Net Income: | Up 12% Y/Y | Up 27% Q/Q | |
Net Operating Income: | Up 4% Y/Y | Up 18% Q/Q | |
Fully Diluted Operating EPS: | Up 3% Y/Y | Up 18% Q/Q | |
Transactional Premiums Written: | Up 37% Y/Y | Up 75% Q/Q | |
Total Premiums Written: | Up 36% Y/Y | Up 31% Q/Q | |
Premiums Earned: | Up 1% Y/Y | Up 1% Q/Q | |
Loss Ratio: | 13% | Down 5 pts Y/Y | Down 13 pts Q/Q |
"We were pleased with our third quarter results, including positive top line momentum, a 13 percent loss ratio and 13 percent operating return on equity," said
Key Third Quarter 2020 Financial Results and Operational Metrics:
- New insurance written from transactional insurance was
$8.3 billion , an increase of$2.2 billion , or 37%, as compared to the same quarter in the prior year, and an increase of$3.5 billion , or 74%, as compared to the prior quarter. The increases were primarily due to an increase in transactional mortgage originations resulting from a shift in the traditional spring market from the second quarter to the third quarter due to COVID-19 restrictions and an increase in market share. - Premiums written from transactional insurance were
$291 million , representing an increase of$79 million , or 37%, from the same quarter in the prior year, and an increase of$125 million , or 75%, compared to the prior quarter primarily due to the aforementioned higher new insurance written. - New insurance written from portfolio insurance on low loan-to-value mortgages was
$1.6 billion , an increase of$0.3 billion compared to the same quarter in the prior year. Compared to the prior quarter, there was a decrease of$11.8 billion primarily due to decreased demand from lenders following the very high levels of portfolio insurance in the second quarter after the onset of the COVID-19 pandemic and the temporary changes made by the Canadian federal government to eligibility criteria and funding programs for 2020. - Premiums written from portfolio insurance were
$6 million , representing an increase of$0.2 million compared to the same quarter in the prior year and a decrease of$54 million compared to the prior quarter. The decrease compared to the prior quarter was primarily due to lower new insurance written. - Premiums earned of
$173 million were$2 million , or 1%, higher than the same quarter in the prior year, and$1 million , or 1%, higher than the prior quarter, reflecting the relatively higher level of premiums written in 2019 and through the first nine months of 2020. The unearned premiums reserve was$2.2 billion at the end of the quarter, an increase of$0.1 billion from the unearned premium reserve as atDecember 31 st, 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, were negative 8, consisting of 756 new delinquencies offset by 764 cures, and were 381 lower than the same quarter in the prior year. New delinquencies decreased by 194 due to the mortgage payment deferral program. Cures increased by 187 due to strong housing conditions and improved unemployment levels during the third quarter. Regionally, there were decreases in all regions including
Alberta (145),Quebec (79) and theAtlantic region (77). Compared to the prior quarter, new delinquencies, net of cures, decreased by 499 with decreases in all regions includingAlberta (171),Ontario (122), andQuebec (77). - The outstanding principal balance of insured mortgage loans reported under the mortgage payment deferral program totaled
$12.2 billion , or approximately 6% of outstanding insured mortgage balances as atSeptember 30 th, 2020, down from approximately 14% as atJune 30 th, 2020. Regionally, mortgage payment deferrals were primarily driven byAlberta ($4.2 billion ) andOntario ($3.9 billion ). Approximately 66% of mortgage balances subject to payment deferrals have an estimated effective loan-to-value of less than 80%. - The loss ratio, as a percentage of premiums earned, for the quarter was 13% compared to 18% in the same quarter in the prior year and 27% in the prior quarter. Losses on claims of
$23 million were$8 million lower than the same quarter in the prior year, and$23 million lower than the prior quarter, primarily due to significant favorable development related to the strong housing market and improved unemployment. Excluding this favourable development, the loss ratio would have been 23%. The incurred but not reported reserve at the end of the quarter includes the Company's estimate of the losses from defaults that would otherwise have occurred in the quarter had the payment deferral program not been in place.
- The number of delinquencies outstanding of 1,769 reflected an increase of 8 delinquencies, as compared to the same quarter in the prior year, primarily driven by increases in
Ontario (48) and the Prairies region (29) partially offset by a decrease inAlberta (55). Compared to the prior quarter, the number of delinquencies outstanding decreased by 205, primarily driven by decreases in all regions includingAlberta (60), theAtlantic region (40), andQuebec (32). - Expenses were
$33 million during the quarter, resulting in an expense ratio of 19%, as a percentage of premiums earned. This ratio was one percentage point lower than the same quarter in the prior year, consistent with the prior quarter and within the Company's expected operating range of 18% to 20%. - The Company's investment portfolio had a market value of
$6.7 billion at the end of the quarter. The portfolio had an average pre-tax equivalent book yield of 3.0%, compared to 3.3% in the same quarter in the prior year and the prior quarter, and decreased primarily due to the low interest rate environment. The portfolio had a duration of 3.6 years as atSeptember 30 th, 2020, which was relatively consistent with the same quarter in the prior year and the prior quarter. - Operating investment income of
$48 million was$9 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. Operating investment income was consistent with the prior quarter. - Realized and unrealized losses from derivatives and foreign exchange of
$2 million excludes the realized income from the Company's interest rate hedging program of$4 million . This compares to a$10 million loss in the same quarter in the prior year, and a$7 million loss in the prior quarter, with the decrease in losses being primarily due to the impact of interest rates on the market value of the Company's interest rate swaps and interest rate floors and foreign exchange. - Net income of
$124 million was$13 million higher than the same quarter in the prior year, primarily due to lower losses on claims, higher premiums earned, an increase in realized gains on sales of investments, and a lower level of realized and unrealized losses from investments, derivatives and foreign exchange, partially offset by lower operating investment income. Net income was$27 million higher than the prior quarter, primarily due lower losses on claims, an increase in realized gains on sale of investments and a lower level of realized and unrealized losses from investments, derivatives and foreign exchange. - Net operating income of
$119 million was$4 million higher than the same quarter in the prior year, primarily due to lower losses on claims and higher premiums earned, partially offset by lower operating investment income. Net operating income was$18 million higher than the prior quarter primarily due to lower losses on claims. - Operating return on equity was 13% for the quarter, an increase of two percentage points compared to the same quarter in the prior year and the prior quarter.
- The regulatory capital ratio or Mortgage Insurer Capital Adequacy Test ("MICAT") ratio was approximately 179%, 22 percentage points higher than the Company's internal MICAT ratio target of 157% and 29 percentage points higher than the Office of the Superintendent
of Financial Institutions ("OSFI") Supervisory MICAT ratio target of 150%.
- The Company estimates that its outstanding principal balance of insured mortgages as at
September 30 th, 2020, was approximately$206 billion , or 37% of the original insured amount. The Company estimates, that as ofJune 30 th, 2020, the outstanding principal balance for all privately insured mortgages was$282 billion relative to the$350 billion aggregate outstanding principal limit under the government guarantee legislation (Protection of Residential Mortgage or Hypothecary Insurance Act ("PRMHIA")).
Dividends
The Company paid a quarterly dividend of
The Company also announced today that its Board of Directors had declared a dividend of
Shareholders' Equity
As at
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 third 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, https://www.sagen.ca/about/investor-relations/. Investors are encouraged to review all of these materials.
Earnings Call
The Company's third quarter earnings call will be held on
About Genworth MI Canada Inc.
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Consolidated Financial Highlights
| Three Months Ended | Nine Months Ended | ||
2020 | 2019 | 2020 | 2019 | |
Transactional new insurance written1 | ||||
Portfolio new insurance written1 | 1,607 | 1,290 | 16,003 | 4,730 |
| ||||
Premiums written | 297 | 218 | 568 | 518 |
Premiums earned | 173 | 171 | 516 | 508 |
Losses on claims | 23 | 31 | 94 | 82 |
Expenses | 33 | 33 | 102 | 101 |
Net underwriting income | ||||
Investment income (interest and dividends, net of expenses) 1 | 44 | 50 | 134 | 147 |
Interest rate hedging program income | 4 | 7 | 15 | 23 |
| 9 | 5 | 16 | 17 |
Realized and unrealized losses on derivatives, foreign exchange | (2) | (10) | (43) | (63) |
| ||||
| ||||
Net operating income1 | ||||
Basic weighted average common shares outstanding | 86,291,079 | 85,998,556 | 86,280,183 | 86,853,210 |
Diluted weighted average common shares outstanding | 86,546,306 | 85,998,704 | 86,599,187 | 86,866,645 |
Fully diluted earnings per common share | ||||
Fully diluted operating earnings per common share1 | ||||
Fully diluted book value per common share, incl. AOCI1 | ||||
Fully diluted book value per common share, excl. AOCI1 | ||||
Loss ratio1 | 13% | 18% | 18% | 16% |
Combined ratio1 | 32% | 38% | 38% | 36% |
Operating return on equity1 | 13% | 11% | 12% | 12% |
MICAT ratio 1,3 | 179% | 172% | 179% | 172% |
Transactional delinquency ratio1, 2 | 0.27% | 0.27% | 0.27% | 0.27% |
Portfolio delinquency ratio1, 2 | 0.11% | 0.10% | 0.11% | 0.10% |
Delinquency ratio1, 2 | 0.20% | 0.20% | 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. |
2 Based on outstanding balance and excludes delinquencies that have been incurred but not reported. |
3 Company estimate at |
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 | Nine Months Ended | ||
2020 | 2019 | 2020 | 2019 | |
Total investment income | ||||
Adjustment to investment income: | ||||
Net Losses from Investments, derivatives and foreign exchange1 | (7) | 5 | 27 | 45 |
Operating investment income | 48 | 57 | 149 | 170 |
Realized expense (income) from the interest rate hedging program | (4) | (7) | (15) | (23) |
Interest and dividend income, net of investment expenses | ||||
Net income | 124 | 111 | 317 | 318 |
Adjustments to net income, net of taxes: | ||||
Fee on early redemption of long-term debt | - | - | 1 | 2 |
Net Losses from Investments, derivatives and foreign exchange1 | (5) | 4 | 20 | 33 |
Net operating income | ||||
Earnings per common share (basic) 2 | ||||
Adjustments to earnings per common share, net of taxes: | ||||
Fee on early redemption of long-term debt | - | - | 0.02 | 0.03 |
Net Losses from Investments, derivatives and foreign exchange1 | (0.06) | 0.04 | 0.23 | 0.38 |
Operating earnings per common share (basic) 2 | ||||
Earnings per common share (diluted) 2 | ||||
Adjustments to earnings per common share, net of taxes: | ||||
Fee on early redemption of long-term debt | - | - | 0.02 | 0.03 |
Share based compensation re-measurement amount | - | - | 0.08 | - |
Net Losses from Investments, derivatives and foreign exchange1 | (0.06) | 0.04 | 0.23 | 0.38 |
Operating earnings per common share (diluted) 2 |
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 and nine months ended
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 PRMHIA; the effect of changes to the mortgage insurance rules, including government guarantee mortgage eligibility rules, the effect of the government measures and programs in response to the COVID-19 pandemic, 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. ("
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
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