Genworth Financial Inc · NYSE:GNW
Genworth Financial — Q2 2014 Earnings Presentation
36 slides from Genworth Financial's earnings presentation, Jul 30, 2014
Slide 1: Second Quarter 2014 Earnings Summary
Second Quarter 2014 Earnings Summary July 30, 2014 ©2014 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: Strategic Priorities Update
Strategic Priorities Update Long Term Care Insurance (LTC) Three Part Strategy Continuing To Show Results Earnings Continued To Benefit From Higher Incremental Premium & Reduced Benefits 43 States Approved As Part Of 2012 In Force Premium Rate Increases 18 State Approvals For Choice 2 Premium Rate I
Slide 4: 2Q14 Highlights
2Q14 Highlights Net Operating Income Before Net Operating Income Attributable To Noncontrolling Interests (NCI) In Australia MI1 Up 27% Versus Prior Year & Down 13% Versus the Prior Quarter Net Operating Income Up 19% Versus The Prior Year & Down 19% Versus Prior Quarter Unfavorable Foreign Exchange
Slide 5: 2Q14 Summary -- Genworth Consolidated
2Q14 Summary -- Genworth Consolidated Net Operating Income1 Highlights ($MM) Global Mortgage Insurance Division Australia MI NCI2 - - - - 11 Continued Strong Loss Ratio Performance In 193 194 Canada & Australia, 12% & 23%, Respectively 139 158 U.S. MI Loss Performance In Line With Prior 133 Quarter;
Slide 6: 2Q14 Summary -- Global MI
2Q14 Summary -- Global MI Net Operating Income (Loss) Highlights ($MM) Operating Income Up 3% Versus 1Q14; Australia MI NCI - - - - 11 Net Operating Income Before Net 132 Operating Income Attributable To NCI In 107 136 Australia MI Up 11% Versus Prior Quarter 102 41 47 87 Reported Flow NIW1 Up Seque
Slide 7: Canada
Canada Premiums ($MM) Continued Maturing Of Larger 2007 & 2008 141 138 137 130 128 Books Unfavorable $10MM Impact From Foreign Exchange Versus Prior Year NIW Increased Sequentially From Seasonally 2Q13 3Q13 4Q13 1Q14 2Q14 Larger Market Flow NIW 4,700 6,000 5,000 2,900 5,000 Higher Bulk Activity On L
Slide 8: Australia
Australia Premiums ($MM) 101 98 98 97 102 Unfavorable $11MM Impact From Foreign Exchange Versus Prior Year; Premiums Up From Seasoning Of Newer Books Stable MI Market Size 2Q13 3Q13 4Q13 1Q14 2Q14 Flow NIW 8,700 8,000 9,000 7,800 7,900 Bulk NIW 900 100 - - - Benefits & Other Changes In Policy Reserv
Slide 9: U.S. Mortgage Insurance
U.S. Mortgage Insurance Premiums ($MM) Premium Levels Driven By Increase In Insurance 141 137 142 137 144 In Force From New Books (2009+) Higher NIW Sequentially From Seasonally Higher Purchase Originations; Refinance Originations Remain Low From Higher Interest Rates 2Q13 3Q13 4Q13 1Q14 2Q14 MI Pen
Slide 10: Global MI -- Capital Adequacy
Global MI -- Capital Adequacy Regulatory Capital Ratios Comments 2Q13 3Q13 4Q13 1Q14 2Q141 International MI Segment Dividends Paid To Holding Australia – PCA2 134% 135% 148% 147% 154% Company Of $11MM In 2Q14 Australia Canada – MCT3 216% 218% 223% 229% 230% PCA Ratio Impacted By Positive Statutory I
Slide 11: 2Q14 Summary -- U.S. Life Insurance
2Q14 Summary -- U.S. Life Insurance Net Operating Income Highlights ($MM) Net Operating Income Decreased 27% Versus 1Q14 From Adverse 119 111 LTC Experience 94 2Q14 Operating Income Reflected: Life Insurance – Mortality Improved 79 56 54 21 Versus The Prior Quarter 69 LTC – Sequentially Higher Sever
Slide 12: Life Insurance
Life Insurance Premiums & Insurance & Investment Product Fees/Other ($MM) 360 354 347 351 344 Premiums And Insurance & Investment Product Fees/Other Impacted By Gradual Universal Life In Force Block Reduction 2Q13 3Q13 4Q13 1Q14 2Q14 Net Investment Income & Yield1 ($MM) Unfavorable Impact In 1Q14 Fr
Slide 13: Long Term Care Insurance
Long Term Care Insurance Premiums ($MM) 550 564 582 565 577 $56MM YTD Pre-Tax Benefit From In Force Premium Rate Action1 2Q13 3Q13 4Q13 1Q14 2Q14 Net Investment Income & Yield ($MM) 277 282 291 290 292 Low Interest Rate Environment & Variability In Limited 5.70% 5.59% 5.60% 5.61% 5.50% Partnership &
Slide 14: 2012 LTC In Force Premium Rate Increase ($MM)
2012 LTC In Force Premium Rate Increase ($MM) Premium Expectation From 2012 Announced Rate Action1 Approvals Decisions Additional Filings Expectation 43 States Pending By States 33 States When Fully 8 States Implemented ~45-70 ~250-300 ~190-200 + ~15-30 + = 1Includes Assumptions For Waiver Of Premiu
Slide 15: Fixed Annuities
Fixed Annuities Net Investment Spread1 ($MM) 161 142 155 154 153 Fixed Annuity Spreads Impacted By Variability In Limited Partnership & Bond Call Income 2Q13 3Q13 4Q13 1Q14 2Q14 Excluding This Variability, Fixed SPDA2 Spread 2.07% 1.47% 1.61% 1.70% 1.61% Annuity Spreads Down Sequentially & SPIA3 Spr
Slide 16: U.S. Life Company Statutory Results
U.S. Life Company Statutory Results Unassigned Surplus Highlights ($MM) ~5601 Unassigned Surplus Benefitted Sequentially From Positive Statutory Net Income Including A Life Insurance 440 444 Reinsurance Transaction (~$90MM) 2Q14 Statutory Op Income Reflected Life Insurance Reinsurance Transaction (~
Slide 17: 2Q14 Summary -- Corporate & Other
2Q14 Summary -- Corporate & Other Net Operating Loss Highlights ($MM) International Protection Continued Pressure From Slow Consumer Lending In Europe High Unemployment Levels Persist In Southern Europe European GDP Showing Modest Improvement (32) 1Q14 Results Include Favorable Taxes Of $4MM (33) Ru
Slide 18: Net Investment Income
Net Investment Income Net Investment Income Highlights ($MM) 835 Sequential Increase In Net Investment 821 801 805 813 Income From More Favorable Impact From Prepayment Speeds On Structured Securities $2.8B Of Purchases In 2Q14 Primarily In Corporate Debt Securities, ABS5, CMBS/RMBS6 , CML7, CLO8 &
Slide 19: Holding Company Cash & Liquid Assets
Holding Company Cash & Liquid Assets1 Cash & Liquid Assets Roll Forward Highlights ($MM) Variance (45) 2Q14 Dividends Of $21MM Paid From The Operating Companies Net Proceeds Of $500MM From Partial 500 (485) IPO Of Australia MI Received In 2Q14 Wealth Management Sale Closed On 1,2682 21 (90) 1,2232 A
Slide 20: 2014 Goals Recap: Holding Company & Corporate & Other Division
2014 Goals Recap: Holding Company & Corporate & Other Division 2014 Results 2014 Goals & Milestones 2Q 2QYTD Observations Holding Company Holding Company Cash & Liquid Assets1: Exceed 1.5X Interest Coverage $1,223MM2 Plus Risk Buffer Of $350MM 24% Leverage Ratio At Year End 2014 23.9%3 Dividends Int
Slide 21: 2014 Goals Recap: U.S. Life Insurance
2014 Goals Recap: U.S. Life Insurance 2014 Results 2014 Goals & Milestones 2Q 2QYTD Observations Dividends Of $175-$225MM No Dividend Paid In 2Q14; Not Expected To Meet Goal U.S. Life Unassigned Surplus Of $540-$565MM ~$560MM1; Pressure To Goal RBC Ratio > 400% ~490%1 1Company Estimate For The Secon
Slide 22: 2014 Goals Recap: Global MI
2014 Goals Recap: Global MI 2014 Results 2014 Goals & Milestones 2Q 2QYTD Observations Dividends Of $70-$110MM (Revised From International MI $42MM YTD; Revised Dividend Plan $150-$225MM Due To Australia MI IPO) On Track Canada MCT Of 220% (Revised From In ~230%1 Excess Of 190% After Consultation Wi
Slide 23: Summary
Summary Remain On Track For Global MI & Holding Company 2014 Business Goals…U.S Life Insurance Division Challenged From LTC Performance Progress Made On Strategic Objectives; More Work To Be Done Continued Progress On LTC Three Part Strategy Completed Australia IPO Net Operating Income Before Net Op
Slide 24: Appendix
Appendix Genworth 2Q14 Earnings Call Presentation - July 30, 2014 23
Slide 25: Use Of Non-GAAP Measures
Use Of Non-GAAP Measures This presentation includes the non-GAAP financial measures entitled "net operating income (loss)" and “operating earnings per share.” Operating earnings per share is derived from net operating income (loss). The chief operating decision maker evaluates segment performance an
Slide 26: Total Genworth Financial, Inc.'s Stockholders' Equity
Total Genworth Financial, Inc.’s Stockholders’ Equity ($MM) 2Q14 1Q14 4Q13 3Q13 2Q13 U.S. Life Insurance 11,118 10,602 9,485 9,604 10,038 Int’l Mortgage Insurance 3,454 3,971 3,864 3,967 3,846 Canada 1,746 1,648 1,661 1,686 1,655 Australia 1,443 2,055 1,935 2,008 1,919 Other Countries 265 268 268 27
Slide 27: PMIERS Key Highlights – Draft Requirements
PMIERS1 Key Highlights – Draft Requirements Strengthen Counterparty Operational/Financial Requirements Purpose Establish Performance Monitoring Define Remediation Options Strict Control Over Master Policy Terms, Claims Processing & Loss Mitigation Operational Strong Focus On Quality Control Requirem
Slide 28: LTC In Force Block Demographics
LTC In Force1 Block Demographics Old Block New Block Pre PCS PCS I PCS II Choice I2 Choice II PC Flex MFMP3 PC Flex II In Force Premium ($,M) 87 165 427 660 877 233 101 34 In Force Lives (K) 72 70 189 316 416 93 45 14 In Force Policies (K) 72 70 171 290 347 93 45 14 Avg. Attained Age 84.8 81.8 75.9
Slide 29: Reconciliation Of Net Operating Income To Net Income
Reconciliation Of Net Operating Income To Net Income 2014 2013 (Amounts in millions, except per share amounts) 2Q 1Q 4Q 3Q 2Q U.S. Life Insurance Division U.S. Life Insurance segment: Life Insurance $ 39 $ 21 $ 56 $ 54 $ 27 Long-Term Care Insurance 6 46 42 41 26 Fixed Annuities 24 27 21 16 26 Total
Slide 30: Reconciliation Of Net Investment Gains (Losses)
Reconciliation Of Net Investment Gains (Losses) 2014 2013 (Amounts in millions) 2Q 1Q 4Q 3Q 2Q Net investment gains (losses), gross $ 34 $ (17) $ 26 $ (23) $ 21 Adjustments for: Deferred acquisition costs and other intangible amortization and certain benefit reserves 3 1 - 6 7 Net investment gains (
Slide 31: Reconciliation Of Core Yield – Genworth Consolidated
Reconciliation Of Core Yield – Genworth Consolidated 2014 2013 (Assets - amounts in billions) 2Q 1Q 4Q 3Q 2Q 1Q Reported - Total Invested Assets and Cash $ 76.9 $ 74.8 $ 72.8 $ 73.1 $ 72.2 $ 76.5 Subtract: Securities lending 0.3 0.3 0.2 0.2 0.2 0.2 Unrealized gains (losses) 5.6 4.3 2.8 3.3 3.7 6.7 D
Slide 32: Reconciliation Of Reported Yield – U.S. Life Division
Reconciliation Of Reported Yield – U.S. Life Division 2014 2013 U.S. Life Insurance Division 2Q 1Q 4Q 3Q 2Q (Assets - amounts in millions) Reported - Total Invested Assets and Cash $ 58,341 $ 56,710 $ 54,506 $ 54,316 $ 53,906 Subtract: Unrealized gains (losses) 5,160 3,975 2,546 3,047 3,501 Adjusted
Slide 33: Reconciliation Of Pre-Deposit Accounting Basis For LPI
Reconciliation Of Pre-Deposit Accounting Basis For LPI 2Q 2014 1Q 2014 4Q 2013 3Q 2013 2Q 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
Slide 34: Reconciliation Of Net Income Before Noncontrolling Interests In Australia MI
Reconciliation Of Net Income Before Net Income Attributable To Noncontrolling Interests In The Australia MI Business To Net Income Available To Genworth's Common Stockholders And Net Operating Income Before Net Income Attributable To Noncontrolling Interests In The Australia MI Business To Net Opera
Slide 35: 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 36: 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,"