RICHMOND, Va., Nov. 4, 2020 /PRNewswire/ --
- Merger Agreement With China Oceanwide Holdings Group Co., Ltd
(Oceanwide) Extended To November 30,
2020; Oceanwide Has Made Significant Progress On Transaction
Funding
- U.S. Mortgage Insurance (MI) Segment Adjusted Operating Income
Of $141 Million Primarily Driven By
Lower Levels Of New Delinquencies And Incurred But Not Reported
(IBNR) Favorability
-
- $26.6 Billion In New Insurance
Written (NIW) Reflecting Robust Mortgage Origination Market
- U.S. Life Insurance Segment Adjusted Operating Income Of
$14 Million
-
- LTC1 Adjusted Operating Income Of $59 Million Due To Higher Claim Terminations And
Lower Claim Incidence
- Life Insurance Adjusted Operating Loss Of $69 Million Due To Unfavorable Performance In
Term Life And Term Universal Life Insurance Blocks
- Fixed Annuities Adjusted Operating Income Of $24 Million
- Holding Company Cash And Liquid Assets Of $814 Million, Including $74 Million Restricted
-
- $436 Million Dividend From U.S.
MI To The Holding Company From Proceeds Of The Genworth Mortgage
Holdings, Inc. (GMHI)2 Debt Offering Of $750 Million
Genworth Financial, Inc. (NYSE: GNW) today reported results for
the quarter ended September 30, 2020. The company reported net
income3 of $418 million, or $0.82 per diluted share, in the third quarter of
2020, compared with net income of $18 million, or $0.04 per diluted share, in the third quarter of
2019. The company reported adjusted operating
income4 of $132 million, or $0.26 per diluted share, in the third quarter of
2020, compared with adjusted operating income of $123 million,
or $0.24 per diluted share, in the
third quarter of 2019.
"Genworth delivered strong operating performance in the third
quarter, driven by outstanding top line and bottom line results in
our U.S. mortgage insurance business," said Tom McInerney, President and CEO of Genworth.
"While the economic environment remains unpredictable because of
the COVID-19 pandemic, we are confident that we are taking the
right steps to enhance liquidity, position our businesses to
navigate continued uncertainty and maximize shareholder value. In
addition to pursuing the closing of the Oceanwide transaction, we
are also making progress against our strategic priorities which
include addressing our near-term debt obligations, strengthening
our balance sheet and executing our LTC multi-year rate action
plan, which remains critical to stabilizing our U.S. life insurance
businesses."
The COVID-19 pandemic continues to evolve and impact Genworth's
businesses in a number of ways. In the current quarter, the company
saw sequential improvement in unemployment trends, lower levels of
new delinquencies relative to the second quarter and a robust
mortgage origination market, which benefited the U.S. MI business.
Mortality remained elevated relative to last year, which had a
mixed impact on the LTC and life insurance businesses. While
uncertainty remains high, the company is continuing to operate
effectively, and its mortgage insurance businesses are maintaining
strong capital positions to ensure the businesses are resilient
across a wide range of scenarios.
Strategic Update
On October 1, Genworth and
Oceanwide announced they agreed to extend the merger agreement
deadline to not later than November 30,
2020 to provide Oceanwide with additional time to finalize
the funding plan for the transaction, which was delayed due to
challenges presented by the global pandemic.
On November 2, the company
announced that Oceanwide has made significant progress on the Hony
Capital funding and has provided satisfactory documentation to
Genworth indicating that Hony Capital expects to be able to
finalize the $1.8 billion financing
in November, and that Oceanwide is continuing to work diligently
with the goal of closing the transaction by November 30, 2020, subject to timely receipt of
outstanding regulatory re-approvals, confirmations and/or
clearances. Oceanwide is also gathering funds in Mainland China to
provide the remaining amount required to pay for the total Genworth
purchase price of $5.43 per share. In
addition, Oceanwide has requested confirmation of the extension of
the acceptance of filing from the Chinese National Development and
Reform Commission (NDRC) with respect to the transaction.
The parties are hopeful that Oceanwide's transaction funding
will be completed in time to close the transaction by November 30, without the need for an additional
extension.
"I am very pleased with Oceanwide's excellent progress since our
last update," said Tom McInerney,
President and CEO of Genworth. "They have made significant strides
to finalize the financing with Hony Capital, and to update the
filings required to close the transaction. Based on this progress,
we are hopeful we will be able to close the transaction by
November 30 and deliver the best
value to our shareholders."
LU Zhiqiang, chairman of Oceanwide, continued, "The Oceanwide
team and I are working to finalize the remaining steps of the
transaction process as quickly as possible. The acquisition of
Genworth remains a strategically important priority for Oceanwide,
and we remain committed to finalizing the funding plan for the
transaction with the goal of closing the transaction by
November 30."
The transaction has now received all U.S. regulatory approvals
needed to close the transaction, subject to confirmation from the
Delaware Department of Insurance that the acquisition of Genworth's
Delaware-domiciled insurer may
proceed under the existing approval. With respect to recent
regulatory matters: the Financial Industry Regulatory Authority
(FINRA) has confirmed that the transaction may close under FINRA
Rule 1017(c) prior to receiving its final approval; the
government-sponsored enterprises (GSEs) recently re-approved the
transaction, subject to certain conditions; and the North Carolina
Department of Insurance extended its previously-granted approval
through January 24, 2021. Oceanwide needs to receive clearance for
currency conversion and transfer of funds from the State
Administration of Foreign Exchange, and the NDRC needs to confirm
the extension of the acceptance of filing with respect to the
transaction, as its prior acceptance of filing has expired. All
other required approvals and clearances have been secured.
Financial Performance
Consolidated Net
Income & Adjusted Operating Income
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Three months ended
September 30
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2020
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2019
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Per
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Per
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diluted
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diluted
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Total
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(Amounts in
millions, except per share)
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Total
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share
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Total
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share
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% change
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Net income available
to Genworth's common stockholders
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$
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418
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$
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0.82
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$
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18
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|
$
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0.04
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NM5
|
Adjusted operating
income
|
|
$
|
132
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|
$
|
0.26
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|
$
|
123
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|
$
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0.24
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7 %
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Weighted-average
diluted shares
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511.5
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511.2
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As of September
30
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2020
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2019
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Book value per
share
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$
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29.19
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$
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28.57
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Book value per share,
excluding accumulated other
comprehensive income
(loss)
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$
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20.99
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$
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21.38
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Net investment gains, net of taxes and other adjustments,
increased net income by $285 million
in the quarter. The investment gains were driven by sales of U.S.
Treasury bonds supporting the company's LTC business as part of
ongoing portfolio optimization and mark-to-market gains on limited
partnerships. Net income in the third quarter of 2019 included
$5 million from investment gains, net
of taxes and other adjustments.
Net investment income was $827
million in the quarter, compared to $786 million in the prior quarter and
$816 million in the prior year. Net
investment income was higher than the prior quarter and prior year
as a result of higher income from bond calls and prepayments,
limited partnerships and a more favorable inflation impact on U.S.
Government Treasury Inflation Protected Securities. The reported
yield and the core yield4 for the quarter were 4.82
percent and 4.65 percent, respectively, compared to 4.65 percent
and 4.59 percent, respectively, in the prior quarter.
Genworth's effective tax rate on income from continuing
operations for the quarter was approximately 25.6 percent. The
effective tax rate was above 21 percent due to the tax effect of
forward starting swap gains settled prior to the change in the
corporate tax rate under the 2017 Tax Cuts and Jobs Act, which
continue to be tax effected at 35 percent as they are amortized
into net investment income, as well as by the higher tax expense
related to foreign operations.
Adjusted operating income (loss) results by business line are
summarized in the table below:
Adjusted Operating
Income (Loss)
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(Amounts in
millions)
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Q3
20
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|
Q2
20
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|
Q3
19
|
U.S. Mortgage
Insurance
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$
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141
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|
$
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(3)
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$
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137
|
Australia Mortgage
Insurance
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7
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|
|
1
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12
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U.S. Life
Insurance
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14
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(5)
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(1)
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Runoff
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19
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24
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10
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Corporate and
Other
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(49)
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(38)
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(35)
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Total Adjusted
Operating Income (Loss)
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$
|
132
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|
$
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(21)
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$
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123
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (loss) 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
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(Dollar amounts in
millions)
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Q3
20
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Q2
20
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Q3
19
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Adjusted operating
income (loss)
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$
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141
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|
$
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(3)
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$
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137
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New insurance
written
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Primary6
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$
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26,600
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$
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28,400
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$
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18,900
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Loss ratio
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18 %
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94 %
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11 %
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U.S. MI reported adjusted operating income of $141 million,
compared with an adjusted operating loss of $3 million in the prior quarter and adjusted
operating income of $137 million in
the prior year. U.S. MI's primary insurance in force increased 15
percent versus the prior year from strong NIW, partially offset by
lower persistency. Primary NIW decreased six percent from the prior
quarter due to lower estimated market share, which was partially
offset by higher purchase originations and was up 41 percent versus
the prior year primarily from higher mortgage refinancing
originations and a larger private mortgage insurance market. Earned
premiums in the quarter increased versus the prior quarter driven
by insurance in force growth and higher average premium rates,
partially offset by lower single premium policy cancellations.
Current quarter earned premiums increased versus the prior year
mainly from higher insurance in force and from increased single
premium policy cancellations driven by lower persistency and
elevated mortgage refinancing, partially offset by lower average
premium rates and higher ceded premiums associated with reinsurance
transactions.
U.S. MI's current quarter results reflected losses of
$45 million and a loss ratio of 18
percent, which were mainly driven by $61
million of losses from new delinquencies, partially offset
by favorable IBNR development. This compares to losses of
$228 million and a loss ratio of 94
percent in the prior quarter and losses of $23 million and a loss ratio of 11 percent in the
prior year. The significant sequential decline in losses was driven
by a 66 percent decrease in new primary delinquencies from 48,373
to 16,664, driven by materially lower servicer reported
forbearances since the May 2020 peak.
Approximately 75 percent of new primary delinquencies were reported
in forbearance plans which may cure at an elevated rate. In
addition, U.S. MI released $23
million of the $28 million
increase of IBNR reserves established in the prior quarter as new
delinquency trends improved. There was no material reserve factor
update in the current quarter. Current quarter losses increased
versus the prior year primarily driven by COVID-19 related new
delinquencies in the current quarter.
Australia Mortgage Insurance
Operating
Metrics
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(Dollar amounts in
millions)
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Q3
20
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Q2
20
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Q3
19
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Adjusted operating
income
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$
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7
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$
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1
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$
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12
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New insurance
written
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Flow
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$
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5,500
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$
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4,400
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$
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4,600
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Bulk
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$
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100
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$
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100
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$
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—
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Loss ratio
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37 %
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63 %
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36 %
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Australia MI reported adjusted operating income of $7
million, compared with $1 million in the prior quarter and
$12 million in the prior year. Favorable sequential
performance was driven by lower losses from fewer new
delinquencies, higher reported cures and favorable aging of
existing delinquencies, while performance versus the prior year
continued to be impacted by lower earned premiums and lower net
investment income. Australia MI flow NIW increased 14 percent
sequentially and increased 17 percent versus the prior year from
continued strong lender customer mortgage origination volume
supported by ongoing low interest rates. As of the end of the
current quarter, approximately 31,000 of Australia MI's insured
loans in force continued to be enrolled in a payment deferral or
payment holiday program, down from over 48,000 at the end of the
prior quarter. Under regulatory guidance, these loans, unless
previously delinquent, are reported as current. To address the
COVID-19 related timing impacts on delinquencies and account for
the pressured economic conditions caused by the pandemic, the
business strengthened its loss reserves, including IBNR reserves,
by $24 million in the current
quarter. The loss ratio in the quarter was 37 percent, down 26
points sequentially and up one point versus prior year.
U.S. Life Insurance
Adjusted Operating
Income (Loss)
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|
|
|
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(Amounts in
millions)
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Q3
20
|
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Q2
20
|
|
Q3
19
|
Long Term Care
Insurance
|
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$
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59
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$
|
48
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$
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21
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Life
Insurance
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(69)
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(81)
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(25)
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Fixed
Annuities
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24
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|
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28
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3
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Total U.S. Life
Insurance
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$
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14
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$
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(5)
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$
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(1)
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Long Term Care Insurance
Long term care insurance reported adjusted operating income of
$59 million, compared with $48 million in the prior
quarter and $21 million in the prior year. Claim terminations
in the current quarter were higher compared to the prior year and
flat compared to the prior quarter. Although it is not the
company's current practice to track cause of death for LTC
policyholders and claimants, current quarter and prior quarter LTC
results were impacted by higher claim terminations, likely the
result of the COVID-19 pandemic. LTC results also reflected higher
net investment income from limited partnerships and U.S. Government
Treasury Inflation Protected Securities compared to the prior
quarter and prior year. IBNR claim reserves were strengthened by an
additional $24 million in the current
quarter because the company assumes that the lower LTC new claims
incidence is temporary in nature, due to the COVID-19 pandemic, and
claim incidence will likely be higher in future quarters. The IBNR
reserve strengthening partially offset the continued favorable
development on IBNR claims in the current quarter. Earnings
continue to benefit from in force rate actions but were slightly
lower than the prior quarter and the prior year, reflecting less
favorable impacts from benefit reductions, partially offset by
higher premiums.
The company has typically conducted a review of its LTC claims
reserve assumptions in the third or fourth quarter of each year and
will be completing its review in the fourth quarter. While the work
is ongoing, current trends do not indicate a need to strengthen the
LTC claims reserve as assumptions appear to be holding up in the
aggregate. The company will also complete loss recognition and cash
flow testing for all of its U.S. life insurance products in the
fourth quarter.
Life Insurance
Life insurance reported an adjusted operating loss of
$69 million, compared with $81
million in the prior quarter and $25 million in the
prior year. Results reflected higher amortization of deferred
acquisition costs (DAC) compared to the prior quarter and prior
year, primarily associated with higher lapses from the large
20-year level-premium term life insurance block entering its
post-level premium period. Results also reflected reserve increases
during the premium grace period in the 10-year term universal life
insurance block associated with policies entering the post-level
premium period that were higher than the prior year but lower than
the prior quarter. Life mortality was higher compared to the prior
quarter and prior year, attributable in part to the COVID-19
pandemic. Prior year results included an unfavorable after-tax
adjustment of $10 million for higher
ceded reinsurance rates.
Fixed Annuities
Fixed annuities reported adjusted operating income of
$24 million, compared with $28 million in the prior
quarter and $3 million in the prior year. Results versus the
prior quarter and prior year reflected lower net spreads and higher
mortality in the single premium immediate annuity product. Results
in the prior year included unfavorable after-tax charges of
$13 million from loss recognition
testing on the single premium immediate annuity block from low
interest rates.
Runoff
Runoff reported adjusted operating income of $19 million,
compared with $24 million in the prior quarter and
$10 million in the prior year. Results in the current quarter
reflected impacts in the company's variable annuity products from
equity market performance which was less favorable than the prior
quarter but more favorable than the prior year.
Corporate And Other
Corporate and Other reported an adjusted operating loss of
$49 million, compared with $38 million in the prior
quarter and $35 million in the prior year. Current quarter
results reflected higher unfavorable tax timing adjustments
compared to the prior quarter, while prior year results included
favorable tax timing adjustments. Additionally, results in the
current quarter reflected lower interest expense compared to the
prior year from the early redemption of Genworth Holdings, Inc.'s
June 2020 senior notes in
January 2020.
Capital & Liquidity
Genworth maintains the following capital positions in its
operating subsidiaries:
Key Capital &
Liquidity Metrics
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|
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|
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(Dollar amounts in
millions)
|
|
Q3
20
|
|
Q2
20
|
|
Q3
19
|
U.S. MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-To-Capital Ratio7
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|
12.1:1
|
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|
12.0:1
|
|
|
|
11.9:1
|
|
|
Genworth Mortgage
Insurance Corporation Risk-To-Capital Ratio7
|
|
|
12.3:1
|
|
|
|
12.2:1
|
|
|
|
12.1:1
|
|
|
Private Mortgage
Insurer Eligibility Requirements (PMIERs) Sufficiency
Ratio7,8
|
|
|
132
|
%
|
|
|
143
|
%
|
|
|
129
|
%
|
Australia
MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescribed Capital
Amount (PCA) Ratio7
|
|
|
179
|
%
|
|
|
177
|
%
|
|
|
198
|
%
|
U.S. Life Insurance
Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Risk-Based Capital (RBC) Ratio7
|
|
|
240
|
%
|
|
|
222
|
%
|
|
|
199
|
%
|
Holding Company Cash
and Liquid Assets9,10
|
|
$
|
814
|
|
|
$
|
554
|
|
|
$
|
366
|
|
Key Points
- U.S. MI's PMIERs11 sufficiency ratio is estimated to
be 132 percent, $1,074 million above
published PMIERs requirements, which does not take into
consideration the impact of restrictions recently imposed by the
GSEs12. The PMIERs sufficiency ratio was down 11 points,
or approximately $200 million,
sequentially, driven in part by elevated NIW, partially offset by
elevated lapse from prevailing low interest rates in the current
quarter. Additionally, elevated lapses drove an acceleration of the
amortization on existing reinsurance transactions, which caused a
reduction in PMIERs capital credit in the current quarter;
- Both the current quarter and prior quarter PMIERs sufficiency
benefited from a 0.30 multiplier applied to the risk based required
asset factor for certain non-performing loans, which resulted in a
reduction of the published PMIERs required assets by an estimated
$1,217 million at the end of the
quarter, compared to $1,057 million
at the end of the second quarter;
- On October 22, 2020, U.S. MI
completed an insurance linked note transaction, which will add
$350 million of additional PMIERs
capital credit in the fourth quarter of 2020. Had the recently
completed transaction occurred in the third quarter of 2020, U.S.
MI's current quarter PMIERs sufficiency would have been
$1,424 million or 147 percent above
the published PMIERs requirements;
- Australia MI's PCA ratio is estimated to be 179 percent, above
the company's target operating range of 132 to 144 percent. The PCA
ratio was up two points sequentially;
- Subsequent to the third quarter of 2020, Australia MI redeemed
the remainder of its AUD$48 million of Tier 2 debt due July 2025 and has AUD$190 million in Tier 2
subordinated notes remaining due July
2030;
- U.S. life insurance companies' consolidated statutory
risk-based capital is estimated to be 240 percent, which is up from
the prior quarter primarily from strong statutory income in the
quarter driven by LTC results and favorable equity market impacts
on variable annuities; and
- The holding company ended the quarter with $814 million of cash and liquid assets, including
$74 million that is restricted, which
is above the company's target. During the third quarter, the
holding company received a $436
million dividend from U.S. MI from the GMHI debt offering of
$750 million. Additionally, the
holding company repurchased $18
million of its 2021 bonds.
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 third 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 7:00 a.m. on November 5, 2020. Investors are
encouraged to review these materials.
Genworth will conduct a conference call on November 5, 2020
at 8:00 a.m. (ET) to discuss business
results and provide an update on strategic objectives, including
the pending transaction with Oceanwide. Genworth's conference call
will be accessible via telephone and the Internet. The dial-in
number for Genworth's November 5th conference call
is 888 208.1820 or 323 794.2110 (outside the U.S.); conference ID #
6024871. 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 # 6024871 through
November 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 the second quarter of 2020, the company recorded a goodwill
impairment of $3 million, net of the
portion attributable to noncontrolling interests, in its
Australia mortgage insurance
business.
During the second quarter of 2020, the company repurchased
$52 million principal amount of
Genworth Holdings, Inc.'s senior notes with 2021 maturity dates for
a pre-tax gain of $3 million. This
transaction was excluded from adjusted operating income (loss) as
it related to gains on the early extinguishment of debt.
The company recorded a pre-tax expense of $1 million in the second quarter of 2020 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
(loss) for the three months ended September
30, 2020 and 2019, as well as for the three months ended
June 30, 2020, 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 closing of the transaction with China
Oceanwide Holdings Group Co., Ltd. (together with its affiliates,
Oceanwide), Oceanwide's funding plans and transactions the company
might pursue to address its near-term liabilities and financial
obligations, which may include raising capital through its mortgage
insurance subsidiaries and/or transactions to sell a percentage of
its ownership interests in its mortgage insurance businesses, 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 risk that Oceanwide will be unable to raise funding
and the company's inability to complete the Oceanwide transaction
on the agreed terms, in a timely manner or at all, which may
adversely affect the company's business and the price of its common
stock; the risk that the company will be unable to address its
near-term liabilities and financial obligations, including the
risks that it will be unable to raise additional capital and/or
sell a percentage of its ownership interest in its U.S. mortgage
insurance business to repay the promissory note to AXA S.A. (AXA) and repay and/or refinance its
debt maturing in 2021 or beyond; the parties' inability to obtain
regulatory approvals, clearances or extensions, or the possibility
that such regulatory approvals or clearances may further delay the
Oceanwide transaction or may not be received prior to November 30, 2020 (and either or both of the
parties may not be willing to further waive their end date
termination rights beyond November 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 Oceanwide 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 Oceanwide 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
Oceanwide transaction or that the parties will be unable to agree
upon a closing date following receipt of all regulatory approvals
and clearances; the risk regarding the ongoing availability of any
required financing; the risk that existing and potential legal
proceedings may be instituted against the company in connection
with the Oceanwide transaction that may delay the transaction, make
it more costly or ultimately preclude it; the risk that the
proposed Oceanwide transaction disrupts the company's current plans
and operations as a result of the announcement and consummation of
the transaction; 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 Oceanwide transaction or during the pendency of
the transaction, including but not limited to such changes that
could affect the company's financial performance; certain
restrictions during the pendency of the Oceanwide 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 Oceanwide 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
Oceanwide transaction; the amount of the costs, fees, expenses and
other charges related to the Oceanwide transaction; the risks
related to diverting management's attention from the company's
ongoing business operations; and the company's ability to attract,
recruit, retain and motivate current and prospective employees may
be adversely affected;
- 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 and other
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 raise 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 it expects to complete and
carry out in the fourth quarter of 2020); 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 in the fourth quarter of 2020,
including risks that additional information obtained in finalizing
its claim reserves and margin reviews in the fourth quarter of 2020
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 changes it may make to its assumptions, methodologies or
otherwise in connection with periodic or other reviews, including
reviews it expects to complete and carry out in the fourth quarter
of 2020); 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, heightened
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), including as a result of
the interim conditions and applicable requirements imposed by the
GSEs on the company's U.S. mortgage insurance subsidiary and/or
after the benefit of the 0.30 multiplier applied to non-performing
loans expires under the PMIERs temporary amendments; risks on the
company's U.S. mortgage insurance subsidiary's ability to pay its
holding company dividends as a result of the GSEs' amendments to
PMIERs in response to COVID-19; 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; additional restrictions placed on the
company's U.S. mortgage insurance business by government and
government-owned and government-sponsored enterprises (GSEs) in
connection with a new debt financing and/or sale of a percentage of
its ownership interests therein; 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, either by raising capital
through a debt/equity financing and/or selling a percentage of the
company's ownership interests in its mortgage insurance businesses,
or under a 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; the
impact of increased leverage as a result of the AXA settlement and
related restrictions; continued availability of capital and
financing; future adverse rating agency actions against the company
or its U.S. mortgage insurance subsidiary, 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 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. This press release does not
constitute an offering of any securities
Condensed
Consolidated Statements of Income
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Three months
ended
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
1,034
|
|
$
|
1,015
|
|
$
|
1,019
|
Net investment
income
|
|
|
827
|
|
|
816
|
|
|
786
|
Net investment gains
(losses)
|
|
|
375
|
|
|
(2)
|
|
|
159
|
Policy fees and other
income
|
|
|
184
|
|
|
191
|
|
|
174
|
|
|
Total
revenues
|
|
|
2,420
|
|
|
2,020
|
|
|
2,138
|
Benefits and
expenses:
|
|
|
|
|
|
|
|
|
|
Benefits and other
changes in policy reserves
|
|
|
1,299
|
|
|
1,284
|
|
|
1,486
|
Interest
credited
|
|
|
137
|
|
|
146
|
|
|
139
|
Acquisition and
operating expenses, net of deferrals
|
|
|
249
|
|
|
247
|
|
|
223
|
Amortization of
deferred acquisition costs and intangibles
|
|
|
101
|
|
|
112
|
|
|
93
|
Goodwill
impairment
|
|
|
—
|
|
|
—
|
|
|
5
|
Interest
expense
|
|
|
49
|
|
|
59
|
|
|
44
|
|
|
Total benefits and
expenses
|
|
|
1,835
|
|
|
1,848
|
|
|
1,990
|
Income from
continuing operations before income taxes
|
|
|
585
|
|
|
172
|
|
|
148
|
Provision for income
taxes
|
|
|
150
|
|
|
34
|
|
|
46
|
Income from
continuing operations
|
|
|
435
|
|
|
138
|
|
|
102
|
Income (loss) from
discontinued operations, net of taxes
|
|
|
1
|
|
|
(80)
|
|
|
(520)
|
Net income
(loss)
|
|
|
436
|
|
|
58
|
|
|
(418)
|
Less: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
18
|
|
|
10
|
|
|
23
|
Less: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
30
|
|
|
—
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
418
|
|
$
|
18
|
|
$
|
(441)
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth Financial, Inc.'s
common
stockholders
|
|
$
|
417
|
|
$
|
128
|
|
$
|
79
|
|
|
Income (loss) from
discontinued operations available to Genworth Financial,
Inc.'s
common stockholders
|
|
|
1
|
|
|
(110)
|
|
|
(520)
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
418
|
|
$
|
18
|
|
$
|
(441)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations available to Genworth Financial, Inc.'s
common stockholders
per share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.83
|
|
$
|
0.25
|
|
$
|
0.16
|
|
|
Diluted
|
|
$
|
0.82
|
|
$
|
0.25
|
|
$
|
0.15
|
Net income (loss)
available to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.83
|
|
$
|
0.04
|
|
$
|
(0.87)
|
|
|
Diluted
|
|
$
|
0.82
|
|
$
|
0.04
|
|
$
|
(0.86)
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
505.6
|
|
|
503.5
|
|
|
505.4
|
|
|
Diluted
|
|
|
511.5
|
|
|
511.2
|
|
|
512.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income (Loss) to Adjusted Operating Income
(Loss)
|
(Amounts in
millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
Three
|
|
Three
|
|
|
|
|
|
|
months
ended
|
|
months
ended
|
|
|
|
|
|
|
September
30,
|
|
June
30,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common
stockholders
|
|
$
|
418
|
|
$
|
18
|
|
$
|
(441)
|
|
Add: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
18
|
|
|
10
|
|
|
23
|
|
Add: net income from
discontinued operations attributable to noncontrolling
interests
|
|
|
—
|
|
|
30
|
|
|
—
|
|
Net income
(loss)
|
|
|
436
|
|
|
58
|
|
|
(418)
|
|
Less: income (loss)
from discontinued operations, net of taxes
|
|
|
1
|
|
|
(80)
|
|
|
(520)
|
|
Income from
continuing operations
|
|
|
435
|
|
|
138
|
|
|
102
|
|
Less: net income from
continuing operations attributable to noncontrolling
interests
|
|
|
18
|
|
|
10
|
|
|
23
|
|
Income from
continuing operations available to Genworth Financial,
Inc.'s
common stockholders
|
|
|
417
|
|
|
128
|
|
|
79
|
|
Adjustments to income
from continuing operations available to Genworth Financial, Inc.'s
common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
Net investment
(gains) losses, net13
|
|
|
(362)
|
|
|
(5)
|
|
|
(131)
|
|
Goodwill impairment,
net14
|
|
|
—
|
|
|
—
|
|
|
3
|
|
(Gains) losses on
early extinguishment of debt
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
Expenses related to
restructuring
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Taxes on
adjustments
|
|
|
77
|
|
|
—
|
|
|
30
|
|
Adjusted operating
income (loss)
|
|
$
|
132
|
|
$
|
123
|
|
$
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
U.S. Mortgage
Insurance segment
|
|
$
|
141
|
|
$
|
137
|
|
$
|
(3)
|
|
Australia Mortgage
Insurance segment
|
|
|
7
|
|
|
12
|
|
|
1
|
|
U.S. Life Insurance
segment:
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Care
Insurance
|
|
|
59
|
|
|
21
|
|
|
48
|
|
|
Life
Insurance
|
|
|
(69)
|
|
|
(25)
|
|
|
(81)
|
|
|
Fixed
Annuities
|
|
|
24
|
|
|
3
|
|
|
28
|
|
|
Total U.S. Life
Insurance segment
|
|
|
14
|
|
|
(1)
|
|
|
(5)
|
|
Runoff
segment
|
|
|
19
|
|
|
10
|
|
|
24
|
|
Corporate and
Other
|
|
|
(49)
|
|
|
(35)
|
|
|
(38)
|
|
Adjusted operating
income (loss)
|
|
$
|
132
|
|
$
|
123
|
|
$
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
available to Genworth Financial, Inc.'s common stockholders per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.83
|
|
$
|
0.04
|
|
$
|
(0.87)
|
|
|
|
Diluted
|
|
$
|
0.82
|
|
$
|
0.04
|
|
$
|
(0.86)
|
|
Adjusted operating
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
$
|
0.25
|
|
$
|
(0.04)
|
|
|
|
Diluted
|
|
$
|
0.26
|
|
$
|
0.24
|
|
$
|
(0.04)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
505.6
|
|
|
503.5
|
|
|
505.4
|
|
|
|
Diluted
|
|
|
511.5
|
|
|
511.2
|
|
|
512.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets
|
(Amounts in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Cash, cash
equivalents, restricted cash and invested assets
|
|
$
|
79,910
|
|
$
|
75,226
|
|
Deferred acquisition
costs
|
|
|
1,623
|
|
|
1,836
|
|
Intangible assets and
goodwill
|
|
|
209
|
|
|
201
|
|
Reinsurance
recoverable, net
|
|
|
16,788
|
|
|
17,103
|
|
Deferred tax and
other assets
|
|
|
695
|
|
|
868
|
|
Separate account
assets
|
|
|
5,700
|
|
|
6,108
|
|
|
|
|
Total
assets
|
|
$
|
104,925
|
|
$
|
101,342
|
Liabilities and
equity
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Future policy
benefits
|
|
$
|
41,995
|
|
$
|
40,384
|
|
|
Policyholder account
balances
|
|
|
22,731
|
|
|
22,217
|
|
|
Liability for policy
and contract claims
|
|
|
11,373
|
|
|
10,958
|
|
|
Unearned
premiums
|
|
|
1,846
|
|
|
1,893
|
|
|
Other
liabilities
|
|
|
1,913
|
|
|
1,386
|
|
|
Non-recourse funding
obligations
|
|
|
—
|
|
|
311
|
|
|
Long-term
borrowings
|
|
|
3,570
|
|
|
3,277
|
|
|
Separate account
liabilities
|
|
|
5,700
|
|
|
6,108
|
|
|
Liabilities related
to discontinued operations
|
|
|
565
|
|
|
176
|
|
|
|
|
Total
liabilities
|
|
|
89,693
|
|
|
86,710
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1
|
|
|
1
|
|
|
Additional paid-in
capital
|
|
|
11,997
|
|
|
11,990
|
|
|
Accumulated other
comprehensive income (loss)
|
|
|
4,141
|
|
|
3,433
|
|
|
Retained
earnings
|
|
|
1,317
|
|
|
1,461
|
|
|
Treasury stock, at
cost
|
|
|
(2,700)
|
|
|
(2,700)
|
|
|
|
|
Total Genworth
Financial, Inc.'s stockholders' equity
|
|
|
14,756
|
|
|
14,185
|
|
|
Noncontrolling
interests
|
|
|
476
|
|
|
447
|
|
|
|
|
Total
equity
|
|
|
15,232
|
|
|
14,632
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
104,925
|
|
$
|
101,342
|
Impact of Foreign
Exchange on Adjusted Operating Income and Flow New Insurance
Written15
Three months ended
September 30, 2020
|
|
|
|
|
|
|
|
|
|
Percentages
|
|
|
Percentages
|
|
|
|
Including
Foreign
|
|
|
Excluding
Foreign
|
|
|
|
Exchange
|
|
|
Exchange16
|
|
Australia
MI:
|
|
|
|
|
|
|
Adjusted operating
income
|
|
(42)
|
%
|
|
(42)
|
%
|
Flow new insurance
written
|
|
20
|
%
|
|
17
|
%
|
Flow new insurance
written (3Q20 vs. 2Q20)
|
|
25
|
%
|
|
14
|
%
|
Reconciliation of
Reported Yield to Core Yield
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
months
ended
|
|
|
|
|
|
September
30,
|
|
June
30,
|
(Assets - amounts
in billions)
|
|
2020
|
|
2020
|
Reported Total
Invested Assets and Cash
|
|
$
|
79.3
|
|
|
$
|
77.9
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Securities
lending
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Unrealized gains
(losses)
|
|
|
10.0
|
|
|
|
9.7
|
|
Adjusted End of
Period Invested Assets and Cash
|
|
$
|
69.2
|
|
|
$
|
68.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Invested
Assets and Cash Used in Reported and Core Yield
Calculation
|
|
$
|
68.7
|
|
|
$
|
67.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income - amounts
in millions)
|
|
|
|
|
|
|
|
|
Reported Net
Investment Income
|
|
$
|
827
|
|
|
$
|
786
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
Bond calls and
commercial mortgage loan prepayments
|
|
|
23
|
|
|
|
8
|
|
|
Other non-core
items17
|
|
|
6
|
|
|
|
2
|
|
Core Net Investment
Income
|
|
$
|
798
|
|
|
$
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
Yield
|
|
|
4.82
|
%
|
|
|
4.65
|
%
|
Core Yield
|
|
|
4.65
|
%
|
|
|
4.59
|
%
|
1 Long term care
insurance.
|
2
Genworth's indirect wholly-owned mortgage insurance
subsidiary.
|
3 Unless otherwise stated, all
references in this press release to net income (loss), net income
(loss) per share, 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, 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 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.
|
5 The
company defines "NM" as not meaningful for increases or decreases
greater than 200 percent.
|
6 In
the third quarter of 2020, the company revised the product
descriptions in its U.S. Mortgage Insurance segment to conform with
industry convention and certain regulatory definitions, including
classifications under the PMIERs. Prior year amounts have been
reclassified to conform to the current year presentation where
applicable.
|
7 Company
estimate for the third quarter of 2020 due to timing of the
preparation and filing of statutory statements.
|
8 The
PMIERs sufficiency ratio is calculated as available assets divided
by required assets as defined within the published 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 September 30, 2020, June 30, 2020, and September
30, 2019, the PMIERs sufficiency ratios were $1,074 million, $1,275
million and $861 million, respectively, of available assets above
the published PMIERs requirements.
|
9 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.
|
10
Genworth Holdings, Inc. had $814 million, $504 million and $297
million of cash, cash equivalents and restricted cash as of
September 30, 2020, June 30, 2020 and September 30, 2019,
respectively, which included $74 million, $10 million and $7
million of restricted cash and cash equivalents, respectively.
Genworth Holdings, Inc. also held $50 million and $69 million in
U.S. government securities as of June 30, 2020 and September 30,
2019, respectively, which included $49 million and $59 million,
respectively, of restricted assets.
|
11 Private
Mortgage Insurer Eligibility Requirements.
|
12 The GSEs have imposed certain
capital restrictions on the U.S. MI business which remain in effect
until certain conditions are met. These restrictions currently
require Genworth Mortgage Insurance Corporation, the company's
principal U.S. mortgage insurance subsidiary, to maintain 115
percent of PMIERs minimum required assets among other
restrictions.
|
13 For the three months ended
September 30, 2020, September 30, 2019 and June 30,
2020, net investment (gains) losses were adjusted for DAC and other
intangible amortization and certain benefit reserves of
$1 million, $(3) million and $(4) million,
respectively, and adjusted for net investment gains (losses)
attributable to noncontrolling interests of $12 million,
$(4) million and $32 million, respectively.
|
14 For the three months ended June
30, 2020, goodwill impairment was adjusted by $2 million related to
the company's mortgage insurance business in Australia for the
portion attributable to noncontrolling interests.
|
15 All percentages are comparing the
third quarter of 2020 to the third quarter of 2019 unless otherwise
stated.
|
16 The impact of foreign exchange was
calculated using the comparable prior period exchange
rates.
|
17
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-2020-results-301166500.html
SOURCE Genworth Financial, Inc.