GENWORTH FINANCIAL INC, 10-Q filed on 11/4/2021
Quarterly Report
v3.21.2
Cover Page - shares
9 Months Ended
Sep. 30, 2021
Oct. 27, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001276520  
Current Fiscal Year End Date --12-31  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 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
Sep. 30, 2021
Dec. 31, 2020
Assets    
Fixed maturity securities available-for-sale, at fair value (amortized cost of $53,181 and $53,417 and allowance for credit losses of $— and $4 as of September 30, 2021 and December 31, 2020, respectively) $ 61,274 $ 63,495
Equity securities, at fair value 156 386
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of September 30, 2021 and December 31, 2020) 6,916 6,774
Less: Allowance for credit losses (30) (31)
Commercial mortgage loans, net 6,886 6,743
Policy loans 2,067 1,978
Other invested assets 2,335 2,099
Total investments 72,718 74,701
Cash, cash equivalents and restricted cash 1,937 2,561
Accrued investment income 626 655
Deferred acquisition costs 1,193 1,487
Intangible assets 147 157
Reinsurance recoverable 16,722 16,864
Less: Allowance for credit losses (51) (45)
Reinsurance recoverable, net 16,671 16,819
Other assets 396 404
Deferred tax asset 209 65
Separate account assets 5,978 6,081
Assets related to discontinued operations 0 2,817
Total assets 99,875 105,747
Liabilities and equity    
Future policy benefits 41,794 42,695
Policyholder account balances 19,607 21,503
Liability for policy and contract claims 11,743 11,486
Unearned premiums 685 775
Other liabilities 1,568 1,614
Long-term borrowings 2,412 3,403
Separate account liabilities 5,978 6,081
Liabilities related to discontinued operations 36 2,370
Total liabilities 83,823 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 September 30, 2021 and December 31, 2020, respectively; 508 million and 506 million shares outstanding as of September 30, 2021 and December 31, 2020, respectively 1 1
Additional paid-in capital 11,850 12,008
Accumulated other comprehensive income (loss) 3,800 4,425
Retained earnings 2,325 1,584
Treasury stock, at cost (88 million shares as of September 30, 2021 and December 31, 2020) (2,700) (2,700)
Total Genworth Financial, Inc.'s stockholders' equity 15,276 15,318
Noncontrolling interests 776 502
Total equity 16,052 15,820
Total liabilities and equity $ 99,875 $ 105,747
v3.21.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2021
Dec. 31, 2020
Debt securities amortized costs $ 53,181 $ 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 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Revenues:        
Premiums $ 944 $ 963 $ 2,859 $ 2,866
Net investment income 859 820 2,504 2,381
Net investment gains (losses) 88 351 191 345
Policy fees and other income 179 184 542 538
Total revenues 2,070 2,318 6,096 6,130
Benefits and expenses:        
Benefits and other changes in policy reserves 1,143 1,273 3,522 4,057
Interest credited 123 137 381 417
Acquisition and operating expenses, net of deferrals 290 235 869 682
Amortization of deferred acquisition costs and intangibles 106 94 269 289
Interest expense 35 47 129 140
Total benefits and expenses 1,697 1,786 5,170 5,585
Income from continuing operations before income taxes 373 532 926 545
Provision for income taxes 67 130 201 148
Income from continuing operations 306 402 725 397
Income (loss) from discontinued operations, net of taxes 12 34 28 (451)
Net income (loss) 318 436 753 (54)
Less: net income from continuing operations attributable to noncontrolling interests 4 0 4 0
Less: net income from discontinued operations attributable to noncontrolling interests 0 18 8 35
Net income (loss) available to Genworth Financial, Inc.'s common stockholders 314 418 741 (89)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders:        
Income from continuing operations available to Genworth Financial, Inc.‘s common stockholders 302 402 721 397
Income (loss) from discontinued operations available to Genworth Financial, Inc.'s common stockholders 12 16 20 (486)
Net income (loss) available to Genworth Financial, Inc.'s common stockholders $ 314 $ 418 $ 741 $ (89)
Income from continuing operations available to Genworth Financial, Inc.‘s common stockholders per share:        
Basic $ 0.59 $ 0.79 $ 1.42 $ 0.78
Diluted 0.59 0.79 1.40 0.78
Net income (loss) available to Genworth Financial, Inc.'s common stockholders per share:        
Basic [1] 0.62 0.83 1.46 (0.18)
Diluted $ 0.61 $ 0.82 $ 1.44 $ (0.17)
Weighted-average common shares outstanding:        
Basic 507.4 505.6 506.8 505.1
Diluted 514.2 511.5 514.4 511.2
[1] May not total due to whole number calculation.
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Net income (loss) $ 318 $ 436 $ 753 $ (54)
Other comprehensive income (loss), net of taxes:        
Net unrealized gains (losses) on securities without an allowance for credit losses 7 (98) (373) 264
Net unrealized gains (losses) on securities with an allowance for credit losses 0 (2) 6 (10)
Derivatives qualifying as hedges (12) (226) (220) 449
Foreign currency translation and other adjustments (4) 33 134 8
Total other comprehensive income (loss) (9) (293) (453) 711
Total comprehensive income 309 143 300 657
Less: comprehensive income attributable to noncontrolling interests 3 31 158 38
Total comprehensive income available to Genworth Financial, Inc.‘s common stockholders $ 306 $ 112 $ 142 $ 619
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 (loss) (54)   0   0   0   (89)   0   (89)   35  
Other comprehensive income (loss), net of taxes 711   0   0   708   0   0   708   3  
Total comprehensive income 657                       619   38  
Dividends to noncontrolling interests (9)   0   0   0   0   0   0   (9)  
Stock-based compensation expense and exercises and other 7   0   7   0   0   0   7   0  
Balances, ending at Sep. 30, 2020 15,232   1   11,997   4,141   1,317   (2,700)   14,756   476  
Balances, beginning at Jun. 30, 2020 15,088   1   11,996   4,447   899   (2,700)   14,643   445  
Comprehensive income (loss):                                
Net income (loss) 436   0   0   0   418   0   418   18  
Other comprehensive income (loss), net of taxes (293)   0   0   (306)   0   0   (306)   13  
Total comprehensive income 143                       112   31  
Stock-based compensation expense and exercises and other 1   0   1   0   0   0   1   0  
Balances, ending at Sep. 30, 2020 15,232   1   11,997   4,141   1,317   (2,700)   14,756   476  
Balances, beginning at Dec. 31, 2020 15,820   1   12,008   4,425   1,584   (2,700)   15,318   502  
Initial sale of subsidiary shares to noncontrolling interests 576   0   (171)   (26)   0   0   (197)   773  
Sale of business that included noncontrolling interests (657)   0   0   0   0   0   0   (657)  
Comprehensive income (loss):                                
Net income (loss) 753   0   0   0   741   0   741   12  
Other comprehensive income (loss), net of taxes (453)   0   0   (599)   0   0   (599)   146  
Total comprehensive income 300                       142   158  
Stock-based compensation expense and exercises and other 13   0   13   0   0   0   13   0  
Balances, ending at Sep. 30, 2021 16,052   1   11,850   3,800   2,325   (2,700)   15,276   776  
Balances, beginning at Jun. 30, 2021 15,164   1   12,018   3,834   2,011   (2,700)   15,164   0  
Initial sale of subsidiary shares to noncontrolling interests 576   0   (171)   (26)   0   0   (197)   773  
Comprehensive income (loss):                                
Net income (loss) 318   0   0   0   314   0   314   4  
Other comprehensive income (loss), net of taxes (9)   0   0   (8)   0   0   (8)   (1)  
Total comprehensive income 309                       306   3  
Stock-based compensation expense and exercises and other 3   0   3   0   0   0   3   0  
Balances, ending at Sep. 30, 2021 $ 16,052   $ 1   $ 11,850   $ 3,800   $ 2,325   $ (2,700)   $ 15,276   $ 776  
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Cash flows from operating activities:    
Net income (loss) $ 753 $ (54)
Less (income) loss from discontinued operations, net of taxes (28) 451
Adjustments to reconcile net income (loss) to net cash from operating activities:    
Amortization of fixed maturity securities discounts and premiums (138) (110)
Net investment gains (191) (345)
Charges assessed to policyholders (472) (479)
Acquisition costs deferred (6) 0
Amortization of deferred acquisition costs and intangibles 269 289
Deferred income taxes 202 144
Derivative instruments, limited partnerships and other (252) 77
Stock-based compensation expense 32 22
Change in certain assets and liabilities:    
Accrued investment income and other assets (117) (127)
Insurance reserves 678 1,034
Current tax liabilities (8) 4
Other liabilities, policy and contract claims and other policy-related balances 56 698
Cash used by operating activities—discontinued operations (488) (152)
Net cash from operating activities 290 1,452
Cash flows from (used by) investing activities:    
Fixed maturity securities 3,253 2,656
Commercial mortgage loans 601 479
Other invested assets 176 108
Proceeds from sales of investments:    
Fixed maturity and equity securities 1,591 2,168
Purchases and originations of investments:    
Fixed maturity and equity securities (4,181) (5,858)
Commercial mortgage loans (743) (414)
Other invested assets (447) (318)
Short-term investments, net (24) 32
Policy loans, net 40 27
Proceeds from sale of business, net of cash transferred 270 0
Cash used by investing activities—discontinued operations (67) (159)
Net cash from (used by) investing activities 469 (1,279)
Cash flows used by financing activities:    
Deposits to universal life and investment contracts 511 693
Withdrawals from universal life and investment contracts (1,582) (1,408)
Redemption of non-recourse funding obligations 0 (315)
Proceeds from issuance of long-term debt 0 739
Repayment and repurchase of long-term debt (1,003) (490)
Proceeds from sale of subsidiary shares to noncontrolling interests 529 0
Other, net 67 31
Cash from financing activities—discontinued operations 0 16
Net cash used by financing activities (1,478) (734)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) and $4 related to discontinued operations) 0 0
Net change in cash, cash equivalents and restricted cash (719) (561)
Cash, cash equivalents and restricted cash at beginning of period 2,656 3,341
Cash, cash equivalents and restricted cash at end of period 1,937 2,780
Less cash, cash equivalents and restricted cash of discontinued operations at end of period 0 40
Cash, cash equivalents and restricted cash of continuing operations at end of period $ 1,937 $ 2,740
v3.21.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Statement of Cash Flows [Abstract]    
Discontinued operations exchange rate effect $ (1) $ 4
v3.21.2
Formation of Genworth and Basis of Presentation
9 Months Ended
Sep. 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 underwriting 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 September 30, 2021, Genworth Holdings has $635
 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:
 
   
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. We have no additional debt maturities until August 2023. Interest payments on our senior notes are forecasted to be approximately $77 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 was due in September 2022. On September 21, 2021, we repaid the remaining outstanding balance of the promissory note. Over the next year, we expect to pay AXA approximately $36 million primarily consisting of estimated future claims that are still being processed by AXA. 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 intercompany cash tax payments from its subsidiaries during the nine months ended September 30, 2021 generated from taxable income. Additional intercompany cash tax payments are expected in future periods.
We received net cash proceeds of $370 million and $529 million from the sale of Genworth Australia in March 2021 and the minority IPO of Enact Holdings, Inc. (“Enact Holdings”) in September 2021, respectively. See note 13 for additional details related to the minority IPO of Enact Holdings. 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 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
9 Months Ended
Sep. 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 the process of obtaining necessary data, modifying systems, identifying and developing key inputs and establishing policies, systems and internal controls necessary to implement this new accounting guidance. Given the nature and extent of the changes, this guidance is expected to have a significant impact on our consolidated financial statements and significantly reduce our equity at transition.
v3.21.2
Earnings (Loss) Per Share
9 Months Ended
Sep. 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
September 30,
    
Nine months ended
September 30,
 
(Amounts in millions, except per share amounts)
  
    2021    
    
    2020    
    
    2021    
    
    2020    
 
Weighted-average shares used in basic earnings per share calculations
     507.4        505.6        506.8        505.1  
Potentially dilutive securities:
                                   
Stock options, restricted stock units and stock appreciation rights
     6.8        5.9        7.6        6.1  
    
 
 
    
 
 
    
 
 
    
 
 
 
Weighted-average shares used in diluted earnings per share calculations
     514.2        511.5        514.4        511.2  
    
 
 
    
 
 
    
 
 
    
 
 
 
Income from continuing operations:
                                   
Income from continuing operations
   $ 306      $ 402      $ 725      $ 397  
Less: net income from continuing operations attributable to noncontrolling interests
     4        —          4        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   $ 302      $ 402      $ 721      $ 397  
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic per share
   $ 0.59      $ 0.79      $ 1.42      $ 0.78  
    
 
 
    
 
 
    
 
 
    
 
 
 
Diluted per share
   $ 0.59      $ 0.79      $ 1.40      $ 0.78  
    
 
 
    
 
 
    
 
 
    
 
 
 
Income (loss) from discontinued operations:
                                   
Income (loss) from discontinued operations, net of taxes
   $ 12      $ 34      $ 28      $ (451
Less: net income from discontinued operations attributable to noncontrolling interests
     —          18        8        35  
    
 
 
    
 
 
    
 
 
    
 
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   $ 12      $ 16      $ 20      $ (486
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic per share
   $ 0.02      $ 0.03      $ 0.04      $ (0.96
    
 
 
    
 
 
    
 
 
    
 
 
 
Diluted per share
   $ 0.02      $ 0.03      $ 0.04      $ (0.95
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income (loss):
                                   
Income from continuing operations
   $ 306      $ 402      $ 725      $ 397  
Income (loss) from discontinued operations, net of taxes
     12        34        28        (451
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income (loss)
     318        436        753        (54
Less: net income attributable to noncontrolling interests
     4        18        12        35  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
   $ 314      $ 418      $ 741      $ (89
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic per share
(1)
   $ 0.62      $ 0.83      $ 1.46      $ (0.18
    
 
 
    
 
 
    
 
 
    
 
 
 
Diluted per share
   $ 0.61      $ 0.82      $ 1.44      $ (0.17
    
 
 
    
 
 
    
 
 
    
 
 
 
 
(1)
May not total due to whole number calculation.
v3.21.2
Investments
9 Months Ended
Sep. 30, 2021
Investments
(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods
 
indicated:
 
    
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
 
Fixed maturity securities—taxable
   $ 614     $ 625     $ 1,821     $ 1,830  
Fixed maturity
securities—non-taxable
     2       2       5       5  
Equity securities
     2       3       7       7  
Commercial mortgage loans
     93       82       274       251  
Policy loans
     47       51       137       149  
Other invested assets
     122       79       323       192  
Cash, cash equivalents, restricted cash and short-term investments
     1       1       1       15  
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
     881       843       2,568       2,449  
Expenses and fees
     (22     (23     (64     (68
    
 
 
   
 
 
   
 
 
   
 
 
 
Net investment income
   $ 859     $ 820     $ 2,504     $ 2,381  
    
 
 
   
 
 
   
 
 
   
 
 
 
(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
 
    
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
 
Available-for-sale
fixed maturity securities:
                                
Realized gains
   $ 11     $ 320     $ 23     $ 425  
Realized losses
     —         (1     (7     (6
    
 
 
   
 
 
   
 
 
   
 
 
 
Net realized gains (losses) on
available-for-sale
fixed maturity securities
     11       319       16       419  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net change in allowance for credit losses on
available-for-sale
fixed maturity securities
     —         2       (6     (5
Write-down of
available-for-sale
fixed maturity securities
(1)
     —         (4     (1     (4
Net realized gains (losses) on equity securities sold
     —         (3     (7     (3
Net unrealized gains (losses) on equity securities still held
     (1     3       (3     (4
Limited partnerships
     75       31       177       28  
Commercial mortgage loans
     3       (3     1       (2
Derivative instruments
(2)
     (3     9       9       (75
Other
     3       (3     5       (9
    
 
 
   
 
 
   
 
 
   
 
 
 
Net investment gains (losses)
   $ 88     $ 351     $ 191     $ 345  
    
 
 
   
 
 
   
 
 
   
 
 
 
 
(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 September 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
  $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
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 September 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     $ —       $ (2   $ —       $ —       $ —       $ —       $ 2  
Commercial mortgage
-
b
acked
    3       —         —         —         —         —         —         3  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
available-for-sale
fixed
maturity securities
  $ 7     $ —       $ (2   $ —       $ —       $ —       $ —       $ 5  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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 nine months ended September 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   $ —       $ —    
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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 nine months ended September 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     $ (2   $ —       $ —       $ —       $ —       $ 2  
Commercial mortgage
-
backed
    —         3       —         —         —         —         —         3  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
available-for-sale
fixed
maturity securities
  $ —       $ 7     $ (2   $ —       $ —       $ —       $ —       $ 5  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
(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)
  
September 30, 2021
   
December 31, 2020
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit
losses
(1)
   $ 8,093     $ 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
     (5,716     (7,302
Income taxes, net
     (505     (611
    
 
 
   
 
 
 
Net unrealized investment gains (losses)
     1,872       2,239  
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
     25       25  
    
 
 
   
 
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
   $ 1,847     $ 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
September 30,
 
(Amounts in millions)
  
2021
   
2020
 
Beginning balance
   $ 1,865     $ 1,811  
Unrealized gains (losses) arising during the period:
                
Unrealized gains (losses) on fixed maturity securities
     (433     781  
Adjustment to deferred acquisition costs
     80       (9
Adjustment to present value of future profits
     (2     2  
Adjustment to sales inducements
     3       (5
Adjustment to benefit reserves
     372       (566
Provision for income taxes
     (4     (42
    
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
     16       161  
Reclassification adjustments to net investment (gains) losses, net of taxes of $3 and $70
     (9     (261
    
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
     7       (100
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
     25       —    
    
 
 
   
 
 
 
Ending balance
   $ 1,847     $ 1,711  
    
 
 
   
 
 
 
    
As of or for the

nine months ended
September 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
     (2,042     2,980  
Adjustment to deferred acquisition costs
     (52     48  
Adjustment to present value of future profits
     —         6  
Adjustment to sales inducements
     8       (3
Adjustment to benefit reserves
     1,630       (2,260
Provision for income taxes
     102       (162
    
 
 
   
 
 
 
Change in unrealized gains (losses) on investment securities
     (354     609  
Reclassification adjustments to net investment (gains) losses, net of taxes of $4 and $95
     (13     (355
    
 
 
   
 
 
 
Change in net unrealized investment gains (losses)
     (367     254  
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
     —         (1
    
 
 
   
 
 
 
Ending balance
   $ 1,847     $ 1,711  
    
 
 
   
 
 
 
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 September 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
   $ 3,384      $ 1,117      $ (1   $ —        $ 4,500  
State and political subdivisions
     2,946        476        (4     —          3,418  
Non-U.S.
government
     760        85        (10     —          835  
U.S. corporate:
                                           
Utilities
     4,313        787        (8     —          5,092  
Energy
     2,644        377        (10     —          3,011  
Finance and insurance
     7,977        1,065        (18     —          9,024  
Consumer—non-cyclical
     5,176        1,047        (5     —          6,218  
Technology and communications
     3,281        488        (12     —          3,757  
Industrial
     1,340        179        (1     —          1,518  
Capital goods
     2,395        428        (3     —          2,820  
Consumer—cyclical
     1,700        213        (5     —          1,908  
Transportation
     1,131        241        —         —          1,372  
Other
     373        39        —         —          412  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total U.S. corporate
     30,330        4,864        (62     —          35,132  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Non-U.S.
corporate:
                                           
Utilities
     888        69        (1     —          956  
Energy
     1,213        203        —         —          1,416  
Finance and insurance
     2,147        293        (7     —          2,433  
Consumer—non-cyclical
     673        84        (2     —          755  
Technology and communications
     1,109        172        (1     —          1,280  
Industrial
     974        126        (1     —          1,099  
Capital goods
     627        66        (1     —          692  
Consumer—cyclical
     326        27        (1     —          352  
Transportation
     422        68        —         —          490  
Other
     1,089        181        (3     —          1,267  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total
non-U.S.
corporate
     9,468        1,289        (17     —          10,740  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Residential mortgage-backed
     1,432        141        (1     —          1,572  
Commercial mortgage-backed
     2,496        176        (2     —          2,670  
Other asset-backed
     2,365        43        (1     —          2,407  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Total
available-for-sale
fixed maturity securities
   $ 53,181      $ 8,191      $ (98   $ —        $ 61,274  
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
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   $ 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 September 30, 2021:
 
   
Less than 12 months
   
12 months or more
   
Total
 
(Dollar amounts in millions)
 
Fair
value
   
Gross
unrealized
losses
   
Number of
securities
   
Fair
value
   
Gross
unrealized
losses
   
Number of
securities
   
Fair
value
   
Gross
unrealized
losses
  &