Slide 1: 2023 Half Year Results Investor Presentation
2023 Half Year Results Investor Presentation 22 August 2023
Slide 2: Disclaimer
Disclaimer 2 This presentation contains general information in summary form which is current as at 30 June 2023. 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. 1H23 Financial results 15 3. Closing comments 36 4. Supplementary information 40 5. Glossary 50
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director 2023 Half Year Results
Slide 5: 1H23 highlights
5 1H23 highlights Strong financial Capital Key financial drivers Strategic progress results management Underlying NPAT1 Insurance revenue 100% customer Pro forma PCA coverage $137m $220m renewal ratio 1.80x3 Statutory NPAT Total claims incurred2 Ordinary dividend New customer win $147m ($41m) 14cps
Slide 6: Key performance measures
6 Key performance measures Statutory NPAT ($ millions) Underlying NPAT ($ millions) 137.2 143.4 147.5 128.5 104.0 57.7 1H22 2H22 1H23 1H22 2H22 1H23 Underlying diluted EPS (cps) Annualised underlying ROE (%) 23.7 21.5 40.6 35.1 16.5 26.0 97.0 1H22 2H22 1H23 1H22 2H22 1H23 2023 Half Year Results
Slide 7: Key performance measures
7 Key performance measures Insurance revenue ($ millions) Total incurred claims ratio (%) 251.4 216.2 219.8 2.5 1H22 2H22 1H23 (3.7) 1H22 2H22 1H23 (18.6) PCA coverage ratio (x) Net tangible assets per share ($) 3.44 3.49 2.21 3.12 2.10 1.96 1.801 1H22 2H22 1H23 1H22 2H22 1H23 1. Pro forma PCA cover
Slide 8: Economic environment
8 Economic environment Labor force resilient Dwelling values rising Interest rates rising Unemployment near 50-year low at 3.5% 1H23 national home dwelling values up 2.2% RBA cash rate target has increased 100bps in 1H23 to 4.1% Annual wage growth increased 3.6% improving 5.3% below mid 2022 peak bu
Slide 9: Residential mortgage market
9 Residential mortgage market Industry housing new loan commitments ($ billions) 1 Share of high LVR residential lending 37 8 40% 32 7 27 30% 6 22 20% 17 5 12 10% 4 7 2 3 0% Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Sep-22 Mar-23 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22 Sep-22 Mar-23
Slide 10: NIW and GWP impacted by decreased industry lending
10 NIW and GWP impacted by decreased industry lending Helia New Insurance Written ($ billions) Helia GWP ($ millions) 18.1 322.4 15.5 289.7 14.3 14.7 259.9 13.5 249.1 239.3 12.5 11.2 184.1 188.6 8.9 131.4 6.2 96.6 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1
Slide 11: Delinquencies remain at low levels
11 Delinquencies remain at low levels Industry 90+ day arrears Helia delinquencies (number of) 0.90% 9,000 0.7% 0.80% 8,000 0.6% 0.70% 7,000 0.5% 0.60% 6,000 0.50% 5,000 0.4% 0.40% 4,000 0.3% 0.30% 3,000 0.2% 0.20% 2,000 0.1% 0.10% 1,000 0.00% 0 0.0% Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21 Mar-22
Slide 12: Strategic business momentum
12 Strategic business momentum Enhance Evolve Extend 1H23 achievements: • 100% customer renewals and exclusive large customer owned bank win • Improved borrower and broker engagement, education and sales support tools • Continuing to partner with Household Capital, OSQO and Tic:Toc • New underwritin
Slide 13: Progress on sustainability commitments
13 Progress on sustainability commitments Driving financial wellbeing Demonstrating good corporate Enhancing climate resilience & housing accessibility citizenship • 4,146 hardships supported • Using data to understand impact of • 50% Board gender equality and greater climate on mortgage risk than 4
Slide 14: Capital management initiatives
14 Capital management initiatives Capital returns ($ millions) 1H23 • Ordinary interim dividend of 14cps fully franked 225.7 • Completed $100m on-market share buy-back, reducing share count by 9.1% • Pro forma PCA coverage ratio of 1.80x, above Board targeted 142.9 144.2 range of 1.40 – 1.60x1 100.2
Slide 15: 1H23 Financial results
1H23 Financial results Michael Cant Chief Financial Officer 2023 Half Year Results
Slide 16: AASB 17 recap
16 AASB 17 recap Financial results and returns Capital • Lifetime profits unchanged • Minimal change to current regulatory capital requirements or level of excess capital • Not expected to materially change magnitude of average profit • Profit expected to be less volatile • No impact on capital mana
Slide 17: AASB 17 key concepts
17 AASB 17 key concepts Flows Revenue emergence is linked to liability for remaining coverage (LRC) CSM Risk adjustment CSM Premium received PV of Risk premiums PV of claims, adjustment refunds and expenses PV of claims, refunds and expenses Acquisition expenses LRC opening Interest Expected CSM New
Slide 18: AASB 17 profile of insurance revenue recognition
18 AASB 17 profile of insurance revenue recognition 16% 14% 12% 10% 8% 6% 4% 2% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years since start of book year Note: Illustrative of new book year only. 2023 Half Year Results
Slide 19: Income Statement
19 Income Statement 1H23 v 1H23 commentary: ($ millions) FY21 1H22 2H22 FY22 1H23 1H22 • Insurance revenue similar to pcp but with some (%) compositional changes Insurance revenue 462.6 216.2 251.4 467.7 219.8 1.7 • Insurance service expense again low and down due to Insurance service expense (70.6)
Slide 20: Insurance revenue
20 Insurance revenue 1H23 commentary: ($ millions) FY21 1H22 2H22 FY22 1H23 • Revenue up 1.7% on pcp Expected insurance service expenses incurred 198.4 84.4 88.3 172.7 76.0 • Expected incurred component is lower, reflecting a lower LRC from book run off Risk adjustment recognised in revenue 59.0 25.
Slide 21: Gross written premium (GWP)
21 Gross written premium (GWP) GWP ($ millions) GWP walk ($ millions) 322.4 289.7 259.9 249.1 239.3 184.1 188.6 131.4 96.6 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 1H23 commentary: • GWP was down 49% on pcp reflecting the impact of lower industry volumes on NIW and Federal Government’s Home Guar
Slide 22: Insurance service expense
22 Insurance service expense ($ millions) FY21 1H22 2H22 FY22 1H23 Incurred claims from current period 57.4 38.0 22.6 60.7 44.7 Changes to liabilities for prior incurred claims (77.1) (46.0) (16.4) (62.4) (85.6) Total incurred claims (19.7) (8.0) 6.3 (1.7) (40.9) Insurance expenses 44.2 20.8 24.6 45
Slide 23: Claims paid and delinquencies
23 Claims paid and delinquencies Mortgages in possession and paid claims (number of) 1H23 commentary: 800 700 • The number of paid claims fell 41% on pcp, reflecting delinquency cures and 600 positive “sold no claim” outcomes 500 400 • The number of MIP’s fell 29% 300 • Total and new delinquencies r
Slide 24: Claims incurred
24 Claims incurred ($ millions) FY21 1H22 2H22 FY22 1H23 ($ millions) 1H22 1H23 Opening LIC balance 502.4 437.2 399.3 437.2 386.7 Incurred claims for current period (A) 38.0 44.7 Incurred claims from current period 57.4 38.0 22.6 60.7 44.7 Sold no claim / cancellations1 (38.7) Ageing1 (16.7) Changes
Slide 25: Insurance service result
25 Insurance service result ($ millions) FY21 1H22 2H22 FY22 1H23 1H23 commentary: Contractual service margin recognised 166.6 77.7 86.7 164.4 73.1 • Experience variations were a net benefit of $117.8m for the Risk adjustment recognised in revenue 59.0 25.3 26.3 51.5 23.9 period, largely due to clai
Slide 26: Net investment revenue / loss
26 Net investment revenue / loss Annualised return on total investments 5% 1H23 commentary: 4% • Total annualised return of 4.2% 3% • Interest income double pcp due to higher running yields 2% 1% • Total realised and unrealised losses were a small positive, in contrast to pcp, due to lower mark to m
Slide 27: Net insurance finance income / (expense)
27 Net insurance finance income / (expense) Spot discount rate (%) ($ millions) FY21 1H22 2H22 FY22 1H23 6% 5% Interest accreted to liabilities (12.0) (6.6) (11.0) (17.6) (28.5) 4% Changes in interest rates 38.7 101.4 18.2 119.6 (0.3) 3% Insurance finance income / (expense) 26.7 94.9 7.2 102.1 (28.8
Slide 28: Balance Sheet
28 Balance Sheet 1H23 commentary: ($ millions) 31 Dec 21 30 Jun 22 31 Dec 22 30 Jun 23 Assets • Financial assets are down hoh due to the payment of FY22 Cash 76.7 19.0 23.8 29.0 dividends and the $100m on-market buy-back Accrued investment income 16.8 21.4 21.8 23.9 • DTA largely represents tax impa
Slide 29: $3.0bn cash and financial assets portfolio
29 $3.0bn cash and financial assets portfolio Technical funds 2% 1H23 commentary: Commonwealth 31% Technical funds 31% State Gov't • Average duration 3.2 years1 Corporate / other • 100% fixed interest Fixed • Duration matched with expected claims profile 100% Cash & short term deposits 36% Sharehold
Slide 30: Insurance and reinsurance contract liabilities
30 Insurance and reinsurance contract liabilities 1H23 commentary: ($ millions unless otherwise stated) 31 Dec 21 30 Jun 22 31 Dec 22 30 Jun 23 • LIC fell due to lower delinquencies and some changes in the PV future cashflows 851.9 837.0 755.3 675.3 reserving basis • LRC fell due to lower in-force v
Slide 31: Liability for incurred claims (LIC)
31 Liability for incurred claims (LIC) Liability for incurred claims ($ millions) Reported delinquencies 500 $40,000 7,000 450 $35,000 6,000 400 $30,000 350 5,000 300 $25,000 4,000 250 $20,000 200 3,000 $15,000 150 2,000 $10,000 100 $5,000 1,000 50 - $- 0 2H21 1H22 2H22 1H23 2H21 1H22 2H22 1H23 Repo
Slide 32: Claims sensitivity to economic conditions
32 Claims sensitivity to economic conditions Economic assumptions as at 30 June 20231 Claims sensitivity2,3 Cumulative net claims incurred ($ millions) over 3 years Property price Mortgage rates Unemployment rates HPA +5% (35) Stabilising housing RBA cash rate peaks Gradual increase to HPD -5% 40 ma
Slide 33: Contractual service margin (CSM)
33 Contractual service margin (CSM) CSM walk ($ millions) CSM by cohort ($ millions) 35.3 5.5 23.6 400 (73.1) 300 665.9 657.4 200 100 0 Opening CSM Discount New Business Changes in CSM Closing CSM pre 2015 2015-2019 2020-2023 Unwind Estimates Recognised 1H23 commentary: • CSM is recognised each year
Slide 34: Regulatory capital
34 Regulatory capital ($ millions) 31 Dec 21 30 Jun 22 31 Dec 22 30 Jun 23 1H23 commentary: Capital base • CET1 reduced due to on-market share buy-back and payment of dividends Common equity Tier 1 capital – net assets (CET1) 1,327.5 1,190.6 1,205.7 1,112.5 Regulatory adjustments (29.1) (37.2) (17.2
Slide 35: Capital walk
35 Capital walk PCA coverage ratio walk (x) 1 0.17 0.20 2.21 0.22 0.22 0.22 (0.05) 0.02 1.96 0.22 (0.28) 0.22 (0.03) 0.22 1.80 0.22 (0.28) 0.22 0.21 0.21 (0.05) (0.11) 0.21 0.21 1.99 Tier 1 Tier 2 1.75 1.59 Dec-22 Statutory NPAT Dividend & buy- Assumption In-force runoff New business Reinsurance (%
Slide 36: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director 2023 Half Year Results
Slide 37: Outlook and FY23 guidance
37 Outlook and FY23 guidance Insurance revenue • FY23 insurance revenue is expected to be within a range of $420m to $460m • Timing and magnitude of claims incurred will be driven by the prevailing economic environment Total incurred • Over the course of 2H23 and FY24, total incurred claims are expe
Slide 38: Accelerating financial wellbeing through homeownership
38 Accelerating financial wellbeing through homeownership Australia’s leading Large and growing Positioned for Ongoing capital Delivering strong LMI provider addressable market profitable growth management TSR HLI 120.5% LMI market share1 Annualised underlying ($ millions) $218b ROE (%) 2 Insurer 87
Slide 39: Q&A
Q&A 2023 Half Year Results
Slide 40: Supplementary information
Supplementary information 2023 Half Year Results
Slide 41: Expenses
41 Expenses ($ millions) FY21 1H22 2H22 FY22 1H23 Expenditure incurred 137.3 66.1 70.0 136.0 59.4 Less investment expenses (4.0) (2.0) (0.9) (2.9) (1.3) Less claims handling expenses (3.9) (3.3) (4.1) (7.4) (3.6) Less new acquisition costs incurred (65.2) (30.5) (29.5) (60.0) (22.4) Add amortisation
Slide 42: Residential mortgage lending market
42 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% 34% 33% 30% 30% 29% 29% 30% 30% 27% 25% 45 24% 22% 19% 20% 40 14% 14% 12% 14% 20% 179.8
Slide 43: Insurance in-force
43 Insurance in-force As at 31 December 2022 As at 30 June 2023 Original Effective Change in Original Effective Change in Book year $ billions % Book year $ billions % LVR LVR house price % LVR LVR house price % 2013 & Prior 91.4 34.8% 84.1% 26.6% 119.4% 2014 & Prior 93.4 38.1% 84.3% 34.9% 114.6% 20
Slide 44: Delinquency trends
44 Delinquency trends Number of delinquencies FY21 1H22 2H22 FY22 1H23 Opening balance 6,964 5,826 5,228 5,826 4,569 New delinquencies 7,466 3,315 2,713 6,028 3,030 Cures (8,080) (3,706) (3,219) (6,925) (2,861) Paid claims (524) (207) (153) (360) (122) Closing delinquencies 5,826 5,228 4,569 4,569 4
Slide 45: Cash and financial assets
45 Cash and financial assets Cash and financial assets portfolio1 ($m) 31 Dec 21 % 30 Jun 22 % 31 Dec 22 % 30 Jun 23 % Commonwealth2 532.8 34.5 480.2 36.8 476.1 35.8 377.3 31.4 State Gov't 514.6 33.4 460.7 35.3 436.0 32.8 427.1 35.5 Corporate / other 430.2 27.9 348.9 26.7 379.9 28.5 371.7 30.9 Cash
Slide 46: Reinsurance programme from January 2023
46 Reinsurance programme from 1 January 2023 2023 book year coverage by layer (% of PML) 1 Back book coverage by layer 140% $225m % of Probable Maximum Loss (PML) 120% $ 200m $75m $150m 100% 3rd layer Consortium 6 $150m Retained 2nd layer 80% Consortium 5 1st layer Consortium 4 60% Retained losses C
Slide 47: History of strong Total Shareholder Return (TSR) delivery
47 History of strong Total Shareholder Return (TSR) delivery TSR to 30 June 2023 1YR 78.7% 33.8% 32.5% 28.0% 16.2% 15.7% 15.6% 12.7% 1.9% 0.6% (12.0)% HLI Insurer Insurer Insurer Bank Bank Bank Bank Bank Bank Bank 3YR 120.5% 87.5% 67.1% 66.7% 66.4% 61.3% 52.4% 41.2% 38.3% 7.1% 6.3% HLI Insurer Insur
Slide 48: Reconciliations
48 Reconciliations Annualised statutory ROE Annualised underlying ROE ($ millions) Jun 22 Dec 22 Jun 23 ($ millions) Jun 22 Dec 22 Jun 23 Statutory NPAT 57.7 143.4 147.5 Underlying NPAT 104.0 128.5 137.2 Opening equity 1,327.5 1,190.6 1,205.7 Closing equity 1,190.6 1,205.7 1,112.5 Average equity 1,2
Slide 49: Australian key economic indicators
49 Australian key economic indicators Change in dwelling values (%) 3 months 6 months 12 months Rental vacancies (%) Jun 22 Dec 22 Jun 23 Sydney 4.9 5.3 (5.1) Sydney 1.6 1.8 1.7 Melbourne 1.7 1.7 1.3 Melbourne 1.8 0.8 (5.7) Brisbane 0.6 1.1 1.0 Brisbane 3.0 1.3 (8.2) Perth 0.6 0.5 0.6 Perth 2.8 2.9
Slide 50: Glossary
Glossary 2023 Half Year Results
Slide 51: Glossary
51 Glossary As at 30 June 2023 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a delinquent state HPA / HPD / HPI House price appreciation / depreciation / index API Application programming interface hoh Half-on-half APRA The Australian Prudential
Slide 52: Glossary
52 Glossary As at 30 June 2023 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 53: 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. 22 Aug