Net Income of $104 Million and Adjusted
Operating Income of $159 Million
- Enact segment adjusted operating income of $156 million
- Received $19 million quarterly dividend from Enact
- U.S. Life Insurance segment adjusted operating income of $11
million
- $47 million in annual long-term care insurance (LTC) premium
rate increases approved, increasing net present value from achieved
rate actions by approximately $300 million, bringing the total to
$21.0 billion
- U.S. life insurance companies’ risk-based capital ratio1
estimated at 285 percent
- Redeemed $152 million of debt, achieving holding company debt
target of $1.0 billion or less; cash and liquid assets above target
at $145 million
- Executed $19 million in share repurchases in the quarter; $59
million in total executed through October 2022
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended September 30, 2022. The company reported net
income2 of $104 million, or $0.20 per diluted share, in the third
quarter of 2022, compared with net income of $314 million, or $0.61
per diluted share, in the third quarter of 2021. The company
reported adjusted operating income3 of $159 million, or $0.31 per
diluted share, in the third quarter of 2022, compared with adjusted
operating income of $239 million, or $0.46 per diluted share, in
the third quarter of 2021.
“We are pleased with the progress we have made in the first nine
months of the year. Genworth achieved our debt target, further
stabilized our legacy LTC book and initiated a program to return
capital to our shareholders, while also delivering solid financial
results,” said Tom McInerney, Genworth President and CEO. “Looking
ahead, Genworth expects to have higher free cash flow going
forward, which offers financial flexibility and greater opportunity
for increased capital return to shareholders and investments in
growth.”
Financial Performance
Consolidated Net Income & Adjusted
Operating Income
Three months ended September
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
$
104
$
0.20
$
314
$
0.61
(67)%
Adjusted operating income
$
159
$
0.31
$
239
$
0.46
(33)%
Weighted-average diluted shares
509.4
514.2
As of September 30
2022
2021
Book value per share
$
18.49
$
30.11
Book value per share, excluding
accumulated other comprehensive
income (loss)
$
23.99
$
22.62
Net investment losses, net of taxes and other adjustments,
decreased net income by $53 million in the current quarter,
compared with net investment gains in the prior quarter and prior
year that increased income by $8 million and $70 million,
respectively. The investment losses in the current quarter were
primarily from mark-to-market adjustments on limited partnership
and equity investments held in the LTC business and net trading
losses.
Net investment income was $808 million in the quarter, compared
to $787 million in the prior quarter and $859 million in the prior
year. Net investment income increased versus the prior quarter as a
result of higher income from limited partnerships, primarily in the
LTC business, and higher core yields. 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 (CML) prepayments and limited
partnerships. The reported yield and the core yield3 for the
current quarter were 4.97 percent and 4.93 percent, respectively,
compared to 4.83 percent and 4.79 percent, respectively, in the
prior quarter.
Genworth’s effective tax rate on income from continuing
operations for the current quarter was approximately 28.0 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, as well as
non-deductible expenses.
The table below shows adjusted operating income (loss) by
segment and for Corporate and Other activities:
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Enact4
$
156
$
167
$
134
U.S. Life Insurance
11
21
93
Runoff
9
2
11
Corporate and Other
(17)
(14)
1
Total Adjusted Operating Income
$
159
$
176
$
239
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)
Q3 22
Q2 22
Q3 21
Adjusted operating income4
$
156
$
167
$
134
Primary new insurance written
$
15,069
$
17,448
$
23,972
Loss ratio
(17)%
(26)%
14 %
Enact reported adjusted operating income of $156 million,
compared with $167 million in the prior quarter and $134 million in
the 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 lower refinancing activity
because of the rise in interest rates. Primary NIW decreased 14
percent from the prior quarter. It was also down 37 percent versus
the prior year, primarily from lower refinance originations as a
result of increased mortgage rates. Enact’s expenses in the current
quarter were $59 million, resulting in an expense ratio of 25
percent.
Enact’s current quarter results reflected a benefit of $40
million from incurred losses driven by a net pre-tax reserve
release of $80 million, primarily from favorable cure performance
on COVID-19 delinquencies. The loss ratio in the current quarter
was negative 17 percent, compared to negative 26 percent and
positive 14 percent in the prior quarter and prior year,
respectively. Losses in the prior quarter included a favorable $96
million pre-tax reserve release, primarily related to cures on 2020
COVID-19 delinquencies. New delinquencies in the current quarter
were 9,121, an increase of 16 percent from 7,847 in the prior
quarter, driven by seasonality. Current quarter new delinquencies
increased 23 percent from 7,427 in the prior year. The current
quarter new delinquency rate of 1.0 percent increased from the
prior quarter of 0.8 percent due to seasonality and remains in line
with pre-pandemic levels.
U.S. Life Insurance
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Long-Term Care Insurance
$
25
$
34
$
133
Life Insurance
(33)
(34)
(68)
Fixed Annuities
19
21
28
Total U.S. Life Insurance
$
11
$
21
$
93
Long-Term Care Insurance In-Force Rate
Action Performance
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Adjusted Operating Income from In-Force
Rate Actions5,6
$
258
$
255
$
304
Long-Term Care Insurance Long-term care insurance
reported adjusted operating income of $25 million, compared with
$34 million in the prior quarter and $133 million in the prior
year. Adjusted operating income impacts of $258 million5 from
cumulative in-force rate actions were less favorable than the prior
year, driven by lower reserve releases related to a legal
settlement, as that settlement implementation is materially
complete. However, implementation of a second legal settlement
began on August 1, 2022.
New claims increased versus the prior quarter and prior year
driven by both higher severity and frequency as the blocks age.
Claim terminations were lower and benefit utilization was higher
versus the prior quarter and prior year, as the pandemic impacts
subside.
LTC results reflected higher net investment income of $9 million
after-tax versus the prior quarter, primarily from the favorable
impact of limited partnerships. Compared to the prior year, LTC had
lower net investment income of $19 million after-tax, primarily
from the impact of lower income from limited partnerships, bond
calls and CML prepayments.
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 $33 million, compared with adjusted operating
losses of $34 million in the prior quarter and $68 million in the
prior year. Mortality results in the current quarter were favorable
versus the prior year, as the pandemic impacts subside.
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 charge related to DAC
recoverability testing in the company’s universal life insurance
products7, which was $20 million lower than the prior year.
Fixed Annuities Fixed annuities reported adjusted
operating income of $19 million, compared with $21 million in the
prior quarter and $28 million in the prior year. Net investment
spreads were lower versus the prior quarter and prior year,
primarily from lower bond calls and CML prepayments, as well as
anticipated block runoff. Results in the current quarter were also
impacted by higher mortality in the single premium immediate
annuity product. Compared to the prior quarter, continued rising
interest rates resulted in lower reserves that were mostly offset
by higher DAC amortization in the fixed index annuity product.
Runoff Runoff reported
adjusted operating income of $9 million, compared with $2 million
in the prior quarter and $11 million in the prior year. Current
quarter results in the closed variable annuity product line were
impacted by less unfavorable equity market performance compared to
the prior quarter. Compared to the prior year, unfavorable equity
market performance was mostly offset by favorable mortality
experience in the corporate-owned life insurance products.
Corporate And Other
Corporate and Other reported an adjusted operating loss of $17
million, compared with an adjusted operating loss of $14 million in
the prior quarter and adjusted operating income of $1 million in
the prior year. Current quarter results were lower compared to the
prior year driven by a non-recurring tax benefit of $21 million in
the prior year, partially offset by lower interest expense.
Capital & Liquidity
Genworth maintains the following capital positions in its operating
subsidiaries:
Key Capital & Liquidity
Metrics
(Dollar amounts in millions)
Q3 22
Q2 22
Q3 21
Enact
Combined Risk-To-Capital Ratio8
12.3:1
12.6:1
11.8:1
Enact Mortgage Insurance Corporation
Risk-To-Capital Ratio8
12.3:1
12.6:1
11.9:1
Private Mortgage Insurer Eligibility
Requirements (PMIERs) Sufficiency Ratio8,9
174
%
166
%
181
%
U.S. Life Insurance Companies
Consolidated Risk-Based Capital
Ratio1,8
285
%
290
%
291
%
Holding Company Cash and Liquid
Assets10,11
$
145
$
228
$
638
Key Points
- Enact’s PMIERs sufficiency ratio is estimated to be 174
percent, $2,249 million above published PMIERs requirements12. The
PMIERs sufficiency ratio increased eight points, or by $202
million, sequentially, driven by the execution of a new excess of
loss (XOL) reinsurance transaction, business cash flows and lower
delinquencies, partially offset by NIW and amortization of existing
reinsurance transactions;
- 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 $140 million at the end of the
current quarter, compared to $178 million at the end of the prior
quarter and $570 million at the end of the third quarter of 2021.
These amounts are gross of any incremental reinsurance benefit from
the elimination of the 0.30 multiplier;
- Enact paid a quarterly dividend of $0.14 per share during the
current quarter, with $19 million paid to Genworth;
- Enact completed a XOL reinsurance transaction in the current
quarter, which provides up to approximately $200 million of
reinsurance coverage on mortgage insurance policies written in the
first half of 2022;
- U.S. life insurance companies’ consolidated statutory
risk-based capital ratio1 is estimated to be 285 percent at the end
of the current quarter, down slightly from 290 percent in the prior
quarter, primarily from the impact of declining equity markets in
the closed variable annuity product line, unfavorable mortality in
the life products and higher required capital in LTC as the block
ages;
- Genworth’s holding company ended the third quarter of 2022 with
$145 million of cash and liquid assets. Cash sources in the current
quarter included $64 million from net intercompany tax payments and
a $19 million dividend from Enact. During the current quarter, the
company redeemed its remaining February 2024 debt obligation of
$152 million principal. Genworth achieved its debt target of $1.0
billion or less of parent holding company public debt outstanding
and held $900 million principal as of September 30, 2022;
- In the current quarter, the company satisfied the first of two
consecutive quarters of financial metric conditions related to the
GSEs restrictions on Enact12. The company expects to fully satisfy
these conditions by year-end 2022 and to have the restrictions
removed in early 2023; and
- The company repurchased $19 million of its common stock at an
average price below $3.80 per share in the third quarter of 2022
and repurchased an additional $25 million in October 2022 at an
average price of $4.00 per share. Year-to-date, through October
2022, the company has executed $59 million of its authorized $350
million share repurchase program, which was announced in May
2022.
About Genworth Financial Genworth Financial, Inc. (NYSE:
GNW) is a Fortune 500 company focused on empowering families to
navigate the aging journey with confidence, now and in the future.
Headquartered in Richmond, Virginia, Genworth provides guidance,
products, and services that help people understand their 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 November 2, 2022 at
9:00 a.m. (ET) to discuss its third quarter results, which will be
accessible via:
- Telephone: 888-208-1820 or 323-794-2110 (outside the U.S.);
conference ID # 6660018; 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 webcast will be available on the
company’s website for one year.
Prior to Genworth’s conference call, Enact will hold a
conference call on November 2, 2022 at 8:00 a.m. (ET) to discuss
its results from the third quarter, which will be accessible
via:
- Telephone: 833-634-2594 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 third quarter of 2022, the company paid a pre-tax
make-whole premium of $2 million and wrote off $1 million of bond
consent fees and deferred borrowing costs related to the early
redemption of Genworth Holdings, Inc.’s (Genworth Holdings) senior
notes originally scheduled to mature in February 2024. In the
second quarter of 2022, the company repurchased $48 million
principal amount of Genworth Holdings senior notes due in February
2024 for a pre-tax loss of $1 million. In the third quarter of
2021, the company paid a pre-tax make-whole premium of $6 million
related to the early redemption of Genworth Holdings’ senior notes
originally scheduled to mature in September 2021. 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 in the
second quarter of 2022 and $3 million in the third quarter of 2021
related to restructuring costs as it continues to evaluate and
appropriately size its organizational needs and expenses.
In the third quarter of 2022, the company incurred $6 million of
pre-tax pension plan termination costs related to one of its
defined benefit pension plans. There were no other 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 September 30, 2022 and 2021, as well as for the
three months ended June 30, 2022, and reflect adjusted operating
income 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 Company Action Level
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 potential dividends or share repurchases; future return
of capital by Enact Holdings, Inc. (Enact Holdings), including
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 and
condition of the company’s businesses, including Genworth achieving
two consecutive quarters of financial metrics to satisfy certain
conditions in connection with the GSEs’ restrictions placed on
Enact Holdings and the impact to Genworth’s equity upon adopting
new accounting guidance related to long-duration insurance
contracts; 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 break-even 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 to its
assumptions, methodologies or otherwise in connection with periodic
or other reviews, including reviews it expects to complete and
carry out in the fourth quarter of 2022); 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 in the fourth quarter of 2022,
including risks that additional information obtained in finalizing
our claim reserves and margin reviews in the fourth quarter of 2022
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 (PVFP) (including as a result of any changes it may
make to its assumptions, methodologies or otherwise in connection
with periodic or other reviews, including reviews it expects to
complete and carry out in the fourth quarter of 2022); 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 cybersecurity
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
September 30,
June 30,
2022
2021
2022
Revenues:
Premiums
$
934
$
944
$
927
Net investment income
808
859
787
Net investment gains (losses)
(69)
88
8
Policy fees and other income
166
179
159
Total revenues
1,839
2,070
1,881
Benefits and expenses:
Benefits and other changes in policy
reserves
1,180
1,143
764
Interest credited
128
123
125
Acquisition and operating expenses, net of
deferrals
240
290
589
Amortization of deferred acquisition costs
and intangibles
79
106
84
Interest expense
26
35
26
Total benefits and expenses
1,653
1,697
1,588
Income from continuing operations before
income taxes
186
373
293
Provision for income taxes
52
67
73
Income from continuing operations
134
306
220
Income (loss) from discontinued
operations, net of taxes
5
12
(1)
Net income
139
318
219
Less: net income from continuing
operations attributable to noncontrolling interests
35
4
38
Net income available to Genworth
Financial, Inc.'s common stockholders
$
104
$
314
$
181
Net income available to Genworth
Financial, Inc.'s common stockholders:
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders
$
99
$
302
$
182
Income (loss) from discontinued operations
available to Genworth Financial, Inc.'s common stockholders
5
12
(1)
Net income available to Genworth
Financial, Inc.'s common stockholders
$
104
$
314
$
181
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders per
share:
Basic
$
0.20
$
0.59
$
0.36
Diluted
$
0.19
$
0.59
$
0.36
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.21
$
0.62
$
0.36
Diluted
$
0.20
$
0.61
$
0.35
Weighted-average common shares
outstanding:
Basic
504.0
507.4
509.0
Diluted
509.4
514.2
514.2
Reconciliation of Net Income
to Adjusted Operating Income
(Amounts in millions, except
per share amounts)
(Unaudited)
Three
Three
months ended
months ended
September 30,
June 30,
2022
2021
2022
Net income available to Genworth
Financial, Inc.'s common stockholders
$
104
$
314
$
181
Add: net income from continuing operations
attributable to noncontrolling interests
35
4
38
Net income
139
318
219
Less: income (loss) from discontinued
operations, net of taxes
5
12
(1)
Income from continuing operations
134
306
220
Less: net income from continuing
operations attributable to noncontrolling interests
35
4
38
Income from continuing operations
available to Genworth Financial, Inc.'s common stockholders
99
302
182
Adjustments to income from continuing
operations available to Genworth Financial, Inc.'s common
stockholders:
Net investment (gains) losses, net13
67
(88)
(10)
(Gains) losses on early extinguishment of
debt
3
6
1
Expenses related to restructuring
—
3
1
Pension plan termination costs
6
—
—
Taxes on adjustments
(16)
16
2
Adjusted operating income
$
159
$
239
$
176
Adjusted operating income (loss):
Enact segment
$
156
$
134
$
167
U.S. Life Insurance segment:
Long-Term Care Insurance
25
133
34
Life Insurance
(33)
(68)
(34)
Fixed Annuities
19
28
21
Total U.S. Life Insurance segment
11
93
21
Runoff segment
9
11
2
Corporate and Other
(17)
1
(14)
Adjusted operating income
$
159
$
239
$
176
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.21
$
0.62
$
0.36
Diluted
$
0.20
$
0.61
$
0.35
Adjusted operating income per share:
Basic
$
0.32
$
0.47
$
0.35
Diluted
$
0.31
$
0.46
$
0.34
Weighted-average common shares
outstanding:
Basic
504.0
507.4
509.0
Diluted
509.4
514.2
514.2
Condensed Consolidated Balance
Sheets
(Amounts in millions)
September 30,
December 31,
2022
2021
(Unaudited)
Assets
Cash, cash equivalents, restricted cash
and invested assets
$
60,667
$
74,496
Deferred acquisition costs
2,247
1,146
Intangible assets
237
143
Reinsurance recoverable, net
16,558
16,813
Deferred tax and other assets
1,932
507
Separate account assets
4,298
6,066
Total assets
$
85,939
$
99,171
Liabilities and equity
Liabilities:
Future policy benefits
$
38,095
$
41,528
Policyholder account balances
17,589
19,354
Liability for policy and contract
claims
12,004
11,841
Unearned premiums
597
672
Other liabilities
1,679
1,511
Long-term borrowings
1,622
1,899
Separate account liabilities
4,298
6,066
Liabilities related to discontinued
operations
6
34
Total liabilities
75,890
82,905
Equity:
Common stock
1
1
Additional paid-in capital
11,865
11,858
Accumulated other comprehensive income
(loss)
(2,765)
3,861
Retained earnings
2,924
2,490
Treasury stock, at cost
(2,734)
(2,700)
Total Genworth Financial, Inc.'s
stockholders’ equity
9,291
15,510
Noncontrolling interests
758
756
Total equity
10,049
16,266
Total liabilities and equity
$
85,939
$
99,171
Reconciliation of Reported
Yield to Core Yield
Three
months ended
September 30,
June 30,
(Assets - amounts
in billions)
2022
2022
Reported Total Invested Assets and
Cash
$
60.1
$
63.2
Subtract:
Unrealized gains (losses)
(4.9)
(1.9)
Adjusted End of Period Invested Assets and
Cash
$
65.0
$
65.1
Average Invested Assets and Cash Used in
Reported and Core Yield Calculation
$
65.0
$
65.2
(Income - amounts
in millions)
Reported Net Investment Income
$
808
$
787
Subtract:
Bond calls and commercial
mortgage loan prepayments
6
7
Core Net Investment Income
$
802
$
780
Reported Yield
4.97
%
4.83
%
Core Yield
4.93
%
4.79
%
1 Risk-based capital ratio based on company action level. 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 Reflects Genworth’s ownership amount
excluding noncontrolling interests of $35 million, $38 million and
$4 million in the third quarter of 2022, second quarter of 2022 and
third quarter of 2021, respectively. 5 Excludes reserve updates
resulting from profits followed by losses. 6 Adjusted operating
income from in-force rate actions includes estimated impacts from
legal settlements, net of tax and litigation expenses, of $(1)
million, $8 million and $48 million in the third quarter of 2022,
second quarter of 2022 and third quarter of 2021, respectively. 7
Includes universal life and term universal life insurance products.
8 Company estimate for the third quarter of 2022 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
September 30, 2022, June 30, 2022 and September 30, 2021, the
PMIERs sufficiency ratios were $2,249 million, $2,047 million and
$2,287 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 $145
million, $178 million and $588 million of cash, cash equivalents
and restricted cash as of September 30, 2022, June 30, 2022 and
September 30, 2021, respectively. Genworth Holdings, Inc. also held
$50 million in U.S. government securities as of June 30, 2022 and
September 30, 2021, which included $3 million of restricted assets
as of September 30, 2021. 12 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. 13 For the three
months ended September 30, 2022 and 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/20221101005572/en/
Investors: Sarah E. Crews InvestorInfo@genworth.com
Media: Amy Rein Amy.Rein@genworth.com
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