Net Income of $181 Million and Adjusted
Operating Income of $176 Million
- Enact segment adjusted operating income of
$167 million, with nine percent annual growth in insurance in-force
and strong loss performance
- Received first quarterly dividend from Enact of $19
million
- U.S. Life Insurance segment adjusted operating income of $21
million driven by solid long-term care insurance (LTC) and fixed
annuity performance, partially offset by unfavorable life insurance
results
- $52 million in annual premium rate increases approved,
increasing net present value from achieved LTC rate actions since
2012 by approximately $300 million, bringing the total to $20.7
billion
- U.S. life insurance companies’ risk-based capital ratio
estimated at 290 percent
- Retired $48 million of debt, bringing holding company total
debt to $1,052 million; cash and liquid assets of $228 million
- Executed $30 million in share repurchases through July
2022
- Received a two-notch credit rating upgrade from Moody’s
Investors Service in July 2022
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended June 30, 2022. The company reported net income1
of $181 million, or $0.35 per diluted share, in the second quarter
of 2022, compared with net income of $240 million, or $0.47 per
diluted share, in the second quarter of 2021. The company reported
adjusted operating income2 of $176 million, or $0.34 per diluted
share, in the second quarter of 2022, compared with adjusted
operating income of $194 million, or $0.38 per diluted share, in
the second quarter of 2021.
“Despite a very challenging macroeconomic environment, Genworth
delivered another quarter of strong performance while further
strengthening our balance sheet and returning value to our
shareholders through our share buyback program,” said Tom
McInerney, Genworth President and CEO. “We are proud of the
progress we have made on our long-term value creation strategy.
Going forward, we will continue to balance debt reduction,
investments in growth and capital return to shareholders, while
proactively managing our legacy LTC portfolio.”
Financial Performance
Consolidated Net Income & Adjusted
Operating Income
Three months ended June 30
2022
2021
Per
Per
diluted
diluted
Total
(Amounts in millions, except per
share)
Total
share
Total
share
% change
Net income available to Genworth's common
stockholders
$
181
$
0.35
$
240
$
0.47
(25
)%
Adjusted operating income
$
176
$
0.34
$
194
$
0.38
(9
)%
Weighted-average diluted shares
514.2
515.0
As of June 30
2022
2021
Book value per share
$
23.28
$
29.89
Book value per share, excluding
accumulated other comprehensive income (loss)
$
23.56
$
22.33
Net investment gains, net of taxes and other adjustments,
increased net income by $8 million in the current quarter, compared
with $55 million in the second quarter of 2021. The investment
gains in the current quarter were primarily from mark-to-market
gains on limited partnership investments held in the LTC business
and net gains on derivatives partially offset by mark-to-market
losses on equity investments.
Net investment income was $787 million in the quarter, compared
to $764 million in the prior quarter and $844 million in the prior
year. Net investment income increased versus the prior quarter as a
result of higher income from limited partnerships and the inflation
benefit on Treasury Inflation-Protected Securities (TIPS),
primarily in the LTC business. Net investment income decreased
versus the prior year as a result of lower variable investment
income, primarily driven by lower income from bond calls,
commercial mortgage loan prepayments and limited partnerships,
partially offset by higher income from TIPS. The reported yield and
the core yield2 for the current quarter were 4.83 percent and 4.79
percent, respectively, compared to 4.67 percent and 4.61 percent,
respectively, in the prior quarter.
Genworth’s effective tax rate on income from continuing
operations for the current quarter was approximately 24.9 percent.
As in past quarters, the effective tax rate was increased by the
tax effect on certain forward starting swap gains that are taxed at
35 percent when amortized into net investment income.
The table below shows adjusted operating income (loss) by
segment and for Corporate and Other activities:
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q2 22
Q1 22
Q2 21
Enact3
$
167
$
135
$
135
U.S. Life Insurance
21
(4
)
71
Runoff
2
9
15
Corporate and Other
(14
)
(9
)
(27
)
Total Adjusted Operating Income
$
176
$
131
$
194
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. 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)
Q2 22
Q1 22
Q2 21
Adjusted operating income3
$
167
$
135
$
135
Primary new insurance written
$
17,448
$
18,823
$
26,657
Loss ratio
(26
)%
(4
)%
12
%
Enact reported adjusted operating income of $167 million,
compared with $135 million in both the prior quarter and prior
year. Enact’s primary insurance in-force increased nine percent
versus the prior year, driven by new insurance written (NIW) and
higher persistency given the rise in interest rates. Primary NIW
decreased seven percent from the prior quarter. It was also down 35
percent versus the prior year, primarily from a smaller private
mortgage insurance market. Enact’s expenses in the current quarter
were $61 million, resulting in an expense ratio of 26 percent.
Enact’s current quarter results reflected a benefit of $62
million from incurred losses driven by a favorable $96 million
pre-tax reserve release, primarily related to cures on 2020
COVID-19 delinquencies, which reduced the loss ratio to negative 26
percent. Results in the prior quarter and prior year reflected a
benefit of $10 million and losses of $30 million, and a loss ratio
of negative four percent and 12 percent, respectively. Losses in
the prior quarter included a favorable $50 million pre-tax reserve
release, primarily related to cures on 2020 COVID-19 delinquencies.
New delinquencies in the current quarter were 7,847, a decrease of
10 percent from 8,724 in the prior quarter, driven by seasonality.
Current quarter new delinquencies increased 14 percent from 6,862
in the prior year. The current quarter new delinquency rate of 0.8
percent remained consistent with pre-pandemic levels. Approximately
21 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)
Q2 22
Q1 22
Q2 21
Long-Term Care Insurance
$
34
$
59
$
98
Life Insurance
(34
)
(79
)
(40
)
Fixed Annuities
21
16
13
Total U.S. Life Insurance
$
21
$
(4
)
$
71
Long-Term Care Insurance In-Force Rate
Action Performance
(Amounts in millions)
Q2 22
Q1 22
Q2 21
Adjusted Operating Income from In-Force
Rate Actions4, 5
$
255
$
304
$
310
Long-Term Care Insurance
Long-term care insurance reported adjusted operating income of
$34 million, compared with $59 million in the prior quarter and $98
million in the prior year. Adjusted operating income impacts of
$255 million4 from cumulative in-force rate actions were less
favorable than the prior quarter and prior year, driven primarily
by lower reserve releases from benefit reductions related to a
legal settlement, as that settlement is materially complete.
However, a second legal settlement will begin to be implemented in
the second half of 2022.
In the current quarter, claim terminations and healthy life
mortality were lower versus the prior quarter from a seasonal
decrease in mortality and lower pandemic impacts. New claims
increased versus the prior quarter and prior year driven by both
higher severity and frequency as the legacy blocks age.
LTC results reflected higher net investment income of $31
million after-tax versus the prior quarter, primarily from the
favorable impact of limited partnerships and TIPS. Compared to the
prior year, LTC experienced lower net investment income of $18
million after-tax, primarily from the impact of lower income from
limited partnerships, bond calls and commercial mortgage loan
prepayments, partially offset by TIPS performance.
Renewal premiums decreased versus the prior year driven by
policy terminations and policies entering paid-up status because of
higher non-forfeiture and reduced benefit elections by
policyholders.
Life Insurance
Life insurance reported an adjusted operating loss of $34
million, compared with adjusted operating losses of $79 million in
the prior quarter and $40 million in the prior year. Current
quarter results were favorably impacted by significantly lower
mortality, driven by lower impacts from the pandemic. Amortization
of deferred acquisition costs (DAC) related to term lapses
increased in the current quarter as the 20-year term block issued
in 2002 entered the post-level premium period.
Current quarter results included a lower charge of $7 million
after-tax versus the prior quarter related to DAC recoverability
testing in the company’s universal life insurance products6. In the
prior quarter, the company also recorded a $20 million after-tax
charge related to a cost of insurance legal settlement.
Fixed Annuities
Fixed annuities reported adjusted operating income of $21
million, compared with $16 million in the prior quarter and $13
million in the prior year. Results in the current quarter reflected
higher mortality in the single premium immediate annuity product
and lower DAC amortization in the fixed index annuity product as a
result of rising interest rates. Net investment spreads were lower
versus the prior year, primarily from lower bond calls and
commercial mortgage loan prepayments, as well as anticipated block
runoff.
Runoff
Runoff reported adjusted operating income of $2 million,
compared with $9 million in the prior quarter and $15 million in
the prior year. Current quarter results in the closed variable
annuity product line were impacted by unfavorable equity market
performance compared to the prior quarter and prior year.
Corporate And Other
Corporate and Other reported an adjusted operating loss of $14
million, compared with adjusted operating losses of $9 million in
the prior quarter and $27 million in the prior year. Current
quarter results were lower compared to the prior quarter due to
lower investment income. Additionally, results in the current
quarter reflected lower interest expense versus the prior year from
the reduction of Genworth holding company debt.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital & Liquidity
Metrics
(Dollar amounts in millions)
Q2 22
Q1 22
Q2 21
Enact
Combined Risk-To-Capital Ratio7
12.6:1
12.0:1
11.8:1
Enact Mortgage Insurance Corporation
Risk-To-Capital Ratio7
12.6:1
12.1:1
12.0:1
Private Mortgage Insurer Eligibility
Requirements (PMIERs) Sufficiency Ratio7, 8
166
%
176
%
165
%
U.S. Life Insurance Companies
Consolidated Risk-Based Capital Ratio7
290
%
296
%
272
%
Holding Company Cash and Liquid
Assets9,10
$
228
$
215
$
842
Key Points
- Enact’s PMIERs sufficiency ratio is estimated to be 166
percent, $2,047 million above published PMIERs requirements11. The
PMIERs sufficiency ratio decreased 10 points, or by $214 million,
sequentially, driven by Enact’s operating company distribution to
its holding company, Enact Holdings, Inc., NIW and amortization of
existing reinsurance transactions, partially offset by lapses,
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 $178 million at the end of the
current quarter, compared to $272 million at the end of the prior
quarter and $760 million at the end of the second quarter of 2021.
These amounts are gross of incremental reinsurance benefits from
the elimination of the 0.30 multiplier;
- Enact paid its first quarterly dividend of $0.14 per share
during the current quarter, with $19 million paid to Genworth;
- Enact executed a five-year $200 million revolving credit
facility to enhance its future financial flexibility;
- U.S. life insurance companies’ consolidated statutory
risk-based capital ratio is estimated to be 290 percent at the end
of the current quarter, down from 296 percent in the prior quarter,
primarily from the impact of declining equity markets in the closed
variable annuity product line;
- Genworth’s holding company ended the quarter with $228 million
of cash and liquid assets. Cash sources in the quarter included $58
million from net intercompany tax payments and a $19 million
dividend from Enact. During the current quarter, the company
reduced its February 2024 debt obligation by $48 million through
open market repurchases, leaving $152 million of principal
remaining on the 2024 debt. Genworth’s parent holding company
public debt outstanding was $1,052 million as of June 30,
2022;
- The company repurchased $15 million of its common stock at an
average price below $3.90 per share in the second quarter and
repurchased an additional $15 million in July 2022 at an average
price below $3.75 per share. The company authorized a $350 million
share repurchase program in May 2022 and expects the majority of
share repurchases to occur following the repayment of its remaining
2024 debt; and
- In July 2022, Moody’s Investors Services upgraded the senior
unsecured debt rating of Genworth Holdings, Inc. by two notches,
from B1 to Ba2. The outlook for the rating is stable.
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 Holdings, Inc. (Nasdaq: ACT), a leading U.S. mortgage
insurance provider. For more information on Genworth, visit
genworth.com, and for more information on Enact Holdings, Inc.
visit enactmi.com.
Conference Call And Financial Supplement Information
Investors are encouraged to read this press release, summary
presentation and financial supplement, which are now posted on the
company’s website, http://investor.genworth.com.
Genworth will conduct a conference call on August 2, 2022 at
9:00 a.m. (ET) to discuss the second quarter’s results, which will
be accessible via:
- Telephone: 888-208-1820 or 323-794-2110 (outside the U.S.);
conference ID # 5586482; or
- Webcast: http://investor.genworth.com
Allow at least 15 minutes prior to the call time to register for
the call. A replay of the call will be available at 888-203-1112 or
719-457-0820 (outside the U.S.); conference ID # 5586482 through
August 16, 2022.
Prior to Genworth’s conference call, Enact will hold a
conference call on August 2, 2022 at 8:00 a.m. (ET) to discuss its
results from the second quarter, which will be accessible via:
- Telephone: 866-634-2594 or 412-902-4104 (outside the U.S.);
participants should ask to be joined into the Enact Holdings, Inc.
call; or
- Webcast: http://ir.enactmi.com/news-and-events/events
Allow at least 15 minutes prior to the call time to register for
the call.
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 second and first quarters of 2022, the company
repurchased $48 million and $82 million, respectively, principal
amount of Genworth Holdings, Inc.’s (Genworth Holdings) senior
notes due in February 2024 for a pre-tax loss of $1 million and $3
million, respectively. These transactions were excluded from
adjusted operating income as they relate to gains (losses) on the
early extinguishment of debt.
The company recorded a pre-tax expense of $1 million and $5
million in the second quarter of 2022 and 2021, respectively,
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 months ended June 30, 2022 and 2021, as well as for the three
months ended March 31, 2022, 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 mortgage insurance businesses
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, future Enact Holdings, Inc. (Enact
Holdings) quarterly and special dividends, the cumulative amount of
rate action benefits required for the company’s long-term care
insurance business to achieve break-even, future financial
performance of the company’s businesses, liquidity and future
strategic investments, including new products and services designed
to assist individuals with navigating and financing long-term care,
and potential third-party relationships or business arrangements
relating thereto, as well as statements the company makes regarding
the potential impacts of the coronavirus pandemic (COVID-19).
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, inflation, 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: to strengthen the company’s financial position and create
long-term shareholder value, including with respect to reducing
debt of Genworth Holdings; maximizing the value of Enact Holdings;
achieving economic breakeven on and stabilizing the legacy
long-term care insurance in-force block; advancing the company’s
long-term care growth initiatives, including launching either
unilaterally or with a strategic partner new product and service
offerings designed to assist individuals with navigating and
financing long-term care; and returning capital to Genworth
Financial shareholders, due to numerous risks and constraints,
including but not limited to: Enact Holdings’ ability to pay
dividends, including 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 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 priorities change or become
more costly or difficult to successfully achieve than currently
anticipated or the benefits achieved being less than anticipated;
an inability to identify and contract with a strategic partner
regarding a new long-term care insurance business; an inability to
establish a new long-term care insurance business or product
offerings due to commercial and/or regulatory challenges; an
inability to reduce costs proportionate with Genworth’s reduced
business activity, including as forecasted and 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; or other changes to assumptions or methodologies
materially affect margins; the inability to accurately estimate the
impacts of COVID-19 and other novel diseases; inaccurate models;
the need to increase the company’s reserves as a result of
deviations from its estimates and actuarial assumptions or other
reasons; accelerated amortization of DAC and present value of
future profits (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); changes in valuation of fixed maturity and
equity securities; and the benefits Enact Holdings realizes from
its future loss mitigation actions or programs may be limited;
- liquidity, financial strength and credit ratings, and
counterparty and credit risks including: the impact on Genworth
Financial’s and Genworth Holdings’ liquidity caused by the
inability to receive dividends or other returns of capital from
Enact Holdings, including as a result of COVID-19; limited sources
of capital and financing, including under certain conditions the
company may seek additional capital on unfavorable terms; 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; and defaults or
other events impacting the value of the company's invested assets,
including but not limited to, its fixed maturity and equity
securities, commercial mortgage loans, policy loans and limited
partnership investments;
- 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 inflation and supply
chain disruptions, a potential recession, continued labor shortages
and other displacements caused by COVID-19; interest rates and
changes in rates could adversely affect the company's business and
profitability; deterioration in economic conditions (including as a
result of the Russian invasion of Ukraine) or a decline in home
prices or home sales that adversely affect Enact Holdings’ loss
experience and/or business levels; 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,
including commercial and contractual disputes with counterparties;
heightened regulatory restrictions 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 COVID-19; adverse
changes in regulatory requirements, including risk-based capital;
inability of Enact Holdings to continue to meet the requirements
mandated by PMIERs, including as a result of increased
delinquencies caused by COVID-19; inability of Enact Holdings’ 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, including any 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 accounting and reporting standards, including new
accounting guidance (that is effective for the company on January
1, 2023) related to long-duration insurance contracts;
- operational risks including: the inability to retain, attract
and motivate qualified employees or senior management; Enact
Holdings’ reliance on, and loss of, key customers or distribution
relationships; competition with government-owned and
government-sponsored enterprises may put Enact Holdings at a
competitive disadvantage on pricing and other terms and conditions;
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: Enact Holdings’
inability to maintain or increase capital in its mortgage insurance
subsidiaries in a timely manner; 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
COVID-19, 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 general risks including: the occurrence of natural or
man-made disasters, including geopolitical tensions and war
(including the Russian invasion of Ukraine), or a public health
emergency, including pandemics, climate change or cyber security
breaches, could materially adversely affect the company’s financial
condition and results of operations.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise. 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,
2022
2021
2022
Revenues:
Premiums
$
927
$
947
$
931
Net investment income
787
844
764
Net investment gains (losses)
8
70
28
Policy fees and other income
159
180
169
Total revenues
1,881
2,041
1,892
Benefits and expenses:
Benefits and other changes in policy
reserves
764
1,161
1,139
Interest credited
125
127
125
Acquisition and operating expenses, net of
deferrals
589
304
271
Amortization of deferred acquisition costs
and intangibles
84
86
92
Interest expense
26
43
26
Total benefits and expenses
1,588
1,721
1,653
Income from continuing operations before
income taxes
293
320
239
Provision for income taxes
73
75
58
Income from continuing operations
220
245
181
Loss from discontinued operations, net of
taxes
(1
)
(5
)
(2
)
Net income
219
240
179
Less: net income from continuing
operations attributable to noncontrolling interests
38
—
30
Net income available to Genworth
Financial, Inc.'s common stockholders
$
181
$
240
$
149
Net income available to Genworth
Financial, Inc.'s common stockholders:
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders
$
182
$
245
$
151
Loss from discontinued operations
available to Genworth Financial, Inc.'s common stockholders
(1
)
(5
)
(2
)
Net income available to Genworth
Financial, Inc.'s common stockholders
$
181
$
240
$
149
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders per
share:
Basic
$
0.36
$
0.48
$
0.30
Diluted
$
0.36
$
0.47
$
0.29
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.36
$
0.47
$
0.29
Diluted
$
0.35
$
0.47
$
0.29
Weighted-average common shares
outstanding:
Basic
509.0
507.0
508.3
Diluted
514.2
515.0
517.4
Reconciliation of Net Income
to Adjusted Operating Income
(Amounts in millions, except
per share amounts)
(Unaudited)
Three
Three
months ended
months ended
June 30,
March 31,
2022
2021
2022
Net income available to Genworth
Financial, Inc.'s common stockholders
$
181
$
240
$
149
Add: net income from continuing operations
attributable to noncontrolling interests
38
—
30
Net income
219
240
179
Less: loss from discontinued operations,
net of taxes
(1
)
(5
)
(2
)
Income from continuing operations
220
245
181
Less: net income from continuing
operations attributable to noncontrolling interests
38
—
30
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders
182
245
151
Adjustments to income from continuing
operations available to Genworth Financial, Inc.'s common
stockholders:
Net investment (gains) losses, net12
(10
)
(70
)
(28
)
(Gains) losses on early extinguishment of
debt
1
—
3
Expenses related to restructuring
1
5
—
Taxes on adjustments
2
14
5
Adjusted operating income
$
176
$
194
$
131
Adjusted operating income (loss):
Enact segment
$
167
$
135
$
135
U.S. Life Insurance segment:
Long-Term Care Insurance
34
98
59
Life Insurance
(34
)
(40
)
(79
)
Fixed Annuities
21
13
16
Total U.S. Life Insurance segment
21
71
(4
)
Runoff segment
2
15
9
Corporate and Other
(14
)
(27
)
(9
)
Adjusted operating income
$
176
$
194
$
131
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.36
$
0.47
$
0.29
Diluted
$
0.35
$
0.47
$
0.29
Adjusted operating income per share:
Basic
$
0.35
$
0.38
$
0.26
Diluted
$
0.34
$
0.38
$
0.25
Weighted-average common shares
outstanding:
Basic
509.0
507.0
508.3
Diluted
514.2
515.0
517.4
Condensed Consolidated Balance
Sheets
(Amounts in millions)
June 30,
December 31,
2022
2021
(Unaudited)
Assets
Cash, cash equivalents, restricted cash
and invested assets
$
63,745
$
74,496
Deferred acquisition costs
2,314
1,146
Intangible assets
236
143
Reinsurance recoverable, net
16,631
16,813
Deferred tax and other assets
1,459
507
Separate account assets
4,683
6,066
Total assets
$
89,068
$
99,171
Liabilities and equity
Liabilities:
Future policy benefits
$
38,133
$
41,528
Policyholder account balances
17,907
19,354
Liability for policy and contract
claims
11,915
11,841
Unearned premiums
614
672
Other liabilities
1,468
1,511
Long-term borrowings
1,773
1,899
Separate account liabilities
4,683
6,066
Liabilities related to discontinued
operations
4
34
Total liabilities
76,497
82,905
Equity:
Common stock
1
1
Additional paid-in capital
11,859
11,858
Accumulated other comprehensive income
(loss)
(145
)
3,861
Retained earnings
2,820
2,490
Treasury stock, at cost
(2,715
)
(2,700
)
Total Genworth Financial, Inc.'s
stockholders’ equity
11,820
15,510
Noncontrolling interests
751
756
Total equity
12,571
16,266
Total liabilities and equity
$
89,068
$
99,171
Reconciliation of Reported
Yield to Core Yield
Three
months ended
June 30,
March 31,
(Assets - amounts
in billions)
2022
2022
Reported Total Invested Assets and
Cash
$
63.2
$
68.2
Subtract:
Unrealized gains (losses)
(1.9
)
3.0
Adjusted End of Period Invested Assets and
Cash
$
65.1
$
65.2
Average Invested Assets and Cash Used in
Reported and Core Yield Calculation
$
65.2
$
65.4
(Income - amounts
in millions)
Reported Net Investment Income
$
787
$
764
Subtract:
Bond calls and commercial mortgage loan
prepayments
7
10
Core Net Investment Income
$
780
$
754
Reported Yield
4.83
%
4.67
%
Core Yield
4.79
%
4.61
%
1 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.
2 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.
3 Reflects Genworth’s ownership amount excluding noncontrolling
interests of $38 million and $30 million in the second and first
quarters of 2022, respectively.
4 Excludes reserve updates resulting from profits followed by
losses.
5 Adjusted operating income from in-force rate actions includes
estimated impacts from a legal settlement, net of tax and
litigation expenses, of $8 million, $58 million and $71 million in
the second quarter of 2022, first quarter of 2022 and second
quarter of 2021, respectively.
6 Includes universal life and term universal life insurance
products.
7 Company estimate for the second quarter of 2022 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, 2022, March 31, 2022 and June 30, 2021, the PMIERs
sufficiency ratios were $2,047 million, $2,261 million and $1,941
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 $178 million, $140 million and
$742 million of cash, cash equivalents and restricted cash as of
June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
Genworth Holdings, Inc. also held $50 million, $75 million and $100
million in U.S. government securities as of June 30, 2022, March
31, 2022 and June 30, 2021, respectively, which included $1 million
and $19 million of restricted assets as of March 31, 2022 and June
30, 2021, respectively.
11 The government-sponsored enterprises (GSEs) have imposed
certain capital restrictions which remain in effect until certain
conditions are met. These restrictions required Enact Mortgage
Insurance Corporation, the company’s principal U.S. mortgage
insurance subsidiary, to maintain 120 percent and 115 percent of
PMIERs minimum required assets among other restrictions in 2022 and
2021, respectively.
12 For the three months ended June 30, 2022, net investment
(gains) losses were adjusted for DAC and other intangible
amortization and certain benefit reserves of $(2) million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220801005245/en/
Investors: Sarah E. Crews InvestorInfo@genworth.com
Media: Amy Rein Amy.Rein@genworth.com
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