Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Investor Day (December 2015)
52 slides from Sagen MI Canada's investor day presentation, Dec 7, 2015
Slide 1: 2015 Investor Day: Proven Business Model
2015 INVESTOR DAY Proven Business Model December 7th, 2015 2015 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: Strategic Overview
Stuart Levings President and CEO Strategic Overview 2015 Investor Day Genworth MI Canada Inc. 3
Slide 4: Agenda and key themes
Agenda and key themes Strategic overview Prudent risk management Proven business Delivering a superior customer experience model Financial management and results Question and answer session 2015 Investor Day Genworth MI Canada Inc. 4
Slide 5: Genworth Canada overview
Genworth Canada overview WHO WE ARE MARKET FACTS (Sept. 30th, 2015) LARGEST private residential mortgage insurer in Canada $6.1 billion $3.4 billion Total assets Shareholders’ equity Helped ~1M+ families achieve homeownership ~$3 billion 92 million Supported 250+ Market capitalization Shares outstan
Slide 6: Key accomplishments
Key accomplishments Strong but prudent High quality and diversified 2015 loss ratio top line growth insurance portfolio1 trending towards lower end 20% to 30% range ~34% Current market CREDIT SCORE share 742 Cumulative 25% recent price Strong ROE and increases translate into 25% EPS / BVPS earnings
Slide 7: Proven business model
Proven business model Sound product Advanced risk design management Mandatory, single Well-established risk up-front premium, culture supported by prime mortgage advanced risk / product design underwriting tools Supportive regulatory Proactive loss environment mitigation Effective collaboration Win-
Slide 8: Key strengths
Key strengths Focus on customer Strong market How we measure experience & presence success operational excellence Market share Prudent risk 20+ years of High quality, management performance data diversified portfolio EPS and BVPS growth Best-in-class Experienced technology & and engaged processes wo
Slide 9: Served market: first time homebuyers
Served market: first time homebuyers What our prudent home buyer profile looks like… 5% 3% immigrated 742 average 5% to Canada1 13% credit score2 11% Average Average household borrower age 53% 53% income = 36 years 28% 31% = $97K 67% bought with spouse/partner1 <= 35 >35 - <= 45 >45 - <= 55 > 55 <=
Slide 10: Key themes facing the business today
Key themes facing the business today Market dynamics Economic environment • Flat mortgage • Housing market and originations economic growth • Pipeline of qualified • Consumer indebtedness first-time homebuyers and affordability • Focus on quality within pressures the lending industry • Low interest
Slide 11: Our top strategic priorities
Our top strategic priorities 1 2 3 4 Prudent market Navigating 2016 with Proactive loss Strategic share expansion a keen focus on mitigation expansion; risk management programs evaluating ancillary (e.g. Homeowner opportunities to Assistance enhance core Program) mortgage insurance business BUILDING
Slide 12: Prudent Risk Management
Craig Sweeney Chief Risk Officer Prudent Risk Management 2015 Investor Day Genworth MI Canada Inc. 12
Slide 13: Strong enterprise risk management
Strong enterprise risk management Governance framework Oversight, culture, tone Strategic planning process & risk appetite Risk management processes & tools Identification, assessment, measurement, management & controls Risk monitoring & reporting Risk categories Model Strategic Operational Legal &
Slide 14: Insurance risk framework
Insurance risk framework RISK PILLARS Identify & assess Manage the quality Portfolio Risk key performance risks of new business management • Macro-economic environment • Underwriting fundamentals • Portfolio analytics • Housing market trends • Risk limits and triggers • Identification of emerging lo
Slide 15: Key delinquency drivers
Key delinquency drivers Mortgage arrears and unemployment rate Mortgage arrears and mortgage rate Mortgage Arrears UE Rate (R) Mortgage Arrears 5 Yr Mtg. Rate 0.5% 10% 0.5% 10% 9% 9% 0.4% 8% 0.4% 8% 7% 7% 0.3% 6% 0.3% 6% 5% 5% 0.2% 4% 0.2% 4% Strong correlation 3% Modest correlation 3% 0.1% 2% 0.1%
Slide 16: Government policy actions
Government policy actions ‘07 Today ‘07 / ‘08 ‘14 / ’15 YTD Maximum amortization % > 25 year 40 years 25 years 61% (insured mortgages) amortizations LTV1 limit for new 100% 95% % > 95% LTV 14% mortgages 0%3 LTV limit for mortgage % of > 80% LTV 95% 80% 23% refinancing refinance mortgages LTV limit f
Slide 17: Limiting stacked risk factors
Limiting stacked risk factors LTV mix - transactional 95 LTV – credit score 95 LTV – TDSR >90-95 >85-90 >80-85 >75-80 <=75 <=660 <=680 <=700 <=740 <=780 780+ >40 >35-40 >30-35 <=30% 21% 33% 29% 35% 71% 17% 10% 1% 17% 1% 6% 6% 28% 4% 23% Stacked risks (% of NIW) Halifax Montreal Ottawa Toronto Calgar
Slide 18: Strong portfolio quality & mix
Strong portfolio quality & mix Credit score dispersion1 Regional dispersion2 (as at June 30, 2015) >=700 660 - 669 <660 Alberta Atlantic Ontario B.C. Prairies Quebec 9% 8% 8% 6% 5% 15% 13% 18% 18% 17% 13% 20% 5% Outstanding balance of insured 4% 14% mortgages as at 79% 82% June 30, 2015 of 73% 74% 7
Slide 19: Delinquency rates
Delinquency rates Number of reported delinquencies Ontario BC Alberta Quebec Other ~50% 3,381 3,401 decline over 255 262 5 years 2,940 552 2,752 240 645 261 561 2,153 2,046 554 Current 862 1,048 240 1,830 delinquency Other 183 484 1,756 1,715 rate1 Quebec 413 515 252 722 302 314 240 0.29% Alberta 16
Slide 20: Housing risk: regional risk assessment
Regional risk assessment Market risk High Housing risk GTA GVA Ontario Prairies Alberta Atlantic Quebec Low Economic risk High Monitoring Targeted Balanced risk housing risk in underwriting actions profile Quebec GTA and GVA Alberta & Saskatchewan and Ontario Note: Based on Company estimates. 2015 I
Slide 21: GTA & GVA: market trends
GTA & GVA: market trends GTA1 median price GVA1 median price Market MIC Market MIC 700,000 1,200,000 600,000 Detached 1,000,000 Detached 500,000 800,000 400,000 600,000 300,000 400,000 Condo 200,000 200,000 Condo 100,000 0 2007 2009 2011 2013 2015 2007 2009 2011 2013 2015 Price growth driven First t
Slide 22: GTA & GVA: embedded equity
GTA & GVA: embedded equity 100 Effective 88 90 loan-to-value 84 83 by book year 80 75 75 76 72 71 GTA 67 64 GVA 59 60 51 44 43 40 40 20 0 Portfolio <=2009 2010 2011 2012 2013 2014 2015 Original NIW ($B) 65.2 69.4 6.9 6.3 5.2 4.5 4.9 2.5 Remaining NIW ($B)* 27 6.8 2.9 3.7 3.7 3.7 4.5 2.5 STRONG RUN-O
Slide 23: GTA & GVA: lower risk profile
GTA & GVA: lower risk profile GTA portfolio quality GVA portfolio quality % of <660 credit score Average credit score % of <660 credit score Average credit score 747 747 16% 13% 4% 3% 719 714 2007 2008 2009 2010 2011 2012 2013 2014 15YTD 2007 2008 2009 2010 2011 2012 2013 2014 15YTD STEADY CREDIT SC
Slide 24: Alberta: proactive risk management
Alberta: proactive risk management Regional NIW1 dispersion (Transactional)2 Alberta Ontario Quebec B.C. Other Highlights 13% 11% 13% Underwriting actions resulting in smaller but better quality 12% 13% 13% Alberta portfolio in 2015 12% 16% 10% Reduced exposure to areas in Alberta that are more depe
Slide 25: Alberta: improving portfolio quality
Alberta: improving portfolio quality Credit score Median home price (In ‘$000s) Average gross debt service ratio (%) % Score <660 (R) Avg score (L) 17% $365 $355 $338 $400 $328 $320 $319 $315 $303 $300 $350 738 $300 25% 25% 25% 25% 25% 24% 24% 24% 24% $250 $200 5% $150 $100 713 $50 $0 '07 '08 '09 '1
Slide 26: 2016 annual loss ratio expectations
2016 annual loss ratio expectations MIC loss ratio & CBA1 delinquency rates2 Canada loss ratio - MIC (RS) Alberta DR-CBA 0.9% 50% Alberta delq. 0.8% rate (CBA) (LS) 40% • Canada delinquency rate 0.7% should benefit from stronger 0.6% 2016 Loss Ratio Range economy in ‘16 30% 0.5% • Higher quality MIC
Slide 27: Key takeaways: Prudent risk management
Key takeaways Underwriting actions reducing risk Well positioned to address regional economic pressures Prudent risk management Strong portfolio quality 2016 annual loss ratio range: mid-20% to mid-to-high 30% 2015 Investor Day Genworth MI Canada Inc. 27
Slide 28: Delivering a Superior Customer Experience
Debbie McPherson Scott Gorman SVP, Sales & Marketing SVP, Operations Delivering a Superior Customer Experience 2015 Investor Day Genworth MI Canada Inc. 28
Slide 29: Customer centric culture
Customer centric culture FOCUSED ON DRIVING VALUE THROUGH A SUPERIOR CUSTOMER EXPERIENCE 2015 Investor Day Genworth MI Canada Inc. 29
Slide 30: Key takeaways
Key takeaways Risk appetite integrated into our sales and underwriting strategies Delivering added value through an Competitive integrated and cross-functional approach to customer service differentiation driven by innovative Market share gains achieved customer through relationships, collaboration
Slide 31: Financial Management and Results
Philip Mayers SVP and Chief Financial Officer Financial Management and Results 2015 Investor Day Genworth MI Canada Inc. 31
Slide 32: Proven business model…
Proven business model… Demonstrated Superior customer experience and value added relationships results have produced market share gains Market share 28% 34% (Transactional)1 Q1 2014 Q3 2015 Prudent risk management driving Loss improved portfolio quality and ratio 25% 20% 20% strong loss performance
Slide 33: Strong earnings profile
Strong earnings profile Net operating 366 income1 349 283 280 Underwriting profit (after taxes) 235 255 199 196 Investment income net of interest expense 114 111 (after taxes) 84 84 2013 2014 Q3 YTD 2014 Q3 YTD 2015 Operating EPS (diluted)1 $ 3.60 $ 3.86 $ 2.96 $ 3.02 BVPS (diluted, incl. AOCI) $ 32
Slide 34: Transactional insurance
Transactional insurance New insurance written ($ billions) Net premiums written ($ millions) YoY impact of price increases +$2.6B +$108M $555 +$133M $523 $43 +$3.1B $57 $22 $512 $20 $19 $390 $466 $447 $22 $16 $368 2013 2014 Q3 YTD Q3 YTD 2013 2014 Q3 YTD Q3 YTD 2014 2015 2014 2015 Average premium ra
Slide 35: Portfolio insurance
Portfolio insurance New insurance written ($ billions) Net premiums written ($ millions) +$18M +$4.6B +$1M -$1.3B $83 $20 $70 $71 $17 $65 $15 $16 2013 2014 Q3 YTD Q3 YTD 2013 2014 Q3 YTD Q3 YTD 2014 2015 2014 2015 Strong portfolio insurance volumes in recent years have enhanced lender relationships
Slide 36: Premiums earned growth
Premiums earned growth LARGER RECENT BOOKS PROVIDE TAILWIND FOR PREMIUMS EARNED Unearned premiums reserve ($ millions) Premiums earned ($ millions) 6 years & prior Previous 4 books Most recent Q1 Q2 Q3 Q4 $2.0B FY $573 FY $565 $1.7B $1.8B $578 $142 $143 $370 +20% $443 +30% -2% +3% $143 $140 $148 Q3
Slide 37: Loss ratio drivers
Loss ratio drivers PRODUCT SANDBOX CHANGES & UNDERWRITING CHANGES HAVE IMPROVED PORTFOLIO QUALITY Elimination of higher risk products Improving portfolio quality Portfolio insurance Core transactional products % Score <660 Avg score Refinance >80% LTV 100% LTV 16% 742 14% 737 8% 11% 11% 733 2010 61%
Slide 38: Underwriting profitability
Underwriting profitability Combined ratio Loss ratio Expense ratio 57% 53% 50% 51% 15% 44% 17% 39% 39% 17% 18% 36% 20% 19% 18% 19% 42% 37% 33% 33% 25% 20% 20% 18% 2009* 2010 2011 2012 2013 2014 Q3 YTD 2014 Q3 YTD 2015 Potential impact on loss ratio Decreasing loss ratio Increasing loss ratio • Trend
Slide 39: Loss performance & economic scenarios
Loss performance & economic scenarios Expected over Stress Illustration: economic cycle scenario Unemployment rate change over 5 years 1% to 2% increase 2% to 4% increase Cumulative HPA / HPD over 5 years 5% to 7% -15% to -20% Loss ratio (national) over 5 years 25% to 30% 60% to 70% MI PRICED TO COV
Slide 40: Strong balance sheet
Strong balance sheet ($ millions) Sept. 30, 2015 $2.0B OF UNEARNED PREMIUMS REPRESENT FUTURE REVENUES & PROFITS Assets Illustration: Cash and investments $ 5,678 Unearned premiums $ 2.0B Other assets 411 Future losses on claims & expenses1 (1.1) Total assets $ 6,089 Future pre-tax underwriting incom
Slide 41: Well diversified investment portfolio
Well diversified investment portfolio 17% Fed. Agency / NHA MBS Represents current Federal Agency and NHA MBS relative attractiveness provide incremental yield 17% 18% Provincials $5.7B portfolio1 18% Diversified average credit rating of AA 17% Federal Bonds Duration: 3.8 years1 Government of Canada
Slide 42: Capital management
Capital management Transactional new insurance written ($ millions) Capital required at 220% MCT ($ millions)1 +$123M +$2.6B $3,568 +$3.1B +$248M $22,112 $3,445 $120 $19,502 $116 $19,012 Strength $3,197 $15,919 $38 $3,448 $3,329 Flexibility Efficiency $3,159 2013 2014 Q3 YTD Q3 YTD 2013 Jan. 1/15 Q3
Slide 43: New capital framework for 2017
New capital framework for 2017 1 2 3 4 New regulatory Capital framework is New capital framework Company is working capital framework for being designed to be is not expected to with OSFI closely and mortgage insurers more risk sensitive change the total dollar expects more granular expected to be b
Slide 44: Key takeaways
Key takeaways Price increases & market share gains providing tailwind for premiums written and premiums earned Improved insurance portfolio quality, Proven positive for loss performance business model has positioned Strong balance sheet built on MIC for conservative investment portfolio future finan
Slide 45: Wrap Up
Stuart Levings President and CEO Wrap Up 2015 Investor Day Genworth MI Canada Inc. 45
Slide 46: Key takeaways: MIC is well-positioned
Key takeaways Customer service leader MIC is Deep risk expertise well-positioned for Sustainable business model future success Momentum and staying power 2015 Investor Day Genworth MI Canada Inc. 46
Slide 47: 2015 Investor Day Genworth MI Canada Inc.
2015 Investor Day Genworth MI Canada Inc. 47
Slide 48: Senior management team
Senior management team Stuart Levings, President & CEO 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 President, Chief Operat
Slide 49: Senior management team
Senior management team Craig Sweeney, 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 Business
Slide 50: 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 51: Senior management team
Senior management team Rhonda Lawson, SVP, Human Resources and Facilities 20+ years experience Ms. Lawson joined the Company early in 2013, and brings more than 20 years of leadership experience in senior human resource management roles with global public and private corporations, including Aviva, I
Slide 52: Investor Relations
Jonathan A. Pinto, MBA, LL.M Vice President, Investor Relations 905.287.5482 jonathan.pinto@genworth.com Investor Relations investor.genworthmicanada.ca investor@genworth.com 2015 Investor Day Genworth MI Canada Inc. 52