Genworth MI Canada Inc. . Investor Day 2011 Leading the path to homeownership Genworth MI Canada Inc. 1 Investor Day December 2011
Forward-looking and non-IFRS statements This presentation includes certain forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the Company’s future operating and financial results, expectations regarding premiums written, cap ital expenditure plans, dividend policy and the ability to execute on its future operating, investing and financial strategies, and other statements that are not historical facts. These forward- looking statements may be identified by their use of words such as “may,” “would,” “could,” “will,” “expects,” “anticipates,” “contemplates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These statements are based on the Company’s current assumptions, including assumptions regarding economic, global, political, business, competitive, market and regulatory matters. These forward-looking statements are inherently subject to significant risks, uncertainties and changes in circumstances, many of which are beyond the control of the Company. The Company’s actual results may differ materially from those expressed or implied by such forward -looking statements, including as a result of changes in the facts underlying the Company’s assumptions, and the other risks described in the Company’s Annual Information Form dated March 18, 2011, its Short Form Base Shelf Prospectus dated May 7, 2010, the Prospectus Supplements thereto and all documents incorporated by reference in such documents. Other than as required by applicable laws, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. To supplement its financial statements, the Company uses select non-IFRS financial measures. Non-IFRS measures used by the Company to analyze performance include underwriting ratios such as loss ratio, expense ratio and combined ratio, as well as other performance measures such as net operating income and return on net operating income. The Company believes that these non- IFRS financial measures provide meaningful supplemental information regarding its performance and may be useful to investors because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Non-IFRS measures do not have standardized meanings and are unlikely to be comparable to any similar measures presented by other companies. These measures are defined in the Company’s glossary, which is posted on the Company’s website at http://investor.genworthmicanada.ca. To access the glossary, click on the “Glossary of Terms” link under “Investor Resources” subsection on the left navigation bar. A reconciliation from non-IFRS financial measures to the most readily comparable measures calculated in accordance with IFRS can be found in the Company’s most recent financial statements, which are posted on the Company’s website and are also available at www.sedar.com. Genworth MI Canada Inc. 2 Investor Day December 2011
Welcome SAMANTHA CHEUNG VP INVESTOR RELATIONS Genworth MI Canada Inc. 3 Investor Day December 2011
Agenda Topic Speaker Time Welcome Samantha Cheung , VP Investor Relations 11:00 am Strategic review Brian Hurley , Chairman and CEO Insurance portfolio deep dive Stuart Levings , Chief Risk Officer Competitive positioning Debbie McPherson , SVP Sales and Marketing Consistent profitability Phil Mayers , CFO Wrap-up Brian Hurley , Chairman and CEO Q and A panel All Lunch 12:45 pm Genworth MI Canada Inc. 4 Investor Day December 2011
Key terms When we say … It represents … New Insurance Written Original principal balance of mortgages insured in (NIW) a given period (e.g. one year) Net Premiums Written Premiums collected on insured loans in a given (NPW) period Loan-To-Value (LTV) Loan amount divided by property value at origination Original principal balance of all mortgage loans Insurance In Force (IIF) currently insured IIF x expected maximum severity of a single book (35%) based on Effective Risk In Force (RIF) historical loss experience Unearned Premium Premiums received but not yet amortized into earnings Reserve (UPR) Loss Ratio Incurred losses divided by net earned premiums Genworth MI Canada Inc. 5 Investor Day December 2011
Overview BRIAN HURLEY CHAIRMAN AND CEO Genworth MI Canada Inc. 6 Investor Day December 2011
Key 2011 accomplishments Increased market position Loss ratio within pricing expectations Return on equity of 13% 12% increase in common dividend Book value per share up 10%+ Building value for shareholders Genworth MI Canada Inc. 7 Investor Day December 2011
Business perspectives Strong position in mortgage insurance marketplace Prudent risk management Proven business execution Solid financial foundation Genworth MI Canada Inc. 8 Investor Day December 2011
Canada: solid housing market 90 Day Delinquencies Bank originated mortgages 5.0% 4.5% Strong credit culture 4.0% 3.5% 3.0% Borrower recourse 2.5% 2.0% Interest not tax deductible 1.5% 1.0% 0.5% Active regulatory oversight 0.0% US Australia Canada UK Source: MBA, CML, CBA, APRA Genworth MI Canada Inc. 9 Investor Day December 2011
Regulation provides strong support Mortgage insurance required for loans > 80% loan-to-value Government influences product spectrum Insurance operations regulated by OSFI 90% government guarantee Rated “AA” by S&P and DBRS MI is an integral part of the housing finance system Genworth MI Canada Inc. 10 Investor Day December 2011
Levers for improved earnings and returns Profitability of new business Risk management and loss mitigation Investment portfolio performance optimization Effective capital management and deployment Genworth MI Canada Inc. 11 Investor Day December 2011
Levers for improved earnings and returns New business profitability Quality borrower profile Improved debt service levels Standardized products Risk management and loss mitigation Prudent underwriting standards Seasoned book of business Successful loss management Genworth MI Canada Inc. 12 Investor Day December 2011
Levers for improved earnings and returns Investment portfolio optimization Government Guarantee changes - Elimination of exit fee - Full discretion of investments currently in fund Effective capital management Strong capital generation Ongoing capital flexibility Genworth MI Canada Inc. 13 Investor Day December 2011
High quality insurance portfolio STUART LEVINGS CHIEF RISK OFFICER Genworth MI Canada Inc. 14 Investor Day December 2011
Total risk management approach Key Focus Areas High quality business Monitor performance Actively mitigate risk Avoid risk concentrations Take remedial actions Control the process New business origination In-force management Loss mitigation Enablers Guidelines and pricing Portfolio monitoring Drive workouts Risk appetite and limits Assess emerging risks Asset management Mortgage scoring Portfolio stress testing Monitor loss development Fraud detection Dynamic underwriting QA audits policies Genworth MI Canada Inc. 15 Investor Day December 2011
Second set of eyes on loan quality Stacked risk factors Unique risk factors High loan-to-value Age and income mismatch and low credit scores Limited job tenure Short closing date and thin credit profile High debt ratio and economically Lender requests sensitive area file review Loan-by-loan underwriting independent of lender Genworth MI Canada Inc. 16 Investor Day December 2011
Job loss has the most impact on claims Severity Frequency Job Losses …70% Key driver: Unemployment Key driver: House prices Secondary drivers: Secondary drivers: Reduction of income Property condition House Prices …25% Overextension Extended foreclosure process Interest rates Interest rates Portfolio quality and borrower recourse help to mitigate macro economic impact Genworth MI Canada Inc. 17 Investor Day December 2011
Moderating home prices Home Price Index Market Indicators (3Q11) National MIC 160 Home price 150 7.4% 4.3% appreciation CAGR 1 7.1% 140 Price to income 6.0 3.9 CREA Ave Sales Price 130 1.7 1.6 Price to rent 120 34.1% 21.6% CAGR 6.5% Affordability MIC Served Market 110 $362K $298K Ave price 100 2005 2006 2007 2008 2009 2010 2011 1 Compound Annual Growth Rate (CAGR) 2005 – 3Q2011 Source: CREA and MIC Portfolio Data Source: Stats Canada, CREA and MIC Portfolio Data Genworth MI Canada Inc. 18 Investor Day December 2011
Insured borrowers better than market NATIONAL Market MIC % Var. Average Avg. Price $295K $365K -19% Avg. Income $86K $73K 18% GTA MONTREAL VANCOUVER CALGARY MIC Market % Var. MIC Market % Var. MIC Market % Var. MIC Market % Var. Avg. Price $453K $792k -43% $368K $402K -8% $383K $463K -17% $279K $306K -9% Avg. Income $95K $74K 28% $97K $95K 2% $93K $88K 6% $79K $64K 23% Note: Genworth averages based on 2011 data; Income is Household Income; Market averages for property price from CREA; Income from Statistics Canada Table 202-0403 forecasted. Genworth MI Canada Inc. 19 Investor Day December 2011
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