RICHMOND, Va., Aug. 3, 2021 /PRNewswire/ --
- Continued Progress On Company's Strategic Objectives With
Strong Second Quarter Earnings, Preparations For An Initial Public
Offering (IPO) Of Minority Interest In Enact1 And
Holding Company Debt Reduction
- Enact Adjusted Operating Income Of $135
Million From Favorable Loss Performance Driven By Lower New
Delinquencies
- Enact's PMIERs2 Sufficiency Ratio Estimated At 165
Percent, $1,941 Million Above
Published Requirements
- U.S. Life Insurance Segment Adjusted Operating Income Of
$71 Million Driven By LTC3
Results Benefitting From In Force Rate Actions And Net Investment
Income
- Continued Progress Toward LTC Multi-Year Rate Action Plan
(MYRAP) With $49 Million Incremental
Annual Rate Increases Approved In Second Quarter, With An Estimated
Net Present Value (NPV) Of Approximately $300 Million
- Holding Company Cash And Liquid Assets Of $842 Million, Including $19 Million Restricted
- September 2021 Debt Redemption Of
$513 Million Completed Subsequent To
Quarter-End
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended June 30, 2021. The company reported net
income4 of $240 million, or $0.47 per diluted share, in the second quarter of
2021, compared with a net loss of $441 million, or
$0.86 per diluted share, in the
second quarter of 2020. The company reported adjusted operating
income5 of $194 million, or $0.38 per diluted share, in the second quarter of
2021, compared with an adjusted operating loss of $23 million,
or $0.05 per diluted share, in the
second quarter of 2020.
Strategic Update
During the current quarter, Genworth continued to make progress
on its strategic objectives to strengthen the financial condition
of the company and create long-term shareholder value. The company
continued preparations for a planned minority IPO of Enact, issued
an early redemption notice for the September
2021 debt for a July redemption, made progress on reducing
risk associated with the legacy LTC business through the MYRAP and
continued planning for a new LTC joint venture in the U.S.
The planned IPO of Enact remains a key strategic objective for
Genworth and is subject to market and other conditions, however
because the company is in registration and subject to applicable
publicity restrictions, Genworth is unable to comment further or
provide any additional detail at this time.
On June 21, 2021, Genworth issued
a notice of redemption for its outstanding 7.625% senior notes due
September 2021. Subsequent to the end
of quarter, on July 21, 2021,
Genworth completed the redemption of the $513 million outstanding principal amount of such
notes, which reduced remaining parent holding company public debt
outstanding to $1.7 billion, along
with the AXA S.A. (AXA) liability of approximately $345 million. Since 2013, the company has reduced
its parent holding company debt by a total of approximately
$2.2 billion, with over $1.2 billion retired in 2021 as of the date
hereof.
Genworth continued to execute on its MYRAP during the current
quarter, with the goal of achieving break-even on an economic basis
for the legacy LTC business over time. Incremental annual rate
increases of $49 million were
approved during the current quarter, bringing the total net present
value from LTC premium increases and benefit reductions achieved to
$15.5 billion since 2012.
"We delivered very strong results in the second quarter while
making progress on our strategic plan," said Tom McInerney, Genworth President and CEO.
"Today the company is on a more stable trajectory as a result of
continued strong operating performance, strategic actions we've
taken to reduce debt and excellent progress on the MYRAP over the
past several years. Our goal is to reduce parent holding company
debt to a sustainable level of approximately $1 billion, creating more financial flexibility
to return capital to shareholders and invest in future growth. With
an engaged Board of Directors and leadership team, a skilled and
dedicated workforce and deep expertise and experience, Genworth is
well positioned to create value over the long-term."
Financial Performance
Consolidated Net
Income (Loss) & Adjusted Operating Income (Loss)
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Three months ended
June 30
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2021
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2020
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Per
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Per
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diluted
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diluted
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Total
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(Amounts in
millions, except per share)
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Total
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share
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Total
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share
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% change
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Net income (loss)
available to Genworth's common stockholders
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$
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240
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$
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0.47
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$
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(441)
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$
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(0.86)
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154%
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Adjusted operating
income (loss)
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$
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194
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$
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0.38
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$
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(23)
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$
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(0.05)
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NM6
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Weighted-average
diluted shares
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515.0
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512.5
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As of June
30
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2021
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2020
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Book value per
share
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$
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29.89
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$
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28.96
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Book value per share,
excluding accumulated other comprehensive income (loss)
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$
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22.33
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$
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20.17
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Net investment gains, net of taxes and other adjustments,
increased net income by $55 million
in the current quarter. The investment gains were primarily driven
by mark-to-market gains on limited partnerships in the LTC
business. The net loss of $441
million in the second quarter of 2020 included $77 million of investment gains, net of taxes and
other adjustments.
Net investment income was $844
million in the quarter, compared to $801 million in the prior quarter and
$779 million in the prior year. Net
investment income was higher than the prior quarter and prior year
as a result of higher variable investment income, including income
from limited partnerships, bond calls, commercial mortgage loan
prepayments and the inflation impact on Treasury
Inflation-Protected Securities (TIPS), primarily in the LTC
business. The reported yield and the core yield5 for the
quarter were 5.11 percent and 4.85 percent, respectively, compared
to 4.84 percent and 4.73 percent, respectively, in the prior
quarter.
Genworth's effective tax rate on income from continuing
operations for the quarter was approximately 23 percent. The
effective tax rate was increased by the tax effect of forward
starting swap gains settled prior to the change in the corporate
tax rate under the 2017 Tax Cuts and Jobs Act, which continue to be
tax effected at 35 percent as they are amortized into net
investment income.
Adjusted operating income (loss) results by business line are
summarized in the table below:
Adjusted Operating
Income (Loss)
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(Amounts in
millions)
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Q2
21
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Q1
21
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Q2
20
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Enact
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$
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135
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$
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126
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$
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(3)
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U.S. Life
Insurance
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71
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62
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(5)
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Runoff
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15
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12
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24
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Corporate and
Other
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(27)
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(32)
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(39)
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Total Adjusted
Operating Income (Loss)
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$
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194
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$
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168
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$
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(23)
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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), 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.
Enact
Operating
Metrics
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(Dollar amounts in
millions)
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Q2
21
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Q1
21
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Q2
20
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Adjusted operating
income (loss)
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$
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135
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|
$
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126
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$
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(3)
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Primary new insurance
written
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$
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26,700
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$
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24,900
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$
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28,400
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Loss ratio
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12 %
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22 %
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94 %
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Enact reported adjusted operating income of $135 million,
compared with adjusted operating income of $126 million in the prior quarter and an adjusted
operating loss of $3 million in the
prior year. Enact's primary insurance in force increased 10 percent
versus the prior year from strong new insurance written (NIW),
partially offset by lower persistency. Primary NIW increased seven
percent from the prior quarter due to an increase in purchase
mortgage originations and was down six percent versus the prior
year primarily from lower estimated market share partially offset
by higher purchase originations and a larger private mortgage
insurance market. Earned premiums in the quarter were lower than
the prior quarter driven by lower single premium policy
cancellations, higher ceded premiums and continued lapse of older,
higher priced policies in the current low interest rate environment
offset by insurance in force growth. Current quarter earned
premiums were flat to the prior year as insurance in force growth
was offset by a decrease in single premium policy cancellations,
higher ceded premiums in the current year and the continued lapse
of older, higher priced policies.
Enact's current quarter results reflected losses of $30 million and a loss ratio of 12 percent, which
were primarily driven by new delinquencies. New delinquencies
decreased by 32 percent from 10,053 in the prior quarter to 6,862.
Approximately 45 percent of new primary delinquencies in the
current quarter were reported in forbearance plans which may cure
at elevated rates relative to historical performance. Results in
the prior quarter and prior year reflected losses of $55 million and $228
million, and a loss ratio of 22 percent and 94 percent,
respectively. The sequential decrease in losses was driven mainly
by lower losses from new delinquencies and the $10 million pre-tax reserve strengthening in the
prior quarter. Current quarter losses decreased versus the prior
year driven by higher new delinquencies and unfavorable reserve
adjustments in the prior year as a result of the COVID-19 pandemic.
The current quarter expense ratio of 27 percent was unfavorably
impacted by approximately two percentage points from $4 million of strategic transaction preparation
costs and restructuring costs of $2
million.
U.S. Life Insurance
Adjusted Operating
Income (Loss)
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(Amounts in
millions)
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Q2
21
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Q1
21
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Q2
20
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Long Term Care
Insurance
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$
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98
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$
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95
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$
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48
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Life
Insurance
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(40)
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(63)
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(81)
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Fixed
Annuities
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13
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30
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28
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Total U.S. Life
Insurance
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$
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71
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$
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62
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$
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(5)
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Long Term Care Insurance
Long term care insurance reported adjusted operating income of
$98 million, compared with $95 million in the prior
quarter and $48 million in the prior year. Earnings from in
force rate actions were more favorable than the prior quarter and
prior year, driven primarily by higher benefit reductions, which
included policyholder benefit reduction elections made as part of a
legal settlement, net of litigation expenses and taxes. LTC results
also reflected higher net investment income of $63 million after-tax versus the prior year and
$35 million after-tax versus the
prior quarter from limited partnerships, bond calls, commercial
mortgage loan prepayments and gains on TIPS.
Claim terminations in the current quarter were significantly
lower compared to the prior quarter and prior year, returning to
pre-pandemic levels. Higher claim terminations in recent quarters
were assumed to be driven by the COVID-19 pandemic and temporary in
nature resulting in the establishment, beginning in the fourth
quarter of 2020, of a temporary COVID-19 mortality adjustment
assuming that its mortality experience on the most vulnerable
claimants was accelerated, leaving its overall claim population
less likely to terminate compared to the pre-pandemic average
population. Therefore, in the prior quarter, the company
strengthened its claim reserves to temporarily adjust its mortality
assumption by $53 million after-tax.
However, in the current quarter, the company experienced lower
mortality as the impacts of the pandemic lessened and did not
establish additional claim reserves but reduced a portion of the
COVID-19 mortality adjustment leaving a pre-tax balance of
$143 million as of June 30, 2021. As the COVID-19 pandemic continues
to develop, short-term mortality experience may fluctuate, and the
company would increase or decrease the COVID-19 mortality
adjustment accordingly.
New claim incidence increased slightly versus the prior quarter
but remained lower than pre-pandemic levels, which drove continued
favorable development on incurred but not reported (IBNR) claim
reserves. Since the recent decrease in incidence is assumed to be
driven by the COVID-19 pandemic and temporary in nature, IBNR claim
reserves were strengthened by $23
million after-tax in the prior quarter and $29 million after-tax in the prior year.
Life Insurance
Life insurance reported an adjusted operating loss of
$40 million, compared with adjusted operating losses of
$63 million in the prior quarter and
$81 million in the prior year. Mortality, attributable in part
to the COVID-19 pandemic, was lower compared to the prior quarter
but higher compared to the prior year. Current quarter results
reflected lower deferred acquisition costs (DAC) amortization
compared to the prior year, as the large 20-year level-premium term
life insurance block written at the end of 2000 entered its
post-level premium period following the 60-day grace period.
Results also reflected lower reserve increases during the premium
grace period in the 10-year term universal life insurance block
associated with policies entering the post-level premium period
compared to the prior year. Current quarter results included a
$13 million after-tax charge related
to DAC recoverability testing in the company's universal life
insurance products versus a $17
million after-tax charge related to these products in the
prior quarter.
Fixed Annuities
Fixed annuities reported adjusted operating income of
$13 million, compared with $30 million in the prior
quarter and $28 million in the prior year. Results versus the
prior quarter and prior year reflected lower mortality in the
single premium immediate annuity product and unfavorable impacts
from declining interest rates.
Runoff
Runoff reported adjusted operating income of $15 million,
compared with $12 million in the prior quarter and
$24 million in the prior year. Results in the current quarter
reflected a benefit to the company's variable annuity products from
equity market performance that was favorable compared to the prior
quarter but less favorable compared to the prior year.
Corporate And Other
Corporate and Other reported an adjusted operating loss of
$27 million, compared with adjusted operating losses of
$32 million in the prior quarter and $39 million in the
prior year. Results in the current quarter reflected lower interest
expense compared to both 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)
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Q2
21
|
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Q1
21
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Q2
20
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Enact
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Consolidated
Risk-To-Capital Ratio7
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11.8:1
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11.7:1
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12.0:1
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Genworth Mortgage
Insurance Corporation Risk-To-Capital Ratio7
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12.0:1
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11.9:1
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12.2:1
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Private Mortgage
Insurer Eligibility Requirements (PMIERs) Sufficiency
Ratio7,8
|
|
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165
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%
|
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159
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%
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143
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%
|
U.S. Life Insurance
Companies
|
|
|
|
|
|
|
|
|
|
|
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Consolidated
Risk-Based Capital (RBC) Ratio7
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270
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%
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|
254
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%
|
|
|
222
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%
|
Holding Company Cash
and Liquid Assets9,10
|
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$
|
842
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$
|
757
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$
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554
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|
Key Points
- Enact's PMIERs sufficiency ratio is estimated to be 165
percent, $1,941 million above
published PMIERs requirements11. The PMIERs sufficiency
ratio was up six points, or $177
million, sequentially, driven in part by the completion of
an insurance linked notes transaction, which added $303 million of additional PMIERs capital credit
as of June 30, 2021, elevated lapse
from prevailing low interest rates, business cash flows and lower
delinquencies, partially offset by elevated NIW. Additionally,
elevated lapse continued to drive an acceleration of the
amortization on reinsurance transactions executed in prior
quarters, which caused a reduction in PMIERs capital credit in the
current quarter;
- PMIERs sufficiency benefited from a 0.30 multiplier applied to
the risk based required asset factor for certain non-performing
loans, which resulted in a reduction of the published PMIERs
required assets by an estimated $760
million at the end of the current quarter, compared to
$1,012 million at the end of the
prior quarter and $1,057 million at
the end of the second quarter 2020. These amounts are gross of
incremental reinsurance benefits from the elimination of the 0.30
multiplier;
- Enact Holdings, Inc.12 held $284 million of cash as of June 30, 2021, unchanged from the prior
quarter;
- U.S. life insurance companies' consolidated statutory
risk-based capital is estimated to be 270 percent, up from the
prior quarter primarily from LTC earnings driven by premium rate
increases, benefit reductions, including the impacts from a legal
settlement, and favorable claims experience; and
- The holding company ended the quarter with $842 million of cash and liquid assets, including
$19 million that is restricted. Cash
and liquid assets increased $85
million from the prior quarter's ending balance of
$757 million primarily from
$112 million of net tax inflows,
partially offset by debt service costs. Subsequent to the quarter,
the company redeemed all of its remaining $513 million of outstanding principal due in
September 2021 for approximately
$532 million, which included the
principal amount, a make-whole premium and accrued and unpaid
interest. The parent holding company public debt outstanding is
$1.7 billion, as of the date hereof,
in addition to the AXA liability of approximately $345 million.
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.
Conference Call And Financial Supplement Information
This press release and the second quarter 2021 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 August 4,
2021. Investors are encouraged to review these
materials.
Genworth will conduct a conference call on August 4, 2021 at 9:00
a.m. (ET) to discuss the quarter's results. Genworth's
conference call will be accessible via telephone and the Internet.
The dial-in number for Genworth's August
4th conference call is 888 208.1820 or 323
794.2110 (outside the U.S.); conference ID # 3957029. 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 # 3957209 through
August 18, 2021. 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), 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 estimated
future credit losses, 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.
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.
Adjustments to reconcile net income (loss) available to Genworth
Financial, Inc.'s common stockholders to adjusted operating income
(loss) assume a 21 percent tax rate. Net investment gains (losses)
are also adjusted for DAC and other intangible amortization and
certain benefit reserves.
The company repurchased $52
million and $146 million
principal amount of Genworth Holdings, Inc.'s (Genworth Holdings)
senior notes with 2021 maturity dates for a pre-tax gain (loss) of
$3 million and $(4) million in the second quarter of 2020 and
the first quarter of 2021, respectively. These transactions were
excluded from adjusted operating income (loss) as they relate to
gains (losses) on the early extinguishment of debt.
The company recorded a pre-tax expense of $5 million and $1
million in the second quarters of 2021 and 2020,
respectively, and $21 million in the
first quarter of 2021 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.
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 months ended June 30,
2021 and 2020, as well as for the three months ended
March 31, 2021, 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 businesses at the U.S. corporate federal
income tax rate of 21 percent. Each segment is then adjusted to
reflect the unique tax attributes of that segment such as permanent
differences between U.S. GAAP and 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
included in the company's Enact segment. 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 for the company's Enact segment. Insurance in force
is a measure of the aggregate unpaid principal balance as of the
respective reporting date for loans the company insures. Risk in
force is based on the coverage percentage applied to the estimated
current outstanding loan balance. 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 U.S. mortgage insurance business
included in the company's Enact segment, 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 included
in the company's U.S. Life Insurance segment, 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 a potential minority IPO of Enact
Holdings, Inc. (Enact Holdings), future reductions of debt,
potential dividends or share repurchases, and future strategic
investments, as well as statements the company makes regarding the
potential impacts of the COVID-19 pandemic. 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:
- the company may be unable to successfully execute strategic
plans to effectively address its current business challenges
including: the company's debt maturities and other near-term
liabilities and financial obligations, reducing costs, stabilizing
its U.S. life insurance businesses without additional capital
contributions, improving overall capital and ratings; the risk that
the impacts of or uncertainty created by the COVID-19 pandemic
delay or hinder strategic transactions or otherwise make strategic
transactions less attractive; the inability to pursue strategic
transactions; 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 (including a potential partial sale of Enact
Holdings) in each case, in a timely manner and on anticipated
terms; an inability to increase the capital needed in the company's
businesses in a timely manner and on anticipated terms, including
through improved business performance, reinsurance or similar
transactions, asset sales, debt issuances, securities offerings or
otherwise, in each case as and when required; a failure to obtain
any required regulatory, stockholder, noteholder approvals and/or
other third-party approvals or consents for such strategic
transactions; market conditions that do not permit such a strategic
transaction to be completed or negatively impacts the overall
timing and final terms of such a strategic transaction; 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; an inability to achieve
anticipated cost-savings in a timely manner; and adverse tax or
accounting charges;
- 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 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; the inability to accurately estimate the impacts of the
COVID-19 pandemic; 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); and changes in valuation of
fixed maturity and equity securities;
- 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 impact on the company's liquidity due to the repayment of its
September 2021 debt maturity; an
inability to obtain further financing or liquidity, either by
raising capital through issuing additional debt or equity,
including convertible or equity-linked securities, and/or selling a
percentage of the company's ownership interest in Enact Holdings
prior to the company's future debt maturities, or an inability to
obtain a secured term loan or credit facility; the impact on
holding company liquidity caused by the inability to receive
dividends or other returns of capital from Enact Holdings,
including as a result of the COVID-19 pandemic; the impact of
increased leverage as a result of the AXA settlement and related
restrictions; continued availability of capital and financing;
future adverse rating agency actions against the company or Enact
Holdings, including with respect to rating downgrades or potential
downgrades or being put on review for potential downgrade, all of
which could have adverse implications, 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; defaults on the company's commercial mortgage
loans; defaults on mortgage loans or other assets underlying the
company's investments in its mortgage-backed and asset-backed
securities and volatility in performance;
- risks relating to economic, market and political
conditions including: downturns and volatility in global
economies and equity and credit markets, including as a result of
prolonged unemployment, a sustained low interest rate environment
and other displacements caused by the COVID-19 pandemic; 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
the company's Enact segment; 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 Enact
Holdings, 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, heightened regulatory
restrictions resulting from the COVID-19 pandemic, and other
insurance, regulatory or corporate law restrictions; the inability
to successfully seek in force rate action increases (including
increased premiums and associated benefit reductions) in the
company's long term care insurance business, including as a result
of the COVID-19 pandemic; adverse change in regulatory
requirements, including risk-based capital; inability to continue
to maintain the private mortgage insurer eligibility requirements
(PMIERs); risks on Enact Holdings' ability to pay its holding
company dividends as a result of the government-sponsored
enterprises (GSEs) amendments to PMIERs in response to COVID-19 or
additional PMIERs requirements or other restrictions that the GSEs
may place on the ability of Enact Holdings to pay dividends to its
holding company, including additional potential PMIERs restrictions
that the GSEs may impose if the potential partial sale of Enact
Holdings does not occur by the beginning of October 2021; the impact on capital levels of
increased delinquencies caused by the COVID-19 pandemic; 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 Enact segment;
additional restrictions placed on the Enact segment by government
and government-owned and the GSEs in connection with a new debt
financing and/or sale of a percentage of its ownership interests
therein; inability to continue to implement actions to mitigate the
impact of statutory reserve requirements; changes in tax laws; and
changes in accounting and reporting standards;
- operational risks including: the inability to retain,
attract and motivate qualified employees or senior management; the
impact on processes caused by shelter-in-place or other
governmental restrictions imposed as a result of the COVID-19
pandemic; reliance on, and loss of, key customer or distribution
relationships; 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,
business continuity plans and failures to safeguard or breaches of
confidential information;
- insurance and product-related risks including: the
company's inability to increase premiums and reduce benefits
sufficiently, and in a timely manner, on its in force long term
care insurance policies, in each case, as currently anticipated and
as may be required from time to time in the future (including as a
result of a delay or failure to obtain any necessary regulatory
approvals, including as a result of the COVID-19 pandemic, or
unwillingness or inability of policyholders to pay increased
premiums and/or accept reduced benefits), including to offset any
negative impact on the company's long term care insurance margins;
availability, affordability and adequacy of reinsurance to protect
the company against losses; decreases in the volume of 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: the occurrence of natural or
man-made disasters or a pandemic, similar to the COVID-19 pandemic,
could materially adversely affect its 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. This press release does not
constitute an offering of any securities.
Condensed
Consolidated Statements of Income
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three
months
|
|
|
|
|
|
Three months
ended
|
|
ended
|
|
|
|
|
|
June
30,
|
|
March
31,
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
947
|
|
$
|
957
|
|
$
|
968
|
Net investment
income
|
|
|
844
|
|
|
779
|
|
|
801
|
Net investment gains
(losses)
|
|
|
70
|
|
|
93
|
|
|
33
|
Policy fees and other
income
|
|
|
180
|
|
|
174
|
|
|
183
|
|
|
Total
revenues
|
|
|
2,041
|
|
|
2,003
|
|
|
1,985
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,161
|
|
|
1,447
|
|
|
1,218
|
Interest
credited
|
|
|
127
|
|
|
139
|
|
|
131
|
Acquisition and
operating expenses, net of deferrals
|
|
|
304
|
|
|
210
|
|
|
275
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
86
|
|
|
87
|
|
|
77
|
Interest
expense
|
|
|
43
|
|
|
42
|
|
|
51
|
|
|
Total benefits and
expenses
|
|
|
1,721
|
|
|
1,925
|
|
|
1,752
|
Income from
continuing operations before income taxes
|
|
|
320
|
|
|
78
|
|
|
233
|
Provision for income
taxes
|
|
|
75
|
|
|
23
|
|
|
59
|
Income from
continuing operations
|
|
|
245
|
|
|
55
|
|
|
174
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(5)
|
|
|
(473)
|
|
|
21
|
Net income
(loss)
|
|
|
240
|
|
|
(418)
|
|
|
195
|
Less: net income
(loss) from continuing operations attributable to
noncontrolling
|
|
|
|
|
|
|
|
|
|
|
interests
|
|
|
—
|
|
|
—
|
|
|
—
|
Less: net income from
discontinued operations attributable to noncontrolling
|
|
|
|
|
|
|
|
|
|
|
interests
|
|
|
—
|
|
|
23
|
|
|
8
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
240
|
|
$
|
(441)
|
|
$
|
187
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth Financial,
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc.'s common
stockholders
|
|
$
|
245
|
|
$
|
55
|
|
$
|
174
|
|
|
Income (loss) from
discontinued operations available to Genworth Financial,
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc.'s common
stockholders
|
|
|
(5)
|
|
|
(496)
|
|
|
13
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
240
|
|
$
|
(441)
|
|
$
|
187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth Financial,
Inc.'s
|
|
|
|
|
|
|
|
|
|
|
common stockholders
per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
$
|
0.11
|
|
$
|
0.35
|
|
|
Diluted
|
|
$
|
0.47
|
|
$
|
0.11
|
|
$
|
0.34
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
|
|
|
|
|
|
|
|
|
per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.47
|
|
$
|
(0.87)
|
|
$
|
0.37
|
|
|
Diluted
|
|
$
|
0.47
|
|
$
|
(0.86)
|
|
$
|
0.37
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
507.0
|
|
|
505.4
|
|
|
506.0
|
|
|
Diluted
|
|
|
515.0
|
|
|
512.5
|
|
|
513.8
|
Reconciliation of
Net Income (Loss) to Adjusted Operating Income
(Loss)
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
Three
|
|
Three
|
|
|
months
ended
|
|
months
ended
|
|
|
June
30,
|
|
March
31,
|
|
|
2021
|
|
2020
|
|
2021
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
240
|
|
$
|
(441)
|
|
$
|
187
|
Add: net income
(loss) from continuing operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
—
|
|
|
—
|
Add: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
23
|
|
|
8
|
Net income
(loss)
|
|
|
240
|
|
|
(418)
|
|
|
195
|
Less: income (loss)
from discontinued operations, net of taxes
|
|
|
(5)
|
|
|
(473)
|
|
|
21
|
Income from
continuing operations
|
|
|
245
|
|
|
55
|
|
|
174
|
Less: net income
(loss) from continuing operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
—
|
|
|
—
|
Income from
continuing operations available to Genworth Financial,
Inc.'s
|
|
|
|
|
|
|
|
|
|
|
common
stockholders
|
|
|
245
|
|
|
55
|
|
|
174
|
Adjustments to income
from continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders:
|
|
|
|
|
|
|
|
|
|
Net investment
(gains) losses, net13
|
|
|
(70)
|
|
|
(97)
|
|
|
(33)
|
(Gains) losses on
early extinguishment of debt
|
|
|
—
|
|
|
(3)
|
|
|
4
|
Expenses related to
restructuring
|
|
|
5
|
|
|
1
|
|
|
21
|
Taxes on
adjustments
|
|
|
14
|
|
|
21
|
|
|
2
|
Adjusted operating
income (loss)
|
|
$
|
194
|
|
$
|
(23)
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss):
|
|
|
|
|
|
|
|
|
|
Enact
segment
|
|
$
|
135
|
|
$
|
(3)
|
|
$
|
126
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
98
|
|
|
48
|
|
|
95
|
|
Life
Insurance
|
|
|
(40)
|
|
|
(81)
|
|
|
(63)
|
|
Fixed
Annuities
|
|
|
13
|
|
|
28
|
|
|
30
|
|
Total U.S. Life
Insurance segment
|
|
|
71
|
|
|
(5)
|
|
|
62
|
Runoff
segment
|
|
|
15
|
|
|
24
|
|
|
12
|
Corporate and
Other
|
|
|
(27)
|
|
|
(39)
|
|
|
(32)
|
Adjusted operating
income (loss)
|
|
$
|
194
|
|
$
|
(23)
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.47
|
|
$
|
(0.87)
|
|
$
|
0.37
|
|
Diluted
|
|
$
|
0.47
|
|
$
|
(0.86)
|
|
$
|
0.37
|
Adjusted operating
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
$
|
(0.05)
|
|
$
|
0.33
|
|
Diluted
|
|
$
|
0.38
|
|
$
|
(0.05)
|
|
$
|
0.33
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
507.0
|
|
|
505.4
|
|
|
506.0
|
|
|
Diluted
|
|
|
515.0
|
|
|
512.5
|
|
|
513.8
|
Reconciliation of
Adjusted Operating Loss Previously Reported to Adjusted Operating
Loss
|
Re-Presented to
Exclude Discontinued Operations
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
June
30,
|
|
|
|
2020
|
Adjusted operating
loss as previously reported
|
|
$
|
(21)
|
Remove Australia
Mortgage Insurance segment adjusted operating income
|
|
|
|
|
reported as
discontinued operations
|
|
|
(1)
|
Adjustment for
corporate overhead allocations, net of
taxes14
|
|
|
(4)
|
Tax
adjustments15
|
|
|
3
|
Re-presented adjusted
operating loss
|
|
$
|
(23)
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Cash, cash
equivalents, restricted cash and invested assets
|
|
$
|
75,805
|
|
$
|
77,917
|
|
Deferred acquisition
costs
|
|
|
1,212
|
|
|
1,487
|
|
Intangible
assets
|
|
|
151
|
|
|
157
|
|
Reinsurance
recoverable, net
|
|
|
16,666
|
|
|
16,819
|
|
Deferred tax and
other assets
|
|
|
614
|
|
|
469
|
|
Separate account
assets
|
|
|
6,202
|
|
|
6,081
|
|
Assets related to
discontinued operations
|
|
|
—
|
|
|
2,817
|
|
|
|
|
Total
assets
|
|
$
|
100,650
|
|
$
|
105,747
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
42,165
|
|
$
|
42,695
|
|
|
Policyholder account
balances
|
|
|
19,944
|
|
|
21,503
|
|
|
Liability for policy
and contract claims
|
|
|
11,546
|
|
|
11,486
|
|
|
Unearned
premiums
|
|
|
695
|
|
|
775
|
|
|
Other
liabilities
|
|
|
1,664
|
|
|
1,614
|
|
|
Long-term
borrowings
|
|
|
2,924
|
|
|
3,403
|
|
|
Separate account
liabilities
|
|
|
6,202
|
|
|
6,081
|
|
|
Liabilities related
to discontinued operations
|
|
|
346
|
|
|
2,370
|
|
|
|
|
Total
liabilities
|
|
|
85,486
|
|
|
89,927
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
12,018
|
|
|
12,008
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
3,834
|
|
|
4,425
|
|
|
Retained
earnings
|
|
|
2,011
|
|
|
1,584
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
15,164
|
|
|
15,318
|
|
|
Noncontrolling
interests
|
|
|
—
|
|
|
502
|
|
|
|
|
Total
equity
|
|
|
15,164
|
|
|
15,820
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
100,650
|
|
$
|
105,747
|
Reconciliation of
Reported Yield to Core Yield
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
June
30,
|
|
March
31,
|
(Assets - amounts
in billions)
|
|
2021
|
|
2021
|
Reported Total
Invested Assets and Cash
|
|
$
|
75.2
|
|
|
$
|
72.9
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Unrealized gains
(losses)
|
|
|
8.9
|
|
|
|
6.9
|
|
Adjusted End of
Period Invested Assets and Cash
|
|
$
|
66.2
|
|
|
$
|
65.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets and Cash Used in Reported and Core Yield
Calculation
|
|
$
|
66.1
|
|
|
$
|
66.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in
millions)
|
|
|
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
844
|
|
|
$
|
801
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
39
|
|
|
|
15
|
|
|
Other non-core
items16
|
|
|
3
|
|
|
|
2
|
|
Core Net Investment
Income
|
|
$
|
802
|
|
|
$
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
5.11
|
%
|
|
|
4.84
|
%
|
Core Yield
|
|
|
4.85
|
%
|
|
|
4.73
|
%
|
______________________________________
|
1 Formerly known as U.S. Mortgage
Insurance.
|
2 Private
Mortgage Insurer Eligibility Requirements.
|
3 Long
term care insurance.
|
4 Unless
otherwise stated, all references in this press release to net
income (loss), net income (loss) per share, 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 stockholders per diluted share, 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 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.
|
6 The
company defines "NM" as not meaningful for increases or decreases
greater than 200 percent.
|
7 Company
estimate for the second quarter of 2021 due to timing of the
preparation and filing of statutory statements.
|
8 The
PMIERs sufficiency ratio is calculated as available assets divided
by required assets as defined within the published PMIERs. As of
June 30, 2021, March 31, 2021, and June 30, 2020, the PMIERs
sufficiency ratios were $1,941 million, $1,764 million and $1,275
million, respectively, of available assets above the published
PMIERs requirements.
|
9 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.
|
10
Genworth Holdings, Inc. had $742 million, $757 million and $504
million of cash, cash equivalents and restricted cash as of June
30, 2021, March 31, 2021 and June 30, 2020, respectively, which
included $60 million and $10 million of restricted cash and cash
equivalents as of March 31, 2021 and June 30, 2020, respectively.
Genworth Holdings, Inc. also held $100 million and $50 million in
U.S. government securities as of June 30, 2021 and June 30, 2020,
respectively, which included $19 million and $49 million,
respectively, of restricted assets.
|
11 The
GSEs have imposed certain capital restrictions on the Enact
business which remain in effect until certain conditions are met.
These restrictions currently require Genworth Mortgage Insurance
Corporation, the company's principal U.S. mortgage insurance
subsidiary, to maintain 115 percent of PMIERs minimum required
assets among other restrictions.
|
12
Formerly known as Genworth Mortgage Holdings, Inc., Genworth's
indirect wholly-owned mortgage insurance subsidiary.
|
13 For the
three months ended June 30, 2021, net investment (gains) losses
were adjusted for DAC and other intangible amortization and certain
benefit reserves of $(4) million.
|
14
Expenses previously reported in the Australia Mortgage Insurance
segment and moved to Corporate and Other activities.
|
15 Tax
impacts resulting from the classification of Genworth Mortgage
Insurance Australia Limited as discontinued operations.
|
16
Includes cost basis adjustments on structured securities and
various other immaterial items.
|
View original
content:https://www.prnewswire.com/news-releases/genworth-financial-announces-second-quarter-2021-results-301347434.html
SOURCE Genworth Financial, Inc.