Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Debt Investor Presentation (June 2014)
18 slides from Sagen MI Canada's debt investor presentation, Jun 12, 2014
Slide 1: Presentation to Fixed Income Investors, BMO Capital Markets
PRESENTATION TO FIXED INCOME INVESTORS BMO CAPITAL MARKETS June 12, 2014
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 ope
Slide 3: Speaker: Philip Mayers, CFO
Speaker Philip Mayers CFO Genworth MI Canada Inc.
Slide 4: Overview
Overview Leading private sector residential mortgage insurer Well-established relationships with mortgage lenders Proven track record of solid profitability Leadership team with long tenure and experience Net Operating Income ($MM) Investment Income 118 125 117 120 110 (After Tax) 188 225 20
Slide 5: What is mortgage insurance?
What is mortgage insurance? Attributes Mortgage Insurance Illustration Mandatory for federally regulated lenders on Time of Origination high-ratio mortgages (<20% down payment) Purchase Value $310,000 Original Loan – 95% LTV $294,500 We insure 100% of mortgage for lender Premium Amount @ 3.15% 9
Slide 6: Market overview
Market overview Influencer Impact to business Stable macro economic environment Continued strong loss performance this year Modest mortgage origination market growth Low interest rate environment continues – with stable debt ratios Improving first time home buyer confidence Core high loan-to-value p
Slide 7: Genworth's served market
Genworth’s served market Average Average Average home price gross debt income servicing Genworth Market % Variance Genworth Genworth Vancouver $410K $801K -49% $103K 28% GTA $418K $547K -24% $103K 29% Calgary $412K $456K -10% $117K 27% Montreal $273K $328K -17% $88K 25% Canada $315K $399K -21% $96K
Slide 8: Value proposition to lenders
Value proposition to lenders 1. Counterparty Risk (Insurance Co.): 90% government guarantee Internal MCT target of 185% ... actual Minimum Capital Test ratio of 229% “AA” (DBRS) / “AA-” (S&P) 2. Funding with Insured Mortgages: Eligible for NHA MBS / Canada Mortgage Bonds Insured mortgages
Slide 9: Top line premium performance
Top line premium performance Net premiums written ($MM) Top line Impact from pricing increase Standard Product Current New 90.01 – 95% LTV 2.75% 3.15% 85.01 – 90% LTV 2.00% 2.40% 560 512 80.01 – 85% LTV 1.75% 1.80% 77 Portfolio 65 Insurance Flow 483 447 Premiums Written Impact1 2014E ~$35 MM 2012
Slide 10: Managing our insurance risks
Managing our insurance risks Risk framework Key focus areas Macro-economic environment Identify and assess key Housing market trends performance risks Regional risk factors 560 Underwriting guidelines/policy Manage and control Risk limits and triggers quality of new business Robust quali
Slide 11: Business already aligns with OSFI B21 Draft
Business already aligns with OSFI B21 Draft “Residential Mortgage Insurance Underwriting Practices and Procedures” Principles 1 Maintain a comprehensive underwriting plan 2 Maintain standards for lender qualification 3 Establish prudent underwriting criteria 4 Conduct periodic assessments of lende
Slide 12: Strong insurance portfolio quality
Strong insurance portfolio quality Average 726 727 727 730 733 734 720 Credit Score Key messages: 08 09 10 11 12 13 Q1'14 Credit score up 14 pts since 2008 ($000’s) New business mix drove average home price Average up 4% in Q1 Home Price 304 315 284 296 301 256 266 Gross debt ratios stable, st
Slide 13: 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% Lower risk of 2007 29 12% 91% 65% loss exposure 2008 22
Slide 14: Delinquencies are declining
Delinquencies are declining Number of Reported Delinquencies Key messages: Modest increase in Q1 due to typical seasonality 1,963 1,860 Downward trend YoY driven by improving Other 1,778 1,778 1,830 249 employment and stable housing markets 252 284 255 259 Declining trend in most regions led b
Slide 15: Premiums cover losses in stress scenario
Premiums cover losses in stress scenario Stress Scenario 2011 Book Example Full Cycle Scenario (Early 90’s recession) New Insurance in Force $22 B $22 B Claim Severity 27% 35% Gross Exposure $6 B $8 B Claim Frequency 3% 6% Loss Exposure $181 MM $480 MM Premiums Written $514 MM $514 MM Loss Ratio 35%
Slide 16: Investments contribute steady income
Investments contribute steady income Key messages: Focus on high investment quality Common Equity Cash Diversified portfolio with over 50% 4% 3% government and cash Relatively short duration – 3.7 years Pre-tax yield 1 – 3.7% Corporates Federal 44% 33% Total $5.2 billion Provincial 16% 1. Pr
Slide 17: Capital structure and ratings
Capital structure and ratings Genworth MI Canada Inc. Assets $5.5 B Current Debt O/S Series 1 Series 3 Holdco Cash $94 MM Genworth MI Canada Maturity Date June 15, 2020 April 1, 2024 Debt $425 MM Inc. Equity $3.2 B Principal Amount $275 MM $160 MM Fixed Annual Rate 5.68% 4.24% Debt/Total Cap: 13% S&
Slide 18: Investment highlights – Genworth Canada
Investment highlights – Genworth Canada Leading private sector residential mortgage insurer Well-established relationships with mortgage lenders Proven track record of solid profitability Stable housing and mortgage markets Prudent risk management Capital level well above regulatory targ
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