UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2010~~March 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number 001-32195

LOGO

GENWORTH FINANCIAL, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		33-1073076
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

6620 West Broad Street Richmond, Virginia		23230
(Address of Principal Executive Offices)		(Zip Code)

(804) 281-6000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

~~At July 26, 2010, 489,335,077~~As of April 27, 2011, 490,561,211 shares of Class A Common Stock, par value $0.001 per share, were outstanding.

TABLE OF CONTENTS


		Page
PART I—FINANCIAL INFORMATION			3

Item 1.	Financial Statements		3
Condensed Consolidated Statements of Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ (Unaudited)			3
Condensed Consolidated Balance Sheets as of ~~June 30, 2010~~March 31, 2011 (Unaudited) and December 31, ~~2009~~2010			4
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~six~~three months ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ (Unaudited)			5
Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ (Unaudited)			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62	59

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~131~~	107

Item 4.	Controls and Procedures	~~131~~	108

PART II—OTHER INFORMATION		~~132~~	108

Item 1.	Legal Proceedings	~~132~~	108

Item 1A.	Risk Factors	~~132~~	109

Item 6.	Exhibits	~~133~~	110

Signatures		~~134~~	111

PART I—FINANCIAL INFORMATION

~~Item 1. Financial Statements~~

Item 1.

Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share amounts)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2010			2009			2010			2009			2011			2010
Revenues:
Premiums	$	1,470		$	1,502		$	2,940		$	3,004		$	1,437		$	1,470
Net investment income		823			781			1,588			1,492			830			765
Net investment gains (losses)		(139	)		(53	)		(209	)		(823	)		(28	)		(70	)
Insurance and investment product fees and other		256			253			512			544			329			256

Total revenues		2,410			2,483			4,831			4,217			2,568			2,421

Benefits and expenses:
Benefits and other changes in policy reserves		1,340			1,492			2,655			3,000			1,409			1,315
Interest credited		211			263			424			538			201			213
Acquisition and operating expenses, net of deferrals		499			456			974			897			500			475
Amortization of deferred acquisition costs and intangibles		179			212			363			459			185			184
Interest expense		109			114			224			210			127			115

Total benefits and expenses		2,338			2,537			4,640			5,104			2,422			2,302

Income (loss) before income taxes		72			(54	)		191			(887	)
Benefit for income taxes		(5	)		(4	)		(98	)		(368	)
Income before income taxes														146			119
Provision (benefit) for income taxes														30			(93	)

Net income (loss)		77			(50	)		289			(519	)
Net income														116			212
Less: net income attributable to noncontrolling interests		35			—			69			—			34			34

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	42		$	(50	)	$	220		$	(519	)
Net income available to Genworth Financial, Inc.’s common stockholders													$	82		$	178

Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:
Net income available to Genworth Financial, Inc.’s common stockholders per common share:
Basic	$	0.09		$	(0.11	)	$	0.45		$	(1.20	)	$	0.17		$	0.36

Diluted	$	0.08		$	(0.11	)	$	0.45		$	(1.20	)	$	0.17		$	0.36

Weighted-average common shares outstanding:
Basic		489.1			433.2			489.0			433.2			490.1			488.8

Diluted		494.2			433.2			493.9			433.2			494.4			493.5

Supplemental disclosures:
Total other-than-temporary impairments	$	(24	)	$	(476	)	$	(101	)	$	(1,073	)	$	(31	)	$	(77	)
Portion of other-than-temporary impairments included in other comprehensive income (loss)		(27	)		324			(30	)		324
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)														(5	)		(3	)

Net other-than-temporary impairments		(51	)		(152	)		(131	)		(749	)		(36	)		(80	)
Other investment gains (losses)		(88	)		99			(78	)		(74	)
Other investments gains (losses)														8			10

Total net investment gains (losses)	$	(139	)	$	(53	)	$	(209	)	$	(823	)	$	(28	)	$	(70	)

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except per share amounts)


	June 30, 2010			December 31, 2009			March 31, 2011			December 31, 2010
	(Unaudited)						(Unaudited)
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value	$	53,386		$	49,752		$	54,998		$	55,183
Equity securities available-for-sale, at fair value		199			159			355			332
Commercial mortgage loans		7,208			7,499			6,600			6,718
Restricted commercial mortgage loans related to securitization entities		535			—			485			507
Policy loans		1,467			1,403			1,480			1,471
Other invested assets		4,042			4,702			3,752			3,854
Restricted other invested assets related to securitization entities ($373 at fair value)		374			—
Restricted other invested assets related to securitization entities ($374 and $370 at fair value)								376			372

Total investments		67,211			63,515			68,046			68,437
Cash and cash equivalents		4,586			5,002			3,742			3,132
Accrued investment income		696			691			794			733
Deferred acquisition costs		7,170			7,341			7,334			7,256
Intangible assets		789			934			713			741
Goodwill		1,313			1,324			1,331			1,329
Reinsurance recoverable		17,279			17,332			17,102			17,191
Other assets		1,024			954			883			810
Deferred tax asset		—			92			1,188			1,100
Separate account assets		10,284			11,002			11,807			11,666

Total assets	$	110,352		$	108,187		$	112,940		$	112,395

Liabilities and stockholders’ equity

Liabilities:
Future policy benefits	$	29,929		$	29,469		$	30,872		$	30,717
Policyholder account balances		28,338			28,470			26,399			26,978
Liability for policy and contract claims		6,302			6,567			6,959			6,933
Unearned premiums		4,238			4,714			4,529			4,541
Other liabilities ($183 and $—other liabilities related to securitization entities)		6,287			6,298
Borrowings related to securitization entities ($51 at fair value)		525			—
Other liabilities ($139 and $150 other liabilities related to securitization entities)								6,189			6,085
Borrowings related to securitization entities ($58 and $51 at fair value)								489			494
Non-recourse funding obligations		3,437			3,443			3,431			3,437
Short-term borrowings		730			930
Long-term borrowings		4,331			3,641			5,347			4,952
Deferred tax liability		904			303			1,689			1,621
Separate account liabilities		10,284			11,002			11,807			11,666

Total liabilities		95,305			94,837			97,711			97,424

Commitments and contingencies

Stockholders’ equity:
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 578 million and 577 million shares issued as of June 30, 2010 and December 31, 2009, respectively; 489 million shares outstanding as of June 30, 2010 and December 31, 2009		1			1
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 579 million and 578 million shares issued as of March 31, 2011 and December 31, 2010, respectively; 491 million and 490 million shares outstanding as of March 31, 2011 and December 31, 2010, respectively								1			1
Additional paid-in capital		12,078			12,034			12,101			12,095

Accumulated other comprehensive income (loss):
Net unrealized investment gains (losses):
Net unrealized gains (losses) on securities not other-than-temporarily impaired		208			(1,151	)		77			21
Net unrealized gains (losses) on other-than-temporarily impaired securities		(179	)		(247	)		(114	)		(121	)

Net unrealized investment gains (losses)		29			(1,398	)		(37	)		(100	)

Derivatives qualifying as hedges		1,162			802			864			924
Foreign currency translation and other adjustments		140			432			793			668

Total accumulated other comprehensive income (loss)		1,331			(164	)		1,620			1,492
Retained earnings		3,221			3,105			3,055			2,973
Treasury stock, at cost (88 million shares as of June 30, 2010 and December 31, 2009)		(2,700	)		(2,700	)
Treasury stock, at cost (88 million shares as of March 31, 2011 and December 31, 2010)								(2,700	)		(2,700	)

Total Genworth Financial, Inc.’s stockholders’ equity		13,931			12,276			14,077			13,861
Noncontrolling interests		1,116			1,074			1,152			1,110

Total stockholders’ equity		15,047			13,350			15,229			14,971

Total liabilities and stockholders’ equity	$	110,352		$	108,187		$	112,940		$	112,395

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in millions)

(Unaudited)


	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 stockholders’ equity			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 stockholders’ equity
Balances as of December 31, 2009	$	1	$	12,034	$	(164	)	$	3,105		$	(2,700	)	$	12,276		$	1,074		$	13,350
Balances as of December 31, 2010																							$	1	$	12,095	$	1,492		$	2,973	$	(2,700	)	$	13,861		$	1,110		$	14,971

Cumulative effect of change in accounting, net of taxes and other adjustments		—		—		91			(104	)		—			(13	)		—			(13	)
Comprehensive income (loss):
Net income (loss)		—		—		—			220			—			220			69			289
Net income																								—		—		—			82		—			82			34			116
Net unrealized gains (losses) on securities not other-than-temporarily impaired		—		—		1,268			—			—			1,268			9			1,277			—		—		56			—		—			56			(9	)		47
Net unrealized gains (losses) on other-than-temporarily impaired securities		—		—		68			—			—			68			—			68			—		—		7			—		—			7			—			7
Derivatives qualifying as hedges		—		—		360			—			—			360			—			360			—		—		(60	)		—		—			(60	)		—			(60	)
Foreign currency translation and other adjustments		—		—		(292	)		—			—			(292	)		(15	)		(307	)		—		—		125			—		—			125			29			154

Total comprehensive income (loss)																					1,687																					264
Dividends to noncontrolling interests		—		—		—			—			—			—			(21	)		(21	)		—		—		—			—		—			—			(12	)		(12	)
Stock-based compensation expense and exercises and other		—		24		—			—			—			24			—			24			—		6		—			—		—			6			—			6
Other capital transactions		—		20		—			—			—			20			—			20

Balances as of June 30, 2010	$	1	$	12,078	$	1,331		$	3,221		$	(2,700	)	$	13,931		$	1,116		$	15,047
Balances as of March 31, 2011																							$	1	$	12,101	$	1,620		$	3,055	$	(2,700	)	$	14,077		$	1,152		$	15,229

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY—

(CONTINUED)

(Amounts in millions)

(Unaudited)


	Common stock		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Treasury stock, at cost			Total stockholders’ equity			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 stockholders’ equity
Balances as of December 31, 2008	$	1	$	11,477	$	(3,062	)	$	3,210		$	(2,700	)	$	8,926
Balances as of December 31, 2009																	$	1	$	12,034	$	(164	)	$	3,105		$	(2,700	)	$	12,276		$	1,074		$	13,350

Cumulative effect of change in accounting, net of taxes and other adjustments		—		—		(349	)		355			—			6			—		—		91			(104	)		—			(13	)		—			(13	)
Comprehensive income (loss):
Net income (loss)		—		—		—			(519	)		—			(519	)
Net income																		—		—		—			178			—			178			34			212
Net unrealized gains (losses) on securities not other-than-temporarily impaired		—		—		1,378			—			—			1,378			—		—		408			—			—			408			(1	)		407
Net unrealized gains (losses) on other-than-temporarily impaired securities		—		—		(14	)		—			—			(14	)		—		—		39			—			—			39			—			39
Derivatives qualifying as hedges		—		—		(213	)		—			—			(213	)		—		—		(25	)		—			—			(25	)		—			(25	)
Foreign currency translation and other adjustments		—		—		391			—			—			391			—		—		(2	)		—			—			(2	)		37			35

Total comprehensive income (loss)															1,023																						668
Dividends to noncontrolling interests																		—		—		—			—			—			—			(10	)		(10	)
Stock-based compensation expense and exercises and other		—		15		—			—			—			15			—		10		—			—			—			10			—			10
Other capital transactions																		—		20		—			—			—			20			—			20

Balances as of June 30, 2009	$	1	$	11,492	$	(1,869	)	$	3,046		$	(2,700	)	$	9,970
Balances as of March 31, 2010																	$	1	$	12,064	$	347		$	3,179		$	(2,700	)	$	12,891		$	1,134		$	14,025

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)


	Six months ended June 30,						Three months ended March 31,
	2010			2009			2011			2010
Cash flows from operating activities:
Net income (loss)	$	289		$	(519	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Net income							$	116		$	212
Adjustments to reconcile net income to net cash from operating activities:
Amortization of fixed maturity discounts and premiums		5			106			(18	)		24
Net investment losses (gains)		209			823			28			70
Charges assessed to policyholders		(233	)		(211	)		(159	)		(113	)
Acquisition costs deferred		(392	)		(368	)		(229	)		(193	)
Amortization of deferred acquisition costs and intangibles		363			459			185			184
Deferred income taxes		(173	)		(591	)		(37	)		(101	)
Net increase (decrease) in trading securities, held-for-sale investments and derivative instruments		119			116
Net increase in trading securities, held-for-sale investments and derivative instruments								35			58
Stock-based compensation expense		23			15			7			11
Change in certain assets and liabilities:
Accrued investment income and other assets		24			30			(117	)		(43	)
Insurance reserves		1,208			1,520			557			576
Current tax liabilities		(211	)		197			25			(163	)
Other liabilities and other policy-related balances		(674	)		(208	)		(57	)		(392	)

Net cash from operating activities		557			1,369			336			130

Cash flows from investing activities:
Proceeds from maturities and repayments of investments:
Fixed maturity securities		2,057			1,892			1,627			941
Commercial mortgage loans		263			381			148			136
Restricted commercial mortgage loans related to securitization entities		27			—			22			12
Proceeds from sales of investments:
Fixed maturity and equity securities		2,393			1,663			1,009			1,021
Purchases and originations of investments:
Fixed maturity and equity securities		(6,867	)		(2,700	)		(2,200	)		(3,623	)
Commercial mortgage loans		(23	)		—			(38	)		—
Other invested assets, net		1,491			(348	)		(59	)		344
Policy loans, net		(64	)		(253	)		(9	)		(5	)
Payments for businesses purchased, net of cash acquired								(4	)		—

Net cash from investing activities		(723	)		635			496			(1,174	)

Cash flows from financing activities:
Deposits to universal life and investment contracts		1,174			1,271			560			490
Withdrawals from universal life and investment contracts		(1,734	)		(4,231	)		(1,115	)		(913	)
Short-term borrowings and other, net		(285	)		(330	)		(33	)		(37	)
Repayment and repurchase of long-term borrowings		—			(739	)
Proceeds from the issuance of long-term borrowings		660			—
Redemption of non-recourse funding obligations		(6	)		(12	)		(6	)		(6	)
Proceeds from the issuance of long-term debt								397			—
Repayment of borrowings related to securitization entities		(31	)		—			(12	)		(11	)
Dividends paid to noncontrolling interests		(21	)		—			(12	)		(10	)

Net cash from financing activities		(243	)		(4,041	)		(221	)		(487	)
Effect of exchange rate changes on cash and cash equivalents		(7	)		83			(1	)		(5	)

Net change in cash and cash equivalents		(416	)		(1,954	)		610			(1,536	)
Cash and cash equivalents at beginning of period		5,002			7,328			3,132			5,002

Cash and cash equivalents at end of period	$	4,586		$	5,374		$	3,742		$	3,466

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Formation of Genworth and Basis of Presentation

Genworth Financial, Inc. (“Genworth”) was incorporated in Delaware on October 23, 2003. The accompanying condensed financial statements include on a consolidated basis the accounts of Genworth and our affiliate companies in which we hold a majority voting interest or where we are the primary beneficiary of a variable interest entity, which we refer to as the “Company,” “we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been eliminated in consolidation.

We have the following three operating segments:

•

U.S. Mortgage Insurance. In the ~~U.S.,~~United States, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. We selectively provide mortgage insurance on a structured, or bulk, basis with essentially all of our bulk writings prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage capital and risk.

In January 2011, we discontinued new sales of retail and group variable annuities while continuing to service our existing blocks of business. We continue to offer fixed annuities.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Actual results could differ from those estimates. These condensed consolidated financial statements include all adjustments considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our ~~2009~~2010 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.

(2) Accounting Pronouncements

Recently Adopted

~~Accounting for Transfers of Financial Assets~~

On January 1, ~~2010,~~2011, we adopted new accounting guidance related to ~~accounting for transfers~~goodwill impairment testing when a reporting unit’s carrying value is zero or negative. This guidance did not impact our consolidated financial statements upon adoption, as all of ~~financial assets. This~~our reporting units with goodwill balances have positive carrying values.

On January 1, 2011, we adopted new accounting guidance ~~amends the previous guidance on transfers~~related to how investments held through separate accounts affect an insurer’s consolidation analysis of financial assets by eliminating the qualifying special-purpose entity concept, providing certain conditions that must be met to qualify for sale accounting, changing the amount of gain or loss recognized on certain transfers and requiring additional disclosures.those investments. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements. The elimination of the qualifying special-purpose entity concept requires that these entities be considered for consolidation as a result of the new guidance related to variable interest entities (“VIEs”) as discussed below.

~~Improvements to Financial Reporting by Enterprises Involved with VIEs~~

On January 1, ~~2010,~~2011, we adopted new accounting guidance ~~for determining which enterprise, if any, has a controlling financial interest in a VIE and requires~~related to additional disclosures about ~~involvement~~purchases, sales, issuances and settlements in ~~VIEs. Under this new accounting guidance,~~ the ~~primary beneficiary~~rollforward of a VIE is the enterprise that has the power to direct the activities of a VIE that most significantly impacts the VIE’s economic performance and has the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. Upon adoption of this new accounting guidance, we were required to consolidate certain VIEs, including previously qualifying special-purpose entities and investment structures. We recorded a transition adjustment for the impact upon adoption to reflect the difference between the assets and liabilities of the newly consolidated entities and the amounts recorded for our interests in these entities prior to adoption. On January 1, 2010, we recorded a net cumulative effect adjustment of $104 million to retained earnings with a partial offset to accumulated other comprehensive income (loss) of $91 million related to the adoption of this new accounting guidance.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The assets and liabilities of the newly consolidated entities were as follows as of January 1, 2010:~~

(Amounts in millions)
Carrying value ⁽¹⁾ Adjustment for election
of fair value option⁽²⁾ Amounts
recorded upon
consolidation
Assets

Restricted commercial mortgage loans
$ 564 $ —      $ 564
Restricted other invested assets
409 (30 ) 379
Accrued investment income
2 —      2

Total assets
975 (30 ) 945

Liabilities

Other liabilities
138 —      138
Borrowings related to securitization entities
644 (80 ) 564

Total liabilities
782 (80 ) 702

Net assets and liabilities of newly consolidated entities
$ 193 $ 50    243

Less: amortized cost of fixed maturity securities previously recorded⁽³⁾
404

Cumulative effect adjustment to retained earnings upon adoption, pre-tax
(161 )
Tax effect
57

Net cumulative effect adjustment to retained earnings upon adoption
$ (104 )

⁽¹⁾

Carrying value represents the amounts that would have been recorded in the consolidated financial statements on January 1, 2010 had we recorded the assets and liabilities in our financial statements from the date we first met the conditions for consolidation based on the criteria in the new accounting guidance.

⁽²⁾	~~Amount represents the difference between book value and fair value of the investments and borrowings related to consolidated securitization entities where we have elected fair value option.~~

⁽³⁾	~~Fixed maturity securities that were previously recorded had net unrealized investment losses of $91 million included in accumulated other comprehensive income (loss) as of December 31, 2009.~~

For commercial mortgage loans, the carrying amounts represent the unpaid principal balance less any reserve. Restricted other invested assets are comprised of trading securities that are recorded at fair value. Trading securities represent asset-backed securities where we electedLevel 3 fair value ~~option. Borrowings related to securitization entities are recorded at unpaid principal except for the borrowings related to entities where we elected fair value option for all assets and liabilities.~~

For certain entities consolidated upon adoption of the new accounting guidance on January 1, 2010, we elected fair value option to measure all assets and liabilities at current fair value with future changes in fair value being recording in income (loss). We elected fair value option for certain entities as a method to better present the offsetting changes in assets and liabilities related to third-party interests in those entities and eliminated the potential accounting mismatch between the measurement of the assets and derivatives of the entity compared to the borrowings issued by the entity. The entities where we did not elect fair value option did not have the same accounting mismatch since the assets held by the securitization entity and the borrowings of the entity were recorded at cost. See note 7 for additional information related to consolidation of VIEs.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The new accounting guidance related to consolidation of VIEs has been deferred for a reporting entity’s interest in an entity that has all of the attributes of an investment company as long as there is no implicit or explicit obligation to fund losses of the entity. For entities that meet these criteria, the new accounting guidance related to VIE consolidation would not be applicable until further guidance is issued. Accordingly, we did not have any impact upon adoption related to entities that meet the deferral criteria, such as certain limited partnership and fund investments.

~~Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements~~

On January 1, 2010, we adopted new accounting guidance requiring additional disclosures for significant transfers between Level 1 and 2 fair value measurements and clarifications to existing fair value disclosures related to the level of disaggregation, inputs and valuation techniques.measurements. The adoption of this new accounting guidance did not have a material impact on our consolidated financial statements.

Not Yet Adopted

In ~~July 2010,~~April 2011, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued new accounting guidance ~~that will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance~~ for ~~credit losses. Certain additional disclosures in this~~troubled debt restructurings. This new accounting guidance and related disclosures will be effective for us on ~~December 31, 2010 with certain other additional disclosures that will be effective for us on March 31,~~July 1, 2011. We do not expect the adoption of this ~~new~~ accounting guidance to have a material impact on our consolidated financial statements.

In ~~April~~October 2010, the FASB issued new accounting guidance ~~on how investments held through separate accounts affect an insurer’s consolidation analysis of those investments.~~related to accounting for costs associated with acquiring or renewing insurance contracts. This new accounting guidance will be effective for us on January 1, ~~2011.~~2012. When adopted, we expect to defer fewer costs. The new guidance is effective prospectively with retrospective adoption allowed. We dohave not ~~expect~~yet determined the ~~adoption of~~method nor impact this ~~new~~ accounting guidance towill have ~~a material impact~~ on our consolidated financial statements.

In March 2010, the FASB issued new accounting guidance clarifying the scope exception for embedded credit derivatives and when those features would be bifurcated from the host contract. Under the new accounting guidance, only embedded credit derivative features that are in the form of subordination of one financial instrument to another would not be subject to the bifurcation requirements. Accordingly, upon adoption of this new accounting guidance, we are required to bifurcate embedded credit derivatives that no longer qualify under the amended scope exception. In conjunction with our adoption, we elected fair value option for certain fixed maturity securities. This accounting guidance was effective for us on July 1, 2010. The impact upon adoption of this new accounting guidance was approximately $270 million, before taxes and other adjustments, and was recorded as a reduction in retained earnings with a corresponding increase in accumulated other comprehensive income (loss) on July 1, 2010.

In January 2010, the FASB issued new accounting guidance to require additional disclosures about purchases, sales, issuances, and settlements in the rollforward of Level 3 fair value measurements. This new accounting guidance will be effective for us on January 1, 2011. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

(3) Earnings ~~(Loss)~~ Per Share

Basic and diluted earnings ~~(loss)~~ per share are calculated by dividing each income ~~(loss)~~ category presented below by the weighted-average basic and diluted shares outstanding for the periods indicated:


	Three months ended June 30,					Six months ended June 30,					Three months ended March 31,
(Amounts in millions, except per share amounts)	2010		2009			2010		2009			2011		2010
Net income (loss)	$	77	$	(50	)	$	289	$	(519	)
Net income											$	116	$	212
Less: net income attributable to noncontrolling interests		35		—			69		—			34		34

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	42	$	(50	)	$	220	$	(519	)
Net income available to Genworth Financial, Inc.’s common stockholders											$	82	$	178

Basic per common share:
Net income (loss)	$	0.16	$	(0.11	)	$	0.59	$	(1.20	)
Net income											$	0.24	$	0.43
Less: net income attributable to noncontrolling interests		0.07		—			0.14		—			0.07		0.07

Net income (loss) available to Genworth Financial, Inc.’s common stockholders⁽¹⁾	$	0.09	$	(0.11	)	$	0.45	$	(1.20	)
Net income available to Genworth Financial, Inc.’s common stockholders⁽¹⁾											$	0.17	$	0.36

Diluted per common share:
Net income (loss)	$	0.16	$	(0.11	)	$	0.59	$	(1.20	)
Net income											$	0.23	$	0.43
Less: net income attributable to noncontrolling interests		0.07		—			0.14		—			0.07		0.07

Net income (loss) available to Genworth Financial, Inc.’s common stockholders⁽¹⁾	$	0.08	$	(0.11	)	$	0.45	$	(1.20	)
Net income available to Genworth Financial, Inc.’s common stockholders⁽¹⁾											$	0.17	$	0.36

Weighted-average shares used in basic earnings (loss) per common share calculations		489.1		433.2			489.0		433.2

Weighted-average shares used in basic earnings per common share calculations												490.1		488.8
Potentially dilutive securities:
Stock options, restricted stock units and stock appreciation rights		5.1		—			4.9		—			4.3		4.7

Weighted-average shares used in diluted earnings (loss) per common share calculations⁽²⁾		494.2		433.2			493.9		433.2
Weighted-average shares used in diluted earnings per common share calculations												494.4		493.5

⁽¹⁾	May not total due to whole number calculation.

⁽²⁾

Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our net loss for the three and six months ended June 30, 2009, we were required to use basic weighted-average common shares outstanding in the calculation of the 2009 diluted loss per share, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 1.2 million and 0.6 million, respectively, would have been antidilutive to the calculation. If we had not incurred a net loss for the three and six months ended June 30, 2009, dilutive potential common shares would have been 434.4 million and 433.8 million, respectively.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

(4) Investments

(a) Net Investment Income

Sources of net investment income were as follows for the periods indicated:

Three months ended
June 30, Six months ended
June 30,
(Amounts in millions)
    2010         2009     2010 2009
Fixed maturity securities—taxable
$ 646    $ 604    $ 1,272    $ 1,227
Fixed maturity securities—non-taxable
16    28    32    58
Commercial mortgage loans
99    109    203    223
Restricted commercial mortgage loans related to securitization
entities⁽¹⁾
10    —      20    —
Equity securities
5    3    7    6
Other invested assets
39    (7 ) 37    (106 )
Restricted other invested assets related to securitization entities⁽¹⁾
—      —      1    —
Policy loans
28    52    55    96
Cash, cash equivalents and short-term investments
4    14    9    31

Gross investment income before expenses and fees
847    803    1,636    1,535
Expenses and fees
(24 ) (22 ) (48 ) (43 )

Net investment income
$ 823    $ 781    $ 1,588    $ 1,492

⁽¹⁾	~~See note 7 for additional information related to consolidated securitization entities.~~


	Three months ended March 31,
(Amounts in millions)	2011			2010
Fixed maturity securities—taxable	$	670		$	626
Fixed maturity securities—non-taxable		11			16
Commercial mortgage loans		92			104
Restricted commercial mortgage loans related to securitization entities		10			10
Equity securities		3			2
Other invested assets		34			(2	)
Restricted other invested assets related to securitization entities		—			1
Policy loans		29			27
Cash, cash equivalents and short-term investments		6			5

Gross investment income before expenses and fees		855			789
Expenses and fees		(25	)		(24	)

Net investment income	$	830		$	765

(b) Net Investment Gains (Losses)

The following table sets forth net investment gains (losses) for the periods indicated:


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
(Amounts in millions)	2010			2009			2010			2009			2011			2010
Available-for-sale securities:
Realized gains on sale	$	53		$	21		$	76		$	50
Realized losses on sale		(36	)		(48	)		(74	)		(111	)
Realized gains													$	29		$	23
Realized losses														(31	)		(38	)

Net realized gains (losses) on available-for-sale securities														(2	)		(15	)

Impairments:
Total other-than-temporary impairments		(24	)		(476	)		(101	)		(1,073	)		(31	)		(77	)
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)		(27	)		324			(30	)		324			(5	)		(3	)

Net other-than-temporary impairments		(51	)		(152	)		(131	)		(749	)		(36	)		(80	)

Trading securities		(4	)		11			2			(1	)		11			6
Commercial mortgage loans		(18	)		(5	)		(22	)		(11	)		(1	)		(4	)
Net gains (losses) related to securitization entities⁽¹⁾		(47	)		—			(36	)		—
Derivative instruments⁽²⁾		(38	)		114			(46	)		(7	)
Net gains (losses) related to securitization entities														10			11
Derivative instruments⁽¹⁾														(10	)		(8	)
Other		2			6			22			6			—			20

Net investment gains (losses)	$	(139	)	$	(53	)	$	(209	)	$	(823	)	$	(28	)	$	(70	)

⁽¹⁾	~~See note 7 for additional information related to consolidated securitization entities.~~

⁽²⁾	See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

We generally intend to hold securities in unrealized loss positions until they recover. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the ~~three months~~periods ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ was ~~$858~~$397 million and ~~$367~~$558 million, respectively, which was approximately ~~96% and 89%, respectively,~~94% of book ~~value. The aggregate fair~~ value ~~of securities sold at a loss during the six months ended June 30, 2010 and 2009 was $1,416 million and $737 million, respectively, which was approximately 95% and 87%, respectively, of book value.~~for both periods.

The following represents the activity for credit losses recognized in net income ~~(loss)~~ on debt securities where an other-than-temporary impairment was identified and a portion of other-than-temporary impairments was included in other comprehensive income (loss) (“OCI”) as of or for the ~~periods indicated:~~three months ended March 31:

   As of or for the
three months ended
June 30,
(Amounts in millions)
       2010         2009
Cumulative credit loss beginning balance
   $ 1,025    $ —
Impact upon adoption of new accounting guidance
   —      1,204
Additions:

Other-than-temporary impairments not previously recognized
   11    56
Increases related to other-than-temporary impairments previously recognized
   32    95
Reductions:

Securities sold, paid down or disposed
   (90 ) (270 )
Securities where there is intent to sell
   —      —

Cumulative credit loss ending balance
   $ 978    $ 1,085

   As of or for the
six months ended
June 30,
(Amounts in millions)
   2010 2009
Cumulative credit loss beginning balance
   $ 1,059    $ —
Impact upon adoption of new accounting guidance
   —      1,204
Additions:

Other-than-temporary impairments not previously recognized
   31    56
Increases related to other-than-temporary impairments previously recognized
   78    95
Reductions:

Securities sold, paid down or disposed
   (190 ) (270 )
Securities where there is intent to sell
   —      —

Cumulative credit loss ending balance
   $ 978    $ 1,085

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~


(Amounts in millions)	2011			2010
Beginning balance	$	784		$	1,059
Additions:
Other-than-temporary impairments not previously recognized		3			20
Increases related to other-than-temporary impairments previously recognized		31			46
Reductions:
Securities sold, paid down or disposed		(63	)		(100	)
Securities where there is intent to sell		—			—

Ending balance	$	755		$	1,025

(c) Unrealized Investment Gains and Losses

Net unrealized gains and losses on investment securities classified as available-for-sale and other invested assets are reduced by deferred income taxes and adjustments to present value of future profits, deferred acquisition costs and sales inducements that would have resulted had such gains and losses been realized. Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:


(Amounts in millions)	June 30, 2010			December 31, 2009			March 31, 2011			December 31, 2010
Net unrealized gains (losses) on investment securities:
Fixed maturity securities	$	296		$	(2,245	)	$	548		$	511
Equity securities		7			20			20			9
Other invested assets		(27	)		(29	)		(20	)		(22	)

Subtotal		276			(2,254	)		548			498
Adjustments to present value of future profits, deferred acquisition costs and sales inducements		(162	)		138
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves								(546	)		(583	)
Income taxes, net		(37	)		757			2			35

Net unrealized investment gains (losses)		77			(1,359	)		4			(50	)
Less: net unrealized investment gains (losses) attributable to noncontrolling interests		48			39			41			50

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.	$	29		$	(1,398	)	$	(37	)	$	(100	)

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The change in net unrealized gains (losses) on available-for-sale securities reported in accumulated other comprehensive income (loss) was as follows as of or for the ~~periods indicated:~~three months ended March 31:


	As of or for the three months ended June 30,
(Amounts in millions)	2010			2009			2011			2010
Beginning balance	$	(860	)	$	(4,095	)	$	(100	)	$	(1,398	)
Cumulative effect of change in accounting		—			(349	)
Impact upon adoption of new accounting guidance								—			91
Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities		1,498			2,261			12			763
Adjustment to deferred acquisition costs		(80	)		(164	)		(21	)		(113	)
Adjustment to present value of future profits		(51	)		(79	)		(1	)		(31	)
Adjustment to sales inducements		(10	)		1			(4	)		(15	)
Adjustment to benefit reserves								63			—
Provision for income taxes		(480	)		(714	)		(20	)		(220	)

Change in unrealized gains (losses) on investment securities		877			1,305			29			384
Reclassification adjustments to net investment (gains) losses, net of taxes of $(11) and $(63)		22			116
Reclassification adjustments to net investment (gains) losses, net of taxes of $(13) and $(34)								25			62

Change in net unrealized investment gains (losses)		899			1,072			54			537
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests		10			—
Less: change in net unrealized investment (gains) losses attributable to noncontrolling interests								9			1

Ending balance	$	29		$	(3,023	)	$	(37	)	$	(860	)

(d) Fixed Maturity and Equity Securities

As of March 31, 2011, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses						Fair value
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired			Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	3,352	$	102	$	—	$	(40	)	$	—		$	3,414
Tax-exempt		1,029		16		—		(117	)		—			928
Government—non-U.S.		2,267		99		—		(7	)		—			2,359
U.S. corporate		23,069		1,062		12		(390	)		—			23,753
Corporate—non-U.S.		13,655		454		—		(163	)		(9	)		13,937
Residential mortgage-backed		4,897		134		20		(270	)		(181	)		4,600
Commercial mortgage-backed		3,841		120		3		(172	)		(36	)		3,756
Other asset-backed		2,324		19		—		(90	)		(2	)		2,251

Total fixed maturity securities		54,434		2,006		35		(1,249	)		(228	)		54,998
Equity securities		334		24		—		(3	)		—			355

Total available-for-sale securities	$	54,768	$	2,030	$	35	$	(1,252	)	$	(228	)	$	55,353

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

   As of or for the
six months ended
June 30,
(Amounts in millions)
   2010 2009
Beginning balance
   $ (1,398 ) $ (4,038 )
Cumulative effect of change in accounting
   91    (349 )
Unrealized gains (losses) arising during the period:

Unrealized gains (losses) on investment securities
   2,261    1,558
Adjustment to deferred acquisition costs
   (193 ) (184 )
Adjustment to present value of future profits
   (81 ) (70 )
Adjustment to sales inducements
   (26 ) —
Provision for income taxes
   (700 ) (467 )

Change in unrealized gains (losses) on investment securities
   1,261    837
Reclassification adjustments to net investment (gains) losses, net of taxes of $(45) and $(284)
   84    527

Change in net unrealized investment gains (losses)
   1,436    1,015
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   9    —

Ending balance
   $ 29    $ (3,023 )

~~(d) Fixed Maturity and Equity Securities~~

As of ~~June 30,~~December 31, 2010, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:

(Amounts in millions)
Amortized
cost or
cost Gross unrealized gains Gross unrealized losses Fair
value
Not other-than-
temporarily
impaired Other-than-
temporarily
impaired Not other-than-
temporarily
impaired Other-than-
temporarily
impaired
Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises
$ 3,422 $ 262 $ —   $ —      $ —      $ 3,684
Tax-exempt
1,407 39 —   (96 ) —      1,350
Government—non-U.S.
2,023 126 —   (3 ) —      2,146
U.S. corporate
22,529 1,332 7 (489 ) (1 ) 23,378
Corporate—non-U.S.
12,572 494 12 (279 ) —      12,799
Residential mortgage-backed
4,395 160 8 (347 ) (261 ) 3,955
Commercial mortgage-backed
4,117 152 7 (488 ) (62 ) 3,726
Other asset-backed
2,640 18 —   (297 ) (13 ) 2,348

Total fixed maturity securities
53,105 2,583 34 (1,999 ) (337 ) 53,386
Equity securities
192 13 —   (6 ) —      199

Total available-for-sale securities
$ 53,297 $ 2,596 $ 34 $ (2,005 ) $ (337 ) $ 53,585


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses						Fair value
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired			Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	3,568	$	145	$	—	$	(8	)	$	—		$	3,705
Tax-exempt		1,124		19		—		(113	)		—			1,030
Government—non-U.S.		2,257		118		—		(6	)		—			2,369
U.S. corporate		23,282		1,123		10		(448	)		—			23,967
Corporate—non-U.S.		13,180		485		—		(167	)		—			13,498
Residential mortgage-backed		4,821		116		18		(304	)		(196	)		4,455
Commercial mortgage-backed		3,936		132		6		(286	)		(45	)		3,743
Other asset-backed		2,494		18		—		(94	)		(2	)		2,416

Total fixed maturity securities		54,662		2,156		34		(1,426	)		(243	)		55,183
Equity securities		323		13		—		(4	)		—			332

Total available-for-sale securities	$	54,985	$	2,169	$	34	$	(1,430	)	$	(243	)	$	55,515

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

~~As of December 31, 2009, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:~~

(Amounts in millions)
   Amortized
cost or
cost    Gross unrealized gains    Gross unrealized losses Fair
value
      Not other-than-
temporarily
impaired    Other-than-
temporarily
impaired    Not other-than-
temporarily
impaired Other-than-
temporarily
impaired
Fixed maturity securities:
   ��
U.S. government, agencies and government-sponsored enterprises
   $ 2,673    $ 25    $ —      $ (96 ) $ —      $ 2,602
Tax-exempt
   1,606    42    —      (104 ) —      1,544
Government—non-U.S.
   2,310    96    —      (22 ) —      2,384
U.S. corporate
   21,598    628    3    (814 ) (3 ) 21,412
Corporate—non-U.S.
   12,530    366    11    (356 ) —      12,551
Residential mortgage-backed
   3,989    41    7    (484 ) (326 ) 3,227
Commercial mortgage-backed
   4,404    44    4    (738 ) (97 ) 3,617
Other asset-backed
   2,887    8    —      (466 ) (14 ) 2,415

Total fixed maturity securities
   51,997    1,250    25    (3,080 ) (440 ) 49,752
Equity securities
   139    23    —      (3 ) —      159

Total available-for-sale securities
   $ 52,136    $ 1,273    $ 25    $ (3,083 ) $ (440 ) $ 49,911

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following table presents the gross unrealized losses and fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of ~~June 30, 2010:~~March 31, 2011:


	Less than 12 months						12 months or more						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		Fair value		Gross unrealized losses⁽¹⁾			Number of securities		Fair value		Gross unrealized losses⁽²⁾			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises													$	1,187	$	(40	)		56	$	—	$	—			—	$	1,187	$	(40	)		56
Tax-exempt	$	106	$	(3	)	33	$	272	$	(93	)	93		229		(13	)		81		244		(104	)		91		473		(117	)		172
Government—non-U.S.		69		(1	)	30		34		(2	)	6		312		(6	)		80		39		(1	)		11		351		(7	)		91
U.S. corporate		1,257		(47	)	168		3,596		(443	)	304		3,883		(140	)		484		2,068		(250	)		174		5,951		(390	)		658
Corporate—non-U.S.		926		(32	)	163		1,774		(247	)	161		2,633		(82	)		362		992		(90	)		92		3,625		(172	)		454
Residential mortgage-backed		291		(5	)	76		1,097		(603	)	461		454		(23	)		80		964		(428	)		389		1,418		(451	)		469
Commercial mortgage-backed		79		(4	)	11		1,282		(546	)	277		254		(10	)		37		1,105		(198	)		199		1,359		(208	)		236
Other asset-backed		413		(1	)	28		969		(309	)	147		173		(1	)		30		424		(91	)		46		597		(92	)		76

Subtotal, fixed maturity securities		3,141		(93	)	509		9,024		(2,243	)	1,449		9,125		(315	)		1,210		5,836		(1,162	)		1,002		14,961		(1,477	)		2,212
Equity securities		51		(5	)	41		7		(1	)	8		71		(2	)		46		6		(1	)		11		77		(3	)		57

Total for securities in an unrealized loss position	$	3,192	$	(98	)	550	$	9,031	$	(2,244	)	1,457	$	9,196	$	(317	)		1,256	$	5,842	$	(1,163	)		1,013	$	15,038	$	(1,480	)		2,269

% Below cost—fixed maturity securities:
<20% Below cost	$	3,089	$	(71	)	469	$	6,602	$	(515	)	763
20-50% Below cost		51		(20	)	22		2,069		(1,006	)	406
>50% Below cost		1		(2	)	18		353		(722	)	280

Total fixed maturity securities		3,141		(93	)	509		9,024		(2,243	)	1,449

% Below cost—equity securities:
<20% Below cost		46		(2	)	40		7		(1	)	8
20-50% Below cost		5		(3	)	1		—		—		—

Total equity securities		51		(5	)	41		7		(1	)	8

Total for securities in an unrealized loss position	$	3,192	$	(98	)	550	$	9,031	$	(2,244	)	1,457


Investment grade	$	2,564	$	(81	)	422	$	7,203	$	(1,386	)	959
Below investment grade		628		(17	)	128		1,828		(858	)	498

Total for securities in an unrealized loss position	$	3,192	$	(98	)	550	$	9,031	$	(2,244	)	1,457

⁽¹⁾	Amounts included $218 million of unrealized losses on other-than-temporarily impaired securities.

⁽²⁾	Amounts included $228 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Aging of Gross Unrealized Losses and Other-Than-Temporary Losses

The following table presents the gross unrealized losses and number of investment securities, aggregated by investment type and length of time that individual investment securities have been in ana continuous unrealized loss position, as of June 30, 2010 consisted of 2,007 securities and accounted for unrealized losses of $2,342 million. Of these unrealized losses of $2,342 million, 63% were investment grade (rated “AAA” through “BBB-”) and 25% were less than 20% below cost. March 31, 2011:


	Less than 20%								20% to 50%								Greater than 50%
(Dollar amounts in millions)	Gross unrealized losses			% of total gross unrealized losses			Number of securities		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Fixed maturity securities:
Less than 12 months:
Investment grade	$	(278	)		19	%		1,143	$	(24	)		2	%		8	$	—			—	%		—
Below investment grade		(11	)		1			50		(1	)		—			3		(1	)		—			6

Total		(289	)		20			1,193		(25	)		2			11		(1	)		—			6

12 months or more:
Investment grade		(279	)		19			437		(246	)		16			128		(63	)		4			24
Below investment grade ⁽¹⁾		(86	)		6			149		(293	)		20			155		(195	)		13			109

Total		(365	)		25			586		(539	)		36			283		(258	)		17			133

Equity securities:
Less than 12 months:
Investment grade		(1	)		—			24		—			—			—		—			—			—
Below investment grade		(1	)		—			22		—			—			—		—			—			—

Total		(2	)		—			46		—			—			—		—			—			—

12 months or more:
Investment grade		(1	)		—			11		—			—			—		—			—			—
Below investment grade		—			—			—		—			—			—		—			—			—

Total		(1	)		—			11		—			—			—		—			—			—

Total	$	(657	)		45	%		1,836	$	(564	)		38	%		294	$	(259	)		17	%		139

⁽¹⁾	Amounts included $202 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The securities less than 20% below cost were primarily attributable to credit spreads that have widened since acquisition for certain mortgage-backed and asset-backed securities and corporate securities in the finance and insurance sector. ~~Included in these unrealized losses as~~

Concentration of ~~June 30, 2010 was $337 million of unrealized losses on other-than-~~

~~GENWORTH FINANCIAL, INC.~~Gross Unrealized Losses and Other-Than-Temporary Losses by Sector

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~temporarily impaired securities. Of~~The following table presents the ~~total unrealized losses on other-than-temporarily impaired securities, $332 million have been in an unrealized loss position for more than 12 months.~~

~~Of the unrealized losses~~concentration of ~~$2,342 million, $1,468 million were related to structured securities and $552 million were related to corporate securities in the finance and insurance sector. Of the remaining~~ gross unrealized losses of $322 million, $99 million were related to tax-exempt and government—non-U.S. securities and $223 million were primarily related to other corporate securities that were spread evenly across all other sectors with no individualby sector ~~exceeding $40 million.~~

Of the $1,468 million unrealized losses in structured securities, 41% were in residential mortgage-backed securities and 37% were in commercial mortgage-backed securities with the remainder in other asset-backed securities. Approximately 54% of the total unrealized losses in structured securities were on securities that have retained investment grade ratings. Most of these securities have been in an unrealized loss position for 12 months or more. Given ongoing concern about the housing market and unemployment, the fair value of these securities has declined due to credit spreads that have widened since acquisition. We examined the performance of the underlying collateral and developed our estimate of cash flows expected to be collected. In doing so, we identified certain securities where the non-credit portion of other-than-temporary impairments was recorded in OCI. Based on this evaluation, we determined that the unrealized losses on our mortgage-backed and asset-backed securities represented temporary impairments as of ~~June 30, 2010.~~March 31, 2011:

Of the $552 million unrealized losses in the finance and insurance sector, most have been in an unrealized loss position for 12 months or more. Most of these securities have retained a credit rating of investment grade. A portion of the unrealized losses included securities where an other-than-temporary impairment was recorded in OCI. Given the current market conditions, including current financial industry events and uncertainty around global economic conditions, the fair value of these securities has declined due to credit spreads that have widened since acquisition. In our examination of these securities, we considered all available evidence, including the issuers’ financial condition and current industry events to develop our conclusion on the amount and timing of the cash flows expected to be collected. Based on this evaluation, we determined that the unrealized losses on these securities represented temporary impairments as of June 30, 2010. A subset of the securities issued by banks and other financial institutions represent investments in financial hybrid securities on which a debt impairment model was employed. Most of these securities retain a credit rating of investment grade. The majority of these securities were issued by foreign financial institutions. The fair value of these securities has been impacted by credit spreads that have widened since acquisition and reflect uncertainty surrounding the extent and duration of government involvement, potential capital restructuring of these institutions, and continued but diminishing risk that income payments may be deferred. The remaining unrealized losses in our U.S. and non-U.S. corporate securities were evenly distributed across all other major industry types that comprise our corporate bond holdings.

Of the investment securities in an unrealized loss position for 12 months or more as of June 30, 2010, 686 securities were 20% or more below cost, of which 357 securities were also below investment grade (rated “BB+” and below) and accounted for unrealized losses of $747 million. These securities were primarily structured securities or securities issued by corporations in the finance and insurance sector. Included in this amount are other-than-temporarily impaired securities where the non-credit loss of $260 million was recorded in OCI.


	Investment grade						Below investment grade
(Amounts in millions)	Gross unrealized losses			% of gross unrealized losses			Gross unrealized losses			% of gross unrealized losses
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	(40	)		3	%	$	—			—	%
Tax-exempt		(115	)		8			(2	)		—
Government—non-U.S.		(7	)		1			—			—
U.S. corporate		(360	)		24			(30	)		2
Corporate—non-U.S.		(158	)		11			(14	)		1
Residential mortgage-backed		(95	)		6			(356	)		24
Commercial mortgage-backed		(93	)		6			(115	)		8
Other asset-backed		(22	)		1			(70	)		5

Subtotal, fixed maturity securities		(890	)		60			(587	)		40
Equity securities		(2	)		—			(1	)		—

Total	$	(892	)		60	%	$	(588	)		40	%

While certain securities included in the preceding ~~table~~tables were considered other-than-temporarily impaired, we expect to recover the new amortized cost based on our estimate of cash flows to be collected. We do not intend to sell and it is not more likely than not that we will be required to sell these securities prior to recovering our amortized cost.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Despite the considerable analysis and rigor employed on our structured securities, it is at least reasonably possible that the underlying collateral of these investments will perform worse than current market expectations. Such events may lead to adverse changes in cash flows on our holdings of asset-backed and mortgage-backed securities and potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. We expect our investments in corporate securities will continue to perform in accordance with our conclusions about the amount and timing of estimated cash flows. Although we do not anticipate such events, it is at least reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Structured Securities

The following table presents the concentration of gross unrealized losses related to structured securities as of March 31, 2011:


	Investment grade						Below investment grade
(Amounts in millions)	Gross unrealized losses			% of gross unrealized losses			Gross unrealized losses			% of gross unrealized losses
Structured securities:
Residential mortgage-backed	$	(95	)		13	%	$	(356	)		48	%
Commercial mortgage-backed		(93	)		12			(115	)		15
Other asset-backed		(22	)		3			(70	)		9

Total structured securities	$	(210	)		28	%	$	(541	)		72	%

Most of the structured securities have been in an unrealized loss position for 12 months or more. Given ongoing concern about the housing market and unemployment, the fair value of these securities has declined due to credit spreads that have widened since acquisition. We examined the performance of the underlying collateral and developed our estimate of cash flows expected to be collected. In doing so, we identified certain securities where the non-credit portion of other-than-temporary impairments was recorded in OCI. Based on this evaluation, we determined that the unrealized losses on our mortgage-backed and asset-backed securities represented temporary impairments as of March 31, 2011.

Corporate Securities

The following table presents the concentration of gross unrealized losses related to corporate debt and equity securities by industry as of March 31, 2011:


	Investment grade						Below investment grade
(Amounts in millions)	Less than 12 months			12 months or more			Less than 12 months			12 months or more
Industry:
Finance and insurance	$	(45	)	$	(216	)	$	(9	)	$	(15	)
Utilities and energy		(64	)		(9	)		—			—
Consumer—non-cyclical		(23	)		(7	)		—			(3	)
Consumer—cyclical		(4	)		(6	)		(1	)		(2	)
Capital goods		(6	)		(7	)		—			(7	)
Industrial		(15	)		(13	)		—			(2	)
Technology and communications		(19	)		(6	)		—			(2	)
Transportation		(3	)		(27	)		—			—
Other		(33	)		(17	)		(2	)		(2	)

Total	$	(212	)	$	(308	)	$	(12	)	$	(33	)

A portion of the unrealized losses in the finance and insurance sector included debt securities where an other-than-temporary impairment was recorded in OCI. Given the current market conditions, including current financial industry events and uncertainty around global economic conditions, the fair value of these debt securities has declined due to credit spreads that have widened since acquisition. In our examination of these

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

securities, we considered all available evidence, including the issuers’ financial condition and current industry events to develop our conclusion on the amount and timing of the cash flows expected to be collected. Based on this evaluation, we determined that the unrealized losses on these debt securities represented temporary impairments as of March 31, 2011. A subset of the securities issued by banks and other financial institutions represent investments in financial hybrid securities on which a debt impairment model was employed. The majority of hybrid securities retain a credit rating of investment grade and were issued by foreign financial institutions. The fair value of the hybrid securities has been impacted by credit spreads that have widened since acquisition and reflect uncertainty surrounding the extent and duration of government involvement, potential capital restructuring of these institutions, and continued but diminishing risk that income payments may be deferred.


	Less than 12 months						12 months or more						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		Fair value		Gross unrealized losses⁽¹⁾			Number of securities		Fair value		Gross unrealized losses⁽²⁾			Number of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	1,759	$	(95	)	81	$	6	$	(1	)	2	$	545	$	(8	)		36	$	—	$	—			—	$	545	$	(8	)		36
Tax-exempt		152		(6	)	48		346		(98	)	113		285		(12	)		101		244		(101	)		90		529		(113	)		191
Government—non-U.S.		341		(3	)	60		105		(19	)	35		431		(5	)		69		21		(1	)		7		452		(6	)		76
U.S. corporate		2,823		(81	)	317		5,660		(736	)	510		3,615		(125	)		443		2,338		(323	)		191		5,953		(448	)		634
Corporate—non-U.S.		1,721		(55	)	221		2,245		(301	)	258		2,466		(53	)		296		1,141		(114	)		102		3,607		(167	)		398
Residential mortgage-backed		941		(252	)	256		1,012		(558	)	348		461		(23	)		92		1,031		(477	)		416		1,492		(500	)		508
Commercial mortgage-backed		714		(64	)	81		1,720		(771	)	345		177		(8	)		26		1,167		(323	)		225		1,344		(331	)		251
Other asset-backed		329		(6	)	43		1,727		(474	)	183		401		(2	)		37		512		(94	)		53		913		(96	)		90

Subtotal, fixed maturity securities		8,780		(562	)	1,107		12,821		(2,958	)	1,794		8,381		(236	)		1,100		6,454		(1,433	)		1,084		14,835		(1,669	)		2,184
Equity securities		2		(1	)	3		12		(2	)	9		77		(3	)		48		5		(1	)		4		82		(4	)		52

Total for securities in an unrealized loss position	$	8,782	$	(563	)	1,110	$	12,833	$	(2,960	)	1,803	$	8,458	$	(239	)		1,148	$	6,459	$	(1,434	)		1,088	$	14,917	$	(1,673	)		2,236

% Below cost—fixed maturity securities:
<20% Below cost	$	8,437	$	(245	)	920	$	9,699	$	(762	)	1,055
20-50% Below cost		267		(137	)	91		2,637		(1,246	)	455
>50% Below cost		76		(180	)	96		485		(950	)	284

Total fixed maturity securities		8,780		(562	)	1,107		12,821		(2,958	)	1,794

% Below cost—equity securities:
<20% Below cost		2		(1	)	3		11		(1	)	5
>50% Below cost		—		—		—		1		(1	)	4

Total equity securities		2		(1	)	3		12		(2	)	9

Total for securities in an unrealized loss position	$	8,782	$	(563	)	1,110	$	12,833	$	(2,960	)	1,803

Investment grade	$	8,391	$	(320	)	891	$	10,897	$	(2,122	)	1,390
Below investment grade		391		(243	)	219		1,936		(838	)	413

Total for securities in an unrealized loss position	$	8,782	$	(563	)	1,110	$	12,833	$	(2,960	)	1,803

⁽¹⁾	Amounts included $240 million of unrealized losses on other-than-temporarily impaired securities.

⁽²⁾	Amounts included $243 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)


	Less than 20%								20% to 50%								Greater than 50%
(Dollar amounts in millions)	Gross unrealized losses			% of total gross unrealized losses			Number of securities		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Fixed maturity securities:
Less than 12 months:
Investment grade	$	(222	)		13	%		1,031	$	(7	)		1	%		8	$	—			—	%		—
Below investment grade		(4	)		—			45		(1	)		—			10		(2	)		—			6

Total		(226	)		13			1,076		(8	)		1			18		(2	)		—			6

12 months or more:
Investment grade		(330	)		20			473		(328	)		20			166		(105	)		6			40
Below investment grade ⁽¹⁾		(88	)		5			115		(324	)		19			162		(258	)		16			128

Total		(418	)		25			588		(652	)		39			328		(363	)		22			168

Equity securities:
Less than 12 months:
Investment grade		(1	)		—			20		(1	)		—			1		—			—			—
Below investment grade		(1	)		—			27		—			—			—		—			—			—

Total		(2	)		—			47		(1	)		—			1		—			—			—

12 months or more:
Investment grade		(1	)		—			4		—			—			—		—			—			—
Below investment grade		—			—			—		—			—			—		—			—			—

Total		(1	)		—			4		—			—			—		—			—			—

Total	$	(647	)		38	%		1,715	$	(661	)		40	%		347	$	(365	)		22	%		174

⁽¹⁾	Amounts included $213 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The scheduled maturity distribution of fixed maturity securities as of ~~June 30, 2010~~March 31, 2011 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.


(Amounts in millions)	Amortized cost or cost		Fair value		Amortized cost or cost		Fair value
Due one year or less	$	2,776	$	2,801	$	2,360	$	2,379
Due after one year through five years		11,367		11,696		11,966		12,248
Due after five years through ten years		8,494		8,877		9,324		9,678
Due after ten years		19,316		19,983		19,722		20,086

Subtotal		41,953		43,357		43,372		44,391
Residential mortgage-backed		4,395		3,955		4,897		4,600
Commercial mortgage-backed		4,117		3,726		3,841		3,756
Other asset-backed		2,640		2,348		2,324		2,251

Total	$	53,105	$	53,386	$	54,434	$	54,998

As of ~~June 30, 2010, $5,015~~March 31, 2011, $4,504 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.

As of ~~June 30, 2010,~~March 31, 2011, securities issued by finance and insurance, utilities and energy, and consumer—non-cyclical industry groups represented approximately ~~24%~~23%, 22% and ~~12%~~11% of our domestic and foreign corporate fixed maturity securities portfolio, respectively. No other industry group comprised more than 10% of our investment portfolio. This portfolio is widely diversified among various geographic regions in the ~~U.S.~~United States and internationally, and is not dependent on the economic stability of one particular region.

As of ~~June 30, 2010,~~March 31, 2011, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.

(e) Commercial Mortgage Loans

Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of prepayments, amortization and allowance for loan losses.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the ~~periods~~dates indicated:


	June 30, 2010					December 31, 2009					March 31, 2011						December 31, 2010
(Amounts in millions)	Carrying value			% of total		Carrying value			% of total		Carrying value			% of total			Carrying value			% of total
Property Type
Property type:
Retail	$	2,047		28	%	$	2,115		28	%	$	1,976			30	%	$	1,974			29	%
Office		1,971		27			2,025		27			1,822			27			1,850			27
Industrial		1,903		26			1,979		26			1,745			26			1,788			26
Apartments		812		11			832		11			700			11			725			11
Mixed use/other		540		8			590		8			411			6			435			7

Total principal balance		7,273		100	%		7,541		100	%		6,654			100	%		6,772			100	%

Unamortized balance of loan origination fees and costs		5					6					4						5
Allowance for losses⁽¹⁾		(70	)				(48	)
Allowance for losses												(58	)					(59	)

Total⁽²⁾	$	7,208				$	7,499
Total											$	6,600					$	6,718


											March 31, 2011						December 31, 2010
(Amounts in millions)											Carrying value			% of total			Carrying value			% of total
Geographic region:
Pacific											$	1,746			26	%	$	1,769			26	%
South Atlantic												1,577			24			1,583			23
Middle Atlantic												880			13			937			14
East North Central												603			9			612			9
Mountain												527			8			540			8
New England												480			7			482			7
West North Central												355			5			369			6
West South Central												305			5			297			4
East South Central												181			3			183			3

Total principal balance												6,654			100	%		6,772			100	%

Unamortized balance of loan origination fees and costs												4						5
Allowance for losses												(58	)					(59	)

Total											$	6,600					$	6,718

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

⁽¹⁾	~~Included $13 million related to held-for-sale commercial mortgage loans as of June 30, 2010.~~ The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:

⁽²⁾

Included held-for-sale mortgage loans of $37 million and $17 million as of June 30, 2010 and December 31, 2009, respectively. The held-for-sale mortgage loans as of December 31, 2009 represented interests in reverse mortgage loans. In the first quarter of 2010, we began reporting held-for-sale reverse mortgages in other invested assets.

   June 30, 2010 December 31, 2009
(Amounts in millions)
   Carrying
value % of
total Carrying
value % of
total
Geographic Region

Pacific
   $ 1,937    27 % $ 2,005    27 %
South Atlantic
   1,660    23    1,711    23
Middle Atlantic
   974    13    1,005    13
East North Central
   701    10    728    10
Mountain
   624    8    650    9
New England
   491    7    492    6
West North Central
   378    5    389    5
West South Central
   314    4    331    4
East South Central
   194    3    230    3

Total principal balance
   7,273    100 % 7,541    100 %

Unamortized balance of loan origination fees and costs
   5    6
Allowance for losses⁽¹⁾
   (70 ) (48 )

Total⁽²⁾
   $ 7,208    $ 7,499


	March 31, 2011
(Amounts in millions)	31 – 60 days past due			61 – 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	3		$	3		$	—		$	6		$	1,970		$	1,976
Office		—			—			10			10			1,812			1,822
Industrial		—			4			12			16			1,729			1,745
Apartments		—			—			—			—			700			700
Mixed use/other		—			—			—			—			411			411

Total principal balance	$	3		$	7		$	22		$	32		$	6,622		$	6,654

% of total commercial mortgage loans		—	%		—	%		—	%		—	%		100	%		100	%

⁽¹⁾	~~Included $13 million related to held-for-sale commercial mortgage loans as of June 30, 2010.~~

⁽²⁾


	December 31, 2010
(Amounts in millions)	31 – 60 days past due			61 – 90 days past due			Greater than 90 days past due			Total past due			Current			Total
Property type:
Retail	$	—		$	—		$	—		$	—		$	1,974		$	1,974
Office		—			—			12			12			1,838			1,850
Industrial		—			6			27			33			1,755			1,788
Apartments		—			—			—			—			725			725
Mixed use/other		—			—			—			—			435			435

Total principal balance	$	—		$	6		$	39		$	45		$	6,727		$	6,772

% of total commercial mortgage loans		—	%		—	%		1	%		1	%		99	%		100	%

As of March 31, 2011 and December 31, 2010, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

~~“Impaired”~~The following table sets forth the commercial mortgage loans ~~are defined~~on nonaccrual status by ~~U.S. GAAP~~property type as of the dates indicated:


(Amounts in millions)	March 31, 2011		December 31, 2010
Property type:
Retail	$	—	$	—
Office		10		12
Industrial		12		27
Apartments		—		—
Mixed use/other		—		—

Total principal balance	$	22	$	39

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans for ~~which it is probable that~~ the ~~lender will be unable to collect all amounts due according to original contractual terms of the loan agreement.~~period ended March 31:

Under these principles, we may have two types of “impaired” loans: loans requiring specific allowances for losses ($5 million for the six months ended June 30, 2010 and $21 million for the year ended December 31, 2009) and loans expected to be fully recoverable because the carrying amount has been reduced previously through charge-offs or deferral of income recognition (none for the six months ended June 30, 2010 and for the year ended December 31, 2009).

Average investment in specifically impaired loans was $3 million and $10 million as of June 30, 2010 and December 31, 2009, respectively, and there was no interest income recognized on these loans while they were considered impaired.


(Amounts in millions)	2011
Allowance for credit losses:
Beginning balance	$	59
Charge-offs		(1	)
Recoveries		—
Provision		—

Ending balance	$	58

Ending allowance for individually impaired loans	$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	58

Principal balance:
Ending balance	$	6,654

Ending balance of individually impaired loans	$	14

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,640

The following table presents the activity in the allowance for losses ~~during~~for the ~~periods~~period ended March 31:


(Amounts in millions)	2010
Beginning balance	$	48
Provision		4
Release		—

Ending balance	$	52

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables set forth our individually impaired commercial mortgage loans by property type as of the dates indicated:

(Amounts in millions)
   Three months ended
June 30, 2010    Six months ended
June 30, 2010
Beginning balance
   $ 52    $ 48
Provision⁽¹⁾
   18    22
Release
   —      —

Ending balance
   $ 70    $ 70


	March 31, 2011
(Amounts in millions)	Recorded investment		Unpaid principal balance		Charge- offs		Related allowance		Average recorded investment		Interest income recognized
Property type:
Retail	$	1	$	2	$	1	$	—	$	1	$	—
Office		9		10		1		—	$	3		—
Industrial		4		6		2		—	$	4		—
Apartments		—		—		—		—	$	—		—
Mixed use/other		—		—		—		—	$	—		—

Total	$	14	$	18	$	4	$	—	$	3	$	—

⁽¹⁾

~~Included $13 million related to held-for-sale commercial mortgage loans.~~
   December 31, 2010
(Amounts in millions)
   Recorded
investment    Unpaid
principal
balance    Charge-
offs    Related
allowance    Average
recorded
investment    Interest
income
recognized
Property type:

Retail
   $ 5       $ 8       $ 3       $ —         $ 2       $ —
Office
   6       8       2       —         $ 2       —
Industrial
   19       24       5       —         $ 3       —
Apartments
   —         —         —         —         $ —         —
Mixed use/other
   —         —         —         —         $ —         —

Total
   $ 30       $ 40       $ 10       $ —         $ 3       $ —

In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgages loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables set forth the average loan-to-value of commercial mortgage loans by property type as of the dates indicated:


	March 31, 2011
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100%			Total
Property type:
Retail	$	477		$	268		$	845		$	347		$	39		$	1,976
Office		318			308			702			364			130			1,822
Industrial		418			372			624			260			71			1,745
Apartments		125			188			265			107			15			700
Mixed use/other		99			19			143			141			9			411

Total	$	1,437		$	1,155		$	2,579		$	1,219		$	264		$	6,654

% of total		22	%		17	%		39	%		18	%		4	%		100	%

Weighted-average debt service coverage ratio		2.24			1.98			2.42			1.83			1.02			2.14


	December 31, 2010
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100%			Total
Property type:
Retail	$	477		$	287		$	805		$	363		$	42		$	1,974
Office		320			327			612			446			145			1,850
Industrial		431			361			625			284			87			1,788
Apartments		99			172			321			133			—			725
Mixed use/other		123			10			63			221			18			435

Total	$	1,450		$	1,157		$	2,426		$	1,447		$	292		$	6,772

% of total		22	%		17	%		36	%		21	%		4	%		100	%

Weighted-average debt service coverage ratio		2.24			1.99			1.79			2.42			0.75			2.01

The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:


	March 31, 2011
(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	$	119		$	309		$	499		$	522		$	412		$	1,861
Office		196			182			241			486			538			1,643
Industrial		245			163			278			708			333			1,727
Apartments		7			61			123			296			146			633
Mixed use/other		47			18			11			77			69			222

Total	$	614		$	733		$	1,152		$	2,089		$	1,498		$	6,086

% of total		10	%		12	%		19	%		34	%		25	%		100	%

Weighted-average loan-to-value		86	%		71	%		68	%		60	%		51	%		63	%

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	December 31, 2010
(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	$	125		$	317		$	490		$	512		$	415		$	1,859
Office		176			186			238			524			547			1,671
Industrial		260			166			292			698			346			1,762
Apartments		7			62			160			290			135			654
Mixed use/other		49			12			17			78			94			250

Total	$	617		$	743		$	1,197		$	2,102		$	1,537		$	6,196

% of total		10	%		12	%		19	%		34	%		25	%		100	%

Weighted-average loan-to-value		90	%		71	%		68	%		62	%		50	%		64	%

The following tables set forth the debt service coverage ratio for floating rate commercial mortgage loans by property type as of the dates indicated:


	March 31, 2011
(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	$	—		$	—		$	—		$	2		$	113		$	115
Office		—			—			—			9			170			179
Industrial		1			5			—			1			11			18
Apartments		—			—			—			29			38			67
Mixed use/other		—			4			—			—			185			189

Total	$	1		$	9		$	—		$	41		$	517		$	568

% of total		—	%		2	%		—	%		7	%		91	%		100	%

Weighted-average loan-to-value		28	%		58	%		—	%		69	%		77	%		76	%


	December 31, 2010
(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	$	—		$	—		$	—		$	2		$	113		$	115
Office		—			—			—			57			122			179
Industrial		1			5			—			1			19			26
Apartments		—			4			—			21			46			71
Mixed use/other		—			—			—			—			185			185

Total	$	1		$	9		$	—		$	81		$	485		$	576

% of total		—	%		2	%		—	%		14	%		84	%		100	%

Weighted-average loan-to-value		30	%		62	%		—	%		83	%		77	%		78	%

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(f) Restricted Commercial Mortgage Loans Related To Securitization Entities

The following tables set forth additional information regarding our restricted commercial mortgage loans related to securitization entities as of the ~~date~~dates indicated:


	June 30, 2010					March 31, 2011						December 31, 2010
(Amounts in millions)	Carrying value			% of total		Carrying value			% of total			Carrying value			% of total
Property Type
Property type:
Retail	$	195		37	%	$	177			36	%	$	182			36	%
Industrial		131		24			120			25			124			24
Office		122		23			105			22			117			23
Apartments		66		12			63			13			64			13
Mixed use/other		23		4			22			4			22			4

Total principal balance		537		100	%		487			100	%		509			100	%

Allowance for losses		(2	)				(2	)					(2	)

Total	$	535				$	485					$	507


						March 31, 2011						December 31, 2010
(Amounts in millions)						Carrying value			% of total			Carrying value			% of total
Geographic region:
South Atlantic						$	176			36	%	$	189			37	%
Pacific							88			18			90			18
Middle Atlantic							68			14			70			14
East North Central							50			10			51			10
Mountain							31			7			32			6
East South Central							31			7			32			6
West North Central							30			6			31			6
West South Central							12			2			13			3
New England							1			—			1			—

Total principal balance							487			100	%		509			100	%

Allowance for losses							(2	)					(2	)

Total						$	485					$	507

As of March 31, 2011 and December 31, 2010, all restricted commercial mortgage loans were current and there were no restricted commercial mortgage loans on nonaccrual status.

Of the total carrying value of restricted commercial mortgage loans as of March 31, 2011 and December 31, 2010, $485 million and $507 million, respectively, related to loans not individually impaired that were evaluated collectively for impairment. There was no provision for credit losses recorded during the three months ended March 31, 2011 related to restricted commercial mortgage loans. A provision for credit losses of $2 million was recorded during the three months ended March 31, 2010 related to restricted commercial mortgage loans, which reflected our ending allowance for credit losses balance and was required upon consolidation of securitization entities as of January 1, 2010.

In evaluating the credit quality of restricted commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. The risks associated with restricted commercial

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

   June 30, 2010
(Amounts in millions)
   Carrying
value % of
total
Geographic Region

South Atlantic
   $ 197    37 %
Pacific
   95    18
Middle Atlantic
   72    13
East North Central
   57    11
Mountain
   36    7
East South Central
   33    6
West North Central
   33    6
West South Central
   13    2
New England
   1    —

Total principal balance
   537    100 %

Allowance for losses
   (2 )

Total
   $ 535

~~See note 7~~mortgage loans can typically be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for ~~additional information related~~an amount that would enable us to ~~consolidated securitization entities.~~recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.

The following tables set forth the average loan-to-value of restricted commercial mortgage loans by property type as of the dates indicated:


	March 31, 2011
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100%			Total
Property type:
Retail	$	146		$	26		$	—		$	2		$	3		$	177
Industrial		105			8			4			2			1			120
Office		88			7			5			3			2			105
Apartments		35			9			—			19			—			63
Mixed use/other		16			6			—			—			—			22

Total	$	390		$	56		$	9		$	26		$	6		$	487

% of total		80	%		12	%		2	%		5	%		1	%		100	%

Weighted-average debt service coverage ratio		1.78			1.32			1.02			1.16			0.39			1.66


	December 31, 2010
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100%			Total
Property type:
Retail	$	141		$	34		$	1		$	3		$	3		$	182
Industrial		108			8			4			2			2			124
Office		90			19			5			3			—			117
Apartments		35			9			—			20			—			64
Mixed use/other		17			5			—			—			—			22

Total	$	391		$	75		$	10		$	28		$	5		$	509

% of total		77	%		15	%		2	%		5	%		1	%		100	%

Weighted-average debt service coverage ratio		1.82			1.35			1.05			1.18			0.52			1.69

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables set forth the debt service coverage ratio for fixed rate restricted commercial mortgage loans by property type as of the dates indicated:


	March 31, 2011
(Amounts in millions)	Less than 1.00			1.01 – 1.25			1.26 – 1.50			1.51 – 2.00			Greater than 2.00			Total
Property type:
Retail	$	14		$	9		$	43		$	78		$	33		$	177
Industrial		16			5			22			44			33			120
Office		11			17			24			37			16			105
Apartments		—			24			12			18			9			63
Mixed use/other		—			—			7			10			5			22

Total	$	41		$	55		$	108		$	187		$	96		$	487

% of total		9	%		11	%		22	%		38	%		20	%		100	%

Weighted-average loan-to-value		63	%		55	%		41	%		39	%		31	%		42	%


	December 31, 2010
(Amounts in millions)	Less than 1.00			1.01 – 1.25			1.26 – 1.50			1.51 – 2.00			Greater than 2.00			Total
Property type:
Retail	$	14		$	6		$	52		$	77		$	33		$	182
Industrial		11			9			25			50			29			124
Office		14			14			23			45			21			117
Apartments		—			21			10			26			7			64
Mixed use/other		—			—			7			11			4			22

Total	$	39		$	50		$	117		$	209		$	94		$	509

% of total		8	%		10	%		23	%		41	%		18	%		100	%

Weighted-average loan-to-value		65	%		55	%		42	%		41	%		31	%		43	%

There were no floating rate restricted commercial mortgage loans as of March 31, 2011 or December 31, 2010.

(g) Restricted Other Invested Assets Related To Securitization Entities

We have consolidated securitization entities that hold certain investments that are recorded as restricted other invested assets related to securitization entities. The consolidated securitization entities hold certain investments as trading securities whereby the changes in fair value are recorded in current period ~~income (loss).~~income. The trading securities are comprised of asset-backed securities, including residual interest in certain policy loan securitization entities and highly rated bonds that are primarily backed by credit card receivables. ~~See note 7 for additional information related to consolidated securitization entities.~~

(5) Derivative Instruments

Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce certain of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as “derivatives not designated as ~~hedges”~~hedges�� in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as “derivatives designated as hedges,” which include both cash flow and fair value hedges.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following table sets forth our positions in derivative instruments as of the dates indicated:


	Derivative assets							Derivative liabilities							Derivative assets							Derivative liabilities
	Balance sheet classification		Fair value					Balance sheet classification		Fair value
(Amounts in millions)													Balance sheet classification		Fair value						Balance sheet classification	Fair value
(Amounts in millions)	Balance sheet classification	Balance sheet classification		June 30, 2010		December 31, 2009			Balance sheet classification		June 30, 2010		Balance sheet classification	December 31, 2009			March 31, 2011			December 31, 2010				March 31, 2011			December 31, 2010
Derivatives designated as hedges		Balance sheet classification							Balance sheet classification
Cash flow hedges:								Balance sheet classification
Interest rate swaps	Other invested assets		$	540	$	72		Other liabilities		$	9	$	114		Other invested assets	$	168		$	222	Balance sheet classification		Other liabilities		$	106		$	56
Inflation indexed swaps	Other invested assets			1		—		Other liabilities			22		21		Other invested assets		—			—		Other liabilities			35			33
Foreign currency swaps	Other invested assets			140		101		Other liabilities			—		—		Other invested assets		192			205		Other liabilities			—			—

Total cash flow hedges				681		173					31		135				360			427					141			89

Fair value hedges:
Interest rate swaps	Other invested assets			124		132		Other liabilities			11		15		Other invested assets		77			95		Other liabilities			6			8
Foreign currency swaps	Other invested assets			20		24		Other liabilities			—		—		Other invested assets		36			35		Other liabilities			—			—

Total fair value hedges				144		156					11		15				113			130					6			8

Total derivatives designated as hedges				825		329					42		150				473			557					147			97

Derivatives not designated as hedges
Interest rate swaps	Other invested assets			509		505		Other liabilities			41		59		Other invested assets		385			446		Other liabilities			20			74
Interest rate swaps related to securitization entities⁽¹⁾	Restricted other invested assets			—		—		Other liabilities			23		—
Equity return swaps															Other invested assets		—			—		Other liabilities			1			3
Interest rate swaps related to securitization entities															Restricted other invested assets		—			—		Other liabilities			16			19
Interest rate swaptions	Other invested assets			4		54		Other liabilities			—		67		Other invested assets		—			—		Other liabilities			—			—
Credit default swaps	Other invested assets			2		11		Other liabilities			27		3		Other invested assets		11			11		Other liabilities			7			7
Credit default swaps related to securitization entities⁽¹⁾	Restricted other invested assets			—		—		Other liabilities			159		—
Credit default swaps related to securitization entities															Restricted other invested assets		—			—		Other liabilities			120			129
Equity index options	Other invested assets			97		39		Other liabilities			—		2		Other invested assets		32			33		Other liabilities			—			3
Financial futures	Other invested assets			—		—		Other liabilities			—		—		Other invested assets		—			—		Other liabilities			—			—
Other foreign currency contracts	Other invested assets			6		8		Other liabilities			—		—		Other invested assets		—			—		Other liabilities			8			—
Reinsurance embedded derivatives⁽²⁾	Other assets			2		—		Other liabilities			—		—
Reinsurance embedded derivatives⁽¹⁾															Other assets		—			1		Other liabilities			—			—
GMWB embedded derivatives	Reinsurance recoverable ⁽³⁾			9		(5	)	Policyholder account balances⁽⁴⁾			447		175		Reinsurance recoverable⁽²⁾		(7	)		(5	)	Policyholder account balances ⁽³⁾			69			121

Total derivatives not designated as hedges				629		612					697		306				421			486					241			356

Total derivatives			$	1,454	$	941				$	739	$	456			$	894		$	1,043				$	388		$	453

⁽¹⁾	~~See note 7 for additional information related to consolidated securitization entities.~~

⁽²⁾	Represents embedded derivatives associated with certain reinsurance agreements.

⁽³⁾⁽²⁾

Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.

⁽⁴⁾⁽³⁾

Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

The fair value of derivative positions presented above was not offset by the respective collateral amounts retained or provided under these agreements. The amounts recognized for derivative counterparty collateral retained by us was recorded in other invested assets with a corresponding amount recorded in other liabilities to represent our obligation to return the collateral retained by us.

The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB 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, 2009		Additions		Maturities/ terminations			June 30, 2010		Measurement		December 31, 2010		Additions		Maturities/ terminations			March 31, 2011
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps	Notional	$	9,479	$	1,382	$	(206	)	$	10,655		Notional	$	12,355	$	995	$	(3	)	$	13,347
Inflation indexed swaps	Notional		376		157		(6	)		527		Notional		525		9		—			534
Foreign currency swaps	Notional		491		—		—			491		Notional		491		—		—			491

Total cash flow hedges			10,346		1,539		(212	)		11,673				13,371		1,004		(3	)		14,372

Fair value hedges:
Interest rate swaps	Notional		2,366		—		(139	)		2,227		Notional		1,764		—		(326	)		1,438
Foreign currency swaps	Notional		85		—		—			85		Notional		85		—		—			85

Total fair value hedges			2,451		—		(139	)		2,312				1,849		—		(326	)		1,523

Total derivatives designated as hedges			12,797		1,539		(351	)		13,985				15,220		1,004		(329	)		15,895

Derivatives not designated as hedges
Interest rate swaps	Notional		6,474		2,345		(577	)		8,242		Notional		7,681		35		(1,275	)		6,441
Equity return swaps												Notional		208		7		—			215
Interest rate swaps related to securitization entities	Notional		—		138		(3	)		135		Notional		129		—		(3	)		126
Interest rate swaptions	Notional		5,100		200		(5,100	)		200		Notional		200		—		(200	)		—
Credit default swaps	Notional		1,090		50		—			1,140		Notional		1,195		115		(100	)		1,210
Credit default swaps related to securitization entities	Notional		—		322		(5	)		317		Notional		317		—		—			317
Equity index options	Notional		912		397		(614	)		695		Notional		744		288		(451	)		581
Financial futures	Notional		5,822		3,696		(5,019	)		4,499		Notional		3,937		1,372		(1,806	)		3,503
Other foreign currency contracts	Notional		521		73		—			594		Notional		521		185		—			706
Reinsurance embedded derivatives	Notional		—		47		—			47		Notional		72		12		—			84

Total derivatives not designated as hedges			19,919		7,268		(11,318	)		15,869				15,004		2,014		(3,835	)		13,183

Total derivatives		$	32,716	$	8,807	$	(11,669	)	$	29,854			$	30,224	$	3,018	$	(4,164	)	$	29,078


(Number of policies)											Measurement		December 31, 2010		Additions		Terminations			March 31, 2011
Derivatives not designated as hedges
GMWB embedded derivatives												Policies		49,566		675		(654	)		49,587

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Number of policies)
   Measurement    December 31, 2009    Additions    Terminations June 30, 2010
Derivatives not designated as hedges

GMWB embedded derivatives
   Policies    47,543    2,244    (1,445 ) 48,342

Approximately $1.1 billion of notional value above is related to derivatives with counterparties that can be terminated at the option of the derivative counterparty and represented a net fair value asset of ~~$148~~$195 million as of ~~June 30, 2010.~~

~~GENWORTH FINANCIAL, INC.~~March 31, 2011.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Cash Flow Hedges

Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of OCI. We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) pay U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure on liabilities denominated in foreign currencies; (v) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed-rate bond purchases and/or interest income; and (vi) other instruments to hedge the cash flows of various forecasted transactions.

The following table provides information about the pre-tax income ~~(loss)~~ effects of cash flow hedges for the three months ended ~~June 30, 2010:~~March 31, 2011:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income (loss) from OCI			Classification of gain (loss) reclassified into net income (loss)	Gain (loss) recognized in net income (loss) ⁽¹⁾		Classification of gain (loss) recognized in net income (loss)	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 ⁽¹⁾			Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	599		$	4		Net investment income	$	15	Net investment gains (losses)	$	(101	)	$	(5	)	Net investment income	$	(2	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(3	)		1		Interest expense		—	Net investment gains (losses)
Foreign currency swaps		6			(2	)	Interest expense		—	Net investment gains (losses)		3			(1	)	Interest expense		—		Net investment gains (losses)

Total	$	602		$	3			$	15		$	(98	)	$	(6	)		$	(2	)

⁽¹⁾	~~Represents ineffective portion of cash flow hedges, as there were no amounts excluded from the measurement of effectiveness.~~

~~The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the three months ended June 30, 2009:~~

(Amounts in millions)
Gain (loss)
recognized in OCI Gain (loss)
reclassified into
net income (loss)
from OCI Classification of gain
(loss) reclassified into
net income (loss) Gain (loss)
recognized in
net income (loss) ⁽¹⁾ Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
$ (177 ) $ 3    Net investment
income
$ (4 ) Net investment
gains (losses)
Interest rate swaps hedging assets
—      2    Net investment
gains (losses)
—      Net investment
gains (losses)
Foreign currency
swaps
(1 ) (5 ) Interest expense —      Net investment
gains (losses)

Total
$ (178 ) $ —      $ (4 )

⁽¹⁾	~~Represents ineffective portion of cash flow hedges, as there were no amounts excluded from the measurement of effectiveness.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the six months ended June 30, 2010:~~

(Amounts in millions)
Gain (loss)
recognized in OCI Gain (loss)
reclassified into
net income (loss)
from OCI Classification of gain
(loss) reclassified into
net income (loss) Gain (loss)
recognized in
net income (loss) ⁽¹⁾ Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
$ 563    $ 8    Net investment
income $ 12 Net investment
gains (losses)
Interest rate swaps hedging assets
—      1    Net investment
gains (losses) —   Net investment
gains (losses)
Interest rate swaps hedging liabilities
(3 ) 1    Interest expense —   Net investment
gains (losses)
Foreign currency
swaps
7    (4 ) Interest expense —   Net investment
gains (losses)

Total
$ 567    $ 6    $ 12

⁽¹⁾	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.

The following table provides information about the pre-tax income ~~(loss)~~ effects of cash flow hedges for the ~~six~~three months ended ~~June 30, 2009:~~March 31, 2010:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income (loss) from OCI			Classification of gain (loss) reclassified into net income (loss)	Gain (loss) recognized in net income (loss) ⁽¹⁾			Classification of gain (loss) recognized in net income (loss)	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⁽¹⁾			Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	(322	)	$	8		Net investment income	$	(10	)	Net investment gains (losses)	$	(36	)	$	4		Net investment income	$	(3	)	Net investment gains (losses)
Interest rate swaps hedging assets		—			5		Net investment gains (losses)		—		Net investment gains (losses)		—			1		Net investment gains (losses)		—		Net investment gains (losses)
Foreign currency swaps		(13	)		(8	)	Interest expense		—		Net investment gains (losses)		1			(2	)	Interest expense		—		Net investment gains (losses)

Total	$	(335	)	$	5			$	(10	)		$	(35	)	$	3			$	(3	)

⁽¹⁾	Represents ineffective portion of cash flow hedges as there were no amounts excluded from the measurement of effectiveness.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The total of derivatives designated as cash flow hedges of ~~$1.2 billion,~~$864 million, net of taxes, recorded in stockholders’ equity as of ~~June 30, 2010~~March 31, 2011 is expected to be reclassified to future net income (loss), concurrently with and primarily offsetting changes in interest expense and interest income on floating-rate instruments and interest income on future fixed-rate bond purchases. Of this amount, $8$18 million, net of taxes, is expected to be reclassified to net income (loss) in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2045. No amounts were reclassified to net income ~~(loss)~~ during the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 in connection with forecasted transactions that were no longer considered probable of occurring.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Fair Value Hedges

Certain derivative instruments are designated as fair value hedges. The changes in fair value of these instruments are recorded in net income (loss). In addition, changes in the fair value attributable to the hedged portion of the underlying instrument are reported in net income (loss). We designate and account for the following as fair value hedges when they have met the effectiveness requirements: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) interest rate swaps to convert fixed rate liabilities into floating rate liabilities; (iii) cross currency swaps to convert non-U.S. dollar fixed rate liabilities to floating rate U.S. dollar liabilities; and (iv) other instruments to hedge various fair value exposures of investments.

The following table provides information about the pre-tax income ~~(loss)~~ effects of fair value hedges and related hedged items for the three months ended ~~June 30, 2010:~~March 31, 2011:


	Derivative instrument								Hedged item				Derivative instrument									Hedged item
(Amounts in millions)	Gain (loss) recognized in net income (loss)			Classification of gain (loss) recognized in net income (loss)	Other impacts to net income (loss)			Classification of other impacts to net income (loss)	Gain (loss) recognized in net income (loss)			Classification of gain (loss) recognized in net income (loss)	Gain (loss) recognized in net income			Classification of gain (loss) recognized in net income	Other impacts to net income			Classification of other impacts to net income		Gain (loss) recognized in net income			Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	1		Net investment gains (losses)	$	(3	)	Net investment income	$	(1	)	Net investment gains (losses)	$	1		Net investment gains (losses)	$	(3	)		Net investment income	$	(1	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(6	)	Net investment gains (losses)		25		Interest credited		6		Net investment gains (losses)		(22	)	Net investment gains (losses)		20			Interest credited		22		Net investment gains (losses)
Foreign currency swaps		(2	)	Net investment gains (losses)		1		Interest credited		2		Net investment gains (losses)		—		Net investment gains (losses)		1			Interest credited		(1	)	Net investment gains (losses)

Total	$	(7	)		$	23			$	7			$	(21	)		$	18				$	20

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides information about the pre-tax income ~~(loss)~~ effects of fair value hedges and related hedged items for the three months ended ~~June 30, 2009:~~

Derivative instrument Hedged item
(Amounts in millions)
Gain (loss)
recognized in
net income
(loss) Classification
of gain (loss)
recognized in
net income (loss) Other impacts
to net
income (loss) Classification
of other
impacts to
net income (loss) Gain (loss)
recognized in
net income
(loss) Classification
of gain (loss)
recognized in net
income (loss)
Interest rate swaps hedging assets
$ 4    Net investment
gains (losses)
$ (4 ) Net investment
income $ (6 ) Net investment
gains (losses)
Interest rate swaps hedging liabilities
(50 ) Net investment
gains (losses)
23    Interest credited 51    Net investment
gains (losses)
Foreign currency
swaps
(2 ) Net investment
gains (losses) —      Interest credited 1    Net investment
gains (losses)

Total
$ (48 ) $ 19    $ 46

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the six months ended June 30,~~March 31, 2010:

Derivative instrument Hedged item
(Amounts in millions)
Gain (loss)
recognized in
net income
(loss) Classification
of gain (loss)
recognized in
net income (loss) Other impacts
to net
income (loss) Classification
of other
impacts to
net income (loss) Gain (loss)
recognized in
net income
(loss) Classification
of gain (loss)
recognized in net
income (loss)
Interest rate swaps hedging assets
$ 2    Net investment
gains (losses) $ (6 ) Net investment
income $ (2 ) Net investment
gains (losses)
Interest rate swaps hedging liabilities
(7 ) Net investment
gains (losses) 50    Interest credited 7    Net investment
gains (losses)
Foreign currency
swaps
(4 ) Net investment
gains (losses) 2 Interest credited 4    Net investment
gains (losses)

Total
$ (9 ) $ 46    $ 9

~~The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the six months ended June 30, 2009:~~


	Derivative instrument								Hedged item				Derivative instrument								Hedged item
(Amounts in millions)	Gain (loss) recognized in net income (loss)			Classification of gain (loss) recognized in net income (loss)	Other impacts to net income (loss)			Classification of other impacts to net income (loss)	Gain (loss) recognized in net income (loss)			Classification of gain (loss) recognized in net income (loss)	Gain (loss) recognized in net income			Classification of gain (loss) recognized in net income	Other impacts to net income			Classification of other impacts to net income	Gain (loss) recognized in net income			Classification of gain (loss) recognized in net income
Interest rate swaps hedging assets	$	6		Net investment gains (losses)	$	(8	)	Net investment income	$	(10	)	Net investment gains (losses)	$	1		Net investment gains (losses)	$	(3	)	Net investment income	$	(1	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(59	)	Net investment gains (losses)		42		Interest credited		62		Net investment gains (losses)		(1	)	Net investment gains (losses)		25		Interest credited		1		Net investment gains (losses)
Foreign currency swaps		(13	)	Net investment gains (losses)		1		Interest credited		11		Net investment gains (losses)		(2	)	Net investment gains (losses)		1		Interest credited		2		Net investment gains (losses)

Total	$	(66	)		$	35			$	63			$	(2	)		$	23			$	2

The difference between the gain (loss) recognized for the derivative ~~instruments~~instrument and the hedged ~~items~~item presented above represents the net ineffectiveness of the fair value hedging relationships. The other impacts presented above represent the net income ~~(loss)~~ effects of the derivative instruments that are presented in the same location as the income ~~(loss)~~ activity from the hedged ~~items.~~item. There were no amounts excluded from the measurement of effectiveness.

Derivatives Not Designated As Hedges

We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps, swaptions and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) credit default swaps to enhance yield and reproduce characteristics of investments with similar terms and credit risk; (iii) equity index options, equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits; (iv) interest rate swaps where the hedging relationship does not qualify for hedge accounting; (v) credit default swaps to mitigate loss exposure to certain credit risk; and (vi) foreign currency forward contracts to mitigate currency risk associated with future dividends from certain ~~currency risk.~~foreign subsidiaries to our holding company. Additionally, we provide GMWBs on certain

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

products that are required to be bifurcated as embedded derivatives and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.

We also have derivatives related to securitization entities where we were required to consolidate the related securitization entity as a result of our involvement in the structure. The counterparties for these derivatives typically only have recourse to the securitization entity. The interest rate swaps used for these entities are typically used to effectively convert the interest payments on the assets of the securitization entity to the same basis as the interest rate on the borrowings issued by the securitization entity. Credit default swaps are utilized in certain securitization entities to enhance the yield payable on the borrowings issued by the securitization entity and also include a settlement feature that allows the securitization entity to provide the par value of assets in the securitization entity for the amount of any losses incurred under the credit default swap. ~~See note 7 for additional information related to consolidated securitization entities.~~

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides the pre-tax gain (loss) recognized in net income ~~(loss)~~ for the effects of derivatives not designated as hedges for the periods indicated:

   Three months ended June 30, Classification of gain (loss) recognized
in net income (loss)
(Amounts in millions)
   2010 2009
Interest rate swaps
   $ 63    $ 164    Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾
   (9 ) —      Net investment gains (losses)
Interest rate swaptions
   35    (338 ) Net investment gains (losses)
Credit default swaps
   (32 ) 35    Net investment gains (losses)
Credit default swaps related to securitization entities⁽¹⁾
   (46 ) —      Net investment gains (losses)
Equity index options
   50    (71 ) Net investment gains (losses)
Financial futures
   105    (163 ) Net investment gains (losses)
Inflation indexed swaps
   —      4    Net investment gains (losses)
Other foreign currency contracts
   2    8    Net investment gains (losses)
Reinsurance embedded derivatives
   2    —      Net investment gains (losses)
GMWB embedded derivatives
   (278 ) 479    Net investment gains (losses)

Total derivatives not designated as hedges
   $ (108 ) $ 118

⁽¹⁾	~~See note 7 for additional information related to consolidated securitization entities.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table provides the pre-tax gain (loss) recognized in net income (loss) for the effects of derivatives not designated as hedges for the periods indicated:~~

   Six months ended June 30, Classification of gain (loss) recognized
in net income (loss)
(Amounts in millions)
   2010 2009
Interest rate swaps
   $ 57    $ 246    Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾
   (12 ) —      Net investment gains (losses)
Interest rate swaptions
   57    (579 ) Net investment gains (losses)
Credit default swaps
   (27 ) 21    Net investment gains (losses)
Credit default swaps related to securitization entities⁽¹⁾
   (41 ) —      Net investment gains (losses)
Equity index options
   23    (55 ) Net investment gains (losses)
Financial futures
   72    (84 ) Net investment gains (losses)
Inflation indexed swaps
   —      (4 ) Net investment gains (losses)
Foreign currency swaps
   —      6    Net investment gains (losses)
Other foreign currency contracts
   (1 ) 10    Net investment gains (losses)
Reinsurance embedded derivatives
   2    —      Net investment gains (losses)
GMWB embedded derivatives
   (242 ) 440    Net investment gains (losses)

Total derivatives not designated as hedges
   $ (112 ) $ 1

⁽¹⁾	~~See note 7 for additional information related to consolidated securitization entities.~~


	Three months ended March 31,						Classification of gain (loss) recognized in net income
(Amounts in millions)	2011			2010			Classification of gain (loss) recognized in net income
Interest rate swaps	$	2		$	(6	)	Net investment gains (losses)
Equity return swaps		(4	)		—		Net investment gains (losses)
Interest rate swaps related to securitization entities		1			(3	)	Net investment gains (losses)
Interest rate swaptions		—			22		Net investment gains (losses)
Credit default swaps		3			5		Net investment gains (losses)
Credit default swaps related to securitization entities		9			5		Net investment gains (losses)
Equity index options		(19	)		(27	)	Net investment gains (losses)
Financial futures		(39	)		(33	)	Net investment gains (losses)
Other foreign currency contracts		(9	)		(3	)	Net investment gains (losses)
GMWB embedded derivatives		59			36		Net investment gains (losses)

Total derivatives not designated as hedges	$	3		$	(4	)

Derivative Counterparty Credit Risk

As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, net fair value assets by counterparty totaled ~~$1.3 billion~~$773 million and ~~$739~~$888 million, respectively. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, net fair value liabilities by counterparty totaled ~~$192~~$191 million and ~~$74~~$172 million, respectively. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, we retained collateral of ~~$1.1 billion~~$745 million and ~~$647~~$794 million, respectively, related to these agreements, including over collateralization of $6$53 million and ~~$10~~$29 million, respectively, from certain counterparties. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, we posted ~~$12~~$67 million and ~~$121~~$30 million, respectively, of collateral to derivative counterparties, including over collateralization of $3$16 million and ~~$46~~$11 million, respectively. For derivatives related to securitization entities, there are no arrangements that require either party to provide collateral and the recourse of the derivative counterparty is typically limited to the assets held by the securitization entity and there is no recourse to any entity other than the securitization entity.

Except for derivatives related to securitization entities, all of our master swap agreements contain credit downgrade provisions that allow either party to assign or terminate derivative transactions if the other party’s long-term unsecured debt rating or financial strength rating is below the limit defined in the applicable agreement. If the downgrade provisions had been triggered as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, we could have been allowed to claim up to ~~$292~~$81 million and ~~$102~~$123 million, respectively, from counterparties and required to disburse up to $1$4 million ~~in both periods.~~and $5 million, respectively. This represented the net fair value of gains and losses by counterparty, less available collateral held, and did not include any fair value gains or losses for derivatives related to securitization entities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

Credit ~~Derivatives—Sell Protection~~Derivatives

We sell protection under single name credit default swaps and credit default swap index tranches in combination with purchasing securities to replicate characteristics of similar investments based on the credit quality and term of the credit default swap. Credit default triggers for both indexed reference entities and single name reference entities follow the Credit Derivatives Physical Settlement Matrix published by the International Swaps and Derivatives Association. Under these terms, credit default triggers are defined as bankruptcy, failure to pay or restructuring, if applicable. Our maximum exposure to credit loss equals the notional value for credit default ~~swaps and the par value of debt instruments with embedded credit derivatives.~~swaps. In the event of default for credit default swaps, we are typically required to pay the protection holder the full notional value less a recovery rate determined at auction. ~~For debt instruments with embedded credit derivatives, the security’s principal is typically reduced by the net amount of default for any referenced entity defaults.~~

In addition to the credit derivatives discussed above, we also have credit derivative instruments related to securitization entities that we ~~were required to consolidate~~consolidated in 2010. These derivatives represent a customized index of reference entities with specified attachment points for certain derivatives. The credit default triggers are similar to those described above. In the event of default, the securitization entity will provide the counterparty with the par value of assets held in the securitization entity for the amount of incurred loss on the credit default swap. The maximum exposure to loss for the securitization entity is the notional value of the derivatives. Certain losses on these credit default swaps would be absorbed by the third-party noteholders of the securitization entity and the remaining losses on the credit default swaps would be absorbed by our portion of the notes issued by the securitization entity. ~~See note 9 for information on the third-party borrowings related to consolidated securitization entities.~~

The following table sets forth our credit default swaps where we sell protection on single name reference entities and the fair values as of the dates indicated:

   June 30, 2010    December 31, 2009
(Amounts in millions)
   Notional
value    Assets    Liabilities    Notional
value    Assets    Liabilities
Reference entity credit rating and maturity:

AAA

Matures after one year through five years
   $ 5    $ —      $ —      $ 6    $ —      $ —
AA

Matures after one year through five years
   11    —      —      5    —      —
A

Matures after one year through five years
   32    —      —      32    1    —
Matures after five years through ten years
   10    —      —      10    —      —
BBB

Matures after one year through five years
   68    1    —      73    1    —
Matures after five years through ten years
   29    —      1    29    —      —

Total credit default swaps on single name reference entities
   $ 155    $ 1    $ 1    $ 155    $ 2    $ —


	March 31, 2011						December 31, 2010
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets			Liabilities
Reference entity credit rating and maturity:
AAA
Matures after one year through five years	$	5	$	—	$	—	$	5	$	—		$	—
AA
Matures after one year through five years		6		—		—		6		—			—
Matures after five years through ten years		5		—		—		5		—			—
A
Matures after one year through five years		37		1		—		37		1			—
Matures after five years through ten years		10		—		—		5		—			—
BBB
Matures after one year through five years		68		2		—		68		2	��		—
Matures after five years through ten years		24		—		—		29		—			—

Total credit default swaps on single name reference entities	$	155	$	3	$	—	$	155	$	3		$	—

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

The following table sets forth our credit default swaps where we sell protection on credit default swap index tranches and the fair values as of the dates indicated:

June 30, 2010 December 31, 2009
(Amounts in millions)
Notional
value Assets Liabilities Notional
value Assets Liabilities
Index tranche attachment/detachment point and maturity:

9% – 12% matures after one year through five years⁽¹⁾
$ 300 $ —   $ 13 $ 50 $ —   $ —
9% – 12% matures after five years through ten years⁽²⁾
—   —   —   250 1 1
10% – 15% matures after five years through ten years⁽³⁾
250 —   6 250 —   2
12% – 22% matures after five years through ten years⁽⁴⁾
248 —   6 248 4 —
15% – 30% matures after five years through ten years⁽⁵⁾
127 —   1 127 2 —

Total credit default swap index tranches
925 —   26 925 7 3

Customized credit default swap index tranches related to securitization entities:

Portion backing third-party borrowings maturing 2017⁽⁶⁾
17 —   9 —   —   —
Portion backing our interest maturing 2017⁽⁷⁾
300 —   150 —   —   —

Total customized credit default swap index tranches related to securitization entities
317 —   159 —   —   —

Total credit default swaps on index tranches
$ 1,242 $ —   $ 185 $ 925 $ 7 $ 3


	March 31, 2011						December 31, 2010
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets		Liabilities
Original index tranche attachment/detachment point and maturity:
9% – 12% matures after one year through five years ⁽¹⁾	$	300	$	1	$	3	$	300	$	—	$	3
10% – 15% matures after one year through five years⁽²⁾		250		4		—		250		4		—
12% – 22% matures after five years through ten years ⁽³⁾		248		—		4		248		—		4
15% – 30% matures after five years through ten years⁽⁴⁾		127		1		—		127		2		—

Total credit default swap index tranches		925		6		7		925		6		7

Customized credit default swap index tranches related to securitization entities:
Portion backing third-party borrowings maturing 2017 ⁽⁵⁾		17		—		7		17		—		8
Portion backing our interest maturing 2017⁽⁶⁾		300		—		113		300		—		121

Total customized credit default swap index tranches related to securitization entities		317		—		120		317		—		129

Total credit default swaps on index tranches	$	1,242	$	6	$	127	$	1,242	$	6	$	136

⁽¹⁾	The current attachment/detachment as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009~~2010 was 9% – 12%.

⁽²⁾	The current attachment/detachment as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009 was 9% – 12%.~~

⁽³⁾	~~The current attachment/detachment as of June 30,~~ 2010 ~~and December 31, 2009~~ was 10% – 15%.

⁽⁴⁾⁽³⁾

The current attachment/detachment as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009~~2010 was 12% – 22%.

⁽⁵⁾⁽⁴⁾

The current attachment/detachment as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009~~2010 was 14.8% – 30.3%.

⁽⁶⁾⁽⁵⁾

Original notional value was $39 million.

⁽⁷⁾⁽⁶⁾

Original notional value was $300 million.

~~The following table sets forth our holding of available-for-sale fixed maturity securities that include embedded credit derivatives and the fair values as of the dates indicated:~~

   June 30, 2010    December 31, 2009
(Amounts in millions)
   Par
value    Amortized
cost or
cost    Fair
value    Par
value    Amortized
cost or
cost    Fair
value
Credit rating:

AA

Matures after five years through ten years
   $ 100    $ 100    $ 96    $ 100    $ 100    $ 96
BBB

Matures after five years through ten years⁽¹⁾
   —      —      —      100    100    76
BB

Matures after five years through ten years⁽¹⁾
   —      —      —      200    228    148

Total available-for-sale fixed maturity securities that include embedded credit derivatives
   $ 100    $ 100    $ 96    $ 400    $ 428    $ 320

⁽¹⁾	~~The amounts in 2009 related to certain VIEs that were consolidated on January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

(6) Fair Value of Financial Instruments

Assets and liabilities that are reflected in the accompanying consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash and cash equivalents, investment securities, separate accounts, securities held as collateral and derivative instruments. Other financial assets and liabilities—those not carried at fair value—are discussed below. Apart from certain of our borrowings and certain marketable securities, few of the instruments discussed below are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The basis on which we estimate fair value is as follows:

Commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.

Restricted commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates.

Other invested assets.Based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the related instrument. Primarily represents short-term investments, limited partnerships accounted for under the cost ~~method and bank loans.~~

~~Short-term borrowings.~~~~Based on carrying value which approximates fair value since the borrowings are based on variable interest rates that are reset monthly.~~method.

Long-term borrowings.Based on market quotes or comparable market transactions.

Non-recourse funding obligations. Based on the then current coupon, revalued based on the London Interbank Offered Rate (“LIBOR”) ~~set~~ and current spread assumption based on commercially available data. The model is a floating rate coupon model using the spread assumption to derive the valuation.

Borrowings related to securitization entities.Based on market quotes or comparable market transactions.

Investment contracts.Based on expected future cash flows, discounted at current market rates for annuity contracts or institutional products.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following represents the fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:


(Amounts in millions)	June 30, 2010							December 31, 2009							March 31, 2011							December 31, 2010
(Amounts in millions)	Notional amount			Carrying amount		Fair value		Notional amount			Carrying amount		Fair value		Notional amount			Carrying amount		Fair value		Notional amount			Carrying amount		Fair value
Assets:
Commercial mortgage loans	$		⁽¹⁾	$	7,208	$	7,211	$		⁽¹⁾	$	7,499	$	7,213	$		⁽¹⁾	$	6,600	$	6,827	$		⁽¹⁾	$	6,718	$	6,896
Restricted commercial mortgage loans⁽²⁾			⁽¹⁾		535		554			⁽¹⁾		—		—			⁽¹⁾		485		529			⁽¹⁾		507		554
Other invested assets			⁽¹⁾		328		332			⁽¹⁾		1,766		1,769			⁽¹⁾		328		340			⁽¹⁾		267		272
Liabilities:
Short-term borrowings⁽³⁾			⁽¹⁾		730		730			⁽¹⁾		930		930
Long-term borrowings⁽³⁾			⁽¹⁾		4,331		4,127			⁽¹⁾		3,641		3,291
Non-recourse funding obligations⁽³⁾			⁽¹⁾		3,437		1,468			⁽¹⁾		3,443		1,674
Borrowings related to securitization entities^{(2), (3)}			⁽¹⁾		474		497			⁽¹⁾		—		—
Long-term borrowings⁽²⁾																	⁽¹⁾		5,347		5,320			⁽¹⁾		4,952		4,928
Non-recourse funding obligations⁽²⁾																	⁽¹⁾		3,431		2,175			⁽¹⁾		3,437		2,170
Borrowings related to securitization entities																	⁽¹⁾		431		452			⁽¹⁾		443		467
Investment contracts			⁽¹⁾		21,287		22,048			⁽¹⁾		21,515		21,743			⁽¹⁾		19,106		19,671			⁽¹⁾		19,772		20,471
Performance guarantees, principally letters of credit		77			—		—		117			—		—
Other firm commitments:
Commitments to fund limited partnerships		143			—		—		194			—		—		106			—		—		110			—		—
Ordinary course of business lending commitments		5			—		—		—			—		—		39			—		—		28			—		—

⁽¹⁾	These financial instruments do not have notional amounts.

⁽²⁾	See note ~~7 for additional information related to consolidated securitization entities.~~

⁽³⁾	~~See note 9~~8 for additional information related to borrowings.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recurring Fair Value Measurements

We have fixed maturity, equity and trading securities, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.

Fixed maturity, equity and trading securities

The valuations of fixed maturity, equity and trading securities are determined using a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information.

We utilize certain third-party data providers when determining fair value. We consider information obtained from third-party pricing services as well as third-party broker provided prices, or broker quotes, in our determination of fair value. Additionally, we utilize internal models to determine the valuation of securities using an income approach where the inputs are based on third-party provided market inputs. While we consider the valuations provided by third-party pricing services and broker quotes, management determines the fair value of our investment securities after considering all relevant and available information. We also obtain an understanding of the valuation methodologies and procedures used by third-party data providers to ensure sufficient understanding to evaluate the valuation data received and determine the appropriate fair value.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

In general, we first obtain valuations from pricing services. If a price is not supplied by a pricing service, we will typically seek a broker quote. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for identical securities are not readily observable and these securities are not typically valued by pricing services. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quote valuation is available, we determine fair value using internal models.

For pricing services, we obtain an understanding of the pricing methodologies and procedures for each type of instrument. In general, a pricing service does not provide a price for a security if sufficient information is not readily available to determine fair value or if such security is not in the specific sector or class covered by a particular pricing service. Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs.

For private fixed maturity securities, we utilize an internal model to determine fair value and utilize public bond spreads by sector, rating and maturity to develop the market rate that would be utilized for a similar public bond. We then add an additional premium to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We assign each security an internal rating to determine ~~the~~ appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds to determine whether the spreads utilized would be considered observable inputs for the private placement being valued. To determine the significance of unobservable inputs, we calculate the impact on the valuation from the unobservable input and will classify a security as Level 3 when the impact on the valuation exceeds 10%.

For broker quotes, we discuss the valuation methodology utilized by the third party but cannot typically obtain sufficient evidence to determine the valuation does not include significant unobservable inputs. Accordingly, we typically classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For remaining securities priced using internal models, we maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The following ~~table summarizes~~tables summarize the primary sources considered when determining fair value of each class of fixed maturity securities as of ~~June 30, 2010.~~the dates indicated:

(Amounts in millions)
   Total    Level 1    Level 2    Level 3
U.S. government, agencies and government-sponsored enterprises:

Pricing services
   $ 3,667    $ —      $ 3,667    $ —
Internal models
   17    —      8    9

Total U.S. government, agencies and government-sponsored enterprises
   3,684    —      3,675    9

Tax-exempt:

Pricing services
   1,350    —      1,350    —

Total tax-exempt
   1,350    —      1,350    —

Government—non-U.S.:

Pricing services
   2,116    —      2,116    —
Internal models
   30    —      12    18

Total government—non-U.S.
   2,146    —      2,128    18

U.S. corporate:

Pricing services
   19,988    —      19,988    —
Broker quotes
   300    —      —      300
Internal models
   3,090    —      1,870    1,220

Total U.S. corporate
   23,378    —      21,858    1,520

Corporate—non-U.S.:

Pricing services
   10,793    —      10,696    97
Broker quotes
   136    —      —      136
Internal models
   1,870    —      1,383    487

Total corporate—non-U.S.
   12,799    —      12,079    720

Residential mortgage-backed:

Pricing services
   3,893    —      3,893    —
Broker quotes
   35    —      —      35
Internal models
   27    —      —      27

Total residential mortgage-backed
   3,955    —      3,893    62

Commercial mortgage-backed:

Pricing services
   3,662    —      3,662    —
Broker quotes
   20    —      —      20
Internal models
   44    —      5    39

Total commercial mortgage-backed
   3,726    —      3,667    59

Other asset-backed:

Pricing services
   1,978    —      1,978    —
Broker quotes
   156    —      —      156
Internal models
   214    —      9    205

Total other asset-backed
   2,348    —      1,987    361

Total fixed maturity securities
   $ 53,386    $ —      $ 50,637    $ 2,749


	March 31, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3
U.S. government, agencies and government-sponsored enterprises:
Pricing services	$	3,401	$	—	$	3,401	$	—
Internal models		13		—		12		1

Total U.S. government, agencies and government-sponsored enterprises		3,414		—		3,413		1

Tax-exempt:
Pricing services		928		—		928		—

Total tax-exempt		928		—		928		—

Government—non-U.S.:
Pricing services		2,348		—		2,348		—
Internal models		11		—		10		1

Total government—non-U.S.		2,359		—		2,358		1

U.S. corporate:
Pricing services		20,506		—		20,506		—
Broker quotes		232		—		—		232
Internal models		3,015		—		2,532		483

Total U.S. corporate		23,753		—		23,038		715

Corporate—non-U.S.:
Pricing services		12,081		—		12,081		—
Broker quotes		87		—		—		87
Internal models		1,769		—		1,654		115

Total corporate—non-U.S.		13,937		—		13,735		202

Residential mortgage-backed:
Pricing services		4,465		—		4,465		—
Broker quotes		64		—		—		64
Internal models		71		—		—		71

Total residential mortgage-backed		4,600		—		4,465		135

Commercial mortgage-backed:
Pricing services		3,714		—		3,714		—
Broker quotes		16		—		—		16
Internal models		26		—		—		26

Total commercial mortgage-backed		3,756		—		3,714		42

Other asset-backed:
Pricing services		2,083		—		1,985		98
Broker quotes		165		—		—		165
Internal models		3		—		3		—

Total other asset-backed		2,251		—		1,988		263

Total fixed maturity securities	$	54,998	$	—	$	53,639	$	1,359

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)


	December 31, 2010
(Amounts in millions)	Total		Level 1		Level 2		Level 3
U.S. government, agencies and government-sponsored enterprises:
Pricing services	$	3,688	$	—	$	3,688	$	—
Internal models		17		—		6		11

Total U.S. government, agencies and government-sponsored enterprises		3,705		—		3,694		11

Tax-exempt:
Pricing services		1,030		—		1,030		—

Total tax-exempt		1,030		—		1,030		—

Government—non-U.S.:
Pricing services		2,357		—		2,357		—
Internal models		12		—		11		1

Total government—non-U.S.		2,369		—		2,368		1

U.S. corporate:
Pricing services		20,563		—		20,563		—
Broker quotes		235		—		—		235
Internal models		3,169		—		2,304		865

Total U.S. corporate		23,967		—		22,867		1,100

Corporate—non-U.S.:
Pricing services		11,584		—		11,584		—
Broker quotes		113		—		—		113
Internal models		1,801		—		1,546		255

Total corporate—non-U.S.		13,498		—		13,130		368

Residential mortgage-backed:
Pricing services		4,312		—		4,312		—
Broker quotes		72		—		—		72
Internal models		71		—		—		71

Total residential mortgage-backed		4,455		—		4,312		143

Commercial mortgage-backed:
Pricing services		3,693		—		3,693		—
Broker quotes		16		—		—		16
Internal models		34		—		—		34

Total commercial mortgage-backed		3,743		—		3,693		50

Other asset-backed:
Pricing services		2,241		—		2,143		98
Broker quotes		169		—		—		169
Internal models		6		—		5		1

Total other asset-backed		2,416		—		2,148		268

Total fixed maturity securities	$	55,183	$	—	$	53,242	$	1,941

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following ~~table summarizes~~tables summarize the primary sources considered when determining fair value of equity securities as of ~~June 30, 2010.~~the dates indicated:


									March 31, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Pricing services	$	190	$	20	$	170	$	—	$	268	$	262	$	6	$	—
Broker quotes		6		—		—		6		6		—		—		6
Internal models		3		—		—		3		81		—		—		81

Total equity securities	$	199	$	20	$	170	$	9	$	355	$	262	$	6	$	87


	December 31, 2010
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Pricing services	$	245	$	240	$	5	$	—
Broker quotes		6		—		—		6
Internal models		81		—		—		81

Total equity securities	$	332	$	240	$	5	$	87

The following ~~table summarizes~~tables summarize the primary sources considered when determining fair value of trading securities as of ~~June 30, 2010.~~the dates indicated:


									March 31, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Pricing services	$	85	$	—	$	85	$	—	$	329	$	—	$	329	$	—
Internal models										238		—		—		238
Broker quotes		136		—		—		136		100		—		—		100

Total trading securities	$	221	$	—	$	85	$	136	$	667	$	—	$	329	$	338


	December 31, 2010
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Pricing services	$	348	$	—	$	348	$	—
Broker quotes		230		—		—		230
Internal models		99		—		—		99

Total trading securities	$	677	$	—	$	348	$	329

Restricted other invested assets related to securitization entities

We have trading securities related to securitization entities that are classified as restricted other invested assets and are carried at fair value. The trading securities represent asset-backed securities. The valuation for trading securities is determined using a market approach and/or an income approach depending on the availability of information. For certain highly rated asset-backed securities, there is observable market information for transactions of the same or similar instruments and is provided to us by a third-party pricing service and is classified as Level 2. For certain securities that are not actively traded, we determine fair value after considering third-party broker provided prices or discounted expected cash flows using current yields for similar securities and classify these valuations as Level 3.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Securities lending and derivative counterparty collateral

The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by third-party pricing services.

Separate account assets

The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.

Derivatives

In determining the fair value of derivatives, we consider the counterparty collateral arrangements and rights of set-off when determining whether any incremental adjustment should be made for both the counterparty’s and our non-performance risk. As a result of these counterparty arrangements, we determined no adjustment for our non-performance risk was required to our derivative liabilities.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Interest rate swaps.The valuation of interest rate swaps is determined using an income approach. The primary ~~inputs~~input into the valuation ~~represent~~represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2. For certain other swaps, there are features that provide an option to the counterparty to terminate the swap at specified dates and would be considered a significant unobservable input and results in the fair value measurement of the derivative being classified as Level 3.

Interest rate swaps related to securitization entities.The valuation of interest rate swaps related to securitization entities is determined using an income approach. The primary input into the valuation ~~represent~~represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2.

Inflation indexed swaps. The valuation of inflation indexed swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and consumer price index, which are generally considered observable inputs, and results in the derivative being classified as Level 2.

Interest rate swaptions. The valuation of interest rate swaptions is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, which is generally considered an observable input, forward interest rate volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate volatility input, the derivative is classified as Level 3.

Foreign currency swaps. The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered an observable input, and results in the derivative being classified as Level 2.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Credit default swaps. We have both single name credit default swaps and index tranche credit default swaps. For single name credit default swaps, we utilize an income approach to determine fair value based on using current market information for the credit spreads of the reference entity, which is considered observable inputs based on the reference entities of our derivatives and results in these derivatives being classified as Level 2. For index tranche credit default swaps, we utilize an income approach that utilizes current market information related to credit spreads and expected defaults and losses associated with the reference entities that comprise the respective index associated with each derivative. There are significant unobservable inputs associated with the timing and amount of losses from the reference entities as well as the timing or amount of losses, if any, that will be absorbed by our tranche. Accordingly, the index tranche credit default swaps are classified as Level 3.

Credit default swaps related to securitization entities.Credit default swaps related to securitization entities represent customized index tranche credit default swaps and are valued using a similar methodology as described above for index tranche credit default swaps. We determine fair value of these credit default swaps after considering both the valuation methodology described above as well as the valuation provided by the derivative counterparty. In addition to the valuation methodology and inputs described for index tranche credit default swaps, these customized credit default swaps contain a feature that permits the securitization entity to provide the par value of underlying assets in the securitization entity to settle any losses under the credit default swap. The valuation of this settlement feature is dependent upon the valuation of the underlying assets and the timing and amount of any expected loss on the credit default swap, which is considered a significant unobservable input. Accordingly, these customized index tranche credit default swaps related to securitization entities are classified as Level 3.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Equity index options. We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rate volatility and time value component associated with the optionality in the derivative, which are considered significant unobservable inputs in most instances. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3.3

Financial futures. The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is zero as a result of settling the margins on these contracts on a daily basis.

Equity return swaps.The valuation of equity return swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and underlying equity index values, which are generally considered observable inputs, and results in the derivative being classified as Level 2.

Other foreign currency contracts. We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate and foreign currency exchange rate volatility and time value component associated with the optionality in the derivative. As a result of the significant unobservable inputs associated with the forward interest rate and foreign currency exchange rate volatility input, the derivative is classified as Level 3. We also have foreign currency forward contracts where the valuation is determined using an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Reinsurance embedded derivatives

We have certain reinsurance agreements that result in a reinsurance counterparty holding assets for our benefit where this feature is considered an embedded derivative requiring bifurcation. As a result, we measure the embedded derivatives at fair value with changes in fair value being recorded in income. Fair value is determined by comparing the fair value and cost basis of the underlying assets. The underlying assets are primarily comprised of highly rated investments and result in the fair value of the embedded derivatives being classified as Level 2.

GMWB embedded derivatives

We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. In addition to these inputs, we also consider risk and expense margins when determining the projected cash flows that would be determined by another market participant. While the risk and expense margins are considered in determining fair value, these inputs do not have a significant impact on the valuation.

For GMWB liabilities, non-performance risk is integrated into the discount rate. ~~The~~Prior to the third quarter of 2010, the discount rate ~~utilized in our valuation~~ was based on the swap curve, which ~~included the credit risk of an instrument rated “AA” and~~ incorporated the non-performance risk of our GMWB liabilities. ~~In recent periods,~~Beginning in 2009, the swap curve ~~has been lower than~~dropped below the U.S. Treasury curve ~~for~~at certain points on the ~~curve. For~~longer end of the curve, and in 2010, the points ~~where the swap curve is lower than~~below the U.S. Treasury curve expanded to several points beyond 10 years. For these points on the curve, we ~~utilize~~utilized the U.S. Treasury curve as our discount ~~rate.~~rate through the second quarter of 2010. Beginning in the third quarter of 2010, we revised our discount rate to reflect market credit spreads that represent an adjustment for the non-performance risk of the GMWB liabilities. The credit spreads included in our discount rate range from 60 to 80 basis points over the most relevant points on the U.S. Treasury curve. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, the impact of non-performance risk onresulted in a lower fair value of our GMWB ~~valuation was not material.~~liabilities of $39 million and $44 million, respectively.

To determine ~~whether the use of the swap curve was~~ the appropriate discount rate to reflect the non-performance risk of the GMWB liabilities, we evaluate the non-performance risk in our liabilities based on a hypothetical exit market transaction as there is no exit market for these types of liabilities. A hypothetical exit

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

market can be viewed as a hypothetical transfer of the liability to another similarly rated insurance company which would closely resemble a reinsurance transaction. Another hypothetical exit market transaction can be viewed as a hypothetical transaction from the perspective of the GMWB policyholder. After considering all relevant factors in assessing whether any additional adjustment to the discount rate for non-performance risk was necessary, including assumptions we expect market participants would utilize in a hypothetical exit market transaction, we determined that no incremental adjustment to the discount rate was necessary for our GMWB liabilities that are recorded at fair value. We believe that a hypothetical exit market participant would use a similar discount rate as described above to value the ~~liabilities and would not incorporate changes in non-performance risk in the discount rate other than the implied credit spread incorporated in the swap curve.~~liabilities.

For equity index volatility, we determine the projected equity market volatility using both historical volatility and projected near-term equity market volatility with more significance being placed on projected and recent historical data.

Equity index and fund correlations are determined based on historical price observations for the fund and equity index.

For policyholder assumptions, we use our expected lapse, mortality and utilization assumptions and update these assumptions for our actual experience, as necessary. For our lapse assumption, we adjust our base lapse assumption by policy based on a combination of the policyholder’s current account value and GMWB benefit.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We classify the GMWB valuation as Level 3 based on having significant unobservable inputs. We evaluate the inputs and methodologies used to determine fair value based on how we expect a market participant would determine exit value. As stated above, there is no exit market or market participants for the GMWB embedded derivatives. Accordingly, we evaluate our inputs and resulting fair value based on a hypothetical exit market and hypothetical market participants. A hypothetical exit market could be viewed as a transaction that would closely resemble reinsurance. While reinsurance transactions for this type of product are not an observable input, we consider this type of hypothetical exit market, as appropriate, when evaluating our inputs and determining that our inputs are consistent with that of a hypothetical market participant.

Borrowings related to securitization entities

We record certain borrowings related to securitization entities at fair value. The fair value of these borrowings is determined using either a market approach or income approach, depending on the instrument and availability of market information. Given the unique characteristics of the securitization entities that issued these borrowings as well as the lack of comparable instruments, we determine fair value considering the valuation of the underlying assets held by the securitization entities and any derivatives, as well as any unique characteristics of the borrowings that may impact the valuation. After considering all relevant inputs, we determine fair value of the borrowings using the net valuation of the underlying assets and derivatives that are backing the borrowings. Accordingly, these instruments are classified as Level 3.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

The following tables set forth our assets and liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:


	June 30, 2010								March 31, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	3,684	$	—	$	3,675	$	9	$	3,414		$	—	$	3,413	$	1
Tax-exempt		1,350		—		1,350		—		928			—		928		—
Government—non-U.S.		2,146		—		2,128		18		2,359			—		2,358		1
U.S. corporate		23,378		—		21,858		1,520		23,753			—		23,038		715
Corporate—non-U.S.		12,799		—		12,079		720		13,937			—		13,735		202
Residential mortgage-backed		3,955		—		3,893		62		4,600			—		4,465		135
Commercial mortgage-backed		3,726		—		3,667		59		3,756			—		3,714		42
Other asset-backed		2,348		—		1,987		361		2,251			—		1,988		263

Total fixed maturity securities		53,386		—		50,637		2,749		54,998			—		53,639		1,359

Equity securities		199		20		170		9		355			262		6		87

Other invested assets:
Trading securities		221		—		85		136		667			—		329		338
Derivative assets:
Interest rate swaps		1,173		—		1,164		9		630			—		627		3
Inflation indexed swaps		1		—		1		—
Foreign currency swaps		160		—		160		—		228			—		228		—
Interest rate swaptions		4		—		—		4
Credit default swaps		2		—		2		—		11			—		5		6
Equity index options		97		—		—		97		32			—		—		32
Other foreign currency contracts		6		—		5		1

Total derivative assets		1,443		—		1,332		111		901			—		860		41

Securities lending collateral		680		—		680		—		811			—		811		—
Derivatives counterparty collateral		100		—		100		—		605			—		605		—
Restricted other invested assets related to securitization entities		373		—		199		174

Total other invested assets		2,817		—		2,396		421		2,984			—		2,605		379

Other assets⁽¹⁾		2		—		2		—
Reinsurance recoverable⁽²⁾		9		—		—		9
Restricted other invested assets related to securitization entities										374			—		199		175
Reinsurance recoverable⁽¹⁾										(7	)		—		—		(7	)
Separate account assets		10,284		10,284		—		—		11,807			11,807		—		—

Total assets	$	66,697	$	10,304	$	53,205	$	3,188	$	70,511		$	12,069	$	56,449	$	1,993

Liabilities
Policyholder account balances⁽³⁾	$	447	$	—	$	—	$	447
Policyholder account balances⁽²⁾									$	69		$	—	$	—	$	69
Derivative liabilities:
Interest rate swaps		61		—		61		—		132			—		132		—
Interest rate swaps related to securitization entities		23		—		23		—		16			—		16		—
Inflation indexed swaps		22		—		22		—		35			—		35		—
Credit default swaps		27		—		1		26		7			—		—		7
Credit default swaps related to securitization entities		159		—		—		159		120			—		—		120
Equity return swaps										1			—		1		—
Other foreign currency contracts										8			—		8		—

Total derivative liabilities		292		—		107		185		319			—		192		127
Borrowings related to securitization entities		51		—		—		51		58			—		—		58

Total liabilities	$	790	$	—	$	107	$	683	$	446		$	—	$	192	$	254

⁽¹⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

⁽²⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	December 31, 2010
(Amounts in millions)	Total			Level 1		Level 2		Level 3
Assets
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	3,705		$	—	$	3,694	$	11
Tax-exempt		1,030			—		1,030		—
Government—non-U.S.		2,369			—		2,368		1
U.S. corporate		23,967			—		22,867		1,100
Corporate—non-U.S.		13,498			—		13,130		368
Residential mortgage-backed		4,455			—		4,312		143
Commercial mortgage-backed		3,743			—		3,693		50
Other asset-backed		2,416			—		2,148		268

Total fixed maturity securities		55,183			—		53,242		1,941

Equity securities		332			240		5		87

Other invested assets:
Trading securities		677			—		348		329
Derivative assets:
Interest rate swaps		763			—		758		5
Foreign currency swaps		240			—		240		—
Credit default swaps		11			—		5		6
Equity index options		33			—		—		33

Total derivative assets		1,047			—		1,003		44

Securities lending collateral		772			—		772		—
Derivatives counterparty collateral		630			—		630		—

Total other invested assets		3,126			—		2,753		373

Restricted other invested assets related to securitization entities		370			—		199		171
Other assets⁽¹⁾		1			—		1		—
Reinsurance recoverable⁽²⁾		(5	)		—		—		(5	)
Separate account assets		11,666			11,666		—		—

Total assets	$	70,673		$	11,906	$	56,200	$	2,567

Liabilities
Policyholder account balances⁽³⁾	$	121		$	—	$	—	$	121
Derivative liabilities:
Interest rate swaps		138			—		138		—
Interest rate swaps related to securitization entities		19			—		19		—
Inflation indexed swaps		33			—		33		—
Credit default swaps		7			—		—		7
Credit default swaps related to securitization entities		129			—		—		129
Equity index options		3			—		—		3
Equity return swaps		3			—		3		—

Total derivative liabilities		332			—		193		139
Borrowings related to securitization entities		51			—		—		51

Total liabilities	$	504		$	—	$	193	$	311

⁽¹⁾	Represents embedded derivatives associated with certain reinsurance agreements.

⁽²⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

⁽³⁾	Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

   December 31, 2009
(Amounts in millions)
   Total Level 1    Level 2    Level 3
Assets

Investments:

Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises
   $ 2,602    $ —      $ 2,586    $ 16
Tax-exempt
   1,544    —      1,542    2
Government—non-U.S.
   2,384    —      2,377    7
U.S. corporate
   21,412    —      20,339    1,073
Corporate—non-U.S.
   12,551    —      12,047    504
Residential mortgage-backed
   3,227    —      1,746    1,481
Commercial mortgage-backed
   3,617    —      59    3,558
Other asset-backed
   2,415    —      996    1,419

Total fixed maturity securities
   49,752    —      41,692    8,060

Equity securities
   159    42    108    9

Other invested assets:

Trading securities
   174    —      29    145
Derivative assets:

Interest rate swaps
   709    —      706    3
Foreign currency swaps
   125    —      125    —
Interest rate swaptions
   54    —      —      54
Credit default swaps
   11    —      5    6
Equity index options
   39    —      —      39
Other foreign currency contracts
   8    —      —      8

Total derivative assets
   946    —      836    110

Securities lending collateral
   853    —      853    —
Derivatives counterparty collateral
   148    —      148    —

Total other invested assets
   2,121    —      1,866    255

Reinsurance recoverable⁽¹⁾
   (5 ) —      —      (5 )
Separate account assets
   11,002    11,002    —      —

Total assets
   $ 63,029    $ 11,044    $ 43,666    $ 8,319

Liabilities

Policyholder account balances⁽²⁾
   $ 175    $ —      $ —      $ 175
Derivative liabilities:

Interest rate swaps
   188    —      186    2
Inflation indexed swaps
   21    —      21    —
Interest rate swaptions
   67    —      —      67
Credit default swap
   3    —      3    —
Equity index options
   2    —      —      2

Total derivative liabilities
   281    —      210    71

Total liabilities
   $ 456    $ —      $ 210    $ 246

⁽¹⁾	~~Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.~~

⁽²⁾	~~Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following tables present additional information about assets measured at~~We review the fair value onhierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a ~~recurring basis~~reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and ~~for which we have utilized significant unobservable (Level 3) inputs to determine~~out of Level 3, or between other levels, at the beginning fair value ~~as of or~~ for the ~~dates indicated:~~

Beginning
balance
as of
April 1,
2010 Total realized and
unrealized gains
(losses) Purchases,
sales,
issuances
and
settlements,
net Transfer
in Level 3⁽¹⁾ Transfer
out of
Level 3 Ending
balance
as of
June 30,
2010 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
(Amounts in millions)
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government- sponsored enterprises
$ 8    $ —      $ —   $ (1 ) $ 6 $ (4 ) $ 9 $ —
Tax-exempt
2    —      —   —      —   (2 ) —   —
Government—non-U.S.
1    —      1 —      16 —      18 —
U.S. corporate
906    11 19 (29 ) 653 (40 ) 1,520 4
Corporate—non-U.S.
508    —      7 2    294 (91 ) 720 —
Residential mortgage- backed
171    —      —   (26 ) 1 (84 ) 62 —
Commercial mortgage- backed
47    —      10 (1 ) 11 (8 ) 59 —
Other asset-backed
409    (8 ) 2 (14 ) —   (28 ) 361 (8 )

Total fixed maturity securities
2,052    3    39 (69 ) 981 (257 ) 2,749 (4 )

Equity securities
67    —      1 1    —   (60 ) 9 —

Other invested assets:

Trading securities
142    (7 ) —   1    —   —      136 (7 )
Derivative assets:

Interest rate swaps
4    5    —   —      —   —      9 5
Interest rate swaptions
14    24    —   (34 ) —   —      4 24
Credit default swaps
7    (7 ) —   —      —   —      —   (7 )
Equity index options
34    46    —   17    —   —      97 46
Other foreign currency contracts
4    (3 ) —   —      —   —      1 (3 )

Total derivative assets
63    65    —   (17 ) —   —      111 65

Total other invested assets
205    58    —   (16 ) —   —      247 58

Restricted other invested assets related to securitization entities ⁽²⁾
174    (2 ) 2 —      —   —      174 (2 )
Reinsurance recoverable⁽³⁾
(6 ) 15    —   —      —   —      9 15

Total Level 3 assets
$ 2,492    $ 74    $ 42 $ (84 ) $ 981 $ (317 ) $ 3,188 $ 67

⁽¹⁾

~~The transfer into Level 3 was primarily related to private fixed U.S. corporate and corporate—non U.S. securities and resulted from a change~~reporting period in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our private placements and resulted in unobservable inputs having a significant impact on certain valuations.

⁽²⁾	~~Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~

⁽³⁾	~~Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Beginning
balance
as of
April 1,
2009 Total realized and
unrealized gains
(losses) Purchases,
sales,
issuances
and
settlements,
net Transfer
in Level 3 Transfer
out of
Level 3 Ending
balance
as of
June 30,
2009 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
(Amounts in millions)
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government-sponsored entities
$ 19 $ —      $ (37 ) $ 4    $ 389 $ (18 ) $ 357 $ —
Tax exempt
5 —      —      —      2 (5 ) 2 —
Government—non-U.S.
35 —      2    3    —   (18 ) 22 —
U.S. corporate
1,658 (14 ) 140    (70 ) 240 (546 ) 1,408 6
Corporate—non-U.S.
1,136 (10 ) 25    (23 ) 204 (565 ) 767 1
Residential mortgage-backed
2,602 (106 ) 66    (44 ) 4 (899 ) 1,623 (88 )
Commercial mortgage-backed
3,647 (10 ) 7    (27 ) 27 (516 ) 3,128 (11 )
Other asset-backed
1,901 (8 ) 137    (98 ) 8 (877 ) 1,063 (4 )

Total fixed maturity securities
11,003 (148 ) 340    (255 ) 874 (3,444 ) 8,370 (96 )

Equity securities
61 —      —      —      —   —      61 —

Other invested assets:

Trading securities
156 15    —      (5 ) —   (33 ) 133 13
Derivative assets
706 (256 ) —      (164 ) —   —      286 (237 )

Total other invested assets
862 (241 ) —      (169 ) —   (33 ) 419 (224 )

Reinsurance recoverable
18 (16 ) —      —      —   —      2 (16 )

Total Level 3 assets
$ 11,944 $ (405 ) $ 340    $ (424 ) $ 874 $ (3,477 ) $ 8,852 $ (336 )

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following tables present additional information about assets measured at fair value on a recurring basis and for~~ which ~~we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for~~ the ~~dates indicated:~~

Beginning
balance
as of
January 1,
2010 Total realized and
unrealized gains
(losses) Purchases,
sales,
issuances
and
settlements,
net Transfer
in Level 3 ⁽¹⁾ Transfer
out of
Level 3 Ending
balance
as of
June 30,
2010 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
(Amounts in millions)
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises
$ 16    $ —      $ —   $ (2 ) $ 9 $ (14 ) $ 9 $ —
Tax-exempt
2    —      —   —      —   (2 ) —   —
Government—non-U.S.
7    —      1 —      16 (6 ) 18 —
U.S. corporate
1,073    11 34 31    678 (307 ) 1,520 8
Corporate—non-U.S.
504    1    8 11    353 (157 ) 720 1
Residential mortgage- backed
1,481    —      3 80    1 (1,503 ) 62 —
Commercial mortgage- backed
3,558    1    14 (63 ) 11 (3,462 ) 59 —
Other asset-backed
1,419    (24 ) 23 (18 ) 10 (1,049 ) 361 (24 )

Total fixed maturity securities
8,060    (11 ) 83 39    1,078 (6,500 ) 2,749 (15 )

Equity securities
9    —      —   8    52 (60 ) 9 —

Other invested assets:

Trading securities
145    1    —   (10 ) —   —      136 1
Derivative assets:

Interest rate swaps
3    6    —   —      —   —      9 6
Interest rate swaptions
54    15    —   (65 ) —   —      4 15
Credit default swaps
6    (6 ) —   —      —   —      —   (6 )
Equity index options
39    22    —   36    —   —      97 22
Other foreign currency contracts
8    (7 ) —   —      —   —      1 (7 )

Total derivative assets
110    30    —   (29 ) —   —      111 30

Total other invested assets
255    31    —   (39 ) —   —      247 31

Restricted other invested assets related to securitization
entities ⁽²⁾
—      (2 ) 2 —      174 —      174 (2 )
Reinsurance recoverable⁽³⁾
(5 ) 14    —   —      —   —      9 14

Total Level 3 assets
$ 8,319    $ 32    $ 85 $ 8    $ 1,304 $ (6,560 ) $ 3,188 $ 28

⁽¹⁾	The transfer out of Level 3 was primarily related to residential and commercial mortgage-backed and other asset-backed securities and resulted from a change in the observability of inputs used to determine fair value.

⁽²⁾	~~Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~

⁽³⁾	~~Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

changes occur. Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations ~~of the mortgage-backed and asset-based securities markets~~ obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from third-party pricing sources to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.

While we observed some increased trading activity for certain mortgage-backed and asset-backed securities during 2009, primarily as a result of government programs, we did not observe a broad-based improvement in market conditions to result in the classification of several mortgage-backed and asset-backed securities as Level 2. During the six months ended June 30, 2010, primary market issuance and secondary market activity for commercial and non-agency residential mortgage-backed and other asset-backed securities increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in our conclusion that there is sufficient trading activity in similar instruments to support classifying certain mortgage-backed and asset-backed securities as Level 2 as of June 30, 2010. Accordingly, our assessment resulted in a transfer out of Level 3 of $1,503 million, $3,462 million and $1,049 million, respectively, during the six months ended June 30, 2010 related to residential mortgage-backed, commercial mortgage-backed and other asset-backed securities.

Beginning
balance
as of
January 1,
2009 Total realized and
unrealized gains
(losses) Purchases, sales,
issuances and
settlements, net Transfer
in Level 3 Transfer
out of
Level 3 Ending
balance
as of
June 30,
2009 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
(Amounts in millions)
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government- sponsored entities
$ 25 $ —      $ (38 ) $ 13    $ 389 $ (32 ) $ 357 $ —
Tax exempt
—   —      —      5    2 (5 ) 2 —
Government—non-U.S.
31 —      —      9    —   (18 ) 22 —
U.S. corporate
2,734 (16 ) 111    (111 ) 377 (1,687 ) 1,408 5
Corporate—non-U.S.
1,560 (33 ) 142    11    404 (1,317 ) 767 (27 )
Residential mortgage-backed
1,957 (331 ) 164    (154 ) 885 (898 ) 1,623 (313 )
Commercial mortgage-backed
3,219 (39 ) 43    (106 ) 532 (521 ) 3,128 (39 )
Other asset-backed
1,034 (22 ) 180    (232 ) 981 (878 ) 1,063 (18 )

Total fixed maturity securities
10,560 (441 ) 602    (565 ) 3,570 (5,356 ) 8,370 (392 )

Equity securities
60 —      —      1    —   —      61 —

Other invested assets:

Trading securities
125 1    —      (15 ) 54 (32 ) 133 —
Derivative assets
933 (494 ) —      (175 ) 22 —      286 (474 )

Total other invested assets
1,058 (493 ) —      (190 ) 76 (32 ) 419 (474 )

Reinsurance recoverable
18 (17 ) —      1    —   —      2 (17 )

Total Level 3 assets
$ 11,696 $ (951 ) $ 602    $ (753 ) $ 3,646 $ (5,388 ) $ 8,852 $ (883 )

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3, or between other levels, at the beginning fair value for the reporting period in which the changes occur.

The following tables present additional information about ~~liabilities~~assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:

Beginning
balance
as of
April 1,
2010 Total realized and
unrealized (gains)
losses Purchases,
sales,
issuances
and
settlements,
net Transfer
in Level 3 Transfer
out of
Level 3 Ending
balance
as of
June 30,
2010 Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held
(Amounts in millions)
Included in
net (income)
loss Included
in OCI
Policyholder account
balances⁽¹⁾
$ 145 $ 294    $ —   $ 8    $ —   $ —   $ 447 $ 294
Derivative liabilities:

Interest rate swaptions
18 (10 ) —   (8 ) —   —   —   (10 )
Credit default swaps
1 25    —   —      —   —   26 25
Credit default swaps related to securitization
entities⁽²⁾
118 46    —   (5 ) —   —   159 46
Equity index options
4 (3 ) —   (1 ) —   —   —   (3 )

Total derivative liabilities
141 58    —   (14 ) —   —   185 58
Borrowings related to securitization entities⁽²⁾
58 (7 ) —   —      —   —   51 (6 )

Total Level 3 liabilities
$ 344 $ 345    $ —   $ (6 ) $ —   $ —   $ 683 $ 346


	Beginning balance as of January 1, 2011		��	Total realized and unrealized gains (losses)						Purchases		Sales			Issuances		Settlements			Transfer in Level 3		Transfer out of Level 3			Ending balance as of March 31, 2011			Total gains (losses) included in net income attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2011		��	Included in net income			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfer in Level 3		Transfer out of Level 3			Ending balance as of March 31, 2011
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	11		$	—		$	—		$	—	$	—		$	—	$	—		$	—	$	(10	)	$	1		$	—
Government—non-U.S.		1			—			—			—		—			—		—			—		—			1			—
U.S. corporate⁽¹⁾		1,100			4			(3	)		3		—			—		(45	)		16		(360	)		715			4
Corporate—non-U.S. ⁽¹⁾		368			(12	)		(3	)		25		(25	)		—		(5	)		40		(186	)		202			(11	)
Residential mortgage-backed		143			(1	)		2			—		—			—		(8	)		—		(1	)		135			(1	)
Commercial mortgage-backed		50			—			—			—		—			—		(8	)		—		—			42			—
Other asset-backed		268			(1	)		2			8		(8	)		—		(21	)		15		—			263			(1	)

Total fixed maturity securities		1,941			(10	)		(2	)		36		(33	)		—		(87	)		71		(557	)		1,359			(9	)

Equity securities		87			1			1			—		—			—		(2	)		—		—			87			—

Other invested assets:
Trading securities		329			9			—			5		—			—		(5	)		—		—			338			9
Derivative assets:
Interest rate swaps		5			(2	)		—			—		—			—		—			—		—			3			(2	)
Credit default swaps		6			—			—			—		—			—		—			—		—			6			—
Equity index options		33			(19	)		—			24		—			—		(6	)		—		—			32			(19	)

Total derivative assets		44			(21	)		—			24		—			—		(6	)		—		—			41			(21	)

Total other invested assets		373			(12	)		—			29		—			—		(11	)		—		—			379			(12	)

Restricted other invested assets related to securitization entities		171			4			—			—		—			—		—			—		—			175			4
Reinsurance recoverable ⁽²⁾		(5	)		(3	)		—			—		—			1		—			—		—			(7	)		(3	)

Total Level 3 assets	$	2,567		$	(20	)	$	(1	)	$	65	$	(33	)	$	1	$	(100	)	$	71	$	(557	)	$	1,993		$	(20	)

⁽⁽¹⁾¹⁾

~~Represents embedded derivatives associated with~~The transfers in and out of Level 3 were primarily related to private fixed rate U.S. corporate and corporate—non-U.S. securities and resulted from a change in the observability of the additional premium to the public bond spread to adjust for the liquidity and other features of our ~~GMWB liabilities, excluding the~~private placements and resulted in unobservable inputs having a significant impact ~~of reinsurance.~~on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out.

⁽²⁾	~~Relates to~~Represents embedded derivatives associated with the ~~consolidation~~reinsured portion of ~~certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~our GMWB liabilities.

Beginning
balance
as of
April 1,
2009 Total realized and
unrealized (gains)
losses Purchases,
sales,
issuances
and
settlements,
net Transfer
in Level 3 Transfer
out of
Level 3 Ending
balance
as of
June 30,
2009 Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held
(Amounts in millions)
Included in
net (income)
loss Included
in OCI
Policyholder account balances
$ 923 $ (495 ) $ —   $ 7    $ —   $ —   $ 435 $ (490 )
Other liabilities⁽¹⁾
73 137    —   (49 ) —   —   161 105

Total Level 3 liabilities
$ 996 $ (358 ) $ —   $ (42 ) $ —   $ —   $ 596 $ (385 )

⁽¹⁾	~~Represents derivative liabilities.~~

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~STATEMENTS

(Unaudited)


	Beginning balance as of January 1, 2010			Total realized and unrealized gains (losses)						Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of March 31, 2010			Total gains (losses) included in net income attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2010			Included in net income			Included in OCI			Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of March 31, 2010
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	16		$	—		$	—		$	(1	)	$	3	$	(10	)	$	8		$	—
Tax-exempt		2			—			—			—			—		—			2			—
Government—non-U.S.		7			—			—			—			—		(6	)		1			—
U.S. corporate		1,073			—			15			60			25		(267	)		906			4
Corporate—non-U.S.		504			1			1			9			59		(66	)		508			1
Residential mortgage-backed ⁽¹⁾		1,481			—			3			106			—		(1,419	)		171			—
Commercial mortgage-backed ⁽¹⁾		3,558			1			4			(62	)		—		(3,454	)		47			—
Other asset-backed⁽¹⁾		1,419			(16	)		21			(4	)		10		(1,021	)		409			(16	)

Total fixed maturity securities		8,060			(14	)		44			108			97		(6,243	)		2,052			(11	)

Equity securities		9			—			(1	)		7			52		—			67			—

Other invested assets:
Trading securities		145			8			—			(11	)		—		—			142			8
Derivative assets:
Interest rate swaps		3			1			—			—			—		—			4			2
Interest rate swaptions		54			(10	)		—			(30	)		—		—			14			(5	)
Credit default swaps		6			1			—			—			—		—			7			1
Equity index options		39			(25	)		—			20			—		—			34			(24	)
Other foreign currency contracts		8			(4	)		—			—			—		—			4			(4	)

Total derivative assets		110			(37	)		—			(10	)		—		—			63			(30	)

Total other invested assets		255			(29	)		—			(21	)		—		—			205			(22	)

Restricted other invested assets related to securitization entities		—			—			—			—			174		—			174			—
Reinsurance recoverable⁽²⁾		(5	)		(1	)		—			—			—		—			(6	)		(1	)

Total Level 3 assets	$	8,319		$	(44	)	$	43		$	94		$	323	$	(6,243	)	$	2,492		$	(34	)

⁽¹⁾

During 2010, primary market issuance and secondary market activity for commercial and non-agency residential mortgage-backed and other asset-backed securities increased the market observable inputs used to establish fair values for similar securities. These factors, along with more consistent pricing from third-party sources, resulted in our conclusion that there is sufficient trading activity in similar instruments to support classifying certain mortgage-backed and asset-backed securities as Level 2.

⁽²⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:


	Beginning balance as of January 1, 2010			Total realized and unrealized (gains) losses							Purchases, sales, issuances and settlements, net			Transfer in Level 3			Transfer out of Level 3		Ending balance as of June 30, 2010			Total (gains) losses included in net (income) loss attributable to liabilities still held				Beginning balance as of January 1, 2011				Total realized and unrealized (gains) losses													Settlements			Transfer in Level 3		Transfer out of Level 3		Ending balance as of March 31, 2011		Total (gains) losses included in net (income) attributable to liabilities still held
(Amounts in millions)			Included in net (income) loss				Included in OCI									Included in net (income)					Included in OCI								Purchases				Sales			Issuances							Settlements			Transfer in Level 3		Transfer out of Level 3		Ending balance as of March 31, 2011
Policyholder account balances⁽¹⁾	Beginning balance as of January 1, 2010	$	175		$	255			$	—	Purchases, sales, issuances and settlements, net			Transfer in Level 3	$	17	Transfer out of Level 3		Ending balance as of June 30, 2010	$	—			$	—	Beginning balance as of January 1, 2011		$	447		$	255
Policyholder account balances⁽¹⁾																										$	121			$	(62	)		$	—		$	—	$	—	$	10	$	—		$	—	$	—	$	69	$	(61	)
Derivative liabilities:
Interest rate swaps		2			(2	)			—			—			—			—		—			(2	)
Interest rate swaptions		67			(42	)			—			(25	)		—			—		—			(42	)
Credit default swaps		—			26				—			—			—			—		26			26				7				(2	)			—			3		—		—		(1	)		—		—		7		(2	)
Credit default swaps related to securitization entities⁽²⁾		—			41				—			(3	)		121			—		159			41
Credit default swaps related to securitization entities																											129				(9	)			—			—		—		—		—			—		—		120		(9	)
Equity index options		2			(1	)			—			(1	)		—			—		—			(1	)			3				—				—			—		—		—		(3	)		—		—		—		—

Total derivative liabilities		71			22				—			(29	)		121			—		185			22				139				(11	)			—			3		—		—		(4	)		—		—		127		(11	)
Borrowings related to securitization entities⁽²⁾		—			(8	)			—			—			59			—		51			(8	)
Borrowings related to securitization entities																											51				7				—			—		—		—		—			—		—		58		7

Total Level 3 liabilities	$	246		$	269			$	—		$	(12	)	$	180		$	—	$	683		$	269			$	311			$	(66	)		$	—		$	3	$	—	$	10	$	(4	)	$	—	$	—	$	254	$	(65	)

⁽⁽¹⁾¹⁾

Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

⁽²⁾	~~Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~


	Beginning balance as of January 1, 2009			Total realized and unrealized (gains) losses							Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2009			Total (gains) losses included in net (income) loss attributable to liabilities still held				Beginning balance as of January 1, 2010			Total realized and unrealized (gains) losses					Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3		Ending balance as of March 31, 2010		Total (gains) losses included in net (income) attributable to liabilities still held
(Amounts in millions)			Included in net (income) loss				Included in OCI				Purchases, sales, issuances and settlements, net							Included in net (income)							Included in OCI									Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3		Ending balance as of March 31, 2010
Policyholder account balances	Beginning balance as of January 1, 2009	$	878		$	(456	)		$	—		$	13	Transfer in Level 3		Transfer out of Level 3	$	—	Ending balance as of June 30, 2009		$		—		$	Beginning balance as of January 1, 2010	435	$	(445	)
Other liabilities⁽¹⁾		68			142				—			(49	)		—		—			161			110
Policyholder account balances⁽¹⁾																										$	175		$	(39	)	$	9	$	—		$	—	$	—	$	145	$	(37	)
Derivative liabilities:
Interest rate swaps																											2			(2	)		—		—			—		—		—		(2	)
Interest rate swaptions																											67			(32	)		—		(17	)		—		—		18		(15	)
Credit default swaps																											—			1			—		—			—		—		1		1
Credit default swaps related to securitization entities																											—			(5	)		—		2			121		—		118		(5	)
Equity index options																											2			3			—		(1	)		—		—		4		3

Total derivative liabilities																											71			(35	)		—		(16	)		121		—		141		(18	)
Borrowings related to securitization entities																											—			(2	)		—		—			60		—		58		(2	)

Total Level 3 liabilities	$	946		$	(314	)		$	—		$	(36	)	$	—	$	—		$	596		$	(335	)		$	246		$	(76	)	$	9	$	(16	)	$	181	$	—	$	344	$	(57	)

⁽¹⁽¹⁾⁾

Represents ~~derivative liabilities.~~embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net investment gains (losses) within the consolidated statements of income or OCI within stockholders’ equity based on the appropriate accounting treatment for the instrument.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Purchases, sales, issuances and settlements ~~net,~~ represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and ~~sales~~settlements of fixed maturity, equity and trading securities and purchases, issuances and settlements of derivative instruments.

~~Purchases, sales, issuances~~Issuances and settlements ~~net,~~ presented for policyholder account balances represent the issuances and settlements of embedded derivatives associated with our GMWB liabilities where: issuances are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance and settlements are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income) ~~loss”~~” in the tables presented above.

The amount presented for unrealized gains (losses) for assets and liabilities still held as of the reporting date primarily represents impairments ~~related to~~for available-for-sale ~~securities, accretion on certain fixed maturity~~ securities, changes in fair value of trading securities and certain derivatives and changes in fair value of embedded derivatives associated with our GMWB liabilities that existed as of the reporting date, which were recorded in net investment gains (losses).

~~Non-Recurring Fair Value Measurements~~

~~We hold investments in bank loans that are recorded at the lower of cost or fair value~~, and ~~are recorded in other invested assets. As of June 30, 2010, $3 million of bank loans were recorded at fair value, based~~accretion on market observable information and classified as Level 2, which was lower than their respective cost; therefore, we recorded $1 million of fair value loss adjustments for the three and six months ended June 30, 2010. In addition, we held an investment in one commercial mortgage loan that was recorded at the lower of cost or fair value. As of June 30, 2010, $37 million of commercial mortgage loans were recorded at fair value, based on the expected transaction price and classified as Level 2. Therefore, we recorded $13 million of fair value adjustments for the three and six months ended June 30, 2010.

~~(7) Variable Interest and Securitization Entities~~

VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. We evaluate VIEs to determine whether we are the primary beneficiary and are required to consolidate the assets and liabilities of the entity. The determination of the primary beneficiary for a VIE can be complex and requires management judgment regarding the expected results of the entity and who directs the activities of the entity that most significantly impact the economic results of the VIE. Our primary involvement related to VIEs includes:

~~asset securitization transactions,~~

certain ~~investments and~~

~~certain mortgage insurance policies.~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~(a) Asset Securitizations~~

We have used former affiliates and third-party entities to facilitate asset securitizations. Disclosure requirements related to off-balance sheet arrangements encompass a broader array of arrangements than those at risk for consolidation. These arrangements include transactions with term securitization entities, as well as transactions with conduits that are sponsored by third parties.

~~The following table summarizes the total securitized assets as of the dates indicated:~~

(Amounts in millions)
   June 30,
2010    December 31,
2009
Receivables secured by:

Commercial mortgage loans
   $ —      $ 574
Fixed maturity securities
   80    123
Other assets
   168    236

Total securitized assets not required to be consolidated
   248    933

Total securitized assets required to be consolidated
   612    —

Total securitized assets
   $ 860    $ 933

Financial support for certain securitization entities was provided under credit support agreements, in which we provided limited recourse for a maximum of $117 million of credit losses as of June 30, 2010. These agreements will remain in place throughout the life of the related entities. Included in this amount was $40 million for the limited recourse related to one of our commercial mortgage loan entities that was required to be consolidated with assets of $125 million as of June 30, 2010. There were no amounts recorded for these limited recourse liabilities as of June 30, 2010 and December 31, 2009.

~~(b) Securitization and Variable Interest Entities Not Required To Be Consolidated~~

~~We are involved in certain securitization and VIEs where we are not required to consolidate the securitization entity.~~

~~Asset securitizations.~~We transferred assets to securitization entities that would be considered VIEs but we were not required to consolidate the securitization entities. These securitization entities were designed to have significant limitations on the types of assets owned and the types and extent of permitted activities and decision making rights. We evaluated our involvement in the entities’ design and our decision making ability regarding the assets held by the securitization entity and determined we would generally not be the party with power to direct the activities that significantly impact the economic performance of the entity.

In certain instances, we determined we were the party with power but did not have a variable interest in the entity. Our interest in the entities included servicer fees and excess interest, where our benefit from our excess interest holding is subordinated to third-party holdings. Based on the composition of the assets in the securitization entity, there were no reasonable scenarios that would result in our interest receiving any significant benefit for the entity. As a result, our interest would not be considered a variable interest in the entity as a result of meeting certain requirements in the accounting guidance.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Amounts recognized in our consolidated financial statements related to our involvement with entities used to facilitate asset securitization transactions where the securitization entity was not required to be consolidated as of the dates indicated:

   June 30, 2010    December 31, 2009
(Amounts in millions)
   Cost    Fair
value    Cost    Fair
value
Retained interests—assets
   $ 1    $ 2    $ 79    $ 44

Total
   $ 1    $ 2    $ 79    $ 44

~~The decrease in the amounts presented above were primarily a result of having to consolidate certain securitization entities as discussed above.~~

In certain securitization transactions, we retained an interest in transferred assets. Those interests take various forms and may be subject to credit, prepayment and interest rate risks. When we securitized receivables, we determined the fair value based on discounted cash flow models that incorporate, among other things, assumptions including credit losses, prepayment speeds and discount rates. These assumptions were based on our experience, market trends and anticipated performance related to the particular assets securitized. Our retained interests are reflected as fixed maturity securities ~~available-for-sale.~~

Following a securitization transaction, we retained the responsibility for servicing the receivables, and as such, were entitled to receive an ongoing fee based on the outstanding principal balances of the receivables. There were no servicing assets nor liabilities recorded as the benefits of servicing the assets were adequate to compensate an independent servicer for its servicing responsibilities.

~~There has been no new asset securitization activity in 2010 or 2009.~~

~~Investments.~~We hold investments in certain structures that are considered VIEs. Our investments represent beneficial interests that are primarily in the form of structured securities. Our involvement in these structures typically represent a passive investment in the returns generated by the VIE and typically do not result in having significant influence over the economic performance of the VIE. See note 4 for additional information related to our investments, which ~~includes information related to structured securities, such as asset-backed and mortgage-backed securities. Our maximum exposure to loss represents our cost basis in the investments.~~

~~Mortgage insurance.~~We also provide mortgage insurance on certain residential mortgage loans originated and securitized by third parties using VIEs to issue mortgage-backed securities. While we provide mortgage insurance on the underlying loans, we do not typically have any ongoing involvement with the VIE other than our mortgage insurance coverage and do not act in a servicing or decision making capacity for the underlying loans held by the VIE.

~~(c) Securitization and Variable Interest Entities Required To Be Consolidated~~

As a result of adopting new accounting guidance for VIE consolidation on January 1, 2010, we were required to consolidate certain VIEs. Our involvement with VIEs that were required to be consolidated related to asset securitization transactions and certain investments, both of which are described in more detail below. Prior to being required to consolidate these entities, our interest in these entities was recorded in ~~our consolidated financial statements as fixed maturity securities available-for-sale.~~

~~GENWORTH FINANCIAL, INC.~~net investment income.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Asset securitizations.~~For VIEs related to asset securitization transactions, we were required to consolidate three securitization entities as a result of our involvement in the entities’ design or having certain decision making ability regarding the assets held by the securitization entity. These securitization entities were designed to have significant limitations on the types of assets owned and the types and extent of permitted activities and decision making rights. The three securitization entities that were required to be consolidated are comprised of two securitization entities backed by commercial mortgage loans and one backed by residual interests in certain policy loan securitization entities.

For one of our commercial mortgage loan securitization entities with assets of $125 million as of June 30, 2010, our economic interest represents the excess interest received on the loans compared to the interest paid on the entity’s obligation. We also act as the servicer for the underlying mortgage loans and have the ability to direct certain activities in accordance with the agreements related to the securitization entity.

For the other commercial mortgage loan securitization entity with assets of $417 million as of June 30, 2010, our economic interest represents the excess interest of the commercial mortgage loans and the subordinated notes of the securitization entity. The commercial mortgage loans are serviced by a third-party servicer and special servicer. However, we have the right to replace the special servicer without cause at any time. This right is recognized under accounting guidance as resulting in our effective control of the activities directed by the special servicer.

Our economic interest in the policy loan securitization entity represents the excess interest received from the residual interest in certain policy loan securitization entities and the floating rate obligation issued by the securitization entity. The securitization entity also contains an interest rate swap to mitigate the difference between the effective fixed receipt on the assets and the floating rate obligation issued by the securitization entity. Since there are no significant ongoing activities in the securitization entity, we evaluated the design of the entity upon inception when we transferred the residual interests in the securitization entity. Prior to 2010, we fully impaired our investment in this securitization entity as a result of not expecting any future economic benefits from our investment under any reasonable scenario. However, there are certain remote interest rate and mortality scenarios that would result in our residual interest receiving significant economic benefits in relation to benefits received by the securitization entity. In accordance with the relevant accounting guidance, the use of probability is not permitted when determining whether we would have the ability to receive significant benefits from the securitization entity.

~~Investments.~~For VIEs related to certain investments, we were required to consolidate three securitization entities as a result of having certain decision making rights related to instruments held by the entities. These securitization entities were designed as synthetic collateralized debt obligations whereby the entities purchased highly rated asset-backed securities and entered into credit default swaps to generate income that would be passed to the noteholders of the entities. The entities also have the ability to settle any losses incurred on the credit default swap by providing the derivative counterparty asset-backed securities with a par amount equal to the loss incurred on the credit default swap. We hold the majority of the notes issued by the securitization entity and also have certain decision making rights related to the instruments held by the entity. Previously, we were not required to consolidate the securitization entity as a result of other noteholders absorbing the majority of expected losses from the entity.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table shows the activity presented in our consolidated statement of income related to the consolidated securitization entities for the periods indicated:~~

(Amounts in millions)
   Three months ended
June 30, 2010 Six months ended
June 30, 2010
Revenues:

Net investment income:

Restricted commercial mortgage loans
   $ 9    $ 19
Restricted other invested assets
   —      1

Total net investment income
   9    20

Net investment gains (losses):

Trading securities
   2    9
Derivatives
   (55 ) (53 )
Commercial mortgage loans
   (1 ) (1 )
Borrowings related to securitization entities recorded at fair value
   7    9

Total net investment gains (losses)
   (47 ) (36 )

Total revenues
   (38 ) (16 )

Expenses:

Interest expense
   7    15

Total expenses
   7    15

Loss before income taxes
   (45 ) (31 )
Benefit for income taxes
   (16 ) (11 )

Net loss
   $ (29 ) $ (20 )

~~The following table shows the assets and liabilities that were recorded for the consolidated securitization entities as of the date indicated:~~

(Amounts in millions)
   June 30, 2010
Assets

Investments:

Restricted commercial mortgage loans
   $ 535
Restricted other invested assets:

Trading securities
   373
Other
   1

Total restricted other invested assets
   374

Total investments
   909
Cash and cash equivalents
   2
Accrued investment income
   1

Total assets
   $ 912

Liabilities

Other liabilities:

Derivative liabilities
   $ 182
Other liabilities
   1

Total other liabilities
   183
Borrowings related to securitization entities
   525

Total liabilities
   $ 708

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The assets and other instruments held by the securitization entities are restricted and can only be used to fulfill the obligations of the securitization entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated subsidiaries, except $40 million of limited recourse related to a consolidated commercial mortgage loan securitization entity.

~~(8)~~(7) Commitments and Contingencies

(a) Litigation

We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, bidding practices in connection with our management and administration of a ~~third party’s~~third-party’s municipal guaranteed investment contract business, claims payments and procedures, ~~cancellation or rescission of coverage,~~ product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement laws, and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. WeIn addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations. At this time, it is not feasible to predict, nor to determine the ultimate outcomes of ~~all~~any pending investigations and legal proceedings, nor to provide reasonable ranges of ~~potential~~possible losses.

As previously disclosed, in December 2009, one of our non-insurance subsidiaries, one of the subsidiary’s officers and Genworth Financial, Inc. were named in a putative class action lawsuit captionedMichael J. Goodman and Linda Brown v. Genworth Financial Wealth Management, Inc., et al, in the United States District Court for the Eastern District of New York. In response to our motion to dismiss the complaint in its entirety, the Court granted on March 30, 2011 the motion to dismiss the state law fiduciary duty claim and denied the motion to dismiss the remaining federal claims. We continue to vigorously defend this action.

As previously disclosed, we and one of our mortgage insurance subsidiaries were named in a putative class action lawsuit filed in November 2010 captionedArchie Moses and Violet M. Moses v. SunTrust Banks, Inc., et al,in the United States District Court for the District of Columbia. On March 10, 2011, plaintiffs voluntarily dismissed the action without prejudice as to Genworth Financial, Inc. and our mortgage insurance subsidiary.

(b) Commitments

As of ~~June 30, 2010,~~March 31, 2011, we were committed to fund ~~$143~~$106 million in limited partnership investments and $5$39 million in U.S. commercial mortgage loan investments.

~~(9)~~(8) Borrowings and Other Financings

Revolving Credit Facilities

We have two five-year revolving credit facilities that mature in May 2012 and August 2012. These facilities bear variable interest rates based on one-month LIBOR plus a ~~margin. Each of these facilities originally had $1.0 billion available for borrowings. Lehman Commercial Paper Inc. (“LCP”) had committed $70 million under the August 2012 credit facility~~margin and ~~Lehman Brothers Bank, FSB (“Lehman FSB”) had committed $70 million under the May 2012 credit facility. On October 5, 2008, LCP filed for protection under Chapter 11 of the Federal~~

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. LCP was unable to fulfill its commitments under the August 2012 credit facility and Lehman FSB declined to fulfill its commitment under the May 2012 credit facility. On April 1, 2010, a consent and waiver agreement was entered into which releases the Lehman Brothers-related entities from their commitments under the facilities and reduces the remaining commitments by those respective amounts. Therefore, as of June 30, 2010, we ~~had~~have access to $1.9 billion under these facilities.

~~In June 2010,~~ As of March 31, 2011, we ~~repaid $100 million of outstanding~~had no borrowings under ~~each of our five-year revolving credit facilities using the net proceeds from our senior notes offering that was completed in June 2010.~~

~~As of June 30, 2010,~~these facilities; however, we ~~had borrowings of $730~~utilized $280 million under these facilities ~~and~~primarily for the issuance of letters of credit for the benefit of one of our life insurance subsidiaries. As of December 31, 2010, we had no borrowings under these facilities; however, we utilized ~~$54~~$56 million under these facilities primarily for the issuance of letters of credit for the benefit of one of our lifestyle protection insurance subsidiaries. As of December 31, 2009, we had borrowings of $930 million under these facilities, and we utilized $407 million under these facilities for the issuance of letters of credit for the benefit of one of our life insurance subsidiaries.

Long-Term Senior Notes

In ~~June 2010,~~March 2011, we issued senior notes having an aggregate principal amount of $400 million, with an interest rate equal to ~~7.700%~~7.625% per year payable semi-annually, and maturing in ~~June 2020~~September 2021 (“~~2020~~2021 Notes”). The ~~2020~~2021 Notes are our direct, unsecured obligations and will rank equally with all of our existing and future unsecured and unsubordinated obligations. We have the option to redeem all or a portion of the ~~2020~~2021 Notes at any time with proper notice to the note holders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread. The net proceeds of $397 million from the issuance of the ~~2020~~2021 Notes ~~were used to repay $100 million of outstanding borrowings under each of our five-year revolving credit facilities and the remainder of the proceeds~~ were used for general corporate purposes.

In June 2010, our majority-owned subsidiary, Genworth MI Canada Inc. (“Genworth Canada”), issued CDN$275 million of 5.68% senior notes due 2020. The net proceeds of the offering will be used to fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada is expected to use any proceeds it receives from such transactions for general corporate and investment purposes, and/or to fund a distribution to, or a repurchase of common shares from, Genworth Canada’s shareholders.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Non-Recourse Funding Obligations

As of ~~June 30, 2010,~~March 31, 2011, we had $3.4 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, the weighted-average interest rates on our non-recourse funding obligations were ~~1.51%~~1.41% and ~~1.49%~~1.44%, respectively.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Borrowings Related To Securitization Entities~~

~~Borrowings related to securitization entities were as follows as of June 30, 2010:~~

(Amounts in millions)
   Principal
amount Carrying
value
GFCM LLC, due 2035, 5.2541%
   $ 236    $ 236
GFCM LLC, due 2035, 5.7426%
   113    113
Genworth Special Purpose Two, LLC, due 2023, 6.0175%
   125    125
Marvel Finance 2007-1 LLC, due 2017⁽¹⁾
   5    1
Marvel Finance 2007-4 LLC, due 2017⁽¹⁾
   12    5
Genworth Special Purpose Five, LLC, due 2040⁽¹⁾
   NA ⁽²⁾ 45

Total
   $ 491    $ 525

⁽¹⁾	~~Accrual of interest based on three-month LIBOR that resets every three months plus a fixed margin.~~

⁽²⁾	~~Principal amount not applicable. Notional balance is $117 million.~~

These borrowings are required to be paid down as principal is collected on the restricted investments held by the securitization entities and accordingly the repayment of these borrowings follows the maturity or prepayment, as permitted, of the restricted investments. See note 7 for additional information on consolidated securitization entities.

~~(10)~~(9) Income Taxes

The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:


	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2010		2009		2010		2009		2011			2010
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%	35.0	%		35.0	%		35.0	%
Increase (reduction) in rate resulting from:
State income tax, net of federal income tax effect	—		(5.1	)	(2.1	)	0.2			1.2			(3.4	)
Benefit on tax favored investments	(8.0	)	(3.1	)	(7.1	)	3.8			(2.7	)		(6.6	)
Effect of foreign operations	(33.7	)	(18.6	)	(21.3	)	3.3			(14.4	)		(13.7	)
Non-deductible expenses	2.2		0.7		0.5		(0.5	)		0.6			(0.5	)
Interest on uncertain tax positions	(2.4	)	(2.7	)	(2.3	)	(0.3	)		—			(2.2	)
Tax benefits related to separation from our former parent	—		—		(55.8	)	—			—			(89.5	)
Other, net	—		1.2		1.8		—			0.8			2.7

Effective rate	(6.9	)%	7.4	%	(51.3	)%	41.5	%		20.5	%		(78.2	)%

The effective tax rate ~~decreased~~increased significantly from the prior year due to uncertain tax benefits related to separation from our former parent ~~favorable impact of newly enacted Australian tax legislation, lower taxed foreign income and tax favored investments.~~

in the prior year that did not recur. In connection with our 2004 separation from our former parent, General Electric (“GE”), we made certain joint tax elections and realized certain tax benefits. During the first quarter of 2010, the Internal Revenue Service (“IRS”) completed an examination of GE’s 2004 tax return, including these tax impacts. Therefore, $106 million

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

of previously uncertain tax benefits related to separation became certain and we recognized those in the first quarter of 2010. Additionally, we recorded $20 million as additional paid-in capital related to our 2004 separation.

~~(11)~~(10) Segment Information

We conduct our operations in three operating business segments: (1) Retirement and Protection, which includes our life insurance, long-term care insurance, wealth management products and services and retirement income products; (2) International, which includes international mortgage and lifestyle protection insurance; and (3) U.S. Mortgage ~~Insurance, which includes mortgage-related products and services that facilitate homeownership by enabling borrowers to buy homes with low-down-payment mortgages.~~Insurance.

We also have Corporate and Other activities which include interest and other debt financing expenses, other corporate income and expenses not allocated to the segments, the results of ~~non-core businesses and~~ non-strategic products that are managed outside of our operating segments, and eliminations of inter-segment transactions.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income (loss) and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of “net operating income (loss) available to Genworth Financial, Inc.’s common stockholders.” We define net operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding net income attributable to noncontrolling interests, after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A ~~significant~~ component of our net investment gains (losses) is the result of impairments, 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) ~~are often~~can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends. While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that net operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate net operating income (loss) available to Genworth Financial, Inc.’s common stockholders, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. However, net operating income (loss) available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of net operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.

There were no infrequent or unusual non-operating items excluded from net operating income ~~(loss)~~ available to Genworth Financial, Inc.’s common stockholders during the periods presented other than a $106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010.

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

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


	Three months ended June 30,					Six months ended June 30,					Three months ended March 31,
(Amounts in millions)	2010			2009		2010			2009		2011		2010
Revenues:
Retirement and Protection	$	1,643		$	1,607	$	3,236		$	2,594	$	1,738	$	1,593
International		622			639		1,273			1,229		632		651
U.S. Mortgage Insurance		181			196		362			384		177		181
Corporate and Other		(36	)		41		(40	)		10		21		(4	)

Total revenues	$	2,410		$	2,483	$	4,831		$	4,217	$	2,568	$	2,421

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

   Three months ended
June 30, Six months ended
June 30,
(Amounts in millions)
       2010         2009       2010     2009
Retirement and Protection
   $ 114    $ 123    $ 236    $ 161
International
   105    87    196    188
U.S. Mortgage Insurance
   (40 ) (134 ) (76 ) (269 )
Corporate and Other
   (61 ) (67 ) (124 ) (57 )

Net operating income available to Genworth Financial, Inc.’s common stockholders
   118    9    232    23
Net investment gains (losses), net of taxes and other adjustments
   (76 ) (59 ) (118 ) (542 )
Net tax benefit related to separation from our former parent
   —      —      106    —

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   42    (50 ) 220    (519 )
Add: net income attributable to noncontrolling interests
   35    —      69    —

Net income (loss)
   $ 77    $ (50 ) $ 289    $ (519 )


	Three months ended March 31,
(Amounts in millions)	2011			2010
Retirement and Protection’s net operating income	$	127		$	122
International’s net operating income		124			91
U.S. Mortgage Insurance’s net operating loss		(81	)		(36	)
Corporate and Other’s net operating loss		(72	)		(63	)

Net operating income		98			114
Net investment gains (losses), net of taxes and other adjustments		(16	)		(42	)
Net tax benefit related to separation from our former parent		—			106

Net income available to Genworth Financial, Inc.’s common stockholders		82			178
Add: net income attributable to noncontrolling interests		34			34

Net income	$	116		$	212

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

(Amounts in millions)
   June 30,
2010    December 31,
2009
Assets:

Retirement and Protection
   $ 85,087    $ 81,497
International
   11,444    12,143
U.S. Mortgage Insurance
   3,564    4,247
Corporate and Other
   10,257    10,300

Total assets
   $ 110,352    $ 108,187

~~GENWORTH FINANCIAL, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~(12) Noncontrolling Interests~~

In July 2009, Genworth Canada, our indirect subsidiary, completed the initial public offering (the “Offering”) of its common shares. Of the 49.7 million common shares of Genworth Canada that were sold in the Offering, 5.1 million common shares were sold by Genworth Canada and 44.6 million common shares were sold by Brookfield Life Assurance Company Limited, our indirect wholly-owned subsidiary. Following completion of the Offering, we beneficially own 57.5% of the common shares of Genworth Canada.

~~In the six months ended June 30, 2010, dividends of $21 million were paid to the noncontrolling interests.~~


(Amounts in millions)	March 31, 2011		December 31, 2010
Assets:
Retirement and Protection	$	86,622	$	86,352
International		12,838		12,422
U.S. Mortgage Insurance		3,989		3,875
Corporate and Other		9,491		9,746

Total assets	$	112,940	$	112,395

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.~~herein and with our 2010 Annual Report on Form 10-K.

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. 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 due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following:

•

Risks relating to our businesses, including downturns and volatility in global economies and equity and credit markets, downgrades in our financial strength or credit ratings, interest rate fluctuations and levels, adverse capital and credit market conditions, the valuation of fixed maturity, equity and trading securities, defaults, downgrade or other events impacting the value of our fixed maturity securities portfolio, defaults on our commercial mortgage loans or the mortgage loans underlying our investments in commercial mortgage-backed securities and volatility in performance, goodwill impairments, ~~the soundness of other financial institutions, inability~~default by counterparties to ~~access our credit facilities,~~reinsurance arrangements or derivative instruments, an adverse change in risk-based capital and other regulatory requirements, insufficiency of reserves, legal constraints on dividend distributions by our subsidiaries, competition, availability, affordability and adequacy of reinsurance, ~~default by counterparties,~~ loss of key distribution partners, regulatory restrictions on our operations and changes in applicable laws and regulations, legal or regulatory investigations or actions, the failure or any compromise of the security of our computer systems, ~~and~~ the occurrence of natural or man-made disasters or a ~~pandemic;~~pandemic, the effect of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, changes in the accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies and impairments of or valuation allowances against our deferred tax assets;

•

Risks relating to our Retirement and Protection segment, including changes in morbidity and mortality, accelerated amortization of deferred acquisition costs and present value of future profits, reputational risks as a result of rate increases on certain in-force long-term care insurance products, medical advances, such as genetic research and diagnostic imaging, and related legislation, unexpected changes in persistency rates, ability to continue to implement actions to mitigate the impact of statutory reserve requirements and the failure of demand for long-term care insurance to increase;

•

Risks relating to our International segment, including political and economic instability or changes in government policies, foreign exchange rate fluctuations, unexpected changes in unemployment rates, unexpected increases in mortgage insurance default rates or severity of defaults, the significant portion of high loan-to-value insured international mortgage loans which generally result in more and larger claims than lower loan-to-value ~~loans,~~ratios, competition with government-owned and government-sponsored enterprises (“GSEs”) offering mortgage insurance and changes in regulations;

•

Risks relating to our U.S. Mortgage Insurance segment, including increases in mortgage insurance default rates, failure to meet, or ~~severity of defaults,~~have waived to the extent needed, the minimum statutory capital requirements and hazardous financial condition standards, uncertain results of continued investigations of insured U.S. mortgage loans, possible rescissions of coverage and the results of objections to our rescissions, the extent to which loan modifications and other similar programs may provide benefits to us, unexpected changes in unemployment and underemployment rates, further deterioration in economic conditions or a further decline in home prices, problems associated with foreclosure process defects that may defer claim payments, changes to the role or structure of Federal National Mortgage

Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), competition with government-owned and government-sponsored enterprises offering mortgage insurance, ~~(including the Federal Housing Administration (“FHA”)),~~ changes in regulations that affect ~~our~~the U.S. mortgage insurance business, the influence of Fannie Mae, Freddie Mac and a small number of large mortgage lenders and investors, decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations, increases in the use of alternatives to private mortgage insurance and reductions by

lenders in the level of coverage they select, the impact of the use of reinsurance with reinsurance companies affiliated with mortgage lending customers, legal actions under the Real Estate Settlement Procedures Act of 1974 (“RESPA”) and potential liabilities in connection with our U.S. contract underwriting services;

•

Other risks, including the possibility that in certain circumstances we will be obligated to make payments to General Electric Company (“GE”) under the tax matters agreement with GE even if our corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control and provisions of ~~the~~our certificate of incorporation and bylaws and the tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests; and

•

Risks relating to our common stock, including the suspension of dividends and stock price ~~fluctuation.~~fluctuations.

~~For additional information regarding the risks identified above, see “Item 1A. Risk Factors” in our 2009 Annual Report on Form 10-K.~~ We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

Our business

We are a leading financial security company dedicated to providing insurance, wealth management, investment and financial solutions to more than 15 million customers, with a presence in more than 25 countries. We have three operating segments: Retirement and Protection, International and U.S. Mortgage Insurance.

•

Retirement and Protection. We offer ~~and~~and/or manage a variety of protection, wealth management and retirement income products. Our primary ~~protection~~insurance products ~~include:~~include life and long-term care ~~and Medicare supplement~~ insurance. Additionally, we offer other ~~senior supplemental~~Medicare supplement insurance products, as well as care coordination services for our long-term care policyholders. Our wealth management and retirement income products include: a variety of managed account programs and advisor services, financial planning services, fixed and ~~variable deferred and~~ immediate individual ~~annuities~~annuities. We previously offered variable deferred and group variable annuities offered through retirement plans. For the three months ended ~~June 30, 2010,~~March 31, 2011, our Retirement and Protection segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were ~~$81~~$112 million and $114 million, respectively. For the six months ended June 30, 2010, our Retirement and Protection segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $165 million and $236$127 million, respectively.

•

International. We offer mortgage and lifestyle protection insurance products and related services in multiple markets. We are a leading provider of mortgage insurance products in Canada, Australia, Mexico and multiple European countries. Our products predominantly insure prime-based, individually underwritten residential mortgage loans, also known as flow mortgage insurance. On a limited basis, we also provide mortgage insurance on a structured, or bulk, basis that aids in the sale of mortgages to the capital markets and helps lenders manage capital and risk. ~~Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage risk.~~ We are a leading provider of ~~payment~~ protection coverages primarily associated with certain financial obligations (referred to as lifestyle protection) in multiple European ~~countries, Canada and Mexico. Our~~countries. These lifestyle protection insurance products help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death. For the three months ended ~~June 30, 2010,~~March 31, 2011, our International segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were ~~$107~~$127 million and $105 million, respectively. For the six months ended June 30, 2010, our International segment’s net income available to Genworth Financial, Inc.’s common stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders were $202 million and $196$124 million, respectively.

•

insurance. We selectively provide mortgage insurance on a structured, or bulk, basis with essentially all of our bulk writings prime-based. Additionally, we offer services, analytical tools and technology that enable lenders to operate efficiently and manage capital and risk. For the three months ended June 30, 2010, our U.S. Mortgage Insurance segment’s net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were $43 million and $40 million, respectively. For the six months ended June 30, 2010,March 31, 2011, our U.S. Mortgage Insurance segment’s net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were both ~~$76~~$81 million.

We also have Corporate and Other activities which include debt financing expenses that are incurred at our holding company level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of ~~non-core businesses and~~ non-strategic products that are managed outside of our operating segments. Our non-strategic products include our institutional and corporate-owned life insurance products. Institutional products consist ofof: funding agreements, funding agreements backing notes (“FABNs”) and guaranteed investment contracts (“GICs”). For the three months ended ~~June 30, 2010, our~~March 31, 2011, Corporate and Other ~~activities’~~activities had a net loss available to Genworth Financial, Inc.’s common stockholders and a net operating loss available to Genworth Financial, Inc.’s common stockholders ~~were $103~~of $76 million and $61 million, respectively. For the six months ended June 30, 2010, our Corporate and Other activities’ net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were $71 million and $124$72 million, respectively.

Business trends and conditions

Our business is, and we expect will continue to be, influenced by a number of industry-wide and product-specific trends and conditions. The following discussion of business trends and conditions should be read together with the trends discussed in our ~~2009~~2010 Annual Report on Form 10-K, which described additional business trends and conditions.

General conditions and trends affecting our businesses

Financial and economic environment. ~~As a financial security company, the~~The stability of both the financial markets and global economies in which we operate impacts ~~our~~the sales, revenue growth and profitability trends of our businesses. ~~Global~~Improvements in equity markets, credit markets, interest rate spreads and global financial markets ~~improved~~seen during 2010 continued in the first quarter of ~~2010 from~~2011. In Canada, the ~~volatility experienced~~housing market continued to improve while unemployment levels remained relatively in ~~2009,~~line with ~~solid performance, lower volatility in equity markets, narrowing spreads~~the fourth quarter of 2010. In Australia, the housing market has remained stable and ~~better credit performance in many sectors of~~unemployment levels remained consistent with the ~~debt markets. However, in the second~~fourth quarter of 2010 ~~we saw a decline in equity markets and widening spreads primarily as a result of~~despite recent natural disasters though these disasters could impact regional economies over the ~~perceived contagion risk related to the European sovereign debt crisis. In 2010, Canadian and Australian economies and housing markets improved. Despite continued stress in the~~medium-term. The U.S. housing market reflected continuing stress, growing levels of foreclosures and variations in performance by sub-market, ~~there were~~including continued signs of ~~stabilization.~~stabilization within certain regions. Europe remained a slow growth ~~environment.~~

~~Slow economic growth, coupled~~environment with uncertain financial market conditions, influenced, and may continue to influence, investment and spending decisions by both consumers and businesses as they adjust their consumption, debt and risk profiles in response to these conditions. As a result, our sales, revenues and profitability trends of certain insurance and investment products were adversely impacted during the first half of 2009. Since then, these trends have improved as investor confidence in the markets and the outlook for some consumers and businesses strengthened. Other factors such as government spending, monetary policies, regulatory initiatives, the volatility and strength of the capital markets, anticipated tax policy changes and the impact of U.S. healthcare and financial regulation reform can continue to affect economic and business outlooks andlower consumer ~~behaviors moving forward.~~

In response to market conditions, we adjusted our investment and asset-liability management strategies to reduce risk during strained economic and financial market conditions. In addition, we refined our product and

distribution management strategies to best fit with our strengths, profitability targets and risk tolerance. These and other company actions were made to enhance our competitive position as well as our capital flexibility and liquidity.lending activity. See “—Trends and conditions affecting our segments” below for a discussion regarding the impacts the financial markets and global economies have on our businesses.

~~Since late 2008,~~Slow or varied levels of economic growth, coupled with uncertain financial markets and economic outlooks, changes in government policy, regulatory reforms and other changes in market conditions, influenced, and we believe 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. Although these trends have generally improved as investor confidence in the markets and the outlook for some consumers and businesses strengthened, our sales, revenues and profitability trends of certain insurance and investment products have been and could be further adversely impacted going forward. In particular, factors such as government spending, monetary policies, the volatility and strength of the capital markets, anticipated tax policy changes and the impact of U.S. healthcare and financial regulation reform will continue to affect economic and business outlooks and consumer behaviors moving forward.

The U.S. government, Federal Reserve and other legislative and regulatory bodies ~~have taken~~continue to take a variety of ~~other~~ actions to support the economy and capital markets, influence interest rates, stabilize ~~the capital~~housing markets and provide ~~needed~~ liquidity to promote economic growth. These include various mortgage restructuring programs

implemented or under consideration by the ~~government-sponsored enterprises (“GSEs”),~~GSEs, lenders, servicers and the U.S. government. Outside of the ~~U.S.,~~United States, various governments took actions to stimulate economies, stabilize financial systems and improve market liquidity. In general, these actions have positively affected these countries and their markets; however, there can be no assurance as to the future level of impact of any of these actions on the economic and financial markets, including levels of volatility. A delayed economic recovery period or a U.S. or global recessionary or debt crisis setback could materially and adversely affect our business, financial condition and results of operations.

We evaluate our product offerings, investment and asset-liability management strategies to moderate risk especially during periods of strained economic and financial market conditions. In addition, we continue to review our product and distribution management strategies to align with our strengths, profitability targets and risk tolerance. These and other company actions should enhance our competitive position as well as our capital flexibility and liquidity.

Volatility in credit and investment markets. ~~Market conditions showed continued signs of improvement in~~During the first quarter of 2010 resulting in greater investor confidence and positive, though inconsistent, equity and credit market performance. Continued strong demand for fixed-income products resulted in credit spread compression. However, during the first quarter of 2010, there was higher2011, markets were characterized by rising volatility in ~~select~~the U.S. Treasury market due to external events in Europe, North Africa and the Middle East and due to the earthquake in Japan. Credit spreads were generally less volatile and ended the quarter tighter. Macroeconomic conditions, improving company fundamentals, declining corporate default rates, reduced net supply of spread product and continued strong investor demand drove the tightening in both credit and securitized products. Fears regarding systemic risk were largely contained this quarter, despite European sovereign ~~bonds~~concerns and ~~related securities as concerns grew over~~political instability in North Africa and the ~~refinancing needs of Greece and certain other European countries. In the second quarter of 2010,~~Middle East. For securitized products, the market ~~moved away from riskier assets. This was generally~~continued to see shrinking supply, though issuance did improve in commercial mortgage-backed securities. Asset valuations in securitized sectors continued to improve given a ~~response to increased concerns regarding macro-economic risks in Europe~~strong supply and a slowing in the pace of recovery of the U.S. economy. During the second quarter of 2010, Treasury yields declined substantially as equity volatility increased and high yield bond spreads widened as the market demand grew for higher-quality assets. Nonetheless, investor liquidity was strong during the quarter and most investment grade bond issues were met with good demand. Investor appetite for asset-backed securities remained strong given limited supply,imbalance, stable credit performance and the structural protections embedded in the ~~larger~~ transactions brought to market. ~~Although financial sector performance improved during the first half of 2010, high levels of unemployment and continued global economic uncertainty still weigh on certain markets.~~

~~While~~Certain segments of the marketplace isare still experiencing declines in the performance of collateral underlying certain structured securities, ~~corporate~~but impairments ~~continued their downward trend and were at~~in our investment portfolio remained consistent with the moderate levels ~~during~~recorded in the ~~first half~~third and fourth quarters of 2010. We recorded net other-than-temporary impairments of ~~$51~~$36 million ~~and $131 million, respectively, during~~in the ~~three and six months ended June 30, 2010~~first quarter of 2011 which were lower than prior year levels and we expect losses to moderate further. Additionally, in the first half of 2010, losses related to limited partnerships decreased $116 million as compared to the first half of 2009 with limited partnership gains in the second quarter of 2010. Although economic conditions may continue to negatively impact certain investment valuations, the underlying collateral associated with ~~assets~~securities that have not been impaired continues to perform.

Looking ahead, we believe that the current credit environment provides us with opportunities to invest across a variety of asset classes to meet our yield requirements, as well as to continue ~~our~~execution of various risk management disciplines involving further diversification ~~and efforts to minimize risk~~ within the investment portfolio. See “—Investments and Derivative Instruments” for additional information on our investment portfolio.

Trends and conditions affecting our segments

Retirement and Protection

Life insurance. Results of our life insurance business are impacted by sales, mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements. Additionally, sales of our products and persistency of our insurance in-force are dependent on competitive product features and pricing, effective distribution and customer service.

~~The increase in life~~Life insurance sales ~~we experienced during the second half of 2009 continued into~~increased in the first half of 2010 in ~~large~~ part ~~the result of~~due to strong adoption of our new term universal life insurance ~~product. As anticipated,~~product and remained stable through the second half of 2010 and into the first quarter of 2011 with sales of our term universal life insurance product up 29% in the first quarter of 2011 versus the traditional term and term universal life insurance sales in the prior year. We believe our term universal life insurance product offers a better value proposition to the consumer when compared to our traditional term life insurance ~~product have declined given the introduction late in 2009 of~~products which we no longer sell. Based on recent sales trends, we believe our ~~new term universal life insurance product that was designed to replace our traditional term life insurance product. Our new~~ term universal life insurance product is ~~more capital efficient and we believe offers a similar or better value proposition to the consumer as our traditional term life insurance product, and is~~ competitively priced for the ~~main street~~middle and emerging affluent markets. ~~We have experienced strong initial adoption of the product; however, the growth rate will ultimately depend upon the intensity~~Throughout 2010 and level of future distributor (existing brokerage general agents (“BGAs”) and other distributors) and consumer adoption. In our universal life insurance products, sales for the first half of 2010 were relatively stable given product changes made in 2009 to our new universal life insurance product that resulted in a more capital efficient product that is priced to achieve targeted returns. New premium sales may decline, remain flat or increase depending upon the ongoing distributor and consumer adoption and usage, as well as overall market conditions.

~~Throughout 2009,~~into 2011, we experienced favorable mortality results in our term life insurance products as compared to priced ~~mortality. In 2010,~~

mortality ~~remained favorable although~~assumptions. Additionally, while less sosevere in the first quarter of 2011 than in ~~2009. Additionally,~~prior quarters, we have experienced lower persistency as compared to pricing assumptions for 10-year term life insurance policies written in 1999 and 2000 as they ~~reach~~go through their post-level rate period. ~~Given the relatively high volume of~~We expect this trend in persistency to continue as these 10-year term life insurance policies ~~written in 2000, we expect this trend to continue~~go through their post-level rate period and then moderate ~~as these policies have now reached their post-level rate period.~~thereafter.

Regulations XXX and AXXX require insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and certain universal life insurance policies with secondary ~~guarantees, which increase~~guarantees. This increases the capital required to write these products beyond economic requirements. The ~~solutions~~alternatives available to reduce the impact for the increased reserve requirements on some of our in-force books of business have over time become ~~more~~ limited and ~~expensive; however, we have~~more expensive. Despite this, committed funding sources are in place for approximately 95% of our anticipated peak level reserves required under Regulations XXX and AXXX, soand therefore we believe unfunded reserve exposure is minimal. Additionally, we have made product modifications and introduced new products designed to reduce capital requirements and limit financing costs associated with existing products and thereby improve the profitability of new business. The new term universal life insurance product, discussed above, offers death benefit guarantee premiums that are competitive with traditional term insurance premiums for comparable durations and provides greater consumer flexibility typically associated with universal life coverage. We have also introduced product modifications to our universal life insurance products which provide shorter guarantee periods thereby reducing capital requirements.

Long-term care insurance. Results of our long-term care insurance business are influenced by morbidity, mortality, persistency, investment yields, new product sales, expenses and ~~reinsurance.~~reinsurance as well as the relative competitiveness of our offerings.

In recent years, industry-wide first-year annualized premiums of long-term care insurance declined during the recession and rebounded as the economy stabilized. This positive trend continued during the first quarter of 2011. Sales of our individual long-term care ~~insurance~~product have either declined or grown moderately. While our overall sales in 2009 were adversely impacted primarily by the general economic conditions and lower sales through our independent distribution and career force channels,increased 48% in the ~~second half~~first quarter of ~~2009 and continuing into~~2011 versus the ~~first half of 2010, we experienced improvements in our long-term care insurance sales. Recent improvements are~~prior year due in part to growth in the ~~breadth~~market and competitor actions combined with the impacts of ~~our distribution, and we have~~the progress made ~~progress~~ on multiple growth initiatives ~~with an emphasis on~~relating to distribution effectiveness and broadening of our ~~offerings, including additional~~individual and group offerings. We have experienced, and may continue to experience, higher claims than priced for in older issued policies which negatively impact our results of operations.

In the fourth quarter of 2010, one of our competitors announced its intent to exit the long-term care insurance market effective January 1, 2011. In addition, several competitors have announced their intent to seek rate actions on their individual and certain group long-term care insurance ~~participation~~products. These announcements by competitors could disrupt the market and ~~linked-benefits products.~~

In the first half of 2009, termination rates increased on the new and old blocks of business resulting in lower benefits and other changes in policy reserves that contributed positively to results of operations. However, during the second half of 2009 and continuing into the first half of 2010, termination rates have decreased to levels experienced historically resulting in higher benefits and other changes in policy reserves that contributed to lower results of operations. We have also experienced higher claims in older issued policies in recent periods which have negatively impactedimpact our ~~results of operations.~~sales going forward.

We continue pursuing multiple ~~growth~~ initiatives including: new product issuance and service offerings; investing in ~~case management,~~care coordination capabilities; maintaining tight expense ~~management,~~management; actively exploring alternative reinsurance ~~strategies,~~strategies; executing effective investment ~~strategies~~strategies; and considering other actions to improve business profitability and the performance of the overall ~~block,~~block. These efforts include evaluating the need for future in-force rate increases, where warranted. In this connection, we began filing for a rate increase of 18% on two blocks of older long-term care insurance policies in November 2010. The state approval process of an in-force rate increase varies, and in ~~particular our older blocks~~certain states can take up to two years to obtain approval. Upon approval, premium increases may only occur on an insured’s policy anniversary date. Therefore, the benefits of ~~business, including potential future~~any rate ~~increases.~~ increase may not be fully realized until the implementation is complete over the next several years.

In addition, changes in regulations or government programs, including certain aspects of healthcare reform, such as the Community Living Assistance Services and Supports (“CLASS”) Act, could impact our long-term care insurance business positively or negatively. As such, we continue to actively monitor regulatory developments.

Wealth management.Results of our wealth management business are impacted by the demand for asset management products and related support services, investment performance and equity market conditions.

The decline and volatility in the equity markets that began in 2008 negatively impacted the asset management industry overall, as well as our assets under management, net flows, the performance of certain mutual funds we offer and associated fee income. The recovery of equity and fixed income ~~markets began in~~market improvements since the second quarter of 2009, ~~and continued throughout 2009 and into the first quarter of 2010, although we saw a reversal of this trend late in the second quarter of 2010.~~

~~The market improvement over the second half of 2009 and first quarter of 2010, in addition to~~ our introduction of new investment strategies, the expansion of products and services we offer to our advisors and an increase in the

number of advisors that do business with us collectively contributed to our higher sales, net flows and assets under management in the last three quarters of 2009 and the first half of 2010. Market declines and volatility in the second quarter of 2010 reduced sales and net flows over prior periods although net flows remained positive. Despite the market volatility, the business generated positive net flows since April 2009.management. Depending upon the direction of equity and fixed income markets in the future, we could see a correlated impact on sales, net flows and assets under management.

On December 31, 2010, we purchased the operating assets of Altegris Capital, LLC (“Altegris”). This acquisition provided a platform of alternative investments including hedge funds and managed futures products and had approximately $2.2 billion in client assets as of December 31, 2010.

Retirement income.Results of our retirement income business are affected by investment performance, interest rate levels, slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, policyholder lapses, new product sales and relative competitiveness of our offerings. Our competitive position within many of our distribution channels and our ability to grow this business depends on many factors, including product ~~features~~offerings and company ratings. ~~Product features~~Our product offerings include current and minimum crediting rates on our spread-based products and surrender ~~charges and guaranteed~~charges. Guaranteed benefit features inof our in-force variable annuity products ~~which~~ provide guaranteed death or living benefits to the consumer.

~~Recent~~Refinements of product ~~changes~~offerings and ~~sales of annuity products~~related pricing and investment strategies reflect ~~a more~~ targeted growth ~~strategy in order~~plans to achieve appropriate risk adjusted returns. ~~We have scaled back certain product features~~In January 2011, we discontinued sales of our individual and ~~targeted certain market segments to reduce risk in our annuity products. In this connection,~~group variable annuities; however, we have targeted distributors and producers and chosen sales personnel that align with this more focused strategy. Beginning in the second half of 2009, we expanded our distribution relationships with new financial institutions, independent financial planners and BGAs and we expect towill continue to ~~expand these distribution relationships~~service our existing block of business and ~~introduce new product offerings.~~accept additional deposits on existing contracts.

In fixed annuities, sales may fluctuate as interest rates change and as we offer these products using a disciplined approach to meet targeted returns. We have introduced new market value adjustment deferred annuity products in the ~~BGA~~brokerage general agency (“BGA”) channel and we have re-priced immediate annuities to maintain spreads and targeted returns. ~~In 2009, spreads on fixed annuity products declined~~Early in ~~connection with lower short-term rates and from holding higher cash balances to manage through challenging market conditions. Through the first half of~~ 2010, we ~~have~~ reinvested a significant portion of the excess cash and ~~are achieving~~achieved improvements in spread-related income as a result of higher yields. Looking ahead, we will continue to actively evaluate marketing and investment strategies in the event that interest rates increase. We have targeted distributors and producers and maintained sales capabilities that align with our focused strategy. We have expanded distribution relationships with new financial institutions, independent financial planners and BGAs and we expect to continue to further expand these distribution relationships while selectively adding additional product offerings.

In variable annuities, the improvement in ~~the~~ equity markets ~~during the second half of 2009 and the first quarter of 2010~~ favorably ~~impacted our results. However, the decline and volatility in the equity markets during the second quarter of 2010 adversely~~ impacted our results. In the future, equity market performance and volatility could result in additional gains or losses in our variable annuity products ~~and~~although associated hedging ~~program which~~

~~would impact our results. In addition,~~activities are expected to mitigate these impacts. As this is a closed block of business, we ~~continue to offer variable annuity products with living benefit features~~will see limited new deposits as described above. However, in response to the risk in equity markets, certain product features have been scaled back to reduce adverse selection risk and volatility while costs to the consumer have been increased. These product changes are similar to actions taken by many, but not all, of our competitors. We believe the benefits offered by these products remain attractive to consumers within our targeted markets.we will only accept additional deposits on existing contracts.

International

International mortgage insurance.Results of our international mortgage insurance business are affected by changes in regulatory environments, employment levels and other economic and housing market trends, including interest rate trends, home price appreciation, mortgage origination volume, levels of mortgage delinquencies and movements in foreign currency exchange rates.

Throughout 2009, we observed increased stability in international housing markets, particularly in Canada and Australia, as lower mortgage rates, improved housing affordability, certain government programs and improved consumer confidence resulted in increased home sales activity. As a result, home prices increased in these markets during 2009. In the first half of 2010, home price growth slowed in Canada and Australia. Additionally, while unemployment increased during the first half of 2009, we observed a modest decline in unemployment rates in these two markets during the second half of 2009 and we have seen this trend continue or strengthen in the first half of 2010. In certain of our European mortgage insurance markets, we have observed early signs of stabilization as unemployment growth and declines in home prices have moderated.

Canada and Australia comprise approximately 97% of our international mortgage insurance risk in-force with an estimated average effective loan-to-value ratio of ~~61%~~62% as of ~~June 30, 2010.~~March 31, 2011. We expect that these established markets will continue to be key drivers of revenues and earnings in our international mortgage insurance business. Our entry and growth in developing international markets will remain ~~disciplined~~selective and ~~selective.~~disciplined.

During 2010, we continued to observe increased stability in international housing markets, particularly in Canada and Australia, as the economic recovery which began in 2009 gained momentum. As a result of improving economic and employment outlooks, relatively low mortgage rates, improved housing affordability

and consumer confidence, home sales activity remained strong and home prices increased at the start of 2010 in these two markets. During the second half of 2010, home price appreciation moderated after a sustained period of growth. During the first quarter of 2011, home prices increased modestly in Canada and remained relatively flat in Australia. During the remainder of 2011, we expect home prices to remain consistent with current levels in both Canada and Australia. Additionally, we observed a decline in unemployment rates in these two markets during 2010 with rates remaining fairly stable during the first quarter of 2011. However, in Australia, with the combined impact of higher mortgage interest rates, increases in the cost of living and January flooding, the Queensland economy is pressured which could adversely impact our results of operations.

In ~~Canada,~~many of our European mortgage insurance markets, we have observed early signs of stabilization as unemployment rates appear to be peaking and declines in home prices have moderated. The overall economic environment in Europe, however, continues to be dominated by concerns about the fiscal health of the region, which has created uncertainty about the timing and speed of economic recovery.

Since the beginning of 2010, the Bank of Canada increased the overnight rate by 2575 basis points into 1.0% and we expect the ~~second quarter~~Bank of ~~2010, and has implemented another 25 basis points increase in July 2010.~~Canada to maintain the overnight rate at current levels at least through the first half of 2011. In Australia, as a sign of the relative health and stability of that economy, the Reserve Bank of Australia increased the cash rate by ~~150~~175 basis points to 4.75% between September 30, 2009 and ~~June 30, 2010. It is anticipated that both the Bank of Canada and~~March 31, 2011. We also expect the Reserve Bank of Australia ~~may increase rates modestly in~~to maintain the ~~second~~cash rate at current levels through the first half of ~~2010.~~2011.

In Canada, we experienced higher than anticipated levels of flow new insurance written ~~in the first half of 2010 driven by a larger mortgage market.~~during 2010. A low mortgage interest rate environment in ~~the first half of~~ 2010 ~~with rates forecasted to increase in the second half of the year~~ and improved consumer confidence contributed to this increase. Additionally, implementation of the harmonized sales tax in July 2010 in British Columbia and Ontario, which had the potential to increase the cost of purchasing a home for certain buyers, contributed tothese higher ~~levels of mortgage originations in 2010. We believe these factors accelerated purchase decisions into~~levels. During the first ~~half~~quarter of 2011, favorable economic conditions persisted with housing affordability benefiting from low interest rates and historically low unemployment levels. As of March 31, 2011, our 2010 book of business represents 12% of our insurance in-force while our 2007 and 2008 book years, the ~~year and may result in lower levels of mortgage originations and an associated decrease~~two largest in our portfolio, together represent 33% of our insurance in-force. As a result of our large 2007 and 2008 book years and subsequent smaller books seasoning during 2011, earned premiums in Canada are expected to decline moderately relative to 2010 levels. In January 2011, the Canadian government announced new mortgage rules that became effective in March and April of 2011. These changes may reduce the amount of net premiums written in 2011. This decline may be offset by modest growth in flow new insurance written in ~~the second half of 2010.~~2011 if economic conditions in Canada continue to be favorable and we are able to continue to gradually increase our market share.

In Australia, total mortgage market activity slowed during 2010 as ~~a result~~the incremental government stimulus and incentives for first-time homebuyers implemented during the economic downturn were eliminated. Additionally, high loan-to-value mortgage originations, particularly above 90% loan-to-value, declined significantly in 2010 as banks allocated less capital to high loan-to-value lending and consumers became cautious of ~~low interest rates~~rising personal debt levels. This trend continued during the first ~~nine months~~quarter of 2009 and specific government programs, there was an increase in mortgage originations by first-time home buyers and an associated increase in our flow new insurance written. The Australian government extended its enhanced first-time home buyer program benefits through the end of 2009, although at reduced levels, and eliminated these enhanced benefits altogether effective January 1, 2010. As a result of lower levels of government support to first-time home buyers and2011. These factors, combined with increased interest rates beginning in the fourth quarter of 2009, ~~there has been~~led to a decrease in mortgage originations and an associated decrease in our flow new insurance written ~~in the first half of 2010. As some liquidity returned~~during 2010 compared to ~~the securitization market in Australia, we insured additional bulk transactions in the first half of 2010. We expect to continue to write modest levels of bulk~~2009 levels. Our flow new insurance written ~~throughout 2010.~~

further decreased during the first quarter of 2011 compared to the fourth quarter of 2010 reflecting smaller mortgage originations market as well as the economic impact of recent natural disasters. For the remainder of 2011, we expect flow new insurance written to remain flat compared to 2010 levels.

~~During 2009,~~Over the past two years, we significantly expanded our focus on, and the resources devoted to, loss mitigation initiatives, including programs that actively partner with our lenders to find solutions that cure delinquencies through actions such as loan modifications ~~and~~that keep borrowers in their ~~homes. These~~homes, asset management strategies such as arranged and facilitated sales and pursuing recoveries. Loan modification programs benefit all parties as borrowers are able to remain in their homes, lenders maintain their relationship with the borrower and an earning asset, and we mitigate claim payments under the terms of our mortgage insurance policies. Additionally, in cases where no solution is found to cure the delinquency and keep the borrower in their home, we are actively partnering with our lenders to optimize the transition process, including taking early possession of properties, and mitigate claim payments. As a result of our expanded focus, there was an increase in the

number of loans subject to our loss mitigation initiatives, which ~~we believe~~ had a favorable impact on our results of operations. We have also seen improvements in our total losses as economies continue to improve, home ~~prices continue~~price appreciation transitions to ~~increase~~a stable rate of growth and unemployment levels decline. With ongoing improvement in the Canadian and Australian economies and stable housing markets, as well as the success we ~~experienced~~are experiencing with our loss mitigation initiatives outlined above, we expect our overall loss levels to ~~continue to~~ improve ~~from the~~modestly over time compared with levels experienced ~~during 2009.~~in 2010. These loss levels will vary quarterly based on seasonal or event-driven fluctuations.

Lifestyle protection insurance. Growth and performance of our lifestyle protection insurance business is dependent in part on economic conditions, including consumer lending levels, unemployment trends, client account penetration and mortality and morbidity trends. Additionally, the types and mix of our products will vary based on regulatory and consumer acceptance of our products.

~~For~~The profitability of our lifestyle protection insurance business improved during 2010 and in the ~~six months ended June 30,~~first quarter of 2011 and has been driven by lower new claim registrations from stabilizing European unemployment levels and the impact of our policy re-pricing and distribution contract restructuring initiatives. Sales during 2010 ~~sales~~ decreased primarily as a result of stagnating economies across Europe, which resulted in a decline in consumer lending where most of our insurance coverages attach as banks tightened lending criteria and consumer demand declined. ~~Additionally, our ongoing focus on risk management led us to exit certain relationships or concentration~~Sales in the first quarter of ~~coverages.~~2011 remained consistent with the fourth quarter of 2010 levels. We are actively pursuing various growth initiatives to ~~offset these market conditions; however,~~expand our distribution channels and our product offerings which have begun to help to mitigate lower consumer lending levels. However, depending on the severity and length of these conditions, we could experience additional declines in sales ~~declines.~~

~~In contrast~~or the inability to the first half of 2009, when unemployment rates increased rapidly, we have seen a slowdown in the rate of increase or stabilization in unemployment over the past several quarters broadly across Europe with regional variation. Consequently, we experienced a continued declinegenerate targeted growth in new sales.

New claim registrations on unemployment-related policies ~~particularly~~declined throughout 2010 and the first quarter of 2011 and are at the lowest levels since the third quarter of 2008. This, combined with stabilizing claim durations, has led to a decrease in ~~Ireland~~our loss ratio. The improvement in our loss ratio has been most notable in the Nordic and ~~Spain since March 2009 and in Denmark since March 2010.~~Western Europe regions. We expect unemployment rates in Europe to ~~increase~~ slowly ~~and peak in~~decline over the ~~second half of 2010. Increasing claims duration pressure from longer periods of persistent unemployment and accident and sickness claims is beginning to stabilize~~next several quarters with regional variation. Additionally, we expect slow but positive European gross domestic product growth, which could positively impact consumer lending demand as ~~a result of re-pricing actions and loss mitigation efforts.~~well as reduce claim pressures through new job creation.

During ~~2009~~2010 and into ~~2010,~~2011, significant progress was made in improving profitability through pricing, coverage or distribution contract changes on both new and eligible in-force policies. ~~Collectively,~~With most of these contract restructuring projects complete, we are focusing on increasing sales through improved product offerings and expanded distribution channels. We expect these strategies ~~will~~to continue to improve profitability and help to offset the impact of continued high unemployment as well as ~~relatively low~~lower levels of consumer lending.

U.S. Mortgage Insurance

Results of our U.S. mortgage insurance business are affected by unemployment, underemployment and other economic and housing market trends, ~~including~~ interest rates, home prices, mortgage origination volume mix and practices, ~~and product mix, as well as~~ the levels and aging of mortgage delinquencies including seasonal ~~variations.~~variations, the inventory of unsold homes and lender modification efforts. These economic and housing market trends are ~~in turn~~ continuing to be adversely affected by ~~the~~ ongoing ~~weak~~weakness in the domestic economy and related levels of unemployment. ~~However,~~This has resulted in numerous outcomes including rising foreclosures, more borrowers seeking loan modifications and elevated housing inventories which place downward pressure on home values. At the same time, home prices are ~~beginning~~continuing to ~~stabilize~~show signs of stabilizing or ~~improve~~improving in ~~many~~several U.S. markets after a significant decline from their peak levels. Overall, we anticipate ~~some~~ additional ~~modest~~ declines in home values ~~in 2010~~during 2011 and we expect unemployment and underemployment levels ~~may increase modestly by the end of 2010.~~to stabilize and gradually decline over time though remain elevated for an extended period.

ADuring 2010, a weak housing market, tightened lending standards, the lack of consumer confidence and the lack of liquidity in some mortgage securitization markets, along with volatility in mortgage interest rates,

continued to drive a smaller mortgage origination market. ~~However, in this smaller origination~~Within the private mortgage insurance market, ~~we have seen an increase in our market share in recent quarters. The~~the mortgage insurance

penetration rate and overall market size ~~have been~~was driven down by growth in ~~FHA~~Federal Housing Administration (“FHA”) originations, associated with multiple pricing, underwriting and loan size factors, and the negative impact of GSE market fees and loan level pricing which ~~can make~~made private mortgage insurance solutions less competitive with the FHA solution. Given ongoing FHA risk management actions, we have seen the private mortgage insurance penetration rate increase somewhat in the first quarter of 2011 and expect this to continue given the additional FHA pricing changes effective in April 2011. This increase has been mitigated in part by increased GSE loan level fees which can make private mortgage insurance less attractive. Going forward, ~~this trend may~~further fees could limit the demand for or competitiveness of private mortgage insurance. ~~Alternatively, given potential adjustments in FHA policies and pricing, GSE pricing and housing and financial reform involving the GSEs and government programs,~~Considering both of these trends, the industry ~~expects~~continues to expect to regain market share over time. ~~Specifically, the~~The mortgage insurance industry level of market penetration and eventual market size ~~could~~will continue to be affected by any actions taken by the GSEs, the FHA or the U.S. government impacting housing policy, underwriting standards or related reforms. The Housing and Economic Recovery Act of 2008 ~~provides~~provided for changes to, among other things, the regulatory authority and oversight of the GSEs and the authority of the FHA including with respect to premium pricing, maximum loan limits and down payment requirements. The FHA is also seeking legislative authority to increase its annual premium rates. Such an increase is expected to increase the private mortgage insurance industry’s market share compared to that of the FHA. In addition, Fannie Mae and Freddie Mac remain the largest purchasers and guarantors of mortgage loans in the United States.

We ~~control~~continue to manage the quality of new business through prudent underwriting guidelines, which we modify from time to time when circumstances warrant. ~~For example, we announced in early 2010 the expansion of certain underwriting guidelines.~~ We ~~are~~ also ~~seeing~~expect to continue realizing the benefit of previously implemented rate increases along with other pricing-related actions. In addition, we regularly monitor competitor pricing and underwriting changes and their potential market impact.

While we are currently experiencing a decrease in the ~~previously announced rate increase~~level of 20% on average for our flow products and a reduction in captive cession which equates to an effective pricing improvement of approximately 15%. We previously exited certain product lines, such as A minus, Alt-A and 100% loan-to-value products. We also continue to monitor our targeted declining market policy, which among various restrictions, limited coverages to loans with 90% loan-to-value and below and to adjust those markets accordingly as areas of the U.S. housing market begin to stabilize or improve. In the first quarter of 2010, we reduced the number of markets subject to our declining market policy to allow coverage of loans up to 95% loan-to-value in additional markets given improving housing market conditions, which may result in increased new ~~business written.~~

~~Overall~~delinquencies, overall pressure on the housing market ~~has~~continues to adversely ~~affected~~affect the performance of our portfolio, particularly our ~~2005,~~ 2006, 2007 and ~~2007~~first half of 2008 book years that we believe peaked in their delinquency development during the first quarter of 2010. Delinquencies for these book years continue to drive the level of new delinquencies being reported. While the impact was originally concentrated in certain states and alternative product types, during ~~2009,~~the last few years, the impact has shifted to more traditional products reflecting the elevated unemployment and underemployment levels throughout the country. ~~We have also seen~~Beginning mid-2010, we saw an increase in ~~the number of~~ foreclosure starts ~~and in the rate at which foreclosures progress to claim. As such, we have begun to see~~as well as an increase in our paid claims as ~~these~~late stage delinquency loans go through foreclosure.

~~However, as~~ We expect this trend to continue at least through the second quarter of 2011. Suspensions of foreclosure actions in response to problems associated with lender and servicer foreclosure process defects have caused, and could further cause, claim payments to be deferred to later periods and potentially have an adverse impact on a ~~result~~recovery of the residential mortgage market.

The recent stabilization of home prices and unemployment levels ~~and~~in certain markets, expanded efforts in the mortgage market to modify loans ~~we experienced~~and improved performance of our second half of 2008, 2009 and 2010 book years, resulted in a decrease in delinquencies induring the first ~~half~~quarter of ~~2010.~~2011. This decrease reflected a reduction in new delinquencies combined with a higher number of paid claims and increased cures from government and lender loan modification programs and other loss mitigation ~~activities.~~activities through the first half of 2010. However, ~~aged~~aging of delinquencies continued to increase through the remainder of 2010 and through the first quarter of 2011; moreover, foreclosures continued increasing and liquidations remained elevated through the ~~second quarter of 2010, both of which pressure home prices in certain markets~~same period, thereby resulting in higher levels of ~~default.~~claims. If home values ~~continue to~~experience further decline, ~~and~~ credit remains tight and interest rates increase, the ability to cure a delinquent loan could be more difficult to achieve. In addition, while we continue to execute on our loan modification strategy, during the first quarter of 2011, we have seen the level of loan modification actions remain consistent with the level we experienced during the fourth quarter of 2010. Further reduction of loan modifications would have an adverse impact on the ability of borrowers to cure a delinquent loan.

Our loss mitigation activities, including those relating to workouts, loan modifications, pre-sales, rescissions and targeted settlements, net of reinstatements, ~~have~~which occurred during the first quarter of 2011 resulted in a reduction of expected losses of ~~approximately $450~~$122 million ~~during the six months ended June 30, 2010~~ compared to ~~$333~~$233 million ~~during~~in the ~~six months ended June 30, 2009.~~ first quarter of 2010.

Workouts and loan modifications, which related to loans representing 3%1% of our primary risk in-force as of ~~June 30, 2010,~~March 31, 2011, and occurred during the period then ended, resulted in a reduction of ~~loss exposure~~expected losses of ~~approximately $267~~$94 million ~~for the six months ended June 30, 2010~~ compared to ~~$97~~$113 million ~~for~~in the ~~six months ended June 30, 2009.~~first quarter of 2010. Our workout and loan modification programs with various ~~lender~~lenders and ~~service customers~~servicers are designed to help borrowers in default regain current repayment status on their mortgage loans, which ultimately allowed many of these borrowers to remain in their homes. During the ~~six months ended June 30, 2010,~~first quarter of 2011, we executed loan restructurings and modifications with our lender partners that resulted in reduced monthly mortgage loan repayment amounts ~~either~~

through reductions of the underlying loans’ interest rates ~~and/~~or debt forgiveness by lenders, or through a lengthening of the loans’ principal amortization ~~period.~~period, or through some combination thereof. The loans that are subject to workouts and loan modifications that were completed could be subject to potential re-default by the underlying borrower at some future date. In addition, pre-sales and other non-cure workouts that occurred during the first quarter of 2011 resulted in a reduction of ~~loss exposure~~expected losses of ~~approximately $28~~$17 million ~~for the six months ended June 30, 2010~~ compared to ~~$21~~$13 million ~~for~~that occurred during the ~~six months ended June 30, 2009.~~ first quarter of 2010.

As a result of investigation activities on certain insured delinquent loans, we found ~~significant~~certain levels of misrepresentation and non-compliance with ~~certain~~specific terms and conditions of our underlying master insurance policies, as well as fraud. These findings separately resulted in rescission actions that occurred during the first quarter of 2011 which reduced our ~~loss exposure~~expected losses at the time of rescission by ~~approximately $155~~$11 million ~~for the six months ended June 30, 2010~~ compared to ~~$215~~$107 million ~~for~~that occurred during the ~~six months ended June 30, 2009. Benefits~~first quarter of 2010.

During 2010, benefits from loss mitigation activities ~~are~~began shifting from rescissions to loan modifications where we expect a majority of our loss mitigation benefits to be achieved going forward. ~~During 2010, we reached agreements with a servicer and a counterparty that further reduced our risk in-force exposure. Our investigations process and rescission actions, along with expanded~~Although loan modification efforts supported by various related lender and government programs, have benefited our results significantly and these benefits are expected to continue. At the same time, we continue to discuss with lenders any concerns with respect to our rescission practices and risk exposures in books of business. Going forward, however, there is no assurance regarding what specific level of benefits may result from modification, rescission or settlement activity. In addition, there are several programs related to the U.S. housing market being implemented by the U.S. government, GSEs, servicers and various lenders that we expect will mitigate losses on loans we insure. We are actively participating in and supporting these various programs. These programs are expected to limit increases in paid claims and we continue to pursue ~~ways~~a wide range of approaches to ~~support mortgage servicers in their efforts~~execute appropriate loan modifications, government-sponsored programs such as Home Affordable Modification Program (“HAMP”) continue to ~~increase the~~decline as alternative programs have begun to gain momentum. With lower benefits from government-sponsored programs and the limited impact from alternative programs to date, we have experienced higher levels of paid claims. Depending upon the mix of loss mitigation ~~activities.~~activity, market trends and employment levels in future periods, we could see additional adverse loss reserve changes going forward.

We also participate in reinsurance programs in which we share portions of our premiums associated with flow insurance written on loans originated or purchased by lenders with captive insurance entities of these lenders in exchange for an agreed upon level of loss coverage above a specified attachment point. For the ~~six~~three months ended ~~June 30, 2010,~~March 31, 2011, we recorded reinsurance recoveries of ~~$89~~$21 million where cumulative losses have exceeded the attachment points in captive reinsurance arrangements, primarily related to our 2005, 2006, 2007 and ~~2007~~2008 book years. We have exhausted certain captive reinsurance tiers for these book years based on loss development trends. Once the captive reinsurance or trust assets are exhausted, we are responsible for additional losses incurred. We have begun to experience constraints on the recognition of captive benefit recovery due to the amount of funds held in certain captive trusts and the exhaustion of captive loss tiers for certain reinsurers. As of January 1, 2009, we no longer ~~participate in~~enter into excess loss of captive reinsurance transactions and, ~~we will~~therefore, only participate in quota share reinsurance arrangements. The majority of our excess of loss captive reinsurance arrangements are in runoff with no new books of business being added going forward; however, we will continue to benefit from captive reinsurance on our 2005, 2006, 2007 and ~~2007~~2008 book years.

As of March 31, 2011, Genworth Mortgage Insurance Corporation (“GEMICO”) exceeded the maximum risk-to-capital requirement of 25:1. GEMICO is authorized and continues to write new business in North Carolina under a revocable two-year waiver of that state’s maximum 25:1 risk-to-capital requirement limitation, which the North Carolina Department of Insurance (“NCDOI”) approved in a letter dated January 31, 2011. By extension, GEMICO also remains authorized and continues to write business in 34 additional states that do not have a maximum risk-to-capital requirement. Ten additional states have granted GEMICO the authority to continue to write new business by a waiver (or other communication) regarding their relative state’s risk-to-capital requirements, subject to varying terms and conditions. Consequently, GEMICO is authorized to write new business in 45 states as of March 31, 2011. While we continue to seek this regulatory flexibility through additional state waivers, where available, we expect to manage our capital and business operations so as

to maintain capacity to write new profitable business. Currently, we utilize another one of our U.S. mortgage insurance subsidiaries, Genworth Residential Mortgage Insurance Corporation of North Carolina (“GRMIC-NC”), to write business in those five states where GEMICO is restricted under risk-to-capital requirements and where no waiver has been granted to date. We have also taken steps to be able to utilize another one of our U.S. mortgage insurance subsidiaries, Genworth Residential Mortgage Assurance Corporation (“GRMAC”), for similar purposes. In this regard, Fannie Mae has approved both our use of GRMIC-NC and our request that GRMAC be recognized as an eligible insurer. Fannie Mae’s approvals allow either entity to write business in lieu of GEMICO subject to specified conditions, including that we refrain from utilizing either entity, except in states where GEMICO is prohibited from writing business due to a breach of its maximum risk-to-capital requirement and has not obtained the applicable waiver of such breach. We remain in ongoing consultation with our state regulators and the GSEs regarding our ongoing use of these alternative arrangements, as necessary.

Consolidated Results of Operations

The following is a discussion of our consolidated results of operations and should be read in conjunction with “—Business trends and conditions.” For a discussion of our segment results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

The following table sets forth the consolidated results of operations for the periods indicated:


	Three months ended June 30,						Increase (decrease) and percentage change					Three months ended March 31,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	1,470		$	1,502		$	(32	)	(2	)%	$	1,437		$	1,470		$	(33	)	(2	)%
Net investment income		823			781			42		5	%		830			765			65		8	%
Net investment gains (losses)		(139	)		(53	)		(86	)	(162	)%		(28	)		(70	)		42		60	%
Insurance and investment product fees and other		256			253			3		1	%		329			256			73		29	%

Total revenues		2,410			2,483			(73	)	(3	)%		2,568			2,421			147		6	%

Benefits and expenses:
Benefits and other changes in policy reserves		1,340			1,492			(152	)	(10	)%		1,409			1,315			94		7	%
Interest credited		211			263			(52	)	(20	)%		201			213			(12	)	(6	)%
Acquisition and operating expenses, net of deferrals		499			456			43		9	%		500			475			25		5	%
Amortization of deferred acquisition costs and intangibles		179			212			(33	)	(16	)%		185			184			1		1	%
Interest expense		109			114			(5	)	(4	)%		127			115			12		10	%

Total benefits and expenses		2,338			2,537			(199	)	(8	)%		2,422			2,302			120		5	%

Income (loss) before income taxes		72			(54	)		126		NM	⁽¹⁾
Benefit for income taxes		(5	)		(4	)		(1	)	(25	)%
Income before income taxes													146			119			27		23	%
Provision (benefit) for income taxes													30			(93	)		123		132	%

Net income (loss)		77			(50	)		127		NM	⁽¹⁾
Net income													116			212			(96	)	(45	)%
Less: net income attributable to noncontrolling interests		35			—			35		NM	⁽¹⁾		34			34			—		—	%

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	42		$	(50	)	$	92		184	%
Net income available to Genworth Financial, Inc.’s common stockholders												$	82		$	178		$	(96	)	(54	)%

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

Premiums.Premiums consist primarily of premiums earned on insurance products for life, long-term care and Medicare supplement insurance, single premium immediate annuities and structured settlements with life contingencies, lifestyle protection insurance and mortgage insurance.

Our Retirement and Protection segment decreased $7$6 million primarily related to a $9$16 million decrease in our retirement income business and a $7 million decrease in our life insurance business, ~~and a $6 million decrease in our retirement income business,~~ partially offset by ~~an $8~~a $17 million increase in our long-term care insurance business.

Our International segment decreased ~~$13~~$27 million as a result of a decrease of ~~$40~~$43 million in our lifestyle protection insurance business, partially offset by a ~~$27~~$16 million increase in our international mortgage insurance business. The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of ~~$25~~$10 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment ~~decreased $11 million.~~was flat.

Net investment income. Net investment income represents the income earned on our investments.

Weighted-average investment yields increased to 4.8% for the three months ended ~~June 30, 2010~~March 31, 2011 from ~~4.6%~~4.4% for the three months ended ~~June 30, 2009.~~March 31, 2010. The increase in weighted-average investment yields was primarily attributable to ~~lower losses on~~the improved performance of limited ~~partnerships.~~partnerships accounted for under the equity method and the reinvestment of cash balances. Net investment income for the three months ended ~~June 30, 2010~~March 31, 2011 included ~~$10~~$4 million of gains related to limited partnerships ~~accounted for under the equity method~~ as compared to ~~$33~~$34 million of losses inrelated to limited partnerships for the three months ended ~~June 30, 2009.~~March 31, 2010.

Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of January 1, 2010. These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.

The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of ~~$11~~$5 million attributable to changes in foreign exchange rates in our International segment.

Net investment gains (losses).Net investment gains (losses) consist of realized gains and losses from the sale or impairment of our investments and unrealized and realized gains and losses from our trading securities and derivative instruments. For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

We recorded ~~$51~~$36 million of net other-than-temporary impairments for the three months ended ~~June 30, 2010~~March 31, 2011 as compared to ~~$152~~$80 million for the three months ended ~~June 30, 2009.~~March 31, 2010. Of total impairments for the three months ended ~~June 30,~~March 31, 2011 and 2010, ~~and 2009, $43~~$21 million and ~~$109~~$62 million, respectively, related to structured securities, including ~~$23~~$15 million and ~~$66~~$36 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. ~~For~~Impairments related to corporate securities as a result of bankruptcies, receivership or concerns about the issuer’s ability to continue to make contractual payments or where we have intent to sell were $14 million and $5 million for the three months ended ~~June 30,~~March 31, 2011 and 2010, werespectively. We also recorded $5impairments of $6 million ~~of impairments~~ related to ~~commercial mortgage loans~~financial hybrid securities and $4$7 million related to limited partnership investments. For the three months ended June 30, 2009, we recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year. We also recorded $5 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlandsinvestments during the three months ended ~~June 30, 2009.~~March 31, 2010.

Net investment losses related to derivatives of ~~$38~~$10 million in the ~~second~~first quarter of ~~2010~~2011 were primarily related to ~~$31~~$8 million of losses associated with derivative instruments used to hedge foreign currency risk, $4 million of losses from the change in the value of ~~our credit default swaps due to widening credit spreads, $21 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the~~ derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with guaranteed minimum withdrawal benefits (“GMWBs”) exceeding the change in value of the embedded derivative liabilities and $9$2 million of losses due to hedge ineffectiveness. These losses were partially offset by $3 million of gains from credit default swaps due to narrowing credit spreads and $1 million of gains related to a derivative strategy to mitigate ~~the~~ interest rate risk associated with our statutory capital position. These losses were partially offset by $15 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $4 million of gains from other non-qualified interest rate swaps, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $2 million of gains from foreign currency options and forward contracts. Net investment ~~gains~~losses related to derivatives of ~~$114~~$8 million in the ~~second~~first quarter of ~~2009~~2010 were primarily related to ~~gains~~$14 million of losses in derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of the embedded derivative ~~instruments used for mitigating this risk.~~

~~We also recorded $47 million of net losses related to securitization entities in the second quarter of 2010 primarily associated with derivatives~~liabilities and ~~$18~~$3 million of losses ~~related to commercial mortgage loans~~ from ~~a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance.~~ foreign

currency options. These losses were partially offset by $5 million of gains from credit default swaps utilized to improve our diversification and portfolio yield and $5 million of gains in non-qualified interest rate swaps.

Net ~~gains~~losses related to the sale of available-for-sale securities were ~~$17~~$2 million in the ~~second~~first quarter of ~~2010~~2011 compared to ~~losses of $27~~$15 million in the ~~second~~first quarter of ~~2009.~~2010. We also recorded $16 million from the recovery of a counterparty receivable in the first quarter of 2010.

Insurance and investment product fees and other. Insurance and investment product fees and other consist 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 and other fees.

Our Retirement and Protection segment increased ~~$50~~$78 million largely driven by an increase of ~~$23~~$39 million in our life insurance business, an increase of $29 million in our wealth management business ~~an increase of $13 million in our life insurance business~~ and an increase of ~~$11~~$8 million in our retirement income business.

~~Corporate and Other activities decreased $44 million.~~

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 life, long-term care and Medicare supplement insurance, structured settlements and single premium immediate annuities with life contingencies, lifestyle protection insurance and claim costs incurred related to mortgage insurance products.

Our Retirement and Protection segment increased ~~$66~~$44 million primarily attributable to a ~~$33 million increase in our life insurance business, a $23~~$34 million increase in our long-term care insurance business and a ~~$10~~$30 million increase in our life insurance business, partially offset by a $20 million decrease in our retirement income business.

Our International segment decreased ~~$63~~$33 million as a result of a decrease of ~~$44~~$36 million in our lifestyle protection insurance business, ~~and a decrease~~partially offset by an increase of ~~$19~~$3 million in our international mortgage insurance business. The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of ~~$10~~$6 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment ~~decreased $155~~increased $83 million.

Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.

Our Retirement and Protection segment decreased $8$6 million principally related to our retirement income business.

Corporate and Other activities decreased ~~$44~~$6 million.

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 primarily costs and expenses that vary with and are primarily related to the sale and issuance of our insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.

Our Retirement and Protection segment increased ~~$41~~$43 million primarily attributable to a ~~$17~~$26 million increase in our wealth management business, a ~~$15~~$14 million increase in our retirement income business and an $11 million increase in our long-term care insurance business, ~~and~~partially offset by an $8 million ~~increase~~decrease in our life insurance business.

Our International segment ~~increased $8~~decreased $5 million primarily related to ~~an $11 million increase in our international mortgage insurance business, partially offset by~~ a $3$6 million decrease in our lifestyle protection insurance business. The three months ended March 31, 2011 included a decrease of $2 million attributable to changes in foreign exchange rates.

Corporate and Other activities decreased $6$13 million.

Amortization of deferred acquisition costs and intangibles. Amortization of deferred acquisition costs and intangibles consists primarily of the amortization of acquisition costs that are capitalized, present value of future profits and capitalized software.

Our Retirement and Protection segment ~~decreased $34~~increased $6 million primarily attributable to an $18 million increase in our retirement income business, partially offset by a ~~$44~~$7 million decrease in our ~~retirement income~~life insurance business and a $5 million decrease in our long-term care insurance ~~business, partially offset by a $15 million increase in our life insurance~~ business.

Our International segment ~~was relatively flat as~~decreased $5 million primarily related to a $7$10 million decrease in our lifestyle protection insurance business, partially offset by a $5 million increase in our international mortgage insurance ~~business was offset by a $6 million decrease in our lifestyle protection insurance~~ business. The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of $2$1 million attributable to changes in foreign exchange rates.

Interest expense. Interest expense represents interest related to our borrowings that are incurred at our holding company or subsidiary level and our non-recourse funding obligations and interest expense related to certain reinsurance arrangements being accounted for as deposits.

Our Retirement and Protection segment increased $5$4 million ~~primarily~~ related to our life insurance business.

Our International segment decreased ~~$14~~$4 million related to a decrease of $10 million in our lifestyle protection insurance business, partially offset by a $6 million increase in our international mortgage insurance business. The three months ended March 31, 2011 included a decrease of $1 million attributable to changes in foreign exchange rates.

Corporate and ~~Other~~other activities increased $4$12 million.

~~Benefit~~Provision (benefit) for income ~~taxes~~taxes.. The effective tax rate ~~decreased~~increased to ~~(6.9)~~20.5% for the three months ended March 31, 2011 from (78.2)% for the three months ended ~~June 30, 2010 from 7.4% for the three months ended June 30, 2009.~~March 31, 2010. This ~~decrease~~increase in the effective tax rate was primarily attributable to ~~the favorable impact of newly enacted Australian tax legislation,~~changes in uncertain tax benefits in the prior year related to separation from our former parent, partially offset by lower taxed foreign income and tax favored ~~investments benefits recognized in the current year and from the effects of interim tax accounting standards in the prior year.~~investments. The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of $7$3 million attributable to changes in foreign exchange rates.

Net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests represents the portion of equity in a subsidiary attributable to third parties. The ~~increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The~~ three months ended ~~June 30, 2010~~March 31, 2011 included an increase of $4$2 million attributable to changes in foreign exchange rates.

Net income ~~(loss)~~ available to Genworth Financial, Inc.’s common stockholders. We reported lower net income available to Genworth Financial, Inc.’s common stockholders in the current year compared to ~~a net loss available to Genworth Financial, Inc.’s common stockholders in~~ the prior year primarily related to a ~~lower~~$106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010 and a higher net operating loss in our U.S. ~~mortgage insurance business.~~Mortgage Insurance segment in the current year. For a discussion of our Retirement and Protection, International and U.S. Mortgage Insurance segments and Corporate and Other activities, see the “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.” Included in net income available to Genworth Financial, Inc.’s common stockholders was an increase of ~~$12 million, net of tax, attributable to changes in foreign exchange rates.~~

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

~~The following table sets forth the consolidated results of operations for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 2,940    $ 3,004    $ (64 ) (2 )%
Net investment income
   1,588    1,492    96    6 %
Net investment gains (losses)
   (209 ) (823 ) 614    75 %
Insurance and investment product fees and other
   512    544    (32 ) (6 )%

Total revenues
   4,831    4,217    614    15 %

Benefits and expenses:

Benefits and other changes in policy reserves
   2,655    3,000    (345 ) (12 )%
Interest credited
   424    538    (114 ) (21 )%
Acquisition and operating expenses, net of deferrals
   974    897    77    9 %
Amortization of deferred acquisition costs and intangibles
   363    459    (96 ) (21 )%
Interest expense
   224    210    14    7 %

Total benefits and expenses
   4,640    5,104    (464 ) (9 )%

Income (loss) before income taxes
   191    (887 ) 1,078    122 %
Benefit for income taxes
   (98 ) (368 ) 270    73 %

Net income (loss)
   289    (519 ) 808    156 %
Less: net income attributable to noncontrolling interests
   69    —      69    NM ⁽¹⁾

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   $ 220    $ (519 ) $ 739    142 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

~~Premiums~~

Our Retirement and Protection segment decreased $18 million primarily related to a $23 million decrease in our life insurance business and a $17 million decrease in our retirement income business, partially offset by a $22 million increase in our long-term care insurance business.

Our International segment decreased $5 million as a result of a decrease of $64 million in our lifestyle protection insurance business, partially offset by a $59 million increase in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $93 million attributable to changes in foreign exchange rates.

~~Our U.S. Mortgage Insurance segment decreased $39 million.~~

~~Net investment income~~

Weighted-average investment yields increased to 4.6% for the six months ended June 30, 2010 from 4.3% for the six months ended June 30, 2009. The increase in weighted-average investment yields was primarily attributable to lower losses on limited partnerships. Net investment income for the six months ended June 30, 2010 included $116 million of lower losses related to limited partnerships accounted for under the equity method as compared to the six months ended June 30, 2009. Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of

January 1, 2010. These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.

~~The six months ended June 30, 2010 included an increase of $32 million attributable to changes in foreign exchange rates in our International segment.~~

~~Net investment gains (losses).~~~~For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”~~

We recorded $131 million of net other-than-temporary impairments for the six months ended June 30, 2010 as compared to $749 million for the six months ended June 30, 2009. Of total impairments, for the six months ended June 30, 2010 and 2009, $105 million and $389 million, respectively, related to structured securities, including $59 million and $268 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. Impairments related to corporate securities as a result of bankruptcies, receivership or concerns about the issuer’s ability to continue to make contractual payments or where we have intent to sell were $5 million and $59 million for the six months ended June 30, 2010 and 2009, respectively. We also recorded $6 million and $245 million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the six months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010, we recorded $10 million of impairments related to limited partnership investments and $5 million related to commercial mortgage loans. We recorded a $36 million impairment related to a retained interest in securitized assets based on revised assumptions regarding cash flows from the assets underlying this securitization transaction during the six months ended June 30, 2009. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year.

Net investment losses related to derivatives of $46 million for the six months ended June 30, 2010 were primarily related to $35 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs, $27 million of losses from the change in value of our credit default swaps due to widening credit spreads and $6 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. These losses were partially offset by $13 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $7 million of gains from other non-qualified interest rate swaps and $2 million of gains related to embedded derivatives associated with certain reinsurance agreements. Net investment losses related to derivatives of $7 million for the six months ended June 30, 2009 were primarily related to losses from a derivative strategy to mitigate the interest rate risk associated with our statutory capital position which were partially offset by gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.

We also recorded $36 million of net losses related to securitization entities primarily associated with derivatives and $22 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance during the six months ended June 30, 2010. There was also a net gain of $16 million from the recovery of a counterparty receivable in 2010. Net gains related to the sale of available-for-sale securities were $2 million during the six months ended June 30, 2010 compared to losses of $61 million during the six months ended June 30, 2009.

~~Insurance and investment product fees and other~~

Our Retirement and Protection segment increased $85 million largely driven by an increase of $40 million in our wealth management business, an increase of $24 million in our life insurance business and an increase of $19 million in our retirement income business.

~~Corporate and Other activities decreased $116 million.~~

~~Benefits and other changes in policy reserves~~

Our Retirement and Protection segment increased $98 million primarily attributable to a $69 million increase in our long-term care insurance business and a $39 million increase in our life insurance business, partially offset by a $10 million decrease in our retirement income business.

Our International segment decreased $81 million as a result of a decrease of $59 million in our lifestyle protection insurance business and a decrease of $22 million in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $35 million attributable to changes in foreign exchange rates.

~~Our U.S. Mortgage Insurance segment decreased $362 million.~~

~~Interest credited~~

~~Our Retirement and Protection segment decreased $20 million principally related to our retirement income business.~~

~~Corporate and Other activities decreased $94 million.~~

~~Acquisition and operating expenses, net of deferrals~~

Our Retirement and Protection segment increased $68 million primarily attributable to a $31 million increase in our wealth management business, a $21 million increase in our long-term care insurance business, a $12 million increase in our life insurance business and a $4 million increase in our retirement income business.

Our International segment increased $16 million related to an $18 million increase in our international mortgage insurance business, partially offset by a $2 million decrease in our lifestyle protection insurance business. The six months ended June 30, 2010 included an increase of $19 million attributable to changes in foreign exchange rates.

~~Corporate and Other activities decreased $9 million.~~

~~Amortization of deferred acquisition costs and intangibles~~

Our Retirement and Protection segment decreased $92 million primarily attributable to a $104 million decrease in our retirement income business and a $12 million decrease in our long-term care insurance business, partially offset by a $24 million increase in our life insurance business.

Our International segment was relatively flat as a $14 million decrease in our lifestyle protection insurance business was offset by a $13 million increase in our international mortgage insurance business. The six months ended June 30, 2010 included an increase of $10 million attributable to changes in foreign exchange rates.

~~Interest expense.~~ ~~Interest expense increased primarily related to a $12 million increase in Corporate and Other activities.~~

~~Benefit for income taxes~~. The effective tax rate decreased to (51.3)% for the six months ended June 30, 2010 from 41.5% for the six months ended June 30, 2009. This decrease in the effective tax rate was attributable to changes in uncertain tax benefits related to our separation from our former parent, favorable impact of newly enacted Australian tax legislation, ~~lower taxed foreign income and tax favored investments. The six months ended June 30, 2010 included an increase of $19 million attributable to changes in foreign exchange rates.~~

~~Net income attributable to noncontrolling interests~~. The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The six months ended June 30, 2010 included an increase of $9 million attributable to changes in foreign exchange rates.

~~Net income (loss) available to Genworth Financial, Inc.’s common stockholders.~~ We reported net income available to Genworth Financial, Inc.’s common stockholders in the current year compared to a net loss available to Genworth Financial, Inc.’s common stockholders in the prior year primarily related to additional tax benefits recognized in the current year, lower net investment losses and a lower loss in our U.S. mortgage insurance business. For a discussion of our Retirement and Protection, International and U.S. Mortgage Insurance segments and Corporate and Other activities, see the “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.” Included in net income available to Genworth Financial, Inc.’s common stockholders was an increase of $32 million, net of tax, attributable to changes in foreign exchange rates.

Reconciliation of net income ~~(loss)~~ to net operating income available to Genworth Financial, Inc.’s common stockholders

Net operating income available to Genworth Financial, Inc.’s common stockholders for the three months ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ was ~~$118~~$98 million and ~~$9 million, respectively. Net operating income available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2010 and 2009 was $232 million and $23~~$114 million, respectively. We define net operating income available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding net income attributable to noncontrolling interests, after-tax net investment gains (losses) and other adjustments and infrequent or unusual non-operating items. We exclude net investment gains (losses) and

infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A ~~significant~~ component of our net investment gains (losses) is the result of impairments, 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) ~~are often~~can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Infrequent or unusual non-operating items are also excluded from net operating income available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends. There were no infrequent or unusual non-operating items excluded from net operating income available to Genworth Financial, Inc.’s common stockholders during the periods presented other than a $106 million tax benefit related to separation from our former parent recorded in the first quarter of 2010.

While some of these items may be significant components of net income ~~(loss)~~ available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. ~~GAAP,~~generally accepted accounting principles (“U.S. GAAP”), we believe that net operating income available to Genworth Financial, Inc.’s common stockholders and measures that are derived from or incorporate net operating income available to Genworth Financial, Inc.’s common stockholders, including net operating income available to Genworth Financial, Inc.’s common stockholders per common 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. However, net operating income available to Genworth Financial, Inc.’s common stockholders ~~is not a substitute for~~and net operating income ~~(loss)~~ available to Genworth Financial, Inc.’s common stockholders per common share on a basic and diluted basis are not substitutes for net income available to Genworth Financial, Inc.’s common stockholders or net income available to Genworth Financial, Inc.’s common stockholders per common share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of net operating income available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.

The following table includes a reconciliation of net income ~~(loss)~~ to net operating income available to Genworth Financial, Inc.’s common stockholders for the periods indicated:


	Three months ended June 30,					Six months ended June 30,						Three months ended March 31,
(Amounts in millions)	2010		2009			2010			2009			2011		2010
Net income (loss)	$	77	$	(50	)	$	289		$	(519	)
Net income												$	116	$	212
Less: net income attributable to noncontrolling interests		35		—			69			—			34		34

Net income (loss) available to Genworth Financial, Inc.’s common stockholders		42		(50	)		220			(519	)
Adjustments to net income (loss) available to Genworth Financial, Inc.’s common stockholders:
Net income available to Genworth Financial, Inc.’s common stockholders													82		178
Adjustments to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		76		59			118			542			16		42
Net tax benefit related to separation from our former parent		—		—			(106	)		—			—		(106	)

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	118	$	9		$	232		$	23		$	98	$	114

Earnings ~~(loss)~~ per share

The following table provides basic and diluted net income ~~(loss)~~ available to Genworth Financial, Inc.’s common ~~stockholder~~stockholders and net operating income available to Genworth Financial, Inc.’s common stockholders per common share for the periods indicated:

   Three months ended
June 30, Six months ended
June 30,
(Amounts in millions, except per share amounts)
   2010    2009 2010    2009
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:

Basic
   $ 0.09    $ (0.11 ) $ 0.45    $ (1.20 )

Diluted
   $ 0.08    $ (0.11 ) $ 0.45    $ (1.20 )

Weighted-average common shares outstanding:

Basic
   489.1    433.2    489.0    433.2

Diluted⁽¹⁾
   494.2    433.2    493.9    433.2

⁽¹⁾


	Three months ended March 31,
(Amounts in millions, except per share amounts)	2011		2010
Net income available to Genworth Financial, Inc.’s common stockholders per common share:
Basic	$	0.17	$	0.36

Diluted	$	0.17	$	0.36

Net operating income available to Genworth Financial, Inc.’s common stockholders per common share:
Basic	$	0.20	$	0.23

Diluted	$	0.20	$	0.23

Weighted-average common shares outstanding:
Basic		490.1		488.8

Diluted		494.4		493.5

Diluted weighted-average shares outstanding ~~for 2010~~ reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation.

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 net operating income available to Genworth Financial, Inc.’s common stockholders. See note 1110 in our “—Notes to Condensed Consolidated Financial Statements” for a reconciliation of net operating income available to Genworth Financial, Inc.’s common stockholders of our segments and Corporate and Other activities to net income ~~(loss)~~ available to Genworth Financial, Inc.’s common stockholders.

Management’s discussion and analysis by segment also contains selected operating performance measures including “sales,” “assets under management” and “insurance in-force” or “risk in-force” which are commonly used in the insurance and investment industries as measures of operating performance.

Management regularly monitors and reports ~~the~~ sales ~~metric~~metrics as a measure of volume of new and renewal business generated in a period. Sales refer to: (1) annualized first-year premiums for term life, long-term care and Medicare supplement insurance; (2) new and additional premiums/deposits for universal and term universal life insurance, linked-benefits, spread-based and variable products; (3) gross flows and net flows, which represent gross flows less redemptions, for our wealth management business; (4) written premiums and deposits, gross of ceded reinsurance and cancellations, and premium equivalents, where we earn a fee for administrative services only business, for our lifestyle protection ~~insurance;~~insurance business; (5) new insurance written for mortgage insurance; and (6) written premiums net of cancellations for our Mexican insurance operations, which in each case reflects the amount of business we generated during each period ~~presented; and (6) written premiums, net of cancellations, for our Mexican insurance operations.~~presented. Sales do not include renewal premiums on policies or contracts written during prior periods. We consider annualized first-year premiums, new premiums/deposits, gross and net flows, written premiums, premium equivalents and new insurance written to be ~~measures~~a measure of our operating performance because they represent ~~measures~~a measure of new sales of insurance policies or contracts during a specified period, rather than ~~measures~~a measure of our revenues or profitability during that period.

Management regularly monitors and reports assets under management for our wealth management business, insurance in-force and risk in-force. Assets under management for our wealth management business represent third-party assets under management that are not consolidated in our financial statements. Insurance in-force for our life, international mortgage and U.S. mortgage insurance businesses is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. ~~Risk~~For our risk in-force ~~for~~in our international ~~and U.S.~~ mortgage insurance ~~businesses is a measure that~~business, we have computed an “effective” risk in-force amount, which recognizes that the loss on any particular ~~mortgage~~ loan will be reduced by the net proceeds received upon sale of the ~~underlying~~ property. Effective risk in-force has been calculated by applying to insurance in-force a factor of 35% that represents our highest expected average per-claim payment for any one underwriting year over the life of our businesses in Canada, Australia and New Zealand. Risk in-force for our U.S. mortgage insurance business is our obligation that is limited under contractual terms to the amounts less than 100% of the mortgage loan value. We consider assets under management for our wealth management business, insurance in-force and risk in-force to be ~~measures~~a measure of our operating performance because they represent ~~measures~~a measure of the size of our business at a specific date which will generate revenues and profits in a future period, rather than ~~measures~~a measure of our revenues or profitability during that period.

We also include ~~a metric~~information related to loss mitigation activities for our U.S. mortgage insurance business. We define loss mitigation activities as rescissions, cancellations, borrower loan modifications, repayment plans, lender- and borrower-titled ~~pre-sales~~presales and other loan workouts and claim mitigation actions. Estimated savings related to rescissions are the reduction in carried loss reserves, net of premium refunds and reinstatement of prior rescissions. Estimated savings related to loan modifications and other cure related loss mitigation actions represent the reduction in carried loss reserves. For non-cure related actions, including ~~pre-sales,~~presales, the estimated savings represent the difference between the full claim obligation and the actual amount paid. We believe that this ~~metric~~information helps to enhance the understanding of the operating performance of our U.S. mortgage insurance ~~business.~~business as they specifically impact current and future loss reserves and level of claim payments.

These operating 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.

The following discussions of our segment results of operations should be read in conjunction with the “—Business trends and conditions.”

Retirement and Protection segment

Segment results of operations

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:

   Three months ended
June 30,    Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010         2009            2010 vs. 2009
Revenues:

Premiums
   $ 822    $ 829    $ (7 ) (1 )%
Net investment income
   630    564    66    12 %
Net investment gains (losses)
   (69 ) 4    (73 ) NM ⁽¹⁾
Insurance and investment product fees and other
   260    210    50    24 %

Total revenues
   1,643    1,607    36    2 %

Benefits and expenses:

Benefits and other changes in policy reserves
   961    895    66    7 %
Interest credited
   176    184    (8 ) (4 )%
Acquisition and operating expenses, net of deferrals
   252    211    41    19 %
Amortization of deferred acquisition costs and intangibles
   104    138    (34 ) (25 )%
Interest expense
   29    24    5    21 %

Total benefits and expenses
   1,522    1,452    70    5 %

Income before income taxes
   121    155    (34 ) (22 )%
Provision for income taxes
   40    56    (16 ) (29 )%

Net income available to Genworth Financial, Inc.’s common stockholders
   81    99    (18 ) (18 )%
Adjustment to net income (loss) available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   33    24    9    38 %

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 114    $ 123    $ (9 ) (7 )%

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~


	Three months ended March 31,						Increase (decrease) and percentage change
(Amounts in millions)	2011			2010			2011 vs. 2010
Revenues:
Premiums	$	818		$	824		$	(6	)	(1	)%
Net investment income		628			594			34		6	%
Net investment gains (losses)		(28	)		(67	)		39		58	%
Insurance and investment product fees and other		320			242			78		32	%

Total revenues		1,738			1,593			145		9	%

Benefits and expenses:
Benefits and other changes in policy reserves		989			945			44		5	%
Interest credited		168			174			(6	)	(3	)%
Acquisition and operating expenses, net of deferrals		273			230			43		19	%
Amortization of deferred acquisition costs and intangibles		111			105			6		6	%
Interest expense		26			22			4		18	%

Total benefits and expenses		1,567			1,476			91		6	%

Income before income taxes		171			117			54		46	%
Provision for income taxes		59			33			26		79	%

Net income available to Genworth Financial, Inc.’s common stockholders		112			84			28		33	%
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		15			38			(23	)	(61	)%

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	127		$	122		$	5		4	%

The following table sets forth net operating income available to Genworth Financial, Inc.’s common stockholders for the businesses included in our Retirement and Protection segment for the periods indicated:


	Three months ended June 30,				Increase (decrease) and percentage change					Three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009					2011		2010		2011 vs. 2010
Net operating income available to Genworth Financial, Inc.’s common stockholders:
Life insurance	$	32	$	58	$	(26	)	(45	)%	$	52	$	37	$	15		41	%
Long-term care insurance		47		42		5		12	%		40		40		—		—	%
Wealth management		10		7		3		43	%		10		11		(1	)	(9	)%
Retirement income		25		16		9		56	%		25		34		(9	)	(26	)%

Total net operating income available to Genworth Financial, Inc.’s common stockholders	$	114	$	123	$	(9	)	(7	)%	$	127	$	122	$	5		4	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

Our life insurance business ~~decreased $26~~increased $15 million ~~primarily attributable to lower persistency on~~from growth in our universal and term universal life insurance ~~policies entering the post-level rate period~~products, an $8 million favorable cumulative impact from a recent change in premium taxes in Virginia and ~~increased claims as the result of higher~~favorable investment income, partially offset by less favorable mortality in our term life insurance products in the current year compared to the prior year. The prior year included an unfavorable reinsurance adjustment of $5 million and a favorable tax settlement that did not recur.

Our long-term care insurance business ~~increased $5 million~~was flat as ~~the favorable performance of newer issued policies and~~ higher investment ~~income were partially offset by lower terminations~~spread in the current ~~year.~~year was offset by higher claims as a result of the aging and growth of the in-force block.

Our wealth management business ~~increased $3 million from~~was relatively flat as higher average assets under management from ~~favorable equity~~ market ~~performance~~growth and positive net ~~flows.~~flows were offset by a $2 million favorable tax adjustment in the prior year that did not recur.

Our retirement income business ~~increased~~decreased $9 million. Our fee-based products decreased $6 million mainly attributable to an $8 million favorable adjustment to deferred acquisition costs in the prior year that did not recur and a $7 million charge in the first quarter of 2011 from the discontinuance of our variable annuity offerings announced in 2011, partially offset by favorable market performance. Our spread-based products ~~increased $24~~decreased $3 million primarily from an increase in ~~net investment income. Our fee-based products decreased $15 million mainly attributable~~an accrual related to ~~less favorable market performance.~~guarantee funds in the current year.

Revenues

Premiums

Our life insurance business decreased $9$7 million primarily ~~attributable to~~as a result of the ~~introduction~~runoff of our ~~term universal life insurance product that is designed to replace new sales of our existing~~ term life insurance products, ~~with fees associated with deposits~~partially offset by an unfavorable reinsurance adjustment of $8 million in the ~~new product reflected in insurance and investment product fees and other. The decrease was also from higher lapses on policies entering the post-level rate period.~~prior year that did not recur.

Our long-term care insurance business increased $8$17 million mainly attributable to growth ofin the in-force block from new ~~sales, renewal premiums and in-force rate actions.~~sales.

Our retirement income business decreased $6$16 million primarily driven by lower ~~life-contingent~~life contingent sales of our spread-based ~~products in the current market environment.~~products.

Net investment income

Our life insurance business increased ~~$11~~$24 million mainly related to ~~limited partnerships accounted for under the equity method. Net investment~~higher average invested assets, an increase in income ~~included $3 million of gains related to~~from limited partnerships accounted for under the equity method and reinvestment of cash balances. Net investment income included $2 million of gains related to limited partnerships in the ~~second~~first quarter of ~~2010~~2011 as compared to losses related to limited partnerships of $9$5 million in the ~~second~~first quarter of ~~2009.~~2010.

Our long-term care insurance business increased ~~$32~~$19 million largely as a result of an increase in average invested assets due to growth of our long-term care insurance in-force block. Additionally, net investment income in the ~~second~~first quarter of ~~2010~~2011 included lower losses of $3 million ~~of gains~~ related to limited partnerships accounted for under the equity method as compared to ~~losses~~the first quarter of $32010. These increases were partially offset by an unfavorable adjustment of $6 million related to the accounting for interest rate swaps in the ~~second quarter of 2009.~~current year.

Our retirement income business ~~increased $23~~decreased $9 million primarily attributable to a decline in average invested assets, partially offset by an increase in income from limited partnerships accounted for under the equity method. Net investment income in the first quarter of 2011 included $4gains of $1 million ~~of gains~~ related to limited partnerships ~~accounted for under the equity method in the second quarter of 2010~~ as compared to losses related to limited partnerships of ~~$17~~$4 million in the ~~second~~first quarter of 2009. Net investment income for our spread-based products also benefited from the reinvestment of the high cash balances we were holding during 2009. These increases were partially offset by a decline in average invested assets of our fee-based products.2010.

Net investment gains (losses).For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

Net investment losses in our life insurance business decreased ~~$35~~$26 million primarily driven by lower ~~losses~~impairments and higher gains from the sale of investment securities related to portfolio repositioning ~~and lower impairments recorded~~ in the current year.

Our long-term care insurance business had net investment ~~gains~~losses of $8 million in the current year mainly from ~~the sale of investment securities related to portfolio repositioning as~~impairments compared to net investment ~~losses~~gains of $2 million in the prior year primarily from derivative ~~losses related to our derivative strategy to mitigate interest rate risk associated with our statutory capital position.~~gains, partially offset by impairments.

~~Our~~Net investment losses in our retirement income business ~~had net investment losses in the current year~~decreased $23 million primarily ~~from losses~~related to higher gains related to embedded derivatives associated with our variable annuity products with GMWBs, ~~as compared to net investment gains related to those embedded derivatives in the prior year. The current year embedded derivative losses were~~ partially offset by ~~lower impairments.~~higher losses from the sale of investment securities related to portfolio repositioning.

Insurance and investment product fees and other

Our life insurance business increased ~~$13~~$39 million primarily from growth of our ~~new~~ term universal ~~life insurance product that is designed to replace sales of our traditional term~~and universal life insurance products.

Our wealth management business increased ~~$23~~$29 million primarily attributable to higher average assets under management from ~~favorable market performance and~~the purchase of Altegris in the fourth quarter of 2010, positive net flows ~~as gross flows exceeded redemptions.~~and market growth.

Our retirement income business increased ~~$11~~$8 million mainly ~~due to~~as a result of higher average account values ofin our fee-based products from favorable market ~~improvement in the second half of 2009 and the first quarter of 2010.~~performance.

Benefits and expenses

Benefits and other changes in policy reserves

Our life insurance business increased ~~$33~~$30 million principally related to ~~increased claims associated with higher~~growth of our term universal life insurance product and less favorable mortality in our term life insurance products ~~compared to the prior year and aging of the in-force block.~~

~~Our long-term care insurance business increased $23 million primarily as a result of the aging and growth of the in-force block and lower terminations~~ in ~~the current year.~~

Our retirement income business increased $10 million largely attributable to our fee-based products related to our guaranteed minimum benefit liabilities for our variable annuity contracts driven by unfavorable market impacts during the current year as compared to the prior year, partially offset by the runoff of our term life insurance products.

Our long-term care insurance business increased $34 million primarily as a result of the aging and growth of our long-term care insurance in-force block.

Our retirement income business decreased $20 million largely attributable to a decrease of $17 million from our life-contingent spread-based products as a result of a decline in sales in the current year. Our fee-based products decreased $3 million driven by a decline in our guaranteed minimum death benefit claims.

Interest credited. Interest credited decreased $8$6 million primarily related to our retirement income business from lower account values on fixed annuities and lower crediting rates as the fixed annuities reach the end of their initial crediting rate guarantee period.

Acquisition and operating expenses, net of deferrals

Our life insurance business ~~increased~~decreased $8 million primarily related to a $13 million favorable cumulative impact from a recent change in premium taxes in Virginia in the current year, partially offset by higher expenses from growth of our term universal life insurance ~~products.~~product.

Our long-term care insurance business increased ~~$15~~$11 million ~~related~~largely attributable to growth of our long-term care insurance in-force block.

Our wealth management business increased ~~$17~~$26 million primarily from increased asset-based expenses ~~as assets under management increased~~ from ~~favorable market impacts and positive net flows.~~

~~Our retirement income business remained relatively flat as higher costs associated with sales~~the acquisition of ~~our fee-based products were offset by lower sales of our spread-based products.~~

~~Amortization of deferred acquisition costs and intangibles~~

~~Our life insurance business increased $15 million primarily attributable to higher amortization related to lower persistency in our term life insurance products entering the post-level rate period.~~

~~Our long-term care insurance business decreased $5 million from lower terminations~~Altegris in the ~~current year, partially offset by growth~~fourth quarter of ~~our in-force block.~~

Our retirement income business decreased $44 million primarily related to a decrease of $29 million in our fee-based products largely attributable to a decrease in amortization of deferred acquisition costs from lower net investment gains, partially offset by an increase in amortization from unfavorable market performance in the current year. Our spread-based products decreased $15 million mainly from a $9 million favorable unlocking primarily related to lower lapse trends in the current year and lower amortization of deferred acquisition costs attributable to higher net investment losses.

~~Interest expense.~~ ~~Interest expense increased $5 million primarily related to our life insurance business from higher costs associated with the issuance of letters of credit related to reinsurance transactions.~~

~~Provision for income taxes.~~~~The effective tax rate decreased to 33.1% for the three months ended June 30,~~ 2010, from 36.1% for the three months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to a revision in the state effective tax rate in the prior year and tax favored investments recognized in the current year.

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

~~The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 1,646    $ 1,664    $ (18 ) (1 )%
Net investment income
   1,224    1,083    141    13 %
Net investment gains (losses)
   (136 ) (570 ) 434    76 %
Insurance and investment product fees and other
   502    417    85    20 %

Total revenues
   3,236    2,594    642    25 %

Benefits and expenses:

Benefits and other changes in policy reserves
   1,906    1,808    98    5 %
Interest credited
   350    370    (20 ) (5 )%
Acquisition and operating expenses, net of deferrals
   482    414    68    16 %
Amortization of deferred acquisition costs and intangibles
   209    301    (92 ) (31 )%
Interest expense
   51    50    1    2 %

Total benefits and expenses
   2,998    2,943    55    2 %

Income (loss) before income taxes
   238    (349 ) 587    168 %
Provision (benefit) for income taxes
   73    (132 ) 205    155 %

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   165    (217 ) 382    176 %
Adjustment to net income (loss) available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   71    378    (307 ) (81 )%

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 236    $ 161    $ 75    47 %

~~The following table sets forth net operating income for the businesses included in our Retirement and Protection segment for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010            2009       2010 vs. 2009
Net operating income available to Genworth Financial, Inc.’s common stockholders:

Life insurance
   $ 69    $ 96    $ (27 ) (28 )%
Long-term care insurance
   87    83    4    5 %
Wealth management
   21    13    8    62 %
Retirement income
   59    (31 ) 90    NM ⁽¹⁾

Total net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 236    $ 161    $ 75    47 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

~~Net operating income available to Genworth Financial, Inc.’s common stockholders~~

Our life insurance business decreased $27 million primarily in our term life insurance products attributable to higher mortality compared to the prior year, lower persistency in the post-level rate period and an unfavorable reinsurance adjustment of $5 million, partially offset by higher net investment income and a favorable tax settlement in the current year.

Our long-term care insurance business increased $4 million as the favorable performance of newer issued policies and higher investment income in the current year were partially offset by higher claims in older issued policies and lower terminations in the current year.

~~Our wealth management business increased $8 million from higher average assets under management from favorable equity market performance and~~ positive net flows and ~~a $2 million favorable tax adjustment in the current year.~~market growth.

Our retirement income business increased ~~$90 million. Our spread-based products increased $61~~$14 million ~~primarily~~largely driven by a $9 million charge in the first quarter of 2011 from the discontinuance of our variable annuity offerings announced in 2011 and an increase of $4 million from an ~~increase in net investment income. Our fee-based products increased $29 million mainly attributable~~accrual related to ~~lower amortization of deferred acquisition costs from increases in the equity market performance.~~

~~Revenues~~

~~Premiums~~

Our life insurance business decreased $23 million mainly attributable to the introduction of our term universal life insurance product that is designed to replace new sales of our existing term life insurance products with fees associated with deposits of the new product reflected in insurance and investment product fees and other. The decrease was also a result of an unfavorable reinsurance adjustment of $8 million and higher lapses on policies entering the post-level rate periodguarantee funds in the current year.

~~Our long-term care insurance business increased $22 million mainly attributable to growth of the in-force block from new sales, renewal premiums and in-force rate actions.~~

~~Our retirement income business decreased $17 million primarily driven by lower life-contingent sales of our spread-based products in the current market environment.~~

~~Net investment income~~

Our life insurance business increased $14 million mainly related to $24 million of lower losses in the current year related to limited partnerships accounted for under the equity method. This increase was partially offset by a decline in average invested assets related to our term life insurance products and lower yields on the assets backing our non-recourse funding obligations supporting certain term and universal life insurance reserves.

Our long-term care insurance business increased $64 million largely as a result of an increase in average invested assets due to growth of our in-force block. Additionally, net investment income in the current year included $17 million of lower losses related to limited partnerships accounted for under the equity method.

Our retirement income business increased $63 million primarily attributable to $78 million of lower losses related to limited partnerships accounted for under the equity method. Net investment income for our spread-based products also benefited from the reinvestment of the high cash balances we were holding during 2009. These increases were partially offset by a decline in average invested assets of our fee-based products.

Net investment losses in our life insurance business decreased $169 million primarily driven by lower losses from the sale of investment securities related to portfolio repositioning and lower impairments recorded in the current year.

Our long-term care insurance business had net investment gains in the current year from the sale of investment securities related to portfolio repositioning as compared to net investment losses in the prior year from derivative losses related to our derivative strategy to mitigate interest rate risk associated with our statutory capital position.

Net investment losses in our retirement income business decreased $16 million primarily related to lower impairments recorded in the current year which were partially offset by higher losses related to embedded derivatives associated with our variable annuity products with GMWBs.

~~Insurance and investment product fees and other~~

Our life insurance business increased $24 million primarily from growth of our new term universal life insurance product that is designed to replace sales of our traditional term life insurance products.

Our wealth management business increased $40 million primarily attributable to higher average assets under management from favorable market impacts and positive net flows as gross flows exceeded redemptions.

Our retirement income business increased $19 million mainly due to higher average account values of our fee-based products from market improvement in the second half of 2009 and the first quarter of 2010.

~~Benefits and expenses~~

~~Benefits and other changes in policy reserves~~

Our life insurance business increased $39 million principally related to increased claims associated with higher mortality in our term life insurance products compared to the prior year and aging of our life insurance products.

Our long-term care insurance business increased $69 million primarily as a result of the aging and growth of the in-force block, higher claims in older issued policies and lower terminations in the current year.

Our retirement income business decreased $10 million attributable to a decrease of $5 million from our fee-based products related to a decrease in guaranteed minimum death benefit claims, partially offset by an increase related to our guaranteed minimum benefit liabilities driven by unfavorable market performance in the current year. Our life-contingent spread-based products decreased $5 million driven by a decline in sales in the current market environment, partially offset by higher amortization of sales inducements as a result of lower net investment losses in the current year.

~~Interest credited.~~ Interest credited decreased $20 million primarily related to our retirement income business from lower account values on fixed annuities and lower crediting rates as the fixed annuities reach the end of their initial crediting rate guarantee period.

~~Acquisition and operating expenses, net of deferrals~~

~~Our life insurance business increased $12 million primarily from growth of our life insurance products.~~

~~Our long-term care insurance business increased $21 million related to growth of our in-force block.~~

~~Our wealth management business increased $31 million primarily from increased asset-based expenses as assets under management increased from favorable market impacts and positive net flows.~~

~~Our retirement income business increased $4 million primarily from higher costs associated with sales of our fee-based products, partially offset by lower sales of our spread-based products.~~

Amortization of deferred acquisition costs and intangibles

Our life insurance business ~~increased $24~~decreased $7 million primarily attributable to lower amortization related to our term life insurance policies coming out of their post-level rate period and a decrease in amortization of present value of future profits driven by higher mortality in our universal life insurance products. These decreases were partially offset by an increase in amortization ~~related~~due to ~~lower persistency in~~growth of our ~~term~~universal life insurance ~~products entering the post-level rate period.~~products.

Our long-term care insurance business decreased ~~$12~~$5 million primarily from ~~lower terminations~~deferring costs associated with the sale of joint policies that were incorrectly expensed in prior years as a result of a system conversion in late 2008 that was identified and corrected in the ~~current year,~~fourth quarter of 2010. This decrease was partially offset by growth of our long-term care insurance in-force block.

Our retirement income business ~~decreased $104~~increased $18 million primarily related to ~~a decrease~~an increase of ~~$107~~$13 million in our fee-based products ~~largely attributable to lower amortization of deferred acquisition costs~~principally from ~~improved equity market performance. The decrease was also related to~~ a $12 million favorable adjustment recorded in the ~~current year. The~~ prior year ~~included additional amortization of deferred acquisition costs of $54 million from loss recognition testing~~ that did not recur. ~~This decrease was partially offset by an increase of $3 million in our~~Our spread-based products increased $5 million mainly from ~~higher amortization of deferred acquisition costs attributable~~less favorable adjustments related to ~~lower net investment losses~~lapses in the current year, partially offset by a $9decrease in the account values of these products.

Interest expense. Interest expense increased $4 million ~~favorable unlocking primarily~~ related to ~~lower lapse trends~~our life insurance business from higher letter of credit fees in the current year.

Provision ~~(benefit)~~ for income taxes.The effective tax rate ~~decreased~~increased to ~~30.7%~~34.5% for the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 from ~~37.8%~~28.2% for the ~~six~~three months ended ~~June 30, 2009. This decrease~~March 31, 2010. The increase in the effective tax rate was primarily attributable to the proportion of tax favored ~~investments recognized~~investment benefits to pre-tax results in the current year compared to the prior year and ~~the relationship of~~a change in uncertain tax ~~favored investments recognized~~positions in the prior ~~year to the pre-tax loss.~~year.

Retirement and Protection selected financial and operating performance measures

Life insurance

The following ~~tables set~~table sets forth selected operating performance measures regarding our life insurance business as of or for the dates indicated:


	Three months ended June 30,				Increase (decrease) and percentage change					Six months ended June 30,				Increase (decrease) and percentage change					As of or for the three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009					2010		2009		2010 vs. 2009					2011		2010		2011 vs. 2010
Term life insurance
Net earned premiums	$	228	$	238	$	(10	)	(4	)%	$	452	$	475	$	(23	)	(5	)%	$	219	$	224	$	(5	)	(2	)%
Annualized first-year premiums		4		18		(14	)	(78	)%		18		37		(19	)	(51	)%		—		14		(14	)	(100	)%
Life insurance in-force, net of reinsurance																				452,116		472,696		(20,580	)	(4	)%
Life insurance in-force before reinsurance																				587,545		620,108		(32,563	)	(5	)%

Term universal life insurance
Net deposits	$	14	$	—	$	14		NM	⁽¹⁾	$	19	$	—	$	19		NM	⁽¹⁾	$	35	$	5	$	30		NM	⁽¹⁾
Term universal life annualized first-year deposits		24		—		24		NM	⁽¹⁾		34		—		34		NM	⁽¹⁾
Annualized first-year deposits																				31		10		21		NM	⁽¹⁾
Life insurance in-force, net of reinsurance																				58,371		5,453		52,918		NM	⁽¹⁾
Life insurance in-force before reinsurance																				58,811		5,456		53,355		NM	⁽¹⁾

Universal and whole life insurance
Net earned premiums and deposits	$	121	$	116	$	5		4	%	$	239	$	240	$	(1	)	—	%	$	162	$	118	$	44		37	%
Universal life annualized first-year deposits		10		8		2		25	%		17		17		—		—	%		11		7		4		57	%
Universal life excess deposits		28		23		5		22	%		48		51		(3	)	(6	)%		36		20		16		80	%
Linked-benefits⁽²⁾																				23		—		23		NM	⁽¹⁾
Life insurance in-force, net of reinsurance																				44,131		43,712		419		1	%
Life insurance in-force before reinsurance																				50,855		50,655		200		—	%

Total life insurance
Net earned premiums and deposits	$	363	$	354	$	9		3	%	$	710	$	715	$	(5	)	(1	)%	$	416	$	347	$	69		20	%
Annualized first-year premiums		4		18		(14	)	(78	)%		18		37		(19	)	(51	)%		—		14		(14	)	(100	)%
Annualized first-year deposits		34		8		26		NM	⁽¹⁾		51		17		34		200	%		42		17		25		147	%
Excess deposits		28		23		5		22	%		48		51		(3	)	(6	)%
Universal life excess deposits																				36		20		16		80	%
Linked-benefits⁽²⁾																				23		—		23		NM	⁽¹⁾
Life insurance in-force, net of reinsurance																				554,618		521,861		32,757		6	%
Life insurance in-force before reinsurance																				697,211		676,219		20,992		3	%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

   As of June 30,    Percentage
change
(Amounts in millions)
   2010    2009    2010 vs. 2009
Term life insurance

Life insurance in-force, net of reinsurance
   $ 468,098    $ 477,759    (2 )%
Life insurance in-force before reinsurance
   612,284    623,139    (2 )%
Term universal life insurance

Life insurance in-force, net of reinsurance
   $ 17,754    $ —      NM ⁽¹⁾
Life insurance in-force before reinsurance
   17,820    —      NM ⁽¹⁾
Universal and whole life insurance

Life insurance in-force, net of reinsurance
   $ 43,743    $ 43,800    —   %
Life insurance in-force before reinsurance
   50,617    50,994    (1 )%
Total life insurance

Life insurance in-force, net of reinsurance
   $ 529,595    $ 521,559    2 %
Life insurance in-force before reinsurance
   680,721    674,133    1 %

⁽¹⁾⁽²⁾

~~We define “NM” as~~In the first quarter of 2011, we began reporting the results of the linked-benefits product for universal life insurance in our life insurance business. The linked-benefits product for universal life insurance was previously reported in our long-term care insurance business. The amounts associated with this product were not ~~meaningful for increases or decreases greater than 200%.~~material and the prior period amounts were not re-presented.

Term life insurance

Net earned premiums decreased mainly as a result of ~~lower sales in~~ the ~~current year from the introduction~~runoff of our ~~term universal life insurance product that is designed to replace new sales of our existing~~ term life insurance products, ~~and higher lapses on policies entering the post-level rate period. For the six months ended June 30, 2010, the decrease was also attributable to~~partially offset by an unfavorable reinsurance adjustment of $8 million in the ~~first quarter of 2010. Annualized first-year premiums~~prior year that did not recur. The in-force block also decreased ~~as we focused on sales of our new term universal life insurance product.~~due to runoff.

Term universal life insurance

InNet deposits increased due to growth of this product since its introduction in late 2009, we introduced a new term universal life insurance product that is designed to replace new sales of our existing term life insurance products. This new product provides greater flexibility typically associated with universal life insurance coverage.2009.

Universal and whole life insurance

~~Annualized first-year~~Net earned premiums and deposits ~~remained relatively flat as we maintained~~increased due primarily to the growth of our ~~focus on smaller face amounts.~~universal life insurance products. The in-force block was relatively flat as the growth ofin our universal life insurance products was offset by the continued runoff of our closed block of the whole life ~~insurance.~~insurance product.

Long-term care insurance

The following table sets forth selected financial and operating performance measures regarding our long-term care insurance business, which includes individual and group long-term care insurance, Medicare supplement insurance, ~~linked-benefits products,~~ as well as several runoff blocks of accident and health insurance for the periods indicated:


	Three months ended June 30,				Increase (decrease) and percentage change				Six months ended June 30,				Increase (decrease) and percentage change
(Amounts in millions)																	Three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009				2010		2009		2010 vs. 2009				2011		2010		2011 vs. 2010
Net earned premiums:
Long-term care	$	480	$	478	$	2	—	%	$	959	$	953	$	6	1	%	$	492	$	479	$	13		3	%
Medicare supplement and other		78		72		6	8	%		158		142		16	11	%		84		80		4		5	%

Total	$	558	$	550	$	8	1	%	$	1,117	$	1,095	$	22	2	%	$	576	$	559	$	17		3	%

Annualized first-year premiums and deposits	$	60	$	44	$	16	36	%	$	127	$	91	$	36	40	%	$	65	$	67	$	(2	)	(3	)%

Net earned premiums increased mainly attributable to growth ofin our in-force block from new ~~sales, renewal premiums and in-force rate actions.~~ sales.

The ~~increase~~decrease in annualized first-year premiums and deposits was primarily attributable to ~~growth~~our linked-benefits products. In the first quarter of 2011, we began reporting the results of the linked-benefits products for universal life insurance and single premium deferred annuity products in our ~~individual~~life insurance and ~~group~~spread-based retirement income businesses, respectively. The linked-benefits products were previously reported in our long-term care insurance ~~and linked-benefits~~business. This decrease was partially offset by growth in our individual long-term care insurance products.

Wealth management

The following table sets forth selected financial performance measures regarding our wealth management business as of or for the dates indicated:

   As of or for the three
months ended June 30, As of or for the six
months ended June 30,
(Amounts in millions)
       2010         2009         2010         2009
Assets under management, beginning of period
   $ 20,037    $ 14,210    $ 18,865    $ 15,447
Gross flows
   1,362    1,113    2,837    1,909
Redemptions
   (926 ) (953 ) (1,897 ) (2,227 )

Net flows
   436    160    940    (318 )
Market performance
   (925 ) 1,539    (257 ) 780

Assets under management, end of period
   $ 19,548    $ 15,909    $ 19,548    $ 15,909

   As of or for the three
months ended March 31,
(Amounts in millions)
       2011         2010
Assets under management, beginning of period
   $ 24,740    $ 18,865
Gross flows
   2,058    1,475
Redemptions
   (1,703 ) (971 )

Net flows
   355    504
Market performance
   456    668

Assets under management, end of period
   $ 25,551    $ 20,037

Wealth ~~management~~Management results represent Genworth Financial Wealth Management, Inc., Genworth Financial Investment Services, Inc., Genworth Financial Trust Company, Centurion Financial Advisers, Inc., Quantavis Consulting, Inc. and ~~Quantuvis Consulting, Inc.~~the Altegris companies.

The increase in assets under management was ~~primarily~~ attributable to ~~favorable equity market performance and~~the acquisition of Altegris on December 31, 2010, positive net ~~flows.~~flows and market growth.

Retirement income

Fee-based products

The following table sets forth selected operating performance measures regarding our fee-based products as of or for the dates indicated:


	As of or for the three months ended June 30,						As of or for the six months ended June 30,						As of or for the three months ended March 31,
(Amounts in millions)	2010			2009			2010			2009			2011			2010
Income Distribution Series⁽¹⁾
Account value, net of reinsurance, beginning of period	$	6,135		$	5,093		$	5,943		$	5,234
Account value, beginning of period													$	6,590		$	5,943
Deposits		141			133			314			258			117			173
Surrenders, benefits and product charges		(150	)		(109	)		(277	)		(215	)		(185	)		(127	)

Net flows		(9	)		24			37			43			(68	)		46
Interest credited and investment performance		(162	)		169			(16	)		9			165			146

Account value, net of reinsurance, end of period	$	5,964		$	5,286		$	5,964		$	5,286
Account value, end of period													$	6,687		$	6,135

Traditional variable annuities
Account value, net of reinsurance, beginning of period	$	2,048		$	1,642		$	2,016		$	1,756		$	2,078		$	2,016
Deposits		25			16			52			35			17			27
Surrenders, benefits and product charges		(70	)		(60	)		(135	)		(123	)		(88	)		(65	)

Net flows		(45	)		(44	)		(83	)		(88	)		(71	)		(38	)
Interest credited and investment performance		(124	)		198			(54	)		128			89			70

Account value, net of reinsurance, end of period	$	1,879		$	1,796		$	1,879		$	1,796		$	2,096		$	2,048

Variable life insurance
Account value, beginning of period	$	303		$	248		$	298		$	266		$	313		$	298
Deposits		3			3			6			7			3			3
Surrenders, benefits and product charges		(8	)		(9	)		(18	)		(20	)		(11	)		(10	)

Net flows		(5	)		(6	)		(12	)		(13	)		(8	)		(7	)
Interest credited and investment performance		(19	)		29			(7	)		18			14			12

Account value, end of period	$	279		$	271		$	279		$	271		$	319		$	303

⁽¹⁾

The Income Distribution Series products are comprised of our deferred and immediate variable annuity products, including those variable annuity products with rider options that provide guaranteed income benefits, including GMWBs and certain types of guaranteed annuitization benefits. These products do not include fixed single premium immediate annuities or deferred annuities, which may also serve income distribution needs.

Income Distribution Series

Account value related to our Income Distribution Series products increased from the prior year mainly attributable to ~~positive net flows and favorable~~ market ~~performance~~growth, partially offset by surrenders outpacing sales. Beginning in ~~the second half of 2009 and~~ the first quarter of ~~2010. Net flows decreased during the second quarter~~2011, we no longer solicit sales of ~~2010 due~~our variable annuities; however, we continue to ~~unfavorable equity market impacts.~~service our existing block of business and accept additional deposits on existing contracts.

Traditional variable annuities

In our traditional variable annuities, the increase in account value from the prior year was principally ~~the~~as a result of ~~improved equity~~ market ~~performance in the second half of 2009,~~growth, partially offset by surrenders outpacing sales. Beginning in the first quarter of 2011, we no longer solicit sales of our variable annuities; however, we continue to service our existing block of business and accept additional deposits on existing contracts.

Variable life insurance

We no longer solicit sales of this product; however, we continue to service our existing block of business.

Spread-based products

The following table sets forth selected operating performance measures regarding our spread-based products as of or for the dates indicated:


	As of or for the three months ended June 30,						As of or for the six months ended June 30,						As of or for the three months ended March 31,
(Amounts in millions)	2010			2009			2010			2009			2011			2010
Fixed annuities
Account value, beginning of period													$	10,819		$	11,409
Deposits														120			41
Surrenders, benefits and product charges														(368	)		(312	)

Net flows														(248	)		(271	)
Interest credited														89			96

Account value, end of period													$	10,660		$	11,234

Single premium immediate annuities
Account value, beginning of period													$	6,528		$	6,675
Premiums and deposits														85			95
Surrenders, benefits and product charges														(256	)		(265	)

Net flows														(171	)		(170	)
Interest credited														83			88
Effect of accumulated net unrealized investment gains (losses)														(29	)		—

Account value, end of period													$	6,411		$	6,593

Structured settlements
Account value, net of reinsurance, beginning of period	$	11,234		$	11,833		$	11,409		$	11,996		$	1,113		$	1,115
Deposits		92			229			133			471
Surrenders, benefits and product charges		(304	)		(394	)		(616	)		(902	)		(15	)		(14	)

Net flows		(212	)		(165	)		(483	)		(431	)		(15	)		(14	)
Interest credited		95			102			191			205			15			14

Account value, net of reinsurance, end of period	$	11,117		$	11,770		$	11,117		$	11,770		$	1,113		$	1,115

Single premium immediate annuities
Account value, net of reinsurance, beginning of period	$	6,593		$	6,925		$	6,675		$	6,957
Premiums and deposits		100			101			195			212
Surrenders, benefits and product charges		(251	)		(289	)		(516	)		(525	)
Total premiums from spread-based products													$	20		$	36

Net flows		(151	)		(188	)		(321	)		(313	)
Interest credited		87			90			175			183
Total deposits on spread-based products													$	185		$	100

Account value, net of reinsurance, end of period	$	6,529		$	6,827		$	6,529		$	6,827

Structured settlements
Account value, net of reinsurance, beginning of period	$	1,115		$	1,101		$	1,115		$	1,106
Premiums and deposits		—			6			—			10
Surrenders, benefits and product charges		(15	)		(5	)		(29	)		(28	)

Net flows		(15	)		1			(29	)		(18	)
Interest credited		15			15			29			29

Account value, net of reinsurance, end of period	$	1,115		$	1,117		$	1,115		$	1,117

Total premiums from spread-based retail products	$	32		$	38		$	68		$	85

Total deposits on spread-based retail products	$	160		$	298		$	260		$	608

Fixed annuities

Account value of our fixed annuities decreased as surrenders exceeded deposits. Sales have ~~slowed significantly~~increased over the prior year but remain at lower levels given the low interest rate environment and other market ~~conditions and changes in the product management strategy.~~conditions.

Single premium immediate annuities

Account value of our single premium immediate annuities decreased as surrenders exceeded ~~deposits~~premiums and ~~premiums.~~deposits. Sales have slowed ~~significantly~~ given the low interest rate environment and other market ~~conditions and changes in the product management strategy.~~conditions.

Structured settlements

We no longer solicit sales of this product; however, we continue to service our existing block of business.

International segment

Segment results of operations

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

The following table sets forth the results of operations relating to our International segment for the periods indicated:

Three months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
    2010         2009     2010 vs. 2009
Revenues:

Premiums
$ 495    $ 508    $ (13 ) (3 )%
Net investment income
127    122    5    4 %
Net investment gains (losses)
1    4    (3 ) (75 )%
Insurance and investment product fees and other
(1 ) 5    (6 ) (120 )%

Total revenues
622    639    (17 ) (3 )%

Benefits and expenses:

Benefits and other changes in policy reserves
163    226    (63 ) (28 )%
Acquisition and operating expenses, net of deferrals
205    197    8    4 %
Amortization of deferred acquisition costs and intangibles
67    66    1    2 %
Interest expense
10    24    (14 ) (58 )%

Total benefits and expenses
445    513    (68 ) (13 )%

Income before income taxes
177    126    51    40 %
Provision for income taxes
35    36    (1 ) (3 )%

Net income
142    90    52    58 %
Less: net income attributable to noncontrolling interests
35    —      35    NM ⁽¹⁾

Net income available to Genworth Financial, Inc.’s common stockholders
107    90    17    19 %
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
(2 ) (3 ) 1    33 %

Net operating income available to Genworth Financial, Inc.’s common stockholders
$ 105    $ 87    $ 18    21 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

   Three months ended
March 31, Increase
(decrease) and
percentage
change
(Amounts in millions)
       2011         2010     2011 vs. 2010
Revenues:

Premiums
   $ 477    $ 504    $ (27 ) (5 )%
Net investment income
   143    132    11    8 %
Net investment gains (losses)
   6    9    (3 ) (33 )%
Insurance and investment product fees and other
   6    6    —      —   %

Total revenues
   632    651    (19 ) (3 )%

Benefits and expenses:

Benefits and other changes in policy reserves
   141    174    (33 ) (19 )%
Acquisition and operating expenses, net of deferrals
   198    203    (5 ) (2 )%
Amortization of deferred acquisition costs and intangibles
   67    72    (5 ) (7 )%
Interest expense
   19    23    (4 ) (17 )%

Total benefits and expenses
   425    472    (47 ) (10 )%

Income before income taxes
   207    179    28    16 %
Provision for income taxes
   46    50    (4 ) (8 )%

Net income
   161    129    32    25 %
Less: net income attributable to noncontrolling interests
   34    34    —      —   %

Net income available to Genworth Financial, Inc.’s common stockholders
   127    95    32    34 %
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (3 ) (4 ) 1    25 %

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 124    $ 91    $ 33    36 %

The following table sets forth net operating income available to Genworth Financial, Inc.’s common stockholders for the businesses included in our International segment for the periods indicated:


	Three months ended June 30,				Increase (decrease) and percentage change				Three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009				2011		2010		2011 vs. 2010
Net operating income available to Genworth Financial, Inc.’s common stockholders:
International mortgage insurance	$	93	$	83	$	10	12	%	$	99	$	79	$	20	25	%
Lifestyle protection insurance		12		4		8	200	%		25		12		13	108	%

Total net operating income available to Genworth Financial, Inc.’s common stockholders:	$	105	$	87	$	18	21	%
Total net operating income available to Genworth Financial, Inc.’s common stockholders									$	124	$	91	$	33	36	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of ~~$14~~$7 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the effect of foreign exchange, the decrease in our international mortgage insurance business was primarily driven by the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5% resulting in lower net operating income of $35 million, which included $4 million attributable to changes in foreign exchange rates, in the second quarter of 2010. Excluding the impact related to noncontrolling interests, netNet operating income for our international mortgage insurance business increased ~~primarily due to~~from overall lower losses ~~in Canada~~ and ~~Australia. There was also a benefit from newly enacted Australian tax legislation in the current year.~~taxes, partially offset by higher interest expense.

Net operating income for our lifestyle protection insurance business increased ~~from a decrease in~~attributable to lower new claim registrations from ~~stabilization of~~improving economic conditions and a favorable impact from our re-pricing actions ~~that we began~~taken in ~~the second half of 2009,~~2010, partially offset by ~~lower sales from~~ reduced levels of consumer lending.

Revenues

Premiums

Our international mortgage insurance business increased ~~$27~~$16 million and our lifestyle protection insurance business decreased ~~$40~~$43 million.

The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of ~~$31~~$17 million and a decrease of $6$7 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the effects of foreign exchange, our international mortgage insurance business was relatively flat. In both Canada and Australia, lower premiums were attributable to seasoning of our in-force blocks of business. This decrease was offset by lower ceded affiliated reinsurance in Australia in the current year. In Europe, premiums decreased as a result of lender settlements in the prior year and ongoing loss mitigation activities.

The decrease in our lifestyle protection insurance business was primarily attributable to our runoff block of business and a decrease in premium volume driven by reduced levels of consumer lending. Additionally, there was a favorable premium adjustment related to the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the first quarter of 2010 both of which were offset in expenses. These decreases were partially offset by re-pricing actions taken during 2010.

Net investment income

Our international mortgage insurance business increased $10 million and our lifestyle protection insurance business increased $1 million.

The three months ended March 31, 2011 included an increase of $7 million and a decrease of $2 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The increase in our international mortgage insurance business was primarily as a result of higher average invested assets in Canada and Australia.

The increase in our lifestyle protection insurance business was principally attributable to reinsurance arrangements accounted for under the deposit method as these arrangements were in a gain position.

Benefits and expenses

Benefits and other changes in policy reserves

Our international mortgage insurance business increased $3 million and our lifestyle protection insurance business decreased $36 million.

The three months ended March 31, 2011 included an increase of $7 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was primarily driven by lower losses in Europe related to ~~Australia as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums~~lender settlements in the ~~second quarter of 2010~~prior year and ~~lower new business volumes.~~

The decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions that we began in the second half of 2009.

~~Net investment income~~

~~Our international mortgage insurance business increased $14 million and our lifestyle protection insurance business decreased $9 million.~~

The three months ended June 30, 2010 included an increase of $12 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~Our international mortgage insurance business~~ongoing loss mitigation activities. Australia was relatively flat as an increase in ~~invested assets~~reserves driven by the economic impact of recent flooding was offset by lower ~~yields.~~

~~The decrease~~paid claims. Losses in ~~our lifestyle protection insurance business~~Canada were flat as lower severity from overall economic improvement in the current year was principally attributable to reinsurance arrangements accounted for under the deposit method and a decrease in average invested assets. In 2009, we made a reclassification adjustment to interest expense related to our reinsurance arrangements that were in a loss position that did not recur.

~~Benefits and expenses~~

~~Benefits and other changes in policy reserves~~

~~Our international mortgage insurance business decreased $19 million and our lifestyle protection insurance business decreased $44 million.~~

The three months ended June 30, 2010 included an increase of $11 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~The decrease in our international mortgage insurance business was primarily related to Canada and Australia. In Canada, losses declined driven~~offset by ~~lower~~higher new delinquencies ~~from an improving economy. In Australia, losses decreased as~~in Alberta which have a ~~result of lower reserves~~higher average reserve per ~~delinquency primarily from an improving economy.~~delinquency.

The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations ~~as a result of~~driven by continued stabilization of economic conditions in Europe. ~~These decreases were partially offset by a favorable reserve adjustment in the second quarter of 2009 that did not recur.~~

Acquisition and operating expenses, net of deferrals.Acquisition and operating expenses, net of deferrals,

~~Our international mortgage insurance business increased $11~~ decreased $5 million ~~and~~largely attributable to our lifestyle protection insurance business ~~decreased $3 million.~~

from a decrease in paid commissions related to a decline in new business, partially offset by an increase in profit commissions driven by lower claims. Additionally, there was a favorable commission adjustment in the first quarter of 2010 that was offset in premiums. The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of $5$2 million and a decrease of $5$4 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The increase in our international mortgage insurance business was due to higher expenses in Canada and the cancellation of our capital maintenance agreement with our U.S. mortgage insurance business in the second quarter of 2009.

Excluding the effects of foreign exchange, the increase in our lifestyle protection insurance business was largely attributable to an increase in profit commissions driven by lower claims, partially offset by a decrease in commissions related to a decline in new business.

Amortization of deferred acquisition costs and intangibles

Our international mortgage insurance business increased $7$5 million and our lifestyle protection insurance business decreased $6$10 million.

The three months ended ~~June 30, 2010~~March 31, 2011 included an increase of $3$2 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The increase in our international mortgage insurance business ~~was as a result of~~resulted primarily from an increase inrelated to software and higher amortization of deferred acquisition costs ~~from~~driven by the seasoning of our in-force blocks of business.

The decrease in our lifestyle protection insurance business was ~~attributable to a decrease in the U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business.~~

~~Interest expense.~~Interest expense decreased $14 million primarily related to our lifestyle protection insurance business due to reinsurance arrangements accounted for under the deposit method. In 2009, we made a reclassification adjustment from net investment income related to our reinsurance arrangements that were in a loss position that did not recur.

~~Provision for income taxes.~~The effective tax rate decreased to 19.8% for the three months ended June 30, 2010 from 28.6% for the three months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to the favorable impact of newly enacted Australian tax legislation and lower taxed foreign income in the current year. The three months ended June 30, 2010 also included an increase of $7 million attributable to changes in foreign exchange rates for our international mortgage business.

~~Net income attributable to noncontrolling interests~~. The increase related to the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%. The three months ended June 30, 2010 included an increase of $4 million attributable to changes in foreign exchange rates.

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

~~The following table sets forth the results of operations relating to our International segment for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 999    $ 1,004    $ (5 ) —   %
Net investment income
   259    226    33    15 %
Net investment gains (losses)
   10    (11 ) 21    191 %
Insurance and investment product fees and other
   5    10    (5 ) (50 )%

Total revenues
   1,273    1,229    44    4 %

Benefits and expenses:

Benefits and other changes in policy reserves
   337    418    (81 ) (19 )%
Acquisition and operating expenses, net of deferrals
   408    392    16    4 %
Amortization of deferred acquisition costs and intangibles
   139    140    (1 ) (1 )%
Interest expense
   33    32    1    3 %

Total benefits and expenses
   917    982    (65 ) (7 )%

Income before income taxes
   356    247    109    44 %
Provision for income taxes
   85    66    19    29 %

Net income
   271    181    90    50 %
Less: net income attributable to noncontrolling interests
   69    —      69    NM ⁽¹⁾

Net income available to Genworth Financial, Inc.’s common stockholders
   202    181    21    12 %
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (6 ) 7    (13 ) (186 )%

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 196    $ 188    $ 8    4 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

~~The following table sets forth net operating income for the businesses included in our International segment for the periods indicated:~~

   Six months ended
June 30,    Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010            2009            2010 vs. 2009
Net operating income available to Genworth Financial, Inc.’s common stockholders:

International mortgage insurance
   $ 172    $ 173    $ (1 ) (1 )%
Lifestyle protection insurance
   24    15    9    60 %

Total net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 196    $ 188    $ 8    4 %

~~Net operating income available to Genworth Financial, Inc.’s common stockholders~~

The six months ended June 30, 2010 included an increase of $33 million and a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The decrease in our international mortgage insurance business was primarily driven by the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5% resulting in lower net operating income of $68 million, which included $9 million attributable to changes in foreign exchange rates, for the six months ended June 30, 2010. Excluding the impact related to noncontrolling interests, net operating income for our international mortgage insurance business increased from lower losses partially offset by lower premiums. There was also a benefit from newly enacted Australian tax legislation in the current year.

Net operating income for our lifestyle protection insurance business increased from a decrease in new claim registrations from stabilization of economic conditions and a favorable impact from our re-pricing actions that we began in the second half of 2009, partially offset by lower sales from reduced levels of consumer lending.

~~Revenues~~

~~Premiums~~

~~Our international mortgage insurance business increased $59 million and our lifestyle protection insurance business decreased $64 million.~~

The six months ended June 30, 2010 included increases of $77 million and $16 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was related to rescissions and other terminations related to loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums during the six months ended June 30, 2010 and lower new business volumes. In Canada, premiums were relatively flat as seasoning of our in-force block of business was offset by lower policy cancellations.

~~The decrease in our lifestyle protection insurance business was~~ primarily attributable to our runoff ~~business. Reduced levels~~block of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions that we began in the second half of 2009. Additionally, there was a favorable premium adjustment related to the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the first quarter of 2010. These adjustments were offset in expenses.

~~Net investment income~~

~~Our international mortgage insurance business increased $27 million and our lifestyle protection insurance business increased $6 million.~~

The six months ended June 30, 2010 included increases of $29 million and $3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was principally attributable to lower yields, partially offset by an increase in invested assets.

The increase in our lifestyle protection insurance business was largely related to reinsurance arrangements accounted for under the deposit method of accounting as these arrangements were in a gain position, partially offset by lower yields and invested assets.

~~Benefits and expenses~~

~~Benefits and other changes in policy reserves~~

~~Our international mortgage insurance business decreased $22 million and our lifestyle protection insurance business decreased $59 million.~~

The six months ended June 30, 2010 included increases of $30 million and $5 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The decrease in our international mortgage insurance business was primarily related to Canada and Australia. In Canada, losses declined driven by lower new delinquencies from an improving economy. In Australia, losses decreased as a result of lower reserves per delinquency primarily from an improving economy. Losses in Europe also declined primarily related to ongoing loss mitigation activities.

The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations as a result of stabilization of economic conditions in Europe. These decreases were partially offset by higher paid claims, particularly in Denmark.

~~Acquisition and operating expenses, net of deferrals~~

~~Our international mortgage insurance business increased $18 million and our lifestyle protection insurance business decreased $2 million.~~

The six months ended June 30, 2010 included increases of $11 million and $8 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

The increase in our international mortgage insurance business was primarily due to higher expenses in Canada and the cancellation of our capital maintenance agreement with our U.S. mortgage insurance business in the second quarter of 2009.

The decrease in our lifestyle protection insurance business was largely attributable to a decrease in commissions related to a decline in new business. This decrease was partially offset by an increase in profit commissions driven by lower claims. Additionally, there was a favorable commission adjustment in the first quarter of 2010 that was offset in premiums and a favorable impact from our re-pricing actions that we began in the second half of 2009.

~~Amortization of deferred acquisition costs and intangibles~~

~~Our international mortgage insurance business increased $13 million and our lifestyle protection insurance business decreased $14 million.~~

The six months ended June 30, 2010 included increases of $7 million and $3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~The increase in our international mortgage insurance business was as a result of an increase in amortization of deferred acquisition costs from the seasoning of our in-force blocks of business.~~

The decrease in our lifestyle protection insurance business was attributable to a decrease in the U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business. Additionally, there was an unfavorable adjustment in the first quarter of 2010 related to the timing of receiving client data that was offset in premiums.

Interest expense

Our international mortgage insurance business increased $6 million and our lifestyle protection insurance business decreased $10 million.

The three months ended March 31, 2011 included a decrease of $1 million attributable to changes in foreign exchange rates in our lifestyle protection insurance business.

The increase in our international mortgage insurance business was related to Canada from the issuance of debt by our majority-owned subsidiary in June and December 2010.

The decrease in our lifestyle protection insurance business was due to reinsurance arrangements accounted for under the deposit method of accounting as these arrangements were in a lower loss position in the current year.

Provision for income taxes.The effective tax rate decreased to ~~23.9%~~22.2% for the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 from ~~26.7%~~27.9% for the ~~six~~three months ended ~~June 30, 2009.~~March 31, 2010. This decrease in the effective tax rate was primarily attributable to ~~the favorable impact of newly enacted Australian tax legislation and~~changes in lower taxed foreign ~~income in the current year.~~income. The ~~six~~three months ended ~~June 30, 2010 also~~March 31, 2011 included ~~increases~~an increase of ~~$17~~$4 million and $2a decrease of $1 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

International selected operating performance measures

International mortgage insurance

The following table sets forth selected operating performance measures regarding our international mortgage insurance business as of or for the dates indicated:

   As of June 30,    Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010    2009    2010 vs. 2009
Primary insurance in-force
   $ 484,100    $ 452,800    $ 31,300    7 %
Risk in-force
   163,000    148,000    15,000    10 %


	Three months ended June 30,				Increase (decrease) and percentage change				Six months ended June 30,				Increase (decrease) and percentage change				As of or for the three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009				2010		2009		2010 vs. 2009				2011		2010		2011 vs. 2010
Primary insurance in-force																	$	577,500	$	515,500	$	62,000		12	%
Risk in-force																		194,700		172,900		21,800		13	%
New insurance written	$	14,900	$	13,000	$	1,900	15	%	$	28,800	$	23,300	$	5,500	24	%		12,700		13,900		(1,200	)	(9	)%
Net premiums written		218		181		37	20	%		381		319		62	19	%		172		163		9		6	%
Net earned premiums		251		224		27	12	%		497		438		59	13	%		262		246		16		7	%

Primary insurance in-force and risk in-force

Our businesses in Australia, New Zealand and Canada currently provide 100% coverage on the majority of the loans we insure in those markets. For the purpose of representing our risk in-force, we have computed an “effective” risk in-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective risk in-force has been calculated by applying to insurance in-force a factor that represents our highest expected average per-claim payment for any one underwriting year over the life of our businesses in Australia, New Zealand and Canada. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2011 and 2010, ~~and 2009,~~ this factor was 35%.

Primary insurance in-force and risk in-force increased primarily as a result of new insurance written in Canada and Australia, partially offset by cancellations in Australia and loss mitigation activities in ~~Europe.~~Europe during 2010. Primary insurance in-force and risk in-force included increases of ~~$25.1~~$45.8 billion and ~~$9.5~~$15.7 billion, respectively, attributable to changes in foreign exchange rates as of ~~June 30, 2010.~~March 31, 2011.

New insurance written

~~For the three and six months ended June 30, 2010,~~New insurance written was lower primarily driven by decreases in flow new insurance written ~~increased primarily as~~in Australia due to a ~~result of~~smaller mortgage originations market and lower bulk transactions volume in Canada. These decreases were partially offset by higher flow new insurance written in Canada ~~driven by growth~~from an estimated increase in ~~the mortgage origination markets as consumer confidence improved. Also contributing to the increase was growth in~~our market share and bulk ~~new insurance written in Australia~~

~~and Canada as some liquidity returned to the securitization market~~transactions in Australia and ~~as select lenders look for capital relief~~Europe in Canada. Partially offsetting these increases was a decrease in flow new insurance written in Australia reflecting higher interest rates and lower mortgage originations primarily from first-time homebuyers and in Europe where we have taken actions to selectively reduce new business including exiting selected distribution relationships.the current year. The three ~~and six~~ months ended ~~June 30, 2010~~March 31, 2011 included ~~increases~~an increase of ~~$1.9~~$1.0 billion ~~and $4.8 billion, respectively,~~ attributable to changes in foreign exchange rates.

Net premiums written and net earned premiums

Most of our international mortgage insurance policies provide for single premiums at the time that loan proceeds are advanced. We initially record the single premiums to unearned premium reserves and recognize the premiums earned over time in accordance with the expected pattern of risk emergence. As of ~~June 30, 2010,~~March 31, 2011, our unearned premium reserves ~~decreased to $2.8~~were $3.1 billion, including an increase of $0.2 billion attributable to changes in foreign exchange rates, ~~from $2.9~~compared to $3.1 billion as of ~~June 30, 2009.~~March 31, 2010. Excluding the effects of foreign exchange, our unearned premium reserves decreased primarily related to seasoning of our in-force block of business.

~~For~~

Excluding the ~~three and six months ended June 30, 2010,~~effects of foreign exchange, net premiums written ~~increased~~decreased primarily ~~driven by an increase~~from lower flow new insurance written in Australia and bulk new insurance written in Canada. Partially offsetting this decrease was higher flow new insurance written in Canada ~~partially offset by a decrease~~and lower ceded affiliated reinsurance premiums in ~~new insurance written in Australia, a decrease in average price driven by a decline in new business volume with loan-to-value ratios of more than 90% and increased ceded reinsurance premiums.~~Australia. The three ~~and six~~ months ended ~~June 30, 2010~~March 31, 2011 included ~~increases~~an increase of ~~$28~~$11 million ~~and $59 million, respectively,~~ attributable to changes in foreign exchange rates.

~~For the three months ended June 30, 2010, excluding~~Excluding the effects of foreign exchange, net earned premiums ~~decreased primarily related~~were relatively flat. In both Canada and Australia, lower premiums were attributable to ~~Australia as~~ seasoning of our in-force block of ~~business was more than offset by increased ceded reinsurance premiums in the second quarter of 2010 and lower new business volumes.~~

For the six months ended June 30, 2010, excluding the effects of foreign exchange, net earned premiums decreased related to rescissions and other terminations related to loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as seasoning of our in-force block of business was more than offset by increased ceded reinsurance premiums during the six months ended June 30, 2010 and lower new business volumes. In Canada, premiums were relatively flat as seasoning of our in-force block of businessbusiness. This decrease was offset by lower ~~policy cancellations.~~ceded affiliated reinsurance in Australia in the current year. In Europe, premiums decreased as a result of lender settlements in the prior year and ongoing loss mitigation activities. The three ~~and six~~ months ended ~~June 30, 2010~~March 31, 2011 included ~~increases~~an increase of ~~$31~~$17 million ~~and $77 million, respectively,~~ attributable to changes in foreign exchange rates.

Loss and expense ratios

The following table sets forth the loss and expense ratios for our international mortgage insurance business for the dates indicated:

��


	Three months ended June 30,				Increase (decrease)		Six months ended June 30,				Increase (decrease)		Three months ended March 31,						Increase (decrease)
	2010		2009		2010 vs. 2009		2010		2009		2010 vs. 2009		2011			2010			2011 vs. 2010
Loss ratio	42	%	56	%	(14	)%	43	%	53	%	(10	)%		42	%		43	%		(1	)%
Expense ratio	33	%	30	%	3	%	38	%	35	%	3	%		45	%		44	%		1	%

The loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. The expense ratio is the ratio of general expenses to net premiums written. In our business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of deferred acquisition costs and intangibles.

The decrease in the loss ratio ~~for the three months ended June 30, 2010~~ was primarily attributable to lower losses in ~~Canada from a decrease~~Europe related to lender settlements in ~~delinquencies~~the prior year and inongoing loss mitigation activities. In Australia, ~~as a result of lower reserves per delinquency.~~

~~The decrease in~~ the loss ratio ~~for~~increased primarily from an increase in reserves driven by the ~~six months ended June 30, 2010 was primarily attributable to lower losses in Canada from a decrease in delinquencies and in Australia as a result~~economic impact of lower reserves per delinquency. There were also decreased losses in Europe related to ongoing loss mitigation activities in Spain. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.recent flooding.

The increase in the expense ratio ~~for the three and six months ended June 30, 2010~~ was primarily attributable to ~~higher expenses in Canada and a decrease in~~Australia from lower net premiums ~~written in Australia.~~written.

Delinquent loans

The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our international mortgage insurance portfolio as of the dates indicated:


	June 30, 2010		December 31, 2009		June 30, 2009		March 31, 2011			December 31, 2010			March 31, 2010
Primary insurance
Primary insurance:
Insured loans in-force	2,938,624		2,911,605		2,918,570			2,983,530			2,986,059			2,937,992
Delinquent loans⁽¹⁾	22,093		22,821		24,569			21,615			21,082			24,015
Percentage of delinquent loans (delinquency rate)⁽¹⁾	0.75	%	0.78	%	0.84	%		0.72	%		0.71	%		0.82	%

Flow loans in-force	2,447,543		2,418,144		2,392,425			2,477,736			2,468,354			2,442,408
Flow delinquent loans⁽¹⁾	19,219		19,652		21,389			18,218			17,684			20,931
Percentage of flow delinquent loans (delinquency rate)⁽¹⁾	0.79	%	0.81	%	0.89	%		0.74	%		0.72	%		0.86	%

Bulk loans in-force	491,081		493,461		526,145			505,794			517,705			495,584
Bulk delinquent loans⁽²⁾⁽¹⁾	2,874		3,169		3,180			3,397			3,398			3,084
Percentage of bulk delinquent loans (delinquency rate)	0.59	%	0.64	%	0.60	%		0.67	%		0.66	%		0.62	%

⁽¹⁾

The amounts previously presented in our second quarter of 2009 Quarterly Report on Form 10-Q have been revised for June 30, 2009 to include delinquencies associated with a lender captive reinsured by us in Australia that had previously been excluded. There was no impact on reserves or losses as these items had previously been included in reported amounts.

⁽²⁾

Included loans where we were in a secondary loss position for which no reserve was established due to an existing deductible. Excluding these loans, bulk delinquent loans were ~~2,858~~3,374 as of ~~June 30, 2010, 3,154~~March 31, 2011, 3,376 as of December 31, ~~2009~~2010 and ~~2,547~~3,072 as of ~~June 30, 2009.~~March 31, 2010.

Flow loans in-force increased primarily ~~due to growth~~from flow new insurance written in Canada ~~that was~~during the current year while bulk loans in-force decreased from higher cancellations in Australia. Delinquent loans increased from higher delinquencies in Australia and Europe as a result of the seasoning of our insurance in-force, partially offset by ~~loss mitigation efforts in Europe. Bulk loans in-force decreased due to limited market opportunities. Delinquent loans decreased from~~ lower ~~new~~ delinquencies in ~~Canada from improving economic conditions and in Europe from ongoing loss mitigation activities, partially offset by a moderate increase in delinquencies in Australia.~~Mexico.

Lifestyle protection insurance

The following table sets forth selected operating performance measures regarding our lifestyle protection insurance business and other related consumer protection insurance products for the periods indicated:

   Three months ended
June 30,    Increase
(decrease) and
percentage
change Six months ended
June 30,    Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010            2009        2010 vs. 2009     2010            2009        2010 vs. 2009
Lifestyle protection insurance gross written premiums, premium equivalents and deposits
   $ 424    $ 456    $ (32 ) (7 )% $ 861    $ 863    $ (2 ) —   %
Mexico operations gross written premiums
   —      16    (16 ) (100 )% —      32    (32 ) (100 )%
Net earned premiums
   244    284    (40 ) (14 )% 502    566    (64 ) (11 )%

   Three months ended
March 31,    Increase
(decrease) and
percentage
change
(Amounts in millions)
       2011            2010        2011 vs. 2010
Lifestyle protection insurance gross written premiums, premium equivalents and deposits
   $ 423       $ 437       $ (14 ) (3 )%
Net earned premiums
   215       258       (43 ) (17 )%

Gross written premiums, premium equivalents and deposits

~~The three and six months ended June 30, 2010 included a decrease of $8 million and an increase of $30 million, respectively, attributable to changes in foreign exchange rates.~~ Gross written premiums, premium equivalents and deposits, gross of ceded reinsurance and cancellations, ~~decreased mainly attributable to~~were relatively flat as our re-pricing initiatives were offset by reduced levels of consumer lending. ~~In the third quarter~~The three months ended March 31, 2011 included a decrease of ~~2009, we sold our Mexico operations; therefore, there were no sales~~$13 million attributable to changes in ~~2010.~~foreign exchange rates.

Net earned premiums

For the three months ended ~~June 30, 2010,~~March 31, 2011, the decrease ~~in our lifestyle protection insurance business~~ was primarily attributable to our runoff ~~business. Reduced~~block of business and a decrease in premium volume driven by reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions taken in the second half of 2009. The three months ended June 30, 2010 included a decrease of $6 million attributable to changes in foreign exchange rates.

For the six months ended June 30, 2010, the decrease in our lifestyle protection insurance business was primarily attributable to our runoff business. Reduced levels of consumer lending and lower single premium sales related to new business regulations in the U.K. also contributed to the decrease. These decreases were partially offset by a favorable impact from our re-pricing actions taken in the second half of 2009.lending. Additionally, there was a favorable premium adjustment related to the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the first quarter of 2010. ~~These adjustments were offset in expenses.~~ The ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 included ~~an increase~~a decrease of ~~$16~~$7 million attributable to changes in foreign exchange rates.

U.S. Mortgage Insurance segment

Segment results of operations

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:


	Three months ended June 30,						Increase (decrease) and percentage change					Three months ended March 31,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	153		$	164		$	(11	)	(7	)%	$	142		$	142		$	—		—	%
Net investment income		31			35			(4	)	(11	)%		33			30			3		10	%
Net investment gains (losses)		(3	)		—			(3	)	NM	⁽¹⁾		1			4			(3	)	(75	)%
Insurance and investment product fees and other		—			(3	)		3		100	%		1			5			(4	)	(80	)%

Total revenues		181			196			(15	)	(8	)%		177			181			(4	)	(2	)%

Benefits and expenses:
Benefits and other changes in policy reserves		216			371			(155	)	(42	)%		279			196			83		42	%
Acquisition and operating expenses, net of deferrals		33			33			—		—	%		34			34			—		—	%
Amortization of deferred acquisition costs and intangibles		4			5			(1	)	(20	)%		4			3			1		33	%

Total benefits and expenses		253			409			(156	)	(38	)%		317			233			84		36	%

Loss before income taxes		(72	)		(213	)		141		66	%		(140	)		(52	)		(88	)	(169	)%
Benefit for income taxes		(29	)		(79	)		50		63	%		(59	)		(19	)		(40	)	NM	⁽¹⁾

Net loss available to Genworth Financial, Inc.’s common stockholders		(43	)		(134	)		91		68	%		(81	)		(33	)		(48	)	(145	)%
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		3			—			3		NM	⁽¹⁾		—			(3	)		3		100	%

Net operating loss available to Genworth Financial, Inc.’s common stockholders	$	(40	)	$	(134	)	$	94		70	%	$	(81	)	$	(36	)	$	(45	)	(125	)%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

Net operating loss available to Genworth Financial, Inc.’s common stockholders

The ~~decrease~~increase in the net operating loss available to Genworth Financial, Inc.’s common stockholders was as a result of ~~moderating losses~~lower benefits from ~~a decrease in delinquencies and increasing~~ loss mitigation activities ~~including settlements,~~and an increase in ~~2010.~~the aging of existing delinquencies, partially offset by lower new delinquencies.

Revenues

Premiums ~~decreased~~remained flat as lower premium refunds related to rescission activity were offset by both lower average primary insurance in-force and lower premiums assumed from an affiliate under an intercompany reinsurance agreement.

Net investment income increased primarily related to a preferred stock dividend in the current year, partially offset by lower invested assets.

The decrease in net investment gains was primarily driven by lower new insurance written as a result of a smaller mortgage insurance market and policy coverage rescission activity, partially offset by the favorable impact of rate increases and an increase in flow persistency from 81% for the three months ended June 30, 2009 to 88% for the three months ended June 30, 2010.

Net investment income decreased primarily from lower average invested assets. Net investment income in 2010 included $2 million of lower losses related to limited partnerships accounted for under the equity method.

~~Net investment losses in 2010 were as a result of a decrease in~~ gains on ~~sales~~the sale of investments from portfolio repositioning ~~activities for the three months ended June 30, 2010 compared to the three months ended June 30, 2009.~~activities.

Insurance and investment product fees and other income ~~increased primarily~~decreased from the ~~cancellation~~commutation of a ~~capital maintenance agreement with our European international mortgage insurance business~~captive trust in the ~~second quarter of 2009.~~prior year that did not recur.

Benefits and expenses

Benefits and other changes in policy reserves ~~decreased~~increased due to an increase in change in reserves of $258 million and a decrease in net paid claims of $175 million. This included a settlement with a counterparty related to our GSE Alt-A business of $5 million, consisting of net paid claims of $180 million and a decrease in change in reserves of ~~$202~~$185 million in the first quarter of 2010. Excluding the settlement in the prior year, the increase in incurred losses in the current year was driven by lower benefits from loss mitigation activities and an increase in ~~net paid claims~~the aging of ~~$46 million. The decrease in change in reserves was primarily driven~~existing delinquencies, partially offset by ~~a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts.~~lower new delinquencies. The increase in paid claims was attributable to ~~an increase~~higher claim counts offset by a decrease in average claim payments reflecting ~~higher~~lower loan balances in more recent book years and higher claim counts. Benefits and other changes in reserves included a reinsurance credit principally related to our captive reinsurance arrangements of $55 million and $76 million for the three months ended June 30, 2010 and 2009, respectively.balances.

Benefit for income taxes.The effective tax rate increased to ~~40.3%~~42.1% for the three months ended ~~June 30, 2010~~March 31, 2011 from ~~37.1%~~36.5% for the three months ended ~~June 30, 2009.~~March 31, 2010. This increase in the effective tax rate was primarily attributable to ~~proportion of~~changes in tax favored investment income and ~~to the effects of interim~~a state income tax ~~accounting standards~~adjustment in the prior ~~year.~~

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

~~The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010         2009     2010 vs. 2009
Revenues:

Premiums
   $ 295    $ 334    $ (39 ) (12 )%
Net investment income
   61    68    (7 ) (10 )%
Net investment gains (losses)
   1    (19 ) 20    105 %
Insurance and investment product fees and other
   5    1    4    NM ⁽¹⁾

Total revenues
   362    384    (22 ) (6 )%

Benefits and expenses:

Benefits and other changes in policy reserves
   412    774    (362 ) (47 )%
Acquisition and operating expenses, net of deferrals
   67    65    2    3 %
Amortization of deferred acquisition costs and intangibles
   7    10    (3 ) (30 )%

Total benefits and expenses
   486    849    (363 ) (43 )%

Loss before income taxes
   (124 ) (465 ) 341    73 %
Benefit for income taxes
   (48 ) (183 ) 135    74 %

Net loss available to Genworth Financial, Inc.’s common stockholders
   (76 ) (282 ) 206    73 %
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   —      13    (13 ) (100 )%

Net operating loss available to Genworth Financial, Inc.’s common stockholders
   $ (76 ) $ (269 ) $ 193    72 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

~~Net operating loss available to Genworth Financial, Inc.’s common stockholders~~

The decrease in the net operating loss available to Genworth Financial, Inc.’s common stockholders was as a result of moderating losses from a decrease in delinquencies and increasing loss mitigation activities, including settlements, in 2010.

~~Revenues~~

Premiums decreased primarily driven by lower new insurance written as a result of a smaller mortgage insurance market and policy coverage rescission activity, partially offset by the favorable impact of rate increases and an increase in flow persistency from 82% for the six months ended June 30, 2009 to 87% for the six months ended June 30, 2010.

Net investment income decreased primarily from lower average invested assets. Net investment income in 2010 included $6 million of lower losses related to limited partnerships accounted for under the equity method.

~~The change in net investment gains (losses) was primarily driven by impairments recorded in the first quarter of 2009~~year that did not recur. Also contributing to the change was an increase in gains on sales of investments from portfolio repositioning activities for the six months ended June 30, 2010 compared to the six months ended June 30, 2009.

Insurance and investment product fees and other income increased primarily from the cancellation of a capital maintenance agreement with our European international mortgage insurance business in the second quarter of 2009.

~~Benefits and expenses~~

Benefits and other changes in policy reserves decreased due to a decrease in change in reserves of $639 million and an increase in net paid claims of $276 million. The decrease in change in reserves was primarily driven by a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Benefits and other changes in reserves included a reinsurance credit principally related to our captive reinsurance arrangements of $89 million and $195 million for the six months ended June 30, 2010 and 2009, respectively.

~~Benefit for income taxes.~~The effective tax rate decreased to 38.7% for the six months ended June 30, 2010 from 39.4% for the six months ended June 30, 2009. This decrease in the effective tax rate was primarily attributable to tax favored investments.

U.S. Mortgage Insurance selected operating performance measures

The following table sets forth selected operating performance measures regarding our U.S. Mortgage Insurance segment as of or for the dates indicated:

   As of June 30,    Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010    2009    2010 vs. 2009
Primary insurance in-force
   $ 131,900    $ 155,200    $ (23,300 ) (15 )%
Risk in-force
   30,700    33,900    (3,200 ) (9 )%


	Three months ended June 30,				Increase (decrease) and percentage change					Six months ended June 30,				Increase (decrease) and percentage change					As of or for the three months ended March 31,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009					2010		2009		2010 vs. 2009					2011		2010		2011 vs. 2010
Primary insurance in-force																			$	123,300	$	134,800	$	(11,500	)	(9	)%
Risk in-force																				28,800		31,100		(2,300	)	(7	)%
New insurance written	$	2,200	$	3,400	$	(1,200	)	(35	)%	$	3,900	$	7,100	$	(3,200	)	(45	)%		2,400		1,700		700		41	%
Net premiums written		152		160		(8	)	(5	)%		294		331		(37	)	(11	)%		142		142		—		—	%

Primary insurance in-force and risk in-force

Primary insurance in-force ~~and risk in-force~~ decreased primarily as a result of ~~an increase in rescissions~~rescission and other loss mitigation ~~actions, including agreements with a counterparty that reduced our bulk risk in-force exposure.~~actions. This decrease was partially offset by an increase in ~~flow~~ new insurance written from an increase in ~~our~~the overall mortgage insurance ~~market share, partially offset~~market. In addition, risk in-force decreased due to tighter mortgage insurance guidelines and ~~limited by tight domestic credit markets and lending guidelines,~~mortgage lender underwriting standards as well as a weak housing market and ~~limited~~reduced mortgage credit liquidity. ~~Our flow~~Flow persistency was ~~87% and 82%~~86% for the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 and ~~2009, respectively.~~2010.

New insurance written

New insurance written ~~decreased~~increased during the three months ended ~~June 30, 2010~~March 31, 2011 primarily driven ~~by constraints in the bulk market. This decrease was partially offset~~ by an increase in ~~flow new~~the overall mortgage insurance ~~written from an increase~~market, partially offset by a decline in our mortgage insurance market share ~~partially offset by~~due to tighter mortgage insurance guidelines and mortgage lender underwriting standards. New insurance written decreased during the six months ended June 30, 2010 primarily driven by constraints in the bulk market as well as a decrease in flow new insurance written from a decline in overall mortgage originations as a result of a weak housing market and reduced mortgage credit liquidity.

Net premiums written

Net premiums written ~~decreased principally from~~remained flat as lower reinsurance premiums were offset by higher new insurance written ~~during 2010~~ as a result of ~~a lower~~an increase in the overall mortgage insurance ~~origination~~ market.

Loss and expense ratios

The following table sets forth the loss and expense ratios for our U.S. Mortgage Insurance segment for the ~~periods~~dates indicated:


	Three months ended June 30,				Increase (decrease)		Six months ended June 30,				Increase (decrease)		Three months ended March 31,						Increase (decrease)
	2010		2009		2010 vs. 2009		2010		2009		2010 vs. 2009		2011			2010			2011 vs. 2010
Loss ratio	141	%	225	%	(84	)%	140	%	231	%	(91	)%		197	%		138	%		59	%
Expense ratio	25	%	24	%	1	%	25	%	23	%	2	%		27	%		26	%		1	%

~~For~~The three months ended March 31, 2010 included a settlement with a counterparty related to our GSE Alt-A business of $5 million, consisting of net paid claims of $180 million and a decrease in change in reserves of $185 million. Excluding the settlement in the first quarter of 2010, the loss ratio for the three months ended ~~June 30,~~March 31, 2010 ~~the decrease~~would have been 141%. The increase in the loss ratio was primarily attributable to ~~a decrease~~an increase in change in reserves ~~which was~~largely driven by lower benefits from loss mitigation activities and an increase in the aging of existing delinquencies, partially offset by ~~an increase in paid claims. The decrease in change in reserves was primarily driven by~~ lower new ~~delinquencies and~~delinquencies. In addition, the loss ratio increased as net paid claims increased from higher claim counts, partially offset by a decrease ~~in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase~~ in average claim payments reflecting ~~higher~~lower loan ~~balances in more recent book years and higher claim counts. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.~~

For the six months ended June 30, 2010, the decrease in the loss ratio was primarily attributable to a decrease in change in reserves which was partially offset by an increase in paid claims. The remaining decrease in change in reserves was primarily driven by lower new delinquencies and a decrease in delinquencies from the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was attributable to an increase in average claim payments reflecting higher loan balances in more recent book years and higher claim counts. Partially offsetting the decrease in the loss ratio was a decline in net earned premiums.

~~The expense ratio increased as a result of a decrease in net premiums written for the three and six months ended June 30, 2010.~~balances.

Delinquent loans

The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our U.S. mortgage insurance portfolio as of the dates indicated:


	June 30, 2010		December 31, 2009		June 30, 2009		March 31, 2011			December 31, 2010			March 31, 2010
Primary insurance:
Insured loans in-force	821,617		890,730		947,777			763,439			781,024			840,618
Delinquent loans	101,759		122,279		102,800			89,018			95,395			107,104
Percentage of delinquent loans (delinquency rate)	12.39	%	13.73	%	10.85	%		11.66	%		12.21	%		12.74	%

Flow loans in-force	723,301		753,370		796,633			673,276			687,964			735,564
Flow delinquent loans	98,771		107,495		87,590			85,758			92,225			102,389
Percentage of flow delinquent loans (delinquency rate)	13.66	%	14.27	%	11.00	%		12.74	%		13.41	%		13.92	%

Bulk loans in-force	98,316		137,360		151,144			90,163			93,060			105,054
Bulk delinquent loans⁽¹⁾	2,988		14,784		15,210			3,260			3,170			4,715
Percentage of bulk delinquent loans (delinquency rate)	3.04	%	10.76	%	10.06	%		3.62	%		3.41	%		4.49	%

A minus and sub-prime loans in-force	83,859		89,678		97,271			75,421			77,822			86,185
A minus and sub-prime delinquent loans	24,867		29,238		25,271			20,656			22,827			26,387
Percentage of A minus and sub-prime delinquent loans (delinquency rate)	29.65	%	32.60	%	25.98	%		27.39	%		29.33	%		30.62	%

Pool insurance:
Insured loans in-force	19,473		20,370		21,166			17,421			17,880			19,907
Delinquent loans	831		781		632			913			989			783
Percentage of delinquent loans (delinquency rate)	4.27	%	3.83	%	2.99	%		5.24	%		5.53	%		3.93	%

⁽¹⁾

Included loans where we were in a secondary loss position for which no reserve was established due to an existing deductible. Excluding these loans, bulk delinquent loans were ~~1,478~~1,814 as of ~~June 30, 2010, 11,319~~March 31, 2011, 1,713 as of December 31, ~~2009~~2010 and ~~10,294~~2,155 as of ~~June 30, 2009.~~March 31, 2010.

Delinquency and foreclosure levels that developed principally in our 2006, 2007 and 2008 book years have ~~increased significantly since the second quarter of 2009~~remained high as the ~~U.S.~~United States continues to experience an economic recession and weakness in its housing markets. ~~There has also been a continued increase in delinquencies and foreclosures in our 2005, 2006 and 2007 book years.~~ These trends continue to be especially evident in Florida, California, Arizona and Nevada, as well as in our A minus, Alt-A, ~~ARMs~~adjustable rate mortgages (“ARMs”) and certain 100% loan-to-value products. However, we have seen ~~delinquencies decrease in our primary insurance in-force since the fourth quarter of 2009 as a result of settlements reached with counterparties in 2010, as well as~~ a decline in new ~~flow delinquencies and increased cures from loan modification programs.~~delinquencies.

Primary insurance delinquency rates differ from region to region in the ~~U.S.~~United States at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth our primary delinquency rates for the various regions of the ~~U.S.~~United States and the ten largest states by our risk in-force ~~and total reserves~~ 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 June 30, 2010		Percent of total reserves as of June 30, 2010 ⁽¹⁾			Delinquency rate													Delinquency rate
	Percent of primary risk in-force as of June 30, 2010				June 30, 2010			December 31, 2009			June 30, 2009			Percent of primary risk in-force as of March 31, 2011		Percent of total reserves as of March 31, 2011 ⁽¹⁾		March 31, 2011				December 31, 2010			March 31, 2010
By Region:			Percent of total reserves as of June 30, 2010 ⁽¹⁾
Southeast⁽²⁾	23	%	31	%		17.06	%		18.36	%		14.98	%		22%		34%			16.26	%		16.79	%		17.28	%
South Central⁽³⁾	16		15			11.41	%		12.42	%		9.27	%		16		13			10.01	%		11.00	%		11.81	%
Northeast⁽⁴⁾	14		10			10.85	%		11.60	%		8.78	%		14		11			11.44	%		11.66	%		11.13	%
North Central⁽⁵⁾	11		12			11.50	%		12.20	%		9.08	%		12		12			11.06	%		11.51	%		11.66	%
Pacific⁽⁶⁾	11		15			15.83	%		19.43	%		16.14	%		11		14			13.64	%		14.39	%		16.66	%
Great Lakes⁽⁷⁾	9		7			9.08	%		10.20	%		8.58	%		9		7			8.44	%		8.92	%		9.47	%
Plains⁽⁸⁾	6		3			7.59	%		8.29	%		6.16	%		6		3			7.73	%		8.14	%		7.72	%
Mid-Atlantic⁽⁹⁾	5		4			11.23	%		13.08	%		9.63	%
New England⁽¹⁰⁾	5		3			11.11	%		12.48	%		9.38	%
New England⁽⁹⁾															5		3			10.43	%		10.71	%		11.67	%
Mid-Atlantic⁽¹⁰⁾															5		3			10.09	%		10.67	%		11.85	%

Total	100	%	100	%		12.39	%		13.73	%		10.85	%		100%		100%			11.66	%		12.21	%		12.74	%

⁽¹⁾	Total reserves were ~~$1,952~~$2,220 million as of ~~June 30, 2010.~~March 31, 2011.

⁽²⁾	Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee.

⁽³⁾	Arizona, Colorado, Louisiana, New Mexico, Oklahoma, Texas and Utah.

⁽⁴⁾	New Jersey, New York and Pennsylvania.

⁽⁵⁾	Illinois, Minnesota, Missouri and Wisconsin.

⁽⁶⁾	Alaska, California, Hawaii, Nevada, Oregon and Washington.

⁽⁷⁾	Indiana, Kentucky, Michigan and Ohio.

⁽⁸⁾	Idaho, Iowa, Kansas, Montana, Nebraska, North Dakota, South Dakota and Wyoming.

⁽⁹⁾	~~Delaware, Maryland, Virginia, Washington D.C. and West Virginia.~~

⁽¹⁰⁾	Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

⁽¹⁰⁾	Delaware, Maryland, Virginia, Washington D.C. and West Virginia.


	Percent of primary risk in-force as of June 30, 2010		Percent of total reserves as of June 30, 2010 ⁽¹⁾			Delinquency rate													Delinquency rate
	Percent of primary risk in-force as of June 30, 2010				June 30, 2010			December 31, 2009			June 30, 2009			Percent of primary risk in-force as of March 31, 2011		Percent of total reserves as of March 31, 2011 ⁽¹⁾		March 31, 2011				December 31, 2010			March 31, 2010
By State:			Percent of total reserves as of June 30, 2010 ⁽¹⁾
Florida	8	%	20	%		28.86	%		30.77	%		26.81	%		7%		23%			28.09	%		28.31	%		29.07	%
Texas	7	%	3	%		8.80	%		9.49	%		6.76	%		7%		3%			7.63	%		8.71	%		9.10	%
New York	6	%	4	%		8.88	%		9.42	%		7.03	%		7%		4%			9.59	%		9.76	%		9.12	%
California	5	%	8	%		16.40	%		21.87	%		19.08	%		5%		7%			12.89	%		13.99	%		17.72	%
Illinois	5	%	7	%		15.79	%		16.40	%		12.11	%		5%		8%			15.44	%		15.79	%		16.09	%
Georgia	4	%	4	%		17.13	%		17.62	%		13.06	%		4%		4%			15.12	%		16.16	%		17.40	%
North Carolina	4	%	2	%		11.12	%		11.73	%		8.44	%		4%		2%			10.73	%		11.23	%		11.50	%
New Jersey															4%		4%			17.53	%		17.30	%		16.68	%
Pennsylvania	4	%	2	%		10.34	%		11.13	%		8.41	%		4%		2%			10.32	%		10.94	%		10.66	%
New Jersey	4	%	4	%		16.36	%		17.35	%		13.31	%
Ohio	3	%	2	%		7.85	%		8.47	%		6.94	%		3%		2%			7.97	%		8.19	%		8.11	%

⁽¹⁾	Total reserves were ~~$1,952~~$2,220 million as of ~~June 30, 2010.~~March 31, 2011.

The following table sets forth the dispersion of our total reserves and primary insurance in-force and risk in-force by year of policy origination and average annual mortgage interest rate as of ~~June 30, 2010:~~March 31, 2011:


(Amounts in millions)	Average rate		Percent of total reserves⁽¹⁾		Primary insurance in-force		Percent of total		Primary risk in-force		Percent of total		Average rate			Percent of total reserves⁽¹⁾			Primary insurance in-force		Percent of total			Primary risk in-force		Percent of total
Policy Year
1999 and prior	7.80	%	1	%	$	2,004	1.5	%	$	520	1.7	%
2000	8.26	%	—			353	0.3			89	0.3
2000 and prior														7.86	%		0.8	%	$	1,995		1.6	%	$	512		1.8	%
2001	7.49	%	1			1,292	1.0			325	1.1			7.56	%		0.5			1,037		0.8			261		0.9
2002	6.62	%	1			3,098	2.3			753	2.5			6.64	%		1.0			2,559		2.1			629		2.2
2003	5.65	%	2			12,480	9.5			2,105	6.9			5.65	%		2.3			10,225		8.3			1,762		6.2
2004	5.88	%	2			7,317	5.5			1,640	5.4			5.88	%		2.6			6,245		5.1			1,416		5.0
2005	5.98	%	13			11,559	8.8			2,931	9.7			5.98	%		13.5			10,088		8.2			2,589		9.1
2006	6.52	%	23			15,453	11.7			3,737	12.3			6.49	%		22.4			13,590		11.0			3,316		11.6
2007	6.61	%	50			33,467	25.4			8,229	27.1			6.57	%		48.8			29,931		24.3			7,377		25.8
2008	6.19	%	7			30,998	23.5			7,633	25.2			6.16	%		7.9			27,807		22.5			6,894		24.1
2009	5.08	%	—			10,061	7.6			1,563	5.1			5.08	%		0.1			8,254		6.7			1,421		5.0
2010	4.97	%	—			3,854	2.9			820	2.7			4.66	%		0.1			9,248		7.5			1,901		6.7
2011														4.50	%		—			2,343		1.9			465		1.6

Total portfolio	6.22	%	100	%	$	131,936	100.0	%	$	30,345	100.0	%		6.10	%		100.0	%	$	123,322		100.0	%	$	28,543		100.0	%

⁽¹⁾	Total reserves were ~~$1,952~~$2,220 million as of ~~June 30, 2010.~~March 31, 2011.

Corporate and Other

Results of Operations

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:


	Three months ended June 30,						Increase (decrease) and percentage change					Three months ended March 31,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	—		$	1		$	(1	)	(100	)%	$	—		$	—		$	—		—	%
Net investment income		35			60			(25	)	(42	)%		26			9			17		189	%
Net investment gains (losses)		(68	)		(61	)		(7	)	(11	)%		(7	)		(16	)		9		56	%
Insurance and investment product fees and other		(3	)		41			(44	)	(107	)%		2			3			(1	)	(33	)%

Total revenues		(36	)		41			(77	)	(188	)%		21			(4	)		25		NM	⁽¹⁾

Benefits and expenses:
Interest credited		35			79			(44	)	(56	)%		33			39			(6	)	(15	)%
Acquisition and operating expenses, net of deferrals		9			15			(6	)	(40	)%		(5	)		8			(13	)	(163	)%
Amortization of deferred acquisition costs and intangibles		4			3			1		33	%		3			4			(1	)	(25	)%
Interest expense		70			66			4		6	%		82			70			12		17	%

Total benefits and expenses		118			163			(45	)	(28	)%		113			121			(8	)	(7	)%

Loss before income taxes		(154	)		(122	)		(32	)	(26	)%		(92	)		(125	)		33		26	%
Benefit for income taxes		(51	)		(17	)		(34	)	(200	)%		(16	)		(157	)		141		90	%

Net loss available to Genworth Financial, Inc.’s common stockholders		(103	)		(105	)		2		2	%
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:
Net income (loss) available to Genworth Financial, Inc.’s common stockholders													(76	)		32			(108	)	NM	⁽¹⁾
Adjustments to net income (loss) available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		42			38			4		11	%		4			11			(7	)	(64	)%
Net tax benefit related to separation from our former parent													—			(106	)		106		100	%

Net operating loss available to Genworth Financial, Inc.’s common stockholders	$	(61	)	$	(67	)	$	6		9	%	$	(72	)	$	(63	)	$	(9	)	(14	)%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

Net operating loss available to Genworth Financial, Inc.’s common stockholders

~~The decrease in the~~We reported a higher net operating loss available to Genworth Financial, Inc.’s common stockholders in the current year ~~was~~compared to the prior year primarily as a result of lower tax benefits and higher ~~tax benefits.~~

~~Revenues~~

~~Net investment income decreased primarily driven by lower investment income related to policy loans from a bankruptcy-related lapse in 2009. This decrease was~~interest expense, partially offset by an increase in net investment income ~~largely~~and higher allocated expenses.

Revenues

Higher investment income was primarily driven by the improved performance of limited partnership investments accounted for under the equity method. Net investment income included $1 million of gains related to limited partnerships in the ~~consolidation~~first quarter of ~~certain securitization entities as~~2011 compared to $21 million of ~~January 1,~~losses related to limited partnerships in the first quarter of 2010.

~~Insurance and investment product fees and other decreased primarily as~~ The increase was partially offset by a ~~result of income from the early retirement of institutional contracts at a discount to contract values~~decline in ~~2009 that did not recur.~~average invested assets.

Benefits and expenses

The decrease in interest credited was ~~mainly~~ attributable to lower interest rates on interest paid on our floating rate policyholder liabilities and a decrease in average outstanding liabilities. ~~There was also a decrease as a result of a bankruptcy-related lapse in 2009 of a large group corporate-owned life insurance policy.~~

~~Operating expenses decreased as a result of higher allocated expenses in the current year.~~

~~Interest expense increased primarily related to the consolidation of certain securitization entities as of January 1, 2010.~~

~~The increase in the income tax benefit was primarily related to allocated tax expense in the prior year.~~

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

~~The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:~~

   Six months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
       2010         2009     2010 vs. 2009
Revenues:

Premiums
   $ —      $ 2    $ (2 ) (100 )%
Net investment income
   44    115    (71 ) (62 )%
Net investment gains (losses)
   (84 ) (223 ) 139    62 %
Insurance and investment product fees and other
   —      116    (116 ) (100 )%

Total revenues
   (40 ) 10    (50 ) NM ⁽¹⁾

Benefits and expenses:

Interest credited
   74    168    (94 ) (56 )%
Acquisition and operating expenses, net of deferrals
   17    26    (9 ) (35 )%
Amortization of deferred acquisition costs and intangibles
   8    8    —      —   %
Interest expense
   140    128    12    9 %

Total benefits and expenses
   239    330    (91 ) (28 )%

Loss before income taxes
   (279 ) (320 ) 41    13 %
Benefit for income taxes
   (208 ) (119 ) (89 ) (75 )%

Net loss available to Genworth Financial, Inc.’s common stockholders
   (71 ) (201 ) 130    65 %
Adjustments to net loss available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   53    144    (91 ) (63 )%
Net tax benefit related to separation from our former parent
   (106 ) —      (106 ) NM ⁽¹⁾

Net operating loss available to Genworth Financial, Inc.’s common stockholders
   $ (124 ) $ (57 ) $ (67 ) (118 )%

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~

~~Net operating loss available to Genworth Financial, Inc.’s common stockholders~~

The increase in the net operating loss available to Genworth Financial, Inc.’s common stockholders in the current year was primarily attributable to income from the early retirement of institutional contracts at a discount to contract values in the prior year that did not recur.

~~Revenues~~

Net investment income decreased primarily driven by lower investment income related to policy loans from a bankruptcy-related lapse in 2009, lower yields on floating rate investments and a decline in average invested

assets. Net investment income also included $9 million of higher losses related to limited partnership investments accounted for under the equity method in 2010. These decreases were partially offset by an increase in net investment income largely related to the consolidation of certain securitization entities as of January 1, 2010.

Insurance and investment product fees and other decreased primarily as a result of income from the early retirement of institutional contracts at a discount to contract values in 2009 that did not recur.

~~Benefits and expenses~~

The decrease in interest credited was mainly attributable to lower interest rates on interest paid on our floating rate policyholder liabilities and a decrease in average outstanding liabilities. There was also a decrease as a result of a bankruptcy-related lapse in 2009 of a large group corporate-owned life insurance policy.

Operating expenses decreased as a result of higher allocated expenses to the operating segments in the current year.

Interest expense increased ~~largely~~ related to the ~~consolidation~~debt issuances in the second half of ~~certain securitization entities as of January 1,~~ 2010.

The ~~increase~~decrease in the income tax benefit was primarily related to changes in uncertain tax benefits in the prior year related to separation from our former parent.

Investments and Derivative Instruments

Investment results

The following ~~tables set~~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
June 30, Increase (decrease)
   2010 2009 2010 vs. 2009
(Amounts in millions)
   Yield Amount Yield Amount Yield Amount
Fixed maturity securities—taxable
   5.0 % $ 646    5.2 % $ 604    (0.2 )% $ 42
Fixed maturity securities—non-taxable
   4.3 % 16    4.6 % 28    (0.3 )% (12 )
Commercial mortgage loans
   5.5 % 99    5.5 % 109    —   % (10 )
Restricted commercial mortgage loans related to securitization entities⁽¹⁾
   7.3 % 10    —   % —      7.3 % 10
Equity securities
   11.8 % 5    3.6 % 3    8.2 % 2
Other invested assets
   14.9 % 39    (1.3 )% (7 ) 16.2 % 46
Policy loans
   7.7 % 28    10.5 % 52    (2.8 )% (24 )
Cash, cash equivalents and short-term investments
   0.3 % 4    0.7 % 14    (0.4 )% (10 )

Gross investment income before expenses and fees
   4.9 % 847    4.7 % 803    0.2 % 44
Expenses and fees
   (0.1 )% (24 ) (0.1 )% (22 ) —   % (2 )

Net investment income
   4.8 % $ 823    4.6 % $ 781    0.2 % $ 42

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~

   Six months ended
June 30, Increase (decrease)
   2010 2009 2010 vs. 2009
(Amounts in millions)
   Yield Amount Yield Amount Yield Amount
Fixed maturity securities—taxable
   5.0 % $ 1,272    5.3 % $ 1,227    (0.3 )% $ 45
Fixed maturity securities—non-taxable
   4.3 % 32    4.6 % 58    (0.3 )% (26 )
Commercial mortgage loans
   5.7 % 203    5.5 % 223    0.2 % (20 )
Restricted commercial mortgage loans related to securitization entities⁽¹⁾
   7.4 % 20    —   % —      7.4 % 20
Equity securities
   9.4 % 7    4.1 % 6    5.3 % 1
Other invested assets
   6.8 % 37    (9.3 )% (106 ) 16.1 % 143
Restricted other invested assets related to securitization entities⁽¹⁾
   0.6 % 1    —   % —      0.6 % 1
Policy loans
   7.6 % 55    10.0 % 96    (2.4 )% (41 )
Cash, cash equivalents and short-term investments
   0.3 % 9    0.8 % 31    (0.5 )% (22 )

Gross investment income before expenses and fees
   4.8 % 1,636    4.4 % 1,535    0.4 % 101
Expenses and fees
   (0.2 )% (48 ) (0.1 )% (43 ) (0.1 )% (5 )

Net investment income
   4.6 % $ 1,588    4.3 % $ 1,492    0.3 % $ 96

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~


	Three months ended March 31,												Increase (decrease)
	2011						2010						2011 vs. 2010
(Amounts in millions)	Yield			Amount			Yield			Amount			Yield			Amount
Fixed maturity securities—taxable		5.0	%	$	670			4.9	%	$	626			0.1	%	$	44
Fixed maturity securities—non-taxable		4.2	%		11			4.3	%		16			(0.1	)%		(5	)
Commercial mortgage loans		5.5	%		92			5.8	%		104			(0.3	)%		(12	)
Restricted commercial mortgage loans related to securitization entities		7.6	%		10			7.3	%		10			0.3	%		—
Equity securities		3.2	%		3			6.6	%		2			(3.4	)%		1
Other invested assets		10.1	%		34			(0.7	)%		(2	)		10.8	%		36
Restricted other invested assets related to securitization entities		0.3	%		—			1.0	%		1			(0.7	)%		(1	)
Policy loans		8.0	%		29			7.7	%		27			0.3	%		2
Cash, cash equivalents and short-term investments		0.7	%		6			0.4	%		5			0.3	%		1

Gross investment income before expenses and fees		5.0	%		855			4.6	%		789			0.4	%		66
Expenses and fees		(0.2	)%		(25	)		(0.2	)%		(24	)		—	%		(1	)

Net investment income		4.8	%	$	830			4.4	%	$	765			0.4	%	$	65

Yields for fixed maturity and equity securities are based on weighted-average amortized cost or cost, respectively. Yields for other invested assets, which include securities lending activity, are calculated net of the corresponding securities lending liability. All other yields are based on average carrying values.

For the three ~~and six~~ months ended ~~June 30, 2010,~~March 31, 2011, the increase in overall weighted-average investment yields was primarily attributable to ~~lower losses on~~the improved performance of limited ~~partnerships.~~partnerships accounted for under the equity method

and the reinvestment of cash balances. Net investment income for the three months ended ~~June 30, 2010~~March 31, 2011 included ~~$10~~$4 million of gains related to limited partnerships ~~accounted for under the equity method~~ as compared to ~~losses of $33 million in the three months ended June 30, 2009. Net investment income for the six months ended June 30, 2010 included $116~~$34 million of ~~lower~~ losses related to limited partnerships ~~accounted~~ for ~~under~~ the ~~equity method as compared to the six~~three months ended ~~June 30, 2009. Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of January 1,~~March 31, 2010. ~~These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009 and lower yields on floating rate investments.~~

The following table sets forth net investment gains (losses) for the periods indicated:

   Three months ended
June 30, Six months ended
June 30,
(Amounts in millions)
       2010         2009         2010         2009
Available-for-sale securities:

Realized gains on sale
   $ 53    $ 21    $ 76    $ 50
Realized losses on sale
   (36 ) (48 ) (74 ) (111 )
Impairments:

Total other-than-temporary impairments
   (24 ) (476 ) (101 ) (1,073 )
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)
   (27 ) 324    (30 ) 324

Net other-than-temporary impairments
   (51 ) (152 ) (131 ) (749 )

Trading securities
   (4 ) 11    2    (1 )
Commercial mortgage loans
   (18 ) (5 ) (22 ) (11 )
Net gains (losses) related to securitization entities⁽¹⁾
   (47 ) —      (36 ) —
Derivative instruments
   (38 ) 114    (46 ) (7 )
Other
   2    6    22    6

Net investment gains (losses)
   $ (139 ) $ (53 ) $ (209 ) $ (823 )

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~


	Three months ended March 31,
(Amounts in millions)	2011			2010
Available-for-sale securities:
Realized gains	$	29		$	23
Realized losses		(31	)		(38	)

Net realized gains (losses) on available-for-sale securities		(2	)		(15	)

Impairments:
Total other-than-temporary impairments		(31	)		(77	)
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)		(5	)		(3	)

Net other-than-temporary impairments		(36	)		(80	)

Trading securities		11			6
Commercial mortgage loans		(1	)		(4	)
Net gains (losses) related to securitization entities		10			11
Derivative instruments		(10	)		(8	)
Other		—			20

Net investment gains (losses)	$	(28	)	$	(70	)

Three Months Ended ~~June 30, 2010~~March 31, 2011 Compared to Three Months Ended ~~June 30, 2009~~March 31, 2010

Net investment losses related to derivatives of ~~$38~~$10 million in the ~~second~~first quarter of ~~2010~~2011 were primarily related to ~~$31~~$8 million of losses associated with derivative instruments used to hedge foreign currency risk, $4 million of losses from the change in the value of ~~our credit default swaps due to widening credit spreads, $21 million of losses from the change in value of the embedded derivative liabilities exceeding the change in value of the~~ derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of the embedded derivative liabilities and $9$2 million of losses due to hedge ineffectiveness. These losses were partially offset by $3 million of gains from credit default swaps due to narrowing credit spreads and $1 million of gains related to a derivative strategy to mitigate ~~the~~ interest rate risk associated with our statutory capital position. These losses were partially offset by $15 million of ineffectiveness gains from our cash flow hedge programs related to our long-term care insurance business, $4 million of gains from other non-qualified interest rate swaps, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $2 million of gains from foreign currency options and forward contracts. Net investment ~~gains~~losses related to derivatives of ~~$114~~$8 million in the ~~second~~first quarter of ~~2009~~2010 were primarily related to ~~gains~~$14 million of losses in derivative instruments used for mitigating the risk of embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of the embedded derivative ~~instruments used for mitigating this risk.~~liabilities and $3 million of losses from foreign currency options. These losses were partially offset by $5 million of gains from credit default swaps utilized to improve our diversification and portfolio yield and $5 million of gains in non-qualified interest rate swaps.

~~We also recorded $47 million of net~~Net losses related to securitization entities in the second quarter of 2010 primarily associated with derivatives and $18 million of losses related to commercial mortgage loans from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance. Net gains related to the sale of available-for-sale securities were ~~$17~~$2 million in the ~~second~~first quarter of ~~2010~~2011 compared to ~~losses of $27~~$15 million in the ~~second~~first quarter of ~~2009.~~2010. We also recorded $16 million from the recovery of a counterparty receivable in the first quarter of 2010.

The aggregate fair value of securities sold at a loss during the three months ended ~~June 30,~~March 31, 2011 and 2010 ~~and 2009~~ was ~~$858~~$397 million from the sale of ~~159~~74 securities and ~~$367~~$558 million from the sale of ~~106~~128 securities, respectively, which was approximately ~~96% and 89%, respectively,~~94% of book ~~value.~~value for both 2011 and 2010. The loss on sales of securities in the three months ended ~~June 30, 2010~~March 31, 2011 was primarily driven by widening credit spreads. Generally, securities that are sold at a loss represent either small dollar amounts or percentage losses upon disposition. However, in certain circumstances, events may occur that change our intent to hold specific securities and thus result in our disposition of the security at a loss. Examples of these events include unforeseen issuer-specific events or conditions and shifts in risk or uncertainty of certain securities. Of the securities that were sold at a loss during the three months ended ~~June 30, 2010,~~March 31, 2011, the average period of time those securities had been continuously in an unrealized loss position was approximately 1913 months. The securities sold at a loss ~~during~~in the ~~three months ended June 30, 2010~~first quarter of 2011 included ~~one mortgage-backed security~~two U.S. corporate securities that ~~was~~were sold for a total loss of $4$11 million related to portfolio repositioning activities. Of the securities that were sold at a loss during the three months ended June 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately nine months. Of the securities that were sold at a loss, there were no individual transactions that produced losses considered material to the consolidated financial statements.

~~Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009~~

of $7 million for the six months ended June 30, 2009 were primarily related to losses from a derivative strategy to mitigate the interest rate risk associated with our statutory capital position which were partially offset by gains in embedded derivative liabilities associated with our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.

The aggregate fair value of securities sold at a loss during the six months ended June 30, 2010 and 2009 was $1,416 million from the sale of 239 securities and $737 million from the sale of 199 securities, respectively, which was approximately 95% and 87%, respectively, of book value. The loss on sales of securities in the six months ended June 30, 2010 was primarily driven by widening credit spreads. Generally, securities that are sold at a loss represent either small dollar amounts or percentage losses upon disposition. However, in certain circumstances, events may occur that change our intent to hold specific securities and thus result in our disposition of the security at a loss. Examples of these events include unforeseen issuer-specific events or conditions and shifts in risk or uncertainty of certain securities. Of the securities that were sold at a loss during the six months ended June 30,March 31, 2010, the average period of time those securities had been continuously in an unrealized loss position was approximately 1816 months. The securities sold at a loss ~~during~~in the ~~six months ended June 30,~~first quarter of 2010 included one non-U.S. government security that was sold for a total loss of $7 million ~~in the first quarter of 2010 and one mortgage-backed security that was sold for a total loss of $4 million in the second quarter of 2010~~ related to portfolio repositioning activities. Of the securities that were sold at a loss during the six months ended June 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately nine months. The securities sold at a loss during the six months ended June 30, 2009 included one in the financial services sector totaling $10 million due to portfolio repositioning.

Investment portfolio

The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:

   June 30, 2010 December 31, 2009
(Amounts in millions)
   Carrying value    % of total Carrying value    % of total
Fixed maturity securities, available-for-sale:

Public
   $ 40,677    56 % $ 37,158    54 %
Private
   12,709    18    12,594    19
Commercial mortgage loans
   7,208    10    7,499    11
Other invested assets
   4,042    6    4,702    7
Policy loans
   1,467    2    1,403    2
Restricted commercial mortgage loans related to securitization entities⁽¹⁾
   535    1    —      —
Restricted other invested assets related to securitization entities⁽¹⁾
   374    1    —      —
Equity securities, available-for-sale
   199    —      159    —
Cash and cash equivalents
   4,586    6    5,002    7

Total cash, cash equivalents and invested assets
   $ 71,797    100 % $ 68,517    100 %

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~

   March 31, 2011 December 31, 2010
(Amounts in millions)
   Carrying value    % of total Carrying value    % of total
Fixed maturity securities, available-for-sale:

Public
   $ 42,385       59 % $ 42,526       59 %
Private
   12,613       18    12,657       18
Commercial mortgage loans
   6,600       9    6,718       9
Other invested assets
   3,752       5    3,854       5
Policy loans
   1,480       2    1,471       2
Restricted commercial mortgage loans related to securitization entities
   485       1    507       1
Restricted other invested assets related to securitization entities
   376       1    372       1
Equity securities, available-for-sale
   355       —      332       1
Cash and cash equivalents
   3,742       5    3,132       4

Total cash, cash equivalents and invested assets
   $ 71,788       100 % $ 71,569       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 4 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to our investment portfolio.

We hold fixed maturity, equity and trading securities, derivatives, embedded derivatives, securities held as collateral 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 ~~June 30, 2010,~~March 31, 2011, approximately 6%3% 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 6 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to fair value.

Fixed maturity and equity securities

As of ~~June 30,~~March 31, 2011, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses						Fair value
(Amounts in millions)	Amortized cost or cost		Not other-than- temporarily impaired		Other-than- temporarily impaired		Not other-than- temporarily impaired			Other-than- temporarily impaired			Fair value
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	3,352	$	102	$	—	$	(40	)	$	—		$	3,414
Tax-exempt		1,029		16		—		(117	)		—			928
Government—non-U.S.		2,267		99		—		(7	)		—			2,359
U.S. corporate		23,069		1,062		12		(390	)		—			23,753
Corporate—non-U.S.		13,655		454		—		(163	)		(9	)		13,937
Residential mortgage-backed⁽¹⁾		4,897		134		20		(270	)		(181	)		4,600
Commercial mortgage-backed		3,841		120		3		(172	)		(36	)		3,756
Other asset-backed ⁽¹⁾		2,324		19		—		(90	)		(2	)		2,251

Total fixed maturity securities		54,434		2,006		35		(1,249	)		(228	)		54,998
Equity securities		334		24		—		(3	)		—			355

Total available-for-sale securities	$	54,768	$	2,030	$	35	$	(1,252	)	$	(228	)	$	55,353

⁽¹⁾	Fair value included $457 million collateralized by sub-prime residential mortgage loans and $344 million collateralized by Alt-A residential mortgage loans.

As of December 31, 2010, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


	Amortized cost or cost			Gross unrealized gains						Gross unrealized losses							Fair value
(Amounts in millions)																Amortized cost or cost				Gross unrealized gains						Gross unrealized losses							Fair value
(Amounts in millions)	Amortized cost or cost		Amortized cost or cost			Not other-than- temporarily impaired			Other-than- temporarily impaired			Not other-than- temporarily impaired			Other-than- temporarily impaired				Fair value			Not other-than- temporarily impaired			Other-than- temporarily impaired			Not other-than- temporarily impaired				Other-than- temporarily impaired
Fixed maturity securities:																Amortized cost or cost
U.S. government, agencies and government-sponsored enterprises	$	3,422	Amortized cost or cost		$	262		$	—		$	—		$	—			$	Fair value	3,684	$	3,568		$	145		$	—			$	(8	Fair value	)	$	—	$	3,705
Tax-exempt		1,407			39			—			(96	)		—				1,350		1,124			19			—			(113	)			—			1,030
Government—non-U.S.		2,023			126			—			(3	)		—				2,146		2,257			118			—			(6	)			—			2,369
U.S. corporate		22,529			1,332			7			(489	)		(1	)			23,378		23,282			1,123			10			(448	)			—			23,967
Corporate—non-U.S.		12,572			494			12			(279	)		—				12,799		13,180			485			—			(167	)			—			13,498
Residential mortgage-backed⁽¹⁾		4,395			160			8			(347	)		(261	)			3,955		4,821			116			18			(304	)			(196	)		4,455
Commercial mortgage-backed		4,117			152			7			(488	)		(62	)			3,726		3,936			132			6			(286	)			(45	)		3,743
Other asset-backed⁽¹⁾		2,640			18			—			(297	)		(13	)			2,348		2,494			18			—			(94	)			(2	)		2,416

Total fixed maturity securities		53,105			2,583			34			(1,999	)		(337	)			53,386		54,662			2,156			34			(1,426	)			(243	)		55,183
Equity securities		192			13			—			(6	)		—				199		323			13			—			(4	)			—			332

Total available-for-sale securities	$	53,297		$	2,596		$	34		$	(2,005	)	$	(337	)		$	53,585	$	54,985		$	2,169		$	34		$	(1,430	)		$	(243	)	$	55,515

⁽¹⁾	Fair value included ~~$434~~$457 million collateralized by sub-prime residential mortgage loans and ~~$358~~$376 million collateralized by Alt-A residential mortgage loans.

~~As of December 31, 2009, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:~~

Amortized
cost or
cost Gross unrealized gains Gross unrealized losses Fair
value
(Amounts in millions)
Not other-than-
temporarily
impaired Other-than-
temporarily
impaired Not other-than-
temporarily
impaired Other-than-
temporarily
impaired
Fixed maturity securities:

U.S. government, agencies and government-sponsored enterprises
$ 2,673 $ 25 $ —   $ (96 ) $ —      $ 2,602
Tax-exempt
1,606 42 —   (104 ) —      1,544
Government—non-U.S.
2,310 96 —   (22 ) —      2,384
U.S. corporate
21,598 628 3 (814 ) (3 ) 21,412
Corporate—non-U.S.
12,530 366 11 (356 ) —      12,551
Residential mortgage-backed⁽¹⁾
3,989 41 7 (484 ) (326 ) 3,227
Commercial mortgage-backed
4,404 44 4 (738 ) (97 ) 3,617
Other asset-backed⁽¹⁾
2,887 8 —   (466 ) (14 ) 2,415

Total fixed maturity securities
51,997 1,250 25 (3,080 ) (440 ) 49,752
Equity securities
139 23 —   (3 ) —      159

Total available-for-sale securities
$ 52,136 $ 1,273 $ 25 $ (3,083 ) $ (440 ) $ 49,911

⁽¹⁾	~~Fair value included $422 million collateralized by sub-prime residential mortgage loans and $369 million collateralized by Alt-A residential mortgage loans.~~

Fixed maturity securities ~~increased $3.6 billion primarily attributable to improved market performance~~decreased $185 million as ~~our fixed maturity securities were in a net unrealized gain position as of June 30, 2010 as compared to a net unrealized loss position as of December 31, 2009. The increase is also attributable to~~maturities exceeded purchases ~~of fixed maturity securities~~ during ~~2010 as we continue to reinvest cash.~~the period.

We allocate net unrealized investment gains (losses) from Corporate and Other activities to our Retirement and Protection segment using an approach based principally upon the investment portfolio established to support the segment’s products and targeted capital levels. We do not allocate net unrealized investment gains (losses) from Corporate and Other activities to our International and U.S. Mortgage Insurance segments because they have their own separate investment portfolios, and net unrealized investment gains (losses) from those portfolios are reflected in the International and U.S. Mortgage Insurance segment balance sheets, respectively. The majority of our unrealized losses were related to securities held within our Retirement and Protection segment. Our U.S. Mortgage Insurance segment had gross unrealized losses of ~~$102~~$131 million and ~~$134~~$128 million as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, respectively.

Our sub-prime securities were principally backed by first lien mortgages. We did not have any exposure to interest margin deals, highly leveraged transactions or collateralized debt obligation-squared investments. The fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans by rating and vintage was as follows as of June 30, 2010:

(Amounts in millions)
   2004
and prior    2005    2006    2007    Total
Ratings⁽¹⁾:

AAA
   $ 44    $ 7    $ —      $ —      $ 51
AA
   21    17    —      20    58
A
   11    19    3    —      33
BBB
   17    15    —      —      32
BB
   12    25    —      —      37
B
   4    28    28    —      60
CCC and lower
   24    38    87    14    163

Total sub-prime securities
   $ 133    $ 149    $ 118    $ 34    $ 434

⁽¹⁾	~~Based on ratings as of June 30, 2010.~~

~~The fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans by rating and vintage was as follows as of December 31, 2009:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    Total
Ratings⁽¹⁾:

AAA
   $ 42    $ 12    $ —      $ —      $ 54
AA
   23    20    1    19    63
A
   17    47    4    —      68
BBB
   11    6    1    —      18
BB
   8    13    27    —      48
B
   6    24    25    —      55
CCC and lower
   24    16    62    14    116

Total sub-prime securities
   $ 131    $ 138    $ 120    $ 33    $ 422

⁽¹⁾	~~Based on ratings as of December 31, 2009.~~

~~The fair value of our mortgage-backed and asset-backed securities collateralized by Alt-A residential mortgage loans by rating and vintage was as follows as of June 30, 2010:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    2008    2009    2010    Total
Ratings⁽¹⁾:

AAA
   $ 43    $ 18    $ —      $ —      $ —      $ —      $ 7    $ 68
AA
   8    7    1    —      —      —      —      16
A
   17    2    1    6    —      —      —      26
BBB
   25    —      3    —      —      —      —      28
BB
   1    4    —      4    —      —      —      9
B
   3    40    29    4    —      —      —      76
CCC and lower
   4    71    31    29    —      —      —      135

Total Alt-A securities
   $ 101    $ 142    $ 65    $ 43    $ —      $ —      $ 7    $ 358

⁽¹⁾	~~Based on ratings of June 30, 2010.~~

~~The fair value of our mortgage-backed and asset-backed securities collateralized by Alt-A residential mortgage loans by rating and vintage was as follows as of December 31, 2009:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    Total
Ratings⁽¹⁾:

AAA
   $ 43    $ —      $ 1    $ —      $ 44
AA
   9    26    1    —      36
A
   17    23    1    8    49
BBB
   26    1    3    —      30
BB
   2    25    —      4    31
B
   2    19    32    6    59
CCC and lower
   5    55    36    24    120

Total Alt-A securities
   $ 104    $ 149    $ 74    $ 42    $ 369

⁽¹⁾	~~Based on ratings of December 31, 2009.~~

Gross unrealized losses in our sub-prime and Alt-A residential mortgage-backed and asset-backed securities as of June 30, 2010 were primarily a result of credit spreads that have widened since acquisition as a result of marketplace uncertainty arising from higher defaults in sub-prime and Alt-A residential mortgage loans, partially offset by lower asset balances. Our investments in sub-prime residential mortgage-backed and asset-backed securities increased primarily attributable to tightening credit spreads, partially offset by principal payment activity. Our investments in Alt-A residential mortgage-backed and asset-backed securities decreased primarily as a result of principal payment activity, partially offset by tightening credit spreads.

~~The fair value of our commercial mortgage-backed securities by rating and vintage was as follows as of June 30, 2010:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    2008    2009    Total
Ratings⁽¹⁾:

AAA
   $ 1,942    $ 332    $ 331    $ 118    $ —      $ 29    $ 2,752
AA
   45    46    109    61    —      —      261
A
   49    26    78    107    —      —      260
BBB
   52    17    39    47    —      —      155
BB
   33    7    47    75    —      —      162
B
   17    —      12    21    —      —      50
CCC and lower
   15    6    60    5    —      —      86

Total commercial mortgage-backed securities
   $ 2,153    $ 434    $ 676    $ 434    $ —      $ 29    $ 3,726

⁽¹⁾	~~Based on ratings as of June 30, 2010.~~

~~The fair value of our commercial mortgage-backed securities by rating and vintage was as follows as of December 31, 2009:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    2008    2009    Total
Ratings⁽¹⁾:

AAA
   $ 1,943    $ 338    $ 336    $ 120    $ —      $ 20    $ 2,757
AA
   52    63    85    127    —      —      327
A
   69    36    54    54    —      —      213
BBB
   50    12    41    33    —      —      136
BB
   30    6    33    52    —      —      121
B
   17    —      10    11    —      —      38
CCC and lower
   10    4    11    —      —      —      25

Total commercial mortgage-backed securities
   $ 2,171    $ 459    $ 570    $ 397    $ —      $ 20    $ 3,617

⁽¹⁾	~~Based on ratings as of December 31, 2009.~~

Commercial mortgage loans

The following tables set forth additional information regarding our commercial mortgage loans as of the dates indicated:


	June 30, 2010								March 31, 2011
(Loan amounts in millions)	Total loan balance ⁽¹⁾		Delinquent loan balance		Number of loans	Number of delinquent loans	Average loan- to-value⁽²⁾
(Dollar amounts in millions)									Total loan balance ⁽¹⁾		Delinquent loan balance		Number of loans		Number of delinquent loans		Average loan- to-value⁽²⁾
Loan Year
2004 and prior	$	2,470	$	18	989	8	49	%	$	2,103	$	35		886		8		50	%
2005		1,564		—	319	—	64	%		1,440		3		310		1		64	%
2006		1,497		11	288	2	72	%		1,397		—		281		—		72	%
2007		1,435		14	199	4	81	%		1,293		—		191		—		77	%
2008		288		9	59	2	80	%		281		11		58		2		77	%
2009		—		—	—	—	—	%		—		—		—		—		—	%
2010		23		—	4	—	52	%		103		—		17		—		64	%
2011										38		—		9		—		70	%

Total	$	7,277	$	52	1,858	16	65	%	$	6,655	$	49		1,752		11		65	%

⁽¹⁾	~~Does not include $4~~Excludes $1 million of ~~premium.~~net premium discount on commercial mortgage loans acquired from third parties.

⁽²⁾	Represents loan-to-value as of ~~June 30, 2010.~~March 31, 2011.


	December 31, 2009								December 31, 2010
(Loan amounts in millions)	Total loan balance		Delinquent loan balance		Number of loans	Number of delinquent loans	Average loan- to-value⁽¹⁾
(Dollar amounts in millions)									Total loan balance ⁽¹⁾		Delinquent loan balance		Number of loans		Number of delinquent loans		Average loan- to-value⁽²⁾
Loan Year
2004 and prior	$	2,644	$	5	1,039	2	49	%	$	2,169	$	21		908		6		51	%
2005		1,607		—	320	—	63	%		1,458		—		312		—		65	%
2006		1,521		15	290	4	70	%		1,418		9		283		1		73	%
2007		1,458		76	203	3	80	%		1,345		9		193		2		79	%
2008		295		—	61	—	77	%		282		11		58		2		77	%
2009⁽²⁾		16		—	518	—	—	%		—		—		—		—		—	%
2010										104		—		17		—		58	%

Total	$	7,541	$	96	2,431	9	63	%	$	6,776	$	50		1,771		11		65	%

⁽¹⁾	Excludes $4 million of net premium discount on commercial mortgage loans acquired from third parties.

⁽²⁾	Represents loan-to-value as of December 31, ~~2009.~~

⁽²⁾	Loan balance represents reverse mortgage originations not sold as of December 31, 2009 and number of loans represents total reverse mortgage loan originations for 2009. In the first quarter of 2010, we began reporting reverse mortgages in other invested assets.2010.

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans for the period ended March 31:


(Amounts in millions)	2011
Allowance for credit losses:
Beginning balance	$	59
Charge-offs		(1	)
Recoveries		—
Provision		—

Ending balance	$	58

Ending allowance for individually impaired loans	$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	58

Principal balance:
Ending balance	$	6,654

Ending balance of individually impaired loans	$	14

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,640

The following table presents the activity in the allowance for losses ~~during~~for the ~~periods indicated:~~period ended March 31:


(Amounts in millions)	As of or for the three months ended June 30, 2010		As of or for the six months ended June 30, 2010		2010
Beginning balance	$	52	$	48	$	48
Provision⁽¹⁾		18		22		4
Release		—		—		—

Ending balance	$	70	$	70	$	52

⁽¹⁾	~~Included $13 million related to held-for-sale~~The charge-offs during 2011 were related to individually impaired commercial mortgage loans.

~~The increase in the provision during 2010 was related to a change in reserving assumptions to reflect the current market environment.~~

Restricted commercial mortgage loans related to securitization entities

The following ~~table sets~~tables set forth additional information regarding our restricted commercial mortgage loans related to securitization entities as of the ~~date~~dates indicated:


	June 30, 2010								March 31, 2011
(Loan amounts in millions)	Total loan balance		Delinquent loan balance		Number of loans	Number of delinquent loans	Average loan- to-value⁽¹⁾
(Dollar amounts in millions)									Total loan balance		Delinquent loan balance		Number of loans		Number of delinquent loans		Average loan- to-value⁽¹⁾
Loan Year
2004 and prior	$	537	$	—	209	—	44	%	$	487	$	—		198		—		42	%

Total	$	537	$	—	209	—	44	%	$	487	$	—		198		—		42	%

⁽¹⁾	Represents loan-to-value as of ~~June 30,~~March 31, 2011.

   December 31, 2010
(Dollar amounts in millions)
   Total loan
balance    Delinquent
loan balance    Number of
loans    Number of
delinquent
loans    Average loan-
to-value⁽¹⁾
Loan Year

2004 and prior
   $ 509       $ —         202       —         43 %

Total
   $ 509       $ —         202       —         43 %

⁽¹⁾	Represents loan-to-value as of December 31, 2010.

~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~

Other invested assets

The following table sets forth the carrying values of our other invested assets as of the dates indicated:


	June 30, 2010				December 31, 2009				March 31, 2011					December 31, 2010
(Amounts in millions)	Carrying value		% of total		Carrying value		% of total		Carrying value		% of total			Carrying value		% of total
Derivatives	$	1,443	36	%	$	946	20	%	$	901		24	%	$	1,047		27	%
Securities lending collateral										811		22			772		20
Derivatives counterparty collateral		1,058	26			647	14			745		20			794		21
Securities lending collateral		680	17			853	18
Trading securities										667	��	18			677		18
Limited partnerships		363	9			430	9			339		9			340		9
Trading securities		221	5			174	4
Short-term investments		190	5			1,590	34			198		5			139		3
Other investments		87	2			62	1			91		2			85		2

Total other invested assets	$	4,042	100	%	$	4,702	100	%	$	3,752		100	%	$	3,854		100	%

Our investments in derivatives and derivative counterparty collateral ~~increased~~decreased primarily as a result of ~~a decrease~~an increase in long-term interest rates. Securities lending collateral ~~decreased~~increased primarily from ~~our decision to decrease the~~increased program ~~size. Limited partnership investments decreased primarily from sales and unrealized depreciation and returned capital, partially offset by calls on outstanding commitments.~~demand. The ~~decrease~~increase in short-term investments was attributable to ~~portfolio repositioning activities in~~purchases during the first ~~half~~quarter of ~~2010.~~2011.

Derivatives

~~The following table sets forth our positions in derivative instruments as of the dates indicated:~~

Derivative assets Derivative liabilities
Balance
sheet
classification Fair value Balance
sheet
classification Fair value
(Amounts in millions)
June 30,
2010 December 31,
2009 June 30,
2010 December 31,
2009
Derivatives designated as hedges

Cash flow hedges:

Interest rate swaps
Other invested
assets $ 540 $ 72    Other
liabilities $ 9 $ 114
Inflation indexed swaps
Other invested
assets
1 —      Other
liabilities 22 21
Foreign currency swaps
Other invested
assets 140 101    Other
liabilities —   —

Total cash flow hedges
681 173    31 135

Fair value hedges:

Interest rate swaps
Other invested
assets 124 132    Other
liabilities 11 15
Foreign currency swaps
Other invested
assets 20 24    Other
liabilities —   —

Total fair value hedges
144 156    11 15

Total derivatives designated as hedges
825 329    42 150

Derivatives not designated as hedges

Interest rate swaps
Other invested
assets 509 505    Other
liabilities 41 59
Interest rate swaps related to securitization entities⁽¹⁾
Restricted
other invested
assets —   —      Other
liabilities 23 —
Interest rate swaptions
Other invested
assets 4 54    Other
liabilities —   67
Credit default swaps
Other invested
assets 2 11    Other
liabilities 27 3
Credit default swaps related to securitization entities⁽¹⁾
Restricted
other invested
assets —   —      Other
liabilities 159 —
Equity index options
Other invested
assets 97 39    Other
liabilities —   2
Financial futures
Other invested
assets —   —      Other
liabilities —   —
Other foreign currency contracts
Other invested
assets 6 8    Other
liabilities —   —
Reinsurance embedded derivatives⁽²⁾
Other assets 2 —      Other
liabilities —   —
GMWB embedded derivatives
Reinsurance
recoverable ⁽³⁾ 9 (5 ) Policyholder
account
balances⁽⁴⁾ 447 175

Total derivatives not designated as hedges
629 612    697 306

Total derivatives
$ 1,454 $ 941    $ 739 $ 456

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~

⁽²⁾	~~Represents embedded derivatives associated with certain reinsurance agreements.~~

⁽³⁾	~~Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.~~

⁽⁴⁾	~~Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.~~


(Notional in millions)	Measurement	December 31, 2009		Additions		Maturities/ terminations			June 30, 2010		Measurement		December 31, 2010		Additions		Maturities/ terminations			March 31, 2011
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps	Notional	$	9,479	$	1,382	$	(206	)	$	10,655		Notional	$	12,355	$	995	$	(3	)	$	13,347
Inflation indexed swaps	Notional		376		157		(6	)		527		Notional		525		9		—			534
Foreign currency swaps	Notional		491		—		—			491		Notional		491		—		—			491

Total cash flow hedges			10,346		1,539		(212	)		11,673				13,371		1,004		(3	)		14,372

Fair value hedges:
Interest rate swaps	Notional		2,366		—		(139	)		2,227		Notional		1,764		—		(326	)		1,438
Foreign currency swaps	Notional		85		—		—			85		Notional		85		—		—			85

Total fair value hedges			2,451		—		(139	)		2,312				1,849		—		(326	)		1,523

Total derivatives designated as hedges			12,797		1,539		(351	)		13,985				15,220		1,004		(329	)		15,895

Derivatives not designated as hedges
Interest rate swaps	Notional		6,474		2,345		(577	)		8,242		Notional		7,681		35		(1,275	)		6,441
Equity return swaps												Notional		208		7		—			215
Interest rate swaps related to securitization entities	Notional		—		138		(3	)		135		Notional		129		—		(3	)		126
Interest rate swaptions	Notional		5,100		200		(5,100	)		200		Notional		200		—		(200	)		—
Credit default swaps	Notional		1,090		50		—			1,140		Notional		1,195		115		(100	)		1,210
Credit default swaps related to securitization entities	Notional		—		322		(5	)		317		Notional		317		—		—			317
Equity index options	Notional		912		397		(614	)		695		Notional		744		288		(451	)		581
Financial futures	Notional		5,822		3,696		(5,019	)		4,499		Notional		3,937		1,372		(1,806	)		3,503
Other foreign currency contracts	Notional		521		73		—			594		Notional		521		185		—			706
Reinsurance embedded derivatives	Notional		—		47		—			47		Notional		72		12		—			84

Total derivatives not designated as hedges			19,919		7,268		(11,318	)		15,869				15,004		2,014		(3,835	)		13,183

Total derivatives		$	32,716	$	8,807	$	(11,669	)	$	29,854			$	30,224	$	3,018	$	(4,164	)	$	29,078


(Number of policies)	Measurement	December 31, 2009	Additions	Terminations		June 30, 2010	Measurement		December 31, 2010		Additions		Terminations			March 31, 2011
Derivatives not designated as hedges
GMWB embedded derivatives	Policies	47,543	2,244	(1,445	)	48,342		Policies		49,566		675		(654	)		49,587

The decrease in the notional value of derivatives was primarily attributable to a ~~$3.1~~$1.1 billion notional decrease in interest rate swaps and swaptions related to a derivative strategy to mitigate interest rate risk associated with our statutory capital position, a ~~$1.4 billion notional decrease in non-qualifying futures used for duration management related to our long-term care insurance and deferred annuity products and a~~ $0.6 billion notional decrease in ~~non-qualifying futures and~~ interest rate swaps and financial futures used to hedge liabilities related to our institutional ~~products. The~~products and a $0.5 billion notional decrease in derivatives used to hedge our variable annuity products with GMWBs. These decreases were partially offset by a ~~$1.6~~$1.0 billion notional increase in ~~qualifying and non-qualifying~~ cash flow hedges related to our interest rate hedging strategy associated with our long-term care insurance ~~products, a $0.5 billion notional increase in credit default swaps and interest rate swaps related to securitization entities and a $0.2 billion notional increase in inflation indexed swaps.~~products.

Consolidated Balance Sheets

Total assets. Total assets increased ~~$2.2~~$0.5 billion from ~~$108.2~~$112.4 billion as of December 31, ~~2009~~2010 to ~~$110.4~~$112.9 billion as of ~~June 30, 2010.~~March 31, 2011.

Cash, cash equivalents and invested assets increased ~~$3.3~~$0.2 billion primarily from an increase of ~~$3.6~~$0.6 billion in cash and cash equivalents, partially offset by a decrease of $0.4 billion in invested assets. The increase in cash was primarily attributable to our debt issuance in March 2011. Our fixed maturity securities portfolio decreased $0.2 billion resulting primarily from ~~improved market performance and an increase in~~maturities exceeding purchases during the first quarter of ~~fixed maturity securities. Also contributing to the increase was an increase of $0.9 billion in restricted commercial~~2011. Commercial mortgage loans ~~and other~~decreased $0.1 billion as collections exceeded originations during the first quarter of 2011. Other invested assets ~~from the consolidation of certain securitization entities as of January 1, 2010. Partially offsetting these increases was a decrease in other invested assets of $0.7~~decreased $0.1 billion primarily driven by a decrease in ~~short-term investments~~derivatives and ~~securities lending,~~derivatives counterparty collateral, partially offset by an increase in ~~derivatives~~our securities lending program and derivatives counterparty collateral. Also contributing to the decrease was a decrease of $0.4 billion in cash and cash equivalents as the net proceeds from the U.S. and Canadian senior note issuances in the second quarter of 2010 were more than offset by purchases of fixed maturity securities.short-term investments.

Separate account assets ~~decreased $0.7~~increased $0.1 billion primarily as a result of ~~unfavorable~~favorable market performance of the underlying securities.

Total liabilities. Total liabilities increased ~~$0.5~~$0.3 billion from ~~$94.8~~$97.4 billion as of December 31, ~~2009~~2010 to ~~$95.3~~$97.7 billion as of ~~June 30, 2010.~~March 31, 2011.

Our policyholder-related liabilities decreased $0.4 billion largely attributable to a decrease in ~~reserves associated with~~ our ~~retirement income business~~spread-based products from benefit payments and scheduled maturities of our spread-based products and a decrease in our U.S. mortgage insurance business primarily from settlements and a decline in delinquencies in 2010. Unearned premiums decreased in our international mortgage insurance business primarily attributable to seasoning and in our lifestyle protection insurance business from a decline in sales.institutional products. These decreases were partially offset by an increase in ~~reserves related to~~ our long-term care insurance business from growth of our in-force ~~block~~block.

Other liabilities increased $0.1 billion primarily as a result of the timing of payments and an increase in our ~~retirement income business from an increase~~securities lending program, partially offset by a decrease in ~~fee-based product sales.~~

~~Borrowings related to securitization entities increased $0.5 billion from the consolidation of certain securitization entities as of January 1, 2010.~~our repurchase program.

Long-term borrowings increased ~~$0.7~~$0.4 billion principally from the issuance of ~~$400 million of~~ senior notes in ~~the second quarter of 2010 and from the issuance of CDN$275 million of senior notes by our majority-owned subsidiary, Genworth MI Canada Inc. (“Genworth Canada”), in the second quarter of 2010.~~March 2011.

Separate account liabilities ~~decreased $0.7~~increased $0.1 billion primarily as a result of ~~unfavorable~~favorable market performance of the underlying securities.

Total stockholders’ equity. Total stockholders’ equity increased ~~$1.6~~$0.2 billion from ~~$13.4~~$15.0 billion as of December 31, ~~2009~~2010 to ~~$15.0~~$15.2 billion as of ~~June 30, 2010.~~March 31, 2011.

We reported net income available to Genworth Financial, Inc.’s common stockholders of ~~$0.2~~$0.1 billion for the ~~six~~three months ended ~~June 30, 2010.~~March 31, 2011.

~~We recorded a cumulative effect adjustment that reduced retained earnings by $104 million with a partial offset to accumulated~~Accumulated other comprehensive income ~~(loss) of $91 million related~~increased $0.1 billion predominately attributable to the ~~consolidation~~weakening of ~~certain securitization entities as of January 1, 2010.~~the U.S. dollar against other currencies resulting in higher foreign currency translation adjustments.

We had accumulated other comprehensive income of $1.3 billion as of June 30, 2010 compared to accumulated other comprehensive loss of $0.2 billion as of December 31, 2009. The change in accumulated other comprehensive income was primarily attributable to a decrease of $1.4 billion in net unrealized investment losses from improved market performance during the first half of 2010.

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.

Genworth Financial and subsidiaries

The following table sets forth our condensed consolidated cash flows for the ~~six~~three months ended ~~June 30:~~March 31:


(Amounts in millions)	2010			2009			2011			2010
Net cash from operating activities	$	557		$	1,369		$	336		$	130
Net cash from investing activities		(723	)		635			496			(1,174	)
Net cash from financing activities		(243	)		(4,041	)		(221	)		(487	)

Net decrease in cash before foreign exchange effect	$	(409	)	$	(2,037	)
Net increase (decrease) in cash before foreign exchange effect							$	611		$	(1,531	)

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 exceed policy acquisition costs, benefits paid, redemptions and operating expenses. These positive cash flows are then invested to support the obligations of our insurance and investment products and required capital supporting these products. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. The ~~decrease~~increase in cash inflows from operating activities in the first ~~half~~quarter of ~~2010~~2011 compared to the first ~~half~~quarter of ~~2009~~2010 was primarily as a result of ~~higher~~lower tax settlements ~~higher paid claims in our U.S. mortgage insurance business, including settlements that were paid~~ in the first ~~half~~quarter of ~~2010,~~2011 and ~~a decrease~~an increase from ~~other liabilities and~~ policy-related balances associated with the timing of payments.

In analyzing our cash flow, we focus on the change in the amount of cash available and used in investing activities. We had net cash ~~outflows~~inflows from investing activities in the first ~~half~~quarter of ~~2010~~2011 as ~~purchases of investments exceeded~~ proceeds from maturities and sales of fixed maturity ~~securities. In early 2009, we were holding excess cash balances. In the second half~~securities exceeded purchases of ~~2009 and into 2010, we began reinvesting this excess cash.~~investments.

Changes in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on, universal life insurance and investment contracts; the issuance and acquisition of debt and equity securities; the issuance and repayment of borrowings and non-recourse funding obligations; and dividends to our ~~preferred~~ stockholders and other capital transactions. We had net cash outflows from financing activities in the first ~~half~~quarter of ~~2010~~2011 related to redemptions of our investment contracts primarily from scheduled maturities and surrenders which exceeded deposits received on these contracts. ~~In 2009, redemptions were significantly higher due~~Net cash from financing activities increased related to ~~scheduled maturities and the early retirement of institutional contracts. This was partially offset by~~ net proceeds received from the issuance of senior notes induring the ~~U.S. and Canada.~~first quarter of 2011.

In the ~~U.S.~~United States and Canada, we engage in certain securities lending transactions for the purpose of enhancing the yield on our investment securities portfolio, which require the borrower to provide collateral, consisting of cash and government securities, on a daily basis in amounts equal to or exceeding 102% in the ~~U.S.~~United States and 105% in Canada of the fair value of the applicable securities loaned. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. Cash and non-cash collateral, such as a security, received by us on securities lending transactions is reflected in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral. Any cash collateral received is reinvested by our custodian based upon the investment guidelines provided within our agreement. In the ~~U.S.,~~United States, the reinvested cash collateral is primarily invested in a money market fund approved by the National Association of Insurance Commissioners (“NAIC”), U.S. and foreign government securities, U.S. government agency securities, asset-backed securities and corporate debt

~~securities, all of which have scheduled maturities of less than three years.~~ securities. In Canada, the lending institution must be included on the approved Securities Lending Borrowers List with the Canadian regulator and the intermediary must be rated at least “AA-” by Standard & Poor’s Financial Services LLC. We are currently ~~fully~~ indemnified against counterparty credit risk by the intermediary. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, the fair value of securities loaned under the securities lending program was ~~$0.7~~$0.8 billion, ~~and $0.9 billion, respectively,~~ consisting of $0.5 billion ~~and $0.6 billion, respectively,~~ in the ~~U.S. and $0.2 billion~~United States and $0.3 billion ~~respectively,~~ in Canada. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, the fair value of collateral held under the securities

lending program was ~~$0.7~~$0.8 billion ~~and $0.9 billion, respectively,~~ and the offsetting obligation to return collateral of ~~$0.7~~$0.8 billion ~~and $0.9 billion, respectively,~~ was included in other liabilities in the consolidated balance sheets. We had non-cash collateral of ~~$221 million and $326 million~~$0.3 billion as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009, respectively.~~2010.

We also have a repurchase program in which we sell an investment security at a specified price and agree to repurchase that security at another specified price at a later date. Repurchase agreements are treated as collateralized financing transactions and are carried at the amounts at which the securities will be subsequently reacquired, including accrued interest, as specified in the respective agreement. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities. As of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, the fair value of securities pledged under the repurchase program was ~~$2.2~~$1.6 billion and ~~$2.1~~$1.7 billion, respectively, and the repurchase obligation of ~~$1.9~~$1.6 billion and ~~$2.1~~$1.7 billion, respectively, was included in other liabilities in the consolidated balance sheets.

Genworth Financial, Inc.—holding company

We conduct all our operations through our operating subsidiaries. Dividends from our subsidiaries and permitted payments to us under our tax sharing arrangements with our subsidiaries are our principal sources of cash to pay stockholder dividends and to meet our holding company obligations, including payments of principal and interest on our outstanding indebtedness. Other principal sources of cash include proceeds from the issuance of debt and equity securities, including borrowings pursuant to our credit facilities, and sales of assets.

Our primary uses of funds at our holding company level include payment of general operating expenses, payment of principal, interest and other expenses related to holding company debt, payment of ~~stockholder~~ dividends on our common and preferred stock, amounts we owe to GE under the Tax Matters Agreement, contributions to subsidiaries, repurchase of stock, and, potentially, acquisitions.

Our holding company had ~~$916~~$1,140 million and ~~$1,298~~$813 million of cash and cash equivalents as of ~~June 30, 2010~~March 31, 2011 and December 31, ~~2009,~~2010, respectively. ~~During the six months ended June 30, 2010, we contributed $200 million to one of our life insurance subsidiaries to fund growth and invested~~Our holding company also had $200 million in highly liquid U.S. government ~~bonds.~~bonds as of March 31, 2011 and December 31, 2010.

In November 2008, our Board of Directors decided to suspend the payment of dividends on our common stock indefinitely. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements of our subsidiaries, legal requirements, regulatory constraints, our credit and financial strength ratings and such other factors as the Board of Directors deems relevant.

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, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements.

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 and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from repayments of principal, investment income 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 estimated lives 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 ~~June 30, 2010,~~March 31, 2011, our total cash, cash equivalents and invested assets were $71.8 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, limited partnership interests and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes represented approximately ~~33%~~31% of the carrying value of our total cash, cash equivalents and invested assets as of ~~June 30, 2010.~~March 31, 2011.

As of ~~June 30, 2010,~~March 31, 2011, we had approximately ~~$860~~$444 million of GICs outstanding. Substantially all of these contracts allow for the payment of benefits at contract value to Employee Retirement Income Security Act ~~of 1974~~ (“ERISA”) plans prior to contract maturity in the event of death, disability, retirement or change in investment election. ~~Contracts~~These contracts also provide for early termination by the contractholder but are subject to an adjustment to the contract value for changes in the level of interest rates from the time the GIC was issued plus an early withdrawal penalty. We carefully underwrite these risks before issuing a GIC to a plan and historically have been able to effectively manage our exposure to these benefit payments. Our GICs typically credit interest at a fixed interest rate and have a fixed maturity generally ranging from two to six years.

During 2005, certain of our domestic life insurance subsidiaries transferred primarily foreign-issued investment securities to an affiliated special-purpose entity (“SPE”) that is consolidated in our financial statements and whose sole purpose is to securitize these investment securities and issue secured notes to various affiliated insurance companies. The securitized investments are owned in their entirety by the SPE and are not available to satisfy the claims of our creditors. These securitized investments provide collateral to the notes issued by the SPE to the insurance companies. The value of those securities as of June 30, 2010 was $802 million. In July 2010, the affiliated SPE redeemed the structured notes that were held by our domestic life insurance subsidiaries with investment securities. There was no gain or loss recorded on the transaction.

Capital resources and financing activities

We have two five-year revolving credit facilities that mature in May 2012 and August 2012. These facilities bear variable interest rates based on a one-month London Interbank Offered Rate (“LIBOR”) plus a ~~margin. Each of these facilities originally had $1.0 billion available for borrowings. Lehman Commercial Paper Inc. (“LCP”) had committed $70 million under the August 2012 credit facility~~margin and Lehman Brothers Bank, FSB (“Lehman FSB”) had committed $70 million under the May 2012 credit facility. On October 5, 2008, LCP filed for protection under Chapter 11 of the Federal Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. LCP was unable to fulfill its commitments under the August 2012 credit facility and

Lehman FSB declined to fulfill its commitment under the May 2012 credit facility. On April 1, 2010, a consent and waiver agreement was entered into which releases the Lehman Brothers-related commitments under the facilities and reduces the remaining commitments by those respective amounts. Therefore, as of June 30, 2010, we ~~had~~have access to $1.9 billion under these facilities. ~~In June 2010,~~As of March 31, 2011, we ~~repaid $100 million of outstanding~~had no borrowings under ~~each of our five-year revolving credit facilities using the net proceeds from our senior notes offering that was completed in June 2010. As of June 30, 2010, we had borrowings of $730 million under~~ these ~~facilities, and~~facilities; however, we utilized ~~$54~~$280 million ~~of the commitment~~ under these facilities primarily for the issuance of ~~a letter~~letters of credit for the benefit of one of our life insurance subsidiaries. As of December 31, 2010, we had no borrowings under these facilities; however, we utilized $56 million under these facilities primarily for the issuance of letters of credit for the benefit of one of our lifestyle protection insurance subsidiaries. As of June 30, 2010, we have an unused credit capacity under our revolving credit facilities of $1.1 billion. These two facilities contain minimum consolidated net worth requirements. Consolidated net worth, as defined in these agreements, means all amounts that would be included on a consolidated balance sheet of the borrower and its subsidiaries under stockholders’ equity, excluding accumulated other comprehensive income (loss).

In June 2010, our majority-owned subsidiary, Genworth Canada, issued CDN$275 million of 5.68% senior notes due 2020. The net proceeds of the offering will be used to fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada is expected to use any proceeds it receives from such transactions for general corporate and investment purposes, and/or to fund a distribution to, or a repurchase of common shares from, Genworth Canada’s shareholders. In July 2010, Genworth Canada announced a substantial issuer bid, pursuant to which it will offer to purchase for cancellation up to CDN$325 million of its common shares. Brookfield Life Assurance Company Limited, our wholly-owned subsidiary and majority shareholder of Genworth Canada, intends to ultimately sell a sufficient number of shares to maintain its ownership at the current 57.5% level.

We believe our revolving credit facilities and anticipated cash flows from operations will provide us with sufficient capital flexibility and liquidity to meet our future operating requirements, as well as optimize our capital structure. In addition, we actively monitor our liquidity position, liquidity generation options and the credit markets given changing market conditions. However, we cannot predict with any certainty the impact to us from any further disruptions in the credit markets or further downgrades by one or more of the rating agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our holding company. The availability of additional funding will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, the overall availability of credit to the financial services industry, the level of activity and availability of reinsurers, our credit ratings and credit capacity and the performance of and outlook for our business.

Genworth MI Canada Inc., our majority-owned subsidiary, plans to repurchase approximately CAD$160 million of its existing common shares, with the amount and timing subject to market conditions and customary approvals. We expect to receive approximately CAD$82 million after-tax in net proceeds, with no percentage change in ownership.

Contractual obligations and commercial commitments

We enter into obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed based upon analysis of these obligations as the funding of these future cash obligations will be from future cash flows from premiums, deposits, fees and investment income that are not reflected herein. Future cash outflows, whether they are contractual obligations or not, also will vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings.

Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates and market performance. Many of our obligations are linked to cash-generating contracts. These obligations include payments to contractholders that assume those contractholders will continue to make deposits in accordance with the terms of their contracts. In addition, our operations involve significant expenditures that are not based upon “commitments.”

There have been no material additions or changes to our contractual obligations and commercial commitments as set forth in our ~~2009~~2010 Annual Report on Form 10-K filed on February ~~26, 2010,~~25, 2011, except as discussed above under ~~“Capital~~“—Capital resources and financing activities.” However, we announced in March 2011 that we intend to redeem all outstanding shares of our Series A Preferred Stock on June 1, 2011, in accordance with their terms.

Securitization Entities

There were no off-balance sheet securitization transactions in the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 or ~~2009. See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~2010.

New Accounting Standards

For a discussion of recently adopted and not yet adopted accounting standards, see note 2 in our “—Notes to Condensed Consolidated Financial Statements.”

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~

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, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. The following is a discussion of our market risk exposures and our risk management practices.

Credit markets ~~have~~ continued to show signs of improvement across most asset classes in the first quarter of ~~2010.~~2011. See “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of recent market conditions.

In the ~~second~~first quarter of ~~2010,~~2011, the currencies in Canada and Australia strengthened against the U.S. dollar, while in Europe, the currencies weakened against the U.S. dollar, as compared to the ~~prior year.~~first quarter of 2010 and remained relatively flat from the fourth quarter of 2010. This has generally resulted in higher levels of reported revenues and net income, ~~(loss),~~ assets, liabilities and accumulated other comprehensive income (loss) in our U.S. dollar consolidated financial statements. See “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion on the impact changes in foreign currency exchange ~~rates have had during the year.~~rates.

There were no other material changes in these risks since December 31, ~~2009.~~2010.

~~Item 4. Controls and Procedures~~

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~June 30, 2010,~~March 31, 2011, 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 the design and operation~~ 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 ~~the design and operation of these~~our disclosure controls and procedures were ~~effective.~~effective as of March 31, 2011.

Changes in Internal Control Over Financial Reporting During the Quarter Ended ~~June 30, 2010~~March 31, 2011

There were no changes in our internal control over financial reporting that occurred during the ~~six months~~quarter ended ~~June 30, 2010~~March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

~~Item 1. Legal Proceedings~~

Item 1.

Legal Proceedings

We face ~~a significant~~the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, bidding practices in connection with our management and administration of a ~~third party’s~~third-party’s municipal guaranteed investment contract business, claims payments and procedures, ~~cancellation or rescission of coverage,~~ product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of RESPA or related state anti-inducement laws, and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts ~~including punitive and treble damages,~~ which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. WeIn addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition ~~and~~or results of operations.

~~There~~Except as disclosed below, there were no material developments during the ~~six~~three months ended ~~June 30, 2010~~March 31, 2011 in any of the legal proceedings identified in Part I, Item 3 of our ~~2009~~2010 Annual Report on Form ~~10-K, as updated in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010.~~10-K. In addition, there were no new material legal proceedings during the ~~six~~three months ended ~~June~~March 31, 2011.

As previously disclosed, in December 2009, one of our non-insurance subsidiaries, one of the subsidiary’s officers and Genworth Financial, Inc. were named in a putative class action lawsuit captionedMichael J. Goodman and Linda Brown v. Genworth Financial Wealth Management, Inc., et al, in the United States District Court for the Eastern District of New York. In response to our motion to dismiss the complaint in its entirety, the Court granted on March 30, ~~2010.~~2011 the motion to dismiss the state law fiduciary duty claim and denied the motion to dismiss the remaining federal claims. We continue to vigorously defend this action.

We cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to ~~further~~additional unrelated investigations and ~~have lawsuits filed against us.~~lawsuits. Increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely affect our business, financial condition and results of operations.

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 ~~2009~~2010 Annual Report on Form 10-K which 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. As of ~~June 30, 2010,~~March 31, 2011, there have been no material changes to the risk factors set forth in the above-referenced filing.

Item 6. ~~Exhibits~~ Exhibits



10		Form of Stock Appreciation Rights with a Maximum Share Value Award Agreement under the 2004 Genworth Financial, Inc. Omnibus Incentive Plan

12		Statement of Ratio of Income to Fixed Charges

31.1		Certification of Michael D. Fraizer

31.2		Certification of Patrick B. Kelleher

32.1		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Michael D. Fraizer

32.2		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Patrick B. Kelleher

~~101~~101.INS		The following consolidated financial statements from Genworth Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed on July 30, 2010, formatted in XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Stockholders’ Equity and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

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: ~~July 30, 2010~~May 4, 2011

	By:	/s/S/ AMY R. CORBIN
		Amy R. Corbin Vice President and Controller (Duly Authorized Officer and Principal Accounting Officer)

~~134~~111


(Amounts in millions)	Carrying value ⁽¹⁾		Adjustment for election of fair value option⁽²⁾			Amounts recorded upon consolidation
Assets
Restricted commercial mortgage loans	$	564	$	—		$	564
Restricted other invested assets		409		(30	)		379
Accrued investment income		2		—			2

Total assets		975		(30	)		945

Liabilities
Other liabilities		138		—			138
Borrowings related to securitization entities		644		(80	)		564

Total liabilities		782		(80	)		702

Net assets and liabilities of newly consolidated entities	$	193	$	50			243

Less: amortized cost of fixed maturity securities previously recorded⁽³⁾							404

Cumulative effect adjustment to retained earnings upon adoption, pre-tax							(161	)
Tax effect							57

Net cumulative effect adjustment to retained earnings upon adoption						$	(104	)


(Amounts in millions)	Three months ended June 30, 2010		Six months ended June 30, 2010
Beginning balance	$	52	$	48
Provision⁽¹⁾		18		22
Release		—		—

Ending balance	$	70	$	70


	Three months ended June 30,						Classification of gain (loss) recognized in net income (loss)
(Amounts in millions)	2010			2009
Interest rate swaps	$	63		$	164		Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾		(9	)		—		Net investment gains (losses)
Interest rate swaptions		35			(338	)	Net investment gains (losses)
Credit default swaps		(32	)		35		Net investment gains (losses)
Credit default swaps related to securitization entities⁽¹⁾		(46	)		—		Net investment gains (losses)
Equity index options		50			(71	)	Net investment gains (losses)
Financial futures		105			(163	)	Net investment gains (losses)
Inflation indexed swaps		—			4		Net investment gains (losses)
Other foreign currency contracts		2			8		Net investment gains (losses)
Reinsurance embedded derivatives		2			—		Net investment gains (losses)
GMWB embedded derivatives		(278	)		479		Net investment gains (losses)

Total derivatives not designated as hedges	$	(108	)	$	118


	Six months ended June 30,						Classification of gain (loss) recognized in net income (loss)
(Amounts in millions)	2010			2009
Interest rate swaps	$	57		$	246		Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾		(12	)		—		Net investment gains (losses)
Interest rate swaptions		57			(579	)	Net investment gains (losses)
Credit default swaps		(27	)		21		Net investment gains (losses)
Credit default swaps related to securitization entities⁽¹⁾		(41	)		—		Net investment gains (losses)
Equity index options		23			(55	)	Net investment gains (losses)
Financial futures		72			(84	)	Net investment gains (losses)
Inflation indexed swaps		—			(4	)	Net investment gains (losses)
Foreign currency swaps		—			6		Net investment gains (losses)
Other foreign currency contracts		(1	)		10		Net investment gains (losses)
Reinsurance embedded derivatives		2			—		Net investment gains (losses)
GMWB embedded derivatives		(242	)		440		Net investment gains (losses)

Total derivatives not designated as hedges	$	(112	)	$	1


	Beginning balance as of April 1, 2010			Total realized and unrealized gains (losses)					Purchases, sales, issuances and settlements, net			Transfer in Level 3⁽¹⁾		Transfer out of Level 3			Ending balance as of June 30, 2010		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of April 1, 2010			Included in net income (loss)			Included in OCI		Purchases, sales, issuances and settlements, net			Transfer in Level 3⁽¹⁾		Transfer out of Level 3			Ending balance as of June 30, 2010
Fixed maturity securities:
U.S. government, agencies and government- sponsored enterprises	$	8		$	—		$	—	$	(1	)	$	6	$	(4	)	$	9	$	—
Tax-exempt		2			—			—		—			—		(2	)		—		—
Government—non-U.S.		1			—			1		—			16		—			18		—
U.S. corporate		906			11			19		(29	)		653		(40	)		1,520		4
Corporate—non-U.S.		508			—			7		2			294		(91	)		720		—
Residential mortgage- backed		171			—			—		(26	)		1		(84	)		62		—
Commercial mortgage- backed		47			—			10		(1	)		11		(8	)		59		—
Other asset-backed		409			(8	)		2		(14	)		—		(28	)		361		(8	)

Total fixed maturity securities		2,052			3			39		(69	)		981		(257	)		2,749		(4	)

Equity securities		67			—			1		1			—		(60	)		9		—

Other invested assets:
Trading securities		142			(7	)		—		1			—		—			136		(7	)
Derivative assets:
Interest rate swaps		4			5			—		—			—		—			9		5
Interest rate swaptions		14			24			—		(34	)		—		—			4		24
Credit default swaps		7			(7	)		—		—			—		—			—		(7	)
Equity index options		34			46			—		17			—		—			97		46
Other foreign currency contracts		4			(3	)		—		—			—		—			1		(3	)

Total derivative assets		63			65			—		(17	)		—		—			111		65

Total other invested assets		205			58			—		(16	)		—		—			247		58

Restricted other invested assets related to securitization entities ⁽²⁾		174			(2	)		2		—			—		—			174		(2	)
Reinsurance recoverable⁽³⁾		(6	)		15			—		—			—		—			9		15

Total Level 3 assets	$	2,492		$	74		$	42	$	(84	)	$	981	$	(317	)	$	3,188	$	67


	Beginning balance as of April 1, 2009		Total realized and unrealized gains (losses)						Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2009		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of April 1, 2009		Included in net income (loss)			Included in OCI			Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2009
Fixed maturity securities:
U.S. government, agencies and government-sponsored entities	$	19	$	—		$	(37	)	$	4		$	389	$	(18	)	$	357	$	—
Tax exempt		5		—			—			—			2		(5	)		2		—
Government—non-U.S.		35		—			2			3			—		(18	)		22		—
U.S. corporate		1,658		(14	)		140			(70	)		240		(546	)		1,408		6
Corporate—non-U.S.		1,136		(10	)		25			(23	)		204		(565	)		767		1
Residential mortgage-backed		2,602		(106	)		66			(44	)		4		(899	)		1,623		(88	)
Commercial mortgage-backed		3,647		(10	)		7			(27	)		27		(516	)		3,128		(11	)
Other asset-backed		1,901		(8	)		137			(98	)		8		(877	)		1,063		(4	)

Total fixed maturity securities		11,003		(148	)		340			(255	)		874		(3,444	)		8,370		(96	)

Equity securities		61		—			—			—			—		—			61		—

Other invested assets:
Trading securities		156		15			—			(5	)		—		(33	)		133		13
Derivative assets		706		(256	)		—			(164	)		—		—			286		(237	)

Total other invested assets		862		(241	)		—			(169	)		—		(33	)		419		(224	)

Reinsurance recoverable		18		(16	)		—			—			—		—			2		(16	)

Total Level 3 assets	$	11,944	$	(405	)	$	340		$	(424	)	$	874	$	(3,477	)	$	8,852	$	(336	)


	Beginning balance as of January 1, 2009		Total realized and unrealized gains (losses)						Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2009		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of January 1, 2009		Included in net income (loss)			Included in OCI			Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2009
Fixed maturity securities:
U.S. government, agencies and government- sponsored entities	$	25	$	—		$	(38	)	$	13		$	389	$	(32	)	$	357	$	—
Tax exempt		—		—			—			5			2		(5	)		2		—
Government—non-U.S.		31		—			—			9			—		(18	)		22		—
U.S. corporate		2,734		(16	)		111			(111	)		377		(1,687	)		1,408		5
Corporate—non-U.S.		1,560		(33	)		142			11			404		(1,317	)		767		(27	)
Residential mortgage-backed		1,957		(331	)		164			(154	)		885		(898	)		1,623		(313	)
Commercial mortgage-backed		3,219		(39	)		43			(106	)		532		(521	)		3,128		(39	)
Other asset-backed		1,034		(22	)		180			(232	)		981		(878	)		1,063		(18	)

Total fixed maturity securities		10,560		(441	)		602			(565	)		3,570		(5,356	)		8,370		(392	)

Equity securities		60		—			—			1			—		—			61		—

Other invested assets:
Trading securities		125		1			—			(15	)		54		(32	)		133		—
Derivative assets		933		(494	)		—			(175	)		22		—			286		(474	)

Total other invested assets		1,058		(493	)		—			(190	)		76		(32	)		419		(474	)

Reinsurance recoverable		18		(17	)		—			1			—		—			2		(17	)

Total Level 3 assets	$	11,696	$	(951	)	$	602		$	(753	)	$	3,646	$	(5,388	)	$	8,852	$	(883	)


(Amounts in millions)	Principal amount			Carrying value
GFCM LLC, due 2035, 5.2541%	$	236		$	236
GFCM LLC, due 2035, 5.7426%		113			113
Genworth Special Purpose Two, LLC, due 2023, 6.0175%		125			125
Marvel Finance 2007-1 LLC, due 2017⁽¹⁾		5			1
Marvel Finance 2007-4 LLC, due 2017⁽¹⁾		12			5
Genworth Special Purpose Five, LLC, due 2040⁽¹⁾		NA	⁽²⁾		45

Total	$	491		$	525


	As of June 30,				Percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009
Term life insurance
Life insurance in-force, net of reinsurance	$	468,098	$	477,759	(2	)%
Life insurance in-force before reinsurance		612,284		623,139	(2	)%

Term universal life insurance
Life insurance in-force, net of reinsurance	$	17,754	$	—	NM	⁽¹⁾
Life insurance in-force before reinsurance		17,820		—	NM	⁽¹⁾

Universal and whole life insurance
Life insurance in-force, net of reinsurance	$	43,743	$	43,800	—	%
Life insurance in-force before reinsurance		50,617		50,994	(1	)%

Total life insurance
Life insurance in-force, net of reinsurance	$	529,595	$	521,559	2	%
Life insurance in-force before reinsurance		680,721		674,133	1	%


(Amounts in millions)	2004 and prior		2005		2006		2007		Total
Ratings⁽¹⁾:
AAA	$	44	$	7	$	—	$	—	$	51
AA		21		17		—		20		58
A		11		19		3		—		33
BBB		17		15		—		—		32
BB		12		25		—		—		37
B		4		28		28		—		60
CCC and lower		24		38		87		14		163

Total sub-prime securities	$	133	$	149	$	118	$	34	$	434

Large ~~Accelerated Filer~~ xaccelerated filer

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