Segment Information

6 Months Ended

Jun. 30, 2022

Segment Information

(11) Segment Information

We have the following three operating business segments: Enact; U.S. Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities businesses); and Runoff (which includes the results of non-strategic products which have not been actively sold since 2011). In addition to our three operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.

We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. GAAP and 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.

We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders.” We define adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial 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 initial gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our 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, we believe that adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, 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) available to Genworth Financial, Inc.’s common stockholders 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) available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.

Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.

During the three and six months ended June 30, 2022, we repurchased $48 million and $130 million principal amount of Genworth Holdings’ senior notes due in February 2024, respectively, for a pre-tax loss of $1 million and $4 million, respectively. During the six months ended June 30, 2021, we repurchased $146 million principal amount of Genworth Holdings’ senior notes due in September 2021 for a pre-tax loss of

$4 million. These transactions were excluded from adjusted operating income as they relate to losses on the early extinguishment of debt.

We recorded a pre-tax expense of $1 million and $5 million for the three months ended June 30, 2022 and 2021, respectively, and $1 million and $26 million for the six months ended June 30, 2022 and 2021, respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.

The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:

	Three months ended June 30,				Six months ended June 30,
(Amounts in millions)	2022		2021		2022		2021
Revenues:
Enact segment	$	273	$	276	$	543	$	564
U.S. Life Insurance segment:
Long-term care insurance		1,119		1,226		2,228		2,366
Life insurance		310		329		649		677
Fixed annuities		92		122		208		254
U.S. Life Insurance segment		1,521		1,677		3,085		3,297
Runoff segment		70		88		136		164
Corporate and Other activities		17		—		9		1
Total revenues	$	1,881	$	2,041	$	3,773	$	4,026

The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating income available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities for the periods indicated:

	Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2022			2021			2022			2021
Net income available to Genworth Financial, Inc.’s common stockholders	$	181		$	240		$	330		$	427
Add: net income from continuing operations attributable to noncontrolling interests		38			—			68			—
Add: net income from discontinued operations attributable to noncontrolling interests		—			—			—			8
Net income		219			240			398			435
Less: income (loss) from discontinued operations, net of taxes		(1	)		(5	)		(3	)		16
Income from continuing operations		220			245			401			419
Less: net income from continuing operations attributable to noncontrolling interests		38			—			68			—
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders		182			245			333			419
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net (1)		(10	)		(70	)		(38	)		(103	)
(Gains) losses on early extinguishment of debt		1			—			4			4
Expenses related to restructuring		1			5			1			26
Taxes on adjustments		2			14			7			16
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders	$	176		$	194		$	307		$	362

(1) For the three and six months ended June 30, 2022, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million.

	Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2022			2021			2022			2021
Adjusted operating income (loss) available to Genworth Financial, Inc.’scommon stockholders:
Enact segment	$	167		$	135		$	302		$	261
U.S. Life Insurance segment:
Long-term care insurance		34			98			93			193
Life insurance		(34	)		(40	)		(113	)		(103	)
Fixed annuities		21			13			37			43
U.S. Life Insurance segment		21			71			17			133
Runoff segment		2			15			11			27
Corporate and Other activities		(14	)		(27	)		(23	)		(59	)
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders	$	176		$	194		$	307		$	362

The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:

(Amounts in millions)	June 30, 2022		December 31, 2021
Assets:
Enact segment	$	5,763	$	5,850
U.S. Life Insurance segment		73,288		81,210
Runoff segment		8,264		9,460
Corporate and Other activities		1,753		2,651
Total assets	$	89,068	$	99,171