Table of Contents
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
(Address of principal executive offices) |
(Zip Code) | |
☒ |
Accelerated filer |
☐ | ||||
Non-accelerated filer |
☐ |
Smaller reporting company |
||||
Emerging growth company |
||||||
Title of Each Class |
Trading Symbol |
Name of each exchange on which registered | ||
Table of Contents
TABLE OF CONTENTS
| Page | ||||||
| PART I—FINANCIAL INFORMATION |
||||||
| Financial Statements | 3 | |||||
| Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (Unaudited) |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| 6 | ||||||
| 7 | ||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
8 | |||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 92 | |||||
| Quantitative and Qualitative Disclosures About Market Risk | 140 | |||||
| Controls and Procedures | 141 | |||||
| PART II—OTHER INFORMATION |
| |||||
| Legal Proceedings | 142 | |||||
| Risk Factors | 142 | |||||
| Unregistered Sales of Equity Securities and Use of Proceeds | 142 | |||||
| Exhibits | 143 | |||||
| 144 | ||||||
2
Table of Contents
March 31, 2023 |
December 31, 2022 |
|||||||
(As adjusted) |
||||||||
Assets |
||||||||
Investments: |
||||||||
Fixed maturity securities available-for-sale, |
$ | $ | ||||||
Equity securities, at fair value |
||||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $ |
||||||||
Less: Allowance for credit losses |
( |
) | ( |
) | ||||
Commercial mortgage loans, net |
||||||||
Policy loans |
||||||||
Limited partnerships |
||||||||
Other invested assets |
||||||||
Total investments |
||||||||
Cash, cash equivalents and restricted cash |
||||||||
Accrued investment income |
||||||||
Deferred acquisition costs |
||||||||
Intangible assets |
||||||||
Reinsurance recoverable |
||||||||
Less: Allowance for credit losses |
( |
) | ( |
) | ||||
Reinsurance recoverable, net |
||||||||
Other assets |
||||||||
Deferred tax asset |
||||||||
Market risk benefit assets |
||||||||
Separate account assets |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and equity |
||||||||
Liabilities: |
||||||||
Future policy benefits |
$ | $ | ||||||
Policyholder account balances |
||||||||
Market risk benefit liabilities |
||||||||
Liability for policy and contract claims |
||||||||
Unearned premiums |
||||||||
Other liabilities |
||||||||
Long-term borrowings |
||||||||
Separate account liabilities |
||||||||
Liabilities related to discontinued operations |
||||||||
Total liabilities |
||||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Class A common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive income (loss) |
( |
) | ( |
) | ||||
Retained earnings |
||||||||
Treasury stock, at cost ( |
( |
) | ( |
) | ||||
Total Genworth Financial, Inc.’s stockholders’ equity |
||||||||
Noncontrolling interests |
||||||||
Total equity |
||||||||
Total liabilities and equity |
$ | $ | ||||||
Three months ended March 31, |
||||||||
2023 |
2022 |
|||||||
(As adjusted) |
||||||||
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 |
||||||||
Loss from discontinued operations, net of taxes |
( |
) | ||||||
Net income |
||||||||
Less: net income from continuing operations attributable to noncontrolling interests |
||||||||
Less: net income from discontinued operations attributable to noncontrolling interests |
||||||||
Net income available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ||||||
Net income available to Genworth Financial, Inc.’s common stockholders: |
||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ||||||
Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders |
( |
) | ||||||
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 |
||||||||
Three months ended March 31, |
||||||||
2023 |
2022 |
|||||||
(As adjusted) |
||||||||
Net income |
$ | $ | ||||||
Other comprehensive income (loss), net of taxes: |
||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses |
( |
) | ||||||
Net unrealized gains (losses) on securities with an allowance for credit losses |
( |
) | ||||||
Derivatives qualifying as hedges |
( |
) | ||||||
Change in the discount rate used to measure future policy benefits |
( |
) | ||||||
Change in instrument-specific credit risk of market risk benefits |
||||||||
Foreign currency translation and other adjustments |
( |
) | ||||||
Total other comprehensive income (loss) |
( |
) | ||||||
Total comprehensive income (loss) |
( |
) | ||||||
Less: comprehensive income (loss) attributable to noncontrolling interests |
( |
) | ||||||
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | ( |
) | $ | ||||
Three months ended March 31, 2023 |
||||||||||||||||||||||||||||||||
Common stock |
Additional paid-in capital |
Accumulated other comprehensive income (loss) |
Retained earnings |
Treasury stock, at cost |
Total Genworth Financial, Inc.’s stockholders’ equity |
Noncontrolling interests |
Total equity |
|||||||||||||||||||||||||
Balances as of December 31, 2022 (as adjusted) |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||||||
Repurchase of subsidiary shares |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of taxes |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||
Total comprehensive income (loss) |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Treasury stock acquired in connection with share repurchases |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||
Dividends to noncontrolling interests |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Stock-based compensation expense and exercises and other |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||
Balances as of March 31, 2023 |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||||||
Three months ended March 31, 2022 |
||||||||||||||||||||||||||||||||
Common stock |
Additional paid-in capital |
Accumulated other comprehensive income (loss) |
Retained earnings |
Treasury stock, at cost |
Total Genworth Financial, Inc.’s stockholders’ equity |
Noncontrolling interests |
Total equity |
|||||||||||||||||||||||||
Balances as of December 31, 2021 (as adjusted) |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Net income |
||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of taxes |
( |
) |
||||||||||||||||||||||||||||||
Total comprehensive income (loss) |
( |
) |
||||||||||||||||||||||||||||||
Stock-based compensation expense and exercises and other |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||||
Balances as of March 31, 2022 (as adjusted) |
$ |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||||||
Three months ended March 31, |
||||||||
2023 |
2022 |
|||||||
(As adjusted) |
||||||||
| Cash flows from (used by) operating activities: |
||||||||
| Net income |
$ | $ | ||||||
| Less loss from discontinued operations, net of taxes |
||||||||
| Adjustments to reconcile net income to net cash from (used by) operating activities: |
||||||||
| Amortization of fixed maturity securities discounts and premiums |
( |
) | ( |
) | ||||
| Net investment (gains) losses |
( |
) | ||||||
| Changes in fair value of market risk benefits and associated hedges |
( |
) | ||||||
| Charges assessed to policyholders |
( |
) | ( |
) | ||||
| Acquisition costs deferred |
( |
) | ( |
) | ||||
| Amortization of deferred acquisition costs and intangibles |
||||||||
| Deferred income taxes |
||||||||
| Derivative instruments, limited partnerships and other |
( |
) | ( |
) | ||||
| Stock-based compensation expense |
||||||||
| Change in certain assets and liabilities: |
||||||||
| Accrued investment income and other assets |
( |
) | ( |
) | ||||
| Insurance reserves |
||||||||
| Current tax liabilities |
||||||||
| Other liabilities, policy and contract claims and other policy-related balances |
( |
) | ( |
) | ||||
| Cash used by operating activities—discontinued operations |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash from (used by) operating activities |
( |
) | ||||||
| |
|
|
|
|||||
| Cash flows from (used by) investing activities: |
||||||||
| Proceeds from maturities and repayments of investments: |
||||||||
| Fixed maturity securities |
||||||||
| Commercial mortgage loans |
||||||||
| Limited partnerships and other invested assets |
||||||||
| Proceeds from sales of investments: |
||||||||
| Fixed maturity and equity securities |
||||||||
| Purchases and originations of investments: |
||||||||
| Fixed maturity and equity securities |
( |
) | ( |
) | ||||
| Commercial mortgage loans |
( |
) | ( |
) | ||||
| Limited partnerships and other invested assets |
( |
) | ( |
) | ||||
| Short-term investments, net |
( |
) | ||||||
| Policy loans, net |
||||||||
| |
|
|
|
|||||
| Net cash from investing activities |
||||||||
| |
|
|
|
|||||
| Cash flows from (used by) financing activities: |
||||||||
| Deposits to universal life and investment contracts |
||||||||
| Withdrawals from universal life and investment contracts |
( |
) | ( |
) | ||||
| Repayment and repurchase of long-term debt |
( |
) | ( |
) | ||||
| Repurchase of subsidiary shares |
( |
) | ||||||
| Treasury stock acquired in connection with share repurchases |
( |
) | ||||||
| Dividends paid to noncontrolling interests |
( |
) | ||||||
| Other, net |
||||||||
| |
|
|
|
|||||
| Net cash used by financing activities |
( |
) | ( |
) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash |
||||||||
| |
|
|
|
|||||
| Net change in cash, cash equivalents and restricted cash |
( |
) | ( |
) | ||||
| Cash, cash equivalents and restricted cash at beginning of period |
||||||||
| |
|
|
|
|||||
| Cash, cash equivalents and restricted cash at end of period |
||||||||
| Less cash, cash equivalents and restricted cash of discontinued operations at end of period |
||||||||
| |
|
|
|
|||||
| Cash, cash equivalents and restricted cash of continuing operations at end of period |
$ | $ | ||||||
| |
|
|
|
|||||
• |
Enact. |
• |
Long-Term Care Insurance |
• |
Life and Annuities. |
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
DAC and balances amortized on a basis consistent with DAC, including intangible assets and cost of reinsurance |
DAC associated with long-duration insurance contracts is grouped into cohorts consistent with groupings used to estimate the related liability for future policy benefits and is amortized on a constant level basis over the expected contract term, which approximates straight-line. Assumptions used to amortize DAC are consistent with the assumptions used to estimate the liability for future policy benefits. Revised assumptions are recognized prospectively over the remaining term of the related contract. DAC and balances amortized on a basis consistent with DAC are no longer subject to impairment, shadow adjustments or recoverability testing; however, present value of future profits (“PVFP”) is still assessed for recoverability in connection with premium deficiency testing. |
The constant level basis we use to amortize DAC by product is as follows: • long-term care insurance—total life count • life insurance—face amount • fixed and variable annuities—policy count We apply the amortization rate at the beginning of the current reporting period, which reflects assumption updates, if applicable, and actual experience through the end of the current reporting period. We have elected to amortize intangible assets associated with investment contracts, such as PVFP, in a manner consistent with DAC. Cost of reinsurance is deferred and amortized in a manner consistent with DAC over the terms of the related reinsurance treaties. |
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
MRBs, which include contracts or contract features that protect the policyholder’s account balance and expose the insurer to other-than-nominal capital market risk, such as guaranteed minimum death benefits (“GMDBs”), guaranteed minimum withdrawal benefits (“GMWBs”) and guaranteed payout annuity floor benefits (“GPAFs”) |
MRBs are measured at fair value with changes related to instrument-specific credit risk recorded as a separate component in accumulated other comprehensive income (loss) and remaining changes recorded in net income (loss). |
For additional details, see notes 7 and 13. | ||
Liability for future policy benefits—level of aggregation |
For the purpose of calculating the net premium ratio used to measure the liability for future policy benefits, long-duration insurance contracts are grouped into annual cohorts on the basis of original contract issue date. For acquired contracts, the acquisition date is considered the original contract issue date. The net premium ratio for long-duration traditional and limited payment contracts is the ratio of expected benefits less the existing carrying value of reserves to gross premiums. |
Traditional and limited-payment long-duration insurance contracts are generally grouped into annual calendar-year cohorts based on the contract issue date, product type and company. Limited-payment contracts are grouped into cohorts separately from other traditional products and riders are combined with the associated base policies. Certain products may also be grouped by acquisition date for acquired contracts and reinsurance treaty effective date for reinsurance recoverables. | ||
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
| Liability for future policy benefits—cash flow assumptions | All cash flow assumptions used to estimate the liability for future policy benefits (including health care experience, policyholder persistency or lapses (i.e., the probability that a policy or contract will remain in-force from one period to the next), insured mortality (i.e., life expectancy or longevity) and insured morbidity (i.e., frequency and severity of claim, including claim termination rates and benefit utilization rates)) are reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required. Changes in cash flow assumptions are recorded using a retrospective approach with a cumulative catch-up adjustment by recalculating the net premium ratio (which is capped at 100%) using actual historical and updated future cash flow assumptions. The liability for future policy benefits is recalculated using the revised net premium ratio and locked-in discount rate as of the beginning of the current reporting period and compared to the carrying amount as of the beginning of the current reporting period using the previous net premium ratio and locked-in discount rate, with any difference recorded as a remeasurement gain (loss). Cash flow assumptions no longer reflect a provision for adverse deviation, and the premium deficiency test and shadow adjustments are eliminated. |
We calculate a single liability for future policy benefits and therefore, all cash flows, including benefit payments (such as claims in course of settlement and incurred claims) are aggregated. As a result, our U.S. life insurance companies elected to combine their previously disclosed liability for policy and contract claims, excluding amounts related to certain life and annuity products not subject to the new accounting guidance, within the liability for future policy benefits and present the aggregate liability as one line item in our condensed consolidated balance sheets. Cash flow assumptions will be formally reviewed and updated as necessary based on experience studies in the fourth quarter each year. We elected to update the net premium ratio quarterly for actual versus expected experience; therefore, during interim reporting periods we will replace forecasted cash flow assumptions with actual cash flows with any difference recorded in net income (loss). We made an entity-wide election not to update our expense assumptions and therefore, these assumptions remain locked-in at the time of the Transition Date or if issued after the Transition Date, at the time of contract inception. |
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
| Liability for future policy benefits—discount rate assumptions | The liability for future policy benefits is measured using two different discount rates, a current discount rate and a locked-in discount rate. The current discount rate is used to remeasure the liability for future policy benefits recorded in the condensed consolidated balance sheets and is a current upper-medium grade fixed-income instrument yield, commonly interpreted to be a single-A rated bond rate, with the same duration as the corresponding liability. The locked-in discount rate is used to determine the amounts recorded to net income (loss) and is held constant for the purpose of calculating the net premium ratio and interest accretion. The difference between the liability measured using the locked-in rate and the liability measured using the current rate is recorded in accumulated other comprehensive income (loss). For policies in-force prior to the Transition Date, the locked-in discount rate is equal to the discount rate in effect immediately before the Transition Date. For contracts issued on or after the Transition Date, the locked-in discount rate is a single-A rated bond rate identified at inception of the contract. |
The methodology used to determine the current discount rate assumption maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. The current discount rate assumption is based on a single-A curve published by a market data service. For cash flows projected beyond the observable curve, we use estimation techniques consistent with Level 3 fair value measurements as defined in note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form 10-K to interpolate from the last observable rate to an estimated ultimate long-term rate. For contracts issued on or after the Transition Date, the locked-in discount rate for each issue-year cohort is determined as a single discount rate, using the weighted-average monthly single-A fixed-income forward curves over the current calendar year. |
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
Liability for future policy benefits—deferred profit liability |
A deferred profit liability is established for limited-payment products at the time of contract issuance for any amount of gross premiums received in excess of net premiums, which is amortized into net income (loss) in proportion to insurance in-force for life insurance products and expected future benefit payments for fixed annuity products. Cash flow assumptions related to the deferred profit liability are consistent with the assumptions used to estimate the related liability for future policy benefits and are updated at the same time. The deferred profit liability is recalculated using updated cash flow assumptions as of the beginning of the current reporting period and compared to the current carrying amount as of the beginning of the current reporting period, with any difference recorded in net income (loss). |
Key Area Impacted |
Change to Accounting Policy |
Policy Elections and Other Significant Matters | ||
Policyholder account balances—additional insurance liabilities |
Additional insurance liabilities are established for guarantees or certain product features not classified as MRBs or embedded derivatives. The calculation of additional insurance liabilities includes investment performance. Therefore, the impacts from net unrealized investment gains and losses on available for-sale investment securities backing additional insurance liabilities are required to be analyzed, as if those unrealized investment gains and losses were realized. These “shadow adjustments” result in the recognition of unrealized gains and losses on additional insurance liabilities in a manner consistent with unrealized gains and losses on available-for-sale investment securities, which are recorded in accumulated other comprehensive income (loss). |
Annual premium deficiency testing is still required to be performed for our universal and term universal life insurance products. |
Effect of adopting LDTI |
||||||||||||||||||||||||
(Amounts in millions) |
As originally reported |
Eliminate shadow adjustments |
Changes in measurement of assets and liabilities |
Change in discount rate |
Recognize MRBs |
As adjusted |
||||||||||||||||||
Assets |
||||||||||||||||||||||||
Total investments |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Cash, cash equivalents and restricted cash |
||||||||||||||||||||||||
Accrued investment income |
||||||||||||||||||||||||
Deferred acquisition costs |
( |
) | ||||||||||||||||||||||
Intangible assets |
( |
) | ( |
) | ||||||||||||||||||||
Reinsurance recoverable |
( |
) | ||||||||||||||||||||||
Less: Allowance for credit losses |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Reinsurance recoverable, net |
( |
) | ||||||||||||||||||||||
Other assets |
( |
) | ||||||||||||||||||||||
Deferred tax asset |
( |
) | ||||||||||||||||||||||
Market risk benefit assets |
||||||||||||||||||||||||
Separate account assets |
||||||||||||||||||||||||
Total assets |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||
Liabilities and equity |
||||||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||
Future policy benefits |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||
Policyholder account balances |
( |
) | ( |
) | ||||||||||||||||||||
Market risk benefit liabilities |
||||||||||||||||||||||||
Liability for policy and contract claims |
( |
) | ||||||||||||||||||||||
Unearned premiums |
( |
) | ||||||||||||||||||||||
Other liabilities |
||||||||||||||||||||||||
Long-term borrowings |
||||||||||||||||||||||||
Separate account liabilities |
||||||||||||||||||||||||
Liabilities related to discontinued operations |
||||||||||||||||||||||||
Total liabilities |
( |
) | ||||||||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||
Equity: |
||||||||||||||||||||||||
Class A common stock |
||||||||||||||||||||||||
Additional paid-in capital |
||||||||||||||||||||||||
Accumulated other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Retained earnings |
( |
) | ( |
) | ||||||||||||||||||||
Treasury stock, at cost |
( |
) | ( |
) | ||||||||||||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Noncontrolling interests |
||||||||||||||||||||||||
Total equity |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Total liabilities and equity |
$ | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||||
Effect of adopting LDTI |
||||||||||||||||||||||||
| (Amounts in millions) |
As originally reported |
Change in amortization |
Changes in measurement of insurance liabilities |
Remeasurement (gains) losses |
Change in MRBs |
As adjusted |
||||||||||||||||||
| 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 |
( |
) | ||||||||||||||||||||||
| Loss from discontinued operations, net of taxes |
( |
) | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income |
( |
) | ||||||||||||||||||||||
| Less: net income from continuing operations attributable to noncontrolling interests |
||||||||||||||||||||||||
| Less: net income from discontinued operations attributable to noncontrolling interests |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income available to Genworth Financial, Inc.’s common stockholders |
$ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) available to Genworth Financial, Inc.’s common stockholders: |
||||||||||||||||||||||||
| Income from continuing operations available to Genworth Financial, Inc.’s common stockholders |
$ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||
| Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders |
( |
) | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 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 |
||||||||||||||||||||||||
| |
|
|
|
|||||||||||||||||||||
Effect of adopting LDTI |
||||||||||||||||||||||||
| (Amounts in millions) |
As originally reported |
Change in amortization |
Changes in measurement of insurance liabilities |
Remeasurement (gains) losses |
Change in MRBs |
As adjusted |
||||||||||||||||||
| Cash flows from (used by) operating activities: |
||||||||||||||||||||||||
| Net income |
$ |
$ |
$ |
( |
) |
$ |
$ |
$ |
||||||||||||||||
| Less loss from discontinued operations, net of taxes |
||||||||||||||||||||||||
| Adjustments to reconcile net income to net cash used by operating activities: |
||||||||||||||||||||||||
| Amortization of fixed maturity securities discounts and premiums |
( |
) |
( |
) | ||||||||||||||||||||
| Net investment (gains) losses |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Changes in fair value of market risk benefits and associated hedges |
( |
) |
( |
) | ||||||||||||||||||||
| Charges assessed to policyholders |
( |
) |
( |
) | ||||||||||||||||||||
| Acquisition costs deferred |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Amortization of deferred acquisition costs and intangibles |
( |
) |
||||||||||||||||||||||
| Deferred income taxes |
( |
) |
||||||||||||||||||||||
| Derivative instruments, limited partnerships and other |
( |
) |
( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||
| Change in certain assets and liabilities: |
||||||||||||||||||||||||
| Accrued investment income and other assets |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Insurance reserves |
( |
) |
( |
) |
||||||||||||||||||||
| Other liabilities, policy and contract claims and other policy-related balances |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Cash used by operating activities—discontinued operations |
( |
) |
( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash used by operating activities |
$ |
( |
) |
$ |
$ |
$ |
$ |
$ |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of adopting LDTI |
||||||||||||||||||||||||
| (Amounts in millions) |
Balances as of December 31, 2020 (as reported) |
Eliminate shadow adjustments |
Changes in measurement of assets and liabilities |
Change in discount rate |
Recognize MRBs |
Balances as of January 1, 2021 (as adjusted) |
||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Total investments |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
| Cash, cash equivalents and restricted cash |
||||||||||||||||||||||||
| Accrued investment income |
||||||||||||||||||||||||
| Deferred acquisition costs |
||||||||||||||||||||||||
| Intangible assets |
||||||||||||||||||||||||
| Reinsurance recoverable |
( |
) |
||||||||||||||||||||||
| Less: Allowance for credit losses |
( |
) |
( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Reinsurance recoverable, net |
( |
) |
||||||||||||||||||||||
| Other assets |
( |
) |
||||||||||||||||||||||
| Deferred tax asset |
( |
) |
||||||||||||||||||||||
| Market risk benefit assets |
||||||||||||||||||||||||
| Separate account assets |
||||||||||||||||||||||||
| Assets related to discontinued operations |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total assets |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Liabilities and equity |
||||||||||||||||||||||||
| Liabilities: |
||||||||||||||||||||||||
| Future policy benefits |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
||||||||||||||||
| Policyholder account balances |
( |
) |
( |
) |
||||||||||||||||||||
| Market risk benefit liabilities |
||||||||||||||||||||||||
| Liability for policy and contract claims |
( |
) |
||||||||||||||||||||||
| Unearned premiums |
( |
) |
||||||||||||||||||||||
| Other liabilities |
||||||||||||||||||||||||
| Long-term borrowings |
||||||||||||||||||||||||
| Separate account liabilities |
||||||||||||||||||||||||
| Liabilities related to discontinued operations |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
( |
) |
||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Commitments and contingencies |
||||||||||||||||||||||||
| Equity: |
||||||||||||||||||||||||
| Class A common stock |
||||||||||||||||||||||||
| Additional paid-in capital |
||||||||||||||||||||||||
| Accumulated other comprehensive income (loss) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Retained earnings |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
| Treasury stock, at cost |
( |
) |
( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Genworth Financial, Inc.’s stockholders’ equity |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
| Noncontrolling interests |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total equity |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities and equity |
$ |
$ |
( |
) |
$ |
$ |
$ |
$ |
||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(Amounts in millions) |
Accumulated other comprehensive income (loss) |
Retained earnings |
Total stockholders’ equity |
|||||||||
Deferred acquisition costs |
$ | $ | $ | |||||||||
Intangible assets |
||||||||||||
Reinsurance recoverable |
||||||||||||
Other assets |
||||||||||||
Future policy benefits |
( |
) | ( |
) | ( |
) | ||||||
Policyholder account balances |
||||||||||||
Market risk benefits, net |
( |
) | ( |
) | ( |
) | ||||||
Other liabilities |
( |
) | ( |
) | ||||||||
Deferred taxes |
||||||||||||
Total |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
(Amounts in millions) |
Long-term care insurance |
Life insurance |
Fixed annuities |
Variable annuities |
Total |
|||||||||||||||
Balances as of December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Adjustment for removal of related balances in accumulated other comprehensive income (loss) |
||||||||||||||||||||
Adjusted balances as of January 1, 2021 |
$ |
$ |
$ |
$ |
||||||||||||||||
Enact segment |
||||||||||||||||||||
Total deferred acquisition costs as of January 1, 2021 |
$ |
|||||||||||||||||||
(Amounts in millions) |
Life insurance |
Fixed annuities |
Variable annuities |
Total |
||||||||||||
Balances as of December 31, 2020 |
$ |
$ |
$ |
$ |
||||||||||||
Adjustment for removal of related balance in accumulated other comprehensive income (loss) |
||||||||||||||||
Adjusted balances as of January 1, 2021 |
$ |
$ |
$ |
$ |
||||||||||||
(Amounts in millions) |
Long-term care insurance |
Life insurance |
Fixed annuities |
Total |
||||||||||||
Balances as of December 31, 2020 |
$ |
$ |
$ |
$ |
||||||||||||
Reclassify liability for policy and contract claims, unearned premiums and due premiums (1) |
||||||||||||||||
Change in discount rate assumptions |
||||||||||||||||
Change in cash flow assumptions (2) |
( |
) |
||||||||||||||
Change in cash flow assumptions, effect of increase (decrease) of the deferred profit liability (2) |
( |
) |
( |
) | ||||||||||||
Adjustment for removal of related balances in accumulated other comprehensive income (loss) |
( |
) |
( |
) |
( |
) | ||||||||||
Adjusted balances as of January 1, 2021 |
||||||||||||||||
Less: reinsurance recoverable |
||||||||||||||||
Adjusted balances as of January 1, 2021, net of reinsurance |
$ |
$ |
$ |
$ |
||||||||||||
(1) |
Upon adopting LDTI, we elected to combine our previously disclosed liability for policy and contract claims, unearned premiums and due premiums, excluding amounts related to mortgage insurance and certain life and annuity products not subject to the new accounting guidance, within the liability for future policy benefits and present the aggregate liability as one line item in our condensed consolidated balance sheets. |
(2) |
For limited-payment contracts, if the remeasured liability for future policy benefits under LDTI is (less) greater than the carrying value immediately before the Transition Date, the deferred profit liability is increased (decreased) with a corresponding (decrease) increase to the liability for future policy benefits. |
(Amounts in millions) |
Fixed index annuities |
Variable annuities |
Total |
|||||||||
Balances as of December 31, 2020 |
$ | $ | $ | |||||||||
Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit risk |
||||||||||||
Adjustment for the cumulative effect of changes in the instrument-specific credit risk since issuance |
||||||||||||
Total adjustment for the difference between carrying amount and fair value |
||||||||||||
Adjusted balances as of January 1, 2021 |
||||||||||||
Less: reinsurance recoverable |
||||||||||||
Adjusted balances as of January 1, 2021, net of reinsurance |
$ | $ | $ | |||||||||
Three months ended March 31, |
||||||||
(Amounts in millions, except per share amounts) |
2023 |
2022 |
||||||
Weighted-average common shares used in basic earnings per share calculations |
||||||||
Potentially dilutive securities: |
||||||||
Stock options, restricted stock units and other equity-based awards |
||||||||
Weighted-average common shares used in diluted earnings per share calculations |
||||||||
Income from continuing operations: |
||||||||
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 |
$ | $ | ||||||
Basic per share |
$ | $ | ||||||
Diluted per share |
$ | $ | ||||||
Loss from discontinued operations: |
||||||||
Loss from discontinued operations, net of taxes |
$ | $ | ( |
) | ||||
Less: net income from discontinued operations attributable to noncontrolling interests |
||||||||
Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ( |
) | ||||
Basic per share |
$ | $ | ||||||
Diluted per share |
$ | $ | ||||||
Net income: |
||||||||
Income from continuing operations |
$ | $ | ||||||
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 |
$ | $ | ||||||
Basic per share |
$ | $ | ||||||
Diluted per share |
$ | $ | ||||||
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Fixed maturity securities—taxable |
$ | $ | ||||||
Fixed maturity securities—non-taxable |
||||||||
Equity securities |
||||||||
Commercial mortgage loans |
||||||||
Policy loans |
||||||||
Limited partnerships |
||||||||
Other invested assets |
||||||||
Cash, cash equivalents, restricted cash and short-term investments |
||||||||
Gross investment income before expenses and fees |
||||||||
Expenses and fees |
( |
) | ( |
) | ||||
Net investment income |
$ | $ | ||||||
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Realized investment gains (losses): |
||||||||
Available-for-sale |
||||||||
Realized gains |
$ | $ | ||||||
Realized losses |
( |
) | ( |
) | ||||
Net realized gains (losses) on available-for-sale |
( |
) | ( |
) | ||||
Net realized gains (losses) on equity securities sold |
||||||||
Net realized gains (losses) on limited partnerships |
||||||||
Total net realized investment gains (losses) |
( |
) | ( |
) | ||||
Net change in allowance for credit losses on available-for-sale |
( |
) | ||||||
Write-down of available-for-sale (1) |
( |
) | ||||||
Net unrealized gains (losses) on equity securities still held |
( |
) | ||||||
Net unrealized gains (losses) on limited partnerships |
||||||||
Commercial mortgage loans |
( |
) | ||||||
Derivative instruments (2) |
||||||||
Other |
( |
) | ||||||
Net investment gains (losses) |
$ | ( |
) | $ | ||||
(1) |
Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis. |
(2) |
See note 6 for additional information on the impact of derivative instruments included in net investment gains (losses). |
(Amounts in millions) |
Beginning balance |
Increase from securities without allowance in previous periods |
Increase (decrease) from securities with allowance in previous periods |
Securities sold |
Decrease due to change in intent or requirement to sell |
Write-offs |
Recoveries |
Ending balance |
||||||||||||||||||||||||
Fixed maturity securities: |
||||||||||||||||||||||||||||||||
U.S. corporate |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Commercial mortgage-backed |
||||||||||||||||||||||||||||||||
Total available-for-sale |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses (1) |
$ | ( |
) | $ | ( |
) | ||
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses (1) |
( |
) | ||||||
Adjustments to policyholder contract balances |
||||||||
Income taxes, net |
||||||||
Net unrealized investment gains (losses) |
( |
) | ( |
) | ||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests |
( |
) | ( |
) | ||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. |
$ | ( |
) | $ | ( |
) | ||
(1) |
Excludes foreign exchange. |
| (Amounts in millions) |
2023 |
2022 |
||||||
| Beginning balance |
$ | ( |
) | $ | ||||
| Unrealized gains (losses) arising during the period: |
||||||||
| Unrealized gains (losses) on fixed maturity securities |
( |
) | ||||||
| Adjustments to policyholder contract balances |
( |
) | ||||||
| Provision for income taxes |
( |
) | ||||||
| |
|
|
|
|||||
| Change in unrealized gains (losses) on investment securities |
( |
) | ||||||
| Reclassification adjustments to net investment (gains) losses, net of taxes of $( |
||||||||
| |
|
|
|
|||||
| Change in net unrealized investment gains (losses) |
( |
) | ||||||
| Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests |
( |
) | ||||||
| |
|
|
|
|||||
| Ending balance |
$ | ( |
) | $ | ||||
| |
|
|
|
|||||
| (Amounts in millions) |
Amortized cost or cost |
Gross unrealized gains |
Gross unrealized losses |
Allowance for credit losses |
Fair value |
|||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
| State and political subdivisions |
( |
) | ||||||||||||||||||
| Non-U.S. government |
( |
) | ||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||
| Utilities |
( |
) | ||||||||||||||||||
| Energy |
( |
) | ||||||||||||||||||
| Finance and insurance |
( |
) | ( |
) | ||||||||||||||||
| Consumer—non-cyclical |
( |
) | ||||||||||||||||||
| Technology and communications |
( |
) | ||||||||||||||||||
| Industrial |
( |
) | ||||||||||||||||||
| Capital goods |
( |
) | ||||||||||||||||||
| Consumer—cyclical |
( |
) | ( |
) | ||||||||||||||||
| Transportation |
( |
) | ||||||||||||||||||
| Other |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total U.S. corporate |
( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||
| Utilities |
( |
) | ||||||||||||||||||
| Energy |
( |
) | ||||||||||||||||||
| Finance and insurance |
( |
) | ||||||||||||||||||
| Consumer—non-cyclical |
( |
) | ||||||||||||||||||
| Technology and communications |
( |
) | ||||||||||||||||||
| Industrial |
( |
) | ||||||||||||||||||
| Capital goods |
( |
) | ||||||||||||||||||
| Consumer—cyclical |
( |
) | ||||||||||||||||||
| Transportation |
( |
) | ||||||||||||||||||
| Other |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total non-U.S. corporate |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Residential mortgage-backed |
( |
) | ||||||||||||||||||
| Commercial mortgage-backed |
( |
) | ( |
) | ||||||||||||||||
| Other asset-backed |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total available-for-sale |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| (Amounts in millions) |
Amortized cost or cost |
Gross unrealized gains |
Gross unrealized losses |
Allowance for credit losses |
Fair value |
|||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
| State and political subdivisions |
( |
) | ||||||||||||||||||
| Non-U.S. government |
( |
) | ||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||
| Utilities |
( |
) | ||||||||||||||||||
| Energy |
( |
) | ||||||||||||||||||
| Finance and insurance |
( |
) | ||||||||||||||||||
| Consumer—non-cyclical |
( |
) | ||||||||||||||||||
| Technology and communications |
( |
) | ||||||||||||||||||
| Industrial |
( |
) | ||||||||||||||||||
| Capital goods |
( |
) | ||||||||||||||||||
| Consumer—cyclical |
( |
) | ||||||||||||||||||
| Transportation |
( |
) | ||||||||||||||||||
| Other |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total U.S. corporate |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||
| Utilities |
( |
) | ||||||||||||||||||
| Energy |
( |
) | ||||||||||||||||||
| Finance and insurance |
( |
) | ||||||||||||||||||
| Consumer—non-cyclical |
( |
) | ||||||||||||||||||
| Technology and communications |
( |
) | ||||||||||||||||||
| Industrial |
( |
) | ||||||||||||||||||
| Capital goods |
( |
) | ||||||||||||||||||
| Consumer—cyclical |
( |
) | ||||||||||||||||||
| Transportation |
( |
) | ||||||||||||||||||
| Other |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total non-U.S. corporate |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Residential mortgage-backed |
( |
) | ||||||||||||||||||
| Commercial mortgage-backed |
( |
) | ||||||||||||||||||
| Other asset-backed |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total available-for-sale |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
|||||||||||||||||||||||||||
| Description of Securities |
||||||||||||||||||||||||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| State and political subdivisions |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Non-U.S. government |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| U.S. corporate |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Non-U.S. corporate |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Residential mortgage-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Commercial mortgage-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other asset-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| % Below cost: |
||||||||||||||||||||||||||||||||||||
| <20% Below cost |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| 20%-50% Below cost |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Investment grade |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| Below investment grade |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
|||||||||||||||||||||||||||
| Description of Securities |
||||||||||||||||||||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||||||||||||||||||
| Utilities |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| Energy |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Finance and insurance |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Technology and communications |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Industrial |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Capital goods |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Transportation |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Subtotal, U.S. corporate securities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||||||||||||||||||
| Utilities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Energy |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Finance and insurance |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Technology and communications |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Industrial |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Capital goods |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Transportation |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Subtotal, non-U.S. corporate securities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for corporate securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
|||||||||||||||||||||||||||
| Description of Securities |
||||||||||||||||||||||||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| State and political subdivisions |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Non-U.S. government |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| U.S. corporate |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Non-U.S. corporate |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Residential mortgage-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Commercial mortgage-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other asset-backed |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| % Below cost: |
||||||||||||||||||||||||||||||||||||
| <20% Below cost |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| 20%-50% Below cost |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| >50% Below cost |
( |
) |
( |
) |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Investment grade |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| Below investment grade |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for fixed maturity securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Less than 12 months |
12 months or more |
Total |
||||||||||||||||||||||||||||||||||
| (Dollar amounts in millions) |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
Fair value |
Gross unrealized losses |
Number of securities |
|||||||||||||||||||||||||||
| Description of Securities |
||||||||||||||||||||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||||||||||||||||||
| Utilities |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| Energy |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Finance and insurance |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Technology and communications |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Industrial |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Capital goods |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Transportation |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Subtotal, U.S. corporate securities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||||||||||||||||||
| Utilities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Energy |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Finance and insurance |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Technology and communications |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Industrial |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Capital goods |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Transportation |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| Other |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Subtotal, non-U.S. corporate securities |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total for corporate securities in an unrealized loss position |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Amortized |
||||||||
| (Amounts in millions) |
cost or cost |
Fair value |
||||||
| Due one year or less |
$ | $ | ||||||
| Due after one year through five years |
||||||||
| Due after five years through ten years |
||||||||
| Due after ten years |
||||||||
| |
|
|
|
|||||
| Subtotal |
||||||||
| Residential mortgage-backed |
||||||||
| Commercial mortgage-backed |
||||||||
| Other asset-backed |
||||||||
| |
|
|
|
|||||
| Total |
$ | $ | ||||||
| |
|
|
|
|||||
March 31, 2023 |
December 31, 2022 |
|||||||||||||||
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
Property type: |
||||||||||||||||
Retail |
$ | % | $ | % | ||||||||||||
Office |
||||||||||||||||
Industrial |
||||||||||||||||
Apartments |
||||||||||||||||
Mixed use |
||||||||||||||||
Other |
||||||||||||||||
Subtotal |
% | % | ||||||||||||||
Allowance for credit losses |
( |
) | ( |
) | ||||||||||||
Total |
$ | $ | ||||||||||||||
March 31, 2023 |
December 31, 2022 |
|||||||||||||||
(Amounts in millions) |
Carrying value |
% of total |
Carrying value |
% of total |
||||||||||||
Geographic region: |
||||||||||||||||
South Atlantic |
$ | % | $ | % | ||||||||||||
Pacific |
||||||||||||||||
Mountain |
||||||||||||||||
Middle Atlantic |
||||||||||||||||
West South Central |
||||||||||||||||
East North Central |
||||||||||||||||
West North Central |
||||||||||||||||
East South Central |
||||||||||||||||
New England |
||||||||||||||||
Subtotal |
% | % | ||||||||||||||
Allowance for credit losses |
( |
) | ( |
) | ||||||||||||
Total |
$ | $ | ||||||||||||||
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Allowance for credit losses: |
||||||||
Beginning balance |
$ | $ | ||||||
Provision |
( |
) | ||||||
Write-offs |
||||||||
Recoveries |
||||||||
Ending balance |
$ | $ | ||||||
(Amounts in millions) |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 and prior |
Total |
|||||||||||||||||||||
Debt-to-value: |
||||||||||||||||||||||||||||
0% - 50% |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
51% - 60% |
||||||||||||||||||||||||||||
61% - 75% |
||||||||||||||||||||||||||||
76% - 100% |
||||||||||||||||||||||||||||
Greater than 100% |
||||||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Debt service coverage ratio: |
||||||||||||||||||||||||||||
Less than 1.00 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
1.00 - 1.25 |
||||||||||||||||||||||||||||
1.26 - 1.50 |
||||||||||||||||||||||||||||
1.51 - 2.00 |
||||||||||||||||||||||||||||
Greater than 2.00 |
||||||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
March 31, 2023 |
||||||||||||||||||||||||
(Amounts in millions) |
0% - 50% |
51% - 60% |
61% - 75% |
76% - 100% |
Greater than 100% |
Total |
||||||||||||||||||
Property type: |
||||||||||||||||||||||||
Retail |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Office |
||||||||||||||||||||||||
Industrial |
||||||||||||||||||||||||
Apartments |
||||||||||||||||||||||||
Mixed use |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
% of total |
% | % | % | % | % | % | ||||||||||||||||||
Weighted-average debt service coverage ratio |
||||||||||||||||||||||||
December 31, 2022 |
||||||||||||||||||||||||
(Amounts in millions) |
0% - 50% |
51% - 60% |
61% - 75% |
76% - 100% |
Greater than 100% |
Total |
||||||||||||||||||
Property type: |
||||||||||||||||||||||||
Retail |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Office |
||||||||||||||||||||||||
Industrial |
||||||||||||||||||||||||
Apartments |
||||||||||||||||||||||||
Mixed use |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
% of total |
% | % | % | % | % | % | ||||||||||||||||||
Weighted-average debt service coverage ratio |
||||||||||||||||||||||||
March 31, 2023 |
||||||||||||||||||||||||
(Amounts in millions) |
Less than 1.00 |
1.00 - 1.25 |
1.26 - 1.50 |
1.51 - 2.00 |
Greater than 2.00 |
Total |
||||||||||||||||||
Property type: |
||||||||||||||||||||||||
Retail |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Office |
||||||||||||||||||||||||
Industrial |
||||||||||||||||||||||||
Apartments |
||||||||||||||||||||||||
Mixed use |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
% of total |
% | % | % | % | % | % | ||||||||||||||||||
Weighted-average debt-to-value |
% | % | % | % | % | % | ||||||||||||||||||
December 31, 2022 |
||||||||||||||||||||||||
(Amounts in millions) |
Less than 1.00 |
1.00 - 1.25 |
1.26 - 1.50 |
1.51 - 2.00 |
Greater than 2.00 |
Total |
||||||||||||||||||
Property type: |
||||||||||||||||||||||||
Retail |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Office |
||||||||||||||||||||||||
Industrial |
||||||||||||||||||||||||
Apartments |
||||||||||||||||||||||||
Mixed use |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Total amortized cost |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
% of total |
% | % | % | % | % | % | ||||||||||||||||||
Weighted-average debt-to-value |
% | % | % | % | % | % | ||||||||||||||||||
Derivative assets |
Derivative liabilities |
|||||||||||||||||||||||
Fair value |
Fair value |
|||||||||||||||||||||||
(Amounts in millions) |
Balance sheet classification |
March 31, 2023 |
December 31, 2022 |
Balance sheet classification |
March 31, 2023 |
December 31, 2022 |
||||||||||||||||||
Derivatives designated as hedges |
||||||||||||||||||||||||
Cash flow hedges: |
||||||||||||||||||||||||
Interest rate swaps |
Other invested assets |
$ |
$ |
Other liabilities |
$ |
$ |
||||||||||||||||||
Foreign currency swaps |
Other invested assets |
Other liabilities |
||||||||||||||||||||||
Total cash flow hedges |
||||||||||||||||||||||||
Total derivatives designated as hedges |
||||||||||||||||||||||||
Derivatives not designated as hedges |
||||||||||||||||||||||||
Equity index options |
Other invested assets |
Other liabilities |
||||||||||||||||||||||
Financial futures |
Other invested assets |
Other liabilities |
||||||||||||||||||||||
Fixed index annuity embedded derivatives |
Other assets |
Policyholder account balances (1) |
||||||||||||||||||||||
Indexed universal life embedded derivatives |
Reinsurance recoverable |
Policyholder account balances (2) |
||||||||||||||||||||||
Total derivatives not designated as hedges |
||||||||||||||||||||||||
Total derivatives |
$ |
$ |
$ |
$ |
||||||||||||||||||||
(1) |
Represents the embedded derivatives associated with our fixed index annuity liabilities. |
(2) |
Represents the embedded derivatives associated with our indexed universal life liabilities. |
| (Notional in millions) |
Measurement |
December 31, 2022 |
Additions |
Maturities/ terminations |
March 31, 2023 |
|||||||||||||||
| Derivatives designated as hedges |
||||||||||||||||||||
| Cash flow hedges: |
||||||||||||||||||||
| Interest rate swaps |
Notional | $ | $ | $ | ( |
) | $ | |||||||||||||
| Foreign currency swaps |
Notional | ( |
) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Total cash flow hedges |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives designated as hedges |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Derivatives not designated as hedges |
||||||||||||||||||||
| Equity index options |
Notional | ( |
) | |||||||||||||||||
| Financial futures |
Notional | ( |
) | |||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives not designated as hedges |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives |
$ | $ | $ | ( |
) | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| (Number of policies) |
Measurement |
December 31, 2022 |
Additions |
Maturities/ terminations |
March 31, 2023 |
|||||||||||||||
| Derivatives not designated as hedges |
||||||||||||||||||||
| Fixed index annuity embedded derivatives |
Policies |
( |
) |
|||||||||||||||||
| Indexed universal life embedded derivatives |
Policies |
( |
) |
|||||||||||||||||
| (Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain (loss) reclassified into net income |
Gain (loss) recognized in net income |
Classification of gain (loss) recognized in net income |
|||||||||||||||
| Interest rate swaps hedging assets |
$ | $ | |
Net investment income |
|
$ | |
Net investment gains (losses) |
| |||||||||||
| Interest rate swaps hedging assets |
|
Net investment gains (losses) |
|
|
Net investment gains (losses) |
| ||||||||||||||
| Interest rate swaps hedging liabilities |
( |
) | |
Interest expense |
|
|
Net investment gains (losses) |
| ||||||||||||
| Interest rate swaps hedging liabilities |
|
Net investment gains (losses) |
|
|
Net investment gains (losses) |
| ||||||||||||||
| Foreign currency swaps |
( |
) | |
Net investment income |
|
|
Net investment gains (losses) |
| ||||||||||||
| Foreign currency swaps |
|
Net investment gains (losses) |
|
|
Net investment gains (losses) |
| ||||||||||||||
| |
|
|
|
|
|
|
|
|
| |||||||||||
| Total |
$ | $ | |
|
$ | |
| |||||||||||||
| |
|
|
|
|
|
|
|
|
| |||||||||||
| (Amounts in millions) |
Gain (loss) recognized in OCI |
Gain (loss) reclassified into net income from OCI |
Classification of gain (loss) reclassified into net income |
Gain (loss) recognized in net income |
Classification of gain (loss) recognized in net income |
|||||||||||||||
| Interest rate swaps hedging assets |
$ |
( |
) |
$ |
Net investment income |
$ |
Net investment gains (losses) |
|||||||||||||
| Interest rate swaps hedging assets |
Net investment gains (losses) |
Net investment gains (losses) |
||||||||||||||||||
| Interest rate swaps hedging liabilities |
( |
) |
Interest expense |
Net investment gains (losses) |
||||||||||||||||
| Foreign currency swaps |
( |
) |
Net investment income |
Net investment gains (losses) |
||||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
| Total |
$ |
( |
) |
$ |
$ |
|||||||||||||||
| |
|
|
|
|
|
|||||||||||||||
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Derivatives qualifying as effective accounting hedges as of January 1 |
$ | $ | ||||||
Current period increases (decreases) in fair value, net of deferred taxes of $( |
( |
) | ||||||
Reclassification to net (income), net of deferred taxes of $ |
( |
) | ( |
) | ||||
Derivatives qualifying as effective accounting hedges as of March 31 |
$ | $ | ||||||
Three months ended March 31, |
Classification of gain (loss) recognized in net income |
|||||||||||
(Amounts in millions) |
2023 |
2022 |
||||||||||
Equity index options |
$ |
$ |
( |
) |
Net investment gains (losses) |
|||||||
Financial futures |
( |
) |
( |
) |
Changes in fair value of market risk benefits and associated hedges |
|||||||
Fixed index annuity embedded derivatives |
( |
) |
Net investment gains (losses) |
|||||||||
Indexed universal life embedded derivatives |
Net investment gains (losses) |
|||||||||||
Total derivatives not designated as hedges |
$ |
$ |
( |
) |
||||||||
March 31, 2023 |
December 31, 2022 |
|||||||||||||||||||||||
(Amounts in millions) |
Derivative assets (1) |
Derivative liabilities (1) |
Net derivatives |
Derivative assets (1) |
Derivative liabilities (1) |
Net derivatives |
||||||||||||||||||
Amounts presented in the balance sheet: |
||||||||||||||||||||||||
Gross amounts recognized |
$ | $ | $ | ( |
) | $ | $ | $ | ( |
) | ||||||||||||||
Gross amounts offset in the balance sheet |
||||||||||||||||||||||||
Net amounts presented in the balance sheet |
( |
) | ( |
) | ||||||||||||||||||||
Gross amounts not offset in the balance sheet: |
||||||||||||||||||||||||
Financial instruments (2) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Collateral received |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Collateral pledged |
( |
) | ( |
) | ||||||||||||||||||||
Over collateralization |
( |
) | ( |
) | ||||||||||||||||||||
Net amount |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
(1) |
Does not include amounts related to embedded derivatives as of March 31, 2023 and December 31, 2022. |
(2) |
Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty. |
| • | Third-party pricing services: |
(Amounts in millions) |
Fair value |
Primary methodologies |
Significant inputs | |||||
U.S. government, agencies and government-sponsored enterprises |
$ |
|||||||
State and political subdivisions |
$ |
|||||||
Non-U.S. government |
$ |
|||||||
U.S. corporate |
$ |
|||||||
Non-U.S. corporate |
$ |
|||||||
Residential mortgage-backed |
$ |
|||||||
Commercial mortgage-backed |
$ |
|||||||
Other asset-backed |
$ |
|||||||
| • | Internal models: non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities was $ |
| • | Broker quotes: non-U.S. corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $ |
| • | Internal models: non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes,collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $ |
March 31, 2023 |
||||||||||||||||||||
(Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
NAV (1) |
|||||||||||||||
Assets |
||||||||||||||||||||
Investments: |
||||||||||||||||||||
Fixed maturity securities: |
||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
State and political subdivisions |
||||||||||||||||||||
Non-U.S. government |
||||||||||||||||||||
U.S. corporate: |
||||||||||||||||||||
Utilities |
||||||||||||||||||||
Energy |
||||||||||||||||||||
Finance and insurance |
||||||||||||||||||||
Consumer—non-cyclical |
||||||||||||||||||||
Technology and communications |
||||||||||||||||||||
Industrial |
||||||||||||||||||||
Capital goods |
||||||||||||||||||||
Consumer—cyclical |
||||||||||||||||||||
Transportation |
||||||||||||||||||||
Other |
||||||||||||||||||||
Total U.S. corporate |
||||||||||||||||||||
Non-U.S. corporate: |
||||||||||||||||||||
Utilities |
||||||||||||||||||||
Energy |
||||||||||||||||||||
Finance and insurance |
||||||||||||||||||||
Consumer—non-cyclical |
||||||||||||||||||||
Technology and communications |
||||||||||||||||||||
Industrial |
||||||||||||||||||||
Capital goods |
||||||||||||||||||||
Consumer—cyclical |
||||||||||||||||||||
Transportation |
||||||||||||||||||||
Other |
||||||||||||||||||||
Total non-U.S. corporate |
||||||||||||||||||||
Residential mortgage-backed |
||||||||||||||||||||
Commercial mortgage-backed |
||||||||||||||||||||
Other asset-backed |
||||||||||||||||||||
Total fixed maturity securities |
||||||||||||||||||||
Equity securities |
||||||||||||||||||||
Limited partnerships |
||||||||||||||||||||
Other invested assets: |
||||||||||||||||||||
Derivative assets: |
||||||||||||||||||||
Interest rate swaps |
||||||||||||||||||||
Foreign currency swaps |
||||||||||||||||||||
Equity index options |
||||||||||||||||||||
Total derivative assets |
||||||||||||||||||||
Short-term investments |
||||||||||||||||||||
Total other invested assets |
||||||||||||||||||||
Separate account assets |
||||||||||||||||||||
Total assets |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
(1) |
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
December 31, 2022 |
||||||||||||||||||||
| (Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
NAV (1) |
|||||||||||||||
| Assets |
||||||||||||||||||||
| Investments: |
||||||||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| State and political subdivisions |
||||||||||||||||||||
| Non-U.S. government |
||||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||
| Utilities |
||||||||||||||||||||
| Energy |
||||||||||||||||||||
| Finance and insurance |
||||||||||||||||||||
| Consumer—non-cyclical |
||||||||||||||||||||
| Technology and communications |
||||||||||||||||||||
| Industrial |
||||||||||||||||||||
| Capital goods |
||||||||||||||||||||
| Consumer—cyclical |
||||||||||||||||||||
| Transportation |
||||||||||||||||||||
| Other |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total U.S. corporate |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||
| Utilities |
||||||||||||||||||||
| Energy |
||||||||||||||||||||
| Finance and insurance |
||||||||||||||||||||
| Consumer—non-cyclical |
||||||||||||||||||||
| Technology and communications |
||||||||||||||||||||
| Industrial |
||||||||||||||||||||
| Capital goods |
||||||||||||||||||||
| Consumer—cyclical |
||||||||||||||||||||
| Transportation |
||||||||||||||||||||
| Other |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total non-U.S. corporate |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Residential mortgage-backed |
||||||||||||||||||||
| Commercial mortgage-backed |
||||||||||||||||||||
| Other asset-backed |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total fixed maturity securities |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Equity securities |
||||||||||||||||||||
| Limited partnerships |
||||||||||||||||||||
| Other invested assets: |
||||||||||||||||||||
| Derivative assets: |
||||||||||||||||||||
| Interest rate swaps |
||||||||||||||||||||
| Foreign currency swaps |
||||||||||||||||||||
| Equity index options |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total derivative assets |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Short-term investments |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total other invested assets |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Separate account assets |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total assets |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
(1) |
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
Beginning balance as of January 1, 2023 |
Total realized and unrealized gains (losses) |
Ending balance as of March 31, 2023 |
Total gains (losses) attributable to assets still held |
|||||||||||||||||||||||||||||||||||||||||||||
| (Amounts in millions) |
Included in net income |
Included in OCI |
Purchases |
Sales |
Issuances |
Settlements |
Transfer into Level 3 (1) |
Transfer out of Level 3 (1) |
Included in net income |
Included in OCI |
||||||||||||||||||||||||||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||||||
| State and political subdivisions |
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| U.S. corporate: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Utilities |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Energy |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Finance and insurance |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Technology and communications |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Industrial |
||||||||||||||||||||||||||||||||||||||||||||||||
| Capital goods |
||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Transportation |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total U.S. corporate |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Utilities |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Energy |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Finance and insurance |
||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer—non-cyclical |
||||||||||||||||||||||||||||||||||||||||||||||||
| Technology and communications |
||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial |
||||||||||||||||||||||||||||||||||||||||||||||||
| Capital goods |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer—cyclical |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Transportation |
||||||||||||||||||||||||||||||||||||||||||||||||
| Other |
||||||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total non-U.S. corporate |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Residential mortgage-backed |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed |
||||||||||||||||||||||||||||||||||||||||||||||||
| Other asset-backed |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total fixed maturity securities |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Equity securities |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Limited partnerships |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Equity index options |
||||||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total derivative assets |
||||||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total other invested assets |
||||||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total Level 3 assets |
$ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
(1) |
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
Beginning balance as of January 1, 2022 |
Total realized and unrealized gains (losses) |
Ending balance as of March 31, 2022 |
Total gains (losses) attributable to assets still held |
|||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) |
Included in net income |
Included in OCI |
Purchases |
Sales |
Issuances |
Settlements |
Transfer into Level 3 (1) |
Transfer out of Level 3 (1) |
Included in net income |
Included in OCI |
||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: |
||||||||||||||||||||||||||||||||||||||||||||||||
tical subdiions |
$ | $ | $ | ( |
) | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( |
) | ||||||||||||||||||||||||||||||||
N-U.S. rnment |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
U.S. corporate: |
||||||||||||||||||||||||||||||||||||||||||||||||
Utilities |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Energy |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Finance and insurance |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Consumer—non-cyclical |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Technology and communications |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Industrial |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Capital goods |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Consumer—cyclical |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Transportation |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Other |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Total U.S. corporate |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Non-U.S. corporate: |
||||||||||||||||||||||||||||||||||||||||||||||||
Utilities |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Energy |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Finance and insurance |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Consumer—non-cyclical |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Technology and communications |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Industrial |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Capital goods |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Consumer—cyclical |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Transportation |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Other |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Total non-U.S. corporate |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Residential mortgage-backed |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage-backed |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
Other asset-backed |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
Equity securities |
( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
Limited partnerships |
||||||||||||||||||||||||||||||||||||||||||||||||
Other invested assets: |
||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: |
||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Total derivative assets |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Total other invested assets |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
Total Level 3 assets |
$ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
(1) |
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(Amounts in millions) |
2023 |
2022 |
||||||
Total realized and unrealized gains (losses) included in net income: |
||||||||
| $ | $ | |||||||
| ( |
) | ( |
) | |||||
| $ | $ | ( |
) | |||||
Net gains (losses) included in net income attributable to assets still held: |
||||||||
| $ | $ | |||||||
| ( |
) | ( |
) | |||||
| $ | $ | ( |
) | |||||
(Amounts in millions) |
Valuation technique |
Fair value |
Unobservable input |
Range |
Weighted- average (1) |
|||||||||||||||
Fixed maturity securities: |
||||||||||||||||||||
U.S. corporate: |
||||||||||||||||||||
Utilities |
$ |
Credit spreads |
bps - bps |
|||||||||||||||||
Energy |
Credit spreads |
bps |
||||||||||||||||||
Finance and insurance |
Credit spreads |
bps - bps |
||||||||||||||||||
Consumer—non-cyclical |
Credit spreads |
bps - bps |
||||||||||||||||||
Technology and communications |
Credit spreads |
bps - bps |
||||||||||||||||||
Industrial |
Credit spreads |
bps - bps |
||||||||||||||||||
Capital goods |
Credit spreads |
bps - bps |
||||||||||||||||||
Consumer—cyclical |
Credit spreads |
bps - bps |
||||||||||||||||||
Transportation |
Credit spreads |
bps - bps |
||||||||||||||||||
Other |
Credit spreads |
bps - bps |
||||||||||||||||||
Total U.S. corporate |
$ |
Credit spreads |
bps - bps |
|||||||||||||||||
Non-U.S. corporate: |
||||||||||||||||||||
Utilities |
$ |
Credit spreads |
bps - bps |
|||||||||||||||||
Energy |
Credit spreads |
bps - bps |
||||||||||||||||||
Finance and insurance |
Credit spreads |
bps - bps |
||||||||||||||||||
Consumer—non-cyclical |
Credit spreads |
bps - bps |
||||||||||||||||||
Technology and communications |
Credit spreads |
bps - bps |
||||||||||||||||||
Industrial |
Credit spreads |
bps - bps |
||||||||||||||||||
Capital goods |
Credit spreads |
bps - bps |
||||||||||||||||||
Transportation |
Credit spreads |
bps - bps |
||||||||||||||||||
Other |
Credit spreads |
bps - bps |
||||||||||||||||||
Total non-U.S. corporate |
$ |
Credit spreads |
bps - bps |
|||||||||||||||||
Derivative assets: |
||||||||||||||||||||
Equity index options |
flows |
$ |
Equity index volatility |
% - % |
% |
|||||||||||||||
Lapse rate |
% - % |
% |
||||||||||||||||||
Non-performance risk (counterparty credit risk) |
bps - bps |
|||||||||||||||||||
Other assets (2) |
model |
$ |
Equity index volatility |
% - % |
||||||||||||||||
(1) |
Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities, notional for derivative assets and the policyholder account balances associated with the instrument for the net reinsured portion of our variable annuity MRBs. |
(2) |
Represents the net reinsured portion of our variable annuity MRBs. |
March 31, 2023 |
||||||||||||||||
(Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Liabilities |
||||||||||||||||
Policyholder account balances: |
||||||||||||||||
Fixed index annuity embedded derivatives |
$ | $ | $ | $ | ||||||||||||
Indexed universal life embedded derivatives |
||||||||||||||||
Total policyholder account balances |
||||||||||||||||
Derivative liabilities: |
||||||||||||||||
Interest rate swaps |
||||||||||||||||
Foreign currency swaps |
||||||||||||||||
Total derivative liabilities |
||||||||||||||||
Total liabilities |
$ | $ | $ | $ | ||||||||||||
December 31, 2022 |
||||||||||||||||
(Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||
Liabilities |
||||||||||||||||
Policyholder account balances: |
||||||||||||||||
Fixed index annuity embedded derivatives |
$ | $ | $ | $ | ||||||||||||
Indexed universal life embedded derivatives |
||||||||||||||||
Total policyholder account balances |
||||||||||||||||
Derivative liabilities: |
||||||||||||||||
Interest rate swaps |
||||||||||||||||
Total derivative liabilities |
||||||||||||||||
Total liabilities |
$ | $ | $ | $ | ||||||||||||
Beginning balance as of January 1, 2023 |
Total realized and unrealized (gains) losses |
Ending balance as of March 31, 2023 |
Total (gains) losses attributable to liabilities still held |
|||||||||||||||||||||||||||||||||||||||||||||
| (Amounts in millions) |
Included in net (income) |
Included in OCI |
Purchases |
Sales |
Issuances |
Settlements |
Transfer into Level 3 |
Transfer out of Level 3 |
Included in net (income) |
Included in OCI |
||||||||||||||||||||||||||||||||||||||
| Policyholder account balances: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed index annuity embedded derivatives |
$ | $ | |
$ | |
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
$ | ( |
) | $ | $ | |
$ | |
||||||||||||||||||||||||
| Indexed universal life embedded derivatives |
( |
) | |
( |
) | |||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total policyholder account balances |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total Level 3 liabilities |
$ | $ | ( |
) | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Beginning balance as of January 1, 2022 |
Total realized and unrealized (gains) losses |
Ending balance as of March 31, 2022 |
Total (gains) losses attributable to liabilities still held |
|||||||||||||||||||||||||||||||||||||||||||||
| (Amounts in millions) |
Included in net (income) |
Included in OCI |
Purchases |
Sales |
Issuances |
Settlements |
Transfer into Level 3 |
Transfer out of Level 3 |
Included in net (income) |
Included in OCI |
||||||||||||||||||||||||||||||||||||||
| Policyholder account balances: |
||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed index annuity embedded derivatives |
$ | $ | ( |
) | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Indexed universal life embedded derivatives |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total policyholder account balances |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Total Level 3 liabilities |
$ | $ | ( |
) | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (Amounts in millions) |
2023 |
2022 |
||||||
| Total realized and unrealized (gains) losses included in net (income): |
||||||||
| |
$ | $ | ||||||
| |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
| Total (gains) losses included in net (income) attributable to liabilities still held: |
||||||||
| |
$ | $ | ||||||
| |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
(Amounts in millions) |
Valuation technique |
Fair value |
Unobservable input |
Range |
Weighted- average (1) |
|||||||||||||||
Policyholder account balances: |
||||||||||||||||||||
Fixed index annuity embedded derivatives |
method |
$ |
Expected future interest credited |
|||||||||||||||||
Indexed universal life embedded derivatives |
method |
$ |
Expected future interest credited |
|||||||||||||||||
Market risk benefits: (2) |
||||||||||||||||||||
GMWB withdrawal utilization rate |
||||||||||||||||||||
Non-performance risk (credit spreads) |
||||||||||||||||||||
Fixed index annuities |
model |
$ |
Expected future interest credited |
|||||||||||||||||
Lapse rate |
||||||||||||||||||||
GMWB withdrawal utilization rate |
||||||||||||||||||||
Non-performance risk (credit spreads) |
||||||||||||||||||||
Variable annuities |
|
model |
|
$ |
Equity index volatility |
|||||||||||||||
(1) |
Unobservable inputs weighted by the policyholder account balances associated with the instrument. |
(2) |
Refer to note 13 for additional details related to MRBs. |
March 31, 2023 |
||||||||||||||||||||||||
Notional amount |
Carrying amount |
Fair value |
||||||||||||||||||||||
(Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
Commercial mortgage loans, net |
(1 |
) |
$ | $ | $ | $ | $ | |||||||||||||||||
Bank loan investments |
(1 |
) |
||||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||
Long-term borrowings |
(1 |
) |
||||||||||||||||||||||
Investment contracts |
(1 |
) |
|
|||||||||||||||||||||
Other firm commitments: |
||||||||||||||||||||||||
Commitments to fund bank loan investments |
$ | |||||||||||||||||||||||
Ordinary course of business lending commitments |
||||||||||||||||||||||||
(1) |
These financial instruments do not have notional amounts. |
December 31, 2022 |
||||||||||||||||||||||||
Notional amount |
Carrying amount |
Fair value |
||||||||||||||||||||||
(Amounts in millions) |
Total |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
Commercial mortgage loans, net |
(1 |
) |
$ | $ | $ | $ | $ | |||||||||||||||||
Bank loan investments |
(1 |
) |
||||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||
Long-term borrowings |
(1 |
) |
||||||||||||||||||||||
Investment contracts |
(1 |
) |
||||||||||||||||||||||
Other firm commitments: |
||||||||||||||||||||||||
Commitments to fund bank loan investments |
$ | |||||||||||||||||||||||
Ordinary course of business lending commitments |
||||||||||||||||||||||||
(1) |
These financial instruments do not have notional amounts. |
March 31, 2023 |
December 31, 2022 |
|||||||||||||||
(Amounts in millions) |
Carrying value |
Commitments to fund |
Carrying value |
Commitments to fund |
||||||||||||
Limited partnerships accounted for at NAV: |
||||||||||||||||
Private equity funds (1) |
$ | $ | $ | $ | ||||||||||||
Real estate funds (2) |
||||||||||||||||
Infrastructure funds (3) |
||||||||||||||||
Total limited partnerships accounted for at NAV |
||||||||||||||||
Limited partnerships accounted for at fair value |
||||||||||||||||
Limited partnerships accounted for under equity method of accounting |
||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
(1) |
This class employs various investment strategies such as leveraged buyout, growth equity, venture capital and mezzanine financing, generally investing in debt or equity positions directly in companies or assets of various sizes across diverse industries globally, primarily concentrated in North America. |
(2) |
This class invests in real estate in North America, Europe and Asia via direct property ownership, joint ventures, mortgages and investments in debt and equity instruments. |
(3) |
This class invests in the debt or equity of cash flow generating assets diversified across a variety of industries, including transportation, energy infrastructure, renewable power, social infrastructure, power generation, water, telecommunications and other regulated entities globally. |
March 31, 2023 |
||||||||||||||||||||
(Amounts in millions) |
Long-term care insurance |
Life insurance |
Fixed annuities |
Variable annuities |
Total |
|||||||||||||||
Balance as of January 1 |
$ | $ | $ | $ | $ | |||||||||||||||
Costs deferred |
||||||||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance as of March 31 |
$ | $ | $ | $ | ||||||||||||||||
Enact segment |
||||||||||||||||||||
Total deferred acquisition costs |
$ | |||||||||||||||||||
December 31, 2022 |
||||||||||||||||||||
(Amounts in millions) |
Long-term care insurance |
Life insurance |
Fixed annuities |
Variable annuities |
Total |
|||||||||||||||
Balance as of January 1 |
$ | $ | $ | $ | $ | |||||||||||||||
Costs deferred |
||||||||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance as of December 31 |
$ | $ | $ | $ | ||||||||||||||||
Enact segment |
||||||||||||||||||||
Total deferred acquisition costs |
$ | |||||||||||||||||||
December 31, 2021 |
||||||||||||||||||||
(Amounts in millions) |
Long-term care insurance |
Life insurance |
Fixed annuities |
Variable annuities |
Total |
|||||||||||||||
Balance as of January 1 |
$ | $ | $ | $ | $ | |||||||||||||||
Costs deferred |
||||||||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Balance as of December 31 |
$ | $ | $ | $ | ||||||||||||||||
Enact segment |
||||||||||||||||||||
Total deferred acquisition costs |
$ | |||||||||||||||||||
March 31, 2023 |
December 31, 2022 |
|||||||||||||||
(Amounts in millions) |
Gross carrying amount |
Accumulated amortization |
Gross carrying amount |
Accumulated amortization |
||||||||||||
PVFP |
$ | $ | ( |
) | $ | ( |
) | |||||||||
Capitalized software |
( |
) | ( |
) | ||||||||||||
Deferred sales inducements to contractholders |
( |
) | ( |
) | ||||||||||||
Other |
( |
) | ( |
) | ||||||||||||
Total |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
million, respectively. Amortization expense related to deferred sales inducements of $
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
|||||||||
Beginning balance |
$ | $ | $ | |||||||||
Costs deferred |
||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ||||||
Ending balance |
$ | $ | $ | |||||||||
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
Long-term care insurance |
$ | $ | ||||||
Life insurance |
||||||||
Fixed annuities |
||||||||
Total long-duration insurance contracts |
||||||||
Deferred profit liability |
||||||||
Cost of reinsurance |
||||||||
Total future policy benefits |
$ | $ | ||||||
March 31, 2023 |
||||||||||||
(Dollar amounts in millions) |
Long-term care insurance |
Life insurance (1) |
Fixed annuities |
|||||||||
Present value of expected net premiums: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
( |
) | ||||||||||
Effect of actual variances from expected experience |
( |
) | ||||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Net premiums collected (2) |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other |
||||||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
||||||||||||
Ending balance as of March 31 |
$ | $ | $ | |||||||||
Present value of expected future policy benefits: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
( |
) | ||||||||||
Effect of actual variances from expected experience |
( |
) | ( |
) | ||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other |
( |
) | ||||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
||||||||||||
Ending balance as of March 31 |
$ | $ | $ | |||||||||
Net liability for future policy benefits, before flooring adjustments |
$ | $ | $ | |||||||||
Flooring adjustments |
||||||||||||
Net liability for future policy benefits |
||||||||||||
Less: reinsurance recoverable |
||||||||||||
Net liability for future policy benefits, net of reinsurance recoverable |
$ | $ | $ | |||||||||
Weighted-average liability duration (years) |
||||||||||||
(1) |
The components of the life insurance rollforward exclude flooring. Life insurance reserves are floored on level premium term life insurance products to ensure the liability for future policy benefits for each policy is not less than zero. |
(2) |
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments. |
December 31, 2022 |
||||||||||||
(Dollar amounts in millions) |
Long-term care insurance |
Life insurance (1) |
Fixed annuities |
|||||||||
Present value of expected net premiums: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
||||||||||||
Effect of actual variances from expected experience |
||||||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Net premiums collected (2) |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other |
||||||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
( |
) | ||||||||||
Ending balance as of December 31 |
$ | $ | $ | |||||||||
Present value of expected future policy benefits: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
( |
) | ||||||||||
Effect of actual variances from expected experience |
( |
) | ||||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Reinsurance transactions (3) |
( |
) | ||||||||||
Other |
||||||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
||||||||||||
Ending balance as of December 31 |
$ | $ | $ | |||||||||
Net liability for future policy benefits, before flooring adjustments |
$ | $ | $ | |||||||||
Flooring adjustments |
||||||||||||
Net liability for future policy benefits |
||||||||||||
Less: reinsurance recoverable |
||||||||||||
Net liability for future policy benefits, net of reinsurance recoverable |
$ | $ | $ | |||||||||
Weighted-average liability duration (years) |
||||||||||||
(1) |
The components of the life insurance rollforward exclude flooring. Life insurance reserves are floored on level premium term life insurance products to ensure the liability for future policy benefits for each policy is not less than zero. |
(2) |
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments. |
(3) |
Related to a third-party recapture of certain single premium immediate annuity contracts in 2022. |
December 31, 2021 |
||||||||||||
(Dollar amounts in millions) |
Long-term care insurance |
Life insurance (1) |
Fixed annuities |
|||||||||
Present value of expected net premiums: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
||||||||||||
Effect of actual variances from expected experience |
( |
) | ||||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Net premiums collected (2) |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other |
||||||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
||||||||||||
Ending balance as of December 31 |
$ | $ | $ | |||||||||
Present value of expected future policy benefits: |
||||||||||||
Beginning balance as of January 1 |
$ | $ | $ | |||||||||
Beginning balance, at original discount rate |
$ | $ | $ | |||||||||
Effect of changes in cash flow assumptions |
||||||||||||
Effect of actual variances from expected experience |
( |
) | ( |
) | ||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other |
( |
) | ( |
) | ||||||||
Ending balance, at original discount rate |
||||||||||||
Effect of changes in discount rate assumptions |
||||||||||||
Ending balance as of December 31 |
$ | $ | $ | |||||||||
Net liability for future policy benefits, before flooring adjustments |
$ | $ | $ | |||||||||
Flooring adjustments |
||||||||||||
Net liability for future policy benefits |
||||||||||||
Less: reinsurance recoverable |
||||||||||||
Net liability for future policy benefits, net of reinsurance recoverable |
$ | $ | $ | |||||||||
Weighted-average liability duration (years) |
||||||||||||
(1) |
The components of the life insurance rollforward exclude flooring. Life insurance reserves are floored on level premium term life insurance products to ensure the liability for future policy benefits for each policy is not less than zero. |
(2) |
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments. |
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
|||||||||
Future policy benefits beginning balance, excluding flooring adjustments |
$ | $ | $ | |||||||||
Future policy benefits beginning balance, including flooring adjustments |
$ | $ | $ | |||||||||
Liability remeasurement (gains) losses |
||||||||||||
Current period changes, at original discount rate |
( |
) | ( |
) | ( |
) | ||||||
Changes in discount rate assumptions, excluding flooring adjustments |
( |
) | ( |
) | ||||||||
Change in flooring adjustments, at original discount rate |
||||||||||||
Changes in discount rate assumptions, flooring adjustments |
( |
) | ||||||||||
Future policy benefits ending balance, including flooring adjustments |
$ | $ | $ | |||||||||
Future policy benefits ending balance, excluding flooring adjustments |
$ | $ | $ | |||||||||
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
||||||||||
Long-term care insurance |
||||||||||||
Interest accretion rate |
% | % | % | |||||||||
Current discount rate |
% | % | % | |||||||||
Life insurance |
||||||||||||
Interest accretion rate |
% | % | % | |||||||||
Current discount rate |
% | % | % | |||||||||
Fixed annuities |
||||||||||||
Interest accretion rate |
% | % | % | |||||||||
Current discount rate |
% | % | % | |||||||||
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
||||||||||||||||||||||
(Amounts in millions) |
Undiscounted |
Discounted |
Undiscounted |
Discounted |
Undiscounted |
Discounted |
||||||||||||||||||
Long-term care insurance |
||||||||||||||||||||||||
Expected future gross premiums |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Expected future benefit payments |
||||||||||||||||||||||||
Life insurance |
||||||||||||||||||||||||
Expected future gross premiums |
||||||||||||||||||||||||
Expected future benefit payments |
||||||||||||||||||||||||
Fixed annuities |
||||||||||||||||||||||||
Expected future gross premiums |
||||||||||||||||||||||||
Expected future benefit payments |
||||||||||||||||||||||||
2023 |
2022 |
|||||||||||||||
(Amounts in millions) |
Gross premiums |
Interest expense (1) |
Gross premiums |
Interest expense (1) |
||||||||||||
Long-term care insurance |
$ | $ | $ | $ | ||||||||||||
Life insurance |
||||||||||||||||
Fixed annuities |
||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
(1) |
Amounts for interest accretion, labeled “interest expense” in the table above, are included in benefits and other changes in policy reserves in the condensed consolidated statements of income. |
| (Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
| Life insurance |
$ | $ | ||||||
| Fixed annuities |
||||||||
| Variable annuities |
||||||||
| |
|
|
|
|||||
| Total investment contracts |
||||||||
| Fixed indexed annuity embedded derivatives (1) |
||||||||
| Indexed universal life embedded derivatives (1) |
||||||||
| Additional insurance liabilities (2) |
||||||||
| |
|
|
|
|||||
| Total policyholder account balances |
$ | $ | ||||||
| |
|
|
|
|||||
(1) |
See note 6 for additional information. |
(2) |
Amount represents additional liabilities related to death or other insurance benefits that are recorded within policyholder account balances and are considered long-duration insurance contracts. See note 12 for additional information. |
March 31, 2023 |
||||||||||||
| (Dollar amounts in millions) |
Life insurance |
Fixed annuities |
Variable annuities |
|||||||||
| Beginning balance as of January 1 |
$ | $ | $ | |||||||||
| Issuances |
||||||||||||
| Premiums received |
||||||||||||
| Policy charges |
( |
) | ( |
) | ( |
) | ||||||
| Surrenders and withdrawals |
( |
) | ( |
) | ( |
) | ||||||
| Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
| Net transfers from (to) separate accounts |
||||||||||||
| Interest credited |
||||||||||||
| Other |
||||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance as of March 31 |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Weighted-average crediting rate |
% | % | % | |||||||||
| Net amount at risk (1) |
$ | $ | $ | |||||||||
| Cash surrender value |
$ | $ | $ | |||||||||
(1) |
The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs. |
December 31, 2022 |
||||||||||||
| (Dollar amounts in millions) |
Life insurance |
Fixed annuities |
Variable annuities |
|||||||||
| Beginning balance as of January 1 |
$ | $ | $ | |||||||||
| Issuances |
||||||||||||
| Premiums received |
||||||||||||
| Policy charges |
( |
) | ( |
) | ( |
) | ||||||
| Surrenders and withdrawals |
( |
) | ( |
) | ( |
) | ||||||
| Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
| Net transfers from (to) separate accounts |
||||||||||||
| Interest credited |
||||||||||||
| Other |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance as of December 31 |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Weighted-average crediting rate |
% | % | % | |||||||||
| Net amount at risk (1) |
$ | $ | $ | |||||||||
| Cash surrender value |
$ | $ | $ | |||||||||
(1) |
The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs. |
December 31, 2021 |
||||||||||||
| (Dollar amounts in millions) |
Life insurance |
Fixed annuities |
Variable annuities |
|||||||||
| Beginning balance as of January 1 |
$ | $ | $ | |||||||||
| Issuances |
||||||||||||
| Premiums received |
||||||||||||
| Policy charges |
( |
) | ( |
) | ( |
) | ||||||
| Surrenders and withdrawals |
( |
) | ( |
) | ( |
) | ||||||
| Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
| Net transfers from (to) separate accounts |
||||||||||||
| Interest credited |
||||||||||||
| Other |
( |
) | ||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance as of December 31 |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
| Weighted-average crediting rate |
% | % | % | |||||||||
| Net amount at risk (1) |
$ | $ | $ | |||||||||
| Cash surrender value |
$ | $ | $ | |||||||||
(1) |
The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs. |
March 31, 2023 |
||||||||||||||||||||
(Amounts in millions) |
At guaranteed minimum |
points above |
points above |
Greater than points above |
Total (1) |
|||||||||||||||
Less than |
$ | $ | $ | $ | $ | |||||||||||||||
Total |
$ | $ | $ | $ | $ | |||||||||||||||
(1) |
Excludes investment contracts of approximately $that have a market component to their crediting strategy. |
December 31, 2022 |
||||||||||||||||||||
(Amounts in millions) |
At guaranteed minimum |
points above |
points above |
Greater than points above |
Total (1) |
|||||||||||||||
Less than |
$ | $ | $ | $ | $ | |||||||||||||||
Total |
$ | $ | $ | $ | $ | |||||||||||||||
(1) |
Excludes investment contracts of approximately $ |
(Dollar amounts in millions) |
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
|||||||||
Beginning balance |
$ | $ | $ | |||||||||
Beginning balance before shadow accounting adjustments |
||||||||||||
Effect of changes in cash flow assumptions |
( |
) | ||||||||||
Effect of actual variances from expected experience |
( |
) | ||||||||||
Adjusted beginning balance |
||||||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Assessments collected |
||||||||||||
Benefit payments |
( |
) | ( |
) | ( |
) | ||||||
Derecognition (lapses and withdrawals) |
||||||||||||
Other (flooring adjustment) |
||||||||||||
Ending balance before shadow accounting adjustments |
||||||||||||
Effect of shadow accounting adjustments |
( |
) | ( |
) | ||||||||
Ending balance |
||||||||||||
Less: reinsurance recoverable |
||||||||||||
Additional insurance liabilities, net of reinsurance recoverable |
$ | $ | $ | |||||||||
Weighted-average liability duration (years) |
||||||||||||
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
||||||||||
Interest accretion rate (1) |
% | % | % | |||||||||
Projected crediting rate (2) |
% | % | % | |||||||||
(1) |
The interest accretion rate is determined by using the weighted-average policyholder crediting rates for the underlying policies over the period in-force, and based on the adjusted beginning balance, is used to measure the amount of interest accrual. |
(2) |
The projected crediting rate is determined by using a future crediting rate curve that utilizes a portfolio approach reflecting anticipated reinvestment activity and runoff of existing assets over the projection period. The projected crediting rate is used to discount future assessments and excess benefits. |
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Gross assessments |
$ | $ | ||||||
Interest expense (1) |
$ | $ | ||||||
(1) |
Amounts for interest accretion, labeled “interest expense” in the table above, are included in benefits and other changes in policy reserves in the condensed consolidated statements of income. |
March 31, 2023 |
December 31, 2022 |
|||||||||||||||||||||||
(Amounts in millions) |
Asset |
Liability |
Net liability |
Asset |
Liability |
Net liability |
||||||||||||||||||
Fixed index annuities |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Variable annuities |
||||||||||||||||||||||||
Total market risk benefits |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
March 31, 2023 |
||||||||||||
(Dollar amounts in millions) |
Fixed index annuities |
Variable annuities |
Reinsurance recoverable (1) |
|||||||||
Beginning balance as of January 1 |
$ |
$ |
$ |
|||||||||
Beginning balance before effect of changes in instrument-specific credit risk |
$ |
$ |
$ |
|||||||||
Issuances |
||||||||||||
Interest accrual |
||||||||||||
Attributed fees collected |
||||||||||||
Benefit payments |
( |
) |
( |
) | ||||||||
Effect of changes in interest rates |
||||||||||||
Effect of changes in equity markets |
( |
) |
( |
) |
( |
) | ||||||
Actual policyholder behavior different from expected behavior |
( |
) |
||||||||||
Effect of changes in future expected policyholder behavior |
||||||||||||
Effect of changes in other future expected assumptions |
||||||||||||
Ending balance before effect of changes in instrument-specific credit risk |
||||||||||||
Effect of changes in instrument-specific credit risk |
||||||||||||
Ending balance as of March 31 |
$ |
|||||||||||
Less: reinsurance recoverable |
||||||||||||
Market risk benefits, net of reinsurance recoverable |
$ |
$ |
||||||||||
Weighted-average attained age of contractholders |
||||||||||||
Net amount at risk (2) |
||||||||||||
(1) |
Represents the net reinsured asset related to our variable annuity MRBs. |
(2) |
See note 11 for additional information on the net amount at risk. |
December 31, 2022 |
||||||||||||
| (Dollar amounts in millions) |
Fixed index annuities |
Variable annuities |
Reinsurance recoverable (1) |
|||||||||
| Beginning balance as of January 1 |
$ |
$ |
$ |
|||||||||
| Beginning balance before effect of changes in instrument-specific credit risk |
$ |
$ |
$ |
|||||||||
| Issuances |
||||||||||||
| Interest accrual |
||||||||||||
| Attributed fees collected |
||||||||||||
| Benefit payments |
( |
) |
( |
) | ||||||||
| Effect of changes in interest rates |
( |
) |
( |
) |
( |
) | ||||||
| Effect of changes in equity markets |
||||||||||||
| Actual policyholder behavior different from expected behavior |
( |
) |
||||||||||
| Effect of changes in future expected policyholder behavior |
||||||||||||
| Effect of changes in other future expected assumptions |
||||||||||||
| Other |
||||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance before effect of changes in instrument-specific credit risk |
||||||||||||
| Effect of changes in instrument-specific credit risk |
||||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance as of December 31 |
$ |
|||||||||||
| |
|
|||||||||||
| Less: reinsurance recoverable |
||||||||||||
| |
|
|
|
|||||||||
| Market risk benefits, net of reinsurance recoverable |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| Weighted-average attained age of contractholders |
||||||||||||
| Net amount at risk (2) |
||||||||||||
(1) |
Represents the net reinsured asset related to our variable annuity MRBs. |
(2) |
See note 11 for additional information on the net amount at risk. |
December 31, 2021 |
||||||||||||
| (Dollar amounts in millions) |
Fixed index annuities |
Variable annuities |
Reinsurance recoverable (1) |
|||||||||
| Beginning balance as of January 1 |
$ |
$ |
$ |
|||||||||
| Beginning balance before effect of changes in instrument-specific credit risk |
$ |
$ |
$ |
|||||||||
| Issuances |
||||||||||||
| Interest accrual |
||||||||||||
| Attributed fees collected |
||||||||||||
| Benefit payments |
( |
) |
( |
) | ||||||||
| Effect of changes in interest rates |
( |
) |
( |
) |
( |
) | ||||||
| Effect of changes in equity markets |
( |
) |
( |
) |
( |
) | ||||||
| Actual policyholder behavior different from expected behavior |
( |
) |
||||||||||
| Effect of changes in future expected policyholder behavior |
||||||||||||
| Effect of changes in other future expected assumptions |
||||||||||||
| Other |
( |
) |
||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance before effect of changes in instrument-specific credit risk |
||||||||||||
| Effect of changes in instrument-specific credit risk |
||||||||||||
| |
|
|
|
|
|
|||||||
| Ending balance as of December 31 |
$ |
|||||||||||
| |
|
|||||||||||
| Less: reinsurance recoverable |
||||||||||||
| |
|
|
|
|||||||||
| Market risk benefits, net of reinsurance recoverable |
$ |
$ |
||||||||||
| |
|
|
|
|||||||||
| Weighted-average attained age of contractholders |
||||||||||||
| Net amount at risk (2) |
||||||||||||
(1) |
Represents the net reinsured asset related to our variable annuity MRBs. |
(2) |
See note 11 for additional information on the net amount at risk. |
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
December 31, 2021 |
|||||||||
Beginning balance |
$ | $ | $ | |||||||||
Investment performance and other |
( |
) | ||||||||||
Net transfers to general account (1) |
( |
) | ( |
) | ( |
) | ||||||
Ending balance |
$ | $ | $ | |||||||||
Cash surrender value (2) |
$ | $ | $ | |||||||||
(1) |
Funds are transferred to the general account (policyholder account balances) prior to assessing any policy charges or making any surrender, withdrawal or other benefit payments to contractholders. See note 11 for additional information. |
(2) |
Cash surrender value represents the amount of the contractholders’ account balances that was distributable as of March 31, 2023, December 31, 2022 and December 31, 2021 less certain surrender charges. |
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
Balanced funds |
$ | $ | ||||||
Equity funds |
||||||||
Bond funds |
||||||||
Money market funds |
||||||||
Total |
$ | $ | ||||||
(Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
Enact segment |
$ | $ | ||||||
Life and Annuities segment (1) |
||||||||
Other mortgage insurance business |
||||||||
Total liability for policy and contract claims |
$ | $ | ||||||
(1) |
Primarily includes balances related to our universal and term universal life insurance products. |
Three months ended March 31, |
||||||||
(Amounts in millions) |
2023 |
2022 |
||||||
Beginning balance as of January 1 |
$ | $ | ||||||
Less reinsurance recoverables |
( |
) | ( |
) | ||||
Net beginning balance |
||||||||
Incurred related to insured events of: |
||||||||
Current year |
||||||||
Prior years |
( |
) | ( |
) | ||||
Total incurred |
||||||||
Paid related to insured events of: |
||||||||
Current year |
( |
) | ( |
) | ||||
Prior years |
( |
) | ( |
) | ||||
Total paid |
( |
) | ( |
) | ||||
Foreign currency translation |
— | |||||||
Net ending balance |
||||||||
Add reinsurance recoverables |
||||||||
Ending balance as of March 31 |
$ | $ | ||||||
Three months ended March 31, |
||||||||
2023 |
2022 |
|||||||
Statutory U.S. federal income tax rate |
% | % | ||||||
Increase in rate resulting from: |
||||||||
Tax on income from terminated swaps |
||||||||
Stock-based compensation |
||||||||
Nondeductible expenses |
||||||||
Other, net |
( |
) | ||||||
Effective rate |
% | % | ||||||
Three months ended March 31, |
||||||||
| (Amounts in millions) |
2023 |
2022 |
||||||
| Revenues: |
||||||||
| Enact segment |
$ | $ | ||||||
| Long-Term Care Insurance segment |
||||||||
| Life and Annuities segment: |
||||||||
| Life insurance |
||||||||
| Fixed annuities |
||||||||
| Variable annuities |
||||||||
| |
|
|
|
|||||
| Life and Annuities segment |
||||||||
| |
|
|
|
|||||
| Corporate and Other |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total revenues |
$ | $ | ||||||
| |
|
|
|
|||||
Three months ended March 31, |
||||||||
| (Amounts in millions) |
2023 |
2022 |
||||||
| Net income available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ||||||
| Add: net income from continuing operations attributable to noncontrolling interests |
||||||||
| Add: net income from discontinued operations attributable to noncontrolling interests |
||||||||
| |
|
|
|
|||||
| Net income |
||||||||
| Less: 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 |
( |
) | ||||||
| Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges (1) |
( |
) | ||||||
| (Gains) losses on early extinguishment of debt |
( |
) | ||||||
| Expenses related to restructuring |
||||||||
| Taxes on adjustments |
( |
) | ||||||
| |
|
|
|
|||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ||||||
| |
|
|
|
|||||
(1) |
For the three months ended March 31, 2023 and 2022, changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges were adjusted for changes in reserves, attributed fees and benefit payments of $( |
Three months ended March 31, |
||||||||
| (Amounts in millions) |
2023 |
2022 |
||||||
| Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: |
||||||||
| Enact segment |
$ | $ | ||||||
| Long-Term Care Insurance segment |
( |
) | ||||||
| Life and Annuities segment: |
||||||||
| Life insurance |
( |
) | ( |
) | ||||
| Fixed annuities |
||||||||
| Variable annuities |
||||||||
| |
|
|
|
|||||
| Life and Annuities segment |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Corporate and Other |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders |
$ | $ | ||||||
| |
|
|
|
|||||
| (Amounts in millions) |
March 31, 2023 |
December 31, 2022 |
||||||
| Assets: |
||||||||
| Enact segment |
$ | $ | ||||||
| Long-Term Care Insurance segment |
||||||||
| Life and Annuities segment |
||||||||
| Corporate and Other |
||||||||
| |
|
|
|
|||||
| Total assets |
$ | $ | ||||||
| |
|
|
|
|||||
(Amounts in millions) |
Net unrealized investment gains (losses) |
Derivatives qualifying as hedges (1) |
Change in the discount rate used to measure future policy benefits |
Change in instrument- specific credit risk of market risk benefits |
Foreign currency translation and other adjustments |
Total |
||||||||||||||||||
Balances as of January 1, 2023 |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||||||
OCI before reclassifications |
( |
) | ( |
) | ||||||||||||||||||||
Amounts reclassified from (to) OCI |
( |
) | ( |
) | ||||||||||||||||||||
Current period OCI |
( |
) | ( |
) | ||||||||||||||||||||
Balances as of March 31, 2023 before noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Less: change in OCI attributable to noncontrolling interests |
||||||||||||||||||||||||
Balances as of March 31, 2023 |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||||||
(1) |
See note 6 for additional information. |
(Amounts in millions) |
Net unrealized investment gains (losses) |
Derivatives qualifying as hedges (1) |
Change in the discount rate used to measure future policy benefits |
Change in instrument- specific credit risk of market risk benefits |
Foreign currency translation and other adjustments |
Total |
||||||||||||||||||
Balances as of January 1, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||
OCI before reclassifications |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Amounts reclassified from (to) OCI |
( |
) | ( |
) | ||||||||||||||||||||
Current period OCI |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Balances as of March 31, 2022 before noncontrolling interests |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Less: change in OCI attributable to noncontrolling interests |
( |
) | ( |
) | ||||||||||||||||||||
Balances as of March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||
(1) |
See note 6 for additional information. |
Three months ended March 31, |
Affected line item in the condensed consolidated statements of income | |||||||||
(Amounts in millions) |
2023 |
2022 |
||||||||
Net unrealized investment (gains) losses: |
||||||||||
Unrealized (gains) losses on investments |
$ | $ | Net investment (gains) losses | |||||||
Income taxes |
( |
) | ( |
) | Provision for income taxes | |||||
Total |
$ | $ | ||||||||
Derivatives qualifying as hedges: |
||||||||||
Interest rate swaps hedging assets |
$ | ( |
) | $ | ( |
) | Net investment income | |||
Interest rate swaps hedging assets |
( |
) | ( |
) | Net investment (gains) losses | |||||
Interest rate swaps hedging liabilities |
Interest expense | |||||||||
Interest rate swaps hedging liabilities |
( |
) | Net investment (gains) losses | |||||||
Foreign currency swaps |
( |
) | Net investment income | |||||||
Foreign currency swaps |
( |
) | Net investment (gains) losses | |||||||
Income taxes |
Provision for income taxes | |||||||||
Total |
$ | ( |
) | $ | ( |
) | ||||
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein and with our 2022 Annual Report on Form 10-K. Unless the context otherwise requires, references to “Genworth,” the “Company,” “we” or “our” herein are to Genworth Financial, Inc. on a consolidated basis. References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.
Cautionary note regarding forward-looking statements
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Examples of forward-looking statements include statements we make relating to potential dividends or share repurchases; future return of capital by Enact Holdings, Inc. (“Enact Holdings”), including share repurchases, and quarterly and special dividends; the cumulative amount of rate action benefits required for our long-term care insurance business to achieve economic break-even status; future financial performance and condition of our businesses; liquidity and future strategic investments, including new senior care services and products; future business and financial performance of CareScout LLC (“CareScout”); as well as statements we make regarding the potential of a recession or the re-emergence of the coronavirus pandemic (“COVID-19”).
Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from those in the forward-looking statements due to global political, economic, inflation, business, competitive, market, regulatory and other factors and risks, including but not limited to, the following:
| • | our inability to successfully execute our strategic plans; |
| • | our failure to achieve economic break-even on or stabilize our legacy long-term care insurance in-force block, including as a result of the inability to achieve desired levels of in-force rate actions and/or the timing of our future premium rate increases and associated benefit reductions taking longer to achieve than originally assumed; other regulatory actions negatively impacting our life insurance businesses and/or the inability to establish new long-term care insurance business; |
| • | 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 any inability to receive dividends or other returns of capital from Enact Holdings, and limited sources of capital and financing; |
| • | 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 (“FHA”); the inability of Enact Holdings and/or its U.S. mortgage insurance subsidiaries to continue to meet the requirements mandated by the private mortgage insurer eligibility requirements (“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 high inflation, supply chain disruptions, labor shortages, displacements related to COVID-19 and elevated interest rates, including actions taken by the U.S. Federal Reserve to increase interest rates to combat inflation and |
92
Table of Contents
| slow economic growth, which could heighten the risk of a future recession; unanticipated financial events such as the recent closures and disruption experienced by the banking sector, 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, including inflation, may adversely affect Enact Holdings’ loss experience and/or business levels; political and economic instability or changes in government policies, and fluctuations in international securities markets; |
| • | rating downgrades or potential downgrades in liquidity, financial strength and credit ratings; 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 (including new accounting guidance we adopted on January 1, 2023 related to long-duration insurance contracts); |
| • | litigation and regulatory investigations or other actions, including commercial and contractual disputes with counterparties; |
| • | our inability to achieve anticipated business performance and financial results from CareScout and its senior care growth initiatives through fee-based services, advice, consulting and products; |
| • | the inability to retain, attract and motivate qualified employees or senior management; |
| • | the occurrence of natural or man-made disasters, including geopolitical tensions and war (including the Russian invasion of Ukraine), a public health emergency, including pandemics, climate change or cybersecurity breaches; and |
| • | other factors described in the risk factors contained in Item 1A of our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2023. |
We provide additional information regarding these risks and uncertainties in our Annual Report on Form 10-K. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Accordingly, for the foregoing reasons, we caution you against relying on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required under applicable securities laws.
Overview
Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s principal U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products. We report our business results through three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional life insurance (term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities (which include variable life insurance), none of which are actively marketed or sold.
In addition to our three operating segments, we also have Corporate and Other which includes debt financing expenses that are incurred at the Genworth Holdings, Inc. (“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, such as certain international businesses and discontinued operations. Corporate and Other also includes start-up results related to fee-based services, care support and advice, clinical assessments and consulting offered by CareScout to advance our senior care growth initiatives.
93
Table of Contents
Enact Holdings is a public company traded on the Nasdaq Global Select Market exchange under the ticker symbol “ACT.” Genworth Financial maintains control of Enact Holdings through an indirect majority voting interest and accordingly, Enact Holdings remains a consolidated subsidiary of Genworth Financial. Our Enact segment predominantly includes Enact Holdings and its mortgage insurance subsidiaries. There are minor financial reporting differences between our Enact segment and the standalone financial results of Enact Holdings, which are separately disclosed with the Securities and Exchange Commission. Notwithstanding these differences, we commonly make references to “Enact,” our “Enact segment” and our “U.S. mortgage insurance subsidiaries” throughout this Quarterly Report on Form 10-Q, which generally can be viewed as references to Enact Holdings and its mortgage insurance subsidiaries, unless the context otherwise requires.
Strategic Update
Genworth has advanced its strategy to drive shareholder value over the past several years, culminating in several major achievements in 2022 and into the first quarter of 2023. We reduced Genworth Holdings’ debt to less than $1.0 billion, enhanced the value of Enact, received multiple upgrades from rating agencies, continued to make progress on our multi-year long-term care insurance in-force rate action plan and began returning capital to shareholders for the first time in over 13 years. In addition, during the fourth quarter of 2022, Genworth met the financial conditions associated with certain restrictions the government-sponsored enterprises (“GSEs”) had imposed on Enact, and the GSEs lifted the restrictions effective March 1, 2023. This was an important milestone as Enact is no longer subject to more stringent capital requirements than its peers, putting it on a more level playing field with its competitors. Building on this progress and the transformative improvement in Genworth’s financial position over the past few years, we are refocusing our priorities to three areas, including:
| • | further strengthen our legacy long-term care insurance financial and operational capabilities to address customer needs; |
| • | allocate capital from Enact to drive Genworth Financial’s long-term shareholder value; and |
| • | leverage our unparalleled long-term care expertise to develop innovative aging care services and solutions. |
Our long-term care insurance business continued to make progress on its multi-year long-term care insurance in-force rate action plan, receiving approvals of approximately $50 million of incremental annual premiums during the first quarter of 2023. In aggregate, we estimate that the cumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the first quarter of 2023 was approximately $23.8 billion, on a net present value basis, of the total expected amount required of $30.3 billion. We continue to work closely with the National Association of Insurance Commissioners (“NAIC”) and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
Enact continues to be a significant driver of value for Genworth. As the majority shareholder, Genworth Holdings received $37 million in the first quarter of 2023 from Enact Holdings’ share repurchases and quarterly dividends. Cash flows from Enact have enabled us to achieve key milestones to date and will continue to benefit our shareholders by fueling our share repurchase program and long-term growth strategy. To date, Genworth Financial has repurchased approximately $182 million worth of its common shares under its share repurchase program that began in 2022, including $68 million during the first quarter of 2023 and another $50 million in April 2023, leaving approximately $168 million that may yet be purchased under the program. The timing and number of future shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors.
In terms of our longer-term priorities, we are focused on advancing Genworth’s senior care growth initiatives, including through fee-based and other services, advice, consulting and other products offered by CareScout, an indirect subsidiary of Genworth Financial. We see meaningful opportunities to provide these services to address the needs of elderly Americans, as well as their caregivers and families. We launched the
94
Table of Contents
initial phase of our CareScout services business in March 2023. This business includes a digital platform, where we hope to curate a broad marketplace that matches consumers’ long-term care needs with a network of preferred providers that we are building as part of the initial phase of the CareScout services launch. In addition to the digital platform and preferred network offerings to consumers, employers and long-term care insurers, the discounts available through the network are expected to have the potential to generate significant reductions in our legacy long-term care insurance claims costs. Our CareScout services business is currently focused on home care providers because we believe the majority of Genworth policyholders prefer to receive care in their homes. While the initial focus for the quality care provider network will be with Genworth’s long-term care insurance policyholders in one state, we believe we can accelerate our efforts to build a national quality home care provider network, which we expect could allow a high-quality experience and discounted fees for more existing Genworth policyholders and broaden the scope of our CareScout services business to new consumer markets. As we expand the business, there may be other potential future growth opportunities, namely options that assist in funding long-term care needs and expanding CareScout’s products and services to international markets.
Genworth will strive to maintain a disciplined approach in its capital allocation strategy going forward, balancing investments in growth initiatives with returning value to shareholders. We may also continue to opportunistically repurchase Genworth Holdings’ debt as part of our balanced capital allocation strategy.
Financial Strength and Credit Ratings
On April 25, 2023, Fitch Ratings, Inc. upgraded the financial strength rating of Enact Mortgage Insurance Corporation (“EMICO”), Enact Holdings’ principal U.S. mortgage insurance subsidiary, to “A-” from “BBB+” with an outlook of stable.
On March 1, 2023, Moody’s Investors Service, Inc. upgraded the credit rating of Genworth Holdings to “Ba1” from “Ba2” and upgraded the financial strength rating of EMICO to “A3” from “Baa1.” The outlooks for the ratings are stable.
On February 16, 2023, S&P Global Ratings upgraded the credit rating of Genworth Financial and Genworth Holdings to “BB-” from “B+” with an outlook of stable and upgraded the financial strength rating of EMICO to “BBB+” from “BBB.”
There were no other changes in the financial strength ratings of our insurance subsidiaries or the credit ratings of Genworth Financial and Genworth Holdings subsequent to February 28, 2023, the date we filed our 2022 Annual Report on Form 10-K. For additional information regarding the financial strength ratings of Genworth Financial’s insurance subsidiaries and the credit ratings of Genworth Financial and Genworth Holdings, including their importance to our business, see “Item 1—Ratings” in our 2022 Annual Report on Form 10-K.
Our Financial Information
The financial information in this Quarterly Report on Form 10-Q has been derived from our unaudited condensed consolidated financial statements.
Revenues and expenses
Our revenues consist primarily of the following:
| • | Premiums. Premiums consist primarily of premiums earned on insurance products for mortgage, long-term care and term life insurance. |
| • | Net investment income. Net investment income represents the income earned on our investments. For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.” |
95
Table of Contents
| • | Net investment gains (losses). Net investment gains (losses) consist primarily of realized gains and losses from the sale of our investments, credit losses, unrealized and realized gains and losses from our equity securities, limited partnership investments and derivative instruments. For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.” |
| • | Policy fees and other income. Policy fees and other income consists primarily of fees assessed against policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and term universal life insurance policies, advisory and administration service fees assessed on investment contractholder account values, broker/dealer commission revenues, fee revenue from contract underwriting services and other fees. |
Our expenses consist primarily of the following:
| • | Benefits and other changes in policy reserves. Benefits and other changes in policy reserves consist primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for long-term care insurance, life insurance, accident and health insurance, structured settlements and single premium immediate annuities with life contingencies, and claim costs incurred related to mortgage insurance products. Benefits and other changes in policy reserves exclude the impact of liability remeasurement (gains) losses, which is separately presented as discussed below. |
| • | Liability remeasurement (gains) losses. Liability remeasurement (gains) losses represent changes to the net premium ratio for actual versus expected experience and updates to cash flow assumptions used to measure long-duration and limited-payment insurance contracts. |
| • | Changes in fair value of market risk benefits and associated hedges. Changes in fair value of market risk benefits and associated hedges consist of fair value changes due to capital market risks (other than changes attributable to instrument-specific credit risk) and changes in the fair value of non-qualified derivative instruments associated with our market risk benefits. |
| • | Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances. |
| • | Acquisition and operating expenses, net of deferrals. Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses. |
| • | Amortization of deferred acquisition costs and intangibles. Amortization of deferred acquisition costs (“DAC”) and intangibles consists primarily of the amortization of acquisition costs that are capitalized, present value of future profits and capitalized software. |
| • | Interest expense. Interest expense represents interest related to our borrowings that are incurred at Genworth Holdings or Enact Holdings, and certain reinsurance arrangements being accounted for as deposits. |
| • | Provision (benefit) for income taxes. 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. generally accepted accounting principles (“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. |
| • | Net income from continuing operations attributable to noncontrolling interests. Net income from continuing operations attributable to noncontrolling interests represents the portion of income from continuing operations in a subsidiary attributable to third parties. |
96
Table of Contents
The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.
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. U.S. GAAP generally requires an annualized effective tax rate to be used for interim reporting periods, utilizing projections of full year results. However, in certain circumstances it is appropriate to record the actual effective tax rate for the period if a reliable full year estimate cannot be made. For the three months ended March 31, 2023, we utilized the actual effective tax rate for the interim period to record the provision for income taxes for our Long-Term Care Insurance and Life and Annuities segments and the annualized projected effective tax rate for our Enact segment and Corporate and Other. We utilized the effective tax rate for the year ended December 31, 2022 in determining the re-presented provision for income taxes for the three months ended March 31, 2022.
We allocate corporate expenses to each of our operating segments using various methodologies.
97
Table of Contents
Consolidated Results of Operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth the consolidated results of operations for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 915 | $ | 917 | $ | (2 | ) | — | % | |||||||
| Net investment income |
787 | 764 | 23 | 3 | % | |||||||||||
| Net investment gains (losses) |
(11 | ) | 42 | (53 | ) | (126 | )% | |||||||||
| Policy fees and other income |
163 | 170 | (7 | ) | (4 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
1,854 | 1,893 | (39 | ) | (2 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
1,172 | 1,165 | 7 | 1 | % | |||||||||||
| Liability remeasurement (gains) losses |
22 | (41 | ) | 63 | 154 | % | ||||||||||
| Changes in fair value of market risk benefits and associated hedges |
17 | (41 | ) | 58 | 141 | % | ||||||||||
| Interest credited |
126 | 125 | 1 | 1 | % | |||||||||||
| Acquisition and operating expenses, net of deferrals |
283 | 280 | 3 | 1 | % | |||||||||||
| Amortization of deferred acquisition costs and intangibles |
72 | 88 | (16 | ) | (18 | )% | ||||||||||
| Interest expense |
29 | 26 | 3 | 12 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total benefits and expenses |
1,721 | 1,602 | 119 | 7 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income from continuing operations before income taxes |
133 | 291 | (158 | ) | (54 | )% | ||||||||||
| Provision for income taxes |
39 | 68 | (29 | ) | (43 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income from continuing operations |
94 | 223 | (129 | ) | (58 | )% | ||||||||||
| Loss from discontinued operations, net of taxes |
— | (2 | ) | 2 | 100 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income |
94 | 221 | (127 | ) | (57 | )% | ||||||||||
| Less: net income from continuing operations attributable to noncontrolling interests |
32 | 30 | 2 | 7 | % | |||||||||||
| Less: net income from discontinued operations attributable to noncontrolling interests |
— | — | — | — | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income available to Genworth Financial, Inc.’s common stockholders |
$ | 62 | $ | 191 | $ | (129 | ) | (68 | )% | |||||||
|
|
|
|
|
|
|
|||||||||||
| Net income available to Genworth Financial, Inc.’s common stockholders: |
||||||||||||||||
| Income from continuing operations available to Genworth Financial, Inc.’s common stockholders |
$ | 62 | $ | 193 | $ | (131 | ) | (68 | )% | |||||||
| Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders |
— | (2 | ) | 2 | 100 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net income available to Genworth Financial, Inc.’s common stockholders |
$ | 62 | $ | 191 | $ | (129 | ) | (68 | )% | |||||||
|
|
|
|
|
|
|
|||||||||||
Unless otherwise stated, all references to net income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” 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, adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, respectively.
98
Table of Contents
Use of non- GAAP measures
Reconciliation of net income (loss) to adjusted operating income (loss)
We use 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). Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). We define adjusted operating income (loss) 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), changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual non-operating items. 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. We exclude net investment gains (losses), changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual non-operating items from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating performance.
While some of these items may be significant components of net income (loss) in accordance with U.S. GAAP, we believe 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) or net income (loss) per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) may differ from the definitions used by other companies.
Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges are also adjusted for changes in reserves, attributed fees and benefit payments.
99
Table of Contents
The following table presents a reconciliation of net income to adjusted operating income for the periods indicated:
| Three months ended March 31, |
||||||||
| (Amounts in millions) |
2023 | 2022 | ||||||
| Net income available to Genworth Financial, Inc.’s common stockholders |
$ | 62 | $ | 191 | ||||
| Add: net income from continuing operations attributable to noncontrolling interests |
32 | 30 | ||||||
| Add: net income from discontinued operations attributable to noncontrolling interests |
— | — | ||||||
|
|
|
|
|
|||||
| Net income |
94 | 221 | ||||||
| Less: loss from discontinued operations, net of taxes |
— | (2 | ) | |||||
|
|
|
|
|
|||||
| Income from continuing operations |
94 | 223 | ||||||
| Less: net income from continuing operations attributable to noncontrolling interests |
32 | 30 | ||||||
|
|
|
|
|
|||||
| Income from continuing operations available to Genworth Financial, Inc.’s common stockholders |
62 | 193 | ||||||
| Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: |
||||||||
| Net investment (gains) losses |
11 | (42 | ) | |||||
| Changes in fair value of market risk benefits attributable to changes in interest rates, equity markets and associated hedges (1) |
14 | (54 | ) | |||||
| (Gains) losses on early extinguishment of debt |
(1 | ) | 3 | |||||
| Expenses related to restructuring |
3 | — | ||||||
| Taxes on adjustments |
(5 | ) | 20 | |||||
|
|
|
|
|
|||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders |
$ | 84 | $ | 120 | ||||
|
|
|
|
|
|||||
| (1) | For the three months ended March 31, 2023 and 2022, changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges were adjusted for changes in reserves, attributed fees and benefit payments of $(3) million and $(13) million, respectively. |
We repurchased $11 million principal amount of Genworth Holdings’ senior notes due in June 2034 and $82 million principal amount of Genworth Holdings’ senior notes due in February 2024 in the first quarters of 2023 and 2022, respectively, for a pre-tax gain (loss) of $1 million and $(3) million, respectively. These transactions were excluded from adjusted operating income as they relate to gains (losses) on the early extinguishment of debt.
We recorded a pre-tax expense of $3 million in the first quarter of 2023 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.
100
Table of Contents
Earnings per share
The following table provides basic and diluted earnings per common share for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions, except per share amounts) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: |
||||||||||||||||
| Basic |
$ | 0.13 | $ | 0.38 | $ | (0.25 | ) | (66 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.12 | $ | 0.37 | $ | (0.25 | ) | (68 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income available to Genworth Financial, Inc.’s common stockholders per share: |
||||||||||||||||
| Basic |
$ | 0.13 | $ | 0.38 | $ | (0.25 | ) | (66 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.12 | $ | 0.37 | $ | (0.25 | ) | (68 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders per share: |
||||||||||||||||
| Basic |
$ | 0.17 | $ | 0.24 | $ | (0.07 | ) | (29 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | 0.17 | $ | 0.23 | $ | (0.06 | ) | (26 | )% | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
492.3 | 508.3 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| Diluted |
500.1 | 517.4 | ||||||||||||||
|
|
|
|
|
|||||||||||||
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based awards.
The following table presents a summary of adjusted operating income (loss) for our segments and Corporate and Other for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: |
||||||||||||||||
| Enact segment |
$ | 143 | $ | 135 | $ | 8 | 6 | % | ||||||||
| Long-Term Care Insurance segment |
(37 | ) | 27 | (64 | ) | NM | (1) | |||||||||
| Life and Annuities segment: |
||||||||||||||||
| Life insurance |
(27 | ) | (47 | ) | 20 | 43 | % | |||||||||
| Fixed annuities |
14 | 13 | 1 | 8 | % | |||||||||||
| Variable annuities |
9 | 4 | 5 | 125 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Life and Annuities segment |
(4 | ) | (30 | ) | 26 | 87 | % | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Corporate and Other |
(18 | ) | (12 | ) | (6 | ) | (50 | )% | ||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders |
$ | 84 | $ | 120 | $ | (36 | ) | (30 | )% | |||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
101
Table of Contents
Executive Summary of Consolidated Financial Results
Below is an executive summary of our condensed consolidated financial results for the periods indicated. Amounts within this “Executive Summary of Consolidated Financial Results” are net of taxes, unless otherwise indicated. After-tax amounts assume a tax rate of 21%.
For a discussion of selected financial information and detailed descriptions of operating performance measures see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
| • | Net income for the three months ended March 31, 2023 and 2022 was $62 million and $191 million, respectively, and adjusted operating income was $84 million and $120 million, respectively. |
| • | Our Enact segment drove our first quarter of 2023 consolidated financial results, reporting $143 million of adjusted operating income, an increase of 6% compared to the first quarter of 2022. |
| • | Adjusted operating income increased primarily attributable to higher net investment income in the current year. |
| • | Our Long-Term Care Insurance segment reported adjusted operating income (loss) of $(37) million and $27 million for the three months ended March 31, 2023 and 2022, respectively. |
| • | The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was primarily driven by an unfavorable cash flow assumption update related to implementation timing of our in-force rate action plan in the current year. |
| • | We also experienced higher new claims and benefit utilization in the current year. Terminations were elevated compared to our expectations, although lower than the prior year. |
| • | Higher net investment income and higher premiums related to our in-force rate action plan were mostly offset by higher operating expenses primarily from expenses related to policyholder benefit reduction elections made in connection with legal settlements in the current year. |
| • | Our Life and Annuities segment reported an adjusted operating loss of $4 million and $30 million for the three months ended March 31, 2023 and 2022, respectively. |
| • | Life insurance: |
| • | The adjusted operating loss in our life insurance products decreased $20 million primarily due to a $20 million legal settlement accrual in the prior year that did not recur. |
| • | Current year results reflected unfavorable mortality experience, though improved compared to the prior year as COVID-19 impacts subsided. |
| • | DAC amortization was lower related to lower term lapses, partially offset by lower premiums reflecting runoff of our in-force blocks in the current year. |
| • | Fixed annuities: |
| • | Adjusted operating income in our fixed annuity products increased $1 million mainly attributable to higher mortality in our single premium immediate annuity products, mostly offset by lower net spreads primarily related to block runoff in the current year. |
| • | Variable annuities: |
| • | Adjusted operating income in our variable annuity products increased $5 million predominantly due to aging of the block that resulted in lower attributed fees and benefit payments, partially offset by a decrease in fee income driven by lower account value in the current year. |
102
Table of Contents
| • | Corporate and Other had an adjusted operating loss of $18 million and $12 million for the three months ended March 31, 2023 and 2022, respectively. |
| • | The increase in the loss was primarily driven by higher expenses related to CareScout growth initiatives and higher interest expense in the current year. |
Significant Developments and Strategic Highlights
The periods under review include, among others, the following significant developments and steps taken in the execution of our strategic priorities.
Enact
| • | Persistency and loss performance: |
| • | Enact’s primary persistency rate increased to 85% for the first quarter of 2023 compared to 76% for the first quarter of 2022 largely from suppressed mortgage refinancing activity in the current year due to elevated interest rates. |
| • | Enact recorded a favorable pre-tax reserve adjustment of $70 million during the first quarter of 2023 primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021 compared to a $50 million pre-tax reserve release in the first quarter of 2022 primarily related to 2020 COVID-19 delinquencies. |
| • | PMIERs compliance: |
| • | Effective March 1, 2023, the GSEs removed the capital restrictions that had been imposed on Enact. |
| • | Enact’s PMIERs sufficiency ratio was 164% or $2,098 million above the PMIERs requirements as of March 31, 2023. |
| • | As of March 31, 2023, Enact had estimated available assets of $5,357 million against $3,259 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022 (PMIERs sufficiency as of December 31, 2022 was based on the published requirements applicable to private mortgage insurers and did not give effect to the GSE restrictions previously imposed on Enact). |
| • | Dividends and other return of capital: |
| • | On November 1, 2022, Enact Holdings announced the approval by its board of directors of a share repurchase program under which Enact Holdings may repurchase up to $75 million of its outstanding common stock. We have agreed to participate in order to maintain our overall ownership at its current level. |
| • | Genworth Holdings received $37 million from Enact Holdings’ quarterly dividends and share repurchases as the majority shareholder in the first quarter of 2023. |
U.S. life insurance companies
| • | As of March 31, 2023, the consolidated company action level risk-based capital ratio of our U.S. domiciled life insurance subsidiaries was estimated to be approximately 295%, which increased from 291% as of December 31, 2022. The increase was driven by favorable statutory earnings in our long-term care insurance business mainly from premium rate increases and benefit reductions from in-force rate actions, including the impacts from a legal settlement, and from favorable terminations. The increase was also attributable to favorable impacts from equity market performance related to our variable annuity products. |
103
Table of Contents
| • | As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring these blocks closer to their original pricing. We estimate that the cumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the first quarter of 2023 was approximately $23.8 billion, on a net present value basis, of the total expected amount required of $30.3 billion. |
Liquidity and capital resources
| • | Genworth Financial share repurchase program: |
| • | During the first quarter of 2023, Genworth Financial repurchased 11,224,848 shares of its common stock at an average price of $6.08 per share for a total cost, excluding excise taxes, of $68 million. |
| • | Genworth Financial authorized share repurchases through a Rule 10b5-1 trading plan under which 9,121,315 shares of its common stock were repurchased in April 2023 at an average price of $5.48 per share for a total cost of $50 million before excise taxes, leaving approximately $168 million that may yet be purchased under the share repurchase program. |
| • | Genworth Holdings’ debt: |
| • | During the first quarter of 2023, Genworth Holdings repurchased $11 million principal amount of its 6.50% senior notes due in June 2034 for a pre-tax gain of $1 million and paid accrued interest thereon. |
| • | As of March 31, 2023, Genworth Holdings had outstanding principal of $876 million of long-term debt, with no debt maturities until June 2034. |
Results of Operations and Selected Financial and Operating Performance Measures by Segment
Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss).
Management’s discussion and analysis by segment 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 products included in our Enact segment. We consider new insurance written to be a measure of our Enact segment’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of revenues or profitability during that period.
Management regularly monitors and reports insurance in-force, risk in-force and a loss ratio for our Enact segment. Insurance in-force is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans insured by our U.S. mortgage insurance subsidiaries. Risk in-force is based on the coverage percentage applied to the estimated current outstanding loan balance. We consider insurance in-force and risk in-force to be measures of our Enact segment’s 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. The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. We consider the loss ratio to be a measure of underwriting performance and helps to enhance the understanding of the operating performance of our Enact segment.
104
Table of Contents
Management also regularly monitors and reports on in-force rate actions, including state filing approvals; impacted in-force premiums; weighted-average percentage rate increases approved; and gross incremental premiums approved in our Long-Term Care Insurance segment. In-force rate actions are critical to our strategy for our long-term care insurance business. We monitor these selected operating performance measures for in-force rate actions to track our progress on achieving economic break-even. We consider these in-force rate actions metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.
These operating performance measures enable us to compare our 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.
Enact segment
Trends and conditions
Results of our Enact segment are affected primarily by the following factors: competitor actions; unemployment or underemployment levels; other economic and housing market trends, including interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and practices; the levels and aging of mortgage delinquencies; the effect of seasonal variations; the inventory of unsold homes; loan modification and other servicing efforts; and litigation, among other items. References to “Enact” included herein “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” are, unless the context otherwise requires, to our Enact segment.
Mortgage origination activity remained slow during the first quarter of 2023 in response to rising mortgage rates throughout 2022. The refinance market is likely to remain low in the near to mid-term as the U.S. Federal Reserve has not signaled any intent to reduce interest rates. Housing affordability remains challenged due to higher interest rates, low inventory and elevated home prices, modestly offset by rising median family income, according to the National Association of Realtors Housing Affordability Index. After a sustained period of strong home price appreciation, national home prices began to decline in late 2022 but stabilized during the first quarter of 2023, according to the Federal Housing Finance Agency (“FHFA”) Monthly Purchase-Only House Price Index.
The unemployment rate remained flat at 3.5% in March 2023 compared to December 2022. As of March 31, 2023, there were under six million unemployed Americans, of which approximately one million were long term unemployed over 26 weeks. Both metrics are in line with pre-pandemic levels.
For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. An initial forbearance period is typically up to six months and can be extended for another six months if requested by the borrower to the mortgage servicer. However, the Biden Administration ended the national emergency for COVID-19 in April 2023, so the deadline for requesting a COVID-19 related forbearance under the Coronavirus Aid, Relief, and Economic Security Act will end in August 2023. At present, the GSEs’ COVID-19 related policies, including with respect to forbearance, remain in effect. Further, in March 2023, the GSEs announced new loss mitigation programs that would allow six-month payment deferrals for borrowers facing financial hardship and encouraged servicers to start evaluating borrowers for these programs as early as July 1, 2023 but no later than October 1, 2023. Even though most foreclosure moratoriums expired at the end of 2021, federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend the foreclosure timeline, which could negatively impact the severity of loss on loans that go to claim.
Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported
105
Table of Contents
forbearances have generally declined. As of March 31, 2023, approximately 1% or 13,678 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 34% were reported as delinquent compared with approximately 2% or 18,588 of its active primary policies reported in forbearance with approximately 41% reported as delinquent as of March 31, 2022.
Total delinquencies decreased during the first quarter of 2023 compared to the first quarter of 2022 as a result of cures outpacing new delinquencies. The first quarter 2023 new delinquency rate of 1.0% was slightly higher than the first quarter 2022 new delinquency rate of 0.9%. The full impact of COVID-19 and its adverse economic effects on Enact’s future business results continue to be difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters. Enact continues to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies have declined, it is possible that COVID-19 related forbearance programs could have an adverse impact on Enact’s future results of operations and financial condition.
Private mortgage insurance market penetration and overall market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the FHA and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products.
On October 24, 2022, the FHFA announced targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain first-time home buyers with income at or below area median income and for certain GSE affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans. The fee reductions went into effect in the fourth quarter of 2022 while the new fees on cash-out refinance loans began February 1, 2023. Enact expects these price changes to have a net positive impact to the private mortgage insurance market but believes the impact has been limited to date.
The FHFA also announced in October 2022 its validation and approval of certain credit score models for use by the GSEs and changed the required number of credit reports provided by lenders from all three nationwide consumer reporting agencies to only two. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. The FHFA has announced preliminary implementation expectations, but this is expected to be a multiple year process that will require system and process updates.
In January 2023, the FHFA announced additional updates to its upfront fee structure and pricing matrix. The changes marked the third iteration of the FHFA’s ongoing pricing review since early last year and impact purchase and rate-term refinance loans. Pricing grids are to be broken out by loan purpose and recalibrated to new credit score and loan-to-value ratio categories, along with associated loan attributes. The new pricing matrix also includes new upfront fees for loans with debt-to-income ratios greater than 40%. Some changes went into effect May 1, 2023, but the adjustments related to debt-to-income ratios were delayed until August 2023. The effects of these changes will ultimately be dependent on any changes made by the FHA, but Enact does not expect a significant impact to the private mortgage insurance market.
In February 2023, the Department of Housing and Urban Development announced a 30 basis point reduction of the annual insurance premium charged to borrowers with FHA-insured mortgages in order to reduce the cost of borrowing for eligible lower and middle class homebuyers. This price reduction, which went into effect on March 20, 2023, is expected to have a negative impact on the U.S. private mortgage insurance market but will be partially offset by the effects of the recent FHFA pricing changes referenced above. Enact does not expect the net impact to be material.
The U.S. private mortgage insurance industry is highly competitive. Enact Holdings’ market share is influenced by the execution of its go to market strategy, including but not limited to, pricing competitiveness
106
Table of Contents
relative to its peers and its selective participation in forward commitment transactions. Enact continues to manage the quality of new business through pricing and its underwriting guidelines, which are modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within Enact’s risk adjusted return appetite, enabling it to write new business at returns it views as attractive.
New insurance written of $13.2 billion in the first quarter of 2023 decreased 30% compared to the first quarter of 2022 mostly from a decline in originations due to elevated interest rates.
Enact’s primary persistency rate increased to 85% during the first quarter of 2023 compared to 76% during the first quarter of 2022. The increase in persistency was primarily driven by a decline in the percentage of in-force policies with mortgage rates above current interest rates. Higher persistency offset the decline in new insurance written in the first quarter of 2023, leading to an increase in primary insurance in-force of $4.3 billion as compared to December 31, 2022.
Net earned premiums increased slightly in the first quarter of 2023 compared to the first quarter of 2022 as insurance in-force growth was mostly offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year. The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as borrowers continued to exit forbearance plans and new forbearances declined. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default and Enact refunds the post-delinquent premiums to the insured party if the delinquent loan goes to claim. Enact records a liability and a reduction to net earned premiums for the post-delinquent premiums it expects to refund. The post-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through the first quarter of 2023 was not significant to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies to go claim (“claim rate”) for these loans.
Enact’s loss ratio for the three months ended March 31, 2023 and 2022 was (5)% and (4)%, respectively. Enact recorded a favorable reserve adjustment of $70 million during the first quarter of 2023 primarily related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021 compared to a reserve release of $50 million during the first quarter of 2022 on COVID-19 delinquencies from 2020. During the peak of COVID-19, Enact experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have been curing at levels above Enact’s reserve expectations, which was a primary driver of the release of reserves in both the first quarters of 2023 and 2022.
Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies require a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments. The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.
New primary delinquencies in the first quarter of 2023 increased compared to the first quarter of 2022. New primary delinquencies of 9,599 contributed $58 million of loss expense in the first quarter of 2023, while Enact incurred $39 million of losses from 8,724 new primary delinquencies in the first quarter of 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and
107
Table of Contents
prospective economic conditions. Approximately 17% of Enact’s primary new delinquencies in the first quarter of 2023 were subject to a forbearance plan compared to 27% in the first quarter of 2022. Due to the declining number of new delinquencies in forbearance, Enact no longer differentiates the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.
As of March 31, 2023, EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), EMICO’s domestic insurance regulator, was approximately 12.7:1, compared with a risk-to-capital ratio of 12.9:1 as of December 31, 2022. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.
Under PMIERs, Enact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. Since 2020, the GSEs have issued several amendments to PMIERs, which implemented both permanent and temporary revisions to PMIERs. For loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) had an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount factor for the non-performing loan is the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and (b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period. The PMIERs amendment dated June 30, 2021 further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance.
In September 2020, subsequent to the issuance of Enact Holdings’ senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on Enact. In May 2021, in connection with their conditional approval of the then potential partial sale of Enact Holdings, the GSEs confirmed the GSE Restrictions would remain in effect until certain conditions (the “GSE Conditions”) were met. These conditions were met as of December 31, 2022 and in March 2023, the GSEs confirmed that Enact is no longer subject to the GSE Restrictions and the GSE Conditions.
Prior to the satisfaction of the GSE Conditions, the GSE Restrictions required EMICO to maintain 120% of PMIERs minimum required assets during 2022 and 125% thereafter, and Enact Holdings to retain $300 million of holding company liquidity that could be drawn down exclusively for its debt service or to contribute to EMICO to meet its regulatory capital needs including PMIERs. The removal of the GSE Restrictions and GSE Conditions enhances Enact’s financial flexibility and competitiveness by no longer making it subject to more stringent capital requirements than its peers.
As of March 31, 2023, Enact had estimated available assets of $5,357 million against $3,259 million net required assets under PMIERs compared to available assets of $5,206 million against $3,156 million net required assets as of December 31, 2022. The sufficiency ratio as of March 31, 2023 was 164% or $2,098 million above
108
Table of Contents
the PMIERs requirements, compared to 165% or $2,050 million above the PMIERs requirements as of December 31, 2022. PMIERs sufficiency as of December 31, 2022 was based on the published requirements applicable to private mortgage insurers and did not give effect to the GSE Restrictions previously imposed on Enact. The PMIERs sufficiency in the first quarter of 2023 was relatively flat as an increase in available assets and the completion of an excess of loss reinsurance transaction during the first quarter of 2023 were mostly offset by new insurance written and amortization of existing reinsurance transactions. Enact’s PMIERs required assets as of March 31, 2023 and December 31, 2022 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided $120 million of benefit to Enact’s March 31, 2023 PMIERs required assets compared to $132 million of benefit as of December 31, 2022. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.
On March 8, 2023, Enact executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to approximately $180 million of reinsurance coverage on a portion of current and expected mortgage insurance policies written for the 2023 book year, effective January 1, 2023. Credit risk transfer transactions provided an aggregate of approximately $1,523 million of PMIERs capital credit as of March 31, 2023. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.
On April 26, 2022, Enact Holdings’ board of directors approved the initiation of a quarterly dividend program. Pursuant to the program, Enact Holdings began paying quarterly dividends in the second quarter of 2022. In the first quarter of 2023, Genworth Holdings received $19 million as the majority shareholder. On May 1, 2023, Enact Holdings announced an increase of its next quarterly dividend to $0.16 per share to be paid in June 2023. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition, in November 2022, Enact Holdings announced approval by its board of directors of a share repurchase program under which it may repurchase up to $75 million of its outstanding common stock. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. Enact Holdings began share repurchases under the program in the fourth quarter of 2022 and in the first quarter of 2023, Genworth Holdings received $18 million as the majority shareholder.
EMICO completed a distribution to Enact Holdings in April 2023. Enact Holdings intends to use this and future EMICO distributions to fund the quarterly dividend as well as to bolster its financial flexibility and potentially return additional capital to shareholders.
Returning capital to shareholders, balanced with growth and risk management priorities, remains a key commitment for Enact Holdings, as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ capital prioritization framework, including: supporting its existing policyholders; growing its mortgage insurance business; funding attractive new business opportunities; and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.
109
Table of Contents
Segment results of operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 235 | $ | 234 | $ | 1 | — | % | ||||||||
| Net investment income |
46 | 35 | 11 | 31 | % | |||||||||||
| Net investment gains (losses) |
— | — | — | — | % | |||||||||||
| Policy fees and other income |
— | 1 | (1 | ) | (100 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
281 | 270 | 11 | 4 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
(11 | ) | (10 | ) | (1 | ) | (10 | )% | ||||||||
| Acquisition and operating expenses, net of deferrals |
52 | 54 | (2 | ) | (4 | )% | ||||||||||
| Amortization of deferred acquisition costs and intangibles |
3 | 3 | — | — | % | |||||||||||
| Interest expense |
13 | 13 | — | — | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total benefits and expenses |
57 | 60 | (3 | ) | (5 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income from continuing operations before income taxes |
224 | 210 | 14 | 7 | % | |||||||||||
| Provision for income taxes |
49 | 45 | 4 | 9 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income from continuing operations |
175 | 165 | 10 | 6 | % | |||||||||||
| Less: net income from continuing operations attributable to noncontrolling interests |
32 | 30 | 2 | 7 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income from continuing operations available to Genworth Financial, Inc.’s common stockholders |
143 | 135 | 8 | 6 | % | |||||||||||
| Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: |
||||||||||||||||
| Net investment (gains) losses |
— | — | — | — | % | |||||||||||
| Taxes on adjustments |
— | — | — | — | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating income available to Genworth Financial, Inc.’s common stockholders |
$ | 143 | $ | 135 | $ | 8 | 6 | % | ||||||||
|
|
|
|
|
|
|
|||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income increased primarily attributable to higher net investment income in the current year.
Revenues
Premiums increased slightly as higher insurance in-force driven by increased persistency was mostly offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year.
Net investment income increased primarily from higher investment yields and higher average invested assets, partially offset by lower income from bond calls in the current year.
110
Table of Contents
Benefits and expenses
Benefits and other changes in policy reserves decreased largely from a higher favorable reserve adjustment, mostly offset by higher new delinquencies in the current year. In the first quarter of 2023, Enact recorded a favorable reserve adjustment of $70 million primarily related to better than expected cure performance on COVID-19 delinquencies from 2020 and 2021 compared to a $50 million reserve release on 2020 COVID-19 delinquencies in the prior year.
Provision for income taxes. The effective tax rate was 21.6% for both the three months ended March 31, 2023 and 2022, consistent with the U.S. corporate federal income tax rate.
Enact selected operating performance measures
Primary Mortgage Insurance
Substantially all of Enact’s policies are primary mortgage insurance, which provides protection on individual loans at specified coverage percentages. Primary mortgage insurance is placed on individual loans at the time of origination and is typically delivered to Enact on a loan-by-loan basis. Primary mortgage insurance can also be delivered to Enact on an aggregated basis, whereby each mortgage in a given loan portfolio is insured in a single transaction after the point of origination.
Pool Mortgage Insurance
Pool mortgage insurance transactions provide coverage on a finite set of individual loans identified by the pool policy. Pool policies contain coverage percentages and provisions limiting the insurer’s obligation to pay claims until a threshold amount is reached (known as a “deductible”) or capping the insurer’s potential aggregate liability for claims payments (known as a “stop loss”) or a combination of both provisions. Pool mortgage insurance is typically used to provide additional credit enhancement for certain secondary market mortgage transactions.
The following table sets forth selected operating performance measures regarding Enact as of and for the dates indicated:
| Three months ended March 31, | Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Primary insurance in-force (1) |
$ | 252,516 | $ | 231,853 | $ | 20,663 | 9 | % | ||||||||
| Risk in-force: |
||||||||||||||||
| Primary |
$ | 64,106 | $ | 58,295 | $ | 5,811 | 10 | % | ||||||||
| Pool |
76 | 97 | (21 | ) | (22 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total risk in-force |
$ | 64,182 | $ | 58,392 | $ | 5,790 | 10 | % | ||||||||
|
|
|
|
|
|
|
|||||||||||
| New insurance written |
$ | 13,154 | $ | 18,823 | $ | (5,669 | ) | (30 | )% | |||||||
| (1) | Primary insurance in-force represents the aggregate unpaid principal balance for loans Enact insures. |
Primary insurance in-force and risk in-force
Primary insurance in-force increased mainly from new insurance written. In addition, lower lapses and cancellations drove higher primary persistency largely as a result of suppressed refinancing activity in the current year due to elevated interest rates. The primary persistency rate was 85% and 76% for the three months ended March 31, 2023 and 2022, respectively. Total risk in-force increased primarily as a result of higher primary insurance in-force.
111
Table of Contents
New insurance written
New insurance written decreased principally from lower originations in the current year due to elevated interest rates.
Loss and expense ratios
The following table sets forth the loss and expense ratios for Enact for the dates indicated:
| Three months ended March 31, |
Increase (decrease) | |||||||||||
| 2023 | 2022 | 2023 vs. 2022 | ||||||||||
| Loss ratio |
(5 | )% | (4 | )% | (1 | )% | ||||||
| Expense ratio |
23 | % | 24 | % | (1 | )% | ||||||
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio is the ratio of general expenses to net earned premiums. In Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.
The loss ratio decreased slightly compared to the three months ended March 31, 2022 largely from a higher favorable reserve adjustment, mostly offset by higher new delinquencies in the current year. In the first quarter of 2023, Enact recorded a favorable reserve adjustment of $70 million related to better than expected cure performance on COVID-19 delinquencies from 2020 and 2021 compared to a $50 million reserve release on 2020 COVID-19 delinquencies in the prior year.
The expense ratio was slightly lower compared to the three months ended March 31, 2022 driven by lower operating costs in the current year.
112
Table of Contents
Mortgage insurance loan portfolio
The following table sets forth selected financial information regarding Enact’s loan portfolio as of March 31:
| (Amounts in millions) |
2023 | 2022 | ||||||
| Primary insurance in-force by loan-to-value ratio at origination: |
||||||||
| 95.01% and above |
$ | 40,776 | $ | 36,867 | ||||
| 90.01% to 95.00% |
105,336 | 96,419 | ||||||
| 85.01% to 90.00% |
73,756 | 66,226 | ||||||
| 85.00% and below |
32,648 | 32,341 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 252,516 | $ | 231,853 | ||||
|
|
|
|
|
|||||
| Primary risk in-force by loan-to-value ratio at origination: |
||||||||
| 95.01% and above |
$ | 11,545 | $ | 10,379 | ||||
| 90.01% to 95.00% |
30,589 | 27,987 | ||||||
| 85.01% to 90.00% |
18,054 | 16,082 | ||||||
| 85.00% and below |
3,918 | 3,847 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 64,106 | $ | 58,295 | ||||
|
|
|
|
|
|||||
| Primary insurance in-force by FICO (1) score at origination: |
||||||||
| Over 760 |
$ | 104,635 | $ | 93,222 | ||||
| 740-759 |
40,983 | 36,821 | ||||||
| 720-739 |
35,554 | 32,363 | ||||||
| 700-719 |
29,160 | 27,620 | ||||||
| 680-699 |
21,717 | 21,259 | ||||||
| 660-679 (2) |
11,057 | 10,805 | ||||||
| 640-659 |
6,114 | 6,188 | ||||||
| 620-639 |
2,604 | 2,774 | ||||||
| <620 |
692 | 801 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 252,516 | $ | 231,853 | ||||
|
|
|
|
|
|||||
| Primary risk in-force by FICO score at origination: |
||||||||
| Over 760 |
$ | 26,480 | $ | 23,326 | ||||
| 740-759 |
10,418 | 9,267 | ||||||
| 720-739 |
9,126 | 8,224 | ||||||
| 700-719 |
7,406 | 6,974 | ||||||
| 680-699 |
5,481 | 5,334 | ||||||
| 660-679 (2) |
2,809 | 2,715 | ||||||
| 640-659 |
1,549 | 1,550 | ||||||
| 620-639 |
660 | 699 | ||||||
| <620 |
177 | 206 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 64,106 | $ | 58,295 | ||||
|
|
|
|
|
|||||
| (1) | Fair Isaac Company. |
| (2) | Loans with unknown FICO scores are included in the 660-679 category. |
113
Table of Contents
Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for Enact’s loan portfolio as of the dates indicated:
| March 31, 2023 |
December 31, 2022 |
March 31, 2022 |
||||||||||
| Primary insurance: |
||||||||||||
| Insured loans in-force |
965,544 | 960,306 | 941,689 | |||||||||
| Delinquent loans |
18,633 | 19,943 | 22,571 | |||||||||
| Percentage of delinquent loans (delinquency rate) |
1.93 | % | 2.08 | % | 2.40 | % | ||||||
Delinquency rates have decreased primarily from a decline in total delinquencies as cures outpaced new delinquencies.
The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged missed payment status in Enact’s loan portfolio as of the dates indicated:
| March 31, 2023 | ||||||||||||||||
| (Dollar amounts in millions) |
Delinquencies | Direct primary case reserves (1) |
Risk in-force |
Reserves as % of risk in-force |
||||||||||||
| Payments in default: |
||||||||||||||||
| 3 payments or less |
7,876 | $ | 67 | $ | 462 | 14 | % | |||||||||
| 4 - 11 payments |
6,714 | 182 | 423 | 43 | % | |||||||||||
| 12 payments or more |
4,043 | 213 | 220 | 97 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
18,633 | $ | 462 | $ | 1,105 | 42 | % | |||||||||
|
|
|
|
|
|
|
|||||||||||
| December 31, 2022 | ||||||||||||||||
| (Dollar amounts in millions) |
Delinquencies | Direct primary case reserves (1) |
Risk in-force |
Reserves as % of risk in-force |
||||||||||||
| Payments in default: |
||||||||||||||||
| 3 payments or less |
8,920 | $ | 69 | $ | 509 | 14 | % | |||||||||
| 4 - 11 payments |
6,466 | 166 | 390 | 43 | % | |||||||||||
| 12 payments or more |
4,557 | 244 | 248 | 98 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
19,943 | $ | 479 | $ | 1,147 | 42 | % | |||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | Direct primary case reserves exclude loss adjustment expenses, pool, incurred but not reported (“IBNR”) and reinsurance reserves. |
Reserves as a percentage of risk in-force as of March 31, 2023 remained flat compared to December 31, 2022. While the number of loans that are delinquent for 12 months or more has decreased since December 31, 2022, it remains elevated compared to pre-COVID-19 levels due in large part to COVID-19 related forbearance options and the slowing of foreclosures. Due to continued forbearance options, foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.
114
Table of Contents
Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth the dispersion of direct primary case reserves and primary delinquency rates for the 10 largest states and the 10 largest Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by Enact’s primary risk in-force as of the dates indicated. Delinquency rates are shown by region based upon the location of the underlying property rather than the location of the lender.
| Percent of primary risk in-force as of March 31, 2023 |
Percent of direct primary case reserves as of March 31, 2023 (1) |
Delinquency rate as of | ||||||||||||||||||
| March 31, 2023 |
December 31, 2022 |
March 31, 2022 |
||||||||||||||||||
| By State: |
||||||||||||||||||||
| California |
12 | % | 11 | % | 1.99 | % | 2.09 | % | 2.75 | % | ||||||||||
| Texas |
8 | % | 7 | % | 1.92 | % | 2.12 | % | 2.51 | % | ||||||||||
| Florida (2) |
8 | % | 8 | % | 2.24 | % | 2.54 | % | 2.51 | % | ||||||||||
| New York (2) |
5 | % | 13 | % | 2.82 | % | 2.95 | % | 3.51 | % | ||||||||||
| Illinois (2) |
5 | % | 6 | % | 2.51 | % | 2.54 | % | 2.85 | % | ||||||||||
| Arizona |
4 | % | 2 | % | 1.68 | % | 1.78 | % | 1.92 | % | ||||||||||
| Michigan |
4 | % | 3 | % | 1.72 | % | 1.79 | % | 1.87 | % | ||||||||||
| North Carolina |
3 | % | 2 | % | 1.48 | % | 1.59 | % | 1.96 | % | ||||||||||
| Georgia |
3 | % | 3 | % | 2.19 | % | 2.23 | % | 2.63 | % | ||||||||||
| Washington |
3 | % | 3 | % | 1.64 | % | 1.92 | % | 2.68 | % | ||||||||||
| (1) | Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves. |
| (2) | Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed. |
| Percent of primary risk in-force as of March 31, 2023 |
Percent of direct primary case reserves as of March 31, 2023 (1) |
Delinquency rate as of | ||||||||||||||||||
| March 31, 2023 |
December 31, 2022 |
March 31, 2022 |
||||||||||||||||||
| By MSA or MD: |
||||||||||||||||||||
| Phoenix, AZ MSA |
3 | % | 2 | % | 1.72 | % | 1.83 | % | 1.92 | % | ||||||||||
| Chicago-Naperville, IL MD |
3 | % | 5 | % | 2.77 | % | 2.84 | % | 3.39 | % | ||||||||||
| Atlanta, GA MSA |
3 | % | 3 | % | 2.35 | % | 2.42 | % | 2.92 | % | ||||||||||
| New York, NY MD |
2 | % | 8 | % | 3.51 | % | 3.75 | % | 4.68 | % | ||||||||||
| Washington-Arlington, DC MD |
2 | % | 2 | % | 1.79 | % | 1.85 | % | 2.50 | % | ||||||||||
| Houston, TX MSA |
2 | % | 2 | % | 2.40 | % | 2.60 | % | 3.20 | % | ||||||||||
| Riverside-San Bernardino, CA MSA |
2 | % | 2 | % | 2.54 | % | 2.89 | % | 3.05 | % | ||||||||||
| Los Angeles-Long Beach, CA MD |
2 | % | 3 | % | 2.24 | % | 2.18 | % | 3.22 | % | ||||||||||
| Dallas, TX MD |
2 | % | 1 | % | 1.65 | % | 1.86 | % | 2.04 | % | ||||||||||
| Denver-Aurora-Lakewood, CO MSA |
2 | % | 1 | % | 0.93 | % | 1.12 | % | 1.47 | % | ||||||||||
| (1) | Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves. |
115
Table of Contents
The following table sets forth the dispersion of Enact’s direct primary case reserves, primary insurance in-force and risk in-force by year of policy origination, and delinquency rate as of March 31, 2023:
| (Amounts in millions) |
Percent of direct primary case reserves (1) |
Primary insurance in-force |
Percent of total |
Primary risk in-force |
Percent of total |
Delinquency rate |
||||||||||||||||||
| Policy Year |
||||||||||||||||||||||||
| 2008 and prior |
25 | % | $ | 6,377 | 3 | % | $ | 1,643 | 3 | % | 8.81 | % | ||||||||||||
| 2009 to 2015 |
7 | 4,659 | 2 | 1,238 | 2 | 4.03 | % | |||||||||||||||||
| 2016 |
5 | 5,744 | 2 | 1,538 | 2 | 3.01 | % | |||||||||||||||||
| 2017 |
6 | 6,201 | 2 | 1,632 | 3 | 3.53 | % | |||||||||||||||||
| 2018 |
7 | 6,570 | 3 | 1,672 | 3 | 4.08 | % | |||||||||||||||||
| 2019 |
10 | 15,691 | 6 | 3,989 | 6 | 2.57 | % | |||||||||||||||||
| 2020 |
16 | 52,389 | 21 | 13,484 | 21 | 1.42 | % | |||||||||||||||||
| 2021 |
18 | 79,377 | 31 | 19,917 | 31 | 1.23 | % | |||||||||||||||||
| 2022 |
6 | 62,481 | 25 | 15,647 | 24 | 0.74 | % | |||||||||||||||||
| 2023 |
— | 13,027 | 5 | 3,346 | 5 | 0.02 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total portfolio |
100 | % | $ | 252,516 | 100 | % | $ | 64,106 | 100 | % | 1.93 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves. |
Loss reserves in policy years 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. Loss reserves have shifted to newer book years, largely 2020 and later, given their significant representation of risk in-force. As of March 31, 2023, Enact’s 2016 and newer policy years represented approximately 95% of its primary risk in-force and 68% of its total direct primary case reserves.
Long-Term Care Insurance segment
Trends and conditions
The long-term profitability of our long-term care insurance business depends upon how our actual experience compares with our valuation assumptions, including but not limited to in-force rate actions, morbidity, mortality and persistency. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual results, including but not limited to consistent policyholder behavior over time in addition to a uniform rate of coinsurance and premium taxes. Actual policyholder behavior may differ significantly from these assumptions. Results of our long-term care insurance business are also influenced by our ability to improve investment yields and manage expenses and reinsurance, among other factors. Changes in laws or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.
Because these factors are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our long-term care insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition.
In our long-term care insurance products, we have experienced higher than expected mortality during COVID-19 which had a favorable impact on reserves and our operating results. Although it is not our practice to track cause of death for long-term care insurance policyholders and claimants, we believe the higher mortality in
116
Table of Contents
our long-term care insurance business in early 2022 was likely impacted by COVID-19. We expected the impacts to be temporary, and we saw mortality levels return to pre-pandemic levels in the latter half of 2022. We believe COVID-19 significantly increased mortality on our most vulnerable claimants, which may reduce mortality rates in future periods.
We have also experienced lower than expected new claims incidence in our long-term care insurance business during COVID-19. However, we expected this to be a temporary reduction and that claims incidence experience would ultimately revert to pre-pandemic trends. We are seeing new claims incidence trending back to pre-pandemic levels. In addition, during the pandemic, a larger share of our claimants sought home care instead of facility-based care, and as the impacts of the pandemic subside, we have seen that trend reverse. We continue to utilize virtual assessments to assess eligibility for benefits while in-person assessments have been temporarily discontinued since the onset of COVID-19. We are reviewing the options to resume in-person assessments, with appropriate protocols in place, while having virtual assessments available for those policyholders who would prefer this option. For claimants without the technology to perform virtual assessments, we have alternate options for gathering information. Our long-term care insurance benefit utilization will be monitored for impact, although it is too early to tell the magnitude and/or direction of that impact.
While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on our long-term care insurance business currently depend on the after-effects indirectly caused by the pandemic, including supply chain shortages and high inflation, and the shape of the economic recovery. We will continue to monitor COVID-19 associated impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.
Average claim reserves for new claims are trending higher over time as the mix of claims continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation factors going on claim. Although new claim counts on our older long-term care insurance blocks of business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages with higher likelihood of going on claim.
Given the ongoing challenges in our long-term care insurance business, we continue to pursue initiatives to improve the risk and profitability profile of our business, including: premium rate increases and associated benefit reductions on our in-force policies; managing expense levels; executing investment strategies targeting higher returns; and enhancing our financial and actuarial analytical capabilities. In addition, we have reached certain legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance policies. The first legal settlement related to certain of our long-term care insurance policies, which represents approximately 20% of our block, was implemented beginning in 2021 and its implementation was materially completed in the second quarter of 2022. Another similar legal settlement on certain of our long-term care insurance policies, which represents 15% of our block, became final on July 29, 2022. We began implementation of this settlement on August 1, 2022. On February 15, 2023, the court issued final approval on another similar pending settlement on certain of our long-term care insurance policies, which represents 35% of our block. Pursuant to its terms, the settlement became final on March 27, 2023. We expect to begin implementation of this settlement in the second quarter of 2023. While the two new settlements are similar to the previous settlement, their ultimate impact will depend on the policyholder election rates and the types of reduced benefits elected. Given our experience with the first settlement, we expect these additional settlements to result in an overall net favorable impact to our long-term care insurance business. While we expect renewal premiums to decline over time, the settlements could accelerate that decline if policyholders continue to elect non-forfeiture and reduced benefit options, which have predominantly been the most prevalent policyholder elections for these legal settlements. Executing on our multi-year long-term care insurance in-force rate action plan with premium rate increases and associated benefit reductions on our legacy long-term care insurance policies is critical to the business. For an update on in-force rate actions, refer to “Significant Developments and Strategic Highlights—U.S. life insurance companies” and the selected operating performance measures below.
117
Table of Contents
Results of our long-term care insurance business are also impacted by interest rates. Prior to the recent rise in interest rates beginning in 2022, historic low interest rates put pressure on the profitability and returns of our long-term care insurance business as higher yielding investments matured and were replaced with lower-yielding investments. We have sought to manage the impact of low interest rates through asset-liability management, investment in alternative assets, including limited partnerships, as well as interest rate hedging strategies for a portion of our long-term care insurance product cash flows. In addition, rapidly rising interest rates may cause increased unrealized losses on our investment portfolios and could have an adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-income investments in an unrealized loss position to satisfy claims obligations. In our long-term care insurance business, we also remeasure our liability for future policy benefits and related reinsurance recoverables at the single-A bond rate each quarter. As a result, our insurance liabilities are sensitive to movements in interest rates, which will likely result in continued volatility to our reserve balances and equity.
Segment results of operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth the results of operations relating to our Long-Term Care Insurance segment for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 616 | $ | 607 | $ | 9 | 1 | % | ||||||||
| Net investment income |
473 | 447 | 26 | 6 | % | |||||||||||
| Net investment gains (losses) |
9 | 41 | (32 | ) | (78 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
1,098 | 1,095 | 3 | — | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
940 | 923 | 17 | 2 | % | |||||||||||
| Liability remeasurement (gains) losses |
5 | (65 | ) | 70 | 108 | % | ||||||||||
| Acquisition and operating expenses, net of deferrals |
162 | 140 | 22 | 16 | % | |||||||||||
| Amortization of deferred acquisition costs and intangibles |
18 | 19 | (1 | ) | (5 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total benefits and expenses |
1,125 | 1,017 | 108 | 11 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations before income taxes |
(27 | ) | 78 | (105 | ) | (135 | )% | |||||||||
| Provision for income taxes |
2 | 19 | (17 | ) | (89 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations |
(29 | ) | 59 | (88 | ) | (149 | )% | |||||||||
| Adjustments to income (loss) from continuing operations: |
||||||||||||||||
| Net investment (gains) losses |
(9 | ) | (41 | ) | 32 | 78 | % | |||||||||
| Expenses related to restructuring |
(1 | ) | — | (1 | ) | NM | (1) | |||||||||
| Taxes on adjustments |
2 | 9 | (7 | ) | (78 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders |
$ | (37 | ) | $ | 27 | $ | (64 | ) | NM | (1) | ||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
118
Table of Contents
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
The change to an adjusted operating loss of $37 million in the current year from adjusted operating income of $27 million in the prior year was largely driven by an unfavorable cash flow assumption update related to implementation timing of our in-force rate action plan in the current year. We also experienced higher new claims and benefit utilization in the current year. Terminations were elevated compared to our expectations, although lower than the prior year. Higher net investment income and higher premiums related to our in-force rate action plan were mostly offset by higher operating expenses primarily from expenses related to policyholder benefit reduction elections made in connection with legal settlements in the current year.
Revenues
Premiums increased primarily driven by $30 million of higher premiums from newly implemented in-force rate actions, partially offset by lower renewal premiums from policy terminations and policies entering paid-up status in the current year.
Net investment income increased largely from higher income from limited partnerships and bank loans as well as higher investment yields, partially offset by lower income related to U.S. Government Treasury Inflation Protected Securities (“TIPS”) in the current year.
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Benefits and other changes in policy reserves increased primarily due to higher benefit payments, mostly offset by aging of the in-force block, as well as higher loss adjustment expenses in the current year.
The liability remeasurement loss in the current year was largely driven by an unfavorable assumption update related to implementation timing of our in-force rate action plan and higher than expected new claims and benefit utilization, partially offset by favorable impacts related to elevated terminations. The liability remeasurement gain in the prior year was primarily from elevated claim terminations due in part to COVID-19, partially offset by higher than expected new claims.
Acquisition and operating expenses, net of deferrals, increased principally related to higher premium taxes, commissions and other expenses of $16 million in the current year associated with our in-force rate action plan, which included expenses related to policyholder benefit reduction elections made in connection with legal settlements.
Provision for income taxes. The effective tax rate was (6.3)% and 24.8% for the three months ended March 31, 2023 and 2022, respectively. The decrease in the effective tax rate was primarily attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income, in relation to a pre-tax loss in the current year.
Long-Term Care Insurance selected operating performance measures
As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital.
119
Table of Contents
The following table sets forth filing approvals as part of our multi-year in-force rate action plan for the periods indicated:
| Three months ended March 31, | ||||||||
| (Dollar amounts in millions) |
2023 | 2022 | ||||||
| State filings approved |
23 | 38 | ||||||
| Impacted in-force premiums |
$ | 78 | $ | 354 | ||||
| Weighted-average percentage rate increase approved |
64 | % | 29 | % | ||||
| Gross incremental premiums approved |
$ | 50 | $ | 101 | ||||
During the first quarter of 2023, we also submitted 29 new filings on approximately $247 million in annualized in-force premiums.
The approval process for in-force rate actions and the amount and timing of the premium rate increases and associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a rate increase can take a significant amount of time, and the approved amount may be phased in over time. After approval, insureds are provided with written notice of the increase and increases are generally applied on the insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the implementation cycle is complete and are, therefore, expected to be realized over time.
We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases in order to pay future claims. Because obtaining actuarially justified rate increases and associated benefit reductions is important to our ability to pay future claims, we will consider litigation against states that decline to approve those actuarially justified rate increases. In January 2022, we began litigation with two states that have refused to approve actuarially justified rate increases.
Life and Annuities segment
Trends and conditions
Many factors can affect the results of our life insurance and annuity products, as further discussed below. Because these factors are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our life insurance and annuity products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition. Results of our life insurance and annuity products depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves.
Results of our life insurance and annuity products are also impacted by interest rates. Prior to the recent rise in interest rates beginning in 2022, historic low interest rates put pressure on the profitability and returns of our life insurance and annuity products as higher yielding investments matured and were replaced with lower-yielding investments. We have sought to manage the impact of low interest rates through asset-liability management. Additionally, certain products have implicit and explicit rate guarantees or optionality that are significantly impacted by changes in interest rates. During periods of increasing market interest rates, we may increase crediting rates on in-force universal life insurance and fixed annuity products to remain competitive in the marketplace. In addition, rapidly rising interest rates may cause increased unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-income investments in an unrealized loss position to satisfy surrenders or withdrawals. For a further discussion of the impact of interest
120
Table of Contents
rates on our life insurance and annuity products, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Annual Report on Form 10-K.
Life insurance
Results of our life insurance products are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of business.
Mortality levels may deviate each period from historical trends. Overall mortality experience was lower for the first quarter of 2023 compared to the first quarter of 2022. In our life insurance products, COVID-19 deaths also declined significantly in the first quarter of 2023 compared to the first quarter of 2022. We have experienced higher mortality than our then-current and priced-for assumptions in recent years for our universal life insurance block. We have also been experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance partners reflecting natural block aging and higher mortality compared to expectations.
Our mortality experience for older ages is emerging and we continue to monitor trends in mortality improvement. We will continue to regularly review our mortality assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make adjustments in the future to our assumptions which could impact our life insurance reserves. Any materially adverse changes to our assumptions, including mortality, persistency or interest rates, could have a materially negative impact on our results of operations, financial condition and business.
Fixed annuities
Results of our fixed annuity products are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products; however, we continue to service our existing retained and reinsured blocks of business.
We monitor and change crediting rates on fixed deferred annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, we could see declines in our fixed annuity spreads and margins as interest rates change, depending on the severity of the change.
For fixed indexed annuities, equity market and interest rate performance and volatility could also result in additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.
Variable annuities
Results of our variable annuity products are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our variable annuity products can significantly impact our regulatory capital requirements, distributable earnings and liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate the impacts. In addition, we have used reinsurance to help mitigate volatility in our variable annuity results. We no longer solicit sales of variable annuity products; however, we continue to service our existing retained and reinsured blocks of business.
Equity market volatility and interest rate movements have caused fluctuations in the results of our variable annuity products and regulatory capital requirements. In the future, equity and interest rate market performance and volatility could result in additional gains or losses in these products although associated hedging activities are expected to partially mitigate these impacts.
121
Table of Contents
Segment results of operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth the results of operations relating to our Life and Annuities segment for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 62 | $ | 74 | $ | (12 | ) | (16 | )% | |||||||
| Net investment income |
264 | 279 | (15 | ) | (5 | )% | ||||||||||
| Net investment gains (losses) |
(10 | ) | 14 | (24 | ) | (171 | )% | |||||||||
| Policy fees and other income |
163 | 169 | (6 | ) | (4 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total revenues |
479 | 536 | (57 | ) | (11 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
246 | 255 | (9 | ) | (4 | )% | ||||||||||
| Liability remeasurement (gains) losses |
17 | 24 | (7 | ) | (29 | )% | ||||||||||
| Changes in fair value of market risk benefits and associated hedges |
17 | (41 | ) | 58 | 141 | % | ||||||||||
| Interest credited |
126 | 125 | 1 | 1 | % | |||||||||||
| Acquisition and operating expenses, net of deferrals |
53 | 77 | (24 | ) | (31 | )% | ||||||||||
| Amortization of deferred acquisition costs and intangibles |
51 | 66 | (15 | ) | (23 | )% | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total benefits and expenses |
510 | 506 | 4 | 1 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations before income taxes |
(31 | ) | 30 | (61 | ) | NM | (1) | |||||||||
| Provision (benefit) for income taxes |
(7 | ) | 6 | (13 | ) | NM | (1) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Income (loss) from continuing operations |
(24 | ) | 24 | (48 | ) | (200 | )% | |||||||||
| Adjustments to income (loss) from continuing operations: |
||||||||||||||||
| Net investment (gains) losses |
10 | (14 | ) | 24 | 171 | % | ||||||||||
| Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges (2) |
14 | (54 | ) | 68 | 126 | % | ||||||||||
| Taxes on adjustments |
(4 | ) | 14 | (18 | ) | (129 | )% | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders |
$ | (4 | ) | $ | (30 | ) | $ | 26 | 87 | % | ||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
| (2) | For the three months ended March 31, 2023 and 2022, changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges were adjusted for changes in reserves, attributed fees and benefit payments of $(3) million and $(13) million, respectively. |
122
Table of Contents
The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the products included in our Life and Annuities segment for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: |
||||||||||||||||
| Life insurance |
$ | (27 | ) | $ | (47 | ) | $ | 20 | 43 | % | ||||||
| Fixed annuities |
14 | 13 | 1 | 8 | % | |||||||||||
| Variable annuities |
9 | 4 | 5 | 125 | % | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total adjusted operating loss available to Genworth Financial, Inc.’s common stockholders |
$ | (4 | ) | $ | (30 | ) | $ | 26 | 87 | % | ||||||
|
|
|
|
|
|
|
|||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
| • | The adjusted operating loss in our life insurance products decreased $20 million primarily due to a $20 million legal settlement accrual in the prior year that did not recur. Current year results reflected unfavorable mortality experience, though improved compared to the prior year as COVID-19 impacts subsided. DAC amortization was lower related to lower term lapses, partially offset by lower premiums reflecting runoff of our in-force blocks in the current year. |
| • | Adjusted operating income in our fixed annuity products increased $1 million mainly attributable to higher mortality in our single premium immediate annuity products, mostly offset by lower net spreads primarily related to block runoff in the current year. |
| • | Adjusted operating income in our variable annuity products increased $5 million predominantly due to aging of the block that resulted in lower attributed fees and benefit payments, partially offset by a decrease in fee income driven by lower account value in the current year. |
Revenues
Premiums. The decrease was driven by our life insurance products largely due to the continued runoff of our in-force blocks and higher ceded premiums in the current year.
Net investment income. The decrease in net investment income was primarily attributable to lower average invested assets driven mostly by block runoff in our fixed annuity products in the current year.
Net investment gains (losses). For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Policy fees and other income. The decrease in policy fees and other income was principally from lower fee income due mostly to a decline in average account value in our variable annuity products in the current year.
Benefits and expenses
Benefits and other changes in policy reserves. The decrease in benefits and other changes in policy reserves was largely driven by a decrease of $7 million in our fixed annuity products principally from block runoff, as well as a decrease of $4 million in our life insurance products primarily from lower mortality and block runoff in the current year.
123
Table of Contents
Liability remeasurement (gains) losses. The decrease in liability remeasurement losses was driven by lower mortality in our life insurance products and higher mortality in our fixed annuity products in the current year.
Changes in fair value of market risk benefits and associated hedges. The unfavorable change was driven by increases of $21 million and $37 million in our fixed and variable annuity products, respectively, primarily attributable to lower interest rates, partially offset by favorable equity market impacts in the current year. The unfavorable change in our variable annuity products was also partially offset by lower derivative losses, as well as lower attributed fees and benefit payments due to aging of the in-force block in the current year.
Acquisition and operating expenses, net of deferrals
| • | Our life insurance products decreased $20 million primarily due to a $25 million legal settlement accrual in the prior year that did not recur, partially offset by $6 million of conversion costs associated with an outsourcing arrangement in the current year. |
| • | Our variable annuity products decreased $3 million principally from lower commissions in the current year due to block runoff. |
Amortization of deferred acquisition costs and intangibles. The decrease was primarily related to our life insurance products largely due to higher lapses in the prior year in our 20-year level premium period business written in 2002 as it entered its post-level premium period.
Provision (benefit) for income taxes. The effective tax rate was 22.4% and 18.6% for the three months ended March 31, 2023 and 2022, respectively. The increase in the effective tax rate was primarily attributable to tax benefits from tax favored items in relation to a pre-tax loss in the current year.
Life and Annuities selected operating performance measures
Life insurance
The following table sets forth selected operating performance measures regarding our life insurance products as of the dates indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Term and whole life insurance |
||||||||||||||||
| Life insurance in-force, net of reinsurance |
$ | 46,964 | $ | 49,637 | $ | (2,673 | ) | (5 | )% | |||||||
| Life insurance in-force before reinsurance |
$ | 292,091 | $ | 325,055 | $ | (32,964 | ) | (10 | )% | |||||||
| Term universal life insurance |
||||||||||||||||
| Life insurance in-force, net of reinsurance |
$ | 91,817 | $ | 97,750 | $ | (5,933 | ) | (6 | )% | |||||||
| Life insurance in-force before reinsurance |
$ | 92,431 | $ | 98,392 | $ | (5,961 | ) | (6 | )% | |||||||
| Universal life insurance |
||||||||||||||||
| Life insurance in-force, net of reinsurance |
$ | 29,475 | $ | 30,732 | $ | (1,257 | ) | (4 | )% | |||||||
| Life insurance in-force before reinsurance |
$ | 33,246 | $ | 34,756 | $ | (1,510 | ) | (4 | )% | |||||||
We no longer solicit sales of our traditional life insurance products; however, we continue to service our existing blocks of business. The decrease in insurance in-force in our life insurance products reflects the continued runoff of our in-force blocks.
124
Table of Contents
Corporate and Other
Results of operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:
| Three months ended March 31, |
Increase (decrease) and percentage change |
|||||||||||||||
| (Amounts in millions) |
2023 | 2022 | 2023 vs. 2022 | |||||||||||||
| Revenues: |
||||||||||||||||
| Premiums |
$ | 2 | $ | 2 | $ | — | — | % | ||||||||
| Net investment income |
4 | 3 | 1 | 33 | % | |||||||||||
| Net investment gains (losses) |
(10 | ) | (13 | ) | 3 | 23 | % | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
(4 | ) | (8 | ) | 4 | 50 | % | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Benefits and expenses: |
||||||||||||||||
| Benefits and other changes in policy reserves |
(3 | ) | (3 | ) | — | — | % | |||||||||
| Acquisition and operating expenses, net of deferrals |
16 | 9 | 7 | 78 | % | |||||||||||
| Interest expense |
16 | 13 | 3 | 23 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total benefits and expenses |
29 | 19 | 10 | 53 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations before income taxes |
(33 | ) | (27 | ) | (6 | ) | (22 | )% | ||||||||
| Benefit for income taxes |
(5 | ) | (2 | ) | (3 | ) | (150 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations |
(28 | ) | (25 | ) | (3 | ) | (12 | )% | ||||||||
| Adjustments to loss from continuing operations: |
||||||||||||||||
| Net investment (gains) losses |
10 | 13 | (3 | ) | (23 | )% | ||||||||||
| (Gains) losses on early extinguishment of debt |
(1 | ) | 3 | (4 | ) | (133 | )% | |||||||||
| Expenses related to restructuring |
4 | — | 4 | NM | (1) | |||||||||||
| Taxes on adjustments |
(3 | ) | (3 | ) | — | — | % | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders |
$ | (18 | ) | $ | (12 | ) | $ | (6 | ) | (50 | )% | |||||
|
|
|
|
|
|
|
|||||||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives and higher interest expense in the current year.
Revenues
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives and higher employee-related expenses, including $4 million of restructuring costs in the current year. These increases were partially offset by a gain of $1 million in the current year compared to a loss of $3 million in the prior year related to the repurchase of Genworth Holdings’ senior notes.
125
Table of Contents
Interest expense increased largely driven by a higher floating rate of interest on Genworth Holdings’ junior subordinated notes in the current year, partially offset by the early redemption of Genworth Holdings’ senior notes due in February 2024 in the prior year.
The benefit for income taxes for the three months ended March 31, 2023 was primarily related to the pre-tax loss, partially offset by non-deductible expenses. The benefit for income taxes for the three months ended March 31, 2022 was largely from the pre-tax loss, partially offset by tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income.
Investments and Derivative Instruments
General macroeconomic environment
The stability of both the financial markets and global economies in which we operate impacts the sales, revenue growth and profitability trends of our businesses as well as the value of assets and liabilities.
Varied levels of economic performance, coupled with uncertain economic outlooks, war and geopolitical tensions, changes in government policy, including monetary policy, global trade, regulatory and tax reforms, and other changes in market conditions, such as inflation and the current turmoil in the banking industry, will continue to influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt, capital and risk profiles in response to these conditions. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, government responses and displacements caused by COVID-19, including supply-chain disruptions and shortages, persistent high inflation, monetary policies (such as the U.S. Federal Reserve’s quantitative tightening), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, high commodity costs, including the price of oil, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.
During the first quarter of 2023, the U.S. Federal Reserve continued to address elevated inflation by increasing interest rates. The U.S. Federal Reserve increased interest rates by 25 basis points at both its February and March 2023 meetings, bringing the upper end of the target range to the highest level since 2006. In addition, in its May 2023 meeting, the U.S. Federal Reserve increased interest rates by another 25 basis points. The consumer price index as of the end of the first quarter of 2023 decreased from December 31, 2022, with inflation having fallen for nine consecutive months. Core inflation, which excludes the food and energy sectors, was largely unchanged during the first quarter of 2023. However, both core and reported inflation remain at elevated levels compared to historical norms. The tight labor market, high commodity prices, increased housing costs and strong consumer demand contributed to the continued elevated inflation during the first quarter of 2023. Gross domestic product increased modestly during the first quarter of 2023 compared to the end of the fourth quarter of 2022.
There was a sudden disruption in the banking sector during the first quarter of 2023 caused by regional bank failures, most notably Silicon Valley Bank and Signature Bank, which were each taken into receivership by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC invoked a systemic risk exception to pay back uninsured depositors to mitigate consequences for the economy and the banking system. These two bank failures contributed to deposit outflows and pressure on share prices for other small regional banks in the United States. Concerns have risen around tighter lending standards for regional banks and subsequent negative impacts to commercial real estate financing conditions. Also, during the first quarter of 2023, Credit Suisse Group was acquired by rival Swiss bank UBS Group in a deal brokered by Swiss government officials to stabilize the global banking system and prevent a collapse of Credit Suisse. The long-term impacts of these banking sector disruptions on the broader economy are still uncertain, particularly as financial distress emerges with other
126
Table of Contents
regional banks, such as in the case of First Republic Bank which was recently taken into receivership by the FDIC and subsequently sold to JPMorgan Chase Bank. Regardless of the ultimate outcome, the banking sector distress has shifted market outlooks and lowered growth expectations for 2023.
Although our overall exposure to recently closed financial institutions has been limited to date, to the extent banks and other financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, it could negatively affect our liquidity if it hinders our ability to access or monetize, or negatively affects the value of, our existing cash, cash equivalents or investments portfolio. While our business and balance sheet differ substantially from banking institutions that have been the focus of the greatest scrutiny, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of our common stock and potentially our results of operations.
Given the persistent high inflation, supply chain disruptions, evolving U.S. Federal Reserve monetary policy, uncertainty regarding the impacts of the disruption in the banking sector and prolonged geopolitical tensions, it is possible the U.S. economy could fall into a recession in 2023. Specific to Genworth, we continue to closely monitor the operating results and financial position of Enact Holdings, particularly related to emerging housing trends. If housing trends move in an unfavorable direction in contrast to our current projections, our liquidity, financial position and results of operations could be adversely impacted.
Trends and conditions
Investments
U.S. Treasury yields decreased during the first quarter of 2023 driven by the disruption in the banking sector and its expected impact on economic data and monetary policy actions by the U.S. Federal Reserve. Prior to the disruption in the banking sector, the two-year U.S. Treasury yield reached its highest levels since 2007 and remained higher than the ten-year U.S. Treasury yield by the largest differential in over forty years, while the ten-year U.S. Treasury yield simultaneously increased higher than the thirty-year U.S. Treasury yield. By the end of the first quarter of 2023, the banking sector disruption and subsequent interest rate outlook shift by the U.S. Federal Reserve resulted in both yield differentials normalizing back to levels similar the end of the fourth quarter of 2022, with both the two-year and thirty-year U.S. Treasury yields higher than the ten-year U.S. Treasury yield.
Credit markets performed well during the first quarter of 2023 with credit spreads decreasing prior to the disruption from the banking sector. The banking disruption drove credit spreads in financial sectors higher during March 2023. The increase in non-financial credit spreads was less severe and by the end of the first quarter of 2023, credit spreads for non-financial sectors were similar to levels from the end of the fourth quarter of 2022. After a small pause amidst the banking sector disruption, corporate borrowers in both the investment grade and below investment grade markets had consistent access to capital markets throughout the first quarter of 2023.
As of March 31, 2023, we continue to closely monitor our exposure to the regional banks and commercial real estate in our investment portfolio. We had no exposure to Silicon Valley Bank or Signature Bank and relatively modest exposure to regional banks, most notably First Republic Bank. Given the financial distress and significant credit deterioration of First Republic Bank that led to its receivership by the FDIC, we sold the majority of our investment holdings in the troubled bank and will record a loss from the sale in the second quarter of 2023. Subsequent to the sale, our asset exposure to First Republic Bank is nominal. At this time, we believe our investment portfolio is well positioned and that any risks to valuations as a result of the pressures in the regional banking system and commercial real estate are manageable.
As of March 31, 2023, our fixed maturity securities portfolio, which was 96% investment grade, comprised 77% of our total invested assets and cash.
127
Table of Contents
Derivatives
As of March 31, 2023, $1.4 billion notional of our derivatives portfolio was cleared through the Chicago Mercantile Exchange (“CME”). The customer swap agreements that govern our cleared derivatives contain provisions that enable our clearing agents to request initial margin in excess of CME requirements. As of March 31, 2023, we posted initial margin of $112 million to our clearing agents, which represented $56 million more than was otherwise required by the clearinghouse. Because our clearing agents serve as guarantors of our obligations to the CME, the customer agreements contain broad termination provisions that are not specifically dependent on ratings. As of March 31, 2023, $10.2 billion notional of our derivatives portfolio was in bilateral over-the-counter derivative transactions pursuant to which we have posted aggregate independent amounts of $466 million and are holding collateral from counterparties in the amount of $26 million.
In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The LIBOR tenors, such as the three-month LIBOR, have various phase-out dates with the last committed publication date of June 30, 2023. In December 2022, the Board of Governors of the Federal Reserve System adopted a final rule, which became effective on February 27, 2023. The final rule establishes benchmark rates, based on the Secured Overnight Financing Rate (“SOFR”), to replace LIBOR after its elimination on June 30, 2023. SOFR is calculated and published by the New York Federal Reserve Bank and reflects the combination of three overnight U.S. Treasury Repo Rates. The rate is different from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and currently is available primarily as an overnight rate rather than a one-, three- or six-month rate available for LIBOR.
We completed our assessment of operational readiness for LIBOR cessation related to our various instruments in 2021. Since the initial announcement, we have terminated the majority of our LIBOR-based swaps and entered into alternative rate swaps. We plan to convert our remaining LIBOR-based derivatives to SOFR in the second quarter of 2023. In addition, the designated SOFR benchmark rate will replace the current contractual three-month LIBOR rate applied to Genworth Holdings’ junior subordinated notes due in 2066 subsequent to the second quarter of 2023. See “—Liquidity and Capital Resources—Capital resources and financing activities” for additional information. We do not expect a material adverse impact on our results of operations or financial condition from the transition away from LIBOR.
128
Table of Contents
Investment results
The following table sets forth information about our investment income, excluding net investment gains (losses), for each component of our investment portfolio for the periods indicated:
| Three months ended March 31, | Increase (decrease) | |||||||||||||||||||||||
| 2023 | 2022 | 2023 vs. 2022 | ||||||||||||||||||||||
| (Amounts in millions) |
Yield | Amount | Yield | Amount | Yield | Amount | ||||||||||||||||||
| Fixed maturity securities—taxable |
4.4 | % | $ | 561 | 4.4 | % | $ | 580 | — | % | $ | (19 | ) | |||||||||||
| Fixed maturity securities—non-taxable |
4.6 | % | 1 | 3.6 | % | 1 | 1.0 | % | — | |||||||||||||||
| Equity securities |
2.3 | % | 2 | 3.7 | % | 2 | (1.4 | )% | — | |||||||||||||||
| Commercial mortgage loans |
4.4 | % | 76 | 4.7 | % | 81 | (0.3 | )% | (5 | ) | ||||||||||||||
| Policy loans |
10.3 | % | 55 | 9.8 | % | 50 | 0.5 | % | 5 | |||||||||||||||
| Limited partnerships (1) |
4.7 | % | 28 | 1.4 | % | 7 | 3.3 | % | 21 | |||||||||||||||
| Other invested assets (2) |
51.6 | % | 68 | 64.8 | % | 63 | (13.2 | )% | 5 | |||||||||||||||
| Cash, cash equivalents, restricted cash and short-term investments |
4.0 | % | 18 | — | % | — | 4.0 | % | 18 | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Gross investment income before expenses and fees |
5.0 | % | 809 | 4.8 | % | 784 | 0.2 | % | 25 | |||||||||||||||
| Expenses and fees |
(0.1 | )% | (22 | ) | (0.1 | )% | (20 | ) | — | % | (2 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Net investment income |
4.9 | % | $ | 787 | 4.7 | % | $ | 764 | 0.2 | % | $ | 23 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Average invested assets and cash |
$ | 64,768 | $ | 65,395 | $ | (627 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) | Limited partnership investments are primarily equity-based and do not have fixed returns by period. |
| (2) | Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation. |
Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we measure our 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.
For the three months ended March 31, 2023, gross annualized weighted-average investment yields increased from higher net investment income on lower average invested assets. Net investment income included $21 million of higher limited partnership income, partially offset by $12 million of lower income related to inflation-driven volatility on TIPS and $8 million of lower bond calls and commercial mortgage loan prepayments. We also experienced higher returns on our short-term investments mainly due to higher interest rates in the current year.
129
Table of Contents
The following table sets forth net investment gains (losses) for the periods indicated:
| Three months ended March 31, |
||||||||
| (Amounts in millions) |
2023 | 2022 | ||||||
| Realized investment gains (losses): |
||||||||
| Available-for-sale fixed maturity securities: |
||||||||
| Realized gains |
$ | 3 | $ | 10 | ||||
| Realized losses |
(19 | ) | (18 | ) | ||||
|
|
|
|
|
|||||
| Net realized gains (losses) on available-for-sale fixed maturity securities |
(16 | ) | (8 | ) | ||||
| Net realized gains (losses) on equity securities sold |
— | — | ||||||
| Net realized gains (losses) on limited partnerships |
— | — | ||||||
|
|
|
|
|
|||||
| Total net realized investment gains (losses) |
(16 | ) | (8 | ) | ||||
|
|
|
|
|
|||||
| Net change in allowance for credit losses on available-for-sale fixed maturity securities |
(15 | ) | — | |||||
| Write-down of available-for-sale fixed maturity securities |
— | (2 | ) | |||||
| Net unrealized gains (losses) on equity securities still held |
11 | (6 | ) | |||||
| Net unrealized gains (losses) on limited partnerships |
— | 35 | ||||||
| Commercial mortgage loans |
(2 | ) | 1 | |||||
| Derivative instruments |
12 | 19 | ||||||
| Other |
(1 | ) | 3 | |||||
|
|
|
|
|
|||||
| Net investment gains (losses) |
$ | (11 | ) | $ | 42 | |||
|
|
|
|
|
|||||
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
| • | We recorded $8 million of higher net losses related to the sale of available-for-sale fixed maturity securities during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily from lower realized gains in the current year. |
| • | We recorded an allowance for credit losses on available for sale fixed-maturity securities of $15 million during the three months ended March 31, 2023. We also recorded net unrealized gains on equity securities of $11 million during the three months ended March 31, 2023 compared to net unrealized losses of $6 million during the three months ended March 31, 2022. The three months ended March 31, 2022 included $35 million of net unrealized gains on limited partnerships driven by favorable private equity market performance. |
| • | We had $7 million of lower net gains related to derivatives during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily associated with hedging programs that support our fixed indexed annuity and indexed universal life insurance products, partially offset by higher forward starting swap gains in the current year. |
130
Table of Contents
Investment portfolio
The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:
| March 31, 2023 | December 31, 2022 | |||||||||||||||
| (Amounts in millions) |
Carrying value | % of total | Carrying value | % of total | ||||||||||||
| Available-for-sale fixed maturity securities: |
||||||||||||||||
| Public |
$ | 32,566 | 53 | % | $ | 31,757 | 53 | % | ||||||||
| Private |
14,815 | 24 | 14,826 | 24 | ||||||||||||
| Equity securities |
364 | 1 | 319 | 1 | ||||||||||||
| Commercial mortgage loans, net |
6,891 | 11 | 7,010 | 11 | ||||||||||||
| Policy loans |
2,133 | 3 | 2,139 | 3 | ||||||||||||
| Limited partnerships |
2,456 | 4 | 2,331 | 4 | ||||||||||||
| Other invested assets |
617 | 1 | 566 | 1 | ||||||||||||
| Cash, cash equivalents and restricted cash |
1,752 | 3 | 1,799 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cash, cash equivalents and invested assets |
$ | 61,594 | 100 | % | $ | 60,747 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For a discussion of the change in cash, cash equivalents and invested assets, see the comparison for this line item under “—Consolidated Balance Sheets.” See note 5 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to our investment portfolio.
We hold fixed maturity and equity securities, limited partnerships, derivatives, embedded derivatives and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of March 31, 2023, approximately 6% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 7 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to fair value.
131
Table of Contents
Fixed maturity securities
As of March 31, 2023, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
| (Amounts in millions) |
Amortized cost or cost |
Gross unrealized gains |
Gross unrealized losses |
Allowance for credit losses |
Fair value |
|||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ | 3,417 | $ | 141 | $ | (117 | ) | $ | — | $ | 3,441 | |||||||||
| State and political subdivisions |
2,635 | 32 | (264 | ) | — | 2,403 | ||||||||||||||
| Non-U.S. government |
711 | 15 | (96 | ) | — | 630 | ||||||||||||||
| U.S. corporate: |
||||||||||||||||||||
| Utilities |
4,373 | 91 | (375 | ) | — | 4,089 | ||||||||||||||
| Energy |
2,431 | 46 | (178 | ) | — | 2,299 | ||||||||||||||
| Finance and insurance |
8,067 | 77 | (784 | ) | (6 | ) | 7,354 | |||||||||||||
| Consumer—non-cyclical |
4,733 | 132 | (306 | ) | — | 4,559 | ||||||||||||||
| Technology and communications |
3,259 | 60 | (281 | ) | — | 3,038 | ||||||||||||||
| Industrial |
1,329 | 21 | (105 | ) | — | 1,245 | ||||||||||||||
| Capital goods |
2,275 | 62 | (142 | ) | — | 2,195 | ||||||||||||||
| Consumer—cyclical |
1,777 | 25 | (128 | ) | (3 | ) | 1,671 | |||||||||||||
| Transportation |
1,149 | 39 | (76 | ) | — | 1,112 | ||||||||||||||
| Other |
321 | 5 | (16 | ) | — | 310 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total U.S. corporate |
29,714 | 558 | (2,391 | ) | (9 | ) | 27,872 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||
| Utilities |
812 | — | (66 | ) | — | 746 | ||||||||||||||
| Energy |
1,018 | 27 | (55 | ) | — | 990 | ||||||||||||||
| Finance and insurance |
2,099 | 39 | (179 | ) | — | 1,959 | ||||||||||||||
| Consumer—non-cyclical |
654 | 4 | (69 | ) | — | 589 | ||||||||||||||
| Technology and communications |
995 | 10 | (83 | ) | — | 922 | ||||||||||||||
| Industrial |
898 | 16 | (60 | ) | — | 854 | ||||||||||||||
| Capital goods |
577 | 7 | (47 | ) | — | 537 | ||||||||||||||
| Consumer—cyclical |
242 | 1 | (21 | ) | — | 222 | ||||||||||||||
| Transportation |
393 | 15 | (24 | ) | — | 384 | ||||||||||||||
| Other |
885 | 22 | (51 | ) | — | 856 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total non-U.S. corporate |
8,573 | 141 | (655 | ) | — | 8,059 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Residential mortgage-backed |
1,030 | 12 | (57 | ) | — | 985 | ||||||||||||||
| Commercial mortgage-backed |
2,086 | 2 | (251 | ) | (6 | ) | 1,831 | |||||||||||||
| Other asset-backed |
2,295 | 2 | (137 | ) | — | 2,160 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total available-for-sale fixed maturity securities |
$ | 50,461 | $ | 903 | $ | (3,968 | ) | $ | (15 | ) | $ | 47,381 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
132
Table of Contents
As of December 31, 2022, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
| (Amounts in millions) |
Amortized cost or cost |
Gross unrealized gains |
Gross unrealized losses |
Allowance for credit losses |
Fair value |
|||||||||||||||
| Fixed maturity securities: |
||||||||||||||||||||
| U.S. government, agencies and government-sponsored enterprises |
$ | 3,446 | $ | 86 | $ | (191 | ) | $ | — | $ | 3,341 | |||||||||
| State and political subdivisions |
2,726 | 19 | (346 | ) | — | 2,399 | ||||||||||||||
| Non-U.S. government |
731 | 15 | (101 | ) | — | 645 | ||||||||||||||
| U.S. corporate: |
||||||||||||||||||||
| Utilities |
4,295 | 50 | (447 | ) | — | 3,898 | ||||||||||||||
| Energy |
2,450 | 33 | (221 | ) | — | 2,262 | ||||||||||||||
| Finance and insurance |
8,005 | 59 | (871 | ) | — | 7,193 | ||||||||||||||
| Consumer—non-cyclical |
4,776 | 84 | (403 | ) | — | 4,457 | ||||||||||||||
| Technology and communications |
3,265 | 43 | (361 | ) | — | 2,947 | ||||||||||||||
| Industrial |
1,312 | 15 | (130 | ) | — | 1,197 | ||||||||||||||
| Capital goods |
2,290 | 41 | (193 | ) | — | 2,138 | ||||||||||||||
| Consumer—cyclical |
1,758 | 14 | (155 | ) | — | 1,617 | ||||||||||||||
| Transportation |
1,165 | 32 | (97 | ) | — | 1,100 | ||||||||||||||
| Other |
325 | 3 | (18 | ) | — | 310 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total U.S. corporate |
29,641 | 374 | (2,896 | ) | — | 27,119 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Non-U.S. corporate: |
||||||||||||||||||||
| Utilities |
817 | — | (77 | ) | — | 740 | ||||||||||||||
| Energy |
1,009 | 19 | (68 | ) | — | 960 | ||||||||||||||
| Finance and insurance |
2,124 | 30 | (208 | ) | — | 1,946 | ||||||||||||||
| Consumer—non-cyclical |
655 | 1 | (90 | ) | — | 566 | ||||||||||||||
| Technology and communications |
997 | 4 | (107 | ) | — | 894 | ||||||||||||||
| Industrial |
880 | 8 | (70 | ) | — | 818 | ||||||||||||||
| Capital goods |
606 | 3 | (63 | ) | — | 546 | ||||||||||||||
| Consumer—cyclical |
308 | — | (32 | ) | — | 276 | ||||||||||||||
| Transportation |
392 | 12 | (29 | ) | — | 375 | ||||||||||||||
| Other |
932 | 15 | (58 | ) | — | 889 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total non-U.S. corporate |
8,720 | 92 | (802 | ) | — | 8,010 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Residential mortgage-backed |
1,059 | 7 | (71 | ) | — | 995 | ||||||||||||||
| Commercial mortgage-backed |
2,183 | 2 | (277 | ) | — | 1,908 | ||||||||||||||
| Other asset-backed |
2,328 | 1 | (163 | ) | — | 2,166 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total available-for-sale fixed maturity securities |
$ | 50,834 | $ | 596 | $ | (4,847 | ) | $ | — | $ | 46,583 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Fixed maturity securities increased $0.8 billion compared to December 31, 2022 primarily from a decrease in net unrealized losses related to a decrease in interest rates, partially offset by net sales and maturities in the current year.
133
Table of Contents
Other invested assets
The following table sets forth the carrying values of our other invested assets as of the dates indicated:
| March 31, 2023 | December 31, 2022 | |||||||||||||||
| (Amounts in millions) |
Carrying value | % of total | Carrying value | % of total | ||||||||||||
| Bank loan investments |
$ | 495 | 81 | % | $ | 467 | 82 | % | ||||||||
| Derivatives |
69 | 11 | 50 | 9 | ||||||||||||
| Short-term investments |
7 | 1 | 3 | 1 | ||||||||||||
| Other investments |
46 | 7 | 46 | 8 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other invested assets |
$ | 617 | 100 | % | $ | 566 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Bank loan investments increased from funding of additional investments, partially offset by principal repayments in the current year. Derivatives increased largely from a decrease in interest rates in the current year.
Derivatives
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for fixed index annuity and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:
| (Notional in millions) |
Measurement | December 31, 2022 |
Additions | Maturities/ terminations |
March 31, 2023 |
|||||||||||||||
| Derivatives designated as hedges |
||||||||||||||||||||
| Cash flow hedges: |
||||||||||||||||||||
| Interest rate swaps |
Notional | $ | 8,542 | $ | 669 | $ | (42 | ) | $ | 9,169 | ||||||||||
| Foreign currency swaps |
Notional | 144 | — | (13 | ) | 131 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total cash flow hedges |
8,686 | 669 | (55 | ) | 9,300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives designated as hedges |
8,686 | 669 | (55 | ) | 9,300 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Derivatives not designated as hedges |
||||||||||||||||||||
| Equity index options |
Notional | 936 | 194 | (277 | ) | 853 | ||||||||||||||
| Financial futures |
Notional | 1,403 | 1,478 | (1,445 | ) | 1,436 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives not designated as hedges |
2,339 | 1,672 | (1,722 | ) | 2,289 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total derivatives |
$ | 11,025 | $ | 2,341 | $ | (1,777 | ) | $ | 11,589 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (Number of policies) |
Measurement | December 31, 2022 |
Additions | Maturities/ terminations |
March 31, 2023 |
|||||||||||||||
| Derivatives not designated as hedges |
||||||||||||||||||||
| Fixed index annuity embedded derivatives |
Policies | 7,315 | — | (504 | ) | 6,811 | ||||||||||||||
| Indexed universal life embedded derivatives |
Policies | 771 | — | (6 | ) | 765 | ||||||||||||||
The increase in the notional value of derivatives was primarily attributable to the addition of interest rate swaps that support our long-term care insurance business, partially offset by a decrease in equity index options used to support our fixed indexed annuity products.
The number of policies related to our embedded derivatives decreased as these products are no longer being offered and continue to runoff.
134
Table of Contents
Consolidated Balance Sheets
Total assets. Total assets increased $1,479 million from $89,699 million as of December 31, 2022 to $91,178 million as of March 31, 2023.
| • | Cash, cash equivalents and invested assets increased $847 million primarily from increases of $798 million and $125 million in fixed maturity securities and limited partnership, respectively, partially offset by a decrease of $119 million in commercial mortgage loans. The increase in fixed maturity securities was predominantly related to an increase in the fair value of our available-for-sale fixed maturity securities due to lower interest rates, partially offset by net sales and maturities in the current year. The increase in limited partnerships was largely from capital calls in the current year. These increases were partially offset by a decrease in commercial mortgage loans primarily from repayments outpacing originations in the current year. |
| • | Reinsurance recoverable increased $546 million mainly attributable to a decrease in the single-A interest rate, which is used to discount the liability for future policy benefits and related reinsurance recoverables recorded in the condensed consolidated balance sheets, partially offset by the runoff of our structured settlement products ceded to Union Fidelity Life Insurance Company. |
| • | Separate account assets (and liabilities) increased $62 million primarily due to favorable equity market performance, partially offset by surrenders and withdrawals in the current year. |
Total liabilities. Total liabilities increased $1,695 million from $81,258 million as of December 31, 2022 to $82,953 million as of March 31, 2023.
| • | The liability for future policy benefits increased $2,209 million primarily from a decrease in the single-A interest rate in the current year, which is used to discount the liability for future policy benefits and related reinsurance recoverables recorded in the condensed consolidated balance sheets, and from aging of our long-term care insurance in-force block, including higher interest accretion, partially offset by benefit payments outpacing collected premiums. Current year benefit payments were primarily driven by higher policyholder benefit utilization in our long-term care insurance products, higher mortality in our term life insurance products and benefit payments in our single premium immediate annuity products. |
| • | Policyholder account balances decreased $362 million largely driven by product charges, surrenders and benefit payments in our universal and term universal life insurance products and single premium deferred annuities in the current year. |
| • | Other liabilities decreased $183 million largely driven by lower derivative liability valuations due to a decrease in interest rates and from lower employee payroll accruals in the current year. |
Total equity. Total equity decreased $216 million from $8,441 million as of December 31, 2022 to $8,225 million as of March 31, 2023.
| • | We reported net income available to Genworth Financial, Inc.’s common stockholders of $62 million for the three months ended March 31, 2023. |
| • | Unrealized gains (losses) on investments and derivatives qualifying as hedges increased $907 million and $74 million, respectively, primarily from a decrease in interest rates in the current year. |
| • | Change in the discount rate used to measure future policy benefits decreased $1,227 million largely attributable to a decrease in the single-A interest rate in the current year, which is used to discount the liability for future policy benefits and related reinsurance recoverables with a corresponding impact recorded in accumulated other comprehensive income. |
| • | Treasury stock increased $69 million primarily due to the repurchase of Genworth Financial’s common stock, at cost, including excise taxes and other costs paid in connection with acquiring the shares. |
135
Table of Contents
Liquidity and Capital Resources
Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth needs.
Overview of cash flows—Genworth and subsidiaries
The following table sets forth our unaudited condensed consolidated cash flows for the three months ended March 31:
| (Amounts in millions) |
2023 | 2022 | ||||||
| Net cash from (used by) operating activities |
$ | 17 | $ | (92 | ) | |||
| Net cash from investing activities |
364 | 138 | ||||||
| Net cash used by financing activities |
(428 | ) | (326 | ) | ||||
|
|
|
|
|
|||||
| Net decrease in cash and cash equivalents |
$ | (47 | ) | $ | (280 | ) | ||
|
|
|
|
|
|||||
Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments typically exceed policy acquisition costs, benefits paid, redemptions and operating expenses. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. Positive cash flows from operating activities are then invested to support the obligations of our insurance and investment products and required capital supporting these products. In analyzing our cash flow, we focus on the change in the amount of cash available and used in investing activities. Changes in cash from financing activities primarily relate to deposits to, and redemptions and benefit payments on, universal life insurance and investment contracts; the issuance of debt and equity securities; the repayment or repurchase of borrowings; the repurchase of common stock presented as treasury stock; and other capital transactions.
We had cash inflows from operating activities in the current year compared to outflows in the prior year primarily from lower payments to AXA S.A. (“AXA”) and from net cash disbursements in the prior year in connection with the return of cash collateral received from counterparties under our derivative contracts.
We had higher cash inflows from investing activities in the current year mainly due to repayments of commercial mortgage loans outpacing originations in the current year compared to originations outpacing repayments in the prior year, as well as higher net sales of fixed maturity securities in the current year.
We had higher cash outflows from financing activities in the current year principally from higher net withdrawals from our investment contracts and repurchases of Genworth Financial’s common stock, partially offset by lower repurchases of long-term debt. During the first quarter of 2023, Genworth Holdings repurchased $11 million principal amount of its senior notes due in 2034 compared to the repurchase of $82 million in the first quarter of 2022 of its senior notes due in 2024.
Genworth—holding company liquidity
In consideration of our liquidity, it is important to separate the needs of our holding companies from the needs of their respective subsidiaries. Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries and do not have any significant operations of their own. Accordingly, our holding companies are highly dependent upon their respective subsidiaries to pay dividends and make other payments to meet their respective obligations. Moreover, management’s focus is predominantly on Genworth Holdings’ liquidity given it is the issuer of our outstanding public debt.
136
Table of Contents
Genworth Financial’s and Genworth Holdings’ principal sources of cash are derived from dividends from their respective subsidiaries, subsidiary payments to them under tax sharing and expense reimbursement arrangements and proceeds from borrowings or securities issuances. Our liquidity at the holding company level is highly dependent on the performance of Enact Holdings and its ability to pay timely dividends and other forms of capital returns to Genworth Holdings as anticipated. Although the business performance and financial results of our principal U.S. life insurance subsidiaries have improved significantly, as of December 31, 2022, they had negative unassigned surplus of approximately $849 million under statutory accounting and as a result, we do not expect these subsidiaries to pay dividends for the foreseeable future. Genworth Financial has the right to appoint a majority of directors to the board of directors of Enact Holdings; however, actions taken by Enact Holdings and its board of directors (including in the case of the payment of dividends to us, the approval of Enact Holdings’ independent capital committee) are subject to and may be limited by the interests of Enact Holdings, including but not limited to, its use of capital for growth opportunities and regulatory requirements. In addition, insurance laws and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth Holdings by their insurance subsidiaries.
The primary uses of funds at Genworth Financial and Genworth Holdings include payment of principal, interest and other expenses on current and any future borrowings or other obligations (including payments to AXA associated with a settlement agreement reported as discontinued operations), payment of holding company general operating expenses (including employee benefits and taxes), payments under current and any future guarantees (including guarantees of certain subsidiary obligations), payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities, repurchases of Genworth Financial’s common stock and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Pursuant to the program, during the three months ended March 31, 2023, Genworth Financial repurchased 11,224,848 shares of its common stock at an average price of $6.08 per share for a total cost of $68 million, excluding excise taxes. Genworth Financial also authorized share repurchases through a Rule 10b5-1 trading plan under which 9,121,315 shares of its common stock were repurchased in April 2023 at an average price of $5.48 per share for a total cost of $50 million before excise taxes, leaving approximately $168 million that may yet be purchased under the share repurchase program. Further repurchases under the authorized program will continue to be funded from holding company capital, as well as future cash flow generation, including expected future dividends from Genworth Financial’s ownership in Enact Holdings. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through 10b5-1 trading plans. The timing and number of future shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors. The authorization has no expiration date and may be modified, suspended or terminated at any time.
Our future use of liquidity and capital will prioritize future strategic investments in CareScout and returning capital to Genworth Financial’s shareholders through share repurchases (as discussed above). As of March 31, 2023, Genworth Holdings had outstanding $876 million principal of long-term debt. We may from time to time seek to repurchase or redeem outstanding notes for cash (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise. We expect to provide capital to CareScout to help advance our senior care growth initiatives through fee-based services, advice, consulting and other products related to the needs of elderly Americans, as well as their caregivers and families. We will initially focus on care advice and service offerings that help consumers navigate the complex caregiving challenges in the market, which is less capital intensive than insurance product offerings.
As of March 31, 2023, Genworth Holdings had $233 million of unrestricted cash and cash equivalents, with no debt maturities due until June 2034. We believe Genworth Holdings’ unrestricted cash and cash equivalents
137
Table of Contents
provide sufficient liquidity to meet its financial obligations over the next twelve months. However, we anticipate paying federal taxes starting in 2023 or 2024 due to projected taxable income and the utilization of our remaining foreign tax credits; therefore, we expect the amount of intercompany cash tax payments retained by Genworth Holdings from its subsidiaries to be lower starting in 2023 or 2024 as compared to the amounts received during 2022. We also expect Genworth Holdings’ liquidity to be significantly impacted by the amounts and timing of future dividends and other forms of capital returns from Enact Holdings, which will be influenced by economic, regulatory factors and other conditions that affect its business. We actively monitor our liquidity position (most notably at Genworth Holdings), liquidity generation options and the credit markets given changing market conditions. For example, although interest rates rose dramatically during 2022, we do not expect a significant impact on our liquidity given the reduction in Genworth Holdings’ debt, which will decrease our future debt service costs. However, we are considering different options to protect against rising interest rates, including entering into interest rate swaps that would hedge the floating rate portion of our 2066 debt. Although our overall exposure to the recent banking crisis has been limited to date, to the extent banks and other financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, including from higher interest rates and the corresponding negative impact on investment spreads, it could negatively affect our liquidity or our investment portfolio, particularly if it hinders our ability to access or monetize our existing cash, cash equivalents and investments. Genworth Holdings’ cash management target is to maintain a cash buffer of two times expected annual external debt interest payments. Genworth Holdings may move below or above this targeted cash buffer during any given quarter due to the timing of cash outflows and inflows or from future actions. Management of Genworth Financial continues to evaluate Genworth Holdings’ target level of liquidity as circumstances warrant.
Enact Holdings continues to evaluate its capital allocation strategy to consistently support its existing policyholders, grow its mortgage insurance business, fund attractive new business opportunities and return capital to shareholders. In addition to its quarterly cash dividend program, on November 1, 2022, Enact Holdings announced the approval by its board of directors of a share repurchase program under which Enact Holdings may repurchase up to $75 million of its outstanding common stock. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. As the majority shareholder, Genworth Holdings received $37 million from Enact Holdings’ quarterly dividends and share repurchases in the first quarter of 2023. Future dividends will be subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial, and also be dependent on a variety of economic, market and business conditions, among other considerations. The timing and number of future shares repurchased under the share repurchase program will also depend on a variety of factors, including Enact Holdings’ stock price and trading volume, and general business and market conditions, among other factors.
Genworth Holdings—changes in liquidity
Genworth Holdings had $233 million and $307 million of cash and cash equivalents as of March 31, 2023 and December 31, 2022, respectively. The decrease in Genworth Holdings’ cash and cash equivalents was principally driven by $68 million of funding of Genworth Financial’s common stock repurchases and the repurchase of $11 million principal balance of Genworth Holdings’ senior notes due in 2034, partially offset by $37 million of capital returns from Enact Holdings in the current year, as discussed above.
Capital resources and financing activities
Our current capital resource plans do not include any additional debt offerings or minority sales of Enact Holdings. The availability of additional capital resources will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit ratings and the performance of and outlook for Enact Holdings and the payment of dividends therefrom.
During the first quarter of 2023, Genworth Holdings repurchased $11 million principal amount of its 6.50% senior notes due in June 2034 for a pre-tax gain of $1 million and paid accrued interest thereon.
138
Table of Contents
In December 2022, the Board of Governors of the Federal Reserve System adopted a final rule that became effective on February 27, 2023. The final rule establishes benchmark rates, based on SOFR, that replace LIBOR after its elimination on June 30, 2023. Pursuant to the final rule, Genworth Holdings’ floating rate junior subordinated notes due in 2066, which currently have an annual interest rate equal to three-month LIBOR plus 2.0025%, will transition subsequent to the second quarter of 2023 to an annual interest rate equal to the three-month Term SOFR Reference Rate, plus a tenor spread adjustment of 0.26161%, plus an additional spread of 2.0025%.
Regulated insurance subsidiaries
The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities associated with their various insurance and investment products, operating costs and expenses, the payment of dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt obligations and income taxes. Liabilities arising from insurance and investment products include the payment of benefits and claims, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements. Given the challenging macroeconomic environment, during 2022 and into the first quarter of 2023, employee costs were higher driven in part by high inflation, the competitive labor market and low labor participation. Additionally, in our long-term care insurance business, we have observed an increase in the cost of care principally attributable to elevated inflation. These inflationary impacts have not had a significant impact to date; however, we will continue to monitor macroeconomic trends, including inflation, to help mitigate any potential adverse impacts to our liquidity.
Our insurance subsidiaries have used cash flows from operations and investment activities to fund their liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived from premiums, annuity deposits and insurance and investment product fees and other income, including commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment management fees, investment income and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from maturities and repayments of investments and, as necessary, sales of invested assets.
Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits without forced sales of investments. Products having liabilities with longer durations, such as certain life insurance and long-term care insurance policies, are matched with investments having similar duration such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of March 31, 2023, our total cash, cash equivalents and invested assets were $61.6 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, bank loans, limited partnership investments and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes represented approximately 43% of the carrying value of our total cash, cash equivalents and invested assets as of March 31, 2023.
Off-balance sheet commitments, guarantees and contractual obligations
As of March 31, 2023, we were committed to fund $1,285 million in limited partnership investments, $186 million of bank loan investments which had not yet been drawn, $10 million in private placement investments and $7 million in commercial mortgage loan investments.
As of March 31, 2023, there have been no material additions or changes to guarantees provided by Genworth Financial and Genworth Holdings or to our contractual obligations as compared to the amounts disclosed within our 2022 Annual Report on Form 10-K filed on February 28, 2023.
139
Table of Contents
Supplemental Condensed Consolidating Financial Information
Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior and subordinated notes (a registered security under the Securities Act of 1933) and the holders of the senior and subordinated notes, on an unsecured unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes. Genworth Holdings is a direct, 100% owned subsidiary of Genworth Financial.
Excluding investments in subsidiaries, the assets, liabilities and results of operations of Genworth Financial and Genworth Holdings, on a combined basis, are not material to the consolidated financial position or the consolidated results of operations of Genworth. In addition, none of Genworth Financial’s direct or indirect subsidiaries, other than Genworth Holdings, are issuers or guarantors of any guaranteed securities. Therefore, in accordance with Rule 13-01 of Regulation S-X, we are permitted, and we elected, to exclude the summarized financial information for both the issuer and guarantor of the registered securities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, equity prices and foreign currency exchange rates. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. We may have additional financial impacts other than changes in estimated fair value, which are beyond the scope of this discussion. There have been no material changes to our market risk exposures since December 31, 2022, except as described below.
As a result of the adoption of new accounting guidance related to long-duration insurance contracts on January 1, 2023 as disclosed in note 2 of our unaudited condensed consolidated financial statements under “Item 1—Financial Statements,” we recognized market risk benefits in our condensed consolidated balance sheets, which are reported at fair value. As the contracts or contract features included in market risk benefits expose the insurer to other-than-nominal capital market risk, we updated our interest rate and equity market sensitivities as of December 31, 2022 to include these contracts. Note that all impacts noted below exclude any effects of deferred taxes.
Sensitivity Analysis
Interest Rate Risk
One means of assessing exposure to interest rate changes is to estimate the potential changes in fair value resulting from a hypothetical increase in interest rates of 100 basis points. We performed a sensitivity analysis on our variable annuity market risk benefits and noted that a 100 basis point increase in interest rates, with all other factors held constant, would result in a decrease in the fair value of the net liability after reinsurance of approximately $120 million as of December 31, 2022.
Equity Market Risk
One means of assessing exposure to changes in equity market prices is to estimate the potential changes in fair value resulting from a hypothetical broad-based decline in equity market prices of 10%. We performed a sensitivity analysis on our variable annuity market risk benefits and noted that a 10% decline in equity market prices, with all other factors held constant, would result in an increase in the fair value of the net liability after reinsurance of approximately $80 million as of December 31, 2022.
140
Table of Contents
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2023, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023.
Changes in Internal Control Over Financial Reporting During the Quarter Ended March 31, 2023
During the three months ended March 31, 2023, we executed internal controls associated with the implementation of new accounting guidance related to long-duration insurance contracts as disclosed in note 2 of our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.” As a result, we enhanced our internal controls to address risks associated with applying the new standard; most notably, we implemented controls designed to ensure the reasonableness, completeness, and accuracy of actuarial assumptions and calculations used to estimate our insurance assets and liabilities and related reinsurance recoverables for long-duration and limited-payment insurance contracts.
There were no other changes in our internal control over financial reporting during the three months ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
141
Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See note 18 in our unaudited condensed consolidated financial statements under “Part 1—Item 1—Financial Statements” for a description of material pending litigation and regulatory matters affecting us.
Item 1A. Risk Factors
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 2022 Annual Report on Form 10-K, which together describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. There have been no material changes to the risk factors set forth in the above-referenced filing as of March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Common Stock
The following table sets forth information regarding Genworth Financial’s share repurchases during the three months ended March 31, 2023:
| (Dollar amounts in millions, except share amounts) |
Total number of shares purchased |
Average price paid per share |
Total number of shares purchased as part of publicly announced program |
Approximate dollar amount of shares that may yet be purchased under the program (1) |
||||||||||||
| January 1, 2023 through January 31, 2023 |
— | $ | — | — | $ | 286 | ||||||||||
| February 1, 2023 through February 28, 2023 |
6,047,437 | $ | 6.09 | 6,047,437 | $ | 249 | ||||||||||
| March 1, 2023 through March 31, 2023 |
5,177,411 | $ | 6.06 | 5,177,411 | $ | 218 | ||||||||||
|
|
|
|
|
|||||||||||||
| Total |
11,224,848 | 11,224,848 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The timing and number of shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors. The authorization has no expiration date and may be modified, suspended or terminated at any time. For additional information on the share repurchase program, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” |
142
Table of Contents
Item 6. Exhibits
| § | Management contract or compensatory plan or arrangement. |
143
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GENWORTH FINANCIAL, INC. (Registrant) | ||||||
| Date: May 5, 2023 |
||||||
| By: | /s/ Jerome T. Upton | |||||
| Jerome T. Upton Executive Vice President and Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer | ||||||
144