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8 GENWORtH MI CANADA INC. 2012 ANNuAL REPORt
Finance the Genworth Canada difference
In 2012, Genworth Canada maintained its track record of delivering strong profi tability and shareholder returns. By remaining focused on proactive risk management, superior customer service and disciplined fi nancial management, the Company achieved top-line growth, loss ratio improvement, increased net operating income and enhanced capital strength.
leveraging our fi nancial strength and stability
Approximately one-third of our earnings is generated from our $5.4 billion investment portfolio. Our strategy for managing the investment portfolio is two pronged. Our investment committee assesses the fi nancial markets, sets our risk appetite, determines our portfolio allocation and monitors investment portfolio performance. We also employ two external managers with expertise in managing both fi xed income and equities to execute the portfolio strategy. through this approach, we maintain a sharp focus on diversifying our risk profi le while taking advantage of best-in-class investment managers.
GENWORtH MI CANADA INC. 2012 ANNuAL REPORt 9
Net premiums written($ in millions)
Investment income($ in millions)
Net premiums earned($ in millions)
Net operating income($ in millions)
Loss ratio(%)
Assets($ in millions)
706
360
552
533
550
518 6
10
621
612
589
46
57
50 5
3
51
0
200
400
600
800
1000
0
200
400
600
800
1000
08 09 10 11 12
Net premium written(in millions)
Net premium earned (in millions)
0
20
40
60
0
20
40
60
Combined ratio (%)
31
42
33 3
7
33
Loss ratio (%)
Net premium written(in millions)
Net premium earned (in millions)
Combined ratio (%)
Loss ratio (%)
08 09 10 11 12 08 09 10 11 12 08 09 10 11 12
706
360
552
533
550
518 6
10
621
612
589
46
57
50 5
3
51
0
200
400
600
800
1000
0
200
400
600
800
1000
08 09 10 11 12
Net premium written(in millions)
Net premium earned (in millions)
0
20
40
60
0
20
40
60
Combined ratio (%)
31
42
33 3
7
33
Loss ratio (%)
Net premium written(in millions)
Net premium earned (in millions)
Combined ratio (%)
Loss ratio (%)
08 09 10 11 12 08 09 10 11 12 08 09 10 11 12
706
360
552
533
550
518 6
10
621
612
589
46
57
50 5
3
51
0
200
400
600
800
1000
0
200
400
600
800
1000
08 09 10 11 12
Net premium written(in millions)
Net premium earned (in millions)
0
20
40
60
0
20
40
60
Combined ratio (%)
31
42
33 3
7
33
Loss ratio (%)
Net premium written(in millions)
Net premium earned (in millions)
Combined ratio (%)
Loss ratio (%)
08 09 10 11 12 08 09 10 11 12 08 09 10 11 12
200
189
183
179
367
324
307 3
43
318
462
4,9
15
5,2
10
5,3
98
5,3
93
5,7
34
0
80
160
240
320
400
0
100
200
300
400
500
0
2000
4000
6000
0
1100
2200
3300
2,0
89
2,6
43
2,5
89
2,6
83 3,0
37
08 09 10 11 1208 09 10 11 12 08 09 10 11 12 08 09 10 11 12
122
Ad
just
ed
Ad
just
ed
166
339
201
Net operating income(in millions)
Investment income (in millions)
Assets(in millions)
Shareholders’ equityExcluding AOCI1 (in millions)
200
189
183
179
367
324
307 3
43
318
462
4,9
15
5,2
10
5,3
98
5,3
93
5,7
34
0
80
160
240
320
400
0
100
200
300
400
500
0
2000
4000
6000
0
1100
2200
3300
2,0
89
2,6
43
2,5
89
2,6
83 3,0
37
08 09 10 11 1208 09 10 11 12 08 09 10 11 12 08 09 10 11 12
122
Ad
just
ed
Ad
just
ed
166
339
201
Net operating income(in millions)
Investment income (in millions)
Assets(in millions)
Shareholders’ equityExcluding AOCI1 (in millions)
200
189
183
179
367
324
307 3
43
318
462
4,9
15
5,2
10
5,3
98
5,3
93
5,7
34
0
80
160
240
320
400
0
100
200
300
400
500
0
2000
4000
6000
0
1100
2200
3300
2,0
89
2,6
43
2,5
89
2,6
83 3,0
37
08 09 10 11 1208 09 10 11 12 08 09 10 11 12 08 09 10 11 12
122
Ad
just
ed
Ad
just
ed
166
339
201
Net operating income(in millions)
Investment income (in millions)
Assets(in millions)
Shareholders’ equityExcluding AOCI1 (in millions)
Shareholders’ equityIncluding AOCI ($ in millions)
200
189
183
179
367
324
307 3
43
318
462
4,9
15
5,2
10
5,3
98
5,3
93
5,7
34
0
80
160
240
320
400
0
100
200
300
400
500
0
2000
4000
6000
0
1100
2200
3300
2,0
89
2,6
43
2,5
89
2,6
83 3,0
37
08 09 10 11 1208 09 10 11 12 08 09 10 11 12 08 09 10 11 12
122
Ad
just
ed
Ad
just
ed
166
339
201
Net operating income(in millions)
Investment income (in millions)
Assets(in millions)
Shareholders’ equityExcluding AOCI1 (in millions)
Combined ratio(%)
706
360
552
533
550
518 6
10
621
612
589
46
57
50 5
3
51
0
200
400
600
800
1000
0
200
400
600
800
1000
08 09 10 11 12
Net premium written(in millions)
Net premium earned (in millions)
0
20
40
60
0
20
40
60
Combined ratio (%)
31
42
33 3
7
33
Loss ratio (%)
Net premium written(in millions)
Net premium earned (in millions)
Combined ratio (%)
Loss ratio (%)
08 09 10 11 12 08 09 10 11 12 08 09 10 11 12
Solid financial performance in 2012While the Company’s year-end results were positively impacted by the finalization of the government guarantee legislative framework, adjusted earnings were still higher than the prior year and above market expectations.
We delivered total net operating income of $462 million, adjusted net operating income of $339 million, and maintained a consistent operating return on equity of 13%. Net premiums written of $550 million were higher by 3% compared to the prior year. We successfully offset the effects of a smaller high loan-to-value mortgage market by growing our market penetration and capitalizing on portfolio insurance opportunities.
We also continued to see an improved delinquency rate, down 6 bps to 0.14% as at December 31, 2012, due in part to the ongoing aging of the 2007 and 2008 books, the improvement in the Alberta housing market and the ongoing success of our loss mitigation programs.
these solid financial results contributed to a 14% increase in our book value per share (diluted), to $30.62 as of the end of 2012.
the current macroeconomic environment, together with our strong insurance portfolio quality and geographic diversification, supports our ability to continue to deliver strong profitability.
Capital management flexibilityOur capital position remains strong. We ended 2012
with $3 billion in shareholders’ equity and a regulatory minimum capital test (MCt) ratio of approximately 170%, well above our internal target of 145%.
under the new guarantee rules that took effect January 1, 2013, our operating MCt ratio increased to approximately 210%, further strengthening our claims paying ability. We intend to operate with a MCt ratio moderately above 190% and have established an internal MCt ratio of 185%. We remain focused on balancing capital strength and capital efficiency.
Since our initial public offering in 2009, we have returned $485 million through share buybacks, approximately $50 million in special dividends, and we maintain a low debt-to-capital ratio of 12%. We are pleased to have paid a regular common dividend every quarter since December 2009.
High-quality investment portfolioOur investment portfolio remains strong and generates about one-third of our income. With the elimination of the guarantee fund we now have full investment discretion over the entire portfolio. It contains a well-balanced mix of bonds and equities, earned $189 million in interest and dividends, and achieved $311 million of unrealized gains.
We are committed to maintaining a high-quality portfolio, and we continue to evaluate opportunities, within our risk appetite, to optimize its yield.
Cash and other
Prov �xed income
Fed gov-gov guarantee
Fed government
Corp �xed income
Common shares
Corporate fixed income 42%
Provincial fixedincome 14%
Federal fixed income(government guarantee) 17%
Federalfixed income 16%
Commonshares 6%
Cash and Other 5%
Portfolio Distribution 12/31/12 Rounded Percentages in ChartCorporate Fixed Income 2,241,661 41.7% 42%Federal Government 838,306 15.6% 16%Federal Government-Government Guarantee 949,037 17.6% 17%Provincial Fixed Income 743,921 13.8% 14%Cash and Other 278,307 5.2% 5%Common Shares 328,411 6.1% 6%Total 5,379,642 100.0% 100% Total $5.4 billion
total:
$5.4 billion
127 1
49 156
162 1
70
210
0
44
88
132
176
220
00Jan. 1, 20131211100908
Minimum capital test ratio(%)
08 09 10 11 12 Jan. 1,2013
"08" 127"09" 149"10" 156"11" 162"12" 170"Jan. 1, 2013" 210"0" 0"0" 0
Minimum capital test ratio (MCT) (%)
Adjusted for government guarantee fund exit fee reversal.
Note: Amounts may not total due to rounding.
