Genworth Financial Inc · NYSE:GNW
Genworth Financial — Q4 2022 Earnings Presentation
27 slides from Genworth Financial's earnings presentation, Feb 7, 2023
Slide 1: Fourth Quarter 2022 Earnings Summary
Fourth Quarter 2022 Earnings Summary February 7, 2023 1
Slide 2: Cautionary Note Regarding Forward-looking Statements
Cautionary Note Regarding Forward-looking Statements This presentation 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,"
Slide 3: Key Themes for the 4th Quarter of 2022
Key Themes for the 4th Quarter of 2022 Fourth quarter net income of $175M, or $0.35 per diluted share, and adjusted operating income1 of $167M, or $0.33 per diluted share 2022 full year net income of $609M, or $1.19 per diluted share, and adjusted operating income of $633M, or $1.24 per diluted shar
Slide 4: Significant Progress on Strategic Priorities
Significant Progress on Strategic Priorities Reduce parent holding company Achieve economic breakeven/ debt to ~$1B stabilize legacy LTC block Advance Global Care Solutions Maximize the value of Enact to initiatives under CareScout Genworth shareholders brand Return capital to shareholders 4
Slide 5: 2022 Results Summary – Genworth Consolidated
2022 Results Summary – Genworth Consolidated Enact: $578M1 Adjusted operating income (loss)1 ($M) — Strong loss performance driven by elevated cures from COVID-19 delinquencies 2022 2021 U.S. Life Insurance: $66M 633 765 — Lower LTC earnings driven by new claims growth, lower variable investment inc
Slide 6: 4Q22 Results Summary – Genworth Consolidated
4Q22 Results Summary – Genworth Consolidated Enact: $120M1 Adjusted operating income (loss)1 ($M) — Current quarter net reserve release less favorable than prior quarter — Higher new delinquencies versus prior year due to large books 4Q22 3Q22 4Q21 aging 167 159 164 U.S. Life Insurance: $38M — LTC r
Slide 7: Enact Segment
Enact Segment Primary IIF1 ($B) Earned Premiums ($M) 233 235 237 248 242 227 4Q22 3Q22 4Q21 4Q22 3Q22 4Q21 Primary NIW 15,145 15,069 21,441 Portfolio up 10% versus the prior year, driven by new Earned premiums were lower versus the prior quarter as IIF insurance written (NIW) and higher persistency
Slide 8: Enact Segment
Enact Segment Benefits/Changes in Policy Sufficiency to Published Reserves ($M) PMIERs3,4,5 ($M) 18 174% 6 165% 165% 4Q22 3Q22 4Q21 2,249 2,050 2,003 (40) Loss Ratio 8% (17)% 3% Primary Delqs (#) 19,943 18,856 24,820 Primary New Delqs (#) 10,304 9,121 8,282 Primary Paid Claims (#) 190 187 430 4Q22 3
Slide 9: U.S. Life Insurance Segment
U.S. Life Insurance Segment LTC: $24M — Lower terminations versus the prior year as pandemic impacts subside Adjusted operating income (loss) ($M) — Lower investment income from TIPS1 and LPs2 versus the prior quarter; lower income versus the prior year from LPs, bond calls and CML3 prepayments — Hi
Slide 10: LTC Incidence and Mortality Trends
LTC Incidence and Mortality Trends1 MORTALITY2 INCIDENCE # Active Claim Mortality Counts (000s) # New Active Claim Counts (000s) 3.4 3.3 3.5 4.3 4.1 4.1 4.0 4.0 3.8 3.9 4.1 2.9 3.0 3.0 3.6 3.4 3.5 2.6 2.7 2.6 2.5 2.6 2.7 2.5 3.2 3.5 3.4 3.1 3.5 2.3 2.4 2.4 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2019 2020 2021 2022
Slide 11: LTC: Annual Assumption Review
LTC: Annual Assumption Review GAAP & STATUTORY MARGIN TESTING – ACTIVE LIFE RESERVES Margin Testing Results GAAP margin PGAAP1 Positive margin slightly higher than prior year; no unlocking of reserves remained within ~$0.5 to $1.0B prior HGAAP2 Positive margin slightly lower than prior year year ran
Slide 12: In-Force Rate Action Highlights
In-Force Rate Action Highlights ESTIMATED IMPACT TO GAAP ADJUSTED OPERATING EARNINGS (LOSS) FROM IN-FORCE RATE ACTIONS Estimated GAAP Adjusted Operating Income from In- 385 422 583 943 941 1,153 1,104 Force Rate Actions1 ($M) 598 458 666 Premiums, Premium Tax, 540 Commissions, Other Expenses, Net 19
Slide 13: LTC In-Force Rate Actions: Policyholder Responses
LTC In-Force Rate Actions: Policyholder Responses CUMULATIVE POLICYHOLDER RESPONSES SINCE 20121,2 44.1% 45.5% 37.3% 31.5% 16.4% 18.0% 11.6% 23.3% 9.7% 18.6% 7.2% NFO 12.7% 6.1% 27.7% 25.7% 27.5% 4.6% 21.8% 12.5% 16.1% RBO 8.1% 2016 2017 2018 2019 2020 2021 2022 Paying Full 87.3% 81.4% 76.7% 68.5% 62
Slide 14: Individual LTC In-Force Policy Information
Individual LTC In-Force1 Policy Information Pre PCS PCS I PCS II Choice I2 Choice II PC Flex MFMP3 PC Flex II PC Flex III Total Issue Years 1974-1994 1994-1997 1997-2001 2001-2007 2003-2011 2011-2014 2009-2013 2013-2017 2014+ 1974+ Annual Premium ($M)4 38 106 329 628 1,089 236 91 68 34 2,618 In Forc
Slide 15: Impact of In-Force Rate Actions on Pre-Tax LTC Statutory Earnings
Impact of In-Force Rate Actions on Pre-Tax LTC Statutory Earnings1,2 STATUTORY PRE-TAX LTC IN-FORCE RATE ACTIONS VS PRE-TAX LTC EARNINGS LTC Statutory Pre-Tax Earnings ($M) $(714) $79 $394 $910 $315 LTC Statutory Pre-Tax Earnings 1,317 1,269 1,669 758 1,101 From In-Force Rate Actions3,4 (875) (759)
Slide 16: U.S. Life Insurance Segment
U.S. Life Insurance Segment LTC: $24M — Lower terminations versus the prior year as pandemic impacts subside Adjusted operating income (loss) ($M) — Lower investment income from TIPS and LPs versus the prior quarter; lower income versus the prior year from LPs, bond calls and CML prepayments — Highe
Slide 17: Life Insurance: Annual Assumption Review
Life Insurance: Annual Assumption Review GAAP & STATUTORY MARGIN TESTING Margin Impacts Unlocking & Reserves Assumption changes resulted in a $34M after-tax benefit in UL products in 4Q22 Loss Recognition Testing (LRT) Aggregate term LRT margin remains over $1.0B, consistent with prior year Statutor
Slide 18: U.S. Life Insurance Statutory Capital
U.S. Life Insurance Statutory Capital1 GENWORTH LIFE INSURANCE COMPANY CONSOLIDATED STATUTORY CAPITAL2 Risk-Based Capital Ratio3 289% 286% 199% 213% 229% 12/31/2018 12/31/2019 12/31/2020 12/31/2021 9/30/2022 Statutory Metrics ($M) 2018 2019 2020 2021 3Q22 YTD Capital & Surplus 1,871 2,180 2,123 2,93
Slide 19: Overview of New U.S. GAAP LDTI Accounting Guidance
Overview of New U.S. GAAP LDTI1 Accounting Guidance In scope: Long-duration insurance products including LTC, life, LDTI DOES NOT IMPACT: fixed annuities and variable annuities Effective date: January 1, 2023 — Beginning 1Q23, Genworth will report GAAP financials in Cash flows or economic value acco
Slide 20: Expected LDTI Transition Impacts
Expected LDTI Transition Impacts Stockholders’ equity of $15.3B at the January 1, 2021 transition date will decrease by $13.7B after-tax ‒ Mostly driven by LTC given the very long duration of the product ‒ Includes $11.5B AOCI decrease, primarily from the remeasurement of liabilities for future poli
Slide 21: Holding Company Cash & Liquid Assets
Holding Company Cash & Liquid Assets1 ($M) 37 (17) (11) 168 (15) 307 145 9/30/2022 Enact capital Net intercompany Interest payments Debt retirement Hold co. net other 12/31/2022 returns cash taxes items $168M in capital returns from Enact received late in 4Q22 $37M received in taxes from net interco
Slide 22: Appendix
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Slide 23: Total Genworth Financial, Inc.'s Stockholder Equity (U.S. GAAP)
Total Genworth Financial, Inc.’s Stockholder Equity (U.S. GAAP) ($M) 4Q22 3Q22 2Q22 1Q22 4Q21 Enact1 3,356 3,373 3,342 3,320 3,344 U.S. Life Insurance2 5,723 5,422 7,763 10,106 10,970 LTC2,3 4,147 3,861 5,509 7,234 7,624 Life Insurance2,3 1,549 1,625 2,110 2,489 2,833 Fixed Annuities2,3 27 (64) 144
Slide 24: Use of Non-GAAP Measures
Use of Non-GAAP Measures This presentation includes the non-GAAP financial measures entitled "adjusted operating income (loss)" and "adjusted operating income (loss) per share." Adjusted operating income (loss) per share is derived from adjusted operating income (loss). The chief • operating decisio
Slide 25: Definition of Selected Operating Performance Measures
Definition of Selected Operating Performance Measures The company taxes its businesses at the U.S. corporate federal income tax rate of 21 percent. Each segment is then adjusted to reflect the unique tax attributes of that segment such as permanent differences between U.S. GAAP and tax • law. The di
Slide 26: Reconciliation of Net Income to Adjusted Operating Income
Reconciliation of Net Income to Adjusted Operating Income 2022 2021 ($M) 4Q (Unaudited) 3Q (Unaudited) Full Year (Unaudited) 4Q (Unaudited) Full Year NET INCOME AVAILABLE TO GENWORTH FINANCIAL, INC.’S COMMON STOCKHOLDERS $ 175 $ 104 $ 609 $ 163 $ 904 Add: net income from continuing operations attrib
Slide 27: Cautionary Note Regarding Forward-looking Statements
Cautionary Note Regarding Forward-looking Statements This presentation 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