Genworth MI Canada Inc. Reports Second Quarter 2010 Results
Net Income Increases for the Fourth Consecutive Quarter
TORONTO, July 29 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported results for the second quarter of 2010 with net income of $85 million or $0.72 per diluted share and net operating income of $86 million or $0.73 per diluted share. The Company's reported net operating income represents a 5% increase over last quarter and a 22% increase over the same quarter in 2009.
"We delivered another solid quarter with higher net premiums written and sequential net income growth," said Brian Hurley, Chairman and Chief Executive Officer. "A strong housing market and declining unemployment in the first half of 2010 contributed to our performance. In addition, we continue to execute our capital plan and took definitive steps to improve our capital efficiency and return on shareholders' equity."
Second Quarter 2010 Key Financial Metrics:
- Net premiums written were $157 million, representing a $63 million
sequential increase and a $76 million increase over the second
quarter of 2009. The 67% sequential and 93% increase year over year
in net premiums written was primarily due to a strong Spring housing
market and customer service execution.
- Net premiums earned of $154 million were $2 million lower
sequentially and consistent with the second quarter of 2009. At the
end of the quarter, the Company had $1.9 billion in unearned premium
reserves.
- Losses on claims of $49 million were $10 million lower sequentially
and $22 million lower than in the second quarter of 2009. The loss
ratio of 32% in the second quarter was 6 points lower sequentially
and 14 points lower than in the second quarter of 2009.
- Investment Income of $42 million (excluding $1 million of investment
losses) was $3.5 million lower sequentially and $2.7 million lower
than in the second quarter of 2009.
- Net operating income of $86 million was $5 million higher
sequentially and $16 million higher than in the second quarter of
2009.
- The expense ratio was 15%, 2 points lower sequentially and consistent
with the second quarter of 2009.
- The combined ratio of 47% was 8 points lower sequentially and 15
points lower than in the second quarter of 2009.
- The regulatory capital ratio or Minimum Capital Test ("MCT") ratio
was 154%, representing a 4 point increase sequentially and a 14 point
increase over the second quarter of 2009. In July, as part of its
capital plan, the Company increased its internal MCT target ratio
from 135% to 145%.
- Operating return on equity was 13% for the quarter, consistent
sequentially and 1 point higher than the second quarter in 2009.
Operational Highlights:
The Company continued to make solid progress on its strategic priorities and is well positioned to continue as the leading Canadian private mortgage insurer.
Key highlights for the second quarter of 2010 were:
- The Company continued to improve its market position through its
customer-centric sales and service strategies. During the quarter,
the Company continued to enhance the customer experience and deepen
certain lender relationships that resulted in higher net premiums
written.
- The improving loss ratio was due to fewer new delinquencies resulting
from improved economic conditions and continued Homeowner Assistance
Program activities. The Company is expanding its property re-
marketing program to reduce losses.
- The investment portfolio book yield was 4.4% and the portfolio
duration was 3.4 years as at June 30, 2010. The Company continues to
diversify its portfolio and position the portfolio for a rising
interest rate environment.
Capital Management
In May, the Company filed a $1.5 billion shelf prospectus with the Canadian securities regulator which allows it to offer a variety of securities to the public. Under this prospectus, the Company completed a $275 million offering of 5.68% 10-year debentures in June. The details of that offering can be found in the prospectus supplement dated June 18, 2010.
As previously announced, the Company intends to distribute a portion of its available capital in 2010. After evaluating its capital position, market conditions and share price, the Company launched a substantial issuer bid to repurchase up to $325 million of its common shares. The offer will expire on August 24, 2010, with the details of the offer described more fully in the circular dated July 19, 2010. The Company remains confident in meeting its business objectives and the offer to repurchase shares does not reflect a change in its view regarding growth opportunities.
Shareholders' Equity
Shareholders' equity as of June 30, 2010 was $2.8 billion, or $23.56 per share on a fully diluted basis. Shareholders' equity, excluding accumulated other comprehensive income or loss, as of June 30, 2010 was $2.7 billion, or $22.53 per share on a fully diluted basis.
Dividends
The Company paid a quarterly dividend of $0.22 per common share on June 1, 2010 to shareholders of record as of the close of business on May 15, 2010. The Company also announced today that the board of directors approved its next quarterly shareholders' dividend of $0.22 per common share, payable on September 1, 2010 to shareholders of record at the close of business on August 16, 2010.
Consolidated Financial Highlights
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(In millions, except per Three Months Ended Year To Date Ended
share) June 30 (Unaudited) June 30 (Unaudited)
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2010 2009 2010 2009
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New Insurance Written 7,181 4,198 13,132 7,649
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Insurance In Force 234,196 216,742 234,196 216,742
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Net Premiums Written 157 82 252 146
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Net Premiums Earned 154 154 309 301(2)
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Losses on Claims 49 71 109 131
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Investment Income 41 51 90 94
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Net Income 85 75 169 149(2)
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Net Operating Income(1) 86 70 167 147(2)
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Fully Diluted EPS $0.72 $0.67 $1.43 $1.33(2)
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Fully Diluted Operating EPS(1) $0.73 $0.63 $1.42 $1.31(2)
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Loss Ratio 32% 46% 35% 44%
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Combined Ratio 47% 62% 51% 58%(2)
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Operating Return on Equity 13% 12% 13% 14%(2)
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Minimum Capital Test Ratio 154% 140% 154% 140%
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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) Including the impact of the change to the premium recognition curve
in the first quarter of 2009, financial measures for the six months
ended June 30, 2009 would have been: net premiums earned, $401; net
income, $213; net operating income, $211; fully diluted earnings per
share, $1.90; fully diluted operating earnings per share, $1.88;
combined ratio, 45%, and operating return on equity, 19%.
Detailed Operating Results and Financial Supplement
For more information on Genworth MI Canada Inc.'s operating results, please refer to the Company's Management's Discussion and Analysis and Financial Statements as posted on SEDAR and available at:
http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00028505.
This press release, the financial statements, Management's Discussion and Analysis, and the second quarter 2010 financial supplement are also posted on the Company's website at http://investor.genworthmicanada.ca. Investors are encouraged to review all of these materials.
Conference Call
Genworth MI Canada Inc.'s second quarter conference call will be held on July 30, 2010 at 10:30 am EST. The call is accessible via telephone and over the Internet on the Company's web site at www.genworthmicanada.ca. Slides to accompany the conference call will be posted on July 30th before the start of the conference call. The dial-in number for the July 30th conference call is 1-888-300-0053 (No. I.D. 80635498). A recording of the call will be available on the Company's website through to September 15, 2010.
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 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. 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, including the Company's plans with respect to its capital structure, the current issuer bid 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 Genworth MI Canada Inc.'s current beliefs or expectations, including in the case of statements regarding the Company's plans with respect to its capital structure and current issuer bid, 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 control of Genworth MI Canada Inc. 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 June 30, 2010, Genworth Financial Canada had $5.5 billion in total assets and $2.8 billion in 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.
For further information: Investors - Samantha Cheung, 905-287-5482, [email protected]; Media - Anita DiPaolo-Booth, 905-287-5394, [email protected]
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