Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — H1 2017 Earnings Presentation
35 slides from Helia's earnings presentation, Aug 2, 2017
Slide 1: Genworth Mortgage Insurance Australia 1H 2017 Financial Results Presentation
Genworth Mortgage Insurance Australia 1H 2017 Financial Results Presentation 2 August 2017 ©2017 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 2017. 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: Introduction
Introduction Georgette Nicholas, CEO
Slide 4: 1H17 financial results summary
1H17 financial results summary (A$ millions) 1H16 1H17 Change % 1H result in line with expectations • GWP lower on changes in the customer portfolio Gross written premium 189.8 182.3 (4.0%) and reflects the impact of $2.1 billion bulk portfolio transactions Net earned premium 228.8 211.6 (7.5%) • Re
Slide 5: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 $ bn 37% 34% 33% 31% 31% 27% 27% 24% 22% 22% 371 376 335 37 31 300 52 40 51 262 256 40 240 242 49 219 46 36 41 26 31 41 43 47 50 43 199 200 40 166 139 102 99 98 111 74 71 68 80 80 83 93 65 63 66 2008 2009 2010 2011 2012 2013 2014
Slide 6: Macroeconomic conditions
Macroeconomic conditions Delinquency rates by geography Unemployment rates (seasonally adjusted) Change Change State Jun 16 Jun 17 State Jun 16 Jun 17 (basis points) (basis points) New South Wales 0.30% 0.32% 2 bps New South Wales 5.2% 4.8% (40) bps Victoria 0.37% 0.41% 4 bps Victoria 5.7% 5.9% 20 b
Slide 7: Genworth value proposition
Genworth value proposition Innovation and technology will underpin Genworth’s value proposition Market & regulatory changes Genworth value proposition • Changing credit cycle • Customer focused • New and refined bank capital • Risk management partner requirements • Mortgage market insights • Tighter
Slide 8: Genworth's Strategic Objectives
Genworth’s Strategic Objectives A refined strategic plan to re-ignite profitable growth over the medium term Mission: We support Australians in realising their dream of home ownership through the provision of capital and risk management solutions to mortgage lenders Vision: To be the leading provide
Slide 9: Detailed financial performance
Detailed financial performance Luke Oxenham, CFO
Slide 10: 1H 2017 income statement
1H 2017 income statement (A$ millions) 1H16 1H17 Change 1H16 v 1H17 Gross written premium 189.8 182.3 (4.0%) Movement in unearned premium 76.0 63.1 (17.0%) Gross earned premium 265.8 245.4 (7.7%) Outwards reinsurance expense (36.9) (33.9) 8.1% Net earned premium 228.8 211.6 (7.5%) Net claims incurre
Slide 11: New insurance written
New insurance written NIW1 by original LVR2 band NIW1 by product type $ bn, % $ bn, % 87% 87% 86% 84% 18.9 84% 17.7 82% 82% 17.3 18.9 17.3 17.7 28% 14.9 25% 14.0 33% 13.1 14.9 21% 12.6 14.0 16% 12.6 13.1 18% 17% 51% 49% 99.1% 52% 48% 99.3% 50% 49% 98.6% 55% 99.1% 99.2% 99.3% 99.1% 25% 36% 34% 17% 21
Slide 12: Gross written premium
Gross written premium GWP and average price of flow business GWP walk $ m, % $m 2.0% 5.6 (26.6) 1.82% 1.79% 1.78% 189.8 13.5 182.3 1.65% 313.6 320.6 1.55% 1.56% 1.45% 1.5% 285.4 222.2 1.0% 189.8 192.1 182.3 0.5% 0.0% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 1H16 Total Product Flow Flow 1H17 1 mix Volume L
Slide 13: Net incurred claims
Net incurred claims (A$ millions unless otherwise stated) 1Q16 2Q16 1H16 3Q16 4Q16 2H16 1Q17 2Q17 1H17 Number of paid claims (#) 280 286 566 321 312 633 356 355 711 Average paid claim1 ($’000) 65.8 79.2 72.6 73.3 65.0 70.8 92.5 112.2 102.3 Claims paid1 18.4 22.7 41.1 23.5 21.3 44.8 32.9 39.8 72.7 Mo
Slide 14: Loss development
Loss development Quarterly delinquency roll and incurred loss drivers Delinquency roll 1Q16 2Q16 1H16 3Q16 4Q16 2H16 1Q17 2Q17 1H17 Opening balance 5,552 5,889 5,552 6,413 6,844 6,413 6,731 6,926 6,731 New delinquencies 2,697 3,215 5,912 3,214 2,786 6,000 2,852 3,145 5,997 Cures (2,080) (2,405) (4,4
Slide 15: 1H 2017 regulatory capital position
1H 2017 regulatory capital position (A$ in millions) 31 Dec 16 30 Jun 17 NIW by original LVR band and Probable Maximum Loss Capital Base $ bn Common Equity Tier 1 Capital 2,012.8 2,012.8 Tier 2 Capital 200.0 200.0 2.60 2.59 Regulatory Capital Base 2,212.8 2,212.8 2.51 Capital Requirement 2.36 2.36 P
Slide 16: Ongoing program of capital management
Ongoing program of capital management Recent actions Genworth dividends • Since listing, Genworth has paid out all after- tax profits by way of ordinary and special dividends to shareholders. 20 100% • Reinsurance program of $950 million as at 1 90% 16 80% January 2017. Program was restructured on O
Slide 17: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong balance sheet with $3.5bn in cash and investments and $1.1bn in UPR Balance sheet as at 30 June 2017 Unearned premium by year as at 30 June 2017 (A$ in millions) 31 Dec 16 30 Jun 17 Assets 2010 2011 Total UPR $1.1bn 1% 2% Cash and cash equivalents 57
Slide 18: Summary and conclusion
Summary and conclusion Georgette Nicholas, CEO
Slide 19: 2017 outlook
2017 outlook • Australian economic conditions have moderated recently as the economy continues to transition away from the mining investment boom. • The unemployment rate posted modest improvement since year end but key labour market indicators remain mixed. Under-employment remains elevated, implyi
Slide 20: Questions
Questions Georgette Nicholas, CEO Luke Oxenham, CFO
Slide 21: Supplementary slides
Supplementary slides x Genworth %,<.
Slide 22: Residential mortgage lending market
Residential mortgage lending market Investment vs. owner-occupied (APRA statistics)1 Investment vs. owner-occupied3 (Genworth) $ bn, % $ bn, % 40% 30% 36% 37% 27% 34% 35% 34% 25% 32% 33% 24% 31% 23% 23% 23% 29% 21% 20% 20% 136 128 136 109 8.7 76 12.5 78 84 81 6.7 8.0 8.6 68 8.4 6.2 5.2 6.4 235 248 2
Slide 23: 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 30 June 2017 IIF1 by product type, as at 30 June 2017 Total IIF $323 bn Low HomeBuyer Plus 95.01%+ 60.01-70% Doc 3% Other 2% 6% 5% 1% <60% 8% 90.01-95% 28.0% 70.01-80% 17% 85.01-90% Standard 31.0% 80.
Slide 24: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ m, % 26.6% 26.7% 27.1% $ m, % 64.3% 26.3% 25.7% 25.9% 57.3% 60.6% 24.4% 51.4% 46.2% 48.8% 144.2 62.8 44.7% 59.8 60.2 60.8 125.6 131.2 128.3 58.1 55.8 54.7 110.1 101.0 101.5 60.8 55.8 54.7 34.4 34.1 33.6 62.8 34.0 34.9 30.5 27.5 60.2 58.2 59.8 75.4 8
Slide 25: Delinquency development
Delinquency development Quarterly delinquency composition Delinquencies by book year Dec 16 Jun 17 Delinquencies by geography Dec 16 Jun 17 2008 and prior 2,928 3,065 0.41% New South Wales 1,106 1,159 0.32% 2009 882 955 1.00% Victoria 1,378 1,455 0.41% 2010 430 402 0.57% Queensland 2,102 2,281 0.72%
Slide 26: Delinquency development
Delinquency development1 Favourable performance post 2009 • 2008 Book Year was affected by the economic downturn experienced across Australia and heightened stress experienced among self-employed borrowers, particularly in Queensland, which was exacerbated by the floods in 2011. • Post-GFC book year
Slide 27: No. of arrears
Delinquency population by months in arrears 7,285 6,844 6,926 7,000 6,731 12% 6,413 5,804 13% 14% 14% 5,900 5,889 6,000 13% 5,552 19% 5,405 5,300 5,378 14% 14% 20% 5,070 14% 17% 4,953 15% 19% 5,000 16% 16% 15% 18% 18% 16% 18% 17% 17% No. of arrears 16% 18% 25% 4,000 17% 18% 16% 25% 26% 18% 24% 25% 2
Slide 28: Portfolio evolution
Portfolio evolution Annual NIW1 by LVR Annual NIW1 by Product Type $bn $bn 73.8 73.8 26% 28% 17% 44.7 44.7 41.6 41.6 35.4 36.2 15% 35.4 36.2 36% 31.8 33.8 32.6 35% 31.8 33.8 1% 32.6 30.8 30.8 3% 2% 46% 36% 26.6 5% 1% 26.6 36% 23% 3% 24% 29% 39% 72% 1% 1% 20% 17% 57% 41% 51% 13.1 85% 97% 98% 99% 99%
Slide 29: Insurance in force
Insurance in force Insurance portfolio as at 30 June 2017 – total $323 billion Insurance in force (IIF)1 by original LVR2 band IIF1 by product type Total IIF $323 bn Low HomeBuyer Plus Doc 3% Other 95.01%+ 60.01-70% 5% 1% 2% 6% <60% 8% 90.01-95% 28.0% 70.01-80% 17% Standard 85.01-90% 91% 31.0% 80.01
Slide 30: Investment portfolio
Investment portfolio Conservative, well-diversified portfolio with duration to maturity of 1.5 years1 Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type 7% ~0% 7% 7% 1% 5% 10% 30% 30% 20% 12% 48% 19% 11% 23% 32% 38% ~0% Corporate State Gov't 0 - 1 yr
Slide 31: Reinsurance program
Reinsurance program Reinsurance Program 31 Dec 2016 - $900m cover Reinsurance Program 30 Jun 2017 - $950m cover $m $m 3,000 3,000 2,500 2,500 Consortium 6 100 100 Provider 1 100 Provider 1 100 Consortium 5 100 Consortium 5 200 Consortium 4 200 Consortium 4 APRA Losses ($m) APRA Losses ($m) 2,000 2,0
Slide 32: Claims severity
Claims severity1 35% 32% 30% 26% 26% 24% 25% 25% 21% 23% 23% 20% 19% 15% 10% 10% 5% 4% 0% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1. Claim severity refers to the size of net claims paid as a
Slide 33: Claims frequency by Book Year
Claims frequency by Book Year (%) as at 30 June 2017 1.8% 1.68% 1.6% 1.4% 1.22% 1.2% 1.22% 1.0% 0.98% 0.8% 0.6% 0.40% 0.45% 0.4% 0.34% 0.20% 0.2% 0.03% 0.09% 0.0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 34: Effective LVR
Effective LVR As at 30 Jun 17 As at 31 Dec 16 Insurance in force LVR Change in Insurance in force LVR Change in house price house price Book year $ billion % Original Effective % Book year $ billion % Original Effective % 2008 & prior 83.7 29% 77.8% 34.2% 101% 2007& prior 70.7 24% 76.6% 33.4% 96% 20
Slide 35: Income statement reconciliation
Income statement reconciliation Reconciling to the US GAAP figures reported by Genworth Financial, Inc. Walk from US GAAP AUS segment results to Quarterly Less Quarterly AUD Adjustments Total Genworth AIFRS Genworth Consolidated Income supplement non - suppleme equivalent adjustments group Statement
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