☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 80-0873306 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
6620 West Broad Street Richmond, | 23230 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||
Emerging growth company | ☐ |
Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
Class A Common Stock, par value $.001 per share | GNW | New York Stock Exchange |
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6 | |||||||||||
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9 | |||||||||||
Item 2. | 80 | ||||||||||
Item 3. | |||||||||||
Item 4. | 177 | ||||||||||
177 | |||||||||||
Item 1. | 177 | ||||||||||
Item 1A. | 177 | ||||||||||
Item 6. | 179 | ||||||||||
180 |
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 | ||||
September 30, 2020 | December 31, 2019 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at fair value (amortized cost of $55,252 and allowance for credit losses of $5 as of September 30, 2020) | $ | 64,416 | $ | 60,339 | ||||
Equity securities, at fair value | 629 | 239 | ||||||
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of September 30, 2020 and December 31, 2019) | 6,911 | 6,976 | ||||||
Less: Allowance for credit losses | (31 | ) | (13 | ) | ||||
Commercial mortgage loans, net | 6,880 | 6,963 | ||||||
Policy loans | 2,153 | 2,058 | ||||||
Other invested assets | 2,402 | 1,632 | ||||||
Total investments | 76,480 | 71,231 | ||||||
Cash, cash equivalents and restricted cash | 2,780 | 3,341 | ||||||
Accrued investment income | 650 | 654 | ||||||
Deferred acquisition costs | 1,623 | 1,836 | ||||||
Intangible assets and goodwill | 209 | 201 | ||||||
Reinsurance recoverable | 16,832 | 17,103 | ||||||
Less: Allowance for credit losses | (44 | ) | 0 | |||||
Reinsurance recoverable, net | 16,788 | 17,103 | ||||||
Other assets | 445 | 443 | ||||||
Deferred tax asset | 250 | 425 | ||||||
Separate account assets | 5,700 | 6,108 | ||||||
Total assets | $ | 104,925 | $ | 101,342 | ||||
Liabilities and equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 41,995 | $ | 40,384 | ||||
Policyholder account balances | 22,731 | 22,217 | ||||||
Liability for policy and contract claims | 11,373 | 10,958 | ||||||
Unearned premiums | 1,846 | 1,893 | ||||||
Other liabilities | 1,913 | 1,386 | ||||||
Non-recourse funding obligations | 0 | 311 | ||||||
Long-term borrowings | 3,570 | 3,277 | ||||||
Separate account liabilities | 5,700 | 6,108 | ||||||
Liabilities related to discontinued operations | 565 | 176 | ||||||
Total liabilities | 89,693 | 86,710 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 594 million and 592 million shares issued as of September 30, 2020 and December 31, 2019, respectively; 506 million and 504 million shares outstanding as of September 30, 2020 and December 31, 2019, respectively | 1 | 1 | ||||||
Additional paid-in capital | 11,997 | 11,990 | ||||||
Accumulated other comprehensive income (loss) | 4,141 | 3,433 | ||||||
Retained earnings | 1,317 | 1,461 | ||||||
Treasury stock, at cost (88 million shares as of September 30, 2020 and December 31, 2019) | (2,700 | ) | (2,700 | ) | ||||
Total Genworth Financial, Inc.’s stockholders’ equity | 14,756 | 14,185 | ||||||
Noncontrolling interests | 476 | 447 | ||||||
Total equity | 15,232 | 14,632 | ||||||
Total liabilities and equity | $ | 104,925 | $ | 101,342 | ||||
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 September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | 1,034 | $ | 1,015 | $ | 3,068 | $ | 3,004 | ||||||||
Net investment income | 827 | 816 | 2,406 | 2,426 | ||||||||||||
Net investment gains (losses) | 375 | (2 | ) | 382 | 27 | |||||||||||
Policy fees and other income | 184 | 191 | 539 | 601 | ||||||||||||
Total revenues | 2,420 | 2,020 | 6,395 | 6,058 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Benefits and other changes in policy reserves | 1,299 | 1,284 | 4,146 | 3,817 | ||||||||||||
Interest credited | 137 | 146 | 417 | 439 | ||||||||||||
Acquisition and operating expenses, net of deferrals | 249 | 247 | 721 | 713 | ||||||||||||
Amortization of deferred acquisition costs and intangibles | 101 | 112 | 310 | 277 | ||||||||||||
Goodwill impairment | 0 | 0 | 5 | 0 | ||||||||||||
Interest expense | 49 | 59 | 145 | 179 | ||||||||||||
Total benefits and expenses | 1,835 | 1,848 | 5,744 | 5,425 | ||||||||||||
Income from continuing operations before income taxes | 585 | 172 | 651 | 633 | ||||||||||||
Provision for income taxes | 150 | 34 | 186 | 169 | ||||||||||||
Income from continuing operations | 435 | 138 | 465 | 464 | ||||||||||||
Income (loss) from discontinued operations, net of taxes | 1 | (80 | ) | (519 | ) | 42 | ||||||||||
Net income (loss) | 436 | 58 | (54 | ) | 506 | |||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 18 | 10 | 35 | 45 | ||||||||||||
Less: net income from discontinued operations attributable to noncontrolling interests | 0 | 30 | 0 | 101 | ||||||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 418 | $ | 18 | $ | (89 | ) | $ | 360 | |||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 417 | $ | 128 | $ | 430 | $ | 419 | ||||||||
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders | 1 | (110 | ) | (519 | ) | (59 | ) | |||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 418 | $ | 18 | $ | (89 | ) | $ | 360 | |||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.83 | $ | 0.25 | $ | 0.85 | $ | 0.83 | ||||||||
Diluted | $ | 0.82 | $ | 0.25 | $ | 0.84 | $ | 0.82 | ||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share: | ||||||||||||||||
Basic | $ | 0.83 | $ | 0.04 | $ | (0.18 | ) | $ | 0.72 | |||||||
Diluted | $ | 0.82 | $ | 0.04 | $ | (0.17 | ) | $ | 0.71 | |||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 505.6 | 503.5 | 505.1 | 502.7 | ||||||||||||
Diluted | 511.5 | 511.2 | 511.2 | 509.5 |
�� | ||||||||
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 | ||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income (loss) | $ | 436 | $ | 58 | $ | (54 | ) | $ | 506 | |||||||
Other comprehensive income (loss), net of taxes: | ||||||||||||||||
Net unrealized gains (losses) on securities without an allowance for credit losses | (98 | ) | 0 | 264 | 0 | |||||||||||
Net unrealized gains (losses) on securities with an allowance for credit losses | (2 | ) | 0 | (10 | ) | 0 | ||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired | 0 | 371 | 0 | 1,126 | ||||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities | 0 | 0 | 0 | 1 | ||||||||||||
Derivatives qualifying as hedges | (226 | ) | 276 | 449 | 478 | |||||||||||
Foreign currency translation and other adjustments | 33 | (64 | ) | 8 | 33 | |||||||||||
Total other comprehensive income (loss) | (293 | ) | 583 | 711 | 1,638 | |||||||||||
Total comprehensive income | 143 | 641 | 657 | 2,144 | ||||||||||||
Less: comprehensive income attributable to noncontrolling interests | 31 | 14 | 38 | 206 | ||||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders | $ | 112 | $ | 627 | $ | 619 | $ | 1,938 | ||||||||
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 September 30, 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 June 30, 2020 | $ | 1 | $ | 11,996 | $ | 4,447 | $ | 899 | $ | (2,700 | ) | $ | 14,643 | $ | 445 | $ | 15,088 | |||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | 0 | 0 | 0 | 418 | 0 | 418 | 18 | 436 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of taxes | 0 | 0 | (306 | ) | 0 | 0 | (306 | ) | 13 | (293 | ) | |||||||||||||||||||||
Total comprehensive income | 112 | 31 | 143 | |||||||||||||||||||||||||||||
Stock-based compensation expense and exercises and other | 0 | 1 | 0 | 0 | 0 | 1 | 0 | 1 | ||||||||||||||||||||||||
Balances as of September 30, 2020 | $ | 1 | $ | 11,997 | $ | 4,141 | $ | 1,317 | $ | (2,700 | ) | $ | 14,756 | $ | 476 | $ | 15,232 | |||||||||||||||
Three months ended September 30, 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 June 30, 2019 | $ | 1 | $ | 11,983 | $ | 3,013 | $ | 1,460 | $ | (2,700 | ) | $ | 13,757 | $ | 1,835 | $ | 15,592 | |||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income | 0 | 0 | 0 | 18 | 0 | 18 | 40 | 58 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of taxes | 0 | 0 | 609 | 0 | 0 | 609 | (26 | ) | 583 | |||||||||||||||||||||||
Total comprehensive income | 627 | 14 | 641 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | 0 | 0 | 0 | 0 | 0 | 0 | (96 | ) | (96 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | 0 | 3 | 0 | 0 | 0 | 3 | 5 | 8 | ||||||||||||||||||||||||
Balances as of September 30, 2019 | $ | 1 | $ | 11,986 | $ | 3,622 | $ | 1,478 | $ | (2,700 | ) | $ | 14,387 | $ | 1,758 | $ | 16,145 | |||||||||||||||
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 | |||||||||||||||
Nine months ended September 30, 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 | 0 | 0 | 0 | (55 | ) | 0 | (55 | ) | 0 | (55 | ) | |||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Net income (loss) | 0 | 0 | 0 | (89 | ) | 0 | (89 | ) | 35 | (54 | ) | |||||||||||||||||||||
Other comprehensive income, net of taxes | 0 | 0 | 708 | 0 | 0 | 708 | 3 | 711 | ||||||||||||||||||||||||
Total comprehensive income | 619 | 38 | 657 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | 0 | 0 | 0 | 0 | 0 | 0 | (9 | ) | (9 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | 0 | 7 | 0 | 0 | 0 | 7 | 0 | 7 | ||||||||||||||||||||||||
Balances as of September 30, 2020 | $ | 1 | $ | 11,997 | $ | 4,141 | $ | 1,317 | $ | (2,700 | ) | $ | 14,756 | $ | 476 | $ | 15,232 | |||||||||||||||
Nine months ended September 30, 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 | 0 | 0 | 0 | 0 | 0 | 0 | (44 | ) | (44 | ) | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | 0 | 0 | 0 | 360 | 0 | 360 | 146 | 506 | ||||||||||||||||||||||||
Other comprehensive income, net of taxes | 0 | 0 | 1,578 | 0 | 0 | 1,578 | 60 | 1,638 | ||||||||||||||||||||||||
Total comprehensive income | 1,938 | 206 | 2,144 | |||||||||||||||||||||||||||||
Dividends to noncontrolling interests | 0 | 0 | 0 | 0 | 0 | 0 | (149 | ) | (149 | ) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other | 0 | (1 | ) | 0 | 0 | 0 | (1 | ) | 6 | 5 | ||||||||||||||||||||||
Balances as of September 30, 2019 | $ | 1 | $ | 11,986 | $ | 3,622 | $ | 1,478 | $ | (2,700 | ) | $ | 14,387 | $ | 1,758 | $ | 16,145 | |||||||||||||||
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 | ||||
Nine months ended | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (54 | ) | $ | 506 | |||
Less (income) loss from discontinued operations, net of taxes | 519 | (42 | ) | |||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||
Amortization of fixed maturity securities discounts and premiums | (97 | ) | (93 | ) | ||||
Net investment gains | (382 | ) | (27 | ) | ||||
Charges assessed to policyholders | (479 | ) | (532 | ) | ||||
Acquisition costs deferred | (9 | ) | (22 | ) | ||||
Amortization of deferred acquisition costs and intangibles | 310 | 277 | ||||||
Goodwill impairment | 5 | 0 | ||||||
Deferred income taxes | 166 | 106 | ||||||
Derivative instruments, limited partnerships and other | 88 | 121 | ||||||
Stock-based compensation expense | 22 | 17 | ||||||
Change in certain assets and liabilities: | ||||||||
Accrued investment income and other assets | (183 | ) | (327 | ) | ||||
Insurance reserves | 1,034 | 906 | ||||||
Current tax liabilities | 6 | 36 | ||||||
Other liabilities, policy and contract claims and other policy-related balances | 769 | 348 | ||||||
Cash from (used by) operating activities—discontinued operations | (263 | ) | 334 | |||||
Net cash from operating activities | 1,452 | 1,608 | ||||||
Cash flows used by investing activities: | ||||||||
Proceeds from maturities and repayments of investments: | ||||||||
Fixed maturity securities | 2,760 | 2,734 | ||||||
Commercial mortgage loans | 479 | 395 | ||||||
Other invested assets | 108 | 106 | ||||||
Proceeds from sales of investments: | ||||||||
Fixed maturity and equity securities | 3,270 | 3,024 | ||||||
Purchases and originations of investments: | ||||||||
Fixed maturity and equity securities | (7,179 | ) | (5,805 | ) | ||||
Commercial mortgage loans | (414 | ) | (682 | ) | ||||
Other invested assets | (318 | ) | (349 | ) | ||||
Short-term investments, net | (12 | ) | (16 | ) | ||||
Policy loans, net | 27 | 51 | ||||||
Cash used by investing activities—discontinued operations | 0 | (6 | ) | |||||
Net cash used by investing activities | (1,279 | ) | (548 | ) | ||||
Cash flows used by financing activities: | ||||||||
Deposits to universal life and investment contracts | 693 | 637 | ||||||
Withdrawals from universal life and investment contracts | (1,408 | ) | (1,699 | ) | ||||
Redemption of non-recourse funding obligations | (315 | ) | 0 | |||||
Proceeds from issuance of long-term debt | 767 | 0 | ||||||
Repayment and repurchase of long-term debt | (493 | ) | (3 | ) | ||||
Repurchase of subsidiary shares | 0 | (22 | ) | |||||
Dividends paid to noncontrolling interests | (9 | ) | (55 | ) | ||||
Other, net | 31 | (24 | ) | |||||
Cash used by financing activities—discontinued operations | 0 | (76 | ) | |||||
Net cash used by financing activities | (734 | ) | (1,242 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $0 and $8 related to discontinued operations) | 0 | (4 | ) | |||||
Net change in cash, cash equivalents and restricted cash | (561 | ) | (186 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 3,341 | 2,177 | ||||||
Cash, cash equivalents and restricted cash at end of period | 2,780 | 1,991 | ||||||
Less cash, cash equivalents and restricted cash of discontinued operations at end of period | 0 | 362 | ||||||
Cash, cash equivalents and restricted cash of continuing operations at end of period | $ | 2,780 | $ | 1,629 | ||||
• | U.S. Mortgage Insurance. |
• | Australia Mortgage Insurance. |
• | U.S. Life Insurance. |
• | Runoff. |
• | As part of the settlement agreement reached in July 2020 regarding the case titled AXA S.A. v. Genworth Financial International Holdings, LLC et al., of interest on the promissory note, assuming we do not make any pre-payments, |
and a one-time payment on an unrelated liability associated with underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business. See note 12 for additional details on the case. See note 14 for additional details related to the sale of our former lifestyle protection insurance business and amounts recorded related to discontinued operations. |
• | assumptions will no longer be locked-in at contract inception and all cash flow assumptions used to estimate the liability for future policy benefits (except the discount rate) will be reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required. Changes will be recorded in net income (loss) using a retrospective approach with a cumulative catch-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 a single-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 related to instrument-specific credit risk recorded in other comprehensive income (loss) and remaining changes recorded in net income (loss); |
• | 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. |
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 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions, except per share amounts) | 2020 | 20 19 | 2020 | 2019 | ||||||||||||
Weighted-average shares used in basic earnings per share calculations | 505.6 | 503.5 | 505.1 | 502.7 | ||||||||||||
Potentially dilutive securities: | ||||||||||||||||
Stock options, restricted stock units and stock appreciation rights | 5.9 | 7.7 | 6.1 | 6.8 | ||||||||||||
Weighted-average shares used in diluted earnings per share calculations | 511.5 | 511.2 | 511.2 | 509.5 | ||||||||||||
Income from continuing operations: | ||||||||||||||||
Income from continuing operations | $ | 435 | $ | 138 | $ | 465 | $ | 464 | ||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 18 | 10 | 35 | 45 | ||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | $ | 417 | $ | 128 | $ | 430 | $ | 419 | ||||||||
Basic per share | $ | 0.83 | $ | 0.25 | $ | 0.85 | $ | 0.83 | ||||||||
Diluted per share | $ | 0.82 | $ | 0.25 | $ | 0.84 | $ | 0.82 | ||||||||
Income (loss) from discontinued operations: | ||||||||||||||||
Income (loss) from discontinued operations, net of taxes | $ | 1 | $ | (80 | ) | $ | (519 | ) | $ | 42 | ||||||
Less: net income from discontinued operations attributable to noncontrolling interests | 0 | 30 | 0 | 101 | ||||||||||||
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders | $ | 1 | $ | (110 | ) | $ | (519 | ) | $ | (59 | ) | |||||
Basic per share | $ | 0 | $ | (0.22 | ) | $ | (1.03 | ) | $ | (0.12 | ) | |||||
Diluted per share | $ | 0 | $ | (0.21 | ) | $ | (1.02 | ) | $ | (0.12 | ) | |||||
Net income (loss): | ||||||||||||||||
Income from continuing operations | $ | 435 | $ | 138 | $ | 465 | $ | 464 | ||||||||
Income (loss) from discontinued operations, net of taxes | 1 | (80 | ) | (519 | ) | 42 | ||||||||||
Net income (loss) | 436 | 58 | (54 | ) | 506 | |||||||||||
Less: net income attributable to noncontrolling interests | 18 | 40 | 35 | 146 | ||||||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 418 | $ | 18 | $ | (89 | ) | $ | 360 | |||||||
Basic per share (1) | $ | 0.83 | $ | 0.04 | $ | (0.18 | ) | $ | 0.72 | |||||||
Diluted per share (1) | $ | 0.82 | $ | 0.04 | $ | (0.17 | ) | $ | 0.71 | |||||||
(1) |
May not total due to whole number calculation. |
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 September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Fixed maturity securities—taxable | $ | 632 | $ | 631 | $ | 1,855 | $ | 1,878 | ||||||||
Fixed maturity securities—non-taxable | 2 | 2 | 5 | 6 | ||||||||||||
Equity securities | 3 | 4 | 7 | 13 | ||||||||||||
Commercial mortgage loans | 82 | 87 | 251 | 254 | ||||||||||||
Policy loans | 51 | 47 | 149 | 138 | ||||||||||||
Other invested assets | 79 | 62 | 192 | 180 | ||||||||||||
Cash, cash equivalents, restricted cash and short-term investments | 2 | 8 | 17 | 30 | ||||||||||||
Gross investment income before expenses and fees | 851 | 841 | 2,476 | 2,499 | ||||||||||||
Expenses and fees | (24 | ) | (25 | ) | (70 | ) | (73 | ) | ||||||||
Net investment income | $ | 827 | $ | 816 | $ | 2,406 | $ | 2,426 | ||||||||
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 | |||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Available-for-sale fixed maturity securities: | ||||||||||||||||
Realized gains | $ | 332 | $ | 19 | $ | 465 | $ | 93 | ||||||||
Realized losses | (2 | ) | (3 | ) | (8 | ) | (30 | ) | ||||||||
Net realized gains (losses) on available-for-sale fixed maturity securities | 330 | 16 | 457 | 63 | ||||||||||||
Impairments: | ||||||||||||||||
Total other-than-temporary impairments | 0 | 0 | 0 | 0 | ||||||||||||
Portion of other-than-temporary impairments included in other comprehensive income (loss) | 0 | 0 | 0 | 0 | ||||||||||||
Net other-than-temporary impairments | 0 | 0 | 0 | 0 | ||||||||||||
Net change in allowance for credit losses on available-for-sale fixed maturity securities | 2 | 0 | (5 | ) | 0 | |||||||||||
Write-down of available-for-sale fixed maturity securities (1) | (4 | ) | 0 | (4 | ) | 0 | ||||||||||
Net realized gains (losses) on equity securities sold | (3 | ) | 6 | (3 | ) | 9 | ||||||||||
Net unrealized gains (losses) on equity securities still held | 3 | (4 | ) | (7 | ) | 13 | ||||||||||
Limited partnerships | 31 | 6 | 28 | 10 | ||||||||||||
Commercial mortgage loans | (3 | ) | (1 | ) | (2 | ) | (1 | ) | ||||||||
Derivative instruments (2) | 22 | (29 | ) | (73 | ) | (71 | ) | |||||||||
Other | (3 | ) | 4 | (9 | ) | 4 | ||||||||||
Net investment gains (losses) | $ | 375 | $ | (2 | ) | $ | 382 | $ | 27 | |||||||
(1) | Represents write-down of securities we intend to sell or will be required to sell prior to recovery of the amortized cost basis. |
(2) | See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses). |
Three months ended September 30, 2020 | ||||||||||||||||||||||||||||||||
(Amounts in millions) | Beginning balance | Increase from securities without allowance in periods | Increase (decrease) from securities with in periods | Securities sold | Decrease due in requirement to sell | Write-offs | Recoveries | Ending balance | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
Non-U.S. corporate | $ | 4 | $ | 0 | $ | (2 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2 | |||||||||||||||
Commercial mortgage-backed | 3 | 0 | 0 | 0 | 0 | 0 | 0 | 3 | ||||||||||||||||||||||||
Total available-for-sale fixed maturity securities | $ | 7 | $ | 0 | $ | (2 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 5 | |||||||||||||||
Nine months ended September 30, 2020 | ||||||||||||||||||||||||||||||||
(Amounts in millions) | Beginning balance | Increase from securities without allowance in previous periods | Increase (decrease) from securities with in periods | Securities sold | Decrease due in requirement to sell | Write-offs | Recoveries | Ending balance | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
Non-U.S. corporate | $ | 0 | $ | 4 | $ | (2 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2 | |||||||||||||||
Commercial mortgage-backed | 0 | 3 | 0 | 0 | 0 | 0 | 0 | 3 | ||||||||||||||||||||||||
Total available-for-sale fixed maturity securities | $ | 0 | $ | 7 | $ | (2 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 5 | |||||||||||||||
(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) | Three months ended September 30, 2019 | Nine months ended September 30, 2019 | ||||||
Beginning balance | $ | 23 | $ | 24 | ||||
Reductions: | ||||||||
Securities sold, paid down or disposed | 0 | (1 | ) | |||||
Ending balance | $ | 23 | $ | 23 | ||||
(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 | ||||
(Amounts in millions) | September 30, 2020 | December 31, 2019 | ||||||
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses (1) | $ | 9,218 | $ | 6,676 | ||||
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses (1) | (12 | ) | 0 | |||||
Adjustments to deferred acquisition costs, present value of future profits, sales inducements and benefit reserves | (6,998 | ) | (4,789 | ) | ||||
Income taxes, net | (473 | ) | (406 | ) | ||||
Net unrealized investment gains (losses) | 1,735 | 1,481 | ||||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests | 24 | 25 | ||||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. | $ | 1,711 | $ | 1,456 | ||||
(1) | Excludes foreign exchange. |
(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 | ||||
As of or for the three months ended September 30, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Beginning balance | $ | 1,811 | $ | 1,305 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on fixed maturity securities | 781 | 1,607 | ||||||
Adjustment to deferred acquisition costs | (9 | ) | (8 | ) | ||||
Adjustment to present value of future profits | 2 | 1 | ||||||
Adjustment to sales inducements | (5 | ) | (4 | ) | ||||
Adjustment to benefit reserves | (566 | ) | (1,108 | ) | ||||
Provision for income taxes | (42 | ) | (104 | ) | ||||
Change in unrealized gains (losses) on investment securities | 161 | 384 | ||||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $70 and $4 | (261 | ) | (13 | ) | ||||
Change in net unrealized investment gains (losses) | (100 | ) | 371 | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | 0 | 1 | ||||||
Ending balance | $ | 1,711 | $ | 1,675 | ||||
As of or for the nine months ended September 30, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Beginning balance | $ | 1,456 | $ | 595 | ||||
Unrealized gains (losses) arising during the period: | ||||||||
Unrealized gains (losses) on fixed maturity securities | 2,980 | 5,563 | ||||||
Adjustment to deferred acquisition costs | 48 | (1,049 | ) | |||||
Adjustment to present value of future profits | 6 | (54 | ) | |||||
Adjustment to sales inducements | (3 | ) | (35 | ) | ||||
Adjustment to benefit reserves | (2,260 | ) | (2,908 | ) | ||||
Provision for income taxes | (162 | ) | (331 | ) | ||||
Change in unrealized gains (losses) on investment securities | 609 | 1,186 | ||||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $95 and $16 | (355 | ) | (59 | ) | ||||
Change in net unrealized investment gains (losses) | 254 | 1,127 | ||||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests | (1 | ) | 47 | |||||
Ending balance | $ | 1,711 | $ | 1,675 | ||||
(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 | |||||||||
(Amounts in millions) | Amortized cost or cost | Gross unrealized gains | Gross unrealized losses | Allowance for credit losses | Fair value | |||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 3,318 | $ | 1,474 | $ | 0 | $ | 0 | $ | 4,792 | ||||||||||
State and political subdivisions | 2,591 | 525 | (1 | ) | 0 | 3,115 | ||||||||||||||
Non-U.S. government | 1,276 | 126 | (7 | ) | 0 | 1,395 | ||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,294 | 924 | (1 | ) | 0 | 5,217 | ||||||||||||||
Energy | 2,581 | 238 | (54 | ) | 0 | 2,765 | ||||||||||||||
Finance and insurance | 7,611 | 1,135 | (11 | ) | 0 | 8,735 | ||||||||||||||
Consumer—non-cyclical | 5,160 | 1,210 | (2 | ) | 0 | 6,368 | ||||||||||||||
Technology and communications | 2,993 | 537 | (3 | ) | 0 | 3,527 | ||||||||||||||
Industrial | 1,363 | 189 | (1 | ) | 0 | 1,551 | ||||||||||||||
Capital goods | 2,558 | 503 | (4 | ) | 0 | 3,057 | ||||||||||||||
Consumer—cyclical | 1,794 | 252 | (2 | ) | 0 | 2,044 | ||||||||||||||
Transportation | 1,325 | 271 | (15 | ) | 0 | 1,581 | ||||||||||||||
Other | 346 | 43 | 0 | 0 | 389 | |||||||||||||||
Total U.S. corporate | 30,025 | 5,302 | (93 | ) | 0 | 35,234 | ||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 860 | 75 | 0 | 0 | 935 | |||||||||||||||
Energy | 1,192 | 163 | (7 | ) | 0 | 1,348 | ||||||||||||||
Finance and insurance | 2,319 | 312 | (12 | ) | (1 | ) | 2,618 | |||||||||||||
Consumer—non-cyclical | 712 | 95 | (1 | ) | 0 | 806 | ||||||||||||||
Technology and communications | 1,066 | 190 | 0 | 0 | 1,256 | |||||||||||||||
Industrial | 935 | 134 | (1 | ) | 0 | 1,068 | ||||||||||||||
Capital goods | 571 | 61 | (6 | ) | 0 | 626 | ||||||||||||||
Consumer—cyclical | 400 | 38 | (2 | ) | 0 | 436 | ||||||||||||||
Transportation | 571 | 87 | (9 | ) | (1 | ) | 648 | |||||||||||||
Other | 1,562 | 241 | (1 | ) | 0 | 1,802 | ||||||||||||||
Total non-U.S. corporate | 10,188 | 1,396 | (39 | ) | (2 | ) | 11,543 | |||||||||||||
Residential mortgage-backed | 1,825 | 250 | 0 | 0 | 2,075 | |||||||||||||||
Commercial mortgage-backed | 2,775 | 228 | (24 | ) | (3 | ) | 2,976 | |||||||||||||
Other asset-backed | 3,254 | 48 | (16 | ) | 0 | 3,286 | ||||||||||||||
Total available-for-sale fixed maturity securities | $ | 55,252 | $ | 9,349 | $ | (180 | ) | $ | (5 | ) | $ | 64,416 | ||||||||
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 | |||||||||||
Gross unrealized gains | Gross unrealized losses | |||||||||||||||||||||||
(Amounts in millions) | Amortized cost or cost | Not other-than- temporarily impaired | Other- t han-temporarily impaired | Not other-than- temporarily impaired | Other- t han-temporarily impaired | Fair value | ||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,073 | $ | 952 | $ | 0 | $ | 0 | $ | 0 | $ | 5,025 | ||||||||||||
State and political subdivisions | 2,394 | 355 | 0 | (2 | ) | 0 | 2,747 | |||||||||||||||||
Non-U.S. government | 1,235 | 117 | 0 | (2 | ) | 0 | 1,350 | |||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||
Utilities | 4,322 | 675 | 0 | 0 | 0 | 4,997 | ||||||||||||||||||
Energy | 2,404 | 303 | 0 | (8 | ) | 0 | 2,699 | |||||||||||||||||
Finance and insurance | 6,977 | 798 | 0 | (1 | ) | 0 | 7,774 | |||||||||||||||||
Consumer—non-cyclical | 4,909 | 796 | 0 | (4 | ) | 0 | 5,701 | |||||||||||||||||
Technology and communications | 2,883 | 363 | 0 | (1 | ) | 0 | 3,245 | |||||||||||||||||
Industrial | 1,271 | 125 | 0 | 0 | 0 | 1,396 | ||||||||||||||||||
Capital goods | 2,345 | 367 | 0 | (1 | ) | 0 | 2,711 | |||||||||||||||||
Consumer—cyclical | 1,590 | 172 | 0 | (2 | ) | 0 | 1,760 | |||||||||||||||||
Transportation | 1,320 | 187 | 0 | (1 | ) | 0 | 1,506 | |||||||||||||||||
Other | 292 | 30 | 0 | 0 | 0 | 322 | ||||||||||||||||||
Total U.S. corporate | 28,313 | 3,816 | 0 | (18 | ) | 0 | 32,111 | |||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||
Utilities | 779 | 50 | 0 | 0 | 0 | 829 | ||||||||||||||||||
Energy | 1,140 | 179 | 0 | 0 | 0 | 1,319 | ||||||||||||||||||
Finance and insurance | 2,087 | 232 | 0 | 0 | 0 | 2,319 | ||||||||||||||||||
Consumer—non-cyclical | 631 | 55 | 0 | (2 | ) | �� | 0 | 684 | ||||||||||||||||
Technology and communications | 1,010 | 128 | 0 | 0 | 0 | 1,138 | ||||||||||||||||||
Industrial | 896 | 92 | 0 | 0 | 0 | 988 | ||||||||||||||||||
Capital goods | 565 | 40 | 0 | 0 | 0 | 605 | ||||||||||||||||||
Consumer—cyclical | 373 | 24 | 0 | 0 | 0 | 397 | ||||||||||||||||||
Transportation | 557 | 73 | 0 | (1 | ) | 0 | 629 | |||||||||||||||||
Other | 1,431 | 188 | 0 | (2 | ) | 0 | 1,617 | |||||||||||||||||
Total non-U.S. corporate | 9,469 | 1,061 | 0 | (5 | ) | 0 | 10,525 | |||||||||||||||||
Residential mortgage-backed | 2,057 | 199 | 15 | (1 | ) | 0 | 2,270 | |||||||||||||||||
Commercial mortgage-backed | 2,897 | 137 | 0 | (8 | ) | 0 | 3,026 | |||||||||||||||||
Other asset-backed | 3,262 | 30 | 0 | (7 | ) | 0 | 3,285 | |||||||||||||||||
Total available-for-sale fixed maturity securities | $ | 53,700 | $ | 6,667 | $ | 15 | $ | (43 | ) | $ | 0 | $ | 60,339 | |||||||||||
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 | ||||||||||||||||||||||||||||||||||
(Dollar amounts in millions) | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 66 | $ | (1 | ) | 10 | $ | 0 | $ | 0 | — | $ | 66 | $ | (1 | ) | 10 | |||||||||||||||||||
Non-U.S. government | 103 | (7 | ) | 16 | 0 | 0 | 0 | 103 | (7 | ) | 16 | |||||||||||||||||||||||||
U.S. corporate | 1,475 | (82 | ) | 228 | 95 | (11 | ) | 10 | 1,570 | (93 | ) | 238 | ||||||||||||||||||||||||
Non-U.S. corporate | 589 | (27 | ) | 106 | 7 | (1 | ) | 2 | 596 | (28 | ) | 108 | ||||||||||||||||||||||||
Commercial mortgage-backed | 430 | (22 | ) | 68 | 1 | (1 | ) | 1 | 431 | (23 | ) | 69 | ||||||||||||||||||||||||
Other asset-backed | 675 | (10 | ) | 159 | 308 | (6 | ) | 67 | 983 | (16 | ) | 226 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 3,338 | $ | (149 | ) | 587 | $ | 411 | $ | (19 | ) | 80 | $ | 3,749 | $ | (168 | ) | 667 | ||||||||||||||||||
% Below cost: | ||||||||||||||||||||||||||||||||||||
<20% Below cost | $ | 3,264 | $ | (122 | ) | 569 | $ | 401 | $ | (16 | ) | 78 | $ | 3,665 | $ | (138 | ) | 647 | ||||||||||||||||||
20%-50% Below cost | 74 | (27 | ) | 18 | 10 | (3 | ) | 2 | 84 | (30 | ) | 20 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 3,338 | $ | (149 | ) | 587 | $ | 411 | $ | (19 | ) | 80 | $ | 3,749 | $ | (168 | ) | 667 | ||||||||||||||||||
Investment grade | $ | 2,631 | $ | (85 | ) | 472 | $ | 338 | $ | (9 | ) | 70 | $ | 2,969 | $ | (94 | ) | 542 | ||||||||||||||||||
Below investment grade | 707 | (64 | ) | 115 | 73 | (10 | ) | 10 | 780 | (74 | ) | 125 | ||||||||||||||||||||||||
Total for fixed maturity securities in an unrealized loss position | $ | 3,338 | $ | (149 | ) | 587 | $ | 411 | $ | (19 | ) | 80 | $ | 3,749 | $ | (168 | ) | 667 | ||||||||||||||||||
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 | ||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
(Dollar amounts in millions) | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Utilities | $ | 24 | $ | (1 | ) | 6 | $ | 0 | $ | 0 | 0 | $ | 24 | $ | (1 | ) | 6 | |||||||||||||||||||
Energy | 557 | (45 | ) | 84 | 52 | (9 | ) | 6 | 609 | (54 | ) | 90 | ||||||||||||||||||||||||
Finance and insurance | 373 | (11 | ) | 42 | 0 | 0 | 0 | 373 | (11 | ) | 42 | |||||||||||||||||||||||||
Consumer—non-cyclical | 93 | (2 | ) | 12 | 0 | 0 | 0 | 93 | (2 | ) | 12 | |||||||||||||||||||||||||
Technology and communications | 100 | (3 | ) | 12 | 0 | 0 | 0 | 100 | (3 | ) | 12 | |||||||||||||||||||||||||
Industrial | 72 | (1 | ) | 6 | 0 | 0 | 0 | 72 | (1 | ) | 6 | |||||||||||||||||||||||||
Capital goods | 33 | (3 | ) | 7 | 14 | (1 | ) | 1 | 47 | (4 | ) | 8 | ||||||||||||||||||||||||
Consumer—cyclical | 86 | (1 | ) | 21 | 29 | (1 | ) | 3 | 115 | (2 | ) | 24 | ||||||||||||||||||||||||
Transportation | 137 | (15 | ) | 38 | 0 | 0 | 0 | 137 | (15 | ) | 38 | |||||||||||||||||||||||||
Subtotal, U.S. corporate securities | 1,475 | (82 | ) | 228 | 95 | (11 | ) | 10 | 1,570 | (93 | ) | 238 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Energy | 179 | (7 | ) | 18 | 0 | 0 | 0 | 179 | (7 | ) | 18 | |||||||||||||||||||||||||
Finance and insurance | 196 | (5 | ) | 34 | 0 | 0 | 0 | 196 | (5 | ) | 34 | |||||||||||||||||||||||||
Consumer—non-cyclical | 0 | 0 | 0 | 7 | (1 | ) | 2 | 7 | (1 | ) | 2 | |||||||||||||||||||||||||
Industrial | 29 | (1 | ) | 4 | 0 | 0 | 0 | 29 | (1 | ) | 4 | |||||||||||||||||||||||||
Capital goods | 59 | (6 | ) | 11 | 0 | 0 | 0 | 59 | (6 | ) | 11 | |||||||||||||||||||||||||
Consumer—cyclical | 22 | (2 | ) | 11 | 0 | 0 | 0 | 22 | (2 | ) | 11 | |||||||||||||||||||||||||
Transportation | 59 | (5 | ) | 15 | 0 | 0 | 0 | 59 | (5 | ) | 15 | |||||||||||||||||||||||||
Other | 45 | (1 | ) | 13 | 0 | 0 | 0 | 45 | (1 | ) | 13 | |||||||||||||||||||||||||
Subtotal, non-U.S. corporate securities | 589 | (27 | ) | 106 | 7 | (1 | ) | 2 | 596 | (28 | ) | 108 | ||||||||||||||||||||||||
Total for corporate securities in an unrealized loss position | $ | 2,064 | $ | (109 | ) | 334 | $ | 102 | $ | (12 | ) | 12 | $ | 2,166 | $ | (121 | ) | 346 | ||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||
(Dollar amounts in millions) | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 91 | $ | (2 | ) | 14 | $ | 0 | $ | 0 | 0 | $ | 91 | $ | (2 | ) | 14 | |||||||||||||||||||
Non-U.S. government | 224 | (2 | ) | 20 | 0 | 0 | 0 | 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 | 0 | 0 | 0 | 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 in an 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 | 0 | 0 | 0 | 10 | (5 | ) | 3 | 10 | (5 | ) | 3 | |||||||||||||||||||||||||
Total for fixed maturity securities in an 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 in an unrealized loss position | $ | 1,452 | $ | (18 | ) | 231 | $ | 817 | $ | (25 | ) | 158 | $ | 2,269 | $ | (43 | ) | 389 | ||||||||||||||||||
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 | ||||||||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||||||||||||||
(Dollar amounts in millions) | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | Fair value | Gross unrealized losses | Number securities | |||||||||||||||||||||||||||
Description of Securities | ||||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Energy | $ | 54 | $ | (3 | ) | 10 | $ | 80 | $ | (5 | ) | 10 | $ | 134 | $ | (8 | ) | 20 | ||||||||||||||||||
Finance and insurance | 0 | 0 | 0 | 34 | (1 | ) | 4 | 34 | (1 | ) | 4 | |||||||||||||||||||||||||
Consumer—non-cyclical | 34 | (1 | ) | 9 | 93 | (3 | ) | 9 | 127 | (4 | ) | 18 | ||||||||||||||||||||||||
Technology and communications | 0 | 0 | 0 | 18 | (1 | ) | 2 | 18 | (1 | ) | 2 | |||||||||||||||||||||||||
Capital goods | 35 | (1 | ) | 8 | 0 | 0 | 0 | 35 | (1 | ) | 8 | |||||||||||||||||||||||||
Consumer—cyclical | 0 | 0 | 0 | 54 | (2 | ) | 6 | 54 | (2 | ) | 6 | |||||||||||||||||||||||||
Transportation | 0 | 0 | 0 | 23 | (1 | ) | 2 | 23 | (1 | ) | 2 | |||||||||||||||||||||||||
Subtotal, U.S. corporate securities | 123 | (5 | ) | 27 | 302 | (13 | ) | 33 | 425 | (18 | ) | 60 | ||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 0 | 0 | 0 | 31 | (2 | ) | 3 | 31 | (2 | ) | 3 | |||||||||||||||||||||||||
Transportation | 0 | 0 | 0 | 25 | (1 | ) | 3 | 25 | (1 | ) | 3 | |||||||||||||||||||||||||
Other | 79 | (1 | ) | 12 | 6 | (1 | ) | 1 | 85 | (2 | ) | 13 | ||||||||||||||||||||||||
Subtotal, non-U.S. corporate securities | 79 | (1 | ) | 12 | 62 | (4 | ) | 7 | 141 | (5 | ) | 19 | ||||||||||||||||||||||||
Total for corporate securities in an unrealized loss position | $ | 202 | $ | (6 | ) | 39 | $ | 364 | $ | (17 | ) | 40 | $ | 566 | $ | (23 | ) | 79 | ||||||||||||||||||
(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 | ||||
(Amounts in millions) | Amortized cost or cost | Fair value | ||||||
Due one year or less | $ | 1,476 | $ | 1,499 | ||||
Due after one year through five years | 9,646 | 10,265 | ||||||
Due after five years through ten years | 13,164 | 14,863 | ||||||
Due after ten years | 23,112 | 29,452 | ||||||
Subtotal | 47,398 | 56,079 | ||||||
Residential mortgage-backed | 1,825 | 2,075 | ||||||
Commercial mortgage-backed | 2,775 | 2,976 | ||||||
Other asset-backed | 3,254 | 3,286 | ||||||
Total | $ | 55,252 | $ | 64,416 | ||||
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 | ||||||||||||
September 30, 2020 | December 31, 2019 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Property type: | ||||||||||||||||
Retail | $ | 2,481 | 36 | % | $ | 2,590 | 37 | % | ||||||||
Industrial | 1,685 | 24 | 1,670 | 24 | ||||||||||||
Office | 1,625 | 24 | 1,632 | 23 | ||||||||||||
Apartments | 566 | 8 | 541 | 8 | ||||||||||||
Mixed use | 292 | 4 | 281 | 4 | ||||||||||||
Other | 262 | 4 | 266 | 4 | ||||||||||||
Subtotal | 6,911 | 100 | % | 6,980 | 100 | % | ||||||||||
Unamortized balance of loan origination fees | 0 | (4 | ) | |||||||||||||
Allowance for credit losses | (31 | ) | (13 | ) | ||||||||||||
Total | $ | 6,880 | $ | 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 | ||||||||||||
September 30, 2020 | December 31, 2019 | |||||||||||||||
(Amounts in millions) | Carrying value | % of total | Carrying value | % of total | ||||||||||||
Geographic region: | ||||||||||||||||
South Atlantic | $ | 1,761 | 25 | % | $ | 1,715 | 25 | % | ||||||||
Pacific | 1,571 | 23 | 1,673 | 24 | ||||||||||||
Middle Atlantic | 993 | 14 | 992 | 14 | ||||||||||||
Mountain | 776 | 11 | 753 | 11 | ||||||||||||
West North Central | 481 | 7 | 488 | 7 | ||||||||||||
East North Central | 451 | 7 | 455 | 6 | ||||||||||||
West South Central | 427 | 6 | 433 | 6 | ||||||||||||
New England | 262 | 4 | 257 | 4 | ||||||||||||
East South Central | 189 | 3 | 214 | 3 | ||||||||||||
Subtotal | 6,911 | 100 | % | 6,980 | 100 | % | ||||||||||
Unamortized balance of loan origination fees | 0 | (4 | ) | |||||||||||||
Allowance for credit losses | (31 | ) | (13 | ) | ||||||||||||
Total | $ | 6,880 | $ | 6,963 | ||||||||||||
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 | % | ||||||||||||
September 30, 2020 | ||||||||||||||||||||||||
(Amounts in millions) | 31 - 60 days past due | 61 - 90 days past due | Greater than 90 days past due | Total past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 4 | $ | 0 | $ | 10 | $ | 14 | $ | 2,467 | $ | 2,481 | ||||||||||||
Industrial | 0 | 0 | 0 | 0 | 1,685 | 1,685 | ||||||||||||||||||
Office | 0 | 0 | 0 | 0 | 1,625 | 1,625 | ||||||||||||||||||
Apartments | 0 | 0 | 0 | 0 | 566 | 566 | ||||||||||||||||||
Mixed use | 0 | 0 | 0 | 0 | 292 | 292 | ||||||||||||||||||
Other | 0 | 0 | 0 | 0 | 262 | 262 | ||||||||||||||||||
Total amortized cost | $ | 4 | $ | 0 | $ | 10 | $ | 14 | $ | 6,897 | $ | 6,911 | ||||||||||||
% of total commercial mortgage loans | 0 | % | 0 | % | 0 | % | 0 | % | 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 | % | ||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
(Amounts in millions) | 31 - 60 days past due | 61 - 90 days past due | Greater than 90 days past due | Total past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 2,590 | $ | 2,590 | ||||||||||||
Industrial | 0 | 0 | 0 | 0 | 1,670 | 1,670 | ||||||||||||||||||
Office | 0 | 0 | 0 | 0 | 1,632 | 1,632 | ||||||||||||||||||
Apartments | 0 | 0 | 0 | 0 | 541 | 541 | ||||||||||||||||||
Mixed use | 0 | 0 | 0 | 0 | 281 | 281 | ||||||||||||||||||
Other | 0 | 0 | 0 | 0 | 266 | 266 | ||||||||||||||||||
Total recorded investment | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 6,980 | $ | 6,980 | ||||||||||||
% of total commercial mortgage loans | 0 | % | 0 | % | 0 | % | 0 | % | 100 | % | 100 | % | ||||||||||||
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 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Allowance for credit losses: | ||||||||||||||||
Beginning balance | $ | 28 | $ | 11 | $ | 13 | $ | 9 | ||||||||
Cumulative effect of change in accounting | 0 | 0 | 16 | 0 | ||||||||||||
Provision | 3 | 1 | 2 | 3 | ||||||||||||
Write-offs | 0 | 0 | 0 | 0 | ||||||||||||
Recoveries | 0 | 0 | 0 | 0 | ||||||||||||
Ending balance | $ | 31 | $ | 12 | $ | 31 | $ | 12 | ||||||||
(Amounts in millions) | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 and prior | Total | |||||||||||||||||||||
Debt-to-value: | ||||||||||||||||||||||||||||
0% - 50% | $ | 9 | $ | 15 | $ | 38 | $ | 108 | $ | 131 | $ | 2,307 | $ | 2,608 | ||||||||||||||
51% - 60% | 29 | 33 | 191 | 289 | 141 | 734 | 1,417 | |||||||||||||||||||||
61% - 75% | 373 | 746 | 758 | 330 | 223 | 448 | 2,878 | |||||||||||||||||||||
76% - 100% | 0 | 0 | 8 | 0 | 0 | 0 | 8 | |||||||||||||||||||||
Greater than 100% | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Total amortized cost | $ | 411 | $ | 794 | $ | 995 | $ | 727 | $ | 495 | $ | 3,489 | $ | 6,911 | ||||||||||||||
Debt service coverage ratio: | ||||||||||||||||||||||||||||
Less than 1.00 | $ | 0 | $ | 0 | $ | 33 | $ | 3 | $ | 0 | $ | 123 | $ | 159 | ||||||||||||||
1.00 - 1.25 | 41 | 12 | 106 | 73 | 13 | 252 | 497 | |||||||||||||||||||||
1.26 - 1.50 | 69 | 357 | 260 | 96 | 87 | 405 | 1,274 | |||||||||||||||||||||
1.51 - 2.00 | 251 | 356 | 503 | 320 | 266 | 1,214 | 2,910 | |||||||||||||||||||||
Greater than 2.00 | 50 | 69 | 93 | 235 | 129 | 1,495 | 2,071 | |||||||||||||||||||||
Total amortized cost | $ | 411 | $ | 794 | $ | 995 | $ | 727 | $ | 495 | $ | 3,489 | $ | 6,911 | ||||||||||||||
Write-offs, gross | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||
Recoveries | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Write-offs, net | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||
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 | ||||||||||||||||||
September 30, 2020 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 940 | $ | 557 | $ | 984 | $ | 0 | $ | 0 | $ | 2,481 | ||||||||||||
Industrial | 775 | 310 | 600 | 0 | 0 | 1,685 | ||||||||||||||||||
Office | 513 | 337 | 767 | 8 | 0 | 1,625 | ||||||||||||||||||
Apartments | 220 | 85 | 261 | 0 | 0 | 566 | ||||||||||||||||||
Mixed use | 106 | 63 | 123 | 0 | 0 | 292 | ||||||||||||||||||
Other | 54 | 65 | 143 | 0 | 0 | 262 | ||||||||||||||||||
Total amortized cost | $ | 2,608 | $ | 1,417 | $ | 2,878 | $ | 8 | $ | 0 | $ | 6,911 | ||||||||||||
% of total | 38 | % | 20 | % | 42 | % | 0 | % | 0 | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.31 | 1.81 | 1.57 | 1.42 | 0 | 1.90 | ||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 986 | $ | 579 | $ | 1,025 | $ | 0 | $ | 0 | $ | 2,590 | ||||||||||||
Industrial | 808 | 337 | 525 | 0 | 0 | 1,670 | ||||||||||||||||||
Office | 529 | 380 | 723 | 0 | 0 | 1,632 | ||||||||||||||||||
Apartments | 211 | 110 | 220 | 0 | 0 | 541 | ||||||||||||||||||
Mixed use | 104 | 70 | 107 | 0 | 0 | 281 | ||||||||||||||||||
Other | 56 | 69 | 141 | 0 | 0 | 266 | ||||||||||||||||||
Total recorded investment | $ | 2,694 | $ | 1,545 | $ | 2,741 | $ | 0 | $ | 0 | $ | 6,980 | ||||||||||||
% of total | 39 | % | 22 | % | 39 | % | 0 | % | 0 | % | 100 | % | ||||||||||||
Weighted-average debt service coverage ratio | 2.32 | 1.81 | 1.55 | 0 | 0 | 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, 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 | % | ||||||||||||
September 30, 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 | $ | 61 | $ | 134 | $ | 585 | $ | 1,100 | $ | 601 | $ | 2,481 | ||||||||||||
Industrial | 23 | 66 | 218 | 704 | 674 | 1,685 | ||||||||||||||||||
Office | 28 | 111 | 238 | 770 | 478 | 1,625 | ||||||||||||||||||
Apartments | 11 | 24 | 177 | 182 | 172 | 566 | ||||||||||||||||||
Mixed use | 3 | 18 | 37 | 118 | 116 | 292 | ||||||||||||||||||
Other | 33 | 144 | 19 | 36 | 30 | 262 | ||||||||||||||||||
Total amortized cost | $ | 159 | $ | 497 | $ | 1,274 | $ | 2,910 | $ | 2,071 | $ | 6,911 | ||||||||||||
% of total | 2 | % | 7 | % | 19 | % | 42 | % | 30 | % | 100 | % | ||||||||||||
Weighted-average debt-to-value | 57 | % | 61 | % | 63 | % | 59 | % | 41 | % | 54 | % | ||||||||||||
(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 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
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 | % | ||||||||||||
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 | ||||||||||||
Derivative assets | Derivative liabilities | |||||||||||||||||||
Fair value | Fair value | |||||||||||||||||||
(Amounts in millions) | Balance sheet | September 30, 2020 | December 31, 2019 | Balance sheet | September 30, 2020 | December 31, 2019 | ||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Other invested assets | $ | 708 | $ | 197 | Other liabilities | $ | 4 | $ | 10 | ||||||||||
Foreign currency swaps | Other invested assets | 10 | 4 | Other liabilities | 0 | — | ||||||||||||||
Total cash flow hedges | 718 | 201 | 4 | 10 | ||||||||||||||||
Total derivatives designated as hedges | 718 | 201 | 4 | 10 | ||||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Equity index options | Other invested assets | 67 | 81 | Other liabilities | 0 | — | ||||||||||||||
Financial futures | Other invested assets | 0 | — | Other liabilities | 0 | — | ||||||||||||||
Other foreign currency contracts | Other invested assets | 19 | 8 | Other liabilities | 5 | 1 | ||||||||||||||
GMWB embedded derivatives | Reinsurance recoverable (1) | 35 | 20 | Policyholder account balances (2) | 508 | 323 | ||||||||||||||
Fixed index annuity embedded derivatives | Other assets | 0 | — | Policyholder account balances (3) | 432 | 452 | ||||||||||||||
Indexed universal life embedded derivatives | Reinsurance recoverable | 0 | 0 | Policyholder account balances (4) | 25 | 19 | ||||||||||||||
Total derivatives not designated as hedges | 121 | 109 | 970 | 795 | ||||||||||||||||
Total derivatives | $ | 839 | $ | 310 | $ | 974 | $ | 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. |
(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 |
(Notional in millions) | Measurement | December 31, 2019 | Additions | Maturities/ terminations | September 30, 2020 | |||||||||||||||
Derivatives designated as hedges | ||||||||||||||||||||
Cash flow hedges: | ||||||||||||||||||||
Interest rate swaps | Notional | $ | 8,968 | $ | 1,844 | $ | (2,616 | ) | $ | 8,196 | ||||||||||
Foreign currency swaps | Notional | 110 | 0 | 0 | 110 | |||||||||||||||
Total cash flow hedges | 9,078 | 1,844 | (2,616 | ) | 8,306 | |||||||||||||||
Total derivatives designated as hedges | 9,078 | 1,844 | (2,616 | ) | 8,306 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
Interest rate swaps | Notional | 4,674 | 0 | 0 | 4,674 | |||||||||||||||
Equity index options | Notional | 2,451 | 1,527 | (1,849 | ) | 2,129 | ||||||||||||||
Financial futures | Notional | 1,182 | 4,362 | (4,275 | ) | 1,269 | ||||||||||||||
Other foreign currency contracts | Notional | 628 | 5,689 | (4,687 | ) | 1,630 | ||||||||||||||
Total derivatives not designated as hedges | 8,935 | 11,578 | (10,811 | ) | 9,702 | |||||||||||||||
Total derivatives | $ | 18,013 | $ | 13,422 | $ | (13,427 | ) | $ | 18,008 | |||||||||||
(Number of policies) | Measurement | December 31, 2019 | Additions | Maturities/ terminations | September 30, 2020 | |||||||||||||||
Derivatives not designated as hedges | ||||||||||||||||||||
GMWB embedded derivatives | Policies | 25,623 | 0 | (1,452 | ) | 24,171 | ||||||||||||||
Fixed index annuity embedded derivatives | Policies | 15,441 | 0 | (1,511 | ) | 13,930 | ||||||||||||||
Indexed universal life embedded derivatives | Policies | 884 | 0 | (37 | ) | 847 |
(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 | $ | — | ||||||||||||||
(Amounts in millions) | Gain (loss) recognized | Gain (loss) reclassified into net income (loss) from OCI | Classification of (loss) net income (loss) | Gain (loss) recognized in net income (loss) | Classification of (loss) net | |||||||||||
Interest rate swaps hedging assets | $ | (246 | ) | $ | 50 | Net investment income | $ | 0 | Net investment gains (losses) | |||||||
Interest rate swaps hedging | 0 | 4 | Net investment gains (losses) | 0 | Net investment gains (losses) | |||||||||||
Interest rate swaps hedging liabilities | 10 | 0 | Interest expense | 0 | Net investment gains (losses) | |||||||||||
Foreign currency swaps | (7 | ) | 0 | Net investment income | 0 | Net investment gains (losses) | ||||||||||
Total | $ | (243 | ) | $ | 54 | $ | 0 | |||||||||
(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 | ||||||||||||||
(Amounts in millions) | Gain (loss) recognized in OCI | Gain (loss) reclassified into net 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 | $ | 406 | $ | 41 | Net investment income | $ | 0 | Net investment gains (losses) | ||||||||
Interest rate swaps hedging assets | 0 | 4 | Net investment gains (losses) | 0 | Net investment gains (losses) | |||||||||||
Interest rate swaps hedging liabilities | (23 | ) | 0 | Interest expense | 0 | Net investment gains (losses) | ||||||||||
Foreign currency | 5 | 1 | Net investment income | 0 | Net investment gains (losses) | |||||||||||
Total | $ | 388 | $ | 46 | $ | 0 | ||||||||||
(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 | $ | 738 | $ | 139 | Net investment income | | $ | 0 | Net investment gains (losses) | | ||||||||||
Interest rate swaps hedging assets | 0 | 8 | Net investment gains (losses) | | 0 | Net investment gains (losses) | | |||||||||||||
Interest rate swaps hedging liabilities | (52 | ) | 0 | Interest expense | 0 | Net investment gains (losses) | | |||||||||||||
Foreign currency | 6 | 0 | Net investment income | | 0 | Net investment gains (losses) | | |||||||||||||
Total | $ | 692 | $ | 147 | $ | 0 | ||||||||||||||
(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 | $ | 759 | $ | 121 | Net investment income | | $ | 0 | Net investment gains (losses) | | ||||||||||
Interest rate swaps hedging assets | 0 | 6 | Net investment gains (losses) | | 0 | Net investment gains (losses) | | |||||||||||||
Interest rate swaps hedging liabilities | (55 | ) | 0 | Interest expense | 0 | Net investment gains (losses) | | |||||||||||||
Foreign currency | 4 | 0 | Net investment income | | 0 | Net investment gains (losses) | | |||||||||||||
Foreign currency | 0 | 0 | Net investment gains (losses) | | 2 | Net investment gains (losses) | | |||||||||||||
Total | $ | 708 | $ | 127 | $ | 2 | ||||||||||||||
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 September 30, | ||||||||
(Amounts in millions) | 2020 | 2019 | ||||||
Derivatives qualifying as effective accounting hedges as of July 1 | $ | 2,677 | $ | 1,983 | ||||
Current period increases (decreases) in fair value, net of deferred taxes of $52 and $(82) | (191 | ) | 306 | |||||
Reclassification to net (income) loss, net of deferred taxes of $19 and $16 | (35 | ) | (30 | ) | ||||
Derivatives qualifying as effective accounting hedges as of September 30 | $ | 2,451 | $ | 2,259 | ||||
Nine months ended September 30, | ||||||||
(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 $(148) in both periods | 544 | 560 | ||||||
Reclassification to net (income) loss, net of deferred taxes of $52 and $45 | (95 | ) | (82 | ) | ||||
Derivatives qualifying as effective accounting hedges as of September 30 | $ | 2,451 | $ | 2,259 | ||||
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 | ) | ||||||
Three months ended September 30, | Classification of gain (loss) recognized in net income (loss) | |||||||||
(Amounts in millions) | 2020 | 2019 | ||||||||
Interest rate swaps | $ | 1 | $ | (2 | ) | Net investment gains (losses) | ||||
Equity index options | 7 | 1 | Net investment gains (losses) | |||||||
Financial futures | (41 | ) | 35 | Net investment gains (losses) | ||||||
Other foreign currency contracts | 12 | (10 | ) | Net investment gains (losses) | ||||||
GMWB embedded derivatives | 54 | (44 | ) | Net investment gains (losses) | ||||||
Fixed index annuity embedded derivatives | (18 | ) | (14 | ) | Net investment gains (losses) | |||||
Indexed universal life embedded derivatives | 3 | 1 | Net investment gains (losses) | |||||||
Total derivatives not designated as hedges | $ | 18 | $ | (33 | ) | |||||
(Amounts in millions) | Nine months ended September 30, | Classification of gain (loss) recognized in net income (loss) | ||||||||
2020 | 2019 | |||||||||
Interest rate swaps | $ | (11 | ) | $ | (6 | ) | Net investment gains (losses) | |||
Equity index options | (2 | ) | 28 | Net investment gains (losses) | ||||||
Financial futures | 97 | 8 | Net investment gains (losses) | |||||||
Other foreign currency contracts | 9 | (17 | ) | Net investment gains (losses) | ||||||
GMWB embedded derivatives | (153 | ) | (21 | ) | Net investment gains (losses) | |||||
Fixed index annuity embedded derivatives | (31 | ) | (72 | ) | Net investment gains (losses) | |||||
Indexed universal life embedded derivatives | 10 | 1 | Net investment gains (losses) | |||||||
Total derivatives not designated as hedges | $ | (81 | ) | $ | (79 | ) | ||||
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 | ||||||||||||
September 30, 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 | $ | 804 | $ | 9 | $ | 795 | $ | 291 | $ | 11 | $ | 280 | ||||||||||||
Gross amounts offset in the balance sheet | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Net amounts presented in the balance sheet | 804 | 9 | 795 | 291 | 11 | 280 | ||||||||||||||||||
Gross amounts not offset in the balance sheet: | ||||||||||||||||||||||||
Financial instruments (3) | (5 | ) | (5 | ) | 0 | (7 | ) | (7 | ) | 0 | ||||||||||||||
Collateral received | (663 | ) | 0 | (663 | ) | (179 | ) | 0 | (179 | ) | ||||||||||||||
Collateral pledged | 0 | (489 | ) | 489 | 0 | (405 | ) | 405 | ||||||||||||||||
Over collateralization | 13 | 485 | (472 | ) | 18 | 401 | (383 | ) | ||||||||||||||||
Net amount | $ | 149 | $ | 0 | $ | 149 | $ | 123 | $ | 0 | $ | 123 | ||||||||||||
(1) | Included $1 million of accruals on derivatives classified as other assets as of |
(2) | Does not include amounts related to embedded derivatives as of |
(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 . |
include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data, prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings with our |
(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 |
(Amounts in millions) | Fair value | Primary methodologies | Significant inputs | |||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,792 | 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 | $ | 3,058 | 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 | $ | 1,395 | 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 | $ | 31,695 | 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 | $ | 9,220 | 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 | $ | 2,061 | 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 | $ | 2,956 | 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 | $ | 3,125 | Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers | Spreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports |
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 | ||||||||||
September 30, 2020 | ||||||||||||||||||||
(Amounts in millions) | Total | Level | Level 2 | Level | NAV (1) | |||||||||||||||
Assets | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises | $ | 4,792 | $ | 0 | $ | 4,792 | $ | 0 | $ | 0 | ||||||||||
State and political subdivisions | 3,115 | 0 | 3,058 | 57 | 0 | |||||||||||||||
Non-U.S. government | 1,395 | 0 | 1,395 | 0 | 0 | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 5,217 | 0 | 4,376 | 841 | 0 | |||||||||||||||
Energy | 2,765 | 0 | 2,651 | 114 | 0 | |||||||||||||||
Finance and insurance | 8,735 | 0 | 8,204 | 531 | 0 | |||||||||||||||
Consumer—non-cyclical | 6,368 | 0 | 6,265 | 103 | 0 | |||||||||||||||
Technology and communications | 3,527 | 0 | 3,401 | 126 | 0 | |||||||||||||||
Industrial | 1,551 | 0 | 1,511 | 40 | 0 | |||||||||||||||
Capital goods | 3,057 | 0 | 2,960 | 97 | 0 | |||||||||||||||
Consumer—cyclical | 2,044 | 0 | 1,874 | 170 | 0 | |||||||||||||||
Transportation | 1,581 | 0 | 1,527 | 54 | 0 | |||||||||||||||
Other | 389 | 0 | 225 | 164 | 0 | |||||||||||||||
Total U.S. corporate | 35,234 | 0 | 32,994 | 2,240 | 0 | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 935 | 0 | 588 | 347 | 0 | |||||||||||||||
Energy | 1,348 | 0 | 1,111 | 237 | 0 | |||||||||||||||
Finance and insurance | 2,618 | 0 | 2,314 | 304 | 0 | |||||||||||||||
Consumer—non-cyclical | 806 | 0 | 752 | 54 | 0 | |||||||||||||||
Technology and communications | 1,256 | 0 | 1,228 | 28 | 0 | |||||||||||||||
Industrial | 1,068 | 0 | 975 | 93 | 0 | |||||||||||||||
Capital goods | 626 | 0 | 453 | 173 | 0 | |||||||||||||||
Consumer—cyclical | 436 | 0 | 269 | 167 | 0 | |||||||||||||||
Transportation | 648 | 0 | 537 | 111 | 0 | |||||||||||||||
Other | 1,802 | 0 | 1,666 | 136 | 0 | |||||||||||||||
Total non-U.S. corporate | 11,543 | 0 | 9,893 | 1,650 | 0 | |||||||||||||||
Residential mortgage-backed | 2,075 | 0 | 2,061 | 14 | 0 | |||||||||||||||
Commercial mortgage-backed | 2,976 | 0 | 2,956 | 20 | 0 | |||||||||||||||
Other asset-backed | 3,286 | 0 | 3,125 | 161 | 0 | |||||||||||||||
Total fixed maturity securities | 64,416 | 0 | 60,274 | 4,142 | 0 | |||||||||||||||
Equity securities | 629 | 465 | 112 | 52 | 0 | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 708 | 0 | 708 | 0 | 0 | |||||||||||||||
Foreign currency swaps | 10 | 0 | 10 | 0 | 0 | |||||||||||||||
Equity index options | 67 | 0 | 0 | 67 | 0 | |||||||||||||||
Other foreign currency contracts | 19 | 0 | 19 | 0 | 0 | |||||||||||||||
Total derivative assets | 804 | 0 | 737 | 67 | 0 | |||||||||||||||
Securities lending collateral | 75 | 0 | 75 | 0 | 0 | |||||||||||||||
Short-term investments | 251 | 0 | 251 | 0 | 0 | |||||||||||||||
Limited partnerships | 674 | 0 | 0 | 0 | 674 | |||||||||||||||
Total other invested assets | 1,804 | 0 | 1,063 | 67 | 674 | |||||||||||||||
Reinsurance recoverable (2) | 35 | 0 | 0 | 35 | 0 | |||||||||||||||
Separate account assets | 5,700 | 5,700 | 0 | 0 | 0 | |||||||||||||||
Total assets | $ | 72,584 | $ | 6,165 | $ | 61,449 | $ | 4,296 | $ | 674 | ||||||||||
(1) | Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
December 31, 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 | ||||||||||
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 | $ | 0 | $ | 5,025 | $ | 0 | $ | 0 | ||||||||||
State and political subdivisions | 2,747 | 0 | 2,645 | 102 | 0 | |||||||||||||||
Non-U.S. government | 1,350 | 0 | 1,350 | 0 | 0 | |||||||||||||||
U.S. corporate: | ||||||||||||||||||||
Utilities | 4,997 | 0 | 4,132 | 865 | 0 | |||||||||||||||
Energy | 2,699 | 0 | 2,570 | 129 | 0 | |||||||||||||||
Finance and insurance | 7,774 | 0 | 7,202 | 572 | 0 | |||||||||||||||
Consumer—non-cyclical | 5,701 | 0 | 5,607 | 94 | 0 | |||||||||||||||
Technology and communications | 3,245 | 0 | 3,195 | 50 | 0 | |||||||||||||||
Industrial | 1,396 | 0 | 1,356 | 40 | 0 | |||||||||||||||
Capital goods | 2,711 | 0 | 2,609 | 102 | 0 | |||||||||||||||
Consumer—cyclical | 1,760 | 0 | 1,587 | 173 | 0 | |||||||||||||||
Transportation | 1,506 | 0 | 1,428 | 78 | 0 | |||||||||||||||
Other | 322 | 0 | 186 | 136 | 0 | |||||||||||||||
Total U.S. corporate | 32,111 | 0 | 29,872 | 2,239 | 0 | |||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||
Utilities | 829 | 0 | 455 | 374 | 0 | |||||||||||||||
Energy | 1,319 | 0 | 1,072 | 247 | 0 | |||||||||||||||
Finance and insurance | 2,319 | 0 | 2,085 | 234 | 0 | |||||||||||||||
Consumer—non-cyclical | 684 | 0 | 625 | 59 | 0 | |||||||||||||||
Technology and communications | 1,138 | 0 | 1,110 | 28 | 0 | |||||||||||||||
Industrial | 988 | 0 | 884 | 104 | 0 | |||||||||||||||
Capital goods | 605 | 0 | 444 | 161 | 0 | |||||||||||||||
Consumer—cyclical | 397 | 0 | 250 | 147 | 0 | |||||||||||||||
Transportation | 629 | 0 | 438 | 191 | 0 | |||||||||||||||
Other | 1,617 | 0 | 1,477 | 140 | 0 | |||||||||||||||
Total non-U.S. corporate | 10,525 | 0 | 8,840 | 1,685 | 0 | |||||||||||||||
Residential mortgage-backed | 2,270 | 0 | 2,243 | 27 | 0 | |||||||||||||||
Commercial mortgage-backed | 3,026 | 0 | 3,020 | 6 | 0 | |||||||||||||||
Other asset-backed | 3,285 | 0 | 3,153 | 132 | 0 | |||||||||||||||
Total fixed maturity securities | 60,339 | 0 | 56,148 | 4,191 | 0 | |||||||||||||||
Equity securities | 239 | 62 | 126 | 51 | 0 | |||||||||||||||
Other invested assets: | ||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps | 197 | 0 | 197 | 0 | 0 | |||||||||||||||
Foreign currency swaps | 4 | 0 | 4 | 0 | 0 | |||||||||||||||
Equity index options | 81 | 0 | 0 | 81 | 0 | |||||||||||||||
Other foreign currency contracts | 8 | 0 | 8 | 0 | 0 | |||||||||||||||
Total derivative assets | 290 | 0 | 209 | 81 | 0 | |||||||||||||||
Securities lending collateral | 51 | 0 | 51 | 0 | 0 | |||||||||||||||
Short-term investments | 211 | 0 | 211 | 0 | 0 | |||||||||||||||
Limited partnerships | 503 | 0 | 0 | 0 | 503 | |||||||||||||||
Total other invested assets | 1,055 | 0 | 471 | 81 | 503 | |||||||||||||||
Reinsurance recoverable (2) | 20 | 0 | 0 | 20 | 0 | |||||||||||||||
Separate account assets | 6,108 | 6,108 | 0 | 0 | 0 | |||||||||||||||
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. |
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 | ) | |||||||||||||||||||
Beginning balance as of July 1, 2020 | Total realized and unrealized gains (losses) | Ending balance as of September 30, 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 3 (1) | Included in net income (loss) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 63 | $ | 1 | $ | (7 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 57 | $ | 1 | $ | (6 | ) | ||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 936 | 10 | (4 | ) | 15 | 0 | 0 | (52 | ) | 0 | (64 | ) | 841 | 0 | 1 | |||||||||||||||||||||||||||||||||
Energy | 123 | 0 | 0 | 7 | 0 | 0 | (16 | ) | 0 | 0 | 114 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Finance and insurance | 551 | 0 | 2 | 71 | 0 | 0 | (16 | ) | 0 | (77 | ) | 531 | 0 | 2 | ||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 103 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 103 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Technology and communications | 66 | 0 | 3 | 57 | 0 | 0 | 0 | 0 | 0 | 126 | 0 | 3 | ||||||||||||||||||||||||||||||||||||
Industrial | 39 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 40 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Capital goods | 97 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 97 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Consumer— cyclical | 198 | 3 | (1 | ) | 0 | 0 | 0 | (30 | ) | 0 | 0 | 170 | 0 | 1 | ||||||||||||||||||||||||||||||||||
Transportation | 54 | 0 | 1 | 0 | 0 | 0 | (1 | ) | 0 | 0 | 54 | 0 | 1 | |||||||||||||||||||||||||||||||||||
Other | 165 | 0 | 0 | 0 | 0 | 0 | (1 | ) | 0 | 0 | 164 | 0 �� | 0 | |||||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,332 | 13 | 2 | 150 | 0 | 0 | (116 | ) | 0 | (141 | ) | 2,240 | 0 | 9 | ||||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 357 | 0 | 4 | 0 | 0 | 0 | 0 | 6 | (20 | ) | 347 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Energy | 237 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 237 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Finance and insurance | 311 | 1 | (2 | ) | 0 | 0 | 0 | 0 | 19 | (25 | ) | 304 | 1 | (2 | ) | |||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 54 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 54 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Technology and communications | 28 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 28 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Industrial | 92 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 93 | 0 | 1 | ||||||||||||||||||||||||||||||||||||
Capital goods | 173 | 0 | 0 | 10 | 0 | 0 | (10 | ) | 0 | 0 | 173 | 0 | (1 | ) | ||||||||||||||||||||||||||||||||||
Consumer—cyclical | 156 | 0 | 4 | 17 | 0 | 0 | 0 | 0 | (10 | ) | 167 | 0 | 4 | |||||||||||||||||||||||||||||||||||
Transportation | 141 | 0 | (2 | ) | 0 | 0 | 0 | 0 | 0 | (28 | ) | 111 | 0 | (3 | ) | |||||||||||||||||||||||||||||||||
Other | 145 | 0 | 3 | 0 | 0 | 0 | (12 | ) | 0 | 0 | 136 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,694 | 1 | 8 | 27 | 0 | 0 | (22 | ) | 25 | (83 | ) | 1,650 | 1 | 6 | ||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 24 | 0 | (1 | ) | 0 | 0 | 0 | 0 | 0 | (9 | ) | 14 | 0 | 0 | ||||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 21 | 0 | (1 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 20 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Other asset-backed | 121 | 0 | 1 | 78 | 0 | 0 | (10 | ) | 0 | (29 | ) | 161 | 0 | 1 | ||||||||||||||||||||||||||||||||||
Total fixed maturity securities | 4,255 | 15 | 2 | 255 | 0 | 0 | (148 | ) | 25 | (262 | ) | 4,142 | 2 | 10 | ||||||||||||||||||||||||||||||||||
Equity securities | 53 | 0 | 0 | 0 | (1 | ) | 0 | 0 | 0 | 0 | 52 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 66 | 7 | 0 | 27 | 0 | 0 | (33 | ) | 0 | 0 | 67 | (1 | ) | 0 | ||||||||||||||||||||||||||||||||||
Total derivative assets | 66 | 7 | 0 | 27 | 0 | 0 | (33 | ) | 0 | 0 | 67 | (1 | ) | 0 | ||||||||||||||||||||||||||||||||||
Total other invested assets | 66 | 7 | 0 | 27 | 0 | 0 | (33 | ) | 0 | 0 | 67 | (1 | ) | 0 | ||||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 38 | (3 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 35 | (3 | ) | 0 | ||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,412 | $ | 19 | $ | 2 | $ | 282 | $ | (1 | ) | $ | 0 | $ | (181 | ) | $ | 25 | $ | (262 | ) | $ | 4,296 | $ | (2 | ) | $ | 10 | ||||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
Beginning balance as of January 1, 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 | |||||||||||||||||||
Beginning balance as of July 1, 2019 | Total realized and unrealized gains (losses) | Ending balance as of September 30, 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 | $ | 61 | $ | 0 | $ | 11 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 72 | $ | 1 | ||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 789 | 1 | 28 | 13 | 0 | 0 | (7 | ) | 0 | 0 | 824 | 0 | ||||||||||||||||||||||||||||||||
Energy | 122 | 0 | 2 | 12 | 0 | 0 | (1 | ) | 0 | 0 | 135 | 0 | ||||||||||||||||||||||||||||||||
Finance and insurance | 607 | 0 | 11 | 0 | 0 | 0 | (26 | ) | 20 | 0 | 612 | 0 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 89 | 0 | 1 | 9 | 0 | 0 | (1 | ) | 0 | 0 | 98 | 0 | ||||||||||||||||||||||||||||||||
Technology and communications | 44 | 0 | 1 | 0 | 0 | 0 | 0 | 5 | 0 | 50 | 0 | |||||||||||||||||||||||||||||||||
Industrial | 40 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 40 | 0 | |||||||||||||||||||||||||||||||||
Capital goods | 98 | 0 | 2 | 0 | 0 | 0 | 0 | 0 | 0 | 100 | 0 | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 185 | 0 | 2 | 0 | 0 | 0 | (2 | ) | 0 | (9 | ) | 176 | 0 | |||||||||||||||||||||||||||||||
Transportation | 54 | 0 | 1 | 3 | 0 | 0 | (1 | ) | 0 | 0 | 57 | 0 | ||||||||||||||||||||||||||||||||
Other | 199 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (31 | ) | 168 | 0 | ||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,227 | 1 | 48 | 37 | 0 | 0 | (38 | ) | 25 | (40 | ) | 2,260 | 0 | |||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 417 | 0 | 5 | 0 | 0 | 0 | (25 | ) | 0 | 0 | 397 | 0 | ||||||||||||||||||||||||||||||||
Energy | 241 | 0 | 5 | 31 | 0 | 0 | (12 | ) | 0 | 0 | 265 | 0 | ||||||||||||||||||||||||||||||||
Finance and insurance | 179 | 1 | 4 | 0 | 0 | 0 | (3 | ) | 16 | 0 | 197 | 1 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 68 | 0 | 1 | 0 | 0 | 0 | (5 | ) | 0 | 0 | 64 | 0 | ||||||||||||||||||||||||||||||||
Technology and communications | 27 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 28 | 0 | |||||||||||||||||||||||||||||||||
Industrial | 64 | 0 | 0 | 13 | 0 | 0 | 0 | 0 | 0 | 77 | 0 | |||||||||||||||||||||||||||||||||
Capital goods | 181 | 0 | 2 | 0 | 0 | 0 | (4 | ) | 0 | 0 | 179 | 0 | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 126 | 0 | 2 | 9 | 0 | 0 | 0 | 0 | 0 | 137 | 0 | |||||||||||||||||||||||||||||||||
Transportation | 199 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 200 | 0 | |||||||||||||||||||||||||||||||||
Other | 129 | 0 | 3 | 0 | 0 | 0 | (1 | ) | 0 | 0 | 131 | 0 | ||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,631 | 1 | 24 | 53 | 0 | 0 | (50 | ) | 16 | 0 | 1,675 | 1 | ||||||||||||||||||||||||||||||||
Residential mortgage-backed | 36 | 0 | 1 | 0 | 0 | 0 | (1 | ) | 0 | (4 | ) | 32 | 0 | |||||||||||||||||||||||||||||||
Commercial mortgage-backed | 92 | 0 | 14 | 0 | 0 | 0 | 0 | 0 | 0 | 106 | 0 | |||||||||||||||||||||||||||||||||
Other asset-backed | 234 | 0 | 0 | 13 | 0 | 0 | (11 | ) | 0 | (106 | ) | 130 | 0 | |||||||||||||||||||||||||||||||
Total fixed maturity securities | 4,281 | 2 | 98 | 103 | 0 | 0 | (100 | ) | 41 | (150 | ) | 4,275 | 2 | |||||||||||||||||||||||||||||||
Equity securities | 56 | 0 | 0 | 0 | (2 | ) | 0 | 0 | 0 | 0 | 54 | 0 | ||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 65 | 1 | 0 | 13 | 0 | 0 | (17 | ) | 0 | 0 | 62 | 0 | ||||||||||||||||||||||||||||||||
Total derivative assets | 65 | 1 | 0 | 13 | 0 | 0 | (17 | ) | 0 | 0 | 62 | 0 | ||||||||||||||||||||||||||||||||
Total other invested assets | 65 | 1 | 0 | 13 | 0 | 0 | (17 | ) | 0 | 0 | 62 | 0 | ||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 20 | 5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 25 | 5 | |||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,422 | $ | 8 | $ | 98 | $ | 116 | $ | (2 | ) | $ | 0 | $ | (117 | ) | $ | 41 | $ | (150 | ) | $ | 4,416 | $ | 7 | |||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
Beginning balance as of January 1, 2020 | Total realized and unrealized gains (losses) | Ending balance as of September 30, 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 3 (1) | Included in net income (loss) | Included in OCI | ||||||||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 102 | $ | 2 | $ | (19 | ) | $ | 0 | $ | 0 | $ | 0 | $ | (1 | ) | $ | 0 | $ | (27 | ) | $ | 57 | $ | 2 | $ | (19 | ) | ||||||||||||||||||||
Non-U.S. government | 0 | 0 | 0 | 0 | 0 | 0 | (1 | ) | 1 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 865 | 10 | 8 | 47 | 0 | 0 | (54 | ) | 42 | (77 | ) | 841 | 0 | 14 | ||||||||||||||||||||||||||||||||||
Energy | 129 | 1 | (2 | ) | 17 | (21 | ) | 0 | (19 | ) | 22 | (13 | ) | 114 | 0 | (4 | ) | |||||||||||||||||||||||||||||||
Finance and insurance | 572 | 2 | 4 | 92 | 0 | 0 | (40 | ) | 0 | (99 | ) | 531 | 0 | 7 | ||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 94 | 0 | 2 | 8 | 0 | 0 | (1 | ) | 0 | 0 | 103 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Technology and communications | 50 | 0 | 4 | 77 | 0 | 0 | 0 | 0 | (5 | ) | 126 | 0 | 4 | |||||||||||||||||||||||||||||||||||
Industrial | 40 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 40 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Capital goods | 102 | 0 | (1 | ) | 0 | 0 | 0 | (4 | ) | 0 | 0 | 97 | 0 | (1 | ) | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 173 | 3 | 3 | 0 | 0 | 0 | (33 | ) | 24 | 0 | 170 | 0 | 5 | |||||||||||||||||||||||||||||||||||
Transportation | 78 | 0 | (1 | ) | 0 | 0 | 0 | (3 | ) | 10 | (30 | ) | 54 | 0 | 1 | |||||||||||||||||||||||||||||||||
Other | 136 | 0 | 1 | 5 | 0 | 0 | (5 | ) | 27 | 0 | 164 | 0 | 1 | |||||||||||||||||||||||||||||||||||
Total U.S. corporate | 2,239 | 16 | 18 | 246 | (21 | ) | 0 | (159 | ) | 125 | (224 | ) | 2,240 | 0 | 30 | |||||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||||||
Utilities | 374 | 0 | 7 | 12 | 0 | 0 | 0 | 27 | (73 | ) | 347 | 0 | 5 | |||||||||||||||||||||||||||||||||||
Energy | 247 | 0 | (8 | ) | 0 | 0 | 0 | (26 | ) | 24 | 0 | 237 | 0 | (7 | ) | |||||||||||||||||||||||||||||||||
Finance and insurance | 234 | 3 | 7 | 15 | 0 | 0 | 0 | 77 | (32 | ) | 304 | 3 | 8 | |||||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 59 | 0 | 2 | 8 | 0 | 0 | 0 | 1 | (16 | ) | 54 | 0 | 1 | |||||||||||||||||||||||||||||||||||
Technology and communications | 28 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 28 | 0 | 0 | ||||||||||||||||||||||||||||||||||||
Industrial | 104 | 0 | 2 | 0 | 0 | 0 | (5 | ) | 0 | (8 | ) | 93 | 0 | 2 | ||||||||||||||||||||||||||||||||||
Capital goods | 161 | 1 | (2 | ) | 10 | 0 | 0 | (26 | ) | 29 | 0 | 173 | 0 | (2 | ) | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 147 | 0 | 1 | 21 | 0 | 0 | (7 | ) | 32 | (27 | ) | 167 | 0 | (1 | ) | |||||||||||||||||||||||||||||||||
Transportation | 191 | 0 | 0 | 0 | 0 | 0 | 0 | 22 | (102 | ) | 111 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Other | 140 | 0 | 3 | 5 | 0 | 0 | (13 | ) | 1 | 0 | 136 | 0 | 3 | |||||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,685 | 4 | 12 | 71 | 0 | 0 | (77 | ) | 213 | (258 | ) | 1,650 | 3 | 12 | ||||||||||||||||||||||||||||||||||
Residential mortgage-backed | 27 | 0 | (1 | ) | 0 | 0 | 0 | (1 | ) | 4 | (15 | ) | 14 | 0 | 0 | |||||||||||||||||||||||||||||||||
Commercial mortgage-backed | 6 | 0 | 1 | 0 | 0 | 0 | 0 | 20 | (7 | ) | 20 | 0 | 1 | |||||||||||||||||||||||||||||||||||
Other asset-backed | 132 | 0 | (1 | ) | 93 | 0 | 0 | (32 | ) | 0 | (31 | ) | 161 | 0 | (1 | ) | ||||||||||||||||||||||||||||||||
Total fixed maturity securities | 4,191 | 22 | 10 | 410 | (21 | ) | 0 | (271 | ) | 363 | (562 | ) | 4,142 | 5 | 23 | |||||||||||||||||||||||||||||||||
Equity securities | 51 | 0 | 0 | 6 | (5 | ) | 0 | 0 | 0 | 0 | 52 | 0 | 0 | |||||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 81 | (2 | ) | 0 | 45 | 0 | 0 | (57 | ) | 0 | 0 | 67 | 4 | 0 | ||||||||||||||||||||||||||||||||||
Total derivative assets | 81 | (2 | ) | 0 | 45 | 0 | 0 | (57 | ) | 0 | 0 | 67 | 4 | 0 | ||||||||||||||||||||||||||||||||||
Total other invested assets | 81 | (2 | ) | 0 | 45 | 0 | 0 | (57 | ) | 0 | 0 | 67 | 4 | 0 | ||||||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 20 | 14 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 35 | 14 | 0 | ||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 4,343 | $ | 34 | $ | 10 | $ | 461 | $ | (26 | ) | $ | 1 | $ | (328 | ) | $ | 363 | $ | (562 | ) | $ | 4,296 | $ | 23 | $ | 23 | |||||||||||||||||||||
(1) | The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2) | Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
Beginning balance as of January 1, 2019 | Total realized and unrealized gains (losses) | Ending balance as of September 30, 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 | $ | 2 | $ | 19 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 72 | $ | 2 | ||||||||||||||||||||||
U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 643 | 1 | 70 | 109 | (14 | ) | 0 | (47 | ) | 72 | (10 | ) | 824 | 0 | ||||||||||||||||||||||||||||||
Energy | 121 | 0 | 9 | 17 | 0 | 0 | (12 | ) | 0 | 0 | 135 | 0 | ||||||||||||||||||||||||||||||||
Finance and insurance | 534 | 0 | 49 | 40 | 0 | 0 | (38 | ) | 27 | 0 | 612 | 0 | ||||||||||||||||||||||||||||||||
Consumer—non-cyclical | 73 | 0 | 4 | 23 | 0 | 0 | (11 | ) | 9 | 0 | 98 | 0 | ||||||||||||||||||||||||||||||||
Technology and communications | 50 | 0 | 6 | 0 | 0 | 0 | 0 | 5 | (11 | ) | 50 | 0 | ||||||||||||||||||||||||||||||||
Industrial | 39 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 40 | 0 | |||||||||||||||||||||||||||||||||
Capital goods | 92 | 0 | 8 | 0 | 0 | 0 | 0 | 0 | 0 | 100 | 0 | |||||||||||||||||||||||||||||||||
Consumer—cyclical | 211 | 0 | 12 | 0 | (13 | ) | 0 | (16 | ) | 0 | (18 | ) | 176 | 0 | ||||||||||||||||||||||||||||||
Transportation | 57 | 0 | 2 | 7 | 0 | 0 | (9 | ) | 0 | 0 | 57 | 0 | ||||||||||||||||||||||||||||||||
Other | 178 | 0 | 6 | 22 | 0 | 0 | (15 | ) | 8 | (31 | ) | 168 | 0 | |||||||||||||||||||||||||||||||
Total U.S. corporate | 1,998 | 1 | 167 | 218 | (27 | ) | 0 | (148 | ) | 121 | (70 | ) | 2,260 | 0 | ||||||||||||||||||||||||||||||
Non-U.S. corporate: | ||||||||||||||||||||||||||||||||||||||||||||
Utilities | 404 | 0 | 28 | 30 | (7 | ) | 0 | (42 | ) | 0 | (16 | ) | 397 | 0 | ||||||||||||||||||||||||||||||
Energy | 217 | 0 | 17 | 47 | 0 | 0 | (16 | ) | 0 | 0 | 265 | 0 | ||||||||||||||||||||||||||||||||
Finance and insurance | 171 | 3 | 22 | 7 | 0 | 0 | (16 | ) | 16 | (6 | ) | 197 | 3 | |||||||||||||||||||||||||||||||
Consumer—non-cyclical | 106 | 2 | 5 | 0 | 0 | 0 | (49 | ) | 0 | 0 | 64 | 0 | ||||||||||||||||||||||||||||||||
Technology and communications | 26 | 0 | 2 | 0 | 0 | 0 | 0 | 0 | 0 | 28 | 0 | |||||||||||||||||||||||||||||||||
Industrial | 61 | 0 | 3 | 13 | 0 | 0 | 0 | 0 | 0 | 77 | 0 | |||||||||||||||||||||||||||||||||
Capital goods | 173 | 0 | 11 | 10 | 0 | 0 | (15 | ) | 0 | 0 | 179 | 0 | ||||||||||||||||||||||||||||||||
Consumer—cyclical | 122 | 0 | 10 | 9 | 0 | 0 | (4 | ) | 0 | 0 | 137 | 0 | ||||||||||||||||||||||||||||||||
Transportation | 171 | 0 | 10 | 19 | 0 | 0 | 0 | 0 | 0 | 200 | 0 | |||||||||||||||||||||||||||||||||
Other | 81 | 0 | 11 | 35 | 0 | 0 | (2 | ) | 6 | 0 | 131 | 0 | ||||||||||||||||||||||||||||||||
Total non-U.S. corporate | 1,532 | 5 | 119 | 170 | (7 | ) | 0 | (144 | ) | 22 | (22 | ) | 1,675 | 3 | ||||||||||||||||||||||||||||||
Residential mortgage-backed | 35 | 0 | 2 | 0 | 0 | 0 | (1 | ) | 0 | (4 | ) | 32 | 0 | |||||||||||||||||||||||||||||||
Commercial mortgage-backed | 95 | 0 | 23 | 2 | 0 | 0 | 0 | 0 | (14 | ) | 106 | 0 | ||||||||||||||||||||||||||||||||
Other asset-backed | 154 | 0 | 2 | 109 | 0 | 0 | (53 | ) | 28 | (110 | ) | 130 | 0 | |||||||||||||||||||||||||||||||
Total fixed maturity securities | 3,865 | 8 | 332 | 499 | (34 | ) | 0 | (346 | ) | 171 | (220 | ) | 4,275 | 5 | ||||||||||||||||||||||||||||||
Equity securities | 58 | 0 | 0 | 2 | (6 | ) | 0 | 0 | 0 | 0 | 54 | 0 | ||||||||||||||||||||||||||||||||
Other invested assets: | ||||||||||||||||||||||||||||||||||||||||||||
Derivative assets: | ||||||||||||||||||||||||||||||||||||||||||||
Equity index options | 39 | 28 | 0 | 34 | 0 | 0 | (39 | ) | 0 | 0 | 62 | (2 | ) | |||||||||||||||||||||||||||||||
Total derivative assets | 39 | 28 | 0 | 34 | 0 | 0 | (39 | ) | 0 | 0 | 62 | (2 | ) | |||||||||||||||||||||||||||||||
Total other invested assets | 39 | 28 | 0 | 34 | 0 | 0 | (39 | ) | 0 | 0 | 62 | (2 | ) | |||||||||||||||||||||||||||||||
Reinsurance recoverable (2) | 20 | 4 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 25 | 4 | |||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 3,982 | $ | 40 | $ | 332 | $ | 535 | $ | (40 | ) | $ | 1 | $ | (385 | ) | $ | 171 | $ | (220 | ) | $ | 4,416 | $ | 7 | |||||||||||||||||||
(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) | 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 | |||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Total realized and unrealized gains (losses) included in net income (loss): | ||||||||||||||||
Net investment income | $ | 15 | $ | 2 | $ | 21 | $ | 8 | ||||||||
Net investment gains (losses) | 4 | 6 | 13 | 32 | ||||||||||||
Total | $ | 19 | $ | 8 | $ | 34 | $ | 40 | ||||||||
Total gains (losses) included in net income (loss) attributable to assets still held: | ||||||||||||||||
Net investment income | $ | 2 | $ | 2 | $ | 5 | $ | 5 | ||||||||
Net investment gains (losses) | (4 | ) | 5 | 18 | 2 | |||||||||||
Total | $ | (2 | ) | $ | 7 | $ | 23 | $ | 7 | |||||||
(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% |
(Amounts in millions) | Valuation technique | Fair value | Unobservable input | Range | Weighted-average (1) | |||||||||||||
Fixed maturity securities: | ||||||||||||||||||
U.S. corporate: | ||||||||||||||||||
Utilities | Internal models | $ | 774 | Credit spreads | 71bps – 368bps | 183bps | ||||||||||||
Energy | Internal models | 7 | Credit spreads | 91bps | Not applicable | |||||||||||||
Finance and insurance | Internal models | 493 | Credit spreads | 66bps – 321bps | 178bps | |||||||||||||
Consumer—non-cyclical | Internal models | 103 | Credit spreads | 78bps – 358bps | 174bps | |||||||||||||
Technology and communications | Internal models | 126 | Credit spreads | 133bps – 358bps | 224bps | |||||||||||||
Industrial | Internal models | 40 | Credit spreads | 156bps – 373bps | 230bps | |||||||||||||
Capital goods | Internal models | 97 | Credit spreads | 102bps – 273bps | 190bps | |||||||||||||
Consumer—cyclical | Internal models | 133 | Credit spreads | 139bps – 276bps | 201bps | |||||||||||||
Transportation | Internal models | 43 | Credit spreads | 67bps – 156bps | 118bps | |||||||||||||
Other | Internal models | 164 | Credit spreads | 93bps – 206bps | 114bps | |||||||||||||
Total U.S. corporate | �� | Internal models | $ | 1,980 | Credit spreads | 66bps – 373bps | 179bps | |||||||||||
Non-U.S. corporate: | ||||||||||||||||||
Utilities | Internal models | $ | 347 | Credit spreads | 89bps – 292bps | 164bps | ||||||||||||
Energy | Internal models | 82 | Credit spreads | 102bps – 241bps | 156bps | |||||||||||||
Finance and insurance | Internal models | 199 | Credit spreads | 86bps – 174bps | 134bps | |||||||||||||
Consumer—non-cyclical | Internal models | 53 | Credit spreads | 97bps – 162bps | 142bps | |||||||||||||
Technology and communications | Internal models | 28 | Credit spreads | 102bps – 238bps | 184bps | |||||||||||||
Industrial | Internal models | 93 | Credit spreads | 91bps – 241bps | 165bps | |||||||||||||
Capital goods | Internal models | 146 | Credit spreads | 97bps – 254bps | 177bps | |||||||||||||
Consumer—cyclical | Internal models | 54 | Credit spreads | 102bps – 241bps | 197bps | |||||||||||||
Transportation | Internal models | 95 | Credit spreads | 78bps – 241bps | 129bps | |||||||||||||
Other | Internal models | 135 | Credit spreads | 110bps – 490bps | 209bps | |||||||||||||
Total non-U.S. corporate | Internal models | $ | 1,232 | Credit spreads | 78bps – 490bps | 163bps | ||||||||||||
Derivative assets: | ||||||||||||||||||
Equity index options | Discounted cash flows | $ | 67 | Equity index volatility | 6% – 41% | 28% |
(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, 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 | ||||||||
September 30, 2020 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 508 | $ | 0 | $ | 0 | $ | 508 | ||||||||
Fixed index annuity embedded derivatives | 432 | 0 | 0 | 432 | ||||||||||||
Indexed universal life embedded derivatives | 25 | 0 | 0 | 25 | ||||||||||||
Total policyholder account balances | 965 | 0 | 0 | 965 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 4 | 0 | 4 | 0 | ||||||||||||
Other foreign currency contracts | 5 | 0 | 5 | 0 | ||||||||||||
Total derivative liabilities | 9 | 0 | 9 | 0 | ||||||||||||
Total liabilities | $ | 974 | $ | 0 | $ | 9 | $ | 965 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
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 | ||||||||
December 31, 2019 | ||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | ||||||||||||||||
Policyholder account balances: | ||||||||||||||||
GMWB embedded derivatives (1) | $ | 323 | $ | 0 | $ | 0 | $ | 323 | ||||||||
Fixed index annuity embedded derivatives | 452 | 0 | 0 | 452 | ||||||||||||
Indexed universal life embedded derivatives | 19 | 0 | 0 | 19 | ||||||||||||
Total policyholder account balances | 794 | 0 | 0 | 794 | ||||||||||||
Derivative liabilities: | ||||||||||||||||
Interest rate swaps | 10 | 0 | 10 | 0 | ||||||||||||
Other foreign currency contracts | 1 | 0 | 1 | 0 | ||||||||||||
Total derivative liabilities | 11 | 0 | 11 | 0 | ||||||||||||
Total liabilities | $ | 805 | $ | 0 | $ | 11 | $ | 794 | ||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
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 | $ | — | |||||||||||||||||||||||
Beginning balance as of July 1, 2020 | Total realized and unrealized (gains) losses | Ending balance as of September 30, 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 derivatives (1) | $ | 559 | $ | (57 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 6 | $ | 0 | $ | 0 | $ | 0 | $ | 508 | $ | (57 | ) | $ | 0 | ||||||||||||||||||||||
Fixed index annuity embedded derivatives | 447 | 18 | 0 | 0 | 0 | 0 | (33 | ) | 0 | 0 | 432 | 18 | 0 | |||||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 23 | (3 | ) | 0 | 0 | 0 | 5 | 0 | 0 | 0 | 25 | (3 | ) | 0 | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 1,029 | (42 | ) | 0 | 0 | 0 | 11 | (33 | ) | 0 | 0 | 965 | (42 | ) | 0 | |||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 1,029 | $ | (42 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 11 | $ | (33 | ) | $ | 0 | $ | 0 | $ | 965 | $ | (42 | ) | $ | 0 | |||||||||||||||||||||
(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 | 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 | ) | |||||||||||||||||||
Beginning balance as of July 1, 2019 | Total realized and unrealized (gains) losses | Ending balance as of September 30, 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 embedded derivatives (1) | $ | 325 | $ | 49 | $ | 0 | $ | 0 | $ | 0 | $ | 7 | $ | 0 | $ | 0 | $ | 0 | $ | 381 | $ | 50 | ||||||||||||||||||||||
Fixed index annuity embedded derivatives | 438 | 14 | 0 | 0 | 0 | 0 | (8 | ) | 0 | 0 | 444 | 14 | ||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 15 | (1 | ) | 0 | 0 | 0 | 4 | 0 | 0 | 0 | 18 | (1 | ) | |||||||||||||||||||||||||||||||
Total policyholder account balances | 778 | 62 | 0 | 0 | 0 | 11 | (8 | ) | 0 | 0 | 843 | 63 | ||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 778 | $ | 62 | $ | 0 | $ | 0 | $ | 0 | $ | 11 | $ | (8 | ) | $ | 0 | $ | 0 | $ | 843 | $ | 63 | |||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
Beginning balance as of January 1, 2020 | Total realized and unrealized (gains) losses | Ending balance as of September 30, 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 derivatives (1) | $ | 323 | $ | 167 | $ | 0 | $ | 0 | $ | 0 | $ | 18 | $ | 0 | $ | 0 | $ | 0 | $ | 508 | $ | 174 | $ | 0 | ||||||||||||||||||||||||
Fixed index annuity embedded derivatives | 452 | 31 | 0 | 0 | 0 | 0 | (51 | ) | 0 | 0 | 432 | 31 | 0 | |||||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 19 | (10 | ) | 0 | 0 | 0 | 16 | 0 | 0 | 0 | 25 | (10 | ) | 0 | ||||||||||||||||||||||||||||||||||
Total policyholder account balances | 794 | 188 | 0 | 0 | 0 | 34 | (51 | ) | 0 | 0 | 965 | 195 | 0 | |||||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 794 | $ | 188 | $ | 0 | $ | 0 | $ | 0 | $ | 34 | $ | (51 | ) | $ | 0 | $ | 0 | $ | 965 | $ | 195 | $ | 0 | |||||||||||||||||||||||
(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 | Ending balance as of September 30, 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 embedded derivatives (1) | $ | 337 | $ | 25 | $ | 0 | $ | 0 | $ | 0 | $ | 19 | $ | 0 | $ | 0 | $ | 0 | $ | 381 | $ | 29 | ||||||||||||||||||||||
Fixed index annuity embedded derivatives | 389 | 72 | 0 | 0 | 0 | 0 | (17 | ) | 0 | 0 | 444 | 72 | ||||||||||||||||||||||||||||||||
Indexed universal life embedded derivatives | 12 | (1 | ) | 0 | 0 | 0 | 7 | 0 | 0 | 0 | 18 | (1 | ) | |||||||||||||||||||||||||||||||
Total policyholder account balances | 738 | 96 | 0 | 0 | 0 | 26 | (17 | ) | 0 | 0 | 843 | 100 | ||||||||||||||||||||||||||||||||
Total Level 3 liabilities | $ | 738 | $ | 96 | $ | 0 | $ | 0 | $ | 0 | $ | 26 | $ | (17 | ) | $ | 0 | $ | 0 | $ | 843 | $ | 100 | |||||||||||||||||||||
(1) | Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
(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 | ) | |||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Total realized and unrealized (gains) losses included in net (income) loss: | ||||||||||||||||
Net investment income | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Net investment (gains) losses | (42 | ) | 62 | 188 | 96 | |||||||||||
Total | $ | (42 | ) | $ | 62 | $ | 188 | $ | 96 | |||||||
Total (gains) losses included in net (income) loss attributable to liabilities still held: | ||||||||||||||||
Net investment income | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Net investment (gains) losses | (42 | ) | 63 | 195 | 100 | |||||||||||
Total | $ | (42 | ) | $ | 63 | $ | 195 | $ | 100 | |||||||
(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% |
(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% | 4% | ||||||||||||||||
Non-performance risk (credit spreads) | 12bps –83bps | 67bps | ||||||||||||||||
GMWB embedded derivatives (2) | Stochastic cash flow model | $ | 508 | Equity index volatility | 21% – 27% | 23% | ||||||||||||
Fixed index annuity embedded derivatives | Option budget method | $ | 432 | Expected future interest credited | 0 % – 3% | 1% | ||||||||||||
Indexed universal life embedded derivatives | Option budget method | $ | 25 | Expected future interest credited | 3% – 10% | 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 | — | — | — | — | — |
September 30, 2020 | ||||||||||||||||||||||||
Notional amount | Carrying amount | Fair value | ||||||||||||||||||||||
(Amounts in millions) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Commercial mortgage loans | (1) | $ | 6,880 | $ | 7,169 | $ | 0 | $ | 0 | $ | 7,169 | |||||||||||||
Other invested assets | (1) | 410 | 411 | 0 | 23 | 388 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 3,570 | 3,148 | 0 | 2,979 | 169 | ||||||||||||||||||
Investment contracts | (1) | 10,872 | 12,016 | 0 | 0 | 12,016 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 1,112 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Commitments to fund bank loan investments | 35 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Ordinary course of business lending commitments | 126 | 0 | 0 | 0 | 0 | 0 |
(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 | $ | 0 | $ | 0 | $ | 7,239 | |||||||||||||
Other invested assets | (1) | 432 | 432 | 0 | 49 | 383 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Long-term borrowings | (1) | 3,277 | 3,093 | 0 | 2,951 | 142 | ||||||||||||||||||
Non-recourse funding obligations | (1) | 311 | �� | 207 | 0 | 0 | 207 | |||||||||||||||||
Investment contracts | (1) | 11,466 | 12,086 | 0 | 0 | 12,086 | ||||||||||||||||||
Other firm commitments: | ||||||||||||||||||||||||
Commitments to fund limited partnerships | 976 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Commitments to fund bank loan investments | 52 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Ordinary course of business lending commitments | 69 | 0 | 0 | 0 | 0 | 0 |
(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 | — | — | — | — | — |
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 | ||||
As of or for the nine months ended September 30, | ||||||||
(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 | 3,179 | 2,865 | ||||||
Prior years | (389 | ) | (237 | ) | ||||
Total incurred | 2,790 | 2,628 | ||||||
Paid related to insured events of: | ||||||||
Current year | (708 | ) | (659 | ) | ||||
Prior years | (1,867 | ) | (1,794 | ) | ||||
Total paid | (2,575 | ) | (2,453 | ) | ||||
Interest on liability for policy and contract claims | 308 | 285 | ||||||
Foreign currency translation | 5 | (9 | ) | |||||
Net ending balance | 9,080 | 8,367 | ||||||
Add reinsurance recoverables | 2,293 | 2,413 | ||||||
Ending balance | $ | 11,373 | $ | 10,780 | ||||
(Amounts in millions) | ||||
Allowance for credit losses: | ||||
Beginning balance | $ | — | ||
Cumulative effect of change in accounting | 40 | |||
Provision | 2 | |||
Write-offs | — | |||
Recoveries | — | |||
Ending balance | $ | 42 | ||
Three months ended September 30, | Nine months ended September 30, | |||||||
(Amounts in millions) | 2020 | 2020 | ||||||
Allowance for credit losses: | ||||||||
Beginning balance | $ | 44 | $ | 0 | ||||
Cumulative effect of change in accounting | 0 | 40 | ||||||
Provision | 0 | 4 | ||||||
Write-offs | 0 | 0 | ||||||
Recoveries | 0 | 0 | ||||||
Ending balance | $ | 44 | $ | 44 | ||||
(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 | ||||||
(Amounts in millions) | Collateralized | Non-collateralized | Total | |||||||||
Credit rating: | ||||||||||||
A++ | $ | 0 | $ | 514 | $ | 514 | ||||||
A+ | 1,380 | 1,366 | 2,746 | |||||||||
A | 20 | 46 | 66 | |||||||||
B+ | 0 | 2 | 2 | |||||||||
Not rated | 13,422 | 82 | 13,504 | |||||||||
Total reinsurance recoverable | $ | 14,822 | $ | 2,010 | $ | 16,832 | ||||||
(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 | ||||
(Amounts in millions) | September 30, 2020 | December 31, 2019 | ||||||
Genworth Holdings (1) | ||||||||
7.70% Senior Notes, due 2020 | $ | 0 | $ | 397 | ||||
7.20% Senior Notes, due 2021 | 338 | 382 | ||||||
7.625% Senior Notes, due 2021 | 661 | 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 | 2,693 | 3,174 | ||||||
Bond consent fees | (20 | ) | (25 | ) | ||||
Deferred borrowing charges | (10 | ) | (12 | ) | ||||
Total Genworth Holdings | 2,663 | 3,137 | ||||||
Genworth Mortgage Holdings, Inc. | ||||||||
6.50% Senior Notes, due 2025 | 750 | 0 | ||||||
Deferred borrowing charges | (12 | ) | 0 | |||||
Total Genworth Mortgage Holdings, Inc. | 738 | 0 | ||||||
Australia (2) | ||||||||
Floating Rate Junior Subordinated Notes, due 2025 | 35 | 140 | ||||||
Floating Rate Junior Subordinated Notes, due 2030 | 136 | 0 | ||||||
Subtotal | 171 | 140 | ||||||
Deferred borrowing charges | (2 | ) | 0 | |||||
Total Australia | 169 | 140 | ||||||
Total | $ | 3,570 | $ | 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 (“GFMIPL”), our indirect majority-owned subsidiary, who currently has the option to redeem the notes due in 2025 at face value |
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 | % | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||
Increase (reduction) in rate resulting from: | ||||||||||||||||
Swaps terminated prior to the TCJA | 2.6 | 1.2 | 4.3 | 3.2 | ||||||||||||
Provision to return adjustments | 0.8 | (1.6 | ) | 0.7 | (0.4 | ) | ||||||||||
Effect of foreign operations | 1.1 | (0.8 | ) | 1.8 | 2.5 | |||||||||||
Other, net | 0.1 | 0.1 | 0.8 | 0.3 | ||||||||||||
Effective rate | 25.6 | % | 19.9 | % | 28.6 | % | 26.6 | % | ||||||||
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 September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | ||||||||||||||||
U.S. Mortgage Insurance segment | $ | 284 | $ | 251 | $ | 819 | $ | 709 | ||||||||
Australia Mortgage Insurance segment | 102 | 82 | 265 | 288 | ||||||||||||
U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | 1,466 | 1,110 | 3,672 | 3,279 | ||||||||||||
Life insurance | 333 | 347 | 1,016 | 1,101 | ||||||||||||
Fixed annuities | 138 | 145 | 400 | 455 | ||||||||||||
U.S. Life Insurance segment | 1,937 | 1,602 | 5,088 | 4,835 | ||||||||||||
Runoff segment | 103 | 74 | 200 | 234 | ||||||||||||
Corporate and Other activities | (6 | ) | 11 | 23 | (8 | ) | ||||||||||
Total revenues | $ | 2,420 | $ | 2,020 | $ | 6,395 | $ | 6,058 | ||||||||
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 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income (loss) available to Genworth Financial, Inc.’s common stockholders | $ | 418 | $ | 18 | $ | (89 | ) | $ | 360 | |||||||
Add: net income from continuing operations attributable to noncontrolling interests | 18 | 10 | 35 | 45 | ||||||||||||
Add: net income from discontinued operations attributable to noncontrolling interests | 0 | 30 | 0 | 101 | ||||||||||||
Net income (loss) | 436 | 58 | (54 | ) | 506 | |||||||||||
Less: income (loss) from discontinued operations, net of taxes | 1 | (80 | ) | (519 | ) | 42 | ||||||||||
Income from continuing operations | 435 | 138 | 465 | 464 | ||||||||||||
Less: net income from continuing operations attributable to noncontrolling interests | 18 | 10 | 35 | 45 | ||||||||||||
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders | 417 | 128 | 430 | 419 | ||||||||||||
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
Net investment (gains) losses, net (1) | (362 | ) | (5 | ) | (378 | ) | (33 | ) | ||||||||
Goodwill impairment, net (2) | 0 | 0 | 3 | 0 | ||||||||||||
(Gains) losses on early extinguishment of debt | 0 | 0 | 9 | 0 | ||||||||||||
Expenses related to restructuring | 0 | 0 | 2 | 4 | ||||||||||||
Taxes on adjustments | 77 | 0 | 78 | 6 | ||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 132 | $ | 123 | $ | 144 | $ | 396 | ||||||||
(1) | For the three months ended |
(2) | For the nine months ended September 30, 2020, goodwill impairment was adjusted for the portion attributable to noncontrolling interests of $2 million. |
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 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders: | ||||||||||||||||
U.S. Mortgage Insurance segment | $ | 141 | $ | 137 | $ | 286 | $ | 408 | ||||||||
Australia Mortgage Insurance segment | 7 | 12 | 17 | 39 | ||||||||||||
U.S. Life Insurance segment: | ||||||||||||||||
Long-term care insurance | 59 | 21 | 108 | 38 | ||||||||||||
Life insurance | (69 | ) | (25 | ) | (227 | ) | (17 | ) | ||||||||
Fixed annuities | 24 | 3 | 58 | 39 | ||||||||||||
U.S. Life Insurance segment | 14 | (1 | ) | (61 | ) | 60 | ||||||||||
Runoff segment | 19 | 10 | 30 | 39 | ||||||||||||
Corporate and Other activities | (49 | ) | (35 | ) | (128 | ) | (150 | ) | ||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders | $ | 132 | $ | 123 | $ | 144 | $ | 396 | ||||||||
(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 | ||||
(Amounts in millions) | September 30, 2020 | December 31, 2019 | ||||||
Assets: | ||||||||
U.S. Mortgage Insurance segment | $ | 5,494 | $ | 4,504 | ||||
Australia Mortgage Insurance segment | 2,601 | 2,406 | ||||||
U.S. Life Insurance segment | 84,208 | 81,640 | ||||||
Runoff segment | 9,901 | 9,953 | ||||||
Corporate and Other activities | 2,721 | 2,839 | ||||||
Total assets | $ | 104,925 | $ | 101,342 | ||||
(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 | |||||||
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of July 1, 2020 | $ | 1,811 | $ | 2,677 | $ | (41 | ) | $ | 4,447 | |||||||
OCI before reclassifications | 161 | (191 | ) | 33 | 3 | |||||||||||
Amounts reclassified from (to) OCI | (261 | ) | (35 | ) | 0 | (296 | ) | |||||||||
Current period OCI | (100 | ) | (226 | ) | 33 | (293 | ) | |||||||||
Balances as of September 30, 2020 before noncontrolling interests | 1,711 | 2,451 | (8 | ) | 4,154 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | 0 | 0 | 13 | 13 | ||||||||||||
Balances as of September 30, 2020 | $ | 1,711 | $ | 2,451 | $ | (21 | ) | $ | 4,141 | |||||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 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 July 1, 2019 | $ | 1,305 | $ | 1,983 | $ | (275 | ) | $ | 3,013 | |||||||
OCI before reclassifications | 384 | 306 | (64 | ) | 626 | |||||||||||
Amounts reclassified from (to) OCI | (13 | ) | (30 | ) | 0 | (43 | ) | |||||||||
Current period OCI | 371 | 276 | (64 | ) | 583 | |||||||||||
Balances as of September 30, 2019 before noncontrolling interests | 1,676 | 2,259 | (339 | ) | 3,596 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | 1 | 0 | (27 | ) | (26 | ) | ||||||||||
Balances as of September 30, 2019 | $ | 1,675 | $ | 2,259 | $ | (312 | ) | $ | 3,622 | |||||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2020 | $ | 1,456 | $ | 2,002 | $ | (25 | ) | $ | 3,433 | |||||||
OCI before reclassifications | 609 | 544 | 8 | 1,161 | ||||||||||||
Amounts reclassified from (to) OCI | (355 | ) | (95 | ) | 0 | (450 | ) | |||||||||
Current period OCI | 254 | 449 | 8 | 711 | ||||||||||||
Balances as of September 30, 2020 before noncontrolling interests | 1,710 | 2,451 | (17 | ) | 4,144 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | (1 | ) | 0 | 4 | 3 | |||||||||||
Balances as of September 30, 2020 | $ | 1,711 | $ | 2,451 | $ | (21 | ) | $ | 4,141 | |||||||
(1) | Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2) | See note 5 for additional information. |
(Amounts in millions) | Net unrealized investment gains (losses) (1) | Derivatives qualifying as hedges (2) | Foreign currency translation and other adjustments | Total | ||||||||||||
Balances as of January 1, 2019 | $ | 595 | $ | 1,781 | $ | (332 | ) | $ | 2,044 | |||||||
OCI before reclassifications | 1,186 | 560 | 33 | 1,779 | ||||||||||||
Amounts reclassified from (to) OCI | (59 | ) | (82 | ) | 0 | (141 | ) | |||||||||
Current period OCI | 1,127 | 478 | 33 | 1,638 | ||||||||||||
Balances as of September 30, 2019 before noncontrolling interests | 1,722 | 2,259 | (299 | ) | 3,682 | |||||||||||
Less: change in OCI attributable to noncontrolling interests | 47 | 0 | 13 | 60 | ||||||||||||
Balances as of September 30, 2019 | $ | 1,675 | $ | 2,259 | $ | (312 | ) | $ | 3,622 | |||||||
(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. |
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 | ) | ||||||
Amount reclassified from accumulated other comprehensive income (loss) | Affected line item in the consolidated statements of income | |||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||
(Amounts in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net unrealized investment (gains) losses: | ||||||||||||||||||
Unrealized (gains) losses on investments (1) | $ | (331 | ) | $ | (17 | ) | $ | (450 | ) | $ | (75 | ) | Net investment (gains) losses | |||||
Income taxes | 70 | 4 | 95 | 16 | Provision for income taxes | |||||||||||||
Total | $ | (261 | ) | $ | (13 | ) | $ | (355 | ) | $ | (59 | ) | ||||||
Derivatives qualifying as hedges: | ||||||||||||||||||
Interest rate swaps hedging assets | $ | (50 | ) | $ | (41 | ) | $ | (139 | ) | $ | (121 | ) | Net investment income | |||||
Interest rate swaps hedging assets | (4 | ) | (4 | ) | (8 | ) | (6 | ) | Net investment (gains) losses | |||||||||
Foreign currency swaps | 0 | (1 | ) | 0 | 0 | Net investment income | ||||||||||||
Income taxes | 19 | 16 | 52 | 45 | Provision for income taxes | |||||||||||||
Total | $ | (35 | ) | $ | (30 | ) | $ | (95 | ) | $ | (82 | ) | ||||||
(1) | Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves. |
(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 | ||
(Amounts in millions) | September 30, 2020 | |||||||
British Pounds | U.S. Dollar | |||||||
Installment payments due to AXA: | ||||||||
June 2022 | £ | 159 | $ | 206 | ||||
September 2022: | ||||||||
Beginning balance | 158 | 205 | ||||||
Amounts billed as future losses | 29 | 38 | ||||||
Ending balance | 187 | 243 | ||||||
Total amounts due under the promissory note | 346 | 449 | ||||||
Future claims: | ||||||||
Estimated beginning balance | 107 | 138 | ||||||
Less: Amounts billed to date | (29 | ) | (38 | ) | ||||
Estimated future billings | 78 | 100 | ||||||
Total amounts due to AXA under the settlement agreement | £ | 424 | $ | 549 | ||||
• | the consummation of certain qualifying debt transactions in which total gross proceeds of at least $750 million are raised; |
• | the consummation of certain qualifying equity issuances or dispositions with respect to GMHI, or any of our subsidiaries, in which total net cash proceeds of at least $475 million are raised; |
• | certain dispositions of our U.S. mortgage insurance business; |
• | the consummation of the China Oceanwide merger and the funding of the contemplated capital investment plan; |
• | transactions involving a change of control of Genworth, other than the China Oceanwide transaction; and |
• | receipt of dividends and sale proceeds from certain Genworth subsidiaries above certain threshold amounts. |
• | risks related to |
may be instituted against us in connection with the China Oceanwide transaction that may delay the transaction, make it more costly or ultimately preclude it; the risk that the proposed China Oceanwide transaction disrupts our current plans and operations as a result of the announcement and consummation of the transaction; strategic risks in the event the proposed transaction with China Oceanwide is not consummated COVID-19 delay or hinder alternative transactions or otherwise make alternative plans less attractive; our inability to attract buyers for any businesses or other assets we may seek to sell, or securities we may seek to issue, in each case, in a timely manner and on anticipated terms; failure to obtain any required regulatory, stockholder and/or noteholder approvals or consents for such alternative strategic plans, or our challenges changing or being more costly or difficult to successfully address than currently anticipated or the benefits achieved being less than anticipated; inability to achieve anticipated cost-savings in a timely manner; adverse tax or accounting charges; and our ability to risks relating to estimates, assumptions and valuations COVID-19; inaccurate models; deviations from our estimates and actuarial assumptions or other reasons in our long-term care insurance, life insurance and/or annuity businesses; accelerated amortization of deferred acquisition costs (“DAC”) and present value of future profits (“PVFP”) (including as a result of any risks relating to economic, market and political conditions COVID-19; interest rates81
regulatory and legal risks COVID-19, and other insurance, regulatory or corporate law restrictions; the inability to successfully seekin-force rate action increases (including increased premiums and associated benefit reductions) in our long-term care insurance business, including as a result of COVID-19; adverse change in regulatory requirements, including risk-based capital; changes in regulations adversely affecting our Australian mortgage insurance business; inability to continue to maintain the private mortgage insurer eligibility requirements (“PMIERs”), including as a result of the interim conditions and applicable requirements imposed by the GSEs on our U.S. mortgage insurance subsidiary and/or after the benefit of the 0.30 multiplier applied to non-performing loans expires under the PMIERs temporary amendments; risks on our U.S. mortgage insurance subsidiary’s ability to pay our holding company dividends as a result of the GSEs’ amendments to PMIERs in response toCOVID-19; the impact on capital levels of increased delinquencies caused by COVID-19; inability of our U.S. mortgage insurance subsidiaries to meet minimum statutory capital requirements; the influence of Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and a small number of large mortgage lenders on the U.S. mortgage insurance market and adverse changes to the role or structure of Fannie Mae and Freddie Mac; adverse changes in regulations affecting our mortgage insurance businesses; additional restrictions placed on our U.S. mortgage insurance business by government and government-owned and government-sponsored enterprises (“GSEs”) in connection with a new debt financing and/or sale of a percentage of our ownership interests therein; inability to continue to implement actions to mitigate the impact of statutory reserve requirements; changes in tax laws; and changes in accounting and reporting standards;liquidity, financial strength ratings, credit and counterparty risks COVID-19; the impact of increased leverage as a result of the AXA settlement and related restrictions; continued availability of capital and financing; future adverse rating agency actions against us or our U.S. mortgage insurance subsidiary, including with respect to rating downgrades or potential downgrades or being put on review for potential downgrade, all of which could have adverse implications for us, including with respect to key business relationships, product offerings, business results of operations, financial condition and capital needs, strategic plans, collateral obligations and availability and terms of hedging, reinsurance and borrowings; defaults by counterparties to reinsurance arrangements or derivative instruments; defaults or other events impacting the value of our fixed maturity securities portfolio; and defaults on our commercial mortgage loans or the mortgage loans underlying our investments in commercial mortgage-backed securities and volatility in performance;operational risks shelter-in-place or other governmental restrictions imposed as a result ofCOVID-19; reliance on, and loss of, key customer or distribution relationships; competition, including in our mortgage insurance businesses from 82
insurance and product-related risks in-force long-term care insurance policies, in each case, as currently anticipated and as may be required from time to time in the future (including as a result of a delay or failure to obtain any necessary regulatory approvals, including as a result of COVID-19, or unwillingness or inability of policyholders to pay increased premiums and/or accept reduced benefits), including to offset any negative impact on our long-term care insurance margins; availability, affordability and adequacy of reinsurance to protect us against losses; decreases in the volume of highloan-to-value mortgage originations or increases in mortgage insurance cancellations; increases in the use of alternatives to private mortgage insurance and reductions in the level of coverage selected; potential liabilities in connection with our U.S. contract underwriting services; and medical advances, such as genetic research and diagnostic imaging, and related legislation that impact policyholder behavior in ways adverse to us;other risks man-made disasters or a pandemic, such as COVID-19, could materially adversely affect our financial condition and results of operations.We provide additional information regarding these risks and uncertainties in the Definitive Proxy Statement, filed with the U.S. Securities and Exchange Commission (“SEC”) on January 25, 2017, and our Annual Report on Form 10-K, filed with the SEC on February 27, 2020. See also “Part Strategic Update We continue to focus on improving business performance, addressing financial leverage and increasing financial and strategic flexibility across the organization. Our strategy includes maximizing our opportunities in our mortgage insurance businesses and stabilizing our U.S. life insurance businesses. China Oceanwide Transaction On October 21, 2016, Genworth Financial, Inc. (“Genworth Financial”) entered into an agreement and plan of merger (the “Merger Agreement”) with Asia Pacific Global Capital Co., Ltd. (“Parent”), a limited liability company incorporated in the People’s Republic of China and a subsidiary of China Oceanwide Holdings Group Co., Ltd., a limited liability company incorporated in the People’s Republic of China (together with its affiliates, “China Oceanwide”), and Asia Pacific Global Capital USA Corporation (“Merger Sub”), a Delaware corporation and a direct, wholly-owned subsidiary of Asia Pacific Insurance USA Holdings LLC (“Asia Pacific Insurance”), which is a Delaware limited liability company and owned by China Oceanwide, pursuant to which, subject to the terms and conditions set forth therein, Merger Sub would merge with and into Genworth Financial with Genworth Financial surviving the merger as a direct, wholly-owned subsidiary of Asia Pacific Insurance (the “Merger”). China Oceanwide has agreed to acquire all of our outstanding common stock for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. At a special meeting held on March 7, 2017, Genworth Financial’s stockholders voted on and approved a proposal to adopt the Merger Agreement. On 83 (ii) failure by the Parent to approve final documents provided by Genworth for the sale of Genworth, its subsidiaries or a portion of its assets or (iii) in the event that after In addition, as part of the conditions set forth in the Sixteenth Waiver and Agreement, China Oceanwide agreed to submit to Genworth satisfactory evidence by October 31, 2020 confirming that approximately $1.0 billion is available to China Oceanwide from sources in Mainland China and debt financing of up to $1.8 billion is available from sources outside of Mainland China through Hony Capital and/or other acceptable third parties. In aggregate, these funding sources would provide China Oceanwide the necessary funds to acquire Genworth at the agreed upon purchase price of $5.43 per share. China Oceanwide has made significant progress on the Hony Capital funding and has provided satisfactory documentation to Genworth indicating that Hony Capital expects to be able to finalize the $1.8 billion financing in November 2020, and that China Oceanwide is continuing to work diligently with the goal of closing the transaction by November 30, 2020, subject to timely receipt of outstanding regulatory re-approvals, confirmations and/or clearances. China Oceanwide is also gathering funds in Mainland China to provide the remaining amount required to pay for the total Genworth purchase price of $5.43 per share. Genworth also has the right, in connection with the conditions set forth in the Sixteenth Waiver and Agreement, to issue debt or other financing instruments, and pursue other strategic transactions, such as transactions to sell some or all of its interests in its mortgage insurance businesses, as needed to meet its short-term financial obligations, including but not limited to, the AXA promissory note and debt of approximately $1.0 billion maturing in 2021. For additional details on the AXA litigation, the associated settlement agreement and issuance of the promissory note to AXA, see notes 12 and 14 to our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.” If China Oceanwide disagrees with any steps that Genworth takes to meet its financial obligations, it has the right to terminate the transaction in its sole discretion. Under the Genworth recently received confirmation from the U.S. Financial Industry Regulatory Authority (“FINRA”) that the transaction may close under FINRA rules prior to receiving its final approval. In addition, the GSEs recently re-approved the transaction, subject to certain conditions and the North Carolina Department of Insurance extended its previously granted approval through January 24, 2021. China Oceanwide needs to receive clearance for currency conversion and transfer of funds from China’s State Administration of Foreign Exchange, and the Chinese National Development and Reform Commission needs to confirm the extension of the acceptance of filing with respect to the transaction, as its prior acceptance of filing has expired. All other required approvals and clearances have been secured. In September 2020, the GSEs imposed certain conditions and restrictions on our U.S. mortgage insurance business with respect to its capital. These capital restrictions will remain details.In connection with the Merger, China Oceanwide and Genworth have agreed on a capital investment plan under which China Oceanwide and/or its affiliates will contribute an aggregate of $1.5 billion to Genworth over 84 time following consummation of the Merger. This contribution is subject to the closing of the Merger and the receipt of required regulatory approvals and clearances. The $1.5 billion contribution would be used to further improve our financial stability, which could include retiring future debt obligations or enabling future growth opportunities. China Oceanwide has no future obligation and has informed us that it has no current intention, to contribute additional capital to support our legacy long-term care insurance business other than agreed in connection with the regulatory approvals for the China Oceanwide transaction. If the China Oceanwide transaction is completed, we will be a standalone subsidiary and our senior management team will continue to lead the business from our current headquarters in Richmond, Virginia. We intend to maintain our existing portfolio of businesses. Except for the specific monitoring and reporting required under the Committee on Foreign Investment in the United States data security risk mitigation plan, our day-to-day operations are not expected to change as a result of this transaction.Strategic Alternatives If the China Oceanwide transaction is not completed, we will continue to explore strategic alternatives and financing options to address our ongoing challenges. Given the delay in closing the China Oceanwide transaction, we have taken and will continue to take steps to address our near-term liabilities, which include a secured promissory note issued to AXA under the settlement agreement reached on July 20, 2020 and approximately $1.0 billion in debt maturing in 2021. These steps included a debt offering from Genworth Mortgage Holdings, Inc. (“GMHI”), Genworth’s indirect wholly-owned mortgage insurance subsidiary. On August 21, 2020, GMHI issued $750 million of its 6.50% senior notes due in 2025 (“2025 Senior Notes”). A dividend of $436 million was paid to Genworth Holdings, Inc. (“Genworth Holdings) from the net cash proceeds of the offering with the remaining amount retained by GMHI to address GSE requirements. The dividend received from GMHI provides liquidity to address Genworth Holdings’ debt maturing in February 2021. Due to the uncertainty regarding the completion of the China Oceanwide transaction, we are continuing to take steps toward raising capital by preparing for a possible public offering of our U.S. mortgage insurance business, subject to market conditions. Changes to our financial projections, including changes that anticipate planned strategic transactions, may negatively impact our ability to realize certain foreign tax credits or other deferred tax assets and may impair our ability to utilize beneficial consolidated tax rules, all of which could result in a material adverse effect on our results of operations. As a result of the performance of our long-term care and life insurance businesses, as well as the resulting lack of potential dividend capacity from our U.S. life insurance subsidiaries, our financial strength ratings have been downgraded. Absent any alternative commitment of external capital, or other proactive actions to meet our closest debt maturities and other obligations, we believe there would COVID-19. Ongoing Priorities Stabilizing our U.S. life insurance businesses continues to be one of our long-term goals. We will continue to execute this objective primarily through our multi-year long-term care insurance in-force rate action plan. Premium rate increases and associated benefit reductions on our legacy long-term care insurance policies are critical to the business. In addition, reducing debt will remain a high priority. We believe that increased financial support and our strengthened financial foundation resulting from the China Oceanwide transaction would provide us with more options to manage our debt maturities and reduce overall indebtedness, which in turn would likely improve our credit and ratings profile over time. Finally, we also believe that the completion of the China Oceanwide transaction would allow us to place greater focus on the future of our long-term care and mortgage insurance businesses while continuing to service our existing policyholders.85 COVID-19 Summary COVID-19 COVID-19, which COVID-19 and the more detailed disclosures contained elsewhere herein.Economic Backdrop COVID-19 has disrupted the global economy and financial markets, business operations, and consumer behavior and confidence. COVID-19 either through the spread of the virus or the severity of the mitigation steps taken to control its spread. The U.S. economy showed signs of During the third quarter of 2020, the U.S. Federal Reserve The U.S. Federal Reserve U.S. Mortgage Insurance As a result of COVID-19, the second quarter of 2020 financial results of our U.S. mortgage insurance business were negatively impacted primarily through increased borrower uptake of forbearance options, many of which resulted in a new delinquency. Elevated borrower forbearance continued into the third quarter of 2020, however, it slowed meaningfully compared to activity in the second quarter of 2020. Servicer reported forbearance ended the third quarter of 2020 with approximately 6.7% or 61,183 of our active policies reported in a forbearance plan, of which approximately 63% were reported as delinquent. Forbearance to date has 86 Servicers continued the practice of remitting premiums during the early stages of delinquency. As a result, we did not experience an New delinquencies continue to increase driven primarily by an Our U.S. mortgage insurance business third quarter of 2020 PMIERs required assets benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided an estimated $1,217 million of benefit to our September 30, 2020 PMIERs required assets. For non-performing loans that are not subject to a forbearance plan, the 0.30 multiplier is applicable for no longer than three calendar months beginning with the month in which the loan became non-performing due to having missed two monthly payments. For those non-performing loans subject to a forbearance plan, the 0.30 multiplier is applicable for the time the loan remains in the forbearance plan. Given the the uncertainty regarding the impact of COVID-19 on our U.S. mortgage insurance business, among other restraints, we intend to preserve PMIERs available assets and do not expect to receive additional dividends from our U.S. mortgage insurance business COVID-19, among other factors. Australia Mortgage Insurance Many of our lender customers For many borrowers, the six-month deferral period expired in September 2020. Therefore, on September 22, 2020 the Australian Prudential Regulatory Authority (“APRA”) released guidance regarding treatment of loans impacted by COVID-19, including options for loans to be restructured without being treated as delinquent. Lenders have been completing serviceability assessments to determine the most appropriate solutions for borrowers experiencing hardships, including, in some cases, extension of payment deferral programs. The Australian government continued to provide support for incomes, jobs and businesses with additional measures announced in the Federal Budget in October 2020. While the government programs and lender Our Australia mortgage insurance business strengthened its loss reserves by $24 million in the third quarter of 2020 reflecting the economic impacts caused by COVID-19, including a provision for incurred but not reported losses on loans in payment deferral programs. As the majority of loans enrolled in payment deferral programs 87
As a result of potential impacts on capital levels, we U.S. Life Insurance We have experienced some degree of higher mortality across all of our U.S. life insurance We shelter-in-place and social distancing protocols are in effect. Given the lower new claim counts submitted during COVID-19, incurred but not reported reserves were strengthened by $61 million for the nine months ended September 30, 2020, reflecting our assumption that lower new claim incidence during this period will ultimately return to normal levels. Our long-term care insurance benefit utilization will be monitored for impact; although it is too early to tell the magnitude and/or direction of that impact.Our U.S. life insurance companies are dependent on the approval of actuarially justified in-force rate actions in our long-term care insurance business, including those rate actions which were previously filed and are currently pending review and approval. We have experienced some delays and could experience additional delays in receiving approvals of thesein-force rate actions during extension of grace periods and reinstatements mandated by state regulators during COVID-19 have temporarily increased the level of reserves in our term universal life insurance products in the current year. Although most of these mandates have been lifted, we continue to monitor developments related to COVID-19 such as state directives that are issued during this time and we will comply with any new guidance issued by our state insurance regulators. Runoff The most significant impacts on our variable annuity products from COVID-19 are the low interest rate environment and 88 Although certain states Investment Portfolio We are actively monitoring our investment portfolio, including asset valuations impacted by the spread of COVID-19 and the resulting economic disruption. Our investment portfolio is primarily comprised of investment grade fixed maturity securities, with approximately We routinely monitor our investment portfolio for possible ratings downgrades and other signs of distress that could be indicators of impairment. Our monitoring includes identifying assets susceptible to the efforts to contain the spread of COVID-19, including close inspection of investments in industries directly impacted, such as travel, energy, leisure, lodging and auto. Our monitoring also includes inspection of other credit risk attributes, such as high leverage, supply chain interruptions and service disruptions/stoppages.COVID-19. Operational Readiness and Business Continuity Our business continuity plans consider workforce continuity and we currently are requiring all employees to work from home through June 2021. We will continue to monitor workforce continuity and the safety of our employees as we start the process of returning to an office environment in mid 2021. Remote access capabilities have existed at Genworth for many years and are well developed. We have implemented an extensive suite of information technology security controls that are in place when personnel work from within Genworth facilities, and these controls are fully replicated and enforced when personnel work from alternate locations, including their homes. No new security controls had to be implemented as a result of COVID-19 precautions. We continue to monitor and perform analysis of our internal control environment and believe the remote work environment as a result of COVID-19 has not materially affected our ability to maintain effective controls and procedures. 89 Liquidity Genworth During the third quarter of 2020, we successfully executed a debt We also monitor the cash and highly liquid investment positions in each of our operating subsidiaries to ensure they will have the cash necessary to meet their obligations as they come due. Our businesses have liquidity options available to them, including Federal Home Loan Bank funding agreements and repurchase facilities, selling highly liquid securities and entering into new reinsurance arrangements. Given the options available, we believe COVID-19. For additional details on our overall liquidity and future dividend sources, see “—Liquidity and Capital Resources.”We employ a process to both monitor and assess the impacts of unexpected events on our businesses. While the impact of COVID-19 is very difficult to predict, the ultimate impact on our business will depend on the length of the pandemic and speed of the economic recovery. We will continue to monitor developments and the potential financial impacts on our business. For additional details on the impactCOVID-19 is having on ourcurrent results of operations and potential future impacts see “—Business Trends and Conditions” by segment. See also “Item 1A. Risk Executive Summary of Financial Results Below is an executive summary of our consolidated financial results for the periods indicated. Amounts below are net of taxes, unless otherwise indicated. After-tax amounts assume a tax rate of 21%.Three Months Ended We had Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of 90
Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of Our U.S. Life Insurance segment Adjusted operating income available to Genworth Financial, Inc.’s common stockholders The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Our Runoff segment had Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 We had a net loss available to Genworth Financial, Inc.’s common stockholders of $89 million for the nine months ended September 30, 2020 compared to net income available to Genworth Financial, Inc.’s common stockholders of $360 million for the nine months ended September 30, 2019. We had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $144 million and $396 million for the nine months ended September 30, 2020 and 2019, respectively. Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $286 million and $408 million for the nine months ended September 30, 2020 and 2019, respectively. The decrease was primarily attributable to higher losses 91
Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $17 million and $39 million for the nine months ended September 30, 2020 and 2019, respectively. The decrease was primarily driven by lower earned premiums largely from portfolio seasoning and lower policy cancellations, lower net investment income and higher losses mostly associated with the economic impacts caused by COVID-19 in the current year. Our U.S. Life Insurance segment had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $61 million for the nine months ended September 30, 2020 compared to adjusting operating income of $60 million for the nine months ended September 30, 2019. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-term care insurance business increased $70 million primarily from an increase in claim terminations driven mostly by higher mortality in the current year, $55 million of higher premiums and reduced benefits in the current year from in-force rate actions approved and implemented and from continued favorable development on incurred but not reported claims. These increases were partially offset by higher frequency and severity of new claims in the current year. The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders in our life insurance business increased $210 million predominantly attributable to higher reserves in our 10-year term universal life insurance block entering its post-level premium period during the premium grace period, higher mortality in the current year compared to the prior year and higher lapses primarily associated with our large 20-year term life insurance block entering its post-level premium period. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed annuities business increased $19 million predominantly from $31 million of unfavorable charges related to loss recognition testing in the prior year that did not recur and higher mortality in our single premium immediate annuity products, partially offset by lower net spreads in the current year. Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $30 million and $39 million for the nine months ended September 30, 2020 and 2019, respectively. The decrease was predominantly from less favorable equity market performance and a decline in interest rates in the current year. Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $128 million and $150 million for the nine months ended September 30, 2020 and 2019, respectively. The decrease in the loss was Other Significant Developments The periods under review include, among others, the following significant developments. U.S. Mortgage Insurance Incurred losses 92
PMIERs non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan. As of September 30, 2020, our U.S. mortgage insurance business business .Mortgage originations. New insurance in-force through higher new insurance written, which increased Australia Mortgage Insurance Regulatory capital. Key Customers. 93
U.S. Life Insurance In-force rate actions in our long-term care insurance business. in-force rate action filings, we received in-force premiums, or approximately Claims reserve and assumption reviews. Profits followed by losses reserve in our long-term care insurance business. With respect to our long-term care insurance block, excluding the acquired block, our future projections indicate we have projected profits in earlier periods followed by projected losses in later periods. As a result of this pattern of projected profits followed by projected losses, we ratably accrue additional future policy benefit reserves over the profitable periods, currently expected to be through 2033, by the amounts necessary to offset estimated losses during the periods that follow. During the nine months ended September 30, 2020, we increased our long-term care insurance future policy benefit reserves by $247 million, including $110 million during the third quarter of 2020, to accrue for profits followed by losses. As of September 30, 2020, the total amount accrued for profits followed by losses was $570 million. Liquidity, Capital Resources and Intercompany Obligations GMHI debt offering. Australia mortgage insurance debt redemption. Redemption of Genworth Holdings’ June 2020 senior pre-tax loss of $9 million. The senior notes were fully redeemed with a cash payment of $409 million, comprised of the outstanding principal balance of $397 million, accrued interest of $3 million and a make-whole premium of $9 million.94 Repurchase of Genworth Holdings’ 2021 senior pre-tax gain of Redemption of non-recourse funding obligations. non-recourse funding obligations due in 2050. The early redemption resulted in apre-tax loss of $4 million from thewrite-off of deferred borrowing costs.Intercompany note Liquidity and contractual obligations. Financial Strength Ratings On September 4, 2020, On On May 12, 2020, Fitch Ratings, Inc. (“Fitch”) downgraded the financial strength rating of Genworth Financial Mortgage Insurance Pty Limited (“GFMIPL”), our principal Australian mortgage insurance subsidiary, to “A” (Strong) from “A+” (Strong) and maintained a negative outlook. The downgrade reflects the pandemic-driven economic impact on GFMIPL’s financial performance and earnings, which Fitch expects to fall outside its “A” financial strength rating guidelines. In addition, S&P affirmed its “A” (Strong) rating of GFMIPL but revised their outlook to negative from stable on May 15, 2020. On April 18, 2020, we notified S&P and Moody’s 95 Consolidated General Trends and Conditions The stability of both the financial markets and global economies in which we operate impacts the sales, revenue growth and profitability trends of our businesses as well as the value of assets and liabilities. The U.S. and international financial markets in which we operate have been significantly impacted by COVID-19, see “—COVID-19 Summary” for additional details.Varied levels of economic performance, coupled with uncertain economic outlooks, changes in government policy, global trade, regulatory and tax reforms, and other changes in market conditions, will continue to influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt, capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, factors such as the length ofCOVID-19 and the speed of the economic recovery, government responses toCOVID-19 (such as government stimulus), government spending, monetary policies (such as further quantitative easing), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.The U.S. and international governments, the U.S. Federal Reserve, other central banks and other legislative and regulatory bodies have taken certain actions in response to COVID-19 to support the global economy and capital markets. These policies and actions have been supportive to the worldwide economy, however, in spite of these supportive policies the U.S. economy contracted in both the first and second quarters of 2020 and the world economy was in a recession. During the third quarter of 2020, COVID-19 lockdown measures were eased and business activity resumed, which resulted in gross domestic product (“GDP”) growth. It is too early to determine if GDP will continue to grow in the fourth quarter of 2020 given the risk of virus re-emergence and the potential for further actions to be taken to mitigate the spread. We have experienced the effects of the recession, which has adversely impacted our businesses, particularly our mortgage insurance businesses during the second quarter of 2020. We could be further adversely affected if the U.S. or global recession is prolonged or Consolidated Results of Operations The following is a discussion of our consolidated results of operations. For a discussion of our segment results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.” 96 Three Months Ended The following table sets forth the consolidated results of operations for the periods indicated:
Premiums. Our U.S. Mortgage Insurance segment increased $32 million mainly attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset by lower average premium rates and higher ceded premiums from reinsurance transactions executed in the current year. Our Australia Mortgage Insurance segment decreased $6 million predominantly from portfolio seasoning and lower policy cancellations in the current year. 97 Our U.S. Life Insurance segment in-force rate actions approved and implemented, partially offset by policy terminations and policies enteringpaid-up status in the current year. Our life insurance business decreased Net investment income. Net investment gains (losses). Net investment gains (losses) consist primarily of realized gains and losses from the sale Benefits and other changes in policy reserves. Our U.S. Mortgage Insurance segment increased $22 million largely from higher new delinquencies driven primarily by an increase in borrower forbearance as a result of COVID-19 and lower net benefits from cures and aging of existing delinquencies, partially offset by favorable development of $23 million on incurred but not reported delinquencies established in the second quarter of 2020. Our U.S. Life Insurance segment decreased $4 million. Our long-term care insurance business decreased $15 million primarily due to an increase in claim terminations driven mostly by higher mortality in the current year and from favorable development on incurred but not reported claims. Given the lower new claim counts submitted during COVID-19, incurred but not reported reserves were strengthened by $24 million reflecting our assumption that new claim incidence during this period will ultimately return to normal levels, partially offsetting the favorable development on incurred but not reported claims. These decreases were partially offset by higher incremental reserves of $50 million recorded in connection with an accrual for profits followed by losses, aging of the in-force block (including higher frequency of new claims), and higher severity of new claims in the current year. The decrease was also partially offset by a $33 million less favorable impact from reduced benefits in the current year related to in-force rate actions approved and implemented. Our life insurance business increased $41 million primarily attributable to higher mortality in our universal and term universal life insurance products in the current year compared to the prior year and from higher reserves in our 10-year term universal life insurance block entering its post-level premium period during the premium grace period. Our fixed annuities business decreased $30 million principally from $17 million of unfavorable charges in the prior year that did not recur related to loss recognition testing and higher mortality in our single premium immediate annuity products in the current year. Our Australia Mortgage Insurance segment decreased $2 million primarily from favorable aging of existing delinquencies and lower new reported delinquencies, net of cures, partially offset by loss reserve strengthening of $24 million reflecting the economic impacts caused by COVID-19, including a provision for incurred but not reported losses on loans in payment deferral programs in the current year. Interest credited. 98 Amortization of deferred acquisition costs and intangibles. Interest expense. Our Corporate and Other activities decreased $12 million largely driven by the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020. Our U.S. Life Insurance segment decreased $4 million driven by our life insurance business principally related to the early redemption of non-recourse funding obligations in the current year. Our U.S. Mortgage Insurance segment increased $6 million related to senior notes issued by GMHI in August 2020. Provision for income taxes. Net income attributable to noncontrolling interests 99 Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the consolidated results of operations for the periods indicated:
Premiums Our U.S. Mortgage Insurance segment increased $101 million mainly attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset by higher ceded premiums from reinsurance transactions executed in the current year and lower average premium rates. 100 Our U.S. Life Insurance segment increased Our Australia Mortgage Insurance segment decreased $38 million predominantly from portfolio seasoning and lower policy cancellations in the current year. The nine months ended September 30, 2020 included a decrease of $9 million attributable to changes in foreign exchange rates. Net investment income. Net investment gains (losses). Policy fees and other income. Our U.S. Life Insurance segment decreased $52 million primarily driven by our life insurance business from a $21 million favorable correction related to ceded premiums on universal life insurance policies in the prior year that did not recur. The decrease was also attributable to a decline in our universal and term universal life insurance in-force and higher ceded reinsurance costs in the current year. Corporate and Other activities decreased $5 million primarily related to losses from non-functional currency remeasurement transactions in the current year compared to gains in the prior year. Benefits and other changes in policy reserves Our U.S. Mortgage Insurance segment increased $253 million largely from $231 million of losses from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of COVID-19 and strengthening of existing reserves of $28 million in the current year primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. We also experienced lower net benefits from cures and aging of existing delinquencies in the current year. The prior year included a $10 million favorable reserve adjustment mostly associated with lower expected claim rates. Our U.S. Life Insurance segment increased $59 million. Our long-term care insurance business decreased $34 million primarily due to an increase in claim terminations driven mostly by higher mortality and favorable development on incurred but not reported claims. Given the lower new claim counts submitted during COVID-19, incurred but not reported reserves were strengthened by $61 million reflecting our assumption that new claim incidence during this period will ultimately return to normal levels, partially offsetting the favorable development on incurred but not reported claims. These decreases were partially offset by aging of the in-force block (including higher frequency of new claims), higher incremental reserves of 101 Our Runoff segment increased Our Australia Mortgage Insurance segment Interest credited. Acquisition and operating expenses, net of deferrals. Our U.S. Mortgage Insurance segment increased $10 million primarily attributable to higher operating costs driven mostly by increased sales in the current year. Our U.S. Life Insurance segment increased $8 million driven by our long-term care insurance business principally from higher commissions and premium taxes in the current year associated with our in-force rate action plan. Corporate and Other activities Amortization of deferred acquisition costs and Our U.S. Life Insurance segment increased 20-year term life insurance block entering its post-level premium period Our Runoff segment increased Goodwill impairment. Charges for impairment of goodwill are the result of declines in the fair value of the reporting units. Our Australia Mortgage Insurance segment recorded a goodwill impairment charge of $5 million in the current year, which represented the full amount of goodwill related to our mortgage insurance business in Australia. Interest Corporate and Other activities decreased 102 Our U.S. Life Insurance segment decreased $8 million due to our life insurance business principally related to the early redemption of non-recourse funding obligations, partially offset by the write-off of $4 million in deferred borrowing costs in the current year. Our U.S. Mortgage Insurance segment increased $6 million related to senior notes issued by GMHI in August 2020. Provision Net income . The decrease was Use of non-Generally Accepted Accounting Principles (“GAAP”) measuresReconciliation of net income (loss) to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders We use non-GAAP financial measures entitled “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders” and “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share.” Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share is derived from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. We define adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding theafter-tax effects of income (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 unusualnon-operating items. Gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment ofnon-recourse funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusualnon-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusualnon-operating items are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends.While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, including adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per 103 share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies. Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21% tax rate for our domestic segments and a 30% tax rate for our Australia Mortgage Insurance segment and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves. The following table includes a reconciliation of net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the periods indicated:
During the nine months ended September 30, 2020, we repurchased $84 million principal amount of Genworth Holdings’ senior notes with 2021 maturity dates for a pre-tax gain of $4 million. In January 2020, we paid a pre-tax make-whole expense of $9 million related to the early redemption of Genworth non-recourse funding obligations originally due in 2050 resulting in apre-tax loss of $4 million from thewrite-off of deferred borrowing costs.In the second quarter of 2020, we recorded a goodwill impairment of $3 million, net of the portion attributable to noncontrolling interests, in our Australia mortgage insurance business. 105 We recorded a pre-tax expense of Earnings (loss) per share Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category by the weighted-average basic and diluted common shares outstanding for the periods indicated:
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation. Results of Operations and Selected Financial and Operating Performance Measures by Segment Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. See note 11 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities. We tax our international businesses at their local jurisdictional tax rates and our domestic businesses at the U.S. corporate federal income tax rate of 21%. Our segment tax methodology applies the respective jurisdictional or domestic tax rate to the pre-tax income (loss) of each segment, which is then adjusted in each segment to reflect the tax attributes of items unique to that segment such as foreign withholding taxes and permanent differences between U.S. GAAP and local tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year. 106 Management’s discussion and analysis by segment contains selected operating performance measures including “sales” and “insurance in-force” or “riskin-force” which are commonly used in the insurance industry as measures of operating performance.Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance products. We consider new insurance written to be a measure of our operating performance because it represents a measure of new sales of insurance policies or contracts during a specified period, rather than a measure of our revenues or profitability during that period. Management regularly monitors and reports insurance in-force and riskin-force. Insurancein-force for our mortgage insurance businesses is a measure of the aggregate original loan balance for outstanding insurance policies as of the respective reporting date. Riskin-force for our U.S. mortgage insurance business is based on the coverage percentage applied to the estimated current outstanding loan balance. Riskin-force in our Australia mortgage insurance business is computed using an “effective” riskin-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective riskin-force has been calculated by applying to insurancein-force a factor of 35% that represents the highest expected averageper-claim payment for any one underwriting year over the life of our mortgage insurance business in Australia. We also have certain risk share arrangements in Australia where we providepro-rata coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements, the applicablepro-rata coverage amount provided is used when applying the factor. We consider insurancein-force and riskin-force to be measures of our operating performance because they represent measures of the size of our business at a specific date which will generate revenues and profits in a future period, rather than measures of our revenues or profitability during that period.Management also regularly monitors and reports a loss ratio for our businesses. For our mortgage insurance businesses, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For our long-term care insurance business, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of our businesses. These operating performance measures enable us to compare our operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources. U.S. Mortgage Insurance segment Trends and conditions Results of our U.S. mortgage insurance business are affected primarily by the following factors: competitor actions; unemployment or underemployment levels; other economic and housing market trends, including interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and practices; the levels and aging of mortgage delinquencies; the effect of seasonal 107 to 4.6 million from a peak of 18.1 million in April 2020, but the The impact of the COVID-19 pandemic on our future business results is difficult to COVID-19 developments, regulatory and government actions,Specific to housing finance, the COVID-19. Forbearance may be extended for an additional 180 days up to a year in total or shortened at the request of the borrower. Federally backed mortgages include Federal Housing Administration (“FHA”) and U.S. Department of Veterans Affairs (“VA”) backed loans and those purchased by Fannie Mae and Freddie Mac. The CARES Act also 60-day period non-federally backed mortgage loans have The level of mortgage originations requiring private mortgage insurance (“market penetration”) and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the FHA and the 108 GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products, such as those offered through Freddie Mac’s Integrated Mortgage Insurance (“IMAGIN”) and Fannie Mae’s Enterprise Paid Mortgage Insurance (“EPMI”) pilot programs, as well as low down payment programs available through the FHA or GSEs. On May 20, 2020, the FHFA re-proposed the Enterprise Regulatory Capital Framework (“Enterprise Framework”) for Fannie Mae and Freddie Mac. The comment period expired on August 31, 2020. As proposed, the Enterprise Framework would significantly increase regulatory capital requirements for the GSEs over current requirements. If the Enterprise Framework is finalized in its current form, higher capital requirements could ultimately lead to increased costs to borrowers for GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender portfolios. Such a shift could result in a smaller market for private mortgage insurance. For more information about the potential future impact, see “Item 1A—Risk Factors—Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance, could adversely affect our financial condition and results of operations or significantly impact our business,” and “—Risk Factors—The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage insurance are used or lower coverage levels of mortgage insurance are selected” in our 2019 Annual Report on Form 10-K. Our primary persistency declined to 60% during the third quarter of 2020 compared to 75% during the The U.S. private mortgage insurance industry is highly competitive. There are currently six active mortgage insurers, including us. The majority of the new insurance written in our U.S. mortgage insurance business is priced using our proprietary risk-based pricing engine, GenRATE, which provides lenders with a granular approach to pricing for borrowers. All active U.S. mortgage insurers utilize proprietary risk-based pricing engines. 10-K. At the same time, we believe mortgage insurers, including us, consider many variables when pricing their new insurance written including the prevailing and future macroeconomic conditions. New insurance written of $26.6 billion increased 109 Net earned premiums increased in the COVID-19, we continued to experience a significant increase in the number of reported delinquent loans during the third quarter of 2020 as compared to recent quarters prior to COVID-19. During this time and consistent with prior years, servicers continued the practice of remitting premium during the early stages of default. As a result, we did not experience an impact to earned premiums during the third quarter of 2020. Additionally, we have a business practice of refunding the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We record a liability and a reduction to net earned premiums for the post-delinquent premiums we expect to refund. The post-delinquent premium liability recorded in the third quarter of 2020 associated with the increased number of delinquent loans was not significant to the change in earned premiums during the quarter as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rates at which delinquencies go to claim (“roll rates”) for these loans. As a result of COVID-19, certain state insurance regulators have issued orders or provided guidance to insurers requiring or requesting non-payment of premium. Regulators differ greatly in their approaches but generally focus on the avoidance of cancellation of coverage fornon-payment. We currently comply with all state regulatory requirements and requests. If timely payment is not made, future premiums could decrease and the certificate of insurance could be subject to cancellation after 60 days, or such longer time as required under applicable law.While COVID-19 is unique in that it is a sudden, global economic disruption stemming from a health crisis, we have experience with the financial impacts of sudden, unexpected economic events on our U.S. mortgage insurance business. Prior localized natural disasters, such as hurricanes, have helped inform our view of the severity and potential duration of the economic shock caused by the efforts to contain the spread ofCOVID-19. Similar to our hurricane experience,pre-COVID-19 levels. Severity of loss on loans that do go to claim, however, may be negatively impacted by the extended forbearance timeline, the associated elevated expenses such as accumulated interest, the higher loan amount of the recent new delinquencies and home price depreciation, if any. Unlike a hurricane where the natural disaster occurs at a point in time and the rebuild starts soon after, COVID-19 is an ongoing health crisis and we do not know when it will end, making it more difficult to determine the effectiveness of forbearance and the resulting roll rates for new delinquencies in forbearance plans. Given this difference, our prior hurricane experience was relied upon as one consideration, of many, in the establishment of an appropriate roll rate estimate for new delinquencies in forbearance plans that have emerged as a result of COVID-19.Our loss ratio for the three months ended September 30, 2020 was 18% as compared to 11% for the three months ended September 30, 2019. The increase was largely from higher new delinquencies driven primarily by an increase in borrower forbearance as a result of COVID-19, partially offset by favorable development on incurred but not reported delinquencies in the current year. Approximately 75% of our primary new delinquencies in the third quarter of 2020 were subject to a forbearance plan. New primary delinquencies of 16,664 contributed $61 million of loss expense for the three months ended September 30, 2020 calculated by applying a blended estimated roll rate between the estimate for existing pre-COVID-19 early stage delinquencies and our past hurricane related roll rates, which were materially lower given the effectiveness of forbearance and government assistance programs. This compares to $29 million of loss expense from 8,547 new primary delinquencies for the three months ended September 30, 2019. Prior to COVID-19, traditional measures of credit quality, such as Fair Isaac Company (“FICO”) score and whether a loan had a prior delinquency were most predictive of new delinquencies. Because the pandemic has affected a broad portion of the population, attribution 110 analysis of third quarter of 2020 new delinquencies revealed that additional factors such as higher debt to income, geographic regions more affected by the virus or with a higher concentration of affected industries, loan size, and servicer process differences rose in significance. As of risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), GMICO’sdomestic insurance regulator, was approximately risk-to-capital ratio of GMICO’s risk-to-capital ratio remains below the NCDOI’s maximumrisk-to-capital ratio of 25:1. North Carolina’s calculation ofrisk-to-capital excludes therisk-in-force for delinquent loans given the established loss reserves against all delinquencies. As a result, we do not expect any immediate, material pressure to GMICO’srisk-to-capital ratio in the short term as a result ofCOVID-19. GMICO’s ongoingrisk-to-capital ratio will depend principally on the magnitude of future losses incurred by GMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business or capital support (if any) that we provide.Under PMIERs, we are subject to operational and financial requirements that private mortgage insurers must meet in order to remain In September 2020, certain GSE Restrictions were imposed with respect to capital on our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or until the following collective (“GSE Conditions”) are met: a) approval of GMICO’s plan to secure additional capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch for two consecutive quarters and c) certain Genworth financial metrics are achieved. Prior to the satisfaction of the GSE Conditions, the GSE Restrictions require: GMICO to maintain 115% of PMIERs minimum required assets through 2021, 120% during 2022 and 125% thereafter; GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and 111 written approval must be received from the GSEs prior to any additional debt issuance by either GMICO or GMHI. As of certain non-performing Our credit risk transfer program provided an estimated aggregate of The GSE Restrictions govern the period prior to Our U.S. mortgage insurance business paid dividends of $436 million in the third quarter of 2020 generated from the net cash proceeds of GMHI’s 2025 Senior Notes offering. As a result of the uncertainty regarding the impact of COVID-19 and the recently imposed GSEs’ PMIERs Amendment and GSE Restrictions on our U.S. mortgage insurance business, we intend to preserve PMIERs available assets. Accordingly, we intend to defer the payment of additional dividends in 2020. The amount and timing of future economic recovery from COVID-19, among other factors. 112 (“QM”). The regulations also include a temporary category (the “QM Patch”) for mortgages that comply with certain prohibitions and limitations and meet the GSE underwriting and product guidelines. Mortgages that meet these requirements are deemed to be QMs until the earlier of the time in which the GSEs exit FHFA conservatorship or January 10, 2021. The QM Patch permits loans that exceed a debt to income ratio of 43% to be eligible for QM status. Many of the loans that qualify under the QM Patch require credit enhancement, of which private mortgage insurance is the predominate form of coverage. On June 22, 2020, the CFPB issued two Notices of Proposed Rulemaking seeking comments on proposed amendments to its QM regulations, and they extended the QM Patch until the earlier of the effective date of the revised QM Rule (which is not expected to occur prior to April 1, 2021) or when the GSEs exit conservatorship. The comment periods ended on August 10, 2020 and September 8, 2020, respectively. On October 20, 2020 the CFPB issued a final rule extending the QM Patch until the compliance date for the final QM Rule. It is too early to determine what the final QM Rule will include, when or if it will become effective or the impact it will have on our U.S. mortgage insurance business. On August 18, 2020, the CFPB issued an additional Notice of Proposed Rulemaking adding a “seasoning” approach to the QM “safe harbor.” The proposed rule exempts lenders from liability when they make a reasonable, good faith determination of a consumer’s ability to repay any non-QM that has experienced minimal delinquencies within the first three years after origination prior to approving the underwriting. Segment results of operations Three Months Ended The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:
113 Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders increased primarily from higher premiums mainly attributable to higher Revenues Premiums increased mainly attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset by lower average premium rates and higher ceded premiums from reinsurance transactions executed in the current year.Net investment income increased primarily from higher average invested assets in the current year. Benefits and expenses Benefits and other changes in policy reserves increased largely from higher new delinquencies driven primarily by an increase in borrower forbearance as a result of COVID-19 and lower net benefits from cures and aging of existing delinquencies, partially offset by Acquisition and operating expenses, net of deferrals, increased primarily attributable to higher operating costs driven mostly by increased sales in the current year. Interest expense in the current year relates to the senior notes issued by GMHI in August 2020. Provision for income taxes. 114 Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the results of operations relating to our U.S. Mortgage Insurance segment for the periods indicated:
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased primarily attributable to higher losses largely from new delinquencies driven in large part by a significant increase in borrower forbearance as a result of COVID-19, reserve strengthening on existing delinquencies and from lower net benefits from cures and aging of existing delinquencies in the current year. These decreases were partially offset by higher premiums largely driven by higher insurance in-force and an increase in policy cancellations in our single premium mortgage insurance product primarily due to higher mortgage refinancing in the current year. Revenues Premiums increased mainly attributable to higher insurance in-force and an increase in policy cancellations in our single premium mortgage insurance product driven largely by higher mortgage refinancing, partially offset by higher ceded premiums from reinsurance transactions executed in the current year and lower average premium rates. Net investment income increased primarily from higher average invested assets in the current year. 115 Benefits and expenses Benefits and other changes in policy reserves increased largely from $231 million of losses from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of COVID-19 and strengthening of existing reserves of $28 million in the current year primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. We also experienced lower net benefits from cures and aging of existing delinquencies in the current year. The prior year included a $10 million favorable reserve adjustment mostly associated with lower expected claim rates. Acquisition and operating expenses, net of deferrals, increased primarily attributable to higher operating costs driven mostly by increased sales in the current year. Interest expense in the current year relates to the senior notes issued by GMHI in August 2020. Provision for income taxes. U.S. Mortgage Insurance selected operating performance measures In the third quarter of 2020, we revised the product descriptions in our U.S. Mortgage Insurance segment to conform with industry convention and certain regulatory definitions, including classifications under PMIERs. Prior year amounts have been reclassified to conform to the current year presentation. In the United States, we offer the following mortgage insurance products: Primary Mortgage Insurance Substantially all of our policies are primary mortgage insurance, which provides protection on individual loans at specified coverage percentages. Primary mortgage insurance is placed on individual loans at the time of origination and are typically delivered to us on a loan by loan basis. Primary mortgage insurance can also be delivered to us on an aggregated basis, whereby each mortgage in a given loan portfolio is insured in a single transaction after the point of origination. Pool Mortgage Insurance Pool mortgage insurance transactions provide coverage on a finite set of individual loans identified by the pool policy. Pool policies contain coverage percentages and provisions limiting the insurer’s obligation to pay claims until a threshold amount is reached (known as a “deductible”) or capping the insurer’s potential aggregate liability for claims payments (known as a “stop loss”) or a combination of both provisions. Pool mortgage insurance is typically used to provide additional credit enhancement for certain secondary market mortgage transactions. The following
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Primary insurance in-force and risk in-force Primary insurance in-force Risk in-force New insurance written Net premiums written Net premiums written for the three and nine months ended September 30, 2020 increased primarily from higher average in-force, partially offset by higher ceded premiums from reinsurance transactions executed in the current year.Loss and expense ratios The following table sets forth the loss and expense ratios for our U.S. Mortgage Insurance segment for the dates indicated:
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio (net premiums written) is the ratio of general expenses to net premiums written. In our business, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles. The loss ratio 117 existing reserves of $28 million in the current year primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. We also experienced lower The expense ratio (net earned premiums) for the three and nine months ended September 30, 2020 decreased mainly driven by higher net earned premiums, partially offset by higher operating costs in the current year. The expense ratio (net Delinquent loans The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our U.S. mortgage insurance portfolio as of the dates indicated:
Delinquency rates have The following tables set forth in-force by aged missed payment status in our U.S. mortgage insurance portfolio as of the dates indicated:
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As of September 30, 2020, we have experienced a material increase in total missed payments and payments that are delinquent for 4-11 months due in large part to borrowers entering a forbearance plan driven by COVID-19. Forbearance plans may be extended up to a year, therefore, it is possible we could experience elevated delinquencies in this aged category for the remainder of 2020 and the first half of 2021. Resolution of a delinquency in a plan, whether it ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer. Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth our primary delinquency rates for the various regions of the United States and the 10 largest states by our risk in-force as of the dates indicated. Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender.
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The following table sets forth the dispersion of our total reserves and primary insurance in-force and riskin-force by year of policy origination and average annual mortgage interest rate as of
Australia Mortgage Insurance segment Trends and conditions Results of our mortgage insurance business in Australia are affected primarily by changes in regulatory environments, employment levels, consumer borrowing behavior, lender mortgage-related strategies, including lender servicing practices, and other economic and housing market influences, including interest rate trends, home price appreciation or depreciation, mortgage origination volume, levels and aging of mortgage delinquencies and movements in foreign currency exchange rates. During the 120 As of the As of Our mortgage insurance business in Australia completed a review of its premium earnings pattern in the fourth quarter of 2019, which resulted in no changes to the earnings pattern adopted in the fourth quarter of 2017. The adjustment to our premium earnings pattern in the fourth quarter of 2017 was applied on a retrospective basis under U.S. GAAP, however, under local Australian Accounting Standards (“AAS”) this adjustment was applied on a prospective basis. Due to this divergence in accounting application, the financial results and certain metrics, such as the loss ratio and expense ratios, for our mortgage insurance business in Australia were different between the two accounting standards through the 121 deficiency, mostly driven by higher expected future claims. Accordingly, our Australia mortgage insurance business wrote-off AUD$182 million of its DAC balance as part of its first quarter of 2020 results. There was no deficiency adjustment under U.S. GAAP primarily due to a higher unearned premium reserve and a lower DAC balance. This further contributed to differences in results for our Australia mortgage insurance business under the two accounting standards for the nine months ended September 30, 2020. Results of liability adequacy and premium deficiency tests conducted for AAS and U.S. GAAP, respectively, in the Our mortgage insurance business in Australia had lower losses in the Our mortgage insurance business in Australia had higher new insurance written Our mortgage insurance business in Australia is concentrated in a small number of key customers. In October 2019, we renewed our supply and service contract with our largest customer, effective January 1, 2020, for a term of three years. In November 2018, we entered COVID-19, our mortgage insurance business in Australia could be subject to Our mortgage insurance business in Australia evaluates its capital position in relation to the PCA as determined by APRA and utilizes its Internal Capital Adequacy Assessment Process as the framework to ensure that our Australia group of companies as a whole, and each regulated entity, are independently capitalized to meet regulatory requirements. As of 122 representing among other factors, and may require APRA approval.COVID-19, APRA has provided guidance to insurers asking them to In September 2019, the Australian Government released details of the First Home Loan Deposit Scheme (“FHLDS”), which is designed to assist eligible first-time home buyers by providing a government guarantee to participating lenders on eligible loans equal to the difference between the deposit (of at least 5%) and 20% of the purchase price. Borrower income and regional property value caps apply, and the program is intended to support up to 10,000 eligible first-time home buyers each Australian Government fiscal year, which is July 1 through June 30. If the loan comes to an end or the loan principal balance reduces to below 80% of the value of the property at purchase, the government guarantee will terminate. The FHLDS became effective on January 1, 2020 with the annual limit of 10,000 loan guarantees reached for the first year of the program that ended June 30, 2020. 123 Segment results of operations Three Months Ended The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment for the periods indicated:
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased primarily driven by lower earned premiums largely from portfolio seasoning and lower policy cancellations Revenues Premiums decreased predominantly from portfolio seasoning and lower policy cancellations in the current year. Net investment income decreased largely from lower yields in the current year. Net investment gains in the current year primarily related to derivative gains and net gains from the sale of investment securities. Net investment losses in the prior year were largely driven by derivative losses and changes in the fair market value of equity securities, partially offset by net gains from the sale of investment securities. Benefits and expenses Benefits and other changes in policy reserves decreased primarily from favorable aging of existing delinquencies and lower new reported delinquencies, net of cures, partially offset by loss reserve strengthening of $24 million reflecting the economic impacts caused by COVID-19, including a provision for incurred but not reported losses on loans in payment deferral programs in the current year. Provision for income taxes. Net income from continuing operations attributable to noncontrolling interests. 125 Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the results of operations relating to our Australia Mortgage Insurance segment for the periods indicated:
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased primarily driven by lower earned premiums largely from portfolio seasoning and lower policy cancellations, 126 lower net investment income and higher losses mostly associated with the economic impacts caused by COVID-19 in the current year.Revenues Premiums decreased predominantly from portfolio seasoning and lower policy cancellations in the current year. The Net investment income decreased largely from lower Net investment Benefits and expenses Benefits and other changes in policy reserves Amortization of DAC and intangibles decreased largely from lower contract fees amortization in the current year. We recorded a goodwill impairment charge of $5 million in the current year, which represented the full amount of goodwill related to our mortgage insurance business in Australia. Provision Net income Australia Mortgage Insurance selected operating performance measures As of in-force, riskin-force, new insurance written, loansin-force and delinquent loans, are excluded from the following tables. These arrangements represented approximately in-force as of The following
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Our mortgage insurance business in Australia currently provides 100% coverage on the majority of the loans we insure in those markets. For the purpose of representing our risk in-force, we have computed an “effective” riskin-force amount, which recognizes that the loss on any particular loan will be reduced by the net proceeds received upon sale of the property. Effective riskin-force has been calculated by applying to insurancein-force a factor of 35% that represents our highest expected averageper-claim payment for any one underwriting year over the life of our business in Australia. We also have certain risk share arrangements where we providepro-rata coverage of certain loans rather than 100% coverage. As a result, for loans with these risk share arrangements, the applicablepro-rata coverage amount provided is used when applying the factor.Primary insurance in-force and riskin-force Primary insurance in-force and riskin-force New insurance written New insurance written increased Net premiums written Most of our Australian mortgage insurance policies provide for single premiums at the time that loan proceeds are advanced. We initially record the single premiums to unearned premium reserves and recognize the premiums earned over time in accordance with the expected pattern of risk emergence. As of Net premiums written increased for the three and nine months ended September 30, 2020 primarily due to higher flow new insurance written from an increase in mortgage origination volume 128 Loss and expense ratios The following table sets forth the loss and expense ratios for our Australia Mortgage Insurance segment for the periods indicated:
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. The expense ratio (net premiums written) is the ratio of general expenses to net premiums written. In our mortgage insurance business in Australia, general expenses consist of acquisition and operating expenses, net of deferrals, The loss ratio The expense ratio (net earned premiums) increased for the three and nine months ended September 30, 2020 primarily from lower net earned premiums as discussed above. The expense ratio (net premiums written) decreased for the three and nine months ended September 30, 2020 primarily from higher net premiums written primarily due to an increase in flow mortgage origination Delinquent loans The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our Australia mortgage insurance portfolio as of the dates indicated:
Flow loans in-force decreased primarily from policy cancellations in the current year. Flow delinquent loans increased compared to December 31, 2019 from new delinquencies exceeding cures and claims paid in the current year. Flow delinquent loans decreased compared to September 30, 2019 driven by cures and claims paid exceeding new delinquencies.129 Primary insurance delinquency rates differ by the various states and territories of Australia at any one time depending upon economic conditions and cyclical growth patterns. The table below sets forth our primary delinquency rates for the states and territories of Australia by our risk in-force as of the dates indicated. Delinquency rates are shown by region based upon the location of the underlying property, rather than the location of the lender.
Delinquency rates increased mainly from lower flow loans in-force as a result of policy cancellations and new delinquencies exceeding cures in the current year. U.S. Life Insurance segment COVID-19 The most significant impacts in our U.S. life insurance businesses from COVID-19 are related to the current low interest rate environment and in-force rate actions. These impacts would be partially offset by higher mortality which is favorable to our long-term care insurance products. Future changes in morbidity experience may also impact our long-term care insurance business. The low interest rate environment In our long-term care insurance products, we COVID-19 which shelter-in-place and social distancing protocols are in effect. We have temporarily discontinued in-person assessments to assess eligibility for benefits, and are in-person assessment to follow once social distancing protocols are relaxed. Additionally, our U.S. life insurance companies are dependent on the approval of actuarially justified in-force rate actions in our long-term care insurance business, including those rate actions which were previously130 filed and are currently pending review and approval. We have experienced some delays and could experience additional delays in receiving approvals of these rate actions during COVID-19 although we do not expect a significant impact on our financial results during 2020 as a result of We continue to provide customer service COVID-19. In our U.S life insurance companies, we COVID-19 COVID-19 such as state directives that are issued during this time and we will COVID-19 continues for an extended period of time. We have not COVID-19, We actively monitor cash and highly liquid investment positions in each of our U.S. life insurance companies against operating targets that are designed to ensure that we will have the cash necessary to meet our obligations as they come due. The targets are set based on stress scenarios that have the effect of increasing our expected cash outflows and decreasing our expected cash inflows. Liquidity risk is assessed by comparing subsidiary cash to potential cash needs under a stressed liquidity scenario. The stressed scenario reflects potential policyholder surrenders, variability of normal operating cash flow and potential increase in collateral requirements under our cleared derivative program. While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on the U.S. life insurance business will depend on the length and severity of the pandemic and shape of the economic recovery. Further declines in interest rates COVID-19 would increase reserves and capital requirements in our U.S. life insurance business. For sensitivities related to interest rates, lapses and mortality on our U.S. life insurance products, see “Item 7—Management’s Discussion and Analysis— Critical Accounting Estimates” in our 2019 Annual Report on Form10-K. We will continue to monitor COVID-19 impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.Trends and conditions Results of our U.S. life insurance businesses depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves. Many factors can affect the results of our U.S. life insurance businesses. Because these factors are not known in 131 advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels, results of operations and financial condition. Our liability for policy and contract claims is reviewed quarterly and we Results of our U.S. life insurance businesses are also impacted by interest rates. Low interest rates put pressure on the profitability and returns of these businesses as higher yielding investments mature and are replaced with 10-K. The RBC of each of our U.S. life insurance subsidiaries exceeded the level of RBC that would require any of them to take or become subject to any corrective action in their respective domiciliary state as of December 31, 2019. However, the RBC ratio of our U.S. life insurance subsidiaries has been negatively impacted over the past few years as a result of statutory losses driven by the declining performance of the business and increases in our statutory reserves, including results of Actuarial Guideline 38, cash flow testing and assumption reviews particularly in our long-term care insurance business. In the first quarter of 2020, low interest rates and equity market in-force rate actions as a source of earnings and capital. We may see variability in statutory results and a further decline in the RBC ratios of these subsidiaries given the time lag between the approval ofin-force rate actions versus when the benefits from thein-force rate actions (including increasedpremiums and associated benefit reductions) are fully realized in our financial results. Further declines in the RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action. Long-term care insurance The long-term profitability of our long-term care insurance business depends upon how our actual experience compares with our valuation assumptions, including but not limited to morbidity, mortality and persistency. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past 132 has had, and may in the future have, a material adverse effect on our results of operations, financial condition and business. Results of our long-term care insurance business are also influenced by our ability to achieve in-force rate actions, improve investment yields and manage expenses and reinsurance, among other factors. Changes in regulations or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.Our assumptions are sensitive to slight variability in actual experience and small changes in assumptions could result in decreases in the margin of our long-term care insurance blocks to at/or below zero in future years. To the extent, based on reviews, the margin of our long-term care insurance block, excluding the acquired block, is negative, we would be required to recognize a loss, by amortizing more DAC and/or establishing additional benefit reserves. For our acquired block of long-term care insurance, the impacts of adverse changes in assumptions would also be reflected as a loss if our margin for this block is reduced below zero by establishing additional benefit reserves. A significant decrease in our loss recognition testing margin of our long-term care insurance blocks could have a material adverse effect on our business, results of operations and financial condition. As a result of the review of our claim reserves completed in Given the ongoing challenges in our long-term care insurance business, we continue pursuing initiatives to improve the risk and profitability profile of our business including: premium rate increases and associated benefit reductions on our in-force policies; managing expense levels; executing investment strategies targeting higher returns; and enhancing our financial and actuarial analytical capabilities. Executing on our multi-year long-term care insurancein-force rate action plan with premium rate increases and associated benefit reductions on our legacy long-term care insurance policies is critical to the business. For an update onin-force rate actions, refer to “Significant Developments—U.S. Life Insurance.” As of in-force policies. We will also consider litigation against states that decline actuarially justified rate increases. As of The approval process for in-force rate actions and the amount and timing of the premium rate increases and associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a rate increase can take a significant amount of time, and the approved amount may be phased in over time. After approval, insureds are provided with written notice of the increase and increases are generally applied on the insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the implementation cycle is complete and are, therefore, expected to be realized over time.We also manage risk and capital allocated to our long-term care insurance business through utilization of external reinsurance in the form of coinsurance. We executed external reinsurance agreements to reinsure 20% of all sales of our individual long-term care insurance products that have been introduced since early 2013. External new business reinsurance is dependent on a number of factors, including price, availability, risk tolerance and capital levels. Over time, there can be no assurance that affordable, or any, reinsurance will continue to be available. We also have external reinsurance on some older blocks of business which includes a treaty on a yearly renewable term basis on business that was written between 1998 and 2003. This yearly renewable term reinsurance provides coverage for claims on those policies for 15 years after the policy was written. After 133 15 years, reinsurance coverage ends for policies not on claim, while reinsurance coverage continues for policies on claim until the claim ends. The 15-year coverage on the policies written in 2003 expired in 2018; therefore, any new claims will not have reinsurance coverage under this treaty. Since 2013, we have seen, and may continue to see, an increase in our benefit costs as policies with reinsurance coverage exhaust their benefits or terminate and policies which are not covered by reinsurance go on claim.Life insurance Results of our life insurance business are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of business. Mortality levels may deviate each period from historical trends. Overall mortality experience was higher for the three months ended priced-for assumptions in recent years for our universal life insurance blocks. We have also been experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance partners reflecting natural block aging and higher mortality compared to expectations.In the fourth quarter of after-tax charges in our universal and term universal life insurance products primarily from assumption changes related to the lower interest rate environment.We also updated mortality assumptions for certain universal and term universal life insurance products as well as our term life insurance products in the fourth quarter of 2019. Our mortality experience for older ages and late-duration premium periods and conversion products is emerging. Assumption changes in our term life insurance products focused on mortality improvements during the post-level premium period based on observed trends in emerging experience. This change to the mortality assumption increased the loss recognition testing margin in our term life insurance products. We will continue to regularly review our mortality assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make further adjustments in the future to our assumptions which could impact our universal and term universal life insurance reserves or our loss recognition testing results of our term life insurance products. Any further materially adverse changes to our assumptions, including mortality or interest rates, could have a materially negative impact on our results of operations, financial condition and business. Compared to 1998 and prior years, we had a significant increase in term life insurance sales, between 1999 and 2009, particularly in 1999 and 2000. The blocks of business issued since 2000 vary in size as compared to the large 1999 and 2000 blocks of business. As our large 10- and15-year level premium period term life insurance policies written in 1999 and 2000 transitioned to their post-level guaranteed premium rate period, we experienced lower persistency compared to our pricing and valuation assumptions which accelerated DAC amortization in previous years. As our large20-year level premium period business written in 1999 entered itspost-level period, we experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend continued in the first quarter of 2020 for the 1999 block, as it reached the end of its level premium period. Additionally, we 20-year level premium period business written in 2000 as it 10-, 15- and20-year level premium period blocks 134 the post-level period to be COVID-19 We began selling term universal life insurance in late 2009, with sales peaking in 2011 prior to discontinuing sales of the product in 2012. We priced these products assuming high lapses upon expiration of the level premium period and we continue to expect those higher lapses. As our 10-year level premium period term universal life insurance policies written in 2009 and 2010 enter their post-level premium period, we COVID-19 Fixed annuities Results of our fixed annuities business are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products; however, we continue to service our existing retained and reinsured blocks of business. We monitor and change crediting rates on fixed annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, if interest rates remain at current levels or decrease, we could see declines in spreads which impact the margins on our products, particularly our in-force block. For fixed indexed annuities, equity market performance and volatility could also result in additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts. Segment results of operations Three Months Ended The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders in our life insurance business increased $44 million mainly attributable to higher lapses primarily associated with our large 20-year term life insurance block entering its post-level premium period, higher reserves in our 10-year term universal life insurance block entering its post-level premium period during the premium grace period and higher mortality in our universal and term universal life insurance products in the current year compared to the prior year. The prior year included an unfavorable adjustment of Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed annuities business increased $21 million predominantly from $13 million of unfavorable charges related to loss recognition testing in the prior year that did not recur and higher mortality in our single premium immediate annuity products, partially offset by lower net spreads in the current year. Revenues Premiums Our long-term care insurance business increased $9 million largely from $25 million of increased premiums in the current year from in-force rate actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in the current year. Our life insurance business decreased $15 million mainly attributable to the continued runoff of our term and whole life insurance products in the current year. Net investment income Our long-term care insurance business increased $24 million largely from an increase in average invested assets. The increase was also attributable to higher income from limited partnerships and U.S. Government Treasury Inflation Protected Securities (“TIPS”) in the current year. 137 Our fixed annuities business decreased $18 million largely attributable to lower average invested assets due to block runoff in the current year. Net investment gains (losses) The increase in net investment gains in our long-term care insurance business was primarily related to net gains from the sale of U.S. government securities in the current year due to portfolio rebalancing and asset exposure as a result of the prolonged low interest rate environment. The change was also attributable to higher unrealized gains from changes in the fair value of equity securities in the current year. Our life insurance business had net investment gains of $4 million in the current year compared to net investment losses of $2 million in the prior year. The The decrease in net investment losses in our fixed annuities business was primarily driven by higher derivative gains, partially offset by higher losses on embedded derivatives related to our fixed indexed annuity products in the current year. Benefits and expenses Benefits and other changes in policy reserves Our long-term care insurance business decreased $15 million primarily due to an increase in claim terminations driven mostly by higher mortality in the current year and from favorable development on incurred but not reported claims. Given the lower new claim counts submitted during COVID-19, incurred but not reported reserves were strengthened by $24 million reflecting our assumption that new claim incidence during this period will ultimately return to normal levels, partially offsetting the favorable development on incurred but not reported claims. These decreases were partially offset by higher incremental reserves of $50 million recorded in connection with an accrual for profits followed by losses, aging of the in-force block (including higher frequency of new claims), and higher severity of new claims in the current year. The decrease was also partially offset by a $33 million less favorable impact from reduced benefits in the current year related to in-force rate actions approved and implemented. Our life insurance business increased $41 million primarily attributable to higher mortality in our universal and term universal life insurance products in the current year compared to the prior year and from higher reserves in our 10-year term universal life insurance block entering its post-level premium period during the premium grace period. Our fixed annuities business decreased $30 million principally from $17 million of unfavorable charges in the prior year that did not recur related to loss recognition testing and higher mortality in our single premium immediate annuity products in the current year. Interest credited. Interest expense. Provision for income taxes. 138 Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
139 The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-term care insurance business increased $70 million primarily from in-force rate actions approved and implemented The adjusted operating loss available to Genworth Financial Inc.’s common stockholders 10-year term universal life insurance block entering its post-level premium period during the premium grace period, Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Revenues Premiums Our long-term care insurance business increased in-force rate actions approved and implemented, partially offset by policy terminations and policies enteringpaid-up status in the current year.Our life insurance business decreased Our long-term care insurance business increased $31 million largely from higher average invested assets and higher income from limited partnerships, partially offset by lower income on TIPS in the current year. 140 Our life insurance business decreased Our fixed annuities business decreased Net investment gains (losses) Net investment gains in our long-term care insurance business Net investment gains in our life insurance business Policy fees and other income. in-force and higher ceded reinsurance costs in the current year.Benefits and expenses Benefits and other changes in policy reserves Our long-term care insurance business in-force block (including higher frequency of new claims), higher incremental reserves of Our life insurance business increased 10-year term universal life insurance block entering its post-level premium period during the premium grace period and from higher mortality in Our fixed annuities business Interest . The increase was predominantly related to our long-term care insurance business principally from higher commissions and premium taxes in the current year associated with our in-force rate action plan. Amortization of deferred acquisition costs and intangibles Our long-term care insurance business decreased $6 million primarily related to higher persistency on policies that are not on active claim. 141 Our life insurance business increased 20-year term life insurance block entering its post-level premium period Interest expense. non-recourse funding obligations, write-off of $4 million in deferred borrowing Provision higher pre-tax income in the U.S. Life Insurance selected operating performance measures Long-term care insurance The following table sets forth selected operating performance measures regarding our
The loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. Net earned premiums increased in-force rate actions approved and implemented, partially offset by policy terminations and policies enteringpaid-up status in the current year.The loss ratio decreased Life insurance The following
We no longer solicit sales of our traditional life insurance products; however, we continue to service our existing blocks of business. Term and whole life insurance Net earned premiums decreased mainly attributable to the continued runoff of our term life insurance products in the current year. Life insurance in-force also decreased as a result of the continued runoff of our term life insurance products in the current year, including higher lapses primarily associated with a large20-year term life insurance block entering its post-level premium period.Universal life insurance Net deposits decreased for the nine months ended September 30, 2020 principally from $50 million of funding agreements issued with the Federal Home Loan Bank (“FHLB”) of Atlanta in the prior year that did not recur, lower renewals in the current year and from the continued runoff of our in-force block. 143 Fixed annuities The following table sets forth selected operating performance measures regarding our fixed annuities business as of or for the dates indicated:
We no longer solicit sales of our traditional fixed annuity products; however, we continue to service our existing block of business. Account value decreased compared to December 31, 2019 as surrenders, benefits and net unrealized investment losses exceeded interest credited. Account value was also lower compared to June 30, 2020 as surrenders and benefits outpaced interest credited. Runoff segment COVID-19 The most significant impacts from COVID-19 in our Runoff segment are related to the current low interest rate environment and volatile equity While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on our Runoff segment will depend on the length and severity of the pandemic and shape of the economic recovery. We could see additional losses and declines in statutory risk-based capital driven by increases to the required capital supporting our variable annuity products, as a result of the decline in equity markets and low interest rates. For a further discussion of the impact of interest rates, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 2019 Annual Report on Form10-K. Trends and conditions Results of our Runoff segment are affected primarily by investment performance, interest rate levels, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our Runoff segment can significantly impact our regulatory capital requirements, distributable earnings and liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate the impacts. In addition, we may consider reinsurance opportunities to further mitigate volatility in results and manage capital in the future. 144 Equity market volatility and interest rate movements have caused fluctuations in the results of our variable annuity products and regulatory capital requirements. In the future, equity and interest rate market performance and volatility could result in additional gains or losses in these products although associated hedging activities are expected to partially mitigate these impacts. Segment results of operations Three Months Ended The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
Adjusted operating income Revenues Net investment 145 The change to net investment gains in the current year Benefits and expenses Amortization of deferred acquisition costs and intangibles decreased mainly related to lower DAC amortization in our variable annuity products principally due to favorable equity market performance in the current year. Provision for income taxes Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
146 Adjusted operating income available to Genworth Financial, Inc.’s common stockholders Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased predominantly from less favorable equity market performance and a decline in interest rates in the current year. Revenues Net investment income increased primarily driven by higher policy loan income in our corporate-owned life insurance products and higher average invested assets in the variable annuity products in the current year. Net investment losses increased largely related to higher losses on embedded derivatives associated with our variable annuity products with GMWBs, partially offset by higher derivative gains in the current year. Benefits and expenses Benefits and other changes in policy reserves increased primarily attributable to higher GMDB reserves in our variable annuity products due to Amortization of deferred acquisition costs and intangibles increased mainly related to higher DAC amortization in our variable annuity products principally from Provision (benefit) for income taxes pre-tax loss in the currentRunoff selected operating performance measures Variable annuity and variable life insurance products The following table sets forth selected operating performance measures regarding our variable annuity and variable life insurance products as of or for the dates indicated:
We no longer solicit sales of our variable annuity or variable life insurance Account value increased compared to June 30, 2020 primarily to favorable equity market performance and decreased compared to December 31, 2019 primarily related to 147 Institutional products The following table sets forth selected operating performance measures regarding our institutional products as of or for the dates indicated:
Account value related to our institutional products Corporate and Other Activities Results of operations Three Months Ended The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders increased primarily related to lower tax benefits, partially offset by lower interest expense in the current year. Revenues Net investment losses in the current year were primarily driven by derivative losses. Net investment gains in the prior year were largely from net gains from the sale of investment securities and derivative gains. Benefits and expenses Interest expense decreased largely driven by the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020. The provision for income taxes for the three months ended September 30, 2020 was primarily driven by tax expenses from gains on forward starting swaps settled prior to the enactment of the TCJA, unfavorable provision 149 to return adjustments, foreign operations and other nondeductible expenses, partially offset by a tax benefit related to the pre-tax loss. The benefit for income taxes for the three months ended September 30, 2019 was primarily from a tax benefit associated with the pre-tax loss, as well as tax benefits from gains on forward starting swaps settled prior to the enactment of the TCJA, favorable provision to return adjustments, foreign operations and gains related to the Global Intangible Low Taxed Income (“GILTI”) provision of the TCJA. Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders decreased primarily related to lower interest expense and Revenues Net investment income increased 150 The change to net investment gains in the current year from net investment losses in the prior year was predominantly related to derivative gains in the current year compared to derivative losses in the prior year. The decrease in policy fees and other income was primarily related to losses from non-functional currency remeasurement transactions in the current year compared to gains in the prior year. Benefits and expenses Acquisition and operating expenses, net of deferrals, Interest expense decreased largely driven by the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June The pre-tax Investments and Derivative Instruments Trends and conditions Investments—credit and investment markets During the COVID-19. The Credit markets 151 liability management measures taken by companies and minimal negative credit rating migration in the third quarter of 2020. However, this activity leveled off in August 2020 as the broader market recovery slowed. A resurgence of localized COVID-19 cases across Europe and other parts of the globe has sparked new economic shutdowns and concerns over future containment of the virus which may hamper the pace of the global economic recovery. Political gridlock on new fiscal stimulus measures and the upcoming U.S. presidential election have contributed to increased market volatility as concerns over the election results, including the potential for a contested election, and drastic policy shifts under a new administration weigh on the At the COVID-19 to provide alternative forms of relief for a specified period of time. Most of our borrowers are current on payments and we do not anticipate a significant impact from troubled debt restructurings in 2020.The United Kingdom completed its exit from the European Union (“Brexit”) on January 31, 2020. In accordance with the current withdrawal agreement, the legal exit is followed by a transition period that ends on December 31, 2020, during which the United Kingdom continues to remain within the European Union’s single market and customs union. During the transition period, the United Kingdom is expected to negotiate and finalize a trade agreement with the European Union which will lay out the terms of the future trading relation between the two parties. The nature, timing and implications of these trade negotiations remain uncertain. Our investment portfolio maintained approximately As of Derivatives Several of our master swap agreements previously contained credit downgrade provisions that allowed either party to assign or terminate the derivative transaction if the other party’s long-term unsecured credit or financial strength rating was below the limit defined in the applicable agreement. We renegotiated with many of our counterparties to remove the credit downgrade provisions from the master swap agreements entirely or replace them with a provision that allows the counterparty to terminate the derivative transaction if the RBC ratio of the applicable insurance company goes below a certain threshold and as of As of 152 serve as guarantors of our obligations to the CME, the customer agreements contain broad termination provisions that are not specifically dependent on ratings. As of over-the-counter (“OTC”) derivative transactions pursuant to which we have posted aggregate independent amounts of In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from the 1-, 3- and6-month rates available for LIBOR. Upon the announcement, we formed a working group comprised of finance, investments, derivative, and tax professionals, as well as lawyers (the “Working Group”) to evaluate contractsand perform analysis of our LIBOR-based derivative instrument and investment exposure, as well as debt (including subordinated debt and Federal Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment, as a result of the elimination of LIBOR. The Working Group took inventory of all investments with LIBOR exposure and identified nearly 400 instruments. We employ derivatives primarily for the purpose of hedging interest rate risk. The more closely a rate hedging instrument aligns with Treasury rate movements, the more effective it is. As a result, to the extent changes in SOFR in relation to Treasury movements were to differ meaningfully from those of LIBOR, a SOFR-based hedge could be relatively less effective. We currently track both LIBOR and SOFR changes and analyze each in comparison to Treasury rate movements. We have discovered that the difference between the two comparisons is de minimis. Therefore, we do not believe a move to SOFR will have a material impact on our derivatives portfolio. Although we expect a minimal impact from this conversion, we remain actively engaged with the broader financial services community on the topic of SOFR, including conversations with peers, derivatives clearinghouses, bilateral dealers and external legal counsel. With regard to derivatives, we expect the process for implementing SOFR as a replacement rate to be relatively seamless. The International Swap and Derivatives Association (“ISDA”) has developed a contractual supplement to derivatives trading documentation that includes triggers and fallbacks for determining the replacement for a benchmark rate. The supplement may be agreed to between counterparties or through an ISDA protocol. In addition, ISDA has drafted an amendment to the 2006 Interbank Offered Rate definitions and a related protocol for legacy transactions. For our other instruments and contracts, including investments, debt and reinsurance contracts, there is a wide variety in replacement language ranging from a rate freeze to silence on the matter. With respect to instruments that include a rate replacement, we will comply with the process prescribed by each instrument. For investments that do not contain such a replacement, we will generally endeavor to agree upon a replacement rate with our counterparties well in advance of LIBOR’s transition. In some cases, such as our long-term junior subordinated notes that mature in 2066 and are linked to three-month LIBOR, we may decide not to replace LIBOR which would lock-in the last published rate. We understand that the investment community is inclined to adopt SOFR as a substitute rate. Therefore, the adoption of SOFR will add certainty to the process of replacing LIBOR as the reference rate for many instruments. We do acknowledge the complications in calculating the credit spread necessary to equate SOFR to LIBOR and will monitor the potential risk.We are at different stages of assessing operational readiness for LIBOR cessation related to our various instruments. These stages range from derivatives, where we are fully operationally ready, to other products and instruments, as well as tax impacts, where we have just begun our assessment process. Our Working Group will 153 continue to monitor the process of elimination and replacement of LIBOR. Since the initial announcement, we have terminated a portion of our LIBOR-based swaps and entered into alternative rate swaps. In anticipation of the elimination of LIBOR, we plan to continue to convert our remaining LIBOR-based derivatives in a similar manner. In addition, our non-recourse funding obligations with interest rates based onone-month LIBOR were redeemed in January 2020. We expect to implement additional measures that we believe will ease the transition from LIBOR. Even though we have begun to take these actions, as described above, it is too early to determine the ultimate impact the elimination of LIBOR will have on our results of operations or financial condition.Investment results The following
154 Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we measure our investment performance for management purposes. Yields are annualized, for interim periods, and are calculated as net investment income as a percentage of average quarterly asset carrying values except for fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value adjustments and securities lending activity, which is included in other invested assets and is calculated net of the corresponding securities lending liability. For the three months ended The following table sets forth net investment gains (losses) for the periods indicated:
Three Months Ended We recorded net gains related to the sale of available-for-sale fixed maturity securities of 155
We recorded a $4 million write-down of available-for-sale fixed maturity securities during the three months ended September 30, 2020 under the newly adopted current expected credit loss standard associated with the write-down of securities we intend to sell or will be required to sell prior to recovery of the amortized cost basis. We recorded $25 million of higher net gains on limited partnerships during the three months ended September 30, 2020 primarily driven by Net investment gains related to derivatives of $22 million during the three months ended Net investment losses related to derivatives of $29 million during the three months ended September 30, 2019 were primarily associated with various hedging programs that support our Australia Mortgage Insurance segment, as well as our fixed indexed annuity and Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019 We recorded net gains related to the sale of available-for-sale fixed maturity securities of $457 million during the nine months ended September 30, 2020 driven primarily from the sale of U.S. government securities due to portfolio rebalancing and asset exposure management as a result of the prolonged low interest rate environment. We recorded net gains related to the sale of available-for-sale fixed maturity securities of $63 million during the nine months ended September 30, 2019. We recorded a $5 million credit loss and a $4 million write-down of available-for-sale fixed maturity securities, as well as credit losses related to bank loan investments and off-balance sheet credit exposures of $6 million and $3 million, respectively, during the nine months ended September 30, 2020 under the newly adopted current expected credit loss standard reflecting emerging credit distress due mostly to COVID-19. The change to net unrealized losses on equity securities We 156 Investment portfolio The following table sets forth our cash, cash equivalents, restricted cash and invested assets as of the dates indicated:
For a discussion of the change in cash, cash equivalents, restricted cash and invested assets, see the comparison for this line item under “—Consolidated Balance Sheets.” See note 4 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to our investment portfolio. We hold fixed maturity and equity securities, derivatives, embedded derivatives, securities held as collateral and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of Fixed maturity securities As of available-for-sale were as follows:
As of December 31, 2019, the amortized cost or cost, gross unrealized gains (losses) and fair value of our fixed maturity securities classified as available-for-sale were as follows:
Fixed maturity securities increased $4.1 billion compared to December 31, 2019 principally from an increase in unrealized gains related to a decrease in interest rates, as well as purchases exceeding sales, maturities and repayments in the current year. 159
Other invested assets The following table sets forth the carrying values of our other invested assets as of the dates indicated:
Derivatives increased largely from a decrease in interest rates in the current year. Limited partnerships increased primarily from additional capital investments, partially offset by Derivatives The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:
The The number of policies related to our embedded derivatives decreased as these products are no longer being offered and continue to runoff. Consolidated Balance Sheets Total assets Cash, cash equivalents, restricted cash and invested assets non-recourse funding obligations originally due in 2050, DAC decreased $213 million principally associated with higher amortization largely driven by an increase Reinsurance recoverable decreased $315 million mainly attributable to the runoff of our structured settlement products ceded to Union Fidelity Life Insurance Company, an affiliate of our former parent, General Electric Company (“GE”). We also recorded $44 million of expected credit losses in the current year associated with adopting the new accounting guidance. Deferred tax asset decreased Separate account assets decreased $408 million primarily due to surrenders, partially offset by favorable equity market performance in the current year. Total liabilities Future policy benefits in-force block and 161 Policyholder account balances increased Liability for policy and contract claims increased in-force block, as well as higher severity, partially offset by an increase in claim terminations driven mostly by higher mortality and favorable development onNon-recourse funding obligations decreased $311 million due to the early redemption of Rivermont I’s outstandingnon-recourse funding obligations originally due in 2050.Long-term borrowings Liabilities related to discontinued operations increased $389 million predominantly from a promissory note issued in the current year associated with the settlement agreement reached with AXA. See note 14 in our unaudited condensed consolidated financial statements under “Item 1 — Financial Statements” for additional details. Total equity We reported a net loss available to Genworth Financial, Inc.’s common stockholders of Derivatives qualifying as hedges and unrealized gains on investments increased Liquidity and Capital Resources Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth needs. 162 Genworth and subsidiaries The following table sets forth our unaudited condensed consolidated cash flows for the
Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments typically exceed policy acquisition costs, benefits paid, redemptions and operating expenses. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. Positive cash flows from operating activities are then invested to support the obligations of our insurance and investment products and required capital supporting these products. In analyzing our cash flow, we focus on the change in the amount of cash available and used in investing activities. Changes in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on, universal life insurance and investment contracts; deposits from Federal Home Loan Banks; the issuance and acquisition of debt and equity securities; the issuance and repayment or repurchase of borrowings and non-recourse funding obligations; and other capital transactions.We had We had higher cash outflows from investing activities We had non-recourse funding obligations originally due in 2050 and the repurchase of We engage in certain securities lending transactions for the purpose of enhancing the yield on our investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently indemnified against counterparty credit risk by the intermediary. Genworth—holding company Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries and do not have any significant operations of their own. Dividends from their respective subsidiaries, payments to them under tax sharing and expense reimbursement arrangements with their subsidiaries and proceeds from borrowings or securities issuances are their principal sources of cash to meet their obligations. Insurance laws 163 and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth Holdings by their insurance subsidiaries. We expect dividends paid by the insurance subsidiaries will vary depending on strategic objectives, capital levels, regulatory requirements and business performance, including the expected adverse impacts from COVID-19. The primary uses of funds at Genworth Financial and Genworth Holdings include payment of holding company general operating expenses (including Our Board of Directors has suspended the payment of stockholder dividends on our Genworth Financial common stock indefinitely. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will be dependent on many factors including the receipt of dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial strength ratings and such other factors as the Board of Directors deems relevant. In addition, our Board of Directors has suspended repurchases of our Genworth Financial common stock under our stock repurchase program indefinitely. The resumption of our stock repurchase program will be at the discretion of our Board of Directors. Genworth Holdings had During the Due to the macroeconomic uncertainty resulting from COVID-19, we 164 Regulated insurance subsidiaries The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities associated with their various insurance and investment products, operating costs and expenses, the payment of dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt obligations and income taxes. Liabilities arising from insurance and investment products include the payment of benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements. Our insurance subsidiaries have used cash flows from operations and investment activities to fund their liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived from premiums, annuity deposits and insurance and investment product fees and other income, including commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment management fees and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from repayments of principal, investment income and, as necessary, sales of invested assets. Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits without forced sales of investments. Products having liabilities with longer durations, such as certain life insurance and long-term care insurance policies, are matched with investments having similar duration such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of As of Capital resources and financing activities Capital resources On August 21, 2020, GMHI issued $750 million of its 6.50% senior notes due in 2025. Interest on the notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021. These notes mature on August 15, 2025. GMHI may redeem the notes, in whole or in part, at any time prior to February 15, 2025 at its option, by paying a make-whole premium, plus accrued and unpaid interest, if any. At any time on or after February 15, 2025, GMHI may redeem the notes, in whole or in part, at its option, at 100% of the principal amount, plus accrued and unpaid interest. The notes contain customary events of default, which subject to certain notice and cure conditions, can result in the acceleration of the principal and accrued interest on the outstanding notes if GMHI breaches the terms of the indenture. On July 3, 2020, GFMIPL issued AUD$147 million floating rate subordinated notes due in July 2030 in exchange for AUD$147 million of its floating rate subordinated notes due in July 2025 and issued an additional 165 AUD$43 million floating rate subordinated notes due in July 2030. These notes will pay interest quarterly at a floating rate equal to the three-month bank bill swap reference rate plus a margin of a minimum of 5.0% per annum. GFMIPL has an option to redeem the notes at face value on July 3, 2025 and every interest payment date thereafter up to and excluding the maturity date, and for certain tax and regulatory events (in each case subject to APRA’s prior written approval). Following the settlement of these transactions, GFMIPL had outstanding floating rate subordinated notes of AUD$53 million due in July 2025 and AUD$190 million due in July 2030. On August 24, 2020, GFMIPL redeemed AUD$5 million of its floating rate subordinated notes due in July 2025 and paid accrued interest thereon. GFMIPL redeemed the remaining AUD$48 million of its floating rate subordinated notes due in July 2025 on October 6, 2020. Financing activities During the nine months ended September 30, 2020, Genworth Holdings repurchased $84 million principal amount of its senior notes with 2021 maturity dates for a pre-tax gain of $4 million. In March 2020, Genworth Holdings repaid a $200 million intercompany note due to GLIC with a maturity date of March 31, 2020. On January 21, 2020, Genworth Holdings early redeemed $397 million of its 7.70% senior notes originally scheduled to mature in June 2020 for a pre-tax loss of $9 million. The senior notes were fully redeemed with a cash payment of $409 million, comprised of the outstanding principal balance of $397 million, accrued interest of $3 million and a make-whole premium of $9 million.In January 2020, upon receipt of approval from the Director of Insurance of the State of South Carolina, Rivermont I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, redeemed all of its $315 million of outstanding non-recourse funding obligations due in 2050. The early redemption resulted in apre-tax loss of $4 million from thewrite-off of deferred borrowing costs.In Our evaluation of our ability to meet our obligations include the Genworth Holdings has $338 million of its 7.20% senior notes maturing in February 2021 and $659 million of its 7.625% senior notes maturing in September 2021, excluding deferred costs; interest payments on our senior notes are forecasted to be $144 million for the next twelve months; we do not expect to receive further dividends in 2020 from our mortgage insurance subsidiaries due to higher delinquencies and the impact to capital levels resulting from COVID-19; beginning in 2021, until the secured promissory note to AXA is paid, dividends above $50 million from our U.S. mortgage insurance subsidiaries are subject to mandatory prepayment conditions; the receipt of dividends and sale proceeds above certain thresholds from our Australian mortgage insurance business are also subject to mandatory prepayment conditions; and due to the uncertain macroeconomic conditions surrounding COVID-19, on September 30, 2020, Genworth and China Oceanwide agreed to a sixteenth waiver and agreement extending the merger 166
Absent accessing additional liquidity through third party sources and/or the completion of the China Oceanwide transaction, Genworth Holdings expects to have a cash shortfall of approximately $215 million which raises doubt about our ability to meet our financial obligations for the next year. While conditions and events occurring and expected to occur raise doubt about our ability to meet our financial obligations for the next year, we believe management’s plans alleviate this doubt. During the quarter ended September 30, 2020, we successfully executed a debt financing through our U.S. mortgage insurance business, a transaction we deemed probable in our previous assessment of our ability to continue as a going concern. Because of the uncertainty regarding the completion of the China Oceanwide transaction, we are actively taking steps toward raising capital by preparing for a possible public offering of our U.S. mortgage insurance business, subject to market conditions. In addition to a partial sale of our U.S. mortgage insurance business through a public offering, we are also evaluating the possibility of the issuance of convertible, equity-linked securities or another transaction, prior to our senior notes maturing in September 2021. We believe In addition to management’s plans, we believe additional sources of cash our liquidity, see “Item 1A—Risk Factors—Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we may seek additional capital but may be unable to obtain it” and “Litigation and regulatory investigations or other actions are common in the insurance business and may result in financial losses and harm our reputation” in our 2019 Annual Report on Form 10-K. 167 Contractual obligations and commercial commitments We have experienced a significant increase in loss reserves in our U.S. mortgage insurance business during the nine months ended September 30, 2020 driven mostly by higher new delinquencies from borrower forbearance due to COVID-19. We expect a large portion of these delinquencies to cure before becoming an active claim; however, reserves recorded related to borrower forbearance have a high degree of estimation. Therefore, it is possible we could have higher contractual obligations related to these loss reserves if they do not cure as we expect. In addition, as disclosed above, 10-K filed on February 27, 2020. For additional details related to our commitments, see note 12 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”Supplemental Condensed Consolidating Financial Information Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes. Genworth Holdings is a direct, 100% owned subsidiary of Genworth Financial. The following supplemental 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 of Regulation S-X, as amended by the SEC on March 2, 2020. In the first quarter of 2020, we early applied new rules issued by the SEC by removing comparative prior year condensed consolidating financial information herein and presenting the supplemental condensed consolidating financial information outside the footnotes of our interim unaudited condensed consolidated financial statements. We continue to provide prior year annual period condensed consolidating financial information in accordance with the new amended rules.The supplemental condensed consolidating financial information presents the condensed consolidating balance sheet information as of The supplemental condensed consolidating financial information reflects Genworth Financial (“Parent Guarantor”), Genworth Holdings (“Issuer”) and each of Genworth Financial’s other direct and indirect subsidiaries (the “All Other Subsidiaries”) on a combined basis, none of which guarantee the senior notes or subordinated notes, as well as the eliminations necessary to present Genworth Financial’s financial information on a consolidated basis and total consolidated amounts. The accompanying supplemental 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. The following table presents the condensed consolidating balance sheet information as of
The following table presents the condensed consolidating balance sheet information as of December 31, 2019:
The following table presents the condensed consolidating income statement information for the
The following table presents the condensed consolidating income statement information for the year ended December 31, 2019:
The following table presents the condensed consolidating comprehensive income statement information for the
The following table presents the condensed consolidating comprehensive income statement information for the year ended December 31, 2019:
The following table presents the condensed consolidating cash flow statement information for the
The following table presents the condensed consolidating cash flow statement information for the year ended December 31, 2019:
Our insurance company subsidiaries are restricted by state and foreign laws and regulations 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 results as of December 31, 2019, in accordance with applicable dividend restrictions, our subsidiaries could pay dividends of approximately $300 million to us in 2020, and the remaining net assets are considered restricted. While the $300 million is considered unrestricted, our insurance subsidiaries In September 2020, certain GSE Restrictions were imposed with respect to capital on our U.S. mortgage insurance business. These restrictions will remain in effect until the later of six quarters or until the following collective GSE Conditions are met: a) approval of GMICO’s plan to secure additional capital, if needed, b) GMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s or Fitch for two consecutive quarters and c) certain Genworth financial metrics are achieved. Prior to the satisfaction of these conditions, the GSE Restrictions require: GMICO to maintain 115% of PMIERs minimum required assets through 2021, 120% during 2022 and 125% thereafter; GMHI to retain $300 million of its holding company cash that can be drawn down exclusively for its debt service or to contribute to GMICO to meet its regulatory capital needs including PMIERs; and written approval must be received from the GSEs prior to any additional debt issuance by either GMICO or GMHI. The GSE Restrictions govern the period prior to the close of the planned China Oceanwide transaction. The GSEs issued separate conditions and restrictions in September 2020, which place identical restrictions on our U.S. mortgage insurance business, if the China Oceanwide transaction closes. See “Item 2—U.S. Mortgage Insurance segment—trends and conditions” for additional details. Securitization Entities There were no off-balance sheet securitization transactions during the New Accounting Standards For a discussion of recently adopted accounting standards, see note 2 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”
Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. Except as disclosed below and in our executive summary under “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Summary,” there were no other material changes in our market risks since December 31, 2019. See “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of recent market conditions, including changes in interest rates. 176 We are exposed to foreign currency exchange risks associated with fluctuations in foreign currency exchange rates against the U.S. dollar resulting from our international operations and non-U.S.-denominated securities. Our primary international operations are located in
Evaluation of Disclosure Controls and Procedures As of 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of Changes in Internal Control Over Financial Reporting During the Quarter Ended During the three months ended September 30, 2020, PART II—OTHER INFORMATION
See note 12 in our unaudited condensed consolidated financial statements under “Part 1—Item 1—Financial Statements” for a description of material pending litigation and regulatory matters affecting us.
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 2019 Annual Report on Form 10-K, which together describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. Except as disclosed below, there have been no material changes to the risk factors set forth in the above-referenced filing as of COVID-19 could materially adversely affect our financial condition and results of operations. COVID-19 has brought unprecedented changes to the global economy. Large scale disruption in the U.S. economy is leaving several industries non-operational through state and federal mandated shutdowns in an effort to contain the spread of COVID-19. Unemployment claims have increased 177 significant risks, including interest rate declines, significantly higher levels of unemployment, liquidity pressures, credit risk on our investment portfolio, equity market volatility, and operational, information technology and personnel risks. We could experience significant declines in asset valuations and potential material asset impairments, as well as unexpected changes in persistency rates, as policyholders and contractholders who are affected by the pandemic may not be able to meet their contractual obligations, such as premium payments on their insurance policies, deposits to their investment products, or mortgage payments on their loans insured by our mortgage insurance policies. The pandemic has decreased historically low interest rates further and could also significantly increase our mortality and morbidity experience and/or impact our ability to successfully implement in-force rate actions (including increased premiums and associated benefit reductions), all of which could result in higher reserve charges and an adverse impact to our financial results in our U.S. life insurance businesses. Regarding our mortgage insurance businesses, COVID-19 has resulted in significantly higher levels of unemployment, which need for mortgage insurance and have an adverse effect on home prices, all of which would result in a significant adverse impact to our financial condition and results of operations in our mortgage insurance businesses. Losses in our mortgage insurance businesses could lead to lower credit ratings and impaired capital, which could hinder our mortgage insurance businesses from offering their products, preclude them from returning capital to our holding company for prolonged periods of time, and thereby harm our liquidity. COVID-19 could also disrupt medical and financial services and has resulted in us practicing social distancing with our employees through office closures, all of which could disrupt our normal business operations. The level of disruption, the economic downturn, the 178 Item 6. Exhibits
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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