GENWORTH FINANCIAL INC annual report, FY2023

Genworth Financial, Inc. — 2023 Form 10-K

Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Genworth operates through Enact (U.S. mortgage insurance), Long-Term Care Insurance, and Life and Annuities; CareScout startup results are included in Corporate and Other.

Financial results and key metrics

Metric	2023	2022
Total revenues	$7.488 billion	$7.495 billion
Income from continuing operations	$199 million	$1.046 billion
Net income available to common stockholders	$76 million; $0.16 per diluted share	$916 million; $1.79 per diluted share
Adjusted operating income, a non-GAAP measure	$41 million	$818 million
Net cash from operating activities	$597 million	$1.049 billion
Net cash from investing activities	$1.261 billion	$733 million
Net cash used by financing activities	$1.443 billion	$1.554 billion

• Total assets were $90.817 billion and total equity was $8.335 billion at year-end, compared with $89.714 billion and $8.386 billion, respectively, in 2022. Cash, cash equivalents and restricted cash were $2.215 billion.
• Invested assets totaled $59.751 billion. Fixed maturity securities were $46.781 billion; 96% of the portfolio was investment grade. The portfolio had $3.563 billion of gross unrealized losses on fixed maturities, primarily attributed by management to interest rates.
• Genworth Holdings had $350 million of unrestricted cash. It had $856 million of debt outstanding, with no maturities until June 2034. Enact Holdings had $750 million of senior notes due August 2025 and an undrawn $200 million revolving credit facility. Consolidated long-term borrowings were $1.584 billion.
• Genworth received $245 million in capital returns from Enact in 2023. Genworth repurchased $295 million of its shares during the year, excluding excise taxes and other costs. No common-stock dividend was declared; the 2008 suspension remains in place.
• Enact’s primary insurance in-force grew 6% to $262.9 billion, while new insurance written fell 20% to $53.1 billion. Primary persistency rose to 85%; its loss ratio was 3%, versus (10)% in 2022, reflecting reserve releases. Enact reported $552 million of adjusted operating income, down 4%.
• Long-Term Care Insurance reported a $242 million adjusted operating loss, versus $320 million of adjusted operating income in 2022. Its liability for future policy benefits was $43.929 billion on the balance sheet; management cited $42.2 billion measured at the locked-in discount rate. Life and Annuities reported a $188 million adjusted operating loss, compared with $28 million in 2022.

Changes versus the prior year

• Common-stockholder net income fell 92%, to $76 million, while adjusted operating income fell 95%, to $41 million. Revenue was nearly unchanged; the deterioration reflected higher benefits and reserve remeasurement losses, particularly in long-term care and life insurance.
• Long-term care results shifted from a 2022 reserve benefit associated mainly with a legal settlement to unfavorable 2023 assumption updates and actual-versus-expected experience, including higher claims and settlement timing effects. The 2023 annual assumption review added $61 million of pre-tax unfavorable long-term-care impacts and $226 million of pre-tax unfavorable life-insurance impacts.
• Enact’s insurance in-force increased despite lower new business, as elevated persistency offset reduced mortgage originations. It released $241 million of reserves in 2023, compared with $268 million of net favorable reserve adjustments in 2022.
• Cash from operations declined, primarily because of higher long-term-care benefit payments. Cash from investing rose, in part because commercial mortgage payments and fixed-maturity sales and maturities exceeded purchases.
• Year-end equity was nearly flat: improved unrealized investment values increased equity by $1.277 billion, while the discount-rate change for future policy benefits reduced it by $1.036 billion; share repurchases also reduced equity.

Outlook, risks and unusual items

• Management’s priorities are strengthening the legacy long-term-care business, allocating Enact capital to shareholder value, and developing aging-care services through CareScout. CareScout launched its initial services phase in March 2023. No specific consolidated earnings or revenue guidance is provided.
• Management estimates approved long-term-care rate actions from 2012–2023 represent about $28.0 billion of cumulative economic benefit on a net-present-value basis, approximately 84% of its current $33.3 billion plan estimate. The remaining estimated amount is about $5.3 billion and depends on future approvals, implementation and policyholder behavior.
• The long-term-care business depends materially on premium increases and benefit reductions, many requiring state approval. GLICNY recorded $87 million of additional statutory reserves in 2023 after negative asset-adequacy testing; its reported RBC ratio was 202%. The combined RBC ratio for U.S. life subsidiaries was approximately 303%.
• Holding-company liquidity depends heavily on Enact distributions. Genworth does not expect dividends from its U.S. life insurance subsidiaries for the foreseeable future because they had $563 million of negative statutory unassigned surplus. Enact’s future distributions remain subject to capital, regulatory, business and board considerations.
• Enact reported PMIERs available assets of $5.006 billion against $3.119 billion of required assets, a 161% sufficiency ratio and $1.887 billion above requirements. Housing conditions, mortgage rates, home prices, delinquencies, customer concentration and GSE rules remain important risks.
• Other material risks include long-term-care claims and cost-of-care inflation, actuarial assumption and reserve uncertainty, investment and interest-rate volatility, reinsurance collectability, rating changes, litigation, and cybersecurity. The MOVEit incident at vendor PBI exposed or obtained personal information, including Social Security numbers, of approximately 2.5–2.7 million policyholders or other customers. Genworth said it did not then expect a material financial impact, but remediation and potential liabilities remained under review.
• Genworth adopted LDTI with a January 1, 2021 transition date; adoption reduced opening stockholders’ equity by $13.7 billion after tax. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting.

Most important facts for investors to verify

• Whether long-term-care rate actions and legal settlements are approved and realized broadly enough to support reserve assumptions and statutory capital.
• Whether claims, care costs, mortality, persistency and lapse experience develop in line with assumptions, especially in long-term-care and life-insurance blocks.
• Enact’s reserve development, delinquencies, persistency, PMIERs cushion, and capacity to maintain distributions amid mortgage-market and GSE changes.
• Genworth Holdings’ cash needs and debt service relative to future Enact capital returns, including the 2025 maturity of Enact’s $750 million notes and reduced intercompany tax cash flows expected from 2024.
• The progress, funding requirements and commercial uptake of CareScout, as well as the cost and outcome of pending litigation and MOVEit-related claims.
• Quarterly reported net income versus adjusted operating income: the latter is non-GAAP and excludes items that may recur.