First Quarter Net Income of $149 Million and
Adjusted Operating Income of $131 Million
Announced $350 Million Share Repurchase
Authorization, The First Shareholder Return Program In Over 13
Years
- Enact segment adjusted operating income of $135 million, with
10 percent annual growth in insurance in-force and strong loss
performance
- Enact’s Board initiated a quarterly dividend program and
declared a $0.14 dividend per share payable in the second
quarter
- U.S. Life Insurance segment adjusted operating loss of $4
million driven by unfavorable life insurance results, partially
offset by strong long-term care insurance (LTC) performance
- $101 million in annual premium rate increases approved,
increasing net present value from achieved LTC rate actions since
2012 by approximately $800 million, bringing the total to $20.4
billion
- Strong U.S. life insurance companies’ statutory income driving
estimated risk-based capital ratio to 296%
- Retired $82 million of debt, bringing total debt to $1.1
billion; cash and liquid assets of $215 million
- S&P Global Ratings upgraded the credit ratings of Genworth
Financial, Inc. and Genworth Holdings, Inc.
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended March 31, 2022. The company reported net income1
of $149 million, or $0.29 per diluted share, in the first quarter
of 2022, compared with net income of $187 million, or $0.37 per
diluted share, in the first quarter of 2021. The company reported
adjusted operating income2 of $131 million, or $0.25 per diluted
share, in the first quarter of 2022, compared with adjusted
operating income of $168 million, or $0.33 per diluted share, in
the first quarter of 2021.
“Genworth had a strong start to the year, with solid operating
performance, an improved balance sheet and significant progress on
our strategic plan that will drive value for shareholders,” said
Tom McInerney, Genworth President and CEO. “Genworth’s financial
position is stronger than it has been in over a decade, and as a
result, we announced a share repurchase program of up to $350
million.”
Financial Performance
Consolidated Net Income & Adjusted
Operating Income
Three months ended March 31
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
$
149
$
0.29
$
187
$
0.37
(20
)%
Adjusted operating income
$
131
$
0.25
$
168
$
0.33
(22
)%
Weighted-average diluted shares
517.4
513.8
As of March 31
2022
2021
Book value per share
$
28.23
$
29.14
Book value per share, excluding
accumulated other comprehensive
income (loss)
$
23.12
$
21.88
Net investment gains, net of taxes and other adjustments,
increased net income by $22 million in the current quarter,
compared with $26 million in the first 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.
Net investment income was $764 million in the quarter, compared
to $866 million in the prior quarter and $801 million in the prior
year. Net investment income was lower compared to both the prior
quarter and the prior year as a result of lower variable investment
income, primarily driven by lower income from limited partnerships
in the LTC business. The reported yield and the core yield2 for the
current quarter were 4.67 percent and 4.61 percent, respectively,
compared to 5.26 percent and 5.01 percent, respectively, in the
prior quarter.
Genworth’s effective tax rate on income from continuing
operations for the current quarter was approximately 24.3 percent.
The effective tax rate was increased by the tax effect of forward
starting swap gains settled prior to the change in the corporate
tax rate under the 2017 Tax Cuts and Jobs Act.
The table below shows adjusted operating income (loss) by
segment and for Corporate and Other activities:
Adjusted Operating Income
(Loss)
(Amounts in millions)
Q1 22
Q4 21
Q1 21
Enact3
$
135
$
125
$
126
U.S. Life Insurance
(4
)
41
62
Runoff
9
16
12
Corporate and Other
(9
)
(18
)
(32
)
Total Adjusted Operating Income
$
131
$
164
$
168
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)
Q1 22
Q4 21
Q1 21
Adjusted operating income3
$
135
$
125
$
126
Primary new insurance written
$
18,823
$
21,441
$
24,934
Loss ratio
(4
)%
3
%
22
%
Enact reported adjusted operating income of $135 million,
compared with $125 million in the prior quarter and $126 million in
the prior year. Enact’s primary insurance in-force increased ten
percent versus the prior year, driven by strong new insurance
written (NIW) and higher persistency given the rise in interest
rates. Primary NIW decreased 12 percent from the prior quarter. It
was also down 25 percent versus the prior year primarily from a
smaller private mortgage insurance market. Earned premiums in the
current quarter were lower compared to both the prior quarter and
the prior year as higher insurance in-force growth was offset by
the continued lapse of older, higher-priced policies and lower
single premium policy cancellations, as well as higher ceded
premiums versus the prior year. Enact’s expenses in the current
quarter were $57 million, resulting in an expense ratio of 24
percent.
Enact’s current quarter results reflect a benefit of $10 million
from incurred losses driven by a favorable $50 million pre-tax
reserve release, primarily related to 2020 COVID-19 delinquencies,
which reduced the loss ratio by 21 percentage points to negative
four percent. Results in the prior quarter and prior year reflected
losses of $6 million and $55 million, and a loss ratio of three
percent and 22 percent, respectively. New delinquencies in the
current quarter were 8,724, an increase of five percent from 8,282
in the prior quarter, driven by recent large books entering their
expected loss development pattern. Current quarter new
delinquencies decreased 13 percent from 10,053 in the prior year.
Losses in the prior quarter included a $32 million pre-tax reserve
release on pre-COVID-19 delinquencies, while losses in the prior
year included a $10 million pre-tax reserve strengthening on
pre-COVID-19 delinquencies. The current quarter new delinquency
rate of 0.9 percent remained consistent with pre-pandemic levels.
Approximately 27 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)
Q1 22
Q4 21
Q1 21
Long-Term Care Insurance
$
59
$
119
$
95
Life Insurance
(79
)
(98
)
(63
)
Fixed Annuities
16
20
30
Total U.S. Life Insurance
$
(4
)
$
41
$
62
Long-Term Care Insurance In-Force Rate
Action Performance
(Amounts in millions)
Q1 22
Q4 21
Q1 21
Adjusted Operating Income from In-Force
Rate Actions4,5
$
304
$
296
$
243
Long-Term Care Insurance
Long-term care insurance reported adjusted operating income of
$59 million, compared with $119 million in the prior quarter and
$95 million in the prior year. LTC results reflected lower net
investment income of $67 million after-tax versus the prior quarter
and $14 million after-tax versus the prior year primarily due to
the impact of lower income from limited partnerships, bond calls
and commercial mortgage loan prepayments.
Claim terminations in the current quarter remained elevated
versus pre-pandemic levels and were higher compared to the prior
quarter but lower compared to the prior year. The company released
$9 million pre-tax of its COVID-19 mortality reserve in the current
quarter, leaving a pre-tax balance of $125 million as of March 31,
2022. In the prior year, the company strengthened this reserve by
$67 million pre-tax.
New claims increased versus the prior quarter and prior year
driven by both higher severity and frequency as the blocks age.
Development of incurred but not reported (IBNR) claims was less
favorable as new claim incidence increased versus the prior year
but remained lower than pre-pandemic levels. In the prior year, the
company strengthened IBNR claim reserves by $29 million pre-tax as
the decrease in incidence was assumed to be driven by the COVID-19
pandemic and temporary in nature. As incidence continues to trend
back to historical levels, IBNR claim reserves were reduced by $29
million pre-tax in the current quarter, leaving a pre-tax balance
of $46 million as of March 31, 2022.
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. Renewal premiums also decreased compared to the
prior quarter, primarily reflecting the seasonality of the timing
of policyholder anniversaries.
Adjusted operating income of $304 million4 from cumulative
in-force rate actions was more favorable than the prior year and
prior quarter, driven primarily by reserve releases from higher
benefit reductions.
Life Insurance
Life insurance reported an adjusted operating loss of $79
million, compared with adjusted operating losses of $98 million in
the prior quarter and $63 million in the prior year. Mortality,
attributable in part to the COVID-19 pandemic, was lower than the
prior year but higher compared to the prior quarter. During the
current quarter, the company accrued $20 million after-tax related
to a legal settlement.
Current quarter results also included a lower charge of $13
million after-tax related to deferred acquisition costs (DAC)
recoverability testing versus the prior quarter. In the prior
quarter, the company completed its annual review of life insurance
assumptions and recorded an unfavorable charge of $70 million
after-tax, driven by assumption changes primarily related to
unfavorable pre-COVID-19 mortality experience.
Fixed Annuities
Fixed annuities reported adjusted operating income of $16
million, compared with $20 million in the prior quarter and $30
million in the prior year. Results in the current quarter reflected
lower net investment spreads because of lower bond calls and
commercial mortgage loan prepayments, as well as anticipated block
runoff. Mortality in the single premium immediate annuity product
was less favorable than the prior year.
Runoff
Runoff reported adjusted operating income of $9 million,
compared with $16 million in the prior quarter and $12 million in
the prior year. Current quarter results in the variable annuity
products 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 $9
million, compared with adjusted operating losses of $18 million in
the prior quarter and $32 million in the prior year. Current
quarter results included lower interest expense 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)
Q1 22
Q4 21
Q1 21
Enact
Consolidated Risk-To-Capital Ratio6
12.1:1
12.2:1
11.7:1
Enact Mortgage Insurance Corporation
Risk-To-Capital Ratio6
12.2:1
12.3:1
11.9:1
Private Mortgage Insurer Eligibility
Requirements Sufficiency Ratio (PMIERs)6, 7
176
%
165
%
159
%
U.S. Life Insurance Companies
Consolidated Risk-Based Capital Ratio6
296
%
289
%
254
%
Holding Company Cash and Liquid Assets8,
9
$
215
$
356
$
757
Key Points
- Enact’s PMIERs sufficiency ratio is estimated to be 176
percent, $2,261 million above published PMIERs requirements10. The
PMIERs sufficiency ratio increased 11 points, or by $258 million,
sequentially, driven by execution of reinsurance transactions,
lapses, 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 $272 million at the end of the
current quarter, compared to $390 million at the end of the prior
quarter and $1,012 million at the end of the first quarter of 2021.
These amounts are gross of incremental reinsurance benefits from
the elimination of the 0.30 multiplier;
- Enact completed two excess of loss reinsurance transactions
during the current quarter, which will provide approximately $325
million of reinsurance coverage on a portion of the 2021 book year
and will provide up to $294 million of reinsurance coverage on
expected new insurance written for the 2022 book year;
- U.S. life insurance companies’ consolidated statutory
risk-based capital ratio is estimated to be 296 percent at the end
of the current quarter, up from 289 percent in the prior quarter
primarily from strong statutory earnings in the current quarter
driven by LTC premium increases and benefit reductions from
in-force rate actions;
- Genworth’s holding company ended the quarter with $215 million
of cash and liquid assets, including $1 million that is restricted.
Cash sources in the quarter included $64 million from intercompany
tax payments. During the current quarter, the company reduced its
February 2024 debt obligation by $82 million through open market
repurchases, leaving $200 million of principal remaining.
Genworth’s parent holding company public debt outstanding was $1.1
billion as of March 31, 2022; and
- The company’s Board of Directors authorized a $350 million
share repurchase program to be funded from holding company capital,
as well as future cash flow generation, including expected future
dividends from the company’s ownership in Enact. The company
expects the majority of share repurchases to occur following the
repayment of its remaining 2024 debt.
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,
we apply our 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, for
more information on Enact Holdings, Inc. visit enactmi.com.
From time to time, Genworth releases important information via
postings on its website. Accordingly, investors and other
interested parties are encouraged to enroll to receive automatic
email alerts and Really Simple Syndication (RSS) feeds regarding
new postings. Enrollment information is found at
http://investor.genworth.com.
Conference Call And Financial
Supplement Information
This press release, summary presentation and financial
supplement for the first quarter 2022 are now posted on the
company’s website, http://investor.genworth.com. Investors are
encouraged to review these materials.
Genworth will conduct a conference call on May 4, 2022 at 9:00
a.m. (ET) to discuss the quarter’s results. Genworth’s conference
call will be accessible via telephone and Internet. The dial-in
number for Genworth’s May 4th conference call is 888-208-1820 or
323-794-2110 (outside the U.S.); conference ID #8305163. To
participate in the call by webcast, register at
http://investor.genworth.com at least 15 minutes prior to the
webcast to download and install any necessary software.
A replay of the call will be available at 888-203-1112 or
719-457-0820 (outside the U.S.); conference ID #8305163 through May
18, 2022. The webcast will also be archived on the company’s
website for one year.
Prior to Genworth’s conference call, Enact will hold a
conference call on May 4, 2022 at 8:00 a.m. (ET) to discuss its
results from the first quarter. Enact’s conference call will be
accessible via telephone and Internet. The dial-in number for
Enact’s May 4th conference call is 833-730-3978 or 720-405-2123
(outside the U.S.); conference ID #6293684. To participate in the
call by webcast, register at
http://ir.enactmi.com/news-and-events/events at least 15 minutes
prior to the webcast to download and install any necessary
software.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures
entitled "adjusted operating income (loss)" and "adjusted operating
income (loss) per share." Adjusted operating income (loss) per
share is derived from adjusted operating income (loss). The chief
operating decision maker evaluates segment performance and
allocates resources on the basis of adjusted operating income
(loss). The company defines adjusted operating income (loss) as
income (loss) from continuing operations excluding the after-tax
effects of income (loss) from continuing operations attributable to
noncontrolling interests, net investment gains (losses), gains
(losses) on the sale of businesses, gains (losses) on the early
extinguishment of debt, initial gains (losses) on insurance block
transactions, restructuring costs and infrequent or unusual
non-operating items. Initial gains (losses) on insurance block
transactions are defined as gains (losses) on the early
extinguishment of non-recourse funding obligations, early
termination fees for other financing restructuring and/or initial
gains (losses) on reinsurance restructuring for certain blocks of
business. The company excludes net investment gains (losses) and
infrequent or unusual non-operating items because the company does
not consider them to be related to the operating performance of the
company's segments and Corporate and Other activities. A component
of the company's net investment gains (losses) is the result of
estimated future credit losses, the size and timing of which can
vary significantly depending on market credit cycles. In addition,
the size and timing of other investment gains (losses) can be
subject to the company's discretion and are influenced by market
opportunities, as well as asset-liability matching considerations.
Gains (losses) on the sale of businesses, gains (losses) on the
early extinguishment of debt, initial gains (losses) on insurance
block transactions and restructuring costs are also excluded from
adjusted operating income (loss) because, in the company's opinion,
they are not indicative of overall operating trends. Infrequent or
unusual non-operating items are also excluded from adjusted
operating income (loss) if, in the company's opinion, they are not
indicative of overall operating trends.
While some of these items may be significant components of net
income (loss) available to Genworth Financial, Inc.’s common
stockholders in accordance with U.S. GAAP, the company believes
that adjusted operating income (loss) and measures that are derived
from or incorporate adjusted operating income (loss), including
adjusted operating income (loss) per share on a basic and diluted
basis, are appropriate measures that are useful to investors
because they identify the income (loss) attributable to the ongoing
operations of the business. Management also uses adjusted operating
income (loss) as a basis for determining awards and compensation
for senior management and to evaluate performance on a basis
comparable to that used by analysts. However, the items excluded
from adjusted operating income (loss) have occurred in the past and
could, and in some cases will, recur in the future. Adjusted
operating income (loss) and adjusted operating income (loss) per
share on a basic and diluted basis are not substitutes for net
income (loss) available to Genworth Financial, Inc.’s common
stockholders or net income (loss) available to Genworth Financial,
Inc.’s common stockholders per share on a basic and diluted basis
determined in accordance with U.S. GAAP. In addition, the company's
definition of adjusted operating income (loss) may differ from the
definitions used by other companies.
Adjustments to reconcile net income (loss) available to Genworth
Financial, Inc.’s common stockholders to adjusted operating income
(loss) assume a 21 percent tax rate and are net of the portion
attributable to noncontrolling interests. Net investment gains
(losses) are also adjusted for DAC and other intangible
amortization and certain benefit reserves.
In the first quarter of 2022, the company repurchased $82
million principal amount of Genworth Holdings, Inc.’s (Genworth
Holdings) senior notes due in February 2024 for a pre-tax loss of
$3 million. In the fourth quarter of 2021, the company paid a
pre-tax make-whole premium of $20 million related to the early
redemption of Genworth Holdings’ senior notes originally scheduled
to mature in August 2023. In the fourth quarter of 2021, the
company also repurchased $209 million principal amount of Genworth
Holdings' senior notes with 2023 and 2024 maturity dates for a
pre-tax loss of $15 million. In the first quarter of 2021, the
company repurchased $146 million principal amount of Genworth
Holdings' senior notes due in September 2021 for a pre-tax loss of
$4 million. These transactions were excluded from adjusted
operating income as they relate to gains (losses) on the early
extinguishment of debt.
In the fourth quarter of 2021, the company recorded a pre-tax
loss of $92 million as a result of ceding certain term life
insurance policies as part of a life block transaction.
The company recorded a pre-tax expense of $5 million and $21
million in the fourth and first quarters of 2021, respectively,
related to restructuring costs as it continued 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 March 31, 2022 and 2021, as well as for the
three months ended December 31, 2021, and reflect adjusted
operating income (loss) as determined in accordance with accounting
guidance related to segment reporting.
This press release includes the non-GAAP financial measure
entitled "core yield" as a measure of investment yield. The company
defines core yield as the investment yield adjusted for items that
do not reflect the underlying performance of the investment
portfolio. Management believes that analysis of core yield enhances
understanding of the investment yield of the company. However, core
yield is not a substitute for investment yield determined in
accordance with U.S. GAAP. In addition, the company's definition of
core yield may differ from the definitions used by other companies.
A reconciliation of reported U.S. GAAP yield to core yield is
included in a table at the end of this press release.
Definition of Selected Operating Performance Measures
The company taxes its businesses at the U.S. corporate federal
income tax rate of 21 percent. Each segment is then adjusted to
reflect the unique tax attributes of that segment such as permanent
differences between U.S. GAAP and tax law. The difference between
the consolidated provision for income taxes and the sum of the
provision for income taxes in each segment is reflected in
Corporate and Other activities.
The annually-determined tax rates and adjustments to each
segment’s provision for income taxes are estimates which are
subject to review and could change from year to year.
The company reports selected operating performance measures
including "sales" and "insurance in-force" or "risk in-force" which
are commonly used in the insurance industry as measures of
operating performance.
Management regularly monitors and reports sales metrics as a
measure of volume of new business generated in a period. Sales
refer to new insurance written for mortgage insurance products
included in the company's Enact segment. The company considers new
insurance written to be a measure of the operating performance of
its Enact segment because it represents a measure of new sales of
insurance policies during a specified period, rather than a measure
of revenues or profitability during that period.
Management regularly monitors and reports insurance in-force and
risk in-force for the company’s Enact segment. Insurance in-force
is a measure of the aggregate unpaid principal balance as of the
respective reporting date for loans insured by the company’s U.S.
mortgage insurance subsidiaries. Risk in-force is based on the
coverage percentage applied to the estimated current outstanding
loan balance. The company considers insurance in-force and risk
in-force to be measures of the operating performance of its Enact
segment because they represent measures of the size of its business
at a specific date which will generate revenues and profits in a
future period, rather than measures of its revenues or
profitability during that period.
Management also regularly monitors and reports a loss ratio for
the company's businesses. For the U.S. mortgage insurance business
included in the company’s Enact segment, the loss ratio is the
ratio of benefits and other changes in policy reserves to net
earned premiums. For the long-term care insurance business included
in the company’s U.S. Life Insurance segment, the loss ratio is the
ratio of benefits and other changes in reserves less tabular
interest on reserves less loss adjustment expenses to net earned
premiums. The company considers the loss ratio to be a measure of
underwriting performance in these businesses and helps to enhance
the understanding of the operating performance of the
businesses.
Management also regularly monitors and reports adjusted
operating income from in-force rate actions in the long-term care
insurance business included in the company’s U.S. Life Insurance
segment. Adjusted operating income from in-force rate actions
includes premium rate increases and associated benefit reductions
on its long-term care insurance products implemented since 2012,
which are net of estimated premium tax, commissions, and other
expenses on an after-tax basis. Estimates for in-force rate actions
reflect certain simplifying assumptions that may vary materially
from actual historical results, including but not limited to a
uniform rate of coinsurance and premium taxes in addition to
consistent policyholder behavior over time. Actual behavior may
differ significantly from these assumptions. In addition, estimates
exclude reserve updates resulting from profits followed by losses.
The company considers adjusted operating income from in-force rate
actions to be a measure of its operating performance because it
helps bring older generation long-term care insurance blocks closer
to a break-even point over time and helps bring the loss ratios on
newer long-term care insurance blocks back towards their original
pricing.
These operating performance measures enable the company to
compare its operating performance across periods without regard to
revenues or profitability related to policies or contracts sold in
prior periods or from investments or other sources.
Statutory Accounting Data
The company presents certain supplemental statutory data for
Genworth Life Insurance Company (GLIC) and its consolidating life
insurance subsidiaries that has been prepared on the basis of
statutory accounting principles (SAP). GLIC and its consolidating
life insurance subsidiaries file financial statements with state
insurance regulatory authorities and the National Association of
Insurance Commissioners that are prepared using SAP, an accounting
basis either prescribed or permitted by such authorities. Due to
differences in methodology between SAP and U.S. GAAP, the values
for assets, liabilities and equity reflected in financial
statements prepared in accordance with U.S. GAAP are materially
different from those reflected in financial statements prepared
under SAP. This supplemental statutory data should not be viewed as
an alternative to U.S. GAAP or used in lieu of U.S. GAAP.
This supplemental statutory data includes risk-based capital
ratios for GLIC and its consolidating life insurance subsidiaries
as well as statutory earnings. Management uses and provides this
supplemental statutory data because it believes it provides a
useful measure of among other things the adequacy of capital.
Management uses this data to measure against its policy to manage
the U.S. life insurance businesses with internally generated
capital.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may be identified by words such
as "expects," "intends," "anticipates," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning and
include, but are not limited to, statements regarding the outlook
for the company's future business and financial performance.
Examples of forward-looking statements include statements the
company makes relating to future reductions of debt, potential
dividends or share repurchases, future Enact Holdings, Inc. (Enact
Holdings) 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, 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 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; 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
deferred acquisition costs (DAC) and present value of future
profits (PVFP) (including as a result of any future changes it may
make to its assumptions, methodologies or otherwise in connection
with periodic or other reviews); adverse impact on the company's
financial results as a result of projected profits followed by
projected losses (as is currently the case with its long-term care
insurance business); 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, 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 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;
and
- other general risks including: the occurrence of natural or
man-made disasters, including geopolitical tensions and war, or a
public health emergency, including pandemics, 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
March 31,
December 31,
2022
2021
2021
Revenues:
Premiums
$
931
$
968
$
576
Net investment income
764
801
866
Net investment gains (losses)
28
33
132
Policy fees and other income
169
183
162
Total revenues
1,892
1,985
1,736
Benefits and expenses:
Benefits and other changes in policy
reserves
1,139
1,218
861
Interest credited
125
131
127
Acquisition and operating expenses, net of
deferrals
271
275
354
Amortization of deferred acquisition costs
and intangibles
92
77
108
Interest expense
26
51
31
Total benefits and expenses
1,653
1,752
1,481
Income from continuing operations before
income taxes
239
233
255
Provision for income taxes
58
59
62
Income from continuing operations
181
174
193
Income (loss) from discontinued
operations, net of taxes
(2
)
21
(1
)
Net income
179
195
192
Less: net income from continuing
operations attributable to noncontrolling
interests
30
—
29
Less: net income from discontinued
operations attributable to noncontrolling
interests
—
8
—
Net income available to Genworth
Financial, Inc.'s common stockholders
$
149
$
187
$
163
Net income available to Genworth
Financial, Inc.'s common stockholders:
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders
$
151
$
174
$
164
Income (loss) from discontinued operations
available to Genworth Financial,
Inc.'s common stockholders
(2
)
13
(1
)
Net income available to Genworth
Financial, Inc.'s common stockholders
$
149
$
187
$
163
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders per share:
Basic
$
0.30
$
0.35
$
0.32
Diluted
$
0.29
$
0.34
$
0.32
Net income available to Genworth
Financial, Inc.'s common stockholders
per share:
Basic
$
0.29
$
0.37
$
0.32
Diluted
$
0.29
$
0.37
$
0.32
Weighted-average common shares
outstanding:
Basic
508.3
506.0
507.4
Diluted
517.4
513.8
515.6
Reconciliation of Net Income
to Adjusted Operating Income
(Amounts in millions, except
per share amounts)
(Unaudited)
Three
Three
months ended
months ended
March 31,
December 31,
2022
2021
2021
Net income available to Genworth
Financial, Inc.'s common stockholders
$
149
$
187
$
163
Add: net income from continuing operations
attributable to noncontrolling interests
30
—
29
Add: net income from discontinued
operations attributable to noncontrolling
interests
—
8
—
Net income
179
195
192
Less: income (loss) from discontinued
operations, net of taxes
(2
)
21
(1
)
Income from continuing operations
181
174
193
Less: net income from continuing
operations attributable to noncontrolling interests
30
—
29
Income from continuing operations
available to Genworth Financial, Inc.'s
common stockholders
151
174
164
Adjustments to income from continuing
operations available to Genworth
Financial, Inc.'s common stockholders:
Net investment (gains) losses, net11
(28
)
(33
)
(133
)
(Gains) losses on early extinguishment of
debt
3
4
35
Initial loss from life block
transaction
—
—
92
Expenses related to restructuring
—
21
5
Taxes on adjustments
5
2
1
Adjusted operating income
$
131
$
168
$
164
Adjusted operating income (loss):
Enact segment
$
135
$
126
$
125
U.S. Life Insurance segment:
Long-Term Care Insurance
59
95
119
Life Insurance
(79
)
(63
)
(98
)
Fixed Annuities
16
30
20
Total U.S. Life Insurance segment
(4
)
62
41
Runoff segment
9
12
16
Corporate and Other
(9
)
(32
)
(18
)
Adjusted operating income
$
131
$
168
$
164
Net income available to Genworth
Financial, Inc.'s common stockholders per share:
Basic
$
0.29
$
0.37
$
0.32
Diluted
$
0.29
$
0.37
$
0.32
Adjusted operating income per share:
Basic
$
0.26
$
0.33
$
0.32
Diluted
$
0.25
$
0.33
$
0.32
Weighted-average common shares
outstanding:
Basic
508.3
506.0
507.4
Diluted
517.4
513.8
515.6
Condensed Consolidated Balance
Sheets
(Amounts in millions)
March 31,
December 31,
2022
2021
(Unaudited)
Assets
Cash, cash equivalents, restricted cash
and invested assets
$
68,863
$
74,496
Deferred acquisition costs
1,310
1,146
Intangible assets
159
143
Reinsurance recoverable, net
16,764
16,813
Deferred tax and other assets
861
507
Separate account assets
5,530
6,066
Total assets
$
93,487
$
99,171
Liabilities and equity
Liabilities:
Future policy benefits
$
38,897
$
41,528
Policyholder account balances
18,197
19,354
Liability for policy and contract
claims
11,833
11,841
Unearned premiums
639
672
Other liabilities
1,416
1,511
Long-term borrowings
1,819
1,899
Separate account liabilities
5,530
6,066
Liabilities related to discontinued
operations
4
34
Total liabilities
78,335
82,905
Equity:
Common stock
1
1
Additional paid-in capital
11,857
11,858
Accumulated other comprehensive income
(loss)
2,610
3,861
Retained earnings
2,639
2,490
Treasury stock, at cost
(2,700
)
(2,700
)
Total Genworth Financial, Inc.'s
stockholders’ equity
14,407
15,510
Noncontrolling interests
745
756
Total equity
15,152
16,266
Total liabilities and equity
$
93,487
$
99,171
Reconciliation of Reported
Yield to Core Yield
Three
months ended
March 31,
December 31,
(Assets - amounts
in billions)
2022
2021
Reported Total Invested Assets and
Cash
$
68.2
$
73.8
Subtract:
Unrealized gains (losses)
3.0
8.2
Adjusted End of Period Invested Assets and
Cash
$
65.2
$
65.6
Average Invested Assets and Cash Used in
Reported and Core Yield Calculation
$
65.4
$
65.9
(Income - amounts
in millions)
Reported Net Investment Income
$
764
$
866
Subtract:
Bond calls and commercial
mortgage loan prepayments
10
38
Other non-core items12
—
2
Core Net Investment Income
$
754
$
826
Reported Yield
4.67
%
5.26
%
Core Yield
4.61
%
5.01
%
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 $30 million and $29 million
in the first quarter of 2022 and fourth quarter of 2021,
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 $58 million, $57 million and $15
million in the first quarter of 2022, fourth quarter of 2021 and
first quarter of 2021, respectively. 6 Company estimate for the
first quarter of 2022 due to timing of the preparation and filing
of statutory statements. 7 The PMIERs sufficiency ratio is
calculated as available assets divided by required assets as
defined within the published PMIERs. As of March 31, 2022, December
31, 2021 and March 31, 2021, the PMIERs sufficiency ratios were
$2,261 million, $2,003 million and $1,764 million, respectively, of
available assets above the published PMIERs requirements. 8 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. 9 Genworth
Holdings, Inc. had $140 million, $331 million and $757 million of
cash, cash equivalents and restricted cash as of March 31, 2022,
December 31, 2021 and March 31, 2021, respectively, which included
$60 million of restricted cash and cash equivalents as of March 31,
2021. Genworth Holdings, Inc. also held $75 million and $25 million
in U.S. government securities as of March 31, 2022 and December 31,
2021, respectively, which included $1 million and $3 million,
respectively, of restricted assets. 10 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 as of March 31, 2022 and December 31, 2021,
respectively. 11 For the three months ended December 31, 2021, net
investment (gains) losses were adjusted for DAC and other
intangible amortization and certain benefit reserves of $(1)
million. 12 Includes cost basis adjustments on structured
securities and various other immaterial items.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220502005980/en/
Investors: Sarah Crews InvestorInfo@genworth.com
Media: Amy Rein Amy.Rein@genworth.com
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