Genworth Financial, Inc. — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022; it is not a standalone fourth-quarter report. Genworth operates through Enact (U.S. mortgage insurance), U.S. Life Insurance (primarily legacy long-term care insurance, plus in-force life and annuity blocks), Runoff, and Corporate and Other. Genworth retained an 81.6% interest in publicly traded Enact and consolidated its results.
Key financial results
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $7.507 billion | $7.832 billion | Down 4% |
| Income from continuing operations | $739 million | $918 million | Down 19% |
| Net income attributable to Genworth common stockholders | $609 million | $904 million | Down 33% |
| Adjusted operating income attributable to common stockholders (non-GAAP) | $633 million | $765 million | Down 17% |
| Diluted continuing-operations EPS attributable to common stockholders | $1.19 | $1.72 | Down 31% |
| Net cash from operating activities | $1.049 billion | $437 million | Up $612 million |
Enact generated $578 million of adjusted operating income, up 11%; U.S. Life Insurance generated $66 million, down 75%; Runoff generated $37 million, down 31%; and Corporate and Other recorded a $48 million adjusted operating loss. Enact’s loss ratio was negative 10%, reflecting reserve releases, versus 13% in 2021. Long-term care insurance’s loss ratio rose to 75% from 61%. The filing does not provide a consolidated operating-margin measure.
Balance sheet, capital and liquidity
- Total assets were $86.442 billion, down from $99.171 billion; total liabilities were $75.703 billion, down from $82.905 billion. Total equity fell to $10.739 billion from $16.266 billion.
- The equity decline largely reflected 2022 market-driven other comprehensive losses: Genworth reported a $5.428 billion comprehensive loss despite $739 million of net income. Fixed-maturity securities had a $4.3 billion net unrealized loss at year-end, versus a $7.9 billion unrealized gain at year-end 2021.
- Cash, cash equivalents and invested assets totaled $60.747 billion, down from $73.849 billion. Consolidated cash, cash equivalents and restricted cash were $1.799 billion.
- Consolidated long-term borrowings were $1.611 billion, including $887 million of Genworth Holdings debt and $750 million of Enact Holdings senior notes, net of deferred financing costs. Genworth Holdings had $307 million of unrestricted cash, cash equivalents and liquid assets and no debt maturities until 2034. Enact’s $200 million revolving facility was undrawn.
- Enact reported PMIERs available assets of $5.206 billion against $3.156 billion of required assets, a 165% sufficiency ratio, before the effect of GSE-imposed restrictions. Its statutory risk-to-capital ratio was 12.9:1, below the 25:1 limit.
- Operating cash flow improved from 2021, in part because AXA-related cash payments were lower. Investing activities provided $733 million; financing activities used $1.554 billion.
Material changes versus 2021
- Enact’s new insurance written declined 31% to $66.5 billion as higher mortgage rates reduced originations. Higher persistency—80%, versus 62%—helped lift primary insurance in-force 10% to $248.3 billion.
- Enact released $314 million of reserves, primarily as COVID-19-era delinquencies cured better than expected, partly offset by $46 million of strengthening for 2022 delinquencies. Its net favorable reserve adjustments were $268 million; this was a major contributor to segment earnings growth.
- Long-term care adjusted operating income fell to $142 million from $445 million, reflecting higher new-claim frequency and severity, lower investment income and fewer claim terminations as pandemic effects eased.
- Net investment income declined 7% to $3.146 billion. Net investment gains of $323 million in 2021 became a $17 million loss in 2022. Rising interest rates drove a sharp reversal in unrealized fixed-income values.
- Genworth Holdings repurchased $130 million of 2024 notes and redeemed the remaining $152 million principal balance; it also repurchased $13 million of 2034 notes. Outstanding Genworth Holdings debt fell to $887 million.
Outlook, management commentary and material risks
- Long-term care. Management estimates the cumulative net-present-value economic benefit of approved rate actions through 2022 at $23.5 billion, against an estimated total requirement of $30.3 billion. In 2022, approvals represented approximately $549 million of incremental annual premiums; implementation and future approvals remain subject to state regulatory processes. Genworth is litigating with two states over actuarially justified rate increases. The block remains exposed to claims, inflation, persistency and rate-approval assumptions.
- GSE restrictions. Management believed the financial conditions for lifting restrictions on Enact had been met for two consecutive quarters and expected removal in early 2023, subject to GSE review and confirmation. Verify whether approval was granted and the resulting effect on Enact’s capital, distributions and operating flexibility.
- Capital returns and investment. Genworth repurchased 16.2 million shares for $64 million in 2022 under a $350 million authorization and said it intended to accelerate repurchases in 2023. Enact returned $205 million to Genworth Holdings through dividends in 2022, including a $148 million special dividend. Future distributions and parent-company repurchases are not assured. Genworth reported no parent-company dividend policy resumption or timing. CareScout received approximately $20 million of investment in 2022, with additional investment planned; a pilot launch of fee-based services was expected in the first half of 2023.
- LDTI accounting transition. Genworth adopted long-duration targeted improvements on January 1, 2023, applied from a January 1, 2021 transition date. Management estimated an approximately $13.7 billion after-tax reduction in total stockholders’ equity at transition, including an approximately $2.2 billion retained-earnings reduction and an approximately $11.5 billion reduction in accumulated other comprehensive income. The estimates are subject to implementation and actuarial assumptions; the change does not affect statutory accounting or regulatory capital.
- Macroeconomic and market risks. Management cited elevated interest rates, inflation, possible recession, housing affordability and home-price declines as risks to mortgage originations and claims. Enact’s remaining COVID-19-related delinquencies and long foreclosure timelines create uncertainty in reserve estimates and claim severity. Interest-rate changes can also affect investment values, liquidity, policy surrenders and insurance liabilities.
- Liquidity dependence. Genworth’s holding companies depend principally on Enact distributions and intercompany tax payments. U.S. life insurance subsidiaries had approximately $849 million of negative statutory unassigned surplus, and management did not expect them to pay dividends for the foreseeable future. Federal tax payments were expected to reduce intercompany cash tax payments beginning in 2023 or 2024.
- Legal and other matters. The filing describes pending litigation and regulatory matters, including long-term care rate-action disputes, a cost-of-insurance appeal, an ERISA investment-option case, and a reinsurance arbitration demand from Blue Cross Blue Shield of Nebraska. Management said outcomes and reasonably possible losses could not generally be estimated. A separate $25 million cost-of-insurance class settlement was paid in 2022; several long-term care settlements were expected to produce net favorable effects, dependent on policyholder elections.
Investor facts to verify
- Whether the GSEs formally lifted Enact’s restrictions and how that affected capital requirements, liquidity retention and dividends.
- Enact’s subsequent delinquency cures, reserve adequacy and claims experience, particularly for aged and COVID-19-related delinquencies, alongside housing and unemployment trends.
- Actual long-term care rate approvals, implementation, policyholder responses to rate increases and settlement benefit elections, and progress toward the estimated $30.3 billion economic target.
- The realized LDTI transition adjustment and subsequent effects on equity, earnings, reserves and disclosures compared with management’s estimates.
- Enact distributions, parent-company liquidity, tax-payment timing, share repurchases and planned CareScout spending; assess these against debt service and regulatory capital needs.
- Developments in the disclosed litigation, arbitration and reinsurance exposures, and changes in ratings or counterparty recoverability.
Audit and controls. KPMG issued an unqualified opinion on the 2022 consolidated financial statements and on internal control over financial reporting. Management also concluded disclosure controls were effective. The auditor identified critical audit matters involving long-term care reserves and rate-action assumptions, life-insurance guarantees and acquisition costs, mortgage-insurance loss reserves, and the estimated LDTI transition adjustment.