Genworth MI Canada Inc. reported second quarter 2012 net income of $79 million or $0.79 per diluted common share.
In a release on July 31, the Company noted that net operating income was $79 million or $0.79 per diluted common share. On a comparative basis, net operating income was $3 million higher than the prior quarter and $2 million lower year-over-year.
"We continued to capitalize on strong business momentum during the second quarter and delivered top line growth, lower losses on claims, and strong bottom line profitability," said Brian Hurley, Chairman and Chief Executive Officer. "Our prudent approach to risk management helps drive consistent results."
Second Quarter 2012 Key Financial Metrics:
-Net premiums written of $176 million were $97 million higher sequentially and $27 million higher year-over-year. The sequential increase was driven primarily by typical spring seasonality and higher levels of portfolio insurance on low loan-to-value mortgages. The year-over-year increase was primarily a result of higher levels of portfolio insurance on low loan-to-value mortgages.
-Net premiums earned of $148 million were $1 million higher sequentially and $3 million lower year-over-year. The larger 2007 and 2008 books are past their peak premiums earned contribution resulting in a smaller adjustment to the quarterly premium recognition curve this quarter.
-Losses on claims of $48 million were $8 million lower sequentially and $2 million lower year-over- year, reflecting lower new reported delinquencies. This resulted in a loss ratio of 32 percent for the quarter, 6 percentage points lower than the prior quarter.
-Investment Income of $40 million (excluding realized and unrealized investment gains) was $3 million lower sequentially and $3 million lower year-over-year. The sequential decline in investment income resulted from a $2 million decline in government guarantee fund earnings and a modest decrease in the investment portfolio yield.
-Net operating income of $79 million was $3 million higher sequentially and $2 million lower year-over-year. Operating return on equity was 12 percent for the quarter, flat sequentially and one percentage point lower year-over-year.
-The expense ratio was 17 percent, 1 percentage point lower sequentially and 1 percentage point higher year-over-year. Expenses of $25 million were slightly lower on a sequential and year-over- year basis.
-The unearned premium reserve was $1.8 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 160 percent, 1 percentage point higher sequentially and 2 percentage points higher year-over-year. This level of capital is well in excess of the Company's internal MCT target of 145 percent. The Company continues to have a strong capital position with the financial flexibility to support and grow the business.
On June 1, the Company paid a quarterly dividend of $0.29 per common share.
The Company also announced that its Board of Directors approved a dividend of $0.29 per common share, payable on August 31, to shareholders of record at the close of business on August 15.
As of June 30, shareholders' equity was $2.8 billion representing a book value of $27.88 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 $25.81 per common share on a fully diluted basis.
Second Quarter 2012 Key Highlights:
The Company continued to make solid progress towards its operational targets.
-Total new insurance written increased sequentially to $18.8 billion primarily due to $13.1 billion of portfolio insurance written on low loan-to-value mortgages. The Company selectively participates in portfolio insurance under a clearly defined risk appetite and disciplined pricing approach. The Company believes that this selective participation results in profitable business and enhances overall lender relationships.
-The high loan-to-value component of new insurance written was $5.7 billion, representing an increase of 62 percent sequentially, largely driven by typical spring seasonality. The year-over-year decline of 7 percent was largely due to a smaller market for high loan-to-value mortgages as compared to the previous year.
-On June 20, the Government of Canada announced a number of changes to the rules governing the issuance of high loan-to-value residential mortgages (with a greater than 80 percent loan-to- value) backed by the federal government guarantee, effective July 9 of this year. These changes include reducing the maximum amortization period from 30 years to 25 years and reducing the maximum loan-to-value for refinances from 85 percent to 80 percent.
-The total delinquency rate was 0.17 percent, 2 basis points lower sequentially and 8 basis points lower year-over-year. The Company experienced 22 percent 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 asset management strategy.
-The Company's investment portfolio had a market value of $5.0 billion at the end of the quarter. The general portfolio had a pre- tax equivalent book yield of 4.3 percent and duration of 3.5 years as at June 30. The Company's strategy in managing its 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 7 percent. 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.
Genworth MI Canada, through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, is a Canadian private residential mortgage insurer.
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