OneMain Holdings, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 13, 2024. This is an annual report, not a standalone fourth-quarter earnings report. OneMain Holdings (OMH) and its debt-issuing subsidiary OneMain Finance Corporation (OMFC) file jointly; figures below are primarily consolidated OMH results.
Business context
OneMain provides personal loans, credit cards, insurance and related products to primarily nonprime consumers. Its Consumer and Insurance segment is its only reportable segment. At year-end, it reported $21.3 billion of finance receivables and $22.2 billion of managed receivables, serving approximately 2.8 million and 3.0 million customer accounts, respectively. Its distribution network includes about 1,400 branches in 44 states, alongside digital channels.
Key financial results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Interest income | $4.564 billion | $4.435 billion | Up 3% |
| Interest expense | $1.019 billion | $892 million | Up 14% |
| Provision for finance receivable losses | $1.721 billion | $1.402 billion | Up 23% |
| Net interest income after provision | $1.824 billion | $2.141 billion | Down 15% |
| Other revenues | $735 million | $629 million | Up 17% |
| Other expenses | $1.719 billion | $1.615 billion | Up 6% |
| Income before taxes | $840 million | $1.155 billion | Down 27% |
| Net income | $641 million | $872 million | Down 26% |
| Diluted EPS | $5.32 | $7.01 | Down 24% |
Interest income grew with higher average receivables, partly offset by lower yield. Higher funding costs and debt balances raised interest expense. Increased net charge-offs drove the higher credit-loss provision. Other revenue benefited from higher investment income; higher operating costs, insurance claims and regulatory matters contributed to expense growth. The filing does not provide a single headline operating-margin measure.
Credit performance and portfolio
- Net finance receivables increased to $21.349 billion from $19.986 billion. Personal-loan originations decreased to $12.851 billion from $13.879 billion, while personal-loan balances grew to $21.019 billion.
- Personal-loan yield declined to 22.20% from 22.78%. The net charge-off ratio rose to 7.48% from 6.10%; personal-loan 30–89-day delinquency increased to 3.28% from 3.07%.
- The allowance for finance receivable losses was $2.480 billion, or 11.62% of net finance receivables, versus $2.311 billion, or 11.56%, a year earlier. Management cited portfolio growth and a weaker macroeconomic outlook. A 10-percentage-point increase in downside-scenario weighting would raise the estimate by approximately $25 million.
- Credit-card receivables expanded to $330 million from $107 million, with open accounts rising to about 431,000 from 135,000.
Cash flow, debt and liquidity
- Cash from operating activities was $2.519 billion; investing activities used $2.862 billion and financing activities provided $932 million. Cash and cash equivalents ended at $1.014 billion, including $148 million held by regulated insurance subsidiaries or for other operating activities and unavailable for general corporate purposes. Restricted cash was another $534 million.
- Long-term debt was $19.813 billion, up from $18.281 billion; total assets were $24.294 billion and shareholders’ equity $3.186 billion. Scheduled 2024 interest payments were $526 million; no 2024 principal maturities were scheduled for existing unsecured debt.
- OneMain reported $8.4 billion of unencumbered receivables, a $1.3 billion unsecured corporate revolver with no draws, and $6.4 billion of revolving-conduit capacity, of which $1 million was drawn. It also had $12.6 billion of gross finance receivables pledged as collateral.
- OMFC issued $900 million of 9.00% senior notes due 2029 and $700 million of 7.875% notes due 2030, and redeemed its 6.125% notes due 2024. Ratings were below investment grade: S&P BB (Stable), Moody’s Ba2 (Stable), and KBRA BB+ (Positive). Management said liquidity should be adequate, while acknowledging dependence on capital-market access and collections.
Outlook, material events and risks
Management gave no specific numeric earnings or credit-performance guidance. It said it is monitoring unemployment, inflation, interest rates, consumer confidence and geopolitical developments; future changes in assumptions may affect the allowance and provision. Priorities include disciplined underwriting, portfolio growth through products and channels, cost discipline, and maintaining liquidity and diversified funding.
- Regulatory settlements: A May 2023 CFPB consent order required $10 million of interest refunds to affected customers, a $10 million civil penalty and changes to sales and refund practices. A separate NYDFS order required a $4.25 million penalty relating to a prior cybersecurity examination. OneMain said it did not admit to either regulator’s findings or legal conclusions.
- Acquisition: OneMain agreed to acquire Foursight Capital for $115 million cash, including an approximately $900 million auto-loan portfolio; closing was expected in Q1 2024, subject to approvals and customary conditions.
- Funding and credit risks: Nonprime borrower stress, higher delinquencies or defaults, underestimated lifetime losses, higher funding costs, and constrained securitization or debt markets could pressure earnings and liquidity. Debt ratings are non-investment grade and the company has substantial leverage.
- Other risks: The filing identifies consumer-protection and state regulatory exposure, cybersecurity and third-party-vendor risks, insurance-reserve uncertainty, litigation contingencies, and possible limits on subsidiary dividends. Management reported no material cybersecurity incident to date.
- Shareholder returns: OMH paid $4.00 per share in dividends for 2023 and stated an intent to maintain a $1.00 quarterly minimum for the foreseeable future, subject to Board discretion and restrictions. It repurchased $65 million of shares in 2023.
- Leadership changes after year-end: The company announced that CFO Micah Conrad would become COO and Jeannette Osterhout would become CFO, effective March 31, 2024; the outgoing COO was expected to depart by June 30, 2024.
PwC issued an unqualified opinion on the financial statements and concluded OMH’s internal control over financial reporting was effective. The auditor identified the personal-loan loss allowance, particularly macroeconomic assumptions, as a critical audit matter.
Important facts for investors to verify
- Whether delinquencies, charge-offs and allowance coverage stabilize or worsen, especially as recent loan vintages season.
- Whether lower personal-loan yield and higher funding costs continue to compress earnings, and the refinancing cost and maturity profile of debt.
- Liquidity availability in practice, including collateral encumbrance, restrictions on insurance-subsidiary cash and continued access to unsecured and securitization markets.
- Completion and integration of the Foursight acquisition, and performance of the expanded credit-card portfolio.
- Implementation of CFPB and NYDFS order requirements, any further regulatory or litigation developments, and the impact on costs or customer refunds.
- Future dividend and repurchase decisions relative to earnings, cash generation, debt service and capital needs.