Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Investor Day (December 2010)
53 slides from Sagen MI Canada's investor day presentation, Dec 1, 2010
Slide 1: Genworth MI Canada Inc. Investor Day
Genworth MI Canada Inc. Investor Day \, 22a,
Slide 2: Forward-looking statements and non-GAAP measures
This presentation includes certain forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the Company's future operating and financial results, expectations regarding premiums written, capital expenditure plans, dividend policy and th
Slide 3: Welcome and agenda
Welcome Strategic Review and Mortgage Insurance Overview Enterprise Risk Management, Housing Outlook, Impact to Insurance Portfolio Loss Mitigation Growth Organic Growth Levers for Profitability Outlook QandA Lunch to be served at 11:45am Genworth MI Canadalnc. Samantha Cheung, ve investor Relations
Slide 4: Strategic Review
Strategic Review BRIAN HURLEY CHAIRMAN AND CEO Genworth MI Canadalnc. 4 Investor Day December 1, 2010
Slide 5: Canada's leading private residential mortgage insurer
* Canada’s leading private residential mortgage insurer ¢ Highly attractive mortgage market * Strong lender relationships * Consistent profitable growth ¢ Experienced leadership team ¢ Well positioned to deliver Genworth MI Canadalnc. 5 Investor Day December 1, 2010
Slide 6: How mortgage insurance works: lender buys insurance on loan
¢ Lender buys mortgage insurance on $270,000 loan ¢ Borrower reimburses lender for insurance ¢ We insure 100% of the mortgage loan ¢ Upfront premium recognized into revenues over time House price S 300,000 Down payment 10% S 30,000 90% LTV Mortgage loan S 270,000 Premium paid (2.00%) S$ 5,400 Totali
Slide 7: Claim severity depends on home price
Upon default, the severity of the claim depends on home price | Unpaid loan amount S 240,000 Legal, real estate, other S 10,000 Less: Sale price of house S (200,000) Potential Net Claim S 50,000 We have recourse to the borrower for the amount of the claim paid Genworth MI Canadalnc.
Slide 8: Strong credit culture
¢ Strong credit culture * Interestis not tax deductible ¢ Prime borrower market ¢ Mostly bank originated mortgages ¢ Upfront premium ¢ Active regulatory oversight ¢ Borrower recourse Genworth MI Canadalnc. 8 Investor Day Decembe'
Slide 9: Mortgage Delinquency Rate
Mortgage Delinquency Rate* 6% 5% 4% 3% 2% 1% — 0% - 1994 1996 1998 2000 2002 2004 2006 2008 Q2 2010 e=eCanada US iation, and US Mortgage Bankers Association Genworth MI Cai nc. 9 Investor Day December 1, 2010
Slide 10: Genworth MI Canada Inc.
Genworth MI Ca c. Investor Day December 1, 2010
Slide 11: Delivering on All Key Metrics
Delivering on All Key Metrics Q3 2010 YTD Net premiums written Net operating income Combined ratio Return on equity Operating earnings per share (diluted) Genworth MI Canadalnc. 11 Investor Day December 1, 2010
Slide 12: Risk Management, Housing Outlook and Impact
Risk Management, Housing Outlook and Impact STUART LEVINGS CHIEF RISK OFFICER Genworth MI Canadalnc. a) Investor Day December 1, 2010
Slide 13: Enterprise risk management framework
= f wil Portfolio Analytics Underwriting Guidelines and Tools Loan-by-Loan Underwriting Genworth MI Canadalnc. Quality Assurance Loss Mitigation Investment Policy and Regulatory Compliance Investor Day December 1, 2010
Slide 14: Key Drivers of Loss Frequency and Severity
Key Driver of Loss Frequency ¢ Unemployment * GDP Economic Environment Loss Severity Driver * Home prices * Housing activity Housing Market Portfolio Strong Position . - ¢ Embedded home price appreciation Performance ¢ Stabilizing delinquencies Genworth MI Canadalnc. 4 Investor Day December 1, 2010
Slide 15: Job Gain/Loss and Unemployment Rate
Job Gain/Loss (000) Avg. Unemployment Rate 300 9% r 8% 200 + 7% 100 + 6% 5% -100 + 3% 2% -200 + r 1% -300 0% Q42008 Q12009 Q22009 Q32009 Q42009 Q1i2010 Q22010 Q32010 == Quarterly Change in Employment = Average Unemployment Rate Source: Stats Canada Genworth MI Can F Investor Day December 1, 20
Slide 16: Average Home Price
Average Home Price {$000 CAD) Genworth MI C 360 340 320 300 280 260 Sequential Home Price Appreciation (HPA) Q4 2008 Q12009 Q2 2009 Q3 2009 Q42009 Q1 2010 Q2 2010 Q3 2010 =z Average Home Price www «Change in Average Home Price Source: Teranet Investor Day December 1, 20
Slide 17: Housing market assessment
Home Price Appreciation oe Be S @ @ Acceptable Affordability & @ @ @ Supply vs. Demand @ é & Se > Stage l ¢ Strong lending standards, enhanced with regulatory changes in Q2 2010 ¢ Prices supported by fundamentals... not speculation * Balanced housing market driven by solid demand Genworth MI Canadal
Slide 18: Portfolio borrower profile
e 99% owner occupied e 16% lower average price e 17% higher average income e Higher average credit Genworth MI CanadaInc. Investor Day December 1, 2010
Slide 19: Our Risk Profile Better Than Market
Our Risk Profile Better Than Market NATIONAL MIC Market Avg. % Var. Avg. Property Price $287,100 $340,400 -16% Avg. Household Income $83,800 $71,400 17% i” » VANCOUVER CALGARY GTA MIC Market % Var. MIC Market % Var. MIC Market % Var. Avg. Price $459K $653K | -30% $371K $399K 1% $376K $435K 14% Avg.
Slide 20: Auto Decision Engine
Auto Decision Engine Underwriting Guidelines Auto Approval 150 data elements : received OmniScore pedislon from lender Property Tools Referred to Underwriter Genworth MI Canadalnc. 20 Investor Day December 1, 20
Slide 21: Risk factors in underwriting
High Loan-to-Value Low Credit Scores Limited Job Tenure Thin Credit Profile Refinance Economically Sensitive Area Genworth MI Canadalnc. = r A, - que Risk Factors Age and Income Mismatch Short Closing Date Lender Requests File Review Investor Day D
Slide 22: Loan-to-Value and OmniScore Distribution
Loan-to-Value Distribution OmniScore Distribution 75% 75% Ls iy 4 7% 54% 40% 32% 29% 28% 24% 9 20% 20% 13% 13% 14% a aid ial ad a = — <620 <670 >670 a site 2008 2009 +m™2010 Genworth MI Can Inc. Investor Day December 1
Slide 23: Delinquency rates by province
Ontario 0.23% 0.19% 0.17% a § 47% BC 0.25% 0.26% 0.27% t 16% Alberta 0.55% 0.57% 0.58% t 15% Quebec 0.30% 0.24% 0.21% y 15% Other 0.17% 0.17% 0.19% 7% Canada 0.28% | 0.26% 0.25% > Genworth MI Canadalnc. a Investor Day December 1
Slide 24: Portfolio outlook summary
* Modest improvements in unemployment rate ¢ Housing markets on solid footing ¢ Disciplined underwriting approach * Diversified portfolio of prime quality loans . ¢ Embedded equity adds portfolio stability Genworth MI Canadalnc. 24 Investor Day December 1, 2010
Slide 25: Loss Mitigation
Loss Mitigation ROB KIRBY VP LOSS MITIGATION Genworth MI Canadalnc. 25 Investor Day December 1, 2010
Slide 26: Prevent, Engage, Recover
¢ Prevent = Lender awareness — Consumer education Activities Reduce Loss Ratio * Engage — Homeowner Assistance Program ——y, — Assetmanagement ¢ Recover — Borrower Other or third party : Genworth MI Canadalnc. 26 Investor Day December 1, 2010
Slide 27: Borrower assessment and customized workout solution
Borrower Assessment * Root Cause Analysis - Unemployment - Reduced income - Marital disputes - Illness ¢ Ability and Willingness - Short or long term Genworth MI Canadalnc. Customized Workout Solution « Execute Optimal Solution - Capitalization of arrears - Deferred payments - Partial/shared payment
Slide 28: Preparing for the Property Sale and Marketing
Preparing for the Marketing Property Sale * Key Success Factors ¢ Strong Marketing * Driving Impact - Early access to property - Generate the right traffic - Shorten sales period - Preparing the property - Screen buyers - Maximize values - Choosing the right - Accelerate closings professionals Inves
Slide 29: Loss Mitigation Results
so | vs . 5 aE nd \ \ A Ait 1 . YC it nm Raciltc Value Added Loss Mitigation Loss Mitigation Results ¢ Strong lender partnerships Workout Penetration * Business differentiator anit 47% ¢ Reduce frequency ¢ Reduce severity 11% 2008 2009 YTD 2010 Genworth MI Canadalnc. 29 Investor Day December 1
Slide 30: Growth
Growth PETER VUKANOVICH President and COO Genworth MI Canadalnc. 30 Investor Day December 1, 2010
Slide 31: Sales and Marketing, Operations, Investments and Capital Markets
Sales and Marketing Debbie McPherson Organic growth through outstanding Operations customer service Susan Noonan Investments and italM : sts eda aa eenent Multiple levers drive income growth Phil Mayers Genworth MI Canadalnc. ‘ Investor Day December 1, 2010
Slide 32: We are the innovator and growth partner
We are the innovator and growth partner Homebuyers Mortgage insurance lowers the cost of borrowing Consumer education and product information We are atrusted housing policy advisor Genworth MI Canadalnc. Investor Day December 1, 2010
Slide 33: Regulatory framework and role of mortgage insurance
¢ Federal Department of Finance ¢ Competition benefits consumers * OSFI and lenders ¢ Provincial insurance regulators « Ml promotes safety and soundness of the financial system ¢ Capital—Basel Accord ¢ Applies only if insolvent * Credit enhancement for the sale * 10% deductible to the lender of mort
Slide 34: Potential services opportunities
Origination Underwriting Recovery Potential Services Opportunities ¢ Strengthen lender relationships * Leverage existing expertise ¢ Stand alone accretive Genworth MI Canadalnc. 34 Investor Day Decembe'
Slide 35: Organic Growth
Organic Growth Genworth MI Canadalnc. DEBBIE MCPHERSON SVP SALES AND MARKETING SUSAN NOONAN VP OPERATIONS 35 Investor Day December 1, 2010
Slide 36: Best-in-class service and Net Premiums Written
e Best-in-class service Net Premiums Written * Competitive product (SMM) offerings 417 * Customized training ¢ High touch sales... 360 value added relationships 2009 Q3 2010 YTD Genworth MI Canadalnc. 36 Investor Day December 1, 2010
Slide 37: First-time buyer demographics
Demographics ° Ages 25-45 Buying for the ° Family income first time? ~84K Do your homework first. Property characteristics ¢ Average property price $287,000 * Average mortgage $254,000 Genworth MI Canadalnc.
Slide 38: Strong First Time Home Buying Intentions
Strong First Time Home Buying Intentions As % of those planning to purchase a property inthe near term 40 ae 35 30 25 20 15 10 5 i ® Summer 2010 = Summer 2009 0 oll on a & RC & & : ~ , & se & 2 Se & = s & a s << 2 RS & e ca & 2 SF & AY < 9 RS x & Ka AS ¥ 3 mo Source: Altus Group/Ipsos-Reid, The FIRM
Slide 39: Lender segmentation
Lender Segn eni Nationals Field Decisioning Nationals Central Decisioning Regional and Other Mortgage Bankers Genworth MI Canadalnc. nentation 3 Key Originators 25% of Market 3 Key Originators 49% of Market >150 Originators 10% of Market 8 Key Originators 16% of Market Service Training Product Innov
Slide 40: How We Deliver Lender Satisfaction
How We leliver 1 ray Satisfa ction ¢ High touch sales culture * Customized training ¢ Adaptable service model Q32008 Altitude Marketing Research Inc. 3 2010 Lender Satisfaction Report Annual Sample:n = 1100 Genworth MI Canadalnc. Investor Day December 1, 2010
Slide 41: Lender Satisfaction Drivers
falaVavVigdtulatel WU erw UT Is 1 Lender Satisfaction Drivers * Quick turnaround ¢ Flexible underwriting * Consistent decisions * Knowledgeable staff — Products — Guidelines — Lender process Genworth MI Canadalnc. Q3 2009 Q3 2010 % Rating Excellent or Very Good Source: Altitude Marketing Research In
Slide 42: Entrepreneurial culture and customized service
¢ Entrepreneurial culture * Customized service * Collaborative approach ¢ Integral part of lender process * Dedicated lender teams ¢ Grow their business Investor Day December 1, 2010 Genworth MI Canadalnc. 42
Slide 43: Lender testimonials
“Lauren helped me on two files today... she certainly made me look good in front of the brokers.” “Genworth receives the majority of my business because of the relationship with my Account Manager Nancy and my designated Underwriter Sean. Genworth cares about the business | write.” “My Genworth Unde
Slide 44: Levers for Profitability
Levers for Profitability PHIL MAYERS CHIEF FINANCIAL OFFICER Genworth MI Canadalnc. 44 Investor Day December 1, 2010
Slide 45: Levers for profitability and operating income
z ; 2 a 8 id a = E} Grow market penetration Optimize investment yield Strong risk discipline Proactive loss mitigation focus [ i | = Bl © Underwriting Income 1 163 i By | | ¢ Effective capital management 2009 Q3 2010 YTD | 2009 ii Operating Income $3071 = 259? Shareholders’ Equity ($B) $2.6 $2.6 Ope
Slide 46: Market outlook: low rates and affordability
* Low mortgage rates driving eiieeeaieniaieaaieaiiaias strong housing affordability ell * First time home buyer market expected to remain strong * Lower mortgage originations ¢ Higher HLTV penetration Genworth MI Canadalnc. AG Investor Day Dec
Slide 47: $1.9B of unearned premiums
$1.9B of unearned premiums Facing pressure as large 2007 and 2008 books season Earnings Curve by Origination Year 15% - 10% - ® Fiscal 2010 ® Fiscal 2011 5% - 0% | : 2011 2010 2009 2008 2007 2006 Net Premiums $417' $360 $706 $984 $594 Written '@3 YTD 2010 Net Premiums Written Genworth MI Canadalnc.
Slide 48: Premiums Earned and Loss Ratio
Premiums Earned (SMM) * Size of recent books impacting premiums earned - Large 2007 book maturing - Small 2009 book impacting 2011 1 Excluding earnings curve adjustment in Q1'2009 Genworth MI Canadalnc. Loss Ratio (%) 421 31 34 19 | 2007 2008 . 2003 ea * Economic recovery driving improved loss ratio
Slide 49: Investment portfolio market value
Portfolio Market Value (MV) Ch i ™ alenges $5.0B $4.9B — Low rate environment iM . . — — Short portfolio duration gare Ag06 wae ; Corporates * Opportunities Shoe — Adding asset classes ® Federal * Preferred shares = Cash ¢ Dividend paying common shares = Guarantee Fund — Extend duration Asat Dec 31
Slide 50: Generating excess capital
Generating excess capital ¢ In-force profitability ¢ Large 2006 to 2008 books consuming less capital Capital management priorities Q4 2009 Q3 2010 © Shareholder Equity © Debt Outstanding ¢ Investing for growth ¢ Returning capital to shareholders Leverage! : 10% ROE? 13% 14% * Quarterly common divide
Slide 51: Our Future
Our Future BRIAN HURLEY CHAIRMAN AND CEO Genworth MI Canadalnc. 51 Investor Day December 1, 2010
Slide 52: Key takeaways
¢ Prudent risk management is our strength ° Outstanding service drives business growth ° Financial strength provides stability and flexibility Genworth MI Canadalnc. Investor Day December 1, 2010
Slide 53: Genworth MI Canada Inc. Investor Day
Genworth MI Canada Inc. Investor Day \, 22a,