Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Debt Investor Presentation (June 2012)
33 slides from Sagen MI Canada's debt investor presentation, Jun 7, 2012
Slide 1: Genworth MI Canada
Genworth MI Canada Genworth MI Canada Inc. 1 June 2012
Slide 2: Forward-Looking and Non-IFRSs Statements
Forward-Looking and Non-IFRSs Statements This presentation includes certain forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the Company’s future operating and financial results, expectations regarding premiums written, capital
Slide 3: Overview
Overview Genworth MI Canada Inc. 3 June 2012
Slide 4: Leading private Canadian MI platform
Leading private Canadian MI platform History since 1995 Attractive mortgage market Long standing relationships with the largest lenders High quality and diversified insurance portfolio Proactive risk management platform High quality investment portfolio Seasoned management team Deliver
Slide 5: Steady business performance
Steady business performance Q1 2012 Q4 2011 Q1 2011 Net operating income $76 MM $79 MM $78 MM Return on equity 12% 13% 13% Operating earnings per share $0.77 $0.80 $0.73 (diluted) Book Value Per Share (Diluted, including AOCI) 26.94 27.31 24.79 Q1 2011 Q4 2011 Q1 2012 Genworth MI Canada Inc. 5 June
Slide 6: Delivering solid results
Delivering solid results Priorities Q1 2012 Premiums Net premiums written of $79 MM Net earned premiums of $147 MM Prudent risk management Loss ratio of 38% Investment portfolio $43 MM income and book yield of 4.3% Capital strength 159% MCT vs. 145% internal target Dividends Competitive dividend of
Slide 7: Stabilizing Canadian economic environment
Stabilizing Canadian economic environment Slowing home price appreciation - Balanced market conditions - Flat outlook for remainder of 2012 Smaller high loan-to-value market - Government guarantee product changes - Fewer refinance transactions Continued strong borrower quality - Stable debt ra
Slide 8: Fewer delinquencies in Canada
Fewer delinquencies in Canada 90 Day Delinquencies Bank originated mortgages 5.0% 4.5% Strong credit culture 4.0% 3.5% 3.0% Borrower recourse 2.5% 2.0% Interest not tax deductible 1.5% 1.0% 0.5% Active regulatory oversight 0.0% US Australia Canada UK Source: MBA, CML, CBA, APRA Genworth MI
Slide 9: Regulation provides strong support
Regulation provides strong support Mortgage insurance required for loans > 80% loan-to-value Government influences product spectrum Insurance operations regulated by OSFI 90% government guarantee Mortgage insurance is an integral part of the housing finance system Genworth MI Canada Inc. 9 J
Slide 10: High Quality Insurance Portfolio
High Quality Insurance Portfolio Genworth MI Canada Inc. 10 June 2012
Slide 11: Total risk management approach
Total risk management approach High quality business Monitor performance Actively mitigate risk Avoid risk concentrations Take remedial actions Control the process New business origination In-force management Loss mitigation Risk appetite and limits Portfolio monitoring Drive workouts Guidelines and
Slide 12: Job loss has the most impact on claims
Job loss has the most impact on claims Frequency Severity Job Losses …70% Key driver - Unemployment Key driver - House prices Secondary drivers: Secondary drivers: Reduction of income Property condition House Prices …25% Overextension Extended foreclosure process Interest rates Interest
Slide 13: Our served market
Our served market NATIONAL MIC Market Avg. % Var. Avg. Property Price $300,411 $368,455 -18% VANCOUVER CALGARY GTA MONTREAL MIC Market % Var. MIC Market % Var. MIC Market % Var. MIC Market % Var. Avg. Price $446K $774k -42% $366K $399K -8% $395K $497K -20% $286K $306K -7% Note: Genworth averages bas
Slide 14: Improving delinquency rate
Improving delinquency rate Mortgage insurance portfolio Insurance delinquency rate in-force Mar 31 Dec 31 Mar 31 Mar 31 2012 2011 2011 2012 Ontario 0.11% 0.12% 0.18% 46% BC 0.24% 0.28% 0.31% 16% Alberta 0.35% 0.40% 0.59% 16% Quebec 0.24% 0.22% 0.26% 15% Other 0.17% 0.17% 0.19% 7% Canada 0.19% 0.20%
Slide 15: Positive seasoning trends
Positive seasoning trends Book year delinquency development Regional delinquency development 3.5% 1.2% 2004 2005 2006 2007 ON 2007 AB 2007 BC 2007 2008 2009 2010 3.0% 1.0% 2.5% Delinquency Rate 0.8% 2.0% Delinquency Rate 1.5% 0.6% 1.0% 0.4% 0.5% 0.2% 0.0% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
Slide 16: Collateral and seasoning lowers exposure
Collateral and seasoning lowers exposure Insurance in-force (IIF) Potential exposure (PE) Original Effective LTV $267B LTV 90% 2011 90% IIF Collateral HPA Principal Net PE 91% 2010 85% 100% 91% 2009 78% 92% 2008 76% 91% 2007 71% 89% 2006 60% ~10% 90% 2005 and 39% Prior Effective exposure assumes 1
Slide 17: Profitable under a variety of stress scenarios
Profitable under a variety of stress scenarios 4 Year Economic Stress Scenario Observations Cumulative Home Price Declines % 0 -5 High quality, diversified Profitable portfolio performs well -10 under economic stress -15 Loss Ratio ~80-120%* Low effective loan-to-values -20 buffer against loss -
Slide 18: We mitigate from delinquency to claim
We mitigate from delinquency to claim 90+ days arrears Foreclosed 0–90 days arrears Claim (reported to MIC) properties Provide assistance to borrowers impacted over short term Workouts Process is a win for all - consumer, lender, Genworth Accelerate action on late stage delinquencies - protect borro
Slide 19: Strong Competitive Positioning
Strong Competitive Positioning Genworth MI Canada Inc. 19 June 2012
Slide 20: Mortgage insurance benefits lenders
Mortgage insurance benefits lenders Mortgage Originations Capital relief for lenders Credit enhancement/funding Transfer of risk Conventional 2nd set of eyes - underwriting Market intelligence Service innovation HLTV1 ~$75 B Mostly large bank distributed 1. High loan-to-value based on
Slide 21: Critical part of the mortgage process
Critical part of the mortgage process Lead Processing Portfolio Claims Underwriting Management Generation (Order MI) Management Training Seamless processes Credit scores Performance benchmarking Workouts Consumer tools Technology links Fraud detection Market updates Asset management Significant pr
Slide 22: Driving market share
Driving market share Technology Innovation Training Service Market Share Market Penetration Market Share Today Future Tailored lender strategies drive top line growth Genworth MI Canada Inc. 22 June 2012
Slide 23: Delivering Consistent Profitability
Delivering Consistent Profitability Genworth MI Canada Inc. 23 June 2012
Slide 24: Solid financial track record
Solid financial track record Operating Income1 371 ($MM) 642 3431 310 322 307 318 205 248 149 2004 2005 2006 2007 2008 2009 2010 2011 Growing top line Strong growth in robust Economic … strong capital housing market downturn generation Drove lender penetration, invested in Strong business Further pr
Slide 25: Continued profitability
Continued profitability $ MM Q1 2012 Q4 2011 Q1 2011 (except EPS and BVPS) Net premiums written $ 79 $ 123 $ 101 Premiums earned 147 156 155 Losses on claims (56) (62) (59) Underwriting income 65 68 71 Investment income 43 42 43 (excluding gains / losses) Net operating income $ 76 $ 79 $ 78 Operatin
Slide 26: Solid progress on market penetration
Solid progress on market penetration Net Premiums Written ($MM) Premiums Earned ($MM) $552 $533 $620 $612 156 156 166 160 155 149 157 149 154 151 94 101 79 156 155 147 2010 2011 2012 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Single upfront premium, $1.8 B in unearned premiums Genworth MI Canada Inc. 26
Slide 27: Consistent underwriting results
Consistent underwriting results Underwriting Profit ($MM) Premiums Earned $155 $156 $147 Losses on Claims 59 62 56 Premiums earned moderating Expenses 26 26 Loss ratio of 38% within pricing target 26 range of 35 to 40% U/W Profit 71 68 65 Generates steady underwriting profits Q1 2011 Q4 2011 Q
Slide 28: Investment portfolio adds income stability
Investment portfolio adds income stability Preferred, 0.4% Common, 6% Guar. Fund, 15% Primarily fixed income Cash, 2% 96% of bonds ‘A’ or better Corporates, Total $5.0B Federal, 3.7 year duration 46% General Fund 15% $4.2B $303 MM common and preferred equities 4.3% book yield1 Provincial,
Slide 29: Strong capital position with flexibility
Strong capital position with flexibility Strong capital flexibility Minimum Capital Test Ratio • In-force profitability 162% 155% 159% • Capital well above 145% internal target Internal MCT • Debt capacity Target 145% Strong debt ratings • S&P (A- positive) • DBRS (AA low stable) • Financial Str
Slide 30: Closing thoughts
Closing thoughts Genworth MI Canada Inc. 30 June 2012
Slide 31: 2012 Strategic priorities
2012 Strategic priorities Strengthen and continue to grow market position Proactive risk management and loss mitigation Deliver consistent performance and drive profitability Drive efficient capital management Strong market position, disciplined execution, solid financial position Genworth MI Canada
Slide 32: Key terms
Key terms When we say … It represents … New Insurance Written Original principal balance of mortgages insured in (NIW) a given period (e.g. one year) Net Premiums Written Premiums collected on insured loans in a given (NPW) period Loan-To-Value (LTV) Loan amount divided by property value at originat
Slide 33: For further info: Samantha Cheung
For further info: SAMANTHA CHEUNG VP INVESTOR RELATIONS 905 287 5482 samantha.cheung@genworth.com www.genworth.ca Genworth MI Canada Inc. 33 June 2012
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