Kensington Mortgage Company's profit growth is on track to meet directors' expectations for the year ending November 30, 2002.
New business performance continues to be strong and originations for the last five months were substantially above the same period last year following the trend reported for the first half. The offer pipeline has continued to grow whilst credit quality has been maintained. Margins for new business have remained healthy and in line with expectations.
While the mortgage market has continued to be buoyant, Kensington has maintained our prudent lending policies, avoiding high LTV lending, maintaining average income multiples below the average for the industry and ensuring that the loans are secured on high quality properties. The mortgage portfolio is performing well and mortgage arrears and loan losses have continued to fall. Costs remain under control.
The acquisition of The Mortgage Lender Limited, a leading direct distributor of non-conforming mortgages, was completed in September 2002. Integration is progressing well and TML is generating new mortgage business in line with expectations for credit quality, margin and volume.
Kensington's latest securitisation, Residential Mortgage Securities 13 plc, was successfully completed during October 2002. This £600m transaction was 60% larger than any of our previous deals and delivered an attractive cost of funding in relatively turbulent markets. Global demand for the bonds was once again high and, for the first time, the transaction was issued in three currencies (Sterling, US dollars and Euros). In August 2002 the sub-ordinated bonds of RMS 6 were upgraded by S&P and Fitch so that now the sub-ordinated bonds in the first six of Kensington's 13 securitisations have all been upgraded.
The directors remain confident about the future for Kensington. During 2002 it has further strengthened its distribution through the acquisition of TML. Risk management remains central to Kensington's business and, as a result, it is well positioned to sustain its leadership in benign or changing markets and therefore continue to enhance shareholder value.