| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Namename of Registrantregistrant as Specifiedspecified in its Charter) Other Jurisdictionother jurisdiction ofIncorporationOrganization)organization) Principal Executive Offices)principal executive offices)
telephone number, including area code)Telephone Number, Including Area Code)and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of (§and post such files). Yes ☒ No ☐definitiondefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule (Check one):Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
| Class A Common Stock, par value $.001 per share | GNW | New York Stock Exchange |
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| 149 | ||||||
June 30, 2022 | December 31, 2021 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, 51,248 and $52,611 and allowance for credit losses of $— as of June 30, 2022 and December 31, 2021) | $ | 49,286 | $ | 60,480 | ||||
Equity securities, at fair value | 243 | 198 | ||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of June 30, 2022 and December 31, 2021) | 7,088 | 6,856 | ||||||
Less: Allowance for credit losses | (23 | ) | (26 | ) | ||||
Commercial mortgage loans, net | 7,065 | 6,830 | ||||||
Policy loans | 2,178 | 2,050 | ||||||
Limited partnerships | 2,123 | 1,900 | ||||||
Other invested assets | 573 | 820 | ||||||
Total investments | 61,468 | 72,278 | ||||||
Cash, cash equivalents and restricted cash | 1,724 | 1,571 | ||||||
Accrued investment income | 553 | 647 | ||||||
Deferred acquisition costs | 2,314 | 1,146 | ||||||
Intangible assets | 236 | 143 | ||||||
Reinsurance recoverable | 16,691 | 16,868 | ||||||
Less: Allowance for credit losses | (60 | ) | (55 | ) | ||||
| Reinsurance recoverable, net | 16,631 | 16,813 | ||||||
Other assets | 412 | 388 | ||||||
Deferred tax asset | 1,047 | 119 | ||||||
Separate account assets | 4,683 | 6,066 | ||||||
| Total assets | $ | 89,068 | $ | 99,171 | ||||
Liabilities and equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 38,133 | $ | 41,528 | ||||
Policyholder account balances | 17,907 | 19,354 | ||||||
Liability for policy and contract claims | 11,915 | 11,841 | ||||||
Unearned premiums | 614 | 672 | ||||||
Other liabilities | 1,468 | 1,511 | ||||||
Long-term borrowings | 1,773 | 1,899 | ||||||
Separate account liabilities | 4,683 | 6,066 | ||||||
Liabilities related to discontinued operations | 4 | 34 | ||||||
| Total liabilities | 76,497 | 82,905 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 600 million and 596 million shares issued as of June 30, 2022 and December 31, 2021, respectively; 508 million shares outstanding as of June 30, 2022 and December 31, 2021 | 1 | 1 | ||||||
Additional paid-in capital | 11,859 | 11,858 | ||||||
Accumulated other comprehensive income (loss) | (145 | ) | 3,861 | |||||
Retained earnings | 2,820 | 2,490 | ||||||
Treasury stock, at cost (92 million and 88 million shares as of June 30, 2022 and December 31, 2021, respectively) | (2,715 | ) | (2,700 | ) | ||||
| Total Genworth Financial, Inc.’s stockholders’ equity | 11,820 | 15,510 | ||||||
Noncontrolling interests | 751 | 756 | ||||||
| Total equity | 12,571 | 16,266 | ||||||
| Total liabilities and equity | $ | 89,068 | $ | 99,171 | ||||
| September 30, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at fair value | $ | 62,552 | $ | 60,572 | ||||
Equity securitiesavailable-for-sale, at fair value | 765 | 632 | ||||||
Commercial mortgage loans | 6,268 | 6,111 | ||||||
Restricted commercial mortgage loans related to securitization entities | 111 | 129 | ||||||
Policy loans | 1,818 | 1,742 | ||||||
Other invested assets | 1,590 | 2,071 | ||||||
Restricted other invested assets related to securitization entities, at fair value | — | 312 | ||||||
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Total investments | 73,104 | 71,569 | ||||||
Cash and cash equivalents | 2,836 | 2,784 | ||||||
Accrued investment income | 639 | 659 | ||||||
Deferred acquisition costs | 2,342 | 3,571 | ||||||
Intangible assets and goodwill | 315 | 348 | ||||||
Reinsurance recoverable | 17,553 | 17,755 | ||||||
Other assets | 552 | 673 | ||||||
Deferred tax asset | 24 | — | ||||||
Separate account assets | 7,264 | 7,299 | ||||||
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Total assets | $ | 104,629 | $ | 104,658 | ||||
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Liabilities and equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 38,022 | $ | 37,063 | ||||
Policyholder account balances | 24,531 | 25,662 | ||||||
Liability for policy and contract claims | 9,384 | 9,256 | ||||||
Unearned premiums | 3,512 | 3,378 | ||||||
Other liabilities ($1 of other liabilities are related to securitization entities in each period) | 2,002 | 2,916 | ||||||
Borrowings related to securitization entities ($12 are carried at fair value in each period) | 59 | 74 | ||||||
Non-recourse funding obligations | 310 | 310 | ||||||
Long-term borrowings | 4,224 | 4,180 | ||||||
Deferred tax liability | 234 | 53 | ||||||
Separate account liabilities | 7,264 | 7,299 | ||||||
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Total liabilities | 89,542 | 90,191 | ||||||
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Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 588 million and 587 million shares issued as of September 30, 2017 and December 31, 2016, respectively; 499 million and 498 million shares outstanding as of September 30, 2017 and December 31, 2016, respectively | 1 | 1 | ||||||
Additionalpaid-in capital | 11,973 | 11,962 | ||||||
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Accumulated other comprehensive income (loss): | ||||||||
Net unrealized investment gains (losses): | ||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 1,098 | 1,253 | ||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 10 | 9 | ||||||
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Net unrealized investment gains (losses) | 1,108 | 1,262 | ||||||
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Derivatives qualifying as hedges | 2,052 | 2,085 | ||||||
Foreign currency translation and other adjustments | (125 | ) | (253 | ) | ||||
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Total accumulated other comprehensive income (loss) | 3,035 | 3,094 | ||||||
Retained earnings | 760 | 287 | ||||||
Treasury stock, at cost (88 million shares as of September 30, 2017 and December 31, 2016) | (2,700 | ) | (2,700 | ) | ||||
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Total Genworth Financial, Inc.’s stockholders’ equity | 13,069 | 12,644 | ||||||
Noncontrolling interests | 2,018 | 1,823 | ||||||
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Total equity | 15,087 | 14,467 | ||||||
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Total liabilities and equity | $ | 104,629 | $ | 104,658 | ||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 927 | $ | 947 | $ | 1,858 | $ | 1,915 | ||||||||
Net investment income | 787 | 844 | 1,551 | 1,645 | ||||||||||||
Net investment gains (losses) | 8 | 70 | 36 | 103 | ||||||||||||
Policy fees and other income | 159 | 180 | 328 | 363 | ||||||||||||
Total revenues | 1,881 | 2,041 | 3,773 | 4,026 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 764 | 1,161 | 1,903 | 2,379 | ||||||||||||
Interest credited | 125 | 127 | 250 | 258 | ||||||||||||
Acquisition and operating expenses, net of deferrals | 589 | 304 | 860 | 579 | ||||||||||||
Amortization of deferred acquisition costs and intangibles | 84 | 86 | 176 | 163 | ||||||||||||
Interest expense | 26 | 43 | 52 | 94 | ||||||||||||
Total benefits and expenses | 1,588 | 1,721 | 3,241 | 3,473 | ||||||||||||
Income from continuing operations before income taxes | 293 | 320 | 532 | 553 | ||||||||||||
Provision for income taxes | 73 | 75 | 131 | 134 | ||||||||||||
Income from continuing operations | 220 | 245 | 401 | 419 | ||||||||||||
Income (loss) from discontinued operations, net of taxes | (1 | ) | (5 | ) | (3 | ) | 16 | |||||||||
Net income | 219 | 240 | 398 | 435 | ||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | — | — | 8 | ||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | 330 | $ | 427 | ||||||||
Net income available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 182 | $ | 245 | $ | 333 | $ | 419 | ||||||||
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders | (1 | ) | (5 | ) | (3 | ) | 8 | |||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | 330 | $ | 427 | ||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.36 | $ | 0.48 | $ | 0.65 | $ | 0.83 | ||||||||
Diluted | $ | 0.36 | $ | 0.47 | $ | 0.65 | $ | 0.82 | ||||||||
Net income available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.36 | $ | 0.47 | $ | 0.65 | $ | 0.84 | ||||||||
Diluted | $ | 0.35 | $ | 0.47 | $ | 0.64 | $ | 0.83 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 509.0 | 507.0 | 508.6 | 506.5 | ||||||||||||
Diluted | 514.2 | 515.0 | 515.8 | 514.4 | ||||||||||||
millions)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1,135 | $ | 1,108 | $ | 3,382 | $ | 3,029 | ||||||||
Net investment income | 797 | 805 | 2,388 | 2,373 | ||||||||||||
Net investment gains (losses) | 85 | 20 | 220 | 31 | ||||||||||||
Policy fees and other income | 198 | 217 | 619 | 738 | ||||||||||||
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Total revenues | 2,215 | 2,150 | 6,609 | 6,171 | ||||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,344 | 1,662 | 3,796 | 3,715 | ||||||||||||
Interest credited | 164 | 173 | 494 | 523 | ||||||||||||
Acquisition and operating expenses, net of deferrals | 265 | 269 | 775 | 990 | ||||||||||||
Amortization of deferred acquisition costs and intangibles | 83 | 94 | 316 | 305 | ||||||||||||
Interest expense | 73 | 77 | 209 | 262 | ||||||||||||
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Total benefits and expenses | 1,929 | 2,275 | 5,590 | 5,795 | ||||||||||||
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Income (loss) from continuing operations before income taxes | 286 | (125 | ) | 1,019 | 376 | |||||||||||
Provision for income taxes | 102 | 222 | 348 | 355 | ||||||||||||
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Income (loss) from continuing operations | 184 | (347 | ) | 671 | 21 | |||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | 15 | (9 | ) | (25 | ) | |||||||||
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Net income (loss) | 175 | (332 | ) | 662 | (4 | ) | ||||||||||
Less: net income attributable to noncontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
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Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 107 | $ | (380 | ) | $ | 464 | $ | (155 | ) | ||||||
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Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.23 | $ | (0.79 | ) | $ | 0.95 | $ | (0.26 | ) | ||||||
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Diluted | $ | 0.23 | $ | (0.79 | ) | $ | 0.94 | $ | (0.26 | ) | ||||||
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Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
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Diluted | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
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Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 499.1 | 498.3 | 498.9 | 498.3 | ||||||||||||
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Diluted | 501.6 | 498.3 | 501.2 | 498.3 | ||||||||||||
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Supplemental disclosures: | ||||||||||||||||
Total other-than-temporary impairments | $ | (1 | ) | $ | (2 | ) | $ | (4 | ) | $ | (35 | ) | ||||
Portion of other-than-temporary impairments included in other comprehensive income (loss) | — | — | — | — | ||||||||||||
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Net other-than-temporary impairments | (1 | ) | (2 | ) | (4 | ) | (35 | ) | ||||||||
Other investments gains (losses) | 86 | 22 | 224 | 66 | ||||||||||||
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Total net investment gains (losses) | $ | 85 | $ | 20 | $ | 220 | $ | 31 | ||||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income | $ | 219 | $ | 240 | $ | 398 | $ | 435 | ||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses | (2,432 | ) | (58 | ) | (3,483 | ) | (380 | ) | ||||||||
Net unrealized gains (losses) on securities with an allowance for credit losses | — | 4 | — | 6 | ||||||||||||
Derivatives qualifying as hedges | (344 | ) | 211 | (580 | ) | (208 | ) | |||||||||
Foreign currency translation and other adjustments | (7 | ) | 2 | (12 | ) | 138 | ||||||||||
Total other comprehensive income (loss) | (2,783 | ) | 159 | (4,075 | ) | (444 | ) | |||||||||
Total comprehensive income (loss) | (2,564 | ) | 399 | (3,677 | ) | (9 | ) | |||||||||
Less: comprehensive income (loss) attributable to noncontrolling interests | 10 | — | (1 | ) | 155 | |||||||||||
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (2,574 | ) | $ | 399 | $ | (3,676 | ) | $ | (164 | ) | |||||
CHANGES IN EQUITY
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income (loss) | $ | 175 | $ | (332 | ) | $ | 662 | $ | (4 | ) | ||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | (89 | ) | 72 | (173 | ) | 1,624 | ||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | — | 5 | 1 | 6 | ||||||||||||
Derivatives qualifying as hedges | (12 | ) | 54 | (33 | ) | 448 | ||||||||||
Foreign currency translation and other adjustments | 81 | (1 | ) | 261 | 223 | |||||||||||
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Total other comprehensive income (loss) | (20 | ) | 130 | 56 | 2,301 | |||||||||||
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Total comprehensive income (loss) | 155 | (202 | ) | 718 | 2,297 | |||||||||||
Less: comprehensive income attributable to noncontrolling interests | 108 | 64 | 313 | 260 | ||||||||||||
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Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 47 | $ | (266 | ) | $ | 405 | $ | 2,037 | |||||||
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Three months ended June 30, 2022 | ||||||||||||||||||||||||||||||||
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 equity | |||||||||||||||||||||||||
Balances as of March 31, 2022 | $ | 1 | $ | 11,857 | $ | 2,610 | $ | 2,639 | $ | (2,700 | ) | $ | 14,407 | $ | 745 | $ | 15,152 | |||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 181 | — | 181 | 38 | 219 | ||||||||||||||||||||||||
Other comprehensive loss, net of taxes | — | — | (2,755 | ) | — | — | (2,755 | ) | (28 | ) | (2,783 | ) | ||||||||||||||||||||
Total comprehensive income (loss) | (2,574 | ) | 10 | (2,564 | ) | |||||||||||||||||||||||||||
Treasury stock acquired in connection with share repurchases | — | — | — | — | (15 | ) | (15 | ) | — | (15 | ) | |||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 2 | — | — | — | 2 | — | 2 | ||||||||||||||||||||||||
Balances as of June 30, 2022 | $ | 1 | $ | 11,859 | $ | (145 | ) | $ | 2,820 | $ | (2,715 | ) | $ | 11,820 | $ | 751 | $ | 12,571 | ||||||||||||||
Three months ended June 30, 2021 | ||||||||||||||||||||||||||||||||
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 equity | |||||||||||||||||||||||||
Balances as of March 31, 2021 | $ | 1 | $ | 12,011 | $ | 3,675 | $ | 1,771 | $ | (2,700 | ) | $ | 14,758 | $ | — | $ | 14,758 | |||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 240 | — | 240 | — | 240 | ||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | 159 | — | — | 159 | — | 159 | ||||||||||||||||||||||||
Total comprehensive income | 399 | — | 399 | |||||||||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 7 | — | — | — | 7 | — | 7 | ||||||||||||||||||||||||
Balances as of June 30, 2021 | $ | 1 | $ | 12,018 | $ | 3,834 | $ | 2,011 | $ | (2,700 | ) | $ | 15,164 | $ | — | $ | 15,164 | |||||||||||||||
Six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||
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 equity | |||||||||||||||||||||||||
| Balances as of December 31, 2021 | $ | 1 | $ | 11,858 | $ | 3,861 | $ | 2,490 | $ | (2,700 | ) | $ | 15,510 | $ | 756 | $ | 16,266 | |||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | 330 | — | 330 | 68 | 398 | ||||||||||||||||||||||||
| Other comprehensive loss, net of taxes | — | — | (4,006 | ) | — | — | (4,006 | ) | (69 | ) | (4,075 | ) | ||||||||||||||||||||
| Total comprehensive loss | (3,676 | ) | (1 | ) | (3,677 | ) | ||||||||||||||||||||||||||
| Treasury stock acquired in connection with share repurchases | — | — | — | — | (15 | ) | (15 | ) | — | (15 | ) | |||||||||||||||||||||
| Dividends to noncontrolling interests | — | — | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||||
| Stock-based compensation expense and exercises and other | — | 1 | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||
| Balances as of June 30, 2022 | $ | 1 | $ | 11,859 | $ | (145 | ) | $ | 2,820 | $ | (2,715 | ) | $ | 11,820 | $ | 751 | $ | 12,571 | ||||||||||||||
Six months ended June 30, 2021 | ||||||||||||||||||||||||||||||||
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 equity | |||||||||||||||||||||||||
| Balances as of December 31, 2020 | $ | 1 | $ | 12,008 | $ | 4,425 | $ | 1,584 | $ | (2,700 | ) | $ | 15,318 | $ | 502 | $ | 15,820 | |||||||||||||||
| Sale of business that included noncontrolling interests | — | — | — | — | — | — | (657 | ) | (657 | ) | ||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | 427 | — | 427 | 8 | 435 | ||||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | — | — | (591 | ) | — | — | (591 | ) | 147 | (444 | ) | |||||||||||||||||||||
| Total comprehensive income (loss) | (164 | ) | 155 | (9 | ) | |||||||||||||||||||||||||||
| Stock-based compensation expense and exercises and other | — | 10 | — | — | — | 10 | — | 10 | ||||||||||||||||||||||||
| Balances as of June 30, 2021 | $ | 1 | $ | 12,018 | $ | 3,834 | $ | 2,011 | $ | (2,700 | ) | $ | 15,164 | $ | — | $ | 15,164 | |||||||||||||||
CASH FLOWS
| 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 equity | |||||||||||||||||||||||||
Balances as of December 31, 2016 | $ | 1 | $ | 11,962 | $ | 3,094 | $ | 287 | $ | (2,700 | ) | $ | 12,644 | $ | 1,823 | $ | 14,467 | |||||||||||||||
Cumulative effect of change in accounting, net of taxes | — | — | — | 9 | — | 9 | — | 9 | ||||||||||||||||||||||||
Repurchase of subsidiary shares | — | — | — | — | — | — | (31 | ) | (31 | ) | ||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 464 | — | 464 | 198 | 662 | ||||||||||||||||||||||||
Other comprehensive income (loss) net of taxes | — | — | (59 | ) | — | — | (59 | ) | 115 | 56 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total comprehensive income | 405 | 313 | 718 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (92 | ) | (92 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 11 | — | — | — | 11 | 5 | 16 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balances as of September 30, 2017 | $ | 1 | $ | 11,973 | $ | 3,035 | $ | 760 | $ | (2,700 | ) | $ | 13,069 | $ | 2,018 | $ | 15,087 | |||||||||||||||
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|
|
|
|
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|
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|
|
|
|
| |||||||||||||||||
Balances as of December 31, 2015 | $ | 1 | $ | 11,949 | $ | 3,010 | $ | 564 | $ | (2,700 | ) | $ | 12,824 | $ | 1,813 | $ | 14,637 | |||||||||||||||
Return of capital to noncontrolling interests | — | — | — | — | — | — | (70 | ) | (70 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (155 | ) | — | (155 | ) | 151 | (4 | ) | |||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | 2,192 | — | — | 2,192 | 109 | 2,301 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
Total comprehensive income | 2,037 | 260 | 2,297 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (126 | ) | (126 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 10 | — | — | — | 10 | 1 | 11 | ||||||||||||||||||||||||
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|
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|
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|
|
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|
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| |||||||||||||||||
Balances as of September 30, 2016 | $ | 1 | $ | 11,959 | $ | 5,202 | $ | 409 | $ | (2,700 | ) | $ | 14,871 | $ | 1,878 | $ | 16,749 | |||||||||||||||
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| |||||||||||||||||
Six months ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from (used by) operating activities: | ||||||||
Net income | $ | 398 | $ | 435 | ||||
Less (income) loss from discontinued operations, net of taxes | 3 | (16 | ) | |||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of fixed maturity securities discounts and premiums | (84 | ) | (80 | ) | ||||
Net investment (gains) losses | (36 | ) | (103 | ) | ||||
Charges assessed to policyholders | (292 | ) | (317 | ) | ||||
Acquisition costs deferred | (1 | ) | (3 | ) | ||||
Amortization of deferred acquisition costs and intangibles | 176 | 163 | ||||||
Deferred income taxes | 128 | 132 | ||||||
Derivative instruments, limited partnerships and other | (163 | ) | (189 | ) | ||||
Stock-based compensation expense | 20 | 25 | ||||||
Change in certain assets and liabilities: | ||||||||
Accrued investment income and other assets | (70 | ) | (69 | ) | ||||
Insurance reserves | 494 | 507 | ||||||
Current tax liabilities | — | (4 | ) | |||||
Other liabilities, policy and contract claims and other policy-related balances | (205 | ) | (60 | ) | ||||
Cash used by operating activities—discontinued operations | (31 | ) | (192 | ) | ||||
Net cash from operating activities | 337 | 229 | ||||||
Cash flows from (used by) investing activities: | ||||||||
Proceeds from maturities and repayments of investments: | ||||||||
Fixed maturity securities | 1,495 | 2,220 | ||||||
Commercial mortgage loans | 314 | 392 | ||||||
Limited partnerships and other invested assets | 99 | 107 | ||||||
Proceeds from sales of investments: | ||||||||
Fixed maturity and equity securities | 1,302 | 1,306 | ||||||
Purchases and originations of investments: | ||||||||
Fixed maturity and equity securities | (1,800 | ) | (2,868 | ) | ||||
Commercial mortgage loans | (568 | ) | (531 | ) | ||||
Limited partnerships and other invested assets | (297 | ) | (240 | ) | ||||
Short-term investments, net | (24 | ) | (76 | ) | ||||
Policy loans, net | 14 | 28 | ||||||
Proceeds from sale of business, net of cash transferred | — | 270 | ||||||
Cash used by investing activities—discontinued operations | — | (67 | ) | |||||
Net cash from investing activities | 535 | 541 | ||||||
Cash flows from (used by) financing activities: | ||||||||
Deposits to universal life and investment contracts | 314 | 349 | ||||||
Withdrawals from universal life and investment contracts | (779 | ) | (1,143 | ) | ||||
Repayment and repurchase of long-term debt | (130 | ) | (484 | ) | ||||
Dividends paid to noncontrolling interests | (4 | ) | — | |||||
Treasury stock acquired in connection with share repurchases | (15 | ) | — | |||||
Other, net | (105 | ) | 65 | |||||
Net cash used by financing activities | (719 | ) | (1,213 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $— and $(1) related to discontinued operations) | — | 1 | ||||||
Net change in cash, cash equivalents and restricted cash | 153 | (442 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 1,571 | 2,656 | ||||||
Cash, cash equivalents and restricted cash at end of period | 1,724 | 2,214 | ||||||
Less cash, cash equivalents and restricted cash of discontinued operations at end of period | — | — | ||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 1,724 | $ | 2,214 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 662 | $ | (4 | ) | |||
Less loss from discontinued operations, net of taxes | 9 | 25 | ||||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||
Gain on sale of business | — | (26 | ) | |||||
Amortization of fixed maturity securities discounts and premiums and limited partnerships | (107 | ) | (112 | ) | ||||
Net investment gains | (220 | ) | (31 | ) | ||||
Charges assessed to policyholders | (534 | ) | (574 | ) | ||||
Acquisition costs deferred | (67 | ) | (124 | ) | ||||
Amortization of deferred acquisition costs and intangibles | 316 | 305 | ||||||
Deferred income taxes | 234 | 173 | ||||||
Trading securities,held-for-sale investments and derivative instruments | 716 | 759 | ||||||
Stock-based compensation expense | 29 | 25 | ||||||
Change in certain assets and liabilities: | ||||||||
Accrued investment income and other assets | (21 | ) | (258 | ) | ||||
Insurance reserves | 1,202 | 691 | ||||||
Current tax liabilities | (27 | ) | 44 | |||||
Other liabilities, policy and contract claims and other policy-related balances | (260 | ) | 905 | |||||
|
|
|
| |||||
Net cash from operating activities | 1,932 | 1,798 | ||||||
|
|
|
| |||||
Cash flows used by investing activities: | ||||||||
Proceeds from maturities and repayments of investments: | ||||||||
Fixed maturity securities | 3,396 | 2,646 | ||||||
Commercial mortgage loans | 454 | 555 | ||||||
Restricted commercial mortgage loans related to securitization entities | 18 | 27 | ||||||
Proceeds from sales of investments: | ||||||||
Fixed maturity and equity securities | 3,269 | 4,064 | ||||||
Purchases and originations of investments: | ||||||||
Fixed maturity and equity securities | (6,709 | ) | (8,758 | ) | ||||
Commercial mortgage loans | (608 | ) | (405 | ) | ||||
Other invested assets, net | (521 | ) | (138 | ) | ||||
Policy loans, net | 28 | (80 | ) | |||||
Proceeds from sale of businesses, net of cash transferred | — | 39 | ||||||
Payments for business purchased, net of cash acquired | (5 | ) | — | |||||
|
|
|
| |||||
Net cash used by investing activities | (678 | ) | (2,050 | ) | ||||
|
|
|
| |||||
Cash flows used by financing activities: | ||||||||
Deposits to universal life and investment contracts | 902 | 1,028 | ||||||
Withdrawals from universal life and investment contracts | (2,003 | ) | (1,463 | ) | ||||
Redemption ofnon-recourse funding obligations | — | (1,620 | ) | |||||
Repayment and repurchase of long-term debt | — | (362 | ) | |||||
Repayment of borrowings related to securitization entities | (16 | ) | (37 | ) | ||||
Repurchase of subsidiary shares | (31 | ) | — | |||||
Return of capital to noncontrolling interests | — | (70 | ) | |||||
Dividends paid to noncontrolling interests | (92 | ) | (126 | ) | ||||
Other, net | (30 | ) | (49 | ) | ||||
|
|
|
| |||||
Net cash used by financing activities | (1,270 | ) | (2,699 | ) | ||||
|
|
|
| |||||
Effect of exchange rate changes on cash and cash equivalents | 68 | 36 | ||||||
|
|
|
| |||||
Net change in cash and cash equivalents | 52 | (2,915 | ) | |||||
Cash and cash equivalents at beginning of period | 2,784 | 5,993 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of period | $ | 2,836 | $ | 3,078 | ||||
|
|
|
| |||||
See Notes to Condensed Consolidated Financial Statements
On October 21, 2016, Genworth Financial entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“the Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and an indirect, wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into Genworth Financial with Genworth Financial surviving the merger as an indirect, wholly-owned subsidiary of the Parent. The Parent is a newly formed subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “China Oceanwide”). China Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, Genworth’s stockholders voted on and approved a proposal to adopt the Merger Agreement.
The transaction remains subject to closing conditions, including the receipt of required regulatory approvals in the U.S., China, and other international jurisdictions. Both parties are engaging with the relevant regulators regarding the applications and the pending transaction.
References to “Genworth” the “Company,” “we” or “our” in the accompanying unaudited condensed consolidated financial statements and these notes thereto are, unless the context otherwise requires, Financial” refer solely to Genworth Financial, on aInc., and not to any of its consolidated basis.
subsidiaries.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On January 1, 2017, we adopted new accounting guidance related to transition to the equity method of accounting. The guidance eliminates the retrospective application of the equity method of accounting when obtaining significant influence over a previously held investment. The guidance requires that an entity that has anavailable-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. We did not have any significant impact from this guidance on our consolidated financial statements.
On January 1, 2017, we adopted new accounting guidance related to the assessment of contingent put and call options in debt instruments.contractual sale restrictions. The guidance clarifies existing fair value guidance on measuring the requirements for assessing whether contingent call
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(put) options that can accelerate the paymentfair value of principal on debt instruments are clearlyan equity security subject to contractual sale restrictions and closelyadds new disclosures related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence.these securities. This guidance is consistent with our previous accounting practices and, accordingly, did not have any impact on our consolidated financial statements.
On January 1, 2017, we adopted new accounting guidance related to the effect of derivative contract novations on existing hedge accounting relationships. The guidance clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance is consistent with our previous accounting for derivative contract novations and, accordingly, did not have any impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In August 2017, the Financial Accounting Standards Board (“the FASB”) issued new guidance intended to enable entities to better portray the economics of their derivative risk management activities in the financial statements and enhance the transparency and understandability of hedge results. In certain situations, the amendments also simplify the application of hedge accounting. The guidance is currently effective for us on January 1, 2019,2024 using the prospective method, with early adoption permitted. We are in process of evaluating adopting this new guidance early and the impact it may have on our consolidated financial statements.
In May 2017, the FASB issued new guidance to clarify when to account for a change to share-based compensation as a modification. The new guidance requires modification accounting only if there are changes to the fair value, vesting conditions or classification, as a liability or equity, of the share-based compensation. The guidance is effective, prospectively, for us on January 1, 2018, accordingly, the guidance will not have any impact at adoption.
In March 2017, the FASB issued new guidance shortening the amortization period for the premium component of callable debt securities purchased at a premium. The guidance requires the premium to be amortized to the earliest call date. This change does not apply to securities held at a discount. The guidance is currently effective for us on January 1, 2019, with early adoption permitted. We are in process of evaluating the impact the guidance may have on our consolidated financial statements.
In February 2017, the FASB issued new guidance to clarify the accounting for gains and losses from the derecognition of nonfinancial assets and accounting for partial sales of nonfinancial assets. The new guidance clarifies when transferring ownership interests in a consolidated subsidiary holding nonfinancial assets is within scope. It also states that the reporting entity should identify each distinct nonfinancial asset and derecognize when a counterparty obtains control, and clarifies the accounting for partial sales. The new guidance is currently effective for us on January 1, 2018. We do not expect anya significant impactsimpact from this guidance on our consolidated financial statements.
In January 2017, the FASB issued new guidance simplifying the test for goodwill impairment. The new guidance states goodwill impairment is equal to the difference between the carrying value and fair value of the reporting unit up to the amount of recorded goodwill. The new guidance is currently effective for us on January 1, 2020, with early adoption permitted for testing dates after January 1, 2017. We do not expect any significant impacts from this new guidance on our consolidated financial statements.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In October 2016, the FASB issued new guidance related to the income tax effects of intra-entity transfers of assets other than inventory. The new guidance states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance is currently effective for us on January 1, 2018. We are still in process of evaluating the impact the guidance may have on ourcondensed consolidated financial statements including any cumulative effect adjustment that will be recorded directly to retained earnings as of the beginning of the period of adoption.
and disclosures.
single-A
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Weighted-average shares used in basic earnings (loss) per share calculations | 499.1 | 498.3 | 498.9 | 498.3 | ||||||||||||
Potentially dilutive securities: | ||||||||||||||||
Stock options, restricted stock units and stock appreciation rights | 2.5 | — | 2.3 | — | ||||||||||||
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| |||||||||
Weighted-average shares used in diluted earnings (loss) per share calculations (1) | 501.6 | 498.3 | 501.2 | 498.3 | ||||||||||||
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| |||||||||
Income (loss) from continuing operations: | ||||||||||||||||
Income (loss) from continuing operations | $ | 184 | $ | (347 | ) | $ | 671 | $ | 21 | |||||||
Less: income from continuing operations attributable to noncontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
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| |||||||||
Income (loss) from continuing operations available to Genworth Financial, Inc.’scommon stockholders | $ | 116 | $ | (395 | ) | $ | 473 | $ | (130 | ) | ||||||
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| |||||||||
Basic per share | $ | 0.23 | $ | (0.79 | ) | $ | 0.95 | $ | (0.26 | ) | ||||||
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| |||||||||
Diluted per share | $ | 0.23 | $ | (0.79 | ) | $ | 0.94 | $ | (0.26 | ) | ||||||
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| |||||||||
Income (loss) from discontinued operations: | ||||||||||||||||
Income (loss) from discontinued operations, net of taxes | $ | (9 | ) | $ | 15 | $ | (9 | ) | $ | (25 | ) | |||||
Less: income from discontinued operations, net of taxes, attributable tononcontrolling interests | — | — | — | — | ||||||||||||
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|
| |||||||||
Income (loss) from discontinued operations, net of taxes, available to GenworthFinancial, Inc.’s common stockholders | $ | (9 | ) | $ | 15 | $ | (9 | ) | $ | (25 | ) | |||||
|
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|
|
|
|
| |||||||||
Basic per share | $ | (0.02 | ) | $ | 0.03 | $ | (0.02 | ) | $ | (0.05 | ) | |||||
|
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|
|
|
|
|
| |||||||||
Diluted per share | $ | (0.02 | ) | $ | 0.03 | $ | (0.02 | ) | $ | (0.05 | ) | |||||
|
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|
|
|
|
| |||||||||
Net income (loss): | ||||||||||||||||
Income (loss) from continuing operations | $ | 184 | $ | (347 | ) | $ | 671 | $ | 21 | |||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | 15 | (9 | ) | (25 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | 175 | (332 | ) | 662 | (4 | ) | ||||||||||
Less: net income attributable to noncontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
|
|
|
|
|
|
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| |||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 107 | $ | (380 | ) | $ | 464 | $ | (155 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Basic per share | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
|
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|
|
| |||||||||
Diluted per share | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
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| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Weighted-average shares used in basic earnings per share calculations | 509.0 | 507.0 | 508.6 | 506.5 | ||||||||||||
Potentially dilutive securities: | ||||||||||||||||
Stock options, restricted stock units and other equity-based awards | 5.2 | 8.0 | 7.2 | 7.9 | ||||||||||||
Weighted-average shares used in diluted earnings per share calculations | 514.2 | 515.0 | 515.8 | 514.4 | ||||||||||||
Income from continuing operations: | ||||||||||||||||
Income from continuing operations | $ | 220 | $ | 245 | $ | 401 | $ | 419 | ||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 182 | $ | 245 | $ | 333 | $ | 419 | ||||||||
Basic per share | $ | 0.36 | $ | 0.48 | $ | 0.65 | $ | 0.83 | ||||||||
Diluted per share | $ | 0.36 | $ | 0.47 | $ | 0.65 | $ | 0.82 | ||||||||
Income (loss) from discontinued operations: | ||||||||||||||||
Income (loss) from discontinued operations, net of taxes | $ | (1 | ) | $ | (5 | ) | $ | (3 | ) | $ | 16 | |||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | — | — | 8 | ||||||||||||
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders | $ | (1 | ) | $ | (5 | ) | $ | (3 | ) | $ | 8 | |||||
Basic per share | $ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.02 | ||||||
Diluted per share | $ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.02 | ||||||
Net income: | ||||||||||||||||
Income from continuing operations | $ | 220 | $ | 245 | $ | 401 | $ | 419 | ||||||||
Income (loss) from discontinued operations, net of taxes | (1 | ) | (5 | ) | (3 | ) | 16 | |||||||||
Net income | 219 | 240 | 398 | 435 | ||||||||||||
Less: net income attributable to noncontrolling interests | 38 | — | 68 | 8 | ||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | 330 | $ | 427 | ||||||||
Basic per share (1) | $ | 0.36 | $ | 0.47 | $ | 0.65 | $ | 0.84 | ||||||||
Diluted per share (1) | $ | 0.35 | $ | 0.47 | $ | 0.64 | $ | 0.83 | ||||||||
(1) | May not total due to |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Fixed maturity securities—taxable | $ | 640 | $ | 655 | $ | 1,930 | 1,930 | |||||||||
Fixed maturitysecurities—non-taxable | 3 | 3 | 9 | 9 | ||||||||||||
Commercial mortgage loans | 78 | 79 | 231 | 237 | ||||||||||||
Restricted commercial mortgage loans related to securitization entities | 3 | 3 | 7 | 8 | ||||||||||||
Equity securities | 9 | 8 | 26 | 20 | ||||||||||||
Other invested assets | 39 | 34 | 106 | 105 | ||||||||||||
Restricted other invested assets related to securitization entities | — | — | 1 | 3 | ||||||||||||
Policy loans | 39 | 38 | 120 | 107 | ||||||||||||
Cash, cash equivalents and short-term investments | 10 | 5 | 26 | 16 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross investment income before expenses and fees | 821 | 825 | 2,456 | 2,435 | ||||||||||||
Expenses and fees | (24 | ) | (20 | ) | (68 | ) | (62 | ) | ||||||||
|
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| |||||||||
Net investment income | $ | 797 | $ | 805 | $ | 2,388 | $ | 2,373 | ||||||||
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|
|
| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Fixed maturity securities—taxable | $ | 578 | $ | 608 | $ | 1,158 | $ | 1,207 | ||||||||
Fixed maturity securities—non-taxable | 1 | 1 | 2 | 3 | ||||||||||||
Equity securities | 2 | 2 | 4 | 5 | ||||||||||||
Commercial mortgage loans | 78 | 103 | 159 | 181 | ||||||||||||
Policy loans | 51 | 40 | 101 | 90 | ||||||||||||
Limited partnerships | 32 | 54 | 39 | 85 | ||||||||||||
Other invested assets | 66 | 58 | 129 | 116 | ||||||||||||
Cash, cash equivalents, restricted cash and short-term investments | 1 | — | 1 | — | ||||||||||||
Gross investment income before expenses and fees | 809 | 866 | 1,593 | 1,687 | ||||||||||||
Expenses and fees | (22 | ) | (22 | ) | (42 | ) | (42 | ) | ||||||||
Net investment income | $ | 787 | $ | 844 | $ | 1,551 | $ | 1,645 | ||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
Realized gains | $ | 40 | $ | 39 | $ | 177 | $ | 205 | ||||||||
Realized losses | (10 | ) | (24 | ) | (55 | ) | (75 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net realized gains (losses) onavailable-for-sale securities | 30 | 15 | 122 | 130 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Impairments: | ||||||||||||||||
Total other-than-temporary impairments | (1 | ) | (2 | ) | (4 | ) | (35 | ) | ||||||||
Portion of other-than-temporary impairments included inother comprehensive income (loss) | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net other-than-temporary impairments | (1 | ) | (2 | ) | (4 | ) | (35 | ) | ||||||||
|
|
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|
|
|
|
| |||||||||
Trading securities | — | (4 | ) | 1 | 40 | |||||||||||
Commercial mortgage loans | 1 | (1 | ) | 3 | 1 | |||||||||||
Net gains (losses) related to securitization entities | 1 | 2 | 5 | (51 | ) | |||||||||||
Derivative instruments (1) | 54 | 10 | 93 | (52 | ) | |||||||||||
Contingent consideration adjustment | — | — | — | (2 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment gains (losses) | $ | 85 | $ | 20 | $ | 220 | $ | 31 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Realized investment gains (losses): | ||||||||||||||||
Available-for-sale fixed maturity securities: | ||||||||||||||||
Realized gains | $ | 5 | $ | 5 | $ | 15 | $ | 12 | ||||||||
Realized losses | (9 | ) | (4 | ) | (27 | ) | (7 | ) | ||||||||
Net realized gains (losses) on available-for-sale | (4 | ) | 1 | (12 | ) | 5 | ||||||||||
Net realized gains (losses) on equity securities sold | — | (2 | ) | — | (7 | ) | ||||||||||
Net realized gains (losses) on limited partnerships | — | — | — | 3 | ||||||||||||
Total net realized investment gains (losses) | (4 | ) | (1 | ) | (12 | ) | 1 | |||||||||
Net change in allowance for credit losses on available-for-sale | — | (4 | ) | — | (6 | ) | ||||||||||
Write-down of available-for-sale (1) | — | — | (2 | ) | (1 | ) | ||||||||||
Net unrealized gains (losses) on equity securities still held | (27 | ) | 6 | (33 | ) | (2 | ) | |||||||||
Net unrealized gains (losses) on limited partnerships | 24 | 65 | 59 | 99 | ||||||||||||
Commercial mortgage loans | 2 | (1 | ) | 3 | (2 | ) | ||||||||||
Derivative instruments (2) | 9 | 4 | 13 | 12 | ||||||||||||
Other | 4 | 1 | 8 | 2 | ||||||||||||
Net investment gains (losses) | $ | 8 | $ | 70 | $ | 36 | $ | 103 | ||||||||
(1) | Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis. |
(2) | See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses). |
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
The following represents the activityallowance for credit losses recognized in net income (loss) on debt securities where an other-than-temporary impairmentrelated to our
| As of or for the three months ended September 30, | As of or for the nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Beginning balance | $ | 38 | $ | 62 | $ | 42 | $ | 64 | ||||||||
Additions: | ||||||||||||||||
Other-than-temporary impairments not previously recognized | — | — | — | 1 | ||||||||||||
Reductions: | ||||||||||||||||
Securities sold, paid down or disposed | (5 | ) | (8 | ) | (9 | ) | (11 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | $ | 33 | $ | 54 | $ | 33 | $ | 54 | ||||||||
|
|
|
|
|
|
|
| |||||||||
three and six months ended June 30, 2022. The following table represents the allowance for credit losses aggregated by security type for
(Amounts in millions) | Beginning balance | Increase from securities without allowance in previous periods | Increase (decrease) from securities with allowance in previous periods | Securities sold | Decrease due to change in intent or requirement to sell | Write-offs | Recoveries | Ending balance | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
| Non-U.S. corporate | $ | 3 | $ | — | $ | 4 | $ | (7 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Total available-for-sale fixed maturity securities | $ | 3 | $ | — | $ | 4 | $ | (7 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
(Amounts in millions) | Beginning balance | Increase from securities without allowance in previous periods | Increase (decrease) from securities with allowance in previous periods | Securities sold | Decrease due to change in intent or requirement to sell | Write-offs | Recoveries | Ending balance | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
| Non-U.S. corporate | $ | 1 | $ | — | $ | 6 | $ | (7 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Commercial mortgage-backed | 3 | — | — | — | — | (3 | ) | — | — | |||||||||||||||||||||||
| Total available-for-sale fixed maturity securities | $ | 4 | $ | — | $ | 6 | $ | (7 | ) | $ | — | $ | (3 | ) | $ | — | $ | — | ||||||||||||||
(Amounts in millions) | September 30, 2017 | December 31, 2016 | ||||||
Net unrealized gains (losses) on investment securities: | ||||||||
Fixed maturity securities | $ | 4,878 | $ | 3,656 | ||||
Equity securities | 49 | 12 | ||||||
|
|
|
| |||||
Subtotal (1) | 4,927 | 3,668 | ||||||
Adjustments to deferred acquisition costs, present value of future profits, salesinducements and benefit reserves | (3,134 | ) | (1,611 | ) | ||||
Income taxes, net | (619 | ) | (711 | ) | ||||
|
|
|
| |||||
Net unrealized investment gains (losses) | 1,174 | 1,346 | ||||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests | 66 | 84 | ||||||
|
|
|
| |||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. | $ | 1,108 | $ | 1,262 | ||||
|
|
|
| |||||
(Amounts in millions) | June 30, 2022 | December 31, 2021 | ||||||
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses (1) | $ | (1,961 | ) | $ | 7,869 | |||
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses (1) | — | — | ||||||
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances | (17 | ) | (5,487 | ) | ||||
Income taxes, net | 370 | (507 | ) | |||||
Net unrealized investment gains (losses) | (1,608 | ) | 1,875 | |||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests | (54 | ) | 15 | |||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. | $ | (1,554 | ) | $ | 1,860 | |||
(1) | Excludes foreign exchange. |
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The change in net unrealized gains (losses) on
| As of or for the three months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Beginning balance | $ | 1,180 | $ | 2,789 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on investment securities | (10 | ) | 228 | |||||
Adjustment to deferred acquisition costs | (1 | ) | (17 | ) | ||||
Adjustment to present value of future profits | (3 | ) | 3 | |||||
Adjustment to sales inducements | — | (6 | ) | |||||
Adjustment to benefit reserves | (92 | ) | (81 | ) | ||||
Provision for income taxes | 36 | (41 | ) | |||||
|
|
|
| |||||
Change in unrealized gains (losses) on investment securities | (70 | ) | 86 | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $10 and $4 | (19 | ) | (9 | ) | ||||
|
|
|
| |||||
Change in net unrealized investment gains (losses) | (89 | ) | 77 | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (17 | ) | 6 | |||||
|
|
|
| |||||
Ending balance | $ | 1,108 | $ | 2,860 | ||||
|
|
|
| |||||
| As of or for the nine months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Beginning balance | $ | 1,262 | $ | 1,254 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on investment securities | 1,377 | 3,584 | ||||||
Adjustment to deferred acquisition costs | (1,047 | ) | (291 | ) | ||||
Adjustment to present value of future profits | (36 | ) | (26 | ) | ||||
Adjustment to sales inducements | (11 | ) | (46 | ) | ||||
Adjustment to benefit reserves | (429 | ) | (612 | ) | ||||
Provision for income taxes | 51 | (917 | ) | |||||
|
|
|
| |||||
Change in unrealized gains (losses) on investment securities | (95 | ) | 1,692 | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $41 and $33 | (77 | ) | (62 | ) | ||||
|
|
|
| |||||
Change in net unrealized investment gains (losses) | (172 | ) | 1,630 | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (18 | ) | 24 | |||||
|
|
|
| |||||
Ending balance | $ | 1,108 | $ | 2,860 | ||||
|
|
|
| |||||
As of or for the three months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Beginning balance | $ | 850 | $ | 1,919 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on fixed maturity securities | (4,713 | ) | 1,774 | |||||
Adjustment to deferred acquisition costs | 1,082 | 42 | ||||||
Adjustment to present value of future profits | 80 | 1 | ||||||
Adjustment to sales inducements | 2 | 2 | ||||||
Adjustment to benefit reserves | 519 | (1,887 | ) | |||||
Provision for income taxes | 594 | 14 | ||||||
Change in unrealized gains (losses) on investment securities | (2,436 | ) | (54 | ) | ||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $(1) and $— | 4 | — | ||||||
Change in net unrealized investment gains (losses) | (2,432 | ) | (54 | ) | ||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (28 | ) | — | |||||
Ending balance | $ | (1,554 | ) | $ | 1,865 | |||
As of or for the six months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Beginning balance | $ | 1,860 | $ | 2,214 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on fixed maturity securities | (9,843 | ) | (1,609 | ) | ||||
Adjustment to deferred acquisition costs | 1,319 | (132 | ) | |||||
Adjustment to present value of future profits | 81 | 2 | ||||||
Adjustment to sales inducements | 24 | 5 | ||||||
Adjustment to benefit reserves | 4,046 | 1,258 | ||||||
Provision for income taxes | 880 | 106 | ||||||
Change in unrealized gains (losses) on investment securities | (3,493 | ) | (370 | ) | ||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $ (3) and $1 | 10 | (4 | ) | |||||
Change in net unrealized investment gains (losses) | (3,483 | ) | (374 | ) | ||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (69 | ) | (25 | ) | ||||
Ending balance | $ | (1,554 | ) | $ | 1,865 | |||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
(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 | $ | 4,893 | $ | 784 | $ | — | $ | (7 | ) | $ | — | $ | 5,670 | |||||||||||
State and political subdivisions | 2,639 | 247 | — | (26 | ) | — | 2,860 | |||||||||||||||||
Non-U.S. government | 2,143 | 107 | — | (24 | ) | — | 2,226 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,382 | 556 | — | (15 | ) | — | 4,923 | |||||||||||||||||
Energy | 2,243 | 207 | — | (10 | ) | — | 2,440 | |||||||||||||||||
Finance and insurance | 6,051 | 547 | — | (11 | ) | — | 6,587 | |||||||||||||||||
Consumer—non-cyclical | 4,330 | 508 | — | (10 | ) | — | 4,828 | |||||||||||||||||
Technology and communications | 2,558 | 193 | — | (11 | ) | — | 2,740 | |||||||||||||||||
Industrial | 1,247 | 102 | — | (3 | ) | — | 1,346 | |||||||||||||||||
Capital goods | 2,067 | 263 | — | (9 | ) | — | 2,321 | |||||||||||||||||
Consumer—cyclical | 1,506 | 111 | — | (6 | ) | — | 1,611 | |||||||||||||||||
Transportation | 1,188 | 124 | — | (6 | ) | — | 1,306 | |||||||||||||||||
Other | 358 | 24 | — | (2 | ) | — | 380 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total U.S. corporate | 25,930 | 2,635 | — | (83 | ) | — | 28,482 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 1,022 | 45 | — | (5 | ) | — | 1,062 | |||||||||||||||||
Energy | 1,330 | 140 | — | (7 | ) | — | 1,463 | |||||||||||||||||
Finance and insurance | 2,524 | 177 | — | (5 | ) | — | 2,696 | |||||||||||||||||
Consumer—non-cyclical | 692 | 27 | — | (3 | ) | — | 716 | |||||||||||||||||
Technology and communications | 945 | 71 | — | (2 | ) | — | 1,014 | |||||||||||||||||
Industrial | 979 | 81 | — | (2 | ) | — | 1,058 | |||||||||||||||||
Capital goods | 556 | 33 | — | (2 | ) | — | 587 | |||||||||||||||||
Consumer—cyclical | 518 | 10 | — | (1 | ) | — | 527 | |||||||||||||||||
Transportation | 650 | 71 | — | (3 | ) | — | 718 | |||||||||||||||||
Other | 2,594 | 193 | — | (5 | ) | — | 2,782 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate | 11,810 | 848 | — | (35 | ) | — | 12,623 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed | 3,950 | �� | 255 | 14 | (10 | ) | — | 4,209 | ||||||||||||||||
Commercial mortgage-backed | 3,346 | 105 | 2 | (39 | ) | — | 3,414 | |||||||||||||||||
Other asset-backed | 3,052 | 20 | 1 | (5 | ) | — | 3,068 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturity securities | 57,763 | 5,001 | 17 | (229 | ) | — | 62,552 | |||||||||||||||||
Equity securities | 720 | 59 | — | (14 | ) | — | 765 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total available-for-sale securities | $ | 58,483 | $ | 5,060 | $ | 17 | $ | (243 | ) | $ | — | $ | 63,317 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(Amounts in millions) | Amortized cost or cost | Gross unrealized gains | Gross unrealized losses | Allowance for credit losses | Fair value | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,387 | $ | 274 | $ | (34 | ) | $ | — | $ | 3,627 | |||||||||
State and political subdivisions | 2,971 | 74 | (196 | ) | — | 2,849 | ||||||||||||||
Non-U.S. government | 762 | 17 | (97 | ) | — | 682 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,253 | 135 | (285 | ) | — | 4,103 | ||||||||||||||
Energy | 2,496 | 54 | (173 | ) | — | 2,377 | ||||||||||||||
Finance and insurance | 7,947 | 126 | (604 | ) | — | 7,469 | ||||||||||||||
Consumer—non-cyclical | 4,912 | 172 | (292 | ) | — | 4,792 | ||||||||||||||
Technology and communications | 3,224 | 60 | (260 | ) | — | 3,024 | ||||||||||||||
Industrial | 1,263 | 22 | (98 | ) | — | 1,187 | ||||||||||||||
Capital goods | 2,326 | 77 | (145 | ) | — | 2,258 | ||||||||||||||
Consumer—cyclical | 1,679 | 27 | (125 | ) | — | 1,581 | ||||||||||||||
Transportation | 1,113 | 52 | (61 | ) | — | 1,104 | ||||||||||||||
Other | 353 | 8 | (13 | ) | — | 348 | ||||||||||||||
Total U.S. corporate | 29,566 | 733 | (2,056 | ) | — | 28,243 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 864 | 3 | (57 | ) | — | 810 | ||||||||||||||
Energy | 1,123 | 36 | (62 | ) | — | 1,097 | ||||||||||||||
Finance and insurance | 2,103 | 62 | (153 | ) | — | 2,012 | ||||||||||||||
Consumer—non-cyclical | 630 | 4 | (64 | ) | — | 570 | ||||||||||||||
Technology and communications | 1,007 | 10 | (74 | ) | — | 943 | ||||||||||||||
Industrial | 903 | 21 | (63 | ) | — | 861 | ||||||||||||||
Capital goods | 609 | 6 | (50 | ) | — | 565 | ||||||||||||||
Consumer—cyclical | 314 | — | (29 | ) | — | 285 | ||||||||||||||
Transportation | 392 | 20 | (22 | ) | — | 390 | ||||||||||||||
Other | 960 | 39 | (50 | ) | — | 949 | ||||||||||||||
Total non-U.S. corporate | 8,905 | 201 | (624 | ) | — | 8,482 | ||||||||||||||
Residential mortgage-backed | 1,214 | 36 | (37 | ) | — | 1,213 | ||||||||||||||
Commercial mortgage-backed | 2,272 | 7 | (142 | ) | — | 2,137 | ||||||||||||||
Other asset-backed | 2,171 | 1 | (119 | ) | — | 2,053 | ||||||||||||||
| Total available-for-sale fixed maturity securities | $ | 51,248 | $ | 1,343 | $ | (3,305 | ) | $ | — | $ | 49,286 | |||||||||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
(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 | $ | 5,439 | $ | 647 | $ | — | $ | (50 | ) | $ | — | $ | 6,036 | |||||||||||
State and political subdivisions | 2,515 | 182 | — | (50 | ) | — | 2,647 | |||||||||||||||||
Non-U.S. government | 2,024 | 101 | — | (18 | ) | — | 2,107 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,137 | 454 | — | (41 | ) | — | 4,550 | |||||||||||||||||
Energy | 2,167 | 157 | — | (24 | ) | — | 2,300 | |||||||||||||||||
Finance and insurance | 5,719 | 424 | — | (46 | ) | — | 6,097 | |||||||||||||||||
Consumer—non-cyclical | 4,335 | 433 | — | (34 | ) | — | 4,734 | |||||||||||||||||
Technology and communications | 2,473 | 157 | — | (32 | ) | — | 2,598 | |||||||||||||||||
Industrial | 1,161 | 76 | — | (14 | ) | — | 1,223 | |||||||||||||||||
Capital goods | 2,043 | 228 | — | (13 | ) | — | 2,258 | |||||||||||||||||
Consumer—cyclical | 1,455 | 92 | — | (17 | ) | — | 1,530 | |||||||||||||||||
Transportation | 1,121 | 86 | — | (17 | ) | — | 1,190 | |||||||||||||||||
Other | 332 | 17 | — | (1 | ) | — | 348 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total U.S. corporate | 24,943 | 2,124 | — | (239 | ) | — | 26,828 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 940 | 40 | — | (11 | ) | — | 969 | |||||||||||||||||
Energy | 1,234 | 109 | — | (12 | ) | — | 1,331 | |||||||||||||||||
Finance and insurance | 2,413 | 134 | — | (9 | ) | — | 2,538 | |||||||||||||||||
Consumer—non-cyclical | 711 | 17 | — | (14 | ) | — | 714 | |||||||||||||||||
Technology and communications | 953 | 44 | — | (10 | ) | — | 987 | |||||||||||||||||
Industrial | 928 | 39 | — | (9 | ) | — | 958 | |||||||||||||||||
Capital goods | 518 | 21 | — | (4 | ) | — | 535 | |||||||||||||||||
Consumer—cyclical | 434 | 10 | — | (2 | ) | — | 442 | |||||||||||||||||
Transportation | 619 | 65 | — | (7 | ) | — | 677 | |||||||||||||||||
Other | 2,967 | 190 | — | (13 | ) | — | 3,144 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate | 11,717 | 669 | — | (91 | ) | — | 12,295 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed | 4,122 | 259 | 10 | (12 | ) | — | 4,379 | |||||||||||||||||
Commercial mortgage-backed | 3,084 | 98 | 3 | (56 | ) | — | 3,129 | |||||||||||||||||
Other asset-backed | 3,170 | 15 | 1 | (35 | ) | — | 3,151 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturity securities | 57,014 | 4,095 | 14 | (551 | ) | — | 60,572 | |||||||||||||||||
Equity securities | 628 | 31 | — | (27 | ) | — | 632 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalavailable-for-sale securities | $ | 57,642 | $ | 4,126 | $ | 14 | $ | (578 | ) | $ | — | $ | 61,204 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(Amounts in millions) | Amortized cost or cost | Gross unrealized gains | Gross unrealized losses | Allowance for credit losses | Fair value | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,368 | $ | 1,184 | $ | — | $ | — | $ | 4,552 | ||||||||||
State and political subdivisions | 2,982 | 474 | (6 | ) | — | 3,450 | ||||||||||||||
Non-U.S. government | 762 | 86 | (13 | ) | — | 835 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,330 | 783 | (9 | ) | — | 5,104 | ||||||||||||||
Energy | 2,581 | 363 | (10 | ) | — | 2,934 | ||||||||||||||
Finance and insurance | 8,003 | 1,012 | (24 | ) | — | 8,991 | ||||||||||||||
Consumer—non-cyclical | 5,138 | 1,029 | (8 | ) | — | 6,159 | ||||||||||||||
Technology and communications | 3,345 | 476 | (13 | ) | — | 3,808 | ||||||||||||||
Industrial | 1,322 | 175 | (3 | ) | — | 1,494 | ||||||||||||||
Capital goods | 2,334 | 415 | (4 | ) | — | 2,745 | ||||||||||||||
Consumer—cyclical | 1,703 | 203 | (7 | ) | — | 1,899 | ||||||||||||||
Transportation | 1,122 | 249 | — | — | 1,371 | |||||||||||||||
Other | 379 | 41 | (1 | ) | — | 419 | ||||||||||||||
Total U.S. corporate | 30,257 | 4,746 | (79 | ) | — | 34,924 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 867 | 63 | (2 | ) | — | 928 | ||||||||||||||
Energy | 1,194 | 190 | (1 | ) | — | 1,383 | ||||||||||||||
Finance and insurance | 2,171 | 270 | (9 | ) | — | 2,432 | ||||||||||||||
Consumer—non-cyclical | 664 | 81 | (2 | ) | — | 743 | ||||||||||||||
Technology and communications | 1,085 | 166 | (1 | ) | — | 1,250 | ||||||||||||||
Industrial | 933 | 117 | (3 | ) | — | 1,047 | ||||||||||||||
Capital goods | 640 | 66 | (1 | ) | — | 705 | ||||||||||||||
Consumer—cyclical | 316 | 27 | (2 | ) | — | 341 | ||||||||||||||
Transportation | 422 | 68 | (1 | ) | — | 489 | ||||||||||||||
Other | 1,052 | 169 | (4 | ) | — | 1,217 | ||||||||||||||
Total non-U.S. corporate | 9,344 | 1,217 | (26 | ) | — | 10,535 | ||||||||||||||
Residential mortgage-backed | 1,325 | 116 | (1 | ) | — | 1,440 | ||||||||||||||
Commercial mortgage-backed | 2,435 | 152 | (3 | ) | — | 2,584 | ||||||||||||||
Other asset-backed | 2,138 | 29 | (7 | ) | — | 2,160 | ||||||||||||||
| Total available-for-sale fixed maturity securities | $ | 52,611 | $ | 8,004 | $ | (135 | ) | $ | — | $ | 60,480 | |||||||||
| 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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
U.S. government, agenciesand government-sponsoredenterprises | $ | 283 | $ | (6 | ) | 22 | $ | 31 | $ | (1 | ) | 4 | $ | 314 | $ | (7 | ) | 26 | ||||||||||||||||||
State and political subdivisions | 213 | (5 | ) | 45 | 230 | (21 | ) | 23 | 443 | (26 | ) | 68 | ||||||||||||||||||||||||
Non-U.S. government | 922 | (23 | ) | 36 | 24 | (1 | ) | 14 | 946 | (24 | ) | 50 | ||||||||||||||||||||||||
U.S. corporate | 2,335 | (47 | ) | 333 | 766 | (36 | ) | 106 | 3,101 | (83 | ) | 439 | ||||||||||||||||||||||||
Non-U.S. corporate | 1,562 | (22 | ) | 222 | 261 | (13 | ) | 36 | 1,823 | (35 | ) | 258 | ||||||||||||||||||||||||
Residential mortgage-backed | 656 | (9 | ) | 80 | 33 | (1 | ) | 28 | 689 | (10 | ) | 108 | ||||||||||||||||||||||||
Commercial mortgage-backed | 837 | (25 | ) | 120 | 201 | (14 | ) | 30 | 1,038 | (39 | ) | 150 | ||||||||||||||||||||||||
Other asset-backed | 736 | (4 | ) | 131 | 173 | (1 | ) | 40 | 909 | (5 | ) | 171 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Subtotal, fixed maturitysecurities | 7,544 | (141 | ) | 989 | 1,719 | (88 | ) | 281 | 9,263 | (229 | ) | 1,270 | ||||||||||||||||||||||||
Equity securities | 82 | (5 | ) | 142 | 111 | (9 | ) | 89 | 193 | (14 | ) | 231 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total for securities in an unrealizedloss position | $ | 7,626 | $ | (146 | ) | 1,131 | $ | 1,830 | $ | (97 | ) | 370 | $ | 9,456 | $ | (243 | ) | 1,501 | ||||||||||||||||||
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| |||||||||||||||||||
% Below cost—fixed maturitysecurities: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 7,544 | $ | (141 | ) | 989 | $ | 1,719 | $ | (88 | ) | 281 | $ | 9,263 | $ | (229 | ) | 1,270 | ||||||||||||||||||
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| |||||||||||||||||||
Total fixed maturity securities | 7,544 | (141 | ) | 989 | 1,719 | (88 | ) | 281 | 9,263 | (229 | ) | 1,270 | ||||||||||||||||||||||||
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| |||||||||||||||||||
% Below cost—equity securities: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | 79 | (4 | ) | 139 | 111 | (9 | ) | 89 | 190 | (13 | ) | 228 | ||||||||||||||||||||||||
20%-50% Below cost | 3 | (1 | ) | 3 | — | — | — | 3 | (1 | ) | 3 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Total equity securities | 82 | (5 | ) | 142 | 111 | (9 | ) | 89 | 193 | (14 | ) | 231 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total for securities in an unrealizedloss position | $ | 7,626 | $ | (146 | ) | 1,131 | $ | 1,830 | $ | (97 | ) | 370 | $ | 9,456 | $ | (243 | ) | 1,501 | ||||||||||||||||||
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Investment grade | $ | 7,437 | $ | (139 | ) | 984 | $ | 1,656 | $ | (90 | ) | 287 | $ | 9,093 | $ | (229 | ) | 1,271 | ||||||||||||||||||
Below investment grade | 189 | (7 | ) | 147 | 174 | (7 | ) | 83 | 363 | (14 | ) | 230 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total for securities in an unrealizedloss position | $ | 7,626 | $ | (146 | ) | 1,131 | $ | 1,830 | $ | (97 | ) | 370 | $ | 9,456 | $ | (243 | ) | 1,501 | ||||||||||||||||||
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| |||||||||||||||||||
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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 797 | $ | (33 | ) | 49 | $ | 10 | $ | (1 | ) | 3 | $ | 807 | $ | (34 | ) | 52 | ||||||||||||||||||
State and political subdivisions | 1,531 | (193 | ) | 272 | 25 | (3 | ) | 5 | 1,556 | (196 | ) | 277 | ||||||||||||||||||||||||
Non-U.S. government | 389 | (73 | ) | 64 | 73 | (24 | ) | 12 | 462 | (97 | ) | 76 | ||||||||||||||||||||||||
U.S. corporate | 17,949 | (1,896 | ) | 2,235 | 622 | (160 | ) | 72 | 18,571 | (2,056 | ) | 2,307 | ||||||||||||||||||||||||
Non-U.S. corporate | 5,407 | (558 | ) | 691 | 248 | (66 | ) | 35 | 5,655 | (624 | ) | 726 | ||||||||||||||||||||||||
Residential mortgage-backed | 474 | (36 | ) | 121 | 4 | (1 | ) | 5 | 478 | (37 | ) | 126 | ||||||||||||||||||||||||
Commercial mortgage-backed | 1,882 | (137 | ) | 265 | 42 | (5 | ) | 6 | 1,924 | (142 | ) | 271 | ||||||||||||||||||||||||
Other asset-backed | 1,798 | (113 | ) | 319 | 78 | (6 | ) | 19 | 1,876 | (119 | ) | 338 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 30,227 | $ | (3,039 | ) | 4,016 | $ | 1,102 | $ | (266 | ) | 157 | $ | 31,329 | $ | (3,305 | ) | 4,173 | ||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 28,164 | $ | (2,402 | ) | 3,756 | $ | 627 | $ | (101 | ) | 98 | $ | 28,791 | $ | (2,503 | ) | 3,854 | ||||||||||||||||||
20%-50% Below cost | 2,063 | (637 | ) | 260 | 475 | (165 | ) | 59 | 2,538 | (802 | ) | 319 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 30,227 | $ | (3,039 | ) | 4,016 | $ | 1,102 | $ | (266 | ) | 157 | $ | 31,329 | $ | (3,305 | ) | 4,173 | ||||||||||||||||||
Investment grade | $ | 28,568 | $ | (2,801 | ) | 3,763 | $ | 1,023 | $ | (241 | ) | 144 | $ | 29,591 | $ | (3,042 | ) | 3,907 | ||||||||||||||||||
Below investment grade | 1,659 | (238 | ) | 253 | 79 | (25 | ) | 13 | 1,738 | (263 | ) | 266 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 30,227 | $ | (3,039 | ) | 4,016 | $ | 1,102 | $ | (266 | ) | 157 | $ | 31,329 | $ | (3,305 | ) | 4,173 | ||||||||||||||||||
| 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 | |||||||||||||||||||||||||||
| Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 468 | $ | (10 | ) | 69 | $ | 104 | $ | (5 | ) | 17 | $ | 572 | $ | (15 | ) | 86 | ||||||||||||||||||
Energy | 123 | (1 | ) | 22 | 146 | (9 | ) | 16 | 269 | (10 | ) | 38 | ||||||||||||||||||||||||
Finance and insurance | 542 | (7 | ) | 75 | 154 | (4 | ) | 21 | 696 | (11 | ) | 96 | ||||||||||||||||||||||||
Consumer—non-cyclical | 325 | (7 | ) | 50 | 84 | (3 | ) | 12 | 409 | (10 | ) | 62 | ||||||||||||||||||||||||
Technology andcommunications | 208 | (4 | ) | 30 | 127 | (7 | ) | 19 | 335 | (11 | ) | 49 | ||||||||||||||||||||||||
Industrial | 55 | (1 | ) | 12 | 56 | (2 | ) | 8 | 111 | (3 | ) | 20 | ||||||||||||||||||||||||
Capital goods | 274 | (8 | ) | 31 | 8 | (1 | ) | 2 | 282 | (9 | ) | 33 | ||||||||||||||||||||||||
Consumer—cyclical | 127 | (2 | ) | 18 | 70 | (4 | ) | 9 | 197 | (6 | ) | 27 | ||||||||||||||||||||||||
Transportation | 190 | (5 | ) | 24 | 17 | (1 | ) | 2 | 207 | (6 | ) | 26 | ||||||||||||||||||||||||
Other | 23 | (2 | ) | 2 | — | — | — | 23 | (2 | ) | 2 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Subtotal, U.S. corporatesecurities | 2,335 | (47 | ) | 333 | 766 | (36 | ) | 106 | 3,101 | (83 | ) | 439 | ||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 227 | (4 | ) | 31 | 19 | (1 | ) | 2 | 246 | (5 | ) | 33 | ||||||||||||||||||||||||
Energy | 142 | (3 | ) | 21 | 69 | (4 | ) | 11 | 211 | (7 | ) | 32 | ||||||||||||||||||||||||
Finance and insurance | 324 | (3 | ) | 49 | 50 | (2 | ) | 9 | 374 | (5 | ) | 58 | ||||||||||||||||||||||||
Consumer—non-cyclical | 131 | (2 | ) | 16 | 34 | (1 | ) | 4 | 165 | (3 | ) | 20 | ||||||||||||||||||||||||
Technology andcommunications | 80 | (1 | ) | 17 | 12 | (1 | ) | 2 | 92 | (2 | ) | 19 | ||||||||||||||||||||||||
Industrial | 67 | (1 | ) | 10 | 11 | (1 | ) | 2 | 78 | (2 | ) | 12 | ||||||||||||||||||||||||
Capital goods | 34 | (1 | ) | 6 | 34 | (1 | ) | 3 | 68 | (2 | ) | 9 | ||||||||||||||||||||||||
Consumer—cyclical | 101 | (1 | ) | 15 | — | — | — | 101 | (1 | ) | 15 | |||||||||||||||||||||||||
Transportation | 61 | (1 | ) | 13 | 32 | (2 | ) | 3 | 93 | (3 | ) | 16 | ||||||||||||||||||||||||
Other | 395 | (5 | ) | 44 | — | — | — | 395 | (5 | ) | 44 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Subtotal,non-U.S. corporatesecurities | 1,562 | (22 | ) | 222 | 261 | (13 | ) | 36 | 1,823 | (35 | ) | 258 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total for corporate securities in anunrealized loss position | $ | 3,897 | $ | (69 | ) | 555 | $ | 1,027 | $ | (49 | ) | 142 | $ | 4,924 | $ | (118 | ) | 697 | ||||||||||||||||||
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As indicated2022:
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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 2,176 | $ | (268 | ) | 301 | $ | 56 | $ | (17 | ) | 15 | $ | 2,232 | $ | (285 | ) | 316 | ||||||||||||||||||
Energy | 1,534 | (162 | ) | 205 | 53 | (11 | ) | 6 | 1,587 | (173 | ) | 211 | ||||||||||||||||||||||||
Finance and insurance | 5,276 | (554 | ) | 637 | 183 | (50 | ) | 17 | 5,459 | (604 | ) | 654 | ||||||||||||||||||||||||
Consumer—non-cyclical | 2,657 | (268 | ) | 284 | 76 | (24 | ) | 7 | 2,733 | (292 | ) | 291 | ||||||||||||||||||||||||
Technology and communications | 2,192 | (227 | ) | 282 | 123 | (33 | ) | 11 | 2,315 | (260 | ) | 293 | ||||||||||||||||||||||||
Industrial | 805 | (96 | ) | 101 | 11 | (2 | ) | 1 | 816 | (98 | ) | 102 | ||||||||||||||||||||||||
Capital goods | 1,340 | (138 | ) | 162 | 24 | (7 | ) | 4 | 1,364 | (145 | ) | 166 | ||||||||||||||||||||||||
Consumer—cyclical | 1,107 | (111 | ) | 156 | 73 | (14 | ) | 7 | 1,180 | (125 | ) | 163 | ||||||||||||||||||||||||
Transportation | 716 | (60 | ) | 87 | 5 | (1 | ) | 2 | 721 | (61 | ) | 89 | ||||||||||||||||||||||||
Other | 146 | (12 | ) | 20 | 18 | (1 | ) | 2 | 164 | (13 | ) | 22 | ||||||||||||||||||||||||
Subtotal, U.S. corporate securities | 17,949 | (1,896 | ) | 2,235 | 622 | (160 | ) | 72 | 18,571 | (2,056 | ) | 2,307 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 596 | (51 | ) | 63 | 21 | (6 | ) | 3 | 617 | (57 | ) | 66 | ||||||||||||||||||||||||
Energy | 608 | (61 | ) | 65 | 4 | (1 | ) | 1 | 612 | (62 | ) | 66 | ||||||||||||||||||||||||
Finance and insurance | 1,282 | (117 | ) | 190 | 144 | (36 | ) | 16 | 1,426 | (153 | ) | 206 | ||||||||||||||||||||||||
Consumer—non-cyclical | 480 | (61 | ) | 51 | 8 | (3 | ) | 4 | 488 | (64 | ) | 55 | ||||||||||||||||||||||||
Technology and communications | 704 | (74 | ) | 83 | — | — | — | 704 | (74 | ) | 83 | |||||||||||||||||||||||||
Industrial | 475 | (58 | ) | 68 | 16 | (5 | ) | 2 | 491 | (63 | ) | 70 | ||||||||||||||||||||||||
Capital goods | 428 | (50 | ) | 54 | — | — | — | 428 | (50 | ) | 54 | |||||||||||||||||||||||||
Consumer—cyclical | 236 | (26 | ) | 38 | 19 | (3 | ) | 4 | 255 | (29 | ) | 42 | ||||||||||||||||||||||||
Transportation | 195 | (22 | ) | 25 | — | — | — | 195 | (22 | ) | 25 | |||||||||||||||||||||||||
Other | 403 | (38 | ) | 54 | 36 | (12 | ) | 5 | 439 | (50 | ) | 59 | ||||||||||||||||||||||||
Subtotal, non-U.S. corporate securities | 5,407 | (558 | ) | 691 | 248 | (66 | ) | 35 | 5,655 | (624 | ) | 726 | ||||||||||||||||||||||||
Total for corporate securities in an unrealized loss position | $ | 23,356 | $ | (2,454 | ) | 2,926 | $ | 870 | $ | (226 | ) | 107 | $ | 24,226 | $ | (2,680 | ) | 3,033 | ||||||||||||||||||
92% of the unrealized losses were related to investment grade securities as of September 30, 2017. These unrealized losses were predominantly attributable to corporate securities including variable rate securities purchased in a higher rate and lower spread environment. The average fair value percentage below cost for these securities was approximately 5% as of September 30, 2017. As of September 30, 2017, the company did not have any fixed maturity securities that have been in a continuous unrealized loss position for 12 months or more with a fair value that was more than 20% below cost.
| 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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
U.S. government, agenciesand government-sponsoredenterprises | $ | 1,074 | $ | (50 | ) | 37 | $ | — | $ | — | — | $ | 1,074 | $ | (50 | ) | 37 | |||||||||||||||||||
State and political subdivisions | 644 | (32 | ) | 109 | 142 | (18 | ) | 12 | 786 | (50 | ) | 121 | ||||||||||||||||||||||||
Non-U.S. government | 497 | (18 | ) | 51 | — | — | — | 497 | (18 | ) | 51 | |||||||||||||||||||||||||
U.S. corporate | 5,221 | (190 | ) | 711 | 662 | (49 | ) | 94 | 5,883 | (239 | ) | 805 | ||||||||||||||||||||||||
Non-U.S. corporate | 2,257 | (66 | ) | 330 | 408 | (25 | ) | 57 | 2,665 | (91 | ) | 387 | ||||||||||||||||||||||||
Residential mortgage-backed | 725 | (11 | ) | 100 | 58 | (1 | ) | 35 | 783 | (12 | ) | 135 | ||||||||||||||||||||||||
Commercial mortgage-backed | 1,091 | (55 | ) | 168 | 25 | (1 | ) | 9 | 1,116 | (56 | ) | 177 | ||||||||||||||||||||||||
Other asset-backed | 1,069 | (13 | ) | 184 | 328 | (22 | ) | 68 | 1,397 | (35 | ) | 252 | ||||||||||||||||||||||||
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Subtotal, fixed maturitysecurities | 12,578 | (435 | ) | 1,690 | 1,623 | (116 | ) | 275 | 14,201 | (551 | ) | 1,965 | ||||||||||||||||||||||||
Equity securities | 119 | (9 | ) | 182 | 114 | (18 | ) | 47 | 233 | (27 | ) | 229 | ||||||||||||||||||||||||
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Total for securities in an unrealizedloss position | $ | 12,697 | $ | (444 | ) | 1,872 | $ | 1,737 | $ | (134 | ) | 322 | $ | 14,434 | $ | (578 | ) | 2,194 | ||||||||||||||||||
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% Below cost—fixed maturitysecurities: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 12,578 | $ | (435 | ) | 1,690 | $ | 1,543 | $ | (90 | ) | 267 | $ | 14,121 | $ | (525 | ) | 1,957 | ||||||||||||||||||
20%-50% Below cost | — | — | — | 80 | (26 | ) | 8 | 80 | (26 | ) | 8 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Total fixed maturity securities | 12,578 | (435 | ) | 1,690 | 1,623 | (116 | ) | 275 | 14,201 | (551 | ) | 1,965 | ||||||||||||||||||||||||
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% Below cost—equity securities: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | 118 | (8 | ) | 167 | 101 | (14 | ) | 38 | 219 | (22 | ) | 205 | ||||||||||||||||||||||||
20%-50% Below cost | 1 | (1 | ) | 15 | 13 | (4 | ) | 9 | 14 | (5 | ) | 24 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total equity securities | 119 | (9 | ) | 182 | 114 | (18 | ) | 47 | 233 | (27 | ) | 229 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total for securities in an unrealizedloss position | $ | 12,697 | $ | (444 | ) | 1,872 | $ | 1,737 | $ | (134 | ) | 322 | $ | 14,434 | $ | (578 | ) | 2,194 | ||||||||||||||||||
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| |||||||||||||||||||
Investment grade | $ | 12,339 | $ | (432 | ) | 1,657 | $ | 1,354 | $ | (108 | ) | 250 | $ | 13,693 | $ | (540 | ) | 1,907 | ||||||||||||||||||
Below investment grade | 358 | (12 | ) | 215 | 383 | (26 | ) | 72 | 741 | (38 | ) | 287 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total for securities in an unrealizedloss position | $ | 12,697 | $ | (444 | ) | 1,872 | $ | 1,737 | $ | (134 | ) | 322 | $ | 14,434 | $ | (578 | ) | 2,194 | ||||||||||||||||||
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|
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|
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|
|
|
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| |||||||||||||||||||
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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 339 | $ | (6 | ) | 67 | $ | — | $ | — | — | $ | 339 | $ | (6 | ) | 67 | |||||||||||||||||||
Non-U.S. government | 173 | (9 | ) | 28 | 19 | (4 | ) | 1 | 192 | (13 | ) | 29 | ||||||||||||||||||||||||
U.S. corporate | 2,593 | (64 | ) | 266 | 196 | (15 | ) | 22 | 2,789 | (79 | ) | 288 | ||||||||||||||||||||||||
Non-U.S. corporate | 912 | (21 | ) | 124 | 62 | (5 | ) | 8 | 974 | (26 | ) | 132 | ||||||||||||||||||||||||
Residential mortgage-backed | 97 | (1 | ) | 22 | — | — | — | 97 | (1 | ) | 22 | |||||||||||||||||||||||||
Commercial mortgage-backed | 113 | (2 | ) | 17 | 31 | (1 | ) | 4 | 144 | (3 | ) | 21 | ||||||||||||||||||||||||
Other asset-backed | 764 | (7 | ) | 111 | — | — | — | 764 | (7 | ) | 111 | |||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 4,991 | $ | (110 | ) | 635 | $ | 308 | $ | (25 | ) | 35 | $ | 5,299 | $ | (135 | ) | 670 | ||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 4,991 | $ | (110 | ) | 635 | $ | 297 | $ | (20 | ) | 33 | $ | 5,288 | $ | (130 | ) | 668 | ||||||||||||||||||
20%-50% Below cost | — | — | — | 11 | (5 | ) | 2 | 11 | (5 | ) | 2 | |||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 4,991 | $ | (110 | ) | 635 | $ | 308 | $ | (25 | ) | 35 | $ | 5,299 | $ | (135 | ) | 670 | ||||||||||||||||||
Investment grade | $ | 4,644 | $ | (101 | ) | 587 | $ | 241 | $ | (12 | ) | 25 | $ | 4,885 | $ | (113 | ) | 612 | ||||||||||||||||||
Below investment grade | 347 | (9 | ) | 48 | 67 | (13 | ) | 10 | 414 | (22 | ) | 58 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 4,991 | $ | (110 | ) | 635 | $ | 308 | $ | (25 | ) | 35 | $ | 5,299 | $ | (135 | ) | 670 | ||||||||||||||||||
| 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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 855 | $ | (39 | ) | 130 | $ | 21 | $ | (2 | ) | 5 | $ | 876 | $ | (41 | ) | 135 | ||||||||||||||||||
Energy | 190 | (5 | ) | 30 | 276 | (19 | ) | 38 | 466 | (24 | ) | 68 | ||||||||||||||||||||||||
Finance and insurance | 1,438 | (38 | ) | 177 | 113 | (8 | ) | 15 | 1,551 | (46 | ) | 192 | ||||||||||||||||||||||||
Consumer—non-cyclical | 921 | (34 | ) | 117 | — | — | — | 921 | (34 | ) | 117 | |||||||||||||||||||||||||
Technology andcommunications | 507 | (22 | ) | 70 | 126 | (10 | ) | 17 | 633 | (32 | ) | 87 | ||||||||||||||||||||||||
Industrial | 226 | (7 | ) | 38 | 77 | (7 | ) | 10 | 303 | (14 | ) | 48 | ||||||||||||||||||||||||
Capital goods | 322 | (12 | ) | 50 | 6 | (1 | ) | 1 | 328 | (13 | ) | 51 | ||||||||||||||||||||||||
Consumer—cyclical | 431 | (16 | ) | 56 | 26 | (1 | ) | 6 | 457 | (17 | ) | 62 | ||||||||||||||||||||||||
Transportation | 302 | (16 | ) | 41 | 17 | (1 | ) | 2 | 319 | (17 | ) | 43 | ||||||||||||||||||||||||
Other | 29 | (1 | ) | 2 | — | — | — | 29 | (1 | ) | 2 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Subtotal, U.S. corporatesecurities | 5,221 | (190 | ) | 711 | 662 | (49 | ) | 94 | 5,883 | (239 | ) | 805 | ||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 240 | (10 | ) | 32 | 14 | (1 | ) | 1 | 254 | (11 | ) | 33 | ||||||||||||||||||||||||
Energy | 105 | (3 | ) | 18 | 91 | (9 | ) | 16 | 196 | (12 | ) | 34 | ||||||||||||||||||||||||
Finance and insurance | 474 | (8 | ) | 79 | 71 | (1 | ) | 16 | 545 | (9 | ) | 95 | ||||||||||||||||||||||||
Consumer—non-cyclical | 308 | (14 | ) | 30 | — | — | — | 308 | (14 | ) | 30 | |||||||||||||||||||||||||
Technology andcommunications | 232 | (9 | ) | 34 | 28 | (1 | ) | 2 | 260 | (10 | ) | 36 | ||||||||||||||||||||||||
Industrial | 165 | (5 | ) | 21 | 91 | (4 | ) | 10 | 256 | (9 | ) | 31 | ||||||||||||||||||||||||
Capital goods | 104 | (2 | ) | 14 | 28 | (2 | ) | 2 | 132 | (4 | ) | 16 | ||||||||||||||||||||||||
Consumer—cyclical | 90 | (2 | ) | 17 | — | — | — | 90 | (2 | ) | 17 | |||||||||||||||||||||||||
Transportation | 106 | (5 | ) | 16 | 25 | (2 | ) | 2 | 131 | (7 | ) | 18 | ||||||||||||||||||||||||
Other | 433 | (8 | ) | 69 | 60 | (5 | ) | 8 | 493 | (13 | ) | 77 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Subtotal,non-U.S. corporatesecurities | 2,257 | (66 | ) | 330 | 408 | (25 | ) | 57 | 2,665 | (91 | ) | 387 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Total for corporate securities in anunrealized loss position | $ | 7,478 | $ | (256 | ) | 1,041 | $ | 1,070 | $ | (74 | ) | 151 | $ | 8,548 | $ | (330 | ) | 1,192 | ||||||||||||||||||
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| |||||||||||||||||||
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 | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 211 | $ | (7 | ) | 32 | $ | 29 | $ | (2 | ) | 7 | $ | 240 | $ | (9 | ) | 39 | ||||||||||||||||||
Energy | 166 | (3 | ) | 18 | 25 | (7 | ) | 4 | 191 | (10 | ) | 22 | ||||||||||||||||||||||||
Finance and insurance | 960 | (22 | ) | 89 | 62 | (2 | ) | 3 | 1,022 | (24 | ) | 92 | ||||||||||||||||||||||||
Consumer—non-cyclical | 296 | (7 | ) | 30 | 14 | (1 | ) | 2 | 310 | (8 | ) | 32 | ||||||||||||||||||||||||
Technology and communications | 378 | (12 | ) | 37 | 29 | (1 | ) | 2 | 407 | (13 | ) | 39 | ||||||||||||||||||||||||
Industrial | 143 | (3 | ) | 18 | — | — | — | 143 | (3 | ) | 18 | |||||||||||||||||||||||||
Capital goods | 171 | (3 | ) | 16 | 18 | (1 | ) | 2 | 189 | (4 | ) | 18 | ||||||||||||||||||||||||
Consumer—cyclical | 268 | (7 | ) | 26 | — | — | — | 268 | (7 | ) | 26 | |||||||||||||||||||||||||
Other | — | — | — | 19 | (1 | ) | 2 | 19 | (1 | ) | 2 | |||||||||||||||||||||||||
Subtotal, U.S. corporate securities | 2,593 | (64 | ) | 266 | 196 | (15 | ) | 22 | 2,789 | (79 | ) | 288 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 69 | (2 | ) | 9 | — | — | — | 69 | (2 | ) | 9 | |||||||||||||||||||||||||
Energy | 64 | (1 | ) | 10 | — | — | — | 64 | (1 | ) | 10 | |||||||||||||||||||||||||
Finance and insurance | 366 | (8 | ) | 43 | 18 | (1 | ) | 2 | 384 | (9 | ) | 45 | ||||||||||||||||||||||||
Consumer—non-cyclical | 67 | (1 | ) | 12 | 6 | (1 | ) | 1 | 73 | (2 | ) | 13 | ||||||||||||||||||||||||
Technology and communications | 48 | (1 | ) | 8 | — | — | — | 48 | (1 | ) | 8 | |||||||||||||||||||||||||
Industrial | 122 | (3 | ) | 14 | — | — | — | 122 | (3 | ) | 14 | |||||||||||||||||||||||||
Capital goods | 78 | (1 | ) | 8 | — | — | — | 78 | (1 | ) | 8 | |||||||||||||||||||||||||
Consumer—cyclical | 22 | (1 | ) | 8 | 15 | (1 | ) | 3 | 37 | (2 | ) | 11 | ||||||||||||||||||||||||
Transportation | 37 | (1 | ) | 7 | — | — | — | 37 | (1 | ) | 7 | |||||||||||||||||||||||||
Other | 39 | (2 | ) | 5 | 23 | (2 | ) | 2 | 62 | (4 | ) | 7 | ||||||||||||||||||||||||
Subtotal, non-U.S. corporate securities | 912 | (21 | ) | 124 | 62 | (5 | ) | 8 | 974 | (26 | ) | 132 | ||||||||||||||||||||||||
Total for corporate securities in an unrealized loss position | $ | 3,505 | $ | (85 | ) | 390 | $ | 258 | $ | (20 | ) | 30 | $ | 3,763 | $ | (105 | ) | 420 | ||||||||||||||||||
(Amounts in millions) | Amortized cost or cost | Fair value | ||||||
Due one year or less | $ | 1,943 | $ | 1,966 | ||||
Due after one year through five years | 10,901 | 11,333 | ||||||
Due after five years through ten years | 12,363 | 12,933 | ||||||
Due after ten years | 22,208 | 25,629 | ||||||
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|
| |||||
Subtotal | 47,415 | 51,861 | ||||||
Residential mortgage-backed | 3,950 | 4,209 | ||||||
Commercial mortgage-backed | 3,346 | 3,414 | ||||||
Other asset-backed | 3,052 | 3,068 | ||||||
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| |||||
Total | $ | 57,763 | $ | 62,552 | ||||
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| |||||
(Amounts in millions) | Amortized cost or cost | Fair value | ||||||
Due one year or less | $ | 1,310 | $ | 1,314 | ||||
Due after one year through five years | 8,078 | 7,958 | ||||||
Due after five years through ten years | 13,602 | 12,765 | ||||||
Due after ten years | 22,601 | 21,846 | ||||||
Subtotal | 45,591 | 43,883 | ||||||
Residential mortgage-backed | 1,214 | 1,213 | ||||||
Commercial mortgage-backed | 2,272 | 2,137 | ||||||
Other asset-backed | 2,171 | 2,053 | ||||||
Total | $ | 51,248 | $ | 49,286 | ||||
As of September 30, 2017,2022, securities issued by finance and insurance,
| September 30, 2017 | December 31, 2016 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Property type: | ||||||||||||||||
Retail | $ | 2,220 | 35 | % | $ | 2,178 | 36 | % | ||||||||
Industrial | 1,608 | 26 | 1,533 | 25 | ||||||||||||
Office | 1,465 | 23 | 1,430 | 23 | ||||||||||||
Apartments | 489 | 8 | 455 | 7 | ||||||||||||
Mixed use | 222 | 4 | 245 | 4 | ||||||||||||
Other | 277 | 4 | 284 | 5 | ||||||||||||
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| |||||||||
Subtotal | 6,281 | 100 | % | 6,125 | 100 | % | ||||||||||
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| |||||||||||||
Unamortized balance of loan origination fees and costs | (3 | ) | (2 | ) | ||||||||||||
Allowance for losses | (10 | ) | (12 | ) | ||||||||||||
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| |||||||||||||
Total | $ | 6,268 | $ | 6,111 | ||||||||||||
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| |||||||||||||
| September 30, 2017 | December 31, 2016 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Geographic region: | ||||||||||||||||
South Atlantic | $ | 1,620 | 26 | % | $ | 1,546 | 25 | % | ||||||||
Pacific | 1,600 | 26 | 1,567 | 27 | ||||||||||||
Middle Atlantic | 904 | 14 | 915 | 15 | ||||||||||||
Mountain | 556 | 9 | 554 | 9 | ||||||||||||
West North Central | 441 | 7 | 435 | 7 | ||||||||||||
East North Central | 386 | 6 | 388 | 6 | ||||||||||||
West South Central | 327 | 5 | 311 | 5 | ||||||||||||
New England | 237 | 4 | 206 | 3 | ||||||||||||
East South Central | 210 | 3 | 203 | 3 | ||||||||||||
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| |||||||||
Subtotal | 6,281 | 100 | % | 6,125 | 100 | % | ||||||||||
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| |||||||||||||
Unamortized balance of loan origination fees and costs | (3 | ) | (2 | ) | ||||||||||||
Allowance for losses | (10 | ) | (12 | ) | ||||||||||||
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| |||||||||||||
Total | $ | 6,268 | $ | 6,111 | ||||||||||||
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| |||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth the aging of past due commercial mortgage loans by property type as of the dates indicated:
| September 30, 2017 | ||||||||||||||||||||||||
(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 | $ | — | $ | — | $ | — | $ | — | $ | 2,220 | $ | 2,220 | ||||||||||||
Industrial | — | — | — | — | 1,608 | 1,608 | ||||||||||||||||||
Office | 6 | — | — | 6 | 1,459 | 1,465 | ||||||||||||||||||
Apartments | — | — | — | — | 489 | 489 | ||||||||||||||||||
Mixed use | — | — | — | — | 222 | 222 | ||||||||||||||||||
Other | — | — | — | — | 277 | 277 | ||||||||||||||||||
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Total recorded investment | $ | 6 | $ | — | $ | — | $ | 6 | $ | 6,275 | $ | 6,281 | ||||||||||||
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% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
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| December 31, 2016 | ||||||||||||||||||||||||
(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 | $ | — | $ | — | $ | — | $ | — | $ | 2,178 | $ | 2,178 | ||||||||||||
Industrial | 1 | — | 12 | 13 | 1,520 | 1,533 | ||||||||||||||||||
Office | — | — | — | — | 1,430 | 1,430 | ||||||||||||||||||
Apartments | — | — | — | — | 455 | 455 | ||||||||||||||||||
Mixed use | — | — | — | — | 245 | 245 | ||||||||||||||||||
Other | — | — | — | — | 284 | 284 | ||||||||||||||||||
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| |||||||||||||
Total recorded investment | $ | 1 | $ | — | $ | 12 | $ | 13 | $ | 6,112 | $ | 6,125 | ||||||||||||
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% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
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June 30, 2022 | December 31, 2021 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Property type: | ||||||||||||||||
Retail | $ | 2,901 | 41 | % | $ | 2,774 | 40 | % | ||||||||
Industrial | 1,532 | 22 | 1,420 | 21 | ||||||||||||
Office | 1,512 | 21 | 1,526 | 22 | ||||||||||||
Apartments | 578 | 8 | 585 | 9 | ||||||||||||
Mixed use | 350 | 5 | 330 | 5 | ||||||||||||
Other | 215 | 3 | 221 | 3 | ||||||||||||
Subtotal | 7,088 | 100 | % | 6,856 | 100 | % | ||||||||||
Allowance for credit losses | (23 | ) | (26 | ) | ||||||||||||
Total | $ | 7,065 | $ | 6,830 | ||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Geographic region: | ||||||||||||||||
South Atlantic | $ | 1,816 | 26 | % | $ | 1,770 | 26 | % | ||||||||
Pacific | 1,391 | 20 | 1,360 | 20 | ||||||||||||
Middle Atlantic | 990 | 14 | 964 | 14 | ||||||||||||
Mountain | 967 | 14 | 892 | 13 | ||||||||||||
West South Central | 556 | 8 | 483 | 7 | ||||||||||||
East North Central | 469 | 6 | 465 | 7 | ||||||||||||
West North Central | 462 | 6 | 461 | 7 | ||||||||||||
East South Central | 227 | 3 | 224 | 3 | ||||||||||||
New England | 210 | 3 | 237 | 3 | ||||||||||||
Subtotal | 7,088 | 100 | % | 6,856 | 100 | % | ||||||||||
Allowance for credit losses | (23 | ) | (26 | ) | ||||||||||||
Total | $ | 7,065 | $ | 6,830 | ||||||||||||
We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of September 30, 2017, none of our commercial mortgage loans were greater than 90 days past due.
During the nine months ended September 30, 2017 and the year ended December 31, 2016, we modified or extended 7 and 16 commercial mortgage loans, respectively, with a total carrying value of $19 million and $85 million, respectively. All of these modifications or extensions were based on current market interest rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower, except during the year ended December 31, 2016, one loan with a2021 and it was placed on
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Allowance for credit losses: | ||||||||||||||||
Beginning balance | $ | 10 | $ | 13 | $ | 12 | $ | 15 | ||||||||
Charge-offs | — | — | — | (4 | ) | |||||||||||
Recoveries | — | — | — | — | ||||||||||||
Provision | — | — | (2 | ) | 2 | |||||||||||
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| |||||||||
Ending balance | $ | 10 | $ | 13 | $ | 10 | $ | 13 | ||||||||
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| |||||||||
Ending allowance for individually impaired loans | $ | — | $ | — | $ | — | $ | — | ||||||||
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| |||||||||
Ending allowance for loans not individually impaired that were evaluated collectively for impairment | $ | 10 | $ | 13 | $ | 10 | $ | 13 | ||||||||
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| |||||||||
Recorded investment: | ||||||||||||||||
Ending balance | $ | 6,281 | $ | 6,032 | $ | 6,281 | $ | 6,032 | ||||||||
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| |||||||||
Ending balance of individually impaired loans | $ | — | $ | 17 | $ | — | $ | 17 | ||||||||
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| |||||||||
Ending balance of loans not individually impaired that were evaluated collectively for impairment | $ | 6,281 | $ | 6,015 | $ | 6,281 | $ | 6,015 | ||||||||
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| |||||||||
As of September 30, 2017, we had no individually impaired commercial mortgage loans. As of September 30, 2016, we had individually impaired commercial mortgage loans included within the retail property type with a recorded investment of $5 million, an unpaid principal balance of $7 million, charge-offs of $2 million and an average recorded investment of $3 million. As of December 31, 2016, we had one individually impaired loan within the industrial property type with a recorded investment of $12 million, an unpaid principal balance of $15 million and charge-offs of $3 million.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Allowance for credit losses: | ||||||||||||||||
| Beginning balance | $ | 25 | $ | 32 | $ | 26 | $ | 31 | ||||||||
| Provision | (3 | ) | 1 | (4 | ) | 2 | ||||||||||
| Write-offs | — | — | — | — | ||||||||||||
| Recoveries | 1 | — | 1 | — | ||||||||||||
| Ending balance | $ | 23 | $ | 33 | $ | 23 | $ | 33 | ||||||||
(Amounts in millions) | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 and prior | Total | |||||||||||||||||||||
Debt-to-value: | ||||||||||||||||||||||||||||
0%—50% | $ | 2 | $ | 25 | $ | 72 | $ | 62 | $ | 165 | $ | 2,062 | $ | 2,388 | ||||||||||||||
51%—60% | 31 | 37 | 33 | 178 | 293 | 934 | 1,506 | |||||||||||||||||||||
61%—75% | 532 | 875 | 414 | 482 | 394 | 497 | 3,194 | |||||||||||||||||||||
76%—100% | — | — | — �� | — | — | — | — | |||||||||||||||||||||
Greater than 100% | — | — | — | — | — | — | — | |||||||||||||||||||||
Total amortized cost | $ | 565 | $ | 937 | $ | 519 | $ | 722 | $ | 852 | $ | 3,493 | $ | 7,088 | ||||||||||||||
Debt service coverage ratio: | ||||||||||||||||||||||||||||
Less than 1.00 | $ | — | $ | — | $ | 10 | $ | 19 | $ | 40 | $ | 114 | $ | 183 | ||||||||||||||
1.00—1.25 | 13 | 2 | 69 | 72 | 74 | 296 | 526 | |||||||||||||||||||||
1.26—1.50 | 138 | 117 | 31 | 166 | 133 | 318 | 903 | |||||||||||||||||||||
1.51—2.00 | 368 | 716 | 217 | 268 | 425 | 1,248 | 3,242 | |||||||||||||||||||||
Greater than 2.00 | 46 | 102 | 192 | 197 | 180 | 1,517 | 2,234 | |||||||||||||||||||||
Total amortized cost | $ | 565 | $ | 937 | $ | 519 | $ | 722 | $ | 852 | $ | 3,493 | $ | 7,088 | ||||||||||||||
| September 30, 2017 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 933 | $ | 499 | $ | 788 | $ | — | $ | — | $ | 2,220 | ||||||||||||
Industrial | 747 | 356 | 503 | 2 | — | 1,608 | ||||||||||||||||||
Office | 583 | 393 | 473 | 14 | 2 | 1,465 | ||||||||||||||||||
Apartments | 236 | 105 | 143 | 5 | — | 489 | ||||||||||||||||||
Mixed use | 101 | 59 | 62 | — | — | 222 | ||||||||||||||||||
Other | 68 | 29 | 180 | — | — | 277 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recorded investment | $ | 2,668 | $ | 1,441 | $ | 2,149 | $ | 21 | $ | 2 | $ | 6,281 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
% of total | 43 | % | 23 | % | 34 | % | — | % | — | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Weighted-average debt service coverage ratio | 2.65 | 1.85 | 1.60 | 0.63 | 1.04 | 2.10 | ||||||||||||||||||
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|
|
|
| |||||||||||||
| December 31, 2016 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 743 | $ | 511 | $ | 913 | $ | 11 | $ | — | $ | 2,178 | ||||||||||||
Industrial | 605 | 430 | 484 | 14 | — | 1,533 | ||||||||||||||||||
Office | 431 | 310 | 656 | 26 | 7 | 1,430 | ||||||||||||||||||
Apartments | 188 | 89 | 173 | 5 | — | 455 | ||||||||||||||||||
Mixed use | 67 | 87 | 91 | — | — | 245 | ||||||||||||||||||
Other | 60 | 30 | 194 | — | — | 284 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recorded investment | $ | 2,094 | $ | 1,457 | $ | 2,511 | $ | 56 | $ | 7 | $ | 6,125 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
% of total | 34 | % | 24 | % | 41 | % | 1 | % | — | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Weighted-average debt service coverage ratio | 2.20 | 1.88 | 1.61 | 0.80 | (0.07 | ) | 1.87 | |||||||||||||||||
|
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|
|
|
|
|
|
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|
|
| |||||||||||||
June 30, 2022 | ||||||||||||||||||||||||
(Amounts in millions) | 0%—50% | 51%—60% | 61%—75% | 76%—100% | Greater than 100% | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 838 | $ | 598 | $ | 1,465 | $ | — | $ | — | $ | 2,901 | ||||||||||||
Industrial | 720 | 229 | 583 | — | — | 1,532 | ||||||||||||||||||
Office | 472 | 389 | 651 | — | — | 1,512 | ||||||||||||||||||
Apartments | 184 | 96 | 298 | — | — | 578 | ||||||||||||||||||
Mixed use | 118 | 74 | 158 | — | — | 350 | ||||||||||||||||||
Other | 56 | 120 | 39 | — | — | 215 | ||||||||||||||||||
Total amortized cost | $ | 2,388 | $ | 1,506 | $ | 3,194 | $ | — | $ | — | $ | 7,088 | ||||||||||||
% of total | 34 | % | 21 | % | 45 | % | — | % | — | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.34 | 1.88 | 1.61 | — | — | 1.91 | ||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
(Amounts in millions) | 0%—50% | 51%—60% | 61%—75% | 76%—100% | Greater than 100% | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 853 | $ | 611 | $ | 1,310 | $ | — | $ | — | $ | 2,774 | ||||||||||||
Industrial | 745 | 240 | 435 | — | — | 1,420 | ||||||||||||||||||
Office | 505 | 395 | 604 | — | 22 | 1,526 | ||||||||||||||||||
Apartments | 200 | 102 | 283 | — | — | 585 | ||||||||||||||||||
Mixed use | 120 | 70 | 140 | — | — | 330 | ||||||||||||||||||
Other | 57 | 121 | 43 | — | — | 221 | ||||||||||||||||||
Total amortized cost | $ | 2,480 | $ | 1,539 | $ | 2,815 | $ | — | $ | 22 | $ | 6,856 | ||||||||||||
% of total | 36 | % | 23 | % | 41 | % | — | % | — | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.36 | 1.83 | 1.61 | — | 0.68 | 1.93 | ||||||||||||||||||
| September 30, 2017 | ||||||||||||||||||||||||
(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 | $ | 43 | $ | 242 | $ | 298 | $ | 999 | $ | 638 | $ | 2,220 | ||||||||||||
Industrial | 24 | 63 | 180 | 679 | 662 | 1,608 | ||||||||||||||||||
Office | 72 | 67 | 151 | 521 | 654 | 1,465 | ||||||||||||||||||
Apartments | — | 20 | 75 | 193 | 201 | 489 | ||||||||||||||||||
Mixed use | 2 | 4 | 26 | 86 | 104 | 222 | ||||||||||||||||||
Other | 1 | 149 | 15 | 72 | 40 | 277 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recorded investment | $ | 142 | $ | 545 | $ | 745 | $ | 2,550 | $ | 2,299 | $ | 6,281 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
% of total | 2 | % | 9 | % | 12 | % | 40 | % | 37 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Weighted-averageloan-to-value | 57 | % | 60 | % | 58 | % | 57 | % | 41 | % | 52 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| December 31, 2016 | ||||||||||||||||||||||||
(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 | $ | 67 | $ | 204 | $ | 425 | $ | 899 | $ | 583 | $ | 2,178 | ||||||||||||
Industrial | 71 | 113 | 236 | 599 | 514 | 1,533 | ||||||||||||||||||
Office | 91 | 117 | 172 | 609 | 441 | 1,430 | ||||||||||||||||||
Apartments | 19 | 22 | 44 | 217 | 153 | 455 | ||||||||||||||||||
Mixed use | 2 | 9 | 19 | 128 | 87 | 245 | ||||||||||||||||||
Other | 1 | 148 | 60 | 55 | 20 | 284 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total recorded investment | $ | 251 | $ | 613 | $ | 956 | $ | 2,507 | $ | 1,798 | $ | 6,125 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
% of total | 4 | % | 10 | % | 16 | % | 41 | % | 29 | % | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Weighted-averageloan-to-value | 61 | % | 60 | % | 59 | % | 58 | % | 45 | % | 55 | % | ||||||||||||
|
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|
|
|
|
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|
|
|
| |||||||||||||
As
June 30, 2022 | ||||||||||||||||||||||||
(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 | $ | 94 | $ | 150 | $ | 429 | $ | 1,534 | $ | 694 | $ | 2,901 | ||||||||||||
Industrial | 6 | 76 | 134 | 663 | 653 | 1,532 | ||||||||||||||||||
Office | 38 | 106 | 179 | 630 | 559 | 1,512 | ||||||||||||||||||
Apartments | 17 | 62 | 84 | 239 | 176 | 578 | ||||||||||||||||||
Mixed use | 23 | 31 | 40 | 137 | 119 | 350 | ||||||||||||||||||
Other | 5 | 101 | 37 | 39 | 33 | 215 | ||||||||||||||||||
Total amortized cost | $ | 183 | $ | 526 | $ | 903 | $ | 3,242 | $ | 2,234 | $ | 7,088 | ||||||||||||
% of total | 3 | % | 7 | % | 13 | % | 46 | % | 31 | % | 100 | % | ||||||||||||
Weighted-average debt-to-value | 60 | % | 60 | % | 63 | % | 61 | % | 44 | % | 56 | % | ||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
(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 | $ | 102 | $ | 166 | $ | 405 | $ | 1,375 | $ | 726 | $ | 2,774 | ||||||||||||
Industrial | 9 | 64 | 82 | 599 | 666 | 1,420 | ||||||||||||||||||
Office | 67 | 109 | 167 | 593 | 590 | 1,526 | ||||||||||||||||||
Apartments | 17 | 62 | 84 | 225 | 197 | 585 | ||||||||||||||||||
Mixed use | 24 | 32 | 40 | 118 | 116 | 330 | ||||||||||||||||||
Other | 4 | 126 | 13 | 48 | 30 | 221 | ||||||||||||||||||
Total amortized cost | $ | 223 | $ | 559 | $ | 791 | $ | 2,958 | $ | 2,325 | $ | 6,856 | ||||||||||||
% of total | 3 | % | 8 | % | 12 | % | 43 | % | 34 | % | 100 | % | ||||||||||||
Weighted-average debt-to-value | 68 | % | 61 | % | 61 | % | 60 | % | 43 | % | 55 | % | ||||||||||||
income (loss). The trading securities comprised asset-backed securities, including highly rated bonds that were primarily backed by credit card receivables. In 2017, these trading securities were sold as we repositioned these assets in connection with the maturity of the associated liabilities.
(h)
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Derivative assets | Derivative liabilities | |||||||||||||||||||||
| Fair value | Fair value | |||||||||||||||||||||
(Amounts in millions) | Balance sheet classification | September 30, 2017 (5) | December 31, 2016 | Balance sheet classification | September 30, 2017 (5) | December 31, 2016 | ||||||||||||||||
Derivatives designated ashedges | ||||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||||
Interest rate swaps | Other invested assets | $ | 70 | $ | 237 | Other liabilities | $ | 39 | $ | 203 | ||||||||||||
Foreign currency swaps | Other invested assets | 2 | 4 | Other liabilities | — | — | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Total cash flow hedges | 72 | 241 | 39 | 203 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Total derivativesdesignated as hedges | 72 | 241 | 39 | 203 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Derivatives not designated ashedges | ||||||||||||||||||||||
Interest rate swaps | Other invested assets | — | 359 | Other liabilities | — | 146 | ||||||||||||||||
Foreign currency swaps | Other invested assets | 10 | — | Other liabilities | — | 5 | ||||||||||||||||
Credit default swaps related tosecuritization entities | Restricted other invested assets | — | — | Other liabilities | — | 1 | ||||||||||||||||
Equity index options | Other invested assets | 81 | 72 | Other liabilities | — | — | ||||||||||||||||
Financial futures | Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||||
Equity return swaps | Other invested assets | — | 1 | Other liabilities | 2 | 1 | ||||||||||||||||
Other foreign currencycontracts | Other invested assets | 98 | 35 | Other liabilities | 23 | 27 | ||||||||||||||||
GMWB embeddedderivatives | Reinsurance recoverable(1) | 14 | 16 | | Policyholder account balances(2) |
| 257 | 303 | ||||||||||||||
Fixed index annuity embeddedderivatives | Other assets | — | — | | Policyholder account balances(3) |
| 394 | 344 | ||||||||||||||
Indexed universal lifeembedded derivatives | Reinsurance recoverable | — | — | | Policyholder account balances(4) |
| 14 | 11 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Total derivatives notdesignated as hedges | 203 | 483 | 690 | 838 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Total derivatives | $ | 275 | $ | 724 | $ | 729 | $ | 1,041 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Derivative assets | Derivative liabilities | |||||||||||||||||||
Fair value | Fair value | |||||||||||||||||||
(Amounts in millions) | Balance sheet classification | June 30, 2022 | December 31, 2021 | Balance sheet classification | June 30, 2022 | December 31, 2021 | ||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Other invested assets | $ | 30 | $ | 364 | Other liabilities | $ | 342 | $ | 26 | ||||||||||
Foreign currency swaps | Other invested assets | 17 | 6 | Other liabilities | — | — | ||||||||||||||
Total cash flow hedges | 47 | 370 | 342 | 26 | ||||||||||||||||
Total derivatives designated as hedges | 47 | 370 | 342 | 26 | ||||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Equity index options | Other invested assets | 30 | 42 | Other liabilities | — | — | ||||||||||||||
Financial futures | Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
Other foreign currency contracts | Other invested assets | — | 2 | Other liabilities | — | — | ||||||||||||||
GMWB embedded derivatives | Reinsurance recoverable (1) | 19 | 19 | Policyholder account balances (2) | 277 | 271 | ||||||||||||||
Fixed index annuity embedded derivatives | Other assets | — | — | Policyholder account balances (3) | 233 | 294 | ||||||||||||||
Indexed universal life embedded derivatives | Reinsurance recoverable | — | — | Policyholder account balances (4) | 16 | 25 | ||||||||||||||
Total derivatives not designated as hedges | 49 | 63 | 526 | 590 | ||||||||||||||||
Total derivatives | $ | 96 | $ | 433 | $ | 868 | $ | 616 | ||||||||||||
(1) | Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities. |
(2) | Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
(3) | Represents the embedded derivatives associated with our fixed index annuity liabilities. |
(4) | Represents the embedded derivatives associated with our indexed universal life liabilities. |
(Notional in millions) | Measurement | December 31, 2016 | Additions | Maturities/ terminations | September 30, 2017 | |||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Notional | $ | 11,570 | $ | — | $ | (306 | ) | $ | 11,264 | ||||||||||
Foreign currency swaps | Notional | 22 | — | — | 22 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total cash flow hedges | 11,592 | — | (306 | ) | 11,286 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total derivatives designated as hedges | 11,592 | — | (306 | ) | 11,286 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Interest rate swaps | Notional | 4,679 | — | — | 4,679 | |||||||||||||||
Foreign currency swaps | Notional | 201 | 95 | (14 | ) | 282 | ||||||||||||||
Credit default swaps | Notional | 39 | — | — | 39 | |||||||||||||||
Credit default swaps related to securitization entities | Notional | 312 | — | (200 | ) | 112 | ||||||||||||||
Equity index options | Notional | 2,396 | 1,584 | (1,484 | ) | 2,496 | ||||||||||||||
Financial futures | Notional | 1,398 | 4,300 | (4,376 | ) | 1,322 | ||||||||||||||
Equity return swaps | Notional | 165 | 186 | (258 | ) | 93 | ||||||||||||||
Other foreign currency contracts | Notional | 3,130 | 2,163 | (691 | ) | 4,602 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total derivatives not designated as hedges | 12,320 | 8,328 | (7,023 | ) | 13,625 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total derivatives | $ | 23,912 | $ | 8,328 | $ | (7,329 | ) | $ | 24,911 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
(Number of policies) | Measurement | December 31, 2016 | Additions | Maturities/ terminations | September 30, 2017 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
GMWB embedded derivatives | Policies | 33,238 | — | (2,127 | ) | 31,111 | ||||||||||||||
Fixed index annuity embedded derivatives | Policies | 17,549 | — | (367 | ) | 17,182 | ||||||||||||||
Indexed universal life embedded derivatives | Policies | 1,074 | 1 | (66 | ) | 1,009 | ||||||||||||||
(Notional in millions) | Measurement | December 31, 2021 | Additions | Maturities/ terminations | June 30, 2022 | |||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Notional | $ | 7,653 | $ | 262 | $ | (102 | ) | $ | 7,813 | ||||||||||
Foreign currency swaps | Notional | 127 | — | — | 127 | |||||||||||||||
Total cash flow hedges | 7,780 | 262 | (102 | ) | 7,940 | |||||||||||||||
Total derivatives designated as hedges | 7,780 | 262 | (102 | ) | 7,940 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Equity index options | Notional | 1,446 | 495 | (628 | ) | 1,313 | ||||||||||||||
Financial futures | Notional | 946 | 1,973 | (1,969 | ) | 950 | ||||||||||||||
Other foreign currency contracts | Notional | 83 | — | (83 | ) | — | ||||||||||||||
Total derivatives not designated as hedges | 2,475 | 2,468 | (2,680 | ) | 2,263 | |||||||||||||||
Total derivatives | $ | 10,255 | $ | 2,730 | $ | (2,782 | ) | $ | 10,203 | |||||||||||
(Number of policies) | Measurement | December 31, 2021 | Additions | Maturities/ terminations | June 30, 2022 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
GMWB embedded derivatives | Policies | 21,804 | — | (906 | ) | 20,898 | ||||||||||||||
Fixed index annuity embedded derivatives | Policies | 9,344 | — | (1,055 | ) | 8,289 | ||||||||||||||
Indexed universal life embedded derivatives | Policies | 806 | — | (20 | ) | 786 | ||||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest income; (v) forward bond purchase commitments to hedge against the variability in the anticipated cash flows required to purchase future fixed rate bonds; and (vi)(v) other instruments to hedge the cash flows of various forecasted transactions.
(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 innet income (loss) (1) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 17 | $ | 34 | | Net investment income | | $ | — | | Net investment gains (losses) | | ||||||||
Foreign currency swaps | (1 | ) | — | | Net investment income | | — | | Net investment gains (losses) | | ||||||||||
|
|
|
|
|
| |||||||||||||||
Total | $ | 16 | $ | 34 | $ | — | ||||||||||||||
|
|
|
|
|
| |||||||||||||||
2022:
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income from OCI | Classification of gain (loss) reclassified into net income | Gain (loss) recognized in net income | Classification of gain (loss) recognized in net income | |||||||||||
Interest rate swaps hedging assets | $ | (405 | ) | $ | 57 | Net investment income | $ | — | Net investment gains (losses) | |||||||
Interest rate swaps hedging liabilities | — | (1 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
Foreign currency swaps | 14 | — | Net investment income | — | Net investment gains (losses) | |||||||||||
Total | $ | (391 | ) | $ | 56 | $ | — | |||||||||
(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 innet income (loss) (1) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 115 | $ | 27 | | Net investment income | | $ | 2 | | Net investment gains (losses) | | ||||||||
Interest rate swaps hedging liabilities | (2 | ) | — | | Interest expense | | — | | Net investment gains (losses) | | ||||||||||
Foreign currency swaps | (1 | ) | — | | Net investment income | | — | | Net investment gains (losses) | | ||||||||||
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| |||||||||||||||
Total | $ | 112 | $ | 27 | $ | 2 | ||||||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income from OCI | Classification of gain (loss) reclassified into net income | Gain (loss) recognized in net income | Classification of gain (loss) recognized in net income | |||||||||||
Interest rate swaps hedging assets | $ | 314 | $ | 52 | Net investment income | $ | — | Net investment gains (losses) | ||||||||
Interest rate swaps hedging liabilities | (8 | ) | — | Interest expense | — | Net investment gains (losses) | ||||||||||
Foreign currency swaps | 3 | — | Net investment income | — | Net investment gains (losses) | |||||||||||
Total | $ | 309 | $ | 52 | $ | — | ||||||||||
(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 innet income (loss) (1) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 50 | $ | 95 | | Net investment income | | $ | — | | Net investment gains (losses) | | ||||||||
Interest rate swaps hedging assets | — | 2 | | Net investment gains (losses) | | — | | Net investment gains (losses) | | |||||||||||
Interest rate swaps hedging liabilities | (2 | ) | — | Interest expense | — | | Net investment gains (losses) | | ||||||||||||
Foreign currency swaps | (2 | ) | — | | Net investment income | | — | | Net investment gains (losses) | | ||||||||||
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Total | $ | 46 | $ | 97 | $ | — | ||||||||||||||
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2022:
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income from OCI | Classification of gain (loss) reclassified into net income | Gain (loss) recognized in net income | Classification of gain (loss) recognized in net income | |||||||||||
Interest rate swaps hedging assets | $ | (655 | ) | $ | 112 | Net investment income | $ | — | Net investment gains (losses) | |||||||
Interest rate swaps hedging assets | — | 2 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||
Interest rate swaps hedging liabilities | — | (2 | ) | Interest expense | — | Net investment gains (losses) | ||||||||||
Foreign currency swaps | 12 | 1 | Net investment income | — | Net investment gains (losses) | |||||||||||
Total | $ | (643 | ) | $ | 113 | $ | — | |||||||||
(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 innet income (loss) (1) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 839 | $ | 80 | | Net investment income | | $ | 13 | | Net investment gains (losses) | | ||||||||
Interest rate swaps hedging assets | — | 1 | | Net investment gains (losses) | | — | | Net investment gains (losses) | | |||||||||||
Interest rate swaps hedging liabilities | (52 | ) | — | Interest expense | — | | Net investment gains (losses) | | ||||||||||||
Inflation indexed swaps | (5 | ) | 2 | | Net investment income | | — | | Net investment gains (losses) | | ||||||||||
Inflation indexed swaps | — | 7 | | Net investment gains (losses) | | — | | Net investment gains (losses) | | |||||||||||
Foreign currency swaps | (2 | ) | — | | Net investment income | | — | | Net investment gains (losses) | | ||||||||||
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Total | $ | 780 | $ | 90 | $ | 13 | ||||||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income from OCI | Classification of gain (loss) reclassified into net income | Gain (loss) recognized in net income | Classification of gain (loss) recognized in net income | |||||||||||
Interest rate swaps hedging assets | $ | (215 | ) | $ | 104 | Net investment income | $ | — | Net investment gains (losses) | |||||||
Interest rate swaps hedging liabilities | 36 | — | Interest expense | — | Net investment gains (losses) | |||||||||||
Foreign currency swaps | 1 | — | Net investment income | — | Net investment gains (losses) | |||||||||||
Total | $ | (178 | ) | $ | 104 | $ | — | |||||||||
| Three months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Derivatives qualifying as effective accounting hedges as of July 1 | $ | 2,064 | $ | 2,439 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $(6) and $(40) | 10 | 72 | ||||||
Reclassification to net (income), net of deferred taxes of $12 and $9 | (22 | ) | (18 | ) | ||||
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Derivatives qualifying as effective accounting hedges as of September 30 | $ | 2,052 | $ | 2,493 | ||||
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| Nine months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Derivatives qualifying as effective accounting hedges as of January 1 | $ | 2,085 | $ | 2,045 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $(17) and $(273) | 29 | 507 | ||||||
Reclassification to net (income), net of deferred taxes of $35 and $31 | (62 | ) | (59 | ) | ||||
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Derivatives qualifying as effective accounting hedges as of September 30 | $ | 2,052 | $ | 2,493 | ||||
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Three months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Derivatives qualifying as effective accounting hedges as of April 1 | $ | 1,789 | $ | 1,792 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $84 and $(64) | (307 | ) | 245 | |||||
Reclassification to net (income), net of deferred taxes of $19 and $18 | (37 | ) | (34 | ) | ||||
Derivatives qualifying as effective accounting hedges as of June 30 | $ | 1,445 | $ | 2,003 | ||||
Six months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Derivatives qualifying as effective accounting hedges as of January 1 | $ | 2,025 | $ | 2,211 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $137 and $38 | (506 | ) | (140 | ) | ||||
Reclassification to net (income), net of deferred taxes of $39 and $36 | (74 | ) | (68 | ) | ||||
Derivatives qualifying as effective accounting hedges as of June 30 | $ | 1,445 | $ | 2,003 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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.
The following tables provide the (loss) for the effects of derivatives not designated as hedges for the periods indicated:
| Three months ended September 30, | Classification of gain (loss) in net income (loss) | |||||||||
(Amounts in millions) | 2017 | 2016 | ||||||||
Interest rate swaps | $ | 1 | $ | (1 | ) | Net investment gains (losses) | ||||
Credit default swaps related to securitization entities | 2 | 2 | Net investment gains (losses) | |||||||
Equity index options | 16 | 9 | Net investment gains (losses) | |||||||
Financial futures | (17 | ) | (35 | ) | Net investment gains (losses) | |||||
Equity return swaps | (5 | ) | (9 | ) | Net investment gains (losses) | |||||
Other foreign currency contracts | 40 | (2 | ) | Net investment gains (losses) | ||||||
Foreign currency swaps | 8 | (1 | ) | Net investment gains (losses) | ||||||
GMWB embedded derivatives | 30 | 60 | Net investment gains (losses) | |||||||
Fixed index annuity embedded derivatives | (21 | ) | (16 | ) | Net investment gains (losses) | |||||
Indexed universal life embedded derivatives | 2 | 3 | Net investment gains (losses) | |||||||
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Total derivatives not designated as hedges | $ | 56 | $ | 10 | ||||||
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| Nine months ended September 30, | Classification of gain (loss) in net income (loss) | |||||||||
(Amounts in millions) | 2017 | 2016 | ||||||||
Interest rate swaps | $ | 2 | $ | 7 | Net investment gains (losses) | |||||
Interest rate swaps related to securitization entities | — | (10 | ) | Net investment gains (losses) | ||||||
Credit default swaps related to securitization entities | 6 | 16 | Net investment gains (losses) | |||||||
Equity index options | 42 | 5 | Net investment gains (losses) | |||||||
Financial futures | (25 | ) | (9 | ) | Net investment gains (losses) | |||||
Equity return swaps | (19 | ) | (2 | ) | Net investment gains (losses) | |||||
Other foreign currency contracts | 66 | (6 | ) | Net investment gains (losses) | ||||||
Foreign currency swaps | 13 | 6 | Net investment gains (losses) | |||||||
GMWB embedded derivatives | 64 | (58 | ) | Net investment gains (losses) | ||||||
Fixed index annuity embedded derivatives | (57 | ) | (22 | ) | Net investment gains (losses) | |||||
Indexed universal life embedded derivatives | 5 | 6 | Net investment gains (losses) | |||||||
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Total derivatives not designated as hedges | $ | 97 | $ | (67 | ) | |||||
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Three months ended June 30, | Classification of gain (loss) recognized in net income | |||||||||||
(Amounts in millions) | 2022 | 2021 | ||||||||||
Interest rate swaps | $ | — | $ | (1 | ) | Net investment gains (losses) | ||||||
Equity index options | (1 | ) | 6 | Net investment gains (losses) | ||||||||
Financial futures | 17 | 8 | Net investment gains (losses) | |||||||||
GMWB embedded derivatives | (26 | ) | 2 | Net investment gains (losses) | ||||||||
Fixed index annuity embedded derivatives | 11 | (14 | ) | Net investment gains (losses) | ||||||||
Indexed universal life embedded derivatives | 8 | 3 | Net investment gains (losses) | |||||||||
Total derivatives not designated as hedges | $ | 9 | $ | 4 | ||||||||
Six months ended June 30, | Classification of gain (loss) recognized in net income | |||||||||||
(Amounts in millions) | 2022 | 2021 | ||||||||||
Interest rate swaps | $ | — | $ | 3 | Net investment gains (losses) | |||||||
Equity index options | (7 | ) | 9 | Net investment gains (losses) | ||||||||
Financial futures | (30 | ) | (102 | ) | Net investment gains (losses) | |||||||
GMWB embedded derivatives | 6 | 107 | Net investment gains (losses) | |||||||||
Fixed index annuity embedded derivatives | 23 | (18 | ) | Net investment gains (losses) | ||||||||
Indexed universal life embedded derivatives | 19 | 13 | Net investment gains (losses) | |||||||||
Total derivatives not designated as hedges | $ | 11 | $ | 12 | ||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents additional information about derivative assets and liabilities subject to an enforceable master netting arrangement as of the dates indicated:
| September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
(Amounts in millions) | Derivatives assets (1) | Derivatives liabilities (2) | Net derivatives | Derivatives assets (1) | Derivatives liabilities (2) | Net derivatives | ||||||||||||||||||
Amounts presented in the balance sheet: | ||||||||||||||||||||||||
Gross amounts recognized | $ | 262 | $ | 66 | $ | 196 | $ | 724 | $ | 387 | $ | 337 | ||||||||||||
Gross amounts offset in the balance sheet | — | — | — | — | — | — | ||||||||||||||||||
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Net amounts presented in the balance sheet | 262 | 66 | 196 | 724 | 387 | 337 | ||||||||||||||||||
Gross amounts not offset in the balance sheet: | ||||||||||||||||||||||||
Financial instruments (3) | (24 | ) | (24 | ) | — | (172 | ) | (172 | ) | — | ||||||||||||||
Collateral received | (164 | ) | — | (164 | ) | (467 | ) | — | (467 | ) | ||||||||||||||
Collateral pledged | — | (301 | ) | 301 | — | (557 | ) | 557 | ||||||||||||||||
Over collateralization | 8 | 259 | (251 | ) | 1 | 344 | (343 | ) | ||||||||||||||||
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Net amount | $ | 82 | $ | — | $ | 82 | $ | 86 | $ | 2 | $ | 84 | ||||||||||||
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June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
(Amounts in millions) | Derivative assets (1) | Derivative liabilities (1) | Net derivatives | Derivative assets (1) | Derivative liabilities (1) | Net derivatives | ||||||||||||||||||
Amounts presented in the balance sheet: | ||||||||||||||||||||||||
Gross amounts recognized | $ | 77 | $ | 342 | $ | (265 | ) | $ | 414 | $ | 26 | $ | 388 | |||||||||||
Gross amounts offset in the balance sheet | — | — | — | — | — | — | ||||||||||||||||||
Net amounts presented in the balance sheet | 77 | 342 | (265 | ) | 414 | 26 | 388 | |||||||||||||||||
Gross amounts not offset in the balance sheet: | ||||||||||||||||||||||||
Financial instruments (2) | (24 | ) | (24 | ) | — | (20 | ) | (20 | ) | — | ||||||||||||||
Collateral received | (41 | ) | — | (41 | ) | (308 | ) | — | (308 | ) | ||||||||||||||
Collateral pledged | — | (825 | ) | 825 | — | (536 | ) | 536 | ||||||||||||||||
Over collateralization | — | 507 | (507 | ) | 2 | 530 | (528 | ) | ||||||||||||||||
Net amount | $ | 12 | $ | — | $ | 12 | $ | 88 | $ | — | $ | 88 | ||||||||||||
(1) | Does not include amounts related to embedded derivatives as of |
(2) |
Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty. |
Except for derivatives related to securitization entities, almost 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 downgrade provisions had been triggered as a result of downgrades of our counterparties, we could have claimed up to $82 million and $86 million as of September 30, 2017 and December 31, 2016, respectively, or have been required to disburse up to $2 million as of December 31, 2016. There were no amounts that we would have been required to disburse as of September 30, 2017 . The chart above excludes embedded derivatives and derivatives related to securitization entities as those derivatives are not subject to master netting arrangements.
Credit 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
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
default 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.
In addition to the credit derivatives discussed above, we also have credit derivative instruments related to securitization entities that we consolidate. 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.
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, 2017 | December 31, 2016 | |||||||||||||||||||||||
(Amounts in millions) | Notional value | Assets | Liabilities | Notional value | Assets | Liabilities | ||||||||||||||||||
Investment grade | ||||||||||||||||||||||||
Matures in less than one year | $ | 39 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Matures after one year through five years | — | — | — | 39 | — | — | ||||||||||||||||||
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Total credit default swaps on single name reference entities | $ | 39 | $ | — | $ | — | $ | 39 | $ | — | $ | — | ||||||||||||
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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, 2017 | December 31, 2016 | |||||||||||||||||||||||
(Amounts in millions) | Notional value | Assets | Liabilities | Notional value | Assets | Liabilities | ||||||||||||||||||
Customized credit default swap index tranches relatedto securitization entities: | ||||||||||||||||||||||||
Portion backing third-party borrowings maturing 2017 (1) | $ | 12 | $ | — | $ | — | $ | 12 | $ | — | $ | — | ||||||||||||
Portion backing our interest maturing 2017 (2) | 100 | — | 300 | — | 1 | |||||||||||||||||||
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Total customized credit default swap index tranches relatedto securitization entities | 112 | — | — | 312 | — | 1 | ||||||||||||||||||
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Total credit default swaps on index tranches | $ | 112 | $ | — | $ | — | $ | 312 | $ | — | $ | 1 | ||||||||||||
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Assets and liabilities that are reflected in the accompanying unaudited condensed consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash and
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
cash equivalents, short-term investments, 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. Based on recent transactions and/or discounted future cash flows, using current market rates. Given the limited availability of data related to transactions for similar instruments, we typically classify these loans as Level 3.
Restricted commercial mortgage loans. Based on recent transactions and/or discounted future cash flows, using current market rates. Given the limited availability of data related to transactions for similar instruments, we typically classify these loans as Level 3.
Other invested assets.Primarily represents limited partnerships accounted for under the cost method. Limited partnerships are valued based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the underlying instrument. Cost method limited partnerships typically include significant unobservable inputs as a result of being relatively illiquid with limited market activity for similar instruments and are classified as Level 3.
Long-term borrowings.We utilize available market data when determining fair value of long-term borrowings issued in the United States and Canada, which includes data on recent trades for the same or similar financial instruments. Accordingly, these instruments are classified as Level 2 measurements. In cases where market data is not available such as our long-term borrowings in Australia, we use third-party broker provided prices (“broker quotes”) for which we consider the valuation methodology utilized by the third party, but the valuation typically includes significant unobservable inputs. Accordingly, we classify these borrowings where fair value is based on our consideration of broker quotes as Level 3 measurements.
Non-recourse funding obligations. We use an internal model to determine fair value using the current floating rate coupon and expected life/final maturity of the instrument discounted using the floating rate index and current market spread assumption, which is estimated based on recent transactions for these instruments or similar instruments as well as other market information or broker provided data. Given these instruments are private and very little market activity exists, our current market spread assumption is considered to have significant unobservable inputs in calculating fair value and, therefore, results in the fair value of these instruments being classified as Level 3.
Borrowings related to securitization entities.Based on market quotes or comparable market transactions. Some of these borrowings are publicly traded debt securities and are classified as Level 2. Certain borrowings are not publicly traded and are classified as Level 3.
Investment contracts.Based on expected future cash flows, discounted at current market rates for annuity contracts or institutional products. Given the significant unobservable inputs associated with policyholder
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
behavior and current market rate assumptions used to discount the expected future cash flows, we classify these instruments as Level 3 except for certain funding agreement-backed notes that are traded in the marketplace as a security and are classified as Level 2.
The following represents our estimated fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:
| September 30, 2017 | ||||||||||||||||||||||||
| Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | $ | (1) | $ | 6,268 | $ | 6,550 | $ | — | $ | — | $ | 6,550 | ||||||||||||
Restricted commercial mortgage loans | (1) | 111 | 122 | — | — | 122 | ||||||||||||||||||
Other invested assets | (1) | 217 | 243 | — | — | 243 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 4,224 | 3,742 | — | 3,583 | 159 | ||||||||||||||||||
Non-recourse funding obligations | (1) | 310 | 195 | — | — | 195 | ||||||||||||||||||
Borrowings related to securitizationentities | (1) | 47 | 48 | — | 48 | — | ||||||||||||||||||
Investment contracts | (1) | 15,163 | 15,705 | — | 5 | 15,700 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 319 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lendingcommitments | 61 | — | — | — | — | — | ||||||||||||||||||
| December 31, 2016 | ||||||||||||||||||||||||
| Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | $ | (1) | $ | 6,111 | $ | 6,247 | $ | — | $ | — | $ | 6,247 | ||||||||||||
Restricted commercial mortgage loans | (1) | 129 | 141 | — | — | 141 | ||||||||||||||||||
Other invested assets | (1) | 459 | 473 | — | 352 | 121 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 4,180 | 3,582 | — | 3,440 | 142 | ||||||||||||||||||
Non-recourse funding obligations | (1) | 310 | 186 | — | — | 186 | ||||||||||||||||||
Borrowings related to securitizationentities | (1) | 62 | 65 | — | 65 | — | ||||||||||||||||||
Investment contracts | (1) | 16,437 | 16,993 | — | 5 | 16,988 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 201 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lendingcommitments | 73 | — | — | — | — | — | ||||||||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.
We utilize certain third-party data providers when determining fair value. We consider information obtained from pricing services as well as 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
For pricing services, we obtain an understanding of the pricing methodologies and procedures for each type of instrument. Additionally, on a monthly basis we review a sample of securities, examining the pricing service’s
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
assumptions to determine if we agree with the service’s derived price. When available, we also evaluate the prices sampled as compared to other public prices. If a variance greater than apre-defined threshold is noted, additional review of the price is executed to ensure accuracy. 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.
For broker quotes, we consider the valuation methodology utilized by the third party and analyze a sample each month to assess reasonableness given then-current market conditions. Additionally, for broker quotes on certain structured securities we validate prices received against other publicly available pricing sources. Broker quotes are typically based on an income approach given the lackas of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
June 30, 2022.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
assets.assets
(Amounts in millions) | Fair value | Primary methodologies | Significant inputs | |||||
U.S. government, agencies and government-sponsored enterprises | $ | 5,669 | Price quotes from trading desk, broker feeds | Bid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread | ||||
State and political subdivisions | $ | 2,816 | Multi-dimensional attribute-based modeling systems, third-party pricing vendors | Trade prices, material event notices, Municipal Market Data benchmark yields, broker quotes | ||||
Non-U.S. government | $ | 2,210 | Matrix pricing, spread priced to benchmark curves, price quotes from market makers | Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads,bid-offer spread, market research publications, third-party pricing sources | ||||
U.S. corporate | $ | 25,290 | Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, internal models,OAS-based models | Bid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports | ||||
Non-U.S. corporate | $ | 10,711 | Multi-dimensional attribute-based modeling systems,OAS-based models, price quotes from market makers | Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads,bid-offer spread, market research publications, third-party pricing sources | ||||
Residential mortgage-backed | $ | 4,123 | OAS-based models, To Be Announced pricing models, single factor binomial models, internally priced | Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports | ||||
Commercial mortgage-backed | $ | 3,392 | Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage-backed securities analytics model | Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports | ||||
Other asset-backed | $ | 2,843 | Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers, internal models | Spreads to daily updated swaps curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports | ||||
(Amounts in millions) | Fair value | Primary methodologies | Significant inputs | |||||
U.S. government, agencies and government-sponsored enterprises | $3,627 | Price quotes from trading desk, broker feeds | Bid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread | |||||
State and political subdivisions | $2,786 | Multi-dimensional attribute-based modeling systems, third-party pricing vendors | Trade prices, material event notices, Municipal Market Data benchmark yields, broker quotes | |||||
Non-U.S. government | $679 | Matrix pricing, spread priced to benchmark curves, price quotes from market makers | Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources | |||||
U.S. corporate | $24,600 | Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, OAS-based models | Bid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports | |||||
Non-U.S. corporate | $6,588 | Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makers | Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources | |||||
Residential mortgage-backed | $1,183 | OAS-based models, single factor binomial models, internally priced | Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports | |||||
Commercial mortgage-backed | $2,123 | Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage-backed securities analytics model | Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports | |||||
Other asset-backed | $1,924 | Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers | Spreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports | |||||
Securities lending collateral
Short-term Investments
Short-term investments primarily include
of our Level 3 measurements
Fixedfixed maturity securities
• | Internal models: A portion of our $ 3,019 million as of |
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
Equity
Restricted other invested assets related to securitization entities
We previously held trading securities related to securitization entities that were
1. The period end valuation is 0 as a result of settling the margins on these contracts on a daily basis.
For GMWB liabilities,non-performance
To determine the appropriate discount rate to reflect thenon-performance risk of the GMWB liabilities, we evaluate thenon-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. In determining the appropriate discount rate to incorporatenon-performance risk of the GMWB liabilities, we also considered the impacts of state guarantees embedded in the related insurance product as a form of inseparable third-party guarantee. We believe that a hypothetical exit market participant would use a similar discount rate as described above to value the liabilities.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For equity index volatility, we determine the projected equity market volatility using both historical volatility and projected equity market volatility with more significance being placed on projected near-term volatility and recent historical data. Given the different attributes and market characteristics of GMWB liabilities compared to equity index options in the derivative market, the equity index volatility assumption for GMWB liabilities may be different from the volatility assumption for equity index options, especially for the longer dated points on the curve.
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.
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility and
As of June 30, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.
Indexed universal life embedded derivatives
We As of June 30, 2022, a significant change in the unobservable inputs discussed above would have indexed universal life products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs usedresulted in determining thea significantly lower or higher fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporatenon-performance risk and risk margins. As a resultmeasurement.
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. Increases in the valuation of the underlying assets or decreases in the derivative liabilities will result in an increase in the fair value of these borrowings.
Derivatives
We consider counterparty collateral arrangements and rights ofset-off when evaluating our net credit risk exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these arrangements when determining whether any incremental adjustment should be made for both the counterparty’s and ournon-performance risk in measuring fair value for our derivative instruments. As a result of these counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have not recorded any incremental adjustment for ournon-performance risk or thenon-performance risk of the derivative counterparty for our derivative assets or liabilities. We determine fair value for our derivatives using an income approach with internal models based on relevant market inputs for each derivative instrument. We also compare the fair value determined using our internal model to the valuations provided by our derivative counterparties with any significant differences or changes in valuation being evaluated further by our derivatives professionals that are familiar with the instrument and market inputs used in the valuation.
Interest rate swaps.The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation 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. The interest rate volatility input used to value these options would be considered a significant unobservable input and results in the fair value measurement of the derivative being classified as Level 3. These options to terminate the swap by the counterparty are based on forward interest rate swap curves and volatility. As interest rate volatility increases, our valuation of the derivative changes unfavorably.
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 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, the current consumer price index and the forward consumer price index curve, which are generally considered observable inputs, and results in the derivative being classified as Level 2.
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. As credit spreads widen for the underlying issuers comprising the index, the change in our valuation of these credit default swaps will be unfavorable.
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. As credit spreads widen for the underlying issuers comprising the customized index, the change in our valuation of these credit default swaps will be unfavorable.
Equity index options. We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rate volatility and time value component associated with the optionality in the derivative, which are considered significant unobservable inputs in most instances. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3. As equity index volatility increases, our valuation of these options changes favorably.
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.
Forward bond purchase commitments.The valuation of forward bond purchase commitments is determined using an income approach. The primary input into the valuation represents the current bond prices and interest rates, which are generally considered an observable input, 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
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, 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, foreign currency exchange rate volatility and foreign equity index volatility inputs, the derivative is classified as Level 3. As foreign currency exchange rate volatility and foreign equity index volatility increases, the change in our valuation of these options will be favorable for purchase options and unfavorable for options sold. 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)
The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
| September 30, 2017 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
Investments: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 5,670 | $ | — | $ | 5,669 | $ | 1 | ||||||||
State and political subdivisions | 2,860 | — | 2,823 | 37 | ||||||||||||
Non-U.S. government | 2,226 | — | 2,226 | — | ||||||||||||
U.S. corporate: | ||||||||||||||||
Utilities | 4,923 | — | 4,261 | 662 | ||||||||||||
Energy | 2,440 | — | 2,282 | 158 | ||||||||||||
Finance and insurance | 6,587 | — | 5,917 | 670 | ||||||||||||
Consumer—non-cyclical | 4,828 | — | 4,701 | 127 | ||||||||||||
Technology and communications | 2,740 | — | 2,688 | 52 | ||||||||||||
Industrial | 1,346 | — | 1,299 | 47 | ||||||||||||
Capital goods | 2,321 | — | 2,203 | 118 | ||||||||||||
Consumer—cyclical | 1,611 | — | 1,349 | 262 | ||||||||||||
Transportation | 1,306 | — | 1,245 | 61 | ||||||||||||
Other | 380 | — | 210 | 170 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total U.S. corporate | 28,482 | — | 26,155 | 2,327 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. corporate: | ||||||||||||||||
Utilities | 1,062 | — | 703 | 359 | ||||||||||||
Energy | 1,463 | — | 1,286 | 177 | ||||||||||||
Finance and insurance | 2,696 | — | 2,527 | 169 | ||||||||||||
Consumer—non-cyclical | 716 | — | 587 | 129 | ||||||||||||
Technology and communications | 1,014 | — | 985 | 29 | ||||||||||||
Industrial | 1,058 | — | 919 | 139 | ||||||||||||
Capital goods | 587 | — | 437 | 150 | ||||||||||||
Consumer—cyclical | 527 | — | 458 | 69 | ||||||||||||
Transportation | 718 | — | 537 | 181 | ||||||||||||
Other | 2,782 | — | 2,733 | 49 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalnon-U.S. corporate | 12,623 | — | 11,172 | 1,451 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Residential mortgage-backed | 4,209 | — | 4,123 | 86 | ||||||||||||
Commercial mortgage-backed | 3,414 | — | 3,392 | 22 | ||||||||||||
Other asset-backed | 3,068 | — | 2,843 | 225 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total fixed maturity securities | 62,552 | — | 58,403 | 4,149 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Equity securities | 765 | 644 | 77 | 44 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other invested assets: | ||||||||||||||||
Derivative assets: | ||||||||||||||||
Interest rate swaps | 70 | — | 70 | — | ||||||||||||
Foreign currency swaps | 12 | — | 12 | — | ||||||||||||
Equity index options | 81 | — | — | 81 | ||||||||||||
Other foreign currency contracts | 98 | — | 98 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivative assets | 261 | — | 180 | 81 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities lending collateral | 237 | — | 237 | — | ||||||||||||
Short-term investments | 787 | — | 787 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other invested assets | 1,285 | — | 1,204 | 81 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Reinsurance recoverable (1) | 14 | — | — | 14 | ||||||||||||
Separate account assets | 7,264 | 7,264 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | $ | 71,880 | $ | 7,908 | $ | 59,684 | $ | 4,288 | ||||||||
|
|
|
|
|
|
|
| |||||||||
June 30, 2022 | ||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | NAV (1) | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,627 | $ | — | $ | 3,627 | $ | — | $ | — | ||||||||||
State and political subdivisions | 2,849 | — | 2,786 | 63 | — | |||||||||||||||
Non-U.S. government | 682 | — | 679 | 3 | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,103 | — | 3,293 | 810 | — | |||||||||||||||
Energy | 2,377 | — | 2,255 | 122 | — | |||||||||||||||
Finance and insurance | 7,469 | — | 6,815 | 654 | — | |||||||||||||||
Consumer—non-cyclical | 4,792 | — | 4,706 | 86 | — | |||||||||||||||
Technology and communications | 3,024 | — | 2,999 | 25 | — | |||||||||||||||
Industrial | 1,187 | — | 1,154 | 33 | — | |||||||||||||||
Capital goods | 2,258 | — | 2,220 | 38 | — | |||||||||||||||
Consumer—cyclical | 1,581 | — | 1,462 | 119 | — | |||||||||||||||
Transportation | 1,104 | — | 1,048 | 56 | — | |||||||||||||||
Other | 348 | — | 141 | 207 | — | |||||||||||||||
Total U.S. corporate | 28,243 | — | 26,093 | 2,150 | — | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 810 | — | 501 | 309 | — | |||||||||||||||
Energy | 1,097 | — | 964 | 133 | — | |||||||||||||||
Finance and insurance | 2,012 | — | 1,880 | 132 | — | |||||||||||||||
Consumer—non-cyclical | 570 | — | 503 | 67 | — | |||||||||||||||
Technology and communications | 943 | — | 917 | 26 | — | |||||||||||||||
Industrial | 861 | — | 792 | 69 | — | |||||||||||||||
Capital goods | 565 | — | 450 | 115 | — | |||||||||||||||
Consumer—cyclical | 285 | — | 206 | 79 | — | |||||||||||||||
Transportation | 390 | — | 369 | 21 | — | |||||||||||||||
Other | 949 | — | 927 | 22 | — | |||||||||||||||
Total non-U.S. corporate | 8,482 | — | 7,509 | 973 | — | |||||||||||||||
Residential mortgage-backed | 1,213 | — | 1,183 | 30 | — | |||||||||||||||
Commercial mortgage-backed | 2,137 | — | 2,123 | 14 | — | |||||||||||||||
Other asset-backed | 2,053 | — | 1,924 | 129 | — | |||||||||||||||
Total fixed maturity securities | 49,286 | — | 45,924 | 3,362 | — | |||||||||||||||
Equity securities | 243 | 158 | 50 | 35 | — | |||||||||||||||
Limited partnerships | 1,649 | — | — | 23 | 1,626 | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 30 | — | 30 | — | — | |||||||||||||||
Foreign currency swaps | 17 | — | 17 | — | — | |||||||||||||||
Equity index options | 30 | — | — | 30 | — | |||||||||||||||
Total derivative assets | 77 | — | 47 | 30 | — | |||||||||||||||
Short-term investments | 50 | — | 50 | — | — | |||||||||||||||
Total other invested assets | 127 | — | 97 | 30 | — | |||||||||||||||
Reinsurance recoverable (2) | 19 | — | — | 19 | — | |||||||||||||||
Separate account assets | 4,683 | 4,683 | — | — | — | |||||||||||||||
Total assets | $ | 56,007 | $ | 4,841 | $ | 46,071 | $ | 3,469 | $ | 1,626 | ||||||||||
(1) | Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| December 31, 2016 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | ||||||||||||||||
Investments: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 6,036 | $ | — | $ | 6,034 | $ | 2 | ||||||||
State and political subdivisions | 2,647 | — | 2,610 | 37 | ||||||||||||
Non-U.S. government | 2,107 | — | 2,107 | — | ||||||||||||
U.S. corporate: | ||||||||||||||||
Utilities | 4,550 | — | 3,974 | 576 | ||||||||||||
Energy | 2,300 | — | 2,090 | 210 | ||||||||||||
Finance and insurance | 6,097 | — | 5,311 | 786 | ||||||||||||
Consumer—non-cyclical | 4,734 | — | 4,613 | 121 | ||||||||||||
Technology and communications | 2,598 | — | 2,544 | 54 | ||||||||||||
Industrial | 1,223 | — | 1,175 | 48 | ||||||||||||
Capital goods | 2,258 | — | 2,106 | 152 | ||||||||||||
Consumer—cyclical | 1,530 | — | 1,272 | 258 | ||||||||||||
Transportation | 1,190 | — | 1,051 | 139 | ||||||||||||
Other | 348 | — | 205 | 143 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total U.S. corporate | 26,828 | — | 24,341 | 2,487 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-U.S. corporate: | ||||||||||||||||
Utilities | 969 | — | 583 | 386 | ||||||||||||
Energy | 1,331 | — | 1,125 | 206 | ||||||||||||
Finance and insurance | 2,538 | — | 2,356 | 182 | ||||||||||||
Consumer—non-cyclical | 714 | — | 575 | 139 | ||||||||||||
Technology and communications | 987 | — | 920 | 67 | ||||||||||||
Industrial | 958 | — | 849 | 109 | ||||||||||||
Capital goods | 535 | — | 366 | 169 | ||||||||||||
Consumer—cyclical | 442 | — | 373 | 69 | ||||||||||||
Transportation | 677 | — | 496 | 181 | ||||||||||||
Other | 3,144 | — | 3,119 | 25 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalnon-U.S. corporate | 12,295 | — | 10,762 | 1,533 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Residential mortgage-backed | 4,379 | — | 4,336 | 43 | ||||||||||||
Commercial mortgage-backed | 3,129 | — | 3,075 | 54 | ||||||||||||
Other asset-backed | 3,151 | — | 3,006 | 145 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total fixed maturity securities | 60,572 | — | 56,271 | 4,301 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Equity securities | 632 | 551 | 34 | 47 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other invested assets: | ||||||||||||||||
Trading securities | 259 | — | 259 | — | ||||||||||||
Derivative assets: | ||||||||||||||||
Interest rate swaps | 596 | — | 596 | — | ||||||||||||
Foreign currency swaps | 4 | — | 4 | — | ||||||||||||
Equity index options | 72 | — | — | 72 | ||||||||||||
Equity return swaps | 1 | — | 1 | — | ||||||||||||
Other foreign currency contracts | 35 | — | 32 | 3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivative assets | 708 | — | 633 | 75 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities lending collateral | 534 | — | 534 | — | ||||||||||||
|
|
|
|
|
|
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| |||||||||
Total other invested assets | 1,501 | — | 1,426 | 75 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Restricted other invested assets related to securitization entities | 312 | — | 181 | 131 | ||||||||||||
Reinsurance recoverable(1) | 16 | — | — | 16 | ||||||||||||
Separate account assets | 7,299 | 7,299 | — | — | ||||||||||||
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|
|
|
|
| |||||||||
Total assets | $ | 70,332 | $ | 7,850 | $ | 57,912 | $ | 4,570 | ||||||||
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| |||||||||
December 31, 2021 | ||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | NAV (1) | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,552 | $ | — | $ | 4,552 | $ | — | $ | — | ||||||||||
State and political subdivisions | 3,450 | — | 3,368 | 82 | — | |||||||||||||||
Non-U.S. government | 835 | — | 833 | 2 | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 5,104 | — | 4,154 | 950 | — | |||||||||||||||
Energy | 2,934 | — | 2,858 | 76 | — | |||||||||||||||
Finance and insurance | 8,991 | — | 8,306 | 685 | — | |||||||||||||||
Consumer—non-cyclical | 6,159 | — | 6,055 | 104 | — | |||||||||||||||
Technology and communications | 3,808 | — | 3,779 | 29 | — | |||||||||||||||
Industrial | 1,494 | — | 1,457 | 37 | — | |||||||||||||||
Capital goods | 2,745 | — | 2,700 | 45 | — | |||||||||||||||
Consumer—cyclical | 1,899 | — | 1,762 | 137 | — | |||||||||||||||
Transportation | 1,371 | — | 1,307 | 64 | — | |||||||||||||||
Other | 419 | — | 165 | 254 | — | |||||||||||||||
Total U.S. corporate | 34,924 | — | 32,543 | 2,381 | — | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 928 | — | 583 | 345 | — | |||||||||||||||
Energy | 1,383 | — | 1,238 | 145 | — | |||||||||||||||
Finance and insurance | 2,432 | — | 2,272 | 160 | — | |||||||||||||||
Consumer—non-cyclical | 743 | — | 680 | 63 | — | |||||||||||||||
Technology and communications | 1,250 | — | 1,222 | 28 | — | |||||||||||||||
Industrial | 1,047 | — | 954 | 93 | — | |||||||||||||||
Capital goods | 705 | — | 532 | 173 | — | |||||||||||||||
Consumer—cyclical | 341 | — | 265 | 76 | — | |||||||||||||||
Transportation | 489 | — | 436 | 53 | — | |||||||||||||||
Other | 1,217 | — | 1,191 | 26 | — | |||||||||||||||
Total non-U.S. corporate | 10,535 | — | 9,373 | 1,162 | — | |||||||||||||||
Residential mortgage-backed | 1,440 | — | 1,413 | 27 | — | |||||||||||||||
Commercial mortgage-backed | 2,584 | — | 2,568 | 16 | — | |||||||||||||||
Other asset-backed | 2,160 | — | 2,022 | 138 | — | |||||||||||||||
Total fixed maturity securities | 60,480 | — | 56,672 | 3,808 | — | |||||||||||||||
Equity securities | 198 | 101 | 60 | 37 | — | |||||||||||||||
Limited partnerships | 1,462 | — | — | 26 | 1,436 | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 364 | — | 364 | — | — | |||||||||||||||
Foreign currency swaps | 6 | — | 6 | — | — | |||||||||||||||
Equity index options | 42 | — | — | 42 | — | |||||||||||||||
Other foreign currency contracts | 2 | — | 2 | — | — | |||||||||||||||
Total derivative assets | 414 | — | 372 | 42 | — | |||||||||||||||
Short-term investments | 26 | — | 26 | — | — | |||||||||||||||
Total other invested assets | 440 | — | 398 | 42 | — | |||||||||||||||
Reinsurance recoverable (2) | 19 | — | — | 19 | — | |||||||||||||||
Separate account assets | 6,066 | 6,066 | — | — | — | |||||||||||||||
Total assets | $ | 68,665 | $ | 6,167 | $ | 57,130 | $ | 3,932 | $ | 1,436 | ||||||||||
(1) | Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
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 between levels at the beginning fair value for the reporting period in which the changes occur. Given the types of assets classified as Level 1, which primarily represents mutual fund investments, we typically do not have any transfers between Level 1 and Level 2 measurement categories and did not have any such transfers during any period presented.
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/or rating, 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.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Beginning balance as of July 1, 2017 | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Ending balance as of September 30, 2017 | 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, agenciesand government-sponsoredenterprises | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | ||||||||||||||||||||||
State and political subdivisions | 37 | 1 | (1 | ) | — | — | — | — | — | — | 37 | 1 | ||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 638 | — | — | 26 | — | — | (2 | ) | — | — | 662 | — | ||||||||||||||||||||||||||||||||
Energy | 160 | — | — | — | — | — | (2 | ) | — | — | 158 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 861 | 3 | (52 | ) | 22 | (14 | ) | — | (157 | ) | 8 | (1 | ) | 670 | 2 | |||||||||||||||||||||||||||||
Consumer—non-cyclical | 122 | — | 1 | 4 | — | — | — | — | — | 127 | — | |||||||||||||||||||||||||||||||||
Technology andcommunications | 58 | 1 | (3 | ) | — | — | — | (1 | ) | — | (3 | ) | 52 | 1 | ||||||||||||||||||||||||||||||
Industrial | 61 | — | — | — | — | — | — | — | (14 | ) | 47 | — | ||||||||||||||||||||||||||||||||
Capital goods | 118 | 1 | — | — | — | — | (1 | ) | — | — | 118 | 1 | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 266 | — | — | — | — | — | (2 | ) | — | (2 | ) | 262 | — | |||||||||||||||||||||||||||||||
Transportation | 100 | 16 | (10 | ) | — | — | — | (45 | ) | — | — | 61 | — | |||||||||||||||||||||||||||||||
Other | 176 | — | — | — | (4 | ) | — | (2 | ) | — | — | 170 | — | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total U.S. corporate | 2,560 | 21 | (64 | ) | 52 | (18 | ) | — | (212 | ) | 8 | (20 | ) | 2,327 | 4 | |||||||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 359 | — | — | — | — | — | — | — | — | 359 | — | |||||||||||||||||||||||||||||||||
Energy | 177 | — | 1 | — | — | — | (1 | ) | — | — | 177 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 172 | 1 | 1 | — | — | — | (5 | ) | — | — | 169 | — | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 129 | — | — | — | — | — | — | — | — | 129 | — | |||||||||||||||||||||||||||||||||
Technology andcommunications | 48 | 1 | 1 | — | (21 | ) | — | — | — | — | 29 | — | ||||||||||||||||||||||||||||||||
Industrial | 112 | — | — | 13 | — | — | — | 14 | — | 139 | — | |||||||||||||||||||||||||||||||||
Capital goods | 149 | — | 1 | — | — | — | — | — | — | 150 | — | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 67 | — | — | — | — | — | — | 2 | — | 69 | — | |||||||||||||||||||||||||||||||||
Transportation | 190 | — | 1 | — | — | — | (10 | ) | — | — | 181 | — | ||||||||||||||||||||||||||||||||
Other | 41 | (2 | ) | 1 | — | (2 | ) | — | — | 11 | — | 49 | — | |||||||||||||||||||||||||||||||
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Totalnon-U.S. corporate | 1,444 | — | 6 | 13 | (23 | ) | — | (16 | ) | 27 | — | 1,451 | — | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Residential mortgage-backed | 73 | — | — | 22 | — | — | (1 | ) | — | (8 | ) | 86 | — | |||||||||||||||||||||||||||||||
Commercial mortgage-backed | 52 | (1 | ) | (2 | ) | 14 | — | — | — | — | (41 | ) | 22 | — | ||||||||||||||||||||||||||||||
Other asset-backed | 150 | (1 | ) | 1 | 52 | — | — | (5 | ) | 44 | (16 | ) | 225 | — | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total fixed maturity securities | 4,317 | 20 | (60 | ) | 153 | (41 | ) | — | (234 | ) | 79 | (85 | ) | 4,149 | 5 | |||||||||||||||||||||||||||||
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Equity securities | 48 | — | — | — | (1 | ) | — | — | — | (3 | ) | 44 | — | |||||||||||||||||||||||||||||||
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Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 81 | 16 | — | 15 | — | — | (31 | ) | — | — | 81 | 13 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total derivative assets | 81 | 16 | — | 15 | — | — | (31 | ) | — | — | 81 | 13 | ||||||||||||||||||||||||||||||||
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Total other invested assets | 81 | 16 | — | 15 | — | — | (31 | ) | — | — | 81 | 13 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Reinsurance recoverable (2) | 15 | (1 | ) | — | — | — | — | — | — | — | 14 | (1 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Level 3 assets | $ | 4,461 | $ | 35 | $ | (60 | ) | $ | 168 | $ | (42 | ) | $ | — | $ | (265 | ) | $ | 79 | $ | (88 | ) | $ | 4,288 | $ | 17 | ||||||||||||||||||
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Beginning balance as of April 1, 2022 | Total realized and unrealized gains (losses) | Ending balance as of June 30, 2022 | Total gains (losses) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Included in net income | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 71 | $ | 1 | $ | (9 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 63 | $ | 1 | $ | (9 | ) | ||||||||||||||||||||||
Non-U.S. government | 1 | — | — | 2 | — | — | — | — | — | 3 | — | — | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 912 | — | (92 | ) | — | — | — | (1 | ) | 2 | (11 | ) | 810 | — | (92 | ) | ||||||||||||||||||||||||||||||||
Energy | 72 | — | (11 | ) | — | — | — | (7 | ) | 68 | — | 122 | — | (11 | ) | |||||||||||||||||||||||||||||||||
Finance and insurance | 676 | — | (67 | ) | 85 | — | — | (1 | ) | — | (39 | ) | 654 | — | (61 | ) | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 92 | — | (6 | ) | — | — | — | — | — | — | 86 | — | (5 | ) | ||||||||||||||||||||||||||||||||||
Technology and communications | 28 | — | (3 | ) | — | — | — | — | — | — | 25 | — | (3 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 35 | — | (2 | ) | — | — | — | — | — | — | 33 | — | (2 | ) | ||||||||||||||||||||||||||||||||||
Capital goods | 41 | — | (3 | ) | — | — | — | — | — | — | 38 | — | (3 | ) | ||||||||||||||||||||||||||||||||||
Consumer—cyclical | 127 | — | (7 | ) | — | — | — | (1 | ) | — | — | 119 | — | (7 | ) | |||||||||||||||||||||||||||||||||
Transportation | 64 | — | (3 | ) | — | — | — | (1 | ) | — | (4 | ) | 56 | — | (3 | ) | ||||||||||||||||||||||||||||||||
Other | 222 | — | (12 | ) | — | — | — | (3 | ) | — | — | 207 | — | (12 | ) | |||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,269 | — | (206 | ) | 85 | — | — | (14 | ) | 70 | (54 | ) | 2,150 | — | (199 | ) | ||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 334 | — | (25 | ) | — | — | — | — | — | — | 309 | — | (24 | ) | ||||||||||||||||||||||||||||||||||
Energy | 138 | — | (7 | ) | 3 | — | — | (1 | ) | — | — | 133 | — | (8 | ) | |||||||||||||||||||||||||||||||||
Finance and insurance | 143 | 1 | (12 | ) | — | — | — | — | — | — | 132 | 1 | (12 | ) | ||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 60 | — | (4 | ) | — | — | — | — | 11 | — | 67 | — | (4 | ) | ||||||||||||||||||||||||||||||||||
Technology and communications | 27 | — | (1 | ) | — | — | — | — | — | — | 26 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 74 | — | (4 | ) | — | — | — | — | — | (1 | ) | 69 | — | (5 | ) | |||||||||||||||||||||||||||||||||
Capital goods | 132 | — | (7 | ) | — | (10 | ) | — | — | — | — | 115 | — | (7 | ) | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 86 | — | (7 | ) | — | — | — | — | — | — | 79 | — | (7 | ) | ||||||||||||||||||||||||||||||||||
Transportation | 22 | — | (1 | ) | — | — | — | — | — | — | 21 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Other | 24 | — | (2 | ) | — | — | — | — | — | — | 22 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,040 | 1 | (70 | ) | 3 | (10 | ) | — | (1 | ) | 11 | (1 | ) | 973 | 1 | (70 | ) | |||||||||||||||||||||||||||||||
Residential mortgage-backed | 33 | — | (2 | ) | 4 | — | — | (1 | ) | — | (4 | ) | 30 | — | (2 | ) | ||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 15 | — | (1 | ) | — | — | — | — | — | — | 14 | — | (2 | ) | ||||||||||||||||||||||||||||||||||
Other asset-backed | 100 | — | (5 | ) | 40 | (6 | ) | — | — | — | — | 129 | — | (5 | ) | |||||||||||||||||||||||||||||||||
Total fixed maturity securities | 3,529 | 2 | (293 | ) | 134 | (16 | ) | — | (16 | ) | 81 | (59 | ) | 3,362 | 2 | (287 | ) | |||||||||||||||||||||||||||||||
Equity securities | 36 | — | — | — | (1 | ) | — | — | — | — | 35 | — | — | |||||||||||||||||||||||||||||||||||
Limited partnerships | 26 | (3 | ) | — | — | — | — | — | — | — | 23 | (3 | ) | — | ||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 30 | (1 | ) | — | 3 | — | — | (2 | ) | — | — | 30 | (4 | ) | — | |||||||||||||||||||||||||||||||||
Total derivative assets | 30 | (1 | ) | — | 3 | — | — | (2 | ) | — | — | 30 | (4 | ) | — | |||||||||||||||||||||||||||||||||
Total other invested assets | 30 | (1 | ) | — | 3 | — | — | (2 | ) | — | — | 30 | (4 | ) | — | |||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 17 | 2 | — | — | — | — | — | — | — | 19 | 2 | — | ||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 3,638 | $ | — | $ | (293 | ) | $ | 137 | $ | (17 | ) | $ | — | $ | (18 | ) | $ | 81 | $ | (59 | ) | $ | 3,469 | $ | (3 | ) | $ | (287 | ) | ||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
(Amounts in millions) | Beginning balance as of July 1, 2016 | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Ending balance as of September 30, 2016 | 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, agenciesand government-sponsoredenterprises | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | $ | — | ||||||||||||||||||||||
State and political subdivisions | 36 | 1 | — | — | — | — | — | — | (1 | ) | 36 | 1 | ||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 552 | 1 | 4 | 54 | (6 | ) | — | (1 | ) | 1 | (43 | ) | 562 | — | ||||||||||||||||||||||||||||||
Energy | 208 | — | 3 | — | — | — | (8 | ) | — | (1 | ) | 202 | — | |||||||||||||||||||||||||||||||
Finance and insurance | 775 | 4 | 14 | 27 | (5 | ) | — | (32 | ) | 37 | — | 820 | 5 | |||||||||||||||||||||||||||||||
Consumer—non-cyclical | 102 | — | 1 | 5 | (5 | ) | — | — | — | — | 103 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 40 | 1 | — | 12 | — | — | — | — | — | 53 | 1 | |||||||||||||||||||||||||||||||||
Industrial | 78 | — | — | — | — | — | — | — | — | 78 | — | |||||||||||||||||||||||||||||||||
Capital goods | 135 | — | 1 | — | — | — | — | — | — | 136 | 1 | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 254 | — | — | 19 | (5 | ) | — | (1 | ) | 1 | (3 | ) | 265 | — | ||||||||||||||||||||||||||||||
Transportation | 129 | — | 1 | — | — | — | (6 | ) | — | — | 124 | — | ||||||||||||||||||||||||||||||||
Other | 147 | — | — | — | — | — | (1 | ) | 16 | — | 162 | — | ||||||||||||||||||||||||||||||||
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Total U.S. corporate | 2,420 | 6 | 24 | 117 | (21 | ) | — | (49 | ) | 55 | (47 | ) | 2,505 | 7 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 331 | — | 1 | 52 | (5 | ) | — | — | — | (10 | ) | 369 | — | |||||||||||||||||||||||||||||||
Energy | 234 | — | 9 | 8 | (9 | ) | — | (17 | ) | — | — | 225 | — | |||||||||||||||||||||||||||||||
Finance and insurance | 201 | — | 3 | 11 | (1 | ) | — | — | — | — | 214 | — | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 168 | 2 | (1 | ) | 3 | (3 | ) | — | (37 | ) | 12 | — | 144 | — | ||||||||||||||||||||||||||||||
Technology andcommunications | 80 | — | 1 | 2 | (2 | ) | — | — | — | — | 81 | — | ||||||||||||||||||||||||||||||||
Industrial | 95 | — | 2 | 17 | (17 | ) | — | — | 15 | — | 112 | — | ||||||||||||||||||||||||||||||||
Capital goods | 212 | 1 | (2 | ) | — | — | — | (5 | ) | — | (33 | ) | 173 | 1 | ||||||||||||||||||||||||||||||
Consumer—cyclical | 71 | — | — | — | — | — | — | — | — | 71 | — | |||||||||||||||||||||||||||||||||
Transportation | 186 | 1 | (1 | ) | — | — | — | (14 | ) | 1 | — | 173 | — | |||||||||||||||||||||||||||||||
Other | 29 | (2 | ) | 2 | — | (12 | ) | — | — | 10 | — | 27 | (2 | ) | ||||||||||||||||||||||||||||||
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Totalnon-U.S. corporate | 1,607 | 2 | 14 | 93 | (49 | ) | — | (73 | ) | 38 | (43 | ) | 1,589 | (1 | ) | |||||||||||||||||||||||||||||
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Residential mortgage-backed | 96 | — | — | — | (45 | ) | — | (8 | ) | 5 | (11 | ) | 37 | — | ||||||||||||||||||||||||||||||
Commercial mortgage-backed | 33 | — | (3 | ) | — | — | — | — | — | (2 | ) | 28 | — | |||||||||||||||||||||||||||||||
Other asset-backed | 198 | (6 | ) | 7 | — | (5 | ) | — | (5 | ) | 25 | (64 | ) | 150 | (6 | ) | ||||||||||||||||||||||||||||
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Total fixed maturity securities | 4,392 | 3 | 42 | 210 | (120 | ) | — | (135 | ) | 123 | (168 | ) | 4,347 | 1 | ||||||||||||||||||||||||||||||
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Equity securities | 44 | — | — | 2 | — | — | — | — | — | 46 | — | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 57 | 9 | — | 15 | — | — | (20 | ) | — | — | 61 | — | ||||||||||||||||||||||||||||||||
Other foreign currencycontracts | 1 | — | — | — | — | — | — | — | — | 1 | — | |||||||||||||||||||||||||||||||||
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Total derivative assets | 58 | 9 | — | 15 | — | — | (20 | ) | — | — | 62 | — | ||||||||||||||||||||||||||||||||
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Total other invested assets | 58 | 9 | — | 15 | — | — | (20 | ) | — | — | 62 | — | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Restricted other invested assetsrelated to securitization entities | 131 | — | — | — | — | — | — | — | — | 131 | — | |||||||||||||||||||||||||||||||||
Reinsurance recoverable(2) | 26 | (3 | ) | — | — | — | 1 | — | — | — | 24 | (3 | ) | |||||||||||||||||||||||||||||||
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Total Level 3 assets | $ | 4,651 | $ | 9 | $ | 42 | $ | 227 | $ | (120 | ) | $ | 1 | $ | (155 | ) | $ | 123 | $ | (168 | ) | $ | 4,610 | $ | (2 | ) | ||||||||||||||||||
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| |||||||||||||||||||||||
Beginning balance as of April 1, 2021 | Total realized and unrealized gains (losses) | Ending balance as of June 30, 2021 | Total gains (losses) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Included in net income | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 68 | $ | 1 | $ | 6 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 75 | $ | 1 | $ | 6 | ||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 793 | — | 23 | 8 | — | — | (1 | ) | 19 | — | 842 | — | 23 | |||||||||||||||||||||||||||||||||||
Energy | 122 | — | 8 | — | — | — | (1 | ) | — | (52 | ) | 77 | — | 4 | ||||||||||||||||||||||||||||||||||
Finance and insurance | 597 | — | 17 | 55 | — | — | (8 | ) | — | — | 661 | — | 17 | |||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 106 | — | 2 | — | — | — | (2 | ) | 3 | — | 109 | — | 1 | |||||||||||||||||||||||||||||||||||
Technology and communications | 40 | — | 2 | — | — | — | — | — | (12 | ) | 30 | — | 1 | |||||||||||||||||||||||||||||||||||
Industrial | 20 | — | — | — | — | — | — | — | — | 20 | — | — | ||||||||||||||||||||||||||||||||||||
Capital goods | 58 | — | 1 | — | — | — | — | — | — | 59 | — | 1 | ||||||||||||||||||||||||||||||||||||
Consumer—cyclical | 147 | — | 1 | — | — | — | (1 | ) | — | (8 | ) | 139 | — | 1 | ||||||||||||||||||||||||||||||||||
Transportation | 67 | — | 1 | — | — | — | (1 | ) | — | — | 67 | — | 1 | |||||||||||||||||||||||||||||||||||
Other | 200 | — | — | — | — | — | (2 | ) | — | — | 198 | — | 1 | |||||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,150 | — | 55 | 63 | — | — | (16 | ) | 22 | (72 | ) | 2,202 | — | 50 | ||||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 375 | — | 5 | — | — | — | (8 | ) | — | (24 | ) | 348 | — | 4 | ||||||||||||||||||||||||||||||||||
Energy | 243 | — | 10 | — | — | — | (22 | ) | — | (79 | ) | 152 | — | 5 | ||||||||||||||||||||||||||||||||||
Finance and insurance | 290 | — | 17 | — | (2 | ) | — | (52 | ) | — | (51 | ) | 202 | 1 | 5 | |||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 66 | — | — | 8 | — | — | — | — | — | 74 | — | — | ||||||||||||||||||||||||||||||||||||
Technology and communications | 28 | — | — | — | — | — | — | — | — | 28 | — | — | ||||||||||||||||||||||||||||||||||||
Industrial | 93 | — | 1 | — | — | — | — | — | — | 94 | — | 1 | ||||||||||||||||||||||||||||||||||||
Capital goods | 175 | — | 1 | 5 | — | — | — | — | — | 181 | — | 2 | ||||||||||||||||||||||||||||||||||||
Consumer—cyclical | 144 | — | 2 | 1 | — | — | — | — | — | 147 | — | 2 | ||||||||||||||||||||||||||||||||||||
Transportation | 82 | — | 1 | — | — | — | — | — | — | 83 | — | 2 | ||||||||||||||||||||||||||||||||||||
Other | 80 | — | 1 | — | — | — | (13 | ) | — | (15 | ) | 53 | — | 1 | ||||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,576 | — | 38 | 14 | (2 | ) | — | (95 | ) | — | (169 | ) | 1,362 | 1 | 22 | |||||||||||||||||||||||||||||||||
Residential mortgage-backed | 13 | — | 1 | — | — | — | (1 | ) | — | — | 13 | — | — | |||||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 19 | — | — | 1 | — | — | — | — | — | 20 | — | 1 | ||||||||||||||||||||||||||||||||||||
Other asset-backed | 96 | — | 1 | — | — | — | (5 | ) | — | (4 | ) | 88 | — | 1 | ||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 3,922 | 1 | 101 | 78 | (2 | ) | — | (117 | ) | 22 | (245 | ) | 3,760 | 2 | 80 | |||||||||||||||||||||||||||||||||
Equity securities | 43 | — | — | — | — | — | (5 | ) | — | — | 38 | — | — | |||||||||||||||||||||||||||||||||||
Limited partnerships | 25 | 1 | — | — | — | — | — | — | — | 26 | 1 | — | ||||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 53 | 6 | — | 5 | — | — | (17 | ) | — | — | 47 | 2 | — | |||||||||||||||||||||||||||||||||||
Total derivative assets | 53 | 6 | — | 5 | — | — | (17 | ) | — | — | 47 | 2 | — | |||||||||||||||||||||||||||||||||||
Total other invested assets | 53 | 6 | — | 5 | — | — | (17 | ) | — | — | 47 | 2 | — | |||||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 18 | (1 | ) | — | — | — | 1 | — | — | — | 18 | (1 | ) | — | ||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,061 | $ | 7 | $ | 101 | $ | 83 | $ | (2 | ) | $ | 1 | $ | (139 | ) | $ | 22 | $ | (245 | ) | $ | 3,889 | $ | 4 | $ | 80 | |||||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
(Amounts in millions) | Beginning balance as of January 1, 2017 | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Ending balance as of September 30, 2017 | 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, agenciesand government-sponsoredenterprises | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 1 | $ | — | |||||||||||||||||||||
State and political subdivisions | 37 | 2 | (2 | ) | — | — | — | — | — | — | 37 | 2 | ||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 576 | — | 20 | 70 | — | — | (4 | ) | 30 | (30 | ) | 662 | — | |||||||||||||||||||||||||||||||
Energy | 210 | (1 | ) | 6 | — | (10 | ) | — | (32 | ) | 1 | (16 | ) | 158 | (1 | ) | ||||||||||||||||||||||||||||
Finance and insurance | 786 | 11 | (1 | ) | 75 | (31 | ) | — | (163 | ) | 8 | (15 | ) | 670 | 10 | |||||||||||||||||||||||||||||
Consumer—non-cyclical | 121 | — | 2 | 4 | — | — | — | — | — | 127 | — | |||||||||||||||||||||||||||||||||
Technology and | ||||||||||||||||||||||||||||||||||||||||||||
communications | 54 | 2 | 3 | 14 | — | — | (1 | ) | — | (20 | ) | 52 | 2 | |||||||||||||||||||||||||||||||
Industrial | 48 | — | — | 13 | — | — | — | — | (14 | ) | 47 | — | ||||||||||||||||||||||||||||||||
Capital goods | 152 | 1 | 3 | — | — | — | (1 | ) | — | (37 | ) | 118 | 1 | |||||||||||||||||||||||||||||||
Consumer—cyclical | 258 | — | 9 | 2 | — | — | (5 | ) | — | (2 | ) | 262 | — | |||||||||||||||||||||||||||||||
Transportation | 139 | 17 | (5 | ) | — | — | — | (48 | ) | — | (42 | ) | 61 | 1 | ||||||||||||||||||||||||||||||
Other | 143 | — | 1 | — | (4 | ) | — | (7 | ) | 37 | — | 170 | — | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total U.S. corporate | 2,487 | 30 | 38 | 178 | (45 | ) | — | (261 | ) | 76 | (176 | ) | 2,327 | 13 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 386 | — | 5 | 30 | — | — | — | — | (62 | ) | 359 | — | ||||||||||||||||||||||||||||||||
Energy | 206 | — | 6 | — | (1 | ) | — | (1 | ) | — | (33 | ) | 177 | — | ||||||||||||||||||||||||||||||
Finance and insurance | 182 | 4 | 9 | 4 | — | — | (30 | ) | — | — | 169 | 2 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 139 | — | 2 | — | — | — | (12 | ) | — | — | 129 | — | ||||||||||||||||||||||||||||||||
Technology and | ||||||||||||||||||||||||||||||||||||||||||||
communications | 67 | 1 | 1 | — | (21 | ) | — | (19 | ) | — | — | 29 | — | |||||||||||||||||||||||||||||||
Industrial | 109 | — | 3 | 13 | — | — | — | 14 | — | 139 | — | |||||||||||||||||||||||||||||||||
Capital goods | 169 | — | 3 | — | — | — | (15 | ) | — | (7 | ) | 150 | — | |||||||||||||||||||||||||||||||
Consumer—cyclical | 69 | — | — | — | — | — | (2 | ) | 2 | — | 69 | — | ||||||||||||||||||||||||||||||||
Transportation | 181 | — | 4 | 6 | — | — | (10 | ) | 11 | (11 | ) | 181 | — | |||||||||||||||||||||||||||||||
Other | 25 | (2 | ) | 2 | 15 | (2 | ) | — | — | 11 | — | 49 | — | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Totalnon-U.S. corporate | 1,533 | 3 | 35 | 68 | (24 | ) | — | (89 | ) | 38 | (113 | ) | 1,451 | 2 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Residential mortgage-backed | 43 | — | 1 | 26 | — | — | (2 | ) | 26 | (8 | ) | 86 | — | |||||||||||||||||||||||||||||||
Commercial mortgage-backed | 54 | (2 | ) | 4 | 23 | (9 | ) | — | — | — | (48 | ) | 22 | — | ||||||||||||||||||||||||||||||
Other asset-backed | 145 | (8 | ) | 11 | 116 | (35 | ) | — | (12 | ) | 58 | (50 | ) | 225 | — | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total fixed maturity securities | 4,301 | 25 | 87 | 411 | (113 | ) | — | (365 | ) | 198 | (395 | ) | 4,149 | 17 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Equity securities | 47 | — | — | 1 | (1 | ) | — | — | — | (3 | ) | 44 | — | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 72 | 42 | — | 36 | — | — | (69 | ) | — | — | 81 | 21 | ||||||||||||||||||||||||||||||||
Other foreign currencycontracts | 3 | (3 | ) | — | — | — | — | — | — | — | — | (2 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total derivative assets | 75 | 39 | — | 36 | — | — | (69 | ) | — | — | 81 | 19 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total other invested assets | 75 | 39 | — | 36 | — | — | (69 | ) | — | — | 81 | 19 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Restricted other invested assetsrelated to securitization entities | 131 | — | — | — | (131 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Reinsurance recoverable(2) | 16 | (3 | ) | — | — | — | 1 | — | — | — | 14 | (3 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Level 3 assets | $ | 4,570 | $ | 61 | $ | 87 | $ | 448 | $ | (245 | ) | $ | 1 | $ | (434 | ) | $ | 198 | $ | (398 | ) | $ | 4,288 | $ | 33 | |||||||||||||||||||
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| |||||||||||||||||||||||
Beginning balance as of January 1, 2022 | Total realized and unrealized gains (losses) | Ending balance as of June 30, 2022 | Total gains (losses) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Included in net income | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 82 | $ | 2 | $ | (21 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 63 | $ | 2 | $ | (21 | ) | ||||||||||||||||||||||
Non-U.S. government | 2 | — | — | 2 | (1 | ) | — | — | — | — | 3 | — | — | |||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 950 | — | (165 | ) | 35 | — | — | (1 | ) | 2 | (11 | ) | 810 | — | (165 | ) | ||||||||||||||||||||||||||||||||
Energy | 76 | — | (15 | ) | — | — | — | (7 | ) | 68 | — | 122 | — | (15 | ) | |||||||||||||||||||||||||||||||||
Finance and insurance | 685 | — | (123 | ) | 151 | — | — | (3 | ) | — | (56 | ) | 654 | — | (116 | ) | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 104 | — | (11 | ) | — | — | — | (7 | ) | — | — | 86 | — | (11 | ) | |||||||||||||||||||||||||||||||||
Technology and communications | 29 | — | (4 | ) | — | — | — | — | — | — | 25 | — | (4 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 37 | — | (4 | ) | — | — | — | — | — | — | 33 | — | (4 | ) | ||||||||||||||||||||||||||||||||||
Capital goods | 45 | — | (7 | ) | — | — | — | — | — | — | 38 | — | (6 | ) | ||||||||||||||||||||||||||||||||||
Consumer—cyclical | 137 | — | (15 | ) | — | — | — | (3 | ) | — | — | 119 | — | (15 | ) | |||||||||||||||||||||||||||||||||
Transportation | 64 | — | (6 | ) | 5 | — | — | (3 | ) | — | (4 | ) | 56 | — | (6 | ) | ||||||||||||||||||||||||||||||||
Other | 254 | — | (23 | ) | — | — | — | (7 | ) | — | (17 | ) | 207 | — | (22 | ) | ||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,381 | — | (373 | ) | 191 | — | — | (31 | ) | 70 | (88 | ) | 2,150 | — | (364 | ) | ||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 345 | — | (46 | ) | 10 | — | — | — | — | — | 309 | — | (45 | ) | ||||||||||||||||||||||||||||||||||
Energy | 145 | — | (14 | ) | 3 | — | — | (1 | ) | — | — | 133 | — | (15 | ) | |||||||||||||||||||||||||||||||||
Finance and insurance | 160 | 2 | (30 | ) | — | — | — | — | — | — | 132 | 2 | (30 | ) | ||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 63 | — | (7 | ) | — | — | — | — | 11 | — | 67 | — | (7 | ) | ||||||||||||||||||||||||||||||||||
Technology and communications | 28 | — | (2 | ) | — | — | — | — | — | — | 26 | — | (2 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 93 | — | (10 | ) | — | — | — | — | — | (14 | ) | 69 | — | (9 | ) | |||||||||||||||||||||||||||||||||
Capital goods | 173 | — | (15 | ) | — | (10 | ) | — | (33 | ) | — | — | 115 | — | (15 | ) | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 76 | — | (14 | ) | — | — | — | — | 17 | — | 79 | — | (14 | ) | ||||||||||||||||||||||||||||||||||
Transportation | 53 | — | (3 | ) | — | — | — | (29 | ) | — | — | 21 | — | (3 | ) | |||||||||||||||||||||||||||||||||
Other | 26 | — | (4 | ) | — | — | — | — | — | — | 22 | — | (3 | ) | ||||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,162 | 2 | (145 | ) | 13 | (10 | ) | — | (63 | ) | 28 | (14 | ) | 973 | 2 | (143 | ) | |||||||||||||||||||||||||||||||
Residential mortgage-backed | 27 | — | (3 | ) | 13 | — | — | (2 | ) | 4 | (9 | ) | 30 | — | (2 | ) | ||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 16 | — | (2 | ) | — | — | — | — | — | — | 14 | — | (3 | ) | ||||||||||||||||||||||||||||||||||
Other asset-backed | 138 | — | (12 | ) | 46 | (6 | ) | — | (3 | ) | — | (34 | ) | 129 | — | (10 | ) | |||||||||||||||||||||||||||||||
Total fixed maturity securities | 3,808 | 4 | (556 | ) | 265 | (17 | ) | — | (99 | ) | 102 | (145 | ) | 3,362 | 4 | (543 | ) | |||||||||||||||||||||||||||||||
Equity securities | 37 | — | — | — | (1 | ) | — | — | — | (1 | ) | 35 | — | — | ||||||||||||||||||||||||||||||||||
Limited partnerships | 26 | (3 | ) | — | — | — | — | — | — | — | 23 | (3 | ) | — | ||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 42 | (7 | ) | — | 8 | — | — | (13 | ) | — | — | 30 | 2 | — | ||||||||||||||||||||||||||||||||||
Total derivative assets | 42 | (7 | ) | — | 8 | — | — | (13 | ) | — | — | 30 | 2 | — | ||||||||||||||||||||||||||||||||||
Total other invested assets | 42 | (7 | ) | — | 8 | — | — | (13 | ) | — | — | 30 | 2 | — | ||||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 19 | — | — | — | — | — | — | — | — | 19 | — | — | ||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 3,932 | $ | (6 | ) | $ | (556 | ) | $ | 273 | $ | (18 | ) | $ | — | $ | (112 | ) | $ | 102 | $ | (146 | ) | $ | 3,469 | $ | 3 | $ | (543 | ) | ||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| Beginning balance as of January 1, 2016 | Total realized and unrealized gains (losses) | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Ending balance as of September 30, 2016 | Total gains (losses) included in net income (loss) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income (loss) | Included in OCI | Purchases | Sales | Issuances | Settlements | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||
U.S. government, agenciesand government-sponsoredenterprises | $ | 3 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 2 | $ | — | |||||||||||||||||||||
State and political subdivisions | 35 | 2 | (1 | ) | 7 | — | — | — | — | (7 | ) | 36 | 2 | |||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 449 | 1 | 28 | 101 | (6 | ) | — | (9 | ) | 68 | (70 | ) | 562 | — | ||||||||||||||||||||||||||||||
Energy | 253 | — | (1 | ) | — | — | — | (10 | ) | 7 | (47 | ) | 202 | — | ||||||||||||||||||||||||||||||
Finance and insurance | 715 | 12 | 58 | 54 | (14 | ) | — | (59 | ) | 72 | (18 | ) | 820 | 11 | ||||||||||||||||||||||||||||||
Consumer—non-cyclical | 109 | — | 7 | 5 | (18 | ) | — | — | — | — | 103 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 35 | 2 | 4 | 12 | — | — | — | — | — | 53 | 2 | |||||||||||||||||||||||||||||||||
Industrial | 61 | — | 5 | — | — | — | — | 12 | — | 78 | — | |||||||||||||||||||||||||||||||||
Capital goods | 180 | 1 | 6 | — | (10 | ) | — | — | — | (41 | ) | 136 | 1 | |||||||||||||||||||||||||||||||
Consumer—cyclical | 239 | 4 | 9 | 44 | (5 | ) | — | (42 | ) | 19 | (3 | ) | 265 | — | ||||||||||||||||||||||||||||||
Transportation | 106 | 1 | 9 | 17 | — | — | (14 | ) | 5 | — | 124 | 1 | ||||||||||||||||||||||||||||||||
Other | 182 | 1 | 1 | — | — | — | (5 | ) | 16 | (33 | ) | 162 | 1 | |||||||||||||||||||||||||||||||
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Total U.S. corporate | 2,329 | 22 | 126 | 233 | (53 | ) | — | (139 | ) | 199 | (212 | ) | 2,505 | 16 | ||||||||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 287 | — | 9 | 62 | (5 | ) | — | — | 26 | (10 | ) | 369 | — | |||||||||||||||||||||||||||||||
Energy | 252 | — | 33 | 8 | (11 | ) | — | (31 | ) | — | (26 | ) | 225 | — | ||||||||||||||||||||||||||||||
Finance and insurance | 191 | 2 | 11 | 11 | (1 | ) | — | — | — | — | 214 | 2 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 169 | 2 | 9 | 3 | (3 | ) | — | (48 | ) | 12 | — | 144 | — | |||||||||||||||||||||||||||||||
Technology andcommunications | 62 | — | 6 | 18 | (5 | ) | — | — | — | — | 81 | — | ||||||||||||||||||||||||||||||||
Industrial | 84 | — | 7 | 17 | (20 | ) | — | — | 24 | — | 112 | — | ||||||||||||||||||||||||||||||||
Capital goods | 213 | 1 | 7 | — | — | — | (15 | ) | — | (33 | ) | 173 | 1 | |||||||||||||||||||||||||||||||
Consumer—cyclical | 71 | — | 2 | — | — | — | (2 | ) | — | — | 71 | — | ||||||||||||||||||||||||||||||||
Transportation | 144 | 1 | 3 | — | — | — | (14 | ) | 39 | — | 173 | — | ||||||||||||||||||||||||||||||||
Other | 72 | (2 | ) | 4 | — | (12 | ) | — | (7 | ) | 10 | (38 | ) | 27 | (2 | ) | ||||||||||||||||||||||||||||
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Totalnon-U.S. corporate | 1,545 | 4 | 91 | 119 | (57 | ) | — | (117 | ) | 111 | (107 | ) | 1,589 | 1 | ||||||||||||||||||||||||||||||
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Residential mortgage-backed | 116 | — | 2 | 51 | (45 | ) | — | (13 | ) | 13 | (87 | ) | 37 | — | ||||||||||||||||||||||||||||||
Commercial mortgage-backed | 10 | — | 1 | 23 | — | — | (4 | ) | — | (2 | ) | 28 | — | |||||||||||||||||||||||||||||||
Other asset-backed | 1,142 | (16 | ) | 3 | 12 | (25 | ) | — | (19 | ) | 66 | (1,013 | ) | 150 | (16 | ) | ||||||||||||||||||||||||||||
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Total fixed maturity securities | 5,180 | 12 | 222 | 445 | (180 | ) | — | (293 | ) | 389 | (1,428 | ) | 4,347 | 3 | ||||||||||||||||||||||||||||||
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Equity securities | 38 | — | — | 8 | — | — | — | — | — | 46 | — | |||||||||||||||||||||||||||||||||
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Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 1 | — | — | — | — | — | (1 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||
Equity index options | 30 | 5 | — | 51 | — | — | (25 | ) | — | — | 61 | (4 | ) | |||||||||||||||||||||||||||||||
Other foreign currencycontracts | 3 | (2 | ) | — | 1 | — | — | (1 | ) | — | — | 1 | (2 | ) | ||||||||||||||||||||||||||||||
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Total derivative assets | 34 | 3 | — | 52 | — | — | (27 | ) | — | — | 62 | (6 | ) | |||||||||||||||||||||||||||||||
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Total other invested assets | 34 | 3 | — | 52 | — | — | (27 | ) | — | — | 62 | (6 | ) | |||||||||||||||||||||||||||||||
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Restricted other invested assetsrelated to securitization entities | 232 | (55 | ) | — | — | — | — | (46 | ) | — | — | 131 | 9 | |||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 17 | 5 | — | — | — | 2 | — | — | — | 24 | 5 | |||||||||||||||||||||||||||||||||
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Total Level 3 assets | $ | 5,501 | $ | (35 | ) | $ | 222 | $ | 505 | $ | (180 | ) | $ | 2 | $ | (366 | ) | $ | 389 | $ | (1,428 | ) | $ | 4,610 | $ | 11 | ||||||||||||||||||
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Beginning balance as of January 1, 2021 | Total realized and unrealized gains (losses) | Ending balance as of June 30, 2021 | Total gains (losses) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | Included in net income | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 66 | $ | 2 | $ | 7 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 75 | $ | 2 | $ | 7 | ||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 842 | — | (7 | ) | 16 | — | — | (14 | ) | 19 | (14 | ) | 842 | — | (6 | ) | ||||||||||||||||||||||||||||||||
Energy | 128 | — | 4 | — | — | — | (3 | ) | — | (52 | ) | 77 | — | — | ||||||||||||||||||||||||||||||||||
Finance and insurance | 607 | — | (5 | ) | 73 | — | — | (25 | ) | 17 | (6 | ) | 661 | — | (5 | ) | ||||||||||||||||||||||||||||||||
| Consumer—non-cyclical | 109 | — | (1 | ) | — | — | — | (2 | ) | 3 | — | 109 | — | (2 | ) | |||||||||||||||||||||||||||||||||
Technology and communications | 47 | — | — | 12 | — | — | — | 4 | (33 | ) | 30 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 40 | — | — | — | — | — | (20 | ) | — | — | 20 | — | — | |||||||||||||||||||||||||||||||||||
Capital goods | 60 | — | (1 | ) | — | — | — | — | — | — | 59 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
| Consumer—cyclical | 150 | — | (1 | ) | — | — | — | (2 | ) | — | (8 | ) | 139 | — | (1 | ) | ||||||||||||||||||||||||||||||||
Transportation | 70 | — | — | — | — | — | (3 | ) | — | — | 67 | — | — | |||||||||||||||||||||||||||||||||||
Other | 219 | — | (2 | ) | — | — | — | (5 | ) | 6 | (20 | ) | 198 | — | — | |||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,272 | — | (13 | ) | 101 | — | — | (74 | ) | 49 | (133 | ) | 2,202 | — | (16 | ) | ||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 352 | — | (2 | ) | 30 | — | — | (8 | ) | — | (24 | ) | 348 | — | (3 | ) | ||||||||||||||||||||||||||||||||
Energy | 245 | — | 8 | — | — | — | (22 | ) | — | (79 | ) | 152 | — | 3 | ||||||||||||||||||||||||||||||||||
Finance and insurance | 305 | 1 | 1 | — | (2 | ) | — | (52 | ) | — | (51 | ) | 202 | 2 | (11 | ) | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 67 | — | (1 | ) | 8 | — | — | — | — | — | 74 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Technology and communications | 28 | — | — | — | — | — | — | — | — | 28 | — | — | ||||||||||||||||||||||||||||||||||||
Industrial | 95 | — | (1 | ) | — | — | — | — | — | — | 94 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Capital goods | 178 | — | (2 | ) | 5 | — | — | — | — | — | 181 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
| Consumer—cyclical | 146 | — | — | 17 | — | — | — | — | (16 | ) | 147 | — | — | |||||||||||||||||||||||||||||||||||
Transportation | 109 | — | — | — | — | — | (19 | ) | — | (7 | ) | 83 | — | 1 | ||||||||||||||||||||||||||||||||||
Other | 83 | — | (1 | ) | — | — | — | (14 | ) | — | (15 | ) | 53 | — | (1 | ) | ||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,608 | 1 | 2 | 60 | (2 | ) | — | (115 | ) | — | (192 | ) | 1,362 | 2 | (14 | ) | ||||||||||||||||||||||||||||||||
Residential mortgage-backed | 14 | — | — | — | — | — | (1 | ) | — | — | 13 | — | — | |||||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 20 | — | (1 | ) | 1 | — | — | — | — | — | 20 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Other asset-backed | 109 | — | 1 | 3 | — | — | (9 | ) | 2 | (18 | ) | 88 | — | 1 | ||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 4,089 | 3 | (4 | ) | 165 | (2 | ) | — | (199 | ) | 51 | (343 | ) | 3,760 | 4 | (23 | ) | |||||||||||||||||||||||||||||||
Equity securities | 51 | — | — | — | (8 | ) | — | (5 | ) | — | — | 38 | — | — | ||||||||||||||||||||||||||||||||||
Limited partnerships | 17 | 1 | — | 8 | — | — | — | — | — | 26 | 1 | — | ||||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 63 | 9 | — | 10 | — | — | (35 | ) | — | — | 47 | 4 | — | |||||||||||||||||||||||||||||||||||
Total derivative assets | 63 | 9 | — | 10 | — | — | (35 | ) | — | — | 47 | 4 | — | |||||||||||||||||||||||||||||||||||
Total other invested assets | 63 | 9 | — | 10 | — | — | (35 | ) | — | — | 47 | 4 | — | |||||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 26 | (9 | ) | — | — | — | 1 | — | — | — | 18 | (9 | ) | — | ||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,246 | $ | 4 | $ | (4 | ) | $ | 183 | $ | (10 | ) | $ | 1 | $ | (239 | ) | $ | 51 | $ | (343 | ) | $ | 3,889 | $ | — | $ | (23 | ) | |||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Total realized and unrealized gains (losses) included in net income (loss): | ||||||||||||||||
Net investment income | $ | 7 | $ | 11 | $ | 22 | $ | (33 | ) | |||||||
Net investment gains (losses) | 28 | (2 | ) | 39 | (2 | ) | ||||||||||
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Total | $ | 35 | $ | 9 | $ | 61 | $ | (35 | ) | |||||||
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Total gains (losses) included in net income (loss) attributable to assets still held: | ||||||||||||||||
Net investment income | $ | 5 | $ | 9 | $ | 18 | $ | 23 | ||||||||
Net investment gains (losses) | 12 | (11 | ) | 15 | (12 | ) | ||||||||||
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Total | $ | 17 | $ | (2 | ) | $ | 33 | $ | 11 | |||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Total realized and unrealized gains (losses) included in net income: | ||||||||||||||||
Net investment income | $ | 2 | $ | 1 | $ | 4 | $ | 3 | ||||||||
Net investment gains (losses) | (2 | ) | 6 | (10 | ) | 1 | ||||||||||
Total | $ | — | $ | 7 | $ | (6 | ) | $ | 4 | |||||||
Total gains (losses) included in net income attributable to assets still held: | ||||||||||||||||
Net investment income | $ | 2 | $ | 2 | $ | 4 | $ | 4 | ||||||||
Net investment gains (losses) | (5 | ) | 2 | (1 | ) | (4 | ) | |||||||||
Total | $ | (3 | ) | $ | 4 | $ | 3 | $ | — | |||||||
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted- average | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | Internal models | $ | 647 | Credit spreads | 73bps - 379bps | 135bps | ||||||||||||||
Energy | Internal models | 86 | Credit spreads | 80bps - 193bps | 142bps | |||||||||||||||
Finance and insurance | Internal models | 629 | Credit spreads | 70bps - 354bps | 180bps | |||||||||||||||
Consumer—non-cyclical | Internal models | 127 | Credit spreads | 88bps - 247bps | 132bps | |||||||||||||||
Technology andcommunications | Internal models | 52 | Credit spreads | 60bps - 353bps | 299bps | |||||||||||||||
Industrial | Internal models | 20 | Credit spreads | 90bps - 207bps | 162bps | |||||||||||||||
Capital goods | Internal models | 118 | Credit spreads | 90bps - 247bps | 140bps | |||||||||||||||
Consumer—cyclical | Internal models | 236 | Credit spreads | 56bps - 210bps | 129bps | |||||||||||||||
Transportation | Internal models | 54 | Credit spreads | 56bps - 123bps | 89bps | |||||||||||||||
Other | Internal models | 161 | Credit spreads | 64bps - 135bps | 75bps | |||||||||||||||
|
| |||||||||||||||||||
Total U.S. corporate | Internal models | $ | 2,130 | Credit spreads | 56bps - 379bps | 146bps | ||||||||||||||
|
| |||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | Internal models | $ | 358 | Credit spreads | 77bps - 158bps | 116bps | ||||||||||||||
Energy | Internal models | 146 | Credit spreads | 90bps - 169bps | 116bps | |||||||||||||||
Finance and insurance | Internal models | 160 | Credit spreads | 69bps - 179bps | 107bps | |||||||||||||||
Consumer—non-cyclical | Internal models | 118 | Credit spreads | 56bps - 191bps | 112bps | |||||||||||||||
Technology andcommunications | Internal models | 29 | Credit spreads | 123bps - 222bps | 171bps | |||||||||||||||
Industrial | Internal models | 130 | Credit spreads | 109bps - 247bps | 146bps | |||||||||||||||
Capital goods | Internal models | 121 | Credit spreads | 88bps - 145bps | 112bps | |||||||||||||||
Consumer—cyclical | Internal models | 69 | Credit spreads | 87bps - 169bps | 112bps | |||||||||||||||
Transportation | Internal models | 161 | Credit spreads | 78bps - 210bps | 115bps | |||||||||||||||
Other | Internal models | 49 | Credit spreads | 101bps - 233bps | 181bps | |||||||||||||||
|
| |||||||||||||||||||
Totalnon-U.S. corporate | Internal models | $ | 1,341 | Credit spreads | 56bps - 247bps | 120bps | ||||||||||||||
|
| |||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Equity index options | | Discounted cash flows | | $ | 81 | | Equity index volatility | | 6% - 27% | 18 | % | |||||||||
|
| |||||||||||||||||||
2022:
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average (1) | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | Internal models | $ | 781 | Credit spreads | 57bps - 316bps | 175bps | ||||||||||||||
Energy | Internal models | 46 | Credit spreads | 166bps - 306bps | 229bps | |||||||||||||||
Finance and insurance | Internal models | 649 | Credit spreads | 75bps - 322bps | 218bps | |||||||||||||||
Consumer— non-cyclical | Internal models | 86 | Credit spreads | 72bps - 306bps | 171bps | |||||||||||||||
Technology and communications | Internal models | 25 | Credit spreads | 128bps - 184bps | 163bps | |||||||||||||||
Industrial | Internal models | 33 | Credit spreads | 159bps - 308bps | 227bps | |||||||||||||||
Capital goods | Internal models | 38 | Credit spreads | 97bps - 263bps | 185bps | |||||||||||||||
Consumer—cyclical | Internal models | 119 | Credit spreads | 107bps - 244bps | 180bps | |||||||||||||||
Transportation | Internal models | 47 | Credit spreads | 41bps - 210bps | 143bps | |||||||||||||||
Other | Internal models | 149 | Credit spreads | 116bps - 219bps | 140bps | |||||||||||||||
Total U.S. corporate | Internal models | $ | 1,973 | Credit spreads | 41bps - 322bps | 188bps | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | Internal models | $ | 309 | Credit spreads | 87bps - 290bps | 167bps | ||||||||||||||
Energy | Internal models | 124 | Credit spreads | 123bps - 263bps | 191bps | |||||||||||||||
Finance and insurance | Internal models | 131 | Credit spreads | 122bps - 216bps | 172bps | |||||||||||||||
Consumer— non-cyclical | Internal models | 66 | Credit spreads | 72bps - 248bps | 161bps | |||||||||||||||
Technology and communications | Internal models | 26 | Credit spreads | 123bps - 207bps | 164bps | |||||||||||||||
Industrial | Internal models | 69 | Credit spreads | 97bps - 225bps | 153bps | |||||||||||||||
Capital goods | Internal models | 115 | Credit spreads | 72bps - 306bps | 200bps | |||||||||||||||
Consumer—cyclical | Internal models | 52 | Credit spreads | 159bps - 260bps | 198bps | |||||||||||||||
Transportation | Internal models | 20 | Credit spreads | 185bps - 219bps | 189bps | |||||||||||||||
Other | Internal models | 22 | Credit spreads | 86bps - 161bps | 135bps | |||||||||||||||
Total non-U.S. corporate | Internal models | $ | 934 | Credit spreads | 72bps - 306bps | 175bps | ||||||||||||||
Derivative assets: | ||||||||||||||||||||
Equity index options | Discounted cash flows | | $ | 30 | Equity index volatility | | 6% - 35% | 19% | ||||||||||||
(1) | Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by notional for derivative assets. |
| September 30, 2017 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 257 | $ | — | $ | — | $ | 257 | ||||||||
Fixed index annuity embedded derivatives | 394 | — | — | 394 | ||||||||||||
Indexed universal life embedded derivatives | 14 | — | — | 14 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total policyholder account balances | 665 | — | — | 665 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 39 | — | 39 | — | ||||||||||||
Equity return swaps | 2 | — | 2 | — | ||||||||||||
Other foreign currency contracts | 23 | — | 23 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivative liabilities | 64 | — | 64 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings related to securitization entities | 12 | — | — | 12 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | $ | 741 | $ | — | $ | 64 | $ | 677 | ||||||||
|
|
|
|
|
|
|
| |||||||||
June 30, 2022 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 277 | $ | — | $ | — | $ | 277 | ||||||||
Fixed index annuity embedded derivatives | 233 | — | — | 233 | ||||||||||||
Indexed universal life embedded derivatives | 16 | — | — | 16 | ||||||||||||
Total policyholder account balances | 526 | — | — | 526 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 342 | — | 342 | — | ||||||||||||
Total derivative liabilities | 342 | — | 342 | — | ||||||||||||
Total liabilities | $ | 868 | $ | — | $ | 342 | $ | 526 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| December 31, 2016 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 303 | $ | — | $ | — | $ | 303 | ||||||||
Fixed index annuity embedded derivatives | 344 | — | — | 344 | ||||||||||||
Indexed universal life embedded derivatives | 11 | — | — | 11 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total policyholder account balances | 658 | — | — | 658 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 349 | — | 349 | — | ||||||||||||
Foreign currency swaps | 5 | — | 5 | — | ||||||||||||
Credit default swaps related to securitization entities | 1 | — | 1 | — | ||||||||||||
Equity return swaps | 1 | — | 1 | — | ||||||||||||
Other foreign currency contracts | 27 | — | 27 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total derivative liabilities | 383 | — | 383 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Borrowings related to securitization entities | 12 | — | — | 12 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | $ | 1,053 | $ | — | $ | 383 | $ | 670 | ||||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2021 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 271 | $ | — | $ | — | $ | 271 | ||||||||
Fixed index annuity embedded derivatives | 294 | — | — | 294 | ||||||||||||
Indexed universal life embedded derivatives | 25 | — | — | 25 | ||||||||||||
Total policyholder account balances | 590 | — | — | 590 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 26 | — | 26 | — | ||||||||||||
Total derivative liabilities | 26 | — | 26 | — | ||||||||||||
Total liabilities | $ | 616 | $ | — | $ | 26 | $ | 590 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Beginning balance as of July 1, 2017 |
Total realized and | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of September 30, 2017 | Total (gains) losses included in net (income) loss attributable to liabilities still held | |||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) loss | Included in OCI | ||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives (1) | $ | 281 | $ | (31 | ) | $ | — | $ | — | $ | — | $ | 7 | $ | — | $ | — | $ | — | $ | 257 | $ | (31 | ) | ||||||||||||||||||||
Fixed index annuityembedded derivatives | 376 | 21 | — | — | — | — | (3 | ) | — | — | 394 | 21 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 13 | (2 | ) | — | — | — | 3 | — | — | — | 14 | (2 | ) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total policyholder accountbalances | 670 | (12 | ) | — | — | — | 10 | (3 | ) | — | — | 665 | (12 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Borrowings related tosecuritization entities | 12 | — | — | — | — | — | — | — | — | 12 | — | |||||||||||||||||||||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total Level 3 liabilities | $ | 682 | $ | (12 | ) | $ | — | $ | — | $ | — | $ | 10 | $ | (3 | ) | $ | — | $ | — | $ | 677 | $ | (12 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Beginning balance as of April 1, 2022 | Total realized and unrealized (gains) losses | Ending balance as of June 30, 2022 | Total (gains) losses attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB embedded derivatives (1) | $ | 243 | $ | 28 | $ | — | $ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | 277 | $ | 31 | $ | — | ||||||||||||||||||||||||
Fixed index annuity embedded derivatives | 261 | (11 | ) | — | — | — | — | (17 | ) | — | — | 233 | (11 | ) | — | |||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 21 | (8 | ) | — | — | — | 3 | — | — | — | 16 | (8 | ) | — | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 525 | 9 | — | — | — | 9 | (17 | ) | — | — | 526 | 12 | — | |||||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 525 | $ | 9 | $ | — | $ | — | $ | — | $ | 9 | $ | (17 | ) | $ | — | $ | — | $ | 526 | $ | 12 | $ | — | |||||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
(Amounts in millions) | Beginning balance as of July 1, 2016 |
Total realized and | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of September 30, 2016 | Total (gains) losses included in net (income) loss attributable to liabilities still held | ||||||||||||||||||||||||||||||||||
| Included in net (income) loss | Included in OCI | |||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives (1) | $ | 494 | $ | (63 | ) | $ | — | $ | — | $ | — | $ | 8 | $ | — | $ | — | $ | — | $ | 439 | $ | (59 | ) | ||||||||||||||||||||
Fixed index annuityembedded derivatives | 351 | 16 | — | — | — | — | (3 | ) | — | — | 364 | 16 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 13 | (3 | ) | — | — | — | 3 | — | — | — | 13 | (3 | ) | |||||||||||||||||||||||||||||||
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total policyholder accountbalances | 858 | (50 | ) | — | — | — | 11 | (3 | ) | — | — | 816 | (46 | ) | ||||||||||||||||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Borrowings related tosecuritization entities | 11 | — | — | — | — | — | — | — | — | 11 | — | |||||||||||||||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total Level 3 liabilities | $ | 869 | $ | (50 | ) | $ | — | $ | — | $ | — | $ | 11 | $ | (3 | ) | $ | — | $ | — | $ | 827 | $ | (46 | ) | |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Beginning balance as of April 1, 2021 | Total realized and unrealized (gains) losses | Ending balance as of June 30, 2021 | Total (gains) losses attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB embedded derivatives (1) | $ | 272 | $ | (3 | ) | $ | — | $ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | 275 | $ | (4 | ) | $ | — | ||||||||||||||||||||||
Fixed index annuity embedded derivatives | 362 | 14 | — | — | — | — | (37 | ) | — | — | 339 | 14 | — | |||||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 23 | (3 | ) | — | — | — | 4 | — | — | — | 24 | (3 | ) | — | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 657 | 8 | — | — | — | 10 | (37 | ) | — | — | 638 | 7 | — | |||||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 657 | $ | 8 | $ | — | $ | — | $ | — | $ | 10 | $ | (37 | ) | $ | — | $ | — | $ | 638 | $ | 7 | $ | — | |||||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Beginning balance as of January 1, 2017 | Total realized and unrealized (gains) losses | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of September 30, 2017 | Total (gains) losses included in net (income) loss attributable to liabilities still held | |||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) loss | Included in OCI | ||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives(1) | $ | 303 | $ | (67 | ) | $ | — | $ | — | $ | — | $ | 21 | $ | — | $ | — | $ | — | $ | 257 | $ | (64 | ) | ||||||||||||||||||||
Fixed index annuityembedded derivatives | 344 | 57 | — | — | — | — | (7 | ) | — | — | 394 | 57 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 11 | (5 | ) | — | — | — | 8 | — | — | — | 14 | (5 | ) | |||||||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total policyholder accountbalances | 658 | (15 | ) | — | — | — | 29 | (7 | ) | — | — | 665 | (12 | ) | ||||||||||||||||||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Borrowings related tosecuritization entities | 12 | 1 | — | — | — | — | (1 | ) | — | — | 12 | 1 | ||||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total Level 3 liabilities | $ | 670 | $ | (14 | ) | $ | — | $ | — | $ | — | $ | 29 | $ | (8 | ) | $ | — | $ | — | $ | 677 | $ | (11 | ) | |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Beginning balance as of January 1, 2022 | Total realized and unrealized (gains) losses | Ending balance as of June 30, 2022 | Total (gains) losses attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB embedded derivatives (1) | $ | 271 | $ | (6 | ) | $ | — | $ | — | $ | — | $ | 12 | $ | — | $ | — | $ | — | $ | 277 | $ | 1 | $ | — | |||||||||||||||||||||||
Fixed index annuity embedded derivatives | 294 | (23 | ) | — | — | — | — | (37 | ) | — | (1 | ) | 233 | (23 | ) | — | ||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 25 | (19 | ) | — | — | — | 10 | — | — | — | 16 | (19 | ) | — | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 590 | (48 | ) | — | — | — | 22 | (37 | ) | — | (1 | ) | 526 | (41 | ) | — | ||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 590 | $ | (48 | ) | $ | — | $ | — | $ | — | $ | 22 | $ | (37 | ) | $ | — | $ | (1 | ) | $ | 526 | $ | (41 | ) | $ | — | ||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Beginning balance as of January 1, 2016 | Total realized and unrealized (gains) losses | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of September 30, 2016 | Total (gains) losses included in net (income) loss attributable to liabilities still held | |||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) loss | Included in OCI | ||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives (1) | $ | 352 | $ | 63 | $ | — | $ | — | $ | — | $ | 24 | $ | — | $ | — | $ | — | $ | 439 | $ | 72 | ||||||||||||||||||||||
Fixed index annuityembedded derivatives | 342 | 22 | — | — | — | 10 | (10 | ) | — | — | 364 | 22 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 10 | (6 | ) | — | — | — | 9 | — | — | — | 13 | (6 | ) | |||||||||||||||||||||||||||||||
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|
|
| |||||||||||||||||||||||
Total policyholderaccount balances | 704 | 79 | — | — | — | 43 | (10 | ) | — | — | 816 | 88 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
| Derivative liabilities: | ||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps relatedto securitization entities | 14 | (13 | ) | — | — | — | — | 2 | — | (3 | ) | — | — | |||||||||||||||||||||||||||||||
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Total derivative liabilities | 14 | (13 | ) | — | — | — | — | 2 | — | (3 | ) | — | — | |||||||||||||||||||||||||||||||
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Borrowings related tosecuritization entities | 81 | (65 | ) | — | — | — | — | (5 | ) | — | — | 11 | — | |||||||||||||||||||||||||||||||
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Total Level 3 liabilities | $ | 799 | $ | 1 | $ | — | $ | — | $ | — | $ | 43 | $ | (13 | ) | $ | — | $ | (3 | ) | $ | 827 | $ | 88 | ||||||||||||||||||||
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Beginning balance as of January 1, 2021 | Total realized and unrealized (gains) losses | Ending balance as of June 30, 2021 | Total (gains) losses attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB embedded derivatives (1) | $ | 379 | $ | (116 | ) | $ | — | $ | — | $ | — | $ | 12 | $ | — | $ | — | $ | — | $ | 275 | $ | (111 | ) | $ | — | ||||||||||||||||||||||
Fixed index annuity embedded derivatives | 399 | 18 | — | — | — | — | (78 | ) | — | — | 339 | 18 | — | |||||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 26 | (13 | ) | — | — | — | 11 | — | — | — | 24 | (13 | ) | — | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 804 | (111 | ) | — | — | — | 23 | (78 | ) | — | — | 638 | (106 | ) | — | |||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 804 | $ | (111 | ) | $ | — | $ | — | $ | — | $ | 23 | $ | (78 | ) | $ | — | $ | — | $ | 638 | $ | (106 | ) | $ | — | |||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Total realized and unrealized (gains) losses included in net (income) loss: | ||||||||||||||||
Net investment income | $ | — | $ | — | $ | — | $ | — | ||||||||
Net investment (gains) losses | (12 | ) | (50 | ) | (14 | ) | 1 | |||||||||
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Total | $ | (12 | ) | $ | (50 | ) | $ | (14 | ) | $ | 1 | |||||
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Total (gains) losses included in net (income) loss attributable to liabilities still held: | ||||||||||||||||
Net investment income | $ | — | $ | — | $ | — | $ | — | ||||||||
Net investment (gains) losses | (12 | ) | (46 | ) | (11 | ) | 88 | |||||||||
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Total | $ | (12 | ) | $ | (46 | ) | $ | (11 | ) | $ | 88 | |||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Total realized and unrealized (gains) losses included in net (income): | ||||||||||||||||
Net investment income | $ | — | $ | — | $ | — | $ | — | ||||||||
Net investment (gains) losses | 9 | 8 | (48 | ) | (111 | ) | ||||||||||
Total | $ | 9 | $ | 8 | $ | (48 | ) | $ | (111 | ) | ||||||
Total (gains) losses included in net (income) attributable to liabilities still held: | ||||||||||||||||
Net investment income | $ | — | $ | — | $ | — | $ | — | ||||||||
Net investment (gains) losses | 12 | 7 | (41 | ) | (106 | ) | ||||||||||
Total | $ | 12 | $ | 7 | $ | (41 | ) | $ | (106 | ) | ||||||
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted- average | |||||||||||||||
Policyholder account balances: | ||||||||||||||||||||
| | Withdrawal utilization rate | | 40% - 84% | 65% | ||||||||||||||||
| Lapse rate | — % - 8% | 4% | ||||||||||||||||||
| | Non-performance risk (credit spreads) | | 26bps - 83bps | 66bp | s | |||||||||||||||
GMWB embeddedderivatives(1) | | Stochastic cash flow model | | $257 | | Equity index volatility | | 13% - 24% | 20% | |||||||||||
Fixed index annuity embeddedderivatives | | Option budget method | | $394 | | Expected future interest credited | | — % - 2% | 1% | |||||||||||
Indexed universal life embeddedderivatives | | Option budget method | | $14 | | Expected future interest credited | | 3% - 8% | 5% | |||||||||||
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average (1) | |||||||
Policyholder account balances: | ||||||||||||
| Withdrawal utilization rate | 61% - 88% | 77% | ||||||||||
| Lapse rate | 2% - 9% | 3% | ||||||||||
Non-performance risk (credit spreads) | 36bps -83bps | 69bps | ||||||||||
GMWB embedded derivatives (2) | Stochastic cash flow model | $ | 277 | Equity index volatility | 20% - 29% | 24% | ||||||
Fixed index annuity embedded derivatives | Option budget method | $ | 233 | Expected future interest credited | — | 1% | ||||||
Indexed universal life embedded derivatives | Option budget method | $ | 16 | Expected future interest credited | 3% - 14% | 5% | ||||||
(1) | Unobservable inputs weighted by the policyholder account balances associated with the instrument. |
(2) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and therefore, a directional change in one input will not affect the other inputs. |
June 30, 2022 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans, net | (1) | $ | 7,065 | $ | 6,679 | $ | — | $ | — | $ | 6,679 | |||||||||||||
Bank loan investments | (1) | 406 | 402 | — | — | 402 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 1,773 | 1,336 | — | 1,336 | — | ||||||||||||||||||
Investment contracts | (1) | 8,071 | 8,146 | — | — | 8,146 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund bank loan investments | 75 | — | — | — | — | — | ||||||||||||||||||
| Ordinary course of business lending commitments | 88 | — | — | — | — | — | ||||||||||||||||||
(1) | These financial instruments do not have notional amounts. |
December 31, 2021 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans, net | (1) | $ | 6,830 | $ | 7,224 | $ | — | $ | — | $ | 7,224 | |||||||||||||
Bank loan investments | (1) | 363 | 370 | — | — | 370 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 1,899 | 1,767 | — | 1,767 | — | ||||||||||||||||||
Investment contracts | (1) | 8,657 | 9,352 | — | — | 9,352 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund bank loan investments | 141 | — | — | — | — | — | ||||||||||||||||||
| Ordinary course of business lending commitments | 125 | — | — | — | — | — | ||||||||||||||||||
(1) | These financial instruments do not have notional amounts. |
June 30, 2022 | December 31, 2021 | |||||||||||||||
(Amounts in millions) | Carrying value | Commitments to fund | Carrying value | Commitments to fund | ||||||||||||
Limited partnerships accounted for at NAV: | ||||||||||||||||
Private equity funds (1) | $ | 1,483 | $ | 1,080 | $ | 1,312 | $ | 950 | ||||||||
Real estate funds (2) | 84 | 145 | 67 | 101 | ||||||||||||
Infrastructure funds (3) | 59 | 11 | 57 | 13 | ||||||||||||
Total limited partnerships accounted for at NAV | 1,626 | 1,236 | 1,436 | 1,064 | ||||||||||||
Limited partnerships accounted for at fair value | 23 | 1 | 26 | 1 | ||||||||||||
Limited partnerships accounted for under equity method of accounting | 473 | 172 | 437 | 120 | ||||||||||||
Low-income housing tax credits(4) | 1 | — | 1 | — | ||||||||||||
Total | $ | 2,123 | $ | 1,409 | $ | 1,900 | $ | 1,185 | ||||||||
(1) | This class employs various investment strategies such as leveraged buyout, growth equity, venture capital and mezzanine financing, generally investing in debt or equity positions directly in companies or assets of various sizes across diverse industries globally, primarily concentrated in North America. |
(2) | This class invests in real estate in North America, Europe and Asia via direct property ownership, joint ventures, mortgages and investments in debt and equity instruments. |
(3) | This class invests in the debt or equity of cash flow generating assets diversified across a variety of industries, including transportation, energy infrastructure, renewable power, social infrastructure, power generation, water, telecommunications and other regulated entities globally. |
(4) | Relates to limited partnership investments that invest in affordable housing projects that qualify for the Low-Income Housing Tax Credit and are accounted for using the proportional amortization method. |
| As of or for the nine months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Unamortized beginning balance | $ | 4,241 | $ | 4,569 | ||||
Impact of foreign currency translation | 12 | 8 | ||||||
Costs deferred | 67 | 124 | ||||||
Amortization, net of interest accretion | (261 | ) | (257 | ) | ||||
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Unamortized ending balance | 4,059 | 4,444 | ||||||
Accumulated effect of net unrealized investment (gains) losses | (1,717 | ) | (462 | ) | ||||
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Ending balance | $ | 2,342 | $ | 3,982 | ||||
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As of or for the six months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Unamortized beginning balance | $ | 2,438 | $ | 2,809 | ||||
Costs deferred | 1 | 3 | ||||||
Amortization, net of interest accretion | (152 | ) | (146 | ) | ||||
Unamortized ending balance | 2,287 | 2,666 | ||||||
Accumulated effect of net unrealized investment (gains) losses | 27 | (1,454 | ) | |||||
Ending balance | $ | 2,314 | $ | 1,212 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In addition, we are required to analyze the impacts from net unrealized investment gains
| As of or for the nine months ended September 30, | ||||||||
(Amounts in millions) | 2017 | 2016 | ||||||
Beginning balance | $ | 9,256 | $ | 8,095 | ||||
Less reinsurance recoverables | (2,409 | ) | (2,122 | ) | ||||
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Net beginning balance | 6,847 | 5,973 | ||||||
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Incurred related to insured events of: | ||||||||
Current year | 2,748 | 2,569 | ||||||
Prior years | (306 | ) | 320 | |||||
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Total incurred | 2,442 | 2,889 | ||||||
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Paid related to insured events of: | ||||||||
Current year | (755 | ) | (727 | ) | ||||
Prior years | (1,746 | ) | (1,646 | ) | ||||
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Total paid | (2,501 | ) | (2,373 | ) | ||||
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Interest on liability for policy and contract claims | 223 | 188 | ||||||
Foreign currency translation | 27 | 14 | ||||||
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Net ending balance | 7,038 | 6,691 | ||||||
Add reinsurance recoverables | 2,346 | 2,178 | ||||||
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Ending balance | $ | 9,384 | $ | 8,869 | ||||
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As of or for the six months ended June 30, | ||||||||
(Amounts in millions) | 2022 | 2021 | ||||||
Beginning balance | $ | 11,841 | $ | 11,486 | ||||
Less reinsurance recoverables | (2,388 | ) | (2,431 | ) | ||||
Net beginning balance | 9,453 | 9,055 | ||||||
Incurred related to insured events of: | ||||||||
Current year | 2,047 | 1,991 | ||||||
Prior years | (483 | ) | (332 | ) | ||||
Total incurred | 1,564 | 1,659 | ||||||
Paid related to insured events of: | ||||||||
Current year | (412 | ) | (477 | ) | ||||
Prior years | (1,250 | ) | (1,255 | ) | ||||
Total paid | (1,662 | ) | (1,732 | ) | ||||
Interest on liability for policy and contract claims | 207 | 202 | ||||||
Net ending balance | 9,562 | 9,184 | ||||||
Add reinsurance recoverables | 2,353 | 2,362 | ||||||
Ending balance | $ | 11,915 | $ | 11,546 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
adverse trends, could possibly be significant, and result in increases in reserves by an amount that could be material to our results of operations and financial condition and liquidity.
As In addition, loss reserves recorded on new delinquencies in our Enact segment have a high degree of estimation, particularly due to the ninelevel of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.
first half of 2022, primarily related to
(Amounts in millions) | June 30, 2022 | December 31, 2021 | ||||||
Genworth Holdings (1) | ||||||||
4.80% Senior Notes, due 2024 | $ | 152 | $ | 282 | ||||
6.50% Senior Notes, due 2034 | 298 | 298 | ||||||
Floating Rate Junior Subordinated Notes, due 2066 | 598 | 598 | ||||||
Subtotal | 1,048 | 1,178 | ||||||
Bond consent fees | (11 | ) | (12 | ) | ||||
Deferred borrowing charges | (6 | ) | (7 | ) | ||||
Total Genworth Holdings | 1,031 | 1,159 | ||||||
Enact Holdings | ||||||||
6.50% Senior Notes, due 2025 (2) | 750 | 750 | ||||||
Deferred borrowing charges | (8 | ) | (10 | ) | ||||
Total Enact Holdings | 742 | 740 | ||||||
Total | $ | 1,773 | $ | 1,899 | ||||
| (1) | Genworth Holdings has the option to redeem all or a portion of the senior notes at any time with notice to the noteholders 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. |
(2) | Senior notes issued by Enact Holdings, who has the option to redeem the notes in whole or in part at any time prior to February 15, 2025, by paying a make-whole premium plus accrued and unpaid interest. |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||
Pre-tax income (loss) | $ | 286 | $ | (125 | ) | $ | 1,019 | $ | 376 | |||||||||||||||||||||||
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Statutory U.S. federal income tax rate | $ | 100 | 35.0 | % | $ | (44 | ) | 35.0 | % | $ | 357 | 35.0 | % | $ | 132 | 35.0 | % | |||||||||||||||
Increase (reduction) in rate resulting from: | ||||||||||||||||||||||||||||||||
State income tax, net of federal income tax effect | 1 | 0.1 | — | — | (2 | ) | (0.2 | ) | 1 | 0.2 | ||||||||||||||||||||||
Tax favored investments | 6 | 1.9 | 1 | (0.7 | ) | 3 | 0.3 | (2 | ) | (0.5 | ) | |||||||||||||||||||||
Effect of foreign operations | (6 | ) | (2.0 | ) | 5 | (3.9 | ) | (14 | ) | (1.3 | ) | (12 | ) | (3.3 | ) | |||||||||||||||||
Non-deductible expenses | — | — | (1 | ) | 0.5 | 1 | 0.1 | (1 | ) | (0.1 | ) | |||||||||||||||||||||
Valuation allowance | — | — | 265 | (212.9 | ) | — | — | 240 | 63.8 | |||||||||||||||||||||||
Stock-based compensation | 1 | 0.5 | 2 | (1.8 | ) | 3 | 0.2 | 5 | 1.4 | |||||||||||||||||||||||
Loss on sale of business | — | — | — | — | — | — | (1 | ) | (0.2 | ) | ||||||||||||||||||||||
Other, net | — | — | (6 | ) | 4.8 | — | — | (7 | ) | (1.8 | ) | |||||||||||||||||||||
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Effective rate | $ | 102 | 35.5 | % | $ | 222 | (179.0 | )% | $ | 348 | 34.1 | % | $ | 355 | 94.5 | % | ||||||||||||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||
Increase in rate resulting from: | ||||||||||||||||
Tax on income from terminated swaps | 2.9 | 2.1 | 2.9 | 2.9 | ||||||||||||
Other, net | 1.0 | 0.3 | 0.7 | 0.3 | ||||||||||||
Effective rate | 24.9 | % | 23.4 | % | 24.6 | % | 24.2 | % | ||||||||
(10)second quarter of 2022 through OCI related to capital deferred tax assets.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managedreported outside of our operating segments, including certain smaller international mortgage insurance businesses and discontinued operations.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.
We recorded apre-tax expense of $1 million in both
In the third quarter of 2016,six months ended June 30, 2022, we recorded apre-tax expense of $2 million related to restructuring costs as part of an expense reduction plan as the company evaluated and appropriately sized its organizational needs and expenses.
In the second quarter of 2016, we completed the sale of our mortgage insurance business in Europe and recorded an additionalpre-tax loss of $2 million; we completed the sale of our term life insurance new business platform and recorded apre-tax gain of $12 million; we settled restricted borrowings related to a securitization entity and recorded a $64 millionpre-tax gain related to the early extinguishment of debt; and we recorded apre-tax expense of $5 million related to restructuring costs as part of an expense reduction plan as the company evaluated and appropriately sized its organizational needs and expenses.
In the first quarter of 2016, we recorded apre-tax loss of $7repurchased $48 million and a tax benefit of $27 million related to the planned sale of our mortgage insurance business in Europe; we paid apre-tax make-whole expense of $20 million related to the early redemption of Genworth Holdings’ 2016 notes; we also repurchased $28$130 million principal amount of Genworth Holdings’ senior notes with various maturity datesdue in February 2024, respectively, for a gain of $4 million; we completed a life block transaction resulting in apre-tax$9$1 million and $4 million, respectively. During the six months ended June 30, 2021, we repurchased $146 million principal amount of Genworth Holdings’ senior notes due in connection withSeptember 2021 for a
There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented other than the following item. We incurred fees during the first quarter of 2016 related to Genworth Holdings’ bond consent solicitation of $18 million for broker, advisor and investment banking fees.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | ||||||||||||||||
U.S. Mortgage Insurance segment | $ | 194 | $ | 186 | $ | 570 | $ | 537 | ||||||||
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Canada Mortgage Insurance segment | 220 | 156 | 593 | 463 | ||||||||||||
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Australia Mortgage Insurance segment | 98 | 115 | 317 | 333 | ||||||||||||
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U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | 1,033 | 980 | 3,063 | 3,051 | ||||||||||||
Life insurance | 389 | 418 | 1,217 | 953 | ||||||||||||
Fixed annuities | 190 | 218 | 605 | 613 | ||||||||||||
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U.S. Life Insurance segment | 1,612 | 1,616 | 4,885 | 4,617 | ||||||||||||
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Runoff segment | 90 | 84 | 266 | 218 | ||||||||||||
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Corporate and Other activities | 1 | (7 | ) | (22 | ) | 3 | ||||||||||
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Total revenues | $ | 2,215 | $ | 2,150 | $ | 6,609 | $ | 6,171 | ||||||||
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The increase in total revenues for the nine months ended September 30, 2017 was primarily attributable to our U.S. Life Insurance segment driven mostly by a life block transaction in our life insurance business in the first quarter
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Revenues: | ||||||||||||||||
Enact segment | $ | 273 | $ | 276 | $ | 543 | $ | 564 | ||||||||
U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | 1,119 | 1,226 | 2,228 | 2,366 | ||||||||||||
Life insurance | 310 | 329 | 649 | 677 | ||||||||||||
Fixed annuities | 92 | 122 | 208 | 254 | ||||||||||||
U.S. Life Insurance segment | 1,521 | 1,677 | 3,085 | 3,297 | ||||||||||||
Runoff segment | 70 | 88 | 136 | 164 | ||||||||||||
Corporate and Other activities | 17 | — | 9 | 1 | ||||||||||||
| Total revenues | $ | 1,881 | $ | 2,041 | $ | 3,773 | $ | 4,026 | ||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) available to Genworth Financial, Inc.’scommon stockholders | $ | 107 | $ | (380 | ) | $ | 464 | $ | (155 | ) | ||||||
Add: net income attributable to noncontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
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Net income (loss) | 175 | (332 | ) | 662 | (4 | ) | ||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | 15 | (9 | ) | (25 | ) | |||||||||
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Income (loss) from continuing operations | 184 | (347 | ) | 671 | 21 | |||||||||||
Less: income from continuing operations attributable tononcontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
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Income (loss) from continuing operations available to Genworth Financial,Inc.’s common stockholders | 116 | (395 | ) | 473 | (130 | ) | ||||||||||
Adjustments to income (loss) from continuing operations available toGenworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses, net (1) | (62 | ) | (18 | ) | (161 | ) | (38 | ) | ||||||||
(Gains) losses from sale of businesses | — | — | — | (3 | ) | |||||||||||
(Gains) losses on early extinguishment of debt, net | — | — | — | (48 | ) | |||||||||||
Losses from life block transactions | — | — | — | 9 | ||||||||||||
Expenses related to restructuring | 1 | 2 | 2 | 22 | ||||||||||||
Fees associated with bond consent solicitation | — | — | — | 18 | ||||||||||||
Taxes on adjustments | 21 | 6 | 56 | (9 | ) | |||||||||||
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| |||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’scommon stockholders | $ | 76 | $ | (405 | ) | $ | 370 | $ | (179 | ) | ||||||
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| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | 330 | $ | 427 | ||||||||
Add: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Add: net income from discontinued operations attributable to noncontrolling interests | — | — | — | 8 | ||||||||||||
Net income | 219 | 240 | 398 | 435 | ||||||||||||
Less: income (loss) from discontinued operations, net of taxes | (1 | ) | (5 | ) | (3 | ) | 16 | |||||||||
Income from continuing operations | 220 | 245 | 401 | 419 | ||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | 182 | 245 | 333 | 419 | ||||||||||||
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses, net (1) | (10 | ) | (70 | ) | (38 | ) | (103 | ) | ||||||||
(Gains) losses on early extinguishment of debt | 1 | — | 4 | 4 | ||||||||||||
Expenses related to restructuring | 1 | 5 | 1 | 26 | ||||||||||||
Taxes on adjustments | 2 | 14 | 7 | 16 | ||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 176 | $ | 194 | $ | 307 | $ | 362 | ||||||||
(1) | For the three and six months ended |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
U.S. Mortgage Insurance segment | $ | 73 | $ | 67 | $ | 237 | $ | 189 | ||||||||
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Canada Mortgage Insurance segment | 37 | 36 | 114 | 107 | ||||||||||||
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| |||||||||
Australia Mortgage Insurance segment | 12 | 14 | 37 | 48 | ||||||||||||
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| |||||||||
U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | (5 | ) | (270 | ) | 42 | (199 | ) | |||||||||
Life insurance | (9 | ) | 48 | 6 | 110 | |||||||||||
Fixed annuities | 13 | 15 | 43 | 28 | ||||||||||||
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| |||||||||
U.S. Life Insurance segment | (1 | ) | (207 | ) | 91 | (61 | ) | |||||||||
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Runoff segment | 13 | 12 | 38 | 22 | ||||||||||||
Corporate and Other activities | (58 | ) | (327 | ) | (147 | ) | (484 | ) | ||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 76 | $ | (405 | ) | $ | 370 | $ | (179 | ) | ||||||
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| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’scommon stockholders: | ||||||||||||||||
Enact segment | $ | 167 | $ | 135 | $ | 302 | $ | 261 | ||||||||
U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | 34 | 98 | 93 | 193 | ||||||||||||
Life insurance | (34 | ) | (40 | ) | (113 | ) | (103 | ) | ||||||||
Fixed annuities | 21 | 13 | 37 | 43 | ||||||||||||
| U.S. Life Insurance segment | 21 | 71 | 17 | 133 | ||||||||||||
Runoff segment | 2 | 15 | 11 | 27 | ||||||||||||
Corporate and Other activities | (14 | ) | (27 | ) | (23 | ) | (59 | ) | ||||||||
| Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders | $ | 176 | $ | 194 | $ | 307 | $ | 362 | ||||||||
(Amounts in millions) | September 30, 2017 | December 31, 2016 | ||||||
Assets: | ||||||||
U.S. Mortgage Insurance segment | $ | 3,015 | $ | 2,674 | ||||
Canada Mortgage Insurance segment | 5,435 | 4,884 | ||||||
Australia Mortgage Insurance segment | 2,814 | 2,619 | ||||||
U.S. Life Insurance segment | 81,858 | 81,933 | ||||||
Runoff segment | 11,149 | 11,352 | ||||||
Corporate and Other activities | 358 | 1,196 | ||||||
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| |||||
Total assets | $ | 104,629 | $ | 104,658 | ||||
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| |||||
(11)
(Amounts in millions) | June 30, 2022 | December 31, 2021 | ||||||
Assets: | ||||||||
Enact segment | $ | 5,763 | $ | 5,850 | ||||
U.S. Life Insurance segment | 73,288 | 81,210 | ||||||
Runoff segment | 8,264 | 9,460 | ||||||
Corporate and Other activities | 1,753 | 2,651 | ||||||
| Total assets | $ | 89,068 | $ | 99,171 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance businesses,subsidiaries, 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 mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to customers, including but not limited to breach of customer information. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2016, Genworth Financial, Inc.,certain members of its current chief executive officer,management team, including its former and present chief executive officer, its former chief financial officer, and current and former members of its board of directors were named in a shareholder derivative suit filed by International Union of Operating Engineers Local No. 478 Pension Fund, Richard L. Salberg and David Pinkoski in the Court of Chancery of the State of Delaware. The case was captionedInt’l Union of Operating Engineers Local No. 478 Pension Fund, et al v. McInerney, et al. In February 2016, Genworth Financial, Inc., its current chief executive officer, its former chief executive officer, its former chief financial officer and current and former members of its board of directors were named in a second shareholder derivative suit filed by Martin Cohen in the Court of Chancery of the State of Delaware. The case was captionedCohen v. McInerney, et al. On February 23, 2016, the Court of Chancery of the State of Delaware consolidated these derivative suits under the captionGenworth Financial, Inc. Consolidated Derivative Litigation. On March 28, 2016, plaintiffs in the consolidated action filed an amended complaint. The amended complaint alleges breaches of fiduciary duties concerning Genworth’s long-term care insurance reserves and concerning Genworth’s Australian mortgage insurance business, including our plans for an IPO of the business and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the court may deem proper. The amended consolidated complaint also adds Genworth’s current chief financial officer as a defendant, based on the current chief financial officer’s alleged conduct in her former capacity as Genworth’s controller and principal accounting officer. We moved to dismiss the consolidated action on May 27, 2016. Thereafter, plaintiffs filed a substantially similar second amended complaint which we moved to dismiss on September 16, 2016. The motion is fully briefed and awaiting disposition by the court.
In October 2016, Genworth Financial, Inc., its current chief executive officer, its former chief executive officer, its current chief financial officer, its former chief financial officer and current and former members of its board of directors were nameddefendants in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery of the State of Delaware. The case is captionedal.alcourtCourt may deem proper. We filed a motion to dismiss on November 14, 2016.
In December 2016, The action was stayed pending the outcome of the proposed China Oceanwide transaction. On April 6, 2021, Genworth Financial Inc.terminated the proposed China Oceanwide transaction, thereby lifting the stay. On July 22, 2022, a stipulation dismissing the case without prejudice was filed with the Court and on July 25, 2022 the Court granted the dismissal.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the United States District Court for the Eastern District of Delaware againstVirginia, captioned
In April 2017, one of our insurance subsidiaries, Genworth Life and Annuity Insurance Company (“GLAIC”) was named as a defendant in a putative class action lawsuit captionedAvazian, et al v. Genworth Life and Annuity Insurance Company, et al, in the United States District Court for the Central District of California. Plaintiff alleges breach of contract and breach of the covenant of good faith and fair dealing based upon GLAIC’s termination of plaintiff’s life insurance policy for nonpayment of premium. Plaintiff alleges that the termination for nonpayment of premium failed to comply with certain notice requirements of the California Insurance Code and seeks certification as a California class action on behalf of all insureds and beneficiaries of life insurance policies issued or delivered by GLAIC in California before January 1, 2013 who lost either their coverage or their ability to make a claim because of the termination of their policies by GLAIC for nonpayment of premium, and further seeks unspecified damages,pre-judgment and post-judgment interest, punitive damages,
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
fees, costs and such other relief as the court deems just and proper. On June 23, 2017, we filed a motion to dismiss the complaint. On July 10, 2017, the plaintiff filed a notice of voluntary dismissal without prejudice. On July 12, 2017, the court ordered that this action and all claims therein, are dismissed in their entirety without prejudice. In August 2017, plaintiffre-filed a similar putative class action lawsuit, along with another plaintiff, Michael Torres, captionedAvazian, et alothers similarly situated v. Genworth Life and Annuity Insurance Company et al,and Genworth Life Insurance Company of New York
(12) As of June 30, 2022, we were also committed to fund $75 million of bank loan investments which had not yet been drawn.
(Loss)
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of July 1, 2017 | $ | 1,180 | $ | 2,064 | $ | (149 | ) | $ | 3,095 | |||||||
OCI before reclassifications | (70 | ) | 10 | 81 | 21 | |||||||||||
Amounts reclassified from (to) OCI | (19 | ) | (22 | ) | — | (41 | ) | |||||||||
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| |||||||||
Current period OCI | (89 | ) | (12 | ) | 81 | (20 | ) | |||||||||
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| |||||||||
Balances as of September 30, 2017 before noncontrolling interests | 1,091 | 2,052 | (68 | ) | 3,075 | |||||||||||
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Less: change in OCI attributable to noncontrolling interests | (17 | ) | — | 57 | 40 | |||||||||||
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Balances as of September 30, 2017 | $ | 1,108 | $ | 2,052 | $ | (125 | ) | $ | 3,035 | |||||||
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| |||||||||
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of April 1, 2022 | $ | 850 | $ | 1,789 | $ | (29 | ) | $ | 2,610 | |||||||
OCI before reclassifications | (2,436 | ) | (307 | ) | (7 | ) | (2,750 | ) | ||||||||
Amounts reclassified from (to) OCI | 4 | (37 | ) | — | (33 | ) | ||||||||||
Current period OCI | (2,432 | ) | (344 | ) | (7 | ) | (2,783 | ) | ||||||||
Balances as of June 30, 2022 before noncontrolling interests | (1,582 | ) | 1,445 | (36 | ) | (173 | ) | |||||||||
Less: change in OCI attributable to noncontrolling interests | (28 | ) | — | — | (28 | ) | ||||||||||
Balances as of June 30, 2022 | $ | (1,554 | ) | $ | 1,445 | $ | (36 | ) | $ | (145 | ) | |||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of July 1, 2016 | $ | 2,789 | $ | 2,439 | $ | (140 | ) | $ | 5,088 | |||||||
OCI before reclassifications | 86 | 72 | (1 | ) | 157 | |||||||||||
Amounts reclassified from (to) OCI | (9 | ) | (18 | ) | — | (27 | ) | |||||||||
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Current period OCI | 77 | 54 | (1 | ) | 130 | |||||||||||
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| |||||||||
Balances as of September 30, 2016 before noncontrolling interests | 2,866 | 2,493 | (141 | ) | 5,218 | |||||||||||
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Less: change in OCI attributable to noncontrolling interests | 6 | — | 10 | 16 | ||||||||||||
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| |||||||||
Balances as of September 30, 2016 | $ | 2,860 | $ | 2,493 | $ | (151 | ) | $ | 5,202 | |||||||
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| |||||||||
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of April 1, 2021 | $ | 1,919 | $ | 1,792 | $ | (36 | ) | $ | 3,675 | |||||||
OCI before reclassifications | (54 | ) | 245 | 2 | 193 | |||||||||||
Amounts reclassified from (to) OCI | — | (34 | ) | — | (34 | ) | ||||||||||
Current period OCI | (54 | ) | 211 | 2 | 159 | |||||||||||
Balances as of June 30, 2021 before noncontrolling interests | 1,865 | 2,003 | (34 | ) | 3,834 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | — | — | — | — | ||||||||||||
Balances as of June 30, 2021 | $ | 1,865 | $ | 2,003 | $ | (34 | ) | $ | 3,834 | |||||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2017 | $ | 1,262 | $ | 2,085 | $ | (253 | ) | $ | 3,094 | |||||||
OCI before reclassifications | (95 | ) | 29 | 261 | 195 | |||||||||||
Amounts reclassified from (to) OCI | (77 | ) | (62 | ) | — | (139 | ) | |||||||||
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Current period OCI | (172 | ) | (33 | ) | 261 | 56 | ||||||||||
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Balances as of September 30, 2017 before noncontrolling interests | 1,090 | 2,052 | 8 | 3,150 | ||||||||||||
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Less: change in OCI attributable to noncontrolling interests | (18 | ) | — | 133 | 115 | |||||||||||
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Balances as of September 30, 2017 | $ | 1,108 | $ | 2,052 | $ | (125 | ) | $ | 3,035 | |||||||
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(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2022 | $ | 1,860 | $ | 2,025 | $ | (24 | ) | $ | 3,861 | |||||||
OCI before reclassifications | (3,493 | ) | (506 | ) | (12 | ) | (4,011 | ) | ||||||||
Amounts reclassified from (to) OCI | 10 | (74 | ) | — | (64 | ) | ||||||||||
Current period OCI | (3,483 | ) | (580 | ) | (12 | ) | (4,075 | ) | ||||||||
Balances as of June 30, 2022 before noncontrolling interests | (1,623 | ) | 1,445 | (36 | ) | (214 | ) | |||||||||
Less: change in OCI attributable to noncontrolling interests | (69 | ) | — | — | (69 | ) | ||||||||||
Balances as of June 30, 2022 | $ | (1,554 | ) | $ | 1,445 | $ | (36 | ) | $ | (145 | ) | |||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2016 | $ | 1,254 | $ | 2,045 | $ | (289 | ) | $ | 3,010 | |||||||
OCI before reclassifications | 1,692 | 507 | 223 | 2,422 | ||||||||||||
Amounts reclassified from (to) OCI | (62 | ) | (59 | ) | — | (121 | ) | |||||||||
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Current period OCI | 1,630 | 448 | 223 | 2,301 | ||||||||||||
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| |||||||||
Balances as of September 30, 2016 before noncontrolling interests | 2,884 | 2,493 | (66 | ) | 5,311 | |||||||||||
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Less: change in OCI attributable to noncontrolling interests | 24 | — | 85 | 109 | ||||||||||||
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| |||||||||
Balances as of September 30, 2016 | $ | 2,860 | $ | 2,493 | $ | (151 | ) | $ | 5,202 | |||||||
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| |||||||||
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2021 | $ | 2,214 | $ | 2,211 | $ | — | $ | 4,425 | ||||||||
| OCI before reclassifications | (370 | ) | (140 | ) | 138 | (372 | ) | |||||||||
| Amounts reclassified from (to) OCI | (4 | ) | (68 | ) | — | (72 | ) | |||||||||
| Current period OCI | (374 | ) | (208 | ) | 138 | (444 | ) | |||||||||
Balances as of June 30, 2021 before noncontrolling interests | 1,840 | 2,003 | 138 | 3,981 | ||||||||||||
Less: change in OCI attributable to noncontrolling interests | (25 | ) | — | 172 | 147 | |||||||||||
Balances as of June 30, 2021 | $ | 1,865 | $ | 2,003 | $ | (34 | ) | $ | 3,834 | |||||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2 ) | See note 5 for additional information. |
2021.
| Amount reclassified from accumulated other comprehensive income (loss) | Affected line item | |||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net unrealized investment (gains) losses: | ||||||||||||||||||
Unrealized (gains) losses oninvestments (1) | $ | (29 | ) | $ | (13 | ) | $ | (118 | ) | $ | (95 | ) | Net investment (gains) losses | |||||
Provision for income taxes | 10 | 4 | 41 | 33 | Provision for income taxes | |||||||||||||
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Total | $ | (19 | ) | $ | (9 | ) | $ | (77 | ) | $ | (62 | ) | ||||||
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Derivatives qualifying as hedges: | ||||||||||||||||||
Interest rate swaps hedging assets | $ | (34 | ) | $ | (27 | ) | $ | (95 | ) | $ | (80 | ) | Net investment income | |||||
Interest rate swaps hedging assets | — | — | (2 | ) | (1 | ) | Net investment (gains) losses | |||||||||||
Inflation indexed swaps | — | — | — | (2 | ) | Net investment income | ||||||||||||
Inflation indexed swaps | — | — | — | (7 | ) | Net investment (gains) losses | ||||||||||||
Provision for income taxes | 12 | 9 | 35 | 31 | Provision for income taxes | |||||||||||||
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Total | $ | (22 | ) | $ | (18 | ) | $ | (62 | ) | $ | (59 | ) | ||||||
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(Amounts in millions) | Amount reclassified from accumulated other comprehensive income (loss) | Affected line item in the consolidated statements of income | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||
Net unrealized investment (gains) losses: | ||||||||||||||||||
Unrealized (gains) losses on investments (1) | $ | 5 | $ | — | $ | 13 | $ | (5 | ) | Net investment (gains) losses | ||||||||
Income taxes | (1 | ) | — | (3 | ) | 1 | Provision for income taxes | |||||||||||
Total | $ | 4 | $ | — | $ | 10 | $ | (4 | ) | |||||||||
Derivatives qualifying as hedges: | ||||||||||||||||||
Interest rate swaps hedging assets | $ | (57 | ) | $ | (52 | ) | $ | (112 | ) | $ | (104 | ) | Net investment income | |||||
Interest rate swaps hedging assets | — | — | (2 | ) | — | Net investment (gains) losses | ||||||||||||
Interest rate swaps hedging liabilities | 1 | — | 2 | — | Interest expense | |||||||||||||
Foreign currency swaps | — | — | (1 | ) | — | Net investment income | ||||||||||||
Income taxes | 19 | 18 | 39 | 36 | Provision for income taxes | |||||||||||||
Total | $ | (37 | ) | $ | (34 | ) | $ | (74 | ) | $ | (68 | ) | ||||||
(1) | Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves. |
(13) Condensed Consolidating Financial Information
(Amounts in millions) | Three months ended June 30, 2021 | Six months ended June 30, 2021 | ||||||
Revenues: | ||||||||
Premiums | $ | — | $ | 51 | ||||
Net investment income | — | 4 | ||||||
Net investment gains (losses) | — | (5 | ) | |||||
Total revenues | — | 50 | ||||||
Benefits and expenses: | ||||||||
Benefits and other changes in policy reserves | — | 11 | ||||||
Acquisition and operating expenses, net of deferrals | — | 7 | ||||||
Amortization of deferred acquisition costs and intangibles | — | 6 | ||||||
Interest expense | — | 1 | ||||||
Total benefits and expenses | — | 25 | ||||||
Income before income taxes and loss on sale (1) | — | 25 | ||||||
Provision for income taxes | — | 8 | ||||||
Income before loss on sale | — | 17 | ||||||
Loss on sale, net of taxes | — | (3 | ) | |||||
Income from discontinued operations, net of taxes | — | 14 | ||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | 8 | ||||||
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders | $ | — | $ | 6 | ||||
(1) | The six months ended June 30, 2021, includes pre-tax income from discontinued operations available to Genworth Financial, Inc.’s common stockholders of $13 million. |
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securitiesavailable-for-sale, at fair value | $ | — | $ | — | $ | 60,772 | $ | (200 | ) | $ | 60,572 | |||||||||
Equity securitiesavailable-for-sale, at fair value | — | — | 632 | — | 632 | |||||||||||||||
Commercial mortgage loans | — | — | 6,111 | — | 6,111 | |||||||||||||||
Restricted commercial mortgage loans related to securitization entities | — | — | 129 | — | 129 | |||||||||||||||
Policy loans | — | — | 1,742 | — | 1,742 | |||||||||||||||
Other invested assets | — | 105 | 1,966 | — | 2,071 | |||||||||||||||
Restricted other invested assets related to securitization entities, at fair value | — | — | 312 | — | 312 | |||||||||||||||
Investments in subsidiaries | 12,730 | 12,308 | — | (25,038 | ) | — | ||||||||||||||
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|
|
| |||||||||||
Total investments | 12,730 | 12,413 | 71,664 | (25,238 | ) | 71,569 | ||||||||||||||
Cash and cash equivalents | — | 998 | 1,786 | — | 2,784 | |||||||||||||||
Accrued investment income | — | — | 663 | (4 | ) | 659 | ||||||||||||||
Deferred acquisition costs | — | — | 3,571 | — | 3,571 | |||||||||||||||
Intangible assets and goodwill | — | — | 348 | — | 348 | |||||||||||||||
Reinsurance recoverable | — | — | 17,755 | — | 17,755 | |||||||||||||||
Other assets | 9 | 134 | 530 | — | 673 | |||||||||||||||
Intercompany notes receivable | — | 84 | 67 | (151 | ) | — | ||||||||||||||
Deferred tax assets | 28 | — | (28 | ) | — | — | ||||||||||||||
Separate account assets | — | — | 7,299 | — | 7,299 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 12,767 | $ | 13,629 | $ | 103,655 | $ | (25,393 | ) | $ | 104,658 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities and equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Future policy benefits | $ | — | $ | — | $ | 37,063 | $ | — | $ | 37,063 | ||||||||||
Policyholder account balances | — | — | 25,662 | — | 25,662 | |||||||||||||||
Liability for policy and contract claims | — | — | 9,256 | — | 9,256 | |||||||||||||||
Unearned premiums | — | — | 3,378 | — | 3,378 | |||||||||||||||
Other liabilities | 39 | 301 | 2,581 | (5 | ) | 2,916 | ||||||||||||||
Intercompany notes payable | 84 | 267 | — | (351 | ) | — | ||||||||||||||
Borrowings related to securitization entities | — | — | 74 | — | 74 | |||||||||||||||
Non-recourse funding obligations | — | — | 310 | — | 310 | |||||||||||||||
Long-term borrowings | — | 3,716 | 464 | — | 4,180 | |||||||||||||||
Deferred tax liability | — | (816 | ) | 869 | — | 53 | ||||||||||||||
Separate account liabilities | — | — | 7,299 | — | 7,299 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 123 | 3,468 | 86,956 | (356 | ) | 90,191 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity: | ||||||||||||||||||||
Common stock | 1 | — | — | — | 1 | |||||||||||||||
Additionalpaid-in capital | 11,962 | 9,097 | 20,252 | (29,349 | ) | 11,962 | ||||||||||||||
Accumulated other comprehensive income (loss) | 3,094 | 3,135 | 3,116 | (6,251 | ) | 3,094 | ||||||||||||||
Retained earnings | 287 | (2,071 | ) | (8,792 | ) | 10,863 | 287 | |||||||||||||
Treasury stock, at cost | (2,700 | ) | — | — | — | (2,700 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity | 12,644 | 10,161 | 14,576 | (24,737 | ) | 12,644 | ||||||||||||||
Noncontrolling interests | — | — | 2,123 | (300 | ) | 1,823 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total equity | 12,644 | 10,161 | 16,699 | (25,037 | ) | 14,467 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and equity | $ | 12,767 | $ | 13,629 | $ | 103,655 | $ | (25,393 | ) | $ | 104,658 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
(Amounts in millions) | British Pounds | U.S. Dollar | ||||||||||||||
June 30, 2022 | December 31, 2021 | June 30, 2022 | December 31, 2021 | |||||||||||||
Installment payments due to AXA: | ||||||||||||||||
June 2022: | �� | |||||||||||||||
Beginning balance | £ | — | £ | 159 | $ | — | $ | 217 | ||||||||
Prepayments (1) | — | (159 | ) | — | (217 | ) | ||||||||||
Ending balance | — | — | — | — | ||||||||||||
| September 2022: | ||||||||||||||||
| Beginning balance | — | 187 | — | 256 | ||||||||||||
| Amounts billed as future losses | — | 45 | — | 61 | ||||||||||||
Prepayments (1) | — | (232 | ) | — | (324 | ) | ||||||||||
| Foreign exchange and other | — | — | — | 7 | ||||||||||||
| Ending balance | — | — | — | — | ||||||||||||
| Total amounts due under the promissory note | — | — | — | — | ||||||||||||
Future claims: | ||||||||||||||||
Estimated beginning balance | 22 | 79 | 30 | 108 | ||||||||||||
Plus: Additional amounts invoiced | 2 | — | 2 | — | ||||||||||||
Change in estimated future claims | — | (10 | ) | — | (14 | ) | ||||||||||
Less: Amounts billed and included as mandatory prepayments | — | (45 | ) | — | (61 | ) | ||||||||||
Less: Amounts paid | (23 | ) | (2 | ) | (31 | ) | (3 | ) | ||||||||
Foreign exchange and other | — | — | — | — | ||||||||||||
Estimated future claims | 1 | 22 | 1 | 30 | ||||||||||||
Total amounts due to AXA under the settlement agreement | £ | 1 | £ | 22 | $ | 1 | $ | 30 | ||||||||
(1) | On March 3, 2021, we completed the sale of Genworth Australia and received net proceeds of approximately AUD483 million ($370 million). The sale of Genworth Australia resulted in a mandatory principal payment of approximately £176 million ($245 million) related to our outstanding secured promissory note issued to AXA, dated as of July 20, 2020, as amended by the parties in connection with the Genworth Australia sale. On September 21, 2021, we used a portion of the net proceeds from the minority IPO of Enact Holdings to repay the remaining outstanding balance of the secured promissory note of approximately £215 million ($296 million). |
The following table presents
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 1,135 | $ | — | $ | 1,135 | ||||||||||
Net investment income | (1 | ) | 2 | 800 | (4 | ) | 797 | |||||||||||||
Net investment gains (losses) | — | (4 | ) | 89 | — | 85 | ||||||||||||||
Policy fees and other income | — | 4 | 195 | (1 | ) | 198 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (1 | ) | 2 | 2,219 | (5 | ) | 2,215 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 1,344 | — | 1,344 | |||||||||||||||
Interest credited | — | — | 164 | — | 164 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 20 | (2 | ) | 247 | — | 265 | ||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 83 | — | 83 | |||||||||||||||
Interest expense | — | 66 | 12 | (5 | ) | 73 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 20 | 64 | 1,850 | (5 | ) | 1,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries | (21 | ) | (62 | ) | 369 | — | 286 | |||||||||||||
Provision (benefit) for income taxes | (5 | ) | (21 | ) | 128 | — | 102 | |||||||||||||
Equity in income of subsidiaries | 123 | 71 | — | (194 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from continuing operations | 107 | 30 | 241 | (194 | ) | 184 | ||||||||||||||
Income (loss) from discontinued operations, net of taxes | — | 4 | (13 | ) | — | (9 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income | 107 | 34 | 228 | (194 | ) | 175 | ||||||||||||||
Less: net income attributable to noncontrolling interests | — | — | 68 | — | 68 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 107 | $ | 34 | $ | 160 | $ | (194 | ) | $ | 107 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating income statement information for the three months ended September 30, 2016:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 1,108 | $ | — | $ | 1,108 | ||||||||||
Net investment income | (2 | ) | 1 | 810 | (4 | ) | 805 | |||||||||||||
Net investment gains (losses) | — | (1 | ) | 21 | — | 20 | ||||||||||||||
Policy fees and other income | — | — | 217 | — | 217 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (2 | ) | — | 2,156 | (4 | ) | 2,150 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 1,662 | — | 1,662 | |||||||||||||||
Interest credited | — | — | 173 | — | 173 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 13 | — | 256 | — | 269 | |||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 94 | — | 94 | |||||||||||||||
Interest expense | — | 69 | 12 | (4 | ) | 77 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 13 | 69 | 2,197 | (4 | ) | 2,275 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss from continuing operations before income taxes and equity in loss of subsidiaries | (15 | ) | (69 | ) | (41 | ) | — | (125 | ) | |||||||||||
Provision (benefit) for income taxes | (4 | ) | 155 | 71 | — | 222 | ||||||||||||||
Equity in loss of subsidiaries | (369 | ) | (207 | ) | — | 576 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loss from continuing operations | (380 | ) | (431 | ) | (112 | ) | 576 | (347 | ) | |||||||||||
Income from discontinued operations, net of taxes | — | 11 | 4 | — | 15 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net loss | (380 | ) | (420 | ) | (108 | ) | 576 | (332 | ) | |||||||||||
Less: net income attributable to noncontrolling interests | — | — | 48 | — | 48 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net loss available to Genworth Financial, Inc.’s common stockholders | $ | (380 | ) | $ | (420 | ) | $ | (156 | ) | $ | 576 | $ | (380 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating income statement information for the nine months ended September 30, 2017:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 3,382 | $ | — | $ | 3,382 | ||||||||||
Net investment income | (3 | ) | 5 | 2,397 | (11 | ) | 2,388 | |||||||||||||
Net investment gains (losses) | — | (12 | ) | 232 | — | 220 | ||||||||||||||
Policy fees and other income | — | 3 | 617 | (1 | ) | 619 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (3 | ) | (4 | ) | 6,628 | (12 | ) | 6,609 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 3,796 | — | 3,796 | |||||||||||||||
Interest credited | — | — | 494 | — | 494 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 48 | (2 | ) | 729 | — | 775 | ||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 316 | — | 316 | |||||||||||||||
Interest expense | — | 187 | 34 | (12 | ) | 209 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 48 | 185 | 5,369 | (12 | ) | 5,590 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries | (51 | ) | (189 | ) | 1,259 | — | 1,019 | |||||||||||||
Provision (benefit) for income taxes | (9 | ) | (65 | ) | 422 | — | 348 | |||||||||||||
Equity in income of subsidiaries | 506 | 339 | — | (845 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income from continuing operations | 464 | 215 | 837 | (845 | ) | 671 | ||||||||||||||
Income (loss) from discontinued operations, net of taxes | — | 4 | (13 | ) | — | (9 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income | 464 | 219 | 824 | (845 | ) | 662 | ||||||||||||||
Less: net income attributable to noncontrolling interests | — | — | 198 | — | 198 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 464 | $ | 219 | $ | 626 | $ | (845 | ) | $ | 464 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating income statement information for the nine months ended September 30, 2016:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 3,029 | $ | — | $ | 3,029 | ||||||||||
Net investment income | (3 | ) | 1 | 2,386 | (11 | ) | 2,373 | |||||||||||||
Net investment gains (losses) | — | (14 | ) | 45 | — | 31 | ||||||||||||||
Policy fees and other income | — | (6 | ) | 745 | (1 | ) | 738 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (3 | ) | (19 | ) | 6,205 | (12 | ) | 6,171 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 3,715 | — | 3,715 | |||||||||||||||
Interest credited | — | — | 523 | — | 523 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 118 | 38 | 834 | — | 990 | |||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 305 | — | 305 | |||||||||||||||
Interest expense | 1 | 210 | 63 | (12 | ) | 262 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 119 | 248 | 5,440 | (12 | ) | 5,795 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from continuing operations before income taxes and equity in income (loss) of subsidiaries | (122 | ) | (267 | ) | 765 | — | 376 | |||||||||||||
Provision (benefit) for income taxes | (31 | ) | 88 | 298 | — | 355 | ||||||||||||||
Equity in income (loss) of subsidiaries | (62 | ) | 78 | — | (16 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) from continuing operations | (153 | ) | (277 | ) | 467 | (16 | ) | 21 | ||||||||||||
Loss from discontinued operations, net of taxes | (2 | ) | (7 | ) | (16 | ) | — | (25 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) | (155 | ) | (284 | ) | 451 | (16 | ) | (4 | ) | |||||||||||
Less: net income attributable to noncontrolling interests | — | — | 151 | — | 151 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (155 | ) | $ | (284 | ) | $ | 300 | $ | (16 | ) | $ | (155 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating comprehensive income statement information for the three months ended September 30, 2017:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income | $ | 107 | $ | 34 | $ | 228 | $ | (194 | ) | $ | 175 | |||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | (72 | ) | (71 | ) | (89 | ) | 143 | (89 | ) | |||||||||||
Derivatives qualifying as hedges | (12 | ) | (12 | ) | (12 | ) | 24 | (12 | ) | |||||||||||
Foreign currency translation and other adjustments | 24 | 12 | 80 | (35 | ) | 81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income (loss) | (60 | ) | (71 | ) | (21 | ) | 132 | (20 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income (loss) | 47 | (37 | ) | 207 | (62 | ) | 155 | |||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 108 | — | 108 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 47 | $ | (37 | ) | $ | 99 | $ | (62 | ) | $ | 47 | ||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
The following table presents the condensed consolidating comprehensive income statement information for the three months ended September 30, 2016:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net loss | $ | (380 | ) | $ | (420 | ) | $ | (108 | ) | $ | 576 | $ | (332 | ) | ||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 66 | 63 | 73 | (130 | ) | 72 | ||||||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 5 | 4 | 4 | (8 | ) | 5 | ||||||||||||||
Derivatives qualifying as hedges | 54 | 54 | 57 | (111 | ) | 54 | ||||||||||||||
Foreign currency translation and other adjustments | (11 | ) | (3 | ) | — | 13 | (1 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income (loss) | 114 | 118 | 134 | (236 | ) | 130 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income (loss) | (266 | ) | (302 | ) | 26 | 340 | (202 | ) | ||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 64 | — | 64 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders | $ | (266 | ) | $ | (302 | ) | $ | (38 | ) | $ | 340 | $ | (266 | ) | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating comprehensive income statement information for the nine months ended September 30, 2017:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income | $ | 464 | $ | 219 | $ | 824 | $ | (845 | ) | $ | 662 | |||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | (155 | ) | (172 | ) | (173 | ) | 327 | (173 | ) | |||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 1 | 1 | 1 | (2 | ) | 1 | ||||||||||||||
Derivatives qualifying as hedges | (33 | ) | (33 | ) | (32 | ) | 65 | (33 | ) | |||||||||||
Foreign currency translation and other adjustments | 128 | 109 | 260 | (236 | ) | 261 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income (loss) | (59 | ) | (95 | ) | 56 | 154 | 56 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income | 405 | 124 | 880 | (691 | ) | 718 | ||||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 313 | — | 313 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ | 405 | $ | 124 | $ | 567 | $ | (691 | ) | $ | 405 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
The following table presents the condensed consolidating comprehensive income statement information for the nine months ended September 30, 2016:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income (loss) | $ | (155 | ) | $ | (284 | ) | $ | 451 | $ | (16 | ) | $ | (4 | ) | ||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 1,600 | 1,555 | 1,625 | (3,156 | ) | 1,624 | ||||||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 6 | 5 | 6 | (11 | ) | 6 | ||||||||||||||
Derivatives qualifying as hedges | 448 | 447 | 481 | (928 | ) | 448 | ||||||||||||||
Foreign currency translation and other adjustments | 138 | 65 | 224 | (204 | ) | 223 | ||||||||||||||
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Total other comprehensive income (loss) | 2,192 | 2,072 | 2,336 | (4,299 | ) | 2,301 | ||||||||||||||
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Total comprehensive income | 2,037 | 1,788 | 2,787 | (4,315 | ) | 2,297 | ||||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 260 | — | 260 | |||||||||||||||
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Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ | 2,037 | $ | 1,788 | $ | 2,527 | $ | (4,315 | ) | $ | 2,037 | |||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating cash flows statement information for the nine months ended September 30, 2017:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income | $ | 464 | $ | 219 | $ | 824 | $ | (845 | ) | $ | 662 | |||||||||
Less loss from discontinued operations, net of taxes | — | (4 | ) | 13 | — | 9 | ||||||||||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||||||||||||||
Equity in income from subsidiaries | (506 | ) | (339 | ) | — | 845 | — | |||||||||||||
Dividends from subsidiaries | — | 119 | (119 | ) | — | — | ||||||||||||||
Amortization of fixed maturity securities discounts and premiums and limited partnerships | — | 4 | (111 | ) | — | (107 | ) | |||||||||||||
Net investment (gains) losses | — | 12 | (232 | ) | — | (220 | ) | |||||||||||||
Charges assessed to policyholders | — | — | (534 | ) | — | (534 | ) | |||||||||||||
Acquisition costs deferred | — | — | (67 | ) | — | (67 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 316 | — | 316 | |||||||||||||||
Deferred income taxes | 6 | (47 | ) | 275 | — | 234 | ||||||||||||||
Trading securities,held-for-sale investments and derivative instruments | — | (46 | ) | 762 | — | 716 | ||||||||||||||
Stock-based compensation expense | 23 | — | 6 | — | 29 | |||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | 2 | (2 | ) | (25 | ) | 4 | (21 | ) | ||||||||||||
Insurance reserves | — | — | 1,202 | — | 1,202 | |||||||||||||||
Current tax liabilities | (6 | ) | (75 | ) | 54 | — | (27 | ) | ||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | (29 | ) | 34 | (259 | ) | (6 | ) | (260 | ) | |||||||||||
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Net cash from operating activities | (46 | ) | (125 | ) | 2,105 | (2 | ) | 1,932 | ||||||||||||
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Cash flows used by investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | — | 3,396 | — | 3,396 | |||||||||||||||
Commercial mortgage loans | — | — | 454 | — | 454 | |||||||||||||||
Restricted commercial mortgage loans related to securitization entities | — | — | 18 | — | 18 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 3,269 | — | 3,269 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (6,709 | ) | — | (6,709 | ) | |||||||||||||
Commercial mortgage loans | — | — | (608 | ) | — | (608 | ) | |||||||||||||
Other invested assets, net | — | 25 | (548 | ) | 2 | (521 | ) | |||||||||||||
Policy loans, net | — | — | 28 | — | 28 | |||||||||||||||
Intercompany notes receivable | — | (77 | ) | 34 | 43 | — | ||||||||||||||
Capital contributions to subsidiaries | (7 | ) | — | 7 | — | — | ||||||||||||||
Payments for business purchased, net of cash acquired | (7 | ) | — | 2 | — | (5 | ) | |||||||||||||
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Net cash used by investing activities | (14 | ) | (52 | ) | (657 | ) | 45 | (678 | ) | |||||||||||
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Cash flows used by financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 902 | — | 902 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (2,003 | ) | — | (2,003 | ) | |||||||||||||
Repayment of borrowings related to securitization entities | — | — | (16 | ) | — | (16 | ) | |||||||||||||
Repurchase of subsidiary shares | — | — | (31 | ) | — | (31 | ) | |||||||||||||
Dividends paid to noncontrolling interests | — | — | (92 | ) | — | (92 | ) | |||||||||||||
Proceeds from intercompany notes payable | 61 | (35 | ) | 17 | (43 | ) | — | |||||||||||||
Other, net | (1 | ) | (32 | ) | 3 | — | (30 | ) | ||||||||||||
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Net cash used by financing activities | 60 | (67 | ) | (1,220 | ) | (43 | ) | (1,270 | ) | |||||||||||
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Effect of exchange rate changes on cash and cash equivalents | — | — | 68 | — | 68 | |||||||||||||||
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Net change in cash and cash equivalents | — | (244 | ) | 296 | — | 52 | ||||||||||||||
Cash and cash equivalents at beginning of period | — | 998 | 1,786 | — | 2,784 | |||||||||||||||
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Cash and cash equivalents at end of period | $ | — | $ | 754 | $ | 2,082 | $ | — | $ | 2,836 | ||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating cash flows statement information for the nine months ended September 30, 2016:
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income (loss) | $ | (155 | ) | $ | (284 | ) | $ | 451 | $ | (16 | ) | $ | (4 | ) | ||||||
Less loss from discontinued operations, net of taxes | 2 | 7 | 16 | — | 25 | |||||||||||||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||||||||||||||
Equity in (income) loss from subsidiaries | 62 | (78 | ) | — | 16 | — | ||||||||||||||
Dividends from subsidiaries | — | 250 | (250 | ) | — | — | ||||||||||||||
(Gain) loss on sale of businesses | — | 1 | (27 | ) | — | (26 | ) | |||||||||||||
Amortization of fixed maturity securities discounts and premiums and limited partnerships | — | 3 | (115 | ) | — | (112 | ) | |||||||||||||
Net investment (gains) losses | — | 14 | (45 | ) | — | (31 | ) | |||||||||||||
Charges assessed to policyholders | — | — | (574 | ) | — | (574 | ) | |||||||||||||
Acquisition costs deferred | — | — | (124 | ) | — | (124 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 305 | — | 305 | |||||||||||||||
Deferred income taxes | 8 | 304 | (139 | ) | — | 173 | ||||||||||||||
Trading securities,held-for-sale investments and derivative instruments | — | 5 | 754 | — | 759 | |||||||||||||||
Stock-based compensation expense | 18 | — | 7 | — | 25 | |||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | (3 | ) | (4 | ) | (246 | ) | (5 | ) | (258 | ) | ||||||||||
Insurance reserves | — | — | 691 | — | 691 | |||||||||||||||
Current tax liabilities | 11 | (4 | ) | 37 | — | 44 | ||||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | (1 | ) | (22 | ) | 928 | — | 905 | |||||||||||||
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Net cash from operating activities | (58 | ) | 192 | 1,669 | (5 | ) | 1,798 | |||||||||||||
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Cash flows used by investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | 150 | 2,496 | — | 2,646 | |||||||||||||||
Commercial mortgage loans | — | — | 555 | — | 555 | |||||||||||||||
Restricted commercial mortgage loans related to securitization entities | — | — | 27 | — | 27 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 4,064 | — | 4,064 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (8,758 | ) | — | (8,758 | ) | |||||||||||||
Commercial mortgage loans | — | — | (405 | ) | — | (405 | ) | |||||||||||||
Other invested assets, net | — | — | (143 | ) | 5 | (138 | ) | |||||||||||||
Policy loans, net | — | — | (80 | ) | — | (80 | ) | |||||||||||||
Intercompany notes receivable | — | (58 | ) | (18 | ) | 76 | — | |||||||||||||
Proceeds from sale of businesses, net of cash transferred | — | 1 | 38 | — | 39 | |||||||||||||||
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Net cash used by investing activities | — | 93 | (2,224 | ) | 81 | (2,050 | ) | |||||||||||||
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Cash flows used by financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 1,028 | — | 1,028 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (1,463 | ) | — | (1,463 | ) | |||||||||||||
Redemption ofnon-recourse funding obligations | — | — | (1,620 | ) | — | (1,620 | ) | |||||||||||||
Repayment and repurchase of long-term debt | — | (326 | ) | (36 | ) | — | (362 | ) | ||||||||||||
Repayment of borrowings related to securitization entities | — | — | (37 | ) | — | (37 | ) | |||||||||||||
Return of capital to noncontrolling interests | — | — | (70 | ) | — | (70 | ) | |||||||||||||
Dividends paid to noncontrolling interests | — | — | (126 | ) | — | (126 | ) | |||||||||||||
Proceeds from intercompany notes payable | 58 | 18 | — | (76 | ) | — | ||||||||||||||
Other, net | — | (36 | ) | (13 | ) | — | (49 | ) | ||||||||||||
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Net cash used by financing activities | 58 | (344 | ) | (2,337 | ) | (76 | ) | (2,699 | ) | |||||||||||
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Effect of exchange rate changes on cash and cash equivalents | — | — | 36 | — | 36 | |||||||||||||||
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Net change in cash and cash equivalents | — | (59 | ) | (2,856 | ) | — | (2,915 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | — | 1,124 | 4,869 | — | 5,993 | |||||||||||||||
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Cash and cash equivalents at end of period | $ | — | $ | 1,065 | $ | 2,013 | $ | — | $ | 3,078 | ||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our insurance company subsidiaries are restricted by state
References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.20162021 Annual Report on Form10-K. References herein Unless the context otherwise requires, references to “Genworth,” the “Company,” “we” or “our” inherein are unless the context otherwise requires, to Genworth Financial, Inc. on a consolidated basis.
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changes to assumptions or |
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competition |
Our business
We are dedicated to helping meet the homeownership
In addition to our five operating business segments, we also have Corporate and Other activitiesactivities. Our U.S. Life Insurance segment includes long-term care
Strategic Update
We continue to focus on improving business performance, addressing financial leverage and increasing financial and strategic flexibility across the organization. Our strategy includes maximizing our opportunities in our mortgage insurance businesses and restructuring our U.S. life insurance businesses.
China Oceanwide Transaction
On October 21, 2016, Genworth Financial entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“the Parent”), a limited liability company incorporated in the People’s Republic of China, and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and an indirect, wholly-owned subsidiary of the Parent. Subject to the terms and conditions of the Merger Agreement, including the satisfaction or waiver of certain conditions, Merger Sub would merge with and into Genworth Financial with Genworth Financial surviving the merger as an indirect, wholly-owned subsidiary of the Parent. The Parent is a newly formed subsidiary of China Oceanwide Holdings Group Co., Ltd. (together with its affiliates, “China Oceanwide”). China Oceanwide has agreed to acquire allissuer of our outstanding public debt, to approximately $1.0 billion over time; maximizing the value of Enact Holdings; achieving economic breakeven on and stabilizing the legacy long-term care insurance in-force block; advancing Genworth’s long-term care growth initiatives; and returning capital to Genworth Financial shareholders. During the second quarter of 2022, we continued to make meaningful progress on our strategic priorities. On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Pursuant to the program, in the second quarter of 2022, Genworth Financial repurchased 3,869,494 shares of its common stock at an average price of $3.88 per share for a total transaction valuecash outlay of approximately $2.7 billion, or $5.43$15 million. Genworth Financial also authorized share repurchases through a Rule 10b5-1 trading plan under which 4,034,794 shares of its common stock were repurchased during July 2022 at an average price of $3.72 per share in cash. The agreement concluded our previously announced strategic review process, which we had undertaken over the previous two years. Atfor a special meeting held on March 7, 2017, Genworth Financial’s stockholders voted on and approved a proposal to adopt the Merger Agreement.
Genworth Financial and China Oceanwide continue to work towards satisfying the closing conditionstotal cash outlay of their proposed transaction as soon as possible. To date, we have announced approvals from the Virginia State Corporation Commission Bureau of Insurance, the North Carolina Department of Insurance, the South Carolina Department of Insurance and the Vermont Insurance Division. However, on October 2, 2017, Genworth Financial and China Oceanwide withdrew their joint voluntary notice to CFIUS, with an intent to refile with additional mitigation approaches. Both parties are actively engaged in developing these approaches, including the potential involvement of a U.S. third-party service provider, and anticipate refiling a new joint notice with CFIUS as soon as the terms of the additional mitigation approaches are determined. Genworth Financial and China Oceanwide are fully committed to developing an acceptable solution with CFIUS; however, there can$15 million, leaving approximately $320 million that may yet be no assurance that CFIUS will ultimately agree to clear the transaction between Genworth Financial and China Oceanwide on terms acceptable to the parties or at all. In addition to approval and clearance by CFIUS, the closing of the proposed transaction remains subject to the receipt of required regulatory approvals in the U.S., China, and other international jurisdictions and other closing conditions. Genworth Financial and China Oceanwide also continue to be actively engaged with the other relevant regulators regarding the pending applications.
On August 21, 2017, Genworth Financial, the Parent and Merger Sub entered into a Waiver and Agreement pursuant to which Genworth Financial and the Parent each agreed to, among other things, waive until November 30, 2017 its right to terminate the Merger Agreement and abandon the merger in accordance with the terms of the Merger Agreement due to a failure of the merger to have been completed on or before August 31, 2017. Genworth Financial and China Oceanwide are also discussing an additional waiver of each party’s right to terminate the Merger Agreement beyond the November 30, 2017 deadline. If we are unable to reach an agreement as to a further extension of the deadline or are unable to satisfy the closing conditions by the applicable deadline, then either party may terminate the Merger Agreement. Genworth Financial and China Oceanwide remain committed to satisfying the closing conditionspurchased under the Merger Agreement as soon as possible.
As partshare repurchase program. This was the first return of the transaction, China Oceanwide committed in the Merger Agreement to contribute $600 million of cashcapital to Genworth Financial shareholders in over 13 years. We expect the majority of share repurchases to address our debt maturing in May 2018, on or before its maturity, as well as $525 millionoccur following the repayment of cash to our U.S. life insurance businesses. This contribution is in addition to $175 millionGenworth Holdings’ remaining February 2024 debt.
If the China Oceanwide transaction is completed, we will be a standalone subsidiary of China Oceanwide and our senior management team will continue to lead the business from our current headquarters in Richmond, Virginia. Likewise, we intend to maintain our existing portfolio of businesses, including our mortgage insurance businesses in Australia and Canada. Ourday-to-day operations are not expected to change as a result of this transaction.
Restructuring of U.S. Life Insurance Businesses
In February 2016, we announced that one of our strategic objectives was to separate, then isolate, through a series of internal transactions, our long-term care insurance business from our other U.S. life insurance
businesses. We continued to pursue this plan in connection with the China Oceanwide transaction, with some differences from our previously announced restructuring plan. Our goal under the plan has been to align substantially all of our non-New Yorkin-force life insurance and annuity business under Genworth Life and Annuity Insurance Company (“GLAIC”), our Virginia domiciled life insurance company, and substantially all of our non-New York long-term care insurance business under Genworth Life Insurance Company (“GLIC”), our Delaware domiciled life insurance company. As part of this strategic objective, effective April 1, 2017, GLAIC assumed risk on a coinsurance basis for certain blocks of term life insurance, universal life insurance and single premium whole life insurance from GLIC. Effective July 1, 2017, GLIC recaptured certain single premium deferred annuity products previously ceded to GLAIC. In addition, effective July 1, 2017, GLAIC assumed risk on a modified coinsurance basis for certain blocks of fixed annuities, including those single premium deferred annuity products recaptured by GLIC, and certain corporate-owned life insurance policies from GLIC. As a result, there was an adverse impact on GLIC’s risk-based capital ratio of approximately 15 points in the third quarter of 2017. However,2022, depending upon economic and business conditions, among other considerations. If we are able to retire the internal transactions had no impact on our consolidated results of operations and financial condition preparedFebruary 2024 debt in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) as2022, the financial impact of the intercompany reinsurance was eliminated in consolidation. These transactions complete our goal to align substantially all of our non-New Yorkin-force life insurance and annuity business under GLAIC and substantially all of our non-New York long-term care insurance business under GLIC. All of these transactions were also required under the Merger Agreement with China Oceanwide. The reinsurance treaties effective July 1, 2017 include provisions that require us to unwind or void these treaties in the event the merger transaction with China Oceanwide is terminated.
In addition, based on China Oceanwide’s $525 million capital commitment under the Merger Agreement, together with the $175 million of cash previously committed byremaining debt outstanding at Genworth Holdings a Genworth holding company would seek, in connection with the completionwill be approximately $900 million, below our target of the China Oceanwide transaction, the purchase of GLAIC from GLIC at fair market value. Together with the internal reinsurance transactions completed in April 2017 and July 2017, finalization of the GLAIC sale, if completed, would isolate our non-New York long-term care insurance business from our other non-New York U.S. life insurance businesses and achieve this strategic objective, and regulatory approval to do so is a condition to the closing of the China Oceanwide transaction. China Oceanwide has no future obligation and has expressed no intention to contribute additional capital to support our legacy long-term care insurance business.
Separating and isolating our long-term care insurance business has been an important strategic objective, because we believe it would:
Strategic Alternatives
If the China Oceanwide transaction is not completed, we will continue to explore strategic alternatives and financing options to address our ongoing challenges, including our May 2018 debt maturity and other debt service obligations. Prior to the announcement of the China Oceanwide transaction, we previously disclosed that after discussions with regulators, we believed as a first step, we might only be able to distribute a portion of GLAIC from GLIC. As a result of the recent performance of our long-term care and life insurance businesses and the charges we recorded in the third and fourth quarters of 2016, absent the China Oceanwide transaction and any alternative commitment of external capital, we believe there would be: considerable doubt as to the feasibility and timing of achieving a partial unstacking of GLAIC in the foreseeable future, if at all; increased pressure on
and potential downgrades of our financial strength ratings, particularly for our mortgage insurance businesses, which could affect our ability to maintain our market share of the U.S. mortgage insurance industry; limitation on our ability to continue to write new long-term care insurance policies; and other limitations on our holding company liquidity and ability to service and/or refinance our holding company debt. In the absence of the China Oceanwide transaction and/or a refinancing alternative, which we can neither predict nor guarantee, we believe we would need to pursue asset sales to address these challenges, including potential sales of our mortgage insurance businesses in Canada and/or Australia. Asset sales or changes to our financial projections, including changes that anticipate planned asset sales, may negatively impact our ability to realize certain foreign tax credits or other deferred tax assets and have a resulting material adverse effect on our results of operation. We are also evaluating options to insulateStabilizing our U.S. mortgage insurance business from additional ratings pressure, including a potential partial sale, in the event a transaction with China Oceanwide cannot be completed.
Ongoing Priorities
Stabilizing our long-term carelife insurance business continues to be ourone of Genworth’s long-term goal. We will continuegoals. Our U.S. life insurance business continued to execute against this objective primarily through ourmake progress on its multi-year long-term care insurance in-force rate action plan. Increasingplan, receiving approvals of approximately $153 million of incremental annual premiums and/or benefit modifications on our legacy long-term care insurance policies are critical to our ability to increasefor the capital levels needed to support the business.six months ended June 30, 2022. In addition, reducing debt will remain a high priority. We believe that increased financial support and our strengthened financial foundation resulting from the China Oceanwide transaction would provide us with more options to manage our debt maturities and reduce overall indebtedness, which in turn is intended to improve our credit and ratings profile over time. Finally,aggregate, we also believeestimate that the completion of the China Oceanwide transaction would allow us to place greater focus on the futurecumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the second quarter of 2022 was approximately $20.7 billion, on a net present value basis, of the total expected amount required of $28.7 billion. We continue to work closely with the National Association of Insurance Commissioners (“NAIC”) and mortgage insurance businesses while continuingstate regulators to service our existing policyholders.
Executive Summarydemonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
Below is an executive summary of our consolidated financial resultsGenworth Holdings to “Ba2” (Speculative) from “B1” (Speculative) and provided a Stable outlook. The reasons cited for the periods indicated. Amounts below are net of taxes, unless otherwise indicated.
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Significant Developments
The periods under review include, among others, the following significant developments.
Dispositions
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U.S. Life Insurance
Liquidity and Capital Resources
Financial Strength Ratings
Ratings with respect to the financial strength of operating subsidiaries are an important factor in establishing the competitive position of insurance companies. Ratings are important to maintaining public confidence in us and our ability to market our products. Rating organizations review the financial performance and condition of most insurers and provide opinions regarding financial strength, operating performance and ability to meet obligations to policyholders.
As of November 2, 2017, our principal mortgage insurance subsidiaries were rated in terms of financial strength by Standard & Poor’s Financial Services, LLC (“S&P”), Moody’s Investor Service, Inc. (“Moody’s”) and Dominion Bond Rating Service (“DBRS”) as follows:
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As of November 2, 2017, our principal life insurance subsidiaries were rated in terms of financial strength by S&P, Moody’s and A.M. Best Company, Inc. (“A.M. Best”) as follows:
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The S&P, Moody’s, DBRS and A.M. Best financial strength ratings of our operating companies are not designed to be, and do not serve as, measuresinsurance subsidiaries or the credit ratings of protection or valuation offered to investors. These financial strength ratings should not be relied on with respect to making an investment in our securities.
S&P states that insurers rated “A” (Strong), “BB” (Marginal) or “B” (Weak) have strong, marginal or weak financial security characteristics, respectively. The “A,” “BB” and “B” ranges are the third-, fifth- and sixth-highest of nine financial strength rating ranges assigned by S&P, which range from “AAA” to “R.” A plus (+) or minus (-) shows relative standing within a major rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below the “CCC” category. Accordingly, the “A+,” “BB+” and “B+” ratings are the fifth-, eleventh- and fourteenth-highest of S&P’s 21 ratings categories.
On September 18, 2017, based largely on regulatory approval uncertainty pertaining to the China Oceanwide transaction, S&P revised Genworth Financial and Genworth Holding’s CreditWatch status from developing implicationsHoldings subsequent to negative implications. S&P downgradedFebruary 28, 2022, the financial strength rating ofdate we filed our principal life insurance subsidiaries; GLIC, Genworth Life Insurance Company of New York (“GLICNY”) and GLAIC fromBB- (Marginal) to B+ (Weak), and maintained2021 Annual Report on Form 10-K. For additional information regarding the CreditWatch status of GLIC and GLICNY at negative implications and GLAIC at developing implications. S&P’s rating actions were also based on their negative view of the operating performance of our U.S. Life Insurance segment, the ongoing impact of the low interest rate environment and the further need for premium rate increases in our long-term care insurance business. S&P also affirmed the financial strength rating of Genworth Mortgage Insurance Corporation (“GMICO”) at BB+ (Marginal), however, revised GMICO’s CreditWatch status from developing implications to negative implications. The financial strength ratings of Genworth Financial Mortgage Insurance Company CanadaFinancial’s insurance subsidiaries and Genworth Financial Mortgage Insurance Pty. Limited (Australia) were also affirmed at A+ (Strong).
Moody’s states that insurance companies rated “Baa” (Adequate) offer adequate financial security and that insurance companies rated “Ba” (Questionable) or “B” (Poor) offer questionable financial security. The “Baa” (Adequate), “Ba” (Questionable) and “B” (Poor) ranges are the fourth-, fifth- and sixth-highest, respectively, of nine financial strength rating ranges assigned by Moody’s, which range from “Aaa” to “C.” Numeric modifiers are used to refer to the ranking within the group, with 1 being the highest and 3 being the lowest. These modifiers are not added to ratings in the “Aaa” category or to ratings below the “Caa” category. Accordingly, the “Baa1,” “Ba1” and “B2” ratings are the eighth-, eleventh- and fifteenth-highest, respectively, of Moody’s 21 ratings categories.
On October 3, 2017, which followed our recent announcement that we had withdrawn our joint voluntary notice with CFIUS with an intent to refile, Moody’s downgraded the credit ratings of Genworth Holdings senior unsecured debt from Ba3 (Questionable) to B2 (Poor), downgraded the financial strength ratings of GLICFinancial and GLICNY from Ba3 (Questionable) to B2 (Poor) and downgraded GLAIC from Baa2 (Adequate) to Ba1 (Questionable). Moody’s downgrade was based principally upon the uncertain financial flexibility at Genworth Holdings, including their importance to address upcoming debt maturities, execution risk associated with closing the China Oceanwide transaction and continued risk associated with our long-term care insurance business. On September 13, 2017, Moody’s downgraded the financial strength rating of Genworth Financial Mortgage Insurance Pty. Limited (Australia) from A3 (Good) to Baa1 (Adequate). Moody’s downgrade reflects their risk assessment surrounding the Australian housing market, which in their view, has higher risk and lower demand for domestic lenders’ mortgage insurance products. On March 10, 2017, Moody’s downgraded the financial strength rating of GLIC and GLICNY from Ba2 (Questionable) to Ba3 (Questionable). Moody’s downgrade was principally related to a reductionbusiness, see “Item 1—Ratings” in our long-term care insurance margins, uncertainty related to future long-term care insurance margins and reliance on significant future rate actions, the approval for which varies by state and can take several years.
DBRS states that long-term obligations rated “AA” are of superior credit quality. The capacity for the payment of financial obligations is considered high and unlikely to be significantly vulnerable to future events. Credit quality differs from “AAA” only to a small degree. On July 21, 2017, DBRS confirmed the financial strength rating of Genworth Financial Mortgage Insurance Company Canada at AA (Superior). The financial strength rating confirmation reflects the company’s market position, insurance portfolio and risk analytics, as well as its capital position relative to the capital required to meet insurance claim obligations.
A.M. Best states that the “B++” (Good) rating is assigned to those companies that have, in its opinion, a good ability to meet their ongoing insurance obligations while “B” (Fair) is assigned to those companies that
have, in its opinion, a fair ability to meet their ongoing insurance obligations. The “B++” (Good) and “B” (Fair) ratings are the fifth- and seventh-highest of 15 ratings assigned by A.M. Best, which range from “A++” to “F.”
We also solicit a rating from Fitch for our Australian mortgage insurance subsidiary. Fitch states that “A” (Strong) rated insurance companies are viewed as possessing strong capacity to meet policyholder and contract obligations. The “A” rating category is the third-highest of nine financial strength rating categories, which range from “AAA” to “C.” The symbol (+) or (-) may be appended to a rating to indicate the relative position of a credit within a rating category. These suffixes are not added to ratings in the “AAA” category or to ratings below the “B” category. Accordingly, the “A+” rating is the fifth-highest of Fitch’s 21 ratings categories.
S&P, Moody’s, DBRS, A.M. Best and Fitch review their ratings periodically and we cannot assure you that we will maintain our current ratings in the future. Other agencies may also rate our company or our insurance subsidiaries on a solicited or an unsolicited basis. We do not provide information to agencies issuing unsolicited ratings and we cannot ensure that any agencies that rate our company or our insurance subsidiaries on an unsolicited basis will continue to do so.
For a discussion of the impacts of the recent rating agency actions on our derivative instruments, see “Item 2—Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Investments and Derivative Instruments.”
For a discussion of the risks associated with ratings actions, see “Item 1A Risk Factors—Recent adverse rating agency actions have resulted in a loss of business and adversely affected our results of operations, financial condition and business and future adverse rating actions could have a further and more significant adverse impact on us” in our 20162021 Annual Report on Form10-K.
Consolidated
General Trends
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 as well as value of assets and liabilities. The U.S. and several international financial markets have been impacted by concerns regarding global economies and the rate and strength of recovery, particularly given recent political and geographical events in East Asia, Europe and the Middle East. Slower growth and higher debt levels in China have created more uncertainty for global economies, heightened by S&P’s and Moody’s downgradeexpenses
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. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities have been and could be further impacted going forward. In particular, factors such as government spending, monetary policies, the volatility and strength of the capital markets, anticipated tax policy changes and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates and consumer behaviors moving forward.
The U.S. and international governments, the Federal Reserve, other central banks and other legislative and regulatory bodies have taken certain actions to support the economy and capital markets, influence interest rates, influence housing markets and mortgage servicing and provide liquidity to promote economic growth. These include various mortgage restructuring programs implemented or under consideration by the GSEs, lenders, servicers and the U.S. government. Outside of the United States, various governments and central banks have taken actions to stimulate economies, stabilize financial systems and improve market liquidity. In aggregate, these actions had a positive effect in the short term on the economies of these countries and their markets; however, there can be no assurance as to the future impact these types of actions may have on the economic and financial markets, including levels of interest rates and volatility. A delayed economic recovery period, a U.S. or global recession or regional or global financial crisis could materially and adversely affect our business, financial condition and results of operations.
Consolidated Results of Operations
The following is a discussion of our consolidated results of operations. For a discussion of our segment results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”
Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016
The following table sets forth the consolidated results of operations for the periods indicated:
| Three months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1,135 | $ | 1,108 | $ | 27 | 2 | % | ||||||||
Net investment income | 797 | 805 | (8 | ) | (1 | )% | ||||||||||
Net investment gains (losses) | 85 | 20 | 65 | NM | (1) | |||||||||||
Policy fees and other income | 198 | 217 | (19 | ) | (9 | )% | ||||||||||
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Total revenues | 2,215 | 2,150 | 65 | 3 | % | |||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,344 | 1,662 | (318 | ) | (19 | )% | ||||||||||
Interest credited | 164 | 173 | (9 | ) | (5 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 265 | 269 | (4 | ) | (1 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 83 | 94 | (11 | ) | (12 | )% | ||||||||||
Interest expense | 73 | 77 | (4 | ) | (5 | )% | ||||||||||
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Total benefits and expenses | 1,929 | 2,275 | (346 | ) | (15 | )% | ||||||||||
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Income (loss) from continuing operations before income taxes | 286 | (125 | ) | 411 | NM | (1) | ||||||||||
Provision for income taxes | 102 | 222 | (120 | ) | (54 | )% | ||||||||||
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Income (loss) from continuing operations | 184 | (347 | ) | 531 | 153 | % | ||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | 15 | (24 | ) | (160 | )% | |||||||||
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Net income (loss) | 175 | (332 | ) | 507 | 153 | % | ||||||||||
Less: net income attributable to noncontrolling interests | 68 | 48 | 20 | 42 | % | |||||||||||
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Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 107 | $ | (380 | ) | $ | 487 | 128 | % | |||||||
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life and accident and health insurance, single premium immediate annuities and structured settlements with life contingencies.Our U.S. Life Insurance segment increased $23 million. Our long-term care insurance business increased $31 million largely from $21 million of increased premiums in the current year fromin-force rate actions approved and implemented. Our life insurance business decreased $8 million mainly driven by continued runoff of our term life insurance products, including higher lapses primarily from our large15-year and20-year term life insurance blocks entering their post-level guaranteed premium rate periods in the current year.Our Canada Mortgage Insurance segment increased $7 million principally from the seasoning of our larger, more recentin-force blocks of business.Our U.S. Mortgage Insurance segment increased $6 million mostly attributable to higher average flow insurancein-force, partially offset by lower rates on our mortgage insurance in-force in the current year.Our Australia Mortgage Insurance segment decreased $10 million largely due to the seasoning of our smaller prior yearin-force blocks of business and lower policy cancellations in the current year. The three months ended September 30, 2017 included an increase of $3 million attributable to changes in foreign exchange rates.insurance.
following:
Our U.S. Life Insurance segment decreased $12 million primarily related to our fixed annuities business predominantly from lower average account values in the current year.
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 costs and expenses that are related directly to the successful acquisition
which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses. |
deferred acquisition costsDAC and intangibles consists primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.
Provision for income taxes. The effective tax rate was 35.5% for the three months ended September 30, 2017 compared to (179.0)% for the three months ended September 30, 2016. The effective tax rate for the three months ended September 30, 2017 was impacted by higher tax benefits from lower taxed foreign income. The effective tax rate for the three months ended September 30, 2016 was impacted by a valuation allowance of $265 million recorded on deferred tax assets related to foreign tax credits that we no longer expect to realize.
Net incomecontinuing operations attributable to noncontrolling interests. interests.
Nine
2021
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 3,382 | $ | 3,029 | $ | 353 | 12 | % | ||||||||
Net investment income | 2,388 | 2,373 | 15 | 1 | % | |||||||||||
Net investment gains (losses) | 220 | 31 | 189 | NM | (1) | |||||||||||
Policy fees and other income | 619 | 738 | (119 | ) | (16 | )% | ||||||||||
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Total revenues | 6,609 | 6,171 | 438 | 7 | % | |||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 3,796 | 3,715 | 81 | 2 | % | |||||||||||
Interest credited | 494 | 523 | (29 | ) | (6 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 775 | 990 | (215 | ) | (22 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 316 | 305 | 11 | 4 | % | |||||||||||
Interest expense | 209 | 262 | (53 | ) | (20 | )% | ||||||||||
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Total benefits and expenses | 5,590 | 5,795 | (205 | ) | (4 | )% | ||||||||||
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Income from continuing operations before income taxes | 1,019 | 376 | 643 | 171 | % | |||||||||||
Provision for income taxes | 348 | 355 | (7 | ) | (2 | )% | ||||||||||
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Income from continuing operations | 671 | 21 | 650 | NM | (1) | |||||||||||
Loss from discontinued operations, net of taxes | (9 | ) | (25 | ) | 16 | 64 | % | |||||||||
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Net income (loss) | 662 | (4 | ) | 666 | NM | (1) | ||||||||||
Less: net income attributable to noncontrolling interests | 198 | 151 | 47 | 31 | % | |||||||||||
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Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 464 | $ | (155 | ) | $ | 619 | NM | (1) | |||||||
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Three months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | �� | |||||||||||||||
Premiums | $ | 927 | $ | 947 | $ | (20 | ) | (2 | )% | |||||||
Net investment income | 787 | 844 | (57 | ) | (7 | )% | ||||||||||
Net investment gains (losses) | 8 | 70 | (62 | ) | (89 | )% | ||||||||||
Policy fees and other income | 159 | 180 | (21 | ) | (12 | )% | ||||||||||
Total revenues | 1,881 | 2,041 | (160 | ) | (8 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 764 | 1,161 | (397 | ) | (34 | )% | ||||||||||
Interest credited | 125 | 127 | (2 | ) | (2 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 589 | 304 | 285 | 94 | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 84 | 86 | (2 | ) | (2 | )% | ||||||||||
Interest expense | 26 | 43 | (17 | ) | (40 | )% | ||||||||||
Total benefits and expenses | 1,588 | 1,721 | (133 | ) | (8 | )% | ||||||||||
Income from continuing operations before income taxes | 293 | 320 | (27 | ) | (8 | )% | ||||||||||
Provision for income taxes | 73 | 75 | (2 | ) | (3 | )% | ||||||||||
Income from continuing operations | 220 | 245 | (25 | ) | (10 | )% | ||||||||||
Loss from discontinued operations, net of taxes | (1 | ) | (5 | ) | 4 | 80 | % | |||||||||
Net income | 219 | 240 | (21 | ) | (9 | )% | ||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 38 | — | 38 | NM | (1) | |||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | — | — | — | % | |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | (59 | ) | (25 | )% | |||||||
Net income available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 182 | $ | 245 | $ | (63 | ) | (26 | )% | |||||||
Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders | (1 | ) | (5 | ) | 4 | 80 | % | |||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | (59 | ) | (25 | )% | |||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
Premiums
Net investment income.For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.”
Net investment gains (losses).For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Policy fees and other income
Benefits and other changes in policy reserves
Interest credited
Acquisition and operating expenses, net of deferrals
Amortization of deferred acquisition costs and intangibles
Our U.S. Life Insurance segment decreased $10 million. Our long-term care insurance business decreased $8 million principally from a smallerin-force block in the current year as a result of lower
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Interest expense
Provision for income taxes. The effective tax rate decreased to 34.1%operations for the nine months ended September 30, 2017 from 94.5% for the nine months ended September 30, 2016. The effective tax rate for the nine months ended September 30, 2017 was impacted by higher tax benefits from lower taxed foreign income. The effective tax rate for the nine months ended September 30, 2016 was impacted by a valuation allowance of $265 million recorded on deferred tax assets relatedperiods indicated:
Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1,858 | $ | 1,915 | $ | (57 | ) | (3 | )% | |||||||
Net investment income | 1,551 | 1,645 | (94 | ) | (6 | )% | ||||||||||
Net investment gains (losses) | 36 | 103 | (67 | ) | (65 | )% | ||||||||||
Policy fees and other income | 328 | 363 | (35 | ) | (10 | )% | ||||||||||
Total revenues | 3,773 | 4,026 | (253 | ) | (6 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,903 | 2,379 | (476 | ) | (20 | )% | ||||||||||
Interest credited | 250 | 258 | (8 | ) | (3 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 860 | 579 | 281 | 49 | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 176 | 163 | 13 | 8 | % | |||||||||||
Interest expense | 52 | 94 | (42 | ) | (45 | )% | ||||||||||
Total benefits and expenses | 3,241 | 3,473 | (232 | ) | (7 | )% | ||||||||||
Income from continuing operations before income taxes | 532 | 553 | (21 | ) | (4 | )% | ||||||||||
Provision for income taxes | 131 | 134 | (3 | ) | (2 | )% | ||||||||||
Income from continuing operations | 401 | 419 | (18 | ) | (4 | )% | ||||||||||
Income (loss) from discontinued operations, net of taxes | (3 | ) | 16 | (19 | ) | (119 | )% | |||||||||
Net income | 398 | 435 | (37 | ) | (9 | )% | ||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 68 | — | 68 | NM | (1) | |||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | 8 | (8 | ) | (100 | )% | ||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 330 | $ | 427 | $ | (97 | ) | (23 | )% | |||||||
Net income available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 333 | $ | 419 | $ | (86 | ) | (21 | )% | |||||||
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders | (3 | ) | 8 | (11 | ) | (138 | )% | |||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 330 | $ | 427 | $ | (97 | ) | (23 | )% | |||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
Use ofnon-GAAP measures
Reconciliation ofnet income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
We usenon-GAAP financial measures entitled “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders” and “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share.” Adjustedadjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, respectively.
timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments, gainsGains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusualnon-operating items are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) available to Genworth Financial, Inc.’scommon stockholders | $ | 107 | $ | (380 | ) | $ | 464 | $ | (155 | ) | ||||||
Add: net income attributable to noncontrolling interests | 68 | 48 | 198 | 151 | ||||||||||||
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Net income (loss) | 175 | (332 | ) | 662 | (4 | ) | ||||||||||
Income (loss) from discontinued operations, net of taxes | (9 | ) | 15 | (9 | ) | (25 | ) | |||||||||
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Income (loss) from continuing operations | 184 | (347 | ) | 671 | 21 | |||||||||||
Less: income from continuing operations attributable to noncontrollinginterests | 68 | 48 | 198 | 151 | ||||||||||||
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Income (loss) from continuing operations available to GenworthFinancial, Inc.’s common stockholders | 116 | (395 | ) | 473 | (130 | ) | ||||||||||
Adjustments to income (loss) from continuing operations available toGenworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses, net (1) | (62 | ) | (18 | ) | (161 | ) | (38 | ) | ||||||||
(Gains) losses on sale of businesses | — | — | — | (3 | ) | |||||||||||
(Gains) losses on early extinguishment of debt, net | — | — | — | (48 | ) | |||||||||||
Losses from life block transactions | — | — | — | 9 | ||||||||||||
Expenses related to restructuring | 1 | 2 | 2 | 22 | ||||||||||||
Fees associated with bond consent solicitation | — | — | — | 18 | ||||||||||||
Taxes on adjustments | 21 | 6 | 56 | (9 | ) | |||||||||||
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Adjusted operating income (loss) available to Genworth Financial, Inc.’scommon stockholders | $ | 76 | $ | (405 | ) | $ | 370 | $ | (179 | ) | ||||||
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Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 181 | $ | 240 | $ | 330 | $ | 427 | ||||||||
Add: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Add: net income from discontinued operations attributable to noncontrolling interests | — | — | — | 8 | ||||||||||||
Net income | 219 | 240 | 398 | 435 | ||||||||||||
Less: Income (loss) from discontinued operations, net of taxes | (1 | ) | (5 | ) | (3 | ) | 16 | |||||||||
Income from continuing operations | 220 | 245 | 401 | 419 | ||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 38 | — | 68 | — | ||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | 182 | 245 | 333 | 419 | ||||||||||||
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses, net (1) | (10 | ) | (70 | ) | (38 | ) | (103 | ) | ||||||||
(Gains) losses on early extinguishment of debt | 1 | — | 4 | 4 | ||||||||||||
Expenses related to restructuring | 1 | 5 | 1 | 26 | ||||||||||||
Taxes on adjustments | 2 | 14 | 7 | 16 | ||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 176 | $ | 194 | $ | 307 | $ | 362 | ||||||||
| (1) | For the three months |
We recorded
In the third quarter of 2016,six months ended June 30, 2021, we recorded apre-tax expense of $2 million related to restructuring costs as part of an expense reduction plan as the company evaluated and appropriately sized its organizational needs and expenses.
In the second quarter of 2016, we completed the sale of our mortgage insurance business in Europe and recorded an additionalpre-tax loss of $2 million; we completed the sale of our term life insurance new business platform and recorded apre-tax gain of $12 million; we settled restricted borrowings related to a securitization entity and recorded a $64 millionpre-tax gain related to the early extinguishment of debt; and we recorded apre-tax expense of $5 million related to restructuring costs as part of an expense reduction plan as the company evaluated and appropriately sized its organizational needs and expenses.
In the first quarter of 2016, we recorded apre-tax loss of $7 million and a tax benefit of $27 million related to the planned sale of our mortgage insurance business in Europe; we paid apre-tax make-whole expense of $20 million related to the early redemption of Genworth Holdings’ 2016 notes; we also repurchased $28$146 million principal amount of Genworth Holdings’ senior notes with various maturity datesdue in September 2021 for apre-tax gain loss of $4 million; we completed a life block transaction resulting in apre-tax loss of $9 million in connection withmillion. These transactions were excluded from adjusted operating income as they relate to losses on the early extinguishment ofnon-recourse funding obligations; and we debt.
There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented other than thepresented.
Earnings (loss) per share
Basictable provides basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted common shares outstandingshare for the periods indicated:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Income (loss) from continuing operations available to GenworthFinancial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.23 | $ | (0.79 | ) | $ | 0.95 | $ | (0.26 | ) | ||||||
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Diluted | $ | 0.23 | $ | (0.79 | ) | $ | 0.94 | $ | (0.26 | ) | ||||||
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Net income (loss) available to Genworth Financial, Inc.’s commonstockholders per share: | ||||||||||||||||
Basic | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
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Diluted | $ | 0.21 | $ | (0.76 | ) | $ | 0.93 | $ | (0.31 | ) | ||||||
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Adjusted operating income (loss) available to Genworth Financial,Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.15 | $ | (0.81 | ) | $ | 0.74 | $ | (0.36 | ) | ||||||
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Diluted | $ | 0.15 | $ | (0.81 | ) | $ | 0.74 | $ | (0.36 | ) | ||||||
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Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 499.1 | 498.3 | 498.9 | 498.3 | ||||||||||||
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Diluted (1) | 501.6 | 498.3 | 501.2 | 498.3 | ||||||||||||
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Three months ended June 30, | Increase (decrease) and percentage change | Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions, except per share amounts) | 2022 | 2021 | 2022 vs. 2021 | 2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.36 | $ | 0.48 | $ | (0.12 | ) | (25 | )% | $ | 0.65 | $ | 0.83 | $ | (0.18 | ) | (22 | )% | ||||||||||||||
Diluted | $ | 0.36 | $ | 0.47 | $ | (0.11 | ) | (23 | )% | $ | 0.65 | $ | 0.82 | $ | (0.17 | ) | (21 | )% | ||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.36 | $ | 0.47 | $ | (0.11 | ) | (23 | )% | $ | 0.65 | $ | 0.84 | $ | (0.19 | ) | (23 | )% | ||||||||||||||
Diluted | $ | 0.35 | $ | 0.47 | $ | (0.12 | ) | (26 | )% | $ | 0.64 | $ | 0.83 | $ | (0.19 | ) | (23 | )% | ||||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.35 | $ | 0.38 | $ | (0.03 | ) | (8 | )% | $ | 0.60 | $ | 0.71 | $ | (0.11 | ) | (15 | )% | ||||||||||||||
Diluted | $ | 0.34 | $ | 0.38 | $ | (0.04 | ) | (11 | )% | $ | 0.60 | $ | 0.70 | $ | (0.10 | ) | (14 | )% | ||||||||||||||
Weighted-average common shares outstanding: | ||||||||||||||||||||||||||||||||
Basic | 509.0 | 507.0 | 508.6 | 506.5 | ||||||||||||||||||||||||||||
Diluted | 514.2 | 515.0 | 515.8 | 514.4 | ||||||||||||||||||||||||||||
awards.
Three months ended June 30, | Increase (decrease) and percentage change | Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | 2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||||||||||||||||||
Enact segment | $ | 167 | $ | 135 | $ | 32 | 24 | % | $ | 302 | $ | 261 | $ | 41 | 16 | % | ||||||||||||||||
U.S. Life Insurance segment: | ||||||||||||||||||||||||||||||||
Long-term care insurance | 34 | 98 | (64 | ) | (65 | )% | 93 | 193 | (100 | ) | (52 | )% | ||||||||||||||||||||
Life insurance | (34 | ) | (40 | ) | 6 | 15 | % | (113 | ) | (103 | ) | (10 | ) | (10 | )% | |||||||||||||||||
Fixed annuities | 21 | 13 | 8 | 62 | % | 37 | 43 | (6 | ) | (14 | )% | |||||||||||||||||||||
U.S. Life Insurance segment | 21 | 71 | (50 | ) | (70 | )% | 17 | 133 | (116 | ) | (87 | )% | ||||||||||||||||||||
Runoff segment | 2 | 15 | (13 | ) | (87 | )% | 11 | 27 | (16 | ) | (59 | )% | ||||||||||||||||||||
Corporate and Other activities | (14 | ) | (27 | ) | 13 | 48 | % | (23 | ) | (59 | ) | 36 | 61 | % | ||||||||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 176 | $ | 194 | $ | (18 | ) | (9 | )% | $ | 307 | $ | 362 | $ | (55 | ) | (15 | )% | ||||||||||||||
We allocate our consolidated provision for income taxes to our operating segments. Our allocation methodology applies a specific tax rate to thepre-tax income (loss) of each segment, which is then adjusted in each segment to reflect the tax attributes of items unique to that segment such as foreign income. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities. The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year. The effective tax rates disclosed herein are calculated using whole dollars. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.
.
our long-term care insurance business included in our U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to be a measure of underwriting performance in these businesses and helphelps to enhance the understanding of the operating performance of our businesses.
An assumed tax rate of 35% is utilized in certain adjustments to
income attributable
U.S. Mortgage Insurance
The level of privateoperations and financial condition.
Mortgage origination volume decreased duringlender portfolios. Such a shift could result in a smaller market for private mortgage insurance.
New insurance written decreased 12% during the third quarter of 2017 compared to the third quarter of 2016 due to a decline in our estimatedthe percentage of in-force policies with mortgage rates above current interest rates and offset the decline in new insurance written in the second quarter of 2022, leading to an increase in insurance in-force of $5.7 billion as compared to March 31, 2022. Prior to 2022, low persistency impacted business performance trends during 2021 in several ways, including but not limited to, accelerating the recognition of earned premiums due to single premium policy cancellations, accelerating the amortization of existing reinsurance transactions and shifting the concentration of Enact’s primary insurance in-force to more recent years of policy origination. As of June 30, 2022, Enact’s primary insurance in-force had approximately 4% concentration in 2014 and prior book years. In contrast, Enact’s 2021 and 2022 book years represented 37% and 15%, respectively, of its primary insurance in-force concentration as of June 30, 2022.
Our loss ratio was 20% duringmonths of unpaid interest and associated expenses that are included in the thirdmortgage insurance claim amount to a maximum of 36 months.
As of September 30, 2017, GMICO’s2022, EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), GMICO’sEMICO’s domestic insurance regulator, was approximately 12.9:12.6:1, compared with arisk-to-capital ratio of approximately 13.1:12.1:1 as of June 30, 2017 and approximately 14.5:1 as of DecemberMarch 31, 2016. This2022. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximumrisk-to-capital ratio of 25:1. GMICO’sNorth Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoingrisk-to-capital ratio will depend principally on the magnitude of future losses incurred by GMICO,EMICO, the effectiveness of ongoing loss mitigation activities, new
Effective December 31, 2015, each GSE adopted revisedprovided.
Asprevailing and prospective macro-economic conditions, regulatory landscape and business performance. Any future dividends or additional returns of September 30, 2017, loans modified through the Home Affordable Refinance Program (“HARP”) accounted for approximately $13.2 billioncapital will include a proportionate distribution to minority shareholders.
2021 (Amounts in millions) Revenues: Premiums Net investment income Net investment gains (losses) Policy fees and other income Total revenues Benefits and expenses: Benefits and other changes in policy reserves Acquisition and operating expenses, net of deferrals Amortization of deferred acquisition costs and intangibles Total benefits and expenses Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Adjustments to income from continuing operations: Net investment (gains) losses Expenses related to restructuring Taxes on adjustments Adjusted operating income available to Genworth Financial, Inc.’s common stockholders persistency.SeptemberJune 30, 20172022 Compared to Three Months Ended SeptemberJune 30, 2016U.S. Mortgage InsuranceEnact segment for the periods indicated: Three months ended
September 30, Increase
(decrease) and
percentage
change 2017 2016 2017 vs. 2016 $ 175 $ 169 $ 6 4 % 18 16 2 13 % — — — — % 1 1 — — % 194 186 8 4 % 35 36 (1 ) (3 )% 43 45 (2 ) (4 )% 3 3 — — % 81 84 (3 ) (4 )% 113 102 11 11 % 40 36 4 11 % 73 66 7 11 % — — — — % — 1 (1 ) (100 )% — — — — % $ 73 $ 67 $ 6 9 %
June 30,
(decrease) and
percentage
change $ 238 $ 243 $ (5 ) (2 )% 36 35 1 3 % (1 ) (2 ) 1 50 % 273 276 (3 ) (1 )% (62 ) 30 (92 ) NM (1) 58 63 (5 ) (8 )% 3 4 (1 ) (25 )% 13 12 1 8 % 12 109 (97 ) (89 )% 261 167 94 56 % 57 35 22 63 % 204 132 72 55 % 38 — 38 NM (1) 166 132 34 26 % 1 2 (1 ) (50 )% — 2 (2 ) (100 )% — (1 ) 1 100 % $ 167 $ 135 $ 32 24 % (1) availableincreased primarily attributable to lower losses driven by a favorable reserve adjustment of $76 million primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations. The increase was partially offset by the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial, Inc.’s common stockholders increased mainly dueFinancial’s ownership percentage to higher81.6% and resulted in lower net income of $38 million, and by lower premiums resulting from higher mortgage insurancein-force in the current year.increaseddecreased mainly attributable todriven by continued lapse of older higher average flow insurancein-force,priced policies and lower single premium policy cancellations, partially offset by lower rates on our mortgagehigher insurance in-force in the current year.Net investment incomeyear driven by increased primarily from higher average invested assets in the current year.
prior year that did not recur.
Nine81.6%.
2021
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 514 | $ | 489 | $ | 25 | 5 | % | ||||||||
Net investment income | 53 | 46 | 7 | 15 | % | |||||||||||
Net investment gains (losses) | — | (1 | ) | 1 | (100 | )% | ||||||||||
Policy fees and other income | 3 | 3 | — | — | % | |||||||||||
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Total revenues | 570 | 537 | 33 | 6 | % | |||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 67 | 112 | (45 | ) | (40 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 124 | 125 | (1 | ) | (1 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 10 | 8 | 2 | 25 | % | |||||||||||
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Total benefits and expenses | 201 | 245 | (44 | ) | (18 | )% | ||||||||||
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Income from continuing operations before income taxes | 369 | 292 | 77 | 26 | % | |||||||||||
Provision for income taxes | 132 | 104 | 28 | 27 | % | |||||||||||
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Income from continuing operations | 237 | 188 | 49 | 26 | % | |||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses | — | 1 | (1 | ) | (100 | )% | ||||||||||
Expenses related to restructuring | — | 1 | (1 | ) | (100 | )% | ||||||||||
Taxes on adjustments | — | (1 | ) | 1 | 100 | % | ||||||||||
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Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 237 | $ | 189 | $ | 48 | 25 | % | ||||||||
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Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 472 | $ | 495 | $ | (23 | ) | (5 | )% | |||||||
Net investment income | 71 | 70 | 1 | 1 | % | |||||||||||
Net investment gains (losses) | (1 | ) | (3 | ) | 2 | 67 | % | |||||||||
Policy fees and other income | 1 | 2 | (1 | ) | (50 | )% | ||||||||||
Total revenues | 543 | 564 | (21 | ) | (4 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | (72 | ) | 85 | (157 | ) | (185 | )% | |||||||||
Acquisition and operating expenses, net of deferrals | 112 | 120 | (8 | ) | (7 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 6 | 8 | (2 | ) | (25 | )% | ||||||||||
Interest expense | 26 | 25 | 1 | 4 | % | |||||||||||
Total benefits and expenses | 72 | 238 | (166 | ) | (70 | )% | ||||||||||
Income from continuing operations before income taxes | 471 | 326 | 145 | 44 | % | |||||||||||
Provision for income taxes | 102 | 69 | 33 | 48 | % | |||||||||||
Income from continuing operations | 369 | 257 | 112 | 44 | % | |||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 68 | — | 68 | NM | (1) | |||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | 301 | 257 | 44 | 17 | % | |||||||||||
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses | 1 | 3 | (2 | ) | (67 | )% | ||||||||||
Expenses related to restructuring | — | 2 | (2 | ) | (100 | )% | ||||||||||
Taxes on adjustments | — | (1 | ) | 1 | 100 | % | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 302 | $ | 261 | $ | 41 | 16 | % | ||||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
Revenues
Premiumsyear driven by increased mainly attributable to higher average flow insurance in-force, partially offset by lower rates on our mortgage insurance in-force in the current year. The prior year included the reversal of an accrual for premium refunds related to policy cancellations that did not recur.
Net investment income increased primarily from higher average invested assets in the current year.
persistency.
U.S. Mortgage Insurance81.6%.
| As of September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Primary insurancein-force (1) | $ | 148,000 | $ | 133,700 | $ | 14,300 | 11 | % | ||||||||
Riskin-force | 35,900 | 32,500 | 3,400 | 10 | % | |||||||||||
As of June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Primary insurance in-force (1) | $ | 237,563 | $ | 217,477 | $ | 20,086 | 9 | % | ||||||||
Risk in-force: | ||||||||||||||||
Primary | $ | 59,911 | $ | 54,643 | $ | 5,268 | 10 | % | ||||||||
Pool | 89 | 123 | (34 | ) | (28 | )% | ||||||||||
Total risk in-force | $ | 60,000 | $ | 54,766 | $ | 5,234 | 10 | % | ||||||||
| (1) | Primary insurancein-force represents the aggregate |
| Three months ended September 30, | Increase (decrease) and percentage change | Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | 2017 | 2016 | 2017 vs. 2016 | ||||||||||||||||||||||||||
New insurance written | $ | 11,300 | $ | 12,800 | $ | (1,500 | ) | (12 | )% | $ | 28,700 | $ | 31,600 | $ | (2,900 | ) | (9 | )% | ||||||||||||||
Net premiums written | 200 | 193 | 7 | 4 | % | 561 | 559 | 2 | — | % | ||||||||||||||||||||||
Loss ratio Expense ratio (net earned premiums) Expense ratio (net premiums written)
June 30,
(decrease) and
percentage
change
June 30,
(decrease) and
percentage
change $ 17,448 $ 26,657 $ (9,209 ) (35 )% $ 36,271 $ 51,591 $ (15,320 ) (30 )% $14.8 billionnew insurance written. In addition, lower lapses and cancellations in the current year drove higher flow insurancein-force, which increased from $131.6 billion as of September 30, 2016 to $146.4 billion as of September 30, 2017primary persistency, largely as a result of new insurance written, partially offset by lapses duringa decline in refinance originations due to rising interest rates in the current year. The increase in flow insurancein-forcePrimary persistency was partially offset by a decline of $0.5 billion in bulk insurancein-force, which decreased from $2.1 billion as of September78% and 59% for the six months ended June 30, 2016 to $1.6 billion as of September 30, 2017 from cancellations2022 and lapses. In addition,2021, respectively. Total riskin-force increased primarily as a result of higher flowprimary insurancein-force. Flow persistency was 83% and 78% for the nine months ended September 30, 2017 and 2016, respectively.ninesix months ended SeptemberJune 30, 2017,2022, new insurance written decreased primarily due to a smaller estimated private mortgage insurance market, which was primarily driven by a decline in our estimated market share.Net premiums writtenNet premiums written for the three months ended September 30, 2017 increased primarily from higher average flow insurancein-forcerefinance originations due to rising interest rates in the current year.our U.S. Mortgage Insurance segmentEnact for the dates indicated: Three months ended
September 30, Increase (decrease) Nine months ended
September 30, Increase (decrease) 2017 2016 2017 vs. 2016 2017 2016 2017 vs. 2016 20 % 21 % (1 )% 13 % 23 % (10 )% 26 % 28 % (2 )% 26 % 27 % (1 )% 23 % 24 % (1 )% 24 % 24 % — %
June 30,
June 30, (26 )% 12 % (38 )% (15 )% 17 % (32 )% 26 % 27 % (1 )% 25 % 26 % (1 )% incurred lossesbenefits and loss adjustment expensesother changes in policy reserves to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio (net premiums written) is the ratio of general expenses to net premiums written. In our business,Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.and nine months ended SeptemberJune 30, 2017 decreased2022 largely from improvements in net benefit from cures and aginga favorable reserve adjustment of existing delinquencies and lower$96 million, partially offset by higher new delinquencies in the current year. The decrease in the loss ratio was also driven by higher net earned premiums attributable to higher average flow insurancein-forcedecreased for the six months ended June 30, 2022 largely from favorable reserve adjustments of $146 million in the current year compared to reserve strengthening of $10 million in the prior year. The decreasefavorable reserve
The expense ratio (net earned premiums) for the three and nine months ended September 30, 2017 decreased slightly driven by higher net earnedlower premiums in the current year.
(Amounts in millions) | 2022 | 2021 | ||||||
Primary insurance in-force by loan-to-value ratio at origination: | ||||||||
95.01% and above | $ | 37,636 | $ | 33,657 | ||||
90.01% to 95.00% | 99,303 | 94,307 | ||||||
85.01% to 90.00% | 67,866 | 61,234 | ||||||
85.00% and below | 32,758 | 28,279 | ||||||
Total | $ | 237,563 | $ | 217,477 | ||||
Primary risk in-force by loan-to-value ratio at origination: | ||||||||
95.01% and above | $ | 10,647 | $ | 9,228 | ||||
90.01% to 95.00% | 28,838 | 27,308 | ||||||
85.01% to 90.00% | 16,517 | 14,776 | ||||||
85.00% and below | 3,909 | 3,331 | ||||||
Total | $ | 59,911 | $ | 54,643 | ||||
Primary insurance in-force by FICO (1) score at origination: | ||||||||
Over 760 | $ | 96,625 | $ | 83,602 | ||||
740-759 | 37,853 | 34,402 | ||||||
720-739 | 33,263 | 30,964 | ||||||
700-719 | 28,136 | 27,032 | ||||||
680-699 | 21,221 | 21,469 | ||||||
660-679 (2) | 10,822 | 10,191 | ||||||
640-659 | 6,154 | 6,008 | ||||||
620-639 | 2,725 | 2,838 | ||||||
<620 | 764 | 971 | ||||||
Total | $ | 237,563 | $ | 217,477 | ||||
Primary risk in-force by FICO score at origination: | ||||||||
Over 760 | $ | 24,252 | $ | 20,908 | ||||
740-759 | 9,559 | 8,628 | ||||||
720-739 | 8,484 | 7,879 | ||||||
700-719 | 7,129 | 6,848 | ||||||
680-699 | 5,329 | 5,385 | ||||||
660-679 (2) | 2,728 | 2,531 | ||||||
640-659 | 1,547 | 1,494 | ||||||
620-639 | 687 | 720 | ||||||
<620 | 196 | 250 | ||||||
Total | $ | 59,911 | $ | 54,643 | ||||
| (1) | Fair Isaac Company. |
| (2) | Loans with unknown FICO scores are included in the 660-679 category. |
| September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Primary insurance: | ||||||||||||
Insured loansin-force | 730,174 | 699,841 | 686,789 | |||||||||
Delinquent loans | 20,508 | 25,709 | 25,803 | |||||||||
Percentage of delinquent loans (delinquency rate) | 2.81 | % | 3.67 | % | 3.76 | % | ||||||
Flow loanin-force | 712,848 | 678,168 | 665,821 | |||||||||
Flow delinquent loans | 19,765 | 24,631 | 24,720 | |||||||||
Percentage of flow delinquent loans (delinquency rate) | 2.77 | % | 3.63 | % | 3.71 | % | ||||||
Bulk loansin-force | 17,326 | 21,673 | 20,968 | |||||||||
Bulk delinquent loans (1) | 743 | 1,078 | 1,083 | |||||||||
Percentage of bulk delinquent loans (delinquency rate) | 4.29 | % | 4.97 | % | 5.17 | % | ||||||
A minus andsub-prime loansin-force | 19,828 | 23,063 | 24,281 | |||||||||
A minus andsub-prime delinquent loans | 4,080 | 5,252 | 5,306 | |||||||||
Percentage of A minus andsub-prime delinquent loans (delinquency rate) | 20.58 | % | 22.77 | % | 21.85 | % | ||||||
Pool insurance: | ||||||||||||
Insured loansin-force | 5,145 | 5,742 | 5,896 | |||||||||
Delinquent loans | 252 | 325 | 343 | |||||||||
Percentage of delinquent loans (delinquency rate) | 4.90 | % | 5.66 | % | 5.82 | % | ||||||
June 30, 2022 | December 31, 2021 | June 30, 2021 | ||||||||||
Primary insurance: | ||||||||||||
Insured loans in-force | 946,891 | 937,350 | 933,616 | |||||||||
Delinquent loans | 19,513 | 24,820 | 33,568 | |||||||||
Percentage of delinquent loans (delinquency rate) | 2.06 | % | 2.65 | % | 3.60 | % | ||||||
delinquencies.
| September 30, 2017 | ||||||||||||||||
(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 | 8,268 | $ | 40 | $ | 350 | 11 | % | |||||||||
4 - 11 payments | 5,273 | 116 | 228 | 51 | % | |||||||||||
12 payments or more | 6,224 | 256 | 306 | 84 | % | |||||||||||
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| |||||||||||
Total | 19,765 | $ | 412 | $ | 884 | 47 | % | |||||||||
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| |||||||||||
June 30, 2022 | ||||||||||||||||
(Dollar amounts in millions) | Delinquencies | Direct primary case reserves (1) | Risk in- force | Reserves as % of risk in-force | ||||||||||||
Payments in default: | ||||||||||||||||
3 payments or less | 6,442 | $ | 35 | $ | 341 | 10 | % | |||||||||
4 - 11 payments | 6,372 | 122 | 368 | 33 | % | |||||||||||
12 payments or more | 6,699 | 369 | 382 | 97 | % | |||||||||||
Total | 19,513 | $ | 526 | $ | 1,091 | 48 | % | |||||||||
December 31, 2021 | ||||||||||||||||
(Dollar amounts in millions) | Delinquencies | Direct primary case reserves (1) | Risk in- force | Reserves as % of risk in-force | ||||||||||||
Payments in default: | ||||||||||||||||
3 payments or less | 6,586 | $ | 35 | $ | 340 | 10 | % | |||||||||
4 - 11 payments | 7,360 | 111 | 426 | 26 | % | |||||||||||
12 payments or more | 10,874 | 460 | 643 | 72 | % | |||||||||||
Total | 24,820 | $ | 606 | $ | 1,409 | 43 | % | |||||||||
| (1) | Direct |
| December 31, 2016 | ||||||||||||||||
(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 | 9,355 | $ | 49 | $ | 382 | 13 | % | |||||||||
4 - 11 payments | 6,364 | 147 | 268 | 55 | % | |||||||||||
12 payments or more | 8,912 | 383 | 434 | 88 | % | |||||||||||
|
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|
|
|
| |||||||||||
Total | 24,631 | $ | 579 | $ | 1,084 | 53 | % | |||||||||
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| |||||||||||
| Percent of primary riskin-force as of September 30, 2017 | Percent of total reserves as of September 30, 2017 (1) | Delinquency rate | ||||||||||||||||||
| September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||
By Region: | ||||||||||||||||||||
Southeast (2) | 18 | % | 21 | % | 3.28 | % | 4.28 | % | 4.44 | % | ||||||||||
South Central (3) | 15 | 10 | 2.63 | % | 3.20 | % | 3.12 | % | ||||||||||||
Pacific (4) | 15 | 8 | 1.52 | % | 2.02 | % | 2.08 | % | ||||||||||||
Northeast (5) | 13 | 33 | 4.94 | % | 6.72 | % | 6.96 | % | ||||||||||||
North Central (6) | 12 | 9 | 2.30 | % | 3.00 | % | 2.97 | % | ||||||||||||
Great Lakes (7) | 11 | 6 | 2.11 | % | 2.70 | % | 2.78 | % | ||||||||||||
New England (8) | 6 | 6 | 2.83 | % | 3.62 | % | 3.70 | % | ||||||||||||
Mid-Atlantic (9) | 6 | 5 | 2.92 | % | 3.80 | % | 3.84 | % | ||||||||||||
Plains (10) | 4 | 2 | 2.27 | % | 2.94 | % | 3.09 | % | ||||||||||||
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| |||||||||||||||||
Total | 100 | % | 100 | % | 2.81 | % | 3.67 | % | 3.76 | % | ||||||||||
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| |||||||||||||||||
Percent of primary risk in-force as of June 30, 2022 | Percent of direct primary case reserves as of June 30, 2022 (1) | Delinquency rate as of | ||||||||||||||||||
June 30, 2022 | December 31, 2021 | June 30, 2021 | ||||||||||||||||||
By State: | ||||||||||||||||||||
California | 11 | % | 10 | % | 2.18 | % | 3.17 | % | 4.70 | % | ||||||||||
Texas | 8 | % | 8 | % | 2.12 | % | 2.89 | % | 4.20 | % | ||||||||||
Florida (2) | 8 | % | 8 | % | 2.06 | % | 2.97 | % | 4.52 | % | ||||||||||
New York (2) | 5 | % | 13 | % | 3.17 | % | 3.80 | % | 5.10 | % | ||||||||||
Illinois (2) | 5 | % | 6 | % | 2.53 | % | 3.09 | % | 4.13 | % | ||||||||||
Michigan | 4 | % | 3 | % | 1.66 | % | 1.87 | % | 2.11 | % | ||||||||||
Arizona | 4 | % | 2 | % | 1.71 | % | 2.31 | % | 3.13 | % | ||||||||||
North Carolina | 3 | % | 2 | % | 1.67 | % | 2.18 | % | 2.99 | % | ||||||||||
Pennsylvania (2) | 3 | % | 3 | % | 2.13 | % | 2.38 | % | 3.06 | % | ||||||||||
Georgia | 3 | % | 3 | % | 2.21 | % | 2.94 | % | 4.28 | % | ||||||||||
| (1) | Direct primary case reserves |
| (2) | Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be completed. |
Percent of primary risk in-force as of June 30, 2022 | Percent of direct primary case reserves as of June 30, 2022 (1) | Delinquency rate as of | ||||||||||||||||||
June 30, 2022 | December 31, 2021 | June 30, 2021 | ||||||||||||||||||
By MSA or MD: | ||||||||||||||||||||
Chicago-Naperville, IL MD | 3 | % | 5 | % | 2.94 | % | 3.68 | % | 5.09 | % | ||||||||||
Phoenix, AZ MSA | 3 | % | 2 | % | 1.71 | % | 2.36 | % | 3.15 | % | ||||||||||
New York, NY MD | 3 | % | 8 | % | 4.17 | % | 5.32 | % | 7.69 | % | ||||||||||
Atlanta, GA MSA | 2 | % | 3 | % | 2.42 | % | 3.28 | % | 4.84 | % | ||||||||||
Washington-Arlington, DC MD | 2 | % | 2 | % | 1.98 | % | 2.96 | % | 4.86 | % | ||||||||||
Houston, TX MSA | 2 | % | 3 | % | 2.86 | % | 3.61 | % | 5.54 | % | ||||||||||
Riverside-San Bernardino, CA MSA | 2 | % | 2 | % | 2.72 | % | 3.42 | % | 5.24 | % | ||||||||||
Los Angeles-Long Beach, CA MD | 2 | % | 2 | % | 2.35 | % | 3.95 | % | 5.89 | % | ||||||||||
Dallas, TX MD | 2 | % | 1 | % | 1.70 | % | 2.31 | % | 3.60 | % | ||||||||||
Nassau County, NY MD | 2 | % | 5 | % | 4.25 | % | 5.55 | % | 8.10 | % | ||||||||||
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and |
| Percent of primary riskin-force as of September 30, 2017 | Percent of total reserves as of September 30, 2017 (1) | Delinquency rate | ||||||||||||||||||
| September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||
By State: | ||||||||||||||||||||
California | 8 | % | 3 | % | 1.35 | % | 1.56 | % | 1.59 | % | ||||||||||
Texas | 7 | % | 4 | % | 2.94 | % | 3.33 | % | 3.33 | % | ||||||||||
Florida | 6 | % | 11 | % | 3.54 | % | 4.89 | % | 5.33 | % | ||||||||||
New York | 6 | % | 17 | % | 5.09 | % | 6.88 | % | 7.12 | % | ||||||||||
Illinois | 6 | % | 6 | % | 2.70 | % | 3.45 | % | 3.42 | % | ||||||||||
Washington | 4 | % | 2 | % | 1.20 | % | 1.79 | % | 1.86 | % | ||||||||||
Pennsylvania | 4 | % | 4 | % | 3.59 | % | 4.70 | % | 4.83 | % | ||||||||||
Michigan | 4 | % | 1 | % | 1.47 | % | 1.79 | % | 1.91 | % | ||||||||||
Ohio | 4 | % | 2 | % | 2.44 | % | 3.30 | % | 3.38 | % | ||||||||||
North Carolina | 3 | % | 2 | % | 2.80 | % | 3.65 | % | 3.79 | % | ||||||||||
(Amounts in millions) | Average rate | Percent of total reserves(1) | Primary insurance in-force | Percent of total | Primary risk in-force | Percent of total | ||||||||||||||||||
Policy Year | ||||||||||||||||||||||||
2004 and prior | 6.01 | % | 10.3 | % | $ | 2,361 | 1.6 | % | $ | 463 | 1.3 | % | ||||||||||||
2005 | 5.60 | % | 10.0 | 2,206 | 1.5 | 531 | 1.5 | |||||||||||||||||
2006 | 5.73 | % | 15.6 | 4,018 | 2.7 | 942 | 2.6 | |||||||||||||||||
2007 | 5.66 | % | 33.4 | 10,423 | 7.0 | 2,431 | 6.8 | |||||||||||||||||
2008 | 5.20 | % | 15.9 | 8,676 | 5.9 | 2,017 | 5.6 | |||||||||||||||||
2009 | 4.93 | % | 0.6 | 851 | 0.6 | 183 | 0.5 | |||||||||||||||||
2010 | 4.68 | % | 0.5 | 1,178 | 0.8 | 270 | 0.8 | |||||||||||||||||
2011 | 4.54 | % | 0.7 | 1,712 | 1.2 | 403 | 1.1 | |||||||||||||||||
2012 | 3.84 | % | 0.8 | 4,544 | 3.1 | 1,111 | 3.1 | |||||||||||||||||
2013 | 4.05 | % | 1.7 | 8,250 | 5.6 | 2,041 | 5.7 | |||||||||||||||||
2014 | 4.43 | % | 3.5 | 12,556 | 8.5 | 3,067 | 8.6 | |||||||||||||||||
2015 | 4.12 | % | 4.0 | 23,726 | 16.0 | 5,807 | 16.2 | |||||||||||||||||
2016 | 3.86 | % | 2.7 | 39,291 | 26.5 | 9,545 | 26.6 | |||||||||||||||||
2017 | 4.26 | % | 0.3 | 28,197 | 19.0 | 7,008 | 19.6 | |||||||||||||||||
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Total portfolio | 4.46 | % | 100.0 | % | $ | 147,989 | 100.0 | % | $ | 35,819 | 100.0 | % | ||||||||||||
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(Amounts in millions) | Percent of direct primary case reserves (1) | Primary insurance in-force | Percent of total | Primary risk in- force | Percent of total | Delinquency rate | ||||||||||||||||||
Policy Year | ||||||||||||||||||||||||
2008 and prior | 26 | % | $ | 7,246 | 3 | % | $ | 1,867 | 3 | % | 9.81 | % | ||||||||||||
2009 to 2014 | 5 | 2,577 | 1 | 687 | 1 | 5.06 | % | |||||||||||||||||
2015 | 4 | 3,526 | 1 | 943 | 2 | 3.58 | % | |||||||||||||||||
2016 | 7 | 7,377 | 3 | 1,964 | 3 | 3.16 | % | |||||||||||||||||
2017 | 9 | 7,328 | 3 | 1,922 | 3 | 3.84 | % | |||||||||||||||||
2018 | 11 | 7,613 | 3 | 1,922 | 3 | 4.70 | % | |||||||||||||||||
2019 | 15 | 18,141 | 8 | 4,575 | 8 | 2.81 | % | |||||||||||||||||
2020 | 17 | 62,154 | 26 | 15,763 | 26 | 1.33 | % | |||||||||||||||||
2021 | 6 | 86,175 | 37 | 21,384 | 36 | 0.72 | % | |||||||||||||||||
2022 | — | 35,426 | 15 | 8,884 | 15 | 0.14 | % | |||||||||||||||||
Total portfolio | 100 | % | $ | 237,563 | 100 | % | $ | 59,911 | 100 | % | 2.06 | % | ||||||||||||
| (1) | Direct primary case reserves |
Canada Mortgage Insurance segment
(Amounts in millions) Revenues: Premiums Net investment income Net investment gains (losses) Policy fees and other income Total revenues Benefits and expenses: Benefits and other changes in policy reserves Acquisition and operating expenses, net of deferrals Amortization of deferred acquisition costs and intangibles Interest expense Total benefits and expenses Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Less: income from continuing operations attributable to noncontrollinginterests Income from continuing operations available to Genworth Financial, Inc.’scommon stockholders Adjustments to income from continuing operations available to GenworthFinancial, Inc.’s common stockholders: Net investment (gains) losses, net (2) Expenses related to restructuring Taxes on adjustments Adjusted operating income available to Genworth Financial, Inc.’s common stockholders (Amounts in millions) Revenues: Premiums Net investment income Net investment gains (losses) Policy fees and other income Total revenues Benefits and expenses: Benefits and other changes in policy reserves Acquisition and operating expenses, net of deferrals Amortization of deferred acquisition costs and intangibles Interest expense Total benefits and expenses Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Less: income from continuing operations attributable to noncontrollinginterests Income from continuing operations available to Genworth Financial, Inc.’scommon stockholders Adjustments to income from continuing operations available to GenworthFinancial, Inc.’s common stockholders: Net investment (gains) losses, net (2) Expenses related to restructuring Taxes on adjustments Adjusted operating income available to Genworth Financial, Inc.’s commonstockholders (Amounts in millions) Primary insurancein-force Riskin-force (Amounts in millions) New insurance written Net premiums written Loss ratio Expense ratio (net earned premiums) Expense ratio (net premiums written) Primary insured loansin-force Delinquent loans Percentage of delinquent loans (delinquency rate) Flow loansin-force Flow delinquent loans Percentage of flow delinquent loans (delinquency rate) Bulk loansin-force Bulk delinquent loans Percentage of bulk delinquent loans (delinquency rate) By province and territory: Ontario Alberta British Columbia Quebec Saskatchewan Nova Scotia Manitoba New Brunswick All other Total (Amounts in millions) Revenues: Premiums Net investment income Net investment gains (losses) Total revenues Benefits and expenses: Benefits and other changes in policy reserves Acquisition and operating expenses, net of deferrals Amortization of deferred acquisition costs and intangibles Interest expense Total benefits and expenses Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Less: income from continuing operations attributable to noncontrollinginterests Income from continuing operations available to Genworth Financial, Inc.’scommon stockholders Adjustments to income from continuing operations available to GenworthFinancial, Inc.’s common stockholders: Net investment (gains) losses, net (1) Taxes on adjustments Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders (Amounts in millions) Revenues: Premiums Net investment income Net investment gains (losses) Total revenues Benefits and expenses: Benefits and other changes in policy reserves Acquisition and operating expenses, net of deferrals Amortization of deferred acquisition costs and intangibles Interest expense Total benefits and expenses Income from continuing operations before income taxes Provision for income taxes Income from continuing operations Less: income from continuing operations attributable to noncontrollinginterests Income from continuing operations available to Genworth Financial, Inc.’scommon stockholders Adjustments to income from continuing operations available to GenworthFinancial, Inc.’s common stockholders: Net investment (gains) losses, net(2) Taxes on adjustments Adjusted operating income available to Genworth Financial, Inc.’s commonstockholders (Amounts in millions) Primary insurancein-force Riskin-force (Amounts in millions) New insurance written Net premiums written Loss ratio Expense ratio (net earned premiums) Expense ratio (net premiums written) Primary insured loansin-force Delinquent loans Percentage of delinquent loans (delinquency rate) Flow loansin-force Flow delinquent loans Percentage of flow delinquent loans (delinquency rate) Bulk loansin-force Bulk delinquent loans Percentage of bulk delinquent loans (delinquency rate) By state and territory: New South Wales Queensland Victoria Western Australia South Australia Australian Capital Territory Tasmania New Zealand Northern Territory Total TrendsconditionsResultsprior are outsized compared to their representation of ourrisk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance business in Canada are affected primarily by changes in the regulatory environment, employment levels, consumer borrowing behavior, lender mortgage-related strategies, including lender servicing practices, and other economic and housing market influences, including interest rate trends, home price appreciation or depreciation, mortgage origination volume, levels and agingportfolio. The largest portion of mortgage delinquencies and movements in foreign currency exchange rates. During the third quarter of 2017, the Canadian dollar strengthened against the U.S. dollar as comparedloss reserves has shifted to both the third quarter of 2016 and the second quarter of 2017, which positively impacted the results of our mortgage insurance business in Canada as reported in U.S. dollars. Any future movement in foreign exchange rates could impact future results.The Canadian gross domestic product is expected to have experienced moderate growth in the third quarter of 2017, although slightly lower than in the second quarter of 2017, reflecting normalization in oil production and strong residential investment. The overnight interest rate in Canada was 1.0% at September 30, 2017 as compared to 0.50% at the end of the second quarter of 2017. Canada’s unemployment rate decreased to 6.2% at the end of the third quarter of 2017 compared to 6.5% at the end of the second quarter of 2017 due in part to a decrease in workforce participation.National home prices increased in the third quarter of 2017 by approximately 11% compared to the third quarter of 2016 largely driven by strong housing markets in Ontario and British Columbia. The increase was approximately 2% compared to the second quarter of 2017, mostly due to continued strength in the British Columbia market, while Ontario prices remained relatively flat. Home sales in Canada decreased in the third quarter of 2017 by approximately 9% compared to the third quarter of 2016 and 6% compared to the second quarter of 2017. This was largely due to a slowdown in sales in Ontario, particularly in the Greater Toronto Area (“GTA”) following the release of the Ontario Provincial Government’s Fair Housing Plan in April 2017. The plan was designed to temper the real estate market and contained numerous measures, including anon-resident speculation tax that targets affordability in the purchase and rental housing markets in the GTA and surrounding areas.Our mortgage insurance business in Canada experienced lower losses in the third quarter of 2017 compared to the third quarter of 2016 primarily due to lower new delinquencies, net of cures, resulting from strong or improving regional economic conditions and from a lower average reserve per delinquency in the current year. Our loss ratio in Canada was 14% for the third quarter of 2017 and 11% for the nine months ended September 30, 2017. Given the loss ratio performance thus far in 2017 and the economic forecast for the balance of the year, we expect our full year 2017 loss ratio to be lower than our full year 2016 loss ratio of 22%.On October 3, 2016, the Minister of Finance announced changes intended to reinforce the Canadian housing finance system. These changes primarily included more restrictive qualification guidelines on homebuyers seeking mortgage insurance and new requirements on insured mortgage loans using bulk or other discretionary lowloan-to-value mortgage insurance that previously only applied to highloan-to-value insured mortgages. These changes in regulatory requirements have resulted in a smaller flow mortgage insurance market and lower demand for bulk insurance.In the third quarter of 2017, flow new insurance written volumes decreased in our mortgage insurance business in Canada compared to the third quarter of 2016 primarily due to a smaller flow mortgage insurance market sizenewer book years as a result of the aforementioned regulatory changes in the fourth quarter of 2016. However, earned premiums were higher in the third quarter of 2017 compared to the third quarter of 2016 from seasoning of our larger, more recent blocks of business and price increases in recent years.Bulk new insurance written levels were lower in the third quarter of 2017 compared to the third quarter of 2016 primarily due to lower demand as a result of regulatory changes that took effect in 2016 and a substantial increase in bulk insurance premium rates on mortgage applications received after December 31, 2016 in response to higher regulatory capital requirements. New insurance written from bulk mortgage insurance varies from period to period based on a number of factors, including the amount of bulk mortgages lenders seek to insure, the competitiveness of our pricing and our risk appetite for such mortgage insurance. Effective July 1, 2016, bulk mortgage insurance is only available on mortgages used in the Canada Mortgage and Housing Corporation securitization programs and is prohibited on mortgages used in private securitizations after aphase-in period. In addition, effective November 30, 2016, additional regulatory changes were implemented that prohibit insuring bulk refinances and most investor mortgages. While there was aone-time increase in bulk insurance volumes in the first quarter of 2017 primarily due to the closing of several large bulk insurance transactions on applications received in the fourth quarter of 2016, we anticipate a decrease for the full year 2017 as a result of the aforementioned changes.We are subject to regulation under the Protection of Residential Mortgage or Hypothecary Insurance Act (Canada) (“PRMHIA”). Under PRMHIA and the Insurance Companies Act (Canada), our mortgage insurance business in Canada is required to meet a minimum capital test (“MCT”) to support its outstanding mortgage insurancein-force. The MCT ratio is calculated based on a methodology prescribed by the Office of the Superintendent of Financial Institutions (“OSFI”). On January 1, 2017, the capital advisory titled “Capital Requirements for Federally Regulated Mortgage Insurers” became effective. The advisory provides a new standard framework for determining the capital requirements for residential mortgage insurance companies. Under this new regulatory capital framework, the holding target of 220% was recalibrated to the updated OSFI Supervisory MCT Target and PRMHIA requirement of 150%. As of September 30, 2017, our MCT ratio under the new framework was approximately 165%, which was above the supervisory target.The new framework released by OSFI in December 2016 is more risk sensitive and incorporates additional risk attributes, including credit score, remaining amortization and outstanding loan balance. The advisory includes supplementary capital requirements on new business in areas where home prices are high relative to borrower incomes upon origination. As a result of these higher regulatory capital requirements, our mortgage insurance business in Canada implemented an increase in premium rates of approximately 20% on flow new business effective March 17, 2017. Similarly, the business also increased its premium rates for bulk insurance.On October 17, 2017, OSFI released the final version of GuidelineB-20 “Residential Mortgage Underwriting Practices and Procedures,” which applies to all federally-regulated financial institutions that are engaged in residential mortgage underwriting and/or the acquisition of residential mortgage loan assets in Canada. The guideline takes effect January 1, 2018, and will require enhanced underwriting practices for all uninsured mortgages, including the application of a qualifying stress test. TheB-20 Guideline does not directly impact the regulatory requirements for our mortgage insurance business in Canada, as it is governed by OSFI’s GuidelineB-21 “Residential Mortgage Insurance Underwriting Practices and Procedures.” We believe the Guideline will not have a material impact on the highloan-to-value market in Canada. However, it is still too early to determine the potential impact this Guideline will have on the Canadian mortgage and housing market.Segment results of operationsThree Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016The following table sets forth the results of operations relating to our Canada Mortgage Insurance segment for the periods indicated: Three months
ended
September 30, Increase
(decrease)
and
percentage
change 2017 2016 2017 vs. 2016 $ 131 $ 124 $ 7 6 % 33 33 — — % 55 — 55 NM (1) 1 (1 ) 2 200 % 220 156 64 41 % 18 30 (12 ) (40 )% 20 21 (1 ) (5 )% 11 10 1 10 % 4 5 (1 ) (20 )% 53 66 (13 ) (20 )% 167 90 77 86 % 55 24 31 129 % 112 66 46 70 % 54 30 24 80 % 58 36 22 61 % (32 ) — (32 ) NM (1) 1 — 1 NM (1) 10 — 10 NM (1) $ 37 $ 36 $ 1 3 % (1)We define “NM” as not meaningful for increases or decreases greater than 200%.(2)For the three months ended September 30, 2017, net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $23 million.Adjusted operating income available to Genworth Financial, Inc.’s common stockholdersAdjusted operating income available to Genworth Financial, Inc.’s common stockholders increased mainly driven by lower losses and higher premiums, mostly offset by lower tax benefits in the current year.RevenuesPremiums increased principally from the seasoning of our larger, more recentin-force blocks of business.Net investment gains in the current year were primarily driven by derivative gains on interest rate swaps, foreign currency forward contracts and cross currency interest rate swaps.Benefits and expensesBenefits and other changes in policy reserves decreased largely from lower new delinquencies, net of cures, and from a lower average reserve per delinquency in the current year.Provision for income taxes.The effective tax rate increased to 32.9% for the three months ended September 30, 2017 from 26.7% for the three months ended September 30, 2016. The increase in the effective tax rate was primarily attributable to decreased tax benefits from lower taxed foreign income in the current year.Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016The following table sets forth the results of operations relating to our Canada Mortgage Insurance segment for the periods indicated: Nine months
ended
September 30, Increase
(decrease) and
percentage
change 2017 2016 2017 vs. 2016 $ 383 $ 357 $ 26 7 % 96 94 2 2 % 113 12 101 NM (1) 1 — 1 NM (1) 593 463 130 28 % 42 81 (39 ) (48 )% 57 58 (1 ) (2 )% 32 29 3 10 % 13 13 — — % 144 181 (37 ) (20 )% 449 282 167 59 % 147 76 71 93 % 302 206 96 47 % 146 94 52 55 % 156 112 44 39 % (65 ) (7 ) (58 ) NM (1) 1 — 1 NM (1) 22 2 20 NM (1) $ 114 $ 107 $ 7 7 % (1)We define “NM” as not meaningful for increases or decreases greater than 200%.(2)For the nine months ended September 30, 2017 and 2016, net investment gains (losses) were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $48 million and $5 million, respectively.Adjusted operating income available to Genworth Financial, Inc.’s common stockholdersAdjusted operating income available to Genworth Financial, Inc.’s common stockholders increased mainly driven by lower losses and higher premiums, partially offset by lower tax benefits in the current year.RevenuesPremiums increased primarily from the seasoning of our larger, more recentin-force blocks of business.Net investment gains in the current year were primarily driven by derivative gains on interest rate swaps, foreign currency forward contracts and cross currency interest rate swaps, as well as foreign exchange gains on the sale ofnon-functional currency investment securities.Benefits and expensesBenefits and other changes in policy reserves decreased largely from lower new delinquencies, net of cures, as well as from a lower average reserve per delinquency and from favorable loss reserve development related to incurred but not reported delinquencies as of December 31, 2016.Provision for income taxes.The effective tax rate increased to 32.7% for the nine months ended September 30, 2017 from 27.1% for the nine months ended September 30, 2016. The increase in the effective tax rate was primarily attributable to decreased tax benefits from lower taxed foreign income in the current year.Canada Mortgage Insurance selected operating performance measuresThe following tables set forth selected operating performance measures regarding our Canada Mortgage Insurance segment as of or for the dates indicated: As of September 30, Increase (decrease)
and
percentage change 2017 2016 2017 vs. 2016 $ 390,700 $ 347,300 $ 43,400 12 % 136,700 121,500 15,200 13 % Three months ended
September 30, Increase
(decrease) and
percentage
change Nine months ended
September 30, Increase
(decrease) and
percentage
change 2017 2016 2017 vs. 2016 2017 2016 2017 vs. 2016 $ 5,000 $ 10,400 $ (5,400 ) (52 )% $ 19,800 $ 40,200 $ (20,400 ) (51 )% 156 172 (16 ) (9 )% 378 447 (69 ) (15 )% Primary insurancein-force and riskin-forceOur mortgage insurance business in Canada currently provides 100% coverage on the majority of the loans we insure in that market. For the purpose of representing our riskin-force, we have computed an “effective” riskin-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 riskin-force has been calculated by applying to insurancein-force a factor that represents our highest expected averageper-claim payment for any one underwriting year over the life of our business in Canada. For the three and nine months ended September 30, 2017 and 2016, this factor was 35%.Primary insurancein-force and riskin-force increased primarily as a result of flow new insurance written and bulk mortgage insurance activity. Insurancein-force and riskin-force included increases of $19.2 billion and $6.7 billion, respectively, attributable to changes in foreign exchange rates.New insurance writtenNew insurance written decreased for the three and nine months ended September 30, 2017 primarily as a result of lower bulk mortgage insurance activity and flow new insurance written. For the three and nine months ended September 30, 2017, bulk mortgage insurance activity decreased by $4.5 billion and $18.6 billion, respectively, driven by increased demand in the prior year preceding regulatory changes that became effective on July 1, 2016 and from lower demand in the current year due to a higher average premium rate as a result of higher regulatory capital requirements and additional regulatory changes that became effective on November 30, 2016. Flow new insurance written decreased $900 million and $1.8 billion for the three and nine months ended September 30, 2017, respectively, primarily due to a smaller market size resulting from regulatory changes effective October 17, 2016. New insurance written for the three and nine months ended September 30, 2017 included increases of $100 million and $400 million, respectively, attributable to changes in foreign exchange rates.Net premiums writtenOur mortgage insurance policies in Canada 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 patternCOVID-19 given their significant representation of risk emergence.in-force. As of September 30, 2017, our unearned premium reserves were $1,713 million, compared to $1,628 million as of September 30, 2016. The change in unearned premium reserves included an increase of $84 million attributable to changes in foreign exchange rates.Net premiums written decreased for the three and nine months ended September 30, 2017 primarily from lower bulk mortgage insurance activity and lower flow volume due to regulatory changes, partially offset by premium rate increases.Loss and expense ratiosThe following table sets forth the loss and expense ratios for our Canada Mortgage Insurance segment for the periods indicated: Three months
ended
September 30, Increase
(decrease) Nine months
ended
September 30, Increase
(decrease) 2017 2016 2017 vs. 2016 2017 2016 2017 vs. 2016 14 % 24 % (10 )% 11 % 23 % (12 )% 23 % 24 % (1 )% 23 % 24 % (1 )% 20 % 18 % 2 % 23 % 19 % 4 % The loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio (net premiums written) is the ratio of general expenses to net premiums written. In our mortgage insurance business in Canada, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.The loss ratio decreased for the three and nine months ended September 30, 2017 primarily from a decrease in the number of new flow delinquencies, net of cures, and from a lower average reserve per delinquency as a result of improvement inoil-producing regions, home price appreciation, particularly in Ontario, and overall improving regional macroeconomic conditions in the current year.The expense ratio (net earned premiums) decreased for the three and nine months ended September 30, 2017 primarily attributable to higher premiums from the seasoning of our larger, more recentin-force blocks of business.The expense ratio (net premiums written) increased for the three and nine months ended September 30, 2017 primarily attributable to lower net premiums written in the current year.Delinquent loansThe following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our Canada mortgage insurance portfolio as of the dates indicated: September 30, 2017 December 31, 2016 September 30, 2016 2,098,771 2,029,400 2,006,484 1,759 2,070 2,027 0.08 % 0.10 % 0.10 % 1,434,662 1,394,067 1,379,020 1,434 1,693 1,715 0.10 % 0.12 % 0.12 % 664,109 635,333 627,464 325 377 312 0.05 % 0.06 % 0.05 % Flow mortgage loansin-force increased from new policies written and bulk mortgage loansin-force increased from new bulk activity. The number of delinquent loans of our flow mortgage insurance decreased primarily from regional housing market improvement, particularly inoil-producing regions in the current year.Primary insurance delinquency rates differ by the various provinces and territories of Canada at any one time depending upon economic conditions and cyclical growth patterns. The table below sets forth our primary delinquency rates for the various provinces and territories of Canada by our riskin-force 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
riskin-force as of
September 30, 2017 Delinquency rate September 30,
2017 December 31,
2016 September 30,
2016 47 % 0.03 % 0.04 % 0.04 % 16 0.18 % 0.22 % 0.22 % 15 0.05 % 0.06 % 0.07 % 13 0.12 % 0.15 % 0.15 % 3 0.25 % 0.28 % 0.27 % 2 0.16 % 0.18 % 0.20 % 2 0.09 % 0.07 % 0.08 % 1 0.15 % 0.19 % 0.15 % 1 0.16 % 0.17 % 0.14 % 100 % 0.08 % 0.10 % 0.10 % Delinquency rates decreased slightly reflecting improvement primarily in Alberta and Quebec due to improving macroeconomic conditions in those regions in the current year.As a part of enhanced lender reporting, we receive updated outstanding loansin-force in Canada from almost all of our customers. Based on the data provided by lenders, the delinquency rate as of September 30, 2017 was 0.18%, reflecting a lower number of outstanding loans and related policiesin-force compared to our reported policiesin-force.Australia Mortgage Insurance segmentTrends and conditionsResults of our mortgage insurance business in Australia are affected primarily by changes in regulatory environments, employment levels, consumer borrowing behavior, lender mortgage-related strategies, including lender servicing practices, and other economic and housing market influences, including interest rate trends, home price appreciation or depreciation, mortgage origination volume, levels and aging of mortgage delinquencies and movements in foreign currency exchange rates. During the third quarter of 2017, the Australian dollar strengthened against the U.S. dollar as compared to both the third quarter of 2016 and the second quarter of 2017, which favorably impacted the results of our mortgage insurance business in Australia as reported in U.S. dollars. Any future movement in foreign exchange rates could impact future results.The Australian gross domestic product is expected to have had moderate growth in the third quarter of 2017, supported by sustained low interest rates and an ongoing rise in resource exports. The cash rate remained flat at 1.50% in the third quarter of 2017. The September 2017 unemployment rate improved slightly to 5.5% from 5.6% at the end of the second quarter of 2017.Home prices in Australia continued to appreciate in the third quarter of 2017, with September 30, 2017 home values approximately 9% higher than a year ago and approximately 1% higher than at the end of the second quarter of 2017. The Sydney and Melbourne housing markets continue to be the major driver with annual home price growth of approximately 11% and 12%, respectively, as of the end of the third quarter of 2017.Our mortgage insurance business in Australia had lower losses in the third quarter of 2017 compared to the third quarter of 2016 due to lower new delinquencies net of cures, as well as improved aging of existing delinquencies, primarily in commodity-dependent regions. The loss ratio in Australia for the three months ended September 30, 2017 was 37%. We expect continued regional loss pressures and lower expected earned premiums to drive our loss ratio higher for the full year 2017 as compared to the full year 2016 loss ratio of 34%. In addition, during the fourth quarter of 2017, our mortgage insurance business in Australia will complete its annual review of its premium earnings pattern. The outcome of this review could impact our results of operations, including our loss ratio.In the third quarter of 2017, our mortgage insurance business in Australia experienced a decrease in new insurance written volumes compared to the third quarter of 2016 and the second quarter of 2017 due to lower market penetration from a change in customer mix, as well as the Australian Prudential Regulation Authority’s (“APRA”) continued focus on lending standards, investment lending and serviceability.Gross premiums written in the third quarter of 2017 were lower compared to the third quarter of 2016 primarily driven by a decrease in flow volumes, particularly from a reduction in highloan-to-value mortgage origination volume resulting from regulatory measures to slow the growth in investment lending and limit the flow of new interest-only lending.In November 2016, we entered into a new contract with our largest customer, effective January 1, 2017, with a term of three years. During the first three quarters of 2017, this customer represented 39% of our new insurance written. The contract with another large customer was set to expire in November 2017 but was recently extended through November 2018 under similar terms. This customer represented 12% of our new insurance written during the first three quarters of 2017. The contract with our former second largest customer was terminated by the customer effective April 8, 2017.Our mortgage insurance business in Australia evaluates its capital position in relation to the Prescribed Capital Amount (“PCA”) as determined by APRA, utilizing the Internal Capital Adequacy Assessment Process as the framework to ensure that our Australia group of companies as a whole, and each regulated entity, are independently capitalized to meet regulatory requirements. As of September 30, 2017, the estimated PCA ratio ofour mortgage insurance business in Australia was approximately 184%, representing an increase from 181% as of June 30, 2017, largely resulting from lower production volumes, portfolio seasoning2022, Enact’s 2015 and cancellations, partially offset by dividends paidnewer policy years represented approximately 96% of its primary risk in-force and share repurchase activity in the third quarter69% of 2017.In March 2017, APRA announced changes to reinforce sound mortgage lending practices, focusing on slowing investor growth and limiting the flow of new interest-only lending. These changes could impact future new insurance written volumes in our Australian mortgage insurance business.Segment results of operationsThree Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment for the periods indicated: Three months
ended
September 30, Increase
(decrease) and
percentage
change 2017 2016 2017 vs. 2016 $ 78 $ 88 $ (10 ) (11 )% 19 23 (4 ) (17 )% 1 4 (3 ) (75 )% 98 115 (17 ) (15 )% 29 37 (8 ) (22 )% 18 23 (5 ) (22 )% 10 4 6 150 % 3 2 1 50 % 60 66 (6 ) (9 )% 38 49 (11 ) (22 )% 12 16 (4 ) (25 )% 26 33 (7 ) (21 )% 14 18 (4 ) (22 )% 12 15 (3 ) (20 )% (1 ) (2 ) 1 50 % 1 1 — — % $ 12 $ 14 $ (2 ) (14 )% (1)For the three months ended September 30, 2016, net investment gains (losses) were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $2 million.Adjusted operating income available to Genworth Financial, Inc.’s common stockholdersAdjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased primarily driven by lower premiums and investment income, partially offset by lower losses in the current year.RevenuesPremiums decreased largely due to the seasoning of our smaller prior yearin-force blocks of business and lower policy cancellations in the current year. The three months ended September 30, 2017 included an increase of $3 million attributable to changes in foreign exchange rates.Net investment income decreased primarily from lower yields in the current year.Net investment gains decreased predominantly from lower net gains from the sale of investment securities, partially offset by impairments in the current year.Benefits and expensesBenefits and other changes in policy reserves decreased largely attributable to lower new delinquencies, net of cures, and from improved aging of existing delinquencies primarily in commodity-dependent regions in the current year.Acquisition and operating expenses, net of deferrals, decreased primarily from a change in the classification of contract fees amortization expense, which we began recording to amortization of DAC and intangibles as of the second quarter of 2017.Amortization of DAC and intangibles increased principally as a result of a change in the classification of contract fees amortization expense that was previously recorded to acquisition and operating expenses, net of deferrals, as discussed above.Provision for income taxes. The effective tax rate increased to 33.1% for the three months ended September 30, 2017 from 32.2% for the three months ended September 30, 2016. The increase in the effective tax rate was primarily attributable to decreased tax benefits from lower taxed foreign income in the current year.Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment for the periods indicated: Nine months
ended
September 30, Increase
(decrease) and
percentage
change 2017 2016 2017 vs. 2016 $ 237 $ 255 $ (18 ) (7 )% 57 72 (15 ) (21 )% 23 6 17 NM (1) 317 333 (16 ) (5 )% 84 89 (5 ) (6 )% 50 67 (17 ) (25 )% 31 11 20 182 % 7 8 (1 ) (13 )% 172 175 (3 ) (2 )% 145 158 (13 ) (8 )% 48 51 (3 ) (6 )% 97 107 (10 ) (9 )% 52 57 (5 ) (9 )% 45 50 (5 ) (10 )% (12 ) (3 ) (9 ) NM (1) 4 1 3 NM (1) $ 37 $ 48 $ (11 ) (23 )% (1)We define “NM” as not meaningful for increases or decreases greater than 200%.(2)For the nine months ended September 30, 2017 and 2016, net investment gains (losses) were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $11 million and $3 million, respectively.Adjusted operating income available to Genworth Financial, Inc.’s common stockholdersAdjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased primarily driven by lower premiums and investment income, partially offset by lower losses in the current year.RevenuesPremiums decreased predominantly from the seasoning of our smaller prior yearin-force blocks of business. The nine months ended September 30, 2017 included an increase of $7 million attributable to changes in foreign exchange rates.Net investment income decreased primarily from lower yields and lower average invested assets in the current year.Net investment gains increased predominantly from higher net gains from the sale of investment securities due to the rebalancing of our portfolio, partially offset by impairments and derivative losses in the current year.Benefits and expensesBenefits and other changes in policy reserves decreased largely attributable to $6 million of favorablenon-reinsurance recoveries on paid claims in the second quarter of 2017 and a higher net benefit from cures and aging of existing delinquencies, partially offset by higher new delinquencies primarily in commodity-dependent regions in the current year. The nine months ended September 30, 2017 included an increase of $3 million attributable to changes in foreign exchange rates.Acquisition and operating expenses, net of deferrals, decreased primarily from a change in the classification of contract fees amortization expense, which we began recording to amortization of DAC and intangibles in the second quarter of 2017, as well as lower employee compensation and benefit expenses and a decrease in professional fees in the current year.Amortization of DAC and intangibles increased as a result of a change in the classification of contract fees amortization expense that was previously recorded to acquisition and operating expenses, net of deferrals, as discussed above, and higher contract fees being amortized in the current year.Provision for income taxes. The effective tax rate increased to 33.5% for the nine months ended September 30, 2017 from 32.4% for the nine months ended September 30, 2016. The increase in the effective tax rate was primarily attributable to decreased tax benefits from lower taxed foreign income in the current year.Australia Mortgage Insurance selected operating performance measuresThe following tables set forth selected operating performance measures regarding our Australia Mortgage Insurance segment as of or for the dates indicated: As of September 30, Increase
(decrease)
and
percentage
change 2017 2016 2017 vs. 2016 $ 252,200 $ 247,900 $ 4,300 2 % 87,700 86,300 1,400 2 % Three months
ended
September 30, Increase
(decrease)
and
percentage
change Nine months ended
September 30, Increase
(decrease)
and
percentage
change 2017 2016 2017 vs. 2016 2017 2016 2017 vs. 2016 $ 4,300 $ 4,600 $ (300 ) (7 )% $ 14,100 $ 14,800 $ (700 ) (5 )% 56 57 (1 ) (2 )% 168 169 (1 ) (1 )% Primary insurancein-force and riskin-forceOur mortgage insurance business in Australia currently provides 100% coverage on the majority of the loans we insure in those markets. For the purpose of representing our riskin-force, we have computed an “effective” riskin-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 riskin-force has been calculated by applying to insurancein-force a factor that represents our highest expected averageper-claim payment for any one underwriting year over the life of our business in Australia. For the three and nine months ended September 30, 2017 and 2016, this factor was35%. We also have certain risk share arrangements where we providepro-rata coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements, the applicablepro-rata coverage amount provided is used when applying the factor. In addition, Australia currently providesexcess-of-loss reinsurance coverage with one lender. The insurancein-force and riskin-force associated with this reinsurance agreement are excluded from the above metrics as they are insignificant in relation to the rest of the portfolio.Primary insurancein-force and riskin-force increased primarily from increases of $5.8 billion and $2.0 billion, respectively, from changes in foreign exchange rates.New insurance writtenNew insurance written decreased for the three and nine months ended September 30, 2017 mainly attributable to lower market penetration from a change in customer mix, partially offset by higher bulk mortgage insurance written. The three and nine months ended September 30, 2017 included increases of $200 million and $500 million, respectively, attributable to changes in foreign exchange rates.Net premiums writtenMost of our Australian 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 30, 2017, our unearned premium reserves were $852 million, compared to $922 million as of September 30, 2016. The change in unearned premium reserves included an increase of $19 million attributable to changes in foreign exchange rates.Net premiums written decreased slightly for the three and nine months ended September 30, 2017 primarily from lower market penetration from a change in customer mix. The three and nine months ended September 30, 2017 included increases of $2 million and $5 million, respectively, attributable to changes in foreign exchange rates.Loss and expense ratiosThe following table sets forth the loss and expense ratios for our Australia Mortgage Insurance segment for the periods indicated: Three months ended
September 30, Increase (decrease) Nine months ended
September 30, Increase (decrease) 2017 2016 2017 vs. 2016 2017 2016 2017 vs. 2016 37 % 42 % (5 )% 35 % 35 % — % 37 % 31 % 6 % 35 % 31 % 4 % 51 % 48 % 3 % 49 % 46 % 3 % The loss ratio is the ratio of incurred losses and loss adjustment expenses to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio (net premiums written) is the ratio of general expenses to net premiums written. In our mortgage insurance business in Australia, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.The loss ratio decreased for the three months ended September 30, 2017 largely attributable to lower new delinquencies, net of cures, and improved aging of existing delinquencies primarily in commodity-dependent regions in the current year. The loss ratio was flat for the nine months ended September 30, 2017 as higher new delinquencies predominantly in commodity-dependent regions and lower net earned premiums were offset by $6 million of favorablenon-reinsurance recoveries on paid claims and higher net benefits from cures and aging of existing delinquencies in the current year.The expense ratio (net earned premiums) increased for the three months ended September 30, 2017 primarily from lower net earned premiums and for the nine months ended September 30, 2017 primarily from lower net earned premiums and from higher contract fees being amortized in the current year.The expense ratio (net premiums written) increased for the three and nine months ended September 30, 2017 primarily due to higher contract fees being amortized and lower net premiums written in the current year.Delinquent loansThe following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our Australia mortgage insurance portfolio as of the dates indicated: September 30, 2017 December 31, 2016 September 30, 2016 1,422,501 1,464,139 1,470,302 7,146 6,731 6,844 0.50 % 0.46 % 0.47 % 1,308,998 1,354,616 1,358,286 6,912 6,451 6,574 0.53 % 0.48 % 0.48 % 113,503 109,523 112,016 234 280 270 0.21 % 0.26 % 0.24 % Flow loansin-force decreased primarily from policy cancellations. Flow delinquent loans increased from higher new delinquencies primarily as a result of economic pressures in commodity-dependent regions.Primary insurance delinquency rates differ by the various states and territories of Australia at any one time depending upon economic conditions and cyclical growth patterns. The table below sets forth ourits total direct primary delinquency rates for the states and territories of Australia by our riskin-force 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
riskin-force as of
September 30, 2017 Delinquency rate September 30,
2017 December 31,
2016 September 30,
2016 28 % 0.31 % 0.30 % 0.32 % 23 0.72 % 0.66 % 0.67 % 23 0.39 % 0.38 % �� 0.39 % 12 0.88 % 0.74 % 0.69 % 6 0.65 % 0.61 % 0.62 % 3 0.19 % 0.17 % 0.20 % 2 0.38 % 0.35 % 0.37 % 2 0.06 % 0.07 % 0.10 % 1 0.50 % 0.36 % 0.33 % 100 % 0.50 % 0.46 % 0.47 % Delinquency rates increased in the current year compared to December 31, 2016 and September 30, 2016 primarily from higher new delinquencies attributable to economic pressures, particularly in commodity-dependent regions.reserves inresults of our U.S. life insurance businesses. Because these factors are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels, results of operations and financial condition.We perform loss recognition testing to ensure that the current reserves along with the present value of future gross premiums are sufficient to cover the present value of future expected claims and expense, as well as recover the unamortized portion of DAC and, if any, PVFP. If the loss recognition test indicates a deficiency in the ability to pay all future claims and expenses, including the amortization of DAC and PVFP, a loss is recognized in earnings as an impairment of the DAC and/or PVFP balance and, if the loss is greater than the DAC and/or PVFP balance, by an increase in reserves. business annually typically during the third or fourth quarter of each year. Our liability for future policy benefits is reviewed at least annually as a part of our loss recognition testing typically performed in the third or fourth quarter of each year. As part of loss recognition testing, we also review the recoverability of DAC and PVFP at least annually. In addition, we perform cash flow testing separately for each of our U.S. life insurance companies on a statutory accounting basis annually. We performedannual reviewlife insurance subsidiaries exceeded the minimum required risk-based capital (“RBC”) levels in their respective domiciliary state. The consolidated RBC ratio of claim reserve assumptions forour U.S. domiciled life insurance subsidiaries was approximately 289% as of December 31, 2021. As of June 30, 2022, the
Our U.S. Life Insurance segment will continue to migrate to a new valuation and projection platform for certain lines of business, while we upgrade platforms for other lines of business. The migration and upgrades are partFuture declines in the RBC ratio 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 and processes enterprise wide. These efforts will also provide our U.S. Life Insurance segment with improved platforms to support emerging accounting guidance and ongoing changes in capital regulations. Concurrently, valuation processes and methodologies will be reviewed, and maylife insurance subsidiaries could result in additional refinements to our models and/or assumptions. Any material changes in balances, margins or income trends that may result from these activities will be disclosed accordingly. In addition, we intend to continue to enhance our modeling capabilities of our various businesses, including for our long-term care insurance projections where we migrated to a new modeling system for the majority of ourlong-term care insurance business in the fourth quarter of 2016. We anticipate migrating substantially all of our retained long-term care insurance business to this new modeling system by the end of 2017. The new modeling system will valueheightened supervision and forecast associated liability cash flows and policyholder behavior at a more granular level than our current system.
One of our strategic objectives is to separate, then isolate, through a series of internal transactions, ourlong-term care insurance business from our other U.S. life insurance businesses. Our goal under the plan has been to align substantially all of our non-New Yorkin-force life insurance and annuity business under GLAIC, our Virginia domiciled life insurance company, and substantially all of our non-New York long-term care insurance business under GLIC, our Delaware domiciled life insurance company. As part of this strategic objective, effective April 1, 2017, GLAIC assumed risk on a coinsurance basis for certain blocks of term life insurance, universal life insurance and single premium whole life insurance from GLIC. Effective July 1, 2017, GLIC recaptured certain single premium deferred annuity products previously ceded to GLAIC. In addition,
effective July 1, 2017, GLAIC assumed risk on a modified coinsurance basis for certain blocks of fixed annuities, including those single premium deferred annuity products recaptured by GLIC, and certain corporate-owned life insurance policies from GLIC. As a result, there was an adverse impact on GLIC’s risk-based capital ratio of approximately 15 points in the third quarter of 2017. However, the internal transactions had no impact on our consolidated results of operations and financial condition prepared in accordance with U.S. GAAP as the financial impact of the intercompany reinsurance was eliminated in consolidation. These transactions complete our goal to align substantially all of our non-New Yorkin-force life insurance and annuity business under GLAIC and substantially all of our non-New York long-term care insurance business under GLIC. All of these transactions were also required under the Merger Agreement with China Oceanwide. The reinsurance treaties effective July 1, 2017 include provisions that require us to unwind or void these treaties in the event the merger transaction with China Oceanwide is terminated.
In addition, a Genworth holding company will pursue the purchase of GLAIC from GLIC at fair market value, subject to applicable regulatory approvals. Together with the internal reinsurance transactions completed in April 2017 and July 2017, finalization of the GLAIC sale, if completed, would isolate our non-New York long-term care insurance business from our other non-New York U.S. life insurance businesses and achieve this strategic objective.
action.
Our liability for policy and contract claims is reviewed quarterly and we conduct a detailed review of our claim reserve assumptions for
Inon remaining claims. As of June 30, 2022, the fourth quarter of 2016, we performed our loss recognition and cash flow testing. We incorporated the assumption and methodology changes made in the third quarter of 2016 into these tests. These changes had a material negative impact on the marginsbalance of our long-term care insurance block, excluding the acquired block. The acquired block has a higher percentage of indemnity policies and was positively affected by the new claim assumptions. As a part of the process, we considered incremental benefits from expected future rate actions that helped mitigate the impact of these changes. As part of the annual testing, we also reviewed assumptions for
incidence and interest rates, among other assumptions. We will continue to regularly review our methodologies and assumptions in light of emerging experience and may be required to make further adjustments to our long-term care insurance claim reserves inassociated with COVID-19 mortality was $110 million. As COVID-19 continues to develop, short-term mortality experience may fluctuate, and we would decrease the future, which couldCOVID-19 mortality adjustment if we experience lower mortality.
impact.
In connection with the updated assumptions and methodologies that increased claim reserves on existing claimscompleted in our 2016 review,prior years, we now establishhave been establishing higher claim reserves on new claims, which will decreasehas negatively impacted earnings in future periods in which the higher reserves are recorded. Additionally,and we expect this to continue going forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims continues to evolve, with an increasing number of policies with higher daily benefit amounts unlimited benefit pools and higher inflation factors going on claim. Also,Although new claim counts on our older long-term care insurance blocks of business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks of business and expect continued growth in new claims on these blocks as our blockspolicyholders reach older attained ages with higher likelihood of business continue to age. In addition, premiums will decline as policies terminate from mortality and lapses.
We experience volatility in our loss ratios caused by variances in policy terminations, claim terminations, claim severity and claim counts. Our approved premium rate actions may also cause fluctuations in our loss ratios during the period when reserves are adjusted to reflect policyholders taking reduced benefits ornon-forfeiture options within their policy coverage. In addition, we periodically review our reserve assumptions and methodologies based upon developing experience, which may result in changes to claim reserves and loss recognition testing results, causing volatility in our operating results and loss ratios. Our loss ratio for the nine months ended September 30, 2017 was 74% compared to 94% for the nine months ended September 30, 2016. The loss ratio for the nine months ended September 30, 2016 reflected the updated assumptions and methodologies from our annual review of claim reserve assumptions completed in the third quarter of 2016.
Our long-term care insurance sales decreased 50% during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Sales decreased primarily due to our lower ratings. We expect that our sales will continue to be adversely impacted by our current ratings. Future adverse ratings announcements or actions could negatively impact our sales levels further.
Despite our low sales levels in our long-term care insurance business given our current ratings, we continue to evaluate new products. For example, we previously launched an enhanced product to improve competitiveness, while meeting our targeted returns, by, among other things, reducing premium rates, benefit levels and adjusting other coverage options. In support of this product, we are investing in targeted distribution and marketing initiatives to increase long-term care insurance sales. In addition, we are evaluating market trends and sales and investing in the development of products and distribution strategies that we believe will help expand the long-term care insurance market over time and meet broader consumer needs.
We also manage risk and capital allocated to our long-term care insurance business through utilization of external reinsurance in the form of coinsurance. We executed external reinsurance agreements to reinsure 20% of all sales of our individual long-term care insurance products that have been introduced since early 2013. External new business reinsurance levels vary and are dependent on a number of factors, including price, availability, risk tolerance and capital levels. Over time, there can be no assurance that affordable, or any, reinsurance will continue to be available. We also have external reinsurance on some older blocks of business which includes a treaty on a yearly renewable term basis on business that was written between 1998 and 2003. This yearly renewable term reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 15 years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on claim until the claim ends. Since 2013, we have seen, and may continue to see, an increase in our benefit costs as policies with reinsurance coverage exhaust their benefits or terminate and policies which are not covered by reinsurance gogoing on claim.
As a result of
The Pennsylvania Insurance Commissioner (the “Commissioner”) previously placed long-term care insurer Penn Treaty in rehabilitation, an intermediate action before insolvency, and subsequently petitioned a state court to convert the rehabilitation into a liquidation. On November 9, 2016, the state court held a hearing on the Commissioner’s petition to convert the rehabilitation into liquidation with no objections. As of December 31, 2016, the liquidation order had not been entered and as a result, we were unable to estimate when or to what extent Penn Treaty would ultimately be declared insolvent, or the amount of the insolvency and we did not establish an accrual for guaranty fund assessments associated with Penn Treaty as of December 31, 2016. However, on March 1, 2017, the Pennsylvania Commonwealth Court approved petitions to liquidate Penn Treaty due to financial difficulties that could not be resolved through rehabilitation. In the first quarter of 2017, we received guaranty fund assessments related to Penn Treaty and recorded an accrual of $21 million.
upcoming filings.
We reviewproducts; however, we continue to service our life assumptions at least annually typically in the third or fourth quarterexisting retained and reinsured blocks of each year. As part of our annual review of assumptions in the fourth quarter of 2016, we reviewed our assumptions, including interest rate assumptions, with the benefit of updated experience and comparisons to industry experience, where appropriate. As part of this review, we implemented an updated mortality table for our life insurance products. This updated table improved our mortality rates in younger ages but deteriorated mortality rates in older ages. business.
Between 1999
products; however, we continue to service our existing retained and reinsured blocks of business.
block but would not have an immediate benefit to net income.
2021
| Three months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 748 | $ | 725 | $ | 23 | 3 | % | ||||||||
Net investment income | 683 | 695 | (12 | ) | (2 | )% | ||||||||||
Net investment gains (losses) | 27 | 21 | 6 | 29 | % | |||||||||||
Policy fees and other income | 154 | 175 | (21 | ) | (12 | )% | ||||||||||
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Total revenues | 1,612 | 1,616 | (4 | ) | — | % | ||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,255 | 1,556 | (301 | ) | (19 | )% | ||||||||||
Interest credited | 128 | 140 | (12 | ) | (9 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 149 | 149 | — | — | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 50 | 69 | (19 | ) | (28 | )% | ||||||||||
Interest expense | 3 | 2 | 1 | 50 | % | |||||||||||
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Total benefits and expenses | 1,585 | 1,916 | (331 | ) | (17 | )% | ||||||||||
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Income (loss) from continuing operations before income taxes | 27 | (300 | ) | 327 | 109 | % | ||||||||||
Provision (benefit) for income taxes | 10 | (106 | ) | 116 | 109 | % | ||||||||||
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Income (loss) from continuing operations | 17 | (194 | ) | 211 | 109 | % | ||||||||||
Adjustments to income (loss) from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net (1) | (28 | ) | (21 | ) | (7 | ) | (33 | )% | ||||||||
Expenses related to restructuring | — | 1 | (1 | ) | (100 | )% | ||||||||||
Taxes on adjustments | 10 | 7 | 3 | 43 | % | |||||||||||
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Adjusted operating loss available to Genworth Financial,Inc.’s common stockholders | $ | (1 | ) | $ | (207 | ) | $ | 206 | 100 | % | ||||||
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Three months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 688 | $ | 703 | $ | (15 | ) | (2 | )% | |||||||
Net investment income | 700 | 763 | (63 | ) | (8 | )% | ||||||||||
Net investment gains (losses) | 4 | 66 | (62 | ) | (94 | )% | ||||||||||
Policy fees and other income | 129 | 145 | (16 | ) | (11 | )% | ||||||||||
Total revenues | 1,521 | 1,677 | (156 | ) | (9 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 816 | 1,129 | (313 | ) | (28 | )% | ||||||||||
Interest credited | 80 | 87 | (7 | ) | (8 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 513 | 219 | 294 | 134 | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 72 | 77 | (5 | ) | (6 | )% | ||||||||||
Total benefits and expenses | 1,481 | 1,512 | (31 | ) | (2 | )% | ||||||||||
Income from continuing operations before income taxes | 40 | 165 | (125 | ) | (76 | )% | ||||||||||
Provision for income taxes | 15 | 42 | (27 | ) | (64 | )% | ||||||||||
Income from continuing operations | 25 | 123 | (98 | ) | (80 | )% | ||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net (1) | (5 | ) | (67 | ) | 62 | 93 | % | |||||||||
Expenses related to restructuring | 1 | 2 | (1 | ) | (50 | )% | ||||||||||
Taxes on adjustments | — | 13 | (13 | ) | (100 | )% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 21 | $ | 71 | $ | (50 | ) | (70 | )% | |||||||
| (1) | For the three months ended |
| Three months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Long-term care insurance | $ | (5 | ) | $ | (270 | ) | $ | 265 | 98 | % | ||||||
Life insurance | (9 | ) | 48 | (57 | ) | (119 | )% | |||||||||
Fixed annuities | 13 | 15 | (2 | ) | (13 | )% | ||||||||||
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Total adjusted operating loss available to Genworth Financial, Inc.’s common stockholders | $ | (1 | ) | $ | (207 | ) | $ | 206 | 100 | % | ||||||
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Three months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Long-term care insurance | $ | 34 | $ | 98 | $ | (64 | ) | (65 | )% | |||||||
Life insurance | (34 | ) | (40 | ) | 6 | 15 | % | |||||||||
Fixed annuities | 21 | 13 | 8 | 62 | % | |||||||||||
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 21 | $ | 71 | $ | (50 | ) | (70 | )% | |||||||
Net investment income
Net investment gains (losses). The increase was driven largely by our long-term care insurance business predominantly from higher net gains from the sale of investment securities in the current year.
Policy fees and other income. The decrease was mostly attributable to our life insurance business primarily as a result of suspending sales of these products on March 7, 2016 and a decline in our term universal and universal life insurancein-force blocks in the current year. The decrease was also driven by an $8 million unfavorable model refinement in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
Our long-term care insurance business decreased $366 million principally from the completion of our annual review of our claim reserves conducted during the third quarter of 2016 which resulted in higher
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Interest credited. Interest credited decreased mostly driven by our fixed annuities business predominantly from lower average account values in the current year.
Acquisition and operating expenses, net of deferrals
immediate annuity contracts by a third party and normal block runoff, along with lower bond calls and commercial mortgage loan prepayments in the current year. |
that is expected to increase future investment spreads.intangibles.The decreaseintangiblesamortization of DACpolicy terminations and intangibles was primarily related to ourpolicies entering paid-up status in the current year.principally as a result of a net $15increased $6 million favorable model refinementprimarily from higher lapses in the current year. The decrease wasour 20-year term life insurance block written in 2002 entering its post-level premium period, partially offset by higherlower amortization in our universal and term universal life insurance product reflecting previously updated lapse assumptions. Inproducts due to block runoff.we have also experienced higher lapses and accelerated DAC amortization associated with our large15-year and20-year term life insurance blocks entering their post-level guaranteed level premium rate periods.
2021NineSeptemberJune 30, 20172022 Compared to NineSix Months Ended SeptemberJune 30, 2016
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 2,242 | $ | 1,917 | $ | 325 | 17 | % | ||||||||
Net investment income | 2,058 | 2,049 | 9 | — | % | |||||||||||
Net investment gains (losses) | 91 | 119 | (28 | ) | (24 | )% | ||||||||||
Policy fees and other income | 494 | 532 | (38 | ) | (7 | )% | ||||||||||
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Total revenues | 4,885 | 4,617 | 268 | 6 | % | |||||||||||
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Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 3,582 | 3,403 | 179 | 5 | % | |||||||||||
Interest credited | 389 | 427 | (38 | ) | (9 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 450 | 513 | (63 | ) | (12 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 221 | 231 | (10 | ) | (4 | )% | ||||||||||
Interest expense | 9 | 35 | (26 | ) | (74 | )% | ||||||||||
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Total benefits and expenses | 4,651 | 4,609 | 42 | 1 | % | |||||||||||
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Income from continuing operations before income taxes | 234 | 8 | 226 | NM | (1) | |||||||||||
Provision for income taxes | 83 | 3 | 80 | NM | (1) | |||||||||||
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Income from continuing operations | 151 | 5 | 146 | NM | (1) | |||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net (2) | (93 | ) | (129 | ) | 36 | 28 | % | |||||||||
(Gains) losses from life block transactions | — | 9 | (9 | ) | (100 | )% | ||||||||||
Expenses related to restructuring | — | 19 | (19 | ) | (100 | )% | ||||||||||
(Gains) losses on sale of businesses | — | (1 | ) | 1 | 100 | % | ||||||||||
Taxes on adjustments | 33 | 36 | (3 | ) | (8 | )% | ||||||||||
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Adjusted operating income (loss) available to Genworth Financial,Inc.’s common stockholders | $ | 91 | $ | (61 | ) | $ | 152 | NM | (1) | |||||||
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Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1,383 | $ | 1,417 | $ | (34 | ) | (2 | )% | |||||||
Net investment income | 1,376 | 1,479 | (103 | ) | (7 | )% | ||||||||||
Net investment gains (losses) | 60 | 108 | (48 | ) | (44 | )% | ||||||||||
Policy fees and other income | 266 | 293 | (27 | ) | (9 | )% | ||||||||||
Total revenues | 3,085 | 3,297 | (212 | ) | (6 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,957 | 2,284 | (327 | ) | (14 | )% | ||||||||||
Interest credited | 162 | 177 | (15 | ) | (8 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 712 | 411 | 301 | 73 | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 155 | 145 | 10 | 7 | % | |||||||||||
Total benefits and expenses | 2,986 | 3,017 | (31 | ) | (1 | )% | ||||||||||
Income from continuing operations before income taxes | 99 | 280 | (181 | ) | (65 | )% | ||||||||||
Provision for income taxes | 35 | 74 | (39 | ) | (53 | )% | ||||||||||
Income from continuing operations | 64 | 206 | (142 | ) | (69 | )% | ||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net | (60 | ) | (108 | ) | 48 | 44 | % | |||||||||
Expenses related to restructuring | 1 | 16 | (15 | ) | (94 | )% | ||||||||||
Taxes on adjustments | 12 | 19 | (7 | ) | (37 | )% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 17 | $ | 133 | $ | (116 | ) | (87 | )% | |||||||
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Long-term care insurance | $ | 42 | $ | (199 | ) | $ | 241 | 121 | % | |||||||
Life insurance | 6 | 110 | (104 | ) | (95 | )% | ||||||||||
Fixed annuities | 43 | 28 | 15 | 54 | % | |||||||||||
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Total adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 91 | $ | (61 | ) | $ | 152 | NM | (1) | |||||||
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Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Long-term care insurance | $ | 93 | $ | 193 | $ | (100 | ) | (52 | )% | |||||||
Life insurance | (113 | ) | (103 | ) | (10 | ) | (10 | )% | ||||||||
Fixed annuities | 37 | 43 | (6 | ) | (14 | )% | ||||||||||
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 17 | $ | 133 | $ | (116 | ) | (87 | )% | |||||||
Revenues
Premiums
Net investment income
Net investment gains (losses)
Policy fees and other income. The decrease was mostly attributable to our life insurance business primarily as a result of suspending sales of these products on March 7, 2016 and a decline in our term universal and universal life insurancein-force blocks in the current year. The decrease was also related to an $8 million unfavorable model refinement in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
Interest credited. Interest credited decreased driven mostly by our fixed annuities business predominantly from lower average account values and a decrease in crediting rates in the current year.
Acquisition and operating expenses, net of deferrals
Amortization of deferred acquisition costs and intangibles
Interest expense. Interest expense decreased driven
current year that is expected to increase future investment spreads.
The following table sets forth selected operating performance measures regarding
| Three months ended September 30, | Increase (decrease) and percentage change | Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | 2017 | 2016 | 2017 vs. 2016 | ||||||||||||||||||||||||||
Net earned premiums: | ||||||||||||||||||||||||||||||||
Individual long-term care insurance | $ | 613 | $ | 591 | $ | 22 | 4 | % | $ | 1,815 | $ | 1,792 | $ | 23 | 1 | % | ||||||||||||||||
Group long-term care insurance | 28 | 19 | 9 | 47 | % | 83 | 72 | 11 | 15 | % | ||||||||||||||||||||||
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Total | $ | 641 | $ | 610 | $ | 31 | 5 | % | $ | 1,898 | $ | 1,864 | $ | 34 | 2 | % | ||||||||||||||||
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Annualized first-year premiums and deposits: | ||||||||||||||||||||||||||||||||
Individual long-term care insurance | $ | 2 | $ | 2 | $ | — | — | % | $ | 6 | $ | 11 | $ | (5 | ) | (45 | )% | |||||||||||||||
Group long-term care insurance | 1 | 3 | (2 | ) | (67 | )% | 3 | 7 | (4 | ) | (57 | )% | ||||||||||||||||||||
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Total | $ | 3 | $ | 5 | $ | (2 | ) | (40 | )% | $ | 9 | $ | 18 | $ | (9 | ) | (50 | )% | ||||||||||||||
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Loss ratio | 79 | % | 146 | % | (67 | )% | 74 | % | 94 | % | (20 | )% | ||||||||||||||||||||
Three months ended June 30, | Increase (decrease) and percentage change | Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | 2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||||||
Premiums | $ | 226 | $ | 207 | $ | 19 | 9 | % | $ | 436 | $ | 402 | $ | 34 | 8 | % | ||||||||||||||||
Plus: Benefits and other changes in policy reserves (1) | 121 | 274 | (153 | ) | (56 | )% | 357 | 426 | (69 | ) | (16 | )% | ||||||||||||||||||||
Less: Acquisition and operating expenses, net of deferrals (2) | 25 | 88 | (63 | ) | (72 | )% | 86 | 128 | (42 | ) | (33 | )% | ||||||||||||||||||||
Adjusted operating income before taxes | 322 | 393 | (71 | ) | (18 | )% | 707 | 700 | 7 | 1 | % | |||||||||||||||||||||
Income taxes | 67 | 83 | (16 | ) | (19 | )% | 148 | 147 | 1 | 1 | % | |||||||||||||||||||||
Adjusted operating income (3) | $ | 255 | $ | 310 | $ | (55 | ) | (18 | )% | $ | 559 | $ | 553 | $ | 6 | 1 | % | |||||||||||||||
| (1) | Amounts represent benefit reductions elected by policyholders as an alternative to increased premiums. These amounts reduced benefits and other changes in policy reserves in our long-term care insurance business for the periods indicated. |
| (2) | Amounts include premium taxes, commissions and other expenses associated with our long-term care insurance in-force rate action plan, which included expenses of $6 million and $49 million (consisting entirely of cash damages) for the three and six months ended June 30, 2022, respectively, and $70 million and $93 million for three and six months ended June 30, 2021, respectively, related to policyholder benefit reduction elections made as part of a legal settlement. Included in the $70 million and $93 million of expenses for the three and six months ended June 30, 2021, respectively, were $61 million and $81 million, respectively, of cash damages. As of June 30, 2022, the implementation of the legal settlement is substantially complete. |
| (3) | Adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions excludes reserve updates resulting from profits followed by losses. |
Three months ended June 30, | Increase (decrease) and percentage change | Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | 2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||||||
Net earned premiums: | ||||||||||||||||||||||||||||||||
Individual long-term care insurance (1) | $ | 595 | $ | 617 | $ | (22 | ) | (4 | )% | $ | 1,185 | $ | 1,232 | $ | (47 | ) | (4 | )% | ||||||||||||||
Group long-term care insurance | 33 | 31 | 2 | 6 | % | 64 | 62 | 2 | 3 | % | ||||||||||||||||||||||
Total | $ | 628 | $ | 648 | $ | (20 | ) | (3 | )% | $ | 1,249 | $ | 1,294 | $ | (45 | ) | (3 | )% | ||||||||||||||
Loss ratio | 81 | % | 62 | % | 19 | % | 72 | % | 62 | % | 10 | % | ||||||||||||||||||||
| (1) | For the three months ended June 30, 2022 and 2021, amounts include increased premiums of $226 million and $207 million, respectively, from in-force rate actions approved and implemented. For the six months ended June 30, 2022 and 2021, amounts include increased premiums of $436 million and $402 million, respectively, from in-force rate actions approved and implemented. |
Annualized first-year premiums and deposits decreased principally from lower sales due to our current ratings.
| Three months ended September 30, | Increase (decrease) and percentage change | Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | 2017 | 2016 | 2017 vs. 2016 | ||||||||||||||||||||||||||
Term and whole life insurance | ||||||||||||||||||||||||||||||||
Net earned premiums | $ | 107 | $ | 115 | $ | (8 | ) | (7 | )% | $ | 344 | $ | 50 | $ | 294 | NM | (1) | |||||||||||||||
Sales | — | — | — | — | % | — | 7 | (7 | ) | (100 | )% | |||||||||||||||||||||
Term universal life insurance | ||||||||||||||||||||||||||||||||
Net deposits | $ | 59 | $ | 62 | $ | (3 | ) | (5 | )% | $ | 184 | $ | 191 | $ | (7 | ) | (4 | )% | ||||||||||||||
Universal life insurance | ||||||||||||||||||||||||||||||||
Net deposits | $ | 81 | $ | 86 | $ | (5 | ) | (6 | )% | $ | 250 | $ | 297 | $ | (47 | ) | (16 | )% | ||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||
Universal life insurance | 1 | 1 | — | — | % | 2 | 4 | (2 | ) | (50 | )% | |||||||||||||||||||||
Linked-benefits | — | — | — | — | % | — | 3 | (3 | ) | (100 | )% | |||||||||||||||||||||
Total life insurance | ||||||||||||||||||||||||||||||||
Net earned premiums and deposits | $ | 247 | $ | 263 | $ | (16 | ) | (6 | )% | $ | 778 | $ | 538 | $ | 240 | 45 | % | |||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||
Term life insurance | — | — | — | — | % | — | 7 | (7 | ) | (100 | )% | |||||||||||||||||||||
Universal life insurance | 1 | 1 | — | — | % | 2 | 4 | (2 | ) | (50 | )% | |||||||||||||||||||||
Linked-benefits | — | — | — | — | % | — | 3 | (3 | ) | (100 | )% | |||||||||||||||||||||
| As of September 30, | Percentage change | |||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||
Term and whole life insurance | ||||||||||||
Life insurancein-force, net of reinsurance | $ | 196,872 | $ | 204,549 | (4 | )% | ||||||
Life insurancein-force before reinsurance | 467,821 | 494,642 | (5 | )% | ||||||||
Term universal life insurance | ||||||||||||
Life insurancein-force, net of reinsurance | $ | 119,442 | $ | 123,770 | (3 | )% | ||||||
Life insurancein-force before reinsurance | 120,291 | 124,670 | (4 | )% | ||||||||
Universal life insurance | ||||||||||||
Life insurancein-force, net of reinsurance | $ | 37,335 | $ | 40,237 | (7 | )% | ||||||
Life insurancein-force before reinsurance | 42,726 | 46,038 | (7 | )% | ||||||||
Total life insurance | ||||||||||||
Life insurancein-force, net of reinsurance | $ | 353,649 | $ | 368,556 | (4 | )% | ||||||
Life insurancein-force before reinsurance | 630,838 | 665,350 | (5 | )% | ||||||||
Term and whole life insurance
Net earned premiums decreased during the three months ended September 30, 2017 primarily from continued runoff
Three months ended June 30, | Increase (decrease) and percentage change | Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | 2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||||||
Term and whole life insurance | ||||||||||||||||||||||||||||||||
Net earned premiums | $ | 60 | $ | 55 | $ | 5 | 9 | % | $ | 134 | $ | 123 | $ | 11 | 9 | % | ||||||||||||||||
Term universal life insurance | ||||||||||||||||||||||||||||||||
Net deposits | 49 | 53 | (4 | ) | (8 | )% | 98 | 106 | (8 | ) | (8 | )% | ||||||||||||||||||||
Universal life insurance | ||||||||||||||||||||||||||||||||
Net deposits | 58 | 64 | (6 | ) | (9 | )% | 125 | 133 | (8 | ) | (6 | )% | ||||||||||||||||||||
Total life insurance | ||||||||||||||||||||||||||||||||
Net earned premiums and deposits | $ | 167 | $ | 172 | $ | (5 | ) | (3 | )% | $ | 357 | $ | 362 | $ | (5 | ) | (1 | )% | ||||||||||||||
premiums as part of a life block transaction in the first quarter of 2016, partially offset by the continued runoff of our term life insurance products in the current year.
Sales of our term life insurance products decreased from the suspension of sales of our traditional life insurance products on March 7, 2016. While we no longer solicit sales of these products, we continue to service our existing block of business.
Term universal life insurance
As of June 30, | Percentage change | |||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||
Term and whole life insurance | ||||||||||||
Life insurance in-force, net of reinsurance | $ | 50,267 | $ | 56,111 | (10 | )% | ||||||
Life insurance in-force before reinsurance | $ | 316,649 | $ | 347,745 | (9 | )% | ||||||
Term universal life insurance | ||||||||||||
Life insurance in-force, net of reinsurance | $ | 95,941 | $ | 103,473 | (7 | )% | ||||||
Life insurance in-force before reinsurance | $ | 96,570 | $ | 104,145 | (7 | )% | ||||||
Universal life insurance | ||||||||||||
Life insurance in-force, net of reinsurance | $ | 30,434 | $ | 31,807 | (4 | )% | ||||||
Life insurance in-force before reinsurance | $ | 34,405 | $ | 36,045 | (5 | )% | ||||||
Total life insurance | ||||||||||||
Life insurance in-force, net of reinsurance | $ | 176,642 | $ | 191,391 | (8 | )% | ||||||
Life insurance in-force before reinsurance | $ | 447,624 | $ | 487,935 | (8 | )% | ||||||
Universal
in-force blocks.
| As of or for the three months ended September 30, | As of or for the nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Single Premium Deferred Annuities | ||||||||||||||||
Account value, beginning of period | $ | 11,321 | $ | 12,191 | $ | 11,806 | $ | 12,480 | ||||||||
Deposits | 3 | 3 | 7 | 175 | ||||||||||||
Surrenders, benefits and product charges | (383 | ) | (270 | ) | (1,031 | ) | (879 | ) | ||||||||
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Net flows | (380 | ) | (267 | ) | (1,024 | ) | (704 | ) | ||||||||
Interest credited and investment performance | 79 | 86 | 238 | 234 | ||||||||||||
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Account value, end of period | $ | 11,020 | $ | 12,010 | $ | 11,020 | $ | 12,010 | ||||||||
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Single Premium Immediate Annuities | ||||||||||||||||
Account value, beginning of period | $ | 4,752 | $ | 5,198 | $ | 4,853 | $ | 5,180 | ||||||||
Premiums and deposits | 24 | 25 | 64 | 75 | ||||||||||||
Surrenders, benefits and product charges | (151 | ) | (173 | ) | (474 | ) | (572 | ) | ||||||||
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Net flows | (127 | ) | (148 | ) | (410 | ) | (497 | ) | ||||||||
Interest credited | 52 | 56 | 159 | 173 | ||||||||||||
Effect of accumulated net unrealized investment gains (losses) | 9 | 23 | 84 | 273 | ||||||||||||
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Account value, end of period | $ | 4,686 | $ | 5,129 | $ | 4,686 | $ | 5,129 | ||||||||
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Structured Settlements | ||||||||||||||||
Account value, net of reinsurance, beginning of period | $ | 1,055 | $ | 1,061 | $ | 1,061 | $ | 1,066 | ||||||||
Surrenders, benefits and product charges | (17 | ) | (11 | ) | (51 | ) | (44 | ) | ||||||||
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| |||||||||
Net flows | (17 | ) | (11 | ) | (51 | ) | (44 | ) | ||||||||
Interest credited | 14 | 14 | 42 | 42 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Account value, net of reinsurance, end of period | $ | 1,052 | $ | 1,064 | $ | 1,052 | $ | 1,064 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total premiums from fixed annuities | $ | — | $ | — | $ | — | $ | 3 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total deposits from fixed annuities | $ | 27 | $ | 28 | $ | 71 | $ | 247 | ||||||||
|
|
|
|
|
|
|
| |||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Account value, beginning of period | $ | 9,505 | $ | 11,172 | $ | 10,163 | $ | 11,815 | ||||||||
Premiums and deposits | 21 | 21 | 39 | 38 | ||||||||||||
Surrenders, benefits and product charges (1) | (755 | ) | (482 | ) | (1,169 | ) | (1,026 | ) | ||||||||
Net flows | (734 | ) | (461 | ) | (1,130 | ) | (988 | ) | ||||||||
Interest credited and investment performance | 58 | 95 | 119 | 180 | ||||||||||||
Effect of accumulated net unrealized investment gains (losses) | (266 | ) | 107 | (589 | ) | (94 | ) | |||||||||
Account value, end of period | $ | 8,563 | $ | 10,913 | $ | 8,563 | $ | 10,913 | ||||||||
| (1) | Amount included the recapture of $373 million account value of certain single premium immediate annuities by a third party in the second quarter of 2022. |
Single Premium Deferred Annuities
Single Premium Immediate Annuities
Account value of ourcertain single premium immediate annuities decreased as benefits exceededannuity
current year.
We discontinued sales ofuse hedging strategies as well as liquidity planning and asset-liability management to help mitigate the impacts. In addition, we have used reinsurance to help mitigate volatility in our individual and group variable annuities in 2011; however, we continue to service our existing blocks of variable annuity business and accept additional deposits on existing contracts. results.
The results of our institutional products are impacted by scheduled maturities of the liabilities, credit and interest income performance on assets, as well as liquidity levels. However, we believe our liquidity planning and our asset-liability management will mitigate this risk. While we do not actively sell institutional products, we may periodically issue funding agreements for asset-liability matching purposes.
Several factors may impact the time period for these products to runoff including the specific policy types, economic conditions and management strategies.
2021
| Three months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Net investment income | $ | 40 | $ | 37 | $ | 3 | 8 | % | ||||||||
Net investment gains (losses) | 9 | 4 | 5 | 125 | % | |||||||||||
Policy fees and other income | 41 | 43 | (2 | ) | (5 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Total revenues | 90 | 84 | 6 | 7 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 5 | 2 | 3 | 150 | % | |||||||||||
Interest credited | 36 | 33 | 3 | 9 | % | |||||||||||
Acquisition and operating expenses, net of deferrals | 16 | 20 | (4 | ) | (20 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 7 | 7 | — | — | % | |||||||||||
Interest expense | — | 1 | (1 | ) | (100 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 64 | 63 | 1 | 2 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Income from continuing operations before income taxes | 26 | 21 | 5 | 24 | % | |||||||||||
Provision for income taxes | 8 | 6 | 2 | 33 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Income from continuing operations | 18 | 15 | 3 | 20 | % | |||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net(1) | (8 | ) | (4 | ) | (4 | ) | (100 | )% | ||||||||
Taxes on adjustments | 3 | 1 | 2 | 200 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders | $ | 13 | $ | 12 | $ | 1 | 8 | % | ||||||||
|
|
|
|
|
| |||||||||||
Three months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Net investment income | $ | 51 | $ | 43 | $ | 8 | 19 | % | ||||||||
Net investment gains (losses) | (10 | ) | 10 | (20 | ) | (200 | )% | |||||||||
Policy fees and other income | 29 | 35 | (6 | ) | (17 | )% | ||||||||||
Total revenues | 70 | 88 | (18 | ) | (20 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 11 | 2 | 9 | NM | (1) | |||||||||||
Interest credited | 45 | 40 | 5 | 13 | % | |||||||||||
Acquisition and operating expenses, net of deferrals | 12 | 14 | (2 | ) | (14 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 9 | 4 | 5 | 125 | % | |||||||||||
Total benefits and expenses | 77 | 60 | 17 | 28 | % | |||||||||||
Income (loss) from continuing operations before income taxes | (7 | ) | 28 | (35 | ) | (125 | )% | |||||||||
Provision (benefit) for income taxes | (2 | ) | 6 | (8 | ) | (133 | )% | |||||||||
Income (loss) from continuing operations | (5 | ) | 22 | (27 | ) | (123 | )% | |||||||||
Adjustments to income (loss) from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net (2) | 9 | (9 | ) | 18 | 200 | % | ||||||||||
Taxes on adjustments | (2 | ) | 2 | (4 | ) | (200 | )% | |||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 2 | $ | 15 | $ | (13 | ) | (87 | )% | |||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
| (2) | For the three months ended |
Benefits
Acquisition and operating expenses, net of deferrals,other income decreased mostlyprincipally from lower state guaranty fund assessmentsfee income driven mostly by a decline in the average account values in our variable annuity products in the current year.
Nine
2021
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Net investment income | $ | 119 | $ | 108 | $ | 11 | 10 | % | ||||||||
Net investment gains (losses) | 24 | (17 | ) | 41 | NM | (1) | ||||||||||
Policy fees and other income | 123 | 127 | (4 | ) | (3 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Total revenues | 266 | 218 | 48 | 22 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 18 | 26 | (8 | ) | (31 | )% | ||||||||||
Interest credited | 105 | 96 | 9 | 9 | % | |||||||||||
Acquisition and operating expenses, net of deferrals | 47 | 54 | (7 | ) | (13 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 20 | 25 | (5 | ) | (20 | )% | ||||||||||
Interest expense | 1 | 1 | — | — | % | |||||||||||
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 191 | 202 | (11 | ) | (5 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Income from continuing operations before income taxes | 75 | 16 | 59 | NM | (1) | |||||||||||
Provision for income taxes | 23 | 2 | 21 | NM | (1) | |||||||||||
|
|
|
|
|
| |||||||||||
Income from continuing operations | 52 | 14 | 38 | NM | (1) | |||||||||||
Adjustments to income from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net(2) | (22 | ) | 12 | (34 | ) | NM | (1) | |||||||||
Taxes on adjustments | 8 | (4 | ) | 12 | NM | (1) | ||||||||||
|
|
|
|
|
| |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders | $ | 38 | $ | 22 | $ | 16 | 73 | % | ||||||||
|
|
|
|
|
| |||||||||||
Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Net investment income | $ | 101 | $ | 92 | $ | 9 | 10 | % | ||||||||
Net investment gains (losses) | (25 | ) | 4 | (29 | ) | NM | (1) | |||||||||
Policy fees and other income | 60 | 68 | (8 | ) | (12 | )% | ||||||||||
Total revenues | 136 | 164 | (28 | ) | (17 | )% | ||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 19 | 10 | 9 | 90 | % | |||||||||||
Interest credited | 88 | 81 | 7 | 9 | % | |||||||||||
Acquisition and operating expenses, net of deferrals | 24 | 27 | (3 | ) | (11 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 15 | 9 | 6 | 67 | % | |||||||||||
Total benefits and expenses | 146 | 127 | 19 | 15 | % | |||||||||||
Income (loss) from continuing operations before income taxes | (10 | ) | 37 | (47 | ) | (127 | )% | |||||||||
Provision (benefit) for income taxes | (3 | ) | 7 | (10 | ) | (143 | )% | |||||||||
Income (loss) from continuing operations | (7 | ) | 30 | (37 | ) | (123 | )% | |||||||||
Adjustments to income (loss) from continuing operations: | ||||||||||||||||
Net investment (gains) losses, net (2) | 23 | (4 | ) | 27 | NM | (1) | ||||||||||
Taxes on adjustments | (5 | ) | 1 | (6 | ) | NM | (1) | |||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 11 | $ | 27 | $ | (16 | ) | (59 | )% | |||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
| (2) | For the |
availabledecreased predominantly due to Genworth Financial, Inc.’s common stockholders increased primarily driven by favorableunfavorable equity market performance and higher interest rates resulting in a decline in the current year.RevenuesNet investmentaverage account values of our variable annuity products reducing fee income, increased mainly drivenpartially offset by higher policy loan income in our corporate-owned life insurance products in the current year.currentprior year were primarilywas predominantly related to lower gains on embedded derivatives associated with our variable annuity products with GMWBs, partially offset by lower derivative losses. Net investment losses in the prior year were largely related to losses on embedded derivatives associated withcurrent year.with GMWBs, partially offset by net gains fromin the salecurrent year.
Acquisition and operating expenses, net of deferrals, decreased largely driven by lower state guaranty fund assessments in the current year.
| As of or for the three months ended September 30, | As of or for the nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Variable Annuities—Income Distribution Series(1) | ||||||||||||||||
Account value, beginning of period | $ | 4,526 | $ | 4,849 | $ | 4,581 | $ | 4,942 | ||||||||
Deposits | 5 | 6 | 13 | 17 | ||||||||||||
Surrenders, benefits and product charges | (132 | ) | (151 | ) | (425 | ) | (431 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net flows | (127 | ) | (145 | ) | (412 | ) | (414 | ) | ||||||||
Interest credited and investment performance | 98 | 90 | 328 | 266 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Account value, end of period | $ | 4,497 | $ | 4,794 | $ | 4,497 | $ | 4,794 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Traditional Variable Annuities | ||||||||||||||||
Account value, net of reinsurance, beginning of period | $ | 1,149 | $ | 1,177 | $ | 1,167 | $ | 1,241 | ||||||||
Deposits | 2 | 2 | 6 | 6 | ||||||||||||
Surrenders, benefits and product charges | (52 | ) | (47 | ) | (162 | ) | (154 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net flows | (50 | ) | (45 | ) | (156 | ) | (148 | ) | ||||||||
Interest credited and investment performance | 41 | 49 | 129 | 88 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Account value, net of reinsurance, end of period | $ | 1,140 | $ | 1,181 | $ | 1,140 | $ | 1,181 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Variable Life Insurance | ||||||||||||||||
Account value, beginning of period | $ | 295 | $ | 283 | $ | 283 | $ | 291 | ||||||||
Deposits | 1 | 1 | 5 | 5 | ||||||||||||
Surrenders, benefits and product charges | (10 | ) | (7 | ) | (27 | ) | (24 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net flows | (9 | ) | (6 | ) | (22 | ) | (19 | ) | ||||||||
Interest credited and investment performance | 10 | 8 | 35 | 13 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Account value, end of period | $ | 296 | $ | 285 | $ | 296 | $ | 285 | ||||||||
|
|
|
|
|
|
|
| |||||||||
As of or for the three months ended June 30, | As of or for the six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Account value, beginning of period | $ | 4,459 | $ | 4,863 | $ | 4,839 | $ | 5,001 | ||||||||
Deposits | 4 | 4 | 9 | 10 | ||||||||||||
Surrenders, benefits and product charges | (105 | ) | (140 | ) | (236 | ) | (327 | ) | ||||||||
Net flows | (101 | ) | (136 | ) | (227 | ) | (317 | ) | ||||||||
Interest credited and investment performance | (445 | ) | 241 | (699 | ) | 284 | ||||||||||
Account value, end of period | $ | 3,913 | $ | 4,968 | $ | 3,913 | $ | 4,968 | ||||||||
Variable Annuities—Income Distribution Series
Traditional Variable Annuities
Inperformance and surrenders in the current year.
Institutional products
The following table sets forth selected operating performance measures regarding our institutional 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, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
GICs, FABNs and Funding Agreements | ||||||||||||||||
Account value, beginning of period | $ | 460 | $ | 561 | $ | 560 | $ | 410 | ||||||||
Deposits | — | — | — | 150 | ||||||||||||
Surrenders and benefits | (102 | ) | (2 | ) | (206 | ) | (4 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net flows | (102 | ) | (2 | ) | (206 | ) | 146 | |||||||||
Interest credited | 2 | 2 | 6 | 5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Account value, end of period | $ | 360 | $ | 561 | $ | 360 | $ | 561 | ||||||||
|
|
|
|
|
|
|
| |||||||||
2021 and June 30, 2021. Account value related to our institutional products decreased compared to$50 million during the three months ended June 30, 2017 and December 31, 20162021 mainly attributable to scheduled maturitiesa maturity payment.
2021
| Three months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 3 | $ | 2 | $ | 1 | 50 | % | ||||||||
Net investment income | 4 | 1 | 3 | NM | (1) | |||||||||||
Net investment gains (losses) | (7 | ) | (9 | ) | 2 | 22 | % | |||||||||
Policy fees and other income | 1 | (1 | ) | 2 | 200 | % | ||||||||||
|
|
|
|
|
| |||||||||||
Total revenues | 1 | (7 | ) | 8 | 114 | % | ||||||||||
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 2 | 1 | 1 | 100 | % | |||||||||||
Acquisition and operating expenses, net of deferrals | 19 | 11 | 8 | 73 | % | |||||||||||
Amortization of deferred acquisition costs and intangibles | 2 | 1 | 1 | 100 | % | |||||||||||
Interest expense | 63 | 67 | (4 | ) | (6 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 86 | 80 | 6 | 8 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Loss from continuing operations before income taxes | (85 | ) | (87 | ) | 2 | 2 | % | |||||||||
Provision (benefit) for income taxes | (23 | ) | 246 | (269 | ) | (109 | )% | |||||||||
|
|
|
|
|
| |||||||||||
Loss from continuing operations | (62 | ) | (333 | ) | 271 | 81 | % | |||||||||
Adjustments to loss from continuing operations: | ||||||||||||||||
Net investment (gains) losses | 7 | 9 | (2 | ) | (22 | )% | ||||||||||
Taxes on adjustments | (3 | ) | (3 | ) | — | — | % | |||||||||
|
|
|
|
|
| |||||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders | $ | (58 | ) | $ | (327 | ) | $ | 269 | 82 | % | ||||||
|
|
|
|
|
| |||||||||||
Three months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1 | $ | 1 | $ | — | — | % | ||||||||
Net investment income | — | 3 | (3 | ) | (100 | )% | ||||||||||
Net investment gains (losses) | 15 | (4 | ) | 19 | NM | (1) | ||||||||||
Policy fees and other income | 1 | — | 1 | NM | (1) | |||||||||||
Total revenues | 17 | — | 17 | NM | (1) | |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | (1 | ) | — | (1 | ) | NM | (1) | |||||||||
Acquisition and operating expenses, net of deferrals | 6 | 8 | (2 | ) | (25 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | — | 1 | (1 | ) | (100 | )% | ||||||||||
Interest expense | 13 | 31 | (18 | ) | (58 | )% | ||||||||||
Total benefits and expenses | 18 | 40 | (22 | ) | (55 | )% | ||||||||||
Loss from continuing operations before income taxes | (1 | ) | (40 | ) | 39 | 98 | % | |||||||||
Provision (benefit) for income taxes | 3 | (8 | ) | 11 | 138 | % | ||||||||||
Loss from continuing operations | (4 | ) | (32 | ) | 28 | 88 | % | |||||||||
Adjustments to loss from continuing operations: | ||||||||||||||||
Net investment (gains) losses | (15 | ) | 4 | (19 | ) | NM | (1) | |||||||||
(Gains) losses on early extinguishment of debt | 1 | — | 1 | NM | (1) | |||||||||||
Expenses related to restructuring | — | 1 | (1 | ) | (100 | )% | ||||||||||
Taxes on adjustments | 4 | — | 4 | NM | (1) | |||||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders | $ | (14 | ) | $ | (27 | ) | $ | 13 | 48 | % | ||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
Revenues
Netnet investment income increased primarily related to higher yieldsgains in the current year.
The decrease inyear from net investment losses in the prior year was primarilypredominantly related to lower losses from derivativesderivative gains in the current year compared to derivative losses in the prior year.
Acquisition and operating expenses, net of deferrals, increased mainly driven by higher consulting fees in the current year.
The incomefair value of equity securities, partially offset by tax benefit in the current year was principally from lower taxed foreign income. The income tax provision in the prior year was largely attributable to a valuation allowance of $265 million recordedexpense on deferred tax assets that did not recur.
2021NineSeptemberJune 30, 20172022 Compared to NineSix Months Ended SeptemberJune 30, 2016
| Nine months ended September 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 6 | $ | 11 | $ | (5 | ) | (45 | )% | |||||||
Net investment income | 5 | 4 | 1 | 25 | % | |||||||||||
Net investment gains (losses) | (31 | ) | (88 | ) | 57 | 65 | % | |||||||||
Policy fees and other income | (2 | ) | 76 | (78 | ) | (103 | )% | |||||||||
|
|
|
|
|
| |||||||||||
Total revenues | (22 | ) | 3 | (25 | ) | NM | (1) | |||||||||
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 3 | 4 | (1 | ) | (25 | )% | ||||||||||
Acquisition and operating expenses, net of deferrals | 47 | 173 | (126 | ) | (73 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | 2 | 1 | 1 | 100 | % | |||||||||||
Interest expense | 179 | 205 | (26 | ) | (13 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 231 | 383 | (152 | ) | (40 | )% | ||||||||||
|
|
|
|
|
| |||||||||||
Loss from continuing operations before income taxes | (253 | ) | (380 | ) | 127 | 33 | % | |||||||||
Provision (benefit) for income taxes | (85 | ) | 119 | (204 | ) | (171 | )% | |||||||||
|
|
|
|
|
| |||||||||||
Loss from continuing operations | (168 | ) | (499 | ) | 331 | 66 | % | |||||||||
Adjustments to loss from continuing operations: | ||||||||||||||||
Net investment (gains) losses | 31 | 88 | (57 | ) | (65 | )% | ||||||||||
(Gains) losses on sale of businesses | — | (2 | ) | 2 | 100 | % | ||||||||||
(Gains) losses on early extinguishment of debt | — | (48 | ) | 48 | 100 | % | ||||||||||
Expenses related to restructuring | 1 | 2 | (1 | ) | (50 | )% | ||||||||||
Fees associated with bond consent solicitation | — | 18 | (18 | ) | (100 | )% | ||||||||||
Taxes on adjustments | (11 | ) | (43 | ) | 32 | 74 | % | |||||||||
|
|
|
|
|
| |||||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders | $ | (147 | ) | $ | (484 | ) | $ | 337 | 70 | % | ||||||
|
|
|
|
|
| |||||||||||
Six months ended June 30, | Increase (decrease) and percentage change | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 vs. 2021 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 3 | $ | 3 | $ | — | — | % | ||||||||
Net investment income | 3 | 4 | (1 | ) | (25 | )% | ||||||||||
Net investment gains (losses) | 2 | (6 | ) | 8 | 133 | % | ||||||||||
Policy fees and other income | 1 | — | 1 | NM | (1) | |||||||||||
Total revenues | 9 | 1 | 8 | NM | (1) | |||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | (1 | ) | — | (1 | ) | NM | (1) | |||||||||
Acquisition and operating expenses, net of deferrals | 12 | 21 | (9 | ) | (43 | )% | ||||||||||
Amortization of deferred acquisition costs and intangibles | — | 1 | (1 | ) | (100 | )% | ||||||||||
Interest expense | 26 | 69 | (43 | ) | (62 | )% | ||||||||||
Total benefits and expenses | 37 | 91 | (54 | ) | (59 | )% | ||||||||||
Loss from continuing operations before income taxes | (28 | ) | (90 | ) | 62 | 69 | % | |||||||||
Benefit for income taxes | (3 | ) | (16 | ) | 13 | 81 | % | |||||||||
Loss from continuing operations | (25 | ) | (74 | ) | 49 | 66 | % | |||||||||
Adjustments to loss from continuing operations: | ||||||||||||||||
Net investment (gains) losses | (2 | ) | 6 | (8 | ) | (133 | )% | |||||||||
(Gains) losses on early extinguishment of debt | 4 | 4 | — | — | % | |||||||||||
Expenses related to restructuring | — | 8 | (8 | ) | (100 | )% | ||||||||||
Taxes on adjustments | — | (3 | ) | 3 | 100 | % | ||||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders | $ | (23 | ) | $ | (59 | ) | $ | 36 | 61 | % | ||||||
| (1) | We define “NM” as not meaningful for increases or decreases greater than 200%. |
available to Genworth Financial, Inc.’s common stockholders decreased primarily related to tax charges of $265 million in the prior year that did not recur and lower operating and interest expense in the current year.Premiums decreased largely related to the sale of our European mortgage insurance business in May 2016.decrease inchange to net investment losses was primarily related to a $64 million lossgains in the current year from thewrite-off of our residual interest in certain policy loan securitization entitiesnet investment losses in the prior year that did not recur and from lowerwas predominantly related to derivative gains in the current year compared to derivative losses in the current year. These decreases wereprior year, partially offset by netrealized losses from the sale of investment securities in the current year compared to net gains in the prior year.Policy fees and other income in the prior year included a gain
Thechanges in the fair value of equity securities, partially offset by tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax benefit in the current year was principally from lower taxed foreign income. Therate of 35% as they are amortized into net investment income tax provision in the prior year was largely attributable to a valuation allowance of $265 million recorded on deferred tax assets that did not recur.
and non-deductible expenses.
Trends
Investments—credit such as inflation, 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, including as a result of COVID-19. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, factors such as the speed of the economic recovery from COVID-19, future government responses to COVID-19 or another public health emergency, including government stimulus, government spending, monetary policies (such as quantitative tightening), the volatility and strength of the capital markets,
changes in tax policy and/or in U.S. tax legislation, inflation, including the price of oil, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.
conflict.
cash.
We actively responded to the risk in our derivatives portfolio arising from our counterparties’ right to terminate their bilateralover-the-counter (“OTC”) derivatives transactions with us following the downgrades of our life insurance subsidiaries by S&P in September 2017 and by Moody’s in October 2017. We notified our counterparties of the downgrades to determine whether they would exercise their rights to terminate the transactions, agree to maintain the transactions with us under revised terms or permit us to move the transactions to clearing through the Chicago Mercantile Exchange (“CME”). Although some counterparties have indicated
that they reserve their rights to take action against us, only one counterparty has done so. During October 2017, this counterparty terminated approximately $800 million notional with us, which we have re-hedged using financial futures. We also continue to discuss the downgrades with the other counterparties.
results of operations or financial condition.
| Three months ended September 30, | Increase (decrease) | |||||||||||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 vs. 2016 | |||||||||||||||||||||
| Yield | Amount | Yield | Amount | Yield | Amount | |||||||||||||||||||
Fixed maturity securities—taxable | 4.5 | % | $ | 640 | 4.6 | % | $ | 655 | (0.1 | )% | $ | (15 | ) | |||||||||||
Fixed maturitysecurities—non-taxable | 3.7 | % | 3 | 3.7 | % | 3 | — | % | — | |||||||||||||||
Commercial mortgage loans | 5.0 | % | 78 | 5.2 | % | 79 | (0.2 | )% | (1 | ) | ||||||||||||||
Restricted commercial mortgage loans related tosecuritization entities | 10.5 | % | 3 | 7.4 | % | 3 | 3.1 | % | — | |||||||||||||||
Equity securities | 5.1 | % | 9 | 5.8 | % | 8 | (0.7 | )% | 1 | |||||||||||||||
Other invested assets | 61.6 | % | 39 | 24.7 | % | 34 | 36.9 | % | 5 | |||||||||||||||
Policy loans | 8.6 | % | 39 | 8.7 | % | 38 | (0.1 | )% | 1 | |||||||||||||||
Cash, cash equivalents and short-term investments | 1.1 | % | 10 | 0.6 | % | 5 | 0.5 | % | 5 | |||||||||||||||
|
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|
|
| |||||||||||||||||||
Gross investment income before expenses and fees | 4.7 | % | 821 | 4.7 | % | 825 | — | % | (4 | ) | ||||||||||||||
Expenses and fees | (0.2 | )% | (24 | ) | (0.1 | )% | (20 | ) | (0.1 | )% | (4 | ) | ||||||||||||
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|
|
|
|
| |||||||||||||||||||
Net investment income | 4.5 | % | $ | 797 | 4.6 | % | $ | 805 | (0.1 | )% | $ | (8 | ) | |||||||||||
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|
|
|
| |||||||||||||||||||
Average invested assets and cash | $ | 70,400 | $ | 69,825 | $ | 575 | ||||||||||||||||||
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| |||||||||||||||||||
| Nine months ended September 30, | Increase (decrease) | |||||||||||||||||||||||
| 2017 | 2016 | 2017 vs. 2016 | ||||||||||||||||||||||
(Amounts in millions) | Yield | Amount | Yield | Amount | Yield | Amount | ||||||||||||||||||
Fixed maturity securities—taxable | 4.5 | % | $ | 1,930 | 4.6 | % | $ | 1,930 | (0.1 | )% | $ | — | ||||||||||||
Fixed maturitysecurities—non-taxable | 3.7 | % | 9 | 3.6 | % | 9 | 0.1 | % | — | |||||||||||||||
Commercial mortgage loans | 5.0 | % | 231 | 5.2 | % | 237 | (0.2 | )% | (6 | ) | ||||||||||||||
Restricted commercial mortgage loans related tosecuritization entities | 7.8 | % | 7 | 7.2 | % | 8 | 0.6 | % | (1 | ) | ||||||||||||||
Equity securities | 5.1 | % | 26 | 5.7 | % | 20 | (0.6 | )% | 6 | |||||||||||||||
Other invested assets | 45.7 | % | 106 | 24.0 | % | 105 | 21.7 | % | 1 | |||||||||||||||
Restricted other invested assets related tosecuritization entities | 1.1 | % | 1 | 1.1 | % | 3 | — | % | (2 | ) | ||||||||||||||
Policy loans | 9.0 | % | 120 | 8.6 | % | 107 | 0.4 | % | 13 | |||||||||||||||
Cash, cash equivalents and short-term investments | 1.0 | % | 26 | 0.5 | % | 16 | 0.5 | % | 10 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Gross investment income before expenses and fees | 4.7 | % | 2,456 | 4.6 | % | 2,435 | 0.1 | % | 21 | |||||||||||||||
Expenses and fees | (0.2 | )% | (68 | ) | (0.1 | )% | (62 | ) | (0.1 | )% | (6 | ) | ||||||||||||
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|
|
|
|
| |||||||||||||||||||
Net investment income | 4.5 | % | $ | 2,388 | 4.5 | % | $ | 2,373 | — | % | $ | 15 | ||||||||||||
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|
|
| |||||||||||||||||||
Average invested assets and cash | $ | 70,018 | $ | 69,837 | $ | 181 | ||||||||||||||||||
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|
| |||||||||||||||||||
Three months ended June 30, | Increase (decrease) | |||||||||||||||||||||||
2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||
(Amounts in millions) | Yield | Amount | Yield | Amount | Yield | Amount | ||||||||||||||||||
Fixed maturity securities—taxable | 4.5 | % | $ | 578 | 4.6 | % | $ | 608 | (0.1 | )% | $ | (30 | ) | |||||||||||
Fixed maturity securities—non-taxable | 3.6 | % | 1 | 3.1 | % | 1 | 0.5 | % | — | |||||||||||||||
Equity securities | 3.4 | % | 2 | 4.1 | % | 2 | (0.7 | )% | — | |||||||||||||||
Commercial mortgage loans | 4.5 | % | 78 | 6.0 | % | 103 | (1.5 | )% | (25 | ) | ||||||||||||||
Policy loans | 9.7 | % | 51 | 7.9 | % | 40 | 1.8 | % | 11 | |||||||||||||||
Limited partnerships (1) | 6.2 | % | 32 | 17.2 | % | 54 | (11.0 | )% | (22 | ) | ||||||||||||||
Other invested assets (2) | 62.6 | % | 66 | 68.6 | % | 58 | (6.0 | )% | 8 | |||||||||||||||
Cash, cash equivalents, restricted cash and short-term investments | 0.3 | % | 1 | — | % | — | 0.3 | % | 1 | |||||||||||||||
Gross investment income before expenses and fees | 4.9 | % | 809 | 5.2 | % | 866 | (0.3 | )% | (57 | ) | ||||||||||||||
Expenses and fees | (0.1 | )% | (22 | ) | (0.1 | )% | (22 | ) | — | % | — | |||||||||||||
Net investment income | 4.8 | % | $ | 787 | 5.1 | % | $ | 844 | (0.3 | )% | $ | (57 | ) | |||||||||||
Average invested assets and cash | $ | 65,150 | $ | 66,081 | $ | (931 | ) | |||||||||||||||||
| (1) | Limited partnership investments are primarily equity-based and do not have fixed returns by period. |
| (2) | Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation. |
Six months ended June 30, | Increase (decrease) | |||||||||||||||||||||||
2022 | 2021 | 2022 vs. 2021 | ||||||||||||||||||||||
(Amounts in millions) | Yield | Amount | Yield | Amount | Yield | Amount | ||||||||||||||||||
Fixed maturity securities—taxable | 4.5 | % | $ | 1,158 | 4.5 | % | $ | 1,207 | — | % | $ | (49 | ) | |||||||||||
Fixed maturity securities—non-taxable | 3.6 | % | 2 | 4.7 | % | 3 | (1.1 | )% | (1 | ) | ||||||||||||||
Equity securities | 3.6 | % | 4 | 3.9 | % | 5 | (0.3 | )% | (1 | ) | ||||||||||||||
Commercial mortgage loans | 4.6 | % | 159 | 5.3 | % | 181 | (0.7 | )% | (22 | ) | ||||||||||||||
Policy loans | 9.7 | % | 101 | 8.9 | % | 90 | 0.8 | % | 11 | |||||||||||||||
Limited partnerships (1) | 3.9 | % | 39 | 14.3 | % | 85 | (10.4 | )% | (46 | ) | ||||||||||||||
Other invested assets (2) | 63.2 | % | 129 | 67.1 | % | 116 | (3.9 | )% | 13 | |||||||||||||||
Cash, cash equivalents, restricted cash and short-term investments | 0.1 | % | 1 | — | % | — | 0.1 | % | 1 | |||||||||||||||
Gross investment income before expenses and fees | 4.9 | % | 1,593 | 5.1 | % | 1,687 | (0.2 | )% | (94 | ) | ||||||||||||||
Expenses and fees | (0.1 | )% | (42 | ) | (0.1 | )% | (42 | ) | — | % | — | |||||||||||||
Net investment income | 4.8 | % | $ | 1,551 | 5.0 | % | $ | 1,645 | (0.2 | )% | $ | (94 | ) | |||||||||||
Average invested assets and cash | $ | 65,288 | $ | 66,234 | $ | (946 | ) | |||||||||||||||||
| (1) | Limited partnership investments are primarily equity-based and do not have fixed returns by period. |
| (2) | Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation. |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||
Realized gains | $ | 40 | $ | 39 | $ | 177 | $ | 205 | ||||||||
Realized losses | (10 | ) | (24 | ) | (55 | ) | (75 | ) | ||||||||
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|
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| |||||||||
Net realized gains (losses) onavailable-for-sale securities | 30 | 15 | 122 | 130 | ||||||||||||
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| |||||||||
Impairments: | ||||||||||||||||
Total other-than-temporary impairments | (1 | ) | (2 | ) | (4 | ) | (35 | ) | ||||||||
Portion of other-than-temporary impairments included in other comprehensive income (loss) | — | — | — | — | ||||||||||||
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|
|
|
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| |||||||||
Net other-than-temporary impairments | (1 | ) | (2 | ) | (4 | ) | (35 | ) | ||||||||
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|
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| |||||||||
Trading securities | — | (4 | ) | 1 | 40 | |||||||||||
Commercial mortgage loans | 1 | (1 | ) | 3 | 1 | |||||||||||
Net gains (losses) related to securitization entities | 1 | 2 | 5 | (51 | ) | |||||||||||
Derivative instruments | 54 | 10 | 93 | (52 | ) | |||||||||||
Contingent consideration adjustment | — | — | — | (2 | ) | |||||||||||
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|
|
|
|
|
|
| |||||||||
Net investment gains (losses) | $ | 85 | $ | 20 | $ | 220 | $ | 31 | ||||||||
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| |||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(Amounts in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Realized investment gains (losses): | ||||||||||||||||
Available-for-sale fixed maturity securities: | ||||||||||||||||
Realized gains | $ | 5 | $ | 5 | $ | 15 | $ | 12 | ||||||||
Realized losses | (9 | ) | (4 | ) | (27 | ) | (7 | ) | ||||||||
Net realized gains (losses) on available-for-sale fixed maturity securities | (4 | ) | 1 | (12 | ) | 5 | ||||||||||
Net realized gains (losses) on equity securities sold | — | (2 | ) | — | (7 | ) | ||||||||||
Net realized gains (losses) on limited partnerships | — | — | — | 3 | ||||||||||||
Total net realized investment gains (losses) | (4 | ) | (1 | ) | (12 | ) | 1 | |||||||||
Net change in allowance for credit losses on available-for-sale fixed maturity securities | — | (4 | ) | — | (6 | ) | ||||||||||
Write-down of available-for-sale fixed maturity securities | — | — | (2 | ) | (1 | ) | ||||||||||
Net unrealized gains (losses) on equity securities still held | (27 | ) | 6 | (33 | ) | (2 | ) | |||||||||
Net unrealized gains (losses) on limited partnerships | 24 | 65 | 59 | 99 | ||||||||||||
Commercial mortgage loans | 2 | (1 | ) | 3 | (2 | ) | ||||||||||
Derivative instruments | 9 | 4 | 13 | 12 | ||||||||||||
Other | 4 | 1 | 8 | 2 | ||||||||||||
Net investment gains (losses) | $ | 8 | $ | 70 | $ | 36 | $ | 103 | ||||||||
Net investment gains related to derivatives of $10 million during the three months ended September 30, 2016 were primarily associated with hedging programs for our runoff variable annuity products and gains related to hedge ineffectiveness from our cash flow hedge programs for our long-term care insurance business due to a decrease in long-term interest rates. These gains were partially offset by losses in derivatives used to hedge foreign currency risk associated with assets held and expected dividend payments from certain foreign subsidiaries.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
ended June 30, 2021. Included in the $12 million of net losses for the six months ended June 30, 2022 was $27 million of realized losses principally related to U.S. corporate securities sold to optimize cash at Genworth Holdings. We also recorded $7 million of net losses related to the sale of equity securities during the six months ended June 30, 2021. |
| September 30, 2017 | December 31, 2016 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Fixed maturity securities,available-for-sale: | ||||||||||||||||
Public | $ | 45,882 | 61 | % | $ | 45,131 | 61 | % | ||||||||
Private | 16,670 | 22 | 15,441 | 21 | ||||||||||||
Equity securities,available-for-sale | 765 | 1 | 632 | 1 | ||||||||||||
Commercial mortgage loans | 6,268 | 8 | 6,111 | 8 | ||||||||||||
Restricted commercial mortgage loans related to securitization entities | 111 | — | 129 | — | ||||||||||||
Policy loans | 1,818 | 2 | 1,742 | 2 | ||||||||||||
Other invested assets | 1,590 | 2 | 2,071 | 3 | ||||||||||||
Restricted other invested assets related to securitization entities | — | — | 312 | — | ||||||||||||
Cash and cash equivalents | 2,836 | 4 | 2,784 | 4 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash, cash equivalents and invested assets | $ | 75,940 | 100 | % | $ | 74,353 | 100 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Available-for-sale fixed maturity securities: | ||||||||||||||||
Public | $ | 33,878 | 54 | % | $ | 42,501 | 58 | % | ||||||||
Private | 15,408 | 24 | 17,979 | 24 | ||||||||||||
Equity securities | 243 | — | 198 | — | ||||||||||||
Commercial mortgage loans, net | 7,065 | 12 | 6,830 | 9 | ||||||||||||
Policy loans | 2,178 | 3 | 2,050 | 3 | ||||||||||||
Limited partnerships | 2,123 | 3 | 1,900 | 3 | ||||||||||||
Other invested assets | 573 | 1 | 820 | 1 | ||||||||||||
Cash, cash equivalents and restricted cash | 1,724 | 3 | 1,571 | 2 | ||||||||||||
Total cash, cash equivalents, restricted cash and invested assets | $ | 63,192 | 100 | % | $ | 73,849 | 100 | % | ||||||||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
(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 andgovernment-sponsoredenterprises | $ | 4,893 | $ | 784 | $ | — | $ | (7 | ) | $ | — | $ | 5,670 | |||||||||||
State and political subdivisions | 2,639 | 247 | — | (26 | ) | — | 2,860 | |||||||||||||||||
Non-U.S. government (1) | 2,143 | 107 | — | (24 | ) | — | 2,226 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,382 | 556 | — | (15 | ) | — | 4,923 | |||||||||||||||||
Energy | 2,243 | 207 | — | (10 | ) | — | 2,440 | |||||||||||||||||
Finance and insurance | 6,051 | 547 | — | (11 | ) | — | 6,587 | |||||||||||||||||
Consumer—non-cyclical | 4,330 | 508 | — | (10 | ) | — | 4,828 | |||||||||||||||||
Technology and communications | 2,558 | 193 | — | (11 | ) | — | 2,740 | |||||||||||||||||
Industrial | 1,247 | 102 | — | (3 | ) | — | 1,346 | |||||||||||||||||
Capital goods | 2,067 | 263 | — | (9 | ) | — | 2,321 | |||||||||||||||||
Consumer—cyclical | 1,506 | 111 | — | (6 | ) | — | 1,611 | |||||||||||||||||
Transportation | 1,188 | 124 | — | (6 | ) | — | 1,306 | |||||||||||||||||
Other | 358 | 24 | — | (2 | ) | — | 380 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total U.S. corporate (1) | 25,930 | 2,635 | — | (83 | ) | — | 28,482 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 1,022 | 45 | — | (5 | ) | — | 1,062 | |||||||||||||||||
Energy | 1,330 | 140 | — | (7 | ) | — | 1,463 | |||||||||||||||||
Finance and insurance | 2,524 | 177 | — | (5 | ) | — | 2,696 | |||||||||||||||||
Consumer—non-cyclical | 692 | 27 | — | (3 | ) | — | 716 | |||||||||||||||||
Technology and communications | 945 | 71 | — | (2 | ) | — | 1,014 | |||||||||||||||||
Industrial | 979 | 81 | — | (2 | ) | — | 1,058 | |||||||||||||||||
Capital goods | 556 | 33 | — | (2 | ) | — | 587 | |||||||||||||||||
Consumer—cyclical | 518 | 10 | — | (1 | ) | — | 527 | |||||||||||||||||
Transportation | 650 | 71 | — | (3 | ) | — | 718 | |||||||||||||||||
Other | 2,594 | 193 | — | (5 | ) | — | 2,782 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate (1) | 11,810 | 848 | — | (35 | ) | — | 12,623 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed (2) | 3,950 | 255 | 14 | (10 | ) | — | 4,209 | |||||||||||||||||
Commercial mortgage-backed | 3,346 | 105 | 2 | (39 | ) | — | 3,414 | |||||||||||||||||
Other asset-backed (2) | 3,052 | 20 | 1 | (5 | ) | — | 3,068 | |||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturitysecurities | 57,763 | 5,001 | 17 | (229 | ) | — | 62,552 | |||||||||||||||||
Equity securities | 720 | 59 | — | (14 | ) | — | 765 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalavailable-for-salesecurities | $ | 58,483 | $ | 5,060 | $ | 17 | $ | (243 | ) | $ | — | $ | 63,317 | |||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
(Amounts in millions) | Amortized cost or cost | Gross unrealized gains | Gross unrealized losses | Allowance for credit losses | Fair value | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,387 | $ | 274 | $ | (34 | ) | $ | — | $ | 3,627 | |||||||||
State and political subdivisions | 2,971 | 74 | (196 | ) | — | 2,849 | ||||||||||||||
Non-U.S. government | 762 | 17 | (97 | ) | — | 682 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,253 | 135 | (285 | ) | — | 4,103 | ||||||||||||||
Energy | 2,496 | 54 | (173 | ) | — | 2,377 | ||||||||||||||
Finance and insurance | 7,947 | 126 | (604 | ) | — | 7,469 | ||||||||||||||
Consumer—non-cyclical | 4,912 | 172 | (292 | ) | — | 4,792 | ||||||||||||||
Technology and communications | 3,224 | 60 | (260 | ) | — | 3,024 | ||||||||||||||
Industrial | 1,263 | 22 | (98 | ) | — | 1,187 | ||||||||||||||
Capital goods | 2,326 | 77 | (145 | ) | — | 2,258 | ||||||||||||||
Consumer—cyclical | 1,679 | 27 | (125 | ) | — | 1,581 | ||||||||||||||
Transportation | 1,113 | 52 | (61 | ) | — | 1,104 | ||||||||||||||
Other | 353 | 8 | (13 | ) | — | 348 | ||||||||||||||
Total U.S. corporate | 29,566 | 733 | (2,056 | ) | — | 28,243 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 864 | 3 | (57 | ) | — | 810 | ||||||||||||||
Energy | 1,123 | 36 | (62 | ) | — | 1,097 | ||||||||||||||
Finance and insurance | 2,103 | 62 | (153 | ) | — | 2,012 | ||||||||||||||
Consumer—non-cyclical | 630 | 4 | (64 | ) | — | 570 | ||||||||||||||
Technology and communications | 1,007 | 10 | (74 | ) | — | 943 | ||||||||||||||
Industrial | 903 | 21 | (63 | ) | — | 861 | ||||||||||||||
Capital goods | 609 | 6 | (50 | ) | — | 565 | ||||||||||||||
Consumer—cyclical | 314 | — | (29 | ) | — | 285 | ||||||||||||||
Transportation | 392 | 20 | (22 | ) | — | 390 | ||||||||||||||
Other | 960 | 39 | (50 | ) | — | 949 | ||||||||||||||
Total non-U.S. corporate | 8,905 | 201 | (624 | ) | — | 8,482 | ||||||||||||||
Residential mortgage-backed | 1,214 | 36 | (37 | ) | — | 1,213 | ||||||||||||||
Commercial mortgage-backed | 2,272 | 7 | (142 | ) | — | 2,137 | ||||||||||||||
Other asset-backed | 2,171 | 1 | (119 | ) | — | 2,053 | ||||||||||||||
Total available-for-sale fixed maturity securities | $ | 51,248 | $ | 1,343 | $ | (3,305 | ) | $ | — | $ | 49,286 | |||||||||
| Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
(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 andgovernment-sponsoredenterprises | $ | 5,439 | $ | 647 | $ | — | $ | (50 | ) | $ | — | $ | 6,036 | |||||||||||
State and political subdivisions | 2,515 | 182 | — | (50 | ) | — | 2,647 | |||||||||||||||||
Non-U.S. government (1) | 2,024 | 101 | — | (18 | ) | — | 2,107 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,137 | 454 | — | (41 | ) | — | 4,550 | |||||||||||||||||
Energy | 2,167 | 157 | — | (24 | ) | — | 2,300 | |||||||||||||||||
Finance and insurance | 5,719 | 424 | — | (46 | ) | — | 6,097 | |||||||||||||||||
Consumer—non-cyclical | 4,335 | 433 | — | (34 | ) | — | 4,734 | |||||||||||||||||
Technology and communications | 2,473 | 157 | — | (32 | ) | — | 2,598 | |||||||||||||||||
Industrial | 1,161 | 76 | — | (14 | ) | — | 1,223 | |||||||||||||||||
Capital goods | 2,043 | 228 | — | (13 | ) | — | 2,258 | |||||||||||||||||
Consumer—cyclical | 1,455 | 92 | — | (17 | ) | — | 1,530 | |||||||||||||||||
Transportation | 1,121 | 86 | — | (17 | ) | — | 1,190 | |||||||||||||||||
Other | 332 | 17 | — | (1 | ) | — | 348 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total U.S. corporate (1) | 24,943 | 2,124 | — | (239 | ) | — | 26,828 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 940 | 40 | — | (11 | ) | — | 969 | |||||||||||||||||
Energy | 1,234 | 109 | — | (12 | ) | — | 1,331 | |||||||||||||||||
Finance and insurance | 2,413 | 134 | — | (9 | ) | — | 2,538 | |||||||||||||||||
Consumer—non-cyclical | 711 | 17 | — | (14 | ) | — | 714 | |||||||||||||||||
Technology and communications | 953 | 44 | — | (10 | ) | — | 987 | |||||||||||||||||
Industrial | 928 | 39 | — | (9 | ) | — | 958 | |||||||||||||||||
Capital goods | 518 | 21 | — | (4 | ) | — | 535 | |||||||||||||||||
Consumer—cyclical | 434 | 10 | — | (2 | ) | — | 442 | |||||||||||||||||
Transportation | 619 | 65 | — | (7 | ) | — | 677 | |||||||||||||||||
Other | 2,967 | 190 | — | (13 | ) | — | 3,144 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate (1) | 11,717 | 669 | — | (91 | ) | — | 12,295 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed (2) | 4,122 | 259 | 10 | (12 | ) | — | 4,379 | |||||||||||||||||
Commercial mortgage-backed | 3,084 | 98 | 3 | (56 | ) | — | 3,129 | |||||||||||||||||
Other asset-backed (2) | 3,170 | 15 | 1 | (35 | ) | — | 3,151 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturitysecurities | 57,014 | 4,095 | 14 | (551 | ) | — | 60,572 | |||||||||||||||||
Equity securities | 628 | 31 | — | (27 | ) | — | 632 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalavailable-for-salesecurities | $ | 57,642 | $ | 4,126 | $ | 14 | $ | (578 | ) | $ | — | $ | 61,204 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(Amounts in millions) | Amortized cost or cost | Gross unrealized gains | Gross unrealized losses | Allowance for credit losses | Fair value | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,368 | $ | 1,184 | $ | — | $ | — | $ | 4,552 | ||||||||||
State and political subdivisions | 2,982 | 474 | (6 | ) | — | 3,450 | ||||||||||||||
Non-U.S. government | 762 | 86 | (13 | ) | — | 835 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,330 | 783 | (9 | ) | — | 5,104 | ||||||||||||||
Energy | 2,581 | 363 | (10 | ) | — | 2,934 | ||||||||||||||
Finance and insurance | 8,003 | 1,012 | (24 | ) | — | 8,991 | ||||||||||||||
Consumer—non-cyclical | 5,138 | 1,029 | (8 | ) | — | 6,159 | ||||||||||||||
Technology and communications | 3,345 | 476 | (13 | ) | — | 3,808 | ||||||||||||||
Industrial | 1,322 | 175 | (3 | ) | — | 1,494 | ||||||||||||||
Capital goods | 2,334 | 415 | (4 | ) | — | 2,745 | ||||||||||||||
Consumer—cyclical | 1,703 | 203 | (7 | ) | — | 1,899 | ||||||||||||||
Transportation | 1,122 | 249 | — | — | 1,371 | |||||||||||||||
Other | 379 | 41 | (1 | ) | — | 419 | ||||||||||||||
Total U.S. corporate | 30,257 | 4,746 | (79 | ) | — | 34,924 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 867 | 63 | (2 | ) | — | 928 | ||||||||||||||
Energy | 1,194 | 190 | (1 | ) | — | 1,383 | ||||||||||||||
Finance and insurance | 2,171 | 270 | (9 | ) | — | 2,432 | ||||||||||||||
Consumer—non-cyclical | 664 | 81 | (2 | ) | — | 743 | ||||||||||||||
Technology and communications | 1,085 | 166 | (1 | ) | — | 1,250 | ||||||||||||||
Industrial | 933 | 117 | (3 | ) | — | 1,047 | ||||||||||||||
Capital goods | 640 | 66 | (1 | ) | — | 705 | ||||||||||||||
Consumer—cyclical | 316 | 27 | (2 | ) | — | 341 | ||||||||||||||
Transportation | 422 | 68 | (1 | ) | — | 489 | ||||||||||||||
Other | 1,052 | 169 | (4 | ) | — | 1,217 | ||||||||||||||
Total non-U.S. corporate | 9,344 | 1,217 | (26 | ) | — | 10,535 | ||||||||||||||
Residential mortgage-backed | 1,325 | 116 | (1 | ) | — | 1,440 | ||||||||||||||
Commercial mortgage-backed | 2,435 | 152 | (3 | ) | — | 2,584 | ||||||||||||||
Other asset-backed | 2,138 | 29 | (7 | ) | — | 2,160 | ||||||||||||||
Total available-for-sale fixed maturity securities | $ | 52,611 | $ | 8,004 | $ | (135 | ) | $ | — | $ | 60,480 | |||||||||
Our exposure in peripheral European countries consists
| December 31, 2016 | ||||||||||||||||||||
(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 | $ | 521 | 304 | 31 | % | $ | — | — | ||||||||||||
2005 | 469 | 135 | 43 | % | — | — | ||||||||||||||
2006 | 434 | 105 | 52 | % | 15 | 1 | ||||||||||||||
2007 | 452 | 126 | 54 | % | 1 | 1 | ||||||||||||||
2008 | 135 | 25 | 54 | % | — | — | ||||||||||||||
2009 | — | — | — | % | — | — | ||||||||||||||
2010 | 89 | 17 | 48 | % | — | — | ||||||||||||||
2011 | 215 | 47 | 47 | % | — | — | ||||||||||||||
2012 | 588 | 88 | 52 | % | — | — | ||||||||||||||
2013 | 781 | 136 | 54 | % | — | — | ||||||||||||||
2014 | 892 | 147 | 61 | % | — | — | ||||||||||||||
2015 | 932 | 143 | 65 | % | — | — | ||||||||||||||
2016 | 617 | 100 | 69 | % | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 6,125 | 1,373 | 55 | % | $ | 16 | 2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
(Amounts in millions) Short-term investments Derivatives Limited partnerships Securities lending collateral Trading securities Other investments Total other invested assets (Notional in millions) Derivatives designated as hedges Cash flow hedges: Interest rate swaps Foreign currency swaps Total cash flow hedges Total derivatives designated as hedges Derivatives not designated as hedges Interest rate swaps Foreign currency swaps Credit default swaps Credit default swaps related to securitization entities Equity index options Financial futures Equity return swaps Other foreign currency contracts Total derivatives not designated as hedges Total derivatives (Number of policies) Derivatives not designated as hedges GMWB embedded derivatives Fixed index annuity embedded derivatives Indexed universal life embedded derivatives long-term care insurance products. September 30, 2017 December 31, 2016 Carrying value % of total Carrying value % of total $ 787 49 % $ 352 17 % 261 16 708 34 244 15 199 10 237 15 534 25 — — 259 13 61 5 19 1 $ 1,590 100 % $ 2,071 100 % $ 406 71 % $ 363 45 % 77 13 414 50 50 9 26 3 40 7 17 2 $ 573 100 % $ 820 100 % primarily attributable to recent central clearing parties rule changes impacting our accounting treatment for variation margin pertaining to cleared swap positions, which was previously considered cash collateral and is now treated as daily settlements of the derivative contract. Securities lending collateral decreased driven by market demand. Our investmentslargely from an increase in trading securities decreased from higher net sales. Short-term investments increased principally from higher net purchases in our Australia Mortgage Insurance and U.S. Life Insurance segmentsinterest rates in the current year. Bank loan investments increased from funding of additional investments, partially offset by principal repayments in the current year.andembedded derivatives, fixed index annuity embedded derivatives and indexed universal life 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: Measurement December 31,
2016 Additions Maturities/
terminations September 30,
2017 Notional $ 11,570 $ — $ (306 ) $ 11,264 Notional 22 — — 22 11,592 — (306 ) 11,286 11,592 — (306 ) 11,286 Notional 4,679 — — 4,679 Notional 201 95 (14 ) 282 Notional 39 — — 39 Notional 312 — (200 ) 112 Notional 2,396 1,584 (1,484 ) 2,496 Notional 1,398 4,300 (4,376 ) 1,322 Notional 165 186 (258 ) 93 Notional 3,130 2,163 (691 ) 4,602 12,320 8,328 (7,023 ) 13,625 $ 23,912 $ 8,328 $ (7,329 ) $ 24,911 Measurement December 31,
2016 Additions Maturities/
terminations September 30,
2017 Policies 33,238 — (2,127 ) 31,111 Policies 17,549 — (367 ) 17,182 Policies 1,074 1 (66 ) 1,009
2021
terminations
2022 Notional $ 7,653 $ 262 $ (102 ) $ 7,813 Notional 127 — — 127 7,780 262 (102 ) 7,940 7,780 262 (102 ) 7,940 Notional 1,446 495 (628 ) 1,313 Notional 946 1,973 (1,969 ) 950 Notional 83 — (83 ) — 2,475 2,468 (2,680 ) 2,263 $ 10,255 $ 2,730 $ (2,782 ) $ 10,203
2021
terminations
2022 Policies 21,804 — (906 ) 20,898 Policies 9,344 — (1,055 ) 8,289 Policies 806 — (20 ) 786 $1.0 billion increasedecrease in the notional value of derivatives was primarily attributable to anthe termination of derivatives that support our fixed indexed annuity products and the termination of foreign currency derivatives previously entered into to hedge payments to AXA under a settlement agreement, partially offset by a net increase in ournon-qualified foreign currency interest rate swaps related to anon-qualified derivative strategy to mitigate interest rate risk associated withthat support our regulatory capital position.
Total liabilities. Total liabilities decreased $649 million from $90,191 million asrising interest rates, partially offset by the utilization of December 31, 2016 to $89,542 million as of September 30, 2017.
Other liabilities
|
(Amounts in millions) | 2017 | 2016 | ||||||
Net cash from operating activities | $ | 1,932 | $ | 1,798 | ||||
Net cash used by investing activities | (678 | ) | (2,050 | ) | ||||
Net cash used by financing activities | (1,270 | ) | (2,699 | ) | ||||
|
|
|
| |||||
Net decrease in cash before foreign exchange effect | $ | (16 | ) | $ | (2,951 | ) | ||
|
|
|
| |||||
(Amounts in millions) | 2022 | 2021 | ||||||
Net cash from operating activities | $ | 337 | $ | 229 | ||||
Net cash from investing activities | 535 | 541 | ||||||
Net cash used by financing activities | (719 | ) | (1,213 | ) | ||||
Net increase (decrease) in cash before foreign exchange effect | $ | 153 | $ | (443 | ) | |||
We had lower cash outflows from investing activities primarily from lower purchasesGenworth Mortgage Insurance Australia Limited, partially offset by higher net sales and higher maturities of fixed maturity securities in the current year. These amounts were partially offset by lower sales of fixed maturity securities as well as higher net purchases of short-term investments primarily from the decision to manage the interest rate risk and reposition our portfolios, particularly in our Australian mortgage insurance business in the current year.
year, Genworth Holdings repurchased $130 million principal amount of its senior notes due in February 2024. In the United Statesprior year, Genworth Holdings repaid $338 million principal balance of its senior notes due in February 2021 and Canada, we engagerepurchased $146 million principal amount of its senior notes due in certain securities lending transactions for the purpose of enhancing the yield on our investment securities 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.
We previously had a repurchase program in which we sold an investment security at a specified price and agreed to repurchase that security at another specified price at a later date. In 2017 we repaid $75 million, the entire amount due at maturity related to these repurchase agreements.
September 2021.
liquidity
The primary uses of funds at Genworth Financial and Genworth Holdings include payment of holding company general operating expenses (including taxes), payment of principal, interest and other expenses on current and any future borrowings or other obligations (including payments to AXA associated with a settlement agreement reported as discontinued operations), payment of holding company general operating expenses (including employee benefits and taxes), payments under current and any future guarantees (including guarantees of certain subsidiary obligations), payment of amounts previously owed to GE under the Tax Matters Agreement, payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities, repurchases of Genworth Financial’s common stock and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.
Our Board We also expect to provide capital, predominantly to CareScout, LLC (“CareScout”), to help advance Genworth’s long-term care growth initiatives. CareScout is an integral part of Directorsour new Global Care Solutions business that will seek to provide fee-based advice, consulting and other services related to the needs of elderly Americans, as well as their caregivers and families. While we have not made final decisions on the Global Care Solutions strategy and the set of products and services we will offer, it is likely that Genworth will initially focus on long-term care advice and service offerings that help consumers navigate the complex caregiving challenges in the market, which is less capital intensive than insurance product offerings.
2021, respectively, which included approximately $3 million of restricted assets as of December 31, 2021. The decrease in Genworth Holdings’ cash, cash equivalents and restricted cash was principally driven by the repurchase of $130 million principal amount of its senior notes due in February 2024, a $55 million payment to GE to satisfy its remaining obligation under the Tax Matters Agreement and the payment of unprocessed claims of $31 million to AXA, partially offset by intercompany cash tax payments received from its subsidiaries and dividends of $19 million from Enact Holdings in the current year.
credit facility remained undrawn.
Effective2022.
In August 2017, Genworth Australia announced its intention to commence anon-market sharebuy-back program for shares upGE pursuant to a maximum aggregate amountTax Matters Agreement, which was recorded in other liabilities in our condensed consolidated balance sheet. On April 14, 2022, Genworth Holdings satisfied its remaining obligation of AUD$100 million. The total number$55 million under the Tax Matters Agreement with GE.
In May 2017, Genworth Canada announced acceptance by the Toronto Stock Exchange of its Notice of Intention to Make a Normal Course Issuer Bid (“NCIB”). Pursuantcompared to the NCIB, Genworth Canada may, if considered advisable, purchase from time to time through May 4, 2018, up to an aggregate of approximately 4.6 million of its issued and outstanding common shares. In August 2017 and September 2017, Genworth Canada repurchased approximately 1.1 million of its shares for CAD$40 million through the NCIB. We participated in the NCIB in order to maintainamounts disclosed within our ownership position at its current level of approximately 57.1% and received $18 million in cash. Of the $18 million of cash proceeds received, $12 million was paid as dividends to Genworth Holdings in the third quarter of 2017 and $6 million was retained by GMICO.
Capital resources and financing activities
On September 29, 2017, Genworth Canada, our majority-owned subsidiary, entered into a CAD$200 million syndicated senior unsecured revolving credit facility, which matures on September 29, 2022. Any borrowings under Genworth Canada’s credit facility will bear interest at a rate per annum equal to, at the option of Genworth Canada, either a fixed rate or a variable rate pursuant to the terms of the credit agreement. The credit facility includes customary representations, warranties, covenants, terms and conditions. This syndicated credit facility replaced an existing CAD$100 million senior unsecured revolving credit facility which was cancelled on September 29, 2017. As of September 30, 2017, there was no amount outstanding under Genworth Canada’s credit facility and all of the covenants were fully met.
We believe existing cash held at Genworth Holdings combined with dividends from operating subsidiaries, payments under tax sharing and expense reimbursement arrangements with subsidiaries, proceeds from borrowings or securities issuances, and if necessary, sales of assets, as described below, will provide us with sufficient capital flexibility and liquidity to meet our projected future operating and financing requirements. We actively monitor our liquidity position, liquidity generation options and the credit markets given changing market conditions. We target liquidity at Genworth Holdings to maintain a minimum balance of one andone-half times expected annual debt interest payments plus an additional $350 million. As of September 30, 2017, Genworth Holdings was above this target due in part to intercompany tax payments of approximately $300 million received from its subsidiaries in 2016. Subject to the completion of the China Oceanwide transaction, China Oceanwide has committed in the Merger Agreement to contribute $600 million of cash to us to address our debt maturing in May 2018, on or before its maturity. We will continue to evaluate our target level of liquidity as circumstances warrant and may move above or below the target for a period of time given future actions and due to the timing of cash inflows and outflows. Additionally, we will continue to evaluate market influences on the valuation of our senior debt, and may consider additional opportunities to repurchase our debt over time. We cannot predict with any certainty the impact to us from any future disruptions in the credit markets or the recent or any 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 companies. We are currently reviewing potential refinancing options, which may include secured indebtedness,to address upcoming debt maturitiesin the event the transaction with China Oceanwide cannot be completed in a timely manner or at all. We could also utilize holding company cash and/or pursue potential asset sales to address upcoming debt maturities in the event the transaction with China Oceanwide cannot be completed. In the absence of the transaction with China Oceanwide or a refinancing alternative, we believe we would need to pursue asset sales to address our debt maturities, including potential sales of our mortgage insurance businesses in
Canada and/or Australia. We are also evaluating options to insulate our U.S. mortgage insurance business from additional ratings pressure, including a potential partial sale, in the event the transaction with China Oceanwide cannot be completed. 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 reinsurance, our credit ratings and credit capacity and the performance of and outlook for our business. For a discussion of certain risks associated with our liquidity, see “Item 1A—Risk Factors)—Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we may seek additional capital but may be unable to obtain it” in our 20162021 Annual Report on Form10-K.
Contractual obligations and commercial commitments
10-K filed on February 28, 2022.
Securitization Entities
There were nooff-balance sheet securitization transactions during the nine months ended September 30, 2017 or 2016.
New Accounting Standards
28, 2022. For a discussion of recently adopted accounting standards,additional details related to our commitments, see note 212 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost of $51,248 and allowance for credit losses of $—) | $ | — | $ | — | $ | 49,286 | $ | — | $ | 49,286 | ||||||||||
Equity securities, at fair value | — | — | 243 | — | 243 | |||||||||||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4) | — | — | 7,088 | — | 7,088 | |||||||||||||||
Less: Allowance for credit losses | — | — | (23 | ) | — | (23 | ) | |||||||||||||
Commercial mortgage loans, net | — | — | 7,065 | — | 7,065 | |||||||||||||||
Policy loans | — | — | 2,178 | — | 2,178 | |||||||||||||||
Limited partnerships | — | — | 2,123 | — | 2,123 | |||||||||||||||
Other invested assets | — | 50 | 523 | — | 573 | |||||||||||||||
Investments in subsidiaries | 11,851 | 12,097 | — | (23,948 | ) | — | ||||||||||||||
Total investments | 11,851 | 12,147 | 61,418 | (23,948 | ) | 61,468 | ||||||||||||||
Cash, cash equivalents and restricted cash | — | 178 | 1,546 | — | 1,724 | |||||||||||||||
Accrued investment income | — | — | 553 | — | 553 | |||||||||||||||
Deferred acquisition costs | — | — | 2,314 | — | 2,314 | |||||||||||||||
Intangible assets | — | — | 236 | — | 236 | |||||||||||||||
Reinsurance recoverable | — | — | 16,691 | — | 16,691 | |||||||||||||||
Less: Allowance for credit losses | — | — | (60 | ) | — | (60 | ) | |||||||||||||
Reinsurance recoverable, net | — | — | 16,631 | — | 16,631 | |||||||||||||||
Other assets | 1 | 181 | 230 | — | 412 | |||||||||||||||
Intercompany notes receivable | 113 | 54 | — | (167 | ) | — | ||||||||||||||
Deferred tax assets | (1 | ) | 433 | 615 | — | 1,047 | ||||||||||||||
Separate account assets | — | — | 4,683 | — | 4,683 | |||||||||||||||
Total assets | $ | 11,964 | $ | 12,993 | $ | 88,226 | $ | (24,115 | ) | $ | 89,068 | |||||||||
Liabilities and equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Future policy benefits | $ | — | $ | — | $ | 38,133 | $ | — | $ | 38,133 | ||||||||||
Policyholder account balances | — | — | 17,907 | — | 17,907 | |||||||||||||||
Liability for policy and contract claims | — | — | 11,915 | — | 11,915 | |||||||||||||||
Unearned premiums | — | — | 614 | — | 614 | |||||||||||||||
Other liabilities | 144 | 6 | 1,318 | — | 1,468 | |||||||||||||||
Intercompany notes payable | — | 113 | 54 | (167 | ) | — | ||||||||||||||
Long-term borrowings | — | 1,031 | 742 | — | 1,773 | |||||||||||||||
Separate account liabilities | — | — | 4,683 | — | 4,683 | |||||||||||||||
Liabilities related to discontinued operations | — | 1 | 3 | — | 4 | |||||||||||||||
Total liabilities | 144 | 1,151 | 75,369 | (167 | ) | 76,497 | ||||||||||||||
Equity: | ||||||||||||||||||||
Common stock | 1 | — | 4 | (4 | ) | 1 | ||||||||||||||
Additional paid-in capital | 11,859 | 12,728 | 18,144 | (30,872 | ) | 11,859 | ||||||||||||||
Accumulated other comprehensive income (loss) | (145 | ) | (144 | ) | (52 | ) | 196 | (145 | ) | |||||||||||
Retained earnings | 2,820 | (742 | ) | (6,290 | ) | 7,032 | 2,820 | |||||||||||||
Treasury stock, at cost | (2,715 | ) | — | — | — | (2,715 | ) | |||||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity | 11,820 | 11,842 | 11,806 | (23,648 | ) | 11,820 | ||||||||||||||
Noncontrolling interests | — | — | 1,051 | (300 | ) | 751 | ||||||||||||||
Total equity | 11,820 | 11,842 | 12,857 | (23,948 | ) | 12,571 | ||||||||||||||
Total liabilities and equity | $ | 11,964 | $ | 12,993 | $ | 88,226 | $ | (24,115 | ) | $ | 89,068 | |||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,611 and allowance for credit losses of $—) | $ | — | $ | — | $ | 60,480 | $ | — | $ | 60,480 | ||||||||||
Equity securities, at fair value | — | — | 198 | — | 198 | |||||||||||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4) | — | — | 6,856 | — | 6,856 | |||||||||||||||
Less: Allowance for credit losses | — | — | (26 | ) | — | (26 | ) | |||||||||||||
Commercial mortgage loans, net | — | — | 6,830 | — | 6,830 | |||||||||||||||
Policy loans | — | — | 2,050 | — | 2,050 | |||||||||||||||
Limited partnerships | — | — | 1,900 | — | 1,900 | |||||||||||||||
Other invested assets | — | 27 | 793 | — | 820 | |||||||||||||||
Investments in subsidiaries | 15,517 | 15,626 | — | (31,143 | ) | — | ||||||||||||||
Total investments | 15,517 | 15,653 | 72,251 | (31,143 | ) | 72,278 | ||||||||||||||
Cash, cash equivalents and restricted cash | — | 331 | 1,240 | — | 1,571 | |||||||||||||||
Accrued investment income | — | — | 647 | — | 647 | |||||||||||||||
Deferred acquisition costs | — | — | 1,146 | — | 1,146 | |||||||||||||||
Intangible assets | — | — | 143 | — | 143 | |||||||||||||||
Reinsurance recoverable | — | — | 16,868 | — | 16,868 | |||||||||||||||
Less: Allowance for credit losses | — | — | (55 | ) | — | (55 | ) | |||||||||||||
Reinsurance recoverable, net | — | — | 16,813 | — | 16,813 | |||||||||||||||
Other assets | 5 | 207 | 176 | — | 388 | |||||||||||||||
Intercompany notes receivable | — | 15 | 1 | (16 | ) | — | ||||||||||||||
Deferred tax assets | 4 | 555 | (440 | ) | — | 119 | ||||||||||||||
Separate account assets | — | — | 6,066 | — | 6,066 | |||||||||||||||
Total assets | $ | 15,526 | $ | 16,761 | $ | 98,043 | $ | (31,159 | ) | $ | 99,171 | |||||||||
Liabilities and equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Future policy benefits | $ | — | $ | — | $ | 41,528 | $ | — | $ | 41,528 | ||||||||||
Policyholder account balances | — | — | 19,354 | — | 19,354 | |||||||||||||||
Liability for policy and contract claims | — | — | 11,841 | — | 11,841 | |||||||||||||||
Unearned premiums | — | — | 672 | — | 672 | |||||||||||||||
Other liabilities | 4 | 64 | 1,443 | — | 1,511 | |||||||||||||||
Intercompany notes payable | 12 | 1 | 3 | (16 | ) | — | ||||||||||||||
Long-term borrowings | — | 1,159 | 740 | — | 1,899 | |||||||||||||||
Separate account liabilities | — | — | 6,066 | — | 6,066 | |||||||||||||||
Liabilities related to discontinued operations | — | 30 | 4 | — | 34 | |||||||||||||||
Total liabilities | 16 | 1,254 | 81,651 | (16 | ) | 82,905 | ||||||||||||||
Equity: | ||||||||||||||||||||
Common stock | 1 | — | 4 | (4 | ) | 1 | ||||||||||||||
Additional paid-in capital | 11,858 | 12,724 | 18,135 | (30,859 | ) | 11,858 | ||||||||||||||
Accumulated other comprehensive income (loss) | 3,861 | 3,861 | 3,906 | (7,767 | ) | 3,861 | ||||||||||||||
Retained earnings | 2,490 | (1,078 | ) | (6,709 | ) | 7,787 | 2,490 | |||||||||||||
Treasury stock, at cost | (2,700 | ) | — | — | — | (2,700 | ) | |||||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity | 15,510 | 15,507 | 15,336 | (30,843 | ) | 15,510 | ||||||||||||||
Noncontrolling interests | — | — | 1,056 | (300 | ) | 756 | ||||||||||||||
Total equity | 15,510 | 15,507 | 16,392 | (31,143 | ) | 16,266 | ||||||||||||||
Total liabilities and equity | $ | 15,526 | $ | 16,761 | $ | 98,043 | $ | (31,159 | ) | $ | 99,171 | |||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 1,858 | $ | — | $ | 1,858 | ||||||||||
Net investment income | (2 | ) | 1 | 1,552 | — | 1,551 | ||||||||||||||
Net investment gains (losses) | — | — | 36 | — | 36 | |||||||||||||||
Policy fees and other income | — | — | 328 | — | 328 | |||||||||||||||
Total revenues | (2 | ) | 1 | 3,774 | — | 3,773 | ||||||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 1,903 | — | 1,903 | |||||||||||||||
Interest credited | — | — | 250 | — | 250 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 15 | 4 | 841 | — | 860 | |||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 176 | — | 176 | |||||||||||||||
Interest expense | — | 26 | 26 | — | 52 | |||||||||||||||
Total benefits and expenses | 15 | 30 | 3,196 | — | 3,241 | |||||||||||||||
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries | (17 | ) | (29 | ) | 578 | — | 532 | |||||||||||||
Provision (benefit) for income taxes | — | (6 | ) | 137 | — | 131 | ||||||||||||||
Equity in income of subsidiaries | 347 | 374 | — | (721 | ) | — | ||||||||||||||
Income from continuing operations | 330 | 351 | 441 | (721 | ) | 401 | ||||||||||||||
Loss from discontinued operations, net of taxes | — | (3 | ) | — | — | (3 | ) | |||||||||||||
Net income | 330 | 348 | 441 | (721 | ) | 398 | ||||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | — | — | 68 | — | 68 | |||||||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | — | — | — | — | |||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 330 | $ | 348 | $ | 373 | $ | (721 | ) | $ | 330 | |||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 3,435 | $ | — | $ | 3,435 | ||||||||||
Net investment income | (3 | ) | — | 3,373 | — | 3,370 | ||||||||||||||
Net investment gains (losses) | — | — | 323 | — | 323 | |||||||||||||||
Policy fees and other income | — | (1 | ) | 703 | 2 | 704 | ||||||||||||||
Total revenues | (3 | ) | (1 | ) | 7,834 | 2 | 7,832 | |||||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 4,383 | — | 4,383 | |||||||||||||||
Interest credited | — | — | 508 | — | 508 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 25 | 44 | 1,154 | — | 1,223 | |||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 377 | — | 377 | |||||||||||||||
Interest expense | (1 | ) | 109 | 50 | 2 | 160 | ||||||||||||||
Total benefits and expenses | 24 | 153 | 6,472 | 2 | 6,651 | |||||||||||||||
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries | (27 | ) | (154 | ) | 1,362 | — | 1,181 | |||||||||||||
Provision (benefit) for income taxes | (1 | ) | (33 | ) | 297 | — | 263 | |||||||||||||
Equity in income of subsidiaries | 930 | 1,041 | — | (1,971 | ) | — | ||||||||||||||
Income from continuing operations | 904 | 920 | 1,065 | (1,971 | ) | 918 | ||||||||||||||
Income from discontinued operations, net of taxes | — | 13 | 14 | — | 27 | |||||||||||||||
Net income | 904 | 933 | 1,079 | (1,971 | ) | 945 | ||||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | — | — | 33 | — | 33 | |||||||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | — | 8 | — | 8 | |||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 904 | $ | 933 | $ | 1,038 | $ | (1,971 | ) | $ | 904 | |||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income | $ | 330 | $ | 348 | $ | 441 | $ | (721 | ) | $ | 398 | |||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses | (3,414 | ) | (3,413 | ) | (3,433 | ) | 6,777 | (3,483 | ) | |||||||||||
Net unrealized gains (losses) on securities with an allowance for credit losses | — | — | — | — | — | |||||||||||||||
Derivatives qualifying as hedges | (580 | ) | (580 | ) | (582 | ) | 1,162 | (580 | ) | |||||||||||
Foreign currency translation and other adjustments | (12 | ) | (12 | ) | (12 | ) | 24 | (12 | ) | |||||||||||
Total other comprehensive income (loss) | (4,006 | ) | (4,005 | ) | (4,027 | ) | 7,963 | (4,075 | ) | |||||||||||
Total comprehensive loss | (3,676 | ) | (3,657 | ) | (3,586 | ) | 7,242 | (3,677 | ) | |||||||||||
Less: comprehensive loss attributable to noncontrolling interests | — | — | (1 | ) | — | (1 | ) | |||||||||||||
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders | $ | (3,676 | ) | $ | (3,657 | ) | $ | (3,585 | ) | $ | 7,242 | $ | (3,676 | ) | ||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income | $ | 904 | $ | 933 | $ | 1,079 | $ | (1,971 | ) | $ | 945 | |||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses | (334 | ) | (335 | ) | (371 | ) | 670 | (370 | ) | |||||||||||
Net unrealized gains (losses) on securities with an allowance for credit losses | 6 | 6 | 6 | (12 | ) | 6 | ||||||||||||||
Derivatives qualifying as hedges | (186 | ) | (186 | ) | (215 | ) | 401 | (186 | ) | |||||||||||
Foreign currency translation and other adjustments | (24 | ) | (24 | ) | 149 | 47 | 148 | |||||||||||||
Total other comprehensive income (loss) | (538 | ) | (539 | ) | (431 | ) | 1,106 | (402 | ) | |||||||||||
Total comprehensive income | 366 | 394 | 648 | (865 | ) | 543 | ||||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 177 | — | 177 | |||||||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ | 366 | $ | 394 | $ | 471 | $ | (865 | ) | $ | 366 | |||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from (used by) operating activities: | ||||||||||||||||||||
Net income | $ | 330 | $ | 348 | $ | 441 | $ | (721 | ) | $ | 398 | |||||||||
Less loss from discontinued operations, net of taxes | — | 3 | — | — | 3 | |||||||||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities: | ||||||||||||||||||||
Equity in income from subsidiaries | (347 | ) | (374 | ) | — | 721 | — | |||||||||||||
Dividends from subsidiaries | — | 19 | (19 | ) | — | — | ||||||||||||||
Amortization of fixed maturity securities discounts and premiums | — | 1 | (85 | ) | — | (84 | ) | |||||||||||||
Net investment (gains) losses | — | — | (36 | ) | — | (36 | ) | |||||||||||||
Charges assessed to policyholders | — | — | (292 | ) | — | (292 | ) | |||||||||||||
Acquisition costs deferred | — | — | (1 | ) | — | (1 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 176 | — | 176 | |||||||||||||||
Deferred income taxes | 3 | 75 | 50 | — | 128 | |||||||||||||||
Derivative instruments, limited partnerships and other | — | 4 | (167 | ) | — | (163 | ) | |||||||||||||
Stock-based compensation expense | 15 | — | 5 | — | 20 | |||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | 4 | 2 | (76 | ) | — | (70 | ) | |||||||||||||
Insurance reserves | — | — | 494 | — | 494 | |||||||||||||||
Current tax liabilities | 140 | (54 | ) | (86 | ) | — | — | |||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | 6 | (3 | ) | (208 | ) | — | (205 | ) | ||||||||||||
Cash used by operating activities—discontinued operations | — | (31 | ) | — | — | (31 | ) | |||||||||||||
Net cash from (used by) operating activities | 151 | (10 | ) | 196 | — | 337 | ||||||||||||||
Cash flows from (used by) investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | — | 1,495 | — | 1,495 | |||||||||||||||
Commercial mortgage loans | — | — | 314 | — | 314 | |||||||||||||||
Limited partnerships and other invested assets | — | — | 99 | — | 99 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 1,302 | — | 1,302 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (1,800 | ) | — | (1,800 | ) | |||||||||||||
Commercial mortgage loans | — | — | (568 | ) | — | (568 | ) | |||||||||||||
Limited partnerships and other invested assets | — | — | (297 | ) | — | (297 | ) | |||||||||||||
Short-term investments, net | — | (25 | ) | 1 | — | (24 | ) | |||||||||||||
Policy loans, net | — | — | 14 | — | 14 | |||||||||||||||
Intercompany notes receivable, net | (113 | ) | (39 | ) | 1 | 151 | — | |||||||||||||
Capital contributions to subsidiaries | (2 | ) | (6 | ) | 8 | — | — | |||||||||||||
Net cash from (used by) investing activities | (115 | ) | (70 | ) | 569 | 151 | 535 | |||||||||||||
| �� | ||||||||||||||||||||
Cash flows from (used by) financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 314 | — | 314 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (779 | ) | — | (779 | ) | |||||||||||||
Repayment and repurchase of long-term debt | — | (130 | ) | — | — | (130 | ) | |||||||||||||
Intercompany notes payable, net | (12 | ) | 112 | 51 | (151 | ) | — | |||||||||||||
Dividends paid to noncontrolling interests | — | — | (4 | ) | — | (4 | ) | |||||||||||||
Treasury stock acquired in connection with share repurchases | (15 | ) | — | — | — | (15 | ) | |||||||||||||
Other, net | (9 | ) | (55 | ) | (41 | ) | — | (105 | ) | |||||||||||
Net cash used by financing activities | (36 | ) | (73 | ) | (459 | ) | (151 | ) | (719 | ) | ||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | — | — | — | — | — | |||||||||||||||
Net change in cash, cash equivalents and restricted cash | — | (153 | ) | 306 | — | 153 | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 331 | 1,240 | — | 1,571 | |||||||||||||||
Cash, cash equivalents and restricted cash at end of period | — | 178 | 1,546 | — | 1,724 | |||||||||||||||
Less cash, cash equivalents and restricted cash of discontinued operations at end of period | — | — | — | — | — | |||||||||||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | — | $ | 178 | $ | 1,546 | $ | — | $ | 1,724 | ||||||||||
(Amounts in millions) | Parent Guarantor | Issuer | All Other Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from (used by) operating activities: | ||||||||||||||||||||
Net income | $ | 904 | $ | 933 | $ | 1,079 | $ | (1,971 | ) | $ | 945 | |||||||||
Less income from discontinued operations, net of taxes | — | (13 | ) | (14 | ) | — | (27 | ) | ||||||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities: | ||||||||||||||||||||
Equity in income from subsidiaries | (930 | ) | (1,041 | ) | — | 1,971 | — | |||||||||||||
Dividends from subsidiaries | — | 552 | (552 | ) | — | — | ||||||||||||||
Amortization of fixed maturity securities discounts and premiums | — | 6 | (182 | ) | — | (176 | ) | |||||||||||||
Net investment (gains) losses | — | — | (323 | ) | — | (323 | ) | |||||||||||||
Charges assessed to policyholders | — | — | (620 | ) | — | (620 | ) | |||||||||||||
Acquisition costs deferred | — | — | (8 | ) | — | (8 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 377 | — | 377 | |||||||||||||||
Deferred income taxes | — | 341 | (51 | ) | — | 290 | ||||||||||||||
Derivative instruments, limited partnerships and other | — | 75 | (434 | ) | — | (359 | ) | |||||||||||||
Stock-based compensation expense | 40 | — | — | — | 40 | |||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | (1 | ) | 9 | (137 | ) | — | (129 | ) | ||||||||||||
Insurance reserves | — | — | 642 | — | 642 | |||||||||||||||
Current tax liabilities | (5 | ) | 17 | (46 | ) | — | (34 | ) | ||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | (13 | ) | (40 | ) | 363 | — | 310 | |||||||||||||
Cash from (used by) operating activities—discontinued operations | — | (564 | ) | 73 | — | (491 | ) | |||||||||||||
Net cash from (used by) operating activities | (5 | ) | 275 | 167 | — | 437 | ||||||||||||||
Cash flows from (used by) investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | — | 4,162 | — | 4,162 | |||||||||||||||
Commercial mortgage loans | — | — | 874 | — | 874 | |||||||||||||||
Limited partnerships and other invested assets | — | — | 255 | — | 255 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 2,273 | — | 2,273 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (5,216 | ) | — | (5,216 | ) | |||||||||||||
Commercial mortgage loans | — | — | (963 | ) | — | (963 | ) | |||||||||||||
Limited partnerships and other invested assets | — | — | (767 | ) | — | (767 | ) | |||||||||||||
Short-term investments, net | — | — | 18 | — | 18 | |||||||||||||||
Policy loans, net | — | — | 57 | — | 57 | |||||||||||||||
Intercompany notes receivable, net | — | 4 | (1 | ) | (3 | ) | — | |||||||||||||
Capital contributions to subsidiaries | (2 | ) | — | 2 | — | — | ||||||||||||||
Proceeds from sale of business, net of cash transferred | — | — | 270 | — | 270 | |||||||||||||||
Cash used by investing activities—discontinued operations | — | — | (67 | ) | — | (67 | ) | |||||||||||||
Net cash from (used by) investing activities | (2 | ) | 4 | 897 | (3 | ) | 896 | |||||||||||||
Cash flows from (used by) financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 669 | — | 669 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (2,071 | ) | — | (2,071 | ) | |||||||||||||
Repayment and repurchase of long-term debt | — | (1,541 | ) | — | — | (1,541 | ) | |||||||||||||
Intercompany notes payable, net | 12 | 1 | (16 | ) | 3 | — | ||||||||||||||
Proceeds from sale of subsidiary shares to noncontrolling interests | — | 529 | — | — | 529 | |||||||||||||||
Dividends paid to noncontrolling interests | — | — | (37 | ) | — | (37 | ) | |||||||||||||
Other, net | (5 | ) | (15 | ) | 52 | — | 32 | |||||||||||||
Net cash from (used by) financing activities | 7 | (1,026 | ) | (1,403 | ) | 3 | (2,419 | ) | ||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) related to discontinued operations) | — | — | 1 | — | 1 | |||||||||||||||
Net change in cash, cash equivalents and restricted cash | — | (747 | ) | (338 | ) | — | (1,085 | ) | ||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 1,078 | 1,578 | — | 2,656 | |||||||||||||||
Cash, cash equivalents and restricted cash at end of period | — | 331 | 1,240 | — | 1,571 | |||||||||||||||
Less cash, cash equivalents and restricted cash of discontinued operations at end of period | — | — | — | — | — | |||||||||||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | — | $ | 331 | $ | 1,240 | $ | — | $ | 1,571 | ||||||||||
Interest2021, except as described below. As a result of the increase in interest rates remain at historically low levels despiteduring the factsix months ended June 30, 2022, we have experienced a significant decrease in the fair value of our fixed maturity securities. Due to the increase in interest rates during the six months ended June 30, 2022 and the expectation that interest rates will continue to rise throughout the remainder of 2022 driven by U.S. Federal Reserve has raised its benchmark lendingmonetary tightening, we have updated our interest rate two times in 2017 and market expectations remain for an additional rate increase during 2017. Despitesensitivity analysis as of June 30, 2022. In addition to the Federal Reserve’s actions, U.S. Treasury yields were lower throughout the third quarter of 2017 but rose significantly in the last week of September 2017, in response to potential tax reform. However,pro-growth stimulus policies are still uncertain and weaker inflation data has investors more cautious on the direction of longer term interest rates. Seeupdated sensitivity analysis below, 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.
We are exposedconditions, including changes in interest rates.
2022.
2022
(Dollar amounts in millions, except share amounts) | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced program | Approximate dollar amount of shares that may yet be purchased under the program (1) | ||||||||||||
May 1, 2022 through May 31, 2022 | 3,869,494 | $ | 3.88 | 3,869,494 | $ | 335 | ||||||||||
Total | 3,869,494 | 3,869,494 | ||||||||||||||
| § | Management contract or compensatory plan or arrangement. |
GENWORTH FINANCIAL, INC. (Registrant) | ||||||
| Date: | ||||||
| ||||||
By: | /s/ Jerome T. Upton | |||||
Jerome T. Upton | ||||||
Senior Vice President and Controller (Principal Accounting Officer) | ||||||
176