Sagen MI Canada Inc · TSX:MIC.PR.A
Sagen MI Canada — Genworth MI Canada — Investor Presentation (February 2012)
31 slides from Sagen MI Canada's investor presentation, February 2012
Slide 1: Genworth MI Canada Inc. – Leading the path to homeownership
Genworth MI Canada Inc. Leading the path to homeownership Genworth MI Canada Inc. February 1 2012
Slide 2: Forward-looking and non-IFRS statements
Forward-looking and non-IFRS 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 e
Slide 3: 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 4: Overview
Overview Genworth MI Canada Inc. 4
Slide 5: Solid Q4 2011 and Full Year Results
Solid Q4 2011 and Full Year Results Q4 2011 Full Year 2011 Net operating income $79 MM $318 MM Return on equity 13% 13% Operating earnings per share (diluted) $0.80 $3.12 Operating Earnings Per Share (Diluted) Book Value Per Share (Diluted, including AOCI) $3.23 $26.94 $3.12 $3.01 $24.44 $22.40 Chan
Slide 6: Delivering Solid Results
Delivering Solid Results Priorities Full Year 2011 Premiums Net premiums written of $533 MM Prudent risk management Loss ratio of 37% General investment portfolio return Book yield of 4.3% Capital strength 162% MCT vs. 145% internal target Dividends to shareholders $1.07 per share plus special divid
Slide 7: Housing Market - Signs of Soft Landing
Housing Market - Signs of Soft Landing Flat home price appreciation Reasonable supply at 5.8 months Moderating demand reflects affordability pressures Mortgage originations flat Slower economic environment Reduced urgency to buy as low rates persist Stable debt service ratios Increasing level of awa
Slide 8: Fewer Delinquencies in Canada
Fewer Delinquencies in Canada 90 Day Delinquencies Bank originated mortgages 5.0% 4.5% 4.0% Strong credit culture 3.5% 3.0% Borrower recourse 2.5% 2.0% 1.5% Interest not tax deductible 1.0% 0.5% Active regulatory oversight 0.0% US Australia Canada UK Source: MBA, CML, CBA, APRA Genworth MI Canada In
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
Slide 10: High Quality Insurance Portfolio
High Quality Insurance Portfolio Genworth MI Canada Inc. 10
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 Guidelines and pricing Portfolio monitoring Drive workouts Risk appetite an
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 rates Portfo
Slide 13: Improving Delinquency Rate
Improving Delinquency Rate Mortgage insurance portfolio Insurance delinquency rate in-force Dec 31 Sept 30 Dec 31 Dec 31 2011 2011 2010 2011 Ontario 0.12% 0.13% 0.18% 46% BC 0.28% 0.27% 0.30% 16% Alberta 0.40% 0.46% 0.62% 16% Quebec 0.22% 0.22% 0.23% 15% Other 0.17% 0.18% 0.19% 7% Canada 0.20% 0.21%
Slide 14: Positive Seasoning Trends
Positive Seasoning Trends Book year delinquency development Regional delinquency development 3.5% 1.4% Canada 2007 Canada 2008 Canada 2009 ON 2007 AB 2007 BC 2007 3.0% 1.2% 2.5% Delinquency Rate Delinquency Rate 1.0% 2.0% 0.8% 1.5% 0.6% 0.4% 1.0% 0.2% 0.5% 0.0% 0.0% 1 4 7 10 13 16 19 22 25 28 31 34
Slide 15: 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 100
Slide 16: 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 -25 L
Slide 17: 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 18: Strong Competitive Positioning
Strong Competitive Positioning Genworth MI Canada Inc. 18
Slide 19: 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 ~$75 B Mostly large bank distributed 1. High loan-to-value based on Company estima
Slide 20: Critical Part of the Mortgage Process
Critical Part of the Mortgage Process Lead Processing Portfolio Claims Underwriting Management Generation (Order MI) Management Training Seamless processes Credit scores Performance benchmarking Workouts Consumer tools Technology links Fraud detection Market updates Asset management Significant prog
Slide 21: Driving Market Share
Driving Market Share Technology Innovation Training Service Market Share Market Penetration Market Share Today Future Tailored lender strategies drive top line growth Genworth MI Canada Inc. 21
Slide 22: Delivering Consistent Profitability
Delivering Consistent Profitability Genworth MI Canada Inc. 22
Slide 23: Solid Financial Track Record
Solid Financial Track Record Operating Income1 371 ($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 24: Continued Profitability
Continued Profitability $ MM (except EPS) Q4 2011 Q3 2011 Q4 2010 Net premiums written $ 123 $ 160 $ 134 Premiums earned 156 149 156 Losses on claims (62) (54) (50) Underwriting income 68 71 78 Investment income 42 44 44 (excluding gains / losses) Net operating income $ 79 $ 80 $ 84 Operating EPS (d
Slide 25: Solid Progress on Market Penetration
Solid Progress on Market Penetration Net Premiums Written ($MM) Premiums Earned ($MM) $552 $533 $620 $612 134 123 156 156 166 160 155 149 157 149 154 151 94 101 156 155 2010 2011 2010 2011 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Single upfront premium, $1.8 B in unearned premiums Genworth MI Canada Inc. 25
Slide 26: Losses and Expenses Within Pricing Range
Losses and Expenses Within Pricing Range 55% 56% 53% Total delinquencies 52% 50% Combined 50% 49% declined by 4% 17% 17% 16% 17% Expense 18% 16% 17% Average reserve per delinquency increased by 14% 38% 36% 39% 37% Loss 32% 33% 33% Ongoing loss mitigation Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 FY 2010 FY 2011
Slide 27: $5 Billion Investment Portfolio
$5 Billion Investment Portfolio Preferred, 1% Common, 4% Guar. Fund, 14% Primarily fixed income Cash, 2% 96% of bonds ‘A’ or better 3.9 year duration Corporates, Federal, Total $5.1B 46% General Fund 17% $225 MM common and $4.3B preferred equities 4.3% book yield1 Provincial, 16% 1. Pre-tax equivale
Slide 28: Government Guarantee framework positive
Government Guarantee framework positive New Framework Same level of guarantee Guarantee fund and related exit fees to be eliminated Higher capital requirement to be set by Minister of Finance Higher regulatory capital available to Exit fees to be eliminated offset higher capital requirements $MM Q4
Slide 29: Strong Capital Position with Flexibility
Strong Capital Position with Flexibility Minimum Capital Test Ratio Capital Management Priorities 162% Fund core growth 156% 155% Maintain strong ratings Internal MCT S&P (A- positive) Target 145% DBRS (AA low stable) Financial Strength S&P (AA- ) and DBRS (AA stable) Preserve financial flexibility
Slide 30: Closing thoughts
Closing thoughts Genworth MI Canada Inc. 30
Slide 31: Strategic Priorities for 2012
Strategic Priorities for 2012 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 Ca
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