latest-quarter

Genworth MI Canada Inc. Reports First Quarter 2020

Net Income:

$95 million

Down 3% Y/Y

Down 13% Q/Q

Net Operating Income:

$117 million

Down 1% Y/Y

Up 4% Q/Q

Fully Diluted Operating EPS:

$1.35

Flat Y/Y

Up 4% Q/Q





Transactional Premiums Written:

$110 million

Up 10% Y/Y

Down 38% Q/Q

Total Premiums Written:

$114 million

Up 8% Y/Y

Down 38% Q/Q

Premiums Earned:

$171 million

Up 1% Y/Y

Flat Q/Q

Loss Ratio:

14%

Down 1 pt Y/Y

Down 6 pts Q/Q

TORONTO, May 5, 2020 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported first quarter 2020 net income of $95 million, earnings per fully diluted common share of $0.99, net operating income of $117 million, operating earnings per fully diluted common share of $1.35 and an operating return on equity of 13%.

"We were pleased with our first quarter results, including positive top line momentum, a 14 per cent loss ratio and 13 percent operating return on equity," said Stuart Levings, President and CEO. "That said, the environment has changed significantly in the face of the COVID-19 pandemic and resulting economic shutdown, introducing a higher level of uncertainty. Our business has successfully transitioned to a fully remote working environment in order to protect the well-being of our employees and continues to be fully operational as we serve our customers during this challenging time. We take comfort in the strength of our business model and capital position, along with our disciplined risk management and proven loss mitigation strategies as we manage through this period of economic stress. We commend the government, regulator and front-line workers for their efforts in helping to ease the impact this pandemic is having on Canadians and the Canadian economy."

Key First Quarter 2020 Financial Results And Operational Metrics:

  • New insurance written from transactional insurance was $3.2 billion, an increase of $0.3 billion, or 10%, as compared to the same quarter in the prior year, primarily due to a larger transactional mortgage originations market. Compared to the prior quarter, transactional new insurance written decreased by $1.9 billion, or 37%, primarily as a result of typical seasonality.

  • Premiums written from transactional insurance were $110 million, representing an increase of $10 million, or 10%, from the same quarter in the prior year, primarily due to the aforementioned higher new insurance written. Compared to the prior quarter, premiums written decreased by $67 million, or 38%, primarily due to seasonality.

  • New insurance written from portfolio insurance on low loan-to-value mortgages was $1.0 billion, a decrease of $0.1 billion compared to the same quarter in the prior year and $0.4 billion from the prior quarter.  

  • Premiums written from portfolio insurance were $4 million, representing a decrease of $1 million compared to the same quarter in the prior year and the prior quarter primarily due to lower new insurance written.

  • Premiums earned of $171 million were $2 million, or 1%, higher than the same quarter in the prior year, reflecting the relatively higher level of premiums written in 2019. Premiums earned were flat compared to the prior quarter.  The unearned premiums reserve was $2.1 billion at the end of the quarter, down modestly from December 31, 2019. These unearned premiums will be recognized as premiums earned over time in accordance with the Company's historical pattern of loss emergence.

  • New delinquencies, net of cures, of 284 were 121 fewer than the same quarter in the prior year primarily due to decreases in Alberta (46), Ontario (38), the Atlantic region (19) and Quebec (17). Compared to the prior quarter, new delinquencies, net of cures, decreased by 101 primarily due to decreases in Alberta (32), Quebec (29) and Ontario (26).

  • The loss ratio, as a percentage of premiums earned, for the quarter was 14% compared to 15% in the same quarter in the prior year and 20% in the prior quarter. Losses on claims of $25 million were $1 million lower than the same quarter in the prior year, primarily due to the aforementioned decrease in new reported delinquencies, net of cures, partially offset by a higher average reserve per delinquency. Losses on claims decreased by $10 million from the prior quarter, primarily due to the aforementioned decrease in in new delinquencies, net of cures and a higher level of favourable development.

  • The number of delinquencies outstanding of 1,754 reflected a decrease of 6 delinquencies, as compared to the same quarter in the prior year, including increases in Alberta (54) and the Pacific region (22), and decreases in Ontario (61) and Quebec (48). Compared to the prior quarter, the number of delinquencies outstanding decreased by 44, primarily driven by decreases in Alberta (35), Ontario (17), and Quebec (15).

  • Expenses were $37 million during the quarter, resulting in an expense ratio of 22%, as a percentage of premiums earned.  This ratio was two percentage points higher than the same quarter in the prior year, one percentage point higher than the prior quarter and above the Company's expected operating range of 18% to 20%. The increase was primarily due to a higher share-based compensation expense arising from the adverse impact of the Company's lower share price on its share-based hedging program.

  • The Company's investment portfolio had a market value of $6.1 billion at the end of the quarter.  The portfolio had a pre-tax equivalent book yield of 3.3% and duration of 3.5 years as at March 31, 2020, each of which were relatively consistent with the same quarter in the prior year and the prior quarter.

  • Operating investment income of $54 million was $3 million lower than the same quarter in the prior year primarily due to a decrease in the average amount of invested assets and lower realized income from the Company's interest rate hedging program reflecting the impact of lower interest rates. Compared to the prior quarter, operating investment income was approximately $1 million lower, primarily due to a decrease in the average amount of invested assets.

  • Realized and unrealized losses from derivatives and foreign exchange of $34 million excludes the realized income from the Company's interest rate hedging program of $7 million. This compares to a $30 million loss in the same quarter in the prior year, with the increase in losses being primarily due to the impact of lower interest rates on the market value of the Company's interest rate swaps. Compared to the prior quarter, losses increased by $27 million primarily due to the impact of lower interest rates on the market value of the Company's interest rate swaps and foreign exchange.  

  • Net income of $95 million was $3 million lower than the same quarter in the prior year, primarily due to a higher level of realized and unrealized losses from investments, derivatives and foreign exchange, higher expenses, and lower operating investment income, partially offset by higher premiums earned. Net income was $14 million lower than the prior quarter, primarily due to a higher level of realized and unrealized losses from investments, derivatives and foreign exchange, and higher expenses, partially offset by lower losses on claims.

  • Net operating income of $117 million was $2 million lower than the same quarter in the prior year, primarily due to higher expenses, and lower operating investment income, partially offset by higher premiums earned. Net operating income was $5 million higher than the prior quarter primarily due to lower losses on claims, partially offset by higher expenses and lower operating investment income.

  • Operating return on equity was 13% for the quarter, up one percentage point from the same quarter in the prior year and from the prior quarter.

  • The regulatory capital ratio or Mortgage Insurer Capital Adequacy Test ("MICAT") ratio was approximately 172%, 15 percentage points higher than the Company's internal MICAT ratio target of 157% and 22 percentage points higher than the OSFI Supervisory MICAT ratio target of 150%. 

  • The Company estimates that its outstanding principal balance of insured mortgages as at March 31, 2020, was approximately $197 billion, or 37% of the original insured amount. The Company estimates, that as of December 31, 2019, the outstanding principal balance for all privately insured mortgages was $272 billion relative to the $350 billion aggregate outstanding principal limit under the government guarantee legislation (Protection of Residential Mortgage or Hypothecary Insurance Act). 

Dividends

The Company paid the following dividends in the first quarter of 2020; on March 19th, 2020, a special dividend of $2.32 per common share; on March 5th, 2020, a quarterly dividend of $0.54 per common share; on February 11th, 2020, a special dividend of $2.32 per common share.

The Company also announced today that its Board of Directors had declared a dividend of $0.54 per common share, payable on June 3rd, 2020, to shareholders of record at the close of business on May 19th, 2020. 

Shareholders' Equity

As at March 31, 2020, shareholders' equity was $3.4 billion, representing a book value including accumulated other comprehensive income ("AOCI") of $39.61 per common share on a fully diluted basis. Excluding AOCI, shareholders' equity was $3.5 billion, representing a book value of $40.56 per common share on a fully diluted basis.

Credit and Debt Ratings

The Company's issuer credit rating by DBRS Ratings Limited of 'A' high and the financial strength rating of the Company's primary operating subsidiary of 'AA' were recently affirmed, while the trend changed to negative as a result of the ongoing uncertainty regarding future economic conditions resulting from the ongoing COVID-19 pandemic. The Company's credit rating by Standard & Poor's of 'BBB+' and the financial strength of the Company's primary operating subsidiary of 'A+'  were recently affirmed, while the outlook changed to negative in light of the economic uncertainty associated with the potential impact of COVID-19 pandemic.   

Detailed Operating Results and Financial Supplement

For more information on the Company's operating results, please refer to the Company's Management's Discussion and Analysis as posted on SEDAR and available at www.sedar.com.

This Press Release, as well as the Company's first quarter 2020 consolidated Financial Statements, Management's Discussion and Analysis ("MD&A") and 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. 

Earnings Call

The Company's first quarter earnings call will be held on May 6th, 2020 at 9:00 am ET (Local: 647-794-4605, Toll free: 1-800-239-9838, Conference ID: 1825155).  The call is accessible via telephone and by audio webcast on the Company's website.  If listening via webcast, participants are encouraged to pre-register for the webcast through the Company's website.  Slides to accompany the call will be posted just prior to its start. A replay of the call will be available until June 5th, 2020 (647-436-0148 or 1-888-203-1112, replay passcode: 1825155). The webcast will also be available for replay on the Company's website for a period of approximately 45 days following the call.            

About Genworth MI Canada Inc. 

Genworth MI Canada Inc. (TSX: MIC) through its subsidiary, Genworth Financial Mortgage Insurance Company Canada ("Genworth Canada"), is the largest private sector residential mortgage insurer in Canada.  The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers. Genworth Canada differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For more than two decades, Genworth Canada has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system.  As at March 31, 2020, the Company had $6.6 billion total assets and $3.4 billion shareholders' equity. Find out more at www.genworth.ca.

Contact Information :

Investors – Aaron Williams, 905-287-5504 aaron.williams@genworth.com
Media – Susan Carter, 905-287-5520 susan.carter@genworth.com

Consolidated Financial Highlights


($ millions, except per share amounts)

Three Months Ended

March 31st (unaudited),

2020

2019

Transactional new insurance written 1

$3,190

$2,902

Portfolio new insurance written 1

952

1,014

Total new insurance written 1

$4,142

$3,917

Premiums written

114

105

Premiums earned

171

169

Losses on claims

25

25

Expenses

37

33

Net underwriting income

$109

$110

Investment income (interest and dividends, net of expenses) 1

47

48

Interest rate hedging program income

7

9

Realized gains on sale of investments

5

1

Realized and unrealized losses on derivatives, foreign exchange

(34)

(30)

Total net investment income

$25

$27

Net income

$95

$97

Net operating income1

$117

$119

Basic weighted average common shares outstanding

86,258,270

87,593,413

Diluted weighted average common shares outstanding

86,622,175

87,958,677

Fully diluted earnings per common share

$0.99

$1.10

Fully diluted operating earnings per common share1

$1.35

$1.35

Fully diluted book value per common share, incl. AOCI1

$39.61

$46.60

Fully diluted book value per common share, excl. AOCI1

$40.56

$46.22

Loss ratio1

14%

15%

Combined ratio1

36%

35%

Operating return on equity1

13%

12%

MICAT ratio 1,3

172%

172%

Transactional delinquency ratio1, 2

0.28%

0.28%

Portfolio delinquency ratio1, 2

0.10%

0.09%

Delinquency ratio1, 2

0.20%

0.20%

Note: Amounts may not total due to rounding.

1This is a financial measure not calculated based on International Financial Reporting Standards ("IFRS").  See the "Non-IFRS Financial Measures" section of this press release for additional information.

Based on outstanding balance and excludes delinquencies that have been incurred but not reported.

Company estimate at March 31, 2020.

Non-IFRS Financial Measures

To supplement the Company's consolidated financial statements, which are prepared in accordance with IFRS, the Company uses certain non-IFRS financial measures to analyze performance. The Company's key performance indicators and certain other information included in this press release include non-IFRS financial measures. Such non-IFRS financial measures used by the Company to analyze performance include, among others, interest and dividend income, net of investment expenses, operating investment income, net operating income (excluding fee on early redemption of long-term debt), operating earnings per common share (basic) and operating earnings per common share (diluted). 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 financial measures do not have standardized meanings and are unlikely to be comparable to any similar measures presented by other companies.


Three months ended March 31,

(in millions of dollars, unless otherwise specified)

2020

2019

Total investment income

$ 25

$ 27

Adjustment to investment income:



Net Losses from Investments, derivatives and foreign exchange 1

29

30

Operating investment income

54

57

Realized expense (income) from the interest rate hedging program

(7)

(9)

Interest and dividend income, net of investment expenses

$ 47

$ 48

Net income

95

97

Adjustments to net income, net of taxes:



Fee on early redemption of long-term debt

1

-

Net losses from investments, derivatives and foreign exchange¹

21

22

Net operating income

$ 117

$ 119

Earnings per common share (basic)

$ 1.10

$ 1.11

Adjustment to earnings per common share, net of taxes:



Fee on early redemption of long-term debt

0.02

-

Net losses from investments, derivatives and foreign exchange¹

0.25

0.25

Operating earnings per common share (basic)

$ 1.36

$ 1.36

Earnings per common share (diluted)2

$ 0.99

$ 1.10

Adjustment to earnings per common share, net of taxes:



Fee on early redemption of long-term debt

0.02

-

Share based compensation re-measurement amount

0.10

-

Net losses from investments, derivatives and foreign exchange¹

0.25

0.25

Operating earnings per common share (diluted)2

$ 1.35

$ 1.35

Note: Amounts may not total due to rounding.

1 Includes realized and unrealized gains and losses from derivatives and foreign exchange, excluding realized income and expense from the interest rate hedging program. 2 The difference between basic and diluted earnings per common share and basic and diluted operating earnings per common share is caused by the potentially dilutive impact of share-based compensation awards.

Non-IFRS financial measures reconciled to comparable IFRS measures for such periods

Definitions of key non-IFRS financial measures and explanations of why these measures are useful to investors and management can be found in the Company's "Glossary", in the "Non-IFRS financial measures" section at the end of the Company's MD&A for the three months ended March 31st, 2020.  The MD&A, along with the Company's most recent financial statements, are available on the Company's website and on SEDAR at www.sedar.com.

Caution regarding forward-looking information and statements

Certain statements made in this news release contain forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). When used in this news release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to the Company are intended to identify forward-looking statements. Specific forward-looking statements in this document include, but are not limited to, statements with respect to the impact of any potential guideline changes by OSFI or legislative changes introduced in connection with the Protection of Residential Mortgage or Hypothecary Insurance Act ("PRMHIA"); the effect of changes to the mortgage insurance rules, including government guarantee mortgage eligibility rules, the Company's beliefs as to housing demand and home price appreciation, key macroeconomic factors, unemployment rates; the Company's future operating and financial results; the operating range for the Company's expense ratio; expectations regarding premiums written; and capital expenditure plans, dividend policy and the ability to execute on its future operating, investing and financial strategies.

The forward-looking statements contained herein are based on certain factors and assumptions, certain of which appear proximate to the applicable forward-looking statements contained herein. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors beyond the Company's ability to control or predict, that may cause the actual results, performance or achievements of the Company, or developments in the Company's business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Actual results or developments may differ materially from those contemplated by the forward-looking statements.

The Company's actual results and performance could differ materially from those anticipated in these forward-looking statements as a result of both known and unknown risks, including: the continued availability of the Canadian government's guarantee of private mortgage insurance on terms satisfactory to the Company; the Company's expectations regarding its revenues, expenses and operations; the potential impact of the COVID-19 pandemic on the Company's business and operations; the Company's plans to implement its strategy and operate its business; the Company's expectations regarding the compensation of directors and officers; the Company's anticipated cash needs and its estimates regarding its capital expenditures, capital requirements, reserves and its needs for additional financing; the Company's plans for and timing of expansion of service and products; the Company's ability to accurately assess and manage risks associated with the policies that are written; the Company's ability to accurately manage market, interest and credit risks; the Company's ability to maintain ratings, which may be affected by the ratings of its majority shareholder, Brookfield Business Partners L.P. ("Brookfield Business Partners"); interest rate fluctuations; a decrease in the volume of high loan-to-value mortgage originations; the cyclical nature of the mortgage insurance industry; changes in government regulations and laws mandating mortgage insurance; the acceptance by the Company's lenders of new technologies and products; the Company's ability to attract lenders and develop and maintain lender relationships; the Company's competitive position and its expectations regarding competition from other providers of mortgage insurance in Canada; anticipated trends and challenges in the Company's business and the markets in which it operates; changes in the global or Canadian economies; a decline in the Company's regulatory capital or an increase in its regulatory capital requirements; loss of members of the Company's senior management team; potential legal, tax and regulatory investigations and actions; the failure of the Company's computer systems or potential cyber threats; potential conflicts of interest between the Company and its majority shareholder, Brookfield Business Partners.

This is not an exhaustive list of the factors that may affect any of the Company's forward-looking statements. Some of these and other factors are discussed in more detail in the Company's Annual Information Form (the "AIF") dated March 11th, 2020. Investors and others should carefully consider these and other factors and not place undue reliance on the forward-looking statements. Further information regarding these and other risk factors is included in the Company's public filings with provincial and territorial securities regulatory authorities (including the Company's AIF) and can be found on the System for Electronic Document Analysis and Retrieval ("SEDAR") website at www.sedar.com. The forward-looking statements contained in this news release represent the Company's views only as of the date hereof. Forward-looking statements contained in this news release are based on management's current plans, estimates, projections, beliefs and opinions and the assumptions related to these plans, estimates, projections, beliefs and opinions may change, and are presented for the purpose of assisting the Company's security holders in understanding management's current views regarding those future outcomes and may not be appropriate for other purposes. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company does not undertake to update any forward-looking statements, except to the extent required by applicable securities laws.

SOURCE Genworth MI Canada

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August 4, 2020 - 4:26 PM ET Note: Minimum 20 minute delay