Genworth(GNW) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Genworth Financial, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of income, comprehensive income, changes in equity, and cash flows, along with detailed notes explaining business operations, accounting policies, investment details, derivative instruments, fair value measurements, and other financial disclosures Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :-------------------------- | :------------------ | | Assets | | | | Total investments | $58,868 million | $57,928 million | | Cash, cash equivalents and restricted cash | $1,797 million | $2,048 million | | Total assets | $87,336 million | $86,871 million | | Liabilities | | | | Future policy benefits | $54,111 million | $53,610 million | | Policyholder account balances | $14,163 million | $14,594 million | | Total liabilities | $77,557 million | $77,440 million | | Equity | | | | Total Genworth Financial, Inc.'s stockholders' equity | $8,788 million | $8,494 million | | Total equity | $9,779 million | $9,431 million | Condensed Consolidated Statements of Income | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,796 million | $1,769 million | $3,582 million | $3,633 million | | Total benefits and expenses | $1,671 million | $1,626 million | $3,331 million | $3,254 million | | Income from continuing operations before income taxes | $125 million | $143 million | $251 million | $379 million | | Provision for income taxes | $35 million | $32 million | $71 million | $98 million | | Income from continuing operations | $90 million | $111 million | $180 million | $281 million | | Loss from discontinued operations, net of taxes | $(7) million | $(1) million | $(12) million | $(2) million | | Net income | $83 million | $110 million | $168 million | $279 million | | Net income available to Genworth Financial, Inc.'s common stockholders | $51 million | $76 million | $105 million | $215 million | | Basic EPS (continuing operations) | $0.14 | $0.18 | $0.28 | $0.49 | | Diluted EPS (continuing operations) | $0.14 | $0.17 | $0.28 | $0.49 | | Basic EPS (net income) | $0.12 | $0.17 | $0.25 | $0.49 | | Diluted EPS (net income) | $0.12 | $0.17 | $0.25 | $0.48 | Condensed Consolidated Statements of Comprehensive Income | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $83 million | $110 million | $168 million | $279 million | | Total other comprehensive income | $58 million | $407 million | $289 million | $867 million | | Total comprehensive income | $141 million | $517 million | $457 million | $1,146 million | | Total comprehensive income available to Genworth Financial, Inc.'s common stockholders | $100 million | $483 million | $375 million | $1,083 million | Condensed Consolidated Statements of Changes in Equity | Metric | Balances as of March 31, 2025 | Balances as of June 30, 2025 | | :----------------------------------- | :---------------------------- | :--------------------------- | | Total Genworth Financial, Inc.'s stockholders' equity | $8,710 million | $8,788 million | | Noncontrolling interests | $971 million | $991 million | | Total equity | $9,681 million | $9,779 million | | Metric | Balances as of December 31, 2024 | Balances as of June 30, 2025 | | :----------------------------------- | :----------------------------- | :--------------------------- | | Total Genworth Financial, Inc.'s stockholders' equity | $8,494 million | $8,788 million | | Noncontrolling interests | $937 million | $991 million | | Total equity | $9,431 million | $9,779 million | - For the three months ended June 30, 2025, total comprehensive income was $141 million, with $100 million attributable to Genworth Financial, Inc.'s common stockholders. Treasury stock acquired in connection with share repurchases amounted to $30 million[15] - For the six months ended June 30, 2025, total comprehensive income was $457 million, with $375 million attributable to Genworth Financial, Inc.'s common stockholders. Treasury stock acquired in connection with share repurchases amounted to $76 million[18] Condensed Consolidated Statements of Cash Flows | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash from (used by) operating activities | $40 million | $(100) million | | Net cash from (used by) investing activities | $160 million | $401 million | | Net cash from (used by) financing activities | $(451) million | $(584) million | | Net change in cash, cash equivalents and restricted cash | $(251) million | $(283) million | | Cash, cash equivalents and restricted cash at end of period | $1,797 million | $1,932 million | Note 1 — Business and Basis of Presentation Genworth Financial, Inc. operates through three reportable segments: Enact (private mortgage insurance), Long-Term Care Insurance, and Life and Annuities (servicing existing protection and retirement income products) - Genworth Financial, Inc. manages its business through three reportable segments: Enact (private mortgage insurance), Long-Term Care Insurance, and Life and Annuities (servicing existing products)[25][27] - During the six months ended June 30, 2025, Genworth Financial repurchased 10,797,934 shares of its common stock at an average price of $6.95 per share, totaling $76 million[30] - As of July 31, 2025, approximately $70 million remained available for repurchase under the existing share repurchase program[30] Note 2 — Accounting Changes The FASB issued new accounting guidance in November 2024 requiring disaggregated expense disclosures, effective January 1, 2027, and in December 2023, new guidance to improve income tax disclosures, effective January 1, 2025 - New FASB guidance issued in November 2024 requires disaggregated disclosures of certain expense categories, effective January 1, 2027[31] - New FASB guidance issued in December 2023 improves income tax disclosures, effective January 1, 2025, expanding disclosures without impacting consolidated financial statements[32] Note 3 — Earnings (Loss) Per Share Basic and diluted earnings per share calculations are provided for income from continuing operations, loss from discontinued operations, and net income for the three and six months ended June 30, 2025 and 2024 | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Weighted-average common shares (basic) | 413.2 million | 436.4 million | 415.7 million | 439.7 million | | Weighted-average common shares (diluted) | 417.5 million | 440.7 million | 420.2 million | 445.5 million | | Basic EPS (continuing operations) | $0.14 | $0.18 | $0.28 | $0.49 | | Diluted EPS (continuing operations) | $0.14 | $0.17 | $0.28 | $0.49 | | Basic EPS (net income) | $0.12 | $0.17 | $0.25 | $0.49 | | Diluted EPS (net income) | $0.12 | $0.17 | $0.25 | $0.48 | Note 4 — Investments The company's investment portfolio generated $802 million in net investment income for the three months ended June 30, 2025, and $1,541 million for the six months ended June 30, 2025 | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $802 million | $808 million | $1,541 million | $1,590 million | | Net investment gains (losses) | $(28) million | $(61) million | $(1) million | $(12) million | | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------- | :------------ | :---------------- | | Amortized cost of fixed maturity securities | $48,684 million | $48,720 million | | Gross unrealized gains on fixed maturity securities | $685 million | $452 million | | Gross unrealized losses on fixed maturity securities | $(3,672) million | $(4,260) million | | Allowance for credit losses on fixed maturity securities | $(25) million | $(10) million | | Fair value of fixed maturity securities | $45,672 million | $44,902 million | - As of June 30, 2025, the allowance for credit losses on commercial mortgage loans increased to $56 million from $39 million as of December 31, 2024, primarily due to updates to the analytical model[67][74] - During the three and six months ended June 30, 2025, one commercial mortgage loan in the office property type with an amortized cost of $9 million was modified due to the borrower experiencing financial difficulty. The modification extended the contractual term and increased the interest rate[71] Note 5 — Derivative Instruments Genworth uses derivative instruments to mitigate risks from fluctuations in interest rates, equity prices, and currency exchange rates | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total derivative assets | $42 million | $56 million | | Total derivative liabilities | $1,040 million | $991 million | | Metric | December 31, 2024 | June 30, 2025 | | :----------------------------------- | :------------------ | :------------ | | Total derivatives (notional) | $13,746 million | $14,001 million | | Fixed indexed annuity embedded derivatives (policies) | 4,867 | 4,509 | | Indexed universal life embedded derivatives (policies) | 717 | 699 | | Classification of gain (loss) recognized in net income | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Equity index options | $5 million | $1 million | $1 million | $6 million | | Financial futures | $(50) million | $(15) million | $(17) million | $(79) million | | Forward bond purchase commitments | $(12) million | $(7) million | $(8) million | $(11) million | | Foreign currency forward contracts | $(24) million | $0 million | $(24) million | $0 million | | Fixed indexed annuity embedded derivatives | $(6) million | $(5) million | $(2) million | $(13) million | | Indexed universal life embedded derivatives | $0 million | $2 million | $1 million | $6 million | | Total derivatives not designated as hedges | $(87) million | $(24) million | $(49) million | $(91) million | Note 6 — Fair Value of Financial Instruments The company measures various financial instruments at fair value, categorized into Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (significant unobservable inputs) | Asset Class | Total (June 30, 2025) | Level 1 | Level 2 | Level 3 | NAV (1) | | :----------------------------------- | :-------------------- | :------ | :------ | :------ | :------ | | Total fixed maturity securities | $45,672 million | $0 million | $42,783 million | $2,889 million | $0 million | | Equity securities | $516 million | $447 million | $28 million | $41 million | $0 million | | Limited partnerships | $2,637 million | $0 million | $0 million | $17 million | $2,620 million | | Total derivative assets | $42 million | $0 million | $19 million | $23 million | $0 million | | Separate account assets | $4,394 million | $4,394 million | $0 million | $0 million | $0 million | | Total assets | $53,272 million | $4,841 million | $42,841 million | $2,970 million | $2,620 million | | Liability Class | Total (June 30, 2025) | Level 1 | Level 2 | Level 3 | | :----------------------------------- | :-------------------- | :------ | :------ | :------ | | Fixed indexed annuity embedded derivatives | $144 million | $0 million | $0 million | $144 million | | Indexed universal life embedded derivatives | $13 million | $0 million | $0 million | $13 million | | Total derivative liabilities | $883 million | $0 million | $781 million | $102 million | | Total liabilities | $1,040 million | $0 million | $781 million | $259 million | | Asset Class (Level 3) | Fair value (June 30, 2025) | Unobservable input | Range | Weighted-average | | :----------------------------------- | :------------------------- | :----------------- | :---- | :--------------- | | U.S. corporate fixed maturity securities | $1,864 million | Credit spreads | 14bps - 239bps | 126bps | | Non-U.S. corporate fixed maturity securities | $645 million | Credit spreads | 66bps - 191bps | 113bps | | Equity index options | $17 million | Equity index volatility | 6% - 51% | 25% | | Forward bond purchase commitments | $6 million | Counterparty financing spreads | 17bps - 54bps | 31bps | | Net market risk benefits (variable annuities) | $104 million | Lapse rate | 2% - 9% | 5% | | | | Non-performance risk | 42bps - 83bps | 69bps | | | | Equity index volatility | 15% - 29% | 22% | | Liability Class (Level 3) | Fair value (June 30, 2025) | Unobservable input | Range | Weighted-average | | :----------------------------------- | :------------------------- | :------------------------- | :---------- | :--------------- | | Fixed indexed annuity embedded derivatives | $144 million | Expected future interest credited | 1% - 4% | 2% | | Indexed universal life embedded derivatives | $13 million | Expected future interest credited | 3% - 13% | 5% | | Fixed indexed annuities (MRBs) | $53 million | GMWB utilization rate | — % - 82% | 67% | | | | Non-performance risk (credit spreads) | 42bps - 83bps | 69bps | | | | Expected future interest credited | 1% - 4% | 2% | | Variable annuities (MRBs) | $342 million | Lapse rate | 2% - 11% | 5% | | | | GMWB utilization rate | 59% - 90% | 79% | | | | Non-performance risk (credit spreads) | 42bps - 83bps | 69bps | | | | Equity index volatility | 15% - 29% | 22% | | Forward bond purchase commitments | $102 million | Counterparty financing spreads | 23bps - 54bps | 44bps | Note 7 — Deferred Acquisition Costs Deferred acquisition costs (DAC) for the company's insurance products totaled $1,680 million as of June 30, 2025, down from $1,779 million as of December 31, 2024 | Segment/Product | Balance as of January 1, 2025 | Amortization (6 months ended June 30, 2025) | Balance as of June 30, 2025 | | :------------------------ | :---------------------------- | :------------------------------------------ | :--------------------------- | | Long term care insurance | $823 million | $(27) million | $796 million | | Life insurance | $812 million | $(61) million | $751 million | | Fixed annuities | $37 million | $(4) million | $33 million | | Variable annuities | $83 million | $(6) million | $77 million | | Enact segment | $24 million | $0 million | $23 million | | Total deferred acquisition costs | $1,779 million | $(98) million | $1,680 million | Note 8 — Future Policy Benefits The total liability for future policy benefits was $54,111 million as of June 30, 2025, an increase from $53,610 million as of December 31, 2024 | Product | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Long-term care insurance | $41,800 million | $41,172 million | | Life insurance | $1,536 million | $1,564 million | | Fixed annuities | $10,609 million | $10,695 million | | Total future policy benefits | $54,111 million | $53,610 million | - For the six months ended June 30, 2025, long-term care insurance liability increased by $16 million due to unfavorable cash flow assumption updates (implementation timing of in-force rate actions) and by $41 million due to actual variances (higher benefit utilization), partially offset by a $26 million gain from a third-party reinsurance recapture[204] | Product | Weighted-average interest accretion (locked-in) rate (June 30, 2025) | Weighted-average current discount rate (June 30, 2025) | | :------------------------ | :--------------------------------------------------- | :------------------------------------- | | Long-term care insurance | 5.7% | 5.6% | | Life insurance | 5.8% | 5.1% | | Fixed annuities | 6.8% | 5.5% | Note 9 — Policyholder Account Balances Total policyholder account balances decreased to $14,163 million as of June 30, 2025, from $14,594 million as of December 31, 2024, primarily due to benefit payments, surrenders, and withdrawals in fixed annuity and universal/term universal life insurance products | Product | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Life insurance | $7,075 million | $7,235 million | | Fixed annuities | $3,520 million | $3,789 million | | Variable annuities | $443 million | $467 million | | Fixed indexed annuity embedded derivatives | $144 million | $155 million | | Indexed universal life embedded derivatives | $13 million | $15 million | | Additional insurance liabilities | $2,955 million | $2,920 million | | Total policyholder account balances | $14,163 million | $14,594 million | | Product | Net amount at risk (June 30, 2025) | Cash surrender value (June 30, 2025) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Life insurance | $40,583 million | $4,036 million | | Fixed annuities | $29 million | $2,689 million | | Variable annuities | $381 million | $443 million | Note 10 — Additional Insurance Liabilities Additional insurance liabilities, primarily for universal and term universal life insurance products, increased to $2,955 million as of June 30, 2025, from $2,920 million at year-end 2024 | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Ending balance | $2,955 million | $2,920 million | | Weighted-average liability duration (years) | 17.4 | 17.8 | | Interest accretion rate | 3.3% | 3.4% | | Projected crediting rate | 3.8% | 3.8% | - For the six months ended June 30, 2025, additional insurance liabilities increased primarily due to unfavorable mortality experience[229] Note 11 — Market Risk Benefits Total market risk benefits (MRBs) net liability decreased to $395 million as of June 30, 2025, from $408 million as of December 31, 2024 | Product | Asset (June 30, 2025) | Liability (June 30, 2025) | Net liability (June 30, 2025) | | :------------------------ | :-------------------- | :---------------------- | :-------------------------- | | Fixed indexed annuities | $0 million | $53 million | $53 million | | Variable annuities | $58 million | $400 million | $342 million | | Total market risk benefits | $58 million | $453 million | $395 million | | Change Component (6 months ended June 30, 2025) | Fixed indexed annuities | Variable annuities | | :------------------------------------------------ | :---------------------- | :----------------- | | Interest accretion | $1 million | $9 million | | Attributed fees collected | $2 million | $18 million | | Benefit payments | $0 million | $(13) million | | Effect of changes in interest rates | $4 million | $29 million | | Effect of changes in equity markets | $0 million | $(56) million | | Actual policyholder behavior different from expected behavior | $(1) million | $(4) million | Note 12 — Separate Accounts Separate account liabilities, primarily from variable annuity products, decreased to $4,394 million as of June 30, 2025, from $4,438 million at year-end 2024 | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Beginning balance as of January 1 | $4,438 million | $4,509 million | | Premiums and deposits | $14 million | $29 million | | Surrenders and withdrawals | $(179) million | $(406) million | | Benefit payments | $(110) million | $(217) million | | Investment performance | $282 million | $631 million | | Ending balance | $4,394 million | $4,438 million | | Cash surrender value | $4,392 million | $4,436 million | | Asset Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Equity funds | $2,078 million | $2,087 million | | Balanced funds | $1,813 million | $1,834 million | | Bond funds | $301 million | $313 million | | Money market funds | $202 million | $204 million | | Total | $4,394 million | $4,438 million | Note 13 — Liability for Policy and Contract Claims The total liability for policy and contract claims increased to $763 million as of June 30, 2025, from $670 million as of December 31, 2024 | Segment | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Enact segment | $552 million | $525 million | | Life and Annuities segment | $203 million | $139 million | | Other mortgage insurance business | $8 million | $6 million | | Total liability for policy and contract claims | $763 million | $670 million | - For the six months ended June 30, 2025, the Enact segment recorded reserve releases of $95 million, primarily due to favorable cure performance on delinquencies from early 2024 and prior[248] Note 14 — Income Taxes The effective tax rate for the three and six months ended June 30, 2025, was 28.0% and 28.3%, respectively, higher than the statutory U.S. federal income tax rate of 21% | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Statutory U.S. federal income tax rate | 21.0% | 21.0% | 21.0% | 21.0% | | Effective rate | 28.0% | 22.4% | 28.3% | 25.9% | - The effective tax rate was above the statutory rate primarily due to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35%[250] - The company utilizes the actual effective tax rate for interim reporting for its Long-Term Care Insurance and Life and Annuities segments, and the annualized projected effective tax rate for its Enact segment and Corporate and Other[253] Note 15 — Segment Information Genworth's reportable segments are Enact, Long-Term Care Insurance, and Life and Annuities, with performance evaluated based on adjusted operating income (loss) | Segment | Adjusted Operating Income (Loss) (3 months ended June 30, 2025) | Adjusted Operating Income (Loss) (3 months ended June 30, 2024) | | :----------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Enact | $141 million | $165 million | | Long-Term Care Insurance | $(37) million | $(29) million | | Life and Annuities | $(7) million | $(1) million | | Total reportable segment adjusted operating income | $97 million | $135 million | | Segment | Adjusted Operating Income (Loss) (6 months ended June 30, 2025) | Adjusted Operating Income (Loss) (6 months ended June 30, 2024) | | :----------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Enact | $278 million | $300 million | | Long-Term Care Insurance | $(67) million | $(26) million | | Life and Annuities | $(40) million | $(16) million | | Total reportable segment adjusted operating income | $171 million | $258 million | | Segment | Total Assets (June 30, 2025) | Total Assets (December 31, 2024) | | :----------------------------------- | :--------------------------- | :----------------------------- | | Enact | $6,777 million | $6,525 million | | Long-Term Care Insurance | $45,725 million | $44,877 million | | Life and Annuities | $33,355 million | $33,797 million | Note 16 — Commitments and Contingencies The company faces various litigation and regulatory risks, including class action lawsuits related to cost of insurance charges, fraudulent transfer, ERISA fiduciary duties, and data security breaches (MOVEit Cybersecurity Incident) - Genworth is involved in several class action lawsuits, including TVPX ARS, INC. v. GLAIC (cost of insurance charges), Burkhart et al. v. Genworth Financial et al. (fraudulent transfer), Trauernicht et al v. Genworth Financial (ERISA fiduciary duties), and In Re MOVEit Customer Data Security Breach Litigation (data security)[274][277][280][284] - In M/O Arbitration Between Blue Cross Blue Shield Nebraska and GLIC, the arbitration panel's final decision on May 19, 2025, led to a $24 million payment to BCBSNE and a $50 million release in insurance reserves, resulting in a pre-tax gain of $26 million for Genworth in Q2 2025[283] - Genworth has commitments to fund $1,748 million in limited partnership investments, $394 million in private placement investments, $122 million of bank loan investments, and $20 million in commercial mortgage loan investments as of June 30, 2025[54][185][186][191][527] - Genworth provided AXA a guarantee up to £80 million for PPI mis-selling losses. A favorable U.K. High Court judgment on July 25, 2025, against Santander could entitle Genworth to recover approximately $750 million[292] Note 17 — Changes in Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) (AOCI) for Genworth Financial, Inc. decreased to $(1,372) million as of June 30, 2025, from $(1,642) million as of January 1, 2025 | Component | Balances as of April 1, 2025 | Current period OCI (3 months ended June 30, 2025) | Balances as of June 30, 2025 | | :----------------------------------- | :--------------------------- | :------------------------------------------------ | :--------------------------- | | Net unrealized investment gains (losses) | $(2,660) million | $134 million | $(2,536) million | | Derivatives qualifying as hedges | $535 million | $(155) million | $380 million | | Change in discount rate used to measure future policy benefits | $704 million | $66 million | $770 million | | Total | $(1,421) million | $58 million | $(1,372) million | | Component | Balances as of January 1, 2025 | Current period OCI (6 months ended June 30, 2025) | Balances as of June 30, 2025 | | :----------------------------------- | :----------------------------- | :------------------------------------------------ | :--------------------------- | | Net unrealized investment gains (losses) | $(3,156) million | $640 million | $(2,536) million | | Derivatives qualifying as hedges | $492 million | $(112) million | $380 million | | Change in discount rate used to measure future policy benefits | $1,023 million | $(253) million | $770 million | | Total | $(1,642) million | $289 million | $(1,372) million | | Reclassification from AOCI (net of taxes) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net unrealized investment (gains) losses | $14 million | $15 million | $17 million | $32 million | | Derivatives qualifying as hedges | $(31) million | $(34) million | $(62) million | $(70) million | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Genworth Financial's financial condition and results of operations, highlighting strategic updates, consolidated financial performance, and detailed segment-level analysis Cautionary note regarding forward-looking statements - The report contains forward-looking statements regarding future business and financial performance, including potential dividends, share repurchases, long-term care insurance rate actions, CareScout growth initiatives, and the AXA/Santander litigation[304] - These statements are subject to inherent uncertainties, risks, and changes in circumstances due to global political, economic, inflation, business, competitive, market, and regulatory factors[305] Overview - Genworth Financial offers mortgage and long-term care insurance products through its principal insurance subsidiaries[310] - The company reports business results through three segments: Enact (private mortgage insurance), Long-Term Care Insurance, and Life and Annuities (servicing existing products)[311] - Genworth Financial maintains control of Enact Holdings, a public company, through an indirect majority voting interest, consolidating it as the Enact segment[313] Strategic Update - Genworth Holdings received $94 million in capital returns from Enact Holdings in Q2 2025, funding strategic initiatives, including CareScout products and services, share repurchases, and opportunistic debt reduction[314] - The estimated cumulative economic benefit of approved long-term care insurance rate actions since 2012 through Q2 2025 was approximately $31.6 billion on a net present value basis[315] - CareScout Services expanded its network to nearly 650 home care providers and launched Care Plans, with planned investments of $45 million to $50 million for full year 2025[318] - CareScout Care Assurance, an individual long-term care insurance product, was approved in 29 jurisdictions as of June 30, 2025, with a planned capital contribution of $85 million to CareScout Insurance for full year 2025[319] Creating shareholder value - Enact Holdings provided $94 million of capital returns to Genworth Holdings in the second quarter of 2025, supporting strategic initiatives and share repurchases[314] - Since May 2022 through July 31, 2025, Genworth Financial repurchased $630 million worth of its common stock[314] Legacy businesses - The company continues to pursue its multi-year in-force rate action plan for long-term care insurance, achieving an estimated cumulative economic benefit of approximately $31.6 billion (net present value) of approved rate actions since 2012 through Q2 2025[315] CareScout growth initiatives - CareScout Services increased its network to nearly 650 home care providers nationwide, with most offering rates below the median cost of care, and launched 'Care Plans' for virtual care evaluations[318] - Planned investment in CareScout Services for full year 2025 is approximately $45 million to $50 million[318] - CareScout Care Assurance, an individual long-term care insurance product, was approved by 29 jurisdictions as of June 30, 2025, with a planned launch later this year[319] - A capital contribution of $85 million is planned for CareScout Insurance subsidiary for full year 2025 to meet regulatory capital requirements, an increase from the previously planned $75 million[319] Financial Strength and Credit Ratings - There were no changes in the financial strength ratings of the principal insurance subsidiaries or the credit ratings of Genworth Financial and Genworth Holdings subsequent to February 28, 2025[321] Our Financial Information - Revenues primarily consist of premiums, net investment income, net investment gains (losses), and policy fees and other income[324] - Expenses primarily consist of benefits and other changes in policy reserves, liability remeasurement (gains) losses, changes in fair value of market risk benefits and associated hedges, interest credited, acquisition and operating expenses, amortization of deferred acquisition costs and intangibles, and interest expense[324] Revenues and expenses - Revenues are primarily derived from premiums, net investment income, net investment gains (losses), and policy fees and other income[324] - Expenses include benefits and other changes in policy reserves, liability remeasurement (gains) losses, changes in fair value of market risk benefits and associated hedges, interest credited, acquisition and operating expenses, amortization of deferred acquisition costs and intangibles, and interest expense[324] Consolidated Results of Operations | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (2025 vs. 2024) | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :---------------------- | | Total revenues | $1,796 million | $1,769 million | $27 million (2%) | | Total benefits and expenses | $1,671 million | $1,626 million | $45 million (3%) | | Income from continuing operations before income taxes | $125 million | $143 million | $(18) million (-13%) | | Net income available to Genworth Financial, Inc.'s common stockholders | $51 million | $76 million | $(25) million (-33%) | | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (2025 vs. 2024) | | :------------------------------------------------- | :----------------------------- | :----------------------------- | :---------------------- | | Total revenues | $3,582 million | $3,633 million | $(51) million (-1%) | | Total benefits and expenses | $3,331 million | $3,254 million | $77 million (2%) | | Income from continuing operations before income taxes | $251 million | $379 million | $(128) million (-34%) | | Net income available to Genworth Financial, Inc.'s common stockholders | $105 million | $215 million | $(110) million (-51%) | Use of non-GAAP measures - Adjusted operating income (loss) is a non-GAAP financial measure used by the chief operating decision maker to assess performance and allocate resources, as it minimizes the impact of macroeconomic volatility[330][332] - Adjusted operating income (loss) excludes after-tax effects of noncontrolling interests, net investment gains (losses), changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges, gains (losses) on business sales, early extinguishment of debt, restructuring costs, and infrequent non-operating items[332] | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to Genworth Financial, Inc.'s common stockholders | $51 million | $76 million | $105 million | $215 million | | Income from continuing operations available to Genworth Financial, Inc.'s common stockholders | $58 million | $77 million | $117 million | $217 million | | Adjusted operating income available to Genworth Financial, Inc.'s common stockholders | $68 million | $125 million | $119 million | $210 million | Earnings per share | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS (continuing operations) | $0.14 | $0.18 | $0.28 | $0.49 | | Diluted EPS (continuing operations) | $0.14 | $0.17 | $0.28 | $0.49 | | Basic EPS (net income) | $0.12 | $0.17 | $0.25 | $0.49 | | Diluted EPS (net income) | $0.12 | $0.17 | $0.25 | $0.48 | | Basic EPS (adjusted operating income) | $0.16 | $0.29 | $0.29 | $0.48 | | Diluted EPS (adjusted operating income) | $0.16 | $0.28 | $0.28 | $0.47 | | Weighted-average common shares outstanding (basic) | 413.2 million | 436.4 million | 415.7 million | 439.7 million | | Weighted-average common shares outstanding (diluted) | 417.5 million | 440.7 million | 420.2 million | 445.5 million | Executive Summary of Consolidated Financial Results For the three months ended June 30, 2025, net income was $51 million (down from $76 million YoY) and adjusted operating income was $68 million (down from $125 million YoY) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $51 million | $76 million | $105 million | $215 million | | Adjusted operating income | $68 million | $125 million | $119 million | $210 million | - Enact segment's adjusted operating income decreased primarily due to a lower reserve release and higher new delinquencies, partially offset by higher net investment income[343][344] - Long-Term Care Insurance segment's adjusted operating loss increased due to non-recurring net insurance recoveries in the prior year and a higher remeasurement loss, partially offset by higher limited partnership income[343][344] - Life and Annuities segment's adjusted operating loss increased due to block runoff and unfavorable mortality, and lower net spread income[343][344] Significant Developments and Key Highlights - Enact's primary persistency rate was 82% in Q2 2025, and new insurance written decreased 3% YoY. Enact recorded a pre-tax reserve release of $48 million in Q2 2025, down from $77 million in Q2 2024[351] - Enact's PMIERs sufficiency ratio was 165% ($1,961 million above requirements) as of June 30, 2025. Enact Holdings authorized a new $350 million share repurchase program on April 30, 2025[351] - The estimated cumulative economic benefit of approved long-term care insurance rate actions since 2012 through Q2 2025 was approximately $31.6 billion (net present value)[347] - The consolidated risk-based capital ratio of U.S. life insurance subsidiaries was approximately 304% as of June 30, 2025, a slight decrease from 306% at December 31, 2024[348] - Genworth Holdings had $248 million of unrestricted cash and cash equivalents as of June 30, 2025, and received $94 million in capital returns from Enact Holdings during Q2 2025. Genworth Financial executed $30 million in share repurchases during Q2 2025[352] Results of Operations and Selected Financial and Operating Performance Measures by Segment This section provides a detailed breakdown of the financial performance and key operating metrics for each of Genworth's reportable segments: Enact, Long-Term Care Insurance, and Life and Annuities Enact segment Enact's adjusted operating income decreased by 15% for the three months and 7% for the six months ended June 30, 2025, primarily due to lower reserve releases and higher new delinquencies, partially offset by increased net investment income | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted operating income | $141 million | $165 million | $278 million | $300 million | | Premiums | $245 million | $244 million | $490 million | $485 million | | Net investment income | $66 million | $59 million | $129 million | $116 million | | Benefits and other changes in policy reserves | $25 million | $(17) million | $56 million | $3 million | | Loss ratio | 10% | (7)% | 11% | 1% | | Expense ratio | 22% | 28% | 21% | 25% | - Enact's adjusted operating income decreased primarily due to a lower reserve release ($48 million in Q2 2025 vs. $77 million in Q2 2024) and higher new delinquencies (11,567 in Q2 2025 vs. 10,461 in Q2 2024)[95][98][99] | Metric | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Primary insurance in-force | $269,754 million | $266,060 million | | Total risk in-force | $70,455 million | $68,943 million | | New insurance written (3 months) | $13,254 million | $13,619 million | | New insurance written (6 months) | $23,072 million | $24,145 million | | Primary persistency rate (Q2) | 82% | 83% | | Delinquency rate | 2.32% | 1.96% | - Enact's PMIERs sufficiency ratio was 165% or $1,961 million above the requirements as of June 30, 2025[365] - Enact Holdings authorized a new share repurchase program of up to $350 million on April 30, 2025[367] Long-Term Care Insurance segment The Long-Term Care Insurance segment's adjusted operating loss increased to $(37) million for the three months and $(67) million for the six months ended June 30, 2025 | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted operating loss | $(37) million | $(29) million | $(67) million | $(26) million | | Premiums | $578 million | $564 million | $1,149 million | $1,142 million | | Net investment income | $516 million | $494 million | $967 million | $958 million | | Liability remeasurement (gains) losses | $50 million | $43 million | $32 million | $27 million | | Acquisition and operating expenses, net of deferrals | $115 million | $82 million | $224 million | $184 million | - The adjusted operating loss increased primarily due to non-recurring net insurance recoveries of $19 million in the prior year and a higher remeasurement loss in the current year, partially offset by higher limited partnership income and a $26 million gain from a third-party reinsurance recapture[107][109][283] - Premiums increased due to $29 million (3 months) and $54 million (6 months) from newly implemented in-force rate actions, partially offset by lower renewal premiums from prior benefit reduction elections and policy terminations[107][109] | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cash flow assumption updates | $8 million | $(24) million | $7 million | $(26) million | | Actual variances from expected experience | $42 million | $67 million | $25 million | $53 million | | Total liability remeasurement (gains) losses | $50 million | $43 million | $32 million | $27 million | - The estimated cumulative economic benefit of approved rate actions since 2012 through Q2 2025 was approximately $31.6 billion on a net present value basis[347][437] Life and Annuities segment The Life and Annuities segment reported an adjusted operating loss of $(7) million for the three months and $(40) million for the six months ended June 30, 2025 | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted operating loss | $(7) million | $(1) million | $(40) million | $(16) million | | Premiums | $39 million | $44 million | $83 million | $97 million | | Net investment income | $216 million | $250 million | $436 million | $504 million | | Policy fees and other income | $156 million | $164 million | $312 million | $322 million | | Benefits and other changes in policy reserves | $220 million | $237 million | $464 million | $487 million | | Liability remeasurement (gains) losses | $10 million | $(4) million | $32 million | $4 million | | Interest credited | $94 million | $125 million | $193 million | $250 million | - The adjusted operating loss in life insurance products decreased by $3 million for the three months ended June 30, 2025, due to a non-recurring legal settlement accrual in the prior year, but increased by $8 million for the six months due to block runoff and unfavorable mortality[114][117] - Adjusted operating income in fixed and variable annuities decreased primarily from unfavorable mortality and lower net spread income due to block runoff[114][117] - Net investment income decreased primarily from lower policy loan rates in corporate-owned life insurance products and lower average invested assets in fixed annuity products[114][117] Corporate and Other The Corporate and Other segment's adjusted operating loss increased to $(29) million for the three months and $(52) million for the six months ended June 30, 2025 | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Adjusted operating loss | $(29) million | $(10) million | $(52) million | $(48) million | | Net investment income | $4 million | $5 million | $9 million | $12 million | | Net investment gains (losses) | $(28) million | $(2) million | $(28) million | $(6) million | | Acquisition and operating expenses, net of deferrals | $29 million | $22 million | $48 million | $51 million | | Interest expense | $14 million | $17 million | $28 million | $34 million | - The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives and lower net investment income, partially offset by lower interest expense[119][120] Investments and Derivative Instruments The investment portfolio was impacted by a steepening U.S. Treasury yield curve and widening credit spreads in Q2 2025 - The U.S. Treasury yield curve steepened in Q2 2025, with short-term yields decreasing and 30-year yields increasing. Credit spreads widened initially but tightened by quarter-end[486] | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net investment income | $802 million | $808 million | $1,541 million | $1,590 million | | Net investment gains (losses) | $(28) million | $(61) million | $(1) million | $(12) million | | Asset Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total cash, cash equivalents and invested assets | $60,665 million | $59,976 million | | Public fixed maturity securities | $31,077 million | $30,650 million | | Private fixed maturity securities | $14,595 million | $14,252 million | | Limited partnerships | $3,337 million | $3,142 million | | Derivatives | $42 million | $56 million | - The notional value of derivatives increased to $14,001 million as of June 30, 2025, primarily due to additions of foreign currency forward contracts and forward bond purchase commitments[502] Consolidated Balance Sheets Total assets increased by $465 million to $87,336 million as of June 30, 2025, driven by increases in fixed maturity securities and limited partnerships, partially offset by a decrease in cash | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total assets | $87,336 million | $86,871 million | | Total liabilities | $77,557 million | $77,440 million | | Total equity | $9,779 million | $9,431 million | - Invested assets increased by $940 million, primarily from $770 million in fixed maturity securities (due to lower interest rates increasing fair value) and $195 million in limited partnerships[507] - Future policy benefits increased by $501 million, mainly due to a decrease in the single-A interest rate used to discount the liability[507] - Unrealized gains (losses) on investments increased total equity by $620 million, while derivatives qualifying as hedges decreased total equity by $112 million[507] Liquidity and Capital Resources Genworth's liquidity and capital resources are focused on generating cash flows, borrowing, and raising capital | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash from (used by) operating activities | $40 million | $(100) million | | Net cash from (used by) investing activities | $160 million | $401 million | | Net cash from (used by) financing activities | $(451) million | $(584) million | | Net increase (decrease) in cash and cash equivalents | $(251) million | $(283) million | - Genworth Holdings had $248 million of unrestricted cash and cash equivalents as of June 30, 2025, and aims to maintain a cash buffer of two times expected annual external debt interest payments[518][519] - Genworth Holdings received $170 million of capital returns from Enact Holdings during the six months ended June 30, 2025, through share repurchases and quarterly dividends[515] - Genworth Financial repurchased 10,797,934 shares of common stock for $75 million during the six months ended June 30, 2025, with approximately $70 million remaining under the program as of July 31, 2025[516] - Potential recoveries of approximately $750 million from the AXA/Santander litigation are expected to be deployed in line with capital allocation priorities: investing in CareScout growth, returning cash to shareholders via share repurchases, and opportunistically paying down debt[529] Supplemental Condensed Consolidating Financial Information - Genworth Financial provides a full and unconditional guarantee to the trustee and holders of Genworth Holdings' outstanding senior and subordinated notes[531] - The company elected to exclude summarized financial information for the issuer and guarantor of registered securities in accordance with Rule 13-01 of Regulation S-X, as their combined assets, liabilities, and results of operations are not material to the consolidated financial position[532] PART II—OTHER INFORMATION Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the company's exposure to market risk, which includes potential losses from adverse changes in interest rates, equity prices, and foreign currency exchange rates - Market risk is the risk of loss from adverse changes in market rates and prices (interest rates, equity prices, foreign currency exchange rates)[533] - There were no material changes in the company's market risks since December 31, 2024[533] Item 4. Controls and Procedures As of June 30, 2025, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective - The company's disclosure controls and procedures were effective as of June 30, 2025[534] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[535] Item 1. Legal Proceedings This section refers to Note 16 in the financial statements for a detailed description of all material pending litigation and regulatory matters affecting the company - Material pending litigation and regulatory matters are described in Note 16 to the unaudited condensed consolidated financial statements[536] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K as of June 30, 2025 - No material changes to the risk factors set forth in the 2024 Annual Report on Form 10-K as of June 30, 2025[537] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2025, Genworth Financial repurchased 4,281,077 shares of its common stock at an average price of $7.06 per share | Period | Total number of shares purchased | Average price paid per share | Approximate dollar amount of shares that may yet be purchased under the program | | :----------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | | April 1, 2025 through April 30, 2025 | 1,422,395 | $7.03 | $100 million | | May 1, 2025 through May 31, 2025 | 1,441,909 | $6.94 | $90 million | | June 1, 2025 through June 30, 2025 | 1,416,773 | $7.06 | $80 million | | Total | 4,281,077 | | | Item 5. Other Information No directors or officers of Genworth adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[539] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the 2025 Omnibus Incentive Plan, certifications from the CEO and CFO, and various Inline XBRL documents - Exhibits include the 2025 Genworth Financial, Inc. Omnibus Incentive Plan, Certifications of Thomas J. McInerney and Jerome T. Upton (pursuant to Sections 31.1, 31.2, 32.1, 32.2), and Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase Documents, and Cover Page Interactive Data File)[541] Signatures The report was duly signed on behalf of Genworth Financial, Inc. by Darren W. Woodell, Vice President and Controller (Principal Accounting Officer), on July 31, 2025 - The report was signed by Darren W. Woodell, Vice President and Controller (Principal Accounting Officer) of Genworth Financial, Inc. on July 31, 2025[545]