First Quarter 2025 MD&A

Management's Discussion and Analysis For the three months ended March 31, 2025

Interpretation

The current and prior period comparative results for Sagen MI Canada Inc. ("Sagen" or the "Company"), reflect the consolidation of the Company and its subsidiaries, including Sagen Mortgage Insurance Company Canada (the "Insurance Subsidiary"). The Insurance Subsidiary is engaged in the provision of mortgage insurance in Canada and is regulated by the Office of the Superintendent of Financial Institutions ("OSFI") as well as financial services regulators in each province.

The following Management's Discussion and Analysis ("MD&A") of the financial condition and results of operations as approved by the Company's board of directors (the "Board") on April 30, 2025, is prepared for the three months ended March 31, 2025. The unaudited condensed consolidated interim financial statements of the Company were prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). This MD&A should be read in conjunction with the Company's financial statements.

In this MD&A, references to "$", "dollars" or "Canadian dollars" are to Canadian dollars and references to "US$" or "U.S. dollars" are to United States dollars. Amounts are stated in Canadian dollars unless otherwise indicated.

Unless the context otherwise requires, all references in this MD&A to "Sagen" or the "Company" refer to Sagen MI Canada Inc. and its subsidiaries.

Unless the context otherwise requires, all financial information is presented on an IFRS basis.

Caution regarding forward-looking information and statements

Certain statements made in this MD&A contain forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). When used in this MD&A, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and 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: guideline changes by OSFI; the impact of such changes on the Company; the impact on the Company of the 2025 MICAT Guideline (as defined herein); the impact of the implementation of new accounting standards on the Company's financial statements; measures introduced by the Canadian federal government in the federal budget in April 2024; the timing and application of CSDS 1 and CSDS 2 (each defined herein); the Company's beliefs as to housing demand and home price appreciation, key macroeconomic factors, unemployment rates, and potential tariffs imposed by the United States; the Company's future operating and financial results; expectations regarding premiums written; capital expenditure plans, dividend policy and the ability of the Company to execute on its future operating, investing and financial strategies.

The forward-looking statements contained herein are based on certain factors and assumptions, certain of which appear proximate to the applicable forward-looking statements contained herein. Inherent in the forward-looking statements are known and unknown risks, uncertainties and other factors beyond the Company's ability to control or predict, that may cause the actual results, performance or achievements of the Company, or developments in the Company's business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Actual results or developments may differ materially from those contemplated by the forward-looking statements.

The Company's actual results and performance could differ materially from those anticipated in these forward-looking statements as a result of both known and unknown risks, including: the continued availability of the Canadian government's guarantee of private mortgage insurance on terms satisfactory to the Company; the Company's expectations regarding its revenues, expenses and operations; the Company's plans to implement its strategy and operate its business; the Company's expectations regarding the compensation of directors and officers; the Company's anticipated cash needs and its estimates regarding its capital expenditures, capital requirements, reserves and its needs for additional financing; the Company's plans for and timing of expansion of service and products; the Company's ability to accurately assess and manage risks associated with the policies that are written; the Company's ability to accurately manage market, interest and credit risks; the Company's ability to maintain ratings, which may be affected by the ratings of its sole Class A common shareholder, Brookfield Business Partners L.P., together with certain of its affiliates and institutional partners ("Brookfield"); interest rate, credit spreads, foreign exchange rates and equity price fluctuations; a decrease in the volume of high loan-to-value mortgage originations; the cyclical nature of the mortgage insurance industry; changes in government regulations and laws mandating mortgage insurance or impacting the competitive landscape of the mortgage insurance industry; the acceptance by the Company's lenders of new technologies and products; the Company's ability to attract lenders and develop and maintain lender relationships; the Company's competitive position and its expectations regarding competition from other providers of mortgage insurance in Canada; anticipated trends and challenges in the Company's business and the markets in which it operates; changes in the global or Canadian economies; a decline in the Company's regulatory capital or an increase in its regulatory capital requirements; increased market volatility, political risk, regulatory compliance and costs associated with

international investing; geopolitical risk, including deterioration in international trade or consumer confidence due to geopolitical instability resulting from armed conflicts or acts of terrorism or war; environmental concerns, including climate change; changes in the value of investment securities held by the Company; loss of members of the Company's senior management team; potential legal, tax and regulatory investigations and actions; negative publicity; operational risks, including the failure of the Company's computer systems or potential cyber threats; reduction of business or adverse selection of loans with key lenders; the Company's reliance on its subsidiaries; litigation; insufficient insurance coverage; and potential conflicts of interest between the Company and its sole Class A common shareholder, Brookfield.

This is not an exhaustive list of the factors that may affect any of the Company's forward-looking statements. Some of these and other factors are discussed in more detail in the Company's Annual Information Form (the "AIF") dated March 19, 2025. Investors and others should carefully consider these and other factors and not place undue reliance on the forward-looking statements. Further information regarding these and other risk factors is included in the Company's public filings with provincial and territorial securities regulatory authorities (including the Company's AIF) and can be found on the System for Electronic Data Analysis and Retrieval + ("SEDAR+") website at https://www.sedarplus.com. The forward-looking statements contained in this MD&A represent the Company's views only as of the date hereof. Forward-looking statements contained in this MD&A are based on management's current plans, estimates, projections, beliefs and opinions and the assumptions related to these plans, estimates, projections, beliefs and opinions may change, and are presented for the purpose of assisting the Company's security holders in understanding management's current views regarding those future outcomes and may not be appropriate for other purposes. While the Company anticipates that subsequent events and developments may cause the Company's views to change, the Company does not undertake to update any forward-looking statements, except to the extent required by applicable securities laws.

Non-GAAP and other financial measures disclosure

Non-GAAP financial measures are used by the Company to analyze performance and supplement its consolidated financial statements, which are prepared in accordance with IFRS. Such non-GAAP financial measures include premiums written; net operating income; operating investment income; interest and dividend income, net of investment expenses; pre-tax equivalent operating investment income; net insurance revenue; and net insurance service results. See the Non-GAAP and other financial measures section at the end of this MD&A for a reconciliation of (i) net insurance revenue to the comparable financial measure of insurance revenue, (ii) net insurance service result to the comparable financial measure of insurance service result, (iii) operating investment income and interest and dividend income, net of investment expenses to the comparable financial measure of total investment income; (iv) net operating income to the comparable financial measure of net income; and (v) pre-tax equivalent operating investment income to the comparable financial measure of total investment income.

Non-GAAP ratios used by the Company include investment yield.

Supplementary financial measures used by the Company to analyze performance include loss ratio, expense ratio, combined ratio, financial leverage ratio and contractual service margin ratio. The supplementary financial measures can be calculated using financial measures from the Company's consolidated financial statements.

The Company believes that these non-GAAP financial measures, non-GAAP ratios and supplementary financial measures provide meaningful information regarding its performance and may be useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. These measures and ratios may not have standardized meanings and may not be comparable to similar measures presented by other companies.

Definitions of key non-GAAP and other financial measures and explanations of why these measures are useful to investors and management can be found in the Company's Non-GAAP and other financial measures glossary, in the Non-GAAP and other financial measures section at the end of this MD&A.

Operational metrics

Operational metrics used by the Company include outstanding insured mortgage balances, delinquency ratio on outstanding insured mortgage balances, new reported delinquencies, cures, average reserve per delinquencies and average premium rate. These metrics are used by the Company to analyze performance in regard to the aggregate amount of outstanding insurance, delinquency trends and premium rate trends.

Contents

Business profile 6

Overview 7

First quarter financial highlights 7

Recent business and regulatory developments 8

First quarter review 11

Summary of quarterly results 16

Financial condition 17

Financial instruments 17

Liquidity 21

Derivative financial instruments 22

Capital expenditures 22

Capital management 23

Mortgage insurer capital adequacy test 23

Debt 24

Credit facility 25

Preferred shares 26

Financial strength ratings 26

Capital transactions 27

Restrictions on dividends and capital transactions 27

Outstanding share data 27

Risk management 28

Enterprise risk management framework 28

Governance framework 28

Risk principles 29

Risk appetite framework 29

Risk controls 30

Risk categories 30

Financial reporting controls and accounting disclosures 33

Disclosure controls & procedures and internal control over financial reporting 33

Changes in accounting standards and future accounting standards 33

Sustainability and climate-related reporting standards 34

Material accounting judgements, estimates and assumptions 34

Transactions with related parties 35

Non-GAAP and other financial measures 36

Non-GAAP and other financial measures glossary 37

Other Glossary 38

List of tables

Table 1: Selected financial information 7

Table 2: Results of operations 11

Table 3: Premiums written 12

Table 4: Net insurance revenue 12

Table 5: Losses on claims 13

Table 6: Expenses 13

Table 7: Investment income 14

Table 8: Net Income 15

Table 9: Statement of financial position 15

Table 10: Summary of quarterly results 16

Table 11: Invested assets by asset class for the portfolio 18

Table 12: Invested assets by credit rating for the portfolio 19

Table 13: Summary of the Company's cash flows 21

Table 14: Fair value and notional amounts of derivatives by terms of maturity 22

Table 15: Mortgage Insurer Capital Adequacy Test 23

Table 16: Details of the Company's long-term debt and hybrid notes 24

Table 17: Changes in the number of common shares, Class A common shares and Series 1 Preferred Shares outstanding 27

Table 18: Non-GAAP financial measures reconciled to comparable IFRS measures 36

Attachments

• Original document
• Permalink

Disclaimer

Sagen MI Canada Inc. published this content on May 01, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 01, 2025 at 21:07 UTC.