Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Helia Group Ltd (ASX:HLI, Financial) delivered an underlying net profit after tax of $107 million for the first half of 2024.
- The company returned $177 million to shareholders through on-market share buybacks and dividends.
- Helia's prudential capital amount ratio remains strong at 2.08 times as of June 30, 2024.
- The company successfully renewed a contract with a top 10 lender and is proposing to extend its relationship with its largest customer.
- Helia received external recognition, winning the Mortgage and Finance Association of Australia award and the top Insurance Employer Award from Insurance Business Magazine.
Negative Points
- Statutory net profit after tax was $97 million, below the underlying profit due to unrealized losses on the bond portfolio.
- Insurance revenue was down 11% compared to the prior period, reflecting lower levels of premium and less favorable premium experience variation.
- New business volumes remain subdued due to economic and public policy factors, including the federal government home loan guarantee scheme.
- The level of new delinquencies increased by 23% in the first half, reflecting higher interest rates and cost-of-living pressures.
- The overall number of delinquencies rose by 15% half-on-half, although the delinquency rate remains relatively low at 0.63%.
Q & A Highlights
Q: Can you elaborate on the repositioning of LMI and your strategy behind it?
A: Pauline Blight-Johnston, CEO: The repositioning of LMI is about changing its perception from a negative tax to a valuable investment for accessing the property market. We are working to make the government and financial commentators understand its true value. We are also increasing efforts with brokers to highlight LMI's benefits.
Q: Is the PCA ratio of 1.91 times an end-of-year target?
A: Michael Cant, CFO: No, the 1.91 times PCA ratio is an illustration of where it would be if the buyback and dividend were completed. It is not an end-of-year target.
Q: Can you split out the unrealized and realized gains in the investment portfolio?
A: Michael Cant, CFO: The vast majority of the gains are unrealized, primarily in the bond portfolio due to a modest rise in interest rates leading up to June 30.
Q: Are there any unique risk dynamics in the bulk flows received over the half?
A: Michael Cant, CFO: The bulk flows are primarily from non-bank lenders and smaller banks, which use securitization more. These portfolios have lower average LMI.
Q: Any updates on the CBA contract and its components?
A: Pauline Blight-Johnston, CEO: We cannot discuss confidential conversations with customers regarding potential new business or extension opportunities.
Q: What are the key drivers of profitability for the full year 2024?
A: Pauline Blight-Johnston, CEO: The key driver will be the timing and magnitude of future claims, which are difficult to predict. Total incurred claims are expected to increase but remain below long-term expectations.
Q: How is Helia managing the cyclical impacts on new business volumes?
A: Pauline Blight-Johnston, CEO: We are working to expand our market footprint, explore operational efficiencies, and reposition LMI to reinforce its value. We are also focusing on customer renewals and new business opportunities.
Q: What is Helia's approach to sustainability?
A: Pauline Blight-Johnston, CEO: Our sustainability approach is built on three pillars: driving financial well-being and housing accessibility, enhancing climate resilience, and demonstrating good corporate citizenship. We maintain net zero Scope 1 and 2 emissions and support community programs.
Q: How is Helia's capital management strategy evolving?
A: Michael Cant, CFO: Our capital management principles remain unchanged. We aim to deploy capital at attractive returns to shareholders and return surplus capital through dividends or buybacks. We are committed to operating within the board's target PCA range.
Q: What are the future projections for Helia's market share and growth?
A: Pauline Blight-Johnston, CEO: We are focused on growing and defending our LMI market share, expanding the market for LMI, driving operational agility, and delivering world-class performance. We believe there is a significant opportunity for LMI in the Australian property market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
