Ann: 2023 Full Year Results Investor Presentation, page-101

I've just re-listened to Christopher Joye on Livewire from 12th April 2024, episode 200: 'No margin for error for risk junkies craving rate cuts'.

At 50 mins 35 secs, Chris is asked the regular questions about what he thinks investors are overlooking. In part, he says that markets are priced to perfection and that there is no room for error where it comes to rates. Chris has long thought that the next move in rates in Australia still needs to be up, not down.

While property prices are expensive and the circumstances from the pandemic have resulted in large returns of capital, I don't think HLI is overpriced. My view is that we are undervalued at the current price.

If we are now in the 'higher for longer' scenario, I can see unemployment rising but not to a level where claims frequency increases for HLI in an unmanageable way. I can see more people being proactive and selling their properties that have appreciated and downsizing rather than defaulting, resulting in claim amounts being lower than otherwise.

With another buyback on the table at the AGM (resolution 3 below), seems like we are well positioned to navigate a 'higher for longer' scenario.

Resolution 3:
“That, for the purposes of section 257C of the Corporations Act 2001 (Cth) and for all other purposes, approval is given for the Company to buy back up to 60,000,000 of the Company’s issued ordinary shares (representing approximately 20% of the Company’s issued shares as at 22 March 2024, in the form of one or more on-market share buy-backs, to be conducted over a period of up to 12 months from the date of the 2024 Annual General Meeting.”

From the HLI Annual Report...
Helia’s financial results are heavily influenced by economic conditions. Key aspects of our the economic outlook for 2024 are:
• Economic growth is expected to slow in 2024;
• Inflation is expected to moderate but remain above the RBA target range of 2-3% p.a.;
• The unemployment rate is expected to gradually increase to 4.6% by the end of 2024 as economic growth slows;
• The RBA cash rate is expected to fall to 3.85% by the end of 2024.

Outlook for Helia:
• The duration of the cyclical downturn in GWP volumes is expected to be driven by interest rates and house prices;
• A slowing economy is expected to result in moderate increases in claims in the periods ahead;
• Medium to longer-term pent-up demand from prospective borrowers currently saving for a deposit, new home construction and population growth should combine to provide support for the industry; and
• Helia is in a strong position to respond to the changing economic conditions.