RICHMOND, Va., Feb. 4, 2020 /PRNewswire/ --
- Completed Sale Of Genworth's Majority Interest In Genworth MI
Canada Inc. To Brookfield Business Partners L.P. With Approximately
$1.8 Billion Total Net Proceeds
- Merger Agreement With China Oceanwide Holdings Group Co., Ltd
(Oceanwide) Extended To Not Later Than March
31, 2020
- U.S. Mortgage Insurance (MI) 2019 Full Year Adjusted Operating
Income Of $568 Million, 16 Percent
Above Prior Year, With Strong New Insurance Written
-
- U.S. MI's PMIERs1 Sufficiency Ratio At 138 Percent,
In Excess Of $1.0 Billion Above
Requirements
- Strong Capital Levels In Australia MI With $34
Million Dividend To The Holding Company In The Quarter
- Continued Progress Toward LTC2 Multi-Year Rate
Action Plan (MYRAP) With $334 Million
Incremental Annual Rate Increases Approved In 2019, With An
Estimated Net Present Value (NPV) Of $2.0
Billion
- Annual U.S. GAAP Assumption Review Completed For U.S. Life
Insurance:
-
- LTC Active Life U.S. GAAP Margins Approximately $0.5 To $1.0
Billion, Consistent With Prior Year
- Universal Life Insurance3 After-Tax Charges Of
$139 Million Primarily Related To
Interest Rate Assumption Updates
- Holding Company Cash And Liquid Assets Of $1.5 Billion
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended December 31, 2019.
The company reported 2019 full year net income4 of
$343 million, or $0.67 per diluted share, in 2019, compared with
net income of $119 million, or
$0.245 per diluted
share, in 2018. The company reported adjusted operating
income6 of $420 million,
or $0.82 per diluted share, in 2019,
compared with an adjusted operating loss of $5 million, or $0.015 per diluted share, in
2018.
For the fourth quarter of 2019, the company reported a net loss
of $17 million, or $0.03 per diluted share, compared with a net loss
of $329 million, or $0.665 per diluted share, in the
fourth quarter of 2018. The company reported adjusted operating
income of $24 million, or
$0.05 per diluted share, in the
fourth quarter of 2019, compared with an adjusted operating loss of
$305 million, or $0.615 per diluted share, in the
fourth quarter of 2018. The net loss in the current quarter was
comprised of income from continuing operations of $36 million more than offset by a net loss from
discontinued operations of $537 million. The loss from
discontinued operations included a net after-tax loss of
$110 million related to the company's
divestiture of its lifestyle protection insurance business to AXA
in 2015, following an adverse court ruling on pending
litigation. This charge was partially offset by income from
discontinued operations of $57
million in the quarter primarily driven by a favorable tax
position refinement to the loss on the sale of Genworth Canada.
Genworth made strong progress with its MYRAP in 2019, receiving
approvals for $334 million of
incremental annual premium increases during the year, with an
estimated NPV of $2.0 billion. In
aggregate, the company has now achieved approximately $12.5 billion in NPV from approved rate increases
since 2012, with approximately $7.5
billion in additional expected future in force rate actions
from its MYRAP included in 2019 loss recognition testing. The
company continues to work closely with the National Association of
Insurance Commissioners (NAIC) and state regulators to demonstrate
the broad-based need for actuarially justified rate increases in
order to pay future claims. As previously disclosed, Genworth
intends to manage the U.S. life insurance companies on a standalone
basis, with no plans to infuse capital in the future other than the
capital committed in connection with the completion of the
Oceanwide transaction.
"Genworth delivered strong operating performance in 2019, driven
by outstanding results in our U.S. mortgage insurance business,"
said Tom McInerney, president and
CEO of Genworth. "We continued to execute against our strategic
priorities, including reducing debt, strengthening our balance
sheet and executing our LTC multi-year rate action plan, which is
critical to stabilizing our U.S. life insurance business."
Strategic Update
Genworth and Oceanwide continued to work diligently towards
closing their previously announced transaction.
On December 12, 2019, Genworth
completed the sale of its stake in Genworth Canada to Brookfield
Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN) for a total
transaction value of CAD$2.4 billion.
As previously disclosed, the net cash proceeds were approximately
USD$1.8 billion including the special
dividend paid in October 2019 and
after adjustments for foreign exchange, fees, and expenses.
Genworth Mortgage Insurance Corporation (GMICO), Genworth's primary
U.S. MI insurance subsidiary, received $517
million of the net proceeds from the transaction based on
its ownership share of Genworth Canada, increasing its capital
levels. In addition, $445 million of
the net proceeds were used to retire the company's term loan issued
March 7, 2018 as required under the
terms of the loan agreement.
On December 22, 2019, Genworth and
Oceanwide entered into a 13th waiver and agreement extending their
merger agreement deadline to not later than March 31, 2020. The 13th waiver also provides
termination rights for Oceanwide to the extent that regulators
subsequently impose materially adverse conditions on the
transaction. In addition, the waiver provides that the parties will
mutually agree upon a closing date after the receipt of all
required regulatory approvals. In the event Genworth and Oceanwide
cannot agree on a closing date following receipt of all regulatory
approvals, each party has the right to terminate the merger
agreement.
In January 2020, Fannie Mae and
Freddie Mac reapproved Oceanwide's proposed acquisition of GMICO,
as contemplated under the merger agreement between Genworth and
Oceanwide and updated to reflect subsequent developments including
the Genworth Canada sale. Their reapprovals include certain
conditions and obligations which are subject to confidentiality
restrictions. The parties anticipate being able to meet these
conditions.
Oceanwide and Genworth received approvals from all necessary
U.S. regulators with respect to the Oceanwide Transaction earlier
in 2019. The approval of the New York Department of Financial
Services (NYDFS) has expired and the parties remain in discussion
with the NYDFS in an effort to secure its reapproval. Genworth and
the NYDFS have been engaged for several months in discussions
regarding the fourth quarter 2019 assumption review for Genworth
Life Insurance Company of New York
(GLICNY) and the reapproval of the transaction. As part of the
discussion process, the NYDFS has recently communicated to
Oceanwide and Genworth that the reapproval would be contingent on a
capital contribution by Genworth Financial to GLICNY. Oceanwide and
Genworth are continuing discussions with the NYDFS in an effort to
secure its reapproval, including a potential capital contribution
from Genworth that would require Oceanwide's consent under the
merger agreement.
Genworth also remains in discussions with other state regulators
regarding their existing approvals of the transaction. In the fall
of 2019, the parties provided supplemental information to certain
regulators to reflect the Genworth Canada disposition and the
passage of time since their prior approval of the Oceanwide
Transaction. Regulators have reviewed the supplemental information,
and the parties are working with these regulators to provide
additional information as part of their review. Following the
receipt of all required U.S. regulatory approvals, Oceanwide will
also need to receive clearance in China for the currency conversion and transfer
of funds.
Genworth and Oceanwide remain committed to the capital
investment plan under which Oceanwide and/or its affiliates will
contribute an aggregate of $1.5
billion to Genworth over time following the consummation of
the merger, subject to the receipt of the required regulatory
approvals and clearances.
"We are in discussions with the NYFDS in an effort to secure a
reapproval of the Oceanwide transaction, which represents one of
the last remaining milestones in closing the transaction," said
Tom McInerney, president and CEO of
Genworth Financial. "Genworth and its Board of Directors continue
to believe the transaction is the best and most certain outcome for
our shareholders. We will continue to work hard to reach a prompt
resolution with the NYDFS and satisfy all other closing conditions
to complete the transaction as soon as possible. However, if the
parties are unable to reach an agreement with the NYDFS that is
also acceptable to our other state insurance regulators, Oceanwide
and Genworth will need to consider other alternatives to the
transaction for each party."
Lu Zhiqiang, chairman of
Oceanwide, added: "Oceanwide remains fully committed to the
transaction with Genworth, subject to the receipt of the required
regulatory approvals and clearances. We look forward to the
successful completion of the transaction."
Financial Performance
Consolidated Net
Income (Loss) &
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Adjusted Operating
Income (Loss)
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Three months ended
December 31
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Twelve months ended
December 31
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2019
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2018
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2019
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2018
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Per
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Per
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Per
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Per
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diluted
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diluted
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Total
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diluted
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diluted
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Total
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(Amounts in
millions, except per share)
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Total
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share
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Total
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share
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%
change
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Total
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share
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Total
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share
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%
change
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Net income (loss)
available to Genworth's
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common
stockholders
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$
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(17)
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$
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(0.03)
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$
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(329)
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$
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(0.66)
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95 %
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$
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343
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$
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0.67
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$
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119
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$
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0.24
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188
%
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Adjusted operating
income (loss)
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$
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24
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$
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0.05
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$
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(305)
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$
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(0.61)
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108
%
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$
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420
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$
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0.82
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$
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(5)
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$
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(0.01)
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NM8
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Weighted-average
diluted common shares5
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510.4
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500.8
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509.7
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500.4
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As of December
31
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2019
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2018
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Book value per
share
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$
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28.17
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$
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24.86
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Book value per share,
excluding
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accumulated other
comprehensive
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income
(loss)
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$
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21.35
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$
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20.78
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Net investment gains, net of taxes and other adjustments,
reduced the net loss in the quarter by $12
million, primarily from mark-to-market gains on limited
partnerships. The net loss recorded in the fourth quarter of 2018
included $29 million from net
investment gains, net of taxes and other adjustments.
Net investment income was $794
million in the quarter, down from $816 million in the prior quarter and up from
$779 million in the prior year. Net
investment income increased versus the prior year primarily due to
higher variable investment income and continued growth in invested
assets. Net investment income decreased versus the prior quarter
primarily due to lower limited partnership income and unfavorable
prepayment speed adjustments on mortgage backed securities. The
reported yield and the core yield6 for the
quarter were 4.74 percent and 4.62 percent, respectively, compared
to 4.93 percent and 4.80 percent, respectively, in the prior
quarter.
Genworth's effective tax rate on income from continuing
operations was approximately 33 percent for the quarter,
resulting in a 2019 full year effective tax rate of approximately
27 percent. Taxes for the quarter included prior year true-ups and
other adjustments which increased the quarterly effective tax rate
by eight points.
Adjusted operating income (loss) results by business line are
summarized in the table below:
Adjusted Operating
Income (Loss)
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(Amounts in
millions)
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Q4
19
|
|
Q3
19
|
|
Q4
18
|
U.S. Mortgage
Insurance
|
|
$
|
160
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$
|
137
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$
|
124
|
Australia Mortgage
Insurance
|
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12
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12
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18
|
U.S. Life
Insurance
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(115)
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(1)
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(425)
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Runoff
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17
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10
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(2)
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Corporate and
Other
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(50)
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(35)
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(20)
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Total Adjusted
Operating Income (Loss)
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$
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24
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$
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123
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$
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(305)
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Adjusted operating income (loss) represents income (loss) from
continuing operations excluding the after-tax effects of income
(loss) from continuing operations attributable to noncontrolling
interests, net investment gains (losses), goodwill
impairments, gains (losses) on the sale of businesses, gains
(losses) on the early extinguishment of debt, gains (losses) on
insurance block transactions, restructuring costs and other
adjustments, net of taxes. A reconciliation of net income (loss) to
adjusted operating income (loss) is included at the end of this
press release.
Unless specifically noted in the discussion of results for the
Australia MI business, references to percentage changes exclude the
impact of translating foreign denominated activity into U.S.
dollars (foreign exchange). Percentage changes that include the
impact of foreign exchange are found in a table at the end of this
press release.
U.S. Mortgage Insurance
Operating
Metrics
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(Dollar amounts in
millions)
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Q4
19
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Q3
19
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Q4
18
|
Adjusted operating
income
|
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$
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160
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$
|
137
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$
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124
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New insurance
written
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Primary
Flow
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$
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18,100
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$
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18,900
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$
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9,300
|
Loss ratio
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4%
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11%
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7%
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U.S. MI reported adjusted operating income of $160 million, compared with $137 million in the prior quarter and
$124 million in the prior year. U.S.
MI's flow insurance in force increased 15 percent versus the prior
year from strong new insurance written (NIW), driving continued
growth in earned premiums. U.S. MI achieved $18.1 billion in flow NIW in the quarter, down
four percent from the prior quarter due to market
seasonality. Flow NIW increased 95 percent versus the prior
year primarily driven by a larger estimated private mortgage
insurance market from higher refinance originations, as well as an
estimated increase in market share with the market adoption of the
company's proprietary risk-based pricing engine, GenRATE, and
selective participation in forward commitment transactions. The
growth in earned premiums versus the prior year was also driven by
increased single premium cancellations from higher refinancing
activity and a favorable $14 million
pre-tax single premium earnings pattern adjustment, partially
offset by lower average premium rates.
The U.S. MI loss ratio was four percent, down seven points
sequentially and down three points compared to the prior year.
Current quarter results included a favorable $13 million pre-tax reserve factor adjustment,
which combined with the single premium earnings pattern adjustment
reduced the loss ratio by six points. The company continues to
experience low levels of losses driven by a strong housing market
with low delinquency rates and high cure rates on
delinquencies.
Australia Mortgage Insurance
Operating
Metrics
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(Dollar amounts in
millions)
|
|
Q4
19
|
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Q3
19
|
|
Q4
18
|
Adjusted operating
income
|
|
$
|
12
|
|
$
|
12
|
|
$
|
18
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
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Flow
|
|
$
|
4,900
|
|
$
|
4,600
|
|
$
|
4,000
|
|
Bulk
|
|
$
|
400
|
|
$
|
—
|
|
$
|
800
|
Loss ratio
|
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|
30%
|
|
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36%
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29%
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|
Australia MI reported adjusted operating income of $12
million which was flat to the prior quarter and down from
$18 million in the prior year.
Australia MI flow NIW increased nine percent sequentially and 28
percent versus the prior year, primarily due to higher mortgage
origination volume from certain key customers. The loss ratio in
the quarter was 30 percent, down six points sequentially primarily
due to seasonally lower new delinquencies, net of cures, and up one
point from the prior year primarily due to lower levels of earned
premiums from portfolio seasoning.
U.S. Life Insurance
Adjusted Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q4
19
|
|
Q3
19
|
|
Q4
18
|
Long Term Care
Insurance
|
|
$
|
19
|
|
$
|
21
|
|
$
|
(314)
|
Life
Insurance
|
|
|
(164)
|
|
|
(25)
|
|
|
(108)
|
Fixed
Annuities
|
|
|
30
|
|
|
3
|
|
|
(3)
|
Total U.S. Life
Insurance
|
|
$
|
(115)
|
|
$
|
(1)
|
|
$
|
(425)
|
Long Term Care Insurance
LTC reported adjusted operating income of $19 million, compared with adjusted operating
income of $21 million in the prior
quarter and an adjusted operating loss of $314 million in the prior year. Compared to the
prior quarter, results reflected seasonally lower claim
terminations. Compared to the prior quarter and prior year, results
reflected higher earnings from in force rate actions as well as
favorable development on prior period incurred but not reported
claims, partially offset by growth in new claims. Results in the
prior year reflected an after-tax charge of $258 million from the completion of the annual
review of LTC assumptions and methodologies driven primarily by
increasing later duration utilization assumptions for claims with
lifetime benefits.
During the quarter, the company completed its annual review of
U.S. GAAP active life margins, also referred to as loss recognition
testing. All key margin-testing assumptions were reviewed and
updated where appropriate. As of December 31, 2018, the U.S.
GAAP loss recognition testing margins for the LTC business were
approximately $0.5 to $1.0
billion and the margins as of December
31, 2019 remain in this range. The 2019 margins reflected
higher emerging incidence experience on newer blocks, particularly
on older attained ages, and an unfavorable calibration to reflect
recent benefit utilization experience. These updates were offset by
higher modeled benefit from planned future in force rate actions,
primarily on newer blocks. The company continues to separately test
its LTC acquired block (representing business written prior to late
1995) for recoverability as part of testing its U.S. GAAP loss
recognition margins. The U.S. GAAP loss recognition testing margin
for the LTC acquired block was positive. Cash flow testing results
remain in process and will be made available with year-end
statutory filings.
Life Insurance
Life insurance reported an adjusted operating loss of
$164 million, compared with
$25 million in the prior quarter and
$108 million in the prior year.
During the quarter, the company completed its annual review of life
insurance assumptions and recorded after-tax charges of
$139 million, including $107 million from assumption changes primarily
driven by the lower interest rate environment and $32 million from unfavorable model corrections.
Results in the prior year included after-tax charges of
$91 million related to the company's
annual review of life insurance assumptions. Compared to the prior
quarter and prior year, results reflected lower mortality in
universal and term life insurance products, offset by unfavorable
reserve increases in the term universal life insurance product from
lower than expected terminations. Compared to the prior year,
results also reflected higher amortization of deferred acquisition
costs (DAC) primarily associated with higher lapses from large
20-year level-premium term life insurance blocks entering their
post-level premium periods.
Fixed Annuities
Fixed annuities reported adjusted operating income of
$30 million, compared with
$3 million in the prior quarter and
an adjusted operating loss of $3
million in the prior year. Results in the prior quarter and
prior year included unfavorable after-tax charges of $13 million and $17
million, respectively, from loss recognition testing on the
single premium immediate annuity block due primarily to lower
interest rates. Results versus the prior quarter and prior year
included a favorable change in fixed indexed annuities reserves due
to the rise in interest rates in the quarter and higher mortality
in the single premium immediate annuity business.
Runoff
Runoff reported adjusted operating income of $17 million, compared with $10 million in the prior quarter and an adjusted
operating loss of $2 million in the
prior year. Compared to the prior quarter and prior year, results
reflected favorable impacts in the company's variable annuity
business from favorable equity market performance and favorable
changes in interest rates compared to the prior quarter and prior
year, partially offset by higher mortality.
Corporate And Other
Corporate and Other reported an adjusted operating loss of
$50 million, compared with
$35 million in the prior quarter and
$20 million in the prior year.
Results in the current quarter reflected less favorable tax timing
adjustments relative to the prior quarter and prior year.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital &
Liquidity Metrics
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(Dollar amounts in
millions)
|
|
Q4
19
|
|
Q3
19
|
|
Q4
18
|
U.S.
MI
|
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Consolidated
Risk-To-Capital Ratio9
|
|
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12.2:1
|
|
|
|
11.9:1
|
|
|
|
12.2:1
|
|
|
Genworth Mortgage
Insurance Corporation Risk-To-Capital
Ratio9
|
|
|
12.5:1
|
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|
|
12.1:1
|
|
|
|
12.5:1
|
|
|
Private Mortgage
Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio9,
10
|
|
|
138
|
%
|
|
|
129
|
%
|
|
|
129
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio9
|
|
|
191
|
%
|
|
|
198
|
%
|
|
|
194
|
%
|
U.S. Life Insurance
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC) Ratio
|
|
|
N/A
|
11
|
|
|
199
|
%
|
|
|
199
|
%
|
Holding Company Cash
and Liquid Assets12, 13
|
|
$
|
1,531
|
|
|
$
|
366
|
|
|
$
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Points
- U.S. MI's PMIERs sufficiency ratio is estimated to be 138
percent, in excess of $1.0 billion
above requirements. Capital sufficiency increased in the quarter
from the completion of an Insurance Linked Note transaction,
eliminated PMIERs discount on affiliate stock following Genworth
Canada sale and continued earnings during the quarter, partially
offset by a $250 million dividend
paid in October 2019;
- Australia MI's PCA ratio is estimated to be 191 percent, above
the company's target operating range of 132 to 144 percent. The
ratio decreased in the quarter driven primarily by lower available
capital from a special dividend paid in the quarter;
- U.S. life insurance companies' statutory and cash flow testing
results remain in process and will be made available with year-end
statutory filings;
- The holding company ended the quarter with $1.5 billion of cash and liquid assets. The
holding company received $334 million
combined dividends from the company's MI subsidiaries in the
quarter, in addition to $1.2 billion
in net proceeds to the holding company from the sale of Genworth
Canada. In connection with the sale, $445
million of proceeds were used to repay the company's secured
term loan;
- Subsequent to year-end, the holding company made a £100 million
interim payment (USD$134 million) to
AXA related to an adverse court ruling on pending litigation that
was reflected in the loss on discontinued operations in the fourth
quarter of 2019. Additionally, on January
21, 2020, the holding company completed a redemption of its
June 2020 debt maturity for
approximately $409 million, including
$397 million in principal and
$12 million in make-whole premiums
and accrued interest.
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 insurance
holding company committed to helping families achieve the dream of
homeownership and address the financial challenges of aging through
its leadership positions in mortgage insurance and long term care
insurance. Headquartered in Richmond, Virginia, Genworth traces its roots
back to 1871 and became a public company in 2004. For more
information, visit genworth.com.
From time to time, Genworth releases important information via
postings on its corporate website. Accordingly, investors and other
interested parties are encouraged to enroll to receive automatic
email alerts and Really Simple Syndication (RSS) feeds regarding
new postings. Enrollment information is found under the "Investors"
section of genworth.com. From time to time, Genworth's
publicly traded subsidiary, Genworth Mortgage Insurance Australia
Limited, separately releases financial and other information about
its operations. This information can be found at
http://www.genworth.com.au.
Conference Call And Financial Supplement Information
This press release and the fourth quarter 2019 financial
supplement are now posted on the company's website. Additional
information regarding business results will be posted on the
company's website, http://investor.genworth.com, by 8:00 a.m. on February 5,
2020. Investors are encouraged to review these
materials.
Genworth will conduct a conference call on February 5, 2020 at 9:00
a.m. (ET) to discuss business results and provide an update
on strategic objectives, including the pending transaction with
Oceanwide. Genworth's conference call will be accessible via
telephone and the Internet. The dial-in number for Genworth's
February 5th conference
call is 888 208.1820 or 323 794.2110 (outside the U.S.); conference
ID # 5795605. To participate in the call by webcast, register at
http://investor.genworth.com at least 15 minutes prior to the
webcast to download and install any necessary software.
A replay of the call will be available at 888
203.1112 or 719 457.0820 (outside
the U.S.); conference ID # 5795605 through February 19, 2020. The webcast will also be
archived on the company's website for one year.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures
entitled "adjusted operating income (loss)" and "adjusted operating
income (loss) per share." Adjusted operating income (loss) per
share is derived from adjusted operating income (loss). The chief
operating decision maker evaluates segment performance and
allocates resources on the basis of adjusted operating income
(loss). The company defines adjusted operating income (loss) as
income (loss) from continuing operations excluding the after-tax
effects of income (loss) from continuing operations attributable to
noncontrolling interests, net investment gains (losses), goodwill
impairments, gains (losses) on the sale of businesses, gains
(losses) on the early extinguishment of debt, gains (losses) on
insurance block transactions, restructuring costs and infrequent or
unusual non-operating items. Gains (losses) on insurance block
transactions are defined as gains (losses) on the early
extinguishment of non-recourse funding obligations, early
termination fees for other financing restructuring and/or resulting
gains (losses) on reinsurance restructuring for certain blocks of
business. The company excludes net investment gains (losses) and
infrequent or unusual non-operating items because the company does
not consider them to be related to the operating performance of the
company's segments and Corporate and Other activities. A component
of the company's net investment gains (losses) is the result of
impairments, the size and timing of which can vary significantly
depending on market credit cycles. In addition, the size and timing
of other investment gains (losses) can be subject to the company's
discretion and are influenced by market opportunities, as well as
asset-liability matching considerations. Goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the
early extinguishment of debt, gains (losses) on insurance block
transactions and restructuring costs are also excluded from
adjusted operating income (loss) because, in the company's opinion,
they are not indicative of overall operating trends. Infrequent or
unusual non-operating items are also excluded from adjusted
operating income (loss) if, in the company's opinion, they are not
indicative of overall operating trends.
While some of these items may be significant components of net
income (loss) available to Genworth Financial, Inc.'s common
stockholders in accordance with U.S. GAAP, the company believes
that adjusted operating income (loss) and measures that are derived
from or incorporate adjusted operating income (loss), including
adjusted operating income (loss) per share on a basic and diluted
basis, are appropriate measures that are useful to investors
because they identify the income (loss) attributable to the ongoing
operations of the business. Management also uses adjusted operating
income (loss) as a basis for determining awards and compensation
for senior management and to evaluate performance on a basis
comparable to that used by analysts. However, the items excluded
from adjusted operating income (loss) have occurred in the past and
could, and in some cases will, recur in the future. Adjusted
operating income (loss) and adjusted operating income (loss) per
share on a basic and diluted basis are not substitutes for net
income (loss) available to Genworth Financial, Inc.'s common
stockholders or net income (loss) available to Genworth Financial,
Inc.'s common stockholders per share on a basic and diluted basis
determined in accordance with U.S. GAAP. In addition, the company's
definition of adjusted operating income (loss) may differ from the
definitions used by other companies.
In 2019, the company revised how it taxes the adjustments to
reconcile net income (loss) available to Genworth Financial, Inc.'s
common stockholders to adjusted operating income (loss) to align
the tax rate used in the reconciliation to each segment's local
jurisdictional tax rate. Beginning in the first quarter of 2019,
the company used a tax rate of 30 percent for its Australia
Mortgage Insurance segment to tax effect its adjustments. Its
domestic segments remain at a 21 percent tax rate. In 2018, the
company assumed a flat 21 percent tax rate on adjustments for all
of its segments to reconcile net income (loss) available to
Genworth Financial, Inc.'s common stockholders and adjusted
operating income (loss). These adjustments are also net of the
portion attributable to noncontrolling interests and net investment
gains (losses) are adjusted for DAC and other intangible
amortization and certain benefit reserves.
Prior year amounts have not been re-presented to reflect this
revised presentation; however, the previous methodology would not
have resulted in a materially different segment-level adjusted
operating income (loss).
The company recorded a pre-tax expense of $4 million in the first quarter of 2019 and
$2 million in the third quarter of
2018 related to restructuring costs as it continues to evaluate and
appropriately size its organizational needs and expenses. There
were no infrequent or unusual items excluded from adjusted
operating income (loss) during the periods presented other than
fees incurred during the fourth quarter of 2018 related to Genworth
Holdings, Inc.'s bond consent solicitation of $6 million for broker, advisor and investment
banking fees.
The tables at the end of this press release provide a
reconciliation of net income (loss) available to Genworth
Financial, Inc.'s common stockholders to adjusted operating income
(loss) for the three and twelve months ended December 31, 2019 and 2018, as well as for the
three months ended September 30,
2019, and reflect adjusted operating income (loss) as
determined in accordance with accounting guidance related to
segment reporting.
This press release includes the non-GAAP financial measure
entitled "core yield" as a measure of investment yield. The company
defines core yield as the investment yield adjusted for items that
do not reflect the underlying performance of the investment
portfolio. Management believes that analysis of core yield enhances
understanding of the investment yield of the company. However, core
yield is not a substitute for investment yield determined in
accordance with U.S. GAAP. In addition, the company's definition of
core yield may differ from the definitions used by other companies.
A reconciliation of reported U.S. GAAP yield to core yield is
included in a table at the end of this press release.
Definition of Selected Operating Performance Measures
The company taxes its international businesses at their local
jurisdictional tax rates and its domestic businesses at the U.S.
corporate federal income tax rate of 21 percent. The company's
segment tax methodology applies the respective jurisdictional or
domestic tax rate to the pre-tax income (loss) of each segment,
which is then adjusted in each segment to reflect the tax
attributes of items unique to that segment such as foreign
withholding taxes and permanent differences between U.S. GAAP and
local tax law. The difference between the consolidated provision
for income taxes and the sum of the provision for income taxes in
each segment is reflected in Corporate and Other activities.
The annually-determined tax rates and adjustments to each
segment's provision for income taxes are estimates which are
subject to review and could change from year to year.
The company reports selected operating performance measures
including "sales" and "insurance in force" or "risk in force" which
are commonly used in the insurance industry as measures of
operating performance.
Management regularly monitors and reports sales metrics as a
measure of volume of new business generated in a period. Sales
refer to new insurance written for mortgage insurance products. The
company considers new insurance written to be a measure of the
company's operating performance because it represents a measure of
new sales of insurance policies during a specified period, rather
than a measure of the company's revenues or profitability during
that period.
Management regularly monitors and reports insurance in force and
risk in force. Insurance in force for the company's mortgage
insurance businesses is a measure of the aggregate original loan
balance for outstanding insurance policies as of the respective
reporting date. Risk in force for the company's U.S. mortgage
insurance business is based on the coverage percentage applied to
the estimated current outstanding loan balance. Risk in force in
the Australia mortgage insurance
business is computed using an "effective" risk in force amount,
which recognizes that the loss on any particular loan will be
reduced by the net proceeds received upon sale of the property.
Effective risk in force has been calculated by applying to
insurance in force a factor of 35 percent that represents the
highest expected average per-claim payment for any one underwriting
year over the life of the company's mortgage insurance business in
Australia. The company also has
certain risk share arrangements in Australia where it provides pro-rata coverage
of certain loans rather than 100 percent coverage. As a result, for
loans with these risk share arrangements, the applicable pro-rata
coverage amount provided is used when applying the factor. The
company considers insurance in force and risk in force to be
measures of its operating performance because they represent
measures of the size of its business at a specific date which will
generate revenues and profits in a future period, rather than
measures of its revenues or profitability during that period.
Management also regularly monitors and reports a loss ratio for
the company's businesses. For the mortgage insurance businesses,
the loss ratio is the ratio of benefits and other changes in policy
reserves to net earned premiums. For the long term care insurance
business, the loss ratio is the ratio of benefits and other changes
in reserves less tabular interest on reserves less loss adjustment
expenses to net earned premiums. The company considers the loss
ratio to be a measure of underwriting performance in these
businesses and helps to enhance the understanding of the operating
performance of the businesses.
These operating performance measures enable the company to
compare its operating performance across periods without regard to
revenues or profitability related to policies or contracts sold in
prior periods or from investments or other sources.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may be identified by words such
as "expects," "intends," "anticipates," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning and
include, but are not limited to, statements regarding the outlook
for the company's future business and financial performance.
Examples of forward-looking statements include statements the
company makes relating to the transactions with China Oceanwide
Holdings Group Co., Ltd. (together with its affiliates, Oceanwide),
the company's discussions with regulators in connection therewith
and any capital contribution resulting therefrom. Forward-looking
statements are based on management's current expectations and
assumptions, which are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict. Actual
outcomes and results may differ materially from those in the
forward-looking statements due to global political, economic,
business, competitive, market, regulatory and other factors and
risks, including, but not limited to, the following:
- risks related to the proposed transaction with Oceanwide
including: the company's inability to complete the transaction with
Oceanwide in a timely manner or at all; the parties' inability to
obtain regulatory re-approvals, clearances or extensions, or the
possibility that such regulatory re-approvals or clearances may
further delay the transaction with Oceanwide or will not be
received prior to March 31, 2020 (and
either or both of the parties may not be willing to further waive
their end date termination rights beyond March 31, 2020) or that materially burdensome or
adverse regulatory conditions may be imposed or undesirable
measures may be required in connection with any such regulatory
re-approvals, clearances or extensions (including those conditions
or measures that either or both of the parties may be unwilling to
accept or undertake, as applicable) or that with continuing delays,
circumstances may arise that make one or both parties unwilling to
proceed with the transaction with Oceanwide or unable to comply
with the conditions to existing regulatory approvals or one or both
of the parties may be unwilling to accept any new condition under a
regulatory re-approval; the risk that the parties will not be able
to obtain other regulatory approvals, re-approvals, clearances or
extensions, including in connection with a potential alternative
funding structure or the current geo-political environment, or that
one or more regulators may rescind or fail to extend existing
approvals, or that the revocation by one regulator of approvals
will lead to the revocation of approvals by other regulators; the
parties' inability to obtain any necessary regulatory approvals,
clearances or extensions for the post-closing capital plan; the
risk that a condition to the closing of the transaction with
Oceanwide may not be satisfied or that a condition to closing that
is currently satisfied may not remain satisfied due to the delay in
closing the transaction with Oceanwide; existing and potential
legal proceedings may be instituted against the company in
connection with the transaction that may delay the transaction,
make it more costly or ultimately preclude it; the risk that the
proposed transactions disrupt the company's current plans and
operations as a result of the announcement and consummation of the
transactions; certain restrictions during the pendency of the
transactions that may impact the company's ability to pursue
certain business opportunities or strategic transactions; continued
availability of capital and financing to the company before, or in
the absence of, the consummation of the transactions; further
rating agency actions and downgrades in the company's debt or
financial strength ratings; changes in applicable laws or
regulations; the company's ability to recognize the anticipated
benefits of the transaction with Oceanwide; the amount of the
costs, fees, expenses and other charges related to the
transactions, including costs and expenses related to conditions
imposed in connection with regulatory approvals, re-approvals or
clearances, which may be material; the risks associated with
diverting management's attention from the company's ongoing
business operations; the company's ability to attract, recruit,
retain and motivate current and prospective employees may be
adversely affected; and disruptions and uncertainty relating to the
transaction, whether or not it is completed, may harm the company's
relationships with its employees, customers, distributors, vendors
or other business partners, and may result in a negative impact on
the company's business;
- strategic risks in the event the proposed transaction with
Oceanwide is not consummated including: the company's inability
to successfully execute alternative strategic plans to effectively
address its current business challenges (including with respect to
stabilizing its U.S. life insurance businesses, debt obligations,
cost savings, ratings and capital); the company's inability to
attract buyers for any businesses or other assets it may seek to
sell, or securities it may seek to issue, in each case, in a timely
manner and on anticipated terms; failure to obtain any required
regulatory, stockholder and/or noteholder approvals or consents for
such alternative strategic plans, or the company's challenges
changing or being more costly or difficult to successfully address
than currently anticipated or the benefits achieved being less than
anticipated; the risks associated with the potential impact on
liquidity of pending litigation; inability to achieve anticipated
cost-savings in a timely manner; adverse tax or accounting charges;
and the company's inability to increase the capital needed in its
mortgage insurance businesses in a timely manner and on anticipated
terms, including through business performance, reinsurance or
similar transactions, asset sales, securities offerings or
otherwise, in each case as and when required;
- risks relating to estimates, assumptions and valuations
including: inadequate reserves and the need to increase reserves
(including as a result of any changes the company may make in the
future to its assumptions, methodologies or otherwise in connection
with periodic or other reviews); risks related to the impact of the
company's annual review of assumptions and methodologies related to
its annual long term care insurance claim reserves and margin
reviews, including risks that additional information obtained in
the future or other changes to assumptions or methodologies
materially affect margins; inaccurate models; deviations from the
company's estimates and actuarial assumptions or other reasons in
its long term care insurance, life insurance and/or annuity
businesses; accelerated amortization of deferred acquisition costs
(DAC) and present value of future profits (PVFP) (including as a
result of any future changes it may make to its assumptions,
methodologies or otherwise in connection with periodic or other
reviews); adverse impact on the company's financial results as a
result of projected profits followed by projected losses (as is
currently the case with its long term care insurance business);
adverse impact on the company's results of operations, including
the outcome of future annual reviews of the premium earnings
pattern for its mortgage insurance businesses; and changes in
valuation of fixed maturity and equity securities;
- risks relating to economic, market and political
conditions including: downturns and volatility in global
economies and equity and credit markets; interest rates and changes
in rates have adversely impacted, and may continue to materially
adversely impact, the company's business and profitability;
deterioration in economic conditions or a decline in home prices
that adversely affect the company's loss experience in mortgage
insurance; political and economic instability or changes in
government policies; and fluctuations in foreign currency exchange
rates and international securities markets;
- regulatory and legal risks including: extensive
regulation of the company's businesses and changes in applicable
laws and regulations (including changes to tax laws and
regulations); litigation and regulatory investigations or other
actions; dependence on dividends and other distributions from the
company's subsidiaries (particularly its mortgage insurance
subsidiaries) and the inability of any subsidiaries to pay
dividends or make other distributions to the company, including as
a result of the performance of its subsidiaries and insurance,
regulatory or corporate law restrictions; adverse change in
regulatory requirements, including risk-based capital; changes in
regulations adversely affecting the company's Australian mortgage
insurance business; inability to continue to maintain the private
mortgage insurer eligibility requirements (PMIERs); inability of
the company's U.S. mortgage insurance subsidiaries to meet minimum
statutory capital requirements; the influence of Federal National
Mortgage Association (Fannie Mae), Federal Home Loan Mortgage
Corporation (Freddie Mac) and a small number of large mortgage
lenders on the U.S. mortgage insurance market and adverse changes
to the role or structure of Fannie Mae and Freddie Mac; adverse
changes in regulations affecting the company's mortgage insurance
businesses; inability to continue to implement actions to mitigate
the impact of statutory reserve requirements; impact of additional
regulations pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act; changes in tax laws; and changes in
accounting and reporting standards;
- liquidity, financial strength ratings, credit and
counterparty risks including: insufficient internal sources to
meet liquidity needs and limited or no access to capital (including
the ability to obtain further financing under an additional secured
term loan or credit facility); continued availability of capital
and financing; future adverse rating agency actions, including with
respect to rating downgrades or potential downgrades or being put
on review for potential downgrade, all of which could have adverse
implications for the company, including with respect to key
business relationships, product offerings, business results of
operations, financial condition and capital needs, strategic plans,
collateral obligations and availability and terms of hedging,
reinsurance and borrowings; defaults by counterparties to
reinsurance arrangements or derivative instruments; defaults or
other events impacting the value of the company's fixed maturity
securities portfolio; and defaults on the company's commercial
mortgage loans or the mortgage loans underlying its investments in
commercial mortgage-backed securities and volatility in
performance;
- operational risks including: inability to retain,
attract and motivate qualified employees or senior management;
ineffective or inadequate risk management in identifying,
controlling or mitigating risks; reliance on, and loss of, key
customer or distribution relationships; competition, including in
the company's mortgage insurance businesses from government and
government-owned and government-sponsored enterprises (GSEs)
offering mortgage insurance; the design and effectiveness of the
company's disclosure controls and procedures and internal control
over financial reporting may not prevent all errors, misstatements
or misrepresentations; and failure or any compromise of the
security of the company's computer systems, disaster recovery
systems and business continuity plans and failures to safeguard, or
breaches of, its confidential information;
- insurance and product-related risks including: the
company's inability to increase premiums and associated benefit
reductions sufficiently, and in a timely manner, on in force long
term care insurance policies, and charge higher premiums on
policies, in each case, as currently anticipated and as may be
required from time to time in the future (including as a result of
the company's failure to obtain any necessary regulatory approvals
or unwillingness or inability of policyholders to pay increased
premiums and/or accept reduced benefits), including to offset any
impact on the company's long term care insurance margins;
availability, affordability and adequacy of reinsurance to protect
the company against losses; inability to realize anticipated
benefits of the company's rescissions, curtailments, loan
modifications or other similar programs in its mortgage insurance
businesses; premiums for the significant portion of the company's
mortgage insurance risk in force with high loan-to-value ratios may
not be sufficient to compensate the company for the greater risks
associated with those policies; decreases in the volume of high
loan-to-value mortgage originations or increases in mortgage
insurance cancellations; increases in the use of alternatives to
private mortgage insurance and reductions in the level of coverage
selected; potential liabilities in connection with the company's
U.S. contract underwriting services; and medical advances, such as
genetic research and diagnostic imaging, and related legislation
that impact policyholder behavior in ways adverse to the
company;
- other risks including: impairments of or valuation
allowances against the company's deferred tax assets and the
occurrence of natural or man-made disasters or a pandemic could
materially adversely affect the company's financial condition and
results of operations.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Condensed
Consolidated Statements of Income
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
2019
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,033
|
|
$
|
993
|
|
$
|
4,037
|
|
$
|
3,994
|
|
Net investment
income
|
|
|
794
|
|
|
779
|
|
|
3,220
|
|
|
3,121
|
|
Net investment gains
(losses)
|
|
|
23
|
|
|
22
|
|
|
50
|
|
|
(9)
|
|
Policy fees and other
income
|
|
|
188
|
|
|
191
|
|
|
789
|
|
|
795
|
|
|
|
Total
revenues
|
|
|
2,038
|
|
|
1,985
|
|
|
8,096
|
|
|
7,901
|
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,346
|
|
|
1,824
|
|
|
5,163
|
|
|
5,606
|
|
Interest
credited
|
|
|
138
|
|
|
152
|
|
|
577
|
|
|
611
|
|
Acquisition and
operating expenses, net of deferrals
|
|
|
249
|
|
|
249
|
|
|
962
|
|
|
943
|
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
164
|
|
|
81
|
|
|
441
|
|
|
348
|
|
Interest
expense
|
|
|
60
|
|
|
61
|
|
|
239
|
|
|
256
|
|
|
|
Total benefits and
expenses
|
|
|
1,957
|
|
|
2,367
|
|
|
7,382
|
|
|
7,764
|
|
Income (loss) from
continuing operations before income taxes
|
|
|
81
|
|
|
(382)
|
|
|
714
|
|
|
137
|
|
Provision (benefit)
for income taxes
|
|
|
26
|
|
|
(109)
|
|
|
195
|
|
|
70
|
|
Income (loss) from
continuing operations
|
|
|
55
|
|
|
(273)
|
|
|
519
|
|
|
67
|
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(31)
|
|
|
(54)
|
|
|
11
|
|
|
230
|
|
Net income
(loss)
|
|
|
24
|
|
|
(327)
|
|
|
530
|
|
|
297
|
|
Less: net income from
continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
19
|
|
|
8
|
|
|
64
|
|
|
70
|
|
Less: net income
(loss) from discontinued operations attributable
to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
22
|
|
|
(6)
|
|
|
123
|
|
|
108
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
(17)
|
|
$
|
(329)
|
|
$
|
343
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders
|
|
$
|
36
|
|
$
|
(281)
|
|
$
|
455
|
|
$
|
(3)
|
|
|
|
Income (loss) from
discontinued operations available to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Genworth Financial,
Inc.'s common stockholders
|
|
|
(53)
|
|
|
(48)
|
|
|
(112)
|
|
|
122
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders
|
|
$
|
(17)
|
|
$
|
(329)
|
|
$
|
343
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations available to Genworth
Financial,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc.'s common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.07
|
|
$
|
(0.56)
|
|
$
|
0.90
|
|
$
|
(0.01)
|
|
|
|
Diluted
|
|
$
|
0.07
|
|
$
|
(0.56)
|
|
$
|
0.89
|
|
$
|
(0.01)
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03)
|
|
$
|
(0.66)
|
|
$
|
0.68
|
|
$
|
0.24
|
|
|
|
Diluted
|
|
$
|
(0.03)
|
|
$
|
(0.66)
|
|
$
|
0.67
|
|
$
|
0.24
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
503.5
|
|
|
500.8
|
|
|
502.9
|
|
|
500.4
|
|
|
|
Diluted5
|
|
|
510.4
|
|
|
500.8
|
|
|
509.7
|
|
|
500.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income (Loss) to Adjusted Operating Income
(Loss)
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
Three
|
|
Twelve
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
(17)
|
|
$
|
(329)
|
|
$
|
343
|
|
$
|
119
|
|
$
|
18
|
|
Add: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
19
|
|
|
8
|
|
|
64
|
|
|
70
|
|
|
10
|
|
Add: net income
(loss) from discontinued operations attributable to noncontrolling
interests
|
|
22
|
|
|
(6)
|
|
|
123
|
|
|
108
|
|
|
30
|
|
Net income
(loss)
|
|
|
24
|
|
|
(327)
|
|
|
530
|
|
|
297
|
|
|
58
|
|
Less: income (loss)
from discontinued operations, net of taxes
|
|
|
(31)
|
|
|
(54)
|
|
|
11
|
|
|
230
|
|
|
(80)
|
|
Income (loss) from
continuing operations
|
|
|
55
|
|
|
(273)
|
|
|
519
|
|
|
67
|
|
|
138
|
|
Less: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
19
|
|
|
8
|
|
|
64
|
|
|
70
|
|
|
10
|
|
Income (loss) from
continuing operations available to Genworth Financial, Inc.'s
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stockholders
|
|
|
36
|
|
|
(281)
|
|
|
455
|
|
|
(3)
|
|
|
128
|
|
Adjustments to income
(loss) from continuing operations available to
Genworth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment
(gains), net14
|
|
|
(17)
|
|
|
(36)
|
|
|
(50)
|
|
|
(10)
|
|
|
(5)
|
|
Expenses related to
restructuring
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
2
|
|
|
—
|
|
Fees associated with
bond consent solicitation
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
Taxes on
adjustments
|
|
|
5
|
|
|
6
|
|
|
11
|
|
|
—
|
|
|
—
|
|
Adjusted operating
income (loss)
|
|
$
|
24
|
|
$
|
(305)
|
|
$
|
420
|
|
$
|
(5)
|
|
$
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance segment
|
|
$
|
160
|
|
$
|
124
|
|
$
|
568
|
|
$
|
490
|
|
$
|
137
|
|
Australia Mortgage
Insurance segment
|
|
|
12
|
|
|
18
|
|
|
51
|
|
|
76
|
|
|
12
|
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
19
|
|
|
(314)
|
|
|
57
|
|
|
(348)
|
|
|
21
|
|
|
Life
Insurance
|
|
|
(164)
|
|
|
(108)
|
|
|
(181)
|
|
|
(107)
|
|
|
(25)
|
|
|
Fixed
Annuities
|
|
|
30
|
|
|
(3)
|
|
|
69
|
|
|
79
|
|
|
3
|
|
|
Total U.S. Life
Insurance segment
|
|
|
(115)
|
|
|
(425)
|
|
|
(55)
|
|
|
(376)
|
|
|
(1)
|
|
Runoff
segment
|
|
|
17
|
|
|
(2)
|
|
|
56
|
|
|
35
|
|
|
10
|
|
Corporate and
Other
|
|
|
(50)
|
|
|
(20)
|
|
|
(200)
|
|
|
(230)
|
|
|
(35)
|
|
Adjusted operating
income (loss)
|
|
$
|
24
|
|
$
|
(305)
|
|
$
|
420
|
|
$
|
(5)
|
|
$
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03)
|
|
$
|
(0.66)
|
|
$
|
0.68
|
|
$
|
0.24
|
|
$
|
0.04
|
|
|
|
Diluted
|
|
$
|
(0.03)
|
|
$
|
(0.66)
|
|
$
|
0.67
|
|
$
|
0.24
|
|
$
|
0.04
|
|
Adjusted operating
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.05
|
|
$
|
(0.61)
|
|
$
|
0.84
|
|
$
|
(0.01)
|
|
$
|
0.25
|
|
|
|
Diluted
|
|
$
|
0.05
|
|
$
|
(0.61)
|
|
$
|
0.82
|
|
$
|
(0.01)
|
|
$
|
0.24
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
503.5
|
|
|
500.8
|
|
|
502.9
|
|
|
500.4
|
|
|
503.5
|
|
|
|
Diluted5
|
|
|
510.4
|
|
|
500.8
|
|
|
509.7
|
|
|
500.4
|
|
|
511.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
Cash, cash
equivalents, restricted cash and invested assets
|
|
$
|
75,226
|
|
$
|
68,165
|
|
Deferred acquisition
costs
|
|
|
1,836
|
|
|
3,142
|
|
Intangible assets and
goodwill
|
|
|
201
|
|
|
333
|
|
Reinsurance
recoverable
|
|
|
17,103
|
|
|
17,278
|
|
Deferred tax and
other assets
|
|
|
868
|
|
|
1,131
|
|
Separate account
assets
|
|
|
6,108
|
|
|
5,859
|
|
Assets held for sale
related to discontinued operations
|
|
|
—
|
|
|
5,015
|
|
|
|
|
Total
assets
|
|
$
|
101,342
|
|
$
|
100,923
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
40,384
|
|
$
|
37,940
|
|
|
Policyholder account
balances
|
|
|
22,217
|
|
|
22,968
|
|
|
Liability for policy
and contract claims
|
|
|
10,958
|
|
|
10,295
|
|
|
Unearned
premiums
|
|
|
1,893
|
|
|
2,013
|
|
|
Other
liabilities
|
|
|
1,562
|
|
|
1,529
|
|
|
Non-recourse funding
obligations
|
|
|
311
|
|
|
311
|
|
|
Long-term
borrowings
|
|
|
3,277
|
|
|
3,707
|
|
|
Separate account
liabilities
|
|
|
6,108
|
|
|
5,859
|
|
|
Liabilities held for
sale related to discontinued operations
|
|
|
—
|
|
|
2,112
|
|
|
|
|
Total
liabilities
|
|
|
86,710
|
|
|
86,734
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,990
|
|
|
11,987
|
|
|
Accumulated other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
(losses) on securities not other-than-temporarily
impaired
|
|
1,444
|
|
|
585
|
|
|
|
|
|
Net unrealized gains
(losses) on other-than-temporarily impaired securities
|
|
12
|
|
|
10
|
|
|
|
|
Net unrealized
investment gains (losses)
|
|
|
1,456
|
|
|
595
|
|
|
|
|
Derivatives
qualifying as hedges
|
|
|
2,002
|
|
|
1,781
|
|
|
|
|
Foreign currency
translation and other adjustments
|
|
|
(25)
|
|
|
(332)
|
|
|
Total accumulated
other comprehensive income (loss)
|
|
|
3,433
|
|
|
2,044
|
|
|
Retained
earnings
|
|
|
1,461
|
|
|
1,118
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
14,185
|
|
|
12,450
|
|
|
Noncontrolling
interests
|
|
|
447
|
|
|
1,739
|
|
|
|
|
Total
equity
|
|
|
14,632
|
|
|
14,189
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
101,342
|
|
$
|
100,923
|
|
|
|
|
|
|
|
Summary of Loss
From Discontinued Operations Available to
|
Genworth Financial
Inc.'s Common Stockholders
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
December
31,
|
|
|
|
|
2019
|
|
Net cash proceeds,
including special dividend15
|
|
$
|
1,790
|
|
Cash proceeds from
special dividend
|
|
|
54
|
|
Net cash
proceeds
|
|
|
1,736
|
|
Carrying value of
Genworth Canada
|
|
|
3,022
|
|
Less: carrying value
attributable to noncontrolling interests16
|
|
|
1,417
|
|
Carrying value,
excluding noncontrolling interests
|
|
|
1,605
|
|
Excess of net cash
proceeds above carrying value
|
|
|
131
|
|
Less: net deferred
losses and other adjustments17
|
|
|
325
|
|
Pre-tax loss on
sale
|
|
|
(194)
|
|
Tax
benefit
|
|
|
73
|
|
Total after-tax loss
on sale
|
|
|
(121)
|
|
Less: after-tax
estimated loss on sale recorded in the third quarter of
2019
|
|
|
(164)
|
|
After-tax gain on
sale recorded in current quarter
|
|
|
43
|
|
Income from
discontinued operations related to Genworth Canada, excluding loss
on sale
|
|
|
36
|
|
Loss from
discontinued operations related to previous sale of lifestyle
protection insurance business in 2015
|
|
(110)
|
|
Less: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
22
|
|
Loss from
discontinued operations available to Genworth Financial Inc.'s
common stockholders
|
$
|
(53)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Operating Income (Loss) Previously Reported to Adjusted
Operating Loss
|
Re-Presented to
Exclude Discontinued Operations
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
|
December
31,
|
|
December
31
|
|
|
|
2018
|
|
2018
|
Adjusted operating
income (loss) as previously reported
|
|
$
|
(291)
|
|
$
|
179
|
Remove Canada
Mortgage Insurance segment adjusted operating
income
reported as discontinued
operations
|
|
(48)
|
|
|
(187)
|
Adjustment for
corporate overhead allocations, net of
taxes18
|
|
|
(4)
|
|
|
(15)
|
Adjustment for
interest on debt that was required to be repaid as a result of
the
disposal transaction, net of
taxes19
|
|
7
|
|
|
20
|
Tax
adjustments20
|
|
|
31
|
|
|
(2)
|
Re-presented adjusted
operating loss
|
|
$
|
(305)
|
|
$
|
(5)
|
|
|
|
|
|
|
|
|
Impact of Foreign
Exchange on Adjusted Operating Income and Flow New Insurance
Written21
Three months ended
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange22
|
|
Australia
MI:
|
|
|
|
|
|
|
Adjusted operating
income
|
|
(33)
|
%
|
|
(28)
|
%
|
Flow new insurance
written
|
|
23
|
%
|
|
28
|
%
|
Flow new insurance
written (4Q19 vs. 3Q19)
|
7
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
Reconciliation of
Reported Yield to Core Yield
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
December
31,
|
|
September
30,
|
(Assets - amounts
in billions)
|
|
2019
|
|
2019
|
Reported Total
Invested Assets and Cash
|
|
$
|
74.6
|
|
|
$
|
73.9
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Unrealized
gains
|
|
|
6.9
|
|
|
|
7.5
|
|
Adjusted End of
Period Invested Assets and Cash
|
|
$
|
67.6
|
|
|
$
|
66.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets and Cash Used in Reported Yield Calculation
|
|
$
|
66.9
|
|
|
$
|
66.2
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Restricted commercial
mortgage loans related to a securitization
entity23
|
|
―
|
|
|
|
―
|
|
Average Invested
Assets and Cash Used in Core Yield Calculation
|
|
$
|
66.9
|
|
|
$
|
66.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in
millions)
|
|
|
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
794
|
|
|
$
|
816
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
23
|
|
|
|
13
|
|
|
Other non-core
items24
|
|
|
(2)
|
|
|
|
8
|
|
|
Restricted commercial
mortgage loans related to a securitization
entity23
|
|
―
|
|
|
|
―
|
|
Core Net Investment
Income
|
|
$
|
773
|
|
|
$
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.74
|
%
|
|
|
4.93
|
%
|
Core Yield
|
|
|
4.62
|
%
|
|
|
4.80
|
%
|
1 Private
Mortgage Insurer Eligibility Requirements
|
2 Long term care insurance
|
3 Includes both universal life and
term universal life insurance
|
4 Unless otherwise stated, all
references in this press release to net income (loss), net income
(loss) per share, net income (loss) from discontinued operations,
adjusted operating income (loss), adjusted operating income (loss)
per share and book value per share should be read as net income
(loss) available to Genworth's common stockholders, net income
(loss) available to Genworth's common stock-holders per diluted
share, net income (loss) from discontinued operations available to
Genworth's common stockholders, adjusted operating income (loss)
available to Genworth's common stockholders, adjusted operating
income (loss) available to Genworth's common stockholders per
diluted share and book value available to Genworth's common
stockholders per share, respectively.
|
5 Under applicable accounting
guidance, companies in a loss position are required to use basic
weighted-average common shares outstanding in the calculation of
diluted loss per share. Therefore, as a result of the loss from
continuing operations for the three and twelve months ended
December 31, 2018, the company was required to use basic
weighted-average common shares outstanding in the calculation of
diluted loss per share for the three and twelve months ended
December 31, 2018, as the inclusion of shares for stock options,
restricted stock units and stock appreciation rights of 7.6 million
and 3.8 million, respectively, would have been antidilutive to the
calculation. If the company had not incurred a loss from continuing
operations for the three and twelve months ended December 31, 2018,
dilutive potential weighted-average common shares outstanding would
have been 508.4 million and 504.2 million, respectively.
|
6 This is a financial measure that is
not calculated based on U.S. Generally Accepted Accounting
Principles (Non-GAAP). See the Use of Non-GAAP Measures
section of this press release for additional
information.
|
7 A
detailed breakdown of the net loss from discontinued operations is
provided in a table at the end of this press release.
|
8 The
company defines "NM" as not meaningful for increases or decreases
greater than 200 percent.
|
9 Company estimate for the fourth
quarter of 2019 due to timing of the preparation and filing of
statutory statements.
|
10 The PMIERs sufficiency ratio is
calculated as available assets divided by required assets as
defined within PMIERs. The current period PMIERs sufficiency ratio
is an estimate due to the timing of the PMIERs filing for the U.S.
mortgage insurance business. The periods ending December 31, 2019
and September 30, 2019 reflect the revised PMIERs standards
effective March 31, 2019. As of December 31, 2019, September 30,
2019, and December 31, 2018, the PMIERs sufficiency ratios were in
excess of $1.0 billion, $850 million and $750 million,
respectively, of available assets above the applicable PMIERs
requirements.
|
11 U.S. life insurance companies'
statutory and cash flow testing results will be made available with
year-end statutory filings.
|
12 Holding company cash and liquid
assets comprises assets held in Genworth Holdings, Inc. (the issuer
of outstanding public debt) which is a wholly-owned subsidiary of
Genworth Financial, Inc.
|
13 Genworth Holdings, Inc. had $1,461
million, $297 million and $429 million of cash, cash equivalents
and restricted cash as of December 31, 2019, September 30, 2019 and
December 31, 2018, respectively, which included approximately zero,
$7 million and $16 million of restricted cash, respectively.
Genworth Holdings, Inc. also held $70 million, $69 million and $75
million in U.S. government securities as of December 31, 2019,
September 30, 2019 and December 31, 2018, respectively, which
included $48 million, $59 million and $42 million, respectively, of
restricted assets.
|
14 For the three months ended
December 31, 2019 and 2018, the years ended December 31, 2019 and
2018 and the three months ended September 30, 2019, net investment
(gains) losses were adjusted for DAC and other intangible
amortization and certain benefit reserves of $(3) million, $(5)
million, $(11) million, $(12) million and $(3) million,
respectively, and adjusted for net investment gains (losses)
attributable to noncontrolling interests of $9 million, $(9)
million, $11 million, $(7) million and $(4) million,
respectively.
|
15 Net proceeds after adjusting for
fees, expenses and foreign exchange, including special dividend of
CAD$1.45 paid in October 2019.
|
16 Excludes net deferred losses
attributable to noncontrolling interests of $110 million that are
described in the following footnote.
|
17 Primarily driven by net deferred
losses from cumulative historical foreign currency translation
adjustments and deferred taxes in other comprehensive income as a
result of tax law changes and change of intent regarding permanent
reinvestment partially offset by unrealized net gain on investments
reflected in other comprehensive income.
|
18 Expenses previously reported in
the Canada MI segment and moved to Corporate and Other
Activities.
|
19 Interest on a senior secured term
loan facility owed by Genworth Holdings, Inc. previously reported
in Corporate and Other Activities and moved to discontinued
operations.
|
20 Tax impacts resulting from the
classification of Genworth Canada as held-for-sale.
|
21 All percentages are comparing the
fourth quarter of 2019 to the fourth quarter of 2018 unless
otherwise stated.
|
22 The impact of foreign exchange was
calculated using the comparable prior period exchange
rates.
|
23 Represents the incremental assets
and investment income related to restricted commercial mortgage
loans.
|
24
Includes cost basis adjustments on structured securities and
various other immaterial items.
|
View original
content:http://www.prnewswire.com/news-releases/genworth-financial-announces-fourth-quarter-2019-results-300998805.html
SOURCE Genworth Financial, Inc.