Genworth Financial Inc · NYSE:GNW

Genworth Financial — Q4 2014 Earnings Presentation

38 slides from Genworth Financial's earnings presentation, Feb 11, 2015

1. Slide 1: Fourth Quarter 2014 Earnings Summary

   Fourth Quarter 2014 Earnings Summary February 11, 2015 ©2015 Genworth Financial, Inc. All rights reserved.

2. Slide 2: Cautionary Note Regarding Forward-Looking Statements

   Cautionary Note Regarding Forward-Looking Statements This presentation contains certain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “anticipates,” “inte

3. Slide 3: 4Q14 Strategic Update

   4Q14 Strategic Update Completed Annual GAAP1 & Substantially Completed Statutory2 Margin Testing; ‫‏‬ Positive Margin For Majority Of Long Term Care Insurance (LTC) Book Acquired Blocks & New York Subsidiary Had Negative Margins Resulting In 4Q14 Charges Conducted A Deep Assessment Of Existing Portf

4. Slide 4: 4Q14 Summary -- Genworth Consolidated

   4Q14 Summary -- Genworth Consolidated Net Operating Income (Loss)1 Highlights ($MM, Except Per Share Amounts) Global Mortgage Insurance Division Australia MI NCI2 - - 11 23 21 Continued Strong Loss Ratio Performance Of 26% In Canada, 15% In Australia & 61% In U.S. MI 193 194 158 Less Favorable Tax B

5. Slide 5: 4Q14 Summary -- Global MI

   4Q14 Summary -- Global MI Net Operating Income (Loss) Highlights ($MM) Reported Net Operating Income Down Slightly Versus 3Q14; Continued Strong Australia MI NCI - - 11 23 21 Loss Ratio Performance 136 Reported Flow NIW1 Down Sequentially In 132 Canada & United States From Seasonal Variation 107 47

6. Slide 6: Canada

   Canada Premiums ($MM) Unfavorable $4MM Impact From Foreign 137 130 128 130 127 Exchange Versus Prior Quarter & Unfavorable $10MM Versus Prior Year Flow NIW Decreased Sequentially From A Seasonally Smaller Originations Market 4Q13 1Q14 2Q14 3Q14 4Q14 Flow NIW 5,000 2,900 5,000 6,800 5,500 Bulk NIW 2,

7. Slide 7: Australia

   Australia Premiums ($MM) 98 97 102 105 102 Unfavorable $6MM Impact From Foreign Exchange Versus Prior Quarter Stable MI Market Size 4Q13 1Q14 2Q14 3Q14 4Q14 Flow NIW 9,000 7,800 7,900 8,100 8,000 Bulk NIW - - - 1,000 100 Benefits & Other Changes In Policy Reserves ($MM) Total Delinquencies Down 7% F

8. Slide 8: U.S. Mortgage Insurance

   U.S. Mortgage Insurance Premiums ($MM) 151 Premium Levels Driven Primarily By Increase In 142 137 144 146 Insurance In Force From New Books (2009+) Lower NIW Sequentially From Seasonally Smaller Purchase Originations; Selective Participation In Single Premium Lender Paid NIW MI Penetration Flat Sequ

9. Slide 9: Global MI -- Capital Adequacy

   Global MI -- Capital Adequacy Regulatory Capital Ratios Comments 4Q13 1Q14 2Q14 3Q14 4Q141 International MI Segment Dividends Paid To Holding Australia – PCA2 148% 147% 154% 156% 159% Company Of $109MM In 2014 Australia Canada – MCT3 223% 229% 230% 224% 225% PCA Ratio Impacted By Positive Statutory

10. Slide 10: 4Q14 Summary -- U.S. Life Insurance

    4Q14 Summary -- U.S. Life Insurance Net Operating Income (Loss) Highlights ($MM) 4Q14 Operating Loss Reflected: 119 94 69 LTC – $478MM Unfavorable After-Tax ‫‏‬ 42 Impact From Annual LTC Loss Recognition 46 6 (322) (482) 56 21 39 13 1 Testing On Acquired Blocks; $16MM After- Long Term 21 27 24 26 23

11. Slide 11: Long Term Care Insurance

    Long Term Care Insurance Premiums ($MM) 582 565 577 587 607 $132MM YTD Pre-Tax Benefit From In Force Premium Rate Action1 4Q13 1Q14 2Q14 3Q14 4Q14 Net Investment Income & Yield ($MM) 291 290 292 293 303 Results Reflect Low Interest Rate Environment & Variability In 5.70% 5.59% 5.50% Limited Partners

12. Slide 12: 2012 LTC In Force Premium Rate Increase ($MM)

    2012 LTC In Force Premium Rate Increase ($MM) Premium Expectation From 2012 Announced Rate Action1 Approvals CA + Second Round Expectation 47 States: Round 1 Filings When Fully 12 States: Round 22 19 States Implemented ~10-40 ~250-300 ~240-2602 + = 1Includes Assumptions For Waiver Of Premium & Polic

13. Slide 13: Life Insurance

    Life Insurance Premiums & Insurance & Investment Product Fees/Other ($MM) 347 351 344 377 354 Recapture Of Reinsurance Treaty Favorably Impacted Premiums In 3Q14 4Q13 1Q14 2Q14 3Q14 4Q14 Net Investment Income & Yield1 ($MM) Favorable Change From Prepayment Speeds Given Low 139 128 137 123 133 Intere

14. Slide 14: Fixed Annuities

    Fixed Annuities Net Investment Spread1 ($MM) 155 154 153 154 153 Fixed Annuity Spreads Impacted By Variability In Limited Partnership & 4Q13 1Q14 2Q14 3Q14 4Q14 Bond Call Income SPDA2 Spread 1.61% 1.70% 1.61% 1.70% 1.63% SPIA3 Spread 1.36% 1.03% 1.21% 1.17% 1.25% Benefits & Other Changes In Policy R

15. Slide 15: U.S. Life Company Statutory Results

    U.S. Life Company Statutory Results Unassigned Surplus Highlights ($MM) 563 Unassigned Surplus Decreased ~$135MM & RBC Ratio Decreased ~18 Points 440 444 Primary Drivers Include: $39MM Increase In LTC Cash Flow Testing Reserves In The New York Subsidiary As Part Of The Annual 291 Review Of LTC Margi

16. Slide 16: 4Q14 Summary -- Corporate & Other

    4Q14 Summary -- Corporate & Other Net Operating Loss Highlights ($MM) International Protection Continued Pressure From Slow Consumer Lending In Europe (17) High Unemployment Levels Persist In Southern Europe (33) (32) European GDP Flat Sequentially & Modest Improvement YTD (47) Results Reflected $4

17. Slide 17: Net Investment Income

    Net Investment Income Net Investment Income Highlights ($MM) Sequential Increase In Net Investment 835 813 819 805 805 Income Primarily From Changes In Prepayment Speeds On Structured Securities Due To Low Interest Rates $2.2B Of Purchases In 4Q14 Primarily In Corporate & Government Debt Securities,

18. Slide 18: Holding Company Cash & Liquid Assets

    Holding Company Cash & Liquid Assets1 Cash & Liquid Assets Roll Forward Highlights ($MM) 4Q14 Dividends Of $67MM Paid From The Variance (35) Operating Companies Target Holding Company Cash & Liquid Assets Of 1.5X Interest Coverage Plus $350MM Buffer Maintained At Quarter Ends 67 (76) 1,1382 (26) Lev

19. Slide 19: 2014 Goals Recap: Holding Company & Corporate & Other

    2014 Goals Recap: Holding Company & Corporate & Other Division 2014 Results 2014 Goals & Milestones 4Q 4QYTD Observations Holding Company Holding Company Cash & Liquid $1,103MM2; ~$685MM In Excess Of Assets1: Exceed 1.5X Interest Coverage 1.5X Interest Coverage Plus Risk Buffer Of $350MM 24% Leverag

20. Slide 20: 2014 Goals Recap: U.S. Life Insurance

    2014 Goals Recap: U.S. Life Insurance 2014 Results 2014 Goals & Milestones 4Q 4QYTD Observations Dividends Of $175-$225MM No Dividend Paid In 2014 U.S. Life Unassigned Surplus Of $540-$565MM ~$155MM1 RBC Ratio > 400% ~430%1 1Company Estimate For The Fourth Quarter Of 2014, Due To Timing Of The Filin

21. Slide 21: 2014 Goals Recap: Global MI

    2014 Goals Recap: Global MI 2014 Results 2014 Goals & Milestones 4Q 4QYTD Observations Dividends Of $70-$110MM (Revised From International MI $150-$225MM Due To Australia MI IPO) $109MM YTD Canada MCT Of 220% (Revised From In ~225%1 Excess Of 190% After Consultation With Regulator) Australia PCA Ran

22. Slide 22: 2015 Preliminary Perspectives

    2015 Preliminary Perspectives Australia: PCA Of 132%-144% Canada: MCT Of 220% International MI Dividends: $150 To $230MM U.S. MI: 60%-70% Of Risk In-Force Composed Of 2009 & Forward Goals Books Of Business By End Of 2015 U.S. MI: Combined Risk-To-Capital Ratio Of < 18:1 U.S. Life Companies: RBC Rati

23. Slide 23: Summary

    Summary Completed Annual GAAP1 & Substantially Completed Statutory2 Margin Testing; ‫‏‬ Positive Margin For Majority Of Long Term Care Insurance (LTC) Book Acquired Blocks & New York Subsidiary Had Negative Margins Resulting In 4Q14 Charges Conducted A Deep Assessment Of Existing Portfolio Of Busine

24. Slide 24: Appendix

    Appendix Genworth 4Q14 Earnings Call Presentation - February 11, 2015 23

25. Slide 25: Total Genworth Financial, Inc.'s Stockholders' Equity

    Total Genworth Financial, Inc.’s Stockholders’ Equity ($MM) 4Q14 3Q14 2Q14 1Q14 4Q13 U.S. Life Insurance 10,975 11,153 11,118 10,602 9,485 Int’l Mortgage Insurance 3,047 3,331 3,454 3,971 3,864 Canada 1,631 1,699 1,746 1,648 1,661 Australia 1,197 1,392 1,443 2,055 1,935 Other Countries 219 240 265 2

26. Slide 26: Use Of Non-GAAP Measures

    Use Of Non-GAAP Measures This presentation includes the non-GAAP 1 financial measures entitled "net operating income (loss)" and “net operating income (loss) per share.” Net operating income (loss) per share is derived from net operating income (loss). The chief operating decision maker evaluates se

27. Slide 27: Use Of Non-GAAP Measures (cont.)

    Use Of Non-GAAP Measures (cont.) This presentation also includes non-GAAP financial measures entitled "net income (loss) before net income attributable to noncontrolling interests in the Australia MI business" and "net operating income (loss) before net operating income attributable to noncontrollin

28. Slide 28: Reconciliation Of Net Operating Income (Loss) To Net Income (Loss)

    Reconciliation Of Net Operating Income (Loss) To Net Income (Loss) 2014 2013 (Amounts in millions, except per share amounts) 4Q 3Q 2Q 1Q 4Q U.S. Life Insurance Division U.S. Life Insurance segment: Long-Term Care Insurance $ (506) $ (361) $ 6 $ 46 $ 42 Life Insurance 1 13 39 21 56 Fixed Annuities 23

29. Slide 29: Reconciliation Of Net Investment Gains (Losses)

    Reconciliation Of Net Investment Gains (Losses) 2014 2013 (Amounts in millions) 4Q 3Q 2Q 1Q 4Q Net investment gains (losses), gross $ (10) $ (27) $ 34 $ (17) $ 26 Adjustments for: Deferred acquisition costs and other intangible amortization and certain benefit reserves 1 9 3 1 - Net investment gains

30. Slide 30: Reconciliation Of Core Yield – Genworth Consolidated

    Reconciliation Of Core Yield – Genworth Consolidated 2014 2013 (Assets - amounts in billions) 4Q 3Q 2Q 1Q 4Q Reported - Total Invested Assets and Cash $ 78.2 $ 76.6 $ 76.9 $ 74.8 $ 72.8 Subtract: Securities lending 0.3 0.3 0.3 0.3 0.2 Unrealized gains (losses) 6.7 5.4 5.6 4.3 2.8 Derivative counterp

31. Slide 31: Reconciliation Of Reported Yield – U.S. Life Division

    Reconciliation Of Reported Yield – U.S. Life Division 2014 2013 U.S. Life Insurance Division 4Q 3Q 2Q 1Q 4Q (Assets - amounts in millions) Reported - Total Invested Assets and Cash $ 61,024 $ 59,339 $ 58,341 $ 56,710 $ 54,506 Subtract: Unrealized gains (losses) 6,213 4,982 5,160 3,975 2,546 Adjusted

32. Slide 32: Reconciliation Of Pre-Deposit Accounting Basis For LPI

    Reconciliation Of Pre-Deposit Accounting Basis For LPI 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013 Deposit Pre-Deposit Deposit Pre-Deposit Deposit Pre-Deposit Deposit Pre-Deposit Deposit Pre-Deposit Accounting Accounting Accounting Accounting Accounting Accounting Accounting Accounting Accounting Accoun

33. Slide 33: Reconciliation Of Net Income Before Noncontrolling Interests In Australia MI Business

    Reconciliation Of Net Income (Loss) Before Net Income Attributable To Noncontrolling Interests In The Australia MI Business To Net Income (Loss) Available To Genworth's Common Stockholders And Net Operating Income (Loss) Before Net Income Attributable To Noncontrolling Interests In The Australia MI

34. Slide 34: Reconciliation Of Leverage Ratio

    Reconciliation Of Leverage Ratio As of As of (Amounts in millions) December 31, 2014 September 30, 2014 Long-term borrowings $ 4,639 $ 4,662 Adjust long-term borrowings related to noncontrolling interests: Canada (noncontrolling interests ownership of 42.7%) (160) (166) Australia (noncontrolling int

35. Slide 35: Reconciliation Of Adjusted Interest Coverage To Interest Expense & Income

    Reconciliation Of Adjusted Interest Coverage To Interest Expense & Income (Loss) From Continuing Operations Before Income Taxes The company references a non-GAAP1 measure entitled “adjusted interest coverage ratio” as an indicator of the company’s ability to pay interest on its outstanding debt. The

36. Slide 36: Definition Of Selected Operating Performance Measures

    Definition Of Selected Operating Performance Measures Management uses selected operating performance measures including ''sales" and "insurance in force" or "risk in force" which are commonly used in the insurance industry as measures of operating performance. Management regularly monitors and repor

37. Slide 37: Cautionary Note Regarding Forward-Looking Statements

    Cautionary Note Regarding Forward-Looking Statements This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,”

38. Slide 38: Cautionary Note Regarding Forward-Looking Statements

    Cautionary Note Regarding Forward-Looking Statements Risks relating primarily to the company’s long-term care insurance, life insurance and annuities businesses, including: (xxviii) the company’s inability to increase sufficiently, and in a timely manner, premiums on in-force long-term care insuranc

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