Genworth Financial Announces Second Quarter 2021 Results

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PR Newswire

RICHMOND, Va., Aug. 3, 2021

RICHMOND, Va., Aug. 3, 2021 /PRNewswire/ --

Continued Progress On Company's Strategic Objectives With Strong Second Quarter Earnings, Preparations For An Initial Public Offering (IPO) Of Minority Interest In Enact¹ And Holding Company Debt Reduction
Enact Adjusted Operating Income Of $135 Million From Favorable Loss Performance Driven By Lower New Delinquencies
Enact's PMIERs² Sufficiency Ratio Estimated At 165 Percent, $1,941 Million Above Published Requirements
U.S. Life Insurance Segment Adjusted Operating Income Of $71 Million Driven By LTC³ Results Benefitting From In Force Rate Actions And Net Investment Income
Continued Progress Toward LTC Multi-Year Rate Action Plan (MYRAP) With $49 Million Incremental Annual Rate Increases Approved In Second Quarter, With An Estimated Net Present Value (NPV) Of Approximately $300 Million
Holding Company Cash And Liquid Assets Of $842 Million, Including $19 Million Restricted
September 2021 Debt Redemption Of $513 Million Completed Subsequent To Quarter-End

Genworth Financial, Inc. (NYSE: GNW) today reported results for the quarter ended June 30, 2021. The company reported net income⁴ of $240 million, or $0.47 per diluted share, in the second quarter of 2021, compared with a net loss of $441 million, or $0.86 per diluted share, in the second quarter of 2020. The company reported adjusted operating income⁵ of $194 million, or $0.38 per diluted share, in the second quarter of 2021, compared with an adjusted operating loss of $23 million, or $0.05 per diluted share, in the second quarter of 2020.

Strategic Update

During the current quarter, Genworth continued to make progress on its strategic objectives to strengthen the financial condition of the company and create long-term shareholder value. The company continued preparations for a planned minority IPO of Enact, issued an early redemption notice for the September 2021 debt for a July redemption, made progress on reducing risk associated with the legacy LTC business through the MYRAP and continued planning for a new LTC joint venture in the U.S.

The planned IPO of Enact remains a key strategic objective for Genworth and is subject to market and other conditions, however because the company is in registration and subject to applicable publicity restrictions, Genworth is unable to comment further or provide any additional detail at this time.

On June 21, 2021, Genworth issued a notice of redemption for its outstanding 7.625% senior notes due September 2021. Subsequent to the end of quarter, on July 21, 2021, Genworth completed the redemption of the $513 million outstanding principal amount of such notes, which reduced remaining parent holding company public debt outstanding to $1.7 billion, along with the AXA S.A. (AXA) liability of approximately $345 million. Since 2013, the company has reduced its parent holding company debt by a total of approximately $2.2 billion, with over $1.2 billion retired in 2021 as of the date hereof.

Genworth continued to execute on its MYRAP during the current quarter, with the goal of achieving break-even on an economic basis for the legacy LTC business over time. Incremental annual rate increases of $49 million were approved during the current quarter, bringing the total net present value from LTC premium increases and benefit reductions achieved to $15.5 billion since 2012.

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"We delivered very strong results in the second quarter while making progress on our strategic plan," said Tom McInerney, Genworth President and CEO. "Today the company is on a more stable trajectory as a result of continued strong operating performance, strategic actions we've taken to reduce debt and excellent progress on the MYRAP over the past several years. Our goal is to reduce parent holding company debt to a sustainable level of approximately $1 billion, creating more financial flexibility to return capital to shareholders and invest in future growth. With an engaged Board of Directors and leadership team, a skilled and dedicated workforce and deep expertise and experience, Genworth is well positioned to create value over the long-term."

Financial Performance

Consolidated Net Income (Loss) & Adjusted Operating Income (Loss)
	Three months ended June 30
	2021				2020
			Per				Per
			diluted				diluted		Total
(Amounts in millions, except per share)	Total		share		Total		share		% change

Net income (loss) available to Genworth's common stockholders	$	240	$	0.47	$	(441)	$	(0.86)	154%
Adjusted operating income (loss)	$	194	$	0.38	$	(23)	$	(0.05)	NM⁶
Weighted-average diluted shares		515.0				512.5

	As of June 30
	2021				2020
Book value per share			$	29.89			$	28.96
Book value per share, excluding accumulated other comprehensive income (loss)			$	22.33			$	20.17

Net investment gains, net of taxes and other adjustments, increased net income by $55 million in the current quarter. The investment gains were primarily driven by mark-to-market gains on limited partnerships in the LTC business. The net loss of $441 million in the second quarter of 2020 included $77 million of investment gains, net of taxes and other adjustments.

Net investment income was $844 million in the quarter, compared to $801 million in the prior quarter and $779 million in the prior year. Net investment income was higher than the prior quarter and prior year as a result of higher variable investment income, including income from limited partnerships, bond calls, commercial mortgage loan prepayments and the inflation impact on Treasury Inflation-Protected Securities (TIPS), primarily in the LTC business. The reported yield and the core yield⁵ for the quarter were 5.11 percent and 4.85 percent, respectively, compared to 4.84 percent and 4.73 percent, respectively, in the prior quarter.

Genworth's effective tax rate on income from continuing operations for the quarter was approximately 23 percent. The effective tax rate was increased by the tax effect of forward starting swap gains settled prior to the change in the corporate tax rate under the 2017 Tax Cuts and Jobs Act, which continue to be tax effected at 35 percent as they are amortized into net investment income.

Adjusted operating income (loss) results by business line are summarized in the table below:

Adjusted Operating Income (Loss)
(Amounts in millions)	Q2 21		Q1 21		Q2 20
Enact	$	135	$	126	$	(3)
U.S. Life Insurance		71		62		(5)
Runoff		15		12		24
Corporate and Other		(27)		(32)		(39)
Total Adjusted Operating Income (Loss)	$	194	$	168	$	(23)

Adjusted operating income (loss) represents income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. A reconciliation of net income (loss) to adjusted operating income (loss) is included at the end of this press release.

Enact

Operating Metrics

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