Genworth MI Canada Inc. Reports Third Quarter 2012 Results

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

 _____________________________________________________________________
|                                    |Three Months Ended September 30 |
|($ millions, except per share       |          (Unaudited)           |
|amounts)                            |________________________________|
|                                    |  2012 |               2011     |
|____________________________________|_______|________________________|
|New Insurance Written(1)            |  9,876|                   7,219|
|____________________________________|_______|________________________|
|Insurance In Force(1)               |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 Income(1)             |     81|                      80|
|____________________________________|_______|________________________|
|Fully Diluted Earnings Per Common   |       |                        |
|Share                               |  $0.86|                   $0.80|
|____________________________________|_______|________________________|
|Fully Diluted Operating Earnings Per|       |                        |
|Common Share(1)                     |  $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 AOCI(1)            | $26.45|                  $24.79|
|____________________________________|_______|________________________|
|Loss Ratio(1)                       |    30%|                     36%|
|____________________________________|_______|________________________|
|Combined Ratio(1)                   |    48%|                     52%|
|____________________________________|_______|________________________|
|Operating Return on Equity(1)       |    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.

 

 

Investors - Samantha Cheung, 905-287-5482   samantha.cheung@genworth.com 
Media - Lisa Azzuolo, 905-287-5520 lisa.azzuolo@genworth.com

SOURCE: Genworth MI Canada

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CO: Genworth MI Canada
ST: Ontario
NI: REL ERN CONF DIV 

-0- Oct/30/2012 20:26 GMT