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MIC Fixed Income Presentation – March 24, 20141 1Genworth MI Canada Inc.
Genworth MI Canada
Genworth MI Canada BUILDING ON GROWTH MOMENTUM
MAY 2015
MIC Fixed Income Presentation – March 24, 20142 2Genworth MI Canada Inc.
Genworth MI Canada > FORWARD-LOOKING ANDNON-IFRS STATEMENTS
This presentation relating to Genworth MI Canada Inc. (the “Company”, “Genworth Canada” or “MIC”) includes certain forward-lookingstatements. These forward-looking statements include, but are not limited to, statements with respect to the Company’s futureoperating and financial results, expectations regarding premiums written, losses on claims and investment income, the Canadianhousing market, and other statements that are not historical facts. These forward-looking statements may be identified by their use ofwords such as “may”, “would”, “could”, “will,” “intend”, “plan”, “anticipate”, “believe”, “seek”, “propose”, “estimate”, “expect”, andsimilar 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 tosignificant risks, uncertainties and changes in circumstances, many of which are beyond the control of the Company. The Company’sactual results may differ materially from those expressed or implied by such forward-looking statements, including as a result ofchanges in the facts underlying the Company’s assumptions, and the other risks described in the Company’s Annual Information Formdated March 23, 2015, its Short Form Base Shelf Prospectus dated June 18, 2014, the Prospectus Supplements thereto, its mostrecently issued Management’s Discussion and Analysis and all documents incorporated by reference in such documents. Other than asrequired 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. Non-IFRS financial measures include netoperating income, interest and dividend income (net of investment expenses), operating earnings per common share (basic), operatingearnings per common share (diluted), shareholders’ equity excluding accumulated other comprehensive income (“AOCI”), operatingreturn on equity and underwriting ratios such as loss ratio, expense ratio and combined ratio. The Company believes that these non-IFRS financial measures provide meaningful supplemental information regarding its performance and may be useful to investorsbecause they allow for greater transparency with respect to key metrics used by management in its financial and operational decisionmaking. Non-IFRS measures do not have standardized meanings and are unlikely to be comparable to any similar measures presentedby other companies. These measures are defined in the Company’s glossary, which is posted on the Company’s website athttp://investor.genworthmicanada.ca. A reconciliation from non-IFRS financial measures to the most readily comparable measurescalculated 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.
MIC Fixed Income Presentation – March 24, 20143 3Genworth MI Canada Inc.
Genworth MI Canada
LARGEST PRIVATE RESIDENTIAL
MORTGAGE INSURER IN CANADA
Since 1995 helped 1.5 million families COAST TO COAST achieve homeownership.
We support more than 250 Canadian lenders.
MARKET FACTS (as at March 31, 2015)
$5.9 billion Total Assets
$3.4 billion Shareholders’ Equity
$3 billion Market Capitalization
93 million Shares Outstanding
COMPETITIVE STRENGTHS
Strong Market Presence
Long-Standing Customer Relationships
Best-in Class Technology and Processes
Prudent Risk Management
Impressive Long-Term Track Record
Experienced and Engaged Workforce
> WHO WE ARE
MIC Fixed Income Presentation – March 24, 20144 4Genworth MI Canada Inc.
Genworth MI Canada> STRONG PERFORMANCE
0.22
0.260.29
0.32
0.35
0.15
0.25
0.35
0.45
Dividends Paid/Share
20102011 2012 2013 2014
$2.67
$3.02
$3.08
$3.43
$3.60
$3.86
$0.00 $1.00 $2.00 $3.00 $4.00 $5.00
09
10
11
12
13
14
Operating earning per share(diluted)
$22.40
$24.44
$26.94
$30.62
$32.53
0 5 10 15 20 25 30 35
09
10
11
12
13
14
Book value per share(diluted, including AOCI)
13%
14%
13%
13%
12%
12%
0% 5% 10% 15%
09
10
11
12
13
14
Operating return on equity(%)
2009Q3
$35.02
0.39
*Excludes the impact of the change to the premium recognition curve in Q1 2009
*
MIC Fixed Income Presentation – March 24, 20145 5Genworth MI Canada Inc.
Genworth MI Canada> MISSION AND VISION
OUR MISSION
Working with our lender partners, regulators and influencers we
› help people responsibly achieve and maintain the dream of homeownership
› promote strong and sustainable communities across Canada
While enhancing stakeholder value
OUR VISION
CANADA’S MORTGAGE INSURER OF CHOICE
MIC Fixed Income Presentation – March 24, 20146 6Genworth MI Canada Inc.
Genworth MI Canada > COMPETITIVE STRENGTHS AND GROWTH CATALYSTS
Strong Market Presence
Long-Standing Customer Relationships
Best-in Class Technology and Processes
Prudent Risk Management
Impressive Long-Term Track Record
Experienced and Engaged Workforce
COMPETITIVE STRENGTHS
Market Share Market SizePremium
RatesAdjacent
Opportunities
COMPETITIVE STRENGTHS
GROWTH CATALYSTS
FOCUS ON PEOPLE, RISK AND TECHNOLOGY
MIC Fixed Income Presentation – March 24, 20147 7Genworth MI Canada Inc.
Genworth MI Canada> KEY STRATEGIC PRIORITIES
Expand Market Share
Proactive Risk Management
Strong Government Relations
Efficient Capital Structure
Adjacent Opportunities
Employ and Engage Employees
High Quality, Diversified Portfolio
Operating Income Growth
HOW WE MEASURE SUCCESS
Market Share Gains
Strong Employee Engagement
STRATEGIC PRIORITIES
MIC Fixed Income Presentation – March 24, 20148 8Genworth MI Canada Inc.
Genworth MI Canada > CHANGING MARKET DYNAMICS
REBALANCING OF ECONOMIC GROWTH ACROSS THE COUNTRY
Market Dynamics
Oil is anticipated to be in the $55-$65 USD range for 2015
2015 GDP outlook of 1.9%
Canadian dollar expected to be in the range of $0.78 to $0.82 per USD
Interest rate flat; low interest rates to partially offset economic impact from lower oil prices
Impact to Business
Unemployment rate modestly higher and home prices modestly lower in oil producing regions (Alberta, Newfoundland, Saskatchewan)
GDP, home prices and employment in Ontario and Quebec may benefit from lower oil prices and Canadian dollar
Continued lower interest rates supportive of housing affordability
MIC Fixed Income Presentation – March 24, 20149 9Genworth MI Canada Inc.
Genworth MI Canada > HIGHER QUALITY PORTFOLIO
Average Credit Score
Average Home Price
Average Gross Debt Service Ratio
Steady credit score improvement since 2009
Average home price 23% below CREA national average price of $424K
Home price increase driven by higher concentration in Toronto and Vancouver
Gross debt ratios stable, strong preference for 5 year fixed-rate mortgages
Financially disciplined first-time homebuyers
726 727 727 730733
737 737
'09 '10 '11 '12 '13 '14 Q1'15
266 284 296 301 304 315 326
'09 '10 '11 '12 '13 '14 Q1'15
($000’s)
22 24 25 24 23 24 25
'09 '10 '11 '12 '13 '14 Q1'15
(%)
MIC Fixed Income Presentation – March 24, 201410 10Genworth MI Canada Inc.
Genworth MI Canada> DELINQUENCY TREND
Outstanding Delinquencies
Y/Y delinquency improvement reflects lower delinquencies in Ontario and BC
Improvement in delinquencies partially offset by Alberta, Quebec and the Atlantic region
497 430 431 395 407
303268 279 268 260
249221 207 222 220
527
511 516 569 584
206
198 199 207 216
78
75 76 95 105
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
1,860
1,703 1,7081,756 1,792Prairies
Atlantic
Quebec
Alberta
BC
Ontario
MIC Fixed Income Presentation – March 24, 201411 11Genworth MI Canada Inc.
Genworth MI Canada> OUR SERVED MARKET
Region Average Home Price Average Income
Average Gross Debt Servicing
Genworth Market % Variance Genworth Genworth
Vancouver $486K $847K -43% $115K 28%
Toronto $447K $589K -24% $108K 29%
Calgary $421K $445K -5% $113K 27%
Rest of Canada $297K $334K -11% 94K 24%
Canada $326K $424K -23% $97K 25%
GENWORTH’S AVERAGE HOME PRICE ~23% LOWER THAN MARKET AVERAGE
Note: Q1’15 data; Genworth averages for purchase deals only, market averages from CREA; market rest of Canada calculated by using CREA cities weighted average s
MIC Fixed Income Presentation – March 24, 201412 12Genworth MI Canada Inc.
Genworth MI Canada> FINANCIAL PRIORITIES
PRIORITIES IMPACT ON FINANCIAL METRICS
› Prudent top line growth Increasing premiums written Improving premiums earned
› Proactive risk management› High quality insurance portfolio
Loss ratio in 20-30% range for 2015
› High quality investment portfolio Investment income pressured by low rate environment
› Proactive approach to capital management
Operating modestly above MCT holding target of 220% Ongoing capital generation Focus on sustainable ordinary and growing dividend
TARGETING ROE EXPANSION OVER TIME
MIC Fixed Income Presentation – March 24, 201413 13Genworth MI Canada Inc.
Genworth MI Canada> STRONG PERFORMANCE
$MM except EPS and BVPS Q1’15 Q4’14 Q1’14
Premiums written $130 $178 $84
Premiums earned 143 143 141
Losses on claims 31 37 28
Expenses 24 30 27
Underwriting income $87 $76 $86
Investment income(excl. realized gains / losses)
42 43 44
Net operating Income $97 $84 $91
Diluted operating EPS $1.03 $0.89 $0.96
Book value per share(diluted, incl. AOCI)
$36.07 $35.02 $33.52
MCT 233% 225% 229%
Strong top line performance was primarily result of market penetration
Loss ratio of 22%
Consistent investment income
$5 MM one-time favorable tax item
Book value up to $36 per share
Strong capital position
MIC Fixed Income Presentation – March 24, 201414 14Genworth MI Canada Inc.
Genworth MI Canada> TOP LINE GROWTH
71 104
13
26
Q1 '14 Q1 '15
Premiums Written($millions)
Transactional (High LTV)
Portfolio(Low LTV)
VPY +100%$84
$130
VPY +47%
Premiums Earned
$141 $143 VPY +2%
Strong sales momentum expected to continue into 2015
15% premium rate increase effective June 1 on >90% loan-to-value
Higher premiums written Y/Y is positive for earned premiums going forward
Incremental Premiums Written (2014 & 2015 Price Increases on $22 B of Transactional NIW Example)
45 75 75
25 55
2014 2015 2016
($MM)
Incremental Premiums Earned (2014 & 2015 Price Increases on $22 B of Transactional NIW Example)
2 15 40
65
2014 2015 2016 2017
($MM)
MIC Fixed Income Presentation – March 24, 201415 15Genworth MI Canada Inc.
Genworth MI Canada > UNDERWRITING PROFITABILITY
86 97 87 76 87
27 27
24 30
24
28 17
30 37 31
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Underwriting profit
Expenses
Losses on claims
Loss ratio 20% 12% 21% 26% 22%
Expense ratio 19% 19% 17% 21% 17%
Combined ratio 39% 31% 38% 47% 39%
New delinquenciesnet of cures
469 289 412 489 432
($millions)Underwriting Profitability
Loss ratio improved 4 pts. Q/Q Improved Quebec performance
Low level of Alberta delinquencies
Expense ratio of 17% in line with target
Full year 2015 loss ratio expected to be in the range of 20 to 30%
MIC Fixed Income Presentation – March 24, 201416 16Genworth MI Canada Inc.
Genworth MI Canada
Diversify Globally
IG Emerging Markets Debt US CLOs (<3% of AUM / “A’ or
Above) Hedge FX Risk
Diversify by Sector
Market Weight Financials Underweight Energy
Preserve Principal Gov’t Bonds (~50% of AUM)
Investment Grade Bonds
Protect From Rising Rates Short Duration (3.8 Years) Floating Rate Notes
Cash Flow Match Liabilities Portfolio Duration < 5 Years
Enhance Income Dividend Paying Equities Preferred Shares IG Emerging Markets Debt US CLOs
(<3% of AUM / “A” or Above)
ACTIVE PORTFOLIO MANAGEMENT
› 4 external managers
› In -house investmentallocation & oversight
› Focus on investmentgrade fixed income
› Limited appetite for“risk” assets
1. Pre-tax equivalent book yield after dividend gross-up of general portfolio
$5.6 B INVESTMENT PORTFOLIO PRE-TAX YIELD1 OF 3.4% (MAR.31/15)
> DISCIPLINED APPROACH TO INVESTMENT MANAGEMENT
IG = Investment Grade CLOs = Collateral Loan Obligations
YIELD CURRENTLY PRESSURED BY LOW RATES ... STILL STRONG INCOME CONTRIBUTOR
MIC Fixed Income Presentation – March 24, 201417 17Genworth MI Canada Inc.
Genworth MI Canada> STRONG BALANCE SHEET
$ MM March 31, 2015
Assets
Cash and investments $5,649
Other Assets 280
Total Assets $5,929
Liabilities
Loss reserves 119
Unearned Premiums 1,786
Long Term Debt 432
Other Liabilities 191
Total Liabilities 2,527
Shareholders’ Equity (w/AOCI) 3,402
Total Liabilities and Shareholders’ Equity
$5,929
Book Value Per Share (diluted) $36.07
KEY HIGHLIGHTS
› $1.8 B of unearned premiums represent future revenues & profits
› Illustration:
Unearned Premiums $1.8 B
Future Losses on Claims & Expenses1
(1.0)
Future Pre-tax Underwriting Income 0.8
Future Net Income $0.6 B
1. Theoretical example - future losses on claims and expenses calculated using 55% combined ratio
MIC Fixed Income Presentation – March 24, 201418 18Genworth MI Canada Inc.
Genworth MI Canada> CAPITAL STRENGTH
185% 185%
40% 48%
225%233%
2014 Q1 2015
Minimum Capital Test Ratio (MCT)
Internal MCT target
Buffer to internal target
KEY HIGHLIGHTS
› Strong capital generation has resulted in actions
› History of ordinary dividend increases
› 35-45% payout ratio
› History of share repurchases - $75 million in Q4 2014, $105 million in 2013, $160 million in 2011, $325 million in 2010
› Special dividends paid in 2011 and 2014
› Renewed NCIB effective until May 2015
› Conservative leverage of 12%
› Holding company cash and liquid securities of $158 million
› Intend to operate moderately above 220% MCT operating holding target
CAPITAL OBJECTIVES: STRENGTH, FLEXIBILITY, EFFICIENCY
MIC Fixed Income Presentation – March 24, 201419 19Genworth MI Canada Inc.
POTENTIAL IMPACT OF PERFORMANCE LEVERS OVER TIME
Levers EPS ROE Comments
Price Increase ↑ ↑2014 price increase positive to EPS/ROEAnnual review of pricing by government
Market Share Gains ↑ ↑ Capitalizing on momentum
Investment Yield Improvement
↑ ↑10 bps improvement in yield adds $4MM in net operating income
Capital Optimization ↑ Potential for a lower MCT Holding
> ROE EXPANSION
SEVERAL LEVERS TO DRIVE ROE EXPANSION OVER TIME
MIC Fixed Income Presentation – March 24, 201420 20Genworth MI Canada Inc.
Genworth MI Canada
Proven and sustainable business model
Clear strategy for prudent growth
Supportive market and regulatory environment
Experts at managing mortgage default risk
Solid financial position
Experienced and engaged employees
> KEY TAKE-AWAYS
CANADA’S MORTGAGE INSURER OF CHOICE
MIC Fixed Income Presentation – March 24, 201421 21Genworth MI Canada Inc.
Genworth MI Canada> CONTACT INFORMATION
INVESTOR RELATIONS
HEAD OFFICE
2060 Winston Park DriveSuite 300Oakville, Ontario905-287-5300 (reception)
DIRECT CONTACT
Samantha CheungVice-President, Investor Relations
905.287.5482
Visit our online Annual Report at www.genworth.ca