Fourth Quarter Net Income of $163 Million and
Adjusted Operating Income of $164 Million;
2021 Full Year Net Income of $904 Million and
Adjusted Operating Income of $765 Million
- Enact segment adjusted operating income of $125 million, with
nine percent annual growth in primary insurance in force and a loss
ratio of three percent
- Enact’s PMIERs1 sufficiency ratio estimated at 165 percent,
approximately $2.0 billion above published requirements
- U.S. Life Insurance segment adjusted operating income of $41
million driven by long term care insurance (LTC) results
benefitting from in force rate actions and higher net investment
income
- Annual U.S. GAAP assumption review completed for U.S. Life
Insurance segment:
- LTC U.S. GAAP active life margins remained positive and in the
prior year range of $0.5 to $1.0 billion
- Net unfavorable impact of $70 million after-tax in life
insurance
- Strong U.S. Life Insurance companies’ statutory income driving
estimated year-end RBC to 290%
- Received $163 million dividend payment from Enact
- Significant holding company debt retirement in the fourth
quarter of 2021 and approximately $2.1 billion principal retired in
the year
- Genworth holding company cash and liquid assets of $356 million
at year-end
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended December 31, 2021. The company reported net
income2 of $163 million, or $0.32 per diluted share, in the fourth
quarter of 2021, compared with net income of $267 million, or $0.52
per diluted share, in the fourth quarter of 2020. The company
reported adjusted operating income3 of $164 million, or $0.32 per
diluted share, in the fourth quarter of 2021, compared with
adjusted operating income of $188 million, or $0.37 per diluted
share, in the fourth quarter of 2020.
The company reported full year net income of $904 million, or
$1.76 per diluted share, in 2021, compared with net income of $178
million, or $0.35 per diluted share in 2020. The company reported
adjusted operating income of $765 million, or $1.48 per diluted
share, in 2021, compared with adjusted operating income of $310
million, or $0.61 per diluted share, in 2020.
“Genworth delivered strong operating performance, including
outstanding statutory results in its U.S. Life Insurance business,
in what was an exceptional year for the company,” said Tom
McInerney, Genworth President and CEO. “While driving this
performance, Genworth made significant progress against its
strategic priorities. In 2021, we completed a partial IPO of Enact,
retired more than $2.0 billion of holding company debt, made
progress toward stabilizing our legacy long term care insurance
business, reduced expenses and advanced long-term care growth
initiatives. The combination of our strong underlying operating
performance in Enact and LTC, improved balance sheet, reduced cost
of capital and 81.6% ownership of Enact is creating value for
Genworth’s shareholders over both the near- and long-term.”
Fourth
Quarter of 2021 Strategic Highlights
- Reduced holding company debt by $518 million in the fourth
quarter, including full retirement of the senior notes due in
August 2023 ($400 million principal) and reduction of the February
2024 senior notes by $118 million principal. As of December 31,
2021, Genworth had approximately $1.2 billion of parent holding
company long-term debt outstanding and $356 million in cash and
liquid assets.
- Continued progress against LTC multi-year rate action plan,
with an estimated $19.6 billion net present value from achieved LTC
rate actions since 2012.
- Shareholder return program will be evaluated once the company
reaches its holding company debt target of $1.0 billion and Enact
initiates its regular common dividend.
Financial
Performance
Consolidated Net Income &
Adjusted Operating Income
Three months ended December
31
Twelve months ended December
31
2021
2020
2021
2020
Per
Per
Per
Per
diluted
diluted
Total
diluted
diluted
Total
(Amounts in millions, except per
share)
Total
share
Total
share
% change
Total
share
Total
share
% change
Net income available to Genworth's
common stockholders
$
163
$
0.32
$
267
$
0.52
(39)%
$
904
$
1.76
$
178
$
0.35
NM 4
Adjusted operating income
$
164
$
0.32
$
188
$
0.37
(13)%
$
765
$
1.48
$
310
$
0.61
147 %
Weighted-average diluted common shares
515.6
512.5
514.7
511.6
As of December 31
2021
2020
Book value per share
$
30.57
$
30.28
Book value per share, excluding
accumulated other comprehensive
income (loss)
$
22.96
$
21.54
Net investment gains, net of taxes and other adjustments,
increased net income by $106 million in the current quarter,
compared with $114 million in the fourth quarter of 2020. The
investment gains in the current quarter were primarily from
mark-to-market gains on limited partnership investments held in the
LTC business.
In December 2021, the company entered into a new third-party
reinsurance agreement to cede certain term life insurance policies
as part of a life block transaction. The transaction resulted in a
net after-tax U.S. GAAP loss of $73 million for the amounts
initially ceded. However, this transaction generated statutory
capital of approximately $170 million for Genworth Life Insurance
Company and its subsidiaries.
Net investment income was $866 million in the quarter, compared
to $859 million in the prior quarter and $846 million in the prior
year. Net investment income was higher compared to both the prior
quarter and the prior year as a result of higher variable
investment income, primarily driven by income from limited
partnerships in the LTC business. The reported yield and the core
yield3 for the current quarter were 5.26 percent and 5.01 percent,
respectively, compared to 5.19 percent and 4.95 percent,
respectively, in the prior quarter.
Genworth’s effective tax rate on income from continuing
operations for the current quarter was approximately 24 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.
The below table shows adjusted operating income (loss) by
segment and for Corporate and Other activities:
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q4 21
Q3 21
Q4 20
Enact
$
125
$
134
$
95
U.S. Life Insurance
41
93
129
Runoff
16
11
13
Corporate and Other
(18)
1
(49)
Total Adjusted Operating Income
$
164
$
239
$
188
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, initial gains (losses) on insurance block transactions,
restructuring costs and other adjustments, net of taxes. A
reconciliation of net income to adjusted operating income is
included at the end of this press release.
Enact
Operating Metrics
(Dollar amounts in millions)
Q4 21
Q3 21
Q4 20
Adjusted operating income
$
125
$
134
$
95
Primary new insurance written
$
21,400
$
24,000
$
27,000
Loss ratio
3 %
14 %
35 %
Enact reported adjusted operating income of $125 million,
compared with $134 million in the prior quarter and $95 million in
the prior year. Enact’s primary insurance in force increased nine
percent versus the prior year from new insurance written (NIW),
partially offset by historically low persistency. Primary NIW
decreased 11 percent from the prior quarter and was also down 21
percent versus the prior year primarily from a smaller private
mortgage insurance market driven in part by a decline in refinance
activity. Earned premiums in the current quarter were lower
compared to both the prior quarter and the prior year as insurance
in force growth was offset by a decrease in single premium policy
cancellations, the continued lapse of older, higher priced policies
and higher ceded premiums versus the prior year. Enact’s expenses
in the current quarter were $59 million, resulting in an expense
ratio of 25 percent, which increased slightly versus the prior
quarter.
Enact’s current quarter results reflected losses of $6 million
and a loss ratio of three percent. Results in the prior quarter and
prior year reflected losses of $34 million and $89 million, and a
loss ratio of 14 percent and 35 percent, respectively. New
delinquencies in the current quarter were 8,282, an increase of 12
percent from 7,427 in the prior quarter, driven by elevated
delinquencies from FEMA5 impacted areas and recent large books
entering their expected loss development pattern. Current quarter
new delinquencies decreased 31 percent from 11,923 in the prior
year. Losses in the current quarter included a $32 million pre-tax
reserve release on pre-COVID-19 delinquencies, while losses in the
prior year included a $37 million pre-tax reserve strengthening on
existing delinquencies. The favorable reserve development decreased
the current quarter loss ratio by 13 points. Despite the sequential
increase in new delinquencies, the current quarter new delinquency
rate of 0.9 percent remained consistent with pre-pandemic levels.
Approximately 29 percent of new primary delinquencies in the
current quarter were reported in forbearance plans which may cure
at elevated rates.
U.S. Life Insurance
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q4 21
Q3 21
Q4 20
Long Term Care Insurance
$
119
$
133
$
129
Life Insurance
(98)
(68)
(20)
Fixed Annuities
20
28
20
Total U.S. Life Insurance
$
41
$
93
$
129
Long Term Care Insurance In Force Rate
Action Performance
(Amounts in millions)
Q4 21
Q3 21
Q4 20
Adjusted Operating Income from In Force
Rate Actions6,7
$
296
$
304
$
225
Long Term Care Insurance
Long term care insurance reported adjusted operating income of
$119 million, compared with $133 million in the prior quarter and
$129 million in the prior year. Earnings from in force rate actions
were more favorable than the 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 $26 million after-tax versus the prior year
and $9 million after-tax versus the prior quarter primarily from
limited partnerships, bond calls, commercial mortgage loan
prepayments and gains on Treasury Inflation-Protected
Securities.
Claim terminations in the current quarter remained elevated
versus pre-pandemic levels, increasing compared to the prior
quarter but decreasing compared to the prior year. Beginning in the
fourth quarter of 2020, the company established a temporary
COVID-19 mortality adjustment, reflecting the assumption that the
pandemic had accelerated its mortality experience on the most
vulnerable claimants, leaving its overall claim population less
likely to terminate compared to the pre-pandemic average
population. In the current quarter, the company released $8 million
of this reserve, leaving a pre-tax balance of $134 million as of
December 31, 2021. As the COVID-19 pandemic continues to develop,
short-term mortality experience may fluctuate, and the COVID-19
mortality adjustment would be reduced accordingly if mortality
experience becomes unfavorable until the reserve is exhausted.
New claim incidence increased versus the prior year but has
remained lower than pre-pandemic levels. With the historically low
new claim incidence since the onset of the COVID-19 pandemic,
favorable development on incurred but not reported (IBNR) claim
reserves has continued, but to a lesser extent. Since the second
quarter of 2020, IBNR has been strengthened to reflect the
company’s assumption that incidence during the COVID-19 pandemic
has been temporarily delayed. In the current quarter, IBNR claim
reserves were reduced by $34 million after-tax, compared to a
strengthening of $37 million after-tax in the prior year.
In the current quarter, the company completed its annual review
of LTC claim reserve assumptions and methodologies and made no
changes to existing claim reserves, as experience in the aggregate
was in line with expectations. In the prior year, earnings included
a net benefit of $13 million after-tax from the completion of the
annual review of LTC assumptions and methodologies, primarily
related to claim reserves.
In the current quarter, the company also completed its annual
review of U.S. GAAP LTC active life margins, referred to as loss
recognition testing. All key margin testing assumptions were
reviewed and updated where appropriate. As of December 31, 2021,
the combined loss recognition testing margins for the separately
tested LTC acquired and historic blocks were positive and remained
within the $0.5 to $1.0 billion range. The company updated several
assumptions with respect to benefit utilization trends, lapses,
mortality, expenses and interest rates. The most significant update
was to the benefit utilization growth trend, reflecting increased
cost of care growth, which was offset by a higher modeled benefit
from planned future in force rate actions. As margins remained
positive, there was no reserve strengthening required, and
therefore no resulting charge to current quarter earnings.
Life Insurance
Life insurance reported an adjusted operating loss of $98
million, compared with $68 million in the prior quarter and $20
million in the prior year. During the current quarter, the company
completed its annual review of life insurance assumptions and
recorded an unfavorable charge of $70 million after-tax, driven by
assumption changes primarily related to unfavorable pre-COVID-19
mortality experience, particularly in the term universal life
insurance products, and interest rates. Results in the prior year
included a benefit of $60 million after-tax related to the
company’s annual review of life insurance assumptions.
Mortality, attributable in part to the COVID-19 pandemic, was
lower compared to both the prior quarter and the prior year.
Current quarter results also included a $32 million after-tax
charge related to DAC recoverability testing in the company’s term
universal and universal life insurance products versus a $30
million after-tax charge in the prior quarter and $50 million in
the prior year. Results in the prior year reflected higher DAC
amortization compared to the current year, as the large 20-year
level-premium term life insurance block written at the end of 2000
entered its post-level premium period.
Fixed Annuities
Fixed annuities reported adjusted operating income of $20
million, compared with $28 million in the prior quarter and $20
million in the prior year. Results in the current quarter reflected
an unfavorable adjustment related to state guaranty funds.
Mortality in the single premium immediate annuity product was
favorable compared to both the prior quarter and prior year.
Runoff
Runoff reported adjusted operating income of $16 million,
compared with $11 million in the prior quarter and $13 million in
the prior year. Current quarter results in the variable annuity
products were impacted by equity market and interest rate
performance which was favorable compared to the prior quarter and
less favorable than the prior year. Mortality experience in the
corporate-owned life insurance products was also higher in the
prior quarter. Results in the prior year included a $5 million
after-tax charge in the company’s variable annuity products from
annual assumption updates.
Corporate And Other
Corporate and Other reported an adjusted operating loss of $18
million, compared to adjusted operating income of $1 million in the
prior quarter and an adjusted operating loss of $49 million in the
prior year. Results in the prior quarter included tax benefits of
$21 million from a reduction in uncertain tax positions due to the
expiration of certain statute of limitations. Current quarter
results included lower interest expense from the reduction of
Genworth holding company debt and lower corporate expenses.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital & Liquidity
Metrics
(Dollar amounts in millions)
Q4 21
Q3 21
Q4 20
Enact
Consolidated Risk-To-Capital Ratio8
12.2:1
11.8:1
12.1:1
Genworth Mortgage Insurance Corporation
Risk-To-Capital Ratio8
12.3:1
11.9:1
12.3:1
Private Mortgage Insurer Eligibility
Requirements (PMIERs) Sufficiency Ratio8, 9
165
%
181
%
137
%
U.S. Life Insurance Companies
Consolidated Risk-Based Capital (RBC)
Ratio8
290
%
291
%
229
%
Holding Company Cash and Liquid Assets10,
11
$
356
$
638
$
1,103
Key Points
- Enact’s PMIERs sufficiency ratio is estimated to be 165
percent, $2,003 million above published PMIERs requirements12. The
PMIERs sufficiency ratio was down 16 points, or $284 million,
sequentially, driven by the dividend paid in the current quarter,
NIW and amortization of existing reinsurance transactions,
partially offset by elevated lapse from prevailing low interest
rates, business cash flows and lower delinquencies;
- 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 $390 million at the end of the
current quarter, compared to $570 million at the end of the prior
quarter and $1,046 million at the end of the fourth quarter of
2020. These amounts are gross of incremental reinsurance benefits
from the elimination of the 0.30 multiplier;
- In January 2022, Enact completed an excess of loss reinsurance
transaction, which will provide $294 million of reinsurance
coverage on a portion of current and expected new insurance written
for the 2022 book year;
- 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 company estimates fourth quarter of 2021 RBC
to be 290 percent, slightly down from 291 percent in the prior
quarter due to the expected negative impacts of assumption updates
and cash flow testing, offset by the benefit from the life block
transaction completed in the fourth quarter. The company’s estimate
for RBC in the fourth quarter of 2021 is significantly higher than
229 percent reported in the prior year, primarily attributable to
the strong statutory earnings in the current year, driven by LTC
premium increases and benefit reductions from in force rate
actions, including the impacts from a legal settlement, favorable
investment performance and favorable terminations. Statutory income
through the third quarter of 2021 was $693 million; and
- Genworth’s holding company ended the quarter with $356 million
of cash and liquid assets, including $3 million that is restricted.
Cash sources in the quarter included a $163 million dividend from
Enact and $75 million from intercompany tax arrangements. During
the current quarter, the company redeemed all of its $400 million
of outstanding principal due in August 2023 through a combination
of open market repurchases and a make-whole tender. In addition,
the company reduced its February 2024 debt obligation by $118
million through open market repurchases, leaving $282 million
principal remaining. Genworth’s parent holding company public debt
outstanding was approximately $1.2 billion as of December 31,
2021.
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 provider of
products, services and solutions that help families address the
financial challenges of aging. Headquartered in Richmond, Virginia,
Genworth applies its nearly 150 years of experience each day to
helping people navigate caregiving options and fund their long term
care needs. Genworth is also the parent company of publicly traded
Enact (Nasdaq: ACT), a leading U.S. mortgage insurance provider.
For more information on Genworth, visit genworth.com. From time to
time Enact separately releases financial and other information
about its operations. This information can be found at
ir.enactmi.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 fourth
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 February 2, 2022. Investors are encouraged to review
these materials.
Genworth will conduct a conference call on February 2, 2022 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 February 2nd conference call is
888-208-1820 or 323-794-2110 (outside the U.S.); conference ID
#4404709. 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 #4404709 through
February 16, 2022. The webcast will also be archived on the
company’s website for one year.
Prior to Genworth’s conference call, Enact will hold a
conference call on February 2, 2022 at 8:00 a.m. (ET) to discuss
its results from the fourth quarter. Enact’s conference call will
be accessible via telephone and the Internet. The dial-in number
for Enact’s February 2nd conference call is 833-730-3978 or
720-405-2123 (outside the U.S.); conference ID #7969025. To
participate in the call by webcast, register at
http://ir.enactmi.com/news-and-events/events at least 15 minutes
prior to the webcast to download and install any necessary
software.
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, initial gains (losses) on insurance block
transactions, restructuring costs and infrequent or unusual
non-operating items. Initial 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 initial
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, initial 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 and are net of the portion
attributable to noncontrolling interests. Net investment gains
(losses) are also adjusted for DAC and other intangible
amortization and certain benefit reserves.
In the fourth and third quarters of 2021, the company paid a
pre-tax make-whole premium of $20 million and $6 million,
respectively, related to the early redemption of Genworth Holdings,
Inc.’s (Genworth Holdings) senior notes originally scheduled to
mature in August 2023 and September 2021, respectively. In the
fourth quarter of 2021, the company repurchased $209 million
principal amount of Genworth Holdings' senior notes due in 2023 and
2024 for a pre-tax loss of $15 million. In the first quarter of
2021, the company repurchased $146 million principal amount of
Genworth Holdings' senior notes due in September 2021 for a pre-tax
loss of $4 million. During 2020, the company repurchased $84
million principal amount of Genworth Holdings' senior notes with
2021 maturity dates for a pre-tax gain of $3 million and $1 million
in the second and first quarters of 2020, respectively. In January
2020, the company paid a pre-tax make-whole expense of $9 million
related to the early redemption of Genworth Holdings’ senior notes
originally scheduled to mature in June 2020 and Rivermont Life
Insurance Company I, the company’s indirect wholly-owned special
purpose consolidated captive insurance subsidiary, early redeemed
all of its $315 million outstanding non-recourse funding
obligations originally due in 2050 resulting in a pre-tax loss of
$4 million from the write-off of deferred borrowing costs. These
transactions were excluded from adjusted operating income as they
relate to gains (losses) on the early extinguishment of debt.
In the fourth quarter of 2021, the company recorded a pre-tax
loss of $92 million as a result of ceding certain term life
insurance policies as part of a life block transaction.
The company recorded a pre-tax expense of $5 million, $3
million, $5 million and $21 million in the fourth, third, second
and first quarters of 2021, respectively, and $1 million in each of
the fourth, second and first quarters of 2020 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
during the periods presented.
The tables at the end of this press release provide a
reconciliation of net income available to Genworth Financial,
Inc.'s common stockholders to adjusted operating income for the
three and twelve months ended December 31, 2021 and 2020, as well
as for the three months ended September 30, 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 operating performance of
its Enact segment because it represents a measure of new sales of
insurance policies during a specified period, rather than a measure
of 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 insured by the company’s U.S.
mortgage insurance subsidiaries. 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 the operating performance of its Enact
segment 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.
Management also regularly monitors and reports adjusted
operating income from in force rate actions in the long term care
insurance business included in the company’s U.S. Life Insurance
segment. Adjusted operating income from in force rate actions
includes premium rate increases and associated benefit reductions
on its long term care insurance products implemented since 2012,
which are net of estimated premium tax, commissions, and other
expenses on an after-tax basis. Estimates for in force rate actions
reflect certain simplifying assumptions that may vary materially
from actual historical results, including but not limited to a
uniform rate of coinsurance and premium taxes in addition to
consistent policyholder behavior over time. Actual behavior may
differ significantly from these assumptions. In addition, estimates
exclude reserve updates resulting from profits followed by losses.
The company considers adjusted operating income from in force rate
actions to be a measure of its operating performance because it
helps bring older generation long term care insurance blocks closer
to a break-even point over time and helps bring the loss ratios on
newer long term care insurance blocks back towards their original
pricing.
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.
Statutory Accounting Data
The company presents certain supplemental statutory data for
Genworth Life Insurance Company (GLIC) and its consolidating life
insurance subsidiaries that has been prepared on the basis of
statutory accounting principles (SAP). GLIC and its consolidating
life insurance subsidiaries file financial statements with state
insurance regulatory authorities and the National Association of
Insurance Commissioners that are prepared using SAP, an accounting
basis either prescribed or permitted by such authorities. Due to
differences in methodology between SAP and U.S. GAAP, the values
for assets, liabilities and equity reflected in financial
statements prepared in accordance with U.S. GAAP are materially
different from those reflected in financial statements prepared
under SAP. This supplemental statutory data should not be viewed as
an alternative to U.S. GAAP or used in lieu of U.S. GAAP.
This supplemental statutory data includes risk-based capital
ratios for GLIC and its consolidating life insurance subsidiaries
as well as statutory earnings. Management uses and provides this
supplemental statutory data because it believes it provides a
useful measure of among other things the adequacy of capital.
Management uses this data to measure against its policy to manage
the U.S. life insurance businesses with internally generated
capital.
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 future reductions of debt, potential
dividends or share repurchases, and future strategic investments,
including new products and services designed to assist individuals
with navigating and financing long term care, 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 its strategic plans including: reducing the company's debt
maturities and other near-term liabilities and financial
obligations, reducing costs, stabilizing its U.S. life insurance
businesses, improving overall capital and ratings; returning
capital to the company’s shareholders through dividends and/or
share repurchases; and launching either unilaterally or with a
strategic partner new product and service offerings designed to
assist individuals with navigating and financing long-term care due
to a variety of risks and constraints, including but not limited
to: dependency on Enact Holdings’ to pay dividends, including
constraints as a result of the GSEs’ amendments to PMIERs in
response to COVID-19 as well as additional PMIERs requirements or
other restrictions that the GSEs may place on the ability of Enact
Holdings to pay dividends; an inability to establish new long term
care insurance business or product offerings due to commercial
and/or regulatory challenges; an inability to identify and contract
with a strategic partner regarding a new long-term care insurance
business; 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; the
company's strategic plans change or become 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, including new accounting guidance (that is
effective for the company on January 1, 2023) related to
long-duration insurance contracts;
• 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, including
whether borrower’s in a forbearance plan ultimately cure or result
in a claim; 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: 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; 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
unemployment, low labor participation, inflation, supply chain
disruptions, 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, including in connection with high mortgage
refinancing resulting in the cancellation of private mortgage
insurance consequently reducing Enact Holdings’ persistency on its
insurance in-force; rising interest rates could reduce the volume
of mortgage originations thereby adversely effecting Enact Holdings
new insurance written and results of operations; deterioration in
economic conditions or a decline in home prices that adversely
affect Enact Holdings’ loss experience; political and economic
instability or changes in government policies; and fluctuations in
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; Enact Holdings ability
to continue to maintain PMIERs; risks on Enact Holdings’ ability to
pay holding company dividends as a result of the 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 holding company dividends; the impact on
capital levels due to 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 in 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 Enact Holdings; additional restrictions
placed on Enact Holdings by government and government-owned
enterprises and the GSEs in connection with additional capital
transactions; 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,
including new accounting guidance (that is not yet effective for
the company) related to long-duration insurance contracts which
will likely materially impact the company’s financial position and
significantly reduce the company’s equity upon adoption (including
its equity at the accounting transition date of January 1, 2021)
and could result in increased volatility in the company’s results
of operations, as well as other comprehensive income (loss);
• operational risks including: the inability
to retain, attract and motivate qualified employees or senior
management; 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 Enact Holdings’
U.S. contract underwriting services; Enact Holdings’ delegated
underwriting program may subject its mortgage insurance
subsidiaries to unanticipated claims; 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 public health emergency,
including pandemics, could materially adversely affect the
company’s business, 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
Twelve months ended
ended
December 31,
December 31,
September 30,
2021
2020
2021
2020
2021
Revenues:
Premiums
$
576
$
970
$
3,435
$
3,836
$
944
Net investment income
866
846
3,370
3,227
859
Net investment gains (losses)
132
147
323
492
88
Policy fees and other income
162
191
704
729
179
Total revenues
1,736
2,154
7,832
8,284
2,070
Benefits and expenses:
Benefits and other changes in policy
reserves
861
1,157
4,383
5,214
1,143
Interest credited
127
132
508
549
123
Acquisition and operating expenses, net of
deferrals
354
253
1,223
935
290
Amortization of deferred acquisition costs
and intangibles
108
174
377
463
106
Interest expense
31
55
160
195
35
Total benefits and expenses
1,481
1,771
6,651
7,356
1,697
Income from continuing operations before
income taxes
255
383
1,181
928
373
Provision for income taxes
62
82
263
230
67
Income from continuing operations
193
301
918
698
306
Income (loss) from discontinued
operations, net of taxes
(1)
(35)
27
(486)
12
Net income
192
266
945
212
318
Less: net income from continuing
operations attributable to noncontrolling
interests
29
—
33
—
4
Less: net income (loss) from discontinued
operations attributable to
noncontrolling interests
—
(1)
8
34
—
Net income available to Genworth
Financial, Inc.'s common stockholders
$
163
$
267
$
904
$
178
$
314
Net income available to Genworth
Financial, Inc.'s common stockholders:
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders
$
164
$
301
$
885
$
698
$
302
Income (loss) from discontinued operations
available to Genworth Financial,
Inc.'s common stockholders
(1)
(34)
19
(520)
12
Net income available to Genworth
Financial, Inc.'s common stockholders
$
163
$
267
$
904
$
178
$
314
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders per share:
Basic
$
0.32
$
0.60
$
1.75
$
1.38
$
0.59
Diluted
$
0.32
$
0.59
$
1.72
$
1.36
$
0.59
Net income available to Genworth
Financial, Inc.'s common stockholders
per share:
Basic
$
0.32
$
0.53
$
1.78
$
0.35
$
0.62
Diluted
$
0.32
$
0.52
$
1.76
$
0.35
$
0.61
Weighted-average common shares
outstanding:
Basic
507.4
505.6
506.9
505.2
507.4
Diluted
515.6
512.5
514.7
511.6
514.2
Reconciliation of Net Income
to Adjusted Operating Income
(Amounts in millions, except
per share amounts)
(Unaudited)
Three
Twelve
Three
months ended
months ended
months ended
December 31,
December 31,
September 30,
2021
2020
2021
2020
2021
Net income available to Genworth
Financial, Inc.'s common stockholders
$
163
$
267
$
904
$
178
$
314
Add: net income from continuing operations
attributable to noncontrolling interests
29
—
33
—
4
Add: net income (loss) from discontinued
operations attributable to
noncontrolling interests
—
(1)
8
34
—
Net income
192
266
945
212
318
Less: income (loss) from discontinued
operations, net of taxes
(1)
(35)
27
(486)
12
Income from continuing operations
193
301
918
698
306
Less: net income from continuing
operations attributable to noncontrolling interests
29
—
33
—
4
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders
164
301
885
698
302
Adjustments to income from continuing
operations available to Genworth
Financial, Inc.'s common stockholders:
Net investment (gains) losses, net13
(133)
(144)
(324)
(503)
(88)
Losses on early extinguishment of debt
35
—
45
9
6
Initial loss from life block
transaction
92
—
92
—
—
Expenses related to restructuring
5
1
34
3
3
Taxes on adjustments
1
30
33
103
16
Adjusted operating income
$
164
$
188
$
765
$
310
$
239
Adjusted operating income (loss):
Enact segment
$
125
$
95
$
520
$
381
$
134
U.S. Life Insurance segment:
Long Term Care Insurance
119
129
445
237
133
Life Insurance
(98)
(20)
(269)
(247)
(68)
Fixed Annuities
20
20
91
78
28
Total U.S. Life Insurance segment
41
129
267
68
93
Runoff segment
16
13
54
43
11
Corporate and Other
(18)
(49)
(76)
(182)
1
Adjusted operating income
$
164
$
188
$
765
$
310
$
239
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.32
$
0.53
$
1.78
$
0.35
$
0.62
Diluted
$
0.32
$
0.52
$
1.76
$
0.35
$
0.61
Adjusted operating income per share:
Basic
$
0.32
$
0.37
$
1.51
$
0.61
$
0.47
Diluted
$
0.32
$
0.37
$
1.48
$
0.61
$
0.46
Weighted-average common shares
outstanding:
Basic
507.4
505.6
506.9
505.2
507.4
Diluted
515.6
512.5
514.7
511.6
514.2
Reconciliation of Adjusted
Operating Income Previously Reported to Adjusted Operating
Income
Re-Presented to Exclude
Discontinued Operations
(Amounts in millions)
Three months ended
Twelve months ended
December 31,
December 31,
2020
2020
Adjusted operating income as previously
reported
$
173
$
317
Remove Australia Mortgage Insurance
segment adjusted operating (income) loss
reported as discontinued operations
16
(1)
Adjustment for corporate overhead
allocations, net of taxes14
(5)
(17)
Tax adjustments15
4
11
Re-presented adjusted operating income
$
188
$
310
Condensed Consolidated Balance
Sheets
(Amounts in millions)
(Unaudited)
December 31,
December 31,
2021
2020
Assets
Cash, cash equivalents, restricted cash
and invested assets
$
74,496
$
77,917
Deferred acquisition costs
1,146
1,487
Intangible assets
143
157
Reinsurance recoverable, net
16,813
16,819
Deferred tax and other assets
507
469
Separate account assets
6,066
6,081
Assets related to discontinued
operations
—
2,817
Total assets
$
99,171
$
105,747
Liabilities and equity
Liabilities:
Future policy benefits
$
41,528
$
42,695
Policyholder account balances
19,354
21,503
Liability for policy and contract
claims
11,841
11,486
Unearned premiums
672
775
Other liabilities
1,511
1,614
Long-term borrowings
1,899
3,403
Separate account liabilities
6,066
6,081
Liabilities related to discontinued
operations
34
2,370
Total liabilities
82,905
89,927
Equity:
Common stock
1
1
Additional paid-in capital
11,858
12,008
Accumulated other comprehensive income
(loss)
3,861
4,425
Retained earnings
2,490
1,584
Treasury stock, at cost
(2,700)
(2,700)
Total Genworth Financial, Inc.'s
stockholders’ equity
15,510
15,318
Noncontrolling interests
756
502
Total equity
16,266
15,820
Total liabilities and equity
$
99,171
$
105,747
Reconciliation of Reported
Yield to Core Yield
Three
months ended
December 31,
September 30,
(Assets - amounts
in billions)
2021
2021
Reported Total Invested Assets and
Cash
$
73.8
$
74.7
Subtract:
Unrealized gains (losses)
8.2
8.5
Adjusted End of Period Invested Assets and
Cash
$
65.6
$
66.2
Average Invested Assets and Cash Used in
Reported and Core Yield Calculation
$
65.9
$
66.2
(Income - amounts
in millions)
Reported Net Investment Income
$
866
$
859
Subtract:
Bond calls and commercial mortgage loan
prepayments
38
43
Other non-core items16
2
(4)
Core Net Investment Income
$
826
$
820
Reported Yield
5.26
%
5.19
%
Core Yield
5.01
%
4.95
%
1 Private Mortgage Insurer Eligibility Requirements. 2 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. 3 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. 4 The company defines “NM” as not
meaningful for increases or decreases greater than 200 percent. 5
Federal Emergency Management Agency 6 Excludes reserve updates
resulting from profits followed by losses. 7 Includes estimated
premium tax, commissions, and other expenses, net of tax of $(61)
million, $(61) million and $(14) million in the fourth quarter of
2021, third quarter of 2021 and fourth quarter of 2020,
respectively. Also includes estimated impacts from a legal
settlement, net of tax and litigation expenses, of $57 million and
$48 million in the fourth quarter of 2021 and third quarter of
2021, respectively. 8 Company estimate for the fourth quarter of
2021 due to timing of the preparation and filing of statutory
statements. 9 The PMIERs sufficiency ratio is calculated as
available assets divided by required assets as defined within the
published PMIERs. As of December 31, 2021, September 30, 2021 and
December 31, 2020, the PMIERs sufficiency ratios were $2,003
million, $2,287 million and $1,229 million, respectively, of
available assets above the published PMIERs requirements. 10
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. 11
Genworth Holdings, Inc. had $331 million, $588 million and $1,078
million of cash, cash equivalents and restricted cash as of
December 31, 2021, September 30, 2021 and December 31, 2020,
respectively, which included $46 million of restricted cash and
cash equivalents as of December 31, 2020. Genworth Holdings, Inc.
also held $25 million, $50 million and $25 million in U.S.
government securities as of December 31, 2021, September 30, 2021
and December 31, 2020, respectively, which included $3 million, $3
million and $25 million, respectively, of restricted assets. 12 The
government-sponsored enterprises’ (GSEs) have imposed certain
capital restrictions which remain in effect until certain
conditions are met. These restrictions required 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 as of December 31, 2021.
Effective January 1, 2022, these requirements increased to 120
percent. 13 For the three months ended December 31, 2021 and 2020
and the twelve months ended December 31, 2021 and 2020, net
investment (gains) losses were adjusted for DAC and other
intangible amortization and certain benefit reserves of $(1)
million, $3 million, $(1) million and $(11) million, respectively.
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 Australia as
discontinued operations. 16 Includes cost basis adjustments on
structured securities and various other immaterial items.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220201005895/en/
Investors: Sarah Crews InvestorInfo@genworth.com
Media: Amy Rein Amy.Rein@genworth.com
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