Genworth MI Canada Inc. Reports Solid Third Quarter Results
Higher Net Premiums Written and Lower Losses on Claims Contributed
Positively to Results
TORONTO, Oct. 29 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported solid results for the third quarter of 2009 with net income of $79 million or $0.67 per diluted share and net operating income of $75 million or $0.63 per diluted share.
"We are pleased with our results this quarter. Low interest rates, increasing consumer confidence and the stabilization of home prices resulted in higher home sales. These factors have all contributed to a sequential improvement in the top line," said Brian Hurley, Chairman and Chief Executive Officer. "A recovering economy and our pro-active loss mitigation strategies resulted in lower losses on claims and improved net income. We are encouraged by these favourable economic developments and how they may impact our results going forward."
Key Operating Metrics:
- Net premiums written were $104 million, representing an increase of
$22 million over last quarter and a $119 million decrease over the
same period last year. The increase over last quarter was primarily
due to traditional strong summer volumes and improving consumer
confidence.
- Net premiums earned in the quarter of $154 million were slightly
higher than last quarter and $21 million greater than the same period
last year. The year-over-year increase was due to the seasoning of
the large 2007 and 2008 books.
- Losses on claims of $64 million were $7 million lower than in the
last quarter and were $28 million higher than in the same period last
year. The loss ratio of 42% and combined ratio of 57% were both lower
than last quarter. An improving economic environment, the
strengthening of underwriting guidelines and procedures started in
early 2008, and continued execution of the Company's Homeownership
Assistance Program (HAP) supported the improvement in losses on
claims over last quarter. The year-over-year increase in losses on
claims was due to prevailing economic conditions including higher
levels of unemployment and the seasoning of our large 2007 and 2008
books in this environment.
- Investment Income of $49 million (including gains) was lower than
last quarter reflecting lower overall investment yields from new
fixed income investments. Investment income was in line with the same
quarter last year.
- Net operating income of $75 million was $6 million higher than last
quarter and $10 million lower than the same quarter last year.
- The expense ratio of 15% was the same as last quarter. Overall,
expenses increased to $24 million, up $6 million from the same
quarter last year. The increase in expenses over last year was
primarily due to the amortization of previously deferred acquisition
expenses related to the growth of premiums earned and incremental
expenses related to the transition to a public company.
- The regulatory capital ratio increased to 147% from 140% at the end
of the second quarter. This is well in excess of the regulatory
supervisory target of 120% and the Company's internal regulatory
target of 135%.
- Operating return on equity was 12% for this quarter, flat from the
second quarter. The improvement in earnings related to lower losses
was offset by the impact of the increase in equity from the $25
million of net proceeds from the Company's initial public offering
and the higher regulatory capital ratio.
Third Quarter Highlights:
Customer Service
----------------
During the quarter, the Company continued to enhance its service offerings to homebuyers and customers while maintaining a sharp focus on risk management in light of economic conditions. The Company enhanced the efficiency of its auto-decisioning process. As part of its ongoing service strategy, the Company will continue to judiciously adapt its underwriting stance and process to changing economic conditions.
Loss Mitigation
---------------
The Company's HAP or loss mitigation strategy (workouts and claims management) achieved beneficial results this quarter. As a result of the Company's ongoing commitment to this program, it increased the number of workouts by 8% over last quarter. The Company believes that HAP continues to be a key differentiator for the Company with lenders. If delinquencies continue to stabilize, the Company believes that the volumes going through the HAP program will also start to stabilize.
Economic Drivers
----------------
In the third quarter, housing market activity increased in response to improving consumer confidence and housing affordability fueled by low mortgage interest rates. Several economists suggest that the strong third quarter housing market activity was heavily influenced by pent-up demand from the fourth quarter of 2008 and first quarter of 2009. Overall, increased home affordability, low interest rates, and improving consumer confidence are positive for the Company's business and for top line growth. The Company expects that the volume of new insurance written in the fourth quarter of 2009 will be in line with the third quarter of 2009.
After several quarters of job loss data, there were modest job gains in the third quarter, resulting in an 8.4% unemployment rate at the end of the quarter, down from 8.7% in August 2009. An improving Canadian job market should have a positive effect on the Company's losses on claims. In light of improving signs in the housing market, the Company remains cautiously optimistic on the mortgage origination market and future loss performance.
Investments
-----------
The Company continues to pro-actively manage a diversified portfolio of $5.0 billion, including the funds held pursuant to its federal government guarantee, consisting primarily of fixed income government assets and high grade corporate credits. There were no impairments in the quarter. At the end of the quarter, the Company had $506 million of cash on hand. The Company's strategy is to continue to look for opportunities to enhance the overall yield in its portfolio while maintaining prudent risk and capital management. The Company's general portfolio had an average duration of 3.2 years as at the end of the quarter, which is unchanged from last quarter.
Shareholders' Equity
--------------------
Shareholders' equity as of September 30, 2009 was $2.6 billion, or $21.95
per share on a fully diluted basis. Shareholders' equity, excluding
accumulated other comprehensive income (loss), as of September 30, 2009 was
$2.5 billion, or $21.06 per share on a fully diluted basis.
Consolidated Financial Highlights
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Three Months Ended Nine Months Ended
Sept. 30 (Unaudited) Sept. 30 (Unaudited)
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2009 2008 2009 2008
(Amounts in ----------------------------------------------------------
millions,
except Diluted Diluted Diluted Diluted
per share) EPS EPS EPS EPS
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New Insurance
Written 5,051 9,197 12,701 24,081
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Insurance In
Force 219,927 204,939 219,927 204,939
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Net Premiums
Written 104 223 250 554
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Net Premiums
Earned 154 133 555(2) 380
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Losses on Claims 64 36 195 102
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Investment Income 49 46 143 156
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Net Income 79 $0.67 85 $0.76 291(2) $2.56 262 $2.36
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Net Operating
Income(2) 75 $0.63 85 $0.76 286(2) $2.51 249 $2.24
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Loss Ratio 42% 27% 35%(2) 27%
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Combined Ratio 57% 41% 48%(2) 40%
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Minimum Capital
Test Ratio 147% 123% 147% 123%
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(1) This is a financial measure not calculated based on Canadian
generally accepted accounting principles (GAAP). See the "Non-GAAP
Measures" section of this press release for additional information.
(2) Excluding the impact of change to the premium recognition curve, net
premiums earned, net income, net operating income, loss ratio and
combined ratio for the nine months ended Sept 30, 2009 would have
been $455, $228, $122, 43% and 58%, respectively.
Detailed Operating Results
For more information on Genworth MI Canada Inc.'s operating results, please refer to the Interim Financial Statements and Management's Discussion & Analysis filed on SEDAR and available at http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00028505.
A copy of these statements can also be found on the Company's website at http://investor.genworthmicanada.ca
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 September 30, 2009, Genworth Financial Canada had $5.2 billion in total assets and $2.6 billion in shareholders' equity. Based in Oakville, Ontario, the Company employs approximately 265 people across Canada. Additional information about Genworth MI Canada Inc. is available at www.genworth.ca.
Conference Calls and Financial Supplement Information
This press release and the third quarter 2009 financial supplement are posted on the Company's website. Investors are encouraged to review all of these materials.
Genworth MI Canada Inc.'s conference call will be accessible via telephone and the Internet. The dial-in number for the October 30, 2009 10:30 am conference call is 1-888-300-0053 (No.36091708). The call will also be available in listen-only mode via the Internet at http://investor.genworthmicanada.ca. A replay of the call will be available from the Company's website through to December 15, 2009.
Non-GAAP Measures
To supplement its financial statements, the Company uses select non-GAAP financial measures. Non-GAAP 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 operating income and return on operating income. The Company believes that these non-GAAP 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-GAAP measures do not have standardized meaning 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 Company's website at http://investor.genworthmicanada.ca. To access the glossary, click on the "Glossary of Terms" link under "Investor Resources" subsection on the left navigation bar.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain forward-looking statements. These forward-looking statements include, but are not limited to, Genworth MI Canada's plans, objectives, expectations and intentions and other statements contained in this release that are not historical facts as well as statements identified by words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", or words of similar meaning. These statements are based on Genworth MI Canada Inc.'s current beliefs or expectations and are inherently subject to significant uncertainties and changes in circumstances, many of which are beyond the control of Genworth MI Canada Inc. Actual results may differ materially from these expectations due to changes in global, political, economic, business, competitive, market and regulatory factors. 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.
For further information: Investors - Samantha Cheung, (905) 287-5482, [email protected]; Media - Anita DiPaolo-Booth, (905) 287-5394, [email protected]
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