6620 West Broad Street     Richmond, Virginia 23230

 

November 1, 2018

 

Dear Stockholder,

 

You are invited to attend the 2018 Annual Meeting of Stockholders of Genworth Financial, Inc. to be held at 9:00 a.m. local time on Thursday, December 13, 2018, at The Westin Richmond, 6631 West Broad Street, Richmond, Virginia 23230.

 

As previously announced, on October 21, 2016, we entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation, a Delaware corporation and an indirect, wholly-owned subsidiary of Parent, a subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “Oceanwide”). Pursuant to the Merger Agreement, Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, our stockholders voted on and approved a proposal to adopt the Merger Agreement.

 

Genworth and Oceanwide remain committed to satisfying the closing conditions under the Merger Agreement as soon as possible, subject to receipt of the required regulatory approvals. Because the pending transaction has not yet been completed, the 2018 Annual Meeting of Stockholders has been scheduled in order to ensure that we remain in compliance with the listing standards of the New York Stock Exchange, which require each listed issuer to hold an annual meeting of stockholders no later than one year after the end of the issuer’s fiscal year. In the event the proposed merger is completed by December 13, 2018, the 2018 Annual Meeting will not be held.

 

The 2018 Annual Meeting of Stockholders will include a report on our business operations, discussion and voting on the matters set forth in the accompanying Notice of 2018 Annual Meeting of Stockholders and Proxy Statement, and discussion and voting on any other business matters properly brought before the meeting.

 

The compensation information included in the Proxy Statement reflects compensation paid to our directors and named executive officers in 2017. This information was previously disclosed in an amendment to our Form 10-K for the fiscal year ended December 31, 2017, which was filed with the U.S. Securities and Exchange Commission on April 3, 2018.

 

We use the U.S. Securities and Exchange Commission rule that permits companies to furnish proxy materials to their stockholders over the Internet. We believe this expedites stockholders receiving proxy materials, lowers our costs and conserves natural resources. Therefore, we are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of the Proxy Statement and our 2017 Annual Report. The Notice of Internet Availability of Proxy Materials explains how to access the proxy materials online, vote online and obtain a paper copy of our proxy materials.

 

Whether or not you plan to attend the 2018 Annual Meeting of Stockholders, you can ensure your shares are represented at the meeting by promptly submitting your proxy by telephone, by Internet or by completing, signing, dating and returning your proxy card.

 

Cordially,
/s/ James S. Riepe				/s/ Thomas J. McInerney
James S. Riepe				Thomas J. McInerney
Non-Executive Chairman of the Board				President and Chief Executive Officer

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS

 

 

 

9:00 a.m., December 13, 2018

The Westin Richmond

6631 West Broad Street

Richmond, Virginia 23230

 

November 1, 2018

 

To our Stockholders:

 

NOTICE IS HEREBY GIVEN that Genworth Financial, Inc.’s 2018 Annual Meeting of Stockholders will be held at The Westin Richmond, 6631 West Broad Street, Richmond, Virginia 23230, on Thursday, December 13, 2018, at 9:00 a.m. local time, to address all matters that may properly come before the 2018 Annual Meeting of Stockholders. In addition to receiving a report on our business operations, stockholders will be asked:

 

(1)

to elect the nine nominees named in this Proxy Statement as directors until the next annual meeting;

 

(2)

to approve, on an advisory basis, the compensation of our named executive officers;

 

(3)

to approve the 2018 Genworth Financial, Inc. Omnibus Incentive Plan;

 

(4)

to ratify the selection of KPMG LLP as our independent registered public accounting firm for 2018; and

 

(5)

to transact such other business as may properly come before the 2018 Annual Meeting or any adjournment thereof.

 

Stockholders of record at the close of business on October 19, 2018 will be entitled to vote at the meeting and any adjournments. In accordance with the U.S. Securities and Exchange Commission rule, we are furnishing this Proxy Statement and our 2017 Annual Report to our stockholders over the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need more quickly. In addition, it lowers our costs of printing and delivering these materials, and reduces the environmental impact of our 2018 Annual Meeting of Stockholders. The Notice of Internet Availability of Proxy Materials sent to many of our stockholders explains how to access the proxy materials online, vote online and obtain a paper copy of our proxy materials.

 

We urge you to participate in the 2018 Annual Meeting of Stockholders, either by attending and voting in person or by voting through other acceptable means as promptly as possible. You may vote by telephone, through the Internet or by mailing your completed and signed proxy card (or voting instruction form, if you hold your shares through a broker, bank or other nominee). Each share of Class A Common Stock issued and outstanding as of the record date is entitled to one vote on each matter to be voted upon at our 2018 Annual Meeting of Stockholders. Your vote is important and we urge you to vote.

 

This Notice, the Proxy Statement and proxy card are first being made available or mailed to stockholders on or about November 1, 2018.

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 13, 2018

 

GENWORTH’S NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS, PROXY STATEMENT AND 2017 ANNUAL REPORT ARE AVAILABLE, FREE OF CHARGE, AT:

WWW.PROXYVOTE.COM

CONTENTS

 

Proxy Summary			i
Proxy Statement			1
Internet Availability of Proxy Materials			1
Information About the 2018 Annual Meeting and Proxy Voting			2
Information About Communications with Genworth and Our Board of Directors			7
•  Election of Directors			9
Corporate Governance			15
Board of Directors and Committees			18
Information Relating to Directors, Director Nominees, Executive Officers and Significant Stockholders			27
Report of the Management Development and Compensation Committee			30
Compensation Discussion and Analysis			31
Executive Compensation			52
•  Advisory Vote to Approve Named Executive Officer Compensation			67
•  Approval of the 2018 Genworth Financial, Inc. Omnibus Incentive Plan			68
Equity Compensation Plans			75
Certain Relationships and Transactions			75
Evaluation of Compensation Program Risks			76
Section 16(a) Beneficial Ownership Reporting Compliance			76
Report of the Audit Committee			77
Independent Registered Public Accounting Firm			78
•  Ratification of Selection of Independent Registered Public Accounting Firm			79
Appendix A: 2018 Genworth Financial, Inc. Omnibus Incentive Plan			A-1

 

• To be voted on at the meeting

 

Every stockholder’s vote is important. Please complete, sign,

date and return your proxy card, or submit your

proxy by telephone or by Internet.

PROXY SUMMARY

This summary highlights information about Genworth Financial, Inc. (the “company,” “Genworth,” “we,” “our” and “us”) and certain information contained elsewhere in this proxy statement (“Proxy Statement”) for Genworth’s 2018 Annual Meeting of Stockholders (the “2018 Annual Meeting”). This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

The compensation information included in the Proxy Statement reflects compensation paid to our directors and named executive officers in 2017, which was previously disclosed in Amendment No. 1 to our Form 10-K for the fiscal year ended December 31, 2017, which was filed with the U.S. Securities and Exchange Commission on April 3, 2018 (“Amendment No. 1 to Form 10-K”). Certain information, including information about our corporate governance, director independence, our policy for related party transactions, and accounting fees and services, were also disclosed in Amendment No. 1 to Form 10-K.

2018 Annual Meeting of Stockholders Information

 

Date and Time:		Thursday, December 13, 2018 at 9:00 a.m. local time
Place:		The Westin Richmond, 6631 West Broad St., Richmond, Virginia 23230
Record Date:		October 19, 2018
Voting Rights:		Each share of Class A Common Stock issued and outstanding as of the record date is entitled to one vote for each director nominee and one vote for each of the other proposals properly presented at the meeting.

2017 Company and Executive Compensation Highlights

Following an active and extensive two-year strategic review process, Genworth entered into an agreement and plan of merger (the “Merger Agreement”), dated October 21, 2016, with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and an indirect, wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into Genworth with Genworth surviving the merger as an indirect, wholly-owned subsidiary of Parent. Parent is a subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “Oceanwide”). Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. The transaction has been approved by Genworth’s stockholders, and is subject to other closing conditions, including the receipt of regulatory approvals.¹

We had strong operational performance in 2017 including net income for the year of $817 million and adjusted operating income of $696 million, as further described in the 2017 Company Performance section below. We also made significant progress toward satisfying the closing conditions of the Merger Agreement with Oceanwide in 2017, including stockholder approval of the transaction, as well as numerous conditional state regulatory approvals. Notwithstanding this progress, the transaction did not close in 2017 due to unanticipated delays in the regulatory reviews.

We believe our stock price performance during 2017 was heavily influenced by market uncertainty about the prospects for completing the Oceanwide transaction as well as continued uncertainty related to the long-term care insurance industry and our legacy long-term care insurance business, despite our strong 2017 financial results. We do continue to believe that the Oceanwide transaction is the best alternative for stockholders, and completing it therefore continues to be our top priority. We have made additional progress toward closing this transaction during 2018. We will continue to work toward the completion of the Oceanwide transaction as soon as possible as well as focus on financial results for each of our operating businesses.

 

1

This Proxy Summary, as well as certain compensation disclosures included in this Proxy Statement, are presented without regard to the terms of the proposed merger with Oceanwide. For further information regarding the terms, conditions and interests of certain persons under the proposed merger, see our proxy statement for the special meeting of stockholders held on March 7, 2017, which was filed on January 25, 2017.

 

i

Our executive compensation programs are performance-based and align executive officer incentives with stockholder interests over multiple timeframes. In 2017, we continued to award long-term incentives in the form of equity to our executive officers. We aligned named executive officer annual incentives in 2017 with solid operational performance as well as progress toward completing the Oceanwide transaction. Additionally, incentives were aligned with the execution of financial and strategic initiatives that would improve our operating performance, enable strategic flexibility of our life and long-term care (“LTC”) insurance businesses, and increase returns in our mortgage insurance businesses. We met or exceeded our key operational, strategic and financial objectives for 2017 across all businesses, with the exception of our Australia mortgage business. However, after excluding the U.S. GAAP impact of the earnings curve adjustment of the Australia mortgage business, which has no impact on the overall long-term profitability of the business, the business was deemed by the Compensation Committee to be performing at target and delivering solid underlying earnings performance.

2017 Company Performance

Below is a summary of our key performance results for 2017:

Mortgage Insurance

 

•

Our U.S. and Canada mortgage insurance businesses significantly exceeded their goals with respect to adjusted operating income2 and operating ROE3, while our Australia mortgage insurance business, after excluding the U.S. GAAP impact of its earnings curve adjustment, which has no impact on the overall long-term profitability of the business, was deemed to be performing at target and delivering solid underlying earnings performance.

 

•

We exceeded our internal goals for our PMIERs capital requirements in our U.S. mortgage insurance business and exceeded internal goals for its new business pricing returns and other strategic metrics; and

 

•

We maintained prudent top-line growth in our Canada mortgage insurance business within risk tolerances, and maintained strong portfolio quality and strong capital ratios.

U.S. Life Insurance

 

•

We exceeded our internal targets for premium rate increases on our unprofitable legacy blocks of long-term care insurance, and continued execution of our multi-year rate action filing plan;

 

•

We exceeded our internal goals with respect to our operating income metric as described in the annual incentive section below; and

 

•

We made meaningful progress toward the separation and isolation of our long-term care insurance business through reinsurance transactions in 2017.

Corporate and Other

 

•

We had strong investment portfolio performance, exceeding our goals for net investment income, impairments and trading losses for the year;

 

•

We ended the year with holding company cash and cash equivalents of $870 million4, which remained above our 2017 target of one and one-half times annual debt service, plus a $350 million buffer; and

 

•

2017 net income was $817 million and adjusted operating income2 was $696 million.

 

(2)

“Adjusted operating income (loss)” equals income (loss) from continuing operations excluding the after-tax effects of income (loss) attributable to non-controlling 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.

(3)	“Operating ROE” for each of our mortgage insurance businesses is defined in the table outlining key financial metrics on page 39.

(4)	Comprises cash and cash equivalents of $795 million and U.S. government bonds of $75 million as of December 31, 2017.

 

ii

Impact of 2017 Performance on Compensation

Our operating performance in 2017, as well as our trailing three-year performance, have directly impacted our named executive officer compensation, as follows:

 

•

The company met or exceeded our key operational, strategic and financial objectives for 2017 across all businesses, with the exception of our Australia mortgage business. However, after excluding the U.S. GAAP impact of the earnings curve adjustment of the Australia mortgage business, which has no impact on the overall long-term profitability of the business, the business was deemed to be performing at target and delivering solid underlying earnings performance;

 

•

Annual incentive awards for our other named executive officers were also above target, and were based on performance for their respective areas of responsibility and contributions made toward closing the Oceanwide transaction;

 

•

Based on our trailing three-year performance, our 2014—2016 performance stock unit (“PSU”) awards and 2015—2017 PSU awards did not result in any share payouts to the named executive officers; and

 

•

The aggregate value of outstanding long-term equity awards (both vested and unvested) held by our named executive officers continues to be below targeted values, consistent with the decline in our stock price in the past few years.

Voting Matters and Board Recommendations

 

Proposals		Board Recommendation		Page Number for Additional Information
1. Election of Directors		FOR each nominee		9
2. Advisory Vote to Approve Named Executive Officer Compensation		FOR		67
3. Approval of the 2018 Genworth Financial, Inc. Omnibus Incentive Plan		FOR		68
4. Ratification of Independent Registered Public Accounting Firm		FOR		79

 

iii

Our Director Nominees

The table below sets forth information about our director nominees, each of whom is an incumbent member of the Genworth Financial, Inc. Board of Directors (the “Board” or the “Board of Directors”), including their ages, length of service on our Board and relevant experience. The Board has determined that eight of the nine nominees are independent directors under the New York Stock Exchange listing requirements and our Governance Principles.

 

Director Nominee		Age				Director Since				Experience
William H. Bolinder			75				2010			Former President, Chief Executive Officer and a director of Acadia Trust N.A.
G. Kent Conrad			70				2013			Former U.S. Senator
Melina E. Higgins			51				2013			Former Partner at The Goldman Sachs Group, Inc.
Thomas J. McInerney			62				2013			President and Chief Executive Officer of Genworth Financial, Inc.
David M. Moffett			66				2012			Former Chief Executive Officer and a director of Federal Home Loan Mortgage Corporation
Thomas E. Moloney			74				2009			Former Senior Executive Vice President and Chief Financial Officer of John Hancock Financial Services, Inc.
Debra J. Perry			67				2016			Former Executive at Moody’s Investor Service, Inc.
Robert P. Restrepo Jr.			68				2016			Former Chairman and President and Chief Executive Officer of State Auto Financial Corporation
James S. Riepe+			75				2006			Former Vice Chairman of T. Rowe Price Group, Inc.

 

+	Non-Executive Chairman of the Board

Our Corporate Governance Facts

 

Size of Board as of November 1, 2018		9
Number of Independent Directors as of November 1, 2018		8
Board Committees Consist Entirely of Independent Directors		Yes
All Director Nominees Attended at least 75% of Meetings Held in 2017		Yes
Annual Election of All Directors		Yes
Majority Voting for Directors		Yes
Separate Independent Chairman and CEO		Yes
Independent Directors Meet Regularly in Executive Session		Yes
Annual Board and Committee Self-Evaluations		Yes
Stockholders Holding at least 40% of Outstanding Common Stock Have Ability to Call Special Meeting		Yes
Stock Ownership Requirements for Directors		Yes
Anti-Hedging and Anti-Pledging Policies for Directors and Executive Officers		Yes
Corporate Social Responsibility Section of Our Corporate Website		Yes
Poison Pill		No

 

iv

Additional Executive Compensation Governance Facts

 

Annual Advisory Approval of Executive Compensation		Yes
Use of Performance-Based Long-Term Incentives		Yes
Stock Ownership Requirements for Executive Officers		Yes
Stock Ownership Requirement for CEO, as a Multiple Of Base Salary		7x
Retention Requirements for Equity Awards		Yes
Clawback Policy		Yes
Double-Trigger for Change of Control Benefits		Yes
Excise Tax Gross-Ups for Change of Control Benefits		No

Our Executive Compensation Philosophy and Practices

Our executive compensation programs utilize a balanced mix of base salary, annual and long-term incentives and customary benefits to attract and retain highly qualified executives and maintain a strong relationship between executive pay and company performance. As evidenced by the results of our “say-on-pay” votes at our 2017, 2016 and 2015 Annual Meetings of Stockholders, with over 94%, 82% and 97%, respectively, of shares represented at the meeting and entitled to vote voting in favor, we believe that stockholders have indicated strong support for the structure and execution of our named executive officer compensation programs.

Highlights of our named executive officer compensation programs, as described in the Compensation Discussion and Analysis section below, include:

 

•

compensation programs that are performance-based and align executive officer incentives with stockholder interests over multiple timeframes;

 

•

annual incentives that are earned based on performance measured against specific financial and operational objectives for an executive’s area of responsibility, together with a qualitative assessment of performance;

 

•

at-risk pay and compensation design that reflect an executive officer’s impact on company performance over time; and

 

•

appropriate risk management practices, including a clawback policy, anti-hedging policy, anti-pledging policy, stock ownership requirements, net share retention ratio and net hold requirements with respect to equity grants.

 

v

PROXY STATEMENT

 

Genworth Financial, Inc.

6620 West Broad Street

Richmond, Virginia 23230

 

As previously announced, on October 21, 2016, we entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation, a Delaware corporation and an indirect, wholly-owned subsidiary of Parent, a subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “Oceanwide”). Pursuant to the Merger Agreement, Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, our stockholders voted on and approved a proposal to adopt the Merger Agreement.

 

Genworth and Oceanwide remain committed to satisfying the closing conditions under the Merger Agreement as soon as possible, subject to receipt of the required regulatory approvals. Because the pending transaction has not yet been completed, the 2018 Annual Meeting of Stockholders has been scheduled in order to ensure that we remain in compliance with the listing standards of the New York Stock Exchange (“NYSE”), which require each listed issuer to hold an annual meeting of stockholders no later than one year after the end of the issuer’s fiscal year. In the event the proposed merger is completed by December 13, 2018, the 2018 Annual Meeting will not be held.

 

This Proxy Statement is furnished in connection with the solicitation of proxies by Genworth on behalf of the Board of Directors for the 2018 Annual Meeting. The Notice of 2018 Annual Meeting of Stockholders, the Proxy Statement and proxy card are first being made available or mailed to stockholders on or about November 1, 2018.

 

Your vote is important. Whether or not you plan to attend the 2018 Annual Meeting, please take the time to vote your shares as soon as possible. You can ensure that your shares are voted at the meeting by submitting your proxy by telephone, by Internet or by completing, signing, dating and returning the proxy card. Submitting your proxy by any of these methods will not affect your right to attend the meeting and vote. A stockholder who gives a proxy may revoke it by voting in person at the 2018 Annual Meeting, by delivering a subsequent proxy or by notifying Genworth’s Corporate Secretary in writing of such revocation. Attendance at the meeting alone will not revoke a previously submitted proxy.

 

INTERNET AVAILABILITY OF PROXY MATERIALS

 

We are making this Proxy Statement and our 2017 Annual Report, which includes our Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report”), available to our stockholders on the Internet. We mailed to many of our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including this Proxy Statement and our 2017 Annual Report. The Notice of Internet Availability of Proxy Materials also provides instructions on how to vote online, by mail or by telephone. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request these materials. Other stockholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote online, or have been mailed paper copies of our proxy materials and a proxy card (or a voting instruction form from their broker, bank or other nominee).

 

Internet distribution of proxy materials is designed to expedite receipt by stockholders, lower the costs associated with our 2018 Annual Meeting, and reduce the environmental impact of our 2018 Annual Meeting. However, if you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please follow the instructions for requesting such materials contained on the

 

1

Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

 

INFORMATION ABOUT THE 2018 ANNUAL MEETING AND PROXY VOTING

 

What matters are to be voted on at the 2018 Annual Meeting?

 

Genworth intends to present the following proposals for stockholder consideration and voting at the 2018 Annual Meeting:

 

(1) to elect the nine nominees named in this Proxy Statement as directors until the next annual meeting;

 

(2) to approve, on an advisory basis, the compensation of our named executive officers;

 

(3) to approve the 2018 Genworth Financial, Inc. Omnibus Incentive Plan;

 

(4) to ratify the selection of KPMG LLP (“KPMG”) as our independent registered public accounting firm for 2018; and

 

(5) to transact such other business as may properly come before the 2018 Annual Meeting or any adjournment thereof.

 

What is the recommendation of the Board of Directors with respect to each proposal?

 

The Board of Directors recommends votes:

 

•

FOR the election of the nine nominees named in this Proxy Statement as directors;

 

•

FOR the approval, on an advisory basis, of the compensation of our named executive officers;

 

•

FOR the approval of the 2018 Genworth Financial, Inc. Omnibus Incentive Plan; and

 

•

FOR the ratification of the selection of KPMG as our independent registered public accounting firm for 2018.

 

Will any other matters be presented for a vote at the 2018 Annual Meeting?

 

At this time, we are not aware of any other matters that will be presented for a vote at the 2018 Annual Meeting. However, if another matter were to be properly presented, the proxies would use their own judgment in how to vote on that matter.

 

Who is entitled to vote at the 2018 Annual Meeting?

 

All holders of our Class A Common Stock, par value $0.001 (our “common stock”), issued and outstanding at the close of business on October 19, 2018 (the “record date”) are entitled to vote at the 2018 Annual Meeting. As of the record date, there were 500,757,037 shares of our common stock issued and outstanding. Each share outstanding on the record date will be entitled to one vote.

 

How do I vote my shares?

 

Record Holders. Stockholders of record may vote their shares in person at the 2018 Annual Meeting, or may submit a proxy to cause their shares to be represented and voted at the 2018 Annual Meeting. Stockholders of record may grant a proxy with respect to their shares by mail, by telephone or by Internet. Granting a proxy by telephone or by Internet will be available through 11:59 p.m. Eastern time on December 12, 2018. Voting instructions appear on your proxy card. If you grant a proxy by telephone or by Internet, please have your proxy card available.

 

Beneficial Holders. If you are the beneficial owner, but not the record owner, of our common stock, you will receive instructions about voting from the bank, broker or other nominee that is the stockholder of record of your

 

2

shares. Your ability to vote over the Internet or by telephone depends on the voting procedures of your bank, broker or other nominee. If you wish to attend the 2018 Annual Meeting to vote in person, you will have to contact your bank, broker or other nominee to obtain its proxy, and bring that document with you to the meeting.

 

Retirement Plan Holders. If you hold shares of our common stock through the Genworth Financial, Inc. Retirement and Savings Plan (the “Retirement and Savings Plan”) or the Genworth Financial Canada Stock Savings Plan (the “Canada Plan”), you will receive instructions about how to direct the trustee of your plan to vote your shares. Please review these voting instructions to determine your ability to vote over the Internet or by telephone.

 

Proxies or voting instruction forms submitted by mail, telephone or Internet will be voted in the manner indicated by the individuals named on the proxy or the voting instruction form.

 

What if I sign and return my proxy or voting instructions but do not specify how to vote my shares?

 

Record Holders. If you submit a proxy but do not specify how your shares are to be voted, the proxies will vote your shares:

 

•

FOR the election of the nine nominees named in this Proxy Statement as directors;

 

•

FOR the approval, on an advisory basis, of the compensation of our named executive officers;

 

•

FOR the approval of the 2018 Genworth Financial, Inc. Omnibus Incentive Plan; and

 

•

FOR the ratification of the selection of KPMG as our independent registered public accounting firm for 2018.

 

Beneficial Holders. If you submit a voting instruction form to your bank, broker or other nominee but do not specify how to vote your shares, your shares will be voted in the bank, broker or other nominee’s discretion with respect to the ratification of KPMG but such shares will not be voted with respect to the election of directors, the proposal to approve, on an advisory basis, the compensation of our named executive officers, or the proposal to approve the 2018 Genworth Financial, Inc. Omnibus Incentive Plan (the “2018 Plan”).

 

Retirement Plan Holders. If you hold your shares through the Retirement and Savings Plan and submit your voting instruction form but do not specify how to vote your shares, the shares credited to your account will be voted by the trustee in the same proportion that it votes shares in other accounts for which it received timely instructions. If, however, you hold shares through the Canada Plan, and, in either case, you do not direct how to vote those shares, those shares will not be voted.

 

May I change or revoke my proxy after it is submitted?

 

Yes, you may change or revoke your proxy before the 2018 Annual Meeting by:

 

•

subsequently granting a proxy by telephone or by Internet;

 

•

returning a later-dated proxy card;

 

•

sending your notice of revocation to our Corporate Secretary; or

 

•

attending the 2018 Annual Meeting and voting in person.

 

If you submit your changed proxy or revocation by telephone or by Internet, it must be received by 11:59 p.m. Eastern time on December 12, 2018. If you submit your changed proxy or revocation by another method specified above, it must be received before the polls close for voting. Attendance at the meeting alone will not revoke a previously submitted proxy.

 

3

Who can attend the 2018 Annual Meeting?

 

You are entitled to attend the 2018 Annual Meeting only if you are a holder of record or a beneficial owner of our common stock as of the record date, or you hold a valid proxy for the 2018 Annual Meeting.

 

If you are a Genworth stockholder of record and wish to attend the meeting, please so indicate on the proxy card or as prompted by the telephone or Internet voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the 2018 Annual Meeting.

 

If you are a beneficial owner of Genworth shares and a bank, broker or other nominee is the record owner of your shares, you will need to have proof that you are the beneficial owner to be admitted to the meeting. A recent statement or letter from your bank or broker confirming your ownership as of the record date, or presentation of a valid proxy from a bank, broker or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

 

You should be prepared to present photo identification for admittance. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the 2018 Annual Meeting.

 

What is a quorum?

 

In order for business to be conducted at the 2018 Annual Meeting, a quorum must be present. A quorum will be present if stockholders of record holding a majority in voting power of the outstanding shares of stock entitled to vote at the meeting are present in person or are represented by proxies.

 

What vote is required for the items of business at the 2018 Annual Meeting?

 

Holders of our common stock will vote as a single class and will be entitled to one vote per share with respect to each matter to be presented at the 2018 Annual Meeting.

 

Election of directors. Under our Bylaws, each of the nominees for director receiving a majority of votes cast by holders of our common stock at the meeting, in person or by proxy, shall be elected to our Board of Directors, unless the election is contested, in which case directors shall be elected by a plurality of votes properly cast. An election shall be contested if, as determined by the Board of Directors, the number of nominees exceeds the number of directors to be elected. A majority of votes cast means that the number of votes cast for a director exceeds the number of votes cast against that director, with abstentions and “broker non-votes” counting as votes neither for nor against such director’s election. Under our Bylaws, any incumbent director who is a nominee in an uncontested election who does not receive a majority of votes cast shall promptly tender his or her resignation from the Board of Directors following the certification of the stockholder vote. Any resignation so received will not be made effective until it is acted upon by the Board of Directors. The Nominating and Corporate Governance Committee will assess the appropriateness of the nominee continuing to serve as a director and will recommend to the Board of Directors whether to accept or reject the resignation, or whether other action should be taken. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and the reason for the decision. The director resignation procedures set forth in our Bylaws do not apply to contested elections of directors.

 

The Board of Directors has proposed nine nominees for election. No other nominees for election to the Board of Directors have been submitted for election in accordance with the Bylaws. Thus, the Board of Directors has not determined that the election will be contested, and each director will be elected by a majority of votes cast.

 

Advisory vote to approve named executive officer compensation. The affirmative vote of the holders of a majority of shares of our common stock present at the meeting, in person or by proxy, and entitled to vote on the

 

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matter is required for the non-binding, advisory vote to approve the compensation of our named executive officers. The vote is advisory, and therefore not binding on the company, the Management Development and Compensation Committee or our Board of Directors. However, the Management Development and Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation as it deems appropriate.

 

Approval of the 2018 Genworth Financial, Inc. Omnibus Incentive Plan. In 2017, despite a largely depleted share pool for new awards under the company’s 2012 Omnibus Incentive Plan (the “2012 Plan”), we elected not to seek stockholder approval of additional shares under the 2012 Plan or request approval of a new equity incentive plan in light of our pending merger with Oceanwide. As a result, we did not have enough shares available in 2018 to make our typical grant of equity awards to executive officers and other employees. Many of the shares remaining were granted in 2018 as an equity incentive to our CEO, and our other executive officers received 2018 annual incentive awards in the form of performance-based cash awards. While Genworth and Oceanwide remain committed to satisfying the conditions under the Merger Agreement as soon as possible, we continue to believe that while we are a public company, the interests of our executive officers should be aligned with our stockholders through grants of meaningful and market competitive equity-based incentives. Accordingly, we are requesting that stockholders approve the 2018 Plan with a replenished share pool in order to have sufficient shares available in the event that we remain public at the time of our regular 2019 annual long-term incentive grant. In the event the 2018 Plan is not approved by stockholders, we believe that we would likely not have sufficient shares for future equity awards to our executive officers and would need to consider other alternatives for our long-term incentive awards.

 

The affirmative vote of a majority of shares of common stock present at the meeting, in person or by proxy, and entitled to vote on the matter is required for the approval of the 2018 Plan.

 

Ratification of the selection of KPMG as our independent registered public accounting firm for 2018. The affirmative vote of the holders of a majority of shares of our common stock present at the meeting, in person or by proxy, and entitled to vote on the matter is required for the ratification of the selection of KPMG as our independent registered public accounting firm for 2018.

 

Other matters. The affirmative vote of the holders of a majority of shares of our common stock present at the meeting, in person or by proxy, and entitled to vote on the matter is required for approval of any other matters.

 

How are abstentions and broker non-votes counted?

 

Because the election of directors is uncontested, directors will be elected by a majority of votes cast, as provided under our Bylaws. Abstentions will not be counted in determining whether a director has received a majority of the votes cast for his or her election. Abstentions will have the same effect as votes “against” the advisory vote to approve named executive officer compensation, the proposal to approve the 2018 Plan, and the proposal to ratify the selection of KPMG as our independent registered public accounting firm for 2018.

 

If a bank, broker or other nominee returns a proxy card indicating that it does not have discretionary authority to vote as to a particular matter (“broker non-votes”), those shares will be treated as not entitled to vote on that matter. Brokers do not have the discretionary authority to vote on the election of directors. Broker non-votes do not count as votes and, therefore, will not be counted in determining whether a director has received a majority of the votes cast for his or her election.

 

Brokers also do not have the discretionary authority to cast: (i) an advisory vote on named executive officer compensation, or (ii) a vote to approve the 2018 Plan. As a result, brokers will not be treated as entitled to vote on these matters and, therefore, will not have any effect on the outcome of the proposals.

 

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The ratification of the selection of KPMG as our independent registered public accounting firm for 2018 is deemed to be a discretionary matter and brokers will be permitted to vote uninstructed shares as to such matter.

 

Abstentions and broker non-votes will be counted as shares present for purposes of determining whether a quorum is present.

 

Who counts the votes?

 

The Board will continue, as it has in past years, to retain an independent tabulator to receive and tabulate the proxies and appoint an independent inspector of election to certify the results.

 

What are the costs for soliciting proxies for the 2018 Annual Meeting?

 

Proxies will be solicited on behalf of the Board of Directors by mail, telephone, other electronic means or in person, and we will pay the solicitation costs. Copies of proxy materials and of the 2017 Annual Report will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse such record holders for their reasonable expenses. Georgeson Inc. has been retained to assist in soliciting proxies at a fee of $16,000, plus distribution costs and other costs and expenses.

 

What is the deadline for submission of stockholder proposals for the 2019 Annual Meeting?

 

The rules of the U.S. Securities and Exchange Commission (the “SEC”) establish the eligibility requirements and the procedures that must be followed for a stockholder’s proposal to be included in a public company’s proxy materials. Pursuant to those rules, any proposal for inclusion in Genworth’s proxy materials for an annual meeting held in 2019 (the “2019 Annual Meeting”) would have to be received at our principal executive offices on or before July 5, 2019. However, if the date of the 2019 Annual Meeting changes by more than 30 days from the anniversary of the 2018 Annual Meeting, then the deadline is a reasonable time before we begin to print and send our proxy materials for the 2019 Annual Meeting. Although Genworth and Oceanwide remain committed to satisfying the closing conditions under the Merger Agreement as soon as possible, if we hold a 2019 Annual Meeting, we expect that such meeting would be held on or about July 18, 2019, which is more consistent with the timing of prior years’ annual meetings. Further, if we were to hold the 2019 Annual Meeting on or about that date, we would expect to begin printing and sending the proxy materials for such meeting commencing on or about June 5, 2019. In that case, because we would have moved the 2019 meeting date by more than 30 days from the anniversary of the 2018 Annual Meeting, proposals submitted for inclusion in Genworth’s 2019 proxy materials would have to be received a reasonable time before we print and send our proxy materials. Genworth is requesting that any stockholder proposals for inclusion in the 2019 proxy materials be submitted no later than February 28, 2019. Proposals for inclusion in our 2019 proxy materials must comply with all requirements of the rules of the SEC.

 

In addition, our Bylaws establish an advance notice procedure with regard to director nominations and other business proposals by stockholders intended to be presented at the 2019 Annual Meeting of Stockholders. For these nominations or other business proposals to be properly brought before the meeting by a stockholder, since we expect that, if held, the 2019 Annual Meeting will occur on a date that is more than 30 days before the anniversary of the 2018 Annual Meeting, the stockholder must deliver written notice to us not earlier than the close of business on the 120^th day prior to the 2019 Annual Meeting and not later than the close of business on the later of the 90^th day prior to the 2019 Annual Meeting or the tenth (10^th) day following the day on which we first publicly announce the date of such meeting. Such nominations and other business proposals must comply with all requirements set forth in our Bylaws. Our Bylaws provide that business proposals that comply with all rules and requirements of the SEC and are included in our Proxy Statement are deemed to comply with the advance notice procedures in our Bylaws.

 

All notices of intention to present director nominations or other business proposals at the 2019 Annual Meeting, whether or not intended to be included in our proxy materials, should be addressed to: Corporate Secretary, Genworth Financial, Inc., 6620 West Broad Street, Richmond, Virginia 23230.

 

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Where can I find the voting results of the 2018 Annual Meeting?

 

The preliminary voting results will be announced at the 2018 Annual Meeting. In addition, within four business days following the 2018 Annual Meeting, we intend to file the final voting results with the SEC on Form 8-K. If the final voting results have not been certified within that four-day period, we will report the preliminary voting results on Form 8-K at that time and will file an amendment to the Form 8-K to report the final voting results within four business days of the date that the final results are certified. The final voting results will also be posted in the corporate governance section of our website. To view the results, go to www.genworth.com, select “Investors,” then select “Corporate Governance” and finally select “2018 Annual Meeting Results.”

 

May I request electronic delivery of proxy statements and annual reports in the future?

 

Stockholders of record may elect to receive future proxy statements and annual reports electronically by providing consent to electronic delivery online at www.proxyvote.com. Should you choose to receive your proxy materials electronically, your choice will remain in effect until you notify Genworth or Broadridge Financial Solutions, Inc., in accordance with applicable law, that you wish to resume mail delivery of these documents. If you hold your Genworth common stock through a bank, broker or other nominee, refer to the information provided by that entity for instructions on how to receive your proxy materials electronically.

 

Where can I view this Proxy Statement and Genworth’s 2017 Annual Report electronically?

 

This Proxy Statement and Genworth’s 2017 Annual Report may be viewed online at www.proxyvote.com.

 

How can I get a copy of Genworth’s Annual Report on Form 10-K?

 

To obtain a copy of Genworth’s 2017 Annual Report, which includes our Form 10-K for the fiscal year ended December 31, 2017, without charge, address your request to Investor Relations, Genworth Financial, Inc., 6620 West Broad Street, Richmond, Virginia 23230. In addition, the 2017 Annual Report may be accessed at our website. To view, go to www.genworth.com, select “Investors,” then select “SEC Filings” and finally select “Annual Reports.” Our Form 10-K for the fiscal year ended December 31, 2017 also may be accessed at the SEC’s website at www.sec.gov.

 

INFORMATION ABOUT COMMUNICATIONS WITH GENWORTH AND OUR BOARD OF DIRECTORS

 

How may I communicate directly with Genworth and the Board of Directors?

 

The Board of Directors has established a process for stockholders and other interested persons to communicate directly with Genworth and its non-management directors. Information regarding this process, including how to email or write our non-management directors, may be found on our website. To view this process, go to www.genworth.com, select “Investors,” then select “Corporate Governance” and finally select “Contact the Board.” Concerns relating to accounting, internal accounting controls and auditing matters may also be submitted confidentially and anonymously through the methods specified on our website. You may direct your communications to our non-management directors as a group or individually, or to any committee of the Board of Directors. The Corporate Secretary or Genworth’s ombudsman monitor, review and sort all written communications to the non-management directors. Communications related to matters that are within the scope of the responsibilities of the Board of Directors are forwarded to the Board of Directors, the relevant committee of the Board or an individual director, as appropriate.

 

The Corporate Secretary or Genworth’s ombudsman forward correspondence related to routine business and customer service matters to the appropriate management personnel. The Corporate Secretary or Genworth’s ombudsman will immediately consult with the Audit Committee Chairman, who will determine whether to communicate further with the Audit Committee and/or the full Board of Directors with respect to any correspondence received relating to accounting, internal accounting controls, auditing matters or officer conduct.

 

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Letters may be sent to the non-management directors as a group or individually, care of the Corporate Secretary, Genworth Financial, Inc., 6620 West Broad Street, Building #1, Richmond, Virginia 23230.

 

In addition, letters may be sent directly to Genworth, care of the Corporate Secretary or Investor Relations, Genworth Financial, Inc., 6620 West Broad Street, Building #1, Richmond, Virginia 23230.

 

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ELECTION OF DIRECTORS

 

Currently, nine directors serve on our Board of Directors, the terms for whom all expire at the 2018 Annual Meeting. At the 2018 Annual Meeting, nine directors are to be elected to hold office until the 2019 Annual Meeting and until their successors have been duly elected and qualified or until the earlier of their resignation or removal in a manner provided for in the Bylaws. Working through its Nominating and Corporate Governance Committee, our Board of Directors continually evaluates the optimal size for the Board and may consider the addition of one or more independent directors to the Board.

 

The nine nominees for election at the 2018 Annual Meeting are listed on pages 10-14 with brief biographies, a list of their current committee memberships and descriptions of their qualifications and skills to serve as our directors. See the Board of Directors and Committees—Board Composition section below for a description of how our directors’ blend of backgrounds benefits our company. The Board of Directors has determined that eight of the nine nominees are independent directors under the NYSE listing requirements and our Governance Principles, which are discussed below in the Corporate Governance section.

 

All of the nominees named in this Proxy Statement have been nominated by our Board of Directors to be elected by holders of our common stock. We are not aware of any reason why any nominee would be unable to serve as a director. If a nominee for election is unable to serve, the shares represented by all valid proxies will be voted for the election of any other person that our Board of Directors may nominate as a substitute.

 

Our Governance Principles state that directors generally will not be nominated for election to our Board of Directors after their 73rd birthday, although the Board may nominate candidates over 73 for special circumstances. The Board of Directors has determined that special circumstances exist to nominate each of Mr. Bolinder, Mr. Moloney and Mr. Riepe for election to the Board after his 73rd birthday. Each of Mr. Bolinder, Mr. Moloney and Mr. Riepe have served in key leadership roles while providing financial and/or insurance industry expertise to our Board. In addition, they each have actively participated in our two-year strategic review process and we believe that their background and knowledge of our businesses and strategy is important at this time to provide Board continuity in light of the pending merger with Oceanwide and as Genworth continues to pursue actions to maximize stockholder value. As a result, the Board believes that retaining each of Mr. Bolinder, Mr. Moloney and Mr. Riepe on the Board of Directors is in the best interest of our stockholders, and has nominated each of Mr. Bolinder, Mr. Moloney and Mr. Riepe for election as directors to hold office until the 2019 Annual Meeting and until his successor has been elected and qualified.

 

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Committees Nominating and Corporate Governance (Chair)   Risk		William H. Bolinder, 75, former President, Chief Executive Officer and a director of Acadia Trust N.A. Director since October 2010.   Mr. Bolinder retired in June 2006 from serving as President, Chief Executive Officer and a director of Acadia Trust N.A., positions he had held since 2003. He had previously been a member of the Group Management Board for Zurich Financial Services Group from 1994 to 2002. Mr. Bolinder joined Zurich American Insurance Company, USA in 1986 as Chief Operating Officer and became Chief Executive Officer in 1987. Mr. Bolinder also previously served on the boards of directors of Endurance Specialty Holdings Ltd. (“Endurance”) from December 2001 to March 2017 (Endurance was acquired in 2017) and Quanta Capital Holding Ltd. from January 2007 to October 2008. Mr. Bolinder has also served on the board of the American Insurance Association, American Institute for Chartered Property Casualty Underwriting, Insurance Institute for Applied Ethics, Insurance Institute of America, Insurance Services Office, Inc. and the National Association of Independent Insurers. Mr. Bolinder received a B.S. in Business Administration from the University of Massachusetts, Dartmouth.   Qualifications: Mr. Bolinder offers extensive experience in the insurance and financial services industry, including a combined 16 years serving in various positions with one of the world’s largest insurance companies and its U.S. subsidiary, and three years as president, chief executive officer and director of an investment advisory and trustee company. Mr. Bolinder’s current and former directorships with underwriters of specialty lines of insurance and reinsurance provide valuable knowledge regarding the international financial services sector.

 

Committees   Nominating and Corporate Governance   Risk		G. Kent Conrad, 70, former U.S. Senator. Director since March 2013.   Sen. Conrad served as a U.S. Senator representing the State of North Dakota from January 1987 to January 2013. He served as the Chair of the Senate Budget Committee from 2006 until his retirement. Prior to serving in the U.S. Senate, Sen. Conrad served as the Tax Commissioner for the State of North Dakota from 1981 to 1986 and as Assistant Tax Commissioner from 1974 to 1980. Sen. Conrad received an A.B. in Political Science from Stanford University and an M.B.A. from George Washington University.   Qualifications: Sen. Conrad’s 26 years of experience as a U.S. Senator, including serving as Chair of the Senate Budget Committee for approximately six years, provides the Board with extensive information and insight into public policy, fiscal affairs, governmental relations and legislative and regulatory issues.

 

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Committees   Management Development and Compensation   Nominating and Corporate Governance		Melina E. Higgins, 51, former Partner at The Goldman Sachs Group. Director since September 2013.   Ms. Higgins retired in 2010 from a nearly 20-year career at The Goldman Sachs Group Inc., where she served as a Managing Director from 2001 and a Partner from 2002. During her tenure at Goldman Sachs, Ms. Higgins served as Head of the Americas and Co-Chairperson of the Investment Advisory Committee for the GS Mezzanine Partners funds, which managed over $30 billion of assets. She also served as a member of the Investment Committee for the Principal Investment Area, which oversaw and approved global private equity and private debt investments. Goldman’s Principal Investment Area was one of the largest alternative asset managers in the world. Ms. Higgins has served as a director of Mylan N.V. since February 2013. Ms. Higgins has also served as non-executive chairman of the board of Antares Midco, Inc. since January 2016 and is a member of the Women’s Leadership Board of Harvard University’s John F. Kennedy School of Government. Ms. Higgins received a B.A. in Economics and Spanish from Colgate University and an M.B.A. from Harvard Business School.   Qualifications: Ms. Higgins’ extensive finance and investment experience, having spent nearly 20 years with The Goldman Sachs Group, Inc., as well as serving as a director for both public and private companies, provides the board with significant insight in connection with our restructuring and turnaround initiatives.

 

		Thomas J. McInerney, 62, President and Chief Executive Officer of Genworth Financial, Inc. Director since January 2013.   Mr. McInerney has been our President and Chief Executive Officer and a director since January 2013. Before joining our company, Mr. McInerney had served as a Senior Advisor to the Boston Consulting Group from June 2011 to December 2012, providing consulting and advisory services to leading insurance and financial services companies in the United States and Canada. From October 2009 to December 2010, Mr. McInerney was a member of ING Groep’s Management Board for Insurance, where he was the Chief Operating Officer of ING’s insurance and investment management business worldwide. Prior to that, he served in a variety of senior roles with ING Groep NV after serving in many leadership positions with Aetna, where he began his career as an insurance underwriter in June 1978. Mr. McInerney is a member of the American Council of Life Insurers and serves, and has served, on its CEO Steering Committees and Board. Mr. McInerney received a B.A. in Economics from Colgate University and an M.B.A. from the Tuck School of Business at Dartmouth College and serves on Tuck’s Board of Advisors.   Qualifications: Mr. McInerney offers insight into our company from his current role as the President and Chief Executive Officer. He also brings extensive knowledge of the insurance and financial services industries gained through 40 years of experience serving in significant leadership positions with Genworth, ING Groep NV and Aetna.

 

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Committees   Management Development and Compensation (Chair)   Nominating and Corporate Governance		David M. Moffett, 66, former Chief Executive Officer and director of Federal Home Loan Mortgage Corporation. Director since December 2012.   Mr. Moffett was the Chief Executive Officer and a director of the Federal Home Loan Mortgage Corporation from September 2008 until his retirement in March 2009. Prior to this position, Mr. Moffett served as a Senior Advisor with the Carlyle Group LLC from May 2007 to September 2008. Mr. Moffett also served as the Vice Chairman and Chief Financial Officer of U.S. Bancorp from 2001 to 2007, after its merger with Firstar Corporation, having previously served as Vice Chairman and Chief Financial Officer of Firstar Corporation from 1998 to 2001 and as Chief Financial Officer of StarBanc Corporation, a predecessor to Firstar Corporation, from 1993 to 1998. Mr. Moffett has served as a director of CSX Corporation since May 2015, and PayPal Holdings, Inc. since July 2015 (currently serving as its Lead Director). He also previously served on the boards of directors of CIT Group Inc. from July 2010 to May 2016, eBay Inc. from July 2007 to July 2015, MBIA Inc. from May 2007 to September 2008, The E.W. Scripps Company from May 2007 to September 2008 and Building Materials Holding Corporation from May 2006 to November 2008. Mr. Moffett also serves as a trustee on the boards of Columbia Fund Series Trust I and Columbia Funds Variable Insurance Trust, overseeing approximately 52 funds within the Columbia Funds mutual fund complex. He also serves as a trustee for the University of Oklahoma Foundation. Mr. Moffett holds a B.A. degree in Economics from the University of Oklahoma and an M.B.A. degree from Southern Methodist University.   Qualifications: Mr. Moffett has many years of experience as the chief financial officer of public financial services companies. He also has experience as the chief executive officer of an entity in the housing finance industry, including related public policy experience.

 

Committees   Audit   Risk (Chair)		Thomas E. Moloney, 74, former Senior Executive Vice President and Chief Financial Officer of John Hancock Financial Services, Inc. Director since October 2009.   Mr. Moloney served as the interim Chief Financial Officer of MSC—Medical Services Company (“MSC”) from December 2007 to March 2008. He retired as the Senior Executive Vice President and Chief Financial Officer of John Hancock Financial Services, Inc. in December 2004. He had served in this position since 1992. Mr. Moloney served in various roles at John Hancock Financial Services, Inc. during his tenure from 1965 to 1992, including Vice President, Controller, and Senior Accountant. Mr. Moloney has served as a director of SeaWorld Entertainment, Inc. since January 2015. He also previously served as a director of MSC from 2005 to 2012 (MSC was acquired in 2012 and ceased to be a public company in 2008). Mr. Moloney is on the boards of Nashoba Learning Group and the Boston Children’s Museum (past Chairperson), both non-profit organizations. Mr. Moloney received a B.A. in Accounting from Bentley University and holds a Silver Level Executive Masters Professional Director Certification from the Corporate Directors Group.   Qualifications: Mr. Moloney provides almost 40 years of insurance industry and accounting experience, including having served as the chief financial officer of a public insurance company. He provides extensive knowledge of accounting and finance in regard to insurance products as well as risk assessment and risk oversight.

 

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Committees   Audit   Risk		Debra J. Perry, 67, former Executive at Moody’s Investor Service, Inc. Director since December 2016.   Ms. Perry worked at Moody’s Corporation from 1992 to 2004. From 2001 to 2004, Ms. Perry was a senior managing director in the Global Ratings and Research Unit of Moody’s Investors Service, Inc. where she oversaw the Americas Corporate Finance and U.S. Public Finance Groups. From 1999 to 2001, Ms. Perry served as Chief Administrative Officer and Chief Credit Officer, and from 1996 to 1999, she was a group managing director for the Finance, Securities and Insurance Rating Groups of Moody’s Corporation. Ms. Perry has also been a managing member of Perry Consulting LLC, an advisory firm specializing in credit risk management and governance within the financial industry, since 2008. Ms. Perry has served as a director of Assurant, Inc., a provider of risk management solutions, since August 2017, The Bernstein Funds, Inc., a mutual fund complex, since July 2011 and chair since July 2018, and Korn/Ferry International, a talent management and executive search firm, since 2008. She was a member of the board of PartnerRe, a Bermuda-based reinsurance company, from June 2013 to March 2016. She was also a trustee of the Bank of America Funds from June 2011 until April 2016. Ms. Perry served on the board of directors of CNO Financial Group, Inc. from 2004 to 2011. In 2014, Ms. Perry was named to the National Association of Corporate Directors’ Directorship 100, which recognizes the most influential people in the boardroom and corporate governance community. From September 2012 to December 2014, Ms. Perry served as a member of the Executive Committee of the Committee for Economic Development (“CED”) in Washington, D.C. a non-partisan, business-led public policy organization, until its merger with the Conference Board, and she continues as a member of CED. Ms. Perry received her B.A. in History from the University of Wisconsin and her M.A. in European History from Yale University.   Qualifications: Ms. Perry brings extensive knowledge of corporate governance as a result of her many years of board and board committee experience, including service on multiple audit committees, two of which she has chaired. Ms. Perry also has significant experience in executive management at a Nationally Recognized Statistical Rating Organization, or “NRSRO,” where she oversaw the financial analysis and assignment of credit and financial strength ratings to financial and industrial companies and public sector entities, including the global insurance industry.

 

Committees   Audit (Chair)   Management Development and Compensation		Robert P. Restrepo Jr., 68, former Chairman and President and Chief Executive Officer of State Auto Financial Corporation. Director since December 2016.   Mr. Restrepo retired from State Auto Financial Corporation in 2015, having served as its Chairman from 2006 to December 2015 and as its President and Chief Executive Officer from 2006 to May 2015. Mr. Restrepo has over 40 years of insurance industry experience, having held executive roles at Main Street America Group, Hanover Insurance Group Inc. (formerly Allmerica Financial Corp), Travelers and Aetna. Mr. Restrepo has served as a director of Majesco, a provider of insurance software and consulting services, since August 2015, and RLI Corp., a property and casualty insurance company, since July 2016. Mr. Restrepo also currently serves on the boards of directors of The Larry H. Miller Group of Companies and Nuclear Electric Insurance Limited. Mr. Restrepo received a B.A. in English from Yale University.   Qualifications: Mr. Restrepo offers over 40 years of experience managing and operating insurance companies and has expertise in corporate governance, acquisitions, risk, strategic planning and leadership development.

 

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Committees   Audit   Management Development and Compensation		James S. Riepe, 75, Senior Advisor and former Vice Chairman of T. Rowe Price Group, Inc. Director since March 2006, Lead Director from February 2009 to May 2012 and Non-Executive Chairman of the Board since May 2012.   Mr. Riepe is a retired Vice Chairman and a Senior Advisor at T. Rowe Price Group, Inc. Mr. Riepe served as the Vice Chairman of T. Rowe Price Group, Inc. from 1997 until his retirement in December 2005. Prior to joining T. Rowe Price Group, Inc. in 1981, Mr. Riepe was an Executive Vice President of The Vanguard Group. He has served as a director of LPL Financial Holdings Inc. since February 2008. Mr. Riepe also previously served on the boards of directors of The NASDAQ OMX Group, Inc. from May 2003 to May 2014, T. Rowe Price Group, Inc. from 1981 to 2006 and 57 T. Rowe Price registered investment companies (mutual funds) until his retirement in 2006. He is an Emeritus member of the University of Pennsylvania’s Board of Trustees and Trustee of Penn Medicine. Mr. Riepe received a B.S. in Industrial Management, M.B.A. and Honorary Doctor of Laws degree from the University of Pennsylvania.   Qualifications: Mr. Riepe brings to the Board significant expertise in finance and investments, as well as extensive management and operating experience, gained through his role as a senior executive in the investment management industry, including 23 years with T. Rowe Price.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE

ELECTION OF MR. BOLINDER, SEN. CONRAD, MS. HIGGINS, MR. MCINERNEY, MR. MOFFETT, MR. MOLONEY, MS. PERRY, MR. RESTREPO AND MR. RIEPE.

 

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CORPORATE GOVERNANCE

 

Governance Principles

 

Our Governance Principles are published on Genworth’s website, as are our other corporate governance materials, including the charters adopted by the Board for each of our standing committees and any key practices adopted by the committees. To view these materials, go to www.genworth.com, select “Investors” and then select “Corporate Governance.” The Board regularly reviews corporate governance developments and may modify these principles, charters and key practices as warranted. Any modifications will be reflected in the documents on Genworth’s website.

 

Meeting Attendance

 

The Board and its committees held the following number of meetings during 2017:

 

		Number of Meetings
Board of Directors			13
Audit Committee			12
Management Development and Compensation Committee			5
Nominating and Corporate Governance Committee			4
Risk Committee			7

 

During 2017, each of our director nominees attended more than 75% of the aggregate of (1) the total number of meetings of the Board of Directors (held during the period for which he or she has been a director) and (2) the total number of meetings held by all committees of the Board on which he or she served (during the periods that he or she served). As set forth in the Governance Principles, directors are expected to attend the 2018 Annual Meeting. All of our current directors who were serving at the time of our 2017 Annual Meeting of Stockholders attended that meeting.

 

Board Leadership Structure

 

Our Board of Directors functions in a collaborative fashion that emphasizes active participation and leadership by all of its members. As further described in our Governance Principles, the company’s business is conducted day-to-day by its officers, under the direction of our Chief Executive Officer (“CEO”) and the oversight of the Board, to enhance the long-term value of the company for its stockholders. Our Bylaws require our Board of Directors to appoint a Chairman of the Board but give it the flexibility to appoint as Chairman (i) our CEO, (ii) an independent director or (iii) a non-independent director other than the CEO. Our Board of Directors determines who to appoint as our Chairman based on the knowledge and experience of the people then serving on our Board of Directors and as CEO and chooses the person whom it believes best meets the needs of our company at that time. Our Board of Directors has determined that having Thomas J. McInerney serve as our CEO and a director and James S. Riepe serve as our Non-Executive Chairman of the Board is the appropriate leadership structure for our company at this time. In May 2012, our Board selected Mr. Riepe, one of our independent directors since 2006 and formerly our Lead Director, to serve as our Non-Executive Chairman of the Board due to Mr. Riepe’s service with and knowledge of our company and his significant leadership experience.

 

As more fully set forth in our Governance Principles, available on our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance” and then select “Governance Principles”), the Non-Executive Chairman’s responsibilities and authority include:

 

•

presiding at all meetings of the Board, stockholders and non-management and independent directors;

 

•

facilitating efficient Board operations through regular engagement with standing committees of the Board and individual directors;

 

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•

regularly communicating with the CEO to provide him or her with advice and counsel, and to share information about recent developments;

 

•

serving as a liaison between the CEO and the non-management and independent directors;

 

•

consulting on meeting agendas;

 

•

working with management to assure that meeting materials are fulfilling the needs of directors;

 

•

consulting on the meeting calendar and meeting schedules to assure there is sufficient time to discuss all agenda items;

 

•

periodically calling meetings of the non-management and independent directors, including at the request of such directors;

 

•

working with the CEO to respond to stockholder inquiries involving the Board; and

 

•

fulfilling other responsibilities as determined by the Board.

 

Role of Board in the Oversight of Risk

 

Our Board of Directors recognizes that, although risk management is primarily the responsibility of Genworth’s management, the Board plays a critical role in the oversight of risk. As a financial services company, the very nature of our business involves the underwriting, management and assumption of risks on behalf of our customers. The Board believes it is an important part of its responsibilities to oversee the company’s overall risk assessment processes and management thereof. The Board as a whole has historically discussed with management specific business risks as part of its regular reviews of the individual business units and also on a company-wide basis as part of its strategic reviews.

 

Our Board established the Risk Committee to be specifically responsible for overseeing Genworth’s enterprise risk management policies and related risk profile, including but not limited to the following major risk exposures: credit risks, market risks, insurance risks, housing risks, operational risks, model risks, information technology risks, and any other risk that poses a material threat to the viability of Genworth. In connection with reviewing and overseeing the control, management and mitigation processes relating to Genworth’s enterprise management policies and risk appetite, the Risk Committee recommends annually for Board approval: (i) enterprise risk management policies and (ii) the risk appetite of the company. The Risk Committee oversees the implementation and maintenance of such policies and appetite. All members of the Risk Committee are independent, as discussed below, and Genworth’s Chief Risk Officer also has a direct reporting obligation to the Risk Committee.

 

The Board also utilizes its other committees to oversee specific risks and receives regular reports from the committees on the areas of risk for which they have oversight. The Audit Committee has responsibility for oversight of risks associated with financial accounting and reporting, including the system of internal control. The Management Development and Compensation Committee oversees the risks relating to compensation plans and programs, as well as management development and leadership succession in the company’s various business units. Our Nominating and Corporate Governance Committee is responsible for the oversight of risks relating to corporate governance.

 

We believe that our risk oversight structure is supported by our current Board leadership structure, with the Non-Executive Chairman of the Board working together with our independent Risk Committee and our other standing committees.

 

Board Self-Evaluation

 

The Board and each of its committees follow a specific process, overseen by the Nominating and Corporate Governance Committee, to determine their effectiveness and opportunities for improvement. The Board and each

 

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respective committee conduct a self-evaluation annually, focusing on how the Board can improve its key functions of overseeing personnel development, financials, and other major issues of strategy, risk, integrity, reputation and governance. During the process, ideas are solicited from directors about:

 

•

improving prioritization of issues;

 

•

improving quality of written, chart and oral presentations from management;

 

•

improving quality of Board or committee discussions on these key matters;

 

•

improving communication and feedback regarding observations of fellow Board members;

 

•

identifying ways to improve the effectiveness of the Board and its committees;

 

•

identifying how specific issues in the past year could have been handled better;

 

•

identifying specific issues which should be discussed in the future; and

 

•

identifying any other matter of importance to Board functioning.

 

The Nominating and Corporate Governance Committee coordinates with the Non-Executive Chairman of the Board to organize the comments received in a manner that identifies options for changes at either the Board or committee level. The Board and each committee then review and discuss the results of the self-assessments, and the Non-Executive Chairman of the Board and chairpersons of each committee coordinate any necessary follow-up actions.

 

Director Independence

 

Our Board currently consists of nine directors, eight of whom are independent (as defined by our Governance Principles and NYSE listing standards) and one of whom is our CEO, Mr. McInerney. For a director to be independent, the Board must determine that the director does not have any direct or indirect material relationship with Genworth. The Board has established guidelines to assist it in determining director independence, which conform to, or are more exacting than, the independence requirements of the NYSE. The independence guidelines are set forth in Section 4 of our Governance Principles, which are available on our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance” and then select “Governance Principles”). In addition to applying these guidelines, the Board will consider all relevant facts and circumstances in making an independence determination. Our Board has determined that the purchase of Genworth products and services on the same terms available to unaffiliated entities or persons does not impair a director’s independence and therefore such purchases are not considered by our Board when making independence determinations. The Board has determined that Mr. Bolinder, Sen. Conrad, Ms. Higgins, Mr. Moffett, Mr. Moloney, Ms. Perry, Mr. Restrepo and Mr. Riepe satisfy the NYSE’s independence requirements and Genworth’s independence guidelines.

 

In addition to the independence guidelines discussed above, members of the Audit Committee must satisfy additional independence requirements established by the SEC and the NYSE. Specifically, they may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from Genworth or any of its subsidiaries other than their directors’ compensation and they may not be affiliated with Genworth or any of its subsidiaries. The Board has determined that all of the members of the Audit Committee satisfy the relevant SEC and NYSE independence requirements.

 

Further, in affirmatively determining the independence of any director who will serve on the Management Development and Compensation Committee, the Board has also considered all factors specifically relevant to determining whether a director has a relationship to Genworth that is material to that director’s ability to be independent from management in connection with the duties of a member of the Management Development and Compensation Committee, including: (1) the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by Genworth to such director; and (2) whether the director is affiliated with Genworth, its subsidiaries or its affiliates.

 

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Code of Business Conduct and Ethics

 

All of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, must act ethically at all times and in accordance with the policies comprising our code of business conduct and ethics set forth in Genworth’s Code of Ethics (“Code of Ethics”). If an actual or potential conflict of interest arises for a director, the director shall promptly inform the chief executive officer. To view our Code of Ethics, go to www.genworth.com, select “Investors,” then select “Corporate Governance,” then select “Code of Business Conduct & Ethics” and finally select “Genworth Code of Ethics.” Section 11 of our Governance Principles, which are available on our website, more fully addresses our Code of Ethics. Under our Governance Principles, the Board will not permit any waiver of any ethics policy for any director or executive officer. Within the time period required by the SEC and the NYSE, we will post on our website any amendment to our Code of Ethics.

 

BOARD OF DIRECTORS AND COMMITTEES

 

Board Composition

 

Our Board of Directors is composed of individuals with diverse experience at policy-making levels in business and government in areas that are relevant to the company. Each director was nominated on the basis of the unique set of qualifications and skills he or she brings to the Board, as well as how those qualifications and skills blend with those of the others on the Board as a whole. The blend of our directors’ diverse backgrounds ensures that issues facing the company are examined and addressed with the benefit of a broad array of perspectives and expertise.

 

We believe that our directors have demonstrated leadership in a variety of positions across various professions and industries. Their experiences, qualifications, attributes and skills include:

 

DIRECTOR EXPERIENCES, QUALIFICATIONS, ATTRIBUTES AND  SKILLS
✓ Chief Executive Officer (Former or Current)		✓ Healthcare/Medical
✓ Chief Financial Officer (Former or Current)		✓ Consumer Marketing
✓ Insurance		✓ Public Policy/Political
✓ Mortgage		✓ Technology/IT
✓ Risk		✓ Restructuring and Turnaround
✓ Mergers and Acquisitions		✓ Asset Management
✓ Finance and Investment Management		✓ International

 

As a group, apart from Mr. McInerney, our directors include three former chief executive officers (Mr. Bolinder, Mr. Moffett and Mr. Restrepo), two former chief financial officers (Mr. Moffett and Mr. Moloney), five directors with a background in insurance (Mr. Bolinder, Mr. Moffett, Mr. Moloney, Ms. Perry and Mr. Restrepo), one director with mortgage experience (Mr. Moffett), six directors with risk experience (Mr. Bolinder, Mr. Moffett, Mr. Moloney, Ms. Perry, Mr. Restrepo and Mr. Riepe), seven directors with experience in mergers and acquisitions (Mr. Bolinder, Ms. Higgins, Mr. Moffett, Mr. Moloney, Ms. Perry, Mr. Restrepo and Mr. Riepe), six directors with a background in finance and investment management (Mr. Bolinder, Ms. Higgins, Mr. Moffett, Mr. Moloney, Ms. Perry and Mr. Riepe), two directors with healthcare and medical experience (Sen. Conrad and Ms. Higgins), one director with consumer marketing experience (Mr. Riepe), three directors with public policy experience (Sen. Conrad, Mr. Moffett and Mr. Restrepo), two directors with technology experience (Mr. Moloney and Mr. Riepe), three directors with restructuring and turnaround experience (Ms. Higgins, Ms. Perry and Mr. Restrepo), five directors with a background in asset management (Mr. Bolinder, Ms. Higgins, Mr. Moffett, Ms. Perry and Mr. Riepe), and six directors with international experience (Mr. Bolinder, Ms. Higgins, Mr. Moffett, Mr. Moloney, Ms. Perry and Mr. Riepe). See the Our Board of Directors section above for a description of each director’s complete biographical information, qualifications and skills.

 

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Subject to the rights of the holders of any outstanding series of our preferred stock, our certificate of incorporation provides that the number of authorized directors of our company will be fixed from time to time by a resolution adopted by our Board of Directors, but will not be less than one nor more than 15. Our Governance Principles further state that the size of the Board should be in the range of seven to 15 directors. Our Board of Directors has set the size of the Board of Directors at nine members, but continues to evaluate the optimal size for the Board and may consider the addition of one or more independent directors to the Board in the future.

 

Each director elected by the holders of our common stock will serve until the 2019 Annual Meeting and until his or her successor is duly elected and qualified, or until the earlier of their resignation or removal in a manner provided for in the Bylaws. The holders of our common stock do not have cumulative voting rights in the election of directors.

 

Our Governance Principles provide that directors who serve as chief executive officers or in equivalent positions for other public companies should not serve on more than two other boards of public companies in addition to the Genworth Board and other directors should not serve on more than four other boards of public companies in addition to the Genworth Board.

 

Board Committees

 

The four standing committees of the Board are the Audit Committee, Management Development and Compensation Committee, Nominating and Corporate Governance Committee and Risk Committee. These committees are described below. The Board has established written charters for each of its four standing committees. Our Board of Directors may also establish various other committees to assist it in carrying out its responsibilities.

 

Audit Committee

 

The Board has established the Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee consists solely of “independent” directors as defined by the applicable rules of the NYSE and the SEC and by our Governance Principles. In addition, the Board has determined that all four of the Audit Committee’s current members, Messrs. Moloney, Restrepo, and Riepe and Ms. Perry, are “audit committee financial experts,” as defined by SEC rules.

 

As more fully set forth in its charter, which can be found in the corporate governance section of our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance,” then select “Audit Committee” and finally select “Charter”), the purpose of the Audit Committee is to assist the Board in its oversight of the integrity of the company’s financial statements, the company’s compliance with legal and regulatory requirements, the independence and qualifications of the company’s independent registered public accounting firm and the performance of the company’s internal audit function and independent auditors. The Audit Committee’s duties include:

 

•

discussing with management and our independent registered public accounting firm our annual and quarterly financial statements, earnings releases and financial information and earnings guidance provided to analysts and rating agencies;

 

•

selecting our independent registered public accounting firm and approving the terms of its engagement;

 

•

discussing with management and our independent registered accounting firm any audit problems or difficulties and management’s response;

 

•

independently and/or in coordination with the Risk Committee, overseeing risks associated with financial accounting and reporting, including the system of internal control, which includes reviewing and discussing with management and our independent registered public accounting firm the company’s risk assessment process and management policies with respect to the company’s major financial risk exposure and the procedures utilized by management to identify and mitigate the exposure to such risks;

 

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•

reviewing our financial reporting and accounting standards and principles;

 

•

reviewing our internal system of financial controls and the results of internal audits;

 

•

obtaining and reviewing formal written reports from the independent registered public accounting firm regarding its internal quality-control procedures;

 

•

reviewing and investigating any matters pertaining to the integrity of management, including conflicts of interest, or adherence to standards of business conduct;

 

•

preparing and publishing a committee report for inclusion in the proxy statement;

 

•

establishing procedures for the hiring of employees or former employees of our independent registered public accounting firm;

 

•

establishing procedures for the receipt, retention and treatment of complaints on accounting, internal accounting controls or auditing matters; and

 

•

establishing policies and procedures for the review and approval of all proposed transactions with “Related Persons,” as that term is defined in Section 11(b) of our Governance Principles.

 

The Audit Committee has determined that in view of the increased demands and responsibilities of the committee, its members generally should not serve on more than two additional audit committees of other public companies. The Audit Committee’s report appears on page 77 of this Proxy Statement.

 

Management Development and Compensation Committee

 

The Management Development and Compensation Committee (the “Compensation Committee”) consists solely of “independent” directors as defined by the applicable rules of the NYSE and by our Governance Principles. As more fully set forth in its charter, which can be found in the corporate governance section of our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance,” then select “Management Development and Compensation Committee” and finally select “Charter”), the Compensation Committee’s responsibilities include:

 

•

reviewing and approving on an annual basis the corporate goals and objectives with respect to the compensation of our CEO, evaluating our CEO’s performance in light of these goals and objectives and setting our CEO’s compensation based on such evaluation;

 

•

reviewing and approving on an annual basis the evaluation process and compensation structure for our other officers, including evaluating and setting the compensation for our senior executive officers;

 

•

reviewing and approving our variable incentive compensation and other stock-based compensation plans;

 

•

assisting the Board in developing and evaluating potential candidates for executive positions and overseeing the development of succession plans;

 

•

assessing the structure and composition of the leadership of the company;

 

•

reviewing and discussing our Compensation Discussion and Analysis, recommending its inclusion to the Board in our annual reports and proxy statements and publishing a committee report;

 

•

overseeing risks relating to our compensation programs; and

 

•

determining whether the work of any compensation consultant who had a role in determining or recommending the amount or form of executive or director compensation raised any conflict of interest.

 

Under its charter, the Compensation Committee has authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Compensation

 

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Committee’s report appears on page 30 of this Proxy Statement. Additional information regarding the Compensation Committee’s processes and procedures for consideration of executive compensation is also provided in the Compensation Discussion and Analysis section below.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee (the “Nominating Committee”) consists solely of “independent” directors as defined by the applicable rules of the NYSE and by our Governance Principles. As more fully set forth in its charter, which can be found in the corporate governance section of our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance,” then select “Nominating and Corporate Governance Committee” and finally select “Charter”), the Nominating Committee’s responsibilities include:

 

•

leading the search for individuals qualified to become members of our Board;

 

•

reviewing the Board’s committee structure and recommending committee members;

 

•

developing and annually reviewing the governance principles;

 

•

overseeing the annual self-evaluations of the Board and its committees;

 

•

overseeing risks related to corporate governance;

 

•

reviewing annually director compensation and benefits; and

 

•

periodically reviewing the environmental, social and governance practices of the company.

 

The Nominating Committee makes recommendations to the Board of Directors of candidates for election to our Board, and our Board of Directors nominates director candidates and makes recommendations to our stockholders. This committee will consider all stockholder recommendations for candidates for the Board, which should be sent to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Genworth Financial, Inc., 6620 West Broad Street, Building #1, Richmond, Virginia 23230.

 

The Nominating Committee believes all director nominees should meet certain qualifications and possess certain qualities or skills that, when considered in light of the qualities and skills of the other director nominees, assist the Board in overseeing our operations and developing and pursuing its strategic objectives. The Nominating Committee believes each director nominee should at a minimum:

 

•

possess the highest personal and professional ethics, integrity and values;

 

•

be committed to representing the long-term interests of our stockholders;

 

•

have an inquisitive and objective perspective, practical wisdom and mature judgment;

 

•

bring a distinct skill set of value to the Board and the company when viewed alone and in combination with other directors;

 

•

be willing and able to devote sufficient time to carrying out his or her duties and responsibilities effectively; and

 

•

be committed to serve on the Board for an extended period of time.

 

The Nominating Committee, as a matter of practice, takes diversity factors into account when considering potential director nominees. The company does not have a formal policy on Board diversity. The qualifications, qualities and skills required for directors are further set forth in Section 3 of Genworth’s Governance Principles, which are available on our website.

 

In addition to considering candidates suggested by stockholders, the Nominating Committee considers potential candidates recommended by current directors, company officers, employees and others. We have also

 

21

engaged an outside search firm to assist us in identifying and evaluating potential director candidates. The Nominating Committee considers all potential candidates regardless of the source of the recommendation and determines whether potential candidates meet our qualifications, qualities and skills for directors. Where there is an interest in a particular candidate, the Nominating Committee’s review is multi-faceted and typically includes a review of written materials regarding the candidate, due diligence performed internally and externally, a review of a completed candidate questionnaire and one or more interviews with members of the Nominating Committee.

 

The Nominating Committee is also responsible for reviewing periodically the nature and amount of our political contributions, the operations of our Political Action Committee and our public disclosure regarding such activities. In addition, the Nominating Committee periodically reviews our policies and practices on matters of corporate citizenship, including philanthropic programs and financial and other support of charitable, education and cultural organizations.

 

Risk Committee

 

The purpose of the Risk Committee is to assist the Board in its oversight of all areas relating to Genworth’s enterprise risk management policies and the related risk profiles, including, but not limited to, the following major risk exposures: credit risks; market risks; insurance risks; housing risks; operational risks; model risks; information technology risks; and any other risk that poses a material threat to the viability of the company.

 

As more fully set forth in its charter, which can be found in the corporate governance section of our website (to view, go to www.genworth.com, select “Investors,” then select “Corporate Governance,” then select “Risk Committee” and finally select “Charter”), the Risk Committee’s responsibilities include:

 

•

reviewing and recommending annually for Board approval (i) the company’s enterprise risk management policies and (ii) the risk appetite of the company, and to oversee the implementation and maintenance of such policies and appetite;

 

•

receiving regular reports on the efforts to implement and comply with regulatory requirements related to risk management;

 

•

reviewing and overseeing the control, management and mitigation processes relating to Genworth’s enterprise risk management policies and risk appetite;

 

•

reviewing Genworth’s ability to assess and manage significant and emerging risks;

 

•

reviewing and analyzing Genworth’s major risk exposures, strategies, processes, and policies, with accompanying stress tests;

 

•

reviewing and overseeing Genworth’s internal risk function;

 

•

periodically reviewing and overseeing Genworth’s compliance processes and policies;

 

•

periodically reviewing and overseeing Genworth’s information technology and information security systems, processes and policies, with a presentation on this topic to the full Board at least annually;

 

•

receiving reports regarding risks associated with litigation and investigations/regulatory matters involving the company; and

 

•

discussing with management the company’s overall investment portfolio and investment strategies.

 

Meetings of Non-Management and Independent Directors

 

All of our current non-management directors are independent (as determined in accordance with the NYSE listing standards and our Governance Principles) and our non-management directors met without management present at regularly scheduled Board meetings during 2017. Our Governance Principles provide that the non-management directors will meet regularly without management present. Mr. McInerney, our CEO, is currently

 

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the only employee of the company who serves on our Board. In addition, our Governance Principles provide that if the non-management directors include individuals who are not independent, as determined in accordance with the NYSE listing standards and our Governance Principles, then the independent directors on our Board will separately meet at least one time each year. Our Governance Principles provide that the Non-Executive Chairman of the Board, currently Mr. Riepe, will preside at the meetings of the non-management directors and the independent directors; in the absence of Mr. Riepe, the non-management directors present will select an independent committee chair to preside at such session. The independent Non-Executive Chairman of the Board may periodically call meetings of the non-management and independent directors, including at the request of the non-management or independent directors.

 

Compensation of Directors

 

The Nominating Committee has the responsibility for annually reviewing and recommending to the Board compensation and benefits for “non-management directors.” Non-management directors are those directors who are not executive officers of Genworth or its affiliates. Accordingly, all directors, other than Mr. McInerney, are regarded as non-management directors. Mr. McInerney does not receive any compensation for serving as a director. The Nominating Committee determined not to recommend any changes to the company’s non-management director compensation and benefits program for 2017.

 

In 2017, the company’s compensation and benefits for non-management directors were as follows:

 

•

Annual Retainer. Each non-management director is paid an annual retainer, payable in quarterly installments following the end of each quarter of service. The amount of the annual retainer is $230,000. Of this amount, 60% of the annual retainer is paid in deferred stock units (“DSUs”) and 40% is paid in cash. Instead of receiving a cash payment, non-management directors may elect to have 100% of their annual retainer paid in DSUs; however, no more than 30,000 DSUs may be granted to any non-management director with respect to the annual retainer in any one calendar year. To the extent this limit would be exceeded, the remainder of a director’s annual retainer will be paid in cash.

 

•

Deferred Stock Units. Each DSU awarded to non-management directors represents the right to receive one share of our common stock in the future. DSUs are granted at the end of each quarter of service and are credited to a notional account maintained by us in the recipient’s name. The number of DSUs granted is determined by dividing the DSU value to be delivered by the fair market value of our common stock on the date of grant. If the company pays dividends on its common stock, dividend equivalents accrue with respect to the DSUs, which are reinvested in additional DSUs. The DSUs will be paid out beginning one year after the director leaves the Board in a single payment or in payments over 10 years, at the election of the director, or, if earlier, upon the death of the director.

 

•

Retainer for Non-Executive Chairman of the Board. The Non-Executive Chairman of the Board receives a $200,000 annual retainer in addition to the regular annual retainer. Such amount is paid in quarterly installments, following the end of each quarter of service. Of this amount, 60% is paid in DSUs and 40% is paid in cash. Instead of receiving a cash payment, the Non-Executive Chairman of the Board may elect to have 100% of the additional annual retainer paid in DSUs; however, no more than 25,000 DSUs may be granted to the Non-Executive Chairman of the Board with respect to the additional annual retainer in any one calendar year. To the extent this limit would be exceeded, the remainder of the additional annual retainer will be paid in cash.

 

•

Fees for Lead Director. If a Lead Director is appointed in the absence of an independent Non-Executive Chairman of the Board, the Lead Director would receive an annual cash retainer of $20,000 in quarterly installments, as additional compensation for services as Lead Director.

 

•

Fees for Committee Chairs. The chairpersons of each of our standing committees receive additional cash retainers, which are paid in quarterly installments. The chairperson of the Audit Committee receives an annual cash retainer of $20,000, the chairperson of the Compensation Committee receives

 

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an annual cash retainer of $15,000, and the chairpersons of each of our other standing committees receive an annual cash retainer of $10,000.

 

•

Matching Gift Program. The company offers a matching gift program that provides for the matching of employee and director charitable contributions pursuant to the contribution guidelines established by the Genworth Foundation. Each non-management director is eligible for such charitable contributions to be matched on a 50% basis, up to a maximum matching contribution of $10,000 during any calendar year.

 

•

Reimbursement of Certain Expenses. Non-management directors are reimbursed for reasonable travel and other Board-related expenses, including expenses to attend Board and committee meetings, other business-related events and director education seminars, in accordance with policies approved from time to time.

 

The following table sets forth information concerning compensation paid or accrued by us in 2017 to our non-management directors:

 

2017 Director Compensation Table

 

Name		Fees Earned or Paid in Cash ($)(2)				Stock Awards ($)(3)(4)				All Other Compensation ($)(5)				Total ($)
William H. Bolinder			127,065				78,413				10,000				215,478
G. Kent Conrad			117,065				78,413				6,500				201,978
Melina E. Higgins			117,065				78,413				10,000				205,478
David M. Moffett			132,065				78,413				10,000				220,478
Thomas E. Moloney			127,065				78,413				10,000				215,478
James A. Parke(1)			134,785				80,529				10,000				225,314
Debra J. Perry			117,065				78,413				3,750				199,228
Robert P. Restrepo Jr.			117,065				78,413				10,000				205,478
James S. Riepe			222,432				144,293				10,000				376,725

 

(1)	Mr. Parke passed away on February 21, 2018.

(2)

Amounts include the portion of the annual retainer (described above) that was paid in cash. Mr. Parke elected to receive 100% of his annual retainer payable in 2017 in the form of DSUs and reached the maximum deferral of 30,000 DSUs with his third quarter retainer payment; therefore, a portion of his third quarter payment and his full fourth quarter payment were made in cash. Messrs. Bolinder, Conrad, Moffett, Moloney, Restrepo and Riepe and Mses. Higgins and Perry reached the maximum deferral of 30,000 DSUs with their fourth quarter retainer payment and Mr. Riepe reached the maximum deferral of 25,000 DSUs as Non-Executive Chairman of the Board with his fourth quarter retainer payment; therefore, a portion of their fourth quarter payment was made in cash. Amounts also include applicable committee chair fees and the cash portion of the retainer for the Non-Executive Chairman of the Board of Directors.

(3)

Reflects the aggregate grant date fair value of DSUs, determined in accordance with FASB ASC Topic 718. The fair value of stock unit awards for purposes of Topic 718 typically equals the price of the underlying stock on the date of grant; however, amounts in the table are lower because the DSUs do not convert to transferable shares until one year after the director leaves the Board of Directors, and Topic 718 provides that the impact of transferability restrictions that remain in place after an award of stock based compensation vests may be considered when determining the fair value of the award for accounting purposes. The Finnerty option pricing model was, therefore, used to factor in these post-vest holding requirements with the following assumptions: (i) expected post vesting restriction period of 7.9 years; (ii) expected volatility of 82.0%; (iii) risk-free interest rate of 1.60%; (iv) expected dividend yield of 0.00%; and (v) calculated discount for post vest restriction period of 31.8%.

 

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(4)	The following table shows for each non-management director the total number of DSUs held as of December 31, 2017 (rounded down to the nearest whole share):

 

Name		Total Number of DSUs Held as of December 31, 2017
William H. Bolinder			139,671
G. Kent Conrad			102,832
Melina E. Higgins			97,837
David M. Moffett			111,725
Thomas E. Moloney			147,415
James A. Parke			242,302
Debra J. Perry			31,403
Robert P. Restrepo Jr.			31,403
James S. Riepe			292,055

 

(5)	Amounts reflect company charitable match contributions.

 

Director Stock Ownership Policy

 

To help promote the alignment of the personal interests of the company’s directors with the interests of our stockholders, we have established a robust stock ownership policy for all non-management directors. Under the policy, each non-management director is expected to hold common stock and/or DSUs while serving as a director of Genworth having a value equal to five times the value of the cash portion of the annual retainer payable to non-management directors, which during 2017 was $92,000. Therefore, the corresponding ownership guideline is $460,000. Non-management directors are expected to satisfy this ownership guideline over time after their initial appointment to the Board, and are not permitted to sell any shares of Genworth common stock received from us until the ownership guideline has been met. The DSUs held by the non-management directors settle in shares of common stock beginning one year after the director leaves the Board of Directors in a single payment or in payments over 10 years, at the election of the director, or earlier upon the death of the director.

 

The following table shows the stock ownership as of October 1, 2018 of our non-management directors serving on that date, the percentage of the ownership guideline that they have reached, and the number of years that have elapsed since the director was initially made subject to the policy. The value of each non-management director’s stock ownership is based on the closing price of our common stock on October 1, 2018 ($4.14).

 

Director		Number of Shares/DSUs Held (#)				Value as of October 1, 2018 ($)				Stock Held as % of Ownership Guideline				Years Subject to Ownership Policy
William H. Bolinder			170,992				707,907				>100	%			7
G. Kent Conrad			131,152				542,969				>100	%			5
Melina E. Higgins			126,158				522,294				>100	%			5
David M. Moffett			140,045				579,786				>100	%			5
Thomas E. Moloney			186,736				773,087				>100	%			8
Debra J. Perry			59,724				247,257				54	%			1
Robert P. Restrepo Jr.			59,724				247,257				54	%			1
James S. Riepe			412,309				1,706,959				>100	%			12

 

25

Anti-Hedging and Anti-Pledging Policies for Directors and Executive Officers

 

The company maintains an anti-hedging policy, which prohibits executive officers and directors from buying or selling options (puts or calls) on Genworth securities on an exchange or in any other organized market, and also prohibits certain forms of hedging or monetization transactions with respect to Genworth securities, such as prepaid variable forward contracts, equity swaps, collars, forward sale contracts and exchange funds. The company maintains this policy because hedging transactions, which might be considered short-term bets on the movement of the company’s securities, could create the appearance that the person is trading based on inside information. In addition, transactions in options may also focus the person’s attention on short-term performance at the expense of our long-term objectives.

 

The company also maintains an anti-pledging policy, which prohibits its executive officers and directors from holding Genworth securities in a margin account or otherwise pledging Genworth securities as collateral for a loan. Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. The company maintains this policy because a margin sale or foreclosure sale may occur at a time when the pledger is aware of material nonpublic information or otherwise is not permitted to trade in Genworth securities and the margin sale or foreclosure sale of Genworth securities during such time could also create the appearance that the person is trading based on inside information.

 

26

INFORMATION RELATING TO DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS AND SIGNIFICANT STOCKHOLDERS

 

Ownership of Genworth Common Stock

 

The following table sets forth information as of October 1, 2018, except as indicated in the footnotes to the table, regarding the beneficial ownership of our common stock by:

 

•

all persons (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to own beneficially more than 5% of any class of our common stock (based on the most recently available information filed with the SEC);

 

•

the named executive officers included in the 2017 Summary Compensation Table below;

 

•

each of our current directors; and

 

•

all directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated in the footnotes to the table, each of the directors and executive officers possesses sole voting and investment power with respect to all shares set forth opposite his or her name. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock issuable upon the exercise of stock options or stock appreciation rights (“SARs”) or upon the conversion of restricted stock units (“RSUs”) held by that person that are currently exercisable or convertible, or are exercisable or convertible within 60 days of October 1, 2018, are deemed to be issued and outstanding. These shares, however, are not deemed outstanding for purposes of computing percentage ownership of any other stockholder. The number of shares issuable upon exercise of SARs is calculated based on the excess of the closing price of our common stock on October 1, 2018 over the base price of the SARs. As of October 1, 2018, there were 500,756,164 shares of common stock outstanding and no shares of any other class of voting securities outstanding.

 

27

The address of each director and executive officer listed below is c/o Genworth Financial, Inc., 6620 West Broad Street, Richmond, Virginia 23230.

 

		Beneficial Ownership								Other Non-Management Director  Stock-Based Holdings(1)
Name of Beneficial Owner		Number of Shares				Percentage (%)
BlackRock, Inc.(2)			54,184,339				10.82
The Vanguard Group, Inc.(3)			42,876,579				8.56
Thomas J. McInerney			265,984				*
Kelly L. Groh(4)			182,991				*
Kevin D. Schneider			300,279				*
Ward E. Bobitz(5)			139,667				*
Daniel J. Sheehan IV(6)			333,852				*
William H. Bolinder			3,000				*				167,992
G. Kent Conrad			—				—				131,152
Melina E. Higgins			—				—				126,158
David M. Moffett			—				—				140,045
Thomas E. Moloney			11,000				*				175,736
Debra J. Perry			—				—				59,724
Robert P. Restrepo Jr.			—				—				59,724
James S. Riepe			68,000				*				344,309
All directors and executive officers as a group (15 persons)(7)			1,403,630				*

 

*	Less than 1%.

(1)

Represents DSUs held by the non-management directors that settle in shares of common stock beginning one year after the director leaves the Board in a single payment or in payments over 10 years, at the election of the director, or earlier upon the death of the director. See the Board of Directors and Committees-Compensation of Directors section above for more information regarding DSUs.

(2)

Information obtained solely by reference to the Schedule 13G/A filed with the SEC on January 19, 2018 by BlackRock, Inc. (“BlackRock”). BlackRock reported that it has sole power to vote or direct the vote of 52,874,303 shares and that it has sole power to dispose or to direct the disposition of 54,184,339 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.

(3)

Information obtained solely by reference to the Schedule 13G/A filed with the SEC on February 9, 2018 by The Vanguard Group, Inc. (“Vanguard”). Vanguard reported that it has sole power to vote or direct the vote of 545,792 shares that it beneficially owns, and has shared power to vote or direct to vote of 64,976 shares, and that it has sole power to dispose or to direct the disposition of 42,299,472 shares and has shared power to dispose or to direct the disposition of 577,107 shares. Vanguard further reported that (a) Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 512,131 shares, or 0.10%, of our common stock as a result of its serving as investment manager of collective trust accounts and (b) Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 98,637 shares, or 0.01%, of our common stock as a result of its serving as investment manager of Australian investment offerings. The address for Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(4)	Includes 39,000 shares of common stock issuable upon the exercise of stock options and 2,500 shares of common stock issuable upon conversion of RSUs.

(5)	Includes 45,500 shares of common stock issuable upon the exercise of stock options.

(6)	Includes 58,000 shares of common stock issuable upon the exercise of stock options.

(7)	Includes 142,500 shares of common stock issuable upon the exercise of stock options and 2,500 shares of common stock issuable upon conversion of RSUs. Represents ownership by all current directors and executive officers.

 

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Ownership of Public Company Genworth Subsidiaries

 

Genworth MI Canada Inc.

 

In July 2009, Genworth MI Canada Inc. (“Genworth Canada”), our indirect, majority-owned subsidiary, completed an initial public offering of its common shares. As of October 1, 2018, we beneficially owned approximately 57% of the common shares of Genworth Canada. The following table sets forth information as of October 1, 2018, regarding the beneficial ownership of the common shares of Genworth Canada by the named executive officers and all of our directors and executive officers as a group. As of October 1, 2018, none of our current directors beneficially owned any common shares of Genworth Canada. Beneficial ownership is determined in accordance with the rules of the SEC. The executive officers that hold Genworth Canada common shares possess sole voting and investment power with respect to all shares set forth by their name. As of October 1, 2018, there were 88,748,110 common shares of Genworth Canada outstanding and no shares of any other class of voting securities outstanding.

 

		Beneficial Ownership
Name of Beneficial Owner		Number of Shares				Percentage (%)
Thomas J. McInerney			—				—
Kelly L. Groh			—				—
Kevin D. Schneider			—				—
Ward E. Bobitz			—				—
Daniel J. Sheehan IV			—				—
All directors and executive officers as a group (15 persons)(1)			—				—

 

(1)	Represents ownership by all current directors and executive officers.

 

Genworth Mortgage Insurance Australia Limited 

 

In May 2014, Genworth Mortgage Insurance Australia Limited (“Genworth Australia”), our indirect, majority-owned subsidiary, completed an initial public offering of its common shares. As of October 1, 2018, we beneficially owned approximately 52.0% of the common shares of Genworth Australia. The following table sets forth information as of October 1, 2018, regarding the beneficial ownership of the common shares of Genworth Australia by the named executive officers and all of our directors and executive officers as a group. As of October 1, 2018, none of our current directors beneficially owned any common shares of Genworth Australia. Beneficial ownership is determined in accordance with the rules of the SEC. The executive officers that hold Genworth Australia common shares possess sole voting and investment power with respect to all shares set forth by their name. As of October 1, 2018, there were 437,464,832 common shares of Genworth Australia outstanding and no shares of any other class of voting securities outstanding.

 

		Beneficial Ownership
Name of Beneficial Owner		Number of Shares				Percentage (%)
Thomas J. McInerney			—				—
Kelly L. Groh			—				—
Kevin D. Schneider			33,419				*
Ward E. Bobitz			—				—
Daniel J. Sheehan IV			—				—
All directors and executive officers as a group (15 persons)(1)			33,419				*

 

*	Less than 1%.

(1)	Represents ownership by all current directors and executive officers.

 

29

REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE

 

The Management Development and Compensation Committee of the Board of Directors oversees the compensation programs of Genworth Financial, Inc. on behalf of the Board. In fulfilling its oversight responsibilities, the committee reviewed and discussed with management the Compensation Discussion and Analysis included in this document.

 

In reliance on the review and discussion referred to above, the Management Development and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Genworth’s Form 10-K for the fiscal year ended December 31, 2017, which has been or will be filed with the U.S. Securities and Exchange Commission.

 

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts. This report is provided by the following independent directors, who constitute the committee:

 

David M. Moffett, Chair

Melina E. Higgins

Robert P. Restrepo Jr.

James S. Riepe

 

30

COMPENSATION DISCUSSION AND ANALYSIS

 

This section provides an overview and analysis of our compensation programs and policies, including the material compensation decisions made under the programs with respect to the following executive officers, whom we refer to as our “named executive officers” or “NEOs:”

 

•

Thomas J. McInerney, President and Chief Executive Officer (“CEO”);

 

•

Kelly L. Groh, Executive Vice President and Chief Financial Officer (“CFO”);

 

•

Kevin D. Schneider, Executive Vice President and Chief Operating Officer (“COO”);

 

•

Ward E. Bobitz, Executive Vice President and General Counsel (“General Counsel”); and

 

•

Daniel J. Sheehan IV, Executive Vice President—Chief Investment Officer (“CIO”).

 

Executive Summary

 

We aligned named executive officer incentives in 2017 with the execution of financial and other strategic initiatives that would improve our operating performance, enable strategic flexibility of our life and long-term care (“LTC”) insurance businesses, and increase returns in our mortgage insurance businesses. We met or exceeded our key operational, strategic and financial objectives for 2017 across all businesses, with the exception of our Australia mortgage business. However, after excluding the U.S. GAAP impact of the earnings curve adjustment of the Australia mortgage business, which has no impact on the overall long-term profitability of the business, the business was deemed by the Compensation Committee to be performing at target and delivering solid underlying earnings performance.

 

Following an active and extensive two-year strategic review process, Genworth entered into an agreement and plan of merger (the “Merger Agreement”), dated October 21, 2016, with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and an indirect, wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into Genworth with Genworth surviving the merger as an indirect, wholly-owned subsidiary of Parent. Parent is a subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “Oceanwide”). Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. The transaction has been approved by Genworth’s stockholders, and is subject to other closing conditions, including the receipt of regulatory approvals.¹

 

(1)

This Compensation Discussion and Analysis, as well as certain compensation disclosures included in this Proxy Statement, are presented without regard to the terms of the proposed merger with Oceanwide. For further information regarding the terms, conditions and interests of certain persons under the proposed merger, see our proxy statement for the special meeting of stockholders held on March 7, 2017, which was filed on January 25, 2017.

 

31

2017 Company Performance

 

Below is a summary of our key performance results for 2017:

 

Mortgage Insurance

 

•

Our U.S. and Canada mortgage insurance businesses significantly exceeded their goals with respect to adjusted operating income2 and operating ROE3, while our Australia mortgage insurance business, after excluding the U.S. GAAP impact of its earnings curve adjustment, which has no impact on the overall long-term profitability of the business, was deemed to be performing at target and delivering solid underlying earnings performance.

 

•

We exceeded our internal goals for our PMIERs capital requirements in our U.S. mortgage insurance business and exceeded internal goals for its new business pricing returns and other strategic metrics; and

 

•

We maintained prudent top-line growth in our Canada mortgage insurance business within risk tolerances, and maintained strong portfolio quality and strong capital ratios.

 

U.S. Life Insurance

 

•

We exceeded our internal targets for premium rate increases on our unprofitable legacy blocks of long-term care insurance, and continued execution of our multi-year rate action filing plan;

 

•

We exceeded our internal goals with respect to our operating income metric as described in the annual incentive section below; and

 

•

We made meaningful progress toward the separation and isolation of our long-term care insurance business through reinsurance transactions in 2017.

 

Corporate and Other

 

•

We had strong investment portfolio performance, exceeding our goals for net investment income, impairments and trading losses for the year;

 

•

We ended the year with holding company cash and cash equivalents of $870 million4, which remained above our target of one and one-half times annual debt service, plus a $350 million buffer; and

 

•

2017 net income was $817 million and adjusted operating income2 was $696 million.

 

Impact of 2017 Performance on Compensation

 

Our operating performance in 2017, as well as our trailing three-year performance, have directly impacted our named executive officer compensation, as follows:

 

•

The company met or exceeded our key operational, strategic and financial objectives for 2017 across all businesses, with the exception of our Australia mortgage business. However, after excluding the U.S. GAAP impact of the earnings curve adjustment of the Australia mortgage business, which has no impact on the overall long-term profitability of the business, the business was deemed to be performing at target and delivering solid underlying earnings performance.

 

(2)

“Adjusted operating income (loss)” equals income (loss) from continuing operations excluding the after-tax effects of income (loss) attributable to non-controlling 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.

(3)	“Operating ROE” for each of our mortgage insurance businesses is defined in the table outlining key financial metrics on page 39.

(4)	Comprises cash and cash equivalents of $795 million and U.S. government bonds of $75 million as of December 31, 2017.

 

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•

Annual incentive awards for our other named executive officers were also above target, and were based on performance for their respective areas of responsibility and contributions made toward closing the Oceanwide transaction;

 

•

Based on our trailing three-year performance, our 2014—2016 performance stock unit (“PSU”) awards and 2015—2017 PSU awards did not result in any share payouts to the named executive officers; and

 

•

The aggregate value of outstanding long-term equity awards (both vested and unvested) held by our named executive officers continues to be below targeted values, consistent with the decline in our stock price in the past few years.

 

Impact of Performance on CEO Compensation

 

The following illustrations summarize the total direct compensation for our CEO for 2013 through 2017 through three different perspectives: reported pay, which values long-term equity awards based on a grant-date fair value; realizable pay, which reflects the accumulated spread or nominal value of outstanding equity awards as of December 31, 2017 for awards made in the represented year; and realized pay, which shows the value actually realized from any stock appreciation rights (“SARs”) exercised and restricted stock units (“RSUs”) vested during the period.

 

Because we aligned the largest portion of our CEO’s initial compensation package in 2013 with stockholder value through an award of SARs, which only yields value to the extent the stock price appreciates above the base price established on the grant date, there is a significant difference between reported pay in 2013 for long-term equity, and what that initial award has yielded in terms of either realizable pay or realized pay. For example, the base price of Mr. McInerney’s initial grant of SARs upon his hire in 2013 was $7.90, with a reported value of approximately $7.1 million. However, primarily because of significant challenges in our legacy long-term care insurance books of business, our stock price as of the end of 2017 was significantly below the base price for that award, resulting in no value related to that award in the realizable pay column for 2013, and none of those SARs have been exercised, resulting in no value as realized pay for any of the subsequent years.

 

CEO Reported, Realizable and Realized Pay

 

 

(1)	Reported Pay represents: (i) base salary paid; (ii) actual annual incentive earned for performance in the period; and (iii) the grant-date fair value of any equity-based awards granted during the period (SARs,

 

33

RSUs, or target value of PSUs), each as reported in the Summary Compensation Table for the applicable year. Reported pay excludes any amounts shown as “all other compensation” in the Summary Compensation Table for illustrative purposes.

(2)	Realizable Pay represents: (i) base salary paid; (ii) actual annual incentive earned for performance in the period; and (iii) the value as of December 31, 2017, based on our closing price of $3.11 of any outstanding long-term equity awards granted during the applicable year.

 

Realizable pay for 2013 does not include any value for the outstanding SARs granted as part of Mr. McInerney’s initial compensation package because the closing price of our stock on December 31, 2017 was below the exercise price of the SARs. It also does not include any value related to his initial grant of RSUs, which have all since vested and are reflected as Realized Pay in the year vested.

 

Realizable pay for 2014 and 2015 do not include any outstanding value for the 2014-2016 or 2015-2017 PSUs respectively because company performance was below threshold levels and those awards have been cancelled.

 

Realizable pay for 2016 includes the estimated value of 2016-2018 PSUs awarded in 2016 based on applying 2017 year-end projected performance against the performance goals, and then reflecting achievement at the next highest performance milestone. As of the end of 2017, we estimate performance for these awards to be performing at or above target. For purposes of this table, we have shown the value as of December 31, 2017 of the maximum number of PSUs (125%).

 

Realizable pay for 2017 includes 2017-2019 PSUs awarded in 2017 based on applying 2017 year-end projected performance against the performance goals, and then reflecting achievement at the next highest performance milestone. As of the end of 2017, we estimate performance for these awards to be performing at or above target. For purposes of this table, we have shown the value as of December 31, 2017 of the maximum number of PSUs (150%).

(3)

Realized Pay represents: (i) base salary paid; (ii) actual annual incentive earned for performance in the period; and (iii) the pre-tax value of any RSUs vested or SARs exercised during the period, valued at the time of such vesting or exercise. No SARs have been exercised and no awards of PSUs have vested in the reported timeframe as PSUs which would have been earned in this timeframe have not met threshold performance goals and have therefore been cancelled.

 

Additional Key Compensation Developments

 

•

Our CEO was awarded a regular and competitively-sized annual long-term equity grant in the first quarter of 2016 and 2017, respectively, which was different from 2014 and 2015 because his initial long-term equity grants awarded at the time of his hire in January 2013 were intended to provide three-years of annual equity incentive values covering 2013-2015.

 

•

In 2017, we granted our CEO a long-term incentive award consisting of 50% PSUs and 50% RSUs, consistent with our other NEOs. We changed to this more balanced approach of granting our CEO a combination of performance-based and time-vesting awards because we believe this approach provides both incentive for performance and retention value, while driving share ownership and continued stockholder alignment.

 

•

Certain previously awarded cash retention incentives for Ms. Groh and Messrs. Schneider and Sheehan were earned in 2017. These incentives were established in prior years based on the individual’s demonstrated sustained leadership and importance to the company’s strategic review initiatives. Our CEO has not been awarded any cash retention incentives.

 

Consideration of Last Year’s Advisory Stockholder Vote on Executive Compensation

 

At the 2017 Annual Meeting of Stockholders held on December 13, 2017, over 94% of the shares voted were cast in favor of the compensation of the company’s named executive officers, as discussed and disclosed in the 2017

 

34

proxy statement. Annual advisory votes to approve named executive officer compensation serve as a tool to help guide the Compensation Committee in evaluating the alignment of the company’s executive compensation programs with the interests of the company and our stockholders. We also reach out from time to time to obtain stockholder input on the company’s compensation and governance practices, and to address any questions they may have. In considering the results of the 2017 advisory vote to approve named executive officer compensation, the Compensation Committee concluded that the company’s overall pay practices and the compensation paid to our named executive officers for 2017 relative to the company’s performance enjoyed strong stockholder support, and did not make any specific changes to our compensation program as a result of the vote.

 

Governance and Principles Underlying Our Compensation Programs

 

Our objective in compensating executive officers is to attract, retain and motivate employees of superior ability who are dedicated to the long-term interests of our stockholders. This has proven to be a significant issue for the company as challenges from legacy long-term care insurance blocks of business have materially impaired the financial performance and stockholder value of the company. The following principles guide our compensation program design and individual compensation decisions. Additionally, we have highlighted below key elements of our compensation programs or policies for named executive officers that illustrate how we support these principles in practice:

 

Our Guiding Principles		Examples of Programs or Policies That Support Our Principles
Compensation should be primarily performance-based and align executive officer incentives with stockholder interests across multiple timeframes.		•  Annual incentives (short-term performance-based awards)   •  Annual long-term equity grants to NEOs include PSUs (vest based on company performance after three years), and RSUs (long-term stock appreciation with an emphasis on retention)
At-risk pay and compensation design should reflect an executive officer’s impact on company performance over time.		•  A significant portion of annual compensation of our NEOs is completely at risk   •  Our CEO pay that is completely at risk is approximately 60% of total pay   •  The pay of our other NEOs that is completely at risk is approximately 55%   •  Annual long-term equity grants constitute the largest component of target compensation for executive officers   •  Annual incentive goals align NEO compensation with performance in their area of responsibility
Total compensation opportunities should be competitive within the relevant marketplace.		•  Our compensation benchmarking approach, as described below, and annual review of the composition of our peer group
Our incentive compensation should reward financial and operational performance, and allow for qualitative assessment.		•  In determining annual incentive awards, the Compensation Committee measures performance against specific financial objectives for the person’s area of responsibility, together with a qualitative assessment of operational performance and other results   •  As noted above, this qualitative assessment is particularly important because of the significant impact on the performance of the company caused by the legacy long-term care insurance blocks of business   •  Our PSUs reward achievement of specific longer-term company objectives, while the Compensation Committee reserves the flexibility of negative discretion at payout

 

35

Our Guiding Principles		Examples of Programs or Policies That Support Our Principles
Plan designs and incentives should support appropriate risk management practices.		•  Executive officer stock ownership guidelines for the CEO (7x salary), our COO, CFO and CIO (3x), and for our other Executive Vice Presidents or Senior Vice Presidents (2x)   •  50% retention ratio for net after-tax shares received from the vesting or exercise of all equity incentive awards until executive officers’ stock ownership guidelines are met, ensuring significant personal assets are aligned with long-term stockholder interests   •  Exercises of previously awarded stock options and SARs are settled in stock and are subject to a nine-month net hold requirement   •  Clawback, anti-hedging and anti-pledging policies

 

Our Decision-Making Process

 

Role of the Compensation Committee

 

The Compensation Committee seeks a collaborative relationship with management, and currently uses an independent third-party compensation consultant to provide for a more informed decision-making process and objective perspective in this important governance matter. The Compensation Committee facilitates the annual review process of CEO performance and compensation decisions, with input from the Board and support of the compensation consultant. The Compensation Committee regularly meets in executive session without management present, and retains the final authority to approve all compensation policies, programs and amounts paid to our named executive officers.

 

Role of Management and Compensation Consultants

 

Our CEO and Executive Vice President—Human Resources regularly attend meetings of the Compensation Committee to provide analysis, details and recommendations regarding the company’s executive compensation programs and plan design. Our COO also periodically attends Compensation Committee meetings to provide additional analysis of business performance and strategy, context for understanding incentive goals and results, and his perspectives on leadership and talent within our operating businesses. Our CEO provides the Compensation Committee with performance assessments and compensation recommendations in his role as a manager for individual named executive officers (other than himself). The Compensation Committee, typically in the first quarter of each year, then determines and approves annual incentive award payouts for the prior year, any adjustments to base salary, target annual incentives for the upcoming year, and awards of long-term incentives to executive officers. For more information on the compensation decisions made in 2017, see the Our Annual Compensation Program section below.

 

The Compensation Committee has retained Steven Hall & Partners, LLC, an independent compensation consultant, to assist in reviewing and analyzing compensation data for our CEO and other named executive officers. The compensation consultant regularly attends Compensation Committee meetings and meets with the Compensation Committee in executive session without management present. The Compensation Committee occasionally requests special studies, assessments of market trends and education regarding changing laws and regulations from the compensation consultant to assist the Compensation Committee in its decision-making processes for the CEO and other executive officers. For example, in 2017, the compensation consultant supported the Compensation Committee’s evaluation of the peer group to be used for benchmarking purposes and recommended no changes to the group. The compensation consultant provides the Compensation Committee with advice, but does not determine the amount or form of compensation for our named executive officers.

 

36

The Compensation Committee assessed the independence of the compensation consultant and other advisors pursuant to SEC rules and concluded that no conflict of interest exists that would prevent the compensation consultant or other advisors from independently advising the Compensation Committee.

 

Evaluating Market Competitiveness

 

We generally evaluate market competitiveness of our programs as an input into the process of designing plans and setting target compensation levels for named executive officers. We review each component of compensation for our named executive officers separately and in the aggregate, and also consider the internal relationships among the named executive officers to help determine appropriate pay levels. With respect to individual named executive officers, we compare the total target compensation opportunities for our named executive officers to target opportunities for similar positions at comparable companies. These benchmarks are a gauge for evaluating market competitiveness, but are not given greater weight than other key factors when making compensation decisions. For example, individual named executive officers may have higher or lower target compensation levels compared to market medians based on level of responsibility, individual experience and skills, performance trends, competitive dynamics, retention needs and internal equity considerations.

 

The Compensation Committee typically utilizes a combination of publicly available information related to a specific list of peer companies (the “Peer Group”), as well as information available through market compensation surveys to provide a broad perspective of market practice. While no individual company matches our lines of business precisely, the Peer Group is intended to represent, in the aggregate, companies with revenue sources and talent demands similar to the company. With respect to size, we generally look at revenue or total assets as indicators of comparability rather than market capitalization due to our legacy long-term care insurance business and the potential for volatility year over year as stock prices change. The companies included in market surveys used by the company are not individually identifiable for a particular executive position (and therefore we are not benchmarking against any particular company within the survey), and also may change from year-to-year based on voluntary participation in the market surveys we use, mergers and divestitures, or changes in corporate structure.

 

To the extent we make changes to our business portfolio, or as peer companies adjust their own business lines or distribution channels, we will consider adding peers, or removing peers which no longer have revenue sources and talent demands similar to ours. The Compensation Committee will consider advice and recommendations developed by its compensation consultant to support our benchmarking principles. The Peer Group used when considering 2017 compensation actions was composed of the following companies:

 

Aflac, Inc.		Fidelity National Financial		Principal Financial Group, Inc.
American Financial Group, Inc.		First American Financial Corporation		Radian Group
Assurant, Inc.		Hanover Insurance Group		Reinsurance Group of America, Inc.
CNA Financial Corporation,		Lincoln National Corporation		Unum Group
CNO Financial Group, Inc.		MGIC Investment Corporation

 

In 2017, and following determination of 2017 compensation for our named executive officers, our Compensation Committee reviewed our Peer Group and determined that no changes were needed as it is appropriate based on company size, sources of revenue and sources of talent.

 

37

Our Annual Compensation Program

 

Our 2017 annual compensation program for named executive officers consists of the following key elements: base salary, annual incentive, and annual long-term equity grants (including RSUs and PSUs). A significant portion of annual compensation of our NEOs is completely at risk.

 

 

(1)	Represents 2017 annual incentive at target.

(2)	Represents grant date fair value of equity awards made in 2017.

 

Below is a summary and assessment of actions taken with respect to our annual compensation program for our named executive officers.

 

Base Salary

 

Base salaries are generally intended to reflect the scope of an executive officer’s responsibilities and level of experience, reward sustained performance over time and be market-competitive. In February 2017, the Compensation Committee undertook its annual review of executive officer base salaries. The Compensation Committee approved salary increases for Ms. Groh of 9% and Mr. Bobitz of 17% as a continuation of base salary progressions to market competitive levels following their promotions in 2015. The Compensation Committee determined to not make any base salary adjustments for the other named executive officers at that time as the existing base salaries were considered competitive within the marketplace for their roles.

 

Annual Incentive

 

In our annual incentive program, we review performance against clear financial objectives, together with a qualitative assessment of operational objectives and other accomplishments toward strategic priorities not necessarily reflected in annual financial results. Each named executive officer has an annual incentive target, expressed as a percentage of base salary. The 2017 target annual incentive opportunities for our named executive officers ranged from 100% to 200% of base salary, and payout opportunities for 2017 ranged from zero to 200% of their individual target amount. Individual annual incentive targets are reported in the 2017 Grants of Plan-Based Awards Table below.

 

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The key financial objectives used to measure 2017 performance and the related results are summarized below. Adjusted operating income (loss) and operating Return on Equity (ROE) represented key top-level measures of financial performance for our mortgage insurance businesses. In our U.S. life insurance companies, we measured incremental premiums approved for long-term care insurance in-force rate actions and an operating income metric.

 

Performance Unit		Key Financial Metrics ($ in millions)		2017 Target				2017 Measured Result				Variance
U.S. Mortgage Insurance(1)		Adjusted operating income		$	270			$	311			$	41
		Operating ROE (unlevered 5 pt average)			13.7	%			15.2	%			150			bps
Canada Mortgage Insurance(2)		Adjusted operating income		$	130			$	157			$	27
		Operating ROE (unlevered 5 pt average)			6.9	%			8.1	%			120			bps
Australia Mortgage Insurance(3)		Adjusted operating income		$	40			$	(88	)		$	(128	)
		Operating ROE (unlevered 5 pt average)			7.0	%			(13.6	)%			NM	(9)
U.S. Life Insurance(4)		Gross incremental premiums approved for LTC in-force rate actions		$	174			$	198			$	24
		Operating income metric(5)		$	175			$	200			$	25
Investments		Net investment income(6)		$	3,161			$	3,197			$	36
		Total company adjusted U.S. GAAP impairments and trading losses(7)		$	(60	)		$	134			$	194
		U.S. Life Insurance statutory impairments and trading losses and capital/credit migration impact(8)		$	(120	)		$	71			$	191

 

(1)

Operating ROE for our U.S. mortgage insurance business equals adjusted operating income divided by average ending Genworth’s stockholders’ equity, excluding accumulated other comprehensive income (loss), for the most recent five quarters. The planned Operating ROE target assumed that the Oceanwide transaction would have closed during 2017, requiring the write-off of Deferred Tax Assets of approximately $300 million and a resultant reduction of equity. The actual results were normalized as if this write-off had occurred.

(2)

Operating ROE for our Canada mortgage insurance business equals adjusted operating income excluding our portion of interest expense related to debt using our ownership percentage of 57.1%, divided by average ending Genworth’s stockholders’ equity, excluding accumulated other comprehensive income (loss) and our portion of debt, for the most recent five quarters.

(3)

Operating ROE for our Australia mortgage insurance business equals adjusted operating income excluding our portion of interest expense related to debt using our ownership percentage of 52%, divided by average ending Genworth’s stockholders’ equity, excluding accumulated other comprehensive income (loss) and our portion of debt, for the most recent five quarters. After excluding the U.S. GAAP impact of the earnings curve adjustment of the Australia mortgage business, which has no impact on the overall long-term profitability of the business, the business was deemed by the Compensation Committee to be performing at target and delivering solid underlying earnings performance.

(4)	In-force rate actions approved and implemented in 2017, which represented a weighted-average increase of 28% on $714 million in annualized LTC in-force premiums, or approximately $198 million.

 

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(5)	The U.S. Life Insurance operating income metric includes the results of our Runoff segment and excludes certain in-force reserve adjustments related to assumptions, methodology and modeling refinements, and guaranty fund assessments, and was calculated as follows:

 

(amounts in millions)
U.S. Life Insurance and Runoff adjusted operating income		$	73
Excludes:
Assumption updates			104
Methodology and modeling refinements			17
Guaranty fund assessments			6
U.S. Life Insurance and Runoff operating income metric		$	200

 

(6)	2017 measured results for net investment income were adjusted to be translated at planned foreign exchange rates, which reduced net investment income by $3 million.

(7)	Total company adjusted U.S. GAAP impairments and trading losses were calculated as follows:

 

(amounts in millions)
Net investment gains (losses)		$	265
Excludes:
Gains on derivatives			(97	)
Foreign exchange impact			(19	)
Commercial loan valuation allowance			(6	)
Other mark to market adjustments			(9	)
Total company adjusted U.S. GAAP impairments and trading losses		$	134

 

(8)

Investment impairments and trading losses are calculated in accordance with statutory accounting rules and the capital/credit migration impact represents statutory risk-based capital impact to U.S. Life Insurance companies from changes in National Association of Insurance Commissioners or “NAIC” rating of invested assets shown at a 350% multiple.

(9)	We define “not meaningful” (NM) for increases or decreases greater than 200%.

 

For 2017, the company also identified and disclosed certain key strategic priorities designed to have an impact on company financial performance and stockholder value over time. The Compensation Committee took these strategic priorities into account when evaluating the performance of our named executive officers and consideration was given for the accomplishments in their areas of responsibility. These key strategic priorities, and related accomplishments in 2017, included:

 

Key Strategic Priority		2017 Key Accomplishments/Results
Close Oceanwide Transaction & Transition Execution		•  Obtained stockholder approval of the transaction in March of 2017   •  Obtained conditional regulatory approval in North Carolina, South Carolina, Vermont and Virginia   •  Ongoing work and active engagement with Oceanwide to gain regulatory approvals for the transaction

 

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