OneMain Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is a combined annual filing for OneMain Holdings, Inc. (OMH) and its wholly owned debt issuer, OneMain Finance Corporation (OMFC); their consolidated results are substantially the same. The supplied filing text reports annual results, not standalone fourth-quarter results.
Business context
OneMain originates and services fixed-rate personal loans primarily for nonprime customers, offers credit cards through a bank partner, and sells optional insurance and related products. At year-end, it had approximately 1,400 branches in 44 states, $20.0 billion of finance receivables and 2.47 million customer accounts; managed receivables, including loans serviced for partners, were $20.8 billion.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Interest income | $4.435 billion | $4.364 billion |
| Interest expense | $892 million | $937 million |
| Provision for finance receivable losses | $1.402 billion | $593 million |
| Net interest income after provision | $2.141 billion | $2.834 billion |
| Other revenues | $629 million | $531 million |
| Other expenses | $1.607 billion | $1.624 billion |
| Income before tax | $1.163 billion | $1.741 billion |
| Net income | $878 million | $1.314 billion |
| Diluted EPS | $7.06 | $9.87 |
- Portfolio and credit: Year-end net finance receivables were $19.986 billion, up from $19.212 billion. Average receivables were $19.440 billion. Yield was 22.79%, versus 23.84%; the net charge-off ratio increased to 6.10% from 4.20%, and the 30–89-day personal-loan delinquency ratio rose to 3.07% from 2.43%.
- Credit reserves: The allowance for finance receivable losses was $2.311 billion, or 11.56% of receivables, compared with $2.095 billion, or 10.90%, a year earlier. The filing says higher provision reflected increased charge-offs, portfolio growth and weaker macroeconomic conditions.
- Cash flow: Operating cash flow was $2.387 billion; investing cash outflow was $2.119 billion; financing cash outflow was $326 million. Cash and cash equivalents were $498 million, including $147 million held at regulated insurers or for other operating activities and unavailable for general corporate purposes. Restricted cash was $461 million.
- Debt and liquidity: Long-term debt was $18.281 billion, versus $17.750 billion. Equity was $3.029 billion and total assets were $22.533 billion. The $1.25 billion unsecured corporate revolver was undrawn; $50 million was drawn under revolving conduit facilities, with $6.1 billion of remaining capacity. Unencumbered loans totaled $9.3 billion. Scheduled 2023 principal and interest payments on existing debt, excluding securitizations, were $1.5 billion.
- Margins: The filing provides yield and net interest income after credit-loss provision, but does not provide a clear conventional net interest margin value.
Material changes and capital actions
- Provision for credit losses rose 136% year over year; net income fell approximately 33% and diluted EPS approximately 28%. Interest income grew modestly, while lower funding costs reduced interest expense.
- Personal-loan originations were $13.879 billion, approximately flat with 2021. Credit-card receivables increased to $107 million from $25 million, and open accounts increased to 135,335 from 65,513. Card delinquencies also increased from a low prior-year base.
- OneMain issued $600 million of social securitization notes and completed three other personal-loan securitizations; it also entered into $350 million of private secured term funding. It redeemed $637 million of 8.875% notes due 2025 and repurchased $269 million of unsecured notes.
- OMH repurchased 7.18 million shares for $303 million during the year. It paid $3.80 per share in dividends for 2022; in February 2023 it declared a $1.00-per-share quarterly dividend. Future dividends remain at the Board’s discretion.
Outlook, risks and unusual items
- Management gave no numeric earnings or credit guidance. It said it is monitoring unemployment, inflation, interest rates, consumer confidence and geopolitical developments, and may revise credit-loss assumptions and reserves. Management emphasized disciplined underwriting, liquidity and capital coverage, and customer relationships.
- Management believed liquidity would be adequate for operations and obligations for at least 24 months, subject to its assumptions and risks. OMFC’s debt ratings were non-investment grade: S&P BB, Moody’s Ba2 (both stable), and KBRA BB+ (positive). The companies reported compliance with debt covenants at year-end.
- Key risks include deterioration in nonprime borrower repayment, inadequate credit-loss reserves, funding-market access and refinancing costs, substantial indebtedness, interest-rate exposure, increased regulation, competition, and cyber, data-security and third-party vendor disruptions. Fixed-rate loans may lose value as rates rise, while funding costs may increase.
- The CFPB notified the Company in March 2022 that staff was considering recommending legal action over alleged issues with refunds for canceled optional insurance and membership products. OneMain disputes wrongdoing, is cooperating, and said it could not estimate the investigation’s duration or outcome; potential remedies could include penalties, restitution or injunctive relief. Management did not then expect a material adverse effect.
- PwC issued unqualified audit opinions on the financial statements and, for OMH, internal control over financial reporting; management reported effective controls. The auditors identified the allowance for personal-loan credit losses and forecast macroeconomic assumptions as a critical audit matter. The filing reports a $25 million allowance sensitivity for a 10-percentage-point increase in downside-scenario weighting.
Important facts for investors to verify
- Whether delinquency, charge-offs and reserve levels continue to rise, and how actual losses compare with the allowance assumptions.
- Whether OneMain sustains access to securitization and unsecured debt markets and meets upcoming debt-service needs on acceptable terms.
- Developments and any financial or operational consequences from the CFPB’s optional-product refund investigation and other legal or regulatory matters.
- Whether credit-card expansion produces profitable growth without further deterioration in card delinquencies.
- Future dividend and repurchase decisions, taking account of liquidity, debt restrictions and the fact that some cash and investments are unavailable for general corporate purposes.