Table of Contents

Exhibit 99.2

 

LOGO


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

 

Table of Contents

   Page  

Investor Letter

     3  

Use of Non-GAAP Measures

     4  

Results of Operations and Selected Operating Performance Measures

     5  

Financial Highlights

     6  

Consolidated Quarterly Results

  

Consolidated Net Income (Loss) by Quarter

     8  

Reconciliation of Net Income (Loss) to Adjusted Operating Income (Loss)

     9  

Consolidated Balance Sheets

     10-11  

Consolidated Balance Sheets by Segment

     12-13  

Deferred Acquisition Costs (DAC) Rollforward

     14  

Quarterly Results by Business

  

Adjusted Operating Income and Sales—U.S. Mortgage Insurance Segment

     16-22  

Adjusted Operating Income and Sales—Canada Mortgage Insurance Segment

     24-27  

Adjusted Operating Income and Sales—Australia Mortgage Insurance Segment

     29-32  

Adjusted Operating Income (Loss)—U.S. Life Insurance Segment

     34-37  

Adjusted Operating Income (Loss)—Runoff Segment

     39  

Adjusted Operating Loss—Corporate and Other Activities

     41  

Additional Financial Data

  

Investments Summary

     43  

Fixed Maturity Securities Summary

     44  

General Account U.S. GAAP Net Investment Income Yields

     45  

Net Investment Gains (Losses), Net—Detail

     46  

Reconciliations of Non-GAAP Measures

  

Reconciliation of Operating Return On Equity (ROE)

     48  

Reconciliation of Core Yield

     49  

Corporate Information

  

Financial Strength Ratings

     51  

Note:

Unless otherwise stated, all references in this financial supplement to net income (loss), net income (loss) per share, adjusted operating income (loss), adjusted operating income (loss) per share, book value and book value per share should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, non-U.S. Generally Accepted Accounting Principles (U.S. GAAP) adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, non-GAAP adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, book value available to Genworth Financial, Inc.’s common stockholders and book value available to Genworth Financial, Inc.’s common stockholders per share, respectively.

 

2


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Dear Investor,

Thank you for your continued interest in Genworth Financial, Inc.

Regards,

Investor Relations

InvestorInfo@genworth.com

 

3


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Use of Non-GAAP Measures

This financial supplement includes the non-GAAP financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share.” Adjusted operating income (loss) per share is derived from adjusted operating income (loss). The chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). The company defines adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on reinsurance restructuring for certain blocks of business. The company excludes net investment gains (losses) and infrequent or unusual non-operating items because the company does not consider them to be related to the operating performance of the company’s segments and Corporate and Other activities. A component of the company’s net investment gains (losses) is the result of impairments, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to the company’s discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) because, in the company’s opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) if, in the company’s opinion, they are not indicative of overall operating trends.

While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, the company believes that adjusted operating income (loss) and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) per share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, the company’s definition of adjusted operating income (loss) may differ from the definitions used by other companies.

In the first quarter of 2019, the company revised how it taxes the adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) to align the tax rate used in the reconciliation to each segment’s local jurisdictional tax rate. Beginning in the first quarter of 2019, the company used a tax rate of 27% and 30% for its Canada and Australia Mortgage Insurance segments, respectively, to tax effect their adjustments. Its domestic segments remain at a 21% tax rate. In 2018, the company assumed a flat 21% tax rate on adjustments for all of its segments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss). These adjustments are also net of the portion attributable to noncontrolling interests and net investment gains (losses) are adjusted for DAC and other intangible amortization and certain benefit reserves (see page 46).

Prior year amounts have not been re-presented to reflect this revised presentation; however, the previous methodology would not have resulted in a materially different segment-level adjusted operating income (loss).

In the second quarter of 2019, the company recorded a pre-tax loss of $1 million, net of the portion attributable to noncontrolling interests, related to the early redemption of CAD$100 million of Genworth MI Canada Inc.’s senior notes originally scheduled to mature in June 2020. The company recorded a pre-tax expense of $4 million in the first quarter of 2019 and $2 million in the third quarter of 2018 related to restructuring costs as it continues to evaluate and appropriately size its organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented other than fees incurred during the fourth quarter of 2018 related to Genworth Holdings, Inc.’s bond consent solicitation of $6 million for broker, advisor and investment banking fees.

The table on page 9 of this financial supplement provides a reconciliation of net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) for the periods presented and reflects adjusted operating income (loss) as determined in accordance with accounting guidance related to segment reporting. This financial supplement includes other non-GAAP measures management believes enhances the understanding and comparability of performance by highlighting underlying business activity and profitability drivers. These additional non-GAAP measures are on pages 48 and 49 of this financial supplement.

 

4


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

 

Results of Operations and Selected Operating Performance Measures

The company’s chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). The table on page 9 of this financial supplement provides a reconciliation of net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) for the periods presented and reflects adjusted operating income (loss) as determined in accordance with accounting guidance related to segment reporting.

The company taxes its international businesses at their local jurisdictional tax rates and its domestic businesses at the U.S. corporate federal income tax rate of 21%. The company’s segment tax methodology applies the respective jurisdictional or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.

The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.

This financial supplement contains selected operating performance measures including “sales” and “insurance in-force” or “risk in-force” which are commonly used in the insurance industry as measures of operating performance.

Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance. Sales do not include renewal premiums on policies or contracts written during prior periods. The company considers new insurance written to be a measure of the company’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of the company’s revenues or profitability during that period.

Management regularly monitors and reports insurance in-force and risk in-force. Insurance in-force for the company’s mortgage insurance businesses is a measure of the aggregate original loan balance for outstanding insurance policies as of the respective reporting date. Risk in-force for the company’s U.S. mortgage insurance business is based on the coverage percentage applied to the estimated current outstanding loan balance. For risk in-force in the mortgage insurance businesses in Canada and Australia, the company has computed an “effective” risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a factor of 35% that represents the highest expected average per-claim payment for any one underwriting year over the life of the company’s mortgage insurance businesses in Canada and Australia. In Australia, the company has certain risk share arrangements where it provides pro-rata coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements, the applicable pro-rata coverage amount provided is used when applying the factor. The company considers insurance in-force and risk in-force to be measures of its operating performance because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period.

Management also regularly monitors and reports a loss ratio for the company’s businesses. For the mortgage insurance businesses, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For the long-term care insurance business, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. The company considers the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of the businesses.

These operating performance measures enable the company to compare its operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.

 

5


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

 

Financial Highlights

(amounts in millions, except per share data)

 

Balance Sheet Data

   June 30,
2019
    March 31,
2019
    December 31,
2018
    September 30,
2018
    June 30,
2018
 

Total Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income

   $ 10,744     $ 10,582     $ 10,406     $ 10,731     $ 10,583  

Total accumulated other comprehensive income

     3,013       2,492       2,044       2,067       2,327  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Genworth Financial, Inc.’s stockholders’ equity

   $ 13,757     $ 13,074     $ 12,450     $ 12,798     $ 12,910  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value per share

   $ 27.32     $ 25.98     $ 24.86     $ 25.56     $ 25.78  

Book value per share, excluding accumulated other comprehensive income

   $ 21.34     $ 21.03     $ 20.78     $ 21.43     $ 21.14  

Common shares outstanding as of the balance sheet date

     503.5       503.3       500.8       500.8       500.7  
     Twelve months ended  

Twelve Month Rolling Average ROE

   June 30,
2019
    March 31,
2019
    December 31,
2018
    September 30,
2018
    June 30,
2018
 

U.S. GAAP Basis ROE

     1.5     1.7     1.1     7.7     7.4

Operating ROE(1)

     1.7     1.7     1.7     7.6     7.1
     Three months ended  

Quarterly Average ROE

   June 30,
2019
    March 31,
2019
    December 31,
2018
    September 30,
2018
    June 30,
2018
 

U.S. GAAP Basis ROE

     6.3     6.6     (12.5 )%      5.5     7.2

Operating ROE(1)

     7.7     4.6     (11.0 )%      5.4     7.6

 

Basic and Diluted Shares

   Three months ended
June 30, 2019
     Six months ended
June 30, 2019
 

Weighted-average common shares used in basic earnings per share calculations

     503.4        502.3  

Potentially dilutive securities:

     

Stock options, restricted stock units and stock appreciation rights

     5.3        6.4  
  

 

 

    

 

 

 

Weighted-average common shares used in diluted earnings per share calculations

     508.7        508.7  
  

 

 

    

 

 

 

 

(1) 

See page 48 herein for a reconciliation of U.S. GAAP Basis ROE to Operating ROE.

 

6


Table of Contents

Consolidated Quarterly Results

 

 

 

7


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Consolidated Net Income (Loss) by Quarter

(amounts in millions, except per share amounts)

 

     2019      2018  
     2Q      1Q      Total      4Q     3Q      2Q     1Q     Total  

REVENUES:

                      

Premiums

   $ 1,126      $ 1,114      $ 2,240      $ 1,121     $ 1,122      $ 1,136     $ 1,140     $ 4,519  

Net investment income

     852        829        1,681        815       815        828       804       3,262  

Net investment gains (losses)

     (45      74        29        (114     13        (14     (31     (146

Policy fees and other income

     223        187        410        191       193        209       202       795  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     2,156        2,204        4,360        2,013       2,143        2,159       2,115       8,430  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                      

Benefits and other changes in policy reserves

     1,270        1,301        2,571        1,847       1,321        1,205       1,311       5,684  

Interest credited

     146        147        293        152       151        152       156       611  

Acquisition and operating expenses, net of deferrals

     247        251        498        261       243        253       240       997  

Amortization of deferred acquisition costs and intangibles

     95        91        186        92       83        112       104       391  

Interest expense

     73        72        145        74       72        77       76       299  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     1,831        1,862        3,693        2,426       1,870        1,799       1,887       7,982  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     325        342        667        (413     273        360       228       448  

Provision (benefit) for income taxes

     107        112        219        (86     63        111       63       151  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     218        230        448        (327     210        249       165       297  

Less: net income attributable to noncontrolling interests

     50        56        106        2       64        59       53       178  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS

   $ 168      $ 174      $ 342      $ (329   $ 146      $ 190     $ 112     $ 119  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
                          

Earnings (Loss) Per Share Data:

                    

Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share

                    

Basic

   $ 0.33      $ 0.35      $ 0.68      $ (0.66   $ 0.29      $ 0.38     $ 0.22     $ 0.24  

Diluted

   $ 0.33      $ 0.34      $ 0.67      $ (0.66   $ 0.29      $ 0.38     $ 0.22     $ 0.24  

Weighted-average common shares outstanding

                    

Basic

     503.4        501.2        502.3        500.8       500.7        500.6       499.6       500.4  

Diluted(1)

     508.7        508.6        508.7        500.8       503.3        502.6       502.7       504.2  

 

(1) 

Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of the net loss for the three months ended December 31, 2018, the company was required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share for the three months ended December 31, 2018, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 7.6 million would have been antidilutive to the calculation. If the company had not incurred a net loss for the three months ended December 31, 2018, dilutive potential weighted-average common shares outstanding would have been 508.4 million.    

 

8


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Reconciliation of Net Income (Loss) to Adjusted Operating Income (Loss)

(amounts in millions, except per share amounts)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

NET INCOME (LOSS)

   $ 218      $ 230     $ 448     $ (327   $ 210     $ 249     $ 165     $ 297  

Less: net income attributable to noncontrolling interests

     50        56       106       2       64       59       53       178  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS

     168        174       342       (329     146       190       112       119  

ADJUSTMENTS TO NET INCOME (LOSS) AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS:

                   

Net investment (gains) losses, net(1)

     43        (71     (28     42       (3     12       17       68  

(Gains) losses on early extinguishment of debt, net(2)

     1        —         1       —         —         —         —         —    

Expenses related to restructuring

     —          4       4       —         2       —         —         2  

Fees associated with bond consent solicitation

     —          —         —         6       —         —         —         6  

Taxes on adjustments

     (8      14       6       (10     —         (2     (4     (16
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 204      $ 121     $ 325     $ (291   $ 145     $ 200     $ 125     $ 179  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

ADJUSTED OPERATING INCOME (LOSS):

                   

U.S. Mortgage Insurance segment

   $ 147      $ 124     $ 271     $ 124     $ 118     $ 137     $ 111     $ 490  

Canada Mortgage Insurance segment

     41        41       82       48       44       46       49       187  

Australia Mortgage Insurance segment

     13        14       27       18       17       22       19       76  

U.S. Life Insurance segment:

                   

Long-Term Care Insurance

     37        (20     17       (314     (24     22       (32     (348

Life Insurance

     10        (2     8       (108     (2     4       (1     (107

Fixed Annuities

     19        17       36       (3     23       31       28       79  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. Life Insurance segment

     66        (5     61       (425     (3     57       (5     (376
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Runoff segment

     9        20       29       (2     14       13       10       35  

Corporate and Other

     (72      (73     (145     (54     (45     (75     (59     (233
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

ADJUSTED OPERATING INCOME (LOSS)

   $ 204      $ 121     $ 325     $ (291   $ 145     $ 200     $ 125     $ 179  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

                                                          

Earnings (Loss) Per Share Data:

                 

Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share

                 

Basic

   $ 0.33      $ 0.35     $ 0.68     $ (0.66   $ 0.29     $ 0.38     $ 0.22     $ 0.24  

Diluted

   $ 0.33      $ 0.34     $ 0.67     $ (0.66   $ 0.29     $ 0.38     $ 0.22     $ 0.24  

Adjusted operating income (loss) per share

                 

Basic

   $ 0.40      $ 0.24     $ 0.65     $ (0.58   $ 0.29     $ 0.40     $ 0.25     $ 0.36  

Diluted

   $ 0.40      $ 0.24     $ 0.64     $ (0.58   $ 0.29     $ 0.40     $ 0.25     $ 0.36  

Weighted-average common shares outstanding

                 

Basic

     503.4        501.2       502.3       500.8       500.7       500.6       499.6       500.4  

Diluted(3)

     508.7        508.6       508.7       500.8       503.3       502.6       502.7       504.2  

 

(1) 

Net investment (gains) losses were adjusted for the portion attributable to noncontrolling interests and DAC and other intangible amortization and certain benefit reserves (see page 46 for reconciliation).

(2) 

For the three months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $1 million.

(3) 

Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of the net loss for the three months ended December 31, 2018, the company was required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share for the three months ended December 31, 2018, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 7.6 million would have been antidilutive to the calculation. If the company had not incurred a net loss for the three months ended December 31, 2018, dilutive potential weighted-average common shares outstanding would have been 508.4 million.

 

9


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Consolidated Balance Sheets

(amounts in millions)

 

     June 30,
2019
     March 31,
2019
     December 31,
2018
     September 30,
2018
     June 30,
2018
 
ASSETS                 

Investments:

                

Fixed maturity securities available-for-sale, at fair value

   $ 63,774      $ 61,360      $ 59,661      $ 59,404      $ 60,032  

Equity securities, at fair value

     644        635        655        783        758  

Commercial mortgage loans(1)

     7,019        6,988        6,749        6,655        6,570  

Policy loans

     2,076        1,994        1,861        1,859        1,872  

Other invested assets

     1,535        1,208        1,188        1,354        1,650  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investments

     75,048        72,185        70,114        70,055        70,882  

Cash, cash equivalents and restricted cash

     1,938        2,221        2,177        2,505        2,243  

Accrued investment income

     626        726        675        657        602  

Deferred acquisition costs

     2,105        2,219        3,263        3,336        3,086  

Intangible assets and goodwill

     244        265        347        355        354  

Reinsurance recoverable

     17,211        17,257        17,278        17,351        17,385  

Other assets

     564        532        474        467        574  

Deferred tax asset

     383        573        736        650        601  

Separate account assets

     6,187        6,210        5,859        6,745        6,750  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 104,306      $ 102,188      $ 100,923      $ 102,121      $ 102,477  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Included restricted commercial mortgage loans of $56 million, $59 million, $62 million, $87 million and $90 million, respectively, as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018 related to a securitization entity.

 

10


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Consolidated Balance Sheets

(amounts in millions)

 

     June 30,
2019
     March 31,
2019
    December 31,
2018
    September 30,
2018
    June 30,
2018
 

LIABILITIES AND EQUITY

             

Liabilities:

             

Future policy benefits

   $ 39,583      $ 38,369     $ 37,940     $ 38,018     $ 37,913  

Policyholder account balances

     22,673        22,651       22,968       22,993       23,366  

Liability for policy and contract claims

     10,677        10,536       10,379       9,844       9,665  

Unearned premiums

     3,488        3,482       3,546       3,668       3,669  

Other liabilities

     1,723        1,682       1,682       1,830       1,965  

Borrowings related to a securitization entity

     —          —         —         20       28  

Non-recourse funding obligations

     311        311       311       310       310  

Long-term borrowings

     4,044        4,035       4,025       4,051       4,047  

Deferred tax liability

     28        30       24       21       23  

Separate account liabilities

     6,187        6,210       5,859       6,745       6,750  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     88,714        87,306       86,734       87,500       87,736  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

             

Common stock

     1        1       1       1       1  

Additional paid-in capital

     11,983        11,989       11,987       11,983       11,981  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated other comprehensive income (loss):

             

Net unrealized investment gains (losses):

             

Net unrealized gains (losses) on securities not other-than-temporarily impaired

     1,294        932       585       598       726  

Net unrealized gains (losses) on other-than-temporarily impaired securities

     11        11       10       10       10  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Net unrealized investment gains (losses)

     1,305        943       595       608       736  

Derivatives qualifying as hedges

     1,983        1,850       1,781       1,717       1,863  

Foreign currency translation and other adjustments

     (275      (301     (332     (258     (272
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total accumulated other comprehensive income

     3,013        2,492       2,044       2,067       2,327  

Retained earnings

     1,460        1,292       1,118       1,447       1,301  

Treasury stock, at cost

     (2,700      (2,700     (2,700     (2,700     (2,700
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total Genworth Financial, Inc.’s stockholders’ equity

     13,757        13,074       12,450       12,798       12,910  

Noncontrolling interests

     1,835        1,808       1,739       1,823       1,831  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     15,592        14,882       14,189       14,621       14,741  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 104,306      $ 102,188     $ 100,923     $ 102,121     $ 102,477  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     

 

11


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Consolidated Balance Sheet by Segment

(amounts in millions)

 

    June 30, 2019  
    U.S.
Mortgage
Insurance
    Canada
Mortgage
Insurance
    Australia
Mortgage
Insurance
    U.S. Life
Insurance
    Runoff     Corporate and
Other
(1)
    Total  

ASSETS

             

Cash and investments

  $ 3,846     $ 5,060     $ 2,303     $ 62,499     $ 2,896     $ 1,008     $ 77,612  

Deferred acquisition costs and intangible assets

    50       140       65       1,911       173       10       2,349  

Reinsurance recoverable

    —         —         2       16,474       735       —         17,211  

Deferred tax and other assets

    81       72       154       118       27       495       947  

Separate account assets

    —         —         —         —         6,187       —         6,187  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,977     $ 5,272     $ 2,524     $ 81,002     $ 10,018     $ 1,513     $ 104,306  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

             

Liabilities:

             

Future policy benefits

  $ —       $ —       $ —       $ 39,581     $ 2     $ —       $ 39,583  

Policyholder account balances

    —         —         —         19,434       3,239       —         22,673  

Liability for policy and contract claims

    254       91       209       10,102       13       8       10,677  

Unearned premiums

    419       1,571       997       497       4       —         3,488  

Non-recourse funding obligations

    —         —         —         311       —         —         311  

Deferred tax and other liabilities

    79       183       185       560       52       692       1,751  

Borrowings and capital securities

    —         333       140       —         —         3,571       4,044  

Separate account liabilities

    —         —         —         —         6,187       —         6,187  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    752       2,178       1,531       70,485       9,497       4,271       88,714  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

             

Allocated equity, excluding accumulated other comprehensive income (loss)

    3,148       1,947       453       7,419       515       (2,738     10,744  

Allocated accumulated other comprehensive income (loss)

    77       (188     40       3,098       6       (20     3,013  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Genworth Financial, Inc.’s stockholders’ equity

    3,225       1,759       493       10,517       521       (2,758     13,757  

Noncontrolling interests

    —         1,335       500       —         —         —         1,835  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    3,225       3,094       993       10,517       521       (2,758     15,592  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 3,977     $ 5,272     $ 2,524     $ 81,002     $ 10,018     $ 1,513     $ 104,306  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Includes inter-segment eliminations and other businesses that are managed outside the operating segments.

 

12


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Consolidated Balance Sheet by Segment

(amounts in millions)

 

    March 31, 2019  
    U.S.
Mortgage
Insurance
    Canada
Mortgage
Insurance
    Australia
Mortgage
Insurance
    U.S. Life
Insurance
    Runoff     Corporate and
Other
(1)
    Total  

ASSETS

             

Cash and investments

  $ 3,652     $ 4,935     $ 2,300     $ 61,882     $ 2,918     $ (555   $ 75,132  

Deferred acquisition costs and intangible assets

    50       137       69       2,029       189       10       2,484  

Reinsurance recoverable

    —         —         4       16,513       740       —         17,257  

Deferred tax and other assets

    106       74       160       195       25       545       1,105  

Separate account assets

    —         —         —         —         6,210       —         6,210  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,808     $ 5,146     $ 2,533     $ 80,619     $ 10,082     $ —       $ 102,188  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

             

Liabilities:

             

Future policy benefits

  $ —       $ —       $ —       $ 38,367     $ 2     $ —       $ 38,369  

Policyholder account balances

    —         —         —         19,442       3,209       —         22,651  

Liability for policy and contract claims

    280       88       204       9,946       10       8       10,536  

Unearned premiums

    421       1,518       1,031       508       4       —         3,482  

Non-recourse funding obligations

    —         —         —         311       —         —         311  

Deferred tax and other liabilities

    104       169       177       618       48       596       1,712  

Borrowings and capital securities

    —         324       141       —         —         3,570       4,035  

Separate account liabilities

    —         —         —         —         6,210       —         6,210  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    805       2,099       1,553       69,192       9,483       4,174       87,306  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

             

Allocated equity, excluding accumulated other comprehensive income (loss)

    2,973       1,960       450       8,726       598       (4,125     10,582  

Allocated accumulated other comprehensive income (loss)

    30       (229     38       2,701       1       (49     2,492  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Genworth Financial, Inc.’s stockholders’ equity

    3,003       1,731       488       11,427       599       (4,174     13,074  

Noncontrolling interests

    —         1,316       492       —         —         —         1,808  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    3,003       3,047       980       11,427       599       (4,174     14,882  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 3,808     $ 5,146     $ 2,533     $ 80,619     $ 10,082     $ —       $ 102,188  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Includes inter-segment eliminations and other businesses that are managed outside the operating segments.

 

13


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Deferred Acquisition Costs Rollforward

(amounts in millions)

 

     U.S.
Mortgage
Insurance
    Canada
Mortgage
Insurance
    Australia
Mortgage
Insurance
    U.S. Life
Insurance
    Runoff     Total  

Unamortized balance as of March 31, 2019

   $ 28     $ 122     $ 38     $ 3,320     $ 188     $ 3,696  

Costs deferred

     3       11       2       2       —         18  

Amortization, net of interest accretion

     (3     (10     (3     (62     (4     (82

Impact of foreign currency translation

     —         2       —         —         —         2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unamortized balance as of June 30, 2019

     28       125       37       3,260       184       3,634  

Effect of accumulated net unrealized investment (gains) losses

     —         —         —         (1,510     (19     (1,529
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019

   $ 28     $ 125     $ 37     $ 1,750     $ 165     $ 2,105  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


Table of Contents

U.S. Mortgage Insurance Segment

 

 

 

15


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income and Sales—U.S. Mortgage Insurance Segment

(amounts in millions)

 

     2019      2018  
     2Q      1Q      Total      4Q      3Q      2Q     1Q      Total  

REVENUES:

                        

Premiums

   $ 206      $ 194      $ 400      $ 193      $ 190      $ 184     $ 179      $ 746  

Net investment income

     28        28        56        26        23        23       21        93  

Net investment gains (losses)

     —          —          —          —          —          —         —          —    

Policy fees and other income

     1        1        2        —          1        1       —          2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total revenues

     235        223        458        219        214        208       200        841  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

BENEFITS AND EXPENSES:

                        

Benefits and other changes in policy reserves

     —          16        16        14        20        (14     16        15,800  

Acquisition and operating expenses, net of deferrals

     44        46        90        44        41        45       39        169  

Amortization of deferred acquisition costs and intangibles

     4        4        8        3        4        3       4        14  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total benefits and expenses

     48        66        114        61        65        34       59        219  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

INCOME BEFORE INCOME TAXES

     187        157        344        158        149        174       141        622  

Provision for income taxes

     40        33        73        34        31        37       30        132  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

NET INCOME

     147        124        271        124        118        137       111        490  
 

ADJUSTMENTS TO NET INCOME:

                        

Net investment (gains) losses

     —          —          —          —          —          —         —          —    

Taxes on adjustments

     —          —          —          —          —          —         —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

ADJUSTED OPERATING INCOME

   $ 147      $ 124      $ 271      $ 124      $ 118      $ 137     $ 111      $ 490  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
  

 

 

                                                               

SALES:

                      

Flow New Insurance Written (NIW)

   $ 15,800      $ 9,600      $ 25,400      $ 9,300      $ 10,300      $ 11,400     $ 9,000      $ 40,000  

 

16


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Flow New Insurance Written Metrics—U.S. Mortgage Insurance Segment

(amounts in millions)

 

    2019     2018  
    2Q      1Q     4Q     3Q     2Q     1Q  
    Flow
NIW
    % of
Flow
NIW
     Flow
NIW
     % of
Flow
NIW
    Flow
NIW
     % of
Flow
NIW
    Flow
NIW
     % of
Flow
NIW
    Flow
NIW
     % of
Flow
NIW
    Flow
NIW
     % of
Flow
NIW
 

Product

                               

Monthly(1)

  $ 13,900       88    $ 8,400        87   $ 7,900        85   $ 8,400        82   $ 9,700        85   $ 7,300        81

Single

    1,900       12        1,200        13       1,400        15       1,900        18       1,700        15       1,700        19  
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Flow

  $ 15,800       100    $ 9,600        100   $ 9,300        100   $ 10,300        100   $ 11,400        100   $ 9,000        100
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

FICO Scores

                               

Over 735

  $ 9,200       58    $ 5,500        57   $ 5,200        56   $ 6,000        58   $ 6,900        60   $ 5,300        59

680-735

    5,500       35        3,300        35       3,200        35       3,300        32       3,700        32       3,000        33  

660-679(2)

    600       4        400        4       500        5       500        5       400        4       400        5  

620-659

    500       3        400        4       400        4       500        5       400        4       300        3  

<620

    —         —          —          —         —          —         —          —         —          —         —          —    
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Flow

  $ 15,800       100    $ 9,600        100   $ 9,300        100   $ 10,300        100   $ 11,400        100   $ 9,000        100
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Loan-To-Value Ratio

                               

95.01% and above

  $ 2,900       18    $ 1,800        19   $ 2,000        21   $ 2,000        19   $ 2,400        21   $ 1,600        18

90.01% to 95.00%

    6,900       44        4,200        44       4,000        43       4,500        44       4,900        43       3,900        43  

85.01% to 90.00%

    4,300       27        2,500        26       2,300        25       2,800        27       2,900        25       2,500        28  

85.00% and below

    1,700       11        1,100        11       1,000        11       1,000        10       1,200        11       1,000        11  
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Flow

  $ 15,800       100    $ 9,600        100   $ 9,300        100   $ 10,300        100   $ 11,400        100   $ 9,000        100
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Origination

                               

Purchase

  $ 13,900       88    $ 8,600        90   $ 8,800        95   $ 9,800        95   $ 10,700        94   $ 8,000        89

Refinance

    1,900       12        1,000        10       500        5       500        5       700        6       1,000        11  
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total Flow

  $ 15,800       100    $ 9,600        100   $ 9,300        100   $ 10,300        100   $ 11,400        100   $ 9,000        100
 

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) 

Includes loans with annual and split payment types.

(2) 

Loans with unknown FICO scores are included in the 660-679 category.

 

17


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Other Metrics—U.S. Mortgage Insurance Segment

(dollar amounts in millions)

 

     2019     2018  
     2Q     1Q     Total     4Q     3Q     2Q     1Q     Total  

Net Premiums Written

   $ 204     $ 193     $ 397     $ 192     $ 195     $ 191     $ 185     $ 763  
 

Flow New Risk Written

   $ 3,931     $ 2,403     $ 6,334     $ 2,300     $ 2,559     $ 2,866     $ 2,247     $ 9,972  
 

Primary Insurance In-Force(1)

   $ 178,500     $ 170,400       $ 166,700     $ 163,200     $ 159,500     $ 154,900    

Risk In-Force

                  

Flow(2)

   $ 42,917     $ 41,020       $ 40,115     $ 39,304     $ 38,433     $ 37,252    

Bulk(3)

     167       173         178       188       195       202    
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total Primary

     43,084       41,193         40,293       39,492       38,628       37,454    

Pool

     62       66         69       72       75       80    
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total Risk In-Force

   $ 43,146     $ 41,259       $ 40,362     $ 39,564     $ 38,703     $ 37,534    
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
 

Primary Risk In-Force That Is GSE Conforming

     93     93       94     94     94     94  
 

Expense Ratio (Net Earned Premiums)(4)

     24     25     25     24     23     26     24     25
 

Expense Ratio (Net Premiums Written)(5)

     24     26     25     25     23     25     23     24
 

Flow Persistency

     82     86       86     84     83     84  
 

Risk To Capital Ratio(6)

     11.8:1       11.9:1         12.2:1       12.3:1       12.6:1       12.5:1    
 

PMIERs Sufficiency Ratio(7)

     123     123       129     130     129     124  
 

Average Primary Loan Size (in thousands)

   $ 218     $ 215       $ 213     $ 211     $ 209     $ 207    

The expense ratios included above were calculated using whole dollars and may be different than the ratios calculated using the rounded numbers included herein.

 

(1) 

Primary insurance in-force represents aggregate loan balances for outstanding insurance policies and is used to determine premiums. Original loan balances are presented for policies with level renewal premiums. Amortized loan balances are presented for policies with annual, amortizing renewal premiums.

(2) 

Flow risk in-force represents current loan balances as provided by servicers, lenders and investors and conforms to the presentation under the Private Mortgage Insurer Eligibility Requirements (PMIERs).

(3) 

As of June 30, 2019, 88% of the bulk risk in-force was related to loans financed by lenders who participated in the mortgage programs sponsored by the Federal Home Loan Banks.

(4) 

The ratio of an insurer’s general expenses to net earned premiums. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(5) 

The ratio of an insurer’s general expenses to net premiums written. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(6) 

Certain states limit a private mortgage insurer’s risk in-force to 25 times the total of the insurer’s policyholders’ surplus plus the statutory contingency reserve, commonly known as the “risk to capital” requirement. The current period risk to capital ratio is an estimate due to the timing of the filing of statutory statements and is prepared consistent with the presentation of the statutory financial statements in the combined annual statement of the U.S. mortgage insurance business.

(7) 

The PMIERs sufficiency ratio is calculated as available assets divided by required assets as defined within PMIERs. The current period PMIERs sufficiency ratio is an estimate due to the timing of the PMIERs filing for the U.S. mortgage insurance business. As of June 30, 2019 and March 31, 2019, the PMIERs sufficiency ratios were in excess of $650 million and $600 million, respectively, of available assets above the PMIERs requirements. As of December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, the PMIERs sufficiency ratios were in excess of $750 million, $750 million, $700 million and $600 million, respectively, of available assets above the prior PMIERs requirements.

 

18


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Loss Metrics—U.S. Mortgage Insurance Segment

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

Paid claims

                   

Flow

                   

Direct

   $ 24      $ 30     $ 54     $ 34     $ 52     $ 45     $ 53     $ 184  

Assumed(1)

     —          —         —         —         —         —         1       1  

Ceded

     —          —         —         —         —         —         (1     (1

Loss adjustment expenses

     2        2       4       —         3       2       2       7  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Flow

     26        32       58       34       55       47       55       191  

Bulk

     —          —         —         —         1       —         1       2  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Primary

     26        32       58       34       56       47       56       193  

Pool

     —          —         —         —         —         1       —         1  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Paid Claims

   $ 26      $ 32     $ 58     $ 34     $ 56     $ 48     $ 56     $ 194  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Average Paid Claim (in thousands)

   $ 45.4      $ 49.0       $ 41.4     $ 45.9     $ 43.1     $ 47.5    
 

Average Reserve Per Delinquency (in thousands)

                   

Flow

   $ 16.5      $ 17.4       $ 17.3     $ 18.8     $ 19.6     $ 20.2    

Bulk loans with established reserve

   $ 14.1      $ 13.8       $ 14.6     $ 17.6     $ 18.4     $ 17.6    
 

Reserves:

                   

Flow direct case

   $ 222      $ 246       $ 261     $ 280     $ 314     $ 372    

Bulk direct case

     4        4         5       7       8       8    

Assumed(1)

     1        1         2       2       2       2    

All other(2)

     27        29         28       28       28       33    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total Reserves

   $ 254      $ 280       $ 296     $ 317     $ 352     $ 415    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
 

Beginning Reserves

   $     280      $     296     $     296     $     317     $     352     $     415     $     455     $     455  

Paid claims

     (26      (32     (58     (34     (56     (48     (57     (195

Increase (decrease) in reserves

     —          16       16       13       21       (15     17       36  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Reserves

   $ 254      $ 280     $ 254     $ 296     $ 317     $ 352     $ 415     $ 296  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Beginning Reinsurance Recoverable(3)

   $ —        $ —       $ —       $ —       $ —       $ —       $ 1     $ 1  

Ceded paid claims

     —          —         —         —         —         —         (1     (1
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Reinsurance Recoverable

   $ —        $ —       $ —       $ —       $ —       $ —       $ —       $ —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss Ratio(4)

     —        8     4     7     11     (8 )%      9     5

The loss ratio included above was calculated using whole dollars and may be different than the ratio calculated using the rounded numbers included herein.

 

(1) 

Assumed is comprised of reinsurance arrangements with state governmental housing finance agencies.

(2) 

Other includes loss adjustment expenses, pool and incurred but not reported reserves.

(3) 

Reinsurance recoverable excludes ceded unearned premium recoveries and amounts for which cash proceeds have not yet been received.

(4) 

The ratio of benefits and other changes in policy reserves to net earned premiums. During the second quarter of 2019, the company recorded a favorable reserve adjustment of $10 million, which reduced the loss ratio by five percentage points for the three months ended June 30, 2019. During the second quarter of 2018, the company recorded a favorable reserve adjustment of $28 million, which reduced the loss ratio by four percentage points for the twelve months ended December 31, 2018 and 15 percentage points for the three months ended June 30, 2018.

 

19


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Delinquency Metrics—U.S. Mortgage Insurance Segment

(dollar amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

Number of Primary Delinquencies

                   

Flow

     15,070        15,764         16,670       16,367       17,505       20,007    

Bulk loans with an established reserve

     347        360         403       415       445       494    

Bulk loans with no reserve(1)

     65        82         86       92       101       101    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total Number of Primary Delinquencies

     15,482        16,206         17,159       16,874       18,051       20,602    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
 

Beginning Number of Primary Delinquencies

     16,206        17,159       17,159       16,874       18,051       20,602       23,188       23,188  

New delinquencies

     7,705        8,539       16,244       8,719       7,884       7,049       8,409       32,061  

Delinquency cures

     (7,872      (8,835     (16,707     (7,601     (7,857     (8,488     (9,840     (33,786

Paid claims

     (557      (657     (1,214     (833     (1,204     (1,112     (1,155     (4,304
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Number of Primary Delinquencies

     15,482        16,206       15,482       17,159       16,874       18,051       20,602       17,159  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Composition of Cures

                   

Reported delinquent and cured-intraquarter

     1,621        2,342         1,767       1,651       1,514       2,288    

Number of missed payments delinquent prior to cure:

                   

3 payments or less

     4,567        4,862         4,131       3,951       4,568       5,413    

4 - 11 payments

     1,434        1,345         1,382       1,943       2,070       1,719    

12 payments or more

     250        286         321       312       336       420    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total

     7,872        8,835         7,601       7,857       8,488       9,840    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Primary Delinquencies by Missed Payment Status

                   

3 payments or less

     7,807        7,873         8,578       7,853       7,539       8,335    

4 - 11 payments

     4,243        4,755         4,689       4,745       5,657       6,875    

12 payments or more

     3,432        3,578         3,892       4,276       4,855       5,392    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Primary Delinquencies

     15,482        16,206         17,159       16,874       18,051       20,602    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
                       
     June 30, 2019                          

Flow Delinquencies and Percentage

Reserved by Payment Status

   Delinquencies      Direct Case
Reserves
(2)
    Risk In-Force     Reserves as % of
Risk In-Force
                         

3 payments or less in default

     7,629      $ 26     $ 341       8        

4 - 11 payments in default

     4,162        75       190       39        

12 payments or more in default

     3,279        121       167       72        
  

 

 

    

 

 

   

 

 

           

Total

     15,070      $ 222     $ 698       32        
  

 

 

    

 

 

   

 

 

           
     December 31, 2018                          

Flow Delinquencies and Percentage

Reserved by Payment Status

   Delinquencies      Direct Case
Reserves
(2)
    Risk In-Force     Reserves as % of
Risk In-Force
                         

3 payments or less in default

     8,360      $ 31     $ 365       8        

4 - 11 payments in default

     4,591        88       208       42        

12 payments or more in default

     3,719        142       188       76        
  

 

 

    

 

 

   

 

 

           

Total

     16,670      $ 261     $ 761       34        
  

 

 

    

 

 

   

 

 

           

 

(1) 

Reserves were not established on loans where the company was in a secondary loss position due to an existing deductible and the company believes they currently have no risk for claim.

(2) 

Direct flow case reserves exclude loss adjustment expenses, incurred but not reported and reinsurance reserves.

 

20


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Portfolio Quality Metrics—U.S. Mortgage Insurance Segment

 

     2019     2018  
     2Q      1Q     4Q     3Q     2Q     1Q  

Primary Loans

               

Primary loans in-force

     818,358        792,800       783,288       773,290       762,727       749,145  

Primary delinquent loans

     15,482        16,206       17,159       16,874       18,051       20,602  

Primary delinquency rate

     1.89      2.04     2.19     2.18     2.37     2.75
 

Flow loans in-force

     806,739        780,733       770,657       759,965       748,497       734,411  

Flow delinquent loans

     15,070        15,764       16,670       16,367       17,505       20,007  

Flow delinquency rate

     1.87      2.02     2.16     2.15     2.34     2.72
 

Bulk loans in-force

     11,619        12,067       12,631       13,325       14,230       14,734  

Bulk delinquent loans

     412        442       489       507       546       595  

Bulk delinquency rate

     3.55      3.66     3.87     3.80     3.84     4.04
 

A minus and sub-prime loans in-force

     14,180        14,712       15,348       16,087       16,928       17,964  

A minus and sub-prime delinquent loans

     2,367        2,530       2,727       2,817       3,058       3,557  

A minus and sub-prime delinquency rate

     16.69      17.20     17.77     17.51     18.06     19.80
 

Pool Loans

               

Pool loans in-force

     4,331        4,470       4,535       4,636       4,774       4,961  

Pool delinquent loans

     177        187       220       215       204       220  

Pool delinquency rate

     4.09      4.18     4.85     4.64     4.27     4.43
 

Primary Risk In-Force by Credit Quality

               

Over 735

     57      57     57     57     57     57

680-735

     32      32     32     32     32     32

660-679(1)

     5      5     5     5     5     5

620-659

     5      5     5     5     5     5

<620

     1      1     1     1     1     1

 

(1) 

Loans with unknown FICO scores are included in the 660-679 category.

 

21


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Portfolio Quality Metrics—U.S. Mortgage Insurance Segment

(amounts in millions)

 

     June 30, 2019  

Policy Year

   Average
Rate
(1)
    % of Total
Reserves
(2)
    Primary
Insurance In-Force
     % of Total     Primary
Risk In-Force
     % of Total     Delinquency
Rate
 

2004 and prior

     6.10     8.4   $ 1,515        0.9   $ 285        0.7     11.39

2005 to 2008

     5.47     58.2       17,576        9.8       4,037        9.4       7.79

2009 to 2012

     4.29     2.2       3,934        2.2       913        2.1       1.80

2013

     4.11     1.8       4,755        2.7       1,162        2.7       1.44

2014

     4.45     4.4       8,277        4.6       2,013        4.7       1.80

2015

     4.15     6.2       16,648        9.3       4,023        9.3       1.27

2016

     3.89     7.5       30,515        17.1       7,348        17.0       0.93

2017

     4.25     7.2       33,245        18.6       8,087        18.8       0.90

2018

     4.77     3.9       36,887        20.7       9,025        20.9       0.49

2019

     4.75     0.2       25,129        14.1       6,191        14.4       0.07
    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

Total

     4.53     100.0   $ 178,481        100.0   $ 43,084        100.0     1.89
    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   
     June 30, 2019     March 31, 2019     June 30, 2018        
     Primary
Risk In-Force
    Primary
Delinquency Rate
    Primary
Risk In-Force
     Primary
Delinquency Rate
    Primary
Risk In-Force
     Primary
Delinquency Rate
       

Lender concentration (by original applicant)

   $ 43,084       1.89   $ 41,193        2.04   $ 38,628        2.37  

Top 10 lenders

   $ 12,597       2.11   $ 11,617        2.38   $ 11,249        2.83  

Top 20 lenders

   $ 16,729       2.03   $ 15,555        2.27   $ 15,014        2.75  

Loan-to-value ratio

                

95.01% and above

   $ 7,837       3.16   $ 7,401        3.46   $ 6,594        4.22  

90.01% to 95.00%

     22,389       1.49     21,433        1.59     20,088        1.75  

80.01% to 90.00%

     12,699       1.59     12,195        1.73     11,762        2.05  

80.00% and below

     159       2.43     164        2.43     184        2.81  
  

 

 

     

 

 

      

 

 

      

Total

   $ 43,084       1.89   $ 41,193        2.04   $ 38,628        2.37  
  

 

 

     

 

 

      

 

 

      

Loan grade

                

Prime

   $ 42,587       1.63   $ 40,678        1.76   $ 38,035        2.01  

A minus and sub-prime

     497       16.69     515        17.20     593        18.06  
  

 

 

     

 

 

      

 

 

      

Total

   $ 43,084       1.89   $ 41,193        2.04   $ 38,628        2.37  
  

 

 

     

 

 

      

 

 

      

 

(1) 

Average Annual Mortgage Interest Rate.

(2) 

Total reserves were $254 million as of June 30, 2019.

 

22


Table of Contents

 

Canada Mortgage Insurance Segment

 

 

 

 

23


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income and Sales—Canada Mortgage Insurance Segment

(amounts in millions)

 

     2019      2018  
     2Q      1Q     Total      4Q     3Q     2Q     1Q     Total  

REVENUES:

                    

Premiums

   $ 125      $ 126     $ 251      $ 128     $ 127     $ 131     $ 139     $ 525  

Net investment income

     35        34       69        36       34       34       34       138  

Net investment gains (losses)

     1        (1     —          (136     29       (15     (15     (137
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     161        159       320        28       190       150       158       526  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                    

Benefits and other changes in policy reserves

     19        19       38        23       18       19       18       78  

Acquisition and operating expenses, net of deferrals

     22        20       42        16       17       20       17       70  

Amortization of deferred acquisition costs and intangibles

     11        10       21        11       11       11       10       43  

Interest expense

     5        4       9        5       4       4       5       18  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     57        53       110        55       50       54       50       209  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     104        106       210        (27     140       96       108       317  

Provision (benefit) for income taxes

     29        29       58        (7     37       24       30       84  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     75        77       152        (20     103       72       78       233  

Less: net income (loss) attributable to noncontrolling interests

     35        36       71        (6     46       32       36       108  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS

     40        41       81        (14     57       40       42       125  
 

ADJUSTMENTS TO NET INCOME (LOSS) AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS:

                    

Net investment (gains) losses, net(1)

     —          —         —          78       (17     8       9       78  

(Gains) losses on early extinguishment of debt, net(2)

     1        —         1        —         —         —         —         —    

Taxes on adjustments

     —          —         —          (16     4       (2     (2     (16
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME(3)

   $ 41      $ 41     $ 82      $ 48     $ 44     $ 46     $ 49     $ 187  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

                                                           

SALES:

                  

New Insurance Written (NIW)

                  

Flow

   $ 3,900      $ 2,200     $ 6,100      $ 3,300     $ 4,200     $ 3,700     $ 2,500     $ 13,700  

Bulk

     1,900        700       2,600        900       600       900       900       3,300  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Canada NIW(4)

   $ 5,800      $ 2,900     $ 8,700      $ 4,200     $ 4,800     $ 4,600     $ 3,400     $ 17,000  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                        

 

(1)  Net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests as reconciled below:

   

Net investment (gains) losses, gross

   $ (1    $ 1     $ —      $ 136     $ (29   $ 15     $ 15     $ 137  

Adjustment for net investment gains (losses) attributable to noncontrolling interests

     1        (1     —          (58     12       (7     (6     (59
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment (gains) losses, net

   $ —        $ —       $ —        $ 78     $ (17   $ 8     $ 9     $ 78  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(2) 

For the three months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $1 million.

(3) 

Adjusted operating income for the Canadian platform adjusted for foreign exchange as compared to the prior year period was $43 million and $87 million for the three and six months ended June 30, 2019, respectively.

(4) 

New insurance written for the Canadian platform adjusted for foreign exchange as compared to the prior year period was $6,100 million and $9,100 million for the three and six months ended June 30, 2019, respectively.

 

24


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Canada Mortgage Insurance Segment

(amounts in millions)

 

     2019     2018  
     2Q      1Q       Total       4Q     3Q     2Q     1Q     Total  

Net Premiums Written

   $ 145      $ 79     $ 224     $ 119     $ 150     $ 133     $ 92     $ 494  

Loss Ratio(1)

     15      15     15     18     14     15     13     15

Expense Ratio (Net Earned Premiums)(2)

     26      24     25     21     22     23     20     22

Expense Ratio (Net Premiums Written)(3)

     22      39     28     23     19     23     30     23
 

Primary Insurance In-Force(4)

   $ 395,700      $ 382,200       $ 372,000     $ 389,400     $ 380,200     $ 384,600    

Primary Risk In-Force(5)

                   

Flow

   $ 94,900      $ 91,600       $ 89,000     $ 92,800     $ 89,800     $ 90,500    

Bulk

     43,600        42,200         41,200       43,500       43,300       44,100    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total

   $ 138,500      $ 133,800       $ 130,200     $ 136,300     $ 133,100     $ 134,600    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
                       
     June 30, 2019     March 31, 2019              

Risk In-Force by Loan-To-Value Ratio(6)

   Primary      Flow     Bulk     Primary     Flow     Bulk              

95.01% and above

   $ 47,842      $ 47,842     $ —       $ 45,964     $ 45,964     $ —        

90.01% to 95.00%

     27,898        27,898       —         26,987       26,987       —        

80.01% to 90.00%

     15,974        15,974       —         15,532       15,532       —        

80.00% and below

     46,774        3,152       43,622       45,303       3,075       42,228      
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

   $ 138,488      $ 94,866     $ 43,622     $ 133,786     $ 91,558     $ 42,228      
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

The loss and expense ratios included above were calculated using whole dollars and may be different than the ratios calculated using the rounded numbers included herein.

 

(1) 

The ratio of benefits and other changes in policy reserves to net earned premiums.

(2) 

The ratio of an insurer’s general expenses to net earned premiums. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(3) 

The ratio of an insurer’s general expenses to net premiums written. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(4) 

As part of an ongoing effort to improve the estimate of outstanding insurance exposure, the company is receiving updated outstanding balances in Canada from almost all of its customers. As a result, the company estimates that the outstanding balance of insured mortgages was approximately $157.0 billion, $154.0 billion, $152.0 billion, $163.0 billion, $162.0 billion and $168.0 billion as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively. This is based on the extrapolation of the amounts reported by lenders to the entire insured population. The current period reported amount is an estimate due to the timing of information received by the company’s customers.

(5) 

The business currently provides 100% coverage on the majority of the loans the company insures. For the purpose of representing the risk in-force, Canada has computed an “effective risk in-force” amount which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a factor that represents the highest expected average per-claim payment for any one underwriting year over the life of the business. This factor was 35% for all periods presented.

(6) 

Loan amount in loan-to-value ratio calculation includes capitalized premiums, where applicable.

 

25


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Canada Mortgage Insurance Segment

(dollar amounts in millions)

 

Primary Insurance

   June 30, 2019     March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018        

Insured loans in-force(1),(2)

     2,174,084       2,152,048       2,143,191       2,133,618       2,137,221    

Insured delinquent loans

     1,701       1,760       1,684       1,695       1,742    

Insured delinquency rate(2),(3)

     0.08     0.08     0.08     0.08     0.08  

Flow loans in-force(1)

     1,523,128       1,507,283       1,499,304       1,486,859       1,470,826    

Flow delinquent loans

     1,340       1,384       1,310       1,327       1,406    

Flow delinquency rate(3)

     0.09     0.09     0.09     0.09     0.10  

Bulk loans in-force(1)

     650,956       644,765       643,887       646,759       666,395    

Bulk delinquent loans

     361       376       374       368       336    

Bulk delinquency rate(3)

     0.06     0.06     0.06     0.06     0.05  

Loss Metrics

   June 30, 2019     March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018        

Beginning Reserves

   $ 88     $ 84     $ 82     $ 83     $ 84    

Paid claims(4)

     (18     (19     (18     (19     (20  

Increase in reserves

     19       21       24       17       21    

Impact of changes in foreign exchange rates

     2       2       (4     1       (2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Ending Reserves

   $ 91     $ 88     $ 84     $ 82     $ 83    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
     June 30, 2019     March 31, 2019     June 30, 2018  

Province and Territory

   % of Primary
Risk In-Force
    Primary
Delinquency Rate
    % of Primary
Risk In-Force
    Primary
Delinquency Rate
    % of Primary
Risk In-Force
    Primary
Delinquency Rate
 

Ontario

     47     0.03     47     0.03     47     0.03

Alberta

     17       0.21     17       0.19     16       0.17

British Columbia

     14       0.04     14       0.04     14       0.04

Quebec

     13       0.07     13       0.09     13       0.10

Saskatchewan

     3       0.27     3       0.29     3       0.28

Nova Scotia

     2       0.13     2       0.13     2       0.15

Manitoba

     2       0.09     2       0.11     2       0.10

New Brunswick

     1       0.08     1       0.13     1       0.15

All Other

     1       0.20     1       0.20     2       0.20
  

 

 

     

 

 

     

 

 

   

Total

     100     0.08     100     0.08     100     0.08
  

 

 

     

 

 

     

 

 

   

By Policy Year

                                    

2010 and prior

     39     0.04     39     0.04     41     0.05

2011

     5       0.14     5       0.15     5       0.13

2012

     6       0.16     6       0.17     6       0.18

2013

     6       0.16     6       0.18     6       0.15

2014

     7       0.17     7       0.17     8       0.16

2015

     10       0.11     11       0.12     11       0.11

2016

     13       0.08     13       0.08     13       0.08

2017

     7       0.09     7       0.08     7       0.04

2018

     5       0.03     5       0.02     3       —  

2019

     2       —       1       —       —         —  
  

 

 

     

 

 

     

 

 

   

Total

     100     0.08     100     0.08     100     0.08
  

 

 

     

 

 

     

 

 

   

 

(1) 

Insured loans in-force represent the original number of loans insured for which the coverage term has not expired, and for which no policy level cancellation or termination has been received.

(2) 

As part of an ongoing effort to improve the estimate of outstanding insurance exposure, the company is receiving updated outstanding loans in-force in Canada from almost all of its customers. As a result, the company estimates that the outstanding loans in-force were 901,000 as of June 30, 2019, 902,000 as of March 31, 2019, 910,000 as of December 31, 2018, 924,000 as of September 30, 2018 and 935,000 as of June 30, 2018. This is based on the extrapolation of the amounts reported by lenders to the entire insured population. The corresponding insured delinquency rate was 0.19% as of June 30, 2019, 0.20% as of March 31, 2019, 0.18% as of December 31, 2018 and September 30, 2018 and 0.19% as of June 30, 2018. The current period reported amounts are estimates due to the timing of information received by the company’s customers.

(3) 

Delinquency rates are based on insured loans in-force.

(4) 

Paid claims exclude adjustments for expected recoveries related to loss reserves and prior paid claims.

 

26


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Canada Mortgage Insurance Segment

(Canadian dollar amounts in millions)

 

     2019      2018  
     2Q      1Q     Total      4Q     3Q     2Q     1Q     Total  

Paid claims(1)

                    

Flow

   $ 22      $ 26     $ 48      $ 18     $ 23     $ 26     $ 23     $ 90  

Bulk

     1        1       2        2       2       1       2       7  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Paid Claims

   $ 23      $ 27     $ 50      $ 20     $ 25     $ 27     $ 25     $ 97  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   

Average Paid Claim (in thousands)

   $ 67.0      $ 81.2        $ 58.1     $ 67.4     $ 79.4     $ 68.5    
   

Average Reserve Per Delinquency (in thousands)

   $ 69.9      $ 66.4        $ 68.0     $ 62.6     $ 62.5     $ 62.7    
   
Loss Metrics                                                   

Beginning Reserves

   $ 117      $ 115     $ 115      $ 106     $ 109     $ 108     $ 109     $ 109  

Paid claims(1)

     (23      (27     (50      (20     (25     (27     (25     (97

Increase in reserves

     25        29       54        29       22       28       24       103  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Reserves

   $ 119      $ 117     $ 119      $ 115     $ 106     $ 109     $ 108     $ 115  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loan Amount(2)

                    

Over $550K

     9      9        9     9     9     8  

$400K to $550K

     15        15          15       15       15       15    

$250K to $400K

     35        35          35       34       34       34    

$100K to $250K

     38        38          38       39       39       39    

$100K or Less

     3        3          3       3       3       4    
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   

Total

     100      100        100     100     100     100  
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   
   

Average Primary Loan Size (in thousands)

   $ 238      $ 237        $ 237     $ 236     $ 234     $ 233    

All amounts presented in Canadian dollars.

 

(1) 

Paid claims exclude adjustments for expected recoveries related to loss reserves and prior paid claims.

(2) 

The percentages in this table are based on the amount of primary insurance in-force in each loan band as a percentage of total insurance in-force.

 

27


Table of Contents

 

Australia Mortgage Insurance Segment

 

 

 

28


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income and Sales—Australia Mortgage Insurance Segment

(amounts in millions)

 

     2019      2018  
     2Q      1Q      Total      4Q      3Q      2Q      1Q      Total  

REVENUES:

                         

Premiums

   $ 80      $ 83      $ 163      $ 82      $ 87      $ 106      $ 98      $ 373  

Net investment income

     15        16        31        15        17        18        17        67  

Net investment gains (losses)

     1        12        13        (19      1        12        (9      (15

Policy fees and other income

     —          (1      (1      1        —          —          1        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     96        110        206        79        105        136        107        427  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BENEFITS AND EXPENSES:

                         

Benefits and other changes in policy reserves

     26        28        54        24        27        29        30        110  

Acquisition and operating expenses, net of deferrals

     17        17        34        16        15        17        17        65  

Amortization of deferred acquisition costs and intangibles

     9        9        18        10        10        12        11        43  

Interest expense

     2        2        4        2        3        2        2        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total benefits and expenses

     54        56        110        52        55        60        60        227  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

INCOME BEFORE INCOME TAXES

     42        54        96        27        50        76        47        200  

Provision for income taxes

     13        16        29        8        15        23        14        60  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME

     29        38        67        19        35        53        33        140  

Less: net income attributable to noncontrolling interests

     15        20        35        8        18        27        17        70  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS

     14        18        32        11        17        26        16        70  
 

ADJUSTMENTS TO NET INCOME AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS:

                         

Net investment (gains) losses, net(1)

     (1      (6      (7      10        —          (6      4        8  

Taxes on adjustments

     —          2        2        (3      —          2        (1      (2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ADJUSTED OPERATING INCOME(2)

   $ 13      $ 14      $ 27      $ 18      $ 17      $ 22      $ 19      $ 76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  

 

 

                                                                

SALES:

                       

New Insurance Written (NIW)

                       

Flow

   $ 3,700      $ 3,400      $ 7,100      $ 4,000      $ 3,800      $ 3,700      $ 3,400      $ 14,900  

Bulk

     1,200        500        1,700        800        —          900        —          1,700  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Australia NIW(3),(4)

   $ 4,900      $ 3,900      $ 8,800      $ 4,800      $ 3,800      $ 4,600      $ 3,400      $ 16,600  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  

 

 

                                                                

 

(1)  Net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests as reconciled below:

 

   

Net investment (gains) losses, gross

   $ (1    $ (12    $ (13    $ 19      $ (1    $ (12    $ 9      $ 15  

Adjustment for net investment gains (losses) attributable to noncontrolling interests

     —          6        6        (9      1        6        (5      (7
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment (gains) losses, net

   $ (1    $ (6    $ (7    $ 10      $ —        $ (6    $ 4      $ 8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(2) 

Adjusted operating income for the Australian platform adjusted for foreign exchange as compared to the prior year period was $14 million and $30 million for the three and six months ended June 30, 2019, respectively.

(3) 

New insurance written for the Australian platform adjusted for foreign exchange as compared to the prior year period was $5,400 million and $9,600 million for the three and six months ended June 30, 2019, respectively.

(4) 

The business currently has structured insurance transactions with three lenders where it is in a secondary loss position. The new insurance written associated with these arrangements is excluded from these metrics.

 

29


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Australia Mortgage Insurance Segment

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

Net Premiums Written

   $ 58      $ 52     $ 110     $ 70     $ 56     $ 56     $ 60     $ 242  

Loss Ratio(1)

     34      34     34     29     31     28     30     30

Expense Ratio (Net Earned Premiums)(2)

     33      31     32     32     29     27     29     29

Expense Ratio (Net Premiums Written)(3)

     44      50     47     38     46     50     47     45
 

Primary Insurance In-Force(4)

   $ 215,600      $ 219,200       $ 218,200     $ 222,500     $ 229,400     $ 246,300    

Primary Risk In-Force(4),(5)

                   

Flow

   $ 69,100      $ 70,600       $ 70,300     $ 71,900     $ 74,000     $ 79,600    

Bulk

     6,000        5,700         5,700       5,600       5,900       6,100    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

Total

   $ 75,100      $ 76,300       $ 76,000     $ 77,500     $ 79,900     $ 85,700    
  

 

 

    

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   
                       
     June 30, 2019     March 31, 2019              

Risk In-Force by Loan-To-Value Ratio(4),(6)

   Primary      Flow     Bulk     Primary     Flow     Bulk              

95.01% and above

   $ 10,624      $ 10,624     $ —       $ 11,045     $ 11,045     $ —                     

90.01% to 95.00%

     20,938        20,932       6       21,247       21,242       5      

80.01% to 90.00%

     22,722        22,656       66       22,845       22,783       62      

80.00% and below

     20,809        14,924       5,885       21,170       15,511       5,659      
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total

   $ 75,093      $ 69,136     $ 5,957     $ 76,307     $ 70,581     $ 5,726      
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

The loss and expense ratios included above were calculated using whole dollars and may be different than the ratios calculated using the rounded numbers included herein.

 

(1) 

The ratio of benefits and other changes in policy reserves to net earned premiums.

(2) 

The ratio of an insurer’s general expenses to net earned premiums. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(3) 

The ratio of an insurer’s general expenses to net premiums written. In the business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.

(4) 

The business currently has structured insurance transactions with three lenders where it is in a secondary loss position. The insurance in-force and risk in-force associated with these arrangements are excluded from these metrics. The risk in-force on these transactions was approximately $157 million, $157 million, $154 million, $158 million, $159 million and $160 million as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively.

(5) 

The business currently provides 100% coverage on the majority of the loans the company insures. For the purpose of representing the risk in-force, Australia has computed an “effective risk in-force” amount which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a factor that represents the highest expected average per-claim payment for any one underwriting year over the life of the business. This factor was 35% for all periods presented. Australia also has certain risk share arrangements where it provides pro-rata coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements, the applicable pro-rata coverage amount provided is used when applying the factor.

(6) 

Loan amount in loan-to-value ratio calculation includes capitalized premiums, where applicable.

 

30


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Australia Mortgage Insurance Segment

(dollar amounts in millions)

 

Primary Insurance(1)

   June 30, 2019     March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018        

Insured loans in-force

     1,308,811       1,323,172       1,332,906       1,335,133       1,354,614  

Insured delinquent loans

     7,891       7,490       7,145       7,350       7,306  

Insured delinquency rate

     0.60     0.57     0.54     0.55     0.54

Flow loans in-force

     1,200,603       1,217,050       1,226,219       1,229,558       1,247,229  

Flow delinquent loans

     7,642       7,265       6,931       7,133       7,076  

Flow delinquency rate

     0.64     0.60     0.57     0.58     0.57

Bulk loans in-force

     108,208       106,122       106,687       105,575       107,385  

Bulk delinquent loans

     249       225       214       217       230  

Bulk delinquency rate

     0.23     0.21     0.20     0.21 %     0.21

Loss Metrics

   June 30, 2019     March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018  

Beginning Reserves

   $ 204     $ 196     $ 201     $ 206     $ 211  

Paid claims(2)

     (20     (22     (25     (27     (25

Increase in reserves

     27       28       25       26       29  

Impact of changes in foreign exchange rates

     (2     2       (5     (4     (9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Reserves

   $ 209     $ 204     $ 196     $ 201     $ 206  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     June 30, 2019     March 31, 2019     June 30, 2018  

State and Territory(1)

   % of Primary
Risk In-Force
    Primary
Delinquency Rate
    % of Primary
Risk In-Force
    Primary
Delinquency Rate
    % of Primary
Risk In-Force
    Primary
Delinquency Rate
 

New South Wales

     27     0.45     28     0.41     28     0.37

Queensland

     23       0.81     23       0.74     23       0.73

Victoria

     23       0.45     22       0.42     23       0.42

Western Australia

     13       1.10     13       1.05     12       0.99

South Australia

     6       0.68     6       0.69     6       0.67

Australian Capital Territory

     3       0.25     3       0.19     3       0.18

Tasmania

     2       0.31     2       0.28     2       0.34

New Zealand

     2       0.02     2       0.04     2       0.06

Northern Territory

     1       0.83     1       0.76     1       0.61
  

 

 

     

 

 

     

 

 

   

Total

     100     0.60     100     0.57     100     0.54
  

 

 

     

 

 

     

 

 

   

By Policy Year(1)

                                    

2010 and prior

     44     0.52     45     0.49     47     0.49

2011

     4       0.80     4       0.78     5       0.75

2012

     6       1.11     6       1.05     6       0.92

2013

     7       1.10     7       0.98     7       0.87

2014

     8       0.97     8       0.90     9       0.79

2015

     7       0.82     8       0.74     8       0.59

2016

     7       0.60     7       0.54     8       0.35

2017

     7       0.36     7       0.28     7       0.11

2018

     7       0.15     7       0.07     3       —  

2019

     3       0.01     1       —       —         —  
  

 

 

     

 

 

     

 

 

   

Total

     100     0.60     100     0.57     100     0.54
  

 

 

     

 

 

     

 

 

   

 

(1) 

The business currently has structured insurance transactions with three lenders where it is in a secondary loss position. The loans in-force, including delinquent loans, and risk in-force associated with these arrangements are excluded from these metrics.

(2) 

Paid claims exclude adjustments for expected recoveries related to loss reserves and prior paid claims.

 

31


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Selected Key Performance Measures—Australia Mortgage Insurance Segment

(Australian dollar amounts in millions)

 

     2019      2018  
     2Q      1Q     Total      4Q     3Q     2Q     1Q     Total  

Paid Claims(1)

                    

Flow

   $ 28      $ 30     $ 58      $ 34     $ 38     $ 33     $ 44     $ 149  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Paid Claims

   $ 28      $ 30     $ 58      $ 34     $ 38     $ 33     $ 44     $ 149  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

Average Paid Claim (in thousands)

   $ 94.1      $ 94.2        $ 104.2     $ 117.2     $ 110.1     $ 119.5    
 

Average Reserve Per Delinquency (in thousands)

   $ 37.8      $ 38.4        $ 39.0     $ 37.9     $ 38.2     $ 39.4    
 

Loss Metrics

                    

Beginning Reserves

   $ 288      $ 279     $ 279      $ 278     $ 279     $ 274     $ 280     $ 280  

Paid claims(1)

     (28      (30     (58      (34     (38     (33     (44     (149

Increase in reserves

     38        39       77        35       37       38       38       148  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending Reserves

   $ 298      $ 288     $ 298      $ 279     $ 278     $ 279     $ 274     $ 279  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loan Amount(2),(3)

                    

Over $550K

     19      18        18     18     17     17  

$400K to $550K

     21        21          21       21       21       20    

$250K to $400K

     33        34          34       34       34       35    

$100K to $250K

     22        22          22       22       23       23    

$100K or Less

     5        5          5       5       5       5    
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   

Total

     100      100        100     100     100     100  
  

 

 

    

 

 

      

 

 

   

 

 

   

 

 

   

 

 

   
 

Average Primary Loan Size (in thousands)(3)

   $ 235      $ 233        $ 232     $ 231     $ 229     $ 228    

All amounts presented in Australian dollars.

 

(1) 

Paid claims exclude adjustments for expected recoveries related to loss reserves and prior paid claims.

(2) 

The percentages in this table are based on the amount of primary insurance in-force in each loan band as a percentage of total insurance in-force.

(3) 

The business currently has structured insurance transactions with three lenders where it is in a secondary loss position. The loans in-force associated with these arrangements are excluded from these metrics.

 

32


Table of Contents

 

U.S. Life Insurance Segment

 

 

 

33


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income (Loss)—U.S. Life Insurance Segment

(amounts in millions)

 

     2019     2018  
     2Q      1Q      Total     4Q     3Q     2Q     1Q     Total  

REVENUES:

                    

Premiums

   $ 713      $ 709      $ 1,422     $ 716     $ 717     $ 712     $ 722     $ 2,867  

Net investment income

     724        701        1,425       690       696       707       688       2,781  

Net investment gains (losses)

     (36      84        48       38       (7     (10     8       29  

Policy fees and other income

     187        151        338       154       155       169       163       641  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,588        1,645        3,233       1,598       1,561       1,578       1,581       6,318  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                    

Benefits and other changes in policy reserves

     1,211        1,236        2,447       1,767       1,248       1,163       1,238       5,416  

Interest credited

     106        106        212       113       113       116       119       461  

Acquisition and operating expenses, net of deferrals

     142        148        290       153       144       146       141       584  

Amortization of deferred acquisition costs and intangibles

     67        66        133       55       53       78       71       257  

Interest expense

     4        5        9       4       4       4       4       16  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     1,530        1,561        3,091       2,092       1,562       1,507       1,573       6,734  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     58        84        142       (494     (1     71       8       (416

Provision (benefit) for income taxes

     19        24        43       (101     6       21       6       (68
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     39        60        99       (393     (7     50       2       (348
 

ADJUSTMENTS TO NET INCOME (LOSS):

                    

Net investment (gains) losses, net(1)

     35        (86      (51     (41     6       9       (9     (35

Expenses related to restructuring

     (1      4        3       —         —         —         —         —    

Taxes on adjustments

     (7      17        10       9       (2     (2     2       7  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 66      $ (5    $ 61     $ (425   $ (3)     $ 57     $ (5)     $ (376
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                        

 

(1)  Net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves as reconciled below:

   

 

Net investment (gains) losses, gross

   $ 36      $ (84    $ (48   $ (38   $ 7     $ 10     $ (8   $ (29

Adjustment for DAC and other intangible amortization and certain benefit reserves

     (1      (2      (3     (3     (1     (1     (1     (6
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment (gains) losses, net

   $ 35      $ (86    $ (51   $ (41   $ 6     $ 9     $ (9   $ (35
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

34


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income (Loss)—U.S. Life Insurance Segment—Long-Term Care Insurance

(amounts in millions)

 

     2019     2018  
     2Q      1Q      Total     4Q     3Q     2Q     1Q     Total  

REVENUES:

                    

Premiums

   $ 640      $ 628      $ 1,268     $ 650     $ 648     $ 632     $ 631     $ 2,561  

Net investment income

     428        406        834       398       397       399       382       1,576  

Net investment gains (losses)

     (15      80        65       46       4       3       6       59  

Policy fees and other income

     2        —          2       —         (1     1       1       1  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     1,055        1,114        2,169       1,094       1,048       1,035       1,020       4,197  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                    

Benefits and other changes in policy reserves

     896        927        1,823       1,311       944       874       928       4,057  

Interest credited

     —          —          —         —         —         —         —         —    

Acquisition and operating expenses, net of deferrals

     93        101        194       105       99       101       93       398  

Amortization of deferred acquisition costs and intangibles

     26        25        51       25       24       22       27       98  

Interest expense

     —          —          —         —         —         —         —         —    
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     1,015        1,053        2,068       1,441       1,067       997       1,048       4,553  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     40        61        101       (347     (19     38       (28     (356

Provision (benefit) for income taxes

     15        19        34       (69     1       14       (1     (55
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     25        42        67       (278     (20     24       (27     (301
 

ADJUSTMENTS TO NET INCOME (LOSS):

                    

Net investment (gains) losses

     15        (80      (65     (46     (4     (3     (6     (59

Expenses related to restructuring

     (1      2        1       —         —         —         —         —    

Taxes on adjustments

     (2      16        14       10       —         1       1       12  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 37      $ (20    $ 17     $ (314   $ (24   $ 22     $ (32   $ (348
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                        

RATIOS:

                  

Loss Ratio(1)

     74      81      78     138     83     75     84     95

Gross Benefits Ratio(2)

     140      148      144     202     146     138     147     158

 

(1) 

The loss ratio was calculated by dividing benefits and other changes in policy reserves less tabular interest on reserves less loss adjustment expenses by net earned premiums.

(2) 

The gross benefits ratio was calculated by dividing benefits and other changes in policy reserves by net earned premiums.

 

35


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income (Loss)—U.S. Life Insurance Segment—Life Insurance

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

REVENUES:

                   

Premiums

   $ 73      $ 81     $ 154     $ 66     $ 69     $ 80     $ 91     $ 306  

Net investment income

     130        133       263       127       128       125       124       504  

Net investment gains (losses)

     (3      10       7       (5     (4     (2     5       (6

Policy fees and other income

     182        148       330       151       152       164       159       626  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     382        372       754       339       345       367       379       1,430  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                   

Benefits and other changes in policy reserves

     244        242       486       367       239       225       247       1,078  

Interest credited

     58        58       116       61       59       60       61       241  

Acquisition and operating expenses, net of deferrals

     37        34       71       35       33       33       35       136  

Amortization of deferred acquisition costs and intangibles

     28        27       55       14       16       42       29       101  

Interest expense

     4        5       9       4       4       4       4       16  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     371        366       737       481       351       364       376       1,572  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     11        6       17       (142     (6     3       3       (142

Provision (benefit) for income taxes

     3        1       4       (30     (1     1       —         (30
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     8        5       13       (112     (5     2       3       (112
 

ADJUSTMENTS TO NET INCOME (LOSS):

                   

Net investment (gains) losses

     3        (10     (7     5       4       2       (5     6  

Expenses related to restructuring

     —          1       1       —         —         —         —         —    

Taxes on adjustments

     (1      2       1       (1     (1     —         1       (1
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 10      $ (2   $ 8     $ (108   $ (2   $ 4     $ (1   $ (107
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

                                                          

 

36


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income (Loss)—U.S. Life Insurance Segment—Fixed Annuities

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

REVENUES:

                   

Premiums

   $ —        $ —       $ —       $ —       $ —       $ —       $ —       $ —    

Net investment income

     166        162       328       165       171       183       182       701  

Net investment gains (losses)

     (18      (6     (24     (3     (7     (11     (3     (24

Policy fees and other income

     3        3       6       3       4       4       3       14  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     151        159       310       165       168       176       182       691  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BENEFITS AND EXPENSES:

                   

Benefits and other changes in policy reserves

     71        67       138       89       65       64       63       281  

Interest credited

     48        48       96       52       54       56       58       220  

Acquisition and operating expenses, net of deferrals

     12        13       25       13       12       12       13       50  

Amortization of deferred acquisition costs and intangibles

     13        14       27       16       13       14       15       58  

Interest expense

     —          —         —         —         —         —         —         —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total benefits and expenses

         144            142           286           170           144           146           149           609  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     7        17       24       (5     24       30       33       82  

Provision (benefit) for income taxes

     1        4       5       (2     6       6       7       17  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     6        13       19       (3     18       24       26       65  
 

ADJUSTMENTS TO NET INCOME (LOSS):

                   

Net investment (gains) losses, net(1)

     17        4       21       —         6       10       2       18  

Expenses related to restructuring

     —          1       1       —         —         —         —         —    

Taxes on adjustments

     (4      (1     (5     —         (1     (3     —         (4
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 19      $ 17     $ 36     $ (3   $ 23     $ 31     $ 28     $ 79  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       

 

(1)  Net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves as reconciled below:

   

 

Net investment (gains) losses, gross

   $ 18      $ 6     $ 24     $ 3     $ 7     $ 11     $ 3     $ 24  

Adjustment for DAC and other intangible amortization and certain benefit reserves

     (1      (2     (3     (3     (1     (1     (1     (6
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment (gains) losses, net

   $ 17      $ 4     $ 21     $ —       $ 6     $ 10     $ 2     $ 18  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

37


Table of Contents

 

Runoff Segment

 

 

 

38


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Income (Loss)—Runoff Segment

(amounts in millions)

 

     2019      2018  
     2Q      1Q      Total      4Q      3Q      2Q      1Q      Total  

REVENUES:

                         

Net investment income

   $ 47      $ 47      $ 94      $ 45      $ 44      $ 43      $ 42      $ 174  

Net investment gains (losses)

     (4      —          (4      (15      (3      (1      (14      (33

Policy fees and other income

     35        35        70        37        38        38        40        153  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     78        82        160        67        79        80        68        294  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BENEFITS AND EXPENSES:

                         

Benefits and other changes in policy reserves

     13        1        14        17        7        7        8        39  

Interest credited

     40        41        81        39        38        36        37        150  

Acquisition and operating expenses, net of deferrals

     13        13        26        14        14        14        15        57  

Amortization of deferred acquisition costs and intangibles

     4        2        6        13        5        8        7        33  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total benefits and expenses

     70        57        127        83        64        65        67        279  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

     8        25        33        (16      15        15        1        15  

Provision (benefit) for income taxes

     1        5        6        (3      2        3        —          2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME (LOSS)

     7        20        27        (13      13        12        1        13  
 

ADJUSTMENTS TO NET INCOME (LOSS):

                         

Net investment (gains) losses, net(1)

     2        —          2        13        1        1        12        27  

Taxes on adjustments

     —          —          —          (2      —          —          (3      (5
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ADJUSTED OPERATING INCOME (LOSS)

   $ 9      $ 20      $ 29      $ (2    $ 14      $ 13      $ 10      $ 35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  

 

 

                                                                

 

(1)  Net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves as reconciled below:

   

Net investment (gains) losses, gross

   $ 4      $ —        $ 4      $ 15      $ 3      $ 1      $ 14      $ 33  

Adjustment for DAC and other intangible amortization and certain benefit reserves

     (2      —          (2      (2      (2      —          (2      (6
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net investment (gains) losses, net

   $ 2      $ —        $ 2      $ 13      $ 1      $ 1      $ 12      $ 27  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

39


Table of Contents

 

Corporate and Other

 

 

40


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Adjusted Operating Loss—Corporate and Other(1)

(amounts in millions)

 

     2019      2018  
     2Q      1Q      Total      4Q      3Q      2Q      1Q      Total  

REVENUES:

                         

Premiums

   $ 2      $ 2      $ 4      $ 2      $ 1      $ 3      $ 2      $ 8  

Net investment income

     3        3        6        3        1        3        2        9  

Net investment gains (losses)

     (7      (21      (28      18        (7      —          (1      10  

Policy fees and other income

     —          1        1        (1      (1      1        (2      (3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Total revenues    (2)      (15)      (17)      22      (6)      7      1      24  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BENEFITS AND EXPENSES:

                         

Benefits and other changes in policy reserves

     1        1        2        2        1        1        1        5  

Acquisition and operating expenses, net of deferrals

     9        7        16        18        12        11        11        52  

Amortization of deferred acquisition costs and intangibles

     —          —          —          —          —          —          1        1  

Interest expense

     62        61        123        63        61        67        65        256  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Total benefits and expenses    72      69      141      83      74      79      78      314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

LOSS BEFORE INCOME TAXES

     (74      (84      (158      (61      (80      (72      (77      (290

Provision (benefit) for income taxes

     5        5        10        (17      (28      3        (17      (59
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NET LOSS

     (79      (89      (168      (44      (52      (75      (60      (231
 

ADJUSTMENTS TO NET LOSS:

                         

Net investment (gains) losses

     7        21        28        (18      7        —          1        (10

Expenses related to restructuring

     1        —          1        —          2        —          —          2  

Fees associated with bond consent solicitation

     —          —          —          6        —          —          —          6  

Taxes on adjustments

     (1      (5      (6      2        (2      —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ADJUSTED OPERATING LOSS

   $ (72    $ (73    $ (145    $ (54    $ (45    $ (75    $ (59    $ (233
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                             

 

(1) 

Includes inter-segment eliminations and the results of other businesses that are managed outside the operating segments, including certain smaller international mortgage insurance businesses.

 

41


Table of Contents

 

Additional Financial Data

 

 

 

42


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Investments Summary

(amounts in millions)

 

     June 30, 2019      March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018  
     Carrying
Amount
     % of
Total
     Carrying
Amount
     % of
Total
    Carrying
Amount
    % of
Total
    Carrying
Amount
     % of
Total
    Carrying
Amount
     % of
Total
 

Composition of Investment Portfolio

                                                                 

Fixed maturity securities:

                           

Investment grade:

                           

Public fixed maturity securities

   $ 35,114        45    $ 33,634        45   $ 32,630       45   $ 32,496        45   $ 32,813        45

Private fixed maturity securities

     14,501        19        13,838        19       13,000       18       12,628        17       12,362        17  

Residential mortgage-backed securities(1)

     2,697        4        2,908        4       2,998       4       3,178        5       3,522        5  

Commercial mortgage-backed securities

     2,970        4        2,943        4       3,007       4       3,146        4       3,340        5  

Other asset-backed securities

     3,698        5        3,405        5       3,414       5       3,044        4       2,950        4  

State and political subdivisions

     2,636        3        2,546        3       2,552       4       2,795        4       2,855        4  

Non-investment grade fixed maturity securities

     2,158        3        2,086        3       2,060       3       2,117        3       2,190        3  

Equity securities:

                           

Common stocks and mutual funds

     111        —          103        —         141       —         171        —         164        —    

Preferred stocks

     533        1        532        1       514       1       612        1       594        1  

Commercial mortgage loans

     6,963        9        6,929        9       6,687       9       6,568        9       6,480        9  

Restricted commercial mortgage loans related to a securitization entity

     56        —          59        —         62       —         87        —         90        —    

Policy loans

     2,076        3        1,994        3       1,861       3       1,859        3       1,872        3  

Cash, cash equivalents, restricted cash and short-term investments

     2,211        3        2,360        3       2,407       3       2,864        4       2,951        4  

Securities lending

     113        —          106        —         103       —         166        —         211        —    

Other invested assets:

 

Limited partnerships

     512        1        462        1       409       1       372        1       335        —    
 

Derivatives:(2)

                           
 

Long-term care (LTC) forward starting swap—cash flow

     144        —          59        —         42       —         36        —         49        —    
 

Other cash flow

     5        —          3        —         6       —         2        —         2        —    
 

Equity index options—non-qualified

     65        —          60        —         39       —         80        —         70        —    
 

Other non-qualified

     66        —          65        —         91       —         127        —         109        —    
 

Other

     357        —          314        —         268       —         212        —         166        —    
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total invested assets and cash

   $ 76,986        100    $ 74,406        100   $ 72,291       100   $ 72,560        100   $ 73,125        100
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Public Fixed Maturity Securities—Credit Quality:

                                                                 

NRSRO(3) Designation

                                                                     

AAA

     $ 10,856        24    $ 10,778        25   $ 10,799       26   $ 11,642        28   $ 12,269        29

AA

       4,202        10        4,084        10       4,117       10       4,358        10       4,428        10  

A

       12,555        29        12,301        29       12,005       29       11,984        28       12,174        28  

BBB

       15,171        34        14,240        33       13,669       32       12,994        31       12,929        30  

BB

       1,128        3        1,081        3       1,149       3       1,156        3       1,221        3  

B

       76        —          76        —         93       —         130        —         123        —    

CCC and lower

       25        —          25        —         25       —         27        —         31        —    
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total public fixed maturity securities

   $ 44,013        100    $ 42,585        100   $ 41,857       100   $ 42,291        100   $ 43,175        100
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Private Fixed Maturity Securities—Credit Quality:

                                                                 

NRSRO(3) Designation

                                                                     

AAA

     $ 2,726        14    $ 2,545        14   $ 2,540       14   $ 2,109        12   $ 2,045        12

AA

       2,507        13        2,364        13       2,198       13       2,224        13       2,156        13  

A

       5,496        28        5,228        28       4,866       27       4,695        27       4,750        28  

BBB

       8,103        41        7,734        41       7,407       42       7,281        43       7,091        42  

BB

       869        4        843        4       737       4       724        4       733        4  

B

       58        —          59        —         54       —         78        1       80        1  

CCC and lower

       2        —          2        —         2       —         2        —         2        —    
    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total private fixed maturity securities

   $ 19,761        100    $ 18,775        100   $ 17,804       100   $ 17,113        100   $ 16,857        100
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
  

 

 

    

 

 

                                                                     

 

(1) 

The company does not have any material exposure to residential mortgage-backed securities collateralized debt obligations (CDOs).

(2) 

Certain derivative balances have been reclassified as of June 30, 2018 to conform to the current period presentation.

(3) 

Nationally Recognized Statistical Rating Organizations.

 

43


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Fixed Maturity Securities Summary

(amounts in millions)

 

    June 30, 2019     March 31, 2019     December 31, 2018     September 30, 2018     June 30, 2018  
    Fair Value     % of
Total
    Fair Value     % of
Total
    Fair Value     % of
Total
    Fair Value     % of
Total
    Fair Value     % of
Total
 

Fixed Maturity Securities—Security Sector:

                     
   

U.S. government, agencies and government-sponsored enterprises

  $ 4,987       8 %      $ 4,731       8   $ 4,631       8   $ 5,181       9   $ 5,353       9

State and political subdivisions

    2,636       4       2,546       4       2,552       4       2,795       5       2,855       5  

Foreign government

    2,649       4       2,518       4       2,393       4       2,289       4       2,380       4  

U.S. corporate

    31,401       49       29,941       49       28,762       48       27,538       46       27,569       46  

Foreign corporate

    12,647       20       12,286       20       11,837       20       12,173       20       12,002       20  

Residential mortgage-backed securities

    2,738       4       2,950       5       3,044       5       3,222       6       3,567       6  

Commercial mortgage-backed securities

    2,989       5       2,962       5       3,016       5       3,156       5       3,349       5  

Other asset-backed securities

    3,727       6       3,426       5       3,426       6       3,050       5       2,957       5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

  $ 63,774       100   $ 61,360       100   $ 59,661       100   $ 59,404       100   $ 60,032       100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate Bond Holdings—Industry Sector:

                     
   

Investment Grade:

                     

Finance and insurance

  $ 10,009       23   $ 9,605       22   $ 9,062       22   $ 8,712       22   $ 8,616       22

Utilities

    5,944       13       5,718       14       5,665       14       5,674       14       5,785       15  

Energy

    3,898       9       3,757       9       3,449       8       3,358       8       3,310       8  

Consumer—non-cyclical

    6,107       14       5,798       14       5,595       14       5,232       13       5,042       13  

Consumer—cyclical

    2,055       5       1,950       5       1,900       5       1,887       5       1,875       5  

Capital goods

    3,158       7       3,005       7       2,876       7       2,788       7       2,815       7  

Industrial

    2,142       5       2,029       5       1,957       5       1,899       5       2,028       5  

Technology and communications

    3,964       9       3,720       9       3,582       9       3,424       9       3,346       8  

Transportation

    2,244       5       2,164       5       2,017       5       1,945       5       1,973       5  

Other

    2,571       6       2,602       6       2,625       6       2,879       7       2,836       7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    42,092       96       40,348       96       38,728       95       37,798       95       37,626       95  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   

Non-Investment Grade:

                     

Finance and insurance

    216       1       200       —         183       —         177       —         196       —    

Utilities

    100       —         94       —         51       —         57       —         56       —    

Energy

    331       1       308       1       339       1       357       1       359       1  

Consumer—non-cyclical

    155       —         168       1       192       1       193       1       201       1  

Consumer—cyclical

    243       1       237       1       217       1       220       1       220       1  

Capital goods

    157       —         146       —         130       —         154       —         157       —    

Industrial

    211       —         193       —         226       1       219       1       232       1  

Technology and communications

    465       1       452       1       438       1       448       1       442       1  

Transportation

    8       —         13       —         23       —         13       —         6       —    

Other

    70       —         68       —         72       —         75       —         76       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    1,956       4       1,879       4       1,871       5       1,913       5       1,945       5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 44,048       100   $ 42,227       100   $ 40,599       100   $ 39,711       100   $ 39,571       100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed Maturity Securities—Contractual Maturity Dates:

                     
   

Due in one year or less

  $ 1,973       3   $ 2,021       3   $ 1,874       3   $ 1,719       3   $ 1,701       3

Due after one year through five years

    11,602       18       11,105       18       10,952       18       10,987       18       11,149       19  

Due after five years through ten years

    13,197       21       12,770       21       12,463       21       12,531       21       12,601       21  

Due after ten years

    27,548       43       26,126       43       24,886       42       24,739       42       24,708       41  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    54,320       85       52,022       85       50,175       84       49,976       84       50,159       84  

Mortgage and asset-backed securities

    9,454       15       9,338       15       9,486       16       9,428       16       9,873       16  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturity securities

  $ 63,774       100   $ 61,360       100   $ 59,661       100   $ 59,404       100   $ 60,032       100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                               

 

44


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

General Account U.S. GAAP Net Investment Income Yields

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

U.S. GAAP Net Investment Income

                   

Fixed maturity securities—taxable

   $ 665      $ 643     $ 1,308     $ 648     $ 643     $ 651     $ 635     $ 2,577  

Fixed maturity securities—non-taxable

     2        2       4       2       3       3       3       11  

Commercial mortgage loans

     84        81       165       80       81       77       82       320  

Restricted commercial mortgage loans related to a securitization entity

     1        1       2       2       1       2       2       7  

Equity securities

     10        9       19       9       11       10       10       40  

Other invested assets

     47        44       91       49       41       42       37       169  

Limited partnerships

     12        15       27       (4     3       11       2       12  

Policy loans

     45        46       91       44       41       41       43       169  

Cash, cash equivalents, restricted cash and short-term investments

     11        12       23       12       13       14       12       51  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross investment income before expenses and fees

     877        853       1,730       842       837       851       826       3,356  

Expenses and fees

     (25      (24     (49     (27     (22     (23     (22     (94
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

   $ 852      $ 829     $ 1,681     $ 815     $ 815     $ 828     $ 804     $ 3,262  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Annualized Yields

                   

Fixed maturity securities—taxable

     4.6      4.5     4.5     4.5     4.5     4.5     4.4     4.5

Fixed maturity securities—non-taxable

     6.1      6.1     6.1     3.7     3.9     3.8     3.7     4.0

Commercial mortgage loans

     4.8      4.8     4.8     4.8     5.0     4.8     5.2     4.9

Restricted commercial mortgage loans related to a securitization entity

     7.0      6.7     6.8     10.8     4.5     8.4     7.8     7.9

Equity securities

     6.3      5.6     5.9     5.0     5.7     5.1     5.1     5.3

Other invested assets(1)

     56.1      65.7     61.1     99.0     107.9     150.0     129.8     111.9

Limited partnerships(2)

     9.9      13.8     11.7     (4.1 )%      3.4     13.8     2.9     3.6

Policy loans

     8.8      9.5     9.2     9.5     8.8     9.0     9.6     9.2

Cash, cash equivalents, restricted cash and short-term investments

     1.9      2.0     2.0     1.8     1.8     1.7     1.3     1.6
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross investment income before expenses and fees

     5.0      4.8     4.9     4.8     4.8     4.8     4.8     4.8

Expenses and fees

     (0.2 )%       (0.1 )%      (0.1 )%      (0.2 )%      (0.2 )%      (0.1 )%      (0.2 )%      (0.2 )% 
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income

     4.8      4.7     4.8     4.6     4.6     4.7     4.6     4.6
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  

 

 

                                                          

Yields are based on net investment income as reported under U.S. GAAP and are consistent with how the company measures its investment performance for management purposes. Yields are annualized, for interim periods, and are calculated as net investment income as a percentage of average quarterly asset carrying values except for fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value adjustments and securities lending activity, which is included in other invested assets and is calculated net of the corresponding securities lending liability. See page 49 herein for average invested assets and cash used in the yield calculation.

 

(1) 

Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation.

(2) 

Limited partnership investments are primarily equity-based and do not have fixed returns by period.

 

45


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Net Investment Gains (Losses), Net—Detail

(amounts in millions)

 

     2019     2018  
     2Q      1Q     Total     4Q     3Q     2Q     1Q     Total  

Net realized gains (losses) on available-for-sale securities:

                   

Fixed maturity securities:

                   

U.S. corporate

   $ (15    $ 30     $ 15     $ 10     $ (6   $ (7   $ (3   $ (6

U.S. government, agencies and government-sponsored enterprises

     2        33       35       54       1       —         —         55  

Foreign corporate

     (1      (1     (2     (6     —         (2     (3     (11

Foreign government

     11        1       12       (4     (2     —         —         (6

State and political subdivisions

     —          —         —         (1     —         —         —         (1

Mortgage-backed securities

     1        (2     (1     (5     (2     2       (2     (7

Asset-backed securities

     —          (1     (1     —         —         (1     —         (1

Foreign exchange

     1        (1     —         2       1       —         (1     2  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net realized gains (losses) on available-for-sale securities

     (1      59       58       50       (8     (8     (9     25  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains (losses) on equity securities sold

     —          3       3       1       —         8       2       11  

Net unrealized gains (losses) on equity securities still held

     (12      8       (4     (83     —         3       (18     (98

Limited partnerships

     (11      15       4       3       3       (2     7       11  

Commercial mortgage loans

     1        (1     —         —         —         —         —         —    

Derivative instruments

     (22      (10     (32     (85     18       (15     (13     (95
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment gains (losses), gross

     (45      74       29       (114     13       (14     (31     (146

Adjustment for DAC and other intangible amortization and certain benefit reserves

     3        2       5       5       3       1       3       12  

Adjustment for net investment (gains) losses attributable to noncontrolling interests

     (1      (5     (6     67       (13     1       11       66  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment gains (losses), net

   $ (43    $ 71     $ 28     $ (42   $ 3     $ (12   $ (17   $ (68
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                       

 

46


Table of Contents

 

Reconciliations of Non-GAAP Measures

 

 

 

 

47


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Reconciliation of Operating ROE

(amounts in millions)

 

Twelve Month Rolling Average ROE

   Twelve months ended  
     June 30,
2019
     March 31,
2019
     December 31,
2018
    September 30,
2018
     June 30,
2018
 

U.S. GAAP Basis ROE

             

Net income available to Genworth Financial, Inc.’s common stockholders for the twelve months ended(1)

   $ 159      $ 181      $ 119     $ 801      $ 762  

Quarterly average Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income(2)

   $ 10,609      $ 10,539      $ 10,500     $ 10,426      $ 10,264  

U.S. GAAP Basis ROE(1)/(2)

     1.5      1.7      1.1     7.7      7.4

Operating ROE

             

Adjusted operating income for the twelve months ended(1)

   $ 179      $ 175      $ 179     $ 796      $ 727  

Quarterly average Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income(2)

   $ 10,609      $ 10,539      $ 10,500     $ 10,426      $ 10,264  

Operating ROE(1)/(2)

     1.7      1.7      1.7     7.6      7.1

Quarterly Average ROE

   Three months ended  
     June 30,
2019
     March 31,
2019
     December 31,
2018
    September 30,
2018
     June 30,
2018
 

U.S. GAAP Basis ROE

             

Net income (loss) available to Genworth Financial, Inc.’s common stockholders for the period ended(3)

   $ 168      $ 174      $ (329   $ 146      $ 190  

Quarterly average Genworth Financial, Inc.’s stockholders’ equity for the period, excluding accumulated other comprehensive income(4)

   $ 10,663      $ 10,494      $ 10,569     $ 10,657      $ 10,487  

Annualized U.S. GAAP Quarterly Basis ROE(3)/(4)

     6.3      6.6      (12.5 )%      5.5      7.2

Operating ROE

             

Adjusted operating income (loss) for the period ended(3)

   $ 204      $ 121      $ (291   $ 145      $ 200  

Quarterly average Genworth Financial, Inc.’s stockholders’ equity for the period, excluding accumulated other comprehensive income(4)

   $ 10,663      $ 10,494      $ 10,569     $ 10,657      $ 10,487  

Annualized Operating Quarterly Basis ROE(3)/(4)

     7.7      4.6      (11.0 )%      5.4      7.6

Non-GAAP Definition for Operating ROE

The company references the non-GAAP financial measure entitled “operating return on equity” or “operating ROE.” The company defines operating ROE as adjusted operating income (loss) divided by average ending Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income (loss) in average ending Genworth Financial, Inc.’s stockholders’ equity. Management believes that analysis of operating ROE enhances understanding of the efficiency with which the company deploys its capital. However, operating ROE is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders divided by average ending Genworth Financial, Inc.’s stockholders’ equity determined in accordance with U.S. GAAP.

 

(1) 

The twelve months ended information is derived by adding the four quarters of net income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) from page 9 herein.

(2) 

Quarterly average Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income, is derived by averaging ending Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income, for the most recent five quarters.

(3) 

Net income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) from page 9 herein.

(4) 

Quarterly average Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income, is derived by averaging ending Genworth Financial, Inc.’s stockholders’ equity, excluding accumulated other comprehensive income.

 

48


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Reconciliation of Core Yield

 

          2019     2018  
   (Assets—amounts in billions)      2Q        1Q       Total       4Q       3Q       2Q       1Q       Total  
   Reported—Total Invested Assets and Cash    $ 77.0      $ 74.4     $ 77.0     $ 72.3     $ 72.6     $ 73.1     $ 74.6     $ 72.3  
   Subtract:                    
  

Securities lending

     0.1        0.1       0.1       0.1       0.2       0.2       0.2       0.1  
  

Unrealized gains (losses)

     5.9        3.8       5.9       1.9       2.2       2.7       3.7       1.9  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Adjusted end of period invested assets and cash    $ 71.0      $ 70.5     $ 71.0     $ 70.3     $ 70.2     $ 70.2     $ 70.7     $ 70.3  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(A)

   Average Invested Assets and Cash Used in Reported Yield Calculation    $ 70.8      $ 70.4     $ 70.6     $ 70.2     $ 70.2     $ 70.4     $ 70.7     $ 70.4  
   Subtract:                    
  

Restricted commercial mortgage loans related to a securitization entity(1)

     —          0.1       —         —         —         —         0.1       —    
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(B)

   Average Invested Assets and Cash Used in Core Yield Calculation    $ 70.8      $ 70.3     $ 70.6     $ 70.2     $ 70.2     $ 70.4     $ 70.6     $ 70.4  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   (Income—amounts in millions)                    
 

(C)

  

Reported—Net Investment Income

   $ 852      $ 829     $ 1,681     $ 815     $ 815     $ 828     $ 804     $ 3,262  
   Subtract:                    
  

Bond calls and commercial mortgage loan prepayments

     7        6       13       8       8       9       11       36  
  

Other non-core items(2)

     7        2       9       2       1       2       (2     3  
  

Restricted commercial mortgage loans related to a securitization entity(1)

     —          —         —         1       1       —         1       3  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(D)

  

Core Net Investment Income

   $ 838      $ 821     $ 1,659     $ 804     $ 805     $ 817     $ 794     $ 3,220  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

(C) / (A)

  

Reported Yield

     4.82      4.71     4.76     4.64     4.64     4.70     4.55     4.63

(D) / (B)

  

Core Yield

     4.74      4.67     4.70     4.58     4.59     4.64     4.50     4.58

Note:    Yields have been annualized.

Non-GAAP Definition for Core Yield

The company references the non-GAAP financial measure entitled “core yield” as a measure of investment yield. The company defines core yield as the investment yield adjusted for items that do not reflect the underlying performance of the investment portfolio. Management believes that analysis of core yield enhances understanding of the investment yield of the company. However, core yield is not a substitute for investment yield determined in accordance with U.S. GAAP.

 

(1) 

Represents the incremental assets and investment income related to restricted commercial mortgage loans.

(2) 

Includes cost basis adjustments on structured securities and various other immaterial items.

 

49


Table of Contents

 

Corporate Information

 

 

 

50


Table of Contents

GENWORTH FINANCIAL, INC.

FINANCIAL SUPPLEMENT

SECOND QUARTER 2019

Financial Strength Ratings As Of July 29, 2019

 

Company

   Standard & Poor’s Financial
Services LLC (S&P)
   Moody’s Investors Service,
Inc. (Moody’s)
   A.M. Best Company, Inc.
(A.M. Best)

Genworth Mortgage Insurance Corporation

   BB+ (Marginal)    Baa3 (Adequate)    N/A

Genworth Financial Mortgage Insurance Company Canada(1)

   A+ (Strong)    N/A    N/A

Genworth Financial Mortgage Insurance Pty Limited (Australia)(2)

   A (Strong)    N/A    N/A

Genworth Life Insurance Company

   B- (Weak)    B3 (Poor)    B- (Fair)

Genworth Life and Annuity Insurance Company

   B- (Weak)    B1 (Poor)    B+ (Good)

Genworth Life Insurance Company of New York

   B- (Weak)    B3 (Poor)    B- (Fair)

The S&P, Moody’s, A.M. Best, Dominion Bond Rating Service (DBRS) and Fitch Rating Service (Fitch) ratings included are not designed to be, and do not serve as, measures of protection or valuation offered to investors. These financial strength ratings should not be relied on with respect to making an investment in the company’s securities.

S&P states that an insurer rated “A” (Strong) has strong financial security characteristics that outweigh any vulnerabilities and is highly likely to have the ability to meet financial commitments. Insurers rated “A” (Strong), “BB” (Marginal) or “B” (Weak) have strong, marginal or weak financial security characteristics, respectively. The “A,” “BB” and “B” ranges are the third-, fifth- and sixth-highest of nine financial strength rating ranges assigned by S&P, which range from “AAA” to “R.” A plus (+) or minus (-) shows relative standing within a rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below the “CCC” category. Accordingly, the “A+,” “A,” “BB+” and “B-” ratings are the fifth-, sixth-, eleventh- and sixteenth-highest of S&P’s 21 ratings categories.

Moody’s states that insurance companies rated “Baa” (Adequate) offer adequate financial security and those rated “B” (Poor) offer questionable financial security. The “Baa” (Adequate) and “B” (Poor) ranges are the fourth- and sixth-highest, respectively, of nine financial strength rating ranges assigned by Moody’s, which range from “Aaa” to “C.” Numeric modifiers are used to refer to the ranking within the groups, with 1 being the highest and 3 being the lowest. These modifiers are not added to ratings in the “Aaa” category or to ratings below the “Caa” category. Accordingly, the “Baa3,” “B1” and “B3” ratings are the tenth-, fourteenth- and sixteenth-highest, respectively, of Moody’s 21 ratings categories.

A.M. Best states that its “B+” (Good) rating is assigned to companies that have, in its opinion, a good ability to meet their ongoing insurance obligations while “B-” (Fair) is assigned to those companies that have, in its opinion, a fair ability to meet their ongoing insurance obligations. The “B+” (Good) and “B-” (Fair) ratings are the sixth- and eighth-highest of 15 ratings assigned by A.M. Best, which range from “A++” to “F.”

DBRS states that long-term obligations rated “AA” are of superior credit quality. Given the restrictive definition DBRS has for the “AAA” category, entities rated “AA” are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.

The Australian mortgage insurance subsidiary also solicits a rating from Fitch. Fitch states that “A” (Strong) rated insurance companies are viewed as possessing strong capacity to meet policyholder and contract obligations. The “A” rating category is the third-highest of nine financial strength rating categories, which range from “AAA” to “C.” The symbol (+) or (-) may be appended to a rating to indicate the relative position of a credit within a rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below the “B” category. Accordingly, the “A+” rating is the fifth-highest of Fitch’s 21 ratings categories.

The company also solicits a rating from HR Ratings on a local scale for Genworth Seguros de Credito a la Vivienda S.A. de C.V., its Mexican mortgage insurance subsidiary, with a short-term rating of “HR1” and long-term rating of “HR AA.” For short-term ratings, HR Ratings states that “HR1” rated companies are viewed as exhibiting high capacity for timely payment of debt obligations in the short-term and maintain low credit risk. The “HR1” short-term rating category is the highest of six short-term rating categories, which range from “HR1” to “HR D.” For long-term ratings, HR Ratings states that “HR AA” rated companies are viewed as having high credit quality and offer high safety for timely payment of debt obligations and maintain low credit risk under adverse economic scenarios. The “HR AA” long-term rating is the second-highest of HR Rating’s eight long-term rating categories, which range from “HR AAA” to “HR D.”

S&P, Moody’s, A.M. Best, DBRS, Fitch and HR Ratings review their ratings periodically and the company cannot assure you that it will maintain the current ratings in the future. These and other agencies may also rate the company or its insurance subsidiaries on a solicited or an unsolicited basis.

 

(1) 

Genworth Financial Mortgage Insurance Company Canada is also rated “AA” by DBRS.

(2) 

Genworth Financial Mortgage Insurance Pty Limited (Australia) is also rated “A+” by Fitch.

 

51