Helia Group Limited · ASX:HLI
Helia — FY2023 Earnings Presentation
50 slides from Helia's earnings presentation, Feb 27, 2024
Slide 1: 2023 Full Year Results Investor Presentation
2023 Full Year Results Investor Presentation 27 February 2024
Slide 2: Disclaimer
Disclaimer 2 This presentation contains general information in summary form which is current as at 31 December 2023. It may present financial information on both a statutory basis (prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standar
Slide 3: Agenda
3 Agenda 1. Overview 4 2. FY23 Financial results 16 3. Closing comments 34 4. Supplementary information 38 5. Glossary 47
Slide 4: Overview
Overview Pauline Blight-Johnston Chief Executive Officer and Managing Director 2023 Full Year Results
Slide 5: FY23 highlights
5 FY23 highlights Strong financial Capital Key financial drivers Strategic progress results management Underlying NPAT1 Insurance revenue NPS up 2 points to PCA coverage $248m $427m +79 ratio 1.86x Statutory NPAT Total claims incurred2 Won Great FY23 dividends of $275m ($67m) Southern Bank 59cps3 In
Slide 6: Key performance measures
6 Key performance measures Statutory NPAT ($ millions) Underlying NPAT ($ millions) 275.1 247.7 226.6 232.6 217.5 201.2 FY21 FY22 FY23 FY21 FY22 FY23 Underlying diluted EPS (cps) Underlying ROE (%) 21.1 76.3 18.5 18.4 60.8 54.9 97.0 FY21 FY22 FY23 FY21 FY22 FY23 2023 Full Year Results
Slide 7: Key performance measures
7 Key performance measures Insurance revenue ($ millions) Total incurred claims ratio (%) 462.6 467.7 427.3 FY21 FY22 FY23 (0.4) (4.3) (15.7) FY21 FY22 FY23 PCA coverage ratio (x)1 NTA and CSM per share ($)3 2.21 5.32 2.03 4.78 1.86 4.53 1.4-1.6x 2 3.44 3.76 3.19 FY21 FY22 FY23 FY21 FY22 FY23 Net ta
Slide 8: Economic environment
8 Economic environment Labor force resilient Dwelling values rising Higher interest rates Unemployment remained low at 3.9% at end of 2023 National home dwelling values up 8.1% in 2023 to new RBA cash rate target increased 125bps in FY23 to 4.35% record Annual wage growth increased 4.2% improving Av
Slide 9: Cyclical and structural factors driving residential mortgage market
9 Cyclical and structural factors driving residential mortgage market Industry housing new loan commitments ($ billions)1 Share of high LVR residential lending (% of total lending) 37 8 40% 32 7 27 30% 6 22 20% 17 5 12 10% 4 7 2 3 0% Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun
Slide 10: Impact of cyclical and structural factors on LMI market volumes
10 Impact of cyclical and structural factors on LMI market volumes Industry quarterly GWP ($ millions)1 Government Guarantees allocated and take up 450 50,000 400 350 40,000 300 250 30,000 200 150 20,000 100 65% 50 10,000 67% 76% 0 68% 0 Jun 19/20 Jun 20/21 Jun 21/22 Jun 22/23 Jun 23/24 YTD Source:
Slide 11: Delinquencies remain very low
11 Delinquencies remain very low Industry 90+ day arrears Helia delinquencies (number of) 1.0% 9,000 8,000 0.8% 7,000 6,000 0.6% 5,000 0.4% 4,000 3,000 0.2% 2,000 0.0% 1,000 Mar-19 Dec-19 Sep-19 Mar-20 Dec-20 Sep-20 Mar-21 Dec-21 Dec-22 Dec-23 Sep-21 Mar-22 Sep-22 Mar-23 Sep-23 Jun-19 Jun-20 Jun-21
Slide 12: Leading partner of choice for flexible home ownership solutions
12 Leading partner of choice for flexible home ownership solutions Home loan lenders Home buyers Top 101 Family Monthly SMSF SME Net promoter score (NPS)2 1. CBA Helia Assistance Residential 2. WBC Peer 2 3. NAB Peer 1 4. ANZ Captive 5. MQG Self-insured 6. BOQ Helia +75 +77 +79 7. BEN Helia +49 +42
Slide 13: Improving broker and borrower education
13 Improving broker and borrower education First home buyer resources Case studies it’s my home LMI education Deposit estimators and Infographics Videos resources Annual lifestyle and educational magazine 2023 Full Year Results
Slide 14: Progress on sustainability commitments
14 Progress on sustainability commitments Driving financial wellbeing Demonstrating good corporate Enhancing climate resilience & housing accessibility citizenship • 42,641 home buyers helped into homes • Achieved 100% net zero commitment for • Greater than 40% women in leadership Scope 1 & 2 emissi
Slide 15: Capital management
15 Capital management Dividend per share (cps) Principles • Deploy capital at attractive returns for shareholders 30 27 • Return to and then operate within Board target range of 1.40 – 1.60x PCA over time 12 • Target stable fully franked ordinary dividend 12 12 14 14 15 • Declare special dividends a
Slide 16: FY23 Financial results
FY23 Financial results Michael Cant Chief Financial Officer 2023 Full Year Results
Slide 17: Income Statement
17 Income Statement FY23 v FY23 commentary: ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 FY22 • Insurance revenue down on pcp due to lower in-force (%) volumes Insurance revenue 216.2 251.4 467.7 219.8 207.4 427.3 (8.6) Total incurred claims 8.0 (6.3) 1.7 40.9 26.3 67.2 N.M.1 • Total incurred claims w
Slide 18: Insurance revenue
18 Insurance revenue FY23 commentary: ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 • Insurance revenue down 9% on pcp Expected insurance service expenses 84.4 88.3 172.7 76.0 88.1 164.1 • Expected incurred component is lower reflecting a lower incurred LRC from book run off Risk adjustment recognised
Slide 19: Gross written premium (GWP)
19 Gross written premium (GWP) GWP ($ millions) GWP walk ($ millions) 322.4 289.7 (3.3) 259.9 249.1 239.3 184.1 188.6 (121.9) (9.5) 319.9 131.4 96.6 88.6 185.2 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H22 1H23 2H23 FY22 Mix Volume Rate FY23 FY23 commentary: • GWP was down 42% on pcp, reflecting lower ind
Slide 20: Insurance service expense
20 Insurance service expense ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 Incurred claims from current period 38.0 22.6 60.7 44.7 19.9 64.6 Changes to liabilities for prior incurred claims (46.0) (16.4) (62.4) (85.6) (46.2) (131.8) Total incurred claims (8.0) 6.3 (1.7) (40.9) (26.3) (67.2) Insurance e
Slide 21: Claims paid and delinquencies
21 Claims paid and delinquencies Mortgages in possession and paid claims (number of) FY23 commentary: 800 700 • Number of paid claims down 33% on pcp and the number of MIPs fell 22% 600 500 • New and closing delinquencies remain at low levels 400 • Policies in negative equity remain at historic low
Slide 22: Incurred claims
22 Incurred claims Composition of total incurred claims ($ millions) FY23 commentary: 90 • Current period incurred claims remain well below long term historical levels 50 10 • Large benefit from changes to liabilities for prior incurred claims due to: -30 FY21 FY22 FY23 o High cancellations (refinan
Slide 23: Insurance service result
23 Insurance service result ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 FY23 commentary: Contractual service margin recognised 77.7 86.7 164.4 73.1 65.7 138.8 • Experience variations were a net benefit of $212m for the Risk adjustment recognised in revenue 25.3 26.3 51.5 23.9 25.2 49.1 period, largel
Slide 24: Net investment revenue / (loss)
24 Net investment revenue / (loss) Annual return on total investments 5% FY23 commentary: 4% • Interest and dividend income up due to higher average interest rates during 3% the period 2% • Unrealised gains reflect mark to market movements mainly in 2H23 due to 1% falling bond rates 0% • Interest an
Slide 25: Net insurance finance (expense) / income
25 Net insurance finance (expense) / income ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 Interest accreted to liabilities (6.6) (11.0) (17.6) (28.5) (32.7) (61.2) Changes in interest rates 101.4 18.2 119.6 (0.3) (28.3) (28.7) Insurance finance income / (expense) 94.9 7.2 102.1 (28.8) (61.1) (89.9) Rei
Slide 26: Balance Sheet
26 Balance Sheet ($ millions) 31 Dec 22 30 Jun 23 31 Dec 23 FY23 commentary: Assets • Cash and financial assets are down pcp due to the payment Cash 23.8 29.0 57.0 of the dividends and the on-market share buy-back Accrued investment income 21.8 23.9 26.7 • DTA largely represents tax impact of timing
Slide 27: Cash and financial assets
27 Cash and financial assets Technical funds ($ millions) 31 Dec 22 % 30 Jun 23 % 31 Dec 23 % Commonwealth1 476.1 35.8 377.3 31.4 360.8 32.1 • Average duration 3.7 years2 State Gov't 436.0 32.8 427.1 35.5 404.4 36.0 • 100% fixed interest and cash Corporate / other 379.9 28.5 371.7 30.9 304.2 27.1 Ca
Slide 28: Insurance and reinsurance contract liabilities
28 Insurance and reinsurance contract liabilities FY23 commentary: ($ millions unless otherwise stated) 31 Dec 22 30 Jun 23 31 Dec 23 • LRC fell due to lower in-force and top-up volumes PV future cashflows 755.3 675.3 608.7 • CSM accounts for a large proportion of LRC and represents expected future
Slide 29: Liability for incurred claims (LIC)
29 Liability for incurred claims (LIC) Liability for incurred claims ($ millions) Reported delinquencies 450 $40,000 7,000 400 $35,000 6,000 350 $30,000 5,000 300 $25,000 250 4,000 $20,000 200 3,000 $15,000 150 2,000 100 $10,000 50 $5,000 1,000 - $- 0 1H22 FY22 1H23 FY23 1H22 FY22 1H23 FY23 Reported
Slide 30: Claims sensitivity to economic conditions
30 Claims sensitivity to economic conditions Economic assumptions as at 31 December 20231 Claims sensitivity2 LRC ($ millions) LIC Excluding CSM3 Liability (base) 761 308 Property price Mortgage rates Unemployment rates Upside economics Stabilising housing RBA cash rate to fall Gradual increase to U
Slide 31: Contractual service margin (CSM)
31 Contractual service margin (CSM) CSM walk ($ millions) Remaining CSM to be recognised ($ millions) 147.2 133.0 98.0 (138.8) 12.6 31.7 68.4 665.9 657.4 123.7 665.9 669.2 88.6 108.3 Less than one year One to two years Two to three years Opening CSM Interest New business Change in CSM recognised Clo
Slide 32: Regulatory capital
32 Regulatory capital ($ millions) 31 Dec 22 30 Jun 23 31 Dec 23 FY23 commentary: Capital base • PML reduced due to low new business, high cancellations Net assets 1,205.7 1,112.5 1,141.4 and portfolio seasoning Regulatory adjustments (17.2) (37.4) (22.5) • Reinsurance capital credit down due to a l
Slide 33: Capital walk
33 Capital walk PCA coverage ratio walk (x)1 0.32 0.50 2.21 (0.15) 0.22 0.03 1.86 (0.40) 1.67 0.20 (0.65) (0.14) 0.20 (0.05) 1.99 1.66 1.47 Dec-22 Statutory NPAT Dividend & buy- In-force run off New business Reinsurance (% of Other Dec-23 Dividend Buy-back Pro forma back strain PML) Tier 1 Tier 2 FY
Slide 34: Closing comments
Closing comments Pauline Blight-Johnston Chief Executive Officer and Managing Director 2023 Full Year Results
Slide 35: Outlook and FY24 guidance
35 Outlook and FY24 guidance Insurance revenue • FY24 insurance revenue expected to be within range of $360m to $440m Total incurred • Total incurred claims ratio expected to increase towards ~30% which is representative of Helia’s expectations through claims the cycle Capital and • FY24 annual ordi
Slide 36: Accelerating financial wellbeing through homeownership
36 Accelerating financial wellbeing through homeownership Australia’s leading Positioned for Capital Delivering strong Cyclical market2 LMI provider profitable growth management TSR3 HLI 129.0% LMI market share1 ($ millions) Underlying ROE (%) ($ millions) Insurer 83.4% 225.7 34% 400 191.5 Insurer 6
Slide 37: Q&A 2023 Full Year Results
* Helia. Q&A 2023 Full Year Resuts
Slide 38: Supplementary information
Supplementary information 2023 Full Year Results
Slide 39: Residential mortgage lending market
39 Residential mortgage lending market Originations and HLVR penetration1 Industry loan approvals: Investment vs. owner occupied ($ billions, %) Helia NIW: Investment vs. owner occupied ($ billions, %) 2 40% 37% 34% 33% 31% 30% 30% 29% 29% 30% 27% 25% 45 24% 24% 19% 20% 40 14% 14% 12% 14% 20% 179.8
Slide 40: Insurance in-force
40 Insurance in-force As at 31 December 2022 As at 31 Dec 2023 Original Effective Change in Original Effective Change in Book year $ billions % Book year $ billions % LVR LVR house price % LVR LVR house price % 2013 & Prior 91.4 34.8% 84.1% 26.6% 119.4% 2014 & Prior 89.4 37.9% 84.2% 27.2% 122.0% 201
Slide 41: Delinquency trends
41 Delinquency trends Number of delinquencies 1H22 2H22 FY22 1H23 2H23 FY23 Opening balance 5,826 5,228 5,826 4,569 4,616 4,569 New delinquencies 3,315 2,713 6,028 3,030 3,121 6,151 Cures (3,706) (3,219) (6,925) (2,861) (3,087) (5,948) Paid claims (207) (153) (360) (122) (118) (240) Closing delinque
Slide 42: Illustrative AASB 17 profile of insurance revenue recognition
42 Illustrative AASB 17 profile of insurance revenue recognition 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Years since start of book year Note: Illustrative of new book years only. 2023 Full Year Results
Slide 43: Reinsurance programme from January 2024
43 Reinsurance programme from 1 January 2024 Illustrative book year coverage by layer (% of PML) 1 Back book coverage by layer 140% 2,000 1,800 APRA 1 in 200 Net Paid Claims ($ millions) 120% 1,600 % of Probable Maximum Loss (PML) 100% 75 1,400 75 Consortium 6 3rd layer Retained 75 Retained 1,200 75
Slide 44: Reconciliations
44 Reconciliations Expenses Statutory NPAT to underlying NPAT1 ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 ($ millions) 1H22 2H22 FY22 1H23 2H23 FY23 Expenditure incurred 66.1 70.0 136.0 59.4 69.7 129.1 Statutory NPAT 57.7 143.4 201.2 147.5 127.6 275.1 Less investment expenses (2.0) (0.9) (2.9) (1.3)
Slide 45: Australian key economic indicators
45 Australian key economic indicators Change in dwelling values (%) 3 months 6 months 12 months Rental vacancies (%) Dec 22 Jun 23 Dec 23 Sydney 0.8% 3.4% 11.1% Sydney 1.8 1.7 1.7 Melbourne 1.7 1.3 1.5 Melbourne (0.2%) 1.1% 3.5% Brisbane 1.1 1.0 1.2 Brisbane 3.7% 7.9% 13.1% Perth 0.5 0.6 0.5 Perth 5
Slide 46: History of strong Total Shareholder Return (TSR) delivery
46 History of strong Total Shareholder Return (TSR) delivery TSR to 31 December 2023 1YR 82.8% 22.3% 20.0% 16.9% 14.2% 13.6% 13.4% 7.7% 4.8% 4.2% HLI Insurer Insurer Bank Bank Bank Insurer Bank Bank Bank Bank (5.9%) 129.0% 3YR 83.4% 60.1% 55.5% 50.6% 46.8% 38.1% 35.6% 30.2% 21.8% HLI Insurer Insurer
Slide 47: Glossary
Glossary 2023 Full Year Results
Slide 48: Glossary
48 Glossary As at 31 Dec 2023 Term Definition Term Definition Ageing Movement in reserves on any insurance policy that remains in a delinquent state HPA / HPD / HPI House price appreciation / depreciation / index Incurred but not reported - Delinquent loans that have been incurred but not reported,
Slide 49: Glossary
49 Glossary As at 30 June 2023 Term Definition Term Definition Prescribed capital amount is an APRA formula (set out in Prudential Standard GPS 110) designed to PCA Underlying diluted earnings per Underlying NPAT divided by the weighted average number of shares outstanding for the period, adjusted e
Slide 50: Investor materials can be found at:
Investor materials can be found at: Helia.com.au For more information, analysts, investors and other interested parties should contact: Paul O’Sullivan Head of Investor Relations D: +61 499 088 640 E: investorrelations@helia.com.au The release of this announcement was authorised by the Board. 27 Feb