Net premiums written of $101 million
Net operating income of $78 million
TORONTO, May 3 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX:
MIC) today reported results for the first quarter of 2011 with net
income of $80 million or $0.76 per diluted share and net operating
income of $78 million or $0.74 per diluted share. Operating earnings
per share was higher by $0.05 year over year and sequentially lower by
The Company received $101 million in net premiums written, representing
a 7% increase over the same period last year. Net operating income
decreased 7% sequentially and 5% year over year.
"We delivered solid net premiums written in a slower origination
market. As expected, we saw some seasonal loss pressure, which is
typical for the first quarter," said Brian Hurley, Chairman and Chief
Executive Officer. "As part of our ongoing evaluation of our business
needs and capital position, we are focused on capital structure
efficiency and are planning a share repurchase. This action will
enhance our shareholder value while maintaining financial flexibility."
First Quarter 2011 Key Financial Metrics:
Net premiums written of $101 million were $33 million lower sequentially but $7 million
higher year over year. The sequential decrease was primarily due to
typical winter seasonality in the mortgage origination market. The
year over year increase in net premiums written was due to strong sales
and service execution, resulting in continued market penetration.
Net premiums earned of $155 million were $1 million lower sequentially and year over year.
At the end of the quarter, the Company had $1.85 billion in unearned
premium reserves, which will be earned into premiums over time in
accordance with the Company's premium recognition curve.
Losses on claims of $59 million were $9 million higher sequentially and flat on a year
over year basis. The loss ratio of 38% in the first quarter was 6
points higher sequentially and flat year over year.The sequential
increase in losses on claims was primarily due to seasonality and a
higher average reserve per delinquency in Alberta.
Investment Income of $43 million (excluding $3 million of realized and unrealized
investment gains) was $1 million lower sequentially and $2 million
lower year over year.
Net operating income of $78 million was $6 million lower sequentially and $4 million lower
year over year. This resulted in an operating return on equity of 13% for the quarter, 1 point lower sequentially and flat year over
The expense ratio was 17% or 1 point lower sequentially and one point higher year over
year, while the combined ratio of 55% was 5 points higher sequentially and flat year over year.
The regulatory capital ratio or Minimum Capital Test ("MCT") ratio was 155%, 1 point lower sequentially but 5 points higher year over
Capital and Shareholders' Equity
The Company continued to maintain a strong capital position, ending the
quarter with a regulatory minimum capital test ratio of 155% and
holding company cash of approximately $210 million. As part of the
Company's ongoing capital planning to create a more efficient capital
structure and to enhance shareholder value while maintaining the
flexibility to support growth, the Company plans to repurchase
approximately $160 million of its existing common shares in 2011. The
nature, size and timing of the potential share repurchase in 2011 will
be dependent upon the Company's capital requirements at that time,
general market conditions, completion of certain documentation, and the
receipt of customary approvals. While there is no assurance that the
Company will undertake any such share repurchase, the proposed share
repurchase reflects management's confidence in its business operations
and its ability to fund growth opportunities going forward.
As of March 31, 2011, shareholders' equity was $2.6 billion or $24.79
per common share on a fully diluted basis. Excluding accumulated other
comprehensive income ("AOCI") or loss, shareholders' equity was $2.5
billion or $23.80 per common share on a fully diluted basis.
First Quarter 2011 Key Operational Highlights:
The Company continued to make solid progress on its strategic
priorities. The Company is well-positioned with the financial
flexibility and business strength to support its insurance in-force, to
fund growth opportunities, to maintain strong credit ratings and to
New insurance written of $4.4 billion for high loan-to-value mortgages
represented a sequential decrease of 23% due to typical seasonality,
but a year over year increase of 5% due to improved market penetration.
The government mortgage rule changes that took effect March 18, 2011
did not have a material impact on mortgage originations in the quarter.
While the Company's earned premiums are consistent sequentially and year
over year, the current earned premiums have benefited from the large
2007 and 2008 books of business. It is expected that the contributions
of these large books to premiums earned will decrease in the coming
quarters as they move past their peak earnings period.
The increase in losses on claims during the quarter was mainly due to
typical seasonal pressure on the housing market during the winter
season and the loss experience from certain areas in Alberta. The
average reserve per delinquency for the quarter improved marginally and
sequentially to $58,000 from $60,800 in the fourth quarter of 2010 due
to improving severity in Ontario and Quebec, offset by higher severity
from claims in Alberta. The Company believes that its average loss
ratio for 2011 will be in the mid 30 percent range.
During the quarter, the Company continued to realize positive results
from its loss mitigation activities. The Company's Homeowner
Assistance Program completed 1,253 workouts representing over 40% of
new reported delinquencies. As well, the Company continued to expand
its initiative to accelerate and facilitate the conveyance of real
estate properties to the Company in selected circumstances. This
strategy allows for better control of the marketing process, reduction
in carrying costs during the sale process, and the potential
realization of a higher property sales price, with the cumulative
impact being lower losses.
The Company had an investment portfolio of $5.1 billion as at March 31,
2011. Excluding the Government Guarantee Fund and debt proceeds
received in December 2010, the general portfolio had a pre-tax
equivalent book yield of 4.3% and duration of 3.7 years as at March 31,
2011. The portfolio is well-positioned with a short duration and
should benefit from a rising interest rate environment as $419 million
of investment maturities for the remainder of the year are reinvested.
On March 1, 2011, the Company paid a quarterly dividend of $0.26 per
common share. Since becoming a public company in 2009, this dividend
represents the sixth consecutive quarterly payment of dividends to
shareholders. The Company also announced today that its Board of
Directors approved a $0.26 per common share dividend, payable on June
1, 2011 to shareholders of record at the close of business on May 16,
Consolidated Financial Highlights1
($ millions, except per share amounts)
Three Months Ended March 31 (Unaudited)
New Insurance Written
Insurance In Force
Net Premiums Written
Net Premiums Earned
Losses on Claims
Realized and Unrealized Gains or Losses
Net Operating Income1
Fully Diluted Earnings Per Share
Fully Diluted Operating Earnings Per Share2
Fully Diluted Book Value Per Common Share, excluding AOCI
Operating Return on Equity
Minimum Capital Test Ratio (MCT)
1 Effective January 1, 2010, the Company has adopted International
Financial Reporting Standards ("IFRSs"). Certain accounting and
measurement methods previously applied under Canadian GAAP were amended
to comply with IFRSs. The comparative figures for 2010 have been
restated to reflect these adjustments.
2This is a financial measure not calculated based on International
Financial Reporting Standards (IFRSs). See the "Non-IFRS Measures"
section of this press release for additional information.
Detailed Operating Results and Financial Supplement
For more information on the Company's operating results, please refer to
the Company's Review of Performance and Financial Statements as posted
on SEDAR and available at:
This press release, the financial statements, Management Discussion and
Analysis, and the first quarter 2011 financial supplement are also
posted on the investor section of the Company's website (http://investor.genworthmicanada.ca). Investors are encouraged to review all of these materials.
The Company's first quarter earnings call will be held on May 4th at 1:00 pm EST. The dial-in number is 1-888-300-0053 (#I.D. 59872678).
The call is accessible via telephone and by audio webcast on the
Company's website. Slides to accompany the call will be posted just
prior to its start. A recording will be available on the Company's
website until July 15, 2011.
Non-IFRS Financial Measures
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 non-IFRS 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 measure presented by
other companies. These measures are defined in the Company's glossary,
which is posted on the investor section of the Company's website (http://investor.genworthmicanada.ca). To access the glossary, click on the "Glossary of Terms" link under
"Investor Resources" subsection on the left navigation bar. A
reconciliation of non-IFRS financial measures to the most recently
comparable measures calculated in accordance with IFRS can be found in
the Management Discussion and Analysis filed with the Company's most
recent financial statements, which are available on the Company's
website and on SEDAR at www.sedar.com.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain forward-looking statements. These
forward-looking statements include, but are not limited to, the
Company's plans, objectives, expectations and intentions, and other
statements contained in this release that are not historical facts.
These statements may be identified by their use of words such as
"expects", "anticipates", "contemplates", "intends", "plans",
"believes", "seeks", "estimates", or words of similar meaning. These
statements are based on the Company's current beliefs or expectations,
including the Company's assumptions, beliefs and expectations regarding
its future capital requirements, market conditions and its ability to
obtain regulatory approvals. These statements are inherently subject
to significant risks, uncertainties and changes in circumstances, many
of which are beyond the Company's control. The Company's actual results
may differ materially from those expressed or implied by such
forward-looking statements, including as a result of changes in global,
political, economic, business, competitive, market and regulatory
factors, and the other risks described in the Company's Annual
Information Form. 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.
About Genworth MI Canada Inc.
Genworth MI Canada Inc., through its subsidiary, Genworth Financial
Mortgage Insurance Company Canada, has been the leading Canadian
private residential mortgage insurer since 1995. Known as Genworth
Financial Canada, "The Homeownership Company," it provides default
mortgage insurance to Canadian residential mortgage lenders that
enables low down payment borrowers to own a home more affordably and
stay in their homes during difficult financial times. Genworth
Financial Canada combines technological and service excellence with
risk management expertise to deliver innovation to the mortgage
marketplace. As of March 31, 2011, Genworth Financial Canada had $5.4
billion total assets and $2.6 billion shareholders' equity. Based in
Oakville, Ontario, Genworth Financial Canada employs approximately 265
people across Canada. Additional information about Genworth MI Canada
Inc. is available at www.genworth.ca.
SOURCE Genworth MI Canada
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