RICHMOND, Va., Oct. 29, 2015 /PRNewswire/ -- Genworth
Financial, Inc. (NYSE: GNW) today reported results for the period
ended September 30, 2015. The company
reported a net loss1 of $284
million, or $0.57 per diluted
share, compared with a net loss of $844
million, or $1.70 per diluted
share, in the third quarter of 2014. The net loss in the quarter
includes an after-tax loss of $296
million, or $0.59 per diluted
share, related to a write-off of deferred acquisition costs (DAC)
from the previously announced life block sale. Net operating
income2 for the third quarter of 2015 was $64 million, or $0.13 per diluted share, compared with a net
operating loss of $323 million, or
$0.65 per diluted share, in the third
quarter of 2014.
Strategic Update
As of September 30, 2015, the U.S. mortgage insurance
(MI) business would be compliant with the private mortgage insurer
eligibility requirements (PMIERs) capital requirements, with a
prudent buffer, when including:
- An excess of loss reinsurance transaction on its 2015 book of
business which has been executed with a panel of reinsurers, and
would be effective as of October 1,
2015, that is expected to provide approximately $225 million of PMIERs capital credit as of
December 31, 2015. This transaction,
which is pending approval from the government sponsored enterprises
(GSEs), has similar terms and conditions as the two recent
transactions approved by the GSEs.
- An internal legal entity restructuring completed on
October 1, 2015.
The company has generated or expects to generate a total of
approximately $525 million in PMIERs
capital credit year-to-date from three reinsurance transactions
covering the 2009 through 2015 books of business in addition to the
intercompany sale of its ownership of affiliated preferred
securities of approximately $200
million. The company will work to maintain a prudent
level of capital in excess of the PMIERs capital requirements.
The company continues to make progress on the completion of the
planned sale of its lifestyle protection insurance business. The
transaction is expected to generate approximately $400 million in net proceeds and close by the end
of 2015, subject to customary conditions, including requisite
regulatory approvals.
In September 2015, the company
announced it had agreed to sell certain blocks of its term life
insurance to Protective Life Insurance Company which is expected to
generate initial capital of approximately $100 to $150 million in aggregate to Genworth.
The transaction is expected to utilize all of the net operating
losses in the U.S. life insurance companies resulting in expected
intercompany tax payments over time to the holding company and
other entities for the use of tax benefits. The transaction is
expected to close in the first quarter of 2016, subject to
customary conditions, including requisite regulatory approvals.
In October 2015, the company
announced it had entered into an agreement to sell its European
mortgage insurance business to AmTrust Financial Services, Inc.
that is expected to result in net proceeds of approximately
$55 million. These proceeds will
provide additional capital credit to Genworth Mortgage Insurance
Corporation under PMIERs. Additionally, the company expects to
record an after-tax GAAP loss of approximately $140 million related to the sale in the fourth
quarter of 2015. The transaction is expected to close in the first
quarter of 2016 and is subject to customary conditions, including
requisite regulatory approvals.
The company has taken and will continue to take steps to bring
cash expenses in line with near-term sales levels. The company now
expects to achieve its annualized cash savings target of
$100 million pre-tax or more in the
first half of 2016.
"Our Global Mortgage Insurance Division is performing well with
strong loss ratios and U.S. MI made substantial progress towards
PMIERs compliance. Long term care insurance remains challenged, but
we continue to receive significant premium rate increases and
claims experience remained in line with our expectations," said
Tom McInerney, President and CEO.
"We are making progress on our strategic priorities and will
continue to explore strategic options to accelerate our
turnaround."
Consolidated
Net Loss &
|
Net Operating
Income (Loss)
|
|
|
|
Three months ended
September 30
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Per
|
|
|
|
|
Per
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
|
|
diluted
|
|
Total
|
|
(Amounts in
millions, except per share)
|
|
Total
|
|
share
|
|
Total
|
|
share
|
|
%
change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to
Genworth's common stockholders
|
|
$
|
(284)
|
|
$
|
(0.57)
|
|
$
|
(844)
|
|
$
|
(1.70)
|
|
66 %
|
|
Net operating income
(loss)
|
|
$
|
64
|
|
$
|
0.13
|
|
$
|
(323)
|
|
$
|
(0.65)
|
|
120 %
|
|
Weighted average
diluted shares3
|
|
|
497.4
|
|
|
|
|
|
496.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
2015
|
|
2014
|
|
|
|
Book value per
share
|
|
|
|
|
$
|
27.29
|
|
|
|
|
$
|
30.54
|
|
|
|
Book value per share,
excluding accumulated other comprehensive income
(loss)
|
|
|
|
|
$
|
20.30
|
|
|
|
|
$
|
22.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment losses, net of taxes and other adjustments, were
$22 million in the quarter, compared
to net investment gains of $4 million
in the prior quarter and net investment losses of $10 million in the prior year. Total impairments,
net of tax, were $6 million in the
quarter, compared to none in the prior quarter and $4 million in the prior year.
Net investment income decreased to $783
million, compared to $793
million in the prior quarter primarily from lower limited
partnership income. The reported yield for the current quarter was
4.46 percent. The core yield2 was 4.39 percent, down
from the prior quarter.
Net operating income (loss) results are summarized in the table
below:
Net Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
Global Mortgage
Insurance Division
|
|
$
|
91
|
|
$
|
110
|
|
$
|
85
|
U.S. Life Insurance
Division
|
|
|
40
|
|
|
57
|
|
|
(322)
|
Corporate and Other
Division
|
|
|
(67)
|
|
|
(48)
|
|
|
(86)
|
Total Net
Operating Income (Loss)
|
|
$
|
64
|
|
$
|
119
|
|
$
|
(323)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) represents net operating income
(loss) from continuing operations excluding net investment gains
(losses), goodwill impairments, gains (losses) on the sale of
businesses, gains (losses) on the early extinguishment of debt,
gains (losses) on insurance block transactions, restructuring costs
and other adjustments, net of taxes. A reconciliation of net
operating income (loss) of segments and Corporate and Other
activities to net loss is included at the end of this press
release.
Unless specifically noted in the discussion of results for the
International Mortgage Insurance segment, references to percentage
changes exclude the impact of translating foreign denominated
activity into U.S. dollars (foreign exchange). Percentage changes,
which include the impact of foreign exchange, are found in a table
at the end of this press release. The impact of foreign exchange on
results in the third quarter of 2015 was an unfavorable
$13 million versus the prior
year.
Global Mortgage Insurance Division
Global Mortgage
Insurance Division had net operating income of $91 million, compared with $110 million in the prior quarter and
$85 million a year ago.
Global Mortgage
Insurance Division
|
Net Operating
Income (Loss)
|
(Amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
International
Mortgage Insurance
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
$
|
38
|
|
$
|
37
|
|
$
|
46
|
|
Australia
|
|
|
21
|
|
|
29
|
|
|
48
|
|
Other
Countries
|
|
|
(5)
|
|
|
(5)
|
|
|
(7)
|
Total
International Mortgage Insurance
|
|
|
54
|
|
|
61
|
|
|
87
|
U.S. Mortgage
Insurance
|
|
|
37
|
|
|
49
|
|
|
(2)
|
Total Global
Mortgage Insurance
|
|
$
|
91
|
|
$
|
110
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
(Amounts in
billions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
International
Mortgage Insurance
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
$
|
6.6
|
|
$
|
5.4
|
|
$
|
6.8
|
|
|
Australia
|
|
|
6.3
|
|
|
6.5
|
|
|
8.1
|
|
|
Other
Countries
|
|
|
0.6
|
|
|
0.5
|
|
|
0.4
|
|
Bulk
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
4.8
|
|
|
3.3
|
|
|
5.6
|
|
|
Australia
|
|
|
—
|
|
|
1.7
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance
|
|
|
|
|
|
|
|
|
|
|
Primary
Flow
|
|
|
9.3
|
|
|
8.2
|
|
|
7.5
|
|
Canada Mortgage Insurance
Canada reported net operating income of
$38 million versus $37 million in the prior quarter and $46 million in the prior year. The loss ratio in
the quarter was 21 percent, up four points from the prior quarter
driven by a seasonal increase in new delinquencies, net of cures,
and flat compared to the prior year. Results included lower
expenses versus the prior quarter and unfavorable foreign exchange
versus the prior year of $7 million.
Flow new insurance written (NIW) was up 26
percent4 sequentially from a seasonally larger
originations market and up 15 percent4 year over year
primarily from an increase in market penetration. In addition, the
company completed several bulk transactions in the quarter of
approximately $4.8 billion in total,
consisting of low loan-to-value prime loans.
Australia Mortgage Insurance
Australia reported net operating income of
$21 million versus $29 million in the prior quarter and $48 million in the prior year. The loss ratio in
the quarter was 29 percent, up one point sequentially and eight
points from the prior year. Results in the quarter include
actuarial updates to earned premiums and loss reserves which
combined had a negligible impact on earnings, but did unfavorably
impact the loss ratio by approximately seven points. New
delinquencies were down 10 percent sequentially and cures were up
11 percent sequentially from normal seasonal variation, including
improved performance in Queensland
and Western Australia. Results
versus the prior quarter were lower by $6
million from the company's further sell down of
approximately 14 percent of its ownership in the Australia business in May 2015, less favorable tax benefits and
unfavorable foreign exchange. Results versus the prior year were
also impacted by less favorable tax benefits of $15 million, an unfavorable $8 million related to the further sell down in
May 2015 and unfavorable foreign
exchange of $6 million. Flow NIW was
up two percent4 sequentially and down two
percent4 year over year.
Other Countries Mortgage Insurance
Other Countries had
a net operating loss of $5 million,
flat to the prior quarter and down from a net operating loss of
$7 million in the prior year.
U.S. Mortgage Insurance
U.S. MI net operating income
was $37 million, compared with net
operating income of $49 million in
the prior quarter and a net operating loss of $2 million in the prior year. The prior year
included an unfavorable impact of $34
million related to loss mitigation settlements. The loss
ratio in the current quarter was 43 percent, up 10 points
sequentially reflecting normal seasonal variation in new flow
delinquencies which increased approximately 13 percent from the
prior quarter and decreased approximately 11 percent from the prior
year, reflecting the continued burn through of delinquencies from
the 2005 to 2008 book years. Results versus the prior year also
reflected lower net investment income, primarily related to an
approximately $8 million reduction
from the affiliated preferred securities that were transferred to
the holding company in July 2015.
Flow NIW of $9.3 billion increased
13 percent from the prior quarter from a larger purchase
originations market and increased 24 percent versus the prior year
primarily from a larger purchase originations market and higher
refinance activity. During the third quarter, the company increased
its single premium lender paid new insurance written and continues
its selective participation in this market. Future volumes of
this product will vary in part depending on the company's
evaluation of the risk return profile of these transactions.
U.S. Life Insurance Division
U.S. Life Insurance
Division net operating income was $40
million, compared with net operating income of $57 million in the prior quarter and a net
operating loss of $322 million a year
ago.
U.S. Life
Insurance Division
|
Net Operating
Income (Loss)
|
(Amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
U.S. Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
$
|
(10)
|
|
$
|
10
|
|
$
|
(361)
|
|
Life
Insurance
|
|
|
31
|
|
|
22
|
|
|
13
|
|
Fixed
Annuities
|
|
|
19
|
|
|
25
|
|
|
26
|
Total U.S. Life
Insurance
|
|
|
40
|
|
|
57
|
|
|
(322)
|
Total U.S. Life
Insurance
|
|
$
|
40
|
|
$
|
57
|
|
$
|
(322)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
(Amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
U.S. Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
Individual
|
|
$
|
7
|
|
$
|
8
|
|
$
|
28
|
|
|
Group
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
Term Life
|
|
|
7
|
|
|
9
|
|
|
13
|
|
|
Universal
Life
|
|
|
2
|
|
|
4
|
|
|
11
|
|
|
Linked
Benefits
|
|
|
3
|
|
|
2
|
|
|
4
|
|
Fixed
Annuities
|
|
|
260
|
|
|
224
|
|
|
371
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Care Insurance
Long term care insurance
(LTC) had a net operating loss of $10
million, compared with net operating income of $10 million in the prior quarter and a net
operating loss of $361 million in the
prior year. Results in the quarter reflected $21 million of after-tax unfavorable items, due
largely to corrections to reinsurance, premium taxes and group LTC
reserves. The current quarter included favorable mortality on
existing claims versus the prior year, unfavorable severity given
the mix of new claims with a higher average reserve versus the
prior year and less favorable benefits from reinsurance versus both
the prior quarter and prior year. Results in the prior quarter
included net favorable items of $12
million after-tax while results in the prior year included
$380 million after-tax of unfavorable
items. The loss ratio in the current quarter was 76 percent. Given
that experience in aggregate included in this year's claim
reserves review was in line with expectations, the company made no
significant adjustments in the current quarter to its assumptions
and methodologies related to its LTC claim reserves.
Results for the quarter included a favorable impact from higher
premiums and reduced benefit options of $19
million after-tax versus the prior quarter and $16 million after-tax versus the prior year
related to premium increases from in force rate actions approved
and implemented to date.
Individual LTC sales of $7 million
were lower than the prior quarter and the prior year. Sales are
expected to continue at low levels in the near term due to the 2014
introduction of a higher priced LTC product and lower ratings, but
build over time as new products and distribution strategies are
introduced.
Life Insurance
Life insurance net operating income was
$31 million, compared with
$22 million in the prior quarter and
$13 million in the prior year.
Results in the quarter included favorable mortality versus both the
prior quarter and prior year in addition to higher reinsurance
expenses versus the prior year. Results in the prior year reflected
$10 million of net unfavorable items.
Sales of $12 million decreased
compared to the prior quarter and the prior year.
Fixed Annuities
Fixed annuities net operating income
was $19 million, compared with
$25 million in the prior quarter and
$26 million in the prior year.
Results in the quarter reflected unfavorable impacts from mortality
and lower limited partnership income versus both the prior quarter
and prior year. Sales in the quarter totaled $260 million, up sequentially and down versus the
prior year.
Corporate and Other Division
Corporate and Other
Division net operating loss was $67
million, compared with $48
million in the prior quarter and $86
million in the prior year.
Corporate and
Other Division
|
Net Operating
Income (Loss)
|
(Amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
Runoff
|
|
$
|
(4)
|
|
$
|
9
|
|
$
|
5
|
Corporate and
Other
|
|
|
(63)
|
|
|
(57)
|
|
|
(91)
|
Total Corporate
and Other
|
|
$
|
(67)
|
|
$
|
(48)
|
|
$
|
(86)
|
|
|
|
|
|
|
|
|
|
|
|
|
Runoff net operating loss was $4
million, compared with net operating income of $9 million in the prior quarter and net operating
income of $5 million in the prior
year reflecting unfavorable equity market performance versus the
prior quarter and prior year and lower limited partnership income
versus the prior quarter. Results in the prior year also included a
favorable impact from refinement of DAC assumptions related to the
company's annual review of assumptions in variable annuity
products.
Corporate and Other net operating loss was $63 million, compared with $57 million in the prior quarter and $91 million in the prior year. Results in the
current quarter included higher legal accruals and expenses of
$17 million after-tax. Results versus
the prior year reflected less favorable taxes.
Capital & Liquidity
Genworth maintains solid
capital positions in its operating subsidiaries.
Key Capital &
Liquidity Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q3
15
|
|
Q2
15
|
|
Q3
14
|
|
Canada
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Capital Test
(MCT) Ratio5
|
|
|
227
|
%
|
|
|
231
|
%
|
|
|
224
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio5
|
|
|
167
|
%
|
|
|
164
|
%
|
|
|
156
|
%
|
U.S.
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-To-Capital Ratio5
|
|
|
14.3:1
|
|
|
|
13.7:1
|
|
|
|
15.4:1
|
|
|
GMICO Risk-To-Capital
Ratio5
|
|
|
14.3:1
|
|
|
|
13.5:1
|
|
|
|
14.8:1
|
|
U.S. Life
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC) Ratio5
|
|
|
445
|
%
|
|
|
455
|
%
|
|
|
448
|
%
|
|
Unassigned
Surplus5
|
|
$
|
75
|
|
|
$
|
97
|
|
|
$
|
291
|
|
Holding Company
Cash6 and Liquid Assets7
|
|
$
|
983
|
|
|
$
|
1,154
|
|
|
$
|
1,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Points
- $102 million of dividends from
the operating subsidiaries were paid to the holding company during
the third quarter in addition to the remaining $50 million in net proceeds related to the sale
of 92.3 million shares of the Australia MI business in May 2015;
- In July 2015, approximately
$200 million of cash from Genworth
Holdings, Inc. was paid to U.S. MI in exchange for the business'
ownership interest in affiliated preferred securities;
- Unassigned surplus and RBC ratio declined versus the prior
quarter primarily from unfavorable equity market impacts in runoff
and lower LTC earnings, partially offset by favorable taxes;
- The holding company ended the third quarter with a buffer of
approximately $490 million in excess
of one and a half times annual debt service and restricted
cash;
- The holding company targets maintaining cash balances of at
least one and a half times its annual debt service expense plus a
risk buffer of $350 million; and
- A $90 million reduction in
surplus occurred in U.S. MI related to the anticipated sale of the
European MI business, increasing the consolidated risk-to-capital
ratio by less than one point.
About Genworth Financial
Genworth
Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance
holding company committed to helping families become more
financially secure, self-reliant and prepared for the future.
Genworth has leadership positions in mortgage insurance and long
term care insurance and product offerings in life insurance and
fixed annuities that assist consumers in solving their home
ownership, insurance and retirement needs. To help families start
"the talk" about their futures and long term care planning,
Genworth recently completed the first stage of its national
#LetsTalk Tour to encourage conversations and information sharing.
Headquartered in Richmond,
Virginia, Genworth traces its roots back to 1871 and became
a public company in 2004. For more information, visit
genworth.com.
From time to time, Genworth releases important information via
postings on its corporate website. Accordingly, investors and other
interested parties are encouraged to enroll to receive automatic
email alerts and Really Simple Syndication (RSS) feeds regarding
new postings. Enrollment information is found under the "Investors"
section of genworth.com. From time to time, Genworth's
publicly traded subsidiaries, Genworth MI Canada Inc. and Genworth
Mortgage Insurance Australia Limited, separately release financial
and other information about their operations. This information can
be found at http://genworth.ca and
http://www.genworth.com.au.
Conference Call and Financial Supplement
Information
This press release and the third quarter 2015
financial supplement are now posted on the company's website.
Additional information regarding business results and strategic
update will be posted on the company's website,
http://investor.genworth.com, by 7:30
a.m. on October 30, 2015.
Investors are encouraged to review these materials.
Genworth will conduct a conference call on October 30, 2015 at 8:00
a.m. (ET) to discuss third quarter 2015 results and provide
an update on strategic priorities. The conference call will be
accessible via telephone and the Internet. The dial-in number for
the conference call is 877 888.4034 or 913 489.5101 (outside the
U.S.); conference ID # 726558. To participate in the call by
webcast, register at http://investor.genworth.com at least 15
minutes prior to the webcast to download and install any necessary
software.
Replays of the call will be available through November 13, 2015 at 888 203.1112 or 719 457.0820
(outside the U.S.); conference ID # 726558. The webcast will also
be archived on the company's website.
Use of Non-GAAP Measures
This press release includes
the non-GAAP financial measures entitled "net operating income
(loss)" and "net operating income (loss) per common share." Net
operating income (loss) per common share is derived from net
operating income (loss). The chief operating decision maker
evaluates segment performance and allocates resources on the basis
of net operating income (loss). The company defines net operating
income (loss) as income (loss) from continuing operations excluding
the after-tax effects of income attributable to noncontrolling
interests, net investment gains (losses), goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the
early extinguishment of debt, gains (losses) on insurance block
transactions, restructuring costs and infrequent or unusual
non-operating items. Gains (losses) on insurance block transactions
are defined as gains (losses) on the early extinguishment of
non-recourse funding obligations, early termination fees for other
financing restructuring and/or resulting gains (losses) on
reinsurance restructuring for certain blocks of business. The
company excludes net investment gains (losses) and infrequent or
unusual non-operating items because the company does not consider
them to be related to the operating performance of the company's
segments and Corporate and Other activities. A component of the
company's net investment gains (losses) is the result of
impairments, the size and timing of which can vary significantly
depending on market credit cycles. In addition, the size and timing
of other investment gains (losses) can be subject to the company's
discretion and are influenced by market opportunities, as well as
asset-liability matching considerations. Goodwill impairments,
gains (losses) on the sale of businesses, gains (losses) on the
early extinguishment of debt, gains (losses) on insurance block
transactions and restructuring costs are also excluded from net
operating income (loss) because, in the company's opinion, they are
not indicative of overall operating trends. Infrequent or unusual
non-operating items are also excluded from net operating income
(loss) if, in the company's opinion, they are not indicative of
overall operating trends.
While some of these items may be significant components of net
income (loss) available to Genworth's common stockholders in
accordance with GAAP, the company believes that net operating
income (loss) and measures that are derived from or incorporate net
operating income (loss), including net operating income (loss) per
common share on a basic and diluted basis, are appropriate measures
that are useful to investors because they identify the income
(loss) attributable to the ongoing operations of the business.
Management also uses net operating income (loss) as a basis for
determining awards and compensation for senior management and to
evaluate performance on a basis comparable to that used by
analysts. However, the items excluded from net operating income
(loss) have occurred in the past and could, and in some cases will,
recur in the future. Net operating income (loss) and net operating
income (loss) per common share on a basic and diluted basis are not
substitutes for net income (loss) available to Genworth's common
stockholders or net income (loss) available to Genworth's common
stockholders per common share on a basic and diluted basis
determined in accordance with GAAP. In addition, the company's
definition of net operating income (loss) may differ from the
definitions used by other companies.
In the third quarter of 2014, the company recorded goodwill
impairments of $167 million, net of
taxes, in the long-term care insurance business and $350 million, net of taxes, in the life insurance
business.
In the third quarter of 2015, the company paid an early
redemption payment of approximately $1
million, net of taxes and portion attributable to
noncontrolling interests, related to the early redemption of
Genworth Financial Mortgage Insurance Pty Limited's notes that were
scheduled to mature in 2021. In the third quarter of 2015, the
company also repurchased approximately $50
million principal amount of Genworth Holdings, Inc.'s notes
with various maturity dates for a loss of $1
million, net of taxes. These transactions were excluded from
net operating income (loss) for the periods presented as they
related to a loss on the early extinguishment of debt.
In the third quarter of 2015, the company recorded a DAC
impairment of $296 million, net of
taxes, on certain term life insurance policies in connection with
entering into an agreement to complete a life block
transaction.
In the second quarter of 2015, the company recorded a
$2 million after-tax expense related
to restructuring costs as part of an expense reduction plan as the
company evaluates and appropriately sizes its organizational needs
and expenses.
There were no infrequent or unusual items excluded from net
operating income (loss) during the periods presented other than the
following item. The company recognized a tax charge of $7 million in the third quarter of 2015 from
potential business portfolio changes related to its mortgage
insurance business in Europe.
The tables at the end of this press release reflect net
operating income (loss) as determined in accordance with accounting
guidance related to segment reporting, and a reconciliation of net
operating income (loss) of the company's segments and Corporate and
Other activities to net income (loss) available to Genworth's
common stockholders for the three months ended September 30, 2015 and 2014, as well as for the
three months ended June 30, 2015.
Adjustments to reconcile net income (loss) attributable to
Genworth's common stockholders and net operating income (loss)
assume a 35 percent tax rate and are net of the portion
attributable to noncontrolling interests. Net investment gains
(losses) are also adjusted for DAC and other intangible
amortization and certain benefit reserves.
This press release includes the non-GAAP financial measure
entitled "core yield" as a measure of investment yield. The company
defines core yield as the investment yield adjusted for those items
that are not recurring in nature. Management believes that analysis
of core yield enhances understanding of the investment yield of the
company. However, core yield is not a substitute for investment
yield determined in accordance with GAAP. In addition, the
company's definition of core yield may differ from the definitions
used by other companies. A reconciliation of core yield to reported
GAAP yield is included in a table at the end of this press
release.
Results of Operations by Segment
In the first quarter
of 2015, the company revised how it allocates the consolidated
provision for income taxes to its operating segments to simplify
the process and reflect how the chief operating decision maker is
evaluating segment performance. The revised methodology applies a
specific tax rate to the pre-tax income (loss) of each segment,
which is then adjusted in each segment to reflect the tax
attributes of items unique to that segment such as foreign income.
The difference between the consolidated provision for income taxes
and the sum of the provision for income taxes in each segment is
reflected in Corporate and Other activities. Previously, the
company calculated a unique income tax provision for each segment
based on quarterly changes to tax attributes and implications of
transactions specific to each product within the segment.
The annually-determined tax rates and adjustments to each
segment's provision for income taxes are estimates which are
subject to review and could change from year to year. Prior year
amounts have not been re-presented to reflect this revised
presentation and are, therefore, not comparable to the current year
provision for income taxes by segment. However, the company does
not believe that the previous methodology would have resulted in a
materially different segment-level provision for income taxes.
Definition of Selected Operating Performance
Measures
The company reports selected operating performance
measures including "sales" and "insurance in force" or "risk in
force" which are commonly used in the insurance industry as
measures of operating performance.
Management regularly monitors and reports sales metrics as a
measure of volume of new and renewal business generated in a
period. Sales refer to: (1) new insurance written for mortgage
insurance; (2) annualized first-year premiums for long term care
and term life insurance products; (3) annualized first-year
deposits plus five percent of excess deposits for universal and
term universal life insurance products; (4) 10 percent of premium
deposits for linked-benefits products; and (5) new and additional
premiums/deposits for fixed annuities. Sales do not include renewal
premiums on policies or contracts written during prior periods. The
company considers new insurance written, annualized first-year
premiums/deposits, premium equivalents and new premiums/deposits to
be a measure of the company's operating performance because they
represent a measure of new sales of insurance policies or contracts
during a specified period, rather than a measure of the company's
revenues or profitability during that period.
Management regularly monitors and reports insurance in force and
risk in force. Insurance in force for the international mortgage
and U.S. mortgage insurance businesses is a measure of the
aggregate face value of outstanding insurance policies as of the
respective reporting date. For risk in force in the international
mortgage insurance business, the company has computed an
"effective" risk in force amount, which recognizes that the loss on
any particular loan will be reduced by the net proceeds received
upon sale of the property. Effective risk in force has been
calculated by applying to insurance in force a factor of 35 percent
that represents the highest expected average per-claim payment for
any one underwriting year over the life of the company's businesses
in Canada and Australia. In Australia, the company has certain risk share
arrangements where it provides pro-rata coverage of certain loans
rather than 100 percent coverage. As a result, for loans with these
risk share arrangements, the applicable pro-rata coverage amount
provided is used when applying the factor. Risk in force for the
U.S. mortgage insurance business is the obligation that is limited
under contractual terms to the amounts less than 100 percent of the
mortgage loan value. The company considers insurance in force and
risk in force to be measures of the company's operating performance
because they represent measures of the size of the business at a
specific date which will generate revenues and profits in a future
period, rather than measures of the company's revenues or
profitability during that period.
Management also regularly monitors and reports a loss ratio for
the company's businesses. For the mortgage insurance businesses,
the loss ratio is the ratio of incurred losses and loss adjustment
expenses to net earned premiums. For the long term care insurance
business, the loss ratio is the ratio of benefits and other changes
in reserves less tabular interest on reserves less loss adjustment
expenses to net earned premiums. The company considers the loss
ratio to be a measure of underwriting performance in these
businesses and helps to enhance the understanding of the operating
performance of the businesses.
An assumed tax rate of 35 percent is utilized in certain
adjustments to net operating income (loss) and in the explanation
of specific variances of operating performance and investment
results.
These operating performance measures enable the company to
compare its operating performance across periods without regard to
revenues or profitability related to policies or contracts sold in
prior periods or from investments or other sources.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains certain
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by words such as "expects," "intends,"
"anticipates," "plans," "believes," "seeks," "estimates," "will" or
words of similar meaning and include, but are not limited to,
statements regarding the outlook for the company's future business
and financial performance. Forward-looking statements are based on
management's current expectations and assumptions, which are
subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Actual outcomes and
results may differ materially due to global political, economic,
business, competitive, market, regulatory and other factors and
risks, including, but not limited to, the following:
- Risks relating to all of the company's businesses,
including: (i) inability to successfully develop and execute
strategic plans to effectively address the company's current
business challenges (including with respect to its long term care
insurance business, ratings and capital), including as a result of
the inability to complete the planned sale of the company's
lifestyle protection insurance business, certain blocks of the
company's term life insurance or the company's European mortgage
insurance business at all or on the terms anticipated and failure
to attract buyers for any other businesses or other assets the
company may seek to sell, or securities it may seek to issue, in
each case, in a timely manner on anticipated terms; inability to
generate required capital; failure to obtain any required
regulatory, stockholder and/or noteholder approvals or consents, or
the company's challenges changing or being more costly or difficult
to successfully address than currently anticipated or the benefits
achieved being less than anticipated; inability to successfully
develop more targeted product features and benefits, strengthen
relationships with producers or achieve anticipated cost-savings in
a timely manner; adverse tax or accounting charges; (ii) inability
to increase the capital needed in the company's businesses in a
timely manner and on anticipated terms, including through improved
business performance, reinsurance or similar transactions, asset
sales, securities offerings or otherwise, in each case as and when
required; (iii) inadequate reserves and the need to increase
reserves, including as a result of any changes the company may make
to its assumptions, methodologies or otherwise in connection with
periodic or other reviews (including as a result of the company's
actual experience differing significantly from its assumptions);
(iv) ineffective or inadequate risk management in identifying,
controlling or mitigating risks; weaknesses in, or ineffective,
internal controls; (v) recent or future adverse rating agency
actions, including with respect to rating downgrades or potential
downgrades, being placed on negative outlook or being put on review
for potential downgrade, all of which could have adverse
implications for the company, including with respect to key
business relationships, product offerings, business results of
operations, financial condition and capital needs, strategic plans,
collateral obligations and availability and terms of hedging,
reinsurance and borrowings; (vi) inability to retain, attract and
motivate qualified employees and independent sales representatives,
particularly in the light of the company's recent business
challenges; (vii) adverse change in regulatory requirements,
including risk-based capital; (viii) dependence on dividends and
other distributions from the company's subsidiaries (particularly
the company's international subsidiaries) and the inability of any
subsidiaries to pay dividends or make other distributions to the
company, including as a result of the performance of the
subsidiaries and insurance, regulatory or corporate law
restrictions (including the unwillingness or inability of the
subsidiary that indirectly owns most of the company's interests in
the Australian and Canadian mortgage insurance businesses to pay
the dividends that it receives from those businesses as a result of
the impact on its financial condition of its capital support for
certain long term care insurance related reinsurance arrangements);
(ix) inability to borrow under the company's credit facility; (x)
downturns and volatility in global economies and equity and credit
markets; (xi) interest rates and changes in rates; (xii)
availability, affordability and adequacy of reinsurance to protect
the company against losses; (xiii) defaults by counterparties to
reinsurance arrangements or derivative instruments; (xiv) changes
in valuation of fixed maturity, equity and trading securities; (xv)
defaults or other events impacting the value of the company's fixed
maturity securities portfolio; (xvi) defaults on the company's
commercial mortgage loans or the mortgage loans underlying its
investments in commercial mortgage-backed securities and volatility
in performance; (xvii) competition; (xviii) reliance on, and loss
of, key distribution relationships; (xix) extensive regulation of
the company's businesses and changes in applicable laws and
regulations; (xx) litigation and regulatory investigations or other
actions (including the two shareholder putative class action
lawsuits alleging securities law violations filed against the
company in 2014); (xxi) the material weakness in the company's
internal control over financial reporting; (xxii) failure or any
compromise of the security of the company's computer systems,
disaster recovery systems and business continuity plans and
failures to safeguard, or breaches of, the company's confidential
information; (xxiii) occurrence of natural or man-made disasters or
a pandemic; (xxiv) impact of additional regulations pursuant to the
Dodd-Frank Wall Street Reform and Consumer Protection Act; (xxv)
changes in accounting and reporting standards; (xxvi) impairments
of or valuation allowances against the company's deferred tax
assets; (xxvii) accelerated amortization of DAC and present value
of future profits (including as a result of any changes the company
may make to its assumptions, methodologies or otherwise in
connection with periodic or other reviews); (xxviii) political and
economic instability or changes in government policies; and (xxix)
fluctuations in foreign currency exchange rates and international
securities markets;
- Risks relating primarily to the company's mortgage insurance
businesses, including: (i) deterioration in economic conditions
or a decline in home prices that adversely affect the company's
loss experience in mortgage insurance; (ii) premiums for the
significant portion of the company's international mortgage
insurance risk in-force with high loan-to-value ratios may not be
sufficient to compensate the company for the greater risks
associated with those policies; (iii) competition in the company's
international and U.S. mortgage insurance businesses, including
from government and government-owned and GSEs offering mortgage
insurance; (iv) changes in regulations adversely affecting the
company's international operations; (v) inability to meet or
maintain the PMIERs on the contemplated timetable with the
contemplated funding; (vi) inability of U.S. mortgage insurance
subsidiaries to meet minimum statutory capital requirements and
hazardous financial condition standards; (vii) the influence of
Federal National Mortgage Association (Fannie Mae), Federal Home
Loan Mortgage Corporation (Freddie Mac) and a small number of large
mortgage lenders on the U.S. mortgage insurance market and adverse
changes to the role or structure of Fannie Mae and Freddie Mac;
(viii) increases in U.S. mortgage insurance default rates; (ix)
inability to realize anticipated benefits of the company's
rescissions, curtailments, loan modifications or other similar
programs in its U.S. mortgage insurance business; (x) problems
associated with foreclosure process defects in the United States that may defer claim
payments; (xi) competition with GSEs may put the company at a
disadvantage on pricing and other terms and conditions; (xii)
adverse changes in regulations affecting the company's U.S.
mortgage insurance business; (xiii) decreases in the volume of high
loan-to-value mortgage originations or increases in mortgage
insurance cancellations in the United
States; (xiv) increases in the use of alternatives to
private mortgage insurance in the United
States and reductions in the level of coverage selected; and
(xv) potential liabilities in connection with the company's U.S.
contract underwriting services;
- Risks relating primarily to the company's long term care
insurance, life insurance and annuities businesses, including:
(i) the company's inability to increase sufficiently, and in a
timely manner, premiums on in-force long term care insurance
policies and/or reduce in-force benefits, and charge higher
premiums on new policies, in each case, as currently anticipated
(including the future increases assumed in connection with the
completion of the company's margin reviews in the fourth quarter of
2014) and as may be required from time to time in the future
(including as a result of its failure to obtain any necessary
regulatory approvals or unwillingness or inability of policyholders
to pay increased premiums); the company's inability to reflect
future premium increases and other management actions in its margin
calculation as anticipated; (ii) failure to sufficiently increase
demand for the company's long term care insurance, life insurance
and fixed annuity products; (iii) adverse impact on the company's
financial results as a result of projected profits followed by
projected losses (as is currently the case with the company's long
term care insurance business); (iv) deviations from the persistency
assumptions used to price and establish reserves for the company's
insurance policies and annuity contracts; (v) medical advances,
such as genetic research and diagnostic imaging, and related
legislation that impact policyholder behavior in ways adverse to
the company; and (vi) inability to continue to implement actions to
mitigate the impact of statutory reserve requirements;
- Other risks, including: (i) the possibility that in
certain circumstances the company will be obligated to make
payments to General Electric Company (GE) under the tax matters
agreement with GE even if its corresponding tax savings are never
realized and payments could be accelerated in the event of certain
changes in control; and (ii) provisions of the company's
certificate of incorporation and bylaws and the tax matters
agreement with GE may discourage takeover attempts and business
combinations that stockholders might consider in their best
interests; and
- Risks relating to the company's common stock, including:
(i) the continued suspension of payment of dividends; and (ii)
stock price fluctuations.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Condensed
Consolidated Statements of Income
|
(Amounts in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
September
30,
|
|
|
2015
|
|
2014
|
Revenues:
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,145
|
|
$
|
1,210
|
Net investment
income
|
|
|
783
|
|
|
778
|
Net investment gains
(losses)
|
|
|
(51)
|
|
|
(27)
|
Insurance and
investment product fees and other
|
|
|
223
|
|
|
229
|
Total
revenues
|
|
|
2,100
|
|
|
2,190
|
Benefits and
expenses:
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,290
|
|
|
1,934
|
Interest
credited
|
|
|
179
|
|
|
185
|
Acquisition and
operating expenses, net of deferrals
|
|
|
314
|
|
|
284
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
563
|
|
|
113
|
Goodwill
impairment
|
|
|
—
|
|
|
550
|
Interest
expense
|
|
|
105
|
|
|
104
|
Total benefits and
expenses
|
|
|
2,451
|
|
|
3,170
|
Loss from continuing
operations before income taxes
|
|
|
(351)
|
|
|
(980)
|
Benefit for income
taxes
|
|
|
(134)
|
|
|
(187)
|
Loss from continuing
operations
|
|
|
(217)
|
|
|
(793)
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(21)
|
|
|
6
|
Net
loss
|
|
|
(238)
|
|
|
(787)
|
Less: net income
attributable to noncontrolling interests
|
|
|
46
|
|
|
57
|
Net loss available to
Genworth Financial, Inc.'s common stockholders
|
|
$
|
(284)
|
|
$
|
(844)
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations available to Genworth Financial, Inc.'s
|
|
|
|
|
|
|
common stockholders
per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.53)
|
|
$
|
(1.71)
|
Diluted
|
|
$
|
(0.53)
|
|
$
|
(1.71)
|
Net loss available to
Genworth Financial, Inc.'s common stockholders per
|
|
|
|
|
|
|
common
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.57)
|
|
$
|
(1.70)
|
Diluted
|
|
$
|
(0.57)
|
|
$
|
(1.70)
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
497.4
|
|
|
496.6
|
Diluted3
|
|
|
497.4
|
|
|
496.6
|
Reconciliation of
Net Operating Income (Loss) to Net Loss
|
(Amounts in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
Three
|
|
|
months
ended
|
|
months
ended
|
|
|
September
30,
|
|
June
30,
|
|
|
2015
|
|
2014
|
|
2015
|
Net operating income
(loss):
|
|
|
|
|
|
|
|
|
|
Global Mortgage
Insurance Division
|
|
|
|
|
|
|
|
|
|
International Mortgage
Insurance segment
|
|
|
|
|
|
|
|
|
|
Canada
|
|
$
|
38
|
|
$
|
46
|
|
$
|
37
|
Australia
|
|
|
21
|
|
|
48
|
|
|
29
|
Other Countries
|
|
|
(5)
|
|
|
(7)
|
|
|
(5)
|
Total International
Mortgage Insurance segment
|
|
|
54
|
|
|
87
|
|
|
61
|
U.S. Mortgage
Insurance segment
|
|
|
37
|
|
|
(2)
|
|
|
49
|
Total Global Mortgage
Insurance Division
|
|
|
91
|
|
|
85
|
|
|
110
|
U.S. Life Insurance
Division
|
|
|
|
|
|
|
|
|
|
U.S. Life Insurance
segment
|
|
|
|
|
|
|
|
|
|
Long Term Care Insurance
|
|
|
(10)
|
|
|
(361)
|
|
|
10
|
Life Insurance
|
|
|
31
|
|
|
13
|
|
|
22
|
Fixed Annuities
|
|
|
19
|
|
|
26
|
|
|
25
|
Total U.S. Life
Insurance segment
|
|
|
40
|
|
|
(322)
|
|
|
57
|
Total U.S. Life
Insurance Division
|
|
|
40
|
|
|
(322)
|
|
|
57
|
Corporate and Other
Division
|
|
|
|
|
|
|
|
|
|
Runoff
segment
|
|
|
(4)
|
|
|
5
|
|
|
9
|
Corporate and
Other
|
|
|
(63)
|
|
|
(91)
|
|
|
(57)
|
Total Corporate and
Other Division
|
|
|
(67)
|
|
|
(86)
|
|
|
(48)
|
Net operating income
(loss)
|
|
|
64
|
|
|
(323)
|
|
|
119
|
Adjustments to net
operating income (loss):
|
|
|
|
|
|
|
|
|
|
Net investment gains
(losses), net (see below for reconciliation)
|
|
|
(22)
|
|
|
(10)
|
|
|
4
|
Goodwill impairment,
net
|
|
|
—
|
|
|
(517)
|
|
|
—
|
Gains (losses) on
early extinguishment of debt, net
|
|
|
(2)
|
|
|
—
|
|
|
—
|
Gains (losses) from
life block transactions, net
|
|
|
(296)
|
|
|
—
|
|
|
—
|
Expenses related to
restructuring, net
|
|
|
—
|
|
|
—
|
|
|
(2)
|
Tax impact from
potential business portfolio changes
|
|
|
(7)
|
|
|
—
|
|
|
—
|
Income (loss) from
continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders
|
|
|
(263)
|
|
|
(850)
|
|
|
121
|
Net income
attributable to noncontrolling interests
|
|
|
46
|
|
|
57
|
|
|
54
|
Income (loss) from
continuing operations
|
|
|
(217)
|
|
|
(793)
|
|
|
175
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(21)
|
|
|
6
|
|
|
(314)
|
Net
loss
|
|
|
(238)
|
|
|
(787)
|
|
|
(139)
|
Less: net income
attributable to noncontrolling interests
|
|
|
46
|
|
|
57
|
|
|
54
|
Net loss available to
Genworth Financial, Inc.'s common stockholders
|
|
$
|
(284)
|
|
$
|
(844)
|
|
$
|
(193)
|
|
|
|
|
|
|
|
|
|
|
Net loss available to
Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
stockholders per
common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.57)
|
|
$
|
(1.70)
|
|
$
|
(0.39)
|
Diluted
|
|
$
|
(0.57)
|
|
$
|
(1.70)
|
|
$
|
(0.39)
|
Net operating income
(loss) per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.13
|
|
$
|
(0.65)
|
|
$
|
0.24
|
Diluted
|
|
$
|
0.13
|
|
$
|
(0.65)
|
|
$
|
0.24
|
Weighted-average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
497.4
|
|
|
496.6
|
|
|
497.4
|
Diluted3
|
|
|
497.4
|
|
|
496.6
|
|
|
499.3
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
Net investment gains
(losses), gross
|
|
$
|
(51)
|
|
$
|
(27)
|
|
$
|
8
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
DAC and other
intangible amortization and certain
|
|
|
|
|
|
|
|
|
|
benefit reserves
|
|
|
9
|
|
|
9
|
|
|
8
|
Net investment gains
(losses) attributable to noncontrolling interests
|
|
|
8
|
|
|
3
|
|
|
(9)
|
Taxes
|
|
|
12
|
|
|
5
|
|
|
(3)
|
Net investment gains
(losses), net of taxes and other adjustments
|
|
$
|
(22)
|
|
$
|
(10)
|
|
$
|
4
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
Assets
|
|
|
|
|
|
Cash, cash
equivalents and invested assets
|
|
$
|
76,535
|
|
$
|
77,388
|
|
Deferred acquisition
costs
|
|
|
4,437
|
|
|
4,849
|
|
Intangible
assets
|
|
|
284
|
|
|
250
|
|
Goodwill
|
|
|
14
|
|
|
16
|
|
Reinsurance
recoverable
|
|
|
17,276
|
|
|
17,314
|
|
Other
assets
|
|
|
577
|
|
|
524
|
|
Separate account
assets
|
|
|
7,893
|
|
|
9,208
|
|
Assets held for sale
related to discontinued operations
|
|
|
1,206
|
|
|
1,809
|
|
|
|
|
Total
assets
|
|
$
|
108,222
|
|
$
|
111,358
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
36,472
|
|
$
|
35,915
|
|
|
Policyholder account
balances
|
|
|
26,000
|
|
|
26,032
|
|
|
Liability for policy
and contract claims
|
|
|
8,065
|
|
|
7,937
|
|
|
Unearned
premiums
|
|
|
3,340
|
|
|
3,547
|
|
|
Deferred tax and
other liabilities
|
|
|
3,442
|
|
|
4,140
|
|
|
Borrowings related to
securitization entities
|
|
|
188
|
|
|
219
|
|
|
Non-recourse funding
obligations
|
|
|
1,951
|
|
|
1,996
|
|
|
Long-term
borrowings
|
|
|
4,601
|
|
|
4,639
|
|
|
Separate account
liabilities
|
|
|
7,893
|
|
|
9,208
|
|
|
Liabilities held for
sale related to discontinued operations
|
|
|
854
|
|
|
928
|
|
|
|
|
Total
liabilities
|
|
|
92,806
|
|
|
94,561
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,944
|
|
|
11,997
|
|
|
Accumulated other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
(losses) on securities not other-than-temporarily
impaired
|
|
|
1,709
|
|
|
2,431
|
|
|
|
|
|
Net unrealized gains
(losses) on other-than-temporarily impaired securities
|
|
|
22
|
|
|
22
|
|
|
|
|
Net unrealized
investment gains (losses)
|
|
|
1,731
|
|
|
2,453
|
|
|
|
|
Derivatives
qualifying as hedges
|
|
|
2,130
|
|
|
2,070
|
|
|
|
|
Foreign currency
translation and other adjustments
|
|
|
(383)
|
|
|
(77)
|
|
|
Total accumulated
other comprehensive income (loss)
|
|
|
3,478
|
|
|
4,446
|
|
|
Retained
earnings
|
|
|
856
|
|
|
1,179
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
13,579
|
|
|
14,923
|
|
|
Noncontrolling
interests
|
|
|
1,837
|
|
|
1,874
|
|
|
|
|
Total stockholders'
equity
|
|
|
15,416
|
|
|
16,797
|
|
|
|
|
Total liabilities and
stockholders' equity
|
|
$
|
108,222
|
|
$
|
111,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of Foreign
Exchange on Operating Results8
Three months ended
September 30, 2015
|
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada Mortgage
Insurance (MI):
|
|
|
|
|
|
|
Flow new insurance
written
|
|
(3)
|
%
|
|
15
|
%
|
Flow new insurance
written (3Q15 vs. 2Q15)
|
|
22
|
%
|
|
26
|
%
|
|
|
|
|
|
|
|
Australia
MI:
|
|
|
|
|
|
|
Flow new insurance
written
|
|
(22)
|
%
|
|
(2)
|
%
|
Flow new insurance
written (3Q15 vs. 2Q15)
|
|
(3)
|
%
|
|
2
|
%
|
|
|
|
|
|
|
|
Reconciliation of
Core Yield to Reported Yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
|
September
30,
|
|
(Assets - amounts
in billions)
|
|
2015
|
|
Reported Total
Invested Assets and Cash
|
|
$
|
75.9
|
|
|
Subtract:
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.4
|
|
|
Unrealized gains
(losses)
|
|
|
5.4
|
|
|
Derivative
counterparty collateral
|
|
|
—
|
|
|
Adjusted end of
period invested assets
|
|
$
|
70.1
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets Used in Reported Yield Calculation
|
|
$
|
70.2
|
|
|
Subtract:
|
|
|
|
|
|
|
|
Restricted commercial
mortgage loans and other invested assets related to
|
|
|
|
|
|
securitization
entities10
|
|
|
0.2
|
|
|
Average Invested
Assets Used in Core Yield Calculation
|
|
$
|
70.0
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in millions)
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
783
|
|
|
Subtract:
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
12
|
|
|
Other non-core
items11
|
|
|
1
|
|
|
Restricted commercial
mortgage loans and other invested assets related to
|
|
|
|
|
|
securitization
entities10
|
|
|
2
|
|
|
Core Net Investment
Income
|
|
$
|
768
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.46
|
%
|
|
Core Yield
|
|
|
4.39
|
%
|
|
1 Unless otherwise stated, all references in this
press release to net loss, net loss per share, book value, book
value per share and stockholders' equity should be read as net loss
available to Genworth's common stockholders, net loss available to
Genworth's common stockholders per share, book value available to
Genworth's common stockholders, book value available to Genworth's
common stockholders per share and stockholders' equity available to
Genworth's common stockholders, respectively.
2 This is a financial measure not calculated based on
U.S. Generally Accepted Accounting Principles (Non-GAAP). See the
Use of Non-GAAP Measures section of this press release for
additional information.
3 Under applicable accounting guidance, companies
in a loss position are required to use basic weighted-average
common shares outstanding in the calculation of diluted loss per
share. Therefore, as a result of the loss from continuing
operations for the three months ended September 30, 2015 and 2014, the company was
required to use basic weighted-average common shares outstanding in
the calculation of diluted loss per share for the three months
ended September 30, 2015 and 2014, as
the inclusion of shares for stock options, restricted stock units
and stock appreciation rights of 1.3 million and 5.4 million,
respectively, would have been antidilutive to the calculation. If
the company had not incurred a loss from continuing operations for
the three months ended September 30,
2015 and 2014, dilutive potential weighted-average common
shares outstanding would have been 498.7 million and 502.0 million,
respectively. Since it had net operating income for the three
months ended September 30, 2015, the
company used 498.7 million diluted weighted-average common shares
outstanding in the calculation of diluted net operating income per
common share.
4 Percent change excludes the impact of foreign
exchange.
5 Company estimate for the third quarter of 2015, due to
timing of the filing of statutory statements.
6 Holding company cash & liquid assets comprises
assets held in Genworth Holdings, Inc. (the issuer of outstanding
public debt) which is a wholly-owned subsidiary of Genworth
Financial, Inc.
7 Comprises cash and cash equivalents of $733 million, $904
million and $988 million,
respectively, and U.S. government bonds of $250 million, $250
million and $150 million,
respectively, as of September 30,
2015, June 30, 2015 and
September 30, 2014.
8 All percentages are comparing the third quarter of
2015 to the third quarter of 2014 unless otherwise stated.
9 The impact of foreign exchange was calculated using
the comparable prior period exchange rates.
10 Represents the incremental assets and investment
income related to restricted commercial mortgage loans and other
invested assets.
11 Includes cost basis adjustments on structured
securities and various other immaterial items.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/genworth-financial-announces-third-quarter-2015-results-300169034.html
SOURCE Genworth Financial, Inc.