Genworth Financial, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023; balance-sheet comparisons are with December 31, 2023. Genworth operates Enact mortgage insurance, a legacy Long-Term Care Insurance business, and a runoff Life and Annuities business, alongside Corporate and Other, including CareScout initiatives. Amounts below are in millions unless stated otherwise.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $1,864 | $1,854 |
| Income before tax from continuing operations | $236 | $209 |
| Continuing income / net income | $170 / $169 | $154 / $154 |
| Net income available to Genworth common stockholders | $139; $0.31 diluted EPS | $122; $0.24 diluted EPS |
| Adjusted operating income available to common stockholders (non-GAAP) | $85; $0.19 diluted EPS | $144; $0.29 diluted EPS |
| Net cash from (used by) operating activities | $(107) | $17 |
| Cash, cash equivalents and restricted cash | $1,952 at March 31 | $2,215 at December 31 |
| Total assets / total liabilities | $89,192 / $80,313 | $90,817 / $82,482 at December 31 |
| Total equity | $8,879 | $8,335 at December 31 |
| Long-term borrowings | $1,579 carrying value | $1,584 at December 31 |
Revenue rose about 1%; continuing pre-tax income rose about 13%. The continuing pre-tax margin was approximately 12.7%, versus 11.3% in Q1 2023. The effective tax rate was 28.0%, up from 26.3%. GAAP net income attributable to all owners was $169; the $139 figure is the amount available to Genworth common stockholders. Genworth repurchased 10.2 million shares for $63 at an average $6.17 per share during the quarter.
Material changes and segment performance
- Adjusted operating income declined 41% to $85. Enact contributed $135, down 6%; Long-Term Care Insurance contributed $3, down from $23; Life and Annuities recorded a $15 adjusted operating loss, versus a $4 loss; Corporate and Other recorded a $38 loss, versus $18.
- Enact: New insurance written fell 20% to $10.5 billion, reflecting a smaller estimated market and lower estimated share. Primary insurance in-force increased 4% year over year to $263.6 billion; persistency was 85%. A $54 reserve release was recorded, compared with $70 in Q1 2023; new primary delinquencies and related loss expense increased. PMIERs sufficiency was 163%, or $1.883 billion above requirements.
- Long-Term Care Insurance: Segment adjusted operating income fell to $3, principally due to less favorable mortality and lower renewal premiums. Premiums declined 6% to $578. Management estimates approved rate actions since 2012 delivered approximately $28.3 billion of cumulative economic benefit on a net-present-value basis.
- Life and Annuities: Revenue fell 4% to $461 as legacy blocks run off; the products are no longer actively marketed. Life insurance remained loss-making on an adjusted basis, while fixed and variable annuity adjusted income also declined.
Cash flow, investment, debt and liquidity
Operating cash flow shifted to a $107 outflow from a $17 inflow, primarily because of settlements of derivatives supporting variable annuity guarantees and lower long-term-care premiums collected. Investing activities generated $143, compared with $364; financing used $299, compared with $428. Cash and restricted cash declined $263 during the quarter.
Investments totaled $59.1 billion, down $689 from year-end. Available-for-sale fixed maturities had a $46.1 billion fair value against $49.3 billion amortized cost; unrealized losses reflected substantially higher interest rates, and management said it did not intend or expect to be required to sell the securities before recovery of amortized cost. Net investment income was $782, down slightly from $787; net investment gains were $49 versus an $11 loss, including $43 of limited-partnership gains. Fixed maturities were 96% investment grade, according to the filing.
Genworth Holdings, the debt-issuing holding company, had $253 million of unrestricted cash at quarter-end, down from $350 million. Management said this was sufficient for its obligations over the next 12 months, while noting liquidity depends heavily on Enact’s ability to make capital returns. Genworth Holdings had $850 million principal amount of debt, with no maturities until June 2034. Enact had $750 million principal amount of senior notes due August 2025 and an undrawn credit facility. These principal amounts are distinct from the consolidated balance-sheet carrying value of long-term borrowings.
Outlook, commentary, risks and unusual items
- No consolidated earnings or revenue guidance is provided. Management says long-term-care claims are expected to rise as policyholders age, with peak claim years for major blocks more than a decade away. It expects CareScout investment to continue and is developing services and a potential route back into long-term-care insurance.
- The third and final long-term-care legal settlement is expected to be materially implemented by year-end 2024; management expects an overall favorable economic effect, subject to policyholder elections. The filing reports litigation with two states over rate increases. In Q1, 23 state filings were approved, affecting $166 million of in-force premiums, with a 25% weighted-average approved increase.
- Long-term-care liabilities and results remain sensitive to claims, mortality, persistency, care-cost inflation, rate-action approvals, legal settlements, interest rates and actuarial assumptions. Management warns that small assumption changes or experience deviations can materially affect reserves and results.
- Other stated risks include mortgage-market and housing conditions, recession and inflation, regulatory or capital requirements, investment and counterparty losses, reinsurance availability, cybersecurity/vendor incidents, and litigation. The filing says it cannot estimate reasonably possible losses for the specifically described pending legal matters, including MOVEit-related class actions, insurance disputes and a long-term-care reinsurance arbitration.
- Q1 net investment gains and market-risk-benefit fair-value movements affected GAAP results; adjusted operating income excludes specified items and is a non-GAAP measure, not a substitute for GAAP earnings. OCI included a $1.105 billion benefit from changes in the discount rate used for future policy benefits, partly offset by investment and hedge losses; this materially supported the increase in equity.
- Enact’s ratings outlooks were revised to positive from stable by Moody’s and Fitch. Management reported no material change in market risk disclosures, risk factors, or internal control over financial reporting during the quarter.
Important facts for investors to verify
- Reconcile GAAP common-stockholder earnings ($139) with adjusted operating income ($85), including the investment-gain and market-risk-benefit adjustments.
- Track Enact delinquency trends, reserve releases, new insurance written, persistency and continued PMIERs capital headroom.
- Assess long-term-care claims, mortality and care-cost trends, rate approvals and implementation, settlement elections, and the sustainability of subsidiary statutory capital.
- Monitor holding-company cash and its dependence on Enact dividends and repurchases, plus Enact’s August 2025 debt maturity and refinancing options.
- Review the magnitude and duration of unrealized investment losses, interest-rate sensitivity, liquidity needs and derivative collateral requirements.
- Follow developments and potential financial exposure in pending litigation and the BCBSNE arbitration; the filing provides no clear estimate of reasonably possible losses.