OneMain (OMF) - 2022 Q4 - Annual Report

Forward-Looking Statements This chapter outlines the inherent risks and uncertainties associated with forward-looking statements, advising caution against undue reliance - The report contains forward-looking statements subject to risks, uncertainties, and assumptions that may cause actual results to differ materially from current expectations. Readers are cautioned not to place undue reliance on these statements[14] - Key factors that could cause material differences include adverse changes in economic conditions (interest rates, inflation, unemployment), information system failures, increased competition, changes in regulations, substantial indebtedness, and credit rating downgrades[15] PART I Item 1. Business OneMain Holdings provides personal loans and credit cards to nonprime customers through an omnichannel model, supported by insurance products and a commitment to social responsibility - OneMain Holdings, Inc. (OMH) and its wholly-owned subsidiary OneMain Finance Corporation (OMFC) operate as a combined entity, providing personal loans and credit cards primarily to nonprime customers[20][21] - The company serves approximately 2.47 million customer accounts with $20.0 billion in finance receivables and manages a total of 2.56 million accounts and $20.8 billion in managed receivables as of December 31, 2022[21] - Operations are conducted through a network of approximately 1,400 branch locations in 44 states, complemented by online lending and servicing capabilities[22] - The company's offerings include personal loans (secured/unsecured, fixed-rate, 3-6 year terms), BrightWay and BrightWay+ credit cards, and optional credit and non-credit insurance products through its subsidiaries AHL and Triton[25][26][28] - A key competitive strength is its omnichannel operating model, combining a national branch network with digital capabilities, proprietary underwriting, and sophisticated data analytics for effective risk management[57] - The company is committed to Corporate Social Responsibility (CSR), focusing on financial wellness, community contributions, and diversity and inclusion initiatives, including issuing Social Bonds to support credit-disadvantaged communities[66][67][69] Item 1A. Risk Factors The company faces significant risks from adverse economic conditions, credit losses, operational failures, regulatory changes, intense competition, and substantial indebtedness - Economic downturns, including high unemployment, inflation, and interest rates, disproportionately affect nonprime borrowers, increasing credit risks and potentially reducing revenues and cash flows[79][80] - Inadequate allowance for finance receivable losses, based on estimates and assumptions, could lead to increased provision for losses and adversely affect results of operations[83][84] - Information system failures, cyber-attacks, and data breaches pose significant reputational, financial, legal, and operational risks, especially with an increased remote workforce[93][94][95] - The highly competitive consumer finance industry, coupled with extensive federal and state regulations (including Dodd-Frank Act and CFPB oversight), can increase compliance costs, limit product offerings, and lead to enforcement actions[112][113][122] - Significant indebtedness could limit financial flexibility, increase borrowing costs, and make the company vulnerable to economic changes, with an inability to access adequate liquidity sources posing a going concern risk[135][139] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - The company has no unresolved staff comments[164] Item 2. Properties The company's properties include approximately 1,400 leased branch locations and owned administrative and servicing facilities - The company operates approximately 1,400 leased branch locations in 44 states[165] - Administrative offices are leased in Wilmington, Delaware; Irving, Texas; Charlotte, North Carolina; and New York, New York, with lease terms expiring between 2023 and 2028[166] - Owned properties include a loan servicing facility in London, Kentucky, and six buildings in Evansville, Indiana, which support administrative and centralized functions[167] Item 3. Legal Proceedings Legal proceedings information is incorporated by reference from Note 14 of the Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 14 of the Notes to the Consolidated Financial Statements[168] Item 4. Mine Safety Disclosures The company has no mine safety disclosures to report - The company has no mine safety disclosures[169] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities OMH common stock is listed on NYSE, with a quarterly dividend policy and an active stock repurchase program, while OMFC stock is privately held - OMH's common stock is listed on the NYSE under the symbol "OMF". As of January 31, 2023, there were 120,811,795 shares outstanding[4][171] - OMH intends to pay a minimum quarterly dividend of $1.00 per share, but all subsequent dividends are at the Board's discretion, dependent on financial condition, earnings, cash flows, and capital requirements[172][267] OMH Common Stock Repurchases (Q4 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Dollar Value of Shares That May Yet Be Purchased | | :----------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------- | | October 1 - October 31 | 659,386 | $31.85 | $761,198,965 | | November 1 - November 30 | 480,726 | $37.79 | $743,032,987 | | December 1 - December 31 | 481,529 | $36.34 | $725,533,397 | | Total | 1,621,641 | $34.94 | | - In 2022, OMH repurchased 7,181,023 shares for $303 million under a $1 billion stock repurchase program authorized until December 31, 2024, with $726 million remaining capacity[175][192][263] - OMFC's common stock is entirely held by OMH, and no public trading market exists for it[173] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes OneMain's financial performance, recent developments, and outlook, covering operating results, credit quality, liquidity, and capital resources Overview OneMain provides personal loans and credit cards to nonprime customers, with the C&I segment managing $20.8 billion in receivables, driven by key financial performance indicators - OneMain operates in the U.S., offering personal loans and BrightWay/BrightWay+ credit cards, along with optional credit and non-credit insurance products, primarily to nonprime customers[181][185] - As of December 31, 2022, the Consumer and Insurance (C&I) segment was the sole reportable segment, managing 2.56 million customer accounts and $20.8 billion in managed receivables[183] - The company monitors key performance drivers including interest income, interest expense, net credit losses, operating expenses, and finance receivables originations and purchase volume[186][187][188][189][190] Recent Developments and Outlook This section details 2022 corporate actions, including stock repurchases, debt funding, and redemptions, alongside management's macroeconomic monitoring and risk adjustment strategies - In 2022, OMH authorized a $1.0 billion stock repurchase program, with $726 million remaining capacity as of December 31, 2022[192] - OMFC completed a $350 million private secured term funding and its first $600 million social securitization (OMFIT 2022-S1) in April 2022, aimed at promoting financial inclusion for rural, lower-income borrowers[194][195] - OMFC redeemed $637 million of its 8.875% Senior Notes due 2025 and increased its unsecured corporate revolver capacity to $1.25 billion, with no amounts drawn as of December 31, 2022[197][198] - Management is actively monitoring macroeconomic developments (geopolitical actions, unemployment, inflation, interest rates) and is prepared to adjust its allowance for finance receivable losses accordingly[204] Results of Operations This section analyzes the company's consolidated operating results, highlighting trends in interest income, expenses, provision for losses, and key financial metrics OMH's Consolidated Operating Results (2020-2022) | (dollars in millions, except per share amounts) | 2022 | 2021 | 2020 | | :---------------------------------------------- | :------ | :------ | :------ | | Interest income | $4,435 | $4,364 | $4,368 | | Interest expense | $892 | $937 | $1,027 | | Provision for finance receivable losses | $1,402 | $593 | $1,319 | | Net interest income after provision | $2,141 | $2,834 | $2,022 | | Other revenues | $629 | $531 | $526 | | Other expenses | $1,607 | $1,624 | $1,571 | | Income before income taxes | $1,163 | $1,741 | $977 | | Income taxes | $285 | $427 | $247 | | Net income | $878 | $1,314 | $730 | | Diluted EPS | $7.06 | $9.87 | $5.41 | | Net finance receivables | $19,986 | $19,212 | $18,084 | | Yield | 22.79% | 23.84% | 24.24% | | Net charge-off ratio | 6.10% | 4.20% | 5.54% | - In 2022, interest income increased by $71 million (2%) due to loan portfolio growth, while interest expense decreased by $45 million (5%) due to a lower average cost of funds[211] - Provision for finance receivable losses significantly increased by $809 million (136%) in 2022, driven by higher net charge-offs and an increased allowance for losses due to a weakened macroeconomic environment and portfolio growth[213] - Other revenues rose by $98 million (18%) in 2022, primarily from increased gains on finance receivable sales and higher servicing revenue[214] - Other expenses decreased by $17 million (1%) in 2022, mainly due to favorable insurance claims experience and fully amortized customer relationships intangible assets, partially offset by higher salaries, benefits, and technology investments[215] OMH's Non-GAAP Financial Measures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------------------- | :------ | :------ | :------ | | Income before income taxes - Segment Accounting Basis | $1,177 | $1,788 | $1,021 | | Adjusted pretax income (non-GAAP) | $1,214 | $1,918 | $1,092 | | Pretax capital generation (non-GAAP) | $1,427 | $1,737 | $1,407 | Segment Results This section details the financial performance of the Consumer and Insurance segment, including adjusted pretax income, revenues, and expenses Consumer and Insurance (C&I) Segment Financials (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------------------- | :------ | :------ | :------ | | Interest income | $4,429 | $4,355 | $4,353 | | Interest expense | $886 | $930 | $1,007 | | Provision for finance receivable losses | $1,399 | $587 | $1,313 | | Net interest income after provision | $2,144 | $2,838 | $2,033 | | Other revenues | $644 | $597 | $551 | | Other expenses | $1,574 | $1,517 | $1,492 | | Adjusted pretax income (non-GAAP) | $1,214 | $1,918 | $1,092 | | Net finance receivables | $19,987 | $19,215 | $18,091 | | Yield | 22.78% | 23.82% | 24.17% | | Net charge-off ratio | 6.10% | 4.20% | 5.54% | - C&I adjusted pretax income decreased by $704 million (36.7%) in 2022 compared to 2021, primarily due to an $812 million (138%) increase in provision for finance receivable losses[226][231] - Interest income for C&I increased by $74 million (2%) in 2022 due to loan portfolio growth, while interest expense decreased by $44 million (5%) due to a lower average cost of funds[229] - Other revenues for C&I increased by $47 million (8%) in 2022, mainly from higher gains on finance receivable sales and increased servicing revenue[232] - Other expenses for C&I increased by $57 million (4%) in 2022, driven by higher salaries, benefits, and software/technology investments, partially offset by lower insurance policy and benefits claims[233] Credit Quality This section analyzes credit quality, including finance receivables growth, delinquency trends, allowance for losses, TDRs, and FICO score distribution - Net finance receivables grew to $20.0 billion at December 31, 2022, from $19.2 billion at December 31, 2021, consisting of personal loans and credit cards[236] Delinquency Ratios (2021 vs. 2022) | Delinquency Ratio | Personal Loans (2022) | Personal Loans (2021) | Credit Cards (2022) | Credit Cards (2021) | | :---------------- | :-------------------- | :-------------------- | :------------------ | :------------------ | | 30-89 days past due | 3.07% | 2.43% | 5.90% | 0.08% | | 30+ days past due | 5.80% | 4.43% | 13.08% | 0.08% | | 60+ days past due | 4.01% | 2.96% | 9.69% | 0.00% | | 90+ days past due | 2.74% | 2.00% | 7.18% | 0.00% | - Personal loans are considered nonperforming at 90 days past due, at which point finance charge accrual stops. Credit cards accrue finance charges until charge-off at approximately 180 days past due[238][239] Allowance for Finance Receivable Losses (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :------ | :------ | :------ | | Balance at beginning of period | $2,095 | $2,269 | $829 | | Provision for finance receivable losses | $1,402 | $593 | $1,319 | | Charge-offs | $(1,438) | $(989) | $(1,162) | | Recoveries | $252 | $222 | $165 | | Balance at end of period | $2,311 | $2,095 | $2,269 | | Allowance ratio (Total) | 11.56% | 10.90% | 12.55% | - The allowance for finance receivable losses increased in 2022 due to a weakened macroeconomic environment and loan portfolio growth, with the allowance ratio for personal loans rising from 10.93% in 2021 to 11.54% in 2022[243][246] Troubled Debt Restructured (TDR) Finance Receivables (2021 vs. 2022) | (dollars in millions) | 2022 | 2021 | | :-------------------- | :--- | :--- | | TDR net finance receivables | $904 | $650 | | Allowance for TDR finance receivable losses | $369 | $270 | Net Finance Receivables by FICO Score (2021 vs. 2022) | FICO Score Category | 2022 (Total) | 2021 (Total) | | :------------------ | :----------- | :----------- | | 660 or higher | $4,270 | $4,911 | | 620-659 | $5,023 | $5,328 | | 619 or below | $10,693 | $8,973 | | Total | $19,986 | $19,212 | Liquidity and Capital Resources This section details OneMain's funding sources, liquidity position, debt ratings, capital allocation, and contractual obligations - OneMain funds operations through cash flows, secured/unsecured debt, revolving conduit facilities, whole loan sales, and equity. As of December 31, 2022, the company had $9.3 billion in unencumbered loans and $1.25 billion in unsecured corporate revolver capacity (undrawn)[252][254][256] - OMFC's long-term corporate debt ratings are BB (S&P, Stable), Ba2 (Moody's, Stable), and BB+ (KBRA, Positive)[262] - In 2022, OMH repurchased $303 million of its common stock, and OMFC paid $471 million in dividends to OMH to fund OMH's dividends and stock repurchases[263][265] - The company sold $720 million of gross finance receivables in 2022 (up from $505 million in 2021) through whole loan sale agreements, generating $63 million in gains[268] - Net cash provided by operating activities was $2.4 billion in 2022, while net cash used for investing activities was $2.1 billion, primarily for finance receivable originations[269][270] - As of December 31, 2022, the company had $498 million in cash and cash equivalents, with $147 million restricted for regulated insurance subsidiaries or other operating activities[272] Contractual Obligations (as of Dec 31, 2022) | (dollars in millions) | 2023 | 2024-2025 | 2026-2027 | 2028+ | Securitizations | Private Secured Term Funding | Revolving Conduit Facilities | Total | | :-------------------- | :------ | :-------- | :-------- | :------ | :-------------- | :--------------------------- | :--------------------------- | :------- | | Principal maturities | $1,004 | $2,519 | $2,350 | $3,283 | $9,003 | $350 | $50 | $18,559 | | Interest payments | $513 | $787 | $435 | $1,124 | $899 | $64 | $9 | $3,831 | | Total | $1,517 | $3,306 | $2,785 | $4,407 | $9,902 | $414 | $59 | $22,390 | Critical Accounting Policies and Estimates This section outlines critical accounting policies and estimates, focusing on the allowance for finance receivable losses and TDRs, emphasizing management judgment - The allowance for finance receivable losses is a critical estimate, based on historical experience, current conditions, and reasonable and supportable forecasts of collectability, primarily using a cumulative loss model for personal loans[287][288] - Management judgment is crucial in determining the allowance, considering quantitative analyses, qualitative factors (portfolio, industry, economic trends), and adjustments for model imprecision[289] - Forecasting macroeconomic conditions, especially unemployment rates, involves significant judgment and estimation uncertainty, which can lead to fluctuations in the allowance for finance receivable losses[290][291] - Troubled Debt Restructured (TDR) finance receivables are loans modified due to borrower financial difficulties, with reserves established by discounting estimated future cash flows at the pre-modification effective interest rate[294][295] Recent Accounting Pronouncements This section details the impact of recent accounting pronouncements, including ASU 2018-12 and ASU 2022-02, on financial reporting - The company will adopt ASU 2018-12 (Targeted Improvements to the Accounting for Long-Duration Contracts) on January 1, 2023, which will increase insurance claims and policyholder liabilities and reduce accumulated other comprehensive income[423][424][425] - ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures) will also be adopted on January 1, 2023, eliminating TDR accounting for creditors and enhancing disclosures, but is not expected to materially impact financial statements[426][427] Seasonality This section describes the seasonal patterns affecting personal loan volume and delinquencies, impacting operating results and cash needs - Personal loan volume is typically highest in the second and fourth quarters due to marketing and seasonal demand, while demand is lower in January and February due to tax refunds[297] - Delinquencies on personal loans are generally lower in the first and second quarters and tend to increase throughout the rest of the year, contributing to fluctuations in operating results and cash needs[297] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's financial instruments are sensitive to interest rate changes, but a 100 basis points shift is not expected to materially impact fair values due to offsetting effects - The fair values of certain assets and liabilities are sensitive to changes in market interest rates[299] - An immediate and sustained 100 basis points increase or decrease in interest rates is not expected to materially impact the company's financial position, as changes in asset fair values would be partially offset by corresponding changes in liability fair values[299] Estimated Impact of 100 bps Interest Rate Change on Fair Values (2022) | (dollars in millions) | +100 bps | -100 bps | | :-------------------- | :------- | :------- | | Net finance receivables, less allowance for finance receivable losses | $(212) | $217 | | Fixed-maturity investment securities | $(70) | $75 | | Long-term debt | $(461) | $484 | - The company does not enter into interest rate-sensitive financial instruments for trading or speculative purposes[302] Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements for OMH and OMFC, including balance sheets, income statements, cash flows, and detailed notes Report of Independent Registered Public Accounting Firm (OneMain Holdings, Inc.) PwC issued an unqualified opinion on OMH's financial statements and internal controls, highlighting the allowance for finance receivable losses as a critical audit matter - PricewaterhouseCoopers LLP audited OneMain Holdings, Inc.'s consolidated financial statements and internal control over financial reporting, issuing an unqualified opinion on both for the period ended December 31, 2022[308][309] - A critical audit matter identified was the allowance for finance receivable losses for personal loans, specifically management's significant judgment in adjusting the cumulative loss model for forecasted macroeconomic conditions[318][319] Report of Independent Registered Public Accounting Firm (OneMain Finance Corporation) PwC issued an unqualified opinion on OMFC's financial statements, identifying the allowance for finance receivable losses as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on OneMain Finance Corporation's consolidated financial statements for the period ended December 31, 2022[323] - Similar to OMH, a critical audit matter was the allowance for finance receivable losses for personal loans, due to management's significant judgment in incorporating forecasted macroeconomic conditions into the loss model[329][330] Financial Statements of OneMain Holdings, Inc. and Subsidiaries This section presents the consolidated financial statements for OneMain Holdings, Inc. and its subsidiaries Consolidated Balance Sheets This section presents OMH's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheet (OMH) - Key Figures (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Total assets | $22,533 | $22,079 | | Net finance receivables | $19,986 | $19,212 | | Allowance for finance receivable losses | $(2,311) | $(2,095) | | Total liabilities | $19,504 | $18,986 | | Long-term debt | $18,281 | $17,750 | | Total shareholders' equity | $3,029 | $3,093 | - Total assets increased by $454 million to $22,533 million in 2022, driven by growth in net finance receivables[334] - Total liabilities increased by $518 million to $19,504 million, primarily due to an increase in long-term debt[334] - Shareholders' equity decreased by $64 million to $3,029 million, influenced by common stock repurchases and other comprehensive loss[334] Consolidated Statements of Operations This section presents OMH's consolidated statements of operations, detailing revenues, expenses, net income, and diluted EPS Consolidated Statements of Operations (OMH) - Key Figures (2020-2022) | (dollars in millions, except per share amounts) | 2022 | 2021 | 2020 | | :---------------------------------------------- | :------ | :------ | :------ | | Interest income | $4,435 | $4,364 | $4,368 | | Net interest income | $3,543 | $3,427 | $3,341 | | Provision for finance receivable losses | $1,402 | $593 | $1,319 | | Net income | $878 | $1,314 | $730 | | Diluted EPS | $7.06 | $9.87 | $5.41 | - Net income decreased by $436 million (33.2%) in 2022 to $878 million, primarily due to a significant increase in the provision for finance receivable losses[335] - Diluted earnings per share decreased from $9.87 in 2021 to $7.06 in 2022[337] Consolidated Statements of Comprehensive Income This section presents OMH's consolidated statements of comprehensive income, detailing net income and other comprehensive income (loss) Consolidated Statements of Comprehensive Income (OMH) - Key Figures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Net income | $878 | $1,314 | $730 | | Other comprehensive income (loss), net of tax | $(180) | $(33) | $50 | | Comprehensive income | $698 | $1,281 | $780 | - Comprehensive income decreased significantly from $1,281 million in 2021 to $698 million in 2022, largely due to a net change in unrealized losses on available-for-sale securities and lower net income[338] Consolidated Statements of Shareholders' Equity This section presents OMH's consolidated statements of shareholders' equity, detailing changes from repurchases, dividends, and net income Consolidated Statements of Shareholders' Equity (OMH) - Key Changes (2022) | (dollars in millions) | Balance, Jan 1, 2022 | Common stock repurchased | Other comprehensive loss | Cash dividends | Net income | Balance, Dec 31, 2022 | | :-------------------- | :------------------- | :----------------------- | :----------------------- | :------------- | :--------- | :-------------------- | | Total Shareholders' Equity | $3,093 | $(303) | $(180) | $(478) | $878 | $3,029 | - Shareholders' equity decreased from $3,093 million at the beginning of 2022 to $3,029 million at year-end, primarily impacted by common stock repurchases ($303 million) and cash dividends ($478 million), partially offset by net income ($878 million)[340] Consolidated Statements of Cash Flows This section presents OMH's consolidated statements of cash flows, detailing operating, investing, and financing activities Consolidated Statements of Cash Flows (OMH) - Key Figures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :------ | :------ | :------ | | Net cash provided by operating activities | $2,387 | $2,247 | $2,212 | | Net cash used for investing activities | $(2,119) | $(2,143) | $(751) | | Net cash used for financing activities | $(326) | $(1,810) | $(370) | | Net change in cash and cash equivalents and restricted cash | $(58) | $(1,706) | $1,091 | | Cash and cash equivalents and restricted cash at end of period | $959 | $1,017 | $2,723 | - Net cash provided by operating activities increased to $2,387 million in 2022 from $2,247 million in 2021[344] - Net cash used for investing activities remained high at $2,119 million in 2022, primarily due to net principal originations and purchases of finance receivables[344] - Net cash used for financing activities decreased to $326 million in 2022 from $1,810 million in 2021, reflecting lower debt repayments and cash dividends[344] Financial Statements of OneMain Finance Corporation and Subsidiaries This section presents the consolidated financial statements for OneMain Finance Corporation and its subsidiaries Consolidated Balance Sheets This section presents OMFC's consolidated balance sheets, detailing assets, liabilities, and shareholder's equity Consolidated Balance Sheet (OMFC) - Key Figures (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Total assets | $22,523 | $22,046 | | Net finance receivables | $19,986 | $19,212 | | Allowance for finance receivable losses | $(2,311) | $(2,095) | | Total liabilities | $19,505 | $18,986 | | Long-term debt | $18,281 | $17,750 | | Total shareholder's equity | $3,018 | $3,060 | - OMFC's total assets increased by $477 million to $22,523 million in 2022, mirroring OMH's consolidated growth[346] - Shareholder's equity for OMFC decreased by $42 million to $3,018 million, primarily due to cash dividends paid to OMH[346] Consolidated Statements of Operations This section presents OMFC's consolidated statements of operations, detailing revenues, expenses, and net income Consolidated Statements of Operations (OMFC) - Key Figures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Interest income | $4,435 | $4,364 | $4,368 | | Net interest income | $3,543 | $3,427 | $3,341 | | Provision for finance receivable losses | $1,402 | $593 | $1,319 | | Net income | $878 | $1,314 | $730 | - OMFC's net income decreased by $436 million (33.2%) to $878 million in 2022, consistent with OMH's consolidated results, driven by higher provision for finance receivable losses[348] Consolidated Statements of Comprehensive Income This section presents OMFC's consolidated statements of comprehensive income, detailing net income and other comprehensive income (loss) Consolidated Statements of Comprehensive Income (OMFC) - Key Figures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Net income | $878 | $1,314 | $730 | | Other comprehensive income (loss), net of tax | $(180) | $(33) | $50 | | Comprehensive income | $698 | $1,281 | $780 | - OMFC's comprehensive income decreased to $698 million in 2022 from $1,281 million in 2021, consistent with OMH's consolidated trend[350] Consolidated Statements of Shareholder's Equity This section presents OMFC's consolidated statements of shareholder's equity, detailing changes from cash dividends and net income Consolidated Statements of Shareholder's Equity (OMFC) - Key Changes (2022) | (dollars in millions) | Balance, Jan 1, 2022 | Cash dividends | Net income | Balance, Dec 31, 2022 | | :-------------------- | :------------------- | :------------- | :--------- | :-------------------- | | Total Shareholder's Equity | $3,060 | $(757) | $878 | $3,018 | - OMFC's shareholder's equity decreased from $3,060 million to $3,018 million in 2022, primarily due to $757 million in cash dividends paid, partially offset by $878 million in net income[352] Consolidated Statements of Cash Flows This section presents OMFC's consolidated statements of cash flows, detailing operating, investing, and financing activities Consolidated Statements of Cash Flows (OMFC) - Key Figures (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Net cash provided by operating activities | $2,388 | $2,251 | $2,207 | | Net cash used for investing activities | $(2,119) | $(2,143) | $(751) | | Net cash used for financing activities | $(304) | $(1,845) | $(365) | | Net change in cash and cash equivalents and restricted cash | $(35) | $(1,737) | $1,091 | | Cash and cash equivalents and restricted cash at end of period | $951 | $986 | $2,723 | - OMFC's cash flow trends are consistent with OMH's consolidated results, with operating cash increasing and investing cash remaining high due to loan originations[354] Notes to the Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering significant accounting policies, financial instruments, and other disclosures Note 1. Nature of Operations This note describes the nature of operations for OMH and OMFC as financial services holding companies in consumer finance and insurance - OneMain Holdings, Inc. (OMH) and its wholly-owned subsidiary, OneMain Finance Corporation (OMFC), are financial services holding companies engaged in consumer finance and insurance businesses[358] - OMFC's results are consolidated into OMH, and the report's content generally applies to both entities unless specified otherwise[359] Note 2. Summary of Significant Accounting Policies This note outlines significant accounting policies, including consolidation, revenue recognition, allowance for losses, goodwill, investments, and VIEs - The consolidated financial statements are prepared using GAAP and include OMH, its subsidiaries, and consolidated Variable Interest Entities (VIEs)[359] - Finance receivables are classified as held for investment at amortized cost, with revenue recognized using the interest method. Accrual of finance charges stops when personal loans are 90 days past due and credit cards are 180 days past due[362][364][365] - The allowance for finance receivable losses is estimated based on historical loss experience, current conditions, and macroeconomic forecasts, primarily using a cumulative loss model for personal loans[372] - Goodwill is tested for impairment annually or when circumstances indicate impairment, using a qualitative assessment followed by a quantitative test if necessary[378][379] - Investment securities are generally classified as available-for-sale or other, recorded at fair value, with unrealized gains/losses on available-for-sale securities recognized in accumulated other comprehensive income[392][393] - The company consolidates VIEs where it is the primary beneficiary, meaning it has the power to direct significant activities and the obligation to absorb losses or right to receive significant benefits[403] Note 3. Recent Accounting Pronouncements This note details the impact of recent accounting pronouncements, including ASU 2018-12 and ASU 2022-02, on financial reporting - ASU 2018-12 (Targeted Improvements to the Accounting for Long-Duration Contracts) will be adopted on January 1, 2023, requiring annual updates to assumptions for future policy benefits and recognizing discount rate changes in other comprehensive income[423][424] - The adoption of ASU 2018-12 will result in an increase to insurance claims and policyholder liabilities and a reduction to accumulated other comprehensive income[425] - ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures) will also be adopted on January 1, 2023, eliminating TDR accounting for creditors and enhancing disclosures, with no material impact expected on financial statements[426][427] Note 4. Finance Receivables This note details finance receivables, including components, geographic concentrations, sales, delinquency, TDRs, and unfunded commitments Components of Net Finance Receivables (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 (Personal Loans) | Dec 31, 2022 (Credit Cards) | Dec 31, 2021 (Personal Loans) | Dec 31, 2021 (Credit Cards) | | :-------------------- | :---------------------------- | :-------------------------- | :---------------------------- | :-------------------------- | | Gross finance receivables | $19,615 | $107 | $18,944 | $24 | | Unearned fees | $(220) | — | $(225) | $(1) | | Accrued finance charges and fees | $299 | — | $289 | — | | Deferred origination costs | $185 | — | $179 | $2 | | Total | $19,879 | $107 | $19,187 | $25 | - Net finance receivables increased to $19,986 million in 2022 from $19,212 million in 2021, with personal loans comprising the vast majority[430] - The largest geographic concentrations of personal loans in 2022 were Texas (10%), Florida (7%), and California (7%)[432] - The company sold $720 million of gross finance receivables in 2022 (up from $505 million in 2021) through whole loan sale agreements, generating $63 million in gains[433] Personal Loans by Delinquency Status and Origination Year (Dec 31, 2022) | (dollars in millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total | | :-------------------- | :------ | :------ | :------ | :------ | :------ | :------ | :------- | | Current | $10,614 | $4,927 | $1,758 | $1,081 | $240 | $105 | $18,725 | | 30-59 days past due | $136 | $136 | $43 | $28 | $9 | $5 | $357 | | 60-89 days past due | $92 | $101 | $32 | $19 | $6 | $3 | $253 | | 90+ days past due | $160 | $246 | $74 | $44 | $13 | $7 | $544 | | Total | $11,002 | $5,410 | $1,907 | $1,172 | $268 | $120 | $19,879 | Troubled Debt Restructured (TDR) Finance Receivables (2021 vs. 2022) | (dollars in millions) | 2022 | 2021 | | :-------------------- | :--- | :--- | | TDR gross finance receivables | $898 | $646 | | TDR net finance receivables | $904 | $650 | | Allowance for TDR finance receivable losses | $369 | $270 | - Unfunded lending commitments, primarily unused credit card lines, totaled $81 million at December 31, 2022, and are unconditionally cancellable[443] Note 5. Allowance for Finance Receivable Losses This note details changes in the allowance for finance receivable losses, including provision, charge-offs, recoveries, and impairment method breakdown - The allowance for finance receivable losses increased in 2022 due to a weakened macroeconomic environment and growth in the loan portfolio[446] Changes in Allowance for Finance Receivable Losses (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :------ | :------ | :------ | | Balance at beginning of period | $2,095 | $2,269 | $829 | | Provision for finance receivable losses | $1,402 | $593 | $1,319 | | Charge-offs | $(1,438) | $(989) | $(1,162) | | Recoveries | $252 | $222 | $165 | | Balance at end of period | $2,311 | $2,095 | $2,269 | Allowance for Finance Receivable Losses by Impairment Method (Dec 31, 2022) | (dollars in millions) | Personal Loans | Credit Cards | Total | | :-------------------- | :------------- | :----------- | :---- | | Collectively evaluated for impairment | $1,921 | $21 | $1,942 | | TDR finance receivables | $369 | — | $369 | | Total | $2,290 | $21 | $2,311 | | Allowance for finance receivable losses as a percentage of finance receivables | 11.52% | 19.12% | 11.56% | Note 6. Investment Securities This note details investment securities, including available-for-sale and other securities, their fair values, and unrealized gains/losses Available-for-Sale Securities (Fair Value) (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | U.S. government and government sponsored entities | $16 | $16 | | Obligations of states, municipalities, and political subdivisions | $66 | $79 | | Commercial paper | $55 | $50 | | Non-U.S. government and government sponsored entities | $142 | $155 | | Corporate debt | $1,137 | $1,302 | | Mortgage-backed, asset-backed, and collateralized | $313 | $305 | | Total | $1,729 | $1,907 | - Total available-for-sale securities decreased from $1,907 million in 2021 to $1,729 million in 2022, with a significant increase in unrealized losses from $8 million to $169 million[452][455] - The unrealized losses are primarily due to changes in interest rates and market spreads, and are not considered credit-related. The company does not intend to sell these securities before recovery of amortized cost[455] Other Securities (Fair Value) (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Bonds | $23 | $30 | | Preferred stock | $15 | $22 | | Common stock | $33 | $33 | | Total | $71 | $85 | - Other securities, primarily equity securities, decreased from $85 million in 2021 to $71 million in 2022, with net unrealized losses of $9 million in 2022[460][461] Note 7. Goodwill and Other Intangible Assets This note details goodwill and other intangible assets, including changes from amortization and the absence of impairment charges - Goodwill remained at $1.4 billion at December 31, 2022 and 2021, with no impairments recorded during 2020-2022[464] Net Other Intangible Assets (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Trade names | $220 | $220 | | Licenses | $25 | $25 | | VOBA | $15 | $28 | | Customer relationships | — | — | | Other | $1 | $1 | | Total | $261 | $274 | - Net other intangible assets decreased from $274 million in 2021 to $261 million in 2022, primarily due to the full amortization of the customer relationships intangible asset in the prior year[465] - Amortization expense for other intangible assets was $13 million in 2022, down from $32 million in 2021[465] Note 8. Long-term Debt This note details long-term debt, including carrying and fair values, interest rates, redemptions, revolver capacity, and covenant compliance Long-term Debt Carrying Value and Fair Value (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 (Carrying Value) | Dec 31, 2022 (Fair Value) | Dec 31, 2021 (Carrying Value) | Dec 31, 2021 (Fair Value) | | :-------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Senior debt | $18,109 | $16,782 | $17,578 | $18,574 | | Junior subordinated debt | $172 | $187 | $172 | $207 | | Total | $18,281 | $16,969 | $17,750 | $18,781 | - Total long-term debt increased to $18,281 million in 2022 from $17,750 million in 2021. The fair value of long-term debt decreased significantly, indicating a rise in market interest rates[467] Weighted Average Effective Interest Rates on Long-term Debt (2020-2022) | Debt Type | 2022 | 2021 | 2020 | | :-------------------- | :----- | :----- | :----- | | Senior debt | 4.97% | 5.38% | 5.68% | | Junior subordinated debt | 7.42% | 4.02% | 5.64% | | Total | 4.99% | 5.37% | 5.68% | - OMFC redeemed its $637 million 8.875% Senior Notes due 2025 in June 2022, incurring a $26 million net loss on repurchases and repayments of debt[471] - OMFC increased its unsecured corporate revolver capacity to $1.25 billion in June 2022, with no amounts drawn as of December 31, 2022[472] - OMFC was in compliance with all debt covenants as of December 31, 2022. The Junior Subordinated Debenture's interest rate is variable (3-month LIBOR + 1.75%) and is expected to transition to a SOFR-based rate after June 30, 2023[475][477] Note 9. Variable Interest Entities This note explains the consolidation of VIEs for asset-backed financing, detailing their assets, liabilities, and financing structures - OneMain consolidates Variable Interest Entities (VIEs) for asset-backed financing transactions (secured debt, revolving conduits) where OMFC or OMFH is the primary beneficiary[481] - The company retains an interest and credit risk in these financing transactions through ownership of residual interests and, in some cases, subordinate debt classes, which are first to absorb credit losses[482] Consolidated VIE Assets and Liabilities (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Net finance receivables | $10,432 | $8,821 | | Allowance for finance receivable losses | $1,126 | $910 | | Long-term debt | $9,361 | $7,999 | - Securitized borrowings have revolving periods (2-7 years) with no principal payments required, but early amortization events or defaults could accelerate obligations[485] - As of December 31, 2022, $350 million was outstanding under private secured term funding, and $50 million was drawn under revolving conduit facilities with a remaining borrowing capacity of $6.1 billion[486][488] Note 10. Insurance This note details the insurance business, including reserves, unpaid claims, statutory net income, and regulatory dividend limitations - The insurance business is conducted through wholly-owned subsidiaries AHL (life and health) and Triton (property and casualty), licensed in most U.S. states and Canada[490] Insurance Reserves (2021 vs. 2022) | (dollars in millions) | Dec 31, 2022 | Dec 31, 2021 | | :-------------------- | :----------- | :----------- | | Finance receivable related (Unearned premium & claim reserves) | $749 | $761 | | Payable to third-party beneficiaries | $257 | $256 | | Non-finance receivable related | $345 | $365 | | Total | $1,351 | $1,382 | - Net balance of unpaid claims and loss adjustment expenses was $102 million at December 31, 2022, with a $11 million redundancy in prior years' net reserves due to favorable developments in credit life, credit disability, and term life claims[495] Statutory Net Income (Loss) for Insurance Companies (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Triton (Property and casualty) | $58 | $66 | $(7) | | AHL (Life and health) | $98 | $79 | $114 | - Insurance subsidiaries are subject to state regulations limiting dividend payments. In 2022, Triton paid $50 million in ordinary dividends, while AHL paid none (compared to $50 million in 2021)[505][506] Note 11. Capital Stock and Earnings Per Share (OMH Only) This note details OMH's capital stock structure, changes in common stock, and earnings per share calculations - OMH has authorized preferred and common stock, while OMFC has special and common stock. No preferred or special stock was issued or outstanding at December 31, 2022[507][508] Changes in OMH Common Stock Issued and Outstanding (2020-2022) | (shares) | 2022 | 2021 | 2020 | | :-------------------- | :------------ | :------------ | :------------ | | Balance at beginning of period | 127,809,640 | 134,341,724 | 136,101,156 | | Common shares issued | 333,038 | 180,839 | 272,266 | | Common shares repurchased | (7,181,023) | (6,712,923) | (2,031,698) | | Treasury stock issued | 80,470 | — | — | | Balance at end of period | 121,042,125 | 127,809,640 | 134,341,724 | Earnings Per Share (OMH Only) (2020-2022) | (dollars in millions, except per share data) | 2022 | 2021 | 2020 | | :------------------------------------------- | :------ | :------ | :------ | | Net income | $878 | $1,314 | $730 | | Weighted average number of shares outstanding (diluted) | 124,417,274 | 133,054,494 | 134,919,258 | | Diluted Earnings per share | $7.06 | $9.87 | $5.41 | Note 12. Accumulated Other Comprehensive Income (Loss) This note details changes in accumulated other comprehensive income (loss), net of tax, including unrealized gains/losses on securities Changes in Accumulated Other Comprehensive Income (Loss), Net of Tax (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Balance at beginning of period | $61 | $94 | $44 | | Other comprehensive income (loss) before reclassifications | $(179) | $(32) | $51 | | Reclassification adjustments | $(1) | $(1) | $(1) | | Balance at end of period | $(119) | $61 | $94 | - Accumulated other comprehensive income (loss) shifted from a gain of $61 million in 2021 to a loss of $119 million in 2022, primarily due to unrealized losses on available-for-sale securities[514] Note 13. Income Taxes This note details income taxes, including components of income before tax, expense, effective rates, unrecognized benefits, and deferred tax assets Components of Income Before Income Tax Expense (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :------ | :------ | :------ | | U.S. operations | $1,142 | $1,722 | $973 | | Foreign operations | $21 | $19 | $4 | | Total | $1,163 | $1,741 | $977 | Components of Income Tax Expense (Benefit) (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Total current | $347 | $349 | $289 | | Total deferred | $(62) | $78 | $(42) | | Total | $285 | $427 | $247 | Reconciliation of Statutory to Effective Income Tax Rate (2020-2022) | | 2022 | 2021 | 2020 | | :-------------------- | :------ | :------ | :------ | | Statutory federal income tax rate | 21.00% | 21.00% | 21.00% | | State income taxes, net of federal | 2.93% | 3.27% | 3.52% | | Effective income tax rate | 24.51% | 24.56% | 25.33% | - The effective income tax rate decreased slightly to 24.51% in 2022 from 24.56% in 2021, primarily due to lower state tax expense[520][521] - Gross unrecognized tax benefits decreased from $8 million in 2021 to $6 million in 2022[521] - Net deferred tax assets increased by $113 million to $452 million in 2022, mainly due to the tax effect of increased allowance for finance receivable losses and capitalization of research and experimental costs[524][525] - The Inflation Reduction Act of 2022 (IRA) introduces a 15% Corporate Alternative Minimum Tax and a 1% excise tax on stock repurchases, but is not expected to have a material impact on the consolidated financial statements[527] Note 14. Leases and Contingencies This note details operating lease assets and liabilities, maturities, and legal proceedings, including a CFPB investigation - Operating lease right-of-use assets and liabilities were $152 million and $161 million, respectively, at December 31, 2022[529] Maturities of Operating Lease Liabilities (Dec 31, 2022) | (dollars in millions) | Operating Leases | | :-------------------- | :--------------- | | 2023 | $58 | | 2024 | $46 | | 2025 | $35 | | 2026 | $23 | | 2027 | $14 | | 2028 | $2 | | Thereafter | $1 | | Total lease payments | $179 | | Imputed interest | $(18) | | Total | $161 | | Weighted Average Remaining Lease Term | 3.71 years | | Weighted Average Discount Rate | 3.24% | - Operating lease cost was $58 million in 2022, and total lease cost (including variable lease cost) was $72 million[530] - The company is involved in various legal actions, including a CFPB investigation regarding refunding practices for optional insurance and membership plan products. While the company believes it has not violated the law, the ultimate outcome is uncertain, but not expected to have a material adverse effect[532][536] Note 15. Retirement Benefit Plans This note details defined contribution and benefit retirement plans, including contributions, funded status, costs, discount rates, and asset allocation - The company sponsors defined contribution plans (401(k) Plan, NQDC Plan) and defined benefit plans (Springleaf Retirement Plan, CommoLoCo Retirement Plan, Unfunded Defined Benefit Plans)[539][541][543][544][545] - 401(k) Plan contributions were $19 million in 2022, with no discretionary profit sharing contributions made[539][540] Funded Status of Defined Benefit Pension Plans (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Projected benefit obligation, end of period | $275 | $374 | $401 | | Fair value of plan assets, end of period | $278 | $383 | $405 | | Funded status, end of period | $3 | $9 | $4 | - The defined benefit plans were overfunded by $3 million at December 31, 2022, down from $9 million in 2021, primarily due to actuarial losses from discount rate fluctuations[547] Components of Net Periodic Benefit Cost (2020-2022) | (dollars in millions) | 2022 | 2021 | 2020 | | :-------------------- | :--- | :--- | :--- | | Net periodic benefit cost | $(5) | $(5) | $(5) | | Net actuarial loss recognized in OCI | $12 | $1 | $2 | | Total recognized in net periodic benefit cost and OCI | $7 | $(4) | $(3) | - The weighted average discount rate for projected benefit obligations increased to 4.96% in 2022 from 2.67% in 2021[551] - Plan assets are primarily allocated to fixed income securities (95%) and equity securities (4%) as of December 31, 2022, with a target allocation of 95% fixed income and 5% equity for 2023[555] Note 16. Share-Based Compensation This note details share-based compensation expense, unrecognized expense, service and performance awards, and the Employee Stock Purchase Plan - Total share-based compensation expense, net of forfeitures, was $29 million in 2022, up from $22 million in 2021[564] - As of December 31, 2022, $41 million in unrecognized compensation expense related to unvested awards is expected to be recognized over approximately two years[564] - Service-based Restricted Stock Units (RSUs) are granted to directors, executives, and employees with vesting periods of one to five years. The weighted-average grant date fair value for service-based awards in 2022 was $50.43[565][566] - Performance-based awards are granted to executives based on financial or market performance over three to seven years. The weighted average grant date fair value for performance-based awards in 2022 was $50.34[568][569][571] - No vesting conditions were satisfied for cash-settled stock-based awards in 2022. In 2021, $54 million was recognized as expense when a portion of these awards vested[573][574] - The Employee Stock Purchase Plan (ESP Plan), effective January 1, 2022, allows eligible employees to purchase common stock at a discount. **80,470 shares of treasur