1Q19 FINANCIAL RESULTS PRESENTATION - Genworth...

©2019 Genworth Mortgage Insurance Australia Limited. All rights reserved.

Illustration by

Australian artist and illustrator, Mike Watt

1 MAY 2019

1Q19 FINANCIAL

RESULTS

PRESENTATION

1Q 2019 financial results – produced by Genworth.

This presentation contains general information in summary form which is current as at 31 March 2019. It may present financial information on both a statutory basis

(prepared in accordance with Australian accounting standards which comply with International Financial Reporting Standards (IFRS) and non-IFRS basis.

This presentation is not a recommendation or advice in relation to Genworth or any product or service offered by Genworth’s subsidiaries. It is not intended to be relied

upon as advice to investors or potential investors, and does not contain all information relevant or necessary for an investment decision. It should be read in conjunction

with Genworth’s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange (ASX). These are also available at

genworth.com.au.

No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information

contained in this presentation. To the maximum extent permitted by law, Genworth, its subsidiaries and their respective directors, officers, employees and agents disclaim

all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted

from this presentation. No recommendation is made as to how investors should make an investment decision. Investors must rely on their own examination of Genworth,

including the merits and risks involved. Investors should consult with their own professional advisors in connection with any acquisition of securities.

The information in this report is for general information only. To the extent that certain statements contained in this report may constitute “forward-looking statements” or

statements about “future matters”, the information reflects Genworth’s intent, belief or expectations at the date of this report. Genworth gives no undertaking to update this

information over time (subject to legal or regulatory requirements). Any forward-looking statements, including projections, guidance on future revenues, earnings and

estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Forward-looking statements involve

known and unknown risks, uncertainties and other factors that may cause Genworth’s actual results, performance or achievements to differ materially from any future

results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements, opinions and estimates in this report are

based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on

interpretations of current market conditions. Neither Genworth, nor any other person, gives any representation, assurance or guarantee that the occurrence of the events

expressed or implied in any forward-looking statements in this report will actually occur. In addition, please note that past performance is no guarantee or indication of

future performance.

This presentation does not constitute an offer to issue or sell securities or other financial products in any jurisdiction. The distribution of this report outside Australia may be

restricted by law. Any recipient of this presentation outside Australia must seek advice on and observe any such restrictions. This presentation may not be reproduced or

published, in whole or in part, for any purpose without the prior written permission of Genworth. Local currencies have been used where possible. Prevailing current

exchange rates have been used to convert foreign currency amounts into Australian dollars, where appropriate. All references starting with “FY” refer to the financial year

ended 31 December. For example, “FY18” refers to the year ended 31 December 2018. All references starting with “1H” refers to the half year ended 30 June. All

references starting with “2H” refers to the half year ended 31 December. For example, “2H18” refers to the half year ended 31 December 2018. All references starting with

“1Q” refers to the quarter ended 31 March. For example, “1Q19” refers to the quarter ended 31 March 2019.

Genworth Mortgage Insurance Australia Limited ABN 72 154 890 730 ® Genworth, Genworth Financial and the Genworth logo are registered service marks of Genworth

Financial, Inc and used pursuant to license.

Disclaimer

2

http://www.genworth.com.au/

IntroductionGeorgette Nicholas, CEO and MD


Summary

1Q19 result in line with guidance

• New Insurance Written of $5.4 billion, up 24.0% from 1Q18

• GWP decreased 50.4% reflecting the fact that 1Q18 GWP included a

bespoke transaction written via Genworth’s Bermudian entity (utilising a

consortium of global reinsurers). Excluding this transaction, GWP increased

7.5% in 1Q19 versus 1Q18, reflecting an increase in traditional LMI flow

and bulk business written

• NEP increased 8.2% from $67.4 million in 1Q18 to $72.9 million in 1Q19.

Excluding the $4.5 million impact of the lapsed policy initiative in 1Q19,

NEP increased 1.5%

• Reported NPAT of $47.8 million includes after tax unrealised gain of $25.5

million on investment portfolio (1Q18: $11.5 million after tax unrealised loss)

• Underlying NPAT1 of $22.3 million includes after tax realised gain of $3.5

million (1Q18: $1.7 million)

• Loss ratio of 55.3% for 1Q19 decreased by 60 bps from 1Q18. Full year

loss ratio expected to be in line with FY19 guidance given the seasonality of

the business with the first half of the year traditionally experiencing an

uptick in claims.

Strategic update

• Leveraging technology and data to deliver operating and underwriting

efficiencies (e.g. new data sources secured enabling swifter identification of

loans that have been discharged or refinanced to further enhance the

benefits of the Company’s lapsed policy initiative)

• Progressing product enhancement capability to offer regular premium LMI

offerings and LMI premiums based on risk assessment utilising additional

data sources.

Capital management

• New on-market share buy-back (up to $100 million) commenced in

February 2019 – acquired 11.8 million shares (valued at $29.4 million) as at

31 March 2019.

1Q19 results overview

4

(A$ millions) 1Q18 1Q19Change

%

Gross written premium 174.1 86.3 (50.4%)

Net earned premium 67.4 72.9 8.2%

Reported net profit after

tax8.4 47.8 469.0%

Underlying net profit after

tax1 19.9 22.3 12.1%

Key financial

measureFY19 guidance 1Q19 actual

NEP growth -5% to +5% 8.2%

Full year loss

ratio45% to 55% 55.3%

Ordinary

dividend payout

ratio

50% to 80% N/A

1. Underlying NPAT excludes the after tax impact of mark-to-market gains/(losses) of $25.5 million on the investment portfolio, and the impact of unhedged movements in foreign exchange rates on Genworth’s non-AUD exposures. The bulk of these foreign exchange exposures are hedged.

1Q 2019 financial results – produced by Genworth.5

Interest rates House values – capital city dwellings

Macroeconomic conditions

Total delinquency rates by geography (Genworth) Unemployment rates (seasonally adjusted)

Source: Reserve Bank of Australia Source: CoreLogic

Source: Australian Bureau of Statistics.Source: Genworth. Note: Total delinquency includes aged as well as new delinquencies

but excludes excess of loss insurance.

State Mar 18 Mar 19Change

(basis points)

New South Wales 0.33% 0.41% 8 bps

Victoria 0.39% 0.42% 3 bps

Queensland 0.67% 0.74% 7 bps

Western Australia 0.88% 1.05% 17 bps

South Australia 0.63% 0.69% 6 bps

Group 0.49% 0.57% 8 bps

State Mar 18 Mar 19Change

(basis points)

New South Wales 5.0% 4.3% (70 bps)

Victoria 5.2% 4.6% (60 bps)

Queensland 6.0% 6.1% 10 bps

Western Australia 6.9% 6.0% (90 bps)

South Australia 5.6% 5.9% 30 bps

National 5.5% 5.0% (50 bps)

80

100

120

140

160

180

200

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Ho

me valu

e In

dex

NSW VIC QLD SA WA ACT Australia

0%

1%

2%

3%

4%

5%

6%

7%

8%

Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19

Cash rate Standard variable mortgage rate


Originations and HLVR penetration1

Residential mortgage lending market

Note: Totals may not sum due to rounding. Total new residential loans approved in the 12 months to 31 December 2018 were $359.3 billion, down 6.6% on the previous corresponding period.

1. Prior periods have been restated in line with market updates.

Sources: APRA Quarterly ADI property exposures statistics (ADI’s new housing loan approvals), December 2018.

6

HLVR Penetration

71 68 63 66 80 80 83 93 101 99

102 99 98111

139166

200200

20218743 47 50

43

41

49

5152

5449

4626 31

36

40

40

37 3128

24

262

240 242 256

300

335

371 376 385

359

34%

31%

33%

31%

27% 27%

24%

22%21%

20%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Loans approved LVR<60% Loans approved LVR 60%-80% Loans approved LVR 80%-90% Loans approved LVR>90% HLVR loans (% of New residential loan approvals)

A$ bn

Detailed financial performance

Michael Bencsik, CFO


1Q19 income statement

Note: Totals may not sum due to rounding.

1. Net of ceding commissions.

2. Investment income on technical funds and shareholder funds include the before-tax effect of realised and unrealised gains/(losses) on the investment portfolio.

3. Underlying NPAT excludes the after tax impact of mark-to-market gains/(losses) of $25.5 million on the investment portfolio, and the impact of unhedged movements in foreign

exchange rates on our non-AUD exposures. The bulk of these foreign exchange exposures are hedged.

8

(A$ millions) 1Q18 2Q18 3Q18 4Q18 1Q19 Change

1Q18 v 1Q19

Gross written premium 174.1 92.7 92.1 101.3 86.3 (50.4%)

Movement in unearned premium (84.7) 0.8 (6.5) (13.4) 3.9 104.6%

Gross earned premium 89.4 93.5 85.6 87.9 90.2 0.9%

Outwards reinsurance expense (22.0) (17.5) (17.5) (18.0) (17.4) 20.9%

Net earned premium 67.4 76.0 68.1 69.9 72.9 8.2%

Net claims incurred (37.7) (38.7) (35.8) (33.7) (40.3) (6.9%)

Acquisition costs (9.4) (10.6) (10.1) (10.6) (11.0) (17.0%)

Other underwriting expenses1 (13.2) (14.0) (12.0) (14.6) (13.8) (4.5%)

Underwriting result 7.1 12.7 10.2 11.0 7.8 9.9%

Investment income on technical funds2 6.6 8.2 6.4 17.5 33.0 400.0%

Insurance profit 13.7 20.9 16.6 28.5 40.8 197.8%

Net investment income on shareholder

funds2 1.2 28.5 15.1 (5.6) 30.1 2,408.3%

Financing costs (2.9) (3.0) (3.1) (3.1) (3.2) (10.3%)

Profit before income tax 12.0 46.4 28.5 19.8 67.7 464.2%

Income tax expense (3.6) (12.9) (9.0) (5.6) (19.9) (452.8%)

Net profit after tax 8.4 33.5 19.6 14.2 47.8 469.0%

Underlying net profit after tax3 19.9 30.4 20.4 23.3 22.3 12.1%


NIW1 by original LVR2 band NIW1 by product type

New insurance written

1. NIW includes capitalised premium. NIW excludes excess of loss insurance (excess of loss insurance includes the Bermudian entity transaction).

2. Original LVR excludes capitalised premium and excess of loss insurance.

$ bn, % $ bn

9

42%

26%18% 4% 5% 24% 4% 19%

15%

42%

56%

62%74%

72%

58%

73%

62%

65%

16%18%

20% 22%

23%

18%

23%

18%

20%

6.86.3

5.5 5.4

4.3

6.0

5.1

6.8

5.4

81%

84%85%

88% 88%

84%

88%

85%86%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

0 - 80.00% 80.01 - 90.00% 90.01% and above Original LVR

99.3% 99.3%99.4% 99.5%

99.4%

99.7%99.6%

99.7%99.7%

6.8 6.3

5.5 5.4

4.3

6.0

5.1

6.8

5.4

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Standard Others (incl. HomeBuyer Plus)


GWP and average price1 of flow business GWP walk

Gross written premium

1. Average price excludes excess of loss insurance and bulk transactions.

2. Historical NIW has been adjusted in the average premium calculation to reflect a risk sharing arrangement.

3. GWP Volume includes excess of loss insurance and bulk transactions.

$ m$ m, %

10

88.2 94.1 88.997.7

174.1

92.7 92.1101.3

86.3

1.60%1.69%

1.83% 1.80% 1.82% 1.80% 1.82% 1.79% 1.75%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

GWP (including bulk) Average premium (Flow only)2

0.1

(3.6)

(84.2)174.1

86.3

1Q18 Flow LVRband mix

Volume Other 1Q193


Net claims incurred


1.Movement in non-reinsurance recoveries on paid claims is excluded from average paid claim calculation and claims paid.

2.In 1Q19 the Company continued to progress its Strategic Program of Work by leveraging technology and data. This has included securing new data sources that have further enhanced

the benefits of the lapsed policy initiative implemented in 1H18 which enabled refinanced or discharged loans to be more swiftly identified.

(A$ millions unless otherwise stated) 1Q18 2Q18 3Q18 4Q18 1Q19

Number of paid claims (#) 365 301 320 325 319

Average paid claim1 ($’000) 117.8 115.2 115.7 102.1 94.2

Claims paid1 43.0 34.7 37.0 33.2 30.1

Movement in non-reinsurance recoveries on paid claims 0.6 (1.5) (0.5) - -

Movement in reserves (6.0) 5.6 (0.7) 0.5 10.2

Net claims incurred 37.7 38.7 35.8 33.7 40.3

Reported loss ratio (%) 55.9% 50.9% 52.6% 48.2% 55.3%

Movement in non-reinsurance recoveries on paid claims (0.6) 1.5 0.5 - -

Adjusted net claims incurred [A] 37.1 40.2 36.3 33.7 40.3

Net earned premium (NEP) 67.4 76.0 68.1 69.9 72.9

Lapsed policy initiative2 - (8.2) - - (4.5)

NEP excluding impact of lapsed policy initiative [B] 67.4 67.8 68.1 69.9 68.4

Adjusted loss ratio – [A] / [B] (%) 55.0% 59.3% 53.3% 48.2% 58.9%


Delinquency roll and incurred loss drivers

Loss development

1.Ageing relates to reserve movements on delinquencies that remain delinquent from prior periods.

2.Includes changes to actuarial assumptions.

Note: This slide excludes excess of loss insurance.

12

Delinquency roll 1Q18 2Q18 3Q18 4Q18 1Q19

Opening balance 6,696 6,958 7,306 7,350 7,145

New delinquencies 2,701 2,864 2,742 2,390 2,662

Cures (2,074) (2,215) (2,378) (2,270) (1,998)

Paid claims (365) (301) (320) (325) (319)

Closing delinquencies 6,958 7,306 7,350 7,145 7,490

Delinquency rate 0.49% 0.54% 0.55% 0.54% 0.57%

Average reserve per delinquency ($’000) 47.9 46.4 46.0 47.5 46.7

Net claims incurred ($m) 1Q18 2Q18 3Q18 4Q18 1Q19

New delinquencies 34 34 38 32 35

Cures (32) (29) (33) (38) (32)

Ageing1 35 35 32 37 32

Paid claims gap (2) - (1) (2) -

Other adjustments2 3 (1) - 5 5

Net claims incurred 38 39 36 34 40


Strong balance sheet with $3.2bn in cash and investments and $1.2bn in UPR

Balance sheet as at 31 March 2019

Unearned premium by year as at

31 March 2019

Balance sheet and unearned premium reserve

Total UPR $1.2bn

Note: Totals may not sum due to rounding. The above chart includes excess of loss

insurance.

1.Includes trade receivables, prepayments, plant and equipment and right-of-use asset.

2.Includes reinsurance payables, lease liabilities and other payables.

13

(A$ in millions) 31 Dec 18 31 Mar 19

Assets

Cash and cash equivalents 141.5 50.5

Accrued investment income 22.1 27.8

Investments 3,083.0 3,160.6

Deferred reinsurance expense 43.3 83.9

Non-reinsurance recoveries 21.2 21.8

Deferred acquisition costs 166.8 166.6

Deferred tax assets 7.9 6.7

Goodwill and Intangibles 15.3 15.3

Other assets1 88.9 87.7

Total assets 3,590.1 3,620.9

Liabilities

Payables2 94.1 138.6

Outstanding claims 339.1 349.9

Unearned premiums 1,214.2 1,210.6

Interest bearing liabilities 198.2 198.5

Employee provisions 7.3 7.3

Total liabilities 1,852.8 1,904.7

Net assets 1,737.3 1,716.2

2011

1%

2012

2%

2013

4% 2014

7%

2015

10%

2016

14%

2017

22%

2018

33%

2019

7%


NIW1 by original LVR band and Probable

Maximum Loss

1Q 2019 regulatory capital position


$ bn

14

1. NIW excludes excess of loss reinsurance.

(A$ in millions) 31 Dec 18 31 Mar 19

Capital Base

Common Equity Tier 1 Capital 1,748.1 1,711.8

Tier 2 Capital 200.0 200.0

Regulatory Capital Base 1,948.1 1,911.8

Capital requirement

Probable Maximum Loss (PML) 1,764.7 1,713.7

Net premiums liability deduction (303.5) (309.9)

Allowable reinsurance (800.4) (791.2)

Insurance concentration risk charge (ICRC) 660.7 612.5

Asset risk charge 124.8 115.8

Asset concentration risk charge - -

Insurance risk charge 245.5 243.3

Operational risk charge 31.7 30.8

Aggregation benefit (56.4) (52.4)

Prescribed Capital Amount (PCA) 1,006.3 949.9

PCA Coverage ratio (times) 1.94 x 2.01 x

Note: manual update the links for %

30%16% 19% 19%

26% 31%23%

13%15%

41%

45%45%

51% 51%51%

58%

67%

65%

29%39%

36%30%

23%

17%

19%20%

20%

30.8

33.835.4 36.2

32.6

26.6

23.922.2

5.4

2.36 2.36

2.60 2.592.51

2.28

2.00

1.761.71

2011 2012 2013 2014 2015 2016 2017 2018 1Q19

0-80.00% 80.01-90.00%

90.01% and above Probable Maximum Loss


Program continues to drive efficiency

Reinsurance program as at 31 Mar 2019 Observations

Reinsurance

• As at 31 March 2019, $800 million of excess of loss

cover with varying durations depending on the layer

• Well diversified panel with over 20 different reinsurers

participating across the program (minimum rating of A-)

• Non-renewal of $100 million remote layer of reinsurance

on 1 April 2018 due to lack of internal economic capital

credit recognition and reducing Probable Maximum Loss

• The program continues to drive efficient economic

capital credit.

200

200

200

100

100

0

500

1,000

1,500

2,000

2,500

31-Mar-19

AP

RA

Lo

sse

s N

et

Pai

d C

laim

s ($

m)

Consortium 6

Consortium 5

Consortium 4

Consortium 3

Consortium 2

Retained losses


Ongoing program of capital management

• Since listing in 2014, Genworth has paid out all after tax

profits by way of ordinary and special dividends to

shareholders

• Paid fully franked final ordinary dividends of $39.3 million

in March 2019

• Two on-market share buy-backs completed in 2018

valued at $149.1 million

• New on-market share buy-back (up to $100 million)

commenced in February 2019 – acquired 11.8 million

shares (valued at $29.4 million) as at 31 March 2019.

Genworth intends to recommence this buy-back subject

to business and market conditions, the prevailing share

price, market volumes and other considerations

• Resolution to be put to shareholders at 2019 Annual

General Meeting seeking approval for the possible buy-

back of up to 100 million shares on-market over the next

12 months.

Recent actions Genworth dividends

Future actions being considered

The Company continues to actively manage its capital

position and to evaluate its excess capital and potential

uses.

0%

20%

40%

60%

80%

100%

0

4

8

12

16

20

24

28

32

FY14 FY15 FY16 FY17 FY18

Ord

inary

payo

ut

rati

o

ce

nts

pe

r sh

are

Ordinary Special Dividend payout ratio (RHS)

Summary and conclusion

Georgette Nicholas, CEO and MD

Key financial measures – FY19 guidance

Net earned premium -5% to +5%

Full year loss ratio 45% to 55%

Ordinary dividend payout ratio 50% to 80%


Genworth economic outlook and FY19 guidance

Full year outlook is subject to market conditions and unforeseen circumstances or economic events.

2019

Economic growth in 1Q19 consistent with

2H18 trends, reflecting softer growth rates

compared with 1H18

Global economic uncertainty and

moderating housing markets resulting in

cautionary household consumption

Expectation of moderating housing market

conditions to continue in 2019

Perth likely to continue to experience

challenging market conditions throughout 2019

resulting from the flow-on effect of the end of

the mining boom.

Tighter credit conditions and weak wage

growth expected to continue.

Increased housing supply to impact some

metropolitan regions

RBA expected to continue to closely monitor

the labour market, consumer sentiment and

forward signs of a weakening economy.


Conclusion

Heading

Lorem ipsum dolor sit

amet, augue dignissim

Business is well

capitalised

Track record of

delivering profits

and strong capital

returns

Strategy designed

to position

Genworth as the

leading provider of

customer-focused

capital and risk

management

solutions

Excess capital and

potential uses

continue to be

evaluated

Well positioned

to continue to

deliver

sustainable

shareholder

returns over time

Utilising technology to deliver operational

efficiencies and greater underwriting risk

management insights

Good progress in

implementing

strategic initiatives

that broaden

product offerings

Unique set of

competencies that

can be leveraged

to grow our

business

Strategic work to

deliver profitable

growth over the

medium term

Ordinary dividend

payout range of

50%-80%

19

Questions

Supplementary slides


Designed to deliver profitable growth over the medium-term

Genworth’s Strategic Program of Work

Our purpose:

Value proposition: Innovation and technology will underpin Genworth’s value proposition

1. Redefine core business model 2. Leverage data and technology to add value across

the mortgage value chainProduct enhancement

Underwriting efficiencies

Leverage data and partnerships

Operating efficiencies

Regulator and policy maker advocacy

2017 and 2018 initiatives Longer-term initiatives (2019+)

Strategic enablers

People, organisation

and cultural change

Data and

analyticsTechnology Stakeholder

management

Product innovation

Enhanced customer experience

Leverage HLVR experience and expertise

22

Our vision: To help Australians achieve the dream of home ownership

To be the leading provider of customer-focused capital and risk management solutions in residential mortgage markets and deliver sustainable shareholder returns


Investment vs. owner-occupied (APRA statistics

for ADI)1 Investment vs. owner-occupied2 (Genworth)

Residential mortgage lending market

• Investment property lending represented 30% of

originations for the period ended 31 December 2018.

• Investment property lending represented 14% of

Genworth’s portfolio for the period ended 31 March 2019.

1. Prior periods have been restated in line with market updates.

2. Flow NIW only. Owner occupied includes loans for owner occupied and other types.

Sources: APRA Quarterly ADI property exposures statistics (ADIs new housing loan approvals), December 2018. Statistics only show ADIs mortgage portfolios above $1 billion, thereby

excluding small lenders and non-banks.

$ bn, %$ bn, %

187159 164 172 191 200

235 248 258 250

7681 78

84

109136

136 128 127109

29%

34%32% 33%

36%

40%

37%34%

33%

30%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Owner-occupied Investment Investment as a % of total

2

33.0

20.9 21.226.5 26.4 26.4

22.1 19.1 17.0 17.1

4.1

8.7

6.2 5.2

6.7 8.0 8.6

8.4 6.4

4.0 2.8

0.7

21% 23%

20% 20%

23%24%

27%

25%

19%

14%14%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1Q 2019

Owner-occupied Investment Investment as a % of total


Insurance in force (IIF)1 by original LVR2 band,

as at 31 March 2019 IIF1 by product type, as at 31 March 2019

Insurance-in-force and new insurance written

Flow NIW1 by loan type IIF1 by loan type, as at 31 March 2019

1.NIW and IIF include capitalised premium. NIW and IIF exclude excess of loss insurance. Genworth has retained $222m of risk in relation to excess of loss insurance.

2.Original LVR excludes capitalised premium.

24

Total IIF $309 bn

<60%8%

60.01-70%6%

70.01-80%15%

80.01-85%9%

85.01-90%34%

90.01-95%27%

95.01%+1%

Standard92%

Low Doc5%

HomeBuyer Plus2% Other

1%

86%

14%

86%

14%

Owner-occupied Investment

FY-2018 1Q-2019

Investment26%

Owner-occupied74%


Expenses Combined ratio

Insurance ratio analysis

Insurance margin Trailing 12-month ROE and underlying ROE

The expense ratio is calculated by dividing the sum of the acquisition costs and the other underwriting

expenses by the net earned premium. Net of ceding commissions.The combined ratio is the sum of the loss ratio and the expense ratio.

The insurance margin is calculated by dividing the profit from underwriting and interest income on

technical funds (including realised and unrealised gains or losses) by the net earned premium.

The trailing 12 months underlying ROE is calculated by dividing underlying NPAT of the past 12 months

by the average of the opening and closing underlying equity balance for the past 12 months. The trailing

twelve months ROE is calculated by dividing NPAT of the past 12 months by the average of the opening

and closing equity balance for the past 12 months.

$ m, % $ m, %

% %

25

13.7 13.5 13.7 9.0 9.4 10.6 10.1 10.6 11.0

13.5 14.1 16.0

14.9 13.2 14.0

12.0 14.6 13.8

27.2 27.629.7

23.9 22.624.6

22.125.2 24.8

25.2% 26.6%29.7%

40.6%

33.5% 32.4% 32.5%36.1% 34.0%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Acquisition costs Underwriting costs Expense ratio

37.6 36.0 37.0 31.2 37.7 38.7 35.8 33.7 40.3

27.2 27.6 29.723.9

22.6 24.622.1 25.2

24.8

64.8 63.6 66.7

55.160.3 63.3

57.9 58.965.1

60.1% 61.3% 66.6%93.7% 89.5% 83.3% 85.0% 84.3% 89.3%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Net claims incurred Expenses Combined ratio

51.7%

44.3%

34.6%

20.4% 20.3%

27.5%24.4%

40.8%

56.0%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

11% 11% 11%

9%

7%6%

5% 5% 6%

9%

8% 7% 8%

6% 5% 5%4%

7%

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

underlying ROE ROE


Delinquency composition

Delinquency development

Delinquencies by book

yearMar 18 Mar 19

2010 and prior 4,043 3,875 0.49%

2011 389 416 0.78%

2012 665 708 1.05%

2013 619 695 0.98%

2014 641 716 0.90%

2015 378 525 0.74%

2016 187 347 0.54%

2017 36 168 0.28%

2018 - 40 0.07%

2019 - - -

TOTAL 6,958 7,490 0.57%

Delinquencies by

geographyMar 18 Mar 19

New South Wales 1,156 1,322 0.41%

Victoria 1,346 1,349 0.42%

Queensland 2,100 2,171 0.74%

Western Australia 1,418 1,660 1.05%

South Australia 616 661 0.69%

Australian Capital Territory 60 63 0.19%

Tasmania 153 131 0.28%

Northern Territory 82 118 0.76%

New Zealand 27 15 0.04%

TOTAL 6,958 7,490 0.57%

Note: This slide excludes excess of loss insurance.

Delinquency rate (%) is calculated as number of delinquencies divided by number of policies in force.


Favourable performance post 2009

Delinquency development

• Overall portfolio vintage delinquency performance remains relatively stable quarter on quarter, in-line with seasonal expectations and the impact of

ageing delinquencies as a result of slower loss management processes by lenders

• Deterioration in the 2013-14 vintages which have been primarily affected by the downturn in mining regions resulting in ongoing economic and

housing market challenges

• Historical performance of 2008 book year was affected by the economic downturn experienced across Australia and heightened stress experienced

among self-employed borrowers, particularly in Queensland, exacerbated by the 2011 floods with the expectations to stabilise

• Post-GFC book years seasoning at lower levels as a result of better credit quality underwriting.

Note: graph excludes excess of loss insurance and bulk.

Delinquency rate is calculated as number of delinquencies divided by number of policies written which is gross of cancelled policies.

0.11%

0.18%

0.28%

0.47%

0.41%

0.28%

0.42%

0.60%0.58%0.59%

0.51%

0.39%

0.23%

0.00%

0.05%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1 7

13

19

25

31

37

43

49

55

61

67

73

79

85

91

97

10

3

10

9

11

5

12

1

12

7

13

3

13

9

14

5

15

1

15

7

16

3

16

9

17

5

18

1

18

7

Delin

qu

en

cy

rate

(%

)

Performance month

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019


By month in arrears1, 2

Delinquency population


1. Prior quarters cures were amended in 1Q18 to include cures as a result of hardship assistance programs.

2. This slide excludes excess of loss insurance.

44%45% 44% 42% 43%

45% 44%41%

43%43% 42%

41%42%

24%

24%

25% 25%

26%

25%26%

27%

27%

27% 27%28%

27%

18%

18%

17% 19%

20%

19%19%

20%

20%

20% 21%22%

23%

14%

13%

14% 14%

13%

12%12%

13%

11%

10% 10%9%

8%

5,889

6,413

6,8446,731

6,926

7,2857,146

6,696

6,958

7,306 7,3507,145

7,490

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19

Cure

ra

te

No

. of a

rrea

rs

3-5 Months 6-9 Months 10+ Months MIP Cure rate (%)


Insurance in force

IIF1 by book year IIF1 by state

1.IIF includes capitalised premium. Excludes excess of loss insurance

NSW28%

VIC22%

QLD23%

WA13%

SA6%

TAS2%

ACT3%

NT1%

NZ2%

2009& Prior39%

20104%2011

5%20126%

20137%

20148%

20158%

20167%

20177%

20187%

20192%


Conservative, well-diversified portfolio with average maturity of 3.4 years1

Investment portfolio

Investment portfolio by maturity Investment portfolio by issuer type Investment portfolio by rating

Investment portfolio by maturity

(as at) 31 Dec 18 31 Mar 19

0-1 Yr 841 814

1-3 Yr 1,012 1,005

3–5 Yr 464 474

5-10 Yrs 524 593

> 10 Yrs 251 253

Equities 123 72

Total 3,215 3,211

Investment portfolio by rating

(as at) 31 Dec 18 31 Mar 19

AAA 1,238 1,406

AA 800 740

A 482 486

BBB or below 431 456

Cash 141 51

Equities 123 72

Total 3,215 3,211

Investment portfolio by issuer type

(as at) 31 Dec 18 31 Mar 19

C’wealth 792 811

Corporate 1,473 1,542

State gov’t 437 440

Cash equiv. 258 295

Cash 141 51

Equities 123 72

Derivatives (9) 1

Total 3,215 3,211

1. Maturity of 3.4 years excludes equities. Note: Derivatives contracts are with AA rated counterparties and have a maturity of less than 1 year.

2. Fixed income and cash portfolio average duration of 2.1 years.

26%

31%

15%

18%

8%

2%

0 - 1 yr 1 - 3 yr 3 - 5 yr

5 - 10 yr >10 yr Equities

48%

14%

9%

2%

25%

2%

Corporate State Gov't Cash Equiv.

Cash C'wealth Equities

Derivatives (0%)

44%

23%

15%

14%

2%

2%

AAA AA A BBB or Below Cash Equities

1Q19 FINANCIAL RESULTS PRESENTATION - Genworth...

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