Brookfield acquires mortgage insurer Genworth Canada in $2.4-billion deal

BANKING REPORTER | The Globe and Mail

Brookfield Asset Management Inc.’s private-equity arm is making a long-term bet on Canada’s mortgage market with a $2.4-billion deal to take control of Genworth MI Canada Inc., the country’s second-largest mortgage insurer.

Brookfield Business Partners LP, a publicly-traded subsidiary of the global asset manager, is acquiring a 57-per-cent stake in Genworth MI Canada from the mortgage insurer’s American parent company, Genworth Financial Inc.

Brookfield will pay $48.86 a share for nearly 49 million shares in Genworth MI Canada – a 5-per-cent discount to the price at Monday’s close on the Toronto Stock Exchange, but an 18-per-cent premium compared with the date when the company was formally put up for sale.

The deal appears to relieve a headache for Richmond, Va.-based Genworth, which has waited years for regulators to approve a separate deal that would see the American company acquired for US$2.7-billion by a privately held Chinese buyer, China Oceanwide Holdings Group Co. Ltd. That transaction, which was first announced in October, 2016, has stalled while awaiting approval from Canadian regulators and federal officials, who are required to consider the potential impact on Canada’s mortgage industry and have held the deal up over national-security concerns, even after U.S. regulators gave it a green light.

Earlier this summer, Genworth Financial announced it was considering “strategic alternatives” for Genworth MI Canada, seeking to break the deadlock. That raised the prospect that, absent a suitable buyer, Genworth Financial’s stake in its Canadian subsidiary might have to be sold into the public market at a discount. But Brookfield emerged with deep pockets and the industry expertise needed to take control.

“We are pleased to find such a high-calibre buyer for our interest in Genworth Canada,” said Genworth Financial president and chief executive Tom McInerney.

Genworth Financial’s share price shot up 15.8 per cent on Tuesday, and Brookfield Business Partners shares rose 2.7 per cent, but stock in Genworth MI Canada fell 1.7 per cent.

The Canadian arm of Genworth is a rare asset. It is Canada’s largest private-sector mortgage insurer, providing a backstop against defaults to residential mortgage lenders, and it trails only the government-owned Canada Mortgage and Housing Corporation (CMHC) in size. Its only privately owned competitor is Canada Guaranty Mortgage Insurance Company, which is jointly owned by Ontario Teachers’ Pension Plan and financier Stephen Smith.

Genworth Canada currently has a 33-per-cent share of the country’s mortgage-insurance market, while CMHC holds half and Canada Guaranty the remaining 17 per cent, according to data from RBC Dominion Securities Inc. But the federal housing agency has been ceding its share to the private insurers.

Genworth’s improving position in a highly consolidated market made it a logical target for Brookfield Business Partners, which seeks to acquire and manage companies in sectors where the barrier to entry is high. Brookfield also has extensive expertise in mortgages and housing: It is one of the largest residential real estate developers in North America, active in real estate financing, and owns the Royal LePage brokerage.

Brookfield Business Partners managing partner David Nowak described Genworth Canada as “a high-quality leader in the mortgage-insurance sector,” in a statement.

The total share of mortgages that are insured has been falling, from 57 per cent in 2015 to 41 per cent in 2019, according to a recent CMHC report. The shift toward uninsured mortgages comes as regulators have tightened rules on mortgage lending, requiring borrowers to meet stricter tests to qualify for mortgage insurance.

Even so, the housing sector as a whole has continued to grow, adding a steady stream of new demand for mortgage insurance, particularly from first-time home buyers. And Brookfield is betting that Genworth can grab a larger share of the market, making full use of Brookfield’s deep relationships with banks that do the lion’s share of Canada’s mortgage lending.

The deal is expected to close before then end of 2019, subject to approvals from Canada’s banking regulator and Minister of Finance.

Brookfield is not currently looking to acquire the 43 per cent of Genworth MI Canada’s shares that are owned by other investors. But Jaeme Gloyn, an analyst at National Bank Financial Inc., said that prospect “is not entirely off the table” and “would likely unfold at a premium” to the price Brookfield is paying for control.

Ratings agency DBRS Ltd. called the deal “positive for Genworth Canada,” which has been more stable than its U.S. parent.

Oceanwide Holdings consented to the transaction and extended the deadline to finalize its own deal with Genworth Financial until Dec. 31.

Source: The Globe and Mail

Can an insurance company do banking better? Manulife Financial Corp. is upping its game

PERSONAL FINANCE COLUMNIST

Two words you never thought you’d say in imagining a brighter future for chequing and savings accounts: Manulife Bank.

A non-factor for years, the banking division of insurance giant Manulife Financial Corp. is upping its game. On Monday, Manulife Bank introduced a package of services designed to claim a share of a market for daily banking that is crowded with big banks, alternative banks, credit unions and upstart financial technology companies.

Manulife’s strategy: Appeal to millennials and other digitally savvy people with a four-part bundle of banking services wrapped in an app for smartphones that helps with saving and budgeting. Manulife’s goal: Compete against the country’s banking heavyweights more than the alternative players. “We’re here to be the best alternative to the big banks,” said Rick Lunny, chief executive of Manulife Bank.

The All-in Banking Package from Manulife Bank is slick enough that it should be studied by other banks looking at how to adapt their accounts for the digital age. The question is whether there’s enough there to offset the so-so economics for customers who believe in paying the least in fees while getting the most interest.

The core of All-in is an unlimited transaction account (e-transfers included) that costs $10 a month, compared to $14 to $16 for similar big bank accounts and zero at an increasing number of alternative online banks. The All-in account goes down to zero in fees in a month where you add $100 or more to a savings account that comes as part of the package.

That savings account pays 1.2 per cent, a disappointment. Several alternative online banks that have savings accounts are paying 2.25 per cent or more to go with their no-fee chequing accounts. Examples: Alterna Bank, Motive Financial and Motusbank, which opened for business in April.

The third part of the All-in package is a no-fee cash-back credit card paying rewards of 2 per cent on groceries and 1 per cent on other expenses. This reward rate is not at all bad, although anyone wanting a no-fee cash-back card should check out the Rogers World Elite MasterCard.

The fourth part of the All-in package is travel interruption insurance offered by Manulife. Finally, as a sweetener, Manulife is offering people who sign up for All-in one year of Amazon Prime, which otherwise costs $79. Amazon Prime offers free delivery of Amazon orders plus access to TV shows and movies.

All-in is most interesting when you look at the way financial technology is deployed to help customers manage their money so they’re able to save more.

Mr. Lunny said the bank partnered with five fintech companies to develop features such as the one that lets you set how much money you want in your chequing account and then sweeps any excess into savings at the end of each day. Other functions show how close you are to saving enough each month to eliminate the $10 account fee and how close you are to your credit-card limit. There’s also what Manulife calls an intelligent virtual assistant, which can answer questions about banking and offer tips on budgeting, saving and such.

The most obvious big bank competition to All-in comes from the online banks Tangerine, owned by Bank of Nova Scotia, and Simplii Financial, owned by Canadian Imperial Bank of Commerce. Both offer no-fee chequing with unlimited transactions and savings accounts with rates of 1.2 per cent.

On fintech specifically, some of the most noteworthy competition to All-in comes from the budgeting apps at a pair of big banks, Toronto-Dominion Bank and Royal Bank of Canada.

Manulife designed All-in to work most effectively on smartphones and expects the bulk of its customers to access their account that way rather than desktop computers. It’s a sign of how much importance the bank is putting on young adult customers as opposed to an older, wealthier demographic targeted by the bank’s Advantage Account.

Mr. Lunny said the bank hopes to attract millennials with the All-in package, then sell them mortgages and investments as they get older and more established. “We feel millennials are our future,” he said.

For millennials, the All-in package scores well on mobile-friendly technology and convenience – four products in one. But having to save $100 a month to make the $10 account fee vanish? That’s old school, and not in a good way.

Desjardins launches $45-million fintech fund

Desjardins Group is launching a $45-million fund to invest in financial technology startups as it seeks to build more direct relationships with a nascent sector that once looked poised to disrupt traditional banking.

The new fund will make investments ranging from a few hundred thousand dollars to as much as $3-million, taking stakes of 10 per cent to 25 per cent in early-stage “fintech” companies. It will be managed by Desjardins Capital, the financial co-operative’s venture capital arm, which has invested in more than 400 companies.

The fund builds on existing partnerships and investments Desjardins has made with more than 20 fintechs dating back several years. The burgeoning fintech sector was once seen as a threat to established institutions such as Desjardins but, faced with the high cost and difficulty of acquiring new customers, many fintechs have changed course and have begun collaborating with large financial companies to help them with the transition to digital banking and insurance services.

By creating this new fund, Desjardins is looking to take tighter control of its investments in financial technologies, and to sharpen its focus on products and services that can directly contribute to its strategy, from innovation in insurance and wealth management to strengthening cybersecurity.

Desjardins has already pumped $25-million into Luge Capital, a venture fund focused on fintech and artificial intelligence that launched last year with a total of $75-million from backers such as Caisse de dépôt et placement du Québec and Sun Life Financial. Desjardins will continue to back Luge, but now wants to make its own investment decisions as well. Whereas past investments have often been confined to startups in Quebec, the new fund will also seek out opportunities in the United States, Britain, Europe and Australia.

“With $45-million, we can do a lot,” said Guy Cormier, chief executive of Desjardins Group. “There’s a lot of noise, there’s a lot of buzz in the fintech industry, and we just have to be quite careful and quite clever about the kind of partnerships [we choose]. We really know what we want to do, what we want to accomplish, so we’re not trying to go everywhere. But with this fund now we have more capacity.”

The fund’s first investment falls outside the normal boundaries of fintech. Desjardins is putting $400,000 into X-TELIA Group Inc., a company that operates a wireless network tailored to home automation and connecting the so-called internet of things, to help expand its network across Canada. Desjardins sees applications to home and auto insurance, but is also a major lender to the agricultural sector, and X-TELIA connects smart sensors on farmers’ grain silos to make it easier to manage inventory.

“We want to add to our offer. It’s not any more enough for a financial institution to do the financing or to do the everyday banking,” said Martin Brunelle, vice-president of transformation and special projects at Desjardins. “What we want is to ease the lives of our members or our customers.”

Three other fintech companies are currently in the pipeline to receive investments from the new fund, Mr. Brunelle said. But they are at different stages of maturity and some could take years to bear fruit, if they flourish at all.

“The first goal is not return on investment for us. It’s really to build a relationship that is stronger, tighter with these fintechs, and will help us to build something that is great for our members and clients,” Mr. Cormier said. “The return on investment will be there maybe in a few years.”

Source: The Globe and Mail

The Financial Services Regulatory Authority of Ontario will help reduce regulatory burden and make Ontario open for business

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Fairfax Financial says chief financial officer David Bonham died suddenly

THE CANADIAN PRESS

Fairfax Financial Holdings Ltd. says chief financial David Bonham died suddenly during the weekend.

Fairfax chief executive Prem Watsa says the entire Fairfax family mourns the sudden and unexpected loss.

John Varnell, Fairfax’s vice-president, corporate development, has been appointed to serve as chief financial officer on an interim basis.

Varnell previously served as the chief financial officer of Fairfax on two occasions, as well as the chief financial officer of Northbridge Financial Corp. and Fairfax India Holdings Corp.

Fairfax is a holding company with subsidiaries in property and casualty insurance and reinsurance.

 

Technical CE Credits for BC Insurance Licensees

Technical CE Credits for BC Insurance Licensees

Continuing Education requirements for insurance licensees in British Columbia varies based on your experience and if you have any professional designations.

All BC Insurance licensees must meet the CE requirements for their class of license, annually from June 1 to May 31 .

Only technical courses qualify for CE credits.

What are technical CE credits?

For General insurance, if you are a Level 1 or Level 2 licensee, the only qualifying insurance continuing education is technical material directly related to:

  • General insurance products.
  • Compliance with insurance legislation and licensee requirements such as Council Rules, Council’s Code of Conduct, the Insurance Act, and privacy legislation.
  • Ethics.
  • Errors and Omissions.

For level 3 licensees, “technical material” is broadened to include courses relating to management, accounting, and human resources.

For Life/A&S insurance, the only qualifying continuing education is technical material directly related to:

  • Life insurance products.
  • Financial planning, provided the education is geared to life insurance and not a non-insurance sector, such as securities or mutual funds.
  • Compliance with insurance legislation and requirements such as Council Rules, Council’s Code of Conduct, the Insurance Act, privacy legislation, and anti-terrorism/money laundering legislation.
  • Ethics.
  • Errors and Omissions.

 

ILScorp online courses will display the word Technical in the course credit type.  For example, the online course Cyber Insurance, which covers topics such as privacy and actual cyber coverage forms has the credit type: General/Adjuster – Technical, which will display in the course description as well as on your completed CE certificates.

Other courses such as, Dealing with Difficult People and A Structured Approach for Terminating Employees, deals with topics related to management and human resources. ILScorp does not display the word Technical in the course description or the CE Certificate of these soft skill type courses however, they do qualify as Technical CE for Level 3 Licensees only.

Before starting your online courses with ILScorp, be sure to check the credit type, and accrediting provinces associated with your course. Some courses are Technical in nature, some courses are not, some courses are accredited in BC, while others are accredited in Ontario only.

Your course description with display all the valid accreditation criteria so be sure to double check all the details before you start the course.

ILScorp offers General/Adjuster – Technical CE as well as Life/A&S-Technical CE credits.

All courses are provincially accredited and completed entirely online. ILScorp will also keep your completed course history and CE certificates on file for up to 7 years in case of audit.

Remember BC, your deadline is May 31, 2019 and you can only complete a maximum of 7 technical CE credits per day and excess credits cannot be carried over into the next annual license period.

Contact ILScorp today to meet your CE requirements!

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