Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — H1 2016 Earnings Presentation
34 slides from Helia's earnings presentation, Aug 3, 2016
Slide 1: 1H 2016 Financial results presentation
Genworth Mortgage Insurance Australia 1H 2016 Financial results presentation 3 August 2016 ©2016 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 2016. 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: 1H16 financial results summary
1H16 financial results summary (A$ millions) 1H15 1H16 Change % Solid earnings performance Reported NPAT includes mark-to-market Gross written premium 285.4 189.8 (33.5%) movement on investment portfolio Underlying NPAT resilient Net earned premium 225.7 228.8 1.4% Ongoing focus on expense man
Slide 5: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR Penetration $ bn 37% 34% 34% 33% 33% 31% 28% 24% 22% 372 338 37 303 41 52 262 256 42 240 242 53 219 46 37 26 31 57 41 43 47 49 50 200 40 163 125 102 99 98 105 74 65 71 68 63 65 79 81 83 2008 2009 2010 2011 2012 2013 2014 2015 2016 Loans appro
Slide 6: Macroeconomic conditions
Macroeconomic conditions Delinquency rates by geography Unemployment rates by geography (seasonally adjusted) Change Change State Jun 15 Jun 16 State Jun 15 Jun 16 (basis points) (basis points) New South Wales 0.30% 0.30% - New South Wales 5.8% 5.3% (50) bps Victoria 0.34% 0.37% 3 bps Victoria 6.0%
Slide 7: Genworth’s strategy underpins creation of shareholder value
Genworth’s strategy underpins creation of shareholder value Target: Deliver a sustainable ROE above the cost of capital by: 1. Strengthening and growing our customer relationships and product value proposition Leading market position Focused on meeting the strategic needs of our customers 2. Tar
Slide 8: Detailed financial performance
Detailed financial performance Luke Oxenham, CFO
Slide 9: 1H 2016 income statement
1H 2016 income statement (A$ millions) 1H15 1H16 Change Gross written premium 285.4 189.8 (33.5%) Movement in unearned premium (19.7) 76.0 (485.8%) Gross earned premium 265.7 265.8 0.0% Outwards reinsurance expense (40.0) (36.9) (7.8%) Net earned premium 225.7 228.8 1.4% Net claims incurred (49.9) (
Slide 10: New insurance written
New insurance written NIW 1 by original LVR2 band NIW 1 by product type $ bn, % $ bn, % 87% 87% 86% 85% 18.9 83% 17.3 17.7 18.9 17.3 17.7 28% 14.9 25% 14.0 14.9 33% 14.0 21% 16% 17.3% 51% 49% 99.1% 52% 48% 98.6% 99.3% 50% 99.1% 99.2% 25% 36% 17% 21% 27% 1H14 2H14 1H15 2H15 1H16 1H14 2H14 1H15 2H15 1
Slide 11: Gross written premium
Gross written premium GWP and average price of flow business GWP walk $ m, % $m 285.4 (5.3) (51.0) 2.0% 1.82% 1.79% 1.78% (39.3) 313.6 320.6 1.55% 1.5% 285.4 1.45% 189.8 222.2 1.0% 189.8 0.5% 0.0% 1H14 2H14 1H15 2H15 1H16 1H15 Product price Volume LVR mix 1H16 1 GWP (including bulk) Average premium
Slide 12: Net incurred claims
Net incurred claims (A$ millions unless otherwise stated) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Number of paid claims (#) 280 288 325 291 280 286 Average paid claim1 ($’000) 62.5 66.9 65.9 71.0 65.8 79.2 Claims paid1 17.5 19.3 21.4 20.6 18.4 22.7 Movement in borrower recovery receivable on paid (9.6) 0.7 0.
Slide 13: 1H 2016 regulatory capital position
1H 2016 regulatory capital position Solvency ratio remains above Board target range (A$ in millions) 31 Dec 15 30 Jun 16 NIW by original LVR band and Probable Maximum Loss Capital Base $ bn Common Equity Tier 1 Capital 2,351.2 2,100.2 2.60 2.59 Tier 2 Capital 249.6 200.0 2.51 Regulatory Capital Base
Slide 14: Capital management initiatives
Capital management initiatives Ongoing program of capital management actions Recent actions Genworth dividends Since listing, Genworth has paid out all 20 70% after-tax profits by way of ordinary and special dividends to shareholders. 16 Reinsurance program increased to 65% Ordinary payout ratio
Slide 15: Summary and conclusion
Summary and conclusion Georgette Nicholas, CEO
Slide 16: 2016 outlook
2016 outlook Dynamic mortgage market continuing to impact new business volumes Outlook for the Australian residential mortgage market is supported by sound fundamentals, especially stable unemployment rates and accommodative monetary policy setting. House price appreciation in 2016 expected to m
Slide 17: Questions
Questions Georgette Nicholas, CEO Luke Oxenham, CFO
Slide 18: Supplementary Slides
Supplementary Slides
Slide 19: Residential mortgage lending market
Residential mortgage lending market Investment vs. owner-occupied (APRA statistics) Investment vs. owner-occupied1 (Genworth) $ bn, % $bn, % 39% 37% 30% 34% 35% 27% 32% 33% 31% 26% 31% 29% 24% 23% 23% 21% 20% 20% 138 132 105 76 84 8.7 81 78 12.5 68 6.7 8.0 8.6 8.4 6.2 5.2 234 187 197 206 33.0 151 15
Slide 20: 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 IIF1 by product type, as at 30 June 2016 June 2016 Total IIF $324 bn Low HomeBuyer Plus Doc 3% Other 95.01%+ 60.01-70% 5% 1% 2% 6% <60% 9% 90.01-95% 29% 70.01-80% 17% Standard 85.01-90% 17.3% 91% 8
Slide 21: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ m, % 26.6% 26.3% 26.7% $ m, % 57.3% 25.7% 46.2% 24.4% 48.8% 51.4% 44.7% 59.8 60.2 62.8 125.6 131.2 58.1 55.8 110.1 101.0 101.5 55.8 34.4 34.1 62.8 34.0 34.9 30.5 60.2 58.2 59.8 75.4 25.8 28.7 62.8 24.1 24.9 25.3 42.8 41.7 49.9 1H14 2H14 1H15 2H15 1H
Slide 22: Delinquency development
Delinquency development Favourable performance post 2009 1.40% 2005 2006 2007 1.20% 2008 2009 2010 1.00% 2011 2012 2013 2014 Delinquency rate (%) 0.80% 2015 2016 0.60% 0.49% 0.49% 0.43% 0.40% 0.45% 0.29% 0.43% 0.31% 0.31% 0.20% 0.20% 0.14% 0.08% 0.00% 103 109 115 121 127 133 139 145 151 13 19 25 31
Slide 23: Delinquency development
Delinquency development Quarterly delinquency roll and delinquency composition Delinquency Roll 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Opening balance 4,953 5,378 5,900 5,804 5,552 5,889 New delinquencies 2,679 3,103 2,782 2,401 2,697 3,215 Cures (1,971) (2,293) (2,553) (2,362) (2,080) (2,405) Paid claims (2
Slide 24: Delinquency population by months in arrears
Delinquency population by months in arrears 7,000 6,413 5,900 5,804 5,889 6,000 13% 5,552 5,405 5,300 5,378 14% 14% 5,070 14% 4,953 15% 5,000 16% 15% 18% 16% 18% 17% 16% 18% 17% 18% No. of arrears 16% 18% 4,000 17% 16% 18% 24% 24% 25% 24% 3,000 23% 22% 25% 23% 22% 23% 2,000 46% 45% 45% 45% 44% 44% 4
Slide 25: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong balance sheet with $3.7bn in Cash and Investments and $1.2bn in UPR (A$ in millions) 31 Dec 15 30 Jun 16 Unearned premium by book year as at 30 June 2016 Assets Total UPR $1.2 bn Cash and cash equivalents 78.1 37.8 2009 2010 Investments 1 3,882.4 3,6
Slide 26: Genworth reinsurance program
Genworth reinsurance program Increase in reinsurance coverage part of ongoing capital optimisation Reinsurance Program 31 Dec 2015 - $875m cover Reinsurance Program 30 Jun 2016 - $950m cover $m $m 3,000 3,000 100 Provider 3 2,500 100 Provider 3 2,500 100 Consortium 5 250 Consortium 3 200 Consortium
Slide 27: Half yearly financial information
Half yearly financial information Financial ratios1 Pro forma Actual Actual Actual Actual 1H14 2H14 1H15 2H15 1H16 Loss ratio 19.6% 18.4% 22.1% 25.7% 33.0% Expense ratio 26.6% 26.3% 26.7% 25.7% 24.4% Combined Ratio 46.2% 44.7% 48.8% 51.4% 57.3% Insurance Margin 66.2% 65.4% 57.2% 59.0% 63.5% Effectiv
Slide 28: Summary portfolio characteristics
Summary portfolio characteristics Insurance portfolio as at 30 June 2016 – total $324 billion Insurance in force by LVR band (original LVR) Insurance in force by product type Low HomeBuyer Plus 60.01-70% Doc 3% Other 95.01%+ 5% 1% 2% 6% <60% 8% 90.01-95% 29% 70.01-80% 17% Standard 85.01-90% 80.01-85
Slide 29: Investment portfolio
Investment portfolio Conservative, well-diversified portfolio with duration to maturity of 2.3 years1 Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type Avg. Maturity = 2.3yrs1 4% 3% 4% 2% 4% 4% 13% 25% 19% 20% 43% 45% 9% 30% 26% 26% 23% Corporate Sta
Slide 30: Portfolio evolution (10 year history)
Portfolio evolution (10 year history) Annual NIW by LVR Annual NIW by Product Type $bn 73.8 $bn 73.8 58.6 26% 58.6 28% 28% 17% 44.7 41.6 34% 44.7 41.6 35.4 36.2 31.8 33.8 32.6 35.4 36.2 22% 36% 30.8 35% 15% 33.8 31.8 30.8 2% 1% 32.6 46% 36% 3% 1% 24% 39% 36% 23% 5% 3% 29% 72% 1% 20% 57% 14.0 41% 41%
Slide 31: Claims severity
Claims severity 1 30% 26% 25% 24% 25% 22% 22% 23% 22% 20% 18% 18% 15% 14% 12% 10% 5% 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1. Claim severity refers to the size of net claims paid as a p
Slide 32: Claims frequency by Book Year as at 30 June 2016
Claims frequency by Book Year as at 30 June 2016 1.8% 1.6% 1.57% 1.4% 1.12% 1.20% 1.2% 1.05% 1.0% 0.94% 0.8% 0.6% 0.4% 0.37% 0.29% 0.2% 0.02% 0.19% 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 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 33: Effective LVR
Effective LVR As at 30 Jun 16 As at 31 Dec 15 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 % 2007 & prior 72.9 25% 76.7% 34.3% 94% 74.5 26% 76.8% 36.7% 87% 2007 & prior 20
Slide 34: Income statement reconciliation
Income statement reconciliation Reconciling to the US GAAP figures reported by Genworth Financial, Inc. Adjustments AUD Walk from US GAAP AUS Segment Results to AIFRS Less: Non equivalent Genworth Consolidated Income Statement for period Quarterly controlling Quarterly Quarterly Total Genworth ended
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