TORONTO, May 3, 2011 (Canada NewsWire via COMTEX) -- Net premiums written of $101 million
Net operating income of $78 million
Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported results for the first quarter of 2011 with net income of $80 million or $0.76 per diluted share and net operating income of $78 million or $0.74 per diluted share. Operating earnings per share was higher by $0.05 year over year and sequentially lower by $0.06.
The Company received $101 million in net premiums written, representing a 7% increase over the same period last year. Net operating income decreased 7% sequentially and 5% year over year.
"We delivered solid net premiums written in a slower origination market. As expected, we saw some seasonal loss pressure, which is typical for the first quarter," said Brian Hurley, Chairman and Chief Executive Officer. "As part of our ongoing evaluation of our business needs and capital position, we are focused on capital structure efficiency and are planning a share repurchase. This action will enhance our shareholder value while maintaining financial flexibility."
First Quarter 2011 Key Financial Metrics:
- Net premiums written of $101 million were $33 million lower
sequentially but $7 million higher year over year. The
sequential decrease was primarily due to typical winter
seasonality in the mortgage origination market. The year over
year increase in net premiums written was due to strong sales
and service execution, resulting in continued market
penetration.
- Net premiums earned of $155 million were $1 million lower
sequentially and year over year. At the end of the quarter,
the Company had $1.85 billion in unearned premium reserves,
which will be earned into premiums over time in accordance with
the Company's premium recognition curve.
- Losses on claims of $59 million were $9 million higher
sequentially and flat on a year over year basis. The loss
ratio of 38% in the first quarter was 6 points higher
sequentially and flat year over year.The sequential increase in
losses on claims was primarily due to seasonality and a higher
average reserve per delinquency in Alberta.
- Investment Income of $43 million (excluding $3 million of
realized and unrealized investment gains) was $1 million lower
sequentially and $2 million lower year over year.
- Net operating income of $78 million was $6 million lower
sequentially and $4 million lower year over year. This resulted
in an operating return on equity of 13% for the quarter, 1
point lower sequentially and flat year over year.
- The expense ratio was 17% or 1 point lower sequentially and one
point higher year over year, while the combined ratio of 55%
was 5 points higher sequentially and flat year over year.
- The regulatory capital ratio or Minimum Capital Test ("MCT")
ratio was 155%, 1 point lower sequentially but 5 points higher
year over year.
Capital and Shareholders' Equity
- The Company continued to maintain a strong capital position,
ending the quarter with a regulatory minimum capital test ratio
of 155% and holding company cash of approximately $210
million. As part of the Company's ongoing capital planning to
create a more efficient capital structure and to enhance
shareholder value while maintaining the flexibility to support
growth, the Company plans to repurchase approximately $160
million of its existing common shares in 2011. The nature,
size and timing of the potential share repurchase in 2011 will
be dependent upon the Company's capital requirements at that
time, general market conditions, completion of certain
documentation, and the receipt of customary approvals. While
there is no assurance that the Company will undertake any such
share repurchase, the proposed share repurchase reflects
management's confidence in its business operations and its
ability to fund growth opportunities going forward.
- As of March 31, 2011, shareholders' equity was $2.6 billion or
$24.79 per common share on a fully diluted basis. Excluding
accumulated other comprehensive income ("AOCI") or loss,
shareholders' equity was $2.5 billion or $23.80 per common
share on a fully diluted basis.
First Quarter 2011 Key Operational Highlights:
The Company continued to make solid progress on its strategic priorities. The Company is well-positioned with the financial flexibility and business strength to support its insurance in-force, to fund growth opportunities, to maintain strong credit ratings and to optimize returns.
- New insurance written of $4.4 billion for high loan-to-value
mortgages represented a sequential decrease of 23% due to
typical seasonality, but a year over year increase of 5% due to
improved market penetration. The government mortgage rule
changes that took effect March 18, 2011 did not have a material
impact on mortgage originations in the quarter.
- While the Company's earned premiums are consistent sequentially
and year over year, the current earned premiums have benefited
from the large 2007 and 2008 books of business. It is expected
that the contributions of these large books to premiums earned
will decrease in the coming quarters as they move past their
peak earnings period.
- The increase in losses on claims during the quarter was mainly
due to typical seasonal pressure on the housing market during
the winter season and the loss experience from certain areas in
Alberta. The average reserve per delinquency for the quarter
improved marginally and sequentially to $58,000 from $60,800 in
the fourth quarter of 2010 due to improving severity in Ontario
and Quebec, offset by higher severity from claims in Alberta.
The Company believes that its average loss ratio for 2011 will
be in the mid 30 percent range.
- During the quarter, the Company continued to realize positive
results from its loss mitigation activities. The Company's
Homeowner Assistance Program completed 1,253 workouts
representing over 40% of new reported delinquencies. As well,
the Company continued to expand its initiative to accelerate
and facilitate the conveyance of real estate properties to the
Company in selected circumstances. This strategy allows for
better control of the marketing process, reduction in carrying
costs during the sale process, and the potential realization of
a higher property sales price, with the cumulative impact being
lower losses.
- The Company had an investment portfolio of $5.1 billion as at
March 31, 2011. Excluding the Government Guarantee Fund and
debt proceeds received in December 2010, the general portfolio
had a pre-tax equivalent book yield of 4.3% and duration of 3.7
years as at March 31, 2011. The portfolio is well-positioned
with a short duration and should benefit from a rising interest
rate environment as $419 million of investment maturities for
the remainder of the year are reinvested.
Dividends
- On March 1, 2011, the Company paid a quarterly dividend of
$0.26 per common share. Since becoming a public company in
2009, this dividend represents the sixth consecutive quarterly
payment of dividends to shareholders. The Company also
announced today that its Board of Directors approved a $0.26
per common share dividend, payable on June 1, 2011 to
shareholders of record at the close of business on May 16,
2011.
Consolidated Financial Highlights(1)
_____________________________________________________________________
| |Three Months Ended March 31 (Unaudited)|
|($ millions, except per share|_______________________________________|
|amounts) | 2011 | 2010 |
| |_______|_______________________________|
| | | |
|_____________________________|_______|_______________________________|
|New Insurance Written | 5,429| 6,121|
|_____________________________|_______|_______________________________|
|Insurance In Force |248,811| 228,656|
|_____________________________|_______|_______________________________|
|Net Premiums Written | 101| 94|
|_____________________________|_______|_______________________________|
|Net Premiums Earned | 155| 156|
|_____________________________|_______|_______________________________|
|Losses on Claims | 59| 59|
|_____________________________|_______|_______________________________|
|Investment Income | 43| 45|
|_____________________________|_______|_______________________________|
|Realized and Unrealized Gains| 3| 4|
|or Losses | | |
|_____________________________|_______|_______________________________|
|Net Income | 80| 84|
|_____________________________|_______|_______________________________|
|Net Operating Income(1) | 78| 82|
|_____________________________|_______|_______________________________|
|Fully Diluted Earnings Per | $0.76| $0.71|
|Share | | |
|_____________________________|_______|_______________________________|
|Fully Diluted Operating | $0.74| $0.69|
|Earnings Per Share(2) | | |
|_____________________________|_______|_______________________________|
|Fully Diluted Book Value Per | $23.80| $22.03|
|Common Share, excluding AOCI | | |
|_____________________________|_______|_______________________________|
|Loss Ratio | 38%| 38%|
|_____________________________|_______|_______________________________|
|Combined Ratio | 55%| 55%|
|_____________________________|_______|_______________________________|
|Operating Return on Equity | 13%| 13%|
|_____________________________|_______|_______________________________|
|Minimum Capital Test Ratio | 155%| 150%|
|(MCT) | | |
|_____________________________|_______|_______________________________|
(1 )Effective January 1, 2010, the Company has adopted International Financial Reporting Standards ("IFRSs"). Certain accounting and measurement methods previously applied under Canadian GAAP were amended to comply with IFRSs. The comparative figures for 2010 have been restated to reflect these adjustments. (2)This is a financial measure not calculated based on International Financial Reporting Standards (IFRSs). See the "Non-IFRS 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 Company's Review of Performance 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 Discussion and Analysis, and the first quarter 2011 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 4(th) at 1:00 pm EST. The dial-in number is 1-888-300-0053 (#I.D. 59872678). 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 recording will be available on the Company's website until July 15, 2011.
Non-IFRS Financial Measures
To supplement its financial statements, the Company uses select non-IFRS financial measures. Non-IFRS 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 net operating income. 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 measure 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 (http://investor.genworthmicanada.ca). To access the glossary, click on the "Glossary of Terms" link under "Investor Resources" subsection on the left navigation bar. A reconciliation of non-IFRS financial measures to the most recently comparable measures calculated in accordance with IFRS can be found in the Management 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 "expects", "anticipates", "contemplates", "intends", "plans", "believes", "seeks", "estimates", or words of similar meaning. These statements are based on the Company's current beliefs or expectations, including 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 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., 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 March 31, 2011, Genworth Financial Canada had $5.4 billion total assets and $2.6 billion 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.
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SOURCE: Genworth MI Canada