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Press Release: Genworth MI Canada Inc. Reports Fourth Quarter 2020 Results Including Net Operating Income of $124 Million

· 02/04/2021 17:38
-- New insurance written from transactional insurance was $9.5 billion, an increase of $4.5 billion, or 88%, as compared to the same quarter in the prior year, and an increase of $1.2 billion, or 15%, as compared to the prior quarter. The increases were primarily due to an increase in transactional mortgage originations and an increase in market share. -- Premiums written from transactional insurance were $335 million, representing an increase of $158 million, or 89%, from the same quarter in the prior year, and an increase of $43 million, or 15%, 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 $3.2 billion, an increase of $1.9 billion compared to the same quarter in the prior year, and an increase of $1.6 billion compared to the prior quarter primarily due to increased demand from lenders. -- Premiums written from portfolio insurance were $20 million, representing an increase of $14 million compared to the same quarter in the prior year and the prior quarter primarily due to the aforementioned higher new insurance written and a modest increase in the average premium rate due to a change in product mix. -- Premiums earned of $181 million were $10 million, or 6%, higher than the same quarter in the prior year, and $8 million, or 5%, higher than the prior quarter, reflecting the relatively higher level of premiums written in 2019 and 2020. The unearned premiums reserve was $2.4 billion at the end of the quarter, an increase of $0.3 billion from the unearned premium reserve as at December 31st, 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 7, consisting of 559 new delinquencies offset by 566 cures, and were 392 lower than the same quarter in the prior year. New delinquencies decreased by 408 primarily due to the mortgage payment deferral program. Regionally, there were decreases in all regions including Alberta (116), Ontario (90) and Quebec (72). New delinquencies, net of cures, were consistent with the prior quarter. -- The outstanding principal balance of insured mortgage loans reported under the mortgage payment deferral program totaled $1.8 billion, or approximately 1% of outstanding insured mortgage balances as at December 31st, 2020, down from approximately 6% as at September 30th, 2020. Regionally, mortgage payment deferrals were primarily driven by Alberta ($0.5 billion) and Ontario ($0.6 billion). Approximately 72% 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 10% compared to 20% in the same quarter in the prior year and 13% in the prior quarter. Losses on claims of $18 million were $16 million lower than the same quarter in the prior year, and $5 million lower than the prior quarter, primarily due to significant favorable development related to the strong housing market and improved unemployment. 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 1,581 reflected a decrease of 217 delinquencies, as compared to the same quarter in the prior year, primarily driven by decreases in the Atlantic region (75), Alberta (50) and Quebec (47). Compared to the prior quarter, the number of delinquencies outstanding decreased by 188, driven by decreases in all regions including Ontario (62), Quebec (37) and Alberta (35). -- Expenses were $38 million during the quarter, resulting in an expense ratio of 21%, as a percentage of premiums earned. This ratio was two percentage points higher than the prior quarter, and one percentage point higher than the same quarter in the prior year and the upper end of the Company's expected operating range of 18% to 20% primarily due to one-time costs related to the pending acquisition of the Company by Brookfield Business Partners L.P., and certain of its affiliates and institutional partners. -- The Company's investment portfolio had a market value of $7.0 billion at the end of the quarter. The portfolio had an average pre-tax equivalent book yield of 2.8%, compared to 3.2% in the same quarter in the prior year and 3.0% in the prior quarter, and decreased primarily due to the low interest rate environment. The portfolio had a duration of 3.6 years as at December 31st, 2020, which was relatively consistent with the same quarter in the prior year and the prior quarter. -- Operating investment income of $46 million was $9 million lower than the same quarter in the prior year and $2 million lower than the prior quarter primarily due to the impact of the low interest rate environment. -- Realized and unrealized losses from derivatives and foreign exchange of $1 million excludes the realized income from the Company's interest rate hedging program of $4 million. This compares to a $6 million loss in the same quarter in the prior year, and $2 million 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 $16 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 investment income and higher expenses. Net income was consistent with the prior quarter. -- Net operating income of $124 million was $12 million higher than the same quarter in the prior year, and $5 million higher than the prior quarter, primarily due to lower losses on claims and higher premiums earned, partially offset by lower operating investment income and higher expenses. -- 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 consistent with the prior quarter. -- The regulatory capital ratio or Mortgage Insurer Capital Adequacy Test ("MICAT") ratio was approximately 187%, 30 percentage points higher than the Company's internal MICAT ratio target of 157% and 37 percentage points higher than the Office of the Superintendent of Financial Institutions Supervisory MICAT ratio target of 150%. -- The Company estimates that its outstanding principal balance of insured mortgages as at December 31st, 2020, was approximately $206 billion, or 36% of the original insured amount. The Company estimates, that as of September 30th, 2020, the outstanding principal balance for all privately insured mortgages was $286 billion relative to the $350 billion aggregate outstanding principal limit under the government guarantee legislation (Protection of Residential Mortgage or Hypothecary Insurance Act).Net Income: $124 million Up 15% Y/Y Flat Q/Q Net Operating Income: $124 million Up 10% Y/Y Up 4% Q/Q Fully Diluted Operating EPS: $1.43 Up 10% Y/Y Up 4% Q/Q Transactional Premiums Written: $335 million Up 89% Y/Y Up 15% Q/Q Total Premiums Written: $354 million Up 94% Y/Y Up 19% Q/Q Premiums Earned: $181 million Up 6% Y/Y Up 5% Q/Q Loss Ratio: 10% Down 10 pts Y/Y Down 3 pts Q/Q

Genworth MI Canada Inc. Reports Fourth Quarter 2020 Results Including Net Operating Income of $124 Million

Canada NewsWire

TORONTO, Feb. 4, 2021

TORONTO, Feb. 4, 2021 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported fourth quarter 2020 net income of $124 million, earnings per fully diluted common share of $1.44, net operating income of $124 million, operating earnings per fully diluted common share of $1.43 and an operating return on equity of 13%.

"We were very pleased with our fourth quarter and full year results, including strong top line momentum, a relatively low loss ratio and 13 percent operating return on equity," said Stuart Levings, President and CEO. "While the economic environment continues to evolve in line with our expectations, there remains a high degree of uncertainty, especially as we manage through the second wave of COVID-19. That said, the proactive government measures, improved employment levels and strength of the housing market should help us manage through this period even as the mortgage deferral program winds down. We would also like to thank our employees for their commitment and dedication during this challenging year."

Key Fourth Quarter 2020 Financial Results and Operational Metrics:

Dividends

The Company paid a quarterly dividend of $0.54 per common share on November 30(th) , 2020.

The Company also announced today that its Board of Directors had declared a dividend of $0.54 per common share, payable on March 3(rd) , 2021, to shareholders of record at the close of business on February 16(th) , 2021.

Shareholders' Equity

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February 04, 2021 17:38 ET (22:38 GMT)