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 ~~September~~June 30, ~~2010~~2011

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

For the transition period from to

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 October~~As of July 25, ~~2010, 489,595,629~~2011, 490,716,493 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.
~~Item 1.~~Financial Statements		3
	Condensed Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009~~2010 (Unaudited)			3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2010~~2011 (Unaudited) and December 31, ~~2009~~2010			4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009~~2010 (Unaudited)			5
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009~~2010 (Unaudited)			6
	Notes to Condensed Consolidated Financial Statements (Unaudited)			7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			6366

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			~~131~~137

Item 4.	Controls and Procedures			~~131~~137

PART II—OTHER INFORMATION				138

Item 1.
~~Item 1.~~Legal Proceedings		~~132~~138

Item 1A.	Risk Factors			139

Item 5.	Other Information			139

Item 6.	Exhibits			140

~~Item 1A.Risk Factors~~Signatures				~~133~~

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds~~		~~135~~

~~Item 6.Exhibits~~		~~135~~

~~Signatures~~		~~136~~141

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share amounts)

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009			2011			2010			2011			2010
Revenues:
Premiums	$	1,447		$	1,492		$	4,387		$	4,496		$	1,455		$	1,470		$	2,892		$	2,940
Net investment income		815			759			2,403			2,251			881			823			1,711			1,588
Net investment gains (losses)		105			(122	)		(104	)		(945	)		(40	)		(139	)		(68	)		(209	)
Insurance and investment product fees and other		300			262			812			806			359			256			688			512

Total revenues		2,667			2,391			7,498			6,608			2,655			2,410			5,223			4,831

Benefits and expenses:
Benefits and other changes in policy reserves		1,502			1,450			4,157			4,450			1,672			1,340			3,081			2,655
Interest credited		212			225			636			763			204			211			405			424
Acquisition and operating expenses, net of deferrals		472			484			1,446			1,381			514			499			1,014			974
Amortization of deferred acquisition costs and intangibles		227			143			590			602			197			179			382			363
Interest expense		114			96			338			306			134			109			261			224

Total benefits and expenses		2,527			2,398			7,167			7,502			2,721			2,338			5,143			4,640

Income (loss) before income taxes		140			(7	)		331			(894	)		(66	)		72			80			191
Provision (benefit) for income taxes		18			(52	)		(80	)		(420	)		(6	)		(5	)		24			(98	)

Net income (loss)		122			45			411			(474	)		(60	)		77			56			289
Less: net income attributable to noncontrolling interests		39			26			108			26			36			35			70			69

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	83		$	19		$	303		$	(500	)	$	(96	)	$	42		$	(14	)	$	220


Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:
Basic	$	0.17		$	0.04		$	0.62		$	(1.14	)	$	(0.20	)	$	0.09		$	(0.03	)	$	0.45

Diluted	$	0.17		$	0.04		$	0.61		$	(1.14	)	$	(0.20	)	$	0.08		$	(0.03	)	$	0.45

Weighted-average common shares outstanding:
Basic		489.5			448.9			489.1			438.5			490.6			489.1			490.4			489.0

Diluted		493.9			451.6			493.9			438.5			490.6			494.2			490.4			493.9


Supplemental disclosures:
Total other-than-temporary impairments	$	(7	)	$	(285	)	$	(108	)	$	(1,358	)	$	(28	)	$	(24	)	$	(59	)	$	(101	)
Portion of other-than-temporary impairments included in other comprehensive income (loss)		(30	)		89			(60	)		413			2			(27	)		(3	)		(30	)

Net other-than-temporary impairments		(37	)		(196	)		(168	)		(945	)		(26	)		(51	)		(62	)		(131	)
Other investment gains (losses)		142			74			64			—			(14	)		(88	)		(6	)		(78	)

Total net investment gains (losses)	$	105		$	(122	)	$	(104	)	$	(945	)	$	(40	)	$	(139	)	$	(68	)	$	(209	)

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except per share amounts)


	September 30, 2010			December 31, 2009			June 30, 2011			December 31, 2010
	(Unaudited)						(Unaudited)
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value	$	56,356		$	49,752		$	56,221		$	55,183
Equity securities available-for-sale, at fair value		223			159			374			332
Commercial mortgage loans		6,929			7,499			6,432			6,718
Restricted commercial mortgage loans related to securitization entities		522			—			457			507
Policy loans		1,480			1,403			1,542			1,471
Other invested assets		5,320			4,702			3,301			3,854
Restricted other invested assets related to securitization entities ($376 at fair value)		378			—
Restricted other invested assets related to securitization entities ($378 and $370 at fair value)								379			372

Total investments		71,208			63,515			68,706			68,437
Cash and cash equivalents		3,598			5,002			2,831			3,132
Accrued investment income		760			691			693			733
Deferred acquisition costs		7,055			7,341			7,362			7,256
Intangible assets		647			934			692			741
Goodwill		1,321			1,324			1,333			1,329
Reinsurance recoverable		17,223			17,332			16,999			17,191
Other assets		958			954			988			810
Deferred tax asset		867			92			1,291			1,100
Separate account assets		11,063			11,002			11,452			11,666

Total assets	$	114,700		$	108,187		$	112,347		$	112,395

Liabilities and stockholders’ equity
Liabilities:
Future policy benefits	$	30,758		$	29,469		$	31,177		$	30,717
Policyholder account balances		27,714			28,470			26,115			26,978
Liability for policy and contract claims		6,448			6,567			7,327			6,933
Unearned premiums		4,492			4,714			4,563			4,541
Other liabilities ($166 and $— other liabilities related to securitization entities)		6,949			6,298
Borrowings related to securitization entities ($44 at fair value)		502			—
Other liabilities ($145 and $150 other liabilities related to securitization entities)								5,637			6,085
Borrowings related to securitization entities ($58 and $51 at fair value)								452			494
Non-recourse funding obligations		3,437			3,443			3,374			3,437
Short-term borrowings		730			930
Long-term borrowings		4,373			3,641			4,755			4,952
Deferred tax liability		2,163			303			1,937			1,621
Separate account liabilities		11,063			11,002			11,452			11,666

Total liabilities		98,629			94,837			96,789			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 September 30, 2010 and December 31, 2009, respectively; 490 million and 489 million shares outstanding as of September 30, 2010 and December 31, 2009, respectively		1			1
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 579 million and 578 million shares issued as of June 30, 2011 and December 31, 2010, respectively; 491 million and 490 million shares outstanding as of June 30, 2011 and December 31, 2010, respectively								1			1
Additional paid-in capital		12,084			12,034			12,110			12,095

Accumulated other comprehensive income (loss):
Net unrealized investment gains (losses):
Net unrealized gains (losses) on securities not other-than-temporarily impaired		730			(1,151	)		352			21
Net unrealized gains (losses) on other-than-temporarily impaired securities		(143	)		(247	)		(116	)		(121	)

Net unrealized investment gains (losses)		587			(1,398	)		236			(100	)

Derivatives qualifying as hedges		1,354			802			943			924
Foreign currency translation and other adjustments		543			432			883			668

Total accumulated other comprehensive income (loss)		2,484			(164	)		2,062			1,492
Retained earnings		3,133			3,105			2,959			2,973
Treasury stock, at cost (88 million shares as of September 30, 2010 and December 31, 2009)		(2,700	)		(2,700	)
Treasury stock, at cost (88 million shares as of June 30, 2011 and December 31, 2010)								(2,700	)		(2,700	)

Total Genworth Financial, Inc.’s stockholders’ equity		15,002			12,276			14,432			13,861
Noncontrolling interests		1,069			1,074			1,126			1,110

Total stockholders’ equity		16,071			13,350			15,558			14,971

Total liabilities and stockholders’ equity	$	114,700		$	108,187		$	112,347		$	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		—		—			260			(275	)		—			(15	)		—			(15	)
Repurchase of subsidiary shares		—		—			—			—			—			—			(131	)		(131	)		—		—		—			—			—			—			(71	)		(71	)
Comprehensive income (loss):
Net income (loss)		—		—			—			303			—			303			108			411			—		—		—			(14	)		—			(14	)		70			56
Net unrealized gains (losses) on securities not other-than-temporarily impaired		—		—			1,621			—			—			1,621			28			1,649			—		—		331			��			—			331			5			336
Net unrealized gains (losses) on other-than-temporarily impaired securities		—		—			104			—			—			104			—			104			—		—		5			—			—			5			—			5
Derivatives qualifying as hedges		—		—			552			—			—			552			—			552			—		—		19			—			—			19			—			19
Foreign currency translation and other adjustments		—		—			111			—			—			111			22			133			—		—		215			—			—			215			36			251

Total comprehensive income (loss)																						2,849																						667
Dividends to noncontrolling interests		—		—			—			—			—			—			(32	)		(32	)		—		—		—			—			—			—			(24	)		(24	)
Stock-based compensation expense and exercises and other		—		30			—			—			—			30			—			30			—		15		—			—			—			15			—			15
Other capital transactions		—		20			—			—			—			20			—			20

Balances as of September 30, 2010	$	1	$	12,084		$	2,484		$	3,133		$	(2,700	)	$	15,002		$	1,069		$	16,071
Balances as of June 30, 2011																								$	1	$	12,110	$	2,062		$	2,959		$	(2,700	)	$	14,432		$	1,126		$	15,558

Balances as of December 31, 2008	$	1	$	11,477		$	(3,062	)	$	3,210		$	(2,700	)	$	8,926		$	—		$	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			—			6			—		—		91			(104	)		—			(13	)		—			(13	)
Initial sale of subsidiary shares to noncontrolling interests		—		(85	)		(60	)		—			—			(145	)		828			683
Additional sale of subsidiary shares to noncontrolling interests		—		(3	)		(12	)		—			—			(15	)		99			84
Issuance of common stock		—		622			—			—			—			622			—			622
Comprehensive income (loss):
Net income (loss)		—		—			—			(500	)		—			(500	)		26			(474	)
Net income																									—		—		—			220			—			220			69			289
Net unrealized gains (losses) on securities not other-than-temporarily impaired		—		—			3,027			—			—			3,027			19			3,046			—		—		1,268			—			—			1,268			9			1,277
Net unrealized gains (losses) on other-than-temporarily impaired securities		—		—			(19	)		—			—			(19	)		—			(19	)		—		—		68			—			—			68			—			68
Derivatives qualifying as hedges		—		—			(148	)		—			—			(148	)		—			(148	)		—		—		360			—			—			360			—			360
Foreign currency translation and other adjustments		—		—			646			—			—			646			56			702			—		—		(292	)		—			—			(292	)		(15	)		(307	)

Total comprehensive income (loss)																						3,107																						1,687
Dividends to noncontrolling interests																									—		—		—			—			—			—			(21	)		(21	)
Stock-based compensation expense and exercises and other		—		17			—			—			—			17			—			17			—		24		—			—			—			24			—			24
Other capital transactions																									—		20		—			—			—			20			—			20

Balances as of September 30, 2009	$	1	$	12,028		$	23		$	3,065		$	(2,700	)	$	12,417		$	1,028		$	13,445
Balances as of June 30, 2010																								$	1	$	12,078	$	1,331		$	3,221		$	(2,700	)	$	13,931		$	1,116		$	15,047

See Notes to Condensed Consolidated Financial Statements

GENWORTH FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)


	Nine months ended September 30,						Six months ended June 30,
	2010			2009			2011			2010
Cash flows from operating activities:
Net income (loss)	$	411		$	(474	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Amortization of fixed maturity discounts and premiums		(11	)		103
Net income							$	56		$	289
Adjustments to reconcile net income to net cash from operating activities:
Amortization of fixed maturity discounts and premiums and limited partnerships								(53	)		5
Net investment losses (gains)		104			945			68			209
Charges assessed to policyholders		(367	)		(332	)		(327	)		(233	)
Acquisition costs deferred		(610	)		(540	)		(449	)		(392	)
Amortization of deferred acquisition costs and intangibles		590			602			382			363
Deferred income taxes		(111	)		(634	)		(85	)		(173	)
Net increase (decrease) in trading securities, held-for-sale investments and derivative instruments		113			(4	)
Gain on sale of subsidiary		—			(4	)
Net increase in trading securities, held-for-sale investments and derivative instruments								79			119
Stock-based compensation expense		31			17			16			23
Change in certain assets and liabilities:
Accrued investment income and other assets		(31	)		(135	)		(83	)		24
Insurance reserves		1,767			2,153			1,281			1,208
Current tax liabilities		(313	)		55			5			(211	)
Other liabilities and other policy-related balances		(597	)		102			(48	)		(674	)

Net cash from operating activities		976			1,854			842			557

Cash flows from investing activities:
Proceeds from maturities and repayments of investments:
Fixed maturity securities		3,302			3,157			3,069			2,057
Commercial mortgage loans		493			519			411			263
Restricted commercial mortgage loans related to securitization entities		40			—			49			27
Proceeds from sales of investments:
Fixed maturity and equity securities		3,329			3,343			1,893			2,393
Purchases and originations of investments:
Fixed maturity and equity securities		(10,223	)		(5,091	)		(5,183	)		(6,867	)
Commercial mortgage loans		(35	)		—			(142	)		(23	)
Other invested assets, net		1,483			122			(28	)		1,491
Policy loans, net		(77	)		426			(71	)		(64	)
Net cash transferred related to the sale of a subsidiary		—			(90	)
Payments for businesses purchased, net of cash acquired								(4	)		—

Net cash from investing activities		(1,688	)		2,386			(6	)		(723	)

Cash flows from financing activities:
Deposits to universal life and investment contracts		1,832			1,801			1,221			1,174
Withdrawals from universal life and investment contracts		(2,950	)		(6,669	)		(2,123	)		(1,734	)
Short-term borrowings and other, net		(86	)		(363	)		137			(285	)
Repayment and repurchase of long-term borrowings		(6	)		(809	)
Proceeds from the issuance of long-term borrowings		660			—
Redemption of non-recourse funding obligations		(6	)		(12	)
Redemption and repurchase of non-recourse funding obligations								(45	)		(6	)
Proceeds from the issuance of long-term debt								545			660
Repayment and repurchase of long-term debt								(760	)		—
Repayment of borrowings related to securitization entities		(46	)		—			(49	)		(31	)
Proceeds from issuance of common stock		—			622
Proceeds from the sale of subsidiary shares to noncontrolling interests		—			771
Repurchase of subsidiary shares		(131	)		—			(71	)		—
Dividends paid to noncontrolling interests		(32	)		—			(24	)		(21	)

Net cash from financing activities		(765	)		(4,659	)		(1,169	)		(243	)
Effect of exchange rate changes on cash and cash equivalents		73			235			32			(7	)

Net change in cash and cash equivalents		(1,404	)		(184	)		(301	)		(416	)
Cash and cash equivalents at beginning of period		5,002			7,328			3,132			5,002

Cash and cash equivalents at end of period	$	3,598		$	7,144		$	2,831		$	4,586

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:

•

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 primarily help consumers meet specified payment obligations should they become unable to pay due to accident, illness, involuntary unemployment, disability or death.

•

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. 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

GENWORTH FINANCIAL, INC.

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

(Unaudited)

financial statements should not be regarded as necessarily indicative of results that may be expected for the entire 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

~~Scope Exception for Embedded Credit Derivatives~~

On ~~July~~January 1, ~~2010,~~2011, we adopted new accounting guidance related to ~~embedded credit derivatives.~~goodwill impairment testing when a reporting unit’s carrying value is zero or negative. This ~~accounting~~ guidance clarified 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 onedid not impact our consolidated financial ~~instrument to another would not be subject to the bifurcation requirements. Accordingly,~~statements upon adoption, we were required to bifurcate embedded credit derivatives that no longer qualified under the amended scope exception. In conjunction with our adoption, we elected fair value option for certain fixed maturity securities. On July 1, 2010, we recorded a net cumulative effect adjustment of $171 million to retained earnings with an offset to accumulated other comprehensive income (loss) of $169 million. The following summarizes the components for the cumulative effect adjustment:

(Amounts in millions)
   Accumulated other
comprehensive
income (loss) Retained
earnings Total stockholders’
equity
Investment securities
   $ 267    $ (267 ) $ —
Adjustment to deferred acquisition costs
   (4 ) 1    (3 )
Adjustment to sales inducements
   (1 ) 1    —
Provision for income taxes
   (93 ) 94    1

Net cumulative effect adjustment
   $ 169    $ (171 ) $ (2 )

For certain securities where the embedded credit derivative would require bifurcation, we elected the fair value option to carry the entire instrument at fair value to reduce the cost of calculating and recording the fair value of the embedded derivative feature separate from the debt security. Additionally, we elected the fair value option for a portionas all of our other asset-backed securities for operational ease and to record and present the securities at fair value in future periods. Upon electing fair value option on July 1, 2010, these securities were reclassified into the trading category included in other invested assets and had a fair value of $407 million. Prior to electing fair value option, these securities were classified as available-for-sale fixed maturity securities.

~~Accounting for Transfers of Financial Assets~~reporting units with goodwill balances have positive carrying values.

On January 1, ~~2010,~~2011, we adopted new accounting guidance related to ~~accounting for transfers~~how investments held through separate accounts affect an insurer’s consolidation analysis of financial assets. This accounting guidance amended the previous guidance on transfers 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 required that these entities be considered for consolidation as a result of the new guidance related to variable interest entities (“VIEs”) as discussed below.

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

~~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 required~~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.

~~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.~~

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

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 recorded 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.

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 ~~October 2010,~~June 2011, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance requiring presentation of the components of net income (loss), the components of other comprehensive income (loss) (“~~FASB”~~OCI”) and total comprehensive income either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. This new accounting guidance is effective for us on January 1, 2012. We do not expect the adoption of this accounting guidance to have a material impact on our consolidated financial results.

In May 2011, the FASB issued new accounting guidance for fair value measurements. This new accounting guidance clarifies existing fair value measurement requirements and changes certain fair value measurement principles and disclosure requirements that will be effective for us on January 1, 2012. We have not yet determined the impact this accounting guidance will have on our consolidated financial statements.

In April 2011, the FASB issued new accounting guidance for troubled debt restructurings. This new accounting guidance and related disclosures will be effective for us on July 1, 2011. The adoption of this accounting guidance will not have a material impact on our consolidated financial statements.

In April 2011, the FASB issued new accounting guidance for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The new guidance removes the requirement to consider a transferor’s ability to fulfill its contractual rights from the criteria when determining effective control and is effective, for us, prospectively to any transactions occurring on or after January 1, 2012. We do not expect the adoption of this accounting guidance to have a material impact on our consolidated financial statements.

In October 2010, the FASB issued new accounting guidance related to accounting for costs associated with acquiring or renewing insurance contracts. This new accounting guidance will be effective for us on January 1, 2012. When adopted, we expect to defer fewer costs. The new guidance is effective prospectively with ~~retrospective adoption allowed. We have not yet determined the method nor impact this accounting guidance will have on our consolidated financial statements.~~

In July 2010, 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 new accounting guidance will be effective for us on December 31, 2010 with certain other additional disclosures that will be effective for us on March 31, 2011. We do not expect the adoption of this new accounting guidance to have a material impact on our consolidated financial statements.

In April 2010, the FASB issued new accounting guidance on how investments held through separate accounts affect an insurer’s consolidation analysis of those investments. 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)

~~In January 2010,~~retrospective adoption allowed. We intend to adopt this new guidance retrospectively. We have not yet determined 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~~impact this 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.

(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 September 30,				Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(Amounts in millions, except per share amounts)	2010		2009		2010		2009			2011			2010		2011			2010
Net income (loss)	$	122	$	45	$	411	$	(474	)	$	(60	)	$	77	$	56		$	289
Less: net income attributable to noncontrolling interests		39		26		108		26			36			35		70			69

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	83	$	19	$	303	$	(500	)	$	(96	)	$	42	$	(14	)	$	220

Basic per common share:
Net income (loss)	$	0.25	$	0.10	$	0.84	$	(1.08	)	$	(0.12	)	$	0.16	$	0.11		$	0.59
Less: net income attributable to noncontrolling interests		0.08		0.06		0.22		0.06			0.07			0.07		0.14			0.14

Net income (loss) available to Genworth Financial, Inc.’s common stockholders⁽¹⁾	$	0.17	$	0.04	$	0.62	$	(1.14	)	$	(0.20	)	$	0.09	$	(0.03	)	$	0.45

Diluted per common share:
Net income (loss)	$	0.25	$	0.10	$	0.83	$	(1.08	)	$	(0.12	)	$	0.16	$	0.11		$	0.59
Less: net income attributable to noncontrolling interests		0.08		0.06		0.22		0.06			0.07			0.07		0.14			0.14

Net income (loss) available to Genworth Financial, Inc.’s common stockholders⁽¹⁾	$	0.17	$	0.04	$	0.61	$	(1.14	)	$	(0.20	)	$	0.08	$	(0.03	)	$	0.45

Weighted-average shares used in basic earnings (loss) per common share calculations		489.5		448.9		489.1		438.5
Weighted-average shares used in basic earnings per common share calculations											490.6			489.1		490.4			489.0
Potentially dilutive securities:
Stock options, restricted stock units and stock appreciation rights		4.4		2.7		4.8		—			—			5.1		—			4.9

Weighted-average shares used in diluted earnings (loss) per common share calculations⁽²⁾		493.9		451.6		493.9		438.5
Weighted-average shares used in diluted earnings per common share calculations⁽²⁾											490.6			494.2		490.4			493.9

⁽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 available to Genworth Financial, Inc.’s common stockholders for the ~~nine~~three and six months ended ~~September~~June 30, ~~2009,~~2011, we were required to use basic weighted-average common shares outstanding in the calculation offor the three and six months ended June 30, 2011 diluted loss per share, ~~for the nine months ended September 30, 2009,~~ as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of ~~1.3~~3.7 million and 4.0 million, respectively, would have been antidilutive to the calculation. If we had not incurred a net loss available to Genworth Financial, Inc.’s common stockholders for the ~~nine~~three and six months ended ~~September~~June 30, ~~2009,~~2011, dilutive potential common shares would have been ~~439.8 million.~~494.3 million and 494.4 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
September 30, Nine months ended
September 30,
(Amounts in millions)
    2010         2009         2010         2009
Fixed maturity securities—taxable
$ 658    $ 610    $ 1,930    $ 1,837
Fixed maturity securities—non-taxable
14    27    46    85
Commercial mortgage loans
95    106    298    329
Restricted commercial mortgage loans related to securitization entities ⁽¹⁾
10    —      30    —
Equity securities
4    6    11    12
Other invested assets
24    4    61    (102 )
Restricted other invested assets related to securitization entities⁽¹⁾
1    —      2    —
Policy loans
28    19    83    115
Cash, cash equivalents and short-term investments
6    9    15    40

Gross investment income before expenses and fees
840    781    2,476    2,316
Expenses and fees
(25 ) (22 ) (73 ) (65 )

Net investment income
$ 815    $ 759    $ 2,403    $ 2,251

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


	Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2011			2010			2011			2010
Fixed maturity securities—taxable	$	693		$	646		$	1,363		$	1,272
Fixed maturity securities—non-taxable		10			16			21			32
Commercial mortgage loans		92			99			184			203
Restricted commercial mortgage loans related to securitization entities		9			10			19			20
Equity securities		10			5			13			7
Other invested assets		55			39			89			37
Restricted other invested assets related to securitization entities		—			—			—			1
Policy loans		30			28			59			55
Cash, cash equivalents and short-term investments		6			4			12			9

Gross investment income before expenses and fees		905			847			1,760			1,636
Expenses and fees		(24	)		(24	)		(49	)		(48	)

Net investment income	$	881		$	823		$	1,711		$	1,588

(b) Net Investment Gains (Losses)

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


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2010			2009			2010			2009			2011			2010			2011			2010
Available-for-sale securities:
Realized gains on sale	$	38		$	122		$	114		$	172
Realized losses on sale		(35	)		(81	)		(109	)		(192	)
Realized gains													$	25		$	53		$	54		$	76
Realized losses														(34	)		(36	)		(65	)		(74	)

Net realized gains (losses) on sale of available-for-sale securities		3			41			5			(20	)
Net realized gains (losses) on available-for-sale securities														(9	)		17			(11	)		2

Impairments:
Total other-than-temporary impairments		(7	)		(285	)		(108	)		(1,358	)		(28	)		(24	)		(59	)		(101	)
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)		(30	)		89			(60	)		413
Portion of other-than-temporary impairments included in other comprehensive income (loss)														2			(27	)		(3	)		(30	)

Net other-than-temporary impairments		(37	)		(196	)		(168	)		(945	)		(26	)		(51	)		(62	)		(131	)

Trading securities		23			16			25			15			14			(4	)		25			2
Commercial mortgage loans		(9	)		(8	)		(31	)		(19	)		2			(18	)		1			(22	)
Net gains (losses) related to securitization entities⁽¹⁾		30			—			(6	)		—			(5	)		(47	)		5			(36	)
Derivative instruments⁽²⁾⁽¹⁾		94			19			48			12			(15	)		(38	)		(25	)		(46	)
Other		1			6			23			12			(1	)		2			(1	)		22

Net investment gains (losses)	$	105		$	(122	)	$	(104	)	$	(945	)	$	(40	)	$	(139	)	$	(68	)	$	(209	)

⁽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 ended ~~September~~June 30, 2011 and 2010 ~~and 2009~~ was ~~$275~~$294 million and ~~$354~~$858 million, respectively, which was approximately ~~89%~~91% and ~~84%~~96%, respectively, of book value. The aggregate fair value of securities sold at a loss during the ~~nine~~six months ended ~~September~~June 30, 2011 and 2010 ~~and 2009~~ was ~~$1,691~~$691 million and ~~$1,091~~$1,416 million, respectively, which was approximately ~~94%~~93% and ~~86%~~95%, respectively, of book value.

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”)~~OCI as of or for the periods indicated:

   As of or for the
three months ended
September 30,
(Amounts in millions)
       2010         2009
Cumulative credit loss beginning balance
   $ 978    $ 1,085
Additions:

Other-than-temporary impairments not previously recognized
   13    25
Increases related to other-than-temporary impairments previously recognized
   22    74
Reductions:

Securities sold, paid down or disposed
   (126 ) (103 )
Securities where there is intent to sell
   —      (5 )

Cumulative credit loss ending balance
   $ 887    $ 1,076

   As of or for the
nine months ended
September 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
   44    81
Increases related to other-than-temporary impairments previously recognized
   100    169
Reductions:

Securities sold, paid down or disposed
   (316 ) (373 )
Securities where there is intent to sell
   —      (5 )

Cumulative credit loss ending balance
   $ 887    $ 1,076

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~


	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(Amounts in millions)	2011			2010			2011			2010
Beginning balance	$	755		$	1,025		$	784		$	1,059
Additions:
Other-than-temporary impairments not previously recognized		1			11			4			31
Increases related to other-than-temporary impairments previously recognized		17			32			48			78
Reductions:
Securities sold, paid down or disposed		(47	)		(90	)		(110	)		(190	)

Ending balance	$	726		$	978		$	726		$	978

(c) Unrealized Investment Gains and Losses

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)	September 30, 2010			December 31, 2009			June 30, 2011			December 31, 2010
Net unrealized gains (losses) on investment securities:
Fixed maturity securities	$	2,075		$	(2,245	)	$	1,141		$	511
Equity securities		15			20			21			9
Other invested assets		(27	)		(29	)		(24	)		(22	)

Subtotal		2,063			(2,254	)		1,138			498
Adjustments to present value of future profits, deferred acquisition costs, sales inducements and benefit reserves		(1,057	)		138
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves								(694	)		(583	)
Income taxes, net		(352	)		757			(153	)		35

Net unrealized investment gains (losses)		654			(1,359	)		291			(50	)
Less: net unrealized investment gains (losses) attributable to noncontrolling interests		67			39			55			50

Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.	$	587		$	(1,398	)	$	236		$	(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:


	As of or for the three months ended September 30,						As of or for the three months ended June 30,
(Amounts in millions)	2010			2009			2011			2010
Beginning balance	$	29		$	(3,023	)	$	(37	)	$	(860	)
Cumulative effect of change in accounting		169			—
Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities		1,486			2,796			555			1,498
Adjustment to deferred acquisition costs		(187	)		(264	)		(36	)		(80	)
Adjustment to present value of future profits		(101	)		(93	)		(15	)		(51	)
Adjustment to sales inducements		(21	)		(13	)		(3	)		(10	)
Adjustment to benefit reserves		(581	)		—			(94	)		—
Provision for income taxes		(210	)		(863	)		(142	)		(480	)

Change in unrealized gains (losses) on investment securities		386			1,563			265			877
Reclassification adjustments to net investment (gains) losses, net of taxes of $(12) and $(51)		22			100
Reclassification adjustments to net investment (gains) losses, net of taxes of $(13) and $(11)								22			22

Change in net unrealized investment gains (losses)		577			1,663			287			899
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests		(19	)		(41	)		14			10

Ending balance	$	587		$	(1,401	)	$	236		$	29


	As of or for the six months ended June 30,
(Amounts in millions)	2011			2010
Beginning balance	$	(100	)	$	(1,398	)
Cumulative effect of change in accounting		—			91
Unrealized gains (losses) arising during the period:
Unrealized gains (losses) on investment securities		567			2,261
Adjustment to deferred acquisition costs		(57	)		(193	)
Adjustment to present value of future profits		(16	)		(81	)
Adjustment to sales inducements		(7	)		(26	)
Adjustment to benefit reserves		(31	)		—
Provision for income taxes		(162	)		(700	)

Change in unrealized gains (losses) on investment securities		294			1,261
Reclassification adjustments to net investment (gains) losses, net of taxes of $(26) and $(45)		47			84

Change in net unrealized investment gains (losses)		341			1,436
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests		5			9

Ending balance	$	236		$	29

GENWORTH FINANCIAL, INC.

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

(Unaudited)

   As of or for the
nine months ended
September 30,
(Amounts in millions)
   2010 2009
Beginning balance
   $ (1,398 ) $ (4,038 )
Cumulative effect of change in accounting
   260    (349 )
Unrealized gains (losses) arising during the period:

Unrealized gains (losses) on investment securities
   3,747    4,352
Adjustment to deferred acquisition costs
   (381 ) (448 )
Adjustment to present value of future profits
   (182 ) (164 )
Adjustment to sales inducements
   (46 ) (12 )
Adjustment to benefit reserves
   (581 ) —
Provision for income taxes
   (910 ) (1,328 )

Change in unrealized gains (losses) on investment securities
   1,647    2,400
Reclassification adjustments to net investment (gains) losses, net of taxes of $(57) and $(337)
   106    627

Change in net unrealized investment gains (losses)
   2,013    2,678
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   (28 ) (41 )

Ending balance
   $ 587    $ (1,401 )

(d) Fixed Maturity and Equity Securities

As of ~~September~~June 30, 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	$	3,548	$	153	$	—	$	(19	)	$	—		$	3,682
Tax-exempt		940		19		—		(94	)		—			865
Government—non-U.S.		2,265		128		—		(4	)		—			2,389
U.S. corporate		23,081		1,260		13		(307	)		—			24,047
Corporate—non-U.S.		14,038		530		—		(139	)		(1	)		14,428
Residential mortgage-backed		5,252		174		15		(268	)		(190	)		4,983
Commercial mortgage-backed		3,767		135		6		(153	)		(34	)		3,721
Other asset-backed		2,172		22		—		(86	)		(2	)		2,106

Total fixed maturity securities		55,063		2,421		34		(1,070	)		(227	)		56,221
Equity securities		352		25		—		(3	)		—			374

Total available-for-sale securities	$	55,415	$	2,446	$	34	$	(1,073	)	$	(227	)	$	56,595

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:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains				Gross unrealized losses						Fair value		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		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	$	3,508	$	414	$	—	$	—		$	—		$	3,922	$	3,568	$	145	$	—	$	(8	)	$	—		$	3,705
Tax-exempt		1,288		55		—		(72	)		—			1,271		1,124		19		—		(113	)		—			1,030
Government—non-U.S.		2,188		169		—		(5	)		—			2,352		2,257		118		—		(6	)		—			2,369
U.S. corporate		22,979		1,858		10		(322	)		—			24,525		23,282		1,123		10		(448	)		—			23,967
Corporate—non-U.S.		13,282		730		15		(209	)		(3	)		13,815		13,180		485		—		(167	)		—			13,498
Residential mortgage-backed		4,629		228		14		(312	)		(225	)		4,334		4,821		116		18		(304	)		(196	)		4,455
Commercial mortgage-backed		4,011		188		5		(389	)		(58	)		3,757		3,936		132		6		(286	)		(45	)		3,743
Other asset-backed		2,391		25		—		(34	)		(2	)		2,380		2,494		18		—		(94	)		(2	)		2,416

Total fixed maturity securities		54,276		3,667		44		(1,343	)		(288	)		56,356		54,662		2,156		34		(1,426	)		(243	)		55,183
Equity securities		208		18		—		(3	)		—			223		323		13		—		(4	)		—			332

Total available-for-sale securities	$	54,484	$	3,685	$	44	$	(1,346	)	$	(288	)	$	56,579	$	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 ~~September~~June 30, ~~2010:~~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															$	1,002	$	(19	)		43	$	—	$	—			—	$	1,002	$	(19	)		43
Tax-exempt	$	—	$	—			—	$	277	$	(72	)		92		114		(3	)		31		253		(91	)		88		367		(94	)		119
Government—non-U.S.		141		(4	)		32		21		(1	)		2		189		(3	)		58		11		(1	)		5		200		(4	)		63
U.S. corporate		631		(17	)		89		2,572		(305	)		199		2,933		(94	)		337		1,712		(213	)		150		4,645		(307	)		487
Corporate—non-U.S.		836		(20	)		130		1,443		(192	)		109		1,896		(65	)		276		854		(75	)		78		2,750		(140	)		354
Residential mortgage-backed		170		(2	)		46		1,051		(535	)		432		450		(19	)		92		884		(439	)		373		1,334		(458	)		465
Commercial mortgage-backed		78		(1	)		16		1,135		(446	)		239		361		(17	)		51		1,034		(170	)		180		1,395		(187	)		231
Other asset-backed		287		(1	)		19		470		(35	)		53		113		(5	)		20		343		(83	)		39		456		(88	)		59

Subtotal, fixed maturity securities		2,143		(45	)		332		6,969		(1,586	)		1,126		7,058		(225	)		908		5,091		(1,072	)		913		12,149		(1,297	)		1,821
Equity securities		34		(3	)		18		—		—			—		83		(2	)		54		10		(1	)		10		93		(3	)		64

Total for securities in an unrealized loss position	$	2,177	$	(48	)		350	$	6,969	$	(1,586	)		1,126	$	7,141	$	(227	)		962	$	5,101	$	(1,073	)		923	$	12,242	$	(1,300	)		1,885

% Below cost—fixed maturity securities:
<20% Below cost	$	2,139	$	(42	)		311	$	5,128	$	(375	)		603	$	6,969	$	(190	)		883	$	3,966	$	(354	)		544	$	10,935	$	(544	)		1,427
20-50% Below cost		3		(1	)		8		1,593		(714	)		310
20%-50% Below cost																89		(34	)		20		986		(432	)		249		1,075		(466	)		269
>50% Below cost		1		(2	)		13		248		(497	)		213		—		(1	)		5		139		(286	)		120		139		(287	)		125

Total fixed maturity securities		2,143		(45	)		332		6,969		(1,586	)		1,126		7,058		(225	)		908		5,091		(1,072	)		913		12,149		(1,297	)		1,821

% Below cost—equity securities:
<20% Below cost		28		(1	)		17		—		—			—		78		(1	)		53		10		(1	)		10		88		(2	)		63
20-50% Below cost		6		(2	)		1		—		—			—
20%-50% Below cost																5		(1	)		1		—		—			—		5		(1	)		1
>50% Below cost																—		—			—		—		—			—		—		—			—

Total equity securities		34		(3	)		18		—		—			—		83		(2	)		54		10		(1	)		10		93		(3	)		64

Total for securities in an unrealized loss position	$	2,177	$	(48	)		350	$	6,969	$	(1,586	)		1,126	$	7,141	$	(227	)		962	$	5,101	$	(1,073	)		923	$	12,242	$	(1,300	)		1,885


Investment grade	$	2,070	$	(43	)		294	$	5,224	$	(796	)		689	$	6,837	$	(217	)		863	$	3,616	$	(505	)		527	$	10,453	$	(722	)		1,390
Below investment grade		107		(5	)		56		1,745		(790	)		437
Not rated—fixed maturity securities		—		—			—		—		—			—
Not rated—equity securities		—		—			—		—		—			—
Below investment grade⁽³⁾																304		(10	)		99		1,485		(568	)		396		1,789		(578	)		495

Total for securities in an unrealized loss position	$	2,177	$	(48	)		350	$	6,969	$	(1,586	)		1,126	$	7,141	$	(227	)		962	$	5,101	$	(1,073	)		923	$	12,242	$	(1,300	)		1,885

~~The investment~~

⁽¹⁾	Amounts included $222 million of unrealized losses on other-than-temporarily impaired securities.

⁽²⁾	Amounts included $227 million of unrealized losses on other-than-temporarily impaired securities.

⁽³⁾	Amounts that have been in a continuous loss position for 12 months or more included $208 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As indicated in the table above, the majority of the securities in ana continuous unrealized loss position ~~as of September 30, 2010 consisted of 1,476 securities and accounted~~ for ~~unrealized losses of $1,634 million. Of these unrealized losses of $1,634 million, 51%~~less than 12 months were investment grade ~~(rated “AAA” through “BBB-”)~~ and ~~26% were~~ less than 20% below cost. ~~The securities less than 20% below cost~~These unrealized losses were primarily attributable to credit spreads that have widened since acquisition for ~~certain mortgage-backed~~corporate securities across various industry sectors, including finance and ~~asset-backed~~insurance as well as transportation. For securities that have been in a continuous unrealized loss for less than 12 months, the average fair value percentage below cost was approximately 3% as of June 30, 2011.

Fixed Maturity Securities In A Continuous Unrealized Loss Position For 12 Months Or More

Of the $354 million of unrealized losses on fixed maturity securities in a continuous unrealized loss for 12 months or more that were less than 20% below cost, the weighted-average rating was “BBB” and approximately 75% of the unrealized losses were related to investment grade securities as of June 30, 2011. These unrealized losses were attributable to the widening of credit spreads for these securities since acquisition, primarily associated with corporate securities in the finance and insurance ~~sector. Included in~~sector as well as mortgaged-back and asset-backed securities. The average fair value percentage below cost for these ~~unrealized losses~~securities was approximately 8% as of ~~September~~June 30, ~~2010 was $288 million of unrealized losses on other-than-temporarily impaired securities. Of the total unrealized losses on other-than-temporarily impaired~~2011. See below for additional discussion related to fixed maturity securities ~~$286 million~~that have been in a continuous loss position for 12 months or more with a fair value that was more than 20% below cost.

The following tables present the concentration of gross unrealized losses and fair values of fixed maturity securities that were more than 20% below cost and in a continuous loss position for 12 months or more by asset class as of June 30, 2011:


	Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Fixed maturity securities:
Tax-exempt	$	184	$	(78	)		6	%		55	$	—	$	—			—	%		—
Government—non-U.S.		2		(1	)		—			1		—		—			—			—
U.S. corporate		77		(30	)		2			4		14		(26	)		2			1
Corporate—non-U.S.		66		(20	)		2			4		—		—			—			—
Structured securities:
Residential mortgage-backed		56		(23	)		2			21		12		(27	)		2			14
Commercial mortgage-backed		80		(30	)		2			9		2		(3	)		—			5
Other asset-backed		4		(1	)		—			1		1		(1	)		—			1

Total structured securities		140		(54	)		4			31		15		(31	)		2			20

Total	$	469	$	(183	)		14	%		95	$	29	$	(57	)		4	%		21

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Below Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Fixed maturity securities:
Tax-exempt	$	—	$	—			—	%		—	$	—	$	—			—	%		—
U.S. corporate		14		(6	)		—			2		—		—			—			—
Structured securities:
Residential mortgage-backed		342		(168	)		13			124		82		(184	)		14			81
Commercial mortgage-backed		61		(22	)		2			23		17		(33	)		3			16
Other asset-backed		100		(53	)		4			5		11		(12	)		1			2

Total structured securities		503		(243	)		19			152		110		(229	)		18			99

Total	$	517	$	(249	)		19	%		154	$	110	$	(229	)		18	%		99

For all securities in an unrealized loss position, we expect to recover the 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. See below for further discussion of gross unrealized losses by asset class.

Tax-Exempt Securities

As indicated in the table above, $78 million of gross unrealized losses were related to tax-exempt securities that have been in a continuous unrealized loss position for more than 12 ~~months.~~months and were more than 20% below cost. The unrealized losses for tax-exempt securities represent municipal bonds that were diversified by state as well as municipality or political subdivision within those states. Of these tax-exempt securities, the average unrealized loss was approximately $1 million which represented an average of 30% below cost. The unrealized losses primarily related to widening of credit spreads on these securities since acquisition as a result of higher risk premiums being attributed to these securities from uncertainty in many political subdivisions related to special revenues supporting these obligations as well as certain securities having longer duration that may be viewed as less desirable in the current market place. Additionally, the fair value of certain of these securities has been negatively impacted as a result of having certain bond insurers associated with the security. In our analysis of impairment for these securities, we expect to recover our amortized cost from the cash flows of the underlying securities before any guarantee support. However, the existence of these guarantees may negatively impact the value of the debt security in certain instances. We performed an analysis of these securities and the underlying activities that are expected to support the cash flows and determined we expect to recover our amortized cost.

GENWORTH FINANCIAL, INC.

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

(Unaudited)

Corporate Debt Securities

OfThe following tables present the concentration of gross unrealized losses ~~of $1,634 million, $1,020 million were related to structured securities~~ and ~~$395 million were~~fair values related to corporate securities in the finance and insurance sector. Of the remaining gross unrealized losses of $219 million, $77 million were related to tax-exempt and government—non-U.S. securities and $142 million were primarily related to other corporatedebt fixed maturity securities that were ~~spread evenly across all other sectors with no individual sector exceeding $28 million.~~

~~Of the $1,020 million unrealized losses~~more than 20% below cost and in structured securities, 53% were in residential mortgage-backed securities and 44% were in commercial mortgage-backed securities with the remainder in other asset-backed securities. Approximately 39% 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 unrealizeda continuous loss position for 12 months or ~~more. Given ongoing concern about~~more by industry as of June 30, 2011:


	Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities
Industry:
Finance and insurance	$	139	$	(49	)		4	%		7	$	—	$	—			—	%		—
Transportation		—		—			—			—		14		(26	)		2			1
Other		4		(1	)		—			1		—		—			—			—

Total	$	143	$	(50	)		4	%		8	$	14	$	(26	)		2	%		1


	Below Investment Grade
	20% to 50%										Greater than 50%
(Dollar amounts in millions)	Fair value		Gross unrealized losses			% of total gross unrealized losses			Number of securities		Fair value		Gross unrealized losses		% of total gross unrealized losses			Number of securities
Industry:
Finance and insurance	$	14	$	(6	)		—	%		2	$	—	$	—		—	%		—
Consumer – cyclical		—		—			—			—		—		—		—			—
Transportation		—		—			—			—		—		—		—			—

Total	$	14	$	(6	)		—	%		2	$	—	$	—		—	%		—

Of the ~~housing market and unemployment,~~total unrealized losses of $82 million for corporate fixed maturity securities presented in the ~~fair value~~preceding tables, $55 million, or 67%, 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 September 30, 2010.~~

~~Of the $395 million unrealized losses~~related to issuers 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.that were 26% below cost on average. 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 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 ~~September~~June 30, ~~2010. A subset~~2011. Of the $55 million of unrealized losses related to the ~~securities issued by banks~~finance and ~~other financial institutions represent investments in~~insurance industry, $28 million related to financial hybrid securities on which a debt impairment model was employed. Most of ~~these~~our hybrid securities ~~retain~~retained a credit rating of investment grade. The ~~majority of these securities were issued by foreign financial institutions. The~~ fair value of these 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. We continue to receive our contractual payments and expect to fully recover our amortized cost.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As presented in the table above, we also had one security related to the transportation industry that had a total unrealized loss of $26 million that was 65% below cost as of June 30, 2011. The ~~remaining unrealized losses~~issuer of this security has diverse holdings in long-term franchises on toll roads, bridges and tunnels in economically important regions. Our security holding represented a senior interest that benefits from structural enhancements that protect our rights to the issuer’s cash flows. In our evaluation of the issuer, we believed there were sufficient assets and cash flows for the issuer to continue to make their contractual payments and that resulted in our ~~U.S. and non-U.S.~~conclusion that we will recover the amortized cost despite the fair value of this security being greater than 50% below cost.

We expect that our investments in corporate securities ~~were evenly distributed across all other major industry types~~will continue to perform in accordance with our expectations about the amount and timing of estimated cash flows. Although we do not anticipate such events, it is at least reasonably possible that ~~comprise~~issuers of our investments in corporate ~~bond holdings.~~securities will perform worse than current expectations. Such events may lead us to recognize write-downs within our portfolio of corporate securities in the future.

Structured Securities

Of the ~~investment~~$557 million of unrealized losses related to structured securities that have been in an unrealized loss position for 12 months or more ~~as of September 30, 2010, 523 securities~~and were more than 20% ~~or more~~ below cost, ~~of which 323~~$192 million related to other-than-temporarily-impaired securities ~~were also below investment grade (rated “BB+” and below) and accounted for~~where the unrealized losses represented the non-credit portion of ~~$701 million. These securities were primarily~~the impairment. The extent and duration of the unrealized loss position on our structured securities oris due to the ongoing concern and uncertainty about the residential and commercial real estate market and unemployment, resulting in credit spreads that have widened since acquisition. Additionally, the fair value of certain structured securities has been significantly impacted from high risk premiums being incorporated into the valuation as a result of the amount of potential losses that may be absorbed by the security in the event of additional deterioration in the housing market.

While we considered the length of time each security had been in an unrealized loss position, the extent of the unrealized loss position and any significant declines in fair value subsequent to the balance sheet date in our evaluation of impairment for each of these individual securities, the primary factor in our evaluation of impairment is the expected performance for each of these securities. Our evaluation of expected performance is based on the historical performance of the associated securitization trust as well as the historical performance of the underlying collateral. Our examination of the historical performance of the securitization trust included consideration of the following factors for each class of securities issued by ~~corporations in~~ the ~~finance~~trust: i) the payment history, including failure to make scheduled payments; ii) current payment status; iii) current and ~~insurance sector. Included~~historical outstanding balances; iv) current levels of subordination and losses incurred to-date; and v) characteristics of the underlying collateral. Our examination of the historical performance of the underlying collateral included: i) historical default rates, delinquency rates, voluntary and involuntary prepayments and severity of losses, including recent trends in this ~~amount are other-than-temporarily impaired securities where~~information; ii) current payment status; iii) loan to collateral value ratios, as applicable; iv) vintage; and v) other underlying characteristics such as current financial condition.

We used our assessment of the ~~non-credit loss~~historical performance of ~~$228 million was recorded in OCI.~~

~~While certain securities included in~~both the ~~preceding table were considered other-than-temporarily impaired, we expect~~securitization trust and the underlying collateral for each security, along with third-party sources, when available, to ~~recover the new amortized cost based on~~develop our best estimate of cash flows expected to be collected. ~~We do not intend~~These estimates reflect projections for future delinquencies, prepayments, defaults and losses for the assets that collateralize the securitization trust and are used to ~~sell~~determine the expected cash flows for our security, based on the payment structure of the trust. Our projection of expected cash flows is primarily based on the expected performance of the underlying assets that collateralize the securitization trust and it is not ~~more likely~~directly impacted by the rating of our security. While we consider the rating of the security as an indicator of the financial condition of the issuer, this factor does not have a significant impact on our expected

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

cash flows for each security. In limited circumstances, our expected cash flows include expected payments from reliable financial guarantors where we believe the financial guarantor will have sufficient assets to pay claims under the financial guarantee when the cash flows from the securitization trust are not sufficient to make scheduled payments. We then discount the expected cash flows using the effective yield of each security to determine the present value of expected cash flows.

Based on this evaluation, the present value of expected cash flows was greater than ~~not~~or equal to the amortized cost for each security. Accordingly, we determined that ~~we will be required to sell these~~the unrealized losses on each of our structured securities ~~prior to recovering our amortized cost.~~represented temporary impairments as of June 30, 2011.

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~~structured securities and ~~mortgage-backed~~future write-downs within our portfolio of structured securities.

GENWORTH FINANCIAL, INC.

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

(Unaudited)

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.


	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	$	8,359	$	(226	)		1,076	$	4,852	$	(418	)		588	$	13,211	$	(644	)		1,664
20-50% Below cost		267		(137	)		91		2,637		(1,246	)		455
20%-50% Below cost																22		(8	)		18		1,428		(652	)		328		1,450		(660	)		346
>50% Below cost		76		(180	)		96		485		(950	)		284		—		(2	)		6		174		(363	)		168		174		(365	)		174

Total 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

% Below cost—equity securities:
<20% Below cost		2		(1	)		3		11		(1	)		5		72		(2	)		47		5		(1	)		4		77		(3	)		51
>50% Below cost		—		—			—		1		(1	)		4
20%-50% Below cost																5		(1	)		1		—		—			—		5		(1	)		1

Total 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


Investment grade	$	8,391	$	(320	)		891	$	10,897	$	(2,122	)		1,390	$	8,249	$	(231	)		1,060	$	4,850	$	(764	)		683	$	13,099	$	(995	)		1,743
Below investment grade		391		(243	)		219		1,936		(838	)		413
Below investment grade⁽³⁾																209		(8	)		88		1,609		(670	)		405		1,818		(678	)		493

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

⁽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.

⁽³⁾	Amounts that have been in a continuous loss position for 12 months or more included $213 million of unrealized losses on other-than-temporarily impaired securities.

GENWORTH FINANCIAL, INC.

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

(Unaudited)

The scheduled maturity distribution of fixed maturity securities as of ~~September~~June 30, ~~2010~~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	$	2,591	$	2,613	$	2,831	$	2,857
Due after one year through five years		12,156		12,562		11,766		12,103
Due after five years through ten years		8,818		9,454		9,570		10,031
Due after ten years		19,680		21,256		19,705		20,420

Subtotal		43,245		45,885		43,872		45,411
Residential mortgage-backed		4,629		4,334		5,252		4,983
Commercial mortgage-backed		4,011		3,757		3,767		3,721
Other asset-backed		2,391		2,380		2,172		2,106

Total	$	54,276	$	56,356	$	55,063	$	56,221

As of ~~September~~June 30, ~~2010, $4,985~~2011, $4,505 million of our investments (excluding mortgage-backed and asset-backed securities) were subject to certain call provisions.

As of ~~September~~June 30, ~~2010,~~2011, securities issued by finance and insurance, utilities and energy, and consumer—non-cyclical industry groups represented approximately ~~24%~~22%, 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 ~~September~~June 30, ~~2010,~~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)~~

~~(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:

   September 30, 2010 December 31, 2009
(Amounts in millions)
   Carrying
value % of
total Carrying
value % of
total
Property Type

Retail
   $ 2,015    29 % $ 2,115    28 %
Office
   1,897    27    2,025    27
Industrial
   1,861    27    1,979    26
Apartments
   776    11    832    11
Mixed use/other
   437    6    590    8

Total principal balance
   6,986    100 % 7,541    100 %

Unamortized balance of loan origination fees and costs
   5    6
Allowance for losses
   (62 ) (48 )

Total⁽¹⁾
   $ 6,929    $ 7,499

⁽¹⁾	Included held-for-sale mortgage loans of $17 million as of December 31, 2009. 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 mortgage loans in other invested assets.

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

Pacific
   $ 1,857    27 % $ 2,005    27 %
South Atlantic
   1,593    23    1,711    23
Middle Atlantic
   935    13    1,005    13
East North Central
   657    9    728    10
Mountain
   591    9    650    9
New England
   484    7    492    6
West North Central
   374    5    389    5
West South Central
   306    4    331    4
East South Central
   189    3    230    3

Total principal balance
   6,986    100 % 7,541    100 %

Unamortized balance of loan origination fees and costs
   5    6
Allowance for losses
   (62 ) (48 )

Total⁽¹⁾
   $ 6,929    $ 7,499

⁽¹⁾	Included held-for-sale mortgage loans of $17 million as of December 31, 2009. 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 mortgage loans in other invested assets.

~~“Impaired” loans are defined by U.S. GAAP as 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.~~


	June 30, 2011						December 31, 2010
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Property type:
Retail	$	1,912			30	%	$	1,974			29	%
Office		1,757			27			1,850			27
Industrial		1,753			27			1,788			26
Apartments		718			11			725			11
Mixed use/other		345			5			435			7

Subtotal		6,485			100	%		6,772			100	%

Unamortized balance of loan origination fees and costs		4						5
Allowance for losses		(57	)					(59	)

Total	$	6,432					$	6,718

GENWORTH FINANCIAL, INC.

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

(Unaudited)


	June 30, 2011						December 31, 2010
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total
Geographic region:
South Atlantic	$	1,624			25	%	$	1,583			23	%
Pacific		1,615			25			1,769			26
Middle Atlantic		865			13			937			14
East North Central		577			9			612			9
Mountain		516			8			540			8
New England		422			7			482			7
West North Central		349			5			369			6
West South Central		348			5			297			4
East South Central		169			3			183			3

Subtotal		6,485			100	%		6,772			100	%

Unamortized balance of loan origination fees and costs		4						5
Allowance for losses		(57	)					(59	)

Total	$	6,432					$	6,718

The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:


	June 30, 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	$	9		$	—		$	5		$	14		$	1,898		$	1,912
Office		4			—			18			22			1,735			1,757
Industrial		2			—			10			12			1,741			1,753
Apartments		—			—			—			—			718			718
Mixed use/other		—			—			—			—			345			345

Total recorded investment	$	15		$	—		$	33		$	48		$	6,437		$	6,485

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


	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 recorded investment	$	—		$	6		$	39		$	45		$	6,727		$	6,772

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

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Under these principles, we may have two types~~As of ~~“impaired” loans: loans requiring specific allowances for losses ($14 million for the nine months ended September~~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 nine months ended September 30, 2010 and for the year ended December 31, 2009).

~~Average investment in specifically impaired loans was $5 million and $10 million as of September 30, 2010~~2011 and December 31, ~~2009,~~2010, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest.

During 2011 and 2010, we modified or extended 11 and 13, respectively, commercial mortgage loans with a total carrying value of $36 million and ~~there was no~~$98 million, respectively. All of these modifications or extensions were based on current market interest ~~income recognized~~rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower and were not considered troubled debt restructurings.

The following table sets forth the commercial mortgage loans on ~~these~~nonaccrual status by property type as of the dates indicated:


(Amounts in millions)	June 30, 2011		December 31, 2010
Property type:
Retail	$	5	$	—
Office		18		12
Industrial		10		27
Apartments		—		—
Mixed use/other		—		—

Total recorded investment	$	33	$	39

The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans ~~while they were considered impaired.~~for the periods indicated:


(Amounts in millions)	Three months ended June 30, 2011			Six months ended June 30, 2011
Allowance for credit losses:
Beginning balance	$	58		$	59
Charge-offs		(4	)		(5	)
Recoveries		—			—
Provision		3			3

Ending balance	$	57		$	57

Ending allowance for individually impaired loans	$	—		$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	57		$	57

Recorded investment:
Ending balance	$	6,485		$	6,485

Ending balance of individually impaired loans	$	13		$	13

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,472		$	6,472

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the activity in the allowance for losses ~~during~~for the periods indicated:


(Amounts in millions)	Three months ended September 30, 2010			Nine months ended September 30, 2010			Three months ended June 30, 2010		Six months ended June 30, 2010
Beginning balance	$	70		$	48		$	52	$	48
Provision(1)		5			27			18		22
Release⁽¹⁾		(13	)		(13	)		—		—

Ending balance	$	62		$	62		$	70	$	70

⁽¹⁾

Included $13 million related to held-for-sale commercial mortgage ~~loans that were sold in the third quarter of 2010.~~loans.

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


	June 30, 2011
(Amounts in millions)	Recorded investment		Unpaid principal balance		Charge- offs		Related allowance		Average recorded investment		Interest income recognized
Property type:
Retail	$	3	$	4	$	1	$	—	$	2	$	—
Office		10		13		3		—	$	10		—
Industrial		—		—		—		—	$	—		—
Apartments		—		—		—		—	$	—		—
Mixed use/other		—		—		—		—	$	—		—

Total	$	13	$	17	$	4	$	—	$	6	$	—


	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

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 loan-to-value of commercial mortgage loans by property type as of the dates indicated:


	June 30, 2011
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100% ⁽¹⁾			Total
Property type:
Retail	$	458		$	247		$	847		$	322		$	38		$	1,912
Office		321			294			605			365			172			1,757
Industrial		498			329			613			283			30			1,753
Apartments		147			191			304			61			15			718
Mixed use/other		83			40			72			140			10			345

Total recorded investment	$	1,507		$	1,101		$	2,441		$	1,171		$	265		$	6,485

% of total		23	%		17	%		38	%		18	%		4	%		100	%

Weighted-average debt service coverage ratio		2.28			1.86			2.16			1.80			1.56			2.05

⁽¹⁾	Included $13 million of impaired loans and $252 million of loans in good standing, with a total weighted-average loan-to-value of 119%, where borrowers continued to make timely payments and have no history of delinquencies or distress.


	December 31, 2010
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100% ⁽¹⁾			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 recorded investment	$	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

⁽¹⁾	Included $25 million of impaired loans and $267 million of loans in good standing, with a total weighted-average loan-to-value of 117%, where borrowers continued to make timely payments and have no history of delinquencies or distress.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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


	June 30, 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	$	92		$	357		$	412		$	587		$	352		$	1,800
Office		194			135			268			432			553			1,582
Industrial		242			226			316			596			355			1,735
Apartments		12			91			79			301			168			651
Mixed use/other		56			17			11			71			91			246

Total recorded investment	$	596		$	826		$	1,086		$	1,987		$	1,519		$	6,014

% of total		10	%		14	%		18	%		33	%		25	%		100	%

Weighted-average loan-to-value		84	%		72	%		66	%		60	%		51	%		63	%


	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 recorded investment		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:


	June 30, 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	$	—		$	—		$	1		$	—		$	111		$	112
Office		—			—			8			—			167			175
Industrial		1			—			—			6			11			18
Apartments		—			—			—			29			38			67
Mixed use/other		—			4			—			—			95			99

Total recorded investment	$	1		$	4		$	9		$	35		$	422		$	471

% of total		—	%		1	%		2	%		7	%		90	%		100	%

Weighted-average loan-to-value		47	%		77	%		26	%		77	%		79	%		77	%

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

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

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

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

~~( f )~~(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:


	September 30, 2010						June 30, 2011						December 31, 2010
(Amounts in millions)	Carrying value			% of total			Carrying value			% of total			Carrying value			% of total
Property Type
Property type:
Retail	$	190			36	%	$	175			38	%	$	182			36	%
Industrial		128			25			113			24			124			24
Office		120			23			101			22			117			23
Apartments		64			12			62			14			64			13
Mixed use/other		22			4			8			2			22			4

Total principal balance		524			100	%
Subtotal								459			100	%		509			100	%

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

Total	$	522					$	457					$	507


							June 30, 2011						December 31, 2010
(Amounts in millions)							Carrying value			% of total			Carrying value			% of total
Geographic region:
South Atlantic							$	160			35	%	$	189			37	%
Pacific								77			17			90			18
Middle Atlantic								71			15			70			14
East North Central								48			10			51			10
Mountain								31			7			32			6
East South Central								30			7			32			6
West North Central								29			6			31			6
West South Central								12			3			13			3
New England								1			—			1			—

Subtotal								459			100	%		509			100	%

Allowance for losses								(2	)					(2	)

Total							$	457					$	507

GENWORTH FINANCIAL, INC.

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

(Unaudited)

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

South Atlantic
   $ 193    37 %
Pacific
   92    18
Middle Atlantic
   71    14
East North Central
   54    10
Mountain
   36    7
East South Central
   32    6
West North Central
   32    6
West South Central
   13    2
New England
   1    —

Total principal balance
   524    100 %

Allowance for losses
   (2 )

Total
   $ 522

~~See note 7~~Of our restricted commercial mortgage loans as of June 30, 2011, $457 million were current, $1 million were 61 to 90 days past due and $1 million were past due for ~~additional information~~more than 90 days and still accruing interest. As of December 31, 2010, all restricted commercial mortgage loans were current and there were no restricted commercial mortgage loans on nonaccrual status.

As of June 30, 2011 and December 31, 2010, loans not individually impaired that were evaluated collectively for impairment were $458 million and $509 million, respectively, of the total recorded investment of restricted commercial mortgage loans of $459 million and $509 million, respectively. There was no provision for credit losses recorded during the three months ended June 30, 2011 or 2010 related to ~~consolidated~~restricted commercial mortgage loans. There was no provision for credit losses recorded during the six months ended June 30, 2011 related to restricted commercial mortgage loans. A provision for credit losses of $2 million was recorded during the six months ended June 30, 2010 related to restricted commercial mortgage loans, which reflected our ending allowance for credit losses balance and was required upon consolidation of securitization ~~entities.~~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 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 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.

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


	June 30, 2011
(Amounts in millions)	0% – 50%			51% – 60%			61% – 75%			76% – 100%			Greater than 100%			Total
Property type:
Retail	$	147		$	25		$	—		$	—		$	3		$	175
Industrial		97			8			6			—			2			113
Office		87			7			5			1			1			101
Apartments		34			9			—			19			—			62
Mixed use/other		8			—			—			—			—			8

Total recorded investment	$	373		$	49		$	11		$	20		$	6		$	459

% of total		82	%		11	%		2	%		4	%		1	%		100	%

Weighted-average debt service coverage ratio		1.74			1.46			1.26			0.93			0.47			1.65

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	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 recorded investment	$	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

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:


	June 30, 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	$	7		$	48		$	66		$	21		$	33		$	175
Industrial		20			24			27			11			31			113
Office		12			12			39			25			13			101
Apartments		12			10			20			15			5			62
Mixed use/other		—			—			3			—			5			8

Total recorded investment	$	51		$	94		$	155		$	72		$	87		$	459

% of total		11	%		21	%		34	%		15	%		19	%		100	%

Weighted-average loan-to-value		63	%		39	%		37	%		43	%		31	%		40	%


	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	$	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 recorded investment	$	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	%

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

There were no floating rate restricted commercial mortgage loans as of June 30, 2011 or December 31, 2010.

(g) Restricted Other Invested Assets Related To Securitization Entities

~~Our~~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). 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 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” 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)~~STATEMENTS

(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			September 30, 2010				December 31, 2009				Balance sheet classification			September 30, 2010		December 31, 2009			Balance sheet classification		June 30, 2011			December 31, 2010			June 30, 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		$	821		$	72				Other liabilities	$	5		$	114	Other invested assets		$	264		$	222		Other liabilities		$	62	$	56
Inflation indexed swaps		Other invested assets			7			—				Other liabilities		5			21	Other invested assets			—			—		Other liabilities			61		33
Foreign currency swaps		Other invested assets			180			101				Other liabilities		—			—	Other invested assets			—			205		Other liabilities			—		—

Total cash flow hedges					1,008			173						10			135				264			427					123		89

Fair value hedges:
Interest rate swaps		Other invested assets			117			132				Other liabilities		10			15	Other invested assets			69			95		Other liabilities			4		8
Foreign currency swaps		Other invested assets			31			24				Other liabilities		—			—	Other invested assets			46			35		Other liabilities			—		—

Total fair value hedges					148			156						10			15				115			130					4		8

Total derivatives designated as hedges					1,156			329						20			150				379			557					127		97

Derivatives not designated as hedges
Interest rate swaps		Other invested assets			454			505				Other liabilities		57			59	Other invested assets			386			446		Other liabilities			21		74
Equity return swaps		Other invested assets			—			—				Other liabilities		6			—	Other invested assets			6			—		Other liabilities			1		3
Interest rate swaps related to securitization entities ⁽¹⁾		Restricted other invested assets			—			—				Other liabilities		34			—	Restricted other invested assets			—			—		Other liabilities			18		19
Interest rate swaptions		Other invested assets			8			54				Other liabilities		—			67	Other invested assets			—			—		Other liabilities			—		—
Credit default swaps		Other invested assets			4			11				Other liabilities		9			3	Other invested assets			9			11		Other liabilities			9		7
Credit default swaps related to securitization entities ⁽¹⁾		Restricted other invested assets			—			—				Other liabilities		130			—	Restricted other invested assets			—			—		Other liabilities			126		129
Equity index options		Other invested assets			61			39				Other liabilities		—			2	Other invested assets			40			33		Other liabilities			—		3
Financial futures		Other invested assets			—			—				Other liabilities		—			—	Other invested assets			—			—		Other liabilities			—		—
Other foreign currency contracts		Other invested assets			—			8				Other liabilities		3			—	Other invested assets			—			—		Other liabilities			12		—
Reinsurance embedded derivatives⁽²⁾⁽¹⁾		Other assets			4			—				Other liabilities		—			—	Other assets			—			1		Other liabilities			1		—
GMWB embedded derivatives		Reinsurance recoverable⁽³⁾			4			(5	)			Policyholder account balances⁽⁴⁾		316			175	Reinsurance recoverable⁽²⁾			(5	)		(5	)	Policyholder account balances ⁽³⁾			113		121

Total derivatives not designated as hedges					535			612						555			306				436			486					301		356

Total derivatives				$	1,691		$	941					$	575		$	456			$	815		$	1,043				$	428	$	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			September 30, 2010		Measurement	December 31, 2010		Additions		Maturities/ terminations			June 30, 2011
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps		Notional	$	9,479	$	1,382	$	(209	)	$	10,652	Notional	$	12,355	$	995	$	(157	)	$	13,193
Inflation indexed swaps		Notional		376		157		(10	)		523	Notional		525		16		—			541
Foreign currency swaps		Notional		491		—		—			491	Notional		491		—		(491	)		—

Total cash flow hedges				10,346		1,539		(219	)		11,666			13,371		1,011		(648	)		13,734

Fair value hedges:
Interest rate swaps		Notional		2,366		—		(281	)		2,085	Notional		1,764		—		(405	)		1,359
Foreign currency swaps		Notional		85		—		—			85	Notional		85		—		—			85

Total fair value hedges				2,451		—		(281	)		2,170			1,849		—		(405	)		1,444

Total derivatives designated as hedges				12,797		1,539		(500	)		13,836			15,220		1,011		(1,053	)		15,178

Derivatives not designated as hedges
Interest rate swaps		Notional		6,474		4,057		(2,569	)		7,962	Notional		7,681		314		(1,550	)		6,445
Equity return swaps		Notional		—		200		—			200	Notional		208		139		—			347
Interest rate swaps related to securitization entities		Notional		—		138		(6	)		132	Notional		129		—		(6	)		123
Interest rate swaptions		Notional		5,100		200		(5,100	)		200	Notional		200		—		(200	)		—
Credit default swaps		Notional		1,090		100		—			1,190	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		564		(614	)		862	Notional		744		521		(480	)		785
Financial futures		Notional		5,822		5,579		(6,817	)		4,584	Notional		3,937		2,687		(3,463	)		3,161
Other foreign currency contracts		Notional		521		132		(73	)		580	Notional		521		185		(535	)		171
Reinsurance embedded derivatives		Notional		—		52		—			52	Notional		72		89		—			161

Total derivatives not designated as hedges				19,919		11,344		(15,184	)		16,079			15,004		4,050		(6,334	)		12,720

Total derivatives			$	32,716	$	12,883	$	(15,684	)	$	29,915		$	30,224	$	5,061	$	(7,387	)	$	27,898


(Number of policies)												Measurement	December 31, 2010		Additions		Terminations			June 30, 2011
Derivatives not designated as hedges
GMWB embedded derivatives												Policies		49,566		690		(1,326	)		48,930

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

GMWB embedded derivatives
Policies 47,543 3,089 (1,882 ) 48,750

Approximately ~~$1.1 billion~~$125 million 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 ~~$186~~$1 million as of ~~September~~June 30, ~~2010.~~

~~GENWORTH FINANCIAL, INC.~~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 ~~September~~June 30, ~~2010:~~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 (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	$	299	$	4		Net investment income	$	8	Net investment gains (losses)
Interest rate swaps hedging assets		—		1		Net investment gains (losses)		—	Net investment gains (losses)	$	113	$	(6	)	Net investment income	$	2	Net investment gains (losses)
Interest rate swaps hedging liabilities		—		—		Interest expense		—	Net investment gains (losses)		—		1		Interest expense		—	Net investment gains (losses)
Foreign currency swaps		2		(1	)	Interest expense		—	Net investment gains (losses)		1		(4	)	Interest expense		—	Net investment gains (losses)
			��
Total	$	301	$	4			$	8		$	114	$	(9	)		$	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 ~~September~~June 30, ~~2009:~~2010:


(Amounts in millions)	Gain (loss) recognized in OCI		Gain (loss) reclassified into net income (loss) from OCI⁽¹⁾			Classification of gain (loss) reclassified into net income (loss)	Gain (loss) recognized in net income (loss)⁽²⁾			Classification of gain (loss) recognized in net income (loss)	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	$	99	$	2		Net investment income	$	(2	)	Net investment gains (losses)	$	599		$	4		Net investment income	$	15	Net investment gains (losses)
Interest rate swaps hedging assets		—		—		Net investment gains (losses)		—		Net investment gains (losses)
Foreign currency swaps		—		(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		3		—		Interest expense		1		Net investment gains (losses)		6			(2	)	Interest expense		—	Net investment gains (losses)

Total	$	102	$	1			$	(1	)		$	602		$	3			$	15

⁽¹⁾	Amounts include $(1) million of gains reclassified into net income (loss) for cash flow hedges that were terminated or de-designated where the effective portion is reclassified into net income (loss) when the underlying hedge item affects net income (loss).

⁽²⁾	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)~~STATEMENTS

(Unaudited)

The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the ~~nine~~six months ended ~~September~~June 30, ~~2010:~~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 (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	$	862		$	12		Net investment income	$	20	Net investment gains (losses)
Interest rate swaps hedging assets		—			2		Net investment gains (losses)		—	Net investment gains (losses)	$	12	$	(11	)	Net investment income	$	—	Net investment gains (losses)
Interest rate swaps hedging liabilities		(3	)		1		Interest expense		—	Net investment gains (losses)		—		1		Interest expense		—	Net investment gains (losses)
Foreign currency swaps		9			(5	)	Interest expense		—	Net investment gains (losses)		4		(5	)	Interest expense		—	Net investment gains (losses)

Total	$	868		$	10			$	20		$	16	$	(15	)		$	—

⁽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 ~~nine~~six months ended ~~September~~June 30, ~~2009:~~2010:


(Amounts in millions)	Gain (loss) recognized in OCI			Gain (loss) reclassified into net income (loss) from OCI⁽¹⁾			Classification of gain (loss) reclassified into net income (loss)	Gain (loss) recognized in net income (loss)⁽²⁾			Classification of gain (loss) recognized in net income (loss)	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	$	(223	)	$	10		Net investment income	$	(12	)	Net investment gains (losses)	$	563		$	8		Net investment income	$	12	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		—			(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		(10	)		(8	)	Interest expense		1		Net investment gains (losses)		7			(4	)	Interest expense		—	Net investment gains (losses)

Total	$	(233	)	$	6			$	(11	)		$	567		$	6			$	12

⁽¹⁾	Amounts include $4 million of gains reclassified into net income (loss) for cash flow hedges that were terminated or de-designated where the effective portion is reclassified into net income (loss) when the underlying hedge item affects net income (loss).

⁽²⁾	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 total of derivatives designated as cash flow hedges of ~~$1.4 billion,~~$943 million, net of taxes, recorded in stockholders’ equity as of ~~September~~June 30, ~~2010~~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, $6$23 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 ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 in connection with forecasted transactions that were no longer considered probable of occurring.

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

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 ~~September~~June 30, ~~2010:~~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 (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	$	—		Net investment gains (losses)	$	(4	)	Net investment income	$	(1	)	Net investment gains (losses)	$	1		Net investment gains (losses)	$	(2	)	Net investment income	$	(1	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(4	)	Net investment gains (losses)		25		Interest credited		4		Net investment gains (losses)		(7	)	Net investment gains (losses)		17		Interest credited		7		Net investment gains (losses)
Foreign currency swaps		11		Net investment gains (losses)		—		Interest credited		(10	)	Net investment gains (losses)		11		Net investment gains (losses)		—		Interest credited		(11	)	Net investment gains (losses)

Total	$	7			$	21			$	(7	)		$	5			$	15			$	(5	)

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 ~~September~~June 30, ~~2009:~~2010:


	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 (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	$	1	Net investment gains (losses)	$	(4	)	Net investment income	$	—		Net investment gains (losses)	$	1		Net investment gains (losses)	$	(3	)	Net investment income	$	(1	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		14	Net investment gains (losses)		26		Interest credited		(14	)	Net investment gains (losses)		(6	)	Net investment gains (losses)		25		Interest credited		6		Net investment gains (losses)
Foreign currency swaps		3	Net investment gains (losses)		—		Interest credited		(4	)	Net investment gains (losses)		(2	)	Net investment gains (losses)		1		Interest credited		2		Net investment gains (losses)

Total	$	18		$	22			$	(18	)		$	(7	)		$	23			$	7

GENWORTH FINANCIAL, INC.

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

(Unaudited)

The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the ~~nine~~six months ended ~~September~~June 30, ~~2010:~~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 (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)	$	(10	)	Net investment income	$	(3	)	Net investment gains (losses)	$	2		Net investment gains (losses)	$	(5	)	Net investment income	$	(2	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(11	)	Net investment gains (losses)		75		Interest credited		11		Net investment gains (losses)		(29	)	Net investment gains (losses)		37		Interest credited		29		Net investment gains (losses)
Foreign currency swaps		7		Net investment gains (losses)		2		Interest credited		(6	)	Net investment gains (losses)		11		Net investment gains (losses)		1		Interest credited		(12	)	Net investment gains (losses)

Total	$	(2	)		$	67			$	2			$	(16	)		$	33			$	15

The following table provides information about the pre-tax income (loss) effects of fair value hedges and related hedged items for the ~~nine~~six months ended ~~September~~June 30, ~~2009:~~2010:


	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 (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	$	7		Net investment gains (losses)	$	(12	)	Net investment income	$	(10	)	Net investment gains (losses)	$	2		Net investment gains (losses)	$	(6	)	Net investment income	$	(2	)	Net investment gains (losses)
Interest rate swaps hedging liabilities		(45	)	Net investment gains (losses)		68		Interest credited		48		Net investment gains (losses)		(7	)	Net investment gains (losses)		50		Interest credited		7		Net investment gains (losses)
Foreign currency swaps		(10	)	Net investment gains (losses)		1		Interest credited		7		Net investment gains (losses)		(4	)	Net investment gains (losses)		2		Interest credited		4		Net investment gains (losses)

Total	$	(48	)		$	57			$	45			$	(9	)		$	46			$	9

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; and (vii) equity index options and credit default swaps

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

to mitigate certain macroeconomic risks associated with certain foreign subsidiaries. Additionally, we provide GMWBs on certain 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.

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

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.~~

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 September 30,
Classification of gain (loss) recognized
in net income (loss)
(Amounts in millions)
       2010         2009
Interest rate swaps
   $ 36    $ (52 ) Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾
   (12 ) —      Net investment gains (losses)
Interest rate swaptions
   4    85    Net investment gains (losses)
Credit default swaps
   22    15    Net investment gains (losses)
Credit default swaps related to securitization entities ⁽¹⁾
   30    —      Net investment gains (losses)
Equity index options
   (55 ) (49 ) Net investment gains (losses)
Equity return swaps
   (6 ) —      Net investment gains (losses)
Financial futures
   (43 ) (106 ) Net investment gains (losses)
Inflation indexed swaps
   —      —      Net investment gains (losses)
Other foreign currency contracts
   (8 ) (5 ) Net investment gains (losses)
Reinsurance embedded derivatives
   2    —      Net investment gains (losses)
GMWB embedded derivatives
   133    133    Net investment gains (losses)

Total derivatives not designated as hedges
   $ 103    $ 21

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

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~


	Three months ended June 30,						Classification of gain (loss) recognized in net income (loss)
(Amounts in millions)	2011			2010
Interest rate swaps	$	2		$	63		Net investment gains (losses)
Equity return swaps		(6	)		—		Net investment gains (losses)
Interest rate swaps related to securitization entities		(4	)		(9	)	Net investment gains (losses)
Interest rate swaptions		—			35		Net investment gains (losses)
Credit default swaps		—			(32	)	Net investment gains (losses)
Credit default swaps related to securitization entities		(4	)		(46	)	Net investment gains (losses)
Equity index options		(9	)		50		Net investment gains (losses)
Financial futures		34			105		Net investment gains (losses)
Other foreign currency contracts		(4	)		2		Net investment gains (losses)
Reinsurance embedded derivatives		(1	)		2		Net investment gains (losses)
GMWB embedded derivatives		(33	)		(278	)	Net investment gains (losses)

Total derivatives not designated as hedges	$	(25	)	$	(108	)

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:


	Nine months ended September 30,						Classification of gain (loss) recognized in net income (loss)	Six months ended June 30,						Classification of gain (loss) recognized in net income (loss)
(Amounts in millions)	2010			2009				2011			2010
Interest rate swaps	$	93		$	194		Net investment gains (losses)	$	4		$	57		Net investment gains (losses)
Interest rate swaps related to securitization entities⁽¹⁾		(24	)		—		Net investment gains (losses)
Equity return swaps									(10	)		—		Net investment gains (losses)
Interest rate swaps related to securitization entities									(3	)		(12	)	Net investment gains (losses)
Interest rate swaptions		61			(494	)	Net investment gains (losses)		—			57		Net investment gains (losses)
Credit default swaps		(5	)		36		Net investment gains (losses)		3			(27	)	Net investment gains (losses)
Credit default swaps related to securitization entities⁽¹⁾		(11	)		—		Net investment gains (losses)
Credit default swaps related to securitization entities									5			(41	)	Net investment gains (losses)
Equity index options		(32	)		(104	)	Net investment gains (losses)		(28	)		23		Net investment gains (losses)
Equity return swaps		(6	)		—		Net investment gains (losses)
Financial futures		29			(190	)	Net investment gains (losses)		(5	)		72		Net investment gains (losses)
Inflation indexed swaps		—			(4	)	Net investment gains (losses)
Foreign currency swaps		—			6		Net investment gains (losses)
Other foreign currency contracts		(9	)		5		Net investment gains (losses)		(13	)		(1	)	Net investment gains (losses)
Reinsurance embedded derivatives		4			—		Net investment gains (losses)		(1	)		2		Net investment gains (losses)
GMWB embedded derivatives		(109	)		573		Net investment gains (losses)		26			(242	)	Net investment gains (losses)

Total derivatives not designated as hedges	$	(9	)	$	22			$	(22	)	$	(112	)

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Derivative Counterparty Credit Risk

As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, net fair value assets by counterparty totaled ~~$1.6 billion~~$691 million and ~~$739~~$888 million, respectively. As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, net fair value liabilities by counterparty totaled ~~$169~~$186 million and ~~$74~~$172 million, respectively. As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, we retained collateral of ~~$1.6 billion~~$704 million and ~~$647~~$794 million, respectively, related to these agreements, including over collateralization of ~~$100~~$86 million and ~~$10~~$29 million, respectively, from certain counterparties. As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, we posted $4$23 million and ~~$121~~$30 million, respectively, of collateral to derivative counterparties, including ~~zero over collateralization for September 30, 2010 and~~ over collateralization of ~~$46~~$1 million ~~for December 31, 2009.~~and $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 ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, we could have been allowed to claim up to ~~$106~~$73 million and ~~$102~~$123 million, respectively, from counterparties and required to disburse up to $2$20 million and $1$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)~~

~~(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.~~

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

September 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
6    —      —      5    —      —
Matures after five years through ten years
5    —      —      —      —      —
A

Matures after one year through five years
37    1    —      32    1    —
Matures after five years through ten years
5    —      —      10    —      —
BBB

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

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

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~


	June 30, 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		1		—		68		2		—
Matures after five years through ten years		24		—		—		29		—		—

Total credit default swaps on single name reference entities	$	155	$	2	$	—	$	155	$	3	$	—

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:

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

Total credit default swap index tranches
925    1    9 925    7    3

Customized credit default swap index tranches related to securitization entities:

Portion backing third-party borrowings maturing 2017 ⁽⁷⁾
17    —      8    —      —      —
Portion backing our interest maturing 2017⁽⁸⁾
300    —      122    —      —      —

Total customized credit default swap index tranches related to securitization entities
317    —      130    —      —      —

Total credit default swaps on index tranches
$ 1,242    $ 1    $ 139    $ 925    $ 7    $ 3


	June 30, 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	$	4	$	300	$	—	$	3
10% – 15% matures after one year through five years ⁽²⁾		250		3		—		250		4		—
12% – 22% matures after five years through ten years ⁽³⁾		248		—		5		248		—		4
15% – 30% matures after five years through ten years ⁽⁴⁾		127		—		—		127		2		—

Total credit default swap index tranches		925		4		9		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		—		119		300		—		121

Total customized credit default swap index tranches related to securitization entities		317		—		126		317		—		129

Total credit default swaps on index tranches	$	1,242	$	4	$	135	$	1,242	$	6	$	136

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

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

⁽³⁾	~~The current attachment/detachment as of September 30,~~ 2010 ~~was 10% – 15%.~~

⁽⁴⁾	~~The current attachment/detachment as of December 31, 2009~~ was 10% – 15%.

⁽⁵⁾⁽³⁾

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

⁽⁶⁾⁽⁴⁾

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

⁽⁷⁾⁽⁵⁾

Original notional value was $39 million.

⁽⁸⁾⁽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:~~

   September 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⁽¹⁾
   $ —         $ —         $ —         $ 100       $ 100       $ 96
BBB

Matures after five years through ten years⁽²⁾
   —         —         —         100       100       76
BB

Matures after five years through ten years⁽²⁾
   —         —         —         200       228       148

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

⁽¹⁾	~~The amounts in 2009 related to securities that were reclassified to the trading category on July 1, 2010 as a result of adopting new accounting guidance related to embedded credit derivatives.~~

⁽²⁾	~~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)~~STATEMENTS

(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.

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

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

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

Other invested ~~assets~~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, ~~and~~ limited partnerships accounted for under the cost method.

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

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

Non-recourse funding ~~obligations~~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~~entities.. Based on market quotes or comparable market transactions.

Investment ~~contracts~~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)~~STATEMENTS

(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)	September 30, 2010							December 31, 2009							June 30, 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⁾	$	6,929	$	7,136	$		⁽¹⁾	$	7,499	$	7,213	$		⁽¹⁾	$	6,432	$	6,742	$		⁽¹⁾	$	6,718	$	6,896
Restricted commercial mortgage loans ⁽²⁾			⁽¹⁾		522		574			⁽¹⁾		—		—			⁽¹⁾		457		506			⁽¹⁾		507		554
Other invested assets			⁽¹⁾		329		332			⁽¹⁾		1,766		1,769			⁽¹⁾		282		293			⁽¹⁾		267		272
Liabilities:
Short-term borrowings⁽³⁾			⁽¹⁾		730		730			⁽¹⁾		930		930
Long-term borrowings⁽³⁾			⁽¹⁾		4,373		4,363			⁽¹⁾		3,641		3,291
Non-recourse funding obligations⁽³⁾			⁽¹⁾		3,437		2,199			⁽¹⁾		3,443		1,674
Borrowings related to securitization entities ^{(2), (3)}			⁽¹⁾		458		491			⁽¹⁾		—		—
Long-term borrowings⁽²⁾																	⁽¹⁾		4,755		4,766			⁽¹⁾		4,952		4,928
Non-recourse funding obligations⁽²⁾																	⁽¹⁾		3,374		2,339			⁽¹⁾		3,437		2,170
Borrowings related to securitization entities																	⁽¹⁾		394		417			⁽¹⁾		443		467
Investment contracts			⁽¹⁾		20,596		21,621			⁽¹⁾		21,515		21,743			⁽¹⁾		18,728		19,365			⁽¹⁾		19,772		20,471
Performance guarantees, principally letters of credit		74			—		—		117			—		—
Other firm commitments:
Commitments to fund limited partnerships		121			—		—		194			—		—		90			—		—		110			—		—
Ordinary course of business lending commitments		44			—		—		—			—		—		49			—		—		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.

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

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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~~consider 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.

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)~~STATEMENTS

(Unaudited)

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


									June 30, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
U.S. government, agencies and government-sponsored enterprises:
Pricing services	$	3,905	$	—	$	3,905	$	—	$	3,669	$	—	$	3,669	$	—
Internal models		17		—		3		14		13		—		—		13

Total U.S. government, agencies and government-sponsored enterprises		3,922		—		3,908		14		3,682		—		3,669		13

Tax-exempt:
Pricing services		1,271		—		1,271		—		865		—		865		—

Total tax-exempt		1,271		—		1,271		—		865		—		865		—

Government—non-U.S.:
Pricing services		2,322		—		2,322		—		2,378		—		2,378		—
Internal models		30		—		11		19		11		—		10		1

Total government—non-U.S.		2,352		—		2,333		19		2,389		—		2,388		1

U.S. corporate:
Pricing services		21,038		—		21,038		—		20,787		—		20,787		—
Broker quotes		286		—		—		286		277		—		—		277
Internal models		3,201		—		2,158		1,043		2,983		—		2,311		672

Total U.S. corporate		24,525		—		23,196		1,329		24,047		—		23,098		949

Corporate—non-U.S.:
Pricing services		11,831		—		11,734		97		12,568		—		12,568		—
Broker quotes		148		—		—		148		86		—		—		86
Internal models		1,836		—		1,478		358		1,774		—		1,489		285

Total corporate—non-U.S.		13,815		—		13,212		603		14,428		—		14,057		371

Residential mortgage-backed:
Pricing services		4,202		—		4,202		—		4,859		—		4,859		—
Broker quotes		59		—		—		59		63		—		—		63
Internal models		73		—		—		73		61		—		—		61

Total residential mortgage-backed		4,334		—		4,202		132		4,983		—		4,859		124

Commercial mortgage-backed:
Pricing services		3,706		—		3,706		—		3,678		—		3,678		—
Broker quotes		23		—		—		23		16		—		—		16
Internal models		28		—		4		24		27		—		—		27

Total commercial mortgage-backed		3,757		—		3,710		47		3,721		—		3,678		43

Other asset-backed:
Pricing services		2,207		—		2,207		—		1,840		—		1,840		—
Broker quotes		142		—		—		142		265		—		—		265
Internal models		31		—		7		24		1		—		1		—

Total other asset-backed		2,380		—		2,214		166		2,106		—		1,841		265

Total fixed maturity securities	$	56,356	$	—	$	54,046	$	2,310	$	56,221	$	—	$	54,455	$	1,766

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 ~~September 30, 2010:~~the dates indicated:


									June 30, 2011
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Pricing services	$	206	$	22	$	184	$	—	$	268	$	260	$	8	$	—
Broker quotes		7		—		—		7		6		—		—		6
Internal models		10		—		—		10		100		—		—		100

Total equity securities	$	223	$	22	$	184	$	17	$	374	$	260	$	8	$	106


									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 ~~September 30, 2010:~~the dates indicated:


									June 30, 2011
(Amounts in millions)									Total		Level 1		Level 2		Level 3
Pricing services									$	316	$	—	$	316	$	—
Broker quotes										291		—		—		291

Total trading securities									$	607	$	—	$	316	$	291


									December 31, 2010
(Amounts in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Pricing services	$	336	$	—	$	336	$	—	$	348	$	—	$	348	$	—
Broker quotes		157		—		—		157		230		—		—		230
Internal models		208		—		—		208		99		—		—		99

Total trading securities	$	701	$	—	$	336	$	365	$	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 ~~equity index~~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.

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, foreign equity index 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,~~and foreign equity index volatility inputs, 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.~~income (loss). 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. Prior to the third quarter of 2010, the discount rate was based on the swap curve, which incorporated the non-performance risk of our GMWB liabilities. Beginning in 2009, the swap curve dropped below the U.S. Treasury curve at certain points on the longer end of the curve, and in 2010, the points below the U.S. Treasury curve expanded to several points beyond 10 years. For these points on the curve, we utilized the U.S. Treasury curve as our discount 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 ~~September~~June 30, 2011 and December 31, 2010, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of ~~$70~~$44 million. ~~As of December 31, 2009, the impact of non-performance risk on our GMWB valuation was not material.~~

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

To determine 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 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. We believe that a hypothetical exit market participant would use a similar discount rate as described above to value the 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:


	September 30, 2010								June 30, 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	$	3,922	$	—	$	3,908	$	14	$	3,682		$	—	$	3,669		$	13
Tax-exempt		1,271		—		1,271		—		865			—		865			—
Government—non-U.S.		2,352		—		2,333		19		2,389			—		2,388			1
U.S. corporate		24,525		—		23,196		1,329		24,047			—		23,098			949
Corporate—non-U.S.		13,815		—		13,212		603		14,428			—		14,057			371
Residential mortgage-backed		4,334		—		4,202		132		4,983			—		4,859			124
Commercial mortgage-backed		3,757		—		3,710		47		3,721			—		3,678			43
Other asset-backed		2,380		—		2,214		166		2,106			—		1,841			265

Total fixed maturity securities		56,356		—		54,046		2,310		56,221			—		54,455			1,766

Equity securities		223		22		184		17		374			260		8			106

Other invested assets:
Trading securities		701		—		336		365		607			—		316			291
Derivative assets:
Interest rate swaps		1,392		—		1,383		9		719			—		715			4
Inflation indexed swaps		7		—		7		—
Foreign currency swaps		211		—		211		—		46			—		46			—
Interest rate swaptions		8		—		—		8
Credit default swaps		4		—		3		1		9			—		5			4
Equity index options		61		—		—		61		40			—		—			40
Equity return swaps										6			—		6			—

Total derivative assets		1,683		—		1,604		79		820			—		772			48

Securities lending collateral		702		—		702		—		554			—		554			—
Derivatives counterparty collateral		156		—		156		—		522			—		522			—

Total other invested assets		3,242		—		2,798		444		2,503			—		2,164			339

Restricted other invested assets related to securitization entities		376		—		198		178		378			—		203			175
Other assets⁽¹⁾		4		—		4		—		(1	)		—		(1	)		—
Reinsurance recoverable⁽²⁾		4		—		—		4		(5	)		—		—			(5	)
Separate account assets		11,063		11,063		—		—		11,452			11,452		—			—

Total assets	$	71,268	$	11,085	$	57,230	$	2,953	$	70,922		$	11,712	$	56,829		$	2,381

Liabilities
Policyholder account balances⁽³⁾	$	316	$	—	$	—	$	316	$	113		$	—	$	—		$	113
Derivative liabilities:
Interest rate swaps		72		—		72		—		87			—		87			—
Interest rate swaps related to securitization entities		34		—		34		—		18			—		18			—
Inflation indexed swaps		5		—		5		—		61			—		61			—
Credit default swaps		9		—		—		9		9			—		—			9
Credit default swaps related to securitization entities		130		—		—		130		126			—		—			126
Equity return swaps		6		—		6		—		1			—		1			—
Other foreign currency contracts		3		—		3		—		12			—		12			—

Total derivative liabilities		259		—		120		139		314			—		179			135
Borrowings related to securitization entities		44		—		—		44		58			—		—			58

Total liabilities	$	619	$	—	$	120	$	499	$	485		$	—	$	179		$	306

⁽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)


(Amounts in millions)	December 31, 2009
(Amounts in millions)											December 31, 2010
(Amounts in millions)	Total			Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3
(Amounts in millions)
Investments:
Fixed maturity securities:
U.S. government, agencies and government-sponsored enterprises	$	2,602		$	—	$	2,586	$	16		$	3,705		$	—	$	3,694	$	11
Tax-exempt		1,544			—		1,542		2			1,030			—		1,030		—
Government—non-U.S.		2,384			—		2,377		7			2,369			—		2,368		1
U.S. corporate		21,412			—		20,339		1,073			23,967			—		22,867		1,100
Corporate—non-U.S.		12,551			—		12,047		504			13,498			—		13,130		368
Residential mortgage-backed		3,227			—		1,746		1,481			4,455			—		4,312		143
Commercial mortgage-backed		3,617			—		59		3,558			3,743			—		3,693		50
Other asset-backed		2,415			—		996		1,419			2,416			—		2,148		268

Total fixed maturity securities		49,752			—		41,692		8,060			55,183			—		53,242		1,941

Equity securities		159			42		108		9			332			240		5		87

Other invested assets:
Trading securities		174			—		29		145			677			—		348		329
Derivative assets:
Interest rate swaps		709			—		706		3			763			—		758		5
Foreign currency swaps		125			—		125		—			240			—		240		—
Interest rate swaptions		54			—		—		54
Credit default swaps		11			—		5		6			11			—		5		6
Equity index options		39			—		—		39			33			—		—		33
Other foreign currency contracts		8			—		—		8

Total derivative assets		946			—		836		110			1,047			—		1,003		44

Securities lending collateral		853			—		853		—			772			—		772		—
Derivatives counterparty collateral		148			—		148		—			630			—		630		—

Total other invested assets		2,121			—		1,866		255			3,126			—		2,753		373

Restricted other invested assets related to securitization entities												370			—		199		171
Other assets⁽¹⁾												1			—		1		—
Reinsurance recoverable⁽¹⁾⁽²⁾		(5	)		—		—		(5	)		(5	)		—		—		(5	)
Separate account assets		11,002			11,002		—		—			11,666			11,666		—		—

Total assets	$	63,029		$	11,044	$	43,666	$	8,319		$	70,673		$	11,906	$	56,200	$	2,567

Liabilities
Policyholder account balances⁽²⁾⁽³⁾	$	175		$	—	$	—	$	175		$	121		$	—	$	—	$	121
Derivative liabilities:
Interest rate swaps		188			—		186		2			138			—		138		—
Interest rate swaps related to securitization entities												19			—		19		—
Inflation indexed swaps		21			—		21		—			33			—		33		—
Interest rate swaptions		67			—		—		67
Credit default swap		3			—		3		—
Credit default swaps												7			—		—		7
Credit default swaps related to securitization entities												129			—		—		129
Equity index options		2			—		—		2			3			—		—		3
Equity return swaps												3			—		3		—

Total derivative liabilities		281			—		210		71			332			—		193		139
Borrowings related to securitization entities												51			—		—		51

Total liabilities	$	456		$	—	$	210	$	246		$	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.

⁽²⁾⁽³⁾

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

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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.

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations 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.

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 April 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 June 30, 2011			Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of July 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 September 30, 2010				Total gains (losses) included in net income (loss) attributable to assets still held						Included in net income (loss)				Included in OCI									Issuances		Settlements			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2011
(Amounts in millions)	Beginning balance as of July 1, 2010		Included in net income (loss)			Included in OCI					Transfer in Level 3
Fixed maturity securities:								Purchases, sales, issuances and settlements, net									Ending balance as of September 30, 2010							Beginning balance as of April 1, 2011											Purchases		Sales
U.S. government, agencies and government- sponsored enterprises	$	9	$	—		$	—	$	—		$	5	Transfer out of Level 3		$	—			$	14				$	—
Tax-exempt		—		—			—		—			—		—				—				—
U.S. government, agencies and government-sponsored enterprises																								$	1			$	—			$	—		$	—	$	—		$	—	$	—		$	12	$	—		$	13		$	—
Government—non-U.S.		18		—			1		—			—		—				19				—			1				—				—			—		—			—		—			—		—			1			—
U.S. corporate⁽¹⁾		1,520		4			23		2			83		(303	)			1,329				4			715				4				9			27		(5	)		—		(18	)		236		(19	)		949			4
Corporate—non-U.S.⁽¹⁾		720		(8	)		—		(8	)		119		(220	)			603				(8	)		202				1				—			15		(10	)		—		(2	)		165		—			371			1
Residential mortgage- backed		62		—			1		9			65		(5	)			132				—
Commercial mortgage- backed		59		(6	)		8		(15	)		1		—				47				—
Other asset-backed⁽²⁾		361		—			5		15			—		(215	)			166				—
Residential mortgage-backed																									135				—				(10	)		3		—			—		(4	)		—		—			124			—
Commercial mortgage-backed																									42				—				2			—		—			—		(1	)		—		—			43			—
Other asset-backed																									263				—				7			—		—			—		(5	)		—		—			265			—

Total fixed maturity securities		2,749		(10	)		38		3			273		(743	)			2,310				(4	)		1,359				5				8			45		(15	)		—		(30	)		413		(19	)		1,766			5

Equity securities		9		11			—		(11	)		8		—				17				—			87				—				—			24		(5	)		—		—			—		—			106			—

Other invested assets:
Trading securities⁽²⁾		136		7			—		9			213		—				365				7
Trading securities																									338				7				—			—		(41	)		—		(13	)		—		—			291			7
Derivative assets:
Interest rate swaps		9		—			—		—			—		—				9				—			3				1				—			—		—			—		—			—		—			4			1
Interest rate swaptions		4		4			—		—			—		—				8				4
Credit default swaps		—		1			—		—			—		—				1				1			6				(2	)			—			—		—			—		—			—		—			4			(2	)
Equity index options		97		(54	)		—		18			—		—				61				(54	)		32				(8	)			—			15		—			—		1			—		—			40			(8	)
Other foreign currency contracts		1		—			—		(1	)		—		—				—				—

Total derivative assets		111		(49	)		—		17			—		—				79				(49	)		41				(9	)			—			15		—			—		1			—		—			48			(9	)

Total other invested assets		247		(42	)		—		26			213		—				444				(42	)		379				(2	)			—			15		(41	)		—		(12	)		—		—			339			(2	)

Restricted other invested assets related to securitization entities ⁽³⁾		174		4			—		—			—		—				178				3
Reinsurance recoverable⁽⁴⁾		9		(7	)		—		2			—		—				4				(7	)
Restricted other invested assets related to securitization entities																									175				—				—			—		—			—		—			—		—			175			—
Reinsurance recoverable ⁽²⁾																									(7	)			1				—			—		—			1		—			—		—			(5	)		1

Total Level 3 assets	$	3,188	$	(44	)	$	38	$	20		$	494	$	(743	)		$	2,953			$	(50	)	$	1,993			$	4			$	8		$	84	$	(61	)	$	1	$	(42	)	$	413	$	(19	)	$	2,381		$	4

⁽¹⁾

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 private placements and resulted in unobservable inputs having a significant impact on certain valuations for transfers in or no longer having significant impact on certain valuations for transfers out.

⁽²⁾	Transfers in for trading securities were offset by transfers out of other asset-backed securities and were driven primarily by the adoption of new accounting guidance related to embedded credit derivatives.

⁽³⁾	~~Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~

⁽⁴⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

GENWORTH FINANCIAL, INC.

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

(Unaudited)


(Amounts in millions)	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		174			(2	)		2		—			—		—			174		(2	)
Reinsurance recoverable⁽²⁾		(6	)		15			—		—			—		—			9		15

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

(Amounts in millions)
Beginning
balance
as of
July 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
September 30,
2009 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government- sponsored entities
$ 357    $ —      $ —      $ —      $ 4    $ (356 ) $ 5    $ —
Tax exempt
2    —      —      —      —      —      2    —
Government—non-U.S.
22    —      (2 ) (1 ) 15 —      34    —
U.S. corporate
1,408    25    60    (52 ) 387    (308 ) 1,520    5
Corporate—non-U.S.
767    7    69    74    293    (178 ) 1,032    (2 )
Residential mortgage-backed
1,623    (89 ) 200    (51 ) 20    (44 ) 1,659    (77 )
Commercial mortgage-backed
3,128    (6 ) 294    (34 ) 476    (229 ) 3,629    (6 )
Other asset-backed
1,063    (1 ) 105    (122 ) 1    (31 ) 1,015    (1 )

Total fixed maturity securities
8,370    (64 ) 726    (186 ) 1,196    (1,146 ) 8,896    (81 )

Equity securities
61    —      1    (1 ) —      (1 ) 60    —

Other invested assets:

Trading securities
133    16    —      —      —      —      149    16
Derivative assets
286    (15 ) —      1    —      —      272    (11 )

Total other invested assets
419    1    —      1    —      —      421    5

Reinsurance recoverable
2    (2 ) —      —      —      —      —      (2 )

Total Level 3 assets
$ 8,852    $ (65 ) $ 727    $ (186 ) $ 1,196    $ (1,147 ) $ 9,377    $ (78 )

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

GENWORTH FINANCIAL, INC.

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

(Unaudited)


																									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 June 30, 2011			Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	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 September 30, 2010				Total gains (losses) included in net income (loss) attributable to assets still held						Included in net income (loss)				Included in OCI									Issuances		Settlements			Transfer in Level 3		Transfer out of Level 3			Ending balance as of June 30, 2011
(Amounts in millions)	Beginning balance as of January 1, 2010			Included in net income (loss)			Included in OCI					Transfer in Level 3
Fixed maturity securities:									Purchases, sales, issuances and settlements, net									Ending balance as of September 30, 2010							Beginning balance as of January 1, 2011											Purchases		Sales
U.S. government, agencies and government- sponsored enterprises	$	16		$	—		$	—	$	(2	)	$	14	Transfer out of Level 3		$	(14	)		$	14				$	—
Tax-exempt		2			—			—		—			—		(2	)			—				—
U.S. government, agencies and government-sponsored enterprises																									$	11			$	—			$	—		$	—	$	—		$	—	$	—		$	12	$	(10	)	$	13		$	—
Government—non-U.S.		7			—			2		—			16		(6	)			19				—			1				—				—			—		—			—		—			—		—			1			—
U.S. corporate⁽¹⁾		1,073			15			57		33			761		(610	)			1,329				12			1,100				8				6			30		(5	)		—		(63	)		252		(379	)		949			8
Corporate—non-U.S. ⁽¹⁾		504			(7	)		8		3			472		(377	)			603				(7	)		368				(11	)			(3	)		40		(35	)		—		(7	)		205		(186	)		371			(10	)
Residential mortgage- backed ⁽²⁾		1,481			—			4		89			66		(1,508	)			132				—
Commercial mortgage- backed⁽²⁾		3,558			(5	)		22		(78	)		12		(3,462	)			47				—
Other asset-backed ^{(2), (3)}		1,419			(24	)		28		(3	)		10		(1,264	)			166				(24	)
Residential mortgage-backed																										143				(1	)			(8	)		3		—			—		(12	)		—		(1	)		124			(1	)
Commercial mortgage-backed																										50				—				2			—		—			—		(9	)		—		—			43			—
Other asset-backed																										268				(1	)			9			8		(8	)		—		(26	)		15		—			265			(1	)

Total fixed maturity securities		8,060			(21	)		121		42			1,351		(7,243	)			2,310				(19	)		1,941				(5	)			6			81		(48	)		—		(117	)		484		(576	)		1,766			(4	)

Equity securities		9			11			—		(3	)		60		(60	)			17				—			87				1				1			24		(5	)		—		(2	)		—		—			106			—

Other invested assets:
Trading securities⁽³⁾		145			8			—		(1	)		213		—				365				8
Trading securities																										329				16				—			5		(41	)		—		(18	)		—		—			291			16
Derivative assets:
Interest rate swaps		3			6			—		—			—		—				9				6			5				(1	)			—			—		—			—		—			—		—			4			(1	)
Interest rate swaptions		54			19			—		(65	)		—		—				8				19
Credit default swaps		6			(5	)		—		—			—		—				1				(5	)		6				(2	)			—			—		—			—		—			—		—			4			(2	)
Equity index options		39			(32	)		—		54			—		—				61				(32	)		33				(27	)			—			39		—			—		(5	)		—		—			40			(27	)
Other foreign currency contracts		8			(7	)		—		(1	)		—		—				—				(7	)

Total derivative assets		110			(19	)		—		(12	)		—		—				79				(19	)		44				(30	)			—			39		—			—		(5	)		—		—			48			(30	)

Total other invested assets		255			(11	)		—		(13	)		213		—				444				(11	)		373				(14	)			—			44		(41	)		—		(23	)		—		—			339			(14	)

Restricted other invested assets related to securitization entities ⁽⁴⁾		—			4			—		—			174		—				178				1
Reinsurance recoverable⁽⁵⁾		(5	)		7			—		2			—		—				4				7
Restricted other invested assets related to securitization entities																										171				4				—			—		—			—		—			—		—			175			4
Reinsurance recoverable ⁽²⁾																										(5	)			(2	)			—			—		—			2		—			—		—			(5	)		(2	)

Total Level 3 assets	$	8,319		$	(10	)	$	121	$	28		$	1,798	$	(7,303	)		$	2,953			$	(22	)	$	2,567			$	(16	)		$	7		$	149	$	(94	)	$	2	$	(142	)	$	484	$	(576	)	$	2,381		$	(16	)

⁽¹⁾

⁽²⁾	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.

⁽³⁾	Transfers in for trading securities were offset by transfers out of other asset-backed securities and were driven primarily by the adoption of new accounting guidance related to embedded credit derivatives.

⁽⁴⁾	~~Relates to the consolidation of certain securitization entities as of January 1, 2010. See note 7 for additional information related to consolidated securitization entities.~~

⁽⁵⁾	Represents embedded derivatives associated with the reinsured portion of our GMWB 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 ⁽¹⁾			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 January 1, 2010			Included in net income (loss)			Included in OCI		Purchases, sales, issuances and settlements, net			Transfer in Level 3		Transfer out of Level 3 ⁽¹⁾			Ending balance as of June 30, 2010
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		—			174		—			174		(2	)
Reinsurance recoverable⁽²⁾		(5	)		14			—		—			—		—			9		14

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

Our assessment of whether or not there were significant unobservable inputs 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
⁽¹⁾
During 2010, primary 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 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 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 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 September 30, 2010. Accordingly, our assessment resulted in a transfer out of Level 3 of $1,508 million, $3,462 million and $1,264 million, respectively, during the nine months ended September 30, 2010 related to residential mortgage-backed, commercial mortgage-backed and other asset-backed securities.
⁽²⁾
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.

GENWORTH FINANCIAL, INC.

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

(Unaudited)

(Amounts in millions)
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
September 30,
2009 Total gains
(losses)
included in
net income
(loss)
attributable
to assets
still held
Included in
net income
(loss) Included
in OCI
Fixed maturity securities:

U.S. government, agencies and government- sponsored entities
$ 25    $ —      $ (38 ) $ 13    $ 394    $ (389 ) $ 5    $ —
Tax exempt
—      —      —      5    2    (5 ) 2    —
Government—non-U.S.
31    —      (2 ) 9    15    (19 ) 34    —
U.S. corporate
2,734    9    170    (163 ) 764    (1,994 ) 1,520    10
Corporate—non-U.S.
1,560    (26 ) 211    85    696    (1,494 ) 1,032    (29 )
Residential mortgage-backed
1,957    (421 ) 364    (205 ) 905    (941 ) 1,659    (391 )
Commercial mortgage-backed
3,219    (44 ) 337    (140 ) 1,008    (751 ) 3,629    (45 )
Other asset-backed
1,034    (23 ) 285    (355 ) 982    (908 ) 1,015    (18 )

Total fixed maturity securities
10,560    (505 ) 1,327    (751 ) 4,766    (6,501 ) 8,896    (473 )

Equity securities
60    —      1 1    —      (2 ) 60    —

Other invested assets:

Trading securities
125    17    —      (15 ) 54    (32 ) 149    16
Derivative assets
933    (508 ) —      (175 ) 22    —      272    (486 )

Total other invested assets
1,058    (491 ) —      (190 ) 76    (32 ) 421    (470 )

Reinsurance recoverable
18    (18 ) —      —      —      —      —      (18 )

Total Level 3 assets
$ 11,696    $ (1,014 ) $ 1,328    $ (940 ) $ 4,842    $ (6,535 ) $ 9,377    $ (961 )

~~GENWORTH FINANCIAL, INC.~~

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

~~(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 July 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 September 30, 2010			Total (gains) losses included in net (income) loss attributable to liabilities still held			Beginning balance as of April 1, 2011				Total realized and unrealized (gains) losses																	Settlements			Transfer in Level 3			Transfer out of Level 3			Ending balance as of June 30, 2011			Total (gains) losses included in net (income) loss attributable to liabilities still held
(Amounts in millions)				Included in net (income) loss				Included in OCI									Included in net (income) loss							Included in OCI							Purchases				Sales				Issuances										Settlements			Transfer in Level 3			Transfer out of Level 3			Ending balance as of June 30, 2011
Policyholder account balances ⁽¹⁾	Beginning balance as of July 1, 2010	$	447			$	(140	)		$	—	Purchases, sales, issuances and settlements, net		Transfer in Level 3	$	9		Transfer out of Level 3		$	—	Ending balance as of September 30, 2010		$		—		Beginning balance as of April 1, 2011	$	316			$	(138	)		$	69			$	34		$	—		$	—		$	—		$	10		$	—		$	—		$	—	$	113	$	34
Derivative liabilities:
Credit default swaps		26				(17	)			—			—		—				—				9			(17	)		7				2				—				—			—			—			—			—			—			9			2
Credit default swaps related to securitization entities ⁽²⁾		159				(30	)			—			1		—				—				130			(30	)		120				6				—				—			—			—			—			—			—			126			6

Total derivative liabilities		185				(47	)			—			1		—				—				139			(47	)		127				8				—				—			—			—			—			—			—			135			8
Borrowings related to securitization entities ⁽²⁾		51				(8	)			—			—		1				—				44			(8	)

Borrowings related to securitization entities																													58				—				—				—			—			—			—			—			—			58			—

Total Level 3 liabilities	$	683			$	(195	)		$	—		$	10	$	1			$	—			$	499		$	(193	)	$	254			$	42			$	—			$	—		$	—		$	10		$	—		$	—		$	—		$	306		$	42

⁽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
July 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
September 30,
2009 Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held
Included in
net (income)
loss Included
in OCI
Policyholder account balances⁽¹⁾
$ 435    $ (135 ) $ —      $ 8    $ —      $ —      $ 308    $ (133 )
Other liabilities⁽²⁾
161    (57 ) —      —      —      —      104    (57 )

Total Level 3 liabilities
$ 596    $ (192 ) $ —      $ 8    $ —      $ —      $ 412    $ (190 )
��


	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)	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		Transfer out of Level 3		Ending balance as of June 30, 2010
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		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		58		(7	)		—		—			—		—		51		(6	)

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

⁽¹⁾	Represents embedded derivatives associated with our GMWB ~~liabilities.~~

⁽²⁾	~~Represents derivatives.~~liabilities, excluding the impact of reinsurance.

GENWORTH FINANCIAL, INC.

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

(Unaudited)


(Amounts in millions)	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 September 30, 2010			Total (gains) losses included in net (income) loss attributable to liabilities still held
(Amounts in millions)																Transfer in Level 3			Beginning balance as of January 1, 2011				Ending balance as of September 30, 2010						Total realized and unrealized (gains) losses																Settlements				Transfer in Level 3				Transfer out of Level 3				Ending balance as of June 30, 2011				Total (gains) losses included in net (income) loss attributable to liabilities still held
(Amounts in millions)	Beginning balance as of January 1, 2010			Beginning balance as of January 1, 2010				Included in net (income) loss			Included in OCI				Purchases, sales, issuances and settlements, net				Beginning balance as of January 1, 2011		Transfer in Level 3				Transfer out of Level 3			Ending balance as of September 30, 2010				Total (gains) losses included in net (income) loss attributable to liabilities still held				Included in net (income) loss			Included in OCI			Purchases			Settlements			Sales								Issuances
(Amounts in millions)		$	115	Beginning balance as of January 1, 2010					$	—									$	121	Transfer in Level 3				Transfer out of Level 3		$	Ending balance as of September 30, 2010			(28			)		$	—		$	—		$	—		$	20			Transfer in Level 3	$	—		Transfer out of Level 3		$	—	Ending balance as of June 30, 2011			$				—		$	113	$	(27	)
Derivative liabilities:												Purchases, sales, issuances and settlements, net
Interest rate swaps		2				(2	)			—			—		Purchases, sales, issuances and settlements, net			—				—			—			(2	)
Interest rate swaptions		67				(42	)			—			(25	)			—				—			—			(42	)
Credit default swaps		—				9				—			—				—				—			9			9				7			—				—			3			—			—				(1	)			—				—				9			—
Credit default swaps related to securitization entities ⁽²⁾		—				11				—			(2	)			121				—			130			11
Credit default swaps related to securitization entities																															129			(3	)			—			—			—			—				—				—				—				126			(3	)
Equity index options		2				(1	)			—			(1	)			—				—			—			(1	)			3			—				—			—			—			—				(3	)			—				—				—			—

Total derivative liabilities		71				(25	)			—			(28	)			121				—			139			(25	)			139			(3	)			—			3			—			—				(4	)			—				—				135			(3	)
Borrowings related to securitization entities⁽²⁾		—				(16	)			—			—				60				—			44			(16	)

Borrowings related to securitization entities																															51			7				—			—			—			—				—				—				—				58			7

Total Level 3 liabilities	$	246			$	74			$	—		$	(2	)		$	181			$	—		$	499		$	76			$	311		$	(24	)		$	—		$	3		$	—		$	20			$	(4	)		$	—			$	—			$	306		$	(23	)

⁽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
September 30,
2009 Total (gains)
losses
included in
net (income)
loss
attributable
to liabilities
still held
Included in
net (income)
loss Included
in OCI
Policyholder account balances⁽¹⁾
$ 878    $ (592 ) $ —      $ 22    $ —      $ —      $ 308    $ (579 )
Other liabilities⁽²⁾
68    85    —      (49 ) —      —      104    53

Total Level 3 liabilities
$ 946    $ (507 ) $ —      $ (27 ) $ —      $ —      $ 412    $ (526 )


	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
(Amounts in millions)	Beginning balance as of January 1, 2010		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, 2010
Policyholder account balances⁽¹⁾	$	175	$	255		$	—	$	17		$	—	$	—	$	447	$	255
Derivative liabilities:
Interest rate swaps		2		(2	)		—		—			—		—		—		(2	)
Interest rate swaptions		67		(42	)		—		(25	)		—		—		—		(42	)
Credit default swaps		—		26			—		—			—		—		26		26
Credit default swaps related to securitization entities		—		41			—		(3	)		121		—		159		41
Equity index options		2		(1	)		—		(1	)		—		—		—		(1	)

Total derivative liabilities		71		22			—		(29	)		121		—		185		22

Borrowings related to securitization entities		—		(8	)		—		—			59		—		51		(8	)

Total Level 3 liabilities	$	246	$	269		$	—	$	(12	)	$	180	$	—	$	683	$	269

⁽¹⁾	Represents embedded derivatives associated with our GMWB ~~liabilities.~~liabilities, excluding the impact of reinsurance.

⁽²⁾	~~Represents derivatives.~~

~~GENWORTH FINANCIAL, INC.~~

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

~~(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

(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, ~~all of~~ which were recorded in net investment gains (losses), ~~except for~~and accretion on ~~debt~~certain fixed maturity securities which was recorded in net investment income.

(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.~~

~~(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.

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

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

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

Commercial mortgage loans
   $ —         $ 574
Fixed maturity securities
   74       123
Other assets
   165       236

Total securitized assets not required to be consolidated
   239       933

Total securitized assets required to be consolidated
   598       —

Total securitized assets
   $ 837       $ 933

Financial support for certain securitization entities was provided under credit support agreements, in which we provided limited recourse for a maximum of $114 million of credit losses as of September 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 $118 million as of September 30, 2010. There were no amounts recorded for these limited recourse liabilities as of September 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.

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:

   September 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

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

~~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.

~~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 $118 million as of September 30, 2010, our economic interest represents the excess interest received on the loans compared to the

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

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 $409 million as of September 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
September 30, 2010    Nine months ended
September 30, 2010
Revenues:

Net investment income:

Restricted commercial mortgage loans
   $ 10       $ 30
Restricted other invested assets
   1       2

Total net investment income
   11       32

Net investment gains (losses):

Trading securities
   5       14
Derivatives
   18       (35 )
Commercial mortgage loans
   —         (1 )
Borrowings related to securitization entities recorded at fair value
   7       16

Total net investment gains (losses)
   30       (6 )

Total revenues
   41       26

Expenses:

Interest expense
   7       22
Acquisition and operating expenses
   2       2

Total expenses
   9       24

Income before income taxes
   32       2
Provision for income taxes
   12       1

Net income
   $ 20       $ 1

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

(Amounts in millions)
   September 30, 2010
Assets

Investments:

Restricted commercial mortgage loans
   $ 522
Restricted other invested assets:

Trading securities
   376
Other
   2

Total restricted other invested assets
   378

Total investments
   900
Cash and cash equivalents
   —
Accrued investment income
   1

Total assets
   $ 901

Liabilities

Other liabilities:

Derivative liabilities
   $ 164
Other liabilities
   2

Total other liabilities
   166
Borrowings related to securitization entities
   502

Total liabilities
   $ 668

~~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)~~ 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 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 identified, the U.K. antitrust authorities conducted a review of the payment protection insurance sector. In January 2009, the antitrust authorities issued their final report that included the remedies to address the antitrust issues identified in their findings. The remedies included prohibitions on the sale of single premium payment protection insurance products, or the sale of payment protection products within seven days of the sale of the underlying credit product unless the consumer contacts the distributor after 24 hours of sale of the credit product, as well as additional informational remedies. Though it was previously anticipated that the remedies would be implemented during 2010, a successful appeal brought against key elements of the findings by a large U.K. retail bank delayed implementation of the full remedies package. Following publication of the antitrust authorities’ response to the appeal, it appears that the remedies package will now be implemented during the second half of 2011 and early 2012.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On ~~July 30, 2010,~~June 22, 2011, we received a subpoena from the office of the New York Attorney General, relating to an industry-wide investigation of ~~the use of retained asset accounts as a settlement option for life insurance death benefit payments. When a retained asset account is established for a beneficiary, our insurance company~~

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

~~subsidiary retains the death benefit proceeds in its general account~~unclaimed property and ~~pays interest on those proceeds. Beneficiaries can withdraw all of the funds or a portion of the funds held in the account at any time.~~escheatment practices and procedures. In addition to the subpoena, ~~we have been contacted by~~other state ~~insurance~~ regulators ~~regarding retained asset accounts.~~are conducting reviews and examinations on the same subject. We ~~have responded to the New York Attorney General subpoena and state insurance regulator information~~are cooperating with these requests and ~~will cooperate with respect~~inquiries.

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 ~~any follow-up requests or inquiries.~~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.

(b) Commitments

As of ~~September~~June 30, ~~2010,~~2011, we were committed to fund ~~$121~~$90 million in limited partnership investments and ~~$44~~$49 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 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 September 30, 2010, we ~~had~~have access to $1.9 billion under these facilities.

In As of June ~~2010,~~30, 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 September 30, 2010,~~these facilities; however, we ~~had borrowings of $730~~utilized $279 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 ~~$57~~$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,~~2011, our indirect wholly-owned subsidiary, Genworth Financial Mortgage Insurance Pty Limited, issued AUD$140 million of subordinated floating rate notes due 2021 with an interest rate of three-month Bank Bill Swap reference rate plus a margin of 4.75%. Genworth Financial Mortgage Insurance Pty Limited expects to use the proceeds it received from this transaction for general corporate purposes.

During the second quarter of 2011, we repaid ¥57.0 billion of senior notes that matured in June 2011, plus accrued interest. In addition, the arrangements to swap our obligations under these notes to a U.S. dollar obligation matured. These swaps had a notional principal amount of $491 million with interest at a rate of 4.84% per year. Upon maturity of these swaps, we received $212 million from the derivative counterparty resulting in a net repayment of $491 million of principal related to these notes.

In 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.

GENWORTH FINANCIAL, INC.

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

(Unaudited)

Mandatorily Redeemable Preferred Stock

InOn June ~~2010, our majority-owned subsidiary, Genworth MI Canada Inc. (“Genworth Canada”), issued CAD$275 million of 5.68% senior notes due 2020. The net proceeds~~1, 2011, we redeemed all the remaining outstanding shares of the ~~offering were used~~Series A Preferred Stock at a price of $50 per share, plus unpaid dividends accrued to ~~fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada used~~ the ~~proceeds it received from such transactions~~date of redemption, for ~~general corporate and investment purposes and to fund a repurchase of common shares from Genworth Canada’s shareholders.~~$57 million.

Non-Recourse Funding Obligations

As of ~~September~~June 30, ~~2010,~~2011, we had $3.4 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves. In the second quarter of 2011, we repurchased principal of $57 million of notes secured by our non-recourse funding obligations, plus accrued interest, for a pre-tax gain of $17 million. As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, the weighted-average interest rates on our non-recourse funding obligations were ~~1.42%~~1.33% and ~~1.49%~~1.44%, respectively.

~~Borrowings Related To Securitization Entities~~

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

(Amounts in millions)
   Principal
amount Carrying
value
GFCM LLC, due 2035, 5.2541%
   $ 228    $ 228
GFCM LLC, due 2035, 5.7426%
   113    113
Genworth Special Purpose Two, LLC, due 2023, 6.0175%
   117    117
Marvel Finance 2007-1 LLC, due 2017⁽¹⁾
   5    1
Marvel Finance 2007-4 LLC, due 2017⁽¹⁾
   12    6
Genworth Special Purpose Five, LLC, due 2040⁽¹⁾
   NA ⁽²⁾ 37

Total
   $ 475    $ 502

⁽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 was $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.

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

~~(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 September 30,										Nine months ended September 30,										Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2010					2009					2010					2009
Pre-tax income (loss)	$	140				$	(7	)			$	331				$	(894	)
																					2011			2010			2011			2010
Statutory U.S. federal income tax rate	$	49		35.0	%	$	(2	)	35.0	%	$	116		35.0	%	$	(313	)	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		4		2.5			—		1.4			(1	)	(0.2	)		(2	)	0.2			(2.4	)		—			4.3			(2.1	)
Benefit on tax favored investments		(9	)	(6.6	)		(15	)	214.5			(23	)	(6.9	)		(49	)	5.5			(0.4	)		(8.0	)		(4.5	)		(7.1	)
Effect of foreign operations		(30	)	(21.1	)		(10	)	141.5			(70	)	(21.2	)		(40	)	4.4			(24.8	)		(33.7	)		(5.9	)		(21.3	)
Non-deductible expenses																						1.2			2.2			0.2			0.5
Interest on uncertain tax positions		(1	)	(0.4	)		(10	)	138.8			(5	)	(1.5	)		(7	)	0.8			(0.4	)		(2.4	)		0.4			(2.3	)
Non-deductible expenses		2		1.3			(10	)	141.5			3		0.9			(6	)	0.7
Tax benefits related to separation from our former parent		—		—			—		—			(106	)	(32.2	)		—		—			—			—			—			(55.8	)
Other, net		3		2.2			(5	)	70.2			6		1.9			(3	)	0.4			0.9			—			0.5			1.8

Effective rate	$	18		12.9	%	$	(52	)	742.9	%	$	(80	)	(24.2	)%	$	(420	)	47.0	%		9.1	%		(6.9	)%		30.0	%		(51.3	)%

For the three months ended ~~September~~June 30, ~~2010,~~2011, the effective tax rate ~~decreased significantly~~increased compared to the prior year primarily due to higher taxes in the current year as a result of a Canadian legislative change and an Australian tax legislation benefit in the prior year. The Canadian legislation change passed in June 2011 will eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase the effective tax rate on our U.S. GAAP earnings as prior deductions for contributions to the fund lowered the effective tax rate on U.S. GAAP earnings.

For the six months ended June 30, 2011, the effective tax rate increased from the prior year ~~due to small pre-tax results in relation to tax adjustments in the prior year. For the nine months ended September 30, 2010, the effective tax rate decreased significantly from the prior year~~primarily due to changes in uncertain tax benefits related to ~~separation from our former parent, lower taxed foreign income and tax favored investments in the current year.~~

~~In connection with~~ our 2004 separation from our former parent, General Electric (“GE”),. At the time of the separation, 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 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. The effective tax rate also increased due to higher taxes in the current year pursuant to the Canadian legislative change as compared to an Australian tax legislative benefit in the prior year.

GENWORTH FINANCIAL, INC.

~~(11)~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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.

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

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

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.

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


	Three months ended September 30,					Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(Amounts in millions)	2010		2009			2010		2009			2011		2010			2011		2010
Revenues:
Retirement and Protection	$	1,810	$	1,521		$	5,046	$	4,115		$	1,784	$	1,643		$	3,522	$	3,236
International		594		663			1,867		1,892			658		622			1,290		1,273
U.S. Mortgage Insurance		195		235			557		619			170		181			347		362
Corporate and Other		68		(28	)		28		(18	)		43		(36	)		64		(40	)

Total revenues	$	2,667	$	2,391		$	7,498	$	6,608		$	2,655	$	2,410		$	5,223	$	4,831

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—(Continued)~~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 September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2010			2009			2010			2009			2011			2010			2011			2010
Retirement and Protection	$	111		$	134		$	347		$	295
International		121			96			317			284
U.S. Mortgage Insurance		(152	)		(116	)		(228	)		(385	)
Corporate and Other		(51	)		(33	)		(175	)		(90	)
Retirement and Protection’s net operating income													$	149		$	114		$	276		$	236
International’s net operating income														107			105			231			196
U.S. Mortgage Insurance’s net operating loss														(253	)		(40	)		(334	)		(76	)
Corporate and Other’s net operating loss														(77	)		(61	)		(149	)		(124	)

Net operating income available to Genworth Financial, Inc.’s common stockholders		29			81			261			104
Net operating income (loss) available to Genworth Financial, Inc.’s common stockholders														(74	)		118			24			232
Net investment gains (losses), net of taxes and other adjustments		54			(62	)		(64	)		(604	)		(22	)		(76	)		(38	)		(118	)
Net tax benefit related to separation from our former parent		—			—			106			—			—			—			—			106

Net income (loss) available to Genworth Financial, Inc.’s common stockholders		83			19			303			(500	)		(96	)		42			(14	)		220
Add: net income attributable to noncontrolling interests		39			26			108			26			36			35			70			69

Net income (loss)	$	122		$	45		$	411		$	(474	)	$	(60	)	$	77		$	56		$	289

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


(Amounts in millions)	September 30, 2010		December 31, 2009		June 30, 2011		December 31, 2010
Assets:
Retirement and Protection	$	87,357	$	81,497	$	87,119	$	86,352
International		12,188		12,143		12,834		12,422
U.S. Mortgage Insurance		3,883		4,247		4,048		3,875
Corporate and Other		11,272		10,300		8,346		9,746

Total assets	$	114,700	$	108,187	$	112,347	$	112,395

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(11) Liability for Policy and Contract Claims

The following table sets forth changes in the liability for policy and contract claims for the dates indicated:


	As of or for the six months ended June 30,
(Amounts in millions)	2011⁽¹⁾			2010⁽²⁾
Beginning balance	$	6,933		$	6,567
Less reinsurance recoverables		(1,654	)		(1,769	)

Net beginning balance		5,279			4,798

Incurred related to insured events of:
Current year		1,720			1,641
Prior years		494			120

Total incurred		2,214			1,761

Paid related to insured events of:
Current year		(475	)		(452	)
Prior years		(1,373	)		(1,539	)

Total paid		(1,848	)		(1,991	)

Interest on liability for policy and contract claims		67			59
Foreign currency translation		37			(63	)

Net ending balance		5,749			4,564
Add reinsurance recoverables		1,578			1,738

Ending balance	$	7,327		$	6,302

⁽¹⁾

Current year reserves related to our U.S. Mortgage Insurance segment for the six months ended June 30, 2011 were reduced by loss mitigation activities of $22 million related to workouts, loan modifications and pre-sales. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $230 million to date, including $211 million related to workouts, loan modifications and pre-sales, and $19 million related to rescissions, net of reinstatements of $49 million.

⁽²⁾

Current year reserves related to our U.S. Mortgage Insurance segment for the six months ended June 30, 2010 were reduced by loss mitigation activities of $97 million, including $94 million related to workouts, loan modifications and pre-sales, and $3 million related to rescissions, net of reinstatements. Loss mitigation actions related to prior year delinquencies resulted in a reduction of expected losses of $353 million to date, including $201 million related to workouts, loan modifications and pre-sales, and $152 million related to rescissions, net of reinstatements of $107 million.

We establish reserves for the ultimate cost of settling claims on reported and unreported insured events that have occurred on or before the respective reporting period. These liabilities are associated primarily with our mortgage, long-term care and lifestyle protection insurance products and represent our best estimates of the liabilities at the time based on known facts, historical trends of claim payments and other external factors, such as various trends in economic conditions, housing prices, employment rates, mortality, morbidity and medical costs.

While the liability for policy and contract claims represents our current best estimates, there may be additional adjustments to these amounts based on information and trends not presently known. Such adjustments, reflecting any variety of new and adverse or favorable trends, could possibly be significant, exceeding the currently recorded reserves by an amount that could be material to our results of operations, financial condition and liquidity. For

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

example, in our U.S. mortgage insurance business, the amount and rate at which home prices, employment levels and cure rates for delinquent loans change could result in additional changes to reserves in future periods.

As of June 30, 2011, the increase in the ending liability for policy and contract claims was largely related to our U.S. Mortgage Insurance segment due to a reserve strengthening in the second quarter of 2011. In addition, our long-term care insurance business increased as a result of growth of the in-force block and claims experience including the severity and duration of existing claims.

During the six months ended June 30, 2011, we strengthened prior year reserves by $494 million as a result of changes in estimates related to prior year insured events and the development of information and trends not previously known when establishing the reserves in prior periods.

During the six months ended June 30, 2011, we increased prior year reserves in our U.S. Mortgage Insurance segment by $382 million from $2,282 million as of December 31, 2010. During the second quarter of 2011, we strengthened reserves by $299 million as a result of worsening trends in recent experience in the quarter as well as market trends in an environment of continuing weakness in the U.S. residential real estate market. These trends reflected a decline in cure rates in the second quarter of 2011 for delinquent loans and continued aging trends in the delinquent loan inventory. These trends were associated with a range of factors, including slow-moving pipelines of mortgages in some stage of foreclosure and delinquent loans under consideration for loan modifications. Specifically, reduced cure rates were driven by lower borrower self-cures and lower levels of lender loan modifications outside of government-sponsored modification programs. The decline in cure rates was also concentrated in earlier term delinquencies at a level higher than expected or historically experienced. In our U.S. Mortgage Insurance segment, loss mitigation actions that occurred during the six months ended June 30, 2011 resulted in a reduction of expected losses of $252 million.

During the six months ended June 30, 2011, we increased prior year claim reserves related to our long-term care insurance business by $144 million from $3,678 million as of December 31, 2010. In the current stressed economic environment, we have experienced an increase in severity and duration of claims associated with observed loss development which contributed to the reserve increase.

For our other businesses, the remaining favorable development during the six months ended June 30, 2011 related to refinements to our estimates as part of our reserving process on both reported and unreported insured events occurring in the prior year that were not significant.

As of June 30, 2010, the decrease in the ending liability for policy and contract claims was largely related to our U.S. Mortgage Insurance segment due principally to a substantial decrease in flow delinquencies, coupled with a settlement that was reached with a GSE counterparty regarding certain bulk Alt-A business in the first quarter of 2010. In our U.S. Mortgage Insurance segment, loss mitigation actions that occurred during the six months ended June 30, 2010 resulted in a reduction of expected losses of $450 million. Our international mortgage insurance business also decreased from favorable global economic and housing market conditions. These decreases were partially offset by an increase related to our long-term care insurance business as a result of growth of the in-force block and claims experience, including the severity and duration of existing claims.

During the six months ended June 30, 2010, we strengthened prior year reserves by $120 million primarily related to our long-term care insurance business. During the six months ended June 30, 2010, we increased prior year reserves in our long-term care insurance business by $109 million from $3,188 million as of December 31, 2009. We experienced an increase in severity and duration of claims associated with observed loss development which contributed to the reserve increase.

GENWORTH FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For our other businesses, the remaining unfavorable development during the six months ended June 30, 2010 related to refinements to our estimates as part of our reserving process on both reported and unreported insured events occurring in the prior year that were not significant.

(12) Sale of Medicare Supplement Insurance Business

In June 2011, we reached an agreement to sell our Medicare supplement insurance business for $290 million in cash, subject to customary adjustments based on the amount of capital in the business at closing. We expect to recognize a realized gain on the sale, with the closing of the sale expected to occur in the fourth quarter of 2011. Our Medicare supplement insurance business is included in our long-term care insurance business in our Retirement and Protection segment. The transaction includes the sale of Continental Life Insurance Company of Brentwood, Tennessee and its subsidiary, American Continental Insurance Company, and the reinsurance of the Medicare supplement insurance in-force business written by other Genworth life insurance subsidiaries.

(13) Noncontrolling Interests

In ~~July 2009,~~June 2011, Genworth MI Canada Inc. (“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 (“Brookfield”), our indirect wholly-owned subsidiary. Following completion of the Offering, we beneficially owned 57.5% of the common shares of Genworth Canada. In August 2010, Genworth Canada repurchased ~~12.3~~approximately 6.2 million common shares for CAD$~~325~~160 million through a substantial issuer bid. Brookfield Life Assurance Company Limited, our indirect wholly-owned subsidiary, participated in the issuer bid by making a proportionate tender and received CAD$~~187~~90 million and continues to hold approximately 57.5% of the outstanding common shares of Genworth Canada.

~~In the nine months ended September 30, 2010, dividends of $32 million were paid to the noncontrolling interests.~~

~~GENWORTH FINANCIAL, INC.~~

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

~~(Unaudited)~~

~~(13) Subsequent Event~~

On October 18, 2010, we entered into an agreement to purchase the operating assets of Altegris Capital, LLC (“Altegris”), which will be accounted for as a business combination. The acquisition will be part of our wealth management business in our Retirement and Protection segment. Altegris, based in La Jolla, California, provides a platform of alternative investments, including hedge funds and managed futures products, and has approximately $2.0 billion in client assets. The target date for closing the transaction, subject to various approvals and closing conditions, is December 31, 2010. We will pay approximately $35 million at closing, with additional performance-based payments of up to $85 million during the five-year period following closing.

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~~downgrades 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, the occurrence of natural or man-made disasters or a pandemic, ~~and~~ the effect of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection ~~Act;~~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 and problems associated with foreclosure process defects that may defer claim payments;~~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 life and long-term care insurance. Additionally, we offer other 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~~fixed deferred and immediate individual annuities. We previously offered variable deferred annuities and group variable annuities offered through retirement plans. For the three months ended ~~September~~June 30, ~~2010,~~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 ~~$135~~$123 million and ~~$111~~$149 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2010,~~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 ~~$300~~$235 million and ~~$347~~$276 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 ~~primarily~~ 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 ~~September~~June 30,

~~2010,~~ 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 ~~$124~~$110 million and ~~$121~~$107 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2010,~~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 ~~$326~~$237 million and ~~$317~~$231 million, respectively.

•

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. For the three months ended ~~September~~June 30, 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 $252 million and $253 million, respectively. For the six 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 ~~$141~~$333 million and $152 million, respectively. For the nine months ended September 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 $217 million and $228$334 million, respectively.

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 ~~September~~June 30, ~~2010, our Corporate and Other activities’~~2011, the net loss available to Genworth Financial, Inc.’s common stockholders and net operating loss available to Genworth Financial, Inc.’s common stockholders were ~~$35~~both $77 million ~~and $51 million, respectively. For the nine months ended September 30, 2010, our~~for Corporate and Other ~~activities’~~activities. For the six months ended June 30, 2011, Corporate and Other 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 $106~~of $153 million and ~~$175~~$149 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 on an ongoing basis.~~conditions. The following discussion of ~~quarterly~~ 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 the sales, revenue growth and profitability trends of our businesses. ~~Global financial markets improved during the first quarter of 2010 from the volatility experienced in 2009, with solid performance~~Improvements in equity markets, ~~and narrowing~~ credit markets and interest rate spreads ~~along with better credit performance in many sectors of the debt markets. However,~~seen during 2010 generally continued in the ~~second quarter~~first half of ~~2010, we saw a decline in equity~~2011. Although global financial markets ~~and widening debt spreads primarily as a result of the perceived contagion risk related to~~experienced some improvement, the European ~~sovereign~~ debt ~~crisis. Equity markets improved~~crisis and ~~debt spreads tightened as~~ concerns regarding ~~systemic European sovereign risk subsided during~~ the ~~third quarter~~U.S. debt ceiling impacted the rate of 2010. In 2010, Canadian and Australian economies and housing markets improved although the high loan-to-value mortgage origination market in Australia remained substantially below levels seen in prior years.recovery. The U.S. housing market reflected continuing stress and growing levels of foreclosures ~~and~~with variations in performance by sub-market, including ~~continued~~ signs of stabilization within certain ~~regions.~~regions while others declined. Unemployment and underemployment levels in the United States remained relatively constant with the fourth quarter of 2010 and the first quarter of 2011. We expect unemployment and underemployment levels in the United States to stabilize and gradually decrease over time though remain elevated for an extended period. In Canada, the housing market continued to improve with home prices remaining stable, while unemployment levels improved modestly from the first quarter of 2011. In Australia, the housing market has remained fairly stable with home prices declining modestly from the first quarter of 2011 and unemployment levels remaining consistent with the first quarter of 2011. Consumers in

Australia became more cautious given higher interest rates, higher costs of living, general concerns about the global economy and slow recovery in regions impacted by the recent natural disasters. Europe remained a slow growth environment with lower lending activity and reduced consumer ~~lending activity.~~

~~Slow economic growth, coupled with uncertain financial market, government policy~~spending, particularly in Greece, Spain, Portugal, Ireland and ~~other market conditions, influenced, and will continue to influence, investment and spending decisions by consumers and businesses~~Italy, in part 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 will continue to affect economic and business outlooks and 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.European debt crisis. 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, concerns around resolution of the U.S. debt ceiling, the volatility and strength of the capital markets, anticipated tax policy changes and the impact of U.S. healthcare and global 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 a variety of other~~continue to take certain actions to ~~stabilize~~support the economy and capital markets, influence interest rates, influence housing markets and mortgage servicing 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~~previously had a positive effect on these countries and their markets; however, there can be no assurance as to the future level of impact these types of ~~any of these actions~~action may have 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. During the ~~third~~second quarter of ~~2010,~~2011, markets were characterized by ~~both declining U.S. Treasury yields~~high levels of uncertainty regarding resolution of issues around peripheral Europe and, ~~tightening credit spreads. Ongoing expectation~~particularly toward the latter part of ~~renewed Federal Reserve support~~the quarter, disappointing economic data and concerns around resolution of the U.S. ~~economic recovery,~~debt ceiling. Spreads on domestic U.S. issuances continued to decline early in ~~addition~~the second quarter of 2011, as uncertainty remained contained and demand and issuance was strong. However, as the European Union’s policy failed to ~~continued strong demand~~provide conclusive support for ~~fixed income assets, resulted in a significant drop in~~Greece and other less stable peripheral European countries, and concerns about the U.S. ~~Treasury yields. Strong~~debt ceiling rose, issuances declined markedly and credit spreads began to widen. Despite these adverse developments and spread widening during the second quarter of 2011, investor demand ~~also continued~~remained strong for investment grade debt and higher quality issues that came to ~~drive credit spreads tighter in all sectors. In particular, continued progress in both the U.S. and Europe in developing and implementing financial regulation resulted in improved pricing~~market were generally oversubscribed. Similarly for ~~both domestic and non-U.S. borrowers. Concerns regarding systemic European sovereign risk subsided, although more focused concerns about particular European borrowers remain. For~~ securitized products, the ~~market was characterized~~latter half of the second quarter of 2011 saw increased volatility, mainly driven by ~~shrinking supply~~weaker economic and ~~lower~~housing data. In addition, the liquidation of certain non-agency securities by the Federal Reserve weighed heavily on the markets, and this coupled with heavy issuance ~~across all asset types. Asset valuations in securitized sectors continued to improve given a strong supply~~of commercial mortgage-backed securities put pressure on both residential and ~~demand imbalance, stable credit performance, and the structural protections embedded in the transactions brought to market.~~commercial mortgage-backed securities.

Certain segments of the marketplace are still experiencing declines in the performance of collateral underlying certain structured securities, but ~~corporate~~ impairments ~~continued their downward trend and were at~~in our investment portfolio declined further in the second quarter of 2011 from the moderate levels ~~during~~recorded in the ~~first~~second half of 2010 ~~with a minimal increase in~~and the ~~third~~first quarter of ~~2010.~~ 2011.

We recorded net other-than-temporary impairments of ~~$37~~$62 million ~~and $168 million, respectively,~~ during the ~~three and nine~~six months ended ~~September~~June 30, ~~2010~~2011 which were lower than prior year levels and we expect losses to moderate further. Additionally, during the nine months ended September 30, 2010, losses related to limited partnerships decreased $137 million as compared to the nine months ended September 30, 2009 with limited partnership gains in the second and third quarters of 2010. Although economic conditions may continue to negatively impact certain investment valuations, the underlying collateral associated with 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~~increased in the ~~second~~first half of ~~2009 continued into~~2011 compared to 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, sales~~Sales of our ~~traditional term life insurance product have declined given the introduction late in 2009 of our new~~ term universal life insurance product ~~that was designed to replace our~~were up 29% in the first half of 2011 versus the traditional term and term universal life insurance ~~product. Our new~~sales in the prior year and up 16% from the first quarter of 2011. We believe our term universal life insurance product ~~is more capital efficient and we believe~~ offers a ~~similar or~~ better value proposition to the consumer aswhen compared to our traditional term life insurance products which we no longer sell. We believe our term universal life insurance product ~~and is~~has been competitively priced for the ~~main street~~middle and emerging affluent ~~markets.~~markets as reflected in recent trends. We ~~have experienced strong adoption of the product; however, the growth rate will ultimately depend upon the intensity~~expect our sales levels could be impacted by shifts in consumer demand, relative pricing, return on capital decisions and other factors; therefore, we expect to see a reduced level of future distributor (existing brokerage general agents (“BGAs”) and other distributors) and consumer adoption, as well as competitors offering similar products. In our universal life insurance products, sales ~~during 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. Going forward,~~ the ~~level~~second half of ~~new premium sales will depend on ongoing distributor and consumer adoption and usage, as well as overall market conditions.~~2011.

Throughout ~~2009,~~2010 and into 2011, we experienced favorable mortality results in our term life insurance products as compared to priced mortality assumptions. ~~In 2010, mortality remained favorable to pricing assumptions although~~During this same period, while less sosevere in 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 go through their post-level rate period. We expect this trend in persistency to continue as these 10-year term life insurance policies go through their post-level rate period and then moderate thereafter.

Regulations XXX and AXXX require insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and for certain universal life insurance policies with secondary ~~guarantees, which increase~~guarantees. This increases the capital required to write these products ~~beyond~~to be in excess of 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 limited or more ~~limited and expensive; however, we have~~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~~In addition, the statutory reserve requirements of Regulations XXX and ~~introduced~~AXXX are currently being reviewed by the Life Actuarial Task Force of the National Association of Insurance Commissioners (“NAIC”). While it is too early to assess how this task force will address specific issues, if any, related to the statutory reserve requirements, any new ~~products designed~~interpretation of, or future revisions to, ~~reduce capital~~the valuation requirements ~~and limit financing costs compared to existing products and thereby improve the profitability of new business. The new term universal~~could impact our 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.business.

Long-term care insurance. Results of our long-term care insurance business are influenced by sales, 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 ~~have either~~ declined ~~or grown moderately. While~~during the recession and rebounded as the economy stabilized. This positive trend continued during 2011. Sales of our ~~overall sales~~individual long-term care insurance product increased 47% in ~~2009 were adversely impacted primarily by~~ the ~~general~~second quarter of 2011 versus the prior year

~~economic conditions~~due in part to growth in the market and ~~lower~~competitor actions. These trends combined with the impacts of the progress made on our multiple growth initiatives relating to distribution effectiveness and broadening of our individual and group offerings have resulted in increased sales. We expect our sales ~~through our independent distribution~~levels could be impacted by shifts in consumer demand, relative pricing, pricing of next generation products, return on capital decisions and ~~career force channels,~~other factors; therefore, we expect to see a reduced level of sales in the second half of 2009 and continuing into the first nine months of 2010, we experienced improvements in our long-term care insurance sales. Recent improvements are due in part to the breadth of our distribution, and we have made progress on multiple growth initiatives with an emphasis on distribution effectiveness and broadening our individual and group offerings.

2011. In the first half of 2009, termination rates increased on our 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 nine months of 2010, termination rates have decreased and returned to levels experienced historically resulting in higher benefits and other changes in policy reserves that contributed to lower results of operations. In recent periods,addition, we have experienced, and may continue to experience, higher claims than priced for in older issued policies which negatively ~~impacted~~impact our results of operations.

Since the fourth quarter of 2010, several of our competitors have exited the long-term care insurance market or announced their intent to seek rate actions on their individual and certain group long-term care insurance products. These announcements by competitors have disrupted the market and could impact our sales going forward.

We continue pursuing multiple initiatives including: new product issuance and service offerings; investing in ~~claims case management;~~care coordination capabilities; maintaining tight expense management; actively exploring alternative reinsurance strategies; executing effective investment strategies; and considering other actions to improve business profitability and the performance of the overall block. These efforts include ~~our older blocks of business and~~evaluating the ~~potential~~need for future in-force rate increases, where warranted. In this ~~connection, on October 21, 2010,~~regard, we ~~announced plans to file~~began filing for a ~~premium~~ rate increase of 18% on two blocks of older long-term care insurance policies in November 2010. As of June 30, 2011, we have received approvals in 30 states which represent ~~approximately 25%~~more than 50% of ~~individual long-term care insurance~~the impacted premiums. ~~We plan~~The state approval process of an in-force rate increase varies, and in certain states can take up to ~~begin filing for~~two years to obtain approval. Upon approval, premium increases may only occur on an insured’s policy anniversary date. Therefore, the benefits of any rate ~~changes in early November and anticipate that this~~ increase ~~will~~may not ~~take effect~~be fully realized until ~~2011. The~~the implementation ~~will take place~~is complete over the next ~~two to three~~few years. ~~In addition, changes~~

Changes in regulations or government programs, including long-term care insurance rate action legislation and 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 the second quarter of 2009 and continued throughout 2009 and 2010.

~~The market improvement, in addition to our~~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 have collectively contributed to our ~~higher~~growth in assets under management from sales and positive net flows ~~and assets under management.~~for nine sequential quarters. 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 ~~October 18,~~December 31, 2010, we ~~entered into an agreement to purchase~~purchased the operating assets of Altegris Capital, LLC (“Altegris”). ~~Altegris provides~~This acquisition provided a platform of alternative investments including hedge funds and managed futures products and ~~has~~had approximately ~~$2.0~~$2.2 billion in client ~~assets. See note 13 in our “—Notes to Condensed Consolidated Financial Statements” for additional information.~~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 offerings, relative pricing and company ratings. 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, including reduced commission structures, and investment strategies reflect ~~a more~~ targeted growth ~~strategy in order~~plans to achieve appropriate risk adjusted returns. In January 2011, we discontinued sales of our individual and group variable annuities; however, we will continue to service our existing block of business and accept additional deposits on existing contracts.

In fixed annuities, sales may fluctuate as a result of consumer demand, changes in interest rates, credit spreads, relative pricing, return on capital decisions and as we offer these products using a disciplined approach to manage risks. We have ~~scaled back certain product features~~introduced new market value adjustment deferred annuity products in the brokerage general agency (“BGA”) channel and we have re-priced immediate annuities to maintain spreads and targeted ~~certain market segments~~returns. Looking ahead, we will continue to ~~reduce risk~~actively evaluate marketing and investment strategies in ~~our annuity products. In this connection, we~~the event that interest rates increase. We have targeted distributors and producers and ~~chosen~~maintained sales ~~personnel~~capabilities that align with ~~this more~~our focused strategy. ~~Beginning in the second half of 2009, we~~We have expanded ~~our~~ distribution relationships with new financial institutions, independent financial planners and BGAs and we expect to continue to further expand these distribution ~~relationships.~~

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 channel and we have re-priced immediate annuities to maintain spreads and targeted returns. In 2009, spreads on fixed annuity products declined 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 reinvested a significant portion of the excess cash and are achieving improvements in spread-related income as a result of higher yields. Looking ahead, we will continue to actively evaluate investment strategies in the event that interest rates increase rapidly resulting in liability durations shortening.relationships while selectively adding additional product offerings.

In variable annuities, the improvement in ~~the~~ equity markets favorably 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. 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.will see limited new deposits as 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, consumer borrowing behavior, lender mortgage-related strategies and other economic and housing market ~~trends,~~influences, including interest rate trends, home price appreciation or depreciation, mortgage origination volume, levels of mortgage delinquencies and movements in foreign currency exchange rates.

~~Throughout 2009,~~Canada and Australia comprise approximately 97% of our international mortgage insurance risk in-force with an estimated average effective loan-to-value ratio of 60% as of June 30, 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 selective and disciplined.

In Canada, during the first half of 2011, favorable economic conditions persisted with housing affordability benefiting from low interest rates and historically low unemployment levels. In 2011, the Bank of Canada maintained the overnight rate at 1.0% which was set in 2010 and we ~~observed~~expect the Bank of Canada to slightly increase the overnight rate through the remainder of 2011. During the first half of 2011, home prices increased ~~stability in international housing markets, particularly~~modestly 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 notably in these markets during 2009. During 2010, home price appreciation slowed in both Canada and Australia. Looking forward to the remainder of 2010 and into 2011, we expect home prices to ~~stabilize or grow moderately~~remain consistent with the current levels during the remainder of the year. Additionally, the unemployment rate in ~~Australia while remaining relatively flat in Canada. Additionally, while unemployment increased~~Canada improved marginally from the first quarter of 2011.

In Canada, flow new insurance written during the first half of ~~2009,~~2011 remained consistent with levels in the first half of 2010. As of June 30, 2011, our 2010 book of business represents 12% of our insurance in-force while our 2007 and 2008 book years, the two largest in our portfolio, together represent 31% 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 flow new insurance written in 2011 primarily due to a smaller refinance market. The impact on net premiums written will depend upon the refinance share of new mortgage originations and the effect of the elimination of the 35-year amortization option. We expect this trend to continue if economic conditions in Canada continue to be favorable and we are able to continue to gradually increase our market share.

Losses in Canada have ~~observed~~remained relatively flat from levels experienced in 2010 as improving overall economic conditions and stable housing markets, as well as the success we experienced with our loss mitigation initiatives, were pressured by delinquency trends in Alberta earlier in the year. While loss levels may vary quarterly based on seasonal or event-driven fluctuations, we expect our overall loss levels in Canada to improve modestly over time compared with levels experienced in 2010.

In June 2011, the Canadian government passed legislation, that when effective, will formalize existing mortgage insurance arrangements with private mortgage insurers to eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase our effective tax rate on a ~~moderate decline~~U.S. GAAP basis, as prior deductions for contributions to the fund lowered the effective tax rate on Canadian earnings. However, this legislation does not change the current government guarantee of 90% provided on mortgages we insure. While we do not anticipate any significant impacts to our business as a result of this legislation, a full assessment of the impact on our business cannot be completed until the regulations are finalized.

As part of our capital optimization strategies, Genworth MI Canada Inc. (“Genworth Canada”), our indirect subsidiary, repurchased CAD$160 million of its existing common shares through a substantial issuer bid in ~~unemployment~~June 2011. Brookfield Life Assurance Company Limited (“Brookfield”), our indirect wholly-owned subsidiary, participated in the issuer bid by making a proportionate tender and received CAD$90 million and continues to hold approximately 57.5% of the outstanding common shares of Genworth Canada.

In Australia, the economy has slowed, particularly in Queensland, given the economic impact of the flooding in January 2011, pressures from higher interest rates, higher costs of living, higher exchange rates and cautious consumer spending. As a result, increased levels of new delinquencies were reported by financial institutions in ~~these two markets since~~this market, which adversely impacted the results of our operations. The housing market in Australia has remained fairly stable despite home price declines in the second quarter of 2011 and we expect home prices to remain consistent with current levels. Additionally, unemployment levels remained consistent with the first quarter of 2011. In 2011, the Reserve Bank of Australia maintained the cash rate at 4.75% which is consistent with the rate in December 2010 and we expect the Reserve Bank of Australia to maintain the cash rate near current levels through the remainder of the year.

Total mortgage market activity in Australia continued to slow during the first half of ~~2009.~~ 2011 as consumers became more cautious about higher interest rates, rising personal debt levels and global economic uncertainty. Additionally, some lenders were slow to return to the high loan-to-value market. Our flow new insurance written further decreased during the first quarter of 2011 compared to the fourth quarter of 2010 reflecting a smaller mortgage originations market, as well as the economic impact of recent natural disasters. While flow new insurance written in the second quarter of 2011 improved from the first quarter of 2011, we expect flow new insurance written to remain flat compared to 2010 levels for the remainder of the year.

Losses in Australia improved throughout most of 2010 as a result of continued loss mitigation activities and the benefits of the improving economic environment. In the first quarter of 2011, this trend reversed driven by higher reserves for claims anticipated from the natural disasters during that quarter, particularly the flooding in Queensland. In the second quarter of 2011, there was an increase in delinquencies and reserves as the cumulative impact of the factors noted previously exerted pressure on elements of the portfolio. We expect these pressures to continue through the remainder of 2011 resulting in an elevated loss ratio as was seen in the second quarter of 2011 which may begin to moderate in 2012.

As part of our strategy to reduce dependence on affiliate reinsurance and to aid the capital optimization strategies in Australia, our indirect wholly-owned subsidiary, Genworth Financial Mortgage Insurance Pty Limited, issued AUD$140 million of subordinated floating rate notes in June 2011.

In 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.

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% as of September 30, 2010. 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 selective.

Since the beginning of 2010, the Bank of Canada increased the overnight rate by 75 basis points to 1.0% and is expected to hold it constant for the remainder of 2010. 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 basis points to 4.5% between September 30, 2009 and September 30, 2010.

~~In Canada, we experienced higher than anticipated levels of flow new insurance written during~~Over the first nine months of 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 these higher levels. Additionally, implementation of the harmonized sales tax in British Columbia and Ontario, which had the potential to increase the cost of purchasing a home for certain buyers, also contributed to higher levels of mortgage originations in the first half of 2010. We believe these factors accelerated purchase decisions in 2010 and we expect lower levels of mortgage originations and an associated decrease in our flow new insurance written in the fourth quarter of 2010 as normal seasonal patterns slow originations.

In Australia, as a result of low interest rates during the first nine months 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. 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. As a result of lower levels of government support to first-time home buyers, a decline in high loan-to-value mortgage originations and increased interest rates beginning in the fourth quarter of 2009, there has been a decrease in mortgage originations and an associated decrease in our flow new insurance written during the first nine months of 2010. As some liquidity returned to the securitization market in Australia, we insured some bulk transactions in the first three quarters of 2010 and we expect to continue to write modest levels during the fourth quarter of 2010.

~~During 2009,~~past several 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 that keep borrowers in their homes, asset management strategies such as arranged and facilitated sales and pursuing recoveries. ~~These~~Loan modification programs benefit all parties as borrowers are able to remain in their homes, lenders maintain their relationship with the borrower ~~and~~while retaining an interest 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, ~~and~~including taking early possession of properties to 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 to increase and unemployment levels decline. With ongoing improvement in the Canadian and Australian economies and stable housing markets, as well as the success we experienced with our loss mitigation initiatives outlined above, we expect our overall loss levels to remain favorable to the levels experienced in 2009.

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 nine months ended September 30, 2010, net operating income in~~The profitability of our lifestyle protection insurance business improved ~~significantly as compared to~~during 2010 and through the ~~prior year. This improved profitability has been~~first half of 2011 driven by lower new claim registrations from stabilizing European unemployment levels and the impact of our ~~contract~~policy re-pricing and distribution contract restructuring ~~initiative in late 2009 through early 2010.~~initiatives. Sales during ~~the nine months ended September 30,~~ 2010 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. ~~However, sales increased modestly~~Sales in the first quarter of 2011 remained consistent with the fourth quarter of 2010 levels but improved in the second quarter of 2011 as a result of signing new clients during the ~~third quarter of 2010.~~quarter. We are actively pursuing various growth initiatives to 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 or the inability to generate targeted growth in new sales.

New claim registrations on unemployment-related policies ~~have continued to decline~~declined throughout 2010 and ~~are~~through the first half of 2011 and remain at the lowest levels since the third quarter of 2008. This, combined with stabilizing claim durations, has led to a ~~decrease in~~lower loss ratio since the second quarter of 2010 and our loss ~~ratio.~~ratio has remained relatively consistent with the third quarter of 2010. The improvement in our loss ratio has been most notable in the Nordic and Western Europe regions. We expect unemployment rates in Europe to slowly ~~decline~~improve over the next several quarters with regional variation. Additionally, we ~~see~~expect slow but positive European gross domestic product growth, which could positively impact consumer lending demand as 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. 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 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.~~unemployment and underemployment. This has resulted in numerous outcomes including rising foreclosures, more borrowers seeking loan modifications and elevated ~~foreclosed and delinquent~~ housing inventories which place downward pressure on home values. ~~At the same time, home prices are continuing to show signs of stabilizing or improving in several U.S. markets after a significant decline from their peak levels.~~ Overall, we anticipate ~~some~~ additional declines in home values ~~in the fourth quarter of 2010 and into early~~during 2011 and we expect unemployment and underemployment levels to stabilize and gradually decrease over time though remain elevated for an extended period.

Beginning in 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. Within the private mortgage insurance market, 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 ~~recent~~ongoing FHA risk management actions, we have seen the private mortgage insurance penetration rate increase ~~slightly in~~through the ~~third~~second quarter of ~~2010~~2011 and expect this to continue given the additional FHA pricing changes effective in ~~October 2010. In contrast, GSEs have maintained~~April 2011. This increase has been mitigated in part by increased GSE loan level ~~pricing up charges~~fees which can make private mortgage insurance less ~~attractive compared to FHA solutions.~~attractive. Going forward, ~~this trend may~~further GSE fee increases could limit the demand for or competitiveness of private mortgage insurance. ~~Alternatively, given recently enacted adjustments in FHA policies and pricing along with 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 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. 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 the benefit of the previously implemented rate increase of 20% on average for our flow products and a reduction in lender captive cession which equates to an effective pricing improvement of approximately 15%. We also previously exited certain product lines, such as A minus, Alt-A and 100% loan-to-value products. We continue to monitor and selectively reduce our targeted declining market policy, which among various restrictions, limited coverages to loans with 90% loan-to-value and below and to

adjust the restrictions in 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. In addition, we regularly monitor competitor pricing and underwriting changes and their potential market impact.

~~Overall~~While we continue to experience a decrease in the level of new 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. Albeit at a lower rate, 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. InBeginning mid-2010, ~~both~~we saw an increase in foreclosure starts ~~and the rate at which foreclosures progress to claim increased. As a result, we expect to see~~as well as an increase in our paid claims as ~~these~~ late stage delinquency loans go through foreclosure. ~~Recently announced voluntary suspended~~This trend continued through the second quarter of 2011. Suspensions and delays 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 the timing of a recovery of the U.S. residential mortgage market.

~~As a result of the recent stabilization of home prices and unemployment levels in certain markets and expanded~~Expanded efforts in the mortgage lending market to modify loans ~~we experienced a decrease~~and improved performance of our second half of 2008 and the 2009 and 2010 book years compared with the performance of prior book years, resulted in continued reductions in delinquency levels during the second quarter of 2011. However, aging of delinquencies ~~during 2010. This decrease reflected a reduction in new delinquencies combined with increased cures from government and lender loan modification programs and other loss mitigation activities~~continued to increase through the ~~first half~~remainder of ~~2010. However, aged delinquencies~~2010 and through the second quarter of 2011; moreover, foreclosures continued increasing and liquidations remained elevated through the ~~third 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 or 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 half of 2011, we have seen the level of loan modification actions moderating against the levels we experienced during the fourth quarter of 2010. We saw evidence of low levels of modification activity outside of government programs and servicers distracted by various regulatory and legal actions. 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 six months ended June 30, 2011 resulted in a reduction of expected losses of ~~approximately $608~~$252 million compared to $450 million during the ~~nine~~six months ended ~~September~~June 30, ~~2010 compared to $557 million during the nine months ended September 30, 2009.~~ 2010.

Workouts and loan modifications, which related to loans representing 4%2% of our primary risk in-force as of ~~September~~June 30, ~~2010,~~2011, and occurred during the period then ended, resulted in a reduction of ~~loss exposure of approximately $413 million for~~expected losses during the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 of $195 million compared to ~~$140~~$267 million ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~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 ~~nine months ended September 30, 2010,~~first quarter of 2011, we executed a loan ~~restructurings~~restructuring and ~~modifications~~modification program with some of 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 six months ended June 30, 2011 resulted in a reduction of ~~loss exposure~~expected losses of ~~approximately $43~~$38 million ~~for~~compared to $28 million that occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2010 compared to $33 million for the nine months ended September 30, 2009.~~ 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 six months ended June 30, 2011 which reduced our ~~loss exposure~~expected losses at the time of rescission by ~~approximately $152~~$19 million ~~for~~compared to $155 million that occurred during the ~~nine~~six months ended ~~September~~June 30, 2010. We expect limited benefit from rescission actions in future periods.

During 2010, ~~compared to $384 million for the nine months ended September 30, 2009. Benefits~~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. ~~With the exception~~Although loan servicers continue to pursue a wide range of ~~Florida, the shift from rescissions~~approaches to ~~modification benefits was proportional across regions, products and vintages. In Florida, we saw reduced opportunities to mitigate losses through~~execute appropriate loan modifications, ~~due~~government-sponsored programs such as Home Affordable Modification Program (“HAMP”) continue to ~~its~~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 ~~percentage~~levels of ~~later stage delinquencies and larger base of investor properties as compared to the broader portfolio. This resulted in an increase in reserves of $85 million in the third quarter of 2010.~~paid claims. Depending upon the mix of loss mitigation activity, market trends, ~~and unemployment~~employment levels in future periods and other general economic impacts which influence the U.S. residential housing market, we could see additional adverse loss reserve ~~changes.~~

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 loan modification efforts supported by various related lender and government programs, have benefited our results significantly. While expanded loan modification efforts and resulting benefits are expected to continue, the level of rescission activities has declined and we expect this level to remain stable for the foreseeable future. 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 to support mortgage servicers in their efforts to increase the benefits from loss mitigation activities.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 ~~nine~~six months ended ~~September~~June 30, ~~2010,~~2011, we recorded reinsurance recoveries of ~~$156~~$66 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 enter into excess loss of captive reinsurance transactions and, 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.

~~The insurance laws of various states, including North Carolina, require mortgage insurers~~We are executing a non-cash intercompany transaction to ~~maintain a minimum amount of~~increase the statutory capital ~~relative to risk in-force~~ in ~~order for~~our U.S. mortgage insurance companies by using a ~~mortgage insurer to~~portion of common shares of Genworth Canada, with an estimated market value of $375 million, currently held by Brookfield, our indirect wholly-owned subsidiary. Once this transaction is complete, we will continue to ~~write new business. During~~hold approximately 57.5% of the ~~third quarter~~outstanding common shares of ~~2010,~~Genworth Canada on a consolidated basis. In addition, Brookfield will have the right, exercisable at its discretion, to purchase for cash these common shares of Genworth Canada from our U.S. mortgage insurance companies at the then current

market price. Brookfield will also have a right of first refusal with respect to the transfer of these common shares of Genworth Canada by the U.S. mortgage insurance companies. This transaction is undergoing customary regulatory review and is expected to be effective as of June 30, 2011, for statutory financial reporting purposes.

As of June 30, 2011, Genworth Mortgage Insurance Corporation (“GEMICO”) exceeded the maximum risk-to-capital ~~ratio increased. Under certain stress scenarios, risk-to-capital ratios could rise to levels that could pressure our ability~~requirement of 25:1. GEMICO is authorized and continues to write new business ~~if available waivers for operating over specified risk-to-capital ratios are not obtained from regulators. Accordingly, we are pursuing various capital strategies which include exploring~~in North Carolina under a ~~temporary~~revocable two-year waiver of ~~the~~that state’s maximum 25:1 risk-to-capital requirement ~~with~~limitation, which the North Carolina Department of Insurance (“NCDOI”) approved in a letter dated January 31, 2011. By extension, GEMICO also remains authorized and ~~may~~continues to write business in 34 additional states that do ~~so with other state regulators where~~not have a maximum risk-to-capital requirement. Eleven additional states have granted GEMICO the authority to ~~grant~~continue to write new business by a waiver ~~exists. At the same time,~~(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 46 states as of June 30, 2011. While we continue to seek ~~necessary approvals~~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 four 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 ~~the licensing, capitalization and activation of a subsidiary for the purpose of writing new business.~~similar purposes. In this regard, ~~the NCDOI recently~~Fannie Mae has approved both our ~~filing to permit implementation~~use of ~~this plan.~~GRMIC-NC and our request that GRMAC be recognized as an eligible insurer. We ~~also continue to work~~remain in ongoing consultation with our state regulators and the GSEs regarding our ongoing use of these alternative arrangements, as necessary.

Ratings

Following our announcement on July 20, 2011 that we strengthened reserves by approximately $300 million in our U.S. mortgage insurance business, Standard & Poor’s Financial Services LLC (“S&P”) lowered the financial strength ratings on GEMICO and GRMIC-NC to ~~obtain their related approvals.~~“BB-” from “BB+.” The “BB” range is the fifth-highest of nine financial strength rating ranges assigned by S&P, which range from “AAA” to “R.” A plus (+) or minus (-) shows relative standing in a rating category. Accordingly, the “BB-” rating is the thirteenth-highest of S&P’s 21 ratings categories.

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 ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the consolidated results of operations for the periods indicated:


	Three months ended September 30,					Increase (decrease) and percentage change					Three months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2010		2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	1,447	$	1,492		$	(45	)	(3	)%	$	1,455		$	1,470		$	(15	)	(1	)%
Net investment income		815		759			56		7	%		881			823			58		7	%
Net investment gains (losses)		105		(122	)		227		186	%		(40	)		(139	)		99		71	%
Insurance and investment product fees and other		300		262			38		15	%		359			256			103		40	%

Total revenues		2,667		2,391			276		12	%		2,655			2,410			245		10	%

Benefits and expenses:
Benefits and other changes in policy reserves		1,502		1,450			52		4	%		1,672			1,340			332		25	%
Interest credited		212		225			(13	)	(6	)%		204			211			(7	)	(3	)%
Acquisition and operating expenses, net of deferrals		472		484			(12	)	(2	)%		514			499			15		3	%
Amortization of deferred acquisition costs and intangibles		227		143			84		59	%		197			179			18		10	%
Interest expense		114		96			18		19	%		134			109			25		23	%

Total benefits and expenses		2,527		2,398			129		5	%		2,721			2,338			383		16	%

Income (loss) before income taxes		140		(7	)		147		NM	⁽¹⁾		(66	)		72			(138	)	(192	)%
Provision (benefit) for income taxes		18		(52	)		70		135	%
Benefit for income taxes												(6	)		(5	)		(1	)	(20	)%

Net income		122		45			77		171	%
Net income (loss)												(60	)		77			(137	)	(178	)%
Less: net income attributable to noncontrolling interests		39		26			13		50	%		36			35			1		3	%

Net income available to Genworth Financial, Inc.’s common stockholders	$	83	$	19		$	64		NM	⁽¹⁾
Net income (loss) available to Genworth Financial, Inc.’s common stockholders											$	(96	)	$	42		$	(138	)	NM	⁽¹⁾

⁽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 ~~increased $32 million primarily related to~~was flat as a ~~$35~~$22 million increase in our long-term care insurance business ~~and~~was offset by a $12 million ~~increase~~decrease in our retirement income business ~~partially offset by~~and a ~~$15~~$10 million decrease in our life insurance business.

Our International segment decreased ~~$70~~$4 million as a result of a $21 million decrease ~~of $69 million~~ in our lifestyle protection insurance business, ~~and~~partially offset by a $1$17 million ~~decrease~~increase in our international mortgage insurance business. The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of ~~$11~~$44 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment decreased $7$11 million.

Net investment income. Net investment income represents the income earned on our investments.

Weighted-average investment yields increased to ~~4.7%~~5.1% for the three months ended ~~September~~June 30, ~~2010~~2011 from ~~4.4%~~4.8% for the three months ended ~~September~~June 30, ~~2009.~~2010. The increase in weighted-average investment yields was primarily attributable to the ~~reinvestment~~improved performance of limited partnerships accounted for under the ~~high cash balances we were holding during 2009~~equity method and ~~lower losses on limited partnerships.~~$16 million of bond calls and prepayments in the current year. Net investment income for the three months ended ~~September~~June 30, ~~2010~~2011 included $1$7 million of higher gains related to limited partnerships ~~accounted for under the equity method as~~ compared to ~~$20 million of losses in~~ the three months ended ~~September~~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.

The three months ended ~~September~~June 30, ~~2010~~2011 included an increase of $2$13 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 ~~$37~~$26 million of net other-than-temporary impairments for the three months ended ~~September~~June 30, ~~2010~~2011 as compared to ~~$196~~$51 million for the three months ended ~~September~~June 30, ~~2009.~~2010. Of total impairments for the three months ended ~~September~~June 30, 2011 and 2010, ~~and 2009, $26~~$17 million and ~~$99~~$43 million, respectively, related to structured securities, including ~~$18~~$9 million and ~~$74~~$23 million, respectively, related to sub-prime and Alt-A residential mortgage-backed and asset-backed securities. For the three months ended ~~September~~June 30, 2011 and 2010, we recorded $8$4 million ~~related to corporate securities~~ and $2$5 million, respectively, of impairments related to commercial mortgage ~~loans. We~~loans and $2 million and $4 million, respectively, of impairments related to limited partnership investments. For the three months ended June 30, 2011, we also recorded ~~$71~~$3 million of impairments related to ~~financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the three months ended September 30, 2009.~~real estate held-for-investment.

Net investment ~~gains~~losses related to derivatives of ~~$94~~$15 million infor the ~~third quarter of 2010~~three months ended June 30, 2011 were primarily ~~related~~due to ~~$66~~$16 million of ~~gains~~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”) ~~as a result~~and $4 million of ~~changes in the non-performance risk incorporated into the discount rate~~losses associated with derivatives used to value GMWB embedded derivatives. The increase also included $22 million of gains from the change in value of our credit default swaps due to narrowing credit spreads, $9 million of ineffectiveness gains from our cash flow hedge ~~programs related to our long-term care insurance business, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $1~~foreign currency risk. These losses were partially offset by $3 million of gains related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital ~~position. These~~position and $2 million of gains in other non-qualified interest rate swaps. Net investment losses related to derivatives of $38 million for the three months ended June 30, 2010 were ~~partially offset by $6~~primarily related to $31 million of losses from ~~foreign currency forward contracts. Net investment gains related~~the change in value of our credit default swaps due to ~~derivatives~~widening credit spreads, $21 million of ~~$19 million~~losses from the change in value of the ~~third quarter~~embedded derivative liabilities exceeding the change in value of ~~2009 were primarily related to gains in~~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 derivative instruments used for mitigating this risk.~~

~~We also recorded $30 million of net gains related to securitization entities in the third quarter of 2010 primarily associated with derivatives~~ and $9 million of losses related to ~~commercial mortgage loans.~~ 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 ~~gains~~losses related to the sale of available-for-sale securities were $9 million during the three months ended June 30, 2011 compared to net gains of $17 million during the three months ended June 30, 2010. We recorded $14 million of net gains related to trading securities during the three months ended June 30, 2011. We recorded $42 million of lower net losses related to securitization entities during the three months ended June 30, 2011 compared to the three months ended June 30, 2010 primarily associated with lower losses related to derivatives. We also ~~$38~~recorded $2 million ~~lower~~of gains related to commercial mortgage loans during the three months ended June 30, 2011 attributable to a decrease in the ~~current year.~~allowance compared to $18 million of losses during the three months ended June 30, 2010 from a lower of cost or market adjustment on loans held-for-sale and an increase in the allowance.

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 ~~$44~~$88 million largely driven by ana $61 million increase ~~of $17~~in our life insurance business, a $25 million increase in our wealth management business and a $4 million increase in our retirement income business.

Our International segment increased $10 million primarily as a result of an increase of ~~$11~~$6 million in our ~~long-term care insurance business, an increase of $9 million in our life~~international mortgage insurance business and an increase of $7$4 million in our ~~retirement income~~lifestyle protection insurance business. The three months ended June 30, 2011 did not include a change attributable to changes in foreign exchange rates.

Corporate and Other activities ~~decreased $5~~increased $4 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 ~~$88~~$43 million primarily attributable to a ~~$39~~$62 million increase in our long-term care insurance business and a ~~$28~~$7 million increase in our life insurance business, ~~and~~partially offset by a ~~$21~~$26 million ~~increase~~decrease in our retirement income business.

Our International segment decreased ~~$80~~$21 million primarily as a result of a decrease of ~~$46~~$22 million in our lifestyle protection insurance business, ~~and a decrease~~partially offset by an increase of ~~$34~~$1 million in our international mortgage insurance business. The three months ended June 30, 2011 included an increase of $13 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment increased ~~$45~~$310 million.

Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.

Our Retirement and Protection segment decreased ~~$12~~$3 million ~~principally related~~primarily attributable to a $10 million decrease in our retirement income business, partially offset by an $8 million increase in our life insurance business.

Corporate and Other activities decreased $4 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 ~~$28~~$22 million primarily attributable to a ~~$15~~$20 million increase in our wealth management business ~~a $14 million increase in our long-term care insurance business~~ and a $3$2 million increase in our life insurance ~~business, partially offset by a $4 million decrease in our retirement income~~ business.

Our International segment ~~decreased $23 million related to~~was flat as a ~~$30~~$6 million decrease in our lifestyle protection insurance business ~~partially~~was offset by ~~a $7~~an increase of $6 million ~~increase~~ in our international mortgage insurance business. The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of ~~$11~~$17 million attributable to changes in foreign exchange rates.

~~Our U.S. Mortgage Insurance segment decreased $6 million.~~

Corporate and Other activities decreased ~~$11~~$9 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 increased ~~$92~~$14 million primarily attributable to a ~~$48 million increase in our life insurance business, a $37~~$16 million increase in our retirement income business, ~~and~~partially offset by a $7$2 million ~~increase~~decrease in our ~~long-term care~~life insurance business.

Our International segment ~~decreased $6~~increased $5 million ~~from an $8~~primarily related to a $3 million ~~decrease~~increase in our lifestyle protection insurance business ~~partially offset by~~and a $2 million increase in our international mortgage insurance business. The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of $3$5 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 decreased $3 million related to our life insurance business.

Our International segment ~~decreased $4~~increased $12 million ~~largely related to~~driven by an $8increase of $6 million ~~decrease~~ in each of our international mortgage insurance and our lifestyle protection insurance ~~business, partially offset by a $4 million increase in our international mortgage insurance business.~~businesses. The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of $1$2 million attributable to changes in foreign exchange rates.

Corporate and ~~Other~~other activities increased ~~$19~~$16 million.

~~Provision (benefit)~~Benefit for income ~~taxes~~taxes.. The effective tax rate ~~decreased~~increased to ~~12.9%~~9.1% for the three months ended ~~September~~June 30, ~~2010~~2011 from ~~742.9%~~(6.9)% for the three months ended ~~September~~June 30, ~~2009.~~2010. This ~~decrease~~increase in the effective tax rate was primarily attributable to ~~small pre-tax results in relation to tax adjustments~~higher taxes in the ~~prior~~current year ~~including~~as a result of a Canadian legislative change as compared to an Australian tax ~~favored investments benefits, the effect of lower taxed foreign income, non-deductible expenses and interest on uncertain tax positions~~legislative benefit in the prior year. The Canadian legislation change passed in June 2011 will eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase the effective tax rate on our U.S. generally accepted accounting principles (“U.S. GAAP”) earnings as prior deductions for contributions to the fund lowered the effective tax rate on U.S. GAAP earnings. The three months ended ~~September~~June 30, ~~2010~~2011 included an increase of $2$4 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~~income 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%, as well as a result of lower losses from an improving economy. The three months ended ~~September~~June 30, ~~2010~~2011 included an increase of $3$2 million attributable to changes in foreign exchange rates.

Net income (loss) available to Genworth Financial, Inc.’s common stockholders. ~~The increase~~We reported a net loss available to Genworth Financial, Inc.’s common stockholders in the current year compared to net income available to Genworth Financial, Inc.’s common stockholders in the ~~current~~prior year ~~was~~ primarily related to ~~improved investment performance, partially offset by~~ a higher net operating loss in our U.S. mortgage insurance ~~business.~~business largely related to the reserve strengthening during the three months ended June 30, 2011 and additional tax benefits recognized in the prior year. These decreases were partially offset by higher product fee income and improved investment performance 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 the net loss available to Genworth Financial, Inc.’s common stockholders for the three months ended June 30, 2011 was an increase of $14 million, net of tax, attributable to changes in foreign exchange rates.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the consolidated results of operations for the periods indicated:

   Nine months ended
  September 30,   Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010     2009 2010 vs. 2009
Revenues:

Premiums
   $ 4,387    $ 4,496    $ (109 ) (2 )%
Net investment income
   2,403    2,251    152    7 %
Net investment gains (losses)
   (104 ) (945 ) 841    89 %
Insurance and investment product fees and other
   812    806    6    1 %

Total revenues
   7,498    6,608    890    13 %

Benefits and expenses:

Benefits and other changes in policy reserves
   4,157    4,450    (293 ) (7 )%
Interest credited
   636    763    (127 ) (17 )%
Acquisition and operating expenses, net of deferrals
   1,446    1,381    65    5 %
Amortization of deferred acquisition costs and intangibles
   590    602    (12 ) (2 )%
Interest expense
   338    306    32    10 %

Total benefits and expenses
   7,167    7,502    (335 ) (4 )%

Income (loss) before income taxes
   331    (894 ) 1,225    137 %
Benefit for income taxes
   (80 ) (420 ) 340    81 %

Net income (loss)
   411    (474 ) 885    187 %
Less: net income attributable to noncontrolling interests
   108    26    82    NM ⁽¹⁾

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   $ 303    $ (500 ) $ 803    161 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~


	Six months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2011			2010			2011 vs. 2010
Revenues:
Premiums	$	2,892		$	2,940		$	(48	)	(2	)%
Net investment income		1,711			1,588			123		8	%
Net investment gains (losses)		(68	)		(209	)		141		67	%
Insurance and investment product fees and other		688			512			176		34	%

Total revenues		5,223			4,831			392		8	%

Benefits and expenses:
Benefits and other changes in policy reserves		3,081			2,655			426		16	%
Interest credited		405			424			(19	)	(4	)%
Acquisition and operating expenses, net of deferrals		1,014			974			40		4	%
Amortization of deferred acquisition costs and intangibles		382			363			19		5	%
Interest expense		261			224			37		17	%

Total benefits and expenses		5,143			4,640			503		11	%

Income before income taxes		80			191			(111	)	(58	)%
Provision (benefit) for income taxes		24			(98	)		122		124	%

Net income		56			289			(233	)	(81	)%
Less: net income attributable to noncontrolling interests		70			69			1		1	%

Net income (loss) available to Genworth Financial, Inc.’s common stockholders	$	(14	)	$	220		$	(234	)	(106	)%

Premiums

Our Retirement and Protection segment ~~increased $14~~decreased $6 million primarily related to a ~~$57~~$28 million ~~increase~~decrease in our ~~long-term care insurance~~retirement income business ~~partially offset by~~and a ~~$38~~$17 million decrease in our life insurance business, ~~and a $5~~partially offset by an increase of $39 million ~~decrease~~ in our ~~retirement income~~long-term care insurance business.

Our International segment decreased ~~$75~~$31 million as a result of a decrease of ~~$133~~$64 million in our lifestyle protection insurance business, partially offset by ~~a $58~~an increase of $33 million ~~increase~~ in our international mortgage insurance business. The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of ~~$82~~$54 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment decreased ~~$46~~$11 million.

Net investment income

Weighted-average investment yields increased to ~~4.7%~~5.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 from ~~4.3%~~4.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~2010. The increase in weighted-average investment yields was primarily attributable to improved performance of limited partnerships and $20 million of higher bond calls and prepayments in the ~~reinvestment of the high cash balances we were holding during 2009 and lower losses on limited partnerships.~~current year. Net investment income for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~$137~~$21 million of ~~lower losses~~gains related to limited partnerships accounted for under the equity method as compared to $24 million of losses for the ~~prior year. Additionally, there was an increase in net investment income related to the consolidation of certain securitization entities as of January 1,~~six months ended June 30, 2010. ~~These increases were partially offset by a decrease in investment income related to policy loans from a bankruptcy-related lapse in 2009.~~

The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of ~~$34~~$18 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 ~~$168~~$62 million of net other-than-temporary impairments for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 as compared to ~~$945~~$131 million for the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~2010. Of total impairments for the ~~nine~~six months ended ~~September~~June 30, 2011 and 2010, ~~and 2009, $131~~$38 million and ~~$488~~$105 million, respectively, related to structured securities, including ~~$77~~$24 million and ~~$342~~$59 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 ~~$13~~$14 million and ~~$81~~$5 million for the ~~nine~~six months ended ~~September~~June 30, 2011 and 2010, respectively. For the six months ended June 30, 2011 and 2010, we recorded $5 million of impairments related to commercial mortgage loans and $2 million and $10 million, respectively, of impairments related to limited partnership investments. For the six months ended June 30, 2011, we also recorded $3 million of impairments related to real estate held-for-investment. For the six months ended June 30, 2010, ~~and 2009, respectively. We~~we also recorded $6 ~~million and $316~~ million of impairments related to financial hybrid securities primarily from banks in the U.K., Ireland and the Netherlands during the nine months ended September 30, 2010 and 2009, respectively. For the nine months ended September 30, 2010, we recorded $10 million of impairments related to limited partnership investments and $7 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 nine months ended September 30, 2009. We concluded the value of our retained interest was zero and recognized the full impairment in the prior year.securities.

Net investment ~~gains~~losses related to derivatives of ~~$48~~$25 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 were primarily ~~related~~due to ~~$31~~$20 million of ~~gains~~losses from the change in value of derivative instruments used for mitigating the risk of embedded derivative liabilities exceeding the ~~change~~gains in value of the embedded derivative liabilities associated with our variable annuity products with GMWBs ~~which included a reduction in the GMWB valuation as a result~~and $13 million of ~~changes in the non-performance risk incorporated into the discount rate~~losses associated with derivatives used to ~~value GMWB embedded derivatives. The increase also included $22 million of ineffectiveness gains from our cash flow~~ hedge ~~programs related to our long- term care insurance business and $4~~foreign currency risk. These losses were partially offset by $5 million of gains related to ~~embedded derivatives~~a derivative strategy to mitigate the interest rate risk associated with ~~certain reinsurance agreements. These~~our statutory capital position and $3 million of gains in other non-qualified interest rate swaps. Net investment losses related to derivatives of $46 million for the six months ended June 30, 2010 were ~~partially offset by $5~~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 $4$6 million of losses related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. ~~Net investment gains related to derivatives of $12 million for the nine months ended September 30, 2009 were primarily related to~~These losses ~~from a derivative strategy to mitigate the interest rate risk associated with our statutory capital position which~~ were partially offset by $13 million of ineffectiveness gains infrom 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 ~~derivative liabilities~~derivatives associated with ~~our variable annuity products with GMWBs exceeding the change in value of derivative instruments used for mitigating this risk.~~certain reinsurance agreements.

Net losses related to the sale of available-for-sale securities were $11 million during the six months ended June 30, 2011 compared to net gains of $2 million during the six months ended June 30, 2010. We recorded ~~$31~~$23 million of higher gains related to trading securities during the six months ended June 30, 2011 compared to the six months ended June 30, 2010. We recorded $5 million of net gains related to securitization entities during the six months ended June 30, 2011 primarily related to gains on trading securities compared to $36 million of net losses during the six months ended June 30, 2010 primarily associated with derivatives. We also recorded $1 million of gains related to commercial mortgage loans during the six months ended June 30, 2011 attributable to a decrease in the allowance compared to $22 million of losses during the six months ended June 30, 2010 from a lower of cost or market adjustment on loans held-for-sale and an increase in the ~~allowance and $6 million of net losses related to securitization entities primarily associated with derivatives during the nine months ended September 30, 2010.~~allowance. 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 $5 million during the nine months ended September 30, 2010 compared to net losses of $20 million during the nine months ended September 30, 2009.

Insurance and investment product fees and other

Our Retirement and Protection segment increased ~~$129~~$166 million largely driven by an increase of ~~$57 million in our wealth management business, an increase of $33~~$100 million in our life insurance business, an increase of ~~$26~~$54 million in our wealth management business and an increase of $12 million in our retirement income ~~business and an increase of $13 million in our long-term care insurance~~ business.

Our U.S. Mortgage Insurance segment decreased $3 million.

Corporate and Other activities ~~decreased $121~~increased $3 million.

Benefits and other changes in policy reserves

Our Retirement and Protection segment increased ~~$186~~$87 million primarily attributable to a ~~$108~~$96 million increase in our long-term care insurance business and a ~~$67~~$37 million increase in our life insurance business, ~~and an $11~~partially offset by a $46 million ~~increase~~decrease in our retirement income business.

Our International segment decreased ~~$161~~$54 million as a result of a decrease of ~~$105~~$58 million in our lifestyle protection insurance business, ~~and a decrease~~partially offset by an increase of ~~$56~~$4 million in our international mortgage insurance business. The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of ~~$35~~$19 million attributable to changes in foreign exchange rates.

Our U.S. Mortgage Insurance segment ~~decreased $317~~increased $393 million.

Interest credited

Our Retirement and Protection segment decreased ~~$32~~$9 million ~~principally related~~primarily attributable to an $18 million decrease in our retirement income business, partially offset by an $11 million increase in our life insurance business.

Corporate and Other activities decreased ~~$95~~$10 million.

Acquisition and operating expenses, net of deferrals

Our Retirement and Protection segment increased ~~$96~~$65 million primarily attributable to a $46 million increase in our wealth management business, a ~~$35~~$13 million increase in our retirement income business and a $12 million increase in our long-term care insurance business, ~~and~~partially offset by a ~~$15~~$6 million ~~increase~~decrease in our life insurance business.

Our International segment decreased $7$5 million related to a ~~$32~~$12 million decrease in our lifestyle protection insurance business, partially offset by a ~~$25~~$7 million increase in our international mortgage insurance business. The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of $8$15 million attributable to changes in foreign exchange rates.

~~Our U.S. Mortgage Insurance segment decreased $4 million.~~

Corporate and Other activities decreased ~~$20~~$22 million.

Amortization of deferred acquisition costs and intangibles

Our Retirement and Protection segment ~~was flat as an~~increased $20 million primarily attributable to a $34 million increase ~~of $72~~in our retirement income business, partially offset by a $9 million decrease in our life insurance ~~business was offset by a $67 million decrease in our retirement income~~ business and a $5 million decrease in our long-term care insurance business.

Our International segment ~~decreased $7 million primarily~~was flat as a ~~result of a $22~~$7 million decrease in our lifestyle protection insurance business was ~~partially~~ offset by a ~~$15~~$7 million increase in our international mortgage insurance business. The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of $7$6 million attributable to changes in foreign exchange rates.

Interest ~~expense.~~expense ~~Interest expense~~

Our International segment increased ~~primarily~~$8 million related to a ~~$31~~$12 million increase in our international mortgage insurance business, partially offset by a decrease of $4 million in our lifestyle protection insurance business. The three months ended June 30, 2011 included an increase of $1 million attributable to changes in foreign exchange rates.

Corporate and ~~Other activities.~~other activities increased $28 million.

~~Benefit~~Provision (benefit) for income taxes. The effective tax rate ~~decreased~~increased to ~~(24.2)~~30.0% for the six months ended June 30, 2011 from (51.3)% for the ~~nine~~six months ended ~~September~~June 30, ~~2010 from 47.0% for the nine months ended September 30, 2009.~~2010. This ~~decrease~~increase in the effective tax rate was attributable to changes in uncertain tax benefits in the prior year related to our separation from our former parent ~~lower taxed foreign income~~ and higher taxes in the current year as a result of a Canadian legislative change as compared to an Australian tax ~~favored investments.~~legislative benefit in the prior year. The ~~nine~~Canadian legislation change passed in June 2011 will eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase the effective tax rate on our U.S. GAAP earnings as prior deductions for contributions to the fund lowered the effective tax rate on U.S. GAAP earnings. The six months ended ~~September~~June 30, ~~2010~~2011 included an increase of ~~$21~~$7 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 nine~~six months ended ~~September~~June 30, ~~2010~~2011 included an increase of ~~$12~~$4 million attributable to changes in foreign exchange rates.

Net income (loss) available to Genworth Financial, Inc.’s common stockholders. We reported a net ~~income~~loss available to Genworth Financial, Inc.’s common stockholders in the current year compared to a net ~~loss~~income available

to Genworth Financial, Inc.’s common stockholders in the prior year primarily related to a higher loss in our U.S. mortgage insurance business largely related to the reserve strengthening in the current year and additional tax benefits recognized in the prior year. These decreases were partially offset by higher product fee income and improved investment performance in the current ~~year, lower net investment losses and a lower loss in our U.S. mortgage insurance business.~~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 the net ~~income~~loss available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2011 was an increase of ~~$32~~$20 million, net of tax, attributable to changes in foreign exchange rates.

Reconciliation of net income (loss) to net operating income (loss) available to Genworth Financial, Inc.’s common stockholders

The net operating loss available to Genworth Financial, Inc.’s common stockholders for the three months ended June 30, 2011 was $74 million compared to net operating income available to Genworth Financial, Inc.’s common stockholders of $118 million for the three months ended June 30, 2010. Net operating income available to Genworth Financial, Inc.’s common stockholders for the ~~three~~six months ended ~~September~~June 30, 2011 and 2010 ~~and 2009~~ was ~~$29~~$24 million and ~~$81 million, respectively. Net operating income available to Genworth Financial, Inc.’s common stockholders for the nine months ended September 30, 2010 and 2009 was $261 million and $104~~$232 million, respectively. 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. 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.

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. ~~generally accepted accounting principles (“U.S. GAAP”),~~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, including net operating income (loss) 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 (loss) available to

Genworth Financial, Inc.’s common stockholders and net operating income (loss) available to Genworth Financial, Inc.’s common stockholders isper common share on a basic and diluted basis are not ~~a substitute~~substitutes for net income (loss) available to Genworth Financial, Inc.’s common stockholders or net income (loss) 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 (loss) 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 (loss) available to Genworth Financial, Inc.’s common stockholders for the periods indicated:

   Three months ended
September 30,    Nine months ended
September 30,
(Amounts in millions)
       2010         2009            2010         2009
Net income (loss)
   $ 122    $ 45       $ 411    $ (474 )
Less: net income attributable to noncontrolling interests
   39    26    108    26

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   83    19       303    (500 )
Adjustments to net income (loss) available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (54 ) 62       64    604
Net tax benefit related to separation from our former parent
   —      —         (106 ) —

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 29    $ 81       $ 261    $ 104


	Three months ended June 30,					Six months ended June 30,
(Amounts in millions)	2011			2010		2011			2010
Net income (loss)	$	(60	)	$	77	$	56		$	289
Less: net income attributable to noncontrolling interests		36			35		70			69

Net income (loss) available to Genworth Financial, Inc.’s common stockholders		(96	)		42		(14	)		220
Adjustments to net income (loss) available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		22			76		38			118
Net tax benefit related to separation from our former parent		—			—		—			(106	)

Net operating income (loss) available to Genworth Financial, Inc.’s common stockholders	$	(74	)	$	118	$	24		$	232

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 (loss) available to Genworth Financial, Inc.’s common stockholders per common share for the periods indicated:


	Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,					Six months ended June 30,
(Amounts in millions, except per share amounts)	2010		2009		2010		2009			2011			2010		2011			2010
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:
Basic	$	0.17	$	0.04	$	0.62	$	(1.14	)	$	(0.20	)	$	0.09	$	(0.03	)	$	0.45

Diluted⁽¹⁾	$	0.17	$	0.04	$	0.61	$	(1.14	)
Diluted										$	(0.20	)	$	0.08	$	(0.03	)	$	0.45

Net operating income (loss) available to Genworth Financial, Inc.’s common stockholders per common share:
Basic										$	(0.15	)	$	0.24	$	0.05		$	0.47

Diluted										$	(0.15	)	$	0.24	$	0.05		$	0.47

Weighted-average common shares outstanding:
Basic		489.5		448.9		489.1		438.5			490.6			489.1		490.4			489.0

Diluted⁽¹⁾		493.9		451.6		493.9		438.5			490.6			494.2		490.4			493.9

⁽¹⁾

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 available to Genworth Financial, Inc.’s common stockholders for the ~~nine~~three and six months ended ~~September~~June 30, ~~2009,~~2011, we were required to use basic weighted-average common shares outstanding in the calculation offor the ~~2009~~three and six months ended June 30, 2011 diluted loss per share, as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of ~~1.3~~3.7 million and 4.0 million, respectively, would have been antidilutive to the calculation. If we had not incurred a net loss available to Genworth Financial, Inc.’s common stockholders for the ~~nine~~three and six months ended ~~September~~June 30, ~~2009,~~2011, dilutive potential common shares would have been ~~439.8 million.~~494.3 million and 494.4 million, respectively.

Diluted weighted-average shares outstanding ~~for~~in 2010 ~~and for the three months ended September 30, 2009~~ 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 (loss) 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 (loss) 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, claims curtailment 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, 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 ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:


	Three months ended September 30,						Increase (decrease) and percentage change					Three months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	845		$	813		$	32		4	%	$	822		$	822		$	—		—	%
Net investment income		630			576			54		9	%		660			630			30		5	%
Net investment gains (losses)		57			(102	)		159		156	%		(46	)		(69	)		23		33	%
Insurance and investment product fees and other		278			234			44		19	%		348			260			88		34	%

Total revenues		1,810			1,521			289		19	%		1,784			1,643			141		9	%

Benefits and expenses:
Benefits and other changes in policy reserves		990			902			88		10	%		1,004			961			43		4	%
Interest credited		174			186			(12	)	(6	)%		173			176			(3	)	(2	)%
Acquisition and operating expenses, net of deferrals		254			226			28		12	%		274			252			22		9	%
Amortization of deferred acquisition costs and intangibles		159			67			92		137	%		118			104			14		13	%
Interest expense		26			23			3		13	%		26			29			(3	)	(10	)%

Total benefits and expenses		1,603			1,404			199		14	%		1,595			1,522			73		5	%

Income before income taxes		207			117			90		77	%		189			121			68		56	%
Provision for income taxes		72			32			40		125	%		66			40			26		65	%

Net income available to Genworth Financial, Inc.’s common stockholders		135			85			50		59	%		123			81			42		52	%
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		(24	)		49			(73	)	(149	)%		26			33			(7	)	(21	)%

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	111		$	134		$	(23	)	(17	)%	$	149		$	114		$	35		31	%

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 September 30,				Increase (decrease) and percentage change					Three months ended June 30,				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	$	33	$	78	$	(45	)	(58	)%	$	72	$	32	$	40		125	%
Long-term care insurance		44		39		5		13	%		31		47		(16	)	(34	)%
Wealth management		8		8		—		—	%		13		10		3		30	%
Retirement income		26		9		17		189	%		33		25		8		32	%

Total net operating income available to Genworth Financial, Inc.’s common stockholders	$	111	$	134	$	(23	)	(17	)%	$	149	$	114	$	35		31	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

Our life insurance business ~~decreased $45~~increased $40 million ~~primarily driven~~principally from an $11 million gain on the repurchase of notes secured by our non-recourse funding obligations, favorable mortality, higher ~~lapses on~~investment income, improved persistency and growth of our term life insurance policies issued in 1999 and 2000 as they go through their post-level rate period, increased claims as the result of higher mortality in our term life insurance products compared to the prior year and a favorable unlocking related to estimated gross profit assumptions in our universal life insurance ~~products in the prior year that did not recur in the current year. These decreases were partially offset by an increase in net investment income.~~product.

Our long-term care insurance business ~~increased $5~~decreased $16 million ~~as a result of~~mainly attributable to higher ~~investment income as well as growth and continued~~claims in older issued policies, partially offset by the favorable performance of newer issued policies.

Our wealth management business ~~was flat as~~increased $3 million primarily from higher average assets under management from market growth and positive net ~~flows were offset by a tax adjustment in the current year.~~flows.

Our retirement income business increased ~~$17~~$8 million ~~primarily attributable~~largely related to an increase of ~~$18~~$9 million in our fee-based products from favorable market performance in the current year. This increase was partially offset by a $1 million decrease in our spread-based products from higher amortization due to less favorable adjustments related to ~~an increase~~lapses, partially offset by more favorable mortality in ~~net investment income.~~our single premium immediate annuity product.

Revenues

Premiums

Our life insurance business decreased ~~$15~~$10 million primarily ~~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~~as a result of the ~~new product reflected in insurance and investment product fees and other. The decrease was also from higher lapses on~~runoff of our term life insurance ~~policies as they go through their post-level rate period.~~products.

Our long-term care insurance business increased ~~$35~~$22 million mainly attributable to growth of the in-force block from new ~~sales and in-force rate actions.~~sales.

Our retirement income business ~~increased~~decreased $12 million primarily driven by ~~higher~~lower life-contingent sales of our spread-based products.

Net investment income

Our life insurance business increased ~~$11~~$22 million mainly related to ~~limited partnerships accounted for under the equity method.~~higher average invested assets and reinvestment of cash balances. Net investment income in the second quarter of 2011 also included $1higher gains of $4 million ~~of gains related to~~from limited partnerships accounted for under the equity method ~~in the current year as compared to losses of $6~~and $4 million ~~in the prior year.~~from bond calls and prepayments.

Our long-term care insurance business increased ~~$27~~$18 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 included $1 million of gains related to limited partnerships accounted for under the equity method in the current year as compared to losses of $5 million in the prior year.

Our retirement income business ~~increased $16~~decreased $10 million primarily attributable to the benefit from the reinvestment of high cash balances held during 2009 and $8 million of lower losses from limited partnerships accounted for under the equity method. These increases were partially offset by a decline in average invested assets. Net investment income also included $10 million of additional investment income from bond calls and prepayments in the current year.

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 $30~~increased $8 million primarily driven by ~~lower impairments recorded in the current year and lower gains~~higher losses from the sale of investment securities related to portfolio repositioning.

Our long-term care insurance business had net investment losses of $8 million in the current year ~~of $5 million compared to $5 million of net~~mainly from impairments. Net investment gains of $4 million in the prior year were primarily ~~related~~attributable to ~~sales~~gains from the sale of investment securities related to portfolio ~~repositioning.~~repositioning, partially offset by impairments.

~~Our~~Net investment losses in our retirement income business ~~had net~~decreased $43 million largely attributable to a $37 million decrease in losses related to our spread-based products primarily related to higher derivative gains and higher gains from the sale of investment ~~gains~~securities related to portfolio repositioning in the current year ~~of $75 million~~ compared to ~~$63~~prior year. Our fee-based products had $6 million of ~~net investment~~lower losses ~~in the prior year primarily from gains~~on embedded derivatives associated with our variable annuity products with GMWBs ~~as a result of changes in non-performance risk incorporated into the discount rate used to value GMWB embedded derivatives and lower impairments~~ in the current ~~year.~~year, partially offset by lower derivative gains.

Insurance and investment product fees and other

Our life insurance business increased $9$61 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. Partially offsetting this increase was a decrease primarily from a favorable adjustment in our~~and universal life insurance products ~~related to estimated gross profit assumptions~~and also included a gain of $17 million from the repurchase of notes secured by our non-recourse funding obligations in the ~~prior year that did not recur.~~

~~Our long-term care insurance business increased $11 million primarily driven by our equity access business as a result of higher margins on loans.~~current year.

Our wealth management business increased ~~$17~~$25 million primarily attributable to higher average assets under management from the purchase of Altegris in the fourth quarter of 2010, market growth and positive net flows.

Our retirement income business increased $7$4 million mainly ~~due to~~as a result of higher average account values ofin our fee-based products from favorable market ~~growth.~~performance.

Benefits and expenses

Benefits and other changes in policy reserves

Our life insurance business increased ~~$28~~$7 million principally related to ~~increased claims associated with higher mortality~~growth of our term universal life insurance product. This increase was partially offset by improved persistency in our term life insurance products ~~aging of our in-force block and an increase~~ in ~~reserves due to growth in our new term universal life insurance product. The~~the current year ~~also included~~as a ~~$5 million increase in reserves from a policy valuation system input correction related to~~result of smaller blocks entering the post-level rate period and overall lower lapse rates and favorable mortality on our universal and term life insurance ~~products.~~products in the current year as compared to the prior year.

Our long-term care insurance business increased ~~$39~~$62 million primarily as a result of ~~higher claims and increased reserves from~~ the aging and growth of our long-term care insurance in-force block and ~~lower terminations in the current year.~~higher claims on older issued policies.

Our retirement income business ~~increased $21~~decreased $26 million largely attributable to a decrease of $22 million from our life-contingent spread-based products ~~related to higher life-contingent~~as a result of a decline in sales in the current year and ~~higher amortization of sales inducements as a result of net investment losses~~more favorable mortality in the current year compared to prior year. Our fee-based products decreased $4 million driven by a decline in our guaranteed minimum death benefit claims.

Interest credited

Our life insurance business increased $8 million from the timing of reinsurance activity in the current year.

~~Interest credited.~~ ~~Interest credited decreased $12 million primarily related to our~~Our retirement income business decreased $10 million 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.~~period in a low interest rate environment.

Acquisition and operating expenses, net of deferrals

Our life insurance business increased $3$2 million primarily related to higher expenses from growth of our term universal life insurance ~~products.~~

Our long-term care insurance business increased $14 million largely driven by our equity access business as a result of increased broker commissions on loans and from growth of our long-term care insurance in-force block.product.

Our wealth management business increased ~~$15~~$20 million primarily from increased asset-based expenses ~~as assets under management increased~~ from the acquisition of Altegris in the fourth quarter of 2010, market growth and positive net flows.

~~Our retirement income business decreased $4 million as the prior year included non-recoverable acquisition expenses.~~

Amortization of deferred acquisition costs and intangibles

Our life insurance business ~~increased $48 million. The prior year included an adjustment~~decreased $2 million primarily attributable to ~~estimated gross profits of $20 million and~~ lower amortization of ~~$20 million from a~~deferred acquisition costs related to our term life insurance products in the post-level rate period, partially offset by an increase in amortization of deferred acquisition costs driven by favorable ~~unlocking~~mortality in our universal life insurance products that did not recur in the current year. The current year also increased primarily attributable to increased amortization on our universal life insurance products primarily from favorable mortality in the current year compared to the prior year. In addition, amortization increased due to higher lapses in our term life insurance policies as they go through their post-level rate period and from growth in our term universal life insurance product.products.

Our long-term care insurance business ~~increased $7 million from~~was flat as growth of our long-term care insurance in-force block ~~partially~~was offset by ~~lower terminations~~a decrease in amortization due to 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.

Our retirement income business increased ~~$37~~$16 million primarily related to an increase of ~~$25~~$20 million in our ~~fee-based~~spread-based products ~~largely~~principally from less favorable adjustments related to lapses and higher amortization of deferred acquisition costs attributable to increased amortization as a result of higher gains in the current year related to embedded derivatives associated with our variable annuity products with GMWBs and an unfavorable refinement of assumptions of $9 million in the current year. Our spread-based products increased $12 million mainly from increased amortization attributable to net investment gains in the current year compared tolower net investment losses in the ~~prior~~current year. ~~The~~This increase was partially offset by a decrease in the account values of these products. Our fee-based products decreased $4 million mainly from favorable equity market performance in the current year, partially offset by an increase in amortization of deferred acquisition costs from lower derivative losses.

Interest expense. Interest expense decreased $3 million related to our life insurance business from the write-off of capitalized costs associated with our non-recourse funding obligations in the prior year, ~~also included an unfavorable unlocking primarily related to spread assumptions that did not recur.~~partially offset by higher letter of credit fees in the current year.

Provision for income taxes.The effective tax rate increased to ~~34.8%~~34.9% for the three months ended ~~September~~June 30, ~~2010~~2011 from ~~27.4%~~33.1% for the three months ended ~~September~~June 30, ~~2009.~~2010. The increase in the effective tax rate was primarily attributable to ~~a change~~tax favored investment benefits in ~~uncertain tax positions~~relation to higher pre-tax earnings in the current year compared to the prior year.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to our Retirement and Protection segment for the periods indicated:

   Nine months ended
September 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 2,491    $ 2,477    $ 14    1 %
Net investment income
   1,854    1,659    195    12 %
Net investment gains (losses)
   (79 ) (672 ) 593    88 %
Insurance and investment product fees and other
   780    651    129    20 %

Total revenues
   5,046    4,115    931    23 %

Benefits and expenses:

Benefits and other changes in policy reserves
   2,896    2,710    186    7 %
Interest credited
   524    556    (32 ) (6 )%
Acquisition and operating expenses, net of deferrals
   736    640    96    15 %
Amortization of deferred acquisition costs and intangibles
   368    368    —      —   %
Interest expense
   77    73    4    5 %

Total benefits and expenses
   4,601    4,347    254    6 %

Income (loss) before income taxes
   445    (232 ) 677    NM ⁽¹⁾
Provision (benefit) for income taxes
   145    (100 ) 245    NM ⁽¹⁾

Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   300    (132 ) 432    NM ⁽¹⁾
Adjustment to net income (loss) available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   47    427    (380 ) (89 )%

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 347    $ 295    $ 52    18 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~


	Six months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2011			2010			2011 vs. 2010
Revenues:
Premiums	$	1,640		$	1,646		$	(6	)	—	%
Net investment income		1,288			1,224			64		5	%
Net investment gains (losses)		(74	)		(136	)		62		46	%
Insurance and investment product fees and other		668			502			166		33	%

Total revenues		3,522			3,236			286		9	%

Benefits and expenses:
Benefits and other changes in policy reserves		1,993			1,906			87		5	%
Interest credited		341			350			(9	)	(3	)%
Acquisition and operating expenses, net of deferrals		547			482			65		13	%
Amortization of deferred acquisition costs and intangibles		229			209			20		10	%
Interest expense		52			51			1		2	%

Total benefits and expenses		3,162			2,998			164		5	%

Income before income taxes		360			238			122		51	%
Provision for income taxes		125			73			52		71	%

Net income available to Genworth Financial, Inc.’s common stockholders		235			165			70		42	%
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		41			71			(30	)	(42	)%

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	276		$	236		$	40		17	%

The following table sets forth net operating income for the businesses included in our Retirement and Protection segment for the periods indicated:

   Nine months ended
September 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
   $ 102       $ 174    $ (72 ) (41 )%
Long-term care insurance
   131       122    9    7 %
Wealth management
   29       21    8    38 %
Retirement income
   85       (22 ) 107    NM ⁽¹⁾

Total net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 347       $ 295    $ 52    18 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~


	Six months ended June 30,				Increase (decrease) and percentage change
(Amounts in millions)	2011		2010		2011 vs. 2010
Net operating income available to Genworth Financial, Inc.’s common stockholders:
Life insurance	$	124	$	69	$	55		80	%
Long-term care insurance		71		87		(16	)	(18	)%
Wealth management		23		21		2		10	%
Retirement income		58		59		(1	)	(2	)%

Total net operating income available to Genworth Financial, Inc.’s common stockholders	$	276	$	236	$	40		17	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

Our life insurance business ~~decreased $72~~increased $55 million ~~primarily~~from growth of our term universal life insurance product, an $11 million gain on the repurchase of notes secured by our non-recourse funding obligations, an $8 million favorable cumulative impact from a recent change in premium taxes in Virginia and higher investment income. These increases were partially offset by the runoff of our term life insurance ~~products attributable to an increase in claims as a result of higher mortality compared to the~~products. The prior year ~~higher lapses on our term life insurance policies issued in 1999 and 2000 as they go through their post-level rate period~~also included an unfavorable reinsurance adjustment of $5 million and a favorable ~~unlocking related to estimated gross profit assumptions in our universal life insurance products in the prior year~~tax settlement that did not recur. ~~These decreases were partially offset by higher net investment income in the current year.~~

Our long-term care insurance business ~~increased $9~~decreased $16 million ~~from growth and continued~~as higher claims in older issued policies were partially offset by the favorable performance of newer issued ~~policies and higher investment income in the current year, partially offset by lower terminations.~~policies.

Our wealth management business increased $8$2 million ~~from~~as a result of higher average assets under management from market growth and positive net ~~flows.~~flows which were partially offset by a $2 million favorable tax adjustment in the prior year that did not recur.

Our retirement income business was relatively flat. Our fee-based products increased ~~$107 million.~~$3 million mainly attributable to favorable market performance, partially offset by 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. Our spread-based products ~~increased $79~~decreased $4 million primarily from an increase in amortization due to less favorable adjustments related to lapses and a decrease in net investment ~~income. Our fee-based products increased $28 million mainly attributable to market growth.~~income, partially offset by more favorable mortality in our single premium immediate annuity product.

Revenues

Premiums

Our life insurance business decreased ~~$38~~$17 million ~~mainly attributable to~~primarily 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 of the new product reflected in insurance and investment product fees and other. The decrease was also a result of higher lapses on our term life insurance policies as they go through their post-level rate period andpartially offset by an unfavorable reinsurance adjustment of $8 million in the ~~current year.~~prior year that did not recur.

Our long-term care insurance business increased ~~$57~~$39 million mainly attributable to growth ofin the in-force block from new ~~sales and in-force rate actions.~~sales.

Our retirement income business decreased $5$28 million primarily driven by lower life-contingent sales of our spread-based products.

Net investment income

Our life insurance business increased ~~$25~~$46 million mainly related to ~~$31~~higher average invested assets and reinvestment of cash balances. Net investment income for the six months ended June 30, 2011 also included gains of $9 million ~~of lower losses in the current year related to~~from limited partnerships accounted for under the equity ~~method. This increase was partially offset by a decline~~method compared to losses of $2 million in ~~average invested assets related to our term life insurance products.~~the prior year and $6 million of additional investment income from bond calls and prepayments in the current year.

Our long-term care insurance business increased ~~$91~~$37 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~~These increases were partially offset by an unfavorable adjustment of $6 million related to the accounting for interest rate swaps in the current ~~year~~year.

Our retirement income business decreased $19 million primarily attributable to a decline in average invested assets. Net investment income for the six months ended June 30, 2011 also included ~~$23~~$14 million of ~~lower losses related to~~additional income from bond calls and prepayments and higher gains of $5 million from limited partnerships accounted for under the equity ~~method.~~method compared to prior year.

Our retirement income business increased $79 million primarily attributable to $86 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 held during 2009. These increases were partially offset by lower average invested assets.

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 ~~$199~~$18 million primarily driven by lower impairments ~~recorded~~ in the current ~~year and lower losses from the sale of investment securities related to portfolio repositioning.~~year.

Our long-term care insurance business had net investment ~~gains~~losses of $1$16 million in the current year mainly from impairments compared to net investment gains of $6 million in the prior year primarily from derivative gains and gains from the sale of investment securities related to portfolio repositioning, compared to $238 million of net investment losses in the prior year primarily attributable to impairments and derivative losses related to our strategy to mitigate interest rate risk associated with our statutory capital position.partially offset by impairments.

Net investment losses in our retirement income business decreased ~~$154~~$66 million largely attributable to a $52 million decrease in our spread-based products primarily related to ~~lower impairments recorded~~derivative gains in the current year compared to losses in the prior year and higher gains from the sale of investment securities related to portfolio repositioning in the current year. Our fee-based products had $14 million in lower losses primarily related to gains on embedded derivatives associated with our variable annuity products with GMWBs ~~as a result of changes~~ in ~~non-performance risk incorporated into~~ the ~~discount rate used~~current year compared to ~~value GMWB embedded derivatives.~~losses in the prior year.

Insurance and investment product fees and other

Our life insurance business increased ~~$33~~$100 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. The prior year also included a favorable adjustment related to estimated gross profit assumptions in ourand universal life insurance products ~~that did not recur.~~

~~Our long-term care business increased $13~~and also included a gain of $17 million ~~primarily driven~~from the repurchase of notes secured by our ~~equity access business as a result of higher margins on loans.~~non-recourse funding obligations in the current year.

Our wealth management business increased ~~$57~~$54 million primarily attributable to higher average assets under management from the purchase of Altegris in the fourth quarter of 2010, market growth and positive net flows.

Our retirement income business increased ~~$26~~$12 million mainly ~~due to~~as a result of higher average account values ofin our fee-based products from favorable market ~~growth.~~performance.

Benefits and expenses

Benefits and other changes in policy reserves

Our life insurance business increased ~~$67~~$37 million principally related to ~~increased claims associated with higher mortality in our term life insurance products compared to the prior year, aging~~growth of ~~our in-force block and an increase in reserves due to growth in~~ our term universal life insurance ~~product. The current year also included a $5 million increase in reserves from a policy valuation system input correction related to~~product, partially offset by the runoff of our term life insurance products.

Our long-term care insurance business increased ~~$108~~$96 million primarily as a result of the aging and growth of ~~the~~our long-term care insurance in-force block and ~~lower terminations~~higher claims on older issued policies.

Our retirement income business decreased $46 million largely attributable to a decrease of $39 million from our life-contingent spread-based products as a result of a decline in sales in the current year and more favorable mortality in the current year compared to prior year. Our fee-based products decreased $7 million driven by a decline in our guaranteed minimum death benefit claims.

Interest credited

Our life insurance business increased $11 million from the timing of reinsurance activity in the current year.

Our retirement income business ~~increased $11~~decreased $18 million primarily attributable to our spread-based products related to higher amortization of sales inducements as a result of lower net investment losses in the current year, partially offset by lower life-contingent sales in the current year. Our fee-based products increased related to our guaranteed minimum benefit liabilities driven by less favorable market performance in the current year, partially offset by a decrease in guaranteed minimum death benefit claims.

~~Interest credited~~~~. Interest credited decreased $32 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.~~period in a low interest rate environment.

Acquisition and operating expenses, net of deferrals

Our life insurance business ~~increased $15~~decreased $6 million primarily related to a $13 million favorable cumulative impact from a recent change in premium taxes in Virginia in the first quarter of 2011, partially offset by higher expenses from growth of our term universal life insurance ~~products.~~product.

Our long-term care insurance business increased ~~$35~~$12 million largely ~~driven by our equity access business as a result of increases in broker commissions on loans and from~~attributable to growth of our long-term care insurance in-force block.

Our wealth management business increased $46 million primarily from increased asset-based expenses ~~as assets under management increased~~ from ~~favorable~~the acquisition of Altegris in the fourth quarter of 2010, market ~~impacts~~growth and positive net flows.

Our retirement income business ~~was flat as higher costs associated with~~increased $13 million largely driven by a $9 million charge in the ~~sale~~first quarter of 2011 from the discontinuance of our ~~fee-based products were offset by lower sales~~variable annuity offerings announced in 2011 and an increase of ~~our spread-based products and higher non-recoverable acquisition expenses~~$4 million from an accrual related to guarantee funds in the ~~prior~~current year.

Amortization of deferred acquisition costs and intangibles

Our life insurance business ~~increased $72~~decreased $9 million primarily attributable to ~~a prior year adjustment to estimated gross profits of $33 million and~~ lower amortization of ~~$20 million from~~deferred acquisition costs related to our term life insurance policies in the post-level rate period and a ~~favorable unlocking~~decrease in amortization of present value of future profits driven by higher mortality in our universal life insurance ~~products that did not recur~~products. These decreases were partially offset by an increase in ~~the current year. Also contributing~~amortization of deferred acquisition costs due to ~~the increase was higher amortization from~~ growth ~~related to~~of our universal life insurance ~~and term universal life insurance products and higher lapses in our term life insurance policies as they go through their post-level rate period.~~products.

Our long-term care insurance business decreased $5 million primarily from ~~lower terminations~~a decrease in amortization due to 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 that was partially offset by growth of our long-term care insurance in-force block.

Our retirement income business ~~decreased $67~~increased $34 million primarily related to ~~a decrease~~an increase of ~~$82~~$25 million in our spread-based products mainly from less favorable adjustments related to our fee-based products. The prior year included additional amortization of deferred acquisition costs of $54 million from loss recognition testing that did not recur. Additionally, amortization decreased as a result of lower gains in the current year related to embedded derivatives associated with our variable annuity products with GMWBs. This decrease was partially offset by an unfavorable refinement of assumptions of $9 million in the current year. Our spread-based products also increased $15 million mainly fromlapses and higher amortization of deferred acquisition costs attributable to lower net investment losses in the current year. This increase was partially offset by a decrease in the account values of these products. Our fee-based products increased $9 million principally from a $12 million favorable adjustment recorded in the prior year that did not recur and an increase in amortization of deferred acquisition costs from lower derivative losses in the current year, partially offset by ~~a $9 million of~~ favorable ~~unlocking primarily related to lower lapse trends~~equity market performance in the current ~~year as compared to an unfavorable unlocking primarily related to spread assumptions in the prior~~ year.

Provision ~~(benefit)~~ for income ~~taxes~~taxes.. The effective tax rate ~~decreased~~increased to ~~32.6%~~34.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 from ~~43.1%~~30.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~2010. The ~~decrease~~increase in the effective tax rate was primarily attributable to ~~the proportion of~~ tax favored investment benefits in relation to higher pre-tax ~~results~~earnings in the current year compared to the prior ~~year and a change in uncertain tax positions in the prior~~ year.

Retirement and Protection selected financial and operating performance measures

Life insurance

The following tables set forth selected operating performance measures regarding our life insurance business as of or for the dates indicated:


	Three months ended September 30,				Increase (decrease) and percentage change					Nine months ended September 30,				Increase (decrease) and percentage change					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					2011		2010		2011 vs. 2010					2011		2010		2011 vs. 2010
Term life insurance
Net earned premiums	$	221	$	236	$	(15	)	(6	)%	$	673	$	711	$	(38	)	(5	)%	$	218	$	228	$	(10	)	(4	)%	$	437	$	452	$	(15	)	(3	)%
Annualized first-year premiums		1		19		(18	)	(95	)%		19		56		(37	)	(66	)%		—		4		(4	)	(100	)%		—		18		(18	)	(100	)%
Term universal life insurance
Net deposits	$	21	$	—	$	21		NM	⁽¹⁾	$	40	$	—	$	40		NM	⁽¹⁾	$	45	$	14	$	31		NM	⁽¹⁾	$	80	$	19	$	61		NM	⁽¹⁾
Term universal life annualized first-year deposits		31		—		31		NM	⁽¹⁾		65		—		65		NM	⁽¹⁾
Annualized first-year deposits																				36		24		12		50	%		67		34		33		97	%
Universal and whole life insurance
Net earned premiums and deposits	$	120	$	111	$	9		8	%	$	359	$	351	$	8		2	%	$	156	$	121	$	35		29	%	$	318	$	239	$	79		33	%
Universal life annualized first-year deposits		10		8		2		25	%		27		25		2		8	%		9		10		(1	)	(10	)%		20		17		3		18	%
Universal life excess deposits		26		23		3		13	%		73		74		(1	)	(1	)%		35		28		7		25	%		71		48		23		48	%
Linked-benefits⁽²⁾																				25		—		25		NM	⁽¹⁾		48		—		48		NM	⁽¹⁾
Total life insurance
Net earned premiums and deposits	$	362	$	347	$	15		4	%	$	1,072	$	1,062	$	10		1	%	$	419	$	363	$	56		15	%	$	835	$	710	$	125		18	%
Annualized first-year premiums		1		19		(18	)	(95	)%		19		56		(37	)	(66	)%		—		4		(4	)	(100	)%		—		18		(18	)	(100	)%
Annualized first-year deposits		41		8		33		NM	⁽¹⁾		92		25		67		NM	⁽¹⁾		45		34		11		32	%		87		51		36		71	%
Excess deposits		26		23		3		13	%		73		74		(1	)	(1	)%
Universal life excess deposits																				35		28		7		25	%		71		48		23		48	%
Linked-benefits⁽²⁾																				25		—		25		NM	⁽¹⁾		48		—		48		NM	⁽¹⁾

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

⁽²⁾

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 material and the prior period amounts were not re-presented.


	As of September 30,				Percentage change			As of June 30,				Percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009			2011		2010		2011 vs. 2010
Term life insurance
Life insurance in-force, net of reinsurance	$	465,275	$	474,721		(2	)%	$	447,336	$	468,098		(4	)%
Life insurance in-force before reinsurance		603,606		621,808		(3	)%		580,113		612,284		(5	)%
Term universal life insurance
Life insurance in-force, net of reinsurance	$	31,761	$	—		NM	⁽¹⁾	$	73,569	$	17,754		NM	⁽¹⁾
Life insurance in-force before reinsurance		31,935		—		NM	⁽¹⁾		74,107		17,820		NM	⁽¹⁾
Universal and whole life insurance
Life insurance in-force, net of reinsurance	$	43,797	$	43,875		—	%	$	44,207	$	43,743		1	%
Life insurance in-force before reinsurance		50,632		50,952		(1	)%		50,884		50,617		1	%
Total life insurance
Life insurance in-force, net of reinsurance	$	540,833	$	518,596		4	%	$	565,112	$	529,595		7	%
Life insurance in-force before reinsurance		686,173		672,760		2	%		705,104		680,721		4	%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

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~~products. For the six months ended June 30 2011, the decrease was partially offset by an unfavorable reinsurance adjustment of $8 million in the prior year that ~~is designed~~did not recur. The in-force block also decreased due to ~~replace new sales of our existing term life insurance products, lower renewals and higher lapses on policies as they go through their post-level rate period.~~runoff.

Term universal life insurance

~~In late 2009, we introduced a new term universal life insurance product that is designed~~Net deposits increased due to ~~replace new sales of our existing term life insurance products. The increase is primarily related to the continued~~ growth of ~~our~~this product since its introduction in late 2009. The in-force ~~block.~~block has increased primarily driven by strong production and product adoption.

Universal and whole life insurance

Net earned premiums and deposits increased due primarily to the growth of our 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 whole life insurance.

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 September 30,				Increase (decrease) and percentage change				Nine months ended September 30,				Increase (decrease) and percentage change				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				2011		2010		2011 vs. 2010				2011		2010		2011 vs. 2010
Net earned premiums:
Long-term care	$	494	$	469	$	25	5	%	$	1,453	$	1,422	$	31	2	%	$	495	$	480	$	15	3	%	$	987	$	959	$	28	3	%
Medicare supplement and other		83		73		10	14	%		241		215		26	12	%		85		78		7	9	%		169		158		11	7	%

Total	$	577	$	542	$	35	6	%	$	1,694	$	1,637	$	57	3	%	$	580	$	558	$	22	4	%	$	1,156	$	1,117	$	39	3	%

Annualized first-year premiums and deposits	$	69	$	53	$	16	30	%	$	196	$	144	$	52	36	%	$	69	$	60	$	9	15	%	$	134	$	127	$	7	6	%

Net earned premiums increased mainly attributable to growth ofin our in-force block from new ~~sales and in-force rate actions.~~ sales.

The increase in annualized first-year premiums and deposits was primarily attributable to growth ofin our individual ~~and group~~ long-term care insurance ~~and~~products, partially offset by a change in reporting related to 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 life insurance and spread-based retirement income businesses, respectively. The linked-benefits products were previously reported in our long-term care insurance business.

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 September 30, As of or for the nine
months ended September 30,
(Amounts in millions)
       2010         2009         2010         2009
Assets under management, beginning of period
   $ 19,548    $ 15,909    $ 18,865    $ 15,447
Gross flows
   1,354    1,372    4,191    3,281
Redemptions
   (893 ) (904 ) (2,790 ) (3,131 )

Net flows
   461    468    1,401    150
Market performance
   1,151    1,615    894    2,395

Assets under management, end of period
   $ 21,160    $ 17,992    $ 21,160    $ 17,992


	As of or for the three months ended June 30,						As of or for the six months ended June 30,
(Amounts in millions)	2011			2010			2011			2010
Assets under management, beginning of period	$	25,551		$	20,037		$	24,740		$	18,865
Gross flows		1,807			1,362			3,865			2,837
Redemptions		(1,143	)		(926	)		(2,846	)		(1,897	)

Net flows		664			436			1,019			940
Market performance		(285	)		(925	)		171			(257	)

Assets under management, end of period	$	25,930		$	19,548		$	25,930		$	19,548

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 market growth, ~~and~~ positive net ~~flows.~~flows and the acquisition of Altegris on December 31, 2010.

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 September 30,						As of or for the nine months ended September 30,						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			2011			2010				2011			2010
Income Distribution Series ⁽¹⁾
Account value, net of reinsurance, beginning of period	$	5,964		$	5,286		$	5,943		$	5,234
Account value, beginning of period													$	6,687		$	6,135			$	6,590		$	5,943
Deposits		131			190			445			448			33			141				150			314
Surrenders, benefits and product charges		(131	)		(109	)		(408	)		(324	)		(171	)		(150	)			(356	)		(277	)

Net flows		—			81			37			124			(138	)		(9	)			(206	)		37
Interest credited and investment performance		370			435			354			444			57			(162	)			222			(16	)

Account value, net of reinsurance, end of period	$	6,334		$	5,802		$	6,334		$	5,802
Account value, end of period													$	6,606		$	5,964			$	6,606		$	5,964

Traditional variable annuities
Account value, net of reinsurance, beginning of period	$	1,879		$	1,796		$	2,016		$	1,756		$	2,096		$	2,048			$	2,078		$	2,016
Deposits		20			25			72			60			3			25				20			52
Surrenders, benefits and product charges		(68	)		(48	)		(203	)		(171	)		(100	)		(70	)			(188	)		(135	)

Net flows		(48	)		(23	)		(131	)		(111	)		(97	)		(45	)	��		(168	)		(83	)
Interest credited and investment performance		162			200			108			328			13			(124	)			102			(54	)

Account value, net of reinsurance, end of period	$	1,993		$	1,973		$	1,993		$	1,973		$	2,012		$	1,879			$	2,012		$	1,879

Variable life insurance
Account value, beginning of period	$	279		$	271		$	298		$	266		$	319		$	303			$	313		$	298
Deposits		3			3			9			10			3			3				6			6
Surrenders, benefits and product charges		(10	)		(12	)		(28	)		(32	)		(11	)		(8	)			(22	)		(18	)

Net flows		(7	)		(9	)		(19	)		(22	)		(8	)		(5	)			(16	)		(12	)
Interest credited and investment performance		25			30			18			48			3			(19	)			17			(7	)

Account value, end of period	$	297		$	292		$	297		$	292		$	314		$	279			$	314		$	279

⁽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~~market 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 ~~market growth.~~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 as a result of market 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 September 30,						As of or for the nine months ended September 30,						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			2011			2010			2011			2010
Fixed annuities
Account value, beginning of period													$	10,660		$	11,234		$	10,819		$	11,409
Deposits														275			92			395			133
Surrenders, benefits and product charges														(441	)		(304	)		(809	)		(616	)

Net flows														(166	)		(212	)		(414	)		(483	)
Interest credited														88			95			177			191

Account value, end of period													$	10,582		$	11,117		$	10,582		$	11,117

Single premium immediate annuities
Account value, beginning of period													$	6,411		$	6,593		$	6,528		$	6,675
Premiums and deposits														85			100			170			195
Surrenders, benefits and product charges														(253	)		(251	)		(509	)		(516	)

Net flows														(168	)		(151	)		(339	)		(321	)
Interest credited														82			87			165			175
Effect of accumulated net unrealized investment gains (losses)														59			—			30			—

Account value, end of period													$	6,384		$	6,529		$	6,384		$	6,529

Structured settlements
Account value, net of reinsurance, beginning of period	$	11,117		$	11,770		$	11,409		$	11,996		$	1,113		$	1,115		$	1,113		$	1,115
Deposits		136			69			269			540
Surrenders, benefits and product charges		(376	)		(353	)		(992	)		(1,255	)		(14	)		(15	)		(29	)		(29	)

Net flows		(240	)		(284	)		(723	)		(715	)		(14	)		(15	)		(29	)		(29	)
Interest credited		95			102			286			307			14			15			29			29

Account value, net of reinsurance, end of period	$	10,972		$	11,588		$	10,972		$	11,588		$	1,113		$	1,115		$	1,113		$	1,115

Single premium immediate annuities
Account value, net of reinsurance, beginning of period	$	6,529		$	6,827		$	6,675		$	6,957
Premiums and deposits		116			91			311			303
Surrenders, benefits and product charges		(251	)		(255	)		(767	)		(780	)
Total premiums from spread-based products													$	20		$	32		$	40		$	68

Net flows		(135	)		(164	)		(456	)		(477	)
Interest credited		85			90			260			273
Effect of accumulated net unrealized investment gains (losses)		304			—			304			—
Total deposits on spread-based products													$	340		$	160		$	525		$	260

Account value, net of reinsurance, end of period	$	6,783		$	6,753		$	6,783		$	6,753

Structured settlements
Account value, net of reinsurance, beginning of period	$	1,115		$	1,117		$	1,115		$	1,106
Premiums and deposits		—			—			—			10
Surrenders, benefits and product charges		(16	)		(15	)		(45	)		(43	)

Net flows		(16	)		(15	)		(45	)		(33	)
Interest credited		15			14			44			43

Account value, net of reinsurance, end of period	$	1,114		$	1,116		$	1,114		$	1,116

Total premiums from spread-based retail products	$	42		$	30		$	110		$	115

Total deposits on spread-based retail products	$	210		$	130		$	470		$	738

Fixed annuities

Account value of our fixed annuities decreased as surrenders exceeded deposits. Sales ~~have slowed significantly given market conditions and changes~~increased in the ~~product management strategy.~~current year driven by reduced commission offerings but remain at lower levels given the low interest rate environment and other market conditions.

Single premium immediate annuities

Account value of our single premium immediate annuities decreased as ~~surrenders~~payouts 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.

~~Valuation systems and processes~~

Over the next 12 to 24 months, our Retirement and Protection segment will migrate to a new valuation and projection platform. This migration is part of our ongoing efforts to improve the infrastructure and capabilities of our information systems and our routine assessment and refinement of financial, actuarial, investment and risk

management capabilities enterprise wide. This migration will also provide our Retirement and Protection segment with a platform to support emerging accounting guidance and ongoing changes in capital regulations. Concurrently, valuation processes and methodologies will be reviewed. Any material changes in balances or income trends that may result from these activities will be disclosed accordingly.

International segment

Segment results of operations

Three Months Ended ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to our International segment for the periods indicated:


	Three months ended September 30,						Increase (decrease) and percentage change					Three months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	453		$	523		$	(70	)	(13	)%	$	491		$	495		$	(4	)	(1	)%
Net investment income		121			124			(3	)	(2	)%		152			127			25		20	%
Net investment gains (losses)		8			4			4		100	%		6			1			5		NM	⁽¹⁾
Insurance and investment product fees and other		12			12			—		—	%		9			(1	)		10		NM	⁽¹⁾

Total revenues		594			663			(69	)	(10	)%		658			622			36		6	%

Benefits and expenses:
Benefits and other changes in policy reserves		120			200			(80	)	(40	)%		142			163			(21	)	(13	)%
Acquisition and operating expenses, net of deferrals		192			215			(23	)	(11	)%		205			205			—		—	%
Amortization of deferred acquisition costs and intangibles		59			65			(6	)	(9	)%		72			67			5		7	%
Interest expense		11			15			(4	)	(27	)%		22			10			12		120	%

Total benefits and expenses		382			495			(113	)	(23	)%		441			445			(4	)	(1	)%

Income before income taxes		212			168			44		26	%		217			177			40		23	%
Provision for income taxes		49			45			4		9	%		71			35			36		103	%

Net income		163			123			40		33	%		146			142			4		3	%
Less: net income attributable to noncontrolling interests		39			26			13		50	%		36			35			1		3	%

Net income available to Genworth Financial, Inc.’s common stockholders		124			97			27		28	%		110			107			3		3	%
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		(3	)		(1	)		(2	)	(200	)%		(3	)		(2	)		(1	)	(50	)%

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	121		$	96		$	25		26	%	$	107		$	105		$	2		2	%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

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
September 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
   $ 93       $ 78       $ 15       19 %
Lifestyle protection insurance
   28       18       10       56 %

Total net operating income available to Genworth Financial, Inc.’s common stockholders:
   $ 121       $ 96       $ 25       26 %


	Three months ended June 30,				Increase (decrease) and percentage change
(Amounts in millions)	2011		2010		2011 vs. 2010
Net operating income available to Genworth Financial, Inc.’s common stockholders:
International mortgage insurance	$	82	$	93	$	(11	)	(12	)%
Lifestyle protection insurance		25		12		13		108	%

Total net operating income available to Genworth Financial, Inc.’s common stockholders	$	107	$	105	$	2		2	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

The three months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of $5$11 million and ~~a decrease of $4~~$3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~Net operating income for our~~Our international mortgage insurance business ~~increased primarily related to~~decreased from higher taxes and interest expense, partially offset by lower overall losses ~~in Canada, Australia~~ and ~~Europe.~~higher investment income.

~~Net operating income for our~~Our lifestyle protection insurance business increased ~~primarily~~ attributable to ~~a tax benefit in the current year and a decrease in~~lower new claim registrations ~~resulting~~ from ~~stabilization~~improving economic conditions and a favorable impact from our re-pricing actions taken in 2010, partially offset by reduced levels of ~~economic conditions.~~consumer lending.

Revenues

Premiums

Our international mortgage insurance business ~~decreased $1~~increased $17 million and our lifestyle protection insurance business decreased ~~$69~~$21 million.

The three months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of ~~$11~~$24 million and ~~a decrease of $22~~$20 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~The~~Excluding the effects of foreign exchange, the decrease in our international mortgage insurance business was primarily related to lower premiums in Canada and Australia attributable to seasoning of our in-force blocks of business. In addition, in Australia, lower ceded affiliated reinsurance was largely offset by a decrease in premiums from ~~an increase~~a lower rate of policy cancellations in ~~ceded reinsurance~~the current year. In Europe, premiums ~~and~~decreased as a result of lender settlements in ~~Europe from rescissions and other terminations related to loss mitigation activities particularly in Spain.~~the prior year.

The decrease in our lifestyle protection insurance business was primarily attributable to our runoff block of business and a decrease in ~~overall~~ premium ~~volumes~~volume driven by ~~slower lending in Europe and our runoff business.~~reduced levels of consumer lending. These decreases were partially offset by re-pricing actions taken during 2010.

Net investment income

Our international mortgage insurance business increased $7$10 million and our lifestyle protection insurance business increased $15 million.

The three months ended June 30, 2011 included increases of $9 million and $4 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 as higher average invested assets were offset by lower investment yields.

The increase in our lifestyle protection insurance business was principally attributable to reinsurance arrangements accounted for under the deposit method as certain of these arrangements were in a higher gain position in the current year.

Insurance and investment product fees and other

Our international mortgage insurance business increased $6 million and our lifestyle protection insurance business increased $4 million.

The increase in our international mortgage insurance business was mainly attributable to currency transactions related to a foreign branch in the current year.

The increase in our lifestyle protection insurance business was mainly attributable to non-functional currency transactions attributable to changes in foreign exchange rates.

Benefits and expenses

Benefits and other changes in policy reserves

Our international mortgage insurance business increased $1 million and our lifestyle protection insurance business decreased ~~$10~~$22 million.

The three months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of $5$10 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 primarily driven by lower losses in Europe related to lender settlements in the prior year and ongoing loss mitigation activities. In Australia, losses increased primarily as a result of higher new delinquencies from the seasoning of our in-force block of business and a higher average reserve per delinquency reflecting the economic impact of recent flooding, partially offset by lower paid claims. Losses in Canada were relatively flat as lower severity from overall economic improvement in the current year was offset by new delinquencies in Alberta which have a higher average reserve per delinquency.

The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations.

Acquisition and operating expenses, net of $3deferrals

Our international mortgage insurance business increased $6 million and our lifestyle protection insurance business decreased $6 million.

The three months ended June 30, 2011 included increases of $4 million and $13 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 reinvestment of cash balances in Canada and Australia.~~driven by lower net deferred acquisition costs which were partially offset by lower overall expenses.

The decrease in our lifestyle protection insurance business was ~~principally attributable to reinsurance arrangements accounted for under the deposit method and~~driven by a decrease in ~~average invested assets.~~

~~Benefits and expenses~~

~~Benefits and other changes in policy reserves~~

~~Our international mortgage insurance business decreased $34 million and our lifestyle protection insurance business decreased $46 million.~~

The three months ended September 30, 2010 included an increase of $5 million and a decrease of $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 a decrease in Europe from ongoing loss mitigation efforts. In Australia, losses decreased as a result of lower claims paid. Additionally, in both Canada and Australia, losses declined driven by lower reserves per delinquency from an improving economy.

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.

~~Acquisition and operating expenses, net of deferrals~~

~~Our international mortgage insurance business increased $7 million and our lifestyle protection insurance business decreased $30 million.~~

~~The three months ended September 30, 2010 included a decrease of $11 million attributable to changes in foreign exchange rates for our lifestyle protection insurance business.~~

~~The increase in our international mortgage insurance business was due to higher expenses in Australia and Europe primarily from a decrease in deferrable expenses from lower new business volume.~~

~~The decrease in our lifestyle protection insurance business was largely attributable to a decrease in~~paid commissions related to a decline in new ~~business.~~business, partially offset by an increase in profit commissions driven by lower claims.

Amortization of deferred acquisition costs and intangibles

Our international mortgage insurance business increased $2 million and our lifestyle protection insurance business ~~decreased $8~~increased $3 million.

The three months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of $1$2 million and ~~a decrease of $4~~$3 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

~~Our~~Excluding the effects of foreign exchange, our international mortgage insurance business was ~~relatively~~ flat as higher amortization of deferred acquisition costs from the seasoning of our in-force blocks of business in Australia and Canada was offset by lower ~~new business volume.~~amortization in Europe as a result of lender settlements in the prior year.

~~The decrease in~~Excluding the effects of foreign exchange, our lifestyle protection insurance business was ~~attributable~~flat as our runoff block of business was offset by higher amortization of deferred acquisition costs in the current year due to a ~~decrease~~favorable client adjustment in the ~~U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business.~~prior year that did not recur.

Interest expense

Our international mortgage insurance ~~business increased $4 million~~ and ~~our~~ lifestyle protection insurance ~~business decreased $8~~businesses each increased $6 million.

The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~increases of $1 million attributable to changes in foreign exchange rates ~~for~~in both our international mortgage insurance and lifestyle protection ~~insurance business.~~businesses.

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~~increase in our lifestyle protection insurance business was ~~related~~due to reinsurance arrangements accounted for under the deposit ~~method.~~method of accounting as certain of these arrangements were in a higher loss position in the current year.

Provision for income taxes.The effective tax rate ~~decreased~~increased to ~~23.1%~~32.7% for the three months ended ~~September~~June 30, ~~2010~~2011 from ~~26.8%~~19.8% for the three months ended ~~September~~June 30, ~~2009.~~2010. This ~~decrease~~increase in the effective tax rate was primarily attributable to higher taxes in the current year as a result of a Canadian legislative change as compared to an Australian tax legislative benefit in ~~uncertain~~the prior year. The Canadian legislation change passed in June 2011 will eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase the effective tax ~~positions.~~rate on our U.S. GAAP earnings as prior deductions for contributions to the fund lowered the effective tax rate on U.S. GAAP earnings. The three months ended ~~September~~June 30, ~~2010 also~~2011 included ~~an increase~~increases of $2$3 million and $1 million attributable to changes in foreign exchange rates for our international mortgage ~~business.~~and lifestyle protection insurance businesses, respectively.

~~Net income attributable to noncontrolling interests~~. The increase related mainly to the timing of the initial public offering of our Canadian mortgage insurance business in July 2009 which reduced our ownership percentage to 57.5%, as well as the result of lower losses from an improving economy. The three months ended September 30, 2010 included an increase of $3 million attributable to changes in foreign exchange rates.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to our International segment for the periods indicated:

   Nine months ended
September 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 1,452    $ 1,527    $ (75 ) (5 )%
Net investment income
   380    350    30    9 %
Net investment gains (losses)
   18    (7 ) 25    NM ⁽¹⁾
Insurance and investment product fees and other
   17    22    (5 ) (23 )%

Total revenues
   1,867    1,892    (25 ) (1 )%

Benefits and expenses:

Benefits and other changes in policy reserves
   457    618    (161 ) (26 )%
Acquisition and operating expenses, net of deferrals
   600    607    (7 ) (1 )%
Amortization of deferred acquisition costs and intangibles
   198    205    (7 ) (3 )%
Interest expense
   44    47    (3 ) (6 )%

Total benefits and expenses
   1,299    1,477    (178 ) (12 )%

Income before income taxes
   568    415    153    37 %
Provision for income taxes
   134    111    23    21 %

Net income
   434    304    130    43 %
Less: net income attributable to noncontrolling interests
   108    26 82    NM ⁽¹⁾

Net income available to Genworth Financial, Inc.’s common stockholders
   326    278    48    17 %
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (9 ) 6    (15 ) NM ⁽¹⁾

Net operating income available to Genworth Financial, Inc.’s common stockholders
   $ 317    $ 284    $ 33    12 %

⁽¹⁾	~~We define “NM” as not meaningful for increases or decreases greater than 200%.~~


	Six months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2011			2010			2011 vs. 2010
Revenues:
Premiums	$	968		$	999		$	(31	)	(3	)%
Net investment income		295			259			36		14	%
Net investment gains (losses)		12			10			2		20	%
Insurance and investment product fees and other		15			5			10		200	%

Total revenues		1,290			1,273			17		1	%

Benefits and expenses:
Benefits and other changes in policy reserves		283			337			(54	)	(16	)%
Acquisition and operating expenses, net of deferrals		403			408			(5	)	(1	)%
Amortization of deferred acquisition costs and intangibles		139			139			—		—	%
Interest expense		41			33			8		24	%

Total benefits and expenses		866			917			(51	)	(6	)%

Income before income taxes		424			356			68		19	%
Provision for income taxes		117			85			32		38	%

Net income		307			271			36		13	%
Less: net income attributable to noncontrolling interests		70			69			1		1	%

Net income available to Genworth Financial, Inc.’s common stockholders		237			202			35		17	%
Adjustment to net income available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		(6	)		(6	)		—		—	%

Net operating income available to Genworth Financial, Inc.’s common stockholders	$	231		$	196		$	35		18	%

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:


	Nine months ended September 30,				Increase (decrease) and percentage change				Six months ended June 30,				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	$	265	$	251	$	14	6	%	$	181	$	172	$	9	5	%
Lifestyle protection insurance		52		33		19	58	%		50		24		26	108	%

Total net operating income available to Genworth Financial, Inc.’s common stockholders	$	317	$	284	$	33	12	%	$	231	$	196	$	35	18	%

Net operating income available to Genworth Financial, Inc.’s common stockholders

The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of ~~$38~~$18 million and ~~a decrease of $5~~$2 million attributable to changes in foreign exchange rates for our international mortgage and lifestyle protection insurance businesses, respectively.

Excluding the ~~impact~~effects of foreign exchange, and 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 $81 million, net operating income for our international mortgage insurance business ~~increased~~decreased from ~~lower losses,~~higher taxes and interest expense, partially offset by lower ~~premiums. There was also a benefit from newly enacted Australian tax legislation in the current year.~~overall losses and higher investment income.

~~Net operating income for our~~Our lifestyle protection insurance business increased ~~primarily due~~attributable to ~~a decrease in~~lower new claim registrations ~~resulting~~ from ~~stabilization of~~improving economic ~~conditions. This was~~conditions and a favorable impact from our re-pricing actions taken in 2010, partially offset by ~~lower sales from~~ reduced levels of consumer lending.

Revenues

Premiums

Our international mortgage insurance business increased ~~$58~~$33 million and our lifestyle protection insurance business decreased ~~$133~~$64 million.

The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of ~~$88~~$41 million and ~~a decrease of $6~~$13 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~~lower overall premiums attributable to ~~loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as~~the seasoning of our in-force ~~block~~blocks of ~~business~~business. In addition, in Australia, lower ceded affiliated reinsurance was more than offset by ~~increased ceded reinsurance~~a decrease in premiums from a lower rate of policy cancellations and lower flow new business ~~volumes during 2010.~~volume in the current year. In Europe, premiums decreased as a result of lender settlements in the prior year.

The decrease in our lifestyle protection insurance business was primarily attributable to our runoff block of business and a decrease in ~~overall~~ premium ~~volumes~~volume driven by ~~slower lending~~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 ~~Europe and our runoff business.~~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 ~~$34~~$20 million and our lifestyle protection insurance business ~~decreased $4~~increased $16 million.

The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of ~~$34 million attributable to changes in foreign exchange rates for our international mortgage business.~~

~~Excluding the effects of foreign exchange, our international mortgage insurance business was flat as lower yields were offset by an increase in invested assets and reinvestment of cash balances.~~

The decrease in our lifestyle protection insurance business was largely due to lower yields and lower invested assets which were partially offset by reinsurance arrangements accounted for under the deposit method of accounting as these arrangements were in a gain position.

~~Benefits and expenses~~

~~Benefits and other changes in policy reserves~~

~~Our international mortgage insurance business decreased $56~~$16 million and ~~our lifestyle protection insurance business decreased $105 million.~~

~~The nine months ended September 30, 2010 included an increase of $35 million attributable to changes in foreign exchange rates for our international mortgage insurance business.~~

The decrease in our international mortgage insurance business was primarily related to Canada as 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.

~~Acquisition and operating expenses, net of deferrals~~

~~Our international mortgage insurance business increased $25 million and our lifestyle protection insurance business decreased $32 million.~~

~~The nine months ended September 30, 2010 included an increase of $11 million and a decrease of $3~~$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 ~~due~~as a result of higher average invested assets in Australia and Canada, partially offset by lower investment yields in Canada.

Insurance and investment product fees and other

Our international mortgage and lifestyle protection insurance businesses each increased $5 million.

The increase in our international mortgage insurance business was mainly attributable to currency transactions related to a foreign branch in the current year.

The increase in our lifestyle protection insurance business was mainly attributable to non-functional currency transactions as the result of changes in foreign exchange rates.

Benefits and expenses

Benefits and other changes in policy reserves

Our international mortgage insurance business increased $4 million and our lifestyle protection insurance business decreased $58 million.

The six months ended June 30, 2011 included increases of $17 million and $2 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 decrease was primarily driven by lower losses in Europe related to lender settlements in the prior year and ongoing loss mitigation activities. In Australia, losses increased primarily as a result of higher new delinquencies from seasoning of our in-force block of business and a higher average reserve per delinquency reflecting the economic impact of the recent flooding. Partially offsetting this increase was lower paid claims in Australia as a result of lender settlements in the prior year. Losses in Canada were relatively flat as ~~well as~~lower severity from overall economic improvement in the current year was offset by new delinquencies in Alberta which have a higher ~~expenses in Australia from a decrease in deferrable expenses from lower new business volume.~~average reserve per delinquency.

The decrease in our lifestyle protection insurance business was largely attributable to a decrease in claim reserves from declining claim registrations.

Acquisition and operating expenses, net of deferrals

Our international mortgage insurance business increased $7 million and our lifestyle protection insurance business decreased $12 million.

The six months ended June 30, 2011 included increases of $6 million and $9 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 as lower net deferred acquisition costs were offset by lower overall expenses.

The decrease in our lifestyle protection insurance business was driven by a decrease in paid commissions related to a decline in new ~~business. This decrease was~~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.

Amortization of deferred acquisition costs and intangibles

Our international mortgage insurance business increased ~~$15~~$7 million and our lifestyle protection insurance business decreased ~~$22~~$7 million.

The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~an increase~~increases of $8$4 million and ~~a decrease of $1~~$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 as a result of~~resulted primarily from an increase inrelated to software and higher amortization of deferred acquisition costs from the seasoning of our in-force blocks of business in Australia and Canada. This increase was partially offset by lower amortization in Europe as the result of lender settlements in the prior year.

The decrease in our lifestyle protection insurance business was primarily attributable to our runoff block of 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 $12 million and our lifestyle protection insurance business decreased $4 million.

The six months ended June 30, 2011 included an increase of $1 million attributable to changes in foreign exchange rates in our international mortgage 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 ~~attributable~~due to reinsurance arrangements accounted for under the deposit method of accounting as certain of these arrangements were in a ~~decrease~~lower loss position in the ~~U.K. from lower single premium sales related to new business regulations and a decrease from our runoff business.~~current year.

Provision for income taxes.The effective tax rate ~~decreased~~increased to ~~23.6%~~27.6% for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 from ~~26.8%~~23.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2009.~~2010. This ~~decrease~~increase in the effective tax rate was primarily attributable to ~~a change in uncertain tax positions, the favorable impact of newly enacted Australian tax legislation and lower taxed foreign income~~higher taxes in the current year as a result of a Canadian legislative change as compared to an Australian tax legislative benefit in the prior year. The ~~nine~~Canadian legislation change passed in June 2011 will eliminate the Canadian government guarantee fund. The elimination of the guarantee fund is expected to increase the effective tax rate on our U.S. GAAP earnings as prior deductions for contributions to the fund lowered the effective tax rate on U.S. GAAP earnings. The six months ended ~~September~~June 30, ~~2010 also~~2011 included ~~increases~~an increase of ~~$19 million and $2~~$7 million attributable to changes in foreign exchange rates for our international mortgage ~~and lifestyle protection~~ insurance ~~businesses, respectively.~~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 nine months ended September 30, 2010 included an increase of $12 million attributable to changes in foreign exchange rates.

International selected operating performance measures

International mortgage insurance

The following tables set forth selected operating performance measures regarding our international mortgage insurance business as of or for the dates indicated:


	As of September 30,				Increase (decrease) and percentage change				As of June 30,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009				2011		2010		2011 vs. 2010
Primary insurance in-force	$	535,400	$	495,100	$	40,300	8	%	$	597,900	$	484,100	$	113,800	24	%
Risk in-force		180,200		162,600		17,600	11	%		201,600		163,000		38,600	24	%


	Three months ended September 30,				Increase (decrease) and percentage change					Nine months ended September 30,				Increase (decrease) and percentage change				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				2011		2010		2011 vs. 2010				2011		2010		2011 vs. 2010
New insurance written	$	15,000	$	14,400	$	600		4	%	$	43,800	$	37,700	$	6,100	16	%	$	17,800	$	14,900	$	2,900	19	%	$	30,500	$	28,800	$	1,700	6	%
Net premiums written		233		204		29		14	%		614		523		91	17	%		257		218		39	18	%		429		381		48	13	%
Net earned premiums		235		236		(1	)	—	%		732		674		58	9	%		268		251		17	7	%		530		497		33	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”~~

“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 ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009,~~2010, 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 ~~$32.3~~$92.7 billion and ~~$11.7~~$31.3 billion, respectively, attributable to changes in foreign exchange rates as of ~~September~~June 30, ~~2010.~~2011.

New insurance written

For the three months ended ~~September~~June 30, ~~2010,~~2011, new insurance written increased ~~including~~primarily as a result of increases in bulk transactions in Canada, Australia and Europe in the current year. These increases were partially offset by decreases in flow new insurance written in Australia and Canada as a result of smaller mortgage originations markets. In addition, flow new insurance written declined in Europe due to lower volume from existing lenders. The three months ended June 30, 2011 included an increase of ~~$0.8~~$1.8 billion attributable to changes in foreign exchange rates. ~~Excluding~~

For the ~~impact~~six months ended June 30, 2011, excluding the effects of foreign exchange, new insurance written decreased ~~modestly. Flow new insurance written decreased~~primarily as a result of decreases in Australia reflecting higher interest rates and lower mortgage originations primarily driven by a reduction in first-time homebuyer benefits and in Europe where we have taken actions to selectively reduce new business including exiting selected distribution relationships. These decreases were partially offset by higher flow ~~new insurance written in Canada driven by growth in the mortgage origination markets and growth in bulk~~ new insurance written in Australia and Canada as ~~some liquidity returned to the securitization market in Australia and as select lenders sought capital relief in Canada.~~

~~For the nine months ended September 30, 2010,~~a result of smaller mortgage originations markets. In addition, flow new insurance written ~~increased including~~declined in Europe due to lower volume from existing lenders. These decreases were partially offset by increases in bulk transactions in Australia, Europe and Canada in the current year. The six months ended June 30, 2011 included an increase of ~~$5.6~~$2.8 billion attributable to changes in foreign exchange rates. In Canada, flow new insurance written increased driven by growth in the mortgage origination markets. Also contributing to the increase was growth in bulk new insurance written in Australia and Canada as some liquidity returned to the securitization market in Australia and as select lenders sought capital relief 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 driven by a reduction in first-time homebuyer benefits and in Europe where we have taken actions to selectively reduce new business including exiting selected distribution relationships.

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 ~~September~~June 30, ~~2010,~~2011, our unearned premium reserves ~~decreased to $3.0~~were $3.1 billion, including an increase of ~~$0.2~~$0.4 billion attributable to changes in foreign exchange rates, ~~from $3.1~~compared to $2.8 billion as of ~~September~~June 30, ~~2009.~~2010. Excluding the effects of foreign exchange, our unearned premium reserves decreased primarily related to seasoning of our in-force block of business.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2010,~~2011, net premiums written increased primarily ~~driven by an increase in new insurance written in Canada, partially offset by a decrease in~~from higher average price, bulk new insurance written in Australia, ~~a decrease~~Canada and Europe and lower ceded affiliated reinsurance premiums in ~~average price driven~~Australia in the current year. These increases were partially offset by ~~a decline~~lower flow net premiums written in ~~new~~Canada as an increase in market share was more than offset by lower business volume with loan-to-value ratios of more than 90% ~~and increased ceded reinsurance premiums.~~. The three and ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included increases of ~~$12~~$22 million and ~~$71~~$33 million, respectively, attributable to changes in foreign exchange rates.

For the three months ended ~~September~~June 30, ~~2010,~~2011, excluding the effects of foreign exchange, net earned premiums decreased primarily related to lower premiums in Canada and Australia attributable to the seasoning of our in-force blocks of business. In addition, in Australia, lower ceded affiliated reinsurance was largely offset by a decrease in premiums from a lower rate of policy cancellations in the current year. In Europe, premiums decreased as a result of lender settlements in the prior year. The three months ended June 30, 2011 included an increase of $24 million attributable to changes in ~~ceded reinsurance premiums and in Europe from rescissions and other terminations related to loss mitigation activities particularly in Spain.~~foreign exchange rates.

For the ~~nine~~six months ended ~~September~~June 30, ~~2010,~~2011, excluding the effects of foreign exchange, net earned premiums decreased related to ~~rescissions and other terminations related~~lower overall premiums attributable to ~~loss mitigation activities in Europe, particularly in Spain. In addition, premiums in Australia decreased as~~the seasoning of our in-force ~~block~~blocks of ~~business~~business. In addition, in Australia, lower ceded affiliated reinsurance was more than offset by ~~increased ceded reinsurance~~a decrease in premiums from a lower rate of policy cancellations and lower flow new business ~~volumes during 2010.~~volume in the current year. In Europe, premiums decreased as a result of lender settlements in the prior year. The ~~three and nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~increases~~an increase of ~~$11~~$41 million ~~and $88 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 September 30,						Increase (decrease)			Nine months ended September 30,						Increase (decrease)			Three months ended June 30,						Increase (decrease)			Six months ended June 30,						Increase (decrease)
	2010			2009			2010 vs. 2009			2010			2009			2010 vs. 2009			2011			2010			2011 vs. 2010			2011			2010			2011 vs. 2010
Loss ratio		35	%		50	%		(15	)%		40	%		52	%		(12	)%		40	%		42	%		(2	)%		41	%		43	%		(2	)%
Expense ratio		31	%		31	%		—	%		35	%		34	%		1	%		31	%		33	%		(2	)%		37	%		38	%		(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 and six months ended ~~September~~June 30, ~~2010~~2011 was primarily attributable to lower losses in Europe related to lender settlements in the prior year and ongoing loss mitigation ~~activities and in~~activities. In Australia, as a result of lower paid claims. Additionally, in both Canada and Australia, losses declined as a result of lower reserves per delinquency primarily from an improving economy. Partially offsetting the decrease in the loss ratio ~~was a decline in net earned premiums.~~increased primarily from higher reserves driven by higher new delinquencies from the seasoning of our in-force block of business and the economic impact of the recent flooding.

The decrease in the loss ratio for the nine months ended September 30, 2010 was primarily attributable to lower losses in Canada from a decrease in delinquencies and in Australia as a result 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.

~~The~~ expense ratio ~~was relatively flat~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010 as higher expenses were offset by~~2011 was primarily attributable to an increase in net premiums ~~written.~~

written, partially offset by higher general expenses.

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:


	September 30, 2010			December 31, 2009			September 30, 2009			June 30, 2011			December 31, 2010			June 30, 2010
Primary insurance
Primary insurance:
Insured loans in-force		2,948,710			2,911,605			2,939,957			3,004,011			2,986,059			2,938,624
Delinquent loans⁽¹⁾		22,078			22,821			24,518			22,495			21,082			22,093
Percentage of delinquent loans (delinquency rate)⁽¹⁾		0.75	%		0.78	%		0.83	%		0.75	%		0.71	%		0.75	%

Flow loans in-force		2,454,401			2,418,144			2,420,701			2,486,842			2,468,354			2,447,543
Flow delinquent loans⁽¹⁾		19,384			19,652			21,459			19,070			17,684			19,219
Percentage of flow delinquent loans (delinquency rate)⁽¹⁾		0.79	%		0.81	%		0.89	%		0.77	%		0.72	%		0.79	%

Bulk loans in-force		494,309			493,461			519,256			517,169			517,705			491,081
Bulk delinquent loans⁽²⁾⁽¹⁾		2,694			3,169			3,059			3,425			3,398			2,874
Percentage of bulk delinquent loans (delinquency rate)		0.55	%		0.64	%		0.59	%		0.66	%		0.66	%		0.59	%

⁽¹⁾

The amounts previously presented in our third quarter of 2009 Quarterly Report on Form 10-Q have been revised for September 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 ~~2,674~~3,403 as of ~~September~~June 30, ~~2010, 3,154~~2011, 3,376 as of December 31, ~~2009~~2010 and ~~2,418~~2,858 as of ~~September~~June 30, ~~2009.~~2010.

~~Since December 31, 2009, flow~~Flow loans in-force increased primarily ~~due to~~from growth in Canada ~~that was~~during the current year while bulk loans in-force decreased primarily due to cancellations in Australia. Delinquent loans increased from higher delinquencies in Australia and Europe as a result of the seasoning of our in-force blocks of business, partially offset by loss mitigation efforts in Europe and lower volumes in Australia. Bulk loans in-force increased marginally driven by growth in Canada. Delinquent loans decreased from ongoing loss mitigation activities in Europe and lower delinquencies in Canada ~~from improving economic conditions, partially offset by a moderate increase in delinquencies in Australia.~~and 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 September 30,				Increase (decrease) and percentage change					Nine months ended September 30,				Increase (decrease) and percentage change					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					2011		2010		2011 vs. 2010					2011		2010		2011 vs. 2010
Lifestyle protection insurance gross written premiums, premium equivalents and deposits	$	438	$	474	$	(36	)	(8	)%	$	1,299	$	1,337	$	(38	)	(3	)%	$	469	$	424	$	45		11	%	$	892	$	861	$	31		4	%
Mexico operations gross written premiums		—		18		(18	)	(100	)%		—		50		(50	)	(100	)%
Net earned premiums		218		287		(69	)	(24	)%		720		853		(133	)	(16	)%		223		244		(21	)	(9	)%		438		502		(64	)	(13	)%

Gross written premiums, premium equivalents and deposits

The three and nine months ended September 30, 2010 included a decrease of $41 million and of $11 million, respectively, attributable to changes in foreign exchange rates. Excluding foreign exchange, gross

Gross written premiums, premium equivalents and deposits, gross of ceded reinsurance and cancellations, increased ~~modestly during the~~from sales growth. The three and six months ended ~~September~~June 30, ~~2010. Gross written premiums, premium equivalents~~2011 included increases of $40 million and ~~deposits, gross of ceded reinsurance and cancellations, decreased during the nine months ended September 30, 2010 mainly~~$27 million, respectively, attributable to ~~reduced levels of consumer lending. In the third quarter of 2009, we sold our Mexico operations; therefore, there were no sales~~changes in ~~2010.~~foreign exchange rates.

Net earned premiums

For the three months ended ~~September~~June 30, ~~2010,~~2011, the decrease ~~in our lifestyle protection insurance business~~ was primarily attributable to ~~lower single~~our runoff block of business and a decrease in premium ~~sales~~ volume ~~in Europe,~~driven by reduced levels of consumer ~~lending and lower single premium sales related to new business regulations in the U.K and our runoff business.~~lending. The three months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of ~~$22~~$20 million attributable to changes in foreign exchange rates.

For the ~~nine~~six months ended ~~September~~June 30, ~~2010,~~2011, the decrease ~~in our lifestyle protection insurance business~~ was primarily attributable to ~~lower sales volume in Europe and~~ our runoff ~~business. Reduced~~business and a decrease in premium volume driven by reduced levels of consumer ~~lending and lower single~~lending. Additionally, there was a favorable premium ~~sales~~adjustment related to ~~new business regulations~~the timing of receiving client data which was partially offset by an unfavorable reinsurance adjustment in the ~~U.K. also contributed to the decrease.~~first quarter of 2010, both of which were offset in expenses. The ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~a decrease~~an increase of $6$13 million attributable to changes in foreign exchange rates.

U.S. Mortgage Insurance segment

Segment results of operations

Three Months Ended ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~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
September 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 149    $ 156    $ (7 ) (4 )%
Net investment income
   28    34    (6 ) (18 )%
Net investment gains (losses)
   15    41    (26 ) (63 )%
Insurance and investment product fees and other
   3 4    (1 ) (25 )%

Total revenues
   195    235    (40 ) (17 )%

Benefits and expenses:

Benefits and other changes in policy reserves
   391    346    45    13 %
Acquisition and operating expenses, net of deferrals
   28    34    (6 ) (18 )%
Amortization of deferred acquisition costs and intangibles
   6    6    —      —   %

Total benefits and expenses
   425    386    39    10 %

Loss before income taxes
   (230 ) (151 ) (79 ) (52 )%
Benefit for income taxes
   (89 ) (62 ) (27 ) (44 )%

Net loss available to Genworth Financial, Inc.’s common stockholders
   (141 ) (89 ) (52 ) (58 )%
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (11 ) (27 ) 16    59 %

Net operating loss available to Genworth Financial, Inc.’s common stockholders
   $ (152 ) $ (116 ) $ (36 ) (31 )%

   Three months ended
June 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
       2011         2010     2011 vs. 2010
Revenues:

Premiums
   $ 142    $ 153    $ (11 ) (7 )%
Net investment income
   26    31    (5 ) (16 )%
Net investment gains (losses)
   1    (3 ) 4    133 %
Insurance and investment product fees and other
   1    —      1    —   %


Total revenues
   170    181    (11 ) (6 )%


Benefits and expenses:

Benefits and other changes in policy reserves
   526    216    310    144 %
Acquisition and operating expenses, net of deferrals
   35    33    2 6 %
Amortization of deferred acquisition costs and intangibles
   4    4    —      —   %


Total benefits and expenses
   565    253    312    123 %


Loss before income taxes
   (395 ) (72 ) (323 ) NM ⁽¹⁾
Benefit for income taxes
   (143 ) (29 ) (114 ) NM ⁽¹⁾


Net loss available to Genworth Financial, Inc.’s common stockholders
   (252 ) (43 ) (209 ) NM ⁽¹⁾
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (1 ) 3    (4 ) (133 )%


Net operating loss available to Genworth Financial, Inc.’s common stockholders
   $ (253 ) $ (40 ) $ (213 ) NM ⁽¹⁾

⁽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 was ~~as a result of an increase~~mainly related to the reserve strengthening in the second quarter of 2011 from a decline in the cure rates and continued aging of existing delinquent ~~loans due to higher foreclosure starts and higher levels of claim payments.~~loans.

Revenues

Premiums decreased ~~primarily~~ driven by lower new insurance written as a result of a smaller mortgage insurance origination market and lower premiums assumed from an affiliate under an intercompany reinsurance agreement, partially offset by less policy coverage rescission activity. ~~The flow persistency remained flat at 84% for both the three months ended September 30, 2010 and 2009.~~

Net investment income decreased primarily ~~from~~due to lower average invested ~~assets.~~assets and lower yield from holding higher cash balances.

~~Net~~The increase in net investment gains ~~decreased as a result of lower~~was primarily driven by higher gains on ~~sales~~the sale of investments from portfolio repositioning ~~activities~~activities.

Benefits and expenses

Benefits and other changes in policy reserves increased due to an increase in change in reserves of $343 million, partially offset by a decrease in net paid claims of $33 million. In the second quarter of 2011, we strengthened reserves by $299 million primarily related to a decline in cure rates during the second quarter of 2011 for delinquent loans and continued aging of existing delinquencies. Of the reserve strengthening, approximately $102 million was associated with worsening trends in recent experience. These trends were associated with a range of factors, including reduced opportunities to mitigate losses through loan modification actions due to a higher percentage of early stage delinquencies shifting to a more aged delinquency status. Specifically, reduced cure rates were driven by lower levels of borrower self-cures and lender loan modifications outside of government-sponsored modification programs. In addition, our expectations going forward include further deterioration in cure rates from a continuation of current market trends and an ongoing weakness in the U.S. residential real estate market. Accordingly, these expectations going forward resulted in an additional reserve strengthening of approximately $197 million in the second quarter of 2011. These increases were partially offset by lower new delinquencies. The decrease in net paid claims was attributable to lower claim counts and lower average claim payments reflecting lower loan balances.

Benefit for income taxes.The effective tax rate decreased to 36.2% for the three months ended ~~September~~June 30, ~~2010 compared to~~2011 from 40.3% for the three months ended ~~September~~June 30, ~~2009.~~2010. This decrease in the effective tax rate was primarily attributable to tax favored investment benefits in relation to pre-tax results in the current year compared to the prior year.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

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)	2011			2010			2011 vs. 2010
Revenues:
Premiums	$	284		$	295		$	(11	)	(4	)%
Net investment income		59			61			(2	)	(3	)%
Net investment gains (losses)		2			1			1		100	%
Insurance and investment product fees and other		2			5			(3	)	(60	)%

Total revenues		347			362			(15	)	(4	)%

Benefits and expenses:
Benefits and other changes in policy reserves		805			412			393		95	%
Acquisition and operating expenses, net of deferrals		69			67			2		3	%
Amortization of deferred acquisition costs and intangibles		8			7			1		14	%

Total benefits and expenses		882			486			396		81	%

Loss before income taxes		(535	)		(124	)		(411	)	NM	⁽¹⁾
Benefit for income taxes		(202	)		(48	)		(154	)	NM	⁽¹⁾

Net loss available to Genworth Financial, Inc.’s common stockholders		(333	)		(76	)		(257	)	NM	⁽¹⁾
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		(1	)		—			(1	)	—	%

Net operating loss available to Genworth Financial, Inc.’s common stockholders	$	(334	)	$	(76	)	$	(258	)	NM	⁽¹⁾

⁽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 was mainly related to the reserve strengthening in the second quarter of 2011 from a decline in the cure rates and continued aging of existing delinquent loans.

Revenues

Premiums decreased driven by lower new insurance written as a result of a smaller mortgage insurance origination market and lower premiums assumed from an affiliate under an intercompany reinsurance agreement, partially offset by less policy coverage rescission activity.

Net investment income decreased primarily related to lower average invested assets, partially offset by a preferred stock dividend in the current year.

The increase in net investment gains was primarily driven by gains on the sale of investments from portfolio repositioning activities.

Insurance and investment product fees and other income decreased primarily from the commutation of a captive trust in the prior year that did not recur.

Benefits and expenses

Benefits and other changes in policy reserves increased due to an increase in change in reserves of ~~$184~~$601 million, ~~and~~partially offset by a decrease in net paid claims of ~~$139~~$208 million. In the ~~third~~second quarter of ~~2009,~~2011, we ~~reached a settlement of arbitration proceedings with a lender regarding bulk transactions of $95~~strengthened reserves by $299 million ~~consisting of $203 million of paid claims and a decrease in reserves of $108 million. The increase in change in reserves was~~ primarily related to ~~an increase~~a decline in cure rates in the second quarter of 2011 for delinquent loans and continued aging of ~~delinquent loans as compared to~~existing delinquencies. Of the ~~prior year driven by foreclosure starts and~~reserve strengthening, approximately $102 million was associated with worsening trends in recent experience. These trends were associated with a ~~reduction in rescission activity, partially offset by an increase in loan modifications. With the exception~~range of ~~Florida, the shift from rescissions to modification benefits was proportional across regions, products and vintages. In Florida, we saw~~factors, including reduced opportunities to mitigate losses through loan ~~modifications~~modification actions due to ~~its~~a higher percentage of ~~later~~early stage delinquencies shifting to a more aged delinquency status. Specifically, reduced cure rates were driven by lower levels of borrower self-cures and ~~larger base~~lender loan modifications outside of ~~investor properties as compared to the broader portfolio. Excluding the settlement~~government-sponsored modification programs. In addition, our expectations going forward include further deterioration in cure rates from a continuation of current market trends and an ongoing weakness in the ~~prior year,~~U.S. residential real estate market. Accordingly, these expectations going forward resulted in an additional reserve strengthening of approximately $197 million in the second quarter of 2011. These increases were partially offset by lower new delinquencies. The decrease in net paid claims ~~increased largely~~was attributable to ~~an increase in~~lower claim counts and lower average claim payments reflecting ~~higher~~lower loan ~~balances within the 2005, 2006 and 2007 book years, as well as higher claim counts within those same book years. Benefits and other changes in policy reserves~~balances. The prior year also included a ~~reinsurance credit principally~~settlement with a counterparty related to our ~~captive reinsurance arrangements~~GSE Alt-A business of ~~$67~~$5 million, ~~and $41~~consisting of net paid claims of $180 million ~~for the three months ended September 30, 2010~~ and ~~2009, respectively.~~

~~Acquisition and operating expenses decreased primarily attributable to lower operating expenses from~~ a decrease in ~~net premiums written.~~change in reserves of $185 million that did not recur.

Benefit for income taxes.The effective tax rate decreased to 37.8% for the six months ended June 30, 2011 from 38.7% for the ~~three~~six months ended ~~September~~June 30, ~~2010 from 41.1% for the three months ended September 30, 2009.~~2010. This decrease in the effective tax rate was primarily attributable to tax favored investment ~~income.~~

~~Nine Months Ended September 30, 2010 Compared~~benefits in relation to ~~Nine Months Ended September 30, 2009~~

~~The following table sets forth the~~pre-tax results ~~of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:~~

   Nine months ended
September 30, Increase
(decrease) and
percentage
change
(Amounts in millions)
   2010 2009 2010 vs. 2009
Revenues:

Premiums
   $ 444    $ 490    $ (46 ) (9 )%
Net investment income
   89    102    (13 ) (13 )%
Net investment gains (losses)
   16    22    (6 ) (27 )%
Insurance and investment product fees and other
   8    5    3    60 %

Total revenues
   557    619    (62 ) (10 )%

Benefits and expenses:

Benefits and other changes in policy reserves
   803    1,120    (317 ) (28 )%
Acquisition and operating expenses, net of deferrals
   95    99    (4 ) (4 )%
Amortization of deferred acquisition costs and intangibles
   13    16    (3 ) (19 )%

Total benefits and expenses
   911    1,235    (324 ) (26 )%

Loss before income taxes
   (354 ) (616 ) 262    43 %
Benefit for income taxes
   (137 ) (245 ) 108    44 %

Net loss available to Genworth Financial, Inc.’s common stockholders
   (217 ) (371 ) 154    42 %
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:

Net investment (gains) losses, net of taxes and other adjustments
   (11 ) (14 ) 3    21 %

Net operating loss available to Genworth Financial, Inc.’s common stockholders
   $ (228 ) $ (385 ) $ 157    41 %

~~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, partially offset by less policy coverage rescission activity. The flow persistency increased from 83% for the nine months ended September 30, 2009 to 86% for the nine months ended September 30, 2010.

Net investment income decreased primarily from lower average invested assets. Net investment income in 2010 included $5 million of lower losses related to limited partnerships accounted for under the equity method.

~~The decrease in net investment gains was primarily driven by lower gains on sales of investments from portfolio repositioning activities~~ in the current year ~~partially offset by impairments recorded in 2009 that did not recur.~~

~~Insurance and investment product fees and other income increased primarily related~~compared to 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 $454 million and an increase in net paid claims of $137 million. In the third quarter of 2009, we reached a settlement of arbitration proceedings with a lender regarding bulk transactions of $95 million, consisting of $203 million of paid claims and a decrease in reserves of $108 million that did not recur. The decrease in change in reserves in the current year was driven by lower new delinquencies and a decrease in delinquencies since the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in paid claims was principally attributable to an increase in average claim payments reflecting higher loan balances within the 2005, 2006 and 2007 book years as well as higher claim counts within those same book years. Benefits and other changes in policy reserves also included a reinsurance credit principally related to our captive reinsurance arrangements of $156 million and $236 million for the nine months ended September 30, 2010 and 2009, respectively.

~~Acquisition and operating expenses decreased primarily attributable to lower operating expenses from a decrease in net premiums written.~~

~~Benefit for income taxes.~~The effective tax rate decreased to 38.7% for the nine months ended September 30, 2010 from 39.8% for the nine months ended September 30, 2009. This decrease in the effective tax rate was primarily attributable to tax favored investments.prior year.

U.S. Mortgage Insurance selected operating performance measures

The following tables set forth selected operating performance measures regarding our U.S. Mortgage Insurance segment as of or for the dates indicated:


	As of September 30,				Increase (decrease) and percentage change					As of June 30,				Increase (decrease) and percentage change
(Amounts in millions)	2010		2009		2010 vs. 2009					2011		2010		2011 vs. 2010
Primary insurance in-force	$	129,100	$	149,500	$	(20,400	)	(14	)%	$	120,900	$	131,900	$	(11,000	)	(8	)%
Risk in-force		30,000		33,000		(3,000	)	(9	)%		28,300		30,700		(2,400	)	(8	)%


	Three months ended September 30,				Increase (decrease) and percentage change					Nine months ended September 30,				Increase (decrease) and percentage change					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					2011		2010		2011 vs. 2010					2011		2010		2011 vs. 2010
New insurance written	$	2,700	$	2,000	$	700		35	%	$	6,600	$	9,100	$	(2,500	)	(27	)%	$	1,900	$	2,200	$	(300	)	(14	)%	$	4,300	$	3,900	$	400		10	%
Net premiums written		148		150		(2	)	(1	)%		442		481		(39	)	(8	)%		145		152		(7	)	(5	)%		287		294		(7	)	(2	)%

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~~as well as a ~~counterparty that reduced our bulk risk in-force exposure. This decrease was partially offset by an increase in flow new insurance written from an increase in our~~smaller mortgage insurance market ~~share, partially offset~~in the current year. 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 86% and ~~83%~~87% for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 and ~~2009,~~2010, respectively.

New insurance written

~~New insurance written increased during~~For the three months ended ~~September~~June 30, ~~2010~~2011, new insurance written decreased primarily driven by a slight decline in our mortgage insurance market share, coupled with a decline in mortgage originations. For the six months ended June 30, 2011, new insurance written increased primarily driven by an increase in ~~flow~~the overall mortgage insurance market following FHA pricing changes.

Net premiums written

For the three months ended June 30, 2011, net premiums written decreased due to lower new insurance written ~~from an increase~~as a result of a decline in our mortgage insurance market share and lower premiums assumed from an affiliate under an intercompany reinsurance agreement. For the six months ended June 30, 2011, net premiums written decreased due to lower reinsurance premiums, partially offset by ~~tighter mortgage insurance guidelines and mortgage lender underwriting standards.~~

~~New insurance written decreased during the nine months ended September 30, 2010 primarily driven by constraints in the bulk market. This decrease was partially offset by an increase in flow~~higher new insurance written ~~from an increase in our mortgage insurance market share, partially offset by tighter mortgage insurance guidelines and mortgage lender underwriting standards.~~

~~Net premiums written~~

~~Net premiums written decreased during the nine months ended September 30, 2010 principally from lower new insurance written during 2010~~ as a result of ~~a lower~~an overall increase in the 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 September 30,						Increase (decrease)			Nine months ended September 30,						Increase (decrease)			Three months ended June 30,						Increase (decrease)			Six months ended June 30,						Increase (decrease)
	2010			2009			2010 vs. 2009			2010			2009			2010 vs. 2009			2011			2010			2011 vs. 2010			2011			2010			2011 vs. 2010
Loss ratio		263	%		223	%		40	%		181	%		228	%		(47	)%		369	%		141	%		228	%		283	%		140	%		143	%
Expense ratio		23	%		26	%		(3	)%		24	%		24	%		—	%		27	%		25	%		2	%		27	%		25	%		2	%

~~In the third quarter of 2009, we reached a $95 million settlement with a lender regarding certain bulk transactions. Excluding the effect of this settlement, the~~The loss ratio for the three and ~~nine~~six months ended ~~September~~June 30, ~~2009 would have been 162% and 209%, respectively.~~

~~For the three months ended September 30, 2010, the increase in the loss ratio was~~2011 increased primarily attributable to ~~an increase in change in reserves and~~a reserve strengthening of $299 million primarily related to a decline in ~~net earned premiums, partially offset by a decrease in net paid claims as a result of~~cure rates during the ~~settlement in the third~~second quarter of ~~2009. The increase in change in reserves was primarily related to an increase in the~~2011 for delinquent loans and continued aging of ~~delinquent loans compared to~~existing delinquencies. Of the ~~prior year driven by foreclosure starts and~~reserve strengthening, approximately $102 million was associated with worsening trends in recent experience. These trends were associated with a ~~reduction in rescission activity, partially offset by an increase in loan modifications. With the exception~~range of ~~Florida, the shift from rescissions to modification benefits was proportional across regions, products and vintages. In Florida, we saw~~factors, including reduced opportunities to mitigate losses through loan ~~modifications~~modification actions due to ~~its~~a higher percentage of ~~later~~early stage delinquencies shifting to a more aged delinquency status. Specifically, reduced

cure rates were driven by lower levels of borrower self-cures and ~~larger base~~lender loan modifications outside of ~~investor properties as compared to the broader portfolio. Excluding the settlement~~government-sponsored modification programs. In addition, our expectations going forward include further deterioration in cure rates from a continuation of current market trends and an ongoing weakness in the ~~prior year, net paid claims increased largely attributable to~~U.S. residential real estate market. Accordingly, these expectations going forward resulted in an ~~increase in average claim payments reflecting higher loan balances within the 2005, 2006 and 2007 book years as well as higher claim counts within those same book years.~~

~~For the nine months ended September 30, 2010, the decrease~~additional reserve strengthening of approximately $197 million in the ~~loss ratio was primarily attributable to a decrease in change in reserves,~~second quarter of 2011. These increases were partially offset ~~by an increase in net paid claims. The decrease in change in reserves was driven~~ by lower new delinquencies and a decrease in ~~delinquencies since the fourth quarter of 2009 related to increased loss mitigation efforts. The increase in~~ paid claims ~~was principally~~ attributable to ~~an increase in~~lower claim counts and lower average claim payments reflecting ~~higher~~lower loan ~~balances within the 2005, 2006~~balances. The six months ended June 30, 2010 also 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 ~~2007 book years as well as higher claim counts within those same book years. Partially offsetting the~~a decrease in ~~the loss ratio was a decline~~change in ~~net earned premiums.~~reserves of $185 million.

The expense ratio ~~decreased~~increased as a result of ~~lower expenses, partially offset by~~ a decrease in net premiums written for the three and six months ended ~~September~~June 30, ~~2010. The expense ratio was flat as lower expenses were offset by a decrease in net premiums written for the nine months ended September 30, 2010.~~

2011.

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:


	September 30, 2010			December 31, 2009			September 30, 2009			June 30, 2011			December 31, 2010			June 30, 2010
Primary insurance:
Insured loans in-force		802,090			890,730			914,770			746,740			781,024			821,617
Delinquent loans		98,613			122,279			115,430			87,464			95,395			101,759
Percentage of delinquent loans (delinquency rate)		12.29	%		13.73	%		12.62	%		11.71	%		12.21	%		12.39	%

Flow loans in-force		705,754			753,370			774,000			658,251			687,964			723,301
Flow delinquent loans		95,567			107,495			100,208			84,442			92,225			98,771
Percentage of flow delinquent loans (delinquency rate)		13.54	%		14.27	%		12.95	%		12.83	%		13.41	%		13.66	%

Bulk loans in-force		96,336			137,360			140,770			88,489			93,060			98,316
Bulk delinquent loans⁽¹⁾		3,046			14,784			15,222			3,022			3,170			2,988
Percentage of bulk delinquent loans (delinquency rate)		3.16	%		10.76	%		10.81	%		3.42	%		3.41	%		3.04	%

A minus and sub-prime loans in-force		80,774			89,678			93,344			73,211			77,822			83,859
A minus and sub-prime delinquent loans		23,882			29,238			28,151			20,284			22,827			24,867
Percentage of A minus and sub-prime delinquent loans (delinquency rate)		29.57	%		32.60	%		30.16	%		27.71	%		29.33	%		29.65	%

Pool insurance:
Insured loans in-force		18,759			20,370			20,859			16,943			17,880			19,473
Delinquent loans		939			781			741			931			989			831
Percentage of delinquent loans (delinquency rate)		5.01	%		3.83	%		3.55	%		5.49	%		5.53	%		4.27	%

⁽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 ~~1,439~~1,569 as of ~~September~~June 30, ~~2010, 11,319~~2011, 1,713 as of December 31, ~~2009~~2010 and ~~11,002~~1,478 as of ~~September~~June 30, ~~2009.~~2010.

Delinquency and foreclosure levels that developed principally in our ~~2005,~~ 2006, 2007 and ~~2007~~2008 book years have remained high as the ~~U.S.~~United States continues to experience an economic recession and weakness in its ~~housing markets.~~residential real estate market. These trends continue to be especially evident in Florida, California, Arizona and Nevada, as well as in our A minus, Alt-A, 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.

The following tables set forth flow delinquencies, direct case reserves and risk in-force by aged missed payment status in our U.S. mortgage insurance portfolio as of the dates indicated:


	June 30, 2011
(Dollar amounts in millions)	Delinquencies		Direct case reserves ⁽¹⁾		Risk in-force		Reserves as % of risk in-force
Payments in default:
3 payments or less		20,255	$	193	$	810		24	%
4 – 11 payments		26,099		714		1,186		60	%
12 payments or more		38,088		1,349		1,901		71	%

Total		84,442	$	2,256	$	3,897		58	%

⁽¹⁾	Direct flow case reserves exclude loss adjustment expenses, incurred but not reported and reinsurance reserves.


	December 31, 2010
(Dollar amounts in millions)	Delinquencies		Direct case reserves ⁽¹⁾		Risk in-force		Reserves as % of risk in-force
Payments in default:
3 payments or less		24,104	$	152	$	959		16	%
4 – 11 payments		33,635		754		1,546		49	%
12 payments or more		34,486		1,142		1,757		65	%

Total		92,225	$	2,048	$	4,262		48	%

⁽¹⁾	Direct flow case reserves exclude loss adjustment expenses, incurred but not reported and reinsurance reserves.

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 September 30, 2010			Percent of total reserves as of September 30, 2010 ⁽¹⁾				Delinquency rate									Percent of primary risk in-force as of June 30, 2011				Percent of total reserves as of June 30, 2011 ⁽¹⁾				Delinquency rate
	Percent of primary risk in-force as of September 30, 2010						September 30, 2010				December 31, 2009			September 30, 2009						June 30, 2011						December 31, 2010			June 30, 2010
By Region:				Percent of total reserves as of September 30, 2010 ⁽¹⁾													Percent of primary risk in-force as of June 30, 2011
Southeast⁽²⁾		23	%		34	%			16.94	%		18.36	%		17.06	%		22	%		Percent of total reserves as of June 30, 2011 ⁽¹⁾		35	%			16.37	%		16.79	%		17.06	%
South Central⁽³⁾		16			14				11.19	%		12.42	%		11.01	%		16				12				9.90	%		11.00	%		11.41	%
Northeast⁽⁴⁾		14			9				11.15	%		11.60	%		10.48	%		14				12				11.71	%		11.66	%		10.85	%
North Central⁽⁵⁾		11			11				11.52	%		12.20	%		11.00	%		12				11				11.36	%		11.51	%		11.50	%
Pacific⁽⁶⁾		11			15				15.13	%		19.43	%		18.19	%		11				13				13.29	%		14.39	%		15.83	%
Great Lakes⁽⁷⁾		9			7				8.99	%		10.20	%		9.72	%		9				7				8.49	%		8.92	%		9.08	%
Plains⁽⁸⁾		6			3				7.96	%		8.29	%		7.50	%		6				3				7.75	%		8.14	%		7.59	%
Mid-Atlantic⁽⁹⁾		5			4				10.80	%		13.08	%		11.76	%
New England⁽¹⁰⁾		5			3				11.04	%		12.48	%		11.40	%
New England⁽⁹⁾																		5				3				10.36	%		10.71	%		11.11	%
Mid-Atlantic⁽¹⁰⁾																		5				4				10.12	%		10.67	%		11.23	%

Total		100	%		100	%			12.29	%		13.73	%		12.62	%		100	%			100	%			11.71	%		12.21	%		12.39	%

⁽¹⁾	Total reserves were ~~$1,973~~$2,506 million as of ~~September~~June 30, ~~2010.~~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 September 30, 2010			Percent of total reserves as of September 30, 2010⁽¹⁾				Delinquency rate									Percent of primary risk in-force as of June 30, 2011				Percent of total reserves as of June 30, 2011 ⁽¹⁾				Delinquency rate
	Percent of primary risk in-force as of September 30, 2010						September 30, 2010				December 31, 2009			September 30, 2009						June 30, 2011						December 31, 2010			June 30, 2010
By State:				Percent of total reserves as of September 30, 2010⁽¹⁾													Percent of primary risk in-force as of June 30, 2011
Florida		8	%		24	%			28.59	%		30.77	%		29.56	%		7	%		Percent of total reserves as of June 30, 2011 ⁽¹⁾		24	%			28.35	%		28.31	%		28.86	%
Texas		7	%		3	%			8.83	%		9.49	%		8.22	%		7	%			3	%			7.61	%		8.71	%		8.80	%
New York		7	%		4	%			9.34	%		9.42	%		8.44	%		7	%			5	%			9.71	%		9.76	%		8.88	%
California		5	%		7	%			15.16	%		21.87	%		21.04	%		5	%			7	%			12.24	%		13.99	%		16.40	%
Illinois		5	%		7	%			15.66	%		16.40	%		14.65	%		5	%			7	%			15.90	%		15.79	%		15.79	%
Georgia		4	%		4	%			16.88	%		17.62	%		15.59	%		4	%			4	%			14.70	%		16.16	%		17.13	%
North Carolina		4	%		2	%			11.25	%		11.73	%		10.08	%		4	%			3	%			10.93	%		11.23	%		11.12	%
New Jersey																		4	%			5	%			17.73	%		17.30	%		16.36	%
Pennsylvania		4	%		2	%			10.48	%		11.13	%		10.02	%		4	%			2	%			10.81	%		10.94	%		10.34	%
New Jersey		4	%		4	%			16.54	%		17.35	%		15.81	%
Ohio		3	%		2	%			7.83	%		8.47	%		8.08	%		3	%			2	%			8.00	%		8.19	%		7.85	%

⁽¹⁾	Total reserves were ~~$1,973~~$2,506 million as of ~~September~~June 30, ~~2010.~~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 ~~September~~June 30, ~~2010:~~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		7.79	%		1	%	$	1,886		1.5	%	$	489		1.6	%
2000		8.27	%		—			337		0.3			85		0.3
2000 and prior																		7.84	%		1.3	%	$	1,876		1.6	%	$	481		1.7	%
2001		7.50	%		—			1,217		0.9			306		1.0			7.58	%		0.7			954		0.8			240		0.9
2002		6.63	%		1			2,919		2.3			711		2.4			6.64	%		1.5			2,358		2.0			581		2.1
2003		5.65	%		2			11,801		9.1			1,988		6.7			5.65	%		3.7			9,603		7.9			1,622		5.8
2004		5.88	%		3			6,948		5.4			1,562		5.3			5.88	%		4.2			5,963		4.9			1,354		4.8
2005		5.98	%		14			11,050		8.6			2,810		9.4			5.98	%		12.6			9,710		8.0			2,501		8.9
2006		6.51	%		23			14,805		11.4			3,589		12.1			6.49	%		19.7			13,144		10.9			3,216		11.5
2007		6.60	%		49			32,246		25.0			7,932		26.7			6.56	%		40.0			29,077		24.0			7,171		25.6
2008		6.19	%		7			29,815		23.1			7,358		24.8			6.15	%		15.8			26,922		22.3			6,685		23.8
2009		5.08	%		—			9,617		7.4			1,519		5.1			5.08	%		0.3			7,982		6.6			1,386		4.9
2010		4.84	%		—			6,475		5.0			1,369		4.6			4.66	%		0.2			9,085		7.5			1,872		6.7
2011																		4.63	%		—			4,264		3.5			920		3.3

Total portfolio		6.18	%		100	%	$	129,116		100.0	%	$	29,718		100.0	%		6.08	%		100.0	%	$	120,938		100.0	%	$	28,029		100.0	%

⁽¹⁾	Total reserves were ~~$1,973~~$2,506 million as of ~~September~~June 30, ~~2010.~~2011.

Corporate and Other

Results of Operations

Three Months Ended ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:


	Three months ended September 30,						Increase (decrease) and percentage change					Three months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	—		$	—		$	—		—	%
Net investment income		36			25			11		44	%	$	43		$	35		$	8		23	%
Net investment gains (losses)		25			(65	)		90		138	%		(1	)		(68	)		67		99	%
Insurance and investment product fees and other		7			12			(5	)	(42	)%		1			(3	)		4		133	%

Total revenues		68			(28	)		96		NM	⁽¹⁾		43			(36	)		79		NM	⁽¹⁾

Benefits and expenses:
Benefits and other changes in policy reserves		1			2			(1	)	(50	)%
Interest credited		38			39			(1	)	(3	)%		31			35			(4	)	(11	)%
Acquisition and operating expenses, net of deferrals		(2	)		9			(11	)	(122	)%		—			9			(9	)	(100	)%
Amortization of deferred acquisition costs and intangibles		3			5			(2	)	(40	)%		3			4			(1	)	(25	)%
Interest expense		77			58			19		33	%		86			70			16		23	%

Total benefits and expenses		117			113			4		4	%		120			118			2		2	%

Loss before income taxes		(49	)		(141	)		92		65	%		(77	)		(154	)		77		50	%
Benefit for income taxes		(14	)		(67	)		53		79	%		—			(51	)		51		100	%

Net loss available to Genworth Financial, Inc.’s common stockholders		(35	)		(74	)		39		53	%		(77	)		(103	)		26		25	%
Adjustment to net loss available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		(16	)		41			(57	)	(139	)%		—			42			(42	)	(100	)%

Net operating loss available to Genworth Financial, Inc.’s common stockholders	$	(51	)	$	(33	)	$	(18	)	(55	)%	$	(77	)	$	(61	)	$	(16	)	(26	)%

⁽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~~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 ~~an increase in~~higher interest expense, partially offset ~~by higher net investment income.~~

~~Revenues~~

~~Net investment income increased primarily driven~~ by an increase in net investment income ~~largely~~and lower operating expenses.

Revenues

Higher investment income was primarily driven by higher dividend income from equity investments and $3 million of higher gains related to limited partnerships accounted for under the ~~consolidation of~~equity method in the current year.

Net investment losses decreased primarily related to derivative activity associated with certain consolidated securitization entities ~~as of January 1, 2010.~~and lower impairments.

Insurance and investment product fees and other ~~decreased primarily as a result of gains from our long-term debt repurchases~~increased mainly attributable to non-functional currency transactions attributable to changes in ~~2009 that did not recur.~~foreign exchange rates in the current year.

Benefits and expenses

The decrease in interest credited was attributable to lower interest rates on interest paid on our floating rate policyholder liabilities and a decrease in average outstanding liabilities.

Operating expenses decreased as a result of higher allocated expenses to the operating segments in the current year.

Interest expense increased ~~primarily~~ related to the ~~consolidation of certain securitization entities as of January 1,~~debt issuances in June and November 2010 and ~~debt that was issued in the second quarter of 2010.~~March 2011.

The decrease in the income tax benefit was primarily related to tax expense allocated to Corporate and Other activities in the current ~~year and a change in uncertain tax positions in the prior~~ year.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2009~~2010

The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:


	Nine months ended September 30,						Increase (decrease) and percentage change					Six months ended June 30,						Increase (decrease) and percentage change
(Amounts in millions)	2010			2009			2010 vs. 2009					2011			2010			2011 vs. 2010
Revenues:
Premiums	$	—		$	2		$	(2	)	(100	)%
Net investment income		80			140			(60	)	(43	)%	$	69		$	44		$	25		57	%
Net investment gains (losses)		(59	)		(288	)		229		80	%		(8	)		(84	)		76		90	%
Insurance and investment product fees and other		7			128			(121	)	(95	)%		3			—			3		NM	⁽¹⁾

Total revenues		28			(18	)		46		NM	⁽¹⁾		64			(40	)		104		NM	⁽¹⁾

Benefits and expenses:
Benefits and other changes in policy reserves		1			2			(1	)	(50	)%
Interest credited		112			207			(95	)	(46	)%		64			74			(10	)	(14	)%
Acquisition and operating expenses, net of deferrals		15			35			(20	)	(57	)%		(5	)		17			(22	)	(129	)%
Amortization of deferred acquisition costs and intangibles		11			13			(2	)	(15	)%		6			8			(2	)	(25	)%
Interest expense		217			186			31		17	%		168			140			28		20	%

Total benefits and expenses		356			443			(87	)	(20	)%		233			239			(6	)	(3	)%

Loss before income taxes		(328	)		(461	)		133		29	%		(169	)		(279	)		110		39	%
Benefit for income taxes		(222	)		(186	)		(36	)	(19	)%		(16	)		(208	)		192		92	%

Net loss available to Genworth Financial, Inc.’s common stockholders		(106	)		(275	)		169		61	%		(153	)		(71	)		(82	)	(115	)%
Adjustments to net loss available to Genworth Financial, Inc.’s common stockholders:
Net investment (gains) losses, net of taxes and other adjustments		37			185			(148	)	(80	)%		4			53			(49	)	(92	)%
Net tax benefit related to separation from our former parent		(106	)		—			(106	)	NM	⁽¹⁾		—			(106	)		106		100	%

Net operating loss available to Genworth Financial, Inc.’s common stockholders	$	(175	)	$	(90	)	$	(85	)	(94	)%	$	(149	)	$	(124	)	$	(25	)	(20	)%

⁽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~~We reported a higher net operating loss available to Genworth Financial, Inc.’s common stockholders in the current year ~~was primarily attributable~~compared 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~~as a result of lower ~~investment income related to policy loans from a bankruptcy-related lapse in 2009, lower yields on floating rate investments~~tax benefits and ~~a decline in average invested assets. Net investment income also included $8 million of~~ higher ~~losses related to limited partnership investments accounted for under the equity method in 2010. These decreases were~~interest expense, partially offset by an increase in net investment income ~~largely~~and lower operating 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 $4 million of gains related to limited partnerships during the ~~consolidation~~six months ended June 30, 2011 compared to losses of $21 million during the six months ended June 30, 2010.

Net investment losses decreased primarily related to derivative activity associated with certain consolidated securitization entities ~~as of January 1, 2010.~~and lower impairments.

Insurance and investment product fees and other ~~decreased primarily as a result of income from~~increased mainly attributable to non-functional currency transactions attributable to changes in foreign exchange rates in the ~~early retirement of institutional contracts at a discount to contract values in 2009 that did not recur.~~current year.

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 of certain securitization entities as of January 1,~~debt issuances in June and November 2010 and ~~debt issued in the second quarter of 2010.~~March 2011.

The ~~increase~~decrease in the income tax benefit was primarily related to ~~a change~~changes in uncertain tax ~~positions~~benefits in the prior year related to separation from our former ~~parent company.~~parent.

Investments and Derivative Instruments

Investment results

The following tables set 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
September 30, Increase (decrease)
   2010 2009 2010 vs. 2009
(Amounts in millions)
   Yield Amount Yield Amount Yield Amount
Fixed maturity securities—taxable
   5.0 % $ 658    5.2 % $ 610    (0.2 )% $ 48
Fixed maturity securities—non-taxable
   4.3 % 14    4.6 % 27    (0.3 )% (13 )
Commercial mortgage loans
   5.4 % 95    5.5 % 106    (0.1 )% (11 )
Restricted commercial mortgage loans related to securitization entities⁽¹⁾
   7.6 % 10    —   % —      7.6 % 10
Equity securities
   6.8 % 4    12.8 % 6    (6.0 )% (2 )
Other invested assets
   9.1 % 24    0.7 % 4    8.4 % 20
Restricted other invested assets related to securitization entities⁽¹⁾
   0.3 % 1    —   % —      0.3 % 1
Policy loans
   7.6 % 28    4.4 % 19    3.2 % 9
Cash, cash equivalents and short-term investments
   0.5 % 6    0.5 % 9    —   % (3 )

Gross investment income before expenses and fees
   4.8 % 840    4.5 % 781    0.3 % 59
Expenses and fees
   (0.1 )% (25 ) (0.1 )% (22 ) —   % (3 )

Net investment income
   4.7 % $ 815    4.4 % $ 759    0.3 % $ 56

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~


	Three months ended June 30,												Increase (decrease)
	2011						2010						2011 vs. 2010
(Amounts in millions)	Yield			Amount			Yield			Amount			Yield			Amount
Fixed maturity securities—taxable		5.2	%	$	693			5.0	%	$	646			0.2	%	$	47
Fixed maturity securities—non-taxable		4.1	%		10			4.3	%		16			(0.2	)%		(6	)
Commercial mortgage loans		5.6	%		92			5.5	%		99			0.1	%		(7	)
Restricted commercial mortgage loans related to securitization entities		7.8	%		9			7.3	%		10			0.5	%		(1	)
Equity securities		11.7	%		10			11.8	%		5			(0.1	)%		5
Other invested assets		16.9	%		55			14.9	%		39			2.0	%		16
Restricted other invested assets related to securitization entities		0.2	%		—			—	%		—			0.2	%		—
Policy loans		7.9	%		30			7.7	%		28			0.2	%		2
Cash, cash equivalents and short-term investments		0.7	%		6			0.3	%		4			0.4	%		2

Gross investment income before expenses and fees		5.3	%		905			4.9	%		847			0.4	%		58
Expenses and fees		(0.2	)%		(24	)		(0.1	)%		(24	)		(0.1	)%		—

Net investment income		5.1	%	$	881			4.8	%	$	823			0.3	%	$	58

Nine months ended
September 30, Increase (decrease)
2010 2009 2010 vs. 2009
(Amounts in millions)
Yield Amount Yield Amount Yield Amount
Fixed maturity securities—taxable
5.0 % $ 1,930    5.2 % $ 1,837    (0.2 )% $ 93
Fixed maturity securities—non-taxable
4.3 % 46    4.7 % 85    (0.4 )% (39 )
Commercial mortgage loans
5.6 % 298    5.5 % 329    0.1 % (31 )
Restricted commercial mortgage loans related to securitization entities⁽¹⁾
7.4 % 30    —   % —      7.4 % 30
Equity securities
8.4 % 11    6.6 % 12    1.8 % (1 )
Other invested assets
7.0 % 61    (6.4 )% (102 ) 13.4 % 163
Restricted other invested assets related to securitization entities⁽¹⁾
0.5 % 2    —   % —      0.5 % 2
Policy loans
7.6 % 83    8.5 % 115    (0.9 )% (32 )
Cash, cash equivalents and short-term investments
0.4 % 15    0.7 % 40    (0.3 )% (25 )

Gross investment income before expenses and fees
4.8 % 2,476    4.4 % 2,316    0.4 % 160
Expenses and fees
(0.1 )% (73 ) (0.1 )% (65 ) —   % (8 )

Net investment income
4.7 % $ 2,403    4.3 % $ 2,251    0.4 % $ 152

⁽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)
	2011						2010						2011 vs. 2010
(Amounts in millions)	Yield			Amount			Yield			Amount			Yield			Amount
Fixed maturity securities—taxable		5.1	%	$	1,363			5.0	%	$	1,272			0.1	%	$	91
Fixed maturity securities—non-taxable		4.1	%		21			4.3	%		32			(0.2	)%		(11	)
Commercial mortgage loans		5.6	%		184			5.7	%		203			(0.1	)%		(19	)
Restricted commercial mortgage loans related to securitization entities		7.7	%		19			7.4	%		20			0.3	%		(1	)
Equity securities		7.6	%		13			9.4	%		7			(1.8	)%		6
Other invested assets		13.5	%		89			6.8	%		37			6.7	%		52
Restricted other invested assets related to securitization entities		0.2	%		—			0.6	%		1			(0.4	)%		(1	)
Policy loans		7.9	%		59			7.6	%		55			0.3	%		4
Cash, cash equivalents and short-term investments		0.7	%		12			0.3	%		9			0.4	%		3

Gross investment income before expenses and fees		5.1	%		1,760			4.8	%		1,636			0.3	%		124
Expenses and fees		(0.1	)%		(49	)		(0.2	)%		(48	)		0.1	%		(1	)

Net investment income		5.0	%	$	1,711			4.6	%	$	1,588			0.4	%	$	123

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 nine~~ months ended ~~September~~June 30, ~~2010,~~2011, the increase in overall weighted-average investment yields was primarily attributable to the ~~reinvestment~~improved performance of limited partnerships accounted for under the ~~high cash balances we were holding during 2009~~equity method and ~~lower losses on limited partnerships.~~$16 million of bond calls and prepayments in the current year. Net investment income for the three months ended ~~September~~June 30, ~~2010~~2011 included $1$7 million of higher gains related to limited partnerships as compared the three months ended June 30, 2010.

For the six months ended June 30, 2011, the increase in overall weighted-average investment yields was primarily attributable to the improved performance of limited partnerships accounted for under the equity method ~~as compared to losses of~~and $20 million of higher bond calls and prepayments in the ~~three months ended September 30, 2009.~~current year. Net investment income for the ~~nine~~six months ended ~~September~~June 30, ~~2010~~2011 included ~~$137~~$21 million of ~~lower losses~~gains related to limited partnerships ~~accounted for under the equity method~~ as compared to $24 million of losses for the ~~nine~~six months ended ~~September~~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.~~

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

   Three months
ended
September 30, Nine months
ended
September 30,
(Amounts in millions)
   2010 2009 2010 2009
Available-for-sale securities:

Realized gains on sale
   $ 38    $ 122    $ 114    $ 172
Realized losses on sale
   (35 ) (81 ) (109 ) (192 )

Net realized gains (losses) on sale of available-for-sale securities
   3    41    5    (20 )

Impairments:

Total other-than-temporary impairments
   (7 ) (285 ) (108 ) (1,358 )
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)
   (30 ) 89    (60 ) 413

Net other-than-temporary impairments
   (37 ) (196 ) (168 ) (945 )

Trading securities
   23    16    25    15
Commercial mortgage loans
   (9 ) (8 ) (31 ) (19 )
Net gains (losses) related to securitization entities⁽¹⁾
   30    —      (6 ) —
Derivative instruments
   94    19    48    12
Other
   1    6    23    12

Net investment gains (losses)
   $ 105    $ (122 ) $ (104 ) $ (945 )

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~


	Three months ended June 30,						Six months ended June 30,
(Amounts in millions)	2011			2010			2011			2010
Available-for-sale securities:
Realized gains	$	25		$	53		$	54		$	76
Realized losses		(34	)		(36	)		(65	)		(74	)

Net realized gains (losses) on available-for-sale securities		(9	)		17			(11	)		2

Impairments:
Total other-than-temporary impairments		(28	)		(24	)		(59	)		(101	)
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)		2			(27	)		(3	)		(30	)

Net other-than-temporary impairments		(26	)		(51	)		(62	)		(131	)

Trading securities		14			(4	)		25			2
Commercial mortgage loans		2			(18	)		1			(22	)
Net gains (losses) related to securitization entities		(5	)		(47	)		5			(36	)
Derivative instruments		(15	)		(38	)		(25	)		(46	)
Other		(1	)		2			(1	)		22

Net investment gains (losses)	$	(40	)	$	(139	)	$	(68	)	$	(209	)

Three Months Ended ~~September~~June 30, ~~2010~~2011 Compared to Three Months Ended ~~September~~June 30, ~~2009~~2010

Net investment ~~gains~~losses related to derivatives of ~~$94~~$15 million infor the ~~third quarter of 2010~~three months ended June 30, 2011 were primarily ~~related~~due to ~~$66~~$16 million of ~~gains~~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 ~~as a result~~and $4 million of ~~changes in the non-performance risk incorporated into the discount rate~~losses associated with derivatives used to value GMWB embedded derivatives. The increase also included $22 million of gains from the change in value of our credit default swaps due to narrowing credit spreads, $9 million of ineffectiveness gains from our cash flow hedge ~~programs related to our long-term care insurance business, $2 million of gains related to embedded derivatives associated with certain reinsurance agreements and $1~~foreign currency risk. These losses were partially offset by $3 million of gains related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital ~~position. These~~position and $2 million of gains in other non-qualified interest rate swaps. Net investment losses related to derivatives of $38 million for the three months ended June 30, 2010 were ~~partially offset by $6~~primarily related to $31 million of losses from ~~foreign currency forward contracts. Net investment gains related~~the change in value of our credit default swaps due to ~~derivatives~~widening credit spreads, $21 million of ~~$19 million~~losses from the change in value of the ~~third quarter~~embedded derivative liabilities exceeding the change in value of ~~2009 were primarily related to gains in~~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 derivative instruments used for mitigating this risk.~~

The aggregate fair value of securities sold at a loss during the three months ended ~~September~~June 30, 2011 and 2010 ~~and 2009~~ was ~~$275 million from the sale of 100 securities and $354~~$294 million from the sale of 78 securities and $858 million from the sale of 159 securities, respectively, which was approximately ~~89%~~91% and ~~84%, respectively,~~96% of book ~~value.~~value for the three months ended June 30, 2011 and 2010, respectively. The loss on sales of securities in the three months ended ~~September 30, 2010~~June, 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 September 30, 2010, the average period of time those securities had been continuously in an unrealized loss position was approximately 19 months. The securities sold at a loss ~~during~~in the ~~three months ended September 30, 2010~~second quarter of 2011 included one ~~U.S~~foreign corporate security that was sold for a total loss of $6$11 million related to portfolio repositioning activities. The securities sold at a loss in the second quarter of 2010 included one ~~municipal bond that was sold for a total loss of $6 million and one collateralized mortgage obligation~~mortgage-backed security that was sold for a total loss of $5 million. Of the securities that were sold at a loss during the three months ended September 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately 13 months. Of the securities that were sold at a loss, there were no individual transactions that produced losses considered material$4 million related to ~~the consolidated financial statements.~~portfolio repositioning activities.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2010~~2011 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2009~~2010

related to a derivative strategy to mitigate the interest rate risk associated with our statutory capital position. Net investment gains related to derivatives of $12 million for the nine months ended September 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 $31~~$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 losses related to the sale of available-for-sale securities were $11 million during the six months ended June 30, 2011 compared to net gains of $2 million during the six months ended June 30, 2010. We recorded $23 million of higher gains related to trading securities during the six months ended June 30, 2011 compared to the six months ended June 30, 2010. We recorded $5 million of net gains related to securitization entities during the six months ended June 30, 2011 primarily related to gains on trading securities compared to $36 million of net losses during the six months ended June 30, 2010 primarily associated with derivatives. We also recorded $1 million of gains related to commercial mortgage loans during the six months ended June 30, 2011 attributable to a decrease in the allowance compared to $22 million of losses during the six months ended June 30, 2010 from a lower of cost or market adjustment on loans held-for-sale and an increase in the ~~allowance and $6 million of net losses related to securitization entities primarily associated with derivatives during the nine months ended September 30, 2010.~~allowance. 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 $5 million during the nine months ended September 30, 2010 compared to net losses of $20 million during the nine months ended September 30, 2009.

The aggregate fair value of securities sold at a loss during the ~~nine~~six months ended ~~September~~June 30, 2011 and 2010 ~~and 2009~~ was ~~$1,691~~$691 million from the sale of ~~285~~145 securities and ~~$1,091~~$1,416 million from the sale of ~~277~~239 securities, respectively, which was approximately ~~94%~~93% and ~~86%~~95%, respectively, of book value. The loss on sales of securities in the ~~nine~~six months ended ~~September~~June 30, ~~2010~~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 nine months ended September 30, 2010, the average period of time those securities had been continuously in an unrealized loss position was approximately 18 months. The securities sold at a loss during the ~~nine~~six months ended ~~September~~June 30, 2011 included two U.S. corporate securities that were sold for a total loss of $11 million in the first quarter of 2011 and one foreign corporate security that was sold for a total loss of $11 million in the second quarter of 2011 related to portfolio repositioning activities. The securities sold at a loss during the six months ended June 30, 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, and one U.S. corporate security, one municipal bond and one collateralized mortgage obligation security that were sold for total losses of $6 million, $6 million and $5 million, respectively, in the third quarter of 2010. Of the securities that were sold at a loss during the nine months ended September 30, 2009, the average period of time those securities had been continuously in an unrealized loss position was approximately 11 months. The securities sold at a loss during the nine months ended September 30, 2009 included one in the financial services sector totaling $47 million due to portfolio repositioning.activities.

Investment portfolio

We analyze our investment portfolio on a security by security basis as part of our ongoing evaluation of our holdings. A component of this ongoing evaluation is an internal credit monitoring process that includes a fundamental evaluation of the credit risk for each security. In this evaluation, we consider published ratings, when available. However, our analysis is not intended to validate nor make any judgments with respect to the validity of any third-party credit ratings but, rather, is intended to serve as the basis for making decisions with respect to our ongoing management of our investment portfolio. Additionally, in any financial reporting disclosure where ratings are presented or stratified, such as investment grade and below investment grade, we utilize the Nationally Recognized Statistical Rating Organization (“NRSRO”) rating, when available, and do not make any adjustments to third-party ratings in such disclosures.

In our evaluation of our securities, we consider current market spreads and ratings published by a NRSRO in our analysis. For corporate securities, we consider factors such as the financial results and ratios of a company, capital structure, industry, covenants and other available information including updates from rating agencies. For structured securities, we also consider underlying asset performance including default, delinquency, loan-to-value of the collateral, third-party enhancement and current levels of subordination. Although we consider NRSRO ratings, they are not considered a significant component of our analysis of fair value or other-than-temporary impairments.

The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:

   September 30, 2010 December 31, 2009
(Amounts in millions)
   Carrying value    % of total Carrying value    % of total
Fixed maturity securities, available-for-sale:

Public
   $ 43,530       58 % $ 37,158       54 %
Private
   12,826       17    12,594       19
Commercial mortgage loans
   6,929       9    7,499       11
Other invested assets
   5,320       7    4,702       7
Policy loans
   1,480       2    1,403       2
Restricted commercial mortgage loans related to securitization entities ⁽¹⁾
   522       1    —         —
Restricted other invested assets related to securitization entities ⁽¹⁾
   378       1    —         —
Equity securities, available-for-sale
   223       —      159       —
Cash and cash equivalents
   3,598       5    5,002       7

Total cash, cash equivalents and invested assets
   $ 74,806       100 % $ 68,517       100 %

⁽¹⁾	~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~


	June 30, 2011					December 31, 2010
(Amounts in millions)	Carrying value		% of total			Carrying value		% of total
Fixed maturity securities, available-for-sale:
Public	$	43,525		61	%	$	42,526		59	%
Private		12,696		18			12,657		18
Commercial mortgage loans		6,432		9			6,718		9
Other invested assets		3,301		5			3,854		5
Policy loans		1,542		2			1,471		2
Restricted commercial mortgage loans related to securitization entities		457		1			507		1
Restricted other invested assets related to securitization entities		379		—			372		1
Equity securities, available-for-sale		374		—			332		1
Cash and cash equivalents		2,831		4			3,132		4

Total cash, cash equivalents and invested assets	$	71,537		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 ~~September~~June 30, ~~2010,~~2011, approximately 5%4% 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


(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	$	3,548	$	153	$	—	$	(19	)	$	—		$	3,682
Tax-exempt⁽¹⁾		940		19		—		(94	)		—			865
Government—non-U.S.		2,265		128		—		(4	)		—			2,389
U.S. corporate⁽²⁾		23,081		1,260		13		(307	)		—			24,047
Corporate—non-U.S.		14,038		530		—		(139	)		(1	)		14,428
Residential mortgage-backed⁽³⁾		5,252		174		15		(268	)		(190	)		4,983
Commercial mortgage-backed		3,767		135		6		(153	)		(34	)		3,721
Other asset-backed⁽³⁾		2,172		22		—		(86	)		(2	)		2,106

Total fixed maturity securities		55,063		2,421		34		(1,070	)		(227	)		56,221
Equity securities		352		25		—		(3	)		—			374

Total available-for-sale securities	$	55,415	$	2,446	$	34	$	(1,073	)	$	(227	)	$	56,595

⁽¹⁾	Fair value included municipal bonds of $545 million related to special revenue bonds, $282 million related to general obligation bonds and $38 million related to other municipal bonds.

⁽²⁾	Fair value included municipal bonds of $522 million related to special revenue bonds and $356 million related to general obligation bonds.

⁽³⁾	Fair value included $414 million collateralized by sub-prime residential mortgage loans and $331 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	Fair value				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				Fair value			Other-than- temporarily impaired
Fixed maturity securities:																		Amortized cost or cost				Fair value
U.S. government, agencies and government-sponsored enterprises	$	3,508	Amortized cost or cost		$	414			$	—			$	—			$	—		$	3,922			$	3,568			$	145			$	—			$	(8	)		$	—			$	3,705
Tax-exempt(1)		1,288			55				—				(72	)			—			1,271			1,124				19				—				(113	)			—				1,030
Government—non-U.S.		2,188			169				—				(5	)			—			2,352			2,257				118				—				(6	)			—				2,369
U.S. corporate(2)		22,979			1,858				10				(322	)			—			24,525			23,282				1,123				10				(448	)			—				23,967
Corporate—non-U.S.		13,282			730				15				(209	)			(3	)		13,815			13,180				485				—				(167	)			—				13,498
Residential mortgage-backed⁽¹⁾⁽³⁾		4,629			228				14				(312	)			(225	)		4,334			4,821				116				18				(304	)			(196	)			4,455
Commercial mortgage-backed		4,011			188				5				(389	)			(58	)		3,757			3,936				132				6				(286	)			(45	)			3,743
Other asset-backed⁽¹⁾⁽³⁾		2,391			25				—				(34	)			(2	)		2,380			2,494				18				—				(94	)			(2	)			2,416

Total fixed maturity securities		54,276			3,667				44				(1,343	)			(288	)		56,356			54,662				2,156				34				(1,426	)			(243	)			55,183
Equity securities		208			18				—				(3	)			—			223			323				13				—				(4	)			—				332

Total available-for-sale securities	$	54,484		$	3,685			$	44			$	(1,346	)		$	(288	)	$	56,579		$	54,985			$	2,169			$	34			$	(1,430	)		$	(243	)		$	55,515

⁽¹⁾	Fair value included ~~$445~~municipal bonds of $666 million related to special revenue bonds, $309 million related to general obligation bonds and $55 million related to other municipal bonds.

⁽²⁾	Fair value included municipal bonds of $682 million related to special revenue bonds and $394 million related to general obligation bonds.

⁽³⁾	Fair value included $457 million collateralized by sub-prime residential mortgage loans and ~~$358 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~~$376 million collateralized by Alt-A residential mortgage loans.

Fixed maturity securities increased ~~$6.6~~$1.0 billion primarily ~~attributable~~due to ~~improved market performance as our fixed maturity securities were~~the decline in ~~a net unrealized gain position as~~interest rates and the decline in the value of September 30, 2010 as compared to a net unrealized loss position as of December 31, 2009. The increase is also attributable to purchases of fixed maturity securities during 2010 as we continued to reinvest the ~~high cash balances we were holding during 2009.~~U.S. dollar.

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 ~~$73~~$98 million and ~~$134~~$128 million as of ~~September~~June 30, ~~2010~~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 September 30, 2010:

(Amounts in millions)
   2004
and prior    2005    2006    2007    Total
Ratings⁽¹⁾:

AAA
   $ 44       $ 7       $ —         $ —         $ 51
AA
   23       16       —         18       57
A
   11       18       3       —         32
BBB
   16       14       —         —         30
BB
   11       26       —         —         37
B
   4       28       22       —         54
CCC and lower
   25       47       97       15       184

Total sub-prime securities
   $ 134       $ 156       $ 122       $ 33       $ 445

⁽¹⁾	~~Based on ratings as of September 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 September 30, 2010:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    2008    2009    2010    Total
Ratings⁽¹⁾:

AAA
   $ 42       $ 16       $ —         $ —         $ —         $ —         $ 13       $ 71
AA
   8       —         1       —         —         —         —         9
A
   16       2       1       6       —         —         —         25
BBB
   25       —         3       —         —         —         —         28
BB
   1       4       —         4       —         —         —         9
B
   3       40       28       5       —         —         —         76
CCC and lower
   4       80       27       29       —         —         —         140

Total Alt-A securities
   $ 99       $ 142       $ 60       $ 44       $ —         $ —         $ 13       $ 358

⁽¹⁾	~~Based on ratings of September 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 September 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 September 30, 2010:~~

(Amounts in millions)
   2004
and prior    2005    2006    2007    2008    2009    2010    Total
Ratings⁽¹⁾:

AAA
   $ 1,937       $ 341       $ 325       $ 121       $ —         $ 30       $ 11       $ 2,765
AA
   52       48       102       32       —         —         3       237
A
   52       29       83       55       —         —         —         219
BBB
   52       24       48       34       —         —         —         158
BB
   17       3       49       133       —         —         —         202
B
   12       —         32       23       —         —         —         67
CCC and lower
   28       9       35       37       —         —         —         109

Total commercial mortgage-backed securities
   $ 2,150       $ 454       $ 674       $ 435       $ —         $ 30       $ 14       $ 3,757

⁽¹⁾	~~Based on ratings as of September 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:


	September 30, 2010											June 30, 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 recorded investment		Number of loans		Loan- to-value ⁽¹⁾			Delinquent principal balance		Number of delinquent loans
Loan Year
2004 and prior	$	2,336	$	26		955		8		51	%	$	1,988		846		49	%	$	30		5
2005		1,540		10		317		2		65	%		1,415		309		64	%		3		1
2006		1,437		14		286		2		73	%		1,293		278		73	%		4		1
2007		1,353		6		194		1		79	%		1,275		188		77	%		—		—
2008		286		13		59		3		77	%		272		57		73	%		2		1
2009		—		—		—		—		—	%		—		—		—	%		—		—
2010		34		—		6		—		49	%		103		17		63	%		—		—
2011													139		27		65	%		—		—

Total	$	6,986	$	69		1,817		16		65	%	$	6,485		1,722		64	%	$	39		8

⁽¹⁾	Represents weighted-average loan-to-value as of ~~September~~June 30, ~~2010.~~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 recorded investment⁽¹⁾		Number of loans		Loan- to-value ⁽²⁾			Delinquent principal balance		Number of delinquent loans
Loan Year
2004 and prior	$	2,644	$	5		1,039		2		49	%	$	2,167		908		51	%	$	21		6
2005		1,607		—		320		—		63	%		1,457		312		65	%		—		—
2006		1,521		15		290		4		70	%		1,417		283		73	%		9		1
2007		1,458		76		203		3		80	%		1,347		193		79	%		9		2
2008		295		—		61		—		77	%		280		58		77	%		11		2
2009⁽²⁾		16		—		518		—		—	%		—		—		—	%		—		—
2010													104		17		58	%		—		—

Total	$	7,541	$	96		2,431		9		63	%	$	6,772		1,771		65	%	$	50		11

⁽¹⁾	~~Represents loan-to-value as~~Re-presented to include $4 million of ~~December 31, 2009.~~net premium/discount on our commercial mortgage loans.

⁽²⁾

~~Loan balance represents reverse mortgage originations not sold~~Represents weighted-average loan-to-value 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 periods indicated:


(Amounts in millions)	Three months ended June 30, 2011			Six months ended June 30, 2011
Allowance for credit losses:
Beginning balance	$	58		$	59
Charge-offs		(4	)		(5	)
Recoveries		—			—
Provision		3			3

Ending balance	$	57		$	57

Ending allowance for individually impaired loans	$	—		$	—

Ending allowance for loans not individually impaired that were evaluated collectively for impairment	$	57		$	57

Recorded investment:
Ending balance	$	6,485		$	6,485

Ending balance of individually impaired loans	$	13		$	13

Ending balance of loans not individually impaired that were evaluated collectively for impairment	$	6,472		$	6,472

The charge-offs during 2011 were related to individually impaired commercial mortgage loans.

The following table presents the activity in the allowance for losses during the periods indicated:


(Amounts in millions)	As of or for the three months ended September 30, 2010			As of or for the nine months ended September 30, 2010			As of or for the three months ended June 30, 2010		As of or for the six months ended June 30, 2010
Beginning balance	$	70		$	48		$	52	$	48
Provision⁽¹⁾		5			27			18		22
Release⁽¹⁾		(13	)		(13	)		—		—

Ending balance	$	62		$	62		$	70	$	70

⁽¹⁾	~~Included~~Includes $13 million related to held-for-sale commercial mortgage ~~loans that were sold in the third quarter of 2010.~~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:


	September 30, 2010											June 30, 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 recorded investment		Number of loans		Loan- to-value ⁽¹⁾			Delinquent principal balance		Number of delinquent loans
Loan Year
2004 and prior	$	524	$	—		206		—		44	%	$	459		192		40	%	$	3		2

Total	$	524	$	—		206		—		44	%	$	459		192		40	%	$	3		2

⁽¹⁾	Represents weighted-average loan-to-value as of ~~September~~June 30, ~~2010.~~2011.

~~See note 7 in our “—Notes to Condensed Consolidated Financial Statements” for additional information related to consolidated securitization entities.~~
   December 31, 2010
(Dollar amounts in millions)
   Total recorded
investment    Number of
loans    Loan-
to-value ⁽¹⁾ Delinquent
principal balance    Number of
delinquent
loans
Loan Year

2004 and prior
   $ 509       202       43 % $ —         —








Total
   $ 509       202       43 % $ —         —

⁽¹⁾	Represents weighted-average loan-to-value as of December 31, 2010.

Other invested assets

The following table sets forth the carrying values of our other invested assets as of the dates indicated:


	September 30, 2010					December 31, 2009					June 30, 2011					December 31, 2010
(Amounts in millions)	Carrying value		% of total			Carrying value		% of total			Carrying value		% of total			Carrying value		% of total
Derivatives	$	1,683		31	%	$	946		20	%	$	820		25	%	$	1,047		27	%
Derivatives counterparty collateral		1,586		30			647		14			705		21			794		21
Trading securities												607		18			677		18
Securities lending collateral		702		13			853		18			554		17			772		20
Trading securities		701		13			174		4
Limited partnerships		365		7			430		9			346		11			340		9
Short-term investments		202		4			1,590		34			155		5			139		3
Other investments		81		2			62		1			114		3			85		2

Total other invested assets	$	5,320		100	%	$	4,702		100	%	$	3,301		100	%	$	3,854		100	%

Our investments in derivatives and derivative counterparty collateral ~~increased~~decreased primarily as a result the maturity of ~~a decrease~~the swap arrangements associated with the maturity of ¥57.0 billion of senior notes in ~~long-term interest rates.~~June 2011. Securities lending collateral decreased primarily ~~from our decision~~due to ~~decrease~~no longer recording the non-cash collateral asset related to the securities lending program ~~size. Limited partnership investments decreased primarily from sales and unrealized depreciation and returned capital, partially offset by calls on outstanding commitments.~~in Canada during the second quarter of 2011 as a result of not having any rights to sell or re-pledge the collateral assets. The ~~increase~~decrease in trading securities was ~~primarily related to the recently adopted accounting guidance for embedded credit derivatives. The decrease in short-term investments was~~ attributable to ~~portfolio repositioning activities in 2010.~~sales and maturities exceeding purchases.

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)
September 30,
2010 December 31,
2009 September 30,
2010 December 31,
2009
Derivatives designated as hedges

Cash flow hedges:

Interest rate swaps

Other invested
assets
   $ 821    $ 72
Other
liabilities
   $ 5    $ 114
Inflation indexed swaps

Other invested
assets


7    —
Other
liabilities
   5    21
Foreign currency swaps

Other invested
assets
   180    101
Other
liabilities
   —      —

Total cash flow hedges
1,008    173    10    135

Fair value hedges:

Interest rate swaps

Other invested
assets
   117    132
Other
liabilities
   10    15
Foreign currency swaps

Other invested
assets
   31    24
Other
liabilities
   —      —

Total fair value hedges
148    156    10    15

Total derivatives designated as hedges
1,156    329    20    150

Derivatives not designated as hedges

Interest rate swaps

Other invested
assets
   454    505
Other
liabilities
   57    59
Equity return swaps

Other invested
assets
   —      —
Other
liabilities
   6    —
Interest rate swaps related to securitization entities⁽¹⁾

Restricted
other invested
assets

   —      —
Other
liabilities
   34    —
Interest rate swaptions

Other invested
assets
   8    54
Other
liabilities
   —      67
Credit default swaps

Other invested
assets
   4    11
Other
liabilities
   9    3
Credit default swaps related to securitization entities⁽¹⁾

Restricted
other invested
assets

   —      —
Other
liabilities
   130    —
Equity index options

Other invested
assets
   61    39
Other
liabilities
   —      2
Financial futures

Other invested
assets
   —      —
Other
liabilities
   —      —
Other foreign currency contracts

Other invested
assets
   —      8
Other
liabilities
   3    —
Reinsurance embedded derivatives ⁽²⁾
Other assets    4    —
Other
liabilities
   —      —
GMWB embedded derivatives

Reinsurance
recoverable⁽³⁾
   4    (5 )

Policyholder
account
balances⁽⁴⁾

   316    175

Total derivatives not designated as hedges
535    612    555    306

Total derivatives
$ 1,691    $ 941    $ 575    $ 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 September 30, 2010
Derivatives designated as hedges

Cash flow hedges:

Interest rate swaps
Notional    $ 9,479    $ 1,382    $ (209 ) $ 10,652
Inflation indexed swaps
Notional    376    157    (10 ) 523
Foreign currency swaps
Notional    491    —      —      491

Total cash flow hedges
10,346    1,539    (219 ) 11,666

Fair value hedges:

Interest rate swaps
Notional    2,366    —      (281 ) 2,085
Foreign currency swaps
Notional    85    —      —      85

Total fair value hedges
2,451    —      (281 ) 2,170

Total derivatives designated as hedges
12,797    1,539    (500 ) 13,836

Derivatives not designated as hedges

Interest rate swaps
Notional    6,474    4,057    (2,569 ) 7,962
Equity return swaps
Notional    —      200    —      200
Interest rate swaps related to securitization entities
Notional    —      138    (6 ) 132
Interest rate swaptions
Notional    5,100    200    (5,100 ) 200
Credit default swaps
Notional    1,090    100    —      1,190
Credit default swaps related to securitization entities
Notional    —      322    (5 ) 317
Equity index options
Notional    912    564    (614 ) 862
Financial futures
Notional    5,822    5,579    (6,817 ) 4,584
Other foreign currency contracts
Notional    521    132    (73 ) 580
Reinsurance embedded derivatives
Notional    —      52    —      52

Total derivatives not designated as hedges
19,919    11,344    (15,184 ) 16,079

Total derivatives
$ 32,716    $ 12,883    $ (15,684 ) $ 29,915


(Notional in millions)												Measurement	December 31, 2010		Additions		Maturities/ terminations			June 30, 2011
Derivatives designated as hedges
Cash flow hedges:
Interest rate swaps												Notional	$	12,355	$	995	$	(157	)	$	13,193
Inflation indexed swaps												Notional		525		16		—			541
Foreign currency swaps												Notional		491		—		(491	)		—

Total cash flow hedges														13,371		1,011		(648	)		13,734

Fair value hedges:
Interest rate swaps												Notional		1,764		—		(405	)		1,359
Foreign currency swaps												Notional		85		—		—			85

Total fair value hedges														1,849		—		(405	)		1,444

Total derivatives designated as hedges														15,220		1,011		(1,053	)		15,178

Derivatives not designated as hedges
Interest rate swaps												Notional		7,681		314		(1,550	)		6,445
Equity return swaps												Notional		208		139		—			347
Interest rate swaps related to securitization entities												Notional		129		—		(6	)		123
Interest rate swaptions												Notional		200		—		(200	)		—
Credit default swaps												Notional		1,195		115		(100	)		1,210
Credit default swaps related to securitization entities												Notional		317		—		—			317
Equity index options												Notional		744		521		(480	)		785
Financial futures												Notional		3,937		2,687		(3,463	)		3,161
Other foreign currency contracts												Notional		521		185		(535	)		171
Reinsurance embedded derivatives												Notional		72		89		—			161

Total derivatives not designated as hedges														15,004		4,050		(6,334	)		12,720

Total derivatives													$	30,224	$	5,061	$	(7,387	)	$	27,898


(Number of policies)	Measurement		December 31, 2009		Additions		Terminations			September 30, 2010		Measurement	December 31, 2010		Additions		Terminations			June 30, 2011
Derivatives not designated as hedges
GMWB embedded derivatives		Policies		47,543		3,089		(1,882	)		48,750	Policies		49,566		690		(1,326	)		48,930

The decrease in the notional value of derivatives was primarily attributable to a ~~$2.7~~$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~~$1.0 billion notional decrease in ~~non-qualifying~~interest rate swaps and financial futures used ~~for duration management related~~ to ~~our long-term care insurance and single premium deferred annuity products and a $0.9 billion notional decrease in non-qualifying futures and interest rate swaps~~hedge liabilities related to our institutional ~~products. The~~products and a $1.0 billion notional decrease from maturing cross currency swaps and options related to the maturity of ¥57.0 billion of senior notes in June 2011. These decreases were partially offset by a ~~$1.5~~$0.8 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 $0.1 billion notional increase in inflation indexed swaps.~~products.

Consolidated Balance Sheets

Total assets. Total assets ~~increased $6.5~~decreased $0.1 billion from ~~$108.2~~$112.4 billion as of December 31, ~~2009~~2010 to ~~$114.7~~$112.3 billion as of ~~September~~June 30, ~~2010.~~2011.

Cash, cash equivalents and invested assets ~~increased $6.3 billion~~decreased $32 million primarily from an increase of $6.6 billion in our fixed maturity securities portfolio resulting primarily from improved market performance and an increase in purchases of fixed maturity securities. Also contributing to the increase was an increase of $0.9 billion in restricted commercial mortgage loans and other invested assets from the consolidation of certain securitization entities as of January 1, 2010. Partially offsetting these increases was a decrease of ~~$1.4 billion~~$301 million in cash and cash equivalents, aspartially offset by an increase of $269 million in invested assets. The decrease in cash was primarily attributable to the ~~net proceeds~~repayment of debt in June 2011. Our fixed maturity securities portfolio increased $1,038 million resulting primarily from the decline in interest rates and the decline in the value of the U.S. ~~and Canadian senior note issuances~~dollar. Commercial mortgage loans decreased $286 million as collections exceeded originations during 2011. Other invested assets decreased $553 million primarily driven by no longer recording the non-cash collateral asset related to the securities lending program in Canada during the second quarter of ~~2010 were more than offset by purchases~~2011 as a result of ~~fixed maturity~~not having any rights to sell or re-pledge the collateral assets and a decrease in derivatives, derivatives counterparty collateral and trading securities.

Separate account assets decreased $214 million primarily as a result of the discontinuance of new sales of variable annuities.

Total liabilities. Total liabilities ~~increased $3.8~~decreased $0.6 billion from ~~$94.8~~$97.4 billion as of December 31, ~~2009~~2010 to ~~$98.6~~$96.8 billion as of ~~September~~June 30, ~~2010.~~2011.

Our policyholder-related liabilities increased ~~$0.2 billion largely attributable to an increase in reserves related to our~~$13 million. Our long-term care insurance business increased from growth of ~~our~~the in-force ~~block. This increase~~block and higher claims. Our U.S. mortgage insurance business increased from a reserve strengthening in the current year which was partially offset by higher paid claims. These increases were partially offset by a decrease in ~~reserves associated with~~our spread-based products from benefit payments and scheduled maturities of our spread-based and institutional ~~products~~products.

Other liabilities decreased $448 million primarily as a result of no longer recording the offsetting liability to the non-cash collateral asset related to the securities lending program in Canada during the second quarter of 2011 as a result of not having any rights to sell or re-pledge the collateral assets and a decrease in our U.S. mortgage insurance business primarily from settlements and a decline in delinquencies in 2010. Unearned premiums decreased primarily in our lifestyle protection insurance business from a decline in sales.

Other liabilities increased $0.7 billion as a result of an increase in derivatives counterparty collateral driven by an increase in asset positions from the long-term interest rate environment and an increase in the timing of broker payments. These increases were partially offset by a decrease in our securities lending and repurchase ~~programs.~~

~~Borrowings related to securitization entities increased $0.5 billion from the consolidation of certain securitization entities as of January 1, 2010.~~program.

Long-term borrowings ~~increased $0.7 billion~~decreased $197 million principally from the ~~issuance~~maturity of ~~$0.4~~our ¥57.0 billion of senior notes in June 2011 and the ~~second quarter~~redemption of ~~2010 and from~~the remaining outstanding shares of the Series A Preferred Stock for $57 million in June 2011. These decreases were partially offset by the issuance of ~~CAD$0.3 billion~~$400 million of senior notes in March 2011 and the issuance of AUD$140 million of subordinated floating rate notes by our ~~majority-owned~~indirect wholly-owned subsidiary, Genworth ~~MI Canada Inc. (“Genworth Canada”),~~Financial Mortgage Insurance Pty Limited, in ~~the second quarter of 2010.~~June 2011.

~~Deferred tax liability increased $1.9 billion due to higher taxes from an increase in unrealized investment gains in 2010.~~Separate account liabilities decreased $214 million primarily as a result of the discontinuance of new sales of variable annuities.

Total stockholders’ equity. Total stockholders’ equity increased ~~$2.7~~$0.5 billion from ~~$13.4~~$15.0 billion as of December 31, ~~2009~~2010 to ~~$16.1~~$15.5 billion as of ~~September~~June 30, ~~2010.~~2011.

We reported a net ~~income~~loss available to Genworth Financial, Inc.’s common stockholders of ~~$0.3 billion~~$14 million for the ~~nine~~six months ended ~~September~~June 30, ~~2010.~~2011.

~~We recorded cumulative effect adjustments that reduced retained earnings by $0.3 billion with a partial offset to accumulated~~Accumulated other comprehensive income (loss) ~~of $0.3 billion related~~increased $570 million predominately attributable to ~~the adoption of new accounting guidance in 2010. See note 2 in our “—Notes to Condensed Consolidated Financial Statements” for additional information.~~

We had accumulated other comprehensive income of $2.5 billion as of September 30, 2010 compared to accumulated other comprehensive loss of $0.2 billion as of December 31, 2009. This change was mainly driven by improved market performance during 2010 resulting in nethigher unrealized investment gains and the weakening of ~~$0.6 billion as of September 30, 2010 compared to net unrealized investment losses of $1.4 billion as of December 31, 2009.~~the U.S. dollar against other currencies resulting in higher foreign currency translation adjustments.

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 ~~nine~~six months ended ~~September~~June 30:


(Amounts in millions)	2010			2009			2011			2010
Net cash from operating activities	$	976		$	1,854		$	842		$	557
Net cash from investing activities		(1,688	)		2,386			(6	)		(723	)
Net cash from financing activities		(765	)		(4,659	)		(1,169	)		(243	)

Net decrease in cash before foreign exchange effect	$	(1,477	)	$	(419	)	$	(333	)	$	(409	)

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 ~~for~~in the ~~nine months ended September 30, 2010~~first half of 2011 compared to the ~~nine months ended September 30, 2009~~first half of 2010 was primarily as a result of ~~higher paid claims in our U.S. mortgage insurance business, including settlements that were paid in 2010, higher~~lower tax settlements in the first half of 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 lower net cash outflows from investing activities ~~for~~in the ~~nine months ended September 30, 2010 as purchases~~first half of ~~investments exceeded proceeds~~2011 primarily from higher maturities ~~and sales~~ of fixed maturity ~~securities. In early 2009, we were holding excess cash balances. In~~securities, partially offset by purchases exceeding sales in the ~~second half of 2009 and into 2010, we reinvested this excess cash.~~current year.

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 ~~repurchase~~acquisition of debt and equity securities; the issuance and repayment or repurchase of borrowings and non-recourse funding obligations; and dividends to our ~~preferred~~ stockholders and other capital transactions. ~~Net~~We had higher net cash outflows from financing activities ~~decreased during~~in the ~~nine months ended September 30, 2010 compared to the nine months ended September 30, 2009~~first half of 2011 primarily related to ~~lower~~debt repayments and redemptions of our investment contracts primarily from scheduled maturities and ~~the early retirement of institutional contracts in 2009. This decrease also related to net proceeds~~surrenders which exceeded deposits received from the issuance of senior notes in the U.S. and Canada in the second quarter of 2010. Additionally, during the nine months ended September 30, 2010, Genworth Canada repurchased common shares resulting in a net cash outflow of $131 million and paid dividends to noncontrolling interests of $32 million.on these contracts.

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. and 105% in Canada of the fair value of the applicable securities loaned.portfolio. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently indemnified against counterparty credit risk by the intermediary.

Under the securities lending program in the United States, the borrower is required to provide collateral, consisting of cash and government securities, on a daily basis in amounts equal to or exceeding 102% of the applicable securities loaned. 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 NAIC, U.S. and foreign government securities, U.S. government agency securities, asset-backed securities and corporate debt securities. As of June 30, 2011 and December 31, 2010, the fair value of securities ~~all~~loaned under our securities lending program in the United States was $0.5 billion. As of ~~which have scheduled maturities~~June 30, 2011 and December 31, 2010, the fair value of ~~less than three years.~~collateral held under our securities lending program in the United States was $0.5 billion and the offsetting obligation to return collateral of $0.5 billion was included in other liabilities in the consolidated balance sheets. We had no non-cash collateral in our securities lending program in the United States as of June 30, 2011 and December 31, 2010.

Under our securities lending program in Canada, the borrower is required to provide collateral consisting of government securities on a daily basis in amounts equal to or exceeding 105% of the fair value of the applicable securities loaned. Securities received from counterparties as collateral are not recorded on our consolidated balance sheet given that the risk and rewards of ownership is not transferred from the counterparties to us in the course of such transactions. Additionally, there was no cash collateral as cash collateral is not permitted as an acceptable form of collateral under the program. 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.~~S&P. As of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, the fair value of securities loaned under ~~the~~our securities lending program in Canada was ~~$0.7 billion and $0.9 billion, respectively, consisting~~$0.3 billion. Prior to the second quarter of ~~$0.5 billion and $0.6 billion, respectively,~~2011, we recorded non-cash collateral in ~~the U.S. and $0.2 billion and $0.3 billion, respectively,~~other invested assets with a corresponding liability in ~~Canada. As of September 30, 2010 and December 31, 2009, the fair value of collateral held under the securities lending program was $0.7 billion and $0.9 billion, respectively, and the offsetting~~other liabilities representing our obligation to return the non-cash collateral. Since we do not have rights to sell or pledge the non-cash collateral, we determined the gross presentation of ~~$0.7 billion~~these amounts were not required and ~~$0.9 billion, respectively, was included in other liabilities~~changed our presentation of these amounts in the ~~consolidated balance sheets. We had non-cash collateral~~second quarter of ~~$0.2 billion and $0.3 billion as of September 30, 2010 and December 31, 2009, respectively.~~2011.

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 ~~September~~June 30, ~~2010~~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~~$1.5 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, ~~debt securities and,~~ potentially, acquisitions.

Our holding company had ~~$1,142~~$657 million and ~~$1,298~~$813 million of cash and cash equivalents as of ~~September~~June 30, ~~2010~~2011 and December 31, ~~2009,~~2010, respectively. ~~During the nine months ended September 30, 2010, we contributed $200~~Our holding company also had $10 million ~~to one of our life insurance subsidiaries to fund growth~~ and ~~invested~~ $200 million in highly liquid U.S. government ~~bonds.~~ bonds as of June 30, 2011 and December 31, 2010, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2010,~~2011, we received dividends from our subsidiaries of ~~$204~~$39 million, ~~primarily~~of which $24 million came from our non-U.S. subsidiaries. ~~Dividends included $182~~In July 2011, we received $65 million ~~primarily~~of dividends from one of our non-U.S. subsidiaries in connection with proceeds from the Canadian share repurchase in the ~~third~~second quarter of ~~2010.~~2011.

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 ~~September~~June 30, ~~2010,~~2011, our total cash, cash equivalents and invested assets were ~~$74.8~~$71.5 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 ~~30%~~31% of the carrying value of our total cash, cash equivalents and invested assets as of ~~September~~June 30, ~~2010.~~2011.

As of ~~September~~June 30, ~~2010,~~2011, we had approximately ~~$623~~$291 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~~We are executing a non-cash intercompany transaction to ~~an affiliated special-purpose entity (“SPE”) that was consolidated~~increase the statutory capital in our ~~financial statements and whose sole purpose was~~U.S. mortgage insurance companies by using a portion of common shares of Genworth Canada, with an estimated market value of $375 million, currently held by Brookfield, our indirect wholly-owned subsidiary. Once this transaction is complete, we will continue to ~~securitize~~hold approximately 57.5% of the outstanding common shares of Genworth Canada on a consolidated basis. In addition, Brookfield will have the right, exercisable at its discretion, to purchase for cash these ~~investment securities and issue secured notes~~common shares of Genworth Canada from our U.S. mortgage insurance companies at the then current market price. Brookfield will also have a right of first refusal with respect to ~~various affiliated~~the transfer of these common shares of Genworth Canada by the U.S. mortgage insurance companies. ~~The securitized investments were owned in their entirety by the SPE~~This transaction is undergoing customary regulatory review and ~~were not available~~is expected to ~~satisfy the claims~~be effective as of our creditors. These securitized investments provided collateral to the notes issued by the SPE to the insurance companies. 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.June 30, 2011, for statutory financial reporting purposes.

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 September 30, 2010, we ~~had~~have access to $1.9 billion under these facilities. InAs of June ~~2010,~~30, 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 September 30, 2010, we had borrowings of $730 million under these ~~facilities, and~~

facilities; however, we utilized ~~$57~~$279 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 September 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).

On June 1, 2011, we redeemed all the remaining outstanding shares of the Series A Preferred Stock at a price of $50 per share, plus unpaid dividends accrued to the date of redemption, for $57 million.

In the second quarter of 2011, we repurchased principal of $57 million of notes secured by our non-recourse funding obligations, plus accrued interest, for a pre-tax gain of $17 million.

In June ~~2010, our majority-owned subsidiary,~~2011, Genworth Canada, issued CAD$275 million of 5.68% senior notes due 2020. The net proceeds of the offering were used to fund transactions among Genworth Canada and its Canadian wholly-owned subsidiaries. Genworth Canada used the proceeds it received from such transactions for general corporate and investment purposes and to fund a repurchase of common shares from Genworth Canada’s shareholders.

~~In August 2010, Genworth Canada~~our indirect subsidiary, repurchased ~~12.3~~approximately 6.2 million common shares for CAD$~~325~~160 million through a substantial issuer bid. Brookfield, ~~Life Assurance Company Limited,~~ our indirect wholly-owned subsidiary, ~~and majority shareholder of Genworth Canada,~~ participated in the issuer bid by making a proportionate tender and received CAD$~~187~~90 million and continues to hold approximately 57.5% of the outstanding common shares of Genworth Canada.

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.

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.”

Securitization Entities

There were no off-balance sheet securitization transactions induring the ~~nine~~six months ended ~~September~~June 30, ~~2010~~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

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 continued to show signs of improvement across most asset classes ~~during 2010.~~in the first half of 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 ~~third~~second quarter of ~~2010,~~2011, the currencies in Canada, Australia and ~~Australia~~Europe strengthened ~~against the U.S. dollar, while in Europe, the currencies weakened~~ against the U.S. dollar as compared to the ~~prior year.~~second quarter of 2010 and the first quarter of 2011. 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

Evaluation of Disclosure Controls and Procedures

As of ~~September~~June 30, ~~2010,~~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 June 30, 2011.

Changes in Internal Control Over Financial Reporting During the Quarter Ended ~~September~~June 30, ~~2010~~2011

There were no changes in our internal control over financial reporting that occurred during the ~~quarter~~six months ended ~~September~~June 30, ~~2010~~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

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.

Except as ~~described~~disclosed below, there were no material developments during the ~~nine~~six months ended ~~September~~June 30, ~~2010~~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 ~~Reports~~Report on Form 10-Q for the quarterly ~~periods~~period ended March 31, ~~2010 and June 30, 2010.~~2011. In addition, except as described below, there were no new material legal proceedings during the quarter ended ~~September~~June 30, ~~2010.~~

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. ~~Other than as set forth below,~~As of June 30, 2011, there have been no material changes to the risk factors set forth in the above-referenced ~~filing as of September 30, 2010.~~filing.

The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act will subject us to substantial additional federal regulation, and we cannot predict the effect of such regulation on our business, results of operations, cash flows or financial condition.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was enacted and signed into law. The Dodd-Frank Act made extensive changes to the laws regulating financial services firms and requires various federal agencies to adopt a broad range of new implementing rules and regulations.

Among other provisions, the Dodd-Frank Act provides for a new framework of regulation of over-the-counter (“OTC”) derivatives markets. This will require us to clear certain types of transactions currently traded in the OTC derivative markets and may limit our ability to customize derivative transactions for our needs. In addition, we will likely experience additional collateral requirements and costs associated with derivative transactions. The Dodd-Frank Act also authorizes the SEC to adopt regulations that could impose heightened standards of care on sellers of our variable or other registered products, which could adversely affect our sales of and reduce our margins on these products.

In the case of our U.S. mortgage insurance business, the Dodd-Frank Act requires securitizers to retain some of the risk associated with mortgage loans they sell or securitize, unless the mortgage loans are “qualified residential mortgages” or are insured by an applicable federal agency. The Dodd-Frank Act provides that the definition of “qualified residential mortgages” will be determined by regulators, with consideration to be given, among other things, to the presence of mortgage insurance. The legislation also prohibits a creditor from making a residential mortgage loan unless the creditor makes a reasonable and good faith determination that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan. These provisions will be clarified in federal rules and regulations to be adopted. Depending on whether and to what extent loans with mortgage insurance are considered “qualified residential mortgages” for purposes of the Dodd-Frank Act’s securitization provisions or “qualified mortgages” for purposes of the ability to repay provisions, this legislation could have a material adverse affect on the amount of new mortgage insurance that we write. The Dodd-Frank Act may in any case reduce the volume of new mortgage loans issued, which could reduce the amount of new mortgage insurance we write. In addition, the Dodd-Frank Act creates a Bureau of Consumer Financial

Protection, which regulates certain aspects of the offering and provision of consumer financial products or services but not the business of insurance. This Bureau may issue rules or regulations that indirectly affect our mortgage insurance business or result in additional compliance burdens and costs.

The Dodd-Frank Act also establishes a Financial Stability Oversight Council, which is authorized to subject nonbank financial companies deemed systemically significant to stricter prudential standards and other requirements and to subject such a company to a special orderly liquidation process outside the federal bankruptcy code, administered by the Federal Deposit Insurance Corporation (although insurance company subsidiaries would remain subject to liquidation and rehabilitation proceedings under state law). In addition, the Dodd-Frank Act establishes a Federal Insurance Office within the Department of the Treasury. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office will perform various functions with respect to insurance, including serving as a non-voting member of the Financial Stability Oversight Council and making recommendations to the Council regarding insurers to be designated for more stringent regulation. The director is also required to conduct a study on how to modernize and improve the system of insurance regulation in the United States, including by increased national uniformity through either a federal charter or effective action by the states.

Federal agencies have been given significant discretion in drafting the rules and regulations that will implement the Dodd-Frank Act. Consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for some time. In addition, this legislation mandated multiple studies and reports for Congress, which could result in additional legislative or regulatory action.

We cannot predict the requirements of the regulations ultimately adopted under the Dodd-Frank Act, the affect such regulations will have on financial markets generally, or on our businesses specifically, the additional costs associated with compliance with such regulations, or any changes to our operations that may be necessary to comply with the Dodd-Frank Act, any of which could have a material adverse affect on our business, results of operations, cash flows or financial condition.

~~Problems associated with foreclosure process defects may cause claim payments to be deferred to later periods.~~

In the U.S., some large mortgage lenders and servicers have voluntarily suspended foreclosure actions in response to reports that certain mortgage servicers and other parties may have acted improperly in foreclosure proceedings. Where this has occurred, we will evaluate our options under the applicable master policies to curtail interest and expense payments that could have been avoided absent a delay in the foreclosure action. While delays in foreclosure completion may temporarily delay the receipt of claims and increase the length of time a loan remains in our delinquent inventory, our estimated claim rates and claim amounts represent our best estimate of what we actually expect to pay on the loans in default as of the reserve date.

Item 2.5.

~~Unregistered Sales of Equity Securities and Use of Proceeds~~Other Information

~~Issuer Purchases~~Genworth Financial, Inc. (the “Company”) maintains the Amended and Restated 2005 Change of ~~Equity Securities~~

~~During~~Control Plan (the “2005 Plan”), under which severance benefits are offered to certain of the ~~third quarter of 2010, we repurchased shares of our Series A Preferred Stock as set forth~~Company’s key executives, including executive officers, in the ~~table below.~~event that their employment is terminated in connection with a change of control of the Company. The Management Development and Compensation Committee (the “Committee”) of the Board of Directors of the Company reviews the 2005 Plan annually. Following the Committee’s 2011 review, the Committee decided that there will be no new participants under the 2005 Plan and that a new plan should be created to offer comparable severance benefits to newly designated key executives. On August 1, 2011, the Committee adopted the Genworth Financial, Inc. 2011 Change of Control Plan (the “2011 Plan”).

The 2011 Plan is identical to the 2005 Plan, except that the 2011 Plan does not provide participants with any tax gross-up benefits. Consistent with the 2005 Plan, the 2011 Plan includes two tiers of benefits that apply to executives who are designated by the Committee. Upon adoption of the 2011 Plan, Tier I benefits initially apply to Martin P. Klein, who was previously appointed Senior Vice President—Chief Financial Officer of the Company effective May 11, 2011, and Tier II benefits initially apply to selected other executives approved by the Committee. The following summary of the 2011 Plan is qualified in its entirety by reference to the text of the 2011 Plan, a copy of which is filed as an exhibit to this report.

(Dollar amounts in millions,
except per share amounts)
Total number of
shares purchased Average price
paid per share Aggregate
liquidation
preference of
repurchased shares⁽¹⁾ Total number of
shares purchased
as part of publicly
announced plans
or programs Approximate
dollar value of
shares that may yet be
purchased under
the plans or
programs
July 1, 2010 through July 31, 2010
—      $ —      $ —      —      $ —
August 1, 2010 through August 31, 2010
120,000    $ 50.23    6    —      —
September 1, 2010 through September 30, 2010
—      $ —      —      —      —

Total
120,000    $ 50.23    $ 6    —      $ —

Summary of 2011 Plan

Benefits under the 2011 Plan are paid only upon the occurrence of two clearly defined events. First, a change of control of the Company (as defined in the 2011 Plan) must have occurred. Second, in order to be eligible for benefits under the 2011 Plan, the designated executive’s employment must either be terminated without cause (and not as a result of death or permanent disability), or by the designated executive for “good reason,” in each case within 24 months from the date of a change of control. Such employment terminations are referred to as a “Qualified Termination.”

Upon the occurrence of a Qualified Termination, a participating executive will receive the following severance benefits:

⁽¹⁾

•

~~Following~~Cash payment. A Tier I executive will receive 200% of the ~~repurchases during 2010, we had an aggregate liquidation preference~~sum of ~~$57 million outstanding as~~his or her base salary and a targeted annual incentive payment; a Tier II executive will receive 150% of ~~September 30, 2010.~~the sum of his or her base salary and a targeted annual incentive payment.

•

Short-term incentive award. The participating executive will receive a pro-rated bonus earned for the portion of the year worked in which termination occurs, based on the executive’s targeted annual incentive payment and the number of days in the year prior to the Qualified Termination.

•

Equity-based incentive awards. All performance-based equity awards will become fully vested based on a target level of performance, and will payout pro rata based on the portion of the performance period elapsed prior to the Qualified Termination. Stock options, restricted stock units and other time-vesting equity awards will become immediately vested, and all restrictions on shares subject to awards will lapse, except for the portion of any award of restricted stock units that vest upon retirement.

•
Retirement provisions. The participating executive will be fully and immediately vested in any funded or unfunded or nonqualified pension or deferred compensation plans in which he or she participates, with payment being made in accordance with the terms of such plans.

•

Health and welfare benefits. The participating executive will receive health and welfare benefit coverage for 18 months.

In addition, upon a Qualified Termination, if a participating executive elects to enter into a non-competition agreement for 18 months, then he or she will be entitled to receive the following enhanced benefits, in addition to the benefits described above:

•

Cash payment. Upon the expiration and successful completion of the non-competition agreement, a Tier I executive will receive an additional payment equal to 100% of the sum of his or her base salary and a targeted annual incentive payment. A Tier II executive will receive an additional payment equal to 50% of the sum of his or her base salary and a targeted annual incentive payment.

•

Equity-based incentive awards. The restrictions on an award of restricted stock units that vest upon retirement shall immediately lapse.

Section 4999 of the Internal Revenue Code imposes a 20% excise tax on individuals who receive compensation in connection with a change of control that exceeds certain specified limits (generally three times his or her average taxable compensation over the last five or fewer years). Because of the way the excise tax is applied, a participant could be better off on an after-tax basis in some instances by taking a lower severance benefit in order to avoid the excise tax. The 2011 Plan provides for such a cut back of benefits, but only if the participant would be benefited by the cut back.

To receive any severance benefits under the 2011 Plan, a participant must execute a general release of claims against the Company and agree to certain restrictive covenants, including restrictions on the use of confidential information and restrictions on the solicitation of customers and employees for 18 months following a Qualified Termination.

The 2011 Plan became effective August 1, 2011. It is attached as Exhibit 10 to this report and is incorporated herein by reference.

Item 6.

Exhibits


3.1		Amended and Restated Certificate of Incorporation of Genworth Financial, Inc.

3.2		Certificate of Retirement of 5.25% Series A Cumulative Preferred Stock of Genworth Financial, Inc.

10		Genworth Financial, Inc. 2011 Change of Control Plan

12		Statement of Ratio of Income to Fixed Charges

31.1		Certification of Michael D. Fraizer

31.2		Certification of ~~Patrick B. Kelleher~~Martin P. Klein

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~~Martin P. Klein

~~101~~ 101.INS		The following consolidated financial statements from Genworth Financial, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, filed on October 29, 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: August 2, 2011

~~Date: October 29, 2010~~	By:	/s/ AMY R. CORBIN
			Amy R. Corbin
		Vice President and Controller
		(Duly Authorized Officer and
		Principal Accounting Officer)

~~136~~141


(Amounts in millions)	Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
Investment securities	$	267		$	(267	)	$	—
Adjustment to deferred acquisition costs		(4	)		1			(3	)
Adjustment to sales inducements		(1	)		1			—
Provision for income taxes		(93	)		94			1

Net cumulative effect adjustment	$	169		$	(171	)	$	(2	)


(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)	Beginning balance as of July 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 September 30, 2009		Total gains (losses) included in net income (loss) attributable to assets still held
(Amounts in millions)	Beginning balance as of July 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 September 30, 2009
Fixed maturity securities:
U.S. government, agencies and government- sponsored entities	$	357	$	—		$	—		$	—		$	4	$	(356	)	$	5	$	—
Tax exempt		2		—			—			—			—		—			2		—
Government—non-U.S.		22		—			(2	)		(1	)		15		—			34		—
U.S. corporate		1,408		25			60			(52	)		387		(308	)		1,520		5
Corporate—non-U.S.		767		7			69			74			293		(178	)		1,032		(2	)
Residential mortgage-backed		1,623		(89	)		200			(51	)		20		(44	)		1,659		(77	)
Commercial mortgage-backed		3,128		(6	)		294			(34	)		476		(229	)		3,629		(6	)
Other asset-backed		1,063		(1	)		105			(122	)		1		(31	)		1,015		(1	)

Total fixed maturity securities		8,370		(64	)		726			(186	)		1,196		(1,146	)		8,896		(81	)

Equity securities		61		—			1			(1	)		—		(1	)		60		—

Other invested assets:
Trading securities		133		16			—			—			—		—			149		16
Derivative assets		286		(15	)		—			1			—		—			272		(11	)

Total other invested assets		419		1			—			1			—		—			421		5

Reinsurance recoverable		2		(2	)		—			—			—		—			—		(2	)

Total Level 3 assets	$	8,852	$	(65	)	$	727		$	(186	)	$	1,196	$	(1,147	)	$	9,377	$	(78	)


(Amounts in millions)	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 September 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 September 30, 2009
Fixed maturity securities:
U.S. government, agencies and government- sponsored entities	$	25	$	—		$	(38	)	$	13		$	394	$	(389	)	$	5	$	—
Tax exempt		—		—			—			5			2		(5	)		2		—
Government—non-U.S.		31		—			(2	)		9			15		(19	)		34		—
U.S. corporate		2,734		9			170			(163	)		764		(1,994	)		1,520		10
Corporate—non-U.S.		1,560		(26	)		211			85			696		(1,494	)		1,032		(29	)
Residential mortgage-backed		1,957		(421	)		364			(205	)		905		(941	)		1,659		(391	)
Commercial mortgage-backed		3,219		(44	)		337			(140	)		1,008		(751	)		3,629		(45	)
Other asset-backed		1,034		(23	)		285			(355	)		982		(908	)		1,015		(18	)

Total fixed maturity securities		10,560		(505	)		1,327			(751	)		4,766		(6,501	)		8,896		(473	)

Equity securities		60		—			1			1			—		(2	)		60		—

Other invested assets:
Trading securities		125		17			—			(15	)		54		(32	)		149		16
Derivative assets		933		(508	)		—			(175	)		22		—			272		(486	)

Total other invested assets		1,058		(491	)		—			(190	)		76		(32	)		421		(470	)

Reinsurance recoverable		18		(18	)		—			—			—		—			—		(18	)

Total Level 3 assets	$	11,696	$	(1,014	)	$	1,328		$	(940	)	$	4,842	$	(6,535	)	$	9,377	$	(961	)


	Beginning balance as of July 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 September 30, 2009		Total (gains) losses included in net (income) loss attributable to liabilities still held
	Beginning balance as of July 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 September 30, 2009
Policyholder account balances⁽¹⁾	$	435	$	(135	)	$	—	$	8	$	—	$	—	$	308	$	(133	)
Other liabilities⁽²⁾		161		(57	)		—		—		—		—		104		(57	)

Total Level 3 liabilities	$	596	$	(192	)	$	—	$	8	$	—	$	—	$	412	$	(190	)
												��


(Amounts in millions)	Principal amount			Carrying value
GFCM LLC, due 2035, 5.2541%	$	228		$	228
GFCM LLC, due 2035, 5.7426%		113			113
Genworth Special Purpose Two, LLC, due 2023, 6.0175%		117			117
Marvel Finance 2007-1 LLC, due 2017⁽¹⁾		5			1
Marvel Finance 2007-4 LLC, due 2017⁽¹⁾		12			6
Genworth Special Purpose Five, LLC, due 2040⁽¹⁾		NA	⁽²⁾		37

Total	$	475		$	502


	Three months ended September 30,						Nine months ended September 30,
(Amounts in millions)	2010			2009			2010			2009
Available-for-sale securities:
Realized gains on sale	$	38		$	122		$	114		$	172
Realized losses on sale		(35	)		(81	)		(109	)		(192	)

Net realized gains (losses) on sale of available-for-sale securities		3			41			5			(20	)

Impairments:
Total other-than-temporary impairments		(7	)		(285	)		(108	)		(1,358	)
Portion of other-than-temporary impairments recognized in other comprehensive income (loss)		(30	)		89			(60	)		413

Net other-than-temporary impairments		(37	)		(196	)		(168	)		(945	)

Trading securities		23			16			25			15
Commercial mortgage loans		(9	)		(8	)		(31	)		(19	)
Net gains (losses) related to securitization entities⁽¹⁾		30			—			(6	)		—
Derivative instruments		94			19			48			12
Other		1			6			23			12

Net investment gains (losses)	$	105		$	(122	)	$	(104	)	$	(945	)


(Amounts in millions)	2004 and prior		2005		2006		2007		Total
Ratings⁽¹⁾:
AAA	$	44	$	7	$	—	$	—	$	51
AA		23		16		—		18		57
A		11		18		3		—		32
BBB		16		14		—		—		30
BB		11		26		—		—		37
B		4		28		22		—		54
CCC and lower		25		47		97		15		184

Total sub-prime securities	$	134	$	156	$	122	$	33	$	445


(Dollar amounts in millions, except per share amounts)	Total number of shares purchased		Average price paid per share		Aggregate liquidation preference of repurchased shares⁽¹⁾		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the plans or programs
July 1, 2010 through July 31, 2010		—	$	—	$	—		—	$	—
August 1, 2010 through August 31, 2010		120,000	$	50.23		6		—		—
September 1, 2010 through September 30, 2010		—	$	—		—		—		—

Total		120,000	$	50.23	$	6		—	$	—

Large ~~Accelerated Filer~~ xaccelerated filer

Accelerated ~~Filer~~ ¨

~~Non-accelerated Filer~~ ¨filer

Non-accelerated filer

Smaller reporting company