Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Investor Day (December 2019)
42 slides from Sagen MI Canada's investor day presentation, Dec 5, 2019
Slide 1: 2019 Investor Day
2019 Investor Day December 5, 2019 We focus on the customer 2019 Investor Day Genworth MI Canada Inc. 1
Slide 2: Forward-looking and non-IFRS statements
Forward-looking and non-IFRS statements Public communications, including oral or written communications such as this document, relating to Genworth MI Canada Inc. (the “Company”, “Genworth Canada” or “MIC”) often contain certain forward-looking statements. These forward-looking statements include, b
Slide 3: December 5th, 2019 – Agenda
Genworth Canada 2019 Investor Day December 5th, 2019 – Agenda Aaron Williams Opening remarks VP, Finance & IR and introduction Stuart Levings President & CEO Strategic outlook Craig Sweeney SVP & Chief Risk Officer Disciplined risk management Philip Mayers SVP & Chief Financial Officer Financial str
Slide 4: December 5th, 2019 – Agenda
Genworth Canada 2019 Investor Day December 5th, 2019 – Agenda Aaron Williams Opening remarks VP, Finance & IR and introduction Stuart Levings President & CEO Strategic outlook Craig Sweeney SVP & Chief Risk Officer Disciplined risk management Philip Mayers SVP & Chief Financial Officer Financial str
Slide 5: Themes for today
Themes for today Constructive MI environment Positive top line momentum High quality insurance portfolio Active capital management Strategic benefits from new ownership Strong shareholder value creation 2019 Investor Day Genworth MI Canada Inc. 5
Slide 6: Constructive MI environment
Constructive MI environment Resilient economy, low unemployment, robust wage Strong population Strong recovery in resale growth growth volumes … up ~11% Y/Y Relatively low interest Improved affordability in Supportive regulatory rates most major markets environment GDP- Canada Population Growth Rate
Slide 7: Positive top line momentum
Positive top line momentum Market size and portfolio quality (denotes transactional new insurance written, C$B) Growth drivers Average credit 1 Market size score 780 140 • Ongoing momentum in FTHB purchases 760 120 740 • ~2% HPA 100 Mortgage 720 rate stress 700 test for MI 80 2 Market share 60 680 9
Slide 8: Smarter MI: A prudent growth strategy
Smarter MI: A prudent growth strategy A Smarter Mortgage Insurance operating platform focused on three key areas: Best in Class High Quality Innovative Loss Customer Experience Insurance Portfolio Mitigation Solutions • Faster approvals a • Disciplined and dynamic • Reengineered loss key customer pr
Slide 9: Innovative product development
Innovative product development Private (Non Government Guaranteed) Mortgage Insurance Product Current focus Longer term New niche market Risk transfer Credit enhancement HLTV properties > LLTV properties > Private RMBS $1MM in GTA/GVA $1MM in GTA/GVA market IN DISCUSSION WITH INDUSTRY STAKEHOLDERS,
Slide 10: High quality insurance portfolio
High quality insurance portfolio GDS>35% and Average Credit Score Mortgage Delinquency Rates (CBA) GDS>35% Avg. Score Ontario British Columbia Alberta Quebec 1.0% 16% 748 0.8% 0.6% 0.50% 7% 0.4% 0.26% 727 0.2% 0.14% 0.0% 0.09% REGULATORY AND UNDERWRITING CHANGES SUPPORTING STRONG PORTFOLIO QUALITY S
Slide 11: Strategic benefits from new ownership
Strategic benefits from new ownership Strong sponsor should be positive for ongoing market share Market Share momentum Focus on capital efficiency including increasing leverage Capital structure to ~15% Diversification Creates potential opportunities for business expansion Triggers transition away f
Slide 12: Our strategic priorities
Our strategic priorities Prudent Growth • Core growth – Enhanced customer experience • New niche market - Innovative product development Proactive Risk Management • Strong risk management framework • Disciplined underwriting and risk appetite Capital Efficiency • MICAT target operating range of 160
Slide 13: 2020 outlook
2020 outlook 1 Cautiously optimistic on Canadian economic growth 2 Majority of housing markets in balanced territory 3 Modestly improved affordability for first time home buyers 4 Market size expansion and market share momentum should drive top line growth 5 Ongoing normalization of loss ratio, prel
Slide 14: December 5th, 2019 – Agenda
Genworth Canada 2019 Investor Day December 5th, 2019 – Agenda Aaron Williams Opening remarks VP, Finance & IR and introduction Stuart Levings President & CEO Strategic outlook Craig Sweeney SVP & Chief Risk Officer Disciplined risk management Philip Mayers SVP & Chief Financial Officer Financial str
Slide 15: Risk management framework
Risk management framework Strong risk governance & supportive regulatory environment Deep understanding of economic and Board housing markets approved business plan and strategy Proprietary mortgage scoring model and disciplined underwriting Clearly defined risk appetite Insurance Robust internal an
Slide 16: Economic Environment
Economic Environment GDP Forecast for 2019 and 2020 Key Strengths 2019F 2020F • Interest rates remain supportive 2.3% 2.4% • Consumer spending and housing activity to continue to recover 1.7% 2.0% 1.7% 2.0% 1.6% • U.S. growth outlook remains solid 1.5% 1.6% 1.5% 1.4% 1.0% 1.1% Key Watch Areas 0.6% •
Slide 17: Housing environment: Sales-to-new listing ratio
Housing environment Sales-to-new listing ratio (YTD) & Y/Y HPA Highlights 90 Sellers market Majority of cities have adjusted Ottawa 80 Montreal to the mortgage rate stress test Halifax 70 Victoria Sales-to-new listing ratio Hamilton Canada Slower housing markets in 60 Calgary Toronto Calgary & Edmon
Slide 18: National risk in-force (RIF)
National risk in-force (RIF) % of Transactional Business With an Effective Loan-to-Value (ELTV) >80% by Book Year3 As at September 30, 2019 98% 100% 93% % ELTV >80% (AB) 75% 80% % ELTV >80% (Other) % ELTV >80% (Total) 60% 78% 73% 56% 40% 26% 26% 29% 2% 10% 20% 2% 2% 26% 25% 18% 19% 20% 20% 0% <=2012
Slide 19: Limiting stacked risk factors
Limiting stacked risk factors 2019 transactional business Loan-to-value (LTV) Mix >90 LTV – Avg Credit Score >90 LTV – TDSR <=660 <=680 <=700 <=740 <=780 >780 >40 35<-40 30<-35 <=30 >90 85<-90 80<-85 <=80 28% 36% 28% 68% 19% 39% 20% 8% 14% 1% 5% 3% 5% 26% Stacked risks (% of NIW): >90 LTV + <=660 Av
Slide 20: Improved delinquency trends
Improved delinquency trends Delinquency rates by book year 2007 book experienced significant economic and 2013-2018 books benefitting housing stress from strong portfolio quality and more stable economic environment 2013-2018 BOOKS: REDUCED PRODUCT RISK, UNDERWRITTEN TO B-21 UNDERWRITING STANDARDS A
Slide 21: Regional delinquency trends
Regional delinquency trends 3,401 Ontario BC Alberta Quebec Other 3,381 255 262 2,940 552 2,752 240 645 261 561 2,153 2,046 554 2,070 1,048 Current 862 240 183 1,830 1,756 1,828 DLQ 484 438 1,718 1,684 1,761 252 Rate1 413 515 302 336 240 722 463 451 436 165 387 482 521 0.35% 492 108 437 569 624 295
Slide 22: Loss ratio trend
Loss ratio trend Regional NIW1 vs. losses on claims Observations Ontario Alberta Quebec Pacific 2 Other Losses & loss ratio3 $100M, 15% $82M, 15% Alberta primarily driving losses 16% 15% 14% on claims in 2018 and 2019 YTD 27% 34% 13% 12% 12% 2% 16% 18% 2% 7% 15% Strong economic conditions in 11% Ont
Slide 23: 2020 full year loss ratio expectations
2020 full year loss ratio expectations MIC loss ratio & CBA delinquency rates Canada loss ratio - MIC (RS) Canada DR-CBA (LS) 0.7% 50% 2020 key assumptions 45% 0.6% 40% UE Rate House Prices 0.5% 2020 Expected Loss Ratio Range 35% National 5.9% - 6.4% -1.0% to 3.0% 30% 0.4% 25% 0.3% • WTI in the $50-
Slide 24: Key takeaways: Disciplined risk management
Key takeaways Underwriting discipline through the cycle Low to moderate housing risk for most regions Disciplined risk Portfolio quality and regional management diversification are key mitigants 2020 preliminary full year loss ratio range: 15% to 25% 2019 Investor Day Genworth MI Canada Inc. 24
Slide 25: December 5th, 2019 – Agenda
Genworth Canada 2019 Investor Day December 5th, 2019 – Agenda Aaron Williams Opening remarks VP, Finance & IR and introduction Stuart Levings President & CEO Strategic outlook Craig Sweeney SVP & Chief Risk Officer Disciplined risk management Philip Mayers SVP & Chief Financial Officer Financial str
Slide 26: Strong balance sheet underpins our value proposition
Strong balance sheet underpins our value proposition ($ millions) Sep. 30, 2019 Dec. 31, 2018 Dec. 31, 2017 Assets High quality investments Cash and investments $ 6,739 $ 6,510 $ 6,600 ~93% inv. grade Other assets 350 379 324 fixed income Total assets $ 7,089 $ 6,889 $ 6,924 Liabilities $2.1 billion
Slide 27: Visibility into ROE progression
Visibility into ROE progression Path to future ROE enhancement (%, illustrative purposes only) ~13 - 15% Capital actions may ~12% include increasing leverage, share buybacks and / or special dividends 2019 YTD Higher avg. premium Loss ratio Investment portfolio Capital management 2022+ rates on rece
Slide 28: Long run pricing ROE
Long run pricing ROE Lifetime Pricing Expectations for Single Transactional Book Average Premium Rate 345 – 350 bps Premiums Written per $1B of NIW $34.5 – 35 MM Loss Ratio 20 – 25% Expense Ratio 18 – 20% Underwriting Margin 55 – 60% Pre-tax book yield 3.20 – 3.25% Capital required per $1 B of New i
Slide 29: Premiums earned drivers & ROE impact
Premiums earned drivers & ROE impact Net premiums written Earnings curve Premiums earned ($ millions) (By age of book for a calendar year) (Contribution by book year)1 Average 2019 Q3 YTD transactional $508 million 2020 premiums premium rate Q4’19 premiums earned1 earned1 2.52% 640 2014 Year 7 700 L
Slide 30: Capital optimization: Organic capital generation
Capital optimization: Organic capital generation Strong capital position & organic O capital generation in 2019 Fund growth with B MICAT operating range J of 160 - 165% Regulatory Capital In Excess Of Operating MICAT Target E of 165% - $ MM C January 1, 2019 (MICAT 172%) $166 T I Total Comprehensive
Slide 31: Capital optimization: Leverage
Capital optimization: Leverage O Current leverage of 10% B Maintain modest J leverage of <= 15% E Public debt outstanding: $435 MM C (C$ millions by maturity) T 260 I V Credit facility of 175 E $300 MM S 2020 2024 15% target leverage is consistent with our investment grade ratings Evaluating options
Slide 32: Proactive investment management
Proactive investment management Clear investment objectives … Strong execution driving stable income … Focus on high quality assets Portfolio Investments: $6.7B Limit exposure to correlated economic 13% risks Investment Diversify geographically (US & select 32% Income emerging market countries
Slide 33: Key takeaways for 2020
Key takeaways for 2020 Marginally higher transactional premiums written on growing market size and market share momentum Flat to modestly higher premiums earned due to strong 2019 book of business Normalizing loss ratio range of 15% to 25% Operating ROE in aided by strong portfolio quality and stabl
Slide 34: December 5th, 2019 – Agenda
Genworth Canada 2019 Investor Day December 5th, 2019 – Agenda Aaron Williams Opening remarks VP, Finance & IR and introduction Stuart Levings President & CEO Strategic outlook Craig Sweeney SVP & Chief Risk Officer Disciplined risk management Philip Mayers SVP & Chief Financial Officer Financial str
Slide 35: Creating shareholder value
Creating shareholder value Book value per share* MIC Share Price $46.73 @ 9/30/2019 $56.12 @11/29/2019 600 Since IPO: Total ordinary Capital management 500 dividends paid: 400 Ordinary Buybacks Specials $1.4B activities Total share 300 49 325 159 buybacks: 40 150 200 $973 MM 160 105 75 50 40 68 Tota
Slide 36: MIC investment thesis
MIC investment thesis Constructive MI environment Clear top line growth strategy Proven Strong risk management and loss mitigation business model and New ownership brings strategic benefits deep mortgage insurance ROE improvement and strong capital expertise generation over the medium term Enabling
Slide 37: Q&A
Q A 2019 Investor Day Genworth MI Canada Inc. 37
Slide 38: Senior management team
Senior management team Stuart Levings, President & Chief Executive Officer 15+ years of mortgage insurance experience Mr. Levings assumed his current role as President and Chief Executive Officer in January 2015. Prior to that Mr. Levings served in such senior leadership positions as Senior Vice Pre
Slide 39: Senior management team
Senior management team Craig Sweeney, SVP & Chief Risk Officer 15+ years of mortgage insurance experience Mr. Sweeney has more than 18 years of professional experience in the mortgage and banking industry. Since joining the Company in 1998, Mr. Sweeney has held senior positions in Operations and Bus
Slide 40: Senior management team
Senior management team Debbie McPherson, SVP, Sales and Marketing 25+ years of mortgage insurance experience Ms. McPherson has over 25 years of experience and success in sales and quality management with the Company. Prior to her current position, Ms. McPherson was the Company’s Ontario Regional Sal
Slide 41: Senior management team
Senior management team Mary-Jo Hewat, SVP, Human Resources and Facilities 20+ years experience Ms. Hewat brings over 20 years of human resources expertise spanning numerous industries and geographies. Ms. Hewat assumed her current role of Senior Vice President, Human Resources and Facilities in May,
Slide 42: Investor Relations
Aaron Williams, CPA, CA Vice President, Finance & Investor Relations 905.287.5504 aaron.williams@genworth.com Investor Relations investor.genworthmicanada.ca investor@genworth.com 2019 Investor Day Genworth MI Canada Inc. 42