Genworth Financial, Inc. (NYSE:GNW) Q1 2023 Earnings Conference Call May 4, 2023 9:00 AM ET Company Participants Sarah Crews - Director, Investor Relations Tom McInerney - President and CEO Jerome Upton - Chief Financial Officer Brian Haendiges - President, U.S. Life Insurance Business Kelly Saltzgaber - Chief Investment Officer Conference Call Participants Brett Osetec - KBW Operator Please standby, we are about to begin. Good morning, ladies and gentlemen. And welcome to Genworth Financial’s First Quarter ...

Debt Reduction and Credit Rating Upgrades - Genworth Financial reduced Genworth Holdings' debt to less than $1.0 billion and received multiple rating agency upgrades[368] - Fitch Ratings upgraded Enact Mortgage Insurance Corporation's financial strength rating to "A-" from "BBB+" with a stable outlook[375] - Moody's Investors Service upgraded Genworth Holdings' credit rating to "Ba1" from "Ba2" and EMICO's financial strength rating to "A3" from "Baa1"[375] - S&P Global Ratings upgraded Genworth Financial and Genworth Holdings' credit rating to "BB-" from "B+" and EMICO's financial strength rating to "BBB+" from "BBB"[375] Share Repurchases and Dividends - Enact Holdings contributed $37 million to Genworth Holdings in Q1 2023 through share repurchases and quarterly dividends[370] - Genworth Financial repurchased $182 million worth of common shares under its share repurchase program, including $68 million in Q1 2023 and $50 million in April 2023[370] - Genworth Financial repurchased 11,224,848 shares of its common stock at an average price of $6.08 per share for a total cost of $68 million in Q1 2023[405] - Enact Holdings increased its quarterly dividend to $0.16 per share for June 2023, with Genworth Holdings receiving $19 million as the majority shareholder in Q1 2023[436] Long-Term Care Insurance - The cumulative economic benefit of Genworth's long-term care insurance in-force rate action plan through Q1 2023 was approximately $23.8 billion, with a total expected amount of $30.3 billion[369] - Genworth's long-term care insurance business received approvals for approximately $50 million of incremental annual premiums in Q1 2023[369] - The cumulative economic benefit of the long-term care insurance multi-year in-force rate action plan through Q1 2023 was approximately $23.8 billion[404] - In Q1 2023, 23 state filings were approved impacting $78 million in in-force premiums with a weighted-average rate increase of 64%, generating $50 million in gross incremental premiums[486] - The company submitted 29 new filings in Q1 2023 on approximately $247 million in annualized in-force premiums[486] - Long-term care insurance segment revenues increased by $3 million (0.3%) to $1,098 million in Q1 2023 compared to Q1 2022, driven by higher premiums and net investment income[478] - Premiums increased by $9 million (1%) to $616 million in Q1 2023, primarily due to $30 million from newly implemented in-force rate actions, partially offset by lower renewal premiums[478][481] - Net investment income rose by $26 million (6%) to $473 million in Q1 2023, largely from higher income from limited partnerships and bank loans as well as higher investment yields[478][481] - Benefits and expenses increased by $108 million (11%) to $1,125 million in Q1 2023, driven by higher benefit payments, loss adjustment expenses, and operating expenses[478][482] - Liability remeasurement losses were $5 million in Q1 2023 compared to gains of $65 million in Q1 2022, a 108% unfavorable change, largely due to higher new claims and benefit utilization[478][482] - Adjusted operating loss was $37 million in Q1 2023 compared to income of $27 million in Q1 2022, driven by unfavorable cash flow assumption updates and higher new claims[480] CareScout Services Business - Genworth launched the initial phase of its CareScout services business in March 2023, focusing on a digital platform and preferred provider network for home care[373] - Genworth's CareScout services business aims to generate significant reductions in legacy long-term care insurance claims costs through network discounts[373] - Acquisition and operating expenses increased by $7 million (78%) to $16 million in Q1 2023, driven by CareScout growth initiatives and restructuring costs[517] - Adjusted operating loss increased by $6 million (50%) to $(18) million in Q1 2023, primarily due to higher CareScout expenses and interest costs[515] Financial Performance and Metrics - Premiums decreased by $2 million (0%) to $915 million in Q1 2023 compared to Q1 2022[384] - Net investment income increased by $23 million (3%) to $787 million in Q1 2023 compared to Q1 2022[384] - Net investment losses were $11 million in Q1 2023, a decrease of $53 million (126%) compared to Q1 2022[384] - Total revenues decreased by $39 million (2%) to $1,854 million in Q1 2023 compared to Q1 2022[384] - Benefits and other changes in policy reserves increased by $7 million (1%) to $1,172 million in Q1 2023 compared to Q1 2022[384] - Liability remeasurement losses were $22 million in Q1 2023, an increase of $63 million (154%) compared to Q1 2022[384] - Changes in fair value of market risk benefits and associated hedges were $17 million in Q1 2023, an increase of $58 million (141%) compared to Q1 2022[384] - Net income available to Genworth Financial, Inc.'s common stockholders decreased by $129 million (68%) to $62 million in Q1 2023 compared to Q1 2022[384] - Adjusted operating income available to Genworth Financial, Inc.'s common stockholders decreased by $36 million (30%) to $84 million in Q1 2023 compared to Q1 2022[390] - Basic earnings per share decreased by 66% to $0.13 in Q1 2023 compared to $0.38 in Q1 2022[393] - Diluted earnings per share decreased by 68% to $0.12 in Q1 2023 compared to $0.37 in Q1 2022[393] - Adjusted operating income decreased by 30% to $84 million in Q1 2023 compared to $120 million in Q1 2022[395] - Enact segment's adjusted operating income increased by 6% to $143 million in Q1 2023 compared to $135 million in Q1 2022[395] - Long-Term Care Insurance segment reported an adjusted operating loss of $37 million in Q1 2023 compared to an income of $27 million in Q1 2022[395] - Life and Annuities segment's adjusted operating loss improved by 87% to $4 million in Q1 2023 compared to $30 million in Q1 2022[395] - Enact's PMIERs sufficiency ratio was 164% or $2,098 million above requirements as of March 31, 2023[401] - Enact's primary persistency rate increased to 85% in Q1 2023 compared to 76% in Q1 2022[401] - Enact's new insurance written decreased by 30% to $13.2 billion in Q1 2023 compared to Q1 2022, primarily due to a decline in originations from elevated interest rates[422] - Enact's primary persistency rate increased to 85% in Q1 2023 from 76% in Q1 2022, driven by a decline in the percentage of in-force policies with mortgage rates above current interest rates[423] - Enact's loss ratio for Q1 2023 was (5)%, with a favorable reserve adjustment of $70 million primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021[425] - New primary delinquencies in Q1 2023 increased to 9,599, contributing $58 million of loss expense, compared to 8,724 new primary delinquencies and $39 million of losses in Q1 2022[427] - Enact's risk-to-capital ratio was approximately 12.7:1 as of March 31, 2023, compared to 12.9:1 as of December 31, 2022, remaining below the maximum risk-to-capital ratio of 25:1[429] - Enact had estimated available assets of $5,357 million against $3,259 million net required assets under PMIERs as of March 31, 2023, with a sufficiency ratio of 164%[432] - Enact's PMIERs sufficiency as of March 31, 2023 was relatively flat, with a $120 million benefit from the application of a 0.30 multiplier to eligible delinquencies, compared to $132 million as of December 31, 2022[434] - Enact executed an excess of loss reinsurance transaction providing up to $180 million of coverage for 2023 book year policies, with $1,523 million of PMIERs capital credit as of March 31, 2023[435] - Enact's total revenues increased by 4% to $281 million in Q1 2023, driven by a 31% increase in net investment income to $46 million[440] - Enact recorded a favorable reserve adjustment of $70 million in Q1 2023, primarily related to better-than-expected cure performance on COVID-19 delinquencies from 2020 and 2021[444] - Primary insurance in-force increased by 9% to $252,516 million in Q1 2023, driven by new insurance written and lower lapses due to elevated interest rates[447] - New insurance written decreased by 30% to $13,154 million in Q1 2023, primarily due to lower originations caused by elevated interest rates[447] - Enact's loss ratio decreased slightly to (5)% in Q1 2023, largely due to a higher favorable reserve adjustment, while the expense ratio decreased to 23% driven by lower operating costs[451] - Primary insurance in-force increased to $252.516 billion in 2023 from $231.853 billion in 2022, with the largest growth in the 95.01% and above loan-to-value ratio category, rising to $40.776 billion from $36.867 billion[454] - Primary risk in-force grew to $64.106 billion in 2023 from $58.295 billion in 2022, with the highest increase in the 90.01% to 95.00% loan-to-value ratio category, reaching $30.589 billion from $27.987 billion[454] - Delinquency rate decreased to 1.93% in March 2023 from 2.08% in December 2022, with delinquent loans dropping to 18,633 from 19,943[456] - Reserves as a percentage of risk in-force remained flat at 42% in March 2023 compared to December 2022, with total reserves at $462 million[458][459] - California accounted for 12% of primary risk in-force and 11% of direct primary case reserves, with a delinquency rate of 1.99% in March 2023, down from 2.09% in December 2022[462] - Policy years 2020 and later represented 68% of total direct primary case reserves and 95% of primary risk in-force as of March 2023[467] - The 2021 policy year had the highest primary insurance in-force at $79.377 billion, representing 31% of the total portfolio, with a delinquency rate of 1.23%[466] - The 2023 policy year showed a minimal delinquency rate of 0.02%, with primary insurance in-force at $13.027 billion, accounting for 5% of the total portfolio[466] - Policy years 2008 and prior accounted for 25% of direct primary case reserves but only 3% of primary risk in-force, with a delinquency rate of 8.81%[466] - The New York Metropolitan Division had the highest delinquency rate at 3.51% in March 2023, down from 3.75% in December 2022, and accounted for 8% of direct primary case reserves[463] Life and Annuities Segment - Life insurance in-force before reinsurance decreased by 10% to $292.1 billion in Q1 2023 compared to Q1 2022[511] - Net investment income decreased by 5% to $264 million in Q1 2023 compared to $279 million in Q1 2022[500] - Total revenues decreased by 11% to $479 million in Q1 2023 compared to $536 million in Q1 2022[500] - Adjusted operating loss in life insurance products decreased by $20 million due to a non-recurring legal settlement accrual in the prior year[504] - Fixed annuity adjusted operating income increased by $1 million mainly due to higher mortality in single premium immediate annuity products[504] - Variable annuity adjusted operating income increased by $5 million due to aging of the block resulting in lower attributed fees and benefit payments[504] - Benefits and other changes in policy reserves decreased by 4% to $246 million in Q1 2023 compared to $255 million in Q1 2022[500] - Acquisition and operating expenses decreased by 31% to $53 million in Q1 2023 compared to $77 million in Q1 2022[500] - Mortality experience for older ages is emerging, and the company continues to monitor trends in mortality improvement[495] - The effective tax rate increased to 22.4% in Q1 2023 from 18.6% in Q1 2022 due to tax benefits from tax-favored items in relation to a pre-tax loss[509] Investment Portfolio and Market Conditions - The company sold the majority of its investment holdings in First Republic Bank and will record a loss in Q2 2023[529] - Fixed maturity securities portfolio was 96% investment grade and comprised 77% of total invested assets and cash as of March 31, 2023[530] - The company plans to convert remaining LIBOR-based derivatives to SOFR in Q2 2023, with no material adverse impact expected[533] - The U.S. Federal Reserve increased interest rates by 25 basis points in February and March 2023, bringing the upper end of the target range to the highest level since 2006[522] - The company's exposure to regional banks and commercial real estate is being closely monitored, with risks deemed manageable[529] - Fixed maturity securities—taxable yield remained stable at 4.4% for both 2023 and 2022, with a decrease in amount from $580 million to $561 million[536] - Net investment income increased by $23 million to $787 million in 2023, with a yield of 4.9%, up from 4.7% in 2022[536] - Limited partnership income increased by $21 million, contributing to higher net investment income in 2023[537] - Realized investment losses on available-for-sale fixed maturity securities increased to $16 million in 2023 from $8 million in 2022[540] - Net unrealized gains on equity securities were $11 million in 2023, compared to net unrealized losses of $6 million in 2022[541] - Total cash, cash equivalents, and invested assets increased to $61,594 million in 2023 from $60,747 million in 2022[544] - Approximately 6% of the company's investment holdings were classified as Level 3 measurements, based on significant inputs not market observable[545] - U.S. corporate fixed maturity securities had a fair value of $27,872 million, with gross unrealized losses of $2,391 million as of March 31, 2023[548] - Non-U.S. corporate fixed maturity securities had a fair value of $8,059 million, with gross unrealized losses of $655 million as of March 31, 2023[548] - Total available-for-sale fixed maturity securities had a fair value of $47,381 million, with gross unrealized losses of $3,968 million as of March 31, 2023[548] - Fixed maturity securities increased by $0.8 billion compared to December 31, 2022, primarily due to a decrease in net unrealized losses related to lower interest rates, partially offset by net sales and maturities[550] - Total available-for-sale fixed maturity securities had a fair value of $46.583 billion as of March 31, 2023, with gross unrealized gains of $596 million and gross unrealized losses of $4.847 billion[550] - Bank loan investments increased to $495 million as of March 31, 2023, up from $467 million in December 2022, representing 81% of total other invested assets[553] - Derivatives notional value increased to $11.025 billion as of March 31, 2023, up from $8.686 billion in December 2022, driven by additions in interest rate swaps[555] - The number of fixed index annuity embedded derivative policies decreased to 7,315 as of March 31, 2023, down from 7,819 in December 2022, reflecting product runoff[555] - Total assets increased by $1.479 billion to $91.178 billion as of March 31, 2023, compared to $89.699 billion in December 2022[557] Mortgage Insurance Market and Regulatory Changes - Mortgage origination activity remained slow in Q1 2023 due to rising mortgage rates, with the refinance market expected to stay low as the Federal Reserve has not signaled any interest rate reductions[411] - The unemployment rate remained flat at 3.5% in March 2023, with under six million unemployed Americans, of which approximately one million were long-term unemployed over 26 weeks[412] - The FHFA announced targeted changes to the GSEs' guarantee fee pricing, eliminating upfront fees for certain first-time home buyers and increasing fees for cash-out refinance loans, with Enact expecting a net positive impact on the private mortgage insurance market[418] - The Department of Housing and Urban Development announced a 30 basis point reduction in the annual insurance premium for FHA-insured mortgages, expected to have a negative impact on the private mortgage insurance market but partially offset by recent FHFA pricing changes[421] COVID-19 Impact and Mortality Trends - COVID-19 led to higher mortality in early 2022, but levels returned to pre-pandemic levels in H2 2022, potentially reducing future mortality rates[470] - The company continues to pursue premium rate increases and benefit reductions on older blocks of business to improve profitability, with legal settlements impacting 20%, 15%, and 35% of the block implemented between 2021-2023[474]

Financial Performance Highlights - Genworth reported a first quarter net income of $62 million, or $0.12 per diluted share, and adjusted operating income of $84 million, or $0.17 per diluted share[9] - The U S life insurance companies' statutory pre-tax income was $192 million, driving a risk-based capital ratio of 295%[10] - Enact segment achieved adjusted operating income of $143 million[9] - Genworth executed $68 million in share repurchases during the quarter, with a total of $182 million executed through April 2023 at an average price less than $5 00 per share[10] Long-Term Care Insurance (LTC) - Continued progress on the LTC multi-year rate action plan, achieving approximately $23 8 billion net present value from in-force rate actions (IFAs) since 2012[9] - LTC adjusted operating loss was $(37) million, reflecting an unfavorable assumption update for implementation timing of certain IFAs[9, 15] - First quarter included $240 million pre-tax of premiums from implemented in-force rate actions, up $30 million versus prior year[38] - In-force rate action approvals in 1Q23 resulted in $50 million in gross incremental premium[44] Segment Performance - Life and Annuities adjusted operating loss was $(4) million[9] - Corporate and Other reported an adjusted operating loss of $(18) million, reflecting higher expenses related to new growth initiatives with CareScout and higher interest expense[9, 18] Portfolio and Capital Management - Fixed maturities comprised $47 4 billion, or 77%, of the total portfolio[22] - Unrealized loss position of $3 1 billion as of 1Q23, down from $4 3 billion in 4Q22[22] - Genworth holding company cash and liquid assets were $233 million at quarter-end[10]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-32195 GENWORTH FINANCI AL, INC. (Exact name of registrant as specified in its charter) Delaware 80-0873306 (State or other jurisdiction of (I.R. ...

Financial Data and Key Metrics Changes - For the full year 2022, net income was $609 million, and adjusted operating income was $633 million or $1.24 per diluted share, exceeding market expectations [10] - In Q4 2022, net income was $175 million and adjusted operating income was $167 million or $0.33 per diluted share [10] - Cash flows from Enact contributed significantly to achieving key milestones and supporting the share repurchase program [11] Business Line Data and Key Metrics Changes - The U.S. Life Insurance segment reported adjusted operating income of $38 million, with $24 million from LTC and $16 million from fixed annuities [21] - LTC adjusted operating income was $24 million, down from $25 million in the prior quarter and $119 million in the prior year, reflecting lower investment income and continued growth in new claims [21] - Fixed annuities reported adjusted operating income of $16 million, compared to $19 million in the prior quarter and $20 million in the prior year [31] Market Data and Key Metrics Changes - Enact's insurance in force increased 10% year-over-year to a record $248 billion, driven by new insurance written and higher persistency [19] - The estimated PMIER sufficiency ratio was 165%, approximately $2.1 billion above published requirements [20] - The U.S. Life Insurance segment's statutory capital and surplus increased from $2.9 billion at the end of 2021 to approximately $3 billion at year-end 2022 [11] Company Strategy and Development Direction - The company aims to invest in growth and return capital to shareholders, with a focus on launching new senior care services under the CareScout brand [39] - A new share repurchase program of up to $350 million was authorized, with $64 million repurchased at an average price of less than $4 per share [7] - The company is pursuing a multiyear rate action plan to stabilize its legacy LTC portfolio, achieving $549 million in annual premium rate increase approvals in 2022 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial strength and flexibility to invest in growth while returning capital to shareholders [6] - The removal of GSE restrictions on Enact is expected to enhance competitiveness and financial conditions [9] - Management highlighted the importance of regulatory support in achieving premium increases for LTC products [53] Other Important Information - The company invested approximately $20 million in CareScout in 2022 and plans an additional $30 million in 2023 [16] - The adoption of the new GAAP accounting standard, LDTI, is expected to result in increased volatility in net income [34][36] - The holding company ended the quarter with $307 million of cash and liquid assets, above the cash target of 2x annual debt service [38] Q&A Session Summary Question: Inquiry about debt repurchase strategy - Management indicated that the focus would be on repurchasing the 2034 senior unsecured notes, with a priority on share buybacks now that debt levels are below the target [41][42] Question: Changes in LTC claim inflation assumptions - Management confirmed that no changes were made to the assumptions or expected approvals in the LTC program, indicating stability in the overall assumptions [44][46] Question: Clarification on LTC premium rate increase assumptions - Management explained that while the cumulative premium rate increase assumption rose to $30.3 billion, the active life reserve margin remained unchanged due to positive impacts from improved regulatory behavior [55][56]

Financial Data and Key Metrics Changes - U.S. GAAP net income for Q3 2022 was $104 million, while adjusted operating income was $159 million or $0.31 per share, compared to $181 million and $176 million respectively in the prior quarter [7][17] - Enact contributed significantly with $156 million in adjusted operating income, while U.S. Life reported $11 million, driven by long-term care (LTC) and fixed annuities [7][18] - The company achieved a critical milestone by reducing holding company debt to $900 million, down from over $3 billion since 2013 [11][16] Business Line Data and Key Metrics Changes - U.S. Life Insurance segment reported adjusted operating income of $11 million, with LTC contributing $25 million and fixed annuities $19 million, offset by a $33 million loss in life insurance [20][26] - The LTC business saw a decrease in adjusted operating income from $34 million in the prior quarter to $25 million, attributed to new claims and claim terminations [20][21] - The Runoff segment reported adjusted operating income of $9 million, compared to $2 million in the prior quarter [28] Market Data and Key Metrics Changes - Enact's insurance in-force increased by 9% year-over-year to $242 billion, driven by new insurance written and higher persistency [18] - The estimated PMIERs sufficiency ratio for Enact was 174%, indicating strong capital levels [19] - The U.S. Life companies had combined pre-tax statutory income of approximately $10 million, an improvement from the previous quarter [8] Company Strategy and Development Direction - The company is focused on long-term growth and shareholder value, with strategic priorities including debt reduction and share buybacks [6][11] - Genworth is preparing to launch a new less capital-intensive LTC Service Navigation and Advice business in 2023, targeting attractive markets with digital technology enhancements [13][14] - The company aims to leverage its 40-plus years of LTC insurance experience to create a unified experience for customers [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating ongoing economic uncertainty due to a well-positioned investment portfolio and expected cash flows from Enact [11][36] - The company anticipates a special dividend from Enact in Q4 2022, which will enhance cash flow for growth and shareholder returns [19][36] - Management noted that the impact of the new GAAP accounting standard (LDTI) will not affect cash flows or business strategy [9][30] Other Important Information - The company has achieved $200 million in annual premium rate increase approvals year-to-date through the third quarter, contributing to a cumulative net present value of $21 billion since 2012 [12][24] - The company is in the process of implementing a third legal settlement related to its LTC policies, which is expected to have financial impacts starting in 2023 [25][29] Q&A Session Summary Question: Can you provide insights on long-term care claim severity trends? - Management indicated a return to pre-pandemic behaviors with higher claim severity as individuals move from home care to facilities, viewing this as a temporary trend [40][42] Question: How is healthcare inflation impacting long-term care claims? - Management noted that while short-term inflation is observed, long-term assumptions remain stable, with offsets from rising interest rates [43][44] Question: Regarding capital allocation, have you considered open market purchases of the floating rate bond? - Management explained that while the bond is attractive long-term, current debt service is well covered by Enact dividends, and there are covenants restricting immediate action [46][48][50] Question: What is the current estimate for the MYRAP goal? - Management confirmed the goal is $28.7 billion, with higher interest rates potentially benefiting the overall book of business [52][54] Question: When are peak claim years expected? - Management estimated peak claim years around 2030 to 2032, particularly for the largest blocks of policies [56][57]

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Genworth Financial, Inc. as of September 30, 2022, and for the three and nine months then ended [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$85.9 billion** from **$99.2 billion**, primarily due to reduced fair value of fixed maturity securities, leading to a decline in total equity Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$85,939** | **$99,171** | | Total Investments | $58,490 | $72,278 | | **Total Liabilities** | **$75,890** | **$82,905** | | Long-term borrowings | $1,622 | $1,899 | | **Total Equity** | **$10,049** | **$16,266** | | Accumulated other comprehensive income (loss) | $(2,765) | $3,861 | | Retained earnings | $2,924 | $2,490 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income available to common stockholders decreased to **$104 million** in Q3 2022 from **$314 million** in Q3 2021, driven by lower total revenues and net investment losses Income Statement Summary (in millions, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,839 | $2,070 | $5,612 | $6,096 | | Net Investment Gains (Losses) | $(69) | $88 | $(33) | $191 | | Income from Continuing Operations | $134 | $306 | $535 | $725 | | Net Income Available to Stockholders | $104 | $314 | $434 | $741 | | Diluted EPS (Net Income) | $0.20 | $0.61 | $0.85 | $1.44 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased to **$645 million** for the nine months ended September 30, 2022, while net cash used by financing activities was **$(1,107) million** Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $645 | $290 | | Net Cash from Investing Activities | $452 | $469 | | Net Cash used by Financing Activities | $(1,107) | $(1,478) | | **Net Change in Cash** | **$(10)** | **$(719)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, segment information, investments, and derivatives, highlighting an expected **$12.0 billion to $13.0 billion** decrease in AOCI due to new long-duration insurance contract accounting guidance - The company operates through three segments: Enact (mortgage insurance), U.S. Life Insurance (long-term care, life, fixed annuities), and Runoff (discontinued products)[27](index=27&type=chunk) - A new accounting standard for long-duration insurance contracts, effective January 1, 2023, is expected to have a significant impact. The company estimates a decrease in accumulated other comprehensive income (AOCI) for its long-term care business of approximately **$12.0 billion to $13.0 billion** as of the transition date (Jan 1, 2021), primarily due to remeasuring liabilities at a lower discount rate[36](index=36&type=chunk)[37](index=37&type=chunk) - The company's Board authorized a **$350 million** share repurchase program in May 2022. As of September 30, 2022, **$34 million** had been spent to repurchase **8,980,350 shares**[31](index=31&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic priorities including debt reduction and Enact's value, and the impact of macroeconomic factors on operations and liquidity [Strategic Update](index=78&type=section&id=Strategic%20Update) Genworth achieved its debt reduction goal, bringing public debt to **$900 million**, and continued its **$350 million** share repurchase program while advancing long-term care rate actions - Achieved strategic priority of reducing Genworth Holdings' public debt to approximately **$1.0 billion**; outstanding debt is now **$900 million** after redeeming the February 2024 notes[272](index=272&type=chunk) - Continued execution of the **$350 million** share repurchase program, with **$34 million** in shares repurchased YTD as of September 30, 2022[272](index=272&type=chunk) - The long-term care insurance in-force rate action plan has achieved an estimated cumulative economic benefit of **$21.0 billion** out of a total expected requirement of **$28.7 billion**[274](index=274&type=chunk) [Consolidated Results of Operations](index=81&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net income and adjusted operating income declined in Q3 2022 and YTD 2022, primarily due to weaker performance in the U.S. Life Insurance segment offsetting strong Enact results Consolidated Financial Results (in millions) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income Available to Stockholders | $104 | $314 | $434 | $741 | | Adjusted Operating Income | $159 | $239 | $466 | $601 | [Segment Results](index=91&type=section&id=Segment%20Results) Enact reported strong adjusted operating income of **$156 million**, while U.S. Life Insurance declined to **$11 million** due to long-term care challenges Adjusted Operating Income by Segment (in millions) | Segment | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Enact | $156 | $134 | $458 | $395 | | U.S. Life Insurance | $11 | $93 | $28 | $226 | | Runoff | $9 | $11 | $20 | $38 | | Corporate and Other | $(17) | $1 | $(40) | $(58) | | **Total** | **$159** | **$239** | **$466** | **$601** | - Enact's strong performance was driven by a **$63 million** net favorable reserve adjustment in Q3 2022, primarily from better-than-expected cures on COVID-19 related delinquencies[305](index=305&type=chunk)[356](index=356&type=chunk) - U.S. Life Insurance results declined due to higher claim severity and frequency in long-term care, a less favorable impact from in-force rate actions, and lower net investment income[306](index=306&type=chunk)[428](index=428&type=chunk) [Liquidity and Capital Resources](index=139&type=section&id=Liquidity%20and%20Capital%20Resources) Genworth Holdings maintains **$145 million** in liquid assets, has no debt maturities until **2034**, and expects **$150 million** from Enact's special dividend to support its share repurchase program - Genworth Holdings held **$145 million** of unrestricted cash, cash equivalents, and liquid assets as of September 30, 2022[556](index=556&type=chunk) - Genworth Holdings has no debt maturities until **June 2034** after redeeming its February 2024 notes[556](index=556&type=chunk) - Enact Holdings announced a special dividend of **$1.12 per share** and a **$75 million** share repurchase program. Genworth expects to receive approximately **$150 million** from the special dividend[559](index=559&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=152&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) A hypothetical **100 basis point** interest rate increase would decrease fixed maturity securities' fair value by **$3.2 billion**, a reduced sensitivity compared to prior year due to existing portfolio value declines - A hypothetical **100 basis point** increase in interest rates would cause the fair value of the company's fixed maturity securities to decrease by an estimated **$3.2 billion** as of September 30, 2022[591](index=591&type=chunk) - This sensitivity has decreased from an estimated **$4.7 billion** decline as of December 31, 2021, primarily because the portfolio's fair value has already decreased due to rising interest rates in 2022[591](index=591&type=chunk) [Item 4. Controls and Procedures](index=152&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of September 30, 2022, with new internal controls implemented for the upcoming long-duration insurance contracts accounting standard - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[592](index=592&type=chunk)[593](index=593&type=chunk) - New internal controls were executed during the quarter related to the implementation of the new accounting guidance for long-duration insurance contracts, which is effective January 1, 2023[594](index=594&type=chunk) [PART II—OTHER INFORMATION](index=153&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=153&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 12 for details on material pending litigation and regulatory matters, including class action lawsuits related to insurance premium increases - For details on material pending litigation and regulatory matters, the report refers to Note 12 in Part I, Item 1[595](index=595&type=chunk) [Item 1A. Risk Factors](index=153&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors as previously disclosed in its 2021 Annual Report on Form 10-K - There have been no material changes to the company's risk factors as disclosed in the 2021 Annual Report on Form 10-K[596](index=596&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=153&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Genworth repurchased **5,110,856 shares** of common stock in Q3 2022 as part of its **$350 million** share repurchase program, with **$316 million** remaining available Issuer Purchases of Common Stock (Q3 2022) | Period | Total Shares Purchased | Average Price Per Share | Approx. Value Remaining ($M) | | :--- | :--- | :--- | :--- | | July 2022 | 4,034,794 | $3.72 | $320 | | August 2022 | 0 | N/A | $320 | | September 2022 | 1,076,062 | $3.95 | $316 | | **Total Q3** | **5,110,856** | **N/A** | **$316** | - The share repurchases are part of a **$350 million** program authorized by the Board of Directors on May 2, 2022[598](index=598&type=chunk) [Item 6. Exhibits](index=154&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including amended bylaws, compensatory plans, CEO/CFO certifications, and XBRL data files - Exhibits filed include amended bylaws, executive compensation plans, and required CEO/CFO certifications[599](index=599&type=chunk)[600](index=600&type=chunk)

Genworth Financial, Inc. (NYSE:GNW) Q2 2022 Earnings Conference Call August 2, 2022 9:00 AM ET Company Participants Sarah Crews - Director, Investor Relations Tom McInerney - President & Chief Executive Officer Dan Sheehan - Chief Financial Officer & Chief Investment Officer Conference Call Participants Ryan Krueger - KBW Geoffrey Dunn - Dowling & Partners Operator Good morning, ladies and gentlemen, and welcome to Genworth Financial's Second Quarter 2022 Earnings Conference Call. My name is Katie, and I wi ...