Genworth(US:GNW)2022-11-02 16:51Financial Data and Key Metrics Changes - U.S. GAAP net income for Q3 2022 was $104 million, while adjusted operating income was $159 million or $0.31 per share, compared to $181 million and $176 million respectively in the prior quarter [7][17] - Enact contributed significantly with $156 million in adjusted operating income, while U.S. Life reported $11 million, driven by long-term care (LTC) and fixed annuities [7][18] - The company achieved a critical milestone by reducing holding company debt to $900 million, down from over $3 billion since 2013 [11][16] Business Line Data and Key Metrics Changes - U.S. Life Insurance segment reported adjusted operating income of $11 million, with LTC contributing $25 million and fixed annuities $19 million, offset by a $33 million loss in life insurance [20][26] - The LTC business saw a decrease in adjusted operating income from $34 million in the prior quarter to $25 million, attributed to new claims and claim terminations [20][21] - The Runoff segment reported adjusted operating income of $9 million, compared to $2 million in the prior quarter [28] Market Data and Key Metrics Changes - Enact's insurance in-force increased by 9% year-over-year to $242 billion, driven by new insurance written and higher persistency [18] - The estimated PMIERs sufficiency ratio for Enact was 174%, indicating strong capital levels [19] - The U.S. Life companies had combined pre-tax statutory income of approximately $10 million, an improvement from the previous quarter [8] Company Strategy and Development Direction - The company is focused on long-term growth and shareholder value, with strategic priorities including debt reduction and share buybacks [6][11] - Genworth is preparing to launch a new less capital-intensive LTC Service Navigation and Advice business in 2023, targeting attractive markets with digital technology enhancements [13][14] - The company aims to leverage its 40-plus years of LTC insurance experience to create a unified experience for customers [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating ongoing economic uncertainty due to a well-positioned investment portfolio and expected cash flows from Enact [11][36] - The company anticipates a special dividend from Enact in Q4 2022, which will enhance cash flow for growth and shareholder returns [19][36] - Management noted that the impact of the new GAAP accounting standard (LDTI) will not affect cash flows or business strategy [9][30] Other Important Information - The company has achieved $200 million in annual premium rate increase approvals year-to-date through the third quarter, contributing to a cumulative net present value of $21 billion since 2012 [12][24] - The company is in the process of implementing a third legal settlement related to its LTC policies, which is expected to have financial impacts starting in 2023 [25][29] Q&A Session Summary Question: Can you provide insights on long-term care claim severity trends? - Management indicated a return to pre-pandemic behaviors with higher claim severity as individuals move from home care to facilities, viewing this as a temporary trend [40][42] Question: How is healthcare inflation impacting long-term care claims? - Management noted that while short-term inflation is observed, long-term assumptions remain stable, with offsets from rising interest rates [43][44] Question: Regarding capital allocation, have you considered open market purchases of the floating rate bond? - Management explained that while the bond is attractive long-term, current debt service is well covered by Enact dividends, and there are covenants restricting immediate action [46][48][50] Question: What is the current estimate for the MYRAP goal? - Management confirmed the goal is $28.7 billion, with higher interest rates potentially benefiting the overall book of business [52][54] Question: When are peak claim years expected? - Management estimated peak claim years around 2030 to 2032, particularly for the largest blocks of policies [56][57]