0001276520 gnw:OtherIndustriesMember us-gaap:FixedMaturitiesMember us-gaap:DomesticCorporateDebtSecuritiesMember 2020-03-31 0001276520 us-gaap:FixedMaturitiesMember us-gaap:ForeignCorporateDebtSecuritiesMember gnw:EnergyMember 2019-03-31
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 80-0873306 | |
(State or
incorporation or | (I.R.S. Employer Identification Number) | |
6620 West Broad Street Richmond , Virginia | 23230 | |
(Address of | (Zip Code) |
telephone number, including area code)(804)Telephone Number, Including Area Code)and posted pursuant to Rule 405 ofRegulation (§and post such files). Yesdefinitiondefinitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule (Check one): ☐ Non-accelerated filer ☐ Smaller reporting company ☐ ☐ 24, 2019, 503,314,344
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Item 1. | ||||||||
3 | ||||||||
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6 | ||||||||
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Item 2. | 67 | |||||||
Item 3. | 140 | |||||||
Item 4. | 140 | |||||||
141 | ||||||||
Item | 141 | |||||||
Item 1A. | 141 | |||||||
Item 6. | 142 | |||||||
143 |
March 31, | December 31, | |||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at fair value | $ | 61,360 | $ | 59,661 | ||||
Equity securities, at fair value | 635 | 655 | ||||||
Commercial mortgage loans ($59 and $62 are restricted as of March 31, 2019 and December 31, 2018, respectively, related to a securitization entity) | 6,988 | 6,749 | ||||||
Policy loans | 1,994 | 1,861 | ||||||
Other invested assets | 1,208 | 1,188 | ||||||
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Total investments | 72,185 | 70,114 | ||||||
Cash, cash equivalents and restricted cash | 2,221 | 2,177 | ||||||
Accrued investment income | 726 | 675 | ||||||
Deferred acquisition costs | 2,219 | 3,263 | ||||||
Intangible assets and goodwill | 265 | 347 | ||||||
Reinsurance recoverable | 17,257 | 17,278 | ||||||
Other assets | 532 | 474 | ||||||
Deferred tax asset | 573 | 736 | ||||||
Separate account assets | 6,210 | 5,859 | ||||||
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Total assets | $ | 102,188 | $ | 100,923 | ||||
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Liabilities and equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 38,369 | $ | 37,940 | ||||
Policyholder account balances | 22,651 | 22,968 | ||||||
Liability for policy and contract claims | 10,536 | 10,379 | ||||||
Unearned premiums | 3,482 | 3,546 | ||||||
Other liabilities | 1,682 | 1,682 | ||||||
Non-recourse funding obligations | 311 | 311 | ||||||
Long-term borrowings | 4,035 | 4,025 | ||||||
Deferred tax liability | 30 | 24 | ||||||
Separate account liabilities | 6,210 | 5,859 | ||||||
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Total liabilities | 87,306 | 86,734 | ||||||
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Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 591 million and 589 million shares issued as of March 31, 2019 and December 31, 2018, respectively; 503 million and 501 million shares outstanding as of March 31, 2019 and December 31, 2018, respectively | 1 | 1 | ||||||
Additionalpaid-in capital | 11,989 | 11,987 | ||||||
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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 | 932 | 585 | ||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 11 | 10 | ||||||
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Net unrealized investment gains (losses) | 943 | 595 | ||||||
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Derivatives qualifying as hedges | 1,850 | 1,781 | ||||||
Foreign currency translation and other adjustments | (301 | ) | (332 | ) | ||||
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Total accumulated other comprehensive income (loss) | 2,492 | 2,044 | ||||||
Retained earnings | 1,292 | 1,118 | ||||||
Treasury stock, at cost (88 million shares as of March 31, 2019 and December 31, 2018) | (2,700 | ) | (2,700 | ) | ||||
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Total Genworth Financial, Inc.’s stockholders’ equity | 13,074 | 12,450 | ||||||
Noncontrolling interests | 1,808 | 1,739 | ||||||
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Total equity | 14,882 | 14,189 | ||||||
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Total liabilities and equity | $ | 102,188 | $ | 100,923 | ||||
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March 31, 2020 | December 31, 2019 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost of $54,136 and allowance for credit losses of $— as of March 31, 2020) | $ | 59,051 | $ | 60,339 | ||||
Equity securities, at fair value | 188 | 239 | ||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of March 31, 2020 and December 31, 2019) | 6,944 | 6,976 | ||||||
Less: Allowance for credit losses | (29 | ) | (13 | ) | ||||
Commercial mortgage loans, net | 6,915 | 6,963 | ||||||
Policy loans | 2,052 | 2,058 | ||||||
Other invested assets | 2,465 | 1,632 | ||||||
Total investments | 70,671 | 71,231 | ||||||
Cash, cash equivalents and restricted cash | 2,483 | 3,341 | ||||||
Accrued investment income | 707 | 654 | ||||||
Deferred acquisition costs | 1,898 | 1,836 | ||||||
Intangible assets and goodwill | 263 | 201 | ||||||
Reinsurance recoverable | 17,122 | 17,103 | ||||||
Less: Allowance for credit losses | (42 | ) | — | |||||
Reinsurance recoverable, net | 17,080 | 17,103 | ||||||
Other assets | 456 | 443 | ||||||
Deferred tax asset | 319 | 425 | ||||||
Separate account assets | 4,967 | 6,108 | ||||||
Total assets | $ | 98,844 | $ | 101,342 | ||||
Liabilities and equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 39,339 | $ | 40,384 | ||||
Policyholder account balances | 22,313 | 22,217 | ||||||
Liability for policy and contract claims | 11,132 | 10,958 | ||||||
Unearned premiums | 1,722 | 1,893 | ||||||
Other liabilities | 1,686 | 1,562 | ||||||
Non-recourse funding obligations | — | 311 | ||||||
Long-term borrowings | 2,851 | 3,277 | ||||||
Separate account liabilities | 4,967 | 6,108 | ||||||
Total liabilities | 84,010 | 86,710 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 593 million and 592 million shares issued as of March 31, 2020 and December 31, 2019, respectively; 505 million and 504 million shares outstanding as of March 31, 2020 and December 31, 2019, respectively | 1 | 1 | ||||||
Additional paid-in capital | 11,993 | 11,990 | ||||||
Accumulated other comprehensive income (loss) | 3,815 | 3,433 | ||||||
Retained earnings | 1,340 | 1,461 | ||||||
Treasury stock, at cost (88 million shares as of March 31, 2020 and December 31, 2019) | (2,700 | ) | (2,700 | ) | ||||
Total Genworth Financial, Inc.’s stockholders’ equity | 14,449 | 14,185 | ||||||
Noncontrolling interests | 385 | 447 | ||||||
Total equity | 14,834 | 14,632 | ||||||
Total liabilities and equity | $ | 98,844 | $ | 101,342 | ||||
Three months ended | ||||||||
March 31, | ||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Premiums | $ | 1,114 | $ | 1,140 | ||||
Net investment income | 829 | 804 | ||||||
Net investment gains (losses) | 74 | (31 | ) | |||||
Policy fees and other income | 187 | 202 | ||||||
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Total revenues | 2,204 | 2,115 | ||||||
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Benefits and expenses: | ||||||||
Benefits and other changes in policy reserves | 1,301 | 1,311 | ||||||
Interest credited | 147 | 156 | ||||||
Acquisition and operating expenses, net of deferrals | 251 | 240 | ||||||
Amortization of deferred acquisition costs and intangibles | 91 | 104 | ||||||
Interest expense | 72 | 76 | ||||||
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Total benefits and expenses | 1,862 | 1,887 | ||||||
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Income before income taxes | 342 | 228 | ||||||
Provision for income taxes | 112 | 63 | ||||||
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Net income | 230 | 165 | ||||||
Less: net income attributable to noncontrolling interests | 56 | 53 | ||||||
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Net income available to Genworth Financial, Inc.’s common stockholders | $ | 174 | $ | 112 | ||||
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Net income available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||
Basic | $ | 0.35 | $ | 0.22 | ||||
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Diluted | $ | 0.34 | $ | 0.22 | ||||
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Weighted-average common shares outstanding: | ||||||||
Basic | 501.2 | 499.6 | ||||||
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Diluted | 508.6 | 502.7 | ||||||
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Supplemental disclosures: | ||||||||
Total other-than-temporary impairments | $ | — | $ | — | ||||
Portion of other-than-temporary impairments included in other comprehensive income (loss) | — | — | ||||||
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Net other-than-temporary impairments | — | — | ||||||
Other investments gains (losses) | 74 | (31 | ) | |||||
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Total net investment gains (losses) | $ | 74 | $ | (31 | ) | |||
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Three months ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenues: | ||||||||
Premiums | $ | 1,015 | $ | 988 | ||||
Net investment income | 793 | 794 | ||||||
Net investment gains (losses) | (152 | ) | 75 | |||||
Policy fees and other income | 181 | 187 | ||||||
Total revenues | 1,837 | 2,044 | ||||||
Benefits and expenses: | ||||||||
Benefits and other changes in policy reserves | 1,361 | 1,282 | ||||||
Interest credited | 141 | 147 | ||||||
Acquisition and operating expenses, net of deferrals | 249 | 237 | ||||||
Amortization of deferred acquisition costs and intangibles | 116 | 81 | ||||||
Interest expense | 52 | 60 | ||||||
Total benefits and expenses | 1,919 | 1,807 | ||||||
Income (loss) from continuing operations before income taxes | (82 | ) | 237 | |||||
Provision (benefit) for income taxes | (10 | ) | 69 | |||||
Income (loss) from continuing operations | (72 | ) | 168 | |||||
Income from discontinued operations, net of taxes | — | 62 | ||||||
Net income (loss) | (72 | ) | 230 | |||||
Less: net income (loss) from continuing operations attributable to noncontrolling interests | (6 | ) | 20 | |||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | 36 | ||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (66 | ) | $ | 174 | |||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders | (66 | ) | 148 | |||||
Income from discontinued operations available to Genworth Financial, Inc.’s common common stockholders | — | 26 | ||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (66 | ) | $ | 174 | |||
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||
Basic | $ | (0.13 | ) | $ | 0.29 | |||
Diluted | $ | (0.13 | ) | $ | 0.29 | |||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||
Basic | $ | (0.13 | ) | $ | 0.35 | |||
Diluted | $ | (0.13 | ) | $ | 0.34 | |||
Weighted-average common shares outstanding: | ||||||||
Basic | 504.3 | 501.2 | ||||||
Diluted | 504.3 | 508.6 | ||||||
Three months ended | ||||||||
March 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | 230 | $ | 165 | ||||
Other comprehensive income (loss), net of taxes: | ||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 379 | (341 | ) | |||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 1 | — | ||||||
Derivatives qualifying as hedges | 69 | (152 | ) | |||||
Foreign currency translation and other adjustments | 54 | (87 | ) | |||||
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Total other comprehensive income (loss) | 503 | (580 | ) | |||||
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Total comprehensive income (loss) | 733 | (415 | ) | |||||
Less: comprehensive income attributable to noncontrolling interests | 111 | 4 | ||||||
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Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 622 | $ | (419 | ) | |||
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�� | ||||||||
Three months ended March 31, | ||||||||
2020 | 2019 | |||||||
Net income (loss) | $ (72 | ) | $ 230 | |||||
Other comprehensive income (loss), net of taxes: | ||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses | (320 | ) | — | |||||
Net unrealized gains (losses) on securities with an allowance for credit losses | — | — | ||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | — | 379 | ||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | — | 1 | ||||||
Derivatives qualifying as hedges | 753 | 69 | ||||||
Foreign currency translation and other adjustments | (98 | ) | 54 | |||||
Total other comprehensive income (loss) | 335 | 503 | ||||||
Total comprehensive income | 263 | 733 | ||||||
Less: comprehensive income (loss) attributable to noncontrolling interests | (53 | ) | 111 | |||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ 316 | $ 622 | ||||||
Total | ||||||||||||||||||||||||||||||||
Genworth | ||||||||||||||||||||||||||||||||
Accumulated | Financial, | |||||||||||||||||||||||||||||||
Additional | other | Treasury | Inc.’s | |||||||||||||||||||||||||||||
Common | paid-in | comprehensive | Retained | stock, at | stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||
stock | capital | income (loss) | earnings | cost | equity | interests | equity | |||||||||||||||||||||||||
Balances as of December 31, 2018 | $ | 1 | $ | 11,987 | $ | 2,044 | $ | 1,118 | $ | (2,700 | ) | $ | 12,450 | $ | 1,739 | $ | 14,189 | |||||||||||||||
Repurchase of subsidiary shares | — | — | — | — | — | — | (12 | ) | (12 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 174 | — | 174 | 56 | 230 | ||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | 448 | — | — | 448 | 55 | 503 | ||||||||||||||||||||||||
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Total comprehensive income | 622 | 111 | 733 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (28 | ) | (28 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 2 | — | — | — | 2 | (2 | ) | — | |||||||||||||||||||||||
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Balances as of March 31, 2019 | $ | 1 | $ | 11,989 | $ | 2,492 | $ | 1,292 | $ | (2,700 | ) | $ | 13,074 | $ | 1,808 | $ | 14,882 | |||||||||||||||
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Balances as of December 31, 2017 | $ | 1 | $ | 11,977 | $ | 3,027 | $ | 1,113 | $ | (2,700 | ) | $ | 13,418 | $ | 1,910 | $ | 15,328 | |||||||||||||||
Cumulative effect of change in accounting, net of taxes | — | — | 131 | (114 | ) | — | 17 | — | 17 | |||||||||||||||||||||||
Repurchase of subsidiary shares | — | — | — | — | — | — | (36 | ) | (36 | ) | ||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 112 | — | 112 | 53 | 165 | ||||||||||||||||||||||||
Other comprehensive loss, net of taxes | — | — | (531 | ) | — | — | (531 | ) | (49 | ) | (580 | ) | ||||||||||||||||||||
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Total comprehensive income (loss) | (419 | ) | 4 | (415 | ) | |||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (36 | ) | (36 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 2 | — | — | — | 2 | 2 | 4 | ||||||||||||||||||||||||
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Balances as of March 31, 2018 | $ | 1 | $ | 11,979 | $ | 2,627 | $ | 1,111 | $ | (2,700 | ) | $ | 13,018 | $ | 1,844 | $ | 14,862 | |||||||||||||||
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Three months ended March 31, 2020 | ||||||||||||||||||||||||||||||||
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, 2019 | $ | 1 | $ | 11,990 | $ | 3,433 | $ | 1,461 | $ | (2,700) | $ | 14,185 | $ | 447 | $ | 14,632 | ||||||||||||||||
Cumulative effect of change in accounting, net of taxes | — | — | — | (55 | ) | — | (55 | ) | — | (55 | ) | |||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net loss | — | — | — | (66 | ) | — | (66 | ) | (6 | ) | (72 | ) | ||||||||||||||||||||
Other comprehensive income (loss), net of taxes | — | — | 382 | — | — | 382 | (47 | ) | 335 | |||||||||||||||||||||||
Total comprehensive income (loss) | 316 | (53 | ) | 263 | ||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (9 | ) | (9 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 3 | — | — | — | 3 | — | 3 | ||||||||||||||||||||||||
Balances as of March 31, 2020 | $ | 1 | $ | 11,993 | $ | 3,815 | $ | 1,340 | $ | (2,700 | ) | $ | 14,449 | $ | 385 | $ | 14,834 | |||||||||||||||
Three months ended March 31, 2019 | ||||||||||||||||||||||||||||||||
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, 2018 | $ | 1 | $ | 11,987 | $ | 2,044 | $ | 1,118 | $ | (2,700 | ) | $ | 12,450 | $ | 1,739 | $ | 14,189 | |||||||||||||||
Repurchase of subsidiary shares | — | — | — | — | — | — | (12 | ) | (12 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 174 | — | 174 | 56 | 230 | ||||||||||||||||||||||||
Other comprehensive income, net of taxes | — | — | 448 | — | — | 448 | 55 | 503 | ||||||||||||||||||||||||
Total comprehensive income | 622 | 111 | 733 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | — | — | — | — | — | — | (28 | ) | (28 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | — | 2 | — | — | — | 2 | (2 | ) | — | |||||||||||||||||||||||
Balances as of March 31, 2019 | $ | 1 | $ | 11,989 | $ | 2,492 | $ | 1,292 | $ | (2,700 | ) | $ | 13,074 | $ | 1,808 | $ | 14,882 | |||||||||||||||
Three months ended | ||||||||
March 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 230 | $ | 165 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of fixed maturity securities discounts and premiums | (16 | ) | (25 | ) | ||||
Net investment (gains) losses | (74 | ) | 31 | |||||
Charges assessed to policyholders | (165 | ) | (178 | ) | ||||
Acquisition costs deferred | (17 | ) | (18 | ) | ||||
Amortization of deferred acquisition costs and intangibles | 91 | 104 | ||||||
Deferred income taxes | 75 | 26 | ||||||
Derivative instruments and limited partnerships | (30 | ) | (152 | ) | ||||
Stock-based compensation expense | 7 | 7 | ||||||
Change in certain assets and liabilities: | ||||||||
Accrued investment income and other assets | (258 | ) | (45 | ) | ||||
Insurance reserves | 301 | 377 | ||||||
Current tax liabilities | 8 | (39 | ) | |||||
Other liabilities, policy and contract claims and other policy-related balances | (18 | ) | (144 | ) | ||||
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Net cash from operating activities | 134 | 109 | ||||||
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Cash flows from (used by) investing activities: | ||||||||
Proceeds from maturities and repayments of investments: | ||||||||
Fixed maturity securities | 902 | 934 | ||||||
Commercial mortgage loans | 127 | 205 | ||||||
Restricted commercial mortgage loans related to a securitization entity | 3 | 8 | ||||||
Proceeds from sales of investments: | ||||||||
Fixed maturity and equity securities | 1,714 | 792 | ||||||
Purchases and originations of investments: | ||||||||
Fixed maturity and equity securities | (2,128 | ) | (2,013 | ) | ||||
Commercial mortgage loans | (370 | ) | (199 | ) | ||||
Other invested assets, net | 17 | 104 | ||||||
Policy loans, net | 12 | 2 | ||||||
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Net cash from (used by) investing activities | 277 | (167 | ) | |||||
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Cash flows from (used by) financing activities: | ||||||||
Deposits to universal life and investment contracts | 198 | 255 | ||||||
Withdrawals from universal life and investment contracts | (581 | ) | (591 | ) | ||||
Proceeds from issuance of long-term debt | — | 441 | ||||||
Repayment of borrowings related to a securitization entity | — | (8 | ) | |||||
Repurchase of subsidiary shares | (12 | ) | (36 | ) | ||||
Dividends paid to noncontrolling interests | (28 | ) | (36 | ) | ||||
Other, net | 48 | 22 | ||||||
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Net cash from (used by) financing activities | (375 | ) | 47 | |||||
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | 8 | (21 | ) | |||||
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Net change in cash, cash equivalents and restricted cash | 44 | (32 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 2,177 | 2,875 | ||||||
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Cash, cash equivalents and restricted cash at end of period | $ | 2,221 | $ | 2,843 | ||||
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Three months ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (72 | ) | $ | 230 | |||
Less income from discontinued operations, net of taxes | — | (62 | ) | |||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||
Amortization of fixed maturity securities discounts and premiums | (35 | ) | (18 | ) | ||||
Net investment (gains) losses | 152 | (75 | ) | |||||
Charges assessed to policyholders | (158 | ) | (165 | ) | ||||
Acquisition costs deferred | (4 | ) | (9 | ) | ||||
Amortization of deferred acquisition costs and intangibles | 116 | 81 | ||||||
Deferred income taxes | (11 | ) | 51 | |||||
Derivative instruments, limited partnerships and other | 347 | (32 | ) | |||||
Stock-based compensation expense | 11 | 6 | ||||||
Change in certain assets and liabilities: | ||||||||
Accrued investment income and other assets | (107 | ) | (242 | ) | ||||
Insurance reserves | 328 | 301 | ||||||
Current tax liabilities | (5 | ) | 9 | |||||
Other liabilities, policy and contract claims and other policy-related balances | 118 | 27 | ||||||
Cash from operating activities—discontinued operations | — | 32 | ||||||
Net cash from operating activities | 680 | 134 | ||||||
Cash flows from (used by) investing activities: | ||||||||
Proceeds from maturities and repayments of investments: | ||||||||
Fixed maturity securities | 921 | 871 | ||||||
Commercial mortgage loans | 139 | 130 | ||||||
Other invested assets | 34 | 20 | ||||||
Proceeds from sales of investments: | ||||||||
Fixed maturity and equity securities | 369 | 1,592 | ||||||
Purchases and originations of investments: | ||||||||
Fixed maturity and equity securities | (1,804 | ) | (1,976 | ) | ||||
Commercial mortgage loans | (107 | ) | (370 | ) | ||||
Other invested assets | (160 | ) | (94 | ) | ||||
Short-term investments, net | 48 | 98 | ||||||
Policy loans, net | 9 | 12 | ||||||
Cash used by investing activities—discontinued operations | — | (6 | ) | |||||
Net cash from (used by) investing activities | (551 | ) | 277 | |||||
Cash flows used by financing activities: | ||||||||
Deposits to universal life and investment contracts | 180 | 198 | ||||||
Withdrawals from universal life and investment contracts | (493 | ) | (581 | ) | ||||
Redemption of non-recourse funding obligations | (315 | ) | — | |||||
Repayment and repurchase of long-term debt | (420 | ) | — | |||||
Repurchase of subsidiary shares | — | (12 | ) | |||||
Dividends paid to noncontrolling interests | (9 | ) | (14 | ) | ||||
Other, net | 100 | 48 | ||||||
Cash used by financing activities—discontinued operations | — | (14 | ) | |||||
Net cash used by financing activities | (957 | ) | (375 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $— and $5 related to discontinued operations) | (30 | ) | 8 | |||||
Net change in cash, cash equivalents and restricted cash | (858 | ) | 44 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 3,341 | 2,177 | ||||||
Cash, cash equivalents and restricted cash at end of period | 2,483 | 2,221 | ||||||
Less cash, cash equivalents and restricted cash of discontinued operations at end of period | — | 201 | ||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 2,483 | $ | 2,020 | ||||
At a special meeting held on March 7, 2017, Genworth Financial’s stockholders voted on and approved a proposal to adopt the Merger Agreement. The closing of the transaction remains subject to other closing conditions and approvals.
conditions.
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businesses and discontinued operations.
On January 1, 2019, we adopted new accounting guidance related to accounting for nonemployee share-based payments. The guidance aligns the measurement and classification of share-based payments to nonemployees issued in exchange for goods or services with the guidance for share-based payments to employees, with certain exceptions. We adopted this new accounting guidance using the modified retrospective method. This guidance is consistent with our previous accounting practices and, accordingly, had no impact on our condensed consolidated financial statements at adoption.
On January 1, 2019, we adopted new accounting guidance related to shortening the amortization period of certain callable debt securities held 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. We adopted this new accounting guidance using the modified retrospective method, which had no significant impact on our condensed consolidated financial statements at adoption.
On January 1, 2019, we adopted new accounting guidance related to the accounting for leases. The new guidance generally requires lessees to recognize both aright-of-use asset and a corresponding lease liability on the balance sheet. We adopted this new accounting guidance using the effective date transition method, which
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
permits entities to apply the new lease standard using a modified retrospective transition approach at the date of adoption. As such, historical periods will continue to be measured and presented under the previous guidance while current and future periods will be subject to this new accounting guidance. The package of practical expedients was also elected upon adoption. Upon adoption we recorded a $60 millionright-of-use asset related to operating leases and a $63 million lease liability. In addition, we de-recognized accrued rent expense of $3 million recorded under the previous accounting guidance. Theright-of-use asset and the lease liability are included in other assets and other liabilities, respectively, but do not have a material impact on our condensed consolidated balance sheet as of March 31, 2019. The initial measurement of ourright-of-use asset had no significant initial direct costs, prepaid lease payments or lease incentives; therefore, a cumulative-effect adjustment was not recorded to the opening retained earnings balance as a result of the change in accounting principle.
Our leased assets are predominantly classified as operating leases and consist of office space in 14 locations primarily in the United States, Canada and Australia. Lease payments included in the calculation of our lease liability include fixed amounts contained within each rental agreement and variable lease payments that are based upon an index or rate. We have elected to combine lease andnon-lease components, as permitted under this new accounting guidance, as a result,non-lease components are included in the calculation of our lease liability as opposed to being separated and accounted for as consideration under the new revenue recognition standard. Our remaining lease terms range from 1 to 14 years and have a weighted-average remaining lease term of 7.6 years as of March 31, 2019. The implicit rate of our lease agreements was not readily determinable; therefore, we utilized our incremental borrowing rate to discount future lease payments. The weighted-average discount rate was 6.24% as of March 31, 2019.
Our aggregate annual rental expense for all leases under the previous guidance was approximately $11 million. Annual rental expense and future minimum lease payments are not expected to be materially different under this new accounting guidance.
Accounting Pronouncements Not Yet Adopted
In August 2018, the Financial Accounting Standards Board (“the FASB”) issued new accounting guidance that significantly changes the recognition and measurement of long-duration insurance contracts and expands disclosure requirements, which impacts our life insurance deferred acquisition costs (“DAC”) and liabilities. In accordance with the guidance, the more significant changes include:
assumptions will no longer belocked-in at contract inception and all cash flow assumptions used to estimate the liability for future policy benefits will be reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required;
changes in cash flow assumptions (except the discount rate) will be recorded in net income (loss) using a retrospective approach with a cumulativecatch-up adjustment by recalculating the net premium ratio (which will be capped at 100%) using actual historical and updated future cash flow assumptions;
the discount rate used to determine the liability for future policy benefits will be a current upper-medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean asingle-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes in the discount rate recorded in other comprehensive income (loss);
the provision for adverse deviation and the premium deficiency test will be eliminated;
market risk benefits associated with deposit-type contracts will be measured at fair value with changes recorded in net income (loss);
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the amortization method for DAC will generally be on a straight-line basis over the expected contract term; and
disclosures will be greatly expanded to include significant assumptions and product liability rollforwards.
The guidance is currently effective for us on January 1, 2021 using the modified retrospective method, with early adoption permitted. We are in process of evaluating the new guidance and the impact it will have on our condensed consolidated financial statements.
In August 2018, the FASB issued new accounting guidance related to disclosure requirements for defined benefit plans as part of itsthe Financial Accounting Standards Board’s (the “FASB”) disclosure framework project. The guidance adds, eliminates and modifies certain disclosure requirements for defined benefit pension and other postretirement benefit plans. TheWe adopted this new accounting guidance is currently effective for us on January 1, 2020 using the retrospective method, with early adoption permitted. We dowhich did not expect anyhave a significant impact from this guidance on our condensed consolidated financial statements and disclosures.
In August 2018, the FASB issued
In June 2016,or disclosures but may impact our process for assessing the FASB issuedeffectiveness of our cash flow hedging relationships, determined on an individual hedge basis, as we implement measures to transition away from LIBOR.
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions, except per share amounts) | 2019 | 2018 | ||||||
Weighted-average shares used in basic earnings per share calculations | 501.2 | 499.6 | ||||||
Potentially dilutive securities: | ||||||||
Stock options, restricted stock units and stock appreciation rights | 7.4 | 3.1 | ||||||
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Weighted-average shares used in diluted earnings per share calculations | 508.6 | 502.7 | ||||||
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Net income: | ||||||||
Net income | $ | 230 | $ | 165 | ||||
Less: net income attributable to noncontrolling interests | 56 | 53 | ||||||
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Net income available to Genworth Financial, Inc.’s common stockholders | $ | 174 | $ | 112 | ||||
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Basic earnings per share: | ||||||||
Net income | $ | 0.46 | $ | 0.33 | ||||
Less: net income attributable to noncontrolling interests | 0.11 | 0.11 | ||||||
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Net income available to Genworth Financial, Inc.’s common stockholders | $ | 0.35 | $ | 0.22 | ||||
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Diluted earnings per share: | ||||||||
Net income | $ | 0.45 | $ | 0.33 | ||||
Less: net income attributable to noncontrolling interests | 0.11 | 0.10 | ||||||
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Net income available to Genworth Financial, Inc.’s common stockholders(1) | $ | 0.34 | $ | 0.22 | ||||
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Three months March 31, | ||||||||
(Amounts in millions, except per share amounts) | 2020 | 2019 | ||||||
Weighted-average shares used in basic earnings (loss) per share calculations | 504.3 | 501.2 | ||||||
Potentially dilutive securities: | ||||||||
Stock options, restricted stock units and stock appreciation rights | — | 7.4 | ||||||
Weighted-average shares used in diluted earnings (loss) per share calculations (1) | 504.3 | 508.6 | ||||||
Income (loss) from continuing operations: | ||||||||
Income (loss) from continuing operations | $ | (72 | ) | $ | 168 | |||
Less: net income (loss) from continuing operations attributable to noncontrolling interests | (6 | ) | 20 | |||||
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | (66 | ) | $ | 148 | |||
Basic per share | $ | (0.13 | ) | $ | 0.29 | |||
Diluted per share | $ | (0.13 | ) | $ | 0.29 | |||
Income from discontinued operations: | ||||||||
Income from discontinued operations, net of taxes | $ | — | $ | 62 | ||||
Less: net income from discontinued operations attributable to noncontrolling interests | — | 36 | ||||||
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders | $ | — | $ | 26 | ||||
Basic per share | $ | — | $ | 0.05 | ||||
Diluted per share | $ | — | $ | 0.05 | ||||
Net income (loss): | ||||||||
Income (loss) from continuing operations | $ | (72 | ) | $ | 168 | |||
Income from discontinued operations, net of taxes | — | 62 | ||||||
Net income (loss) | (72 | ) | 230 | |||||
Less: net income (loss) attributable to noncontrolling interests | (6 | ) | 56 | |||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (66 | ) | $ | 174 | |||
Basic per share (2) | $ | (0.13 | ) | $ | 0.35 | |||
Diluted per share | $ | (0.13 | ) | $ | 0.34 |
(1) | Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 5.4 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, dilutive potential weighted-average common shares outstanding would have been 509.7 million. |
(2) | May not total due to whole number calculation. |
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Fixed maturity securities—taxable | $ | 643 | $ | 635 | ||||
Fixed maturitysecurities—non-taxable | 2 | 3 | ||||||
Equity securities | 9 | 10 | ||||||
Commercial mortgage loans | 81 | 82 | ||||||
Restricted commercial mortgage loans related to a securitization entity | 1 | 2 | ||||||
Policy loans | 46 | 43 | ||||||
Other invested assets | 59 | 39 | ||||||
Cash, cash equivalents, restricted cash and short-term investments | 12 | 12 | ||||||
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Gross investment income before expenses and fees | 853 | 826 | ||||||
Expenses and fees | (24 | ) | (22 | ) | ||||
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Net investment income | $ | 829 | $ | 804 | ||||
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Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Fixed maturity securities—taxable | $ | 622 | $ | 613 | ||||
Fixed maturity securities—non-taxable | 2 | 2 | ||||||
Equity securities | 2 | 4 | ||||||
Commercial mortgage loans | 85 | 82 | ||||||
Policy loans | 49 | 46 | ||||||
Other invested assets | 47 | 59 | ||||||
Cash, cash equivalents, restricted cash and short-term investments | 11 | 11 | ||||||
Gross investment income before expenses and fees | 818 | 817 | ||||||
Expenses and fees | (25 | ) | (23 | ) | ||||
Net investment income | $ | 793 | $ | 794 | ||||
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Available-for-sale securities: | ||||||||
Realized gains | $ | 81 | $ | 7 | ||||
Realized losses | (22 | ) | (16 | ) | ||||
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Net realized gains (losses) onavailable-for-sale securities | 59 | (9 | ) | |||||
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Impairments: | ||||||||
Total other-than-temporary impairments | — | — | ||||||
Portion of other-than-temporary impairments included in other comprehensive income | — | — | ||||||
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Net realized gains (losses) on equity securities sold | 3 | 2 | ||||||
Net unrealized gains (losses) on equity securities still held | 8 | (18 | ) | |||||
Limited partnerships | 15 | 7 | ||||||
Commercial mortgage loans | (1 | ) | — | |||||
Derivative instruments (1) | (10 | ) | (13 | ) | ||||
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Net investment gains (losses) | $ | 74 | $ | (31 | ) | |||
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Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Available-for-sale fixed maturity securities: | ||||||||
Realized gains | $ | 14 | $ | 79 | ||||
Realized losses | (1 | ) | (21 | ) | ||||
Net realized gains (losses) on available-for-sale fixed maturity securities | 13 | 58 | ||||||
Impairments: | ||||||||
Total other-than-temporary impairments | — | — | ||||||
Portion of other-than-temporary impairments included in othercomprehensive income | — | — | ||||||
Net other-than-temporary impairments | — | — | ||||||
Net change in allowance for credit losses on available-for-sale fixed maturitysecurities | — | — | ||||||
Net realized gains (losses) on equity securities sold | — | 3 | ||||||
Net unrealized gains (losses) on equity securities still held | (19 | ) | 12 | |||||
Limited partnerships | (40 | ) | 15 | |||||
Commercial mortgage loans | — | (1 | ) | |||||
Derivative instruments (1) | (105 | ) | (12 | ) | ||||
Other | (1 | ) | — | |||||
Net investment gains (losses) | $ | (152 | ) | $ | 75 | |||
(1) | 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 in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements. If a loss is recognized from a sale subsequent to a balance sheet date due to these unexpected developments, the loss is recognized in the period in which we determined that we have the intent to sell the securities or it is more likely than not that we will be required to sell the securities prior to recovery. The aggregate fair value of securities sold at a loss during the three months ended March 31, 2019 and 2018 was $763 million and $619 million, respectively, which was approximately 97% and 98%, respectively, of book value.
(Amounts in millions) | 2019 | 2018 | ||||||
Beginning balance | $ | 24 | $ | 32 | ||||
Reductions: | ||||||||
Securities sold, paid down or disposed | (1 | ) | (4 | ) | ||||
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Ending balance | $ | 23 | $ | 28 | ||||
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31, 2019:
(Amounts in millions) | ||||
Beginning balance | $ | 24 | ||
Other-than-temporary impairments not previously recognized | — | |||
Increases related to other-than-temporary impairments previously recognized | — | |||
Reductions: | ||||
Securities sold, paid down or disposed | (1 | ) | ||
Ending balance | $ | 23 | ||
(Amounts in millions) | March 31, 2019 | December 31, 2018 | ||||||
Net unrealized gains (losses) on fixed maturity securities(1) | $ | 3,714 | $ | 1,775 | ||||
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves | (2,401 | ) | (952 | ) | ||||
Income taxes, net | (300 | ) | (190 | ) | ||||
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Net unrealized investment gains (losses) | 1,013 | 633 | ||||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests | 70 | 38 | ||||||
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Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. | $ | 943 | $ | 595 | ||||
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(Amounts in millions) | March 31, 2020 | December 31, 2019 | ||||||
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses (1) | $ | 4,957 | $ | 6,676 | ||||
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses (1) | — | — | ||||||
Adjustments to deferred acquisition costs, present value of future profits, sales inducementsand benefit reserves | (3,478 | ) | (4,789 | ) | ||||
Income taxes, net | (318 | ) | (406 | ) | ||||
Net unrealized investment gains (losses) | 1,161 | 1,481 | ||||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests | 21 | 25 | ||||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. | $ | 1,140 | $ | 1,456 | ||||
(1) | Excludes foreign exchange. |
(Amounts in millions) | 2019 | 2018 | ||||||
Beginning balance | $ | 595 | $ | 1,085 | ||||
Cumulative effect of changes in accounting: | ||||||||
Stranded tax effects | — | 189 | ||||||
Recognition and measurement of financial assets and liabilities, net of taxes of $— and $18 | — | (25 | ) | |||||
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Total cumulative effect of changes in accounting | — | 164 | ||||||
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Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on investment securities | 1,999 | (1,681 | ) | |||||
Adjustment to deferred acquisition costs | (989 | ) | 442 | |||||
Adjustment to present value of future profits | (53 | ) | 36 | |||||
Adjustment to sales inducements | (19 | ) | 20 | |||||
Adjustment to benefit reserves | (388 | ) | 740 | |||||
Provision for income taxes | (123 | ) | 95 | |||||
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Change in unrealized gains (losses) on investment securities | 427 | (348 | ) | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $13 and $(1) | (47 | ) | 7 | |||||
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Change in net unrealized investment gains (losses) | 380 | (341 | ) | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | 32 | (9 | ) | |||||
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Ending balance | $ | 943 | $ | 917 | ||||
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(Amounts in millions) | 2020 | 2019 | ||||||
Beginning balance | $ | 1,456 | $ | 595 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on fixed maturity securities | (1,712 | ) | 1,999 | |||||
Adjustment to deferred acquisition costs | 168 | (989 | ) | |||||
Adjustment to present value of future profits | (1 | ) | (53 | ) | ||||
Adjustment to sales inducements | 36 | (19 | ) | |||||
Adjustment to benefit reserves | 1,108 | (388 | ) | |||||
Provision for income taxes | 87 | (123 | ) | |||||
Change in unrealized gains (losses) on investment securities | (314 | ) | 427 | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $1 and $13 | (6 | ) | (47 | ) | ||||
Change in net unrealized investment gains (losses) | (320 | ) | 380 | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (4 | ) | 32 | |||||
Ending balance | $ | 1,140 | $ | 943 | ||||
(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 | $ | 4,041 | $ | 1,730 | $ | — | $ | — | $ | 5,771 | ||||||||||
State and political subdivisions | 2,495 | 374 | (5 | ) | — | 2,864 | ||||||||||||||
Non-U.S. government | 1,118 | 92 | (9 | ) | — | 1,201 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,333 | 556 | (22 | ) | — | 4,867 | ||||||||||||||
Energy | 2,426 | 51 | (385 | ) | — | 2,092 | ||||||||||||||
Finance and insurance | 7,179 | 548 | (104 | ) | — | 7,623 | ||||||||||||||
Consumer—non-cyclical | 5,006 | 725 | (46 | ) | — | 5,685 | ||||||||||||||
Technology and communications | 3,000 | 312 | (37 | ) | — | 3,275 | ||||||||||||||
Industrial | 1,304 | 72 | (31 | ) | — | 1,345 | ||||||||||||||
Capital goods | 2,420 | 272 | (28 | ) | — | 2,664 | ||||||||||||||
Consumer—cyclical | 1,628 | 134 | (43 | ) | — | 1,719 | ||||||||||||||
Transportation | 1,344 | 152 | (23 | ) | — | 1,473 | ||||||||||||||
Other | 295 | 40 | (1 | ) | — | 334 | ||||||||||||||
Total U.S. corporate | 28,935 | 2,862 | (720 | ) | — | 31,077 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 757 | 24 | (16 | ) | — | 765 | ||||||||||||||
Energy | 1,158 | 42 | (102 | ) | — | 1,098 | ||||||||||||||
Finance and insurance | 2,023 | 128 | (40 | ) | — | 2,111 | ||||||||||||||
Consumer—non-cyclical | 639 | 43 | (8 | ) | — | 674 | ||||||||||||||
Technology and communications | 1,021 | 96 | (8 | ) | — | 1,109 | ||||||||||||||
Industrial | 877 | 63 | (29 | ) | — | 911 | ||||||||||||||
Capital goods | 546 | 25 | (10 | ) | — | 561 | ||||||||||||||
Consumer—cyclical | 362 | 12 | (12 | ) | — | 362 | ||||||||||||||
Transportation | 554 | 62 | (13 | ) | — | 603 | ||||||||||||||
Other | 1,475 | 155 | (25 | ) | — | 1,605 | ||||||||||||||
Total non-U.S. corporate | 9,412 | 650 | (263 | ) | — | 9,799 | ||||||||||||||
Residential mortgage-backed | 2,032 | 258 | (17 | ) | — | 2,273 | ||||||||||||||
Commercial mortgage-backed | 2,876 | 169 | (64 | ) | — | 2,981 | ||||||||||||||
Other asset-backed | 3,227 | 12 | (154 | ) | — | 3,085 | ||||||||||||||
Total available-for-sale fixed maturity securities | $ | 54,136 | $ | 6,147 | $ | (1,232 | ) | $ | — | $ | 59,051 | |||||||||
Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
Amortized | Not other-than- | Other-than- | Not other-than- | Other-than- | ||||||||||||||||||||
cost or | temporarily | temporarily | temporarily | temporarily | Fair | |||||||||||||||||||
(Amounts in millions) | cost | impaired | impaired | impaired | impaired | value | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,116 | $ | 619 | $ | — | $ | (4 | ) | $ | — | $ | 4,731 | |||||||||||
State and political subdivisions | 2,329 | 223 | — | (6 | ) | — | 2,546 | |||||||||||||||||
Non-U.S. government | 2,403 | 121 | — | (6 | ) | — | 2,518 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,296 | 426 | — | (37 | ) | — | 4,685 | |||||||||||||||||
Energy | 2,447 | 186 | — | (15 | ) | — | 2,618 | |||||||||||||||||
Finance and insurance | 6,883 | 405 | — | (37 | ) | — | 7,251 | |||||||||||||||||
Consumer—non-cyclical | 4,905 | 407 | — | (55 | ) | — | 5,257 | |||||||||||||||||
Technology and communications | 2,832 | 161 | — | (19 | ) | — | 2,974 | |||||||||||||||||
Industrial | 1,194 | 67 | — | (12 | ) | — | 1,249 | |||||||||||||||||
Capital goods | 2,283 | 225 | — | (19 | ) | — | 2,489 | |||||||||||||||||
Consumer—cyclical | 1,579 | 83 | — | (16 | ) | — | 1,646 | |||||||||||||||||
Transportation | 1,271 | 107 | — | (16 | ) | — | 1,362 | |||||||||||||||||
Other | 379 | 33 | — | (1 | ) | — | 411 | |||||||||||||||||
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Total U.S. corporate | 28,069 | 2,100 | — | (227 | ) | — | 29,942 | |||||||||||||||||
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| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 1,100 | 36 | — | (9 | ) | — | 1,127 | |||||||||||||||||
Energy | 1,327 | 124 | — | (4 | ) | — | 1,447 | |||||||||||||||||
Finance and insurance | 2,434 | 129 | — | (9 | ) | — | 2,554 | |||||||||||||||||
Consumer—non-cyclical | 699 | 19 | — | (9 | ) | — | 709 | |||||||||||||||||
Technology and communications | 1,151 | 52 | — | (6 | ) | — | 1,197 | |||||||||||||||||
Industrial | 920 | 56 | — | (3 | ) | — | 973 | |||||||||||||||||
Capital goods | 644 | 21 | — | (3 | ) | — | 662 | |||||||||||||||||
Consumer—cyclical | 537 | 8 | — | (4 | ) | — | 541 | |||||||||||||||||
Transportation | 756 | 65 | — | (6 | ) | — | 815 | |||||||||||||||||
Other | 2,127 | 139 | — | (6 | ) | — | 2,260 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate | 11,695 | 649 | — | (59 | ) | — | 12,285 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed | 2,762 | 181 | 13 | (6 | ) | — | 2,950 | |||||||||||||||||
Commercial mortgage-backed | 2,946 | 64 | — | (48 | ) | — | 2,962 | |||||||||||||||||
Other asset-backed | 3,422 | 18 | 1 | (15 | ) | — | 3,426 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalavailable-for-sale fixed maturity securities | $ | 57,742 | $ | 3,975 | $ | 14 | $ | (371 | ) | $ | — | $ | 61,360 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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 | $ | 4,073 | $ | 952 | $ | — | $ | — | $ | — | $ | 5,025 | ||||||||||||
State and political subdivisions | 2,394 | 355 | — | (2 | ) | — | 2,747 | |||||||||||||||||
Non-U.S. government | 1,235 | 117 | — | (2 | ) | — | 1,350 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,322 | 675 | — | — | — | 4,997 | ||||||||||||||||||
Energy | 2,404 | 303 | — | (8 | ) | — | 2,699 | |||||||||||||||||
Finance and insurance | 6,977 | 798 | — | (1 | ) | — | 7,774 | |||||||||||||||||
Consumer—non-cyclical | 4,909 | 796 | — | (4 | ) | — | 5,701 | |||||||||||||||||
Technology and communications | 2,883 | 363 | — | (1 | ) | — | 3,245 | |||||||||||||||||
Industrial | 1,271 | 125 | — | — | — | 1,396 | ||||||||||||||||||
Capital goods | 2,345 | 367 | — | (1 | ) | — | 2,711 | |||||||||||||||||
Consumer—cyclical | 1,590 | 172 | — | (2 | ) | — | 1,760 | |||||||||||||||||
Transportation | 1,320 | 187 | — | (1 | ) | — | 1,506 | |||||||||||||||||
Other | 292 | 30 | — | — | — | 322 | ||||||||||||||||||
Total U.S. corporate | 28,313 | 3,816 | — | (18 | ) | — | 32,111 | |||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 779 | 50 | — | — | — | 829 | ||||||||||||||||||
Energy | 1,140 | 179 | — | — | — | 1,319 | ||||||||||||||||||
Finance and insurance | 2,087 | 232 | — | — | — | 2,319 | ||||||||||||||||||
Consumer—non-cyclical | 631 | 55 | — | (2 | ) | — | 684 | |||||||||||||||||
Technology and communications | 1,010 | 128 | — | — | — | 1,138 | ||||||||||||||||||
Industrial | 896 | 92 | — | — | — | 988 | ||||||||||||||||||
Capital goods | 565 | 40 | — | — | — | 605 | ||||||||||||||||||
Consumer—cyclical | 373 | 24 | — | — | — | 397 | ||||||||||||||||||
Transportation | 557 | 73 | — | (1 | ) | — | 629 | |||||||||||||||||
Other | 1,431 | 188 | — | (2 | ) | — | 1,617 | |||||||||||||||||
Total non-U.S. corporate | 9,469 | 1,061 | — | (5 | ) | — | 10,525 | |||||||||||||||||
Residential mortgage-backed | 2,057 | 199 | 15 | (1 | ) | — | 2,270 | |||||||||||||||||
Commercial mortgage-backed | 2,897 | 137 | — | (8 | ) | — | 3,026 | |||||||||||||||||
Other asset-backed | 3,262 | 30 | — | (7 | ) | — | 3,285 | |||||||||||||||||
Total available-for-sale fixed maturity securities | $ | 53,700 | $ | 6,667 | $ | 15 | $ | (43 | ) | $ | — | $ | 60,339 | |||||||||||
As of December 31, 2018, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity securities classified asavailable-for-sale were as follows:
Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
Amortized | Not other-than- | Other-than- | Not other-than- | Other-than- | ||||||||||||||||||||
cost or | temporarily | temporarily | temporarily | temporarily | Fair | |||||||||||||||||||
(Amounts in millions) | cost | impaired | impaired | impaired | impaired | value | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,175 | $ | 473 | $ | — | $ | (17 | ) | $ | — | $ | 4,631 | |||||||||||
State and political subdivisions | 2,406 | 168 | — | (22 | ) | — | 2,552 | |||||||||||||||||
Non-U.S. government | 2,345 | 72 | — | (24 | ) | — | 2,393 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,439 | 331 | — | (95 | ) | — | 4,675 | |||||||||||||||||
Energy | 2,382 | 101 | — | (64 | ) | — | 2,419 | |||||||||||||||||
Finance and insurance | 6,705 | 249 | — | (132 | ) | — | 6,822 | |||||||||||||||||
Consumer—non-cyclical | 4,891 | 294 | — | (137 | ) | — | 5,048 | |||||||||||||||||
Technology and communications | 2,823 | 110 | — | (78 | ) | — | 2,855 | |||||||||||||||||
Industrial | 1,230 | 41 | — | (33 | ) | — | 1,238 | |||||||||||||||||
Capital goods | 2,277 | 165 | — | (51 | ) | — | 2,391 | |||||||||||||||||
Consumer—cyclical | 1,592 | 53 | — | (48 | ) | — | 1,597 | |||||||||||||||||
Transportation | 1,283 | 78 | — | (41 | ) | — | 1,320 | |||||||||||||||||
Other | 376 | 24 | — | (3 | ) | — | 397 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total U.S. corporate | 27,998 | 1,446 | — | (682 | ) | — | 28,762 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 1,056 | 17 | — | (32 | ) | — | 1,041 | |||||||||||||||||
Energy | 1,320 | 72 | — | (23 | ) | — | 1,369 | |||||||||||||||||
Finance and insurance | 2,391 | 72 | — | (40 | ) | — | 2,423 | |||||||||||||||||
Consumer—non-cyclical | 756 | 8 | — | (25 | ) | — | 739 | |||||||||||||||||
Technology and communications | 1,168 | 23 | — | (26 | ) | — | 1,165 | |||||||||||||||||
Industrial | 926 | 36 | — | (17 | ) | — | 945 | |||||||||||||||||
Capital goods | 615 | 10 | — | (10 | ) | — | 615 | |||||||||||||||||
Consumer—cyclical | 532 | 1 | — | (13 | ) | — | 520 | |||||||||||||||||
Transportation | 689 | 46 | — | (15 | ) | — | 720 | |||||||||||||||||
Other | 2,218 | 105 | — | (23 | ) | — | 2,300 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalnon-U.S. corporate | 11,671 | 390 | — | (224 | ) | — | 11,837 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Residential mortgage-backed | 2,888 | 160 | 13 | (17 | ) | — | 3,044 | |||||||||||||||||
Commercial mortgage-backed | 3,054 | 43 | — | (81 | ) | — | 3,016 | |||||||||||||||||
Other asset-backed | 3,444 | 10 | 1 | (29 | ) | — | 3,426 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Totalavailable-for-sale fixed maturity securities | $ | 57,981 | $ | 2,762 | $ | 14 | $ | (1,096 | ) | $ | — | $ | 59,661 | |||||||||||
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|
|
|
|
|
|
|
|
|
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Fair | unrealized | Number of | Fair | unrealized | Number of | Fair | unrealized | Number of | ||||||||||||||||||||||||||||
(Dollar amounts in millions) | value | losses | securities | value | losses | securities | value | losses | securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
U.S. government, agencies and government-sponsoredenterprises | $ | — | $ | — | — | $ | 229 | $ | (4) | 31 | $ | 229 | $ | (4) | 31 | |||||||||||||||||||||
State and political subdivisions | 11 | — | 3 | 259 | (6 | ) | 60 | 270 | (6 | ) | 63 | |||||||||||||||||||||||||
Non-U.S. government | 62 | — | 11 | 331 | (6 | ) | 36 | 393 | (6 | ) | 47 | |||||||||||||||||||||||||
U.S. corporate | 1,247 | (37 | ) | 153 | 5,003 | (190 | ) | 698 | 6,250 | (227 | ) | 851 | ||||||||||||||||||||||||
Non-U.S. corporate | 354 | (6 | ) | 57 | 1,922 | (53 | ) | 296 | 2,276 | (59 | ) | 353 | ||||||||||||||||||||||||
Residential mortgage-backed | 46 | (1 | ) | 9 | 476 | (5 | ) | 85 | 522 | (6 | ) | 94 | ||||||||||||||||||||||||
Commercial mortgage-backed | 168 | (4 | ) | 22 | 933 | (44 | ) | 143 | 1,101 | (48 | ) | 165 | ||||||||||||||||||||||||
Other asset-backed | 981 | (10 | ) | 209 | 707 | (5 | ) | 162 | 1,688 | (15 | ) | 371 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 2,869 | $ | (58 | ) | 464 | $ | 9,860 | $ | (313 | ) | 1,511 | $ | 12,729 | $ | (371 | ) | 1,975 | ||||||||||||||||||
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|
| |||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 2,869 | $ | (58 | ) | 464 | $ | 9,839 | $ | (304 | ) | 1,505 | $ | 12,708 | $ | (362 | ) | 1,969 | ||||||||||||||||||
20%-50% Below cost | — | — | — | 18 | (6 | ) | 3 | 18 | (6 | ) | 3 | |||||||||||||||||||||||||
>50% Below cost | — | — | — | 3 | (3 | ) | 3 | 3 | (3 | ) | 3 | |||||||||||||||||||||||||
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|
|
|
|
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|
|
|
|
| |||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 2,869 | $ | (58 | ) | 464 | $ | 9,860 | $ | (313 | ) | 1,511 | $ | 12,729 | $ | (371 | ) | 1,975 | ||||||||||||||||||
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| |||||||||||||||||||
Investment grade | $ | 2,639 | $ | (51 | ) | 434 | $ | 9,439 | $ | (292 | ) | 1,446 | $ | 12,078 | $ | (343 | ) | 1,880 | ||||||||||||||||||
Below investment grade | 230 | (7 | ) | 30 | 421 | (21 | ) | 65 | 651 | (28 | ) | 95 | ||||||||||||||||||||||||
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|
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|
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|
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|
|
|
|
|
| |||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 2,869 | $ | (58 | ) | 464 | $ | 9,860 | $ | (313 | ) | 1,511 | $ | 12,729 | $ | (371 | ) | 1,975 | ||||||||||||||||||
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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 | $ | 106 | $ | (5 | ) | 18 | $ | — | $ | — | — | $ | 106 | $ | (5 | ) | 18 | |||||||||||||||||||
Non-U.S. government | 156 | (9 | ) | 27 | — | — | — | 156 | (9 | ) | 27 | |||||||||||||||||||||||||
U.S. corporate | 7,358 | (685 | ) | 1,157 | 139 | (35 | ) | 16 | 7,497 | (720 | ) | 1,173 | ||||||||||||||||||||||||
Non-U.S. corporate | 3,257 | (258 | ) | 537 | 17 | (5 | ) | 3 | 3,274 | (263 | ) | 540 | ||||||||||||||||||||||||
Residential mortgage-backed | 304 | (16 | ) | 59 | 13 | (1 | ) | 6 | 317 | (17 | ) | 65 | ||||||||||||||||||||||||
Commercial mortgage-backed | 894 | (60 | ) | 152 | 9 | (4 | ) | 3 | 903 | (64 | ) | 155 | ||||||||||||||||||||||||
Other asset-backed | 2,353 | (130 | ) | 455 | 245 | (24 | ) | 64 | 2,598 | (154 | ) | 519 | ||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 14,428 | $ | (1,163 | ) | 2,405 | $ | 423 | $ | (69 | ) | 92 | $ | 14,851 | $ | (1,232 | ) | 2,497 | ||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 13,585 | $ | (752 | ) | 2,258 | $ | 357 | $ | (38 | ) | 79 | $ | 13,942 | $ | (790 | ) | 2,337 | ||||||||||||||||||
20%-50% Below cost | 784 | (338 | ) | 134 | 63 | (28 | ) | 11 | 847 | (366 | ) | 145 | ||||||||||||||||||||||||
>50% Below cost | 59 | (73 | ) | 13 | 3 | (3 | ) | 2 | 62 | (76 | ) | 15 | ||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 14,428 | $ | (1,163 | ) | 2,405 | $ | 423 | $ | (69 | ) | 92 | $ | 14,851 | $ | (1,232 | ) | 2,497 | ||||||||||||||||||
Investment grade | $ | 13,122 | $ | (927 | ) | 2,171 | $ | 313 | $ | (42 | ) | 77 | $ | 13,435 | $ | (969 | ) | 2,248 | ||||||||||||||||||
Below investment grade | 1,306 | (236 | ) | 234 | 110 | (27 | ) | 15 | 1,416 | (263 | ) | 249 | ||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 14,428 | $ | (1,163 | ) | 2,405 | $ | 423 | $ | (69 | ) | 92 | $ | 14,851 | $ | (1,232 | ) | 2,497 | ||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Fair | unrealized | Number of | Fair | unrealized | Number of | Fair | unrealized | Number of | ||||||||||||||||||||||||||||
(Dollar amounts in millions) | value | losses | securities | value | losses | securities | value | losses | securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 217 | $ | (7 | ) | 22 | $ | 697 | $ | (30 | ) | 103 | $ | 914 | $ | (37 | ) | 125 | ||||||||||||||||||
Energy | 60 | — | 15 | 368 | (15 | ) | 49 | 428 | (15 | ) | 64 | |||||||||||||||||||||||||
Finance and insurance | 203 | (5 | ) | 27 | 1,398 | (32 | ) | 198 | 1,601 | (37 | ) | 225 | ||||||||||||||||||||||||
Consumer— | 313 | (13 | ) | 27 | 813 | (42 | ) | 104 | 1,126 | (55 | ) | 131 | ||||||||||||||||||||||||
Technology and communications | 95 | (4 | ) | 17 | 446 | (15 | ) | 66 | 541 | (19 | ) | 83 | ||||||||||||||||||||||||
Industrial | 98 | (2 | ) | 10 | 193 | (10 | ) | 27 | 291 | (12 | ) | 37 | ||||||||||||||||||||||||
Capital goods | 87 | (2 | ) | 15 | 359 | (17 | ) | 48 | 446 | (19 | ) | 63 | ||||||||||||||||||||||||
Consumer—cyclical | 59 | — | 12 | 397 | (16 | ) | 53 | 456 | (16 | ) | 65 | |||||||||||||||||||||||||
Transportation | 99 | (3 | ) | 7 | 316 | (13 | ) | 49 | 415 | (16 | ) | 56 | ||||||||||||||||||||||||
Other | 16 | (1 | ) | 1 | 16 | — | 1 | 32 | (1 | ) | 2 | |||||||||||||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||||||||
Subtotal, U.S. corporatesecurities | 1,247 | (37 | ) | 153 | 5,003 | (190 | ) | 698 | 6,250 | (227 | ) | 851 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 24 | — | 2 | 259 | (9 | ) | 30 | 283 | (9 | ) | 32 | |||||||||||||||||||||||||
Energy | 29 | — | 4 | 187 | (4 | ) | 26 | 216 | (4 | ) | 30 | |||||||||||||||||||||||||
Finance and insurance | 39 | — | 9 | 475 | (9 | ) | 73 | 514 | (9 | ) | 82 | |||||||||||||||||||||||||
Consumer— | 38 | (1 | ) | 9 | 208 | (8 | ) | 25 | 246 | (9 | ) | 34 | ||||||||||||||||||||||||
Technology and communications | 89 | (2 | ) | 7 | 136 | (4 | ) | 28 | 225 | (6 | ) | 35 | ||||||||||||||||||||||||
Industrial | 8 | — | 4 | 135 | (3 | ) | 18 | 143 | (3 | ) | 22 | |||||||||||||||||||||||||
Capital goods | 23 | — | 4 | 116 | (3 | ) | 16 | 139 | (3 | ) | 20 | |||||||||||||||||||||||||
Consumer—cyclical | 37 | (1 | ) | 6 | 128 | (3 | ) | 25 | 165 | (4 | ) | 31 | ||||||||||||||||||||||||
Transportation | 38 | (1 | ) | 6 | 102 | (5 | ) | 18 | 140 | (6 | ) | 24 | ||||||||||||||||||||||||
Other | 29 | (1 | ) | 6 | 176 | (5 | ) | 37 | 205 | (6 | ) | 43 | ||||||||||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||||||||
Subtotal,non-U.S. corporatesecurities | 354 | (6 | ) | 57 | 1,922 | (53 | ) | 296 | 2,276 | (59 | ) | 353 | ||||||||||||||||||||||||
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|
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|
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|
|
|
|
|
|
| |||||||||||||||||||
Total for corporate securities in an unrealized loss position | $ | 1,601 | $ | (43 | ) | 210 | $ | 6,925 | $ | (243 | ) | 994 | $ | 8,526 | $ | (286 | ) | 1,204 | ||||||||||||||||||
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|
2020:
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 | $ | 582 | $ | (22 | ) | 112 | $ | — | $ | — | — | $ | 582 | $ | (22 | ) | 112 | |||||||||||||||||||
Energy | 1,443 | (364 | ) | 240 | 56 | (21 | ) | 9 | 1,499 | (385 | ) | 249 | ||||||||||||||||||||||||
Finance and insurance | 1,911 | (104 | ) | 259 | — | — | — | 1,911 | (104 | ) | 259 | |||||||||||||||||||||||||
Consumer—non- | 678 | (39 | ) | 108 | 36 | (7 | ) | 2 | 714 | (46 | ) | 110 | ||||||||||||||||||||||||
Technology andcommunications | 772 | (37 | ) | 116 | — | — | — | 772 | (37 | ) | 116 | |||||||||||||||||||||||||
Industrial | 473 | (31 | ) | 63 | — | — | — | 473 | (31 | ) | 63 | |||||||||||||||||||||||||
Capital goods | 489 | (25 | ) | 84 | 12 | (3 | ) | 1 | 501 | (28 | ) | 85 | ||||||||||||||||||||||||
Consumer—cyclical | 585 | (39 | ) | 102 | 35 | (4 | ) | 4 | 620 | (43 | ) | 106 | ||||||||||||||||||||||||
Transportation | 420 | (23 | ) | 71 | — | — | — | 420 | (23 | ) | 71 | |||||||||||||||||||||||||
Other | 5 | (1 | ) | 2 | — | — | — | 5 | (1 | ) | 2 | |||||||||||||||||||||||||
Subtotal, U.S. corporatesecurities | 7,358 | (685 | ) | 1,157 | 139 | (35 | ) | 16 | 7,497 | (720 | ) | 1,173 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 279 | (16 | ) | 37 | — | — | — | 279 | (16 | ) | 37 | |||||||||||||||||||||||||
Energy | 591 | (102 | ) | 66 | — | — | — | 591 | (102 | ) | 66 | |||||||||||||||||||||||||
Finance and insurance | 649 | (40 | ) | 117 | — | — | — | 649 | (40 | ) | 117 | |||||||||||||||||||||||||
Consumer—non- | 136 | (6 | ) | 50 | 5 | (2 | ) | 1 | 141 | (8 | ) | 51 | ||||||||||||||||||||||||
Technology andcommunications | 189 | (8 | ) | 48 | — | — | — | 189 | (8 | ) | 48 | |||||||||||||||||||||||||
Industrial | 384 | (29 | ) | 57 | — | — | — | 384 | (29 | ) | 57 | |||||||||||||||||||||||||
Capital goods | 208 | (10 | ) | 24 | — | — | — | 208 | (10 | ) | 24 | |||||||||||||||||||||||||
Consumer—cyclical | 197 | (12 | ) | 43 | — | — | — | 197 | (12 | ) | 43 | |||||||||||||||||||||||||
Transportation | 162 | (12 | ) | 33 | 7 | (1 | ) | 1 | 169 | (13 | ) | 34 | ||||||||||||||||||||||||
Other | 462 | (23 | ) | 62 | 5 | (2 | ) | 1 | 467 | (25 | ) | 63 | ||||||||||||||||||||||||
Subtotal, non-U.S. corporatesecurities | 3,257 | (258 | ) | 537 | 17 | (5 | ) | 3 | 3,274 | (263 | ) | 540 | ||||||||||||||||||||||||
Total for corporate securities in anunrealized loss position | $ | 10,615 | $ | (943 | ) | 1,694 | $ | 156 | $ | (40 | ) | 19 | $ | 10,771 | $ | (983 | ) | 1,713 | ||||||||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Fair | unrealized | Number of | Fair | unrealized | Number of | Fair | unrealized | Number of | ||||||||||||||||||||||||||||
(Dollar amounts in millions) | value | losses | securities | value | losses | securities | value | losses | securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
U.S. government, agencies and government-sponsoredenterprises | $ | 545 | $ | (8 | ) | 17 | $ | 161 | $ | (9 | ) | 26 | $ | 706 | $ | (17 | ) | 43 | ||||||||||||||||||
State and political subdivisions | 371 | (10 | ) | 63 | 233 | (12 | ) | 57 | 604 | (22 | ) | 120 | ||||||||||||||||||||||||
Non-U.S. government | 261 | (7 | ) | 51 | 508 | (17 | ) | 35 | 769 | (24 | ) | 86 | ||||||||||||||||||||||||
U.S. corporate | 9,975 | (472 | ) | 1,342 | 2,449 | (210 | ) | 365 | 12,424 | (682 | ) | 1,707 | ||||||||||||||||||||||||
Non-U.S. corporate | 4,172 | (150 | ) | 614 | 1,274 | (74 | ) | 209 | 5,446 | (224 | ) | 823 | ||||||||||||||||||||||||
Residential mortgage-backed | 363 | (6 | ) | 57 | 579 | (11 | ) | 96 | 942 | (17 | ) | 153 | ||||||||||||||||||||||||
Commercial mortgage-backed | 758 | (19 | ) | 115 | 870 | (62 | ) | 130 | 1,628 | (81 | ) | 245 | ||||||||||||||||||||||||
Other asset-backed | 1,597 | (23 | ) | 326 | 604 | (6 | ) | 137 | 2,201 | (29 | ) | 463 | ||||||||||||||||||||||||
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Total for fixed maturity securities inan unrealized loss position | $ | 18,042 | $ | (695 | ) | 2,585 | $ | 6,678 | $ | (401 | ) | 1,055 | $ | 24,720 | $ | (1,096 | ) | 3,640 | ||||||||||||||||||
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% Below cost—fixed maturitysecurities: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 18,008 | $ | (685 | ) | 2,581 | $ | 6,624 | $ | (383 | ) | 1,045 | $ | 24,632 | $ | (1,068 | ) | 3,626 | ||||||||||||||||||
20%-50% Below cost | 34 | (10 | ) | 4 | 54 | (18 | ) | 10 | 88 | (28 | ) | 14 | ||||||||||||||||||||||||
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Total for fixed maturity securities inan unrealized loss position | $ | 18,042 | $ | (695 | ) | 2,585 | $ | 6,678 | $ | (401 | ) | 1,055 | $ | 24,720 | $ | (1,096 | ) | 3,640 | ||||||||||||||||||
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Investment grade | $ | 16,726 | $ | (615 | ) | 2,393 | $ | 6,508 | $ | (379 | ) | 1,024 | $ | 23,234 | $ | (994 | ) | 3,417 | ||||||||||||||||||
Below investment grade | 1,316 | (80 | ) | 192 | 170 | (22 | ) | 31 | 1,486 | (102 | ) | 223 | ||||||||||||||||||||||||
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Total for fixed maturity securities inan unrealized loss position | $ | 18,042 | $ | (695 | ) | 2,585 | $ | 6,678 | $ | (401 | ) | 1,055 | $ | 24,720 | $ | (1,096 | ) | 3,640 | ||||||||||||||||||
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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 | $ | 91 | $ | (2 | ) | 14 | $ | — | $ | — | — | $ | 91 | $ | (2 | ) | 14 | |||||||||||||||||||
Non-U.S. government | 224 | (2 | ) | 20 | — | — | — | 224 | (2 | ) | 20 | |||||||||||||||||||||||||
U.S. corporate | 123 | (5 | ) | 27 | 302 | (13 | ) | 33 | 425 | (18 | ) | 60 | ||||||||||||||||||||||||
Non-U.S. corporate | 79 | (1 | ) | 12 | 62 | (4 | ) | 7 | 141 | (5 | ) | 19 | ||||||||||||||||||||||||
Residential mortgage-backed | 22 | (1 | ) | 10 | — | — | — | 22 | (1 | ) | 10 | |||||||||||||||||||||||||
Commercial mortgage-backed | 381 | (5 | ) | 51 | 14 | (3 | ) | 3 | 395 | (8 | ) | 54 | ||||||||||||||||||||||||
Other asset-backed | 532 | (2 | ) | 97 | 439 | (5 | ) | 115 | 971 | (7 | ) | 212 | ||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 1,452 | $ | (18 | ) | 231 | $ | 817 | $ | (25 | ) | 158 | $ | 2,269 | $ | (43 | ) | 389 | ||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 1,452 | $ | (18 | ) | 231 | $ | 807 | $ | (20 | ) | 155 | $ | 2,259 | $ | (38 | ) | 386 | ||||||||||||||||||
20%-50% Below cost | — | — | — | 10 | (5 | ) | 3 | 10 | (5 | ) | 3 | |||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 1,452 | $ | (18 | ) | 231 | $ | 817 | $ | (25 | ) | 158 | $ | 2,269 | $ | (43 | ) | 389 | ||||||||||||||||||
Investment grade | $ | 1,408 | $ | (14 | ) | 223 | $ | 702 | $ | (15 | ) | 145 | $ | 2,110 | $ | (29 | ) | 368 | ||||||||||||||||||
Below investment grade | 44 | (4 | ) | 8 | 115 | (10 | ) | 13 | 159 | (14 | ) | 21 | ||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position | $ | 1,452 | $ | (18 | ) | 231 | $ | 817 | $ | (25 | ) | 158 | $ | 2,269 | $ | (43 | ) | 389 | ||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Fair | unrealized | Number of | Fair | unrealized | Number of | Fair | unrealized | Number of | ||||||||||||||||||||||||||||
(Dollar amounts in millions) | value | losses | securities | value | losses | securities | value | losses | securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 1,246 | $ | (61 | ) | 173 | $ | 343 | $ | (34 | ) | 60 | $ | 1,589 | $ | (95 | ) | 233 | ||||||||||||||||||
Energy | 944 | (47 | ) | 135 | 152 | (17 | ) | 23 | 1,096 | (64 | ) | 158 | ||||||||||||||||||||||||
Finance and insurance | 2,393 | (92 | ) | 326 | 688 | (40 | ) | 95 | 3,081 | (132 | ) | 421 | ||||||||||||||||||||||||
Consumer—non-cyclical | 1,826 | (101 | ) | 203 | 389 | (36 | ) | 55 | 2,215 | (137 | ) | 258 | ||||||||||||||||||||||||
Technology and communications | 1,135 | (51 | ) | 152 | 263 | (27 | ) | 34 | 1,398 | (78 | ) | 186 | ||||||||||||||||||||||||
Industrial | 506 | (27 | ) | 63 | 74 | (6 | ) | 13 | 580 | (33 | ) | 76 | ||||||||||||||||||||||||
Capital goods | 704 | (31 | ) | 103 | 184 | (20 | ) | 27 | 888 | (51 | ) | 130 | ||||||||||||||||||||||||
Consumer—cyclical | 738 | (35 | ) | 123 | 162 | (13 | ) | 26 | 900 | (48 | ) | 149 | ||||||||||||||||||||||||
Transportation | 435 | (25 | ) | 60 | 179 | (16 | ) | 31 | 614 | (41 | ) | 91 | ||||||||||||||||||||||||
Other | 48 | (2 | ) | 4 | 15 | (1 | ) | 1 | 63 | (3 | ) | 5 | ||||||||||||||||||||||||
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Subtotal, U.S. corporatesecurities | 9,975 | (472 | ) | 1,342 | 2,449 | (210 | ) | 365 | 12,424 | (682 | ) | 1,707 | ||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | 404 | (19 | ) | 58 | 173 | (13 | ) | 24 | 577 | (32 | ) | 82 | ||||||||||||||||||||||||
Energy | 439 | (15 | ) | 64 | 136 | (8 | ) | 20 | 575 | (23 | ) | 84 | ||||||||||||||||||||||||
Finance and insurance | 899 | (25 | ) | 151 | 294 | (15 | ) | 52 | 1,193 | (40 | ) | 203 | ||||||||||||||||||||||||
Consumer—non-cyclical | 377 | (16 | ) | 51 | 102 | (9 | ) | 14 | 479 | (25 | ) | 65 | ||||||||||||||||||||||||
Technology and communications | 611 | (24 | ) | 75 | 50 | (2 | ) | 12 | 661 | (26 | ) | 87 | ||||||||||||||||||||||||
Industrial | 275 | (11 | ) | 48 | 72 | (6 | ) | 8 | 347 | (17 | ) | 56 | ||||||||||||||||||||||||
Capital goods | 226 | (7 | ) | 27 | 69 | (3 | ) | 13 | 295 | (10 | ) | 40 | ||||||||||||||||||||||||
Consumer—cyclical | 268 | (11 | ) | 42 | 117 | (2 | ) | 19 | 385 | (13 | ) | 61 | ||||||||||||||||||||||||
Transportation | 232 | (7 | ) | 27 | 67 | (8 | ) | 11 | 299 | (15 | ) | 38 | ||||||||||||||||||||||||
Other | 441 | (15 | ) | 71 | 194 | (8 | ) | 36 | 635 | (23 | ) | 107 | ||||||||||||||||||||||||
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Subtotal,non-U.S. corporatesecurities | 4,172 | (150 | ) | 614 | 1,274 | (74 | ) | 209 | 5,446 | (224 | ) | 823 | ||||||||||||||||||||||||
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Total for corporate securities in an unrealized loss position | $ | 14,147 | $ | (622 | ) | 1,956 | $ | 3,723 | $ | (284 | ) | 574 | $ | 17,870 | $ | (906 | ) | 2,530 | ||||||||||||||||||
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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: | ||||||||||||||||||||||||||||||||||||
Energy | $ | 54 | $ | (3 | ) | 10 | $ | 80 | $ | (5 | ) | 10 | $ | 134 | $ | (8 | ) | 20 | ||||||||||||||||||
Finance and insurance | — | — | — | 34 | (1 | ) | 4 | 34 | (1 | ) | 4 | |||||||||||||||||||||||||
Consumer—non-cyclical | 34 | (1 | ) | 9 | 93 | (3 | ) | 9 | 127 | (4 | ) | 18 | ||||||||||||||||||||||||
Technology and | — | — | — | 18 | (1 | ) | 2 | 18 | (1 | ) | 2 | |||||||||||||||||||||||||
Capital goods | 35 | (1 | ) | 8 | — | — | — | 35 | (1 | ) | 8 | |||||||||||||||||||||||||
Consumer—cyclical | — | — | — | 54 | (2 | ) | 6 | 54 | (2 | ) | 6 | |||||||||||||||||||||||||
Transportation | — | — | — | 23 | (1 | ) | 2 | 23 | (1 | ) | 2 | |||||||||||||||||||||||||
Subtotal, U.S. corporatesecurities | 123 | (5 | ) | 27 | 302 | (13 | ) | 33 | 425 | (18 | ) | 60 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | — | — | — | 31 | (2 | ) | 3 | 31 | (2 | ) | 3 | |||||||||||||||||||||||||
Transportation | — | — | — | 25 | (1 | ) | 3 | 25 | (1 | ) | 3 | |||||||||||||||||||||||||
Other | 79 | (1 | ) | 12 | 6 | (1 | ) | 1 | 85 | (2 | ) | 13 | ||||||||||||||||||||||||
Subtotal, non-U.S. corporatesecurities | 79 | (1 | ) | 12 | 62 | (4 | ) | 7 | 141 | (5 | ) | 19 | ||||||||||||||||||||||||
Total for corporate securities in anunrealized loss position | $ | 202 | $ | (6 | ) | 39 | $ | 364 | $ | (17 | ) | 40 | $ | 566 | $ | (23 | ) | 79 | ||||||||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortized | ||||||||
cost or | Fair | |||||||
(Amounts in millions) | cost | value | ||||||
Due one year or less | $ | 2,005 | $ | 2,021 | ||||
Due after one year through five years | 10,826 | 11,105 | ||||||
Due after five years through ten years | 12,265 | 12,770 | ||||||
Due after ten years | 23,516 | 26,126 | ||||||
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Subtotal | 48,612 | 52,022 | ||||||
Residential mortgage-backed | 2,762 | 2,950 | ||||||
Commercial mortgage-backed | 2,946 | 2,962 | ||||||
Other asset-backed | 3,422 | 3,426 | ||||||
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Total | $ | 57,742 | $ | 61,360 | ||||
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(Amounts in millions) | Amortized cost or cost | Fair value | ||||||
Due one year or less | $ | 1,415 | $ | 1,421 | ||||
Due after one year through five years | 8,835 | 8,949 | ||||||
Due after five years through ten years | 12,207 | 12,642 | ||||||
Due after ten years | 23,544 | 27,700 | ||||||
Subtotal | 46,001 | 50,712 | ||||||
Residential mortgage-backed | 2,032 | 2,273 | ||||||
Commercial mortgage-backed | 2,876 | 2,981 | ||||||
Other asset-backed | 3,227 | 3,085 | ||||||
Total | $ | 54,136 | $ | 59,051 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2019 | December 31, 2018 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
(Amounts in millions) | value | total | value | total | ||||||||||||
Property type: | ||||||||||||||||
Retail | $ | 2,548 | 37 | % | $ | 2,463 | 37 | % | ||||||||
Industrial | 1,678 | 24 | 1,659 | 25 | ||||||||||||
Office | 1,671 | 24 | 1,548 | 23 | ||||||||||||
Apartments | 520 | 7 | 495 | 7 | ||||||||||||
Mixed use | 254 | 4 | 254 | 4 | ||||||||||||
Other | 272 | 4 | 281 | 4 | ||||||||||||
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Subtotal | 6,943 | 100 | % | 6,700 | 100 | % | ||||||||||
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Unamortized balance of loan origination fees and costs | (4 | ) | (4 | ) | ||||||||||||
Allowance for losses | (10 | ) | (9 | ) | ||||||||||||
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Total | $ | 6,929 | $ | 6,687 | ||||||||||||
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March 31, 2019 | December 31, 2018 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
(Amounts in millions) | value | total | value | total | ||||||||||||
Geographic region: | ||||||||||||||||
South Atlantic | $ | 1,739 | 25 | % | $ | 1,709 | 26 | % | ||||||||
Pacific | 1,705 | 25 | 1,684 | 25 | ||||||||||||
Middle Atlantic | 1,020 | 15 | 950 | 14 | ||||||||||||
Mountain | 688 | 10 | 667 | 10 | ||||||||||||
West North Central | 486 | 7 | 470 | 7 | ||||||||||||
East North Central | 449 | 6 | 405 | 6 | ||||||||||||
West South Central | 369 | 5 | 364 | 6 | ||||||||||||
New England | 267 | 4 | 228 | 3 | ||||||||||||
East South Central | 220 | 3 | 223 | 3 | ||||||||||||
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Subtotal | 6,943 | 100 | % | 6,700 | 100 | % | ||||||||||
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Unamortized balance of loan origination fees and costs | (4 | ) | (4 | ) | ||||||||||||
Allowance for losses | (10 | ) | (9 | ) | ||||||||||||
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Total | $ | 6,929 | $ | 6,687 | ||||||||||||
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March 31, 2020 | December 31, 2019 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Property type: | ||||||||||||||||
Retail | $ | 2,566 | 37 | % | $ | 2,590 | 37 | % | ||||||||
Industrial | 1,646 | 24 | 1,670 | 24 | ||||||||||||
Office | 1,641 | 23 | 1,632 | 23 | ||||||||||||
Apartments | 548 | 8 | 541 | 8 | ||||||||||||
Mixed use | 279 | 4 | 281 | 4 | ||||||||||||
Other | 264 | 4 | 266 | 4 | ||||||||||||
Subtotal | 6,944 | 100 | % | 6,980 | 100 | % | ||||||||||
Unamortized balance of loan origination fees | — | (4 | ) | |||||||||||||
Allowance for credit losses | (29 | ) | (13 | ) | ||||||||||||
Total | $ | 6,915 | $ | 6,963 | ||||||||||||
March 31, 2020 | December 31, 2019 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Geographic region: | ||||||||||||||||
South Atlantic | $ | 1,699 | 24 | % | $ | 1,715 | 25 | % | ||||||||
Pacific | 1,648 | 24 | 1,673 | 24 | ||||||||||||
Middle Atlantic | 980 | 14 | 992 | 14 | ||||||||||||
Mountain | 763 | 11 | 753 | 11 | ||||||||||||
West North Central | 485 | 7 | 488 | 7 | ||||||||||||
East North Central | 453 | 7 | 455 | 6 | ||||||||||||
West South Central | 451 | 6 | 433 | 6 | ||||||||||||
New England | 255 | 4 | 257 | 4 | ||||||||||||
East South Central | 210 | 3 | 214 | 3 | ||||||||||||
Subtotal | 6,944 | 100 | % | 6,980 | 100 | % | ||||||||||
Unamortized balance of loan origination fees | — | (4 | ) | |||||||||||||
Allowance for credit losses | (29 | ) | (13 | ) | ||||||||||||
Total | $ | 6,915 | $ | 6,963 | ||||||||||||
March 31, 2019 | ||||||||||||||||||||||||
Greater than | ||||||||||||||||||||||||
31 - 60 days | 61 - 90 days | 90 days past | Total | |||||||||||||||||||||
(Amounts in millions) | past due | past due | due | past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | — | $ | — | $ | — | $ | — | $ | 2,548 | $ | 2,548 | ||||||||||||
Industrial | — | — | — | — | 1,678 | 1,678 | ||||||||||||||||||
Office | — | — | 3 | 3 | 1,668 | 1,671 | ||||||||||||||||||
Apartments | — | — | — | — | 520 | 520 | ||||||||||||||||||
Mixed use | — | — | — | — | 254 | 254 | ||||||||||||||||||
Other | — | — | — | — | 272 | 272 | ||||||||||||||||||
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Total recorded investment | $ | — | $ | — | $ | 3 | $ | 3 | $ | 6,940 | $ | 6,943 | ||||||||||||
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% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
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December 31, 2018 | ||||||||||||||||||||||||
Greater than | ||||||||||||||||||||||||
31 - 60 days | 61 - 90 days | 90 days past | Total | |||||||||||||||||||||
(Amounts in millions) | past due | past due | due | past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 3 | $ | — | $ | — | $ | 3 | $ | 2,460 | $ | 2,463 | ||||||||||||
Industrial | — | — | — | — | 1,659 | 1,659 | ||||||||||||||||||
Office | — | — | 3 | 3 | 1,545 | 1,548 | ||||||||||||||||||
Apartments | — | — | — | — | 495 | 495 | ||||||||||||||||||
Mixed use | — | — | — | — | 254 | 254 | ||||||||||||||||||
Other | — | — | — | — | 281 | 281 | ||||||||||||||||||
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| |||||||||||||
Total recorded investment | $ | 3 | $ | — | $ | 3 | $ | 6 | $ | 6,694 | $ | 6,700 | ||||||||||||
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| |||||||||||||
% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
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March 31, 2020 | ||||||||||||||||||||||||
(Amounts in millions) | 31 - 60 dayspast due | 61 - 90 days past due | Greater than 90 days past due | Total past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | — | $ | — | $ | — | $ | — | $ | 2,566 | $ | 2,566 | ||||||||||||
Industrial | — | — | — | — | 1,646 | 1,646 | ||||||||||||||||||
Office | — | — | — | — | 1,641 | 1,641 | ||||||||||||||||||
Apartments | — | — | — | — | 548 | 548 | ||||||||||||||||||
Mixed use | — | — | — | — | 279 | 279 | ||||||||||||||||||
Other | — | — | — | — | 264 | 264 | ||||||||||||||||||
Total amortized cost | $ | — | $ | — | $ | — | $ | — | $ | 6,944 | $ | 6,944 | ||||||||||||
% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
(Amounts in millions) | 31 - 60 dayspast due | 61 - 90 dayspast due | Greater than 90 days past due | Total past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | — | $ | — | $ | — | $ | — | $ | 2,590 | $ | 2,590 | ||||||||||||
Industrial | — | — | — | — | 1,670 | 1,670 | ||||||||||||||||||
Office | — | — | — | — | 1,632 | 1,632 | ||||||||||||||||||
Apartments | — | — | — | — | 541 | 541 | ||||||||||||||||||
Mixed use | — | — | — | — | 281 | 281 | ||||||||||||||||||
Other | — | — | — | — | 266 | 266 | ||||||||||||||||||
Total recorded investment | $ | — | $ | — | $ | — | $ | — | $ | 6,980 | $ | 6,980 | ||||||||||||
% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of March 31, 2019 and December 31, 2018, our commercial mortgage loans greater than 90 days past due included one impaired loan with a carrying value of $3 million. This loan was modified and the modification was considered to be a troubled debt restructuring. As part of this troubled debt restructuring, we forgave default interest, penalties and fees, and modified the original contractual interest rate but we did not forgive the outstanding principal amount owed by the borrower. This loan’s collateral has an appraised value in excess of the carrying amount and the current carrying amount of this loan is expected to be recoverable.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
$11 million and $12 million, respectively. All of thesedid 0t have any modifications or extensions that were based on current market interest rates and did not result in any forgiveness of the outstanding principal amount owed by the borrower.
considered troubled debt restructurings.
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Allowance for credit losses: | ||||||||
Beginning balance | $ | 9 | $ | 9 | ||||
Charge-offs | — | — | ||||||
Recoveries | — | — | ||||||
Provision | 1 | — | ||||||
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Ending balance | $ | 10 | $ | 9 | ||||
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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 | $ | 9 | ||||
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Recorded investment: | ||||||||
Ending balance | $ | 6,943 | $ | 6,348 | ||||
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Ending balance of individually impaired loans | $ | 3 | $ | 6 | ||||
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| |||||
Ending balance of loans not individually impaired that were evaluated collectively for impairment | $ | 6,940 | $ | 6,342 | ||||
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As of March 31, 2019 and December 31, 2018, we had one individual impaired loan within the office property type with a recorded investment and unpaid principal balance of $3 million and as of March 31, 2018, we had one individual impaired loan with an unpaid principal balance of $6 million.
Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Allowance for credit losses: | ||||||||
Beginning balance | $ | 13 | $ | 9 | ||||
Cumulative effect of change in accounting | 16 | — | ||||||
Provision | — | — | ||||||
Write-offs | — | — | ||||||
Recoveries | — | 1 | ||||||
Ending balance | $ | 29 | $ | 10 | ||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth theloan-to-value
March 31, 2019 | ||||||||||||||||||||||||
Greater | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 877 | $ | 537 | $ | 1,119 | $ | 15 | $ | — | $ | 2,548 | ||||||||||||
Industrial | 738 | 290 | 634 | 14 | 2 | 1,678 | ||||||||||||||||||
Office | 588 | 371 | 712 | — | — | 1,671 | ||||||||||||||||||
Apartments | 208 | 90 | 217 | 5 | — | 520 | ||||||||||||||||||
Mixed use | 104 | 45 | 105 | — | — | 254 | ||||||||||||||||||
Other | 43 | 68 | 161 | — | — | 272 | ||||||||||||||||||
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| |||||||||||||
Total recorded investment | $ | 2,558 | $ | 1,401 | $ | 2,948 | $ | 34 | $ | 2 | $ | 6,943 | ||||||||||||
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% of total | 37 | % | 20 | % | 43 | % | — | % | — | % | 100 | % | ||||||||||||
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Weighted-average debt service coverage ratio | 2.42 | 1.80 | 1.58 | 1.46 | 0.88 | 1.93 | ||||||||||||||||||
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December 31, 2018 | ||||||||||||||||||||||||
Greater | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 866 | $ | 565 | $ | 1,017 | $ | 15 | $ | — | $ | 2,463 | ||||||||||||
Industrial | 749 | 279 | 615 | 14 | 2 | 1,659 | ||||||||||||||||||
Office | 585 | 373 | 588 | 2 | — | 1,548 | ||||||||||||||||||
Apartments | 206 | 95 | 189 | 5 | — | 495 | ||||||||||||||||||
Mixed use | 105 | 36 | 113 | — | — | 254 | ||||||||||||||||||
Other | 43 | 78 | 160 | — | — | 281 | ||||||||||||||||||
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|
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| |||||||||||||
Total recorded investment | $ | 2,554 | $ | 1,426 | $ | 2,682 | $ | 36 | $ | 2 | $ | 6,700 | ||||||||||||
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| |||||||||||||
% of total | 38 | % | 21 | % | 40 | % | 1 | % | — | % | 100 | % | ||||||||||||
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Weighted-average debt service coverage ratio | 2.42 | 2.04 | 1.59 | 1.38 | 0.88 | 2.00 | ||||||||||||||||||
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March 31, 2020 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 956 | $ | 587 | $ | 1,023 | $ | — | $ | — | $ | 2,566 | ||||||||||||
Industrial | 787 | 323 | 536 | — | — | 1,646 | ||||||||||||||||||
Office | 550 | 353 | 738 | — | — | 1,641 | ||||||||||||||||||
Apartments | 220 | 110 | 218 | — | — | 548 | ||||||||||||||||||
Mixed use | 103 | 70 | 106 | — | — | 279 | ||||||||||||||||||
Other | 55 | 69 | 140 | — | — | 264 | ||||||||||||||||||
Total amortized cost | $ | 2,671 | $ | 1,512 | $ | 2,761 | $ | — | $ | — | $ | 6,944 | ||||||||||||
% of total | 38 | % | 22 | % | 40 | % | — | % | — | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.31 | 1.82 | 1.55 | — | — | 1.90 | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 986 | $ | 579 | $ | 1,025 | $ | — | $ | — | $ | 2,590 | ||||||||||||
Industrial | 808 | 337 | 525 | — | — | 1,670 | ||||||||||||||||||
Office | 529 | 380 | 723 | — | — | 1,632 | ||||||||||||||||||
Apartments | 211 | 110 | 220 | — | — | 541 | ||||||||||||||||||
Mixed use | 104 | 70 | 107 | — | — | 281 | ||||||||||||||||||
Other | 56 | 69 | 141 | — | — | 266 | ||||||||||||||||||
Total recorded investment | $ | 2,694 | $ | 1,545 | $ | 2,741 | $ | — | $ | — | $ | 6,980 | ||||||||||||
% of total | 39 | % | 22 | % | 39 | % | — | % | — | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.32 | 1.81 | 1.55 | — | — | 1.90 | ||||||||||||||||||
March 31, 2019 | ||||||||||||||||||||||||
Greater | ||||||||||||||||||||||||
(Amounts in millions) | Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | than 2.00 | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 35 | $ | 155 | $ | 572 | $ | 1,216 | $ | 570 | $ | 2,548 | ||||||||||||
Industrial | 22 | 69 | 259 | 667 | 661 | 1,678 | ||||||||||||||||||
Office | 53 | 56 | 203 | 836 | 523 | 1,671 | ||||||||||||||||||
Apartments | 4 | 24 | 108 | 191 | 193 | 520 | ||||||||||||||||||
Mixed use | 3 | 18 | 52 | 80 | 101 | 254 | ||||||||||||||||||
Other | 13 | 133 | 52 | 40 | 34 | 272 | ||||||||||||||||||
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| |||||||||||||
Total recorded investment | $ | 130 | $ | 455 | $ | 1,246 | $ | 3,030 | $ | 2,082 | $ | 6,943 | ||||||||||||
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% of total | 2 | % | 7 | % | 18 | % | 43 | % | 30 | % | 100 | % | ||||||||||||
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Weighted-averageloan-to-value | 56 | % | 61 | % | 64 | % | 59 | % | 42 | % | 55 | % | ||||||||||||
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December 31, 2018 | ||||||||||||||||||||||||
Greater | ||||||||||||||||||||||||
(Amounts in millions) | Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | than 2.00 | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 43 | $ | 157 | $ | 448 | $ | 1,234 | $ | 581 | $ | 2,463 | ||||||||||||
Industrial | 22 | 75 | 233 | 653 | 676 | 1,659 | ||||||||||||||||||
Office | 57 | 56 | 156 | 765 | 514 | 1,548 | ||||||||||||||||||
Apartments | 4 | 24 | 104 | 168 | 195 | 495 | ||||||||||||||||||
Mixed use | 3 | 19 | 51 | 80 | 101 | 254 | ||||||||||||||||||
Other | 13 | 134 | 50 | 50 | 34 | 281 | ||||||||||||||||||
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Total recorded investment | $ | 142 | $ | 465 | $ | 1,042 | $ | 2,950 | $ | 2,101 | $ | 6,700 | ||||||||||||
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% of total | 2 | % | 7 | % | 16 | % | 44 | % | 31 | % | 100 | % | ||||||||||||
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| |||||||||||||
Weighted-averageloan-to-value | 57 | % | 61 | % | 62 | % | 59 | % | 42 | % | 54 | % | ||||||||||||
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(f) Restricted Commercial Mortgage Loans Related To A Securitization Entity
We have a consolidated securitization entity that holds
March 31, 2020 | ||||||||||||||||||||||||
(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 | $ | 65 | $ | 138 | $ | 601 | $ | 1,126 | $ | 636 | $ | 2,566 | ||||||||||||
Industrial | 24 | 50 | 217 | 655 | 700 | 1,646 | ||||||||||||||||||
Office | 41 | 113 | 273 | 745 | 469 | 1,641 | ||||||||||||||||||
Apartments | 16 | 31 | 130 | 186 | 185 | 548 | ||||||||||||||||||
Mixed use | 3 | 18 | 37 | 105 | 116 | 279 | ||||||||||||||||||
Other | 34 | 146 | 19 | 31 | 34 | 264 | ||||||||||||||||||
Total amortized cost | $ | 183 | $ | 496 | $ | 1,277 | $ | 2,848 | $ | 2,140 | $ | 6,944 | ||||||||||||
% of total | 3 | % | 7 | % | 18 | % | 41 | % | 31 | % | 100 | % | ||||||||||||
Weighted-average debt-to-value | 58 | % | 61 | % | 63 | % | 58 | % | 41 | % | 54 | % | ||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
(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 | $ | 68 | $ | 141 | $ | 596 | $ | 1,148 | $ | 637 | $ | 2,590 | ||||||||||||
Industrial | 24 | 51 | 221 | 658 | 716 | 1,670 | ||||||||||||||||||
Office | 44 | 89 | 277 | 751 | 471 | 1,632 | ||||||||||||||||||
Apartments | 16 | 32 | 129 | 175 | 189 | 541 | ||||||||||||||||||
Mixed use | 4 | 16 | 37 | 107 | 117 | 281 | ||||||||||||||||||
Other | 34 | 147 | 20 | 31 | 34 | 266 | ||||||||||||||||||
Total recorded investment | $ | 190 | $ | 476 | $ | 1,280 | $ | 2,870 | $ | 2,164 | $ | 6,980 | ||||||||||||
% of total | 3 | % | 7 | % | 18 | % | 41 | % | 31 | % | 100 | % | ||||||||||||
Weighted-average debt-to-value | 59 | % | 61 | % | 63 | % | 58 | % | 41 | % | 54 | % | ||||||||||||
(g)March 31, 2020:
(Amounts in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 and prior | Total | |||||||||||||||||||||
Debt-to-value: | ||||||||||||||||||||||||||||
0% - 50% | $ | 4 | $ | 11 | $ | 33 | $ | 104 | $ | 118 | $ | 2,401 | $ | 2,671 | ||||||||||||||
51% - 60% | 12 | 29 | 170 | 280 | 149 | 872 | 1,512 | |||||||||||||||||||||
61% - 75% | 91 | 763 | 800 | 351 | 240 | 516 | 2,761 | |||||||||||||||||||||
76% - 100% | — | — | — | — | — | — | — | |||||||||||||||||||||
Greater than 100% | — | — | — | — | — | — | — | |||||||||||||||||||||
Total amortized cost | $ | 107 | $ | 803 | $ | 1,003 | $ | 735 | $ | 507 | $ | 3,789 | $ | 6,944 | ||||||||||||||
Debt service coverage ratio: | ||||||||||||||||||||||||||||
Less than 1.00 | $ | — | $ | — | $ | 34 | $ | 3 | $ | — | $ | 146 | $ | 183 | ||||||||||||||
1.00 - 1.25 | 24 | 12 | 107 | 74 | 13 | 266 | 496 | |||||||||||||||||||||
1.26 - 1.50 | 16 | 360 | 261 | 97 | 88 | 455 | 1,277 | |||||||||||||||||||||
1.51 - 2.00 | 53 | 358 | 507 | 324 | 275 | 1,331 | 2,848 | |||||||||||||||||||||
Greater than 2.00 | 14 | 73 | 94 | 237 | 131 | 1,591 | 2,140 | |||||||||||||||||||||
Total amortized cost | $ | 107 | $ | 803 | $ | 1,003 | $ | 735 | $ | 507 | $ | 3,789 | $ | 6,944 | ||||||||||||||
Write-offs, gross | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Recoveries | — | — | — | — | — | — | — | |||||||||||||||||||||
Write-offs, net | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Investments in limited partnerships or similar entities are generally considered VIEs when the equity group lacks sufficient financial control. Generally, these investments are limited partner or20192020 and December 31, 2018,2019, the total carrying value of these investments was $445$654 million and $394$616 million, respectively. Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We have not contributed, and do not plan to contribute, any additional financial or other support outside of what is contractually obligated.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Derivative assets | Derivative liabilities | |||||||||||||||||||
Fair value | Fair value | |||||||||||||||||||
Balance | March 31, | December 31, | Balance | March 31, | December 31, | |||||||||||||||
(Amounts in millions) | sheet classification | 2019 | 2018 | sheet classification | 2019 | 2018 | ||||||||||||||
Derivatives designated ashedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Other invested assets | $ | 59 | $ | 42 | Other liabilities | $ | 49 | $ | 102 | ||||||||||
Foreign currency swaps | Other invested assets | 3 | 6 | Other liabilities | — | — | ||||||||||||||
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Total cash flow hedges | 62 | 48 | 49 | 102 | ||||||||||||||||
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Total derivativesdesignated as hedges | 62 | 48 | 49 | 102 | ||||||||||||||||
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Derivatives not designated ashedges | ||||||||||||||||||||
Interest rate swaps in a foreign currency | Other invested assets | 46 | 74 | Other liabilities | — | — | ||||||||||||||
Interest rate caps and floors | Other invested assets | 13 | 7 | Other liabilities | — | — | ||||||||||||||
Foreign currency swaps | Other invested assets | — | — | Other liabilities | 13 | 23 | ||||||||||||||
Equity index options | Other invested assets | 60 | 39 | Other liabilities | — | — | ||||||||||||||
Financial futures | Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
Equity return swaps | Other invested assets | — | — | Other liabilities | 1 | 1 | ||||||||||||||
Other foreign currencycontracts | Other invested assets | 6 | 10 | Other liabilities | 25 | 42 | ||||||||||||||
GMWB embedded derivatives | Reinsurancerecoverable(1) | 18 | 20 | Policyholderaccount balances (2) | 295 | 337 | ||||||||||||||
Fixed index annuity embeddedderivatives | Other assets | — | — | Policyholderaccount balances(3) | 423 | 389 | ||||||||||||||
Indexed universal life embedded derivatives | Reinsurancerecoverable | — | — | Policyholderaccount balances(4) | 13 | 12 | ||||||||||||||
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Total derivatives notdesignated as hedges | 143 | 150 | 770 | 804 | ||||||||||||||||
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Total derivatives | $ | 205 | $ | 198 | $ | 819 | $ | 906 | ||||||||||||
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Derivative assets | Derivative liabilities | |||||||||||||||||||
Balance classification | Fair value | Balance classification | Fair value | |||||||||||||||||
(Amounts in millions) | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||||||||||
Derivatives designated as | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Other invested assets | $ | 1,002 | $ | 197 | Other liabilities | $ | — | $ | 10 | ||||||||||
Foreign currency swaps | Other invested assets | 21 | 4 | Other liabilities | — | — | ||||||||||||||
Total cash flow | 1,023 | 201 | — | 10 | ||||||||||||||||
Total derivativesdesignated | 1,023 | 201 | — | 10 | ||||||||||||||||
Derivatives not designated as | ||||||||||||||||||||
Equity index options | Other invested assets | 62 | 81 | Other liabilities | — | — | ||||||||||||||
Financial futures | Other invested assets | — | — | Other liabilities | — | — | ||||||||||||||
Other foreign currencycontracts | Other invested assets | 16 | 8 | Other liabilities | 14 | 1 | ||||||||||||||
GMWB embeddedderivatives | Reinsurancerecoverable (1) | 47 | 20 | Policyholder account balances (2) | 691 | 323 | ||||||||||||||
Fixed index annuity embedded | Other assets | — | — | Policyholderaccount balances (3) | 413 | 452 | ||||||||||||||
Indexed universal lifeembedded | Reinsurancerecoverable | — | — | Policyholder account balances (4) | 21 | 19 | ||||||||||||||
Total derivatives notdesignated as | 125 | 109 | 1,139 | 795 | ||||||||||||||||
Total derivatives | $ | 1,148 | $ | 310 | $ | 1,139 | $ | 805 | ||||||||||||
(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. |
December 31, | Maturities/ | March 31, | ||||||||||||||||
(Notional in millions) | Measurement | 2018 | Additions | terminations | 2019 | |||||||||||||
Derivatives designated as hedges | ||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||
Interest rate swaps | Notional | $ | 9,924 | $ | — | $ | (654 | ) | $ | 9,270 | ||||||||
Foreign currency swaps | Notional | 80 | 35 | (22 | ) | 93 | ||||||||||||
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Total cash flow hedges | 10,004 | 35 | (676 | ) | 9,363 | |||||||||||||
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Total derivatives designated as hedges | 10,004 | 35 | (676 | ) | 9,363 | |||||||||||||
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Derivatives not designated as hedges | ||||||||||||||||||
Interest rate swaps | Notional | 4,674 | — | — | 4,674 | |||||||||||||
Interest rate swaps in a foreign currency | Notional | 2,565 | 98 | (44 | ) | 2,619 | ||||||||||||
Interest rate caps and floors | Notional | 2,624 | 84 | (38 | ) | 2,670 | ||||||||||||
Foreign currency swaps | Notional | 453 | — | (2 | ) | 451 | ||||||||||||
Equity index options | Notional | 2,628 | 503 | (580 | ) | 2,551 | ||||||||||||
Financial futures | Notional | 1,415 | 1,759 | (1,968 | ) | 1,206 | ||||||||||||
Equity return swaps | Notional | 17 | 1 | — | 18 | |||||||||||||
Other foreign currency contracts | Notional | 1,080 | 1,386 | (1,414 | ) | 1,052 | ||||||||||||
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Total derivatives not designated as hedges | 15,456 | 3,831 | (4,046 | ) | 15,241 | |||||||||||||
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Total derivatives | $ | 25,460 | $ | 3,866 | $ | (4,722 | ) | $ | 24,604 | |||||||||
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December 31, | Maturities/ | March 31, | ||||||||||||||||
(Number of policies) | Measurement | 2018 | Additions | terminations | 2019 | |||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||
GMWB embedded derivatives | Policies | 27,886 | — | (577 | ) | 27,309 | ||||||||||||
Fixed index annuity embedded derivatives | Policies | 16,464 | — | (213 | ) | 16,251 | ||||||||||||
Indexed universal life embedded derivatives | Policies | 929 | — | (11 | ) | 918 |
(Notional in millions) | Measurement | December 31, 2019 | Additions | Maturities/ terminations | March 31, 2020 | |||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Notional | $ | 8,968 | $ | 1,158 | $ | (1,102 | ) | $ | 9,024 | ||||||||||
Foreign currency swaps | Notional | 110 | — | — | 110 | |||||||||||||||
Total cash flow hedges | 9,078 | 1,158 | (1,102 | ) | 9,134 | |||||||||||||||
Total derivatives designated as hedges | 9,078 | 1,158 | (1,102 | ) | 9,134 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Interest rate swaps | Notional | 4,674 | — | — | 4,674 | |||||||||||||||
Equity index options | Notional | 2,451 | 509 | (531 | ) | 2,429 | ||||||||||||||
Financial futures | Notional | 1,182 | 1,651 | (1,266 | ) | 1,567 | ||||||||||||||
Other foreign currency contracts | Notional | 628 | 1,819 | (1,308 | ) | 1,139 | ||||||||||||||
Total derivatives not designated as hedges | 8,935 | 3,979 | (3,105 | ) | 9,809 | |||||||||||||||
Total derivatives | $ | 18,013 | $ | 5,137 | $ | (4,207 | ) | $ | 18,943 | |||||||||||
(Number of policies) | Measurement | December 31, 2019 | Additions | Maturities/ terminations | March 31, 2020 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
GMWB embedded derivatives | Policies | 25,623 | — | (561 | ) | 25,062 | ||||||||||||||
Fixed index annuity embedded derivatives | Policies | 15,441 | — | (317 | ) | 15,124 | ||||||||||||||
Indexed universal life embedded derivatives | Policies | 884 | — | (18 | ) | 866 |
Gain (loss) | ||||||||||||||||
reclassified into | Classification of gain | Gain (loss) | Classification of gain | |||||||||||||
Gain (loss) | net income | (loss) reclassified into | recognized in | (loss) recognized in | ||||||||||||
(Amounts in millions) | recognized in OCI | from OCI | net income | net income | net income | |||||||||||
Interest rate swaps hedging assets | $ | 137 | $ | 38 | Net investment income | $ | — | Net investment gains (losses) | ||||||||
Interest rate swaps hedging assets | — | 6 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||
Interest rate swaps hedging liabilities | (12 | ) | — | Interest expense | — | Net investment gains (losses) | ||||||||||
Foreign currency swaps | (3 | ) | — | Net investment income | 2 | Net investment gains (losses) | ||||||||||
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Total | $ | 122 | $ | 44 | $ | 2 | ||||||||||
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2020:
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income (loss) from OCI | Classification of gain (loss) reclassified into net income (loss) | Gain (loss) recognized in net income (loss) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 1,041 | $ | 43 | Net investment income | $ | — | Net investment gains (losses) | ||||||||||||
Interest rate swaps hedging assets | — | 4 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||||||
Interest rate swaps hedging liabilities | (63 | ) | — | Interest expense | — | Net investment gains (losses) | ||||||||||||||
Foreign currency swaps | 17 | — | Net investment income | — | Net investment gains (losses) | |||||||||||||||
Total | $ | 995 | $ | 47 | $ | — | ||||||||||||||
Gain (loss) | ||||||||||||||||
reclassified into | Classification of gain | Gain (loss) | Classification of gain | |||||||||||||
Gain (loss) | net income | (loss) reclassified into | recognized in | (loss) recognized in | ||||||||||||
(Amounts in millions) | recognized in OCI | from OCI | net income | net income | net income | |||||||||||
Interest rate swaps hedging assets | $ | (173 | ) | $ | 35 | Net investment income | $ | — | Net investment gains (losses) | |||||||
Interest rate swaps hedging assets | — | 5 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||
Interest rate swaps hedging liabilities | 17 | — | Interest expense | — | Net investment gains (losses) | |||||||||||
Foreign currency swaps | (1 | ) | — | Net investment income | — | Net investment gains (losses) | ||||||||||
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Total | $ | (157 | ) | $ | 40 | $ | — | |||||||||
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(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net income (loss) from OCI | Classification of gain (loss) reclassified into net income (loss) | Gain (loss) recognized in net income (loss) | Classification of gain (loss) recognized in net income (loss) | |||||||||||||||
Interest rate swaps hedging assets | $ | 137 | $ | 38 | Net investment income | $ | — | Net investment gains (losses) | ||||||||||||
Interest rate swaps hedging assets | — | 6 | Net investment gains (losses) | — | Net investment gains (losses) | |||||||||||||||
Interest rate swaps hedging liabilities | (12 | ) | — | Interest expense | — | Net investment gains (losses) | ||||||||||||||
Foreign currency swaps | (3 | ) | — | Net investment income | — | Net investment gains (losses) | ||||||||||||||
Forward currency swaps | — | — | Net investment gains (losses) | 2 | Net investment gains (losses) | |||||||||||||||
Total | $ | 122 | $ | 44 | $ | 2 | ||||||||||||||
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Derivatives qualifying as effective accounting hedges as of January 1 | $ | 1,781 | $ | 2,065 | ||||
Cumulative effect of changes in accounting: | ||||||||
Stranded tax effects | — | 12 | ||||||
Changes to the hedge accounting model, net of deferred taxes of $— and $(1) | — | 2 | ||||||
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Total cumulative effect of changes in accounting | — | 14 | ||||||
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Current period increases (decreases) in fair value, net of deferred taxes of $(25) and $34 | 97 | (126 | ) | |||||
Reclassification to net (income), net of deferred taxes of $16 and $14 | (28 | ) | (26 | ) | ||||
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Derivatives qualifying as effective accounting hedges as of March 31 | $ | 1,850 | $ | 1,927 | ||||
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Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Derivatives qualifying as effective accounting hedges as of January 1 | $ | 2,002 | $ | 1,781 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $(212) and $(25) | 783 | 97 | ||||||
Reclassification to net (income) loss, net of deferred taxes of $17 and $16 | (30 | ) | (28 | ) | ||||
Derivatives qualifying as effective accounting hedges as of March 31 | $ | 2,755 | $ | 1,850 | ||||
Three months ended March 31, | Classification of gain (loss) recognized in net income | |||||||||
(Amounts in millions) | 2019 | 2018 | ||||||||
Interest rate swaps | $ | (1 | ) | $ | (1 | ) | Net investment gains (losses) | |||
Interest rate swaps in a foreign currency | (23 | ) | — | Net investment gains (losses) | ||||||
Interest rate caps and floors | 6 | — | Net investment gains (losses) | |||||||
Equity index options | 17 | (15 | ) | Net investment gains (losses) | ||||||
Financial futures | (44 | ) | (24 | ) | Net investment gains (losses) | |||||
Equity return swaps | — | (5 | ) | Net investment gains (losses) | ||||||
Other foreign currency contracts | 9 | 8 | Net investment gains (losses) | |||||||
Foreign currency swaps | 10 | (8 | ) | Net investment gains (losses) | ||||||
GMWB embedded derivatives | 45 | 14 | Net investment gains (losses) | |||||||
Fixed index annuity embedded derivatives | (38 | ) | 8 | Net investment gains (losses) | ||||||
Indexed universal life embedded derivatives | 1 | 5 | Net investment gains (losses) | |||||||
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Total derivatives not designated as hedges | $ | (18 | ) | $ | (18 | ) | ||||
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Three months ended March 31, | Classification of gain (loss) recognized in net income (loss) | |||||||||||
(Amounts in millions) | 2020 | 2019 | ||||||||||
Interest rate swaps | $ | (10 | ) | $ | (1 | ) | Net investment gains (losses) | |||||
Equity index options | (13 | ) | 17 | Net investment gains (losses) | ||||||||
Financial futures | 261 | (44 | ) | Net investment gains (losses) | ||||||||
Other foreign currency contracts | (47 | ) | — | Net investment gains (losses) | ||||||||
GMWB embedded derivatives | (336 | ) | 45 | Net investment gains (losses) | ||||||||
Fixed index annuity embedded derivatives | 32 | (38 | ) | Net investment gains (losses) | ||||||||
Indexed universal life embedded derivatives | 4 | 1 | Net investment gains (losses) | |||||||||
Total derivatives not designated as hedges | $ | (109 | ) | $ | (20 | ) | ||||||
March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
Derivatives | Derivatives | Net | Derivatives | Derivatives | Net | |||||||||||||||||||
(Amounts in millions) | assets (1) | liabilities (2) | derivatives | assets (1) | liabilities (2) | derivatives | ||||||||||||||||||
Amounts presented in the balance sheet: | ||||||||||||||||||||||||
Gross amounts recognized | $ | 196 | $ | 89 | $ | 107 | $ | 185 | $ | 169 | $ | 16 | ||||||||||||
Gross amounts offset in the balance sheet | — | — | — | — | — | — | ||||||||||||||||||
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Net amounts presented in the balance sheet | 196 | 89 | 107 | 185 | 169 | 16 | ||||||||||||||||||
Gross amounts not offset in the balance sheet: | ||||||||||||||||||||||||
Financial instruments(3) | (40 | ) | (40 | ) | — | (66 | ) | (66 | ) | — | ||||||||||||||
Collateral received | (66 | ) | — | (66 | ) | (84 | ) | — | (84 | ) | ||||||||||||||
Collateral pledged | — | (428 | ) | 428 | — | (536 | ) | 536 | ||||||||||||||||
Over collateralization | 2 | 380 | (378 | ) | 10 | 433 | (423 | ) | ||||||||||||||||
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Net amount | $ | 92 | $ | 1 | $ | 91 | $ | 45 | $ | — | $ | 45 | ||||||||||||
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March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
(Amounts in millions) | Derivative assets (1) | Derivative liabilities (2) | Net derivatives | Derivative assets (1) | Derivative liabilities (2) | Net derivatives | ||||||||||||||||||
Amounts presented in the balance sheet: | ||||||||||||||||||||||||
Gross amounts recognized | $ | 1,102 | $ | 14 | $ | 1,088 | $ | 291 | $ | 11 | $ | 280 | ||||||||||||
Gross amounts offset in the balance sheet | — | — | — | — | — | — | ||||||||||||||||||
Net amounts presented in the balance sheet | 1,102 | 14 | 1,088 | 291 | 11 | 280 | ||||||||||||||||||
Gross amounts not offset in the balance sheet: | ||||||||||||||||||||||||
Financial instruments (3) | — | — | — | (7 | ) | (7 | ) | — | ||||||||||||||||
Collateral received | (1,016 | ) | — | (1,016 | ) | (179 | ) | — | (179 | ) | ||||||||||||||
Collateral pledged | — | (451 | ) | 451 | — | (405 | ) | 405 | ||||||||||||||||
Over collateralization | 42 | 437 | (395 | ) | 18 | 401 | (383 | ) | ||||||||||||||||
Net amount | $ | 128 | $ | — | $ | 128 | $ | 123 | $ | — | $ | 123 | ||||||||||||
(1) | Included |
|
Does not include amounts related to embedded derivatives as of March 31, 2020 and December 31, 2019. |
(3) | 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. |
Several 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, financial strength rating or risk-based capital ratio is below the limit defined in the applicable agreement. If the provisions defined in these agreements had been triggered as of March 31, 2019 and December 31, 2018, we could have been allowed to claim $92 million and $45 million, respectively, or have been required to disburse up to $1 million as of March 31, 2019. The chart above excludes embedded derivatives as those derivatives are not subject to master netting arrangements. As of March 31, 2019, no counterparties exercised their rights to terminate or revise the terms of their transactions with us.
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, cash equivalents and restricted cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The 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:
March 31, 2019 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | (1) | $ | 6,929 | $ | 7,038 | $ | — | $ | — | $ | 7,038 | |||||||||||||
Restricted commercial mortgage loans | (1) | 59 | 63 | — | — | 63 | ||||||||||||||||||
Bank loan investments | (1) | 294 | 293 | — | — | 293 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 4,035 | 3,564 | — | 3,420 | 144 | ||||||||||||||||||
Non-recourse funding obligations | (1) | 311 | 215 | — | — | 215 | ||||||||||||||||||
Investment contracts | (1) | 12,663 | 13,241 | — | — | 13,241 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 747 | — | — | — | — | — | ||||||||||||||||||
Commitments to fund bank loan investments | 40 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lendingcommitments | 152 | — | — | — | — | — | ||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | (1) | $ | 6,687 | $ | 6,737 | $ | — | $ | — | $ | 6,737 | |||||||||||||
Restricted commercial mortgage loans | (1) | 62 | 66 | — | — | 66 | ||||||||||||||||||
Bank loan investments | (1) | 248 | 248 | — | — | 248 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 4,025 | 3,577 | — | 3,434 | 143 | ||||||||||||||||||
Non-recourse funding obligations | (1) | 311 | 215 | — | — | 215 | ||||||||||||||||||
Investment contracts | (1) | 13,105 | 13,052 | — | — | 13,052 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 539 | — | — | — | — | — | ||||||||||||||||||
Commitments to fund bank loan investments | 33 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lendingcommitments | 73 | — | — | — | — | — |
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Limited partnerships
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. We utilize the net asset value (“NAV”) of the underlying fund statements as a practical expedient for fair value.
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.
March 31, 2020.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Short-term investments. Short-term investments primarily include commercial paper and other highly liquid debt instruments. The fair value of short-term investments classified as Level 1 is based on quoted prices for the identical instrument.
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Fair value | Primary methodologies | Significant inputs | |||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,731 | 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 | $ | 2,494 | 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 | $ | 2,502 | 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 | $ | 26,748 | 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 | $ | 10,123 | 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 | $ | 2,915 | 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 | $ | 2,864 | 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 | $ | 3,224 | 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 | |||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 5,771 | 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 | $ | 2,781 | 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. gov ernment | $ | 1,185 | 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 | $ | 27,844 | 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 | $ | 7,702 | 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 m o rtgage-backed | $ | 2,249 | 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 | $ | 2,981 | 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 | $ | 2,967 | Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers | 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 |
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
GMWB embedded derivatives
For GMWB liabilities, non-performance risk is integrated into the discount rate. Our discount rate used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the non-performance risk of the GMWB liabilities. As of March 31, 2019 and December 31, 2018, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $60 million and $64 million, respectively.
To determine the appropriate discount rate to reflect the non-performance risk of the GMWB liabilities, we evaluate the non-performance risk in our liabilities based on a hypothetical exit market transaction as there is no exit market for these types of liabilities. A hypothetical exit market can be viewed as a hypothetical transfer of the liability to another similarly rated insurance company which would closely resemble a reinsurance transaction. Another hypothetical exit market transaction can be viewed as a hypothetical transaction from the perspective of the GMWB policyholder. In determining the appropriate discount rate to incorporate non-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.
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.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility andnon-performance risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the GMWB liabilities will increase. Any increase innon-performance risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate would increase the fair value.
Fixed index annuity embedded derivatives
We have fixed indexed annuity 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 used in determining the 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 result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease.
Indexed universal life embedded derivatives
We have indexed universal life insurance 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 used in determining the 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 result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interest rate caps and floors.caps.
March 31, 2019 | ||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | NAV (1) | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsoredenterprises | $ | 4,731 | $ | — | $ | 4,731 | $ | — | $ | — | ||||||||||
State and political subdivisions | 2,546 | — | 2,494 | 52 | — | |||||||||||||||
Non-U.S. government | 2,518 | — | 2,518 | — | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,685 | — | 3,937 | 748 | — | |||||||||||||||
Energy | 2,618 | — | 2,503 | 115 | — | |||||||||||||||
Finance and insurance | 7,251 | — | 6,661 | 590 | — | |||||||||||||||
Consumer—non-cyclical | 5,257 | — | 5,183 | 74 | — | |||||||||||||||
Technology and communications | 2,974 | — | 2,922 | 52 | — | |||||||||||||||
Industrial | 1,249 | — | 1,209 | 40 | — | |||||||||||||||
Capital goods | 2,489 | — | 2,394 | 95 | — | |||||||||||||||
Consumer—cyclical | 1,646 | — | 1,451 | 195 | — | |||||||||||||||
Transportation | 1,362 | — | 1,308 | 54 | — | |||||||||||||||
Other | 411 | — | 212 | 199 | — | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total U.S. corporate | 29,942 | — | 27,780 | 2,162 | — | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 1,127 | — | 692 | 435 | — | |||||||||||||||
Energy | 1,447 | — | 1,226 | 221 | — | |||||||||||||||
Finance and insurance | 2,554 | — | 2,372 | 182 | — | |||||||||||||||
Consumer—non-cyclical | 709 | — | 642 | 67 | — | |||||||||||||||
Technology and communications | 1,197 | — | 1,170 | 27 | — | |||||||||||||||
Industrial | 973 | — | 910 | 63 | — | |||||||||||||||
Capital goods | 662 | — | 489 | 173 | — | |||||||||||||||
Consumer—cyclical | 541 | — | 416 | 125 | — | |||||||||||||||
Transportation | 815 | — | 623 | 192 | — | |||||||||||||||
Other | 2,260 | — | 2,170 | 90 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Totalnon-U.S. corporate | 12,285 | — | 10,710 | 1,575 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Residential mortgage-backed | 2,950 | — | 2,915 | 35 | — | |||||||||||||||
Commercial mortgage-backed | 2,962 | — | 2,864 | 98 | — | |||||||||||||||
Other asset-backed | 3,426 | — | 3,224 | 202 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total fixed maturity securities | 61,360 | — | 57,236 | 4,124 | — | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Equity securities | 635 | 513 | 67 | 55 | — | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 59 | — | 59 | — | — | |||||||||||||||
Interest rate swaps in a foreign currency | 46 | — | 46 | — | — | |||||||||||||||
Interest rate caps and floors | 13 | — | 13 | — | — | |||||||||||||||
Foreign currency swaps | 3 | — | 3 | — | — | |||||||||||||||
Equity index options | 60 | — | — | 60 | — | |||||||||||||||
Other foreign currency contracts | 6 | — | 6 | — | — | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total derivative assets | 187 | — | 127 | 60 | — | |||||||||||||||
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| |||||||||||
Securities lending collateral | 106 | — | 106 | — | — | |||||||||||||||
Short-term investments | 139 | — | 139 | — | — | |||||||||||||||
Limited partnerships | 359 | — | — | — | 359 | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total other invested assets | 791 | — | 372 | 60 | 359 | |||||||||||||||
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|
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|
|
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|
| |||||||||||
Reinsurance recoverable(2) | 18 | — | — | 18 | — | |||||||||||||||
Separate account assets | 6,210 | 6,210 | — | — | — | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 69,014 | $ | 6,723 | $ | 57,675 | $ | 4,257 | $ | 359 | ||||||||||
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|
|
March 31, 2020 | ||||||||||||||||||||
(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 | $ | 5,771 | $ | — | $ | 5,771 | $ | — | $ | — | ||||||||||
State and political subdivisions | 2,864 | — | 2,781 | 83 | — | |||||||||||||||
Non-U.S. government | 1,201 | — | 1,200 | 1 | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,867 | — | 4,024 | 843 | — | |||||||||||||||
Energy | 2,092 | — | 1,968 | 124 | — | |||||||||||||||
Finance and insurance | 7,623 | — | 7,113 | 510 | — | |||||||||||||||
Consumer—non-cyclical | 5,685 | — | 5,597 | 88 | — | |||||||||||||||
Technology and communications | 3,275 | — | 3,214 | 61 | — | |||||||||||||||
Industrial | 1,345 | — | 1,308 | 37 | — | |||||||||||||||
Capital goods | 2,664 | — | 2,574 | 90 | — | |||||||||||||||
Consumer—cyclical | 1,719 | — | 1,540 | 179 | — | |||||||||||||||
Transportation | 1,473 | — | 1,430 | 43 | — | |||||||||||||||
Other | 334 | — | 196 | 138 | — | |||||||||||||||
Total U.S. corporate | 31,077 | — | 28,964 | 2,113 | — | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 765 | — | 410 | 355 | — | |||||||||||||||
Energy | 1,098 | — | 862 | 236 | — | |||||||||||||||
Finance and insurance | 2,111 | — | 1,888 | 223 | — | |||||||||||||||
Consumer—non-cyclical | 674 | — | 616 | 58 | — | |||||||||||||||
Technology and communications | 1,109 | — | 1,082 | 27 | — | |||||||||||||||
Industrial | 911 | — | 819 | 92 | — | |||||||||||||||
Capital goods | 561 | — | 426 | 135 | — | |||||||||||||||
Consumer—cyclical | 362 | — | 198 | 164 | — | |||||||||||||||
Transportation | 603 | — | 495 | 108 | — | |||||||||||||||
Other | 1,605 | — | 1,474 | 131 | — | |||||||||||||||
Total non-U.S. corporate | 9,799 | — | 8,270 | 1,529 | — | |||||||||||||||
Residential mortgage-backed | 2,273 | — | 2,249 | 24 | — | |||||||||||||||
Commercial mortgage-backed | 2,981 | — | 2,981 | — | — | |||||||||||||||
Other asset-backed | 3,085 | — | 2,967 | 118 | — | |||||||||||||||
Total fixed maturity securities | 59,051 | — | 55,183 | 3,868 | — | |||||||||||||||
Equity securities | 188 | 43 | 95 | 50 | — | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 1,002 | — | 1,002 | — | — | |||||||||||||||
Foreign currency swaps | 21 | — | 21 | — | — | |||||||||||||||
Equity index options | 62 | — | — | 62 | — | |||||||||||||||
Other foreign currency contracts | 16 | — | 16 | — | — | |||||||||||||||
Total derivative assets | 1,101 | — | 1,039 | 62 | — | |||||||||||||||
Securities lending collateral | 58 | — | 58 | — | — | |||||||||||||||
Short-term investments | 172 | — | 172 | — | — | |||||||||||||||
Limited partnerships | 518 | — | — | — | 518 | |||||||||||||||
Total other invested assets | 1,849 | — | 1,269 | 62 | 518 | |||||||||||||||
Reinsurance recoverable (2) | 47 | — | — | 47 | — | |||||||||||||||
Separate account assets | 4,967 | 4,967 | — | — | — | |||||||||||||||
Total assets | $ | 66,102 | $ | 5,010 | $ | 56,547 | $ | 4,027 | $ | 518 | ||||||||||
(1) |
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|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2018 | ||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | NAV(1) | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsoredenterprises | $ | 4,631 | $ | — | $ | 4,631 | $ | — | $ | — | ||||||||||
State and political subdivisions | 2,552 | — | 2,501 | 51 | — | |||||||||||||||
Non-U.S. government | 2,393 | — | 2,393 | — | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,675 | — | 4,032 | 643 | — | |||||||||||||||
Energy | 2,419 | — | 2,298 | 121 | — | |||||||||||||||
Finance and insurance | 6,822 | — | 6,288 | 534 | — | |||||||||||||||
Consumer—non-cyclical | 5,048 | — | 4,975 | 73 | — | |||||||||||||||
Technology and communications | 2,855 | — | 2,805 | 50 | — | |||||||||||||||
Industrial | 1,238 | — | 1,199 | 39 | — | |||||||||||||||
Capital goods | 2,391 | — | 2,299 | 92 | — | |||||||||||||||
Consumer—cyclical | 1,597 | — | 1,386 | 211 | — | |||||||||||||||
Transportation | 1,320 | — | 1,263 | 57 | — | |||||||||||||||
Other | 397 | — | 219 | 178 | — | |||||||||||||||
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| |||||||||||
Total U.S. corporate | 28,762 | — | 26,764 | 1,998 | — | |||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 1,041 | — | 637 | 404 | — | |||||||||||||||
Energy | 1,369 | — | 1,152 | 217 | — | |||||||||||||||
Finance and insurance | 2,423 | — | 2,252 | 171 | — | |||||||||||||||
Consumer—non-cyclical | 739 | — | 633 | 106 | — | |||||||||||||||
Technology and communications | 1,165 | — | 1,139 | 26 | — | |||||||||||||||
Industrial | 945 | — | 884 | 61 | — | |||||||||||||||
Capital goods | 615 | — | 442 | 173 | — | |||||||||||||||
Consumer—cyclical | 520 | — | 398 | 122 | — | |||||||||||||||
Transportation | 720 | — | 549 | 171 | — | |||||||||||||||
Other | 2,300 | — | 2,219 | 81 | — | |||||||||||||||
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| |||||||||||
Totalnon-U.S. corporate | 11,837 | — | 10,305 | 1,532 | — | |||||||||||||||
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Residential mortgage-backed | 3,044 | — | 3,009 | 35 | — | |||||||||||||||
Commercial mortgage-backed | 3,016 | — | 2,921 | 95 | — | |||||||||||||||
Other asset-backed | 3,426 | — | 3,261 | 165 | — | |||||||||||||||
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| |||||||||||
Total fixed maturity securities | 59,661 | — | 55,785 | 3,876 | — | |||||||||||||||
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Equity securities | 655 | 533 | 64 | 58 | — | |||||||||||||||
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Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 42 | — | 42 | — | — | |||||||||||||||
Interest rate swaps in a foreign currency | 74 | — | 74 | — | — | |||||||||||||||
Interest rate caps and floors | 7 | — | 7 | — | — | |||||||||||||||
Foreign currency swaps | 6 | — | 6 | — | — | |||||||||||||||
Equity index options | 39 | — | — | 39 | — | |||||||||||||||
Other foreign currency contracts | 10 | — | 10 | — | — | |||||||||||||||
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| |||||||||||
Total derivative assets | 178 | — | 139 | 39 | — | |||||||||||||||
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Securities lending collateral | 102 | — | 102 | — | — | |||||||||||||||
Short-term investments | 230 | — | 230 | — | — | |||||||||||||||
Limited partnerships | 318 | — | — | — | 318 | |||||||||||||||
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Total other invested assets | 828 | — | 471 | 39 | 318 | |||||||||||||||
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Reinsurance recoverable(2) | 20 | — | — | 20 | — | |||||||||||||||
Separate account assets | 5,859 | 5,859 | — | — | — | |||||||||||||||
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Total assets | $ | 67,023 | $ | 6,392 | $ | 56,320 | $ | 3,993 | $ | 318 | ||||||||||
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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
December 31, 2019 | ||||||||||||||||||||
(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 | $ | 5,025 | $ | — | $ | 5,025 | $ | — | $ | — | ||||||||||
State and political subdivisions | 2,747 | — | 2,645 | 102 | — | |||||||||||||||
Non-U.S. government | 1,350 | — | 1,350 | — | — | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,997 | — | 4,132 | 865 | — | |||||||||||||||
Energy | 2,699 | — | 2,570 | 129 | — | |||||||||||||||
Finance and insurance | 7,774 | — | 7,202 | 572 | — | |||||||||||||||
Consumer—non-cyclical | 5,701 | — | 5,607 | 94 | — | |||||||||||||||
Technology and communications | 3,245 | — | 3,195 | 50 | — | |||||||||||||||
Industrial | 1,396 | — | 1,356 | 40 | — | |||||||||||||||
Capital goods | 2,711 | — | 2,609 | 102 | — | |||||||||||||||
Consumer—cyclical | 1,760 | — | 1,587 | 173 | — | |||||||||||||||
Transportation | 1,506 | — | 1,428 | 78 | — | |||||||||||||||
Other | 322 | — | 186 | 136 | — | |||||||||||||||
Total U.S. corporate | 32,111 | — | 29,872 | 2,239 | — | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 829 | — | 455 | 374 | — | |||||||||||||||
Energy | 1,319 | — | 1,072 | 247 | — | |||||||||||||||
Finance and insurance | 2,319 | — | 2,085 | 234 | — | |||||||||||||||
Consumer—non-cyclical | 684 | — | 625 | 59 | — | |||||||||||||||
Technology and communications | 1,138 | — | 1,110 | 28 | — | |||||||||||||||
Industrial | 988 | — | 884 | 104 | — | |||||||||||||||
Capital goods | 605 | — | 444 | 161 | — | |||||||||||||||
Consumer—cyclical | 397 | — | 250 | 147 | — | |||||||||||||||
Transportation | 629 | — | 438 | 191 | — | |||||||||||||||
Other | 1,617 | — | 1,477 | 140 | — | |||||||||||||||
Total non-U.S. corporate | 10,525 | — | 8,840 | 1,685 | — | |||||||||||||||
Residential mortgage-backed | 2,270 | — | 2,243 | 27 | — | |||||||||||||||
Commercial mortgage-backed | 3,026 | — | 3,020 | 6 | — | |||||||||||||||
Other asset-backed | 3,285 | — | 3,153 | 132 | — | |||||||||||||||
Total fixed maturity securities | 60,339 | — | 56,148 | 4,191 | — | |||||||||||||||
Equity securities | 239 | 62 | 126 | 51 | — | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 197 | — | 197 | — | — | |||||||||||||||
Foreign currency swaps | 4 | — | 4 | — | — | |||||||||||||||
Equity index options | 81 | — | — | 81 | — | |||||||||||||||
Other foreign currency contracts | 8 | — | 8 | — | — | |||||||||||||||
Total derivative assets | 290 | — | 209 | 81 | — | |||||||||||||||
Securities lending collateral | 51 | — | 51 | — | — | |||||||||||||||
Short-term investments | 211 | — | 211 | — | — | |||||||||||||||
Limited partnerships | 503 | — | — | — | 503 | |||||||||||||||
Total other invested assets | 1,055 | — | 471 | 81 | 503 | |||||||||||||||
Reinsurance recoverable (2) | 20 | — | — | 20 | — | |||||||||||||||
Separate account assets | 6,108 | 6,108 | — | — | — | |||||||||||||||
Total assets | $ | 67,761 | $ | 6,170 | $ | 56,745 | $ | 4,343 | $ | 503 | ||||||||||
(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. |
(Amounts in millions) | Beginning balance as of January 1, 2019 | 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 March 31, 2019 | Total gains (losses) included in net income attributable to assets still held | ||||||||||||||||||||||||||||||||||
Included in net income | Included in OCI | |||||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||
U.S. government, agenciesand government-sponsoredenterprises | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||
State and political subdivisions | 51 | 1 | — | — | — | — | — | — | — | 52 | 1 | |||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 643 | — | 22 | 14 | (1 | ) | — | (2 | ) | 72 | — | 748 | — | |||||||||||||||||||||||||||||||
Energy | 121 | — | 4 | — | — | — | (10 | ) | — | — | 115 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 534 | — | 23 | 30 | — | — | (4 | ) | 7 | — | 590 | — | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 73 | — | 2 | — | — | — | (10 | ) | 9 | — | 74 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 50 | — | 2 | — | — | — | — | — | — | 52 | — | |||||||||||||||||||||||||||||||||
Industrial | 39 | — | 1 | — | — | — | — | — | — | 40 | — | |||||||||||||||||||||||||||||||||
Capital goods | 92 | — | 3 | — | — | — | — | — | — | 95 | — | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 211 | — | 7 | — | (13 | ) | — | (1 | ) | — | (9 | ) | 195 | — | ||||||||||||||||||||||||||||||
Transportation | 57 | — | 1 | 4 | — | — | (8 | ) | — | — | 54 | — | ||||||||||||||||||||||||||||||||
Other | 178 | — | 3 | 22 | — | — | (12 | ) | 8 | — | 199 | — | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total U.S. corporate | 1,998 | — | 68 | 70 | (14 | ) | — | (47 | ) | 96 | (9 | ) | 2,162 | — | ||||||||||||||||||||||||||||||
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Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 404 | — | 16 | 30 | — | — | — | — | (15 | ) | 435 | — | ||||||||||||||||||||||||||||||||
Energy | 217 | — | 7 | 1 | — | — | (4 | ) | — | — | 221 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 171 | 1 | 11 | 5 | — | — | — | — | (6 | ) | 182 | 1 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 106 | 2 | 3 | — | — | — | (44 | ) | — | — | 67 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 26 | — | 1 | — | — | — | — | — | — | 27 | — | |||||||||||||||||||||||||||||||||
Industrial | 61 | — | 2 | — | — | — | — | — | — | 63 | — | |||||||||||||||||||||||||||||||||
Capital goods | 173 | — | 6 | 5 | — | — | (11 | ) | — | — | 173 | — | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 122 | — | 6 | — | — | — | (3 | ) | — | — | 125 | — | ||||||||||||||||||||||||||||||||
Transportation | 171 | — | 6 | 15 | — | — | — | — | — | 192 | — | |||||||||||||||||||||||||||||||||
Other | 81 | — | 4 | — | — | — | (1 | ) | 6 | — | 90 | — | ||||||||||||||||||||||||||||||||
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Totalnon-U.S. corporate | 1,532 | 3 | 62 | 56 | — | — | (63 | ) | 6 | (21 | ) | 1,575 | 1 | |||||||||||||||||||||||||||||||
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Residential mortgage-backed | 35 | — | — | — | — | — | — | — | — | 35 | — | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 95 | — | 2 | 1 | — | — | — | — | — | 98 | — | |||||||||||||||||||||||||||||||||
Other asset-backed | 165 | — | 1 | 54 | — | — | (13 | ) | 1 | (6 | ) | 202 | — | |||||||||||||||||||||||||||||||
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Total fixed maturity securities | 3,876 | 4 | 133 | 181 | (14 | ) | — | (123 | ) | 103 | (36 | ) | 4,124 | 2 | ||||||||||||||||||||||||||||||
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Equity securities | 58 | — | — | — | (3 | ) | — | — | — | — | 55 | — | ||||||||||||||||||||||||||||||||
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Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
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Total derivative assets | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
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Total other invested assets | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
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Reinsurance recoverable(2) | 20 | (3 | ) | — | — | — | 1 | — | — | — | 18 | (3 | ) | |||||||||||||||||||||||||||||||
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Total Level 3 assets | $ | 3,993 | $ | 18 | $ | 133 | $ | 193 | $ | (17 | ) | $ | 1 | $ | (131 | ) | $ | 103 | $ | (36 | ) | $ | 4,257 | $ | 11 | |||||||||||||||||||
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Beginning balance as of January 1, 2020 | Total realized and unrealized gains (losses) | Ending balance as of March 31, 2020 | Total gains (losses) attributable to assets still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net income (loss) | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 (1) | Transfer out of Level (1) | Included in net income (loss) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 102 | $ | 1 | $ | (19 | ) | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | 83 | $ | 1 | $ | (19 | ) | |||||||||||||||||||||
Non-U.S. government | — | — | — | — | — | — | — | 1 | — | 1 | — | — | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 865 | — | (25 | ) | — | — | — | — | 16 | (13 | ) | 843 | — | (23 | ) | |||||||||||||||||||||||||||||||||
Energy | 129 | — | (15 | ) | 10 | (21 | ) | — | (1 | ) | 22 | — | 124 | — | (14 | ) | ||||||||||||||||||||||||||||||||
Finance and insurance | 572 | 2 | (31 | ) | — | — | — | (12 | ) | — | (21 | ) | 510 | — | (28 | ) | ||||||||||||||||||||||||||||||||
Consumer— non-cyclical | 94 | — | (6 | ) | — | — | — | — | — | — | 88 | — | (6 | ) | ||||||||||||||||||||||||||||||||||
Technology and communications | 50 | — | (4 | ) | 20 | — | — | — | — | (5 | ) | 61 | — | (4 | ) | |||||||||||||||||||||||||||||||||
Industrial | 40 | — | (3 | ) | — | — | — | — | — | — | 37 | — | (2 | ) | ||||||||||||||||||||||||||||||||||
Capital goods | 102 | — | (8 | ) | — | — | — | (4 | ) | — | — | 90 | — | (8 | ) | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 173 | — | (7 | ) | — | — | — | (2 | ) | 15 | — | 179 | — | (7 | ) | |||||||||||||||||||||||||||||||||
Transportation | 78 | — | (4 | ) | — | — | — | (1 | ) | — | (30 | ) | 43 | — | (1 | ) | ||||||||||||||||||||||||||||||||
Other | 136 | — | (1 | ) | 5 | — | — | (2 | ) | — | — | 138 | — | (1 | ) | |||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,239 | 2 | (104 | ) | 35 | (21 | ) | — | (22 | ) | 53 | (69 | ) | 2,113 | — | (94 | ) | |||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 374 | — | (20 | ) | 11 | — | — | — | 21 | (31 | ) | 355 | — | (20 | ) | |||||||||||||||||||||||||||||||||
Energy | 247 | — | (30 | ) | — | — | — | — | 19 | — | 236 | — | (30 | ) | ||||||||||||||||||||||||||||||||||
Finance and insurance | 234 | 1 | (41 | ) | 15 | — | — | — | 21 | (7 | ) | 223 | 1 | (40 | ) | |||||||||||||||||||||||||||||||||
Consumer— non-cyclical | 59 | — | (3 | ) | 8 | — | — | — | 1 | (7 | ) | 58 | — | (3 | ) | |||||||||||||||||||||||||||||||||
Technology andcommunications | 28 | — | (1 | ) | — | — | — | — | — | — | 27 | — | (1 | ) | ||||||||||||||||||||||||||||||||||
Industrial | 104 | — | (7 | ) | — | — | — | (5 | ) | — | — | 92 | — | (6 | ) | |||||||||||||||||||||||||||||||||
Capital goods | 161 | 1 | (11 | ) | — | — | — | (16 | ) | — | — | 135 | — | (11 | ) | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 147 | — | (15 | ) | 4 | — | — | (4 | ) | 32 | — | 164 | — | (15 | ) | |||||||||||||||||||||||||||||||||
Transportation | 191 | — | (9 | ) | — | — | — | — | — | (74 | ) | 108 | — | (5 | ) | |||||||||||||||||||||||||||||||||
Other | 140 | — | (9 | ) | — | — | — | (1 | ) | 1 | — | 131 | — | (9 | ) | |||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,685 | 2 | (146 | ) | 38 | — | — | (26 | ) | 95 | (119 | ) | 1,529 | 1 | (140 | ) | ||||||||||||||||||||||||||||||||
Residential mortgage-backed | 27 | — | (1 | ) | — | — | — | — | 1 | (3 | ) | 24 | — | (1 | ) | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 6 | — | 1 | — | — | — | — | — | (7 | ) | — | — | — | |||||||||||||||||||||||||||||||||||
Other asset-backed | 132 | — | (4 | ) | 9 | — | — | (17 | ) | — | (2 | ) | 118 | — | (5 | ) | ||||||||||||||||||||||||||||||||
Total fixed maturity securities | 4,191 | 5 | (273 | ) | 82 | (21 | ) | — | (66 | ) | 150 | (200 | ) | 3,868 | 2 | (259 | ) | |||||||||||||||||||||||||||||||
Equity securities | 51 | — | — | — | (1 | ) | — | — | — | — | 50 | — | — | |||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 81 | (13 | ) | — | 11 | — | — | (17 | ) | — | — | 62 | (3 | ) | — | |||||||||||||||||||||||||||||||||
Total derivative assets | 81 | (13 | ) | — | 11 | — | — | (17 | ) | — | — | 62 | (3 | ) | — | |||||||||||||||||||||||||||||||||
Total other invested assets | 81 | (13 | ) | — | 11 | — | — | (17 | ) | — | — | 62 | (3 | ) | — | |||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 20 | 26 | — | — | — | 1 | — | — | — | 47 | 26 | — | ||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,343 | $ | 18 | $ | (273 | ) | $ | 93 | $ | (22 | ) | $ | 1 | $ | (83 | ) | $ | 150 | $ | (200 | ) | $ | 4,027 | $ | 25 | $ | (259 | ) | |||||||||||||||||||
(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, 2018 | 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 March 31, 2018 | Total gains (losses) included in net income attributable to assets still held | ||||||||||||||||||||||||||||||||||
Included in net income | Included in OCI | |||||||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||
U.S. government, agencies and government-sponsoredenterprises | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||
State and political subdivisions | 37 | 1 | (3 | ) | — | — | — | — | 18 | — | 53 | 1 | ||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 574 | — | (18 | ) | 3 | — | — | (2 | ) | — | (4 | ) | 553 | — | ||||||||||||||||||||||||||||||
Energy | 147 | — | (5 | ) | 22 | — | — | (18 | ) | — | — | 146 | — | |||||||||||||||||||||||||||||||
Finance and insurance | 626 | 1 | (26 | ) | 26 | — | — | (36 | ) | — | (11 | ) | 580 | 1 | ||||||||||||||||||||||||||||||
Consumer—non-cyclical | 81 | — | (2 | ) | — | — | — | — | — | — | 79 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 73 | — | (6 | ) | — | — | — | (42 | ) | — | — | 25 | — | |||||||||||||||||||||||||||||||
Industrial | 39 | — | — | — | — | — | — | — | — | 39 | — | |||||||||||||||||||||||||||||||||
Capital goods | 121 | — | (8 | ) | — | — | — | (10 | ) | — | — | 103 | — | |||||||||||||||||||||||||||||||
Consumer—cyclical | 262 | — | (9 | ) | 10 | — | — | (11 | ) | — | — | 252 | — | |||||||||||||||||||||||||||||||
Transportation | 60 | — | (1 | ) | — | — | — | (2 | ) | — | — | 57 | — | |||||||||||||||||||||||||||||||
Other | 169 | — | (1 | ) | — | — | — | (2 | ) | — | — | 166 | — | |||||||||||||||||||||||||||||||
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Total U.S. corporate | 2,152 | 1 | (76 | ) | 61 | — | — | (123 | ) | — | (15 | ) | 2,000 | 1 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 343 | — | (9 | ) | 22 | — | — | (20 | ) | — | — | 336 | — | |||||||||||||||||||||||||||||||
Energy | 176 | — | (4 | ) | 23 | — | — | — | — | — | 195 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 161 | 1 | (8 | ) | — | — | — | (1 | ) | — | — | 153 | 1 | |||||||||||||||||||||||||||||||
Consumer—non-cyclical | 124 | — | (3 | ) | — | — | — | (1 | ) | — | — | 120 | — | |||||||||||||||||||||||||||||||
Technology andcommunications | 29 | — | (1 | ) | — | — | — | — | — | — | 28 | — | ||||||||||||||||||||||||||||||||
Industrial | 116 | — | (3 | ) | — | — | — | (5 | ) | — | — | 108 | — | |||||||||||||||||||||||||||||||
Capital goods | 191 | — | (5 | ) | — | — | — | — | — | — | 186 | — | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 54 | — | (2 | ) | — | — | — | — | — | — | 52 | — | ||||||||||||||||||||||||||||||||
Transportation | 170 | — | (4 | ) | — | — | — | — | — | — | 166 | — | ||||||||||||||||||||||||||||||||
Other | 52 | — | (2 | ) | 33 | — | — | — | — | — | 83 | — | ||||||||||||||||||||||||||||||||
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Totalnon-U.S. corporate | 1,416 | 1 | (41 | ) | 78 | — | — | (27 | ) | — | — | 1,427 | 1 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Residential mortgage-backed | 77 | — | (1 | ) | 12 | — | — | — | — | (54 | ) | 34 | — | |||||||||||||||||||||||||||||||
Commercial mortgage-backed | 30 | — | (2 | ) | 7 | — | — | — | — | (29 | ) | 6 | — | |||||||||||||||||||||||||||||||
Other asset-backed | 237 | — | (2 | ) | 55 | — | — | (32 | ) | 3 | (89 | ) | 172 | — | ||||||||||||||||||||||||||||||
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Total fixed maturity securities | 3,950 | 3 | (125 | ) | 213 | — | — | (183 | ) | 21 | (187 | ) | 3,692 | 3 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Equity securities | 44 | — | — | 4 | (3 | ) | — | — | — | — | 45 | — | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 80 | (15 | ) | — | 14 | — | — | (19 | ) | — | — | 60 | (12 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total derivative assets | 80 | (15 | ) | — | 14 | — | — | (19 | ) | — | — | 60 | (12 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total other invested assets | 80 | (15 | ) | — | 14 | — | — | (19 | ) | — | — | 60 | (12 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Reinsurance recoverable(2) | 14 | (2 | ) | — | — | — | 1 | — | — | — | 13 | (2 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Level 3 assets | $ | 4,088 | $ | (14 | ) | $ | (125 | ) | $ | 231 | $ | (3 | ) | $ | 1 | $ | (202 | ) | $ | 21 | $ | (187 | ) | $ | 3,810 | $ | (11 | ) | ||||||||||||||||
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Beginning balance as of January 1, 2019 | Total realized and unrealized gains (losses) | Ending balance as of March 31, 2019 | 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 | Transfer into Level 3 (1) | Transfer out of Level 3 (1) | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 51 | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $— | $ | 52 | $ | 1 | |||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 643 | — | 22 | 14 | (1 | ) | — | (2 | ) | 72 | — | 748 | — | |||||||||||||||||||||||||||||||
Energy | 121 | — | 4 | — | — | — | (10 | ) | — | — | 115 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 534 | — | 23 | 30 | — | — | (4 | ) | 7 | — | 590 | — | ||||||||||||||||||||||||||||||||
Consumer— non-cyclical | 73 | — | 2 | — | — | — | (10 | ) | 9 | — | 74 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 50 | — | 2 | — | — | — | — | — | — | 52 | — | |||||||||||||||||||||||||||||||||
Industrial | 39 | — | 1 | — | — | — | — | — | — | 40 | — | |||||||||||||||||||||||||||||||||
Capital goods | 92 | — | 3 | — | — | — | — | — | — | 95 | — | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 211 | — | 7 | — | (13 | ) | — | (1 | ) | — | (9 | ) | 195 | — | ||||||||||||||||||||||||||||||
Transportation | 57 | — | 1 | 4 | — | — | (8 | ) | — | — | 54 | — | ||||||||||||||||||||||||||||||||
Other | 178 | — | 3 | 22 | — | — | (12 | ) | 8 | — | 199 | — | ||||||||||||||||||||||||||||||||
Total U.S. corporate | 1,998 | — | 68 | 70 | (14 | ) | — | (47 | ) | 96 | (9 | ) | 2,162 | — | ||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 404 | — | 16 | 30 | — | — | — | — | (15 | ) | 435 | — | ||||||||||||||||||||||||||||||||
Energy | 217 | — | 7 | 1 | — | — | (4 | ) | — | — | 221 | — | ||||||||||||||||||||||||||||||||
Finance and insurance | 171 | 1 | 11 | 5 | — | — | — | — | (6 | ) | 182 | 1 | ||||||||||||||||||||||||||||||||
Consumer— non-cyclical | 106 | 2 | 3 | — | — | — | (44 | ) | — | — | 67 | — | ||||||||||||||||||||||||||||||||
Technology andcommunications | 26 | — | 1 | — | — | — | — | — | — | 27 | — | |||||||||||||||||||||||||||||||||
Industrial | 61 | — | 2 | — | — | — | — | — | — | 63 | — | |||||||||||||||||||||||||||||||||
Capital goods | 173 | — | 6 | 5 | — | — | (11 | ) | — | — | 173 | — | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 122 | — | 6 | — | — | — | (3 | ) | — | — | 125 | — | ||||||||||||||||||||||||||||||||
Transportation | 171 | — | 6 | 15 | — | — | — | — | — | 192 | — | |||||||||||||||||||||||||||||||||
Other | 81 | — | 4 | — | — | — | (1 | ) | 6 | — | 90 | — | ||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,532 | 3 | 62 | 56 | — | — | (63 | ) | 6 | (21 | ) | 1,575 | 1 | |||||||||||||||||||||||||||||||
Residential mortgage- backed | 35 | — | — | — | — | — | — | — | — | 35 | — | |||||||||||||||||||||||||||||||||
Commercial mortgage- backed | 95 | — | 2 | 1 | — | — | — | — | — | 98 | — | |||||||||||||||||||||||||||||||||
Other asset-backed | 154 | — | 1 | 54 | — | — | (13 | ) | 1 | — | 197 | — | ||||||||||||||||||||||||||||||||
Total fixed maturity securities | 3,865 | 4 | 133 | 181 | (14 | ) | — | (123 | ) | 103 | (30 | ) | 4,119 | 2 | ||||||||||||||||||||||||||||||
Equity securities | 58 | — | — | — | (3 | ) | — | — | — | — | 55 | — | ||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
Total derivative assets | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
Total other invested assets | 39 | 17 | — | 12 | — | — | (8 | ) | — | — | 60 | 12 | ||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 20 | (3 | ) | — | — | — | 1 | — | — | — | 18 | (3 | ) | |||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 3,982 | $ | 18 | $ | 133 | $ | 193 | $ | (17 | ) | $ | 1 | $ | (131 | ) | $ | 103 | $ | (30 | ) | $ | 4,252 | $ | 11 | |||||||||||||||||||
(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) | 2019 | 2018 | ||||||
Total realized and unrealized gains (losses) included in net income: | ||||||||
Net investment income | $ | 4 | $ | 3 | ||||
Net investment gains (losses) | 14 | (17 | ) | |||||
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| |||||
Total | $ | 18 | $ | (14 | ) | |||
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| |||||
Net gains (losses) included in net income attributable to assets still held: | ||||||||
Net investment income | $ | 2 | $ | 3 | ||||
Net investment gains (losses) | 9 | (14 | ) | |||||
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| |||||
Total | $ | 11 | $ | (11 | ) | |||
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|
(Amounts in millions) | 2020 | 2019 | ||||||
Total realized and unrealized gains (losses) included in net income (loss): | ||||||||
Net investment income | $ — | $ | 4 | |||||
Net investment gains (losses) | 18 | 14 | ||||||
Total | $ 18 | $ | 18 | |||||
Net gains (losses) included in net income (loss) attributable to assets still held: | ||||||||
Net investment income | $ — | $ | 2 | |||||
Net investment gains (losses) | 25 | 9 | ||||||
Total | $ 25 | $ | 11 | |||||
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average | |||||||
Fixed maturity securities: | ||||||||||||
U.S. corporate: | ||||||||||||
Utilities | Internal models | $ | 674 | Credit spreads | 60bps - 302bps | 146bps | ||||||
Energy | Internal models | 92 | Credit spreads | 72bps - 317bps | 169bps | |||||||
Finance and insurance | Internal models | 578 | Credit spreads | 64bps - 268bps | 167bps | |||||||
Consumer—non-cyclical | Internal models | 74 | Credit spreads | 85bps - 177bps | 123bps | |||||||
Technology andcommunications | Internal models | 52 | Credit spreads | 90bps - 317bps | 205bps | |||||||
Industrial | Internal models | 40 | Credit spreads | 108bps - 225bps | 153bps | |||||||
Capital goods | Internal models | 96 | Credit spreads | 100bps - 283bps | 162bps | |||||||
Consumer—cyclical | Internal models | 181 | Credit spreads | 61bps - 235bps | 142bps | |||||||
Transportation | Internal models | 54 | Credit spreads | 54bps - 235bps | 107bps | |||||||
Other | Internal models | 170 | Credit spreads | 64bps - 146bps | 85bps | |||||||
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| |||||||||||
Total U.S. corporate | Internal models | $ | 2,011 | Credit spreads | 54bps - 317bps | 148bps | ||||||
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| |||||||||||
Non-U.S. corporate: | ||||||||||||
Utilities | Internal models | $ | 435 | Credit spreads | 78bps - 228bps | 142bps | ||||||
Energy | Internal models | 202 | Credit spreads | 100bps - 283bps | 163bps | |||||||
Finance and insurance | Internal models | 182 | Credit spreads | 61bps - 222bps | 131bps | |||||||
Consumer—non-cyclical | Internal models | 66 | Credit spreads | 61bps - 172bps | 143bps | |||||||
Technology andcommunications | Internal models | 27 | Credit spreads | 127bps - 184bps | 167bps | |||||||
Industrial | Internal models | 63 | Credit spreads | 99bps - 151bps | 112bps | |||||||
Capital goods | Internal models | 173 | Credit spreads | 85bps - 283bps | 165bps | |||||||
Consumer—cyclical | Internal models | 121 | Credit spreads | 72bps - 283bps | 195bps | |||||||
Transportation | Internal models | 192 | Credit spreads | 61bps - 235bps | 131bps | |||||||
Other | Internal models | 84 | Credit spreads | 111bps - 223bps | 158bps | |||||||
|
| |||||||||||
Totalnon-U.S. corporate | Internal models | $ | 1,545 | Credit spreads | 61bps - 283bps | 149bps | ||||||
|
| |||||||||||
Derivative assets: | ||||||||||||
Equity index options | Discounted cash flows | $ | 60 | Equity index volatility | 6% - 28% | 16% |
2020:
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average (1) | |||||||||||||
Fixed maturity securities: | ||||||||||||||||||
U.S. corporate: | ||||||||||||||||||
Utilities | Internal models | $ | 757 | Credit spreads | 202bps - 667bps | 286bps | ||||||||||||
Energy | Internal models | 17 | Credit spreads | 297bps - 659bps | 490bps | |||||||||||||
Finance and insurance | Internal models | 457 | Credit spreads | 215bps - 579bps | 348bps | |||||||||||||
Consumer— | Internal models | 88 | Credit spreads | 222bps - 659bps | 424bps | |||||||||||||
Technology andcommunications | Internal models | 61 | Credit spreads | 264bps - 559bps | 354bps | |||||||||||||
Industrial | Internal models | 37 | Credit spreads | 524bps - 882bps | 628bps | |||||||||||||
Capital goods | Internal models | 90 | Credit spreads | 345bps - 524bps | 409bps | |||||||||||||
Consumer—cyclical | Internal models | 153 | Credit spreads | 249bps - 534bps | 356bps | |||||||||||||
Transportation | Internal models | 43 | Credit spreads | 150bps - 367bps | 270bps | |||||||||||||
Other | Internal models | 138 | Credit spreads | 213bps - 282bps | 225bps | |||||||||||||
Total U.S. corporate | Internal models | $ | 1,841 | Credit spreads | 150bps - 882bps | 326bps | ||||||||||||
Non-U.S. corporate: | ||||||||||||||||||
Utilities | Internal models | $ | 355 | Credit spreads | 233bps - 387bps | 312bps | ||||||||||||
Energy | Internal models | 102 | Credit spreads | 345bps - 396bps | 364bps | |||||||||||||
Finance and insurance | Internal models | 166 | Credit spreads | 263bps - 435bps | 367bps | |||||||||||||
Consumer— | Internal models | 56 | Credit spreads | 212bps - 363bps | 327bps | |||||||||||||
Technology andcommunications | Internal models | 27 | Credit spreads | 345bps - 363bps | 351bps | |||||||||||||
Industrial | Internal models | 92 | Credit spreads | 212bps - 534bps | 340bps | |||||||||||||
Capital goods | Internal models | 135 | Credit spreads | 212bps - 534bps | 455bps | |||||||||||||
Consumer— | Internal models | 43 | Credit spreads | 241bps - 396bps | 338bps | |||||||||||||
Transportation | Internal models | 108 | Credit spreads | 222bps - 534bps | 387bps | |||||||||||||
Other | Internal models | 130 | Credit spreads | 244bps - 799bps | 441bps | |||||||||||||
Total non-U.S. corporate | Internal models | $ | 1,214 | Credit spreads | 212bps - 799bps | 365bps | ||||||||||||
Derivative assets: | ||||||||||||||||||
Equity index options | Discounted cash flows | $ | 62 | Equity index volatility | 6% - 48% | 27% |
(1) | Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by notional for derivative assets. |
March 31, 2019 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives(1) | $ | 295 | $ | — | $ | — | $ | 295 | ||||||||
Fixed index annuity embedded derivatives | 423 | — | — | 423 | ||||||||||||
Indexed universal life embedded derivatives | 13 | — | — | 13 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total policyholder account balances | 731 | — | — | 731 | ||||||||||||
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|
|
|
|
|
| |||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 49 | — | 49 | — | ||||||||||||
Foreign currency swaps | 13 | — | 13 | — | ||||||||||||
Equity return swaps | 1 | — | 1 | — | ||||||||||||
Other foreign currency contracts | 25 | — | 25 | — | ||||||||||||
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|
|
|
|
|
| |||||||||
Total derivative liabilities | 88 | — | 88 | — | ||||||||||||
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|
|
|
|
|
| |||||||||
Total liabilities | $ | 819 | $ | — | $ | 88 | $ | 731 | ||||||||
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|
|
March 31, 2020 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 691 | $ | — | $ | — | $ | 691 | ||||||||
Fixed index annuity embedded derivatives | 413 | — | — | 413 | ||||||||||||
Indexed universal life embedded derivatives | 21 | — | — | 21 | ||||||||||||
Total policyholder account balances | 1,125 | — | — | 1,125 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Other foreign currency contracts | 14 | — | 14 | — | ||||||||||||
Total derivative liabilities | 14 | — | 14 | — | ||||||||||||
Total liabilities | $ | 1,139 | $ | — | $ | 14 | $ | 1,125 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
December 31, 2018 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives(1) | $ | 337 | $ | — | $ | — | $ | 337 | ||||||||
Fixed index annuity embedded derivatives | 389 | — | — | 389 | ||||||||||||
Indexed universal life embedded derivatives | 12 | — | — | 12 | ||||||||||||
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|
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|
|
| |||||||||
Total policyholder account balances | 738 | — | — | 738 | ||||||||||||
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|
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| |||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 102 | — | 102 | — | ||||||||||||
Foreign currency swaps | 23 | — | 23 | — | ||||||||||||
Equity return swaps | 1 | — | 1 | — | ||||||||||||
Other foreign currency contracts | 42 | — | 42 | — | ||||||||||||
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| |||||||||
Total derivative liabilities | 168 | — | 168 | — | ||||||||||||
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| |||||||||
Total liabilities | $ | 906 | $ | — | $ | 168 | $ | 738 | ||||||||
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|
December 31, 2019 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 323 | $ | — | $ | — | $ | 323 | ||||||||
Fixed index annuity embedded derivatives | 452 | — | — | 452 | ||||||||||||
Indexed universal life embedded derivatives | 19 | — | — | 19 | ||||||||||||
Total policyholder account balances | 794 | — | — | 794 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 10 | — | 10 | — | ||||||||||||
Other foreign currency contracts | 1 | — | 1 | — | ||||||||||||
Total derivative liabilities | 11 | — | 11 | — | ||||||||||||
Total liabilities | $ | 805 | $ | — | $ | 11 | $ | 794 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
Beginning balance as of January 1, 2019 | Total realized and unrealized (gains) losses | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of March 31, 2019 | Total (gains) losses included in net (income) attributable to liabilities still held | |||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives(1) | $ | 337 | $ | (48 | ) | $ | — | $ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | 295 | $ | (44 | ) | ||||||||||||||||||||
Fixed index annuity embedded derivatives | 389 | 38 | — | — | — | — | (4 | ) | — | — | 423 | 38 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 12 | (1 | ) | — | — | — | 2 | — | — | — | 13 | (1 | ) | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total policyholder accountbalances | 738 | (11 | ) | — | — | — | 8 | (4 | ) | — | — | 731 | (7 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Level 3 liabilities | $ | 738 | $ | (11 | ) | $ | — | $ | — | $ | — | $ | 8 | $ | (4 | ) | $ | — | $ | — | $ | 731 | $ | (7 | ) | |||||||||||||||||||
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Beginning balance as of January 1, 2020 | Total realized and unrealized (gains) losses | Ending balance as of March 31, 2020 | Total (gains) losses attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) loss | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Included in net (income) loss | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB embedded (1) | $ | 323 | $ | 362 | $ | — | $ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | 691 | $ | 368 | $ | — | ||||||||||||||||||||||||
Fixed index annuityembedded derivatives | 452 | (32 | ) | — | — | — | — | (7 | ) | — | — | 413 | (32 | ) | — | |||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 19 | (4 | ) | — | — | — | 6 | — | — | — | 21 | (4 | ) | — | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 794 | 326 | — | — | — | 12 | (7 | ) | — | — | 1,125 | 332 | — | |||||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 794 | $ | 326 | $ | — | $ | — | $ | — | $ | 12 | $ | (7 | ) | $ | — | $ | — | $ | 1,125 | $ | 332 | $ | — | |||||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
Beginning balance as of January 1, 2018 | Total realized and unrealized (gains) losses | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | Ending balance as of March 31, 2018 | Total (gains) losses included in net (income) attributable to liabilities still held | |||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) | Included in OCI | ||||||||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives(1) | $ | 250 | $ | (16 | ) | $ | — | $ | — | $ | — | $ | 8 | $ | — | $ | — | $ | — | $ | 242 | $ | (12 | ) | ||||||||||||||||||||
Fixed index annuityembedded derivatives | 419 | (8 | ) | — | — | — | — | (3 | ) | — | — | 408 | (8 | ) | ||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 14 | (5 | ) | — | — | — | 4 | — | — | — | 13 | (5 | ) | |||||||||||||||||||||||||||||||
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| �� |
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| |||||||||||||||||||||||
Total policyholderaccount balances | 683 | (29 | ) | — | — | — | 12 | (3 | ) | — | — | 663 | (25 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Level 3 liabilities | $ | 683 | $ | (29 | ) | $ | — | $ | — | $ | — | $ | 12 | $ | (3 | ) | $ | — | $ | — | $ | 663 | $ | (25 | ) | |||||||||||||||||||
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Beginning balance as of January 1, 2019 | Total realized and unrealized (gains) losses | Ending balance as of March 31, 2019 | Total (gains) losses included in net (income) loss attributable to liabilities still held | |||||||||||||||||||||||||||||||||||||||||
(Amounts in millions) | Included in net (income) loss | Included in OCI | Purchases | Sales | Issuances | Settlements | Transfer into Level 3 | Transfer out of Level 3 | ||||||||||||||||||||||||||||||||||||
Policyholder account balances: | ||||||||||||||||||||||||||||||||||||||||||||
GMWB embeddedderivatives (1) | $ | 337 | $ | (48 | ) | $ | — | $ | — | $ | — | $ | 6 | $ | — | $ | — | $ | — | $ | 295 | $ | (44 | ) | ||||||||||||||||||||
Fixed index annuityembedded derivatives | 389 | 38 | — | — | — | — | (4 | ) | — | — | 423 | 38 | ||||||||||||||||||||||||||||||||
Indexed universal lifeembedded derivatives | 12 | (1 | ) | — | — | — | 2 | — | — | — | 13 | (1 | ) | |||||||||||||||||||||||||||||||
Total policyholderaccount balances | 738 | (11 | ) | — | — | — | 8 | (4 | ) | — | — | 731 | (7 | ) | ||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 738 | $ | (11 | ) | $ | — | $ | — | $ | — | $ | 8 | $ | (4 | ) | $ | — | $ | — | $ | 731 | $ | (7 | ) | |||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
(Amounts in millions) | 2019 | 2018 | ||||||
Total realized and unrealized (gains) losses included in net (income): | ||||||||
Net investment income | $ | — | $ | — | ||||
Net investment (gains) losses | (11 | ) | (29 | ) | ||||
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| |||||
Total | $ | (11 | ) | $ | (29 | ) | ||
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| |||||
Total (gains) losses included in net (income) attributable to liabilities still held: | ||||||||
Net investment income | $ | — | $ | — | ||||
Net investment (gains) losses | (7 | ) | (25 | ) | ||||
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| |||||
Total | $ | (7 | ) | $ | (25 | ) | ||
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|
(Amounts in millions) | 2020 | 2019 | ||||||
Total realized and unrealized (gains) losses included in net (income) loss: | ||||||||
Net investment income | $ | — | $ | — | ||||
Net investment (gains) losses | 326 | (11 | ) | |||||
Total | $ | 326 | $ | (11 | ) | |||
Total (gains) losses included in net (income) loss attributable to liabilities still held: | ||||||||
Net investment income | $ | — | $ | — | ||||
Net investment (gains) losses | 332 | (7 | ) | |||||
Total | $ | 332 | $ | (7 | ) | |||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average | |||||||||
Policyholder account balances: | ||||||||||||||
Withdrawal utilization rate | 44% - 87% | 69% | ||||||||||||
Lapse rate | 2% - 9% | 3% | ||||||||||||
Non-performance risk (credit spreads) | 17bps - 83bps | 65bps | ||||||||||||
GMWB embeddedderivative(1) | | Stochastic cash flow model | | $ | 295 | Equity index volatility | 14% - 23% | 20% | ||||||
Fixed index annuity embeddedderivatives | | Option budget method | | $ | 423 | Expected future interest credited | —% - 3% | 1% | ||||||
Indexed universal life embeddedderivatives | | Option budget method | | $ | 13 | Expected future interest credited | 3% - 9% | 5% |
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average (1) | |||||||||||||||
Policyholder account balances: | ||||||||||||||||||||
Withdrawal utilization rate | 56% - 88% | 73% | ||||||||||||||||||
Lapse rate | 2% - 9% | 3% | ||||||||||||||||||
Non-performance risk (credit spreads) | 83bps - 95bps | 86bps | ||||||||||||||||||
GMWB embeddedderivatives (2) | Stochastic cash flow model | $691 | Equity index volatility | 22% - 35% | 26% | |||||||||||||||
Fixed index annuity embeddedderivatives | Option budget method | $413 | Expected future interest credited | — - 3% | 1% | |||||||||||||||
Indexed universal life embeddedderivatives | Option budget method | $21 | Expected future interest credited | 3% - 13% | 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. |
March 31, 2020 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | (1 | ) | $ | 6,915 | $ | 7,231 | $ | — | $ | — | $ | 7,231 | ||||||||||||
Other invested assets | (1 | ) | 450 | 459 | — | 41 | 418 | |||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1 | ) | 2,851 | 2,334 | — | 2,211 | 123 | |||||||||||||||||
Investment contracts | (1 | ) | 11,500 | 12,438 | — | — | 12,438 | |||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 1,018 | — | — | — | — | — | ||||||||||||||||||
Commitments to fund bank loan investments | 29 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lending commitments | 122 | — | — | — | — | — |
(1) | These financial instruments do not have notional amounts. |
December 31, 2019 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | (1 | ) | $ | 6,963 | $ | 7,239 | $ | — | $ | — | $ | 7,239 | ||||||||||||
Other invested assets | (1 | ) | 432 | 432 | — | 49 | 383 | |||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1 | ) | 3,277 | 3,093 | — | 2,951 | 142 | |||||||||||||||||
Non-recourse funding obligations | (1 | ) | 311 | 207 | — | — | 207 | |||||||||||||||||
Investment contracts | (1 | ) | 11,466 | 12,086 | — | — | 12,086 | |||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 976 | — | — | — | — | — | ||||||||||||||||||
Commitments to fund bank loan investments | 52 | — | — | — | — | — | ||||||||||||||||||
Ordinary course of business lending commitments | 69 | — | — | — | — | — |
(1) | These financial instruments do not have notional amounts. |
As of or for the three | ||||||||
months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Beginning balance | $ | 10,379 | $ | 9,594 | ||||
Less reinsurance recoverables | (2,379 | ) | (2,419 | ) | ||||
|
|
|
| |||||
Net beginning balance | 8,000 | 7,175 | ||||||
|
|
|
| |||||
Incurred related to insured events of: | ||||||||
Current year | 986 | 998 | ||||||
Prior years | (81 | ) | (108 | ) | ||||
|
|
|
| |||||
Total incurred | 905 | 890 | ||||||
|
|
|
| |||||
Paid related to insured events of: | ||||||||
Current year | (162 | ) | (175 | ) | ||||
Prior years | (678 | ) | (692 | ) | ||||
|
|
|
| |||||
Total paid | (840 | ) | (867 | ) | ||||
|
|
|
| |||||
Interest on liability for policy and contract claims | 93 | 81 | ||||||
Foreign currency translation | 3 | (5 | ) | |||||
|
|
|
| |||||
Net ending balance | 8,161 | 7,274 | ||||||
Add reinsurance recoverables | 2,375 | 2,377 | ||||||
|
|
|
| |||||
Ending balance | $ | 10,536 | $ | 9,651 | ||||
|
|
|
|
As of or for the three months endedMarch 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Beginning balance | $ | 10,958 | $ | 10,295 | ||||
Less reinsurance recoverables | (2,406 | ) | (2,379 | ) | ||||
Net beginning balance | 8,552 | 7,916 | ||||||
Incurred related to insured events of: | ||||||||
Current year | 1,028 | 962 | ||||||
Prior years | (105 | ) | (77 | ) | ||||
Total incurred | 923 | 885 | ||||||
Paid related to insured events of: | ||||||||
Current year | (129 | ) | (162 | ) | ||||
Prior years | (728 | ) | (660 | ) | ||||
Total paid | (857 | ) | (822 | ) | ||||
Interest on liability for policy and contract claims | 102 | 93 | ||||||
Foreign currency translation | (29 | ) | 1 | |||||
Net ending balance | 8,691 | 8,073 | ||||||
Add reinsurance recoverables | 2,441 | 2,375 | ||||||
Ending balance | $ | 11,132 | $ | 10,448 | ||||
(Amounts in millions) | ||||
Allowance for credit losses: | ||||
Beginning balance | $ | — | ||
Cumulative effect of change in accounting | 40 | |||
Provision | 2 | |||
Write-offs | — | |||
Recoveries | — | |||
Ending balance | $ | 42 | ||
(Amounts in millions) | Collateralized | Non-collateralized | Total | |||||||||
Credit rating: | ||||||||||||
A++ | $ | — | $ | 503 | $ | 503 | ||||||
A+ | 1,296 | 1,438 | 2,734 | |||||||||
A | 20 | 56 | 76 | |||||||||
A- | — | 1 | 1 | |||||||||
B+ | — | 3 | 3 | |||||||||
Not rated | 13,722 | 83 | 13,805 | |||||||||
Total reinsurance recoverabl e | $ | 15,038 | $ | 2,084 | $ | 17,122 | ||||||
(8)
(Amounts in millions) | March 31, 2020 | December 31, 2019 | ||||||
Genworth Holdings (1) | ||||||||
7.70% Senior Notes, due 2020 | $ | — | $ | 397 | ||||
7.20% Senior Notes, due 2021 | 378 | 382 | ||||||
7.625% Senior Notes, due 2021 | 691 | 701 | ||||||
4.90% Senior Notes, due 2023 | 399 | 399 | ||||||
4.80% Senior Notes, due 2024 | 400 | 400 | ||||||
6.50% Senior Notes, due 2034 | 297 | 297 | ||||||
Floating Rate Junior Subordinated Notes, due 2066 | 598 | 598 | ||||||
Subtotal | 2,763 | 3,174 | ||||||
Bond consent fees | (23 | ) | (25 | ) | ||||
Deferred borrowing charges | (11 | ) | (12 | ) | ||||
Total Genworth Holdings | 2,729 | 3,137 | ||||||
Australia (2) | ||||||||
Floating Rate Junior Subordinated Notes, due 2025 | 122 | 140 | ||||||
Total Australia | 122 | 140 | ||||||
Total | $ | 2,851 | $ | 3,277 | ||||
(1) | We have 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) | Subordinated floating rate notes issued by Genworth Financial Mortgage Insurance Pty Limited, our indirect majority-owned subsidiary, who has the option to redeem the notes at face value beginning on July 3, 2020, subject to the Australian Prudential Regulation Authority’s prior written approval. |
Three months ended March 31, | ||||||||
2019 | 2018 | |||||||
Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | ||||
Increase (reduction) in rate resulting from: | ||||||||
Effect of foreign operations | 5.4 | 5.0 | ||||||
U.S. shareholder tax on foreign operations | 4.8 | (2.1 | ) | |||||
Swaps terminated prior to the TCJA | 2.6 | 2.3 | ||||||
Other, net | (1.1 | ) | 1.4 | |||||
|
|
|
| |||||
Effective rate | 32.7 | % | 27.6 | % | ||||
|
|
|
|
Three months ended March 31, | ||||||||
2020 | 2019 | |||||||
Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | ||||
Increase (reduction) in rate resulting from: | ||||||||
Swaps terminated prior to the TCJA (1) | (6.7 | ) | 4.6 | |||||
Effect of foreign operations | 0.8 | 4.1 | ||||||
Stock-based compensation | (2.1 | ) | — | |||||
Nondeductible expenses | (1.1 | ) | — | |||||
Other, net | 0.3 | (0.6 | ) | |||||
Effective rate | 12.2 | % | 29.1 | % | ||||
(1) | Tax Cuts and Jobs Act |
(9)year.
businesses and discontinued operations.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual impairments,
In the first quarter of 2019, we revised how we tax the adjustments
Prior year amounts have not been re-presented
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We recorded aforin the three months ended March 31,first quarters of 2020 and 2019, respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Revenues: | ||||||||
U.S. Mortgage Insurance segment | $ | 223 | $ | 200 | ||||
|
|
|
| |||||
Canada Mortgage Insurance segment | 159 | 158 | ||||||
|
|
|
| |||||
Australia Mortgage Insurance segment | 110 | 107 | ||||||
|
|
|
| |||||
U.S. Life Insurance segment: | ||||||||
Long-term care insurance | 1,114 | 1,020 | ||||||
Life insurance | 372 | 379 | ||||||
Fixed annuities | 159 | 182 | ||||||
|
|
|
| |||||
U.S. Life Insurance segment | 1,645 | 1,581 | ||||||
|
|
|
| |||||
Runoff segment | 82 | 68 | ||||||
|
|
|
| |||||
Corporate and Other activities | (15 | ) | 1 | |||||
|
|
|
| |||||
Total revenues | $ | 2,204 | $ | 2,115 | ||||
|
|
|
|
Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Revenues: | ||||||||
U.S. Mortgage Insurance segment | $ | 261 | $ | 223 | ||||
Australia Mortgage Insurance segment | 27 | 110 | ||||||
U.S. Life Insurance segment: | ||||||||
Long-term care insurance | 1,006 | 1,114 | ||||||
Life insurance | 348 | 372 | ||||||
Fixed annuities | 133 | 159 | ||||||
U.S. Life Insurance segment | 1,487 | 1,645 | ||||||
Runoff segment | 7 | 82 | ||||||
Corporate and Other activities | 55 | (16 | ) | |||||
Total revenues | $ | 1,837 | $ | 2,044 | ||||
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Net income | $ | 230 | $ | 165 | ||||
Less: net income attributable to noncontrolling interests | 56 | 53 | ||||||
|
|
|
| |||||
Net income available to Genworth Financial, Inc.’s common stockholders | 174 | 112 | ||||||
Adjustments to net income available to Genworth Financial, Inc.’scommon stockholders: | ||||||||
Net investment (gains) losses, net(1) | (71 | ) | 17 | |||||
Expenses related to restructuring | 4 | — | ||||||
Taxes on adjustments | 14 | (4 | ) | |||||
|
|
|
| |||||
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders | $ | 121 | $ | 125 | ||||
|
|
|
|
Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | (66 | ) | $ | 174 | |||
Add: net income (loss) from continuing operations attributable to noncontrolling interests | (6 | ) | 20 | |||||
Add: net income from discontinued operations attributable to noncontrolling interests | — | 36 | ||||||
Net income (loss) | (72 | ) | 230 | |||||
Less: income from discontinued operations, net of taxes | — | 62 | ||||||
Income (loss) from continuing operations | (72 | ) | 168 | |||||
Less: net income (loss) from continuing operations attributable to noncontrolling interests | (6 | ) | 20 | |||||
Income (loss) from continuing operations available to Genworth Financial, Inc.’scommon stockholders | (66 | ) | 148 | |||||
Adjustments to income (loss) from continuing operations available to GenworthFinancial, Inc.’s common stockholders: | ||||||||
Net investment (gains) losses, net (1) | 115 | (71 | ) | |||||
Losses on early extinguishment of debt | 12 | — | ||||||
Expenses related to restructuring | 1 | 4 | ||||||
Taxes on adjustments | (29 | ) | 14 | |||||
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders | $ | 33 | $ | 95 | ||||
(1) | For the three months ended March 31, |
Three months ended | ||||||||
March 31, | ||||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||
U.S. Mortgage Insurance segment | $ | 124 | $ | 111 | ||||
|
|
|
| |||||
Canada Mortgage Insurance segment | 41 | 49 | ||||||
|
|
|
| |||||
Australia Mortgage Insurance segment | 14 | 19 | ||||||
|
|
|
| |||||
U.S. Life Insurance segment: | ||||||||
Long-term care insurance | (20 | ) | (32 | ) | ||||
Life insurance | (2 | ) | (1 | ) | ||||
Fixed annuities | 17 | 28 | ||||||
|
|
|
| |||||
U.S. Life Insurance segment | (5 | ) | (5 | ) | ||||
|
|
|
| |||||
Runoff segment | 20 | 10 | ||||||
Corporate and Other activities | (73 | ) | (59 | ) | ||||
|
|
|
| |||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 121 | $ | 125 | ||||
|
|
|
|
Three months ended March 31, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||
U.S. Mortgage Insurance segment | $ | 148 | $ | 124 | ||||
Australia Mortgage Insurance segment | 9 | 14 | ||||||
U.S. Life Insurance segment: | ||||||||
Long-term care insurance | 1 | (20 | ) | |||||
Life insurance | (77 | ) | (2 | ) | ||||
Fixed annuities | 6 | 17 | ||||||
U.S. Life Insurance segment | (70 | ) | (5 | ) | ||||
Runoff segment | (13 | ) | 20 | |||||
Corporate and Other activities | (41 | ) | (58 | ) | ||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 33 | $ | 95 | ||||
March 31, | December 31, | |||||||
(Amounts in millions) | 2019 | 2018 | ||||||
Assets: | ||||||||
U.S. Mortgage Insurance segment | $ | 3,808 | $ | 3,583 | ||||
Canada Mortgage Insurance segment | 5,146 | 5,038 | ||||||
Australia Mortgage Insurance segment | 2,533 | 2,534 | ||||||
U.S. Life Insurance segment | 80,619 | 79,799 | ||||||
Runoff segment | 10,082 | 9,963 | ||||||
Corporate and Other activities | — | 6 | ||||||
|
|
|
| |||||
Total assets | $ | 102,188 | $ | 100,923 | ||||
|
|
|
|
(10)
(Amounts in millions) | March 31, 2020 | December 31, 2019 | ||||||
Assets: | ||||||||
U.S. Mortgage Insurance segment | $ | 4,542 | $ | 4,504 | ||||
Australia Mortgage Insurance segment | 2,146 | 2,406 | ||||||
U.S. Life Insurance segment | 80,564 | 81,640 | ||||||
Runoff segment | 9,502 | 9,953 | ||||||
Corporate and Other activities | 2,090 | 2,839 | ||||||
Total assets | $ | 98,844 | $ | 101,342 | ||||
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, 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
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
attorneys’ fees and such equitable relief as the courtCourt may deem proper. We filed a motion to dismiss on November 14, 2016. The action is stayed pending the completion of the proposed China Oceanwide transaction.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
leave to file our counterclaim occurred on February 21, 2019. On March 15, 2019, the Middle District of Georgia granted our motion to enjoin and denied our motion for leave to file our counterclaim. As such, plaintiff is enjoined from pursuing its class action in the Eastern District of Virginia. On March 29, 2019, plaintiff filed a notice of appeal in the Middle District of Georgia, notifying the courtCourt of its appeal to the United States Court of Appeals for the Eleventh Circuit from the order granting our motion to enjoin. On March 29, 2019, we filed our notice of cross-appeal in the Middle District of Georgia, notifying the Court of our cross-appeal to the Eleventh Circuit from the portion of the order denying our motion for leave to file our counterclaim. On April 8, 2019, the Eastern District of Virginia lifted the stay in the case and dismissed the case without prejudice, with leave for Plaintiffplaintiff to refile an amended complaint only if a final appellate courtCourt decision vacates the injunction and reverses the Middle District of Georgia’s opinion. On May 21, 2019, plaintiff filed its appeal and memorandum in support in the Eleventh Circuit. We filed our response to plaintiff’s appeal memorandum on July 3, 2019. The Eleventh Circuit Court of Appeals heard oral argument on plaintiff’s appeal and our cross-appeal on April 21, 2020. We intend to continue to vigorously defend the dismissal of this action.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(11)
(Loss)
Net unrealized investment gains | Derivatives qualifying as | Foreign currency translation and other | ||||||||||||||
(Amounts in millions) | (losses) (1) | hedges (2) | adjustments | Total | ||||||||||||
Balances as of January 1, 2019 | $ | 595 | $ | 1,781 | $ | (332 | ) | $ | 2,044 | |||||||
OCI before reclassifications | 427 | 97 | 54 | 578 | ||||||||||||
Amounts reclassified from (to) OCI | (47 | ) | (28 | ) | — | (75 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Current period OCI | 380 | 69 | 54 | 503 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balances as of March 31, 2019 before noncontrolling interests | 975 | 1,850 | (278 | ) | 2,547 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less: change in OCI attributable to noncontrolling interests | 32 | — | 23 | 55 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balances as of March 31, 2019 | $ | 943 | $ | 1,850 | $ | (301 | ) | $ | 2,492 | |||||||
|
|
|
|
|
|
|
|
(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, 2020 | $ | 1,456 | $ | 2,002 | $ | (25 | ) | $ | 3,433 | |||||||
OCI before reclassifications | (314 | ) | 783 | (98 | ) | 371 | ||||||||||
Amounts reclassified from (to) OCI | (6 | ) | (30 | ) | — | (36 | ) | |||||||||
Current period OCI | (320 | ) | 753 | (98 | ) | 335 | ||||||||||
Balances as of March 31, 2020 before noncontrolling interests | 1,136 | 2,755 | (123 | ) | 3,768 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | (4 | ) | — | (43 | ) | (47 | ) | |||||||||
Balances as of March 31, 2020 | $ | 1,140 | $ | 2,755 | $ | (80 | ) | $ | 3,815 | |||||||
(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. |
Net unrealized investment gains | Derivatives qualifying as | Foreign currency translation and other | ||||||||||||||
(Amounts in millions) | (losses) (1) | hedges (2) | adjustments | Total | ||||||||||||
Balances as of January 1, 2018 | $ | 1,085 | $ | 2,065 | $ | (123 | ) | $ | 3,027 | |||||||
Cumulative effect of changes in accounting | 164 | 14 | (47 | ) | 131 | |||||||||||
OCI before reclassifications | (348 | ) | (126 | ) | (87 | ) | (561 | ) | ||||||||
Amounts reclassified from (to) OCI | 7 | (26 | ) | — | (19 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Current period OCI | (341 | ) | (152 | ) | (87 | ) | (580 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balances as of March 31, 2018 before noncontrolling interests | 908 | 1,927 | (257 | ) | 2,578 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Less: change in OCI attributable to noncontrolling interests | (9 | ) | — | (40 | ) | (49 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Balances as of March 31, 2018 | $ | 917 | $ | 1,927 | $ | (217 | ) | $ | 2,627 | |||||||
|
|
|
|
|
|
|
|
(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, 2019 | $ | 595 | $ | 1,781 | $ | (332 | ) | $ | 2,044 | |||||||
OCI before reclassifications | 427 | 97 | 54 | 578 | ||||||||||||
Amounts reclassified from (to) OCI | (47 | ) | (28 | ) | — | (75 | ) | |||||||||
Current period OCI | 380 | 69 | 54 | 503 | ||||||||||||
Balances as of March 31, 2019 before noncontrolling interests | 975 | 1,850 | (278 | ) | 2,547 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | 32 | — | 23 | 55 | ||||||||||||
Balances as of March 31, 2019 | $ | 943 | $ | 1,850 | $ | (301 | ) | $ | 2,492 | |||||||
(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)
benefit obligation as of March 31, 2019 and 2018.2019. The amountbalance also includesincluded taxes of $(45)$23 million and $(46)$(45) million, respectively, related to foreign currency translation adjustments as of March 31, 20192020 and 2018. The March 31, 2018 balance included the impact of adopting new accounting guidance related to stranded tax effects.
2019.
(Amounts in millions) | Amount reclassified from accumulated other comprehensive income | Affected line item in the consolidated statements of income | ||||||||
Three months ended March 31, | ||||||||||
2019 | 2018 | |||||||||
Net unrealized investment (gains) losses: | ||||||||||
Unrealized (gains) losses on investments(1) | $ | (60 | ) | $ | 8 | Net investment (gains) losses | ||||
(Provision) benefit for income taxes | 13 | (1 | ) | (Provision) benefit for income taxes | ||||||
|
|
|
| |||||||
Total | $ | (47 | ) | $ | 7 | |||||
|
|
|
| |||||||
Derivatives qualifying as hedges: | ||||||||||
Interest rate swaps hedging assets | $ | (38 | ) | $ | (35 | ) | Net investment income | |||
Interest rate swaps hedging assets | (6 | ) | (5 | ) | Net investment (gains) losses | |||||
Benefit for income taxes | 16 | 14 | Benefit for income taxes | |||||||
|
|
|
| |||||||
Total | $ | (28 | ) | $ | (26 | ) | ||||
|
|
|
|
Amount reclassified from accumulated other comprehensive income | Affected line item in the consolidated statements of income | |||||||||||
Three months ended March 31, | ||||||||||||
(Amounts in millions) | 2020 | 2019 | ||||||||||
Net unrealized investment (gains) losses: | ||||||||||||
Unrealized (gains) losses on investments (1) | $ | (7 | ) | $ | (60 | ) | Net investment (gains) losses | |||||
(Provision) benefit for income taxes | 1 | 13 | Provision for income taxes | |||||||||
Total | $ | (6 | ) | $ | (47 | ) | ||||||
Derivatives qualifying as hedges: | ||||||||||||
Interest rate swaps hedging assets | $ | (43 | ) | $ | (38 | ) | Net investment income | |||||
Interest rate swaps hedging assets | (4 | ) | (6 | ) | Net investment (gains) losses | |||||||
Benefit for income taxes | 17 | 16 | Provision for income taxes | |||||||||
Total | $ | (30 | ) | $ | (28 | ) | ||||||
(1) | Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves. |
(12) Condensed Consolidating Financial Information
Genworth Financial provides a full and unconditional guarantee to
The following condensed consolidating financial information of Genworth Financial and its direct and indirect subsidiaries has been prepared pursuant to rules regarding the preparation of consolidating financial information ofRegulation S-X.
The condensed consolidating financial information presents the condensed consolidating balance sheet information as of March 31, 2019 and December 31, 2018, the condensed consolidating income statement information, the condensed consolidating comprehensive income statement information and the condensed consolidating cash flow statement informationoperations were separately reported for the three months ended March 31, 2019 and 2018.
The condensed consolidating financial information reflects
The accompanying condensed consolidating financial information is presented based on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries and intercompany activity.
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating balance sheet information as of March 31, 2019:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securitiesavailable-for-sale, at fair value | $ | — | $ | — | $ | 61,560 | $ | (200 | ) | $ | 61,360 | |||||||||
Equity securities, at fair value | — | — | 635 | — | 635 | |||||||||||||||
Commercial mortgage loans ($59 are restricted related to a securitization entity) | — | — | 6,988 | — | 6,988 | |||||||||||||||
Policy loans | — | — | 1,994 | — | 1,994 | |||||||||||||||
Other invested assets | — | 49 | 1,160 | (1 | ) | 1,208 | ||||||||||||||
Investments in subsidiaries | 13,222 | 11,928 | — | (25,150 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investments | 13,222 | 11,977 | 72,337 | (25,351 | ) | 72,185 | ||||||||||||||
Cash, cash equivalents and restricted cash | — | 361 | 1,860 | — | 2,221 | |||||||||||||||
Accrued investment income | — | — | 733 | (7 | ) | 726 | ||||||||||||||
Deferred acquisition costs | — | — | 2,219 | — | 2,219 | |||||||||||||||
Intangible assets and goodwill | — | — | 265 | — | 265 | |||||||||||||||
Reinsurance recoverable | — | — | 17,257 | — | 17,257 | |||||||||||||||
Other assets | (4 | ) | 55 | 482 | (1 | ) | 532 | |||||||||||||
Intercompany notes receivable | — | 231 | — | (231 | ) | — | ||||||||||||||
Deferred tax assets | (11 | ) | 913 | (329 | ) | — | 573 | |||||||||||||
Separate account assets | — | — | 6,210 | — | 6,210 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 13,207 | $ | 13,537 | $ | 101,034 | $ | (25,590 | ) | $ | 102,188 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities and equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Future policy benefits | $ | — | $ | — | $ | 38,369 | $ | — | $ | 38,369 | ||||||||||
Policyholder account balances | — | — | 22,651 | — | 22,651 | |||||||||||||||
Liability for policy and contract claims | — | — | 10,536 | — | 10,536 | |||||||||||||||
Unearned premiums | — | — | 3,482 | — | 3,482 | |||||||||||||||
Other liabilities | 27 | 65 | 1,600 | (10 | ) | 1,682 | ||||||||||||||
Intercompany notes payable | 106 | 200 | 125 | (431 | ) | — | ||||||||||||||
Non-recourse funding obligations | — | — | 311 | — | 311 | |||||||||||||||
Long-term borrowings | — | 3,570 | 465 | — | 4,035 | |||||||||||||||
Deferred tax liability | — | — | 30 | — | 30 | |||||||||||||||
Separate account liabilities | — | — | 6,210 | — | 6,210 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 133 | 3,835 | 83,779 | (441 | ) | 87,306 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity: | ||||||||||||||||||||
Common stock | 1 | — | 3 | (3 | ) | 1 | ||||||||||||||
Additionalpaid-in capital | 11,989 | 9,096 | 18,429 | (27,525 | ) | 11,989 | ||||||||||||||
Accumulated other comprehensive income (loss) | 2,492 | 2,521 | 2,515 | (5,036 | ) | 2,492 | ||||||||||||||
Retained earnings | 1,292 | (1,915 | ) | (5,800 | ) | 7,715 | 1,292 | |||||||||||||
Treasury stock, at cost | (2,700 | ) | — | — | — | (2,700 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity | 13,074 | 9,702 | 15,147 | (24,849 | ) | 13,074 | ||||||||||||||
Noncontrolling interests | — | — | 2,108 | (300 | ) | 1,808 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total equity | 13,074 | 9,702 | 17,255 | (25,149 | ) | 14,882 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and equity | $ | 13,207 | $ | 13,537 | $ | 101,034 | $ | (25,590 | ) | $ | 102,188 | |||||||||
|
|
|
|
|
|
|
|
|
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating balance sheet information as of December 31, 2018:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securitiesavailable-for-sale, at fair value | $ | — | $ | — | $ | 59,861 | $ | (200 | ) | $ | 59,661 | |||||||||
Equity securities, at fair value | — | — | 655 | — | 655 | |||||||||||||||
Commercial mortgage loans ($62 are restricted related to a securitization entity) | — | — | 6,749 | — | 6,749 | |||||||||||||||
Policy loans | — | — | 1,861 | — | 1,861 | |||||||||||||||
Other invested assets | — | 86 | 1,104 | (2 | ) | 1,188 | ||||||||||||||
Investments in subsidiaries | 12,570 | 11,462 | — | (24,032 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total investments | 12,570 | 11,548 | 70,230 | (24,234 | ) | 70,114 | ||||||||||||||
Cash, cash equivalents and restricted cash | — | 429 | 1,748 | — | 2,177 | |||||||||||||||
Accrued investment income | — | — | 679 | (4 | ) | 675 | ||||||||||||||
Deferred acquisition costs | — | — | 3,263 | — | 3,263 | |||||||||||||||
Intangible assets and goodwill | — | — | 347 | — | 347 | |||||||||||||||
Reinsurance recoverable | — | — | 17,278 | — | 17,278 | |||||||||||||||
Other assets | 15 | 62 | 397 | — | 474 | |||||||||||||||
Intercompany notes receivable | — | 180 | 6 | (186 | ) | — | ||||||||||||||
Deferred tax assets | 14 | 907 | (185 | ) | — | 736 | ||||||||||||||
Separate account assets | — | — | 5,859 | — | 5,859 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | $ | 12,599 | $ | 13,126 | $ | 99,622 | $ | (24,424 | ) | $ | 100,923 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities and equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Future policy benefits | $ | — | $ | — | $ | 37,940 | $ | — | $ | 37,940 | ||||||||||
Policyholder account balances | — | — | 22,968 | — | 22,968 | |||||||||||||||
Liability for policy and contract claims | — | — | 10,379 | — | 10,379 | |||||||||||||||
Unearned premiums | — | — | 3,546 | — | 3,546 | |||||||||||||||
Other liabilities | 27 | 97 | 1,565 | (7 | ) | 1,682 | ||||||||||||||
Intercompany notes payable | 122 | 207 | 57 | (386 | ) | — | ||||||||||||||
Non-recourse funding obligations | — | — | 311 | — | 311 | |||||||||||||||
Long-term borrowings | — | 3,567 | 458 | — | 4,025 | |||||||||||||||
Deferred tax liability | — | — | 24 | — | 24 | |||||||||||||||
Separate account liabilities | — | — | 5,859 | — | 5,859 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | 149 | 3,871 | 83,107 | (393 | ) | 86,734 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Equity: | ||||||||||||||||||||
Common stock | 1 | — | 3 | (3 | ) | 1 | ||||||||||||||
Additionalpaid-in capital | 11,987 | 9,095 | 18,425 | (27,520 | ) | 11,987 | ||||||||||||||
Accumulated other comprehensive income (loss) | 2,044 | 2,144 | 2,060 | (4,204 | ) | 2,044 | ||||||||||||||
Retained earnings | 1,118 | (1,984 | ) | (6,012 | ) | 7,996 | 1,118 | |||||||||||||
Treasury stock, at cost | (2,700 | ) | — | — | — | (2,700 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Genworth Financial, Inc.’s stockholders’ equity | 12,450 | 9,255 | 14,476 | (23,731 | ) | 12,450 | ||||||||||||||
Noncontrolling interests | — | — | 2,039 | (300 | ) | 1,739 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total equity | 12,450 | 9,255 | 16,515 | (24,031 | ) | 14,189 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities and equity | $ | 12,599 | $ | 13,126 | $ | 99,622 | $ | (24,424 | ) | $ | 100,923 | |||||||||
|
|
|
|
|
|
|
|
|
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating income statement informationfollows for the three months ended March 31, 2019:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 1,114 | $ | — | $ | 1,114 | ||||||||||
Net investment income | (1 | ) | 3 | 831 | (4 | ) | 829 | |||||||||||||
Net investment gains (losses) | — | (3 | ) | 77 | — | 74 | ||||||||||||||
Policy fees and other income | — | — | 188 | (1 | ) | 187 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (1 | ) | — | 2,210 | (5 | ) | 2,204 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 1,301 | — | 1,301 | |||||||||||||||
Interest credited | — | — | 147 | — | 147 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 4 | (2 | ) | 249 | — | 251 | ||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 91 | — | 91 | |||||||||||||||
Interest expense | 2 | 65 | 10 | (5 | ) | 72 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 6 | 63 | 1,798 | (5 | ) | 1,862 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) before income taxes and equity in income of subsidiaries | (7 | ) | (63 | ) | 412 | — | 342 | |||||||||||||
Provision (benefit) for income taxes | 21 | (12 | ) | 103 | — | 112 | ||||||||||||||
Equity in income of subsidiaries | 202 | 120 | — | (322 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income | 174 | 69 | 309 | (322 | ) | 230 | ||||||||||||||
Less: net income attributable to noncontrolling interests | — | — | 56 | — | 56 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 174 | $ | 69 | $ | 253 | $ | (322 | ) | $ | 174 | |||||||||
|
|
|
|
|
|
|
|
|
|
(Amounts in millions) | ||||
Revenues: | ||||
Premiums | $ | 126 | ||
Net investment income | 35 | |||
Net investment gains (losses) | (1 | ) | ||
Total revenues | 160 | |||
Benefits and expenses: | ||||
Benefits and other changes in policy reserves | 19 | |||
Acquisition and operating expenses, net of deferrals | 14 | |||
Amortization of deferred acquisition costs and intangibles | 10 | |||
Interest expense (1) | 12 | |||
Total benefits and expenses | 55 | |||
Income before income taxes (2) | 105 | |||
Provision for income taxes | 43 | |||
Income from discontinued operations, net of taxes | 62 | |||
Less: net income from discontinued operationsattributable to noncontrolling interests | 36 | |||
Income from discontinued operations available toGenworth Financial, Inc.’s common stockholders | $ | 26 | ||
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents
(1) | Interest on debt assumed by Brookfield and interest on debt that was repaid as a result of the sale of Genworth Canada was allocated and reported in discontinued operations. A senior secured term loan facility (“Term Loan”), owed by Genworth Holdings and secured by GFIH’s ownership interest in Genworth Canada’s outstanding common shares, was repaid in connection with the close of the Genworth Canada sale. Accordingly, interest expense related to the Term Loan of $8 million for the three months ended March 31, 2019 was allocated and reported in discontinued operations. |
(2) | The three months ended March 31, 2019 includes pre-tax income from discontinued operations available to Genworth Financial, Inc.’s common stockholders of $56 million. |
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Revenues: | ||||||||||||||||||||
Premiums | $ | — | $ | — | $ | 1,140 | $ | — | $ | 1,140 | ||||||||||
Net investment income | (1 | ) | 3 | 805 | (3 | ) | 804 | |||||||||||||
Net investment gains (losses) | — | 6 | (37 | ) | — | (31 | ) | |||||||||||||
Policy fees and other income | — | — | 203 | (1 | ) | 202 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenues | (1 | ) | 9 | 2,111 | (4 | ) | 2,115 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Benefits and expenses: | ||||||||||||||||||||
Benefits and other changes in policy reserves | — | — | 1,311 | — | 1,311 | |||||||||||||||
Interest credited | — | — | 156 | — | 156 | |||||||||||||||
Acquisition and operating expenses, net of deferrals | 7 | — | 233 | — | 240 | |||||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 104 | — | 104 | |||||||||||||||
Interest expense | — | 68 | 12 | (4 | ) | 76 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total benefits and expenses | 7 | 68 | 1,816 | (4 | ) | 1,887 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Income (loss) before income taxes and equity in income of subsidiaries | (8 | ) | (59 | ) | 295 | — | 228 | |||||||||||||
Provision (benefit) for income taxes | 6 | (17 | ) | 74 | — | 63 | ||||||||||||||
Equity in income of subsidiaries | 126 | 45 | — | (171 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income | 112 | 3 | 221 | (171 | ) | 165 | ||||||||||||||
Less: net income attributable to noncontrolling interests | — | — | 53 | — | 53 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders | $ | 112 | $ | 3 | $ | 168 | $ | (171 | ) | $ | 112 | |||||||||
|
|
|
|
|
|
|
|
|
|
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 March 31, 2019:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | �� | Issuer | Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Net income | $ | 174 | $ | 69 | $ | 309 | $ | (322 | ) | $ | 230 | |||||||||
Other comprehensive income, net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 347 | 283 | 379 | (630 | ) | 379 | ||||||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 1 | 1 | 1 | (2 | ) | 1 | ||||||||||||||
Derivatives qualifying as hedges | 69 | 69 | 77 | (146 | ) | 69 | ||||||||||||||
Foreign currency translation and other adjustments | 31 | 24 | 53 | (54 | ) | 54 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income | 448 | 377 | 510 | (832 | ) | 503 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income | 622 | 446 | 819 | (1,154 | ) | 733 | ||||||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 111 | — | 111 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ | 622 | $ | 446 | $ | 708 | $ | (1,154 | ) | $ | 622 | |||||||||
|
|
|
|
|
|
|
|
|
|
The following table presents the condensed consolidating comprehensive income statement information for the three months ended March 31, 2018:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net income | $ | 112 | $ | 3 | $ | 221 | $ | (171 | ) | $ | 165 | |||||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | (332 | ) | (295 | ) | (341 | ) | 627 | (341 | ) | |||||||||||
Derivatives qualifying as hedges | (152 | ) | (153 | ) | (165 | ) | 318 | (152 | ) | |||||||||||
Foreign currency translation and other adjustments | (47 | ) | (36 | ) | (88 | ) | 84 | (87 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total other comprehensive income (loss) | (531 | ) | (484 | ) | (594 | ) | 1,029 | (580 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive loss | (419 | ) | (481 | ) | (373 | ) | 858 | (415 | ) | |||||||||||
Less: comprehensive income attributable to noncontrolling interests | — | — | 4 | — | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders | $ | (419 | ) | $ | (481 | ) | $ | (377 | ) | $ | 858 | $ | (419 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating cash flow statement information for the three months ended March 31, 2019:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from (used by) operating activities: | ||||||||||||||||||||
Net income | $ | 174 | $ | 69 | $ | 309 | $ | (322 | ) | $ | 230 | |||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities: | ||||||||||||||||||||
Equity in income from subsidiaries | (202 | ) | (120 | ) | — | 322 | — | |||||||||||||
Dividends from subsidiaries | — | 47 | (47 | ) | — | — | ||||||||||||||
Amortization of fixed maturity securities discounts and premiums | — | 2 | (18 | ) | — | (16 | ) | |||||||||||||
Net investment (gains) losses | — | 3 | (77 | ) | — | (74 | ) | |||||||||||||
Charges assessed to policyholders | — | — | (165 | ) | — | (165 | ) | |||||||||||||
Acquisition costs deferred | — | — | (17 | ) | — | (17 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 91 | — | 91 | |||||||||||||||
Deferred income taxes | 26 | (3 | ) | 52 | — | 75 | ||||||||||||||
Derivative instruments and limited partnerships | — | (10 | ) | (20 | ) | — | (30 | ) | ||||||||||||
Stock-based compensation expense | 6 | — | 1 | — | 7 | |||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | 19 | — | (281 | ) | 4 | (258 | ) | |||||||||||||
Insurance reserves | — | — | 301 | — | 301 | |||||||||||||||
Current tax liabilities | 15 | (9 | ) | 2 | — | 8 | ||||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | (18 | ) | (18 | ) | 21 | (3 | ) | (18 | ) | |||||||||||
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Net cash from (used by) operating activities | 20 | (39 | ) | 152 | 1 | 134 | ||||||||||||||
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Cash flows from (used by) investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | — | 902 | — | 902 | |||||||||||||||
Commercial mortgage loans | — | — | 127 | — | 127 | |||||||||||||||
Restricted commercial mortgage loans related to a securitization entity | — | — | 3 | — | 3 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 1,714 | — | 1,714 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (2,128 | ) | — | (2,128 | ) | |||||||||||||
Commercial mortgage loans | — | — | (370 | ) | — | (370 | ) | |||||||||||||
Other invested assets, net | — | 29 | (11 | ) | (1 | ) | 17 | |||||||||||||
Policy loans, net | — | — | 12 | — | 12 | |||||||||||||||
Intercompany notes receivable | — | (51 | ) | 6 | 45 | — | ||||||||||||||
Capital contributions to subsidiaries | (3 | ) | — | 3 | — | — | ||||||||||||||
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Net cash from (used by) investing activities | (3 | ) | (22 | ) | 258 | 44 | 277 | |||||||||||||
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Cash flows used by financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 198 | — | 198 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (581 | ) | — | (581 | ) | |||||||||||||
Repurchase of subsidiary shares | — | — | (12 | ) | — | (12 | ) | |||||||||||||
Dividends paid to noncontrolling interests | — | — | (28 | ) | — | (28 | ) | |||||||||||||
Intercompany notes payable | (16 | ) | (7 | ) | 68 | (45 | ) | — | ||||||||||||
Other, net | (1 | ) | — | 49 | — | 48 | ||||||||||||||
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Net cash used by financing activities | (17 | ) | (7 | ) | (306 | ) | (45 | ) | (375 | ) | ||||||||||
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | — | — | 8 | — | 8 | |||||||||||||||
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Net change in cash, cash equivalents and restricted cash | — | (68 | ) | 112 | — | 44 | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 429 | 1,748 | — | 2,177 | |||||||||||||||
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Cash, cash equivalents and restricted cash at end of period | $ | — | $ | 361 | $ | 1,860 | $ | — | $ | 2,221 | ||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the condensed consolidating cash flow statement information for the three months ended March 31, 2018:
Parent | All Other | |||||||||||||||||||
(Amounts in millions) | Guarantor | Issuer | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Cash flows from (used by) operating activities: | ||||||||||||||||||||
Net income | $ | 112 | $ | 3 | $ | 221 | $ | (171 | ) | $ | 165 | |||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities: | ||||||||||||||||||||
Equity in income from subsidiaries | (126 | ) | (45 | ) | — | 171 | — | |||||||||||||
Dividends from subsidiaries | — | 63 | (63 | ) | — | — | ||||||||||||||
Amortization of fixed maturity securities discounts and premiums | — | 1 | (26 | ) | — | (25 | ) | |||||||||||||
Net investment (gains) losses | — | (6 | ) | 37 | — | 31 | ||||||||||||||
Charges assessed to policyholders | — | — | (178 | ) | — | (178 | ) | |||||||||||||
Acquisition costs deferred | — | — | (18 | ) | — | (18 | ) | |||||||||||||
Amortization of deferred acquisition costs and intangibles | — | — | 104 | — | 104 | |||||||||||||||
Deferred income taxes | 9 | (47 | ) | 64 | — | 26 | ||||||||||||||
Derivative instruments and limited partnerships | — | 17 | (169 | ) | — | (152 | ) | |||||||||||||
Stock-based compensation expense | 8 | — | (1 | ) | — | 7 | ||||||||||||||
Change in certain assets and liabilities: | ||||||||||||||||||||
Accrued investment income and other assets | 5 | 16 | (63 | ) | (3 | ) | (45 | ) | ||||||||||||
Insurance reserves | — | — | 377 | — | 377 | |||||||||||||||
Current tax liabilities | (23 | ) | 26 | (42 | ) | — | (39 | ) | ||||||||||||
Other liabilities, policy and contract claims and other policy-related balances | (13 | ) | (19 | ) | (117 | ) | 5 | (144 | ) | |||||||||||
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Net cash from (used by) operating activities | (28 | ) | 9 | 126 | 2 | 109 | ||||||||||||||
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Cash flows used by investing activities: | ||||||||||||||||||||
Proceeds from maturities and repayments of investments: | ||||||||||||||||||||
Fixed maturity securities | — | — | 934 | — | 934 | |||||||||||||||
Commercial mortgage loans | — | — | 205 | — | 205 | |||||||||||||||
Restricted commercial mortgage loans related to a securitization entity | — | — | 8 | — | 8 | |||||||||||||||
Proceeds from sales of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | 792 | — | 792 | |||||||||||||||
Purchases and originations of investments: | ||||||||||||||||||||
Fixed maturity and equity securities | — | — | (2,013 | ) | — | (2,013 | ) | |||||||||||||
Commercial mortgage loans | — | — | (199 | ) | — | (199 | ) | |||||||||||||
Other invested assets, net | — | — | 106 | (2 | ) | 104 | ||||||||||||||
Policy loans, net | — | — | 2 | — | 2 | |||||||||||||||
Intercompany notes receivable | — | (56 | ) | 59 | (3 | ) | — | |||||||||||||
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Net cash used by investing activities | — | (56 | ) | (106 | ) | (5 | ) | (167 | ) | |||||||||||
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Cash flows from (used by) financing activities: | ||||||||||||||||||||
Deposits to universal life and investment contracts | — | — | 255 | — | 255 | |||||||||||||||
Withdrawals from universal life and investment contracts | — | — | (591 | ) | — | (591 | ) | |||||||||||||
Proceeds from the issuance of long-term debt | — | 441 | — | — | 441 | |||||||||||||||
Repayment of borrowings related to a securitization entity | — | — | (8 | ) | — | (8 | ) | |||||||||||||
Repurchase of subsidiary shares | — | — | (36 | ) | — | (36 | ) | |||||||||||||
Dividends paid to noncontrolling interests | — | — | (36 | ) | — | (36 | ) | |||||||||||||
Intercompany notes payable | 31 | (59 | ) | 25 | 3 | — | ||||||||||||||
Other, net | (3 | ) | — | 25 | — | 22 | ||||||||||||||
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Net cash from (used by) financing activities | 28 | 382 | (366 | ) | 3 | 47 | ||||||||||||||
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | — | — | (21 | ) | — | (21 | ) | |||||||||||||
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Net change in cash, cash equivalents and restricted cash | — | 335 | (367 | ) | — | (32 | ) | |||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 795 | 2,080 | — | 2,875 | |||||||||||||||
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Cash, cash equivalents and restricted cash at end of period | $ | — | $ | 1,130 | $ | 1,713 | $ | — | $ | 2,843 | ||||||||||
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our insurance company subsidiaries are restricted by state and foreign laws and regulationsapproximately $134 million, which was accrued as to the amount of dividends they may pay to their parent without regulatory approval in any year, the purpose of which is to protect affected insurance policyholders and contractholders, not stockholders. Any dividends in excess of limits are deemed “extraordinary” and require approval. Based on statutory resultsa contingent liability as of December 31, 2018,2019. This amount was included in accordance with applicable dividend restrictions,income (loss) from discontinued operations for the year ended December 31, 2019. See note 12 for additional details related to asserted claims regarding the sale of our subsidiaries could pay dividendslifestyle protection insurance business. We retained liabilities for certain claims, taxes and sales practices that occurred while we owned the lifestyle protection insurance business. We have established our current best estimates for these liabilities where we are able to estimate; however, there may be future adjustments to these estimates, including additional contingent liabilities, which are not currently recorded. If the amounts are recorded, it would result in the establishment of approximately $500 million to usa liability and a loss recognized in 2019 without obtaining regulatory approval, and the remaining net assets are considered restricted. While the $500 million is unrestricted, our insurance subsidiaries may not pay dividends to us in 2019 at this level if they need to retain capital for growth and to meet capital requirements and desired thresholds. Asincome (loss) from discontinued operations.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20182019 Annual Report on Form and, our discussions with regulators in connection therewith. therewith and any capital contribution resulting therefrom, as well as statements we make regarding the potential impacts of the coronavirus pandemic
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