Genworth Financial Inc · NYSE:GNW
Genworth Financial — Q1 2015 Earnings Presentation
34 slides from Genworth Financial's earnings presentation, Apr 29, 2015
Slide 1: First Quarter 2015 Earnings Summary
First Quarter 2015 Earnings Summary April 29, 2015 ©2015 Genworth Financial, Inc. All rights reserved.
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
Slide 3: 1Q15 Strategic Update
1Q15 Strategic Update • Improve Operating Returns • Increase LTC2 Capital Buffers Goals For Success • Support Capital Needs In U.S. MI1 • Maintain Holding Company Cash • Reduce Debt Level Actively Engaged On Three Strategic Imperatives Strengthening MI Simplifying Business Increasing Financi
Slide 4: 1Q15 Summary -- Genworth Consolidated
1Q15 Summary -- Genworth Consolidated Net Operating Income (Loss)1 Highlights ($MM, Except Per Share Amounts) Global MI Division Australia MI NCI2 - 11 23 21 21 Continued Strong Loss Ratio Performance In Canada, Australia & U.S. MI 194 158 156 Unfavorable Foreign Exchange (FX) 132 136 116 Global MI
Slide 5: 1Q15 Summary -- Global MI
1Q15 Summary -- Global MI Net Operating Income (Loss) Highlights ($MM) Reported Net Operating Income Up Versus 4Q14; Continued Strong Loss Australia MI NCI - 11 23 21 21 Ratio Performance & Seasonal Earnings 136 Improvement In U.S. MI 132 Reported Flow NIW1 Down Sequentially 116 From Seasonal Variat
Slide 6: Canada
Canada Premiums ($MM) Unfavorable $9MM Impact From Foreign 130 128 130 127 119 Exchange Versus Prior Quarter & Unfavorable $13MM Versus Prior Year Flow NIW Decreased Sequentially From A Seasonally Smaller Originations Market 1Q14 2Q14 3Q14 4Q14 1Q15 Flow NIW 2,900 5,000 6,800 5,500 3,300 Bulk NIW 2,
Slide 7: Australia
Australia Premiums ($MM) 97 102 105 102 Unfavorable $9MM Impact From Foreign 89 Exchange Versus Prior Quarter & Unfavorable $10MM Versus Prior Year NIW Decreased From Seasonal Variation & Market Pressures; Smaller MI Market Size 1Q14 2Q14 3Q14 4Q14 1Q15 Versus Prior Quarter & Prior Year Flow NIW 7,8
Slide 8: U.S. Mortgage Insurance
U.S. Mortgage Insurance Premiums ($MM) 151 150 Premium Levels Driven Primarily By Increase In 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 Estimated Market Share U
Slide 9: Global MI -- Capital Adequacy
Global MI -- Capital Adequacy Regulatory Capital Ratios Comments 1Q14 2Q14 3Q14 4Q14 1Q151 International MI Segment Dividends Paid To Holding Australia – PCA2 147% 154% 156% 159% 163% Company Of $126MM In 1Q15 Australia Canada – MCT3 229% 230% 224% 225% 233% PCA Ratio Impacted By Positive Statutory
Slide 10: 1Q15 Summary -- U.S. Life Insurance
1Q15 Summary -- U.S. Life Insurance Net Operating Income (Loss) Highlights ($MM) 1Q15 Operating Income Reflected: 94 81 LTC – Favorable Mortality On Existing 69 (322) (482) 46 6 10 Claims; Unfavorable Severity Given Mix Of 21 39 13 1 40 New Claims With Higher Average Reserve; Long Term 27 24 26
Slide 11: Long Term Care Insurance
Long Term Care Insurance Premiums ($MM) 565 577 587 607 589 $46MM YTD Pre-Tax Benefit From In Force Premium Rate Actions Implemented To Date1 1Q14 2Q14 3Q14 4Q14 1Q15 Net Investment Income & Yield ($MM) 313 290 292 293 303 Results Reflect Low Interest Rate Environment & Variability In 5.59% Prepayme
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 Through 4/28/15 Initial Expectation 47 States: Round 1 When Fully Achieved Approved Premium 18 States: Round 2 Implemented Expectation On 2012 Rate Action ~255-270 ~250-300 Remain Focused On
Slide 13: Life Insurance
Life Insurance Premiums & Insurance & Investment Product Fees/Other ($MM) 351 344 377 354 357 Higher Term Life Insurance Premiums, Partially Offset By Reinsurance Transaction That Will Reduce Future Excess Reserve Financing Costs 1Q14 2Q14 3Q14 4Q14 1Q15 Net Investment Income & Yield1 ($MM) 137 133
Slide 14: Fixed Annuities
Fixed Annuities Net Investment Spread1 ($MM) 154 153 154 153 147 Fixed Annuity Spreads Impacted By Variability In Prepayment Speeds, 1Q14 2Q14 3Q14 4Q14 1Q15 Limited Partnership Performance & SPDA2 Spread 1.70% 1.61% 1.70% 1.63% 1.61% Bond Call Income SPIA3 Spread 1.03% 1.21% 1.17% 1.25% 1.02% Benef
Slide 15: U.S. Life Company Statutory Results
U.S. Life Company Statutory Results Unassigned Surplus Highlights ($MM) 563 Unassigned Surplus Decreased ~$40MM & RBC Ratio Increased ~12 Points 444 1Q15 Unassigned Surplus Unfavorably Impacted (Approximately ($70MM)) By Life Insurance Reinsurance Transaction That Will Reduce 291 Future Excess Reser
Slide 16: 1Q15 Summary -- Corporate & Other
1Q15 Summary -- Corporate & Other Net Operating Loss Highlights ($MM) International Protection Continued Pressure From Slow Consumer Lending In Europe (17) High Unemployment Levels Persist In Southern Europe (32) European GDP Increased Slightly Sequentially (41) Runoff (47) Equity Market Growth High
Slide 17: Net Investment Income
Net Investment Income Net Investment Income Highlights ($MM) Sequential Decrease In Net Investment 805 813 805 819 803 Income Primarily From Lower Reinvestment Rates & Unfavorable FX $2.3B Of Purchases In 1Q15 Primarily In Corporate & Government Debt Securities, ABS5, CMBS/RMBS6 & CML7, With Average
Slide 18: Holding Company Cash & Liquid Assets
Holding Company Cash & Liquid Assets1 Cash & Liquid Assets Roll Forward Highlights ($MM) 1Q15 Dividends Of $132MM Paid Variance (33) Primarily From International MI Target Holding Company Cash & Liquid Assets Of 1.5X Interest Coverage Plus $350MM Buffer Maintained At Quarter Ends 132 (63) (102) 1,10
Slide 19: 2015 Goals Recap
2015 Goals Recap 2015 Results 2015 Goals & Milestones 1Q 1QYTD Observations International MI Dividends Of $150-$230MM $126MM YTD Canada MCT Of 220% ~233%1 Australia PCA Range Of 132% To 144% ~163%1 60-70% Of Risk In Force Composed Of U.S. MI ~58% 2009+ Books Combined Risk-To-Capital Ratio Of <18:1 1
Slide 20: Summary
Summary Results Reflect Continued Positive Momentum In The Global MI Division & Strong Results For Life And Fixed Annuities Consideration Given To A Broad Range Of Strategic Options; Actively Engaged On Three Strategic Imperatives 1. Strengthening MI Businesses & LTC 2. Simplifying Business
Slide 21: Appendix
Appendix Genworth 1Q15 Earnings Call Presentation - April 29, 2015 20
Slide 22: Total Genworth Financial, Inc.'s Stockholders' Equity (U.S. GAAP)
Total Genworth Financial, Inc.’s Stockholders’ Equity (U.S. GAAP) ($MM) 1Q15 4Q14 3Q14 2Q14 1Q14 U.S. Life Insurance 11,297 10,975 11,153 11,118 10,602 LTC1 7,116 6,649 6,615 6,102 5,642 Life Insurance1 2,831 2,987 3,181 3,556 3,563 Fixed Annuities1 1,350 1,339 1,357 1,460 1,397 Int’l Mortgage Insur
Slide 23: 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
Slide 24: 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
Slide 25: Reconciliation Of Net Operating Income (Loss) To Net Income (Loss)
Reconciliation Of Net Operating Income (Loss) To Net Income (Loss) 2015 2014 (Amounts in millions, except per share amounts) 1Q 4Q 3Q 2Q 1Q Global Mortgage Insurance Division International Mortgage Insurance segment: Canada $ 40 $ 36 $ 46 $ 47 $ 41 Australia 30 33 48 57 62 Other Countries (6) (7) (7
Slide 26: Reconciliation Of Net Investment Gains (Losses)
Reconciliation Of Net Investment Gains (Losses) 2015 2014 (Amounts in millions) 1Q 4Q 3Q 2Q 1Q Net investment gains (losses), gross $ (16) $ (10) $ (27) $ 34 $ (17) Adjustments for: Deferred acquisition costs and other intangible amortization and certain benefit reserves 6 1 9 3 1 Net investment gai
Slide 27: Reconciliation Of Core Yield – Genworth Consolidated
Reconciliation Of Core Yield – Genworth Consolidated 2015 2014 (Assets - amounts in billions) 1Q 4Q 3Q 2Q 1Q Reported - Total Invested Assets and Cash $ 79.4 $ 78.2 $ 76.6 $ 76.9 $ 74.8 Subtract: Securities lending 0.3 0.3 0.3 0.3 0.3 Unrealized gains (losses) 7.9 6.7 5.4 5.6 4.3 Derivative counterp
Slide 28: Reconciliation Of Reported Yield – U.S. Life Division
Reconciliation Of Reported Yield – U.S. Life Division 2015 2014 U.S. Life Insurance Division 1Q 4Q 3Q 2Q 1Q (Assets - amounts in millions) Reported - Total Invested Assets and Cash $ 62,424 $ 61,024 $ 59,339 $ 58,341 $ 56,710 Subtract: Unrealized gains (losses) 7,382 6,213 4,982 5,160 3,975 Adjusted
Slide 29: Reconciliation Of Pre-Deposit Accounting Basis For LPI
Reconciliation Of Pre-Deposit Accounting Basis For LPI 1Q 2015 4Q 2014 3Q 2014 2Q 2014 1Q 2014 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
Slide 30: 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
Slide 31: Reconciliation Of Leverage Ratio
Reconciliation Of Leverage Ratio As of As of (Amounts in millions) March 31, 2015 December 31, 2014 Long-term borrowings $ 4,601 $ 4,639 Adjust long-term borrowings related to noncontrolling interests: Canada (noncontrolling interests ownership of 42.7%) (146) (160) Australia (noncontrolling interes
Slide 32: 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
Slide 33: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements Cautionary Note Regarding Forward-Looking Statements This press release 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
Slide 34: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements Risks relating primarily to the company’s mortgage insurance businesses, including: (i) deterioration in economic conditions or a decline in home prices that adversely affect the company’s loss experience in mortgage insurance; (ii) premiums for t