0001276520 us-gaap:InterestRateSwapMember us-gaap:OtherLiabilitiesMember us-gaap:FairValueInputsLevel3Member 2022-03-31
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
FORM 10-Q
 
 
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
to
    
Commission file number
001-32195
 
 
 

GENWORTH FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
80-0873306
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
  
6620 West Broad Street
Richmond, Virginia
 
23230
(Address of principal executive offices)
 
(Zip Code)
(804)
281-6000
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer ☒  Accelerated filer ☐
    
Non-accelerated filer ☐  Smaller reporting company ☐
    
     Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒
Securities registered pursuant to Section 12(b) of the Act:
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
As of April 26,July
27
, 2022, 510,505,341503,715,868 shares of Class A Common Stock, par value $0.001 per share, were outstanding.
 
 
Table of Contents
TABLE OF CONTENTS
 
     
Page
 
PART I—FINANCIAL INFORMATION
Item 1. 
3
Item 1.       Financial Statements
   3 
Condensed Consolidated Balance Sheets as of March 31,June 30, 2022 (Unaudited) and December 31, 2021
   3 
Condensed Consolidated Statements of Income for the three and six months ended March 31,June 30, 2022 and 2021 (Unaudited)
   4 
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31,June 30, 2022 and 2021 (Unaudited)
   5 
Condensed Consolidated Statements of Changes in Equity for the three and six months ended March 31,June 30, 2022 and 2021 (Unaudited)
   6 
Condensed Consolidated Statements of Cash Flows for the threesix months ended March 31,June 30, 2022 and 2021 (Unaudited)
   78 
Notes to Condensed Consolidated Financial Statements (Unaudited)
   89 
Item 2.
Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations
   6574 
Item 3.
Item 3.       Quantitative and Qualitative Disclosures About Market Risk
   125145
Item 4.
Controls and Procedures
145 
Item 4.       Controls and ProceduresPART II—OTHER INFORMATION
  125
PART II—OTHER INFORMATION
Item 1.		 126
Item 1.       Legal Proceedings
   126147 
Item 1A.
Item 1A.    Risk Factors
   126147 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
147
Item 6.
Exhibits
   127148 
Signatures
   128149 
 
2
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except par value and share amounts)
 
    
  
March 31,
2022
 
December 31,
2021
   
June 30,
2022
 
December 31,
2021
 
  
(Unaudited)
     
(Unaudited)
   
Assets
          
Investments:
          
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,280 and $52,611 and allowance for credit losses of $0 as of March 31, 2022 and December 31, 2021)
  $55,027  $60,480 
Fixed maturity securities
available-for-sale,
at fair value (amortized cost of $
51,248
and $
52,611
and allowance for credit losses of $
—
as of June 30, 2022 and December 31, 2021)
  $49,286  $60,480 
Equity securities, at fair value
   230   198    243   198 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of March 31, 2022 and December 31, 2021)
   6,938   6,856 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of June 30, 2022 and December 31, 2021)
   7,088   6,856 
Less: Allowance for credit losses
   (25)   (26)    (23)   (26) 
  
 
  
 
   
 
  
 
 
Commercial mortgage loans, net
   6,913   6,830    7,065   6,830 
Policy loans
   2,028   2,050    2,178   2,050 
Limited partnerships
   2,007   1,900    2,123   1,900 
Other invested assets
   671   820    573   820 
  
 
  
 
   
 
  
 
 
Total investments
   66,876   72,278    61,468   72,278 
Cash, cash equivalents and restricted cash
   1,291   1,571    1,724   1,571 
Accrued investment income
   696   647    553   647 
Deferred acquisition costs
   1,310   1,146    2,314   1,146 
Intangible assets
   159   143    236   143 
Reinsurance recoverable
   16,821   16,868    16,691   16,868 
Less: Allowance for credit losses
   (57)   (55)    (60)   (55) 
  
 
  
 
   
 
  
 
 
Reinsurance recoverable, net
   16,764   16,813    16,631   16,813 
Other assets
   440   388    412   388 
Deferred tax asset
   421   119    1,047   119 
Separate account assets
   5,530   6,066    4,683   6,066 
  
 
  
 
   
 
  
 
 
Total assets
  $93,487  $99,171   $89,068  $99,171 
  
 
  
 
   
 
  
 
 
Liabilities and equity
          
Liabilities:
          
Future policy benefits
  $38,897  $41,528   $38,133  $41,528 
Policyholder account balances
   18,197   19,354    17,907   19,354 
Liability for policy and contract claims
   11,833   11,841    11,915   11,841 
Unearned premiums
   639   672    614   672 
Other liabilities
   1,416   1,511    1,468   1,511 
Long-term borrowings
   1,819   1,899    1,773   1,899 
Separate account liabilities
   5,530   6,066    4,683   6,066 
Liabilities related to discontinued operations
   4   34    4   34 
  
 
  
 
   
 
  
 
 
Total liabilities
   78,335   82,905    76,497   82,905 
  
 
  
 
   
 
  
 
 
Commitments and contingencies
   0    0     0    0  
 
Equity:
          
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 598 million and 596 million shares issued as of March 31, 2022 and December 31, 2021, respectively; 510 million and 508 million shares outstanding as of March 31, 2022 and December 31, 2021, respectively
   1   1 
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 600 million and 596 million shares issued as of June 30, 2022 and December 31, 2021, respectively; 508 million shares outstanding as of June 30, 2022 and December 31, 2021
   1   1 
Additional paid-in capital
   11,857   11,858    11,859   11,858 
Accumulated other comprehensive income (loss)
   2,610   3,861    (145)   3,861 
Retained earnings
   2,639   2,490    2,820   2,490 
Treasury stock, at cost (88 million shares as of March 31, 2022 and December 31, 2021)
   (2,700)   (2,700) 
Treasury stock, at cost (92 million and 88 million shares as of June 30, 2022 and December 31, 2021, respectively)
   (2,715)   (2,700) 
  
 
  
 
   
 
  
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
   14,407   15,510    11,820   15,510 
Noncontrolling interests
   745   756    751   756 
  
 
  
 
   
 
  
 
 
Total equity
   15,152   16,266    12,571   16,266 
  
 
  
 
   
 
  
 
 
Total liabilities and equity
  $93,487  $99,171   $89,068  $99,171 
  
 
  
 
   
 
  
 
 
See Notes to Condensed Consolidated Financial Statements
 
3
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited)
 
    
  
Three months ended
March 31,
   
Three months ended
June 30,
 
Six months ended
June 30,
 
  
    2022    
 
    2021    
   
2022
 
2021
 
2022
 
2021
 
Revenues:
              
Premiums
  $931  $968   $927  $947  $1,858  $1,915 
Net investment income
   764   801    787   844   1,551   1,645 
Net investment gains (losses)
   28   33    8   70   36   103 
Policy fees and other income
   169   183    159   180   328   363 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total revenues
   1,892   1,985    1,881   2,041   3,773   4,026 
  
 
  
 
   
 
  
 
  
 
  
 
 
Benefits and expenses:
              
Benefits and other changes in policy reserves
   1,139   1,218    764   1,161   1,903   2,379 
Interest credited
   125   131    125   127   250   258 
Acquisition and operating expenses, net of deferrals
   271   275    589   304   860   579 
Amortization of deferred acquisition costs and intangibles
   92   77    84   86   176   163 
Interest expense
   26   51    26   43   52   94 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total benefits and expenses
   1,653   1,752    1,588   1,721   3,241   3,473 
  
 
  
 
   
 
  
 
  
 
  
 
 
Income from continuing operations before income taxes
   239   233    293   320   532   553 
Provision for income taxes
   58   59    73   75   131   134 
  
 
  
 
   
 
  
 
  
 
  
 
 
Income from continuing operations
   181   174    220   245   401   419 
Income (loss) from discontinued operations, net of taxes
   (2)   21    (1)   (5)   (3)   16 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income
   179   195    219   240   398   435 
Less: net income from continuing operations attributable to noncontrolling interests
   30   0      38   —     68   —   
Less: net income from discontinued operations attributable to noncontrolling interests
   0     8    —     —     —     8 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $181  $240  $330  $427 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders:
              
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174   $182  $245  $333  $419 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (2)   13    (1)   (5)   (3)   8 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $181  $240  $330  $427 
  
 
  
 
   
 
  
 
  
 
  
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
              
Basic
  $0.30  $0.35   $0.36  $0.48  $0.65  $0.83 
  
 
  
 
   
 
  
 
  
 
  
 
 
Diluted
  $0.29  $0.34   $0.36  $0.47  $0.65  $0.82 
  
 
  
 
   
 
  
 
  
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
              
Basic
  $0.29  $0.37   $0.36  $0.47  $0.65  $0.84 
  
 
  
 
   
 
  
 
  
 
  
 
 
Diluted
  $0.29  $0.37   $0.35  $0.47  $0.64  $0.83 
  
 
  
 
   
 
  
 
  
 
  
 
 
Weighted-average common shares outstanding:
              
Basic
   508.3   506.0    509.0   507.0   508.6   506.5 
  
 
  
 
   
 
  
 
  
 
  
 
 
Diluted
   517.4   513.8    514.2   515.0   515.8   514.4 
  
 
  
 
   
 
  
 
  
 
  
 
 
     
See Notes to Condensed Consolidated Financial Statements
 
4
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 
         
   
Three months ended
 
   
March 31,
 
   
    2022    
  
    2021    
 
Net income
  $179  $195 
   
Other comprehensive income (loss), net of taxes:
         
Net unrealized gains (losses) on securities without an allowance for credit losses
   (1,051)   (322) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   0     2 
Derivatives qualifying as hedges
   (236)   (419) 
Foreign currency translation and other adjustments
   (5)   136 
   
 
 
  
 
 
 
Total other comprehensive income (loss)
   (1,292)   (603) 
   
 
 
  
 
 
 
Total comprehensive loss
   (1,113)   (408) 
Less: comprehensive income (loss) attributable to noncontrolling interests
   (11)   155 
   
 
 
  
 
 
 
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
  $(1,102)  $(563) 
   
 
 
  
 
 
 
   
Three months ended
June 30,
  
Six months ended
June 30,
 
   
    2022    
  
    2021    
  
2022
  
2021
 
Net income
  $219  $240  $398  $435 
Other comprehensive income (loss), net of taxes:
                 
Net unrealized gains (losses) on securities without an allowance for credit losses
   (2,432)   (58)   (3,483)   (380) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   —     4   —     6 
Derivatives qualifying as hedges
   (344)   211   (580)   (208) 
Foreign currency translation and other adjustments
   (7)   2   (12)   138 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total other comprehensive income (loss)
   (2,783)   159   (4,075)   (444) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total comprehensive income (loss)
   (2,564)   399   (3,677)   (9) 
Less: comprehensive income (loss) attributable to noncontrolling interests
   10   —     (1)   155 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders
  $(2,574)  $399  $(3,676)  $(164) 
   
 
 
  
 
 
  
 
 
  
 
 
 
See Notes to Condensed Consolidated Financial Statements
 
5
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in millions)
(Unaudited)
 
 
Three months ended June 30, 2022
 
 
Common
stock
 
Additional
paid-in

capital
 
Accumulated
other
comprehensive
income (loss)
 
Retained
earnings
 
Treasury
stock, at
cost
 
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
 
Noncontrolling
interests
 
Total
equity
 
Balances as of March 31, 2022
 $1  $11,857  $2,610  $2,639  $(2,700)  $14,407  $745  $15,152 
Comprehensive income (loss):
                
Net income
  —     —     —     181   —     181   38   219 
Other comprehensive loss, net of taxes
  —     —     (2,755)   —     —     (2,755)   (28)   (2,783) 
Total comprehensive income (loss)
            (2,574)   10   (2,564) 
Treasury stock acquired in connection with share repurchases
  —     —     —     —     (15)   (15)   —     (15) 
Dividends to noncontrolling interests
  —     —     —     —     —     —     (4)   (4) 
Stock-based compensation expense and exercises and other
  —     2   —     —     —     2   —     2 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Balances as of June 30, 2022
 $1  $11,859  $(145)  $2,820  $(2,715)  $11,820  $751  $12,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
Three months ended March 31, 2022
  
           
Total
      
Three months ended June 30, 2021
 
           
Genworth
      
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
 
     
Accumulated
     
Financial,
     
   
Additional
 
other
   
Treasury
 
Inc.’s
     
 
Common
 
paid-in
 
comprehensive
 
Retained
 
stock, at
 
stockholders’
 
Noncontrolling
 
Total
 
 
stock
 
capital
 
income (loss)
 
earnings
 
cost
 
equity
 
interests
 
equity
 
Balances as of December 31, 2021
 $1  $11,858  $3,861  $2,490  $(2,700)  $15,510  $756  $16,266 
Comprehensive income (loss):
                
Balances as of March 31, 2021
 $1  $12,011  $3,675  $1,771  $(2,700)  $14,758  $—    $14,758 
Comprehensive income:
                
Net income
  0     0     0     149   0     149   30   179   —     —     —     240   —     240   —     240 
Other comprehensive loss, net of taxes
  0     0     (1,251)   0     0     (1,251)   (41)   (1,292) 
           
 
  
 
  
 
 
Total comprehensive loss
            (1,102)   (11)   (1,113) 
Other comprehensive income, net of taxes
  —     —     159   —     —     159   —     159 
Total comprehensive income
            399   —     399 
Stock-based compensation expense and exercises and other
  0     (1)   0     0     0     (1)   0     (1)   —     7   —     —     —     7   —     7 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Balances as of March 31, 2022
 $1  $11,857  $2,610  $2,639  $(2,700)  $14,407  $745  $15,152 
Balances as of June 30, 2021
 $1  $12,018  $3,834  $2,011  $(2,700)  $15,164  $—    $15,164 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
 
Three months ended March 31, 2021
 
           
Total
     
           
Genworth
     
     
Accumulated
     
Financial,
     
   
Additional
 
other
   
Treasury
 
Inc.’s
     
 
Common
 
paid-in
 
comprehensive
 
Retained
 
stock, at
 
stockholders’
 
Noncontrolling
 
Total
 
 
stock
 
capital
 
income (loss)
 
earnings
 
cost
 
equity
 
interests
 
equity
 
Balances as of December 31, 2020
 $1  $12,008  $4,425  $1,584  $(2,700)  $15,318  $502  $15,820 
Sale of business that included noncontrolling interests
  0     0     0     0     0     0     (657)   (657) 
Comprehensive income (loss):
                
Net income
  0     0     0     187   0     187   8   195 
Other comprehensive income (loss), net of taxes
  0     0     (750)   0     0     (750)   147   (603) 
           
 
  
 
  
 
 
Total comprehensive income (loss)
            (563)   155   (408) 
Stock-based compensation expense and exercises and other
  0     3   0     0     0     3   0     3 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Balances as of March 31, 2021
 $1  $12,011  $3,675  $1,771  $(2,700)  $14,758  $0    $14,758 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
See Notes to Condensed Consolidated Financial Statements
 
6
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY, CONTINUED
(Amounts in millions)
(Unaudited)
  
Six months ended June 30, 2022
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of December 31, 2021 $1  $11,858  $3,861  $2,490  $(2,700)  $15,510  $756  $16,266 
Comprehensive income (loss):                                
Net income  —
  
   —
  
   —
  
   330   —
  
   330   68   398 
Other comprehensive loss, net of taxes  —
  
   —
  
   (4,006)   —
  
   —
  
   (4,006)   (69)   (4,075) 
Total comprehensive loss                      (3,676)   (1)   (3,677) 
Treasury stock acquired in connection with share repurchases  —
  
   —
  
   —
  
   —
  
   (15)   (15)   —
  
   (15) 
Dividends to noncontrolling interests  —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   (4)   (4) 
Stock-based compensation expense and exercises and other  —
  
   1   —
  
   —
  
   —
  
   1   —
  
   1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2022 $1  $11,859  $(145)  $2,820  $(2,715)  $11,820  $751  $12,571 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Six months ended June 30, 2021
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of December 31, 2020 $1  $12,008  $4,425  $1,584  $(2,700)  $15,318  $502  $15,820 
Sale of business that included noncontrolling interests  —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   (657)   (657) 
Comprehensive income (loss):                                
Net income  —
  
   —
  
   —
  
   427   —
  
   427   8   435 
Other comprehensive income (loss), net of taxes  —
  
   —
  
   (591)   —
  
   —
  
   (591)   147   (444) 
Total comprehensive income (loss)                      (164)   155   (9) 
Stock-based compensation expense and exercises and other  —
  
   10   —
  
   —
  
   —
  
   10   —
  
   10 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2021 $1  $12,018  $3,834  $2,011  $(2,700)  $15,164  $—
  
  $15,164 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See Notes to Condensed Consolidated Financial Statements
7
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
 
   
Three months ended
 
   
March 31,
 
   
    2022    
  
    2021    
 
Cash flows from (used by) operating activities:
         
Net income
  $179  $195 
Less (income) loss from discontinued operations, net of taxes
   2   (21) 
Adjustments to reconcile net income to net cash used by operating activities:
         
Amortization of fixed maturity securities discounts and premiums
   (34)   (32) 
Net investment (gains) losses
   (28)   (33) 
Charges assessed to policyholders
   (150)   (159) 
Acquisition costs deferred
   (2)   (2) 
Amortization of deferred acquisition costs and intangibles
   92   77 
Deferred income taxes
   57   59 
Derivative instruments, limited partnerships and other
   (105)   (113) 
Stock-based compensation expense
   10   11 
Change in certain assets and liabilities:
         
Accrued investment income and other assets
   (43)   (58) 
Insurance reserves
   249   326 
Current tax liabilities
   0     (4) 
Other liabilities, policy and contract claims and other policy-related balances
   (289)   (319) 
Cash used by operating activities — discontinued operations
   (30)   (174) 
   
 
 
  
 
 
 
Net cash used by operating activities
   (92)   (247) 
   
 
 
  
 
 
 
Cash flows from (used by) investing activities:
         
Proceeds from maturities and repayments of investments:
         
Fixed maturity securities
   730   1,031 
Commercial mortgage loans
   115   129 
Limited partnerships and other invested assets
   51   44 
Proceeds from sales of investments:
         
Fixed maturity and equity securities
   581   777 
Purchases and originations of investments:
         
Fixed maturity and equity securities
   (969)   (1,647) 
Commercial mortgage loans
   (197)   (142) 
Limited partnerships and other invested assets
   (137)   (91) 
Short-term investments, net
   (50)   28 
Policy loans, net
   14   3 
Proceeds from sale of business, net of cash transferred
   0     270 
Cash used by investing activities — discontinued operations
   0     (67) 
   
 
 
  
 
 
 
Net cash from investing activities
   138   335 
   
 
 
  
 
 
 
Cash flows from (used by) financing activities:
         
Deposits to universal life and investment contracts
   159   176 
Withdrawals from universal life and investment contracts
   (418)   (578) 
Repayment and repurchase of long-term debt
   (82)   (470) 
Other, net
   15   92 
   
 
 
  
 
 
 
Net cash used by financing activities
   (326)   (780) 
   
 
 
  
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $0 and $(1) related to discontinued operations)
   0     0   
   
 
 
  
 
 
 
Net change in cash, cash equivalents and restricted cash
   (280)   (692) 
Cash, cash equivalents and restricted cash at beginning of period
   1,571   2,656 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period
   1,291   1,964 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
   0     0   
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
  $1,291  $1,964 
   
 
 
  
 
 
 
   
Six months ended
June 30,
 
   
2022
  
2021
 
Cash flows from (used by) operating activities:
   
Net income
  $398  $435 
Less (income) loss from discontinued operations, net of taxes
   3   (16) 
Adjustments to reconcile net income to net cash from operating activities:
         
Amortization of fixed maturity securities discounts and premiums
   (84)   (80) 
Net investment (gains) losses
   (36)   (103) 
Charges assessed to policyholders
   (292)   (317) 
Acquisition costs deferred
   (1)   (3) 
Amortization of deferred acquisition costs and intangibles
   176   163 
Deferred income taxes
   128   132 
Derivative instruments, limited partnerships and other
   (163)   (189) 
Stock-based compensation expense
   20   25 
Change in certain assets and liabilities:
         
Accrued investment income and other assets
   (70)   (69) 
Insurance reserves
   494   507 
Current tax liabilities
   —
  
   (4) 
Other liabilities, policy and contract claims and other policy-related balances
   (205)   (60) 
Cash used by operating activities—discontinued operations
   (31)   (192) 
   
 
 
  
 
 
 
Net cash from operating activities
   337   229 
   
 
 
  
 
 
 
Cash flows from (used by) investing activities:
         
Proceeds from maturities and repayments of investments:
         
Fixed maturity securities
   1,495   2,220 
Commercial mortgage loans
   314   392 
Limited partnerships and other invested assets
   99   107 
Proceeds from sales of investments:
         
Fixed maturity and equity securities
   1,302   1,306 
Purchases and originations of investments:
         
Fixed maturity and equity securities
   (1,800)   (2,868) 
Commercial mortgage loans
   (568)   (531) 
Limited partnerships and other invested assets
   (297)   (240) 
Short-term investments, net
   (24)   (76) 
Policy loans, net
   14   28 
Proceeds from sale of business, net of cash transferred
   —
  
   270 
Cash used by investing activities—discontinued operations
   —
  
   (67) 
   
 
 
  
 
 
 
Net cash from investing activities
   535   541 
   
 
 
  
 
 
 
Cash flows from (used by) financing activities:
         
Deposits to universal life and investment contracts
   314   349 
Withdrawals from universal life and investment contracts
   (779)   (1,143) 
Repayment and repurchase of long-term debt
   (130)   (484) 
Dividends paid to noncontrolling interests
   (4)   —
  
 
Treasury stock acquired in connection with share repurchases
   (15)   —
  
 
Other, net
   (105)   65 
   
 
 
  
 
 
 
Net cash used by financing activities
   (719)   (1,213) 
   
 
 
  
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $— and $(1) related to discontinued operations)
   —
  
   1 
   
 
 
  
 
 
 
Net change in cash, cash equivalents and restricted cash
   153   (442) 
Cash, cash equivalents and restricted cash at beginning of period
   1,571   2,656 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period
   1,724   2,214 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
   —
  
   —
  
 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
  $1,724  $2,214 
   
 
 
  
 
 
 
See Notes to Condensed Consolidated Financial Statements
 
78
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Formation of Genworth and Basis of Presentation
Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of its common stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc. (“Genworth Financial”) upon the completion of the reorganization.
The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and its affiliate companies in which it holds a majority voting interest or power to direct activities of certain variable interest entities (“VIE”), which on a consolidated basis is referred to as “Genworth,” the “Company,” “we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been eliminated in consolidation. References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.
We operate our business through the following 3three operating segments:
 
Enact.
Our Enact segment predominantly includes Enact Holdings, Inc., (“Enact Holdings”) and its mortgage insurance subsidiaries. Through Enact Holdings, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans at specified coverage percentages (“primary mortgage insurance”). Enact Holdings also selectively enters into insurance transactions with lenders and investors, under which it insures a portfolio of loans at or after origination (“pool mortgage insurance”).
 
U.S. Life Insurance.
Through our principal U.S. life insurance subsidiaries, we offer long-term care insurance products as well as service traditional life insurance and fixed annuity products in the United States.
 
Runoff.
The Runoff segment includes the results of products which have not been actively sold since 2011, but we continue to service our existing blocks of business. These products primarily include variable annuity, variable life insurance and corporate-owned life insurance, as well as funding agreements.
In addition to our three3 operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as
9
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
statements and related notes contained in our 2021 Annual Report on Form
10-K.
Certain prior year amounts have been reclassified to conform to the current year presentation.
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Pursuant to the program, in the second quarter of 2022, Genworth Financial repurchased 3,869,494 shares of its common stock at an average price of $3.88 per share for a total cash outlay of $15 million, including costs paid in connection with acquiring the shares. The repurchased shares were recorded at cost and presented as treasury stock in a separate caption in equity in our consolidated balance sheet. Genworth Financial
also
authorized share repurchases through a Rule
10b5-1
trading plan under which 4,034,794
shares of its common stock were repurchased during July 2022 at an average price of
$3.72 per share for a total cash outlay of $15 million, leaving approximately $320 million that may yet be purchased under the share repurchase program.
Under the program, share repurchases may be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The impacttiming and number of
 future
shares repurchased under the ongoing coronavirus pandemic (“COVID-19”) is very difficult to predict. Its related outcomes and impact on our business and the capital markets, and our ability to raise capitalprogram will depend on economic impacts from social, globala variety of factors, including stock price, trading volume, and political influences as a result of the pandemic,general business and the shape of the economic recovery, among other factorsmarket conditions. The authorization has no expiration date and uncertainties.may be modified, suspended or terminated at any time.
(2) Accounting Changes
In March
Accounting Pronouncements Recently Adopted
On April 1, 2022, the Financial Accounting Standards Board (the “FASB”) issuedwe elected to early adopt new accounting guidance related to troubled debt restructurings and the vintage disclosures included within the accounting guidance for credit losses on financial instruments. The guidance eliminates the recognition and measurement requirements for troubled debt restructurings and requires creditors to instead apply existing guidance related to loan refinancing and restructuring to determine whether a modification results in a new loan or a continuation of an existing loan. The guidance also expands disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires the presentation of gross write-offs by year of origination. The guidance is currently effective for us on January 1, 2023 using the prospective method, with an option to use the modified retrospective method for the recognition and measurement of troubled debt restructurings. We arewere permitted to early adopt this new accounting guidance as we adopted the accounting guidance related to credit losses on financial instruments on January 1, 2020. In accordance with the new accounting guidance, we adopted this guidance prospectively as of January 1, 2022; therefore, the guidance did not have any impact at adoption.
Accounting Pronouncements Not Yet Adopted
In June 2022, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance related to the fair value measurement of equity securities subject to contractual sale restrictions. The guidance clarifies existing fair value guidance on measuring the fair value of an equity security subject to contractual sale restrictions and adds new disclosures related to these securities. This guidance is currently effective for us on January 1, 2024 using the prospective method, with early adoption permitted. We do not expect anya significant impact from this guidance on our condensed consolidated financial statements and disclosures.
In August 2018, the FASB issued new accounting guidance that significantly changes the recognition and measurement of long-duration insurance contracts and expands disclosure requirements, which impacts deferred

10
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
acquisition costs (“DAC”) and liabilities in our U.S. life insurance companies. In accordance with the guidance, the more significant changes include:
 
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 reviewedupdated quarterly, with the impact of 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.
9
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

T
hisThis guidance is effective for us on January 1, 2023 using the modified
retrospective
method (with transition adjustments as of January 1, 2021) for all topics except for market risk benefits, which is required to be applied using the retrospective method, with early adoption permitted, which we do not intend to elect. Our implementation efforts continue to progress and corporate governance has been established to support the implementation of this new standard. We are currently in the process ofremain focused on obtaining necessary data, modifying systems, identifying and developing key inputs and assumptions and establishing policies, systems and internal controls necessary to implement this new accounting guidance. Given the nature and extent of the changes, this guidance is expected to have a significant impact on our condensed consolidated financial statements and significantly reduce our equity at transition primarily duedisclosures. The requirement to remeasure the change in the discount rate used to determine our liability for future policy benefits.benefits using an updated
single-A
(3) Earnings Per Share
Basicrated bond rate is expected to result in a significant reduction to our equity at transition. However, with the recent rise in interest rates and diluted earnings per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted common shares outstanding forassociated impact on
single-A
rated bond rates, we expect the initial reduction in our equity to partially reverse in periods indicated:
   
Three months ended
 
   
March 31,
 
(Amounts in millions, except per share amounts)
  
    2022    
  
    2021    
 
Weighted-average shares used in basic earnings per share calculations
   508.3   506.0 
Potentially dilutive securities:
         
Stock options, restricted stock units and other equity-based compensation

   9.1   7.8 
   
 
 
  
 
 
 
Weighted-average shares used in diluted earnings per share calculations
   517.4   513.8 
   
 
 
  
 
 
 
Income from continuing operations:
         
Income from continuing operations
  $181  $174 
Less: net income from continuing operations attributable to noncontrolling interests
   30   0   
   
 
 
  
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174 
   
 
 
  
 
 
 
Basic per share
  $0.30  $0.35 
   
 
 
  
 
 
 
Diluted per share
  $0.29  $0.34 
   
 
 
  
 
 
 
Income (loss) from discontinued operations:
         
Income (loss) from discontinued operations, net of taxes
  $(2)  $21 
Less: net income (loss) from discontinued operations attributable to noncontrolling interests
   0     8 
   
 
 
  
 
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $(2)  $13 
   
 
 
  
 
 
 
Basic per share
  $0    $0.02 
   
 
 
  
 
 
 
Diluted per share
  $0    $0.02 
   
 
 
  
 
 
 
Net income:
         
Income from continuing operations
  $181  $174 
Income (loss) from discontinued operations, net of taxes
   (2)   21 
   
 
 
  
 
 
 
Net income
   179   195 
Less: net income attributable to noncontrolling interests
   30   8 
   
 
 
  
 
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187 
   
 
 
  
 
 
 
Basic per share
(1)
  $0.29  $0.37 
   
 
 
  
 
 
 
Diluted per share
(1)
  $0.29  $0.37 
   
 
 
  
 
 
 
(1) 
May not total duesubsequent to whole number calculation.
10
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:transition date.
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
   
    2021    
 
Fixed maturity securities—taxable
  $580   $599 
Fixed maturity securities—non-taxable
   1    2 
Equity securities
   2    3 
Commercial mortgage loans
   81    78 
Policy loans
   50    50 
Limited partnerships
   7    31 
Other invested assets
   63    58 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   784    821 
Expenses and fees
   (20)    (20) 
   
 
 
   
 
 
 
Net investment income
  $764   $801 
   
 
 
   
 
 
 

(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
  
    2021    
 
Realized investment gains (losses):
         
Available-for-sale fixed maturity securities:
         
Realized gains
  $10  $7 
Realized losses
   (18)   (3) 
   
 
 
  
 
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
   (8)   4 
Net realized gains (losses) on equity securities sold
   0     (5) 
Net realized gains (losses) on limited partnerships
   0     3 
   
 
 
  
 
 
 
Total net realized investment gains (losses)
   (8)   2 
   
 
 
  
 
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
   0     (2) 
Write-down of available-for-sale fixed maturity securities
(1)
   (2)   (1) 
Net unrealized gains (losses) on equity securities still held
   (6)   (8) 
Net unrealized gains (losses) on limited partnerships
   35   34 
Commercial mortgage loans
   1   (1) 
Derivative instruments
(2)
   4   8 
Other
   4   1 
   
 
 
  
 
 
 
Net investment gains (losses)
  $28  $33 
   
 
 
  
 
 
 
(1) 
Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis.
(2) 
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).
 
1
1
11
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
See Note 2—Summary of Significant Accounting Policies included in
(3) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented below by the Notes to Consolidated Financial Statements in our 2021 Annual Report on Form 10-K for a discussion of our policy for evaluatingweighted-average basic and measuring the allowance for credit losses related to our available-for-sale fixed maturity securities. There was no allowance for credit losses related to our available-for-sale fixed maturity investments as of anddiluted common shares outstanding for the three months ended March 31, 2022. The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three months ended March 31, 2021:periods indicated:
 
(Amounts in millions)
 
Beginning
balance
  
Increase
from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to
change in
intent or
requirement
to sell
  
Write-offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
                                
Non-U.S. corporate
 $1  $0    $2  $0    $0    $0    $0    $3 
Commercial mortgage-backed
  3   0     0     0     0     (3)   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
 $4  $0    $2  $0    $0    $(3)  $0    $3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
(Amounts in millions)
  
March 31,
2022
  
December 31,
2021
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses
(1)
  $2,747  $7,869 
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses
(1)
   0     0   
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances
   (1,700)   (5,487) 
Income taxes, net
   (223)   (507) 
   
 
 
  
 
 
 
Net unrealized investment gains (losses)
   824   1,875 
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
   (26)   15 
   
 
 
  
 
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
  $850  $1,860 
   
 
 
  
 
 
 
   
Three months ended
June 30,
  
Six months ended
June 30,
 
(Amounts in millions, except per share amounts)
  
    2022    
  
    2021    
  
2022
  
2021
 
Weighted-average shares used in basic earnings per share calculations
   509.0   507.0   508.6   506.5 
Potentially dilutive securities:
                 
Stock options, restricted stock units and other equity-based awards
   5.2   8.0   7.2   7.9 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average shares used in diluted earnings per share calculations
   514.2   515.0   515.8   514.4 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income from continuing operations:
                 
Income from continuing operations
  $220  $245  $401  $419 
Less: net income from continuing operations attributable to noncontrolling interests
   38   —     68   —   
   
 
 
  
 
 
  
 
 
  
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $182  $245  $333  $419 
   
 
 
  
 
 
  
 
 
  
 
 
 
Basic per share
  $0.36  $0.48  $0.65  $0.83 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted per share
  $0.36  $0.47  $0.65  $0.82 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from discontinued operations:
                 
Income (loss) from discontinued operations, net of taxes
  $(1)  $(5)  $(3)  $16 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     —     —     8 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $(1)  $(5)  $(3)  $8 
   
 
 
  
 
 
  
 
 
  
 
 
 
Basic per share
  $—    $(0.01)  $(0.01)  $0.02 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted per share
  $—    $(0.01)  $(0.01)  $0.02 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income:
                 
Income from continuing operations
  $220  $245  $401  $419 
Income (loss) from discontinued operations, net of taxes
   (1)   (5)   (3)   16 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income
   219   240   398   435 
Less: net income attributable to noncontrolling interests
   38   —     68   8 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $181  $240  $330  $427 
   
 
 
  
 
 
  
 
 
  
 
 
 
Basic per share
(1)
  $0.36  $0.47  $0.65  $0.84 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted per share
(1)
  $0.35  $0.47  $0.64  $0.83 
   
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
Excludes foreign exchange.May not total due to whole number calculation.
 
1
2
12
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2022    
   
    2021    
   
2022
   
2021
 
Fixed maturity securities—taxable
  $578   $608   $1,158   $1,207 
Fixed maturity
securities—non-taxable
   1    1    2    3 
Equity securities
   2    2    4    5 
Commercial mortgage loans
   78    103    159    181 
Policy loans
   51    40    101    90 
Limited partnerships
   32    54    39    85 
Other invested assets
   66    58    129    116 
Cash, cash equivalents, restricted cash and short-term investments
   1    —      1    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   809    866    1,593    1,687 
Expenses and fees
   (22)    (22)    (42)    (42) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net investment income
  $787   $844   $1,551   $1,645 
   
 
 
   
 
 
   
 
 
   
 
 
 
(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
  
Three months ended
June 30,
  
Six months ended
June 30,
 
(Amounts in millions)
 
    2022    
  
    2021    
  
    2022    
  
    2021    
 
Realized investment gains (losses):
                
Available-for-sale fixed maturity securities:
                
Realized gains
 $5  $5  $15  $12 
Realized losses
  (9)   (4)   (27)   (7) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net realized gains (losses) on
available-for-sale
fixed maturity securities
  (4)   1   (12)   5 
Net realized gains (losses) on equity securities sold
  —     (2)   —     (7) 
Net realized gains (losses) on limited partnerships
  —     —     —     3 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total net realized investment gains (losses)
  (4)   (1)   (12)   1 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net change in allowance for credit losses on
available-for-sale
fixed maturity securities
  —     (4)   —     (6) 
Write-down of
available-for-sale
fixed maturity securities
(1)
  —     —     (2)   (1) 
Net unrealized gains (losses) on equity securities still held
  (27)   6   (33)   (2) 
Net unrealized gains (losses) on limited partnerships
  24   65   59   99 
Commercial mortgage loans
  2   (1)   3   (2) 
Derivative instruments
(2)
  9   4   13   12 
Other
  4   1   8   2 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net investment gains (losses)
 $8  $70  $36  $103 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis.
(2)
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).
13
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

See Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2021 Annual Report on Form
10-K
for a discussion of our policy for evaluating and measuring the allowance for credit losses related to our
available-for-sale
fixed maturity securities. There was no allowance for credit losses related to our
available-for-sale
fixed maturity investments as of and for the three and six months ended June 30, 2022. The following table represents the allowance for credit losses aggregated by security type for
available-for-sale
fixed maturity investments as of and for the three months ended June 30, 2021:
(Amounts in millions)
 
Beginning
balance
  
Increase from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to change
in intent or
requirement
to sell
  
Write-offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
        
Non-U.S. corporate $3  $—
  
  $4  $(7)  $—
  
  $—
  
  $—
  
  $—
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities $3  $—
  
  $4  $(7)  $—
  
  $—
  
  $—
  
  $—
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The following table represents the allowance for credit losses aggregated by security type for
available-for-sale
fixed maturity investments as of and for the six months ended June 30, 2021:
(Amounts in millions)
 
Beginning
balance
  
Increase from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to change
in intent or
requirement
to sell
  
Write-offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
        
Non-U.S. corporate $1  $—
  
  $6  $(7)  $—
  
  $—
  
  $—
  
  $—
  
 
Commercial mortgage-backed  3   —
  
   —
  
   —
  
   —
  
   (3)   —
  
   —
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities $4  $—
  
  $6  $(7)  $—
  
  $(3)  $—
  
  $—
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
14
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on
available-for-sale
investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
(Amounts in millions)
  
June 30, 2022
   
December 31, 2021
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses 
(1)
  $(1,961)   $7,869 
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses 
(1)
   —      —   
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances
   (17)    (5,487) 
Income taxes, net
   370    (507) 
   
 
 
   
 
 
 
Net unrealized investment gains (losses)
   (1,608)    1,875 
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
   (54)    15 
   
 
 
   
 
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
  $(1,554)   $1,860 
   
 
 
   
 
 
 
(1)
Excludes foreign exchange.
The change in net unrealized gains (losses) on
available-for-sale
investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the three months ended March 31:periods indicated:
   
As of or for the
three months ended
June 30,
 
(Amounts in millions)
  
2022
   
2021
 
Beginning balance
  $850   $1,919 
Unrealized gains (losses) arising during the period:
          
Unrealized gains (losses) on fixed maturity securities
   (4,713)    1,774 
Adjustment to deferred acquisition costs
   1,082    42 
Adjustment to present value of future profits
   80    1 
Adjustment to sales inducements
   2    2 
Adjustment to benefit reserves
   519    (1,887) 
Provision for income taxes
   594    14 
   
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
   (2,436)    (54) 
Reclassification adjustments to net investment (gains) losses, net of taxes of $(1) and $—
   4    —   
   
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
   (2,432)    (54) 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   (28)    —   
   
 
 
   
 
 
 
Ending balance
  $(1,554)   $1,865 
   
 
 
   
 
 
 
15
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
As of or for the
six months ended
June 30,
 
(Amounts in millions)
  
2022
 
2021
   
2022
   
2021
 
Beginning balance
  $1,860  $2,214   $1,860   $2,214 
Unrealized gains (losses) arising during the period:
           
Unrealized gains (losses) on fixed maturity securities
   (5,130)   (3,383)    (9,843)    (1,609) 
Adjustment to DAC
   237   (174) 
Adjustment to deferred acquisition costs
   1,319    (132) 
Adjustment to present value of future profits
   1   1    81    2 
Adjustment to sales inducements
   22   3    24    5 
Adjustment to benefit reserves and policyholder contract balances
   3,527   3,145 
Adjustment to benefit reserves
   4,046    1,258 
Provision for income taxes
   286   92    880    106 
  
 
  
 
   
 
   
 
 
Change in unrealized gains (losses) on investment securities
   (1,057)   (316)    (3,493)    (370) 
Reclassification adjustments to net investment (gains) losses, net of taxes of $(2) and $1
   6   (4) 
Reclassification adjustments to net investment (gains) losses, net of taxes of
$
(3) and $1
   10    (4) 
  
 
  
 
   
 
   
 
 
Change in net unrealized investment gains (losses)
   (1,051)   (320)    (3,483)    (374) 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   (41)   (25)    (69)    (25) 
  
 
  
 
   
 
   
 
 
Ending balance
  $850  $1,919   $(1,554)   $1,865 
  
 
  
 
   
 
   
 
 
The net unrealized losses on fixed maturity securities recognized during the three and six months ended June 30, 2022 was largely due to increasing interest rates and widening credit spreads. Amounts reclassified out of accumulated other comprehensive income (loss) to net investment gains (losses) include realized gains (losses) on sales of securities, which are determined on a specific identification basis.
 
1
3
16
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(d) Fixed Maturity Securities
As of March 31,June 30, 2022, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as
available-for-sale
were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
 
Allowance
for credit
losses
   
Fair
value
   
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
  $3,356   $744   $(3)  $0     $4,097   $3,387   $274   $(34)  $—     $3,627 
State and political subdivisions
   3,009    206    (81)   0      3,134    2,971    74    (196)   —      2,849 
Non-U.S. government
   778    48    (42)   0      784    762    17    (97)   —      682 
U.S. corporate:
                            
Utilities
   4,345    355    (66)   0      4,634    4,253    135    (285)   —      4,103 
Energy
   2,572    175    (48)   0      2,699    2,496    54    (173)   —      2,377 
Finance and insurance
   8,026    406    (203)   0      8,229    7,947    126    (604)   —      7,469 
Consumer—non-cyclical
   5,070    488    (70)   0      5,488    4,912    172    (292)   —      4,792 
Technology and communications
   3,371    213    (87)   0      3,497    3,224    60    (260)   —      3,024 
Industrial
   1,301    73    (26)   0      1,348    1,263    22    (98)   —      1,187 
Capital goods
   2,346    205    (39)   0      2,512    2,326    77    (145)   —      2,258 
Consumer—cyclical
   1,725    86    (44)   0      1,767    1,679    27    (125)   —      1,581 
Transportation
   1,133    124    (9)   0      1,248    1,113    52    (61)   —      1,104 
Other
   381    24    (4)   0      401    353    8    (13)   —      348 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total U.S. corporate
   30,270    2,149    (596)   0      31,823    29,566    733    (2,056)   —      28,243 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Non-U.S. corporate:
                            
Utilities
   874    19    (15)   0      878    864    3    (57)   —      810 
Energy
   1,158    102    (19)   0      1,241    1,123    36    (62)   —      1,097 
Finance and insurance
   2,129    132    (70)   0      2,191    2,103    62    (153)   —      2,012 
Consumer—non-cyclical
   665    28    (22)   0      671    630    4    (64)   —      570 
Technology and communications
   1,055    61    (17)   0      1,099    1,007    10    (74)   —      943 
Industrial
   918    56    (21)   0      953    903    21    (63)   —      861 
Capital goods
   610    25    (16)   0      619    609    6    (50)   —      565 
Consumer—cyclical
   316    5    (9)   0      312    314    —      (29)   —      285 
Transportation
   392    38    (7)   0      423    392    20    (22)   —      390 
Other
   996    86    (16)   0      1,066    960    39    (50)   —      949 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total non-U.S. corporate
   9,113    552    (212)   0      9,453    8,905    201    (624)   —      8,482 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Residential mortgage-backed
   1,277    57    (14)   0      1,320    1,214    36    (37)   —      1,213 
Commercial mortgage-backed
   2,369    36    (44)   0      2,361    2,272    7    (142)   —      2,137 
Other asset-backed
   2,108    7    (60)   0      2,055    2,171    1    (119)   —      2,053 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total available-for-sale fixed maturity securities
  $52,280   $3,799   $(1,052)  $0     $55,027   $51,248   $1,343   $(3,305)  $—     $49,286 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
 
1
4
17
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
As of December 31, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as
available-for-sale
were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
 
Allowance
for credit
losses
   
Fair
value
   
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
 
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
                            
U.S. government, agencies and government-sponsored enterprises
  $3,368   $1,184   $0    $0     $4,552   $3,368   $1,184   $—    $—     $4,552 
State and political subdivisions
   2,982    474    (6)   0      3,450    2,982    474    (6)   —      3,450 
Non-U.S. government
   762    86    (13)   0      835    762    86    (13)   —      835 
U.S. corporate:
                            
Utilities
   4,330    783    (9)   0      5,104    4,330    783    (9)   —      5,104 
Energy
   2,581    363    (10)   0      2,934    2,581    363    (10)   —      2,934 
Finance and insurance
   8,003    1,012    (24)   0      8,991    8,003    1,012    (24)   —      8,991 
Consumer—non-cyclical
   5,138    1,029    (8)   0      6,159    5,138    1,029    (8)   —      6,159 
Technology and communications
   3,345    476    (13)   0      3,808    3,345    476    (13)   —      3,808 
Industrial
   1,322    175    (3)   0      1,494    1,322    175    (3)   —      1,494 
Capital goods
   2,334    415    (4)   0      2,745    2,334    415    (4)   —      2,745 
Consumer—cyclical
   1,703    203    (7)   0      1,899    1,703    203    (7)   —      1,899 
Transportation
   1,122    249    0     0      1,371    1,122    249    —     —      1,371 
Other
   379    41    (1)   0      419    379    41    (1)   —      419 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total U.S. corporate
   30,257    4,746    (79)   0      34,924    30,257    4,746    (79)   —      34,924 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Non-U.S. corporate:
                            
Utilities
   867    63    (2)   0      928    867    63    (2)   —      928 
Energy
   1,194    190    (1)   0      1,383    1,194    190    (1)   —      1,383 
Finance and insurance
   2,171    270    (9)   0      2,432    2,171    270    (9)   —      2,432 
Consumer—non-cyclical
   664    81    (2)   0      743    664    81    (2)   —      743 
Technology and communications
   1,085    166    (1)   0      1,250    1,085    166    (1)   —      1,250 
Industrial
   933    117    (3)   0      1,047    933    117    (3)   —      1,047 
Capital goods
   640    66    (1)   0      705    640    66    (1)   —      705 
Consumer—cyclical
   316    27    (2)   0      341    316    27    (2)   —      341 
Transportation
   422    68    (1)   0      489    422    68    (1)   —      489 
Other
   1,052    169    (4)   0      1,217    1,052    169    (4)   —      1,217 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total non-U.S. corporate
   9,344    1,217    (26)   0      10,535    9,344    1,217    (26)   —      10,535 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Residential mortgage-backed
   1,325    116    (1)   0      1,440    1,325    116    (1)   —      1,440 
Commercial mortgage-backed
   2,435    152    (3)   0      2,584    2,435    152    (3)   —      2,584 
Other asset-backed
   2,138    29    (7)   0      2,160    2,138    29    (7)   —      2,160 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total available-for-sale fixed maturity securities
  $52,611   $8,004   $(135)  $0     $60,480   $52,611   $8,004   $(135)  $—     $60,480 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
 
1
5
18
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of March 31,June 30, 2022:
 
 
Less than 12 months
 
12 months or more
 
Total
  
Less than 12 months
 
12 months or more
 
Total
 
(Dollar amounts in millions)
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
  
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Description of Securities
                                    
Fixed maturity securities:
                                    
U.S. government, agencies and government-sponsored enterprises
 $67  $(2)   17  $10  $(1)   3  $77  $(3)   20  $797  $(33)   49  $10  $(1)   3  $807  $(34)   52 
State and political subdivisions
  902   (78)   157   25   (3)   5   927   (81)   162   1,531   (193)   272   25   (3)   5   1,556   (196)   277 
Non-U.S. government
  305   (27)   46   80   (15)   10   385   (42)   56   389   (73)   64   73   (24)   12   462   (97)   76 
U.S. corporate
  8,109   (505)   995   627   (91)   65   8,736   (596)   1,060   17,949   (1,896)   2,235   622   (160)   72   18,571   (2,056)   2,307 
Non-U.S. corporate
  2,672   (173)   355   258   (39)   31   2,930   (212)   386   5,407   (558)   691   248   (66)   35   5,655   (624)   726 
Residential mortgage-backed
  304   (13)   78   5   (1)   5   309   (14)   83   474   (36)   121   4   (1)   5   478   (37)   126 
Commercial mortgage-backed
  1,098   (40)   160   43   (4)   6   1,141   (44)   166   1,882   (137)   265   42   (5)   6   1,924   (142)   271 
Other asset-backed
  1,500   (57)   254   66   (3)   15   1,566   (60)   269   1,798   (113)   319   78   (6)   19   1,876   (119)   338 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202  $30,227  $(3,039)   4,016  $1,102  $(266)   157  $31,329  $(3,305)   4,173 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
% Below cost:
                                    
<20% Below cost
 $14,957  $(895)   2,062  $1,066  $(142)   134  $16,023  $(1,037)   2,196  $28,164  $(2,402)   3,756  $627  $(101)   98  $28,791  $(2,503)   3,854 
20%-50% Below cost
  0     0     0     48   (15)   6   48   (15)   6   2,063   (637)   260   475   (165)   59   2,538   (802)   319 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202  $30,227  $(3,039)   4,016  $1,102  $(266)   157  $31,329  $(3,305)   4,173 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Investment grade
 $13,796  $(823)   1,896  $1,031  $(140)   129  $14,827  $(963)   2,025  $28,568  $(2,801)   3,763  $1,023  $(241)   144  $29,591  $(3,042)   3,907 
Below investment grade
  1,161   (72)   166   83   (17)   11   1,244   (89)   177   1,659   (238)   253   79   (25)   13   1,738   (263)   266 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202  $30,227  $(3,039)   4,016  $1,102  $(266)   157  $31,329  $(3,305)   4,173 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
1
6
19
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our corporate securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of March 31,June 30, 2022:
  
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
 $1,089  $(56)   142  $59  $(10)   13  $1,148  $(66)   155 
Energy
  740   (40)   87   63   (8)   7   803   (48)   94 
Finance and insurance
  2,529   (173)   293   203   (30)   17   2,732   (203)   310 
Consumer—non-cyclical
  916   (56)   109   86   (14)   7   1,002   (70)   116 
Technology and communications
  1,094   (73)   147   93   (14)   8   1,187   (87)   155 
Industrial
  361   (26)   46   0     0     0     361   (26)   46 
Capital goods
  553   (35)   65   27   (4)   4   580   (39)   69 
Consumer—cyclical
  507   (34)   65   78   (10)   7   585   (44)   72 
Transportation
  247   (9)   32   0     0     0     247   (9)   32 
Other
  73   (3)   9   18   (1)   2   91   (4)   11 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Subtotal, U.S. corporate securities
  8,109   (505)   995   627   (91)   65   8,736   (596)   1,060 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                                    
Utilities
  272   (13)   28   12   (2)   1   284   (15)   29 
Energy
  291   (18)   27   4   (1)   1   295   (19)   28 
Finance and insurance
  685   (47)   96   157   (23)   16   842   (70)   112 
Consumer—non-cyclical
  253   (21)   32   6   (1)   1   259   (22)   33 
Technology and communications
  269   (17)   41   0     0     0     269   (17)   41 
Industrial
  274   (19)   35   18   (2)   2   292   (21)   37 
Capital goods
  231   (16)   30   0     0     0     231   (16)   30 
Consumer—cyclical
  128   (7)   25   20   (2)   4   148   (9)   29 
Transportation
  125   (7)   19   0     0     0     125   (7)   19 
Other
  144   (8)   22   41   (8)   6   185   (16)   28 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Subtotal, non-U.S. corporate securities
  2,672   (173)   355   258   (39)   31   2,930   (212)   386 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for corporate securities in an unrealized loss position
 $10,781  $(678)   1,350  $885  $(130)   96  $11,666  $(808)   1,446 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
1
7
  
Less than 12 months
  
12 months or more
  
Total
 
(Dollar amounts in millions)
 
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
 
Description of Securities
                                    
U.S. corporate:
                                    
Utilities
 $2,176  $(268)   301  $56  $(17)   15  $2,232  $(285)   316 
Energy
  1,534   (162)   205   53   (11)   6   1,587   (173)   211 
Finance and insurance
  5,276   (554)   637   183   (50)   17   5,459   (604)   654 
Consumer—non-cyclical
  2,657   (268)   284   76   (24)   7   2,733   (292)   291 
Technology and communications
  2,192   (227)   282   123   (33)   11   2,315   (260)   293 
Industrial
  805   (96)   101   11   (2)   1   816   (98)   102 
Capital goods
  1,340   (138)   162   24   (7)   4   1,364   (145)   166 
Consumer—cyclical
  1,107   (111)   156   73   (14)   7   1,180   (125)   163 
Transportation
  716   (60)   87   5   (1)   2   721   (61)   89 
Other
  146   (12)   20   18   (1)   2   164   (13)   22 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Subtotal, U.S. corporate securities
  17,949   (1,896)   2,235   622   (160)   72   18,571   (2,056)   2,307 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S.
corporate:
                                    
Utilities
  596   (51)   63   21   (6)   3   617   (57)   66 
Energy
  608   (61)   65   4   (1)   1   612   (62)   66 
Finance and insurance
  1,282   (117)   190   144   (36)   16   1,426   (153)   206 
Consumer—non-cyclical
  480   (61)   51   8   (3)   4   488   (64)   55 
Technology and communications
  704   (74)   83   —
  
   —
  
   —
  
   704   (74)   83 
Industrial
  475   (58)   68   16   (5)   2   491   (63)   70 
Capital goods
  428   (50)   54   —
  
   —
  
   —
  
   428   (50)   54 
Consumer—cyclical
  236   (26)   38   19   (3)   4   255   (29)   42 
Transportation
  195   (22)   25   —
  
   —
  
   —
  
   195   (22)   25 
Other
  403   (38)   54   36   (12)   5   439   (50)   59 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Subtotal,
non-U.S.
corporate securities
  5,407   (558)   691   248   (66)   35   5,655   (624)   726 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for corporate securities in an unrealized loss position
 $23,356  $(2,454)   2,926  $870  $(226)   107  $24,226  $(2,680)   3,033 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We did not recognize an allowance for credit losses on securities in an unrealized loss position included in the tables above. Based on a qualitative and quantitative review of the issuers of the securities, we believe the decline in fair value was largely due to increasing interest rates and widening credit spreads and was not indicative of credit losses. The issuers continue to make timely principal and interest payments. For all securities in an unrealized loss position without an allowance for credit losses, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost.
20
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31, 2021:
 
 
Less than 12 months
 
12 months or more
 
Total
  
Less than 12 months
 
12 months or more
 
Total
 
(Dollar amounts in millions)
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
  
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Description of Securities
Description of Securities
 
                                  
Fixed maturity securities:
                                    
State and political subdivisions
 $339  $(6)   67  $0    $0     0    $339  $(6)   67  $339  $(6)   67  $—    $—     —    $339  $(6)   67 
Non-U.S. government
  173   (9)   28   19   (4)   1   192   (13)   29   173   (9)   28   19   (4)   1   192   (13)   29 
U.S. corporate
  2,593   (64)   266   196   (15)   22   2,789   (79)   288   2,593   (64)   266   196   (15)   22   2,789   (79)   288 
Non-U.S. corporate
  912   (21)   124   62   (5)   8   974   (26)   132   912   (21)   124   62   (5)   8   974   (26)   132 
Residential mortgage-backed
  97   (1)   22   0     0     0     97   (1)   22   97   (1)   22   —     —     —     97   (1)   22 
Commercial mortgage-backed
  113   (2)   17   31   (1)   4   144   (3)   21   113   (2)   17   31   (1)   4   144   (3)   21 
Other asset-backed
  764   (7)   111   0     0     0     764   (7)   111   764   (7)   111   —     —     —     764   (7)   111 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670  $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
% Below cost:
                                    
<20% Below cost
 $4,991  $(110)   635  $297  $(20)   33  $5,288  $(130)   668  $4,991  $(110)   635  $297  $(20)   33  $5,288  $(130)   668 
20%-50% Below cost
  0     0     0     11   (5)   2   11   (5)   2   —     —     —     11   (5)   2   11   (5)   2 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670  $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Investment grade
 $4,644  $(101)   587  $241  $(12)   25  $4,885  $(113)   612  $4,644  $(101)   587  $241  $(12)   25  $4,885  $(113)   612 
Below investment grade
  347   (9)   48   67   (13)   10   414   (22)   58   347   (9)   48   67   (13)   10   414   (22)   58 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670  $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
1
8
21
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our corporate securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of December 31, 2021:
 
 
Less than 12 months
 
12 months or more
 
Total
  
Less than 12 months
 
12 months or more
 
Total
 
(Dollar amounts in millions)
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
  
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Description of Securities
                                    
U.S. corporate:
                                    
Utilities
 $211  $(7)   32  $29  $(2)   7  $240  $(9)   39  $211  $(7)   32  $29  $(2)   7  $240  $(9)   39 
Energy
  166   (3)   18   25   (7)   4   191   (10)   22   166   (3)   18   25   (7)   4   191   (10)   22 
Finance and insurance
  960   (22)   89   62   (2)   3   1,022   (24)   92   960   (22)   89   62   (2)   3   1,022   (24)   92 
Consumer—non-cyclical
  296   (7)   30   14   (1)   2   310   (8)   32   296   (7)   30   14   (1)   2   310   (8)   32 
Technology and communications
  378   (12)   37   29   (1)   2   407   (13)   39   378   (12)   37   29   (1)   2   407   (13)   39 
Industrial
  143   (3)   18   0     0     0     143   (3)   18   143   (3)   18   —     —     —     143   (3)   18 
Capital goods
  171   (3)   16   18   (1)   2   189   (4)   18   171   (3)   16   18   (1)   2   189   (4)   18 
Consumer—cyclical
  268   (7)   26   0     0     0     268   (7)   26   268   (7)   26   —     —     —     268   (7)   26 
Other
  0     0     0     19   (1)   2   19   (1)   2   —     —     —     19   (1)   2   19   (1)   2 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, U.S. corporate securities
  2,593   (64)   266   196   (15)   22   2,789   (79)   288   2,593   (64)   266   196   (15)   22   2,789   (79)   288 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                    
Utilities
  69   (2)   9   0     0     0     69   (2)   9   69   (2)   9   —     —     —     69   (2)   9 
Energy
  64   (1)   10   0     0     0     64   (1)   10   64   (1)   10   —     —     —     64   (1)   10 
Finance and insurance
  366   (8)   43   18   (1)   2   384   (9)   45   366   (8)   43   18   (1)   2   384   (9)   45 
Consumer—non-cyclical
  67   (1)   12   6   (1)   1   73   (2)   13   67   (1)   12   6   (1)   1   73   (2)   13 
Technology and communications
  48   (1)   8   0     0     0     48   (1)   8   48   (1)   8   —     —     —     48   (1)   8 
Industrial
  122   (3)   14   0     0     0     122   (3)   14   122   (3)   14   —     —     —     122   (3)   14 
Capital goods
  78   (1)   8   0     0     0     78   (1)   8   78   (1)   8   —     —     —     78   (1)   8 
Consumer—cyclical
  22   (1)   8   15   (1)   3   37   (2)   11   22   (1)   8   15   (1)   3   37   (2)   11 
Transportation
  37   (1)   7   0     0     0     37   (1)   7   37   (1)   7   —     —     —     37   (1)   7 
Other
  39   (2)   5   23   (2)   2   62   (4)   7   39   (2)   5   23   (2)   2   62   (4)   7 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, non-U.S. corporate securities
  912   (21)   124   62   (5)   8   974   (26)   132   912   (21)   124   62   (5)   8   974   (26)   132 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for corporate securities in an unrealized loss position
 $3,505  $(85)   390  $258  $(20)   30  $3,763  $(105)   420  $3,505  $(85)   390  $258  $(20)   30  $3,763  $(105)   420 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
1922

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The scheduled maturity distribution of fixed maturity securities as of March 31,June 30, 2022 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Fair
value
   
Amortized
cost or
cost
   
Fair
value
 
Due one year or less
  $1,407   $1,420   $1,310   $1,314 
Due after one year through five years
   8,339    8,501    8,078    7,958 
Due after five years through ten years
   13,771    13,943    13,602    12,765 
Due after ten years
   23,009    25,427    22,601    21,846 
  
 
   
 
   
 
   
 
 
Subtotal
   46,526    49,291    45,591    43,883 
Residential mortgage-backed
   1,277    1,320    1,214    1,213 
Commercial mortgage-backed
   2,369    2,361    2,272    2,137 
Other asset-backed
   2,108    2,055    2,171    2,053 
  
 
   
 
   
 
   
 
 
Total
  $52,280   $55,027   $51,248   $49,286 
  
 
   
 
   
 
   
 
 
As of March 31,June 30, 2022, securities issued by finance and insurance,
consumer—non-cyclical,
utilities and technology and communications industry groups represented approximately 24%25%, 15%, 13% and 11%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 10% of our investment portfolio.
As of March 31,June 30, 2022, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.
(e) Commercial Mortgage Loans
Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments, amortization and allowance for credit losses.
 
2
0
23
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the dates indicated:
 
   
March 31, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Property type:
                   
Retail
  $2,837    41%  $2,774    40% 
Office
   1,527    22   1,526    22 
Industrial
   1,461    21   1,420    21 
Apartments
   577    8   585    9 
Mixed use
   327    5   330    5 
Other
   209    3   221    3 
   
 
 
   
 
 
  
 
 
   
 
 
 
Subtotal
   6,938    100%   6,856    100% 
        
 
 
       
 
 
 
Allowance for credit losses
   (25)        (26)      
   
 
 
       
 
 
      
Total
  $6,913       $6,830      
   
 
 
       
 
 
      
   
June 30, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of total
  
Carrying
value
   
% of total
 
Property type:
       
Retail
  $2,901    41%  $2,774    40% 
Industrial
   1,532    22   1,420    21 
Office
   1,512    21   1,526    22 
Apartments
   578    8   585    9 
Mixed use
   350    5   330    5 
Other
   215    3   221    3 
   
 
 
   
 
 
  
 
 
   
 
 
 
Subtotal
   7,088    100%   6,856    100% 
        
 
 
       
 
 
 
Allowance for credit losses
   (23)        (26)      
   
 
 
       
 
 
      
Total
  $7,065       $6,830      
   
 
 
       
 
 
      
 
   
March 31, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Geographic region:
                   
South Atlantic
  $1,806    26%  $1,770    26% 
Pacific
   1,357    20   1,360    20 
Middle Atlantic
   964    14   964    14 
Mountain
   932    13   892    13 
West South Central
   493    7   483    7 
West North Central
   466    7   461    7 
East North Central
   464    7   465    7 
New England
   235    3   237    3 
East South Central
   221    3   224    3 
   
 
 
   
 
 
  
 
 
   
 
 
 
Subtotal
   6,938    100%   6,856    100% 
        
 
 
       
 
 
 
Allowance for credit losses
   (25)        (26)      
   
 
 
       
 
 
      
Total
  $6,913       $6,830      
   
 
 
       
 
 
      
   
June 30, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of total
  
Carrying
value
   
% of total
 
Geographic region:
       
South Atlantic
  $1,816    26%  $1,770    26% 
Pacific
   1,391    20   1,360    20 
Middle Atlantic
   990    14   964    14 
Mountain
   967    14   892    13 
West South Central
   556    8   483    7 
East North Central
   469    6   465    7 
West North Central
   462    6   461    7 
East South Central
   227    3   224    3 
New England
   210    3   237    3 
   
 
 
   
 
 
  
 
 
   
 
 
 
Subtotal
   7,088    100%   6,856    100% 
        
 
 
       
 
 
 
Allowance for credit losses
   (23)        (26)      
   
 
 
       
 
 
      
Total
  $7,065       $6,830      
   
 
 
       
 
 
      
As of June 30, 2022, we had no commercial mortgage loans past due or on
non-accrual
status. As of December 31, 2021, we had one commercial mortgage loan with an amortized cost of $22 million that was 31 to 60 days past due in the office property type. We wrote off $8 million of this commercial mortgage loan during the year ended December 31, 2021 and it was placed on
non-accrual
status as of December 31, 2021. The carrying value of this commercial mortgage loan was written down to the fair value of its collateral and this loan did not have an allowance for credit losses as of December 31, 2021. As of March 31, 2022, this commercial mortgage loan was more than 90 days past due with an amortized cost of $22 million and was on non-accrual status. As of March 31, 2022, we had 0 other commercial mortgage loans past due or on non-accrual status. For a discussion of our policy related to placing commercial mortgage loans on
non-accrual
status, see Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2021 Annual Report on Form
10-K.
 
2
1
24
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
During the threesix months ended March 31,June 30, 2022, andwe did 0t have any loan modifications or extensions associated with borrowers experiencing financial difficulty that resulted in the consideration of whether to establish a new loan or to continue accounting for the modification or extension under the existing loan. During the year ended December 31, 2021, prior to the adoption of new accounting guidance related to troubled debt restructurings, we did not have any modifications or extensions that were considered troubled debt restructurings.
The following table sets forth the allowance for credit losses related to commercial mortgage loans as of or for the periods indicated:
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
   
    2021    
 
Allowance for credit losses:
          
Beginning balance
  $26   $31 
Provision
   (1)    1 
Write-offs
   0      0   
Recoveries
   0      0   
   
 
 
   
 
 
 
Ending balance
  $25   $32 
   
 
 
   
 
 
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2022    
   
    2021    
   
    2022    
   
    2021    
 
Allowance for credit losses:
        
Beginning balance  $25   $32   $26   $31 
Provision   (3)    1    (4)    2 
Write-offs   —      —      —      —   
Recoveries   1    —      1    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance  $23   $33   $23   $33 
   
 
 
   
 
 
   
 
 
   
 
 
 
In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the
debt-to-value
and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average
debt-to-value
ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower
debt-to-value
indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual
one-time
events such as capital expenditures, prepaid or late real estate tax payments or
non-recurring
third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio is not used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.
 
2
2
25
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth commercial mortgage loans by year of origination and credit quality indicator as of March 31,June 30, 2022:
 
(Amounts in millions)
  
2022
   
2021
   
2020
   
2019
   
2018
   
2017 and
prior
   
Total
   
2022
   
2021
   
2020
   
2019
   
2018
   
2017 and
prior
   
Total
 
Debt-to-value:
                                          
0% - 50%
  $0     $23   $72   $60   $161   $2,136   $2,452 
51% - 60%
   0      40    30    161    272    991    1,494 
61% - 75%
   197    884    420    505    438    526    2,970 
76% - 100%
   0      0      0      0      0      0      0   
0%—50%
  $2   $25   $72   $62   $165   $2,062   $2,388 
51%—60%
   31    37    33    178    293    934    1,506 
61%—75%
   532    875    414    482    394    497    3,194 
76%—100%
   —      —      — ��    —      —      —      —   
Greater than 100%
   0      0      0      0      0      22    22    —      —      —      —      —      —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total amortized cost
  $197   $947   $522   $726   $871   $3,675   $6,938   $565   $937   $519   $722   $852   $3,493   $7,088 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Debt service coverage ratio:
                                          
Less than 1.00
  $0     $0     $10   $19   $41   $150   $220   $—     $—     $10   $19   $40   $114   $183 
1.00 - 1.25
   13    2    69    73    75    317    549 
1.26 - 1.50
   20    118    32    167    134    333    804 
1.51 - 2.00
   148    724    219    269    441    1,270    3,071 
1.00—1.25
   13    2    69    72    74    296    526 
1.26—1.50
   138    117    31    166    133    318    903 
1.51—2.00
   368    716    217    268    425    1,248    3,242 
Greater than 2.00
   16    103    192    198    180    1,605    2,294    46    102    192    197    180    1,517    2,234 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total amortized cost
  $197   $947   $522   $726   $871   $3,675   $6,938   $565   $937   $519   $722   $852   $3,493   $7,088 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
The following tables set forth the
debt-to-value
of commercial mortgage loans by property type as of the dates indicated:
 
   
March 31, 2022
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:
                         
Retail
  $849  $594  $1,394  $0    $0    $2,837 
Office
   492   387   626   0     22   1,527 
Industrial
   738   233   490   0     0     1,461 
Apartments
   196   99   282   0     0     577 
Mixed use
   121   67   139   0     0     327 
Other
   56   114   39   0     0     209 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,452  $1,494  $2,970  $0    $22  $6,938 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   35%   22%   43%   0  %   0  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.35   1.84   1.62   0     0     1.92 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
June 30, 2022
 
(Amounts in millions)
  
0%—50%
  
51%—60%
  
61%—75%
  
76%—100%
  
Greater
than 100%
  
Total
 
Property type:
       
Retail
  $838  $598  $1,465  $—    $—    $2,901 
Industrial
   720   229   583   —     —     1,532 
Office
   472   389   651   —     —     1,512 
Apartments
   184   96   298   —     —     578 
Mixed use
   118   74   158   —     —     350 
Other
   56   120   39   —     —     215 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,388  $1,506  $3,194  $—    $—    $7,088 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   34%   21%   45%   —  %   —  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.34   1.88   1.61   —     —     1.91 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
2
3
26
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
December 31, 2021
   
December 31, 2021
 
(Amounts in millions)
  
0% - 50%
 
51% - 60%
 
61% - 75%
 
76% - 100%
 
Greater
than 100%
 
Total
   
0%—50%
 
51%—60%
 
61%—75%
 
76%—100%
 
Greater than
100%
 
Total
 
Property type:
                          
Retail
  $853  $611  $1,310  $0    $0    $2,774   $853  $611  $1,310  $—    $—    $2,774 
Industrial
   745   240   435   —     —     1,420 
Office
   505   395   604   0     22   1,526    505   395   604   —     22   1,526 
Industrial
   745   240   435   0     0     1,420 
Apartments
   200   102   283   0     0     585    200   102   283   —     —     585 
Mixed use
   120   70   140   0     0     330    120   70   140   —     —     330 
Other
   57   121   43   0     0     221    57   121   43   —     —     221 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Total amortized cost
  $2,480  $1,539  $2,815  $0    $22  $6,856   $2,480  $1,539  $2,815  $—    $22  $6,856 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
% of total
   36%   23%   41%   0  %   0  %   100%    36%   23%   41%   —  %   —  %   100% 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Weighted-average debt service coverage ratio
   2.36   1.83   1.61   0     0.68   1.93    2.36   1.83   1.61   —     0.68   1.93 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:
 
   
March 31, 2022
 
(Amounts in millions)
  
Less than 1.00
  
1.00 - 1.25
  
1.26 - 1.50
  
1.51 - 2.00
  
Greater
than 2.00
  
Total
 
Property type:
                         
Retail
  $100  $157  $426  $1,441  $713  $2,837 
Office
   67   108   165   609   578   1,527 
Industrial
   8   77   80   629   667   1,461 
Apartments
   17   62   77   230   191   577 
Mixed use
   23   31   40   118   115   327 
Other
   5   114   16   44   30   209 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $220  $549  $804  $3,071  $2,294  $6,938 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   8%   12%   44%   33%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt-to-value
   68%   60%   62%   60%   44%   55% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
June 30, 2022
 
(Amounts in millions)
  
Less than 1.00
  
1.00—1.25
  
1.26—1.50
  
1.51—2.00
  
Greater
than 2.00
  
Total
 
Property type:
       
Retail
  $94  $150  $429  $1,534  $694  $2,901 
Industrial
   6   76   134   663   653   1,532 
Office
   38   106   179   630   559   1,512 
Apartments
   17   62   84   239   176   578 
Mixed use
   23   31   40   137   119   350 
Other
   5   101   37   39   33   215 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $183  $526  $903  $3,242  $2,234  $7,088 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   7%   13%   46%   31%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average
debt-to-value
   60%   60%   63%   61%   44%   56% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
   
December 31, 2021
 
(Amounts in millions)
  
Less than 1.00
  
1.00—1.25
  
1.26—1.50
  
1.51—2.00
  
Greater
than 2.00
  
Total
 
Property type:
       
Retail
  $102  $166  $405  $1,375  $726  $2,774 
Industrial
   9   64   82   599   666   1,420 
Office
   67   109   167   593   590   1,526 
Apartments
   17   62   84   225   197   585 
Mixed use
   24   32   40   118   116   330 
Other
   4   126   13   48   30   221 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $223  $559  $791  $2,958  $2,325  $6,856 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   8%   12%   43%   34%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average
debt-to-value
   68%   61%   61%   60%   43%   55% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
2
4
27
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
December 31, 2021
 
(Amounts in millions)
  
Less than 1.00
  
1.00 - 1.25
  
1.26 - 1.50
  
1.51 - 2.00
  
Greater
than 2.00
  
Total
 
Property type:
                         
Retail
  $102  $166  $405  $1,375  $726  $2,774 
Office
   67   109   167   593   590   1,526 
Industrial
   9   64   82   599   666   1,420 
Apartments
   17   62   84   225   197   585 
Mixed use
   24   32   40   118   116   330 
Other
   4   126   13   48   30   221 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $223  $559  $791  $2,958  $2,325  $6,856 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   8%   12%   43%   34%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt-to-value
   68%   61%   61%   60%   43%   55% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(f) Limited Partnerships or Similar Entities
Investments in limited partnerships or similar entities are generally considered VIEs when the equity group lacks sufficient financial control. Generally, these investments are limited partner or
non-managing
member equity investments in a widely held fund that is sponsored and managed by a reputable asset manager. We are not the primary beneficiary of any VIE investment in a limited partnership or similar entity. As of March 31,June 30, 2022 and December 31, 2021, the total carrying value of these investments was $1,936$2,036 million and $1,829 million, respectively. Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We have not contributed, and do not plan to contribute, any additional financial or other support outside of what is contractually obligated.
(5) Derivative Instruments
Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce some of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as “derivatives designated as hedges,” which include cash flow hedges.

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

  
Derivative assets
  
Derivative liabilities
 
    
Fair value
    
Fair value
 
(Amounts in millions)
 
Balance
sheet classification
 
June 30,
2022
  
December 31,
2021
  
Balance
sheet classification
 
June 30,
2022
  
December 31,
2021
 
Derivatives designated as hedges
 
    
Cash flow hedges:
      
Interest rate swaps
  Other invested assets $30   $364   Other liabilities $342   $26 
Foreign currency swaps
  Other invested assets  17    6   Other liabilities  —
  
    —
  
 
     
 
 
   
 
 
     
 
 
   
 
 
 
Total cash flow hedges
     47    370      342    26 
     
 
 
   
 
 
     
 
 
   
 
 
 
Total derivatives designated as hedges
     47    370      342    26 
     
 
 
   
 
 
     
 
 
   
 
 
 
Derivatives not designated as hedges
                        
Equity index options
  Other invested assets  30    42   Other liabilities  —
  
    —
  
 
Financial futures
  Other invested assets  —
  
    —
  
   Other liabilities  —
  
    —
  
 
Other foreign currency contracts
  Other invested assets  —
  
    2   Other liabilities  —
  
    —
  
 

GMWB embedded derivatives
  
Reinsurance
recoverable
(1)
  19    19   
Policyholder
account balances 
(2)
  277    271 
Fixed index annuity embedded derivatives
  Other assets  —
  
    —
  
   
Policyholder
account balances 
(3)
  233    294 
Indexed universal life embedded derivatives
  Reinsurance
recoverable		  —
  
    —
  
   
Policyholder
account balances 
(4)
  16    25 
     
 
 
   
 
 
     
 
 
   
 
 
 
Total derivatives not designated as hedges
     49    63      526    590 
     
 
 
   
 
 
     
 
 
   
 
 
 
Total derivatives
    $96   $433     $868   $616 
     
 
 
   
 
 
     
 
 
   
 
 
 
(1)
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.
(2)
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
(3)
Represents the embedded derivatives associated with our fixed index annuity liabilities.
(4)
Represents the embedded derivatives associated with our indexed universal life liabilities.

 
2
58
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table sets forth our positions in derivative instruments as of the dates indicated:
  
Derivative assets
  
Derivative liabilities
 
     
Fair value
     
Fair value
 
(Amounts in millions)
 
Balance
sheet classification
  
March 31,
2022
  
December 31,
2021
  
Balance sheet
classification
  
March 31,
2022
  
December 31,
2021
 
Derivatives designated as
                        
hedges
                        
Cash flow hedges:
                        
Interest rate swaps
  Other invested assets  $162  $364   Other liabilities  $76  $26 
Foreign currency swaps
  Other invested assets   5   6   Other liabilities   1   0   
      
 
 
  
 
 
      
 
 
  
 
 
 
Total cash flow hedges
      167   370       77   26 
      
 
 
  
 
 
      
 
 
  
 
 
 
Total derivatives designated as hedges
      167   370       77   26 
      
 
 
  
 
 
      
 
 
  
 
 
 
Derivatives not designated as hedges
                        
Equity index options
  Other invested assets   30   42   Other liabilities   0    ��0   
Financial futures
  Other invested assets   0     0     Other liabilities   0     0   
Other foreign currency contracts
  Other invested assets   0     2   Other liabilities   0     0   
GMWB embedded derivatives
  Reinsurance
recoverable
(1)
 
 		  17   19   Policyholder
account balances
 (2)
 
 		  243   271 
Fixed index annuity embedded derivatives
  Other assets   0     0     Policyholder
account balances
 (3)
 
 		  261   294 
Indexed universal life embedded derivatives
  Reinsurance
recoverable		 
 		  0     0     Policyholder
account balances
 (4)
 
 		  21   25 
      
 
 
  
 
 
      
 
 
  
 
 
 
Total derivatives not designated as hedges
      47   63       525   590 
      
 
 
  
 
 
      
 
 
  
 
 
 
Total derivatives
     $214  $433      $602  $616 
      
 
 
  
 
 
      
 
 
  
 
 
 
(1) 
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.
(2) 
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
(3) 
Represents the embedded derivatives associated with our fixed index annuity liabilities.
(4) 
Represents the embedded derivatives associated with our indexed universal life liabilities.
The fair value of derivative positions presented above was not offset by the respective collateral amounts received or provided under these agreements.
2
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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:
 
(Notional in millions)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
  
March 31,
2022
 
Derivatives designated as hedges
                        
Cash flow hedges:
                        
Interest rate swaps
   Notional   $7,653   $0     $(58)  $7,595 
Foreign currency swaps
   Notional    127    0      0     127 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total cash flow hedges
        7,780    0      (58)   7,722 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives designated as hedges
        7,780    0      (58)   7,722 
        
 
 
   
 
 
   
 
 
  
 
 
 
Derivatives not designated as hedges
                        
Equity index options
   Notional    1,446    300    (368)   1,378 
Financial futures
   Notional    946    994    (1,042)   898 
Other foreign currency contracts
   Notional    83    0      (59)   24 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives not designated as hedges
        2,475    1,294    (1,469)   2,300 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives
       $10,255   $1,294   $(1,527)  $10,022 
        
 
 
   
 
 
   
 
 
  
 
 
 
      
(Number of policies)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
  
March 31,
2022
 
Derivatives not designated as hedges
                        
GMWB embedded derivatives
   Policies    21,804    0      (477)   21,327 
Fixed index annuity embedded derivatives
   Policies    9,344    0      (568)   8,776 
Indexed universal life embedded derivatives
   Policies    806    0      (7)   799 
(Notional in millions)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
  
June 30,
2022
 
Derivatives designated as hedges
         
Cash flow hedges:
         
Interest rate swaps
   Notional   $7,653   $262   $(102)  $7,813 
Foreign currency swaps
   Notional    127    —      —     127 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total cash flow hedges
        7,780    262    (102)   7,940 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives designated as hedges
        7,780    262    (102)   7,940 
        
 
 
   
 
 
   
 
 
  
 
 
 
Derivatives not designated as hedges
                        
Equity index options
   Notional    1,446    495    (628)   1,313 
Financial futures
   Notional    946    1,973    (1,969)   950 
Other foreign currency contracts
   Notional    83    —      (83)   —   
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives not designated as hedges
        2,475    2,468    (2,680)   2,263 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives
       $10,255   $2,730   $(2,782)  $10,203 
        
 
 
   
 
 
   
 
 
  
 
 
 
(Number of policies)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
  
June 30,
2022
 
Derivatives not designated as hedges
         
GMWB embedded derivatives
   Policies    21,804    —      (906)   20,898 
Fixed index annuity embedded derivatives
   Policies    9,344    —      (1,055)   8,289 
Indexed universal life embedded derivatives
   Policies    806    —      (20)   786 
Cash Flow Hedges
Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of other comprehensive income (loss) (“OCI”). We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest income; and (v) other instruments to hedge the cash flows of various forecasted transactions.
 
2
729
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended March 31,June 30, 2022:
 
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
  
Classification of gain
(loss) recognized in
net income
 
Interest rate swaps hedging assets
 $(250)  $55   Net investment
income		 
 		 $0     Net investment
gains (losses)
 
 
Interest rate swaps hedging assets
  0     2   Net investment
gains (losses)		 
 		  0     Net investment
gains (losses)		 
 
Interest rate swaps hedging liabilities
  0     (1)   Interest
expense		 
 		  0     Net investment
gains (losses)		 
 
Foreign currency swaps
  (2)   1   Net investment
income		 
 		  0     Net investment
gains (losses)		 
 
  
 
 
  
 
 
      
 
 
     
Total
 $(252)  $57      $0       
  
 
 
  
 
 
      
 
 
     
(Amounts in millions)
  
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
   
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets
  $(405)   $57   Net investment
income		  $—     Net investment
gains (losses)
Interest rate swaps hedging liabilities
   —      (1)   Interest expense   —     Net investment
gains (losses)
Foreign currency swaps
   14    —     Net investment
income		   —     Net investment
gains (losses)
   
 
 
   
 
 
      
 
 
    
Total
  $(391)   $56      $—      
   
 
 
   
 
 
      
 
 
    
The following table provides information about the pre-tax income effects of cash flow hedges for the three months ended March 31,June 30, 2021:
 
(Amounts in millions)
 
Gain (loss)

recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
 
Gain (loss)
recognized in
net income
  
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets $(529)  $52  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  44   0    Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  (2)   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $(487)  $52    $0     
  
 
 
  
 
 
    
 
 
   
(Amounts in millions)
  
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
   
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
   
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets
  $314  $52   Net investment
income		  $—     Net investment
gains (losses)
Interest rate swaps hedging liabilities
   (8)   —     Interest expense   —     Net investment
gains (losses)
Foreign currency swaps
   3   —     Net investment
income		   —     Net investment
gains (losses)
   
 
 
  
 
 
      
 
 
    
Total
  $309  $52      $—      
   
 
 
  
 
 
      
 
 
    
The following table provides information about the pre-tax income effects of cash flow hedges for the six months ended June 30, 2022:
(Amounts in millions)
  
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
   
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets
  $(655)  $112  Net investment
income		  $—     Net investment
gains (losses)
Interest rate swaps hedging assets
   —     2  Net investment
gains (losses)		   —     Net investment
gains (losses)
Interest rate swaps hedging liabilities
   —     (2)  Interest expense   —     Net investment
gains (losses)
Foreign currency swaps
   12   1  Net investment
income		   —     Net investment
gains (losses)
   
 
 
  
 
 
     
 
 
    
Total
  $(643)  $113     $—      
   
 
 
  
 
 
     
 
 
    
3
0
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides information about the pre-tax income effects of cash flow hedges for the six months ended June 30, 2021:
(Amounts in millions)
  
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
   
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
   
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets
  $(215)  $104   Net investment
income		  $—     Net investment
gains (losses)
Interest rate swaps hedging liabilities
   36   —     Interest expense   —     Net investment
gains (losses)
Foreign currency swaps
   1   —     Net investment
income		   —     Net investment
gains (losses)
   
 
 
  
 
 
      
 
 
    
Total
  $(178)  $104      $—      
   
 
 
  
 
 
      
 
 
    
The following tables provide a reconciliation of current period changes, net of applicable income taxes, for these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives qualifying as hedges,” for the periods indicated:
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
2022
  
2021
 
Derivatives qualifying as effective accounting hedges as of January 1
  $2,025  $2,211 
Current period increases (decreases) in fair value, net of deferred taxes of $53 and $102
   (199)   (385) 
Reclassification to net (income), net of deferred taxes of $20 and $18
   (37)   (34) 
   
 
 
  
 
 
 
Derivatives qualifying as effective accounting hedges as of March 31
  $1,789  $1,792 
   
 
 
  
 
 
 

   
Three months
ended June 30,
 
(Amounts in millions)
  
2022
  
2021
 
Derivatives qualifying as effective accounting hedges as of April 1
  $1,789  $1,792 
Current period increases (decreases) in fair value, net of deferred taxes of $84 and $(64)
   (307)   245 
Reclassification to net (income), net of deferred taxes of $19 and $18
   (37)   (34) 
   
 
 
   
 
 
 
Derivatives qualifying as effective accounting hedges as of June 30
  $1,445  $2,003 
   
 
 
   
 
 
 
 

   
Six months ended
June 30,
 
(Amounts in millions)
  
2022
  
2021
 
Derivatives qualifying as effective accounting hedges as of January 1
  $2,025  $2,211 
Current period increases (decreases) in fair value, net of deferred taxes of $137 and $38
   (506)   (140) 
Reclassification to net (income), net of deferred taxes of $39 and $36
   (74)   (68) 
   
 
 
   
 
 
 
Derivatives qualifying as effective accounting hedges as of June 30
  $1,445  $2,003 
   
 
 
   
 
 
 
2
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The total of derivatives designated as cash flow hedges of $1,789$1,445 million, net of taxes, recorded in stockholders’ equity as of March 31,June 30, 2022 is expected to be reclassified to net income (loss) in the future, concurrently with and primarily offsetting changes in interest expense and interest income on floating rate instruments and
interest income on future fixed rate bond purchases. Of this amount, $143$144 million, net of taxes, is expected to be reclassified to net income (loss) in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2057. During the threesix months ended March 31,June 30, 2022 and 2021, we reclassified $3$5 million and $2$4 million, respectively, to net income in connection with forecasted transactions that were no longer considered probable of
occurring.
31
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Derivatives Not Designated As Hedges
We also enter into certain
non-qualifying
derivative instruments such as: (i) interest rate swaps and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) equity index options, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits, fixed index annuities and indexed universal life; and (iii) foreign currency options and forward contracts to mitigate currency risk associated with dividends, cash payments to AXA S.A. (“AXA”) reported as discontinued operations and/or other cash flows from certain foreign subsidiaries to our holding company. Additionally, we provide GMWBs on certain variable annuities that are required to be bifurcated as embedded derivatives. We also offer fixed index annuity and indexed universal life insurance products and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.
The following table providestables provide the
pre-tax
gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:
 
   
Three months ended
March 31,
  
Classification of gain (loss) recognized
in net income
(Amounts in millions)
  
    2022    
  
    2021    
 
Interest rate swaps
  $0    $4  Net investment gains (losses)
Equity index options
   (6)   3  Net investment gains (losses)
Financial futures
   (47)   (110)  Net investment gains (losses)
GMWB embedded derivatives
   32   105  Net investment gains (losses)
Fixed index annuity embedded derivatives
   12   (4)  Net investment gains (losses)
Indexed universal life embedded derivatives
   11   10  Net investment gains (losses)
   
 
 
  
 
 
   
Total derivatives not designated as hedges
  $2  $8   
   
 
 
  
 
 
   
   
Three months ended
June 30,
  
Classification of gain (loss) recognized

in net income
 
(Amounts in millions)
  
    2022    
  
    2021    
 
Interest rate swaps
  $—    $(1)   Net investment gains (losses) 
Equity index options
   (1)   6   Net investment gains (losses) 
Financial futures
   17   8   Net investment gains (losses) 
GMWB embedded derivatives
   (26)   2   Net investment gains (losses) 
Fixed index annuity embedded derivatives
   11   (14)   Net investment gains (losses) 
Indexed universal life embedded derivatives
   8   3   Net investment gains (losses) 
   
 
 
  
 
 
     
Total derivatives not designated as hedges
  $9  $4     
   
 
 
  
 
 
     
   
Six months ended
June 30,
  
Classification of gain (loss) recognized

in net income
 
(Amounts in millions)
  
    2022    
  
    2021    
 
Interest rate swaps
  $—    $3   Net investment gains (losses) 
Equity index options
   (7)   9   Net investment gains (losses) 
Financial futures
   (30)   (102)   Net investment gains (losses) 
GMWB embedded derivatives
   6   107   Net investment gains (losses) 
Fixed index annuity embedded derivatives
   23   (18)   Net investment gains (losses) 
Indexed universal life embedded derivatives
   19   13   Net investment gains (losses) 
   
 
 
  
 
 
     
Total derivatives not designated as hedges
  $11  $12     
   
 
 
  
 
 
     
 
293
2

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Derivative Counterparty Credit Risk
Most of our derivative arrangements with counterparties require the posting of collateral upon meeting certain net exposure thresholds. The following table presents additional information about derivative assets and liabilities subject to an enforceable master netting arrangement as of the dates indicated:​​​​​​​
 
   
March 31, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Derivative
assets 
(1)
  
Derivative
liabilities 
(1)
  
Net
derivatives
  
Derivative
assets
(1)
  
Derivative
liabilities 
(1)
  
Net
derivatives
 
Amounts presented in the balance sheet:
                         
Gross amounts recognized
  $198  $77  $121  $414  $26  $388 
Gross amounts offset in the balance sheet
   0     0     0     0     0     0   
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net amounts presented in the balance sheet
   198   77   121   414   26   388 
Gross amounts not offset in the balance sheet:
                         
Financial instruments
(2)
   (49)   (49)   0     (20)   (20)   0   
Collateral received
   (110)   0     (110)   (308)   0     (308) 
Collateral pledged
   0     (567)   567   0     (536)   536 
Over collateralization
   13   539   (526)   2   530   (528) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net amount
  $52  $0    $52  $88  $0    $88 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
June 30, 2022
  
December 31, 2021
 
(Amounts in millions)
  
Derivative
assets
(1)
  
Derivative
liabilities 
(1)
  
Net
derivatives
  
Derivative
assets
(1)
  
Derivative
liabilities 
(1)
  
Net
derivatives
 
Amounts presented in the balance sheet:
       
Gross amounts recognized
  $77  $342  $(265)  $414  $26  $388 
Gross amounts offset in the balance sheet
   —     —     —     —     —     —   
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net amounts presented in the balance sheet
   77   342   (265)   414   26   388 
Gross amounts not offset in the balance sheet:
                         
Financial instruments
(2)
   (24)   (24)   —     (20)   (20)   —   
Collateral received
   (41)   —     (41)   (308)   —     (308) 
Collateral pledged
   —     (825)   825   —     (536)   536 
Over collateralization
   —     507   (507)   2   530   (528) 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net amount
  $12  $—    $12  $88  $—    $88 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
Included $1 million of accruals on derivatives classified as other assets as of March 31, 2022 and doesDoes not include amounts related to embedded derivatives as of March 31,June 30, 2022 and December 31, 2021.
(2)
Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty.
(6) Fair Value of Financial Instruments
(6)
Fair Value of Financial Instruments
Recurring Fair Value Measurements
We have fixed maturity securities, equity securities, limited partnerships, derivatives, short-term investments, embedded derivatives, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.
Fixed maturity, short-term investments and equity securities
The fair value of fixed maturity securities, short-term investments and equity securities are estimated primarily based on information derived from third-party pricing services (“pricing services”), internal models and/or broker quotes, which use a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. In certain cases where market information is not available for a specific security but is available for similar securities, that security is valued using market information for similar securities, which is also a market approach. When market information is not available for a specific security (or similar securities) or is available but such information is
 
3
03
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
information is not available for a specific security (or similar securities) or is available but such information is
less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed securities), an income approach may be used. In addition, a combination of the results from market and income approaches may be used to estimate fair value. These valuation techniques may change from period to period, based on the relevance and availability of market data.
Further, while we consider the valuations provided by pricing services and broker quotes to be of high quality, management determines the fair value of our investment securities after considering all relevant and available information.
In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quotes valuation is available, we determine fair value using internal models. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for similar securities are not readily observable and these securities are not typically valued by pricing services.
Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs, which would result in the valuation being classified as Level 3.
Broker quotes are typically based on an income approach given the lack of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads and utilize those in an internal model to determine fair value. Other inputs to the model include rating and weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium, which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We utilize price caps for securities where the estimated market yield results in a valuation that may exceed the amount that would be received in a market transaction. When a security does not have an external rating, we assign the security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any price caps utilized, liquidity premiums applied, and whether external ratings are available for our private placements to determine whether the spreads utilized would be considered observable inputs. We classify private securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease) in credit spreads would have resulted in a significant decrease (increase) in the fair value for our fixed maturity securities as of March 31,June 30, 2022.
For remaining securities priced using internal models, we determine fair value using an income approach. We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.
Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio,
 
3
14
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing and/or rating, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from pricing services to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.
A summary of the inputs used for our fixed maturity securities, short-term investments and equity securities based on the level in which instruments are classified is included below. We have combined certain classes of instruments together as the nature of the inputs is similar.
Level 1 measurements
Equity securities.
The primary inputs to the valuation of exchange-traded equity securities include quoted prices for the identical instrument.
Separate account assets.
The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.
Level 2 measurements
Fixed maturity securities
 
Third-party pricing services:
In estimating the fair value of fixed maturity securities, 89%88% of our portfolio was priced using third-party pricing services as of March 31,June 30, 2022. These pricing services utilize industry-standard valuation techniques that include market-based approaches, income-based approaches, a combination of market-based and income-based approaches or other proprietary, internally generated models as part of the valuation processes. These third-party pricing vendors maximize the use of publicly available data inputs to generate valuations for each asset class. Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may 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 pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.
 
3
25
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents a summary of the significant inputs used by our pricing services for certain fair value measurements of fixed maturity securities that are classified as Level 2 as of March 31,June 30, 2022:
 

(Amounts in millions)
 
Fair value
  
Primary methodologies
 
Significant inputs
U.S. government, agencies
and government-sponsored
enterprises
  $4,0973,627  Price quotes from trading desk, broker feeds Bid side prices, trade prices, Option Adjusted
Spread (“OAS”) to swap curve, Bond Market
Association OAS, Treasury Curve, Agency
Bullet Curve, maturity to issuer spread
    
State and political subdivisions
  $3,0632,786  Multi-dimensional attribute-based modeling systems, third-party pricing vendors Trade prices, material event notices, Municipal
Market Data benchmark yields, broker quotes
    
Non-U.S.
government
  $783679  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
  $27,87624,600  
Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers,
OAS-based
models
 Bid side prices to Treasury Curve, Issuer
Curve, which includes sector, quality, duration,
OAS percentage and change for spread matrix,
trade prices, comparative transactions, Trade
Reporting and Compliance Engine (“TRACE”)
reports
    
Non-U.S.
corporate
  $7,4146,588  
Multi-dimensional attribute-based modeling systems,
OAS-based
models, price quotes from market makers
 
Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
    
Residential mortgage-backed
  $1,2871,183  
OAS-based
models, single factor binomial models, internally priced
 Prepayment and default assumptions,
aggregation of bonds with similar
characteristics, including collateral type,
vintage, tranche type, weighted-average life,
weighted-average loan age, issuer program and
delinquency ratio, pay up and pay down
factors, TRACE reports
Commercial mortgage-backed
  $2,3462,123  Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage- backedmortgage-backed securities analytics model Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports
    
Other asset-backed
  $1,9551,924  Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers Spreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports
 
33
36

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Internal models:
A portion of our U.S. corporate and
non-U.S.
corporate securities are valued using internal models. The fair value of these fixed maturity securities was $1,678$1,493 million and $999$921 million, respectively, as of March 31,June 30, 2022. Internally modeled securities are primarily private fixed maturity securities where we use market observable inputs such as an interest rate yield curve, published credit spreads for similar securities based on the external ratings of the instrument and related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are established using inputs from market participants.
Equity securities.
The primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active.
Short-term investments.
The fair value of short-term investments classified as Level 2 is determined after considering prices obtained by pricing services.
Level 3 measurements
Fixed maturity securities
 
Broker quotes:
A portion of our state and political subdivisions,
non-U.S.
government, U.S. corporate,
non-U.S.
corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $269$343 million as of March 31,June 30, 2022.
•
Internal models:
A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was
$
3,019 
million as of June 30, 2022. 
Equity
 
Internal models:
A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $3,260 million as of March 31, 2022.
Equity securities.
The primary inputs to the valuation include broker quotes where the underlying inputs are unobservable and for internal models, structure of the security and issuer rating.
Limited partnerships.
The fair value of limited partnerships classified as Level 3 is determined based on third-party valuation sources that utilize unobservable inputs, such as a reference to public market or private transactions, valuations for comparable companies or assets, discounted cash flows and/or recent
transactions.
 
34
37
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Net asset value
Limited partnerships.
Limited partnerships are valued based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the underlying instrument. We utilize the net asset value (“NAV”) from the underlying fund statements as a practical expedient for fair value.
Derivatives
We consider counterparty collateral arrangements and rights of
set-off
when evaluating our net credit risk exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these arrangements when determining whether any incremental adjustment should be made for both the counterparty’s and our
non-performance
risk in measuring fair value for our derivative instruments. As a result of these counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have not recorded any incremental adjustment for our
non-performance
risk or the
non-performance
risk of the derivative counterparty for our derivative assets or liabilities.
Interest rate swaps.
The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2.
Foreign currency swaps.
The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered observable inputs, and results in the derivative being classified as Level 2.

Equity index options.
We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rates, equity index volatility, equity index and time value component associated with the optionality in the derivative. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3. As of March 31,June 30, 2022, a significant increase (decrease) in the equity index volatility discussed above would have resulted in a significantly higher (lower) fair value measurement.
Financial futures.
The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation is 0 as a result of settling the margins on these contracts on a daily basis.
Other foreign currency contracts.
We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, foreign currency exchange rate volatility and time value component associated with the optionality in the derivative, which are generally considered observable inputs and results in the derivative being classified as Level 2. We also have foreign currency forward contracts where the valuation is determined using
35
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.
38
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
GMWB embedded derivatives
We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. We determine fair value using an internal model based on the various inputs noted above.
Non-performance
risk is integrated into the discount rate used to value GMWB liabilities. Our discount rate used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the
non-performance
risk of the GMWB liabilities. As of March 31,June 30, 2022 and December 31, 2021, the impact of
non-performance
risk resulted in a lower fair value of our GMWB liabilities of $42 million and $49 million, respectively.
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility and
non-performance
risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in
non-performance
risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate would increase the fair value. As of March 31,June 30, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Fixed index annuity and indexed universal life embedded derivatives
We have fixed index annuity and indexed annuityuniversal life insurance products where interest is
credited
to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of March 31, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Indexed universal life embedded derivatives
We have indexed universal life insurance products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature.
36
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of March 31,June 30, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.
 

3
739

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
 
  
March 31, 2022
   
June 30, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV 
(1)
   
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV 
(1)
 
Assets
                              
Investments:
                              
Fixed maturity securities:
                              
U.S. government, agencies and government-sponsored enterprises
  $4,097   $0     $4,097   $0     $0     $3,627   $—     $3,627   $—     $—   
State and political subdivisions
   3,134    0      3,063    71    0      2,849    —      2,786    63    —   
Non-U.S. government
   784    0      783    1    0      682    —      679    3    —   
U.S. corporate:
                              
Utilities
   4,634    0      3,722    912    0      4,103    —      3,293    810    —   
Energy
   2,699    0      2,627    72    0      2,377    —      2,255    122    —   
Finance and insurance
   8,229    0      7,553    676    0      7,469    —      6,815    654    —   
Consumer—non-cyclical
   5,488    0      5,396    92    0      4,792    —      4,706    86    —   
Technology and communications
   3,497    0      3,469    28    0      3,024    —      2,999    25    —   
Industrial
   1,348    0      1,313    35    0      1,187    —      1,154    33    —   
Capital goods
   2,512    0      2,471    41    0      2,258    —      2,220    38    —   
Consumer—cyclical
   1,767    0      1,640    127    0      1,581    —      1,462    119    —   
Transportation
   1,248    0      1,184    64    0      1,104    —      1,048    56    —   
Other
   401    0      179    222    0      348    —      141    207    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total U.S. corporate
   31,823    0      29,554    2,269    0      28,243    —      26,093    2,150    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Non-U.S. corporate:
                              
Utilities
   878    0      544    334    0      810    —      501    309    —   
Energy
   1,241    0      1,103    138    0      1,097    —      964    133    —   
Finance and insurance
   2,191    0      2,048    143    0      2,012    —      1,880    132    —   
Consumer—non-cyclical
   671    0      611    60    0      570    —      503    67    —   
Technology and communications
   1,099    0      1,072    27    0      943    —      917    26    —   
Industrial
   953    0      879    74    0      861    —      792    69    —   
Capital goods
   619    0      487    132    0      565    —      450    115    —   
Consumer—cyclical
   312    0      226    86    0      285    —      206    79    —   
Transportation
   423    0      401    22    0      390    —      369    21    —   
Other
   1,066    0      1,042    24    0      949    —      927    22    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total non-U.S. corporate
   9,453    0      8,413    1,040    0      8,482    —      7,509    973    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Residential mortgage-backed
   1,320    0      1,287    33    0      1,213    —      1,183    30    —   
Commercial mortgage-backed
   2,361    0      2,346    15    0      2,137    —      2,123    14    —   
Other asset-backed
   2,055    0      1,955    100    0      2,053    —      1,924    129    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total fixed maturity securities
   55,027    0      51,498    3,529    0      49,286    —      45,924    3,362    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Equity securities
   230    137    57    36    0      243    158    50    35    —   
Limited partnerships
   1,558    0      0      26    1,532    1,649    —      —      23    1,626 
Other invested assets:
                              
Derivative assets:
                              
Interest rate swaps
   162    0      162    0      0      30    —      30    —      —   
Foreign currency swaps
   5    0      5    0      0      17    —      17    —      —   
Equity index options
   30    0      0      30    0      30    —      —      30    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative assets
   197    0      167    30    0      77    —      47    30    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Short-term investments
   76    0      76    0      0      50    —      50    —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total other invested assets
   273    0      243    30    0      127    —      97    30    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Reinsurance recoverable
(2)
   17    0      0      17    0      19    —      —      19    —   
Separate account assets
   5,530    5,530    0      0      0      4,683    4,683    —      —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total assets
  $62,635   $5,667   $51,798   $3,638   $1,532   $56,007   $4,841   $46,071   $3,469   $1,626 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
34
80
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
December 31, 2021
   
December 31, 2021
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
 (1)
   
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
 (1)
 
Assets
                              
Investments:
                              
Fixed maturity securities:
                              
U.S. government, agencies and government-sponsored enterprises
  $4,552   $0     $4,552   $0     $0     $4,552   $—     $4,552   $—     $—   
State and political subdivisions
   3,450    0      3,368    82    0      3,450    —      3,368    82    —   
Non-U.S. government
   835    0      833    2    0      835    —      833    2    —   
U.S. corporate:
                              
Utilities
   5,104    0      4,154    950    0      5,104    —      4,154    950    —   
Energy
   2,934    0      2,858    76    0      2,934    —      2,858    76    —   
Finance and insurance
   8,991    0      8,306    685    0      8,991    —      8,306    685    —   
Consumer—non-cyclical
   6,159    0      6,055    104    0      6,159    —      6,055    104    —   
Technology and communications
   3,808    0      3,779    29    0      3,808    —      3,779    29    —   
Industrial
   1,494    0      1,457    37    0      1,494    —      1,457    37    —   
Capital goods
   2,745    0      2,700    45    0      2,745    —      2,700    45    —   
Consumer—cyclical
   1,899    0      1,762    137    0      1,899    —      1,762    137    —   
Transportation
   1,371    0      1,307    64    0      1,371    —      1,307    64    —   
Other
   419    0      165    254    0      419    —      165    254    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total U.S. corporate
   34,924    0      32,543    2,381    0      34,924    —      32,543    2,381    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Non-U.S. corporate:
                              
Utilities
   928    0      583    345    0      928    —      583    345    —   
Energy
   1,383    0      1,238    145    0      1,383    —      1,238    145    —   
Finance and insurance
   2,432    0      2,272    160    0      2,432    —      2,272    160    —   
Consumer—non-cyclical
   743    0      680    63    0      743    —      680    63    —   
Technology and communications
   1,250    0      1,222    28    0      1,250    —      1,222    28    —   
Industrial
   1,047    0      954    93    0      1,047    —      954    93    —   
Capital goods
   705    0      532    173    0      705    —      532    173    —   
Consumer—cyclical
   341    0      265    76    0      341    —      265    76    —   
Transportation
   489    0      436    53    0      489    —      436    53    —   
Other
   1,217    0      1,191    26    0      1,217    —      1,191    26    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total non-U.S. corporate
   10,535    0      9,373    1,162    0      10,535    —      9,373    1,162    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Residential mortgage-backed
   1,440    0      1,413    27    0      1,440    —      1,413    27    —   
Commercial mortgage-backed
   2,584    0      2,568    16    0      2,584    —      2,568    16    —   
Other asset-backed
   2,160    0      2,022    138    0      2,160    —      2,022    138    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total fixed maturity securities
   60,480    0      56,672    3,808    0      60,480    —      56,672    3,808    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Equity securities
   198    101    60    37    0      198    101    60    37    —   
Limited partnerships
   1,462    0      0      26    1,436    1,462    —      —      26    1,436 
Other invested assets:
                              
Derivative assets:
                              
Interest rate swaps
   364    0      364    0      0      364    —      364    —      —   
Foreign currency swaps
   6    0      6    0      0      6    —      6    —      —   
Equity index options
   42    0      0      42    0      42    —      —      42    —   
Other foreign currency contracts
   2    0      2    0      0      2    —      2    —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative assets
   414    0      372    42    0      414    —      372    42    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Short-term investments
   26    0      26    0      0      26    —      26    —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total other invested assets
   440    0      398    42    0      440    —      398    42    —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Reinsurance recoverable
(2)
   19    0      0      19    0      19    —      —      19    —   
Separate account assets
   6,066    6,066    0      0      0      6,066    6,066    —      —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total assets
  $68,665   $6,167   $57,130   $3,932   $1,436   $68,665   $6,167   $57,130   $3,932   $1,436 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
394
1

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
 
 
Beginning

balance

as of
January 1,
2022
  
Total realized and

unrealized gains

(losses)
              
Ending

balance

as of
March 31,
2022
  
Total gains
(losses)

attributable to

assets still held
  
Beginning
balance

as of
April 1,
2022
  
Total realized and
unrealized gains
(losses)
              
Ending
balance

as of
June 30,
2022
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1
)
 
Included
in net
income
 
Included
in OCI
  
Included
in net
income
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1)
 
Included
in net
income
 
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $82  $1  $(12)  $0    $0    $0    $0    $0    $0    $71  $1  $(12)  $71  $1  $(9)  $—    $—    $—    $—    $—    $—    $63  $1  $(9) 
Non-U.S. government
  2   0     0     0     (1)   0     0     0     0     1   0     0     1   —     —     2   —     —     —     —     —     3   —     —   
U.S. corporate:
                                                
Utilities
  950   0     (73)   35   0     0     0     0     0     912   0     (73)   912   —     (92)   —     —     —     (1)   2   (11)   810   —     (92) 
Energy
  76   0     (4)   0     0     0     0     0     0     72   0     (4)   72   —     (11)   —     —     —     (7)   68   —     122   —     (11) 
Finance and insurance
  685   0     (56)   66   0     0     (2)   0     (17)   676   0     (55)   676   —     (67)   85   —     —     (1)   —     (39)   654   —     (61) 
Consumer—non-cyclical
  104   0     (5)   0     0     0     (7)   0     0     92   0     (6)   92   —     (6)   —     —     —     —     —     —     86   —     (5) 
Technology and communications
  29   0     (1)   0     0     0     0     0     0     28   0     (1)   28   —     (3)   —     —     —     —     —     —     25   —     (3) 
Industrial
  37   0     (2)   0     0     0     0     0     0     35   0     (2)   35   —     (2)   —     —     —     —     —     —     33   —     (2) 
Capital goods
  45   0     (4)   0     0     0     0     0     0     41   0     (3)   41   —     (3)   —     —     —     —     —     —     38   —     (3) 
Consumer—cyclical
  137   0     (8)   0     0     0     (2)   0     0     127   0     (8)   127   —     (7)   —     —     —     (1)   —     —     119   —     (7) 
Transportation
  64   0     (3)   5   0     0     (2)   0     0     64   0     (3)   64   —     (3)   —     —     —     (1)   —     (4)   56   —     (3) 
Other
  254   0     (11)   0     0     0     (4)   0     (17)   222   0     (10)   222   —     (12)   —     —     —     (3)   —     —     207   —     (12) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total U.S. corporate
  2,381   0     (167)   106   0     0     (17)   0     (34)   2,269   0     (165)   2,269   —     (206)   85   —     —     (14)   70   (54)   2,150   —     (199) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                                
Utilities
  345   0     (21)   10   0     0     0     0     0     334   0     (21)   334   —     (25)   —     —     —     —     —     —     309   —     (24) 
Energy
  145   0     (7)   0     0     0     0     0     0     138   0     (7)   138   —     (7)   3   —     —     (1)   —     —     133   —     (8) 
Finance and insurance
  160   1   (18)   0     0     0     0     0     0     143   1   (18)   143   1   (12)   —     —     —     —     —     —     132   1   (12) 
Consumer—non-cyclical
  63   0     (3)   0     0     0     0     0     0     60   0     (3)   60   —     (4)   —     —     —     —     11   —     67   —     (4) 
Technology and communications
  28   0     (1)   0     0     0     0     0     0     27   0     (1)   27   —     (1)   —     —     —     —     —     —     26   —     (1) 
Industrial
  93   0     (6)   0     0     0     0     0     (13)   74   0     (4)   74   —     (4)   —     —     —     —     —     (1)   69   —     (5) 
Capital goods
  173   0     (8)   0     0     0     (33)   0     0     132   0     (8)   132   —     (7)   —     (10)   —     —     —     —     115   —     (7) 
Consumer—cyclical
  76   0     (7)   0     0     0     0     17   0     86   0     (7)   86   —     (7)   —     —     —     —     —     —     79   —     (7) 
Transportation
  53   0     (2)   0     0     0     (29)   0     0     22   0     (2)   22   —     (1)   —     —     —     —     —     —     21   —     (1) 
Other
  26   0     (2)   0     0     0     0     0     0     24   0     (2)   24   —     (2)   —     —     —     —     —     —     22   —     (1) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total non-U.S. corporate
  1,162   1   (75)   10   0     0     (62)   17   (13)   1,040   1   (73)   1,040   1   (70)   3   (10)   —     (1)   11   (1)   973   1   (70) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Residential mortgage-backed
  27   0     (1)   9   0     0     (1)   4   (5)   33   0     0     33   —     (2)   4   —     —     (1)   —     (4)   30   —     (2) 
Commercial mortgage-backed
  16   0     (1)   0     0     0     0     0     0     15   0     (1)   15   —     (1)   —     —     —     —     —     —     14   —     (2) 
Other asset-backed
  138   0     (7)   6   0     0     (3)   0     (34)   100   0     (5)   100   —     (5)   40   (6)   —     —     —     —     129   —     (5) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total fixed maturity securities
  3,808   2   (263)   131   (1)   0     (83)   21   (86)   3,529   2   (256)   3,529   2   (293)   134   (16)   —     (16)   81   (59)   3,362   2   (287) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity securities
  37   0     0     0     0     0     0     0     (1)   36   0     0     36   —     —     —     (1)   —     —     —     —     35   —     —   
Limited partnerships
  26   0     0     0     0     0     0     0     0     26   0     0     26   (3)   —     —     —     —     —     —     —     23   (3)   —   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  42   (6)   0     5   0     0     (11)   0     0     30   (3)   0     30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total derivative assets
  42   (6)   0     5   0     0     (11)   0     0     30   (3)   0     30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total other invested assets
  42   (6)   0     5   0     0     (11)   0     0     30   (3)   0     30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable
(2)
  19   (2)   0     0     0     0     0     0     0     17   (2)   0     17   2   —     —     —     —     —     —     —     19   2   —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Level 3 assets
 $3,932  $(6)  $(263)  $136  $(1)  $0    $(94)  $21  $(87)  $3,638  $(3)  $(256)  $3,638  $—    $(293)  $137  $(17)  $—    $(18)  $81  $(59)  $3,469  $(3)  $(287) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
(1)
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
4
02
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
Beginning
balance

as of
January 1,
2021
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance

as of
March 31,
2021
  
Total gains
(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3 
(1)
  
Transfer
out of
Level 3 
(1)
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $66  $1  $1  $0    $0    $0    $0    $0    $0    $68  $1  $1 
U.S. corporate:
                                                
Utilities
  842   0     (30)   8   0     0     (13)   0     (14)   793   0     (29) 
Energy
  128   0     (4)   0     0     0     (2)   0     0     122   0     (4) 
Finance and insurance
  607   0     (22)   18   0     0     (17)   17   (6)   597   0     (22) 
Consumer—non-cyclical
  109   0     (3)   0     0     0     0     0     0     106   0     (3) 
Technology and communications
  47   0     (2)   12   0     0     0     4   (21)   40   0     (2) 
Industrial
  40   0     0     0     0     0     (20)   0     0     20   0     0   
Capital goods
  60   0     (2)   0     0     0     0     0     0     58   0     (2) 
Consumer—cyclical
  150   0     (2)   0     0     0     (1)   0     0     147   0     (2) 
Transportation
  70   0     (1)   0     0     0     (2)   0     0     67   0     (1) 
Other
  219   0     (2)   0     0     0     (3)   6   (20)   200   0     (1) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,272   0     (68)   38   0     0     (58)   27   (61)   2,150   0     (66) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                                                
Utilities
  352   0     (7)   30   0     0     0     0     0     375   0     (7) 
Energy
  245   0     (2)   0     0     0     0     0     0     243   0     (2) 
Finance and insurance
  305   1   (16)   0     0     0     0     0     0     290   1   (16) 
Consumer—non-cyclical
  67   0     (1)   0     0     0     0     0     0     66   0     (1) 
Technology and communications
  28   0     0     0     0     0     0     0     0     28   0     0   
Industrial
  95   0     (2)   0     0     0     0     0     0     93   0     (2) 
Capital goods
  178   0     (3)   0     0     0     0     0     0     175   0     (3) 
Consumer—cyclical
  146   0     (2)   16   0     0     0     0     (16)   144   0     (2) 
Transportation
  109   0     (1)   0     0     0     (19)   0     (7)   82   0     (1) 
Other
  83   0     (2)   0     0     0     (1)   0     0     80   0     (2) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total non-U.S. corporate
  1,608   1   (36)   46   0     0     (20)   0     (23)   1,576   1   (36) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  14   0     (1)   0     0     0     0     0     0     13   0     0   
Commercial mortgage-backed
  20   0     (1)   0     0     0     0     0     0     19   0     (2) 
Other asset-backed
  109   0     0     3   0     0     (4)   2   (14)   96   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  4,089   2   (105)   87   0     0     (82)   29   (98)   3,922   2   (103) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  51   0     0     0     (8)   0     0     0     0     43   0     0   
Limited partnerships
  17   0     0     8   0     0     0     0     0     25   0     0   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  63   3   0     5   0     0     (18)   0     0     53   2   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  63   3   0     5   0     0     (18)   0     0     53   2   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  63   3   0     5   0     0     (18)   0     0     53   2   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable
(2)
  26   (8)   0     0     0     0     0     0     0     18   (8)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $4,246  $(3)  $(105)  $100  $(8)  $0    $(100)  $29  $(98)  $4,061  $(4)  $(103) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Beginning
balance
as of
April 1,
2021
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance
as of
June 30,
2021
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3 
(1)
  
Transfer
out of
Level 3 
(1)
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $68  $1  $6  $—    $—    $—    $—    $—    $—    $75  $1  $6 
U.S. corporate:
                                                
Utilities
  793   —     23   8   —     —     (1)   19   —     842   —     23 
Energy
  122   —     8   —     —     —     (1)   —     (52)   77   —     4 
Finance and insurance
  597   —     17   55   —     —     (8)   —     —     661   —     17 
Consumer—non-cyclical
  106   —     2   —     —     —     (2)   3   —     109   —     1 
Technology and communications
  40   —     2   —     —     —     —     —     (12)   30   —     1 
Industrial
  20   —     —     —     —     —     —     —     —     20   —     —   
Capital goods
  58   —     1   —     —     —     —     —     —     59   —     1 
Consumer—cyclical
  147   —     1   —     —     —     (1)   —     (8)   139   —     1 
Transportation
  67   —     1   —     —     —     (1)   —     —     67   —     1 
Other
  200   —     —     —     —     —     (2)   —     —     198   —     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,150   —     55   63   —     —     (16)   22   (72)   2,202   —     50 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S.
corporate:
                                                
Utilities
  375   —     5   —     —     —     (8)   —     (24)   348   —     4 
Energy
  243   —     10   —     —     —     (22)   —     (79)   152   —     5 
Finance and insurance
  290   —     17   —     (2)   —     (52)   —     (51)   202   1   5 
Consumer—non-cyclical
  66   —     —     8   —     —     —     —     —     74   —     —   
Technology and communications
  28   —     —     —     —     —     —     —     —     28   —     —   
Industrial
  93   —     1   —     —     —     —     —     —     94   —     1 
Capital goods
  175   —     1   5   —     —     —     —     —     181   —     2 
Consumer—cyclical
  144   —     2   1   —     —     —     —     —     147   —     2 
Transportation
  82   —     1   —     —     —     —     —     —     83   —     2 
Other
  80   —     1   —     —     —     (13)   —     (15)   53   —     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
non-U.S.
corporate
  1,576   —     38   14   (2)   —     (95)   —     (169)   1,362   1   22 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  13   —     1   —     —     —     (1)   —     —     13   —     —   
Commercial mortgage-backed
  19   —     —     1   —     —     —     —     —     20   —     1 
Other asset-backed
  96   —     1   —     —     —     (5)   —     (4)   88   —     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  3,922   1   101   78   (2)   —     (117)   22   (245)   3,760   2   80 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  43   —     —     —     —     —     (5)   —     —     38   —     —   
Limited partnerships
  25   1   —     —     —     —     —     —     —     26   1   —   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  53   6   —     5   —     —     (17)   —     —     47   2   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  53   6   —     5   —     —     (17)   —     —     47   2   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  53   6   —     5   —     —     (17)   —     —     47   2   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable 
(2)
  18   (1)   —     —     —     1   —     —     —     18   (1)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $4,061  $7  $101  $83  $(2)  $1  $(139)  $22  $(245)  $3,889  $4  $80 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
4
3
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
  
Beginning
balance
as of
January 1,
2022
  
Total realized
and unrealized
gains (losses)
                    
Ending
balance
as of
June 30,
2022
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3 
(1)
  
Transfer
out of
Level 3 
(1)
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:
            
State and political subdivisions
 $82  $2  $(21)  $—    $—    $—    $—    $—    $—    $63  $2  $(21) 
Non-U.S.
government
  2   —     —     2   (1)   —     —     —     —     3   —     —   
U.S. corporate:
                                                
Utilities
  950   —     (165)   35   —     —     (1)   2   (11)   810   —     (165) 
Energy
  76   —     (15)   —     —     —     (7)   68   —     122   —     (15) 
Finance and insurance
  685   —     (123)   151   —     —     (3)   —     (56)   654   —     (116) 
Consumer—non-cyclical
  104   —     (11)   —     —     —     (7)   —     —     86   —     (11) 
Technology and communications
  29   —     (4)   —     —     —     —     —     —     25   —     (4) 
Industrial
  37   —     (4)   —     —     —     —     —     —     33   —     (4) 
Capital goods
  45   —     (7)   —     —     —     —     —     —     38   —     (6) 
Consumer—cyclical
  137   —     (15)   —     —     —     (3)   —     —     119   —     (15) 
Transportation
  64   —     (6)   5   —     —     (3)   —     (4)   56   —     (6) 
Other
  254   —     (23)   —     —     —     (7)   —     (17)   207   —     (22) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,381   —     (373)   191   —     —     (31)   70   (88)   2,150   —     (364) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                                                
Utilities
  345   —
  
   (46)   10   —
  
   —
  
   —
  
   —
  
   —
  
   309   —
  
   (45) 
Energy
  145   —
  
   (14)   3   —
  
   —
  
   (1)   —
  
   —
  
   133   —
  
   (15) 
Finance and insurance
  160   2   (30)   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   132   2   (30) 
Consumer—non-cyclical
  63   —
  
   (7)   —
  
   —
  
   —
  
   —
  
   11   —
  
   67   —
  
   (7) 
Technology and communications
  28   —
  
   (2)   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   26   —
  
   (2) 
Industrial
  93   —
  
   (10)   —
  
   —
  
   —
  
   —
  
   —
  
   (14)   69   —
  
   (9) 
Capital goods
  173   —
  
   (15)   —
  
   (10)   —
  
   (33)   —
  
   —
  
   115   —
  
   (15) 
Consumer—cyclical
  76   —
  
   (14)   —
  
   —
  
   —
  
   —
  
   17   —
  
   79   —
  
   (14) 
Transportation
  53   —
  
   (3)   —
  
   —
  
   —
  
   (29)   —
  
   —
  
   21   —
  
   (3) 
Other
  26   —
  
   (4)   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   22   —
  
   (3) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total non-U.S. corporate
  1,162   2   (145)   13   (10)   —
  
   (63)   28   (14)   973   2   (143) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  27   —
  
   (3)   13   —
  
   —
  
   (2)   4   (9)   30   —
  
   (2) 
Commercial mortgage-backed
  16   —
  
   (2)   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   14   —
  
   (3) 
Other asset-backed
  138   —
  
   (12)   46   (6)   —
  
   (3)   —
  
   (34)   129   —
  
   (10) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  3,808   4   (556)   265   (17)   —
  
   (99)   102   (145)   3,362   4   (543) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  37   —
  
   —
  
   —
  
   (1)   —
  
   —
  
   —
  
   (1)   35   —
  
   —
  
 
Limited partnerships
  26   (3)   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   23   (3)   —
  
 
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  42   (7)   —
  
   8   —
  
   —
  
   (13)   —
  
   —
  
   30   2   —
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  42   (7)   —
  
   8   —
  
   —
  
   (13)   —
  
   —
  
   30   2   —
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  42   (7)   —
  
   8   —
  
   —
  
   (13)   —
  
   —
  
   30   2   —
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable 
(2)
  19   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   —
  
   19   —
  
   —
  
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $3,932  $(6)  $(556)  $273  $(18)  $—
  
  $(112)  $102  $(146)  $3,469  $3  $(543) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
4
14
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  
Beginning
balance
as of
January 1,
2021
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance
as of
June 30,
2021
  
Total gains
(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3 
(1)
  
Transfer
out of
Level 3 
(1)
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $66  $2  $7  $—    $—    $—    $—    $—    $—    $75  $2  $7 
U.S. corporate:
                                                
Utilities
  842   —     (7)   16   —     —     (14)   19   (14)   842   —     (6) 
Energy
  128   —     4   —     —     —     (3)   —     (52)   77   —     —   
Finance and insurance
  607   —     (5)   73   —     —     (25)   17   (6)   661   —     (5) 
Consumer—non-cyclical  109   —     (1)   —     —     —     (2)   3   —     109   —     (2) 
Technology and communications
  47   —     —     12   —     —     —     4   (33)   30   —     (1) 
Industrial
  40   —     —     —     —     —     (20)   —     —     20   —     —   
Capital goods
  60   —     (1)   —     —     —     —     —     —     59   —     (1) 
Consumer—cyclical  150   —     (1)   —     —     —     (2)   —     (8)   139   —     (1) 
Transportation
  70   —     —     —     —     —     (3)   —     —     67   —     —   
Other
  219   —     (2)   —     —     —     (5)   6   (20)   198   —     —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,272   —     (13)   101   —     —     (74)   49   (133)   2,202   —     (16) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S.
corporate:
                                                
Utilities
  352   —     (2)   30   —     —     (8)   —     (24)   348   —     (3) 
Energy
  245   —     8   —     —     —     (22)   —     (79)   152   —     3 
Finance and insurance
  305   1   1   —     (2)   —     (52)   —     (51)   202   2   (11) 
Consumer—non-cyclical
  67   —     (1)   8   —     —     —     —     —     74   —     (1) 
Technology and communications
  28   —     —     —     —     —     —     —     —     28   —     —   
Industrial
  95   —     (1)   —     —     —     —     —     —     94   —     (1) 
Capital goods
  178   —     (2)   5   —     —     —     —     —     181   —     (1) 
Consumer—cyclical  146   —     —     17   —     —     —     —     (16)   147   —     —   
Transportation
  109   —     —     —     —     —     (19)   —     (7)   83   —     1 
Other
  83   —     (1)   —     —     —     (14)   —     (15)   53   —     (1) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
non-U.S.
corporate
  1,608   1   2   60   (2)   —     (115)   —     (192)   1,362   2   (14) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  14   —     —     —     —     —     (1)   —     —     13   —     —   
Commercial mortgage-backed
  20   —     (1)   1   —     —     —     —     —     20   —     (1) 
Other asset-backed
  109   —     1   3   —     —     (9)   2   (18)   88   —     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  4,089   3   (4)   165   (2)   —     (199)   51   (343)   3,760   4   (23) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  51   —     —     —     (8)   —     (5)   —     —     38   —     —   
Limited partnerships
  17   1   —     8   —     —     —     —     —     26   1   —   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  63   9   —     10   —     —     (35)   —     —     47   4   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  63   9   —     10   —     —     (35)   —     —     47   4   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  63   9   —     10   —     —     (35)   —     —     47   4   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable 
(2)
  26   (9)   —     —     —     1   —     —     —     18   (9)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $4,246  $4  $(4)  $183  $(10)  $1  $(239)  $51  $(343)  $3,889  $—    $(23) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2)
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
4
5
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the gains and losses included in net income from assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the three months ended March 31:periods indicated:
 
  
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
2022
   
2021
   
2022
   
2021
   
2022
   
2021
 
Total realized and unrealized gains (losses) included in net income:
                  
Net investment income
  $2   $2   $2   $1   $4   $3 
Net investment gains (losses)
   (8)    (5)    (2)    6    (10)    1 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $(6)   $(3)   $—     $7   $(6)   $4 
  
 
   
 
   
 
   
 
   
 
   
 
 
 
Net gains (losses) included in net income attributable to assets still held:
      
Total gains (losses) included in net income attributable to assets still held:
            
Net investment income
  $2   $2   $2   $2   $4   $4 
Net investment gains (losses)
   (5)    (6)    (5)    2    (1)    (4) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $(3)   $(4)   $(3)   $4   $3   $—   
  
 
   
 
   
 
   
 
   
 
   
 
 
The amount presented for realized and unrealized gains (losses) included in net income for fixed maturity securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity securities.
 
4
26
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents a summary of the significant unobservable inputs used for certain asset fair value measurements that are based on internal models and classified as Level 3 as of March 31,June 30, 2022:

(Amounts in millions)
  
Valuation technique
  
Fair value
   
Unobservable input
  
Range
  
Weighted-average 
(1)
Fixed maturity securities:
                 
U.S. corporate:
                 
Utilities
  Internal models  $880   Credit spreads  
49bps - 227bps
  148bps
Energy
  Internal models   57   Credit spreads  
108bps - 248bps
  173bps
Finance and insurance
  Internal models   670   Credit spreads  54bps - 218bps  158bps
Consumer—non-cyclical
  Internal models   92   Credit spreads  54bps - 248bps  132bps
Technology and communications
  Internal models   27   Credit spreads  87bps - 162bps  133bps
Industrial
  Internal models   35   Credit spreads  98bps - 203bps  136bps
Capital goods
  Internal models   41   Credit spreads  67bps - 190bps  145bps
Consumer—cyclical
  Internal models   127   Credit spreads  85bps - 184bps  137bps
Transportation
  Internal models   53   Credit spreads  32bps - 156bps  103bps
Other
  Internal models   158   Credit spreads  90bps - 170bps  109bps
      
 
 
          
Total U.S. corporate
  Internal models  $2,140   Credit spreads  32bps - 248bps  146bps
      
 
 
          
Non-U.S. corporate:
                 
Utilities
  Internal models  $333   Credit spreads  75bps - 218bps  129bps
Energy
  Internal models   129   Credit spreads  83bps - 203bps  138bps
Finance and insurance
  Internal models   143   Credit spreads  88bps - 150bps  135bps
Consumer—non-cyclical
  Internal models   58   Credit spreads  54bps - 154bps  103bps
Technology and communications
  Internal models   27   Credit spreads  83bps - 139bps  108bps
Industrial
  Internal models   74   Credit spreads  67bps - 182bps  113bps
Capital goods
  Internal models   132   Credit spreads  54bps - 236bps  137bps
Consumer—cyclical
  Internal models   57   Credit spreads  98bps - 203bps  137bps
Transportation
  Internal models   21   Credit spreads  126bps - 203bps  141bps
Other
  Internal models   24   Credit spreads  55bps - 130bps  106bps
      
 
 
          
Total non-U.S. corporate
  Internal models  $998   Credit spreads  54bps - 236bps  129bps
      
 
 
          
Derivative assets:
                 

Equity index options
  Discounted cash flows  $30   Equity index
volatility		  6% - 56%  21%
 
(Amounts in millions)
 
Valuation technique
  
Fair value
  
Unobservable input
  
Range
  
Weighted-average 
(1)
 
Fixed maturity securities:
     
U.S. corporate:
     
Utilities
  Internal models  $781   Credit spreads   57bps
 - 
316bps		   175bps 
Energy
  Internal models   46   Credit spreads   166bps
 - 
306bps		   229bps 
Finance and insurance
  Internal models   649   Credit spreads   75bps
 - 
322bps		   218bps 
Consumer—
non-cyclical
  Internal models   86   Credit spreads   72bps
 - 
306bps		   171bps 
Technology and communications
  Internal models   25   Credit spreads   128bps
 - 
184bps		   163bps 
Industrial
  Internal models   33   Credit spreads   159bps
 - 
308bps		   227bps 
Capital goods
  Internal models   38   Credit spreads   97bps
 - 
263bps		   185bps 
Consumer—cyclical
  Internal models   119   Credit spreads   
107bps
 - 
244bps
   180bps 
Transportation
  Internal models   47   Credit spreads   41bps
 - 
210bps		   143bps 
Other
  Internal models   149   Credit spreads   
116bps
 - 
219bps
   140bps 
      
 
 
             
Total U.S. corporate
  Internal models  $1,973   Credit spreads   41bps
 - 
322bps		   188bps 
      
 
 
             
Non-U.S.
corporate:
                    
Utilities
  Internal models  $309   Credit spreads   87bps
 - 
290bps		   167bps 
Energy
  Internal models   124   Credit spreads   123bps
 - 
263bps		   191bps 
Finance and insurance
  Internal models   131   Credit spreads   122bps
 - 
216bps		   172bps 
Consumer—
non-cyclical
  Internal models   66   Credit spreads   72bps
 - 
248bps		   161bps 
Technology and communications
  Internal models   26   Credit spreads   123bps
 - 
207bps		   164bps 
Industrial
  Internal models   69   Credit spreads   97bps
 - 
225bps		   153bps 
Capital goods
  Internal models   115   Credit spreads   72bps
 - 
306bps		   200bps 
Consumer—cyclical
  Internal models   52   Credit spreads   159bps
 - 
260bps		   198bps 
Transportation
  Internal models   20   Credit spreads   185bps
 - 
219bps		   189bps 
Other
  Internal models   22   Credit spreads   86bps
 - 
161bps		   135bps 
      
 
 
             
Total
non-U.S.
corporate
  Internal models  $934   Credit spreads   72bps
 - 
306bps		   175bps 
      
 
 
             
Derivative assets:
                    
Equity index options
  Discounted cash flows 
 		 $30   Equity index
volatility		 
 		  6% - 35%   19% 
(1)
Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by notional for derivative assets.
Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker quotes, used as an input in determining fair value.
 
4
37
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth our liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
 
   
March 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
                    
Policyholder account balances:
                    
GMWB embedded derivatives
(1)
  $243   $0     $0     $243 
Fixed index annuity embedded derivatives
   261    0      0      261 
Indexed universal life embedded derivatives
   21    0      0      21 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total policyholder account balances
   525    0      0      525 
   
 
 
   
 
 
   
 
 
   
 
 
 
Derivative liabilities:
                    
Interest rate swaps
   76    0      76    0   
Foreign currency swaps
   1    0      1    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative liabilities
   77    0      77    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  $602   $0     $77   $525 
   
 
 
   
 
 
   
 
 
   
 
 
 

   
June 30, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
        
Policyholder account balances:
        
GMWB embedded derivatives
(1)
  $277   $—     $—     $277 
Fixed index annuity embedded derivatives
   233    —      —      233 
Indexed universal life embedded derivatives
   16    —      —      16 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total policyholder account balances
   526    —      —      526 
   
 
 
   
 
 
   
 
 
   
 
 
 
Derivative liabilities:
                    
Interest rate swaps
   342    —      342    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative liabilities
   342    —      342    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  $868   $—     $342   $526 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
   
December 31, 2021
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
                    
Policyholder account balances:
                    
GMWB embedded derivatives
(1)
  $271   $0     $0     $271 
Fixed index annuity embedded derivatives
   294    0      0      294 
Indexed universal life embedded derivatives
   25    0      0      25 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total policyholder account balances
   590    0      0      590 
   
 
 
   
 
 
   
 
 
   
 
 
 
Derivative liabilities:
                    
Interest rate swaps
   26    0      26    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative liabilities
   26    0      26    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  $616   $0     $26   $590 
   
 
 
   
 
 
   
 
 
   
 
 
 

   
December 31, 2021
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
        
Policyholder account balances:
        
GMWB embedded derivatives
(1)
  $271   $—     $—     $271 
Fixed index annuity embedded derivatives
   294    —      —      294 
Indexed universal life embedded derivatives
   25    —      —      25 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total policyholder account balances
   590    —      —      590 
   
 
 
   
 
 
   
 
 
   
 
 
 
Derivative liabilities:
                    
Interest rate swaps
   26    —      26    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total derivative liabilities
   26    —      26    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
  $616   $—     $26   $590 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
4
448

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
  
Beginning

balance

as of

April 1,

2022
  
Total realized and

unrealized (gains)

losses
                    
Ending

balance

as of

June 30,

2022
  
Total (gains) losses

attributable to

liabilities still held
 
(Amounts in millions)
 
Included
in net

(income)
  
Included

in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer

into

Level 3
  
Transfer

out of

Level 3
  
Included

in net

(income)
  
Included

in OCI
 
Policyholder account balances:
            
GMWB embedded derivatives
(1)
 $243  $28  $—    $—    $—    $6  $—    $—    $—    $277  $31  $—   
Fixed index annuity embedded derivatives
  261   (11)   —     —     —     —     (17)   —     —     233   (11)   —   
Indexed universal life embedded derivatives
  21   (8)   —     —     —     3   —     —     —     16   (8)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  525   9   —     —     —     9   (17)   —     —     526   12   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $525  $9  $—    $—    $—    $9  $(17)  $—    $—    $526  $12  $—   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
  
Beginning

balance

as of

April 1,

2021
  
Total realized and

unrealized (gains)

losses
                    
Ending

balance

as of

June 30,

2021
  
Total (gains) losses

attributable to

liabilities still held
 
(Amounts in millions)
 
Included
in net

(income)
  
Included

in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer

into

Level 3
  
Transfer

out of

Level 3
  
Included

in net

(income)
  
Included

in OCI
 
Policyholder account balances:
            
GMWB embedded derivatives
(1)
 $272  $(3)  $—    $—    $—    $6  $—    $—    $—    $275  $(4)  $—   
Fixed index annuity embedded derivatives
  362   14   —     —     —     —     (37)   —     —     339   14   —   
Indexed universal life embedded derivatives
  23   (3)   —     —     —     4   —     —     —     24   (3)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  657   8   —     —     —     10   (37)   —     —     638   7   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $657  $8  $—    $—    $—    $10  $(37)  $—    $—    $638  $7  $—   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
49

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
 
  
Beginning
balance
as of
January 1,

2022
  
Total realized and
unrealized (gains)
losses
                    
Ending
balance

as of
March 31,
2022
  
Total (gains) losses
attributable to
liabilities still held
 
(Amounts in millions)
 
Included
in net
(income)
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Included
in net
(income)
  
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives
(1)
 $271  $(34)  $0    $0    $0    $6  $0    $0    $0    $243  $(30)  $0   
Fixed index annuity embedded derivatives
  294   (12)   0     0     0     0     (20)   0     (1)   261   (12)   0   
Indexed universal life embedded derivatives
  25   (11)   0     0     0     7   0     0     0     21   (11)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  590   (57)   0     0     0     13   (20)   0     (1)   525   (53)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $590  $(57)  $0    $0    $0    $13  $(20)  $0    $(1)  $525  $(53)  $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Beginning

balance

as of

January 1,

2022
  
Total realized and

unrealized (gains)

losses
                    
Ending

balance

as of

June 30,

2022
  
Total (gains) losses

attributable to

liabilities still held
 
(Amounts in millions)
 
Included
in net
(income)
  
Included

in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer

into

Level 3
  
Transfer

out of

Level 3
  
Included

in net

(income)
  
Included

in OCI
 
Policyholder account balances:
            
GMWB embedded derivatives
(1)
 $271  $(6)  $—    $—    $—    $12  $—    $—    $—    $277  $1  $—   
Fixed index annuity embedded derivatives
  294   (23)   —     —     —     —     (37)   —     (1)   233   (23)   —   
Indexed universal life embedded derivatives
  25   (19)   —     —     —     10   —     —     —     16   (19)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  590   (48)   —     —     —     22   (37)   —     (1)   526   (41)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $590  $(48)  $—    $—    $—    $22  $(37)  $—    $(1)  $526  $(41)  $—   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
  
Beginning
balance

as of
January 1,
2021
  
Total realized and
unrealized (gains)
losses
                    
Ending
balance

as of
March 31,
2021
  
Total (gains) losses
attributable to
liabilities still held
 
(Amounts in millions)
 
Included
in net
(income)
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Included
in net
(income)
  
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives
(1)
 $379  $(113)  $0    $0    $0    $6  $0    $0    $0    $272  $(107)  $0   
Fixed index annuity embedded derivatives
  399   4   0     0     0     0     (41)   0     0     362   4   0   
Indexed universal life embedded derivatives
  26   (10)   0     0     0     7   0     0     0     23   (10)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  804   (119)   0     0     0     13   (41)   0     0     657   (113)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $804  $(119)  $0    $0    $0    $13  $(41)  $0    $0    $657  $(113)  $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Beginning

balance

as of

January 1,

2021
  
Total realized and

unrealized (gains)

losses
                    
Ending

balance

as of

June 30,

2021
  
Total (gains) losses

attributable to

liabilities still held
 
(Amounts in millions)
 
Included
in net

(income)
  
Included

in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer

into

Level 3
  
Transfer

out of

Level 3
  
Included

in net

(income)
  
Included

in OCI
 
Policyholder account balances:
            
GMWB embedded derivatives
(1)
 $379  $(116)  $—    $—    $—    $12  $—    $—    $—    $275  $(111)  $—   
Fixed index annuity embedded derivatives
  399   18   —     —     —     —     (78)   —     —     339   18   —   
Indexed universal life embedded derivatives
  26   (13)   —     —     —     11   —     —     —     24   (13)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  804   (111)   —     —     —     23   (78)   —     —     638   (106)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $804  $(111)  $—    $—    $—    $23  $(78)  $—    $—    $638  $(106)  $—   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
45
50
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gains and losses included in net (income) from liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the three months ended March 31:periods indicated:
 
(Amounts in millions)
  
2022
   
2021
 
Total realized and unrealized (gains) losses included in net (income):
          
Net investment income
  $0     $0   
Net investment (gains) losses
   (57)    (119) 
   
 
 
   
 
 
 
Total
  $(57)   $(119) 
   
 
 
   
 
 
 
Total (gains) losses included in net (income) attributable to liabilities still held:
          
Net investment income
  $0     $0   
Net investment (gains) losses
   (53)    (113) 
   
 
 
   
 
 
 
Total
  $(53)   $(113) 
   
 
 
   
 
 
 
   
Three months ended

June 30,
   
Six months ended

June 30,
 
(Amounts in millions)
  
    2022    
   
    2021    
   
    2022    
   
    2021    
 
Total realized and unrealized (gains) losses included in net (income):
        
Net investment income
  $—     $—     $—     $—   
Net investment (gains) losses
   9    8    (48)    (111) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $9   $8   $(48)   $(111) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total (gains) losses included in net (income) attributable to liabilities still held:
                    
Net investment income
  $—     $—     $—     $—   
Net investment (gains) losses
   12    7    (41)    (106) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $12   $7   $(41)   $(106) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and equity securities and purchases, issuances and settlements of derivative instruments.
Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income)” in the tables presented above.
 
45
61
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents a summary of the significant unobservable inputs used for certain liability fair value measurements that are based on internal models and classified as Level 3 as of March 31,June 30, 2022:

(Amounts in millions)
 
Valuation technique
  
Fair value
  
Unobservable input
  
Range
  
Weighted-average 
(1)
 
Policyholder account balances:
                    
           
Withdrawal
utilization rate		 
 		  61% - 89%   77% 
           Lapse rate   2% - 9%   4% 
           
Non-performance risk
(credit spreads)
 
 
  
23bps - 83bps
   66bps 
GMWB embedded derivatives
(2)
  
Stochastic cash flow model 
 		  $243   
Equity index
volatility		 
 		  18% - 27%   23% 
Fixed index annuity embedded derivatives
  
Option budget method 
 		  $261   
Expected future
interest credited		 
 		  0% - 3%   1% 
Indexed universal life embedded derivatives
  
Option budget method 
 		  $21   
Expected future
interest credited		 
 		  3% - 12%   5% 
 
(Amounts in millions)
  
Valuation technique
  
Fair value
   
Unobservable input
  
Range
  
Weighted-average 
(1)
Policyholder account balances:
          
           Withdrawal
utilization rate		  61% - 88%  77%
           Lapse rate  2% - 9%  3%
           
Non-performance

risk
(credit spreads)		  36bps -83bps  69bps
GMWB embedded derivatives
(2)
  Stochastic cash
flow model		  $277   Equity index
volatility		  20% - 29%  24%
Fixed index annuity embedded derivatives
  Option budget
method		  $233   Expected future
interest credited		  —
 
% - 3%		  1%
Indexed universal life embedded derivatives
  Option budget
method		  $16   Expected future
interest credited		  3% - 14%  5%
(1)
Unobservable inputs weighted by the policyholder account balances associated with the instrument.
(2)
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and therefore, a directional change in one input will not affect the other inputs.
Assets and Liabilities Not Required to Be Carried at Fair Value
Assets and liabilities that are reflected in the accompanying unaudited condensed consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash, cash equivalents and restricted cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.
 
45
72
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following represents our estimated fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:
 
   
March 31, 2022
 
   
Notional

amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                             
Commercial mortgage loans, net
           (1)  $6,913   $6,983   $0     $22   $6,961 
Bank loan investments
           (1)   381    384    0      0      384 
Liabilities:
                             
Long-term borrowings
           (1)   1,819    1,587    0      1,587    0   
Investment contracts
           (1)   8,327    8,582    0      0      8,582 
Other firm commitments:
                             
Commitments to fund bank loan investments
   108   0      0      0      0      0   
Ordinary course of business lending commitments
   95   0      0      0      0      0   
   
June 30, 2022
 
   
Notional
amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                             
Commercial mortgage loans, net
       
(1)
 
 $7,065   $6,679   $—     $—     $6,679 
Bank loan investments
       
(1)
 
  406    402    —      —      402 
Liabilities:
                             
Long-term borrowings
       
(1)
 
  1,773    1,336    —      1,336    —   
Investment contracts
       
(1)
 
  8,071    8,146    —      —      8,146 
Other firm commitments:
                             
Commitments to fund bank loan investments
   75   —      —      —      —      —   
Ordinary course of business lending commitments   88   —      —      —      —      —   
 
(1)
These financial instruments do not have notional amounts.
 
   
December 31, 2021
 
   
Notional

amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                             
Commercial mortgage loans, net
           (1)  $6,830   $7,224   $0     $0     $7,224 
Bank loan investments
           (1)   363    370    0      0      370 
Liabilities:
                             
Long-term borrowings
           (1)   1,899    1,767    0      1,767    0   
Investment contracts
           (1)   8,657    9,352    0      0      9,352 
Other firm commitments:
                             
Commitments to fund bank loan investments
   141   0      0      0      0      0   
Ordinary course of business lending commitments
   125   0      0      0      0      0   
   
December 31, 2021
 
   
Notional
amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                             
Commercial mortgage loans, net
       
(1)
 
 $6,830   $7,224   $—     $—     $7,224 
Bank loan investments
       
(1)
 
  363    370    —      —      370 
Liabilities:
                             
Long-term borrowings
       
(1)
 
  1,899    1,767    —      1,767    —   
Investment contracts
       
(1)
 
  8,657    9,352    —      —      9,352 
Other firm commitments:
                             
Commitments to fund bank loan investments
   141   —      —      —      —      —   
Ordinary course of business lending commitments   125   —      —      —      —      —   
 
(1)
These financial instruments do not have notional amounts.
As of June 30, 2022 and December 31, 2021, we also had $27 million and $4 million, respectively, of real estate owned assets included in other invested assets in our condensed consolidated balance sheets, which are initially recorded at fair value less estimated selling costs (the carrying value) and are subsequently valued at the lower of the carrying value or current fair value less estimated selling costs. These properties are recorded at carrying value, which was the fair value as of June 30, 2022 and December 31, 2021. The fair value of the real estate owned assets is classified as Level 2.
Assets Measured Using Net Asset Value
Limited partnerships include partnership interests accounted for using NAV per share (or its equivalent) or fair value for those interests considered minor and partnership interests accounted for under the equity method of accounting for those interests exceeding the minor threshold. Our limited partnership interests accounted for using NAV per share (or its equivalent) are generally not redeemable by the investees and generally cannot be
5
3
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
sold without approval of the general partner. We receive distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years five to ten of the typical contractual life of ten to 12 years.
4
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table presents the carrying value of limited partnerships and commitments to fund as of the dates indicated:
 
   
March 31, 2022
   
December 31, 2021
 
(Amounts in millions)
  
Carrying

value
   
Commitments
to fund
   
Carrying
value
   
Commitments
to fund
 
Limited partnerships accounted for at NAV:
                    
Private equity funds
(1)
  $1,405   $975   $1,312   $950 
Real estate funds
(2)
   72    117    67    101 
Infrastructure funds
(3)
   55    13    57    13 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total limited partnerships accounted for at NAV
   1,532    1,105    1,436    1,064 
   
 
 
   
 
 
   
 
 
   
 
 
 
Limited partnerships accounted for at fair value
   26    1    26    1 
Limited partnerships accounted for under equity method of accounting
   448    203    437    120 
Low-income housing tax credits
(4)
   1    0      1    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,007   $1,309   $1,900   $1,185 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
June 30, 2022
   
December 31, 2021
 
(Amounts in millions)
  
Carrying

value
   
Commitments

to fund
   
Carrying

value
   
Commitments

to fund
 
 
Limited partnerships accounted for at NAV:
                    
Private equity funds
(1)
 $1,483  $1,080  $1,312  $950 
Real estate funds
(2)
  84   145   67   101 
Infrastructure funds
(3)
  59   11   57   13 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total limited partnerships accounted for at NAV
  1,626   1,236   1,436   1,064 
  
 
 
  
 
 
  
 
 
  
 
 
 
Limited partnerships accounted for at fair value
  23   1   26   1 
Limited partnerships accounted for under equity method of accounting
  473   172   437   120 
Low-income
housing tax credits
(4)
  1   —     1   —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $2,123  $1,409  $1,900  $1,185 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1)
This class employs various investment strategies such as leveraged buyout, growth equity, venture capital and mezzanine financing, generally investing in debt or equity positions directly in companies or assets of various sizes across diverse industries globally, primarily concentrated in North America.
(2)
This class invests in real estate in North America, Europe and Asia via direct property ownership, joint ventures, mortgages and investments in debt and equity instruments.
(3)
This class invests in the debt or equity of cash flow generating assets diversified across a variety of industries, including transportation, energy infrastructure, renewable power, social infrastructure, power generation, water, telecommunications and other regulated entities globally.
(4)
Relates to limited partnership investments that invest in affordable housing projects that qualify for the Low-Income Housing Tax Credit and are accounted for using the proportional amortization method.
49
5
4

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(7) Deferred Acquisition Costs
The following table presents the activity impacting deferred acquisition costs (“DAC”) for the dates indicated:
  
As of or for the six months

ended June 30,
 
 
(Amounts in millions)
 
    2022    
   
    2021    
 
Unamortized beginning balance
  $2,438   $2,809 
Costs deferred
   1    3 
Amortization, net of interest accretion
   (152)    (146) 
 
 
 
 
 
 
 
 
 
Unamortized ending balance
   2,287    2,666 
Accumulated effect of net unrealized investment (gains) losses
   27    (1,454) 
 
 
 
 
 
 
 
 
 
Ending balance
  $2,314   $1,212 
   
 
 
   
 
 
 
We regularly review DAC to determine if it is recoverable from future income. As of and for the six months ended June 30, 2022 and 2021, we recorded DAC impairments of $39 million and $38 million, respectively,
in our universal and term universal life insurance products due principally to lower future estimated gross profits. As of June 30, 2022 and 2021, all of our other products had sufficient future income and therefore the related DAC was recoverable.
As of June 30, 2022 and 2021, shadow accounting adjustments increased (decreased) the DAC balance by $27 million and $(1,454) million, respectively, with an offsetting amount recorded in
OCI
. As of June 30, 2021, the majority of the shadow accounting adjustments were recorded in our long-term care insurance business, which reduced its DAC balance to zero. As of June 30, 2021, our long-term care insurance business recorded shadow accounting adjustments of $(1,002) million out of the total shadow accounting adjustments recorded of $(1,454) million. As of June 30, 2022, due to the higher interest rate environment, the shadow accounting adjustments in our long-term care insurance business did not recur. There was no impact to net income related to our shadow accounting adjustments
.

5
5
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(8) Liability for Policy and Contract Claims
The following table sets forth changes in our liability for policy and contract claims as of the dates indicated:
 
   
As of or for the three
months ended
March 31,
 
(Amounts in millions)
  
2022
   
2021
 
Beginning balance
  $11,841   $11,486 
Less reinsurance recoverables
   (2,388)    (2,431) 
   
 
 
   
 
 
 
Net beginning balance
   9,453    9,055 
   
 
 
   
 
 
 
Incurred related to insured events of:
          
Current year
   1,094    1,054 
Prior years
   (293)    (229) 
   
 
 
   
 
 
 
Total incurred
   801    825 
   
 
 
   
 
 
 
Paid related to insured events of:
          
Current year
   (202)    (197) 
Prior years
   (675)    (725) 
   
 
 
   
 
 
 
Total paid
   (877)    (922) 
   
 
 
   
 
 
 
Interest on liability for policy and contract claims
   103    101 
   
 
 
   
 
 
 
Net ending balance
   9,480    9,059 
Add reinsurance recoverables
   2,353    2,356 
   
 
 
   
 
 
 
Ending balance
  $11,833   $11,415 
   
 
 
   
 
 
 
   
As of or for the
six months ended

June 30,
 
(Amounts in millions)
  
2022
   
2021
 
Beginning balance
  $11,841   $11,486 
Less reinsurance recoverables
   (2,388)    (2,431) 
   
 
 
   
 
 
 
Net beginning balance
   9,453    9,055 
   
 
 
   
 
 
 
Incurred related to insured events of:
          
Current year
   2,047    1,991 
Prior years
   (483)    (332) 
   
 
 
   
 
 
 
Total incurred
   1,564    1,659 
   
 
 
   
 
 
 
Paid related to insured events of:
          
Current year
   (412)    (477) 
Prior years
   (1,250)    (1,255) 
   
 
 
   
 
 
 
Total paid
   (1,662)    (1,732) 
   
 
 
   
 
 
 
Interest on liability for policy and contract claims
   207    202 
   
 
 
   
 
 
 
Net ending balance
   9,562    9,184 
Add reinsurance recoverables
   2,353    2,362 
   
 
 
   
 
 
 
Ending balance
  $11,915   $11,546 
   
 
 
   
 
 
 
The liability for policy and contract claims represents our current best estimate; however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could be significant, and result in increases in reserves by an amount that could be material to our results of operations and financial condition and liquidity. In addition, loss reserves recorded on new delinquencies in our Enact segment have a high degree of estimation, particularly due to the level of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.
For the threesix months ended March 31,June 30, 2022, the favorable development of $293$483 million related to insured events of prior years was primarily attributable to our long-term care insurance business largely related to favorable claim terminations mostly attributable to higher mortality, favorable development on prior year incurred but not reported claims and favorable experience on pending claims that did not become an active claim. COVID-19 The coronavirus pandemic
(“COVID-19”)
significantly increased mortality on our most vulnerable claimants and temporarily decreased the number of new claims submitted. As of March 31,June 30, 2022 and December 31, 2021, the balance of incremental claim reserves recorded in connection with changes to claims incidence and mortality experience resulting from
COVID-19
was $171$156 million and $209 million, respectively. DuringFor the first quarter ofsix months ended June 30, 2022, we reduced our incremental claim reserves associated with insured events of prior years by $38$53 million as the impacts of
COVID-19
lessened.
The favorable development related to insured events of prior years was also attributable to our Enact segment, predominantly associated with a $50$146 million of favorable reserve adjustmentadjustments in the first quarterhalf of 2022, primarily related to
COVID-19
delinquencies in 2020 curing at levels above original reserve expectations.
 
5
0
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(9) Borrowings
 
(8)
(a) Short-Term Borrowings
Enact Holdings’ Revolving Credit Facility
On June 30, 2022, Enact Holdings entered into a credit agreement with a syndicate of lenders that provides for a five-year unsecured revolving credit facility in the initial aggregate principal amount of $200 million, including the ability for Enact Holdings to increase the commitments under the credit facility on an uncommitted basis, by an additional aggregate principal amount of up to $100 
million. Any borrowings under Enact Holdings’ credit facility will bear interest at a per annum rate equal to a floating rate tied to a standard short-term borrowing index selected at Enact Holdings’ option, plus an applicable margin, pursuant to the terms of the credit agreement. The applicable margin is based on Enact Holdings’ ratings established by certain debt rating agencies for its outstanding debt. Enact Holdings’ credit facility includes customary representations, warranties, covenants, terms and conditions. As of June 30, 2022, Enact Holdings was in compliance with all covenants and the credit facility remained undrawn.
(b) Long-Term Borrowings
The following table sets forth total long-term borrowings as of the dates indicated:
 
(Amounts in millions)
  
March 31,
2022
   
December 31,
2021
 
Genworth Holdings
(1)
          
4.80% Senior Notes, due 2024
  $200   $282 
6.50% Senior Notes, due 2034
   298    298 
Floating Rate Junior Subordinated Notes, due 2066
   598    598 
   
 
 
   
 
 
 
Subtotal
   1,096    1,178 
Bond consent fees
   (11)    (12) 
Deferred borrowing charges
   (7)    (7) 
   
 
 
   
 
 
 
Total Genworth Holdings
   1,078    1,159 
   
 
 
   
 
 
 
Enact Holdings
          
6.50% Senior Notes, due 2025
(2)
   750    750 
Deferred borrowing charges
   (9)    (10) 
   
 
 
   
 
 
 
Total Enact Holdings
   741    740 
   
 
 
   
 
 
 
Total
  $1,819   $1,899 
   
 
 
   
 
 
 
(Amounts in millions)
  
June 30,
2022
   
December 31,
2021
 
Genworth Holdings
(1)
    
4.80% Senior Notes, due 2024
 $152  $282 
6.50% Senior Notes, due 2034
  298   298 
Floating Rate Junior Subordinated Notes, due 2066
  598   598 
  
 
 
  
 
 
 
Subtotal
  1,048   1,178 
Bond consent fees
  (11)   (12) 
Deferred borrowing charges
  (6)   (7) 
  
 
 
  
 
 
 
Total Genworth Holdings
  1,031   1,159 
  
 
 
  
 
 
 
Enact Holdings
        
6.50% Senior Notes, due 2025
(2)
  750   750 
Deferred borrowing charges
  (8)   (10) 
  
 
 
  
 
 
 
Total Enact Holdings
  742   740 
  
 
 
  
 
 
 
Total
 $1,773  $1,899 
  
 
 
  
 
 
 
 
(1)
Genworth Holdings has the option to redeem all or a portion of the senior notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread.
(2)
Senior notes issued by Enact Holdings, our majority-owned indirect subsidiary, who has the option to redeem the notes in whole or in part at any time prior to February 15, 2025, by paying a make-whole premium plus accrued and unpaid interest.
In the first quarterand second quarters of 2022, Genworth Holdings repurchased $82 million and $48 million principal amount, respectively, of its 4.80% senior notes due in 2024 for a
pre-tax
loss of $3 million and $1
million, respectively, and paid accrued interest thereon.
(9)5
7
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(10) Income Taxes
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:
 
   
Three months ended March 31,
 
   
  2022  
  
  2021  
 
Statutory U.S. federal income tax rate
   21.0%   21.0% 
Increase in rate resulting from:
         
Tax on income from terminated swaps
   2.8   4.1 
Other, net
   0.5   0.2 
   
 
 
  
 
 
 
Effective rate
   24.3%   25.3% 
   
 
 
  
 
 
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
  2022  
   
  2021  
   
  2022  
   
  2021  
 
Statutory U.S. federal income tax rate
   21.0%   21.0%   21.0%   21.0% 
Increase in rate resulting from:
                 
Tax on income from terminated swaps
   2.9   2.1   2.9   2.9 
Other, net
   1.0   0.3   0.7   0.3 
   
 
 
  
 
 
  
 
 
  
 
 
 
Effective rate
   24.9%   23.4%   24.6%   24.2% 
   
 
 
  
 
 
  
 
 
  
 
 
 
The effective tax rate for the three and six months ended March 31,June 30, 2022 and 2021 was above the statutory U.S. federal income tax rate of 21%
largely due to tax expense on certain forward starting swaps, whichswap gains that are tax effected at the previously enacted federal income tax rate of
 35%
5
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
35% whenas they are amortized into net investment income.
The decreaseincrease in the effective tax rate for the three and six months ended March 31,June 30, 2022 compared to the three and six months ended March 31,June 30, 2021 was primarily attributable to lowerhigher tax expense on forward starting swapsswap gains in relation to pre-tax income in the current year.
Our ability to realize our deferred tax assets is largely dependent upon generating sufficient taxable income and capital gains in future years. As of June 30, 2022 and December 31, 2021,
our ta
x
 valuation allowance
was
 $434 million and $382 
million, respectively. Given the change in our unrealized gains (losses) on our fixed maturity securities in the current year due to rising interest rates and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets
,
we recorded an additional valuation allowance
of
 $50 
million in the second quarter of 2022 through OCI related to capital deferred tax assets.
(10)(11) Segment Information
We have the following three
3
operating business segments: Enact; U.S. Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities businesses); and Runoff (which includes the results of
non-strategic
products which have not been actively sold since 2011). In addition to our three operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.
We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. GAAP and 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.
5
8

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. 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 the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or initial gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A 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. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-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
5
2
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 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 is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of 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 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.
WeDuring the three and six months ended June 30, 2022, we repurchased $82$48 million and $130 million principal amount of Genworth Holdings’ senior notes due in February 2024, respectively, for a
pre-tax
loss of $1 million and $4 million, respectively. During the six months ended June 30, 2021, we repurchased $146 million principal amount of Genworth Holdings’ senior notes withdue in September 2021 maturity dates in the first quarters of 2022 and 2021, respectively, for a
pre-tax
loss of $3 million and $4 million, respectively.
59

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
$4 million. These transactions were excluded from adjusted operating income as they relate to losses on the early extinguishment of debt.
We recorded a
pre-tax
expense of $21$1 million inand $5 million for the first quarter ofthree months ended June 30, 2022 and 2021, respectively, and $1 million and $26 million for the six months ended June 30, 2022 and 2021, respectively, related to restructuring costs as we continuedcontinue to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
   
    2021    
 
Revenues:
          
Enact segment
  $270   $288 
U.S. Life Insurance segment:
          
Long-term care insurance
   1,109    1,140 
Life insurance
   339    348 
Fixed annuities
   116    132 
   
 
 
   
 
 
 
U.S. Life Insurance segment
   1,564    1,620 
   
 
 
   
 
 
 
Runoff segment
   66    76 
Corporate and Other activities
   (8)    1 
   
 
 
   
 
 
 
Total revenues
  $1,892   $1,985 
   
 
 
   
 
 
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
  2022  
   
  2021  
   
  2022  
   
  2021  
 
Revenues:
                    
Enact segment
  $273   $276   $543   $564 
U.S. Life Insurance segment:
                    
Long-term care insurance
   1,119    1,226    2,228    2,366 
Life insurance
   310    329    649    677 
Fixed annuities
   92    122    208    254 
   
 
 
   
 
 
   
 
 
   
 
 
 
U.S. Life Insurance segment
   1,521    1,677    3,085    3,297 
   
 
 
   
 
 
   
 
 
   
 
 
 
Runoff segment
   70    88    136    164 
   
 
 
   
 
 
   
 
 
   
 
 
 
Corporate and Other activities
   17    —      9    1 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues  $1,881   $2,041   $3,773   $4,026 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
560

3
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating income available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities for the periods indicated:

   
Three months ended

June 30,
   
Six months ended

June 30,
 
 
(Amounts in millions)
  
  2022  
   
  2021  
   
  2022  
   
  2021  
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $181   $240   $330   $427 
Add: net income from continuing operations attributable to noncontrolling interests
   38    —      68    —   
Add: net income from discontinued operations attributable to noncontrolling interests
   —      —      —      8 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net income
   219    240    398    435 
Less: income (loss) from discontinued operations, net of taxes
   (1)    (5)    (3)    16 
   
 
 
   
 
 
   
 
 
   
 
 
 
Income from continuing operations
   220    245    401    419 
Less: net income from continuing operations attributable to noncontrolling interests
   38    —      68    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   182    245    333    419 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
                    
Net investment (gains) losses, net
(1)
   (10)    (70)    (38)    (103) 
(Gains) losses on early extinguishment of debt
   1    —      4    4 
Expenses related to restructuring
   1    5    1    26 
Taxes on adjustments
   2    14    7    16 
   
 
 
   
 
 
   
 
 
   
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $176   $194   $307   $362 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
  
Three months ended
March 31,
 
(Amounts in millions)
 
    2022    
  
    2021    
 
Net income available to Genworth Financial, Inc.’s common stockholders
 $149  $187 
Add: net income from continuing operations attributable to noncontrolling interests
  30   0   
Add: net income from discontinued operations attributable to noncontrolling interests
  0     8 
  
 
 
  
 
 
 
Net income
  179   195 
Less: income (loss) from discontinued operations, net of taxes
  (2)   21 
  
 
 
  
 
 
 
Income from continuing operations
  181   174 
Less: net income from continuing operations attributable to noncontrolling interests
  30   0   
  
 
 
  
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  151   174 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
        
Net investment (gains) losses, net
  (28)   (33) 
(Gains) losses on early extinguishment of debt
  3   4 
Expenses related to restructuring
  0     21 
Taxes on adjustments
  5   2 
  
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
 $131  $168 
  
 
 
  
 
 
 
(1)
For the three and six months ended June 30, 2022, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million.
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
  2022  
  
  2021  
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
         
Enact segment
  $135  $126 
U.S. Life Insurance segment:
         
Long-term care insurance
   59   95 
Life insurance
   (79)   (63) 
Fixed annuities
   16   30 
   
 
 
  
 
 
 
U.S. Life Insurance segment
   (4)   62 
   
 
 
  
 
 
 
Runoff segment
   9   12 
Corporate and Other activities
   (9)   (32) 
   
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168 
   
 
 
  
 
 
 
5
4
6
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
Three months ended

June 30,
   
Six months ended

June 30,
 
(Amounts in millions)
  
  2022  
   
  2021  
   
  2022  
   
  2021  
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’scommon stockholders:
                    
Enact segment
  $167   $135   $302   $261 
U.S. Life Insurance segment:
                    
Long-term care insurance
   34    98    93    193 
Life insurance
   (34)    (40)    (113)    (103) 
Fixed annuities
   21    13    37    43 
   
 
 
   
 
 
   
 
 
   
 
 
 
U.S. Life Insurance segment   21    71    17    133 
   
 
 
   
 
 
   
 
 
   
 
 
 
Runoff segment
   2    15    11    27 
Corporate and Other activities
   (14)    (27)    (23)    (59) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders  $176   $194   $307   $362 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:
 
(Amounts in millions)
  
March 31,
2022
   
December 31,
2021
   
June 30,
2022
   
December 31,
2021
 
Assets:
            
Enact segment
  $5,790   $5,850   $5,763   $5,850 
U.S. Life Insurance segment
   76,482    81,210    73,288    81,210 
Runoff segment
   8,960    9,460    8,264    9,460 
Corporate and Other activities
   2,255    2,651    1,753    2,651 
  
 
   
 
   
 
   
 
 
Total assets
  $93,487   $99,171   $89,068   $99,171 
  
 
   
 
   
 
   
 
 
(11)(12) Commitments and Contingencies
(a) Litigation and Regulatory Matters
We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, claims payments and procedures, product design, product disclosure, product administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance subsidiaries, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to customers, including but not limited to breach of customer information. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for
6
2
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships, including claims under the Employee Retirement Income Security Act of 1974, post-closing obligations associated with previous dispositions and securities lawsuits. In addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations.
In October 2016, Genworth Financial, certain members of its executive management team, including its former and present chief executive officer, and current and former members of its board of directors were named as defendants in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery of the State of Delaware. The case is captioned
Chopp v. McInerney, et al
. The complaint alleges that Genworth’s board of directors wrongfully refused plaintiff’s demand to commence litigation on behalf of Genworth and asserts claims for breaches of fiduciary duties, waste, contribution and indemnification, and unjust enrichment concerning
5
5
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Genworth’s long-term care insurance reserves and concerning Genworth’s former Australian mortgage insurance business, including our plans for an IPO of the business, and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the Court may deem proper. We filed a motion to dismiss on November 14, 2016. The action was stayed pending the outcome of the proposed China Oceanwide transaction. On April 6, 2021, Genworth Financial terminated the proposed China Oceanwide transaction, thereby lifting the stay. We intend to vigorously defend this action.On July 22, 2022, a stipulation dismissing the case without prejudice was filed with the Court and on July 25, 2022 the Court granted the dismissal.
In September 2018, Genworth Life and Annuity Insurance Company (“GLAIC”), our indirect wholly-owned subsidiary, was named as a defendant in a putative class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
TVPX ARX INC., as Securities Intermediary for Consolidated Wealth Management, LTD. on behalf of itself and all others similarly situated v. Genworth Life and Annuity Insurance Company
. Plaintiff alleges unlawful and excessive cost of insurance charges were imposed on policyholders. The complaint asserts claims for breach of contract, alleging that Genworth improperly considered non-mortality factors when calculating cost of insurance rates and failed to decrease cost of insurance charges in light of improved expectations of future mortality, and seeks unspecified compensatory damages, costs, and equitable relief. On October 29, 2018, we filed a motion to enjoin the case in the Middle District of Georgia, and a motion to dismiss and motion to stay in the Eastern District of Virginia. We moved to enjoin the prosecution of the Eastern District of Virginia action on the basis that it involves claims released in a prior nationwide class action settlement (the “McBride settlement”) that was approved by the Middle District of Georgia. Plaintiff filed an amended complaint on November 13, 2018. On December 6, 2018, we moved the Middle District of Georgia for leave to file our counterclaim, which alleges that plaintiff breached the covenant not to sue contained in the prior settlement agreement by filing its current action. On March 15, 2019, the Middle District of Georgia granted our motion to enjoin and denied our motion for leave to file our counterclaim. As such, plaintiff is enjoined from pursuing its class action in the Eastern District of Virginia. On March 29, 2019, plaintiff filed a notice of appeal in the Middle District of Georgia, notifying the Court of its appeal to the United States Court of Appeals for the Eleventh Circuit from the order granting our motion to enjoin. On March 29, 2019, we filed our notice of cross-appeal in the Middle District of Georgia, notifying the Court of our cross-appeal to the Eleventh Circuit from the portion of the order denying our motion for leave to file our counterclaim. On April 8, 2019, the Eastern District of Virginia dismissed the case without prejudice, with leave for plaintiff to refile an amended
6
3
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
complaint only if a final appellate Court decision vacates the injunction and reverses the Middle District of Georgia’s opinion. On May 21, 2019, plaintiff filed its appeal and memorandum in support in the Eleventh Circuit. We filed our response to plaintiff’s appeal memorandum on July 3, 2019. The Eleventh Circuit Court of Appeals heard oral argument on plaintiff’s appeal and our cross-appeal on April 21, 2020. On May 26, 2020, the Eleventh Circuit Court of Appeals vacated the Middle District of Georgia’s order enjoining Plaintiff’s class action and remanded the case back to the Middle District of Georgia for further factual development as to whether Genworth has altered how it calculates or charges cost of insurance since the McBride settlement. The Eleventh Circuit Court of Appeals did not reach a decision on Genworth’s counterclaim. On June 30, 2021, we filed in the Middle District of Georgia our renewed motion to enforce the class action settlement and release, and renewed our motion for leave to file a counterclaim. The briefing on both motions concluded in October 2021. On March 24, 2022, the Court denied our motions. On April 11, 2022, we filed an appeal of the Court’s denial to the United States Court of Appeals for the Eleventh Circuit. On June 22, 2022, we filed our opening brief in support of the appeal. We intend to continue to vigorously defend this action.
In September 2018, Genworth Financial, Genworth Holdings, Genworth North America Corporation, Genworth Financial International Holdings, LLC (“GFIH”) and Genworth Life Insurance Company (“GLIC”) were named as defendants in a putative class action lawsuit pending in the Court of Chancery of the State of Delaware captioned
Richard F. Burkhart, William E. Kelly, Richard S. Lavery, Thomas R. Pratt, Gerald Green,
5
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
individually and on behalf of all other persons similarly situated v. Genworth et al
. Plaintiffs allege that GLIC paid dividends to its parent and engaged in certain reinsurance transactions causing it to maintain inadequate capital capable of meeting its obligations to GLIC policyholders and agents. The complaint alleges causes of action for intentional fraudulent transfer and constructive fraudulent transfer, and seeks injunctive relief. We moved to dismiss this action in December 2018. On January 29, 2019, plaintiffs exercised their right to amend their complaint. On March 12, 2019, we moved to dismiss plaintiffs’ amended complaint. On April 26, 2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to on June 14, 2019. On August 7, 2019, plaintiffs filed a motion seeking to prevent proceeds that GFIH expected to receive from the then planned sale of its shares in Genworth MI Canada Inc. (“Genworth Canada”) from being transferred out of GFIH. On September 11, 2019, plaintiffs filed a renewed motion seeking the same relief as their August 7, 2019 motion with an exception that allowed GFIH to transfer $450 million of expected proceeds from the sale of Genworth Canada through a dividend to Genworth Holdings to allow the
pay-off
of a senior secured term loan facility dated March 7, 2018 among Genworth Holdings as the borrower, GFIH as the limited guarantor and the lending parties thereto. Oral arguments on our motion to dismiss and plaintiffs’ motion occurred on October 21, 2019, and plaintiffs’ motion was denied. On January 31, 2020, the Court granted in part our motion to dismiss, dismissing claims relating to $395 million in dividends GLIC paid to its parent from 2012 to 2014 (out of the $410 million in total dividends subject to plaintiffs’ claims). The Court denied the balance of the motion to dismiss leaving a claim relating to $15 million in dividends and unquantified claims relating to the 2016 termination of a reinsurance transaction. On March 27, 2020, we filed our answer to plaintiffs’ amended complaint. On May 26, 2021, the plaintiffs filed a second amended and supplemental class action complaint adding additional factual allegations and three new causes of action. On July 26, 2021, we moved to dismiss the three new causes of action and answered the balance of the second amended and supplemental class action complaint. Plaintiffs filed an opposition to our motion to dismiss on September 30, 2021. The Court heard oral arguments on the motion on December 7, 2021 and ordered each party to file supplemental submissions, which were filed on January 28, 2022. On
 May 10, 2022, the Court granted our motion to dismiss the three new causes of action. On January 27, 2022, plaintiffs filed a motion for a preliminary injunction seeking to enjoin GFIH from transferring any assets to any affiliate, including paying any dividends to Genworth Holdings and to enjoin Genworth Holdings and Genworth Financial from transferring or distributing any value to Genworth Financial’s shareholders. On June 2, 2022, plaintiffs withdrew their motion for a preliminary injunction. We intend to continue to vigorously defend this action.
6
4
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On
April 6, 2020, GLAIC was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned
Brighton Trustees, LLC, on behalf of and as trustee for Diamond LS Trust; and Bank of Utah, solely as securities intermediary for Diamond LS Trust; on behalf of themselves and all others similarly situated v. Genworth Life and Annuity Insurance Company
. On May 13, 2020, GLAIC was also named as a defendant in a putative class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned
Ronald L. Daubenmier, individually and on behalf of himself and all others similarly situated v. Genworth Life and Annuity Insurance Company
. On June 26, 2020, plaintiffs filed a consent motion to consolidate the two cases. On June 30, 2020, the United States District Court for the Eastern District of Virginia issued an order consolidating the Brighton Trustees and Daubenmier cases. On July 17, 2020, the Brighton Trustees and Daubenmier plaintiffs filed a consolidated complaint, alleging that GLAIC subjected policyholders to unlawful and excessive increases to cost of insurance charges. The consolidated complaint asserts claims for breach of contract and injunctive relief, and seeks damages in excess of $5 million. The parties participated in a mediation on November 18, 2021. The trial is scheduled to commence on July 8, 2022. On March 25, 2022, the parties reached an agreement in principle to settle the action for $25 million, subject to Court approval.
The Court preliminarily approved the settlement and set October 17, 2022 for the final hearing.
We accrued $25 million for this litigation as of March 31, 2022. In the second quarter of 2022, we paid the accrued balance in full, and accordingly, have no remaining amounts outstanding related to the agreement in principle.
If the settlement is not finally approved, we intend to continue to vigorously defend this action.
5
7
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2021, GLIC and Genworth Life Insurance Company of New York (“GLICNY”) were named as defendants in a putative class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
Judy Halcom, Hugh Penson, Harold Cherry, and Richard Landino, individually, and on behalf of all others similarly situated v. Genworth Life Insurance Company and Genworth Life Insurance Company of New York
. Plaintiffs seek to represent long-term care insurance policyholders, alleging that the defendants made misleading and inadequate disclosures regarding premium increases for long-term care insurance policies. The complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. The trial is
was
scheduled to commence on June 1, 2022. On June 18, 2021, following two days of mediation, the parties reached an agreement in principle to settle this matter on a nationwide basis and signed the settlement agreement on August 23, 2021. On August 31, 2021, the Court preliminarily approved the settlement. The final approval hearing occurred on February 9, 2022, and on June
29, 2022, the parties are awaiting the Court’s decision onCourt issued its final approval of the proposed settlement. Ifsettlement, which became final on July 29, 2022, when the Court approvesappeals period expired and no appeal was filed. We expect to begin implementation of this settlement in the third quarter of 2022, but given the 90-day policyholder election window, we anticipate
financial impacts will not begin until the fourth quarter of 2022. Moreover, because the election mailings occur on the policyholder’s anniversary date, the majority of the impacts are expected to be in 2023. Based on the Court’s final approval of the settlement, we do not anticipate a net positive benefit to earnings from the result to have a material adverse impact on our resultssettlement of operations or financial position. If the Court does not approve the final settlement, we intend to continue to vigorously defend this action.case.
In January 2021, GLAIC was named as a defendant in a putative class action lawsuit pending in the United States District Court for the District of Oregon captioned
Patsy H. McMillan, Individually and On Behalf Of All Others Similarly Situated, v. Genworth Life and Annuity Insurance Company
. Plaintiff seeks to represent life insurance policyholders, alleging that GLAIC impermissibly calculated cost of insurance rates to be higher than permitted by her policy. The complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. We intend to continue to vigorously defend this action.
On August 11, 2021, GLIC and GLICNY received a request for pre-suit mediation related to a potential class action lawsuit that may be brought by five long-term care insurance policyholders, seeking to represent a
6
5
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
nationwide class alleging that the defendants made misleading and inadequate disclosures regarding premium increases
for long-term care insurance policies. The draft complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5$
5
million. Genworth participated in
pre-suit
mediation in
November 2021
and
January 2022.2022
. On January 
15
,
2022
, the parties reached an agreement in principle to settle the dispute on a nationwide basis, subject to the negotiation and execution of a final settlement agreement, and Court approval thereof. On January 
28
,
2022
, the complaint was filed in the United States District Court for the Eastern District of Virginia captioned
Fred Haney, Marsha Merrill, Sylvia Swanson, and Alan Wooten, individually, and on behalf of all others similarly situated v. Genworth Life Insurance Company and Genworth Life Insurance Company of New York
. The parties executed a settlement agreement consistent with the agreement in principle signed on January 
15 2022.
,
2022
. On May 
2
,
2022
, the Court preliminarily approved the settlement. The final approval hearing is scheduled for November 
17 2022.
,
2022
.
If the Court approves the settlement,
we do not anticipate the result to have a material adversewould expect an overall net favorable impact on our results of operations or financial position.operations. If the Court does not approve the final settlement, we intend to continue to vigorously defend this action.
At this time we cannot determine or predict the ultimate outcome of any of the pending legal and regulatory matters specifically identified above or the likelihood of potential future legal and regulatory matters against us. Except as disclosed above, we are not able to provide an estimate or range of reasonably possible losses related to these matters. Therefore, we cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to additional unrelated investigations and lawsuits. Increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely affect our business, financial condition and results of operations.
(b) Commitments
As of June 30, 2022, we were committed to fund $1,409 million in limited partnership investments, $64 million in U.S. commercial mortgage loan investments and $24 million in private placement investments. As of June 30, 2022, we were also committed to fund $75 million of bank loan investments which had not yet been drawn.
 
56
86
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(b) Commitments
As of March 31, 2022, we were committed to fund $1,309 million in limited partnership investments, $75 million in U.S. commercial mortgage loan investments and $20 million in private placement investments. As of March 31, 2022, we were also committed to fund $108 million of bank loan investments which had not yet been drawn.
(12)(13) Changes in Accumulated Other Comprehensive Income (Loss)
The following tables show the changes in accumulated other comprehensive income (loss), net of taxes, by component as of and for the periods indicated:
 
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying as
hedges
(2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2022
 $1,860  $2,025  $(24)  $3,861 
OCI before reclassifications
  (1,057)   (199)   (5)   (1,261) 
Amounts reclassified from (to) OCI
  6   (37)   0     (31) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
  (1,051)   (236)   (5)   (1,292) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2022 before noncontrolling interests
  809   1,789   (29)   2,569 
  
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
  (41)   0     0     (41) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2022
 $850  $1,789  $(29)  $2,610 
  
 
 
  
 
 
  
 
 
  
 
 
 
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
 
  
Derivatives
qualifying as
hedges
 
(2)
 
  
Foreign
currency
translation
and other
adjustments
 
  
Total
 
Balances as of April 1, 2022
  $850   $1,789   $(29)   $2,610 
OCI before reclassifications
   (2,436)    (307)    (7)    (2,750) 
Amounts reclassified from (to) OCI
   4    (37)    —      (33) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Current period OCI
   (2,432)    (344)    (7)    (2,783) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2022 before noncontrolling interests
   (1,582)    1,445    (36)    (173) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: change in OCI attributable to noncontrolling interests
   (28)    —      —      (28) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2022
  $(1,554)   $1,445   $(36)   $(145) 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2)
See note 5 for additional information.
 
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying as
hedges
(2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2021
 $2,214  $2,211  $0    $4,425 
OCI before reclassifications
  (316)   (385)   136   (565) 
Amounts reclassified from (to) OCI
  (4)   (34)   0     (38) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
  (320)   (419)   136   (603) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2021 before noncontrolling interests
  1,894   1,792   136   3,822 
  
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
  (25)   0     172   147 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2021
 $1,919  $1,792  $(36)  $3,675 
  
 
 
  
 
 
  
 
 
  
 
 
 
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
 
  
Derivatives
qualifying as
hedges
 
(2)
 
  
Foreign
currency
translation
and other
adjustments
 
  
Total
 
Balances as of April 1, 2021
  $1,919   $1,792   $(36)   $3,675 
OCI before reclassifications
   (54)    245    2    193 
Amounts reclassified from (to) OCI
   —      (34)    —      (34) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Current period OCI
   (54)    211    2    159 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2021 before noncontrolling interests
   1,865    2,003    (34)    3,834 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: change in OCI attributable to noncontrolling interests
   —      —      —      —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2021
  $1,865   $2,003   $(34)   $3,834 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2)
See note 5 for additional information.
59

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The foreign currency translation and other adjustments balance in the charts above included $(4) million and $(15) million, respectively, net of taxes of $1 million and $4 million, respectively, related to a net unrecognized postretirement benefit obligation as of March 31, 2022 and 2021. The balance also included taxes of $(1) million related to foreign currency translation adjustments as of March 31, 2021.
The following table shows reclassifications in (out) of accumulated other comprehensive income (loss), net of taxes, for the periods presented:
  
Amount reclassified from accumulated
other comprehensive income (loss)
  
Affected line item in the
consolidated statements
of income
  
Three months ended March 31,
 
(Amounts in millions)
 
2022
  
2021
 
Net unrealized investment (gains) losses:
          
Unrealized (gains) losses on
investments
(1)
 $8  $(5)  Net investment (gains) losses
Income taxes
  (2)   1  Provision for income taxes
  
 
 
  
 
 
   
Total
 $6  $(4)   
  
 
 
  
 
 
   
Derivatives qualifying as hedges:
          
Interest rate swaps hedging assets
 $(55)  $(52)  Net investment income
Interest rate swaps hedging assets
  (2)   0    Net investment (gains) losses
Interest rate swaps hedging liabilities
  1   0    Interest expense
Foreign currency swaps
  (1)   0    Net investment income
Income taxes
  20   18  Provision for income taxes
  
 
 
  
 
 
   
Total
 $(37)  $(34)   
  
 
 
  
 
 
   
(1) 
Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves.
6
07
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
   
Derivatives
qualifying as
hedges
 
(2)
   
Foreign
currency
translation
and other
adjustments
   
Total
 
Balances as of January 1, 2022
  $1,860   $2,025   $(24)   $3,861 
OCI before reclassifications
   (3,493)    (506)    (12)    (4,011) 
Amounts reclassified from (to) OCI
   10    (74)    —      (64) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Current period OCI
   (3,483)    (580)    (12)    (4,075) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2022 before noncontrolling interests
   (1,623)    1,445    (36)    (214) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: change in OCI attributable to noncontrolling interests
   (69)    —      —      (69) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2022
  $(1,554)   $1,445   $(36)   $(145) 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1)
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2)
See note 5 for additional information.
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
   
Derivatives
qualifying
as hedges

(2)
   
Foreign
currency
translation
and other
adjustments
   
Total
 
Balances as of January 1, 2021
  $2,214   $2,211   $—     $4,425 
OCI before reclassifications   (370)    (140)    138    (372) 
Amounts reclassified from (to) OCI   (4)    (68)    —      (72) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Current period OCI   (374)    (208)    138    (444) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2021 before noncontrolling interests
   1,840    2,003    138    3,981 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: change in OCI attributable to noncontrolling interests
   (25)    —      172    147 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balances as of June 30, 2021
  $1,865   $2,003   $(34)   $3,834 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1)
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2
)
See note 5 for additional information.
The
foreign currency translation and other adjustments balance in the charts above included $
(4)
million and $
(15)
 million, respectively, net of taxes of $
1
 million and $
4
 million, respectively, related to a net unrecognized postretirement benefit obligation as of June 30, 2022 and 2021. The balance also included taxes of $
2
 million and $
(1)
 million, respectively, related to foreign currency translation adjustments as of June 30, 2022 and 2021.

6
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(13)
The following table shows reclassifications in (out) of accumulated other comprehensive income (loss), net of taxes, for the periods presented:
(Amounts in millions)
  
Amount reclassified from accumulated

other comprehensive income (loss)
  
Affected line item in the
consolidated statements
of income
  
Three months ended
June 30,
  
Six months ended
June 30,
 
  
  2022  
  
  2021  
  
  2022  
  
  2021  
 
Net unrealized investment (gains) losses:
      
Unrealized (gains) losses on investments 
(1)
  $5  $—    $13  $(5)  Net investment (gains) losses
Income taxes
   (1)   —     (3)   1  Provision for income taxes
   
 
 
  
 
 
  
 
 
  
 
 
   
Total
  $4  $—    $10  $(4)   
   
 
 
  
 
 
  
 
 
  
 
 
   
Derivatives qualifying as hedges:
                   
Interest rate swaps hedging assets
  $(57)  $(52)  $(112)  $(104)  Net investment income
Interest rate swaps hedging assets
   —     —     (2)   —    Net investment (gains) losses
Interest rate swaps hedging liabilities
   1   —     2   —    Interest expense
Foreign currency swaps
   —     —     (1)   —    Net investment income
Income taxes
   19   18   39   36  Provision for income taxes
   
 
 
  
 
 
  
 
 
  
 
 
   
Total
  $(37)  $(34)  $(74)  $(68)   
   
 
 
  
 
 
  
 
 
  
 
 
   
(1)
Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves.
69

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(14) Discontinued Operations
On March 3, 2021, we completed a sale of our entire ownership interest of approximately 52% in Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) through an underwriting agreement. We sold our approximately 214.3 million shares of Genworth Australia for AUD2.28 per share and received approximately AUD483 million ($370 million) in net cash proceeds.

A summary of operating results related to Genworth Australia reported as discontinued operations was as follows for the periodperiods indicated:
 
(Amounts in millions)
  
Three months
ended March 31,
2021
 
Revenues:
     
Premiums
  $51 
Net investment income
   4 
Net investment gains (losses)
   (5) 
   
 
 
 
Total revenues
   50 
   
 
 
 
Benefits and expenses:
     
Benefits and other changes in policy reserves
   11 
Acquisition and operating expenses, net of deferrals
   7 
Amortization of deferred acquisition costs and intangibles
   6 
Interest expense
   1 
   
 
 
 
Total benefits and expenses
   25 
   
 
 
 
Income before income taxes and loss on sale
(1)
   25 
Provision for income taxes
   7 
   
 
 
 
Income before loss on sale
   18 
Loss on sale, net of taxes
   (3) 
   
 
 
 
Income from discontinued operations, net of taxes
   15 
   
 
 
 
Less: net income from discontinued operations attributable to noncontrolling interests
   8 
   
 
 
 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $7 
   
 
 
 

(Amounts in millions)
  
Three months ended
June 30, 2021
   
Six months ended
June 30, 2021
 
Revenues:
    
Premiums
  $—     $51 
Net investment income
   —      4 
Net investment gains (losses)
   —      (5) 
   
 
 
   
 
 
 
Total revenues
   —      50 
   
 
 
   
 
 
 
Benefits and expenses:
          
Benefits and other changes in policy reserves
   —      11 
Acquisition and operating expenses, net of deferrals
   —      7 
Amortization of deferred acquisition costs and intangibles
   —      6 
Interest expense
   —      1 
   
 
 
   
 
 
 
Total benefits and expenses
   —      25 
   
 
 
   
 
 
 
Income before income taxes and loss on sale
(1)
   —      25 
Provision for income taxes
   —      8 
   
 
 
   
 
 
 
Income before loss on sale
   —      17 
Loss on sale, net of taxes
   —      (3) 
   
 
 
   
 
 
 
Income from discontinued operations, net of taxes
   —      14 
   
 
 
   
 
 
 
Less: net income from discontinued operations attributable to noncontrolling interests
   —      8 
   
 
 
   
 
 
 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $—     $6 
   
 
 
   
 
 
 
 
(1)
The threesix months ended March 31,June 30, 2021, includes
pre-tax
income from discontinued operations available to Genworth Financial, Inc.’s common stockholders of $13 million.
In addition, we recorded
after-tax
income (loss) of $(1) million and $11 million for the threesix months ended March 31,June 30, 2022 and 2021, respectively, associated with refinements to our tax matters agreement
liability.
Lifestyle protection insurance
On December 1, 2015, Genworth Financial, through its subsidiaries, completed the sale of its lifestyle protection insurance business to AXA. In 2017, AXA sued us for damages on an indemnity in the 2015 agreement related to alleged remediation it paid to customers who purchased payment protection insurance (“PPI”). On July 20, 2020, we reached a settlement agreement related to losses incurred from mis-selling
7
0
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
complaints on policies sold from 1970 through 2004. As part of the settlement agreement, Genworth Holdings
6
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
agreed to make payments for certain PPI mis-selling claims, along with a significant portion of future claims to be invoiced by AXA. Under the settlement agreement, Genworth Holdings issued a secured promissory note to AXA, in which it agreed to make deferred cash payments in two installments in June 2022 and September 2022.

In connection with the Genworth Australia sale, Genworth Holdings made a mandatory principal payment to AXA of approximately £176 million ($245 million) in March 2021. The mandatory payment fully repaid the first installment obligation originally due in June 2022 and partially prepaid the September 2022 installment payment.
On September 21, 2021, Genworth Holdings used a portion of the net proceeds from the minority IPO of Enact Holdings to repay the remaining outstanding balance of the secured promissory note of approximately £215 million ($296 million). As of December 31, 2021, we accrued approximately £22 million ($30
million) of estimated future claims still in process of being invoiced. In February 2022, Genworth Holdings paid AXA
$30
million, which constitutes the majority of the estimated remaining unprocessed claims. We have established our current best estimates for claims still being processed by AXA, as well as other expenses; however, there may be future adjustments to this estimate. If amounts are different from our estimate, it could result in an adjustment to our liability and an additional amount reflected in income (loss) from discontinued operations.
 
62
7
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table presents the amounts owed to AXA under the settlement agreement reflected as liabilities related to discontinued operations in our condensed consolidated balance sheets as of the periods presented:
 
(Amounts in millions)
 
British Pounds
 
U.S. Dollar
   
British Pounds
 
U.S. Dollar
 
 
March 31,
2022
 
December 31,
2021
 
March 31,
2022
 
December 31,
2021
   
June 30,
2022
 
December 31,
2021
 
June 30,
2022
 
December 31,
2021
 
Installment payments due to AXA:
                 
June 2022:
              ��   
Beginning balance
 £0    £159  $0    $217   £—    £159  $—    $217 
Prepayments
(1)
  0     (159)   0     (217)    —     (159)   —     (217) 
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Ending balance
  0     0     0     0      —     —     —     —   
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
September 2022:
                 
Beginning balance
  0     187   0     256    —     187   —     256 
Amounts billed as future losses
  0     45   0     61    —     45   —     61 
Prepayments
(1)
  0     (232)   0     (324)    —     (232)   —     (324) 
Foreign exchange and other
  0     0     0     7    —     —     —     7 
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Ending balance
  0     0     0     0      —     —     —     —   
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total amounts due under the promissory note
  0     0     0     0      —     —     —     —   
Future claims:
                 
Estimated beginning balance
  22   79   30   108    22   79   30   108 
Plus: Additional amounts invoiced
  1   0     1   0      2   —     2   —   
Change in estimated future claims
  0     (10)   0     (14)    —     (10)   —     (14) 
Less: Amounts billed and included as mandatory prepayments
  0     (45)   0     (61)    —     (45)   —     (61) 
Less: Amounts paid
  (22)   (2)   (30)   (3)    (23)   (2)   (31)   (3) 
Foreign exchange and other
  0—     0—     0     0—      —     —     —     —   
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Estimated future claims
  1   22   1   30    1   22   1   30 
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
Total amounts due to AXA under the
settlement
agreement
 £1  £22  $1  $30   £1  £22  $1  $30 
 
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
 
 
(1)
On March 3, 2021, we completed the sale of
Genworth
Australia and received net proceeds of approximately AUD483 million ($370 million). The sale of Genworth Australia resulted in a mandatory
principal payment of approximately £176 million ($245 million) related to our outstanding secured promissory note issued to AXA, dated as of July 20, 2020, as amended by the parties in connection with the Genworth Australia sale. On September 21, 2021, we used a portion of the net proceeds from the minority IPO of Enact Holdings to repay the remaining outstanding balance of the secured promissory note of approximately £215 million ($296 million).
For the three months ended March 31, 2022 and 2021, weWe recorded an
after-tax
loss from discontinued operations of $1 million in each period,and $4 million for the three months ended June 30, 2022 and 2021, respectively, and $2 million and $5 million for the six months ended June 30, 2022 and 2021, respectively, related to the settlement agreement with AXA. In the event AXA recovers amounts from third parties related to the
mis-selling
losses, including from the distributor responsible for the sale of the policies, we have certain rights to share in those recoveries to recoup payments for the underlying
mis-selling
losses. As of March 31,June 30, 2022, we have not recorded any amounts associated with recoveries from third parties.
7
2
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In addition to the future claims still being processed under the settlement agreement, we also have an unrelated liability that is owed to AXA associated with a tax gross up on underwriting losses attributable to a product sold by a distributor in our former lifestyle protection insurance business. As of March 31,June 30, 2022 and
63
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2021, the balance of the liability was $3 million and $4 million,
respectively,
, and is included as liabilities related to discontinued operations in our condensed consolidated balance sheets. For the threesix months ended March 31,June 30, 2021, we recorded an
after-tax
loss of $4 million associated with adjustments to an underwriting loss
liability
previously owed to AXA.
 
647
3
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein and with our 2021 Annual Report on Form 10-K. Unless the context otherwise requires, references to “Genworth,” the “Company,” “we” or “our” herein are to Genworth Financial, Inc. on a consolidated basis. References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.
Cautionary note regarding forward-looking statements
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Examples of forward-looking statements include statements we make relating to future reductions of debt, potential dividends or share repurchases, future Enact Holdings, Inc. (“Enact Holdings”) quarterly and special dividends, the cumulative amount of rate action benefits required for our long-term care insurance business to achieve break-even, future financial performance of our businesses, liquidity and future strategic investments, including new products and services designed to assist individuals with navigating and financing long-term care, and potential third-party relationships or business arrangements relating thereto, as well as statements we make regarding the potential impacts of the coronavirus pandemic (“COVID-19”). Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from those in the forward-looking statements due to global political, economic, inflation, business, competitive, market, regulatory and other factors and risks, including but not limited to, the following:
 
we may be unable to successfully execute our strategic plans
: to strengthen our financial position and create long-term shareholder value, including with respect to reducing debt of Genworth Holdings, Inc. (“Genworth Holdings”); maximizing the value of Enact Holdings; achieving economic breakeven on and stabilizing the legacy long-term care insurance in-force block; advancing our long-term care growth initiatives, including launching either unilaterally or with a strategic partner new product and service offerings designed to assist individuals with navigating and financing long-term care; and returning capital to Genworth Financial shareholders, due to numerous risks and constraints, including but not limited to: Enact Holdings’ ability to pay dividends, including as a result of the government-sponsored enterprises’ (“GSEs”) amendments to the private mortgage insurer eligibility requirements (“PMIERs”) in response to COVID-19, as well as additional PMIERs requirements or other restrictions that the GSEs may place on the ability of Enact Holdings to pay dividends; an inability to increase the capital needed in our businesses in a timely manner and on anticipated terms, including through improved business performance, reinsurance or similar transactions, asset sales, debt issuances, securities offerings or otherwise, in each case as and when required; our strategic priorities change or become more costly or difficult to successfully achieve than currently anticipated or the benefits achieved being less than anticipated; an inability to identify and contract with a strategic partner regarding a new long-term care insurance business; an inability to establish a new long-term care insurance business or product offerings due to commercial and/or regulatory challenges; an inability to reduce costs proportionate with Genworth’s reduced business activity, including as forecasted and in a timely manner; and adverse tax or accounting charges, including new accounting guidance (that is effective for us on January 1, 2023) related to long-duration insurance contracts;
 
risks relating to estimates, assumptions and valuations
including: inadequate reserves and the need to increase reserves (including as a result of any changes we may make in the future to our assumptions, methodologies or otherwise in connection with periodic or other reviews); risks related to the impact of our annual review of assumptions and methodologies related to our long-term care insurance claim reserves and margin reviews, including risks that additional information obtained in the future or other
 
65
74
Table of Contents
 
reserves and margin reviews, including risks that additional information obtained in the future or other changes to assumptions or methodologies materially affect margins; or other changes to assumptions or methodologies materially affect margins; the inability to accurately estimate the impacts of COVID-19;COVID-19 and other novel diseases; inaccurate models; the need to increase our reserves as a result of deviations from our estimates and actuarial assumptions or other reasons; accelerated amortization of deferred acquisition costs (“DAC”) and present value of future profits (“PVFP”) (including as a result of any future changes we may make to our assumptions, methodologies or otherwise in connection with periodic or other reviews); adverse impact on our financial results as a result of projected profits followed by projected losses (as is currently the case with our long-term care insurance business); changes in valuation of fixed maturity and equity securities; and the benefits Enact Holdings realizes from its future loss mitigation actions or programs may be limited;
 
liquidity, financial strength and credit ratings, and counterparty and credit risks
including: the impact on Genworth Financial’s and Genworth Holdings’ liquidity caused by the inability to receive dividends or other returns of capital from Enact Holdings, including as a result of COVID-19; limited sources of capital and financing, including under certain conditions we may seek additional capital on unfavorable terms; future adverse rating agency actions against us or Enact Holdings, including with respect to rating downgrades or potential downgrades or being put on review for potential downgrade, all of which could have adverse implications, 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; and defaults or other events impacting the value of our invested assets, including but not limited to, our fixed maturity and equity securities, commercial mortgage loans, policy loans and limited partnership investments;
 
risks relating to economic, market and political conditions
including: downturns and volatility in global economies and equity and credit markets, including as a result of inflation and supply chain disruptions, a potential recession, continued labor shortages and other displacements caused by COVID-19; interest rates and changes in rates could adversely affect our business and profitability; deterioration in economic conditions (including as a result of the Russian invasion of Ukraine) or a decline in home prices or home sales that adversely affect Enact Holdings’ loss experience and/or business levels; political and economic instability or changes in government policies; and fluctuations in international securities markets;
 
regulatory and legal risks
including: extensive regulation of our businesses and changes in applicable laws and regulations (including changes to tax laws and regulations); litigation and regulatory investigations or other actions, including commercial and contractual disputes with counterparties; heightened regulatory restrictions and other insurance, regulatory or corporate law restrictions; the inability to successfully seek in-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 changes in regulatory requirements, including risk-based capital; inability of Enact Holdings to continue to meet the requirements mandated by PMIERs, including as a result of increased delinquencies caused by COVID-19; inability of Enact Holdings’ 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 in 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 Enact Holdings, including any additional restrictions placed on Enact Holdings by government and government-owned enterprises and the GSEs in connection with additional capital transactions; inability to continue to implement actions to mitigate the impact of statutory reserve requirements; changes in accounting and reporting standards, including new accounting guidance (that is effective for us on January 1, 2023) related to long-duration insurance contracts;
 
operational risks
including: the inability to retain, attract and motivate qualified employees or senior management; Enact Holdings’ reliance on, and loss of, key customers or distribution relationships;
 
6675
Table of Contents
 
competition with government-owned and government-sponsored enterprises may put Enact Holdings at a competitive disadvantage on pricing and other terms and conditions; the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations; and failure or any compromise of the security of our computer systems, disaster recovery systems, business continuity plans and failures to safeguard or breaches of confidential information;
 
insurance and product-related risks
including: Enact Holdings’ inability to maintain or increase capital in its mortgage insurance subsidiaries in a timely manner; our inability to increase premiums and reduce benefits sufficiently, and in a timely manner, on our 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 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 Enact Holdings’ U.S. contract underwriting services; Enact Holdings’ delegated underwriting program may subject its mortgage insurance subsidiaries to unanticipated claims; and medical advances, such as genetic research and diagnostic imaging, and related legislation that impact policyholder behavior in ways adverse to us;
 
other general risks
including: the occurrence of natural or man-made disasters, including geopolitical tensions and war (including the Russian invasion of Ukraine), or a public health emergency, including pandemics, climate change or cybersecurity breaches, could materially adversely affect our financial condition and results of operations.
We provide additional information regarding these risks and uncertainties in our Annual Report on
Form 10-K,
filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2022. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Accordingly, for the foregoing reasons, we caution you against relying on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required under applicable securities laws.
Overview
Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products which are no longer sold.
Enact Holdings is a public company traded on the Nasdaq Global Select Market exchange under the ticker symbol “ACT.” Genworth Financial maintains control of Enact Holdings through an indirect majority voting interest and accordingly, Enact Holdings remains a consolidated subsidiary of Genworth Financial. Our Enact segment predominantly includes Enact Holdings and its mortgage insurance subsidiaries. There are minor financial reporting differences between our Enact segment and the standalone financial results of Enact Holdings, which are separately disclosed with the Securities and Exchange Commission. Notwithstanding these differences, we commonly make references to “Enact,” our “Enact segment” and “our U.S. mortgage insurance subsidiaries” throughout this Quarterly Report on Form 10-Q, which generally can be viewed as references to Enact Holdings and its mortgage insurance subsidiaries, unless the context otherwise requires.
We report our business results through three operating business segments: Enact; U.S. Life Insurance; and Runoff. We also have Corporate and Other activities. Our U.S. Life Insurance segment includes long-term care
 
6776
Table of Contents
insurance, life insurance and fixed annuity products. The Runoff segment primarily includes variable annuity, variable life insurance and corporate-owned life insurance products, which have not been actively sold since 2011.
Strategic Update
Genworth is focused on five strategic priorities, including: reducing the debt of Genworth Holdings, the issuer of our outstanding public debt, to approximately $1.0 billion over time; maximizing the value of Enact Holdings; achieving economic breakeven on and stabilizing the legacy long-term care insurance in-force block; advancing Genworth’s long-term care growth initiatives; and returning capital to Genworth Financial shareholders. During the firstsecond quarter of 2022, we continued to make meaningful progress on our strategic priorities. On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Pursuant to the program, in the second quarter of 2022, Genworth Financial repurchased 3,869,494 shares of its common stock at an average price of $3.88 per share for a total cash outlay of $15 million. Genworth Financial also authorized share repurchases through a Rule 10b5-1 trading plan under which 4,034,794 shares of its common stock were repurchased during July 2022 at an average price of $3.72 per share for a total cash outlay of $15 million, leaving approximately $320 million that may yet be purchased under the share repurchase program. This was the first return of capital to Genworth Financial shareholders in over 13 years. We expect the majority of share repurchases to occur following the repayment of Genworth Holdings’ remaining February 2024 debt.
During the second quarter of 2022, Genworth Holdings repurchased $82$48 million principal amount of its February 2024 debt, leaving $200$152 million outstanding as of March 31,June 30, 2022, and webringing its total outstanding debt to approximately $1,052 million. We plan to retire the remaining outstanding balance of the February 2024 debt in the third quarter of 2022, depending upon economic and business conditions, among other considerations. If we are able to retire the February 2024 debt in 2022, the remaining debt outstanding at Genworth Holdings will be approximately $900 million, below our target of approximately $1.0 billion.
Stabilizing our U.S. life insurance business continues to be one of Genworth’s long-term goals. Our U.S. life insurance business continued to make strong progress on its multi-year long-term care insurance in-force rate action plan, receiving approvals of approximately $101$153 million of incremental annual premiums for the threesix months ended March 31,June 30, 2022. In aggregate, we estimate that the cumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the firstsecond quarter of 2022 was approximately $20.4$20.7 billion, on a net present value basis, of the total expected amount required of $28.7 billion. We continue to work closely with the National Association of Insurance Commissioners (“NAIC”) and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
Given
Financial Strength and Credit Ratings
On July 21, 2022, Moody’s Investors Service, Inc. (“Moody’s) upgraded the significantcredit rating of Genworth Holdings to “Ba2” (Speculative) from “B1” (Speculative) and provided a Stable outlook. The reasons cited for the ratings upgrade include improvement in the results of operationsGenworth Holdings’ liquidity and financial position of Genworth,flexibility and leverage, including the $2.1 billionexpectation that its remaining February 2024 debt will be paid in the third quarter of debt reduction in 2021, and2022. The reasons cited also include the recent approvalexpectation of an ordinary dividend by Enact Holdings’ board of directors, on May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Repurchases under the authorized program would be funded from holding company capital, as well as future cash flow generation, including expected futurecontinued dividends from Genworth Financial’s ownership in Enact Holdings. We expectMoody’s also upgraded the majorityfinancial strength rating of share repurchasesEnact Mortgage Insurance Corporation (“EMICO”) to occur following“Baa1” (Adequate) from “Baa2” (Adequate). The reasons cited for the repayment of Genworth Holdings’ remaining February 2024 debt. If ultimately successful, this will beupgrade include improvements in the first return ofoverall U.S. mortgage insurance sector and Enact’s overall credit profile, including its market position, profitability, capital to Genworth Financial shareholdersadequacy and financial flexibility. The upgrade also reflects Enact’s solid position in over 13 years.the U.S. mortgage insurance market and good client diversification, as well as its consistent PMIERs sufficiency.
Financial Strength and Credit Ratings
77
Table of Contents
On March 11, 2022, S&P Global Ratings (“S&P”) upgraded the credit rating of Genworth Financial and Genworth Holdings to “B+” (Speculative) from “B” (Speculative) and maintained a Positive outlook. The ratings upgrade iswas mostly due to the reduction in Genworth Holdings’ debt and other obligations over the past 12 months, resulting in the Company’s improved financial flexibility and lower liquidity risk. In addition, S&P affirmed its “BBB” (Good) financial strength rating of Enact Mortgage Insurance Corporation (“EMICO”)EMICO and maintained a Positive outlook.
There were no other changes in the financial strength ratings of our insurance subsidiaries or the credit ratings of Genworth Financial and Genworth Holdings subsequent to February 28, 2022, the date we filed our 2021 Annual Report on Form 10-K. For additional information regarding the financial strength ratings of Genworth Financial’s insurance subsidiaries and the credit ratings of Genworth Financial and Genworth Holdings, including their importance to our business, see “Item 1—Ratings” in our 2021 Annual Report on Form 10-K.
68
Table of Contents
Our Financial Information
The financial information in this Quarterly Report on Form 10-Q has been derived from our unaudited condensed consolidated financial statements.
Revenues and expenses
Our revenues consist primarily of the following:
 
PremiumsPremiums.
. Premiums consist primarily of premiums earned on insurance products for mortgage, long-term care and term life insurance.
 
Net investment incomeincome.
. Net investment income represents the income earned on our investments. For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.”
 
Net investment gains (losses).
. Net investment gains (losses) consist primarily of realized gains and losses from the sale of our investments, credit losses, unrealized and realized gains and losses from our equity securities, limited partnership investments and derivative instruments. For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
 
Policy fees and other incomeincome.
. Policy fees and other income consists primarily of fees assessed against policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and term universal life insurance policies, advisory and administration service fees assessed on investment contractholder account values, broker/dealer commission revenues, fee revenue from contract underwriting services and other fees.
Our expenses consist primarily of the following:
 
Benefits and other changes in policy reservesreserves.
. Benefits and other changes in policy reserves consist primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for long-term care insurance, life insurance, accident and health insurance, structured settlements and single premium immediate annuities with life contingencies, and claim costs incurred related to mortgage insurance products.
 
Interest creditedcredited.
. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.
 
Acquisition and operating expenses, net of deferralsdeferrals.
. Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.
 
78
Table of Contents
which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.
Amortization of deferred acquisition costs and intangiblesintangibles.
. Amortization of DAC and intangibles consists primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.
 
Interest expenseexpense.
. Interest expense represents interest related to our borrowings that are incurred at Genworth Holdings or Enact Holdings, and interest expense related to the Tax Matters Agreement previously owed to General Electric Company (“GE”) and certain reinsurance arrangements being accounted for as deposits.
 
Income taxestaxes.
. We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. generally accepted accounting principles (“U.S. GAAP”) and tax law. The
69
Table of Contents
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.
 
Net income from continuing operations attributable to noncontrolling interestsinterests.
. Net income from continuing operations attributable to noncontrolling interests represents the portion of income from continuing operations in a subsidiary attributable to third parties.
The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.
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.
We allocate corporate expenses to each of our operating segments using various methodologies, including based on the amount of capital allocated to each operating segment.methodologies.
 
7079
Table of Contents
Consolidated Results of Operations
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The following table sets forth the consolidated results of operations for the periods indicated:
 
  
Three months
ended March 31,
   
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
 
2021
   
2022 vs. 2021
   
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
               ��    
Premiums
  $931  $968   $(37)   (4)%   $927   $947   $(20)    (2)% 
Net investment income
   764   801    (37)   (5)%    787    844    (57)    (7)% 
Net investment gains (losses)
   28   33    (5)   (15)%    8    70    (62)    (89)% 
Policy fees and other income
   169   183    (14)   (8)%    159    180    (21)    (12)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Total revenues
   1,892   1,985    (93)   (5)%    1,881    2,041    (160)    (8)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Benefits and expenses:
                  
Benefits and other changes in policy reserves
   1,139   1,218    (79)   (6)%    764    1,161    (397)    (34)% 
Interest credited
   125   131    (6)   (5)%    125    127    (2)    (2)% 
Acquisition and operating expenses, net of deferrals
   271   275    (4)   (1)%    589    304    285    94% 
Amortization of deferred acquisition costs and intangibles
   92   77    15   19%    84    86    (2)    (2)% 
Interest expense
   26   51    (25)   (49)%    26    43    (17)    (40)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Total benefits and expenses
   1,653   1,752    (99)   (6)%    1,588    1,721    (133)    (8)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Income from continuing operations before income taxes
   239   233    6   3%    293    320    (27)    (8)% 
Provision for income taxes
   58   59    (1)   (2)%    73    75    (2)    (3)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Income from continuing operations
   181   174    7   4%    220    245    (25)    (10)% 
Income (loss) from discontinued operations, net of taxes
   (2)   21    (23)   (110)% 
Loss from discontinued operations, net of taxes
   (1)    (5)    4    80% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Net income
   179   195    (16)   (8)%    219    240    (21)    (9)% 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —      30   NM(1)    38    —      38    NM(1) 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     8    (8)   (100)%    —      —      —      —  % 
  
 
  
 
   
 
    
 
   
 
   
 
    
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $(38)   (20)%   $181   $240   $(59)    (25)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Net income available to Genworth Financial, Inc.’s common stockholders:
                  
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174   $(23)   (13)%   $182   $245   $(63)    (26)% 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (2)   13    (15)   (115)% 
Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (1)    (5)    4    80% 
  
 
  
 
   
 
    
 
   
 
   
 
    
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $(38)   (20)%   $181   $240   $(59)    (25)% 
  
 
  
 
   
 
    
 
   
 
   
 
    
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
80
Table of Contents
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth the consolidated results of operations for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Revenues:
        
Premiums
  $1,858   $1,915   $(57)    (3)% 
Net investment income
   1,551    1,645    (94)    (6)% 
Net investment gains (losses)
   36    103    (67)    (65)% 
Policy fees and other income
   328    363    (35)    (10)% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   3,773    4,026    (253)    (6)% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   1,903    2,379    (476)    (20)% 
Interest credited
   250    258    (8)    (3)% 
Acquisition and operating expenses, net of deferrals
   860    579    281    49% 
Amortization of deferred acquisition costs and intangibles
   176    163    13    8% 
Interest expense
   52    94    (42)    (45)% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   3,241    3,473    (232)    (7)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations before income taxes
   532    553    (21)    (4)% 
Provision for income taxes
   131    134    (3)    (2)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations
   401    419    (18)    (4)% 
Income (loss) from discontinued operations, net of taxes
   (3)    16    (19)    (119)% 
  
 
 
   
 
 
   
 
 
   
Net income
   398    435    (37)    (9)% 
Less: net income from continuing operations attributable to noncontrolling interests
   68    —      68    NM(1) 
Less: net income from discontinued operations attributable to noncontrolling interests
   —      8    (8)    (100)% 
  
 
 
   
 
 
   
 
 
   
Net income available to Genworth Financial, Inc.’s common stockholders
  $330   $427   $(97)    (23)% 
  
 
 
   
 
 
   
 
 
   
Net income available to Genworth Financial, Inc.’s common stockholders:
        
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $333   $419   $(86)    (21)% 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (3)    8    (11)    (138)% 
  
 
 
   
 
 
   
 
 
   
Net income available to Genworth Financial, Inc.’s common stockholders
  $330   $427   $(97)    (23)% 
  
 
 
   
 
 
   
 
 
   
 
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Unless otherwise stated, all references to net income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, respectively.
 
7181
Table of Contents
Use of non- GAAP measures
Reconciliation of net income (loss) to adjusted operating income (loss)
We use non-GAAP financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share.”��� Adjusted operating income (loss) per share is derived from adjusted operating income (loss). Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). We define adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or initial gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A 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. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) 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) in accordance with U.S. GAAP, we believe that adjusted operating income (loss), and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) per 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) 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) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) or net income (loss) per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) may differ from the definitions used by other companies.
Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate 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.
 
7282
Table of Contents
The following table presents a reconciliation of net income to adjusted operating income for the periods indicated:
 
  
    Three months ended    
 
  
March 31,
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
2022
 
2021
   
    2022    
   
    2021    
   
    2022    
   
    2021    
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $181   $240   $330   $427 
Add: net income from continuing operations attributable to noncontrolling interests
   30   —      38    —      68    —   
Add: net income from discontinued operations attributable to noncontrolling interests
   —     8    —      —      —      8 
  
 
  
 
   
 
   
 
   
 
   
 
 
Net income
   179   195    219    240    398    435 
Less: income (loss) from discontinued operations, net of taxes
   (2)   21 
Less: Income (loss) from discontinued operations, net of taxes
   (1)    (5)    (3)    16 
  
 
  
 
   
 
   
 
   
 
   
 
 
Income from continuing operations
   181   174    220    245    401    419 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —      38    —      68    —   
  
 
  
 
   
 
   
 
   
 
   
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   151   174    182    245    333    419 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
           
Net investment (gains) losses, net
   (28)   (33) 
Net investment (gains) losses, net
(1)
   (10)    (70)    (38)    (103) 
(Gains) losses on early extinguishment of debt
   3   4    1    —      4    4 
Expenses related to restructuring
   —     21    1    5    1    26 
Taxes on adjustments
   5   2    2    14    7    16 
  
 
  
 
   
 
   
 
   
 
   
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168   $176   $194   $307   $362 
  
 
  
 
   
 
   
 
   
 
   
 
 
We
(1) 
For the three months and six months ended June 30, 2022, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million.
During the three and six months ended June 30, 2022, we repurchased $82$48 million and $130 million, respectively, principal amount of Genworth Holdings’ senior notes due in February 2024 for a pre-tax loss of $1 million and $4 million, respectively. During the six months ended June 30, 2021, we repurchased $146 million principal amount of Genworth Holdings’ senior notes withdue in September 2021 maturity dates in the first quarters of 2022 and 2021, respectively, for a pre-tax loss of $3 million and $4 million, respectively.million. These transactions were excluded from adjusted operating income as they relate to losses on the early extinguishment of debt.
We recorded a pre-tax expense of $21$1 million infor the first quarter ofthree and six months ended June 30, 2022 and $5 million and $26 million for the three and six months ended June 30, 2021, respectively, related to restructuring costs as we continuedcontinue to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
 
7383
Table of Contents
Earnings per share
The following table provides basic and diluted earnings per common share for the periods indicated:
 
  
Three months ended
March 31,
   
Increase
(decrease) and
percentage
change
  
Three months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
Six months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions, except per share amounts)
  
    2022    
   
    2021    
   
 2022 vs. 2021 
  
    2022    
 
    2021    
 
2022 vs. 2021
 
2022
 
2021
 
2022 vs. 2021
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
               
Basic
  $0.30   $0.35   $(0.05)   (14)%  $0.36  $0.48  $(0.12)   (25)%  $0.65  $0.83  $(0.18)   (22)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Diluted
  $0.29   $0.34   $(0.05)   (15)%  $0.36  $0.47  $(0.11)   (23)%  $0.65  $0.82  $(0.17)   (21)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
               
Basic
  $0.29   $0.37   $(0.08)   (22)%  $0.36  $0.47  $(0.11)   (23)%  $0.65  $0.84  $(0.19)   (23)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Diluted
  $0.29   $0.37   $(0.08)   (22)%  $0.35  $0.47  $(0.12)   (26)%  $0.64  $0.83  $(0.19)   (23)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders per share:
               
Basic
  $0.26   $0.33   $(0.07)   (21)%  $0.35  $0.38  $(0.03)   (8)%  $0.60  $0.71  $(0.11)   (15)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Diluted
  $0.25   $0.33   $(0.08)   (24)%  $0.34  $0.38  $(0.04)   (11)%  $0.60  $0.70  $(0.10)   (14)% 
  
 
   
 
   
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Weighted-average common shares outstanding:
               
Basic
   508.3    506.0      509.0   507.0     508.6   506.5   
  
 
   
 
     
 
  
 
    
 
  
 
   
Diluted
   517.4    513.8      514.2   515.0     515.8   514.4   
  
 
   
 
     
 
  
 
    
 
  
 
   
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation.awards.
The following table presentstables present a summary of adjusted operating income (loss) for our segments and Corporate and Other activities for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
Six months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
 
    2021    
 
 2022 vs. 2021 
   
    2022    
 
    2021    
 
2022 vs. 2021
 
    2022    
 
    2021    
 
2022 vs. 2021
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
              
Enact segment
  $135  $126  $9   7%   $167  $135  $32   24%  $302  $261  $41   16% 
U.S. Life Insurance segment:
              
Long-term care insurance
   59   95   (36)   (38)%    34   98   (64)   (65)%   93   193   (100)   (52)% 
Life insurance
   (79)   (63)   (16)   (25)%    (34)   (40)   6   15%   (113)   (103)   (10)   (10)% 
Fixed annuities
   16   30   (14)   (47)%    21   13   8   62%   37   43   (6)   (14)% 
  
 
  
 
  
 
    
 
  
 
  
 
   
 
  
 
  
 
  
U.S. Life Insurance segment
   (4)   62   (66)   (106)%    21   71   (50)   (70)%   17   133   (116)   (87)% 
  
 
  
 
  
 
    
 
  
 
  
 
   
 
  
 
  
 
  
Runoff segment
   9   12   (3)   (25)%    2   15   (13)   (87)%   11   27   (16)   (59)% 
Corporate and Other activities
   (9)   (32)   23   72%    (14)   (27)   13   48%   (23)   (59)   36   61% 
  
 
  
 
  
 
    
 
  
 
  
 
   
 
  
 
  
 
  
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168  $(37)   (22)%   $176  $194  $(18)   (9)%  $307  $362  $(55)   (15)% 
  
 
  
 
  
 
    
 
  
 
  
 
   
 
  
 
  
 
  
 
7484
Table of Contents
Executive Summary of Consolidated Financial Results
Below is an executive summary of our condensed 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 March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
 
Net income for the three months ended March 31,June 30, 2022 and 2021 was $149$181 million and $187$240 million, respectively, and adjusted operating income was $131$176 million and $168$194 million, respectively. Our Enact segment drove our first quarter of 2022 consolidated financial results, reporting $135 million of adjusted operating income, an increase of 7% compared to the first quarter of 2021. Our U.S. Life Insurance segment reported an adjusted operating loss of $4 million in the first quarter of 2022 driven mostly by unfavorable life insurance operating results, which reported an adjusted operating loss of $79 million for the three months ended March 31, 2022, an increase of 25% compared to the three months ended March 31, 2021. The following is a summary comparison of adjusted operating income (loss) for our segments and Corporate and Other activities:
 
Our Enact segment haddrove our second quarter of 2022 consolidated financial results, reporting $167 million of adjusted operating income, an increase of $135 million and $126 million for24% compared to the three months ended March 31, 2022 and 2021, respectively.second quarter of 2021.
 
The increase was primarily attributable to lower losses largely fromin the current year driven by a favorable reserve adjustment of $40$76 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $8 million on pre-COVID-19 delinquencies in the prior year, as well as from lower new delinquencies in the current year.expectations.
 
These improvements were partially offset by lower premiums and the minority initial public offering (“IPO”) of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $30$38 million, and by lower premiums in the current year.
 
Our U.S. Life Insurance segment hadreported adjusted operating income of $21 million in the second quarter of 2022 driven mostly by favorable long-term care insurance and fixed annuities operating results, which reported adjusted operating income of $34 million and $21 million, respectively, partially offset by an adjusted operating loss of $4$34 million for the three months ended March 31, 2022 compared to adjusted operating income of $62 million for the three months ended March 31, 2021.in our life insurance business.
 
Long-term care insurance:
 
Adjusted operating income decreased $36$64 million primarily from a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims,$55 million less favorable development on incurred but not reported (“IBNR”) claims, lower renewal premiums and lower net investment income.
These unfavorable developments were partially offset by higher premiums and reduced benefits of $61 millionimpact in the current year from in-force rate actions approved and implemented, which included a lower net favorable impact from policyholder benefit reduction elections made as part of a legal settlement.settlement, as the implementation of the settlement is substantially complete.
 
To account for the change in experience relatedThe decrease was also attributable to mortalityhigher severity and claim incidence due to COVID-19, we increased claim reserves by $76 millionfrequency of new claims, lower net investment income and lower renewal premiums in the priorcurrent year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $30 million.
 
Life insurance:
 
The adjusted operating loss increased $16decreased $6 million mainly attributable to a $20 million legal settlement accrual,lower mortality, partially offset by lower mortalitythe runoff of our in-force blocks and higher lapses in the current year compared to the prior year.our 20-year term life insurance block written in 2002 entering its post-level premium period.
 
75
Table of Contents
Fixed annuities:
 
Adjusted operating income decreased $14increased $8 million mainly attributable to lower net spreads and lowerhigher mortality in our single premium immediate annuitiesannuity products and lower DAC amortization, partially offset by lower net spreads in the current year.
 
Our Runoff segment had adjusted operating income of $9$2 million and $12$15 million for the three months ended March 31,June 30, 2022 and 2021, respectively.
 
The decrease was predominantly due to unfavorable equity market performance and higher interest rates resulting in a decline in the average account values of our variable annuity products reducing fee income in the current year.
 
85
Table of Contents
These unfavorable developments were partially offset by higher policy loan income in our corporate-owned life insurance products in the current year.
Corporate and Other activities had an adjusted operating loss of $9$14 million and $32$27 million for the three months ended March 31,June 30, 2022 and 2021, respectively.
 
The decrease in the loss was primarily related to lower interest expense in the current year.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Net income for the six months ended June 30, 2022 and 2021 was $330 million and $427 million, respectively, and adjusted operating income was $307 million and $362 million, respectively.
Our six months ended June 30, 2022 consolidated financial results were predominantly driven by our Enact segment, which reported $302 million of adjusted operating income, an increase of 16% compared to the six months ended June 30, 2021.
The increase was primarily attributable to lower losses driven by favorable reserve adjustments of $115 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations.
These improvements were partially offset by the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $68 million, and by lower premiums in the current year.
Our U.S. Life Insurance segment reported adjusted operating income of $17 million for the six months ended June 30, 2022 driven mostly by favorable long-term care insurance and fixed annuities operating results, which reported adjusted operating income of $93 million and $37 million, respectively, partially offset by an adjusted operating loss of $113 million in our life insurance business.
Long-term care insurance:
Adjusted operating income decreased $100 million primarily from higher severity and frequency of new claims, lower renewal premiums, lower net investment income and lower terminations.
These unfavorable developments were partially offset by a $6 million higher favorable impact in the current year from in-force rate actions approved and implemented, which included a lower net favorable impact from policyholder benefit reduction elections made as part of a legal settlement, as the implementation of the settlement is substantially complete.
To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $66 million in the prior year. During the first half of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $42 million.
Life insurance:
The adjusted operating loss increased $10 million mainly attributable to a $20 million legal settlement expense, the runoff of our in-force blocks and higher lapses in our 20-year term life insurance block written in 2002 entering its post-level premium period, partially offset by lower mortality in the current year.
Fixed annuities:
Adjusted operating income decreased $6 million mainly attributable to lower net spreads, partially offset by higher mortality in our single premium immediate annuity products and lower DAC amortization in the current year.
86
Table of Contents
Our Runoff segment had adjusted operating income of $11 million and $27 million for the six months ended June 30, 2022 and 2021, respectively.
The decrease was predominantly due to unfavorable equity market performance and higher interest rates resulting in a decline in the average account values of our variable annuity products reducing fee income in the current year.
These unfavorable developments were partially offset by higher policy loan income in our corporate-owned life insurance products in the current year.
Corporate and Other activities had an adjusted operating loss of $23 million and $59 million for the six months ended June 30, 2022 and 2021, respectively.
The decrease in the loss was primarily related to lower interest expense in the current year.
Significant Developments and Strategic Highlights
The periods under review include, among others, the following significant developments and steps taken in the execution of our strategic priorities.
Enact
 
Persistency and loss performance:
Enact’s primary persistency returned to its historic norms of 80% during the second quarter of 2022 primarily driven by rising interest rates, leading to an increase in primary insurance in-force.
Enact recorded favorable reserve adjustments of $146 million during the first half of 2022, including $96 million in the second quarter of 2022, primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations.
PMIERs compliance:
 
Enact’s PMIERs sufficiency ratio was 176%166% or $2,261$2,047 million above the published PMIERs requirements as of March 31,June 30, 2022.
 
As of March 31,June 30, 2022, Enact had estimated available assets of $5,147 million against $3,100 million net required assets under PMIERs compared to available assets of $5,222 million against $2,961 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of DecemberMarch 31, 20212022 (PMIERs sufficiency is based on the published requirements applicable to private mortgage insurers and does not give effect to the GSE restrictions imposed on Enact Holdings).
 
The increasedecrease in the PMIERs sufficiency was driven primarily by the completion of two excess of loss reinsurance transactionsEMICO’s distribution to Enact Holdings in the firstsecond quarter of 2022, which added approximately $370 million of additional PMIERs capital credit as of March 31, 2022, as well as lapses, business cash flows and lower delinquencies, partially offset by new insurance written and amortization of existing reinsurance transactions.transactions, partially offset by lapses, business cash flows and lower delinquencies.
 
As of June 30, 2022 and March 31, 2022, and December 31, 2021, Enact’s PMIERs required assets benefited by $272$178 million and $390$272 million, respectively, from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans.
 
Dividends:
 
On April 26, 2022, Enact Holdings’ board of directors approved the initiation of a dividend program under which it intends to pay a quarterly cash dividend, subject to a quarterly review by its board of directors.
On May 26, 2022, Enact Holdings paid its first quarterly dividend commencing with aand Genworth Holdings received $19 million as the majority shareholder.
87
Table of Contents
Enact Holdings expects to return approximately $250 million of capital to its shareholders in 2022, which includes quarterly dividend payments. Based on this forecast and Genworth Financial’s ownership of $10.14 per share81.6% of Enact Holdings, we would expect to receive approximately $150 million of additional capital returns, in excess of quarterly dividends, most likely in the secondfourth quarter of 2022.
 
Liquidity and financial flexibility:
On June 30, 2022, Enact Holdings will continue to evaluate the most appropriate amountentered into a $200 million unsecured revolving credit facility that remained undrawn as of total capital to return to shareholders for the remainder of 2022, which could include a potential special dividend later in 2022 and/or other capital returns to shareholders.June 30, 2022.
U.S. Life Insurance
 
Long-term care insurance multi-year in-force rate action plan:
 
During the first quarter of 2022, we continued to make strong progress on our long-term care insurance in-force rate action plan.
76
Table of Contents
We estimate that the cumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the firstsecond quarter of 2022 was approximately $20.4$20.7 billion, on a net present value basis, of the total expected amount required of $28.7 billion.
 
We received 3871 filing approvals from 1522 states during the threesix months ended March 31,June 30, 2022, representing a weighted-average increase of 29%31% on approximately $354$487 million in annualized in-force premiums, or approximately $101$153 million of incremental annual premiums.
 
We expect to begin submittingalso submitted 41 new filings in 11 states during the second quarter of 2022.six months ended June 30, 2022 on approximately $280 million in annualized in-force premiums.
 
Profits followed by losses in our long-term care insurance business:
 
Future projections in our long-term care insurance block, excluding the acquired block, 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 will ratably accrue additional future policy benefit reserves over the profitable periods, currently expected to be through 2031, by the amounts necessary to offset estimated losses during the periods that follow.
 
As of March 31,June 30, 2022 and December 31, 2021, the total amount accrued for profits followed by losses was $1,473$1,530 million and $1,274 million, respectively.
Liquidity and Capital Resources
 
Execution of strategic plan to reduce debt maturities:
 
We continue to focus on deleveraging with a goal of reducing debt at Genworth Holdings, the issuer of our outstanding public debt, to approximately $1.0 billion or less over time.
 
As of March 31,June 30, 2022, Genworth Holdings had outstanding $1.1 billion$1,052 million of long-term debt, with no debt maturities until February 2024.
 
During the first quarterhalf of 2022, Genworth Holdings repurchased $82$130 million principal amount of its 4.80% senior notes due in February 2024, leaving a remaining balance outstanding of $200$152 million as of March 31,June 30, 2022. We plan to retire the remaining outstanding balance in the third quarter of 2022, depending upon economic and business conditions, among other considerations.
Genworth Financial share repurchase program:
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock.
During the second quarter of 2022, Genworth Financial repurchased 3,869,494 shares of its common stock at an average price of $3.88 per share for a total cash outlay of $15 million.
88
Table of Contents
Genworth Financial authorized share repurchases through a Rule 10b5-1 trading plan under which 4,034,794 shares of its common stock were repurchased during July 2022 at an average price of $3.72 per share for a total cash outlay of $15 million, leaving approximately $320 million that may yet be purchased under the share repurchase program.
 
Repayment of the majority of AXA S.A.’s (“AXA”) future billings:
 
In connection with the AXA settlement agreement, we agreed to make payments for a significant portion of unprocessed claims to be invoiced by AXA in future periods.
 
In FebruaryDuring the first half of 2022, Genworth Holdings paid AXA $30$31 million, which constitutes the majority of the estimated remaining unprocessed claims.
Genworth Financial share repurchase program:
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase upclaims owed to $350 million of its outstanding Class A common stock.AXA.
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).
Management’s discussion and analysis by segment contains selected operating performance measures including “sales” and “insurance in-force” or “risk in-force” which are commonly used in the insurance industry as measures of operating performance.
77
Table of Contents
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 included in our Enact segment. We consider new insurance written to be a measure of our Enact segment’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of revenues or profitability during that period.
Management regularly monitors and reports insurance in-force and risk in-force for our Enact segment. Insurance in-force is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans insured by our U.S. mortgage insurance subsidiaries. Risk in-force is based on the coverage percentage applied to the estimated current outstanding loan balance. We consider insurance in-force and risk in-force to be measures of our Enact segment’s operating performance because they represent measures of the size of its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period.
Management regularly monitors and reports a loss ratio for our businesses. For our mortgage insurance businesses included in our Enact segment, 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 included in our U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of our businesses.
Management also regularly monitors and reports adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions in the long-term care insurance business included in our U.S. Life Insurance segment. In-force rate actions include premium rate increases and associated benefit reductions implemented since 2012, which are presented net of estimated premium taxes, commissions, and other expenses on an after-tax basis. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual historical results, including but not limited to, a uniform rate of coinsurance and premium taxes in addition to consistent policyholder behavior over time. Actual policyholder behavior may differ significantly from these assumptions. In addition, estimates exclude reserve updates resulting from profits followed by losses. Management considers adjusted operating income attributable
89
Table of Contents
to in-force rate actions to be a measure of our operating performance because it helps bring older generation long-term care insurance blocks closer to a break-even point over time and helps bring the loss ratios on newer long-term care insurance blocks back towards their original pricing.
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.
Enact segment
Trends and conditions
Results of our Enact segment 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 variations; the inventory of unsold homes; loan modification and other servicing efforts; and litigation, among other items. References to “Enact” included herein “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” are, unless the context otherwise requires, to our Enact segment.
Mortgage origination activity declinedcontinued to decline during the firstsecond quarter of 2022 compared to the fourth quarter of 2021 due to typical seasonal trends and in response to rising mortgage rates that specifically impacted the
78
Table of Contents
refinance market. This trendmarket, which is likely to continueremain low as the U.S. Federal Reserve has signaled that it expects to make additional interest rate increases throughout the remainder of 2022. Housing affordability declinedcontinued its decline nationally as of FebruaryMay 2022 compared to February 2021 due to increasing interest rates and rising home prices, and increasing interest rates, modestly offset by rising median family income, according to the National Association of Realtors Housing Affordability Index.
The unemployment rate has continued to decrease since the beginning of COVID-19 and was flat at 3.6% in June 2022 compared to March 2022. Unemployment is2022, following a steady decline from its peak of 14.8% in April 2020, bringing unemployment relatively in line with the pre-pandemic level of 3.5% in February 2020 and has steadily decreased from a peak2020. As of 14.8% in April 2020. After the continued recovery in the first quarter ofJune 30, 2022, the number of unemployed Americans stands at approximatelyunder six million whichand is approximately 300,000200,000 higher than in February 2020. Among the unemployed, thosethe number of persons on temporary layoff continued to decrease to approximately 800,000 from a peak of 18 million in April 2020, and the number of permanent job losses decreasedin June 2022 remained relatively unchanged compared to approximately one million. In addition,March 2022, with the number of long term unemployed over 26 weeks has continued to decrease since March 2021, falling tostable at approximately one million in MarchJune 2022.
In January 2022, the Federal Housing Finance Agency (“FHFA”) introduced new upfront fees charged to borrowers for some high-balance and second home loans sold to Fannie Mae and Freddie Mac. Upfront fees for high-balance loans increased between 0.25% and 0.75%, tiered by loan-to-value ratio. For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by loan-to-value ratio. The new pricing framework became effective April 1, 2022. Enact does not anticipate this will significantly impact the private mortgage insurance market or its results of operations, including future growth.
For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. An initial forbearance period is typically up to six months and can be extended up tofor another six months if requested by the borrower to their mortgage servicer. For GSE loans in a COVID-19 forbearance plan as of February 28, 2021, the maximum forbearance can be up to 18 months. Currently, the GSEs do not have a deadline for requesting an initial forbearance. Even though most foreclosure moratoriums expired at the end of 2021, federal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend the foreclosure timeline, which could negatively impact the severity of loss on loans that go to claim.
Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of March 31,June 30, 2022, approximately 2%1.7% or 18,58815,702 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 41%36% were reported as delinquent.
Total delinquencies decreased during the firstsecond quarter of 2022 compared to the firstsecond quarter of 2021 as a result of cures outpacing new delinquencies. The firstsecond quarter 2022 new delinquency rate of 0.9%0.8% was in line
90
Table of Contents
with Enact’s pre-pandemic levels. Despite continued economic recovery, the full impact of COVID-19 and its adverse economic effects on Enact’s future business results are difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters. Enact continues to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated and delinquencies have declined, it is possible that COVID-19 could have a significant adverse impact on Enact’s future results of operations and financial condition.
Private mortgage insurance market penetration and eventualoverall 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 Federal Housing Administration (“FHA”) and the FHFA.Federal Housing Finance Agency (“FHFA”). In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products. On February 25,
79
Table of Contents
2022, the FHFA finalized the rule for the Enterprise Capital Framework, which included technical corrections to theirits December 17, 2020 rule. Higher GSE capital requirements could ultimately lead to increased costs to borrowers of 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.
In conjunction with preparingJanuary 2022, the FHFA introduced new upfront fees charged to releaseborrowers for some high-balance and second home loans sold to Fannie Mae and Freddie Mac, which became effective April 1, 2022. Upfront fees for high-balance loans increased between 0.25% and 0.75%, tiered by loan-to-value ratio. For second home loans, the GSEs from conservatorship, onupfront fees increased between 1.125% and 3.875%, also tiered by loan-to-value ratio. To date, Enact has not experienced a significant impact to its business or results of operations as a result of this new pricing framework.
On January 14, 2021, the FHFA and the Treasury Department agreed to amend the Preferred Stock Purchase Agreements (“PSPAs”) between the Treasury Department and each of the GSEs to increase the amount of capital each GSE may retain. Among other things, the amendments to the PSPAs limit the number of certain mortgages the GSEs may acquire with two or more prescribed risk factors, including certain mortgages with combined loan-to-value ratios above 90%. However, on September 14, 2021, the FHFA and Treasury Department suspended certain provisions of the amendments to the PSPAs, including the limit on the number of mortgages with two or more risk factors that the GSEs may acquire. Such suspensions terminate on the later of one year after September 14, 2021 or six months after the Treasury Department notifies the GSEs of termination. The limit on the number of mortgages with two or more risk factors was based on the market size at the time, and Enact does not expect any material impact to the private mortgage market in the near term.
New insurance written of $18.8$17.4 billion in the firstsecond quarter of 2022 decreased 25%35% compared to the firstsecond quarter of 2021 primarilymostly due to a smaller estimated private mortgage insurance market, which was primarily driven by a decline in refinance originations due to rising mortgage rates in the current year.
Enact’s primary persistency increased to 76%80% during the firstsecond quarter of 2022 compared to 56%63% during the firstsecond quarter of 2021 and is approachingin line with its historic norms of approximately 80%. The increase in persistency was primarily driven by a decline in the percentage of in-force policies with mortgage rates above current interest rates. The increase in persistency more thanrates and offset the decline in new insurance written in the firstsecond quarter of 2022, leading to an increase in insurance in-force of $5.3$5.7 billion as compared to DecemberMarch 31, 2021.2022. Prior to the first quarter of 2022, low persistency impacted business performance trends during 2021 in several ways, including but not limited to, accelerating the recognition of earned premiums due to single premium policy cancellations, accelerating the amortization of existing reinsurance transactions and shifting the concentration of Enact’s primary insurance in-force to more recent years of policy origination. As of March 31,June 30, 2022, Enact’s primary insurance in-force had approximately 4% concentration in 2014 and prior book years. In contrast, Enact’s 2021 and 2022 book yearyears represented 38%37% and 15%, respectively, of its primary insurance in-force concentration while its 2022 book year was 8% as of March 31,June 30, 2022.
The U.S. private mortgage insurance industry is highly competitive. Enact Holdings’ market share is influenced by the execution of its go to market strategy, including but not limited to, pricing competitiveness
91
Table of Contents
relative to its peers and its selective participation in forward commitment transactions. Enact continues to manage the quality of new business through pricing and its underwriting guidelines, which are modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within Enact’s risk adjusted return appetite, enabling it to write new business at returns it views as attractive.
Net earned premiums decreased in the firstsecond quarter of 2022 compared to the firstsecond quarter of 2021 primarily from the continued lapse of older higher priced policies and a decrease in single premium policy cancellations, in the current year and higher ceded premiums due to a higher volume of credit risk transfer transactions, partially offset by insurance in-force growth in the current year. The total number of delinquent loans has declined from the COVID-19 peak in the second quarter of 2020 as borrowers continued to exit forbearance plans and new forbearances declined. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default. Additionally,default and Enact has a business practice of refundingrefunds the post-delinquent premiums to the insured party if the delinquent loan goes to claim. Enact records a liability and a reduction to net earned premiums for the post-delinquent premiums it expects to refund. The post-
80
Table of Contents
delinquentpost-delinquent premium liability recorded since the beginning of COVID-19 in the second quarter of 2020 through the firstsecond quarter of 2022 was not significant in relation to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies go to claim for these loans.
Enact’s loss ratio for the three months ended March 31,June 30, 2022 and 2021 was (4)(26)% and 22%12%, respectively. The decrease was largely from a favorable reserve adjustment of $50$96 million during the firstsecond quarter of 2022 primarily related to COVID-19 delinquencies from 2020 compared to reserve strengthening of $10 million on pre-COVID-19 delinquencies in the first quarter of 2021 and from lower new delinquencies in the current year.2020. During the peak of COVID-19, Enact experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have been curing at levels above Enact’s reserve expectations, which led to the release of reserves in the firstsecond quarter of 2022.
Enact’s loss reserves continue to be impacted by COVID-19 and remain subject to uncertainty. Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job continue to take advantage of available forbearance programs and payment deferral options. Loss reserves recorded on these new delinquencies haverequire a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments. The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by further home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.
New primary delinquencies in the firstsecond quarter of 2022 declinedincreased compared to the firstsecond quarter of 2021. New primary delinquencies of 8,7247,847 contributed $39$35 million of loss expense in the firstsecond quarter of 2022. Enact incurred $44$30 million of losses from 10,0536,862 new primary delinquencies in the firstsecond quarter of 2021 driven primarily by an increase in borrower forbearance as a result of COVID-19.2021. In determining the loss expense estimate, considerations were given to forbearance and non-forbearance delinquencies, recent cure and claim experience and the prevailing economic conditions. Approximately 27%21% of Enact’s primary new delinquencies in the firstsecond quarter of 2022 were subject to a forbearance plan as compared to 54%45% in the firstsecond quarter of 2021.
As of March 31,June 30, 2022, EMICO’s risk-to-capital ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), EMICO’s domestic insurance regulator, was approximately 12.2:12.6:1, compared with a risk-to-capital ratio of 12.3:12.1:1 as of DecemberMarch 31, 2021.2022. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk-in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new
92
Table of Contents
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 provided.
Under PMIERs, Enact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. Since 2020, the GSEs have issued several amendments to PMIERs, which implemented both permanent and temporary revisions to PMIERs. For loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) had an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount factor for the non-performing loan is the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and
81
Table of Contents
(b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period. The PMIERs amendment dated June 30, 2021 further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance. In addition, the PMIERs amendments imposed permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future Federal Emergency Management Agency Declared Major Disaster Areas eligible for individual assistance.
In September 2020, subsequent to the issuance of Enact Holdings’ senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on Enact. In May 2021, in connection with their conditional approval of the then potential partial sale of Enact Holdings, the GSEs confirmed the GSE Restrictions will remain in effect until the following collective conditions (“GSE Conditions”) are met: (a) EMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. for two consecutive quarters and (b) Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE Conditions, the GSE Restrictions require:
 
EMICO to maintain 120% of PMIERs minimum required assets during 2022 and 125% thereafter;
 
Enact Holdings to retain $300 million of its holding company cash that can be drawn down exclusively for its debt service or to contribute to EMICO 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 EMICO or Enact Holdings.
Until the GSE Conditions imposed in connection with the GSE Restrictions are met, Enact Holdings’ liquidity must not fall below 13.5% of its outstanding debt. As of March 31,June 30, 2022, after taking into account debt service to date, Enact Holdings must maintain holding company cash of approximately $228 million.
Fannie Mae agreed to reconsider the GSE Restrictions if Genworth Financial were to own 50% or less of Enact Holdings at any point prior to their expiration. Our current plans do not include any additional minority sales resultingthat would result in Genworth Financial owning less than 80% of Enact Holdings.
As of March 31,June 30, 2022, Enact had estimated available assets of $5,147 million against $3,100 million net required assets under PMIERs compared to available assets of $5,222 million against $2,961 million net required assets under PMIERs compared to available assets of $5,077 million against $3,074 million net required assets as of DecemberMarch 31, 2021.2022. The sufficiency ratio as of March 31,June 30, 2022 was 166% or $2,047 million above the
93
Table of Contents
published PMIERs requirements, compared to 176% or $2,261 million above the published PMIERs requirements compared to 165% or $2,003 million above the published PMIERs requirements as of DecemberMarch 31, 2021.2022. PMIERs sufficiency is based on the published requirements applicable to private mortgage insurers and does not give effect to the GSE Restrictions imposed on Enact. The increasedecrease in the PMIERs sufficiency in the second quarter of 2022 was driven primarily by the completion of two excess of loss reinsurance transactions in the first quarter of 2022, which added approximately $370 million of additional PMIERs capital credit as of March 31, 2022, as well as lapses, business cash flows and lower delinquencies, partially offset byEMICO’s distribution paid to Enact Holdings, new insurance written and amortization of existing reinsurance transactions.transactions, partially offset by lapses, business cash flows and lower delinquencies. Enact’s PMIERs required assets as of June 30, 2022 and March 31, 2022 and December 31, 2021 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 $272$178 million of benefit to Enact’s March 31,June 30, 2022 PMIERs required assets compared to $390$272 million of benefit as of DecemberMarch 31, 2021.2022. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.
82
Table of Contents
On January 27, 2022, Enact executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to approximately $294 million of reinsurance coverage on a portion of the current and expected new insurance written for the 2022 book year, effective January 1, 2022. On March 24, 2022, Enact executed another excess of loss reinsurance transaction with a panel of reinsurers, which provides up to approximately $325 million of reinsurance coverage on a portfolio of existing mortgage insurance policies written from July 1, 2021 through December 31, 2021, effective March 1, 2022. Credit risk transfer transactions provided an aggregate of approximately $1,622$1,511 million of PMIERs capital credit as of March 31,June 30, 2022. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.
On April 26, 2022, Enact Holdings’ board of directors approved the initiation of a dividend program under which it intends to pay a quarterly cash dividend. The inaugural quarterly dividend for the second quarter of 2022 will be $0.14 per share, payable onOn May 26, 2022, to common shareholders of record on May 9, 2022.Enact Holdings paid its first quarterly dividend and Genworth Holdings received $19 million as the majority shareholder. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial, and will be targeted to be paid in the third month of each subsequent quarter. In April 2022, EMICO completed a distribution to Enact Holdings that will support its ability to pay a quarterly dividend. Enact Holdings intends to use these proceeds and future EMICO distributions to fund the quarterly dividend as well as to bolster its financial flexibility and return additional capital to shareholders.
Returning capital to shareholders, balanced with Enact Holdings’ growth and risk management priorities, remains a key commitment for Enact Holdings as it looks to enhance shareholder value through time. Enact Holdings believes the initiation of a quarterly dividend reflects meaningful progress towards that goal and continueswill continue to evaluate the most appropriate amount of totalits capital to return to shareholders for the remainder of 2022.allocation options. Enact Holdings’ ultimate view will be shaped by its capital prioritization framework, including: supporting its existing policyholders; growing its mortgage insurance business; funding attractive new business opportunities; and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macro-economic conditions, regulatory landscape and business performance. Any future dividends or additional returns of capital will include a proportionate distribution to minority shareholders.
 
8394
Table of Contents
Segment results of operations
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease)
and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
 
    2021    
 
2022 vs. 2021
   
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
             
Premiums
  $234  $252  $(18)   (7)%   $238   $243   $(5)    (2)% 
Net investment income
   35   35   —     —  %    36    35    1    3% 
Net investment gains (losses)
   —     (1)   1   100%    (1)    (2)    1    50% 
Policy fees and other income
   1   2   (1)   (50)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   270   288   (18)   (6)%    273    276    (3)    (1)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   (10)   55   (65)   (118)%    (62)    30    (92)    NM(1) 
Acquisition and operating expenses, net of deferrals
   54   57   (3)   (5)%    58    63    (5)    (8)% 
Amortization of deferred acquisition costs and intangibles
   3   4   (1)   (25)%    3    4    (1)    (25)% 
Interest expense
   13   13   —     —  %    13    12    1    8% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   60   129   (69)   (53)%    12    109    (97)    (89)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income from continuing operations before income taxes
   210   159   51   32%    261    167    94    56% 
Provision for income taxes
   45   34   11   32%    57    35    22    63% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income from continuing operations
   165   125   40   32%    204    132    72    55% 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —     30   NM (1)    38    —      38    NM(1) 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   135   125   10   8%    166    132    34    26% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
             
Net investment (gains) losses
   —     1   (1)   (100)%    1    2    (1)    (50)% 
Expenses related to restructuring
   —      2    (2)    (100)% 
Taxes on adjustments
   —     —     —     —  %    —      (1)    1    100% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $135  $126  $9   7%   $167   $135   $32    24% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income increased primarily attributable to lower losses largely fromdriven by a favorable reserve adjustment of $40$76 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $8 million on pre-COVID-19 delinquencies in the prior year, as well as from lower new delinquencies in the current year. These improvements wereexpectations. The increase was partially offset by lower premiums and the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $30$38 million, and by lower premiums in the current year.
84
Table of Contents
Revenues
Premiums decreased mainly driven by continued lapse of older higher priced policies and lower single premium policy cancellations, and higher ceded premiums, partially offset by higher insurance in-force in the current year.year driven by increased persistency.
95
Table of Contents
Benefits and expenses
Benefits and other changes in policy reserves decreased largely from a favorable reserve adjustment of $50$96 million primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations, partially offset by higher new delinquencies in the current year.
Acquisition and operating expenses, net of deferrals, decreased primarily attributable to expenses associated with strategic transaction preparations and restructuring costs in the prior year that did not recur.
Provision for income taxes.
The effective tax rate was 21.5% and 21.2% for the three months ended June 30, 2022 and 2021, respectively, consistent with the U.S. corporate federal income tax rate.
Net income from continuing operations attributable to noncontrolling interests.
The increase relates to the minority IPO of Enact Holdings on September 16, 2021, which reduced Genworth Financial’s ownership percentage to 81.6%.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
        
Premiums
  $472   $495   $(23)    (5)% 
Net investment income
   71    70    1    1% 
Net investment gains (losses)
   (1)    (3)    2    67% 
Policy fees and other income
   1    2    (1)    (50)% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   543    564    (21)    (4)% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   (72)    85    (157)    (185)% 
Acquisition and operating expenses, net of deferrals
   112    120    (8)    (7)% 
Amortization of deferred acquisition costs and intangibles
   6    8    (2)    (25)% 
Interest expense
   26    25    1    4% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   72    238    (166)    (70)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations before income taxes
   471    326    145    44% 
Provision for income taxes
   102    69    33    48% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations
   369    257    112    44% 
Less: net income from continuing operations attributable to noncontrolling interests
   68    —      68    NM(1) 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   301    257    44    17% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
        
Net investment (gains) losses
   1    3    (2)    (67)% 
Expenses related to restructuring
   —      2    (2)    (100)% 
Taxes on adjustments
   —      (1)    1    100% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $302   $261   $41    16% 
  
 
 
   
 
 
   
 
 
   
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
96
Table of Contents
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income increased primarily attributable to lower losses driven by favorable reserve adjustments of $115 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations. The increase was partially offset by the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $68 million, and by lower premiums in the current year.
Revenues
Premiums decreased mainly driven by continued lapse of older higher priced policies and lower single premium policy cancellations, partially offset by higher insurance in-force in the current year driven by increased persistency.
Benefits and expenses
Benefits and other changes in policy reserves decreased largely from favorable reserve adjustments of $146 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $10 million on pre-COVID-19 delinquencies in the prior year. Enact also experienced lower new delinquencies in the current year.
Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower operatingexpenses associated with strategic transaction preparations and restructuring costs in the current year.prior year that did not recur.
Provision for income taxes.
The effective tax rate was 21.6%21.5% and 21.2% for the threesix months ended March 31,June 30, 2022 and 2021, respectively, consistent with the U.S. corporate federal income tax rate.
Net income from continuing operations attributable to noncontrolling interests.
The increase relates to the minority IPO of Enact Holdings on September 16, 2021, which reduced Genworth Financial’s ownership percentage to 81.6%.
Enact selected operating performance measures
Primary Mortgage Insurance
Substantially all of Enact’s 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 Enact on a loan-by-loan basis. Primary mortgage insurance can also be delivered to Enact 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.
97
Table of Contents
The following table setstables set forth selected operating performance measures regarding Enact as of or for the dates indicated:
 
  
As of or for the three

months ended

March 31,
   
Increase

(decrease) and

percentage

change
   
As of June 30,
   
Increase

(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
   
2022
   
2021
   
2022 vs. 2021
 
Primary insurance in-force
(1)
  $231,853   $210,187   $21,666    10%   $237,563   $217,477   $20,086    9% 
Risk in-force:
                
Primary
  $58,295   $52,866   $5,429    10%   $59,911   $54,643   $5,268    10% 
Pool
   97    134    (37)    (28)%    89    123    (34)    (28)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total risk in-force
  $58,392   $53,000   $5,392    10%   $60,000   $54,766   $5,234    10% 
  
 
   
 
   
 
     
 
   
 
   
 
   
New insurance written
  $18,823   $24,934   $(6,111)    (25)% 
 
(1) 
Primary insurance in-force represents the aggregate unpaid principal balance for loans Enact insures. Original loan balances are primarily used to determine premiums.
 
85
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
  
2022
   
2021
   
2022 vs. 2021
 
New insurance written
  $17,448   $26,657   $(9,209)   (35)%  $36,271   $51,591   $(15,320)   (30)% 
Table of Contents
Primary insurance in-force and risk in-force
Primary insurance in-force increased largely from new insurance written. In addition, higher persistency led to lower lapses and cancellations in the current year drove higher primary persistency, largely as a result of a decline in refinance originations due to rising interest rates in the current year. Primary persistency was 76%78% and 56%59% for the threesix months ended March 31,June 30, 2022 and 2021, respectively. Persistency remains slightly below Enact’s historic norms but is trending upward due to the recent rise in interest rates. Total risk in-force increased primarily as a result of higher primary insurance in-force.
New insurance written
NewFor the three and six months ended June 30, 2022, new insurance written decreased principallyprimarily due to a smaller estimated private mortgage insurance available market, which was primarily driven by a decline in refinance originations due to rising interest rates in the current year.
Loss and expense ratios
The following table sets forth the loss and expense ratios for Enact for the dates indicated:
 
  
Three months ended

March 31,
 
Increase
(decrease)
 
  
Three months ended
June 30,
 
Increase (decrease)
 
Six months ended
June 30,
 
Increase (decrease)
 
  
2022
 
2021
 
2022 vs. 2021
   
2022
 
2021
 
2022 vs. 2021
 
2022
 
2021
 
2022 vs. 2021
 
Loss ratio
   (4)%   22%   (26)%    (26)%   12%   (38)%   (15)%   17%   (32)% 
Expense ratio
   24%   24%   —  %    26%   27%   (1)%   25%   26%   (1)% 
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio is the ratio of general expenses to net earned premiums. In Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.
The loss ratio decreased compared tofor the three months ended March 31, 2021June 30, 2022 largely from a favorable reserve adjustment of $50$96 million, partially offset by higher new delinquencies in the current year. The loss ratio decreased for the six months ended June 30, 2022 largely from favorable reserve adjustments of $146 million in the current year compared to reserve strengthening of $10 million in the prior year. The favorable reserve
98
Table of Contents
adjustments in the current year were primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $10 million on pre-COVID-19 delinquencies in the prior year. Enact also experienced lower new delinquencies in the current year. The favorable reserve adjustment reduced the loss ratio by 21 percentage points in the current year.expectations.
The expense ratio was flat compared tofor the three and six months ended March 31, 2021 as lower operatingJune 30, 2022 decreased slightly primarily attributable to expenses associated with strategic transaction preparations and restructuring costs werein the prior year that did not recur, partially offset by lower premiums in the current year.
86
Table of Contents
Mortgage insurance loan portfolio
The following table sets forth selected financial information regarding Enact’s loan portfolio as of March 31:June 30:
 
(Amounts in millions)
  
2022
   
2021
  
2022
 
2021
 
Primary insurance in-force by loan-to-value ratio at origination:
      
95.01% and above
  $36,867   $33,757  $37,636  $33,657 
90.01% to 95.00%
   96,419    92,124   99,303   94,307 
85.01% to 90.00%
   66,226    58,098   67,866   61,234 
85.00% and below
   32,341    26,208   32,758   28,279 
  
 
   
 
  
 
  
 
 
Total
  $231,853   $210,187  $237,563  $217,477 
  
 
   
 
  
 
  
 
 
Primary risk in-force by loan-to-value ratio at origination:
      
95.01% and above
  $10,379   $9,151  $10,647  $9,228 
90.01% to 95.00%
   27,987    26,637   28,838   27,308 
85.01% to 90.00%
   16,082    13,997   16,517   14,776 
85.00% and below
   3,847    3,081   3,909   3,331 
  
 
   
 
  
 
  
 
 
Total
  $58,295   $52,866  $59,911  $54,643 
  
 
   
 
 
 
 
  
 
 
Primary insurance in-force by FICO
(1)
score at origination:
      
Over 760
  $93,222   $79,285  $96,625  $83,602 
740-759
   36,821    33,607   37,853   34,402 
720-739
   32,363    30,295   33,263   30,964 
700-719
   27,620    26,309   28,136   27,032 
680-699
   21,259    20,777   21,221   21,469 
660-679
(2)
   10,805    10,001   10,822   10,191 
640-659
   6,188    5,981   6,154   6,008 
620-639
   2,774    2,893   2,725   2,838 
<620
   801    1,039   764   971 
  
 
   
 
  
 
  
 
 
Total
  $231,853   $210,187  $237,563  $217,477 
  
 
   
 
  
 
  
 
 
Primary risk in-force by FICO score at origination:
      
Over 760
  $23,326   $19,829  $24,252  $20,908 
740-759
   9,267    8,442   9,559   8,628 
720-739
   8,224    7,715   8,484   7,879 
700-719
   6,974    6,678   7,129   6,848 
680-699
   5,334    5,231   5,329   5,385 
660-679
(2)
   2,715    2,484   2,728   2,531 
640-659
   1,550    1,485   1,547   1,494 
620-639
   699    734   687   720 
<620
   206    268   196   250 
  
 
   
 
  
 
  
 
 
Total
  $58,295   $52,866  $59,911  $54,643 
  
 
   
 
  
 
  
 
 
 
(1) 
Fair Isaac Company.
(2) 
Loans with unknown FICO scores are included in the 660-679 category.
 
8799
Table of Contents
Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for Enact’s loan portfolio as of the dates indicated:
 
  
March 31,

2022
 
December 31,

2021
 
March 31,

2021
   
June 30,
2022
 
December 31,
2021
 
June 30,
2021
 
Primary insurance:
        
Insured loans in-force
   941,689   937,350   922,186    946,891   937,350   933,616 
Delinquent loans
   22,571   24,820   41,332    19,513   24,820   33,568 
Percentage of delinquent loans (delinquency rate)
   2.40%   2.65%   4.48%    2.06%   2.65%   3.60% 
Delinquency rates have decreased primarily from a decline in total delinquencies as the economy continues to recover from COVID-19 and as cures outpaced new delinquencies.
The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged missed payment status in Enact’s loan portfolio as of the dates indicated:
 
  
March 31, 2022
   
June 30, 2022
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct case

reserves
(1)
   
Risk

in-force
   
Reserves as %

of risk in-force
   
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk in-
force
   
Reserves as %
of risk in-force
 
Payments in default:
                
3 payments or less
   6,837   $38   $359    11%    6,442   $35   $341    10% 
4 - 11 payments
   6,875    115    392    29%    6,372    122    368    33% 
12 payments or more
   8,859    438    515    85%    6,699    369    382    97% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   22,571   $591   $1,266    47%    19,513   $526   $1,091    48% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
  
December 31, 2021
   
December 31, 2021
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct case

reserves
(1)
   
Risk

in-force
   
Reserves as %

of risk in-force
   
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk in-
force
   
Reserves as %
of risk in-force
 
Payments in default:
                
3 payments or less
   6,586   $35   $340    10%    6,586   $35   $340    10% 
4 - 11 payments
   7,360    111    426    26%    7,360    111    426    26% 
12 payments or more
   10,874    460    643    72%    10,874    460    643    72% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   24,820   $606   $1,409    43%    24,820   $606   $1,409    43% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNRincurred but not reported (“IBNR”) and reinsurance reserves.
The increase in reserves as a percentage of risk in-force as of March 31,June 30, 2022 was primarily driven by the decrease in delinquent risk in-force mainly due to lower total delinquencies as cures outpaced new delinquencies in the first quarterhalf of 2022. Reserves decreased largely from favorable reserve adjustments as discussed above, partially offset by new delinquencies in the current year. While the number of loans that are delinquent for 12 months or more has decreased since December 31, 2021, it remains elevated compared to pre-COVID-19 levels due in large part to borrowers entering a forbearance plan over a year ago driven by COVID-19. Resolution of a delinquency in a forbearance 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. In addition, due to foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.
100
Table of Contents
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 the dispersion of direct primary case reserves and primary delinquency rates for the 10 largest states and the 10 largest
88
Table of Contents
Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by Enact’s primary 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.
 
  
Percent of primary

risk in-force as of

March 31, 2022
 
Percent of direct

case reserves as of

March 31, 2022
(1)
  
Delinquency rate as of
   
Percent of primary

risk in-force as of
June 30, 2022
 
Percent of direct primary

case reserves as of
June 30, 2022
(1)
  
Delinquency rate as of
 
 
March 31,

2022
 
December 31,

2021
 
March 31,

2021
  
June 30,
2022
 
December 31,
2021
 
June 30,
2021
 
By State:
            
California
   11%   11%   2.75%   3.17%   5.76%    11%   10%   2.18%   3.17%   4.70% 
Texas
   8%   8%   2.51%   2.89%   5.25%    8%   8%   2.12%   2.89%   4.20% 
Florida
(2)
   7%   9%   2.51%   2.97%   5.97%    8%   8%   2.06%   2.97%   4.52% 
New York
(2)
   5%   12%   3.51%   3.80%   6.36%    5%   13%   3.17%   3.80%   5.10% 
Illinois
(2)
   5%   6%   2.85%   3.09%   5.07%    5%   6%   2.53%   3.09%   4.13% 
Michigan
   4%   2%   1.87%   1.87%   2.68%    4%   3%   1.66%   1.87%   2.11% 
Arizona
   4%   2%   1.92%   2.31%   4.06%    4%   2%   1.71%   2.31%   3.13% 
North Carolina
   3%   2%   1.96%   2.18%   3.60%    3%   2%   1.67%   2.18%   2.99% 
Pennsylvania
(2)
   3%   3%   2.30%   2.38%   3.83%    3%   3%   2.13%   2.38%   3.06% 
Washington
   3%   3%   2.68%   2.98%   5.47% 
Georgia
   3%   3%   2.21%   2.94%   4.28% 
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
(2) 
Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be complete.completed.
 
  
Percent of primary

risk in-force as of

March 31, 2022
 
Percent of direct

case reserves as of

March 31, 2022
(1)
  
Delinquency rate as of
  
Percent of primary
risk in-force as of
June 30, 2022
 
Percent of direct primary
case reserves as of
June 30, 2022
(1)
  
Delinquency rate as of
 
 
March 31,

2022
 
December 31,

2021
 
March 31,

2021
  
June 30,
2022
 
December 31,
2021
 
June 30,
2021
 
By MSA or MD:
           
Chicago-Naperville, IL MD
   3%   5%   3.39%   3.68%   6.28%   3%   5%   2.94%   3.68%   5.09% 
Phoenix, AZ MSA
   3%   2%   1.92%   2.36%   4.12%   3%   2%   1.71%   2.36%   3.15% 
New York, NY MD
   3%   8%   4.68%   5.32%   9.56%   3%   8%   4.17%   5.32%   7.69% 
Atlanta, GA MSA
   2%   3%   2.92%   3.28%   6.10%   2%   3%   2.42%   3.28%   4.84% 
Washington-Arlington, DC MD
   2%   2%   2.50%   2.96%   5.84%   2%   2%   1.98%   2.96%   4.86% 
Houston, TX MSA
   2%   3%   3.20%   3.61%   6.89%   2%   3%   2.86%   3.61%   5.54% 
Riverside-San Bernardino, CA MSA
   2%   2%   3.05%   3.42%   6.53%   2%   2%   2.72%   3.42%   5.24% 
Los Angeles-Long Beach, CA MD
   2%   3%   3.22%   3.95%   7.30%   2%   2%   2.35%   3.95%   5.89% 
Dallas, TX MD
   2%   2%   2.04%   2.31%   4.59%   2%   1%   1.70%   2.31%   3.60% 
Nassau County, NY MD
   2%   5%   5.02%   5.55%   10.13%   2%   5%   4.25%   5.55%   8.10% 
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
 
89101
Table of Contents
The following table sets forth the dispersion of Enact’s direct primary case reserves, primary insurance in-force and risk in-force by year of policy origination, and delinquency rate as of March 31,June 30, 2022:
 
(Amounts in millions)
  
Percent of direct

case reserves
(1)
 
Primary

insurance

in-force
   
Percent

of total
 
Primary

risk

in-force
   
Percent

of total
 
Delinquency

rate
   
Percent of direct
primary case reserves 
(1)
 
Primary
insurance
in-force
   
Percent
of total
 
Primary
risk in-
force
   
Percent
of total
 
Delinquency
rate
 
Policy Year
                  
2008 and prior
   25%  $7,723    3%  $1,991    3%   10.41%    26%  $7,246    3%  $1,867    3%   9.81% 
2009 to 2014
   5   2,946    1   788    1   5.34%    5   2,577    1   687    1   5.06% 
2015
   5   3,960    2   1,058    2   4.06%    4   3,526    1   943    2   3.58% 
2016
   7   8,076    4   2,147    4   3.48%    7   7,377    3   1,964    3   3.16% 
2017
   10   8,023    4   2,094    4   4.43%    9   7,328    3   1,922    3   3.84% 
2018
   12   8,306    4   2,092    4   5.48%    11   7,613    3   1,922    3   4.70% 
2019
   17   19,609    8   4,935    8   3.44%    15   18,141    8   4,575    8   2.81% 
2020
   15   65,807    28   16,606    28   1.49%    17   62,154    26   15,763    26   1.33% 
2021
   4   88,757    38   21,959    38   0.58%    6   86,175    37   21,384    36   0.72% 
2022
   —     18,646    8   4,625    8   0.04%    —     35,426    15   8,884    15   0.14% 
  
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
Total portfolio
   100%  $231,853    100%  $58,295    100%   2.40%    100%  $237,563    100%  $59,911    100%   2.06% 
  
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
Loss reserves in policy years 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. The largest portion of loss reserves has shifted to newer book years as a result of COVID-19 given their significant representation of risk in-force. As of March 31,June 30, 2022, Enact’s 2015 and newer policy years represented approximately 96% of its primary risk in-force and 70%69% of its total direct primary case reserves.
U.S. Life Insurance segment
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 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 conduct a detailed review of our claim reserve assumptions and methodologies for our long-term care insurance annually typically during the third or fourth quarter of each year. Our liability for future policy benefits is reviewed at least annually as a part of our loss recognition testing typically performed in the third or fourth quarter of each year. As part of loss recognition testing, we also review the recoverability of DAC and PVFP at least annually. In addition, we perform cash flow testing separately for each of our U.S. life insurance companies on a statutory accounting basis annually.
As of December 31, 2021, each of our life insurance subsidiaries exceeded the minimum required risk-based capital (“RBC”) levels in their respective domiciliary state. The consolidated RBC ratio of our U.S. domiciled
90
Table of Contents
life insurance subsidiaries was approximately 289% as of December 31, 2021. As of March 31,June 30, 2022, the
102
Table of Contents
consolidated RBC ratio of our U.S. domiciled life insurance subsidiaries increased slightly compared to December 31, 2021 as a result of higher earnings in our long-term care insurance business mainly driven by claim experience and premium rate increases and benefit reductions, including policyholder benefit reduction elections made as part of a legal settlement, partially offset by impacts in our variable annuity products from unfavorable equity market performance and elevated mortality in our life insurance products.
We continue to face challenges in our principal life insurance subsidiaries, particularly those subsidiaries that rely heavily on long-term care insurance in-force rate actions as a source of earnings and capital. We may see variability in statutory results and a decline in the RBC ratios of these subsidiaries given the time lag between the approval of in-force rate actions versus when the benefits from the in-force rate actions (including increased premiums and associated benefit reductions) are fully realized in our financial results. Additionally, the RBC ratio of our U.S. life insurance subsidiaries would be negatively impacted by future increases in our statutory reserves, including results of life mortality, cash flow testing and assumption reviews, particularly in our long-term care insurance business. Future declines in the RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action.
Results of our U.S. life insurance businesses are also impacted by interest rates. LowPrior to the recent rise in interest rates during 2022, historic low interest rates put pressure on the profitability and returns of theseour U.S. life insurance businesses as higher yielding investments maturematured and arewere replaced with lower-yielding investments. We seekhave sought to manage the impact of low interest rates through asset-liability management, investment in alternative assets, including limited partnerships, as well as interest rate hedging strategies for a portion of our long-term care insurance product cash flows. Additionally, certain products have implicit and explicit rate guarantees or optionality that are significantly impacted by changes in interest rates. During periods of increasing market interest rates, we may increase crediting rates on in-force universal life insurance and fixed annuity products to remain competitive in the marketplace. In addition, rapidly rising interest rates may cause increased unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-income investments in an unrealized loss position to satisfy surrenders or withdrawals. For a further discussion of the impact of interest rates on our U.S. life insurance businesses, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 2021 Annual Report on Form 10-K.
Our U.S. life insurance businesses have been impacted by COVID-19 as a result of elevated mortality. Our long-term care insurance operating results have been favorably impacted by higher mortality in the first quarterhalf of 2022 and the full year 2021. Conversely, higher mortality rates had unfavorable impacts in our life insurance products and we have observed minimal impact from COVID-19 in our fixed annuity products. 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, the associated after effects indirectly caused by the pandemic, including supply chain shortages and high inflation, and shape of the economic recovery. For sensitivities related to lapses and mortality on our U.S. life insurance products, see “Item 7—Management’s Discussion and Analysis— Critical Accounting Estimates” in our 2021 Annual Report on Form 10-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.
In June 2022, we outsourced operational servicing of our life insurance and fixed annuity blocks to a third-party servicer. In connection with the outsourcing, we will convert certain administrative systems to those used by the third-party servicer over the next three years. There was no impact to the servicing of our long-term care insurance products because they were not a part of the third-party outsourcing agreement.
103
Table of Contents
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 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
91
Table of Contents
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.
In our long-term care insurance products, we have experienced higher mortality during COVID-19 which has had a favorable impact on claim reserves and our operating results. Although it is not our practice to track cause of death for policyholders and claimants, we believe the favorable results of our long-term care insurance business in the first quarterhalf of 2022 as well as in 2021 were likely impacted by COVID-19, but we expect the impacts to be temporary. The COVID-19 pandemic significantly increased mortality on our most vulnerable claimants, which may reduce mortality rates in future periods as the impacts of the pandemic subside. To account for this change in experience due to COVID-19, we adjusted the mortality assumption in our claim reserves to reflect the risk of lower claim termination rates on remaining claims. As of March 31,June 30, 2022, the balance of our incremental claim reserves associated with COVID-19 mortality was $125$110 million. As COVID-19 continues to develop, short-term mortality experience may fluctuate, and we would decrease the COVID-19 mortality adjustment if we experience lower mortality.
We have also experienced lower new claims incidence in our long-term care insurance business during COVID-19; however, we do not expect this to be permanent but rather a temporary reduction while shelter-in-place and social distancing protocols are in effect and that claims incidence experience will ultimately resemble previous trends. As a result, we strengthened our IBNR claim reserves during COVID-19, and as of March 31,June 30, 2022, the balance of IBNR claim reserves due to lower claims incidence was $46 million. New claims incidence remains below pre-pandemic levels and near-term incidence may continue to be impacted by COVID-19. However, pending claims, which are our leading indicator of future incidence, have been trending upward toward historical levels in recent quarters. In addition, during the pandemic, a larger share of our claimants sought home care instead of facility-based care, and as the impacts of the pandemic subsides,subside, we have seen that trend reverse. We continue to utilize virtual assessments to assess eligibility for benefits while in-person assessments have been temporarily discontinued during COVID-19. We are reviewing the options to resume in-person assessments, with appropriate protocols in place, while having virtual assessments available for those policyholders who would prefer this option. For claimants without the technology to perform virtual assessments, we have alternate options for gathering information. 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.
As a result of the review of our claim reserves completed in prior years, we have been establishing higher claim reserves on new claims, which has negatively impacted earnings and we expect this to continue going forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation factors going on claim. Although new claim counts on our older long-term care insurance blocks of business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages with higher likelihood of going on claim.
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. In addition, we have reached certain legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance
104
Table of Contents
policies. The legal settlement related to one of our newer long-term care insurance products was implemented beginning in 2021 and its implementation was materially completed in the first quarter of 2022. We also have two other similar pending settlements, which impact approximately 50% of our long-term care insurance in-force policies. One of the pending settlements on certain of our long-term care insurance policies, which represents 15% of our block, became final on July 29, 2022. We expect to begin implementation of this settlement in the third quarter of 2022, but given the 90-day policyholder election window, we anticipate financial impacts will not begin until the fourth quarter of 2022. Moreover, because the election mailings occur on the policyholder’s anniversary date, the majority of the impacts are expected to be in 2023. We have also received preliminary approval from the court on another pending settlement on certain of our long-term care insurance policies, which represents 35% of our block. A final court hearing to approve that settlement is scheduled for November 2022. Should we receive final approval and have no appeals, we would expect to begin implementing that settlement in 2023. The two new settlement agreements are similar to the previous settlement, and their ultimate impact will depend on the policyholder election rates and the types of reduced benefits elected. Given our experience with the first settlement, we expect these additional settlements to result in an overall net favorable impact to our results of operations. Executing on our multi-year long-term care insurance in-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 on in-force rate actions, refer to “Significant Developments and Strategic Highlights—U.S. Life Insurance.”
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
92
Table of Contents
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.
Because obtaining actuarially justified rate increases and associated benefit reductions is important to our ability to pay future claims, we will consider litigation against states that decline to approve those actuarially justified rate increases. In January 2022, we began litigation with two states that have refused to approve actuarially justified rate increases.
In 2019, the NAIC established the Long-Term Care Insurance (EX) Task Force to address efforts to create a national standard for reviewing and approving long-term care insurance rate increase requests. This task force is charged with developing a consistent national approach for reviewing rate increase requests that result in actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate subsidization, among others. In December 2021, the Task Force adopted its framework for multi-state rate review process and shifted its focus to monitoring the impact of this new process on state rate reviews. We are currently evaluating our participation in the multi-state review process for our upcoming filings.
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 lower for the three months ended March 31,second quarter of 2022 compared to the three months ended March 31, 2021 but higher compared to the fourthsecond quarter of 2021.2021 and the first quarter of 2022. In our life insurance products, COVID-19 deaths in the first quarter of 2022 were lower than the first quarter of 2021 but higher than the fourth quarter of 2021. However, in the second quarter of 2022, COVID-19 deaths in our life insurance products declined significantly. We have also experienced higher mortality than our then-current and priced-for assumptions in recent years for our universal life insurance blocks.block. 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.
105
Table of Contents
In the fourth quarter of 2021, we performed our annual review of life insurance assumptions and loss recognition testing. Our review focused on assumptions for mortality, interest rates and persistency, among other assumptions. Our mortality assumption was updated to align with overall pre-COVID-19 experience in later-duration as well as in targeted blocks such as term universal life insurance, conversion policies and post-level term. As of December 31, 2021, the loss recognition testing margin for our term and whole life insurance products was positive and consistent with the 2020 level.
As part of our review in the fourth quarter of 2021, we recorded a $70 million after-tax expense to net income in our universal and term universal life insurance products primarily related to higher pre-COVID-19 mortality experience.
For the year ended December 31, 2021, in connection with our review of DAC for recoverability, we recorded after-tax charges of $92 million in our term universal and universal life insurance products. In addition, during the six months ended June 30, 2022, we also recorded $31 million, including $12 million in the firstsecond quarter of 2022, we recorded a $19 millionof after-tax DAC impairment chargecharges related to our term universal and universal life insurance products in connection with DAC recoverability testing compared to $32 million after-tax in the fourth quarter of 2021 and $17 million after-tax in the first quarter of 2021.testing.
Our mortality experience for older ages is emerging and we continue to monitor trends in mortality improvement. 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 the loss recognition testing results of our term life insurance products. Any further materially adverse changes to our assumptions, including mortality, persistency or interest rates, could have a materially negative impact on our results of operations, financial condition and business.
93
Table of Contents
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- and 15-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. If lapse experience on future 10-, 15- and 20-year level premium period blocks emerges similar to our large 20-year level premium period business written in 1999 and 2000, we would expect volatility in DAC amortization if persistency is lower than original assumptions, which would reduce profitability in our term life insurance products. However, going forward, given our smaller block sizes and reinsurance agreements in place, we would expect the impact to DAC amortization on policies entering the post-level period to be lower than what we experienced in 2019 and 2020. OurFor example, our 20-year level premium period business written in 2002 willhas begun to enter its post-level period in 2022 and we could experiencehave experienced elevated DAC amortization, duringalbeit lower than the year if lapses arelevels we experienced in 2020 and 2019, due to higher than expected.expected lapses as these policies exit the level premium period. We have also taken actions to mitigate potentially unfavorable impacts through the use of reinsurance, particularly for certain term life insurance policies issued between 2001 and 2004.
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 deferred 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 our fixed annuity spreads which impactand margins as interest rates change, depending on the margins on our products, particularly our single premium immediate annuity products. severity of the change.
106
Table of Contents
We have previously had premium deficiencies in our single premium immediate annuity products that resulted in the establishment of additional future policy benefit reserves that were reflected as charges to net income. In 2021, the results of our loss recognition testing did not result in a premium deficiency; therefore, our liability for future policy benefits was sufficient. If investment performance deteriorates, mortality assumptions decrease or interest rates decrease or remain at the current levels for an extended period of time,change adversely, we could incur additional charges in the future. The impacts of future adverse changes in our assumptions could result in the establishment of additional future policy benefit reserves and would be immediately reflected as a loss if our margin for this block is again reduced below zero. Any favorable variation would result in additional margin and higher income recognized over the remaining duration of the in-force block but would not have an immediate benefit to net income.
For fixed indexed annuities, equity market and interest rate performance and volatility could also result in additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.
94
Table of Contents
Segment results of operations
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
   2022   
 
   2021   
 
2022 vs. 2021
   
2022
   
2021
   
2022 vs. 2021
 
Revenues:
             
Premiums
  $695  $714  $(19)   (3)%   $688   $703   $(15)    (2)% 
Net investment income
   676   716   (40)   (6)%    700    763    (63)    (8)% 
Net investment gains (losses)
   56   42   14   33%    4    66    (62)    (94)% 
Policy fees and other income
   137   148   (11)   (7)%    129    145    (16)    (11)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   1,564   1,620   (56)   (3)%    1,521    1,677    (156)    (9)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   1,141   1,155   (14)   (1)%    816    1,129    (313)    (28)% 
Interest credited
   82   90   (8)   (9)%    80    87    (7)    (8)% 
Acquisition and operating expenses, net of deferrals
   199   192   7   4%    513    219    294    134% 
Amortization of deferred acquisition costs and intangibles
   83   68   15   22%    72    77    (5)    (6)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   1,505   1,505   —     —  %    1,481    1,512    (31)    (2)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income from continuing operations before income taxes
   59   115   (56)   (49)%    40    165    (125)    (76)% 
Provision for income taxes
   20   32   (12)   (38)%    15    42    (27)    (64)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income from continuing operations
   39   83   (44)   (53)%    25    123    (98)    (80)% 
Adjustments to income from continuing operations:
             
Net investment (gains) losses, net
(1)
   (55)   (41)   (14)   (34)%    (5)    (67)    62    93% 
Expenses related to restructuring
   —     14   (14)   (100)%    1    2    (1)    (50)% 
Taxes on adjustments
   12   6   6   100%    —      13    (13)    (100)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $(4)  $62  $(66)   (106)% 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $21   $71   $(50)    (70)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1) 
For the three months ended March 31,June 30, 2022 and 2021, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $1$(1) million infor each period.
107
Table of Contents
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:
 
  
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
 
    2021    
 
2022 vs. 2021
   
    2022    
   
    2021    
   
2022 vs. 2021
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
             
Long-term care insurance
  $59  $95  $(36)   (38)%   $34   $98   $(64)    (65)% 
Life insurance
   (79)   (63)   (16)   (25)%    (34)    (40)    6    15% 
Fixed annuities
   16   30   (14)   (47)%    21    13    8    62% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $(4)  $62  $(66)   (106)% 
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $21   $71   $(50)    (70)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
95
Table of Contents
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
 
Adjusted operating income in our long-term care insurance business decreased $36$64 million primarily from a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims,$55 million less favorable development on IBNR claims, lower renewal premiums and lower net investment income. These decreases were partially offset by higher premiums and reduced benefits of $61 millionimpact in the current year from in-force rate actions approved and implemented, which included a lower net favorable impact from policyholder benefit reduction elections made as part of a legal settlement. To account forsettlement, as the change in experience relatedimplementation of the settlement is substantially complete. The decrease was also attributable to mortalityhigher severity and claim incidence due to COVID-19, we increased claim reserves by $76 millionfrequency of new claims, lower net investment income and lower renewal premiums in the priorcurrent year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $30 million.
 
The adjusted operating loss in our life insurance business increased $16decreased $6 million mainly attributable to a $20 million legal settlement accrual,lower mortality, partially offset by lower mortalitythe runoff of our in-force blocks and higher lapses in the current year compared to the prior year.our 20-year term life insurance block written in 2002 entering its post-level premium period.
 
Adjusted operating income in our fixed annuities business decreased $14increased $8 million mainly attributable to lower net spreads and lowerhigher mortality in our single premium immediate annuitiesannuity products and lower DAC amortization, partially offset by lower net spreads in the current year.
Revenues
Premiums
 
Our long-term care insurance business decreased $25$20 million primarily driven by lower renewal premiums from policy terminations and policies entering paid-up status, partially offset by $15$19 million of increased premiums in the current year from in-force rate actions approved and implemented.
 
Our life insurance business increased $6$5 million primarily driven by lower ceded premiums, partially offset by the continued runoff of our term and whole life insurance products in the current year.
Net investment income
 
Our long-term care insurance business decreased $18$23 million largely from lower income of $28$33 million in the current year mostly attributable to limited partnerships, and bond calls and commercial mortgage loan prepayments, partially offset by higher income of $12$9 million related to U.S. Government Treasury Inflation Protected Securities (“TIPS”).
 
Our life insurance business decreased $4$5 million driven by lower bond calls and commercial mortgage loan prepayments in the current year.
Our fixed annuities business decreased $35 million largely attributable to lower average invested assets driven mostly by the transfer of securities in connection with the recapture of certain single premium
108
Table of Contents
immediate annuity contracts by a third party and normal block runoff, along with lower bond calls and commercial mortgage loan prepayments in the current year.
Net investment gains (losses).
The decrease was largely related to our long-term care insurance business primarily driven by lower unrealized gains from mark to market adjustments on limited partnerships and changes in the fair value of equity securities, partially offset by lower credit losses in the current year and derivative losses in the prior year that did not recur.
Policy fees and other income.
The decrease was largely related to our life insurance business driven mostly by the runoff of our in-force blocks in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
Our long-term care insurance business increased $113 million primarily due to a less favorable impact of $153 million from reduced benefits in the current year related to in-force rate actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement. The increase was also attributable to aging of the in-force block, including higher severity and frequency of new claims. These increases were partially offset by lower incremental reserves of $101 million recorded in connection with an accrual for profits followed by losses and an increase in claim terminations driven mostly by higher mortality in the current year.
Our life insurance business decreased $32 million largely from lower mortality in the current year.
Our fixed annuities business decreased $394 million principally from lower assumed reserves as a result of a third-party recapture of $374 million of certain single premium immediate annuity contracts and higher mortality in the current year.
Interest credited.
The decrease in interest credited was largely driven by our fixed annuities business due to lower average account values from block runoff.
Acquisition and operating expenses, net of deferrals
Our long-term care insurance business decreased $72 million principally related to lower yieldspremium taxes, commissions and other expenses of $63 million associated with our in-force rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement, and from lower operating costs in the current year.
Our fixed annuities business increased $363 million primarily due to a payment of $365 million related to the recapture of certain single premium immediate annuity contracts by a third party in the current year.
Amortization of deferred acquisition costs and intangibles
Our long-term care insurance business decreased $4 million primarily due to decreases in policy terminations and policies entering paid-up status in the current year.
Our life insurance business increased $6 million primarily from higher lapses in our 20-year term life insurance block written in 2002 entering its post-level premium period, partially offset by lower amortization in our universal and term universal life insurance products due to block runoff.
Our fixed annuities business decreased $7 million primarily due to higher interest rates in the current year that is expected to increase future investment spreads.
109
Table of Contents
Provision for income taxes.
The effective tax rate was 39.0% and 25.5% for the three months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate is primarily attributable to higher tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income, in relation to lower pre-tax income in the current year.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Revenues:
        
Premiums
  $1,383   $1,417   $(34)    (2)% 
Net investment income
   1,376    1,479    (103)    (7)% 
Net investment gains (losses)
   60    108    (48)    (44)% 
Policy fees and other income
   266    293    (27)    (9)% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   3,085    3,297    (212)    (6)% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   1,957    2,284    (327)    (14)% 
Interest credited
   162    177    (15)    (8)% 
Acquisition and operating expenses, net of deferrals
   712    411    301    73% 
Amortization of deferred acquisition costs and intangibles
   155    145    10    7% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   2,986    3,017    (31)    (1)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations before income taxes
   99    280    (181)    (65)% 
Provision for income taxes
   35    74    (39)    (53)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations
   64    206    (142)    (69)% 
Adjustments to income from continuing operations:
        
Net investment (gains) losses, net
   (60)    (108)    48    44% 
Expenses related to restructuring
   1    16    (15)    (94)% 
Taxes on adjustments
   12    19    (7)    (37)% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $17   $133   $(116)    (87)% 
  
 
 
   
 
 
   
 
 
   
110
Table of Contents
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:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
        
Long-term care insurance
  $93   $193   $(100)    (52)% 
Life insurance
   (113)    (103)    (10)    (10)% 
Fixed annuities
   37    43    (6)    (14)% 
  
 
 
   
 
 
   
 
 
   
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $17   $133   $(116)    (87)% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income in our long-term care insurance business decreased $100 million primarily from higher severity and frequency of new claims, lower renewal premiums, lower net investment income and lower claim terminations. These decreases were partially offset by a $6 million higher favorable impact in the current year from in-force rate actions approved and implemented, which included a lower net favorable impact from policyholder benefit reduction elections made as part of a legal settlement, as the implementation of the settlement is substantially complete. To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $66 million in the prior year. During the first half of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $42 million.
The adjusted operating loss in our life insurance business increased $10 million mainly attributable to a $20 million legal settlement expense, the runoff of our in-force blocks and higher lapses in our 20-year term life insurance block written in 2002 entering its post-level premium period, partially offset by lower mortality in the current year.
Adjusted operating income in our fixed annuities business decreased $6 million mainly attributable to lower net spreads, partially offset by higher mortality in our single premium immediate annuity products and lower DAC amortization in the current year.
Revenues
Premiums
Our long-term care insurance business decreased $45 million primarily driven by lower renewal premiums from policy terminations and policies entering paid-up status, partially offset by $34 million of increased premiums in the current year from in-force rate actions approved and implemented.
Our life insurance business increased $11 million primarily driven by lower ceded premiums, partially offset by the continued runoff of our term and whole life insurance products in the current year.
Net investment income
Our long-term care insurance business decreased $41 million largely from lower income of $62 million in the current year mostly attributable to limited partnerships, and bond calls and commercial mortgage loan prepayments, partially offset by higher income of $20 million related to TIPS.
111
Table of Contents
Our life insurance business decreased $9 million principally related to lower bond calls and commercial mortgage loan prepayments, and lower average invested assets in the current year.
 
Our fixed annuities business decreased $18$53 million largely attributable to lower average invested assets due to block runoff and fromincluding the transfer of securities in connection with the recapture of certain single premium immediate annuity contracts by a third party, along with lower bond calls and commercial mortgage loan prepayments in the current year.
Net investment gains (losses).
. The increasedecrease was largely related to our long-term care insurance business primarily driven by an increaselower unrealized gains from mark to market adjustments on limited partnerships and changes in the fair value of equity securities, partially offset by lower credit losses in the current year and net realized gains from the sale of investment securities and higher unrealized gains from changes in the fair value of equity securities in the current year compared to losses in the prior year.
Policy fees and other income.
The decrease was largely related to our life insurance business driven mostly by the runoff of our in-force blocks in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
 
Our long-term care insurance business decreased $17increased $96 million primarily due to a moreless favorable impact of $84$69 million from reduced benefits in the current year related to in-force rate actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement. The increase was also attributable to aging of the in-force block, including higher severity and frequency of new claims and lower claim terminations. These increases were partially offset by lower incremental reserves of $76 million recorded in connection with an accrual for profits followed by losses in the current year. To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $84 million in the prior year. During the first half of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $53 million.
96
Table of Contents
implemented, which included policyholder benefit reduction elections made as part of a legal settlement. To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $96 million in the prior year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $38 million. These decreases were partially offset by aging of the in-force block, a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims, less favorable development on IBNR claims and higher incremental reserves of $25 million recorded in connection with an accrual for profits followed by losses in the current year.
 
Our life insurance business was flat as ceded reinsurance was offset bydecreased $32 million largely from lower mortality in the current year.
 
Our fixed annuities business increased $3decreased $391 million principally from lower mortality in ourassumed reserves as a result of a third-party recapture of $374 million of certain single premium immediate annuitiesannuity contracts and higher reserves in our fixed indexed annuity products driven by unfavorable equity market changesmortality in the current year compared to a favorable equity market in the prior year.
Interest credited.
The decrease in interest credited was driven by declines of $4$10 million in both our fixed annuities products and $5 million in our life insurance products due to lower average account values from block runoff.
Acquisition and operating expenses, net of deferrals
 
Our long-term care insurance business increased $2decreased $70 million principally related to higherlower premium taxes, commissions and other expenses of $21$42 million associated with our in-force rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement in the current year, partially offset by restructuring costs of $12 million in the prior year that did not recur and lower operating costs in the current year.
 
Our life insurance business increased $7$10 million primarily due to a $25 million legal settlement accrual,expense and $7 million related to outsourcing conversion costs in the current year, partially offset by lower reinsurance costs in the current year and $4 million of restructuring costs in the prior year that did not recur.
Our fixed annuities business increased $361 million primarily due to a payment of $365 million related to the recapture of certain single premium immediate annuity contracts by a third party in the current year.
112
Table of Contents
Amortization of deferred acquisition costs and intangibles
 
Our long-term carelife insurance business increased $5$15 million principallyprimarily from policy terminations and policieshigher lapses in our 20-year term life insurance block written in 2002 entering paid-up status in the current year.its post-level premium period.
 
Our life insurancefixed annuities business increased $9decreased $6 million primarily driven by mortality experiencedue to higher interest rates in our universal life insurance products.the current year that is expected to increase future investment spreads.
Provision for income taxes.
The effective tax rate was 33.3%35.6% and 27.2%26.2% for the threesix months ended March 31,June 30, 2022 and 2021, respectively. The increase in the effective tax rate is primarily attributable to higher tax expense on certain forward starting swaps, whichswap gains that are tax effected at the previously enacted federal income tax rate of 35% whenas they are amortized into net investment income, in relation to lower pre-tax income in the current year.
U.S. Life Insurance selected operating performance measures
Long-term care insurance
As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their original pricing. In aggregate, we estimate that we have achieved approximately $20.4$20.7 billion, on a net present
97
Table of Contents
value basis, of approved in-force rate increases since 2012. We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
The following table summarizes the impact from cumulative in-force rate actions on the results of operations of our long-term care insurance business for the periods indicated:
 
  
Three months ended
March 31,
   
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
   
    2021    
   
2022 vs. 2021
   
  2022  
   
  2021  
   
  2022 vs. 2021  
 
  2022  
   
  2021  
   
      2022 vs. 2021      
 
Premiums
  $210   $195   $15    8%   $226   $207   $19   9%  $436   $402   $34   8% 
Plus: Benefits and other changes in policy reserves
(1)
   236    152    84    55%    121    274    (153)   (56)%   357    426    (69)   (16)% 
Less: Acquisition and operating expenses, net of deferrals
(2)
   61    40    21    53%    25    88    (63)   (72)%   86    128    (42)   (33)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
   
 
   
 
  
Adjusted operating income before taxes
   385    307    78    25%    322    393    (71)   (18)%   707    700    7   1% 
Income taxes
   81    64    17    27%    67    83    (16)   (19)%   148    147    1   1% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
   
 
   
 
  
Adjusted operating income
(3)
  $304   $243   $61    25%   $255   $310   $(55)   (18)%  $559   $553   $6   1% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
   
 
   
 
  
 
(1) 
Amounts represent benefit reductions elected by policyholders as an alternative to increased premiums. These amounts reduced benefits and other changes in policy reserves in our long-term care insurance business for the periods indicated.
(2) 
Amounts include premium taxes, commissions and other expenses associated with our long-term care insurance in-force rate action plan, which included expenses of $43$6 million and $49 million (consisting entirely of cash damages) for the three and $23six months ended June 30, 2022, respectively, and $70 million and $93 million for three and six months ended June 30, 2021, respectively, related to policyholder benefit reduction elections made as part of a legal settlement for the three months ended March 31, 2022 and 2021, respectively.settlement. Included in the $23$70 million and $93 million of expenses for the three and six months ended March 31,June 30, 2021, was $20respectively, were $61 million and $81 million, respectively, of cash damages. As of June 30, 2022, the implementation of the legal settlement is substantially complete.
(3) 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions excludes reserve updates resulting from profits followed by losses.
113
Table of Contents
See our results of operations above for additional details.
The following table presents net earned premiums and the loss ratio for our long-term care insurance business for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
  
Three months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
Six months ended
June 30,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
 
    2021    
 
2022 vs. 2021
  
  2022  
 
  2021  
 
    2022 vs. 2021    
 
2022
 
2021
 
    2022 vs. 2021    
 
Net earned premiums:
             
Individual long-term care insurance
(1)
  $590  $615  $(25)   (4)%  $595  $617  $(22)   (4)%  $1,185  $1,232  $(47)   (4)% 
Group long-term care insurance
   31   31   —     —  %   33   31   2   6%   64   62   2   3% 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
  
 
  
Total
  $621  $646  $(25)   (4)%  $628  $648  $(20)   (3)%  $1,249  $1,294  $(45)   (3)% 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
  
 
  
Loss ratio
   64%   62%   2%    81%   62%   19%    72%   62%   10%  
 
(1) 
For the three months ended March 31,June 30, 2022 and 2021, amounts include increased premiums of $210$226 million and $195$207 million, respectively, from in-force rate actions approved and implemented. For the six months ended June 30, 2022 and 2021, amounts include increased premiums of $436 million and $402 million, respectively, from in-force rate actions approved and implemented.
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.
98
Table of Contents
Net earned premiums decreased infor the current yearthree months and six months ended June 30, 2022 primarily driven by lower renewal premiums from policy terminations and policies entering paid-up status, partially offset by $15$19 million and $34 million, respectively, of increased premiums in the current year from in-force rate actions approved and implemented.
The loss ratio increased infor the current yearthree and six months ended June 30, 2022 due to thehigher benefits and other changes in reserves and lower premiums as discussed above.
Life insurance
The following table setstables set forth selected operating performance measures regarding our life insurance business as of or for the dates indicated:
 
  
As of or for the three
months ended March 31,
   
Increase (decrease)
and percentage

change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
   
    2022    
   
    2021    
   
  2022 vs. 2021  
 
  2022  
   
  2021  
   
    2022 vs. 2021    
 
Term and whole life insurance
                     
Net earned premiums
  $74   $68   $6    9%   $60   $55   $5   9%  $134   $123   $11   9% 
Life insurance in-force, net of reinsurance
   49,637    77,430    (27,793)    (36)% 
Life insurance in-force before reinsurance
   325,055    355,424    (30,369)    (9)% 
Term universal life insurance
                     
Net deposits
  $49   $53   $(4)    (8)%    49    53    (4)   (8)%   98    106    (8)   (8)% 
Life insurance in-force, net of reinsurance
   97,750    105,360    (7,610)    (7)% 
Life insurance in-force before reinsurance
   98,392    106,055    (7,663)    (7)% 
Universal life insurance
                     
Net deposits
  $67   $69   $(2)    (3)%    58    64    (6)   (9)%   125    133    (8)   (6)% 
Life insurance in-force, net of reinsurance
   30,732    32,132    (1,400)    (4)% 
Life insurance in-force before reinsurance
   34,756    36,435    (1,679)    (5)% 
Total life insurance
                     
  
 
   
 
   
 
   
 
   
 
   
 
  
Net earned premiums and deposits
  $190   $190   $—      —  %   $167   $172   $(5)   (3)%  $357   $362   $(5)   (1)% 
Life insurance in-force, net of reinsurance
   178,119    214,922    (36,803)    (17)% 
Life insurance in-force before reinsurance
   458,203    497,914    (39,711)    (8)% 
  
 
   
 
   
 
   
 
   
 
   
 
  
114
Table of Contents
   
As of June 30,
   
Percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Term and whole life insurance
      
Life insurance in-force, net of reinsurance
  $50,267   $56,111    (10)% 
Life insurance in-force before reinsurance
  $316,649   $347,745    (9)% 
Term universal life insurance
      
Life insurance in-force, net of reinsurance
  $95,941   $103,473    (7)% 
Life insurance in-force before reinsurance
  $96,570   $104,145    (7)% 
Universal life insurance
      
Life insurance in-force, net of reinsurance
  $30,434   $31,807    (4)% 
Life insurance in-force before reinsurance
  $34,405   $36,045    (5)% 
Total life insurance
      
Life insurance in-force, net of reinsurance
  $176,642   $191,391    (8)% 
Life insurance in-force before reinsurance
  $447,624   $487,935    (8)% 
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 increased for the three and six months ended June 30, 2022 mainly attributable to lower ceded premiums, partially offset by the continued runoff of our term and whole life insurance products in the current year.
Universal and term universal life insurance
Net deposits decreased infor the current yearthree and six months ended June 30, 2022 primarily attributable to lower renewals and from the continued runoff of our in-force blocks.
99
Table of Contents
Fixed annuities
The following table sets forth selected operating performance measures regarding our fixed annuities business as of or for the dates indicated:
 
  
As of or for the three

months ended March 31,
   
As of or for the three
months ended June 30,
   
As of or for the six
months ended June 30,
 
(Amounts in millions)
  
    2022    
   
    2021    
   
    2022    
   
    2021    
   
2022
   
2021
 
Account value, beginning of period
  $10,163   $11,815   $9,505   $11,172   $10,163   $11,815 
Deposits
   18    17 
Premiums and deposits
   21    21    39    38 
Surrenders, benefits and product charges(1)
   (414)    (544)    (755)    (482)    (1,169)    (1,026) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Net flows
   (396)    (527)    (734)    (461)    (1,130)    (988) 
Interest credited and investment performance
   61    85    58    95    119    180 
Effect of accumulated net unrealized investment gains (losses)
   (323)    (201)    (266)    107    (589)    (94) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Account value, end of period
  $9,505   $11,172   $8,563   $10,913   $8,563   $10,913 
  
 
   
 
   
 
   
 
   
 
   
 
 
(1) 
Amount included the recapture of $373 million account value of certain single premium immediate annuities by a third party in the second quarter of 2022.
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 March 31, 2022 and December 31, 2021 asdriven mostly by surrenders and benefits, andwhich included the recapture of $373 million of certain single premium immediate annuity
115
Table of Contents
contracts by a third party in the second quarter of 2022. The decrease was also attributable to unfavorable market performance, exceededpartially offset by interest credited in the current year.
Runoff segment
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 considerhave used reinsurance opportunities to furtherhelp mitigate volatility in results and manage capital in the future.our variable annuity results.
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.
100
Table of Contents
Segment results of operations
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease)
and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
  2022  
 
  2021  
 
2022 vs. 2021
   
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
             
Net investment income
  $50  $49  $1   2%   $51   $43   $8    19% 
Net investment gains (losses)
   (15)   (6)   (9)   (150)%    (10)    10    (20)    (200)% 
Policy fees and other income
   31   33   (2)   (6)%    29    35    (6)    (17)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   66   76   (10)   (13)%    70    88    (18)    (20)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   8   8   —     —  %    11    2    9    NM(1) 
Interest credited
   43   41   2   5%    45    40    5    13% 
Acquisition and operating expenses, net of deferrals
   12   13   (1)   (8)%    12    14    (2)    (14)% 
Amortization of deferred acquisition costs and intangibles
   6   5   1   20%    9    4    5    125% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   69   67   2   3%    77    60    17    28% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations before income taxes
   (3)   9   (12)   (133)%    (7)    28    (35)    (125)% 
Provision (benefit) for income taxes
   (1)   1   (2)   (200)%    (2)    6    (8)    (133)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations
   (2)   8   (10)   (125)%    (5)    22    (27)    (123)% 
Adjustments to income (loss) from continuing operations:
             
Net investment (gains) losses, net
(1)(2)
   14   5   9   180%    9    (9)    18    200% 
Taxes on adjustments
   (3)   (1)   (2)   (200)%    (2)    2    (4)    (200)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $9  $12  $(3)   (25)%   $2   $15   $(13)    (87)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2) 
For the three months ended March 31,June 30, 2022 and 2021, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(1) million and $1 million, respectively.
116
Table of Contents
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income decreased predominantly due to unfavorable equity market performance and higher interest rates resulting in a decline in the average account values of our variable annuity products reducing fee income, partially offset by higher policy loan income in our corporate-owned life insurance products in the current year.
Revenues
Net investment income increased primarily from higher policy loan income in our corporate-owned life insurance products in the current year.
The change to net investment losses in the current year from net investment gains in the prior year was predominantly related to losses on embedded derivatives associated with our variable annuity products with guaranteed minimum withdrawal benefits (“GMWBs”) compared to gains in the prior year, partially offset by higher derivative gains in the current year.
Policy fees and other income decreased principally from lower fee income driven mostly by a decline in the average account values in our variable annuity products in the current year.
Benefits and expenses
Benefits and other changes in policy reserves increased primarily attributable to higher guaranteed minimum death benefits (“GMDB”) reserves in our variable annuity products due to unfavorable equity market performance and higher interest rates, partially offset by lower mortality in our variable annuity products in the current year.
Interest credited increased largely due to higher account values in our corporate-owned life insurance products in the current year.
Amortization of deferred acquisition costs and intangibles increased primarily from higher DAC amortization in our variable annuity products due to unfavorable equity market performance in the current year.
Provision for income taxes
. The effective tax rate was 28.7% and 19.6% for the three months ended June 30, 2022 and 2021, respectively. The increase was primarily attributable to tax benefits from tax favored items in relation to a pre-tax loss in the current year compared to pre-tax income in the prior year.
117
Table of Contents
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
        
Net investment income
  $101   $92   $9    10% 
Net investment gains (losses)
   (25)    4    (29)    NM(1) 
Policy fees and other income
   60    68    (8)    (12)% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   136    164    (28)    (17)% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   19    10    9    90% 
Interest credited
   88    81    7    9% 
Acquisition and operating expenses, net of deferrals
   24    27    (3)    (11)% 
Amortization of deferred acquisition costs and intangibles
   15    9    6    67% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   146    127    19    15% 
  
 
 
   
 
 
   
 
 
   
Income (loss) from continuing operations before income taxes
   (10)    37    (47)    (127)% 
Provision (benefit) for income taxes
   (3)    7    (10)    (143)% 
  
 
 
   
 
 
   
 
 
   
Income (loss) from continuing operations
   (7)    30    (37)    (123)% 
Adjustments to income (loss) from continuing operations:
        
Net investment (gains) losses, net
(2)
   23    (4)    27    NM(1) 
Taxes on adjustments
   (5)    1    (6)    NM(1) 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $11   $27   $(16)    (59)% 
  
 
 
   
 
 
   
 
 
   
(1) 
We define “NM” as not meaningful for each period.increases or decreases greater than 200%.
(2) 
For the six months ended June 30, 2022, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income decreased predominantly due to unfavorable equity market performance and higher interest rates resulting in a decline in the average account values of our variable annuity products reducing fee income, partially offset by higher policy loan income in our corporate-owned life insurance products in the current year.
Revenues
Net investment lossesincome increased primarily duefrom higher policy loan income in our corporate-owned life insurance products in the current year.
The change to net investment losses in the current year from net investment gains in the prior year was predominantly related to lower gains on embedded derivatives associated with our variable annuity products with guaranteed minimum withdrawal benefits (“GMWBs”),GMWBs, partially offset by lower derivative losses in the current year.
Policy fees and other income decreased principally from lower fee income driven mostly by a decline in the average account values in our variable annuity products in the current year.
118
Table of Contents
Benefits and expenses
Benefits and other changes in policy reserves increased primarily attributable to higher GMDB reserves in our variable annuity products due to unfavorable equity market performance and higher interest rates, partially offset by lower mortality in our variable annuity products in the current year.
Interest credited increased largely due to higher account values in our corporate-owned life insurance products in the current year.
Amortization of deferred acquisition costs and intangibles increased primarily from higher DAC amortization in our variable annuity products due to unfavorable equity market performance in the current year.
101
Table of Contents
Provision (benefit) for income taxes
. The effective tax rate was 39.2%31.8% and 15.7%18.6% for the threesix months ended March 31,June 30, 2022 and 2021, respectively. The increase was primarily attributable to tax benefits from tax favored items in relation to a pre-tax loss in the current year compared to pre-tax income in the prior year.
Runoff 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:
 
  
As of or for the three

months ended March 31,
   
As of or for the three
months ended June 30,
   
As of or for the six
months ended June 30,
 
(Amounts in millions)
  
      2022      
   
      2021      
   
    2022    
   
    2021    
   
    2022    
   
    2021    
 
Account value, beginning of period
  $4,839   $5,001   $4,459   $4,863   $4,839   $5,001 
Deposits
   5    6    4    4    9    10 
Surrenders, benefits and product charges
   (131)    (187)    (105)    (140)    (236)    (327) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Net flows
   (126)    (181)    (101)    (136)    (227)    (317) 
Interest credited and investment performance
   (254)    43    (445)    241    (699)    284 
  
 
   
 
   
 
   
 
   
 
   
 
 
Account value, end of period
  $4,459   $4,863   $3,913   $4,968   $3,913   $4,968 
  
 
   
 
   
 
   
 
   
 
   
 
 
We no longer solicit sales of our variable annuity or variable life insurance products; however, we continue to service our existing blocks of business and accept additional deposits on existing contracts and policies.
Account value as of March 31,June 30, 2022 decreased compared to March 31, 2022 and December 31, 2021 primarily related to unfavorable equity market performance and surrenders in the current year.
Funding agreements
The account value of our funding agreements was $250 million as of March 31,June 30, 2022, and December 31, 2021 and $300June 30, 2021. Account value decreased $50 million as of March 31, 2021. As of March 31, 2022,during the decrease in account value as compared to March 31,three months ended June 30, 2021 was mainly dueattributable to a maturity payment in the second quarter of 2021.payment.
 
102119
Table of Contents
Corporate and Other Activities
Results of operations
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
 
  
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
 
    2021    
 
2022 vs. 2021
   
    2022    
   
    2021    
   
2022 vs. 2021
 
Revenues:
             
Premiums
  $2  $2  $—     —  %   $1   $1   $—      —  % 
Net investment income
   3   1   2   200%    —      3    (3)    (100)% 
Net investment gains (losses)
   (13)   (2)   (11)   NM(1)    15    (4)    19    NM(1) 
Policy fees and other income
   1    —      1    NM(1) 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   (8)   1   (9)   NM(1)    17    —      17    NM(1) 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   —     —     —     —  %    (1)    —      (1)    NM(1) 
Acquisition and operating expenses, net of deferrals
   6   13   (7)   (54)%    6    8    (2)    (25)% 
Amortization of deferred acquisition costs and intangibles
   —      1    (1)    (100)% 
Interest expense
   13   38   (25)   (66)%    13    31    (18)    (58)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   19   51   (32)   (63)%    18    40    (22)    (55)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Loss from continuing operations before income taxes
   (27)   (50)   23   46%    (1)    (40)    39    98% 
Benefit for income taxes
   (6)   (8)   2   25% 
Provision (benefit) for income taxes
   3    (8)    11    138% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Loss from continuing operations
   (21)   (42)   21   50%    (4)    (32)    28    88% 
Adjustments to loss from continuing operations:
             
Net investment (gains) losses
   13   2   11   NM(1)    (15)    4    (19)    NM(1) 
(Gains) losses on early extinguishment of debt
   3   4   (1)   (25)%    1    —      1    NM(1) 
Expenses related to restructuring
   —     7   (7)   (100)%    —      1    (1)    (100)% 
Taxes on adjustments
   (4)   (3)   (1)   (33)%    4    —      4    NM(1) 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(9)  $(32)  $23   72%   $(14)   $(27)   $13    48% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss decreased primarily related to lower interest expense in the current year.
Revenues
NetThe change to net investment gains in the current year from net investment losses increasedin the prior year was predominantly related to derivative gains in the current year compared to derivative losses in the prior year.
Benefits and expenses
Interest expense decreased largely driven by the early redemption and repurchase of Genworth Holdings’ senior notes due in September 2021, as well as the redemption of Genworth Holdings’ senior notes due in August 2023 and the repurchase of Genworth Holdings’ senior notes due in February 2024.
120
Table of Contents
The provision for income taxes for the three months ended June 30, 2022 was primarily related to tax expense on non-deductible expenses and certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income, partially offset by the tax benefit related to the pre-tax loss. The benefit for income taxes for the three months ended June 30, 2021 was primarily related to the pre-tax loss and unrealized losses from changes in the fair value of equity securities, partially offset by tax expense on non-deductible expenses.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Revenues:
        
Premiums
  $3   $3   $—      —  % 
Net investment income
   3    4    (1)    (25)% 
Net investment gains (losses)
   2    (6)    8    133% 
Policy fees and other income
   1    —      1    NM(1) 
  
 
 
   
 
 
   
 
 
   
Total revenues
   9    1    8    NM(1) 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   (1)    —      (1)    NM(1) 
Acquisition and operating expenses, net of deferrals
   12    21    (9)    (43)% 
Amortization of deferred acquisition costs and intangibles
   —      1    (1)    (100)% 
Interest expense
   26    69    (43)    (62)% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   37    91    (54)    (59)% 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations before income taxes
   (28)    (90)    62    69% 
Benefit for income taxes
   (3)    (16)    13    81% 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations
   (25)    (74)    49    66% 
Adjustments to loss from continuing operations:
        
Net investment (gains) losses
   (2)    6    (8)    (133)% 
(Gains) losses on early extinguishment of debt
   4    4    —      —  % 
Expenses related to restructuring
   —      8    (8)    (100)% 
Taxes on adjustments
   —      (3)    3    100% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(23)   $(59)   $36    61% 
  
 
 
   
 
 
   
 
 
   
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss decreased primarily related to lower interest expense in the current year.
Revenues
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, partially offset by realized losses from the sale of investment securities in the current year compared to net realized gains in the prior year, partially offset by derivative losses in the prior year.
121
Table of Contents
Benefits and expenses
Acquisition and operating expenses, net of deferrals, decreased mainly driven by restructuring costs of $7$8 million in the prior year that did not recur and a lower loss from the repurchase of Genworth Holdings’ senior notes in the current year. In the first quarter of 2022, we recorded a loss of $3 million related to the repurchase of Genworth Holdings’ senior notes due in February 2024 compared to a loss of $4 million in the first quarter of 2021 related to the repurchase of Genworth Holdings’ senior notes due in September 2021.recur.
103
Table of Contents
Interest expense decreased largely driven by the early redemption and repurchase of Genworth Holdings’ senior notes due in September 2021, as well as the redemption of Genworth Holdings’ senior notes due in February 2021 and August 2023.2023 and the repurchase of Genworth Holdings’ senior notes due in February 2024.
The benefit for income taxes for the threesix months ended March 31,June 30, 2022 was primarily related to the pre-tax loss. The benefit for income taxes for the three months ended March 31, 2021 was primarily related to the pre-tax loss, partially offset by tax expense on non-deductible expenses. The benefit for income taxes for the six months ended June 30, 2021 was primarily related to the pre-tax loss and unrealized losses from changes in the fair value of equity securities, partially offset by tax expense on certain forward starting swaps, whichswap gains that are tax effected at the previously enacted federal income tax rate of 35% whenas they are amortized into net investment income.income and non-deductible expenses.
Investments and Derivative Instruments
General macroeconomic environment
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.
Varied levels of economic performance, coupled with uncertain economic outlooks, war and geopolitical tensions, changes in government policy, global trade, regulatory and tax reforms, and other changes in market conditions, such as inflation, will continue to influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt, capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, factors such as the speed of the economic recovery from COVID-19, future government responses to COVID-19 or another public health emergency, including government stimulus, government spending, monetary policies (such as ceasing quantitative easing)tightening), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, inflation, including the price of oil, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.
During the firstsecond quarter of 2022, the U.S. Federal Reserve shifted its monetary policycontinued to aggressively address rising inflation by tightening its balance sheet and increasing interest rates. At its MarchMay 2022 meeting, the U.S. Federal Reserve increased interest rates 25by 50 basis points acceleratedand further increased interest rates by 75 basis points in both its forecast for additional and larger interest rate increases inJune 2022 and is considering plans to begin reducing its balance sheet as early as MayJuly 2022 meetings, with additional increases forecasted for the second half of 2022. TheA tightening labor market, supply chain disruptions and rising commodity prices, have elevated inflationary pressures inas well as the U.S. economy. The Russian invasion of Ukraine put additional pressure on commodity prices, sending crude oil prices up inand subsequent sanctions from the first quarter of 2022United States and peaking in March 2022 at levels not seen since 2008. These factorsWestern Europe, have contributed to risingthe continued rise in inflation, with the consumer price index indicating the highest annual U.S. inflation rate in over 40 years. TheA strong labor market has offset some of these pressures, aswith the unemployment rate continues to declineunchanged from the end of the first quarter of 2022 and job creation was steady in the firstsecond quarter of 2022.
Gross domestic product (“GDP”) rebounded sharply in 2021 as compared to 2020 as the economy continued its recovery from COVID-19. However, GDP contracted abruptly in the first quarter of 2022, gross domestic productand remained contracted abruptly,in the second quarter of 2022 due in part to certain government fiscal support actions lapsing, elevated inflation pressure on consumers, monetary tightening and persistent supply chain disruptions. GivenMany economists believe the potential for future actionsstrong labor market provides a macroeconomic mitigant to be taken to mitigateoffset the risktwo consecutive quarters of negative GDP and therefore believe the U.S.
122
Table of Contents
economy is not in a virus re-emergence due to variants or due to continuedrecession as of June 30, 2022. However, given the persistent high inflation, and supply chain disruptions, or fromevolving U.S. Federal Reserve monetary policy, including the expectation of higher interest rates, and prolonged geopolitical tensions, it is possible the U.S. economy could fall into a recession as early as the third quarter of 2022. Specific to Genworth, we continue to closely monitor the operating results and financial position of Enact Holdings, particularly related to new delinquency trends and whether borrowers in a forbearance plan ultimately cure or result in a claim payment. If delinquency trends move in an unfavorable direction in contrast to our current projections, our liquidity, financial position and results of operations could be adversely impacted.
104
Table of Contents
Trends and conditions
Investments
U.S. Treasury yields increased during the firstsecond quarter of 2022 driven mainly by the shiftchanges in the U.S. Federal Reserve’s monetary policy to combat rising inflation. The U.S. Treasury yield curve flattened significantly atfluctuated during the end of the firstsecond quarter of 2022 as interest rate volatility increased driven by economic data releases and monetary policy actions taken by the U.S. Federal Reserve. The second quarter of 2022 ended with higher increases in the two-year and three-year U.S. Treasury yields than the ten-year and 30-year U.S. Treasury yields and minimal differential between the two-year and ten-year U.S. Treasury yields as of March 31, 2022, as expectationsinverted in favor of the two-year U.S. Federal Reserve interest rate increases for 2022 were accelerated.Treasury yield, which continued to steepen immediately subsequent to the end of the second quarter of 2022.
Credit markets widened during the firstsecond quarter of 2022. The2022 driven by macroeconomic pressures from the U.S. Federal Reserve’s fluctuating monetary policy and subsequent interest rate volatility drove spread widening early in the first quarter of 2022. Russia’svolatility. The Russian invasion of Ukraine and the ensuing sanctions imposed by the United States and Western Europe acceleratedcontinued to put pressure on global supply chains and further contributed to the credit spread widening as commodity price volatility added to existing inflation concerns and supply chain pressures, increasingwidening. During the risksecond quarter of a global economic slowdown. The2022, U.S. investment grade investors favored higher quality credits, driving increased rating dispersion with the differential between BBB and A rated credit market experienced near record supply as companies funded increased merger and acquisition activity, which put additional pressure on spread valuations duringinvestments. Similar rating dispersion occurred in the first quarter of 2022. Despite periods of increased volatility and even wider spreads, U.S. investment grade spreads only widened approximately 25 basis points as of March 31, 2022. The U.S. high yield credit market saw similar spread widening throughoutwhere credit spreads widened even more than in the firstinvestment grade credit market and the differential between BBB and BB rated credits increased. The combination of higher U.S. Treasury yields and wider credit spreads during the second quarter of 2022 and combined with the rise in U.S. Treasurydrove investment yields finished the first quarter of 2022 near its highest yieldsacross all durations to levels not seen since the onset of COVID-19.2018.
As of March 31,June 30, 2022, our investment portfolio had no direct exposure to Russia or Ukraine. The ultimate range of outcomes related to the Russian invasion of Ukraine includes potential credit devaluation or rating agency downgrades of our indirect Russian related exposures. However, at this time, we do not believe there is a material risk to the valuation of our investment portfolio due to credit losses or direct write-offs that may arise as a result of the conflict.
As of June 30, 2022, our fixed maturity securities portfolio, which was 96% investment grade, comprised 81%78% of our total invested assets and cash.
Derivatives
As of March 31,June 30, 2022, $897$949 million notional of our derivatives portfolio was cleared through the Chicago Mercantile Exchange (“CME”). The customer swap agreements that govern our cleared derivatives contain provisions that enable our clearing agents to request initial margin in excess of CME requirements. As of March 31,June 30, 2022, we posted initial margin of $62$71 million to our clearing agents, which represented $31$36 million more than was otherwise required by the clearinghouse. Because our clearing agents 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 March 31,June 30, 2022, $9.1$9.3 billion notional of our derivatives portfolio was in bilateral over-the-counter derivative transactions pursuant to which we have posted aggregate independent amounts of $424$436 million and are holding collateral from counterparties in the amount of $110$41 million.
In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from the London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The LIBOR
123
Table of Contents
tenors, such as the three-month LIBOR, have various phase-out dates with the last committed publication date of June 30, 2023. The Alternate Reference Rate Committee (“ARRC”), convened by the Board of Governors of the Federal Reserve System and the New York Federal Reserve Bank, has endorsed the Secured Overnight Financing Rate (“SOFR”) as its preferred replacement benchmark for U.S. dollar LIBOR. SOFR is calculated and published by the New York Federal Reserve Bank and reflects the combination of three overnight U.S. Treasury Repo Rates. The rate is different from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and currently is available primarily as an overnight rate rather than a 1-, 3- or 6-month rate available for LIBOR.
We completed our assessment of operational readiness for LIBOR cessation related to our various instruments in 2021 and will continue to monitor the process of elimination and replacement of LIBOR, including any new accounting pronouncements that may be issued to provide further transition relief due to the extended cessation dates of certain LIBOR tenors. Since the initial announcement, we have terminated the
105
Table of Contents
majority of our LIBOR-based swaps and entered into alternative rate swaps. In anticipation of the elimination of LIBOR, we plan to continue to convert most of our remaining LIBOR-based derivatives in a similar manner. Moreover, we will continue to monitor the developments coming from ARRC, who is expected to authorize the use of an alternative rate to replace the current contractual three-month LIBOR rate applied to Genworth Holdings’ junior subordinated notes due in 2066. Although uncertainty remains surrounding the final cessation and transition away from LIBOR, we do not expect a material adverse impact on our results of operations or financial condition.
Investment results
The following table setstables set forth information about our investment income, excluding net investment gains (losses), for each component of our investment portfolio for the periods indicated:
 
  
Three months ended March 31,
   
Increase (decrease)
   
Three months ended June 30,
 
Increase (decrease)
 
  
2022
   
2021
   
2022 vs. 2021
   
2022
 
2021
 
2022 vs. 2021
 
(Amounts in millions)
  
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
 
Fixed maturity securities—taxable
   4.4%  $580    4.5%  $599    (0.1)%  $(19)    4.5%  $578   4.6%  $608   (0.1)%  $(30) 
Fixed maturity securities—non-taxable
   3.6%   1    6.3%   2    (2.7)%   (1)    3.6%   1   3.1%   1   0.5%   —   
Equity securities
   3.7%   2    3.8%   3    (0.1)%   (1)    3.4%   2   4.1%   2   (0.7)%   —   
Commercial mortgage loans
   4.7%   81    4.6%   78    0.1%   3    4.5%   78   6.0%   103   (1.5)%   (25) 
Policy loans
   9.8%   50    10.1%   50    (0.3)%   —      9.7%   51   7.9%   40   1.8%   11 
Limited partnerships
(1)
   1.4%   7    11.2%   31    (9.8)%   (24)    6.2%   32   17.2%   54   (11.0)%   (22) 
Other invested assets
(2)
   64.8%   63    65.0%   58    (0.2)%   5    62.6%   66   68.6%   58   (6.0)%   8 
Cash, cash equivalents, restricted cash and short-term investments
   0.3%   1   —  %   —     0.3%   1 
   
 
    
 
    
 
    
 
   
 
   
 
 
Gross investment income before expenses and fees
   4.8%   784    5.0%   821    (0.2)%   (37)    4.9%   809   5.2%   866   (0.3)%   (57) 
Expenses and fees
   (0.1)%   (20)    (0.2)%   (20)    0.1%   —      (0.1)%   (22)   (0.1)%   (22)   —  %   —   
   
 
    
 
    
 
    
 
   
 
   
 
 
Net investment income
   4.7%  $764    4.8%  $801    (0.1)%  $(37)    4.8%  $787   5.1%  $844   (0.3)%  $(57) 
   
 
    
 
    
 
    
 
   
 
   
 
 
Average invested assets and cash
   $65,395    $66,233    $(838)    $65,150   $66,081   $(931) 
   
 
    
 
    
 
    
 
   
 
   
 
 
 
(1) 
Limited partnership investments are primarily equity-based and do not have fixed returns by period.
(2) 
Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation.
124
Table of Contents
   
Six months ended June 30,
  
Increase (decrease)
 
   
2022
  
2021
  
2022 vs. 2021
 
(Amounts in millions)
  
Yield
  
Amount
  
Yield
  
Amount
  
Yield
  
Amount
 
Fixed maturity securities—taxable
   4.5%  $1,158   4.5%  $1,207   —  %  $(49) 
Fixed maturity securities—non-taxable
   3.6%   2   4.7%   3   (1.1)%   (1) 
Equity securities
   3.6%   4   3.9%   5   (0.3)%   (1) 
Commercial mortgage loans
   4.6%   159   5.3%   181   (0.7)%   (22) 
Policy loans
   9.7%   101   8.9%   90   0.8%   11 
Limited partnerships
(1)
   3.9%   39   14.3%   85   (10.4)%   (46) 
Other invested assets
(2)
   63.2%   129   67.1%   116   (3.9)%   13 
Cash, cash equivalents, restricted cash and short-term investments
   0.1%   1   —  %   —     0.1%   1 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   4.9%   1,593   5.1%   1,687   (0.2)%   (94) 
Expenses and fees
   (0.1)%   (42)   (0.1)%   (42)   —  %   —   
   
 
 
   
 
 
   
 
 
 
Net investment income
   4.8%  $1,551   5.0%  $1,645   (0.2)%  $(94) 
   
 
 
   
 
 
   
 
 
 
Average invested assets and cash
   $65,288   $66,234   $(946) 
   
 
 
   
 
 
   
 
 
 
(1) 
Limited partnership investments are primarily equity-based and do not have fixed returns by period.
(2)
Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation.
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 was included in other invested assets prior to the suspension of our securities lending program in the third quarter of 2021 and was calculated net of the corresponding securities lending liability.
For the three months ended March 31,June 30, 2022, gross annualized weighted-average investment yields decreased from lower net investment income on lower average invested assets. Net investment income included $32 million of lower incomebond calls and commercial mortgage loan prepayments and $22 million of $24 million fromlower limited partnerships and $12income, partially offset by $9 million of higher income related to inflation-driven volatility on TIPS.TIPs in the current year.
For the six months ended June 30, 2022, gross annualized weighted-average investment yields decreased from lower investment income on lower average invested assets. Net investment income included $46 million of lower limited partnership income and $37 million of lower bond calls and commercial mortgage loan prepayments, partially offset by $20 million of higher income related to inflation-driven volatility on TIPs in the current year.
 
106125
Table of Contents
The following table sets forth net investment gains (losses) for the periods indicated:
 
  
Three months ended
March 31,
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2022    
 
    2021    
   
    2022    
   
    2021    
   
  2022  
   
  2021  
 
Realized investment gains (losses):
           
Available-for-sale fixed maturity securities:
           
Realized gains
  $10  $7   $5   $5   $15   $12 
Realized losses
   (18)   (3)    (9)    (4)    (27)    (7) 
  
 
  
 
   
 
   
 
   
 
   
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
   (8)   4    (4)    1    (12)    5 
Net realized gains (losses) on equity securities sold
   —     (5)    —      (2)    —      (7) 
Net realized gains (losses) on limited partnerships
   —     3    —      —      —      3 
  
 
  
 
   
 
   
 
   
 
   
 
 
Total net realized investment gains (losses)
   (8)   2    (4)    (1)    (12)    1 
  
 
  
 
   
 
   
 
   
 
   
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
   —     (2)    —      (4)    —      (6) 
Write-down of available-for-sale fixed maturity securities
   (2)   (1)    —      —      (2)    (1) 
Net unrealized gains (losses) on equity securities still held
   (6)   (8)    (27)    6    (33)    (2) 
Net unrealized gains (losses) on limited partnerships
   35   34    24    65    59    99 
Commercial mortgage loans
   1   (1)    2    (1)    3    (2) 
Derivative instruments
   4   8    9    4    13    12 
Other
   4   1    4    1    8    2 
  
 
  
 
   
 
   
 
   
 
   
 
 
Net investment gains (losses)
  $28  $33   $8   $70   $36   $103 
  
 
  
 
   
 
   
 
   
 
   
 
 
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
The three months ended June 30, 2022 included $41 million of lower net unrealized gains on limited partnerships compared to the three months ended June 30, 2021 primarily from more favorable private equity market performance in the prior year. We also recorded $27 million of net unrealized losses on equity securities during the three months ended June 30, 2022 compared to $6 million of net unrealized gains during the three months ended June 30, 2021 driven by unfavorable equity market performance in the current year compared to favorable performance in the prior year.
Net investment gains related to derivatives of $9 million during the three months ended June 30, 2022 were primarily associated with gains on derivatives used to protect statutory surplus from equity market fluctuations and gains on hedging programs that support our indexed universal life insurance products, partially offset by net losses from hedging programs that support our runoff variable annuity products.
Net investment gains related to derivatives of $4 million during the three months ended June 30, 2021 were primarily associated with hedging programs that support our runoff variable annuity and indexed universal life insurance products, partially offset by losses related to derivatives used to protect statutory surplus from equity market fluctuations as well as hedging programs for our fixed indexed annuity products.
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
 
We recorded net losses of $8 million related to the sale of available-for-sale fixed maturity securities of $12 million during the threesix months ended March 31,June 30, 2022 compared to $4$5 million of net gains during the threesix months ended March 31, 2021. Included in the $8 million
126
Table of net losses for the three months ended March 31, 2022 was $18 million of realized losses principally related to U.S. corporate securities sold to optimize cash at Genworth Holdings. We also recorded $5Contents
ended June 30, 2021. Included in the $12 million of net losses for the six months ended June 30, 2022 was $27 million of realized losses principally related to U.S. corporate securities sold to optimize cash at Genworth Holdings. We also recorded $7 million of net losses related to the sale of equity securities during the six months ended June 30, 2021.
The six months ended June 30, 2022 included $40 million of lower net unrealized gains on limited partnerships compared to the six months ended June 30, 2021 primarily from more favorable private equity market performance in the prior year. We also recorded $31 million of higher net unrealized losses on equity securities during the threesix months ended March 31, 2021.June 30, 2022 compared to the six months ended June 30, 2021 driven by more unfavorable equity market performance in the current year.
 
We had $4 million of lower netNet investment gains related to derivatives during the threesix months ended March 31,June 30, 2022 compared to the three months ended March 31, 2021were $13 million primarily from highergains on hedging programs that support our indexed universal life insurance and fixed indexed annuity products, as well as gains on derivatives used to protect statutory surplus from equity market fluctuations, partially offset by net losses from hedging programs that support our runoff variable annuity products.
Net investment gains related to derivatives of $12 million during the six months ended June 30, 2021 were primarily associated with hedging programs that support our indexed universal life insurance and runoff variable annuity products, partially offset by gains on derivative contractslosses related to derivatives used to protect statutory surplus from equity market fluctuations in the current year compared to losses in the prior year.fluctuations.
107
Table of Contents
Investment portfolio
The following table sets forth our cash, cash equivalents, restricted cash and invested assets as of the dates indicated:
 
  
March 31, 2022
 
December 31, 2021
   
June 30, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying value
   
% of total
 
Carrying value
   
% of total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Available-for-sale fixed maturity securities:
              
Public
  $38,219    56%  $42,501    58%   $33,878    54%  $42,501    58% 
Private
   16,808    25   17,979    24    15,408    24   17,979    24 
Equity securities
   230    —     198    —      243    —     198    —   
Commercial mortgage loans, net
   6,913    10   6,830    9    7,065    12   6,830    9 
Policy loans
   2,028    3   2,050    3    2,178    3   2,050    3 
Limited partnerships
   2,007    3   1,900    3    2,123    3   1,900    3 
Other invested assets
   671    1   820    1    573    1   820    1 
Cash, cash equivalents and restricted cash
   1,291    2   1,571    2    1,724    3   1,571    2 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total cash, cash equivalents, restricted cash and invested assets
  $68,167    100%  $73,849    100%   $63,192    100%  $73,849    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
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 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 March 31,June 30, 2022, approximately 6%7% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 6 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to fair value.
 
108127
Table of Contents
Fixed maturity securities
As of March 31,June 30, 2022, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
 
Allowance
for credit
losses
   
Fair
value
   
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
  $3,356   $744   $(3)  $—     $4,097   $3,387   $274   $(34)  $—     $3,627 
State and political subdivisions
   3,009    206    (81)   —      3,134    2,971    74    (196)   —      2,849 
Non-U.S. government
   778    48    (42)   —      784    762    17    (97)   —      682 
U.S. corporate:
                  
Utilities
   4,345    355    (66)   —      4,634    4,253    135    (285)   —      4,103 
Energy
   2,572    175    (48)   —      2,699    2,496    54    (173)   —      2,377 
Finance and insurance
   8,026    406    (203)   —      8,229    7,947    126    (604)   —      7,469 
Consumer—non-cyclical
   5,070    488    (70)   —      5,488    4,912    172    (292)   —      4,792 
Technology and communications
   3,371    213    (87)   —      3,497    3,224    60    (260)   —      3,024 
Industrial
   1,301    73    (26)   —      1,348    1,263    22    (98)   —      1,187 
Capital goods
   2,346    205    (39)   —      2,512    2,326    77    (145)   —      2,258 
Consumer—cyclical
   1,725    86    (44)   —      1,767    1,679    27    (125)   —      1,581 
Transportation
   1,133    124    (9)   —      1,248    1,113    52    (61)   —      1,104 
Other
   381    24    (4)   —      401    353    8    (13)   —      348 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total U.S. corporate
   30,270    2,149    (596)   —      31,823    29,566    733    (2,056)   —      28,243 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Non-U.S. corporate:
                  
Utilities
   874    19    (15)   —      878    864    3    (57)   —      810 
Energy
   1,158    102    (19)   —      1,241    1,123    36    (62)   —      1,097 
Finance and insurance
   2,129    132    (70)   —      2,191    2,103    62    (153)   —      2,012 
Consumer—non-cyclical
   665    28    (22)   —      671    630    4    (64)   —      570 
Technology and communications
   1,055    61    (17)   —      1,099    1,007    10    (74)   —      943 
Industrial
   918    56    (21)   —      953    903    21    (63)   —      861 
Capital goods
   610    25    (16)   —      619    609    6    (50)   —      565 
Consumer—cyclical
   316    5    (9)   —      312    314    —      (29)   —      285 
Transportation
   392    38    (7)   —      423    392    20    (22)   —      390 
Other
   996    86    (16)   —      1,066    960    39    (50)   —      949 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total non-U.S. corporate
   9,113    552    (212)   —      9,453    8,905    201    (624)   —      8,482 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Residential mortgage-backed
   1,277    57    (14)   —      1,320    1,214    36    (37)   —      1,213 
Commercial mortgage-backed
   2,369    36    (44)   —      2,361    2,272    7    (142)   —      2,137 
Other asset-backed
   2,108    7    (60)   —      2,055    2,171    1    (119)   —      2,053 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total available-for-sale fixed maturity securities
  $52,280   $3,799   $(1,052)  $—     $55,027   $51,248   $1,343   $(3,305)  $—     $49,286 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
 
109128
Table of Contents
As of December 31, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
         
U.S. government, agencies and government-sponsored enterprises
  $3,368   $1,184   $—    $—     $4,552 
State and political subdivisions
   2,982    474    (6)   —      3,450 
Non-U.S. government
   762    86    (13)   —      835 
U.S. corporate:
         
Utilities
   4,330    783    (9)   —      5,104 
Energy
   2,581    363    (10)   —      2,934 
Finance and insurance
   8,003    1,012    (24)   —      8,991 
Consumer—non-cyclical
   5,138    1,029    (8)   —      6,159 
Technology and communications
   3,345    476    (13)   —      3,808 
Industrial
   1,322    175    (3)   —      1,494 
Capital goods
   2,334    415    (4)   —      2,745 
Consumer—cyclical
   1,703    203    (7)   —      1,899 
Transportation
   1,122    249    —     —      1,371 
Other
   379    41    (1)   —      419 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,257    4,746    (79)   —      34,924 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
         
Utilities
   867    63    (2)   —      928 
Energy
   1,194    190    (1)   —      1,383 
Finance and insurance
   2,171    270    (9)   —      2,432 
Consumer—non-cyclical
   664    81    (2)   —      743 
Technology and communications
   1,085    166    (1)   —      1,250 
Industrial
   933    117    (3)   —      1,047 
Capital goods
   640    66    (1)   —      705 
Consumer—cyclical
   316    27    (2)   —      341 
Transportation
   422    68    (1)   —      489 
Other
   1,052    169    (4)   —      1,217 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,344    1,217    (26)   —      10,535 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,325    116    (1)   —      1,440 
Commercial mortgage-backed
   2,435    152    (3)   —      2,584 
Other asset-backed
   2,138    29    (7)   —      2,160 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $52,611   $8,004   $(135)  $—     $60,480 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Fixed maturity securities decreased $5.5$11.2 billion compared to December 31, 2021 principally from a decrease in netgross unrealized gains and an increase in gross unrealized losses related to an increase in interest rates, as well as maturities, repaymentsfrom net sales and sales, exceeding purchasesmaturities in the current year.
 
110129
Table of Contents
Other invested assets
The following table sets forth the carrying values of our other invested assets as of the dates indicated:
 
  
March 31, 2022
 
December 31, 2021
   
June 30, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying value
   
% of total
 
Carrying value
   
% of total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Bank loan investments
  $406    71%  $363    45% 
Derivatives
  $197    29%  $414    50%    77    13   414    50 
Bank loan investments
   381    57   363    45 
Short-term investments
   76    11   26    3    50    9   26    3 
Other investments
   17    3   17    2    40    7   17    2 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total other invested assets
  $671    100%  $820    100%   $573    100%  $820    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Derivatives decreased largely from an increase in interest rates in the current year. Short-termBank loan investments increased primarily from purchasesfunding of additional investments, partially offset by principal repayments in the current year.
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:
 
(Notional in millions)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
   
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
June 30,
2022
 
Derivatives designated as hedges
Derivatives designated as hedges
 
                
Cash flow hedges:
                  
Interest rate swaps
   Notional   $7,653   $—     $(58)  $7,595    Notional   $7,653   $262   $(102)  $7,813 
Foreign currency swaps
   Notional    127    —      —     127    Notional    127    —      —     127 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total cash flow hedges
     7,780    —      (58)   7,722      7,780    262    (102)   7,940 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives designated as hedges
     7,780    —      (58)   7,722      7,780    262    (102)   7,940 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Derivatives not designated as hedges
                  
Equity index options
   Notional    1,446    300    (368)   1,378    Notional    1,446    495    (628)   1,313 
Financial futures
   Notional    946    994    (1,042)   898    Notional    946    1,973    (1,969)   950 
Other foreign currency contracts
   Notional    83    —      (59)   24    Notional    83    —      (83)   —   
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives not designated as hedges
     2,475    1,294    (1,469)   2,300      2,475    2,468    (2,680)   2,263 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives
    $10,255   $1,294   $(1,527)  $10,022     $10,255   $2,730   $(2,782)  $10,203 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
(Number of policies)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
   
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
June 30,
2022
 
Derivatives not designated as hedges
                  
GMWB embedded derivatives
   Policies    21,804    —      (477)   21,327    Policies    21,804    —      (906)   20,898 
Fixed index annuity embedded derivatives
   Policies    9,344    —      (568)   8,776    Policies    9,344    —      (1,055)   8,289 
Indexed universal life embedded derivatives
   Policies    806    —      (7)   799    Policies    806    —      (20)   786 
The decrease in the notional value of derivatives was primarily attributable to the termination of derivatives that support our runoff variable annuity and fixed indexed annuity products and the termination of foreign currency derivatives previously entered into to hedge payments to AXA under a settlement agreement, and the termination ofpartially offset by a net increase in interest rate swaps that support our long-term care insurance products.
 
111130
Table of Contents
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
. Total assets decreased $5,684$10,103 million from $99,171 million as of December 31, 2021 to $93,487$89,068 million as of March 31,June 30, 2022.
 
Cash, cash equivalents, restricted cash and invested assets decreased $5,682$10,657 million primarily from decreases of $5,453 million, $280$11,194 million and $149$247 million in fixed maturity securities cash, cash equivalents, restricted cash and other invested assets, respectively, partially offset by increases of $235 million and $223 million in commercial mortgage loans and limited partnerships, respectively. The decrease in fixed maturity securities was predominantly related to a decrease in unrealized gainsthe fair value of our available-for-sale fixed maturities due to an increase inrising interest rates and from net sales and maturities in the current year. The decrease in cash, cash equivalents and restricted cash was largely related to net withdrawals from our investment contracts, the repurchase of Genworth Holdings’ February 2024 senior notes and a payment to AXA associated with unprocessed claims. These decreases to cash were partially offset by net sales and maturities of investment securities in the current year. The decrease in other invested assets was predominantlylargely driven by lower derivative valuations due to an increase in interest rates in the current year. These decreases were partially offset by an increase in commercial mortgage loans primarily from originations outpacing repayments and limited partnerships mainly from capital calls in the current year.
 
DAC increased $164$1,168 million principally attributable to shadow accounting adjustments associated with a decreasean increase in unrealized gainsinterest rates in the current year. The shadow accounting adjustments increased DAC by approximately $237$1,319 million, mostly in our long-term care insurance business, with an offsetting amount recorded in other comprehensive income (loss). This increase was partially offset by a DAC impairmentimpairments of $24$39 million in our universal and term universal life insurance productproducts recorded in connection with our periodic reviews of DAC for recoverability.
 
Reinsurance recoverable decreased $182 million mainly attributable to the runoff of our structured settlement products ceded to Union Fidelity Life Insurance Company, an affiliate of our former parent, GE.
Deferred tax asset increased $302$928 million largely due to a decreasethe change in unrealized gains (losses) on investments and derivatives and investments,due to rising interest rates, partially offset by the utilization of net operating losses in the current year. In addition, given the change in our unrealized gains (losses) on our fixed maturity securities in the current year and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets, we recorded an additional valuation allowance of $50 million in the second quarter of 2022 through other comprehensive income (loss) related to capital deferred tax assets.
 
Separate account assets (and liabilities) decreased $536$1,383 million primarily due to unfavorable equity market performance and surrenders in the current year.
Total liabilities
. Total liabilities decreased $4,570$6,408 million from $82,905 million as of December 31, 2021 to $78,335$76,497 million as of March 31,June 30, 2022.
 
Future policy benefits decreased $2,631$3,395 million primarily driven by shadow accounting adjustments associated with a decreasean increase in unrealized gainsinterest rates in the current year. The shadow accounting adjustments decreased future policy benefits by approximately $2,707$3,137 million, mostly in our long-term care insurance business, with an offsetting amount recorded in other comprehensive income (loss). In addition, we released $371 million of future policy benefits in connection with the recapture of certain single premium immediate annuity contracts by a third party in the current year. The decrease was also attributable to reduced benefits of $238$361 million in the current year related to in-force actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement in our long-term care insurance business. These decreases were partially offset by aging of our long-term care insurance in-force block and higher incremental reserves of $199$256 million recorded in connection with an accrual for profits followed by losses in the current year.
 
131
Table of Contents
Policyholder account balances decreased $1,157$1,447 million largely driven by shadow accounting adjustments associated with a decreasean increase in unrealized gainsinterest rates in the current year. The shadow accounting adjustments decreased policyholder account balances by approximately $820$908 million, mostly in our universal life insurance products, with an offsetting amount recorded in other comprehensive income (loss). The decrease was also attributable to surrenders and benefits in our single premium deferred annuity products in the current year.
 
Other liabilities decreased $95 million principally from lower derivative counterparty collateral held by us, which represents our obligation to return the collateral to the counterparty, due to a decline in derivative valuations driven by a rise in interest rates and due to lower employee payroll accruals.
112
Table of Contents
These decreases were partially offset by an increase in due to broker largely driven by higher trade volumes at the end of the first quarter of 2022, an increase in derivative liabilities due to rising interest rates and higher legal settlement accruals in the current year.
Long-term borrowings decreased $80$126 million mostly attributable to the repurchase of Genworth Holdings’ February 2024 senior notes.
Total equity
. Total equity decreased $1,114$3,695 million from $16,266 million as of December 31, 2021 to $15,152$12,571 million as of March 31,June 30, 2022.
 
We reported net income available to Genworth Financial, Inc.’s common stockholders of $149$330 million for the threesix months ended March 31,June 30, 2022.
 
Unrealized gains (losses) on investments and derivatives qualifying as hedges decreased $1,010$3,414 million and $236$580 million, respectively, primarily from an increase in interest rates in the current year.
Treasury stock increased $15 million primarily due to the repurchase of Genworth Financial’s common stock, at cost, in connection with a share repurchase program.
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.
Overview of cash flows—Genworth and subsidiaries
The following table sets forth our unaudited condensed consolidated cash flows for the threesix months ended March 31:June 30:
 
(Amounts in millions)
  
2022
   
2021
   
2022
   
2021
 
Net cash used by operating activities
  $(92)   $(247) 
Net cash from operating activities
  $337   $229 
Net cash from investing activities
   138    335    535    541 
Net cash used by financing activities
   (326)    (780)    (719)    (1,213) 
  
 
   
 
   
 
   
 
 
Net decrease in cash before foreign exchange effect
  $(280)   $(692) 
Net increase (decrease) in cash before foreign exchange effect
  $153   $(443) 
  
 
   
 
   
 
   
 
 
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 of debt and equity securities; the repayment or repurchase of borrowings; the acquisition of treasury stock; and other capital transactions.
132
Table of Contents
We had lowerhigher cash outflowsinflows from operating activities in the current year primarily from lower payments to AXA, partially offset by higheran increase in net cash disbursements in connection with the return of cash collateral received from counterparties under our derivative contracts. In the current year, we paid AXA $30$31 million which constitutes the majority of the remainingrelated to estimated future claims, compared to payments of $265 million in the prior year comprised of a $247 million mandatory payment in the prior year related to a secured promissory note issued to AXA.AXA and an $18 million settlement payment associated with underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business.
We had slightly lower cash inflows from investing activities mainly due to net proceeds received in the prior year from the sale of Genworth Mortgage Insurance Australia Limited, (“Genworth Australia”) and net purchases of short-term investments in the current year compared to net sales in the prior year, partially offset by higher net sales and maturities of fixed maturity securities in the current year.
113
Table of Contents
We had lower cash outflows from financing activities in the current year principally from lower repayment and repurchase of long-term debt and from lower net withdrawals from our investment contracts. Duringcontracts, partially offset by higher payments related to a Tax Matters Agreement with GE. In the first quarter of 2022,current year, Genworth Holdings repurchased $82$130 million principal amount of its senior notes due in February 2024. DuringIn the first quarter of 2021,prior year, Genworth Holdings paidrepaid $338 million principal balance of its senior notes due in February 2021 and repurchased $146 million principal amount of its senior notes due in September 2021, of which $14 million remained in transit as of March 31, 2021 resulting in a cash outlay of $132 million.2021.
Genworth—holding company liquidity
In consideration of our liquidity, it is important to separate the needs of our holding companies from the needs of their respective subsidiaries. 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. Accordingly, our holding companies are highly dependent upon their respective subsidiaries to pay dividends and make other payments to meet their respective obligations. Moreover, management’s focus is predominantly on Genworth Holdings’ liquidity given it is the issuer of our outstanding public debt.
Genworth Financial’s and Genworth Holdings’ principal sources of cash are derived from dividends from their respective subsidiaries, subsidiary payments to them under tax sharing and expense reimbursement arrangements and proceeds from borrowings or securities issuances. Our liquidity at the holding company level is highly dependent on the performance of Enact Holdings and its ability to pay timely dividends, and other forms of capital returns, to Genworth Holdings as anticipated. Although the business performance and financial results of our U.S. life insurance subsidiaries have improved significantly, as of December 31, 2021, they had negative unassigned surplus of approximately $1.0 billion under statutory accounting and as a result, we do not expect these subsidiaries to pay dividends for the foreseeable future. Genworth Financial has the right to appoint a majority of directors to the board of directors of Enact Holdings; however, actions taken by Enact Holdings and its board of directors (including in the case of the payment of dividends to us, the approval of Enact Holdings’ independent capital committee) are subject to and may be limited by the interests of Enact Holdings, including but not limited to, its use of capital for growth opportunities and regulatory requirements. In addition, insurance laws and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth Holdings by their insurance subsidiaries. See “—Supplemental Condensed Consolidating Financial Information” for additional details.
The primary uses of funds at Genworth Financial and Genworth Holdings include payment of principal, interest and other expenses on current and any future borrowings or other obligations (including payments to AXA associated with a settlement agreement reported as discontinued operations), payment of holding company general operating expenses (including employee benefits and taxes), payments under current and any future guarantees (including guarantees of certain subsidiary obligations), payment of amounts previously owed to General Electric Company (“GE”)GE under the Tax Matters Agreement, payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities, repurchases of Genworth Financial’s common stock and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.
In November 2008, Genworth Financial’s Board of Directors suspended the payment of dividends to its shareholders and the repurchase of common stock under the Company’s stock repurchase program indefinitely.
133
Table of Contents
Given the significant improvement in the results of operations and financial position of Genworth Financial and its subsidiaries, and the $2.1 billion of debt reduction in 2021, on May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Repurchases under the authorized program wouldwill be funded from holding company capital, as well as future cash flow generation, including expected future dividends from Genworth Financial’s ownership in Enact Holdings. We expect the majority of share repurchases to occur following the repayment of Genworth Holdings’ remaining February 2024 debt. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or by other means.means, including through 10b5-1 trading plans. Pursuant to the program, in the second quarter of 2022, Genworth Financial repurchased 3,869,494 shares of its common stock at an average price of $3.88 per share for a total cash outlay of $15 million, including costs paid in connection with acquiring the shares. Genworth Financial also authorized share repurchases through a Rule 10b5-1 trading plan under which 4,034,794 shares of its common stock were repurchased during July 2022 at an average price of $3.72 per share for a total cash outlay of $15 million, leaving approximately $320 million that may yet be purchased under the share repurchase program. The timing and number of future shares repurchased under the program will
114
Table of Contents
depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors. The authorization has no expiration date and may be modified, suspended or terminated at any time.
Our future use of liquidity and capital will prioritize redeemingretiring Genworth Holdings’ February 2024 debt, returning capital to Genworth Financial’s shareholders through share repurchases (as discussed above) and future strategic investments in new products and services designed to assist individuals with navigating and financing long-term care. Our deleveraging goal is to reduce debt at Genworth Holdings to approximately $1.0 billion or less over time. As of March 31,June 30, 2022, we have approximately $1.1 billionoutstanding $1,052 million of outstandinglong-term debt, see below for additional details. We may from time to time seek to repurchase or redeem outstanding notes for cash (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise. We currently seek to address our indebtedness over time through repurchases, redemptions and/or repayments at maturity. We also expect to provide capital, predominantly to CareScout, LLC (“CareScout”), to help advance Genworth’s long-term care growth initiatives. CareScout is an integral part of our new Global Care Solutions business that will seek to provide fee-based advice, consulting and other services related to the needs of elderly Americans, as well as their caregivers and families. While we have not made final decisions on the Global Care Solutions strategy and the set of products and services we will offer, it is likely that Genworth will initially focus on less capital-intensive long-term care advice and service offerings that help consumers navigate the complex caregiving challenges in the market.market, which is less capital intensive than insurance product offerings.
As of March 31,June 30, 2022, Genworth Holdings had $214$228 million of unrestricted cash, cash equivalents and liquid assets. In the first quarterhalf of 2022, Genworth Holdings repurchased $82$130 million principal amount of its senior notes due in February 2024, leaving an outstanding principal balance of $200$152 million of senior notes due in February 2024 as of March 31,June 30, 2022. Thereafter, no debt maturities are due until June 2034. Genworth Holdings intends to retire early the remaining outstanding balance of its senior notes due in February 2024 with cash on hand and/or expected dividends from Enact Holdings and/orand intercompany cash tax payments from its subsidiaries. Interest payments on Genworth Holdings’ remaining senior notes, including the February 2024 debt of $200$152 million that remains outstanding as of March 31,June 30, 2022, is forecasted to be approximately $55$57 million over the next 12 months. For further information about Genworth Holdings’ borrowings, refer to note 89 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.” In addition, in February 2022, Genworth Holdings paid AXA $30 million, which constitutes the majority of the remaining estimated unprocessed claims, and accordingly, we do not expect to pay AXA any significant amounts over the next twelve months.
We believe Genworth Holdings’ unrestricted cash, cash equivalents and liquid assets provide sufficient liquidity to meet its financial obligations over the next twelve months. Furthermore, we believe Genworth Holdings has adequate sources of liquidity to meet its future financial obligations in 2023 and thereafter;
134
Table of Contents
however, we do expect intercompany cash tax payments from Genworth Holdings’ subsidiaries to be lower over the next few years as compared to the amounts received during 2021. We also expect Genworth Holdings’ liquidity to be significantly impacted by the amounts and timing of future dividends from Enact Holdings, which will be influenced by economic, regulatory factors and other conditions that affect its business. We actively monitor our liquidity position (most notably at Genworth Holdings), liquidity generation options and the credit markets given changing market conditions. Genworth Holdings’ cash management target is to maintain a cash buffer of two times expected annual external debt interest payments. Genworth Holdings may move below or above this targeted cash buffer during any given quarter due to the timing of cash outflows and inflows or from future actions. Management of Genworth Financial continues to evaluate Genworth Holdings’ target level of liquidity as circumstances warrant.
Enact Holdings continues to evaluate its capital allocation strategy to consistently support its existing policyholders, grow its mortgage insurance business, fund attractive new business opportunities and return capital to shareholders. To this end, on April 26, 2022, Enact Holdings’ board of directors approved the initiation of a quarterly dividend, beginningwhich began with a dividend of $0.14 per share in the second quarter of 2022, resulting in $19 million of cash paid to Genworth Holdings. Enact Holdings expects to return approximately $250 million of capital to its shareholders in 2022, which includes quarterly dividend payments. Based on this forecast and Genworth Financial’s ownership of 81.6% of Enact Holdings, we would expect to receive approximately $150 million of additional capital returns, in excess of quarterly dividends, most likely in the fourth quarter of 2022. Any future
115
Table of Contents
dividends will be subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial, and also be dependent on a variety of economic, market and business conditions, including the resolution of forbearance related delinquencies, among other considerations. In addition, any future dividends or other returns of capital will include a proportionate distribution to minority shareholders.
Genworth Holdings—changes in liquidity
Genworth Holdings had $140$178 million and $331 million of cash, cash equivalents and restricted cash as of March 31,June 30, 2022 and December 31, 2021, respectively. Genworth Holdings also held $75$50 million and $25 million of U.S. government securities as of March 31,June 30, 2022 and December 31, 2021, respectively, which included approximately $1 million and $3 million of restricted assets respectively.as of December 31, 2021. The decrease in Genworth Holdings’ cash, cash equivalents and restricted cash was principally driven by the repurchase of $82$130 million principal amount of its senior notes due in February 2024, $50 million of net purchases of U.S. government securities and a $30$55 million payment to AXA.GE to satisfy its remaining obligation under the Tax Matters Agreement and the payment of unprocessed claims of $31 million to AXA, partially offset by intercompany cash tax payments received from its subsidiaries and dividends of $19 million from Enact Holdings in the current year.
Capital resources and financing activities
Our current capital resource plans do not include any additional debt offerings or minority sales of Enact Holdings. The availability of additional capital resources will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit ratings and the performance of and outlook for Enact Holdings and the payment of dividends therefrom.
InDuring the first quarterhalf of 2022, Genworth Holdings repurchased $82$130 million principal amount of its 4.80% senior notes due in February 2024 for a pre-tax loss of $3$4 million and paid accrued interest thereon. As of March 31,June 30, 2022, Genworth Holdings’ 4.80% senior notes due in February 2024 hashave an outstanding principal balance of $152 million.
On June 30, 2022, Enact Holdings entered into a credit agreement with a syndicate of lenders that provides for a five-year unsecured revolving credit facility in the initial aggregate principal amount of $200 million, including the ability for Enact Holdings to increase the commitments under the credit facility on an uncommitted basis, by an additional aggregate principal amount of up to $100 million. Any borrowings under Enact Holdings’
135
Table of Contents
credit facility will bear interest at a per annum rate equal to a floating rate tied to a standard short-term borrowing index selected at Enact Holdings’ option, plus an applicable margin, pursuant to the terms of the credit agreement. The applicable margin is based on Enact Holdings’ ratings established by certain debt rating agencies for its outstanding debt. Enact Holdings may use borrowings under its credit facility for working capital needs and general corporate purposes, including the execution of dividends to its shareholders and capital contributions to its insurance subsidiaries. Enact Holdings’ credit facility includes customary representations, warranties, covenants, terms and conditions. As of June 30, 2022, Enact Holdings was in compliance with all covenants and the credit facility remained undrawn.
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 and claims, 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, investment income and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from maturities and repayments of investments 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 March 31,June 30, 2022, our total cash, cash equivalents, restricted cash and invested assets were $68.2$63.2 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, bank loans, limited partnership investments and select mortgage-backed and asset-backed securities are relatively illiquid. These
116
Table of Contents
asset classes represented approximately 41%43% of the carrying value of our total cash, cash equivalents, restricted cash and invested assets as of March 31,June 30, 2022.
Off-balance sheet commitments, guarantees and contractual obligations
As of March 31,June 30, 2022, we were committed to fund $1,309$1,409 million in limited partnership investments, $108$75 million of bank loan investments which had not yet been drawn, $75$64 million in commercial mortgage loan investments and $20$24 million in private placement investments.
As of March 31, 2022 and December 31, 2021, Genworth Holdings had an obligation with GE pursuant to a Tax Matters Agreement, which was recorded in other liabilities in our condensed consolidated balance sheets.sheet. On April 14, 2022, Genworth Holdings satisfied its remaining obligation of $55 million under the Tax Matters Agreement with GE.
As of March 31,June 30, 2022, there have been no material additions or changes to guarantees provided by Genworth Financial and Genworth Holdings as compared to the amounts disclosed within our 2021 Annual Report on Form 10-K filed on February 28, 2022.
136
Table of Contents
Except as disclosed above, there have been no material additions or changes to our contractual obligations as compared to the amounts disclosed within our 2021 Annual Report on Form 10-K filed on February 28, 2022. For additional details related to our commitments, see note 1112 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.
The supplemental condensed consolidating financial information presents the condensed consolidating balance sheet information as of March 31,June 30, 2022 and December 31, 2021, the condensed consolidating income statement information, the condensed consolidating comprehensive income statement information and the condensed consolidating cash flow statement information for the threesix months ended March 31,June 30, 2022 and for the year ended December 31, 2021.
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.
 
117
137
Table of Contents
The following table presents the condensed consolidating balance sheet information as of March 31,June 30, 2022:
 
(Amounts in millions)
 
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Assets
               
Investments:
               
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,280 and allowance for credit losses of $—)
 $—    $—    $55,027  $—    $55,027 
Fixed maturity securities available-for-sale, at fair value (amortized cost of $51,248 and allowance for credit losses of $—)
 $—    $—    $49,286  $—    $49,286 
Equity securities, at fair value
  —     —     230   —     230   —     —     243   —     243 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4)
  —     —     6,938   —     6,938   —     —     7,088   —     7,088 
Less: Allowance for credit losses
  —     —     (25)   —     (25)   —     —     (23)   —     (23) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Commercial mortgage loans, net
  —     —     6,913   —     6,913   —     —     7,065   —     7,065 
Policy loans
  —     —     2,028   —     2,028   —     —     2,178   —     2,178 
Limited partnerships
  —     —     2,007   —     2,007   —     —     2,123   —     2,123 
Other invested assets
  —     75   596   —     671   —     50   523   —     573 
Investments in subsidiaries
  14,419   14,621   —     (29,040)   —     11,851   12,097   —     (23,948)   —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total investments
  14,419   14,696   66,801   (29,040)   66,876   11,851   12,147   61,418   (23,948)   61,468 
Cash, cash equivalents and restricted cash
  —     140   1,151   —     1,291   —     178   1,546   —     1,724 
Accrued investment income
  —     —     696   —     696   —     —     553   —     553 
Deferred acquisition costs
  —     —     1,310   —     1,310   —     —     2,314   —     2,314 
Intangible assets
  —     —     159   —     159   —     —     236   —     236 
Reinsurance recoverable
  —     —     16,821   —     16,821   —     —     16,691   —     16,691 
Less: Allowance for credit losses
  —     —     (57)   —     (57)   —     —     (60)   —     (60) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable, net
  —     —     16,764   —     16,764   —     —     16,631   —     16,631 
Other assets
  1   147   292   —     440   1   181   230   —     412 
Intercompany notes receivable
  16   71   1   (88)   —     113   54   —     (167)   —   
Deferred tax assets
  1   514   (94)   —     421   (1)   433   615   —     1,047 
Separate account assets
  —     —     5,530   —     5,530   —     —     4,683   —     4,683 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total assets
 $14,437  $15,568  $92,610  $(29,128)  $93,487  $11,964  $12,993  $88,226  $(24,115)  $89,068 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Liabilities and equity
               
Liabilities:
               
Future policy benefits
 $—    $—    $38,897  $—    $38,897  $—    $—    $38,133  $—    $38,133 
Policyholder account balances
  —     —     18,197   —     18,197   —     —     17,907   —     17,907 
Liability for policy and contract claims
  —     —     11,833   —     11,833   —     —     11,915   —     11,915 
Unearned premiums
  —     —     639   —     639   —     —     614   —     614 
Other liabilities
  30   64   1,322   —     1,416   144   6   1,318   —     1,468 
Intercompany notes payable
  —     17   71   (88)   —     —     113   54   (167)   —   
Long-term borrowings
  —     1,078   741   —     1,819   —     1,031   742   —     1,773 
Separate account liabilities
  —     —     5,530   —     5,530   —     —     4,683   —     4,683 
Liabilities related to discontinued operations
  —     1   3   —     4   —     1   3   —     4 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities
  30   1,160   77,233   (88)   78,335   144   1,151   75,369   (167)   76,497 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity:
               
Common stock
  1   —     4   (4)   1   1   —     4   (4)   1 
Additional paid-in capital
  11,857   12,726   18,142   (30,868)   11,857   11,859   12,728   18,144   (30,872)   11,859 
Accumulated other comprehensive income (loss)
  2,610   2,610   2,654   (5,264)   2,610   (145)   (144)   (52)   196   (145) 
Retained earnings
  2,639   (928)   (6,468)   7,396   2,639   2,820   (742)   (6,290)   7,032   2,820 
Treasury stock, at cost
  (2,700)   —     —     —     (2,700)   (2,715)   —     —     —     (2,715) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
  14,407   14,408   14,332   (28,740)   14,407   11,820   11,842   11,806   (23,648)   11,820 
Noncontrolling interests
  —     —     1,045   (300)   745   —     —     1,051   (300)   751 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total equity
  14,407   14,408   15,377   (29,040)   15,152   11,820   11,842   12,857   (23,948)   12,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities and equity
 $14,437  $15,568  $92,610  $(29,128)  $93,487  $11,964  $12,993  $88,226  $(24,115)  $89,068 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
118138
Table of Contents
The following table presents the condensed consolidating balance sheet information as of December 31, 2021:
 
(Amounts in millions)
 
Parent
Guarantor
  
Issuer
  
All Other
Subsidiaries
  
Eliminations
  
Consolidated
 
Assets
                    
Investments:
                    
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,611 and allowance for credit losses of $—)
 $—    $—    $60,480  $—    $60,480 
Equity securities, at fair value
  —     —     198   —     198 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4)
  —     —     6,856   —     6,856 
Less: Allowance for credit losses
  —     —     (26)   —     (26) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Commercial mortgage loans, net
  —     —     6,830   —     6,830 
Policy loans
  —     —     2,050   —     2,050 
Limited partnerships
  —     —     1,900   —     1,900 
Other invested assets
  —     27   793   —     820 
Investments in subsidiaries
  15,517   15,626   —     (31,143)   —   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total investments
  15,517   15,653   72,251   (31,143)   72,278 
Cash, cash equivalents and restricted cash
  —     331   1,240   —     1,571 
Accrued investment income
  —     —     647   —     647 
Deferred acquisition costs
  —     —     1,146   —     1,146 
Intangible assets
  —     —     143   —     143 
Reinsurance recoverable
  —     —     16,868   —     16,868 
Less: Allowance for credit losses
  —     —     (55)   —     (55) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable, net
  —     —     16,813   —     16,813 
Other assets
  5   207   176   —     388 
Intercompany notes receivable
  —     15   1   (16)   —   
Deferred tax assets
  4   555   (440)   —     119 
Separate account assets
  —     —     6,066   —     6,066 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total assets
 $15,526  $16,761  $98,043  $(31,159)  $99,171 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Liabilities and equity
                    
Liabilities:
                    
Future policy benefits
 $—    $—    $41,528  $—    $41,528 
Policyholder account balances
  —     —     19,354   —     19,354 
Liability for policy and contract claims
  —     —     11,841   —     11,841 
Unearned premiums
  —     —     672   —     672 
Other liabilities
  4   64   1,443   —     1,511 
Intercompany notes payable
  12   1   3   (16)   —   
Long-term borrowings
  —     1,159   740   —     1,899 
Separate account liabilities
  —     —     6,066   —     6,066 
Liabilities related to discontinued operations
  —     30   4   —     34 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total liabilities
  16   1,254   81,651   (16)   82,905 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity:
                    
Common stock
  1   —     4   (4)   1 
Additional paid-in capital
  11,858   12,724   18,135   (30,859)   11,858 
Accumulated other comprehensive income (loss)
  3,861   3,861   3,906   (7,767)   3,861 
Retained earnings
  2,490   (1,078)   (6,709)   7,787   2,490 
Treasury stock, at cost
  (2,700)   —     —     —     (2,700) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
  15,510   15,507   15,336   (30,843)   15,510 
Noncontrolling interests
  —     —     1,056   (300)   756 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total equity
  15,510   15,507   16,392   (31,143)   16,266 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total liabilities and equity
 $15,526  $16,761  $98,043  $(31,159)  $99,171 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
119139
Table of Contents
The following table presents the condensed consolidating income statement information for the threesix months ended March 31,June 30, 2022:
 
(Amounts in millions)
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
   
Eliminations
 
Consolidated
   
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
   
Eliminations
 
Consolidated
 
Revenues:
              
Premiums
  $—    $—    $931   $—    $931   $—    $—    $1,858   $—    $1,858 
Net investment income
   (1)   —     765    —     764    (2)   1   1,552    —     1,551 
Net investment gains (losses)
   —     —     28    —     28    —     —     36    —     36 
Policy fees and other income
   —     —     169    —     169    —     —     328    —     328 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total revenues
   (1)   —     1,893    —     1,892    (2)   1   3,774    —     3,773 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Benefits and expenses:
              
Benefits and other changes in policy reserves
   —     —     1,139    —     1,139    —     —     1,903    —     1,903 
Interest credited
   —     —     125    —     125    —     —     250    —     250 
Acquisition and operating expenses, net of deferrals
   8   3   260    —     271    15   4   841    —     860 
Amortization of deferred acquisition costs and intangibles
   —     —     92    —     92    —     —     176    —     176 
Interest expense
   —     13   13    —     26    —     26   26    —     52 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total benefits and expenses
   8   16   1,629    —     1,653    15   30   3,196    —     3,241 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries
   (9)   (16)   264    —     239    (17)   (29)   578    —     532 
Provision (benefit) for income taxes
   (2)   (3)   63    —     58    —     (6)   137    —     131 
Equity in income of subsidiaries
   156   172   —      (328)   —      347   374   —      (721)   —   
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income from continuing operations
   149   159   201    (328)   181    330   351   441    (721)   401 
Loss from discontinued operations, net of taxes
   —     (2)   —      —     (2)    —     (3)   —      —     (3) 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income
   149   157   201    (328)   179    330   348   441    (721)   398 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     30    —     30    —     —     68    —     68 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     —     —      —     —      —     —     —      —     —   
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $157  $171   $(328)  $149   $330  $348  $373   $(721)  $330 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
 
120140
Table of Contents
The following table presents the condensed consolidating income statement information for the year ended December 31, 2021:
 
(Amounts in millions)
  
Parent
Guarantor
  
Issuer
  
All Other
Subsidiaries
   
Eliminations
  
Consolidated
 
Revenues:
       
Premiums
  $—    $—    $3,435   $—    $3,435 
Net investment income
   (3)   —     3,373    —     3,370 
Net investment gains (losses)
   —     —     323    —     323 
Policy fees and other income
   —     (1)   703    2   704 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total revenues
   (3)   (1)   7,834    2   7,832 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Benefits and expenses:
       
Benefits and other changes in policy reserves
   —     —     4,383    —     4,383 
Interest credited
   —     —     508    —     508 
Acquisition and operating expenses, net of deferrals
   25   44   1,154    —     1,223 
Amortization of deferred acquisition costs and intangibles
   —     —     377    —     377 
Interest expense
   (1)   109   50    2   160 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total benefits and expenses
   24   153   6,472    2   6,651 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries
   (27)   (154)   1,362    —     1,181 
Provision (benefit) for income taxes
   (1)   (33)   297    —     263 
Equity in income of subsidiaries
   930   1,041   —      (1,971)   —   
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Income from continuing operations
   904   920   1,065    (1,971)   918 
Income from discontinued operations, net of taxes
   —     13   14    —     27 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Net income
   904   933   1,079    (1,971)   945 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     33    —     33 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     —     8    —     8 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $904  $933  $1,038   $(1,971)  $904 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
 
121141
Table of Contents
The following table presents the condensed consolidating comprehensive income statement information for the threesix months ended March 31,June 30, 2022:
 
  
Parent
   
All Other
     
(Amounts in millions)
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
   
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Net income
  $149  $157  $201  $(328)  $179   $330  $348  $441  $(721)  $398 
Other comprehensive income (loss), net of taxes:
            
Net unrealized gains (losses) on securities without an allowance for credit losses
   (1,010)   (1,010)   (1,051)   2,020   (1,051)    (3,414)   (3,413)   (3,433)   6,777   (3,483) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   —     —     —     —     —      —     —     —     —     —   
Derivatives qualifying as hedges
   (236)   (236)   (237)   473   (236)    (580)   (580)   (582)   1,162   (580) 
Foreign currency translation and other adjustments
   (5)   (5)   (5)   10   (5)    (12)   (12)   (12)   24   (12) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total other comprehensive income (loss)
   (1,251)   (1,251)   (1,293)   2,503   (1,292)    (4,006)   (4,005)   (4,027)   7,963   (4,075) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive loss
   (1,102)   (1,094)   (1,092)   2,175   (1,113)    (3,676)   (3,657)   (3,586)   7,242   (3,677) 
Less: comprehensive loss attributable to noncontrolling interests
   —     —     (11)   —     (11)    —     —     (1)   —     (1) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
  $(1,102)  $(1,094)  $(1,081)  $2,175  $(1,102)   $(3,676)  $(3,657)  $(3,585)  $7,242  $(3,676) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
The following table presents the condensed consolidating comprehensive income statement information for the year ended December 31, 2021:
 
  
Parent
   
All Other
     
(Amounts in millions)
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
   
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Net income
  $904  $933  $1,079  $(1,971)  $945   $904  $933  $1,079  $(1,971)  $945 
Other comprehensive income (loss), net of taxes:
            
Net unrealized gains (losses) on securities without an allowance for credit losses
   (334)   (335)   (371)   670   (370)    (334)   (335)   (371)   670   (370) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   6   6   6   (12)   6    6   6   6   (12)   6 
Derivatives qualifying as hedges
   (186)   (186)   (215)   401   (186)    (186)   (186)   (215)   401   (186) 
Foreign currency translation and other adjustments
   (24)   (24)   149   47   148    (24)   (24)   149   47   148 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total other comprehensive income (loss)
   (538)   (539)   (431)   1,106   (402)    (538)   (539)   (431)   1,106   (402) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income
   366   394   648   (865)   543    366   394   648   (865)   543 
Less: comprehensive income attributable to noncontrolling interests
   —     —     177   —     177    —     —     177   —     177 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders
  $366  $394  $471  $(865)  $366   $366  $394  $471  $(865)  $366 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
 
122142
Table of Contents
The following table presents the condensed consolidating cash flow statement information for the threesix months ended March 31,June 30, 2022:
 
 
Parent
   
All Other
     
(Amounts in millions)
 
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Cash flows from (used by) operating activities:
          
Net income
 $149  $157  $201  $(328)  $179  $330  $348  $441  $(721)  $398 
Less loss from discontinued operations, net of taxes
  —     2   —     —     2   —     3   —     —     3 
Adjustments to reconcile net income to net cash from (used by) operating activities:
          
Equity in income from subsidiaries
  (156)   (172)   —     328   —     (347)   (374)   —     721   —   
Dividends from subsidiaries
  —     19   (19)   —     —   
Amortization of fixed maturity securities discounts and premiums
  —     1   (35)   —     (34)   —     1   (85)   —     (84) 
Net investment (gains) losses
  —     —     (28)   —     (28)   —     —     (36)   —     (36) 
Charges assessed to policyholders
  —     —     (150)   —     (150)   —     —     (292)   —     (292) 
Acquisition costs deferred
  —     —     (2)   —     (2)   —     —     (1)   —     (1) 
Amortization of deferred acquisition costs and intangibles
  —     —     92   —     92   —     —     176   —     176 
Deferred income taxes
  1   44   12   —     57   3   75   50   —     128 
Derivative instruments, limited partnerships and other
  —     3   (108)   —     (105)   —     4   (167)   —     (163) 
Stock-based compensation expense
  7   —     3   —     10   15   —     5   —     20 
Change in certain assets and liabilities:
          
Accrued investment income and other assets
  5   2   (50)   —     (43)   4   2   (76)   —     (70) 
Insurance reserves
  —     —     249   —     249   —     —     494   —     494 
Current tax liabilities
  29   (20)   (9)   —     —     140   (54)   (86)   —     —   
Other liabilities, policy and contract claims and other policy-related balances
  3   —     (292)   —     (289)   6   (3)   (208)   —     (205) 
Cash used by operating activities—discontinued operations
  —     (30)   —     —     (30)   —     (31)   —     —     (31) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) operating activities
  38   (13)   (117)   —     (92)   151   (10)   196   —     337 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) investing activities:
          
Proceeds from maturities and repayments of investments:
          
Fixed maturity securities
  —     —     730   —     730   —     —     1,495   —     1,495 
Commercial mortgage loans
  —     —     115   —     115   —     —     314   —     314 
Limited partnerships and other invested assets
  —     —     51   —     51   —     —     99   —     99 
Proceeds from sales of investments:
          
Fixed maturity and equity securities
  —     —     581   —     581   —     —     1,302   —     1,302 
Purchases and originations of investments:
          
Fixed maturity and equity securities
  —     —     (969)   —     (969)   —     —     (1,800)   —     (1,800) 
Commercial mortgage loans
  —     —     (197)   —     (197)   —     —     (568)   —     (568) 
Limited partnerships and other invested assets
  —     —     (137)   —     (137)   —     —     (297)   —     (297) 
Short-term investments, net
  —     (50)   —     —     (50)   —     (25)   1   —     (24) 
Policy loans, net
  —     —     14   —     14   —     —     14   —     14 
Intercompany notes receivable, net
  (16)   (56)   —     72   —     (113)   (39)   1   151   —   
Capital contributions to subsidiaries
  (2)   (6)   8   —     —     (2)   (6)   8   —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) investing activities
  (18)   (112)   196   72   138   (115)   (70)   569   151   535 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
�� 
 
 
Cash flows from (used by) financing activities:
          
Deposits to universal life and investment contracts
  —     —     159   —     159   —     —     314   —     314 
Withdrawals from universal life and investment contracts
  —     —     (418)   —     (418)   —     —     (779)   —     (779) 
Repayment and repurchase of long-term debt
  —     (82)   —     —     (82)   —     (130)   —     —     (130) 
Intercompany notes payable, net
  (12)   16   68   (72)   —     (12)   112   51   (151)   —   
Dividends paid to noncontrolling interests
  —     —     (4)   —     (4) 
Treasury stock acquired in connection with share repurchases
  (15)   —     —     —     (15) 
Other, net
  (8)   —     23   —     15   (9)   (55)   (41)   —     (105) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash used by financing activities
  (20)   (66)   (168)   (72)   (326)   (36)   (73)   (459)   (151)   (719) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
  —     —     —     —     —     —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net change in cash, cash equivalents and restricted cash
  —     (191)   (89)   —     (280)   —     (153)   306   —     153 
Cash, cash equivalents and restricted cash at beginning of period
  —     331   1,240   —     1,571   —     331   1,240   —     1,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash at end of period
  —     140   1,151   —     1,291   —     178   1,546   —     1,724 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
  —     —     —     —     —     —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
 $—    $140  $1,151  $—    $1,291  $—    $178  $1,546  $—    $1,724 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
123143
Table of Contents
The following table presents the condensed consolidating cash flow statement information for the year ended December 31, 2021:
 
 
Parent
   
All Other
     
(Amounts in millions)
 
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Cash flows from (used by) operating activities:
          
Net income
 $904  $933  $1,079  $(1,971)  $945  $904  $933  $1,079  $(1,971)  $945 
Less income from discontinued operations, net of taxes
  —     (13)   (14)   —     (27)   —     (13)   (14)   —     (27) 
Adjustments to reconcile net income to net cash from (used by) operating activities:
          
Equity in income from subsidiaries
  (930)   (1,041)   —     1,971   —     (930)   (1,041)   —     1,971   —   
Dividends from subsidiaries
  —     552   (552)   —     —     —     552   (552)   —     —   
Amortization of fixed maturity securities discounts and premiums
  —     6   (182)   —     (176)   —     6   (182)   —     (176) 
Net investment (gains) losses
  —     —     (323)   —     (323)   —     —     (323)   —     (323) 
Charges assessed to policyholders
  —     —     (620)   —     (620)   —     —     (620)   —     (620) 
Acquisition costs deferred
  —     —     (8)   —     (8)   —     —     (8)   —     (8) 
Amortization of deferred acquisition costs and intangibles
  —     —     377   —     377   —     —     377   —     377 
Deferred income taxes
  —     341   (51)   —     290   —     341   (51)   —     290 
Derivative instruments, limited partnerships and other
  —     75   (434)   —     (359)   —     75   (434)   —     (359) 
Stock-based compensation expense
  40   —     —     —     40   40   —     —     —     40 
Change in certain assets and liabilities:
          
Accrued investment income and other assets
  (1)   9   (137)   —     (129)   (1)   9   (137)   —     (129) 
Insurance reserves
  —     —     642   —     642   —     —     642   —     642 
Current tax liabilities
  (5)   17   (46)   —     (34)   (5)   17   (46)   —     (34) 
Other liabilities, policy and contract claims and other policy-related balances
  (13)   (40)   363   —     310   (13)   (40)   363   —     310 
Cash from (used by) operating activities—discontinued operations
  —     (564)   73   —     (491)   —     (564)   73   —     (491) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) operating activities
  (5)   275   167   —     437   (5)   275   167   —     437 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) investing activities:
          
Proceeds from maturities and repayments of investments:
          
Fixed maturity securities
  —     —     4,162   —     4,162   —     —     4,162   —     4,162 
Commercial mortgage loans
  —     —     874   —     874   —     —     874   —     874 
Limited partnerships and other invested assets
  —     —     255   —     255   —     —     255   —     255 
Proceeds from sales of investments:
          
Fixed maturity and equity securities
  —     —     2,273   —     2,273   —     —     2,273   —     2,273 
Purchases and originations of investments:
          
Fixed maturity and equity securities
  —     —     (5,216)   —     (5,216)   —     —     (5,216)   —     (5,216) 
Commercial mortgage loans
  —     —     (963)   —     (963)   —     —     (963)   —     (963) 
Limited partnerships and other invested assets
  —     —     (767)   —     (767)   —     —     (767)   —     (767) 
Short-term investments, net
  —     —     18   —     18   —     —     18   —     18 
Policy loans, net
  —     —     57   —     57   —     —     57   —     57 
Intercompany notes receivable, net
  —     4   (1)   (3)   —     —     4   (1)   (3)   —   
Capital contributions to subsidiaries
  (2)   —     2   —     —     (2)   —     2   —     —   
Proceeds from sale of business, net of cash transferred
  —     —     270   —     270   —     —     270   —     270 
Cash used by investing activities—discontinued operations
  —     —     (67)   —     (67)   —     —     (67)   —     (67) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) investing activities
  (2)   4   897   (3)   896   (2)   4   897   (3)   896 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) financing activities:
          
Deposits to universal life and investment contracts
  —     —     669   —     669   —     —     669   —     669 
Withdrawals from universal life and investment contracts
  —     —     (2,071)   —     (2,071)   —     —     (2,071)   —     (2,071) 
Repayment and repurchase of long-term debt
  —     (1,541)   —     —     (1,541)   —     (1,541)   —     —     (1,541) 
Intercompany notes payable, net
  12   1   (16)   3   —     12   1   (16)   3   —   
Proceeds from sale of subsidiary shares to noncontrolling interests
  —     529   —     —     529   —     529   —     —     529 
Dividends paid to noncontrolling interests
  —     —     (37)   —     (37)   —     —     (37)   —     (37) 
Other, net
  (5)   (15)   52   —     32   (5)   (15)   52   —     32 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) financing activities
  7   (1,026)   (1,403)   3   (2,419)   7   (1,026)   (1,403)   3   (2,419) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) related to discontinued operations)
  —     —     1   —     1   —     —     1   —     1 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net change in cash, cash equivalents and restricted cash
  —     (747)   (338)   —     (1,085)   —     (747)   (338)   —     (1,085) 
Cash, cash equivalents and restricted cash at beginning of period
  —     1,078   1,578   —     2,656   —     1,078   1,578   —     2,656 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash at end of period
  —     331   1,240   —     1,571   —     331   1,240   —     1,571 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
  —     —     —     —     —     —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
 $—    $331  $1,240  $—    $1,571  $—    $331  $1,240  $—    $1,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
124144
Table of Contents
As of March 31, 2022, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net assets of $14.3 billion and $14.6 billion, respectively. Genworth Financial’s and Genworth Holdings’ insurance subsidiaries are subject to oversight by applicable insurance laws and regulations as to the amount of dividends they may pay to their parent in any year, the purpose of which is to protect affected insurance policyholders and contractholders, not stockholders. Enact Holdings’ ability to pay dividends is limited in part by such regulatory restrictions on its insurance subsidiaries. In general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Basedaddition, the GSEs have imposed certain restrictions on statutory results as of December 31, 2021, in accordance with applicable dividend restrictions, Enact Holdings could pay ordinary dividendswith respect to the amount of approximately $70 millionholding company cash it must retain in 2022,connection with its outstanding debt. For additional information on the GSE Restrictions, see “Item 2—Enact segment—Trends and the remaining net assets are considered restricted. While the $70 million is considered unrestricted, Enact Holdings may not pay dividends at this level during 2022 for a variety of reasons, including the need to preserve capital for regulatory purposes, future growth and capital requirements.conditions.” Although the business performance and financial results of our U.S. life insurance subsidiaries have improved significantly, as of December 31, 2021, they had negative unassigned surplus of approximately $1.0 billion under statutory accounting and as a result, we do not expect these subsidiaries to pay dividends for the foreseeable future.
For additional information on Genworth Financial’s capital management plans, including a new share repurchase program, see “Item 2—Liquidity and Capital Resources.”
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. We may have additional financial impacts other than changes in estimated fair value, which are beyond the scope of this discussion.
There werehave been no material changes into our market risksrisk exposures since December 31, 2021. See2021, except as described below. As a result of the increase in interest rates during the six months ended June 30, 2022, we have experienced a significant decrease in the fair value of our fixed maturity securities. Due to the increase in interest rates during the six months ended June 30, 2022 and the expectation that interest rates will continue to rise throughout the remainder of 2022 driven by U.S. Federal Reserve monetary tightening, we have updated our interest rate sensitivity analysis as of June 30, 2022. In addition to the updated sensitivity analysis below, see “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of recent market conditions, including changes in interest rates.
Sensitivity Analysis
Interest Rate Risk
One means of assessing exposure to interest rate changes is a duration-based analysis that measures the potential changes in fair value resulting from a hypothetical increase in interest rates of 100 basis points across all maturities. This is referred to as a parallel shift in the yield curve. Note that all impacts noted below exclude any effects of deferred taxes unless otherwise noted.
Under this model, with all other factors constant and assuming no offsetting change in the value of our liabilities, we estimated that such an increase in interest rates would cause the fair value of our fixed maturity securities to decrease by approximately $3.5 billion based on the fair value of our fixed maturity securities as of June 30, 2022, as compared to an estimated decrease of $4.7 billion under this model as of December 31, 2021. The decrease in the impact of the parallel shift in the yield curve as of June 30, 2022 compared to December 31, 2021 was principally due to the decrease in the fair value of our fixed maturity securities in the current year due to increasing interest rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31,June 30, 2022, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
145
Table of Contents
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31,June 30, 2022.
Changes in Internal Control Over Financial Reporting During the Quarter Ended March 31,June 30, 2022
During the three months ended March 31,June 30, 2022, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
125146
Table of Contents
PART II—OTHER INFORMATION
Item
Item 1. Legal Proceedings
See note 1112 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.
Item
Item 1A. Risk Factors
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 2021 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. There have been no material changes to the risk factors set forth in the above-referenced filing as of March 31,June 30, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Common Stock
The following table sets forth information regarding Genworth Financial’s share repurchases during the three months ended June 30, 2022:
(Dollar amounts in millions,
except share amounts)
 
Total number of
shares purchased
  
Average price
paid per share
  
Total number of shares
purchased as part of
publicly announced
program
  
Approximate dollar
amount of shares that may
yet be purchased under
the program
(1)
 
May 1, 2022 through May 31, 2022
  3,869,494  $3.88   3,869,494  $335 
 
 
 
   
 
 
  
Total
  3,869,494    3,869,494  
 
 
 
   
 
 
  
(1) 
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Under the program, share repurchases may be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The timing and number of shares repurchased under the program will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The authorization has no expiration date and may be modified, suspended or terminated at any time. For additional information on the share repurchase program, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
 
126147
Table of Contents
Item 6. Exhibits
 
Number
  
Description
  10.1§Separation Agreement and Release, dated December 21, 2021, between Genworth Financial, Inc. and Ward Bobitz (filed herewith)
  31.1  Certification of Thomas J. McInerney (filed herewith)
  31.2  Certification of Daniel J. Sheehan IV (filed herewith)
  32.1  Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code— Thomas J. McInerney (filed herewith)
  32.2  Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code— Daniel J. Sheehan IV (filed herewith)
101.INS  Inline XBRL Instance Document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase Document
104  Cover Page Interactive Data File (embedded within the Inline XBRL document
and
included in Exhibit 101)
 
§
Management contract or compensatory plan or arrangement.
127
148
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
GENWORTH FINANCIAL, INC.
(Registrant)
Date: May 5,August 3, 2022  
 By: 
/s/ Jerome T. Upton
Jerome T. Upton
  
Jerome T. Upton
Senior Vice President and Controller
(Principal Accounting Officer)
 
128149