Helia Group Limited · ASX:HLI
Helia — FY2018 Earnings Presentation
42 slides from Helia's earnings presentation, Feb 6, 2019
Slide 1: Our Place - Financial Results Presentation
OUR PLACE 6 FEBRUARY 2019 FINANCIAL RESULTS PRESENTATION ©2019 Genworth Mortgage Insurance Australia Limited. All rights reserved. Illustration by Sydney based artist and illustrator, Mike Watt
Slide 2: Disclaimer
Disclaimer This presentation contains general information in summary form which is current as at 31 December 2018. 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: Introduction
Introduction Georgette Nicholas, CEO
Slide 4: FY18 results overview
FY18 results overview Summary Change FY18 result in line with guidance (A$ millions) FY17 FY18 % • GWP increased 24.7%. Increase includes business written via Genworth’s recently established Bermudan entity (utilising a consortium of global Gross written premium 369.0 460.2 24.7% reinsurers). Only a
Slide 5: FY18 results overview - 4Q18 result
FY18 results overview Summary % 4Q18 result (A$ millions) 4Q17 1Q18 2Q18 3Q18 4Q18 Change • Increase in 4Q18 GWP versus 4Q17 reflects growth in 4Q17 v. traditional LMI flow business 4Q18 • Excess of loss contract signed with a new customer in 4Q18 Gross written resulting in Genworth now having comme
Slide 6: Macroeconomic conditions
Macroeconomic conditions Interest rates House values – capital city dwellings NSW VIC QLD SA WA ACT Australia 8.0% Cash Rate Standard Variable Mortgage Rate 200 7.0% 180 6.0% 5.0% 160 Home value Index 4.0% 140 3.0% 120 2.0% 100 1.0% 0.0% 80 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec
Slide 7: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 37% A$ bn 34% 33% 31% 31% 27% 27% 24% 22% 21% 20% 376 385 371 28 335 37 31 300 54 40 52 51 271 262 256 40 240 242 49 18 219 46 36 41 37 26 31 41 43 43 200 202 47 50 200 40 166 139 141 102 Penetration99 HLVR 98 111 74 93 101 65 71
Slide 8: Genworth's Strategic Program of Work
Genworth’s Strategic Program of Work Designed to re-ignite profitable growth over the medium-term Value proposition: Innovation and technology will underpin Genworth’s value proposition Focus: To be the leading provider of customer-focused capital and risk management solutions in residential mortgag
Slide 9: Genworth's Strategic Program of Work
Genworth’s Strategic Program of Work Redefining our core business model Initiative Deliverables Bespoke Risk Management Solutions: • Bermudan insurance entity established enabling Genworth to offer bespoke risk management solutions for portfolio cover (across high & low LVRs) utilising consortium of
Slide 10: Detailed financial performance
Detailed financial performance
Slide 11: FY18 income statement
FY18 income statement (A$ millions) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 4Q18 FY18 FY18 v FY17 (%) Gross written premium 88.2 94.1 88.9 97.7 369.0 174.1 92.7 92.1 101.3 460.2 24.7% Movement in unearned premium 36.7 26.5 28.1 (22.0) 69.2 (84.7) 0.8 (6.5) (13.4) (103.8) (250.0%) Gross earned premiu
Slide 12: New insurance written
New insurance written NIW1 by original LVR2 band NIW1 by product type $ bn, % $ bn 87% 87% 86% 87% 18.9 86% 86% 17.7 17.3 84% 18.9 84% 82% 82% 17.3 17.7 28% 14.9 25% 14.0 33% 14.9 12.6 13.1 14.0 21% 11.9 13.1 16% 12.6 17% 10.9 11.9 18% 10.3 10.9 20% 10.3 21% 20% 51% 49% 99.1% 52% 48% 98.6% 99.3% 50%
Slide 13: Gross written premium
Gross written premium GWP and average price1 of flow business GWP walk $ m, % $m 71.3 (0.7) 460.2 20.5 2.0% 369.0 1.82% 1.79% 1.78% 1.82% 1.81% 1.81% 1.65% 313.6 320.6 1.55% 1.56% 1.45% 1.5% 285.4 266.8 222.2 1.0% 189.8 192.1 182.3 186.7 193.4 0.5% 0.0% 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18 2
Slide 14: Net claims incurred
Net claims incurred (A$ millions unless otherwise stated) 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 4Q18 FY18 Number of paid claims (#) 356 355 376 385 1,472 365 301 320 325 1,311 Average paid claim1 ($’000) 92.5 112.2 110.6 133.4 112.6 117.8 115.2 115.7 102.1 112.8 Claims paid1 32.9 39.8 41.6 51.4 16
Slide 15: Loss development
Loss development Delinquency roll and incurred loss drivers Delinquency roll 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 2Q18 3Q18 4Q18 FY18 Opening balance 6,731 6,926 7,285 7,146 6,731 6,696 6,958 7,306 7,350 6,696 New delinquencies 2,852 3,145 2,887 2,463 11,347 2,701 2,864 2,742 2,390 10,697 Cures (2,301) (2,
Slide 16: Balance sheet and unearned premium reserve
Balance sheet and unearned premium reserve Strong balance sheet with $3.2bn in cash and investments and $1.2bn in UPR Unearned premium by year as at Balance sheet as at 31 December 2018 31 December 2018 (A$ in millions) 31 Dec 17 31 Dec 18 Total UPR $1.2bn Assets Cash and cash equivalents 43.0 141.5
Slide 17: FY 2018 regulatory capital position
FY 2018 regulatory capital position (A$ in millions) 31 Dec 17 31 Dec 18 NIW1 by original LVR band and Probable Maximum Loss1 Capital Base Common Equity Tier 1 Capital 1,892.4 1,748.1 $ bn Tier 2 Capital 200.0 200.0 2.60 2.59 2.51 Regulatory Capital Base 2,092.4 1,948.1 2.36 2.36 2.28 Capital requir
Slide 18: Reinsurance
Reinsurance 2018 Renewal has improved capital efficiency Reinsurance program as at 31 Dec 2018 Observations 2,500 • As at 31 December 2018, $800 million of excess of loss cover with varying durations depending on the layer • Well diversified panel with over 20 different reinsurers participating acro
Slide 19: Ordinary payout ratio
Ongoing program of capital management Recent actions Genworth dividends • Since listing in 2014, Genworth has paid out all after-tax profits by way of ordinary and special dividends to shareholders 32 • In FY18 the Board declared: 28 100% ‒ A fully franked final ordinary dividend of 9.0 cps Ordinary
Slide 20: Summary and conclusion
Summary and conclusion we Genworth %, <.
Slide 21: Genworth economic outlook and FY19 guidance
2019 Genworth economic outlook and FY19 guidance Economic outlook for 2019 remains Moderating housing market conditions to positive. Ongoing investment in continue for most of 2019 reflecting pressure infrastructure and non-mining sectors plus on lending due to tightened credit conditions, increases
Slide 22: Conclusion
Conclusion Good progress in Track record of Strategic work implementing Business is well delivering profits being undertaken strategic initiatives capitalised and strong capital to redefine core that broaden returns business model product offerings Unique set of Excess capital and competencies that
Slide 23: Questions
Questions 44 Genworth =, <.
Slide 24: Supplementary slides
Supplementary slides we Genworth %, <.
Slide 25: Earnings curve
Earnings curve Comprehensive review of premium earning pattern completed in 2H17 Earnings pattern for premium written post 1 Oct 20171 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Years since inception 1.Earnings pattern excludes excess of loss insurance and bulk and is based on assumed cancella
Slide 26: Earnings curve
Earnings curve Comparative in-force earning pattern for premium written pre-1 October 20171 35% 30% 25% 20% 15% 10% 5% 0% 2018 2019 2020 2021 2022 2023 2024 Proportion - prior curve (pre 01 Oct 2017) Proportion - revised curve (post 01 Oct 2017) 1.Earnings pattern excludes excess of loss insurance a
Slide 27: Residential mortgage lending market
Residential mortgage lending market Investment vs. owner-occupied (APRA statistics for ADI)1 Investment vs. owner-occupied2 (Genworth) $ bn, % $ bn, % 40% 30% 36% 37% 27% 34% 34% 24% 25% 33% 33% 32% 23% 31% 31% 23% 29% 21% 20% 20% 19% 128 127 136 136 14% 109 8.7 76 83 12.5 78 84 81 6.7 8.0 8.6 68 8.
Slide 28: Insurance-in-force and new insurance written
Insurance-in-force and new insurance written Insurance in force (IIF)1 by original LVR2 band, as at 31 December 2018 IIF1 by product type, as at 31 December 2018 Total IIF $310 bn Low HomeBuyer Plus 95.01%+ Doc 2% Other 60.01-70% 4% 1% 1% 6% <60% 8% 90.01-95% 27% 70.01-80% 15% 80.01-85% Standard 85.
Slide 29: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ m, % $ m, % 76.7% 86.2% 84.6% 34.2% 33.7% 32.9% 64.3% 60.6% 57.3% 51.4% 26.6% 26.3% 26.7% 25.7% 27.1% 25.9% 46.2% 44.7% 48.8% 24.4% 144.2 125.6 131.2 128.3 121.8 123.5 116.7 60.2 62.8 60.8 110.1 58.1 59.8 101.0 101.5 60.8 55.8 54.7 53.6 47.1 47.2 55
Slide 30: 2018 full year performance metrics
2018 full year performance metrics Change Key financial measures FY17 FY18 FY18 vs FY17 NIW ($ billions) $23.9bn $22.2bn (7.0%) Average price - Flow NIW 1.73% 1.81% 8bps Gross written premium ($ millions) $369.0m $460.2m 24.7% Net earned premium ($ millions) $370.5m $281.3m (24.1%) Loss ratio 38.3%
Slide 31: Quarterly financial information
Quarterly financial information Financial ratios Key financial 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 measures Loss ratio 34.8% 34.7% 37.0% 53.1% 55.9% 50.9% 52.6% 48.2% Expense ratio 25.2% 26.6% 29.7% 40.6% 33.5% 32.4% 32.5% 36.1% Combined ratio 60.1% 61.3% 66.6% 93.7% 89.5% 83.3% 85.0% 84.3% Insu
Slide 32: Delinquency development
Delinquency development Delinquency composition Delinquencies by Delinquencies by Dec 17 Jun 18 Dec 18 Dec 17 Jun 18 Dec 18 book year geography 2009 and prior 3,552 3,709 3,434 0.47% New South Wales 1,088 1,224 1,254 0.38% 2010 357 376 371 0.62% Victoria 1,304 1,368 1,296 0.40% 2011 393 427 416 0.77
Slide 33: Delinquency development
Delinquency development Favourable performance post 2009 1.40% 2005 2006 2007 1.20% 2008 2009 2010 1.00% 2011 2012 Delinquency rate (%) 0.80% 2013 2014 2015 0.60% 0.57% 0.55% 2016 0.57% 2017 0.47% 0.47% 2018 0.40% 0.36% 0.41% 0.40% 0.29% 0.26% 0.20% 0.18% 0.18% 0.11% 0.01% 0.00% 103 109 115 121 127
Slide 34: Delinquency population
Delinquency population By month in arrears1, 2 8,000 50% 39.79% 7,285 7,146 7,306 7,350 7,145 42.64% 6,958 45% 7,000 6,844 6,731 6,926 6,696 10% 10% 43.27% 12% 9% 6,413 12% 11% 40.70% 13% 40% 14% 5,900 5,804 5,889 14% 13% 37.46% 6,000 13% 5,552 19% 20% 21% 22% 40.84% 5,378 19% 35% 20% 14% 14% 14% 17
Slide 35: Portfolio evolution
Portfolio evolution Annual NIW1 by LVR Annual NIW1 by product type 73.8 73.8 26% 28% 17% 44.7 44.7 41.6 41.6 36% 35.4 36.2 15% 36.2 33.8 35% 35.4 31.8 32.6 33.8 2% 1% 32.6 46% 30.8 31.8 30.8 3% 36% 1% 24% 36% 23% 26.6 5% 3% 1% 29% 39% 26.6 20% 17% 23.9 72% 1% 23.9 22.2 1% 22.2 57% 19% 20% 0% 41% 45%
Slide 36: Insurance in force
Insurance in force IIF1 by book year IIF1 by state ACT NT NZ 3% 1% 2% 2017 7% 2018 TAS 7% 2% SA 2008 & 6% NSW 2016 28% 7% Prior 35% WA 12% 2015 8% 2014 8% 2009 2013 5% QLD 2010 23% VIC 7% 2012 2011 23% 5% 6% 5% 1.IIF includes capitalised premium. Excludes excess of loss insurance 36 Full Year 2018 f
Slide 37: Investment portfolio
Investment portfolio Conservative, well-diversified portfolio with average maturity of 3.6 years1 Investment portfolio by maturity Investment portfolio by rating Investment portfolio by issuer type 4% 4% 8% 4% 4% 27% 24% 14% 38% 16% 46% 15% 4% 14% 8% 31% 25% 14% Corporate State Gov't Cash Equiv. 0 -
Slide 38: Claims severity
Claims severity1 40% 38% 35% 32% 32% 30% 26% 26% 25% 26% 24% 23% 22% 20% 15% 17% 17% 10% 11% 5% 3% 0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. Claim severity refers to th
Slide 39: Claims frequency
Claims frequency By book year (%) as at 31 December 2018 2.0% 1.8% 1.80% 1.6% 1.4% 1.36% 1.25% 1.2% 1.05% 1.0% 0.8% 0.6% 0.60% 0.55% 0.54% 0.45% 0.4% 0.03% 0.25% 0.2% 0.01% 0.12% 0.0% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 2006 2007 2008 2009 2
Slide 40: Net claims incurred development
Ever to date loss ratio By book year (%) as at 31 December 2018 80% 72% 70% Net claims incurred development 60% 53% 50% 40% 40% 30% 27% 26% 19% 24% 20% 10% 12% 2% 8% 5% 0% 0 0% 1 2 3 4 5 6 7 8 9 10 11 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 40 Full Year 2018 financial results – p
Slide 41: Effective LVR
Effective LVR As at 31 Dec 17 As at 31 Dec 18 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 % 2008 & prior 81.8 28% 77.7% 35.3% 87% 2009 & prior 86.9 31% 78.4% 37.4% 74% 20
Slide 42: NVA
NVA Genworth > Sse