RICHMOND, Va., Oct. 29, 2019 /PRNewswire/ --
- Reached Agreement To Sell Genworth's Majority Interest In
Genworth MI Canada Inc. To Brookfield Business Partners L.P. With
Approximately $1.8 Billion Expected
Net Proceeds
- Merger Agreement With China Oceanwide Holdings Group Co., Ltd
(Oceanwide) Extended To Not Later Than December 31, 2019
- U.S. Mortgage Insurance (MI) Adjusted Operating Income Of
$137 Million With $18.9 Billion In New Insurance Written (NIW) And
Continued Strong Loss Performance
- U.S. MI's PMIERs1 Sufficiency Ratio At 129
Percent, In Excess Of $850 Million
Above Requirements
- $62 Million Capital Returned To
The Holding Company In The Quarter From Canada And Australia
MI
- Continued Progress With Long Term Care Insurance (LTC) In Force
Rate Actions In Line With Plan
- Annual Review Of LTC Claim Reserves Completed With No
Significant Adjustments. Loss Recognition Testing And Cash
Flow Testing Will Be Completed In The Fourth Quarter
- $250 Million Dividend From U.S.
MI To The Holding Company Completed In October 2019
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended September 30, 2019.
The company reported net income2 of $18 million, or $0.04 per diluted share, in the third quarter of
2019, compared with net income of $146
million, or $0.29 per diluted
share, in the third quarter of 2018. The company reported adjusted
operating income3 of $123 million, or $0.24 per diluted share, in the third quarter of
2019, compared with adjusted operating income of $99 million, or $0.20 per diluted share, in the third quarter of
2018.
With the pending sale of Genworth MI Canada Inc. (Genworth
Canada), Canada MI segment results are reported as discontinued
operations, and all prior periods have been re-presented
accordingly. While the expected net proceeds amount exceeds the
balance sheet carrying value of Genworth Canada, the company
recorded an estimated after-tax loss of $164
million on the sale due to historical foreign currency
translation adjustments in accumulated other comprehensive income
that must be recognized upon sale. Including the estimated loss on
sale, the company recognized a net loss from discontinued
operations of $110
million4 in the quarter.
Strategic Update
During and following the third quarter, Genworth and Oceanwide
made progress towards closing their previously announced
transaction.
On August 13, 2019, Genworth and
Brookfield Business Partners L.P. (NYSE: BBU) (TSX: BBU.UN)
(Brookfield Business Partners) announced an agreement for
Brookfield Business Partners to purchase Genworth's majority
interest in Genworth Canada for CAD$48.86 per share, reflecting a total
transaction value of approximately CAD$2.4
billion (the Canada Transaction). Genworth is selling its
stake in Genworth Canada to facilitate the completion of the
acquisition of Genworth by Oceanwide (the Oceanwide Transaction).
Genworth also believes that the sale of its stake in Genworth
Canada would allow it to increase its financial flexibility,
whether or not the Oceanwide Transaction is consummated. Oceanwide
consented to the Canada Transaction, and in connection with the
announcement, Genworth and Oceanwide entered into the 12th Waiver
and Agreement extending the merger agreement deadline to not later
than December 31, 2019.
On October 22, 2019, Genworth
announced it received feedback from Canadian regulators with
respect to the Canada Transaction. The Canadian regulators remain
focused on national security matters, including data protection
and, in particular, the continued protection of Canadian customer
data during the period after the closing of the Canada Transaction
when Genworth will be providing certain transition services to
Genworth Canada before it transitions away from Genworth's
information technology platforms. Genworth and Brookfield Business
Partners are working to assure the regulators that Canadian
customers' information has appropriate protections.
Genworth and Brookfield Business Partners have received all
other required approvals to complete the sale of Genworth Canada
and are targeting a closing of the Canada Transaction by the end of
2019.
The Canada Transaction value of CAD$2.4
billion is expected to result in approximately USD$1.8 billion of net proceeds. Proceeds
received at closing will be reduced by special dividends received
from Genworth Canada during the period between signing and closing.
Of the net proceeds, approximately USD$500
million will be paid to Genworth's primary U.S. MI insurance
subsidiary based on its ownership share of Genworth Canada. In
addition, approximately USD$445
million of proceeds will be used to repay Genworth's term
loan issued March 7, 2018 as required
under the terms of the loan agreement.
Previously, Oceanwide and Genworth had received approvals from
all necessary U.S. regulators with respect to the Oceanwide
Transaction. The parties recently provided supplemental information
to certain regulators to reflect the Genworth Canada disposition
and the passage of time since their prior approval of the Oceanwide
Transaction. The approval of the New York Department of
Financial Services (NYDFS) expired earlier in the year and the
parties are in discussion with the NYDFS to secure an appropriate
reapproval. In addition, Fannie Mae and Freddie Mac will need to
reapprove the Oceanwide Transaction. Other regulators are
still reviewing the supplemental information to determine whether
it has any impact on their existing approvals. Following the
receipt of all required U.S. regulatory approvals, Oceanwide will
also need to receive clearance in China for the currency conversion and transfer
of funds.
Genworth and Oceanwide remain committed to the capital
investment plan under which Oceanwide and/or its affiliates will
contribute an aggregate of $1.5
billion to Genworth over time following the consummation of
the merger, subject to the receipt of the required regulatory
approvals and clearances.
"Genworth has significant expertise in implementing security
protocols that satisfy data security concerns as a result of the
successful implementation of our Enhanced Data Security Program,"
said Tom McInerney, president and
CEO of Genworth Financial. "We are confident in our ability to
satisfy the Canadian government's requirements in order to move
forward with the sale of Genworth Canada, which is the best path
forward to ultimately close the transaction with Oceanwide. The
Oceanwide Transaction continues to represent the best value for
Genworth's shareholders."
LU Zhiqiang, chairman of Oceanwide, added: "Oceanwide remains
committed to the transaction with Genworth, as well as the
$1.5 billion contribution to Genworth
over time following the consummation of the transaction, subject to
the receipt of the required regulatory approvals and clearances. We
look forward to closing the transaction as soon as possible."
Financial
Performance
|
|
Consolidated Net
Income & Adjusted Operating
Income
|
|
|
|
Three months ended
September 30
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
Per
|
|
|
|
|
Per
|
|
|
|
|
|
|
|
|
|
diluted
|
|
|
|
|
diluted
|
|
Total
|
|
(Amounts in
millions, except per share)
|
|
Total
|
|
share
|
|
Total
|
|
share
|
|
% change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to Genworth's common stockholders
|
|
$
|
18
|
|
$
|
0.04
|
|
$
|
146
|
|
$
|
0.29
|
|
(88)%
|
|
Adjusted operating
income
|
|
$
|
123
|
|
$
|
0.24
|
|
$
|
99
|
|
$
|
0.20
|
|
24 %
|
|
Weighted-average
diluted shares
|
|
|
511.2
|
|
|
|
|
|
503.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September
30
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
Book value per
share
|
|
|
|
|
$
|
28.57
|
|
|
|
|
$
|
25.56
|
|
|
|
Book value per share,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (loss)
|
|
|
|
|
$
|
21.38
|
|
|
|
|
$
|
21.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains, net of taxes and other adjustments,
increased net income by $5 million in
the quarter, with net trading gains and gains on limited
partnerships offset by derivative losses. Net income in the third
quarter of 2018 was reduced by net investment losses, net of taxes
and other adjustments, of $11
million.
Net investment income was $816
million in the quarter, flat to the prior quarter and up
from $780 million in the prior year.
Net investment income increased versus the prior year primarily due
to higher limited partnership income, favorable prepayment speed
adjustments on mortgage-backed securities, and continued growth in
invested assets. The reported yield and the core
yield3 for the quarter were 4.93 percent and
4.80 percent, respectively, compared to 4.95 percent and 4.86
percent, respectively, in the prior quarter.
Genworth's effective tax rate on income from continuing
operations was approximately 20 percent, bringing the
year-to-date effective tax rate to approximately 27
percent. The effective tax rate for the quarter was impacted
by tax timing adjustments and lower taxes on foreign
operations.
Adjusted operating income (loss) results by business line are
summarized in the table below:
Adjusted Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q3
19
|
|
Q2
19
|
|
Q3
18
|
U.S. Mortgage
Insurance
|
|
$
|
137
|
|
$
|
147
|
|
$
|
118
|
Australia Mortgage
Insurance
|
|
|
12
|
|
|
13
|
|
|
17
|
U.S. Life
Insurance
|
|
|
(1)
|
|
|
66
|
|
|
(3)
|
Runoff
|
|
|
10
|
|
|
9
|
|
|
14
|
Corporate and
Other
|
|
|
(35)
|
|
|
(57)
|
|
|
(47)
|
Total Adjusted
Operating Income
|
|
$
|
123
|
|
$
|
178
|
|
$
|
99
|
Adjusted operating income (loss) represents income (loss) from
continuing operations excluding the after-tax effects of income
(loss) from continuing operations 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 other
adjustments, net of taxes. A reconciliation of net income to
adjusted operating income is included at the end of this press
release.
Unless specifically noted in the discussion of results for the
Australia MI business, references to percentage changes exclude the
impact of translating foreign denominated activity into U.S.
dollars (foreign exchange). Percentage changes that include the
impact of foreign exchange are found in a table at the end of this
press release.
U.S. Mortgage
Insurance
|
|
|
|
|
|
|
|
|
|
|
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q3
19
|
|
Q2
19
|
|
Q3
18
|
Adjusted operating
income
|
|
$
|
137
|
|
$
|
147
|
|
$
|
118
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
Primary Flow
|
|
$
|
18,900
|
|
$
|
15,800
|
|
$
|
10,300
|
Loss ratio
|
|
|
11%
|
|
|
—%
|
|
|
11%
|
U.S. MI reported adjusted operating income of $137 million, compared with $147 million in the prior quarter and
$118 million in the prior year. U.S.
MI's flow insurance in force increased 14 percent versus the prior
year from strong NIW, driving continued growth in earned premiums,
which exceeded $215 million. The loss
ratio in the current quarter was 11 percent, up 11 points
sequentially and flat to the prior year. Prior quarter results
included a favorable $10 million
pre-tax reserve adjustment which reduced that period's loss ratio
by five points.
U.S. MI achieved $18.9 billion in
flow NIW in the quarter, up 20 percent from the prior quarter and
83 percent versus the prior year driven primarily by a larger
estimated mortgage insurance market from higher refinance
originations as rates declined further during the quarter. The
increase in flow NIW versus the prior year was also driven by an
estimated increase in market share with the market adoption of the
company's proprietary risk-based pricing engine, GenRATE, and
selective participation in forward commitment transactions.
Australia Mortgage
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q3
19
|
|
Q2
19
|
|
Q3
18
|
Adjusted operating
income
|
|
$
|
12
|
|
$
|
13
|
|
$
|
17
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
4,600
|
|
$
|
3,700
|
|
$
|
3,800
|
Bulk
|
|
$
|
—
|
|
$
|
1,200
|
|
$
|
—
|
Loss ratio
|
|
|
36%
|
|
|
34%
|
|
|
31%
|
Australia MI reported adjusted operating income of $12
million versus $13 million in
the prior quarter and $17 million in the prior year.
Australia MI flow NIW increased 27 percent sequentially and 32
percent versus the prior year, primarily due to higher mortgage
origination volume from certain key customers. The loss ratio in
the quarter was 36 percent, up two points sequentially and up five
points from the prior year primarily due to lower levels of earned
premium from portfolio seasoning.
U.S. Life
Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q3
19
|
|
Q2
19
|
|
Q3
18
|
Long Term Care
Insurance
|
|
$
|
21
|
|
$
|
37
|
|
$
|
(24)
|
Life
Insurance
|
|
|
(25)
|
|
|
10
|
|
|
(2)
|
Fixed
Annuities
|
|
|
3
|
|
|
19
|
|
|
23
|
Total U.S. Life
Insurance
|
|
$
|
(1)
|
|
$
|
66
|
|
$
|
(3)
|
Long Term Care Insurance
Long term care insurance reported adjusted operating income of
$21 million, compared with adjusted
operating income of $37 million in
the prior quarter and an adjusted operating loss of $24 million in the prior year. Compared to the
prior quarter and prior year, results reflected higher earnings
from in force rate actions, partially offset by growth in new
claims. Compared to the prior quarter, results also reflected
seasonally lower claim terminations.
The company completed its annual review of LTC claim reserves in
the third quarter. The review concluded with no significant
adjustments to its assumptions and methodologies related to LTC
claim reserves, as experience in aggregate was in line with
expectations. In the fourth quarter of 2019, the company will
perform loss recognition and cash flow testing for all of its U.S.
life insurance products. Fourth quarter annual testing will include
review of assumptions, including incidence, benefit utilization,
mortality, interest rates and in force rate actions, among other
assumptions, and incorporate emerging claim experience in newer LTC
blocks. Results of the annual testing as well as assumption reviews
will be part of fourth quarter earnings disclosures.
Life Insurance
Life insurance reported an adjusted operating loss of
$25 million, compared with adjusted
operating income of $10 million in
the prior quarter and an adjusted operating loss of $2 million in the prior year. Results versus the
prior quarter and prior year reflected higher amortization of
deferred acquisition costs (DAC) primarily associated with higher
lapses from large 20-year level-premium term life insurance blocks
entering their post-level premium periods, partially offset by
lower mortality. Current quarter results included an unfavorable
after-tax adjustment of $10 million
for higher ceded reinsurance rates. Results in the prior quarter
included a reinsurance correction and an adjustment for higher
ceded reinsurance rates resulting in a net favorable after-tax
impact of $17 million.
Fixed Annuities
Fixed annuities reported adjusted operating income of
$3 million, compared with
$19 million in the prior quarter and
$23 million in the prior year.
Results included unfavorable charges of $13
million after-tax from loss recognition testing on the
single premium immediate annuity block due to lower interest rates
versus $4 million in the prior
quarter. Results versus the prior quarter and prior year reflected
lower net spreads. Results versus the prior quarter and prior
year also reflected higher reserves in fixed indexed annuities due
to the decline in interest rates.
Runoff
Runoff reported adjusted operating income of $10 million, compared with $9 million in the prior quarter and $14 million in the prior year. Results in the
current quarter reflected unfavorable impacts in the company's
variable annuity business from less favorable equity market
performance and lower interest rates compared to the prior quarter
and prior year, with lower mortality relative to the prior
quarter.
Corporate And Other
Corporate and Other reported an adjusted operating loss of
$35 million, compared with
$57 million in the prior quarter and
$47 million in the prior year.
Results in the current quarter reflected favorable tax timing
adjustments and lower expenses relative to the prior quarter and
prior year.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital &
Liquidity Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q3
19
|
|
Q2
19
|
|
Q3
18
|
|
U.S.
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-To-Capital Ratio5
|
|
|
11.9:1
|
|
|
|
11.8:1
|
|
|
|
12.3:1
|
|
|
Genworth Mortgage
Insurance Corporation Risk-To-Capital
Ratio5
|
|
|
12.1:1
|
|
|
|
12.1:1
|
|
|
|
12.6:1
|
|
|
Private Mortgage
Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio5,
6
|
|
|
129
|
%
|
|
|
123
|
%
|
|
|
130
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio5
|
|
|
198
|
%
|
|
|
208
|
%
|
|
|
185
|
%
|
U.S. Life Insurance
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC)
Ratio5
|
|
|
200
|
%
|
|
|
191
|
%
|
|
|
268
|
%
|
Holding Company Cash
and Liquid Assets7, 8
|
|
$
|
366
|
|
|
$
|
403
|
|
|
$
|
609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Points
- U.S. MI's PMIERs sufficiency ratio is estimated to be 129
percent, in excess of $850 million
above requirements. Capital sufficiency increased in the quarter
from continued earnings as well as from the execution of an excess
of loss reinsurance transaction during the quarter;
- Australia MI's PCA ratio is estimated to be 198 percent, above
the company's target operating range of 132 to 144 percent. The
ratio decreased in the quarter driven primarily by lower available
capital from dividends paid in the quarter;
- The U.S. Life insurance companies' consolidated RBC ratio is
estimated to be approximately 200 percent, up from 191 percent in
the prior quarter, as in force statutory earnings more than offset
increases in required capital primarily in variable annuities from
lower interest rates and growth of new claims in LTC;
- The holding company ended the quarter with $366 million of cash and liquid assets, which is
below the company's target of two times expected annual debt
interest payments excluding restricted cash and assets. In fourth
quarter results, holding company cash will reflect a $250 million ordinary dividend from U.S. MI and a
$36 million special dividend from
Canada MI, both of which were paid in October 2019.
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a Fortune 500 insurance
holding company committed to helping families achieve the dream of
homeownership and address the financial challenges of aging through
its leadership positions in mortgage insurance and long term care
insurance. 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 2019 financial
supplement are now posted on the company's website. Additional
information regarding business results will be posted on the
company's website, http://investor.genworth.com, by 7:00 a.m. on October 30,
2019. Investors are encouraged to review these
materials.
Genworth will conduct a conference call on October 30, 2019 at 8:00
a.m. (ET) to discuss business results and provide an update
on strategic objectives, including the pending sale of Genworth
Canada and pending transaction with Oceanwide. Genworth's
October 30th conference
call will be accessible via telephone and the Internet. The dial-in
number for the conference call is 888 208.1820 or 323 794.2110
(outside the U.S.); conference ID # 8212170. 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.
A replay of the call will be available at 888
203.1112 or 719 457.0820 (outside the U.S.); conference
ID # 8212170 through November 14,
2019. The webcast will also be archived on the company's
website for one year.
Use of Non-GAAP Measures
This press release includes the non-GAAP financial measures
entitled "adjusted operating income (loss)" and "adjusted operating
income (loss) per share." Adjusted operating income (loss) per
share is derived from adjusted operating income (loss). The chief
operating decision maker evaluates segment performance and
allocates resources on the basis of adjusted operating income
(loss). The company defines adjusted operating income (loss) as
income (loss) from continuing operations excluding the after-tax
effects of income (loss) from continuing operations 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
adjusted 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 adjusted
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 Financial, Inc.'s common
stockholders in accordance with U.S. GAAP, the company believes
that adjusted operating income (loss) and measures that are derived
from or incorporate adjusted operating income (loss), including
adjusted operating income (loss) per 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 adjusted 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 adjusted operating income (loss) have occurred in the past and
could, and in some cases will, recur in the future. Adjusted
operating income (loss) and adjusted operating income (loss) per
share on a basic and diluted basis are not substitutes for net
income (loss) available to Genworth Financial, Inc.'s common
stockholders or net income (loss) available to Genworth Financial,
Inc.'s common stockholders per share on a basic and diluted basis
determined in accordance with U.S. GAAP. In addition, the company's
definition of adjusted operating income (loss) may differ from the
definitions used by other companies.
In 2019, the company revised how it taxes the adjustments to
reconcile net income (loss) available to Genworth Financial, Inc.'s
common stockholders to adjusted operating income (loss) to align
the tax rate used in the reconciliation to each segment's local
jurisdictional tax rate. Beginning in the first quarter of 2019,
the company used a tax rate of 30 percent for its Australia
Mortgage Insurance segment to tax effect its adjustments. Its
domestic segments remain at a 21 percent tax rate. In 2018, the
company assumed a flat 21 percent tax rate on adjustments for all
of its segments to reconcile net income (loss) available to
Genworth Financial, Inc.'s common stockholders and adjusted
operating income (loss). These adjustments are also net of the
portion attributable to noncontrolling interests and net investment
gains (losses) are adjusted for DAC and other intangible
amortization and certain benefit reserves.
Prior year amounts have not been re-presented to reflect this
revised presentation; however, the previous methodology would not
have resulted in a materially different segment-level adjusted
operating income (loss).
The company recorded a pre-tax expense of $2 million in the third quarter of 2018 related
to restructuring costs as it continues to evaluate and
appropriately size its organizational needs and expenses. There
were no infrequent or unusual items excluded from adjusted
operating income during the periods presented.
The tables at the end of this press release provide a
reconciliation of net income available to Genworth Financial,
Inc.'s common stockholders to adjusted operating income for the
three months ended September 30, 2019
and 2018, as well as for the three months ended June 30, 2019, and reflect adjusted operating
income (loss) as determined in accordance with accounting guidance
related to segment reporting.
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 items that
do not reflect the underlying performance of the investment
portfolio. 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 U.S. GAAP. In addition, the company's definition of
core yield may differ from the definitions used by other companies.
A reconciliation of reported U.S. GAAP yield to core yield is
included in a table at the end of this press release.
Definition of Selected Operating Performance Measures
The company taxes its international businesses at their local
jurisdictional tax rates and its domestic businesses at the U.S.
corporate federal income tax rate of 21 percent. The company's
segment tax methodology applies the respective jurisdictional or
domestic 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
withholding taxes and permanent differences between U.S. GAAP and
local tax law. 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.
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.
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 business generated in a period. Sales
refer to new insurance written for mortgage insurance products. The
company considers new insurance written to be a measure of the
company's operating performance because it represents a measure of
new sales of insurance policies 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 company's mortgage
insurance businesses is a measure of the aggregate original loan
balance for outstanding insurance policies as of the respective
reporting date. Risk in force for the company's U.S. mortgage
insurance business is based on the coverage percentage applied to
the estimated current outstanding loan balance. Risk in force in
the Australia mortgage insurance
business is computed using 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 mortgage insurance business in
Australia. The company also has
certain risk share arrangements in Australia 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. The
company considers insurance in force and risk in force to be
measures of its operating performance because they represent
measures of the size of its business at a specific date which will
generate revenues and profits in a future period, rather than
measures of its 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 benefits and other changes in policy
reserves 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.
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.
Examples of forward-looking statements include statements the
company makes relating to the transactions with China Oceanwide
Holdings Group Co., Ltd. (together with its affiliates, Oceanwide),
the company's discussions with regulators in connection therewith
and any capital contribution resulting therefrom, as well as any
statements regarding the pending sale of Genworth MI Canada Inc.
(Genworth Canada). 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 from those in the forward-looking
statements due to global political, economic, business,
competitive, market, regulatory and other factors and risks,
including, but not limited to, the following:
- risks related to the proposed transaction with Oceanwide
including: the company's inability to complete the transaction with
Oceanwide in a timely manner or at all; the parties' inability to
obtain regulatory approvals, clearances or extensions, or the
possibility that such regulatory approvals or clearances may
further delay the transaction with Oceanwide or will not be
received prior to December 31, 2019
(and either or both of the parties may not be willing to further
waive their end date termination rights beyond December 31, 2019) or that materially burdensome
or adverse regulatory conditions may be imposed or undesirable
measures may be required in connection with any such regulatory
approvals, clearances or extensions (including those conditions or
measures that either or both of the parties may be unwilling to
accept or undertake, as applicable) or that with continuing delays,
circumstances may arise that make one or both parties unwilling to
proceed with the transaction with Oceanwide or unable to comply
with the conditions to existing regulatory approvals; the risk that
the parties will not be able to obtain other regulatory approvals,
clearances or extensions, including in connection with a potential
alternative funding structure or the current geo-political
environment, or that one or more regulators may rescind or fail to
extend existing approvals, or that the revocation by one regulator
of approvals will lead to the revocation of approvals by other
regulators; the parties' inability to obtain any necessary
regulatory approvals, clearances or extensions for the post-closing
capital plan; the risk that a condition to the closing of the
transaction with Oceanwide may not be satisfied or that a condition
to closing that is currently satisfied may not remain satisfied due
to the delay in closing the transaction with Oceanwide; the risk
that the sale of Genworth Canada may not be completed in a timely
manner or at all, which may adversely affect the company's business
and the price of its common stock; other risks relating to the sale
of Genworth Canada that are similar to the foregoing, including the
ability of the parties to obtain regulatory approvals for the sale
of Genworth Canada, or the possibility that regulatory approvals
may delay the sale of Genworth Canada or that materially burdensome
or adverse regulatory conditions may be imposed in connection with
any such regulatory approvals; the risk that a condition to closing
of the sale of Genworth Canada may not be satisfied or the risk
that the transaction with Oceanwide might not close regardless of a
sale of Genworth Canada; Genworth's inability to recognize the
anticipated benefits of the sale of Genworth Canada; the risk that
existing and potential legal proceedings may be instituted against
the company in connection with the transaction with Oceanwide or
the sale of Genworth Canada that may delay the transactions, make
it more costly or ultimately preclude it; the risk that any cash
proceeds received by Genworth Financial International Holdings, LLC
from the sale of Genworth Canada may be restricted or limited as a
result of pending litigation summarized in Genworth's Quarterly
Report on Form 10-Q; the risk that the proposed transactions
disrupt the company's current plans and operations as a result of
the announcement and consummation of the transactions; certain
restrictions during the pendency of the transactions that may
impact the company's ability to pursue certain business
opportunities or strategic transactions; continued availability of
capital and financing to the company before, or in the absence of,
the consummation of the transactions; further rating agency actions
and downgrades in the company's debt or financial strength ratings;
changes in applicable laws or regulations; the company's ability to
recognize the anticipated benefits of the transaction with
Oceanwide; the amount of the costs, fees, expenses and other
charges related to the transactions, including costs and expenses
related to conditions imposed in connection with regulatory
approvals or clearances, which may be material; the company's
ability to attract, recruit, retain and motivate current and
prospective employees may be adversely affected; and disruptions
and uncertainty relating to the Oceanwide transaction, whether or
not it is completed, may harm the company's relationships with its
employees, customers, distributors, vendors or other business
partners, and may result in a negative impact on the company's
business;
- strategic risks in the event the proposed transaction with
Oceanwide is not consummated including: the company's inability
to successfully execute alternative strategic plans to effectively
address its current business challenges (including with respect to
stabilizing its U.S. life insurance businesses, debt obligations,
cost savings, ratings and capital); the company's inability to
attract buyers for any businesses or other assets it may seek to
sell, or securities it may seek to issue, in each case, in a timely
manner and on anticipated terms; failure to obtain any required
regulatory, stockholder and/or noteholder approvals or consents for
such alternative strategic plans, 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 achieve anticipated cost-savings in a
timely manner; adverse tax or accounting charges; and the company's
ability to increase the capital needed in its mortgage insurance
businesses in a timely manner and on anticipated terms, including
through business performance, reinsurance or similar transactions,
asset sales, securities offerings or otherwise, in each case as and
when required;
- risks relating to estimates, assumptions and valuations
including: 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 reviews the company expects to complete
and carry out in the fourth quarter of 2019); risks related to the
impact of the annual review of assumptions and methodologies
related to the long term care insurance margin review in the fourth
quarter of 2019, including risks that additional information
obtained in finalizing the margin reviews in the fourth quarter of
2019 or other changes to assumptions or methodologies materially
affect the impact on margins; inaccurate models; deviations from
company estimates and actuarial assumptions or other reasons in the
company's long term care insurance, life insurance and/or annuity
businesses; accelerated amortization of deferred acquisition costs
("DAC") and present value of future profits ("PVFP") (including as
a result of any changes the company may make to assumptions,
methodologies or otherwise in connection with periodic or other
reviews, including reviews the company expects to complete and
carry out in the fourth quarter of 2019); 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
long-term care insurance business); adverse impact on the company's
results of operations, including the outcome of annual review of
the premium earnings pattern for the mortgage insurance business in
Australia (which the company
expects to carry out in the fourth quarter of 2019); and changes in
valuation of fixed maturity and equity securities;
- risks relating to economic, market and political
conditions including: downturns and volatility in global
economies and equity and credit markets; interest rates and changes
in rates have adversely impacted, and may continue to materially
adversely impact, the company's business and profitability;
deterioration in economic conditions or a decline in home prices
that adversely affect the company's loss experience in mortgage
insurance; political and economic instability or changes in
government policies; and fluctuations in foreign currency exchange
rates and international securities markets;
- regulatory and legal risks including: extensive
regulation of the company's businesses and changes in applicable
laws and regulations (including changes to tax laws and
regulations); litigation and regulatory investigations or other
actions; dependence on dividends and other distributions from the
company's subsidiaries (particularly its 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 its subsidiaries and insurance,
regulatory or corporate law restrictions; adverse change in
regulatory requirements, including risk-based capital; changes in
regulations adversely affecting the company's international
operations; inability to continue to maintain the private mortgage
insurer eligibility requirements (PMIERs); inability of the
company's U.S. mortgage insurance subsidiaries to meet minimum
statutory capital requirements; 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; adverse
changes in regulations affecting the company's mortgage insurance
businesses; inability to continue to implement actions to mitigate
the impact of statutory reserve requirements; impact of additional
regulations pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act; changes in tax laws; and changes in
accounting and reporting standards;
- liquidity, financial strength ratings, credit and
counterparty risks including: insufficient internal sources to
meet liquidity needs and limited or no access to capital (including
the ability to obtain further financing under an additional secured
term loan or credit facility); continued availability of capital
and financing before the consummation of the sale of Genworth
Canada; the amount of the costs, fees, expenses and other charges
related to the commitment letter from Brookfield Business Partners
L.P.; future adverse rating agency actions, including with respect
to rating downgrades or potential downgrades 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; defaults by counterparties to
reinsurance arrangements or derivative instruments; defaults or
other events impacting the value of the company's fixed maturity
securities portfolio; and defaults on the company's commercial
mortgage loans or the mortgage loans underlying its investments in
commercial mortgage-backed securities and volatility in
performance;
- operational risks including: inability to retain,
attract and motivate qualified employees or senior management;
ineffective or inadequate risk management in identifying,
controlling or mitigating risks; reliance on, and loss of, key
customer or distribution relationships; competition, including in
the company's mortgage insurance businesses from government and
government-owned and government-sponsored enterprises (GSEs)
offering mortgage insurance; the design and effectiveness of the
company's disclosure controls and procedures and internal control
over financial reporting may not prevent all errors, misstatements
or misrepresentations; and 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, its confidential information;
- insurance and product-related risks including: the
company's inability to increase premiums and associated benefit
reductions sufficiently, and in a timely manner, on in force long
term care insurance policies, and charge higher premiums on
policies, in each case, as currently anticipated and as may be
required from time to time in the future (including as a result of
the company's failure to obtain any necessary regulatory approvals
or unwillingness or inability of policyholders to pay increased
premiums and/or accept reduced benefits), including to offset any
impact on the company's long term care insurance margins;
availability, affordability and adequacy of reinsurance to protect
the company against losses; inability to realize anticipated
benefits of the company's rescissions, curtailments, loan
modifications or other similar programs in its mortgage insurance
businesses; premiums for the significant portion of the company's
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; decreases in the volume of high
loan-to-value mortgage originations or increases in mortgage
insurance cancellations; increases in the use of alternatives to
private mortgage insurance and reductions in the level of coverage
selected; potential liabilities in connection with the company's
U.S. contract underwriting services; and medical advances, such as
genetic research and diagnostic imaging, and related legislation
that impact policyholder behavior in ways adverse to the
company;
- other risks including: impairments of or valuation
allowances against the company's deferred tax assets; 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 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:
the continued suspension of payment of dividends; and 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)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,015
|
|
$
|
995
|
|
$
|
1,001
|
|
Net investment
income
|
|
|
816
|
|
|
780
|
|
|
816
|
|
Net investment gains
(losses)
|
|
|
(2)
|
|
|
(16)
|
|
|
(46)
|
|
Policy fees and other
income
|
|
|
191
|
|
|
193
|
|
|
223
|
|
|
|
Total
revenues
|
|
|
2,020
|
|
|
1,952
|
|
|
1,994
|
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,284
|
|
|
1,303
|
|
|
1,251
|
|
Interest
credited
|
|
|
146
|
|
|
151
|
|
|
146
|
|
Acquisition and
operating expenses, net of deferrals
|
|
|
247
|
|
|
231
|
|
|
229
|
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
112
|
|
|
72
|
|
|
84
|
|
Interest
expense
|
|
|
59
|
|
|
60
|
|
|
60
|
|
|
|
Total benefits and
expenses
|
|
|
1,848
|
|
|
1,817
|
|
|
1,770
|
|
Income from
continuing operations before income taxes
|
|
|
172
|
|
|
135
|
|
|
224
|
|
Provision for income
taxes
|
|
|
34
|
|
|
30
|
|
|
66
|
|
Income from
continuing operations
|
|
|
138
|
|
|
105
|
|
|
158
|
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
(80)
|
|
|
105
|
|
|
60
|
|
Net
income
|
|
|
58
|
|
|
210
|
|
|
218
|
|
Less: net income from
continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
10
|
|
|
18
|
|
|
15
|
|
Less: net income from
discontinued operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
30
|
|
|
46
|
|
|
35
|
|
Net income available
to Genworth Financial, Inc.'s common stockholders
|
|
$
|
18
|
|
$
|
146
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to Genworth Financial, Inc.'s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders
|
|
$
|
128
|
|
$
|
87
|
|
$
|
143
|
|
|
|
Income (loss) from
discontinued operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders
|
|
|
(110)
|
|
|
59
|
|
|
25
|
|
|
|
Net income available
to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders
|
|
$
|
18
|
|
$
|
146
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth
Financial,
|
|
|
|
|
|
|
|
|
|
|
|
Inc.'s common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
$
|
0.17
|
|
$
|
0.29
|
|
|
|
Diluted
|
|
$
|
0.25
|
|
$
|
0.17
|
|
$
|
0.28
|
|
Net income available
to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
0.33
|
|
|
|
Diluted
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
0.33
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
503.5
|
|
|
500.7
|
|
|
503.4
|
|
|
|
Diluted
|
|
|
511.2
|
|
|
503.3
|
|
|
508.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income to Adjusted Operating Income
|
|
(Amounts in
millions, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
Three
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
months
ended
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
Net income available
to Genworth Financial, Inc.'s common stockholders
|
|
$
|
18
|
|
$
|
146
|
|
$
|
168
|
|
Add: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
10
|
|
|
18
|
|
|
15
|
|
Add: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
30
|
|
|
46
|
|
|
35
|
|
Net
income
|
|
|
58
|
|
|
210
|
|
|
218
|
|
Less: income (loss)
from discontinued operations, net of taxes
|
|
|
(80)
|
|
|
105
|
|
|
60
|
|
Income from
continuing operations
|
|
|
138
|
|
|
105
|
|
|
158
|
|
Less: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
10
|
|
|
18
|
|
|
15
|
|
Income from
continuing operations available to Genworth Financial, Inc.'s
common
|
|
|
|
|
|
|
|
|
|
|
|
stockholders
|
|
|
128
|
|
|
87
|
|
|
143
|
|
Adjustments to income
from continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
Net investment
(gains) losses, net9
|
|
|
(5)
|
|
|
14
|
|
|
43
|
|
Expenses related to
restructuring
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Taxes on
adjustments
|
|
|
—
|
|
|
(4)
|
|
|
(8)
|
|
Adjusted operating
income
|
|
$
|
123
|
|
$
|
99
|
|
$
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance segment
|
|
$
|
137
|
|
$
|
118
|
|
$
|
147
|
|
Australia Mortgage
Insurance segment
|
|
|
12
|
|
|
17
|
|
|
13
|
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
21
|
|
|
(24)
|
|
|
37
|
|
|
Life
Insurance
|
|
|
(25)
|
|
|
(2)
|
|
|
10
|
|
|
Fixed
Annuities
|
|
|
3
|
|
|
23
|
|
|
19
|
|
|
Total U.S. Life
Insurance segment
|
|
|
(1)
|
|
|
(3)
|
|
|
66
|
|
Runoff
segment
|
|
|
10
|
|
|
14
|
|
|
9
|
|
Corporate and
Other
|
|
|
(35)
|
|
|
(47)
|
|
|
(57)
|
|
Adjusted operating
income
|
|
$
|
123
|
|
$
|
99
|
|
$
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available
to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
0.33
|
|
|
Diluted
|
|
$
|
0.04
|
|
$
|
0.29
|
|
$
|
0.33
|
|
Adjusted operating
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
$
|
0.20
|
|
$
|
0.35
|
|
|
Diluted
|
$
|
0.24
|
|
$
|
0.20
|
|
$
|
0.35
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
503.5
|
|
|
500.7
|
|
|
503.4
|
|
|
Diluted
|
|
|
511.2
|
|
|
503.3
|
|
|
508.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
|
|
Cash, cash
equivalents, restricted cash and invested assets
|
|
$
|
74,539
|
|
$
|
68,165
|
|
Deferred acquisition
costs
|
|
|
1,881
|
|
|
3,142
|
|
Intangible assets and
goodwill
|
|
|
210
|
|
|
333
|
|
Reinsurance
recoverable
|
|
|
17,180
|
|
|
17,278
|
|
Deferred tax and
other assets
|
|
|
715
|
|
|
1,131
|
|
Separate account
assets
|
|
|
6,005
|
|
|
5,859
|
|
Assets held for sale
related to discontinued operations
|
|
|
5,123
|
|
|
5,015
|
|
|
|
|
Total
assets
|
|
$
|
105,653
|
|
$
|
100,923
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
40,489
|
|
$
|
37,940
|
|
|
Policyholder account
balances
|
|
|
22,607
|
|
|
22,968
|
|
|
Liability for policy
and contract claims
|
|
|
10,780
|
|
|
10,295
|
|
|
Unearned
premiums
|
|
|
1,863
|
|
|
2,013
|
|
|
Other
liabilities
|
|
|
1,445
|
|
|
1,529
|
|
|
Non-recourse funding
obligations
|
|
|
311
|
|
|
311
|
|
|
Long-term
borrowings
|
|
|
3,706
|
|
|
3,707
|
|
|
Separate account
liabilities
|
|
|
6,005
|
|
|
5,859
|
|
|
Liabilities held for
sale related to discontinued operations
|
|
|
2,302
|
|
|
2,112
|
|
|
|
|
Total
liabilities
|
|
|
89,508
|
|
|
86,734
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,986
|
|
|
11,987
|
|
|
Accumulated other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains
(losses) on securities not other-than-temporarily
impaired
|
|
|
1,664
|
|
|
585
|
|
|
|
|
|
Net unrealized gains
(losses) on other-than-temporarily impaired securities
|
|
|
11
|
|
|
10
|
|
|
|
|
Net unrealized
investment gains (losses)
|
|
|
1,675
|
|
|
595
|
|
|
|
|
Derivatives
qualifying as hedges
|
|
|
2,259
|
|
|
1,781
|
|
|
|
|
Foreign currency
translation and other adjustments
|
|
|
(312)
|
|
|
(332)
|
|
|
Total accumulated
other comprehensive income (loss)
|
|
|
3,622
|
|
|
2,044
|
|
|
Retained
earnings
|
|
|
1,478
|
|
|
1,118
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
14,387
|
|
|
12,450
|
|
|
Noncontrolling
interests
|
|
|
1,758
|
|
|
1,739
|
|
|
|
|
Total
equity
|
|
|
16,145
|
|
|
14,189
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
105,653
|
|
$
|
100,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Loss
From Discontinued Operations Available to
|
|
Genworth Financial
Inc.'s Common Stockholders
|
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
|
September
30,
|
|
|
|
|
2019
|
|
Estimated net
proceeds10
|
|
$
|
1,726
|
|
Carrying value of
Genworth Canada
|
|
|
3,017
|
|
Less: carrying value
attributable to noncontrolling
interests11
|
|
|
(1,303)
|
|
Carrying value,
excluding noncontrolling interests
|
|
|
1,714
|
|
Excess of estimated
net proceeds above carrying value
|
|
|
12
|
|
Less: net deferred
losses and other adjustments13
|
|
|
(201)
|
|
Pre-tax loss on
sale
|
|
|
(189)
|
|
Tax
benefit
|
|
|
25
|
|
After-tax estimated
loss on sale
|
|
|
(164)
|
|
Income from
discontinued operations, excluding loss on sale
|
|
|
84
|
|
Less: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
(30)
|
|
Loss from
discontinued operations available to Genworth Financial, Inc.'s
common stockholders
|
|
$
|
(110)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Operating Income Previously Reported to Adjusted
Operating
Income
|
Re-Presented to
Exclude Discontinued Operations
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
June
30,
|
|
September
30,
|
|
|
|
2019
|
|
2018
|
Adjusted operating
income as previously reported
|
|
$
|
204
|
|
$
|
145
|
Remove Canada
Mortgage Insurance segment adjusted operating income
reported
|
|
|
|
|
|
|
|
as discontinued
operations
|
|
|
(41)
|
|
|
(44)
|
Adjustment for
corporate overhead allocations, net of
taxes13
|
|
|
(5)
|
|
|
(4)
|
Adjustment for
interest on debt that is required to be repaid as a result of the
disposal
|
|
|
|
|
|
|
|
transaction, net of
taxes14
|
|
|
6
|
|
|
6
|
Tax
adjustments15
|
|
|
14
|
|
|
(4)
|
Re-presented adjusted
operating income
|
|
$
|
178
|
|
$
|
99
|
|
|
|
|
|
|
|
|
Impact of Foreign
Exchange on Adjusted Operating Income and Flow New Insurance
Written16
Three months ended
September 30, 2019
|
|
|
|
|
|
|
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange17
|
|
Australia
MI:
|
|
|
|
|
|
|
Adjusted operating
income
|
|
(29)
|
%
|
|
(24)
|
%
|
Flow new insurance
written
|
|
21
|
%
|
|
32
|
%
|
Flow new insurance
written (3Q19 vs. 2Q19)
|
|
24
|
%
|
|
27
|
%
|
|
|
|
|
|
|
|
Reconciliation of
Reported Yield to Core Yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
(Assets - amounts
in billions)
|
|
2019
|
|
2019
|
|
Reported Total
Invested Assets and Cash
|
|
$
|
73.9
|
|
|
$
|
72.0
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
Unrealized gains
(losses)
|
|
|
7.5
|
|
|
|
5.7
|
|
|
Adjusted End of
Period Invested Assets and Cash
|
|
$
|
66.3
|
|
|
$
|
66.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets and Cash Used in Reported Yield Calculation
|
|
$
|
66.2
|
|
|
$
|
66.0
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted commercial
mortgage loans related to a securitization
entity18
|
|
|
―
|
|
|
|
―
|
|
|
Average Invested
Assets and Cash Used in Core Yield Calculation
|
|
$
|
66.2
|
|
|
$
|
66.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in
millions)
|
|
|
|
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
816
|
|
|
$
|
816
|
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
13
|
|
|
|
7
|
|
|
|
Other non-core
items19
|
|
|
8
|
|
|
|
7
|
|
|
|
Restricted commercial
mortgage loans related to a securitization
entity18
|
|
|
―
|
|
|
|
―
|
|
|
Core Net Investment
Income
|
|
$
|
795
|
|
|
$
|
802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.93
|
%
|
|
|
4.95
|
%
|
|
Core Yield
|
|
|
4.80
|
%
|
|
|
4.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Private Mortgage Insurer Eligibility
Requirements
2 Unless otherwise stated, all references in this press
release to net income (loss), net income per share, net income
(loss) from discontinued operations, adjusted operating income
(loss), adjusted operating income per share and book value per
share should be read as net income (loss) available to Genworth's
common stockholders, net income (loss) available to Genworth's
common stock-holders per diluted share, net income (loss) from
discontinued operations available to Genworth's common
stockholders, adjusted operating income (loss) available to
Genworth's common stockholders, adjusted operating income (loss)
available to Genworth's common stockholders per diluted share and
book value available to Genworth's common stockholders per share,
respectively.
3 This is a financial measure that is 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.
4 A breakdown of the net loss from discontinued
operations is provided in a table at the end of this press
release.
5 Company estimate for the third quarter of 2019 due to
timing of the preparation and filing of statutory
statements.
6 The PMIERs sufficiency ratio is calculated as
available assets divided by required assets as defined within
PMIERs. The current period PMIERs sufficiency ratio is an estimate
due to the timing of the PMIERs filing for the U.S. mortgage
insurance business. The periods ending September 30, 2019 and June 30, 2019 reflect the revised PMIERs
standards effective March 31, 2019.
As of September 30, 2019,
June 30, 2019, and September 30, 2018, the PMIERs sufficiency ratios
were in excess of $850 million,
$650 million and $750 million, respectively, of available assets
above the applicable PMIERs requirements.
7 Holding company cash and 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.
8 Genworth Holdings, Inc. had $297 million, $358
million and $534 million of
cash, cash equivalents and restricted cash as of September 30, 2019, June
30, 2019 and September 30,
2018, respectively, which included approximately
$7 million, $7
million and $16 million of
restricted cash, respectively. Genworth Holdings, Inc. also held
$69 million, $45 million and $75
million in U.S. government securities as of September 30, 2019, June
30, 2019 and September 30,
2018, respectively, which included $59 million, $42
million and $37 million,
respectively, of restricted assets.
9 For the three months ended September 30, 2019, September 30, 2018 and June 30, 2019, net investment (gains) losses were
adjusted for DAC and other intangible amortization and certain
benefit reserves of $(3) million in
each period and adjusted for net investment gains (losses)
attributable to noncontrolling interests of $(4) million, $1
million and zero, respectively.
10 Net proceeds after adjusting for fees, expenses,
foreign exchange, and special dividend of CAD$1.45 announced on September 12, 2019.
11 Excludes net deferred losses attributable to
noncontrolling interests of $102
million that are described in the following footnote.
12 Primarily driven by net deferred losses from
cumulative historical foreign currency translation adjustments and
deferred taxes in other comprehensive income as a result of tax law
changes and change of intent regarding permanent reinvestment
partially offset by unrealized net gain on investments reflected in
other comprehensive income.
13 Expenses previously reported in the Canada MI segment
and moved to Corporate and Other Activities.
14 Interest on a senior secured term loan owed by
Genworth Holdings, Inc. previously reported in Corporate and Other
Activities and moved to discontinued operations.
15 Tax impacts resulting from the classification of
Genworth Canada as held-for-sale.
16 All percentages are comparing the third quarter of
2019 to the third quarter of 2018 unless otherwise stated.
17 The impact of foreign exchange was calculated using
the comparable prior period exchange rates.
18 Represents the incremental assets and investment
income related to restricted commercial mortgage loans.
19 Includes cost basis adjustments on structured
securities and various other immaterial items.
View original
content:http://www.prnewswire.com/news-releases/genworth-financial-announces-third-quarter-2019-results-300947398.html
SOURCE Genworth Financial, Inc.