Genworth Financial Inc · NYSE:GNW
Genworth Financial — Q1 2014 Earnings Presentation
32 slides from Genworth Financial's earnings presentation, Apr 30, 2014
Slide 1: First Quarter 2014 Earnings Summary
First Quarter 2014 Earnings Summary April 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 States Approved As Part Of 2012 In Force Premium Rate Increases Remained At 41 11 State Approvals For Rate Action
Slide 4: 1Q14 Highlights
1Q14 Highlights Net Operating Income Up 28% Versus The Prior Year & In Line With Prior Quarter Improved Loss Performance In Global Mortgage Insurance Versus Prior Year & Prior Quarter Higher Mortality Across U.S. Life Insurance Products Versus Prior Quarter Foreign Exchange $16MM Unfavorable Versus
Slide 5: 1Q14 Summary -- Genworth Consolidated
1Q14 Summary -- Genworth Consolidated Net Operating Income1 Highlights ($MM) 193 194 Global Mortgage Insurance Division 151 133 139 Continued Strong Loss Ratio Performance In Australia & Canada, 17% & 20%, Respectively 107 87 132 U.S. MI Improvement On A Decline In New Global MI Div. 102 102 Delinqu
Slide 6: 1Q14 Summary -- Global MI
1Q14 Summary -- Global MI Net Operating Income (Loss) Highlights ($MM) 132 Operating Income Up 23% Versus 4Q13 107 102 102 Reported Flow NIW1 Down Sequentially In 87 41 Australia, Canada & U.S. MI From Seasonal 44 Variation & Impacts From Severe Winter In Canada 42 43 United States & Canada 41 1Q14
Slide 7: Canada
Canada Premiums ($MM) Continued Maturing Of Larger 2007 & 2008 144 141 138 137 130 Books Unfavorable $6MM Impact From Foreign Exchange Sequentially Seasonality & Impacts Of Severe Winter Drove 1Q13 2Q13 3Q13 4Q13 1Q14 Decrease In Flow NIW Flow NIW 3,300 4,700 6,000 5,000 2,900 Higher Bulk Activity O
Slide 8: Australia
Australia Premiums ($MM) 101 101 98 98 97 Unfavorable Foreign Exchange Driving Reported Premiums Down Sequentially ($5MM) & Versus Prior Year ($16MM); Premiums Excluding Foreign Exchange Up From Seasoning Of Newer Books 1Q13 2Q13 3Q13 4Q13 1Q14 Seasonally Lower Origination Market & NIW Flow NIW 7,90
Slide 9: U.S. Mortgage Insurance
U.S. Mortgage Insurance Premiums ($MM) Premium Levels Driven By Stable Insurance In 134 141 137 142 137 Force Lower NIW Sequentially From Seasonally Lower Purchase Originations & Impacts From Severe Winter; Refinance Originations Remain Low From Higher Interest Rates 1Q13 2Q13 3Q13 4Q13 1Q14 MI Pene
Slide 10: Global MI -- Capital Adequacy
Global MI -- Capital Adequacy Regulatory Capital Ratios Comments 1Q13 2Q13 3Q13 4Q13 1Q141 International MI Segment Dividends Paid To Holding Australia – PCA2 144% 134% 135% 148% 147% Company Of $31MM In 1Q14 Australia Canada – MCT3 216% 216% 218% 223% 229% PCA Ratio Impacted By Positive Statutory I
Slide 11: 1Q14 Summary -- U.S. Life Insurance
1Q14 Summary -- U.S. Life Insurance Net Operating Income Highlights ($MM) Reported Net Operating Income Decreased 21% Versus 4Q13 From 119 111 Net Impact Of Higher Mortality 94 1Q14 Operating Income Reflected: Life Insurance – Unfavorable Term & 85 56 Universal Life Insurance Mortality; Prior 79 54
Slide 12: Life Insurance
Life Insurance Premiums & Insurance & Investment Product Fees/Other ($MM) 367 360 354 347 351 Term Product Sales Improved Sequentially; New Index Universal Life (UL) Product Introduced In 4Q13 Insurance Product Fees Down From Higher Mortality 1Q13 2Q13 3Q13 4Q13 1Q14 Net Investment Income & Yield1 (
Slide 13: Long Term Care Insurance
Long Term Care Insurance Premiums ($MM) 550 564 582 565 513 $24MM Pre-Tax Benefit From In Force Premium Rate Action1 1Q13 2Q13 3Q13 4Q13 1Q14 Net Investment Income & Yield ($MM) 264 277 282 291 290 Favorable Amortization Correction On Preferred Stock; Lower 5.70% Variable Investment Income 5.60% 5.6
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 41 States Pending By States 30 States When Fully 10 States Implemented ~30-55 ~250-300 ~195-200 + ~25-45 + = 1Includes Assumptions For Waiver Of Premi
Slide 15: Fixed Annuities
Fixed Annuities Net Investment Spread1 ($MM) 155 161 142 155 154 Fixed Annuity Spreads Impacted By Variability In Limited Partnership & Bond Call Income Excluding Limited Partnership Income, 1Q13 2Q13 3Q13 4Q13 1Q14 Fixed Annuity Spreads Up Slightly SPDA2 Spread 1.76% 2.07% 1.47% 1.61% 1.70% Sequent
Slide 16: U.S. Life Company Statutory Results
U.S. Life Company Statutory Results Unassigned Surplus Highlights ($MM) Unassigned Surplus & RBC Impacted 440 ~4401 Sequentially By Positive Statutory Net Income Offset By An Unfavorable Tax Reserve Correction & Lower Credit For 339 Reinsurance 259 4Q13 Statutory Op Income Results Included Benefit F
Slide 17: 1Q14 Summary -- Corporate & Other
1Q14 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 (33) (32) 1Q14 Results Include Favorable Taxes Of $4MM; (
Slide 18: Net Investment Income
Net Investment Income Net Investment Income Highlights ($MM) 835 Sequential Decrease In Net 814 821 801 805 Investment Income From Less Favorable Limited Partnership Income & Unfavorable Impact From Prepayment Speeds On Structured Securities Partially Offset By A Favorable Correction To Preferred St
Slide 19: Holding Company Cash & Liquid Assets
Holding Company Cash & Liquid Assets1 Cash & Liquid Assets Roll Forward Highlights ($MM) Variance (101) 1Q14 Dividends Of $31MM Paid From The Operating Companies Wealth Management Sale Closed On August 30, 2013; Proceeds Held 31 For June 2014 Debt Maturity Of 1,3692 (57) (75) 1,2682 $485MM $485MM 20
Slide 20: 2014 Goals Recap: Holding Company & Corporate & Other Division
2014 Goals Recap: Holding Company & Corporate & Other Division 2014 Results 2014 Goals & Milestones 1Q 1Q Observations Holding Company Holding Company Cash & Liquid $1,268MM2, ~$780MM Net Of Cash Assets1: Exceed 1.5X Interest Coverage Held For 2014 Debt Maturity Plus Risk Buffer Of $350MM 26.2%3 24%
Slide 21: 2014 Goals Recap: U.S. Life Insurance
2014 Goals Recap: U.S. Life Insurance 2014 Results 2014 Goals & Milestones 1Q 1Q Observations Dividends Of $175-$225MM No Dividend Paid In 1Q14; Dividend Plan On Track U.S. Life Unassigned Surplus Of $540-$565MM ~$440MM1; Plan On Track RBC Ratio > 400% ~480%1 1Company Estimate For The First Quarter
Slide 22: 2014 Goals Recap: Global MI
2014 Goals Recap: Global MI 2014 Results 2014 Goals & Milestones 1Q 1Q Observations Dividends Of $150-$225MM (Assumes International MI $31MM; Dividend Plan On Track No Minority IPO In Australia) Canada MCT In Excess Of 190% ~229%1 Australia PCA Range Of 132% To 144%2 ~146%1 $250-$350MM Loss Mitigati
Slide 23: Summary
Summary Remain On Track For 2014 Business Goals Progress Made On Strategic Objectives; More Work To Be Done Continued Progress On LTC Three Part Strategy Australia IPO Is A Priority For 2014 Net Operating Income Up 28% Versus The Prior Year & In Line With Prior Quarter International MI Performance U
Slide 24: Appendix
Appendix Genworth 1Q14 Earnings Call Presentation - April 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: 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) 1Q 4Q 3Q 2Q 1Q U.S. Life Insurance Division U.S. Life Insurance segment: Life Insurance $ 21 $ 56 $ 54 $ 27 $ 36 Long-Term Care Insurance 46 42 41 26 20 Fixed Annuities 27 21 16 26 29 Total
Slide 27: Reconciliation Of Net Investment Gains (Losses)
Reconciliation Of Net Investment Gains (Losses) 2014 2013 (Amounts in millions) 1Q 4Q 3Q 2Q 1Q Net investment gains (losses), gross $ (17) $ 26 $ (23) $ 21 $ (61) Adjustments for: Deferred acquisition costs and other intangible amortization and certain benefit reserves 1 - 6 7 19 Net investment gain
Slide 28: Reconciliation Of Core Yield – Genworth Consolidated
Reconciliation Of Core Yield – Genworth Consolidated 2014 2013 (Assets - amounts in billions) 1Q 4Q 3Q 2Q 1Q Reported - Total Invested Assets and Cash $ 74.8 $ 72.8 $ 73.1 $ 72.2 $ 76.5 Subtract: Securities lending 0.3 0.2 0.2 0.2 0.2 Unrealized gains (losses) 4.3 2.8 3.3 3.7 6.7 Derivative counterp
Slide 29: Reconciliation Of Reported Yield – U.S. Life Division
Reconciliation Of Reported Yield – U.S. Life Division 2014 2013 U.S. Life Insurance Division 1Q 4Q 3Q 2Q 1Q (Assets - amounts in millions) Reported - Total Invested Assets and Cash $ 56,710 $ 54,506 $ 54,316 $ 53,906 $ 56,270 Subtract: Unrealized gains (losses) 3,975 2,546 3,047 3,501 6,246 Adjusted
Slide 30: Reconciliation Of Pre-Deposit Accounting Basis For LPI
Reconciliation Of Pre-Deposit Accounting Basis For LPI 1Q 2014 4Q 2013 3Q 2013 2Q 2013 1Q 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 31: 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 32: 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,"