Genworth Financial Inc · NYSE:GNW

Genworth Financial — Investor Presentation (August 2020)

29 slides from Genworth Financial's investor presentation, August 2020

1. Slide 1: Genworth Financial, Inc. Investor Presentation

   Genworth Financial, Inc. Investor Presentation August 2020 1

2. Slide 2: Disclaimer

   Disclaimer This presentation is not an offer to sell or the solicitation of an offer to buy any securities of Genworth Financial, Inc. (“Genworth,” “we,” “us” or “our”) or Genworth Mortgage Holdings, Inc. (“Genworth Mortgage Insurance” or “GMI”), nor will there be any sales of securities of Genworth

3. Slide 3: Today’s Agenda

   Today’s Agenda  Genworth Mortgage Insurance Overview  Key Credit Highlights  Concluding Remarks  Appendix Genworth Mortgage Insurance 3

4. Slide 4: Today’s Presenters

   Today’s Presenters Dan Sheehan, Chief Financial Officer and Chief Investment Officer, Genworth Financial ‫‏‬  Named Chief Financial Officer in August 2020; served as Chief Investment Officer since April 2012, managing Genworth’s $73bn investment portfolio  Prior to assuming role as Chief Investmen

5. Slide 5: Genworth Mortgage Insurance Overview

   Genworth Mortgage Insurance Overview Genworth Presentation Mortgage Insurance Deck All Rights Reserved 5

6. Slide 6: Overview

   Overview  Genworth Mortgage Holdings, Inc. (“Genworth Mortgage Insurance” or “GMI”) Genworth is the holding company for a leading U.S. Financial, Inc. private mortgage insurance (“PMI”) • Cash and liquid assets: company and is a subsidiary of Genworth $554mm1 • Senior Unsecured Notes: Financial, In

7. Slide 7: Genworth Financial Update

   Genworth Financial Update  Genworth entered into a merger agreement in October of 2016 whereby affiliates of China Oceanwide Holdings Group Co., Ltd. (“Oceanwide”) would acquire Genworth for $5.43 per share, or approximately $2.7bn  In addition to the purchase price, pending the closing of the tra

8. Slide 8: How Private Mortgage Insurance Works

   How Private Mortgage Insurance Works • PMI protects lenders and ultimately mortgage investors against borrower default • The charters of selected Government Sponsored Enterprises (“GSEs”) require credit enhancement, such as mortgage insurance, on loans they acquire with >80% loan-to-value (“LTV”) ra

9. Slide 9: A Snapshot

   Genworth Mortgage Insurance – A Snapshot Business Overview Key Financial Metrics2  Leading private mortgage insurance company founded in 1981 $207bn $50bn  2019 market share of 16%1 Insurance In-Force (“IIF”) Risk In-Force (“RIF”)  H1 2020 market share of 19%1  Successful transition from a “Buy

10. Slide 10: Differentiated Mortgage Insurance Offering

    Differentiated Mortgage Insurance Offering  Long-tenured relationships with a large and diverse customer base  Best-in-class customer service and differentiated customer offerings  Proprietary pricing engine allows for granular approach to pricing and portfolio construction  Excellence in underw

11. Slide 11: Strong Fundamentals for Mortgage Insurance Production

    Strong Fundamentals for Mortgage Insurance Production FIRST-TIME HOMEBUYERS AFFORDABILITY Housing Affordability Index Purchase Origination ($T) (1990 = 100) 1.4 1.5 1.5 1.3 196 186 1.0 1.2 1.1 1.1 1.2 169 172 177 0.9 1.0 0.8 0.9 165 167 168 159 158 0.7 0.6 0.7 148 0.6 0.5 0.5 139 130 125 129 121 111

12. Slide 12: Managing COVID-19 Business Implications

    Managing COVID-19 Business Implications  Swift operational response to protect employees and minimize disruption  Transitioned to work from home in March with vast majority of employees still working remotely  Serving lenders with no change in quality throughout the COVID-19 pandemic  Extensive

13. Slide 13: Key Credit Highlights

    Key Credit Highlights Genworth Presentation Mortgage Insurance Deck All Rights Reserved 13

14. Slide 14: Key Credit Highlights

    Key Credit Highlights A Strong Historical Operating Performance, Driven by Favorable Underwriting Results B Strong Capitalization, Driven by Prudently Managed Balance Sheet C Large In-Force Book of Business Expected to Drive Top Line Results D Resilient Underlying Credit Quality on Mortgage Insuranc

15. Slide 15: Strong Historical Operating Performance, Driven by Favorable Underwriting Results

    A Strong Historical Operating Performance, Driven by Favorable Underwriting Results ($ in millions) Premiums  Large in-force book of business continuing $ 856 $ 695 $ 746 to drive sizeable premiums $ 602 $ 660  Growth in premiums driven by strong $ 226 $ 243 lender relationships while maintaining

16. Slide 16: Strong Capitalization, Driven by Prudently Managed Balance Sheet

    B Strong Capitalization, Driven by Prudently Managed Balance Sheet PMIERs Capitalization PMIERs Excess Capital1 ($ in billions) $0.2 $0.4 $0.6 $0.8 $1.0 $1.1 $1.3  PMI capital requirements governed by 138 % 142 % 143 % PMIERs 121 % 129 % 109 % 115 %  Q2 2020 PMIERs ratio of 143%  Risk-to-capital

17. Slide 17: Large In-Force Book of Business Expected to Drive Top Line Results

    C Large In-Force Book of Business Expected to Drive Top Line Results IIF ($B) $ 199 $ 207 $ 192 $ 167 $ 152 $ 138 $ 122  Large IIF and RIF book seeing meaningful growth in recent years  IIF and RIF CAGR of 12% since 2015 YE2015 YE2016 YE2017 YE2018 YE2019 Q1 2020 Q2 2020 Risk In-Force (“RIF”) ($Bn

18. Slide 18: Strong Underlying Credit Quality of Portfolio

    D Strong Underlying Credit Quality of Portfolio # of High-Risk FICO Score2 LTV2 Layers3 % RIF Q2’20 ​<620 0 1.0% 1% ​620- 679 ​9 5.01% & 1 1.2% 9% LTV > 95% ​8 0.01% - Abov e 90.00% 18% 2 0.3% GMI Q2 2020 RIF ​740+ 30% FICO < 680 ​680-739 36% 55% 3+ 0.0% ​9 0.01% - 95.00% Total 2.5% 52% ◼ Over 90% o

19. Slide 19: Comprehensive Risk Management Philosophy

    E Comprehensive Risk Management Philosophy Three-Pronged Approach to Insurance Risk Management ◼ Identify appropriate risk ◼ CRT allows for reduced portfolio appetite and set risk volatility parameters / limits ◼ Structured in XOL form, either via Acquire Distribute ◼ Thorough underwriting to apply

20. Slide 20: GMI CRT Program

    E Reinsurer GMI CRT Program GMI Retention MILN PMIERs Requirement at Inception ($ in millions, unless stated otherwise) ▪ GMI starts ceding losses to reinsurers just under Initial RIF (%) 3% of RIF for each 7.3% vintage year, up to ~7.5% ~7.2% ~7.2% ~7.3% ~7.0% ~7%... Corresponds to ~30% - 70% lifet

21. Slide 21: Illustrative Delinquency Sensitivity Analysis

    E Illustrative Delinquency Sensitivity Analysis Delinquent loans are subject to non-performing risk charges under PMIERs. For loans with 2-3 missed payments, charges are 55% of the risk in force, with higher charges for policies that Required Assets as % continue to miss payments. PMIERs provides fo

22. Slide 22: Forbearance and Delinquency Trends

    E Forbearance and Delinquency Trends Industry Forbearance1 GMI Delinquencies (Counts) 10.0% Mar Apr May Jun Jul 20 20 20 20 20 8.0% Total Delinquencies 15,417 17,772 42,448 53,587 52,484 6.0% Delq Rate 1.78% 2.03% 4.79% 5.98% 5.81% 4.0% % in Forbearance 5% 11% 66% 79% 77% 2.0% 0.0% New Delinquencies

23. Slide 23: Q2 Performance Summary Update

    E Q2 Performance Summary Update ($ in millions, unless stated otherwise)  Significant NIW growth due highest refi levels Key Items Q1 2020 Q2 2020 Δ since 2003, driven by low rate environment  COVID delinquencies driving losses of NIW ($ in billions) $ 18 $ 28 58.7 % $228mm  48,557 new delinquenc

24. Slide 24: Dynamic Leadership Team with Through-the-Cycle Experience

    F Dynamic Leadership Team with Through- the-Cycle Experience Rohit Gupta Dean Mitchell Duane Duncan Michael Derstine Evan Stolove President Sr. Vice President Sr. Vice President Sr. Vice President Sr. Vice President Chief Executive Officer Chief Financial Officer Government & Industry Affairs Chief

25. Slide 25: Concluding Remarks

    Concluding Remarks Genworth Presentation Mortgage Insurance Deck All Rights Reserved 25

26. Slide 26: Summary Financial Metrics

    Summary Financial Metrics ($ in millions, unless stated otherwise) 2015 2016 2017 2018 2019 Q1 2020 Q2 2020 Income Statement Items Premiums $ 602 $ 660 $ 695 $ 746 $ 856 $ 226 $ 243 Net Investment Income 58 63 73 93 117 33 31 Adjusted Operating Income 179 250 311 490 568 148 (3) Balance Sheet Items

27. Slide 27: Key Takeaways

    Key Takeaways  GMI has been operating from a position of strength, with solid operating performance in recent years  Balance sheet remains strong and can withstand meaningful delinquency developments  Forbearance data showing stabilization in macro conditions  Effectively managing through COVID-

28. Slide 28: Appendix

    Appendix Genworth Mortgage Insurance All Rights Reserved 28

29. Slide 29: Genworth Legal Entity Organization Structure

    Genworth Legal Entity Organization Structure Genworth Financial, Inc.  Cash and liquid assets: $554mm1  Senior Unsecured Notes: $2.1bn Genworth Holdings, Inc.  Subordinated Hybrid Debt: $600mm  Liabilities related to discontinued operations: $653mm2 100% Genworth Mortgage Holdings, Inc. Genworth

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