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RICHMOND, Va.--(BUSINESS WIRE)--Nov 1, 2022--
Genworth Financial, Inc. (NYSE: GNW) today reported results for the quarter ended September 30, 2022. The company reported net income 2 of $104 million, or $0.20 per diluted share, in the third quarter of 2022, compared with net income of $314 million, or $0.61 per diluted share, in the third quarter of 2021. The company reported adjusted operating income 3 of $159 million, or $0.31 per diluted share, in the third quarter of 2022, compared with adjusted operating income of $239 million, or $0.46 per diluted share, in the third quarter of 2021.
“We are pleased with the progress we have made in the first nine months of the year. Genworth achieved our debt target, further stabilized our legacy LTC book and initiated a program to return capital to our shareholders, while also delivering solid financial results,” said Tom McInerney, Genworth President and CEO. “Looking ahead, Genworth expects to have higher free cash flow going forward, which offers financial flexibility and greater opportunity for increased capital return to shareholders and investments in growth.”
Financial Performance
Consolidated Net Income & Adjusted Operating Income
Three months ended September 30
2022
2021
Per
Per
diluted
diluted
Total
(Amounts in millions, except per share)
Total
share
Total
share
% change
Net income available to Genworth's common stockholders
$
104
$
0.20
$
314
$
0.61
(67)%
Adjusted operating income
$
159
$
0.31
$
239
$
0.46
(33)%
Weighted-average diluted shares
509.4
514.2
As of September 30
2022
2021
Book value per share
$
18.49
$
30.11
Book value per share, excluding accumulated other comprehensive
income (loss)
$
23.99
$
22.62
Net investment losses, net of taxes and other adjustments, decreased net income by $53 million in the current quarter, compared with net investment gains in the prior quarter and prior year that increased income by $8 million and $70 million, respectively. The investment losses in the current quarter were primarily from mark-to-market adjustments on limited partnership and equity investments held in the LTC business and net trading losses.
Net investment income was $808 million in the quarter, compared to $787 million in the prior quarter and $859 million in the prior year. Net investment income increased versus the prior quarter as a result of higher income from limited partnerships, primarily in the LTC business, and higher core yields. Net investment income decreased versus the prior year as a result of lower variable investment income, primarily driven by lower income from bond calls, commercial mortgage loan (CML) prepayments and limited partnerships. The reported yield and the core yield 3 for the current quarter were 4.97 percent and 4.93 percent, respectively, compared to 4.83 percent and 4.79 percent, respectively, in the prior quarter.
Genworth’s effective tax rate on income from continuing operations for the current quarter was approximately 28.0 percent. As in past quarters, the effective tax rate was increased by the tax effect on certain forward starting swap gains that are taxed at 35 percent when amortized into net investment income, as well as non-deductible expenses.
The table below shows adjusted operating income (loss) by segment and for Corporate and Other activities:
Adjusted Operating Income (Loss)
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Enact 4
$
156
$
167
$
134
U.S. Life Insurance
11
21
93
Runoff
9
2
11
Corporate and Other
(17)
(14)
1
Total Adjusted Operating Income
$
159
$
176
$
239
Adjusted operating income (loss) represents income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and other adjustments. A reconciliation of net income to adjusted operating income is included at the end of this press release.
Enact
Operating Metrics
(Dollar amounts in millions)
Q3 22
Q2 22
Q3 21
Adjusted operating income 4
$
156
$
167
$
134
Primary new insurance written
$
15,069
$
17,448
$
23,972
Loss ratio
(17)%
(26)%
14 %
Enact reported adjusted operating income of $156 million, compared with $167 million in the prior quarter and $134 million in the prior year. Enact’s primary insurance in-force increased nine percent versus the prior year, driven by new insurance written (NIW) and higher persistency given lower refinancing activity because of the rise in interest rates. Primary NIW decreased 14 percent from the prior quarter. It was also down 37 percent versus the prior year, primarily from lower refinance originations as a result of increased mortgage rates. Enact’s expenses in the current quarter were $59 million, resulting in an expense ratio of 25 percent.
Enact’s current quarter results reflected a benefit of $40 million from incurred losses driven by a net pre-tax reserve release of $80 million, primarily from favorable cure performance on COVID-19 delinquencies. The loss ratio in the current quarter was negative 17 percent, compared to negative 26 percent and positive 14 percent in the prior quarter and prior year, respectively. Losses in the prior quarter included a favorable $96 million pre-tax reserve release, primarily related to cures on 2020 COVID-19 delinquencies. New delinquencies in the current quarter were 9,121, an increase of 16 percent from 7,847 in the prior quarter, driven by seasonality. Current quarter new delinquencies increased 23 percent from 7,427 in the prior year. The current quarter new delinquency rate of 1.0 percent increased from the prior quarter of 0.8 percent due to seasonality and remains in line with pre-pandemic levels.
U.S. Life Insurance
Adjusted Operating Income (Loss)
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Long-Term Care Insurance
$
25
$
34
$
133
Life Insurance
(33)
(34)
(68)
Fixed Annuities
19
21
28
Total U.S. Life Insurance
$
11
$
21
$
93
Long-Term Care Insurance In-Force Rate Action Performance
(Amounts in millions)
Q3 22
Q2 22
Q3 21
Adjusted Operating Income from In-Force Rate Actions 5,6
$
258
$
255
$
304
Long-Term Care Insurance
Long-term care insurance reported adjusted operating income of $25 million, compared with $34 million in the prior quarter and $133 million in the prior year. Adjusted operating income impacts of $258 million 5 from cumulative in-force rate actions were less favorable than the prior year, driven by lower reserve releases related to a legal settlement, as that settlement implementation is materially complete. However, implementation of a second legal settlement began on August 1, 2022.
New claims increased versus the prior quarter and prior year driven by both higher severity and frequency as the blocks age. Claim terminations were lower and benefit utilization was higher versus the prior quarter and prior year, as the pandemic impacts subside.
LTC results reflected higher net investment income of $9 million after-tax versus the prior quarter, primarily from the favorable impact of limited partnerships. Compared to the prior year, LTC had lower net investment income of $19 million after-tax, primarily from the impact of lower income from limited partnerships, bond calls and CML prepayments.
Renewal premiums decreased versus the prior year driven by policy terminations and policies entering paid-up status because of higher non-forfeiture and reduced benefit elections by policyholders.
Life Insurance
Life insurance reported an adjusted operating loss of $33 million, compared with adjusted operating losses of $34 million in the prior quarter and $68 million in the prior year. Mortality results in the current quarter were favorable versus the prior year, as the pandemic impacts subside. Amortization of deferred acquisition costs (DAC) related to term lapses increased in the current quarter as the 20-year term block issued in 2002 entered the post-level premium period.
Current quarter results included a charge related to DAC recoverability testing in the company’s universal life insurance products 7, which was $20 million lower than the prior year.
Fixed Annuities
Fixed annuities reported adjusted operating income of $19 million, compared with $21 million in the prior quarter and $28 million in the prior year. Net investment spreads were lower versus the prior quarter and prior year, primarily from lower bond calls and CML prepayments, as well as anticipated block runoff. Results in the current quarter were also impacted by higher mortality in the single premium immediate annuity product. Compared to the prior quarter, continued rising interest rates resulted in lower reserves that were mostly offset by higher DAC amortization in the fixed index annuity product.
Runoff
Runoff reported adjusted operating income of $9 million, compared with $2 million in the prior quarter and $11 million in the prior year. Current quarter results in the closed variable annuity product line were impacted by less unfavorable equity market performance compared to the prior quarter. Compared to the prior year, unfavorable equity market performance was mostly offset by favorable mortality experience in the corporate-owned life insurance products.
Corporate And Other
Corporate and Other reported an adjusted operating loss of $17 million, compared with an adjusted operating loss of $14 million in the prior quarter and adjusted operating income of $1 million in the prior year. Current quarter results were lower compared to the prior year driven by a non-recurring tax benefit of $21 million in the prior year, partially offset by lower interest expense.
Capital & Liquidity
Genworth maintains the following capital positions in its operating subsidiaries:
Key Capital & Liquidity Metrics
(Dollar amounts in millions)
Q3 22
Q2 22
Q3 21
Enact
Combined Risk-To-Capital Ratio 8
12.3:1
12.6:1
11.8:1
Enact Mortgage Insurance Corporation Risk-To-Capital Ratio 8
12.3:1
12.6:1
11.9:1
Private Mortgage Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio 8,9
174
%
166
%
181
%
U.S. Life Insurance Companies
Consolidated Risk-Based Capital Ratio 1,8
285
%
290
%
291
%
Holding Company Cash and Liquid Assets 10,11
$
145
$
228
$
638
Key Points
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 company focused on empowering families to navigate the aging journey with confidence, now and in the future. Headquartered in Richmond, Virginia, Genworth provides guidance, products, and services that help people understand their caregiving options and fund their long-term care needs. Genworth is also the parent company of publicly traded Enact Holdings, Inc. (Nasdaq: ACT), a leading U.S. mortgage insurance provider. For more information on Genworth, visit genworth.com, and for more information on Enact Holdings, Inc. visit enactmi.com.
Conference Call And Financial Supplement Information
Investors are encouraged to read this press release, summary presentation and financial supplement, which are now posted on the company’s website, http://investor.genworth.com.
Genworth will conduct a conference call on November 2, 2022 at 9:00 a.m. (ET) to discuss its third quarter results, which will be accessible via:
Allow at least 15 minutes prior to the call time to register for the call. A replay of the webcast will be available on the company’s website for one year.
Prior to Genworth’s conference call, Enact will hold a conference call on November 2, 2022 at 8:00 a.m. (ET) to discuss its results from the third quarter, which will be accessible via:
Allow at least 15 minutes prior to the call time to register for the call.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures entitled "adjusted operating income (loss)" and "adjusted operating income (loss) per share." Adjusted operating income (loss) per share is derived from adjusted operating income (loss). The chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). The company defines adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or initial gains (losses) on reinsurance restructuring for certain blocks of business. The company excludes net investment gains (losses) and infrequent or unusual non-operating items because the company does not consider them to be related to the operating performance of the company's segments and Corporate and Other activities. A component of the company's net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to the company's discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) because, in the company's opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) if, in the company's opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, the company believes that adjusted operating income (loss) and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) per share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, the company's definition of adjusted operating income (loss) may differ from the definitions used by other companies.
Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21 percent tax rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.
In the third quarter of 2022, the company paid a pre-tax make-whole premium of $2 million and wrote off $1 million of bond consent fees and deferred borrowing costs related to the early redemption of Genworth Holdings, Inc.’s (Genworth Holdings) senior notes originally scheduled to mature in February 2024. In the second quarter of 2022, the company repurchased $48 million principal amount of Genworth Holdings senior notes due in February 2024 for a pre-tax loss of $1 million. In the third quarter of 2021, the company paid a pre-tax make-whole premium of $6 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in September 2021. These transactions were excluded from adjusted operating income as they relate to gains (losses) on the early extinguishment of debt.
The company recorded a pre-tax expense of $1 million in the second quarter of 2022 and $3 million in the third quarter of 2021 related to restructuring costs as it continues to evaluate and appropriately size its organizational needs and expenses.
In the third quarter of 2022, the company incurred $6 million of pre-tax pension plan termination costs related to one of its defined benefit pension plans. There were no other infrequent or unusual items excluded from adjusted operating income during the periods presented.
The tables at the end of this press release provide a reconciliation of net income available to Genworth Financial, Inc.'s common stockholders to adjusted operating income for the three months ended September 30, 2022 and 2021, as well as for the three months ended June 30, 2022, and reflect adjusted operating income as determined in accordance with accounting guidance related to segment reporting.
This press release includes the non-GAAP financial measure entitled "core yield" as a measure of investment yield. The company defines core yield as the investment yield adjusted for items that do not reflect the underlying performance of the investment portfolio. Management believes that analysis of core yield enhances understanding of the investment yield of the company. However, core yield is not a substitute for investment yield determined in accordance with U.S. GAAP. In addition, the company's definition of core yield may differ from the definitions used by other companies. A reconciliation of reported U.S. GAAP yield to core yield is included in a table at the end of this press release.
Definition of Selected Operating Performance Measures
The company taxes its businesses at the U.S. corporate federal income tax rate of 21 percent. Each segment is then adjusted to reflect the unique tax attributes of that segment such as permanent differences between U.S. GAAP and tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.
The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.
The company reports selected operating performance measures including "sales" and "insurance in-force" or "risk in-force" which are commonly used in the insurance industry as measures of operating performance.
Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance products included in the company's Enact segment. The company considers new insurance written to be a measure of the operating performance of its Enact segment because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of revenues or profitability during that period.
Management regularly monitors and reports insurance in-force and risk in-force for the company’s Enact segment. Insurance in-force is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans insured by the company’s U.S. mortgage insurance subsidiaries. Risk in-force is based on the coverage percentage applied to the estimated current outstanding loan balance. The company considers insurance in-force and risk in-force to be measures of the operating performance of its Enact segment because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period.
Management also regularly monitors and reports a loss ratio for the company's businesses. For the mortgage insurance businesses included in the company’s Enact segment, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For the long-term care insurance business included in the company’s U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. The company considers the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of the businesses.
Management also regularly monitors and reports adjusted operating income from in-force rate actions in the long-term care insurance business included in the company’s U.S. Life Insurance segment. Adjusted operating income from in-force rate actions includes premium rate increases and associated benefit reductions on its long-term care insurance products implemented since 2012, which are net of estimated premium tax, commissions, and other expenses on an after-tax basis. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual historical results, including but not limited to a uniform rate of coinsurance and premium taxes in addition to consistent policyholder behavior over time. Actual behavior may differ significantly from these assumptions. In addition, estimates exclude reserve updates resulting from profits followed by losses. The company considers adjusted operating income from in-force rate actions to be a measure of its operating performance because it helps bring older generation long-term care insurance blocks closer to a break-even point over time and helps bring the loss ratios on newer long-term care insurance blocks back towards their original pricing.
These operating performance measures enable the company to compare its operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.
Statutory Accounting Data
The company presents certain supplemental statutory data for Genworth Life Insurance Company (GLIC) and its consolidating life insurance subsidiaries that has been prepared on the basis of statutory accounting principles (SAP). GLIC and its consolidating life insurance subsidiaries file financial statements with state insurance regulatory authorities and the National Association of Insurance Commissioners that are prepared using SAP, an accounting basis either prescribed or permitted by such authorities. Due to differences in methodology between SAP and U.S. GAAP, the values for assets, liabilities and equity reflected in financial statements prepared in accordance with U.S. GAAP are materially different from those reflected in financial statements prepared under SAP. This supplemental statutory data should not be viewed as an alternative to U.S. GAAP or used in lieu of U.S. GAAP.
This supplemental statutory data includes Company Action Level risk-based capital ratios for GLIC and its consolidating life insurance subsidiaries as well as statutory earnings. Management uses and provides this supplemental statutory data because it believes it provides a useful measure of among other things the adequacy of capital. Management uses this data to measure against its policy to manage the U.S. life insurance businesses with internally generated capital.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements regarding the outlook for the company's future business and financial performance. Examples of forward-looking statements include statements the company makes relating to potential dividends or share repurchases; future return of capital by Enact Holdings, Inc. (Enact Holdings), including quarterly and special dividends; the cumulative amount of rate action benefits required for the company’s long-term care insurance business to achieve break-even; future financial performance and condition of the company’s businesses, including Genworth achieving two consecutive quarters of financial metrics to satisfy certain conditions in connection with the GSEs’ restrictions placed on Enact Holdings and the impact to Genworth’s equity upon adopting new accounting guidance related to long-duration insurance contracts; liquidity and future strategic investments, including new products and services designed to assist individuals with navigating and financing long-term care, and potential third-party relationships or business arrangements relating thereto; as well as statements the company makes regarding the potential impacts of the coronavirus pandemic (COVID-19). Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from those in the forward-looking statements due to global political, economic, inflation, business, competitive, market, regulatory and other factors and risks, including but not limited to, the following:
•the company may be unable to successfully execute its strategic plans: to strengthen the company’s financial position and create long-term shareholder value, including with respect to reducing debt of Genworth Holdings; maximizing the value of Enact Holdings; achieving economic break-even on and stabilizing the legacy long-term care insurance in-force block; advancing the company’s long-term care growth initiatives, including launching either unilaterally or with a strategic partner new product and service offerings designed to assist individuals with navigating and financing long-term care; and returning capital to Genworth Financial shareholders, due to numerous risks and constraints, including but not limited to: Enact Holdings’ ability to pay dividends, including as a result of the GSEs amendments to PMIERs in response to COVID-19 as well as additional PMIERs requirements or other restrictions that the GSEs may place on the ability of Enact Holdings to pay dividends; an inability to increase the capital needed in the company’s businesses in a timely manner and on anticipated terms, including through improved business performance, reinsurance or similar transactions, asset sales, debt issuances, securities offerings or otherwise, in each case as and when required; the company's strategic priorities change or become more costly or difficult to successfully achieve than currently anticipated or the benefits achieved being less than anticipated; an inability to identify and contract with a strategic partner regarding a new long-term care insurance business; an inability to establish a new long-term care insurance business or product offerings due to commercial and/or regulatory challenges; an inability to reduce costs proportionate with Genworth’s reduced business activity, including as forecasted and in a timely manner; and adverse tax or accounting charges, including new accounting guidance (that is effective for the company on January 1, 2023) related to long-duration insurance contracts;
•risks relating to estimates, assumptions and valuations including: inadequate reserves and the need to increase reserves (including as a result of any changes the company may make to its assumptions, methodologies or otherwise in connection with periodic or other reviews, including reviews it expects to complete and carry out in the fourth quarter of 2022); risks related to the impact of the company’s annual review of assumptions and methodologies related to its long-term care insurance claim reserves and margin reviews in the fourth quarter of 2022, including risks that additional information obtained in finalizing our claim reserves and margin reviews in the fourth quarter of 2022 or other changes to assumptions or methodologies materially affect margins; or other changes to assumptions or methodologies materially affect margins; the inability to accurately estimate the impacts of COVID-19 and other novel diseases; inaccurate models; the need to increase the company’s reserves as a result of deviations from its estimates and actuarial assumptions or other reasons; accelerated amortization of DAC and present value of future profits (PVFP) (including as a result of any changes it may make to its assumptions, methodologies or otherwise in connection with periodic or other reviews, including reviews it expects to complete and carry out in the fourth quarter of 2022); adverse impact on the company's financial results as a result of projected profits followed by projected losses (as is currently the case with its long-term care insurance business); changes in valuation of fixed maturity and equity securities; and the benefits Enact Holdings realizes from its future loss mitigation actions or programs may be limited;
•liquidity, financial strength and credit ratings, and counterparty and credit risks including: the impact on Genworth Financial’s and Genworth Holdings’ liquidity caused by the inability to receive dividends or other returns of capital from Enact Holdings, including as a result of COVID-19; limited sources of capital and financing, including under certain conditions the company may seek additional capital on unfavorable terms; future adverse rating agency actions against the company or Enact Holdings, including with respect to rating downgrades or potential downgrades or being put on review for potential downgrade, all of which could have adverse implications, including with respect to key business relationships, product offerings, business results of operations, financial condition and capital needs, strategic plans, collateral obligations and availability and terms of hedging, reinsurance and borrowings; defaults by counterparties to reinsurance arrangements or derivative instruments; and defaults or other events impacting the value of the company's invested assets, including but not limited to, its fixed maturity and equity securities, commercial mortgage loans, policy loans and limited partnership investments;
•risks relating to economic, market and political conditions including : downturns and volatility in global economies and equity and credit markets, including as a result of inflation and supply chain disruptions, a potential recession, continued labor shortages and other displacements caused by COVID-19; interest rates and changes in rates could adversely affect the company's business and profitability; deterioration in economic conditions (including as a result of the Russian invasion of Ukraine) or a decline in home prices or home sales that adversely affect Enact Holdings’ loss experience and/or business levels; political and economic instability or changes in government policies; and fluctuations in international securities markets;
•regulatory and legal risks including : extensive regulation of the company's businesses and changes in applicable laws and regulations (including changes to tax laws and regulations); litigation and regulatory investigations or other actions, including commercial and contractual disputes with counterparties; heightened regulatory restrictions and other insurance, regulatory or corporate law restrictions; the inability to successfully seek in-force rate action increases (including increased premiums and associated benefit reductions) in the company’s long-term care insurance business, including as a result of COVID-19; adverse changes in regulatory requirements, including risk-based capital; inability of Enact Holdings to continue to meet the requirements mandated by PMIERs, including as a result of increased delinquencies caused by COVID-19; inability of Enact Holdings’ U.S. mortgage insurance subsidiaries to meet minimum statutory capital requirements; the influence of Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and a small number of large mortgage lenders in the U.S. mortgage insurance market and adverse changes to the role or structure of Fannie Mae and Freddie Mac; adverse changes in regulations affecting Enact Holdings, including any additional restrictions placed on Enact Holdings by government and government-owned enterprises and the GSEs in connection with additional capital transactions; inability to continue to implement actions to mitigate the impact of statutory reserve requirements; changes in accounting and reporting standards, including new accounting guidance (that is effective for the company on January 1, 2023) related to long-duration insurance contracts;
•operational risks including: the inability to retain, attract and motivate qualified employees or senior management; Enact Holdings’ reliance on, and loss of, key customers or distribution relationships; competition with government-owned and government-sponsored enterprises may put Enact Holdings at a competitive disadvantage on pricing and other terms and conditions; the design and effectiveness of the company’s disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations; and failure or any compromise of the security of the company's computer systems, disaster recovery systems, business continuity plans and failures to safeguard or breaches of confidential information;
•insurance and product-related risks including: Enact Holdings’ inability to maintain or increase capital in its mortgage insurance subsidiaries in a timely manner; the company’s inability to increase premiums and reduce benefits sufficiently, and in a timely manner, on its in-force long-term care insurance policies, in each case, as currently anticipated and as may be required from time to time in the future (including as a result of a delay or failure to obtain any necessary regulatory approvals, including as a result of COVID-19, or unwillingness or inability of policyholders to pay increased premiums and/or accept reduced benefits), including to offset any negative impact on the company's long-term care insurance margins; availability, affordability and adequacy of reinsurance to protect the company against losses; decreases in the volume of mortgage originations or increases in mortgage insurance cancellations; increases in the use of alternatives to private mortgage insurance and reductions in the level of coverage selected; potential liabilities in connection with Enact Holdings’ U.S. contract underwriting services; Enact Holdings’ delegated underwriting program may subject its mortgage insurance subsidiaries to unanticipated claims; and medical advances, such as genetic research and diagnostic imaging, and related legislation that impact policyholder behavior in ways adverse to the company;
•other general risks including: the occurrence of natural or man-made disasters, including geopolitical tensions and war (including the Russian invasion of Ukraine), or a public health emergency, including pandemics, climate change or cybersecurity breaches, could materially adversely affect the company’s financial condition and results of operations.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. This press release does not constitute an offering of any securities.
Condensed Consolidated Statements of Income
(Amounts in millions, except per share amounts)
(Unaudited)
Three months
Three months ended
ended
September 30,
June 30,
2022
2021
2022
Revenues:
Premiums
$
934
$
944
$
927
Net investment income
808
859
787
Net investment gains (losses)
(69)
88
8
Policy fees and other income
166
179
159
Total revenues
1,839
2,070
1,881
Benefits and expenses:
Benefits and other changes in policy reserves
1,180
1,143
764
Interest credited
128
123
125
Acquisition and operating expenses, net of deferrals
240
290
589
Amortization of deferred acquisition costs and intangibles
79
106
84
Interest expense
26
35
26
Total benefits and expenses
1,653
1,697
1,588
Income from continuing operations before income taxes
186
373
293
Provision for income taxes
52
67
73
Income from continuing operations
134
306
220
Income (loss) from discontinued operations, net of taxes
5
12
(1)
Net income
139
318
219
Less: net income from continuing operations attributable to noncontrolling interests
35
4
38
Net income available to Genworth Financial, Inc.'s common stockholders
$
104
$
314
$
181
Net income available to Genworth Financial, Inc.'s common stockholders:
Income from continuing operations available to Genworth Financial, Inc.'s common stockholders
$
99
$
302
$
182
Income (loss) from discontinued operations available to Genworth Financial, Inc.'s common stockholders
5
12
(1)
Net income available to Genworth Financial, Inc.'s common stockholders
$
104
$
314
$
181
Income from continuing operations available to Genworth Financial, Inc.'s common stockholders per share:
Basic
$
0.20
$
0.59
$
0.36
Diluted
$
0.19
$
0.59
$
0.36
Net income available to Genworth Financial, Inc.'s common stockholders per share:
Basic
$
0.21
$
0.62
$
0.36
Diluted
$
0.20
$
0.61
$
0.35
Weighted-average common shares outstanding:
Basic
504.0
507.4
509.0
Diluted
509.4
514.2
514.2
Reconciliation of Net Income to Adjusted Operating Income
(Amounts in millions, except per share amounts)
(Unaudited)
Three
Three
months ended
months ended
September 30,
June 30,
2022
2021
2022
Net income available to Genworth Financial, Inc.'s common stockholders
$
104
$
314
$
181
Add: net income from continuing operations attributable to noncontrolling interests
35
4
38
Net income
139
318
219
Less: income (loss) from discontinued operations, net of taxes
5
12
(1)
Income from continuing operations
134
306
220
Less: net income from continuing operations attributable to noncontrolling interests
35
4
38
Income from continuing operations available to Genworth Financial, Inc.'s common stockholders
99
302
182
Adjustments to income from continuing operations available to Genworth Financial, Inc.'s common stockholders:
Net investment (gains) losses, net 13
67
(88)
(10)
(Gains) losses on early extinguishment of debt
3
6
1
Expenses related to restructuring
—
3
1
Pension plan termination costs
6
—
—
Taxes on adjustments
(16)
16
2
Adjusted operating income
$
159
$
239
$
176
Adjusted operating income (loss):
Enact segment
$
156
$
134
$
167
U.S. Life Insurance segment:
Long-Term Care Insurance
25
133
34
Life Insurance
(33)
(68)
(34)
Fixed Annuities
19
28
21
Total U.S. Life Insurance segment
11
93
21
Runoff segment
9
11
2
Corporate and Other
(17)
1
(14)
Adjusted operating income
$
159
$
239
$
176
Net income available to Genworth Financial, Inc.'s common stockholders per share:
Basic
$
0.21
$
0.62
$
0.36
Diluted
$
0.20
$
0.61
$
0.35
Adjusted operating income per share:
Basic
$
0.32
$
0.47
$
0.35
Diluted
$
0.31
$
0.46
$
0.34
Weighted-average common shares outstanding:
Basic
504.0
507.4
509.0
Diluted
509.4
514.2
514.2
Condensed Consolidated Balance Sheets
(Amounts in millions)
September 30,
December 31,
2022
2021
(Unaudited)
Assets
Cash, cash equivalents, restricted cash and invested assets
$
60,667
$
74,496
Deferred acquisition costs
2,247
1,146
Intangible assets
237
143
Reinsurance recoverable, net
16,558
16,813
Deferred tax and other assets
1,932
507
Separate account assets
4,298
6,066
Total assets
$
85,939
$
99,171
Liabilities and equity
Liabilities:
Future policy benefits
$
38,095
$
41,528
Policyholder account balances
17,589
19,354
Liability for policy and contract claims
12,004
11,841
Unearned premiums
597
672
Other liabilities
1,679
1,511
Long-term borrowings
1,622
1,899
Separate account liabilities
4,298
6,066
Liabilities related to discontinued operations
6
34
Total liabilities
75,890
82,905
Equity:
Common stock
1
1
Additional paid-in capital
11,865
11,858
Accumulated other comprehensive income (loss)
(2,765)
3,861
Retained earnings
2,924
2,490
Treasury stock, at cost
(2,734)
(2,700)
Total Genworth Financial, Inc.'s stockholders’ equity
9,291
15,510
Noncontrolling interests
758
756
Total equity
10,049
16,266
Total liabilities and equity
$
85,939
$
99,171
Reconciliation of Reported Yield to Core Yield
Three
months ended
September 30,
June 30,
(Assets - amounts in billions)
2022
2022
Reported Total Invested Assets and Cash
$
60.1
$
63.2
Subtract:
Unrealized gains (losses)
(4.9)
(1.9)
Adjusted End of Period Invested Assets and Cash
$
65.0
$
65.1
Average Invested Assets and Cash Used in Reported and Core Yield Calculation
$
65.0
$
65.2
(Income - amounts in millions)
Reported Net Investment Income
$
808
$
787
Subtract:
Bond calls and commercial mortgage loan prepayments
6
7
Core Net Investment Income
$
802
$
780
Reported Yield
4.97
%
4.83
%
Core Yield
4.93
%
4.79
%
1 Risk-based capital ratio based on company action level.
2 Unless otherwise stated, all references in this press release to net income (loss), net income (loss) per share, adjusted operating income (loss), adjusted operating income (loss) per share and book value per share should be read as net income (loss) available to Genworth's common stockholders, net income (loss) available to Genworth's common stockholders per diluted share, adjusted operating income (loss) available to Genworth's common stockholders, adjusted operating income (loss) available to Genworth's common stockholders per diluted share and book value available to Genworth's common stockholders per share, respectively.
3 This is a financial measure that is not calculated based on U.S. Generally Accepted Accounting Principles (Non-GAAP). See the Use of Non-GAAP Measures section of this press release for additional information.
4 Reflects Genworth’s ownership amount excluding noncontrolling interests of $35 million, $38 million and $4 million in the third quarter of 2022, second quarter of 2022 and third quarter of 2021, respectively.
5 Excludes reserve updates resulting from profits followed by losses.
6 Adjusted operating income from in-force rate actions includes estimated impacts from legal settlements, net of tax and litigation expenses, of $(1) million, $8 million and $48 million in the third quarter of 2022, second quarter of 2022 and third quarter of 2021, respectively.
7 Includes universal life and term universal life insurance products.
8 Company estimate for the third quarter of 2022 due to timing of the preparation and filing of statutory statements.
9 The PMIERs sufficiency ratio is calculated as available assets divided by required assets as defined within the published PMIERs. As of September 30, 2022, June 30, 2022 and September 30, 2021, the PMIERs sufficiency ratios were $2,249 million, $2,047 million and $2,287 million, respectively, of available assets above the published PMIERs requirements.
10 Holding company cash and liquid assets comprises assets held in Genworth Holdings, Inc. (the issuer of outstanding public debt) which is a wholly-owned subsidiary of Genworth Financial, Inc.
11 Genworth Holdings, Inc. had $145 million, $178 million and $588 million of cash, cash equivalents and restricted cash as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively. Genworth Holdings, Inc. also held $50 million in U.S. government securities as of June 30, 2022 and September 30, 2021, which included $3 million of restricted assets as of September 30, 2021.
12 The government-sponsored enterprises (GSEs) have imposed certain capital restrictions which remain in effect until certain conditions are met. These restrictions required Enact Mortgage Insurance Corporation, the company’s principal U.S. mortgage insurance subsidiary, to maintain 120 percent and 115 percent of PMIERs minimum required assets among other restrictions in 2022 and 2021, respectively.
13 For the three months ended September 30, 2022 and June 30, 2022, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million.
View source version on businesswire.com:https://www.businesswire.com/news/home/20221101005572/en/
CONTACT: Investors: Sarah E. Crews
InvestorInfo@genworth.comMedia: Amy Rein
Amy.Rein@genworth.com
KEYWORD: UNITED STATES NORTH AMERICA VIRGINIA
INDUSTRY KEYWORD: OTHER PROFESSIONAL SERVICES PROFESSIONAL SERVICES FINANCE
SOURCE: Genworth Financial, Inc.
Copyright Business Wire 2022.
PUB: 11/01/2022 04:15 PM/DISC: 11/01/2022 04:17 PM
http://www.businesswire.com/news/home/20221101005572/en