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Genworth slides q4_2013_final

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  • 1. Genworth MI Canada Inc. Fourth Quarter 2013 February 5, 2014
  • 2. 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 expenditure plans, dividend policy and the ability to execute on its future operating, investing and financial strategies, and other statements that are not historical facts. These forward-looking statements may be identified by their use of words such as “may,” “would,” “could,” “will,” “expects,” “anticipates,” “contemplates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These statements are based on the Company’s current assumptions, including assumptions regarding economic, global, political, business, competitive, market and regulatory matters. These forward-looking statements are inherently subject to significant risks, uncertainties and changes in circumstances, many of which are beyond the control of the Company. The Company’s actual results may differ materially from those expressed or implied by such forwardlooking statements, including as a result of changes in the facts underlying the Company’s assumptions, and the other risks described in the Company’s Annual Information Form dated March 29, 2013, its Short Form Base Shelf Prospectus dated May 31, 2012, the Prospectus Supplements thereto and all documents incorporated by reference in such documents. Other than as required by applicable laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. To supplement its financial statements, the Company uses select non-IFRS financial measures. Non-IFRS measures used by the Company to analyze performance include underwriting ratios such as loss ratio, expense ratio and combined ratio, as well as other performance measures such as net operating income and return on net operating income. The Company believes that these nonIFRS financial measures provide meaningful supplemental information regarding its performance and may be useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Non-IFRS measures do not have standardized meanings and are unlikely to be comparable to any similar measures presented by other companies. These measures are defined in the Company’s glossary, which is posted on the Company’s website at http://investor.genworthmicanada.ca. A reconciliation from non-IFRS financial measures to the most readily comparable measures calculated in accordance with IFRS can be found in the Company’s most recent financial statements, which are posted on the Company’s website and are also available at www.sedar.com. Genworth MI Canada Inc. 2 Q4 2013 February 5, 2014
  • 3. 2013 Financial highlights 2013 Y/Y1 $349 million +3% 12% (1pt) Operating EPS (diluted) $3.60 +5% MCT 222% +12 pts Net Operating Income Operating ROE (from Jan 1/13) $0.94 2 $0.86 Q4 2012 1. 2.  Solid earnings performance and Y/Y book value growth of 6%  Low loss ratio driven by strong portfolio quality and favourable economic conditions  Steady investment income  Strong capital position - 2013 actions include share buy back and increased Q4 dividends Book Value Per Share (diluted, including AOCI) Operating EPS (diluted) $0.90 Key messages: Q1 2013 $0.90 $0.89 Q2 2013 $30.62 Q3 2013 Q4 2013 Q4 2012 $31.32 $30.94 Q1 2013 Q2 2013 $31.82 Q3 2013 $32.53 Q4 2013 YoY comparison is to the adjusted net operating income and operating EPS (diluted) which exclude the impact of the government guarantee fund exit fee reversal of $123 million after taxes. Operating EPS (diluted) in the fourth quarter excludes the favourable impact of the government guarantee fund exit fee reversal of $137 million after taxes. Genworth MI Canada Inc. 3 Q4 2013 February 5, 2014
  • 4. Market influencers Dynamics Business implications Housing Market:  Balanced supply and demand  Resale volumes and home prices up modestly Premiums Written:  Flat to modest premium growth  Credit quality expected to remain high Losses on Claims:  Losses should continue to perform well with loss ratios within a 25-35% range Macro-environment:  Unemployment stable around 7%  Modest increase in GDP  Relatively flat rates expected Investment Income:  Stable investment yield Stable housing market in 2014 Genworth MI Canada Inc. 4 Q4 2013 February 5, 2014
  • 5. Insurance portfolio strength 727 727 730 733 720 726 08 09 10 11 12 13 256 266 284 296 301 302 08 09 10 11 12 13 Key highlights: Credit score  High quality insurance written in 2013  Average credit score remains strong – up 13 pts since 2008  Average home price relatively stable – up an average of 3% per year since 2008  Average gross debt ratios well below industry standard ($000’s) Home price (%) Gross debt 23 08 24 25 24 22 09 10 11 12 23 13 Contributing to lower losses on claims Genworth MI Canada Inc. 5 Q4 2013 February 5, 2014
  • 6. Delinquency trends Number of Reported Delinquencies Key highlights:  Modest increase in Q4 due to typical seasonality  Decrease in delinquencies driven by stable employment and improving housing markets  Declining YoY trend in most regions  Alberta down 35% YoY  Quebec continues to be a watch area 2153 Other 240 1963 Quebec 1778 1830 259 252 451 515 1778 255 249 463 482 301 284 284 318 311 295 507 Alberta BC 437 342 337 337 619 533 453 461 517 Q4'12 Ontario Q1'13 Q2'13 Q3'13 Q4'13 Genworth MI Canada Inc. 6 Q4 2013 February 5, 2014
  • 7. Q4 2013 Financial highlights $MM except EPS and BVPS Q4’13 Q3’13 Q4’12 Net premiums written $129 $161 $117 Net premiums earned 142 143 147 Losses on claims 31 32 46 Expenses 33 27 28 Underwriting income 78 84 73 Net investment income 44 51 471 $85 $91 $89 $0.90 $0.94 $0.90 $32.53 $31.82 Key messages: $30.62 (Excl. realized gains / losses) Net Operating Income1 Operating EPS1 Book value per share 1. Strong business execution contributing to solid profitability and BVPS growth  Lower premiums written reflect typical seasonality  Loss ratio of 22% flat QoQ  Increase in expenses related to impact of higher share price on share-based compensation Net Investment Income, net operating income and operating EPS (diluted) in the fourth quarter of 2012 excludes the one-time favourable impact of the government guarantee fund exit fee reversal of $186 million or $137 million after taxes. Strong execution contributing to solid profitability and BVPS growth Genworth MI Canada Inc. 7 Q4 2013 February 5, 2014
  • 8. Top line impacted by seasonality Premiums Written Key highlights: ($millions) $161 18 $137 $119 26 17 $129 11 $84 11 144 119 111 102 74 Q4'12 Q1'13 Q2'13 Q3'13 High loan-to-value: $119 MM in Q4  17 % lower QoQ consistent with seasonality  16% increase YoY reflects normalization of market size resulting from prior product change impact Portfolio: $11 MM in Q4, lower by 39% QoQ  Continue to capitalize on market opportunities  Monitoring developments on proposed portfolio insurance restrictions Q4'13 Portfolio Flow $1.7 billion in unearned premiums Genworth MI Canada Inc. 8 Q4 2013 February 5, 2014
  • 9. Profitability driven by low losses Underwriting profitability Key highlights: ($millions) Premiums earned $147 $144 $143 $143 35 32 31 26 27 33 82 84 78 Losses on claims 46 44 Expenses 28 26 Underwriting profit 73 74 $142  Premiums earned primarily driven by average size of recent books  Low loss ratio of 22% in Q4 and 25% for 2013  Expense ratio of 23% in Q4 ... expected to trend back to 19 to 20% range in 2014 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Loss ratio 31% 31% 25% 22% 22% Expense ratio 19% 18% 18% 19% 23% Combined ratio 50% 49% 43% 41% 45% Favourable economic conditions contributing to solid results Genworth MI Canada Inc. 9 Q4 2013 February 5, 2014
  • 10. Investments contribute steady income Key highlights: Common Equity 3%  High quality mandate continues to drive investment decisions  Reduced equities by $35 million and realized $8 million gain in Q4  Near term reinvestment pressure due to low yields, but well-positioned for future Cash 4% Corporates 42% Total $5.4 billion Federal 35% Portfolio Assets (market value) Pre-tax yield1 Provincial 16% Duration $5.4 billion 3.7 % 3.7 years 1. Pre-tax equivalent book yield after dividend gross-up of general portfolio (as at December 31, 2013) Genworth MI Canada Inc. 10 Q4 2013 February 5, 2014
  • 11. Strong capital position Key highlights: Minimum Capital Test Ratio (MCT) 216% 216% 31% 210% 218% 31% 33%  Successful actions taken to balance capital strength and efficiency 222% 35% 185% 185% Q1'13 Q2'13 Q3'13 9% ordinary dividend increase in Q4’13 Holding company cash of $85 MM 185% Jan. 1 2013 $105 MM share buyback in 2013 • 185% MCT up 4 points QoQ • 185% • • 25% Q4'13 Internal MCT target Buffer Well-positioned in 2014 for capital strength and flexibility Genworth MI Canada Inc. 11 Q4 2013 February 5, 2014
  • 12. Strategic priorities  Maintain disciplined underwriting and insurance portfolio quality strength  Capitalize on sales momentum  Enhance customer experience through innovation  Ongoing focus on balancing capital strength with efficiency  Continue to help shape regulatory environment  Invest in our people Driving shareholder value Genworth MI Canada Inc. 12 Q4 2013 February 5, 2014
  • 13. Question and Answer SAMANTHA CHEUNG Contact: VP INVESTOR RELATIONS 905 287 5482 samantha.cheung@genworth.com www.genworth.ca Genworth MI Canada Inc. 13 Q4 2013 February 5, 2014