Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Debt Investor Presentation (March 2014)
34 slides from Sagen MI Canada's debt investor presentation, Mar 21, 2014
Slide 1: Presentation to Fixed Income Investors
Presentation to Fixed Income Investors March 21, 2014 A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the final
Slide 2: Forward-Looking and Non-IFRS Statements
Forward-Looking and Non-IFRS Statements This presentation relating to Genworth MI Canada Inc. (the “Company”, “Genworth Canada” or “MIC”) includes certain forward- looking statements. These forward-looking statements include, but are not limited to, statements with respect to the Company’s future op
Slide 3: Investment Highlights
Investment Highlights Canada’s leading private sector residential mortgage insurer Stable housing and mortgage markets Well-established relationships with mortgage lenders Prudent risk management Proven track record of solid profitability Capital level well above regulatory target Lead
Slide 4: Company Overview
Company Overview Genworth MI Canada Inc. 4 MIC Fixed Income Presentation – March 21, 2014
Slide 5: What Is Mortgage Insurance?
What Is Mortgage Insurance? Mortgage Insurance Illustration Attributes Time of Origination Mandatory for federally regulated lenders on high-ratio Purchase Value $310,000 mortgages (<20% down payment) Original Loan – 95% LTV $294,500 Premium Amount @ 3.15% We insure 100% of mortgage for lender 9
Slide 6: Mortgage and Housing Markets
Mortgage and Housing Markets Genworth MI Canada Inc. 6 MIC Fixed Income Presentation – March 21, 2014
Slide 7: Mortgage Delinquencies
2006-06 Jun-06 Jun-06 0.91% 0.24% 2006-09 Sep-06 Sep-06 0.94% 0.24% 2006-12 Dec-06 Dec-06 0.96% 0.25% Mortgage Market Generally Stable 2007-03 2007-06 2007-09 Mar-07 Jun-07 Sep-07 Mar-07 Jun-07 Sep-07 0.98% 1.11% 1.26% 0.26% 0.24% 0.26% 2007-12 Dec-07 Dec-07 1.48% 0.26% 2008-03 Mar-08 Mar-08 1.63% 0
Slide 8: Current Product Requirements
Current Product Requirements Product Offering / Underwriting Guidelines Standard Purchase Product 2013 Max LTV 95% LTV Max Total Debt Service Ratio 44% Max Refinance LTV 80% LTV Max Amortization 25 yrs Maximum Home Purchase Price $ 1 million Greater of Contract Rate or 5 Year Qualifying Rate for Ter
Slide 9: Market Influencers
Market Influencers Dynamics1 Business Implications1 Housing Market: Premiums Written: Balanced supply and demand Flat to modest premium growth Resale volumes and home prices up Credit quality expected to remain high modestly Losses on Claims: Losses should continue to perform well Macro-En
Slide 10: Competitive Positioning
Competitive Positioning Genworth MI Canada Inc. 10 MIC Fixed Income Presentation – March 21, 2014
Slide 11: Genworth Canada Summary
Genworth Canada Summary Market Facts (as of December 31, 2013) Competitive Differentiation Well-established relationships with Strong Market TSX Ticker Symbol: MIC mortgage lenders and originators Presence across Canada Innovative and customized service Market Capitalization: $3.2 billion Service Ex
Slide 12: Value Proposition to Lenders
Value Proposition to Lenders Value Proposition Counterparty Risk (Insurance Co.): 90% government guarantee Internal MCT target of 185% ... Actual Minimum Capital Test ratio of 223% “AA” (DBRS) / “AA-” (S&P) Funding with Insured Mortgages: Eligible for NHA MBS / Canada Mortgage Bonds Insure
Slide 13: Delivering Value Beyond Mortgage Insurance
Delivering Value Beyond Mortgage Insurance Key Stakeholders Branches, Specialists, Mortgage Business Risk and C-Suite Underwriting Line Treasury Centres Underwriting Operations Sales Risk Sr. Leadership Genworth Team Support Well-established lender relationships Genworth MI Canada Inc. 13 MIC Fixed
Slide 14: Top-Line Performance
Top-Line Performance Gross Premiums Written ($MM) Total 560 512 77 Portfolio Insurance 65 High Loan-to- Value 483 447 2012 2013 15% price increase effective May 1, 2014 Genworth MI Canada Inc. 14 MIC Fixed Income Presentation – March 21, 2014
Slide 15: Risk Management
Risk Management Genworth MI Canada Inc. 15 MIC Fixed Income Presentation – March 21, 2014
Slide 16: Risk Management Framework
Risk Management Framework Risk Framework Key Focus Areas Macro-economic environment Identify and assess key Housing market trends performance risks Regional risk factors Underwriting guidelines/policy Manage and control quality Risk limits and triggers of new business Robust quality assu
Slide 17: Strong Insurance Portfolio Quality
Strong Insurance Portfolio Quality 720 726 727 727 730 733 Average Key Highlights: Credit Score 08 09 10 11 12 13 Average credit score up 13 pts since 2008 ($000’s) Average home price relatively stable Average Average gross debt ratios well below industry 256 266 284 296 301 304 Home Price sta
Slide 18: Genworth Served Market
Genworth Served Market Average Average Average Home Price Gross Debt Income Servicing Genworth Market % Variance Genworth Genworth Vancouver $420K $767K -45% $98K 27% GTA $418K $522K -20% $100K 28% Calgary $386K $437K -12% $108K 25% Montreal $310K $324K -4% $85K 26% Canada $306K $382K -20% $93K 23%
Slide 19: Seasoning Reduces Loss Exposure
Seasoning Reduces Loss Exposure Estimated Current Effective Loan-to-Value for High Loan-to-Value Insurance in Force Insurance In-Force Original Effective Book Year $ billions % of total Loan-to-Value Loan-to-Value 2006 and Prior 100 40% 90% 39% 2007 29 12% 91% 65% 2008 22 9% 92% 71% 2009 15 6% 91% 7
Slide 20: Delinquency Cycle – Integration is Key
Delinquency Cycle – Integration is Key Objectiv Assessment Foreclosure & Sale Recovery 1 – 3 Months 4 – 18 Months 18 + Months es Prevent Engage Recover Awareness/education Shortfall sales Third parties Homeowner assistance Asset management Borrowers program Best Practice Sharing Risk Und
Slide 21: Delinquency Trends
Delinquency Trends Number of Reported Delinquencies Key Highlights: Decrease in delinquencies driven primarily by 3,381 3,401 declining unemployment rate and stable or Other 255 261 improving housing market conditions 2,752 645 552 Quebec 261 Declining trend in most regions lead by 2,153 Alberta
Slide 22: Financial Performance
Financial Performance Genworth MI Canada Inc. 22 MIC Fixed Income Presentation – March 21, 2014
Slide 23: Underwriting Profits
Underwriting Profits ($MM) Net Premiums $589 $573 Key Highlights: Earned Expenses Loss ratio improvement driving higher 105 underwriting profits 113 Losses on 194 142 $1.7 billion unearned premiums represent Claims future revenues Net 291 319 Underwriting Income 2012 2013 Loss Ratio1 33% 25% Not
Slide 24: Investments Contribute Steady Income
Investments Contribute Steady Income Key Highlights: Focus on investment quality Common Equity Cash 3% 4% Diversified portfolio with over 50% governments and cash Corporates Relatively short duration 42% Federal 35% Total $5.4 billion As at December 31, 2013 Portfolio Assets (market value) $5.
Slide 25: Earnings Profile & Debt Coverage
Earnings Profile & Debt Coverage ($MM) Adjusted Net 339 349 Operating Income 1, 2 Investment Income Net of Interest Expense (After 125 118 Taxes) Underwriting Profit (After Taxes) 214 231 2012 2013 Shareholders’ Equity $3,037 $3,087 Adjusted Operating ROE 1, 2 13% 12% Long Term Debt3 425 425 Debt :
Slide 26: Summary Balance Sheet
Summary Balance Sheet $ MM 2013 2012 Key Highlights: Assets $5.4 B investment grade portfolio Cash and investments $5,435 $5,407 $85 MM of holding company cash Other Assets 256 327 $1.7 B of unearned premiums represent Total Assets $5,691 $5,734 future revenues Liabilities Premiums are earne
Slide 27: Capital Structure
Capital Structure Genworth MI Canada Inc. 27 MIC Fixed Income Presentation – March 21, 2014
Slide 28: Capital Structure & Ratings
Capital Structure & Ratings Genworth MI Canada Inc. Current Debt O/S Series 1 Series 2 Assets $5.7 B Genworth MI Canada Holdco Cash $85 MM Maturity Date June 15, 2020 December Debt $425 MM 15, 2015 Inc. Equity $3.1 B Principal Amount $275 MM $150 MM Fixed Annual Rate 5.68% 4.59% S&P Issuer Rating A-
Slide 29: Strong Capital
Strong Capital Capital Management Objectives Minimum Capital Test Ratio (MCT)1 240% 223% 220% 210% Capital Capital 200% 25% 38% Strength Flexibility 180% 160% 140% 185% 185% Capital Efficiency 120% 100% Jan. 1, 2013 Dec. 31, 2013 1. Minimum Capital test ratio is a non-IFRS measure. See “Forward look
Slide 30: Leadership Team
Leadership Team Genworth MI Canada Inc. 30 MIC Fixed Income Presentation – March 21, 2014
Slide 31: Experienced Leadership Team
Experienced Leadership Team • Brian Hurley • Brian led the establishment of Genworth into the Canadian marketplace in 1994 and later led it through its initial public offering in 2009. He has more Chairman and CEO than 20 years of senior management experience in the mortgage insurance industry world
Slide 32: Experienced Leadership Team
Experienced Leadership Team • Craig has more than 17 years of professional experience in the mortgage and • Craig Sweeney banking industry. Since joining the Company in 1998, he has held senior Chief Risk Officer positions in Operations and Business Development, including Director of Risk Operations
Slide 33: Summary
Summary Genworth MI Canada Inc. 33 MIC Fixed Income Presentation – March 21, 2014
Slide 34: Investment Highlights
Investment Highlights Canada’s leading private sector residential mortgage insurer Stable housing and mortgage markets Well-established relationships with mortgage lenders Prudent risk management Proven track record of solid profitability Capital level well above regulatory target Lead
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