Le Lézard
Classified in: Business, Covid-19 virus
Subject: ERN

Genworth Financial Announces Second Quarter 2021 Results


RICHMOND, Va., Aug. 3, 2021 /PRNewswire/ --

Genworth Financial, Inc. (NYSE: GNW) today reported results for the quarter ended June 30, 2021. The company reported net income4 of $240 million, or $0.47 per diluted share, in the second quarter of 2021, compared with a net loss of $441 million, or $0.86 per diluted share, in the second quarter of 2020. The company reported adjusted operating income5 of $194 million, or $0.38 per diluted share, in the second quarter of 2021, compared with an adjusted operating loss of $23 million, or $0.05 per diluted share, in the second quarter of 2020.

Strategic Update

During the current quarter, Genworth continued to make progress on its strategic objectives to strengthen the financial condition of the company and create long-term shareholder value. The company continued preparations for a planned minority IPO of Enact, issued an early redemption notice for the September 2021 debt for a July redemption, made progress on reducing risk associated with the legacy LTC business through the MYRAP and continued planning for a new LTC joint venture in the U.S.

The planned IPO of Enact remains a key strategic objective for Genworth and is subject to market and other conditions, however because the company is in registration and subject to applicable publicity restrictions, Genworth is unable to comment further or provide any additional detail at this time.

On June 21, 2021, Genworth issued a notice of redemption for its outstanding 7.625% senior notes due September 2021. Subsequent to the end of quarter, on July 21, 2021, Genworth completed the redemption of  the $513 million outstanding principal amount of such notes, which reduced remaining parent holding company public debt outstanding to $1.7 billion, along with the AXA S.A. (AXA) liability of approximately $345 million. Since 2013, the company has reduced its parent holding company debt by a total of approximately $2.2 billion, with over $1.2 billion retired in 2021 as of the date hereof.

Genworth continued to execute on its MYRAP during the current quarter, with the goal of achieving break-even on an economic basis for the legacy LTC business over time. Incremental annual rate increases of $49 million were approved during the current quarter, bringing the total net present value from LTC premium increases and benefit reductions achieved to $15.5 billion since 2012.

"We delivered very strong results in the second quarter while making progress on our strategic plan," said Tom McInerney, Genworth President and CEO. "Today the company is on a more stable trajectory as a result of continued strong operating performance, strategic actions we've taken to reduce debt and excellent progress on the MYRAP over the past several years. Our goal is to reduce parent holding company debt to a sustainable level of approximately $1 billion, creating more financial flexibility to return capital to shareholders and invest in future growth. With an engaged Board of Directors and leadership team, a skilled and dedicated workforce and deep expertise and experience, Genworth is well positioned to create value over the long-term."

Financial Performance

Consolidated Net Income (Loss) & Adjusted Operating Income (Loss)



Three months ended June 30





2021


2020








Per





Per








diluted





diluted


Total

(Amounts in millions, except per share)


Total


share


Total


share


% change
















Net income (loss) available to Genworth's common stockholders


$

240


$

0.47


$

(441)


$

(0.86)


154%

Adjusted operating income (loss)


$

194


$

0.38


$

(23)


$

(0.05)


NM6

Weighted-average diluted shares



515.0






512.5























As of June 30





2021


2020



Book value per share





$

29.89





$

28.96



Book value per share, excluding accumulated other comprehensive income (loss)





$

22.33





$

20.17



Net investment gains, net of taxes and other adjustments, increased net income by $55 million in the current quarter. The investment gains were primarily driven by mark-to-market gains on limited partnerships in the LTC business. The net loss of $441 million in the second quarter of 2020 included $77 million of investment gains, net of taxes and other adjustments.

Net investment income was $844 million in the quarter, compared to $801 million in the prior quarter and $779 million in the prior year. Net investment income was higher than the prior quarter and prior year as a result of higher variable investment income, including income from limited partnerships, bond calls, commercial mortgage loan prepayments and the inflation impact on Treasury Inflation-Protected Securities (TIPS), primarily in the LTC business. The reported yield and the core yield5 for the quarter were 5.11 percent and 4.85 percent, respectively, compared to 4.84 percent and 4.73 percent, respectively, in the prior quarter.

Genworth's effective tax rate on income from continuing operations for the quarter was approximately 23 percent. The effective tax rate was increased by the tax effect of forward starting swap gains settled prior to the change in the corporate tax rate under the 2017 Tax Cuts and Jobs Act, which continue to be tax effected at 35 percent as they are amortized into net investment income.

Adjusted operating income (loss) results by business line are summarized in the table below:

Adjusted Operating Income (Loss)










(Amounts in millions)


Q2 21


Q1 21


Q2 20

Enact


$

135


$

126


$

(3)

U.S. Life Insurance



71



62



(5)

Runoff



15



12



24

Corporate and Other



(27)



(32)



(39)

Total Adjusted Operating Income (Loss)


$

194


$

168


$

(23)

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, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. A reconciliation of net income (loss) to adjusted operating income (loss) is included at the end of this press release.

Enact

Operating Metrics










(Dollar amounts in millions)


Q2 21


Q1 21


Q2 20

Adjusted operating income (loss)


$

135


$

126


$

(3)

Primary new insurance written


$

26,700


$

24,900


$

28,400

Loss ratio



12 %



22 %



94 %

Enact reported adjusted operating income of $135 million, compared with adjusted operating income of $126 million in the prior quarter and an adjusted operating loss of $3 million in the prior year. Enact's primary insurance in force increased 10 percent versus the prior year from strong new insurance written (NIW), partially offset by lower persistency. Primary NIW increased seven percent from the prior quarter due to an increase in purchase mortgage originations and was down six percent versus the prior year primarily from lower estimated market share partially offset by higher purchase originations and a larger private mortgage insurance market. Earned premiums in the quarter were lower than the prior quarter driven by lower single premium policy cancellations, higher ceded premiums and continued lapse of older, higher priced policies in the current low interest rate environment offset by insurance in force growth. Current quarter earned premiums were flat to the prior year as insurance in force growth was offset by a decrease in single premium policy cancellations, higher ceded premiums in the current year and the continued lapse of older, higher priced policies.

Enact's current quarter results reflected losses of $30 million and a loss ratio of 12 percent, which were primarily driven by new delinquencies. New delinquencies decreased by 32 percent from 10,053 in the prior quarter to 6,862. Approximately 45 percent of new primary delinquencies in the current quarter were reported in forbearance plans which may cure at elevated rates relative to historical performance. Results in the prior quarter and prior year reflected losses of $55 million and $228 million, and a loss ratio of 22 percent and 94 percent, respectively. The sequential decrease in losses was driven mainly by lower losses from new delinquencies and the $10 million pre-tax reserve strengthening in the prior quarter. Current quarter losses decreased versus the prior year driven by higher new delinquencies and unfavorable reserve adjustments in the prior year as a result of the COVID-19 pandemic. The current quarter expense ratio of 27 percent was unfavorably impacted by approximately two percentage points from $4 million of strategic transaction preparation costs and restructuring costs of $2 million.

U.S. Life Insurance

Adjusted Operating Income (Loss)










(Amounts in millions)


Q2 21


Q1 21


Q2 20

Long Term Care Insurance


$

98


$

95


$

48

Life Insurance



(40)



(63)



(81)

Fixed Annuities



13



30



28

Total U.S. Life Insurance


$

71


$

62


$

(5)

Long Term Care Insurance

Long term care insurance reported adjusted operating income of $98 million, compared with $95 million in the prior quarter and $48 million in the prior year. Earnings from in force rate actions were more favorable than the prior quarter and prior year, driven primarily by higher benefit reductions, which included policyholder benefit reduction elections made as part of a legal settlement, net of litigation expenses and taxes. LTC results also reflected higher net investment income of $63 million after-tax versus the prior year and $35 million after-tax versus the prior quarter from limited partnerships, bond calls, commercial mortgage loan prepayments and gains on TIPS.

Claim terminations in the current quarter were significantly lower compared to the prior quarter and prior year, returning to pre-pandemic levels. Higher claim terminations in recent quarters were assumed to be driven by the COVID-19 pandemic and temporary in nature resulting in the establishment, beginning in the fourth quarter of 2020, of a temporary COVID-19 mortality adjustment assuming that its mortality experience on the most vulnerable claimants was accelerated, leaving its overall claim population less likely to terminate compared to the pre-pandemic average population. Therefore, in the prior quarter, the company strengthened its claim reserves to temporarily adjust its mortality assumption by $53 million after-tax. However, in the current quarter, the company experienced lower mortality as the impacts of the pandemic lessened and did not establish additional claim reserves but reduced a portion of the COVID-19 mortality adjustment leaving a pre-tax balance of $143 million as of June 30, 2021. As the COVID-19 pandemic continues to develop, short-term mortality experience may fluctuate, and the company would increase or decrease the COVID-19 mortality adjustment accordingly.

New claim incidence increased slightly versus the prior quarter but remained lower than pre-pandemic levels, which drove continued favorable development on incurred but not reported (IBNR) claim reserves. Since the recent decrease in incidence is assumed to be driven by the COVID-19 pandemic and temporary in nature, IBNR claim reserves were strengthened by $23 million after-tax in the prior quarter and $29 million after-tax in the prior year.

Life Insurance

Life insurance reported an adjusted operating loss of $40 million, compared with adjusted operating losses of $63 million in the prior quarter and $81 million in the prior year. Mortality, attributable in part to the COVID-19 pandemic, was lower compared to the prior quarter but higher compared to the prior year. Current quarter results reflected lower deferred acquisition costs (DAC) amortization compared to the prior year, as the large 20-year level-premium term life insurance block written at the end of 2000 entered its post-level premium period following the 60-day grace period. Results also reflected lower reserve increases during the premium grace period in the 10-year term universal life insurance block associated with policies entering the post-level premium period compared to the prior year. Current quarter results included a $13 million after-tax charge related to DAC recoverability testing in the company's universal life insurance products versus a $17 million after-tax charge related to these products in the prior quarter.

Fixed Annuities

Fixed annuities reported adjusted operating income of $13 million, compared with $30 million in the prior quarter and $28 million in the prior year. Results versus the prior quarter and prior year reflected lower mortality in the single premium immediate annuity product and unfavorable impacts from declining interest rates.

Runoff

Runoff reported adjusted operating income of $15 million, compared with $12 million in the prior quarter and $24 million in the prior year. Results in the current quarter reflected a benefit to the company's variable annuity products from equity market performance that was favorable compared to the prior quarter but less favorable compared to the prior year.

Corporate And Other

Corporate and Other reported an adjusted operating loss of $27 million, compared with adjusted operating losses of $32 million in the prior quarter and $39 million in the prior year. Results in the current quarter reflected lower interest expense compared to both the prior quarter and prior year.

Capital & Liquidity

Genworth maintains the following capital positions in its operating subsidiaries:

Key Capital & Liquidity Metrics













(Dollar amounts in millions)


Q2 21


Q1 21


Q2 20

Enact














Consolidated Risk-To-Capital Ratio7



11.8:1




11.7:1




12.0:1



Genworth Mortgage Insurance Corporation Risk-To-Capital Ratio7



12.0:1




11.9:1




12.2:1



Private Mortgage Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio7,8



165

%



159

%



143

%

U.S. Life Insurance Companies














Consolidated Risk-Based Capital (RBC) Ratio7



270

%



254

%



222

%

Holding Company Cash and Liquid Assets9,10


$

842



$

757



$

554


Key Points

About Genworth Financial 

Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 insurance holding company committed to helping families achieve the dream of homeownership and address the financial challenges of aging through its leadership positions in mortgage insurance and long term care insurance. 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.

Conference Call And Financial Supplement Information

This press release and the second quarter 2021 financial supplement are now posted on the company's website. Additional information regarding business results will be posted on the company's website, http://investor.genworth.com, by 8:00 a.m. on August 4, 2021. Investors are encouraged to review these materials.

Genworth will conduct a conference call on August 4, 2021 at 9:00 a.m. (ET) to discuss the quarter's results. Genworth's conference call will be accessible via telephone and the Internet. The dial-in number for Genworth's August 4th conference call is 888 208.1820 or 323 794.2110 (outside the U.S.); conference ID # 3957029. To participate in the call by webcast, register at http://investor.genworth.com at least 15 minutes prior to the webcast to download and install any necessary software. 

A replay of the call will be available at 888 203.1112 or 719 457.0820 (outside the U.S.); conference ID # 3957209 through August 18, 2021. The webcast will also be archived on the company's website for one year.

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, 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 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, 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. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.

The company repurchased $52 million and $146 million principal amount of Genworth Holdings, Inc.'s (Genworth Holdings) senior notes with 2021 maturity dates for a pre-tax gain (loss) of $3 million and $(4) million in the second quarter of 2020 and the first quarter of 2021, respectively. These transactions were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment of debt.

The company recorded a pre-tax expense of $5 million and $1 million in the second quarters of 2021 and 2020, respectively, and $21 million in the first quarter of 2021 related to restructuring costs as it continues to evaluate and appropriately size its organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented.

The tables at the end of this press release provide a reconciliation of net income (loss) available to Genworth Financial, Inc.'s common stockholders to adjusted operating income (loss) for the three months ended June 30, 2021 and 2020, as well as for the three months ended March 31, 2021, and reflect adjusted operating income (loss) as determined in accordance with accounting guidance related to segment reporting.

This press release includes the non-GAAP financial measure entitled "core yield" as a measure of investment yield. The company defines core yield as the investment yield adjusted for items that do not reflect the underlying performance of the investment portfolio. Management believes that analysis of core yield enhances understanding of the investment yield of the company. However, core yield is not a substitute for investment yield determined in accordance with U.S. GAAP. In addition, the company's definition of core yield may differ from the definitions used by other companies. A reconciliation of reported U.S. GAAP yield to core yield is included in a table at the end of this press release.

Definition of Selected Operating Performance Measures

The company taxes its businesses at the U.S. corporate federal income tax rate of 21 percent. Each segment is then adjusted to reflect the unique tax attributes of that segment such as permanent differences between U.S. GAAP and tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.

The annually-determined tax rates and adjustments to each segment's provision for income taxes are estimates which are subject to review and could change from year to year.

The company reports selected operating performance measures including "sales" and "insurance in force" or "risk in force" which are commonly used in the insurance industry as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance products included in the company's Enact segment. The company considers new insurance written to be a measure of the company's operating performance because it represents a measure of new sales of insurance policies 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 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 the company insures. 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 its operating performance because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period.

Management also regularly monitors and reports a loss ratio for the company's businesses. For the U.S. mortgage insurance business included in the company's Enact segment, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For the long term care insurance business included in the company's U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. The company considers the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of the businesses.

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. Examples of forward-looking statements include statements the company makes relating to a potential minority IPO of Enact Holdings, Inc. (Enact Holdings), future reductions of debt, potential dividends or share repurchases, and future strategic investments, as well as statements the company makes regarding the potential impacts of the COVID-19 pandemic. Forward-looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from those in the forward-looking statements due to global political, economic, business, competitive, market, regulatory and other factors and risks, including, but not limited to, the following:

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. This press release does not constitute an offering of any securities.

Condensed Consolidated Statements of Income

(Amounts in millions, except per share amounts)

(Unaudited)












Three months






Three months ended


ended






June 30,


March 31,






2021


2020


2021

Revenues:










Premiums


$

947


$

957


$

968

Net investment income



844



779



801

Net investment gains (losses)



70



93



33

Policy fees and other income



180



174



183



Total revenues



2,041



2,003



1,985

Benefits and expenses:










Benefits and other changes in policy reserves



1,161



1,447



1,218

Interest credited



127



139



131

Acquisition and operating expenses, net of deferrals



304



210



275

Amortization of deferred acquisition costs and intangibles



86



87



77

Interest expense



43



42



51



Total benefits and expenses



1,721



1,925



1,752

Income from continuing operations before income taxes



320



78



233

Provision for income taxes



75



23



59

Income from continuing operations



245



55



174

Income (loss) from discontinued operations, net of taxes



(5)



(473)



21

Net income (loss)



240



(418)



195

Less: net income (loss) from continuing operations attributable to noncontrolling











interests



?



?



?

Less: net income from discontinued operations attributable to noncontrolling











interests



?



23



8

Net income (loss) available to Genworth Financial, Inc.'s common stockholders


$

240


$

(441)


$

187











Net income (loss) available to Genworth Financial, Inc.'s common stockholders:












Income from continuing operations available to Genworth Financial,













Inc.'s common stockholders


$

245


$

55


$

174



Income (loss) from discontinued operations available to Genworth Financial,













Inc.'s common stockholders



(5)



(496)



13



Net income (loss) available to Genworth Financial, Inc.'s common stockholders


$

240


$

(441)


$

187














Income from continuing operations available to Genworth Financial, Inc.'s











common stockholders per share:












Basic


$

0.48


$

0.11


$

0.35



Diluted


$

0.47


$

0.11


$

0.34

Net income (loss) available to Genworth Financial, Inc.'s common stockholders











per share:












Basic


$

0.47


$

(0.87)


$

0.37



Diluted


$

0.47


$

(0.86)


$

0.37

Weighted-average common shares outstanding:












Basic



507.0



505.4



506.0



Diluted



515.0



512.5



513.8

 

Reconciliation of Net Income (Loss) to Adjusted Operating Income (Loss)

(Amounts in millions, except per share amounts)

(Unaudited)



Three


Three



months ended


months ended



June 30,


March 31,



2021


2020


2021

Net income (loss) available to Genworth Financial, Inc.'s common stockholders


$

240


$

(441)


$

187

Add: net income (loss) from continuing operations attributable to noncontrolling interests



?



?



?

Add: net income from discontinued operations attributable to noncontrolling interests



?



23



8

Net income (loss)



240



(418)



195

Less: income (loss) from discontinued operations, net of taxes



(5)



(473)



21

Income from continuing operations



245



55



174

Less: net income (loss) from continuing operations attributable to noncontrolling interests



?



?



?

Income from continuing operations available to Genworth Financial, Inc.'s











common stockholders



245



55



174

Adjustments to income from continuing operations available to Genworth











Financial, Inc.'s common stockholders:










Net investment (gains) losses, net13



(70)



(97)



(33)

(Gains) losses on early extinguishment of debt



?



(3)



4

Expenses related to restructuring



5



1



21

Taxes on adjustments



14



21



2

Adjusted operating income (loss)


$

194


$

(23)


$

168











Adjusted operating income (loss):










Enact segment


$

135


$

(3)


$

126

U.S. Life Insurance segment:











Long Term Care Insurance



98



48



95


Life Insurance



(40)



(81)



(63)


Fixed Annuities



13



28



30


Total U.S. Life Insurance segment



71



(5)



62

Runoff segment



15



24



12

Corporate and Other



(27)



(39)



(32)

Adjusted operating income (loss)


$

194


$

(23)


$

168











Net income (loss) available to Genworth Financial, Inc.'s common stockholders per share:











Basic


$

0.47


$

(0.87)


$

0.37


Diluted


$

0.47


$

(0.86)


$

0.37

Adjusted operating income (loss) per share:











Basic


$

0.38


$

(0.05)


$

0.33


Diluted


$

0.38


$

(0.05)


$

0.33

Weighted-average common shares outstanding:











Basic



507.0



505.4



506.0



Diluted



515.0



512.5



513.8

 

Reconciliation of Adjusted Operating Loss Previously Reported to Adjusted Operating Loss

Re-Presented to Exclude Discontinued Operations

(Amounts in millions)









Three months ended




June 30,




2020

Adjusted operating loss as previously reported


$

(21)

Remove Australia Mortgage Insurance segment adjusted operating income





reported as discontinued operations



(1)

Adjustment for corporate overhead allocations, net of taxes14



(4)

Tax adjustments15



3

Re-presented adjusted operating loss


$

(23)

 

Condensed Consolidated Balance Sheets

(Amounts in millions)

(Unaudited)






















June 30,


December 31,









2021


2020













Assets






Cash, cash equivalents, restricted cash and invested assets


$

75,805


$

77,917


Deferred acquisition costs



1,212



1,487


Intangible assets



151



157


Reinsurance recoverable, net



16,666



16,819


Deferred tax and other assets



614



469


Separate account assets



6,202



6,081


Assets related to discontinued operations



?



2,817





Total assets


$

100,650


$

105,747

Liabilities and equity








Liabilities:









Future policy benefits


$

42,165


$

42,695



Policyholder account balances



19,944



21,503



Liability for policy and contract claims



11,546



11,486



Unearned premiums



695



775



Other liabilities



1,664



1,614



Long-term borrowings



2,924



3,403



Separate account liabilities



6,202



6,081



Liabilities related to discontinued operations



346



2,370





Total liabilities



85,486



89,927


Equity:









Common stock



1



1



Additional paid-in capital



12,018



12,008



Accumulated other comprehensive income (loss)



3,834



4,425



Retained earnings



2,011



1,584



Treasury stock, at cost



(2,700)



(2,700)





Total Genworth Financial, Inc.'s stockholders' equity



15,164



15,318



Noncontrolling interests



?



502





Total equity



15,164



15,820





Total liabilities and equity


$

100,650


$

105,747

 

Reconciliation of Reported Yield to Core Yield












Three






months ended






June 30,


March 31,

(Assets - amounts in billions)


2021


2021

Reported Total Invested Assets and Cash


$

75.2



$

72.9


Subtract:












Securities lending



0.1




0.1



Unrealized gains (losses)



8.9




6.9


Adjusted End of Period Invested Assets and Cash


$

66.2



$

65.9














Average Invested Assets and Cash Used in Reported and Core Yield Calculation


$

66.1



$

66.2














(Income - amounts in millions)                                                                                                          









Reported Net Investment Income


$

844



$

801


Subtract:












Bond calls and commercial mortgage loan prepayments



39




15



Other non-core items16



3




2


Core Net Investment Income


$

802



$

784














Reported Yield



5.11

%



4.84

%

Core Yield



4.85

%



4.73

%

 

______________________________________

1 Formerly known as U.S. Mortgage Insurance.

2 Private Mortgage Insurer Eligibility Requirements.

3 Long term care insurance.

4 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.

5 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.

6 The company defines "NM" as not meaningful for increases or decreases greater than 200 percent.

7 Company estimate for the second quarter of 2021 due to timing of the preparation and filing of statutory statements.

8 The PMIERs sufficiency ratio is calculated as available assets divided by required assets as defined within the published PMIERs. As of June 30, 2021, March 31, 2021, and June 30, 2020, the PMIERs sufficiency ratios were $1,941 million, $1,764 million and $1,275 million, respectively, of available assets above the published PMIERs requirements.

9 Holding company cash and liquid assets comprises assets held in Genworth Holdings, Inc. (the issuer of outstanding public debt) which is a wholly-owned subsidiary of Genworth Financial, Inc.

10 Genworth Holdings, Inc. had $742 million, $757 million and $504 million of cash, cash equivalents and restricted cash as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively, which included $60 million and $10 million of restricted cash and cash equivalents as of March 31, 2021 and June 30, 2020, respectively. Genworth Holdings, Inc. also held $100 million and $50 million in U.S. government securities as of June 30, 2021 and June 30, 2020, respectively, which included $19 million and $49 million, respectively, of restricted assets.

11 The GSEs have imposed certain capital restrictions on the Enact business which remain in effect until certain conditions are met. These restrictions currently require Genworth Mortgage Insurance Corporation, the company's principal U.S. mortgage insurance subsidiary, to maintain 115 percent of PMIERs minimum required assets among other restrictions.

12 Formerly known as Genworth Mortgage Holdings, Inc., Genworth's indirect wholly-owned mortgage insurance subsidiary.

13 For the three months ended June 30, 2021, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(4) million.

14 Expenses previously reported in the Australia Mortgage Insurance segment and moved to Corporate and Other activities.

15 Tax impacts resulting from the classification of Genworth Mortgage Insurance Australia Limited as discontinued operations.

16 Includes cost basis adjustments on structured securities and various other immaterial items.

 

SOURCE Genworth Financial, Inc.


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