Helia Group Limited · ASX:HLI
Helia — Investor Presentation (November 2020)
33 slides from Helia's investor presentation, Nov 5, 2020
Slide 1: 3Q20 Financial Results Presentation
5 NOVEMBER 2020 3Q20 FINANCIAL RESULTS PRESENTATION ©2020 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 September 2020. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standard
Slide 3: Agenda
Agenda 01 Overview 02 3Q20 Financial 03 Summary result Pauline Blight- Pauline Blight- Michael Bencsik Johnston Johnston CFO CEO & MD CEO & MD Pages 12 - 21 Pages 4 - 11 Pages 22 - 23 04 Supplementary slides Pages 24 - 30 3 3Q20 financial results – produced by Genworth.
Slide 4: Overview
Overview Pauline Blight-Johnston, CEO and Managing Director
Slide 5: Good operating momentum in a difficult environment
Good operating momentum in a difficult environment Navigating through the challenging impacts of COVID-19 3Q20 result • 3Q20 Underwriting net profit of $13m (YTD $160m loss). incorporates • 3Q20 Underlying net profit after tax of $27m (YTD $58m loss). reserving for • 3Q20 Statutory net profit after
Slide 6: 3Q20 result incorporates reserving for delayed claims
3Q20 result incorporates reserving for delayed claims Lower claims due to government stimulus measures and deferrals • Gross written premium grew strongly due to low ($ millions) 3Q19 3Q20 Change interest rates and the strong LMI flow performance Gross written premium (GWP) $114.6m $143.8m 25.5% acr
Slide 7: Economic environment slowly improving
Economic environment slowly improving Recovery in the early stages as COVID-19 impacts work through the economy Unemployment Was 6.9% at 3Q20 and is tracking better than our peak central estimate of 9.1%1. Data sourced from ABS at Sep’20 HPA Since 1Q20 national prices are down (1.9%) and are trackin
Slide 8: Quality YTD volume growth
Quality YTD volume growth Housing market activity resilient and key lender customers taking share New insurance written Gross written premium Net earned premium $b $m $m • Mortgage broker share of • Higher business volumes were • Strong GWP growth will drive originations continues to increase. the m
Slide 9: Deferrals reducing and claims delayed
Deferrals reducing and claims delayed Lender check-ins resulting in restructures and deferrals Deferral time series Deferral summary at 3Q20 Insurance in-force (active deferrals) $13,838m Share of insurance in-force2 4.9% Number of active deferrals 31,139 Share of insured loans in-force2 3.0% High L
Slide 10: Capital strength and flexibility
Capital strength and flexibility Surplus capital projected under all scenarios PCA ratio walk Strong capital position underpinned by: • Pro forma PCA ratio of 1.73 times, with surplus over top of target range of $255 million. • Tier 1 ratio 1.51 times, significantly above 0.8 times regulatory requir
Slide 11: Evolving to meet changing customer needs
Evolving to meet changing customer needs Partnering with lenders to provide solutions to borrowers Sound Strong Exploring business customer opportunities fundamentals focus • Over 50 years experience. • Prudent underwriting whilst • Housing affordability • Over 70 active lender managing higher volum
Slide 12: 3Q20 Financial result
3Q20 Financial result Michael Bencsik, Chief Financial Officer
Slide 13: 3Q20 Income statement
3Q20 Income statement Stable business performance ($ millions) 3Q19 3Q20 3Q19 v YTD 30 YTD 30 YTD Sep 19 v YTD 30 Sep 20 commentary: 3Q20 (%) Sep 19 Sep 20 YTD Sep 20 (%) • GWP up reflecting ongoing Gross written premium 114.6 143.8 25.5% 298.7 383.1 28.3% strong volumes from lender Movement in unea
Slide 14: Australia wide snapshot
Australia wide snapshot House prices remain weak, unemployment obscured by stimulus and delinquencies delayed Change in House Prices 3 Months 6 Months YTD Delinquencies by geography Sep 19 % Jun 20 % Sep 20 % Sydney -1.6% -2.4% 1.4% New South Wales 1,422 0.45% 1,495 0.51% 1,439 0.50% Melbourne -3.3%
Slide 15: Spotlight on Victoria
Spotlight on Victoria Victoria’s pathway out of lockdown remains uncertain HPA and rental vacancies Change in dwelling prices Rental vacancies • Melbourne house price movements more pronounced post-COVID-19 than the rest of 3 Months 6 Months 12 Months Sep 19 Sep 20 Victoria. Melbourne -3.3% -5.5% 3.
Slide 16: Net claims incurred
Net claims incurred Loss experience delayed by court closures, lockdowns and deferrals ($ millions unless otherwise stated) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Number of paid claims (#) 319 296 361 376 333 358 332 1 Average paid claim ($’000) 94.2 94.1 97.9 99.4 92.7 97.0 99.4 Claims paid 30.1 27.8 3
Slide 17: Investment performance
Investment performance Investment portfolio yields reflect the low interest environment ($ millions) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Net interest income and dividend income 21.8 20.5 18.9 16.2 14.9 12.3 10.2 Realised gains on investments 5.0 3.2 12.7 7.7 8.3 20.7 17.7 Unrealised gains/(losses) an
Slide 18: Balance sheet
Balance sheet Strong balance sheet with $3.3b in cash and investments Balance sheet as at 30 September 2020 ($ millions) 31 Dec 19 30 Jun 20 30 Sep 20 3Q20 commentary: Assets • Deferred reinsurance expense reduced as the Cash 87.3 80.9 43.3 deferred reinsurance premium was amortised. Accrued investm
Slide 19: Cash and investments portfolio
Cash and investments portfolio Conservative, well-diversified portfolio with average maturity of 4.2 years1 Portfolio by rating2 Investment portfolio ($m) 31 Dec 19 30 Jun 20 30 Sep 20 Commonwealth 944 67% 1,192 71% 804 48% State Gov't 375 27% 226 13% 477 29% Corporate 80 6% 269 16% 391 23% Cash & S
Slide 20: Liability adequacy test (LAT)
Liability adequacy test (LAT) Economic assumptions updated, LAT remains in surplus Key assumptions / outcome 1Q20 3Q20 Economic indicators adopted Central estimate Central estimate • A range of possible economic scenarios were tested. Economic expansion re-commences 1Q21 1Q21 • Central estimate adop
Slide 21: Regulatory capital
Regulatory capital Well-capitalised above Board targets and APRA requirements ($ millions) 31 Dec 19 30 Jun 20 30 Sep 20 NIW1 by original LVR band and probable Capital base maximum loss Common equity Tier 1 capital 1,459.6 1,298.1 1,325.5 $b Tier 2 capital 200.0 200.0 238.4 Regulatory capital base 1
Slide 22: Summary
Summary Pauline Blight-Johnston, CEO and Managing Director
Slide 23: Good operating momentum in a difficult environment
Good operating momentum in a difficult environment Navigating through the challenging impacts of COVID-19 Sound business fundamentals and strong customer focus • GWP growth supporting future NEP growth. • Reserving for anticipated future claims as deferrals end and loans are restructured. • Strategi
Slide 24: Supplementary slides
Supplementary slides HY Genworth 5, <.
Slide 25: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 Source: APRA Quarterly ADI property exposures statistics (ADI’s new housing loan funded), June 2020. APRA has discontinued data on new housing loan approvals from 1 October 2019. APRA new loans funded statistics is used starting
Slide 26: Insurance in-force
Insurance in-force As at 30 September 2019 As at 30 September 2020 Original Effective Change in Original Effective Change in Book year $ billions % Book year $ billions % LVR LVR house price % LVR LVR house price % 2011 & Prior 103.6 37% 78.8% 41.3% 61% 2011 & Prior 97.6 34% 78.6% 38.1% 69% 2012 16.
Slide 27: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $m, % $m, % Insurance margin Trailing 12-month ROE and Underlying ROE % % Source all charts: Genworth 1. Excludes $181.8m DAC write-down in 1Q20, less associated DAC amortisation benefit of $12.3m in 2Q20 and $12.7m in 3Q20. 27 3Q20 financial results
Slide 28: Delinquency trends
Delinquency trends Delinquency roll 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Opening balance 7,145 7,490 7,891 7,713 7,221 7,274 7,614 New delinquencies 2,662 2,853 2,622 2,277 2,326 2,662 2,552 Cures (1,998) (2,156) (2,439) (2,393) (1,940) (1,964) (2,412) Paid claims (319) (296) (361) (376) (333) (358) (
Slide 29: Reinsurance
Reinsurance Reinsurance program as at 30 September 2020 • As at 30 September 2020, $800m of excess of loss cover with varying durations depending on the layer. • Well diversified panel with over 20 different reinsurers participating across the program (minimum rating of A-). • Program is structured
Slide 30: Reconciliations
Reconciliations Statutory profit / (loss) to underlying profit / (loss) ($ millions) 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 Statutory net profit / (loss) after tax 25.1 6.9 (125.6) 35.6 24.6 Unrealised (gains)/losses and FX 2.1 29.2 32.0 (25.6) 4.0 Adjustment for tax (expense)/credits (0.
Slide 31: Glossary
Glossary As at 30 September 2020 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a Expense ratio The expense ratio is calculated by dividing the sum of the delinquent state (3+ months of missed payments or Mortgage In acquisition costs and the othe
Slide 32: Glossary
Glossary As at 30 September 2020 Term Definition Term Definition Loss ratio The loss ratio is calculated by dividing the net claims incurred by Shareholder funds The cash and investments in excess of the Technical funds. the net earned premium Single policy view Excludes additional policies issued f
Slide 33: Contact
For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Iwona Falkiner Head of Investor Relations Head of Corporate Affairs D: +61 499 088 640 D: +61 428 059 965 The release of this announcement was authorised by the Board.