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August 1, 2024 Property and Casualty News No comments

Second Quarter 2024 MD&A

Canadian Markets via PUBT

Management's Discussion and Analysis

For the three and six months ended June 30, 2024

Sagen MI Canada Inc.

Q2 2024 MD&A

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 July 31, 2024 is prepared for the three and six months ended June 30, 2024. 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 "$", "CDN$", "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 2024 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 impact of the cancellation of the "First-Time Home Buyer Incentive" program by the Canadian federal government on the Company's results; 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, and unemployment rates; 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

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Sagen MI Canada Inc.

Q2 2024 MD&A

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 20, 2024. 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 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-GAAPfinancial 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-GAAPand 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. These non-GAAP financial measures have been restated to reflect the impact of new accounting standards as described below.

Non-GAAPratios 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-GAAPand other financial measures glossary, in the Non-GAAPand 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.

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Sagen MI Canada Inc.	Q2 2024 MD&A
Contents
Business profile	6
Overview	8
Second quarter financial highlights	8
Recent business and regulatory developments	9
Second quarter review	14
Summary of quarterly results	21
Financial condition	22
Financial instruments	22
Liquidity	26
Derivative financial instruments	27
Capital expenditures	27
Capital management	28
Mortgage insurer capital adequacy test	28
Debt	29
Credit facility	30
Preferred shares	31
Financial strength ratings	31
Capital transactions	32
Restrictions on dividends and capital transactions	32
Outstanding share data	32
Risk management	33
Enterprise risk management framework	33
Governance framework	33
Risk principles	34
Risk appetite framework	34
Risk controls	35
Risk categories	35
Financial reporting controls and accounting disclosures	38
Disclosure controls & procedures and internal control over financial reporting	38
Changes in accounting standards and future accounting standards	38
Sustainability and climate-related reporting standards	39
Significant estimates and judgements	39
Transactions with related parties	40
Non-GAAP and other financial measures	41
Non-GAAP and other financial measures glossary	42
Other Glossary	43

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Sagen MI Canada Inc.	Q2 2024 MD&A
List of tables
Table 1: Selected financial information	8
Table 2: Results of operations	14
Table 3: Premiums written	15
Table 4: Net insurance revenue	15
Table 5: Losses on claims	16
Table 6: Expenses	17
Table 7: Investment income	18
Table 8: Net Income	19
Table 9: Statement of financial position	20
Table 10: Summary of quarterly results	21
Table 11: Invested assets by asset class for the portfolio	23
Table 12: Invested assets by credit rating for the portfolio	24
Table 13: Summary of the Company's cash flows	26
Table 14: Fair value and notional amounts of derivatives by terms of maturity	27
Table 15: MICAT as at June 30, 2024, and as at December 31, 2023	28
Table 16: Details of the Company's long-term debt and hybrid notes	29
Table 17: Changes in the number of common shares, Class A common shares and Series 1 Preferred Shares outstanding	32
Table 18: Non-GAAP financial measures reconciled to comparable IFRS measures	41

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Sagen MI Canada Inc.

Q2 2024 MD&A

Business profile

Business background

Sagen is the largest private-sector residential mortgage insurer in Canada and has been providing mortgage default insurance in the country since 1995. The Company has built a broad underwriting and distribution platform across the country that provides customer-focused products and support services to the vast majority of Canada's residential mortgage lenders and originators. Sagen underwrites mortgage insurance for residential properties in all provinces and territories of Canada and has the leading market share and largest in-force book among private-sector mortgage insurers. The Canada Mortgage and Housing Corporation ("CMHC"), a crown corporation, and Canada Guaranty Mortgage Insurance Company, a private mortgage insurer, are the Company's main competitors.

Federally regulated lenders are required to purchase transactional mortgage insurance in respect of a residential mortgage loan whenever the loan-to-value ratio exceeds 80%. The Company offers both transactional and portfolio mortgage insurance. The Company's transactional mortgage insurance covers default risk on mortgage loans secured by residential properties to protect lenders from any resulting losses on claims. By offering insurance for transactional mortgages, the Company plays a significant role in providing access to homeownership for Canadian residents. Homebuyers who can only afford to make a smaller down payment can, through the benefits provided by mortgage insurers such as Sagen, obtain mortgages at rates comparable to buyers with more substantial down payments.

The Company also provides portfolio mortgage insurance to lenders for loans with loan-to-value ratios of 80% or less. Portfolio mortgage insurance is beneficial to lenders as it provides the ability to manage capital and funding requirements and mitigate risk. The Company views portfolio mortgage insurance as an extension of its relationship with existing transactional insurance customers. Therefore, the Company carefully manages the level of its portfolio mortgage insurance relative to its overall mortgage insurance business. Premium rates on portfolio mortgage insurance have historically been lower than those on transactional mortgage insurance due to the lower risk profile associated with portfolio loans.

Seasonality

The transactional mortgage insurance business is seasonal. Business volumes vary each quarter, while interest and dividend income, net of investment expenses, and administrative expenses tend to be relatively consistent from quarter to quarter. The variations in business volumes are driven by mortgage origination activity, which typically peak in the spring and summer months. Strong housing demand throughout the second half of 2020 and 2021 impacted the typical seasonal variations in transactional premiums written in 2020 and 2021. In 2022, rising interest rates and strained housing affordability led to a weaker housing market starting in the Spring of 2022, which continued throughout 2023 and into 2024.

Losses on claims vary from quarter to quarter, primarily as the result of prevailing economic conditions, changes in employment levels and characteristics of the outstanding insured mortgage balances, such as size, age, seasonality and geographic mix of delinquencies. Typically, losses on claims increase during the winter months, primarily due to an increase in new delinquencies, and decrease during the spring and summer months. The COVID-19 pandemic and actions taken by lenders and mortgage insurers in respect of mortgage payment deferrals impacted the typical seasonal patterns of mortgage delinquencies in 2020 and 2021. During 2022, the cumulative favourable impact of home price appreciation from 2020 and 2021 in most regions of Canada resulted in relatively low levels of losses on claims and largely muted the typical seasonal pattern, which continued throughout 2023 and into 2024.

The Company's business volumes from portfolio mortgage insurance varies from period to period based on a number of factors including the amount of portfolio mortgages lenders seek to insure, the competitiveness of the Company's pricing, underwriting guidelines and credit enhancement for portfolio insurance, and the Company's risk appetite for such mortgage insurance.

Distribution and marketing

The Company works with lenders, mortgage brokers and real estate agents across Canada to make homeownership more accessible for first- time homebuyers. Mortgage insurance customers consist of originators of residential mortgage loans, such as banks, mortgage loan and trust companies, credit unions and other lenders. These lenders typically determine which mortgage insurer they will use for the placement of mortgage insurance written on loans originated by them. The five largest Canadian chartered banks have historically been the largest residential mortgage originators in Canada.

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Sagen MI Canada Inc.

Q2 2024 MD&A

Impact of rise in interest rates

Starting in March 2022 and through the end of 2023, the Bank of Canada increased the overnight lending rate ten times, resulting in cumulative increases in the overnight lending rate of 475 basis points. In June 2024 the Bank of Canada cut the overnight lending rate by 25 basis point to 4.75%, and in July 2024 it cut the overnight lending rate again by 25 basis points to 4.50%, as compared to 5.00% at December 31, 2023 and 0.25% at January 31, 2022.

Higher interest rates have resulted in a decline in the fair value of the Company's bonds and other fixed income securities during 2023, with a modest recovery in the first half of 2024, which has resulted in unrealized losses recognized in accumulated other comprehensive income. Conversely, higher interest rates have also resulted in higher interest income due to higher reinvestment interest rates, higher interest income on the Company's floating rate invested assets, and run-off of lower yielding investments.

Adoption of new accounting standards

On January 1, 2023, the Company adopted IFRS 17: Insurance contracts ("IFRS 17") and IFRS 9: Financial instruments ("IFRS 9") for the first time. IFRS 17 and IFRS 9 were applied to the Company's financial statements retrospectively, and comparative information was restated. IFRS 17, which replaced IFRS 4: Insurance contracts ("IFRS 4"), had a material impact on the Company's consolidated financial statements in 2023. Despite this impact, the Company's business model and related risks are not affected by these changes in accounting policies.

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Sagen MI Canada Inc.Q2 2024 MD&A

Overview

Second quarter financial highlights

Table 1: Selected financial information

		Three months ended June 30,	Six months ended June 30,
(in millions of dollars, unless otherwise specified)		2024		2023		2024			2023
Premiums written¹	$	219	$	168	$	329		$	262
Insurance revenue	$	199	$	171	$	391		$	316
Net losses on claims		1		11		15			19
Insurance expenses		26		20		53			42
Insurance service expense		27		31		69			61
Insurance service result		172		140		322			255
Insurance finance expense		22		17		40			31
Other operating expenses		7		9		18			19
Net insurance service result¹		143		113		264			205
Investment income:		61				121
Interest			56				109
Dividends		7		7		15			13
Change in allowance for ECL		(3)		1		(7)			-
Income (loss) from associate		-		-		(1)			-
General investment expenses		(2)		(4)		(5)			(6)
Interest and dividend income, net of investment expenses¹		63		60		123			115
Realized income from the interest rate hedging program		-		-		(1)			(1)
Net realized gains (losses) from sales of investments		-		(5)		(1)			(8)
Net fair value gains (losses) on financial assets at FVTPL		6		(1)		35			(2)
Net gains (losses) on derivatives and foreign exchange²		(2)		(7)		(4)			(5)
Total investment income		68		47		152			99
Interest expense		10		10		20			18
Income before income taxes		201		151		396			286
Income taxes		50		39		100			73
Net income	$	151	$	112	$	296		$	213
Adjustment to net income, net of taxes:
Net (gains) losses from investments, financial assets		(4)				(22)
at FVTPL, derivatives and foreign exchange²			10				13
Net operating income¹	$	146	$	122	$	274		$	226
Effective tax rate		25.1 %		25.7 %		25.3 %			25.4 %
Selected measures:		193,000				193,000
Outstanding insured mortgage balances³			194,000				194,000
Delinquency ratio on outstanding insured mortgage balances³		0.17 %		0.15 %		0.17 %			0.15 %
Loss ratio⁴		0 %		7 %		4 %			7 %
Expense ratio⁴		19 %		19 %		20 %			21 %
Combined ratio⁴		19 %		26 %		25 %			28 %
MICAT⁵		174 %		175 %		174 %			175 %

Note: Amounts may not total due to rounding. 1 Non-GAAP financial measure. 2 Includes realized and unrealized gains and losses from derivatives and foreign exchange, excluding realized income and expense from the interest rate hedging program. 3 This estimate is based on the amounts reported by lenders to the Company which represents the vast majority of outstanding insured mortgage balances. 4 Supplementary financial measure. 5 Company estimate as at June 30, 2024. The Company calculated its mortgage insurer capital adequacy test ("MICAT") ratio in accordance with OSFI's Mortgage Insurer Capital Adequacy Test Guideline dated January 1, 2023 for the 2023 reporting period and the 2024 MICAT Guideline dated January 1, 2024 for the 2024 reporting period. The OSFI supervisory MICAT target ratio and minimum MICAT ratio under the Protection of Residential Mortgage or Hypothecary Insurance Act ("PRMHIA") is 150% and the Company's internal target ratio under the MICAT is 157%. See the Non-GAAP and other financial measures section at the end of this MD&A for additional information.

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Sagen MI Canada Inc.

Q2 2024 MD&A

The Company reported net income of $151 million in the second quarter of 2024, $39 million higher than the same quarter in the prior year, primarily due to higher insurance revenue, higher investment income and lower insurance service expense, partially offset by higher insurance finance expense. Net operating income of $146 million in the second quarter of 2024 was lower than net income primarily due to the exclusion of the after-tax impact of net gains from investments, financial assets at Fair Value through Profit or Loss ("FVTPL"), derivatives, and foreign exchange.

The Company reported net income of $296 million in the six months ended June 30, 2024, $83 million higher than the prior year's period, primarily due to higher insurance revenue and higher investment income, partially offset by higher insurance service expense, higher insurance finance expense and higher interest expense. Net operating income of $274 million in the six months ended June 30, 2024 was lower than net income primarily due to the exclusion of the after-tax impact of net gains from investments, financial assets at FVTPL, derivatives, and foreign exchange.

Recent business and regulatory developments

OSFI's new supervisory framework

On February 8, 2024, OSFI released a new supervisory framework for federally regulated financial institutions ("FRFIs") and pension plans that came into effect in April 2024. The new framework is designed to respond quickly to the most serious risks that could jeopardize the public's confidence in the soundness of the Canadian financial system and provide greater transparency to financial institutions through disclosure of (i) a new tier rating based on size, complexity, and potential for contagion, (ii) a rating reflecting viability risk according to an expanded 8-point scale, and (iii) for larger institutions, it will also include ratings of business risk, financial resilience, operational resilience, and risk governance. With this new framework, OSFI aims to act early to address risks that could jeopardize the public's confidence in the soundness of the Canadian financial system.

Mortgage Insurer Capital Adequacy Test 2024 Guideline ("2024 MICAT Guideline")

On October 20, 2023, OSFI published the 2024 MICAT Guideline which builds on the existing MICAT guideline and reflects two key revisions, including (i) incorporating the September 28, 2022 advisory, clarifying the maximum remaining amortization in the capital requirements calculations is the lesser of the calculated remaining amortization period and 40 years, and (ii) an increase to the maximum loan-to-value ratio from 100% to 105% in the capital requirements calculations, aligning the MICAT capital formula to the maximum permitted loan-to- value ratio for insured mortgages.

The revised 2024 MICAT Guideline became effective on January 1, 2024, and has not had a material impact on the Company's MICAT ratio. Refer to the Capital management - Mortgage insurer capital adequacy test section below for additional information.

OSFI Guideline E-23: Model Risk Management Guideline ("Guideline E-23")

On November 20, 2023, OSFI proposed revising Guideline E-23 so that it applies to all analytical models used by FRFIs and federally regulated private pension plans. Guideline E-23 incorporates input received during public consultations undertaken in May 2022, and it now also includes models used for non-financial risks such as climate, cyber and tech and digital innovation risk. OSFI recognizes that federally regulated insurers, including the Company, heavily rely on models to support their decision-making and is proposing to extend the applicability of Guideline E-23 to include this industry as well. The extended consultation period ended in March 2024, with the final revised guideline set to take effect in July 2025. The Company is currently evaluating the impact of Guideline E-23 on its business and operations.

OSFI Guideline B-20: Residential Mortgage Underwriting Practices and Procedures ("Guideline B-20")

On January 12, 2023, OSFI launched a public consultation of Guideline B-20 on Residential Mortgage Underwriting Practices and Procedures for federally regulated mortgage lenders. In that initial consultation, OSFI was interested in stakeholder feedback on a set of proposed complementary debt serviceability measures designed to better control prudential risks arising from high consumer indebtedness. The proposed debt serviceability measures included loan-to-income and debt-to-income restrictions, debt service coverage restrictions, and interest rate affordability stress tests.

On October 16, 2023, OSFI published the results and next steps of the initial public consultation on this guideline. OSFI believes additional measures are needed to mitigate the underlying vulnerability of a buildup in highly indebted borrowers, and it indicated that it would pursue targeted supervisory actions that would aim to limit FRFIs' individual exposures to high household indebtedness over time. These actions

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Sagen MI Canada Inc.

Q2 2024 MD&A

would take into account the size, nature, complexity, and risk profile of each FRFI, balancing sound risk management against the need for FRFIs to compete effectively and take reasonable risks.

It is expected that OSFI will continue to review its expectations relating to real estate secured lending through 2024.

OSFI Guideline B-15: Climate Risk Management ("Guideline B-15")

On March 7, 2023, OSFI published Guideline B-15, which sets out OSFI's expectations related to the management of climate-related risk by FRFIs and align its disclosure expectations with the International Sustainability Standards Board's ("ISSB") final IFRS S2 Climate-related Disclosures standard ("IFRS S2"). In addition to these updates, OSFI also released new Climate Risk Returns that will be used to collect climate- related data on emissions and exposures from FRFIs. The Company's mortgage insurance policy does not cover direct damages from climate risks. The economic transition risk is the most significant climate related risk and the Company is in the process of more formally integrating climate related risks into its strategic planning and public reporting process.

Reinforcing residential mortgage risk management practices

On March 11, 2024, OSFI released a regulatory notice that applies to all FRFIs which was effective immediately. The notice responds to the heightened risk environment for real estate secured lending by reinforcing expectations on sound residential mortgage account and portfolio management practices. The notice provides that institutions should apply the notice alongside Guideline B-20, particularly income verification and higher risk mortgage products, such as variable-rate mortgages with fixed payments, and IFRS 9 as relating to significant increases in credit risk and lifetime loss provisions. The notice further provides that institutions should:

Proactively identify and address vulnerable accounts, portfolio segments and concentrations;
Ensure forward-looking credit risk measurement, modeling, and stress testing to estimate potential losses; and
Apply timely recognition of expected and unexpected losses due to account vulnerabilities or adverse shifts in the risk environment.

Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances

On July 5, 2023, the Financial Consumer Agency of Canada ("FCAC") published its Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, which sets out its expectations for FRFIs to contribute to the protection of consumers of financial products and services by providing tailored support to consumers with an existing residential mortgage loan on such consumer's principal residence who are experiencing severe financial stress as a result of exceptional circumstances, and are at risk of mortgage default. These exceptional circumstances include the current combined effects of high household indebtedness, the rapid increase in interest rates and the increased cost of living.

The FCAC expects FRFIs to pay particular attention to providing support to:

Consumers whose payments on variable rate mortgages fluctuate with interest rates (variable payments) and whose payments have thus increased materially;
Consumers whose payments on variable rate mortgages are fixed and have had a materially larger portion (or all) of their payment covering the increased interest costs or for those who may be facing negative amortization; and
Consumers with fixed rate mortgages reaching near-term maturity, who may be facing a material increase in payments.

OSFI guideline for assurance on capital, leverage and liquidity returns

On November 7, 2022, OSFI released a new guideline setting out their assurance expectations for capital, leverage and liquidity regulatory returns. This guideline seeks to inform external auditors and institutions on the work to be performed on their regulatory returns in an effort to enhance and align OSFI's assurance expectations across all FRFIs. OSFI expects senior management to review and attest on the accuracy and completeness of the MICAT cover schedule on a quarterly basis, beginning in fiscal year 2024. In addition, OSFI expects internal auditors to evaluate and opine on the effectiveness of the processes and internal controls over the MICAT, including related systems, effective beginning fiscal year 2023, at least once every three years. Lastly, on an annual basis beginning with year-end reporting for fiscal 2025, OSFI expects external auditors to evaluate and opine on MICAT-related calculations to ensure they have been prepared in accordance with the appropriate regulatory framework and are free of material misstatements.

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Sagen MI Canada Inc. published this content on 01 August 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 August 2024 21:42:33 UTC.