Net Operating Income of $81 million
Net Operating EPS of $0.82/share
Net Premiums Written of $178 million
Quarterly dividend will increase 10% to $0.32
TORONTO, Oct. 30, 2012 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported third quarter 2012 net income of $85 million or $0.86 per diluted common share. Net operating income was $81 million or $0.82 per diluted common share. On a comparative basis, net operating income was $2 million higher than the prior quarter and $1 million higher year-over-year.
"We continued to deliver consistent profitability," said Brian Hurley, Chairman and Chief Executive Officer. "In addition, we are pleased to be providing shareholders a dividend increase of 10% reflecting our confidence in our business outlook. This increase represents our third common share dividend increase since becoming a public company."
Third Quarter 2012 Key Financial Metrics:
- Net premiums written of $178 million were $2 million higher sequentially and $18 million higher year-over-year. The sequential increase was driven by an increase of $38 million in premiums from high loan-to-value mortgages, which was offset by $36 million in lower premiums from low loan-to-value mortgages. The year-over-year increase was primarily a result of premiums from higher levels of both high loan-to-value mortgages and portfolio insurance on low loan-to-value mortgages.
- Net premiums earned of $147 million were $1 million lower sequentially and $2 million lower year-over-year. As the larger 2007 and 2008 books have largely seasoned, their contribution to earned premiums continued to decline. The current net premiums earned are largely based on the earnings contributions from the more recent books of business originated in 2009 and later.
- Losses on claims of $44 million were $4 million lower sequentially and $10 million lower year-over- year, reflecting lower new reported delinquencies. This resulted in a loss ratio of 30% for the quarter, 2 percentage points lower than the prior quarter and 6 percentage points lower year-over-year. While losses will fluctuate from quarter to quarter, from a pricing perspective, this quarter's losses were lower than the Company's loss ratio range of 35-40% over a full economic cycle.
- Investment Income of $39 million (excluding realized and unrealized investment gains) was $1 million lower sequentially and $5 million lower year-over-year. The sequential decline in investment income resulted from lower reinvestment yields.
- Net operating income of $81 million was $2 million higher sequentially and $1 million higher year-over-year. Operating return on equity was 12% for the quarter, flat sequentially and one percentage point lower year-over-year.
- The expense ratio was 18%, 1 percentage point higher sequentially and 2 percentage points higher year-over-year. This was consistent with the Company's anticipated range.
- The unearned premium reserve increased slightly during the quarter to $1.81 billion at the end of the quarter. These premiums will be earned over time in accordance with the Company's premium recognition curve which follows the Company's loss emergence pattern.
- The regulatory capital ratio or Minimum Capital Test ("MCT") ratio was 164%, 4 percentage points higher sequentially and 3 percentage points higher year-over-year. This level of capital is well in excess of the Company's internal MCT target of 145%. The Company continues to maintain a strong capital position and ongoing financial flexibility to support and grow the business.
Dividends
On August 31, 2012, the Company paid a quarterly dividend of $0.29 per common share.
The Company also announced today that its Board of Directors approved a dividend increase to $0.32 per common share, payable on November 30, 2012, to shareholders of record at the close of business on November 15, 2012. This dividend increase represents a 10% increase in the quarterly payment.
Shareholders' Equity
As of September 30, 2012, shareholders' equity was $2.9 billion representing a book value of $28.72 per common share on a fully diluted basis. Excluding accumulated other comprehensive income ("AOCI") or loss, shareholders' equity was $2.6 billion or a book value of $26.45 per common share on a fully diluted basis.
Third Quarter 2012 Key Highlights:
The Company continued to make solid progress towards its operational targets and continues to maintain its leading position in the Canadian private mortgage insurance industry.
- Total new insurance written this quarter decreased sequentially to $9.9 billion primarily due to lower volumes of portfolio insurance written on low loan-to-value mortgages. The Company selectively participates in portfolio insurance under its clearly defined risk appetite and disciplined pricing approach. The Company believes that this selective participation results in profitable business and enhances overall lender relationships. This quarter, the Company insured $2.7 billion of low-loan-to-value mortgage portfolios. The Company anticipates the volumes of insurance on low loan-to-value mortgages will continue to fluctuate quarter over quarter in conjunction with varying demand from lenders.
- The high loan-to-value component of new insurance written was $7.2 billion, representing an increase of 25% sequentially and 9% year-over-year, largely driven by the volume of mortgage insurance commitments issued in the second quarter during the traditional spring housing market.
- The total delinquency rate was 0.15%, 2 basis points lower sequentially and 6 basis points lower year-over-year. The Company experienced a 9% lower number of net new delinquencies as compared to the previous quarter. The delinquency rate continues to be positively influenced by improving economic conditions in combination with the increased success of the Company's loss mitigation strategies.
- The Company's investment portfolio had a market value of $5.2 billion at the end of the quarter. The general portfolio had a pre-tax equivalent book yield of 4.1% for the quarter and a duration of 3.5 years as at September 30, 2012. The Company's strategy in managing its high-quality investment portfolio remained consistent with previous quarters and the portfolio continues to be comprised primarily of investment grade fixed income securities with an equity component of about 6%. While the investment portfolio is a strong contributor to income, the yield from the investment portfolio continues to be challenged in the context of a low interest rate environment.
- The ratings for the Company and its operating insurance company, Genworth Financial Mortgage Insurance Company of Canada, were recently confirmed by Standard & Poor's Ratings Services (S&P) and DBRS Ratings Limited (DBRS). Genworth MI Canada Inc.'s issuer credit rating remains 'A' with a stable outlook by S&P and 'AA' (low) with stable trend from DBRS. The financial strength of its operating insurance company remains rated 'AA-' with a stable outlook by S&P and 'AA' with a stable trend by DBRS.
Consolidated Financial Highlights
| ($ millions, except per share amounts) | Three Months Ended September 30 (Unaudited) |
|
| 2012 | 2011 | |
| New Insurance Written1 | 9,876 | 7,219 |
| Insurance In Force1 | 294,685 | 261,039 |
| Net Premiums Written | 178 | 160 |
| Net Premiums Earned | 147 | 149 |
| Losses on Claims | 44 | 54 |
| Investment Income | 39 | 44 |
| Realized and Unrealized Gains or Losses on Investments | 5 | 1 |
| Net Income | 85 | 81 |
| Net Operating Income1 | 81 | 80 |
| Fully Diluted Earnings Per Common Share | $0.86 | $0.80 |
| Fully Diluted Operating Earnings Per Common Share1 | $0.82 | $0.79 |
| Fully Diluted Book Value Per Common Share, including AOCI | $28.72 | $26.82 |
| Fully Diluted Book Value Per Common Share, excluding AOCI1 | $26.45 | $24.79 |
| Loss Ratio1 | 30% | 36% |
| Combined Ratio1 | 48% | 52% |
| Operating Return on Equity1 | 12% | 13% |
| Minimum Capital Test Ratio (MCT)1 | 164% | 161% |
| 1 This is a financial measure not calculated based on International Financial Reporting Standards ("IFRSs"). See the "IFRSs and Non-IFRSs Financial 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 Management's Discussion and Analysis as posted on SEDAR and available at www.sedar.com.
This press release, the financial statements, Management's Discussion and Analysis, and the third quarter 2012 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 third quarter earnings call will be held on October 31, 2012 at 10:30 am ET (Local: 416-644-3414, Toll free: 1-800-814-4859). 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 replay of the call will be available until December 1, 2012 (Local: 416-640-1917, Toll Free: 1-877-289-8525 Access Code 4567118#). Participants are encouraged to pre-register for the webcast through the Company's website. A replay of the call will also be available from the Company's website for a period of at least 45 days following the conference call.
IFRSs and Non-IFRSs Financial Measures
The Company's consolidated financial statements are prepared in accordance with IFRSs. To supplement its financial statements, the Company uses select non-IFRSs financial measures. Non-IFRSs 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 operating income. Other non-IFRSs measures used by the Company include shareholders' equity excluding accumulated other comprehensive income ("AOCI"), insurance in-force, new insurance written, minimal capital test ratio ("MCT"), delinquency ratio, severity on claims paid, operating earnings per common share of the Company (basic and diluted), book value per common share (basic and diluted; including and excluding AOCI), dividends paid per common share of the Company, and portfolio duration. The Company believes that these non-IFRSs 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-IFRSs 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 investor section of the Company's website. To access the glossary, click on the "Glossary of Terms" link under "Investor Resources" subsection on the left navigation bar. A reconciliation of non-IFRSs financial measures to the most recently comparable measures calculated in accordance with IFRSs can be found in Management's 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 "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", or 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 Company's expectations regarding the Canadian government's proposed changes to the guarantee regime regarding residential mortgages, and the Company's beliefs as to housing demand and home price appreciation, unemployment rates, the Company's future operating and financial results, sales expectations regarding premiums written, capital expenditure plans, dividend policy and the ability to execute on its future operating, investing and financial strategies. 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. (TSX: MIC), through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, has been the leading Canadian private residential mortgage insurer since 1995. Known as Genworth Canada, the Company 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 Canada combines technological and service excellence with risk management expertise to deliver innovation to the mortgage marketplace. As of September 30, 2012, Genworth Canada had $5.6 billion total assets and $2.9 billion shareholders' equity. Based in Oakville, Ontario, Genworth Canada employs approximately 260 people across Canada. Find out more at www.genworth.ca.
SOURCE: Genworth MI Canada
Investors - Samantha Cheung, 905-287-5482 [email protected]
Media - Lisa Azzuolo, 905-287-5520 [email protected]
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