Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — H1 2015 Earnings Presentation
35 slides from Helia's earnings presentation, Aug 5, 2015
Slide 1: 1H 2015 Financial results presentation
Genworth Mortgage Insurance Australia 1H 2015 Financial results presentation 5 August 2015 ©2015 Genworth Mortgage Insurance Australia Limited. All rights reserved.
Slide 2: Disclaimer
Disclaimer This presentation contains general information in summary form which is current as at 30 June 2015. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IF
Slide 3: Agenda
Agenda 1. Introduction (Ellie Comerford, CEO and MD) • Summary of financial performance • Strategy update • Customer and regulatory update 2. Detailed financial performance (Georgette Nicholas, CFO) • Key performance metrics • Balance sheet • Reinsurance • Capital and solvency update • Investment po
Slide 4: Introduction
Introduction Ellie Comerford, CEO and Managing Director
Slide 5: Overview of 1H 2015 financial performance
Overview of 1H 2015 financial performance Reported Net Profit After Tax (NPAT) of $113.0m, down 25.4% from the pcp, includes $19.9m of after-tax mark-to-market losses Underlying NPAT1 of $132.9m steady against the pcp Gross Written Premium (GWP) of $285.4m, down 9.0% on the pcp Net Earned Pr
Slide 6: Consistent strategic priorities
Consistent strategic priorities Delivering long-term returns to shareholders Strategic Priority 1H15 Key Highlights Strengthen market • Renewed contract with NAB for two years to 20 November 2017 leadership position • New agreement signed with existing customer for <80% LVR business • Ongoing engage
Slide 7: Regulatory landscape and the role of LMI
Regulatory landscape and the role of LMI LMI continues to support the credit quality of the Australian banking system Recent developments The importance of LMI to lenders APRA focused on maintaining lending standards through Transfer credit risk: Enables lenders to transfer the risk of their iss
Slide 8: Detailed financial performance
Detailed financial performance Georgette Nicholas, Chief Financial Officer
Slide 9: 1H 2015 performance metrics
1H 2015 performance metrics Key financial measures Pro Forma 1H14 Actual 1H15 Change 1H15 vs 1H14 NIW ($ billions) $17.3bn $17.7bn 2.3% Average price - Flow NIW 1.82% 1.77% (0.05%) Gross written premium ($ millions) $313.6 m $285.4 m (9.0%) Net earned premium ($ millions) $218.4 m $225.7 m 3.3% Loss
Slide 10: New insurance written
New insurance written NIW 1 by original LVR2 band NIW 1 by product type $ billions, % $ billions, % 18.9 18.3 18.9 17.7 18.3 17.1 17.3 17.7 17.1 17.3 28.1% 35.7% 25.3% 32.6% 36.2% 98.1% 99.1% 98.6% 99.3% 51.4% 49.3% 97.9% 43.5% 45.9% 50.1% 17.3% 20.5% 25.4% 20.3% 18.4% 17.3% 1H13 2H13 1H14 2H14 1H15
Slide 11: Insurance in force and New insurance written
Insurance in force and New insurance written Insurance in force (IIF)1 by original LVR2 band, as at 31 IIF1 by product type, as at 31 December 2014 and 30 June 2015 December 2014 and 30 June 2015 Total IIF $316 billion Total IIF $316 billion 89% 90% 30% 30% 29% 29% 16% 16% 9% 9% 8% 8% 6% 6% 2% 2% 6%
Slide 12: Gross written premium
Gross written premium GWP and average price of flow business (GWP/NIW) GWP walk $ millions, % $ millions 450.0 1.82% 2.00% 1.77% 1.80% 1.77% 400.0 1.68% 350.0 (2.7) 1.50% (21.4) (4.1) 300.0 323.5 313.6 320.6 250.0 273.0 285.4 313.6 285.4 1.00% 200.0 150.0 100.0 0.50% 50.0 0.0 0.00% 1H13 2H13 1H14 2H
Slide 13: Delinquency development
Delinquency development Favourable performance post 2009 2004 1.40% 2005 2006 2007 1.20% 2008 2009 1.00% 2010 Delinquency Rate (%) 2011 2012 0.80% 2013 2014 2015 0.60% 0.41% 0.46% 0.40% 0.40% 0.29% 0.33% 0.35% 0.23% 0.20% 0.26% 0.15% 0.09% 0.09% 0.00% 103 109 115 121 127 133 139 1 7 13 19 25 31 37 4
Slide 14: Net incurred claims
Net incurred claims Average paid claim1 Average reserve per delinquency2 $’000 $’000 80.9 75.4 62.9 54.4 48.4 49.13 47.9 46.6 41.7 43.1 1H13 2H13 1H14 2H14 1H15 30 Jun 13 31 Dec 13 30 Jun 14 31 Dec 14 30 Jun 15 Composition of net incurred claims (A$ millions) 1H13 2H13 1H14 2H14 1H15 Number of paid
Slide 15: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong balance sheet with $4.1bn in Cash and Investments and $1.38bn in UPR (A$ in millions) 31 Dec 14 30 Jun 15 Unearned premium by book year as at 30 June 2015 Assets Total UPR $1.38bn Cash and cash equivalents 88.6 300.0 2008 2009 1% 2% Investments 1 4,1
Slide 16: Expansion to reinsurance program
Expansion to reinsurance program Favourable market conditions to enhance overall capital position Reinsurance Program 31 Dec 2014 - $815m cover Reinsurance Program 30 Jun 2015 - $915m cover $m $m 3,000 3,000 Provider 1 100 Provider 1 2,500 100 2,500 Consortium 2 250 250 Consortium 2 Consortium 1 Con
Slide 17: 1H 2015 regulatory capital position
1H 2015 regulatory capital position Improved solvency from strong 1H 2015 performance and seasoning of old books (A$ in millions) 31 Dec 14 30 Jun 15 Evolution of capital sources Capital Base $ billions Common Equity Tier 1 Capital 2,742.1 2,680.8 Tier 2 Capital 112.0 98.0 3.6 3.7 3.6 3.5 3.4 3.4 Re
Slide 18: Investment portfolio
Investment portfolio Conservative, well-diversified portfolio with duration to maturity of 2.4 years Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type Avg. Maturity = 2.4yrs 3.5% 2.0% 3.5% 7.3% 7.3% 13.5% 15.0% 24.9% 38.2% 23.5% 27.6% 28.6% 29.5% 48.
Slide 19: Summary and conclusion
Summary and conclusion Ellie Comerford, CEO and Managing Director
Slide 20: Summary and Full Year 2015 Outlook
Summary and Full Year 2015 Outlook Guidance unchanged – loss performance in line with expectations GMA remains the market leader in the Australian LMI Market Underlying NPAT1 for 1H15 of $132.9m steady versus the pcp, driven by NEP growth of 3.3% and a loss ratio of 22.1% for 1H15 84% of NIW u
Slide 21: Questions
Questions Ellie Comerford, CEO and Managing Director Georgette Nicholas, Chief Financial Officer
Slide 22: Supplementary Slides
Supplementary Slides
Slide 23: Residential mortgage lending market
Residential mortgage lending market Investment vs. Owner Occupied (APRA statistics) Investment vs. Owner Occupied1 (GMA) $ bn, % 37.1% $bn, % 37.0%* 34.8% 29.9% 33.9% 32.1% 32.8% 31.1% 26.0% 28.8% 24.5% 22.9% 23.3% 20.8% 19.6% 20.2% 124.9 104.8 75.6 84.0 8.7 81.3 77.7 12.5 68.2 6.7 8.0 8.6 6.2 5.2 2
Slide 24: Residential mortgage lending market
Residential mortgage lending market HLVR Penetration $ bn, % Loans approved LVR<60% Loans approved LVR 60%-80% Loans approved LVR 80%-90% Loans approved LVR>90% HLVR Loans (% of New Residential Loan Approvals) 36.9% 34.0% 34.3% 34.0% 33.7% 33.3% 32.8%* 30.5% 41.5 41.9 72.0 46.2 37.3 25.8 30.7 60.5 4
Slide 25: Stable macroeconomic conditions in 2015
Stable macroeconomic conditions in 2015 12.0% 140 120 10.0% 100 8.0% 80 6.0% 60 4.0% 40 2.0% 20 0.0% 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 House price index (RHS) Unemployment rate (LHS) Cash rate (LHS) Variable Mortgage Rate (LHS) • GDP growth of 2.3% (March 2015 quarter), b
Slide 26: 1H 2015 income statement
1H 2015 income statement Change (A$ millions) Pro Forma 1H14 1H15 1H15 vs 1H14 Gross written premium 313.6 285.4 (9.0%) Movement in unearned premium (57.5) (19.7) (65.7%) Gross earned premium 256.1 265.7 3.7% Outwards reinsurance expense (37.7) (40.0) 6.1% Net earned premium 218.4 225.7 3.3% Net cla
Slide 27: Insurance ratio analysis
Insurance ratio analysis Performance trending in line with expectation reflecting seasoning of older books Expenses Combined ratio $ millions, % $ millions, % 27.6% 27.3% 26.6% 26.7% 69.9% 26.3% 49.9% 48.8% 46.2% 44.7% 34.0 34.9 34.4 31.6 30.4 53.0 60.2 58.2 59.8 56.2 81.2 22.6 24.6 24.1 24.9 25.8 4
Slide 28: Half yearly pro forma financial information
Half yearly pro forma financial information Financial ratios1 Pro forma Pro forma Pro forma 2H14 1H15 1H13 2H13 1H14 Loss ratio 42.3% 22.6% 19.6% 18.4% 22.1% Expense ratio 27.6% 27.3% 26.6% 26.3% 26.7% Combined Ratio 69.9% 49.9% 46.2% 44.7% 48.8% Insurance Margin 35.8% 58.1% 66.2% 65.4% 57.2% Effect
Slide 29: Delinquency development
Delinquency development Quarterly delinquency roll and delinquency composition Delinquency Roll 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Opening balance 5,851 5,868 5,820 5,454 4,980 5,070 5,405 5,300 4,953 5,378 New delinquencies 2,928 3,095 2,901 2,383 2,689 2,913 2,734 2,357 2,679 3,103
Slide 30: Delinquency population by MIA aged bucket
Delinquency population by MIA aged bucket 36.2% 7,000 20.3% 5,900 5,868 5,820 6,000 5,454 5,405 5,378 5,300 5,070 4,953 14% 23% 21% 4,980 22% 15% 5,000 16% 16% 18% 17% 22% 16% Arrears # 16% 18% 16% 17% 4,000 16% 17% 16% 18% 16% 24% 21% 23% 23% 22% 3,000 20% 21% 22% 21% 23% 2,000 46% 41% 42% 40% 41%
Slide 31: Summary portfolio characteristics
Summary portfolio characteristics Insurance portfolio as at 30 June 2015 – total $316 billion Insurance in force by LVR band (original LVR) Insurance in force by product type % 2% % 3% 0% <60% 1% 9% 60-70% 6% 6% 70-80% 30% Standard 80-85% 16% Low Doc 85-90% Business Select 90-95% Homebuyer Plus 8% 9
Slide 32: Claims severity
Claims severity 1 30% 25% 25% 24% 22% 23% 20% 22% 19% 17% 17% 15% 13% 10% 5% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1.Claim severity refers to the size of net claims paid as a proportion of the original
Slide 33: Claims frequency by Book Year as at 30 June 2015
Claims frequency by Book Year (%) as at 30 June 2015 1.60% 1.40% 1.45% 1.20% 1.17% 1.00% 1.00% 1.04% 0.89% 0.80% 0.60% 0.40% 0.30% 0.20% 0.21% 0.00% 0.10% 0.00% 0.03% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 34: Effective LVR
Effective LVR House price growth in 1H 2015 has improved embedded borrower equity in portfolio As at 30 Jun 15 As at 31 Dec 14 Insurance in force LVR Change Insurance in force LVR Change in house in house Book year $ billion % Original Effective price % Book year $ billion % Original Effective price
Slide 35: Income statement reconciliation
Income statement reconciliation Reconciling to the US GAAP figures reported by Genworth Financial, Inc. USGAAP Add back: USGAAP USGAAP Adjustments Walk from US GAAP AUS Segment Aus Non Aus Aus Results to AIFRS GMA Consolidated Segment Controlling Segment Segment Income Statement for Period Results i
Genworth Mortgage Insurance Australia — H1 2015 Earnings Presentation on 6ix