Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — FY2014 Earnings Presentation
38 slides from Helia's earnings presentation, Feb 11, 2015
Slide 1: Genworth Mortgage Insurance Australia 2H (Full Year) 2014 Financial results presentation
Genworth Mortgage Insurance Australia 2H (Full Year) 2014 Financial results presentation 11 February 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 31 December 2014. 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
Agenda 1. Introduction (Ellie Comerford, CEO and MD) • Summary of financial performance • Overview of economic environment and residential mortgage market • 2015 Strategy and financial expectations 2. Detailed financial performance (Georgette Nicholas, CFO) • Pro forma income statement ‒ Sales and r
Slide 4: Introduction
Introduction Ellie Comerford, CEO and Managing Director
Slide 5: Overview of 2H14 financial performance
Overview of 2H14 financial performance Solid financial performance in 2014 Reported Net Profit After Tax (NPAT) of $172.7m for 2H14 has increased 51.9% compared to the prior corresponding period (pcp) and includes $26.4m of post-tax mark-to-market gains Underlying NPAT1 for 2H14 of $146.3m has i
Slide 6: 2014 full year performance metrics
2014 full year performance metrics Based on pro forma financial information as set out in the prospectus Key financial measures FY13 IPO prospectus Revised FY 14 target Actual FY 14 Flow NIW ($ billions) $34.4 bn $33.8 bn $35.0bn - $36.0bn $35.1bn Portfolio NIW ($ billions) $1.0 bn $4.0 bn $2.0bn -
Slide 7: Consistent strategic priorities
Consistent strategic priorities Delivering long-term returns to Shareholders Strategic Priority 2014 Key Highlights Strengthen market Maintaining and extending key customer contracts for more than 56% of GWP leadership position End-to end process review of key customers, including policy, proces
Slide 8: Customer Focus a high priority
Customer Focus a high priority Working with customers and other key stakeholders to support the mortgage industry Customer Genworth Australia has commercial relationships with over 100 lender customers across Australia, including three of the four major banks with an estimated 44%1 market share fo
Slide 9: 2015 environmental and financial outlook
2015 environmental and financial outlook Room for caution with uncertain environment expected to continue into 2015 Headline outlook for economy is for growth to remain below trend Unemployment was 6.1% in December 2014. We expect unemployment to be biased toward slightly higher levels of unempl
Slide 10: Detailed financial performance
Detailed financial performance Georgette Nicholas, Chief Financial Officer
Slide 11: 2H 2014 pro forma income statement
2H 2014 pro forma income statement Strong housing and stable economic conditions have supported solid performance Change FY14 (A$ millions) 1H13 2H13 FY13 1H14 2H14 FY14 FY13 vs FY14 F’cast2 Gross written premium 273.0 323.5 596.5 313.6 320.6 634.2 6.3% 663.2 Movement in unearned premium (44.4) (80.
Slide 12: Underlying ROE Progression during 2014
Underlying ROE Progression during 2014 ROE progression underpinned by solid loss performance in FY14 Ongoing focus to enhance ROE using appropriate levers Changes to policy and underwriting criteria have enhanced the quality of recent book years since 2009 Capital Optimisation ‒ Look for oppor
Slide 13: New Insurance Written & Insurance In Force
New Insurance Written & Insurance In Force New business and insurance in force reflecting policy changes since 2009 NIW by LVR band1 for half years ended 30 June and 31 NIW by product type for half years ended 30 June and 31 December of respective periods December of respective periods $ billions, %
Slide 14: Gross Written Premium
Gross Written Premium Price increases offset by shift in LVR mix GWP and average price of flow business (GWP/NIW) Flow business - GWP walk $ millions, % $ millions 10.7 48.3 1.72% 1.77% 1.82% 1.80% (21.3) 1.55% 1.68% 323.5 313.6 320.6 307.3 273.0 237.6 634.2 596.5 1H12 2H12 1H13 2H13 1H14 2H14 FY13
Slide 15: Delinquency development
Delinquency development Favourable performance post 2009 1.40% 2004 2005 1.20% 2006 2007 1.00% 2008 Delinquency Rate (%) 2009 0.80% 2010 2011 0.60% 2012 0.46% 0.40% 2013 0.31% 0.28% 0.42% 0.31% 0.14% 0.20% 0.20% 0.25% 0.12% 0.07% 0.00% 118 4 1 7 100 103 106 109 112 115 121 124 127 130 133 136 139 61
Slide 16: Net incurred claims
Net incurred claims Lower level of delinquencies flowing through to MIP and lower average claim size Average paid claim1 Average reserve per delinquency2 $’000 $’000 83.8 82.2 52.0 51.6 80.9 48.4 75.4 47.9 46.6 41.7 62.9 54.4 1H12 2H12 1H13 2H13 1H14 2H14 30 Jun 12 31 Dec 12 30 Jun 13 31 Dec 13 30 J
Slide 17: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong stable balance sheet with over $1.36bn in UPR (A$ in millions) – Pro forma 31 Dec 12 31 Dec 13 31 Dec 14 Unearned premium by book year as at 31 December 2014 Assets Total UPR $1.36bn Cash and cash equivalents 33.7 113.9 88.6 2008 2009 1% 4% Investmen
Slide 18: 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 01 Jan 2015 - $915m cover $m $m 3,000 3,000 Provider 1 Provider 1 2,500 100 2,500 100 Consortium 2 Consortium 2 250 250 Consortium 1 Con
Slide 19: FY 2014 regulatory capital position
FY 2014 regulatory capital position Improved solvency from strong FY14 performance and seasoning of old books (A$ in millions) – Pro forma 31 Dec 13 31 Dec 14 Evolution of capital sources Capital Base $ billions Common Equity Tier 1 Capital 2,440.0 2,742.1 3.58 Tier 2 Capital 126.0 112.0 3.45 3.54 3
Slide 20: 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 = 2.4 yrs 2.9% 0.1% 2.1% 2.1% 2.0% 11.6% 10.2% 15.5% 24.4% 23.2% 37.6% 28.7% 25.4% 47.
Slide 21: Summary and conclusion
Summary and conclusion Ellie Comerford, CEO and Managing Director
Slide 22: Summary and Conclusion
Summary and Conclusion The leading LMI provider in Australia with strong financial performance GMA remains the market leader in the Australian LMI Market Underlying NPAT1 for FY14 of $279.4m has increased 26.5% against pcp, driven by NEP growth of 12.0% and a loss ratio of 19.0% for the full yea
Slide 23: Questions
Questions Ellie Comerford, CEO and Managing Director Georgette Nicholas, Chief Financial Officer
Slide 24: Supplementary Slides
Supplementary Slides
Slide 25: 'Mixed' macroeconomic conditions in 2014
‘Mixed’ macroeconomic conditions in 2014 • GDP growth for the twelve months to 30 Sep 2014 of 2.7% was below expectations with the pick up in the non-mining sector not large enough to offset weakness in the resources sector • The RBA continues to maintain an accommodative stance on monetary policy –
Slide 26: Residential mortgage lending market
Residential mortgage lending market HLVR Penetration Investment vs. Owner Occupied 2 • 2014 loan originations likely to finish the year with • Investment property lending represented 37% of growth of approximately 7% originations as at 30 Sep 2014 • Penetration of lending in the HLVR space has remai
Slide 27: Insurance ratio analysis
Insurance ratio analysis Performance trending in line with expectation reflecting seasoning of older books Expenses Combined ratio $ millions, % $ millions, % 28.0% 134.3% 27.6% 27.2% 27.3% 26.6% 49.7 65.1% 69.9% 26.3% 49.9% 46.2% 44.7% 34.0 34.9 30.4 31.6 26.8 29.0 53.0 188.8 50.6 56.1 58.2 59.8 22
Slide 28: Half yearly pro forma financial information
Half yearly pro forma financial information Financial ratios 1 Pro forma Pro forma Pro forma Pro forma Pro forma Actual 1H12 2H12 1H13 2H13 1H14 2H14 Loss ratio 106.5% 37.9% 42.3% 22.6% 19.6% 18.4% Expense ratio 28.0% 27.2% 27.6% 27.3% 26.6% 26.3% Combined Ratio 134.5% 65.1% 69.9% 49.9% 46.2% 44.7%
Slide 29: Delinquency development
Delinquency development Quarterly delinquency roll and delinquency composition Delinquency Roll 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Opening balance 5,851 5,868 5,820 5,454 4,980 5,070 5,405 5,300 New delinquencies 2,928 3,095 2,901 2,383 2,689 2,913 2,734 2,357 Cures (2,189) (2,594) (2,757) (2,2
Slide 30: Arrears
Delinquency population by MIA aged bucket 36.2% 7,000 5,868 5,820 6,000 5,454 5,405 5,300 4,980 5,070 23% 21% 20.3% 4,953 5,000 16% 22% 16% 18% 17% 22% 16% 16% 4,000 16% 17% 17% 16% 18% Arrears# 16% 3,000 21% 23% 20% 23% 21% 22% 21% 23% 2,000 41% 45% 44% 42% 42% 40% 44% 41% 1,000 0 Mar-13 Jun-13 Sep
Slide 31: Portfolio evolution (10 year history)
Portfolio evolution (10 year history) Annual NIW by LVR Annual NIW by Product Type Annual GWP and Average Price Annual number of New Policies, plus policies outstanding 1,496,616 1,390,016 123,271 113,057 117,472 112,172 109,477 100,391 91,164 86,174 2007 2008 2009 2010 2011 2012 2013 2014 Policy co
Slide 32: Summary portfolio characteristics
Summary portfolio characteristics Insurance portfolio as at 31 December 2014 – total $314 billion Insurance in force by LVR band (original LVR) Insurance in force by product type % 3.3% 0.9% 0.6% % 2.2% 8.8% <60% 6.0% 6.0% Standard 60.01-70% 30.1% Low Doc 70.01-80% 16.4% Business Select 80.01-85% Ho
Slide 33: Claims severity
Claims severity 1 30% 25% 25% 24% 22% 23% 22% 20% 17% 17% 15% 14% 12% 10% 5% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1.Claim severity refers to the size of net claims paid as a proportion of the original residential
Slide 34: Claims frequency by Book Year (%) as at December 2014
Claims frequency by Book Year (%) as at 31 December 2014 1.60% 1.40% 1.40% 1.20% 1.16% 0.93% 1.04% 1.00% 0.86% 0.80% 0.60% 0.40% 0.28% 0.20% 0.16% 0.00% 0.07% 0.01% 0.00% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The abov
Slide 35: Net claims incurred development
Ever to Date Loss Ratio by Book Year (%) as at 31 December 2014 70% 60% 61% 54% Net claims incurred development 50% 40% 30% 26% 20% 10% 11% 7% 4% 2% 0% 0 1 2 3 4 5 6 7 2007 2008 2009 2010 2011 2012 2013 2014 The above figure excludes Inward Reinsurance, New Zealand, Genworth Financial Mortgage Indem
Slide 36: Effective LVR
Effective LVR House price growth in FY14 has improved embedded borrower equity in portfolio As at 31 Dec 14 As at 31 Dec 13 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 37: Pro forma income statement reconciliation
Pro forma income statement reconciliation Reconciling to the US GAAP figures reported by Genworth Financial, Inc. USGAAP Add back: USGAAP USGAAP Adjustments Aus Non Aus Aus Walk from US GAAP AUS Segment Results to AIFRS Segment Controlling Segment Segment GMA GMA Consolidated Pro Forma Income Statem
Slide 38: Pro forma income statement reconciliation
Pro forma income statement reconciliation Reconciling pro forma results to the AIFRS statutory accounts (A$ in millions) FY14 Pro Forma NPAT for full year to 31 December 2014 324.1 Less period prior to formation of consolidated group: 1 Jan to 18 May 2014 (108.7) Pro Forma result for period 19 May t
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