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Press release from CNW Group

Genworth MI Canada Inc. Reports Third Quarter 2011 Results

Thursday, November 03, 2011

Genworth MI Canada Inc. Reports Third Quarter 2011 Results16:34 EDT Thursday, November 03, 2011Net premiums written of $160 million Net operating income of $80 million Operating return on equity of 13%TORONTO, Nov. 3, 2011 /CNW/ - Genworth MI Canada Inc. (the "Company") (TSX: MIC) today reported results for the third quarter of 2011 with net income of $81 million or $0.82 per diluted common share and net operating income of $80 million or net operating earnings of $0.81 per diluted common share.  Excluding the favourable tax impact experienced during the same period last year, operating earnings per diluted share were higher by $0.05 year over year and sequentially higher by $0.04.The Company also announced today that its Board of Directors approved a dividend increase of 3 cents in the quarterly dividend from $0.26 to $0.29 per common share, with such dividend to be paid on its next payment date.  As well, the Company announced that it has declared a special dividend of $0.50 per common share (with an approximate aggregate amount of $50 million), also to be paid on its next payment date.  The common dividend increase and the special dividend declaration reinforce the strength of the Company's business model and its confidence in delivering ongoing profitability."Despite the challenging Canadian and global economic landscape of today, we continue to deliver solid results," said Brian Hurley, Chairman and CEO.  "In addition, after a detailed review of our financial position and outlook, we are pleased to announce a 12% common share dividend increase and a special dividend to our shareholders."Third Quarter 2011 Key Financial Metrics: Net premiums written of $160 million were $11 million higher sequentially and $6 million lower year over year.  The sequential improvement was primarily driven by seasonality.  The year over year decline was driven by a smaller mortgage origination market as compared to last year due to fewer insured refinance transactions, partially offset by increased market penetration by the Company.Net premiums earned of $149 million were $2 million lower sequentially and $6 million lower year over year.  The decline in earned premiums is the result of the larger 2007 and 2008 books having matured past their peak earning periods, offset by the increased earnings contribution from more recent books of business.  At the end of the third quarter of 2011 and consistent with the previous quarter, the Company had $1.9 billion in unearned premium reserves, which will be earned into premiums over time in accordance with the Company's premium recognition curve.Losses on claims of $54 million were $4 million higher sequentially and $7 million higher year over year.  The loss ratio of 36% in the third quarter was 3 points higher sequentially and 6 points higher year over year. The increase in losses on claims is primarily due to a higher average claim size on delinquent mortgages in Alberta originated in 2007 and 2008.Investment Income of $44 million (excluding $1 million of realized and unrealized investment gains) was $1 million higher sequentially and $1 million lower year over year.  The Company's high quality investment portfolio, comprised primarily of investment grade fixed income securities, continues to be a consistent contributor to net income.Net operating income of $80 million was $1 million lower sequentially and $11 million lower year over year.  Excluding the favourable tax impact experienced last year, net operating income was $6 million lower year over year.  Operating return on equity was 13% for the quarter, the same as the prior quarter and 1 point lower than in the prior year.The expense ratio was 16%, flat sequentially and 1 point lower year over year, while the combined ratio (expense ratio and loss ratio combined) of 52% was 3 points higher sequentially and 5 points higher year over year.  Expenses of $24 million were $1 million lower sequentially and $2 million lower year over year.The regulatory capital ratio or Minimum Capital Test ("MCT") ratio was 161%, 3 points higher sequentially and 8 points higher year over year.  The Company continues to have a strong capital position with the financial flexibility to support the business and its operations.DividendsOn September 1, 2011, the Company paid a quarterly dividend of $0.26 per common share.Furthermore, the Company's Board of Directors has approved an amendment to its dividend policy, authorizing the declaration and payment of a fixed dividend of $0.29 per common share per quarter.  The payment of dividends pursuant to this policy, however, is not guaranteed and the amount and timing of any dividends payable remains at the discretion of the Company's Board of Directors.The Company announced today that its Board of Directors approved a dividend of $0.29 per common share, payable on December 1, 2011, to shareholders of record at the close of business on November 15, 2011.  This dividend payment represents an increase of 12% from its prior quarterly dividend of $0.26 per common share.  In conjunction with the payment of the common share dividend on December 1, 2011, the Company will also pay a special dividend of $0.50 per common share to shareholders of record at the close of business on November 15, 2011.Shareholders' Equity As of September 30, 2011, shareholders' equity was $2.7 billion or a book value of $26.82 per common share on a fully diluted basis.  Excluding accumulated other comprehensive income ("AOCI") or loss, shareholders' equity was $2.5 billion or a book value of $24.79 per common share on a fully diluted basis.Third Quarter 2011 Key Highlights:The Company continued to make solid progress on its strategic priorities and continues to maintain its leading position in the private mortgage insurance industry.New insurance written of $6.6 billion on high loan-to-value mortgages which represented a sequential increase of 7%.  The year over year decrease of 5% was due to a smaller mortgage origination market, primarily due to a lower number of refinance transactions as a consequence of recent government product changes.  This was offset in part by the Company's improved market penetration.The overall delinquency rate for the insurance portfolio was 0.21%, sequentially lower by 4 basis points and lower by 4 basis points than the same period last year.  The delinquency rate is being positively influenced by a higher number of cures and increased paid claims.The Company's Homeowner Assistance Program completed 965 workouts, representing approximately 50% of new reported delinquencies.  As well, the Company's asset management strategy continued to expand during the quarter, which assisted in accelerating the foreclosure and sale process.The Company had an investment portfolio of $5.0 billion at the end of the quarter.  The general portfolio had a pre-tax equivalent book yield of 4.3% and duration of 3.9 years as at September 30, 2011.  The portfolio is well-positioned with a short durationConsolidated Financial Highlights1($ millions, except per share amounts) Three Months Ended Sept 30  (Unaudited)201120101  New Insurance Written7,2197,630Insurance In Force261, 039240,417Net Premiums Written160166Net Premiums Earned149155Losses on Claims5447Investment Income4445Realized and Unrealized Gains or Losses on Investments14Net Income8194Net Operating Income28091Fully Diluted Earnings Per Share$0.82$0.83Fully Diluted Operating Earnings Per Share2$0.81$0.80Fully DilutedBook Value Per Common Share, including AOCI$26.82$24.30Fully DilutedBook Value Per Common Share, excluding AOCI  $24.79$22.74Loss Ratio236%30%Combined Ratio252%47%Operating Return on Equity213%14%Minimum Capital Test Ratio (MCT)161%153%1 Effective January 1, 2010, the Company has adopted International Financial Reporting Standards ("IFRS").  Certain accounting and measurement methods previously applied under Canadian generally accepted accounting principles were amended to comply with IFRS.  The comparative figures for 2010 have been restated to reflect these adjustments.2 This is a financial measure not calculated based on IFRS.  See the "Non-IFRS Financial Measures" section of this press release for additional information.Detailed Operating Results and Financial SupplementFor more information on the Company's operating results, please refer to the Company's Management's Discussion and Analysis and Financial Statements as posted on SEDAR and available at:http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00028505.This press release, the financial statements, Management's Discussion and Analysis, and the third quarter 2011 financial supplement are also posted on the investor section of the Company's website (http://investor.genworthmicanada.ca).  Investors are encouraged to review all of these materials.Earnings CallThe Company's third quarter earnings call will be held on November 4th at 10:30 am EDT. The dial-in number is 1-888-300-0053 (#I.D. 16308812).  The call is accessible via telephone and by audio webcast on the Company's website.  Slides to accompany the call will be posted just prior to its start.  A recording of the call will be available on the Company's website until December 15, 2011. Non-IFRS Financial MeasuresTo 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. 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 measure presented by other companies. These measures are defined in the Company's glossary, which is posted on the investor section of the Company's website (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 of non-IFRS financial measures to the most recently comparable measures calculated in accordance with IFRS can be found in the Management's Discussion and Analysis filed with the Company's most recent financial statements, which are available on the Company's website and on SEDAR at www.sedar.com.Cautionary Note Regarding Forward-Looking StatementsThis press release includes certain forward-looking statements.  These forward-looking statements include, but are not limited to, the Company's plans, objectives, expectations and intentions, and other statements contained in this release that are not historical facts.  These statements may be identified by their use of words such as "expects", "anticipates", "contemplates", "intends", "plans", "believes", "seeks", "estimates", or words of similar meaning. These statements are based on the Company's current beliefs or expectations, including the Company's assumptions, beliefs and expectations regarding its future capital requirements, market conditions and its ability to obtain regulatory approvals.  These statements are inherently subject to significant risks, uncertainties and changes in circumstances, many of which are beyond the Company's control. 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 global, political, economic, business, competitive, market and regulatory factors, and the other risks described in the Company's Annual Information Form.  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.About Genworth MI Canada Inc.Genworth MI Canada Inc., through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, has been the leading Canadian private residential mortgage insurer since 1995.  Known as Genworth Financial Canada, "The Homeownership Company," it provides default mortgage insurance to Canadian residential mortgage lenders that enables low down payment borrowers to own a home more affordably and stay in their homes during difficult financial times.  Genworth Financial Canada combines technological and service excellence with risk management expertise to deliver innovation to the mortgage marketplace.  As of September 30, 2011, Genworth Financial Canada had $5.4 billion total assets and $2.7 billion shareholders' equity.  Based in Oakville, Ontario, Genworth Financial Canada employs approximately 265 people across Canada. Additional information about Genworth MI Canada Inc. is available at www.genworth.ca.   For further information: Investors - Samantha Cheung, 905-287-5482 samantha.cheung@genworth.comMedia - Lisa Azzuolo, 905-287-5520 lisa.azzuolo@genworth.com