Helia Group Limited · ASX:HLI
Helia — Genworth Mortgage Insurance Australia — FY2019 Earnings Presentation
55 slides from Helia's earnings presentation, Feb 5, 2020
Slide 1: FY19 Financial Results Presentation
5 FEBRUARY 2020 FY19 FINANCIAL RESULTS PRESENTATION Illustration by Sydney based artist and illustrator, Mike Watt ©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 31 December 2019. 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 Mr Duncan West, Acting Chief Executive Officer
Slide 4: FY19 results overview
FY19 results overview Summary FY19 result in line with guidance Change (A$ millions) FY18 FY19 % • New insurance written (NIW) of $26.7 billion, up 20.3% (FY18: $22.2 billion). Gross written premium 460.2 433.2 (5.9%) • Gross Written Premium (GWP) decreased 5.9%. Excluding the bespoke transaction wr
Slide 5: Macroeconomic conditions
Macroeconomic conditions Interest rates House values – capital city dwellings 8.0% Cash Rate Standard Variable Mortgage Rate NSW VIC QLD SA WA ACT Australia 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-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec
Slide 6: Residential mortgage lending market
Residential mortgage lending market Originations and HLVR penetration1 $ billions, % 34% 33% 31% 31% 27% 27% 24% 22% 22% 21% 20% 371 384 376 359 335 31 28 300 37 24 40 52 54 262 256 51 49 240 242 40 49 242 46 26 31 36 41 17 43 47 50 43 200 202 187 37 200 139 166 102 99 98 111 121 71 68 80 80 83 93 1
Slide 7: Detailed financial performance
Detailed financial performance Mr Michael Bencsik, Chief Financial Officer
Slide 8: FY19 income statement
FY19 income statement (A$ millions) FY18 FY19 FY19 v • GWP in FY18 included a bespoke transaction written through Genworth’s Bermudian insurance FY18 (%) entity which is also reflected in the movement in Gross written premium 460.2 433.2 (5.9%) unearned premium. Excluding this transaction, GWP incre
Slide 9: New insurance written
New insurance written NIW1 by original LVR2 band NIW1 by product type $ billions, % $ billions 87% 87% 86% 86% 86% 17.7 84% 84% 84% 82% 82% 17.7 25% 14.9 14.0 14.3 13.1 14.9 12.6 12.5 14.0 14.3 21% 16% 11.9 13.1 21% 12.6 12.5 18% 17% 10.9 10.3 11.9 18% 10.9 20% 10.3 21% 20% 49% 48% 52% 49% 99.3% 55%
Slide 10: Gross written premium
Gross written premium GWP and average price1 of flow business GWP walk $ millions, % $ millions 460.2 2.1 (20.7) (8.3) 433.2 1.82% 1.81% 1.81% 1.81% 1.75% 1.56% 1.65% 1.55% 1.45% 266.8 249.1 222.2 189.8 192.1 182.3 186.7 193.4 184.1 2H15 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 FY18 Flow LVR Volume3
Slide 11: Net claims incurred
Net claims incurred (A$ millions unless otherwise stated) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 Number of paid claims (#) 365 301 320 325 1,311 319 296 361 376 1,352 Average paid claim1 ($’000) 117.8 115.2 115.7 102.1 112.8 94.2 94.1 97.9 99.4 96.6 Claims paid1 43.0 34.7 37.0 33.2 147.9
Slide 12: Loss development
Loss development Delinquency roll and incurred loss drivers Delinquency roll 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 Opening balance 6,696 6,958 7,306 7,350 6,696 7,145 7,490 7,891 7,713 7,145 New delinquencies 2,701 2,864 2,742 2,390 10,697 2,662 2,853 2,622 2,277 10,414 Cures (2,074) (2,
Slide 13: Balance sheet
Balance sheet Strong balance sheet with $3.1bn in cash and investments Balance sheet as at 31 December 2019 (A$ in millions) 31 Dec 18 31 Dec 19 Assets Unearned premium by book year as at Cash 141.5 87.3 31 December 20193 Accrued investment income 22.1 19.5 Investments 3,083.0 3,043.8 Total UPR $1.3
Slide 14: 2019 regulatory capital position
2019 regulatory capital position (A$ in millions) 31 Dec 18 31 Dec 19 NIW1 by original LVR band and Probable Capital Base Maximum Loss1 Common Equity Tier 1 Capital 1,748.1 1,459.6 $ billions Tier 2 Capital 200.0 200.0 2.60 2.59 2.51 Regulatory Capital Base 1,948.1 1,659.6 2.36 2.28 Capital requirem
Slide 15: Reinsurance
Reinsurance Program continues to drive efficiency Reinsurance program as at 31 December 2019 Observations 2,500 • As at 31 December 2019, $800 million of excess of loss cover with varying durations depending on the layer. 2,000 100 100 100 100 • Well diversified panel with over 20 different reinsure
Slide 16: Ongoing program of capital management
Ongoing program of capital management Recent actions Genworth dividends • Since listing in 2014, Genworth has returned to shareholders 100% of after tax profits by way of ordinary 52 and special dividends. 48 100% • In relation to FY19 the Board declared: 44 Ordinary payout ratio 40 80% cents per sh
Slide 17: Summary and conclusion
Summary and conclusion 44 Genworth 5, <.
Slide 18: Genworth economic outlook and FY20 guidance
2020 Genworth economic outlook and FY20 guidance Australian economic environment remains Early indicators of stabilisation in the Perth sound. Historically low cash rate, tax cuts, housing market into 2020, aided by a gradual continued infrastructure investment, recovery of the Western Australian ec
Slide 19: Conclusion
Conclusion Good progress in Track record of implementing Business is well delivering profits strategic initiatives capitalised and strong capital that broaden returns product offerings Unique set of Ordinary dividend Excess capital and competencies that payout ratio range potential uses can be lever
Slide 20: Questions
Questions 44 Genworth == 5)
Slide 21: Supplementary slides
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Slide 22: Supplementary slides contents
Supplementary slides Contents Section Slide Section Slide Reconciliations 24 Claims severity 50 Quarterly financial information 26 Claims frequency 51 Delinquency development 27 Ever to date loss ratio 52 Key performance measures 28 Genworth corporate structure 53 Effective LVR 37 Glossary 54 Graph:
Slide 23: Reconciliations
Reconciliations Statutory NPAT and Underlying NPAT ($ millions) 1H18 2H18 1H19 2H19 Statutory NPAT 41.9 33.8 88.1 32.0 Adjustment for change in unrealised (gains)/losses and 12.0 14.1 (64.4) 31.4 foreign currencies Adjustment for tax (expense)/credit on change in unrealised (gains)/losses (3.6) (4.2
Slide 24: Reconciliations
Reconciliations Underlying ROE 12 mths to 12 mths to 12 mths to 12 mths to ($ millions) Jun 18 Dec 18 Jun 19 Dec 19 Underlying NPAT 107.9 93.9 86.7 97.0 Underlying equity1 1,878.0 1,807.6 1,732.2 1,607.9 Underlying ROE (%) 5.7% 5.2% 5.0% 6.0% Source: Genworth Dividend payout ratio FY18 FY19 Ordinary
Slide 25: Quarterly financial information
Quarterly financial information Financial ratios Key financial 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 measures Loss ratio 55.9% 50.9% 52.6% 48.2% 55.3% 53.0% 52.9% 41.4% Expense ratio1 33.5% 32.4% 32.5% 36.1% 34.0% 35.3% 35.7% 35.9% Combined ratio 89.5% 83.3% 85.0% 84.3% 89.3% 88.4% 88.6% 77.3% Ins
Slide 26: Delinquency development
Delinquency development Delinquency composition Delinquencies Delinquencies 31 Dec 18 30 Jun 19 31 Dec 19 % 31 Dec 18 30 Jun 19 31 Dec 19 % by book year by geography 2010 and prior 3,805 4,012 3,591 0.48% New South Wales 1,254 1,425 1,320 0.42% 2011 416 411 361 0.74% Victoria 1,296 1,397 1,258 0.41%
Slide 27: Key performance measures
Key performance measures This section contains selected operating performance measures which are commonly used in the insurance industry as measures of operating performance. These operating performance measures enable the Company to compare its operating performance across periods. All measures in
Slide 28: Key performance measures
Key performance measures (A$ millions) 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 FY18 v FY19 (%) Gross written premium 174.1 92.7 92.1 101.3 460.2 86.3 97.8 114.6 134.6 433.2 (5.9%) Movement in unearned (84.7) 0.8 (6.5) (13.4) (103.8) 3.9 (5.1) (20.9) (42.7) (64.8) 37.6% premium Gross earned
Slide 29: Key performance measures
Key performance measures Primary insurance 31 Mar 2018 30 Jun 2018 30 Sep 2018 31 Dec 2018 31 Mar 2019 30 Jun 2019 30 Sep 2019 31 Dec 2019 Insured loans in-force (#) 1,407,431 1,354,614 1,335,133 1,332,906 1,323,172 1,308,811 1,293,961 1,290,216 Insured delinquent loans (#) 6,958 7,306 7,350 7,145 7
Slide 30: Key performance measures
Key performance measures 31 Dec 2017 31 Mar 2018 30 Jun 2018 30 Sep 2018 31 Dec 2018 31 Mar 2019 30 Jun 2019 30 Sep 2019 31 Dec 2019 % of % of % of % of % of % of % of % of % of Primary Primary Primary Primary Primary Primary Primary Primary Primary primary primary primary primary primary primary pr
Slide 31: Key performance measures
Key performance measures 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 4Q19 FY19 Paid claim1 ($ millions), quarterly analysis Flow 43 35 37 33 148 30 28 35 37 131 Bulk - - - - - - - - - - Total 43 35 37 33 148 30 28 35 37 131 Average paid claim ($ thousands)1 117.8 115.2 115.7 102.1 112.8 94.2 94.1 97.9 9
Slide 32: Key performance measures
Key performance measures 31 Mar 2018 30 Jun 2018 30 Sep 2018 31 Dec 2018 Primary Flow Bulk Primary Flow Bulk Primary Flow Bulk Primary Flow Bulk Risk in force ($ millions) by LVR 95.01% and above 17,390 17,390 - 16,527 16,527 - 16,258 16,258 - 15,986 15,986 - 90.01% to 95.00% 30,574 30,566 8 29,690
Slide 33: Key performance measures
Key performance measures PML (A $millions) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Pre-2008 267.7 260.4 217.5 165.8 108.8 46.0 40.2 36.8 2008 310.6 103.1 91.6 81.5 74.0 67.0 11.6 10.5 2009 434.3 411.1 119.7 105.3 94.2 84.1 73.0 12.9 2010 366.0 255.9 226.6 67.0 59.7 53.4 46.3 41.0 2011 404.5 394.7 26
Slide 34: Key performance measures
Key performance measures GEP (A $millions) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Pre-2008 65.6 35.4 16.5 3.5 - - - - 2008 48.9 32.8 21.6 14.3 2.2 - - - 2009 79.6 57.0 43.0 32.4 13.6 2.7 - - 2010 69.2 48.1 32.1 39.2 14.9 9.6 4.1 2.0 2011 95.2 73.9 54.3 51.0 24.6 16.1 9.4 4.7 2012 89.3 129.9 104.4 8
Slide 35: Key performance measures
Key performance measures Net claims incurred (A $millions) FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Pre-2008 (109.6) (42.0) (8.4) 51.4 (1.1) 27.0 (5.3) (5.2) 2008 (79.2) (31.9) (22.6) (23.7) (8.6) (13.6) (10.7) (9.4) 2009 (47.6) (24.4) (16.6) (40.8) (12.5) (18.9) (4.5) (11.0) 2010 (15.0) (9.7) (8.1)
Slide 36: Effective LVR
Effective LVR As at 31 December 2018 As at 31 December 2019 Insurance in force LVR Change in Insurance in force LVR Change in house price house price Book year $ billions % Original Effective % Book year $ billions % Original Effective % 2009 & prior 86.9 31% 78.4% 37.4% 74% 2010 & prior 90.5 32% 78
Slide 37: Residential mortgage lending market
Residential mortgage lending market NIW: Investment vs. owner-occupied (APRA statistics for ADI)1 NIW: Investment vs. owner-occupied2 (Genworth) $ billions, % $ billions, % 27% 40% 25% 24% 36% 37% 23% 23% 34% 34% 21% 32% 33% 33% 20% 20% 19% 29% 30% 30% 128 127 14% 136 109 14% 136 8.7 109 76 84 6.7 8
Slide 38: 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 2019 IIF1 by product type, as at 31 December 2019 Total IIF $307 billion HomeBuyer Plus Low 95.01%+ 2% Other Doc 1% 1% 4% 60.01-70% <60% 5% 8% 90.01-95% 26% 70.01-80% 16% 80.01-85% 9% 85.0
Slide 39: Insurance ratio analysis
Insurance ratio analysis Expenses Combined ratio $ millions, % $ millions, % 88.8% 86.2% 84.6% 83.0% 76.7% 33.7% 32.9% 34.7% 35.9% 34.2% 64.3% 60.6% 57.3% 48.8% 51.4% 26.7% 25.7% 27.1% 25.9% 144.2 24.4% 131.2 131.0 125.6 128.3 121.8 123.5 125.0 62.8 110.1 116.7 60.2 55.8 60.8 54.7 53.6 51.2 54.0 60.
Slide 40: Delinquency development
Delinquency development 1.40% 2005 2006 2007 1.20% 2008 2009 2010 1.00% 2011 2012 Delinquency rate (%) 0.80% 2013 2014 2015 0.60% 2016 0.60% 0.56% 2017 0.51% 0.50% 0.45% 2018 0.41% 0.41% 2019 0.40% 0.40% 0.36% 0.24% 0.26% 0.25% 0.20% 0.17% 0.10% 0.01% 0.00% 103 109 115 121 127 133 139 145 151 157 16
Slide 41: Delinquency population
Delinquency population By month in arrears1, 2 37.80% 7,891 8,000 7,713 50% 34.19% 7,490 7,285 7,146 7,306 7,350 7,145 8% 9% 7,221 35.10% 6,926 6,958 8% 45% 7,000 6,731 6,696 10% 10% 36.38% 12% 9% 10% 13% 12% 11% 35.38% 23% 40% 14% 13% 23% 30.97% 6,000 23% 19% 19% 20% 21% 22% 24% 35% 31.83% 20% 20%
Slide 42: Portfolio evolution
Portfolio evolution Annual NIW1 by original LVR band Annual NIW1 by product type $ billions $ billions 44.7 44.7 41.6 41.6 35.4 36.2 15% 36% 35.4 36.2 33.8 35% 1% 31.8 32.6 33.8 2% 30.8 31.8 32.6 46% 30.8 3% 1% 36% 5% 36% 23% 26.6 26.7 3% 24% 39% 26.6 26.7 29% 23.9 1% 0% 20% 17% 20% 23.9 22.2 22.2 1
Slide 43: Insurance in force
Insurance in force IIF1 by book year (as at 31 December 2018) IIF1 by book year (as at 31 December 2019) 2017 2018 2018 2019 7% 7% 7% 9% 2016 2008 & Prior 7% 2017 2009 & Prior 35% 7% 38% 2015 2016 8% 6% 2014 2015 8% 7% 2009 5% 2014 2010 2013 2010 7% 2011 4% 7% 2013 2012 4% 2012 2011 5% 6% 6% 5% 5% S
Slide 44: Insurance in force
Insurance in force IIF1 by geography (as at 31 December 2018) IIF1 by geography (as at 31 December 2019) ACT NZ ACT NT NZ NT 3% 3% 2% 1% 2% 1% TAS TAS 2% 2% SA SA NSW 6% NSW 6% 28% 27% WA WA 12% 13% QLD QLD VIC 23% VIC 23% 23% 23% Source: Genworth Source: Genworth 1. IIF includes capitalised premium
Slide 45: Investment performance
Investment performance The primary investment objective is to manage the portfolio of securities to pay claims as they become due, whilst achieving return and income targets with an acceptable level of volatility. The asset allocation and asset management strategy was expanded in FY18 to include exp
Slide 46: Cash and Investments portfolio
Cash and Investments portfolio Conservative, well-diversified portfolio with average maturity of 4.1 years1 Portfolio by maturity Portfolio by rating Portfolio by issuer type 3% 3% 9% 3% 24% 16% 30% 17% 40% 46% 18% 3% 27% 6% 20% 12% 23% Corporate State Gov't 0 - 1 yr 1 - 3 yr AAA AA A BBB or Below E
Slide 47: Cash and Investments portfolio – Technical funds
Cash and Investments portfolio – Technical funds1 Genworth technical funds were $1.4 billion as at 31 December 2019 Investment assets by term to maturity Investment assets by source 6% 8% 17% 27% 26% 23% 67% 26% Corporate 0 - 1 yr 1 - 3 yr 3 - 5 yr 5 - 10 yr 10 yr + State Gov't Cash and short-term d
Slide 48: Cash and Investments portfolio – Shareholder funds
Cash and Investments portfolio – Shareholder funds Genworth shareholder funds were $1.7 billion as at 31 December 2019 Investment assets by term to maturity Investment assets by source 1% 5% 5% 11% 5% 29% 11% 10% 15% 30% 78% 0 - 1 yr 1 - 3 yr 3 - 5 yr Corporate Short-term deposits 5 - 10 yr >10 yr E
Slide 49: Claims severity
Claims severity By book year (%) as at 31 December 2019 40% 37% 35% 32% 32% 30% 27% 26% 26% 25% 24% 23% 23% 20% 19% 15% 17% 15% 10% 9% 5% 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 Year 14 Year 15 2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 50: Claims frequency
Claims frequency By book year (%) as at 31 December 2019 2.0% 1.88% 1.8% 1.6% 1.45% 1.4% 1.27% 1.2% 1.08% 1.0% 0.8% 0.73% 0.60% 0.63% 0.6% 0.59% 0.4% 0.40% 0.2% 0.23% 0.02% 0.10% 0.04% 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 Year 14 2006 20
Slide 51: Ever to date loss ratio
Ever to date loss ratio By book year (%) as at 31 December 2019 80% 74% 70% 60% 50% 40% 41% 30% 29% 27% 28% 23% 20% 17% 10% 10% 3% 7% 0% 5% 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 Development Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Note: This slide excludes excess of loss insurance.
Slide 52: Glossary
Glossary As at 31 December 2019 Term Definition Term Definition AIFRS Australian equivalent to International Financial Reporting Expense ratio The expense ratio is calculated by dividing the sum of the Standards acquisition costs and the other underwriting expenses by the net earned premium ASX ASX
Slide 53: Glossary
Glossary As at 31 December 2019 Term Definition Term Definition Investment The investment return is calculated as the interest income on Regulatory The regulatory capital base is the sum of Tier 1 Capital and Tier 2 return technical funds plus the interest income on shareholder funds capital base Ca
Slide 54: For more information, analysts, investors and other interested parties should contact
For more information, analysts, investors and other interested parties should contact: Iwona (Evi) Falkiner Keshvar Seale Head of Corporate Affairs and Investor Relations Corporate Affairs and Investor Relations Manager M: +61 428 059 965 M: +61 499 088 640 The release of this announcement was autho
Slide 55: NVA
NVA Genworth > Sse
Genworth Mortgage Insurance Australia — FY2019 Earnings Presentation on 6ix