GNW Genworth Financial Inc

Continued progress on the LTC¹ multi-year rate action plan (MYRAP) with $138M of gross incremental premium approvals; $29.2B estimated net present value achieved from in-force rate actions (IFAs) since 2012

CareScout continued to expand the CareScout Quality Network; now available in more than 40 states and covering greater than two-thirds of the aged 65-plus Census population in the United States

Executed $36M in share repurchases in the quarter; $111M executed year-to-date through July 31, 2024, at an average price of $6.19 per share

Repurchased $12M in principal of the company’s subordinated notes at a discount

Net income² of $76M, or $0.17 per diluted share, and adjusted operating income^2,3 of $125M, or $0.28 per diluted share

Enact reported adjusted operating income of $165M²; distributed $63M in capital returns to Genworth

U.S. life insurance companies’ RBC⁴ ratio of 319%⁵ driven by strong statutory income

Genworth holding company cash and liquid assets of $281M⁶ at quarter-end

Consolidated Metrics

(Amounts in millions, except per share data)

Net income²

Earnings per diluted share²

Adjusted operating income^2,3

Adjusted operating income per diluted share^2,3

Weighted-average diluted shares

Net income in the quarter was driven by Enact, which had very strong operating performance, partially offset by losses in LTC and Corporate and Other

Net investment losses, net of taxes, decreased net income by $48 million in the current quarter, compared with net investment gains of $39 million in the prior quarter and $31 million in the prior year. The investment losses in the current quarter were driven primarily by mark-to-market adjustments on limited partnerships and net trading losses as a result of portfolio repositioning

Changes in the fair value of market risk benefits and associated hedges, net of taxes, increased net income by $6 million in the quarter driven primarily by the favorable change in the interest rate yield curve, compared with an increase of $18 million in the prior quarter and $15 million in the prior year

Net investment income was $808 million in the quarter, up from $782 million in the prior quarter driven by higher income from limited partnerships and U.S. Government Treasury Inflation-Protected Securities (TIPS)

GAAP Operating Metrics

(Dollar amounts in millions)

Adjusted operating income²

Primary new insurance written

Loss ratio

Equity⁷

Current quarter results reflected a pre-tax reserve release of $77 million primarily from favorable cure performance on early 2023 and prior delinquencies and favorable claim rate assumption updates. The prior quarter and prior year included pre-tax reserve releases of $54 million and $63 million, respectively

Net investment income of $59 million in the current quarter was up from $50 million in the prior year from higher yields and higher average invested assets

Primary insurance in-force increased three percent versus the prior year to $266 billion driven by new insurance written (NIW) and continued elevated persistency

Primary NIW was down 10 percent versus the prior year. Changes in NIW are primarily impacted by the size of the mortgage insurance market and Enact’s market share

New delinquencies increased 14 percent to 10,461 from 9,205 in the prior year primarily from the normal loss development pattern of the portfolio. New delinquencies for the quarter were more than offset by cure performance

Capital Metric

PMIERs Sufficiency Ratio^5,8

Enact paid a quarterly dividend of $0.185 per share in the current quarter

Estimated PMIERs sufficiency ratio of 169 percent, $2,057 million above requirements

GAAP Operating Metrics

(Amounts in millions)

Adjusted operating income (loss)

Premiums

Net investment income

Liability remeasurement gains (losses)

Cash flow assumption updates

Actual to expected experience

Premiums decreased versus the prior quarter primarily driven by seasonal trends and versus the prior year primarily from policy terminations and policies entering paid-up status. While legal settlements have reduced LTC tail-risk, they have accelerated the decline in renewal premiums, which also decreased the premium impact from IFAs versus the prior quarter

Net investment income increased, driven by favorable limited partnership income and TIPS income

Current quarter liability remeasurement loss included unfavorable actual to expected experience from lower terminations and higher benefit utilization, partially offset by favorable cash flow assumption updates related to the implementation timing and approval amounts of certain IFAs

Current quarter included a $24 million pre-tax benefit from net insurance recoveries

GAAP Adjusted Operating Income (Loss)

(Amounts in millions)

Life Insurance

Fixed Annuities

Variable Annuities

Total Life and Annuities

Current quarter results reflected mortality experience that was favorable versus the prior quarter but unfavorable versus the prior year

Premiums and deferred acquisition costs amortization were lower versus the prior year primarily driven by block runoff

Fixed annuities results reflected favorable mortality, but lower net spread income primarily from block runoff

Variable annuities results included favorable mortality

(Dollar amounts in millions)

Statutory Pre-Tax Income (Loss)^5,10

Long-Term Care Insurance

Life Insurance

Fixed Annuities

Variable Annuities

GLIC Consolidated RBC Ratio⁵

Statutory pre-tax income was $171 million in the current quarter:

LTC continued to benefit from premium increases and benefit reductions from IFAs and legal settlements, as well as a benefit from net insurance recoveries

Life insurance results included favorable seasonal impacts versus the prior quarter

Fixed annuities results reflected favorable mortality, but lower net spread income primarily from block runoff

Variable annuity results included a benefit from the impact of interest rate performance

Current quarter GLIC consolidated RBC ratio was 319 percent, up from the prior quarter driven by strong statutory income

The current quarter adjusted operating loss was $10 million, down from $38 million in the prior quarter and $20 million in the prior year primarily driven by timing of tax related items

(Amounts in millions)

Holding Company Cash and Liquid Assets^11,12

Cash and liquid assets of $281 million in the quarter, including $95 million of advance cash payments from the company’s subsidiaries held for future obligations

Cash inflows during the current quarter consisted of $63 million from Enact capital returns and $52 million from intercompany tax payments held for future obligations

Current quarter cash outflows included $36 million in share repurchases, $19 million related to debt servicing costs and the repurchase of $12 million principal of the company’s subordinated notes at a discount

In the second quarter of 2024, the company repurchased $36 million of its common stock at an average price of $6.29 per share leaving 434 million shares outstanding at the end of the quarter

Executed $470 million in share repurchases program-to-date at an average price of $5.47 per share

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the inability to successfully launch new lines of business, including long-term care insurance and other products and services the company is pursuing with CareScout;

the company’s failure to maintain self-sustainability of its legacy life insurance subsidiaries, including as a result of the inability to achieve desired levels of in-force rate actions and/or the timing of its future premium rate increases and associated benefit reductions taking longer to achieve than originally assumed; other regulatory actions negatively impacting the company’s life insurance businesses;

inaccuracies or changes in estimates, assumptions, methodologies, valuations, projections and/or models, which result in inadequate reserves or other adverse results (including as a result of any changes in connection with quarterly, annual or other reviews);

the impact on holding company liquidity caused by an inability to receive dividends or any other returns of capital from Enact Holdings, and limited sources of capital and financing and the need to seek additional capital on unfavorable terms;

adverse changes to the structure or requirements of Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or the U.S. mortgage insurance market; an increase in the number of loans insured through federal government mortgage insurance programs, including those offered by the Federal Housing Administration; the inability of Enact Holdings and/or its U.S. mortgage insurance subsidiaries to continue to meet the requirements mandated by PMIERs (or any adverse changes thereto), inability to meet minimum statutory capital requirements of applicable regulators or the mortgage insurer eligibility requirements of Fannie Mae or Freddie Mac;

changes in economic, market and political conditions including as a result of elevated inflation, labor shortages and elevated interest rates, which could heighten the risk of a future recession; unanticipated financial events, which could lead to market-wide liquidity problems and other significant market disruption resulting in losses, defaults or credit rating downgrades of other financial institutions; deterioration in economic conditions, a recession or a decline in home prices, all of which could be driven by many potential factors; political and economic instability or changes in government policies, including U.S. federal tax laws or rates, and at regulatory agencies as a result of any change in administration due to the upcoming 2024 U.S. presidential election, and fluctuations in international securities markets;

downgrades in financial strength and credit ratings and potential adverse impacts to liquidity; counterparty credit risks; defaults by counterparties to reinsurance arrangements or derivative instruments; defaults or other events impacting the value of invested assets;

changes in tax rates or tax laws, or changes in accounting and reporting standards;

litigation and regulatory investigations or other actions, including commercial and contractual disputes with counterparties;

the inability to retain, attract and motivate qualified employees or senior management;

the loss of significant key customers and distribution relationships by Enact Holdings;

the impact from deficiencies in the company’s disclosure controls and procedures or internal control over financial reporting;

the occurrence of natural or man-made disasters, including geopolitical tensions and war (including the Russian invasion of Ukraine and the Israel-Hamas conflict), a public health emergency, including pandemics, or climate change;

the inability to effectively manage information technology systems (including artificial intelligence), cyber incidents or other failures, disruptions or security breaches of the company or its third-party vendors, as well as unknown risks and uncertainties associated with artificial intelligence;

the inability of third-party vendors to meet their obligations to the company;

the lack of availability, affordability or adequacy of reinsurance to protect the company against losses;

a decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of mortgage insurance cancellations;

unanticipated claims against Enact Holdings’ delegated underwriting program;

the impact of medical advances such as genetic research and diagnostic imaging, emerging new technology, including artificial intelligence and related legislation; and

other factors described in the risk factors contained in Item 1A of the company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 29, 2024.

Revenues:

Premiums

Net investment income

Net investment gains (losses)

Policy fees and other income

Total revenues

Benefits and expenses:

Benefits and other changes in policy reserves

Liability remeasurement (gains) losses

Changes in fair value of market risk benefits and associated hedges

Interest credited

Acquisition and operating expenses, net of deferrals

Amortization of deferred acquisition costs and intangibles

Interest expense

Total benefits and expenses

Income from continuing operations before income taxes

Provision for income taxes

Income from continuing operations

Income (loss) from discontinued operations, net of taxes

Net income

Less: net income attributable to noncontrolling interests

Net income available to Genworth Financial, Inc.’s common stockholders

Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:

Basic

Diluted

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic

Diluted

Weighted-average common shares outstanding:

Basic

Diluted

Net income available to Genworth Financial, Inc.’s common stockholders

Add: net income attributable to noncontrolling interests

Net income

Less: income (loss) from discontinued operations, net of taxes

Income from continuing operations

Less: net income from continuing operations attributable to noncontrolling interests

Income from continuing operations available to Genworth Financial, Inc.’s common stockholders

Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net¹³

Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges¹⁴

(Gains) losses on early extinguishment of debt, net¹⁵

Expenses related to restructuring

Taxes on adjustments

Adjusted operating income

Adjusted operating income (loss):

Enact segment

Long-Term Care Insurance segment

Life and Annuities segment:

Life Insurance

Fixed Annuities

Variable Annuities

Total Life and Annuities segment

Corporate and Other

Adjusted operating income

Net income available to Genworth Financial, Inc.’s common stockholders per share:

Basic

Diluted

Adjusted operating income per share:

Basic

Diluted

Weighted-average common shares outstanding:

Basic

Diluted

Long-term care insurance.

All references reflect amounts available to Genworth’s common stockholders.

This is a financial measure that is not calculated based on U.S. Generally Accepted Accounting Principles (GAAP). See the Use of Non-GAAP Measures section of this press release for additional information.

Risk-based capital ratio based on company action level for Genworth Life Insurance Company (GLIC) consolidated.

Company estimate for the second quarter of 2024 due to timing of the preparation of the filing(s).

Includes approximately $95 million of advance cash payments from the company’s subsidiaries held for future obligations.

Reflects Genworth’s ownership of equity including accumulated other comprehensive income (loss) and excluding noncontrolling interests of $894 million, $873 million and $807 million in the second and first quarters of 2024 and the second quarter of 2023, respectively.

The Private Mortgage Insurer Eligibility Requirements (PMIERs) sufficiency ratio is calculated as available assets divided by required assets as defined within PMIERs.

Genworth’s principal U.S. life insurance companies: GLIC, Genworth Life and Annuity Insurance Company (GLAIC) and Genworth Life Insurance Company of New York (GLICNY).

Net gain from operations before dividends to policyholders, refunds to members and federal income taxes for GLIC, GLAIC and GLICNY, and before realized capital gains or (losses).

Holding company cash and liquid assets comprises assets held in Genworth Holdings, Inc. (the issuer of outstanding public debt) which is a wholly-owned subsidiary of Genworth Financial, Inc.

Genworth Holdings, Inc. held no short-term investments or U.S. government securities as of June 30, 2024, March 31, 2024 and June 30, 2023.

Net investment (gains) losses were adjusted for the portion attributable to noncontrolling interests of $1 million and $2 million for the three months ended June 30, 2024 and 2023, respectively, and $1 million for the three months ended March 31, 2024.

Changes in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(2) million and $(4) million for the three months ended June 30, 2024 and 2023, respectively, and $(3) million for the three months ended March 31, 2024.

(Gains) losses on early extinguishment of debt are net of the portion attributable to noncontrolling interests of $2 million for the three months ended June 30, 2024.