Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — FY2015 Earnings Presentation
39 slides from Helia's earnings presentation, Feb 5, 2016
Slide 1: Full Year 2015 Financial Results Presentation
Genworth Mortgage Insurance Australia Full Year 2015 Financial Results Presentation 5 February 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 31 December 2015. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards
Slide 3: Overview
Overview Georgette Nicholas, Chief Executive Officer
Slide 4: Agenda
Agenda 1. Overview – Georgette Nicholas, Chief Executive Officer 2. FY15 Financials – Luke Oxenham, Chief Financial Officer 3. Outlook – Georgette Nicholas 4. Q&A FULL YEAR 2015 RESULTS PRESENTATION • produced by GENWORTH AUSTRALIA • 3
Slide 5: FY15 financial results summary
FY15 financial results summary Resilient earnings performance in FY15 FY15 guidance exceeded (A$ millions) FY14 FY15 Change % NEP growth slightly ahead. Loss performance ahead of expectations. Gross written premium 634.2 507.6 (20.0%) Dividend payout ratio progression. Net earned premium 445.8
Slide 6: Residential mortgage lending market
Residential mortgage lending market Reduced high LVR lending in 2015 HLVR Penetration $ billions 36.9% 34.0% 34.1% 33.5% 33.3% 30.5% 28.1% 24.3% 40.8 42.4 2015 data is 54.0 28.3 for first 9 46.2 37.3 59.0 months only 25.8 30.7 38.3 41.3 43.1 47.5 50.1 49.8 161.8 2 39.5 122.0 147.0 101.7 99.0 103.8 9
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: Composition of Underlying ROE changes
Composition of Underlying ROE changes Continue to evaluate opportunities to enhance ROE Underlying ROE Walk from FY14 to FY15 % 0.7 1.5 (0.8) (0.3) (0.2) 17.3% 13.1 12.2 11.5 11.6 11.6 FY14 Change in NEP Change in Investment Change in Equity FY15 Excess Capital FY15 @ 144% Losses Income Base / Other
Slide 9: Detailed financial performance
Detailed financial performance Luke Oxenham, Chief Financial Officer
Slide 10: 2H 2015 income statement
2H 2015 income statement Resilient earnings performance in FY15 Change (A$ millions) 1H14 2H14 FY14 1H15 2H15 FY15 FY14 vs FY15 Gross written premium 313.6 320.6 634.2 285.4 222.2 507.6 (20.0%) Movement in unearned premium (57.5) (56.0) (113.5) (19.7) 61.7 42.0 N/A Gross earned premium 256.1 264.6 5
Slide 11: New Insurance Written
New Insurance Written New business written reflecting policy changes since 2009 NIW 1 by original LVR2 band NIW 1 by product type $ billions, % $ billions, % 86.5% 86.5% 86.5% 86.5% 86.1% 85.1% 18.3 18.9 17.3 17.7 18.3 18.9 17.1 17.3 17.7 17.1 17.3% 14.9 28% 14.9 36% 25% 36% 33% 21% 98.1% 99.1% 97.9
Slide 12: Gross Written Premium
Gross Written Premium Average price of 1.63% in FY15 GWP and average price of flow business (GWP/NIW1) GWP walk $ millions, % $ millions (11.5) (75.9) (39.3) 2.00% 1.82% 1.80% 1.77% 1.77% 1.68% 1.50% 1.49% 323.5 313.6 320.6 285.4 273.0 1.00% 634.2 222.2 507.6 0.50% 0.00% 1H13 2H13 1H14 2H14 1H15 2H1
Slide 13: Net incurred claims
Net incurred claims Average paid claim returning to historical averages Average paid claim1 Average reserve per delinquency2 $’000 $’000 80.9 75.4 62.9 63.5 47.9 48.4 49.9 54.4 46.6 49.1 41.7 43.1 1H13 2H13 1H14 2H14 1H15 2H15 30 Jun 13 31 Dec 13 30 Jun 14 31 Dec 14 30 Jun 15 31 Dec 15 Composition o
Slide 14: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong stable balance sheet with over $1.32bn in UPR (A$ in millions) 31 Dec 14 31 Dec 15 Unearned premium by book year as at 31 December 2015 Assets Total UPR $1.32bn Cash and cash equivalents 88.6 78.1 2009 2010 2008 Investments 1 4,112.0 3,882.4 1.2% 2.4
Slide 15: Expansion to reinsurance program
Expansion to reinsurance program Reinsurance program supports returns and capital objectives Reinsurance Program 31 Dec 2015 - $875m cover Reinsurance Program 01 Jan 2016 - $950m cover $m 3,000 $m 3,000 2,500 100 Provider 3 100 Provider 3 2,500 100 Consortium 5 250 Consortium 3 200 Consortium 4 APRA
Slide 16: FY 2015 regulatory capital position
FY 2015 regulatory capital position Solvency ratio remains above Board target range Pro Forma (A$ in millions) as at 31 Dec 14 31 Dec 15 Evolution of capital sources 1 Jan 16 Capital Base $ billions Common Equity Tier 1 Capital 2,742.1 2,351.2 2,236.3 Tier 2 Capital 112.0 249.6 249.6 3.6 3.7 3.4 3.5
Slide 17: Capital management initiatives
Capital management initiatives Ongoing program of capital management actions Recent actions Genworth dividends Since listing, Genworth has paid out all after- 20 70% tax profits by way of ordinary and special dividends to shareholders. 16 65% Reinsurance program increased to $950 Ordinary payout
Slide 18: Summary and conclusion
Summary and conclusion Georgette Nicholas, CEO
Slide 19: 2016 outlook
2016 outlook Dynamic mortgage market expected 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 mod
Slide 20: Questions
Questions Georgette Nicholas, CEO Luke Oxenham, CFO
Slide 21: Supplementary Slides
Supplementary Slides
Slide 22: Residential mortgage lending market
Residential mortgage lending market Investment vs. Owner Occupied (APRA statistics) Investment vs. Owner Occupied1 (GMA) $ bn, % $ bn, % 39.1% 39.6% 34.8% 29.9% 33.9% 32.1% 32.8% 27.4% 31.1% 28.8% 24.5% 22.9% 23.3% 132.0 20.8% 19.6% 20.2% 105.3 75.6 108.4 84.0 81.3 77.7 68.2 12.5 8.7 6.7 8.0 8.6 8.4
Slide 23: New Insurance Written & Insurance In Force
New Insurance Written & Insurance In Force New business and insurance in force reflecting policy changes since 2009 Insurance in force (IIF)1 by original LVR2 band IIF1 by product type Total IIF $320 billion 89% 90% 30% 30% 29% 29% 16% 16% 9% 9% 8% 8% 6% 6% 2% 2% 6% 5% 3% 3% 17.3% 1% 1% 1% 1% <60% 6
Slide 24: Gross written premium
Gross written premium GWP and average price of flow business (GWP/NIW1) $ millions 1.84% 1.80% 1.80% 1.79% 1.77% 1.77% 1.53% 1.47% 159.7 163.1 153.9 157.5 157.7 127.7 124.7 97.5 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 GWP (including bulk) Average Premium (Flow only) Avg Premium <80% Avg Premium >80%
Slide 25: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ millions, % $ millions, % 27.6% 27.3% 69.9% 26.6% 26.3% 26.7% 25.7% 49.9% 48.8% 51.4% 46.2% 44.7% 34.4 34.1 34.0 34.9 31.6 62.8 30.4 53.0 60.2 58.2 59.8 56.2 81.2 24.6 24.9 25.8 28.7 62.8 22.6 24.1 46.5 42.8 41.7 49.9 1H13 2H13 1H14 2H14 1H15 2H15 1
Slide 26: 2015 full year performance metrics
2015 full year performance metrics Key financial measures FY14 FY15 Change FY15 vs FY14 NIW ($ billions) $36.2bn $32.6bn (9.9%) Average price - Flow NIW 1.80% 1.63% (0.17%) Gross written premium ($ millions) $634.2 m $507.6 m (20.0%) Net earned premium ($ millions) $445.8 m $469.9 m 5.4% Loss ratio
Slide 27: Half yearly financial information
Half yearly financial information Financial ratios 1 Pro forma Pro forma Pro forma Actual Actual Actual 1H13 2H13 1H14 2H14 1H15 2H15 Loss ratio 42.3% 22.6% 19.6% 18.4% 22.1% 25.7% Expense ratio 27.6% 27.3% 26.6% 26.3% 26.7% 25.7% Combined Ratio 69.9% 49.9% 46.2% 44.7% 48.8% 51.4% Insurance Margin 3
Slide 28: Delinquency development
Delinquency development Quarterly delinquency roll and delinquency composition Delinquency Roll 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Opening balance 5,851 5,868 5,820 5,454 4,980 5,070 5,405 5,300 4,953 5,378 5,900 5,804 New delinquencies 2,928 3,095 2,901 2,383 2,689 2,913 2,
Slide 29: Delinquency development
Delinquency development Favourable performance post 2009 1.40% 2005 2006 1.20% 2007 2008 2009 1.00% 2010 Delinquency Rate (%) 2011 2012 0.80% 2013 2014 2015 0.60% 2008 2012 2009 0.45% 0.40% 2013 0.39% 0.40% 0.31% 2011 0.36% 2007 2010 0.30% 0.27% 2006 0.20% 0.20% 2005 0.13% 2015 2014 0% 0.16% 0.00% 1
Slide 30: Net incurred claims
Net incurred claims (A$ millions unless otherwise stated) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Number of paid claims (#) 462 419 350 314 280 288 325 291 Average paid claim ($’000) 65.1 60.5 58.6 49.6 28.2 69.3 67.4 59.4 Claims paid 30.1 25.3 20.5 15.6 7.9 20.0 21.9 17.2 Movement in reserves (12.8
Slide 31: Delinquency population by MIA aged bucket
Delinquency population by MIA aged bucket 7,000 5,868 5,820 5,900 6,000 5,804 5,454 5,405 5,552 5,300 5,378 14% 14% 21% 4,980 5,070 4,953 23% 15% 5,000 16% 15% 22% 16% 18% 16% 17% 17% 22% 16% 16% 18% 18% No. of arrears 4,000 16% 17% 17% 16% 18% 16% 24% 25% 21% 23% 25% 3,000 20% 23% 22% 21% 22% 23% 2
Slide 32: Portfolio evolution (10 year history)
Portfolio evolution (10 year history) Annual NIW by LVR Annual NIW by Product Type 73.8 73.8 4% 6% 58.6 15% 56.5 19% 56.5 58.6 4% 1% 4% 14% 44.7 22% 22% 8% 44.7 24% 17% 41.6 3% 41.6 8% 0% 36.2 24% 4% 35.4 36.2 8% 33.8 35.4 33.8 23% 31.8 1% 0% 32.6 22% 31.8 30.8 0% 32.6 3% 8% 1% 0% 28% 0% 0% 0% 7% 3%
Slide 33: Summary portfolio characteristics
Summary portfolio characteristics Insurance portfolio as at 31 December 2015 – total $320 billion Insurance in force by LVR band (original LVR) Insurance in force by product type 3.0% 1.0% 1.0% % 2.0% % 9.0% <60% 5.0% 6.0% Standard 60.01-70% 29.0% 70.01-80% Low Doc 16.0% Business Select 80.01-85% 85
Slide 34: Investment portfolio
Investment portfolio Conservative well diversified portfolio with duration to maturity of 2.5 years Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type 2.0% 2.0% 3.8% 2.1% 13.0% 17.4% 13.7% 30.1% 17.4% 42.3% 24.5% 30.3% 43.1% 23.9% 34.5% 0.0% 0-1 Yr 1-
Slide 35: Claims severity
Claims severity 1 30% 25% 25% 24% 24% 22% 23% 20% 21% 22% 17% 15% 15% 10% 5% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1.Claim severity refers to the size of net claims paid as a proportion of the original residential mortgage loan amount The above figure excludes Inward Reinsurance,
Slide 36: Claims frequency by Book Year
Claims frequency by Book Year (%) as at 31 December 2015 1.60% 1.50% 1.40% 1.19% 1.20% 1.07% 1.05% 1.00% 0.92% 0.80% 0.60% 0.40% 0.34% 0.20% 0.01% 0.14% 0.25% 0.00% 0.06% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 37: Net claims incurred development
Ever to Date Loss Ratio by Book Year (%) as at 31 December 2015 70% 66% 60% 52% 50% Net claims incurred development 40% 33% 30% 20% 17% 10% 11% 8% 5% 0% 2% 0 0% 1 2 3 4 5 6 7 8 2007 2008 2009 2010 2011 2012 2013 2014 2015 FULL YEAR 2015 RESULTS PRESENTATION • produced by GENWORTH AUSTRALIA • 36
Slide 38: Effective LVR
Effective LVR As at 31 Dec 15 As at 31 Dec 14 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 % 2002 & prior 13.7 5% 78.4% 18.9% 172% 2002 & prior 15.0 5% 78.1% 21.3% 154% 20
Slide 39: Income statement reconciliation
Income statement reconciliation Reconciling to the US GAAP figures reported by Genworth Financial, Inc. USGAAP Add back: USGAAP USGAAP Adjustments Walk from US GAAP AUS Segment Results Aus Non Aus Aus to AIFRS GMA Consolidated Income Segment Controlling Segment Segment Statement for Year Ended 31 De
Genworth Mortgage Insurance Australia — FY2015 Earnings Presentation on 6ix