GENWORTH FINANCIAL INC, 10-Q filed on 8/5/2021
Quarterly Report
v3.21.2
Cover Page - shares
6 Months Ended
Jun. 30, 2021
Jul. 27, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Entity Central Index Key 0001276520  
Current Fiscal Year End Date --12-31  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2021  
Entity Registrant Name GENWORTH FINANCIAL, INC.  
Entity File Number 001-32195  
Entity Tax Identification Number 80-0873306  
Entity Incorporation, State or Country Code DE  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Shell Company false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Address, Address Line One 6620 West Broad Street  
Entity Address, State or Province VA  
Entity Address, City or Town Richmond  
Entity Address, Postal Zip Code 23230  
Entity Interactive Data Current Yes  
City Area Code 804  
Local Phone Number 281-6000  
Trading Symbol GNW  
Security Exchange Name NYSE  
Title of 12(b) Security Class A Common Stock, par value $.001 per share  
Entity Common Stock, Shares Outstanding   507,385,834
v3.21.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Assets    
Fixed maturity securities available-for-sale, at fair value (amortized cost of $53,111 and $53,417 and allowance for credit losses of $— and $4 as of June 30, 2021 and December 31, 2020, respectively) $ 61,649 $ 63,495
Equity securities, at fair value 147 386
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of June 30, 2021 and December 31, 2020) 6,912 6,774
Less: Allowance for credit losses (33) (31)
Commercial mortgage loans, net 6,879 6,743
Policy loans 2,083 1,978
Other invested assets 2,260 2,099
Total investments 73,018 74,701
Cash, cash equivalents and restricted cash 2,214 2,561
Accrued investment income 573 655
Deferred acquisition costs 1,212 1,487
Intangible assets 151 157
Reinsurance recoverable 16,716 16,864
Less: Allowance for credit losses (50) (45)
Reinsurance recoverable, net 16,666 16,819
Other assets 403 404
Deferred tax asset 211 65
Separate account assets 6,202 6,081
Assets related to discontinued operations 0 2,817
Total assets 100,650 105,747
Liabilities and equity    
Future policy benefits 42,165 42,695
Policyholder account balances 19,944 21,503
Liability for policy and contract claims 11,546 11,486
Unearned premiums 695 775
Other liabilities 1,664 1,614
Long-term borrowings 2,924 3,403
Separate account liabilities 6,202 6,081
Liabilities related to discontinued operations 346 2,370
Total liabilities 85,486 89,927
Commitments and contingencies
Equity:    
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 596 million and 594 million shares issued as of June 30, 2021 and December 31, 2020, respectively; 508 million and 506 million shares outstanding as of June 30, 2021 and December 31, 2020, respectively 1 1
Additional paid-in capital 12,018 12,008
Accumulated other comprehensive income (loss) 3,834 4,425
Retained earnings 2,011 1,584
Treasury stock, at cost (88 million shares as of June 30, 2021 and December 31, 2020) (2,700) (2,700)
Total Genworth Financial, Inc.'s stockholders' equity 15,164 15,318
Noncontrolling interests 0 502
Total equity 15,164 15,820
Total liabilities and equity $ 100,650 $ 105,747
v3.21.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Debt securities amortized costs $ 53,111 $ 53,417
Debt securities allowance for credit losses 0 4
Unamortized balance of loan origination fees $ 4 $ 4
Class A common stock, par value $ 0.001 $ 0.001
Class A common stock, shares authorized 1,500,000,000 1,500,000,000
Class A common stock, shares issued 596,000,000 594,000,000
Class A common stock, shares outstanding 508,000,000 506,000,000
Treasury stock, shares 88,000,000 88,000,000
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Revenues:        
Premiums $ 947 $ 957 $ 1,915 $ 1,903
Net investment income 844 779 1,645 1,561
Net investment gains (losses) 70 93 103 (6)
Policy fees and other income 180 174 363 354
Total revenues 2,041 2,003 4,026 3,812
Benefits and expenses:        
Benefits and other changes in policy reserves 1,161 1,447 2,379 2,784
Interest credited 127 139 258 280
Acquisition and operating expenses, net of deferrals 304 210 579 447
Amortization of deferred acquisition costs and intangibles 86 87 163 195
Interest expense 43 42 94 93
Total benefits and expenses 1,721 1,925 3,473 3,799
Income from continuing operations before income taxes 320 78 553 13
Provision for income taxes 75 23 134 18
Income (loss) from continuing operations 245 55 419 (5)
Income (loss) from discontinued operations, net of taxes (5) (473) 16 (485)
Net income (loss) 240 (418) 435 (490)
Less: net income from continuing operations attributable to noncontrolling interests 0 0 0 0
Less: net income from discontinued operations attributable to noncontrolling interests 0 23 8 17
Net income (loss) available to Genworth Financial, Inc.'s common stockholders 240 (441) 427 (507)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders:        
Income (loss) from continuing operations available to Genworth Financial, Inc.'s common stockholders 245 55 419 (5)
Income (loss) from discontinued operations available to Genworth Financial, Inc.'s common stockholders (5) (496) 8 (502)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders $ 240 $ (441) $ 427 $ (507)
Income (loss) from continuing operations available to Genworth Financial, Inc.'s common stockholders per share:        
Basic $ 0.48 $ 0.11 $ 0.83 $ (0.01)
Diluted 0.47 0.11 0.82 (0.01)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders per share:        
Basic [1] 0.47 (0.87) 0.84 (1.00)
Diluted $ 0.47 $ (0.86) $ 0.83 $ (1.00)
Weighted-average common shares outstanding:        
Basic 507.0 505.4 506.5 504.8
Diluted [2] 515.0 512.5 514.4 504.8
[1] May not total due to whole number calculation.
[2] Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 6.3 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, dilutive potential weighted-average common shares outstanding would have been 511.1 million.
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Net income (loss) $ 240 $ (418) $ 435 $ (490)
Other comprehensive income (loss), net of taxes:        
Net unrealized gains (losses) on securities without an allowance for credit losses (58) 682 (380) 362
Net unrealized gains (losses) on securities with an allowance for credit losses 4 (8) 6 (8)
Derivatives qualifying as hedges 211 (78) (208) 675
Foreign currency translation and other adjustments 2 73 138 (25)
Total other comprehensive income (loss) 159 669 (444) 1,004
Total comprehensive income (loss) 399 251 (9) 514
Less: comprehensive income attributable to noncontrolling interests 0 60 155 7
Total comprehensive income (loss) available to Genworth Financial, Inc.'s common stockholders $ 399 $ 191 $ (164) $ 507
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($)
$ in Millions
Total
Cumulative effect of change in accounting, net of taxes
Common stock
Common stock
Cumulative effect of change in accounting, net of taxes
Additional paid-in capital
Additional paid-in capital
Cumulative effect of change in accounting, net of taxes
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss)
Cumulative effect of change in accounting, net of taxes
Retained earnings
Retained earnings
Cumulative effect of change in accounting, net of taxes
Treasury stock, at cost
Treasury stock, at cost
Cumulative effect of change in accounting, net of taxes
Total Genworth Financial, Inc.'s stockholders' equity
Total Genworth Financial, Inc.'s stockholders' equity
Cumulative effect of change in accounting, net of taxes
Noncontrolling interests
Noncontrolling interests
Cumulative effect of change in accounting, net of taxes
Balances, beginning at Dec. 31, 2019 $ 14,632 $ (55) $ 1 $ 0 $ 11,990 $ 0 $ 3,433 $ 0 $ 1,461 $ (55) $ (2,700) $ 0 $ 14,185 $ (55) $ 447 $ 0
Comprehensive income (loss):                                
Net income (490)   0   0   0   (507)   0   (507)   17  
Other comprehensive income (loss), net of taxes 1,004   0   0   1,014   0   0   1,014   (10)  
Total comprehensive income (loss) 514                       507   7  
Dividends to noncontrolling interests (9)   0   0   0   0   0   0   (9)  
Stock-based compensation expense and exercises and other 6   0   6   0   0   0   6   0  
Balances, ending at Jun. 30, 2020 15,088   1   11,996   4,447   899   (2,700)   14,643   445  
Balances, beginning at Mar. 31, 2020 14,834   1   11,993   3,815   1,340   (2,700)   14,449   385  
Comprehensive income (loss):                                
Net income (418)   0   0   0   (441)   0   (441)   23  
Other comprehensive income (loss), net of taxes 669   0   0   632   0   0   632   37  
Total comprehensive income (loss) 251                       191   60  
Stock-based compensation expense and exercises and other 3   0   3   0   0   0   3   0  
Balances, ending at Jun. 30, 2020 15,088   1   11,996   4,447   899   (2,700)   14,643   445  
Balances, beginning at Dec. 31, 2020 15,820   1   12,008   4,425   1,584   (2,700)   15,318   502  
Sale of business that included noncontrolling interests (657)   0   0   0   0   0   0   (657)  
Comprehensive income (loss):                                
Net income 435   0   0   0   427   0   427   8  
Other comprehensive income (loss), net of taxes (444)   0   0   (591)   0   0   (591)   147  
Total comprehensive income (loss) (9)                       (164)   155  
Stock-based compensation expense and exercises and other 10   0   10   0   0   0   10   0  
Balances, ending at Jun. 30, 2021 15,164   1   12,018   3,834   2,011   (2,700)   15,164   0  
Balances, beginning at Mar. 31, 2021 14,758   1   12,011   3,675   1,771   (2,700)   14,758   0  
Comprehensive income (loss):                                
Net income 240   0   0   0   240   0   240   0  
Other comprehensive income (loss), net of taxes 159   0   0   159   0   0   159   0  
Total comprehensive income (loss) 399                       399   0  
Stock-based compensation expense and exercises and other 7   0   7   0   0   0   7   0  
Balances, ending at Jun. 30, 2021 $ 15,164   $ 1   $ 12,018   $ 3,834   $ 2,011   $ (2,700)   $ 15,164   $ 0  
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash flows from operating activities:    
Net income (loss) $ 435 $ (490)
Less (income) loss from discontinued operations, net of taxes (16) 485
Adjustments to reconcile net income (loss) to net cash from operating activities:    
Amortization of fixed maturity securities discounts and premiums (80) (58)
Net investment (gains) losses (103) 6
Charges assessed to policyholders (317) (314)
Acquisition costs deferred (3) (3)
Amortization of deferred acquisition costs and intangibles 163 195
Deferred income taxes 132 16
Derivative instruments, limited partnerships and other (189) 196
Stock-based compensation expense 25 19
Change in certain assets and liabilities:    
Accrued investment income and other assets (69) (84)
Insurance reserves 507 674
Current tax liabilities (4) 2
Other liabilities, policy and contract claims and other policy-related balances (60) 736
Cash used by operating activities—discontinued operations (192) (81)
Net cash from operating activities 229 1,299
Cash flows from (used by) investing activities:    
Fixed maturity securities 2,220 1,616
Commercial mortgage loans 392 302
Other invested assets 107 71
Proceeds from sales of investments:    
Fixed maturity and equity securities 1,306 1,006
Purchases and originations of investments:    
Fixed maturity and equity securities (2,868) (3,336)
Commercial mortgage loans (531) (271)
Other invested assets (240) (236)
Short-term investments, net (76) (17)
Policy loans, net 28 10
Proceeds from sale of business, net of cash transferred 270 0
Cash used by investing activities—discontinued operations (67) (32)
Net cash from (used by) investing activities 541 (887)
Cash flows used by financing activities:    
Deposits to universal life and investment contracts 349 516
Withdrawals from universal life and investment contracts (1,143) (914)
Redemption of non-recourse funding obligations 0 (315)
Repayment and repurchase of long-term debt (484) (471)
Other, net 65 49
Cash used by financing activities—discontinued operations 0 (9)
Net cash used by financing activities (1,213) (1,144)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) and $(6) related to discontinued operations) 1 (12)
Net change in cash, cash equivalents and restricted cash (442) (744)
Cash, cash equivalents and restricted cash at beginning of period 2,656 3,341
Cash, cash equivalents and restricted cash at end of period 2,214 2,597
Less cash, cash equivalents and restricted cash of discontinued operations at end of period 0 74
Cash, cash equivalents and restricted cash of continuing operations at end of period $ 2,214 $ 2,523
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Statement of Cash Flows [Abstract]    
Discontinued operations exchange rate effect $ (1) $ (6)
v3.21.2
Formation of Genworth and Basis of Presentation
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Formation of Genworth and Basis of Presentation
(1) Formation of Genworth and Basis of Presentation
Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of Genworth’s common stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc. upon the completion of the reorganization.
The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and the affiliate companies in which it holds a majority voting interest or where it is the primary beneficiary of a variable interest entity (“VIE”). All intercompany accounts and transactions have been eliminated in consolidation.
Unless the context otherwise requires, references to “Genworth Financial,” “Genworth,” the “Company,” “we” or “our” in the accompanying unaudited condensed consolidated financial statements and the notes thereto are to Genworth Financial, Inc. on a consolidated basis.
We operate our business through the following three operating segments:
 
   
Enact (formerly known as U.S. Mortgage Insurance).
We offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans at specified coverage percentages (“primary mortgage insurance”). We also selectively enter into insurance transactions with lenders and investors, under which we insure a portfolio of loans at or after origination (“pool mortgage insurance”).
 
   
U.S. Life Insurance.
We offer long-term care insurance products as well as service traditional life insurance and fixed annuity products in the United States.
 
   
Runoff.
The Runoff segment includes the results of products which have not been actively sold since 2011, but we continue to service our existing blocks of business. These products primarily include variable annuity, variable life insurance and corporate-owned life insurance, as well as funding agreements.
In addition to our three operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managed outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.
On March 3, 2021, we completed a sale of our entire ownership interest of approximately 52% in Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) through an underwritten agreement. We sold our approximately 214.3 million shares of Genworth Australia for AUD2.28 per share. Our Australian mortgage insurance business, previously the primary business in the Australia Mortgage Insurance segment, is reported as discontinued operations and its financial position, results of operations and cash flows are separately reported for all periods presented. All prior periods reflected herein have been re-presented on this basis. See note 13 for additional information.
 
 
Unless otherwise indicated, references to the condensed consolidated balance sheets, the condensed consolidated statements of income, the condensed consolidated statements of cash flows and the notes to the condensed consolidated financial statements, exclude amounts related to discontinued operations.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2020 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.
Each reporting period, we assess our ability to continue as a going concern for one year from the date the financial statements are issued. As of June 30, 2021, Genworth Holdings has $823 million of unrestricted cash, cash equivalents and liquid assets. Our evaluation of our ability to meet our financial obligations included the following contractual obligations due within one year from the issue date of our unaudited condensed consolidated financial statements included herein, as well as other conditions and events and their relative significance in relation to our ability to meet our obligations:
 
   
As of June 30, 2021, Genworth Holdings had outstanding $513 million of its 7.625% senior notes, excluding the note premium, that was originally scheduled to mature in September 2021. We are currently in compliance with the terms of our debt agreements, and interest payments on our remaining senior notes are forecasted to be approximately $60 million for the next twelve months. In July 2021, Genworth Holdings early redeemed its 7.625% senior notes with a cash payment of approximately $532 million, comprised of the outstanding principal balance, accrued interest and a make-whole premium. See note 8 for additional details on our long-term borrowings.
 
   
As part of the settlement agreement reached in July 2020 regarding the case titled
AXA S.A. v. Genworth Financial International Holdings, LLC et al.,
we issued a secured promissory note to AXA S.A. (“AXA”) that is due in September 2022. On March 3, 2021, we repaid the first installment payment to AXA and a portion of the second installment from cash proceeds received from the Genworth Australia sale. Over the next year, we expect to pay AXA approximately $10 million primarily consisting of interest on the remaining promissory note, assuming we do not make any additional prepayments, and a one-time payment associated with a tax gross up on underwriting losses related to a product sold by a distributor in our former lifestyle protection insurance business. See note 13 for additional details related to the sale of our former lifestyle protection insurance business and amounts recorded related to discontinued operations.
 
   
Genworth Holdings received intercompany cash tax payments from its subsidiaries during the six months ended June 30, 2021 generated primarily from taxable income. Additional intercompany cash tax payments are expected in future periods.
 
   
Until the secured promissory note to AXA is paid, annual dividends above $50 million from Enact Holdings, Inc. (“Enact Holdings”), formerly known as Genworth Mortgage Holdings, Inc., our wholly-owned U.S. mortgage insurance subsidiary, are subject to mandatory prepayment conditions.
 
 
We received net cash proceeds of $370 million from the sale of Genworth Australia in March 2021, of which $247
million was used to prepay a portion of the AXA promissory note, as noted above, including accrued interest. We believe Genworth Holdings’ current unrestricted cash, cash equivalents and liquid assets provide sufficient liquidity to meet our financial obligations and maintain business operations for one year from the date the financial statements are issued, based on relevant conditions and events that are known and reasonably estimable, including current cash and management actions in the normal course. Accordingly, we no longer need to determine whether our plans alleviate doubt about our ability to meet our financial commitments and obligations within the next year.
The remaining AXA promissory note, including expected future claims, is estimated to be $344 million and is due in September 2022. In addition, Genworth Holdings has $400 million of senior notes due in both August 2023 and February 2024. To help address these debt obligations beyond the next year and reduce our overall indebtedness, we are actively taking additional steps toward raising capital by preparing for a potential partial sale of Enact Holdings, subject to market conditions, as well as the satisfaction of various conditions and approvals.
The impact of the ongoing coronavirus pandemic (“COVID-19”) is very difficult to predict. Its related outcomes and impact on our business and the capital markets, and our ability to raise capital will depend on economic impacts from social, global and political influences as a result of the pandemic, and the shape of the economic recovery, among other factors and uncertainties. While these risks exist, we believe our current liquidity is sufficient to meet our obligations for one year following the issuance of our unaudited condensed consolidated financial statements.
v3.21.2
Accounting Changes
6 Months Ended
Jun. 30, 2021
Disclosue of Accounting Changes [Abstract]  
Accounting Changes
(2) Accounting Changes
Accounting Pronouncements Recently Adopted
On January 1, 2021, we adopted new accounting guidance related to simplifying the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. We adopted this new accounting guidance using the retrospective method or modified retrospective method for certain changes and prospective method for all other changes, which did not have a significant impact on our consolidated financial statements and disclosures.
Accounting Pronouncements Not Yet Adopted
In August 2018, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance that significantly changes the recognition and measurement of long-duration insurance contracts and expands disclosure requirements, which impacts our life insurance deferred acquisition costs (“DAC”) and liabilities. In accordance with the guidance, the more significant changes include:
 
   
assumptions will no longer be locked-in at contract inception and all cash flow assumptions used to estimate the liability for future policy benefits (except the discount rate) will be reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required. Changes will be recorded in net income (loss) using a retrospective approach with a cumulative catch-up adjustment by recalculating the net premium ratio (which will be capped at 100%) using actual historical and updated future cash flow assumptions;
 
   
the discount rate used to determine the liability for future policy benefits will be a current upper-medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean a
 
 
 
single-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes in the discount rate recorded in other comprehensive income (loss);
 
   
the provision for adverse deviation and the premium deficiency test will be eliminated;
 
   
market risk benefits associated with deposit-type contracts will be measured at fair value with changes related to instrument-specific credit risk recorded in other comprehensive income (loss) and remaining changes recorded in net income (loss);
 
   
the amortization method for DAC will generally be on a straight-line basis over the expected contract term; and
 
   
disclosures will be greatly expanded to include significant assumptions and product liability rollforwards.
This guidance is effective for us on January 1, 2023 using the modified retrospective method (with transition adjustments as of January 1, 2021) for all topics except for market risk benefits, which is required to be applied using the retrospective method, with early adoption permitted, which we do not intend to elect. We are currently in process of developing a detailed implementation plan that will allow us to obtain necessary data, modify systems, identify and develop key inputs and establish policies, systems and internal controls that will be necessary to implement this new accounting guidance. Given the nature and extent of the changes to our operations, this guidance is expected to have a significant impact on our consolidated financial statements, and may significantly reduce our equity at transition.
 
v3.21.2
Earnings (Loss) Per Share
6 Months Ended
Jun. 30, 2021
Earnings (Loss) Per Share
 
(3) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted common shares outstanding for the periods indicated:
 
    
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions, except per share amounts)
  
    2021    
   
    2020    
   
    2021    
    
    2020    
 
Weighted-average shares used in basic earnings per share calculations
     507.0       505.4       506.5        504.8  
Potentially dilutive securities:
                                 
Stock options, restricted stock units and stock appreciation rights
     8.0       7.1       7.9        —    
    
 
 
   
 
 
   
 
 
    
 
 
 
Weighted-average shares used in diluted earnings per share calculations 
(1)
     515.0       512.5       514.4        504.8  
    
 
 
   
 
 
   
 
 
    
 
 
 
Income (loss) from continuing operations:
                                 
Income (loss) from continuing operations
   $ 245     $ 55     $ 419      $ (5
Less: net income from continuing operations attributable to noncontrolling interests
     —         —         —          —    
    
 
 
   
 
 
   
 
 
    
 
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
   $ 245     $ 55     $ 419      $ (5
    
 
 
   
 
 
   
 
 
    
 
 
 
Basic per share
   $ 0.48     $ 0.11     $ 0.83      $ (0.01
    
 
 
   
 
 
   
 
 
    
 
 
 
Diluted per share
   $ 0.47     $ 0.11     $ 0.82      $ (0.01
    
 
 
   
 
 
   
 
 
    
 
 
 
Income (loss) from discontinued operations:
                                 
Income (loss) from discontinued operations, net of taxes
   $ (5   $ (473   $ 16      $ (485
Less: net income from discontinued operations attributable to noncontrolling interests
     —         23       8        17  
    
 
 
   
 
 
   
 
 
    
 
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   $ (5   $ (496   $ 8      $ (502
    
 
 
   
 
 
   
 
 
    
 
 
 
Basic per share
   $ (0.01   $ (0.98   $ 0.02      $ (0.99
    
 
 
   
 
 
   
 
 
    
 
 
 
Diluted per share
   $ (0.01   $ (0.97   $ 0.02      $ (0.99
    
 
 
   
 
 
   
 
 
    
 
 
 
Net income (loss):
                                 
Income (loss) from continuing operations
   $ 245     $ 55     $ 419      $ (5
Income (loss) from discontinued operations, net of taxes
     (5     (473     16        (485
    
 
 
   
 
 
   
 
 
    
 
 
 
Net income (loss)
     240       (418     435        (490
Less: net income attributable to noncontrolling interests
     —         23       8        17  
    
 
 
   
 
 
   
 
 
    
 
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   $ 240     $ (441   $ 427      $ (507
    
 
 
   
 
 
   
 
 
    
 
 
 
Basic per share 
(2)
   $ 0.47     $ (0.87   $ 0.84      $ (1.00
    
 
 
   
 
 
   
 
 
    
 
 
 
Diluted per share 
(2)
   $ 0.47     $ (0.86   $ 0.83      $ (1.00
    
 
 
   
 
 
   
 
 
    
 
 
 
 
(1)
 
Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 6.3 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, dilutive potential weighted-average common shares outstanding would have been 511.1 million.
(2)
 
May not total due to whole number calculation.
 
v3.21.2
Investments
6 Months Ended
Jun. 30, 2021
Investments
 
(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:
 
    
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
 
Fixed maturity securities—taxable
   $ 608     $ 594     $ 1,207     $ 1,205  
Fixed maturity securities—non-taxable
     1       1       3       3  
Equity securities
     2       2       5       4  
Commercial mortgage loans
     103       84       181       169  
Policy loans
     40       49       90       98  
Other invested assets
     112       66       201       113  
Cash, cash equivalents, restricted cash and short-term investments
     —         4       —         14  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
     866       800       1,687       1,606  
Expenses and fees
     (22     (21     (42     (45
    
 
 
   
 
 
   
 
 
   
 
 
 
Net investment income
   $ 844     $ 779     $ 1,645     $ 1,561  
    
 
 
   
 
 
   
 
 
   
 
 
 
 
 
(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
 
    
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
 
Available-for-sale fixed maturity securities:
                                
Realized gains
   $ 5     $ 103     $ 12     $ 105  
Realized losses
     (4     (5     (7     (5
    
 
 
   
 
 
   
 
 
   
 
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
     1       98       5       100  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
     (4     (7     (6     (7
Write-down of available-for-sale fixed maturity securities 
(1)
     —         —         (1     —    
Net realized gains (losses) on equity securities sold
     (2     —         (7     —    
Net unrealized gains (losses) on equity securities still held
     6       5       (2     (7
Limited partnerships
     65       37       102       (3
Commercial mortgage loans
     (1     1       (2     1  
Derivative instruments 
(2)
     4       (36     12       (84
Other
     1       (5     2       (6
    
 
 
   
 
 
   
 
 
   
 
 
 
Net investment gains (losses)
   $ 70     $ 93     $ 103     $ (6
    
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
 
Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis.
(2)
 
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).
See Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for a discussion of our policy for evaluating and measuring the allowance for credit losses related to our available-for-sale fixed maturity securities. The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three months ended June 30, 2021:​​​​​​​
 
(Amounts in millions)
 
Beginning
balance
   
Increase from
securities
without
allowance in
previous
periods
   
Increase
(decrease)
from securities
with allowance
in previous
periods
   
Securities

sold
   
Decrease
due to change
in intent or
requirement
to sell
   
Write-offs
   
Recoveries
   
Ending
balance
 
Fixed maturity securities:
                                                               
Non-U.S. corporate
  $ 3     $ —       $ 4     $ (7   $ —       $ —       $ —       $ —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $ 3     $ —       $ 4     $ (7   $ —       $ —       $ —       $ —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three and six months ended June 30, 2020:
 
(Amounts in millions)
 
Beginning
balance
   
Increase from
securities
without
allowance in
previous
periods
   
Increase
(decrease)
from securities
with allowance
in previous
periods
   
Securities
sold
   
Decrease
due to
change in
intent or
requirement
to sell
   
Write-
offs
   
Recoveries
   
Ending
balance
 
Fixed maturity securities:
                                                               
Non-U.S. corporate
  $ —       $ 4     $ —       $ —       $ —       $ —       $ —       $ 4  
Commercial mortgage-backed
    —         3       —         —         —         —         —         3  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $ —       $ 7     $ —       $ —       $ —       $ —       $ —       $ 7  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the six months ended June 30, 2021:
 
(Amounts in millions)
 
Beginning
balance
   
Increase from
securities
without
allowance in
previous
periods
   
Increase
(decrease)
from securities
with allowance
in previous
periods
   
Securities
sold
   
Decrease
due to change
in intent or
requirement
to sell
   
Write-

offs
   
Recoveries
   
Ending
balance
 
Fixed maturity securities:
                                                               
Non-U.S. corporate
  $ 1     $ —       $ 6     $ (7   $ —       $ —       $ —       $ —    
Commercial mortgage-backed
    3       —         —         —         —         (3     —         —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $ 4     $ —       $ 6     $ (7   $ —       $ (3   $ —       $ —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
 
(Amounts in millions)
  
June 30, 2021
   
December 31, 2020
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses
(1)
   $ 8,538     $ 10,159  
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses
(1)
     —         (7
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances
     (6,169     (7,302
Income taxes, net
     (504     (611
    
 
 
   
 
 
 
Net unrealized investment gains (losses)
     1,865       2,239  
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
     —         25  
    
 
 
   
 
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
   $ 1,865     $ 2,214  
    
 
 
   
 
 
 
 
(1)
 
Excludes foreign exchange.
The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the periods indicated:
 
    
As of or for the
three months ended

June 30,
 
(Amounts in millions)
  
2021
   
2020
 
Beginning balance
   $ 1,919     $ 1,140  
Unrealized gains (losses) arising during the period:
                
Unrealized gains (losses) on fixed maturity securities
     1,774       3,911  
Adjustment to deferred acquisition costs
     42       (111
Adjustment to present value of future profits
     1       5  
Adjustment to sales inducements
     2       (34
Adjustment to benefit reserves
     (1,887     (2,802
Provision for income taxes
     14       (207
    
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
     (54     762  
Reclassification adjustments to net investment (gains) losses, net of taxes of $—
 
and $24
     —         (88
    
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
     (54     674  
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
     —         3  
    
 
 
   
 
 
 
Ending balance
   $ 1,865     $ 1,811  
    
 
 
   
 
 
 
 
 
    
As of or for the
six months ended

June 30,
 
(Amounts in millions)
  
2021
   
2020
 
Beginning balance
   $ 2,214     $ 1,456  
Unrealized gains (losses) arising during the period:
                
Unrealized gains (losses) on fixed maturity securities
     (1,609     2,199  
Adjustment to deferred acquisition costs
     (132     57  
Adjustment to present value of future profits
     2       4  
Adjustment to sales inducements
     5       2  
Adjustment to benefit reserves
     1,258       (1,694
Provision for income taxes
     106       (120
    
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
     (370     448  
Reclassification adjustments to net investment (gains) losses, net of taxes of $1 and $25
     (4     (94
    
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
     (374     354  
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
     (25     (1
    
 
 
   
 
 
 
Ending balance
   $ 1,865     $ 1,811  
    
 
 
   
 
 
 
Amounts reclassified out of accumulated other comprehensive income (loss) to net investment gains (losses) include realized gains (losses) on sales of securities, which are determined on a specific identification basis.
 
 
(d) Fixed Maturity Securities
As of June 30, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
    
Gross
unrealized
gains
    
Gross
unrealized
losses
   
Allowance
for credit
losses
    
Fair

value
 
Fixed maturity securities:
                                           
U.S. government, agencies and government-sponsored enterprises
   $ 3,350      $ 1,135      $ (1   $ —        $ 4,484  
State and political subdivisions
     2,876        496        (1     —          3,371  
Non-U.S. government
     712        94        (4     —          802  
U.S. corporate:
                                           
Utilities
     4,276        820        (5     —          5,091  
Energy
     2,573        388        (9     —          2,952  
Finance and insurance
     7,895        1,107        (13     —          8,989  
Consumer—non-cyclical
     5,128        1,100        (4     —          6,224  
Technology and communications
     3,244        515        (5     —          3,754  
Industrial
     1,377        196        (1     —          1,572  
Capital goods
     2,424        447        (1     —          2,870  
Consumer—cyclical
     1,758        240        (4     —          1,994  
Transportation
     1,156        253        —         —          1,409  
Other
     394        40        —         —          434  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total U.S. corporate
     30,225        5,106        (42     —          35,289  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Non-U.S. corporate:
                                           
Utilities
     873        73        (1     —          945  
Energy
     1,189        210        —         —          1,399  
Finance and insurance
     2,108        298        (6     —          2,400  
Consumer—non-cyclical
     659        87        (1     —          745  
Technology and communications
     1,098        186        —         —          1,284  
Industrial
     1,003        138        (1     —          1,140  
Capital goods
     574        69        (1     —          642  
Consumer—cyclical
     325        29        (1     —          353  
Transportation
     467        74        —         —          541  
Other
     1,105        193        (3     —          1,295  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total non-U.S. corporate
     9,401        1,357        (14     —          10,744  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Residential mortgage-backed
     1,524        167        —         —          1,691  
Commercial mortgage-backed
     2,538        199        (3     —          2,734  
Other asset-backed
     2,485        50        (1     —          2,534  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total available-for-sale fixed maturity securities
   $ 53,111      $ 8,604      $ (66   $ —        $ 61,649  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
 
 
As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
    
Gross
unrealized
gains
    
Gross
unrealized
losses
   
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
                                          
U.S. government, agencies and government-sponsored enterprises
   $ 3,401      $ 1,404      $ —       $ —       $ 4,805  
State and political subdivisions
     2,622        544        (1     —         3,165  
Non-U.S. government
     728        130        (4     —         854  
U.S. corporate:
                                          
Utilities
     4,226        970        (2     —         5,194  
Energy
     2,532        367        (16     —         2,883  
Finance and insurance
     7,798        1,306        (2     —         9,102  
Consumer—non-cyclical
     5,115        1,323        (1     —         6,437  
Technology and communications
     3,142        619        —         —         3,761  
Industrial
     1,370        232        —         —         1,602  
Capital goods
     2,456        535        —         —         2,991  
Consumer—cyclical
     1,663        284        —         —         1,947  
Transportation
     1,198        304        (2     —         1,500  
Other
     395        45        —         —         440  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total U.S. corporate
     29,895        5,985        (23     —         35,857  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Non-U.S. corporate:
                                          
Utilities
     838        84        —         —         922  
Energy
     1,172        209        (1     —         1,380  
Finance and insurance
     2,130        353        (6     (1     2,476  
Consumer—non-cyclical
     662        112        (1     —         773  
Technology and communications
     1,062        229        —         —         1,291  
Industrial
     969        159        —         —         1,128  
Capital goods
     510        67        (1     —         576  
Consumer—cyclical
     331        41        (1     —         371  
Transportation
     483        88        (1     —         570  
Other
     1,088        236        —         —         1,324  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total non-U.S. corporate
     9,245        1,578        (11     (1     10,811  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Residential mortgage-backed
     1,698        211        —         —         1,909  
Commercial mortgage-backed
     2,759        231        (13     (3     2,974  
Other asset-backed
     3,069        55        (4     —         3,120  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
   $ 53,417      $ 10,138      $ (56   $ (4   $