- The level of federal government guarantee of insured mortgages will remain at 90 percent.
- All mortgages that were previously insured by GFMICC and covered by the Guarantee Agreement will continue to be covered under PRMHIA.
- The maximum outstanding insured exposure for private insured mortgages will be increased from $250 billion to $300 billion. The current risk premium is being replaced by a risk fee payable by the Company to the federal government equal to 2.25 percent of gross premiums written.
- GFMICC's insurance activities will continue to be restricted to insuring mortgages that meet the government guarantee mortgage insurance eligibility guideline.
- The Guarantee Agreement and all obligations under it, including the requirement for a Guarantee Fund and payment of exit fees related to it, will be terminated. As a result the Company will reverse, in the 4 th quarter 2012, the liability it had been accruing for the exit fee. The Company expects the pre-tax impact of this reversal to be approximately $166 million related to exit fees accrued in 2011 and prior years and a further $20 million accrued for the first nine months of 2012. This will result in a net increase in Shareholders' Equity excluding Accumulated Other Comprehensive Income of approximately $135 million.
- The amount held in the Guarantee Fund will revert to the Company on January 1, 2013 and the Company's taxable income will increase by the same amount (the Company's operating income on a GAAP basis will not be affected). The resulting increase in income taxes payable is expected to be approximately $255 million, which the Company has already provided for in its financial statements.
- The Company expects that GFMICC's regulatory capital available will increase by approximately $675 million from the elimination of the Guarantee Fund and the reversal of the exit fees previously accrued, net of the related income tax effect. This will increase its Minimum Capital Test (MCT) ratio by approximately 45 percentage points to over 200%.
- The Guarantee Fund is being eliminated in favour of a higher MCT ratio. The Minister of Finance advised the Company today that under PRMHIA and the Insurance Companies Act ( Canada) the minimum MCT ratio for GFMICC will be 175%. In conjunction with this new target, GFMICC will increase its internal MCT target capital ratio on January 1, 2013 to 185% and expects to operate above 190% MCT in the normal course.
New Government Guarantee Legislative Framework, Effective January 1, 2013, Enhances Genworth MI Canada's Financial Position
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