SMARTER MI PEOPLE POWERED DATA DRIVEN CUSTOMER...
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1 Genworth MI Canada Inc. 2017 Investor Day
December 6th, 2017
2017 Investor Day
SMARTER MI PEOPLE POWERED
DATA DRIVEN
CUSTOMER CENTRIC
2 Genworth MI Canada Inc. 2017 Investor Day
Forward-looking and non-IFRS statements
DRIVING VALUE THROUGH CUSTOMIZED SERVICE EXPERIENCE
Public communications, including oral or written communications such as this document, relating to Genworth MI Canada Inc. (the
“Company”, “Genworth Canada” or “MIC”) often contain certain forward-looking statements. These forward-looking statements
include, but are not limited to, statements with respect to the implementation of any regulatory or legal changes introduced by the
Government and the potential impact on new insurance written, as well as 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, the Canadian housing market, and the size of the transactional insurance market,
proposed or potential transactions involving the Company or its shareholders and other statements that are not historical facts.
These forward-looking statements may be identified by their use of words such as “may”, “would”, “could”, “will,” “intend”, “plan”,
“anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, and similar expressions. These statements are based on the
Company’s current assumptions, including assumptions regarding economic, global, political, business, competitive, market and
regulatory matters. These forward-looking statements are inherently subject to significant risks, uncertainties and changes in
circumstances, many of which are beyond the ability of the Company to control or predict. 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 the facts
underlying the Company’s assumptions, and the other risks described in the Company’s most recently issued Annual Information
Form, Short Form Base Shelf Prospectus, and Management’s Discussion and Analysis and all documents incorporated by reference
in such documents. Management’s current views regarding the Company’s financial outlook are stated as of the date hereof and
may not be appropriate for other purposes. 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.
To supplement its financial statements, the Company uses select non-IFRS financial measures. Such non-IFRS financial measures
include net operating income, operating earnings per common share (basic), operating earnings per common share (diluted),
operating return on equity, insurance in-force, new insurance written, loss ratio, expense ratio, combined ratio, investment yield,
delinquency rates, effective loan-to-value, and Minimum Capital Test (“MCT”). 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 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. A reconciliation from non-IFRS financial measures to the most readily comparable measures
calculated in accordance with IFRS, where applicable, can be found in the Company’s most recent Management’s Discussion and
Analysis, which is posted on the Company’s website and is also available at www.sedar.com.
3 Genworth MI Canada Inc. 2017 Investor Day
DRIVING VALUE THROUGH CUSTOMIZED SERVICE EXPERIENCE
Genworth Canada 2017 Investor Day December 6th, 2017 – Agenda
Lunch and registration: 12 noon to 12:40 PM
Stuart Levings President & CEO
Craig Sweeney SVP & Chief Risk Officer
Philip Mayers SVP & Chief Financial Officer
Opening remarks
and introduction
Duration Discussion topic
5 minutes Jonathan Pinto
VP, Investor Relations
Strategic outlook 30 minutes
Disciplined risk
management 30 minutes
Financial strategy
and insights 30 minutes
Wrap up by CEO, followed by Q & A
period with all executive presenters 30 minutes
4 Genworth MI Canada Inc. 2017 Investor Day
Agenda and key themes
Strategic outlook
Disciplined risk management
Financial strategy and insights
Question and answer session
Smarter M.I.
5 Genworth MI Canada Inc. 2017 Investor Day
Stuart Levings President and Chief Executive Officer
Strategic outlook
6 Genworth MI Canada Inc. 2017 Investor Day
Genworth Canada overview
$4.0 billion Market capitalization*
91 million Shares outstanding**
$6.8 billion Total assets
$3.9 billion Shareholders’ equity
WHO WE ARE
LARGEST private residential mortgage insurer in Canada
Helped 1.5M+ families achieve homeownership1
Supported 250+ Canadian lenders1
MARKET FACTS (Q3’17)
WHAT WE DO2
1 2
4 3
Mortgage Application Mortgage Insurance Application and Premium
Mortgage Loan Insurance Contract
Homebuyer Mortgage lender (originates mortgage)
Mortgage insurer
• Mandatory for less than 20% down payment
• 100% coverage protects lender against default risk
• Upfront non-refundable premium
• Capital relief for lenders
MORTGAGE INSURANCE PRODUCT
SERVED MARKET • Primarily first time homebuyers with:
• 25-45 age demographic
• $102K average household income….70% multiple
borrowers3
Note: Company sources. Market facts in Canadian dollars. 1. Cumulative transactional funded deals.
2. Denotes transactional mortgage insurance. 3. YTD 2017 – as at Q3’17; transactional purchase only.
*As at November 20th, 2017, Source: Ipreo. ** Basic shares outstanding as at Sept. 30, 2017.
7 Genworth MI Canada Inc. 2017 Investor Day
Served market: first time homebuyers
Purchase price <300K >300K - <=500K >500K
…and what they purchase
What our prudent home buyer profile looks like…
46.4%
34.8%
13.0%
5.8%
<= 100K >100K - 150K >150K - 200K > 200K
54.2%
28.6%
12.5%
4.7%
<= 35 >35 - <= 45 >45 - <= 55 > 55
Detached Condo Row/Semi
3% immigrated
to Canada1
70% bought with
spouse/partner1
746 average
credit score1
Average
household
income
= $102K
Average
borrower age
= 36 years
NATIONAL VANCOUVER TORONTO CALGARY
68% 9% 13% 30% 30% 23% 29% 40% 31% 68% 11% 12%
Avg. price2 = $408K
Avg. income = $115K
Avg. GDS3 = 26%
Note: Company sources, in Canadian dollars. 1. Jan17-Sep17 timeframe; Purchase Business only. 2. Average price represents Greater Calgary Area, Greater Toronto Area and Greater
Vancouver Area YTD Sep17; Purchase Business only. 3. Denotes Gross Debt Service Ratio.
Avg. price2 = $518K
Avg. income = $122K
Avg. GDS3 = 29%
Avg. price2 = $461K
Avg. income = $111K
Avg. GDS3 = 28%
Avg. price2 = $325K
Avg. income = $102K
Avg. GDS3 = 24%
8 Genworth MI Canada Inc. 2017 Investor Day
2017 key accomplishments
DRIVING SHAREHOLDER VALUE THROUGH SOUND RISK
MANAGEMENT AND INDUSTRY THOUGHT LEADERSHIP
Loss mitigation efforts ongoing;
54% workout penetration;
success rate of 96%, 12
months after workout on
average3
Enhancements to risk
selection, technology and
processes (Smarter MI)
Strong financial
performance; 7% increase in
quarterly dividend1;
transactional premium rate
increase of 18%2 in 2017
Note: Company sources.
1. Increase is effective Q4’17.
2. Q3 2017 vs. Q3 2016.
3. Oct. 2016 to Sept. 2017 period.
4. YTD Sept. 2017, purchase business only.
2017 loss ratio trending
towards lower half of range
10% to 20% range
Proactive engagement with
regulators to influence
mortgage finance sector
Well-distributed; high quality
portfolio; average credit score
7464, improved debt service
ratios
9 Genworth MI Canada Inc. 2017 Investor Day
Our environment today
Risk Assessment
Economic
Housing &
mortgage
markets
Insurance
portfolio
Regulatory
Key takeaways
Strong economic growth environment, 3.1%1 expected in 2017
Positive momentum in oil producing regions
Interest rates on the rise
Monitoring NAFTA renegotiations
Housing markets trending towards more normalized state
First time homebuyer affordability still impacting HLTV market size
Strong supporting fundamentals; 1MM immigration in next 3 years2
Portfolio quality remains strong
Mortgage rate stress test driving improved consumer debt profile in
the insured segment
Extremely strong mortgage loan performance
Government shifting focus to uninsured mortgage space (B-20)
OSFI capital rules impacting lender profitability and competitor
dynamics
Increasing provincial focus on housing policy initiatives
STRONG MACROECONOMIC ENVIRONMENT
1. BoC GDP forecast, Monetary Policy Report, Oct. 2017. 2. Multi-year strategy tabled by the Liberal government, Nov. 2017.
10 Genworth MI Canada Inc. 2017 Investor Day
Impact from 2016 stress test
304
498 461
390 422
530
314 281
Na
tio
nal
Vic
tori
a
Vancou
ve
r
Ca
lga
ry
Ha
milt
on
Toro
nto
Otta
wa-
Gatine
au
Mo
ntr
ea
l
Meaningful difference in impact across markets (C$, 000s)
Application
volumes* -22% -50% -53% -32% -44% -53% -26% -17%
New
insurance
written**
-15%
Source: Company data. * Change in Activity based on transactional application volumes received YTD Q317 (v. YTD Q316). **Transactional new insurance written (NIW) 3Q YTD 2017 v. 3Q YTD 2016.
CHANGE IN APPLICATIONS DOWN APPROXIMATELY 20% AS EXPECTED; NIW & PREMIUMS
WRITTEN LESS IMPACTED DUE TO RATE INCREASE AND HIGHER APPROVAL RATE
Genworth
insured
property
prices
11 Genworth MI Canada Inc. 2017 Investor Day
B-20 qualifying rate impact
73%
12% 5%
11%
2016 – YTD 2017 Low Ratio
Applications (up to 25 year amortization) GDS & TDS breach drill-down1
Eligible NIW (within debt servicing limits)
TDS > 44% limit
Within 200 bps of limit
>200 above limit Both GDS and TDS
breach
GDS > 39% limit
71%
29%
43% 57%
Within 400 bps of limit
>400 above limit
Note: Company sources. NIW represents new insurance written.
1. Based on Total GDS and/or TDS breach ($)
2. Management estimate.
POTENTIAL IMPACT TO HOUSING DEMAND IN THE 5%-10%2
RANGE; IMPROVES LONG-TERM AFFORDABILITY
Creates more level playing field in terms of qualifying criteria
between uninsured mortgages (B-20) and insured mortgages (B-21)
12 Genworth MI Canada Inc. 2017 Investor Day
Market size
Market share
Premium rate
• Modest improvement in first time homebuyer penetration rate
• Diversified across lenders
• Full year impact of 2017 rate increase (~3.50% v. 3.26%)2
Growth opportunities
1
2
3
TRANSACTIONAL PREMIUMS WRITTEN EXPECTED TO BE MODESTLY HIGHER IN 2018
Transactional market penetration
80%1
~17-20%1
Transactional
insurance
penetration of
~17-20%1 (of
total mortgage
originations) in
2017
2018
expectations
for a
modestly
larger
insured
market
Uninsured market
Insured market
• B-20 & provincial changes slowing home price
appreciation; improved affordability for first time
homebuyer
• Lower mortgage rates for borrower-paid insured
mortgages vs. uninsured mortgages
• B-20 mortgage rate stress test reduces incentive to avoid
high ratio mortgage rules
Key drivers of market size growth:
Impact
+2-3%
+1-2
points
+24 bps
1. Management estimate.
2. Management estimate, vs. Q3 YTD 2017.
13 Genworth MI Canada Inc. 2017 Investor Day
Our core business franchise is solid
Prudently grow key accounts
Drive capital efficiency
Leverage GR strategy
to influence government
• Fundamentals are sound: strong
regulatory structure; prime, de-risked
mandatory product; disciplined
underwriting and covenant recourse
• Risk profile of recent, more exposed
books materially improved over older
books
• Housing in larger markets moving
towards a “soft landing”
• New capital framework and improved
pricing should drive ROE progression
• Business generating excess capital as
older books season
A
D
Proactively manage risk
B
C
Status Strategies to improve core MI business
14 Genworth MI Canada Inc. 2017 Investor Day
Lender MI allocation dynamics
CREATING VALUE THROUGH: RELATIONSHIPS, SERVICE EXPERIENCE,
CLAIMS CREDIBILITY, AND INDUSTRY THOUGHT LEADERSHIP
Allocation at branch
level (50%1 of industry
volume)
Allocation at HQ
(“toggle lenders”) (50%1
of industry volume)
• Focused on driving superior
customer experience
• Relationships/“feet on the street”
• Local market expertise
• Underwriting consultation
• Training
• Key senior decision makers and
relationships
• Thought leadership/data
• Service standard scorecards
• Counterparty assessments
• Portfolio insurance
Field Sales National Accounts
Regional sales resources
across all provinces
Key head office relationships
supported by field sales
1. Management estimate.
15 Genworth MI Canada Inc. 2017 Investor Day
Prudent growth and enhanced customer experience
Growth strategy
(1) Drive enhanced customer
experience and profitability through
our “Smarter MI” strategy
(2) Maintain transparency on credit
ratings and counterparty strength
(3) Build on our reputation as the
preferred MI partner through
ongoing industry “thought
leadership”
Leveraging key capabilities
ENHANCE LENDER ‘POINT OF SALE’ EXPERIENCE TO DRIVE MARKET SHARE GROWTH
Risk
analytics
Customer
segmentation
Enhanced
modeling
25 years of
mortgage
performance
data
16 Genworth MI Canada Inc. 2017 Investor Day
2018 outlook
GRADUAL MARKET NORMALIZATION AS
STAKEHOLDERS ADJUST TO
REGULATORY INTERVENTION
Ongoing economic strength, greater parity between provinces
“Normalized” housing markets, particularly in the GTA
& GVA
B-20 stress test - pressure on conventional
mortgages and higher end price segment
Modest improvement in FTHB fundamentals
Transactional premiums written expected to be
modestly higher in 2018
Ongoing normalization of losses
Emergence of risk based pricing methodology for HLTV
mortgage insurance
17 Genworth MI Canada Inc. 2017 Investor Day
Strategic priorities for 2018
1
Invest in
process
innovation and
technology to
drive improved
customer
experience
4
Maintain an
efficient capital
structure to
ensure capital
strength while
maximizing
ROE
3
Leverage our
strong
government
relations
strategy to
influence our
regulatory
environment
2
Continue to
exercise prudent
risk
management
and proactive
loss mitigation
CONTINUE TO PROVIDE THOUGHT LEADERSHIP IN THE MORTGAGE INDUSTRY
18 Genworth MI Canada Inc. 2017 Investor Day
Craig Sweeney Senior Vice President and Chief Risk Officer
Disciplined risk
management
19 Genworth MI Canada Inc. 2017 Investor Day
Risk governance framework
• Portfolio analytics
• Identification of loss trends
• Drives underwriting changes
• Proactive loss mitigation
Portfolio risk
management
• Clearly defined risk appetite
• Underwriting fundamentals
• Proprietary mortgage scoring model
• Robust quality assurance
Manage the quality
of new business
INSURANCE RISK PILLARS
• Macro-economic environment
• Housing market trends
• Regional risk factors
Identify & assess
key risks
Strong
regulatory
framework
• Defined underwriting best practices (OSFI’s B-20 / B-21 guidelines)
• Borrower recourse
• Efficient and effective mortgage foreclosure process
• Risk-sensitive capital framework
REGULATORY & LEGAL FRAMEWORK
GOVERNANCE
Robust risk
oversight
• Board: Risk, capital and investment committee
• Management: Insurance risk committee; Model risk committee
20 Genworth MI Canada Inc. 2017 Investor Day
Underwriting fundamentals - Smarter MI
APPLICATION SCREENING PROCESS
Credit
Quality
• “Prime”
borrower(s)
• Payment
history
• Debt
serviceability
Collateral
Models
• Property
characteristics
• Locational
influences
• Value /
marketability
UW’ing
Rules
• Regulatory
requirements
• Emerging
risks
• Model ‘blind
spots’
Automated
Underwriting
Decision
• All models
must pass for
a loan to auto
approve
• Enhanced due
diligence on
referred files
Loan Quality
Score
• Comprehensive
loan quality
assessment
21 Genworth MI Canada Inc. 2017 Investor Day
Environment
Commentary
Portfolio
quality
› Significant embedded equity and
strong average credit scores
Canadian
economy
› Strong economic momentum across
most regions going into 2018
Stabilizing oil
prices
› Reinvestment in the oil and gas
sector in initial stages
U.S.
economy
› Robust labour market and consumer
confidence
Commentary
NAFTA /
Recession
› NAFTA negotiations expected to
continue into late 2018
Housing risk:
GTA / GVA
› B-20 Guideline: Stress test to further
reduce over heating in key regions
Rising interest
rates
› Insurance portfolio heavily weighted
to 5-yr fixed rate mortgages
Household
debt levels › MIC: improving borrower debt profile
KEY RISKS KEY STRENGTHS
Source: Company sources, Bank of Canada, RBC economics, US EIA, bls.gov, fred.stlouisfed.org/series/UMCSENT
22 Genworth MI Canada Inc. 2017 Investor Day
1. Total Insurance in Force as at September 30, 2017 based on original insured amount
2. Based on outstanding balance of insured mortgages as reported by the Company as at September 30, 2017 of $222B
3. Effective LTV calculated using Teranet comprehensive data; Based on lender reported outstanding balance of insured mortgages as at September 30, 2017
Insurance in
Force (C$B) 1 $161 $165 $21 $21 $20 $19 $21 $25 $21 $14 $487
O/S Insured Mtg
Balances2 (C$B) $103 $17 $7 $7 $9 $11 $16 $20 $20 $12 $222
% – ELTV3 >80% 0.1% 1% 0% 1% 11% 26% 47% 48% 66% 94% 21%
39% 37%
53% 57%
62% 65%
71% 75%
82%
91%
Bulk <=2009 2010 2011 2012 2013 2014 2015 2016 YTD'17
Average Effective Loan-to-Value (ELTV) by Book Year3
As at September 30, 2017
Bulk
Transactional
Total
>25% EQUITY ON AVERAGE FOR 2015 AND PRIOR BOOK YEARS
National risk in force (RIF)
23 Genworth MI Canada Inc. 2017 Investor Day
Credit profile
C$103B (effective LTV by loan bucket, % of transactional business)
Note: Effective LTV calculated using Teranet comprehensive data; Based on lender reported outstanding balance of insured mortgages as at September 30, 2017
2%
6%
8%
84%
> 75% 70.01-75% 65.01-70% <= 65%
Outstanding insured mortgage balance
10%
5%
739
768
'08
'09
'10
'11
'12
'13
'14
'15
'16
Q3'1
7 Y
TD
% Score* <660 Avg Score
*excludes files with missing Credit Score
84% OF PORTFOLIO INSURANCE HAS EMBEDDED EQUITY OF AT LEAST 35%
Portfolio insurance
24 Genworth MI Canada Inc. 2017 Investor Day
EMBEDDED EQUITY & STRONG CREDIT SCORES REDUCE OVERALL RISK IN PORTFOLIO
C$119B (effective LTV by loan bucket, % of transactional business)
Note: Effective LTV calculated using Teranet comprehensive data; Based on lender reported outstanding balance of insured mortgages as at September 30, 2017
14%
3% 720
746
'08
'09
'10
'11
'12
'13
'14
'15
'16
Q3'1
7 Y
TD
% Score <660 Avg Score
15%
12%
12% 61%
> 90% 85.01-90% 80.01-85% <= 80%
Transactional insurance
Credit profile Outstanding insured mortgage balance
25 Genworth MI Canada Inc. 2017 Investor Day
Limiting stacked risk factors
EXPOSURE TO STACKED RISK LOANS TRENDING DOWNWARD
66%
27%
5% 1%
1%
>90-95 >85-90 >80-85
>75-80 <=75
95 LTV – credit score
3% 5% 8%
29%
36%
19%
<=660 <=680 <=700 <=740 <=780 780+
20%
37%
25%
18%
>40 >35-40 >30-35 <=30%
95 LTV – TDSR
Stacked risks (% of NIW): >90%+ LTV + <=660 credit score + >40 TDSR
Halifax Montreal Ottawa Toronto Calgary Vancouver National
2017 0.2% 0.1% 0.2% 0.1% 0.4% 0.5% 0.4%
2016 0.7% 0.1% 0.4% 0.3% 0.4% 0.3% 0.5%
2015 0.7% 0.5% 0.9% 0.4% 0.6% 0.5% 0.8%
Loan-to-value (LTV) Mix
Note: Company sources; Stacked Risk = >90% LTV and <= 660 score and >40 total debt service ratio (TDSR). NIW represents new insurance written.
• LTV mix, 95LTV by Credit Score, 95LV by TDSR and 2017 Stacked risks based on New Insurance Written (NIW) YTD Sep’17; Purchase only. Excludes Alt A.
• 2015 and 2016 Stacked risks based on Total NIW for the year; Purchase only, excludes Alt A
2017 TRANSACTIONAL BUSINESS
26 Genworth MI Canada Inc. 2017 Investor Day
Early term delinquency trend
Note: Company sources as at Q3’17; MI (transactional) data only. 1. Represents loans that go into delinquency status within the first 12 months.
12-month delinquency rate (DR) trend1
RISK MANAGEMENT PROCESSES DRIVE BETTER PORTFOLIO QUALITY
• Measure of underwriting quality and
potential borrower misrepresentation
• B-20/B-21 guidelines support strong
underwriting discipline
• Key MIC risk processes and controls:
• Lender underwriting quality assurance
• Industry information sharing
• Collateral model tests for inflated values 0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Q3'1
7 Y
TD
12-Month DR
27 Genworth MI Canada Inc. 2017 Investor Day
Regional risk assessment
Ho
us
ing
ris
k
Economic risk Low High
High
GTA
Quebec Alberta
Atlantic
Ontario
(ex GTA)
Prairies
Key Indicators
Overvaluation
Affordability
Price-to- income
Supply / demand
Key Metrics: GDP Forecast; UE Rate; Economic diversity
Pacific
(ex GVA)
Denotes change from Q2’17
Elevated housing risk in GTA.
Regulatory actions reducing risk
GVA
Improved economic forecast
for Alberta and Prairies regions
Sources: Company estimates, Market average/consensus, Northern Economic Diversification Index
28 Genworth MI Canada Inc. 2017 Investor Day
GTA & GVA: housing market trends
Sales-to-listings ratio (%)
Source: CREA, data as at Sep’17. Note: GTA represents the Greater Toronto Area and GVA represents the Greater Vancouver Area.
20
40
60
80
100
24 20 16 12 8 4 FBTax*
4 8 12
GTA
GVA
Months before the tax Months after the tax
Resale price (month 24 = 100)
80
100
120
140
160
24 20 16 12 8 4 FBTax*
4 8 12
GTA
GVA
Months before the tax Months after the tax
Both cities have returned to a
more balanced market
House prices have returned to
2016 levels
29 Genworth MI Canada Inc. 2017 Investor Day
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Jan
17
Fe
b17
Ma
r17
Ap
r17
Ma
y17
Jun
17
Jul1
7
Au
g17
Se
p17
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Jan
17
Fe
b17
Ma
r17
Ap
r17
Ma
y17
Jun
17
Jul1
7
Au
g17
Se
p17
GTA1 median price GVA1 median price
Market MIC Market MIC
Condo
Detached
Condo
Note: Company sources, except for market data based on information from CREA.
Median price on transactional new insurance written for purchase transactions (excludes re-financings).
1. GTA represents the Greater Toronto Area and GVA represents the Greater Vancouver Area.
Detached
GTA & GVA: housing market trends
30 Genworth MI Canada Inc. 2017 Investor Day
Buffers against rising interest rates
2009 2010 2011 2012 2013 2014 2015 2016 YTD
2017
% 5-yr
Fixed 54% 57% 58% 78% 84% 75% 78% 82% 71%
70%
15%
15%
5yr Fixed
<5yr Fixed
Variable
Originations between 2007-YTD 2017
MIC: Interest rate trend
2
3
4
5
6
7
2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017
18F* 19F*
Avg Contract Rate Qualifying Rate buffer
%
* Mortgage renewal rate is the 5 year bond rate plus 150 bps
70% of portfolio* is 5-yr fixed rate MIC: Qualifying rate
*MIC originations between 2007-2017
MAJORITY OF 2013 / 14 BORROWERS WILL RENEW AT RATES
EQUAL TO OR LOWER THAN THEIR ORIGINAL MORTGAGE RATE
31 Genworth MI Canada Inc. 2017 Investor Day
11.1% 10.5%
8.0% 7.9% 7.8%
0%
5%
10%
15%
20
16Q
3
20
16Q
4
20
17Q
1
20
17Q
2
20
17Q
3
Improving gross debt service ratio
REGULATORY CHANGE SUPPORTING IMPROVED PORTFOLIO QUALITY
MIC: Gross debt service ratio >35% Highly indebted borrowers
Note: Data include purchases and refinances originated by federally regulated financial institutions
Note: Company sources for transactional new insurance written
Indebted Borrowers Source: Bank of Canada, Financial System Review Nov. 2017.
32 Genworth MI Canada Inc. 2017 Investor Day
Regional diversification
GEOGRAPHICALLY DIVERSIFIED … ALBERTA EXPOSURE REDUCED TO 18%
Note: Company sources.
1. NIW represents new insurance written.
2. Pacific includes BC and Territories.
Regional highlights
Regulatory changes and
affordability constraints reducing
Ontario NIW
38% 37% 39% 43% 38%
25% 27% 23% 17% 18%
14% 12% 12% 13%
16%
10% 12% 13% 14% 14%
13% 13% 12% 13% 14%
2013 2014 2015 2016 2017 YTD
Ontario Alberta Quebec Pacific Other
Regional NIW1 dispersion (Transactional)2
Underwriting actions resulting
in smaller but better quality
Alberta portfolio since 2014
Strong economic conditions in
Quebec. Key growth region in
2018
33 Genworth MI Canada Inc. 2017 Investor Day
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
20
06
2007
20
08
20
09
20
10
20
11
20
12
20
13
2014
20
15
20
16
Q3 Y
TD
2017
Canada loss ratio - MIC (RS) Canada DR-CBA
2018 annual loss ratio expectations
MIC loss ratio & CBA delinquency rates
PRELIMINARY 2018 ANNUAL LOSS RATIO RANGE 15% TO 25%
Preliminary
2018 Loss
Ratio Range
• WTI price-per-barrel in the
$50-60 US range
• Canadian dollar remains
stable in the 70-80 cent range
• Modest increase in mortgage
interest rates
2018 assumptions
UE Rate House
Prices
National ~6.5% (0.5%)
Note: 2018 assumptions based on Company estimates; denote exit rates.
Data Sources: Canadian Bankers Association, Company sources; all data as at Q3’17 except CBA delinquency rates (as at Aug’17)
1. 2009 excludes the impact of the change to the premium recognition curve in Q1’09
1
34 Genworth MI Canada Inc. 2017 Investor Day
Key takeaways
Disciplined risk management
Underwriting fundamentals
reducing risk
Well positioned to address
economic pressures
2018 annual loss ratio range:
15% to 25%
Strong portfolio quality
35 Genworth MI Canada Inc. 2017 Investor Day
Philip Mayers Senior Vice President and Chief Financial Officer
Financial strategy and
insights
36 Genworth MI Canada Inc. 2017 Investor Day
201
2
201
3
201
4
201
5
201
6
201
7
30.6
2
32.5
3
35.0
2
36.8
2
39.2
8
42.0
4
13%2
12% 12% 12% 11%
13%
0%
5%
10%
15%
20%
25%
0
5
10
15
20
25
30
35
40
45
201
2
201
3
201
4
201
5
201
6
Q3'1
7
1.1
9
1.3
1
1.4
4
1.5
9
1.7
0
1.3
2
201
2
201
3
201
4
201
5
201
6
201
7
Consistently creating shareholder value
Operating earnings per share (C$, diluted)
Book value per share (C$, including AOCI, diluted)
EPS (net of dividends)
Ordinary dividends paid
Buybacks & special dividends
(C$, millions)
$3.4
32
$3.6
0
$3.8
6
$4.0
5
$4.2
3
Total
EPS
6% CAGR1
Track record of year over year
EPS growth
5% CAGR1
1. Net operating income, EPS, and book value per share CAGR (compounded annual growth rate) reflects the 2012-2016 period. 2. 2012 net operating income, EPS & ROE excludes impact of the reversal of the government guarantee fund exit fee.
0 0 105 116 50
3Q
YTD
Operating Income history (C$, millions)
$3.7
6
40
3% CAGR1
On track for continued growth in
operating income
$339
2
$349
$366
$375
$388
$345
3Q
YTD Net operating
income
Operating return on equity
Book value per share
3Q
YTD
37 Genworth MI Canada Inc. 2017 Investor Day
Unearned premiums provide good visibility of
future revenues with significant embedded
value
Strong balance sheet
(C$, millions) Sept. 30,
2017
Dec. 31,
2016
Assets
Cash and investments $ 6,472 $ 6,265
Other assets 355 347
Total assets $ 6,826 $ 6,612
Liabilities
Loss reserves 131 163
Unearned premiums 2,136 2,143
Long-term debt 433 433
Other liabilities 265 224
Total liabilities 2,965 2,963
Shareholders’ equity
(incl. AOCI) 3,861 3,649
Total liabilities and
shareholders’ equity $ 6,826 $ 6,612
Strong capital position with track record of
annual dividend increases and share
buybacks
Modest leverage with debt to total capital of
10%
High quality investment portfolio with ~92%1
investment grade fixed income
Note: Amounts may not total due to rounding. 1. Includes cash and cash equivalents of 5%.
EMBEDDED PROFITS IN $2.1 BILLION UNEARNED PREMIUMS
RESERVE DRIVING ONGOING PROFITABILITY
38 Genworth MI Canada Inc. 2017 Investor Day
2013 and prior years
2013 and prior years
2014
2014
2015
2015
2016
2016
2017
2017
2017 2018 premiumsearned
illustration
Premiums earned
Net premiums written (C$, millions)
Earnings curve (by age of book for a calendar year)
Premiums earned (Contribution by book year)1
Q4/17 and 2018
premiums earned1 Q4/17 premiums
earned1
Note: Earnings curve assumes no material change in the curve with respect to above depiction. 1 Estimates as of Q4/17 and 2018 premiums earned are for illustrative purposes only and are not to scale.
498
760
809
640
512
550
2017
2016
2015
2014
2013
2012
0% 5% 10% 15% 20% 25%
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1
3Q YTD
2018
4Q17 (illustrative
purposes only)
Key drivers of 2018
premiums earned
Transactional premium rate should grow by ~7%
to ~3.50% in 2018 reflecting full impact of Q2 2017
price increase
Premiums earned expected to
be relatively flat in 2018
2017 Q3 YTD $505 million
39 Genworth MI Canada Inc. 2017 Investor Day
Loss ratio
2018 FULL YEAR TARGET LOSS RATIO OF 15 TO 25%
Loss ratio expected to trend
higher in 2018 as losses on
claims begin to normalize in
Ontario and Pacific regions
39% 43% 38%
7%
23% 17% 18%
50%
46%
12% 13% 16% 22%
22%
13% 14% 14%
-1%
12% 13% 14% 23%
33%
2015 2016 2017 YTD 2016 3Q17 YTD
Ontario Alberta Quebec Pacific Other
Regional NIW1 vs. losses on claims
Alberta, Quebec and Atlantic
regions driving 2016 and 2017
losses on claims
Strong economic conditions in
Ontario and Pacific regions
resulting in almost no losses on
claims in these regions
Regional NIW1 dispersion (Transactional)2
Regional losses on
claims distribution
Observations
Note: Company sources.
1. NIW represents new insurance written.
2. Pacific includes BC and Territories.
Loss
ratio 22% 11%
40 Genworth MI Canada Inc. 2017 Investor Day
Loss reserving primer
Unpaid principal &
accrued interest
Incurred but not
reported delinquencies
Settlement costs:
Legal
Appraisal
Repairs
Property
management
Property taxes
Loss reserves represent our best estimate of the net costs of settling claims plus a
provision for adverse deviation for delinquent loans
Best estimate of losses on claims
Estimated
property value
Expected cures
and recoveries
Provision for
adverse deviation
Forced
sale
value
Market
value
Reserves
set using
forced sale
value
Distribution of
sale prices vs.
appraised values
Reflects potential for home
price declines, higher
settlement costs, lower cure or
recovery rates, etc.
LOSS DEVELOPMENT MOST PRONOUNCED WHEN THERE
ARE UNANTICIPATED ECONOMIC DEVELOPMENTS
Note: Company sources.
41 Genworth MI Canada Inc. 2017 Investor Day
Embedded value illustration
In-force portfolio Expected over
economic cycle
Stress
scenario
1% to 2% increase 2% to 4% increase
-5% to -7% -15% to -20%
25% to 30% 60% to 70%
$2.1 billion
($578M) ($1,365M)
($420M) ($420M)
~$813M ~$233M
~$9.00 ~$2.60
Unemployment rate change over 5 years
Cumulative HPA / (HPD) over 5 years
Loss ratio (national) over 5 years
Unearned premiums
Future losses
Future expenses (20% expense ratio)
Embedded value after taxes
MEANINGFUL EMBEDDED FUTURE PROFITS AND ADDITIONAL INTRINSIC VALUE
Additional intrinsic value per share
Note: Company estimates.
42 Genworth MI Canada Inc. 2017 Investor Day
30%
15%
33%
6% 8%
8%
High quality investments
Federals
Provincials
Preferred shares
Emerging markets debt
Investment grade
corporates3
Cash & other4
Duration: 3.9 years
Book yield: 3.1%2
Invested assets (C$, millions, unless noted)
$5,917
$5,867
$176MM of bond
maturities for the
rest of 2017, and
$623MM in 2018
5,940 6,248
305 90 76 43
58
Q3 2016 Q3 2017
Book
value
Unrealized
investment
gain
$6.2B
$6.5B
Net
derivative
(44)
Accrued
income
Industry / sector & subsectors
Corporate bonds & emerging market debt
(~40% of portfolio)
Preferred shares (8% of portfolio)
59% 23%
13%
5%
34%
37%
7%
7% Pipelines
& Distribution
Energy
Financials
Industrials,
Utilities & Other
4%
Infrastructure
Pipelines
& Distribution
Energy
Financials
Industrials,
Utilities & Other
Note: Company sources.
1. Represents market value of investments, includes accrued investment income and other receivables and net derivative financial instruments related to foreign exchange and interest rate hedging programs. 2. Investment yield represents pre-tax equivalent book yield after dividend gross-up of portfolio (as at Sept. 30th, 2017). 3. Market value, includes CLOs. 4. Cash & other includes short-term investments, accrued investment income and other receivables, and net derivative financial instruments.
POSITIONED WELL FOR RISING RATE ENVIRONMENT
Total invested assets (Market value of $6.5 billion1)
11%
Collateralized
loan obligations
43 Genworth MI Canada Inc. 2017 Investor Day
Investments generate steady income stream
Interest rate hedge program
Investment highlights
Current book
yield1
(Sept. 30/17)
Current
duration
Sept. 30/17
(years)
1-year
forward
rates2
Cash & short-term 0.87% 0.2 1.40%
Federal agency
bonds3 2.14% 4.2 2.23%
Provincial gov’t
bonds 3.21% 5.4 2.32%
Corporate bonds (Single A, average quality) 3.28% 3.3 2.42%
Emerging market
debt 3.72% 5.2 3.29%
Preferred shares 6.67% 4.3 6.67%
Total 3.10% 3.9
• Targeting to maintain book yield around 3.1 to 3.2% with duration around 3.8 years
• Substantially hedged interest rate risk on attractive terms … potential to earn $15MM to $18MM in pre-tax
operating income in 2018
• 2018 focus on adding US bonds to further diversify away from Canadian financials
1. Pre-tax equivalent yield including gross-up of dividend income. 2. As at Nov. 22nd, 2017. 3. Federal government bonds constitute government agency bonds and NHA MBS. 4. Floating rate reflects the average for 2018 based on the forward curve as at Dec 4, 2017; fixed rate represents the contract rates for our existing portfolio of interest rate swaps as at September 30th, 2017.
Investment portfolio (by asset class)
Interest rate swaps 2018 forward
curve4
Notional (C$B) $3.5
Floating4 1.60 - 1.70%
Fixed4 1.17%
Spread 0.43 - 0.53%
Potential Impact on
operating investment
income
$15 – 18 MM
44 Genworth MI Canada Inc. 2017 Investor Day
3.9 3.9
0.1 0.2
31-M
ar-
17
Sep
t. 3
0 2
017
Dec. 3
1, 2
018
F
Transitional capital relief for legacy
portfolio insurance & extended
amortization business expected to run-off
in 1H 2019
Continued dialogue on refinements to
regulatory capital framework for 2019
Updating credit scores
Low LTV capital requirements
Regulatory capital
MCT (C$, billions)
Capital build expected to continue from
strong profitability
MCT EXPECTED TO BUILD IN 2018 ... ACCESS TO INSURANCE COMPANY CAPITAL ABOVE
OPERATING RANGE OF 160% TO 165% MAY BE LIMITED UNTIL TRANSITIONAL RELIEF RUNS OFF
Total Capital Available
$4.0 $4.1
Capital above internal MCT target of 157%
Capital required at 157% MCT
Transitional capital benefit
45 Genworth MI Canada Inc. 2017 Investor Day
2018 capital priorities
Funding organic growth
with MCT > 160%
Capital priorities
Maintaining modest
leverage of <= 15%
Capital strength
• MCT expected to increase moderately in
2018
Holding company cash and
liquid investments > $100 MM
Credit facility of $200 MM
Capital flexibility
• Strong flexibility with unutilized debt
capacity and strong holdco cash position
Sustainable
ordinary dividend
Return of capital when
excess capital available
Capital efficiency
• Continued focus on optimizing capital
utilization
Observations
46 Genworth MI Canada Inc. 2017 Investor Day
Mortgage insurance pricing
COST OF CAPITAL ACCOUNTS FOR OVER 50% OF PREMIUM
RATES UNDER THE NEW REGULATORY CAPITAL FRAMEWORK
Cost of
capital1
45-55% Expenses
18-20%
Losses
25-30%
Cost of
capital1
55-65% Expenses
18-20%
Losses
20-25%
2016
2017
new
pricing
Average premium rate
2.93%
Average premium rate
~3.50%
~18% premium rate increase
to achieve >13% ROE
Cost of
capital1
65-75% Expenses
10-15%
Losses
15-20%
Cost of
capital1
75-90%
Expenses
10-15%
Losses
<10%
2016
2017
new
pricing
Average premium rate
0.34%
Average premium rate
~0.76%
~123% premium rate increase
to achieve >13% ROE
Transactional pricing
Portfolio pricing
1. Net of investment income.
47 Genworth MI Canada Inc. 2017 Investor Day
<=600 600 to619
620 to639
640 to659
660 to679
680 to699
700 to719
720 to739
740 to759
760 to779
>=780
Tota
l R
equirem
ent
at Is
sue
Credit Score at Issue
Credit score multiplier for total asset requirement
New base requirement 4.6x
3.2x 2.8x
2.5x 2.1x
1.7x 1.4x
1.0x 0.9x 0.7x 0.6x
Multiplier to
730 credit
score
Based on highest credit score for multiple borrowers
Regulatory capital drivers
2016 & prior 2017 & subsequent
Original loan amount Current outstanding balance
Original LTV Hybrid LTV (O/S balance / original
property value)
Age of loan Original credit score
Supplementary capital for
overheated markets
LTV and credit score are the
most sensitive variables in
regulatory capital model
More granular pricing by LTV
and credit score could be
beneficial
• Better aligns pricing with
underlying risk
• Transparent pricing
• Incentivizes prudent borrower
behavior / credit profile
• Reduces adverse selection &
moral hazard risk
Pricing by LTV and credit score
is predominant model in the US
Regulatory capital, credit scores and future pricing model
MORE GRANULAR PRICING
LIKELY TO EVOLVE OVER TIME
48 Genworth MI Canada Inc. 2017 Investor Day
2018 ROE drivers
Premiums earned by book
year (C$)
Regulatory capital by book
year (~C$3.6B) 2018 ROE by book year
<10%
10-13%
>13%
2013 &prior
2014 to2016
2017 &2018
2018 OPERATING ROE EXPECTED TO BE SIMILAR TO THAT IN RECENT YEARS
OF 12-13%… OVER THE MEDIUM TERM, TARGETING 13% + OPERATING ROE
2017/2018
2013 &
prior
2014-2016
2017/2018
2013 &
prior
years
2014-2016
Recent books dominate
premiums earned….
.…but new capital framework
drives higher capital level for
2016 & prior books
….leading to lower ROE on
2013 & prior books, but
13%+ ROE for 2017 book
49 Genworth MI Canada Inc. 2017 Investor Day
Key takeaways for 2018
Proven business model has positioned
MIC for future financial performance
Modestly higher premiums written driven by
modest growth in MI market size and market share
coupled with higher average premium rates
Consistent with operating ROE in recent
years of 12-13%
Flat premiums earned due to smaller book
of business in 2017
Normalizing loss ratio range of 15% to
25% aided by strong portfolio quality and
stable economic conditions
Modestly higher investment income
inclusive of favorable contribution from
interest rate hedging program
50 Genworth MI Canada Inc. 2017 Investor Day
Stuart Levings President and Chief Executive Officer
Wrap up
51 Genworth MI Canada Inc. 2017 Investor Day
MIC investment thesis
Potential for top-line growth through market size recovery,
share growth, and full year impact of premium rate
increase
Seasoned risk management experience and high
quality portfolio
ROE improvement and strong capital generation
over the medium term
Proven business
model and deep mortgage
insurance expertise
Sound product design and strong regulatory
environment
Enabling execution of business strategy and
organizational success through people development
and cultural alignment
52 Genworth MI Canada Inc. 2017 Investor Day
Culture and values
53 Genworth MI Canada Inc. 2017 Investor Day
Q A
54 Genworth MI Canada Inc. 2017 Investor Day
Senior management team
Stuart Levings, President & Chief Executive Officer
15+ years of mortgage insurance experience
Mr. Levings assumed his current role as President and Chief Executive Officer in January
2015. Prior to that Mr. Levings served in such senior leadership positions as Senior Vice
President, Chief Operating Officer, Senior Vice President, Chief Operations Officer and
Senior Vice President, Chief Risk Officer. Mr. Levings joined the Company in July 2000 as
the Financial Controller, and has also held positions in finance and product development,
including five years as Chief Financial Officer. Before that, Mr. Levings spent seven years
with Deloitte & Touche. Mr. Levings holds a CPA, CA professional designation with over
15 years of professional experience in a variety of industry sectors. Mr. Levings holds a
Bachelor of Accounting Science degree from the University of South Africa and is a
member of both the South African and Canadian Institutes of Chartered Accountants.
Philip Mayers, SVP & Chief Financial Officer
25+ years of mortgage insurance experience
Mr. Mayers became Chief Financial Officer of the Company in 2009. He has over 25
years of finance and general management experience in financial services businesses.
Since joining the Company in 1995, Mr. Mayers has held several senior positions,
including Vice President, Finance, Vice President, Operations, and Senior Vice President,
Business Development. Prior to joining the Company, he held finance positions with
Mortgage Insurance Company of Canada (“MICC”), Esso Petroleum Canada and Deloitte
& Touche. He holds CPA, CA and CMA professional designations and has a Master of
Accounting degree from the University of Waterloo.
55 Genworth MI Canada Inc. 2017 Investor Day
Senior management team
Craig Sweeney, SVP & Chief Risk Officer
15+ years of mortgage insurance experience
Mr. Sweeney has more than 18 years of professional experience in the mortgage and
banking industry. Since joining the Company in 1998, Mr. Sweeney has held senior
positions in Operations and Business Development, including Director of Risk Operations
and Director of Product Development. Mr. Sweeney received an honours Bachelor of Arts
degree in Economics from Carleton University in 1994.
Winsor Macdonell, SVP, General Counsel & Secretary
15+ years of mortgage insurance experience
Mr. Macdonell is responsible for all of the Company’s legal and compliance matters, as
well as government relations. Mr. Macdonell joined the Company in 1999. He was called
to the Bar in Ontario in 1994. Prior to joining the Company, he spent three years in the life
and property and casualty industry, and prior to that was in private practice. Mr.
Macdonell received an honours Bachelor of Commerce degree from Queens University in
1988 and his LL.B. from Dalhousie University in 1992 and his ICD.D in 2014.
56 Genworth MI Canada Inc. 2017 Investor Day
Senior management team
Debbie McPherson, SVP, Sales and Marketing
25+ years of mortgage insurance experience
Ms. McPherson has over 25 years of experience and success in sales and quality
management with the Company. Prior to her current position, Ms. McPherson was the
Company’s Ontario Regional Sales Director. Ms. McPherson plays an active role in many
industry organizations, including the Canadian Association of Accredited Mortgage
Professionals, the Canadian Homebuilders Association and the Canadian Real Estate
Association. Ms. McPherson graduated from the University of Toronto with a Bachelor of
Arts degree.
Michel Cubric, SVP, Operations
20+ years of experience
Michel Cubric joined Genworth Canada as Senior Vice President, Operations in October
2017. Michel originally hails from Brazil where he started his career in the airline industry.
He moved to Canada and began working in the financial services industry. Over a period
of 14 years at CIBC, Michel developed his knowledge and expertise in the area of
mortgages. In 2009 Michel held the role of Senior Vice President, Operations and
Lending Services for Resmor which rebranded to become RMG Mortgages. In 2012,
MCAP acquired the mortgage division of RMG, and Michel continued to lead sales and
underwriting until 2016 in addition to assuming responsibility for MCAP’s sub-servicing
and lender marketing units. Michel holds a Bachelor of Arts in Physical Education and a
Master of Business Administration.
57 Genworth MI Canada Inc. 2017 Investor Day
Senior management team
Mary-Jo Hewat, SVP, Human Resources and Facilities
20+ years experience
Ms. Hewat brings over 20 years of human resources expertise spanning numerous
industries and geographies. Ms. Hewat assumed her current role of Senior Vice President,
Human Resources and Facilities in May, 2016. Prior to joining Genworth Canada, she was
Senior Vice President, HR Business Partnerships at Ontario Municipal Employees
Retirement System (OMERS) as well as Vice President, Human Resources. Her career
has also included senior HR roles with Sherritt and Hudson’s Bay. Ms. Hewat has a
Bachelor of Commerce from Ryerson University and a Masters in Business Administration
from the Schulich School of Business, York University.
Brian Hurley, Executive Chairman
20+ years of mortgage insurance experience
Mr. Hurley led the establishment of Genworth into the Canadian marketplace in 1994 and
later led it through its initial public offering in 2009. He stepped down as President and
CEO of Genworth Canada and assumed the role of Executive Chairman in January 2015.
Mr. Hurley has more than 20 years of senior management experience in the mortgage
insurance industry worldwide, including leading Genworth’s activities in key international
markets from 2004 to 2009. Prior roles include Senior VP, International of General
Electric’s U.S. mortgage insurance business and Senior VP of Sales and Operations. Mr.
Hurley graduated from Assumption College in Worcester, Massachusetts with a Bachelor
of Science degree in Economics.
58 Genworth MI Canada Inc. 2017 Investor Day
[email protected] investor.genworthmicanada.ca
Investor Relations
Jonathan A. Pinto, MBA, LL.M
Vice President, Investor Relations
[email protected] 905.287.5482