RICHMOND, Va., May 5, 2020 /PRNewswire/ --
- Reapprovals Received From New York Department Of Financial
Services (NYDFS) And Virginia Bureau Of Insurance For Pending
Merger With China Oceanwide Holdings Group Co., Ltd
(Oceanwide)
-
- Merger Agreement Extended To Not Later Than June 30, 2020
- U.S. Mortgage Insurance (MI) Adjusted Operating Income Of
$148 Million, 19 Percent Above Prior
Year
-
- U.S. MI's PMIERs1 Sufficiency Ratio At 142 Percent,
In Excess Of $1.1 Billion Above
Requirements
- No Observable Impact From COVID-19 Pandemic On Delinquencies In
First Quarter
- Strong Capital Levels In Australia MI With Approximately AUD$270
Million Above Management Targets
- Continued Progress Toward LTC2 Multi-Year Rate
Action Plan (MYRAP) With $45 Million
Incremental Annual Rate Increases Approved In First Quarter
- U.S. Life Insurance Segment Adversely Impacted By Decline In
Equity Markets And Interest Rates
- Holding Company Cash And Liquid Assets Of $575 Million With $411
Million Holding Company Public Debt Repaid During The
Quarter, Including Early Redemption Of June
2020 Senior Notes
- Closely Monitoring COVID-19 Pandemic, Supporting Customers And
Employees Amid Uncertainty
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended March 31, 2020. The
company reported a net loss3 of $66 million, or $0.134 per diluted share, in the
first quarter of 2020, compared with net income of $174 million, or $0.34 per diluted share, in the first quarter of
2019. The company reported adjusted operating income5 of
$33 million, or $0.07 per diluted share, in the first quarter of
2020, compared with adjusted operating income of $95 million, or $0.19 per diluted share, in the first quarter of
2019.
COVID-19 Update
The COVID-19 pandemic has had a profound effect on the global
economy, and Genworth has been proactive to support its employees,
customers and communities around the world. The company has
implemented business continuity procedures including a global work
from home policy initiated on March
11th and has continued to serve its customers and
policyholders effectively with minimal disruption. Genworth is
providing additional financial, health and wellness resources to
employees including additional paid leave to assist employees in
caring for themselves and their family members. Genworth is also
following regulatory guidelines to support loss mitigation efforts
for mortgage borrowers and extend grace periods for life insurance,
LTC and annuity policyholders. Genworth has extended these and
other relief options to customers to ensure continuation of
insurance coverage and mitigate financial hardship for customers
and policyholders.
The COVID-19 pandemic and ensuing global economic slowdown
impacted the company's first quarter of 2020 financial results
primarily as a result of the significant decline in equity markets
and interest rates during the quarter, which led to
unfavorable impacts in Genworth's fixed and variable annuity
products. The global MI businesses experienced limited impacts from
the pandemic in the first quarter, as mortgage origination levels
remained strong and delinquencies remained stable.
The company is closely monitoring the evolving macroeconomic
environment and is focused on managing and mitigating its risks and
effects. The extent of the economic impact remains uncertain and
will depend on the severity of the pandemic and the shape of the
economic recovery. In the U.S. and Australia MI businesses, the
company is anticipating both a decline in purchase originations in
the second half of 2020 due to lower economic activity and an
increase in delinquencies as a result of higher unemployment.
Higher delinquencies may be mitigated by higher cure rates as
economic activity resumes. Given the expected increase in
delinquency activity and resulting increase in capital
requirements, the company may not receive further dividends from
its MI businesses in 2020 in order to preserve capital in its
insurance subsidiaries during this period of uncertainty. The
amount and timing of dividends will be reevaluated later in the
year and depend on the economic recovery from COVID-19.
In the U.S. Life Insurance segment, interest rate and equity
market movements will continue to impact GAAP and statutory
results. The company continues to manage the U.S. life insurance
businesses on a standalone basis with no plans to infuse or extract
capital other than as committed in connection with the completion
of the Oceanwide transaction.
"I am very proud of our team's response to these unprecedented
challenges and the dedication of our employees as we continue to
serve all of our customers and policyholders during this volatile
period," said Tom McInerney,
President and CEO of Genworth. "Genworth had a strong start to the
year, but headwinds from the COVID-19 pandemic have caused
significant volatility and decline in our market environments. We
expect those challenges to persist into the second quarter and
potentially longer. As we navigate through this time of
uncertainty, we are doing everything in our power to ensure the
safety and wellbeing of our employees while continuing to deliver
outstanding service to our customers and policyholders."
Transaction Update
Genworth and Oceanwide made significant progress towards closing
their transaction during the first quarter. Both parties remain
fully committed to closing the transaction.
On March 24, Genworth announced
that the NYDFS reapproved the proposed acquisition of control by
Oceanwide of Genworth's New
York-domiciled insurance company, Genworth Life Insurance
Company of New York (GLICNY). In
connection with the NYDFS' reapproval, Genworth committed,
among other things, to contribute $100
million to GLICNY at the closing of the transaction.
On March 31, Genworth announced
that the Virginia State Corporation Commission, Bureau of Insurance
also reapproved the proposed acquisition of control by Oceanwide of
Genworth's insurance companies domiciled in Virginia.
Oceanwide is currently finalizing its funding plan for the
transaction purchase price of $5.43
per share. As previously disclosed, Oceanwide has a financing
commitment for debt funding of up to $1.8
billion through Hony Capital to partially finance the
acquisition of Genworth, which was extended to June 30, 2020. After the funding plan is
finalized, Oceanwide will then discuss the currency conversion and
transfer of funds with China's
State Administration of Foreign Exchange (SAFE) in order to
complete the transaction. Oceanwide will also seek confirmation
from the Delaware Department of Insurance that the acquisition of
Genworth's Delaware domiciled
insurer may proceed under the existing approval.
Given the unprecedented market disruptions due to the
coronavirus pandemic, Oceanwide and Genworth extended the merger
agreement deadline to not later than June
30, 2020 to provide the parties with additional time if
needed to close the transaction. Genworth and Oceanwide are working
to close the transaction as soon as possible. While the parties
announced in March that they were targeting a closing by the end of
May, they currently expect that the challenges caused by the
pandemic will likely delay the closing until the end of June.
Oceanwide also remains 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.
"The unprecedented market volatility and decline due to the
coronavirus has presented challenges across the economy. Despite
those challenges, Genworth was able to make significant progress
towards closing the transaction with Oceanwide," said Tom McInerney, President and CEO of Genworth.
"Like Oceanwide, we remain fully committed to closing the
transaction as soon as possible, which we believe is the best value
for shareholders."
"Oceanwide remains fully committed to the Genworth transaction,"
said Lu Zhiqiang, chairman of
Oceanwide. "I continue to believe the long-term value of Genworth
to Oceanwide is very compelling. We are finalizing the
transaction's financing and look forward to welcoming Genworth to
Oceanwide's family of companies as soon as possible."
Financial Performance
Consolidated Net
Income (Loss) & Adjusted Operating
Income
|
|
|
|
|
Three months ended
March 31
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Per
|
|
|
|
|
Per
|
|
|
|
|
|
|
|
|
diluted
|
|
|
|
|
diluted
|
|
Total
|
(Amounts in
millions, except per share)
|
|
Total
|
|
share
|
|
Total
|
|
share
|
|
% change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth's common stockholders
|
|
$
|
(66)
|
|
$
|
(0.13)
|
|
$
|
174
|
|
$
|
0.34
|
|
(138)%
|
Adjusted operating
income
|
|
$
|
33
|
|
$
|
0.07
|
|
$
|
95
|
|
$
|
0.19
|
|
(65)%
|
Weighted-average
diluted shares4
|
|
|
504.3
|
|
|
|
|
|
508.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March
31
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Book value per
share
|
|
|
|
|
$
|
28.61
|
|
|
|
|
$
|
25.98
|
|
|
Book value per share,
excluding accumulated other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
(loss)
|
|
|
|
$
|
21.05
|
|
|
|
|
$
|
21.03
|
|
|
The net loss in the quarter included investment losses of
$89 million, net of taxes and other
adjustments. The investment losses were driven by net losses on
derivatives, including losses due to guaranteed minimum withdrawal
benefits on variable annuities and foreign exchange hedges in
Australia MI due to the decline in
the Australian dollar, and mark-to-market losses on limited
partnerships and equity securities. Net income in the first quarter
of 2019 included $56 million from
investment gains, net of taxes and other adjustments.
Net investment income was $793
million in the quarter, compared to $794 million in both the prior quarter and the
prior year. Net investment income remained in line with the prior
year with higher income from bond calls and prepays offset by lower
income from limited partnerships. Net investment income remained in
line with the prior quarter as lower income from bond calls and
prepays and limited partnerships offset favorable prepayment speed
adjustments on mortgage backed securities. The reported yield and
the core yield5 for the quarter were 4.71
percent and 4.57 percent, respectively, compared to 4.74 percent
and 4.62 percent, respectively, in the prior quarter.
Genworth's effective tax rate was approximately 12 percent on
its net loss for the quarter. The effective tax rate was reduced by
the tax effect of forward starting swap gains settled prior to the
change in the corporate tax rate under the 2017 Tax Cuts and Jobs
Act, which continue to be tax effected at 35 percent as they are
amortized into net investment income.
Adjusted operating income (loss) results by business line are
summarized in the table below:
Adjusted Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q1
20
|
|
Q4
19
|
|
Q1
19
|
U.S. Mortgage
Insurance
|
|
$
|
148
|
|
$
|
160
|
|
$
|
124
|
Australia Mortgage
Insurance
|
|
|
9
|
|
|
12
|
|
|
14
|
U.S. Life
Insurance
|
|
|
(70)
|
|
|
(115)
|
|
|
(5)
|
Runoff
|
|
|
(13)
|
|
|
17
|
|
|
20
|
Corporate and
Other
|
|
|
(41)
|
|
|
(50)
|
|
|
(58)
|
Total Adjusted
Operating Income
|
|
$
|
33
|
|
$
|
24
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (loss) 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)
|
|
Q1
20
|
|
Q4
19
|
|
Q1
19
|
Adjusted operating
income
|
|
$
|
148
|
|
$
|
160
|
|
$
|
124
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
|
Primary
Flow
|
|
$
|
17,900
|
|
$
|
18,100
|
|
$
|
9,600
|
Loss ratio
|
|
|
8%
|
|
|
4%
|
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. MI reported adjusted operating income of $148 million, compared with $160 million in the prior quarter and
$124 million in the prior year. Prior
quarter results included $21 million
of favorable after-tax impacts from assumption updates. U.S. MI's
flow insurance in force increased 17 percent versus the prior year
from strong new insurance written (NIW), driving continued growth
in earned premiums. U.S. MI achieved $17.9
billion in flow NIW in the quarter, up 86 percent versus the
prior year primarily driven by higher refinance originations and
strong estimated market share. Flow NIW decreased one percent from
the prior quarter due to market seasonality. The growth in earned
premiums versus the prior year was also driven by increased single
premium policy cancellations from higher mortgage refinancing
activity partially offset by lower average premium rates.
The company is not aware of any new delinquencies in the first
quarter related to the COVID-19 pandemic and did not identify any
deterioration in the performance of existing delinquencies that
would warrant reserve strengthening, as delinquencies remained low
with strong cure rates. The U.S. MI loss ratio was eight percent,
flat to the prior year and up four points sequentially. The
favorable assumption updates in the prior quarter reduced that
period's loss ratio by six points.
Australia Mortgage Insurance
Operating
Metrics
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q1
20
|
|
Q4
19
|
|
Q1
19
|
Adjusted operating
income
|
|
$
|
9
|
|
$
|
12
|
|
$
|
14
|
New insurance
written
|
|
|
|
|
|
|
|
|
|
|
Flow
|
|
$
|
4,100
|
|
$
|
4,900
|
|
$
|
3,400
|
|
Bulk
|
|
$
|
200
|
|
$
|
400
|
|
$
|
500
|
Loss ratio
|
|
|
34%
|
|
|
30%
|
|
|
34%
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia MI reported adjusted operating income of $9
million, down from $12 million in the
prior quarter and $14 million in the prior year.
Australia MI flow NIW decreased 16 percent sequentially from normal
seasonal patterns and increased 26 percent versus the prior year
primarily due to higher mortgage origination volume from a key
customer. The loss ratio in the quarter was 34 percent, up four
points sequentially primarily due to seasonal increases in losses
and lower premiums due to portfolio seasoning and flat to the prior
year with lower premiums from portfolio seasoning and lower policy
cancellations offset by lower losses primarily from favorable aging
of existing delinquencies.
U.S. Life Insurance
Adjusted Operating
Income (Loss)
|
|
|
|
|
|
|
|
|
|
(Amounts in
millions)
|
|
Q1
20
|
|
Q4
19
|
|
Q1
19
|
Long Term Care
Insurance
|
|
$
|
1
|
|
$
|
19
|
|
$
|
(20)
|
Life
Insurance
|
|
|
(77)
|
|
|
(164)
|
|
|
(2)
|
Fixed
Annuities
|
|
|
6
|
|
|
30
|
|
|
17
|
Total U.S. Life
Insurance
|
|
$
|
(70)
|
|
$
|
(115)
|
|
$
|
(5)
|
Long Term Care Insurance
LTC reported adjusted operating income of $1 million, compared with adjusted operating
income of $19 million in the prior
quarter and an adjusted operating loss of $20 million in the prior year. Earnings from in
force rate actions were higher than the prior year but lower than
the prior quarter. Losses on new claims increased compared to
the prior quarter and prior year, partially offset by continued
favorable development on prior period incurred but not reported
claims. Existing claims performance improved, driven by
seasonally higher terminations compared to the prior quarter and a
slightly favorable impact from the quarterly benefit utilization
rate update compared to an unfavorable update in the prior
year.
Life Insurance
Life insurance reported an adjusted operating loss of
$77 million, compared with
$164 million in the prior quarter and
$2 million in the prior year. During
the prior quarter, the company completed its annual review of life
insurance assumptions and recorded after-tax charges of
$139 million primarily driven by the
lower interest rate environment. Results reflected higher
amortization of deferred acquisition costs (DAC) compared to the
prior year and prior quarter, primarily associated with higher
lapses from a large 20-year level-premium term life insurance block
entering its post-level premium periods. Compared to the prior
quarter and prior year, results also reflected reserve increases
during the premium grace period in the 10-year term universal life
insurance product associated with policies entering the post-level
premium period, as well as higher mortality in universal and term
life insurance products.
Fixed Annuities
Fixed annuities reported adjusted operating income of
$6 million, compared with
$30 million in the prior quarter and
$17 million in the prior year.
Results versus the prior quarter and prior year reflected
unfavorable fixed indexed annuities reserve changes and DAC
amortization due to the decline in equity markets and interest
rates in the quarter, lower mortality in the single premium
immediate annuity product and a decrease in net spreads due to
block runoff. Results in the prior year included unfavorable
after-tax charges of $13 million from
loss recognition testing on the single premium immediate annuity
block.
Runoff
Runoff reported an adjusted operating loss of $13 million, compared with adjusted operating
income of $17 million in the prior
quarter and adjusted operating income of $20
million in the prior year. Compared to the prior quarter and
prior year, results reflected unfavorable impacts in the company's
variable annuity business from the decline in equity markets and
interest rates during the quarter.
Corporate And Other
Corporate and Other reported an adjusted operating loss of
$41 million, compared with
$50 million in the prior quarter and
$58 million in the prior year.
Results in the current quarter reflected lower interest expense
following the early redemption of the June
2020 senior notes and higher investment income.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital &
Liquidity Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in
millions)
|
|
Q1
20
|
|
Q4
19
|
|
Q1
19
|
|
U.S.
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-To-Capital Ratio6
|
|
|
12.2:1
|
|
|
|
12.2:1
|
|
|
|
11.9:1
|
|
|
Genworth Mortgage
Insurance Corporation Risk-To-Capital
Ratio6
|
|
|
12.4:1
|
|
|
|
12.5:1
|
|
|
|
12.1:1
|
|
|
Private Mortgage
Insurer Eligibility Requirements (PMIERs) Sufficiency Ratio6,
7
|
|
|
142
|
%
|
|
|
138
|
%
|
|
|
123
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio6
|
|
|
178
|
%
|
|
|
191
|
%
|
|
|
201
|
%
|
U.S. Life Insurance
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC)
Ratio6
|
|
|
195
|
%
|
|
|
213
|
%
|
|
|
195
|
%
|
Holding Company Cash
and Liquid Assets8, 9
|
|
$
|
575
|
|
|
$
|
1,531
|
|
|
$
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key Points
- U.S. MI's PMIERs sufficiency ratio is estimated to be 142
percent, in excess of $1.1 billion
above requirements. The PMIERs sufficiency ratio benefited three
points from a 30 percent multiplier applied to the risk based
required asset factor for each non-performing loan backed by a
property located in a FEMA Declared Major Disaster Area. PMIERs
sufficiency is expected to decline in upcoming periods as a result
of higher delinquencies related to the macroeconomic environment,
taking into account the reduced PMIERs required asset factors;
- Australia MI's PCA ratio is estimated to be 178 percent, above
the company's target operating range of 132 to 144 percent. The PCA
ratio declined in the quarter following a write-off of DAC in local
results due to higher expected future claims;
- U.S. life insurance companies' consolidated statutory
risk-based capital is estimated to be 195%, down from the previous
quarter primarily due to statutory losses on variable annuities due
to the decline in equity markets and interest rates during the
quarter; and
- The holding company ended the quarter with $575 million of cash and restricted liquid
assets. During the first quarter, the holding company redeemed its
$397 million debt due in June 2020 and repurchased an additional
$14 million of principal on its 2021
maturities. In addition, cash outflows in the quarter included
$200 million to retire its
intercompany note with Genworth Life Insurance Company, a
previously disclosed £100 million interim payment (USD$134 million) to AXA related to an adverse
court ruling on pending litigation, additional cash collateral
posted on interest rate swaps related to the company's hybrid debt
and other expenses including interest payments on outstanding debt
and employee benefit payments.
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 subsidiary, Genworth Mortgage Insurance Australia
Limited, separately releases financial and other information about
its operations. This information can be found at
http://www.genworth.com.au.
Conference Call And Financial Supplement Information
This press release and the first quarter 2020 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 8:00 a.m. on May 6,
2020. Investors are encouraged to review these
materials.
Genworth will conduct a conference call on May 6, 2020 at 9:00 a.m.
(ET) to discuss business results and provide an update on
the pending transaction with Oceanwide. Genworth's conference call
will be accessible via telephone and the Internet. The dial-in
number for Genworth's May
6th conference call is 888 208.1820 or 323
794.2110 (outside the U.S.); conference ID # 7621267. 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 # 7621267 through May 20,
2020. 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
estimated future credit losses, 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.
Adjustments to reconcile net income (loss) available to Genworth
Financial, Inc.'s common stockholders to adjusted operating income
(loss) assume a 21 percent tax rate for the company's domestic
segments and a 30 percent tax rate for its Australia Mortgage
Insurance segment 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.
In January 2020, the company paid
a pre-tax make-whole expense of $9
million related to the early redemption of Genworth
Holdings, Inc.'s (Genworth Holdings) senior notes originally
scheduled to mature in June 2020 and
Rivermont Life Insurance Company I, the company's indirect
wholly-owned special purpose consolidated captive insurance
subsidiary, early redeemed all of its $315
million outstanding non-recourse funding obligations
originally due in 2050 resulting in a pre-tax loss of $4 million from the write-off of deferred
borrowing costs. The company also repurchased $14 million principal amount of Genworth
Holdings' senior notes with 2021 maturity dates for a pre-tax gain
of $1 million in the first quarter of
2020. These transactions were excluded from adjusted operating
income (loss) as they relate to gains (losses) on the early
extinguishment of debt.
The company recorded a pre-tax expense of $1 million and $4
million in the first quarters of 2020 and 2019,
respectively, 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 (loss) during the periods presented.
The tables at the end of this press release provide a
reconciliation of net income (loss) available to Genworth
Financial, Inc.'s common stockholders to adjusted operating income
for the three months ended March 31,
2020 and 2019, as well as for the three months ended
December 31, 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 transaction 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
statements the company makes regarding the potential impacts of the
COVID-19 pandemic. 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 in a
timely manner or at all, which may adversely affect the company's
business and the price of its common stock; the parties' inability
to obtain regulatory approvals, clearances or extensions, or the
possibility that such regulatory approvals or clearances may
further delay the transaction or may not be received prior to
June 30, 2020 (and either or both of
the parties may not be willing to further waive their end date
termination rights beyond June 30,
2020) 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 more previously obtained regulatory approvals or
clearances no longer valid, one or both parties unwilling to
proceed with the transaction or unable to comply with the
conditions to existing regulatory approvals or one or both of the
parties may be unwilling to accept any new condition under a
regulatory approval; 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 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 or
that the parties will be unable to agree upon a closing date
following receipt of all regulatory approvals and clearances; the
risks regarding the ongoing availability of any required financing;
the risk that existing and potential legal proceedings may be
instituted in connection with the transaction that may delay the
transaction, make it more costly or ultimately preclude it; the
risk that the proposed transaction disrupts the company's current
plans and operations as a result of the announcement and
consummation of the transaction; certain restrictions during the
pendency of the transaction 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 transaction;
further rating agency actions and downgrades in the company's
credit or financial strength ratings; changes in applicable laws or
regulations; the company's ability to recognize the anticipated
benefits of the transaction; the amount of the costs, fees,
expenses and other charges related to the transaction; the risks
related to diverting management's attention from the company's
ongoing business operations; the company's ability to attract,
recruit, retain and motivate current and prospective employees may
be adversely affected; and potential adverse reactions or changes
to the company's business relationships with clients, employees,
suppliers or other parties or other business uncertainties
resulting from the announcement of the transaction or during the
pendency of the transaction, including but not limited to such
changes that could affect the company's financial performance;
- 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 risk that the impacts of or
uncertainty created by the COVID-19 pandemic delay or hinder
alternative transactions or otherwise make alternative plans less
attractive; 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 in the
future to its assumptions, methodologies or otherwise in connection
with periodic or other reviews); risks related to the impact of the
company's annual review of assumptions and methodologies related to
its long term care insurance claim reserves and margin reviews,
including risks that additional information obtained in the future
or other changes to assumptions or methodologies materially affect
margins; the inability to accurately estimate the impacts of the
COVID-19 pandemic; inaccurate models; deviations from the company's
estimates and actuarial assumptions or other reasons in its 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 future changes it may make to its assumptions, methodologies or
otherwise in connection with periodic or other reviews); adverse
impact on the company's financial results as a result of projected
profits followed by projected losses (as is currently the case with
its long term care insurance business); adverse impact on the
company's results of operations, including the outcome of its
reviews of the premium earnings pattern for its mortgage insurance
businesses; 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, including as a result of
prolonged unemployment, a sustained low interest rate environment
and other displacements caused by the COVID-19 pandemic; 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 mortgage insurance
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, regulatory
restrictions resulting from the COVID-19 pandemic, and other
insurance, regulatory or corporate law restrictions; the inability
to successfully seek in force rate action increases (including
increased premiums and associated benefit reductions) in the
company's long term care insurance business, including as a result
of the COVID-19 pandemic; adverse change in regulatory
requirements, including risk-based capital; changes in regulations
adversely affecting the company's Australian mortgage insurance
business; inability to continue to maintain the private mortgage
insurer eligibility requirements (PMIERs); the impact on capital
levels of increased delinquencies caused by the COVID-19 pandemic;
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; 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); the impact on holding company
liquidity caused by the inability to receive dividends or other
returns of capital from the company's mortgage insurance businesses
as a result of the COVID-19 pandemic; continued availability of
capital and financing; 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; the impact on processes caused by
shelter-in-place or other governmental restrictions imposed as a
result of the COVID-19 pandemic; 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 reduce benefits
sufficiently, and in a timely manner, on its in force long term
care insurance policies, in each case, as currently anticipated and
as may be required from time to time in the future (including as a
result of a delay or failure to obtain any necessary regulatory
approvals, including as a result of the COVID-19 pandemic, or
unwillingness or inability of policyholders to pay increased
premiums and/or accept reduced benefits), including to offset any
negative impact on the company's long term care insurance margins;
availability, affordability and adequacy of reinsurance to protect
the company against losses; 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 and the
occurrence of natural or man-made disasters or a pandemic, such as
the COVID-19 pandemic, could materially adversely affect its
financial condition and results of operations.
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
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,015
|
|
$
|
988
|
|
$
|
1,033
|
|
Net investment
income
|
|
|
793
|
|
|
794
|
|
|
794
|
|
Net investment gains
(losses)
|
|
|
(152)
|
|
|
75
|
|
|
23
|
|
Policy fees and other
income
|
|
|
181
|
|
|
187
|
|
|
188
|
|
|
|
Total
revenues
|
|
|
1,837
|
|
|
2,044
|
|
|
2,038
|
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,361
|
|
|
1,282
|
|
|
1,346
|
|
Interest
credited
|
|
|
141
|
|
|
147
|
|
|
138
|
|
Acquisition and
operating expenses, net of deferrals
|
|
|
249
|
|
|
237
|
|
|
249
|
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
116
|
|
|
81
|
|
|
164
|
|
Interest
expense
|
|
|
52
|
|
|
60
|
|
|
60
|
|
|
|
Total benefits and
expenses
|
|
|
1,919
|
|
|
1,807
|
|
|
1,957
|
|
Income (loss) from
continuing operations before income taxes
|
|
|
(82)
|
|
|
237
|
|
|
81
|
|
Provision (benefit)
for income taxes
|
|
|
(10)
|
|
|
69
|
|
|
26
|
|
Income (loss) from
continuing operations
|
|
|
(72)
|
|
|
168
|
|
|
55
|
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
—
|
|
|
62
|
|
|
(31)
|
|
Net income
(loss)
|
|
|
(72)
|
|
|
230
|
|
|
24
|
|
Less: net income
(loss) from continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
(6)
|
|
|
20
|
|
|
19
|
|
Less: net income from
discontinued operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
|
—
|
|
|
36
|
|
|
22
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
(66)
|
|
$
|
174
|
|
$
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations available to Genworth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, Inc.'s
common stockholders
|
|
$
|
(66)
|
|
$
|
148
|
|
$
|
36
|
|
|
|
Income (loss) from
discontinued operations available to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Genworth Financial,
Inc.'s common stockholders
|
|
|
—
|
|
|
26
|
|
|
(53)
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stockholders
|
|
$
|
(66)
|
|
$
|
174
|
|
$
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations available to Genworth
Financial,
|
|
|
|
|
|
|
|
|
|
|
|
Inc.'s common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.13)
|
|
$
|
0.29
|
|
$
|
0.07
|
|
|
|
Diluted
|
|
$
|
(0.13)
|
|
$
|
0.29
|
|
$
|
0.07
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
|
|
|
|
|
|
|
|
|
|
|
|
stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.13)
|
|
$
|
0.35
|
|
$
|
(0.03)
|
|
|
|
Diluted
|
|
$
|
(0.13)
|
|
$
|
0.34
|
|
$
|
(0.03)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
504.3
|
|
|
501.2
|
|
|
503.5
|
|
|
|
Diluted4
|
|
|
504.3
|
|
|
508.6
|
|
|
510.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income (Loss) to Adjusted Operating Income
|
|
(Amounts in
millions, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
Three
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
months
ended
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2019
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
(66)
|
|
$
|
174
|
|
$
|
(17)
|
|
Add: net income
(loss) from continuing operations attributable to noncontrolling
interests
|
|
|
(6)
|
|
|
20
|
|
|
19
|
|
Add: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
36
|
|
|
22
|
|
Net income
(loss)
|
|
|
(72)
|
|
|
230
|
|
|
24
|
|
Less: income (loss)
from discontinued operations, net of taxes
|
|
|
—
|
|
|
62
|
|
|
(31)
|
|
Income (loss) from
continuing operations
|
|
|
(72)
|
|
|
168
|
|
|
55
|
|
Less: net income
(loss) from continuing operations attributable to noncontrolling
interests
|
|
|
(6)
|
|
|
20
|
|
|
19
|
|
Income (loss) from
continuing operations available to Genworth Financial, Inc.'s
|
|
|
|
|
|
|
|
|
|
|
common
stockholders
|
|
|
(66)
|
|
|
148
|
|
|
36
|
|
Adjustments to income
(loss) from continuing operations available to
Genworth
|
|
|
|
|
|
|
|
|
|
|
Financial,
Inc.'s common stockholders:
|
|
|
|
|
|
|
|
|
|
|
Net investment
(gains) losses, net10
|
|
|
115
|
|
|
(71)
|
|
|
(17)
|
|
Losses on early
extinguishment of debt
|
|
|
12
|
|
|
—
|
|
|
—
|
|
Expenses related to
restructuring
|
|
|
1
|
|
|
4
|
|
|
—
|
|
Taxes on
adjustments
|
|
|
(29)
|
|
|
14
|
|
|
5
|
|
Adjusted operating
income
|
|
$
|
33
|
|
$
|
95
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance segment
|
|
$
|
148
|
|
$
|
124
|
|
$
|
160
|
|
Australia Mortgage
Insurance segment
|
|
|
9
|
|
|
14
|
|
|
12
|
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
Long Term
Care Insurance
|
|
|
1
|
|
|
(20)
|
|
|
19
|
|
Life
Insurance
|
|
|
(77)
|
|
|
(2)
|
|
|
(164)
|
|
Fixed
Annuities
|
|
|
6
|
|
|
17
|
|
|
30
|
|
Total U.S.
Life Insurance segment
|
|
|
(70)
|
|
|
(5)
|
|
|
(115)
|
|
Runoff
segment
|
|
|
(13)
|
|
|
20
|
|
|
17
|
|
Corporate and
Other
|
|
|
(41)
|
|
|
(58)
|
|
|
(50)
|
|
Adjusted operating
income
|
|
$
|
33
|
|
$
|
95
|
|
$
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(0.13)
|
|
$
|
0.35
|
|
$
|
(0.03)
|
|
|
Diluted
|
|
|
$
|
(0.13)
|
|
$
|
0.34
|
|
$
|
(0.03)
|
|
Adjusted operating
income per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.07
|
|
$
|
0.19
|
|
$
|
0.05
|
|
|
Diluted
|
|
|
$
|
0.07
|
|
$
|
0.19
|
|
$
|
0.05
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
504.3
|
|
|
501.2
|
|
|
503.5
|
|
|
Diluted4
|
|
|
|
504.3
|
|
|
508.6
|
|
|
510.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Assets
|
|
(Unaudited)
|
|
|
|
Cash, cash
equivalents, restricted cash and invested assets
|
|
$
|
73,861
|
|
$
|
75,226
|
|
Deferred acquisition
costs
|
|
|
1,898
|
|
|
1,836
|
|
Intangible assets and
goodwill
|
|
|
263
|
|
|
201
|
|
Reinsurance
recoverable, net
|
|
|
17,080
|
|
|
17,103
|
|
Deferred tax and
other assets
|
|
|
775
|
|
|
868
|
|
Separate account
assets
|
|
|
4,967
|
|
|
6,108
|
|
|
|
Total
assets
|
|
$
|
98,844
|
|
$
|
101,342
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
39,339
|
|
$
|
40,384
|
|
|
Policyholder account
balances
|
|
|
22,313
|
|
|
22,217
|
|
|
Liability for policy
and contract claims
|
|
|
11,132
|
|
|
10,958
|
|
|
Unearned
premiums
|
|
|
1,722
|
|
|
1,893
|
|
|
Other
liabilities
|
|
|
1,686
|
|
|
1,562
|
|
|
Non-recourse funding
obligations
|
|
|
—
|
|
|
311
|
|
|
Long-term
borrowings
|
|
|
2,851
|
|
|
3,277
|
|
|
Separate account
liabilities
|
|
|
4,967
|
|
|
6,108
|
|
|
|
Total
liabilities
|
|
|
84,010
|
|
|
86,710
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,993
|
|
|
11,990
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
3,815
|
|
|
3,433
|
|
|
Retained
earnings
|
|
|
1,340
|
|
|
1,461
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
14,449
|
|
|
14,185
|
|
|
Noncontrolling
interests
|
|
|
385
|
|
|
447
|
|
|
|
Total
equity
|
|
|
14,834
|
|
|
14,632
|
|
|
|
Total liabilities and
equity
|
|
$
|
98,844
|
|
$
|
101,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Operating Income Previously Reported to Adjusted Operating
Income
|
Re-Presented to
Exclude Discontinued Operations
|
(Amounts in
millions)
|
|
|
|
Three months
ended
|
|
|
March
31,
|
|
|
2019
|
Adjusted operating
income as previously reported
|
$
|
121
|
Remove Canada
Mortgage Insurance segment adjusted operating income reported
as
discontinued operations
|
|
(41)
|
Adjustment for
corporate overhead allocations, net of
taxes11
|
|
(4)
|
Adjustment for
interest on debt that was required to be repaid as a result of the
disposal
transaction, net of
taxes12
|
|
6
|
Tax
adjustments13
|
|
13
|
Re-presented adjusted
operating income
|
$
|
95
|
Impact of Foreign
Exchange on Adjusted Operating Income and Flow New Insurance
Written14
Three months ended
March 31, 2020
|
|
|
|
|
|
|
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange15
|
|
Australia
MI:
|
|
|
|
|
|
|
Adjusted operating
income
|
|
(36)
|
%
|
|
(29)
|
%
|
Flow new insurance
written
|
|
21
|
%
|
|
26
|
%
|
Flow new insurance
written (1Q20 vs. 4Q19)
|
|
(16)
|
%
|
|
(16)
|
%
|
|
|
|
|
|
|
|
Reconciliation of
Reported Yield to Core Yield
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
March
31,
|
|
December
31,
|
(Assets - amounts
in billions)
|
|
2020
|
|
2019
|
Reported Total
Invested Assets and Cash
|
|
$
|
73.2
|
|
|
$
|
74.6
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.1
|
|
|
|
0.1
|
|
Unrealized gains
(losses)
|
|
|
6.0
|
|
|
|
6.9
|
|
Adjusted End of
Period Invested Assets and Cash
|
|
$
|
67.1
|
|
|
$
|
67.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets and Cash Used in Reported and Core Yield
Calculation
|
|
$
|
67.3
|
|
|
$
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in
millions)
|
|
|
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
793
|
|
|
$
|
794
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
16
|
|
|
|
23
|
|
Other non-core
items16
|
|
|
7
|
|
|
|
(2)
|
|
Core Net Investment
Income
|
|
$
|
770
|
|
|
$
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.71
|
%
|
|
|
4.74
|
%
|
Core Yield
|
|
|
4.57
|
%
|
|
|
4.62
|
%
|
1 Private Mortgage Insurer Eligibility
Requirements
2 Long term care insurance
3 Unless otherwise stated, all references in this
press release to net income (loss), net income (loss) per share,
net income (loss) from discontinued operations, adjusted operating
income (loss), adjusted operating income (loss) 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 stockholders 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.
4 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 March 31,
2020, 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 March 31,
2020, as the inclusion of shares for stock options,
restricted stock units and stock appreciation rights of 5.4 million
would have been antidilutive to the calculation. If the company had
not incurred a loss from continuing operations for the three months
ended March 31, 2020, dilutive
potential weighted-average common shares outstanding would have
been 509.7 million.
5 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.
6 Company estimate for the first quarter of 2020
due to timing of the preparation and filing of statutory
statements.
7 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. As of March 31,
2020, December 31, 2019 and
March 31, 2019, the PMIERs
sufficiency ratios were in excess of $1.1
billion, $1.0 billion and
$600 million, respectively, of
available assets above the applicable PMIERs requirements.
8 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.
9 Genworth Holdings, Inc. had $525 million, $1,461
million and $361 million of
cash, cash equivalents and restricted cash as of March 31, 2020, December
31, 2019 and March 31, 2019,
respectively, which included approximately $16 million of restricted cash as of March 31, 2019. Genworth Holdings, Inc. also held
$50 million, $70 million and $44
million in U.S. government securities as of March 31, 2020, December
31, 2019 and March 31, 2019,
respectively, which included $50MM, $48MM and $37 million, respectively, of restricted
assets.
10 For the three months ended March 31, 2020, March 31,
2019 and December 31, 2019,
net investment (gains) losses were adjusted for DAC and other
intangible amortization and certain benefit reserves of
$(11) million, $(2) million and $(3)
million, respectively, and adjusted for net investment gains
(losses) attributable to non-controlling interests of $(26) million, $6
million and $9 million,
respectively.
11 Expenses previously reported in the Canada MI
segment and moved to Corporate and Other Activities.
12 Interest on a senior secured term loan facility
owed by Genworth Holdings, Inc. previously reported in Corporate
and Other Activities and moved to discontinued operations.
13 Tax impacts resulting from the classification of
Genworth Canada as held-for-sale.
14 All percentages are comparing the first quarter of
2020 to the first quarter of 2019 unless otherwise stated.
15 The impact of foreign exchange was calculated using
the comparable prior period exchange rates.
16 Includes cost basis adjustments on structured
securities and various other immaterial items.
View original
content:http://www.prnewswire.com/news-releases/genworth-financial-announces-first-quarter-2020-results-301053193.html
SOURCE Genworth Financial, Inc.