OneMain (OMF) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents OMH and OMFC's unaudited financials, highlighting increased net income from lower loss provisions Financial Statements of OneMain Holdings, Inc. (OMH) OMH reported increased net income and EPS, driven by lower loss provisions and growing receivables Balance Sheet Highlights | (dollars in millions) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $821 | $2,272 | | Net finance receivables | $18,843 | $18,084 | | Allowance for finance receivable losses | ($2,061) | ($2,269) | | Total assets | $21,963 | $22,471 | | Long-term debt | $17,661 | $17,800 | | Total shareholders' equity | $3,121 | $3,441 | Results of Operations Highlights | (dollars in millions, except per share) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net interest income | $2,541 | $2,492 | | Provision for finance receivable losses | $356 | $1,186 | | Net income | $1,051 | $371 | | Diluted EPS | $7.84 | $2.75 | - For the nine months ended September 30, 2021, OMH paid cash dividends of $1,188 million ($8.85 per share) and repurchased $176 million of common stock[21] Financial Statements of OneMain Finance Corporation (OMFC) OMFC's results mirror OMH's, showing increased net income from lower loss provisions and significant parent dividends - The results of OMFC are consolidated into OMH, and due to nominal differences, the content throughout the filing relates to both entities unless specified otherwise[42] Results of Operations Highlights | (dollars in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net interest income | $2,541 | $2,492 | | Provision for finance receivable losses | $356 | $1,186 | | Net income | $1,051 | $371 | - During the nine months ended September 30, 2021, OMFC paid cash dividends of $1,388 million to its parent company, OMH[34] Notes to the Condensed Consolidated Financial Statements Notes detail finance receivables growth, decreased loss allowance from improved outlook, and new debt issuances - The company initiated a whole loan sale program in Q1 2021, selling $325 million of gross finance receivables in the first nine months of the year, resulting in a gain of $30 million[52] Finance Receivables and Allowance for Losses | (dollars in millions) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Finance Receivables | $18,843 | $18,084 | | Allowance for Finance Receivable Losses | $2,061 | $2,269 | | Allowance as a % of Receivables | 10.94% | 12.55% | - The decrease in the allowance for finance receivable losses for the nine months ended September 30, 2021, was primarily due to an improved outlook for unemployment and macroeconomic conditions, partially offset by loan portfolio growth[61] - In 2021, OMFC issued a $750 million Social Bond (3.50% Senior Notes due 2027) and $600 million of 3.875% Senior Notes due 2028[78][79] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial performance, credit quality, and liquidity, highlighting increased net income from lower loss provisions Recent Developments and Outlook The company launched new credit card products, issued significant debt, and returned capital to shareholders - Launched two new credit card products, BrightWay and BrightWay+, in Q3 2021 to expand customer relationships and attract new consumers[127] - Issued a $750 million Social Bond and $600 million in senior notes in June and August 2021, respectively, and redeemed $681 million of 7.75% Senior Notes in January 2021[128][129][130] - On August 3, 2021, the company repurchased 1.7 million shares for $99 million in a concurrent share buyback[135] - As of September 30, 2021, $78 million remained under its separate stock repurchase program[136] - Completed the acquisition of Trim, a financial wellness fintech company, on May 14, 2021, to enhance its customer offerings[138] Results of Operations Net income significantly increased due to a substantial decrease in the provision for finance receivable losses Results of Operations Highlights | (dollars in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Interest income | $3,244 | $3,273 | | Interest expense | $703 | $781 | | Provision for finance receivable losses | $356 | $1,186 | | Net income | $1,051 | $371 | | Diluted EPS | $7.84 | $2.75 | - The provision for finance receivable losses decreased by $830 million (70%) for the nine months ended Sep 30, 2021, compared to the same period in 2020, primarily due to an improved economic outlook and better credit performance[150] Segment Results Consumer and Insurance (C&I) segment's adjusted pretax income significantly increased due to reduced loss provisions Segment Performance | (dollars in millions) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Income before income taxes - Segment Basis | $1,429 | $530 | | Adjusted pretax income (non-GAAP) | $1,505 | $595 | | Pretax capital generation (non-GAAP) | $1,292 | $969 | Credit Quality Credit quality improved with decreased allowance for losses and stable delinquency ratios, despite portfolio concentration Delinquency Ratios | Delinquency Ratio | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | 30-89 days past due | 2.20% | 2.28% | | 60+ days past due | 2.40% | 2.64% | | 90+ days past due (Nonperforming) | 1.57% | 1.75% | - The allowance for finance receivable losses decreased as a percentage of receivables from 13.05% at Q3 2020 to 10.94% at Q3 2021, primarily due to an improved outlook for unemployment and macroeconomic conditions[181][183] Portfolio FICO Score Distribution | FICO Score Category | % of Portfolio (Sep 30, 2021) | | :--- | :--- | | 660 or higher (Prime) | 26% | | 620-659 (Near-prime) | 27% | | 619 or below (Sub-prime) | 47% | Liquidity and Capital Resources The company maintains strong liquidity through cash, debt, and loan sales, returning significant capital to shareholders - As of September 30, 2021, the company had $11.0 billion of unencumbered gross finance receivables available to support liquidity[191] - The company had access to 14 revolving conduit facilities with a total borrowing capacity of $7.3 billion as of September 30, 2021, with no amounts drawn[196][217] Cash Dividends Paid | Dividend Declaration Date | Dividend Per Share | Amount Paid (in millions) | | :--- | :--- | :--- | | February 8, 2021 | $3.95 | $531 | | April 26, 2021 | $0.70 | $94 | | July 21, 2021 | $4.20 | $555 | | Total | $8.85 | $1,180 | - During the nine months ended September 30, 2021, OMH repurchased a total of 3,047,844 shares for an aggregate of $176 million, which includes a $99 million concurrent share buyback and $77 million under its stock repurchase program[198][199] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk were reported from previous disclosures - There have been no material changes to the company's market risk as disclosed in its Annual Report[222] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation as of September 30, 2021, the CEO and CFO of both OMH and OMFC concluded that the company's disclosure controls and procedures were effective[225][228] - No changes occurred in internal control over financial reporting during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, internal controls[226][229] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal actions, with outcomes often difficult to estimate - In the normal course of business, the company is named as a defendant in various legal actions[100] - For certain actions, it is not possible to reasonably estimate a loss or range of loss[102] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported - The company refers to the risk factors discussed in its Annual Report, which could materially affect its business, financial condition, or future results[232] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales, detailing significant common stock repurchases Common Stock Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 132,376 | $59.73 | | August 2021 | 2,009,513 | $58.26 | | September 2021 | 293,600 | $56.51 | | Total Q3 2021 | 2,435,489 | $58.13 | - The August repurchases included a 1,700,000 share concurrent buyback at $58.36 per share, which did not reduce availability under the existing $200 million stock repurchase program[234] - As of September 30, 2021, approximately $77.8 million remained available for repurchase under the company's publicly announced stock repurchase program[234] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[235] Item 5. Other Information No other information required to be disclosed under this item was reported - None[237]