GENWORTH FINANCIAL INC, 10-Q filed on 5/5/2021
Quarterly Report
v3.21.1
Cover Page - shares
3 Months Ended
Mar. 31, 2021
Apr. 27, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0001276520  
Current Fiscal Year End Date --12-31  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Mar. 31, 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 $.001 per share  
Entity Common Stock, Shares Outstanding   506,803,281
v3.21.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
Assets    
Fixed maturity securities available-for-sale, at fair value (amortized cost of $53,470 and $53,417 and allowance for credit losses of $3 and $4 as of March 31, 2021 and December 31, 2020, respectively) $ 60,231 $ 63,495
Equity securities, at fair value 238 386
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of March 31, 2021 and December 31, 2020) 6,787 6,774
Less: Allowance for credit losses (32) (31)
Commercial mortgage loans, net 6,755 6,743
Policy loans 1,976 1,978
Other invested assets 1,759 2,099
Total investments 70,959 74,701
Cash, cash equivalents and restricted cash 1,964 2,561
Accrued investment income 704 655
Deferred acquisition costs 1,247 1,487
Intangible assets 155 157
Reinsurance recoverable 16,788 16,864
Less: Allowance for credit losses (44) (45)
Reinsurance recoverable, net 16,744 16,819
Other assets 439 404
Deferred tax asset 314 65
Separate account assets 6,032 6,081
Assets related to discontinued operations 0 2,817
Total assets 98,558 105,747
Liabilities and equity    
Future policy benefits 40,634 42,695
Policyholder account balances 19,999 21,503
Liability for policy and contract claims 11,415 11,486
Unearned premiums 728 775
Other liabilities 1,710 1,614
Long-term borrowings 2,922 3,403
Separate account liabilities 6,032 6,081
Liabilities related to discontinued operations 360 2,370
Total liabilities 83,800 89,927
Commitments and contingencies
Equity:    
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 595 million and 594 million shares issued as of March 31, 2021 and December 31, 2020, respectively; 507 million and 506 million shares outstanding as of March 31, 2021 and December 31, 2020, respectively 1 1
Additional paid-in capital 12,011 12,008
Accumulated other comprehensive income (loss) 3,675 4,425
Retained earnings 1,771 1,584
Treasury stock, at cost (88 million shares as of March 31, 2021 and December 31, 2020) (2,700) (2,700)
Total Genworth Financial, Inc.'s stockholders' equity 14,758 15,318
Noncontrolling interests 0 502
Total equity 14,758 15,820
Total liabilities and equity $ 98,558 $ 105,747
v3.21.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Mar. 31, 2021
Dec. 31, 2020
Debt securities amortized costs $ 53,470 $ 53,417
Debt securities allowance for credit losses 3 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 595,000,000 594,000,000
Class A common stock, shares outstanding 507,000,000 506,000,000
Treasury stock, shares 88,000,000 88,000,000
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Millions, $ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Revenues:    
Premiums $ 968 $ 946
Net investment income 801 782
Net investment gains (losses) 33 (99)
Policy fees and other income 183 180
Total revenues 1,985 1,809
Benefits and expenses:    
Benefits and other changes in policy reserves 1,218 1,337
Interest credited 131 141
Acquisition and operating expenses, net of deferrals 275 237
Amortization of deferred acquisition costs and intangibles 77 108
Interest expense 51 51
Total benefits and expenses 1,752 1,874
Income (loss) from continuing operations before income taxes 233 (65)
Provision (benefit) for income taxes 59 (5)
Income (loss) from continuing operations 174 (60)
Income (loss) from discontinued operations, net of taxes 21 (12)
Net income (loss) 195 (72)
Less: net income from continuing operations attributable to noncontrolling interests 0 0
Less: net income (loss) from discontinued operations attributable to noncontrolling interests 8 (6)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders 187 (66)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders:    
Income (loss) from continuing operations available to Genworth Financial, Inc.'s common stockholders 174 (60)
Income (loss) from discontinued operations available to Genworth Financial, Inc.'s common common stockholders 13 (6)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders $ 187 $ (66)
Income (loss) from continuing operations available to Genworth Financial, Inc.'s common stockholders per share:    
Basic $ 0.35 $ (0.12)
Diluted 0.34 (0.12)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders per share:    
Basic 0.37 (0.13)
Diluted [1] $ 0.37 $ (0.13)
Weighted-average common shares outstanding:    
Basic 506.0 504.3
Diluted [2] 513.8 504.3
[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 three months ended March 31, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 5.4 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, dilutive potential weighted-average common shares outstanding would have been 509.7 million.
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Net income (loss) $ 195 $ (72)
Other comprehensive income (loss), net of taxes:    
Net unrealized gains (losses) on securities without an allowance for credit losses (322) (320)
Net unrealized gains (losses) on securities with an allowance for credit losses 2 0
Derivatives qualifying as hedges (419) 753
Foreign currency translation and other adjustments 136 (98)
Total other comprehensive income (loss) (603) 335
Total comprehensive income (loss) (408) 263
Less: comprehensive income (loss) attributable to noncontrolling interests 155 (53)
Total comprehensive income (loss) available to Genworth Financial, Inc.'s common stockholders $ (563) $ 316
v3.21.1
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 (loss) (72)   0   0   0   (66)   0   (66)   (6)  
Other comprehensive income (loss), net of taxes 335   0   0   382   0   0   382   (47)  
Total comprehensive income (loss) 263                       316   (53)  
Dividends to noncontrolling interests (9)   0   0   0   0   0   0   (9)  
Stock-based compensation expense and exercises and other 3   0   3   0   0   0   3   0  
Balances, ending at Mar. 31, 2020 14,834   1   11,993   3,815   1,340   (2,700)   14,449   385  
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 (loss) 195   0   0   0   187   0   187   8  
Other comprehensive income (loss), net of taxes (603)   0   0   (750)   0   0   (750)   147  
Total comprehensive income (loss) (408)                       (563)   155  
Stock-based compensation expense and exercises and other 3   0   3   0   0   0   3   0  
Balances, ending at Mar. 31, 2021 $ 14,758   $ 1   $ 12,011   $ 3,675   $ 1,771   $ (2,700)   $ 14,758   $ 0  
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from (used by) operating activities:    
Net income (loss) $ 195 $ (72)
Less (income) loss from discontinued operations, net of taxes (21) 12
Adjustments to reconcile net income (loss) to net cash from (used by) operating activities:    
Amortization of fixed maturity securities discounts and premiums (32) (39)
Net investment (gains) losses (33) 99
Charges assessed to policyholders (159) (158)
Acquisition costs deferred (2) (1)
Amortization of deferred acquisition costs and intangibles 77 108
Deferred income taxes 59 (6)
Derivative instruments, limited partnerships and other (113) 387
Stock-based compensation expense 11 10
Change in certain assets and liabilities:    
Accrued investment income and other assets (58) (56)
Insurance reserves 326 328
Current tax liabilities (4) 0
Other liabilities, policy and contract claims and other policy-related balances (319) 235
Cash used by operating activities—discontinued operations (174) (167)
Net cash from (used by) operating activities (247) 680
Cash flows from (used by) investing activities:    
Fixed maturity securities 1,031 875
Commercial mortgage loans 129 139
Other invested assets 44 34
Proceeds from sales of investments:    
Fixed maturity and equity securities 777 162
Purchases and originations of investments:    
Fixed maturity and equity securities (1,647) (1,569)
Commercial mortgage loans (142) (107)
Other invested assets (91) (160)
Short-term investments, net 28 (13)
Policy loans, net 3 9
Proceeds from sale of business, net of cash transferred 270 0
Cash from (used by) investing activities—discontinued operations (67) 79
Net cash from (used by) investing activities 335 (551)
Cash flows used by financing activities:    
Deposits to universal life and investment contracts 176 180
Withdrawals from universal life and investment contracts (578) (493)
Redemption of non-recourse funding obligations 0 (315)
Repayment and repurchase of long-term debt (470) (420)
Other, net 92 100
Cash used by financing activities—discontinued operations 0 (9)
Net cash used by financing activities (780) (957)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) and $(29) related to discontinued operations) 0 (30)
Net change in cash, cash equivalents and restricted cash (692) (858)
Cash, cash equivalents and restricted cash at beginning of period 2,656 3,341
Cash, cash equivalents and restricted cash at end of period 1,964 2,483
Less cash, cash equivalents and restricted cash of discontinued operations at end of period 0 77
Cash, cash equivalents and restricted cash of continuing operations at end of period $ 1,964 $ 2,406
v3.21.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Millions
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement of Cash Flows [Abstract]    
Discontinued operations exchange rate effect $ (1) $ (29)
v3.21.1
Formation of Genworth and Basis of Presentation
3 Months Ended
Mar. 31, 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. (“Genworth Financial”) upon the completion of the reorganization.
The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and 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.
References to “Genworth Financial,” “Genworth,” the “Company,” “we” or “our” in the accompanying unaudited condensed consolidated financial statements and the notes thereto are, unless the context otherwise requires, to Genworth Financial, Inc. on a consolidated basis.
We operate our business through the following three operating segments:
 
   
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 14 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 March 31, 2021, Genworth Holdings has $697 million of unrestricted cash and cash equivalents. 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 March 31, 2021, Genworth Holdings has outstanding $514 million of its 7.625% senior notes that mature in September 2021. We are currently in compliance with the terms of our debt agreements and interest payments on our senior notes are forecasted to be $101 million for the next twelve months. 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 2022. On March 3, 2021, we repaid the first installment payment to AXA and a portion of the second installment payment from cash proceeds received from the Genworth Australia sale. Over the next year, we expect to pay AXA approximately $25 million consisting of interest on the remaining promissory note, assuming we do not make any additional pre-payments, and a one-time payment on an unrelated liability associated with underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business. See note 14 for additional details related to the sale of our former lifestyle protection insurance business and amounts recorded related to discontinued operations.
 
   
Genworth Holdings received in the first quarter of 2021 intercompany cash tax payments generated primarily from taxable income on investment gains and is expecting additional intercompany cash tax payments in future periods.
 
   
Until the secured promissory note to AXA is paid, annual dividends above $50
million from our 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. The remaining proceeds, along with Genworth Holdings’ unrestricted cash and cash equivalents, 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 $343 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 planned partial
sale of our U.S. mortgage insurance business, subject to market
conditions, as well as the satisfication 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.
v3.21.1
Accounting Changes
3 Months Ended
Mar. 31, 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 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. 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.
v3.21.1
Earnings (Loss) Per Share
3 Months Ended
Mar. 31, 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
 
   
March 31,
 
(Amounts in millions, except per share amounts)
 
2021
   
2020
 
Weighted-average shares used in basic earnings per share calculations
    506.0       504.3  
Potentially dilutive securities:
               
Stock options, restricted stock units and stock appreciation rights
    7.8       —    
   
 
 
   
 
 
 
Weighted-average shares used in diluted earnings (loss) per share calculations
(1)
    513.8       504.3  
   
 
 
   
 
 
 
Income (loss) from continuing operations:
               
Income (loss) from continuing operations
  $ 174     $ (60
Less: net income from continuing operations attributable to noncontrolling interests
    —         —    
   
 
 
   
 
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $ 174     $ (60
   
 
 
   
 
 
 
Basic per share
  $ 0.35     $ (0.12
   
 
 
   
 
 
 
Diluted per share
  $ 0.34     $ (0.12
   
 
 
   
 
 
 
Income (loss) from discontinued operations:
               
Income (loss) from discontinued operations, net of taxes
  $ 21     $ (12
Less: net income (loss) from discontinued operations attributable to noncontrolling interests
    8       (6
   
 
 
   
 
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $ 13     $ (6
   
 
 
   
 
 
 
Basic per share
  $ 0.02     $ (0.01
   
 
 
   
 
 
 
Diluted per share
  $ 0.02     $ (0.01
   
 
 
   
 
 
 
Net income (loss):
               
Income (loss) from continuing operations
  $ 174     $ (60
Income (loss) from discontinued operations, net of taxes
    21       (12
   
 
 
   
 
 
 
Net income (loss)
    195       (72
Less: net income (loss) attributable to noncontrolling interests
    8       (6
   
 
 
   
 
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $ 187     $ (66
   
 
 
   
 
 
 
Basic per share
  $ 0.37     $ (0.13
   
 
 
   
 
 
 
Diluted per share
(2)
  $ 0.37     $ (0.13
   
 
 
   
 
 
 
 
(1)
 
Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 5.4 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the three months ended March 31, 2020, dilutive potential weighted-average common shares outstanding would have been 509.7 million.
(2)
 
May not total due to whole number calculation.
v3.21.1
Investments
3 Months Ended
Mar. 31, 2021
Investments
(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:
 
    
    Three months ended    
 
    
March 31,
 
(Amounts in millions)
  
2021
   
2020
 
Fixed maturity securities—taxable
   $ 599     $ 611  
Fixed maturity securities—non-taxable
     2       2  
Equity securities
     3       2  
Commercial mortgage loans
     78       85  
Policy loans
     50       49  
Other invested assets
     89       47  
Cash, cash equivalents, restricted cash and short-term investments
     —         10  
    
 
 
   
 
 
 
Gross investment income before expenses and fees
     821       806  
Expenses and fees
     (20     (24
    
 
 
   
 
 
 
Net investment income
   $ 801     $ 782  
    
 
 
   
 
 
 
(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
 
   
    Three months ended    
 
   
March 31,
 
(Amounts in millions)
 
2021
   
2020
 
Available-for-sale fixed maturity securities:
               
Realized gains
  $ 7     $ 2  
Realized losses
    (3     —    
   
 
 
   
 
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
    4       2  
   
 
 
   
 
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
    (2     —    
Write-down of available-for-sale fixed maturity securities
(1)
    (1     —    
Net realized gains (losses) on equity securities sold
    (5     —    
Net unrealized gains (losses) on equity securities still held
    (8     (12
Limited partnerships
    37       (40
Commercial mortgage loans
    (1     —    
Derivative instruments
(2)
    8       (48
Other
    1       (1
   
 
 
   
 
 
 
Net investment gains (losses)
  $ 33     $ (99
   
 
 
   
 
 
 
 
(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 March 31, 2021:​​​​​​​
 
         
Increase from
   
Increase
                               
         
securities
   
(decrease)
         
Decrease
                   
         
without
   
from securities
         
due to change
                   
         
allowance in
   
with allowance
         
in intent or
                   
   
Beginning
   
previous
   
in previous
   
Securities
   
requirement
               
Ending
 
(Amounts in millions)
 
balance
   
periods
   
periods
   
sold
   
to sell
   
Write-offs
   
Recoveries
   
balance
 
Fixed maturity securities:
                                                               
Non-U.S. corporate
  $ 1     $ —       $ 2     $ —       $ —       $ —       $ —       $ 3  
Commercial mortgage-backed
    3       —         —         —         —         (3     —         —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $ 4     $ —       $ 2     $ —       $ —       $ (3   $ —       $ 3  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
There was no allowance for credit losses related to our available-for-sale fixed maturity securities as of and for the three months ended March 31, 2020.
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
 
(Amounts in millions)
  
March 31, 2021
   
December 31, 2020
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses
(1)
   $ 6,769     $ 10,159  
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses
(1)
     (5     (7
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances
     (4,327     (7,302
Income taxes, net
     (518     (611
    
 
 
   
 
 
 
Net unrealized investment gains (losses)
     1,919       2,239  
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
     —         25  
    
 
 
   
 
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
   $ 1,919     $ 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 three months ended March 31:
 
(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
     (3,383     (1,712
Adjustment to DAC
     (174     168  
Adjustment to present value of future profits
     1       (1
Adjustment to sales inducements
     3       36  
Adjustment to benefit reserves and policyholder contract balances
     3,145       1,108  
Provision for income taxes
     92       87  
    
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
     (316     (314
Reclassification adjustments to net investment (gains) losses, net of taxes of $1
     (4     (6
    
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
     (320     (320
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
     (25     (4
    
 
 
   
 
 
 
Ending balance
   $ 1,919     $ 1,140  
    
 
 
   
 
 
 
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 March 31, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
    
Amortized
    
Gross
    
Gross
   
Allowance
       
    
cost or
    
unrealized
    
unrealized
   
for credit
   
Fair
 
(Amounts in millions)
  
cost
    
gains
    
losses
   
losses
   
value
 
Fixed maturity securities:
                                          
U.S. government, agencies and government-sponsored enterprises
   $ 3,323      $ 951      $ (1   $ —       $ 4,273  
State and political subdivisions
     2,762        384        (11     —         3,135  
Non-U.S. government
     749        84        (13     —         820  
U.S. corporate:
                                          
Utilities
     4,242        644        (13     —         4,873  
Energy
     2,551        275        (24     —         2,802  
Finance and insurance
     7,785        879        (45     —         8,619  
Consumer—non-cyclical
     5,173        904        (11     —         6,066  
Technology and communications
     3,254        419        (16     —         3,657  
Industrial
     1,366        159        (4     —         1,521  
Capital goods
     2,476        377        (8     —         2,845  
Consumer—cyclical
     1,740        198        (8     —         1,930  
Transportation
     1,171        200        (1     —         1,370  
Other
     393        32        (1     —         424  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total U.S. corporate
     30,151        4,087        (131     —         34,107  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Non-U.S. corporate:
                                          
Utilities
     895        64        (2     —         957  
Energy
     1,164        167        (4     —         1,327  
Finance and insurance
     2,193        263        (22     (3     2,431  
Consumer—non-cyclical
     661        65        (4     —         722  
Technology and communications
     1,062        146        (1     —         1,207  
Industrial
     1,018        118        (2     —         1,134  
Capital goods
     537        48        (3     —         582  
Consumer—cyclical
     356        27        (2     —         381  
Transportation
     459        67        (1     —         525  
Other
     1,054        166        (1     —         1,219  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total non-U.S. corporate
     9,399        1,131        (42     (3     10,485  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Residential mortgage-backed
     1,600        175        (1     —         1,774  
Commercial mortgage-backed
     2,688        121        (15     —         2,794  
Other asset-backed
     2,798        48        (3     —         2,843  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
   $ 53,470      $ 6,981      $ (217   $ (3   $ 60,231  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
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:
 
    
Amortized
    
Gross
    
Gross
   
Allowance
       
    
cost or
    
unrealized
    
unrealized
   
for credit
   
Fair
 
(Amounts in millions)
  
cost
    
gains
    
losses
   
losses
   
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   $ 63,495  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of March 31, 2021:
 
   
Less than 12 months
   
12 months or more
   
Total
 
         
Gross
               
Gross
               
Gross
       
   
Fair
   
unrealized
   
Number of
   
Fair
   
unrealized
   
Number of
   
Fair
   
unrealized
   
Number of
 
(Dollar amounts in millions)
 
value
   
losses
   
securities
   
value
   
losses
   
securities
   
value
   
losses
   
securities
 
Description of Securities
                                                                       
Fixed maturity securities:
                                                                       
U.S. government, agencies and government-sponsored enterprises
  $ 30     $ (1     4     $ —       $ —         —       $ 30     $ (1     4  
State and political subdivisions
    354       (11     68       —         —         —         354       (11     68  
Non-U.S. government
    189       (11     25       16       (2     1       205       (13     26  
U.S. corporate
    2,845       (119     291       122       (12     20       2,967       (131     311  
Non-U.S. corporate
    876       (35     102       55       (2     8       931       (37     110  
Residential mortgage-backed
    33       (1     8       —         —         —         33       (1     8  
Commercial mortgage-backed
    385       (10     48       79       (5     14       464       (15     62  
Other asset-backed
    336       (2     50       47       (1     11       383       (3     61  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total for fixed maturity securities in an unrealized loss position
  $ 5,048     $ (190     596     $ 319     $ (22     54     $ 5,367     $ (212     650  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
% Below cost:
                                                                       
<20% Below cost
  $ 5,041     $ (187     595     $ 317     $ (21     53     $ 5,358     $ (208     648  
20%-50% Below cost
    7       (3     1       2       (1     1       9       (4     2  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total for fixed maturity securities in an unrealized loss position
  $ 5,048     $ (190     596     $ 319     $ (22     54     $ 5,367     $ (212     650  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Investment grade
  $ 4,759     $ (179     551     $ 209     $ (8     36     $ 4,968     $ (187     587  
Below investment grade
    289       (11     45       110       (14     18       399       (25     63  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total for fixed maturity securities in an unrealized loss position
  $ 5,048     $ (190     596     $ 319     $ (22     54     $ 5,367     $ (212     650  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table presents the gross unrealized losses and fair values of our corporate securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of March 31, 2021:
 
   
Less than 12 months
   
12 months or more
   
Total
 
         
Gross
               
Gross
               
Gross
       
   
Fair
   
unrealized
   
Number of
   
Fair
   
unrealized
   
Number of
   
Fair
   
unrealized
   
Number of
 
(Dollar amounts in millions)
 
value
   
losses
   
securities
   
value
   
losses
   
securities
   
value
   
losses
   
securities
 
Description of Securities
                                                                       
U.S. corporate:
                                                                       
Utilities
  $ 240     $ (13     34     $ —       $ —         —       $ 240     $ (13     34  
Energy
    348       (15     45       70       (9     12       418       (24     57  
Finance and insurance
    980       (45     87       —         —         —         980       (45     87  
Consumer—non-cyclical
    314       (11     28       —         —         —         314       (11     28  
Technology and communications
    371       (15     39       6       (1     1       377       (16     40  
Industrial
    160       (4     15       —         —         —         160       (4     15  
Capital goods
    166       (7     16       18       (1     2       184       (8     18  
Consumer—cyclical
    245       (8     24       —         —         —         245       (8     24  
Transportation
    —         —         —         28       (1     5       28       (1     5  
Other
    21       (1     3       —         —         —         21       (1     3  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Subtotal, U.S. corporate securities
    2,845       (119     291       122       (12     20       2,967       (131     311  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Non-U.S. corporate:
                                                                       
Utilities