jun 23 31 Dec 23 30 Jun 24 • LRC fell due to lower in-force volumes PV future cashflows 675.3 608.7 564.1 • CSM accounts for a large proportion of LRC and represents expected future profits Ris
Slide 27: Liability for incurred claims (LIC)
27 Liability for incurred claims (LIC) Liability for incurred claims ($ millions) Reported delinquencies 450 $40,000 7,000 400 $35,000 6,000 350 $30,000 5,000 300 $25,000 250 4,000 $20,000 200 3,000 $15,000 150 2,000 100 $10,000 50 $5,000 1,000 - $- 0 1H22 2H22 1H23 2H23 1H24 1H22 2H22 1H23 2H23 1H2
Slide 28: Contractual service margin (CSM)
28 Contractual service margin (CSM) CSM walk ($ millions) 1H24 commentary: 14.8 19.8 6.7 (74.4) • CSM balance down as CSM recognised exceeded the CSM added by new business and positive changes in estimates • $141m of CSM expected to emerge over the next 12 months, excluding new business 669.2 636.2
Slide 29: Regulatory capital
29 Regulatory capital ($ millions) 30 Jun 23 31 Dec 23 30 Jun 24 1H24 commentary: Capital base • PML reduced due to lower new business, high cancellations Net assets 1,112.5 1,141.4 1,061.4 and portfolio seasoning Regulatory adjustments for goodwill/intangibles (12.3) (11.4) (10.7) • Despite lower r
Slide 30: Capital walk
30 Capital walk PCA coverage ratio walk (x)1 0.15 0.03 2.08 0.10 0.19 1.91 1.86 0.23 (0.05) 0.23 0.20 (0.11) (0.07) (0.18) 1.85 1.66 1.68 Dec-23 Statutory NPAT Dividend & buy- In-force runoff New business strain Reinsurance (% of Other Jun-24 Dividend Buy-back Pro forma back PML) Tier 1 Tier 2 1H24
Slide 31: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director 2024 Half Year Results
Slide 32: Outlook and FY24 guidance
32 Outlook and FY24 guidance Insurance • FY24 insurance revenue guidance expected to be in the range of $375-415m revenue • Over the course of 2H24 total incurred claims are expected to increase, but remain well Total incurred below Helia’s expectations of a through the cycle total incurred claims r
Slide 33: Accelerating financial wellbeing through home ownership
33 Accelerating financial wellbeing through home ownership Returns in excess of Delivering strong Leading LMI insurer1 Cyclical market2 Capital management cost of capital TSR3 70 HLI 152.0% ($ billions) Annualised underlying ROE ($ millions) 60 (%) Insurer 49.7% 225.7 14 23.7 Bank 48.5% 50 13 191.2
Slide 34: Q&A
Q&A 2024 Half Year Results
Slide 35: Supplementary information
Supplementary information 2024 Half Year Results
Slide 36: Residential mortgage lending market
36 Residential mortgage lending market Originations and HLVR penetration1 Industry new loans funded: Investment vs. owner occupied ($ billions, %) Helia NIW: Investment vs. owner occupied ($ billions, %) 2 30% 30% 32% 33% 29% 29% 45 32% 40 24% 20% 179.8 35 14% 12% 14% 184.0 185.0 30 3.7 4.2 128.8 25
Slide 37: Insurance in-force
37 Insurance in-force As at 31 Dec 2023 As at 30 June 2024 Original Effective Change in Original Effective Change in Book year $ billions % Book year $ billions % LVR LVR house price % LVR LVR house price % 2014 & prior 89.4 37.9% 84.2% 27.2% 122.0% 2014 & prior 86.3 38.0% 84.2% 25.3% 132.9% 2015 11
Slide 38: Delinquency trends
38 Delinquency trends Number of delinquencies 1H23 2H23 FY23 1H24 Opening balance 4,569 4,616 4,569 4,532 New delinquencies 3,030 3,121 6,151 3,737 Cures (2,861) (3,087) (5,948) (2,948) Paid claims (122) (118) (240) (92) Closing delinquencies 4,616 4,532 4,532 5,229 Delinquency rate1 0.51% 0.52% 0.6
Slide 39: Claims sensitivity to economic conditions
39 Claims sensitivity to economic conditions Economic assumptions as at 30 June 20241 Claims sensitivity2 LRC ($ millions) LIC Excluding CSM3 Property price Mortgage rates Unemployment rates Upside economics Unemployment -1% (20) (5) Housing market growth RBA cash rate to keep at Gradual increase to
Slide 40: Reinsurance programme from June 2024
40 Reinsurance programme from 30 June 2024 Illustrative book year coverage by layer (% of PML) 1 Back book coverage by layer 2,000 140% 1,800 120% APRA 1 in 200 Net Paid Claims ($ millions) 1,600 % of Probable Maximum Loss (PML) 75 100% 1,400 75 3rd layer 75 Retained Consortium 6 75 Retained 1,200 8
Slide 41: Reconciliations
41 Reconciliations Expenses Statutory NPAT to underlying NPAT1 ($ millions) 1H23 2H23 FY23 1H24 ($ millions) 1H23 2H23 FY23 1H24 Expenditure incurred 59.4 69.7 129.1 63.1 Statutory NPAT 147.5 127.6 275.1 97.0 Less investment expenses (1.3) (1.6) (2.9) (1.2) Unrealised (gains) / losses on shareholder
Slide 42: Australian key economic indicators
42 Australian key economic indicators Change in dwelling values (%) 3 months 6 months 12 months Rental vacancies (%) Jun 23 Dec 23 Jun 24 Sydney 1.1% 2.6% 6.3% Sydney 1.7 1.7 1.7 Melbourne 1.3 1.5 1.5 Melbourne (0.6%) (0.4%) 1.3% Brisbane 1.0 1.2 1.1 Brisbane 3.7% 7.1% 15.8% Perth 0.6 0.5 0.8 Perth
Slide 43: History of strong Total Shareholder Return (TSR) delivery
43 History of strong Total Shareholder Return (TSR) delivery TSR to 16 August 2024 43.6% 1YR 40.6% 38.5% 34.4% 31.5% 29.3% 26.3% 24.8% 23.6% 12.7% 12.7% Bank Bank Bank Bank Insurer Insurer Bank Bank HLI Insurer Bank 3YR 152.0% 49.7% 48.5% 46.9% 45.8% 42.4% 40.8% 40.1% 31.2% 20.5% HLI Insurer Bank Ba
Slide 44: Glossary
Glossary 2024 Half Year Results
Slide 45: Glossary
45 Glossary As at 30 June 2024 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a delinquent state Hoh Half-on-half. API Application programming interface HPA / HPD / HPI House price appreciation / depreciation / index Incurred but not reported - De
Slide 46: Glossary
46 Glossary As at 30 June 2024 Term Definition Term Definition Prescribed capital amount is an APRA formula (set out in Prudential Standard GPS 110) designed to PCA Underlying diluted earnings per Underlying NPAT divided by the weighted average number of shares outstanding for the period, adjusted e
Slide 47: 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. 20 Aug