Mr. Stuart Levings reports

GENWORTH MI CANADA INC. REPORTS SECOND QUARTER 2015

Genworth MI Canada Inc. had a second-quarter 2015 net income of $103-million or $1.12 earnings per diluted common share, and net operating income of $92-million or 99-cent operating earnings per diluted common share. The company also delivered an operating return on equity of 12 per cent for the quarter. Premiums written for the quarter increased 28 per cent over the prior year primarily related to the transactional mortgage insurance segment.

"We are pleased with this quarter's solid profitability and strong top-line growth which reflects our improving market share" said Stuart Levings, president and chief executive officer. "Our efforts remain focused on prudent risk management, building a high-quality portfolio and being the mortgage insurer of choice."

Key second-quarter 2015 financial metrics:

• Premiums written of $205-million represented an increase of $45-million, or 28 per cent, compared with the same quarter in the prior year. This increase was primarily the result of improved market penetration and higher average premium rates resulting from the 2014 premium rate increase. When compared with the prior quarter, premiums written were higher by $75-million, or 57 per cent, primarily due to seasonally higher mortgage origination volumes in the spring. The impact of the June 1, 2015, price increase on transactional mortgage insurance will gradually increase over the course of the year due to the time lag between mortgage approvals and mortgage closings.
• Net premiums earned of $144-million were $3-million or 2 per cent higher than the same quarter in the prior year due to the higher level of premiums written in recent years. When compared with the prior quarter, net premiums earned were $1-million or 1 per cent higher. The unearned premium reserve was $1.8-billion at the end of the quarter, up modestly by $61-million from the prior quarter.
• Losses on claims of $25-million reflected $8-million higher losses than the same quarter in the prior year, primarily due to a modest increase in new delinquencies, net of cures, and a higher average reserve per delinquency related to regional mix. Losses on claims represented an improvement of $7-million or 22 per cent from the prior quarter, primarily due to a seasonally lower number of new delinquencies, net of cures. The loss ratio was 17 per cent for the quarter, as compared with 22 per cent in the prior quarter and 12 per cent in the same quarter in the prior year.
• Expenses were $29-million during the quarter, resulting in an expense ratio of 20 per cent, as a percentage of net premiums earned. This ratio was one percentage point higher than the same quarter in the prior year and percentage points higher than the prior quarter. The expense ratio remains in the company's expected operating range.
• Net investment income, excluding realized gains, of $42-million was $2-million lower than the same quarter in the prior year due to the impact of the lower reinvestment rates. Net investment income, excluding realized gains, was consistent with the prior quarter.
• Net operating income of $92-million was $8-million or 8 per cent lower relative to the same quarter in the prior year primarily due to unusually low losses on claims in the second quarter of 2014. Compared with the prior quarter, net operating income was lower due to a $5-million favourable tax adjustment in the first quarter of 2015.
• Operating return on equity was 12 per cent for the quarter, a decrease of one percentage point when compared with the same quarter in the prior year and flat compared with the prior quarter.
• The regulatory capital ratio or minimum capital test (MCT) ratio was approximately 231 per cent, 46 percentage points higher than the company's internal target MCT ratio of 185 per cent and 11 percentage points higher than the company's holding target MCT ratio of 220 per cent. The company intends to operate with a MCT ratio modestly above its holding target.

Key second-quarter 2015 highlights:

• The transactional segment of new insurance written is the company's primary focus, and, during the quarter, new insurance written from this segment was $6.8-billion. Compared with the same quarter in the prior year, new insurance written was up by $1.3-billion or 24 per cent, driven by higher market penetration and a larger origination market. As a result of typical seasonality, new insurance written increased by $2.9-billion as compared with the prior quarter.
• Premiums written from the transactional insurance segment were $183-million. This represents an increase of $55-million, or 43 per cent, from the same quarter in the prior year, primarily due to higher market penetration and higher average premium rates resulting from the 2014 premium rate increase. Compared with the prior quarter, there was an increase of $79-million, or 76 per cent, primarily due to seasonality.
• On June 1, 2015, the company implemented a 15-per-cent increase on its mortgage insurance premium rates on mortgages with less than a 10-per-cent down. The new pricing reflects the higher current capital requirements and supports the long-term health of Canada's housing system. As a result of this price increase, the incremental premiums written and earned premium in 2015 are expected to be approximately $25-million to $30-million and $1-million, respectively.
• The company wrote $4.1-billion of portfolio insurance on low loan-to-value mortgages, representing a decrease of $4.1-billion, or 50 per cent, as compared with the same quarter in the prior year. Compared with the prior quarter, new insurance written from portfolio insurance was $1.8-billion or 30 per cent lower. The volume of portfolio insurance varies from quarter to quarter based on lender demand.
• Premiums written from portfolio insurance were $22-million, representing a decrease of $10-million or 32 per cent as compared with the same quarter in the prior year. Compared with the prior quarter, there was a decrease of $4-million or 17 per cent.
• The number of delinquencies outstanding was 1,666, a decrease of 126 as compared with the prior quarter, primarily reflecting seasonality. Compared with the same quarter in the prior year, this represented a decrease of 37 delinquencies arising primarily from a decrease in Ontario and British Columbia, partially offset by an increase in Quebec.
• The company's investment portfolio had a market value of $5.7-billion at the end of the quarter. The portfolio had a pretax equivalent book yield of 3.3 per cent and duration of 3.6 years as at June 30, 2015. As a result of continuing active portfolio management, the company realized investment gains of $17-million in the quarter, primarily related to the reduction of its common shareholdings.
• The company estimates that its outstanding balance of insured mortgages as at March 31, 2015, was approximately $173-billion.
• During the quarter and pursuant to the company's normal course issuer bid, which will expire on May 4, 2016, the company repurchased 1,454,196 common shares for cancellation, representing approximately 2 per cent of the outstanding common shares, for an aggregate amount of $50-million.

Dividends

On May 29, 2015, the company paid a quarterly dividend of 39 cents per common share. The company also announced today that its board of directors approved a dividend payment of 39 cents per common share, payable on Aug. 31, 2015, to shareholders of record at the close of business on Aug. 17, 2015.

Shareholders' equity

As at June 30, 2015, shareholders' equity was $3.4-billion, representing a book value of $36.18 per common share on a fully diluted basis. Excluding accumulated other comprehensive income (AOCI), shareholders' equity was $3.2-billion, representing a book value of $34.23 per common share on a fully diluted basis.

Credit and debt ratings

The company's issuer credit rating by DBRS Ratings Ltd. is AA low (stable), and the financial strength rating of the company's primary operating subsidiary is AA (stable). The company's credit rating by Standard & Poor's (S&P) is BBB plus (stable), and the financial strength of the company's primary operating subsidiary is A plus (stable).

Detailed operating results and financial supplement

For more information on the company's operating results, please refer to the company's management's discussion and analysis as posted on SEDAR. This press release, the financial statements, the company's management's discussion and analysis, and the second-quarter 2015 financial supplement are also posted on the investor section of the company's website. Investors are encouraged to review all of these materials.

Earnings call

The company's second-quarter earnings call will be held on Aug. 5, 2015, at 10 a.m. ET (local 416-260-0113, toll-free 1-800-524-8950, conference ID 9329253). The call is accessible via telephone and by audio webcast on the company's website. If listening via webcast, participants are encouraged to preregister for the webcast through the company's website. Slides to accompany the call will be posted just prior to its start. A replay of the call will be available until Sept. 3, 2015 (local 647-436-0148, toll-free 1-888-203-1112, replay passcode 9329253). The webcast will also be available for replay on the company's website for a period of at least 45 days following the conference call.

                               CONSOLIDATED FINANCIAL HIGHLIGHTS
                             ($ millions, except per-share amounts)

                                     Three months ended June 30,           Six months ended June 30,
                                        2015               2014              2015              2014

New insurance written (1)            $10,862            $13,628           $20,649           $19,977
Premiums written                         205                160               335               245
Premiums earned                          144                141               287               282
Losses on claims                          25                 17                56                45
Expenses                                  29                 27                54                54
Net underwriting income                   90                 97               178               183
Investment income
(interest and dividends,
net of expenses) (1)                      42                 43                83                87
Net investment gains                      17                  5                32                11
Total net investment income               58                 49               115                98
Net income                              $103                $97              $211              $192
Net operating income (1)                 $92                $99              $188              $190
Fully diluted earnings
per common share                       $1.12              $1.02             $2.23             $2.02
Fully diluted operating
earnings per common share (1)          $0.99              $1.04             $2.02             $2.00
Fully diluted book value
per common share, inc. AOCI (1)       $36.18             $34.17            $36.18            $34.17
Fully diluted book value
per common share, excl. AOCI (1)      $34.23             $32.36            $34.23            $32.36
Loss ratio (1)                            17%                12%               19%               16%
Combined ratio (1)                        37%                31%               38%               35%
Operating return on equity (1)            12%                13%               12%               13%
Minimum capital test ratio (MCT) (1)     231%               231%              231%              231%

(1) This is a financial measure not calculated based on international financial reporting standards.
    See the non-IFRS financial measures section of this press release for additional information.
    The MCT ratio as at June 30, 2015, is based on the company's estimate.

We seek Safe Harbor.