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As filed with the Securities and Exchange Commission on January 20,April 28, 2004

Registration No. 333-          333-112009



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Amendment No. 4
to
FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933


Genworth Financial, Inc.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
 6311
(Primary Standard Industrial
Classification Code Number)
 33-1073076
(I.R.S. Employer Identification Number)


6620 West Broad Street
Richmond, Virginia 23230
(804) 281-6000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)





Leon E. Roday, Esq.
Senior Vice President, General Counsel and Secretary
Genworth Financial, Inc.
6620 West Broad Street
Richmond, Virginia 23230
(804) 281-6000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

Copies to:

David S. Lefkowitz, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
 Alexander M. Dye, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
(212) 424-8000
 Richard J. Sandler, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000

        Approximate date of commencement of proposed sale to the public:As soon as practicable after the effective date of this Registration Statement.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  / /

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  / /

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  / /


CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered
 Proposed maximum
aggregate offering amount(1)(2)

 Amount of
registration fee

 Proposed maximum
aggregate offering
amount(1)(2)

 Amount of
registration fee


Class A Common Stock, par value $0.001 per share $500,000,000 $40,450 $3,835,250,000(3) $463,027(4)

(1)
Includes shares subject to underwriters' over-allotment option.

(2)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act of 1933.

(3)
A fee has been previously paid on $500,000,000 of this amount in connection with the initial filing of this Registration Statement on January 20, 2004.

(4)
Of this amount, $40,450 has been previously paid in connection with the initial filing of this Registration Statement on January 20, 2004.

        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.




The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued April 28, 2004

Issued January 20, 2004

145,000,000 Shares

GRAPHICGRAPHIC

Class A Common Stock


        GE Financial Assurance Holdings, Inc., the selling stockholder and an indirect subsidiary of General Electric Company, or GE, is offering all the 145,000,000 shares of Class A Common Stock to be sold in this offering. This is our initial public offering, and no public market currently exists for our shares. We anticipate that the initial public offering price of the shares will be between $$21.00 and $$23.00 per share.

        The selling stockholder has granted the underwriters the right to purchase up to an additional 21,750,000 shares of Class A Common Stock to cover over-allotments.

        We intend to apply to list theThe Class A Common Stock has been approved for listing on The New York Stock Exchange under the symbol "GNW."

        Concurrently with this offering, the selling stockholder also is offering, by means of a separate prospectus, $600 million of our      % Equity Units. Each Equity Unit will have a stated amount of $25 and will initially consist of a contract to purchase shares of our Class A Common Stock and an interest in a      % senior note due 2009 issued by us.

Concurrently with this offering, the selling stockholder also is offering, by means of a separate prospectus, $100 million of our      % Series A Cumulative Preferred Stock.

        We will not receive any proceeds from the sale by the selling stockholder of Class A Common Stock in this offering or the Equity Units or Series A Cumulative Preferred Stock in the concurrent offerings.

        Investing in our Class A Common Stock involves risks. See "Risk Factors" beginning on page 14.20.


PRICE $                      A SHARE


 
 Per Share
 Total
Price to public $             $            
Underwriting discounts and commissions $             $            
Proceeds to selling stockholder $             $            

        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares of Class A Common Stock to purchasers on                        , 2004.


Joint lead managers and bookrunnersMorgan StanleyGoldman, Sachs & Co.


Morgan StanleyBanc of America Securities LLC

Citigroup

Credit Suisse First Boston
Deutsche Bank Securities
Merrill Lynch & Co.
JPMorgan
UBS Investment Bank
Lehman Brothers


Blaylock & Partners, L.P.
Edward D. Jones & Co., L.P.
KeyBanc Capital Markets
Stephens Inc.

 

Goldman, SachsCochran, Caronia & Co.
Fox-Pitt, Kelton
Legg Mason Wood Walker

Incorporated 


Dowling & Partners Securities
Keefe, Bruyette & Woods
Raymond James
The Williams Capital Group, L.P.

                    , 2004




TABLE OF CONTENTS

 
 Page
Prospectus Summary 1
Risk Factors 1420
Forward-Looking Statements 4250
Use of Proceeds 4351
Dividend Policy 4351
Capitalization 4452
Selected Historical and Pro Forma Financial Information 4756
Management's Discussion and Analysis of Financial Condition and Results of Operations 6069
Corporate Reorganization 114119
Business 116122
Regulation 194202
Management 205213

Arrangements Between GE and Our Company

 
224
236
Ownership of Common Stock 251263
Description of Capital Stock 252266
Description of Equity Units 264278
Description of Certain Indebtedness 269283
Shares Eligible for Future Sale 271286
Certain U.S.United States Federal Tax ConsiderationsConsequences for Non-U.S. Holders of Common Stock 273288
Underwriters 276291
Legal Matters 279297
Experts 279297
Additional Information 279297
Index to Combined Financial Statements F-1
Glossary of Selected Insurance Terms G-1

Through and including            , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        Genworth Financial, Inc. is a newly formed company that, prior to the completion of this offering, will acquire substantially all of the assets and assume certain liabilities of GE Financial Assurance Holdings, Inc., or GEFAHI. GEFAHI is an indirect subsidiary of General Electric Company and a holding company for a group of companies that provide life insurance, long-term care insurance, group life and health insurance, annuities and other investment products and U.S. mortgage insurance. Prior to the completion of this offering, Genworth will acquire certain other insurance businesses (including international mortgage insurance and European payment protection insurance) currently owned by other GE subsidiaries but managed by members of the Genworth management team. Genworth will also enter into several significant reinsurance transactions and other arrangements with subsidiaries of GE. For a detailed discussion of our corporate reorganization, the reinsurance transactions and the other arrangements with GE, see "Corporate Reorganization" and "Arrangements Between GE and Our Company."

        In this prospectus, unless the context otherwise requires, "Genworth," "we," "us," and "our" refer to Genworth Financial, Inc. and its combined subsidiaries and include the operations of the businesses acquired from GEFAHI and other GE subsidiaries in connection with our corporate reorganization. References to "GE" include General Electric Company and its subsidiaries. References to the "selling stockholder" refer to GEFAHI.

        The historical combined financial information presented in this prospectus has been derived from our audited and unaudited combined financial statements, which have been prepared as if Genworth had been in existence throughout all relevant periods. Our historical combined financial information and statements include all businesses that were owned by GEFAHI, including those that will not be transferred to us, as well as the other insurance businesses that we will acquire from other GE subsidiaries, each in connection with our corporate reorganization. The unaudited pro forma financial information in this prospectus differs from the historical combined financial information in that it gives effect to the exclusion of the businesses and other assets and liabilities owned by GEFAHI that will not be transferred to us, and to the reinsurance transactions and the other transactions described under "Selected Historical and Unaudited Pro Forma Financial Information."

i



        You should rely only on the information contained in this prospectus. Neither we, nor the selling stockholder, has authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholder is offering to sell shares of Class A Common Stock and seeking offers to buy shares of Class A Common Stock only in jurisdictions where offers and sales are permitted. We have not taken any action to permit a public offering of the shares of Class A Common Stock outside the U.S. Persons outside the U.S. who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the shares of Class A Common Stock and the distribution of this prospectus outside the U.S. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of the Class A Common Stock.

ii



Prospectus Summary

        This summary highlights information contained elsewhere in this prospectus and may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the information set forth in "Risk Factors," before making an investment decision. For information regarding the pro forma financial information presented in this prospectus, see "Selected Historical and Pro Forma Financial Information."

        GRAPHICGRAPHIC

        We are a leading insurance company in the U.S., with an expanding international presence, serving the life and lifestyle protection, retirement income, investment and mortgage insurance needs of more than 15 million customers. We have leadership positions in key products that we expect will benefit from a number of significant demographic, governmental and market trends. We distribute our products and services through an extensive and diversified distribution network that includes financial intermediaries, independent producers and dedicated sales specialists. We conduct operations in 20 countries and have approximately 5,6405,850 employees.

        We have the following three operating segments:

1


We also have a Corporate and Other segment, which consists primarily of net realized investment gains (losses), most of our interest and other financing expenses, that are incurred at our holding company level, unallocated corporate income and expenses, and the results of several small, non-core businesses that are managed outside our operating segments.



For the nine monthsyear ended September 30,December 31, 2003, our Corporate and Other segment had a pro forma segment net loss of $69$8 million.

        We had $10.9$11.0 billion of total stockholder's interest and $99.9$97.8 billion of total assets as of September 30,December 31, 2003, on a pro forma basis. For the nine monthsyear ended September 30,December 31, 2003, on a pro forma basis, our revenues were $7.3$9.8 billion and our net earnings from continuing operations were $764$935 million. Upon the completion of this offering, we expect our principal life insurance companies to have financial strength ratings of AA-"AA-" (Very Strong) from S&P, Aa3"Aa3" (Excellent) from Moody's and A+"A+" (Superior) from A.M. Best, and we expect our rated mortgage insurance companies to have financial strength ratings of AA"AA" (Very Strong) from S&P, Aa2"Aa2" (Excellent) from Moody's and AA"AA" (Very Strong) from Fitch. The "AA" and "AA-" ratings are the third- and fourth-highest of S&P's 21 ratings categories, respectively. The "Aa2" and "Aa3" ratings are the third- and fourth-highest of Moody's 21 ratings categories, respectively. The "A+" rating is the second-highest of A.M. Best's 15 ratings categories. The "AA" rating is the third-highest of Fitch's 24 ratings categories.

Market Environment and Opportunities

        We believe we are well positioned to benefit from a number of significant demographic, governmental and market trends, including the following:

2


Competitive Strengths

        We believe the following competitive strengths will enable us to capitalize on opportunities in our targeted markets:


3


Growth Strategies

        Our objective is to increase operating earnings and enhance returns on equity. We intend to pursue this objective by focusing on the following strategies:


4



5


Formation of Genworth Financial, Inc.

        We were incorporated in Delaware on October 23, 2003 in preparation for our corporate reorganization.reorganization and this offering.

        Prior to the completion of this offering and the concurrent offerings, we will acquire substantially all of the assets and assume certain liabilities of GE Financial Assurance Holdings, Inc., or GEFAHI. GEFAHI is an indirect subsidiary of GE and a holding company for a group of companies that provide life insurance, long-term care insurance, group life and health insurance, annuities and other investment products and U.S. mortgage insurance. We also will acquire certain other insurance businesses currently owned by other GE subsidiaries but managed by members of the Genworth management team. These businesses include international mortgage insurance, European payment protection insurance, a Bermuda reinsurer and mortgage contract underwriting.

        In consideration for the assets that we will acquire and the liabilities that we will assume in connection with our corporate reorganization, we will issue to GEFAHI the following securities:


        The liabilities we will assume from GEFAHI include ¥60 billion aggregate principal amount of 1.6% notes due 2011 issued by GEFAHI, ¥3 billion of which GEFAHI currently owns and will transfer to us. We refer to these notes in this prospectus as the Yen Notes. We have entered into arrangements

6


to swap our obligations under these notes to a U.S. dollar obligation with a principal amount of $485$491 million and bearing interest at a rate of 4.84% per annum.

        Prior to the completion of this offering and the concurrent offerings, GEFAHI will own 100% of our outstanding common stock, which will consist solely of Class B Common Stock. Shares of Class B Common Stock convert automatically into shares of Class A Common Stock when they are held by any person other than GE or an affiliate of GE or when GE no longer beneficially owns at least 10% of our outstanding common stock. As a result, all the shares of common stock offered in this offering consist of Class A Common Stock. Upon the completion of this offering and the concurrent offerings, GE will beneficially own approximately %70% of our outstanding common stock, assuming the underwriters' over-allotment option is not exercised, and %,66%, if it is exercised in full. GE has informed us that, followingafter completion of this offering, it intends, subject to market conditions, to divest its remaining interest in us as soon as practicable. GE has also informed us that, in any event, it expects to reduce its interest to below 50% within two years of the completion of this offering. GE currently expects to reduce its interest through one or more additional public offerings of our common stock, after this offering, but it is not obligated to divest our shares in this or any other manner.

        Prior to the completion of this offering, we will enter into a number of arrangements with GE governing our separation from GE and a variety of transition and other matters, including our relationship with GE while GE remains a significant stockholder in our company. These arrangements include several significant reinsurance transactions with Union Fidelity Life Insurance Company, or UFLIC, a wholly-ownedan indirect subsidiary of GEFAHI that will not be transferred to us.GE. As part of these transactions, we will cede to UFLIC, effective as of January 1, 2004, all of our in-force blocks of structured settlements,settlement contracts, substantially all of our in-force blocks of variable annuities,annuity contracts, and a block of long-term care insurance policies that we reinsured in 2000 from The Travelers Insurance Company, a subsidiary of Citigroup, Inc., which we refer to in this prospectus as Travelers. In the aggregate, these blocks of business do not meet our target return thresholds, and although we remain liable under these contracts and policies as the ceding insurer, the reinsurance transactions will have the effect of transferring the financial results of the reinsured blocks to UFLIC. We are continuing new sales of structured settlement, variable annuity and long-term care insurance products, and we expect to achieve our targeted returns on these new sales. In addition, we will continue to service these blocks of business, which will preserve our operating scale and enable us to service and grow our new sales of these products. See "Arrangements Between GE and Our Company."


        The diagram below shows the relationships among GE, GEFAHI and Genworth prior to the completion of our corporate reorganization. The dotted lines indicate the businesses that will be transferred to Genworth in connection with our corporate reorganization.

GRAPHIC

*  The Partnership Marketing Group offers life and health insurance, auto club memberships and other financial products and services directly to consumers through affinity marketing arrangements with a variety of organizations. The Partnership Marketing Group historically included UFLIC, a subsidiary that offered the life and health insurance for these arrangements.

        The diagram below shows the relationships among GE, GEFAHI and Genworth after the completion of our corporate reorganization and this offering.

GRAPHIC

        In this prospectus, unless the context otherwise requires, "Genworth," "we," "us," and "our" refer to Genworth Financial, Inc. and its combined subsidiaries and include the operations of the businesses acquired from GEFAHI and other GE subsidiaries in connection with our corporate reorganization.


Risks Relating to Our Company

        As part of your evaluation of our company, you should consider the risks associated with our business, our separation from GE and this offering. These risks include:

7


        For a further discussion of these and other risks, see "Risk Factors."

Additional Information

        Our corporate headquarters and principal executive offices are located at 6620 West Broad Street, Richmond, Virginia 23230. Our telephone number at that address is (804) 281-6000. We maintain a variety of websites to communicate with our distributors and customers and to provide information about various insurance and investment products to the general public. None of the information on our websites is part of this prospectus.

8




The Offering


Class A Common Stock offered by the selling stockholder

 

145,000,000 shares

Common stock to be outstanding immediately after this offering

 

 


 
Class A

 

145,000,000 shares
 
Class B

 

344,528,145 shares

Common stock to be held by the selling stockholder immediately after this offering

 

 


 
Class B

 

344,528,145 shares

Over-allotment option

 

21,750,000 shares of Class A Common Stock to be offered by the selling stockholder if the underwriters exercise the over-allotment option in full.

Voting rights

 

One vote per share for all matters on which stockholders are entitled to vote, except forexcept:





holders of Class A Common Stock will have the rightsright separately to elect and remove a specified number of directors, and





holders of Class B Common Stock will have the right (1) separately to elect and remove a specified number of directors, and (2) to approve significant corporate actions, including mergers, acquisitions, dispositions and incurrences of debt.



The specific number of directors that holders of the holder ofClass A Common Stock and the Class B Common Stock to approve specified corporate actions andwill have the separate rights to elect a specified numberand remove will vary, depending upon the percentage of directors to our board. common stock owned by GE.



See "Description of Capital Stock—Common Stock."

Use of proceeds

 

We will not receive any proceeds from the sale by the selling stockholder of Class A Common Stock in this offering or of the Equity Units or the Series A Preferred Stock in the concurrent offerings.

Dividend policy

 

We intend to pay quarterly cash dividends on our common stock at an initial rate of $$0.065 per share, commencing withshare. The first such dividend will be declared in the third quarter and paid in the fourth quarter of 2004. Class A Common Stock and Class B Common Stock will have identical dividend rights. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our financial condition, earnings, capital requirements of our subsidiaries, legal requirements, regulatory constraints and other factors that the board of directors deems relevant.

Proposed New York Stock Exchange symbol

 

We intend to apply to list theThe Class A Common Stock has been approved for listing on The New York Stock Exchange under the symbol "GNW."

Concurrent Offerings

 

Concurrently with this offering, the selling stockholder is publicly offering, by separate prospectuses:
 
Equity Units

 

$600 million of our      % Equity Units.
 
Series A Preferred Stock

 

$100 million of our      % Series A Cumulative Preferred Stock.

Conditions

 

The offerings of the Equity Units and the Series A Preferred Stock are conditioned upon the completion of this offering.

 

 

This offering is conditioned upon the completion of the offerings of the Series A Preferred Stock and the Equity Units.

9



        Unless otherwise indicated, all information in this prospectus:

10        The number of our stock options, restricted stock units and stock appreciation rights that will be issued in exchange for GE stock options, restricted stock units and stock appreciation rights will depend upon the initial public offering price of our Class A Common Stock and the weighted-average stock price of GE common stock for the trading day immediately prior to the date of this prospectus. Information in this prospectus assumes a price of $30.85 per share of GE common stock, which was the weighted-average stock price on April 27, 2004.




Summary Historical and Pro Forma Financial Information

        The following table sets forth summary historical combined and pro forma financial information. You should read this information in conjunction with the information under "Selected Historical and Pro Forma Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the related notes included elsewhere in this prospectus.

        Prior to the completion of this offering, we will acquire substantially all of the assets and assume certain liabilities of GEFAHI. We also will acquire certain other insurance businesses currently owned by other GE subsidiaries but managed by members of the Genworth management team. These businesses include international mortgage insurance, European payment protection insurance, a Bermuda reinsurer and mortgage contract underwriting. In consideration for the assets that we will acquire and the liabilities that we will assume in connection with our corporate reorganization, we will issue to GEFAHI 489.5 million shares of our Class B Common Stock, $600 million of our Equity Units, $100 million of our Series A Preferred Stock, the $2.4 billion Short-term Intercompany Note and the $550 million Contingent Note.

        We have prepared our combined financial statements as if Genworth had been in existence throughout all relevant periods. Our historical combined financial information and statements include all businesses that were owned by GEFAHI including those that will not be transferred to us, as well as the other insurance businesses that we will acquire from other GE subsidiaries, each in connection with our corporate reorganization.

        The unaudited pro forma information set forth below reflects our historical combined financial information, as adjusted to give effect to the transactions described under "Selected Historical and Pro Forma Financial Information" as if each had occurred as of January 1, 2002,2003, in the case of earnings information, and September 30,December 31, 2003, in the case of financial position information. The following transactions are reflected in the pro forma financial information:

        The unaudited pro forma information below is based upon available information and assumptions that we believe are reasonable. The unaudited pro forma financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our financial condition or results of operations would have been had the transactions described above occurred on the dates indicated. The unaudited pro forma information also should not be considered representative of our future financial condition or results of operations.

        In addition to the pro forma adjustments to our historical combined financial statements, various other factors will have an effect on our financial condition and results of operations after the completion of this offering, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

11





 Historical
 Pro forma

 Historical
 Pro forma
 


 Nine months
ended
September 30,

 Years ended December 31,
 Nine months
ended
September 30,

 Year ended
December 31,


 Years ended December 31,
 Year ended
December 31,

 
(Dollar amounts in millions,
per share amounts in dollars)

 2003(1)
 2002
 2002
 2001
 2000(2)
 1999
 2003
 2002
(Amounts in millions, except
per share amounts)

(Amounts in millions, except
per share amounts)

 2003(1)
 2002
 2001
 2000(2)
 1999
 2003
 
Combined Statement of
Earnings Information
Combined Statement of
Earnings Information
Combined Statement of
Earnings Information
    
Revenues:Revenues:                        Revenues:                   
Premiums $4,937 $4,496 $6,107 $6,012 $5,233 $4,534 $4,601 $5,644Premiums $6,703 $6,107 $6,012 $5,233 $4,534 $6,252 
Net investment income  2,999  2,972  3,979  3,895  3,678  3,440  2,304  3,027Net investment income  4,015  3,979  3,895  3,678  3,440  2,928 
Net realized investment gains (losses)  (29) 41  204  201  262  280  (10) 257Net realized investment gains  10  204  201  262  280  38 
Policy fees and other income  700  705  939  993  1,053  751  423  534Policy fees and other income  943  939  993  1,053  751  557 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total revenues  8,607  8,214  11,229  11,101  10,226  9,005  7,318  9,462 Total revenues  11,671  11,229  11,101  10,226  9,005  9,775 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Benefits and expenses:

Benefits and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Benefits and other changes in policy reserves  3,777  3,402  4,640  4,474  3,586  3,286  3,030  3,643Benefits and other changes in policy reserves  5,232  4,640  4,474  3,586  3,286  4,191 
Interest credited  1,215  1,229  1,645  1,620  1,456  1,290  1,047  1,408Interest credited  1,624  1,645  1,620  1,456  1,290  1,358 
Underwriting, acquisition, and insurance expenses, net of deferrals  1,515  1,393  1,808  1,823  1,813  1,626  1,267  1,427Underwriting, acquisition, and insurance
expenses, net of deferrals
  1,942  1,808  1,823  1,813  1,626  1,614 
Amortization of deferred acquisition costs and intangibles(3)  935  860  1,221  1,237  1,394  1,136  784  995Amortization of deferred acquisition
costs and intangibles(3)
  1,351  1,221  1,237  1,394  1,136  1,144 
Interest expense  94  94  124  126  126  78  94  115Interest expense  140  124  126  126  78  138 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total benefits and expenses  7,536  6,978  9,438  9,280  8,375  7,416  6,222  7,588 Total benefits and expenses  10,289  9,438  9,280  8,375  7,416  8,445 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Earnings from continuing operations before income taxes

Earnings from continuing operations before income taxes

 

 

1,071

 

 

1,236

 

 

1,791

 

 

1,821

 

 

1,851

 

 

1,589

 

 

1,096

 

 

1,874

Earnings from continuing operations
before income taxes

 

 

1,382

 

 

1,791

 

 

1,821

 

 

1,851

 

 

1,589

 

 

1,330

 
Provision for income taxesProvision for income taxes  322  254  411  590  576  455  332  452Provision for income taxes  413  411  590  576  455  395 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earnings from continuing operationsNet earnings from continuing operations $749 $982 $1,380 $1,231 $1,275 $1,134 $764 $1,422Net earnings from continuing operations $969 $1,380 $1,231 $1,275 $1,134 $935 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pro forma earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma earnings from continuing operations
per share:

Pro forma earnings from continuing operations
per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Basic $1.98             $1.91 
 
             
 
Basic                        Diluted $1.98             $1.91 
Diluted                          
             
 
Pro forma shares outstanding:Pro forma shares outstanding:                        Pro forma shares outstanding:                   
Basic  489.5              489.5 
 
             
 
Basic                        Diluted  490.0              490.0 
Diluted                          
             
 

Selected Segment Information

Selected Segment Information

Selected Segment Information

 

 

 

 
Total revenues:Total revenues:                        Total revenues:                   
Protection $4,572 $4,159 $5,605 $5,443 $4,917    $4,374 $5,316Protection $6,153 $5,605 $5,443 $4,917    $5,839 
Retirement Income and Investments  2,792  2,769  3,756  3,721  3,137     2,122  2,819Retirement Income and Investments  3,781  3,756  3,721  3,137     2,707 
Mortgage Insurance  720  705  946  965  895     720  946Mortgage Insurance  982  946  965  895     982 
Affinity(4)  431  445  588  687  817       Affinity(4)  566  588  687  817      
Corporate and Other  92  136  334  285  460     102  381Corporate and Other  189  334  285  460     247 
 
 
 
 
 
    
 
 
 
 
 
    
 
 Total $8,607 $8,214 $11,229 $11,101 $10,226    $7,318 $9,462 Total $11,671 $11,229 $11,101 $10,226    $9,775 
 
 
 
 
 
    
 
 
 
 
 
    
 

Net earnings (loss) from continuing operations:

Net earnings (loss) from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Protection $392 $393 $554 $538 $492    $405 $541Protection $487 $554 $538 $492    $481 
Retirement Income and Investments  128  149  186  215  250     136  202Retirement Income and Investments  151  186  215  250     93 
Mortgage Insurance  292  364  451  428  414     292  451Mortgage Insurance  369  451  428  414     369 
Affinity(4)  15  (1) (3) 24  (13)      Affinity(4)  16  (3) 24  (13)     
Corporate and Other  (78) 77  192  26  132     (69) 228Corporate and Other  (54) 192  26  132     (8)
 
 
 
 
 
    
 
 
 
 
 
    
 
 Total $749 $982 $1,380 $1,231 $1,275    $764 $1,422 Total $969 $1,380 $1,231 $1,275    $935 
 
 
 
 
 
    
 
 
 
 
 
    
 

12





 Historical
 Pro forma

 Historical
 Pro forma


 September 30,
 December 31,
 September 30,

 December 31,
 December 31,
(Dollar amounts in millions)

(Dollar amounts in millions)

(Dollar amounts in millions)

 2003(1)
 2002
 2001
 2000(2)
 1999
 2003
2003(1)
 2002
 2001
 2000(2)
 1999
 2003
Combined Statement of
Financial Position Information
Combined Statement of
Financial Position Information
Combined Statement of
Financial Position Information
Total investments $78,693 $72,080 $62,977 $54,978 $48,341 $59,778
Total investments $77,046 $72,080 $62,977 $54,978 $48,341 $60,160All other assets  24,738  45,277  41,021  44,598  27,758  38,034
All other assets  26,322 45,277  41,021  44,598  27,758  39,713  
 
 
 
 
 
 
 
 
 
 
 
 Total assets $103,431 $117,357 $103,998 $99,576 $76,099 $97,812
 Total assets $103,368 $117,357 $103,998 $99,576 $76,099 $99,873  
 
 
 
 
 
 
 
 
 
 
 

Policyholder liabilities

 

$

66,545

 

$

63,195

 

$

55,900

 

$

48,291

 

$

45,042

 

$

66,046

Policyholder liabilities

 

$

62,649

 

$

60,188

 

$

53,427

 

$

45,965

 

$

42,730

 

$

62,194
Non-recourse funding obligations(5)  600          600
Short-term borrowings  1,686 1,850  1,752  2,258  990  2,400Short-term borrowings  2,239  1,850  1,752  2,258  990  2,400
Long-term borrowings  485 472  622  175  175  485Long-term borrowings  529  472  622  175  175  529
All other liabilities  20,537 38,095  34,032  38,191  20,958  23,860All other liabilities  17,718  35,088  31,559  35,865  18,646  17,275
 
 
 
 
 
 
 
 
 
 
 
 
 Total liabilities $85,357 $100,605 $89,833 $86,589 $64,853 $88,939 Total liabilities $87,631 $100,605 $89,833 $86,589 $64,853 $86,850
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated nonowner changes in stockholder's interest $1,148 $835 $(664)$(424)$(862)$802Accumulated nonowner changes in stockholder's interest $1,672 $835 $(664)$(424)$(862)$1,006
Total stockholder's interest  18,011 16,752  14,165  12,987  11,246  10,934Total stockholder's interest  15,800  16,752  14,165  12,987  11,246  10,962

U.S. Statutory Information

U.S. Statutory Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Statutory Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statutory capital and surplus

 

 

3,915

 

4,636

 

 

5,634

 

 

5,109

 

 

4,429

 

 

 

Statutory capital and surplus

 

 

7,021

 

 

7,207

 

 

7,940

 

 

7,119

 

 

6,140

 

 

 
Asset valuation reserve  396 390  477  497  500   Asset valuation reserve  413  390  477  497  500   

(1)
On August 29, 2003, we sold our Japanese life insurance and domestic auto and homeowners' insurance businesses for aggregate cash proceeds of approximately $2.1 billion, consisting of $1.6 billion paid to us and $0.5 billion paid to other GE affiliates, plus pre-closing dividends. See notesnote 4 and 24 to our audited historical combined financial statements, for the period ended December 31, 2002.included elsewhere in this prospectus.

(2)
During 2000, we consummated three significant business combinations:

(3)
As of January 1, 2002, we adopted Statement of Financial Accounting StandardStandards 142,Goodwill and Other Intangible Assets,and, in accordance with its provisions, discontinued amortization of goodwill. Goodwill amortization was $84 million, $70 million and $53 million for the years ended December 31, 2001, 2000 and 1999, respectively, excluding goodwill amortization included in discontinued operations.

(4)
RepresentsReflects the results of the following businesses whichthat are owned by GEFAHI but which will not be transferred to us in connection with our corporate reorganization, including (a) UFLIC, (b) the Partnership Marketing Group business, (c)(b) an institutional asset management business, and (d)(c) several other small businesses that are not part of our core ongoing business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview—Our historical and pro forma financial information."

(5)
Reflects non-recourse funding obligations. These obligations are represented by notes that bear a floating rate of interest and mature in 2033. The notes were issued by a wholly-owned captive reinsurance subsidiary of our company to fund certain statutory reserves. Both principal and interest payments are guaranteed by a third-party insurance company.


Recent Developments

        The following table sets forth our historical combined and pro forma financial information as of March 31, 2004 and for the three months ended March 31, 2004 and March 31, 2003. The pro forma financial information is prepared on a basis comparable to the pro forma financial information set forth under "Selected Historical and Pro Forma Financial Information," except that the financial position information as of March 31, 2004 is adjusted to give effect to the transactions described in that section as if each had occurred as of that date.

 
 Historical
 Pro forma
 
 Three months ended March 31,
 Three months ended March 31,
(Amounts in millions, except per share amounts)

 2004
 2003
 2004
 2003
Combined Statement of Earnings Information            
Revenues:            
 Premiums $1,722 $1,585 $1,619 $1,476
 Net investment income  1,020  993  755  722
 Net realized investment gains  16  21  15  20
 Policy fees and other income  263  233  166  137
  
 
 
 
  Total revenues  3,021  2,832  2,555  2,355
  
 
 
 
Benefits and expenses:            
 Benefits and other changes in policy reserves  1,348  1,253  1,086  996
 Interest credited  396  409  330  343
 Underwriting, acquisition, and insurance expenses, net of deferrals  508  488  414  404
 Amortization of deferred acquisition costs and intangibles  345  300  286  251
 Interest expense  47  28  45  27
  
 
 
 
  Total benefits and expenses  2,644  2,478  2,161  2,021
  
 
 
 
Earnings from continuing operations before income taxes  377  354  394  334
Provision for income taxes  117  100  128  94
  
 
 
 
Net earnings from continuing operations $260 $254 $266 $240
  
 
 
 

Pro forma earnings from continuing operations per share:

 

 

 

 

 

 

 

 

 

 

 

 
 Basic $0.53 $0.52 $0.54 $0.49
  
 
 
 
 Diluted $0.53 $0.52 $0.54 $0.49
  
 
 
 
Pro forma shares outstanding:            
 Basic  489.5  489.5  489.5  489.5
  
 
 
 
 Diluted  490.0  490.0  490.0  490.0
  
 
 
 

Selected Segment Information

 

 

 

 

 

 

 

 

 

 

 

 
Total revenues:            
 Protection $1,566 $1,476 $1,489 $1,397
 Retirement Income and Investments  976  955  725  686
 Mortgage Insurance  263  227  263  227
 Affinity  139  137    
 Corporate and Other  77  37  78  45
  
 
 
 
  Total $3,021 $2,832 $2,555 $2,355
  
 
 
 

Net earnings (loss) from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 
 Protection $124 $131 $123 $124
 Retirement Income and Investments  31  42  32  26
 Mortgage Insurance  103  85  103  85
 Affinity  (2)     
 Corporate and Other  4  (4) 8  5
  
 
 
 
  Total $260 $254 $266 $240
  
 
 
 

        The increases in historical and pro forma net earnings for the three months ended March 31, 2004 compared with the three months ended March 31, 2003 include, in each case, $12 million due to the favorable impact of changes in foreign exchange rates.


 
 Historical
 Pro forma
(Dollar amounts in millions)

 As of March 31,
2004

 As of March 31,
2004

Combined Statement of Financial Position Information      
Total investments $81,466 $61,776
All other assets  25,070  38,430
  
 
 Total assets $106,536 $100,206
  
 

Policyholder liabilities

 

$

67,346

 

$

66,841
Non-recourse funding obligations  600  600
Short-term borrowings  2,497  2,401
Long-term borrowings  516  516
All other liabilities  18,152  17,580
  
 
 Total liabilities $89,111 $87,938
  
 

Accumulated nonowner changes in stockholder's interest

 

$

2,976

 

$

1,987
Total stockholder's interest  17,425  12,268

Protection

        The following table sets forth the historical and pro forma results of operations relating to our Protection segment.

 
 Historical
 Pro forma
 
 Three months ended March 31,
 Three months ended March 31,
(Dollar amounts in millions)

 2004
 2003
 2004
 2003
Revenues            
Life insurance $373 $360 $373 $360
Long-term care insurance  606  572  529  493
European payment protection insurance  416  370  416  370
Group life and health insurance  171  174  171  174
  
 
 
 
 Total revenues $1,566 $1,476 $1,489 $1,397
  
 
 
 

Segment net earnings

 

 

 

 

 

 

 

 

 

 

 

 
Life insurance $57 $55 $57 $55
Long-term care insurance  40  42  39  35
European payment protection insurance  20  22  20  22
Group life and health insurance  7  12  7  12
  
 
 
 
 Total segment net earnings $124 $131 $123 $124
  
 
 
 

Annualized first-year premiums
and deposits
(1)

 

 

 

 

 

 

 

 

 

 

 

 
Life insurance(2) $37 $44 $37 $44
Long-term care insurance  42  62  42  62
Group life and health insurance  26  21  26  21
  
 
 
 
 Total annualized first-year premiums and deposits $105 $127 $105 $127
  
 
 
 

Gross written premiums

 

 

 

 

 

 

 

 

 

 

 

 
European payment protection insurance $179 $373 $179 $373

(1)
Annualized first-year premiums and deposits reflect the amount of business we generated during each period shown and do not include renewal premiums or deposits on policies written during prior periods. We consider annualized first-year premiums and deposits to be a measure of our operating performance because they represent a measure of new sales of insurance policies during a specified period, rather than a measure of our revenues or profitability during that period. This operating measure enables us to compare our operating performance across periods without regard to revenues or profitability related to policies sold in prior periods or from investments or other sources.

(2)
Includes annualized first-year premiums of $26 million and $31 million in the three months ended March 31, 2004 and 2003, respectively, and deposits of $11 million and $13 million in the three months ended March 31, 2004 and 2003, respectively.

        Segment net earnings decreased by $7 million, or 5%, to $124 million for the three months ended March 31, 2004 from $131 million for the three months ended March 31, 2003. This decrease was primarily the result of decreases in net earnings for group life and health, long-term care and European payment protection insurance products, offset in part by an increase in net earnings for life insurance products. The decrease in group life and health insurance was primarily attributable to higher lapse rates in our dental insurance and administration fee products, as well as higher claims incidence in our life insurance products. The decrease in long-term care insurance was primarily attributable to the loss of $4 million of investment income resulting from a reallocation of capital from our long-term care insurance business to our Corporate and Other segment. The decrease in long-term care insurance was offset in part by growth of the in-force block. The decrease in European payment protection insurance was primarily the result of increased claims in our run-off block of U.K. travel insurance and the loss of certain foreign tax benefits, offset in part by $3 million due to the favorable impact of changes in foreign exchange rates.

        Pro forma segment net earnings decreased $1 million, or 1%, to $123 million for the three months ended March 31, 2004 from $124 million for the three months ended March 31, 2003. Pro forma segment net earnings differ from historical segment net earnings due primarily to the reinsurance with UFLIC of the block of long-term care insurance policies that we reinsured from Travelers in 2000. Pro forma net earnings for long-term care insurance increased $4 million, or 11%, to $39 million for the three months ended March 31, 2004 from $35 million for the three months ended March 31, 2003.

        Annualized first-year premiums and deposits for our life insurance products decreased $7 million, or 16%, to $37 million for the three months ended March 31, 2004 from $44 million for the three months ended March 31, 2003. This decrease was primarily a result of term life insurance price increases implemented in March 2003 that contributed to lower sales of term life insurance in the remainder of 2003 and the three months ended March 31, 2004.

        In the third quarter of 2003, we started selling our newest long-term care insurance products in selected markets. These products were priced to achieve our target returns on capital and to reflect new features and benefits, trends in lapse rates, interest rates, morbidity and adverse claims experience in certain higher risk policyholder classes. Our pricing strategy for these products has contributed to lower sales in recent periods, with annualized first-year premiums for our long-term care insurance products decreasing $20 million, or 32%, to $42 million for the three months ended March 31, 2004 from $62 million for the three months ended March 31, 2003. We believe that our pricing strategy is appropriate relative to the underlying risk exposure of these products and that it will lead to increased net earnings over time.

        Gross written premiums for our European payment protection insurance products decreased $194 million, or 52%, to $179 million for the three months ended March 31, 2004 from $373 million for the three months ended March 31, 2003. To enable us to achieve our targeted returns on capital on our European payment protection insurance products, we decided not to renew certain distribution relationships in the U.K. market. As a result of that decision, gross written premiums in the U.K. decreased by 84%, to $46 million for the three months ended March 31, 2004 from $279 million for the three months ended March 31, 2003. This decline in the U.K. was partially offset in Continental Europe, where gross written premiums increased by 42%, to $133 million for the three months ended March 31, 2004 from $94 million for the three months ended March 31, 2003.

        Annualized first-year premiums for our group life and health insurance products increased $5 million, or 24%, to $26 million for the three months ended March 31, 2004 from $21 million for the three months ended March 31, 2003. This increase was primarily a result of a 53% increase in annualized first-year premiums attributable to growth in our dental, disability and life insurance products.



Retirement Income and Investments

        The following table sets forth the historical and pro forma results of operations relating to our Retirement Income and Investments segment.

 
 Historical
 Pro forma
 
 
 Three months ended March 31,
 Three months ended March 31,
 
 
 2004
 2003
 2004
 2003
 
(Dollar amounts in millions)

  
  
  
  
 
Revenues             
Spread-based retail products $788 $781 $584 $562 
Spread-based institutional products  76  95  76  95 
Fee-based products  112  79  65  29 
  
 
 
 
 
 Total revenues $976 $955 $725 $686 
  
 
 
 
 

Segment net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 
Spread-based retail products $22 $33 $17 $19 
Spread-based institutional products  6  11  6  11 
Fee-based products  3  (2) 9  (4)
  
 
 
 
 
 Total segment net earnings $31 $42 $32 $26 
  
 
 
 
 

Annualized first-year premiums and deposits(1)

 

 

 

 

 

 

 

 

 

 

 

 

 
Spread-based retail products(2) $643 $683 $643 $683 
Spread-based institutional products(3)  501  783  501  783 
Fee-based products  517  557  517  557 
  
 
 
 
 
 Total annualized first-year premiums and deposits $1,661 $2,023 $1,661 $2,023 
  
 
 
 
 

(1)
Annualized first-year premiums and deposits reflect the amount of business we generated during each period shown and do not include renewal premiums or deposits on policies written during prior periods. We consider annualized first-year premiums and deposits to be a measure of our operating performance because they represent a measure of new sales of insurance policies during a specified period, rather than a measure of our revenues or profitability during that period. This operating measure enables us to compare our operating performance across periods without regard to revenues or profitability related to policies sold in prior periods or from investments or other sources.

(2)
Includes annualized first-year premiums of $277 million and $258 million in the three months ended March 31, 2004 and 2003, respectively, and deposits of $366 million and $425 million in the three months ended March 31, 2004 and 2003, respectively.

(3)
Deposits on spread-based institutional products include contracts that have matured but are redeposited with our company. For the three months ended March 31, 2004 and 2003, the amounts of customer redeposits were $177 million and $275 million, respectively.

13        Segment net earnings decreased $11 million, or 26%, to $31 million for the three months ended March 31, 2004 from $42 million for the three months ended March 31, 2003. This decrease was primarily the result of declining yields on invested assets, resulting in lower earnings from our spread-based retail and institutional products. The decrease was also the result of favorable mortality experience in our structured settlement business during the three months ended March 31, 2003 that did not recur in the three months ended March 31, 2004. Segment net earnings were favorably affected by an increase in fees earned pursuant to new arrangements we entered into, effective as of January 1, 2004, to provide investment administrative services related to a pool of municipal guaranteed investment contracts, or GICs, issued by affiliates of GE.


        Pro forma segment net earnings increased $6 million, or 23%, to $32 million for the three months ended March 31, 2004 from $26 million for the three months ended March 31, 2003. Pro forma segment net earnings differ from historical segment net earnings due to the reinsurance with UFLIC of our in-force blocks of structured settlements and substantially all of our in-force blocks of variable annuities. Pro forma net earnings for spread-based retail products decreased $2 million in the three months ended March 31, 2004 from the three months ended March 31, 2003, and historical net earnings decreased $11 million over the same periods. Pro forma net earnings for fee-based products increased $13 million in the three months ended March 31, 2004 from the three months ended March 31, 2003, and historical net earnings increased $5 million over the same periods.


        Annualized first-year premiums and deposits for our spread-based retail products decreased $40 million, or 6%, to $643 million for the three months ended March 31, 2004 from $683 million for the three months ended March 31, 2003. This decrease was primarily the result of lower sales of structured settlements and deposits for fixed annuities, offset in part by an increase in sales of income annuities. The decrease in structured settlements was primarily due to our decision to write those contracts on an opportunistic basis where we are able to achieve our targeted returns. The decrease in fixed annuities was primarily due to lower minimum guaranteed crediting rates introduced throughout 2003, which resulted in lower sales in the three months ended March 31, 2004, compared to the three months ended March 31, 2003. Deposits for our spread-based institutional products decreased $282 million, or 36%, to $501 million for the three months ended March 31, 2004 from $783 million for the three months ended March 31, 2003. The decrease in spread-based institutional products was primarily due to fewer requests for bids following the announcement in November 2003 of our planned separation from GE. We believe this decrease was due primarily to the limited availability to our customers of information about our company prior to the completion of this offering. Deposits for our fee-based products decreased $40 million, or 7%, to $517 million for the three months ended March 31, 2004 from $557 million for the three months ended March 31, 2003. This decrease was primarily the result of lower sales of variable annuities, which we believe was attributable to a market shift to variable annuity products with certain guaranteed benefit features that we did not offer during the three months ended March 31, 2004.

Mortgage Insurance

        The following table sets forth the historical results of operations relating to our Mortgage Insurance segment. The Mortgage Insurance segment's results are not affected by any of the pro forma adjustments.

 
 Historical
 
 Three months ended March 31,
(Dollar amounts in millions)

 2004
 2003
Revenues      
U.S. mortgage insurance $154 $170
International mortgage insurance  109  57
  
 
 Total revenues $263 $227
  
 
Segment net earnings      
U.S. mortgage insurance $59 $57
International mortgage insurance  44  28
  
 
 Total segment net earnings $103 $85
  
 
New insurance written      
U.S. mortgage insurance $6,798 $14,530
International mortgage insurance  10,905  6,257
  
 
 Total new insurance written $17,703 $20,787
  
 

        Segment net earnings increased $18 million, or 21%, to $103 million for the three months ended March 31, 2004 from $85 million for the three months ended March 31, 2003. This increase was primarily the result of a $16 million increase in international net earnings, attributable to higher levels of insurance in force and invested assets. The increase in our international net earnings included $9 million due to the favorable impact of changes in foreign exchange rates. Net earnings of our U.S. mortgage business increased $2 million, primarily as a result of lower underwriting costs due to lower mortgage refinance activity. The lower mortgage refinancing activity resulted in increased persistency in our U.S. mortgage insurance business, with policy cancellation rates in our U.S. flow mortgage insurance business decreasing to 32% for the three months ended March 31, 2004 from 53% for the three months ended March 31, 2003.

        New insurance written decreased $3,084 million, or 15%, to $17,703 million for the three months ended March 31, 2004 from $20,787 million for the three months ended March 31, 2003. This decrease was primarily the result of a $7,732 million decrease in U.S. new insurance written, primarily attributable to lower mortgage refinancing activity. The decrease in U.S. new insurance written was offset in part by a $4,648 million increase in international new insurance written. The increase in our international new insurance written included $2,168 million due to the favorable impact of changes in foreign exchange rates.



Affinity

        Segment net earnings on a historical basis decreased $2 million to a ($2) million loss for the three months ended March 31, 2004. Pro forma financial information is not presented for the Affinity segment because we will not acquire any of the Affinity segment businesses from GEFAHI.

Corporate and Other

        Segment net earnings increased $8 million, or 200%, to $4 million for the three months ended March 31, 2004 from $(4) million for the three months ended March 31, 2003. Pro forma segment net earnings increased $3 million, or 60%, to $8 million for the three months ended March 31, 2004 from $5 million for the three months ended March 31, 2003. The increase in net earnings was due primarily to $4 million of increased investment income resulting from a reallocation of capital from our long-term care insurance business to our Corporate and Other segment. The increase in net earnings was also the result of increases in policy fees and other income that were offset in part by an increase in interest expense, both of which related to the securitization entities that were consolidated in our financial statements in connection with our adoption of FASB Interpretation 46,Consolidation of Variable Interest Entities, on July 1, 2003. Pro forma net earnings in our Corporate and Other segment were higher than historical segment net earnings due to higher invested assets in the Corporate and Other segment after giving effect to the reinsurance transactions with UFLIC.

New Accounting Pronouncement

        On January 1, 2004 we adopted American Institute of Certified Public Accountants Statement of Position 03-1 ("SOP 03-1"),Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts. SOP 03-1 provides guidance on separate account presentation and valuation, the accounting for sales inducements and the classification and valuation of long-duration contract liabilities. Prior to adopting SOP 03-1 we held reserves for both variable annuity guaranteed minimum death benefits and the higher-tier annuitization benefit on two-tiered annuities. To record these reserves in accordance with SOP 03-1, we released $10 million, or 7%, of our two-tiered annuity reserves as well as $3 million of guaranteed minimum death benefit reserves. After giving effect to the impact of the additional deferred acquisition cost amortization related to these reserve releases, we recorded a $5 million benefit in cumulative effect of accounting changes, net of taxes, which is not reflected in net earnings from continuing operations.



Risk Factors

        You should carefully consider the following risks before investing in our common stock. These risks could materially affect our business, results of operations or financial condition and cause the trading price of our common stock to decline. You could lose part or all of your investment.

Risks Relating to Our Businesses

Interest rate fluctuations could adversely affect our cash flowbusiness and profitability.

        Our life insurance and annuityinvestment products are sensitive to interest rate fluctuations and other interest-sensitive products expose us to the risk that falling interest rates will reduce our "spread," or the difference between the returns we earn on the investments that support our obligations under these products and the amounts that we must pay policyholders and contractholders. Because we may reduce the interest rates we credit on most of these products only at limited, pre-established intervals, and because some of them have guaranteed minimum crediting rates, declines in interest rates may adversely affect the profitability of those products. For example, interest rates declined to unusually low levels from 2001 to 2003. During this period, our net earnings from spread-based products, such as fixed and income annuities and guaranteed investment contracts, declined from $207 million for the year ended December 31, 2001 to $138 million for the year ended December 31, 2003.

        During periods of increasing market interest rates, we must offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and we must increase crediting rates on in-force products to keep these products competitive. In addition, increases in market interest rates may cause increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders seek to shift assets to products with perceived higher returns. This processIncreases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial position,condition and results of operations and cash flow from operating activities.operations. An increase in policy surrenders and withdrawals also may also require us to accelerate amortization of policydeferred acquisition costs or other intangibles or cause an impairment of goodwill, which would reduce our net earnings.

        Our long-term care insurance products also expose us to the risk of interest rate fluctuations. The pricing and expected future profitability of our long-term care insurancethese products are based in part on expected investment returns. Over time, long-term care insurance products generally produce positive cash flows as customers pay periodic premiums, which we invest as we receive them. Declining interest rates may reduce our ability to achieve our targeted investment margins and may adversely affect the profitability of our long-term care insurance products.

        In our mortgage insurance business, rising interest rates generally reduce the volume of new mortgages, resulting in a decrease in the volume of new insurance written. Rising interest rates also can increase the monthly mortgage payments for insured homeowners with adjustable rate mortgages, or ARMs, which could have the effect of increasing default rates on ARM loans and thereby increasing our exposure on our mortgage insurance policies. This is particularly relevant in our non-U.S. mortgage insurance business, where ARMs are the predominant mortgage product. Declining interest rates increase the rate at which insured borrowers refinance their existing mortgages, thereby resulting in cancellations of the mortgage insurance covering the refinanced loans. Declining interest rates also generally are associated with home price appreciation, which may provide insured borrowers the option of canceling their mortgage insurance coverage earlier than we anticipated in pricing that coverage. These cancellations could result in a significant decline in revenueshave an adverse effect on our results from our mortgage insurance business.

        Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During periods of declining market interest rates, the interest we receive on variable interest rate investments decreases. In addition, during those periods, we are forced to reinvest the cash we receive as interest or return of principal on our investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of fixed-income securities also may



decide to prepay their obligations in order to borrow at lower market rates, which exacerbates the risk that we may have to invest the cash proceeds of these securities in lower-yielding or lower-credit instruments. Declining interest rates from 2001 to 2003 contributed to a decrease in our weighted average investment yield from 6.5% for the year ended December 31, 2001 to 5.2% for the year ended December 31, 2003. For additional information regarding our investment portfolio, see "Business—Investments." For additional information regarding the sensitivity of the fixed maturities in our investment portfolio to interest rate fluctuations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Sensitivity analysis."

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Downturns and volatility in equity markets may negativelycould adversely affect our business and profitability.

        Significant downturns and volatility in equity markets could have an adverse effect on our financial condition and results of operations in twothree principal ways. First, market downturns and volatility may cause potential new purchasers of our products to refrain from purchasing products, such as variable annuities and variable life insurance, that have returns linked to the performance of the equity markets and may cause current policyholders and contractholders to withdraw cash values from their variable annuities or variable life insurance policies or reduce their investments.those products. The sharp declines in the equity markets during 2001 and 2002 have had adverse impacts on our sales of these products.variable annuities and other products linked to equity markets. For example, our deposits for variable annuities decreased by 28% from $2,309 million for the year ended December 31, 2001 to $1,667 million for the year ended December 31, 2002.

        Second, downturns and volatility in equity markets can have an adverse effect on the revenues and returns from our insurance, annuity and asset management businesses. Because revenues on our separate account and private asset management products and servicesservices. Because these products depend on fees related primarily to the value of assets under management, declines in the equity markets have reduced and could further reduce, our revenues by reducing the value of the investment assets we manage. For example, the recent equity market downturn caused a reduction in the value of the separate account assets underlying our variable life insurance policies, variable annuities and assets under management. As a result, our policy fees and other income in our Retirement Income and Investments segment decreased by 7% from $243 million for the year ended December 31, 2002 to $225 million for the year ended December 31, 2003. In addition, some of our variable annuity products contain guaranteed minimum death benefits and guaranteed minimum income payments tied to the investment performance of the assets held within the variable annuity. Although we will reinsure substantially all of our existing block of variable annuities with UFLIC, we intend to continue offering these products. A significant market decline could result in declines in account values which could increase our payments under the guaranteed minimum death benefits and certain income payments in connection with variable annuities, which could have an adverse effect on our financial condition and results of operations. We also

        Third, we are exposed to equity risk on our holdings of common stock and other equities. An economic downturn, corporate malfeasance or a variety of other factors could cause declines in the value of our equity portfolio and cause our net earnings to decline. For additional information regarding the sensitivity of the equity securities in our investment portfolio to equity market fluctuations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk—Sensitivity analysis."

Defaults in our fixed-income securities portfolio may reduce our earnings.

        Issuers of the fixed-income securities that we own may default on principal and interest payments. As of September 30,each of December 31, 2003 and December 31, 2002, and 2001, respectively, 92%, 93% and 92% of our fixed-maturity securitiesfixed maturities had ratings equivalent to investment-grade. Nevertheless, as a result of the economic downturn and recent corporate malfeasance, the number of companies defaulting on their debt obligations increased dramatically in 2001 and 2002. As of September 30,December 31, 2003 and December 31, 2002, and 2001, we had fixed-maturity securitiesfixed maturities in or near default (where the issuer has missed payment of principal or interest or entered bankruptcy) with a fair value of $271$190 million and $181 million, and $202 million, respectively. A protractedAn economic downturn, or further events of corporate



malfeasance or a variety of other factors could produce additional defaultscause declines in the value of our fixed maturities porfolio and cause our investment returns and net earnings to decline.

        We recognized gross capital gains of $392$473 million, $790 million and $814 million for the nine months ended September 30, 2003, and the years ended December 31, 2003, 2002 and 2001, respectively. We realized these capital gains in part to offset default-related losses during those periods. However, capital gains may not be available in the future, and if they are, we may elect not to recognize capital gains to offset losses.

A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and have a significant adverse effect onadversely affect our financial condition and results of operations.

        Financial strength ratings, which various ratings organizations publish as measures of an insurance company's ability to meet contractholder and policyholder obligations, are important to maintaining public confidence in our products, the ability to market our products and our competitive position. A downgrade in our financial strength ratings, or the announced potential for a downgrade, could have a significant adverse effect on our financial condition and results of operations in many ways, including:

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        In anticipation of thisconnection with our initial public offering and separation from GE, our principal life insurance companies were downgraded from financial strength ratings of "AA" (Very Strong) by S&P and "Aa2" (Excellent) by Moody's, to "AA-" (Very Strong) and "Aa3,""Aa3" (Excellent), respectively. In addition, as a result of our 2003 decision to reduce excess capital at our mortgage insurance subsidiaries, our mortgage insurance companies were downgraded from financial strength ratings of "AAA" (Extremely Strong) by S&P and Fitch and "Aaa" (Exceptional) by Moody's to "AA" (Very Strong) by S&P and Fitch and "Aa2" (Excellent) by Moody's. Although we do not believe that these downgrades have negatively affected our business overall in any material respect, we cannot assure you that they will not have an adverse effect over time or that our ratings will not be further downgraded in the future. The "AA" and "AA-" ratings are the third- and fourth-highest of S&P's 21 ratings categories, respectively. The "Aa2" and "Aa3" ratings are the third- and fourth-highest of Moody's 21 ratings categories, respectively. The "AA" rating is the third-highest of Fitch's 24 ratings categories.

        The charters of the Federal National Mortgage Corporation, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac, only permit them to buy high loan-to-value mortgages that are insured by a "qualified insurer," as determined by each of them. Their current rules effectively provide that they will accept mortgage insurance only from private mortgage insurers with financial strength ratings of at least "AA-" by S&P and "Aa3" by Moody's. If our mortgage insurance companies' financial strength ratings decrease below the thresholds established by Fannie Mae and Freddie Mac, we would not be able to insure mortgages purchased by Fannie Mae or Freddie Mac. Approximately 66%68% of the loans we insured in the U.S. during the nine monthsyear ended September 30,December 31, 2003 were sold to either Fannie Mae or Freddie Mac. An inability to insure mortgage loans sold to Fannie Mae or Freddie Mac, or their transfer of our existing policies to an alternative mortgage insurer, would have an adverse effect on our financial condition and results of operations.

        In 2003, the U.S. Office of Federal Housing Enterprise Oversight announced a risk-based capital rule that treats credit enhancements issued by private mortgage insurers with financial strength ratings of "AAA" more favorably than those issued by "AA" rated insurers. Neither Fannie Mae nor Freddie Mac has adopted policies that distinguish between "AA" rated and "AAA" rated mortgage insurers.



However, if Fannie Mae or Freddie Mac adopts policies that treat "AAA" rated insurers more favorably than "AA" rated insurers, our competitive position may suffer.

        Our mortgage insurance subsidiaries in Canada and Australia are also subject to local regulations that require them to maintain certain specified minimum financial strength ratings to continue their operations.

        In addition to the financial strength ratings of our insurance subsidiaries, ratings agencies also publish credit ratings for our company. The credit ratings have an impact on the interest rates we pay on the money we borrow. Therefore, a downgrade in our credit ratings could increase our cost of borrowing and have an adverse effect on our financial condition and results of operations.

The ratings of our insurance subsidiaries are not evaluations directed to the protection of investors in our common stock.

        The ratings of our insurance subsidiaries described under "Business—Financial Strength Ratings" reflect each rating agency's current opinion of each subsidiary's financial strength, operating performance and ability to meet obligations to policyholders and contractholders. These factors are of concern to policyholders, contractholders, agents, sales intermediaries and lenders. Ratings are not evaluations directed to the protection of investors in our common stock. They are not ratings of our common stock and should not be relied upon when making a decision to buy, hold or sell our shares of common stock or any other

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security. In addition, the standards used by rating agencies in determining financial strength are different from capital requirements set by state insurance regulators. We may need to take actions in response to changing standards set by any of the ratings agencies, as well as statutory capital requirements, which could cause our business and operations to suffer.

If our reserves for future policy benefits and claims are inadequate, we may be required to increase our reserve liabilities, which could adversely affect our results of operations and financial condition.

        We establish reserve liabilities to provide for future obligations under our insurance policies, annuities and other investment products, and mortgage insurance contract underwriting arrangements. Reserves do not represent an exact calculation of liability, but rather are estimates of expected net policy and contract benefits and claims payments over time. Our reserving assumptions and estimates require significant judgments and, therefore, are inherently uncertain. We cannot determine with precision the ultimate amounts that we will pay for actual benefit and claim payments, the timing of those payments, or whether the assets supporting our policy and contract liabilities will increase to the levels we estimate before payment of benefits or claims. We continually monitor our reserves. If we concludedconclude that our reserves are insufficient to cover actual or expected policy and contract benefits and claims payments, we would be required to increase our reserves and incur income statement charges for the period in which we make the determination, which could adversely affect our results of operations and financial condition. For more information on how we set our reserves, see "Business—Reserves."

OurAs a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay dividends to our stockholders and to service debt will be subject to legal restrictions on the payment of dividends to us bymeet our insurance subsidiaries.obligations.

        We will act as a holding company for our insurance subsidiaries and will not have any significant operations of our own. As a holding company, we will rely on dividendsDividends from our subsidiaries as theand permitted payments to us under our tax sharing arrangements with our subsidiaries will be our principal sourcesources of cash to pay stockholder dividends and to meet our obligations. These obligations includingwill include our operating expenses, interest and principal on debt and contract adjustment payments on our Equity Units. These obligations also include amounts we will owe to GE under the tax matters agreement that we and GE will enter into prior to the completion of this offering. If the cash we receive from our subsidiaries pursuant to dividend payment and tax sharing arrangements is insufficient for us to fund any of these obligations, we may be required to raise cash through the incurrence of debt, the issuance of additional equity or the sale of assets.



        The payment of operating expenses, principaldividends and interest on debt obligations and stockholder dividends. Ourother distributions to us by our insurance subsidiaries is regulated by insurance laws and regulations. In general, dividends in excess of prescribed limits are subject to various U.S.deemed "extraordinary" and non-U.S. statutory and regulatory restrictions that limit the amount of dividends or distributions anrequire insurance company may pay without regulatory approval. See "Regulation." TheDuring the years ended December 31, 2003, 2002 and 2001, we received dividends from our insurance subsidiaries of $1,472 million ($1,400 million of which were deemed "extraordinary"), $840 million ($375 million of which were deemed "extraordinary") and $410 million (none of which were deemed "extraordinary"), respectively. In addition, during the years ended December 31, 2003, 2002 and 2001, we received dividends from insurance subsidiaries related to discontinued operations of $495 million, $62 million and $0, respectively. Based on statutory results as of December 31, 2003, our subsidiaries could pay dividends of $1,121 million to us in 2004 without obtaining regulatory approval. However, as a result of the dividends we will pay in connection with our corporate reorganization, most of our insurance subsidiaries will not be able to pay us any additional dividends for the twelve months following this offering without prior regulatory approval. As part of our corporate reorganization, we will retain cash at the holding company level which we believe will be adequate to fund our dividend payments, debt service, obligations under the tax matters agreement and other obligations until our subsidiaries can resume paying dividends to us. In addition, the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our stockholders, are also subject to various conditions imposed by the rating agencies for us to maintain our ratings.

Some of our investments are relatively illiquid.

        Our investments in privately placed debt securities,fixed maturities, mortgage loans, policy loans, limited partnership interests, and real estate and restricted investments held by securitization entities are relatively illiquid. These asset classes represented approximately 20%30% of the carrying value of our total cash and invested assets as of September 30,December 31, 2003, on a pro forma basis. If we require significant amounts of cash on short notice in excess of our normal cash requirements, we may have difficulty selling these investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both. For example, our floating rate funding agreements generally contain "put" provisions through which a contractholder may terminate the funding agreement for any reason after giving notice within the contract's specified notice period, which is generally 90 days but can be less than 30 days. As of September 30,December 31, 2003, the aggregate amount of our outstanding funding agreements with put option features was approximately $3.1$2.4 billion, and the aggregate amount of funding agreements with put option notice periods of 30 days or less was $750$450 million. If an unexpected number of contractholders exercise this right and we are unable to access other liquidity sources, we may have to liquidate assets quickly. Our inability to quickly dispose of illiquid investments could have an adverse effect on our financial condition and results of operations.

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Intense competition could negatively affect our ability to maintain or increase our market share and profitability.

        Our businesses are subject to intense competition. We believe the principal competitive factors in the sale of our products are product features, price, commission structure, marketing and distribution arrangements, brand, reputation, financial strength ratings and service.

        Many other companies actively compete for sales in our protection and retirement income and investments markets, including other major insurers, banks, other financial institutions and specialty providers. The principal direct and indirect competitors for our mortgage insurance business include other private mortgage insurers, as well as federal and state governmental and quasi-governmental agencies in the U.S., including the Federal Housing Administration, or FHA, and to a lesser degree, the Veterans Administration, or VA, Fannie Mae and Freddie Mac, as well as local and state housing finance agencies. We also compete in our mortgage insurance business with structured transactions in the capital markets and with other financial instruments designed to manage credit risk, such as credit default swaps and credit linked notes, with lenders who forego mortgage insurance, or self-insure, on loans held in their portfolios, and with lenders that provide mortgage reinsurance through captive



mortgage reinsurance programs. In Canada and some European countries, our mortgage insurance business competes directly with government entities, which provide comparable mortgage insurance. Government entities with which we compete typically do not have the same capital requirements and do not have the same profit objectives as we do. Although private companies, such as our company, establish pricing terms for their products to achieve targeted returns, these government entities may offer products on terms designed to accomplish social or political objectives or reflect other non-economic goals.

        In many of our product lines, we face competition from competitors that have greater market share or breadth of distribution, offer a broader range of products, services or features, assume a greater level of risk, have lower profitability expectations or have higher financial strength ratings than we do. Many competitors offer similar products and use similar distribution channels. The substantial expansion of banks' and insurance companies' distribution capacities and expansion of product features in recent years have intensified pressure on margins and production levels and have increased the level of competition in many of our business lines.

We may be unable to attract and retain independent sales intermediaries and dedicated sales specialists.

        We distribute our products through financial intermediaries, independent producers and dedicated sales specialists. We compete with other financial institutions to attract and retain commercial relationships in each of these channels, and our success in competing for sales through these sales intermediaries depends onupon factors such as the amount of sales commissions and fees we pay, the breadth of our product offerings, the strength of our brand, our perceived stability and our financial strength ratings, the marketing and services we provide to them and the strength of the relationships we maintain with individuals at those firms. From time to time, due to competitive forces, we have experienced unusually high attrition in particular sales channels for specific products. Our inability to continue to recruit productive independent sales intermediaries and dedicated sales specialists, or our inability to retain strong relationships with the individual agents at our independent sales intermediaries, wouldcould have an adverse effect on our financial condition and results of operations.

If the counterparties to our reinsurance arrangements or to the derivative instruments we use to hedge our business risks default, we may be exposed to risks we had sought to mitigate, which could adversely affect our financial condition and results of operations.

        We use reinsurance and derivative instruments to mitigate our risks in various circumstances. Reinsurance does not relieve us of our direct liability to our policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our reinsurers. We cannot assure you that

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our reinsurers will pay the reinsurance recoverable owed to us now or in the future or that they will pay these recoverables on a timely basis. A reinsurer's insolvency or inability or unwillingness to make payments under the terms of its reinsurance agreement with us could have an adverse effect on us.our financial condition and results of operations.

        Prior to the completion of this offering, we will cede to UFLIC, effective as of January 1, 2004, allpolicy obligations under our structured settlement contracts, which had reserves of $12.0 billion, and our in-force blocksvariable annuity contracts, which had general account reserves of structured settlements,$2.8 billion and separate account reserves of $7.9 billion, in each case as of December 31, 2003. These contracts represent substantially all of our in-force blockscontracts that were in force as of variable annuities, andDecember 31, 2003 for these products. In addition, effective as of January 1, 2004, we will cede to UFLIC policy obligations under a block of long-term care insurance policies that we reinsured from Travelers. As of September 30, 2003, these blocks of businessTravelers, which had aggregate reserves of $16.1 billion.$1.5 billion as of December 31, 2003. UFLIC has agreed to establish trust accounts for our benefit to secure its obligations under the reinsurance arrangements, and General Electric Capital Corporation, an indirect subsidiary of GE, or GE Capital, has agreed to maintain UFLIC's risk-based capital above a specified minimum level. If UFLIC becomes insolvent notwithstanding this agreement, and the amounts in the trusts



trust accounts are insufficient to pay UFLIC's obligations to us, our financial condition and results of operations could be materially adversely affected. See "Arrangements between GE and our Company—Reinsurance Transactions."

        In addition, we use derivative instruments to hedge various business risks. We enter into a variety of derivative instruments, including options, forwards, interest rate and currency swaps and options to enter into interest rate and currency swaps with a number of counterparties. If our counterparties fail to honor their obligations under the derivative instruments, our hedges of the related risk will be ineffective. That failure could have an adverse effect on our financial condition and results of operations.

Fluctuations in foreign currency exchange rates and international securities markets could negatively affect our profitability.

        Our international operations generate revenues denominated in local currencies, and we invest cash generated outside the U.S. in non-U.S.-denominated securities.currencies. For the nine months ended September 30, 2003 and the years ended December 31, 2003, 2002 and 2001, respectively, 18%, 14% and 14% of our revenues, and 27%26%, 12% and 11% of our net earnings from continuing operations were generated by our international operations. We generally invest cash generated by our international operations in securities denominated in local currencies. As of December 31, 2003 and as of each such date,2002, approximately 5% of our invested assets were held by our international operations and were invested primarily in non-U.S.-denominated securities. Although investing in non-U.S.-denominated fixed-income securities denominated in local currencies limits the effect of currency exchange rate fluctuation on local operating results, we remain exposed to the impact of fluctuations in exchange rates affectas we translate the translationoperating results of these resultsour foreign operations into our combined financial statements. AsWe currently do not hedge this exposure, and as a result, period-to-period comparability of our results of operations is affected by fluctuations in exchange rates. For example, our net earnings for the year ended December 31, 2003 included approximately $25 million due to the favorable impact of changes in foreign exchange rates. In addition, because we derive a significant portion of our earnings from non-U.S.-denominated revenue, our results of operations could be adversely affected to the extent the dollar value of non-U.S.-denominated revenue is reduced as a result ofdue to a strengthening U.S. dollar.

        In addition, our investments in non-U.S.-denominated securities are subject to fluctuations in non-U.S. securities and currency markets, and those markets can be volatile. In the last several years, various countries have experienced severe economic and financial disruptions, including significant devaluations of their currencies and low or negative growth rates in their economies. Non-U.S. currency fluctuations also affect the value of any dividends paid by our non-U.S. subsidiaries to their parent companies in the U.S. We may, from timeFor additional information regarding the sensitivity of our net earnings to time, experience losses resulting fromforeign currency exchange rate fluctuations, in the valuessee "Management's Discussion and Analysis of non-U.S. currencies, which could have an adverse effect on our financial conditionFinancial Condition and resultsResults of operations.Operations—Quantitative and Qualitative Disclosures About Market Risk—Sensitivity analysis."

Our insurance businesses are heavily regulated, and changes in regulation may reduce our profitability and limit our growth.

        Our insurance operations are subject to a wide variety of laws and regulations. State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are

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regulated by the insurance departments of the states in which they are domiciled and licensed. Our non-U.S. insurance operations are regulated principally by insurance regulatory authorities in the jurisdictions in which they are domiciled.

        State laws in the U.S. grant insurance regulatory authorities broad administrative powers with respect to, among other things:



State insurance regulators and the National Association of Insurance Commissioners, or NAIC, regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations are often made for the benefit of the consumer at the expense of the insurer and thus could have an adverse effect on our financial condition orand results of operation.operations.

        Our mortgage insurance business is subject to additional laws and regulations. For a discussion of the risks associated with those laws and regulations, see "—Risks Relating to Our Mortgage Insurance Business—Changes in regulations that affect the mortgage insurance business could affect our operations significantly and could reduce the demand for mortgage insurance."

        Currently, the U.S. federal government does not regulate directly the business of insurance. However, federal legislation and administrative policies in several areas can significantly and adversely affect insurance companies. These areas include financial services regulation, securities regulation, pension regulation, privacy, tort reform legislation and taxation. In addition, legislation has been introduced in the U.S. Senate, which, if enacted, would establish comprehensive and exclusive federal regulation over all "interstate insurers." This legislation would repeal the McCarran-Ferguson antitrust exemption for the business of insurance. It would also establish a Federal Insurance Regulatory Commission within the Department of Commerce that would have exclusive regulatory jurisdiction over life and property and casualty insurers that do business in more than one U.S. jurisdiction. The legislation would establish comprehensive federal regulatory oversight over such insurers, including licensing, solvency supervision, accounting and auditing practices, form and rate approval, and market conduct examination. In particular, the legislation would provide for price regulation of life insurance products, which is not now a feature of state regulation of life insurance and could affect the profitability of this business. The legislation also would establish a National Insurance Guaranty Fund which may be empowered to collect pre-funded assessments that are different from, and potentially greater than, current state guaranty fund assessment levels.

        The Federal Trade Commission and the Federal Communications Commission have promulgated regulations governing telemarketing practices, including the implementation of a national Do-Not-Call Registry. These regulations require telemarketers under the jurisdiction of either agency to consult the Do-Not-Call Registry periodically and to remove from telemarketing lists any telephone numbers on that registry before making telemarketing calls. Under the McCarran-Ferguson Act, insurers are not subject to these regulations to the extent that their telemarketing activities constitute the "business of insurance" regulated by state law. Nevertheless, we believe it is not clear whether either agency will attempt to assert jurisdiction over any insurer that engages in telemarketing activities. We believe these regulations already have had an adverse effect, and may have a further adverse effect, on our sales of insurance products, such as long-term care insurance, that we market partly through telemarketing calls.

        Our international operations are subject to regulation in the relevant jurisdictions in which they operate, which in many ways is similar to that of the state regulation outlined above. See "Regulation—International Regulation."



        Many of our customers and independent sales intermediaries also operate in regulated environments. Changes in the regulations that affect their operations also may affect our business relationships with them and their ability to purchase or to distribute our products. Accordingly, these changes could have an adverse effect on our financial condition and results of operation.

        Compliance with applicable insurance laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may increase materially our direct and indirect compliance and other expenses of doing business, thus having an adverse effect on our financial condition and results of operations. For a further discussion of the regulatory framework in which we operate, see "Regulation."

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Legal and regulatory investigations and actions are common in the insurance business and may result in financial losses and harm our reputation.

      ��        We face significant risks of litigation and regulatory investigations and actions in connection with our activities as an insurer, financial services provider, employer, investment adviser, securities issuer, investor and taxpayer. These lawsuits and regulatory actions may be difficult to assess or quantify and may seek recovery of very large or indeterminate amounts, including punitive and treble damages, which may remain unknown for substantial periods of time. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business.

        Life insurance companies historically have been subject to substantial litigation resulting from policy disputes and other matters. Most recently, they have faced extensive claims, including class-action lawsuits, alleging improper life insurance sales practices. Judgments or negotiated settlements of such claims have had an adverse impact on the financial condition and results of operations of other insurance companies. We recently agreed to settle one such case and have established what we believe are adequate reserves to bring the matter to a conclusion. Substantial legal liability in any of these or future legal or regulatory actions could have an adverse financial effect or cause significant reputational harm, which could seriously harm our business prospects.harm. For further details regarding the litigation in which we are involved, see "Business—Legal Proceedings."

We have significant operations in India that could be adversely affected by changes in the political or economic stability of India or government policies in India, or the U.S. or Europe.

        Through an arrangement with an affiliate of GE, we have a substantial team of professionals in India who provide a variety of services to our insurance operations, including customer service, transaction processing, and functional support including finance, investment research, actuarial, risk and marketing. See "Arrangements Between GE and Our Company—Relationship with GE—Arrangements Regarding Our Operations in India." The development of our operations center in India has been facilitated partly by the liberalization policies pursued by the Indian government over the past decade. The current government of India, formed in October 1999, has announced policies and taken initiatives that support the continued economic liberalization policies that have been pursued by previous governments. However, we cannot assure you that these liberalization policies will continue in the future. The rate of economic liberalization could change, and specific laws and policies affecting our business could change as well. A significant change in India's economic liberalization and deregulation policies could adversely affect business and economic conditions in India generally and our business in particular.

        The political climate in the U.S. also could change so that it would not be practical for us to use international operations centers, such as call centers. This could adversely affect our ability to maintain or create low-cost operations outside the U.S. For example, a bill recently introduced in the U.S. Senate, entitled "The Call Center Consumer's Right To Know Act," would, if enacted, require employees of call centers used by a U.S. company to disclose their physical location at the beginning of



each telephone call. An identical bill recently was introduced in the U.S. House of Representatives. Similar legislation also is pending in several states in which we operate. We believe the intent of this legislation is to alert consumers to the use of call centers that are located outside the U.S. If enacted, this legislation could result in consumer pressure to curtail our use of low-cost operations outside the U.S., which could reduce the cost benefits we currently realize from using them.

        Similarly, the political or regulatory climate in Europe could change in ways which would inhibit our ability to use international operations centers. For example, changes in European privacy regulations, or more stringent interpretation or enforcement of these regulations, could require us to curtail our use of low-cost operations in India to service our European businesses, which could reduce the cost benefits we currently realize from using these operations.

The continued threat of terrorism, the occurrence of terrorist acts and ongoing military actions could adversely affect our financial condition and results of operations.

        The continued threat of terrorism and ongoing military actions, as well as heightened security measures in response to these threats and actions, may cause significant volatility in global financial markets, disruptions to commerce and reduced economic activity. These consequences could have an adverse effect on the value of the assets in our investment portfolio. We cannot predict whether, and the extent to which, companies in which we maintain investments may suffer losses as a result of financial, commercial or economic disruptions, or how any such disruptions might affect the ability of those companies to pay interest or principal on their securities. The continued threat of terrorism also could result in increased reinsurance prices and potentially cause us to retain more risk than we

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otherwise would retain if we were able to obtain reinsurance at lower prices. In addition, the occurrence of terrorist actions could result in higher claims under our insurance policies than we had anticipated. For example, we incurred approximately $25 million in losses related to the terrorist events of September 11, 2001.

Risks Relating to Our Protection and Retirement Income and Investments Segments

We may face losses if morbidity rates, mortality rates or mortalityunemployment rates differ significantly from our pricing expectations.

        We set prices for our life insurance, long-term care insurance, European payment protection insurance and some annuity products based upon expected claims and payment patterns, using assumptions for morbidity rates, or likelihood of sickness, and mortality rates, or likelihood of death, of our policyholders and contractholders. The long-term profitability of these products depends upon how our actual experience compares with our pricing assumptions. For example, if morbidity rates are higher, or mortality rates are lower, than our pricing assumptions, we could be required to make greater payments under long-term care insurance policies and annuity contracts than we had projected. Similarly,Conversely, if mortality rates are higher than our pricing assumptions, we could be required to make greater payments under our life insurance and European payment protection policies and annuity contracts with guaranteed minimum death benefits than we had projected.

        ThisThe risk that our claims experience may differ significantly from our pricing assumptions is particularly significant for our long-term care insurance products. Long-term care insurance policies provide for long-duration coverage and, therefore, our actual claims experience will emerge over many years after pricing assumptions have been established. Moreover, as a relatively new product in the market, long-term care insurance does not have the extensive claims experience history of life insurance, and as a result, our ability to forecast future claim rates for long-term care insurance is more limited than for life insurance.

        We use assumptions regarding unemployment levels in pricing our European payment protection insurance. If those unemployment levels are higher than our pricing assumptions, the claims frequency could be higher for our European payment protection insurance business than we had projected.



We may be required to accelerate the amortization of deferred acquisition costs and the present value of future profits, which would increase our expenses and reduce profitability.

        Deferred acquisition costs, or DAC, represent costs which vary with and are primarily related to the sale and issuance of our insurance policies and investment contracts that are deferred and amortized over the estimated life of the related insurance policies. These costs include commissions in excess of ultimate renewal commissions, direct mail and printing costs, sales material and some support costs, such as underwriting and policy and contract issuance expenses. Under U.S. GAAP, DAC is deferred and recognized over the expected life of the policy or contract in relation to either the premiums or gross profits from the underlying contracts.that policy or contract. In addition, when we acquire a block of insurance policies or investment contracts, we assign a portion of the purchase price to the right to receive future net cash flows from existing insurance and investment contracts and policies. This intangible asset, called the present value of future profits, or PVFP, represents the actuarially estimated present value of future cash flows from the acquired policies. We amortize the value of this intangible asset in a manner similar to the amortization of DAC.

        Our amortization of DAC and PVFP generally depends upon anticipated profits from investments, surrender and other policy and contract charges and mortality and maintenance expense margins. Unfavorable experience with regard to expected expenses, investment returns, mortality, morbidity or withdrawals or lapses may cause us to accelerate the amortization of DAC or PVFP, or both, or to record a charge to increase benefit reserves.

        We regularly review DAC and PVFP to determine if they are recoverable from future income. If these costs are not recoverable, they are charged to expenses in the financial period in which we make this determination. For example, if we determine that we are unable to recover DAC from profits over the life of a block of insurance policies or annuity contracts, or if withdrawals or surrender charges associated with early withdrawals do not fully offset the unamortized acquisition costs related to those policies or annuities, we would havebe required to recognize the additional DAC amortization as a current-period

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expense. In recent years, the portion of estimated product margins required to amortize DAC and PVFP has increased in most of our lines of business, with the most significant impact on investment products, primarily as the result of lower investment returns. We also regularly review the recoverability of PVFP for impairment. As of September 30,December 31, 2003 and December 31, 2002, respectively, we had $5.6$5.8 billion and $5.3 billion inof DAC, and $1.2 billion and $1.3 billion of PVFP. We amortized $1.2$1.3 billion of DAC and PVFP as a current-period expense for the year ended December 31, 2002,2003, compared to $1.1$1.2 billion for the year ended December 31, 2001,2002 and $903 million$1.2 billion for the nine monthsyear ended September 30, 2003, comparedDecember 31, 2001.

We may be required to $805recognize impairment in the value of our goodwill, which would increase our expenses and reduce our profitability.

        Goodwill represents the excess of the amount we paid to acquire our subsidiaries and other businesses over the fair value of their net assets at the date of the acquisition. Under U.S. GAAP, we test the carrying value of goodwill for impairment at least annually at the "reporting unit" level, which is either an operating segment or a business one level below the operating segment. Goodwill is impaired if the fair value of the reporting unit as a whole is less than the fair value of the identifiable assets and liabilities of the reporting unit, plus the carrying value of goodwill, at the date of the test. For example, goodwill may become impaired if the fair value of a reporting unit as a whole were to decline by an amount greater than the decline in the value of its individual identifiable assets and liabilities. This may occur for various reasons, including changes in actual or expected earnings or cash flows of a reporting unit, generation of earnings by a reporting unit at a lower rate of return than similar businesses or declines in market prices for publicly traded businesses similar to our reporting units. If any portion of our goodwill becomes impaired, we would be required to recognize the amount of the impairment as a current-period expense. When we adopted Statement of Financial Accounting Standards 142 with respect to recognizing impairment of goodwill, effective January 1, 2002, we



recognized a $376 million forimpairment, net of tax, relating to our domestic auto and homeowners' insurance business (included in discontinued operations), primarily as a result of heightened price competition in the nine months ended September 30, 2002.auto insurance industry.

Our reputation in the long-term care insurance market may be adversely affected if we were to raise premiums on our in-force long-term care insurance products.

        Unlike several of our competitors, we have never increased premiums on any in-force long-term care policies that we have issued. Although the terms of all our long-term care insurance policies permit us to increase premiums during the premium-paying period, any implementation of a premium increase could have an adverse effect on our reputation, our ability to market and sell new long-term care insurance products and our ability to retain existing policyholders.

Genetic mapping research and other medical advances could adversely affect the financial performance of our life insurance, long-term care insurance and annuities businesses.

        Genetic mapping research includes procedures focused on identifying key genes that render an individual predisposed to specific diseases, such as cancer or Alzheimer's disease. Other medical advances, such as diagnostic imaging technologies, also may be used to detect the early onset of diseases such as cancer and heart disease. We believe that if individuals learn through genetic testing or other medical advances that they are predisposed to particular conditions that may reduce life longevity or require long-term care, they will be more likely to purchase our life and long-term care insurance policies or not to permit existing polices to lapse. In contrast, if individuals learn that they are genetically unlikely to develop the conditions that reduce longevity or require long-term care, they will be less likely to purchase our life and long-term care insurance products, but more likely to purchase certain annuity products. In addition, such individuals that are existing policyholders will be more likely to permit their policies to lapse.

        If we were to gain access to the same genetic or other medical information as our prospective policyholders and contractholders, then we would be able to take this information into account in pricing our life and long-term care insurance policies and annuity contracts. However, there are a number of regulatory proposals that would make genetic and other medical information confidential and unavailable to insurance companies. For example, the U.S. Senate recently passed and sent to the U.S. House of Representatives a bill that would prohibit group health plans, health insurers and employers from making enrollment decisions or adjusting premiums on the basis of genetic testing information. Health plans and health insurers also would be prohibited from requiring genetic testing. The Bush Administration has expressed support for the legislation. However, the House has not taken action on the legislation, and it is not clear whether the bill will be enacted or whether life or long-term care insurance underwriting also would be affected by the final legislation. Legislators in certain states have recently introduced similar legislation. If these regulatory proposals were enacted, prospective policyholders and contractholders would only disclose this information if they chose to do so voluntarily. These factors could lead us to reduce sales of products affected by these regulatory proposals and could result in a deterioration of the risk profile of our portfolio, which could lead to payments to our policyholders and contractholders that are higher than we anticipated.

We may face losses if there are significant deviations from our assumptions regarding the future persistency of our insurance policies and annuity contracts.

        The prices and expected future profitability of our life insurance, long-term care insurance, group life and health insurance and deferred annuity products are based in part upon expected patterns of premiums, expenses and benefits, using a number of assumptions, including those related to persistency, which is the probability that a policy or contract will remain in-force from one period to the next. The effect of persistency on profitability varies for different products. For most of our life insurance, group life and health insurance, and deferred annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact on profitability, especially in the early years of a

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policy or contract primarily because we would be required to accelerate the amortization of expenses we deferred in connection with the acquisition of the policy or contract. For the years ended December 31, 2003, 2002 and 2001, persistency in our life insurance and fixed annuity businesses has been slightly higher than assumed, while persistency in our variable annuity and group life and health insurance businesses has been slightly lower than we had assumed.

        For our long-term care insurance and some other health insurance policies, actual persistency in later policy durations that is higher than our persistency assumptions could have a negative impact on profitability. If these policies remain in-force longer than we assumed, then we could be required to make greater benefit payments than we had anticipated when we priced these products. This risk is particularly significant in our long-term care insurance business because we do not have the experience history that we have in many of our other businesses. As a result, our ability to predict persistency for long-term care insurance is more limited than for many other products. Some of our long-term care insurance policies have experienced higher persistency than we had assumed, which has resulted in adverse claims experience.

        Because our assumptions regarding persistency experience are inherently uncertain, reserves for future policy benefits and claims may prove to be inadequate if actual persistency experience is different from those assumptions. Although some of our products permit us to increase premiums during the life of the policy or contract, we cannot guarantee that these increases would be sufficient to maintain profitability. Moreover, many of our products do not permit us to increase premiums or limit those increases during the life of the policy or contract. Significant deviations in experience from pricing expectations regarding persistency could have an adverse effect on the profitability of our products.

Regulation XXX may have an adverse effect on our financial condition and results of operations by requiring us to increase our statutory reserves for term life and universal life insurance or incur higher operating costs.

        The Model Regulation entitled "Valuation of Life Insurance Policies," commonly known as "Regulation XXX," was promulgated by the NAIC and adopted by nearly all states as of January 1, 2001. It requires insurers to establish additional statutory reserves for term and universal life insurance policies with long-term premium guarantees. Virtually all our newly issued term and universal life insurance business is now affected by Regulation XXX.

        In response to this regulation, we have increased term and universal life insurance statutory reserves and changed our premium rates for term and universal life insurance products. We also have implemented reinsurance and capital management actions to mitigate the impact of Regulation XXX. However, we cannot assure you that there will not be regulatory or other challenges to the actions we have taken to date. The result of those challenges could require us to increase statutory reserves or incur higher operating costs.

        We also cannot assure you that we will be able to continue to implement actions to mitigate the impact of Regulation XXX on future sales of term and universal life insurance products. If we are unable to continue to implement those actions, we may be required to increase statutory reserves or incur higher operating costs than we currently anticipate. We also may have to implement measures that may be disruptive to our business. For example, because term and universal life insurance are particularly price-sensitive products, any increase in premiums charged on these products in order to compensate us for the increased statutory reserve requirements or higher costs of reinsurance may result in a significant loss of volume and adversely affect our life insurance operations.

Changes in tax laws could make some of our products less attractive to consumers.

        Changes in tax laws could make some of our products less attractive to consumers. For example, in September 2001, the U.S. Congress enacted the Economic Growth and Taxpayer Relief Reconciliation Act of 2001. This act contains provisions that have lowered and will, over time, significantly further lowerlowered individual income tax rates.



These reductions effectively reduce the benefits of federal income tax deferral on the build-up of value of life insurance and annuity products. The act also includes

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provisions that repeal the federal estate tax over a ten-year period. Some of these changes could reduce our sales of life insurance and annuity products and result in the increased surrender of these products.

        In May 2003, U.S. President George Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003, which reduced the federal income tax that investors are required to pay on long-term capital gains and on some dividends paid on stock. This reduction may provide an incentive for some of our customers and potential customers to shift assets into mutual funds and away from products, including annuities, designed to defer taxes payable on investment returns. Because the income taxes payable on long-term capital gains and some dividends paid on stock have been reduced, investors may decide that the tax-deferral benefits of annuity contracts are less advantageous than the potential after-tax income benefits of mutual funds or other investment products that produceprovide dividends and long-term capital gains. A shift away from annuity contracts and other tax-deferred products would reduce our income from sales of these products, as well as the assets upon which we earn investment income.

        We cannot predict whether any other legislation will be enacted, what the specific terms of any such legislation will be or how, if at all, this legislation or any other legislation could have an adverse effect on our financial condition and results of operations.

Changes in U.S. federal and state securities laws may affect our operations and our profitability.

        U.S. federal and state securities laws apply to investment products that are also "securities," including variable annuities and variable life insurance policies. As a result, some of our subsidiaries and the policies and contracts they offer are subject to regulation under these federal and state securities laws. Our insurance subsidiaries' separate accounts are registered as investment companies under the Investment Company Act of 1940. Some variable annuity contracts and variable life insurance policies issued by our insurance subsidiaries also are also registered under the Securities Act of 1933. Other subsidiaries are registered as broker-dealers under the Securities Exchange Act of 1934 and are members of, and subject to, regulation by the National Association of Securities Dealers, Inc. SomeIn addition, some of our subsidiaries also are also registered as investment advisers under the Investment Advisers Act of 1940.

        Securities laws and regulations are primarily intended to ensure the integrity of the financial markets and to protect investors in the securities markets or investment advisory or brokerage clients. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with those laws and regulations. Changes to these laws or regulations that restrict the conduct of our business could have an adverse effect on our financial condition and results of operations.

Risks Relating to Our Mortgage Insurance Segment

Fannie Mae, Freddie Mac and a small number of large mortgage lenders exert significant influence over the U.S. mortgage insurance market.

        Our mortgage insurance products protect mortgage lenders and investors from default-related losses on residential first mortgage loans made primarily to home buyers with high loan-to-value mortgages—generally, those home buyers who make down payments of less than 20% of their home's purchase price. The largest purchasers of mortgage loans in the U.S. are Fannie Mae and Freddie Mac, which were created by Congressional charter to ensure that mortgage lenders have sufficient funds to continue to finance home purchases. In the first six months of 2003, Fannie Mae purchased approximately 42%38% of all the mortgage loans originated in the U.S., and Freddie Mac purchased approximately 22%, according to statistics published byInside the GSEs. Fannie Mae's and Freddie Mac's charters generally prohibit them from purchasing any mortgage with a face amount that exceeds 80% of the home's value, unless that mortgage is insured by a qualified insurer or the mortgage seller

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retains at least a 10%



participation in the loan or agrees to repurchase the loan in the event of default. As a result, high loan-to-value mortgages purchased by Fannie Mae or Freddie Mac generally are insured with private mortgage insurance. These provisions in Fannie Mae's and Freddie Mac's charters create much of the demand for private mortgage insurance in the U.S. For the nine monthsyear ended September 30,December 31, 2003, Fannie Mae and Freddie Mac purchased approximately 66%68% of the mortgage loans that we insured. As a result, a change in these provisions could have an adverse effect on our financial condition and results of operations.

        In addition, increasing consolidation among mortgage lenders in recent years has resulted in significant customer concentration for mortgage insurers. Ten mortgage lenders accounted for approximately 49%48% of our flow new insurance written for the nine monthsyear ended September 30,December 31, 2003, compared to approximately 40% for the year ended December 31, 1998, and flow insurance premiums received from these lenders represented approximately 46% of the flow insurance premiums we received for the nine monthsyear ended September 30,December 31, 2003, compared to 36% for the year ended December 31, 1998.

        As a result of the significant concentration in mortgage originators and purchasers, Fannie Mae, Freddie Mac and the largest mortgage lenders possess substantial market power which enables them to influence our business and the mortgage insurance industry in general. Although we actively monitor and develop our relationships with Fannie Mae, Freddie Mac and our largest mortgage lending customers, a deterioration in any of these relationships, or the loss of business from any of our key customers, could have an adverse effect on our financial condition and results of operations.

        Our mortgage insurance business is one of the members of the Mortgage Insurance Companies of America, or MICA. In 1999, several large mortgage lenders and a coalition of financial services and housing-related trade associations, including MICA, formed FM Watch, now known as FM Policy Focus, a lobbying organization that supports expanded federal oversight and legislation relating to the role of Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac have criticized and lobbied against the positions taken by FM Policy Focus. These lobbying activities could, among other things, polarize Fannie Mae, Freddie Mac and members of FM Policy Focus. As a result of this possible polarization, our relationships with Fannie Mae and Freddie Mac may limit our opportunities to do business with some mortgage lenders, and our relationships with mortgage lenders who are members of FM Policy Focus may limit our ability to do business with Fannie Mae and Freddie Mac, as well as with mortgage lenders who are not members of FM Policy Focus and are opposed to these efforts. Any of these outcomes could have an adverse effect on our financial condition and results of operations.

A decrease in the volume of high loan-to-value home mortgage originations or an increase in the volume of mortgage insurance cancellations could result in a decline in our revenue.

        We provide mortgage insurance primarily for high loan-to-value mortgages. Factors that could lead to a decrease in the volume of high loan-to-value mortgage originations include:

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A decline in the volume of high loan-to-value mortgage originations would reduce the demand for mortgage insurance and, therefore, could have an adverse effect on our financial condition and results of operations.


        In addition, a significant percentage of the premiums we earn each year in our U.S. mortgage insurance business are renewal premiums from insurance policies written in previous years. We estimate that approximately 75%70% of our gross premiums written for the nine monthsyear ended September 30,December 31, 2003 were renewal premiums. As a result, the length of time insurance remains in force is an important determinant of our mortgage insurance revenues. Fannie Mae, Freddie Mac and many other mortgage investors in the U.S. generally permit a homeowner to ask his loan servicer to cancel his mortgage insurance when the principal amount of the mortgage falls below 80% of the home's value. Factors that tend to reduce the length of time our mortgage insurance remains in force include:


AnThese factors contributed to an increase in our policy cancellation rates from 43% for the year ended December 31, 2002 to 54% for the year ended December 31, 2003. A further increase in the volume of mortgage insurance cancellations in the U.S. generally would reduce the amount of our insurance in force and have an adverse effect on our financial condition and results of operations. These factors are less significant in our non-U.S. operations because we generally receive a single payment for mortgage insurance at the time a loan closes, and this premium typically is not refundable if the policy is canceled.

Continued increases in the volume of "simultaneous second" mortgages could have an adverse effect on the U.S. market for mortgage insurance.

        High loan-to-value mortgages can consist of two simultaneous loans, known as "simultaneous seconds," comprising a first mortgage with a loan-to-value ratio of 80% and a simultaneous second mortgage for the excess portion of the loan, instead of a single mortgage with a loan-to-value ratio of more than 80%. Simultaneous second loans are often known as "80-10-10 loans" because they frequently consist of a first mortgage with an 80% loan-to-value ratio, a second mortgage with a 10% loan-to-value ratio and the remaining 10% paid in cash by the buyer, rather than a single mortgage with a 90% loan-to-value ratio.

        Over the past several years, the volume of simultaneous seconds as an alternative to loans requiring mortgage insurance has increased substantially. We believe this recent increase in simultaneous second loans reflects the following factors:

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Further increases in the volume of simultaneous seconds may cause corresponding decreases in the use of mortgage insurance for high loan-to-value mortgages, which could have an adverse effect on our financial condition and results of operations.



The amount of mortgage insurance we write could decline significantly if mortgage lenders and investors select other alternatives to private mortgage insurance to protect against default risk or if lenders select lower coverage levels of mortgage insurance.

        Lenders may seek to mitigate their mortgage default risks through a variety of alternatives to private mortgage insurance other than simultaneous second mortgages. These alternatives include:


A decline in the use of private mortgage insurance in connection with high loan-to-value home mortgages for any reason would reduce the size of the mortgage insurance market and could have an adverse effect on our financial condition and results of operations.

Our claims expenses would increase and our results of operations would suffer if the rate of defaults on mortgages covered by our mortgage insurance increases or the severity of such defaults exceeds our expectations.

        Our premium rates vary depending upon the perceived risk of a claim on the insured loan and take into account factors such as the loan-to-value ratio, our long-term historical loss experience, whether the mortgage provides for fixed payments or variable payments, the term of the mortgage and the borrower's credit history. We establish renewal premium rates for the life of a mortgage insurance policy upon issuance, and we cannot cancel the policy or adjust the premiums after the policy is issued. As a result, we cannot offset the impact of unanticipated claims with premium increases on policies in force, and we cannot refuse to renew mortgage insurance coverage. The premiums we agree to charge upon writing a mortgage insurance policy may not adequately compensate us for the risks and costs associated with the coverage we provide for the entire life of that policy.

        The long-term profitability of our mortgage insurance business depends upon the accuracy of our pricing assumptions. If defaults on mortgages increase because of an economic downturn or for reasons we failed to take into account adequately, we would be required to make greater claim payments than we planned when we priced our policies. Future claims on our mortgage insurance policies may not match the assumptions made in our pricing. An increase in the amount or frequency of claims beyond the levels contemplated by our pricing assumptions could have an adverse effect on our financial condition and results of operations. In recent years, our results of operations have benefited from historically low loss ratios because of significant home price appreciation and low levels of defaults. Increases from these recent historic lows could have an adverse effect on our financial condition and results of operations.

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        As of September 30,December 31, 2003, approximately 75%79% of our risk in force had not yet reached its anticipated highest claim frequency years, which are generally between the third and seventh year of the loan. As a result, we expect our loss experience on these loans will increase as policies continue to age. If the claim frequency on the risk in force significantly exceeds the claim frequency that was assumed in setting premium rates, our financial condition, results of operations and cash flows would be adversely affected.



A deterioration in economic conditions may adversely affect our loss experience in mortgage insurance.

        Losses in our mortgage insurance business generally result from events, such as unemployment, divorce or illness, that reduce a borrower's ability to continue to make mortgage payments. The amount of the loss we suffer, if any, depends in part on whether the home of a borrower who defaults on a mortgage can be sold for an amount that will cover unpaid principal and interest and the expenses of the sale. A deterioration in economic conditions generally increases the likelihood that borrowers will not have sufficient income to pay their mortgages and can also adversely affect housing values, which increases our risk of loss.

        A substantial economic downturn across the entire U.S. could have a significant adverse effect on our financial condition and results of operations. We also may be particularly affected by economic downturns in states where a large portion of our business is concentrated. As of September 30,December 31, 2003, approximately 51% of our risk in force was concentrated in 10 states, with 8% in California, 8%Florida, 7% in FloridaCalifornia and 7% in Texas. Similarly, our mortgage insurance operations in Canada, Australia and the U.K. are concentrated in the largest cities in those countries. Continued and prolonged adverse economic conditions in these states or cities could result in high levels of claims and losses, which could have an adverse effect on our financial condition and results of operations.

A significant portion of our risk in force consists of loans with high loan-to-value ratios, which generally result in more and larger claims than loans with lower loan-to-value ratios.

        Mortgage loans with higher loan-to-value ratios typically have claim incidence rates substantially higher than mortgage loans with lower loan-to-value ratios. In our U.S. mortgage insurance business as of September 30,December 31, 2003:

        In Canada, Australia and New Zealand, the risks of having a portfolio with a significant portion of high loan-to-value mortgages are greater than in the U.S. and Europe because we generally agree to cover 100% of the losses associated with mortgage defaults in those markets, compared to percentages in the U.S. and Europe that are typically 1212% to 35% of the loan amount. In our non-U.S. mortgage insurance business as of September 30,December 31, 2003:

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        Although mortgage insurance premiums for higher loan-to-value ratio loans generally are higher than for loans with lower loan-to-value ratios, the difference in premium rates may not be sufficient to compensate us for the enhanced risks associated with mortgage loans bearing higher loan-to-value ratios.



We cede a portion of our U.S. mortgage insurance business to mortgage reinsurance companies affiliated with our mortgage lending customers, and this reduces our profitability; recent changes in our ceding policies are likely to result in a reduction in business from some lenders.

        We, like other mortgage insurers, offer opportunities to our mortgage lending customers that are designed to allow them to participate in the risks and rewards of the mortgage insurance business. Many of the major mortgage lenders with which we do business have established captive mortgage reinsurance subsidiaries. These reinsurance subsidiaries assume a portion of the risks associated with the lender's insured mortgage loans in exchange for a percentage of the premiums. In most cases, our reinsurance coverage is an "excess of loss" arrangement with a limited band of exposure for the reinsurer. This means that we are required to pay the first layer of losses arising from defaults in the covered mortgages, the reinsurer paysindemnifies us for the next layer of losses, and we pay any losses in excess of the reinsurer's obligations. The effect of these arrangements historically has been a reduction in the profitability and return on capital of this business to us. Approximately 65%75% of our primary new risk written as of September 30,December 31, 2003 was subject to captive mortgage reinsurance, compared to approximately 73%77% as of December 31, 2002 and 59%61% as of December 31, 2001. Premiums ceded to these reinsurers were approximately $102$139 million, $113 million and $76 million for the nine monthsyears ended September 30,December 31, 2003, $113 million in 2002 and $76 million in 2001.2001, respectively.

        Most large mortgage lenders have developed reinsurance operations that obtain net premium cessions from mortgage insurers of 25% to 40%. To increase our return on capital, we decidedannounced in August 2003 that, effective January 1, 2004, we generally willwould not renew, on their existing terms, our existing excess-of-loss risk sharing arrangements with net premium cessions in excess of 25%. We expect that our decisionthese actions will result in a significant reduction in business from these lenders.

If efforts by Fannie Mae and Freddie Mac to reduce the need for mortgage insurance are successful, they could adversely affect the results of our U.S. mortgage insurance business.

        Freddie Mac has sought changes to the provisions of its Congressional charter that requires private mortgage insurance for low-down-payment mortgages and has lobbied the U.S. Congress for amendments that would permit Fannie Mae and Freddie Mac to use alternative forms of default loss protection or otherwise forego the use of private mortgage insurance. In October 1998, the U.S. Congress passed legislation to amend Freddie Mac's charter to give it flexibility to use alternative structures to protect against mortgage default. Although this charter amendment was quickly repealed, we cannot predict whether similar legislation may be proposed or enacted in the future.

        Fannie Mae and Freddie Mac have the ability to implement new eligibility requirements for mortgage insurers. They also have the authority to increase or reduce required mortgage insurance coverage percentages and to alter or liberalize underwriting standards on low-down-payment mortgages they purchase. We cannot predict the extent to which any new requirements may be enacted or how they may affect the operations of our mortgage insurance business, our capital requirements and our products.

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        In light of recent events concerning Freddie Mac's accounting disclosures and other matters, we believe regulatory changes governing the operations of Freddie Mac, Fannie Mae and other government-sponsored enterprises could occur. We cannot predict what the nature of these changes will be or what effect they may have on our business.

Changes in the policies of the Federal Home Loan Banks could reduce the demand for U.S. mortgage insurance.

        The Federal Home Loan Banks, or FHLBs, purchase single-family conforming mortgage loans originated by participating member institutions. Although the FHLBs are not required to purchase insurance for mortgage loans, they currently use mortgage insurance on substantially all mortgage loans with a loan-to-value ratio above 80% and have become a source of increasing new business for us. If the FHLBs were to purchase uninsured mortgage loans or increase the loan-to-value ratio threshold



above which they require mortgage insurance, the market for mortgage insurance could decrease, and our mortgage insurance business could be adversely affected.

We compete with government-owned and government-sponsored entities in our mortgage insurance business, and this may put us at a competitive disadvantage on pricing and other terms and conditions.

        Our mortgage insurance business competes with many different government-owned and government-sponsored entities in the U.S., Canada and some European countries. In the U.S., these entities include principally the FHA and, to a lesser degree, the VA, Fannie Mae and Freddie Mac, as well as local and state housing finance agencies. In Canada, we compete with the CMHC, a Crown corporation owned by the Canadian government. In Europe, these entities include public mortgage guarantee facilities in The Netherlands, Sweden, Finland and Italy.

        Those competitors may establish pricing terms and business practices that may be influenced by motives such as advancing social housing policy or stabilizing the mortgage lending industry, which may not be consistent with maximizing return on capital or other profitability measures. In addition, those governmental entities typically do not have the same capital requirements that we and other mortgage insurance companies have and therefore may have financial flexibility in their pricing and capacity that could put us at a competitive disadvantage in some respects. In the event that a government-owned or sponsored entity in one of our markets determines to reduce prices significantly or alter the terms and conditions of its mortgage insurance or other credit enhancement products in furtherance of social or other goals rather than a profit motive, we may be unable to compete in that market effectively, which could have an adverse effect on our financial condition and results of operations.

        We compete in Canada with the CMHC, which is owned by the Canadian government and, as a sovereign entity, provides mortgage lenders with 100% capital relief from applicable bank regulatory requirements on loans that it insures. In contrast, lenders receive only 90% capital relief on loans we insure. CMHC also operates the Canadian Mortgage Bond Program, which provides lenders the ability to efficiently guaranty and securitize their mortgage loan portfolios. If we are unable to effectively distinguish ourselves competitively with our Canadian mortgage lender customers, we may be unable to compete effectively with the CMHC as a result of the more favorable capital relief it can provide.provide or the other products and incentives that it offers to lenders.

Changes in regulations that affect the mortgage insurance business could affect our operations significantly and could reduce the demand for mortgage insurance.

        In addition to the general regulatory risks that are described above under "—Our insurance businesses are heavily regulated, and changes in regulation may reduce our profitability and limit our growth," we are also affected by various additional regulations relating particularly to our mortgage insurance operations.

        U.S. federal and state regulations affect the scope of our competitors' operations, which has an effect on the size of the mortgage insurance market and the intensity of the competition in our mortgage insurance business. This competition includes not only other private mortgage insurers, but also U.S. federal and state governmental and quasi-governmental agencies, principally the FHA, and to a lesser degree, the VA, which are governed by federal regulations. Increases in the maximum loan

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amount that the FHA can insure, and reductions in the mortgage insurance premiums the FHA charges, can reduce the demand for private mortgage insurance. The FHA has also streamlined its down-payment formula and made FHA insurance more competitive with private mortgage insurance in areas with higher home prices. These and other legislative and regulatory changes could cause demand for private mortgage insurance to decrease.

        Our U.S. mortgage insurance business, as a credit enhancement provider in the residential mortgage lending industry, also is subject to compliance with various federal and state consumer protection laws, including the Real Estate Settlement Procedures Act, the Equal Credit Opportunity



Act, the Fair Housing Act, the Homeowners Protection Act, the Federal Fair Credit Reporting Act, the Fair Debt Collection Practices Act and others. Among other things, these laws prohibit payments for referrals of settlement service business, require fairness and non-discrimination in granting or facilitating the granting of credit, require cancellation of insurance and refund of unearned premiums under certain circumstances, govern the circumstances under which companies may obtain and use consumer credit information, and define the manner in which companies may pursue collection activities. Changes in these laws or regulations could adversely affect the operations and profitability of our mortgage insurance business. For example, the Department of Housing and Urban Development has proposedis considering a rule that would exempt certain mortgages that provide a single price for a package of settlement services from the prohibition in the Real Estate Settlement Procedures Act, or RESPA, against payments for referrals of settlement service business. If mortgage insurance were included among the settlement services that, when offered as a package, would be exempt from this prohibition, then mortgage lenders would have greater leverage in obtaining business concessions from mortgage insurers.

        The Office of Thrift Supervision recently amended its capital regulations to increase from 80% to 90% the loan-to-value threshold in the definition of a "qualifying mortgage loan." The capital regulations assign a lower risk weight to qualifying mortgage loans than to non-qualifying loans. As a result, these new regulations no longer penalize mortgage lenders for retaining loans that have loan-to-value ratios between 80% and 90% without credit enhancements. Other regulators, including the U.S. Federal Deposit Insurance Corporation, also have raised corresponding loan-to-value thresholds for qualifying mortgage loans from 80% to 90%.

        Mortgage lenders may compete with mortgage insurers as a result of legislation that removed restrictions on affiliations between banks and mortgage insurers. The Graham-Leach-Bliley Act of 1999 permits the combination of banks, insurers, including mortgage insurers, and securities firms under one holding company. This legislation may increase competition by increasing the number, size and financial strength of potential competitors. In addition, mortgage lenders that establish captive reinsurance businesses or affiliate with competing mortgage insurers may reduce their purchases of our products.

        Lenders and loan aggregators also have faced new liabilities and compliance risks posed by state and local laws which have been enacted in recent years to combat "predatory lending" practices. In February 2003 and March 2004, the Ney-Lucas Responsible Lending Act of 2003 wasand the Prohibit Predatory Lending Act of 2004, respectively, were introduced in the U.S. House of Representatives. This bill,These bills, if enacted, would, among other things, prohibit certain lending practices on high-cost mortgages and limit the liability of persons who comply with the law. It is unclear in what form, if any, the Ney-Lucas billeither of these bills will be enacted or what impact itthey would have on our business and the mortgage lending, securitization, and insurance industries generally.

        We have an agreement with the Canadian government pursuant tounder which it guarantees 90% of our Canadianthe benefits payable under a mortgage insurance obligations ifpolicy, less 10% of the original principal amount of an insured loan, in the event that we fail to make claim payments under our Canadian mortgage insurance policieswith respect to that loan because of insolvency. This guarantee provides that the government has the right to review the terms of the guarantee in certain circumstances, including if GE's ownership of our Canadian mortgage insurance company decreases below 50%. GE has informed us that it expects to reduce its equity ownership of us to below 50% within two years of the completion of this offering. That disposition would permit the Canadian

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government to review the terms of its guarantee.guarantee and could lead to a termination of the guarantee for any new insurance written after the termination. Although we believe the Canadian government will preserve the guarantee to maintain competition in the Canadian mortgage insurance industry, any adverse change in the guarantee's terms and conditions or termination of the guarantee could have an adverse effect on our ability to continue offering mortgage insurance products in Canada.


        The Australian Prudential Regulatory Authority, or APRA, regulates all financial institutions in Australia, including general, life and mortgage insurance companies. APRA's license conditions require Australian mortgage insurance companies, including ours, to be mono-line insurers, which are insurance companies that offer just one type of insurance product. However, in November 2003, APRA announced that it is considering, and has sought comment on, a proposal to eliminate the requirement that mortgage insurance companies be mono-line insurers. This proposal is pending and the elimination of the mono-line requirementinsurers, which APRA believes could facilitate the entry of new competitorscompetitors.

        APRA currently is studying the adequacy of the capital requirements that govern lenders and furthermortgage insurers in Australia, particularly in the event of a severe recession accompanied by a significant decline in housing values. If APRA concludes that the capital requirements that currently govern mortgage insurers are not sufficient and decides to increase competitionthe amount of capital required for mortgage insurers, we may, depending on the amount of such increase, be required to increase the capital in theour Australian mortgage insurance market.business. This would reduce our returns on capital from those operations.

Our U.S. mortgage insurance business could be adversely affected by legal actions under RESPA.

        RESPA prohibits paying lenders for the referral of settlement services, including mortgage insurance. This precludes us from providing services to mortgage lenders free of charge, charging fees for services that are lower than their reasonable or fair market value, and paying fees for services that others provide that are higher than their reasonable or fair market value. A number of lawsuits, including some that were class actions, have challenged the actions of private mortgage insurers, including our company, under RESPA, alleging that the insurers have provided products or services at improperly reduced prices in return for the referral of mortgage insurance. We and several other mortgage insurers, without admitting any wrongdoing, reached a settlement in these cases, which includes an injunction that prohibited certain specified practices and details the basis on which mortgage insurers may provide agency pool insurance, captive mortgage reinsurance, contract underwriting and other products and services and be deemed to be in compliance with RESPA. The injunction expired on December 31, 2003, and it is not clear whether the expiration of the injunction will result in new litigation against private mortgage insurers, including us, to extend the injunction or to seek damages under RESPA. We also cannot predict whether our competitors will change their pricing structure or business practices after the expiration of the injunction, which could require us to alter our pricing structure or business practices in response to their actions or suffer a competitive disadvantage, or whether any services we or they provide to mortgage lenders could be found to violate RESPA, the current injunction or any future injunction that might be issued. In addition, U.S. federal and state officials also are authorized to enforce RESPA and to seek civil and criminal penalties, and we cannot predict whether these proceedings might be brought against us or other mortgage insurers. Any such proceedings could have an adverse effect on our financial condition and results of operations.

Our U.S. mortgage insurance business could be adversely affected by legal actions under the Federal Fair Credit Reporting Act.

        An actionTwo actions recently hashave been filed against us in Illinois, each seeking certification of a nationwide class of consumers who allegedly were required to pay for our private mortgage insurance and whose loans allegedly were insured at morea rate higher than our "best available rate," based upon credit information we obtained. TheEach action alleges that the Federal Fair Credit Reporting Act, or the FCRA, requires a notice to borrowers of such "adverse action"borrowers and that we violated the FCRA by failing to give such notice. The plaintiffs in one action seeks statutory damages, actual damages, or both, for the peopleallege in the class,complaint that they are entitled to "actual damages" and attorneys fees, as well as declaratory and injunctive relief."damages within the Court's discretion of not more than $1,000 for each separate violation" of the FCRA. The action also alleges that the failure to give notice to borrowersplaintiffs in the circumstances alleged is a violation of state law applicableother action allege that they are entitled to sales practices"appropriate actual, punitive and seeks declaratorystatutory damages" and injunctive"such other or further relief for this alleged violation. This litigation is aimed at practices commonly followed in our industry, and similaras the Court deems proper." Similar cases are pending against threesix other mortgage insurers. We intend to vigorously defend against this actionthese actions, but we cannot predict itstheir outcome.

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Potential liabilities in connection with our U.S. contract underwriting services could have an adverse effect on our financial condition and results of operations.

        We offer contract underwriting services to many of our mortgage lenders in the U.S., pursuant to which our employees and contractors work directly with the lender to determine whether a particular mortgage applicant's loan application complies with the lender's loan underwriting guidelines or the investor's loan purchase requirements. We also assist in compiling and submitting this data to the automated underwriting systems of Fannie Mae and Freddie Mac, which then independently analyze the data.

        Under the terms of our contract underwriting agreements, we agree to indemnify the lender against losses incurred in the event that we make material errors in determining whether loans processed by our contract underwriters meet specified underwriting or purchase criteria. As a result, we assume credit and interest rate risk in connection with our contract underwriting services. Worsening economic conditions, a deterioration in the quality of our underwriting services or other factors could cause our contract underwriting liabilities to increase and have an adverse effect on our financial condition and results of operations. Although we have established reserves to provide for potential claims in connection with our contract underwriting services, we have limited historical experience that we can use to establish reserves for these potential liabilities, and these reserves may not be adequate to cover liabilities that may arise.

If the European mortgage insurance market does not grow as we expect, we will not be able to execute our strategy to expand our business into this market.

        We have devoted resources to marketing our mortgage insurance products in Europe, and we plan to continue these efforts. Our growth strategy depends partly upon the development of favorable legislative and regulatory policies throughout Europe that support increased homeownership and provide capital relief for institutions that insure their mortgage loan portfolios with private mortgage insurance. In furtherance of these policies, we have collaborated with government agencies to develop bank regulatory capital requirements that provide incentives to lenders to implement risk transfer strategies such as mortgage insurance, as well as governmental policies that encourage homeownership as a wealth accumulation strategy for borrowers with limited resources to make large down payments. We have invested, and we will continue to invest, significant resources to advocate such a regulatory environment at the national and pan-European levels. However, if European legislative and regulatory agencies fail to adopt these policies, then the European markets for high loan-to-value lending and mortgage insurance may not expand as we currently anticipate, and our growth strategy in those markets may not be successful.

Risks Relating to Our Separation from GE

Our separation from GE could adversely affect our business and profitability due to GE's strong brand and reputation.

        As a subsidiary of GE, our businesses have marketed many of their products using the "GE" brand name and logo, and we believe the association with GE has provided many benefits, including:

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Following this offering, our separation from GE could adversely affect our ability to attract and retain highly qualified independent sales intermediaries and dedicated sales specialists for our products. We



may be required to lower the prices of our products, increase our sales commissions and fees, change long-term selling and marketing agreements and take other action to maintain our relationship with our independent sales intermediaries and our dedicated sales specialists, all of which could have an adverse effect on our financial condition and results of operations.

        After our separation from GE, some of our existing policyholders, contractholders and other customers may choose to stop doing business with us, and this could increase our rate of surrenders and withdrawals in our policies and contracts. In addition, other potential policyholders and contractholders may decide not to purchase our products because we no longer will be a part of GE.

        We cannot accurately predict the effect that our separation from GE will have on our sales intermediaries, customers or employees. The risks relating to our separation from GE could materialize at various times, including:

We will only have the right to use the GE brand name and logo for a limited period of time. If we fail to establish in a timely manner a new, independently recognized brand name with a strong reputation, our revenue and profitability could decline.

        Upon completion of this offering, our corporate name will be "Genworth Financial, Inc.," although we and our insurance and other subsidiaries may use the GE brand name and logo in marketing our products and services. Pursuant to a transitional trademark license agreement, GE will grant us the right to use the "GE" mark and the "GE" monogram for up to five years in connection with our products and services. GE also will grant us the right to use "GE," "General Electric" and "GE Capital" in the corporate names of our subsidiaries until the earlier of twelve months after the date on which GE owns less than 20% of our outstanding common stock and five years from the date of the trademark license agreement. When our right to use the GE brand name and logo expires, we may not be able to maintain or enjoy comparable name recognition or status under our new brand. In addition, insurance regulators in the U.S. and the other countries where we do business could require us to accelerate the transition to our independent brand. If we are unable to successfully manage the transition of our business to our new brand, our reputation among our independent sales intermediaries, customers and employees could be adversely affected.

Our historical combined and pro forma financial information is not necessarily representative of the results we would have achieved as a stand-alone company and may not be a reliable indicator of our future results.

        The historical combined and pro forma financial information included in this prospectus does not reflect the financial condition, results of operations or cash flows we would have achieved as a stand-alone company during the periods presented or those we will achieve in the future. This is primarily a result of the following factors:

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