Exhibit 99.1
Genworth Financial, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements and related notes are presented to show the effects of the initial public offering (the “Offering”) of common shares of Genworth MI Canada Inc. (“Genworth Canada”), an indirect subsidiary of Genworth Financial, Inc. (the “Corporation”) on the Corporation’s historical condensed consolidated financial statements. The Offering was completed on July 7, 2009.
The pro forma condensed consolidated balance sheet is based on the assumption that the Offering was completed on March 31, 2009. The pro forma condensed consolidated statements of income for the three months ended March 31, 2009 and for the year ended December 31, 2008 are based on the assumption that the Offering was completed on January 1, 2008.
The unaudited pro forma condensed consolidated financial statements as of and for the periods presented do not purport to present what the Corporation’s results of operations or financial position actually would have been had the Offering been completed on the dates noted above, or to project the Corporation’s results of operations for any future periods. The pro forma adjustments are based upon available information and certain assumptions that the Corporation believes are reasonable under the circumstances. Actual amounts could differ materially from these estimates. The pro forma results should be read in conjunction with the consolidated financial statements and notes thereto in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2008 and Quarterly Report on Form 10-Q for the three months ended March 31, 2009.
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GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2009
(Amounts in millions, except per share amounts)
| Historical | Adjustments (a) | Pro Forma | ||||||||||
| Assets |
||||||||||||
| Investments: |
||||||||||||
| Fixed maturity securities available-for-sale, at fair value |
$ | 41,319 | $ | — | $ | 41,319 | ||||||
| Equity securities available-for-sale, at fair value |
221 | — | 221 | |||||||||
| Commercial mortgage loans |
8,023 | — | 8,023 | |||||||||
| Policy loans |
1,842 | — | 1,842 | |||||||||
| Other invested assets |
6,080 | — | 6,080 | |||||||||
| Total investments |
57,485 | — | 57,485 | |||||||||
| Cash and cash equivalents |
7,064 | 596 | (b) | 7,660 | ||||||||
| Accrued investment income |
821 | — | 821 | |||||||||
| Deferred acquisition costs |
7,716 | — | 7,716 | |||||||||
| Intangible assets |
1,142 | — | 1,142 | |||||||||
| Goodwill |
1,314 | — | 1,314 | |||||||||
| Reinsurance recoverable |
17,398 | — | 17,398 | |||||||||
| Other assets |
998 | — | 998 | |||||||||
| Deferred tax asset |
1,631 | 32 | (c) | 1,663 | ||||||||
| Separate account assets |
8,576 | — | 8,576 | |||||||||
| Total assets |
$ | 104,145 | $ | 628 | $ | 104,773 | ||||||
| Liabilities and stockholders’ equity |
||||||||||||
| Liabilities: |
||||||||||||
| Future policy benefits |
$ | 28,763 | $ | — | $ | 28,763 | ||||||
| Policyholder account balances |
33,196 | — | 33,196 | |||||||||
| Liability for policy and contract claims |
5,815 | — | 5,815 | |||||||||
| Unearned premiums |
4,482 | — | 4,482 | |||||||||
| Other liabilities |
6,316 | — | 6,316 | |||||||||
| Non-recourse funding obligations |
3,443 | — | 3,443 | |||||||||
| Short-term borrowings |
930 | — | 930 | |||||||||
| Long-term borrowings |
4,131 | — | 4,131 | |||||||||
| Deferred tax liability |
264 | — | 264 | |||||||||
| Separate account liabilities |
8,576 | — | 8,576 | |||||||||
| Total liabilities |
95,916 | — | 95,916 | |||||||||
| Commitments and contingencies |
||||||||||||
| Stockholders’ equity: |
||||||||||||
| Class A common stock, $0.001 par value; 1.5 billion shares authorized; 522 million shares issued and 433 million shares outstanding |
1 | — | 1 | |||||||||
| Additional paid-in capital |
11,485 | (87 | )(d) | 11,398 | ||||||||
| Accumulated other comprehensive income (loss): |
||||||||||||
| Net unrealized investment gains (losses) |
(4,095 | ) | (3 | )(e) | (4,098 | ) | ||||||
| Derivatives qualifying as hedges |
1,061 | — | 1,061 | |||||||||
| Foreign currency translation and other adjustments |
(264 | ) | 27 | (f) | (237 | ) | ||||||
| Total accumulated other comprehensive income (loss) |
(3,298 | ) | 24 | (3,274 | ) | |||||||
| Retained earnings |
2,741 | — | 2,741 | |||||||||
| Treasury stock, at cost (88 million shares) |
(2,700 | ) | — | (2,700 | ) | |||||||
| Total Genworth Financial, Inc.’s stockholders’ equity |
8,229 | (63 | ) | 8,166 | ||||||||
| Noncontrolling interests |
— | 691 | (g) | 691 | ||||||||
| Total stockholders’ equity |
8,229 | 628 | 8,857 | |||||||||
| Total liabilities and stockholders’ equity |
$ | 104,145 | $ | 628 | $ | 104,773 | ||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended March 31, 2009
(Amounts in millions, except per share amounts)
| Historical | Adjustments (a) | Pro Forma | ||||||||||
| Revenues: |
||||||||||||
| Premiums |
$ | 1,502 | $ | — | $ | 1,502 | ||||||
| Net investment income |
711 | — | 711 | |||||||||
| Net investment gains (losses) |
(770 | ) | — | (770 | ) | |||||||
| Insurance and investment product fees and other |
291 | — | 291 | |||||||||
| Total revenues |
1,734 | — | 1,734 | |||||||||
| Benefits and expenses: |
||||||||||||
| Benefits and other changes in policy reserves |
1,508 | — | 1,508 | |||||||||
| Interest credited |
275 | — | 275 | |||||||||
| Acquisition and operating expenses, net of deferrals |
441 | — | 441 | |||||||||
| Amortization of deferred acquisition costs and intangibles |
247 | — | 247 | |||||||||
| Interest expense |
96 | — | 96 | |||||||||
| Total benefits and expenses |
2,567 | — | 2,567 | |||||||||
| Income (loss) before income taxes |
(833 | ) | — | (833 | ) | |||||||
| Provision (benefit) for income taxes |
(364 | ) | (3 | )(h) | (367 | ) | ||||||
| Net income (loss) |
(469 | ) | 3 | (466 | ) | |||||||
| Less: net income attributable to noncontrolling interests |
— | (22 | )(i) | (22 | ) | |||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | (469 | ) | $ | (19 | ) | $ | (488 | ) | |||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share: |
||||||||||||
| Basic |
$ | (1.08 | ) | $ | (0.05 | ) | $ | (1.13 | ) | |||
| Diluted |
$ | (1.08 | ) | $ | (0.05 | ) | $ | (1.13 | ) | |||
| Weighted-average common shares outstanding: |
||||||||||||
| Basic |
433.2 | 433.2 | 433.2 | |||||||||
| Diluted |
433.2 | 433.2 | 433.2 | |||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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GENWORTH FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2008
(Amounts in millions, except per share amounts)
| Historical | Adjustments (a) | Pro Forma | ||||||||||
| Revenues: |
||||||||||||
| Premiums |
$ | 6,777 | $ | — | $ | 6,777 | ||||||
| Net investment income |
3,730 | — | 3,730 | |||||||||
| Net investment gains (losses) |
(1,709 | ) | — | (1,709 | ) | |||||||
| Insurance and investment product fees and other |
1,150 | — | 1,150 | |||||||||
| Total revenues |
9,948 | — | 9,948 | |||||||||
| Benefits and expenses: |
||||||||||||
| Benefits and other changes in policy reserves |
5,806 | — | 5,806 | |||||||||
| Interest credited |
1,293 | — | 1,293 | |||||||||
| Acquisition and operating expenses, net of deferrals |
2,160 | — | 2,160 | |||||||||
| Amortization of deferred acquisition costs and intangibles |
884 | — | 884 | |||||||||
| Goodwill impairment |
277 | — | 277 | |||||||||
| Interest expense |
470 | — | 470 | |||||||||
| Total benefits and expenses |
10,890 | — | 10,890 | |||||||||
| Income (loss) before income taxes |
(942 | ) | — | (942 | ) | |||||||
| Provision (benefit) for income taxes |
(370 | ) | (10 | )(j) | (380 | ) | ||||||
| Net income (loss) |
(572 | ) | 10 | (562 | ) | |||||||
| Less: net income attributable to noncontrolling interests |
— | (131 | )(k) | (131 | ) | |||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | (572 | ) | $ | (121 | ) | $ | (693 | ) | |||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share: |
||||||||||||
| Basic |
$ | (1.32 | ) | $ | (0.28 | ) | $ | (1.60 | ) | |||
| Diluted |
$ | (1.32 | ) | $ | (0.28 | ) | $ | (1.60 | ) | |||
| Weighted-average common shares outstanding: |
||||||||||||
| Basic |
433.2 | 433.2 | 433.2 | |||||||||
| Diluted |
433.2 | 433.2 | 433.2 | |||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
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Genworth Financial, Inc.
Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements
(a) Adjustments reflect the impact from the Offering of 44,740,000 common shares of Genworth Canada, an indirect subsidiary of the Corporation, which was completed on July 7, 2009. Of the 44,740,000 common shares of Genworth Canada that were sold in the Offering, 5,100,000 common shares were sold by Genworth Canada, and 39,640,000 common shares were sold by Brookfield Life Assurance Company Limited (the “Selling Shareholder”), an indirect wholly-owned subsidiary of the Corporation. Following completion of the Offering, the Corporation beneficially owns 61.8% of the common shares of Genworth Canada.
In addition, the Selling Shareholder has granted to the underwriters of the Offering an option (the “Over-Allotment Option”), for a period of 30 days after the closing of the Offering, to purchase up to an additional 6,711,000 common shares from the Selling Shareholder. If the Over-Allotment Option is exercised in full, the Corporation will beneficially own 56.1% of the common shares of Genworth Canada. The unaudited pro forma condensed consolidated financial statements do not reflect the exercise of the Over-Allotment Option.
(b) Adjustment reflects the net proceeds received in Canadian dollars by the Corporation in conjunction with the sale of 44,740,000 shares of Genworth Canada’s common stock at the March 31, 2009 exchange rate of 0.7946 United States dollar to 1 Canadian dollar. If the Over-Allotment Option is exercised in full, the Corporation will receive additional net proceeds of $89 million for a total adjustment of $685 million. Proceeds are net of expenses directly related to the Offering, including underwriting commissions, taxes and other items, and assumes these expenses were paid in cash on March 31, 2009.
(c) Adjustment reflects a change in deferred taxes for the 38.2% noncontrolling interests in Genworth Canada in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $40 million.
(d) Adjustment reflects the difference between the net proceeds received, adjustments to deferred taxes and accumulated other comprehensive income (loss) and the 38.2% noncontrolling interests in Genworth Canada following the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $(99) million.
(e) Adjustment reflects the 38.2% noncontrolling interests in Genworth Canada’s net unrealized investment gains (losses) in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would remain at $(3) million.
(f) Adjustment reflects the 38.2% noncontrolling interests in Genworth Canada’s foreign currency translation in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $32 million.
(g) Adjustment reflects the 38.2% noncontrolling interests in Genworth Canada in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $795 million.
(h) Adjustment reflects a reduction in the provision for income taxes as a result of lower U.S. taxes on foreign income for the three months ended March 31, 2009 in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would remain at $(3) million.
(i) Adjustment reflects the 38.2% noncontrolling interests in Genworth Canada’s net income for the three months ended March 31, 2009 in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $(25) million.
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(j) Adjustment reflects a reduction in the provision for income taxes as a result of lower U.S. taxes on foreign income for the year ended December 31, 2008 in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $(12) million.
(k) Adjustment reflects the 38.2% noncontrolling interests in Genworth Canada’s net income for the year ended December 31, 2008 in conjunction with the Offering. If the Over-Allotment Option is exercised in full, noncontrolling interests will be 43.9% and the adjustment would be $(151) million.
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