RICHMOND, Va., Feb. 4, 2016 /PRNewswire/ --
- GAAP Annual Assumption Review Complete
- Long Term Care Insurance (LTC) Active Life GAAP Margins Of
Approximately $2.5 To $3.0 Billion;
Statutory Margin Testing Underway And Subject To Regulatory
Discussion
- Universal Life1 After-Tax Charges Of $194 Million Reflecting Updates To Persistency,
Long Term Interest Rates, Mortality And Other Refinements
- Net Loss & Net Operating Loss Include Aggregate Unfavorable
Items In Universal Life Of $0.39 Per
Diluted Share And Net Favorable Items In LTC Of $0.02 Per Diluted Share
- Continued Solid Loss Ratio Performance In U.S., Canada & Australia Mortgage Insurance
Businesses
- Maintained Strong Capital Positions & Solid Holding Company
Liquidity
- Initiating U.S. Life Restructuring Plan To Separate And Isolate
LTC And Suspend Sales Of Traditional Life And Fixed Annuity
Products
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the period ended December 31, 2015.
The company reported a net loss2 of $292 million, or $0.59 per diluted share, compared with a net loss
of $760 million, or $1.53 per diluted share, in the fourth quarter of
2014. Net operating loss3 for the fourth quarter of 2015
was $82 million, or $0.17 per diluted share, compared with a net
operating loss of $415 million, or
$0.83 per diluted share, in the
fourth quarter of 2014. The net loss and net operating loss in the
quarter include net after-tax charges of $184 million, or $0.37 per diluted share, primarily driven by
assumption updates in universal life insurance. Additionally, the
net loss includes an after-tax loss of $134
million related to the pending sale of the European mortgage
insurance business and an additional after-tax loss of $73 million related to the completed lifestyle
protection insurance business sale.
The company reported a net loss of $615
million, or $1.24 per diluted
share, in 2015, compared with a net loss of $1,244 million, or $2.51 per diluted share, in 2014. The company
reported net operating income of $255
million, or $0.51 per diluted
share, in 2015, compared with a net operating loss of $398 million, or $0.80 per diluted share, in 2014.
"We are pleased with the continued strong performance of our
mortgage insurance businesses," said Tom
McInerney, President and CEO. "In our U.S. life insurance
businesses, we are actively pursuing multiple restructuring actions
to separate and isolate our LTC business and narrow our commercial
focus, including through the suspension of traditional life and
fixed annuity sales."
Strategic Update
In 2016, the company plans to initiate a series of internal
restructuring actions aimed at separating and isolating its LTC
business, subject to regulatory and other potential third-party
approvals. These actions are focused on addressing LTC legacy block
issues that continue to pressure ratings across the
organization.
Also, the company has decided to suspend all sales of
traditional life insurance and fixed annuity products in the first
quarter of 2016 given the continued impact of ratings and recent
sales levels of these products. This action is expected to reduce
cash expenses by approximately $50
million pre-tax annually and the company expects to record
an approximately $15 million pre-tax
restructuring charge in the first quarter of 2016 related to this
decision. In addition, and as previously announced, the
company still expects to achieve annualized cash expense reductions
of $100 million pre-tax or more.
Actions taken in 2015 are expected to reduce cash expenses by
approximately $90 to $100
million pre-tax on an annualized basis, bringing total
expected cash expense reductions to $150 million or more.
As of December 31, 2015, the U.S.
mortgage insurance (MI) business was compliant with the private
mortgage insurer eligibility requirements (PMIERs) capital
requirements, with a prudent buffer. The company generated a total
of approximately $535 million in
PMIERs capital credit in 2015 from three reinsurance transactions
approved by the government-sponsored enterprises (GSEs) covering
the 2009 through 2015 books of business as well as the intercompany
sale of its ownership of affiliated preferred securities for
approximately $200 million. With
regard to the executed reinsurance transactions, the GSEs reserve
the right to reassess the PMIERs capital credit on those
transactions if certain conditions are not met, including if the
statutory risk-to-capital ratio of the business exceeds 18:1. The
company intends to maintain a prudent level of capital in excess of
the PMIERs capital requirements.
In January 2016, the company
completed the sale of certain blocks of term life insurance to
Protective Life Insurance Company. The company expects this
transaction to generate capital of approximately $100 to $150 million in aggregate to Genworth,
which includes an expected tax payment of over $200 million to the holding company that is
scheduled to be settled in July 2016,
partially offset by a decrease in the unassigned surplus of the
U.S. life insurance companies.
In December 2015, the company
completed the sale of its lifestyle protection insurance business
to AXA with estimated net proceeds of approximately $400 million, subject to post-closing
adjustments. In January 2016, the
company redeemed its senior notes due in 2016 using $321 million of proceeds from this
transaction.
During the fourth quarter, the company announced it had entered
into an agreement to sell its European mortgage insurance business
to AmTrust Financial Services, Inc. that is expected to result in
net proceeds of approximately $55
million to the U.S. MI business. The transaction is expected
to close in the first quarter of 2016 and is subject to customary
conditions, including requisite regulatory approvals.
Consolidated Net
Loss &
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Net Operating
Income (Loss)
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Three months ended
December 31
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Twelve months ended
December 31
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(Unaudited)
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(Unaudited)
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2015
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2014
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2015
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2014
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Per
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Per
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Per
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Per
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diluted
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diluted
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Total
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diluted
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diluted
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Total
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(Amounts in
millions, except per share)
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Total
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share
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Total
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share
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%
change
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Total
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share
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Total
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share
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%
change
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Net loss available to
Genworth's common
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stockholders
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$
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(292)
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$
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(0.59)
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$
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(760)
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$
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(1.53)
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62 %
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$
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(615)
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$
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(1.24)
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$
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(1,244)
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$
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(2.51)
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51 %
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Net operating income
(loss)
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$
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(82)
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$
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(0.17)
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$
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(415)
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$
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(0.83)
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80 %
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$
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255
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$
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0.51
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$
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(398)
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$
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(0.80)
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164 %
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Weighted average
diluted shares4
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497.6
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496.7
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497.4
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496.4
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Three months ended
December 31
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(Unaudited)
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2015
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2014
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Book value per
share
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$
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25.76
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$
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30.04
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Book value per share,
excluding
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accumulated other
comprehensive
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income
(loss)
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$
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19.71
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$
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21.09
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In the fourth quarter of 2015, the company changed how it
reviews its operating businesses and no longer has separate
reporting divisions. Under this new structure, the company has the
following five operating business segments: U.S. Mortgage
Insurance; Canada Mortgage Insurance; Australia Mortgage Insurance;
U.S. Life Insurance (which includes its LTC, life insurance and
fixed annuities businesses); and Runoff (which includes the results
of non-strategic products which are no longer actively sold). In
addition to the five operating business segments, the company also
has Corporate and Other activities which include debt financing
expenses that are incurred at the Genworth Holdings level,
unallocated corporate income and expenses, eliminations of
inter-segment transactions and the results of other businesses that
are managed outside of the operating segments, including certain
smaller international mortgage insurance businesses and
discontinued operations. Financial information has been updated for
all periods to reflect the reorganized segment reporting
structure.
Net investment losses, net of taxes and other adjustments, were
zero in the quarter, compared to $22
million in the prior quarter and $4
million in the prior year. Total impairments, net of tax,
were $9 million in the quarter,
compared to $6 million in the prior
quarter and none in the prior year.
Net investment income decreased to $781
million in the quarter, compared to $783 million in the prior quarter and
$797 million in the prior year
primarily from unfavorable foreign exchange and the continued
impact from the low interest rate environment. The reported yield
for the current quarter was 4.45 percent. The core
yield3 was 4.35 percent, down from the prior
quarter.
Net operating income (loss) results are summarized in the table
below:
Net Operating
Income (Loss)
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|
|
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(Amounts in
millions)
|
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Q4
15
|
|
Q3
15
|
|
Q4
14
|
U.S. Mortgage
Insurance
|
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$
|
41
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$
|
37
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$
|
21
|
Canada Mortgage
Insurance
|
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37
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38
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36
|
Australia Mortgage
Insurance
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|
22
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21
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33
|
U.S. Life
Insurance
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|
(135)
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40
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(482)
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Runoff
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11
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(4)
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16
|
Corporate and
Other
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(58)
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|
(68)
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|
|
(39)
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Total Net
Operating Income (Loss)
|
|
$
|
(82)
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|
$
|
64
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|
$
|
(415)
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Net operating income (loss) represents net operating income
(loss) from continuing operations excluding net investment gains
(losses), goodwill impairments, gains (losses) on the sale of
businesses, gains (losses) on the early extinguishment of debt,
gains (losses) on insurance block transactions, restructuring costs
and other adjustments, net of taxes. A reconciliation of net
operating income (loss) of segments and Corporate and Other
activities to net loss is included at the end of this press
release.
Unless specifically noted in the discussion of results for
mortgage insurance businesses in Canada and Australia, references to percentage changes
exclude the impact of translating foreign denominated activity into
U.S. dollars (foreign exchange). Percentage changes, which include
the impact of foreign exchange, are found in a table at the end of
this press release. The impact of foreign exchange on results in
the fourth quarter of 2015 was an unfavorable $8 million and $6
million versus the prior year in the mortgage insurance
businesses in Canada and
Australia, respectively.
U.S. Mortgage Insurance
Operating
Metrics
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(Dollar amounts in
millions)
|
|
Q4
15
|
|
Q3
15
|
|
Q4
14
|
Net operating
income
|
|
$
|
41
|
|
$
|
37
|
|
$
|
21
|
New insurance
written
|
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|
Primary
flow
|
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$
|
7,800
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|
$
|
9,300
|
|
$
|
6,900
|
Loss ratio
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39%
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43%
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61%
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U.S. MI net operating income was $41
million, compared with $37
million in the prior quarter and $21
million in the prior year. The loss ratio in the current
quarter was 39 percent, down four points sequentially from a slight
decrease in new delinquencies, continued growth in insurance in
force resulting in higher earned premiums and the impact of prior
period cancellations. The loss ratio was down 22 points from the
prior year reflecting the continued decline in delinquencies from
the 2005 to 2008 book years.
Flow new insurance written (NIW) of $7.8
billion decreased 16 percent from the prior quarter from a
seasonally smaller purchase originations market but increased 13
percent versus the prior year primarily from a larger purchase
originations market. During the fourth quarter, the company's
concentration of single premium lender paid NIW was in line with
the prior quarter as it continues its selective participation in
this market. Future volumes of this product will vary in part
depending on the company's evaluation of the risk return profile of
these transactions. The business's insurance in force grew
approximately seven percent during 2015 driven by an expanding
purchase originations market, increased market share and its
differentiated service offerings.
Canada Mortgage Insurance
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q4
15
|
|
Q3
15
|
|
Q4
14
|
Net operating
income
|
|
$
|
37
|
|
$
|
38
|
|
$
|
36
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
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Flow
|
|
$
|
4,700
|
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$
|
6,600
|
|
$
|
5,500
|
|
Bulk
|
|
$
|
7,300
|
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$
|
4,800
|
|
$
|
2,300
|
Loss ratio
|
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23%
|
|
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21%
|
|
|
26%
|
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|
Canada reported net operating
income of $37 million versus
$38 million in the prior quarter and
$36 million in the prior year. The
loss ratio in the quarter was 23 percent, up two points from the
prior quarter driven by a seasonal increase in new delinquencies,
net of cures, primarily from Alberta and Quebec and down three points compared to the
prior year. Results included unfavorable foreign exchange of
$8 million and lower expenses versus
the prior year. Flow NIW was down 26
percent5 sequentially from a seasonally smaller
originations market and was flat5 year over year. In
addition, the company completed several bulk transactions in the
quarter of approximately $7.3
billion, consisting of low loan-to-value prime loans, given
strong lender demand.
Australia Mortgage Insurance
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q4
15
|
|
Q3
15
|
|
Q4
14
|
Net operating
income
|
|
$
|
22
|
|
$
|
21
|
|
$
|
33
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
4,600
|
|
$
|
6,300
|
|
$
|
8,000
|
|
Bulk
|
|
$
|
—
|
|
$
|
—
|
|
$
|
100
|
Loss ratio
|
|
|
17%
|
|
|
29%
|
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Australia reported net
operating income of $22 million
versus $21 million in the prior
quarter and $33 million in the prior
year. The loss ratio in the quarter was 17 percent, down 12 points
sequentially and up two points from the prior year. Results in the
prior quarter included actuarial updates that had a negligible
impact on earnings, but did unfavorably impact the third quarter
loss ratio by approximately seven points. New delinquencies were
down 14 percent sequentially and cures were down seven percent
sequentially from normal seasonal variation, including improved
performance in Queensland and
stable performance in Western
Australia. Results versus the prior year were also impacted
by an unfavorable $9 million related
to the company's further sell down of approximately 14 percent of
its ownership in the Australia
business in May 2015 and unfavorable
foreign exchange of $6 million. Flow
NIW was down 24 percent5 sequentially and down 30
percent5 year over year from a smaller high
loan-to-value originations market primarily driven by regulatory
focus on the market and tightened lender risk appetite.
U.S. Life Insurance
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q4
15
|
|
Q3
15
|
|
Q4
14
|
Net operating income
(loss)
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
$
|
19
|
|
$
|
(10)
|
|
$
|
(506)
|
|
Life
Insurance
|
|
|
(173)
|
|
|
31
|
|
|
1
|
|
Fixed
Annuities
|
|
|
19
|
|
|
19
|
|
|
23
|
|
Total U.S. Life
Insurance
|
|
$
|
(135)
|
|
$
|
40
|
|
$
|
(482)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
Individual
|
|
$
|
8
|
|
$
|
7
|
|
$
|
17
|
|
|
Group
|
|
|
2
|
|
|
1
|
|
|
6
|
|
Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
Term Life
|
|
|
6
|
|
|
7
|
|
|
11
|
|
|
Universal
Life
|
|
|
3
|
|
|
2
|
|
|
7
|
|
|
Linked
Benefits
|
|
|
1
|
|
|
3
|
|
|
5
|
|
Fixed
Annuities
|
|
|
314
|
|
|
260
|
|
|
495
|
Long Term Care Insurance
LTC had net operating income of $19
million, compared with a net operating loss of $10 million in the prior quarter and a net
operating loss of $506 million in the
prior year.
During the quarter, the company completed its annual review of
GAAP active life margins or loss recognition testing. GAAP loss
recognition testing margins for the business written since late
1995 were approximately $2.5 to $3.0
billion as higher expected future claim costs were more
than offset by the impact of future in force rate actions. The
company continues to separately test its acquired LTC blocks
(representing business written prior to late 1995) for
recoverability as part of testing its GAAP loss recognition
margins. The GAAP loss recognition testing margin for the acquired
block was slightly positive and did not require an increase to
reserves in the quarter. Results in the quarter also reflected
$10 million of after-tax favorable
items, due largely to assumption updates to loss adjustment
expenses impacting claim reserves, partially offset by corrections
primarily related to reinsurance. Results in the prior quarter
included net unfavorable items of $21
million after-tax while results in the prior year included
$494 million after-tax of unfavorable
items.
Existing claims results were unfavorable versus the prior
quarter from lower terminations, but favorable versus the prior
year from higher terminations. Additionally, results from new
claims were unfavorable versus the prior year from an increase in
new claim counts and higher severity given the mix of new claims
with a higher average reserve. Results in the current quarter also
reflected less favorable experience from policies not on claim
primarily related to the acquired block of policies. The loss ratio
in the current quarter was approximately 73 percent.
Results for the quarter included a favorable impact from higher
premiums and reduced benefit options of $38
million after-tax versus the prior quarter and $55 million after-tax versus the prior year
related to premium increases from in force rate actions approved
and implemented to date. Results in the quarter also reflected a
$4 million after-tax increase to
reserves associated with profits followed by losses on business
written since late 1995. Individual LTC sales of $8 million were higher than the prior quarter,
but lower than the prior year.
Life Insurance
Life insurance had a net operating loss of $173 million, compared with net operating income
of $31 million in the prior quarter
and net operating income of $1
million in the prior year. During the quarter, the company
completed its annual review of life assumptions and recorded an
after-tax charge of $194 million
associated with its universal life insurance products, including
$36 million of corrections related to
reinsurance inputs. The charge reduced the total life insurance
products' deferred acquisition cost (DAC) and other intangible
assets by four percent and increased reserves by two percent versus
the prior year reflecting updated assumptions for persistency, long
term interest rates, mortality and other refinements. In addition
to these initial charges, the assumption changes resulted in an
unfavorable $4 million after-tax
impact in the fourth quarter, as compared to prior periods, and are
also expected to increase future reserve growth and DAC
amortization in similar amounts. Results in the prior year
reflected a $32 million unfavorable
item. Sales of $10 million decreased
compared to the prior quarter and the prior year.
Fixed Annuities
Fixed annuities net operating income was $19 million, compared with $19 million in the prior quarter and $23 million in the prior year. Results in the
quarter reflect unfavorable impacts from mortality and lower bond
call income versus the prior year. Sales in the quarter totaled
$314 million, up sequentially and
down versus the prior year.
Runoff
Runoff net operating income was $11
million, compared with a net operating loss of $4 million in the prior quarter and net operating
income of $16 million in the prior
year reflecting favorable equity market performance versus both the
prior quarter and prior year, but less favorable taxes versus the
prior year.
Corporate And Other
Corporate and Other net operating loss was $58 million, compared with $68 million in the prior quarter and $39 million in the prior year. Results in the
prior quarter included legal accruals and expenses of $17 million after-tax. Results versus the prior
quarter and prior year reflected less favorable taxes.
Capital & Liquidity
Genworth maintains solid capital positions in its operating
subsidiaries.
Key Capital &
Liquidity Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q4
15
|
|
Q3
15
|
|
Q4
14
|
|
U.S.
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-To-Capital Ratio6
|
|
|
16.3:1
|
|
|
|
14.3:1
|
|
|
|
14.5:1
|
|
|
Genworth Mortgage
Insurance Corporation Risk-To-Capital
Ratio6
|
|
|
16.4:1
|
|
|
|
14.3:1
|
|
|
|
14.3:1
|
|
Canada
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Capital Test
(MCT) Ratio6
|
|
|
233
|
%
|
|
|
228
|
%
|
|
|
225
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio6
|
|
|
159
|
%
|
|
|
167
|
%
|
|
|
159
|
%
|
U.S. Life
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC)
Ratio6
|
|
|
430
|
%
|
|
|
444
|
%
|
|
|
438
|
%
|
|
Unassigned
Surplus6
|
|
$
|
(70)
|
|
|
$
|
75
|
|
|
$
|
155
|
|
Holding Company
Cash7 and Liquid Assets8
|
|
$
|
1,374
|
|
|
$
|
983
|
|
|
$
|
1,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Points
- $117 million of dividends and
payments from the operating subsidiaries were paid to the holding
company during the fourth quarter, including $55 million from the buyback of Australia mortgage insurance business shares.
In addition, the holding company received $325 million of proceeds related to the sale of
the lifestyle protection insurance business in December 2015 and anticipates to receive
approximately $50 million during
2016;
- U.S. MI risk-to-capital increased in the quarter as Genworth
Mortgage Insurance Corporation eliminated all outstanding
intercompany surplus notes reducing the concentration of affiliate
assets with no PMIERs impact;
- U.S. MI business was compliant with the PMIERs capital
requirements with a buffer as of December
31, 2015;
- Unassigned surplus and RBC ratio declined versus the prior
quarter in part from updates to assumptions for mortality,
utilization and other refinements related to the company's annual
review of assumptions in variable annuity products;
- In January 2016, Genworth
Holdings completed the redemption of its senior notes due in 2016
for $321 million using proceeds from
the sale of the lifestyle protection insurance business;
- The holding company ended the fourth quarter with approximately
$1.4 billion of cash and liquid
assets, representing a buffer of $907
million in excess of one and a half times annual debt
service and restricted cash. When adjusting for the cash used for
the January 2016 redemption of the
senior notes due in 2016, the buffer would have been $586 million; and
- The holding company targets maintaining cash balances of at
least one and a half times its annual debt service expense plus a
risk buffer of $350 million.
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500
insurance holding company committed to helping families become more
financially secure, self-reliant and prepared for the future.
Genworth has leadership positions in mortgage insurance and long
term care insurance and product offerings in life insurance and
fixed annuities that assist consumers in solving their home
ownership, insurance and retirement needs. Headquartered in
Richmond, Virginia, Genworth
traces its roots back to 1871 and became a public company in 2004.
For more information, visit genworth.com.
From time to time, Genworth releases important information via
postings on its corporate website. Accordingly, investors and other
interested parties are encouraged to enroll to receive automatic
email alerts and Really Simple Syndication (RSS) feeds regarding
new postings. Enrollment information is found under the "Investors"
section of genworth.com. From time to time, Genworth's
publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth
Mortgage Insurance Australia Limited, separately release financial
and other information about their operations. This information can
be found at http://genworth.ca and
http://www.genworth.com.au.
Conference Call and Financial Supplement Information
This press release and the fourth quarter 2015 financial
supplement are now posted on the company's website. Additional
information regarding business results and strategic update will be
posted on the company's website, http://investor.genworth.com, by
7:30 a.m. on February 5, 2016. Investors are encouraged to
review these materials.
Genworth will conduct a conference call on February 5, 2016 at 8:00
a.m. (ET) to discuss business results, its annual assumption
reviews and margin testing, and provide a progress update on
strategic priorities. The conference call will be accessible via
telephone and the Internet. The dial-in number for the conference
call is 877 888.4034 or 913 489.5101 (outside the U.S.); conference
ID # 858342. 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.
Replays of the call will be available through February 19, 2016 at 888 203.1112 or 719 457.0820
(outside the U.S.); conference ID # 858342. The webcast will also
be archived on the company's website.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures
entitled "net operating income (loss)" and "net operating income
(loss) per common share." Net operating income (loss) per common
share is derived from net operating income (loss). The chief
operating decision maker evaluates segment performance and
allocates resources on the basis of net operating income (loss).
The company defines net operating income (loss) as income (loss)
from continuing operations excluding the after-tax effects of
income attributable to noncontrolling interests, net investment
gains (losses), goodwill impairments, gains (losses) on the sale of
businesses, gains (losses) on the early extinguishment of debt,
gains (losses) on insurance block transactions, restructuring costs
and infrequent or unusual non-operating items. Gains (losses) on
insurance block transactions are defined as gains (losses) on the
early extinguishment of non-recourse funding obligations, early
termination fees for other financing restructuring and/or resulting
gains (losses) on reinsurance restructuring for certain blocks of
business. The company excludes net investment gains (losses) and
infrequent or unusual non-operating items because the company does
not consider them to be related to the operating performance of the
company's segments and Corporate and Other activities. A component
of the company's net investment gains (losses) is the result of
impairments, 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. Goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the
early extinguishment of debt, gains (losses) on insurance block
transactions and restructuring costs are also excluded from net
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 net 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's common stockholders in
accordance with GAAP, the company believes that net operating
income (loss) and measures that are derived from or incorporate net
operating income (loss), including net operating income (loss) per
common 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 net 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 net operating income
(loss) have occurred in the past and could, and in some cases will,
recur in the future. Net operating income (loss) and net operating
income (loss) per common share on a basic and diluted basis are not
substitutes for net income (loss) available to Genworth's common
stockholders or net income (loss) available to Genworth's common
stockholders per common share on a basic and diluted basis
determined in accordance with GAAP. In addition, the company's
definition of net operating income (loss) may differ from the
definitions used by other companies.
In the fourth quarter of 2014, the company recorded goodwill
impairments of $129 million, net of
taxes, in the long term care insurance business and $145 million, net of taxes, in the life insurance
business. In the third quarter of 2014, the company recorded
goodwill impairments of $167 million,
net of taxes, in the long term care insurance business and
$350 million, net of taxes, in the
life insurance business.
The company recognized an estimated loss of $134 million, net of taxes, in the fourth quarter
of 2015 for the planned sale of the mortgage insurance business in
Europe, as well as a tax charge of
$7 million in the third quarter of
2015 from potential business portfolio changes related to this
business resulting in a total estimated loss on sale of
$141 million in 2015.
In the third quarter of 2015, the company paid an early
redemption payment of approximately $1
million, net of taxes and portion attributable to
noncontrolling interests, related to the early redemption of
Genworth Financial Mortgage Insurance Pty Limited's notes that were
scheduled to mature in 2021. In the third quarter of 2015, the
company also repurchased approximately $50
million principal amount of Genworth Holdings, Inc.'s notes
with various maturity dates for a loss of $1
million, net of taxes. In the second quarter of 2014, the
company paid an early redemption payment of approximately
$2 million, net of taxes and portion
attributable to noncontrolling interests, related to the early
redemption of Genworth MI Canada Inc.'s notes that were scheduled
to mature in 2015. These transactions were excluded from net
operating income (loss) for the periods presented as they related
to a loss on the early extinguishment of debt.
In the third quarter of 2015, the company recorded a DAC
impairment of $296 million, net of
taxes, on certain term life insurance policies in connection with
entering into an agreement to complete a life block
transaction.
In the fourth and second quarters of 2015, the company recorded
an after-tax expense of $3 million
and $2 million, respectively, related
to restructuring costs as part of an expense reduction plan as the
company evaluates and appropriately sizes its organizational needs
and expenses.
There were no infrequent or unusual items excluded from net
operating income (loss) during the periods presented other than the
following items. There was a $205
million net tax impact in the fourth quarter of 2014 from
potential business portfolio changes. The company recognized a tax
charge of $174 million in the fourth
quarter of 2014 associated with the Australian mortgage insurance
business as the company can no longer assert its intent to
permanently reinvest earnings in that business. In connection with
the company's plans to sell the lifestyle protection insurance
business, the company made a change to the permanent reinvestment
assertion on one of its legal entities recognizing tax expense of
$31 million in the fourth quarter of
2014.
The tables at the end of this press release reflect net
operating income (loss) as determined in accordance with accounting
guidance related to segment reporting, and a reconciliation of net
operating income (loss) of the company's segments and Corporate and
Other activities to net loss available to Genworth's common
stockholders for the three and twelve months ended December 31, 2015 and 2014, as well as for the
three months ended September 30,
2015.
Adjustments to reconcile net income (loss) attributable to
Genworth's common stockholders and net operating income (loss)
assume a 35 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.
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 those items
that are not recurring in nature. 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 GAAP. In addition, the
company's definition of core yield may differ from the definitions
used by other companies. A reconciliation of core yield to reported
GAAP yield is included in a table at the end of this press
release.
Results of Operations by Segment
In the first quarter of 2015, the company revised how it
allocates the consolidated provision for income taxes to its
operating segments to simplify the process and reflect how the
chief operating decision maker is evaluating segment performance.
The revised methodology applies a specific tax rate to the pre-tax
income (loss) of each segment, which is then adjusted in each
segment to reflect the tax attributes of items unique to that
segment such as foreign income. 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. Previously, the company calculated
a unique income tax provision for each segment based on quarterly
changes to tax attributes and implications of transactions specific
to each product within the segment.
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. Prior year
amounts have not been re-presented to reflect this revised
presentation and are, therefore, not comparable to the current year
provision for income taxes by segment. However, the company does
not believe that the previous methodology would have resulted in a
materially different segment-level provision for income taxes.
Definition of Selected Operating Performance Measures
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 and renewal business generated in a
period. Sales refer to: (1) new insurance written for mortgage
insurance; (2) annualized first-year premiums for long term care
and term life insurance products; (3) annualized first-year
deposits plus five percent of excess deposits for universal and
term universal life insurance products; (4) 10 percent of premium
deposits for linked-benefits products; and (5) new and additional
premiums/deposits for fixed annuities. Sales do not include renewal
premiums on policies or contracts written during prior periods. The
company considers new insurance written, annualized first-year
premiums/deposits, premium equivalents and new premiums/deposits to
be a measure of the company's operating performance because they
represent a measure of new sales of insurance policies or contracts
during a specified period, rather than a measure of the company's
revenues or profitability during that period.
Management regularly monitors and reports insurance in force and
risk in force. Insurance in force for the mortgage insurance
businesses is a measure of the aggregate face value of outstanding
insurance policies as of the respective reporting date. For risk in
force in the mortgage insurance businesses, the company has
computed an "effective" risk in force amount, which recognizes that
the loss on any particular loan will be reduced by the net proceeds
received upon sale of the property. Risk in force for the U.S.
mortgage insurance business is the obligation that is limited under
contractual terms to the amounts less than 100 percent of the
mortgage loan value. Effective risk in force has been calculated by
applying to insurance in force a factor of 35 percent that
represents the highest expected average per-claim payment for any
one underwriting year over the life of the company's businesses in
Canada and Australia. In Australia, the company has certain risk share
arrangements where it provides pro-rata coverage of certain loans
rather than 100 percent coverage. As a result, for loans with these
risk share arrangements, the applicable pro-rata coverage amount
provided is used when applying the factor. The company considers
insurance in force and risk in force to be measures of the
company's operating performance because they represent measures of
the size of the business at a specific date which will generate
revenues and profits in a future period, rather than measures of
the company's 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,
the loss ratio is the ratio of incurred losses and loss adjustment
expenses to net earned premiums. For the long term care insurance
business, 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.
An assumed tax rate of 35 percent is utilized in certain
adjustments to net operating income (loss) and in the explanation
of specific variances of operating performance and investment
results.
These operating performance measures enable the company to
compare its operating performance across periods without regard to
revenues or profitability related to policies or contracts sold in
prior periods or from investments or other sources.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements may be identified by words such
as "expects," "intends," "anticipates," "plans," "believes,"
"seeks," "estimates," "will" or words of similar meaning and
include, but are not limited to, statements regarding the outlook
for the company's future business and financial performance.
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 due to global political, economic, business,
competitive, market, regulatory and other factors and risks,
including, but not limited to, the following:
- Risks relating to all of the company's businesses,
including: (i) inability to successfully execute strategic
plans to effectively address the company's current business
challenges (including with respect to its long term care insurance
business, ratings and capital), including as a result of the
inability to complete the planned sale of the company's European
mortgage insurance business at all or on the terms anticipated and
failure to attract buyers for any other businesses or other assets
the company may seek to sell, or securities it may seek to issue,
in each case, in a timely manner on anticipated terms; inability to
generate required capital; failure to obtain any required
regulatory, stockholder and/or noteholder approvals or consents, or
the company's challenges changing or being more costly or difficult
to successfully address than currently anticipated or the benefits
achieved being less than anticipated; inability to successfully
develop more targeted product features and benefits, strengthen
relationships with producers or achieve anticipated cost-savings in
a timely manner; adverse tax or accounting charges; (ii) inability
to obtain the necessary regulatory approvals and/or third party
consents to execute on the company's internal restructuring
initiatives to separate and isolate its long term care
insurance business; (iii) inability to achieve the anticipated
or expected results from the company's internal restructuring
initiatives; (iv) 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, securities offerings or
otherwise, in each case as and when required; (v) 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 as a result of the company's actual experience
differing significantly from its assumptions); (vi) ineffective or
inadequate risk management in identifying, controlling or
mitigating risks; weaknesses in, or ineffective, internal controls;
(vii) inaccurate models to price products, calculate reserves and
value assets could have a material adverse impact on the company's
business, results of operations and financial condition; (viii)
recent or future adverse rating agency actions, including with
respect to rating downgrades or potential downgrades, being placed
on negative outlook or being put on review for potential downgrade,
all of which could have adverse implications for the company,
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; (ix)
inability to retain, attract and motivate qualified employees and
independent sales representatives, particularly in the light of the
company's recent business challenges; (x) adverse change in
regulatory requirements, including risk-based capital; (xi)
dependence on dividends and other distributions from the company's
subsidiaries (particularly the company's international
subsidiaries) and the inability of any subsidiaries to pay
dividends or make other distributions to the company, including as
a result of the performance of the subsidiaries and
insurance, regulatory or corporate law restrictions (including the
unwillingness or inability of the subsidiary that indirectly owns
most of the company's interests in the Australian and
Canadian mortgage insurance businesses to pay the dividends that it
receives from those businesses as a result of the impact on its
financial condition of its capital support for certain long
term care insurance related reinsurance arrangements); (xii)
downturns and volatility in global economies and equity and credit
markets; (xiii) interest rates and changes in rates; (xiv)
availability, affordability and adequacy of reinsurance to protect
the company against losses; (xv) defaults by counterparties to
reinsurance arrangements or derivative instruments; (xvi) changes
in valuation of fixed maturity, equity and trading securities;
(xvii) defaults or other events impacting the value of the
company's fixed maturity securities portfolio; (xviii) defaults on
the company's commercial mortgage loans or the mortgage loans
underlying its investments in commercial mortgage-backed securities
and volatility in performance; (xix) competitors; (xx) reliance on,
and loss of, key customer or distribution relationships; (xxi)
extensive regulation of the company's businesses and changes in
applicable laws and regulations; (xxii) litigation and regulatory
investigations or other actions (including the two shareholder
putative class action lawsuits alleging securities law violations
filed against the company in 2014, including as further described
below); (xxiii) the material weakness in the company's internal
control over financial reporting in the future; (xxiv) failure or
any compromise of the security of the company's computer systems,
disaster recovery systems and business continuity plans and
failures to safeguard, or breaches of, the company's confidential
information; (xxv) occurrence of natural or man-made disasters or a
pandemic; (xxvi) impact of additional regulations pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act; (xxvii)
changes in accounting and reporting standards; (xxviii) impairments
of or valuation allowances against the company's deferred tax
assets; (xxix) accelerated amortization of DAC and present value of
future profits (including as a result of any changes the company
may make to its assumptions, methodologies or otherwise in
connection with periodic or other reviews); (xxx) political and
economic instability or changes in government policies; and (xxxi)
fluctuations in foreign currency exchange rates and international
securities markets;
- Risks relating primarily to the company's mortgage insurance
businesses, including: (i) deterioration in economic conditions
or a decline in home prices that adversely affect the company's
loss experience in its mortgage insurance businesses; (ii)
competition in the company's mortgage insurance businesses,
including from government and government-owned and GSEs offering
mortgage insurance; (iii) changes in regulations adversely
affecting the mortgage insurance markets in which the company
operates; (iv) inability to meet or maintain the requirements
mandated by PMIERs because the GSEs amend them or changes to the
GSE's interpretation of the financial requirements; (v) inability
of U.S. mortgage insurance subsidiaries to meet minimum statutory
capital requirements and hazardous financial condition standards;
(vi) the influence of Federal National Mortgage Association (Fannie
Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and a
small number of large mortgage lenders on the U.S. mortgage
insurance market and adverse changes to the role or structure of
Fannie Mae and Freddie Mac; (vii) increases in U.S. mortgage
insurance default rates; (viii) uncertainty regarding anticipated
benefits from loss mitigation actions or programs in the company's
mortgage insurance businesses; (ix) competition with GSEs may put
the company at a disadvantage on pricing and other terms and
conditions; (x) decreases in the volume of high loan-to-value
mortgage originations or increases in mortgage insurance
cancellations; (xi) increases in the use of alternatives to private
mortgage insurance and reductions in the level of coverage
selected; and (xii) potential liabilities in connection with the
company's U.S. contract underwriting services;
- Risks relating primarily to the company's long term care
insurance, life insurance and annuities businesses, including:
(i) the company's inability to increase sufficiently, and in a
timely manner, premiums on in-force long term care insurance
policies and/or reduce in-force benefits, and charge higher
premiums on new policies, in each case, as currently anticipated
(including the future increases assumed in connection with the
completion of the company's margin reviews in the fourth quarters
of 2014 and 2015) and as may be required from time to time in the
future (including as a result of its failure to obtain any
necessary regulatory approvals or unwillingness or inability of
policyholders to pay increased premiums); the company's inability
to reflect future premium increases and other management actions in
its margin calculation as anticipated; (ii) unanticipated adverse
events or actions in connection with the suspension of sales of the
company's life insurance and fixed annuity products; (iii) failure
to sufficiently increase demand for the company's long term care
insurance; (iv) adverse impact on the company's financial results
as a result of projected profits followed by projected losses (as
is currently the case with the company's long term care insurance
business); (v) medical advances, such as genetic research and
diagnostic imaging, and related legislation that impact
policyholder behavior in ways adverse to the company; and (vi)
inability to continue to implement actions to mitigate the impact
of statutory reserve requirements;
- Other risks, including: (i) the possibility that
in certain circumstances the company will be obligated to make
payments to General Electric Company (GE) under the tax matters
agreement with GE even if its corresponding tax savings are never
realized and payments could be accelerated in the event of certain
changes in control; and (ii) provisions of the company's
certificate of incorporation and bylaws and the tax matters
agreement with GE may discourage takeover attempts and business
combinations that stockholders might consider in their best
interests; and
- Risks relating to the company's common stock, including:
(i) the continued suspension of payment of dividends; and (ii)
stock price fluctuations.
With respect to risks relating to the previously-disclosed
litigation In re Genworth Financial, Inc. Securities
Litigations, the court has scheduled a trial to begin on
May 9, 2016, and the parties are
currently engaging in a mediation process. The plaintiffs have
recently taken the position that the class is entitled to
recover per share and per bond amounts that, if the
plaintiffs were to prevail, would, in the aggregate, be material.
There can be no assurance that the mediation will result in a
settlement and, if it does not, the company intends to continue to
vigorously defend the lawsuit. The company cannot determine or
predict the ultimate outcome of this litigation or provide an
estimate or range of reasonably possible losses arising from this
litigation. Nevertheless, the company believes that it is
reasonably possible it will incur additional losses in resolving
this litigation beyond the amounts already accrued and, if so, that
it is reasonably possible the amount of such losses would be
material.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Condensed
Consolidated Statements of Income
|
(Amounts in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,157
|
|
$
|
1,214
|
|
$
|
4,579
|
|
$
|
4,700
|
Net investment
income
|
|
|
781
|
|
|
797
|
|
|
3,138
|
|
|
3,142
|
Net investment gains
(losses)
|
|
|
(16)
|
|
|
(11)
|
|
|
(75)
|
|
|
(22)
|
Policy fees and other
income
|
|
|
234
|
|
|
229
|
|
|
906
|
|
|
909
|
Total
revenues
|
|
|
2,156
|
|
|
2,229
|
|
|
8,548
|
|
|
8,729
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,435
|
|
|
2,136
|
|
|
5,149
|
|
|
6,418
|
Interest
credited
|
|
|
180
|
|
|
185
|
|
|
720
|
|
|
737
|
Acquisition and
operating expenses, net of deferrals
|
|
|
433
|
|
|
299
|
|
|
1,309
|
|
|
1,138
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
207
|
|
|
128
|
|
|
966
|
|
|
453
|
Goodwill
impairment
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
849
|
Interest
expense
|
|
|
104
|
|
|
106
|
|
|
419
|
|
|
433
|
Total benefits and
expenses
|
|
|
2,359
|
|
|
3,153
|
|
|
8,563
|
|
|
10,028
|
Loss from continuing
operations before income taxes
|
|
|
(203)
|
|
|
(924)
|
|
|
(15)
|
|
|
(1,299)
|
Benefit for income
taxes
|
|
|
(36)
|
|
|
(78)
|
|
|
(9)
|
|
|
(94)
|
Loss from continuing
operations
|
|
|
(167)
|
|
|
(846)
|
|
|
(6)
|
|
|
(1,205)
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(73)
|
|
|
138
|
|
|
(407)
|
|
|
157
|
Net
loss
|
|
|
(240)
|
|
|
(708)
|
|
|
(413)
|
|
|
(1,048)
|
Less: net income
attributable to noncontrolling interests
|
|
|
52
|
|
|
52
|
|
|
202
|
|
|
196
|
Net loss available to
Genworth Financial, Inc.'s common stockholders
|
|
$
|
(292)
|
|
$
|
(760)
|
|
$
|
(615)
|
|
$
|
(1,244)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations available to Genworth Financial, Inc.'s
|
|
|
|
|
|
|
|
|
|
|
|
|
common stockholders per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.44)
|
|
$
|
(1.81)
|
|
$
|
(0.42)
|
|
$
|
(2.82)
|
Diluted
|
|
$
|
(0.44)
|
|
$
|
(1.81)
|
|
$
|
(0.42)
|
|
$
|
(2.82)
|
Net loss available to
Genworth Financial, Inc.'s common stockholders per
|
|
|
|
|
|
|
|
|
|
|
|
|
common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.59)
|
|
$
|
(1.53)
|
|
$
|
(1.24)
|
|
$
|
(2.51)
|
Diluted
|
|
$
|
(0.59)
|
|
$
|
(1.53)
|
|
$
|
(1.24)
|
|
$
|
(2.51)
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
497.6
|
|
|
496.7
|
|
|
497.4
|
|
|
496.4
|
Diluted4
|
|
|
497.6
|
|
|
496.7
|
|
|
497.4
|
|
|
496.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Operating Income (Loss) to Net Loss
|
(Amounts in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
Twelve
|
|
Three
|
|
|
|
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
September
30,
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
Net operating income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance segment
|
|
$
|
41
|
|
$
|
21
|
|
$
|
179
|
|
$
|
91
|
|
$
|
37
|
Canada Mortgage
Insurance segment
|
|
|
37
|
|
|
36
|
|
|
152
|
|
|
170
|
|
|
38
|
Australia Mortgage
Insurance segment
|
|
|
22
|
|
|
33
|
|
|
102
|
|
|
200
|
|
|
21
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
19
|
|
|
(506)
|
|
|
29
|
|
|
(815)
|
|
|
(10)
|
|
Life
Insurance
|
|
|
(173)
|
|
|
1
|
|
|
(80)
|
|
|
74
|
|
|
31
|
|
Fixed
Annuities
|
|
|
19
|
|
|
23
|
|
|
94
|
|
|
100
|
|
|
19
|
|
Total U.S. Life
Insurance segment
|
|
|
(135)
|
|
|
(482)
|
|
|
43
|
|
|
(641)
|
|
|
40
|
Runoff
segment
|
|
|
11
|
|
|
16
|
|
|
27
|
|
|
48
|
|
|
(4)
|
Corporate and
Other
|
|
|
(58)
|
|
|
(39)
|
|
|
(248)
|
|
|
(266)
|
|
|
(68)
|
Net operating income
(loss)
|
|
|
(82)
|
|
|
(415)
|
|
|
255
|
|
|
(398)
|
|
|
64
|
Adjustments to net
operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains
(losses), net (see below for reconciliation)
|
|
|
—
|
|
|
(4)
|
|
|
(19)
|
|
|
(5)
|
|
|
(22)
|
Goodwill impairment,
net
|
|
|
—
|
|
|
(274)
|
|
|
—
|
|
|
(791)
|
|
|
—
|
Gains (losses) on
sale of businesses, net
|
|
|
(134)
|
|
|
—
|
|
|
(141)
|
|
|
—
|
|
|
(7)
|
Gains (losses) on
early extinguishment of debt, net
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(2)
|
|
|
(2)
|
Gains (losses) from
life block transactions, net
|
|
|
—
|
|
|
—
|
|
|
(296)
|
|
|
—
|
|
|
(296)
|
Expenses related to
restructuring, net
|
|
|
(3)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
—
|
Tax impact from
potential business portfolio changes
|
|
|
—
|
|
|
(205)
|
|
|
—
|
|
|
(205)
|
|
|
—
|
Loss from continuing
operations available to Genworth Financial,
Inc.'s common
stockholders
|
|
|
(219)
|
|
|
(898)
|
|
|
(208)
|
|
|
(1,401)
|
|
|
(263)
|
Net income
attributable to noncontrolling interests
|
|
|
52
|
|
|
52
|
|
|
202
|
|
|
196
|
|
|
46
|
Loss from continuing
operations
|
|
|
(167)
|
|
|
(846)
|
|
|
(6)
|
|
|
(1,205)
|
|
|
(217)
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(73)
|
|
|
138
|
|
|
(407)
|
|
|
157
|
|
|
(21)
|
Net
loss
|
|
|
(240)
|
|
|
(708)
|
|
|
(413)
|
|
|
(1,048)
|
|
|
(238)
|
Less: net income
attributable to noncontrolling interests
|
|
|
52
|
|
|
52
|
|
|
202
|
|
|
196
|
|
|
46
|
Net loss available to
Genworth Financial, Inc.'s common stockholders
|
|
$
|
(292)
|
|
$
|
(760)
|
|
$
|
(615)
|
|
$
|
(1,244)
|
|
$
|
(284)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to
Genworth Financial, Inc.'s common stockholders per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.59)
|
|
$
|
(1.53)
|
|
$
|
(1.24)
|
|
$
|
(2.51)
|
|
$
|
(0.57)
|
|
|
Diluted
|
|
$
|
(0.59)
|
|
$
|
(1.53)
|
|
$
|
(1.24)
|
|
$
|
(2.51)
|
|
$
|
(0.57)
|
Net operating income
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.17)
|
|
$
|
(0.83)
|
|
$
|
0.51
|
|
$
|
(0.80)
|
|
$
|
0.13
|
|
|
Diluted
|
|
$
|
(0.17)
|
|
$
|
(0.83)
|
|
$
|
0.51
|
|
$
|
(0.80)
|
|
$
|
0.13
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
497.6
|
|
|
496.7
|
|
|
497.4
|
|
|
496.4
|
|
|
497.4
|
|
|
Diluted4
|
|
|
497.6
|
|
|
496.7
|
|
|
497.4
|
|
|
496.4
|
|
|
497.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains
(losses), gross
|
|
$
|
(16)
|
|
$
|
(11)
|
|
$
|
(75)
|
|
$
|
(22)
|
|
$
|
(51)
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred acquisition
costs and other intangible amortization and certain
benefit reserves
|
|
|
12
|
|
|
1
|
|
|
35
|
|
|
14
|
|
|
9
|
|
Net investment gains
(losses) attributable to noncontrolling interests
|
|
|
3
|
|
|
1
|
|
|
9
|
|
|
—
|
|
|
8
|
|
Taxes
|
|
|
1
|
|
|
5
|
|
|
12
|
|
|
3
|
|
|
12
|
Net investment gains
(losses), net of taxes and other adjustments
|
|
$
|
—
|
|
$
|
(4)
|
|
$
|
(19)
|
|
$
|
(5)
|
|
$
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
Assets
|
|
|
|
|
|
Cash, cash
equivalents and invested assets
|
|
$
|
75,746
|
|
$
|
77,078
|
|
Deferred acquisition
costs
|
|
|
4,398
|
|
|
4,852
|
|
Intangible assets and
goodwill
|
|
|
357
|
|
|
265
|
|
Reinsurance
recoverable
|
|
|
17,245
|
|
|
17,291
|
|
Deferred tax and
other assets
|
|
|
675
|
|
|
479
|
|
Separate account
assets
|
|
|
7,883
|
|
|
9,208
|
|
Assets held for
sale
|
|
|
127
|
|
|
2,143
|
|
|
|
|
Total
assets
|
|
$
|
106,431
|
|
$
|
111,316
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
36,475
|
|
$
|
35,915
|
|
|
Policyholder account
balances
|
|
|
26,209
|
|
|
26,032
|
|
|
Liability for policy
and contract claims
|
|
|
8,095
|
|
|
7,881
|
|
|
Unearned
premiums
|
|
|
3,308
|
|
|
3,485
|
|
|
Deferred tax and
other liabilities
|
|
|
3,028
|
|
|
4,092
|
|
|
Borrowings related to
securitization entities
|
|
|
179
|
|
|
219
|
|
|
Non-recourse funding
obligations
|
|
|
1,920
|
|
|
1,981
|
|
|
Long-term
borrowings
|
|
|
4,570
|
|
|
4,612
|
|
|
Separate account
liabilities
|
|
|
7,883
|
|
|
9,208
|
|
|
Liabilities held for
sale
|
|
|
127
|
|
|
1,094
|
|
|
|
|
Total
liabilities
|
|
|
91,794
|
|
|
94,519
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,949
|
|
|
11,997
|
|
|
Accumulated other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
(losses) on securities not other-than-temporarily
impaired
|
|
|
1,236
|
|
|
2,431
|
|
|
|
|
|
Net unrealized gains
(losses) on other-than-temporarily impaired securities
|
|
|
18
|
|
|
22
|
|
|
|
|
Net unrealized
investment gains (losses)
|
|
|
1,254
|
|
|
2,453
|
|
|
|
|
Derivatives
qualifying as hedges
|
|
|
2,045
|
|
|
2,070
|
|
|
|
|
Foreign currency
translation and other adjustments
|
|
|
(289)
|
|
|
(77)
|
|
|
Total accumulated
other comprehensive income (loss)
|
|
|
3,010
|
|
|
4,446
|
|
|
Retained
earnings
|
|
|
564
|
|
|
1,179
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
12,824
|
|
|
14,923
|
|
|
Noncontrolling
interests
|
|
|
1,813
|
|
|
1,874
|
|
|
|
|
Total
equity
|
|
|
14,637
|
|
|
16,797
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
106,431
|
|
$
|
111,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Foreign
Exchange on Operating Results9
Three months ended
December 31, 2015
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada Mortgage
Insurance (MI):
|
|
|
|
|
|
|
Flow new insurance
written
|
|
(15)
|
%
|
|
―
|
%
|
Flow new insurance
written (4Q15 vs. 3Q15)
|
|
(29)
|
%
|
|
(26)
|
%
|
|
|
|
|
|
|
|
Australia
MI:
|
|
|
|
|
|
|
Flow new insurance
written
|
|
(43)
|
%
|
|
(30)
|
%
|
Flow new insurance
written (4Q15 vs. 3Q15)
|
|
(27)
|
%
|
|
(24)
|
%
|
|
|
|
|
|
|
|
Reconciliation of
Core Yield to Reported Yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
|
December
31,
|
|
(Assets - amounts
in billions)
|
|
2015
|
|
Reported Total
Invested Assets and Cash
|
|
$
|
75.1
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.3
|
|
|
|
Unrealized gains
(losses)
|
|
|
4.2
|
|
|
|
Derivative
counterparty collateral
|
|
|
—
|
|
|
Adjusted end of
period invested assets
|
|
$
|
70.6
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets Used in Reported Yield Calculation
|
|
$
|
70.2
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
Restricted commercial
mortgage loans and other invested assets related to
|
|
|
|
|
|
|
securitization entities11
|
|
|
0.2
|
|
|
Average Invested
Assets Used in Core Yield Calculation
|
|
$
|
70.0
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in
millions)
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
781
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
18
|
|
|
|
Other non-core
items12
|
|
|
(2)
|
|
|
|
Restricted commercial
mortgage loans and other invested assets related to
|
|
|
|
|
|
|
securitization entities11
|
|
|
3
|
|
|
Core Net Investment
Income
|
|
$
|
762
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.45
|
%
|
|
Core Yield
|
|
|
4.35
|
%
|
|
1 Includes both universal life and term universal
life insurance.
2 Unless otherwise stated, all references in this press
release to net loss, net loss per share, book value, book value per
share and stockholders' equity should be read as net loss available
to Genworth's common stockholders, net loss available to Genworth's
common stockholders per share, book value available to Genworth's
common stockholders, book value available to Genworth's common
stockholders per share and stockholders' equity available to
Genworth's common stockholders, respectively.
3 This is a financial measure 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 Under applicable accounting guidance, companies in a
loss position are required to use basic weighted-average common
shares outstanding in the calculation of diluted loss per share.
Therefore, as a result of the loss from continuing operations, the
company was required to use basic weighted-average common shares
outstanding in the calculation of diluted loss per share as the
inclusion of shares for stock options, restricted stock units and
stock appreciation rights of 1.4 million, 1.3 million and 3.2
million, respectively, for the three months ended December 31, 2015, September 30, 2015 and December 31, 2014 and 1.6 million and 5.6
million, respectively, for the twelve months ended December 31, 2015 and 2014 would have been
antidilutive to the calculation. If the company had not incurred a
loss from continuing operations in these periods, dilutive
potential weighted-average common shares outstanding would have
been 499.0 million, 498.7 million and 499.9 million, respectively,
for the three months ended December 31,
2015, September 30, 2015 and
December 31, 2014 and 499.0 million
and 502.0 million, respectively, for the twelve months ended
December 31, 2015 and 2014. Since it
had net operating income for the three months ended September 30, 2015 and the twelve months ended
December 31, 2015, the company used
498.7 million and 499.0 million, respectively, diluted
weighted-average common shares outstanding in the calculation of
diluted net operating income per common share.
5 Percent change excludes the impact of foreign
exchange.
6 Company estimate for the fourth quarter of 2015, due
to timing of the filing of statutory statements.
7 Holding company cash & 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.
8 Comprises cash and cash equivalents of $1,124 million, $733
million and $953 million,
respectively, and U.S. government bonds of $250 million, $250
million and $150 million,
respectively, as of December 31,
2015, September 30, 2015 and
December 31, 2014.
9 All percentages are comparing the fourth quarter of
2015 to the fourth quarter of 2014 unless otherwise stated.
10 The impact of foreign exchange was calculated using
the comparable prior period exchange rates.
11 Represents the incremental assets and investment
income related to restricted commercial mortgage loans and other
invested assets.
12 Includes cost basis adjustments on structured
securities and various other immaterial items.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/genworth-financial-announces-fourth-quarter-2015-results-300215514.html
SOURCE Genworth Financial, Inc.