0001276520 gnw:PolicyholderAccountBalancesMember gnw:IndexedUniversalLifeEmbeddedDerivativesMemberus-gaap:InterestRateSwapMember us-gaap:OtherLiabilitiesMember us-gaap:FairValueInputsLevel3Member 2021-06-30 0001276520 gnw:GenworthHoldingsMember 2020-01-01 2020-01-312022-03-31
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021March 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number 001-32195
 
 
 

GENWORTH FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
80-0873306
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
  
6620 West Broad Street
Richmond, Virginia
 
23230
(Address of principal executive offices)
 
(Zip Code)
(804) 281-6000
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes
☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes
☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☒  Accelerated filer ☐
    
Non-accelerated filer ☐  Smaller reporting company ☐
    
     Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
  
Trading Symbol
  
Name of each exchange
on which registered
Class A Common Stock, par value $.001 per share
  
GNW
  
New York Stock Exchange
As of July 27, 2021, 507,385,834April 26, 2022, 510,505,341 shares of Class A Common Stock, par value $0.001 per share, were outstanding.
 
 
 
Table of Contents
TABLE OF CONTENTS
 
     
Page
 
PART I—FINANCIAL INFORMATION
3
Item 1.       Financial Statements
   3 
Item 1.
Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021
Financial Statements   3 
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (Unaudited)3
Condensed Consolidated Statements of Income for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (Unaudited)
   4 
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (Unaudited)
   5 
Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (Unaudited)
   6 
Condensed Consolidated Statements of Cash Flows for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 (Unaudited)
7
Notes to Condensed Consolidated Financial Statements (Unaudited)
   8 
Notes to Condensed Consolidated Financial Statements (Unaudited)9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations   7465 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk   149125 
Item 4.
Controls and Procedures149
PART II—OTHER INFORMATIONItem 4.       Controls and Procedures
   150125 
Item 1.
Legal Proceedings150
Item 1A.
Risk Factors150
Item 6.
Exhibits151
SignaturesPART II—OTHER INFORMATION
   152126
Item 1.       Legal Proceedings
126
Item 1A.    Risk Factors
126
Item 6.       Exhibits
127
Signatures
128 
2
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except par value and share amounts)
(Unaudited)
  
March 31,
2022
 
December 31,
2021
 
  
June 30,
2021
 
December 31,
2020
   
(Unaudited)
   
Assets
          
Investments:
          
Fixed maturity securities available-for-sale, at fair value (amortized cost of $53,111 and $53,417 and allowance for credit losses of $0and $4 as of June 30, 2021 and December 31, 2020, respectively)
  $61,649  $63,495 
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,280 and $52,611 and allowance for credit losses of $0 as of March 31, 2022 and December 31, 2021)
  $55,027  $60,480 
Equity securities, at fair value
   147   386    230   198 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of June 30, 2021 and December 31, 2020)
   6,912   6,774 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of March 31, 2022 and December 31, 2021)
   6,938   6,856 
Less: Allowance for credit losses
   (33)   (31)    (25)   (26) 
  
 
  
 
   
 
  
 
 
Commercial mortgage loans, net
   6,879   6,743    6,913   6,830 
Policy loans
   2,083   1,978    2,028   2,050 
Limited partnerships
   2,007   1,900 
Other invested assets
   2,260   2,099    671   820 
  
 
  
 
   
 
  
 
 
Total investments
   73,018   74,701    66,876   72,278 
Cash, cash equivalents and restricted cash
   2,214   2,561    1,291   1,571 
Accrued investment income
   573   655    696   647 
Deferred acquisition costs
   1,212   1,487    1,310   1,146 
Intangible assets
   151   157    159   143 
Reinsurance recoverable
   16,716   16,864    16,821   16,868 
Less: Allowance for credit losses
   (50)   (45)    (57)   (55) 
  
 
  
 
   
 
  
 
 
Reinsurance recoverable, net
   16,666   16,819    16,764   16,813 
Other assets
   403   404    440   388 
Deferred tax asset
   211   65    421   119 
Separate account assets
   6,202   6,081    5,530   6,066 
Assets related to discontinued operations
   0     2,817 
  
 
  
 
   
 
  
 
 
Total assets
  $100,650  $105,747   $93,487  $99,171 
  
 
  
 
   
 
  
 
 
Liabilities and equity
          
Liabilities:
          
Future policy benefits
  $42,165  $42,695   $38,897  $41,528 
Policyholder account balances
   19,944   21,503    18,197   19,354 
Liability for policy and contract claims
   11,546   11,486    11,833   11,841 
Unearned premiums
   695   775    639   672 
Other liabilities
   1,664   1,614    1,416   1,511 
Long-term borrowings
   2,924   3,403    1,819   1,899 
Separate account liabilities
   6,202   6,081    5,530   6,066 
Liabilities related to discontinued operations
   346   2,370    4   34 
  
 
  
 
   
 
  
 
 
Total liabilities
   85,486   89,927    78,335   82,905 
  
 
  
 
   
 
  
 
 
Commitments and contingencies
   0    0     0    0  
 
Equity:
          
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 596 million and 594 million shares issued as of June 30, 2021 and December 31, 2020, respectively; 508 million and 506 million shares outstanding as of June 30, 2021 and December 31, 2020, respectively
   1   1 
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 598 million and 596 million shares issued as of March 31, 2022 and December 31, 2021, respectively; 510 million and 508 million shares outstanding as of March 31, 2022 and December 31, 2021, respectively
   1   1 
Additional paid-in capital
   12,018   12,008    11,857   11,858 
Accumulated other comprehensive income (loss)
   3,834   4,425    2,610   3,861 
Retained earnings
   2,011   1,584    2,639   2,490 
Treasury stock, at cost (88 million shares as of June 30, 2021 and December 31, 2020)
   (2,700)   (2,700) 
Treasury stock, at cost (88 million shares as of March 31, 2022 and December 31, 2021)
   (2,700)   (2,700) 
  
 
  
 
   
 
  
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
   15,164   15,318    14,407   15,510 
Noncontrolling interests
   0     502    745   756 
  
 
  
 
   
 
  
 
 
Total equity
   15,164   15,820    15,152   16,266 
  
 
  
 
   
 
  
 
 
Total liabilities and equity
  $100,650  $105,747   $93,487  $99,171 
  
 
  
 
   
 
  
 
 
See Notes to Condensed Consolidated Financial Statements
 
3
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited)
 
            
  
Three months
ended June 30,
 
Six months
ended June 30,
   
Three months ended
March 31,
 
  
2021
 
2020
 
2021
   
2020
   
    2022    
 
    2021    
 
Revenues:
               
Premiums
  $947  $957  $1,915   $1,903   $931  $968 
Net investment income
   844   779   1,645    1,561    764   801 
Net investment gains (losses)
   70   93   103    (6)    28   33 
Policy fees and other income
   180   174   363    354    169   183 
  
 
  
 
  
 
   
 
   
 
  
 
 
Total revenues
   2,041   2,003   4,026    3,812    1,892   1,985 
  
 
  
 
  
 
   
 
   
 
  
 
 
Benefits and expenses:
               
Benefits and other changes in policy reserves
   1,161   1,447   2,379    2,784    1,139   1,218 
Interest credited
   127   139   258    280    125   131 
Acquisition and operating expenses, net of deferrals
   304   210   579    447    271   275 
Amortization of deferred acquisition costs and intangibles
   86   87   163    195    92   77 
Interest expense
   43   42   94    93    26   51 
  
 
  
 
  
 
   
 
   
 
  
 
 
Total benefits and expenses
   1,721   1,925   3,473    3,799    1,653   1,752 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income from continuing operations before income taxes
   320   78   553    13    239   233 
Provision for income taxes
   75   23   134    18    58   59 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from continuing operations
   245   55   419    (5) 
Income from continuing operations
   181   174 
Income (loss) from discontinued operations, net of taxes
   (5)   (473)   16    (485)    (2)   21 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss)
   240   (418)   435    (490) 
Net income
   179   195 
Less: net income from continuing operations attributable to noncontrolling interests
   0     0     0      0      30   0   
Less: net income from discontinued operations attributable to noncontrolling interests
   0     23   8    17    0     8 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $427   $(507) 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders:
          
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $245  $55  $419   $(5) 
Net income available to Genworth Financial, Inc.’s common stockholders:
     
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (5)   (496)   8    (502)    (2)   13 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $427   $(507) 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
          
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
     
Basic
  $0.48  $0.11  $0.83   $(0.01)   $0.30  $0.35 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
  $0.47  $0.11  $0.82   $(0.01)   $0.29  $0.34 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share:
          
Net income available to Genworth Financial, Inc.’s common stockholders per share:
     
Basic
  $0.47  $(0.87)  $0.84   $(1.00)   $0.29  $0.37 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
  $0.47  $(0.86)  $0.83   $(1.00)   $0.29  $0.37 
  
 
  
 
  
 
   
 
   
 
  
 
 
Weighted-average common shares outstanding:
               
Basic
   507.0   505.4   506.5    504.8    508.3   506.0 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
   515.0   512.5   514.4    504.8    517.4   513.8 
  
 
  
 
  
 
   
 
   
 
  
 
 
     
See Notes to Condensed Consolidated Financial Statements
 
4
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 
            
  
Three months ended
June 30,
 
Six months ended
June 30,
   
Three months ended
 
  
  2021  
 
  2020  
 
2021
 
2020
   
March 31,
 
Net income (loss)
  $240  $(418)  $435  $(490) 
  
    2022    
 
    2021    
 
Net income
  $179  $195 
 
Other comprehensive income (loss), net of taxes:
              
Net unrealized gains (losses) on securities without an allowance for credit losses
   (58)   682   (380)   362    (1,051)   (322) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   4   (8)   6   (8)    0     2 
Derivatives qualifying as hedges
   211   (78)   (208)   675    (236)   (419) 
Foreign currency translation and other adjustments
   2   73   138   (25)    (5)   136 
  
 
  
 
  
 
  
 
   
 
  
 
 
Total other comprehensive income (loss)
   159   669   (444)   1,004    (1,292)   (603) 
  
 
  
 
  
 
  
 
   
 
  
 
 
Total comprehensive income (loss)
   399   251   (9)   514 
Less: comprehensive income attributable to noncontrolling interests
   0     60   155   7 
Total comprehensive loss
   (1,113)   (408) 
Less: comprehensive income (loss) attributable to noncontrolling interests
   (11)   155 
  
 
  
 
  
 
  
 
   
 
  
 
 
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders
  $399  $191  $(164)  $507 
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
  $(1,102)  $(563) 
  
 
  
 
  
 
  
 
   
 
  
 
 
See Notes to Condensed Consolidated Financial Statements
 
5
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in millions)
(Unaudited)
 
  
Three months ended June 30, 2021
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of March 31, 2021
 $1  $12,011  $3,675  $1,771  $(2,700)  $14,758  $0    $14,758 
Comprehensive income:                                
Net income  0     0     0     240   0     240   0     240 
Other comprehensive income, net of taxes  0     0     159   0     0     159   0     159 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive income                      399   0     399 
Stock-based compensation expense and exercises and other  0     7   0     0     0     7   0     7 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2021
 $1  $12,018  $3,834  $2,011  $(2,700)  $15,164  $0    $15,164 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Three months ended March 31, 2022
 
                 
Total
       
                 
Genworth
       
        
Accumulated
        
Financial,
       
     
Additional
  
other
     
Treasury
  
Inc.’s
       
  
Common
  
paid-in
  
comprehensive
  
Retained
  
stock, at
  
stockholders’
  
Noncontrolling
  
Total
 
  
stock
  
capital
  
income (loss)
  
earnings
  
cost
  
equity
  
interests
  
equity
 
Balances as of December 31, 2021
 $1  $11,858  $3,861  $2,490  $(2,700)  $15,510  $756  $16,266 
Comprehensive income (loss):
                                
Net income
  0     0     0     149   0     149   30   179 
Other comprehensive loss, net of taxes
  0     0     (1,251)   0     0     (1,251)   (41)   (1,292) 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive loss
                      (1,102)   (11)   (1,113) 
Stock-based compensation expense and exercises and other
  0     (1)   0     0     0     (1)   0     (1) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2022
 $1  $11,857  $2,610  $2,639  $(2,700)  $14,407  $745  $15,152 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
  
Three months ended March 31, 2021
 
                 
Total
       
                 
Genworth
       
        
Accumulated
        
Financial,
       
     
Additional
  
other
     
Treasury
  
Inc.’s
       
  
Common
  
paid-in
  
comprehensive
  
Retained
  
stock, at
  
stockholders’
  
Noncontrolling
  
Total
 
  
stock
  
capital
  
income (loss)
  
earnings
  
cost
  
equity
  
interests
  
equity
 
Balances as of December 31, 2020
 $1  $12,008  $4,425  $1,584  $(2,700)  $15,318  $502  $15,820 
Sale of business that included noncontrolling interests
  0     0     0     0     0     0     (657)   (657) 
Comprehensive income (loss):
                                
Net income
  0     0     0     187   0     187   8   195 
Other comprehensive income (loss), net of taxes
  0     0     (750)   0     0     (750)   147   (603) 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive income (loss)
                      (563)   155   (408) 
Stock-based compensation expense and exercises and other
  0     3   0     0     0     3   0     3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2021
 $1  $12,011  $3,675  $1,771  $(2,700)  $14,758  $0    $14,758 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See Notes to Condensed Consolidated Financial Statements
  
Three months ended June 30, 2020
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of March 31, 2020
 $1  $11,993  $3,815  $1,340  $(2,700)  $14,449  $385  $14,834 
Comprehensive income (loss):                                
Net income (loss)  0     0     0     (441)   0     (441)   23   (418) 
Other comprehensive income, net of taxes  0     0     632   0     0     632   37   669 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive income                      191   60   251 
Stock-based compensation expense and exercises and other  0     3   0     0     0     3   0     3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020
 $1  $11,996  $4,447  $899  $(2,700)  $14,643  $445  $15,088 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
6
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY, CONTINUED
(Amounts in millions)
(Unaudited)
  
Six months ended June 30, 2021
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of December 31, 2020
 $1  $12,008  $4,425  $1,584  $(2,700)  $15,318  $502  $15,820 
Sale of business that included noncontrolling
interests
  0     0     0     0     0     0     (657)   (657) 
Comprehensive income (loss):                                
Net income  0     0     0     427   0     427   8   435 
Other comprehensive income (loss), net
of taxes
  0     0     (591)   0     0     (591)   147   (444) 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive income (loss)                      (164)   155   (9) 
Stock-based compensation expense and exercises and other  0     10   0     0     0     10   0     10 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2021
 $1  $12,018  $3,834  $2,011  $(2,700)  $15,164  $0    $15,164 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Six months ended June 30, 2020
 
  
Common
stock
  
Additional
paid-in
capital
  
Accumulated
other
comprehensive
income (loss)
  
Retained
earnings
  
Treasury
stock, at
cost
  
Total
Genworth
Financial,
Inc.’s
stockholders’
equity
  
Noncontrolling
interests
  
Total
equity
 
Balances as of December 31, 2019
 $1  $11,990  $3,433  $1,461  $(2,700)  $14,185  $447  $14,632 
Cumulative effect of change in accounting, net of taxes  0     0     0     (55)   0     (55)   0     (55) 
Comprehensive income (loss):                                
Net income (loss)  0     0     0     (507)   0     (507)   17   (490) 
Other comprehensive income (loss), net
of taxes
  0     0     1,014   0     0     1,014   (10)   1,004 
                      
 
 
  
 
 
  
 
 
 
Total comprehensive income                      507   7   514 
Dividends to noncontrolling interests  0     0     0     0     0     0     (9)   (9) 
Stock-based compensation expense and exercises and other  0     6   0     0     0     6   0     6 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020
 $1  $11,996  $4,447  $899  $(2,700)  $14,643  $445  $15,088 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
See Notes to Condensed Consolidated Financial Statements
7
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GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
 
  
Six months ended
June 30,
   
Three months ended
 
  
2021
 
2020
   
March 31,
 
Cash flows from operating activities:
     
Net income (loss)
  $435  $(490) 
  
    2022    
 
    2021    
 
Cash flows from (used by) operating activities:
     
Net income
  $179  $195 
Less (income) loss from discontinued operations, net of taxes
   (16)   485    2   (21) 
Adjustments to reconcile net income (loss) to net cash from operating activities:
     
Adjustments to reconcile net income to net cash used by operating activities:
     
Amortization of fixed maturity securities discounts and premiums
   (80)   (58)    (34)   (32) 
Net investment (gains) losses
   (103)   6    (28)   (33) 
Charges assessed to policyholders
   (317)   (314)    (150)   (159) 
Acquisition costs deferred
   (3)   (3)    (2)   (2) 
Amortization of deferred acquisition costs and intangibles
   163   195    92   77 
Deferred income taxes
   132   16    57   59 
Derivative instruments, limited partnerships and other
   (189)   196    (105)   (113) 
Stock-based compensation expense
   25   19    10   11 
Change in certain assets and liabilities:
          
Accrued investment income and other assets
   (69)   (84)    (43)   (58) 
Insurance reserves
   507   674    249   326 
Current tax liabilities
   (4)   2    0     (4) 
Other liabilities, policy and contract claims and other policy-related balances
   (60)   736    (289)   (319) 
Cash used by operating activities—discontinued operations
   (192)   (81) 
Cash used by operating activities — discontinued operations
   (30)   (174) 
  
 
  
 
   
 
  
 
 
Net cash from operating activities
   229   1,299 
Net cash used by operating activities
   (92)   (247) 
  
 
  
 
   
 
  
 
 
Cash flows from (used by) investing activities:
          
Proceeds from maturities and repayments of investments:
          
Fixed maturity securities
   2,220   1,616    730   1,031 
Commercial mortgage loans
   392   302    115   129 
Other invested assets
   107   71 
Limited partnerships and other invested assets
   51   44 
Proceeds from sales of investments:
          
Fixed maturity and equity securities
   1,306   1,006    581   777 
Purchases and originations of investments:
          
Fixed maturity and equity securities
   (2,868)   (3,336)    (969)   (1,647) 
Commercial mortgage loans
   (531)   (271)    (197)   (142) 
Other invested assets
   (240)   (236) 
Limited partnerships and other invested assets
   (137)   (91) 
Short-term investments, net
   (76)   (17)    (50)   28 
Policy loans, net
   28   10    14   3 
Proceeds from sale of business, net of cash transferred
   270   0      0     270 
Cash used by investing activities—discontinued operations
   (67)   (32) 
Cash used by investing activities — discontinued operations
   0     (67) 
  
 
  
 
   
 
  
 
 
Net cash from (used by) investing activities
   541   (887) 
Net cash from investing activities
   138   335 
  
 
  
 
   
 
  
 
 
Cash flows used by financing activities:
     
Cash flows from (used by) financing activities:
     
Deposits to universal life and investment contracts
   349   516    159   176 
Withdrawals from universal life and investment contracts
   (1,143)   (914)    (418)   (578) 
Redemption of non-recourse funding obligations
   0     (315) 
Repayment and repurchase of long-term debt
   (484)   (471)    (82)   (470) 
Other, net
   65   49    15   92 
Cash used by financing activities—discontinued operations
   0     (9) 
  
 
  
 
   
 
  
 
 
Net cash used by financing activities
   (1,213)   (1,144)    (326)   (780) 
  
 
  
 
   
 
  
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) and $(6) related to discontinued operations)
   1   (12) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $0 and $(1) related to discontinued operations)
   0     0   
  
 
  
 
   
 
  
 
 
Net change in cash, cash equivalents and restricted cash
   (442)   (744)    (280)   (692) 
Cash, cash equivalents and restricted cash at beginning of period
   2,656   3,341    1,571   2,656 
  
 
  
 
   
 
  
 
 
Cash, cash equivalents and restricted cash at end of period
   2,214   2,597    1,291   1,964 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
   0     74    0     0   
  
 
  
 
   
 
  
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
  $2,214  $2,523   $1,291  $1,964 
  
 
  
 
   
 
  
 
 
See Notes to Condensed Consolidated Financial Statements
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Formation of Genworth and Basis of Presentation
Genworth Holdings, Inc. (“Genworth Holdings”) (formerly known as Genworth Financial, Inc.) was incorporated in Delaware in 2003 in preparation for an initial public offering (“IPO”) of Genworth’sits common stock, which was completed on May 28, 2004. On April 1, 2013, Genworth Holdings completed a holding company reorganization pursuant to which Genworth Holdings became a direct, 100% owned subsidiary of a new public holding company that it had formed. The new public holding company was incorporated in Delaware on December 5, 2012, in connection with the reorganization, and was renamed Genworth Financial, Inc. (“Genworth Financial”) upon the completion of the reorganization.
The accompanying unaudited condensed financial statements include on a consolidated basis the accounts of Genworth Financial and theits affiliate companies in which it holds a majority voting interest or where it is the primary beneficiarypower to direct activities of acertain variable interest entityentities (“VIE”)., which on a consolidated basis is referred to as “Genworth,” the “Company,” “we,” “us” or “our” unless the context otherwise requires. All intercompany accounts and transactions have been eliminated in consolidation.
Unless the context otherwise requires, references References to “Genworth Financial,” “Genworth,” the “Company,” “we” or “our” in the accompanying unaudited condensed consolidated financial statements and the notes thereto areFinancial” refer solely to Genworth Financial, Inc. on a, and not to any of its consolidated basis.subsidiaries.
We operate our business through the following 3operating3 operating segments:
 
Enact (formerly known as U.S. Mortgage Insurance).Enact.
WeOur Enact segment predominantly includes Enact Holdings, Inc., (“Enact Holdings”) and its mortgage insurance subsidiaries. Through Enact Holdings, we offer mortgage insurance products predominantly insuring prime-based, individually underwritten residential mortgage loans at specified coverage percentages (“primary mortgage insurance”). WeEnact Holdings also selectively enterenters into insurance transactions with lenders and investors, under which we insureit insures a portfolio of loans at or after origination (“pool mortgage insurance”).
 
U.S. Life Insurance.
WeThrough our principal U.S. life insurance subsidiaries, we offer long-term care insurance products as well as service traditional life insurance and fixed annuity products in the United States.
 
Runoff.
The Runoff segment includes the results of products which have not been actively sold since 2011, but we continue to service our existing blocks of business. These products primarily include variable annuity, variable life insurance and corporate-owned life insurance, as well as funding agreements.
In addition to our three operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managedreported outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.
On March 3, 2021, we completed a sale of our entire ownership interest of approximately 52% in Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) through an underwritten agreement. We sold our approximately 214.3 million shares of Genworth Australia for AUD2.28 per share. Our Australian mortgage insurance business, previously the primary business in the Australia Mortgage Insurance segment, is reported as discontinued operations and its financial position, results of operations and cash flows are separately reported for all periods presented. All prior periods reflected herein have been re-presented on this basis. See note 13 for additional information.
9
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unless otherwise indicated, references to the condensed consolidated balance sheets, the condensed consolidated statements of income, the condensed consolidated statements of cash flows and the notes to the condensed consolidated financial statements, exclude amounts related to discontinued operations.
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These unaudited condensed consolidated financial statements include all adjustments (including normal recurring adjustments) considered necessary by management to present a fair statement of the financial position, results of operations and cash flows for the periods presented. The results reported in these unaudited condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2020 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation.
Each reporting period, we assess our ability to continue as a going concern for one year from the date the financial statements are issued. As of June 30, 2021, Genworth Holdings has $823 million of unrestricted cash, cash equivalents and liquid assets. Our evaluation of our ability to meet our financial obligations included the following contractual obligations due within one year from the issue date of our unaudited condensed consolidated financial statements included herein, as well as other conditions and events and their relative significance in relation to our ability to meet our obligations:
As of June 30, 2021, Genworth Holdings had outstanding $513 million of its 7.625% senior notes, excluding the note premium, that was originally scheduled to mature in September 2021. We are currently in compliance with the terms of our debt agreements, and interest payments on our remaining senior notes are forecasted to be approximately $60 million for the next twelve months. In July 2021, Genworth Holdings early redeemed its 7.625% senior notes with a cash payment of approximately $532 million, comprised of the outstanding principal balance, accrued interest and a make-whole premium. See note 8 for additional details on our long-term borrowings.
 
As part of the settlement agreement reached in July 2020 regarding the case titled
AXA S.A. v. Genworth Financial International Holdings, LLC et al.,
we issued a secured promissory note to AXA S.A. (“AXA”) that is due in September 2022. On March 3, 2021, we repaid the first installment payment to AXA and a portion of the second installment from cash proceeds received from the Genworth Australia sale. Over the next year, we expect to pay AXA approximately $10 million primarily consisting of interest on the remaining promissory note, assuming we do not make any additional prepayments, and a one-time payment associated with a tax gross up on underwriting losses related to a product sold by a distributor in our former lifestyle protection insurance business. See note 13 for additional details related to the sale of our former lifestyle protection insurance business and amounts recorded related to discontinued operations.
Genworth Holdings received intercompany cash tax payments from its subsidiaries during the six months ended June 30, 2021 generated primarily from taxable income. Additional intercompany cash tax payments are expected in future periods.
Until the secured promissory note to AXA is paid, annual dividends above $50 million from Enact Holdings, Inc. (“Enact Holdings”), formerly known as Genworth Mortgage Holdings, Inc., our wholly-owned U.S. mortgage insurance subsidiary, are subject to mandatory prepayment conditions.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
We received net cash proceeds of $370 million from
statements and related notes contained in our 2021 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the sale of Genworth Australia in March 2021, of which $247
million was used to prepay a portion of the AXA promissory note, as noted above, including accrued interest. We believe Genworth Holdings’ current unrestricted cash, cash equivalents and liquid assets provide sufficient liquidity to meet our financial obligations and maintain business operations for one year from the date the financial statements are issued, based on relevant conditions and events that are known and reasonably estimable, including current cash and management actions in the normal course. Accordingly, we no longer need to determine whether our plans alleviate doubt about our ability to meet our financial commitments and obligations within the next year.presentation.
The remaining AXA promissory note, including expected future claims, is estimated to be $344 million and is due in September 2022. In addition, Genworth Holdings has $400 million of senior notes due in both August 2023 and February 2024. To help address these debt obligations beyond the next year and reduce our overall indebtedness, we are actively taking additional steps toward raising capital by preparing for a potential partial sale of Enact Holdings, subject to market conditions, as well as the satisfaction of various conditions and approvals.
The impact of the ongoing coronavirus pandemic (“COVID-19”) is very difficult to predict. Its related outcomes and impact on our business and the capital markets, and our ability to raise capital will depend on economic impacts from social, global and political influences as a result of the pandemic, and the shape of the economic recovery, among other factors and uncertainties. While these risks exist, we believe our current liquidity is sufficient to meet our obligations for one year following the issuance of our unaudited condensed consolidated financial statements.
(2) Accounting Changes
In March 2022, the Financial Accounting Pronouncements Recently Adopted
On January 1, 2021, we adoptedStandards Board (the “FASB”) issued new accounting guidance related to simplifyingtroubled debt restructurings and the vintage disclosures included within the accounting guidance for income taxes.credit losses on financial instruments. The guidance eliminates certain exceptionsthe recognition and measurement requirements for troubled debt restructurings and requires creditors to instead apply existing guidance related to loan refinancing and restructuring to determine whether a modification results in a new loan or a continuation of an existing loan. The guidance also expands disclosures for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires the approachpresentation of gross write-offs by year of origination. The guidance is currently effective for intraperiod tax allocation,us on January 1, 2023 using the methodologyprospective method, with an option to use the modified retrospective method for calculating income taxes in an interim period and the recognition and measurement of deferred tax liabilities for outside basis differences.troubled debt restructurings. We adoptedare permitted to early adopt this new accounting guidance usingas we adopted the retrospective method or modified retrospective method for certain changes and prospective method for all other changes, which didaccounting guidance related to credit losses on financial instruments on January 1, 2020. We do not have aexpect any significant impact from this guidance on our consolidated financial statements and disclosures.
Accounting Pronouncements Not Yet Adopted
In August 2018, the Financial Accounting Standards Board (the “FASB”)FASB issued new accounting guidance that significantly changes the recognition and measurement of long-duration insurance contracts and expands disclosure requirements, which impacts our life insurance deferred acquisition costs (“DAC”) and liabilities.liabilities in our U.S. life insurance companies. In accordance with the guidance, the more significant changes include:
 
assumptions will no longer be locked-in at contract inception and all cash flow assumptions used to estimate the liability for future policy benefits (except the discount rate) will be reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required. Changes will be recorded in net income (loss) using a retrospective approach with a cumulative catch-up adjustment by recalculating the net premium ratio (which will be capped at 100%) using actual historical and updated future cash flow assumptions;
 
the discount rate used to determine the liability for future policy benefits will be a current upper-medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean a
11 single-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes in the discount rate recorded in other comprehensive income (loss);
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
single-A rated bond rate for the same duration, and is required to be reviewed quarterly, with changes in the discount rate recorded in other comprehensive income (loss);
the provision for adverse deviation and the premium deficiency test will be eliminated;
 
market risk benefits associated with deposit-type contracts will be measured at fair value with changes related to instrument-specific credit risk recorded in other comprehensive income (loss) and remaining changes recorded in net income (loss);
 
the amortization method for DAC will generally be on a straight-line basis over the expected contract term; and
 
disclosures will be greatly expanded to include significant assumptions and product liability rollforwards.
This
9
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

T
his guidance is effective for us on January 1, 2023 using the modified
retrospective
method (with transition adjustments as of January 1, 2021) for all topics except for market risk benefits, which is required to be applied using the retrospective method, with early adoption permitted, which we do not intend to elect. We are currently in the process of developing a detailed implementation plan that will allow us to obtainobtaining necessary data, modifymodifying systems, identifyidentifying and developdeveloping key inputs and establishassumptions and establishing policies, systems and internal controls that will be necessary to implement this new accounting guidance. Given the nature and extent of the changes, to our operations, this guidance is expected to have a significant impact on our consolidated financial statements and may significantly reduce our equity at transition.transition primarily due to the change in the discount rate used to determine our liability for future policy benefits.
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category presented below by the weighted-average basic and diluted common shares outstanding for the periods indicated:
 
  
Three months ended
 
  
Three months ended
June 30,
 
Six months ended
June 30,
   
March 31,
 
(Amounts in millions, except per share amounts)
  
    2021    
 
    2020    
 
    2021    
   
    2020    
   
    2022    
 
    2021    
 
Weighted-average shares used in basic earnings per share calculations
   507.0   505.4   506.5    504.8    508.3   506.0 
Potentially dilutive securities:
               
Stock options, restricted stock units and stock appreciation rights
   8.0   7.1   7.9    0   
Stock options, restricted stock units and other equity-based compensation

   9.1   7.8 
  
 
  
 
  
 
   
 
   
 
  
 
 
Weighted-average shares used in diluted earnings per share calculations
(1)
   515.0   512.5   514.4    504.8 
Weighted-average shares used in diluted earnings per share calculations
   517.4   513.8 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from continuing operations:
          
Income (loss) from continuing operations
  $245  $55  $419   $(5) 
Income from continuing operations:
     
Income from continuing operations
  $181  $174 
Less: net income from continuing operations attributable to noncontrolling interests
   0     0     0      0      30   0   
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $245  $55  $419   $(5) 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174 
  
 
  
 
  
 
   
 
   
 
  
 
 
Basic per share
  $0.48  $0.11  $0.83   $(0.01)   $0.30  $0.35 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted per share
  $0.47  $0.11  $0.82   $(0.01)   $0.29  $0.34 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from discontinued operations:
               
Income (loss) from discontinued operations, net of taxes
  $(5)  $(473)  $16   $(485)   $(2)  $21 
Less: net income from discontinued operations attributable to noncontrolling interests
   0     23   8    17 
Less: net income (loss) from discontinued operations attributable to noncontrolling interests
   0     8 
  
 
  
 
  
 
   
 
   
 
  
 
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $(5)  $(496)  $8   $(502)   $(2)  $13 
  
 
  
 
  
 
   
 
   
 
  
 
 
Basic per share
  $(0.01)  $(0.98)  $0.02   $(0.99)   $0    $0.02 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted per share
  $(0.01)  $(0.97)  $0.02   $(0.99)   $0    $0.02 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss):
          
Income (loss) from continuing operations
  $245  $55  $419   $(5) 
Net income:
     
Income from continuing operations
  $181  $174 
Income (loss) from discontinued operations, net of taxes
   (5)   (473)   16    (485)    (2)   21 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss)
   240   (418)   435    (490) 
Net income
   179   195 
Less: net income attributable to noncontrolling interests
   0     23   8    17    30   8 
  
 
  
 
  
 
   
 
   
 
  
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $427   $(507) 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187 
  
 
  
 
  
 
   
 
   
 
  
 
 
Basic per share
(2)
  $0.47  $(0.87)  $0.84   $(1.00) 
Basic per share
(1)
  $0.29  $0.37 
  
 
  
 
  
 
   
 
   
 
  
 
 
Diluted per share
(2)
  $0.47  $(0.86)  $0.83   $(1.00) 
Diluted per share
(1)
  $0.29  $0.37 
  
 
  
 
  
 
   
 
   
 
  
 
 
 
(1)
Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 6.3 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, dilutive potential weighted-average common shares outstanding would have been 511.1 million.
(2) 
May not total due to whole number calculation.
 
13
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:
 
   
Three months ended
June 30,
  
Six months ended
June 30,
 
(Amounts in millions)
  
    2021    
  
    2020    
  
    2021    
  
    2020    
 
Fixed maturity securities—taxable
  $608  $594  $1,207  $1,205 
Fixed maturity securities—non-taxable
   1   1   3   3 
Equity securities
   2   2   5   4 
Commercial mortgage loans
   103   84   181   169 
Policy loans
   40   49   90   98 
Other invested assets
   112   66   201   113 
Cash, cash equivalents, restricted cash and short-term investments
   0     4   0     14 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross investment income before expenses and fees
   866   800   1,687   1,606 
Expenses and fees
   (22)   (21)   (42)   (45) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net investment income
  $844  $779  $1,645  $1,561 
   
 
 
  
 
 
  
 
 
  
 
 
 
14
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GENWORTH FINANCIAL, INC.
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
   
    2021    
 
Fixed maturity securities—taxable
  $580   $599 
Fixed maturity securities—non-taxable
   1    2 
Equity securities
   2    3 
Commercial mortgage loans
   81    78 
Policy loans
   50    50 
Limited partnerships
   7    31 
Other invested assets
   63    58 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   784    821 
Expenses and fees
   (20)    (20) 
   
 
 
   
 
 
 
Net investment income
  $764   $801 
   
 
 
   
 
 
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(b) Net Investment Gains (Losses)
The following table sets forth net investment gains (losses) for the periods indicated:
 
  
Three months ended
June 30,
 
Six months ended
June 30,
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2021    
 
    2020    
 
    2021    
 
    2020    
   
    2022    
 
    2021    
 
Realized investment gains (losses):
     
Available-for-sale fixed maturity securities:
              
Realized gains
  $5  $103  $12  $105   $10  $7 
Realized losses
   (4)   (5)   (7)   (5)    (18)   (3) 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
   1   98   5   100    (8)   4 
Net realized gains (losses) on equity securities sold
   0     (5) 
Net realized gains (losses) on limited partnerships
   0     3 
  
 
  
 
 
Total net realized investment gains (losses)
   (8)   2 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
   (4)   (7)   (6)   (7)    0     (2) 
Write-down of available-for-sale fixed maturity securities
(1)
   0     0     (1)   0      (2)   (1) 
Net realized gains (losses) on equity securities sold
   (2)   0     (7)   0   
Net unrealized gains (losses) on equity securities still held
   6   5   (2)   (7)    (6)   (8) 
Limited partnerships
   65   37   102   (3) 
Net unrealized gains (losses) on limited partnerships
   35   34 
Commercial mortgage loans
   (1)   1   (2)   1    1   (1) 
Derivative instruments
(2)
   4   (36)   12   (84)    4   8 
Other
   1   (5)   2   (6)    4   1 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net investment gains (losses)
  $70  $93  $103  $(6)   $28  $33 
  
 
  
 
  
 
  
 
   
 
  
 
 
 
(1) 
Represents write-down of securities deemed uncollectible or that we intend to sell or will be required to sell prior to recovery of the amortized cost basis.
(2) 
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses).
See Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2020 Annual Report on Form 10-K for a discussion of our policy for evaluating and measuring the allowance for credit losses related to our available-for-sale fixed maturity securities. The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three months ended June 30, 2021:​​​​​​​
(Amounts in millions)
 
Beginning
balance
  
Increase from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities

sold
  
Decrease
due to change
in intent or
requirement
to sell
  
Write-offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
                                
Non-U.S. corporate
 $3  $0    $4  $(7)  $0    $0    $0    $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
 $3  $0    $4  $(7)  $0    $0    $0    $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three and six months ended June 30, 2020:
(Amounts in millions)
 
Beginning
balance
  
Increase from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to
change in
intent or
requirement
to sell
  
Write-
offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
                                
Non-U.S. corporate
 $0    $4  $0    $0    $0    $0    $0    $4 
Commercial mortgage-backed
  0     3   0     0     0     0     0     3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
 $0    $7  $0    $0    $0    $0    $0    $7 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the six months ended June 30, 2021:
(Amounts in millions)
 
Beginning
balance
  
Increase from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to change
in intent or
requirement
to sell
  
Write-

offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
                                
Non-U.S. corporate
 $1  $0    $6  $(7)  $0    $0    $0    $0   
Commercial mortgage-backed
  3   0     0     0     0     (3)   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
 $4  $0    $6  $(7)  $0    $(3)  $0    $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
See Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2021 Annual Report on Form 10-K for a discussion of our policy for evaluating and measuring the allowance for credit losses related to our available-for-sale fixed maturity securities. There was no allowance for credit losses related to our available-for-sale fixed maturity investments as of and for the three months ended March 31, 2022. The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity investments as of and for the three months ended March 31, 2021:
(Amounts in millions)
 
Beginning
balance
  
Increase
from
securities
without
allowance in
previous
periods
  
Increase
(decrease)
from securities
with allowance
in previous
periods
  
Securities
sold
  
Decrease
due to
change in
intent or
requirement
to sell
  
Write-offs
  
Recoveries
  
Ending
balance
 
Fixed maturity securities:
                                
Non-U.S. corporate
 $1  $0    $2  $0    $0    $0    $0    $3 
Commercial mortgage-backed
  3   0     0     0     0     (3)   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
 $4  $0    $2  $0    $0    $(3)  $0    $3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(c) Unrealized Investment Gains and Losses
Net unrealized gains and losses on available-for-sale investment securities reflected as a separate component of accumulated other comprehensive income (loss) were as follows as of the dates indicated:
 
(Amounts in millions)
  
June 30, 2021
 
December 31, 2020
   
March 31,
2022
 
December 31,
2021
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses
(1)
  $8,538  $10,159   $2,747  $7,869 
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses
(1)
   0     (7)    0     0   
Adjustments to DAC, present value of future profits, sales inducements, benefit reserves and policyholder contract balances
   (6,169)   (7,302)    (1,700)   (5,487) 
Income taxes, net
   (504)   (611)    (223)   (507) 
  
 
  
 
   
 
  
 
 
Net unrealized investment gains (losses)
   1,865   2,239    824   1,875 
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
   0     25    (26)   15 
  
 
  
 
   
 
  
 
 
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
  $1,865  $2,214   $850  $1,860 
  
 
  
 
   
 
  
 
 
 
(1) 
Excludes foreign exchange.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The change in net unrealized gains (losses) on available-for-sale investment securities reported in accumulated other comprehensive income (loss) was as follows as of and for the periods indicated:three months ended March 31:
 
   
As of or for the
three months ended

June 30,
 
(Amounts in millions)
  
2021
  
2020
 
Beginning balance
  $1,919  $1,140 
Unrealized gains (losses) arising during the period:
         
Unrealized gains (losses) on fixed maturity securities
   1,774   3,911 
Adjustment to deferred acquisition costs
   42   (111) 
Adjustment to present value of future profits
   1   5 
Adjustment to sales inducements
   2   (34) 
Adjustment to benefit reserves
   (1,887)   (2,802) 
Provision for income taxes
   14   (207) 
   
 
 
  
 
 
 
Change in unrealized gains (losses) on investment securities
   (54)   762 
Reclassification adjustments to net investment (gains) losses, net of taxes of $0
 
and $24
   0     (88) 
   
 
 
  
 
 
 
Change in net unrealized investment gains (losses)
   (54)   674 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   0     3 
   
 
 
  
 
 
 
Ending balance
  $1,865  $1,811 
   
 
 
  
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   
As of or for the
six months ended

June 30,
 
(Amounts in millions)
  
2021
  
2020
 
Beginning balance
  $2,214  $1,456 
Unrealized gains (losses) arising during the period:
         
Unrealized gains (losses) on fixed maturity securities
   (1,609)   2,199 
Adjustment to deferred acquisition costs
   (132)   57 
Adjustment to present value of future profits
   2   4 
Adjustment to sales inducements
   5   2 
Adjustment to benefit reserves
   1,258   (1,694) 
Provision for income taxes
   106   (120) 
   
 
 
  
 
 
 
Change in unrealized gains (losses) on investment securities
   (370)   448 
Reclassification adjustments to net investment (gains) losses, net of taxes of $1 and $25
   (4)   (94) 
   
 
 
  
 
 
 
Change in net unrealized investment gains (losses)
   (374)   354 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   (25)   (1) 
   
 
 
  
 
 
 
Ending balance
  $1,865  $1,811 
   
 
 
  
 
 
 
(Amounts in millions)
  
2022
  
2021
 
Beginning balance
  $1,860  $2,214 
Unrealized gains (losses) arising during the period:
         
Unrealized gains (losses) on fixed maturity securities
   (5,130)   (3,383) 
Adjustment to DAC
   237   (174) 
Adjustment to present value of future profits
   1   1 
Adjustment to sales inducements
   22   3 
Adjustment to benefit reserves and policyholder contract balances
   3,527   3,145 
Provision for income taxes
   286   92 
   
 
 
  
 
 
 
Change in unrealized gains (losses) on investment securities
   (1,057)   (316) 
Reclassification adjustments to net investment (gains) losses, net of taxes of $(2) and $1
   6   (4) 
   
 
 
  
 
 
 
Change in net unrealized investment gains (losses)
   (1,051)   (320) 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
   (41)   (25) 
   
 
 
  
 
 
 
Ending balance
  $850  $1,919 
   
 
 
  
 
 
 
Amounts reclassified out of accumulated other comprehensive income (loss) to net investment gains (losses) include realized gains (losses) on sales of securities, which are determined on a specific identification basis.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(d) Fixed Maturity Securities
As of June 30,March 31, 2022, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
                        
U.S. government, agencies and government-sponsored enterprises
  $3,356   $744   $(3)  $0     $4,097 
State and political subdivisions
   3,009    206    (81)   0      3,134 
Non-U.S. government
   778    48    (42)   0      784 
U.S. corporate:
                        
Utilities
   4,345    355    (66)   0      4,634 
Energy
   2,572    175    (48)   0      2,699 
Finance and insurance
   8,026    406    (203)   0      8,229 
Consumer—non-cyclical
   5,070    488    (70)   0      5,488 
Technology and communications
   3,371    213    (87)   0      3,497 
Industrial
   1,301    73    (26)   0      1,348 
Capital goods
   2,346    205    (39)   0      2,512 
Consumer—cyclical
   1,725    86    (44)   0      1,767 
Transportation
   1,133    124    (9)   0      1,248 
Other
   381    24    (4)   0      401 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,270    2,149    (596)   0      31,823 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
                        
Utilities
   874    19    (15)   0      878 
Energy
   1,158    102    (19)   0      1,241 
Finance and insurance
   2,129    132    (70)   0      2,191 
Consumer—non-cyclical
   665    28    (22)   0      671 
Technology and communications
   1,055    61    (17)   0      1,099 
Industrial
   918    56    (21)   0      953 
Capital goods
   610    25    (16)   0      619 
Consumer—cyclical
   316    5    (9)   0      312 
Transportation
   392    38    (7)   0      423 
Other
   996    86    (16)   0      1,066 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,113    552    (212)   0      9,453 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,277    57    (14)   0      1,320 
Commercial mortgage-backed
   2,369    36    (44)   0      2,361 
Other asset-backed
   2,108    7    (60)   0      2,055 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $52,280   $3,799   $(1,052)  $0     $55,027 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
1
4
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of December 31, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair

value
 
Fixed maturity securities:
                        
U.S. government, agencies and government-sponsored enterprises
  $3,350   $1,135   $(1)  $0     $4,484 
State and political subdivisions
   2,876    496    (1)   0      3,371 
Non-U.S. government
   712    94    (4)   0      802 
U.S. corporate:
                        
Utilities
   4,276    820    (5)   0      5,091 
Energy
   2,573    388    (9)   0      2,952 
Finance and insurance
   7,895    1,107    (13)   0      8,989 
Consumer—non-cyclical
   5,128    1,100    (4)   0      6,224 
Technology and communications
   3,244    515    (5)   0      3,754 
Industrial
   1,377    196    (1)   0      1,572 
Capital goods
   2,424    447    (1)   0      2,870 
Consumer—cyclical
   1,758    240    (4)   0      1,994 
Transportation
   1,156    253    0     0      1,409 
Other
   394    40    0     0      434 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,225    5,106    (42)   0      35,289 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
                        
Utilities
   873    73    (1)   0      945 
Energy
   1,189    210    0     0      1,399 
Finance and insurance
   2,108    298    (6)   0      2,400 
Consumer—non-cyclical
   659    87    (1)   0      745 
Technology and communications
   1,098    186    0     0      1,284 
Industrial
   1,003    138    (1)   0      1,140 
Capital goods
   574    69    (1)   0      642 
Consumer—cyclical
   325    29    (1)   0      353 
Transportation
   467    74    0     0      541 
Other
   1,105    193    (3)   0      1,295 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,401    1,357    (14)   0      10,744 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,524    167    0     0      1,691 
Commercial mortgage-backed
   2,538    199    (3)   0      2,734 
Other asset-backed
   2,485    50    (1)   0      2,534 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $53,111   $8,604   $(66)  $0     $61,649 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
                        
U.S. government, agencies and government-sponsored enterprises
  $3,368   $1,184   $0    $0     $4,552 
State and political subdivisions
   2,982    474    (6)   0      3,450 
Non-U.S. government
   762    86    (13)   0      835 
U.S. corporate:
                        
Utilities
   4,330    783    (9)   0      5,104 
Energy
   2,581    363    (10)   0      2,934 
Finance and insurance
   8,003    1,012    (24)   0      8,991 
Consumer—non-cyclical
   5,138    1,029    (8)   0      6,159 
Technology and communications
   3,345    476    (13)   0      3,808 
Industrial
   1,322    175    (3)   0      1,494 
Capital goods
   2,334    415    (4)   0      2,745 
Consumer—cyclical
   1,703    203    (7)   0      1,899 
Transportation
   1,122    249    0     0      1,371 
Other
   379    41    (1)   0      419 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,257    4,746    (79)   0      34,924 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
                        
Utilities
   867    63    (2)   0      928 
Energy
   1,194    190    (1)   0      1,383 
Finance and insurance
   2,171    270    (9)   0      2,432 
Consumer—non-cyclical
   664    81    (2)   0      743 
Technology and communications
   1,085    166    (1)   0      1,250 
Industrial
   933    117    (3)   0      1,047 
Capital goods
   640    66    (1)   0      705 
Consumer—cyclical
   316    27    (2)   0      341 
Transportation
   422    68    (1)   0      489 
Other
   1,052    169    (4)   0      1,217 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,344    1,217    (26)   0      10,535 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,325    116    (1)   0      1,440 
Commercial mortgage-backed
   2,435    152    (3)   0      2,584 
Other asset-backed
   2,138    29    (7)   0      2,160 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $52,611   $8,004   $(135)  $0     $60,480 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
  
Fair
value
 
Fixed maturity securities:
                       
U.S. government, agencies and government-sponsored enterprises
  $3,401   $1,404   $0    $0    $4,805 
State and political subdivisions
   2,622    544    (1)   0     3,165 
Non-U.S. government
   728    130    (4)   0     854 
U.S. corporate:
                       
Utilities
   4,226    970    (2)   0     5,194 
Energy
   2,532    367    (16)   0     2,883 
Finance and insurance
   7,798    1,306    (2)   0     9,102 
Consumer—non-cyclical
   5,115    1,323    (1)   0     6,437 
Technology and communications
   3,142    619    0     0     3,761 
Industrial
   1,370    232    0     0     1,602 
Capital goods
   2,456    535    0     0     2,991 
Consumer—cyclical
   1,663    284    0     0     1,947 
Transportation
   1,198    304    (2)   0     1,500 
Other
   395    45    0     0     440 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total U.S. corporate
   29,895    5,985    (23)   0     35,857 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                       
Utilities
   838    84    0     0     922 
Energy
   1,172    209    (1)   0     1,380 
Finance and insurance
   2,130    353    (6)   (1)   2,476 
Consumer—non-cyclical
   662    112    (1)   0     773 
Technology and communications
   1,062    229    0     0     1,291 
Industrial
   969    159    0     0     1,128 
Capital goods
   510    67    (1)   0     576 
Consumer—cyclical
   331    41    (1)   0     371 
Transportation
   483    88    (1)   0     570 
Other
   1,088    236    0     0     1,324 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total non-U.S. corporate
   9,245    1,578    (11)   (1)   10,811 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
   1,698    211    0     0     1,909 
Commercial mortgage-backed
   2,759    231    (13)   (3)   2,974 
Other asset-backed
   3,069    55    (4)   0     3,120 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total available-for-sale fixed maturity securities
  $53,417   $10,138   $(56)  $(4)  $63,495 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
20
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of June 30, 2021:March 31, 2022:
 
  
Less than 12 months
  
12 months or more
  
Total
 
(Dollar amounts in millions)
 
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
 
Description of Securities
                                    
Fixed maturity securities:
                                    
U.S. government, agencies and government-sponsored enterprises
 $30  $(1)   5  $0    $0     0    $30  $(1)   5 
State and political subdivisions
  100   (1)   32   0     0     0     100   (1)   32 
Non-U.S. government
  112   (3)   22   18   (1)   1   130   (4)   23 
U.S. corporate
  1,482   (37)   141   59   (5)   8   1,541   (42)   149 
Non-U.S. corporate
  434   (12)   51   35   (2)   7   469   (14)   58 
Commercial mortgage-backed
  48   (1)   6   53   (2)   9   101   (3)   15 
Other asset-backed
  280   (1)   55   0     0     0     280   (1)   55 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $2,486  $(56)   312  $165  $(10)   25  $2,651  $(66)   337 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% Below cost:
                                    
<20% Below cost
 $2,479  $(53)   311  $160  $(8)   24  $2,639  $(61)   335 
20%-50% Below cost
  7   (3)   1   5   (2)   1   12   (5)   2 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $2,486  $(56)   312  $165  $(10)   25  $2,651  $(66)   337 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Investment grade
 $2,379  $(50)   293  $82  $(4)   15  $2,461  $(54)   308 
Below investment grade
  107   (6)   19   83   (6)   10   190   (12)   29 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $2,486  $(56)   312  $165  $(10)   25  $2,651  $(66)   337 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
Less than 12 months
  
12 months or more
  
Total
 
(Dollar amounts in millions)
 
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
 
Description of Securities
                                    
Fixed maturity securities:
                                    
U.S. government, agencies and government-sponsored enterprises
 $67  $(2)   17  $10  $(1)   3  $77  $(3)   20 
State and political subdivisions
  902   (78)   157   25   (3)   5   927   (81)   162 
Non-U.S. government
  305   (27)   46   80   (15)   10   385   (42)   56 
U.S. corporate
  8,109   (505)   995   627   (91)   65   8,736   (596)   1,060 
Non-U.S. corporate
  2,672   (173)   355   258   (39)   31   2,930   (212)   386 
Residential mortgage-backed
  304   (13)   78   5   (1)   5   309   (14)   83 
Commercial mortgage-backed
  1,098   (40)   160   43   (4)   6   1,141   (44)   166 
Other asset-backed
  1,500   (57)   254   66   (3)   15   1,566   (60)   269 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% Below cost:
                                    
<20% Below cost
 $14,957  $(895)   2,062  $1,066  $(142)   134  $16,023  $(1,037)   2,196 
20%-50% Below cost
  0     0     0     48   (15)   6   48   (15)   6 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Investment grade
 $13,796  $(823)   1,896  $1,031  $(140)   129  $14,827  $(963)   2,025 
Below investment grade
  1,161   (72)   166   83   (17)   11   1,244   (89)   177 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $14,957  $(895)   2,062  $1,114  $(157)   140  $16,071  $(1,052)   2,202 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
211
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our corporate securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of June 30, 2021:March 31, 2022:
 
 
Less than 12 months
 
12 months or more
 
Total
  
Less than 12 months
 
12 months or more
 
Total
 
(Dollar amounts in millions)
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
  
Fair
value
 
Gross
unrealized
losses
 
Number
of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number

of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number

of
securities
 
Description of Securities
                  
Description of Securities
 
                
U.S. corporate:
                                    
Utilities
 $82  $(5)   17  $0    $0     0    $82  $(5)   17  $1,089  $(56)   142  $59  $(10)   13  $1,148  $(66)   155 
Energy
  88   (4)   10   59   (5)   8   147   (9)   18   740   (40)   87   63   (8)   7   803   (48)   94 
Finance and insurance
  540   (13)   42   0     0     0     540   (13)   42   2,529   (173)   293   203   (30)   17   2,732   (203)   310 
Consumer—non-cyclical
  202   (4)   19   0     0     0     202   (4)   19   916   (56)   109   86   (14)   7   1,002   (70)   116 
Technology and communications
  219   (5)   22   0     0     0     219   (5)   22   1,094   (73)   147   93   (14)   8   1,187   (87)   155 
Industrial
  67   (1)   6   0     0     0     67   (1)   6   361   (26)   46   0     0     0     361   (26)   46 
Capital goods
  95   (1)   8   0     0     0     95   (1)   8   553   (35)   65   27   (4)   4   580   (39)   69 
Consumer—cyclical
  189   (4)   17   0     0     0     189   (4)   17   507   (34)   65   78   (10)   7   585   (44)   72 
Transportation
  247   (9)   32   0     0     0     247   (9)   32 
Other
  73   (3)   9   18   (1)   2   91   (4)   11 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, U.S. corporate securities
  1,482   (37)   141   59   (5)   8   1,541   (42)   149   8,109   (505)   995   627   (91)   65   8,736   (596)   1,060 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                    
Utilities
  42   (1)   6   0     0     0     42   (1)   6   272   (13)   28   12   (2)   1   284   (15)   29 
Energy
  291   (18)   27   4   (1)   1   295   (19)   28 
Finance and insurance
  271   (6)   28   0     0     0     271   (6)   28   685   (47)   96   157   (23)   16   842   (70)   112 
Consumer—non-cyclical
  0     0     0     6   (1)   1   6   (1)   1   253   (21)   32   6   (1)   1   259   (22)   33 
Technology and Industrial
  43   (1)   4   0     0     0     43   (1)   4 
Technology and communications
  269   (17)   41   0     0     0     269   (17)   41 
Industrial
  274   (19)   35   18   (2)   2   292   (21)   37 
Capital goods
  0     0     0     29   (1)   6   29   (1)   6   231   (16)   30   0     0     0     231   (16)   30 
Consumer—cyclical
  32   (1)   8   0     0     0     32   (1)   8   128   (7)   25   20   (2)   4   148   (9)   29 
Transportation
  125   (7)   19   0     0     0     125   (7)   19 
Other
  46   (3)   5   0     0     0     46   (3)   5   144   (8)   22   41   (8)   6   185   (16)   28 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, non-U.S. corporate securities
  434   (12)   51   35   (2)   7   469   (14)   58   2,672   (173)   355   258   (39)   31   2,930   (212)   386 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for corporate securities in an unrealized loss position
 $1,916  $(49)   192  $94  $(7)   15  $2,010  $(56)   207  $10,781  $(678)   1,350  $885  $(130)   96  $11,666  $(808)   1,446 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
1
7
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We did not recognize an allowance for credit losses on securities in an unrealized loss position included in the tables above. Based on a qualitative and quantitative review of the issuers of the securities, we believe the decline in fair value iswas largely due to recent market volatilityincreasing interest rates and iswidening credit spreads and was not indicative of credit losses. The issuers continue to make timely principal and interest payments. For all securities in an unrealized loss position without an allowance for credit losses, we expect to recover the amortized cost based on our estimate of the amount and timing of cash flows to be collected. We do not intend to sell nor do we expect that we will be required to sell these securities prior to recovering our amortized cost.
The following table presents the gross unrealized losses and fair values of our fixed maturity securities for which an allowance for credit losses has not been recorded, aggregated by investment type and length of time that individual fixed maturity securities have been in a continuous unrealized loss position, as of December 31, 2021:
22
  
Less than 12 months
  
12 months or more
  
Total
 
(Dollar amounts in millions)
 
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number
of
securities
 
Description of Securities
 
                                
Fixed maturity securities:
                                    
State and political subdivisions
 $339  $(6)   67  $0    $0     0    $339  $(6)   67 
Non-U.S. government
  173   (9)   28   19   (4)   1   192   (13)   29 
U.S. corporate
  2,593   (64)   266   196   (15)   22   2,789   (79)   288 
Non-U.S. corporate
  912   (21)   124   62   (5)   8   974   (26)   132 
Residential mortgage-backed
  97   (1)   22   0     0     0     97   (1)   22 
Commercial mortgage-backed
  113   (2)   17   31   (1)   4   144   (3)   21 
Other asset-backed
  764   (7)   111   0     0     0     764   (7)   111 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% Below cost:
                                    
<20% Below cost
 $4,991  $(110)   635  $297  $(20)   33  $5,288  $(130)   668 
20%-50% Below cost
  0     0     0     11   (5)   2   11   (5)   2 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Investment grade
 $4,644  $(101)   587  $241  $(12)   25  $4,885  $(113)   612 
Below investment grade
  347   (9)   48   67   (13)   10   414   (22)   58 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $4,991  $(110)   635  $308  $(25)   35  $5,299  $(135)   670 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
1
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gross unrealized losses and fair values of our fixed maturitycorporate securities aggregated by investment type and length of time that individual fixed maturity securities havefor which an allowance for credit losses has not been in a continuous unrealized loss position, as of December 31, 2020:
  
Less than 12 months
  
12 months or more
  
Total
 
(Dollar amounts in millions)
 
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
  
Fair
value
  
Gross
unrealized
losses
  
Number of
securities
 
Description of Securities
                                    
Fixed maturity securities:
                                    
State and political subdivisions
 $28  $(1)   6  $0    $0     0    $28  $(1)   6 
Non-U.S. government
  44   (4)   5   0     0     0     44   (4)   5 
U.S. corporate
  345   (20)   59   33   (3)   4   378   (23)   63 
Non-U.S. corporate
  145   (4)   32   6   (1)   1   151   (5)   33 
Commercial mortgage-backed
  227   (11)   34   1   (1)   1   228   (12)   35 
Other asset-backed
  238   (2)   60   207   (2)   48   445   (4)   108 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $1,027  $(42)   196  $247  $(7)   54  $1,274  $(49)   250 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% Below cost:
                                    
<20% Below cost
 $1,017  $(35)   194  $246  $(6)   53  $1,263  $(41)   247 
20%-50% Below cost
  10   (7)   2   1   (1)   1   11   (8)   3 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $1,027  $(42)   196  $247  $(7)   54  $1,274  $(49)   250 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Investment grade
 $852  $(23)   163  $207  $(2)   48  $1,059  $(25)   211 
Below investment grade
  175   (19)   33   40   (5)   6   215   (24)   39 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total for fixed maturity securities in an unrealized loss position
 $1,027  $(42)   196  $247  $(7)   54  $1,274  $(49)   250 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
23
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the gross unrealized losses and fair values of our corporate securities,recorded, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, based on industry, as of December 31, 2020:2021:
 
 
Less than 12 months
 
12 months or more
 
Total
  
Less than 12 months
 
12 months or more
 
Total
 
(Dollar amounts in millions)
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
  
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Fair
value
 
Gross
unrealized
losses
 
Number of
securities
 
Description of Securities
                                    
U.S. corporate:
                                    
Utilities
 $49  $(2)   9  $0    $0     0    $49  $(2)   9  $211  $(7)   32  $29  $(2)   7  $240  $(9)   39 
Energy
  106   (13)   19   33   (3)   4   139   (16)   23   166   (3)   18   25   (7)   4   191   (10)   22 
Finance and insurance
  128   (2)   15   0     0     0     128   (2)   15   960   (22)   89   62   (2)   3   1,022   (24)   92 
Consumer—non-cyclical
  16   (1)   5   0     0     0     16   (1)   5   296   (7)   30   14   (1)   2   310   (8)   32 
Transportation
  46   (2)   11   0     0     0     46   (2)   11 
Technology and communications
  378   (12)   37   29   (1)   2   407   (13)   39 
Industrial
  143   (3)   18   0     0     0     143   (3)   18 
Capital goods
  171   (3)   16   18   (1)   2   189   (4)   18 
Consumer—cyclical
  268   (7)   26   0     0     0     268   (7)   26 
Other
  0     0     0     19   (1)   2   19   (1)   2 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, U.S. corporate securities
  345   (20)   59   33   (3)   4   378   (23)   63   2,593   (64)   266   196   (15)   22   2,789   (79)   288 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                    
Utilities
  69   (2)   9   0     0     0     69   (2)   9 
Energy
  66   (1)   10   0     0     0     66   (1)   10   64   (1)   10   0     0     0     64   (1)   10 
Finance and insurance
  366   (8)   43   18   (1)   2   384   (9)   45 
Consumer—non-cyclical
  0     0     0     6   (1)   1   6   (1)   1   67   (1)   12   6   (1)   1   73   (2)   13 
Technology and communications
  48   (1)   8   0     0     0     48   (1)   8 
Industrial
  122   (3)   14   0     0     0     122   (3)   14 
Capital goods
  31   (1)   8   0     0     0     31   (1)   8   78   (1)   8   0     0     0     78   (1)   8 
Consumer—cyclical
  15   (1)   6   0     0     0     15   (1)   6   22   (1)   8   15   (1)   3   37   (2)   11 
Transportation
  33   (1)   8   0     0     0     33   (1)   8   37   (1)   7   0     0     0     37   (1)   7 
Other
  39   (2)   5   23   (2)   2   62   (4)   7 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Subtotal, non-U.S. corporate securities
  145   (4)   32   6   (1)   1   151   (5)   33   912   (21)   124   62   (5)   8   974   (26)   132 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total for corporate securities in an unrealized loss position
 $490  $(24)   91  $39  $(4)   5  $529  $(28)   96  $3,505  $(85)   390  $258  $(20)   30  $3,763  $(105)   420 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
19

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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The scheduled maturity distribution of fixed maturity securities as of June 30, 2021March 31, 2022 is set forth below. Actual maturities may differ from contractual maturities because issuers of securities may have the right to call or prepay obligations with or without call or prepayment penalties.
 
(Amounts in millions)
  
Amortized
cost or
cost
   
Fair
value
 
Due one year or less
  $1,268   $1,291 
Due after one year through five years
   8,367    9,030 
Due after five years through ten years
   13,587    15,158 
Due after ten years
   23,342 ��  29,211 
   
 
 
   
 
 
 
Subtotal
   46,564    54,690 
Residential mortgage-backed
   1,524    1,691 
Commercial mortgage-backed
   2,538    2,734 
Other asset-backed
   2,485    2,534 
   
 
 
   
 
 
 
Total
  $53,111   $61,649 
   
 
 
   
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions)
  
Amortized
cost or
cost
   
Fair
value
 
Due one year or less
  $1,407   $1,420 
Due after one year through five years
   8,339    8,501 
Due after five years through ten years
   13,771    13,943 
Due after ten years
   23,009    25,427 
   
 
 
   
 
 
 
Subtotal
   46,526    49,291 
Residential mortgage-backed
   1,277    1,320 
Commercial mortgage-backed
   2,369    2,361 
Other asset-backed
   2,108    2,055 
   
 
 
   
 
 
 
Total
  $52,280   $55,027 
   
 
 
   
 
 
 
As of June 30, 2021,March 31, 2022, securities issued by finance and insurance, consumer—non-cyclical, utilities and technology and communications industry groups represented approximately 25%24%, 15%, 13% and 11%, respectively, of our domestic and foreign corporate fixed maturity securities portfolio. No other industry group comprised more than 10% of our investment portfolio.
As of June 30, 2021,March 31, 2022, we did not hold any fixed maturity securities in any single issuer, other than securities issued or guaranteed by the U.S. government, which exceeded 10% of stockholders’ equity.
(e) Commercial Mortgage Loans
Our mortgage loans are collateralized by commercial properties, including multi-family residential buildings. The carrying value of commercial mortgage loans is stated at original cost net of principal payments, amortization and allowance for credit losses.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We diversify our commercial mortgage loans by both property type and geographic region. The following tables set forth the distribution across property type and geographic region for commercial mortgage loans as of the dates indicated:
 
  
June 30, 2021
 
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of
total
 
Carrying
value
   
% of
total
   
Carrying
value
   
% of
total
 
Carrying
value
   
% of
total
 
Property type:
                      
Retail
  $2,693    39%  $2,442    36%   $2,837    41%  $2,774    40% 
Office
   1,527    22   1,526    22 
Industrial
   1,558    23   1,638    24    1,461    21   1,420    21 
Office
   1,531    22   1,567    23 
Apartments
   573    8   529    8    577    8   585    9 
Mixed use
   298    4   286    4    327    5   330    5 
Other
   259    4   312    5    209    3   221    3 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Subtotal
   6,912    100%   6,774    100%    6,938    100%   6,856    100% 
     
 
     
 
      
 
     
 
 
Allowance for credit losses
   (33)      (31)       (25)      (26)    
  
 
     
 
      
 
     
 
    
Total
  $6,879     $6,743      $6,913     $6,830    
  
 
     
 
      
 
     
 
    
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  
June 30, 2021
 
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying
value
   
% of
total
 
Carrying
value
   
% of
total
   
Carrying
value
   
% of
total
 
Carrying
value
   
% of
total
 
Geographic region:
                      
South Atlantic
 ��$1,788    26%  $1,711    25%   $1,806    26%  $1,770    26% 
Pacific
   1,456    21   1,510    22    1,357    20   1,360    20 
Middle Atlantic
   988    14   994    15    964    14   964    14 
Mountain
   847    12   781    12    932    13   892    13 
West South Central
   493    7   483    7 
West North Central
   466    7   467    7    466    7   461    7 
West South Central
   455    7   423    6 
East North Central
   447    6   441    6    464    7   465    7 
New England
   262    4   260    4    235    3   237    3 
East South Central
   203    3   187    3    221    3   224    3 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Subtotal
   6,912    100%   6,774    100%    6,938    100%   6,856    100% 
     
 
     
 
      
 
     
 
 
Allowance for credit losses
   (33)      (31)       (25)      (26)    
  
 
     
 
      
 
     
 
    
Total
  $6,879     $6,743      $6,913     $6,830    
  
 
     
 
      
 
     
 
    
As of June 30,December 31, 2021, we had one commercial mortgage loan with an amortized cost of $22 million that was 31 to 60 days past due in the office property type. We wrote off $8 million of this commercial mortgage loan during the year ended December 31, 2021 and it was placed on non-accrual status as of December 31, 2020, all2021. The carrying value of ourthis commercial mortgage loan was written down to the fair value of its collateral and this loan did not have an allowance for credit losses as of December 31, 2021. As of March 31, 2022, this commercial mortgage loan was more than 90 days past due with an amortized cost of $22 million and was on non-accrual status. As of March 31, 2022, we had 0 other commercial mortgage loans were current.past due or on non-accrual status. For a discussion of our policy related to placing commercial mortgage loans on non-accrual status, see Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 20202021 Annual Report on Form 10-K. As
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1
Table of June 30, 2021 and December 31, 2020, we had 0 commercial mortgage loans on non-accrual status.Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the sixthree months ended June 30, 2021March 31, 2022 and the year ended December 31, 2020,2021, we did 0tnot have any modifications or extensions that were considered troubled debt restructurings.
The following table sets forth the allowance for credit losses related to commercial mortgage loans as of or for the periods indicated:
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
 
Allowance for credit losses:
                    
Beginning balance
  $32   $29   $31   $13 
Cumulative effect of change in accounting
   0      0      0      16 
Provision
   1    (1)    2    (1) 
Write-offs
   0      0      0      0   
Recoveries
   0      0      0      0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  $33   $28   $33   $28 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
    2022    
   
    2021    
 
Allowance for credit losses:
          
Beginning balance
  $26   $31 
Provision
   (1)    1 
Write-offs
   0      0   
Recoveries
   0      0   
   
 
 
   
 
 
 
Ending balance
  $25   $32 
   
 
 
   
 
 
 
In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the debt-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average debt-to-value ratio is based on our most recent estimate of the fair value for
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower debt-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio is not used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.
The following tables set forth commercial mortgage loans by year of origination and credit quality indicator as of June 30, 2021:
2
2
(Amounts in millions)
  
2021
   
2020
   
2019
   
2018
   
2017
   
2016 and
prior
   
Total
 
Debt-to-value:
                                   
0% - 50%
  $7   $59   $25   $102   $157   $2,151   $2,501 
51% - 60%
   19    51    88    344    236    810    1,548 
61% - 75%
   503    426    649    504    273    508    2,863 
76% - 100%
   0      0      0      0      0      0      0   
Greater than 100%
   0      0      0      0      0      0      0   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total amortized cost
  $529   $536   $762   $950   $666   $3,469   $6,912 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Debt service coverage ratio:
                                   
Less than 1.00
  $0     $0     $8   $27   $12   $131   $178 
1.00 - 1.25
   3    52    67    53    42    283    500 
1.26 - 1.50
   91    81    230    200    57    383    1,042 
1.51 - 2.00
   385    281    289    441    302    1,153    2,851 
Greater than 2.00
   50    122    168    229    253    1,519    2,341 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total amortized cost
  $529   $536   $762   $950   $666   $3,469   $6,912 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth the debt-to-value of commercial mortgage loans by property type as of the dates indicated:
   
June 30, 2021
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:
                         
Retail
  $920  $605  $1,168  $0    $0    $2,693 
Industrial
   716   324   518   0     0     1,558 
Office
   468   452   611   0     0     1,531 
Apartments
   225   77   271   0     0     573 
Mixed use
   112   33   153   0     0     298 
Other
   60   57   142   0     0     259 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,501  $1,548  $2,863  $0    $0    $6,912 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   36%   22%   42%   0  %   0  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.39   1.84   1.62   0     0     1.96 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
December 31, 2020
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:
                         
Retail
  $913  $639  $859  $29  $2  $2,442 
Industrial
   798   351   456   33   0     1,638 
Office
   523   431   595   18   0     1,567 
Apartments
   199   86   238   6   0     529 
Mixed use
   112   47   127   0     0     286 
Other
   100   74   121   17   0     312 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,645  $1,628  $2,396  $103  $2  $6,774 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   39%   24%   35%   2%   0  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.40   1.83   1.61   1.49   0.64   1.97 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth commercial mortgage loans by year of origination and credit quality indicator as of March 31, 2022:
(Amounts in millions)
  
2022
   
2021
   
2020
   
2019
   
2018
   
2017 and
prior
   
Total
 
Debt-to-value:
                                   
0% - 50%
  $0     $23   $72   $60   $161   $2,136   $2,452 
51% - 60%
   0      40    30    161    272    991    1,494 
61% - 75%
   197    884    420    505    438    526    2,970 
76% - 100%
   0      0      0      0      0      0      0   
Greater than 100%
   0      0      0      0      0      22    22 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total amortized cost
  $197   $947   $522   $726   $871   $3,675   $6,938 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Debt service coverage ratio:
                                   
Less than 1.00
  $0     $0     $10   $19   $41   $150   $220 
1.00 - 1.25
   13    2    69    73    75    317    549 
1.26 - 1.50
   20    118    32    167    134    333    804 
1.51 - 2.00
   148    724    219    269    441    1,270    3,071 
Greater than 2.00
   16    103    192    198    180    1,605    2,294 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total amortized cost
  $197   $947   $522   $726   $871   $3,675   $6,938 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following tables set forth the debt-to-value of commercial mortgage loans by property type as of the dates indicated:
   
March 31, 2022
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:
                         
Retail
  $849  $594  $1,394  $0    $0    $2,837 
Office
   492   387   626   0     22   1,527 
Industrial
   738   233   490   0     0     1,461 
Apartments
   196   99   282   0     0     577 
Mixed use
   121   67   139   0     0     327 
Other
   56   114   39   0     0     209 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,452  $1,494  $2,970  $0    $22  $6,938 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   35%   22%   43%   0  %   0  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.35   1.84   1.62   0     0     1.92 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   
December 31, 2021
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:
                         
Retail
  $853  $611  $1,310  $0    $0    $2,774 
Office
   505   395   604   0     22   1,526 
Industrial
   745   240   435   0     0     1,420 
Apartments
   200   102   283   0     0     585 
Mixed use
   120   70   140   0     0     330 
Other
   57   121   43   0     0     221 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $2,480  $1,539  $2,815  $0    $22  $6,856 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   36%   23%   41%   0  %   0  %   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt service coverage ratio
   2.36   1.83   1.61   0     0.68   1.93 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:
 
  
June 30, 2021
   
March 31, 2022
 
(Amounts in millions)
  
Less than 1.00
 
1.00 - 1.25
 
1.26 - 1.50
 
1.51 - 2.00
 
Greater
than 2.00
 
Total
   
Less than 1.00
 
1.00 - 1.25
 
1.26 - 1.50
 
1.51 - 2.00
 
Greater
than 2.00
 
Total
 
Property type:
                          
Retail
  $51  $163  $529  $1,190  $760  $2,693   $100  $157  $426  $1,441  $713  $2,837 
Office
   67   108   165   609   578   1,527 
Industrial
   20   78   136   597   727   1,558    8   77   80   629   667   1,461 
Office
   70   90   169   658   544   1,531 
Apartments
   8   22   126   250   167   573    17   62   77   230   191   577 
Mixed use
   5   23   45   128   97   298    23   31   40   118   115   327 
Other
   24   124   37   28   46   259    5   114   16   44   30   209 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Total amortized cost
  $178  $500  $1,042  $2,851  $2,341  $6,912   $220  $549  $804  $3,071  $2,294  $6,938 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
% of total
   3%   7%   15%   41%   34%   100%    3%   8%   12%   44%   33%   100% 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Weighted-average debt-to-value
   58%   61%   62%   59%   44%   54%    68%   60%   62%   60%   44%   55% 
  
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
December 31, 2020
 
(Amounts in millions)
  
Less than 1.00
  
1.00 - 1.25
  
1.26 - 1.50
  
1.51 - 2.00
  
Greater
than 2.00
  
Total
 
Property type:
                         
Retail
  $55  $169  $483  $969  $766  $2,442 
Industrial
   21   85   143   616   773   1,638 
Office
   101   99   170   634   563   1,567 
Apartments
   9   24   126   228   142   529 
Mixed use
   5   24   29   115   113   286 
Other
   25   125   41   28   93   312 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $216  $526  $992  $2,590  $2,450  $6,774 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   8%   15%   38%   36%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt-to-value
   57%   62%   62%   57%   44%   53% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   
December 31, 2021
 
(Amounts in millions)
  
Less than 1.00
  
1.00 - 1.25
  
1.26 - 1.50
  
1.51 - 2.00
  
Greater
than 2.00
  
Total
 
Property type:
                         
Retail
  $102  $166  $405  $1,375  $726  $2,774 
Office
   67   109   167   593   590   1,526 
Industrial
   9   64   82   599   666   1,420 
Apartments
   17   62   84   225   197   585 
Mixed use
   24   32   40   118   116   330 
Other
   4   126   13   48   30   221 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amortized cost
  $223  $559  $791  $2,958  $2,325  $6,856 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
% of total
   3%   8%   12%   43%   34%   100% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Weighted-average debt-to-value
   68%   61%   61%   60%   43%   55% 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(f) Limited Partnerships or Similar Entities
Limited partnerships are accounted for at fair value when our partnership interest is considered minor (generally less than 3% ownership in the limited partnerships) and we exercise no influence over operating and financial policies. If our ownership percentage exceeds that threshold, limited partnerships are accounted for using the equity method of accounting. In applying either method, we use financial information provided by the investee generally on a one-to-three month lag. However, for limited partnerships measured at fair value, we consider whether an adjustment to the estimated fair value is necessary when the measurement date is not aligned with our reporting date.
Investments in limited partnerships or similar entities are generally considered VIEs when the equity group lacks sufficient financial control. Generally, these investments are limited partner or non-managing member equity investments in a widely held fund that is sponsored and managed by a reputable asset manager. We are not the primary beneficiary of any VIE investment in a limited partnership or similar entity. As of June 30, 2021March 31, 2022 and
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2020,2021, the total carrying value of these investments was $1,306$1,936 million and $1,018$1,829 million, respectively. Our maximum exposure to loss is equal to the outstanding carrying value and future funding commitments. We have not contributed, and do not plan to contribute, any additional financial or other support outside of what is contractually obligated.
(5) Derivative Instruments
Our business activities routinely deal with fluctuations in interest rates, equity prices, currency exchange rates and other asset and liability prices. We use derivative instruments to mitigate or reduce some of these risks. We have established policies for managing each of these risks, including prohibitions on derivatives market-making and other speculative derivatives activities. These policies require the use of derivative instruments in concert with other techniques to reduce or mitigate these risks. While we use derivatives to mitigate or reduce risks, certain derivatives do not meet the accounting requirements to be designated as hedging instruments and are denoted as “derivatives not designated as hedges” in the following disclosures. For derivatives that meet the accounting requirements to be designated as hedges, the following disclosures for these derivatives are denoted as “derivatives designated as hedges,” which include cash flow hedges.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth our positions in derivative instruments as of the dates indicated:
 
 
Derivative assets
 
Derivative liabilities
  
Derivative assets
 
Derivative liabilities
 
 
Balance sheet
classification
 
Fair value
  
Balance sheet
classification
 
Fair value
    
Fair value
   
Fair value
 
(Amounts in millions)
 
June 30,
2021
 
December 31,
2020
 
June 30,
2021
 
December 31,
2020
  
Balance
sheet classification
 
March 31,
2022
 
December 31,
2021
 
Balance sheet
classification
 
March 31,
2022
 
December 31,
2021
 
Derivatives designated as hedges
            
Derivatives designated as
            
hedges
            
Cash flow hedges:
                        
Interest rate swaps
 Other invested assets $280  $468  Other liabilities $53  $23   Other invested assets  $162  $364   Other liabilities  $76  $26 
Foreign currency swaps
 Other invested assets  2   1  Other liabilities  2   2   Other invested assets   5   6   Other liabilities   1   0   
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
Total cash flow hedges
    282   469     55   25     167   370     77   26 
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
Total derivatives designated as hedges
    282   469     55   25     167   370     77   26 
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
Derivatives not designated as hedges
                        
Equity index options
 Other invested assets  47   63  Other liabilities  0     0     Other invested assets   30   42   Other liabilities   0    ��0   
Financial futures
 Other invested assets  0     0    Other liabilities  0     0     Other invested assets   0     0     Other liabilities   0     0   
Other foreign currency contracts
 Other invested assets  24   42  Other liabilities  0     1   Other invested assets   0     2   Other liabilities   0     0   
GMWB embedded derivatives
 Reinsurance recoverable
(1)
  18   26  Policyholder account balances 
(2)
  275   379   Reinsurance
recoverable
(1)
 
 		  17   19   Policyholder
account balances
 (2)
 
 		  243   271 
Fixed index annuity embedded derivatives
 Other assets  0     0    Policyholder account balances
(3)
  339   399   Other assets   0     0     Policyholder
account balances
 (3)
 
 		  261   294 
Indexed universal life embedded derivatives
 Reinsurance recoverable  0     0    Policyholder account balances
(4)
  24   26   Reinsurance
recoverable		 
 		  0     0     Policyholder
account balances
 (4)
 
 		  21   25 
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
Total derivatives not designated as hedges
    89   131     638   805     47   63     525   590 
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
Total derivatives
   $371  $600    $693  $830    $214  $433    $602  $616 
   
 
  
 
    
 
  
 
    
 
  
 
    
 
  
 
 
 
(1) 
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities.
(2) 
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
(3) 
Represents the embedded derivatives associated with our fixed index annuity liabilities.
(4) 
Represents the embedded derivatives associated with our indexed universal life liabilities.
The fair value of derivative positions presented above was not offset by the respective collateral amounts received or provided under these agreements.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The fair value of derivative positions presented above was not offset by the respective collateral amounts received or provided under these agreements.
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:​​​​​​​
 
(Notional in millions)
  
Measurement
   
December 31,
2020
   
Additions
   
Maturities/
terminations
  
June 30,
2021
 
Derivatives designated as hedges
                        
Cash flow hedges:
                        
Interest rate swaps
   Notional   $8,178   $0     $(405)  $7,773 
Foreign currency swaps
   Notional    127    0      0     127 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total cash flow hedges
        8,305    0      (405)   7,900 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives designated as hedges
        8,305    0      (405)   7,900 
        
 
 
   
 
 
   
 
 
  
 
 
 
Derivatives not designated as hedges
                        
Interest rate swaps
   Notional    4,674    0      (4,674)   0   
Equity index options
   Notional    2,000    614    (803)   1,811 
Financial futures
   Notional    1,104    1,972    (2,116)   960 
Other foreign currency contracts
   Notional    1,186    22    (536)   672 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives not designated as hedges
        8,964    2,608    (8,129)   3,443 
        
 
 
   
 
 
   
 
 
  
 
 
 
Total derivatives
       $17,269   $2,608   $(8,534)  $11,343 
        
 
 
   
 
 
   
 
 
  
 
 
 
(Notional in millions)
  
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
 
Derivatives designated as hedges
              
Cash flow hedges:
              
Interest rate swaps
   Notional   $7,653   $0     $(58)  $7,595 
Foreign currency swaps
   Notional    127    0      0     127 
     
 
   
 
   
 
  
 
 
Total cash flow hedges
      7,780    0      (58)   7,722 
     
 
   
 
   
 
  
 
 
Total derivatives designated as hedges
      7,780    0      (58)   7,722 
     
 
   
 
   
 
  
 
 
Derivatives not designated as hedges
              
Equity index options
   Notional    1,446    300    (368)   1,378 
Financial futures
   Notional    946    994    (1,042)   898 
Other foreign currency contracts
   Notional    83    0      (59)   24 
     
 
   
 
   
 
  
 
 
Total derivatives not designated as hedges
      2,475    1,294    (1,469)   2,300 
     
 
   
 
   
 
  
 
 
Total derivatives
     $10,255   $1,294   $(1,527)  $10,022 
     
 
   
 
   
 
  
 
 
 
(Number of policies)
  
Measurement
   
December 31,
2020
   
Additions
   
Maturities/
terminations
 
June 30,
2021
   
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
 
Derivatives not designated as hedges
                            
GMWB embedded derivatives
   Policies      23,713    0      (982)   22,731    Policies    21,804    0      (477)   21,327 
Fixed index annuity embedded derivatives
   Policies    12,778    0        (1,944)     10,834    Policies    9,344    0      (568)   8,776 
Indexed universal life embedded derivatives
   Policies    842    0      (22)   820    Policies    806    0      (7)   799 
Cash Flow Hedges
Certain derivative instruments are designated as cash flow hedges. The changes in fair value of these instruments are recorded as a component of other comprehensive income (loss) (“OCI”). We designate and account for the following as cash flow hedges when they have met the effectiveness requirements: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) forward starting interest rate swaps to hedge against changes in interest rates associated with future fixed rate bond purchases and/or interest income; and (v) other instruments to hedge the cash flows of various forecasted transactions.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the three months ended June 30, 2021:
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income (loss)
from OCI
  
Classification of gain
(loss) reclassified into
net income (loss)
 
Gain (loss)
recognized in
net income (loss)
  
Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
 $314  $52  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  (8)   0    Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  3   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $309  $52    $0     
  
 
 
  
 
 
    
 
 
   
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the three months ended June 30, 2020:
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income (loss)
from OCI
  
Classification of gain
(loss) reclassified into
net income (loss)
 
Gain (loss)
recognized in
net income (loss)
  
Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
 $(57)  $46  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  1   0    Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  (4)   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $(60)  $46    $0     
  
 
 
  
 
 
    
 
 
   
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the six months ended June 30, 2021:
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income (loss)
from OCI
  
Classification of gain
(loss) reclassified into
net income (loss)
 
Gain (loss)
recognized in
net income (loss)
  
Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
 $(215)  $104  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  36   0   ��Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  1   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $(178)  $104    $0     
  
 
 
  
 
 
    
 
 
   
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information about the pre-tax income (loss) effects of cash flow hedges for the sixthree months ended June 30, 2020:March 31, 2022:
 
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income (loss)
from OCI
  
Classification of gain
(loss) reclassified into
net income (loss)
 
Gain (loss)
recognized in
net income (loss)
  
Classification of gain
(loss) recognized in
net income (loss)
Interest rate swaps hedging assets
 $984  $89  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging assets
  0     4  Net investment gains (losses)  0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  (62)   0    Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  13   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $935  $93    $0     
  
 
 
  
 
 
    
 
 
   
(Amounts in millions)
 
Gain (loss)
recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
  
Gain (loss)
recognized in
net income
  
Classification of gain
(loss) recognized in
net income
 
Interest rate swaps hedging assets
 $(250)  $55   Net investment
income		 
 		 $0     Net investment
gains (losses)
 
 
Interest rate swaps hedging assets
  0     2   Net investment
gains (losses)		 
 		  0     Net investment
gains (losses)		 
 
Interest rate swaps hedging liabilities
  0     (1)   Interest
expense		 
 		  0     Net investment
gains (losses)		 
 
Foreign currency swaps
  (2)   1   Net investment
income		 
 		  0     Net investment
gains (losses)		 
 
  
 
 
  
 
 
      
 
 
     
Total
 $(252)  $57      $0       
  
 
 
  
 
 
      
 
 
     
The following tables providetable provides information about the pre-tax income effects of cash flow hedges for the three months ended March 31, 2021:
(Amounts in millions)
 
Gain (loss)

recognized in OCI
  
Gain (loss)
reclassified into
net income
from OCI
  
Classification of gain
(loss) reclassified
into net income
 
Gain (loss)
recognized in
net income
  
Classification of gain
(loss) recognized in
net income
Interest rate swaps hedging assets $(529)  $52  Net investment income $0    Net investment gains (losses)
Interest rate swaps hedging liabilities
  44   0    Interest expense  0    Net investment gains (losses)
Foreign currency swaps
  (2)   0    Net investment income  0    Net investment gains (losses)
  
 
 
  
 
 
    
 
 
   
Total
 $(487)  $52    $0     
  
 
 
  
 
 
    
 
 
   
The following table provides a reconciliation of current period changes, net of applicable income taxes, for these designated derivatives presented in the separate component of stockholders’ equity labeled “derivatives qualifying as hedges,” for the periods indicated:
 
   
Three months
ended June 30,
 
(Amounts in millions)
  
2021
  
2020
 
Derivatives qualifying as effective accounting hedges as of April 1
  $1,792  $2,755 
Current period increases (decreases) in fair value, net of deferred taxes of $(64) and $12
   245   (48) 
Reclassification to net (income) loss, net of deferred taxes of $18 and $16
   (34)   (30) 
   
 
 
  
 
 
 
Derivatives qualifying as effective accounting hedges as of June 30
  $2,003  $2,677 
   
 
 
  
 
 
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
2022
  
2021
 
Derivatives qualifying as effective accounting hedges as of January 1
  $2,025  $2,211 
Current period increases (decreases) in fair value, net of deferred taxes of $53 and $102
   (199)   (385) 
Reclassification to net (income), net of deferred taxes of $20 and $18
   (37)   (34) 
   
 
 
  
 
 
 
Derivatives qualifying as effective accounting hedges as of March 31
  $1,789  $1,792 
   
 
 
  
 
 
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
Six months ended
June 30,
 
(Amounts in millions)
  
2021
  
2020
 
Derivatives qualifying as effective accounting hedges as of January 1
  $2,211  $2,002 
Current period increases (decreases) in fair value, net of deferred taxes of $38 and $(200)
   (140)   735 
Reclassification to net (income) loss, net of deferred taxes of $36 and $33
   (68)   (60) 
   
 
 
  
 
 
 
Derivatives qualifying as effective accounting hedges as of June 30
  $2,003  $2,677 
   
 
 
  
 
 
 
The total of derivatives designated as cash flow hedges of $2,003$1,789 million, net of taxes, recorded in stockholders’ equity as of June 30, 2021March 31, 2022 is expected to be reclassified to net income (loss) in the future, concurrently with and primarily offsetting changes in interest expense and interest income on floating rate instruments and interest income on future fixed rate bond purchases. Of this amount, $138$143 million, net of taxes, is expected to be reclassified to net income (loss) in the next 12 months. Actual amounts may vary from this amount as a result of market conditions. All forecasted transactions associated with qualifying cash flow hedges are expected to occur by 2057. During the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, we reclassified $4$3 million and $1$2 million, respectively, to net income (loss) in connection with forecasted transactions that were no longer considered probable of occurring.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Derivatives Not Designated As Hedges
We also enter into certain non-qualifying derivative instruments such as: (i) interest rate swaps and financial futures to mitigate interest rate risk as part of managing regulatory capital positions; (ii) equity index options, equity return swaps, interest rate swaps and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits, fixed index annuities and indexed universal life; and (iii) foreign currency options and forward contracts to mitigate currency risk associated with future dividends, cash payments to AXA under a promissory noteS.A. (“AXA”) reported as discontinued operations and/or other cash flows from certain foreign subsidiaries to our holding company. Additionally, we provide GMWBs on certain variable annuities that are required to be bifurcated as embedded derivatives. We also offer fixed index annuity and indexed universal life insurance products and have reinsurance agreements with certain features that are required to be bifurcated as embedded derivatives.
The following table provides the pre-tax gain (loss) recognized in net income (loss) for the effects of derivatives not designated as hedges for the periods indicated:
 
   
Three months ended June 30,
  
Classification of gain (loss)
recognized
in net income (loss)
(Amounts in millions)
  
        2021        
  
        2020        
 
Interest rate swaps
  $(1)  $(2)  Net investment gains (losses)
Equity index options
   6   4  Net investment gains (losses)
Financial futures
   8   (123)  Net investment gains (losses)
Other foreign currency contracts
   0     (2)  Net investment gains (losses)
GMWB embedded derivatives
   2   129  Net investment gains (losses)
Fixed index annuity embedded derivatives
   (14)   (45)  Net investment gains (losses)
Indexed universal life embedded derivatives
   3   3  Net investment gains (losses)
   
 
 
  
 
 
   
Total derivatives not designated as hedges
  $4  $(36)   
   
 
 
  
 
 
   
  
Six months ended June 30,
  
Classification of gain (loss)
recognized
in net income (loss)
  
Three months ended
March 31,
  
Classification of gain (loss) recognized
in net income
(Amounts in millions)
  
        2021        
 
        2020        
   
    2022    
 
    2021    
 
Interest rate swaps
  $3  $(12)  Net investment gains (losses)  $0    $4  Net investment gains (losses)
Equity index options
   9   (9)  Net investment gains (losses)   (6)   3  Net investment gains (losses)
Financial futures
   (102)   138  Net investment gains (losses)   (47)   (110)  Net investment gains (losses)
Other foreign currency contracts
   0     8  Net investment gains (losses)
GMWB embedded derivatives
   107   (207)  Net investment gains (losses)   32   105  Net investment gains (losses)
Fixed index annuity embedded derivatives
   (18)   (13)  Net investment gains (losses)   12   (4)  Net investment gains (losses)
Indexed universal life embedded derivatives
   13   7  Net investment gains (losses)   11   10  Net investment gains (losses)
  
 
  
 
     
 
  
 
   
Total derivatives not designated as hedges
  $12  $(88)     $2  $8   
  
 
  
 
     
 
  
 
   
 
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Derivative Counterparty Credit Risk
Most of our derivative arrangements with counterparties require the posting of collateral upon meeting certain net exposure thresholds. The following table presents additional information about derivative assets and liabilities subject to an enforceable master netting arrangement as of the dates indicated:​​​​​​​
 
 
June 30, 2021
 
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
(Amounts in millions)
 
Derivative
assets
(1)
 
Derivative
liabilities 
(1)
 
Net
derivatives
 
Derivative
assets
(1)
 
Derivative
liabilities 
(1)
 
Net
derivatives
   
Derivative
assets 
(1)
 
Derivative
liabilities 
(1)
 
Net
derivatives
 
Derivative
assets
(1)
 
Derivative
liabilities 
(1)
 
Net
derivatives
 
Amounts presented in the balance sheet:
                         
Gross amounts recognized
 $353  $55  $298  $574  $26  $548   $198  $77  $121  $414  $26  $388 
Gross amounts offset in the balance sheet
  0     0     0     0     0     0      0     0     0     0     0     0   
 
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Net amounts presented in the balance sheet
  353   55   298   574   26   548    198   77   121   414   26   388 
Gross amounts not offset in the balance sheet:
                         
Financial instruments
(2)
  (42)   (42)   0     (20)   (20)   0      (49)   (49)   0     (20)   (20)   0   
Collateral received
  (238)   0     (238)   (401)   0     (401)    (110)   0     (110)   (308)   0     (308) 
Collateral pledged
  0     (625)   625   0     (505)   505    0     (567)   567   0     (536)   536 
Over collateralization
  3   612   (609)   2   499   (497)    13   539   (526)   2   530   (528) 
 
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
Net amount
 $76  $0    $76  $155  $0    $155   $52  $0    $52  $88  $0    $88 
 
 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
  
 
 
 
(1) 
DoesIncluded $1 million of accruals on derivatives classified as other assets as of March 31, 2022 and does not include amounts related to embedded derivatives as of June 30, 2021March 31, 2022 and December 31, 2020.2021.
(2) 
Amounts represent derivative assets and/or liabilities that are presented gross within the balance sheet but are held with the same counterparty where we have a master netting arrangement. This adjustment results in presenting the net asset and net liability position for each counterparty.
(6)
(6)
Fair Value of Financial Instruments
Recurring Fair Value Measurements
We have fixed maturity securities, short-term investments, equity securities, limited partnerships, derivatives, short-term investments, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value. Below is a description of the valuation techniques and inputs used to determine fair value by class of instrument.
Fixed maturity, short-term investments and equity securities
The fair value of fixed maturity securities, short-term investments and equity securities are estimated primarily based on information derived from third-party pricing services (“pricing services”), internal models and/or broker quotes, which use a market approach, income approach or a combination of the market and income approach depending on the type of instrument and availability of information. In general, a market approach is utilized if there is readily available and relevant market activity for an individual security. In certain cases where market information is not available for a specific security but is available for similar securities, that security is valued using market information for similar securities, which is also a market approach. When market
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information is not available for a specific security (or similar securities) or is available but such information is less relevant or reliable, an income approach or a combination of a market and income approach is utilized. For securities with optionality, such as call or prepayment features (including mortgage-backed or asset-backed securities), an income approach may be used. In addition, a combination of the results from market and income
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approaches may be used to estimate fair value. These valuation techniques may change from period to period, based on the relevance and availability of market data.
Further, while we consider the valuations provided by pricing services and broker quotes to be of high quality, management determines the fair value of our investment securities after considering all relevant and available information.
In general, we first obtain valuations from pricing services. If prices are unavailable for public securities, we obtain broker quotes. For all securities, excluding certain private fixed maturity securities, if neither a pricing service nor broker quotes valuation is available, we determine fair value using internal models. For certain private fixed maturity securities where we do not obtain valuations from pricing services, we utilize an internal model to determine fair value since transactions for similar securities are not readily observable and these securities are not typically valued by pricing services.
Given our understanding of the pricing methodologies and procedures of pricing services, the securities valued by pricing services are typically classified as Level 2 unless we determine the valuation process for a security or group of securities utilizes significant unobservable inputs, which would result in the valuation being classified as Level 3.
Broker quotes are typically based on an income approach given the lack of available market data. As the valuation typically includes significant unobservable inputs, we classify the securities where fair value is based on our consideration of broker quotes as Level 3 measurements.
For private fixed maturity securities, we utilize an income approach where we obtain public bond spreads and utilize those in an internal model to determine fair value. Other inputs to the model include rating and weighted-average life, as well as sector which is used to assign the spread. We then add an additional premium, which represents an unobservable input, to the public bond spread to adjust for the liquidity and other features of our private placements. We utilize the estimated market yield to discount the expected cash flows of the security to determine fair value. We utilize price caps for securities where the estimated market yield results in a valuation that may exceed the amount that would be received in a market transaction. When a security does not have an external rating, we assign the security an internal rating to determine the appropriate public bond spread that should be utilized in the valuation. While we generally consider the public bond spreads by sector and maturity to be observable inputs, we evaluate the similarities of our private placement with the public bonds, any price caps utilized, liquidity premiums applied, and whether external ratings are available for our private placements to determine whether the spreads utilized would be considered observable inputs. We classify private securities without an external rating or public bond spread as Level 3. In general, a significant increase (decrease) in credit spreads would have resulted in a significant decrease (increase) in the fair value for our fixed maturity securities as of June 30, 2021.March 31, 2022.
For remaining securities priced using internal models, we determine fair value using an income approach. We maximize the use of observable inputs but typically utilize significant unobservable inputs to determine fair value. Accordingly, the valuations are typically classified as Level 3.
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Our assessment of whether or not there were significant unobservable inputs related to fixed maturity securities was based on our observations obtained through the course of managing our investment portfolio, including interaction with other market participants, observations related to the availability and consistency of pricing and/or rating, and understanding of general market activity such as new issuance and the level of secondary market trading for a class of securities. Additionally, we considered data obtained from pricing
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services to determine whether our estimated values incorporate significant unobservable inputs that would result in the valuation being classified as Level 3.
A summary of the inputs used for our fixed maturity securities, short-term investments and equity securities based on the level in which instruments are classified is included below. We have combined certain classes of instruments together as the nature of the inputs is similar.
Level 1 measurements
Equity securities.
The primary inputs to the valuation of exchange-traded equity securities include quoted prices for the identical instrument.
Separate account assets.
The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.
Level 2 measurements
Fixed maturity securities
 
Third-party pricing services:
In estimating the fair value of fixed maturity securities, 90%89% of our portfolio was priced using third-party pricing services as of June 30, 2021.March 31, 2022. These pricing services utilize industry-standard valuation techniques that include market-based approaches, income-based approaches, a combination of market-based and income-based approaches or other proprietary, internally generated models as part of the valuation processes. These third-party pricing vendors maximize the use of publicly available data inputs to generate valuations for each asset class. Priority and type of inputs used may change frequently as certain inputs may be more direct drivers of valuation at the time of pricing. Examples of significant inputs incorporated by pricing services may include sector and issuer spreads, seasoning, capital structure, security optionality, collateral data, prepayment assumptions, default assumptions, delinquencies, debt covenants, benchmark yields, trade data, dealer quotes, credit ratings, maturity and weighted-average life. We conduct regular meetings with our pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.
 
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The following table presents a summary of the significant inputs used by our pricing services for certain fair value measurements of fixed maturity securities that are classified as Level 2 as of June 30, 2021:March 31, 2022:
 
(Amounts in millions)
 
Fair value
  
Primary methodologies
 
Significant inputs
U.S. government, agencies andgovernment-sponsored enterprises
 $4,484  Price quotes from trading desk, broker feeds Bid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread
    
State and political subdivisions
 $3,296  Multi-dimensional attribute-based modeling systems, third-party pricing vendors Trade prices, material event notices, Municipal Market Data benchmark yields, broker quotes
    
Non-U.S. government
 $802  Matrix pricing, spread priced to benchmark curves, price quotes from market makers Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
    
U.S. corporate
 $31,509  Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, OAS-based models Bid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports
    
Non-U.S. corporate
 $8,510  Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makers Benchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
    
Residential mortgage-backed
 $1,678  OAS-based models, single factor binomial models, internally priced Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports
    
Commercial mortgage-backed
 $2,714  
Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage-
backed securities analytics model
 Credit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports
    
Other asset-backed
 $2,446  Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers Spreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports
(Amounts in millions)
Fair value
Primary methodologies
Significant inputs
U.S. government, agencies
and government-sponsored
enterprises
$4,097Price quotes from trading desk, broker feedsBid side prices, trade prices, Option Adjusted Spread (“OAS”) to swap curve, Bond Market Association OAS, Treasury Curve, Agency Bullet Curve, maturity to issuer spread
State and political subdivisions
$3,063Multi-dimensional attribute-based modeling systems, third-party pricing vendorsTrade prices, material event notices, Municipal Market Data benchmark yields, broker quotes
Non-U.S. government
$783Matrix pricing, spread priced to benchmark curves, price quotes from market makersBenchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
U.S. corporate
$27,876Multi-dimensional attribute-based modeling systems, broker quotes, price quotes from market makers, OAS-based modelsBid side prices to Treasury Curve, Issuer Curve, which includes sector, quality, duration, OAS percentage and change for spread matrix, trade prices, comparative transactions, Trade Reporting and Compliance Engine (“TRACE”) reports
Non-U.S. corporate
$7,414Multi-dimensional attribute-based modeling systems, OAS-based models, price quotes from market makersBenchmark yields, trade prices, broker quotes, comparative transactions, issuer spreads, bid-offer spread, market research publications, third-party pricing sources
Residential mortgage-backed
$1,287OAS-based models, single factor binomial models, internally pricedPrepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports
Commercial mortgage-backed
$2,346Multi-dimensional attribute-based modeling systems, pricing matrix, spread matrix priced to swap curves, Trepp commercial mortgage- backed securities analytics modelCredit risk, interest rate risk, prepayment speeds, new issue data, collateral performance, origination year, tranche type, original credit ratings, weighted-average life, cash flows, spreads derived from broker quotes, bid side prices, spreads to daily updated swaps curves, TRACE reports
Other asset-backed
$1,955Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makersSpreads to daily updated swap curves, spreads derived from trade prices and broker quotes, bid side prices, new issue data, collateral performance, analysis of prepayment speeds, cash flows, collateral loss analytics, historical issue analysis, trade data from market makers, TRACE reports
 
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Internal models:
A portion of our U.S. corporate and non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities was $1,578$1,678 million and $872$999 million, respectively, as of June 30, 2021.March 31, 2022. Internally modeled securities are primarily private fixed maturity securities where we use market observable inputs such as an interest rate yield curve, published credit spreads for similar securities based on the external ratings of the instrument and related industry sector of the issuer. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps and liquidity premiums are established using inputs from market participants.
Equity securities.
The primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active.
Securities lending collateralShort-term investments.
The fair value of securities held as collateral is primarily based on Level 2 inputs from market information for the collateral that is held on our behalf by the custodian. We determine fair value after considering prices obtained by pricing services.
Short-term investments
The fair value of short-term investments classified as Level 2 is determined after considering prices obtained by pricing services.
Level 3 measurements
Fixed maturity securities
 
Broker quotes:
A portion of our state and political subdivisions, non-U.S. government, U.S. corporate, non-U.S. corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using broker quotes. Broker quotes are obtained from third-party providers that have current market knowledge to provide a reasonable price for securities not routinely priced by pricing services. Brokers utilized for valuation of assets are reviewed annually. The fair value of our Level 3 fixed maturity securities priced by broker quotes was $336$269 million as of June 30, 2021.March 31, 2022.
 
Internal models:
A portion of our state and political subdivisions, U.S. corporate, non-U.S. corporate, residential mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $3,424$3,260 million as of June 30, 2021.
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March 31, 2022.
Equity securities.
The primary inputs to the valuation include broker quotes where the underlying inputs are unobservable and for internal models, structure of the security and issuer rating.
Limited partnerships.
The fair value of limited partnerships classified as Level 3 is determined based on third-party valuation sources that utilize unobservable inputs, such as a reference to public market or private transactions, valuations for comparable companies or assets, discounted cash flows and/or recent transactions.
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Net asset value
Limited partnershipspartnerships.
Limited partnerships are valued based on comparable market transactions, discounted future cash flows, quoted market prices and/or estimates using the most recent data available for the underlying instrument. We utilize the net asset value (“NAV”) from the underlying fund statements as a practical expedient for fair value.
Derivatives
We consider counterparty collateral arrangements and rights of set-off when evaluating our net credit risk exposure to our derivative counterparties. Accordingly, we are permitted to include consideration of these arrangements when determining whether any incremental adjustment should be made for both the counterparty’s and our non-performance risk in measuring fair value for our derivative instruments. As a result of these counterparty arrangements, we determined that any adjustment for credit risk would not be material and we have not recorded any incremental adjustment for our non-performance risk or the non-performance risk of the derivative counterparty for our derivative assets or liabilities.
Interest rate swaps.
The valuation of interest rate swaps is determined using an income approach. The primary input into the valuation represents the forward interest rate swap curve, which is generally considered an observable input, and results in the derivative being classified as Level 2. For certain interest rate swaps, the inputs into the valuation also include the total returns of certain bonds that would primarily be considered an observable input and result in the derivative being classified as Level 2.
Foreign currency swaps.
The valuation of foreign currency swaps is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve and foreign currency exchange rates, both of which are considered observable inputs, and results in the derivative being classified as Level 2.

Equity index options.
We have equity index options associated with various equity indices. The valuation of equity index options is determined using an income approach. The primary inputs into the valuation represent forward interest rates, equity index volatility, equity index and time value component associated with the optionality in the derivative. The equity index volatility surface is determined based on market information that is not readily observable and is developed based upon inputs received from several third-party sources. Accordingly, these options are classified as Level 3. As of June 30, 2021,March 31, 2022, a significant increase (decrease) in the equity index volatility discussed above would have resulted in a significantly higher (lower) fair value measurement.
Financial futures.
The fair value of financial futures is based on the closing exchange prices. Accordingly, these financial futures are classified as Level 1. The period end valuation
is 0as0 as a result of settling the margins on these contracts on a daily basis.
Other foreign currency contracts.
We have certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options is determined using an income approach. The primary inputs into the valuation represent the forward interest rate swap curve, foreign currency exchange rates, forward interest rate, foreign currency exchange rate volatility and time value component associated with the
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optionality in the derivative, which are generally considered observable inputs and results in the derivative being classified as Level 2. We also have foreign currency forward contracts where the valuation is determined using
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an income approach. The primary inputs into the valuation represent the forward foreign currency exchange rates, which are generally considered observable inputs and results in the derivative being classified as Level 2.
GMWB embedded derivatives
We are required to bifurcate an embedded derivative for certain features associated with annuity products and related reinsurance agreements where we provide a GMWB to the policyholder and are required to record the GMWB embedded derivative at fair value. The valuation of our GMWB embedded derivative is based on an income approach that incorporates inputs such as forward interest rates, equity index volatility, equity index and fund correlation, and policyholder assumptions such as utilization, lapse and mortality. We determine fair value using an internal model based on the various inputs noted above.
Non-performance risk is integrated into the discount rate used to value GMWB liabilities. Our discount rate used to determine fair value of our GMWB liabilities includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the non-performance risk of the GMWB liabilities. As of June 30, 2021March 31, 2022 and December 31, 2020,2021, the impact of non-performance risk resulted in a lower fair value of our GMWB liabilities of $52$42 million and $66$49 million, respectively.
We classify the GMWB valuation as Level 3 based on having significant unobservable inputs, with equity index volatility and non-performance risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the GMWB liabilities will increase. Any increase in non-performance risk would increase the discount rate and would decrease the fair value of the GMWB liability. Additionally, we consider lapse and utilization assumptions to be significant unobservable inputs. An increase in our lapse assumption would decrease the fair value of the GMWB liability, whereas an increase in our utilization rate would increase the fair value. As of June 30, 2021,March 31, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Fixed index annuity embedded derivatives
We have fixed indexed annuity products where interest is
credited
to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature. The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of June 30, 2021,March 31, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.

Indexed universal life embedded derivatives
We have indexed universal life insurance products where interest is credited to the policyholder’s account balance based on equity index changes. This feature is required to be bifurcated as an embedded derivative and
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recorded at fair value. Fair value is determined using an income approach where the present value of the excess cash flows above the guaranteed cash flows is used to determine the value attributed to the equity index feature.
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The inputs used in determining the fair value include policyholder behavior (lapses and withdrawals), near-term equity index volatility, expected future interest credited, forward interest rates and an adjustment to the discount rate to incorporate non-performance risk and risk margins. As a result of our assumptions for policyholder behavior and expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As lapses and withdrawals increase, the value of our embedded derivative liability will decrease. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of June 30, 2021,March 31, 2022, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.
 

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The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the date
s
dates indicated:
 
  
June 30, 2021
   
March 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV 
(1)
   
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV 
(1)
 
Assets
                              
Investments:
                              
Fixed maturity securities:
                              
U.S. government, agencies and government-sponsored enterprises
  $4,484   $0     $4,484   $0     $0     $4,097   $0     $4,097   $0     $0   
State and political subdivisions
   3,371    0      3,296    75    0      3,134    0      3,063    71    0   
Non-U.S. government
   802    0      802    0      0      784    0      783    1    0   
U.S. corporate:
                              
Utilities
   5,091    0      4,249    842    0      4,634    0      3,722    912    0   
Energy
   2,952    0      2,875    77    0      2,699    0      2,627    72    0   
Finance and insurance
   8,989    0      8,328    661    0      8,229    0      7,553    676    0   
Consumer—non-cyclical
   6,224    0      6,115    109    0      5,488    0      5,396    92    0   
Technology and communications
   3,754    0      3,724    30    0      3,497    0      3,469    28    0   
Industrial
   1,572    0      1,552    20    0      1,348    0      1,313    35    0   
Capital goods
   2,870    0      2,811    59    0      2,512    0      2,471    41    0   
Consumer—cyclical
   1,994    0      1,855    139    0      1,767    0      1,640    127    0   
Transportation
   1,409    0      1,342    67    0      1,248    0      1,184    64    0   
Other
   434    0      236    198    0      401    0      179    222    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total U.S. corporate
   35,289    0      33,087    2,202    0      31,823    0      29,554    2,269    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Non-U.S. corporate:
                              
Utilities
   945    0      597    348    0      878    0      544    334    0   
Energy
   1,399    0      1,247    152    0      1,241    0      1,103    138    0   
Finance and insurance
   2,400    0      2,198    202    0      2,191    0      2,048    143    0   
Consumer—non-cyclical
   745    0      671    74    0      671    0      611    60    0   
Technology and communications
   1,284    0      1,256    28    0      1,099    0      1,072    27    0   
Industrial
   1,140    0      1,046    94    0      953    0      879    74    0   
Capital goods
   642    0      461    181    0      619    0      487    132    0   
Consumer—cyclical
   353    0      206    147    0      312    0      226    86    0   
Transportation
   541    0      458    83    0      423    0      401    22    0   
Other
   1,295    0      1,242    53    0      1,066    0      1,042    24    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total non-U.S. corporate
   10,744    0      9,382    1,362    0      9,453    0      8,413    1,040    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Residential mortgage-backed
   1,691    0      1,678    13    0      1,320    0      1,287    33    0   
Commercial mortgage-backed
   2,734    0      2,714    20    0      2,361    0      2,346    15    0   
Other asset-backed
   2,534    0      2,446    88    0      2,055    0      1,955    100    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total fixed maturity securities
   61,649    0      57,889    3,760    0      55,027    0      51,498    3,529    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Equity securities
   147    48    61    38    0      230    137    57    36    0   
  
 
   
 
   
 
   
 
   
 
 
Limited partnerships
   1,558    0      0      26    1,532 
Other invested assets:
                              
Derivative assets:
                              
Interest rate swaps
   280    0      280    0      0      162    0      162    0      0   
Foreign currency swaps
   2    0      2    0      0      5    0      5    0      0   
Equity index options
   47    0      0      47    0      30    0      0      30    0   
Other foreign currency contracts
   24    0      24    0      0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative assets
   353    0      306    47    0      197    0      167    30    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Securities lending collateral
   105    0      105    0      0   
Short-term investments
   121    0      121    0      0      76    0      76    0      0   
Limited partnerships
   1,070    0      0      0      1,070 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total other invested assets
   1,649    0      532    47    1,070    273    0      243    30    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Reinsurance recoverable
(2)
   18    0      0      18    0      17    0      0      17    0   
Separate account assets
   6,202    6,202    0      0      0      5,530    5,530    0      0      0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total assets
  $69,665   $6,250   $58,482   $3,863   $1,070   $62,635   $5,667   $51,798   $3,638   $1,532 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1) 
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
433
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
December 31, 2020
   
December 31, 2021
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
 (1)
   
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
 (1)
 
Assets
                              
Investments:
                              
Fixed maturity securities:
                              
U.S. government, agencies and government-sponsored enterprises
  $4,805   $0     $4,805   $0     $0     $4,552   $0     $4,552   $0     $0   
State and political subdivisions
   3,165    0      3,099    66    0      3,450    0      3,368    82    0   
Non-U.S. government
   854    0      854    0      0      835    0      833    2    0   
U.S. corporate:
                              
Utilities
   5,194    0      4,352    842    0      5,104    0      4,154    950    0   
Energy
   2,883    0      2,755    128    0      2,934    0      2,858    76    0   
Finance and insurance
   9,102    0      8,495    607    0      8,991    0      8,306    685    0   
Consumer—non-cyclical
   6,437    0      6,328    109    0      6,159    0      6,055    104    0   
Technology and communications
   3,761    0      3,714    47    0      3,808    0      3,779    29    0   
Industrial
   1,602    0      1,562    40    0      1,494    0      1,457    37    0   
Capital goods
   2,991    0      2,931    60    0      2,745    0      2,700    45    0   
Consumer—cyclical
   1,947    0      1,797    150    0      1,899    0      1,762    137    0   
Transportation
   1,500    0      1,430    70    0      1,371    0      1,307    64    0   
Other
   440    0      221    219    0      419    0      165    254    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total U.S. corporate
   35,857    0      33,585    2,272    0      34,924    0      32,543    2,381    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Non-U.S. corporate:
                              
Utilities
   922    0      570    352    0      928    0      583    345    0   
Energy
   1,380    0      1,135    245    0      1,383    0      1,238    145    0   
Finance and insurance
   2,476    0      2,171    305    0      2,432    0      2,272    160    0   
Consumer—non-cyclical
   773    0      706    67    0      743    0      680    63    0   
Technology and communications
   1,291    0      1,263    28    0      1,250    0      1,222    28    0   
Industrial
   1,128    0      1,033    95    0      1,047    0      954    93    0   
Capital goods
   576    0      398    178    0      705    0      532    173    0   
Consumer—cyclical
   371    0      225    146    0      341    0      265    76    0   
Transportation
   570    0      461    109    0      489    0      436    53    0   
Other
   1,324    0      1,241    83    0      1,217    0      1,191    26    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total non-U.S. corporate
   10,811    0      9,203    1,608    0      10,535    0      9,373    1,162    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Residential mortgage-backed
   1,909    0      1,895    14    0      1,440    0      1,413    27    0   
Commercial mortgage-backed
   2,974    0      2,954    20    0      2,584    0      2,568    16    0   
Other asset-backed
   3,120    0      3,011    109    0      2,160    0      2,022    138    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total fixed maturity securities
   63,495    0      59,406    4,089    0      60,480    0      56,672    3,808    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Equity securities
   386    276    59    51    0      198    101    60    37    0   
  
 
   
 
   
 
   
 
   
 
 
Limited partnerships
   1,462    0      0      26    1,436 
Other invested assets:
                              
Derivative assets:
                              
Interest rate swaps
   468    0      468    0      0      364    0      364    0      0   
Foreign currency swaps
   1    0      1    0      0      6    0      6    0      0   
Equity index options
   63    0      0      63    0      42    0      0      42    0   
Other foreign currency contracts
   42    0      42    0      0      2    0      2    0      0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative assets
   574    0      511    63    0      414    0      372    42    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Securities lending collateral
   67    0      67    0      0   
Short-term investments
   45    25    20    0      0      26    0      26    0      0   
Limited partnerships
   835    0      0      0      835 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total other invested assets
   1,521    25    598    63    835    440    0      398    42    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Reinsurance recoverable
(2)
   26    0      0      26    0      19    0      0      19    0   
Separate account assets
   6,081    6,081    0      0      0      6,066    6,066    0      0      0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total assets
  $71,509   $6,382   $60,063   $4,229   $835   $68,665   $6,167   $57,130   $3,932   $1,436 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1) 
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
4439

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
 
(Amounts in millions)
 
Beginning
balance

as of
April 1,
2021
  
Total realized and
unrealized gains
(losses)
  
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1)
 
Ending
balance

as of
June 30,
2021
  
Total gains
(losses)
attributable to
assets still held
 
 
Beginning

balance

as of
January 1,
2022
  
Total realized and

unrealized gains

(losses)
              
Ending

balance

as of
March 31,
2022
  
Total gains
(losses)

attributable to

assets still held
 
(Amounts in millions)
 
Beginning
balance

as of
April 1,
2021
 
Included
in net
income
(loss)
 
Included
in OCI
  
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1)
 
Ending
balance

as of
June 30,
2021
  
Included
in net
income
(loss)
 
Included
in OCI
  
Included
in net
income
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1
)
 
Included
in net
income
 
Included
in OCI
 
 
State and political subdivisions
 $68  $1  $6  $0    $0    $0    $0    $0    $0    $75  $1  $6  $82  $1  $(12)  $0    $0    $0    $0    $0    $0    $71  $1  $(12) 
Non-U.S. government
  2   0     0     0     (1)   0     0     0     0     1   0     0   
U.S. corporate:
                                                
Utilities
  793   0     23   8   0     0     (1)   19   0     842   0     23   950   0     (73)   35   0     0     0     0     0     912   0     (73) 
Energy
  122   0     8   0     0     0     (1)   0     (52)   77   0     4   76   0     (4)   0     0     0     0     0     0     72   0     (4) 
Finance and insurance
  597   0     17   55   0     0     (8)   0     0     661   0     17   685   0     (56)   66   0     0     (2)   0     (17)   676   0     (55) 
Consumer—non-cyclical
  106   0     2   0     0     0     (2)   3   0     109   0     1   104   0     (5)   0     0     0     (7)   0     0     92   0     (6) 
Technology and communications
  40   0     2   0     0     0     0     0     (12)   30   0     1   29   0     (1)   0     0     0     0     0     0     28   0     (1) 
Industrial
  20   0     0     0     0     0     0     0     0     20   0     0     37   0     (2)   0     0     0     0     0     0     35   0     (2) 
Capital goods
  58   0     1   0     0     0     0     0     0     59   0     1   45   0     (4)   0     0     0     0     0     0     41   0     (3) 
Consumer—cyclical
  147   0     1   0     0     0     (1)   0     (8)   139   0     1   137   0     (8)   0     0     0     (2)   0     0     127   0     (8) 
Transportation
  67   0     1   0     0     0     (1)   0     0     67   0     1   64   0     (3)   5   0     0     (2)   0     0     64   0     (3) 
Other
  200   0     0     0     0     0     (2)   0     0     198   0     1   254   0     (11)   0     0     0     (4)   0     (17)   222   0     (10) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total U.S. corporate
  2,150   0     55   63   0     0     (16)   22   (72)   2,202   0     50   2,381   0     (167)   106   0     0     (17)   0     (34)   2,269   0     (165) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                                
Utilities
  375   0     5   0     0     0     (8)   0     (24)   348   0     4   345   0     (21)   10   0     0     0     0     0     334   0     (21) 
Energy
  243   0     10   0     0     0     (22)   0     (79)   152   0     5   145   0     (7)   0     0     0     0     0     0     138   0     (7) 
Finance and insurance
  290   0     17   0     (2)   0     (52)   0     (51)   202   1   5   160   1   (18)   0     0     0     0     0     0     143   1   (18) 
Consumer—non-cyclical
  66   0     0     8   0     0     0     0     0     74   0     0     63   0     (3)   0     0     0     0     0     0     60   0     (3) 
Technology and communications
  28   0     0     0     0     0     0     0     0     28   0     0     28   0     (1)   0     0     0     0     0     0     27   0     (1) 
Industrial
  93   0     1   0     0     0     0     0     0     94   0     1   93   0     (6)   0     0     0     0     0     (13)   74   0     (4) 
Capital goods
  175   0     1   5   0     0     0     0     0     181   0     2   173   0     (8)   0     0     0     (33)   0     0     132   0     (8) 
Consumer—cyclical
  144   0     2   1   0     0     0     0     0     147   0     2   76   0     (7)   0     0     0     0     17   0     86   0     (7) 
Transportation
  82   0     1   0     0     0     0     0     0     83   0     2   53   0     (2)   0     0     0     (29)   0     0     22   0     (2) 
Other
  80   0     1 �� 0     0     0     (13)   0     (15)   53   0     1   26   0     (2)   0     0     0     0     0     0     24   0     (2) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total non-U.S. corporate
  1,576   0     38   14   (2)   0     (95)   0     (169)   1,362   1   22   1,162   1   (75)   10   0     0     (62)   17   (13)   1,040   1   (73) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Residential mortgage-backed
  13   0     1   0     0     0     (1)   0     0     13   0     0     27   0     (1)   9   0     0     (1)   4   (5)   33   0     0   
Commercial mortgage-backed
  19   0     0     1   0     0     0     0     0     20   0     1   16   0     (1)   0     0     0     0     0     0     15   0     (1) 
Other asset-backed
  96   0     1   0     0     0     (5)   0     (4)   88   0     1   138   0     (7)   6   0     0     (3)   0     (34)   100   0     (5) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total fixed maturity securities
  3,922   1   101   78   (2)   0     (117)   22   (245)   3,760   2   80   3,808   2   (263)   131   (1)   0     (83)   21   (86)   3,529   2   (256) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity securities
  43   0     0     0     0     0     (5)   0     0     38   0     0     37   0     0     0     0     0     0     0     (1)   36   0     0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Limited partnerships
  26   0     0     0     0     0     0     0     0     26   0     0   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  53   6   0     5   0     0     (17)   0     0     47   2   0     42   (6)   0     5   0     0     (11)   0     0     30   (3)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total derivative assets
  53   6   0     5   0     0     (17)   0     0     47   2   0     42   (6)   0     5   0     0     (11)   0     0     30   (3)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total other invested assets
  53   6   0     5   0     0     (17)   0     0     47   2   0     42   (6)   0     5   0     0     (11)   0     0     30   (3)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable
(2)
  18   (1)   0     0     0     1   0     0     0     18   (1)   0     19   (2)   0     0     0     0     0     0     0     17   (2)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Level 3 assets
 $4,036  $6  $101  $83  $(2)  $1  $(139)  $22  $(245)  $3,863  $3  $80  $3,932  $(6)  $(263)  $136  $(1)  $0    $(94)  $21  $(87)  $3,638  $(3)  $(256) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
(1) 
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
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0
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(Amounts in millions)
 
Beginning
balance
as of
April 1,
2020
  
Total realized and
unrealized gains
(losses)
  
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3
(1)
 
Transfer
out of
Level 3
(1)
 
Ending
balance
as of
June 30,
2020
  
Total gains (losses)
attributable to
assets still held
 
 
Beginning
balance

as of
January 1,
2021
  
Total realized and
unrealized gains
(losses)
              
Ending
balance

as of
March 31,
2021
  
Total gains
(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Beginning
balance
as of
April 1,
2020
 
Included
in net
income
(loss)
 
Included
in OCI
  
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3
(1)
 
Transfer
out of
Level 3
(1)
 
Ending
balance
as of
June 30,
2020
  
Included
in net
income
(loss)
 
Included
in OCI
  
Included
in net
income
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3 
(1)
 
Transfer
out of
Level 3 
(1)
 
Included
in net
income
 
Included
in OCI
 
 
State and political subdivisions
 $83  $0    $7  $0    $0    $0    $0    $0    $(27)  $63  $1  $6  $66  $1  $1  $0    $0    $0    $0    $0    $0    $68  $1  $1 
Non-U.S. government
  1   0     0     0     0     0     (1)   0     0     0     0     0   
U.S. corporate:
                                                
Utilities
  843   0     37   32   0     0     (2)   26   0     936   0     37   842   0     (30)   8   0     0     (13)   0     (14)   793   0     (29) 
Energy
  124   1   13   0     0     0     (2)   0     (13)   123   0     9   128   0     (4)   0     0     0     (2)   0     0     122   0     (4) 
Finance and insurance
  510   0     33   21   0     0     (12)   0     (1)   551   0     33   607   0     (22)   18   0     0     (17)   17   (6)   597   0     (22) 
Consumer—non-cyclical
  88   0     8   8   0     0     (1)   0     0     103   0     8   109   0     (3)   0     0     0     0     0     0     106   0     (3) 
Technology and communications
  61   0     5   0     0     0     0     0     0     66   0     5   47   0     (2)   12   0     0     0     4   (21)   40   0     (2) 
Industrial
  37   0     2   0     0     0     0     0     0     39   0     2   40   0     0     0     0     0     (20)   0     0     20   0     0   
Capital goods
  90   0     7   0     0     0     0     0     0     97   0     7   60   0     (2)   0     0     0     0     0     0     58   0     (2) 
Consumer—cyclical
  179   0     11   0     0     0     (1)   9   0     198   0     11   150   0     (2)   0     0     0     (1)   0     0     147   0     (2) 
Transportation
  43   0     2   0     0     0     (1)   10   0     54   0     2   70   0     (1)   0     0     0     (2)   0     0     67   0     (1) 
Other
  138   0     2   0     0     0     (2)   27   0     165   0     2   219   0     (2)   0     0     0     (3)   6   (20)   200   0     (1) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total U.S. corporate
  2,113   1   120   61   0     0     (21)   72   (14)   2,332   0     116   2,272   0     (68)   38   0     0     (58)   27   (61)   2,150   0     (66) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Non-U.S. corporate:
                                                
Utilities
  355   0     23   1   0     0     0     0     (22)   357   0     23   352   0     (7)   30   0     0     0     0     0     375   0     (7) 
Energy
  236   0     22   0     0     0     (26)   5   0     237   0     22   245   0     (2)   0     0     0     0     0     0     243   0     (2) 
Finance and insurance
  223   1   50   0     0     0     0     37   0     311   1   49   305   1   (16)   0     0     0     0     0     0     290   1   (16) 
Consumer—non-cyclical
  58   0     5   0     0     0     0     0     (9)   54   0     4   67   0     (1)   0     0     0     0     0     0     66   0     (1) 
Technology and communications
  27   0     1   0     0     0     0     0     0     28   0     1   28   0     0     0     0     0     0     0     0     28   0     0   
Industrial
  92   0     8   0     0     0     0     0     (8)   92   0     7   95   0     (2)   0     0     0     0     0     0     93   0     (2) 
Capital goods
  135   0     9   0     0     0     0     29   0     173   0     9   178   0     (3)   0     0     0     0     0     0     175   0     (3) 
Consumer—cyclical
  164   0     12   0     0     0     (3)   0     (17)   156   0     11   146   0     (2)   16   0     0     0     0     (16)   144   0     (2) 
Transportation
  108   0     11   0     0     0     0     22   0     141   0     11   109   0     (1)   0     0     0     (19)   0     (7)   82   0     (1) 
Other
  131   0     9   5   0     0     0     0     0     145   0     9   83   0     (2)   0     0     0     (1)   0     0     80   0     (2) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total non-U.S. corporate
  1,529   1   150   6   0     0     (29)   93   (56)   1,694   1   146   1,608   1   (36)   46   0     0     (20)   0     (23)   1,576   1   (36) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Residential mortgage-backed
  24   0     1   0     0     0     (1)   3   (3)   24   0     0     14   0     (1)   0     0     0     0     0     0     13   0     0   
Commercial mortgage-backed
  0     0     1   0     0     0     0     20   0     21   0     1   20   0     (1)   0     0     0     0     0     0     19   0     (2) 
Other asset-backed
  87   0     2   2   0     0     (1)   0     0     90   0     3   109   0     0     3   0     0     (4)   2   (14)   96   0     0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total fixed maturity securities
  3,837   2   281   69   0     0     (53)   188   (100)   4,224   2   272   4,089   2   (105)   87   0     0     (82)   29   (98)   3,922   2   (103) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity securities
  50   0     0     6   (3)   0     0     0     0     53   0     0     51   0     0     0     (8)   0     0     0     0     43   0     0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Limited partnerships
  17   0     0     8   0     0     0     0     0     25   0     0   
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  62   4   0     7   0     0     (7)   0     0     66   8   0     63   3   0     5   0     0     (18)   0     0     53   2   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total derivative assets
  62   4   0     7   0     0     (7)   0     0     66   8   0     63   3   0     5   0     0     (18)   0     0     53   2   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total other invested assets
  62   4   0     7   0     0     (7)   0     0     66   8   0     63   3   0     5   0     0     (18)   0     0     53   2   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable
(2)
  47   (9)   0     0     0     0     0     0     0     38   (9)   0     26   (8)   0     0     0     0     0     0     0     18   (8)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Level 3 assets
 $3,996  $(3)  $281  $82  $(3)  $0    $(60)  $188  $(100)  $4,381  $1  $272  $4,246  $(3)  $(105)  $100  $(8)  $0    $(100)  $29  $(98)  $4,061  $(4)  $(103) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
(1) 
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
(Amounts in millions)
 
Beginning
balance
as of
January 1,
2021
  
Total realized
 
and
unrealized
 
gains
(losses)
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3
(1)
  
Transfer
out of
Level 3
(1)
  
Ending
balance
as of
June 30,
2021
  
Total gains (losses)
attributable to
assets still held
 
 
Included
in net
income
(loss)
  
Included
in OCI
  
Included
in net
income
(loss)
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $66  $2  $7  $0    $0    $0    $0    $0    $0    $75  $2  $7 
U.S. corporate:
                                                
Utilities
  842   0     (7)   16   0     0     (14)   19   (14)   842   0     (6) 
Energy
  128   0     4   0     0     0     (3)   0     (52)   77   0     0   
Finance and insurance
  607   0     (5)   73   0     0     (25)   17   (6)   661   0     (5) 
Consumer—non-cyclical
  109   0     (1)   0     0     0     (2)   3   0     109   0     (2) 
Technology and communications
  47   0     0     12   0     0     0     4   (33)   30   0     (1) 
Industrial
  40   0     0     0     0     0     (20)   0     0     20   0     0   
Capital goods
  60   0     (1)   0     0     0     0     0     0     59   0     (1) 
Consumer—cyclical
  150   0     (1)   0     0     0     (2)   0     (8)   139   0     (1) 
Transportation
  70   0     0     0     0     0     (3)   0     0     67   0     0   
Other
  219   0     (2)   0     0     0     (5)   6   (20)   198   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,272   0     (13)   101   0     0     (74)   49   (133)   2,202   0     (16) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                                                
Utilities
  352   0     (2)   30   0     0     (8)   0     (24)   348   0     (3) 
Energy
  245   0     8   0     0     0     (22)   0     (79)   152   0     3 
Finance and insurance
  305   1   1   0     (2)   0     (52)   0     (51)   202   2   (11) 
Consumer—non-cyclical
  67   0     (1)   8   0     0     0     0     0     74   0     (1) 
Technology and communications
  28   0     0     0     0     0     0     0     0     28   0     0   
Industrial
  95   0     (1)   0     0     0     0     0     0     94   0     (1) 
Capital goods
  178   0     (2)   5   0     0     0     0     0     181   0     (1) 
Consumer—cyclical
  146   0     0     17   0     0     0     0     (16)   147   0     0   
Transportation
  109   0     0     0     0     0     (19)   0     (7)   83   0     1 
Other
  83   0     (1)   0     0     0     (14)   0     (15)   53   0     (1) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total non-U.S. corporate
  1,608   1   2   60   (2)   0     (115)   0     (192)   1,362   2   (14) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  14   0     0     0     0     0     (1)   0     0     13   0     0   
Commercial mortgage-backed
  20   0     (1)   1   0     0     0     0     0     20   0     (1) 
Other asset-backed
  109   0     1   3   0     0     (9)   2   (18)   88   0     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  4,089   3   (4)   165   (2)   0     (199)   51   (343)   3,760   4   (23) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  51   0     0     0     (8)   0     (5)   0     0     38   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  63   9   0     10   0     0     (35)   0     0     47   4   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  63   9   0     10   0     0     (35)   0     0     47   4   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  63   9   0     10   0     0     (35)   0     0     47   4   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable
(2)
  26   (9)   0     0     0     1   0     0     0     18   (9)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $4,229  $3  $(4)  $175  $(10)  $1  $(239)  $51  $(343)  $3,863  $(1)  $(23) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
47
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions)
 
Beginning
balance
as of
January 1,
2020
  
Total realized
 
and unrealized
 
gains (losses)
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Transfer
into
Level 3
(1)
  
Transfer
out of
Level 3
(1)
  
Ending
balance
as of
June 30,
2020
  
Total gains (losses)
attributable to
assets still held
 
 
Included
in net
income
(loss)
  
Included
in OCI
  
Included
in net
income
(loss)
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions
 $102  $1  $(12)  $0    $0    $0    $(1)  $0    $(27)  $63  $2  $(13) 
Non-U.S. government
  0     0     0     0     0     0     (1)   1   0     0     0     0   
U.S. corporate:
                                                
Utilities
  865   0     12   32   0     0     (2)   42   (13)   936   0     14 
Energy
  129   1   (2)   10   (21)   0     (3)   22   (13)   123   0     (5) 
Finance and insurance
  572   2   2   21   0     0     (24)   0     (22)   551   0     5 
Consumer—non-cyclical
  94   0     2   8   0     0     (1)   0     0     103   0     2 
Technology and communications
  50   0     1   20   0     0     0     0     (5)   66   0     2 
Industrial
  40   0     (1)   0     0     0     0     0     0     39   0     (1) 
Capital goods
  102   0     (1)   0     0     0     (4)   0     0     97   0     (1) 
Consumer—cyclical
  173   0     4   0     0     0     (3)   24   0     198   0     4 
Transportation
  78   0     (2)   0     0     0     (2)   10   (30)   54   0     1 
Other
  136   0     1   5   0     0     (4)   27   0     165   0     1 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total U.S. corporate
  2,239   3   16   96   (21)   0     (43)   125   (83)   2,332   0     22 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Non-U.S. corporate:
                                                
Utilities
  374   0     3   12   0     0     0     21   (53)   357   0     3 
Energy
  247   0     (8)   0     0     0     (26)   24   0     237   0     (8) 
Finance and insurance
  234   2   9   15   0     0     0     58   (7)   311   2   10 
Consumer—non-cyclical
  59   0     2   8   0     0     0     1   (16)   54   0     1 
Technology and communications
  28   0     0     0     0     0     0     0     0     28   0     0   
Industrial
  104   0     1   0     0     0     (5)   0     (8)   92   0     0   
Capital goods
  161   1   (2)   0     0     0     (16)   29   0     173   0     (1) 
Consumer—cyclical
  147   0     (3)   4   0     0     (7)   32   (17)   156   0     (5) 
Transportation
  191   0     2   0     0     0     0     22   (74)   141   0     6 
Other
  140   0     0     5   0     0     (1)   1   0     145   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total non-U.S. corporate
  1,685   3   4   44   0     0     (55)   188   (175)   1,694   2   6 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
  27   0     0     0     0     0     (1)   4   (6)   24   0     0   
Commercial mortgage-backed
  6   0     2   0     0     0     0     20   (7)   21   0     1 
Other asset-backed
  93   0     (2)   8   0     0     (8)   0     (1)   90   0     (2) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total fixed maturity securities
  4,152   7   8   148   (21)   0     (109)   338   (299)   4,224   4   14 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Equity securities
  51   0     0     6   (4)   0     0     0     0     53   0     0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Other invested assets:
                                                
Derivative assets:
                                                
Equity index options
  81   (9)   0     18   0     0     (24)   0     0     66   5   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total derivative assets
  81   (9)   0     18   0     0     (24)   0     0     66   5   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total other invested assets
  81   (9)   0     18   0     0     (24)   0     0     66   5   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Reinsurance recoverable
(2)
  20   17   0     0     0     1   0     0     0     38   17   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 assets
 $4,304  $15  $8  $172  $(25)  $1  $(133)  $338  $(299)  $4,381  $26  $14 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
(2) 
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gains and losses included in net income (loss) from assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the periods indicated:three months ended March 31:
 
  
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
2021
   
2020
   
2021
   
2020
   
2022
   
2021
 
Total realized and unrealized gains (losses) included in net income (loss):
            
Total realized and unrealized gains (losses) included in net income:
      
Net investment income
  $1   $2   $3   $6   $2   $2 
Net investment gains (losses)
   5    (5)    0      9    (8)    (5) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $6   $(3)   $3   $15   $(6)   $(3) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total gains (losses) included in net income (loss) attributable to assets still held:
            
 
Net gains (losses) included in net income attributable to assets still held:
      
Net investment income
  $2   $2   $4   $4   $2   $2 
Net investment gains (losses)
   1    (1)    (5)    22    (5)    (6) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $3   $1   $(1)   $26   $(3)   $(4) 
  
 
   
 
   
 
   
 
   
 
   
 
 
The amount presented for realized and unrealized gains (losses) included in net income (loss) for fixed maturity securities primarily represents amortization and accretion of premiums and discounts on certain fixed maturity securities.
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents a summary of the significant unobservable inputs used for certain asset fair value measurements that are based on internal models and classified as Level 3 as of June 30, 2021:
March 31, 2022:
 
(Amounts in millions)
  
Valuation
technique
   
Fair
value
   
Unobservable
input
   
Range
   
Weighted-
average
(1)
 
Fixed maturity securities:
                         
U.S. corporate:
                         
Utilities
   Internal models   $807    Credit spreads    47bps - 210bps    124bps 
Energy
   Internal models    66    Credit spreads    57bps - 203bps    128bps 
Finance and insurance
   Internal models    644    Credit spreads    44bps - 171bps    113bps 
Consumer—non-cyclical
   Internal models    109    Credit spreads    52bps - 203bps    117bps 
Technology and communications
   Internal models    30    Credit spreads    72bps - 150bps    122bps 
Industrial
   Internal models    21    Credit spreads    85bps - 159bps    127bps 
Capital goods
   Internal models    59    Credit spreads    62bps - 159bps    112bps 
Consumer—cyclical
   Internal models    138    Credit spreads    81bps - 156bps    122bps 
Transportation
   Internal models    55    Credit spreads    46bps - 134bps    87bps 
Other
   Internal models    177    Credit spreads    63bps - 143bps    82bps 
        
 
 
                
Total U.S. corporate
   Internal models   $2,106    Credit spreads    44bps - 210bps    115bps 
        
 
 
                
Non-U.S. corporate:
                         
Utilities
   Internal models   $347    Credit spreads    58bps - 210bps    109bps 
Energy
   Internal models    140    Credit spreads    62bps - 187bps    113bps 
Finance and insurance
   Internal models    160    Credit spreads    78bps - 111bps    93bps 
Consumer—non-cyclical
   Internal models    72    Credit spreads    52bps - 121bps    89bps 
Technology and communications
   Internal models    28    Credit spreads    62bps - 106bps    89bps 
Industrial
   Internal models    94    Credit spreads    57bps - 156bps    98bps 
Capital goods
   Internal models    152    Credit spreads    52bps - 187bps    100bps 
Consumer—cyclical
   Internal models    61    Credit spreads    81bps - 156bps    111bps 
Transportation
   Internal models    83    Credit spreads    52bps - 156bps    85bps 
Other
   Internal models    54    Credit spreads    66bps - 343bps    123bps 
        
 
 
                
Total non-U.S. corporate
   Internal models   $1,191    Credit spreads    52bps - 343bps    103bps 
        
 
 
                
Derivative assets:
                         
Equity index options
   Discounted cash flows 
 		  $47    Equity index
volatility		 
 		   6% - 48%    27% 
(Amounts in millions)
  
Valuation technique
  
Fair value
   
Unobservable input
  
Range
  
Weighted-average 
(1)
Fixed maturity securities:
                 
U.S. corporate:
                 
Utilities
  Internal models  $880   Credit spreads  
49bps - 227bps
  148bps
Energy
  Internal models   57   Credit spreads  
108bps - 248bps
  173bps
Finance and insurance
  Internal models   670   Credit spreads  54bps - 218bps  158bps
Consumer—non-cyclical
  Internal models   92   Credit spreads  54bps - 248bps  132bps
Technology and communications
  Internal models   27   Credit spreads  87bps - 162bps  133bps
Industrial
  Internal models   35   Credit spreads  98bps - 203bps  136bps
Capital goods
  Internal models   41   Credit spreads  67bps - 190bps  145bps
Consumer—cyclical
  Internal models   127   Credit spreads  85bps - 184bps  137bps
Transportation
  Internal models   53   Credit spreads  32bps - 156bps  103bps
Other
  Internal models   158   Credit spreads  90bps - 170bps  109bps
      
 
 
          
Total U.S. corporate
  Internal models  $2,140   Credit spreads  32bps - 248bps  146bps
      
 
 
          
Non-U.S. corporate:
                 
Utilities
  Internal models  $333   Credit spreads  75bps - 218bps  129bps
Energy
  Internal models   129   Credit spreads  83bps - 203bps  138bps
Finance and insurance
  Internal models   143   Credit spreads  88bps - 150bps  135bps
Consumer—non-cyclical
  Internal models   58   Credit spreads  54bps - 154bps  103bps
Technology and communications
  Internal models   27   Credit spreads  83bps - 139bps  108bps
Industrial
  Internal models   74   Credit spreads  67bps - 182bps  113bps
Capital goods
  Internal models   132   Credit spreads  54bps - 236bps  137bps
Consumer—cyclical
  Internal models   57   Credit spreads  98bps - 203bps  137bps
Transportation
  Internal models   21   Credit spreads  126bps - 203bps  141bps
Other
  Internal models   24   Credit spreads  55bps - 130bps  106bps
      
 
 
          
Total non-U.S. corporate
  Internal models  $998   Credit spreads  54bps - 236bps  129bps
      
 
 
          
Derivative assets:
                 

Equity index options
  Discounted cash flows  $30   Equity index
volatility		  6% - 56%  21%
 
(1) 
Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities and by notional for derivative assets.
Certain classes of instruments classified as Level 3 are excluded above as a result of not being material or due to limitations in being able to obtain the underlying inputs used by certain third-party sources, such as broker quotes, used as an input in determining fair value.
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth our liabilities by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
 
  
June 30, 2021
   
March 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
                        
Policyholder account balances:
                        
GMWB embedded derivatives
(1)
  $275   $0     $0     $275   $243   $0     $0     $243 
Fixed index annuity embedded derivatives
   339    0      0      339    261    0      0      261 
Indexed universal life embedded derivatives
   24    0      0      24    21    0      0      21 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total policyholder account balances
   638    0      0      638    525    0      0      525 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Derivative liabilities:
                        
Interest rate swaps
   53    0      53    0      76    0      76    0   
Foreign currency swaps
   2    0      2    0      1    0      1    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative liabilities
   55    0      55    0      77    0      77    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total liabilities
  $693   $0     $55   $638   $602   $0     $77   $525 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
  
December 31, 2020
   
December 31, 2021
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
                        
Policyholder account balances:
                        
GMWB embedded derivatives
(1)
  $379   $0     $0     $379   $271   $0     $0     $271 
Fixed index annuity embedded derivatives
   399    0      0      399    294    0      0      294 
Indexed universal life embedded derivatives
   26    0      0      26    25    0      0      25 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total policyholder account balances
   804    0      0      804    590    0      0      590 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Derivative liabilities:
                        
Interest rate swaps
   23    0      23    0      26    0      26    0   
Foreign currency swaps
   2    0      2    0   
Other foreign currency contracts
   1    0      1    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total derivative liabilities
   26    0      26    0      26    0      26    0   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total liabilities
  $830   $0     $26   $804   $616   $0     $26   $590 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
  
Beginning
balance

as of
April 1,
2021
  
Total realized and
unrealized (gains)
losses
              
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Ending
balance

as of
June
30,
2021
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net
(income)
loss
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net
(income)
loss
  
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives 
(1)
 $272  $(3)  $0    $0    $0    $6  $0    $0    $0    $275  $(4)  $0   
Fixed index annuity embedded derivatives
  362   14   0     0     0     0     (37)   0     0     339   14   0   
Indexed universal life embedded derivatives
  23   (3)   0     0     0     4   0     0     0     24   (3)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  657   8   0     0     0     10   (37)   0     0     638   7   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $657  $8  $0    $0    $0    $10  $(37)  $0    $0    $638  $7  $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
  
Beginning
balance

as of
April 1,
2020
  
Total realized and
unrealized (gains)
losses
              
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Ending
balance

as of
June 30,
2020
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net
(income)
loss
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net
(income)
loss
  
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives 
(1)
 $691  $(138)  $0    $0    $0    $6  $0    $0    $0    $559  $(137)  $0   
Fixed index annuity embedded derivatives
  413   45   0     0     0     0     (11)   0     0     447   45   0   
Indexed universal life embedded derivatives
  21   (3)   0     0     0     5   0     0     0     23   (3)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total policyholder account balances
  1,125   (96)   0     0     0     11   (11)   0     0     1,029   (95)   0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total Level 3 liabilities
 $1,125  $(96)  $0    $0    $0    $11  $(11)  $0    $0    $1,029  $(95)  $0   
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value as of or for the dates indicated:
 
 
Beginning
balance

as of
January
1, 2021
  
Total realized and
unrealized (gains)
losses
          
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Ending
balance

as of
June
30,
2021
  
Total (gains)
losses attributable
to liabilities still
held
  
Beginning
balance
as of
January 1,

2022
  
Total realized and
unrealized (gains)
losses
              
Ending
balance

as of
March 31,
2022
  
Total (gains) losses
attributable to
liabilities still held
 
(Amounts in millions)
 
Included
in net
(income)
loss
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Included
in net
(income)
loss
 
Included
in OCI
  
Included
in net
(income)
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Included
in net
(income)
 
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives
(1)
 $379  $(116)  $0    $0    $0    $12  $0    $0    $0    $275  $(111)  $0    $271  $(34)  $0    $0    $0    $6  $0    $0    $0    $243  $(30)  $0   
Fixed index annuity embedded derivatives
  399   18   0     0     0     0     (78)   0     0     339   18   0     294   (12)   0     0     0     0     (20)   0     (1)   261   (12)   0   
Indexed universal life embedded derivatives
  26   (13)   0     0     0     11   0     0     0     24   (13)   0     25   (11)   0     0     0     7   0     0     0     21   (11)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total policyholder account balances
  804   (111)   0     0    ��0     23   (78)   0     0     638   (106)   0     590   (57)   0     0     0     13   (20)   0     (1)   525   (53)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Level 3 liabilities
 $804  $(111)  $0    $0    $0    $23  $(78)  $0    $0    $638  $(106)  $0    $590  $(57)  $0    $0    $0    $13  $(20)  $0    $(1)  $525  $(53)  $0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
 
Beginning
balance

as of
January 1,
2020
  
Total realized and
unrealized (gains)
losses
          
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Ending
balance

as of
June 30,
2020
  
Total (gains)
losses attributable
to liabilities still
held
  
Beginning
balance

as of
January 1,
2021
  
Total realized and
unrealized (gains)
losses
              
Ending
balance

as of
March 31,
2021
  
Total (gains) losses
attributable to
liabilities still held
 
(Amounts in millions)
 
Included
in net
(income)
loss
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Included
in net
(income)
loss
 
Included
in OCI
  
Included
in net
(income)
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Included
in net
(income)
 
Included
in OCI
 
Policyholder account balances:
                                                
GMWB embedded derivatives
(1)
 $323  $224  $0    $0    $0    $12  $0    $0    $0    $559  $231  $0    $379  $(113)  $0    $0    $0    $6  $0    $0    $0    $272  $(107)  $0   
Fixed index annuity embedded derivatives
  452   13   0     0     0     0     (18)   0     0     447   13   0     399   4   0     0     0     0     (41)   0     0     362   4   0   
Indexed universal life embedded derivatives
  19   (7)   0     0     0     11   0     0     0     23   (7)   0     26   (10)   0     0     0     7   0     0     0     23   (10)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total policyholder account balances
  794   230   0     0     0     23   (18)   0     0     1,029   237   0     804   (119)   0     0     0     13   (41)   0     0     657   (113)   0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Level 3 liabilities
 $794  $230  $0    $0    $0    $23  $(18)  $0    $0    $1,029  $237  $0    $804  $(119)  $0    $0    $0    $13  $(41)  $0    $0    $657  $(113)  $0   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
(1) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the gains and losses included in net (income) loss from liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value and the related income statement line item in which these gains and losses were presented for the periods indicated:three months ended March 31:
 
  
Three months ended
June 30,
  
Six months ended
June 30,
 
(Amounts in millions)
 
    2021    
  
    2020    
  
    2021    
  
    2020    
 
Total realized and unrealized (gains) losses included in net (income) loss:
                
Net investment income
 $0    $0    $0    $0   
Net investment (gains) losses
  8   (96)   (111)   230 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $8  $(96)  $(111)  $230 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total (gains) losses included in net (income) loss attributable to liabilities still held:
                
Net investment income
 $0    $0    $0    $0   
Net investment (gains) losses
  7   (95)   (106)   237 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
 $7  $(95)  $(106)  $237 
  
 
 
  
 
 
  
 
 
  
 
 
 
(Amounts in millions)
  
2022
   
2021
 
Total realized and unrealized (gains) losses included in net (income):
          
Net investment income
  $0     $0   
Net investment (gains) losses
   (57)    (119) 
   
 
 
   
 
 
 
Total
  $(57)   $(119) 
   
 
 
   
 
 
 
Total (gains) losses included in net (income) attributable to liabilities still held:
          
Net investment income
  $0     $0   
Net investment (gains) losses
   (53)    (113) 
   
 
 
   
 
 
 
Total
  $(53)   $(113) 
   
 
 
   
 
 
 
Purchases, sales, issuances and settlements represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases, sales and settlements of fixed maturity and equity securities and purchases, issuances and settlements of derivative instruments.
Issuances presented for GMWB embedded derivative liabilities are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance. Issuances for fixed index annuity and indexed universal life embedded derivative liabilities represent the amount of the premium received that is attributed to the value of the embedded derivative. Settlements of embedded derivatives are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net (income) loss”” in the tables presented above.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents a summary of the significant unobservable inputs used for certain liability fair value measurements that are based on internal models and classified as Level 3 as of June 30, 2021:March 31, 2022:
 
(Amounts in millions)
  
Valuation technique
  
Fair
value
   
Unobservable input
  
Range
  
Weighted-
average
(1)
Policyholder account balances:
                 
           Withdrawal utilization rate  59% - 88%  75%
           Lapse rate  2% - 9%  4%
           
Non-performance risk
(credit spreads)		  14bps - 83bps  65bps
GMWB embedded derivatives 
(2)
  Stochastic cash flow model  $275   Equity index volatility  16% - 26%  22%
Fixed index annuity embedded derivatives
  Option budget method  $339   Expected future interest credited  0  % - 3%  1%
Indexed universal life embedded derivatives
  Option budget method  $24   Expected future interest credited  3% - 9%  5%
(Amounts in millions)
 
Valuation technique
  
Fair value
  
Unobservable input
  
Range
  
Weighted-average 
(1)
 
Policyholder account balances:
                    
           
Withdrawal
utilization rate		 
 		  61% - 89%   77% 
           Lapse rate   2% - 9%   4% 
           
Non-performance risk
(credit spreads)
 
 
  
23bps - 83bps
   66bps 
GMWB embedded derivatives
(2)
  
Stochastic cash flow model 
 		  $243   
Equity index
volatility		 
 		  18% - 27%   23% 
Fixed index annuity embedded derivatives
  
Option budget method 
 		  $261   
Expected future
interest credited		 
 		  0% - 3%   1% 
Indexed universal life embedded derivatives
  
Option budget method 
 		  $21   
Expected future
interest credited		 
 		  3% - 12%   5% 
 
(1) 
Unobservable inputs weighted by the policyholder account balances associated with the instrument.
(2) 
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. The unobservable inputs associated with GMWB embedded derivatives are not interrelated and therefore, a directional change in one input will not affect the other inputs.
Assets and Liabilities Not Required to Be Carried at Fair Value
Assets and liabilities that are reflected in the accompanying unaudited condensed consolidated financial statements at fair value are not included in the following disclosure of fair value. Such items include cash, cash equivalents and restricted cash, short-term investments, investment securities, separate accounts, securities held as collateral and derivative instruments. Apart from certain of our borrowings and certain marketable securities, few of the instruments are actively traded and their fair values must often be determined using models. The fair value estimates are made at a specific point in time, based upon available market information and judgments about the financial instruments, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following represents our estimated fair value of financial assets and liabilities that are not required to be carried at fair value as of the dates indicated:
 
  
June 30, 2021
   
March 31, 2022
 
  
Notional

amount
 
Carrying

amount
   
Fair value
   
Notional

amount
 
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                                  
Commercial mortgage loans, net
               (1)  $6,879   $7,270   $0     $0     $7,270            (1)  $6,913   $6,983   $0     $22   $6,961 
Bank loan investments
               (1)   308    314    0      0      314            (1)   381    384    0      0      384 
Liabilities:
                                  
Long-term borrowings
               (1)   2,924    2,813    0      2,813    0              (1)   1,819    1,587    0      1,587    0   
Investment contracts
               (1)   9,360    10,172    0      0      10,172            (1)   8,327    8,582    0      0      8,582 
Other firm commitments:
                                  
Commitments to fund limited partnerships
   1,187   0      0      0      0      0   
Commitments to fund bank loan investments
   273   0      0      0      0      0      108   0      0      0      0      0   
Ordinary course of business lending commitments
   156   0      0      0      0      0      95   0      0      0      0      0   
 
(1) 
These financial instruments do not have notional amounts.
 
  
December 31, 2020
   
December 31, 2021
 
  
Notional

amount
 
Carrying

amount
   
Fair value
   
Notional

amount
 
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                                  
Commercial mortgage loans, net
               (1)  $6,743   $7,145   $0     $0     $7,145            (1)  $6,830   $7,224   $0     $0     $7,224 
Bank loan investments
               (1)   344    354    0      0      354            (1)   363    370    0      0      370 
Liabilities:
                                  
Long-term borrowings
               (1)   3,403    3,090    0      3,090    0              (1)   1,899    1,767    0      1,767    0   
Investment contracts
               (1)   10,276    11,353    0      0      11,353            (1)   8,657    9,352    0      0      9,352 
Other firm commitments:
                                  
Commitments to fund limited partnerships
   1,090   0      0      0      0      0   
Commitments to fund bank loan investments
   32   0      0      0      0      0      141   0      0      0      0      0   
Ordinary course of business lending commitments
   117   0      0      0      0      0      125   0      0      0      0      0   
 
(1) 
These financial instruments do not have notional amounts.
Assets Measured Using Net Asset Value
Limited partnerships include partnership interests accounted for using NAV per share (or its equivalent) or fair value for those interests considered minor and partnership interests accounted for under the equity method of accounting for those interests exceeding the minor threshold. Our limited partnership interests accounted for using NAV per share (or its equivalent) are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. We receive distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years five to ten of the typical contractual life of ten to 12 years.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the carrying value of limited partnerships and commitments to fund as of the dates indicated:
   
March 31, 2022
   
December 31, 2021
 
(Amounts in millions)
  
Carrying

value
   
Commitments
to fund
   
Carrying
value
   
Commitments
to fund
 
Limited partnerships accounted for at NAV:
                    
Private equity funds
(1)
  $1,405   $975   $1,312   $950 
Real estate funds
(2)
   72    117    67    101 
Infrastructure funds
(3)
   55    13    57    13 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total limited partnerships accounted for at NAV
   1,532    1,105    1,436    1,064 
   
 
 
   
 
 
   
 
 
   
 
 
 
Limited partnerships accounted for at fair value
   26    1    26    1 
Limited partnerships accounted for under equity method of accounting
   448    203    437    120 
Low-income housing tax credits
(4)
   1    0      1    0   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,007   $1,309   $1,900   $1,185 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1) 
This class employs various investment strategies such as leveraged buyout, growth equity, venture capital and mezzanine financing, generally investing in debt or equity positions directly in companies or assets of various sizes across diverse industries globally, primarily concentrated in North America.
(2) 
This class invests in real estate in North America, Europe and Asia via direct property ownership, joint ventures, mortgages and investments in debt and equity instruments.
(3) 
This class invests in the debt or equity of cash flow generating assets diversified across a variety of industries, including transportation, energy infrastructure, renewable power, social infrastructure, power generation, water, telecommunications and other regulated entities globally.
(4) 
Relates to limited partnership investments that invest in affordable housing projects that qualify for the Low-Income Housing Tax Credit and are accounted for using the proportional amortization method.
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Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(7) Liability for Policy and Contract Claims
The following table sets forth changes in our liability for policy and contract claims as of the dates indicated:
 
   
As of or for the six
months ended June 30,
 
(Amounts in millions)
  
2021
   
2020
 
Beginning balance
  $11,486   $10,750 
Less reinsurance recoverables
   (2,431)    (2,406) 
   
 
 
   
 
 
 
Net beginning balance
   9,055    8,344 
   
 
 
   
 
 
 
Incurred related to insured events of:
          
Current year
   1,991    2,178 
Prior years
   (332)    (258) 
   
 
 
   
 
 
 
Total incurred
   1,659    1,920 
   
 
 
   
 
 
 
Paid related to insured events of:
          
Current year
   (477)    (434) 
Prior years
   (1,255)    (1,298) 
   
 
 
   
 
 
 
Total paid
   (1,732)    (1,732) 
   
 
 
   
 
 
 
Interest on liability for policy and contract claims
   202    205 
Foreign currency translation
   0      (2) 
   
 
 
   
 
 
 
Net ending balance
   9,184    8,735 
Add reinsurance recoverables
   2,362    2,319 
   
 
 
   
 
 
 
Ending balance
  $11,546   $11,054 
   
 
 
   
 
 
 
   
As of or for the three
months ended
March 31,
 
(Amounts in millions)
  
2022
   
2021
 
Beginning balance
  $11,841   $11,486 
Less reinsurance recoverables
   (2,388)    (2,431) 
   
 
 
   
 
 
 
Net beginning balance
   9,453    9,055 
   
 
 
   
 
 
 
Incurred related to insured events of:
          
Current year
   1,094    1,054 
Prior years
   (293)    (229) 
   
 
 
   
 
 
 
Total incurred
   801    825 
   
 
 
   
 
 
 
Paid related to insured events of:
          
Current year
   (202)    (197) 
Prior years
   (675)    (725) 
   
 
 
   
 
 
 
Total paid
   (877)    (922) 
   
 
 
   
 
 
 
Interest on liability for policy and contract claims
   103    101 
   
 
 
   
 
 
 
Net ending balance
   9,480    9,059 
Add reinsurance recoverables
   2,353    2,356 
   
 
 
   
 
 
 
Ending balance
  $11,833   $11,415 
   
 
 
   
 
 
 
The liability for policy and contract claims represents our current best estimate; however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could be significant, and result in increases in reserves by an amount that could be material to our results of operations and financial condition and liquidity. In addition, loss reserves recorded on new delinquencies in our Enact segment have a high degree of estimation, particularly due to the level of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.
For the sixthree months ended June 30, 2021,March 31, 2022, the favorable development of $332$293 million related to insured events of prior years was primarily attributable to our long-term care insurance business largely fromrelated to favorable claim terminations mostly attributable to higher mortality, favorable development on prior year incurred but not reported claims favorable claim terminations mostly attributable to higher mortality and favorable experience on pending claims that did not become an active claim. These decreases were partially offset by higherCOVID-19 significantly increased mortality on our most vulnerable claimants and temporarily decreased the number of new claims submitted. As of March 31, 2022 and December 31, 2021, the balance of incremental claim reserves associatedrecorded in connection with changes to claims incidence and mortality experience drivenresulting from COVID-19 was $171 million and $209 million, respectively. During the first quarter of 2022, we reduced our incremental claim reserves associated with insured events of prior years by $38 million as the impacts of COVID-19 which we believe are temporary.lessened.
The favorable development related to insured events of prior years was also attributable to our Enact segment, predominantly associated with a $50 million favorable reserve adjustment in the first quarter of 2022 primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(8) Borrowings
The following table sets forth total long-term borrowings as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2021
   
December 31,
2020
   
March 31,
2022
   
December 31,
2021
 
Genworth Holdings
(1)
            
7.20% Senior Notes, due 2021
  $0     $338 
7.625% Senior Notes, due 2021
   514    660 
4.90% Senior Notes, due 2023
   400    400 
4.80% Senior Notes, due 2024
   400    400   $200   $282 
6.50% Senior Notes, due 2034
   297    297    298    298 
Floating Rate Junior Subordinated Notes, due 2066
   598    598    598    598 
  
 
   
 
   
 
   
 
 
Subtotal
   2,209    2,693    1,096    1,178 
Bond consent fees
   (16)    (19)    (11)    (12) 
Deferred borrowing charges
   (8)    (9)    (7)    (7) 
  
 
   
 
   
 
   
 
 
Total Genworth Holdings
   2,185    2,665    1,078    1,159 
  
 
   
 
   
 
   
 
 
Enact Holdings
            
6.50% Senior Notes, due 2025
(2)
   750    750    750    750 
Deferred borrowing charges
   (11)    (12)    (9)    (10) 
  
 
   
 
   
 
   
 
 
Total Enact Holdings
   739    738    741    740 
  
 
   
 
   
 
   
 
 
Total
  $2,924   $3,403   $1,819   $1,899 
  
 
   
 
   
 
   
 
 
 
(1) 
We haveGenworth Holdings has the option to redeem all or a portion of the senior notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread.
(2) 
Senior notes issued by Enact Holdings, our wholly-owned U.S. mortgage insurancemajority-owned indirect subsidiary, who has the option to redeem the notes in whole or in part at any time prior to February 15, 2025, by paying a make-whole premium plus accrued and unpaid interest.
Genworth Holdings paid its 7.20% senior notes with a principal balanceIn the first quarter of $338 million at maturity on February 16, 2021. Genworth Holdings’ 7.20% senior notes were fully redeemed with a cash payment of $350 million, comprised of the outstanding principal balance and accrued interest.
In March 2021,2022, Genworth Holdings repurchased $146$82 million principal amount of its 7.625%4.80% senior notes due in September 20212024 for a pre-tax loss of $4$3 million and paid accrued interest thereon. On July 21, 2021, Genworth Holdings early redeemed the remainder of its 7.625% senior notes originally scheduled to mature in September 2021. The senior notes were fully redeemed with a cash payment of $532 million, comprised of the outstanding principal balance of $513 million, accrued interest of approximately $13 million and a make-whole premium of approximately $6 million.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(9) Income Taxes
The reconciliation of the federal statutory tax rate to the effective income tax rate was as follows for the periods indicated:
 
   
Three months ended
June 30,
  
Six months ended
June 30,
 
   
    2021    
  
    2020    
  
2021
  
2020
(2)
 
Statutory U.S. federal income tax rate
   21.0%   21.0%   21.0%   21.0% 
Increase (reduction) in rate resulting from:
                 
Swaps terminated prior to the TCJA
(1)
   2.1   9.2   2.9   97.2 
Stock-based compensation
   0     0.2   0.1   14.6 
Non-deductible expense
   0.7   1.3   0.6   14.5 
Tax favored investments
   (0.3)   (1.6)   (0.4)   (16.3) 
Other, net
   (0.1)   (0.6)   0     7.5 
   
 
 
  
 
 
  
 
 
  
 
 
 
Effective rate
   23.4%   29.5%   24.2%   138.5% 
   
 
 
  
 
 
  
 
 
  
 
 
 
   
Three months ended March 31,
 
   
  2022  
  
  2021  
 
Statutory U.S. federal income tax rate
   21.0%   21.0% 
Increase in rate resulting from:
         
Tax on income from terminated swaps
   2.8   4.1 
Other, net
   0.5   0.2 
   
 
 
  
 
 
 
Effective rate
   24.3%   25.3% 
   
 
 
  
 
 
 
The effective tax rate for the three months ended March 31, 2022 and 2021 was above the statutory U.S. federal income tax rate of 21% largely due to tax expense on forward starting swaps, which are tax effected at
 
(1) 
Tax Cuts and Jobs Act.
5
1
(2) 
For the six months ended June 30, 2020, the effective tax rate of 138.5% and the associated higher percentages included in the effective tax rate reconciliation are principally due to the prior year low pre-tax income.
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35% when amortized into net investment income. The decrease in the effective tax rate for the three months ended June 30,March 31, 2022 compared to the three months ended March 31, 2021 was primarily attributable to lower tax expense on forward starting swaps settled prior to the enactment of the TCJA, which are tax effected at 35% as they are amortized into net investment income, in relation to higher pre-tax income in the current year.
The decrease in the effective tax rate for the six months ended June 30, 2021 was mostly attributable to tax expense on forward starting swaps settled prior to the enactment of the TCJA and non-deductible expenses in relation to higher pre-tax income in the current year. The decrease was also attributable to higher tax expense related to stock-based compensation in the prior year.
U.S. GAAP generally requires an annualized effective tax rate to be used for interim reporting periods, utilizing projections of full year results. However, in certain circumstances it is appropriate to record the actual effective tax rate for the period if a reliable full year estimate cannot be made. For the three and six months ended June 30, 2020, we elected to record the actual effective tax rate for the periods, primarily due to the sensitivity of the full year annualized effective rate in relation to small changes in projected pre-tax income.
(10) Segment Information
We have the following 3three operating business segments: Enact, formerly known as U.S. Mortgage Insurance;Enact; U.S. Life Insurance (which includes our long-term care insurance, life insurance and fixed annuities businesses); and Runoff (which includes the results of non-strategic products which have not been actively sold since 2011). In addition to our three operating business segments, we also have Corporate and Other activities which include debt financing expenses that are incurred at the Genworth Holdings level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are managedreported outside of our operating segments, including certain international mortgage insurance businesses and discontinued operations.
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We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. GAAP and tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.
The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.
We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders.” We define adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. GainsInitial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or resultinginitial gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating
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income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders is not a substitute for net income (loss) available to Genworth Financial, Inc.’s common stockholders determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.
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Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21% tax rate.rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.
During the six months ended June 30, 2021, weWe repurchased $146$82 million principal amount of Genworth Holdings’ senior notes due in September 2021 for a pre-tax loss of $4 million. During the threeFebruary 2024 and six months ended June 30, 2020, we repurchased $52$146 million and $66 million, respectively, principal amount of Genworth Holdings’ senior notes with 2021 maturity dates in the first quarters of 2022 and 2021, respectively, for a pre-tax gainloss of $3 million and $4 million, respectively. In January 2020, we paid a pre-tax make-whole expense of $9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020 and Rivermont Life Insurance Company I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, early redeemed all of its $315 million outstanding non-recourse funding obligations originally due in 2050 resulting in a pre-tax loss of $4 million from the write-off of deferred borrowing costs. These transactions were excluded from adjusted operating income (loss) as they relate to gains (losses)losses on the early extinguishment of debt.
We recorded a pre-tax expense of $5$21 million and $26 million forin the three and six months ended June 30,first quarter of 2021 respectively, and $1 million and $2 million for the three and six months ended June 30, 2020, respectively, related to restructuring costs as we continuecontinued to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented.
The following is a summary of revenues for our segments and Corporate and Other activities for the periods indicated:
 
  
Three months
ended June 30,
   
Six months

ended June 30,
   
Three months ended
March 31,
 
(Amounts in millions)
  
2021
   
2020
   
2021
   
2020
   
    2022    
   
    2021    
 
Revenues:
                  
Enact segment
  $276   $274   $564   $535   $270   $288 
U.S. Life Insurance segment:
                  
Long-term care insurance
   1,226    1,200    2,366    2,206    1,109    1,140 
Life insurance
   329    335    677    683    339    348 
Fixed annuities
   122    129    254    262    116    132 
  
 
   
 
   
 
   
 
   
 
   
 
 
U.S. Life Insurance segment
   1,677    1,664    3,297    3,151    1,564    1,620 
  
 
   
 
   
 
   
 
   
 
   
 
 
Runoff segment
   88    90    164    97    66    76 
  
 
   
 
   
 
   
 
 
Corporate and Other activities
   0      (25)    1    29    (8)    1 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total revenues
  $2,041   $2,003   $4,026   $3,812   $1,892   $1,985 
  
 
   
 
   
 
   
 
   
 
   
 
 
 
615
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The following tables present the reconciliation of net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities for the periods indicated:
   
Three months
ended June 30,
  
Six months
ended June 30,
 
(Amounts in millions)
  
2021
  
2020
  
2021
  
2020
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $427  $(507) 
Add: net income from continuing operations attributable to noncontrolling interests
   0     0     0     0   
Add: net income from discontinued operations attributable to noncontrolling interests
   0     23   8   17 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   240   (418)   435   (490) 
Less: income (loss) from discontinued operations, net of taxes
   (5)   (473)   16   (485) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from continuing operations
   245   55   419   (5) 
Less: net income from continuing operations attributable to noncontrolling interests
   0     0     0     0   
   
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
   245   55   419   (5) 
Adjustments to income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders:
                 
Net investment (gains) losses, net
(1)
   (70)   (97)   (103)   (9) 
(Gains) losses on early extinguishment of debt
   0     (3)   4   9 
Expenses related to restructuring
   5   1   26   2 
Taxes on adjustments
   14   21   16   0   
   
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $194  $(23)  $362  $(3) 
   
 
 
  
 
 
  
 
 
  
 
 
 
 
(1) 
For the three and six months ended June 30, 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(4) million and $(15) million, respectively.
  
Three months ended
March 31,
 
(Amounts in millions)
 
    2022    
  
    2021    
 
Net income available to Genworth Financial, Inc.’s common stockholders
 $149  $187 
Add: net income from continuing operations attributable to noncontrolling interests
  30   0   
Add: net income from discontinued operations attributable to noncontrolling interests
  0     8 
  
 
 
  
 
 
 
Net income
  179   195 
Less: income (loss) from discontinued operations, net of taxes
  (2)   21 
  
 
 
  
 
 
 
Income from continuing operations
  181   174 
Less: net income from continuing operations attributable to noncontrolling interests
  30   0   
  
 
 
  
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  151   174 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
        
Net investment (gains) losses, net
  (28)   (33) 
(Gains) losses on early extinguishment of debt
  3   4 
Expenses related to restructuring
  0     21 
Taxes on adjustments
  5   2 
  
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
 $131  $168 
  
 
 
  
 
 
 
   
Three months ended
March 31,
 
(Amounts in millions)
  
  2022  
  
  2021  
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
         
Enact segment
  $135  $126 
U.S. Life Insurance segment:
         
Long-term care insurance
   59   95 
Life insurance
   (79)   (63) 
Fixed annuities
   16   30 
   
 
 
  
 
 
 
U.S. Life Insurance segment
   (4)   62 
   
 
 
  
 
 
 
Runoff segment
   9   12 
Corporate and Other activities
   (9)   (32) 
   
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168 
   
 
 
  
 
 
 
 
625
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
Three months ended
June 30,
  
Six months ended
June 30,
 
(Amounts in millions)
  
    2021    
  
    2020    
  
    2021    
  
    2020    
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
                 
Enact segment
  $135  $(3)  $261  $145 
U.S. Life Insurance segment:
                 
Long-term care insurance
   98   48   193   49 
Life insurance
   (40)   (81)   (103)   (158) 
Fixed annuities
   13   28   43   34 
   
 
 
  
 
 
  
 
 
  
 
 
 
U.S. Life Insurance segment
   71   (5)   133   (75) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Runoff segment
   15   24   27   11 
Corporate and Other activities
   (27)   (39)   (59)   (84) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $194  $(23)  $362  $(3) 
   
 
 
  
 
 
  
 
 
  
 
 
 
The following is a summary of total assets for our segments and Corporate and Other activities as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2021
   
December 31,
2020
   
March 31,
2022
   
December 31,
2021
 
Assets:
            
Enact segment
  $5,845   $5,627   $5,790   $5,850 
U.S. Life Insurance segment
   82,522    84,671    76,482    81,210 
Runoff segment
   9,593    9,735    8,960    9,460 
Corporate and Other activities
   2,690    2,897    2,255    2,651 
  
 
   
 
   
 
   
 
 
Segment assets from continuing operations
   100,650    102,930 
Assets related to discontinued operations
   0      2,817 
  
 
   
 
 
Total assets
  $100,650   $105,747   $93,487   $99,171 
  
 
   
 
   
 
   
 
 
(11) Commitments and Contingencies
(a) Litigation and Regulatory Matters
We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, increases to in-force long-term care insurance premiums, payment of contingent or other sales commissions, claims payments and procedures, product design, product disclosure, product administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers, our pricing structures and business practices in our mortgage insurance business,subsidiaries, such as captive reinsurance arrangements with lenders and contract underwriting services, violations of the Real Estate Settlement and Procedures Act of 1974 or related state anti-inducement laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to
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customers, including but not limited to breach of customer information. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships, post-closing obligations associated with previous dispositions and securities lawsuits. In addition, we are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations from state, federal and international regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition or results of operations.
In JanuaryOctober 2016, Genworth Financial, certain members of its currentexecutive management team, including its former and present chief executive officer, its former chief executive officer, its then former chief financial officer, and current and former members of its board of directors were named in a shareholder derivative suit filed by International Union of Operating Engineers Local No. 478 Pension Fund, Richard L. Salberg and David Pinkoski in the Court of Chancery of the State of Delaware. The case was captioned
Int’l Union of Operating Engineers Local No. 478 Pension Fund, et al v. McInerney, et al
. In February 2016, Genworth Financial, its current chief executive officer, its former chief executive officer, its then former chief financial officer and current and former members of its board of directors were named in a second shareholder derivative suit filed by Martin Cohen in the Court of Chancery of the State of Delaware. The case was captioned
Cohen v. McInerney, et al
. On February 23, 2016, the Court of Chancery of the State of Delaware consolidated these derivative suits under the caption
Genworth Financial, Inc. Consolidated Derivative Litigation
. On March 28, 2016, plaintiffs in the consolidated action filed an amended complaint. The amended complaint alleges breaches of fiduciary duties concerning Genworth’s long-term care insurance reserves and concerning Genworth’s former Australian mortgage insurance business, including our plans for an IPO of the business and seeks unspecified damages, costs, attorneys’ fees and such equitable relief as the Court may deem proper. The amended consolidated complaint also added Genworth’s then current chief financial officer as a defendant, based on alleged conduct in her former capacity as Genworth’s controller and principal accounting officer. We moved to dismiss the consolidated action on May 27, 2016. Thereafter, plaintiffs filed a substantially similar second amended complaint which we moved to dismiss on September 16, 2016. The motion is fully briefed and awaiting disposition by the Court. The action was stayed pending the outcome of the proposed China Oceanwide transaction. On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action remain stayed until April 15, 2021, or until the closing or termination of the merger in the event the merger closed or was terminated prior to April 15, 2021. On April 6, 2021, Genworth Financial terminated the proposed China Oceanwide transaction, thereby lifting the stay. In June 2021, the parties submitted a supplemental briefing on our motion to dismiss, which is now fully briefed and awaiting disposition by the Court. We intend to vigorously defend this action.
In October 2016, Genworth Financial, its current chief executive officer, its former chief executive officer, its then current chief financial officer, its then former chief financial officer and current and former members of its board of directors were nameddefendants in a shareholder derivative suit filed by Esther Chopp in the Court of Chancery of the State of Delaware. The case is captioned
Chopp v. McInerney, et al
. The complaint alleges that Genworth’s board of directors wrongfully refused plaintiff’s demand to commence litigation on behalf of Genworth and asserts claims for breaches of fiduciary duties, waste, contribution and indemnification, and unjust enrichment concerning
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Genworth’s long-term care insurance reserves and concerning Genworth’s former Australian mortgage insurance business, including our plans for an IPO of the business, and seeks unspecified
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damages, costs, attorneys’ fees and such equitable relief as the Court may deem proper. We filed a motion to dismiss on November 14, 2016. The action was stayed pending the outcome of the proposed China Oceanwide transaction. On January 14, 2021, the parties submitted a joint letter to the Court requesting that the action remai
n
 stayed until April 15, 2021, or until the closing or termination of the merger in the event the merger closed or was terminated prior to April 15, 2021. On April 6, 2021, Genworth Financial terminated the proposed China Oceanwide transaction, thereby lifting the stay. We intend to vigorously defend this action.
In September 2018, Genworth Life and Annuity Insurance Company (“GLAIC”), our indirect wholly-owned subsidiary, was named as a defendant in a putative class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
TVPX ARX INC., as Securities Intermediary for Consolidated Wealth Management, LTD. on behalf of itself and all others similarly situated v. Genworth Life and Annuity Insurance Company
. Plaintiff alleges unlawful and excessive cost of insurance charges were imposed on policyholders. The complaint asserts claims for breach of contract, alleging that Genworth improperly considered non-mortality factors when calculating cost of insurance rates and failed to decrease cost of insurance charges in light of improved expectations of future mortality, and seeks unspecified compensatory damages, costs, and equitable relief. On October 29, 2018, we filed a motion to enjoin the case in the Middle District of Georgia, and a motion to dismiss and motion to stay in the Eastern District of Virginia. We moved to enjoin the prosecution of the Eastern District of Virginia action on the basis that it involves claims released in a prior nationwide class action settlement (the “McBride settlement”) that was approved by the Middle District of Georgia. Plaintiff filed an amended complaint on November 13, 2018. On December 6, 2018, we moved the Middle District of Georgia for leave to file our counterclaim, which alleges that plaintiff breached the covenant not to sue contained in the prior settlement agreement by filing its current action. On March 15, 2019, the Middle District of Georgia granted our motion to enjoin and denied our motion for leave to file our counterclaim. As such, plaintiff is enjoined from pursuing its class action in the Eastern District of Virginia. On March 29, 2019, plaintiff filed a notice of appeal in the Middle District of Georgia, notifying the Court of its appeal to the United States Court of Appeals for the Eleventh Circuit from the order granting our motion to enjoin. On March 29, 2019, we filed our notice of cross-appeal in the Middle District of Georgia, notifying the Court of our cross-appeal to the Eleventh Circuit from the portion of the order denying our motion for leave to file our counterclaim. On April 8, 2019, the Eastern District of Virginia dismissed the case without prejudice, with leave for plaintiff to refile an amended complaint only if a final appellate Court decision vacates the injunction and reverses the Middle District of Georgia’s opinion. On May 21, 2019, plaintiff filed its appeal and memorandum in support in the Eleventh Circuit. We filed our response to plaintiff’s appeal memorandum on July 3, 2019. The Eleventh Circuit Court of Appeals heard oral argument on plaintiff’s appeal and our cross-appeal on April 21, 2020. On May 26, 2020, the Eleventh Circuit Court of Appeals vacated the Middle District of Georgia’s order enjoining Plaintiff’s class action and remanded the case back to the Middle District of Georgia for further factual development as to whether Genworth has altered how it calculates or charges cost of insurance since the McBride settlement. The Eleventh Circuit Court of Appeals did not reach a decision on Genworth’s counterclaim. On June 30, 2021, we filed in the Middle District of Georgia our renewed motion to enforce the class action settlement and release, and renewed our motion for leave to file a counterclaim. The briefing on both motions concluded in October 2021. On March 24, 2022, the Court denied our motions. On April 11, 2022, we filed an appeal of the Court’s denial to the United States Court of Appeals for the Eleventh Circuit. We intend to continue to vigorously defend the dismissal of this action.
In September 2018, Genworth Financial, Genworth Holdings, Genworth North America Corporation, Genworth Financial International Holdings, LLC (“GFIH”) and Genworth Life Insurance Company (“GLIC”) were named as defendants in a putative class action lawsuit pending in the Court of Chancery of the State of Delaware captioned
Richard F. Burkhart, William E. Kelly, Richard S. Lavery, Thomas R. Pratt, Gerald Green,
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individually and on behalf of all other persons similarly situated v. Genworth et al
. Plaintiffs allege that GLIC paid dividends to its parent and engaged in certain reinsurance transactions causing it to maintain inadequate capital capable of meeting its obligations to GLIC policyholders and agents. The complaint alleges causes of
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action for intentional fraudulent transfer and constructive fraudulent transfer, and seeks injunctive relief. We moved to dismiss this action in December 2018. On January 29, 2019, plaintiffs exercised their right to amend their complaint. On March 12, 2019, we moved to dismiss plaintiffs’ amended complaint. On April 26, 2019, plaintiffs filed a memorandum in opposition to our motion to dismiss, which we replied to on June 14, 2019. On August 7, 2019, plaintiffs filed a motion seeking to prevent proceeds that GFIH expected to receive from the then planned sale of its shares in Genworth MI Canada Inc. (“Genworth Canada”) from being transferred out of GFIH. On September 11, 2019, plaintiffs filed a renewed motion seeking the same relief fromas their August 7, 2019 motion with an exception that allowed GFIH to transfer
$450 million of expected proceeds from the sale of Genworth Canada through a dividend to Genworth Holdings to allow the pay-off of a senior secured term loan facility dated March 7, 2018 among Genworth Holdings as the borrower, GFIH as the limited guarantor and the lending parties thereto. Oral arguments on our motion to dismiss and plaintiffs’ motion occurred on October 21, 2019, and plaintiffs’ motion was denied. On January 31, 2020, the Court granted in part our motion to dismiss, dismissing claims relating to $395 million in dividends GLIC paid to its parent from 2012 to 2014 (out of the $410 million in total dividends subject to plaintiffs’ claims). The Court denied the balance of the motion to dismiss leaving a claim relating to $15 million in dividends and unquantified claims relating to the 2016 termination of a reinsurance transaction. On March 27, 2020, we filed our answer to plaintiffs’ amended complaint. On May 26, 2021, the plaintiffs filed a second amended and supplemental class action complaint adding additional factual allegations and three new causes of action. On July 26, 2021, we moved to dismiss the three new causes of action and answered the balance of the second amended and supplemental class action complaint. Plaintiffs filed an opposition to our motion to dismiss on September 30, 2021. The Court heard oral arguments on the motion on December 7, 2021 and ordered each party to file supplemental submissions, which were filed on January 28, 2022. On January 27, 2022, plaintiffs filed a motion for a preliminary injunction seeking to enjoin GFIH from transferring any assets to any affiliate, including paying any dividends to Genworth Holdings and to enjoin Genworth Holdings and Genworth Financial from transferring or distributing any value to Genworth Financial’s shareholders. We intend to continue to vigorously defend this action.
On April 6, 2020, GLAIC our indirect wholly-owned subsidiary, was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned
Brighton Trustees, LLC, on behalf of and as trustee for Diamond LS Trust; and Bank of Utah, solely as securities intermediary for Diamond LS Trust; on behalf of themselves and all others similarly situated v. Genworth Life and Annuity Insurance Company
. On May 13, 2020, GLAIC was also named as a defendant in a putative class action lawsuit filed in the United States District Court for the Eastern District of Virginia, captioned
Ronald L. Daubenmier, individually and on behalf of himself and all others similarly situated v. Genworth Life and Annuity Insurance Company
. On June 26, 2020, plaintiffs filed a consent motion to consolidate the two cases. On June 30, 2020, the United States District Court for the Eastern District of Virginia issued an order consolidating the Brighton Trustees and Daubenmier cases. On July 17, 2020, the Brighton Trustees and Daubenmier plaintiffs filed a consolidated complaint, alleging that GLAIC subjected policyholders to an unlawful and excessive increases to cost of insurance increase.charges. The consolidated complaint asserts claims for breach of contract and injunctive relief, and seeks damages in excess of $5 million. On August 31, 2020, we filed an answer to plaintiffs’ consolidated complaint.The parties participated in a mediation on November 18, 2021. The trial is scheduled to commence on April 1,July 8, 2022. On March 25, 2022, the parties reached an agreement in principle to settle the action for $25 million, subject to Court approval. We accrued $25 million for this litigation as of March 31, 2022. If the settlement is not approved, we intend to continue to vigorously defend this action.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In January 2021, GLIC and Genworth Life Insurance Company of New York (“GLICNY”) were named as defendants in a putative class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
Judy Halcom, Hugh Penson, Harold Cherry, and Richard Landino, individually, and on behalf of all others similarly situated v. Genworth Life Insurance Company and Genworth Life Insurance Company of New York
. Plaintiffs seek to represent long-term care insurance policyholders, alleging that the defendants made misleading and inadequate disclosures regarding premium increases for long-term care insurance policies. The complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 
million. The trial is scheduled to commence on June 1, 2022. On June 18, 2021, following two days of mediation, the parties reached an agreement in principle to settle this matter on a nationwide basis. The parties will need to enter into a definitivebasis and signed the settlement agreement file foron August 23, 2021. On August 31, 2021, the Court preliminarily approved the settlement. The final approval hearing occurred on February 9, 2022, and the parties are awaiting the Court’s decision on final approval of the settlement withproposed settlement. If the Court and haveapproves the Court approve the settlement, in order to finalize the settlement of this matter. No assurance can be given that a final settlement will be reached. If we enter into a settlement agreement 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
consistent with the agreement in principle we reached on June 18, 2021, we do not anticipate the result to have a material negativeadverse impact on our results of operations or financial position. If we dothe Court does not enter into aapprove the final settlement, we intend to continue to vigorously defend this action.
In January 2021, GLAIC our indirect wholly-owned subsidiary, was named as a defendant in a putative class action lawsuit pending in the United States District Court for the District of Oregon captioned
Patsy H. McMillan, Individually and On Behalf Of All Others Similarly Situated, v. Genworth Life and Annuity Insurance Company
. Plaintiff seeks to represent life insurance policyholders, alleging that GLAIC impermissibly calculated cost of insurance rates to be higher than that permitted by her policy. The complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5 million. On April 5, 2021, we filed an answer to the plaintiff’s complaint. We intend to continue to vigorously defend thi
s
this action.
On August 11, 2021, GLIC and GLICNY received a request for pre-suit mediation related to a potential class action lawsuit that may be brought by five long-term care insurance policyholders, seeking to represent a nationwide class alleging that the defendants made misleading and inadequate disclosures regarding premium increases for long-term care insurance policies. The draft complaint asserts claims for breach of contract, conversion, and declaratory and injunctive relief, and seeks damages in excess of $5
million. Genworth participated in pre-suit mediation in November 2021 and January 2022. On January 15, 2022, the parties reached an agreement in principle to settle the dispute on a nationwide basis, subject to the negotiation and execution of a final settlement agreement, and Court approval thereof. On January 28, 2022, the complaint was filed in the United States District Court for the Eastern District of Virginia captioned
Fred Haney, Marsha Merrill, Sylvia Swanson, and Alan Wooten, individually, and on behalf of all others similarly situated v. Genworth Life Insurance Company and Genworth Life Insurance Company of New York
. The parties executed a settlement agreement consistent with the agreement in principle signed on January 15, 2022. On May 2, 2022, the Court preliminarily approved the settlement. The final approval hearing is scheduled for November 17, 2022. If the Court approves the settlement, we do not anticipate the result to have a material adverse impact on our results of operations or financial position. If the Court does not approve the final settlement, we intend to continue to vigorously defend this action.
At this time we cannot determine or predict the ultimate outcome of any of the pending legal and regulatory matters specifically identified above or the likelihood of potential future legal and regulatory matters against us. Except as disclosed above, we are not able to provide an estimate or range of reasonably possible losses related to these matters. Therefore, we cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to additional unrelated investigations and lawsuits. Increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could adversely affect our business, financial condition and results of operations.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(b) Commitments
As of June 30, 2021,March 31, 2022, we were committed to fund $1,187$1,309 million in limited partnership investments, $58$75 million in U.S. commercial mortgage loan investments and $98$20 million in private placement investments. As of June 30, 2021,March 31, 2022, we were also committed to fund $273$108 million of bank loan investments which had not yet been drawn.
(12) Changes in Accumulated Other Comprehensive Income (Loss)
The following tables show the changes in accumulated other comprehensive income (loss), net of taxes, by component as of and for the periods indicated:
 
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
 
Derivatives
qualifying
as
hedges
 (2)
 
Foreign
currency
translation
and other
adjustments
 
Total
  
Net
unrealized
investment
gains
(losses)
(1)
 
Derivatives
qualifying as
hedges
(2)
 
Foreign
currency
translation
and other
adjustments
 
Total
 
Balances as of April 1, 2021
  $1,919  $1,792  $(36)  $3,675 
Balances as of January 1, 2022
 $1,860  $2,025  $(24)  $3,861 
OCI before reclassifications
   (54)   245   2   193   (1,057)   (199)   (5)   (1,261) 
Amounts reclassified from (to) OCI
   0     (34)   0     (34)   6   (37)   0     (31) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Current period OCI
   (54)   211   2   159   (1,051)   (236)   (5)   (1,292) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Balances as of June 30, 2021 before noncontrolling interests
   1,865   2,003   (34)   3,834 
Balances as of March 31, 2022 before noncontrolling interests
  809   1,789   (29)   2,569 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Less: change in OCI attributable to noncontrolling interests
   0     0     0     0     (41)   0     0     (41) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Balances as of June 30, 2021
  $1,865  $2,003  $(34)  $3,834 
Balances as of March 31, 2022
 $850  $1,789  $(29)  $2,610 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
(1) 
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2) 
See note 5 for additional information.
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying as
hedges
(2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2021
 $2,214  $2,211  $0    $4,425 
OCI before reclassifications
  (316)   (385)   136   (565) 
Amounts reclassified from (to) OCI
  (4)   (34)   0     (38) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
  (320)   (419)   136   (603) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2021 before noncontrolling interests
  1,894   1,792   136   3,822 
  
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
  (25)   0     172   147 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of March 31, 2021
 $1,919  $1,792  $(36)  $3,675 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1) 
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2) 
See note 5 for additional information.
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying
as
hedges
 (2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of April 1, 2020
  $1,140  $2,755  $(80)  $3,815 
OCI before reclassifications
   762   (48)   73   787 
Amounts reclassified from (to) OCI
   (88)   (30)   0     (118) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
   674   (78)   73   669 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020 before noncontrolling interests
   1,814   2,677   (7)   4,484 
   
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
   3   0     34   37 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020
  $1,811  $2,677  $(41)  $4,447 
   
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2) 
See note 5 for additional information.
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying as
hedges
 (2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2021
  $2,214  $2,211  $0    $4,425 
OCI before reclassifications
   (370)   (140)   138   (372) 
Amounts reclassified from (to) OCI
   (4)   (68)   0     (72) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
   (374)   (208)   138   (444) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2021 before noncontrolling interests
   1,840   2,003   138   3,981 
   
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
   (25)   0     172   147 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2021
  $1,865  $2,003  $(34)  $3,834 
   
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2) 
See note 5 for additional information.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in millions)
  
Net
unrealized
investment
gains
(losses)
(1)
  
Derivatives
qualifying as
hedges
 (2)
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2020
  $1,456  $2,002  $(25)  $3,433 
OCI before reclassifications
   448   735   (25)   1,158 
Amounts reclassified from (to) OCI
   (94)   (60)   0     (154) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Current period OCI
   354   675   (25)   1,004 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020 before noncontrolling interests
   1,810   2,677   (50)   4,437 
   
 
 
  
 
 
  
 
 
  
 
 
 
Less: change in OCI attributable to noncontrolling interests
   (1)   0     (9)   (10) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances as of June 30, 2020
  $1,811  $2,677  $(41)  $4,447 
   
 
 
  
 
 
  
 
 
  
 
 
 
(1) 
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information.
(2) 
See note 5 for additional information.
The foreign currency translation and other adjustments balance in the charts above included $(4) million and $(15) million, respectively, net of taxes of $1 million and $4 million, respectively, related to a net unrecognized postretirement benefit obligation as of June 30,March 31, 2022 and 2021. The balance also included taxes of $(1) million and $22 million, respectively, related to foreign currency translation adjustments as of June 30, 2021 and 2020.March 31, 2021.
The following table shows reclassifications in (out) of accumulated other comprehensive income (loss), net of taxes, for the periods presented:
 
 
Amount reclassified from accumulated
other comprehensive income (loss)
  
Affected line item in the
consolidated statements
of income
 
Amount reclassified from accumulated
other comprehensive income (loss)
  
Affected line item in the
consolidated statements
of income
 
Three months ended
June 30,
 
Six months ended
June 30,
  
Three months ended March 31,
 
(Amounts in millions)
 
    2021    
 
    2020    
 
    2021    
 
    2020    
  
2022
 
2021
 
Net unrealized investment (gains) losses:
                
Unrealized (gains) losses on investments
(1)
 $0    $(112)  $(5)  $(119)  Net investment (gains) losses $8  $(5)  Net investment (gains) losses
Income taxes
  0     24   1   25  Provision for income taxes  (2)   1  Provision for income taxes
 
 
  
 
  
 
  
 
    
 
  
 
   
Total
 $0    $(88)  $(4)  $(94)    $6  $(4)   
 
 
  
 
  
 
  
 
    
 
  
 
   
Derivatives qualifying as hedges:
                
Interest rate swaps hedging assets
 $(52)  $(46)  $(104)  $(89)  Net investment income $(55)  $(52)  Net investment income
Interest rate swaps hedging assets
  0     0     0     (4)  Net investment (gains) losses  (2)   0    Net investment (gains) losses
Interest rate swaps hedging liabilities
  1   0    Interest expense
Foreign currency swaps
  (1)   0    Net investment income
Income taxes
  18   16   36   33  Provision for income taxes  20   18  Provision for income taxes
 
 
  
 
  
 
  
 
    
 
  
 
   
Total
 $(34)  $(30)  $(68)  $(60)    $(37)  $(34)   
 
 
  
 
  
 
  
 
    
 
  
 
   
 
(1) 
Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves.
 
696
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(13) Discontinued Operations
As discussed in note 1, onOn March 3, 2021, we completed thea sale of our entire ownership interest of approximately 52% in Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) through an underwriting agreement. We sold our approximately 214.3 million shares of Genworth Australia through an underwritten agreementfor AUD2.28 per share and received approximately AUD483 million ($370 million) in net cash proceeds. In the first quarter of 2021, we recognized an after-tax loss on sale of $3 million. In addition, we recorded an after-tax favorable adjustment of $11 million in the first quarter of 2021 associated with a refinement to our tax matters agreement liability.
The assets and liabilities related to Genworth Australia were segregated in our condensed consolidated balance sheet until deconsolidation. The major asset and liability categories of Genworth Australia were as follows for the periods indicated:
(Amounts in millions)
  
June 30,
2021
   
December 31,
2020
 
Assets
          
Investments:
          
Fixed maturity securities available-for-sale, at fair value
  $0     $2,295 
Equity securities, at fair value
   0      90 
Other invested assets
   0      154 
   
 
 
   
 
 
 
Total investments
   0      2,539 
Cash, cash equivalents and restricted cash
   0      95 
Accrued investment income
   0      16 
Deferred acquisition costs
   0      42 
Intangible assets
   0      43 
Other assets
   0      40 
Deferred tax asset
   0      42 
   
 
 
   
 
 
 
Assets related to discontinued operations
  $0     $2,817 
   
 
 
   
 
 
 
Liabilities
          
Liability for policy and contract claims
  $0     $331 
Unearned premiums
   0      1,193 
Other liabilities
   0      104 
Long-term borrowings
   0      145 
   
 
 
   
 
 
 
Liabilities related to discontinued operations
  $0     $1,773 
   
 
 
   
 
 
 
Deferred tax assets and liabilities that result in future taxable or deductible amounts to the remaining consolidated group have been reflected in assets or liabilities of continuing operations and not reflected in assets or liabilities related to discontinued operations.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A summary of operating results related to Genworth Australia reported as discontinued operations was as follows for the periodsperiod indicated:
 
  
Three months
ended
June 30,
   
Six months
ended
June 30,
 
(Amounts in millions)
  
2021
   
2020
   
2021
 
2020
   
Three months
ended March 31,
2021
 
Revenues:
              
Premiums
  $0     $62   $51  $131   $51 
Net investment income
   0      7    4   18    4 
Net investment gains (losses)
   0      66    (5)   13    (5) 
Policy fees and other income
   0      0      0     1 
  
 
   
 
   
 
  
 
   
 
 
Total revenues
   0      135    50   163    50 
  
 
   
 
   
 
  
 
   
 
 
Benefits and expenses:
              
Benefits and other changes in policy reserves
   0      39    11   63    11 
Acquisition and operating expenses, net of deferrals
   0      13    7   25    7 
Amortization of deferred acquisition costs and intangibles
   0      6    6   14    6 
Goodwill impairment
   0      5    0     5 
Interest expense
   0      2    1   3    1 
  
 
   
 
   
 
  
 
   
 
 
Total benefits and expenses
   0      65    25   110    25 
  
 
   
 
   
 
  
 
   
 
 
Income before income taxes and loss on sale
(1)
   0      70    25   53    25 
Provision for income taxes
   0      23    8   18    7 
  
 
   
 
   
 
  
 
   
 
 
Income before loss on sale
   0      47    17   35    18 
Loss on sale, net of taxes
   0      0      (3)   0      (3) 
  
 
   
 
   
 
  
 
   
 
 
Income from discontinued operations, net of taxes
   0      47    14   35    15 
  
 
   
 
   
 
  
 
   
 
 
Less: net income from discontinued operations attributable to noncontrolling interests
   0      23    8   17    8 
  
 
   
 
   
 
  
 
   
 
 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $0     $24   $6  $18   $7 
  
 
   
 
   
 
  
 
   
 
 
 
(1) 
The three months ended June 30, 2020, includes pre-tax income from discontinued operations available to Genworth Financial, Inc.’s common stockholders of $37 million. The six months ended June 30,March 31, 2021, and 2020, includes pre-tax income from discontinued operations available to Genworth Financial, Inc.’s common stockholders of $13 million and $28 million, respectively.million.
In addition, we recorded after-tax income (loss) of $(1) and $11 million for the three months ended March 31, 2022 and 2021, respectively, associated with refinements to our tax matters agreement liability.
Lifestyle protection insurance
On December 1, 2015, weGenworth Financial, through its subsidiaries, completed the sale of ourits lifestyle protection insurance business to AXA. In 2017, AXA sued us for damages on an indemnity in the 2015 agreement related to alleged remediation it paid to customers who purchased payment protection insurance (“PPI”). On July 20, 2020, we reached a settlement agreement related to losses incurred from mis-selling complaints on policies sold from 1970 through 2004. As part of the settlement agreement, we agreed to make payments for certain PPI mis-selling claims, along with a significant portion of future claims that are still being processed. Under the settlement agreement, we issued a secured promissory note to AXA, in which we agreed to make deferred cash payments in two installments in June 2022 and September 2022. Future claims that are still being processed will be added to the September 2022 installment payment.Genworth Holdings
 
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
agreed to make payments for certain PPI mis-selling claims, along with a significant portion of future claims to be invoiced by AXA. Under the settlement agreement, Genworth Holdings issued a secured promissory note to AXA, in which it agreed to make deferred cash payments in two installments in June 2022 and September 2022.
In connection with the Genworth Australia sale, weGenworth Holdings made a mandatory principal payment to AXA of approximately £176 million ($245 million) in March 2021. The mandatory payment fully repaid the first installment obligation originally due in June 2022 and partially prepaid the September 2022 installment payment.
On September 21, 2021, Genworth Holdings used a portion of the net proceeds from the minority IPO of Enact Holdings to repay the remaining outstanding balance of the secured promissory note of approximately £215 million ($296 million). As of December 31, 2021, we accrued approximately £22 million ($30
million) of estimated future claims still in process of being invoiced. In February 2022, Genworth Holdings paid AXA
 $30
million, which constitutes the majority of the estimated remaining unprocessed claims. We have established our current best estimates for claims still being processed by AXA, as well as other expenses; however, there may be future adjustments to this estimate. If amounts are different from our estimate, it could result in an adjustment to our liability and an additional amount reflected in income (loss) from discontinued operations.
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table presents the remaining amounts owed to AXA under the settlement agreement which are reflected as liabilities related to discontinued operations in our condensed consolidated balance sheets as of the periods presented:
 
(Amounts in millions)
  
British Pounds
  
U.S. Dollar
 
  
June 30,
2021
  
December 31,
2020
  
June 30,
2021
  
December 31,
2020
 
Installment payments due to AXA:
                 
June 2022:
                 
Beginning balance
  £159  £159  $217  $217 
Prepayments
(1)
   (159)   0     (217)   0   
   
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
   0     159   0     217 
   
 
 
  
 
 
  
 
 
  
 
 
 
September 2022:
                 
Beginning balance
   187   158   256   217 
Prepayments
(1)
   (17)   0     (28)   0   
Amounts billed as future losses
   41   29   56   39 
Foreign exchange and other
   0     0     8   0   
   
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
   211   187   292   256 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total amounts due under the promissory note
   211   346   292   473 
Future claims:
                 
Estimated beginning balance
   79   107   108   146 
Change in estimated future claims
   0     1   0     1 
Less: Amounts billed
   (41)   (29)   (56)   (39) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Estimated future billings
   38   79   52   108 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total amounts due to AXA under the settlement agreement
(2)
  £249  £425  $344  $581 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Amounts in millions)
 
British Pounds
  
U.S. Dollar
 
  
March 31,
2022
  
December 31,
2021
  
March 31,
2022
  
December 31,
2021
 
Installment payments due to AXA:
                
June 2022:
                
Beginning balance
 £0    £159  $0    $217 
Prepayments
(1)
  0     (159)   0     (217) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  0     0     0     0   
  
 
 
  
 
 
  
 
 
  
 
 
 
September 2022:
                
Beginning balance
  0     187   0     256 
Amounts billed as future losses
  0     45   0     61 
Prepayments
(1)
  0     (232)   0     (324) 
Foreign exchange and other
  0     0     0     7 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  0     0     0     0   
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amounts due under the promissory note
  0     0     0     0   
Future claims:
                
Estimated beginning balance
  22   79   30   108 
Plus: Additional amounts invoiced
  1   0     1   0   
Change in estimated future claims
  0     (10)   0     (14) 
Less: Amounts billed and included as mandatory prepayments
  0     (45)   0     (61) 
Less: Amounts paid
  (22)   (2)   (30)   (3) 
Foreign exchange and other
  0—     0—     0     0—   
  
 
 
  
 
 
  
 
 
  
 
 
 
Estimated future claims
  1   22   1   30 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total amounts due to AXA under the
settlement
agreement
 £1  £22  $1  $30 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
(1) 
On March 3, 2021, we completed the sale of
Genworth
Australia and received net proceeds of approximately AUD483 million ($370 million). The sale of Genworth Australia resulted in a mandatory principal payment of approximately £176 million ($245 million) related to our outstanding secured promissory note issued to AXA, dated as of July 20, 2020, as amended by the parties in connection with the Genworth Australia sale.
(2) 
Amounts exclude accrued interest on On September 21, 2021, we used a portion of the net proceeds from the minority IPO of Enact Holdings to repay the remaining outstanding balance of the secured promissory note and certain other expenses. As of June 30, 2021, due principally to the mandatory payment made in connection with the Genworth Australia sale, we reduced the amount of accrued interest payable on the promissory note resulting in a reduction in the total amount owed to AXA of approximately $2 million.£215 million ($296 million).
An after-tax loss of $4 million and $5
million related to the settlement is included in income (loss) from discontinued operations for the three and six months ended June 30, 2021, respectively. The after-tax loss for the six months ended June 30, 2021 is comprised of foreign currency remeasurement losses and legal costs, partially offset by derivative hedge gains associated with foreign currency forward contracts entered into to mitigate our exposure to the installment payments made in British Pounds. For the three and six months ended June 30, 2020,March 31, 2022 and 2021, we recorded
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
an after-tax loss from discontinued operations of $520$1 million in each period, related to the settlement. In connectionsettlement agreement with our prepayment of the promissory note, interest now accrues at a fixed rate of
 2.75% and is due quarterly.
To secure our obligation under the amended promissory note, we granted a 19.9% security interest in the outstanding common stock of Enact Holdings to AXA. AXA does not have the right to sell or repledge the collateral and is not entitled to any voting rights. The collateral will be released back to us upon full repayment of the promissory note. Accordingly, the collateral arrangement has no impact on our consolidated financial statements. In the event AXA recovers amounts from third parties related to the mis-selling losses, including from the distributor responsible for the sale of the policies, we have certain rights to share in those recoveries to recoup payments for the underlying mis-selling losses. As of June 30, 2021,March 31, 2022, we have not recorded any amounts associated with recoveries from third parties.
The promissory note is also subject to certain mandatory prepayments upon the occurrence of:
the consummation of certain qualifying debt transactions in which total gross proceeds of at least $750 million are raised;
the consummation of certain qualifying equity issuances or dispositions with respect to Enact Holdings, or any of our subsidiaries, in which total net cash proceeds of at least $475 million are raised;
certain asset dispositions of Enact Holdings;
transactions involving a change of control of Genworth; and
receipt of dividends and sale proceeds from Enact Holdings above certain threshold amounts.
The promissory note also contains certain negative and affirmative covenants, restrictions imposed on the collateral, representations and warranties and customary events of default.
In addition to the promissory note,future claims still being processed under the settlement agreement, we also have an unrelated liability that is owed to AXA associated with a tax gross up on underwriting losses onattributable to a product sold by a distributor in our former lifestyle protection insurance business. For the six months ended June 30, 2021, we recorded a $4 million after-tax loss due to an adjustment to the underwriting losses. As of June 30, 2021March 31, 2022 and
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GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2020,2021, the balance of the liability iswas $3 million and $4 million, and $16 million,
respectively
, and is included as liabilities related to discontinued operations in our condensed consolidated balance sheets. DuringFor the second quarter ofthree months ended March 31, 2021, we reached a settlement with AXA and made a cash paymentrecorded an after-tax loss of approximately €15$4 million ($18 million) for the amounts owed related to the underwriting losses. The remaining amount accrued as of June 30, 2021 represents our best estimate of amounts owed for a tax gross up associated with the underwriting losses.
We have established our current best estimates for future claims that are still being processed under the settlement agreement, as well as for a tax gross up related to underwriting losses and other expenses; however, there may be future adjustments to these estimates. If amounts are different from our estimates, it could result in an adjustmentunderwriting loss
liability
previously owed to our liabilities and an additional amount reflected in income (loss) from discontinued operations.AXA.
 
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Item 2.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein and with our 20202021 Annual Report on Form 10-K. Unless the context otherwise requires, references to “Genworth Financial,” “Genworth,” the “Company,” “we” or “our” herein are to Genworth Financial, Inc. on a consolidated basis. References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.
Cautionary note regarding forward-looking statements
This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will”“will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Examples of forward-looking statements include statements we make relating to a potential partial sale of Enact Holdings, Inc. (“Enact Holdings”), future reductions of debt, potential dividends or share repurchases, future Enact Holdings, Inc. (“Enact Holdings”) dividends, the cumulative amount of rate action benefits required for our long-term care insurance business to achieve break-even, future financial performance of our businesses, liquidity and future strategic investments, including new products and services designed to assist individuals with navigating and financing long-term care, and potential third-party relationships or business arrangements relating thereto, as well as statements we make regarding the potential impacts of the coronavirus pandemic (“COVID-19”). Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from those in the forward-looking statements due to global political, economic, business, competitive, market, regulatory and other factors and risks, including but not limited to, the following:
 
we may be unable to successfully execute our strategic plans
: to effectively addressstrengthen our current business challenges
including:financial position and create long-term shareholder value, including with respect to reducing debt of Genworth Holdings, Inc. (“Genworth Holdings”); maximizing the value of Enact Holdings; achieving economic breakeven on and stabilizing the legacy long-term care insurance in-force block; advancing our debt maturitieslong-term care growth initiatives, including launching either unilaterally or with a strategic partner new product and service offerings designed to assist individuals with navigating and financing long-term care; and returning capital to Genworth Financial shareholders, due to numerous risks and constraints, including but not limited to: Enact Holdings’ ability to pay dividends as a result of the government-sponsored enterprises’ (“GSEs”) amendments to the private mortgage insurer eligibility requirements (“PMIERs”) in response to COVID-19 as well as additional PMIERs requirements or other near-term liabilities and financial obligations, reducing costs, stabilizing our U.S. life insurance businesses without additional capital contributions, improving overall capital and ratings; the riskrestrictions that the impacts of or uncertainty created by COVID-19 delay or hinder strategic transactions or otherwise make strategic transactions less attractive;GSEs may place on the inability to pursue strategic transactions; our inability to attract buyers for any businesses or other assets we may seek to sell, or securities we may seek to issue (including a potential partial saleability of Enact Holdings) in each case, in a timely manner and on anticipated terms;Holdings to pay dividends; an inability to increase the capital needed in our businesses in a timely manner and on anticipated terms, including through improved business performance, reinsurance or similar transactions, asset sales, debt issuances, securities offerings or otherwise, in each case as and when required; a failure to obtain any required regulatory, stockholder, noteholder approvals and/our strategic priorities change or other third-party approvals or consents for such strategic transactions; market conditions that do not permit such a strategic transaction to be completed or negatively impacts the overall timing and final terms of such a strategic transaction; our challenges changing or beingbecome more costly or difficult to successfully addressachieve than currently anticipated or the benefits achieved being less than anticipated; an inability to achieve anticipated cost-savingsidentify and contract with a strategic partner regarding a new long-term care insurance business; an inability to establish a new long-term care insurance business or product offerings due to commercial and/or regulatory challenges; an inability to reduce costs proportionate with Genworth’s reduced business activity, including as forecasted and in a timely manner; and adverse tax or accounting charges;
charges, including new accounting guidance (that is effective for us on January 1, 2023) related to long-duration insurance contracts;
 
risks relating to estimates, assumptions and valuations
including: inadequate reserves and the need to increase reserves (including as a result of any changes we may make in the future to our assumptions, methodologies or otherwise in connection with periodic or other reviews); risks related to the impact of our annual review of assumptions and methodologies related to our long-term care insurance claim reserves and margin reviews, including risks that additional information obtained in the future or other changes to assumptions or methodologies materially affect margins; the inability to accurately estimate the impacts of COVID-19; inaccurate models; deviations from our estimates and actuarial assumptions or other reasons in our long-term care insurance, life insurance and/or annuity businesses; accelerated amortization of deferred acquisition costs (“DAC”) and present value of future profits (“PVFP”) (including as a result of any future changes we may make to our assumptions, methodologies or otherwise in connection with periodic or other reviews); adverse impact on our financial results as a result of projected profits followed by projected losses (as is currently the case with our long-term care insurance business); and changes in valuation of fixed maturity and equity securities;
 
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reserves and margin reviews, including risks that additional information obtained in the future or other changes to assumptions or methodologies materially affect margins; or other changes to assumptions or methodologies materially affect margins; the inability to accurately estimate the impacts of COVID-19; inaccurate models; the need to increase our reserves as a result of deviations from our estimates and actuarial assumptions or other reasons; accelerated amortization of deferred acquisition costs (“DAC”) and present value of future profits (“PVFP”) (including as a result of any future changes we may make to our assumptions, methodologies or otherwise in connection with periodic or other reviews); adverse impact on our financial results as a result of projected profits followed by projected losses (as is currently the case with our long-term care insurance business); changes in valuation of fixed maturity and equity securities; and the benefits Enact Holdings realizes from its future loss mitigation actions or programs may be limited;
liquidity, financial strength and credit ratings, credit and counterparty and credit risks
including: insufficient internal sources to meet liquidity needs and limited or no access to capital, including the impact on our liquidity due to the repayment of our September 2021 debt maturity; an inability to obtain further financing or liquidity, either by raising capital through issuing additional debt or equity, including convertible or equity-linked securities, and/or selling a percentage of our ownership interest in Enact Holdings prior to our future debt maturities, or an inability to obtain a secured term loan or credit facility; the impact on holding companyGenworth Financial’s and Genworth Holdings’ liquidity caused by the inability to receive dividends or other returns of capital from Enact Holdings, including as a result of COVID-19; the impact of increased leverage as a result of the AXA S.A. (“AXA”) settlement and related restrictions; continued availabilitylimited sources of capital and financing;financing, including under certain conditions we may seek additional capital on unfavorable terms; future adverse rating agency actions against us or Enact Holdings, including with respect to rating downgrades or potential downgrades or being put on review for potential downgrade, all of which could have adverse implications, including with respect to key business relationships, product offerings, business results of operations, financial condition and capital needs, strategic plans, collateral obligations and availability and terms of hedging, reinsurance and borrowings; defaults by counterparties to reinsurance arrangements or derivative instruments; and defaults or other events impacting the value of our invested assets, including but not limited to, our fixed maturity and equity securities, portfolio; defaults on our commercial mortgage loans; defaults on mortgage loans, or other assets underlying our investments in our mortgage-backedpolicy loans and asset-backed securities and volatility in performance; limited partnership investments;
 
risks relating to economic, market and political conditions
including: downturns and volatility in global economies and equity and credit markets, including as a result of prolonged unemployment, a sustained low interest rate environmentinflation and supply chain disruptions, continued labor shortages and other displacements caused by COVID-19; interest rates and changes in rates havecould adversely impacted, and may continue to materially adversely impactaffect our business and profitability; deterioration in economic conditions or a decline in home prices or home sales that adversely affect ourEnact Holdings’ loss experience in our Enact segment;and/or business levels; political and economic instability or changes in government policies; and fluctuations in foreign currency exchange rates and international securities markets;
 
regulatory and legal risks
including: extensive regulation of our businesses and changes in applicable laws and regulations (including changes to tax laws and regulations); litigation and regulatory investigations or other actions; dependence on dividendsactions, including commercial and other distributions from Enact Holdings and the inability of any subsidiaries to pay dividends or make other distributions to us, including as a result of the performance of our subsidiaries,contractual disputes with counterparties; heightened regulatory restrictions resulting from COVID-19, and other insurance, regulatory or corporate law restrictions; the inability to successfully seek in-force rate action increases (including increased premiums and associated benefit reductions) in our long-term care insurance business, including as a result of
COVID-19;
adverse changes in regulatory requirements, including risk-based capital; inability to continue to maintain the private mortgage insurer eligibility requirements (“PMIERs”); risks on Enact Holdings’ ability to pay our holding company dividends as a result of the government-sponsored enterprises (“GSEs”) amendments to PMIERs in response to COVID-19 or additional PMIERs requirements or other restrictions that the GSEs may place on the ability of Enact Holdings to pay dividendscontinue to our holding company,meet the requirements mandated by PMIERs, including additional potential PMIERs restrictions that the GSEs may impose if the potential partial sale of Enact Holdings does not occur prior to October 2021; the impact on capital levelsas a result of increased delinquencies caused by COVID-19; inability of ourEnact Holdings’ U.S. mortgage insurance subsidiaries to meet minimum statutory capital requirements; the influence of Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and a small number of large mortgage lenders in the U.S. mortgage insurance market and adverse changes to the role or structure of Fannie Mae and Freddie Mac; adverse changes in regulations affecting our Enact segment;Holdings, including any additional restrictions placed on our Enact segmentHoldings by government and government-owned enterprises and the GSEs in connection with a new debt financing and/or sale of a percentage of our ownership interests therein;additional capital transactions; inability to continue to implement actions to mitigate the impact of statutory reserve requirements; changes in tax laws; and changes in accounting and reporting standards;standards, including new accounting guidance (that is effective for us on January 1, 2023) related to long-duration insurance contracts;
 
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operational risks
including: the inability to retain, attract and motivate qualified employees or senior management; the impact on processes caused by shelter-in-place or other governmental restrictions imposed as a result of COVID-19;Enact Holdings’ reliance on, and loss of, key customercustomers or distribution relationships;
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competition with government-owned and government-sponsored enterprises may put Enact Holdings at a competitive disadvantage on pricing and other terms and conditions; the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations; and failure or any compromise of the security of our computer systems, disaster recovery systems, business continuity plans and failures to safeguard or breaches of confidential information;
 
insurance and product-related risks
including: Enact Holdings’ inability to maintain or increase capital in its mortgage insurance subsidiaries in a timely manner; our inability to increase premiums and reduce benefits sufficiently, and in a timely manner, on our in-force long-term care insurance policies, in each case, as currently anticipated and as may be required from time to time in the future (including as a result of a delay or failure to obtain any necessary regulatory approvals, including as a result of COVID-19, or unwillingness or inability of policyholders to pay increased premiums and/or accept reduced benefits), including to offset any negative impact on our long-term care insurance margins; availability, affordability and adequacy of reinsurance to protect us against losses; decreases in the volume of mortgage originations or increases in mortgage insurance cancellations; increases in the use of alternatives to private mortgage insurance and reductions in the level of coverage selected; potential liabilities in connection with ourEnact Holdings’ U.S. contract underwriting services; Enact Holdings’ delegated underwriting program may subject its mortgage insurance subsidiaries to unanticipated claims; and medical advances, such as genetic research and diagnostic imaging, and related legislation that impact policyholder behavior in ways adverse to us;
 
other general risks
including: the occurrence of natural or man-made disasters, including geopolitical tensions and war, or a pandemic, similar to COVID-19,public health emergency, including pandemics, could materially adversely affect our financial condition and results of operations.
We provide additional information regarding these risks and uncertainties in our Annual Report on
Form 10-K,
filed with the U.S. Securities and Exchange Commission (“SEC”) on February 26, 2021.28, 2022. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Accordingly, for the foregoing reasons, we caution you against relying on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required under applicable securities laws.
Overview
Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products which are no longer sold.
Enact Holdings is a public company traded on the Nasdaq Global Select Market exchange under the ticker symbol “ACT.” Genworth Financial maintains control of Enact Holdings through an indirect majority voting interest and accordingly, Enact Holdings remains a consolidated subsidiary of Genworth Financial. Our Enact segment predominantly includes Enact Holdings and its mortgage insurance subsidiaries. There are minor financial reporting differences between our Enact segment and the standalone financial results of Enact Holdings, which are separately disclosed with the Securities and Exchange Commission. Notwithstanding these differences, we commonly make references to “Enact,” our “Enact segment” and “our U.S. mortgage insurance subsidiaries” throughout this Quarterly Report on Form 10-Q, which generally can be viewed as references to Enact Holdings and its mortgage insurance subsidiaries, unless the context otherwise requires.
We report our business results through three operating business segments: Enact; U.S. Life Insurance; and Runoff. We also have Corporate and Other activities. Our U.S. Life Insurance segment includes long-term care
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insurance, life insurance and fixed annuity products. The Runoff segment primarily includes variable annuity, variable life insurance and corporate-owned life insurance products, which have not been actively sold since 2011.
Strategic Update
We continue to focusGenworth is focused on executing ourfive strategic plan to raise liquidity to address our futurepriorities, including: reducing the debt maturities, other near-term liabilities and financial obligations, strengthen our financial position and create long-term shareholder value, which could include returning capital to shareholders. Our plan builds on actions we have taken over the last several years to strengthen our financial position, including the sale of Genworth MI Canada Inc., our former Canada mortgage insurance business, the completion of a debt offering through Enact Holdings, the settlement agreement reached with AXA and the sale of Genworth Mortgage Insurance Australia Limited (“Genworth Australia”), our former Australian mortgage insurance business in March 2021. Most recently, on July 21, 2021, Genworth Holdings, Inc. (“Genworth Holdings”) early redeemed its remaining September 2021 senior notes. Subsequent to this redemption, Genworth Holdings has outstanding approximately $1.7 billion of long-term debt, with no debt maturities until August 2023. However, prior to the August 2023 debt maturity, the AXA promissory note of $344 million is due in September 2022. Our priority is to continue to reduce debt at Genworth Holdings, the issuer of our outstanding public debt, to approximately $1$1.0 billion over time.
The potential partial sale of Enact Holdings is a key component of our strategic plan; however, it is subject to various conditions and approvals, including market conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering. We also remain open to other potential strategic alternatives to address our future holding company debt maturities whiletime; maximizing the value of Enact Holdings. In assessingHoldings; achieving economic breakeven on and stabilizing the legacy long-term care insurance in-force block; advancing Genworth’s long-term care growth initiatives; and returning capital to Genworth Financial shareholders. During the first quarter of 2022, we continued to make meaningful progress on our strategic options,priorities. Genworth Holdings repurchased $82 million principal amount of its February 2024 debt, leaving $200 million outstanding as of March 31, 2022, and we plan to retire the remaining outstanding balance in the third quarter of 2022, depending upon economic and business conditions, among other considerations. If we are considering, among other factors,able to retire the level of, and restrictions containedFebruary 2024 debt in 2022, the remaining debt outstanding at Genworth Holdings will be approximately $900 million, below our existing indebtedness, tax considerations, the views of regulators and rating agencies, and the performance and prospects of our businesses. In addition, we have taken steps, and may take additional actions to align our expense structure with our reduced business activities. Expense reduction initiatives completed to date in 2021 are anticipated to result in annualized savingstarget of approximately $50 million.
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Ongoing Priorities
$1.0 billion.
Stabilizing our U.S. life insurance businessesbusiness continues to be one of ourGenworth’s long-term goals. We will continue to execute this objective primarily through our multi-year long-term care insurance in-force rate action plan. Premium rate increases and associated benefit reductions on our legacy long-term care insurance policies are critical to the business. We continue to manage our U.S. life insurance businesses on a standalone basis and are planning for a new long-term care insurance joint venture in the United States. Going forward, the U.S. life insurance businesses will continue to rely on their consolidated statutory capital, significant claim and future policy benefit reserves, prudent management of its in-force blocks and actuarially justified in-force rate actions to satisfy obligations to its policyholders. Our U.S. life insurance business continued to make strong progress on its multi-year long-term care insurance in-force rate action plan, receiving approvals of approximately $206$101 million of incremental annual premiums for the sixthree months ended June 30, 2021.March 31, 2022. In aggregate, we estimate that we have achievedthe cumulative economic benefit of our long-term care insurance multi-year in-force rate action plan through the first quarter of 2022 was approximately $15.5$20.4 billion, on a net present value basis, of approved in-force rate increases since 2012.the total expected amount required of $28.7 billion. We continue to work closely with the National Association of Insurance Commissioners (“NAIC”) and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
Given the significant improvement in the results of operations and financial position of Genworth, including the $2.1 billion of debt reduction in 2021, and the recent approval of an ordinary dividend by Enact Holdings’ board of directors, on May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Repurchases under the authorized program would be funded from holding company capital, as well as future cash flow generation, including expected future dividends from Genworth Financial’s ownership in Enact Holdings. We expect the majority of share repurchases to occur following the repayment of Genworth Holdings’ remaining February 2024 debt. If ultimately successful, this will be the first return of capital to Genworth Financial shareholders in over 13 years.
Financial Strength and Credit Ratings
On March 11, 2022, S&P Global Ratings (“S&P”) upgraded the credit rating of Genworth Financial and Genworth Holdings to “B+” (Speculative) from “B” (Speculative) and maintained a Positive outlook. The ratings upgrade is mostly due to the reduction in Genworth Holdings’ debt and other obligations over the past 12 months, resulting in the Company’s improved financial flexibility and lower liquidity risk. In addition, S&P affirmed its “BBB” (Good) financial strength rating of Enact Mortgage Insurance Corporation (“EMICO”) and maintained a Positive outlook.
There were no other changes in the financial strength ratings of our insurance subsidiaries or the credit ratings of Genworth Financial and Genworth Holdings subsequent to February 28, 2022, the date we filed our 2021 Annual Report on Form 10-K. For additional information regarding the financial strength ratings of Genworth Financial’s insurance subsidiaries and the credit ratings of Genworth Financial and Genworth Holdings, including their importance to our business, see “Item 1—Ratings” in our 2021 Annual Report on Form 10-K.
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Our Financial Information
The financial information in this Quarterly Report on Form 10-Q has been derived from our unaudited condensed consolidated financial statements.
Revenues and expenses
Our revenues consist primarily of the following:
Premiums
. Premiums consist primarily of premiums earned on insurance products for mortgage, long-term care and term life insurance.
Net investment income
. Net investment income represents the income earned on our investments. For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.”
Net investment gains (losses)
. Net investment gains (losses) consist primarily of realized gains and losses from the sale of our investments, credit losses, unrealized and realized gains and losses from our equity securities, limited partnership investments and derivative instruments. For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Policy fees and other income
. Policy fees and other income consists primarily of fees assessed against policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and term universal life insurance policies, advisory and administration service fees assessed on investment contractholder account values, broker/dealer commission revenues, fee revenue from contract underwriting services and other fees.
Our expenses consist primarily of the following:
Benefits and other changes in policy reserves
. Benefits and other changes in policy reserves consist primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for long-term care insurance, life insurance, accident and health insurance, structured settlements and single premium immediate annuities with life contingencies, and claim costs incurred related to mortgage insurance products.
Interest credited
. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.
Acquisition and operating expenses, net of deferrals
. Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.
Amortization of deferred acquisition costs and intangibles
. Amortization of DAC and intangibles consists primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.
Interest expense
. Interest expense represents interest related to our borrowings that are incurred at Genworth Holdings or Enact Holdings, and interest expense related to the Tax Matters Agreement and certain reinsurance arrangements being accounted for as deposits.
Income taxes
. We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. generally accepted accounting principles (“U.S. GAAP”) and tax law. The
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difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.
Net income from continuing operations attributable to noncontrolling interests
. Net income from continuing operations attributable to noncontrolling interests represents the portion of income from continuing operations in a subsidiary attributable to third parties.
The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers.
The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.
We allocate corporate expenses to each of our operating segments using various methodologies, including based on the amount of capital allocated to each operating segment.
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Consolidated Results of Operations
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
The following table sets forth the consolidated results of operations for the periods indicated:
   
Three months
ended March 31,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2022
  
2021
   
2022 vs. 2021
 
Revenues:
      
Premiums
  $931  $968   $(37)   (4)% 
Net investment income
   764   801    (37)   (5)% 
Net investment gains (losses)
   28   33    (5)   (15)% 
Policy fees and other income
   169   183    (14)   (8)% 
  
 
 
  
 
 
   
 
 
  
Total revenues
   1,892   1,985    (93)   (5)% 
  
 
 
  
 
 
   
 
 
  
Benefits and expenses:
      
Benefits and other changes in policy reserves
   1,139   1,218    (79)   (6)% 
Interest credited
   125   131    (6)   (5)% 
Acquisition and operating expenses, net of deferrals
   271   275    (4)   (1)% 
Amortization of deferred acquisition costs and intangibles
   92   77    15   19% 
Interest expense
   26   51    (25)   (49)% 
  
 
 
  
 
 
   
 
 
  
Total benefits and expenses
   1,653   1,752    (99)   (6)% 
  
 
 
  
 
 
   
 
 
  
Income from continuing operations before income taxes
   239   233    6   3% 
Provision for income taxes
   58   59    (1)   (2)% 
  
 
 
  
 
 
   
 
 
  
Income from continuing operations
   181   174    7   4% 
Income (loss) from discontinued operations, net of taxes
   (2)   21    (23)   (110)% 
  
 
 
  
 
 
   
 
 
  
Net income
   179   195    (16)   (8)% 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —      30   NM(1) 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     8    (8)   (100)% 
  
 
 
  
 
 
   
 
 
  
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $(38)   (20)% 
  
 
 
  
 
 
   
 
 
  
Net income available to Genworth Financial, Inc.’s common stockholders:
      
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $151  $174   $(23)   (13)% 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (2)   13    (15)   (115)% 
  
 
 
  
 
 
   
 
 
  
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187   $(38)   (20)% 
  
 
 
  
 
 
   
 
 
  
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Unless otherwise stated, all references to net income (loss), net income (loss) per share, adjusted operating income (loss) and adjusted operating income (loss) per share found in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read as net income (loss) available to Genworth Financial, Inc.’s common stockholders, net income (loss) available to Genworth Financial, Inc.’s common stockholders per share, adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share, respectively.
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Use of non- GAAP measures
Reconciliation of net income (loss) to adjusted operating income (loss)
We use non-GAAP financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share.” Adjusted operating income (loss) per share is derived from adjusted operating income (loss). Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss). We define adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Initial gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of non-recourse funding obligations, early termination fees for other financing restructuring and/or initial gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual non-operating items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual non-operating items are also excluded from adjusted operating income (loss) if, in our opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income (loss) in accordance with U.S. GAAP, we believe that adjusted operating income (loss), and measures that are derived from or incorporate adjusted operating income (loss), including adjusted operating income (loss) per share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) and adjusted operating income (loss) per share on a basic and diluted basis are not substitutes for net income (loss) or net income (loss) per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) may differ from the definitions used by other companies.
Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.
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The following table presents a reconciliation of net income to adjusted operating income for the periods indicated:
   
    Three months ended    
 
   
March 31,
 
(Amounts in millions)
  
2022
  
2021
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $149  $187 
Add: net income from continuing operations attributable to noncontrolling interests
   30   —   
Add: net income from discontinued operations attributable to noncontrolling interests
   —     8 
  
 
 
  
 
 
 
Net income
   179   195 
Less: income (loss) from discontinued operations, net of taxes
   (2)   21 
  
 
 
  
 
 
 
Income from continuing operations
   181   174 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —   
  
 
 
  
 
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   151   174 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
   
Net investment (gains) losses, net
   (28)   (33) 
(Gains) losses on early extinguishment of debt
   3   4 
Expenses related to restructuring
   —     21 
Taxes on adjustments
   5   2 
  
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168 
  
 
 
  
 
 
 
We repurchased $82 million principal amount of Genworth Holdings’ senior notes due in February 2024 and $146 million principal amount of Genworth Holdings’ senior notes with 2021 maturity dates in the first quarters of 2022 and 2021, respectively, for a pre-tax loss of $3 million and $4 million, respectively. These transactions were excluded from adjusted operating income as they relate to losses on the early extinguishment of debt.
We recorded a pre-tax expense of $21 million in the first quarter of 2021 related to restructuring costs as we continued to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
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Earnings per share
The following table provides basic and diluted earnings per common share for the periods indicated:
   
Three months ended
March 31,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions, except per share amounts)
  
    2022    
   
    2021    
   
 2022 vs. 2021 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.30   $0.35   $(0.05)   (14)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Diluted
  $0.29   $0.34   $(0.05)   (15)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.29   $0.37   $(0.08)   (22)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Diluted
  $0.29   $0.37   $(0.08)   (22)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.26   $0.33   $(0.07)   (21)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Diluted
  $0.25   $0.33   $(0.08)   (24)% 
  
 
 
   
 
 
   
 
 
  
 
 
 
Weighted-average common shares outstanding:
       
Basic
   508.3    506.0    
  
 
 
   
 
 
    
Diluted
   517.4    513.8    
  
 
 
   
 
 
    
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation.
The following table presents a summary of adjusted operating income (loss) for our segments and Corporate and Other activities for the periods indicated:
   
Three months ended
March 31,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
  
    2021    
  
 2022 vs. 2021 
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
     
Enact segment
  $135  $126  $9   7% 
U.S. Life Insurance segment:
     
Long-term care insurance
   59   95   (36)   (38)% 
Life insurance
   (79)   (63)   (16)   (25)% 
Fixed annuities
   16   30   (14)   (47)% 
  
 
 
  
 
 
  
 
 
  
U.S. Life Insurance segment
   (4)   62   (66)   (106)% 
  
 
 
  
 
 
  
 
 
  
Runoff segment
   9   12   (3)   (25)% 
Corporate and Other activities
   (9)   (32)   23   72% 
  
 
 
  
 
 
  
 
 
  
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $131  $168  $(37)   (22)% 
  
 
 
  
 
 
  
 
 
  
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Executive Summary of Consolidated Financial Results
Below is an executive summary of our consolidated financial results for the periods indicated. Amounts below are net of taxes, unless otherwise indicated. After-tax amounts assume a tax rate of 21%.
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
 
Net income availablefor the three months ended March 31, 2022 and 2021 was $149 million and $187 million, respectively, and adjusted operating income was $131 million and $168 million, respectively. Our Enact segment drove our first quarter of 2022 consolidated financial results, reporting $135 million of adjusted operating income, an increase of 7% compared to Genworth Financial, Inc.’s common stockholders was $240the first quarter of 2021. Our U.S. Life Insurance segment reported an adjusted operating loss of $4 million in the first quarter of 2022 driven mostly by unfavorable life insurance operating results, which reported an adjusted operating loss of $79 million for the three months ended June 30, 2021March 31, 2022, an increase of 25% compared to a net loss of $441 million for the three months ended June 30, 2020. AdjustedMarch 31, 2021. The following is a summary comparison of adjusted operating income available to Genworth Financial, Inc.’s common stockholders was $194 million(loss) for the three months ended June 30, 2021 compared to an adjusted operating loss of $23 million for the three months ended June 30, 2020.our segments and Corporate and Other activities:
 
Our Enact segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $135 million and $126 million for the three months ended June 30,March 31, 2022 and 2021, comparedrespectively.
The increase was primarily attributable to an adjusted operating losslower losses largely from a favorable reserve adjustment of $3$40 million for the three months ended June 30, 2020. The change to income in the current year from a lossprimarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $8 million on pre-COVID-19 delinquencies in the prior year, was primarilyas well as from higher losseslower new delinquencies in the prior year from higher new delinquencies driven by a significant increase in borrower forbearance and unfavorable reserve adjustments as a result of COVID-19. The increase wascurrent year.
These improvements were partially offset by higher operating costslower premiums and interest expense associated withthe minority initial public offering (“IPO”) of Enact Holdings’ senior notes issuedHoldings that closed in August 2020.September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $30 million in the current year.
 
Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $71 million in the current year compared to an adjusted operating loss of $5$4 million infor the prior year.three months ended March 31, 2022 compared to adjusted operating income of $62 million for the three months ended March 31, 2021.
 
Our long-termLong-term care insurance business had adjustedinsurance:
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $98decreased $36 million and $48 million for the three months ended June 30, 2021 and 2020, respectively. The increase was primarily from a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims, less favorable development on incurred but not reported (“IBNR”) claims, lower renewal premiums and lower net investment income.
These unfavorable developments were partially offset by higher premiums and reduced benefits of $61 million in the current year from in-force rate actions approved and implemented, which included a net favorable impact from policyholder benefit reduction elections made as part of a legal settlementsettlement.
To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $76 million in the currentprior year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $30 million.
Life insurance:
The increase was alsoadjusted operating loss increased $16 million mainly attributable to higher investment income and favorable development on incurred but not reported (“IBNR”) claims,a $20 million legal settlement accrual, partially offset by a decrease in claim terminations driven mostly by lower mortality in the current year compared to the prior year.
 
Our life insurance business had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $40 million and $81 million for the three months ended June 30, 2021 and 2020, respectively. The decrease in the loss was mainly attributable to higher reserves recorded in the prior year on our 10-year term universal life insurance block entering its post-level premium period and from lower lapses primarily associated with our large 20-year term life insurance block written at the end of 2000 as it entered its post-level premium period. These
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Fixed annuities: 
decreases were partially offset by higher mortality in our term universal life insurance product and a DAC impairment of $13 million in our universal life insurance products in the current year.
 
Our fixed annuities business had adjustedAdjusted operating income available to Genworth Financial, Inc.’s common stockholders of $13decreased $14 million and $28 million for the three months ended June 30, 2021 and 2020, respectively. The decrease was mainly attributable to lower net spreads and lower mortality in our single premium immediate annuities and higher reserves in our fixed indexed annuities driven by a less favorable equity market and interest rate changes in the current year.
 
Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $15$9 million and $24$12 million for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The decrease was predominantly due to lower investment income and less favorable equity market performance in the current year.
 
Corporate and Other activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $27 million and $39 million for the three months ended June 30, 2021 and 2020, respectively. The decrease was predominantly due to unfavorable equity market performance and higher interest rates resulting in a decline in the loss was primarily related to lower interest expense in the current year.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Net income available to Genworth Financial, Inc.’s common stockholders was $427 million for the six months ended June 30, 2021 compared to a net lossaverage account values of $507 million for the six months ended June 30, 2020. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders was $362 million for the six months ended June 30, 2021 compared to an adjusted operating loss of $3 million for the six months ended June 30, 2020.
Our Enact segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $261 million and $145 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily attributable to higher losses in the prior year from higher new delinquencies driven by a significant increase in borrower forbearance and higher unfavorable reserve adjustments as a result of COVID-19. The increase was also driven by higher premiums mainly attributable to higher insurance in-force, partially offset by higher ceded premiums, continued lapse of older higher priced policies and a decrease in single premium policy cancellations in the current year. These increases were partially offset by interest expense associated with Enact Holdings’ senior notes issued in August 2020 and higher operating costs in the current year.
Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $133 million in the current year compared to an adjusted operating loss of $75 million in the prior year.
Our long-term care insurance business had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $193 million and $49 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily from favorable development on IBNR claims, higher investment income and higher premiums and reduced benefits of $75 million from in-force rate actions approved and implemented, which included a net favorable impact from policyholder benefit reduction elections made as part of a legal settlement in the current year. We also increased reserves by $66 million in the current year compared to $29 million in the prior year to account for changes to incidence and mortality experience driven by COVID-19, which we believe are temporary.
Our life insurance business had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $103 million and $158 million for the six months ended June 30, 2021 and 2020, respectively. The decrease in the loss was mainly attributable to higher reserves recorded in the prior year on our 10-year term universal life insurance block entering its post-level
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premium period and from lower lapses primarily associated with our large 20-year term life insurance block written at the end of 2000 as it entered its post-level premium period. These decreases were partially offset by higher mortality in our universal and term universal life insurance products and DAC impairments of $30 million in our universal life insurance products in the current year. 
Our fixed annuities business had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $43 million and $34 million for the six months ended June 30, 2021 and 2020, respectively. The increase was mainly attributable to lower reserves and DAC amortization in our fixed indexed annuities driven by favorable equity market and interest rate changes in the current year and higher mortality in our single premium immediate annuities.
Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $27 million and $11 million for the six months ended June 30, 2021 and 2020, respectively. The increase was primarily due to favorable equity market and interest rate performance, partially offset by lower investmentvariable annuity products reducing fee income in the current year.
 
Corporate and Other activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $59$9 million and $84$32 million for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively.
The decrease in the loss was primarily related to lower interest expense and operating costs in the current year.
Other Significant Developments and Strategic Highlights
The periods under review include, among others, the following significant developments.developments and steps taken in the execution of our strategic priorities.
Enact
 
Incurred losses.PMIERs compliance:
Incurred losses were $30 million for the three months ended June 30, 2021, a decrease of $198 million compared to the three months ended June 30, 2020. New primary delinquencies of 6,862 contributed to $30 million of loss expense for the three months ended June 30, 2021. The prior year included $170 million of losses from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of COVID-19 and additional reserves of $28 million for IBNR delinquencies. In addition, existing reserves were strengthened by $28 million in the prior year primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity.
 
Borrower forbearance.
Approximately 45%Enact’s PMIERs sufficiency ratio was 176% or $2,261 million above the published PMIERs requirements as of our primary new delinquencies in the second quarter of 2021 were subject to a forbearance plan as compared to less than 5% in recent quarters prior to COVID-19. Servicer reported forbearance slowed meaningfully beginning in June 2020 and ended the second quarter of 2021 with approximately 4% or 36,271 of our active primary policies reported in a forbearance plan, of which approximately 59% were reported as delinquent.March 31, 2022.
 
PMIERs compliance.
As of June 30, 2021, ourMarch 31, 2022, Enact segment had estimated available assets of $4,926$5,222 million against $2,985$2,961 million net required assets under PMIERs compared to available assets of $4,769$5,077 million against $3,005$3,074 million net required assets as of MarchDecember 31, 2021. The sufficiency ratio as of June 30, 2021 was 165% or $1,941 million above the published PMIERs requirements, compared to 159% or $1,764 million above the published PMIERs requirements as of March 31, 2021. PMIERs(PMIERs sufficiency is based on the published requirements applicable to private mortgage insurers and does not give effect to the GSE restrictions imposed on our Enact segment. Holdings).
The increase in the PMIERs sufficiency was driven in partprimarily by the completion of an insurance linked notes transaction,two excess of loss reinsurance transactions in the first quarter of 2022, which added $303approximately $370 million of additional PMIERs capital credit as of June 30, 2021, elevated lapse driven by prevailing low interest rates,March 31, 2022, as well as lapses, business cash flows and lower delinquencies, partially offset by elevated new insurance written. In addition, elevated lapse continued to drive an acceleration of thewritten and amortization of ourexisting reinsurance transactions executed prior to the second quarter of 2021, which caused a reductiontransactions.
 
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As of March 31, 2022 and December 31, 2021, Enact’s PMIERs required assets benefited by $272 million and $390 million, respectively, from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans.
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in PMIERs capital credit in the second quarter of 2021. Our PMIERs required assets as of June 30, 2021 and March 31, 2021 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided $760 million of benefit to our June 30, 2021 PMIERs required assets compared to $1,012 million of benefit as of March 31, 2021. See “Item 2—Enact segment—Trends and conditions” for additional details.
 
Persistency.Dividends:
Primary persistency
Enact Holdings’ board of directors approved the initiation of a quarterly dividend commencing with a dividend of $10.14 per share in our Enact segment increased to 63% during the second quarter of 2021 compared2022.
Enact Holdings will continue to 59% duringevaluate the second quartermost appropriate amount of 2020 but remained below historic norms. The increasetotal capital to return to shareholders for the remainder of 2022, which could include a potential special dividend later in persistency was primarily driven by a modest increase in interest rates and a decline in the percentage of our in-force policies with mortgage rates above current interest rates. Suppressed persistency has impacted business performance trends in several ways including, but not limited2022 and/or other capital returns to offsetting insurance in-force growth from new insurance written, elevated single premium policy cancellations, accelerating the amortization of our existing reinsurance transactions reducing their associated PMIERs capital credit in the current year and shifting the concentration of our primary insurance in-force to more recent years of policy origination.
shareholders.
U.S. Life Insurance
 
In-forceLong-term care insurance multi-year in-force rate actions inaction plan:
During the first quarter of 2022, we continued to make strong progress on our long-term care insurance business.in-force rate action plan.
As part
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We estimate that the cumulative economic benefit of our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their original pricing. For all of thesemulti-year in-force rate action filings, weplan through the first quarter of 2022 was approximately $20.4 billion, on a net present value basis, of the total expected amount required of $28.7 billion.
We received 7438 filing approvals from 2915 states during the sixthree months ended June 30, 2021,March 31, 2022, representing a weighted-average increase of 43%29% on approximately $477$354 million in annualized in-force premiums, or approximately $206$101 million of incremental annual premiums. We also submitted 34 new filings in 14 states during the six months ended June 30, 2021 on approximately $163 million in annualized in-force premiums.
 
We expect to begin submitting new filings in the second quarter of 2022.
Profits followed by losses in our long-term care insurance business.business:
With respect to
Future projections in our long-term care insurance block, excluding the acquired block, our future projections indicate we have projected profits in earlier periods followed by projected losses in later periods.
As a result of this pattern of projected profits followed by projected losses, we will ratably accrue additional future policy benefit reserves over the profitable periods, currently expected to be through 2031, by the amounts necessary to offset estimated losses during the periods that follow.
As of June 30, 2021March 31, 2022 and December 31, 2020,2021, the total amount accrued for profits followed by losses was $957$1,473 million and $625$1,274 million, respectively.
Liquidity and Capital Resources
 
RedemptionExecution of Genworth Holdings’ February 2021 senior notes.
On February 16, 2021, Genworth Holdings redeemed its 7.20% senior notes with a principal balance of $338 million. The senior notes were fully redeemed with a cash payment of $350 million, comprised of the outstanding principal balance and accrued interest.
Repurchase and redemption of Genworth Holdings’ September 2021 senior notes.
During the six months ended June 30, 2021, Genworth Holdings repurchased $146 million principal amount of its September 2021 senior notes for a pre-tax loss of $4 million. In July 2021, Genworth Holdings early redeemed the remainder of its 7.625% senior notes originally scheduled to mature in September 2021. The senior notes were fully redeemed with a cash payment of $532 million, comprised of the outstanding principal balance of $513 million, accrued interest of approximately $13 million and a make-whole premium of approximately $6 million.
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Mandatory payment of the AXA promissory note.
In connection with the Genworth Australia sale, we made a mandatory principal payment to AXA of approximately £176 million ($245 million) in March 2021. The mandatory payment fully repaid the first installment obligation originally due to AXA in June 2022 and partially prepaid the September 2022 installment payment. AXA and Genworth amended certain mandatory prepayment provisions of the promissory note permitting Genworth to retain a greater amount of the Genworth Australia sale proceeds. As of June 30, 2021, the remaining amount of the promissory note, including expected future claims, is $344 million and is due in September 2022. As a result of the mandatory payment, interest on the promissory note was retroactively reduced and now accrues at a rate of 2.75%. See note 13 in our unaudited condensed consolidated financial statements for additional information. 
Liquidity and contractual obligations
. For additional details related to Genworth Holdings’ liquidity in relation to its contractual obligations, see note 1 to our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” and “Item 2—Liquidity and Capital Resources.”
Dispositions
Sale of our Australian mortgage insurance business.
On March 3, 2021, we completed the sale of our entire ownership interest of approximately 52% in Genworth Australia through an underwritten agreement. We sold our approximately 214.3 million shares of Genworth Australia for AUD2.28 per share and received approximately AUD483 million ($370 million) in net cash proceeds. In the first quarter of 2021, we recognized an after-tax loss on sale of $3 million. See note 13 in our unaudited condensed consolidated financial statements for additional information.
Financial Strength Ratings
On May 20, 2021, Moody’s Investors Service, Inc. (“Moody’s”) affirmed the “Baa3” (Adequate) financial strength rating of Genworth Mortgage Insurance Corporation (“GMICO”), our principal U.S. mortgage insurance subsidiary, and revised its outlook from positive to review for upgrade. In addition, Moody’s affirmed the “Caa1” (Speculative) credit rating of Genworth Holdings’ senior unsecured debt and revised its outlook from developing to review for upgrade.
On May 4, 2021, Standard & Poor’s Financial Services, LLC (“S&P”) modified its outlook for both Genworth and GMICO from Negative Outlook to Creditwatch Positive. The ratings of Genworth and GMICO were unchanged, although S&P indicated that they would likely raise the ratings if Genworth is successful in the execution of its strategic plan including the potential partial sale of Enact Holdings.
For a further discussion of the financial strength ratings of our insurance subsidiaries and the credit ratings of our holding companies, see “Item 1—Ratings” in our 2020 Annual Report on Form 10-K.
Consolidated
General Trends and Conditions
The stability of both the financial markets and global economies in which we operate impacts the sales, revenue growth and profitability trends of our businesses as well as the value of assets and liabilities.
Varied levels of economic performance, coupled with uncertain economic outlooks, changes in government policy, global trade, regulatory and tax reforms, and other changes in market conditions, such as inflation, will continue to influence investment and spending decisions by consumers and businesses as they adjust their consumption,reduce debt capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, factors such as the length of COVID-19 and the speed of the economic recovery, government responses to COVID-19 (such as government
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stimulus), government spending, monetary policies (such as reducing quantitative easing), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, inflation, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.
U.S. Treasury markets fluctuated during the second quarter of 2021 due in part to the expected shifts in the U.S. Federal Reserve’s monetary policy and from inflation concerns, including whether inflation is only transitory until the U.S. economy fully re-opens and supply chains return to full capacity. We do not believe that inflation has had a material effect on our results of operations, except insofar as inflation may affect current and/or future interest rates and U.S. Federal Reserve policy. In addition, continued inflation can impact healthcare costs and the cost of care in our long-term care insurance business. Historically, our long-term care insurance business has experienced higher claim severity due in part to the rising costs of healthcare.
The U.S. and international governments, the U.S. Federal Reserve, other central banks and other legislative and regulatory bodies have taken certain actions in response to COVID-19 to support the global economy and capital markets. These policies and actions have generally been supportive to the worldwide economy, however, in spite of these supportive policies the U.S. economy contracted in 2020 and the world economy fell into a recession. Gross domestic product rebounded sharply in the first quarter of 2021 due in part to the continued rollout of the vaccine. This growth continued into the second quarter of 2021 albeit at a more moderate pace. Most economic forecasts predict a healthy full year 2021 U.S. economy with strong gross domestic product growth, however, given the risk of virus re-emergence due to variants, the slower than expected vaccination uptake and the potential for future actions to be taken to mitigate the risk of a virus re-emergence, it is possible actual economic results could differ materially from forecasts. In the event this occurs, our full year 2021 financial results would be adversely impacted. Moreover, we continue to closely monitor the operating results and financial position of our Enact segment, particularly related to new delinquency trends and whether borrowers in a forbearance plan ultimately cure or result in a claim payment. If these trends move in an unfavorable direction in contrast to our current projections, our financial position and results of operations could be adversely impacted.
Consolidated Results of Operations
The following is a discussion of our consolidated results of operations. For a discussion of our segment results, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”
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Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
The following table sets forth the consolidated results of operations for the periods indicated:
   
Three months ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2021
  
2020
  
2021 vs. 2020
 
Revenues:
     
Premiums
  $947  $957  $(10)   (1)% 
Net investment income
   844   779   65   8%
 
Net investment gains (losses)
   70   93   (23)   (25)% 
Policy fees and other income
   180   174   6   3%
 
  
 
 
  
 
 
  
 
 
  
Total revenues
   2,041   2,003   38   2%
 
  
 
 
  
 
 
  
 
 
  
Benefits and expenses:
     
Benefits and other changes in policy reserves
   1,161   1,447   (286)   (20)% 
Interest credited
   127   139   (12)   (9)% 
Acquisition and operating expenses, net of deferrals
   304   210   94   45% 
Amortization of deferred acquisition costs and intangibles
   86   87   (1)   (1)% 
Interest expense
   43   42   1   2%
 
  
 
 
  
 
 
  
 
 
  
Total benefits and expenses
   1,721   1,925   (204)   (11)% 
  
 
 
  
 
 
  
 
 
  
Income from continuing operations before income taxes
   320   78   242   NM(1) 
Provision for income taxes
   75   23   52   NM(1) 
  
 
 
  
 
 
  
 
 
  
Income from continuing operations
   245   55   190   NM(1) 
Loss from discontinued operations, net of taxes
   (5)   (473)   468   99% 
  
 
 
  
 
 
  
 
 
  
Net income (loss)
   240   (418)   658   157% 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     —     —  % 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     23   (23)   (100)% 
  
 
 
  
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $681   154% 
  
 
 
  
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders:
     
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $245  $55  $190   NM(1) 
Loss from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   (5)   (496)   491   99% 
  
 
 
  
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $681   154% 
  
 
 
  
 
 
  
 
 
  
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Premiums.
Premiums are primarily earned on insurance products for mortgage, long-term care, life insurance, single premium immediate annuities and structured settlements with life contingencies.
Our U.S. Life Insurance segment decreased $9 million. Our long-term care insurance business decreased $1 million primarily driven by policy terminations and policies entering
paid-up
status, mostly offset by $24 million of increased premiums in the current year from
in-force
rate actions
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approved and implemented. Our life insurance business decreased $8 million mainly attributable to the continued runoff of our term and whole life insurance products in the current year.
Our Enact segment was flat as higher insurance
in-force
was offset by a decrease in policy cancellations in our single premium mortgage insurance product, higher ceded premiums and continued lapse of our in-force portfolio in the current year as older higher priced policies continued to lapse in the current low interest rate environment.
Net investment income.
Net investment income represents the income earned on our investments. For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.”
Net investment gains (losses).
Net investment gains (losses) consist primarily of realized gains and losses from the sale of our investments, credit losses, unrealized and realized gains and losses from our equity and trading securities and derivative instruments. For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Policy fees and other income.
Policy fees and other income consists primarily of fees assessed against policyholder and contractholder account values, surrender charges, cost of insurance assessed on universal and term universal life insurance policies, advisory and administration service fees assessed on investment contractholder account values, broker/dealer commission revenues and other fees. The increase was largely attributable to our Runoff segment principally from higher fee income driven mostly by an increase in the average account values in our variable annuity products in the current year.
Benefits and other changes in policy reserves.
Benefits and other changes in policy reserves consist primarily of claim costs incurred related to mortgage insurance products and benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for long-term care, life insurance, structured settlements and single premium immediate annuities with life contingencies.
Our Enact segment decreased $198 million largely from lower new delinquencies in the current year and unfavorable reserve adjustments in the prior year as a result of
COVID-19.
The prior year included $170 million of losses from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of
COVID-19
compared to $30 million of losses from new delinquencies in the current year. In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity.
Our U.S. Life Insurance segment decreased $84 million. Our long-term care insurance business decreased $54 million primarily due to a more favorable impact of $139 million from reduced benefits in the current year related to
in-force
rate actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement, and from favorable development on IBNR claims. These decreases were partially offset by aging of the
in-force
block, a decrease in claim terminations driven mostly by lower mortality in the current year and higher incremental reserves of $62 million recorded in connection with an accrual for profits followed by losses in the current year. In the prior year, we assumed that
COVID-19
temporarily decreased the number of new submitted claims, and accordingly IBNR reserves were strengthened by $37 million. Our life insurance business decreased $44 million primarily attributable to higher reserves recorded in the prior year on our
10-year
term universal life insurance block which entered its post-level premium period, partially offset by higher mortality in our term universal life insurance product in the current year compared to the prior year. Our fixed annuities business increased $14 million principally from lower mortality in our single premium immediate annuities, less favorable equity market performance and unfavorable interest rate changes in the current year.
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Interest credited.
Interest credited represents interest credited on behalf of policyholder and contractholder general account balances. The decrease was largely related to our U.S. Life Insurance segment primarily related to our life insurance and fixed annuities businesses, which decreased $4 million and $6 million, respectively. The decrease was largely related to a decline in the average account values and from lower crediting rates in the current year.
Acquisition and operating expenses, net of deferrals.
Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are costs and expenses that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.
Our U.S. Life Insurance segment increased $72 million predominantly related to our long-term care insurance business principally related to higher premium taxes, commissions and other expenses of $73 million associated with our
in-force
rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement in the current year.
Our Enact segment increased $16 million primarily attributable to higher operating costs, expenses associated with strategic transaction preparations and restructuring costs in the current year.maturities:
 
Our Runoff segment increased $3 million mainly from higher commissions inWe continue to focus on deleveraging with a goal of reducing debt at Genworth Holdings, the issuer of our variable annuity products in the current year.outstanding public debt, to approximately $1.0 billion or less over time.
 
Corporate and Other activities increased $3 million principally due to a gain in the prior year related to the repurchaseAs of Genworth Holdings’ senior notes originally scheduled to mature in 2021 that did not recur.
Amortization of deferred acquisition costs and intangibles.
Amortization of DAC and intangibles consists primarily of the amortization of acquisition costs that are capitalized, PVFP and capitalized software.
Our U.S. Life Insurance segment decreased $6 million. Our long-term care insurance business increased $6 million principally from policy terminations and policies entering
paid-up
status in the current year. Our life insurance business decreased $10 million principally from prior year lapses in our large
20-year
term life insurance block written in 2000, partially offset by a DAC impairment of $16 million in our universal life insurance products in the current year.
Our Runoff segment increased $5 million primarily from higher DAC amortization in our variable annuity products due to less favorable equity market performance in the current year.
Interest expense.
Interest expense represents interest related to our borrowings that are incurred atMarch 31, 2022, Genworth Holdings or subsidiaries and interest expense related to the Tax Matters Agreement and certain reinsurance arrangements being accounted for as deposits.
Our Enact segment increased $12 million in the current year related to Enact Holdings’ senior notes issued in August 2020.had outstanding $1.1 billion of long-term debt, with no debt maturities until February 2024.
 
Corporate and Other activities decreased $11During the first quarter of 2022, Genworth Holdings repurchased $82 million largely driven by the redemptionprincipal amount of Genworth Holdings’its 4.80% senior notes due in February 2021 and2024, leaving a remaining balance outstanding of $200 million as of March 31, 2022. We plan to retire the repurchase of Genworth Holdings’ senior notes due in September 2021.
Provision for income taxes.
The effective tax rate decreased to 23.4% for the three months ended June 30, 2021 from 29.5% for the three months ended June 30, 2020. The decreaseremaining outstanding balance in the effective tax rate was primarily attributable to tax expense on forward starting swaps settled prior to the enactmentthird quarter of the Tax Cuts2022, depending upon economic and Jobs Act (“TCJA”), which are tax effected at 35% as they are amortized into net investment income, in relation to higher
pre-tax
income in the current year.
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Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table sets forth the consolidated results of operations for the periods indicated:
   
Six months ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2021
   
2020
  
2021 vs. 2020
 
Revenues:
      
Premiums
  $1,915   $1,903  $12   1%
 
Net investment income
   1,645    1,561   84   5%
 
Net investment gains (losses)
   103    (6)   109   NM(1) 
Policy fees and other income
   363    354   9   3%
 
  
 
 
   
 
 
  
 
 
  
Total revenues
   4,026    3,812   214   6%
 
  
 
 
   
 
 
  
 
 
  
Benefits and expenses:
      
Benefits and other changes in policy reserves
   2,379    2,784   (405)   (15)% 
Interest credited
   258    280   (22)   (8)% 
Acquisition and operating expenses, net of deferrals
   579    447   132   30% 
Amortization of deferred acquisition costs and intangibles
   163    195   (32)   (16)% 
Interest expense
   94    93   1   1%
 
  
 
 
   
 
 
  
 
 
  
Total benefits and expenses
   3,473    3,799   (326)   (9)% 
  
 
 
   
 
 
  
 
 
  
Income from continuing operations before income taxes
   553    13   540   NM(1) 
Provision for income taxes
   134    18   116   NM(1) 
  
 
 
   
 
 
  
 
 
  
Income (loss) from continuing operations
   419    (5)   424   NM(1) 
Income (loss) from discontinued operations, net of taxes
   16    (485)   501   103% 
  
 
 
   
 
 
  
 
 
  
Net income (loss)
   435    (490)   925   189% 
Less: net income from continuing operations attributable to noncontrolling interests
   —      —     —     —  % 
Less: net income from discontinued operations attributable to noncontrolling interests
   8    17   (9)   (53)% 
  
 
 
   
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $427   $(507)  $934   184% 
  
 
 
   
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders:
      
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $419   $(5)  $424   NM(1) 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   8    (502)   510   102% 
  
 
 
   
 
 
  
 
 
  
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $427   $(507)  $934   184% 
  
 
 
   
 
 
  
 
 
  
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Premiums
Our Enact segment increased $26 million mainly attributable to higher insurance
in-force,
partially offset by higher ceded premiums, continued lapse of older higher priced policies due to the current low interest rate environment and a decrease in policy cancellations in our single premium mortgage insurance product in the current year.
Our U.S. Life Insurance segment decreased $13 million. Our long-term care insurance business increased $3 million largely from $47 million of increased premiums in the current year from
in-force
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rate actions approved and implemented, partially offset by policy terminations and policies entering
paid-up
status in the current year. Our life insurance business decreased $16 million mainly attributable to the continued runoff of our term and whole life insurance products in the current year.
Net investment income.
For discussion of the change in net investment income, see the comparison for this line item under “—Investments and Derivative Instruments.”
Net investment gains (losses).
For discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Policy fees andconditions, among other income
Our U.S. Life Insurance segment increased $7 million primarily driven by our life insurance business from higher ceded reinsurance costs in the prior year that did not recur.considerations.
 
Our Runoff segment increased $3 million principally from higher fee income driven mostly by an increase inRepayment of the average account values in our variable annuity products in the current year.
Benefits and other changes in policy reserves
Our U.S. Life Insurance segment decreased $226 million. Our long-term care insurance business decreased $153 million primarily due to a more favorable impactmajority of $147 million from reduced benefits in the current year related to
in-force
rate actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement, and from favorable development on IBNR claims. These decreases were partially offset by aging of the
in-force
block and higher incremental reserves of $195 million recorded in connection with an accrual for profits followed by losses. In addition, we increased claim reserves by $52 million reflecting our assumption that
COVID-19
accelerated our mortality experience on the most vulnerable claimants, leaving the remaining claim population less likely to terminate compared to the
pre-pandemic
average population. Our life insurance business decreased $64 million primarily attributable to higher reserves recorded in the prior year on our
10-year
term universal life insurance block which entered its post-level premium period, partially offset by higher mortality in our universal and term universal life insurance products in the current year compared to the prior year. Our fixed annuities business decreased $9 million principally from lower reserves in our fixed indexed annuities driven by favorable equity market and interest rate changes in the current year compared to an unfavorable market in the prior year.
Our Enact segment decreased $162 million largely from higher new delinquencies and unfavorable reserve adjustments in the prior year as a result of
COVID-19.
The prior year included $197 million of losses from new delinquencies, $170 million of which were driven primarily by a significant increase in borrower forbearance as a result of
COVID-19.
In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. These decreases were partially offset by current year reserve strengthening of $10 million primarily due to our expectation that
pre-COVID-19
delinquencies will have a modestly higher claim rate than our prior best estimate given the slower emergence of cures to date.
Our Runoff segment decreased $14 million primarily attributable to lower guaranteed minimum death benefitAXA S.A.’s (“GMDB”AXA”) reserves in our variable annuity products due to favorable equity market and interest rate performance in the current year.
Interest credited.
The decrease was largely related to our U.S. Life Insurance segment primarily related to our life insurance and fixed annuities businesses, which decreased $7 million and $13 million, respectively. The decrease was largely related to a decline in the average account values and from lower crediting rates in the current year.
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Acquisition and operating expenses, net of deferrals
Our U.S. Life Insurance segment increased $113 million predominantly related to our long-term care insurance business principally related to higher premium taxes, commissions and other expenses of $99 million associated with our
in-force
rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement in the current year. The increase was also attributable to restructuring costs of $16 million in the current year.
Our Enact segment increased $23 million primarily attributable to higher operating costs, expenses associated with strategic transaction preparations and restructuring costs in the current year.future billings:
 
Corporate and Other activities decreased $7 million mainly drivenIn connection with the AXA settlement agreement, we agreed to make payments for a significant portion of unprocessed claims to be invoiced by lower operating costs and a make-whole premium of $9 millionAXA in the prior year related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020, partially offset by restructuring costs of $8 million and a $4 million loss in the current year related to the repurchase of Genworth Holdings’ senior notes compared to a $4 million gain in the prior year.future periods.
 
Our Runoff segment increased $3In February 2022, Genworth Holdings paid AXA $30 million, mainly from higher commissions in our variable annuity products inwhich constitutes the current year.
Amortizationmajority of deferred acquisition costs and intangibles
Our U.S. Life Insurance segment decreased $25 million. Our long-term care insurance business increased $6 million principally from policy terminations and policies entering
paid-up
status in the current year. Our life insurance business decreased $13 million principally from prior year lapses in our large
20-year
term life insurance block written in 2000, partially offset by DAC impairments of $38 million in our universal life insurance products in the current year. Our fixed annuities business decreased $18 million primarily related to lower DAC amortization reflecting the impact of favorable market changes in the current year.
Our Runoff segment decreased $7 million mainly related to lower DAC amortization in our variable annuity products principally from favorable equity market performance in the current year.
Interest expense
Our Enact segment increased $25 million related to Enact Holdings’ senior notes issued in August 2020.estimated remaining unprocessed claims.
 
Corporate and Other activities decreased $19 million largely driven by the redemption of Genworth Holdings’ senior notes due in February 2021, theFinancial share repurchase of Genworth Holdings’ senior notes due in September 2021 and the early redemption of Genworth Holdings’ senior notes in the prior year originally scheduled to mature in June 2020.program:
 
Our U.S. Life Insurance segment decreased $5
On May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million due to our life insurance business principally related to the early redemption of
non-recourse
funding obligations in the prior year.
Provision for income taxes.
The effective tax rate decreased to 24.2% for the six months ended June 30, 2021 from 138.5% for the six months ended June 30, 2020. The decrease was mostly attributable to tax expense on forward starting swaps settled prior to the enactment of the TCJA and
non-deductible
expenses in relation to higher
pre-tax
income in the current year. The decrease was also attributable to higher tax expense related to stock-based compensation in the prior year.
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its outstanding Class A common stock.
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Use of
non-Generally
Accepted Accounting Principles (“GAAP”) measures
Reconciliation of net income (loss) to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
We use
non-GAAP
financial measures entitled “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders” and “adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share.” Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share is derived from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. We define adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as income (loss) from continuing operations excluding the
after-tax
effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual
non-operating
items. Gains (losses) on insurance block transactions are defined as gains (losses) on the early extinguishment of
non-recourse
funding obligations, early termination fees for other financing restructuring and/or resulting gains (losses) on reinsurance restructuring for certain blocks of business. We exclude net investment gains (losses) and infrequent or unusual
non-operating
items because we do not consider them to be related to the operating performance of our segments and Corporate and Other activities. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. Gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions and restructuring costs are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating trends. Infrequent or unusual
non-operating
items are also excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders if, in our opinion, they are not indicative of overall operating trends.
While some of these items may be significant components of net income (loss) available to Genworth Financial, Inc.’s common stockholders in accordance with U.S. GAAP, we believe that adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, and measures that are derived from or incorporate adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders, including adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis, are appropriate measures that are useful to investors because they identify the income (loss) attributable to the ongoing operations of the business. Management also uses adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders as a basis for determining awards and compensation for senior management and to evaluate performance on a basis comparable to that used by analysts. However, the items excluded from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders have occurred in the past and could, and in some cases will, recur in the future. Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders and adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis are not substitutes for net income (loss) available to Genworth Financial, Inc.’s common stockholders or net income (loss) available to Genworth Financial, Inc.’s common stockholders per share on a basic and diluted basis determined in accordance with U.S. GAAP. In addition, our definition of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders may differ from the definitions used by other companies.
Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21% tax rate. Net investment gains (losses) are also adjusted for DAC and other intangible amortization and certain benefit reserves.
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The following table includes a reconciliation of net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the periods indicated:
   
Three months ended
June 30,
  
Six months ended

June 30,
 
(Amounts in millions)
  
2021
  
2020
  
2021
  
2020
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders
  $240  $(441)  $427  $(507) 
Add: net income from continuing operations attributable to noncontrolling interests
   —     —     —     —   
Add: net income from discontinued operations attributable to noncontrolling interests
   —     23   8   17 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   240   (418)   435   (490) 
Less: income (loss) from discontinued operations, net of taxes
   (5)   (473)   16   (485) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from continuing operations
   245   55   419   (5) 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     —     —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders
   245   55   419   (5) 
Adjustments to income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders:
     
Net investment (gains) losses, net
(1)
   (70)   (97)   (103)   (9) 
(Gains) losses on early extinguishment of debt, net
   —     (3)   4   9 
Expenses related to restructuring
   5   1   26   2 
Taxes on adjustments
   14   21   16   —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $194  $(23)  $362  $(3) 
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)
For the three and six months ended June 30, 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(4) million and $(15) million, respectively.
During the six months ended June 30, 2021, we repurchased $146 million principal amount of Genworth Holdings’ senior notes due in September 2021 for a
pre-tax
loss of $4 million. During the three and six months ended June 30, 2020, we repurchased $52 million and $66 million, respectively, principal amount of Genworth Holdings’ senior notes with 2021 maturity dates for a
pre-tax
gain of $3 million and $4 million, respectively. In January 2020, we paid a
pre-tax
make-whole expense of $9 million related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in June 2020 and Rivermont Life Insurance Company I, our indirect wholly-owned special purpose consolidated captive insurance subsidiary, early redeemed all of its $315 million outstanding
non-recourse
funding obligations originally due in 2050 resulting in a
pre-tax
loss of $4 million from the
write-off
of deferred borrowing costs. These transactions were excluded from adjusted operating income (loss) as they relate to gains (losses) on the early extinguishment of debt.
We recorded a
pre-tax
expense of $5 million and $26 million for the three and six months ended June 30, 2021, respectively, and $1 million and $2 million for the three and six months ended June 30, 2020, respectively, related to restructuring costs as we continue to evaluate and appropriately size our organizational needs and expenses. There were no infrequent or unusual items excluded from adjusted operating income (loss) during the periods presented.
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Earnings (loss) per share
Basic and diluted earnings (loss) per share are calculated by dividing each income (loss) category by the weighted-average basic and diluted common shares outstanding for the periods indicated:
   
Three months ended
June 30,
  
Six months ended

June 30,
 
(Amounts in millions, except per share amounts)
  
2021
   
2020
  
2021
   
2020
 
Income (loss) from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.48   $0.11  $0.83   $(0.01) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Diluted
  $0.47   $0.11  $0.82   $(0.01) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Net income (loss) available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.47   $(0.87)  $0.84   $(1.00) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Diluted
  $0.47   $(0.86)  $0.83   $(1.00) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders per share:
       
Basic
  $0.38   $(0.05)  $0.71   $(0.01) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Diluted
  $0.38   $(0.05)  $0.70   $(0.01) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Weighted-average common shares outstanding:
       
Basic
   507.0    505.4   506.5    504.8 
  
 
 
   
 
 
  
 
 
   
 
 
 
Diluted
(1)
   515.0    512.5   514.4    504.8 
  
 
 
   
 
 
  
 
 
   
 
 
 
(1) 
Under applicable accounting guidance, companies in a loss position are required to use basic weighted-average common shares outstanding in the calculation of diluted loss per share. Therefore, as a result of our loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, we were required to use basic weighted-average common shares outstanding as the inclusion of shares for stock options, restricted stock units and stock appreciation rights of 6.3 million would have been antidilutive to the calculation. If we had not incurred a loss from continuing operations available to Genworth Financial, Inc.’s common stockholders for the six months ended June 30, 2020, dilutive potential weighted-average common shares outstanding would have been 511.1 million.
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based compensation.
Results of Operations and Selected Financial and Operating Performance Measures by Segment
Our chief operating decision maker evaluates segment performance and allocates resources on the basis of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders. See note 10 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for a summary of adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for our segments and Corporate and Other activities..
We tax our businesses at the U.S. corporate federal income tax rate of 21%. Each segment is then adjusted to reflect the unique tax attributes of that segment, such as permanent differences between U.S. GAAP and tax law. The difference between the consolidated provision for income taxes and the sum of the provision for income taxes in each segment is reflected in Corporate and Other activities.
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The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year.
Management’s discussion and analysis by segment contains selected operating performance measures including “sales” and “insurance
in-force”
or “risk
in-force”
which are commonly used in the insurance industry as measures of operating performance.
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Management regularly monitors and reports sales metrics as a measure of volume of new business generated in a period. Sales refer to new insurance written for mortgage insurance products included in our Enact segment. We consider new insurance written to be a measure of our Enact segment’s operating performance because it represents a measure of new sales of insurance policies during a specified period, rather than a measure of our revenues or profitability during that period.
Management regularly monitors and reports insurance
in-force
and risk
in-force
for our Enact segment. Insurance
in-force
is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans we insure.insured by our U.S. mortgage insurance subsidiaries. Risk
in-force
is based on the coverage percentage applied to the estimated current outstanding loan balance. We consider insurance
in-force
and risk
in-force
to be measures of our Enact segment’s operating performance because they represent measures of the size of ourits business at a specific date which will generate revenues and profits in a future period, rather than measures of ourits revenues or profitability during that period.
Management also regularly monitors and reports a loss ratio for our businesses. For our U.S. mortgage insurance businessbusinesses included in our Enact segment, the loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. For our long-term care insurance business included in our U.S. Life Insurance segment, the loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums. We consider the loss ratio to be a measure of underwriting performance in these businesses and helps to enhance the understanding of the operating performance of our businesses.
Management also regularly monitors and reports adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions in the long-term care insurance business included in our U.S. Life Insurance segment. In-force rate actions include premium rate increases and associated benefit reductions implemented since 2012, which are presented net of estimated premium taxes, commissions, and other expenses on an after-tax basis. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual historical results, including but not limited to, a uniform rate of coinsurance and premium taxes in addition to consistent policyholder behavior over time. Actual policyholder behavior may differ significantly from these assumptions. In addition, estimates exclude reserve updates resulting from profits followed by losses. Management considers adjusted operating income attributable to in-force rate actions to be a measure of our operating performance because it helps bring older generation long-term care insurance blocks closer to a break-even point over time and helps bring the loss ratios on newer long-term care insurance blocks back towards their original pricing.
These operating performance measures enable us to compare our operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.
Enact segment
Trends and conditions
Results of our Enact segment are affected primarily by the following factors: competitor actions; unemployment or underemployment levels; other economic and housing market trends, including interest rates, home prices, the number of first-time homebuyers, and mortgage origination volume mix and practices; the levels and aging of mortgage delinquencies; the effect of seasonal variations; the inventory of unsold homes; loan modification and other servicing efforts; and litigation, among other items. References to “Enact” included herein “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Enact segment” are, unless the context otherwise requires, to our Enact segment.
The United States economy and consumer confidence improved in the second quarter of 2021 compared to
Mortgage origination activity declined during the first quarter of 2021. 2022 compared to the fourth quarter of 2021 due to typical seasonal trends and in response to rising mortgage rates that specifically impacted the
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refinance market. This trend is likely to continue as the U.S. Federal Reserve has signaled that it expects to make additional interest rate increases throughout the remainder of 2022. Housing affordability declined nationally as of February 2022 compared to February 2021 due to rising home prices and increasing interest rates, modestly offset by rising median family income according to the National Association of Realtors Housing Affordability Index.
The unemployment rate has continued to decrease since the beginning of COVID-19 and was elevated at 5.9%3.6% in June 2021 compared toMarch 2022. Unemployment is relatively in line with the
pre-pandemic
level of 3.5% in February 2020 butand has steadily decreased from a peak of 14.8% in April 2020. Even afterAfter the continued recovery in the secondfirst quarter of 2021,2022, the number of unemployed Americans stands at approximately 9six million, which is 4 millionapproximately 300,000 higher than in February 2020. Among the unemployed, those on temporary layoff continued to decrease to 2 millionapproximately 800,000 from a peak of 18 million in April 2020, and the number of permanent job losses decreased to approximately 3one million. In addition, the number of long term unemployed over 26 weeks has beguncontinued to decrease since March 2021, falling to approximately 4one million in June 2021. Specific to housing finance, mortgage origination activity remained robust in the second quarter of 2021 fueled by
March 2022.
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refinance activity and strong home sales. Refinance activity remained robust but decreased compared to the second quarter of 2020 and the first quarter of 2021 as mortgage interest rates modestly increased. The purchase market remained strong, but sales of previously owned homes were down 14% in May 2021 after reaching a post-2006 peak in the fourth quarter of 2020. Total unsold inventory of single-family homes remains low at a
2.5-month
supply as of May 2021, which continues to drive home prices higher, increasing our average loan amount on new insurance written. While interest rates modestly rose during the second quarter of 2021, they remained at historically low levels and served as an offset to rising prices to allow continued affordability for borrowers. The pandemic continued to affect our financial results in the second quarter of 2021 but to a lesser extent than in the first quarter of 2021 as we experienced elevated, but declining, servicer reported forbearance while new delinquencies during the second quarter of 2021 returned to
pre-pandemic
levels.
The impact of
COVID-19
on our future business results is difficult to predict. We have performed and have periodically revised our scenario planning to help us better understand and tailor our actions to help mitigate the potential adverse effects of the pandemic on our financial results. While our current financial results to date fall within the range of our current scenarios, the ultimate outcomes and impact on Enact will depend on the spread and length of the pandemic. Of similar importance will be the amount, type and duration of government stimulus and its impact on borrowers, regulatory and government actions to support housing and the economy, uptake of the vaccine, spread mitigating actions to curb a potential increase in cases, the possible resurgence of the virus and variants in the future and the shape of economic recovery. It is difficult to predict how long borrowers will need to use forbearance to assist them during the pandemic. Given the length of time current forbearance plans may be extended, the resolution of a delinquency in a plan, whether it ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer. We continue to monitor
COVID-19
developments and regulatory and government actions. However, given the specific risks to Enact, it is possible the pandemic could have a significant adverse impact on our future results of operations and financial condition.
Specific to housing finance, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act requires mortgage servicers to provide up to 180 days of deferred or reduced payments (forbearance) for borrowers with a federally backed mortgage loan who assert they have experienced a financial hardship related to
COVID-19.
Forbearance may be extended for an additional 180 days up to a year in total or shortened at the request of the borrower. Since the introduction of the CARES Act, the GSEs as well as most servicers of
non-federally
backed mortgage loans have extended similar relief to their respective portfolios of loans. In addition, on February 25, 2021,January 2022, the Federal Housing Finance Agency (“FHFA”) announced thatintroduced new upfront fees charged to borrowers with afor some high-balance and second home loans sold to Fannie Mae and Freddie Mac. Upfront fees for high-balance loans increased between 0.25% and 0.75%, tiered by loan-to-value ratio. For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by loan-to-value ratio. The new pricing framework became effective April 1, 2022. Enact does not anticipate this will significantly impact the private mortgage backedinsurance market or its results of operations, including future growth.
For mortgages insured by the GSEs who arefederal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allows borrowers impacted by COVID-19 to temporarily suspend mortgage payments up to 18 months subject to certain limits. An initial forbearance period is typically up to six months and can be extended up to another six months if requested by the borrower to their mortgage servicer. For GSE loans in an active
a COVID-19
forbearance plan as of February 28, 2021, may requestthe maximum forbearance can be up to two additional forbearance extensions18 months. Currently, the GSEs do not have a deadline for a maximumrequesting an initial forbearance. Even though most foreclosure moratoriums expired at the end of 18 months of total forbearance relief. Separately, on June 24, 2021, the FHFA announced an extension until July 31, 2021 offederal laws and regulations continue to require servicers to discuss loss mitigation options with borrowers before proceeding with foreclosures. These requirements could further extend the foreclosure moratoriumtimeline which could negatively impact the severity of loss on loans that was setgo to expire on June 30, 2021 for mortgages that are purchased by the GSEs. In addition, the CARES Act provides that furnishers of credit reporting information, including servicers, should continue to report a loan as current to credit reporting agencies if the loan is subject to a payment accommodation, such as forbearance, so long as the borrower abides by the terms of the accommodation. Servicer reported forbearance slowed meaningfully beginning in June 2020 and ended the second quarter of 2021 with approximately 4% or 36,271 of our active primary policies reported in a forbearance plan, of which approximately 59% were reported as delinquent. Itclaim.
Although it is difficult to predict the future level of reported forbearance and how many of the policies in a forbearance plan that remain current on their monthly mortgage payment will go delinquent.
On June 28, 2021 the Consumer Financial Protection Bureau (“CFPB”) issueddelinquent, servicer reported forbearances have generally declined. As of March 31, 2022, approximately 2% or 18,588 of Enact’s active primary policies were reported in a final rule to amend Regulation Xforbearance plan, of the Real Estate Settlement Protection Act effective August 31, 2021 to assist mortgage borrowers affected by the
COVID-19
emergency. The final rule establishes temporary procedural changes that permit a loss mitigation review prior to a servicer’s first notice or foreclosure filing on certain mortgages. On June 29, 2021, the FHFA announced that servicers are immediately prohibited from making a first notice or filing for foreclosure for mortgages backed by the GSEs that would be prohibited by the CFPB Regulation X Final Rule before it takes effect on August 31, 2021. These announcements generally prohibit servicers from starting foreclosures on mortgages purchased by the GSEs until after December 31, 2021.
which approximately 41% were reported as delinquent.
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Total delinquencies decreased during the first quarter of 2022 compared to the first quarter of 2021 as a result of cures outpacing new delinquencies. The first quarter 2022 new delinquency rate of 0.9% was in line with Enact’s pre-pandemic levels. Despite continued economic recovery, the full impact of COVID-19 and its adverse economic effects on Enact’s future business results are difficult to predict. Given the maximum length of forbearance plans, the resolution of a delinquency in a plan may not be known for several quarters. Enact continues to monitor regulatory and government actions and the resolution of forbearance delinquencies. While the associated risks have moderated, it is possible that COVID-19 could have a significant adverse impact on Enact’s future results of operations and financial condition.
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MarketPrivate mortgage insurance market penetration and eventual market size are affected in part by actions that impact housing or housing finance policy taken by the GSEs and the U.S. government, including but not limited to, the Federal Housing Administration (“FHA”) and the FHFA. In the past, these actions have included announced changes, or potential changes, to underwriting standards, including changes to the GSEs’ automated underwriting systems, FHA pricing, GSE guaranty fees, loan limits and alternative products. On February 25,
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2022, the FHFA finalized the rule for the Enterprise Capital Framework, which included technical corrections to their December 17, 2020 the FHFA published the Enterprise Regulatory Capital Framework Final Rule, which includes significantly higher regulatory capital requirements for the GSEs over current requirements.rule. Higher GSE capital requirements could ultimately lead to increased costs to borrowers of GSE loans, which in turn could shift the market away from the GSEs to the FHA or lender portfolios. Such a shift could result in a smaller market for private mortgage insurance.
In conjunction with preparing to release the GSEs from conservatorship, on January 14, 2021, the FHFA and the Treasury Department agreed to amend the Preferred Stock Purchase Agreements (“PSPAs”) between the Treasury Department and each of the GSEs to increase the amount of capital each GSE may retain. In addition, amongAmong other things, the amendments to the PSPAs limit the number of certain mortgages the GSEs may acquire with two or more prescribed risk factors, including certain mortgages with combined
loan-to-value
ratios above 90%. Because these limits were developedHowever, on September 14, 2021, the FHFA and Treasury Department suspended certain provisions of the amendments to the PSPAs, including the limit on the number of mortgages with two or more risk factors that the GSEs may acquire. Such suspensions terminate on the later of one year after September 14, 2021 or six months after the Treasury Department notifies the GSEs of termination. The limit on the number of mortgages with two or more risk factors was based on the current market makeup, we dosize at the time, and Enact does not expect any material impact to the private mortgage market in the near term. As previously disclosed,
New insurance written of $18.8 billion in the CFPB’s Qualified Mortgage (“QM”) regulations include a temporary category (the “QM Patch”) for mortgages that comply with certain prohibitions and limitations and meet the GSE underwriting and product guidelines. Mortgages that meet certain requirements are deemed to be QMs until the earlierfirst quarter of the time in which the GSEs exit the FHFA conservatorship or the mandatory compliance date of the final amendments2022 decreased 25% compared to the CFPB’s rule defining what constitutes a QM (“QM Rule”). The CFPB also announced it was reconsidering the QM Rule and would also propose a rule to delay the July 1, 2021 mandatory compliance date of the amended QM Rule. On April 27, 2021, the CFPB promulgated a final rule delaying the mandatory compliance date of the amended QM Rule until October 1, 2022. As provided under the final rule, the prior 43%
debt-to-income-based
QM Rule definition, the new price-based average prime offer rate (“APOR”) definition and the QM Patch will all remain available to lenders for loan applications received prior to October 1, 2022. However, on April 8, 2021, the GSEs issued notices stating that due to the requirements of the PSPAs they would only acquire loans that meet the new price-based APOR definition set forth under the amended QM Rule for applications received on or after July 1, 2021. We believe that loans which previously qualified under the 43% debt-to-income-based QM Rule definition and the QM Patch will continue to qualify under the new price-based APOR definition and therefore we expect little impact from this change. For more information on the previously disclosed regulation, see “Item 1—Business—Regulation—U.S. Insurance Regulation” in our 2020 Annual Report on Form
10-K.
For more information about the potential future impact, see “Item 1A—Risk Factors—Changes to the role of the GSEs or to the charters or business practices of the GSEs, including actions or decisions to decrease or discontinue the use of mortgage insurance, could adversely affect our financial condition and results of operations or significantly impact our business,” and “—Risk Factors—The amount of mortgage insurance we write could decline significantly if alternatives to private mortgage insurance are used or lower coverage levels of mortgage insurance are selected” in our 2020 Annual Report on Form
10-K.
Estimated mortgage origination volume increased during the secondfirst quarter of 2021 comparedprimarily due to the second quarter of 2020 primarily from higher estimated purchase origination volumes, slightly offset by a modest estimated decrease in refinance originations. Thesmaller estimated private mortgage insurance available market, increasewhich was attributableprimarily driven by a decline in refinance originations due to higher purchase originations.rising mortgage rates in the current year.
Our
Enact’s primary persistency increased to 63%76% during the secondfirst quarter of 2022 compared to 56% during the first quarter of 2021 compared to 59% during the second quarterand is approaching its historic norms of 2020 but remained below historic norms.approximately 80%. The increase in persistency was primarily driven by a modest increase in interest rates and a decline in the percentage of our in-force policies with mortgage rates above current interest rates. SuppressedThe increase in persistency hasmore than offset the decline in new insurance written in the first quarter of 2022, leading to an increase in insurance in-force of $5.3 billion as compared to December 31, 2021. Prior to the first quarter of 2022, low persistency impacted business performance trends during 2021 in several ways, including but not limited to, offsetting insurance
in-force
growth from new insurance written, elevatedaccelerating the recognition of earned premiums due to single premium policy cancellations, accelerating the amortization of our existing reinsurance transactions reducing their associated PMIERs capital credit in the current year and shifting the concentration of ourEnact’s primary insurance
in-force
to more recent years of policy origination. As of June 30, 2021, ourMarch 31, 2022, Enact’s primary insurance
in-force
has less
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than 10% had approximately 4% concentration in 2014 and prior book years. Our 2005 through 2008 book year concentration is approximately 4%. In contrast, our 2020 book year represents 38% of our primary insurance
in-force
concentration while ourEnact’s 2021 book year is 23%represented 38% of its primary insurance in-force concentration while its 2022 book year was 8% as of June 30, 2021.March 31, 2022.
New insurance written of $26.7 billion in the second quarter of 2021 decreased 6% compared to the second quarter of 2020 primarily due to our lower estimated market share, partially offset by higher purchase originations and a larger private mortgage insurance market in the current year. The U.S. private mortgage insurance industry is highly competitive. OurEnact Holdings’ market share is influenced by the execution of ourits go to market strategy, including but not limited to, pricing competitiveness relative to ourits peers and ourits selective participation in forward commitment transactions. Our market share remains impacted by the negative ratings differential relative to our competitors, concerns expressed about Genworth’s financial condition and the execution of its strategic plans. We continueEnact continues to manage the quality of new business through pricing and ourits underwriting guidelines, which we modifyare modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within our risk/rewardEnact’s risk adjusted return appetite, and we continueenabling it to write new business at returns we viewit views as attractive.
Net earned premiums were flatdecreased in the secondfirst quarter of 2022 compared to the first quarter of 2021 compared toprimarily from the second quartercontinued lapse of 2020 primarily as growth in our insurance
in-force
was offset byolder higher priced policies, a decrease in single premium policy cancellations in the current year and higher ceded premiums and continued lapsedue to a higher volume of our older higher priced policies.credit risk transfer transactions, partially offset by insurance in-force growth in the current year. The total number of delinquent loans has declined from the
COVID-19
peak in the second quarter of 2020 but remains elevated comparedas borrowers continued to
pre-COVID-19
levels. exit forbearance plans and new forbearances declined. During this time and consistent with prior years, servicers continued the practice of remitting premiums during the early stages of default. Additionally, we haveEnact has a business practice of refunding the post-delinquent premiums to the insured party if the delinquent loan goes to claim. We recordEnact records a liability and a reduction to net earned premiums for the post-delinquent premiums we expectit expects to refund. The post-delinquentpost-
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delinquent premium liability recorded duringsince the beginning of COVID-19 in the second quarter of 2020 andthrough the first halfquarter of 2021 associated with delinquent loans2022 was not significant in relation to the change in earned premiums for those periods as a result of the high concentration of new delinquencies being subject to a servicer reported forbearance plan and the lower estimated rate at which delinquencies go to claim (“claim rates”) for these loans.
Enact’s loss ratio for the three months ended March 31, 2022 and 2021 was (4)% and 22%, respectively. The post-default premium liability increased by $2decrease was largely from a favorable reserve adjustment of $50 million during the first quarter of 2022 primarily related to COVID-19 delinquencies from 2020 compared to reserve strengthening of $10 million on pre-COVID-19 delinquencies in the secondfirst quarter of 2021 primarily due to continued premium remittances on
COVID-19
and from lower new delinquencies partially offset by the continued decline in overall delinquencies. The total liability for all delinquencies was $13 million as of June 30, 2021. As a result of
COVID-19,
certain state insurance regulators required or requested the provision of grace periods of varying lengths to insureds in the eventcurrent year. During the peak of
non-payment
COVID-19, Enact experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have been curing at levels above Enact’s reserve expectations, which led to the release of premium. Regulators differed greatly in their approaches but generally focused on the avoidance of cancellation of coverage for
non-payment.
While most of these requirements and requests have lapsed, it is possible that some or all of them could be
re-issued
reserves in the eventfirst quarter of declarations of new states of emergency that might result from worsening pandemic conditions. We currently comply with all state regulatory requirements. If timely payment is not made, future premiums could decrease and the certificate of insurance could be subject to cancellation after 60 days, or such longer time as required under applicable law.2022.
Our
Enact’s loss reserves continue to be negatively impacted by
COVID-19.
COVID-19 and remain subject to uncertainty. Borrowers who have experienced a financial hardship including, but not limited to, the loss of income due to the closing of a business or the loss of a job have takencontinue to take advantage of available forbearance programs and payment deferral options. During the peak of the pandemic, we experienced elevatedLoss reserves recorded on these new delinquencies which may ultimately cure athave a higher rate than traditional delinquencies. Unlike a hurricane where the natural disaster occurs at a point in time and the rebuild starts soon after,
COVID-19
brought ongoing displacementhigh degree of estimation due to the mortgage insurance market, making it more difficult to determine the effectivenesslevel of forbearance and the resulting claim rates for newuncertainty regarding whether delinquencies in forbearance plans. Given this difference, our prior hurricane experience was leveraged as one of many considerationswill ultimately cure or result in the establishment of an appropriate claim rate estimate for new delinquencies in forbearance plans that have emerged as a result of
COVID-19.
Severitypayments. The severity of loss on loans that do go to claim may be positively impacted by home price appreciation, however, may be negatively impacted by the extended forbearance timeline,and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies and if currentdelinquencies. These negative influences on loss severity could be mitigated in part by further home price appreciation reverses
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in the future.appreciation. For loans insured on or after October 1, 2014, ourEnact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.
Our loss ratio for
New primary delinquencies in the three months ended June 30, 2021 was 12% asfirst quarter of 2022 declined compared to 94% for the three months ended June 30, 2020. The decrease was largely from lower new delinquencies from the improving economy.first quarter of 2021. New primary delinquencies of 6,8628,724 contributed $30$39 million of loss expense in the secondfirst quarter of 2021.2022. Enact incurred $44 million of losses from 10,053 new primary delinquencies in the first quarter of 2021 driven primarily by an increase in borrower forbearance as a result of COVID-19. In determining the loss expense estimate, for the quarter, considerations were given to forbearance and non-forbearance delinquencies, recent cure and claim experience and the ongoingprevailing economic impact due to the pandemic. We incurred $170 millionconditions. Approximately 27% of losses from new delinquencies in the second quarter of 2020 driven primarily by a significant increase in borrower forbearance as a result of
COVID-19.
In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. Approximately 45% of ourEnact’s primary new delinquencies in the secondfirst quarter of 20212022 were subject to a forbearance plan as compared to less than 5%54% in recent quarters prior to
COVID-19.the first quarter of 2021.
As of June 30, 2021, GMICO’s
March 31, 2022, EMICO’s risk-to-capital
ratio under the current regulatory framework as established under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), GMICO’sEMICO’s domestic insurance regulator, was approximately 12.0:12.2:1, compared with a
risk-to-capital
ratio of 11.9:1 and 12.3:1 as of March 31, 2021 and December 31, 2020, respectively. GMICO’s
2021. EMICO’s risk-to-capital
ratio remains below the NCDOI’s maximum
risk-to-capital
ratio of 25:1. North Carolina’s calculation of
risk-to-capital
excludes the
risk-in-force
for delinquent loans given the established loss reserves against all delinquencies. As a result, we do not expect any immediate, material pressure to GMICO’s
EMICO’s ongoing risk-to-capital
ratio in the short term as a result of
COVID-19.
GMICO’s ongoing
risk-to-capital
ratio will depend principally on the magnitude of future losses incurred by GMICO,EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business or capital support provided.
Under PMIERs, we areEnact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. On June 29,Since 2020, the GSEs have issued the “PMIERs Amendment.” In September 2020, the GSEs issued an amended and restated version of theseveral amendments to PMIERs, Amendment that became effective retroactively on June 30, 2020 and included a new reporting requirement that became effective on December 31, 2020. On December 4, 2020, the GSEs issued a revised and restated version of the PMIERs Amendment that revised and replaced the version issued in September 2020. The December 4, 2020 version extended the application of reduced PMIERs capital factors to each non-performing loan that has an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 and extended the capital preservation period from March 31, 2021 to June 30, 2021. On June 30, 2021, the GSEs issued a revised and restated version of the PMIERs Amendment that replaced the version issued on December 4, 2020. The June 30, 2021 version allows loans that enter a forbearance plan on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital factor for as long as the loan remains in forbearance. The June 30, 2021 version also extends the capital preservation period through December 31, 2021 with certain exceptions, as described below.
The PMIERs Amendmentwhich implemented both permanent and temporary revisions to PMIERs. For loans that became non-performing due to a COVID-19 hardship, PMIERs was temporarily amended with respect to each non-performing loan that (i) hashad an initial missed monthly payment occurring on or after March 1, 2020 and prior to April 1, 2021 or (ii) is subject to a forbearance plan granted in response to a financial hardship related to COVID-19, the terms of which are materially consistent with terms of forbearance plans offered by the GSEs. The risk-based required asset amount factor for the non-performing loan will beis the greater of (a) the applicable risk-based required asset amount factor for a performing loan were it not delinquent, and
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(b) the product of a 0.30 multiplier and the applicable risk-based required asset amount factor for a non-performing loan. In the case of (i) above, absent the loan being subject to a forbearance plan described in (ii) above, the 0.30 multiplier will be
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was applicable for no longer than three calendar months beginning with the month in which the loan became a non-performing loan due to having missed two monthly payments. Loans subject to a forbearance plan described in (ii) above include those that are either in a repayment plan or loan modification trial period following the forbearance plan unless reported to the approved insurer that the loan is no longer in such forbearance plan, repayment plan, or loan modification trial period. The PMIERs Amendment also imposed temporaryamendment dated June 30, 2021 further allows loans that enter a forbearance plan due to a COVID-19 hardship on or after April 1, 2021 to remain eligible for extended application of the reduced PMIERs capital preservation provisions through December 31, 2021 that require an approved insurer to meet certain PMIERs minimum required assets buffers (150%factor for as long as the loan remains in the third quarter of 2021 and 115% in the fourth quarter of 2021) or otherwise obtain prior written GSE approval before paying any dividends, pledging or transferring assets to an affiliate or entering into any new, or altering any existing, arrangements under tax sharing and intercompany expense-sharing agreements, even if such insurer had a surplus of available assets.forbearance. In addition, the PMIERs Amendment imposesamendments imposed permanent revisions to the risk-based required asset amount factor for non-performing loans for properties located in future Federal Emergency Management Agency (“FEMA”) Declared Major Disaster Areas eligible for individual assistance.
In September 2020, subsequent to the issuance of Enact Holdings’ senior notes due in 2025, the GSEs imposed certain restrictions (the “GSE Restrictions”) with respect to capital on Enact. In May 2021, in connection with their conditional approval of the then potential partial sale of Enact Holdings, the GSEs confirmed the GSE Restrictions will remain in effect until the following collective conditions (“GSE Conditions”) are met: (a) approval of GMICO’s plan to secure additional capital, if needed, (b) GMICOEMICO obtains “BBB+”/“Baa1” (or higher) rating from S&P, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. for two consecutive quarters and (c)(b) Genworth achieves certain financial metrics. Prior to the satisfaction of the GSE Conditions, the GSE Restrictions require:
 
GMICOEMICO to maintain 115%120% of PMIERs minimum required assets through 2021, 120% during 2022 and 125% thereafter;
 
Enact Holdings to retain $300 million of its holding company cash that can be drawn down exclusively for its debt service or to contribute to GMICOEMICO to meet theirits regulatory capital needs including PMIERs; and
 
written approval must be received from the GSEs prior to any additional debt issuance by either GMICOEMICO or Enact Holdings.
Until the GSE Conditions imposed in connection with the GSE Restrictions are met, Enact Holdings’ liquidity must not fall below 13.5% of its outstanding debt. The GSEs’ conditional approvalAs of the potential partial sale ofMarch 31, 2022, after taking into account debt service to date, Enact Holdings remains in effect through September 30, 2021, however, if the potential partial sale is not completed prior to October 2021, the GSEs will likely reassess the GSE Restrictions. In addition, the GSEs could recommend revisions to the GSE Restrictions based upon a varietymust maintain holding company cash of factors, including the outcome of the potential partial sale of Enact Holdings.approximately $228 million.
The GSEs informed us that a potential partial sale resulting in Genworth owning 70% or less of Enact Holdings by year end 2021 would delay each step up of the PMIERs minimum required asset requirements listed in the first bullet above by one calendar year. In addition, Fannie Mae agreed to reconsider the GSE Restrictions if Genworth Financial were to own 50% or less of Enact Holdings at any point prior to their expiration, however, they reserve the right to impose additional PMIERs requirements if the potential partial sale is not completed prior to October 2021. We will continue to assess our options, including the aforementioned potential partial sales outlined by the GSEs. However, ourexpiration. Our current plans do not include a potential partial saleany additional minority sales resulting in which Genworth ownsFinancial owning less than 80% of Enact Holdings.
As of June 30, 2021,March 31, 2022, Enact had estimated available assets of $4,926$5,222 million against $2,985$2,961 million net required assets under PMIERs compared to available assets of $4,769$5,077 million against $3,005$3,074 million net required assets as of MarchDecember 31, 2021. The sufficiency ratio as of June 30, 2021March 31, 2022 was 165%176% or $1,941$2,261 million above the published PMIERs requirements, compared to 159%165% or $1,764$2,003 million above the published PMIERs requirements as of MarchDecember 31, 2021. PMIERs sufficiency is based on the published requirements applicable to
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private mortgage insurers and does not give effect to the GSE Restrictions imposed on Enact. The increase in the PMIERs sufficiency was driven in partprimarily by the completion of an insurance linked notes transaction,two excess of loss reinsurance transactions in the first quarter of 2022, which added $303approximately $370 million of additional PMIERs capital credit as of June 30, 2021, elevated lapse driven by prevailing low interest rates,March 31, 2022, as well as lapses, business cash flows and lower delinquencies, partially offset by elevated new insurance written. In addition, elevated lapse continued to drive an acceleration of thewritten and amortization of ourexisting reinsurance transactions executed prior to the second quarter of 2021, which caused a reduction in PMIERs capital credit in the second quarter of 2021. Ourtransactions. Enact’s PMIERs required assets as of June 30, 2021March 31, 2022 and MarchDecember 31, 2021 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans. The application of the 0.30 multiplier to all eligible delinquencies provided $760$272 million of benefit to our June 30, 2021Enact’s March 31, 2022 PMIERs required assets compared to $1,012$390 million of benefit as of MarchDecember 31, 2021. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.
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On April 16, 2021,January 27, 2022, Enact obtained $303 million of fully collateralizedexecuted an excess of loss reinsurance transaction with a panel of reinsurers, which provides up to approximately $294 million of reinsurance coverage from Triangle Re 2021-2 Ltd.on a portion of the current and expected new insurance written for the 2022 book year, effective January 1, 2022. On March 24, 2022, Enact executed another excess of loss reinsurance transaction with a panel of reinsurers, which provides up to approximately $325 million of reinsurance coverage on a portfolio of existing mortgage insurance policies written from September 2020July 1, 2021 through December 2020.31, 2021, effective March 1, 2022. Credit risk transfer transactions provided an aggregate of approximately $1,406$1,622 million of PMIERs capital credit as of June 30, 2021.March 31, 2022. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.
SubsequentOn April 26, 2022, Enact Holdings’ board of directors approved the initiation of a dividend program under which it intends to pay a quarterly cash dividend. The inaugural quarterly dividend for the second quarter of 2021, GMICO received2022 will be $0.14 per share, payable on May 26, 2022 to common shareholders of record on May 9, 2022. Future dividend payments are subject to quarterly review and approval from the NCDOI for a dividendby Enact Holdings’ board of $200 milliondirectors and Genworth Financial, and will be targeted to be distributed at year-end 2021. We believe this is an important milestonepaid in the third month of each subsequent quarter. In April 2022, EMICO completed a distribution to Enact Holdings that will support its ability to pay a quarterly dividend. Enact Holdings intends to use these proceeds and future EMICO distributions to fund the quarterly dividend as we workwell as to restartbolster its financial flexibility and return additional capital to shareholders.
Returning capital to shareholders, balanced with Enact Holdings’ growth and risk management priorities, remains a key commitment for Enact Holdings as it looks to enhance shareholder value through time. Enact Holdings believes the initiation of a quarterly dividend reflects meaningful progress towards that goal and continues to evaluate the most appropriate amount of total capital to return to shareholders for the remainder of 2022. Enact Holdings’ ultimate view will be shaped by its capital prioritization framework, including: supporting its existing policyholders; growing its mortgage insurance business; funding attractive new business opportunities; and returning capital to shareholders. Enact Holdings’ total return of capital from Enact. This approval, coupled with Enact’swill also be based on its view of the prevailing and prospective macro-economic conditions, regulatory landscape and business performance and the recently published changes to the GSE capital preservation rules, provides us incremental confidence for a potential 2021 dividend. However, if our potential partial sale of Enact Holdings is not completed prior to October 2021, the GSEs will likely reconsider the PMIERs capital requirements applicable to Enact which could in turn affect Enact’s ability to execute future dividends.performance. Any future dividend is subject to market conditions, business performance, business and regulatory approvals, including the GSEs’ approval related to the potential partial saledividends or additional returns of Enact Holdings and, if occurring followingcapital will include a successful partial sale of Enact Holdings, would include distributionsproportionate distribution to minority shareholders.
 
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Segment results of operations
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
 
  
Three months ended
June 30,
 
Increase
(decrease) and
percentage
change
   
Three months ended
March 31,
 
Increase
(decrease)
and
percentage
change
 
(Amounts in millions)
  
    2021    
 
    2020    
 
2021 vs. 2020
   
    2022    
 
    2021    
 
2022 vs. 2021
 
Revenues:
          
Premiums
  $243  $243  $—     —  %   $234  $252  $(18)   (7)% 
Net investment income
   35   31   4   13%    35   35   —     —  % 
Net investment gains (losses)
   (2)   (1)   (1)   (100)%    —     (1)   1   100% 
Policy fees and other income
   —     1   (1)   (100)%    1   2   (1)   (50)% 
  
 
  
 
  
 
    
 
  
 
  
 
  
Total revenues
   276   274   2   1%    270   288   (18)   (6)% 
  
 
  
 
  
 
    
 
  
 
  
 
  
Benefits and expenses:
          
Benefits and other changes in policy reserves
   30   228   (198)   (87)%    (10)   55   (65)   (118)% 
Acquisition and operating expenses, net of deferrals
   63   47   16   34%    54   57   (3)   (5)% 
Amortization of deferred acquisition costs and intangibles
   4   4   —     —  %    3   4   (1)   (25)% 
Interest expense
   12   —     12   NM(1)    13   13   —     —  % 
  
 
  
 
  
 
    
 
  
 
  
 
  
Total benefits and expenses
   109   279   (170)   (61)%    60   129   (69)   (53)% 
  
 
  
 
  
 
    
 
  
 
  
 
  
Income (loss) from continuing operations before income taxes
   167   (5)   172   NM(1) 
Provision (benefit) for income taxes
   35   (1)   36   NM(1) 
Income from continuing operations before income taxes
   210   159   51   32% 
Provision for income taxes
   45   34   11   32% 
  
 
  
 
  
 
    
 
  
 
  
 
  
Income (loss) from continuing operations
   132   (4)   136   NM(1) 
Adjustments to income (loss) from continuing operations:
     
Income from continuing operations
   165   125   40   32% 
Less: net income from continuing operations attributable to noncontrolling interests
   30   —     30   NM (1) 
  
 
  
 
  
 
  
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   135   125   10   8% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
     
Net investment (gains) losses
   2   1   1   100%    —     1   (1)   (100)% 
Expenses related to restructuring
   2   —     2   NM(1) 
Taxes on adjustments
   (1)   —     (1)   NM(1)    —     —     —     —  % 
  
 
  
 
  
 
    
 
  
 
  
 
  
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $135  $(3)  $138   NM(1) 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $135  $126  $9   7% 
  
 
  
 
  
 
    
 
  
 
  
 
  
 
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
The change to adjusted operating income available to Genworth Financial, Inc.’s common stockholders in the current year from adjusted operating loss in the prior year was primarily attributable to higher losses in the prior year from higher new delinquencies driven by a significant increase in borrower forbearance and unfavorable reserve adjustments as a result of COVID-19. The increase was partially offset by higher operating costs and interest expense associated with Enact Holdings’ senior notes issued in August 2020.
Revenues
Premiums were flat as higher insurance in-force was offset by a decrease in policy cancellations in our single premium mortgage insurance product, higher ceded premiums and continued lapse of our in-force portfolio in the current year as older higher priced policies continued to lapse in the current low interest rate environment.
Net investment income increased primarily from higher average invested assets, partially offset by lower investment yields in the current year.
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Benefits and expenses
Benefits and other changes in policy reserves decreased largely from lower new delinquencies in the current year and unfavorable reserve adjustments in the prior year as a result of COVID-19. The prior year included $170 million of losses from new delinquencies driven primarily by a significant increase in borrower forbearance as a result of COVID-19 compared to $30 million of losses from new delinquencies in the current year. In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity.
Acquisition and operating expenses, net of deferrals, increased primarily attributable to higher operating costs, expenses associated with strategic transaction preparations and restructuring costs in the current year.
Interest expense in the current year relates to Enact Holdings’ senior notes issued in August 2020.
Provision (benefit) for income taxes.
The effective tax rate was 21.2% and 26.6% for the three months ended June 30, 2021 and 2020, respectively. The decrease was driven by pre-tax income in the current year compared to a pre-tax loss in the prior year.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
   
Six months ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
  
    2020    
  
2021 vs. 2020
 
Revenues:
     
Premiums
  $495  $469  $26   6% 
Net investment income
   70   64   6   9% 
Net investment gains (losses)
   (3)   (1)   (2)   (200)% 
Policy fees and other income
   2   3   (1)   (33)% 
  
 
 
  
 
 
  
 
 
  
Total revenues
   564   535   29   5% 
  
 
 
  
 
 
  
 
 
  
Benefits and expenses:
     
Benefits and other changes in policy reserves
   85   247   (162)   (66)% 
Acquisition and operating expenses, net of deferrals
   120   97   23   24% 
Amortization of deferred acquisition costs and intangibles
   8   8   —     —  % 
Interest expense
   25   —     25   NM(1) 
  
 
 
  
 
 
  
 
 
  
Total benefits and expenses
   238   352   (114)   (32)% 
  
 
 
  
 
 
  
 
 
  
Income from continuing operations before income taxes
   326   183   143   78% 
Provision for income taxes
   69   39   30   77% 
  
 
 
  
 
 
  
 
 
  
Income from continuing operations
   257   144   113   78% 
Adjustments to income from continuing operations:
     
Net investment (gains) losses
   3   1   2   200% 
Expenses related to restructuring
   2   —     2   NM(1) 
Taxes on adjustments
   (1)   —     (1)   NM(1) 
  
 
 
  
 
 
  
 
 
  
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $261  $145  $116   80% 
  
 
 
  
 
 
  
 
 
  
(1) 
We define “NM” as not meaningful for increases or decreases greater than 200%.
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Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders increased primarily attributable to higherlower losses largely from a favorable reserve adjustment of $40 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $8 million on pre-COVID-19 delinquencies in the prior year, as well as from higherlower new delinquencies driven by a significant increase in borrower forbearance and higher unfavorable reserve adjustments as a result of COVID-19. The increase was also driven by higher premiums mainly attributable to higher insurance in-force,the current year. These improvements were partially offset by higher cededlower premiums and the minority IPO of Enact Holdings that closed in September 2021, which reduced Genworth Financial’s ownership percentage to 81.6% and resulted in lower net income of $30 million in the current year.
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Revenues
Premiums decreased mainly driven by continued lapse of older higher priced policies, and a decrease inlower single premium policy cancellations in the current year. These increases were partially offset by interest expense associated with Enact Holdings’ senior notes issued in August 2020 and higher operating costs in the current year.
Revenues
Premiums increased mainly attributable to higher insurance in-force,ceded premiums, partially offset by higher ceded premiums, continued lapse of older higher priced policies due to the current low interest rate environment and a decrease in policy cancellations in our single premium mortgage insurance product in the current year.
Net investment income increased primarily from higher income from bond calls and higher average invested assetsin-force in the current year.
Benefits and expenses
Benefits and other changes in policy reserves decreased largely from higher new delinquencies and unfavorablea favorable reserve adjustmentsadjustment of $50 million in the priorcurrent year as a result of COVID-19. The prior year included $197 million of losses from newprimarily related to COVID-19 delinquencies $170 million of which were driven primarily by a significant increase in borrower forbearance as a result of COVID-19. In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. These decreases were partially offset by current year2020 curing at levels above original reserve expectations compared to reserve strengthening of $10 million primarily due to our expectation thaton pre-COVID-19 delinquencies will have a modestly higher claim rate than ourin the prior best estimate givenyear. Enact also experienced lower new delinquencies in the slower emergence of cures to date.current year.
Acquisition and operating expenses, net of deferrals, increaseddecreased primarily attributable to higherlower operating costs, expenses associated with strategic transaction preparations and restructuring costs in the current year.
Interest expense in the current year relates to Enact Holdings’ senior notes issued in August 2020.
Provision for income taxes.
The effective tax rate was 21.2%21.6% and 21.1%21.2% for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively, consistent with the U.S. corporate federal income tax rate.
Net income from continuing operations attributable to noncontrolling interests.
The increase relates to the minority IPO of Enact Holdings on September 16, 2021, which reduced Genworth Financial’s ownership percentage to 81.6%.
Enact selected operating performance measures
Primary Mortgage Insurance
Substantially all of ourEnact’s policies are primary mortgage insurance, which provides protection on individual loans at specified coverage percentages. Primary mortgage insurance is placed on individual loans at the time of origination and are typically delivered to usEnact on a loan by loanloan-by-loan basis. Primary mortgage insurance can also be delivered to usEnact on an aggregated basis, whereby each mortgage in a given loan portfolio is insured in a single transaction after the point of origination.
Pool Mortgage Insurance
Pool mortgage insurance transactions provide coverage on a finite set of individual loans identified by the pool policy. Pool policies contain coverage percentages and provisions limiting the insurer’s obligation to pay
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claims until a threshold amount is reached (known as a “deductible”) or capping the insurer’s potential aggregate liability for claims payments (known as a “stop loss”) or a combination of both provisions. Pool mortgage insurance is typically used to provide additional credit enhancement for certain secondary market mortgage transactions.
The following tables settable sets forth selected operating performance measures regarding our Enact segment as of or for the dates indicated:
 
  
As of June 30,
   
Increase (decrease) and
percentage change
   
As of or for the three

months ended

March 31,
   
Increase

(decrease) and

percentage

change
 
(Amounts in millions)
  
2021
   
2020
   
2021 vs. 2020
   
2022
   
2021
   
2022 vs. 2021
 
Primary insurance in-force
(1)
  $217,500   $197,000   $20,500   10%   $231,853   $210,187   $21,666    10% 
Risk in-force:
               
Primary
  $54,600   $49,900   $4,700   9%   $58,295   $52,866   $5,429    10% 
Pool
   100    100    —     —  %    97    134    (37)    (28)% 
  
 
   
 
   
 
    
 
   
 
   
 
   
Total risk in-force
  $54,700   $50,000   $4,700   9%   $58,392   $53,000   $5,392    10% 
  
 
   
 
   
 
    
 
   
 
   
 
   
New insurance written
  $18,823   $24,934   $(6,111)    (25)% 
 
(1) 
Primary insurance in-force represents the aggregate unpaid principal balance for loans we insure.Enact insures. Original loan balances are primarily used to determine premiums.
 
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2021
   
2020
   
2021 vs. 2020
  
2021
   
2020
   
2021 vs. 2020
 
New insurance written
  $26,700   $28,400   $(1,700)   (6)%  $51,600   $46,300   $5,300    11% 
Net premiums written
  $225   $217   $8   4%  $451   $425   $26    6% 
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Primary insurance in-force and risk in-force
Primary insurance in-force increased largely from new insurance written, partially offset bywritten. In addition, higher persistency led to lower lapses and cancellations as we experienced lower persistency duringin the current year. Primary persistency was 59%76% and 66%56% for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively. Persistency remains slightly below Enact’s historic norms but is trending upward due to the recent rise in interest rates. Total risk in-force increased primarily as a result of higher primary insurance in-force.
New insurance written
For the three months ended June 30, 2021, newNew insurance written decreased primarilyprincipally due to our lower estimated market share, partially offset by higher purchase originations and a largersmaller private mortgage insurance available market, which was primarily driven by a decline in the current year. For the six months ended June 30, 2021, new insurance written increased primarilyrefinance originations due to higher mortgage purchase and refinancing originations and a larger private mortgage insurance market, partially offset by our lower estimated market sharerising interest rates in the current year.
Net premiums written
Net premiums written for the three and six months ended June 30, 2021 increased primarily from higher average primary insurance in-force, partially offset by higher ceded premiums in the current year.
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Loss and expense ratios
The following table sets forth the loss and expense ratios for our Enact segment for the dates indicated:
 
  
Three months ended

March 31,
 
Increase
(decrease)
 
  
Three months
ended June 30,
 
Increase (decrease)
 
Six months
ended June 30,
 
Increase (decrease)
 
  
2021
 
2020
 
2021 vs. 2020
 
2021
 
2020
 
2021 vs. 2020
   
2022
 
2021
 
2022 vs. 2021
 
Loss ratio
   12%   94%   (82)%   17%   53%   (36)%    (4)%   22%   (26)% 
Expense ratio (net earned premiums)
   27%   21%   6%   26%   22%   4% 
Expense ratio
   24%   24%   —  % 
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio (net earned premiums) is the ratio of general expenses to net earned premiums. In our business,Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.
The loss ratio decreased forcompared to the three and six months ended June 30,March 31, 2021 largely from a favorable reserve adjustment of $50 million in the current year primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations compared to reserve strengthening of $10 million on pre-COVID-19 delinquencies in the prior year. Enact also experienced lower new delinquencies in the current year and unfavorableyear. The favorable reserve adjustments inadjustment reduced the prior year as a result of COVID-19. The second quarter of 2020 included $170 million of losses from new delinquencies driven primarilyloss ratio by a significant increase in borrower forbearance as a result of COVID-19 compared to $30 million of losses from new delinquencies in the second quarter of 2021. In the prior year, we also recorded additional reserves of $28 million for IBNR delinquencies and strengthened existing reserves by $28 million primarily driven by the deterioration of early cure emergence patterns impacting claim frequency along with a modest increase in claim severity. The decrease for the six months ended June 30, 2021 was also partially offset by reserve strengthening of $10 million21 percentage points in the current year primarily due to our expectation that pre-COVID-19 delinquencies will have a modestly higher claim rate than our prior best estimate given the slower emergence of cures to date.year.
The expense ratio (net earned premiums) forwas flat compared to the three and six months ended June 30,March 31, 2021 increased mainly driven by higheras lower operating costs in the current year. Expenses associated with strategic transaction preparations and restructuring costs increased our expense ratio by approximately two percentage points for both the three and six months ended June 30, 2021. The increase in the expense ratio (net earned premiums) for the six months ended June 30, 2021 was partiallywere offset by higher net earnedlower premiums in the current year.
 
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Mortgage insurance loan portfolio
The following table sets forth selected financial information regarding our EnactEnact’s loan portfolio as of June 30:March 31:
 
(Amounts in millions)
  
2021
   
2020
   
2022
   
2021
 
Primary insurance in-force by loan-to-value ratio at origination:
        
95.01% and above
  $33,657   $33,483   $36,867   $33,757 
90.01% to 95.00%
   94,307    89,035    96,419    92,124 
85.01% to 90.00%
   61,234    53,794    66,226    58,098 
85.00% and below
   28,279    20,735    32,341    26,208 
  
 
   
 
   
 
   
 
 
Total
  $217,477   $197,047   $231,853   $210,187 
  
 
   
 
   
 
   
 
 
Primary risk in-force by loan-to-value ratio at origination:
        
95.01% and above
  $9,228   $8,789   $10,379   $9,151 
90.01% to 95.00%
   27,308    25,686    27,987    26,637 
85.01% to 90.00%
   14,776    12,957    16,082    13,997 
85.00% and below
   3,331    2,436    3,847    3,081 
  
 
   
 
   
 
   
 
 
Total
  $54,643   $49,868   $58,295   $52,866 
  
 
   
 
 
  
 
   
 
 
Primary insurance in-force by FICO
(1)
score at origination:
        
Over 760
  $83,602   $75,428   $93,222   $79,285 
740-759
   34,402    32,649    36,821    33,607 
720-739
   30,964    28,637    32,363    30,295 
700-719
   27,032    23,746    27,620    26,309 
680-699
   21,469    18,271    21,259    20,777 
660-679
(2)
   10,192    8,781    10,805    10,001 
640-659
   6,008    5,521    6,188    5,981 
620-639
   2,838    2,786    2,774    2,893 
<620
   970    1,228    801    1,039 
  
 
   
 
   
 
   
 
 
Total
  $217,477   $197,047   $231,853   $210,187 
  
 
   
 
   
 
   
 
 
Primary risk in-force by FICO score at origination:
        
Over 760
  $20,908   $19,046   $23,326   $19,829 
740-759
   8,628    8,303    9,267    8,442 
720-739
   7,879    7,312    8,224    7,715 
700-719
   6,848    6,016    6,974    6,678 
680-699
   5,385    4,629    5,334    5,231 
660-679
(2)
   2,531    2,180    2,715    2,484 
640-659
   1,494    1,358    1,550    1,485 
620-639
   720    707    699    734 
<620
   250    317    206    268 
  
 
   
 
   
 
   
 
 
Total
  $54,643   $49,868   $58,295   $52,866 
  
 
   
 
   
 
   
 
 
 
(1) 
Fair Isaac Company.
(2) 
Loans with unknown FICO scores are included in the 660-679 category.
 
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Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for our EnactEnact’s loan portfolio as of the dates indicated:
 
  
June 30,
2021
 
December 31,
2020
 
June 30,
2020
   
March 31,

2022
 
December 31,

2021
 
March 31,

2021
 
Primary insurance:
        
Insured loans in-force
   933,616   924,624   896,232    941,689   937,350   922,186 
Delinquent loans
   33,568   44,904   53,587    22,571   24,820   41,332 
Percentage of delinquent loans (delinquency rate)
   3.60%   4.86%   5.98%    2.40%   2.65%   4.48% 
Delinquency rates have decreased primarily from a decline in total delinquencies particularlyas the economy continues to recover from their peak in the second quarter of 2020COVID-19 and as a result of COVID-19. The decrease was also attributable to cures outpacingoutpaced new delinquencies.
The following tables set forth primary delinquencies, direct primary case reserves and risk in-force by aged missed payment status in our EnactEnact’s loan portfolio as of the dates indicated:
 
  
June 30, 2021
   
March 31, 2022
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct case
reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
   
Delinquencies
   
Direct case

reserves
(1)
   
Risk

in-force
   
Reserves as %

of risk in-force
 
Payments in default:
                
3 payments or less
   6,030   $32   $318    10%    6,837   $38   $359    11% 
4 - 11 payments
   12,378    151    717    21%    6,875    115    392    29% 
12 payments or more
   15,160    406    914    44%    8,859    438    515    85% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   33,568   $589   $1,949    30%    22,571   $591   $1,266    47% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
  
December 31, 2020
   
December 31, 2021
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct case
reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
   
Delinquencies
   
Direct case

reserves
(1)
   
Risk

in-force
   
Reserves as %

of risk in-force
 
Payments in default:
                
3 payments or less
   10,484   $43   $549    8%    6,586   $35   $340    10% 
4 - 11 payments
   30,324    331    1,853    18%    7,360    111    426    26% 
12 payments or more
   4,096    143    204    70%    10,874    460    643    72% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   44,904   $517   $2,606    20%    24,820   $606   $1,409    43% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
The total increase in reserves as a percentage of risk in-force as of June 30, 2021March 31, 2022 was primarily driven by higher reserves in relation to athe decrease in delinquent risk in-force. Delinquent risk in-force decreased mainly fromdue to lower total delinquencies as cures outpaced new delinquencies in the first halfquarter of 2021, while reserves increased primarily from new delinquencies and reserve strengthening in2022. While the current year. Asnumber of June 30, 2021, we have experienced an increase in loans that are delinquent for 12 months or more has decreased since December 31, 2021, it remains elevated compared to pre-COVID-19 levels due in large part to borrowers entering a forbearance plan over a year ago driven by COVID-19. We estimated the loss reserve for COVID-19 related delinquencies by applying a claim rate estimate which considers the emergence of cures on forbearance and non-forbearance delinquencies and the ongoing economic impact due to the pandemic. The large volume of additional forbearance delinquencies moving to 12 or more payments in default combined with lower loss expectations on delinquencies subject to a forbearance plan drove the decrease in reserves as a percentage of risk in-force in the 12 or more payments in default category as of June 30, 2021. Forbearance plans may be extended up to 18 months, therefore, it is possible we could experience elevated delinquencies in this aged category for the remainder of 2021. Resolution of a delinquency in a forbearance plan, whether it ultimately results in a cure or a claim, is difficult to estimate and may not be known for several quarters, if not longer. In addition, due to foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.
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Primary insurance delinquency rates differ from region to region in the United States at any one time depending upon economic conditions and cyclical growth patterns. The tables below set forth the dispersion of direct primary case reserves and our primary delinquency rates for the 10 largest states and the 10 largest
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Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by ourEnact’s primary risk in-force as of the dates indicated. Delinquency rates are shown by region based upon the location of the underlying property rather than the location of the lender.
 
  
Percent of primary

risk in-force as of
June 30, 2021
 
Percent of direct

case reserves as of
June 30, 2021
(1)
  
Delinquency rate as of
   
Percent of primary

risk in-force as of

March 31, 2022
 
Percent of direct

case reserves as of

March 31, 2022
(1)
  
Delinquency rate as of
 
 
June 30,
2021
 
December 31,
2020
 
June 30,
2020
  
March 31,

2022
 
December 31,

2021
 
March 31,

2021
 
By State:
            
California
   12%   12%   4.70%   6.20%   7.67%    11%   11%   2.75%   3.17%   5.76% 
Texas
   8%   8%   4.20%   5.82%   7.31%    8%   8%   2.51%   2.89%   5.25% 
Florida
(2)
   7%   9%   4.52%   6.92%   9.06%    7%   9%   2.51%   2.97%   5.97% 
New York
(2)
   5%   12%   3.51%   3.80%   6.36% 
Illinois
(2)
   5%   6%   4.13%   5.21%   6.13%    5%   6%   2.85%   3.09%   5.07% 
New York
(2)
   5%   12%   5.10%   6.92%   8.89% 
Michigan
   4%   2%   2.11%   2.93%   4.12%    4%   2%   1.87%   1.87%   2.68% 
Arizona
   4%   2%   3.13%   4.54%   5.44%    4%   2%   1.92%   2.31%   4.06% 
North Carolina
   3%   2%   2.99%   3.84%   4.99%    3%   2%   1.96%   2.18%   3.60% 
Pennsylvania
(2)
   3%   3%   3.06%   4.11%   5.44%    3%   3%   2.30%   2.38%   3.83% 
Washington
   3%   3%   4.51%   5.37%   5.59%    3%   3%   2.68%   2.98%   5.47% 
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
(2) 
Jurisdiction predominantly uses a judicial foreclosure process, which generally increases the amount of time it takes for a foreclosure to be complete.
 
   
Percent of primary

risk in-force as of
June 30, 2021
  
Percent of direct

case reserves as of
June 30, 2021
(1)
  
Delinquency rate as of
 
  
June 30,
2021
  
December 31,
2020
  
June 30,
2020
 
By MSA or MD:
      
Chicago-Naperville MD
   3%   4%   5.09%   6.36%   7.69% 
Phoenix MSA
   3%   2%   3.15%   4.63%   5.49% 
New York MD
   3%   8%   7.69%   10.25%   12.92% 
Atlanta MSA
   2%   3%   4.84%   6.68%   8.65% 
Washington DC-Arlington MD
   2%   2%   4.86%   6.09%   8.18% 
Houston MSA
   2%   3%   5.54%   7.59%   8.74% 
Riverside-San Bernardino MSA
   2%   2%   5.24%   7.08%   8.55% 
Los Angeles-Long Beach MD
   2%   3%   5.89%   7.57%   9.28% 
Dallas MD
   2%   2%   3.60%   5.10%   7.31% 
Nassau-Suffolk MD
   2%   4%   8.10%   10.64%   13.33% 
   
Percent of primary

risk in-force as of

March 31, 2022
  
Percent of direct

case reserves as of

March 31, 2022
(1)
  
Delinquency rate as of
 
  
March 31,

2022
  
December 31,

2021
  
March 31,

2021
 
By MSA or MD:
      
Chicago-Naperville, IL MD
   3%   5%   3.39%   3.68%   6.28% 
Phoenix, AZ MSA
   3%   2%   1.92%   2.36%   4.12% 
New York, NY MD
   3%   8%   4.68%   5.32%   9.56% 
Atlanta, GA MSA
   2%   3%   2.92%   3.28%   6.10% 
Washington-Arlington, DC MD
   2%   2%   2.50%   2.96%   5.84% 
Houston, TX MSA
   2%   3%   3.20%   3.61%   6.89% 
Riverside-San Bernardino, CA MSA
   2%   2%   3.05%   3.42%   6.53% 
Los Angeles-Long Beach, CA MD
   2%   3%   3.22%   3.95%   7.30% 
Dallas, TX MD
   2%   2%   2.04%   2.31%   4.59% 
Nassau County, NY MD
   2%   5%   5.02%   5.55%   10.13% 
 
(1) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
 
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The following table sets forth the dispersion of ourEnact’s direct primary case reserves, and primary insurance in-force and risk in-force by year of policy origination, weighted average mortgage interest rate and delinquency rate as of June 30, 2021:March 31, 2022:
 
(Amounts in millions)
  
Weighted
average
rate
(1)
 
Percent of direct
case reserves
(2)
 
Primary
insurance
in-force
   
Percent
of total
 
Primary
risk
in-force
   
Percent
of total
 
Delinquency
rate
   
Percent of direct

case reserves
(1)
 
Primary

insurance

in-force
   
Percent

of total
 
Primary

risk

in-force
   
Percent

of total
 
Delinquency

rate
 
Policy Year
Policy Year
 
                
2004 and prior
   6.18%   3%  $621    —  %  $177    —  %   15.47% 
2005 to 2008
   5.55%   25   9,061    4   2,317    4   11.87% 
2009 to 2013
   4.25%   2   1,961    1   528    1   5.89% 
2014
   4.48%   3   2,709    1   732    1   5.65% 
2008 and prior
   25%  $7,723    3%  $1,991    3%   10.41% 
2009 to 2014
   5   2,946    1   788    1   5.34% 
2015
   4.16%   5   5,810    3   1,549    3   4.99%    5   3,960    2   1,058    2   4.06% 
2016
   3.88%   8   11,499    5   3,052    6   4.65%    7   8,076    4   2,147    4   3.48% 
2017
   4.26%   11   11,763    6   3,032    5   5.84%    10   8,023    4   2,094    4   4.43% 
2018
   4.78%   13   12,289    6   3,086    6   6.98%    12   8,306    4   2,092    4   5.48% 
2019
   4.20%   19   28,842    13   7,225    13   5.01%    17   19,609    8   4,935    8   3.44% 
2020
   3.26%   11   82,308    38   20,536    38   1.36%    15   65,807    28   16,606    28   1.49% 
2021
   3.01%   —     50,614    23   12,409    23   0.14%    4   88,757    38   21,959    38   0.58% 
2022
   —     18,646    8   4,625    8   0.04% 
   
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
Total portfolio
   3.65%   100%  $217,477    100%  $54,643    100%   3.60%    100%  $231,853    100%  $58,295    100%   2.40% 
   
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
 
(1)
Average annual mortgage interest rate weighted by insurance in-force.
(2) 
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
Loss reserves in policy years 2005 through 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses weEnact will experience on these policy years, they have become a smaller percentage of ourits total mortgage insurance portfolio. The largest portion of loss reserves has shifted to newer book years as a result of COVID-19 given their significant representation of risk in-force. As of June 30, 2021, our 2014March 31, 2022, Enact’s 2015 and newer policy years represented approximately 95%96% of ourits primary risk in-force and 70% of ourits total direct primary case reserves.
U.S. Life Insurance segment
COVID-19
The most significant impact in our U.S. life insurance businesses from
COVID-19
in 2021 and 2020 was related to continued elevated mortality. Our long-term care insurance products were favorably impacted by higher mortality in the current year. Conversely, higher mortality rates had unfavorable impacts in our life insurance products and we have observed minimal impact from
COVID-19
in our fixed annuity products. Our products were also negatively impacted by the continued low interest rate environment, particularly as it related to loss recognition testing and asset adequacy analysis in the fourth quarter of 2020.
In our long-term care insurance products, we have experienced higher mortality during
COVID-19
which has had a favorable impact on claim reserves and our operating results. Although it is not our practice to track cause of death for policyholders and claimants, we believe the favorable results of our long-term care insurance business in the first quarter of 2021 and during 2020 were likely impacted by
COVID-19,
but we expect the impacts to be temporary. We believe
COVID-19
has accelerated mortality on our most vulnerable claimants, which may reduce mortality rates in future periods as the impacts of the pandemic subside. Therefore, in the fourth quarter of 2020 and the first quarter of 2021, we strengthened our claims reserve to adjust the mortality assumption by $91 million and $67 million, respectively, to account for the lower future claim termination rates expected on remaining claims. However, in the second quarter of 2021, we experienced lower mortality as the impacts of COVID-19 lessened and we did not establish any additional claims reserve but reduced a portion of
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the COVID-19 mortality adjustment, leaving a cumulative balance of $143 million as of June 30, 2021. As COVID-19 continues to develop, short-term mortality experience may fluctuate, and we would increase or decrease the COVID-19 mortality adjustment accordingly.
We have also experienced lower new claims incidence in our long-term care insurance business during COVID-19; however, we do not expect this to be permanent but rather a temporary reduction while
shelter-in-place
and social distancing protocols are in effect and that claims incidence experience will ultimately resemble previous trends. As a result, we have strengthened our IBNR claim reserves during COVID-19 by $140 million through June 30, 2021. Although new active claim volumes in our long-term care insurance business increased gradually in the first half of 2021, near term incidence may continue to be impacted by
COVID-19.
We continue to utilize virtual assessments to assess eligibility for benefits while
in-person
assessments have been temporarily discontinued during
COVID-19.
We are reviewing the options to resume
in-person
assessments, with appropriate protocols in place, while having virtual assessments available for those policyholders who would prefer this option. For claimants without the technology to perform virtual assessments, we have alternate options for gathering information. Our long-term care insurance benefit utilization will be monitored for impact, although it is too early to tell the magnitude and/or direction of that impact.
Additionally, our U.S. life insurance companies are dependent on the approval of actuarially justified
in-force
rate actions in our long-term care insurance business, including those rate actions which were previously filed and are currently pending review and approval. We have experienced some delays and could experience additional delays in receiving approvals of these rate actions during
COVID-19,
although we did not have a significant impact on our financial results in the first half of 2021 or during 2020 as a result of these delays.
We have continued to provide customer service to our policyholders during this uncertain time and are available to address questions or concerns regarding their policies. We are continually assessing our operational processes and monitoring potential impacts to morbidity due to
COVID-19.
We continue to actively monitor cash and highly liquid investment positions in each of our U.S. life insurance companies against operating targets that are designed to ensure that we will have the cash necessary to meet our obligations as they come due. The targets are set based on stress scenarios that have the effect of increasing our expected cash outflows and decreasing our expected cash inflows. Liquidity risk is assessed by comparing subsidiary cash to potential cash needs under a stressed liquidity scenario. The stressed scenario reflects potential policyholder surrenders, variability of normal operating cash flow and potential increase in collateral requirements under our cleared derivative program.
While the ongoing impact of
COVID-19
is very difficult to predict, the related outcomes and impact on the U.S. life insurance business will depend on the length and severity of the pandemic and shape of the economic recovery. Future declines in interest rates as well as equity market volatility as a result of
COVID-19
would increase reserves and capital requirements in our U.S. life insurance business. For sensitivities related to interest rates, lapses and mortality on our U.S. life insurance products, see “Item 7—Management’s Discussion and Analysis—Critical Accounting Estimates” in our 2020 Annual Report on Form
10-K.
We will continue to monitor
COVID-19
impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.
Trends and conditions
Results of our U.S. life insurance businesses depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves. Many factors can affect the results of our U.S. life insurance businesses. Because these factors are not known in advance, change over time, are difficult to accurately predict and are inherently uncertain, we cannot determine with precision the ultimate amounts we will pay for actual claims or the timing of those payments. We will
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continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our U.S. life insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions can have, and in the past have had, material impacts on our DAC amortization, reserve levels, results of operations and financial condition.
Our liability for policy and contract claims is reviewed quarterly and we conduct a detailed review of our claim reserve assumptions and methodologies for our long-term care insurance business annually typically during the third or fourth quarter of each year. Our liability for future policy benefits is reviewed at least annually as a part of our loss recognition testing typically performed in the third or fourth quarter of each year. As part of loss recognition testing, we also review the recoverability of DAC and PVFP at least annually. In addition, we perform cash flow testing separately for each of our U.S. life insurance companies on a statutory accounting basis annually. We will complete
As of December 31, 2021, each of our annual review of long-term carelife insurance claim reserve assumptionssubsidiaries exceeded the minimum required risk-based capital (“RBC”) levels in the fourth quarter of 2021, and we are monitoring emerging experience particularly in mortality and benefit utilization. While this work is ongoing, current trends do not indicate a need to strengthen the claims reserve as assumptions appear to be holding up in the aggregate. We also plan to complete our loss recognition and cash flow testing as well as assumption reviews for alltheir respective domiciliary state. The consolidated RBC ratio of our U.S. domiciled
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life insurance products insubsidiaries was approximately 289% as of December 31, 2021. As of March 31, 2022, the fourth quarter of 2021. For our 2021 assumption updates, we are generally not including data from 2020 in setting any long-term assumptions, as we do not yet have sufficient information around longer term effects of the pandemic. Our review of long-term care insurance assumptions, as partconsolidated RBC ratio of our testing in the fourth quarterU.S. domiciled life insurance subsidiaries increased compared to December 31, 2021 as a result of 2021, will include mortality, benefit utilization, interest rates and in-force rate actions, among other assumptions. Any assumption changeshigher earnings in our long-term care insurance business that result in pressure to our margin will be assessed for inclusion in our in-forcemainly driven by claim experience and premium rate action plan. In our life insurance business, we will also review mortality, persistencyincreases and interest rates, among other assumptions, in the fourth quarterbenefit reductions, including policyholder benefit reduction elections made as part of 2021. As we complete our review, we are monitoring oura legal settlement, partially offset by elevated mortality experience, including older age mortality as well as mortality improvement, in our life insurance products. Potential changes
We continue to face challenges in our assumptions couldprincipal life insurance subsidiaries, particularly those subsidiaries that rely heavily on long-term care insurance in-force rate actions as a source of earnings and capital. We may see variability in statutory results and a decline in the RBC ratios of these subsidiaries given the time lag between the approval of in-force rate actions versus when the benefits from the in-force rate actions (including increased premiums and associated benefit reductions) are fully realized in our financial results. Additionally, the RBC ratio of our U.S. life insurance subsidiaries would be negatively impact earningsimpacted by future increases in our statutory reserves, including results of life mortality, cash flow testing and assumption reviews, particularly in our long-term care insurance business. Future declines in the RBC ratio of our life insurance business.subsidiaries could result in heightened supervision and regulatory action.
Results of our U.S. life insurance businesses are also impacted by interest rates. Low interest rates put pressure on the profitability and returns of these businesses as higher yielding investments mature and are replaced with lower-yielding investments. We seek to manage the impact of low interest rates through asset-liability management, investment in alternative assets, including limited partnerships, as well as interest rate hedging strategies for a portion of our long-term care insurance product cash flows. Additionally, certain products have implicit and explicit rate guarantees or optionality that are significantly impacted by changes in interest rates. During periods of increasing market interest rates, we may increase crediting rates on in-force universal life insurance and fixed annuity products to remain competitive in the marketplace. In addition, rapidly rising interest rates may cause increased unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on our financial condition and results of operations, including the requirement to liquidate fixed-income investments in an unrealized loss position to satisfy surrenders or withdrawals. For a further discussion of the impact of interest rates on our U.S. life insurance businesses, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 20202021 Annual Report on Form
10-K.
The risk-based capital (“RBC”)
Our U.S. life insurance businesses have been impacted by COVID-19 as a result of eachelevated mortality. Our long-term care insurance operating results have been favorably impacted by higher mortality in the first quarter of 2022 and the full year 2021. Conversely, higher mortality rates had unfavorable impacts in our life insurance products and we have observed minimal impact from COVID-19 in our fixed annuity products. While the ongoing impact of COVID-19 is very difficult to predict, the related outcomes and impact on the U.S. life insurance business will depend on the length and severity of the pandemic and shape of the economic recovery. For sensitivities related to lapses and mortality on our U.S. life insurance subsidiaries exceeded the level of RBC that would require any of themproducts, see “Item 7—Management’s Discussion and Analysis— Critical Accounting Estimates” in our 2021 Annual Report on Form 10-K. We will continue to take or become subject to any corrective action in their respective domiciliary state as of December 31, 2020. However, the RBC ratiomonitor COVID-19 impacts and evaluate all of our U.S. life insurance subsidiaries has been negatively impacted over the past few years by increases in our statutory reserves, including results of Actuarial Guideline 38, cash flow testing and assumption reviews particularly in our long-term care insurance business. However, in the first half of 2021, the RBC ratio increased from 2020assumptions that may need updating as a result of higher earnings in our long-term care insurance business mainly driven by claim experience, premium rate increases and benefit reductions, including policyholder benefit reduction elections made as part of a legal settlement, as well as in our variable annuity products from favorable interest rates and equity markets. We continuelonger-term trends related to face challenges in our principal life insurance subsidiaries, particularly those subsidiaries that rely heavily on
in-force
rate actions as a source of earnings and capital. We may see variability in statutory results and a decline in the RBC ratios of these subsidiaries given the time lag between the approval of
in-force
rate actions versus when the benefits from the
in-force
rate actions (including increased premiums and associated benefit reductions) are fully realized in our financial results. Future declines in the RBC ratio of our life insurance subsidiaries could result in heightened supervision and regulatory action.
pandemic.
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Long-term care insurance
The long-term profitability of our long-term care insurance business depends upon how our actual experience compares with our valuation assumptions, including but not limited to morbidity, mortality and persistency. If any of our assumptions prove to be inaccurate, our reserves may be inadequate, which in the past has had, and may in the future have, a material adverse effect on our results of operations, financial condition and business. Results of our long-term care insurance business are also influenced by our ability to achieve
in-force
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rate actions, improve investment yields and manage expenses and reinsurance, among other factors. Changes in regulations or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.
Our assumptions are sensitiveIn our long-term care insurance products, we have experienced higher mortality during COVID-19 which has had a favorable impact on claim reserves and our operating results. Although it is not our practice to slight variability in actual experiencetrack cause of death for policyholders and small changes in assumptions could result in decreases inclaimants, we believe the marginfavorable results of our long-term care insurance blocksbusiness in the first quarter of 2022 as well as in 2021 were likely impacted by COVID-19, but we expect the impacts to at/or below zerobe temporary. The COVID-19 pandemic significantly increased mortality on our most vulnerable claimants, which may reduce mortality rates in future years.periods as the impacts of the pandemic subside. To account for this change in experience due to COVID-19, we adjusted the extent, basedmortality assumption in our claim reserves to reflect the risk of lower claim termination rates on reviews,remaining claims. As of March 31, 2022, the marginbalance of our incremental claim reserves associated with COVID-19 mortality was $125 million. As COVID-19 continues to develop, short-term mortality experience may fluctuate, and we would decrease the COVID-19 mortality adjustment if we experience lower mortality.
We have also experienced lower new claims incidence in our long-term care insurance block, excludingbusiness during COVID-19; however, we do not expect this to be permanent but rather a temporary reduction while shelter-in-place and social distancing protocols are in effect and that claims incidence experience will ultimately resemble previous trends. As a result, we strengthened our IBNR claim reserves during COVID-19, and as of March 31, 2022, the acquired block, is negative,balance of IBNR claim reserves due to lower claims incidence was $46 million. New claims incidence remains below pre-pandemic levels and near-term incidence may continue to be impacted by COVID-19. However, pending claims, which are our leading indicator of future incidence, have been trending toward historical levels in recent quarters. In addition, during the pandemic, a larger share of our claimants sought home care instead of facility-based care, and as the pandemic subsides, we have seen that trend reverse. We continue to utilize virtual assessments to assess eligibility for benefits while in-person assessments have been temporarily discontinued during COVID-19. We are reviewing the options to resume in-person assessments, with appropriate protocols in place, while having virtual assessments available for those policyholders who would be requiredprefer this option. For claimants without the technology to recognize a loss, by amortizing more DAC and/or establishing additional benefit reserves. For our acquired block ofperform virtual assessments, we have alternate options for gathering information. Our long-term care insurance benefit utilization will be monitored for impact, although it is too early to tell the impactsmagnitude and/or direction of adverse changes in assumptions would also be reflected as a loss if our margin for this block is reduced below zero by establishing additional benefit reserves. A significant decrease in our loss recognition testing margin of our long-term care insurance blocks could have a material adverse effect on our business, results of operations and financial condition.that impact.
As a result of the review of our claim reserves completed in prior years, we have been establishing higher claim reserves on new claims, which has negatively impacted earnings and we expect this to continue going forward. Also, average claim reserves for new claims are trending higher over time as the mix of claims continues to evolve, with an increasing number of policies with higher daily benefit amounts and higher inflation factors going on claim. In addition, althoughAlthough new claim counts on our older long-term care insurance blocks of business will continue to decrease as the blocks run off, we are gaining more experience on our larger new blocks of business and expect continued growth in new claims on these blocks as policyholders reach older attained ages with higher likelihood of going on claim.
Given the ongoing challenges in our long-term care insurance business, we continue pursuing initiatives to improve the risk and profitability profile of our business including: premium rate increases and associated benefit reductions on our
in-force
policies; managing expense levels; executing investment strategies targeting higher returns; and enhancing our financial and actuarial analytical capabilities. Executing on our multi-year long-term care insurance
in-force
rate action plan with premium rate increases and associated benefit reductions on our legacy long-term care insurance policies is critical to the business. For an update on
in-force
rate actions, refer to “Significant Developments—Developments and Strategic Highlights—U.S. Life Insurance.”
The approval process for
in-force
rate actions and the amount and timing of the premium rate increases and associated benefit reductions approved vary by state. In certain states, the decision to approve or disapprove a rate increase can take a significant amount of time, and the approved amount may be phased in over time. After approval, insureds are provided with written notice of the increase and increases are generally applied on the
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insured’s next policy anniversary date. As a result, the benefits of any rate increase are not fully realized until the implementation cycle is complete and are, therefore, expected to be realized over time.
Because obtaining actuarially justified rate increases and associated benefit reductions is important to our ability to pay future claims, we will consider litigation against states that decline to approve those actuarially justified rate increases. In January 2022, we began litigation with two states that have refused to approve actuarially justified rate increases.
In 2019, the NAIC established the Long-Term Care Insurance (EX) Task Force to address efforts to create a national standard for reviewing and approving long-term care insurance rate increase requests. This task force is charged with developing a consistent national approach for reviewing rate increase requests that resultsresult in actuarially appropriate increases being granted by the states in a timely manner and eliminates cross-state rate subsidization, among others. The Long-Term Care Insurance (EX)In December 2021, the Task Force is expectedadopted its framework for multi-state rate review process and shifted its focus to provide a proposal tomonitoring the Executive (EX) Committeeimpact of this new process on state rate reviews. We are currently evaluating our participation in the NAIC before the end of 2021.multi-state review process for our upcoming filings.
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Life insurance
Results of our life insurance business are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors. We no longer solicit sales of traditional life insurance products; however, we continue to service our existing retained and reinsured blocks of business.
Mortality levels may deviate each period from historical trends. Overall mortality experience was higherlower for the sixthree months ended June 30, 2021March 31, 2022 compared to sixthe three months ended June 30, 2020, attributableMarch 31, 2021 but higher compared to the fourth quarter of 2021. In our life insurance products, COVID-19 deaths in part to
COVID-19.
the first quarter of 2022 were lower than the first quarter of 2021 but higher than the fourth quarter of 2021. We have also experienced higher mortality than our then-current and
priced-for
assumptions in recent years for our universal life insurance blocks. We have also been experiencing higher mortality related charges resulting from an increase in rates charged by our reinsurance partners reflecting natural block aging and higher mortality compared to expectations.
In the fourth quarter of 2020,2021, we performed our annual review of life insurance assumptions and loss recognition test.testing. Our review focused on assumptions for mortality, interest rates persistency and mortality,persistency, among other assumptions. Our mortality assumption was updated to align with overall pre-COVID-19 experience in later-duration as well as in targeted blocks such as term universal life insurance, conversion policies and post-level term. As of December 31, 2021, the loss recognition testing margin for our term and whole life insurance products was positive and consistent with the 2020 level.
As part of our review in the fourth quarter of 2020,2021, we recorded a $60$70 million
after-tax
benefit expense to net income in our term universal and term universal life insurance products primarily from favorable assumption updates. The favorable updates in our term universal life insurance product were primarily driven by a model refinement related to persistency and grace period timing. Other assumption updates mostly focused on future cost of insurance rates and long-term trendshigher pre-COVID-19 mortality experience. In addition, in mortality, persistency and interest rates. In the fourthfirst quarter of 2020,2022, we also recorded a $50$19 million
after-tax
DAC impairment charge related to universal life insurance DAC recoverability testing primarily as a result of reflecting these updated assumptions. During the three months ended June 30, 2021 and March 31, 2021, we recorded
after-tax
charges of $13 million and $17 million, respectively, in our universal life insurance products in connection with DAC recoverability testing.
We also updated mortality assumptions for certain universal and term universal life insurance products as well as our term life insurance productstesting compared to $32 million after-tax in the fourth quarter of 2020. 2021 and $17 million after-tax in the first quarter of 2021.
Our mortality experience for older ages is emerging and late-duration premium periods and conversion products is emerging. Assumption changes in our term life insurance products focused on mortality improvements during the post-level premium period based on observedwe continue to monitor trends in emerging experience. This change to the mortality assumption increased the loss recognition testing margin in our term life insurance products.improvement. We will continue to regularly review our mortality assumptions as well as all of our other assumptions in light of emerging experience. We may be required to make further adjustments in the future to our assumptions which could impact our universal and term universal life insurance reserves or ourthe loss recognition testing results of our term life insurance products. Any further materially adverse changes to our assumptions, including mortality, persistency or interest rates, could have a materially negative impact on our results of operations, financial condition and business.
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Compared to 1998 and prior years, we had a significant increase in term life insurance sales between 1999 and 2009, particularly in 1999 and 2000. The blocks of business issued since 2000 vary in size as compared to the large 1999 and 2000 blocks of business. As our large
10-
and
15-year
level premium period term life insurance policies written in 1999 and 2000 transitioned to their post-level guaranteed premium rate period, we experienced lower persistency compared to our pricing and valuation assumptions which accelerated DAC amortization in previous years. As our large
20-year
level premium period business written in 1999 entered its post-level period, we experienced higher lapses resulting in accelerated DAC amortization in 2019. This trend continued in the first quarter of 2020 for the 1999 block, as it reached the end of its level premium period. Additionally, we experienced a similar trend with the
20-year
level premium period business written in 2000 as it entered its post-level period during 2020 and into the first quarter of 2021 due to the
60-day
grace period. If lapse experience on future
10-,
15-
and
20-year
level premium period blocks emerges similar to our large
20-year
level premium period business written in 1999 and 2000, we would expect volatility in DAC amortization if persistency is lower than original assumptions, which would reduce profitability in our term life insurance products. However, going forward, given our smaller block sizes and reinsurance agreements in place, we would expect the impact to DAC amortization on policies entering the
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post-level period to be lower than what we experienced in 2019 and 2020. Our 20-year level premium period business written in 2002 will enter its post-level period in 2022 and we could experience elevated DAC amortization during the year if lapses are higher than expected. We have also taken actions to mitigate potentially unfavorable impacts through the use of reinsurance, particularly for certain term life insurance policies issued between 2001 and 2004.
We began selling term universal life insurance in late 2009, with sales peaking in 2011 prior to discontinuing sales of the product in 2012. We priced these products assuming high lapses upon expiration of the level premium period and we continue to expect those higher lapses. As our
10-year
level premium period term universal life insurance policies written in 2009 and 2010 entered their post-level premium period in late 2019 and 2020, we recorded higher reserves during the premium grace period which were released when the policies lapsed. With the model refinement implemented as part of our 2020 assumption updates, we no longer expect to see this dynamic to the same extent when term universal life insurance blocks enter their post-level period in the future.
Fixed annuities
Results of our fixed annuities business are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, persistency and expense and commission levels. We no longer solicit sales of traditional fixed annuity products; however, we continue to service our existing retained and reinsured blocks of business.
We monitor and change crediting rates on fixed annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, if interest rates remain at current levels or decrease, we could see declines in spreads which impact the margins on our products, particularly our single premium immediate annuity products. Due to theWe have previously had premium deficiency that existeddeficiencies in 2016, we have continued to monitor our single premium immediate annuity products more frequently than annually.that resulted in the establishment of additional future policy benefit reserves that were reflected as charges to net income. In 2021, the results of our loss recognition testing did not result in a premium deficiency; therefore, our liability for future policy benefits was sufficient. If investment performance deteriorates or interest rates decrease or remain at the current levels for an extended period of time, we could incur additional charges in the future. The impacts of future adverse changes in our assumptions could result in the establishment of additional future policy benefit reserves and would be immediately reflected as a loss if our margin for this block is again reduced below zero. Any favorable variation would result in additional margin and higher income recognized over the remaining duration of the
in-force
block but would not have an immediate benefit to net income.
For fixed indexed annuities, equity market and interest rate performance and volatility could also result in additional gains or losses, although associated hedging activities are expected to partially mitigate these impacts.
 
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Segment results of operations
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
 
  
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
 
    2020    
   
    2021 vs. 2020    
   
   2022   
 
   2021   
 
2022 vs. 2021
 
Revenues:
            
Premiums
  $703  $712   $(9)    (1)%   $695  $714  $(19)   (3)% 
Net investment income
   763   692    71    10%    676   716   (40)   (6)% 
Net investment gains (losses)
   66   118    (52)    (44)%    56   42   14   33% 
Policy fees and other income
   145   142    3    2%    137   148   (11)   (7)% 
  
 
  
 
   
 
     
 
  
 
  
 
  
Total revenues
   1,677   1,664    13    1%    1,564   1,620   (56)   (3)% 
  
 
  
 
   
 
     
 
  
 
  
 
  
Benefits and expenses:
            
Benefits and other changes in policy reserves
   1,129   1,213    (84)    (7)%    1,141   1,155   (14)   (1)% 
Interest credited
   87   97    (10)    (10)%    82   90   (8)   (9)% 
Acquisition and operating expenses, net of deferrals
   219   147    72    49%    199   192   7   4% 
Amortization of deferred acquisition costs and intangibles
   77   83    (6)    (7)%    83   68   15   22% 
  
 
  
 
   
 
     
 
  
 
  
 
  
Total benefits and expenses
   1,512   1,540    (28)    (2)%    1,505   1,505   —     —  % 
  
 
  
 
   
 
     
 
  
 
  
 
  
Income from continuing operations before income taxes
   165   124    41    33%    59   115   (56)   (49)% 
Provision for income taxes
   42   33    9    27%    20   32   (12)   (38)% 
  
 
  
 
   
 
     
 
  
 
  
 
  
Income from continuing operations
   123   91    32    35%    39   83   (44)   (53)% 
Adjustments to income from continuing operations:
            
Net investment (gains) losses, net
(2)(1)
   (67)   (121)    54    45%    (55)   (41)   (14)   (34)% 
Expenses related to restructuring
   2   —      2    NM(1)    —     14   (14)   (100)% 
Taxes on adjustments
   13   25    (12)    (48)%    12   6   6   100% 
  
 
  
 
   
 
     
 
  
 
  
 
  
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $71  $(5)   $76    NM(1)   $(4)  $62  $(66)   (106)% 
  
 
  
 
   
 
     
 
  
 
  
 
  
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the three months ended June 30,March 31, 2022 and 2021, and 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(1)$1 million and $(3) million, respectively.in each period.
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The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:
 
  
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
 
2021
 
  
 
2020
 
  
 
    2021 vs. 2020    
 
  
    2022    
 
    2021    
 
2022 vs. 2021
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
             
Long-term care insurance
  $98   $48   $50    104%   $59  $95  $(36)   (38)% 
Life insurance
   (40)    (81)    41    51%    (79)   (63)   (16)   (25)% 
Fixed annuities
   13    28    (15)    (54)%    16   30   (14)   (47)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $71   $(5)   $76    NM(1)   $(4)  $62  $(66)   (106)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
 
(1)
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We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-term care insurance business increased $50decreased $36 million primarily from a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims, less favorable development on IBNR claims, lower renewal premiums and lower net investment income. These decreases were partially offset by higher premiums and reduced benefits of $61 million in the current year from
in-force
rate actions approved and implemented, which included a net favorable impact from policyholder benefit reduction elections made as part of a legal settlementsettlement. To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $76 million in the currentprior year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $30 million.
The increase was alsoadjusted operating loss in our life insurance business increased $16 million mainly attributable to higher investment income and favorable development on IBNR claims,a $20 million legal settlement accrual, partially offset by a decrease in claim terminations driven mostly by lower mortality in the current year.
The adjusted operating loss availableyear compared to Genworth Financial, Inc.’s common stockholders in our life insurance business decreased $41 million mainly attributable to higher reserves recorded in the prior year on our
10-yearyear.
term universal life insurance block entering its post-level premium period and from lower lapses primarily associated with our large
20-year
term life insurance block written at the end of 2000 as it entered its post-level premium period. These decreases were partially offset by higher mortality in our term universal life insurance product and a DAC impairment of $13 million in our universal life insurance products in the current year.
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed annuities business decreased $15$14 million mainly attributable to lower net spreads and lower mortality in our single premium immediate annuities and higher reserves in our fixed indexed annuities driven by a less favorable equity market and interest rate changes in the current year.
Revenues
Premiums
 
Our long-term care insurance business decreased $1$25 million primarily driven by lower renewal premiums from policy terminations and policies entering
paid-up
status, mostlypartially offset by $24$15 million of increased premiums in the current year from
in-force
rate actions approved and implemented.
 
Our life insurance business decreased $8increased $6 million mainly attributable toprimarily driven by lower ceded premiums, partially offset by the continued runoff of our term and whole life insurance products in the current year.
Net investment income
 
Our long-term care insurance business increased $87decreased $18 million largely from higherlower income of $80$28 million in the current year frommostly attributable to limited partnerships and bond calls, partially offset by higher income of $12 million related to U.S. Government Treasury Inflation Protected Securities (“TIPS”).
 
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Our life insurance business decreased $4 million principally related to lower yields and lower average invested assets in the current year.
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(“TIPS”) and bond calls. The increase was also attributable to higher average invested assets in the current year. 
 
Our fixed annuities business decreased $15$18 million largely attributable to lower average invested assets due to block runoff and from lower bond calls in the current year due to block runoff.year.
Net investment gains (losses).
Net investment gains inThe increase was largely related to our long-term care insurance business decreased $62 million principally due toprimarily driven by an increase in net realized gains from the sale of investment securities in the prior year that did not recur, partially offset byand higher unrealized gains in the current year from changes in the fair value of equity securities and from higher credit losses in the prior year.
Net investment losses in our fixed annuities business decreased $9 million primarily related to lower losses on embedded derivatives related to our fixed indexed annuity products, partially offset by lower derivative gains and higher credit losses in the current year.
Policy fees and other income.
The decrease was largely related to our life insurance business driven mostly by the runoff of our in-force blocks in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
 
Our long-term care insurance business decreased $54$17 million primarily due to a more favorable impact of $139$84 million from reduced benefits in the current year related to
in-force
rate actions approved and implemented, which included policyholder benefit reduction elections made as part
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Table of a legal settlement, and from favorable development on IBNR claims. These decreases were partially offset by aging of theContents
in-force
implemented, which included policyholder benefit reduction elections made as part of a legal settlement. To account for the change in experience related to mortality and claim incidence due to COVID-19, we increased claim reserves by $96 million in the prior year. In the first quarter of 2022, as the impacts of COVID-19 lessened, we reduced claim reserves by $38 million. These decreases were partially offset by aging of the in-force block, a decrease in claim terminations driven mostly by lower mortality, higher severity and frequency of new claims, less favorable development on IBNR claims and higher incremental reserves of $25 million recorded in connection with an accrual for profits followed by losses in the current year.
Our life insurance business was flat as ceded reinsurance was offset by lower mortality in the current year and higher incremental reserves of $62 million recorded in connection with an accrual for profits followed by losses in the current year. In the prior year, we assumed that
COVID-19
temporarily decreased the number of new submitted claims, and accordingly IBNR reserves were strengthened by $37 million.
Our life insurance business decreased $44 million primarily attributable to higher reserves recorded in the prior year on our
10-year
term universal life insurance block which entered its post-level premium period, partially offset by higher mortality in our term universal life insurance product in the current year compared to the prior year.
 
Our fixed annuities business increased $14$3 million principally from lower mortality in our single premium immediate annuities lessand higher reserves in our fixed indexed annuity products driven by unfavorable equity market changes in the current year compared to a favorable equity market performance and unfavorable interest rate changes in the currentprior year.
Interest credited.
The decrease in interest credited was related todriven by declines of $4 million in both our fixed annuities and life insurance and fixed annuities businesses largely driven by a decline in theproducts due to lower average account values and from lower crediting rates in the current year.block runoff.
Acquisition and operating expenses, net of deferrals.deferrals
The increase was predominantly related to our
Our long-term care insurance business increased $2 million principally related to higher premium taxes, commissions and other expenses of $73$21 million associated with our
in-force
rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement in the current year, partially offset by restructuring costs in the prior year that did not recur and lower operating costs in the current year.
Our life insurance business increased $7 million primarily due to a $25 million legal settlement accrual, partially offset by lower reinsurance costs in the current year.
Amortization of deferred acquisition costs and intangibles
 
Our long-term care insurance business increased $6$5 million principally from policy terminations and policies entering
paid-up
status in the current year.
 
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Our life insurance business decreased $10increased $9 million principally from prior year lapses in our large
20-year
term life insurance block written in 2000, partially offsetprimarily driven by a DAC impairment of $16 millionmortality experience in our universal life insurance products in the current year.products.
Provision for income taxes.
The effective tax rate was 25.5%33.3% and 26.7%27.2% for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The decrease in the effective tax rate is primarily attributable to higher tax expense on forward starting swaps settled prior to the enactment of the TCJA, which are tax effected at 35% as they are amortized into net investment income, in relation to higher
pre-tax
income in the current year.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table sets forth the results of operations relating to our U.S. Life Insurance segment for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
  
    2020    
   
    2021 vs. 2020    
 
Revenues:
       
Premiums
  $1,417  $1,430   $(13)    (1)% 
Net investment income
   1,479   1,387    92    7% 
Net investment gains (losses)
   108   48    60    125% 
Policy fees and other income
   293   286    7    2% 
  
 
 
  
 
 
   
 
 
   
Total revenues
   3,297   3,151    146    5% 
  
 
 
  
 
 
   
 
 
   
Benefits and expenses:
       
Benefits and other changes in policy reserves
   2,284   2,510    (226)    (9)% 
Interest credited
   177   197    (20)    (10)% 
Acquisition and operating expenses, net of deferrals
   411   298    113    38% 
Amortization of deferred acquisition costs and intangibles
   145   170    (25)    (15)% 
Interest expense
   —     5    (5)    (100)% 
  
 
 
  
 
 
   
 
 
   
Total benefits and expenses
   3,017   3,180    (163)    (5)% 
  
 
 
  
 
 
   
 
 
   
Income (loss) from continuing operations before income taxes
   280   (29)    309    NM(1) 
Provision for income taxes
   74   6    68    NM(1) 
  
 
 
  
 
 
   
 
 
   
Income (loss) from continuing operations
   206   (35)    241    NM(1) 
Adjustments to income (loss) from continuing operations:
       
Net investment (gains) losses, net
(2)
   (108)   (54)    (54)    (100)% 
(Gains) losses on early extinguishment of debt
   —     4    (4)    (100)% 
Expenses related to restructuring
   16   —      16    NM(1) 
Taxes on adjustments
   19   10    9    90% 
  
 
 
  
 
 
   
 
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $133  $(75)   $208    NM(1) 
  
 
 
  
 
 
   
 
 
   
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the six months ended June 30, 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(6) million.
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The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the businesses included in our U.S. Life Insurance segment for the periods indicated:
   
Six months ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
 
2021
 
 
 
2020
 
 
 
    2021 vs. 2020    
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
      
Long-term care insurance
  $193  $49  $144    NM(1) 
Life insurance
   (103)   (158)   55    35% 
Fixed annuities
   43   34   9    26% 
  
 
 
  
 
 
  
 
 
   
Total adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $133  $(75)  $208    NM(1) 
  
 
 
  
 
 
  
 
 
   
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our long-term care insurance business increased $144 million primarily from favorable development on IBNR claims, higher investment income and higher premiums and reduced benefits of $75 million from
in-force
rate actions approved and implemented, which included a net favorable impact from policyholder benefit reduction elections made as part of a legal settlement in the current year. We also increased reserves by $66 million in the current year compared to $29 million in the prior year to account for changes to incidence and mortality experience driven by
COVID-19,
which we believe are temporary.
The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders in our life insurance business decreased $55 million mainly attributable to higher reserves recorded in the prior year on our
10-year
term universal life insurance block entering its post-level premium period and from lower lapses primarily associated with our large
20-year
term life insurance block written at the end of 2000 as it entered its post-level premium period. These decreases were partially offset by higher mortality in our universal and term universal life insurance products and DAC impairments of $30 million in our universal life insurance products in the current year.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders in our fixed annuities business increased $9 million mainly attributable to lower reserves and DAC amortization in our fixed indexed annuities driven by favorable equity market and interest rate changes in the current year and higher mortality in our single premium immediate annuities.
Revenues
Premiums
Our long-term care insurance business increased $3 million largely from $47 million of increased premiums in the current year from
in-force
rate actions approved and implemented, partially offset by policy terminations and policies entering
paid-up
status in the current year.
Our life insurance business decreased $16 million mainly attributable to the continued runoff of our term and whole life insurance products in the current year.
Net investment income
Our long-term care insurance business increased $133 million largely from higher income of $114 million in the current year from limited partnerships, TIPS and bond calls. The increase was also attributable to higher average invested assets in the current year.
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Our life insurance business decreased $6 million principally related to unfavorable prepayment speed adjustments on mortgage-backed securities in the current year.
Our fixed annuities business decreased $35 million largely attributable to lower average invested assets in the current year due to block runoff.
Net investment gains (losses)
Net investment gains in our long-term care insurance business increased $20 million principally due to higher unrealized gains from changes in the fair value of equity securities, and from prior year derivative and credit losses, partially offset by prior year net realized gains from the sale of investment securities.
Net investment gains in our life insurance business increased $12 million predominantly from higher net derivative gains and unrealized gains from changes in the fair value of equity securities in the current year compared to unrealized losses in the prior year.
Net investment losses in our fixed annuities business decreased $28 million primarily related to net derivative gains in the current year compared to net derivative losses in the prior year.
Benefits and expenses
Benefits and other changes in policy reserves
Our long-term care insurance business decreased $153 million primarily due to a more favorable impact of $147 million from reduced benefits in the current year related to
in-force
rate actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement, and from favorable development on IBNR claims. These decreases were partially offset by aging of the
in-force
block and higher incremental reserves of $195 million recorded in connection with an accrual for profits followed by losses. In addition, we increased claim reserves by $52 million reflecting our assumption that
COVID-19
accelerated our mortality experience on the most vulnerable claimants, leaving the remaining claim population less likely to terminate compared to the
pre-pandemic
average population.
Our life insurance business decreased $64 million primarily attributable to higher reserves recorded in the prior year on our
10-year
term universal life insurance block which entered its post-level premium period, partially offset by higher mortality in our universal and term universal life insurance products in the current year compared to the prior year.
Our fixed annuities business decreased $9 million principally from lower reserves in our fixed indexed annuities driven by favorable equity market and interest rate changes in the current year compared to an unfavorable market in the prior year.
Interest credited.
The decrease in interest credited was related to our life insurance and fixed annuities businesses largely driven by a decline in the average account values and from lower crediting rates in the current year.
Acquisition and operating expenses, net of deferrals.
The increase was predominantly related to our long-term care insurance business principally related to higher premium taxes, commissions and other expenses of $99 million associated with our
in-force
rate action plan, which included expenses related to policyholder benefit reduction elections made as part of a legal settlement in the current year. The increase was also attributable to restructuring costs of $16 million in the current year.
Amortization of deferred acquisition costs and intangibles
Our long-term care insurance business increased $6 million principally from policy terminations and policies entering
paid-up
status in the current year.
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Our life insurance business decreased $13 million principally from prior year lapses in our large
20-year
term life insurance block written in 2000, partially offset by DAC impairments of $38 million in our universal life insurance products in the current year. 
Our fixed annuities business decreased $18 million primarily related to lower DAC amortization reflecting the impact of favorable market changes in the current year.
Interest expense.
The decrease in interest expense was due to our life insurance business principally related to the early redemption of
non-recourse
funding obligations in the prior year.
Provision for income taxes.
The effective tax rate was 26.2% and (20.4)% for the six months ended June 30, 2021 and 2020, respectively. The increase in the effective tax rate is primarily attributable to higher tax expense on forward starting swaps, settled prior to the enactment of the TCJA, which are tax effected at 35% as they arewhen amortized into net investment income, in relation to
lower pre-tax
income in the current year.
U.S. Life Insurance selected operating performance measures
Long-term care insurance
As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their original pricing. In aggregate, we estimate that we have achieved approximately $20.4 billion, on a net present
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value basis, of approved in-force rate increases since 2012. We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases and associated benefit reductions in order to pay future claims.
The following table sets forth selected operating performance measures regardingsummarizes the impact from cumulative in-force rate actions on the results of operations of our individual and group long-term care insurance productsbusiness for the periods indicated:
 
   
Three months ended
June 30,
  
Increase
(decrease) and
percentage
change
  
Six months ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
  
    2020    
  
    2021 vs. 2020    
  
    2021    
  
    2020    
  
    2021 vs. 2020    
 
Net earned premiums:
         
Individual long-term care insurance
  $617  $618  $(1)   —  %  $1,232  $1,229  $3   —  % 
Group long-term care insurance
   31   31   —     —  %   62   62   —     —  % 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
Total
  $648  $649  $(1)   —  %  $1,294  $1,291  $3   —  % 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
Loss ratio
   62%   69%   (7)%    62%   74%   (12)%  
   
Three months ended
March 31,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
   
    2021    
   
2022 vs. 2021
 
Premiums
  $210   $195   $15    8% 
Plus: Benefits and other changes in policy reserves
(1)
   236    152    84    55% 
Less: Acquisition and operating expenses, net of deferrals
(2)
   61    40    21    53% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income before taxes
   385    307    78    25% 
Income taxes
   81    64    17    27% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income
(3)
  $304   $243   $61    25% 
  
 
 
   
 
 
   
 
 
   
(1) 
Amounts represent benefit reductions elected by policyholders as an alternative to increased premiums. These amounts reduced benefits and other changes in policy reserves in our long-term care insurance business for the periods indicated.
(2) 
Amounts include premium taxes, commissions and other expenses associated with our long-term care insurance in-force rate action plan, which included expenses of $43 million (consisting entirely of cash damages) and $23 million related to policyholder benefit reduction elections made as part of a legal settlement for the three months ended March 31, 2022 and 2021, respectively. Included in the $23 million of expenses for the three months ended March 31, 2021 was $20 million of cash damages.
(3) 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders attributable to in-force rate actions excludes reserve updates resulting from profits followed by losses.
See our results of operations above for additional details.
The following table presents net earned premiums and the loss ratio for our long-term care insurance business for the periods indicated:
   
Three months ended
March 31,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2022    
  
    2021    
  
2022 vs. 2021
 
Net earned premiums:
     
Individual long-term care insurance
(1)
  $590  $615  $(25)   (4)% 
Group long-term care insurance
   31   31   —     —  % 
  
 
 
  
 
 
  
 
 
  
Total
  $621  $646  $(25)   (4)% 
  
 
 
  
 
 
  
 
 
  
Loss ratio
   64%   62%   2%  
(1) 
For the three months ended March 31, 2022 and 2021, amounts include increased premiums of $210 million and $195 million, respectively, from in-force rate actions approved and implemented.
The loss ratio is the ratio of benefits and other changes in reserves less tabular interest on reserves less loss adjustment expenses to net earned premiums.
Net earned premiums decreased for the three months ended June 30, 2021 primarily driven by policy terminations and policies entering
paid-up
status, mostly offset by $24 million of increased premiums from
in-force
rate actions approved and implemented. Net earned premiums increased for the six months ended June 30, 2021 largely from $47 million of increased premiums from
in-force
rate actions approved and implemented, partially offset by policy terminations and policies entering
paid-up
status in the current year.
The loss ratio decreased for the three and six months ended June 30, 2021 due to the increase in premiums and lower benefits and other changes in reserves as discussed above.
 
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Net earned premiums decreased in the current year primarily driven by lower renewal premiums from policy terminations and policies entering paid-up status, partially offset by $15 million of increased premiums in the current year from in-force rate actions approved and implemented.
The loss ratio increased in the current year due to the lower premiums discussed above.
Life insurance
The following tables settable sets forth selected operating performance measures regarding our life insurance business as of or for the dates indicated:
 
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021 vs. 2020    
  
    2021    
   
2020    
   
    2021 vs. 2020    
 
Term and whole life insurance
               
Net earned premiums
  $55   $63   $(8)    (13)%  $123   $139   $(16)    (12)% 
Term universal life insurance
               
Net deposits
   53    57    (4)    (7)%   106    113    (7)    (6)% 
Universal life insurance
               
Net deposits
   64    65    (1)    (2)%   133    136    (3)    (2)% 
Total life insurance
               
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
Net earned premiums and deposits
  $172   $185   $(13)    (7)%  $362   $388   $(26)    (7)% 
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
   
As of June 30,
   
Percentage
change
 
(Amounts in millions)
  
2021
   
2020
   
  2021 vs. 2020  
 
Term and whole life insurance
      
Life insurance
in-force,
net of reinsurance
  $56,111   $69,969    (20)% 
Life insurance
in-force
before reinsurance
  $347,745   $379,972    (8)% 
Term universal life insurance
      
Life insurance
in-force,
net of reinsurance
  $103,473   $110,705    (7)% 
Life insurance
in-force
before reinsurance
  $104,145   $111,465    (7)% 
Universal life insurance
      
Life insurance
in-force,
net of reinsurance
  $31,807   $33,212    (4)% 
Life insurance
in-force
before reinsurance
  $36,045   $37,753    (5)% 
Total life insurance
      
Life insurance
in-force,
net of reinsurance
  $191,391   $213,886    (11)% 
Life insurance
in-force
before reinsurance
  $487,935   $529,190    (8)% 
   
As of or for the three
months ended March 31,
   
Increase (decrease)
and percentage

change
 
(Amounts in millions)
  
2022
   
2021
   
2022 vs. 2021
 
Term and whole life insurance
        
Net earned premiums
  $74   $68   $6    9% 
Life insurance in-force, net of reinsurance
   49,637    77,430    (27,793)    (36)% 
Life insurance in-force before reinsurance
   325,055    355,424    (30,369)    (9)% 
Term universal life insurance
        
Net deposits
  $49   $53   $(4)    (8)% 
Life insurance in-force, net of reinsurance
   97,750    105,360    (7,610)    (7)% 
Life insurance in-force before reinsurance
   98,392    106,055    (7,663)    (7)% 
Universal life insurance
        
Net deposits
  $67   $69   $(2)    (3)% 
Life insurance in-force, net of reinsurance
   30,732    32,132    (1,400)    (4)% 
Life insurance in-force before reinsurance
   34,756    36,435    (1,679)    (5)% 
Total life insurance
        
Net earned premiums and deposits
  $190   $190   $—      —  % 
Life insurance in-force, net of reinsurance
   178,119    214,922    (36,803)    (17)% 
Life insurance in-force before reinsurance
   458,203    497,914    (39,711)    (8)% 
We no longer solicit sales of our traditional life insurance products; however, we continue to service our existing blocks of business.
Term and whole life insurance
Net earned premiums decreased for the three and six months ended June 30, 2021increased mainly attributable to lower ceded premiums, partially offset by the continued runoff of our term and whole life insurance products. Lifeproducts in the current year.
Universal and term universal life insurance
in-force
also
Net deposits decreased as a result ofin the current year primarily attributable to lower renewals and from the continued runoff of our term life insurance products, including from prior year lapse experience in the large
20-yearin-force blocks.
term life insurance block written in 2000.
Universal and Term universal life insurance
Net deposits decreased for the three and six months ended June 30, 2021 primarily attributable to continued runoff of our
in-force
blocks.
 
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Fixed annuities
The following table sets forth selected operating performance measures regarding our fixed annuities business as of or for the dates indicated:
 
  
As of or for the three
months ended June 30,
   
As of or for the six
months ended June 30,
   
As of or for the three

months ended March 31,
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021    
   
    2020    
   
    2022    
   
    2021    
 
Account value, beginning of period
  $11,172   $12,487   $11,815   $13,023   $10,163   $11,815 
Premiums and deposits
   21    17    38    39 
Deposits
   18    17 
Surrenders, benefits and product charges
   (482)    (375)    (1,026)    (842)    (414)    (544) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Net flows
   (461)    (358)    (988)    (803)    (396)    (527) 
Interest credited and investment performance
   95    134    180    195    61    85 
Effect of accumulated net unrealized investment gains (losses)
   107    (7)    (94)    (159)    (323)    (201) 
  
 
   
 
   
 
   
 
   
 
   
 
 
Account value, end of period
  $10,913   $12,256   $10,913   $12,256   $9,505   $11,172 
  
 
   
 
   
 
   
 
   
 
   
 
 
We no longer solicit sales of our traditional fixed annuity products; however, we continue to service our existing block of business.
Account value decreased compared to MarchDecember 31, 2021 and December 31, 2020 as surrenders, benefits and benefits exceeded favorableunfavorable market performance andexceeded interest credited.credited in the current year.
Runoff segment
Trends and conditions
Results of our Runoff segment are affected primarily by investment performance, interest rate levels, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our Runoff segment can significantly impact our regulatory capital requirements, distributable earnings and liquidity. We use hedging strategies as well as liquidity planning and asset-liability management to help mitigate the impacts. In addition, we may consider reinsurance opportunities to further mitigate volatility in results and manage capital in the future.
Equity market volatility and interest rate movements have caused fluctuations in the results of our variable annuity products and regulatory capital requirements. In the future, equity and interest rate market performance and volatility could result in additional gains or losses in these products although associated hedging activities are expected to partially mitigate these impacts.
 
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Segment results of operations
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
 
  
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
March 31,
 
Increase
(decrease)
and
percentage
change
 
(Amounts in millions)
  
  2021  
   
  2020  
   
  2021 vs. 2020  
   
  2022  
 
  2021  
 
2022 vs. 2021
 
Revenues:
             
Net investment income
  $43   $54   $(11)    (20)%   $50  $49  $1   2% 
Net investment gains (losses)
   10    4    6    150%    (15)   (6)   (9)   (150)% 
Policy fees and other income
   35    32    3    9%    31   33   (2)   (6)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total revenues
   88    90    (2)    (2)%    66   76   (10)   (13)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Benefits and expenses:
             
Benefits and other changes in policy reserves
   2    4    (2)    (50)%    8   8   —     —  % 
Interest credited
   40    42    (2)    (5)%    43   41   2   5% 
Acquisition and operating expenses, net of deferrals
   14    11    3    27%    12   13   (1)   (8)% 
Amortization of deferred acquisition costs and intangibles
   4    (1)    5    NM(1)    6   5   1   20% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total benefits and expenses
   60    56    4    7%    69   67   2   3% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Income from continuing operations before income taxes
   28    34    (6)    (18)% 
Provision for income taxes
   6    6    —      —  % 
Income (loss) from continuing operations before income taxes
   (3)   9   (12)   (133)% 
Provision (benefit) for income taxes
   (1)   1   (2)   (200)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Income from continuing operations
   22    28    (6)    (21)% 
Adjustments to income from continuing operations:
        
Income (loss) from continuing operations
   (2)   8   (10)   (125)% 
Adjustments to income (loss) from continuing operations:
     
Net investment (gains) losses, net
(2)(1)
   (9)    (5)    (4)    (80)%    14   5   9   180% 
Taxes on adjustments
   2    1    1    100%    (3)   (1)   (2)   (200)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $15   $24   $(9)    (38)%   $9  $12  $(3)   (25)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the three months ended June 30,March 31, 2022 and 2021, and 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $1 million and $(1) million, respectively.for each period.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased predominantly due to lower investment income and less favorableunfavorable equity market performance and higher interest rates resulting in a decline in the average account values of our variable annuity products reducing fee income in the current year.
Revenues
Net investment income decreased principallylosses increased primarily due to lower average invested assets in our variable annuity products in the current year.
Net investment gains increased primarily from derivative gains in the current year compared to losses in the prior year, partially offset by lower gains on embedded derivatives associated with our variable annuity products with guaranteed minimum withdrawal benefits (“GMWBs”), partially offset by lower derivative losses in the current year.
Policy fees and other income increaseddecreased principally from higherlower fee income driven mostly by an increase in the average account values in our variable annuity products in the current year.
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Benefits and expenses
Acquisition and operating expenses, net of deferrals, increased mainly from higher commissions in our variable annuity products in the current year.
Amortization of deferred acquisition costs and intangibles increased primarily from higher DAC amortization in our variable annuity products due to less favorable equity market performance in the current year.
Provision for income taxes
. The effective tax rate was 19.6% and 19.9% for the three months ended June 30, 2021 and 2020, respectively. The decrease was primarily related to tax benefits from tax favored items in relation to lower
pre-tax
income in the current year.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table sets forth the results of operations relating to our Runoff segment for the periods indicated:
   
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021 vs. 2020    
 
Revenues:
        
Net investment income
  $92   $103   $(11)    (11)% 
Net investment gains (losses)
   4    (71)    75    106% 
Policy fees and other income
   68    65    3    5% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   164    97    67    69% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   10    24    (14)    (58)% 
Interest credited
   81    83    (2)    (2)% 
Acquisition and operating expenses, net of deferrals
   27    24    3    13% 
Amortization of deferred acquisition costs and intangibles
   9    16    (7)    (44)% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   127    147    (20)    (14)% 
  
 
 
   
 
 
   
 
 
   
Income (loss) from continuing operations before income taxes
   37    (50)    87    174% 
Provision (benefit) for income taxes
   7    (12)    19    158% 
  
 
 
   
 
 
   
 
 
   
Income (loss) from continuing operations
   30    (38)    68    179% 
Adjustments to income (loss) from continuing operations:
        
Net investment (gains) losses, net
(1)
   (4)    62    (66)    (106)% 
Taxes on adjustments
   1    (13)    14    108% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $27   $11   $16    145% 
  
 
 
   
 
 
   
 
 
   
(1)
For the six months ended June 30, 2020, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(9) million.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders increased primarily due to favorable equity market and interest rate performance, partially offset by lower investment income in the current year.
Revenues
Net investment income decreased largely due to lower average invested assets in our variable annuity products in the current year.
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The change to net investment gains in the current year from net investment losses in the prior year was primarily related to gains on embedded derivatives associated with our variable annuity products with GMWBs in the current year compared to losses in the prior year, partially offset by derivative losses in the current year compared to derivative gains in the prior year.
Policy fees and other income increased principally from higher fee income driven mostly by an increasea decline in the average account values in our variable annuity products in the current year.
Benefits and expenses
Benefits and other changes in policy reserves decreased primarily attributableInterest credited increased largely due to lower GMDB reserveshigher account values in our variable annuity products due to favorable equity market and interest rate performance in the current year.
Acquisition and operating expenses, net of deferrals, increased mainly from higher commissions in our variable annuitycorporate-owned life insurance products in the current year.
Amortization
101
Table of deferred acquisition costs and intangibles decreased mainly related to lower DAC amortization in our variable annuity products principally from favorable equity market performance in the current year.Contents
Provision (benefit) for income taxes
. The effective tax rate was 18.6%39.2% and 23.4%15.7% for the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The decreaseincrease was primarily attributable to tax benefits from tax favored itemsa pre-tax loss in relationthe current year compared to
pre-tax
income in the currentprior year.
Runoff selected operating performance measures
Variable annuity and variable life insurance products
The following table sets forth selected operating performance measures regarding our variable annuity and variable life insurance products as of or for the dates indicated:
 
  
As of or for the three
months ended June 30,
 
As of or for the six
months ended June 30,
   
As of or for the three

months ended March 31,
 
(Amounts in millions)
  
2021
 
2020
 
2021
 
2020
   
      2022      
   
      2021      
 
Account value, beginning of period
  $4,863  $4,521  $5,001  $5,042   $4,839   $5,001 
Deposits
   4   6   10   10    5    6 
Surrenders, benefits and product charges
   (140)   (122)   (327)   (288)    (131)    (187) 
  
 
  
 
  
 
  
 
   
 
   
 
 
Net flows
   (136)   (116)   (317)   (278)    (126)    (181) 
Interest credited and investment performance
   241   377   284   18    (254)    43 
  
 
  
 
  
 
  
 
   
 
   
 
 
Account value, end of period
  $4,968  $4,782  $4,968  $4,782   $4,459   $4,863 
  
 
  
 
  
 
  
 
   
 
   
 
 
We no longer solicit sales of our variable annuity or variable life insurance products,products; however, we continue to service our existing blocks of business and accept additional deposits on existing contracts and policies.
Account value increasedas of March 31, 2022 decreased compared to MarchDecember 31, 2021 primarily related to favorableunfavorable equity market performance partially offset byand surrenders in the current year.
Funding agreements
124The account value of our funding agreements was $250 million as of March 31, 2022 and December 31, 2021, and $300 million as of March 31, 2021. As of March 31, 2022, the decrease in account value as compared to March 31, 2021 was mainly due to a maturity payment in the second quarter of 2021.
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Funding agreements
The following table presents the account value of our funding agreements as of or for the dates indicated:
   
As of or for the three
months ended June 30,
  
As of or for the six
months ended June 30,
 
(Amounts in millions)
  
    2021    
  
    2020    
  
    2021    
  
    2020    
 
Funding Agreements
     
Account value, beginning of period
  $300  $253  $300  $253 
Deposits
   —     150   —     150 
Surrenders and benefits
   (51)   (51)   (51)   (52) 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net flows
   (51)   99   (51)   98 
Interest credited
   1   1   1   2 
  
 
 
  
 
 
  
 
 
  
 
 
 
Account value, end of period
  $250  $353  $250  $353 
  
 
 
  
 
 
  
 
 
  
 
 
 
Account value decreased compared to March 31, 2021 and December 31, 2020 mainly attributable to a maturity payment in the current year.
Corporate and Other Activities
Results of operations
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
 
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021 vs. 2020    
 
Revenues:
        
Premiums
  $1   $2   $(1)    (50)% 
Net investment income
   3    2    1    50% 
Net investment gains (losses)
   (4)    (28)    24    86% 
Policy fees and other income
   —      (1)    1    100% 
  
 
 
   
 
 
   
 
 
   
Total revenues
   —      (25)    25    100% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   —      2    (2)    (100)% 
Acquisition and operating expenses, net of deferrals
   8    5    3    60% 
Amortization of deferred acquisition costs and intangibles
   1    1    —      —  % 
Interest expense
   31    42    (11)    (26)% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   40    50    (10)    (20)% 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations before income taxes
   (40)    (75)    35    47% 
Benefit for income taxes
   (8)    (15)    7    47% 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations
   (32)    (60)    28    47% 
Adjustments to loss from continuing operations:
        
Net investment (gains) losses
   4    28    (24)    (86)% 
(Gains) losses on early extinguishment of debt
   —      (3)    3    100% 
Expenses related to restructuring
   1    1    —      —  % 
Taxes on adjustments
   —      (5)    5    100% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(27)   $(39)   $12    31% 
  
 
 
   
 
 
   
 
 
   
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Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders decreased primarily related to lower interest expense in the current year.
Revenues
The decrease in net investment losses was predominantly related to lower derivative losses in the current year.
Benefits and expenses
Acquisition and operating expenses, net of deferrals, increased principally due to a $3 million gain in the prior year related to the repurchase of Genworth Holdings’ senior notes originally scheduled to mature in 2021 that did not recur.
Interest expense decreased largely driven by the redemption of Genworth Holdings’ senior notes due in February 2021 and the repurchase of Genworth Holdings’ senior notes due in September 2021.
The benefit for income taxes for the three months ended June 30, 2021 was primarily related to the
pre-tax
loss and unrealized losses from changes in the fair value of equity securities, partially offset by tax expense on
non-deductible
expenses. The benefit for income taxes for the three months ended June 30, 2020 was primarily driven by a tax benefit related to the
pre-tax
loss, partially offset by tax expense from
non-deductible
expenses and forward starting swaps settled prior to the enactment of the TCJA.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The following table sets forth the results of operations relating to Corporate and Other activities for the periods indicated:
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
March 31,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2021    
   
    2020    
   
    2021 vs. 2020    
   
    2022    
 
    2021    
 
2022 vs. 2021
 
Revenues:
             
Premiums
  $3   $4   $(1)    (25)%   $2  $2  $—     —  % 
Net investment income
   4    7    (3)    (43)%    3   1   2   200% 
Net investment gains (losses)
   (6)    18    (24)    (133)%    (13)   (2)   (11)   NM(1) 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total revenues
   1    29    (28)    (97)%    (8)   1   (9)   NM(1) 
  
 
   
 
   
 
     
 
  
 
  
 
  
Benefits and expenses:
             
Benefits and other changes in policy reserves
   —      3    (3)    (100)%    —     —     —     —  % 
Acquisition and operating expenses, net of deferrals
   21    28    (7)    (25)%    6   13   (7)   (54)% 
Amortization of deferred acquisition costs and intangibles
   1    1    —      —  % 
Interest expense
   69    88    (19)    (22)%    13   38   (25)   (66)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total benefits and expenses
   91    120    (29)    (24)%    19   51   (32)   (63)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Loss from continuing operations before income taxes
   (90)    (91)    1    1%    (27)   (50)   23   46% 
Benefit for income taxes
   (16)    (15)    (1)    (7)%    (6)   (8)   2   25% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Loss from continuing operations
   (74)    (76)    2    3%    (21)   (42)   21   50% 
Adjustments to loss from continuing operations:
             
Net investment (gains) losses
   6    (18)    24    133%    13   2   11   NM(1) 
(Gains) losses on early extinguishment of debt
   4    5    (1)    (20)%    3   4   (1)   (25)% 
Expenses related to restructuring
   8    2    6    NM(1)    —     7   (7)   (100)% 
Taxes on adjustments
   (3)    3    (6)    (200)%    (4)   (3)   (1)   (33)% 
  
 
   
 
   
 
     
 
  
 
  
 
  
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(59)   $(84)   $25    30%   $(9)  $(32)  $23   72% 
  
 
   
 
   
 
     
 
  
 
  
 
  
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
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Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss available to Genworth Financial, Inc.’s common stockholders decreased primarily related to lower interest expense and operating costs in the current year.
Revenues
Net investment income decreased primarily from lower yields in the current year.
The change to net investment losses in the current yearincreased predominantly from net realized losses from the sale of investment gains in the prior year was predominantly related to derivative lossessecurities in the current year compared to net realized gains in the prior year, partially offset by derivative gainslosses in the prior year.
Benefits and expenses
Acquisition and operating expenses, net of deferrals, decreased mainly driven by lower operatingrestructuring costs and a make-whole premium of $9$7 million in the prior year related tothat did not recur and a lower loss from the early redemptionrepurchase of Genworth Holdings’ senior notes originally scheduled to mature in June 2020, partially offset by restructuring costs of $8 million and a $4 million loss in the current yearyear. In the first quarter of 2022, we recorded a loss of $3 million related to the repurchase of Genworth Holdings’ senior notes due in February 2024 compared to a loss of $4 million gain in the prior year.first quarter of 2021 related to the repurchase of Genworth Holdings’ senior notes due in September 2021.
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Interest expense decreased largely driven by the early redemption and repurchase of Genworth Holdings’ senior notes due in September 2021, as well as the redemption of Genworth Holdings’ senior notes due in February 2021 the repurchase of Genworth Holdings’ senior notes due in September 2021 and the early redemption of Genworth Holdings’ senior notes in the prior year originally scheduled to mature in June 2020.August 2023.
The benefit for income taxes for the sixthree months ended June 30,March 31, 2022 was primarily related to the pre-tax loss. The benefit for income taxes for the three months ended March 31, 2021 was primarily related to the
pre-tax
loss, and unrealized losses from changes in the fair value of equity securities, partially offset by tax expense on forward starting swaps, settled prior to the enactment of the TCJA and
non-deductible
expenses. The benefit for income taxes for the six months ended June 30, 2020 was primarily driven by awhich are tax benefit related to the
pre-taxeffected at 35% when amortized into net investment income.
loss, partially offset by tax expense from stock-based compensation and other
non-deductible
expenses.
Investments and Derivative Instruments
General macroeconomic environment
The stability of both the financial markets and global economies in which we operate impacts the sales, revenue growth and profitability trends of our businesses as well as the value of assets and liabilities.
Varied levels of economic performance, coupled with uncertain economic outlooks, war and geopolitical tensions, changes in government policy, global trade, regulatory and tax reforms, and other changes in market conditions, such as inflation, will continue to influence investment and spending decisions by consumers and businesses as they adjust their consumption, debt, capital and risk profiles in response to these conditions, including as a result of COVID-19. These trends change as investor confidence in the markets and the outlook for some consumers and businesses shift. As a result, our sales, revenues and profitability trends of certain insurance and investment products as well as the value of assets and liabilities could be impacted going forward. In particular, factors such as the speed of the economic recovery from COVID-19, future government responses to COVID-19 or another public health emergency, including government stimulus, government spending, monetary policies (such as ceasing quantitative easing), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, inflation, including the price of oil, international trade and the impact of global financial regulation reform will continue to affect economic and business outlooks, level of interest rates, consumer confidence and consumer behavior moving forward.
During the first quarter of 2022, the U.S. Federal Reserve shifted its monetary policy to aggressively address rising inflation by tightening its balance sheet and increasing interest rates. At its March 2022 meeting, the U.S. Federal Reserve increased interest rates 25 basis points, accelerated its forecast for additional and larger interest rate increases in 2022 and is considering plans to begin reducing its balance sheet as early as May 2022. The tightening labor market, supply chain disruptions and rising commodity prices have elevated inflationary pressures in the U.S. economy. The Russian invasion of Ukraine put additional pressure on commodity prices, sending crude oil prices up in the first quarter of 2022 and peaking in March 2022 at levels not seen since 2008. These factors contributed to rising inflation, with the consumer price index indicating the highest annual U.S. inflation rate in 40 years. The labor market has offset some of these pressures, as the unemployment rate continues to decline and job creation was steady in the first quarter of 2022.
Gross domestic product rebounded sharply in 2021 as compared to 2020 as the economy continued its recovery from COVID-19. However, in the first quarter of 2022, gross domestic product contracted abruptly, due in part to certain government fiscal support actions lapsing, elevated inflation pressure on consumers and persistent supply chain disruptions. Given the potential for future actions to be taken to mitigate the risk of a virus re-emergence due to variants or due to continued high inflation and supply chain disruptions or from prolonged geopolitical tensions, it is possible the U.S. economy could fall into a recession as early as 2022. Specific to Genworth, we continue to closely monitor the operating results and financial position of Enact Holdings, particularly related to new delinquency trends and whether borrowers in a forbearance plan ultimately cure or result in a claim payment. If delinquency trends move in an unfavorable direction in contrast to our current projections, our liquidity, financial position and results of operations could be adversely impacted.
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Trends and conditions
Investments
During
U.S. Treasury yields increased during the secondfirst quarter of 2021,2022 driven mainly by the U.S. Federal Reserve maintained interest rates near zero as the U.S. economy continues to recover from the negative impact of
COVID-19.
In its June 2021 meeting, the U.S. Federal Reserve revised its interest rate forecast, and is projecting two separate 25 basis point rate increases in 2023. The U.S. Federal Reserve is also expected to discuss reducing its asset purchase program later in 2021. The U.S. economy continued to show signs of recovery from
COVID-19
during the second quarter of 2021 as economic indicators reflect an improving job market, a reduction in the unemployment rate and improving gross domestic product for 2021. The
COVID-19
vaccine
roll-out
in the United States continued during the second quarter of 2021 with more than 46% of the United States population fully vaccinated and approximately 54% having received at least one dose as of June 30, 2021. U.S. Treasury markets fluctuated during the second quarter of 2021 due in part to the expected shiftsshift in the U.S. Federal Reserve’s monetary policy and from inflation concerns, including whether inflation is only transitory until theto combat rising inflation. The U.S. economy fully
re-opens
and supply chains return to full capacity. The rise in consumer and producer prices also indicated an increase in inflation, with both indices rising back to
pre-COVID
levels, including further expansionary indicators present in both the manufacturing and services sectors. While the
two-year
and three-year Treasury yield increased slightly,curve flattened significantly at the five-year through
30-year
Treasury yields decreased during the second quarterend of 2021 as compared to the first quarter of 2021.2022 with higher increases in the two-year and three-year U.S. Treasury yields than the ten-year and 30-year U.S. Treasury yields and minimal differential between the two-year and ten-year Treasury yields as of March 31, 2022, as expectations of the U.S. Federal Reserve interest rate increases for 2022 were accelerated.
Credit markets continued their strong performance with credit spreadswidened during the first quarter of 2022. The macroeconomic pressures from the U.S. Federal Reserve’s fluctuating monetary policy and subsequent interest rate volatility drove spread widening early in the investment grade securities tightening in the secondfirst quarter of 2021. Credit markets demonstrated resiliency despite fluctuating interest rates.
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Higher yields inUkraine and the ensuing sanctions imposed by the United States comparedand Western Europe accelerated credit spread widening as commodity price volatility added to existing inflation concerns and supply chain pressures, increasing the restrisk of thea global economy, has continued to make the United Stateseconomic slowdown. The U.S. investment grade credit market more attractive to both domesticexperienced near record supply as companies funded increased merger and foreign investors. Seasonally lower supplyacquisition activity, which put additional pressure on spread valuations during the summer is expected to provide additional support to credit markets. This demand has been met with strong supply from bothfirst quarter of 2022. Despite periods of increased volatility and even wider spreads, U.S. investment grade and below investment grade issuers, who continue to access capital markets to refinance debt at historically low rates.
As of June 30, 2021, we did not have any modifications or extensions of commercial mortgage loans that were considered troubled debt restructurings. Modified loans represented 2% of our total loan portfoliospreads only widened approximately 25 basis points as of June 30, 2021, as borrowers have sought additional relief related to
March 31, 2022. The U.S. high yield credit market saw similar spread widening throughout the first quarter of 2022 and combined with the rise in U.S. Treasury yields, finished the first quarter of 2022 near its highest yields since the onset of COVID-19.
We are working with individual borrowers impacted by
COVID-19
to provide alternative forms of relief for a specified period of time. The modified loan population continues to decrease as modification terms expire and property valuations stabilize. Most of our borrowers are current on payments and we do not anticipate a significant impact from troubled debt restructurings in 2021.
As of June 30, 2021,March 31, 2022, our fixed maturity securities portfolio, which was 95%96% investment grade, comprised 78%81% of our total invested assets and cash.
Derivatives
As of June 30, 2021, $960March 31, 2022, $897 million notional of our derivatives portfolio was cleared through the Chicago Mercantile Exchange (“CME”). The customer swap agreements that govern our cleared derivatives contain provisions that enable our clearing agents to request initial margin in excess of CME requirements. As of June 30, 2021,March 31, 2022, we posted initial margin of $65$62 million to our clearing agents, which represented approximately $32$31 million more than was otherwise required by the clearinghouse. Because our clearing agents serve as guarantors of our obligations to the CME, the customer agreements contain broad termination provisions that are not specifically dependent on ratings. As of June 30, 2021, $10.4March 31, 2022, $9.1 billion notional of our derivatives portfolio was in bilateral
over-the-counter
derivative transactions pursuant to which we have posted aggregate independent amounts of $534$424 million and are holding collateral from counterparties in the amount of $238$110 million.
In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from the London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The LIBOR tenors, such as the three-month LIBOR, have various phase-out dates with the last committed publication date for LIBOR is December 31, 2021.of June 30, 2023. The Alternate Reference Rate Committee (“ARRC”), convened by the Board of Governors of the Federal Reserve System and the New York Federal Reserve Bank, has endorsed the Secured Overnight Financing Rate (“SOFR”) as its preferred replacement benchmark for U.S. dollar LIBOR. SOFR is calculated and published by the New York Federal Reserve Bank and reflects the combination of three overnight U.S. Treasury Repo Rates. The rate is different from LIBOR, in that it is a risk-free rate, is backward-looking instead of forward-looking, is a secured rate and currently is available primarily as an overnight rate rather than a
1-,
3-
or
6-month
rate available for LIBOR. Upon the announcement, we formed a working group comprised of finance, investments, derivative, and tax professionals, as well as lawyers (the “Working Group”) to evaluate contracts and perform analysis of our LIBOR-based derivative instrument and investment exposure, as well as debt (including subordinated debt and Federal Home Loan Bank loans), reinsurance agreements and institutional products within the Runoff segment, as a result of the elimination of LIBOR. The Working Group took inventory of all investments with LIBOR exposure and identified nearly 400 instruments.
We have completed our assessment of operational readiness for LIBOR cessation related to our various instruments in 2021 and our Working Group will continue to monitor the process of elimination and replacement of LIBOR.LIBOR, including any new accounting pronouncements that may be issued to provide further transition relief due to the extended cessation dates of certain LIBOR tenors. Since the initial announcement, we have terminated a portionthe
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majority of our LIBOR-based swaps and entered into alternative rate swaps. In anticipation of the elimination of LIBOR, we plan to continue to convert most of our remaining LIBOR-based derivatives in a similar manner. In addition, our
non-recourse
funding obligations with interest rates based on
one-month
Moreover, we will continue to monitor the developments coming from ARRC, who is expected to authorize the use of an alternative rate to replace the current contractual three-month LIBOR were redeemedrate applied to Genworth Holdings’ junior subordinated notes due in January 2020. We2066. Although uncertainty remains surrounding the final cessation and transition away from LIBOR, we do not expect to implement additional measures that we believe will ease the transition from LIBOR. Even though we have begun to take these actions,
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it is too early to determine the ultimatea material adverse impact the elimination of LIBOR will have on our results of operations or financial condition.
Investment results
The following tables settable sets forth information about our investment income, excluding net investment gains (losses), for each component of our investment portfolio for the periods indicated:
 
   
Three months ended June 30,
  
Increase (decrease)
 
   
2021
  
2020
  
2021 vs. 2020
 
(Amounts in millions)
  
Yield
  
Amount
  
Yield
  
Amount
  
Yield
  
Amount
 
Fixed maturity securities—taxable
   4.6%  $608   4.5%  $594   0.1%  $14 
Fixed maturity
securities—non-taxable
   3.1%   1   2.6%   1   0.5%   —   
Equity securities
   4.1%   2   5.3%   2   (1.2)%   —   
Commercial mortgage loans
   6.0%   103   4.9%   84   1.1%   19 
Policy loans
   7.9%   40   9.3%   49   (1.4)%   (9) 
Other invested assets
(1)
   28.1%   112   23.3%   66   4.8%   46 
Cash, cash equivalents, restricted cash and short-term investments
   —  %   —     0.6%   4   (0.6)%   (4) 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   5.2%   866   4.9%   800   0.3%   66 
Expenses and fees
   (0.1)%   (22)   (0.1)%   (21)   —  %   (1) 
   
 
 
   
 
 
   
 
 
 
Net investment income
   5.1%  $844   4.8%  $779   0.3%  $65 
   
 
 
   
 
 
   
 
 
 
Average invested assets and cash
   $66,081   $65,578   $503 
   
 
 
   
 
 
   
 
 
 
  
Six months ended June 30,
 
Increase (decrease)
   
Three months ended March 31,
   
Increase (decrease)
 
  
2021
 
2020
 
2021 vs. 2020
   
2022
   
2021
   
2022 vs. 2021
 
(Amounts in millions)
  
Yield
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
 
Fixed maturity securities—taxable
   4.5%  $1,207   4.6%  $1,205   (0.1)%  $2    4.4%  $580    4.5%  $599    (0.1)%  $(19) 
Fixed maturity
securities—non-taxable
   4.7%   3   4.1%   3   0.6%   —      3.6%   1    6.3%   2    (2.7)%   (1) 
Equity securities
   3.9%   5   5.0%   4   (1.1)%   1    3.7%   2    3.8%   3    (0.1)%   (1) 
Commercial mortgage loans
   5.3%   181   4.9%   169   0.4%   12    4.7%   81    4.6%   78    0.1%   3 
Policy loans
   8.9%   90   9.3%   98   (0.4)%   (8)    9.8%   50    10.1%   50    (0.3)%   —   
Other invested assets
(1)
   26.2%   201   20.6%   113   5.6%   88 
Cash, cash equivalents, restricted cash and short-term investments
   —  %   —     1.0%   14   (1.0)%   (14) 
Limited partnerships
(1)
   1.4%   7    11.2%   31    (9.8)%   (24) 
Other invested assets
(2)
   64.8%   63    65.0%   58    (0.2)%   5 
   
 
   
 
   
 
    
 
    
 
    
 
 
Gross investment income before expenses and fees
   5.1%   1,687   4.9%   1,606   0.2%   81    4.8%   784    5.0%   821    (0.2)%   (37) 
Expenses and fees
   (0.1)%   (42)   (0.1)%   (45)   —  %   3    (0.1)%   (20)    (0.2)%   (20)    0.1%   —   
   
 
   
 
   
 
    
 
    
 
    
 
 
Net investment income
   5.0%  $1,645   4.8%  $1,561   0.2%  $84    4.7%  $764    4.8%  $801    (0.1)%  $(37) 
   
 
   
 
   
 
    
 
    
 
    
 
 
Average invested assets and cash
   $66,234   $65,497   $737    $65,395    $66,233    $(838) 
   
 
   
 
   
 
    
 
    
 
    
 
 
 
(1)
Limited partnership investments are primarily equity-based and do not have fixed returns by period.
(2) 
Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation and includes limited partnership investments, which are primarily equity-based and do not have fixed returns by period.calculation.
Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we measure our investment performance for management purposes. Yields are annualized, for interim periods, and are calculated as net investment income as a percentage of average quarterly asset carrying values except for fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value
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adjustments and securities lending activity, which iswas included in other invested assets prior to the suspension of our securities lending program in the third quarter of 2021 and iswas calculated net of the corresponding securities lending liability.
For the three months ended June 30, 2021,March 31, 2022, gross annualized weighted-average investment yields increaseddecreased from higherlower net investment income on higherlower average invested assets. Net investment income included higherlower income of $40$24 million from limited partnerships $30and $12 million from bond calls and $24 millionof higher income related to inflation-driven volatility on TIPs in the current year.TIPS.
For the six months ended June 30, 2021, gross annualized weighted-average investment yields increased from higher investment income on higher average invested assets. Net investment income included higher income
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Table of $73 million from limited partnerships, $28 million related to inflation-driven volatility on TIPs and $27 million from bond calls in the current year.Contents
The following table sets forth net investment gains (losses) for the periods indicated:
 
  
Three months ended
June 30,
 
Six months ended
June 30,
   
Three months ended
March 31,
 
(Amounts in millions)
  
2021
 
2020
 
2021
 
2020
   
    2022    
 
    2021    
 
Realized investment gains (losses):
   
Available-for-sale
fixed maturity securities:
        
Realized gains
  $5  $103  $12  $105   $10  $7 
Realized losses
   (4)   (5)   (7)   (5)    (18)   (3) 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net realized gains (losses) on
available-for-sale
fixed maturity securities
   1   98   5   100    (8)   4 
Net realized gains (losses) on equity securities sold
   —     (5) 
Net realized gains (losses) on limited partnerships
   —     3 
  
 
  
 
 
Total net realized investment gains (losses)
   (8)   2 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net change in allowance for credit losses on
available-for-sale
fixed maturity securities
   (4)   (7)   (6)   (7)    —     (2) 
Write-down of
available-for-sale
fixed maturity securities
   —     —     (1)   —      (2)   (1) 
Net realized gains (losses) on equity securities sold
   (2)   —     (7)   —   
Net unrealized gains (losses) on equity securities still held
   6   5   (2)   (7)    (6)   (8) 
Limited partnerships
   65   37   102   (3) 
Net unrealized gains (losses) on limited partnerships
   35   34 
Commercial mortgage loans
   (1)   1   (2)   1    1   (1) 
Derivative instruments
   4   (36)   12   (84)    4   8 
Other
   1   (5)   2   (6)    4   1 
  
 
  
 
  
 
  
 
   
 
  
 
 
Net investment gains (losses)
  $70  $93  $103  $(6)   $28  $33 
  
 
  
 
  
 
  
 
   
 
  
 
 
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
 
We recorded net gainslosses of $8 million related to the sale of available-for-sale fixed maturity securities of $98 million during the three months ended June 30, 2020 driven primarily by the saleMarch 31, 2022 compared to $4 million of U.S. government securities due to portfolio rebalancing and asset exposure management.
The three months ended June 30, 2021 included net gains of $65 million on limited partnerships primarily from favorable private equity performance in the current year. We recorded net gains on limited partnerships of $37 million during the three months ended June 30, 2020 driven largely byMarch 31, 2021. Included in the recovery$8 million of net losses for the three months ended March 31, 2022 was $18 million of realized losses principally related to U.S. corporate securities sold to optimize cash at Genworth Holdings. We also recorded $5 million of net losses related to the sale of equity markets insecurities during the second quarter of 2020 after the losses suffered in the first quarter of 2020 due to
COVID-19.three months ended March 31, 2021.
 
Net investmentWe had $4 million of lower net gains related to derivatives of $4 million during the three months ended June 30,March 31, 2022 compared to the three months ended March 31, 2021 were primarily associated withfrom higher net losses from hedging programs that support our runoff variable annuity and indexed universal life insurance products, partially offset by losses related to derivativesgains on derivative contracts used to protect statutory surplus from equity market fluctuations as well as hedging programs for our fixed indexed annuity products.
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Net investment losses related to derivatives of $36 million during the three months ended June 30, 2020 were primarily associated with losses related to derivatives used to protect statutory surplus from equity market fluctuations as well as hedging programs for our fixed indexed annuity products.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
We recorded net gains related to the sale of fixed maturity securities of $100 million during the six months ended June 30, 2020 primarily from the sale of U.S. government securities due to portfolio rebalancing and asset exposure management.
We had $102 million of net gains on limited partnerships during the six months ended June 30, 2021 compared to $3 million of net losses during the six months ended June 30, 2020. The change from losses in the prior year to gains in the current year was primarily due to favorable private equity performance in the current year compared to unfavorable private equity performancelosses in the prior year.
 
Net investment gains related to derivatives of $12 million during the six months ended June 30, 2021 were primarily associated with hedging programs that support our indexed universal life insurance and runoff variable annuity products, partially offset by losses related to derivatives used to protect statutory surplus from equity market fluctuations.107
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Net investment losses related to derivatives of $84 million during the six months ended June 30, 2020 were primarily associated with hedging programs that support our runoff variable annuity and fixed indexed annuity products.
Investment portfolio
The following table sets forth our cash, cash equivalents, restricted cash and invested assets as of the dates indicated:
 
  
June 30, 2021
 
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying value
   
% of total
 
Carrying value
   
% of total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Fixed maturity securities,
available-for-sale:
       
Available-for-sale fixed maturity securities:
       
Public
  $43,431    58%  $44,776    58%   $38,219    56%  $42,501    58% 
Private
   18,218    24   18,719    24    16,808    25   17,979    24 
Equity securities
   147    —     386    —      230    —     198    —   
Commercial mortgage loans, net
   6,879    9   6,743    9    6,913    10   6,830    9 
Policy loans
   2,083    3   1,978    3    2,028    3   2,050    3 
Limited partnerships
   2,007    3   1,900    3 
Other invested assets
   2,260    3   2,099    3    671    1   820    1 
Cash, cash equivalents and restricted cash
   2,214    3   2,561    3    1,291    2   1,571    2 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total cash, cash equivalents, restricted cash and invested assets
  $75,232    100%  $77,262    100%   $68,167    100%  $73,849    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
For a discussion of the change in cash, cash equivalents, restricted cash and invested assets, see the comparison for this line item under “—Consolidated Balance Sheets.” See note 4 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to our investment portfolio.
We hold fixed maturity and equity securities, derivatives, embedded derivatives securities held as collateral and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of June 30, 2021,March 31, 2022, approximately 6% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 6 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to fair value.
 
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Fixed maturity securities
As of June 30,March 31, 2022, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as available-for-sale were as follows:
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
         
U.S. government, agencies and government-sponsored enterprises
  $3,356   $744   $(3)  $—     $4,097 
State and political subdivisions
   3,009    206    (81)   —      3,134 
Non-U.S. government
   778    48    (42)   —      784 
U.S. corporate:
         
Utilities
   4,345    355    (66)   —      4,634 
Energy
   2,572    175    (48)   —      2,699 
Finance and insurance
   8,026    406    (203)   —      8,229 
Consumer—non-cyclical
   5,070    488    (70)   —      5,488 
Technology and communications
   3,371    213    (87)   —      3,497 
Industrial
   1,301    73    (26)   —      1,348 
Capital goods
   2,346    205    (39)   —      2,512 
Consumer—cyclical
   1,725    86    (44)   —      1,767 
Transportation
   1,133    124    (9)   —      1,248 
Other
   381    24    (4)   —      401 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,270    2,149    (596)   —      31,823 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
         
Utilities
   874    19    (15)   —      878 
Energy
   1,158    102    (19)   —      1,241 
Finance and insurance
   2,129    132    (70)   —      2,191 
Consumer—non-cyclical
   665    28    (22)   —      671 
Technology and communications
   1,055    61    (17)   —      1,099 
Industrial
   918    56    (21)   —      953 
Capital goods
   610    25    (16)   —      619 
Consumer—cyclical
   316    5    (9)   —      312 
Transportation
   392    38    (7)   —      423 
Other
   996    86    (16)   —      1,066 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,113    552    (212)   —      9,453 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,277    57    (14)   —      1,320 
Commercial mortgage-backed
   2,369    36    (44)   —      2,361 
Other asset-backed
   2,108    7    (60)   —      2,055 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $52,280   $3,799   $(1,052)  $—     $55,027 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
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Table of Contents
As of December 31, 2021, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as
available-for-sale
were as follows:
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
         
U.S. government, agencies and government-sponsored enterprises
  $3,350   $1,135   $(1)  $—     $4,484 
State and political subdivisions
   2,876    496    (1)   —      3,371 
Non-U.S.
government
   712    94    (4)   —      802 
U.S. corporate:
         
Utilities
   4,276    820    (5)   —      5,091 
Energy
   2,573    388    (9)   —      2,952 
Finance and insurance
   7,895    1,107    (13)   —      8,989 
Consumer—non-cyclical
   5,128    1,100    (4)   —      6,224 
Technology and communications
   3,244    515    (5)   —      3,754 
Industrial
   1,377    196    (1)   —      1,572 
Capital goods
   2,424    447    (1)   —      2,870 
Consumer—cyclical
   1,758    240    (4)   —      1,994 
Transportation
   1,156    253    —     —      1,409 
Other
   394    40    —     —      434 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,225    5,106    (42)   —      35,289 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S.
corporate:
         
Utilities
   873    73    (1)   —      945 
Energy
   1,189    210    —     —      1,399 
Finance and insurance
   2,108    298    (6)   —      2,400 
Consumer—non-cyclical
   659    87    (1)   —      745 
Technology and communications
   1,098    186    —     —      1,284 
Industrial
   1,003    138    (1)   —      1,140 
Capital goods
   574    69    (1)   —      642 
Consumer—cyclical
   325    29    (1)   —      353 
Transportation
   467    74    —     —      541 
Other
   1,105    193    (3)   —      1,295 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total
non-U.S.
corporate
   9,401    1,357    (14)   —      10,744 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
(1)
   1,524    167    —     —      1,691 
Commercial mortgage-backed
   2,538    199    (3)   —      2,734 
Other asset-backed
   2,485    50    (1)   —      2,534 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total
available-for-sale
fixed maturity securities
  $53,111   $8,604   $(66)  $—     $61,649 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
 
(1)
Fair value included $7 million collateralized by
Alt-A
residential mortgage loans.
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As of December 31, 2020, the amortized cost or cost, gross unrealized gains (losses), allowance for credit losses and fair value of our fixed maturity securities classified as
available-for-sale
were as follows:
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
  
Fair
value
 
Fixed maturity securities:
        
U.S. government, agencies and government-sponsored enterprises
  $3,401   $1,404   $—    $—    $4,805 
State and political subdivisions
   2,622    544    (1)   —     3,165 
Non-U.S.
government
   728    130    (4)   —     854 
U.S. corporate:
        
Utilities
   4,226    970    (2)   —     5,194 
Energy
   2,532    367    (16)   —     2,883 
Finance and insurance
   7,798    1,306    (2)   —     9,102 
Consumer—non-cyclical
   5,115    1,323    (1)   —     6,437 
Technology and communications
   3,142    619    —     —     3,761 
Industrial
   1,370    232    —     —     1,602 
Capital goods
   2,456    535    —     —     2,991 
Consumer—cyclical
   1,663    284    —     —     1,947 
Transportation
   1,198    304    (2)   —     1,500 
Other
   395    45    —     —     440 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total U.S. corporate
   29,895    5,985    (23)   —     35,857 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Non-U.S.
corporate:
        
Utilities
   838    84    —     —     922 
Energy
   1,172    209    (1)   —     1,380 
Finance and insurance
   2,130    353    (6)   (1)   2,476 
Consumer—non-cyclical
   662    112    (1)   —     773 
Technology and communications
   1,062    229    —     —     1,291 
Industrial
   969    159    —     —     1,128 
Capital goods
   510    67    (1)   —     576 
Consumer—cyclical
   331    41    (1)   —     371 
Transportation
   483    88    (1)   —     570 
Other
   1,088    236    —     —     1,324 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total
non-U.S.
corporate
   9,245    1,578    (11)   (1)   10,811 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Residential mortgage-backed
(1)
   1,698    211    —     —     1,909 
Commercial mortgage-backed
   2,759    231    (13)   (3)   2,974 
Other asset-backed
   3,069    55    (4)   —     3,120 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Total
available-for-sale
fixed maturity securities
  $53,417   $10,138   $(56)  $(4)  $63,495 
  
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
(1)
Fair value included $8 million collateralized by
Alt-A
residential mortgage loans.
(Amounts in millions)
  
Amortized
cost or
cost
   
Gross
unrealized
gains
   
Gross
unrealized
losses
  
Allowance
for credit
losses
   
Fair
value
 
Fixed maturity securities:
         
U.S. government, agencies and government-sponsored enterprises
  $3,368   $1,184   $—    $—     $4,552 
State and political subdivisions
   2,982    474    (6)   —      3,450 
Non-U.S. government
   762    86    (13)   —      835 
U.S. corporate:
         
Utilities
   4,330    783    (9)   —      5,104 
Energy
   2,581    363    (10)   —      2,934 
Finance and insurance
   8,003    1,012    (24)   —      8,991 
Consumer—non-cyclical
   5,138    1,029    (8)   —      6,159 
Technology and communications
   3,345    476    (13)   —      3,808 
Industrial
   1,322    175    (3)   —      1,494 
Capital goods
   2,334    415    (4)   —      2,745 
Consumer—cyclical
   1,703    203    (7)   —      1,899 
Transportation
   1,122    249    —     —      1,371 
Other
   379    41    (1)   —      419 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total U.S. corporate
   30,257    4,746    (79)   —      34,924 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Non-U.S. corporate:
         
Utilities
   867    63    (2)   —      928 
Energy
   1,194    190    (1)   —      1,383 
Finance and insurance
   2,171    270    (9)   —      2,432 
Consumer—non-cyclical
   664    81    (2)   —      743 
Technology and communications
   1,085    166    (1)   —      1,250 
Industrial
   933    117    (3)   —      1,047 
Capital goods
   640    66    (1)   —      705 
Consumer—cyclical
   316    27    (2)   —      341 
Transportation
   422    68    (1)   —      489 
Other
   1,052    169    (4)   —      1,217 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total non-U.S. corporate
   9,344    1,217    (26)   —      10,535 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Residential mortgage-backed
   1,325    116    (1)   —      1,440 
Commercial mortgage-backed
   2,435    152    (3)   —      2,584 
Other asset-backed
   2,138    29    (7)   —      2,160 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total available-for-sale fixed maturity securities
  $52,611   $8,004   $(135)  $—     $60,480 
  
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Fixed maturity securities decreased $1.8$5.5 billion compared to December 31, 20202021 principally from a decrease in net unrealized gains related to an increase in interest rates, as well as maturities, repayments and sales, exceeding purchases in the current year.
 
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Other invested assets
The following table sets forth the carrying values of our other invested assets as of the dates indicated:
 
  
June 30, 2021
 
December 31, 2020
   
March 31, 2022
 
December 31, 2021
 
(Amounts in millions)
  
Carrying value
   
% of total
 
Carrying value
   
% of total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Limited partnerships
  $1,354    60%  $1,049    50% 
Derivatives
   353    16   574    28   $197    29%  $414    50% 
Bank loan investments
   308    14   344    16    381    57   363    45 
Securities lending collateral
   105    5   67    3 
Short-term investments
   121    5   45    2    76    11   26    3 
Other investments
   19    —   20    1    17    3   17    2 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total other invested assets
  $2,260    100%  $2,099    100%   $671    100%  $820    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Limited partnerships increased primarily from additional capital investments and net unrealized gains, partially offset by return of capital in the current year. Derivatives decreased largely from an increase in interest rates in the current year. Short-term investments increased primarily from purchases in the current year.
Derivatives
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for GMWB embedded derivatives, fixed index annuity embedded derivatives and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:
 
(Notional in millions)
  
Measurement
  
December 31,
2020
   
Additions
   
Maturities/
terminations
 
June 30,
2021
   
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
 
Derivatives designated as hedges
         
Derivatives designated as hedges
 
       
Cash flow hedges:
                  
Interest rate swaps
  Notional  $8,178   $—     $(405)  $7,773    Notional   $7,653   $—     $(58)  $7,595 
Foreign currency swaps
  Notional   127    —      —     127    Notional    127    —      —     127 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total cash flow hedges
     8,305    —      (405)   7,900      7,780    —      (58)   7,722 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives designated as hedges
     8,305    —      (405)   7,900      7,780    —      (58)   7,722 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Derivatives not designated as hedges
                  
Interest rate swaps
  Notional   4,674    —      (4,674)   —   
Equity index options
  Notional   2,000    614    (803)   1,811    Notional    1,446    300    (368)   1,378 
Financial futures
  Notional   1,104    1,972    (2,116)   960    Notional    946    994    (1,042)   898 
Other foreign currency contracts
  Notional   1,186    22    (536)   672    Notional    83    —      (59)   24 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives not designated as hedges
     8,964    2,608    (8,129)   3,443      2,475    1,294    (1,469)   2,300 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives
    $17,269   $2,608   $(8,534)  $11,343     $10,255   $1,294   $(1,527)  $10,022 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
(Number of policies)
  
Measurement
  
December 31,
2020
   
Additions
   
Maturities/
terminations
 
June 30,
2021
   
Measurement
   
December 31,
2021
   
Additions
   
Maturities/
terminations
 
March 31,
2022
 
Derivatives not designated as hedges
                  
GMWB embedded derivatives
  Policies   23,713    —      (982)   22,731    Policies    21,804    —      (477)   21,327 
Fixed index annuity embedded derivatives
  Policies   12,778    —      (1,944)   10,834    Policies    9,344    —      (568)   8,776 
Indexed universal life embedded derivatives
  Policies   842    —      (22)   820    Policies    806    —      (7)   799 
The decrease in the notional value of derivatives was primarily attributable to the termination of interest rate swaps used to protect statutory capital from interest rate fluctuations,derivatives that support our runoff variable annuity and fixed indexed annuity products, the termination of foreign currency derivatives previously entered into to hedge payments to AXA under a settlement agreement and the termination of interest rate swaps that support our long-term care insurance products.
 
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entered into to hedge payments to AXA under the promissory note denominated in a foreign currency and the termination of interest rate swaps used to hedge interest rate fluctuations on Genworth Holdings’ junior subordinated notes.
The number of policies related to our embedded derivatives decreased as these products are no longer being offered and continue to runoff.
Consolidated Balance Sheets
Total assets
. Total assets decreased $5,097$5,684 million from $105,747$99,171 million as of December 31, 20202021 to $100,650$93,487 million as of June 30, 2021.March 31, 2022.
 
Cash, cash equivalents, restricted cash and invested assets decreased $2,030$5,682 million primarily from decreases of $1,846$5,453 million, $347$280 million and $239$149 million in fixed maturity securities, cash, cash equivalents, restricted cash and equity securities,other invested assets, respectively. The decrease in fixed maturity securities was predominantly related to a decrease in unrealized gains due to an increase in interest rates and from net sales and maturities in the current year. The decrease in cash, cash equivalents and restricted cash was largely related to net withdrawals from our investment contracts, the redemption of $338 millionrepurchase of Genworth Holdings’ February 2024 senior notes that matured in February 2021, payments of $265 millionand a payment to AXA primarily under a secured promissory note and the repurchase of $146 million principal amount of senior notes in the current year that are due in September 2021.associated with unprocessed claims. These decreases to cash were partially offset by net proceeds of approximately $370 million received from the sale of Genworth Australiasales and by net salesmaturities of investment securities in the current year. The decrease in equity securitiesother invested assets was largelypredominantly driven by lower derivative valuations due to salesan increase in interest rates in the current year.
 
DAC decreased $275increased $164 million principally attributable to shadow accounting adjustments associated with a decrease in unrealized gains in the current year. The shadow accounting adjustments decreasedincreased DAC by approximately $132$237 million, mostly in our term universal lifelong-term care insurance product,business, with an offsetting amount recorded in other comprehensive income (loss). The decreaseThis increase was also attributable to higher amortization largely drivenpartially offset by an increase in lapsesa DAC impairment of $24 million in our term universal life insurance products and amortization outpacing deferrals reflecting the low salesproduct recorded in our long-term care insurance business. In connection with our periodic reviews of DAC for recoverability, we wrote off $38 million of DAC in our universal life insurance products in the current year due principally to lower future estimated gross profits.
Reinsurance recoverable decreased $153 million mainly attributable to the runoff of our structured settlement products ceded to Union Fidelity Life Insurance Company, an affiliate of our former parent, General Electric Company (“GE”). We also recorded $5 million of expected credit losses in the current year.recoverability.
 
Deferred tax asset increased $146$302 million largely due to a decrease in unrealized gains on derivatives and investments, and from a deferred tax asset of $89 million recorded on the loss on sale of Genworth Australia, partially offset by the utilization of net operating losses and foreign tax credits in the current year.
 
Separate account assets increased $121(and liabilities) decreased $536 million primarily due to favorableunfavorable equity market performance in the current year.
Assets related to discontinued operations decreased $2,817 million due to the sale and deconsolidation of Genworth Australiasurrenders in the current year.
Total liabilities
. Total liabilities decreased $4,441$4,570 million from $89,927$82,905 million as of December 31, 20202021 to $85,486$78,335 million as of June 30, 2021.March 31, 2022.
 
Future policy benefits decreased $530$2,631 million primarily driven by shadow accounting adjustments associated with a decrease in unrealized gains in the current year. The shadow accounting adjustments decreased future policy benefits by approximately $683$2,707 million, mostly in our long-term care insurance business, with an offsetting amount recorded in other comprehensive income (loss). The decrease was also attributable to reduced benefits of $238 million in the current year related to in-force actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement in our long-term care insurance business. These decreases were partially offset by aging of our long-term care insurance in-force block and higher incremental reserves of $199 million recorded in connection with an accrual for profits followed by losses in the current year.
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also attributable to reduced benefits of $431 million in the current year related to
in-force
actions approved and implemented, which included policyholder benefit reduction elections made as part of a legal settlement in our long-term care insurance business, net outflows driven by surrenders and benefits in our single premium immediate annuity products and from the runoff of our term life insurance products, including from higher lapses in the current year. These decreases were partially offset by aging of our long-term care insurance
in-force
block and higher incremental reserves of $332 million recorded in connection with an accrual for profits followed by losses in the current year.
 
Policyholder account balances decreased $1,559$1,157 million largely attributable todriven by shadow accounting adjustments associated with a decrease in unrealized gains in the current year. The shadow accounting adjustments decreased policyholder account balances by approximately $574$820 million, mostly in our universal life insurance products, with an offsetting amount recorded in other comprehensive income (loss). The decrease was also relatedattributable to surrenders and benefits in our single premium deferred annuity products and from scheduled maturities of certain funding agreements in our universal life insurance and institutional products the current year.
 
Liability for policy and contract claims increased $60
Other liabilities decreased $95 million largely relatedprincipally from lower derivative counterparty collateral held by us, which represents our obligation to our long-term care insurance business primarily attributablereturn the collateral to higher new claims asthe counterparty, due to a result of the aging of the
in-force
block and an $82 million increase to claim reserves to account for changes to incidence and mortality experience driven by
COVID-19,
which we believe are temporary. The increase was also attributable to our Enact segment primarilydecline in derivative valuations driven by new delinquencies mostly associated with borrower forbearance resulting from
COVID-19.
These increases were partially offset by fewer pending claimsa rise in our life insurance businessinterest rates and higher claim terminations in our long-term care insurance businessdue to lower employee payroll accruals.
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These decreases were partially offset by an increase in due to broker largely driven by higher trade volumes at the end of the first quarter of 2022, an increase in derivative liabilities due to rising interest rates and higher legal settlement accruals in the current year.
 
Long-term borrowings decreased $479$80 million mainlymostly attributable to the redemptionrepurchase of Genworth Holdings’ 7.20%February 2024 senior notes due in February 2021 and the repurchase of $146 million principal amount of senior notes with a September 2021 maturity date.
Liabilities related to discontinued operations decreased $2,024 million predominantly from the sale and deconsolidation of Genworth Australia, which also resulted in a mandatory payment of approximately $247 million, including accrued interest, to AXA under the secured promissory note in the current year.notes.
Total equity
. Total equity decreased $656$1,114 million from $15,820$16,266 million as of December 31, 20202021 to $15,164$15,152 million as of June 30, 2021.March 31, 2022.
 
We reported net income available to Genworth Financial, Inc.’s common stockholders of $427$149 million for the sixthree months ended June 30, 2021.March 31, 2022.
 
Unrealized gains on investments and derivatives qualifying as hedges decreased $349$1,010 million and $208$236 million, respectively, primarily from an increase in interest rates in the current year.
Noncontrolling interests decreased $502 million related to the deconsolidation of the ownership interest attributable to noncontrolling interests of Genworth Australia recorded in connection with the final disposition in March 2021.
Liquidity and Capital Resources
Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth needs.
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cash flows—Genworth and subsidiaries
The following table sets forth our unaudited condensed consolidated cash flows for the sixthree months ended June 30:March 31:
 
(Amounts in millions)
  
2021
   
2020
   
2022
   
2021
 
Net cash from operating activities
  $229   $1,299 
Net cash from (used by) investing activities
   541    (887) 
Net cash used by operating activities
  $(92)   $(247) 
Net cash from investing activities
   138    335 
Net cash used by financing activities
   (1,213)    (1,144)    (326)    (780) 
  
 
   
 
   
 
   
 
 
Net decrease in cash before foreign exchange effect
  $(443)   $(732)   $(280)   $(692) 
  
 
   
 
   
 
   
 
 
Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments typically exceed policy acquisition costs, benefits paid, redemptions and operating expenses. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits and expenses paid. Positive cash flows from operating activities are then invested to support the obligations of our insurance and investment products and required capital supporting these products. In analyzing our cash flow, we focus on the change in the amount of cash available and used in investing activities. Changes in cash from financing activities primarily relate to the issuance of, and redemptions and benefit payments on, universal life insurance and investment contracts; deposits from Federal Home Loan Banks; the issuance of debt and equity securities; the repayment or repurchase of borrowings and
non-recourse
funding obligations;borrowings; and other capital transactions.
We had lower cash inflowsoutflows from operating activities in the current year primarily from a decreaselower payments to AXA, partially offset by higher net cash disbursements in connection with the return of cash collateral received from counterparties related tounder our derivative positions compared to an increase in the prior year and due to higher payments to AXA in the current year. We made payments of $265 million to AXA incontracts. In the current year, comprisedwe paid AXA $30 million, which constitutes the majority of the remaining estimated future claims, compared to a $247 million mandatory payment in the prior year related to our outstandinga secured promissory note issued to AXA and an $18 million settlement payment associated with underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business. In the prior year, we made an interim litigation payment of $134 million to AXA.
We had lower cash inflows from investing activities mainly due to net proceeds received in the prior year from the sale of Genworth Mortgage Insurance Australia Limited (“Genworth Australia”) and net purchases of short-term investments in the current year mainly fromcompared to net sales in the prior year, partially offset by higher net sales of fixed maturity securities and net proceeds from the sale of Genworth Australia, partially offset by net capital calls on limited partnerships and net purchases of short-term investments. We had cash outflows from investing activities in the prior year primarily driven by net purchasescurrent year.
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Table of fixed maturity securities and net capital calls on limited partnerships.Contents
We had higherlower cash outflows from financing activities in the current year principally from higher net withdrawals from our investment contracts, partially offset by lower repayment and repurchase of long-term debt.debt and from lower net withdrawals from our investment contracts. During the first quarter of 2022, Genworth Holdings redeemedrepurchased $82 million principal amount of its senior notes due in February 2024. During the first quarter of 2021, Genworth Holdings paid $338 million principal balance of its 7.20% senior notes due in February 2021 and repurchased $146 million principal amount of its 7.625% senior notes due in September 2021, of which $14 million remained in the current year. In the prior year, Genworth Holdings early redeemed $397 milliontransit as of its senior notes originally scheduled to matureMarch 31, 2021 resulting in June 2020, Rivermont I early redeemed its $315 million
non-recourse
funding obligations originally due in 2050 and Genworth Holdings repurchased $66 million principal amounta cash outlay of its senior notes with 2021 maturity dates.
We engage in certain securities lending transactions for the purpose of enhancing the yield on our investment securities portfolio. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturity securities on the consolidated balance sheets. We are currently indemnified against counterparty credit risk by the intermediary.$132 million.
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Genworth—holding company liquidity
In consideration of our liquidity, it is important to separate the needs of our holding companies from the needs of their respective subsidiaries. Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries and do not have any significant operations of their own. DividendsAccordingly, our holding companies are highly dependent upon their respective subsidiaries to pay dividends and make other payments to meet their respective obligations. Moreover, management’s focus is predominantly on Genworth Holdings’ liquidity given it is the issuer of our outstanding public debt.
Genworth Financial’s and Genworth Holdings’ principal sources of cash are derived from dividends from their respective subsidiaries, subsidiary payments to them under tax sharing and expense reimbursement arrangements with their subsidiaries and proceeds from borrowings or securities issuancesissuances. Our liquidity at the holding company level is highly dependent on the performance of Enact Holdings and its ability to pay dividends to Genworth Holdings as anticipated. Although the business performance and financial results of our U.S. life insurance subsidiaries have improved significantly, as of December 31, 2021, they had negative unassigned surplus of approximately $1.0 billion under statutory accounting and as a result, we do not expect these subsidiaries to pay dividends for the foreseeable future. Genworth Financial has the right to appoint a majority of directors to the board of directors of Enact Holdings; however, actions taken by Enact Holdings and its board of directors (including in the case of the payment of dividends to us, the approval of Enact Holdings’ independent capital committee) are their principal sourcessubject to and may be limited by the interests of cashEnact Holdings, including but not limited to, meet their obligations. Insuranceits use of capital for growth opportunities and regulatory requirements. In addition, insurance laws and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth Holdings by their insurance subsidiaries. Our liquidity is highly dependent on the performance of Enact Holdings and its ability to pay dividends to us as anticipated. Given the performance of our U.S. life insurance subsidiaries, dividends will not be paid by these subsidiariesSee “—Supplemental Condensed Consolidating Financial Information” for the foreseeable future.additional details.
Subsequent to the second quarter of 2021, GMICO received approval from the NCDOI for a dividend of $200 million to be distributed at
year-end
2021. We believe this is an important milestone as we work to restart the return of capital from Enact Holdings. This approval, coupled with Enact Holdings’ business performance and the recently published changes to the GSE capital preservation rules, provides us incremental confidence for a potential 2021 dividend. However, if our potential partial sale of Enact Holdings is not completed prior to October 2021, the GSEs will likely reconsider the PMIERs capital requirements applicable to our Enact segment which could in turn affect Enact Holdings’ ability to execute future dividends. Any future dividend is subject to market conditions, business performance, business and regulatory approvals, including the GSEs’ approval related to the potential partial sale of Enact Holdings. Future dividend payments are also subject to the mandatory prepayment provisions of the AXA secured promissory note while it remains outstanding and, if occurring following a successful partial sale of Enact Holdings, would include distributions to minority shareholders.
The primary uses of funds at Genworth Financial and Genworth Holdings include payment of holding company general operating expenses (including taxes), payment of principal, interest and other expenses on current and any future borrowings or other obligations (including payments to AXA underassociated with a secured promissory notesettlement agreement reported as discontinued operations), payment of holding company general operating expenses (including employee benefits and taxes), payments under current and any future guarantees (including guarantees of certain subsidiary obligations), payment of amounts previously owed to GEGeneral Electric Company (“GE”) under the Tax Matters Agreement, payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.
In deploying future capital, important current priorities include focusing on Enact Holdings so it remains appropriately capitalizedNovember 2008, Genworth Financial’s Board of Directors suspended the payment of dividends to its shareholders and reducing overall indebtednessthe repurchase of common stock under the Company’s stock repurchase program indefinitely. Given the significant improvement in the results of operations and financial position of Genworth Financial and its subsidiaries, and the $2.1 billion of debt reduction in 2021, on May 2, 2022, Genworth Financial’s Board of Directors authorized a share repurchase program under which Genworth Financial may repurchase up to $350 million of its outstanding Class A common stock. Repurchases under the authorized program would be funded from holding company capital, as well as future cash flow generation, including expected future dividends from Genworth Financial’s ownership in Enact Holdings. We expect the majority of share repurchases to occur following the repayment of Genworth Holdings’ remaining February 2024 debt. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or by other means. The timing and number of shares repurchased under the program will
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depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors. The authorization has no expiration date and may be modified, suspended or terminated at any time.
Our future use of liquidity and capital will prioritize redeeming Genworth Holdings’ February 2024 debt, returning capital to Genworth Financial’s shareholders through share repurchases (as discussed above) and future strategic investments in new products and services designed to assist individuals with navigating and financing long-term care. Our deleveraging goal is to reduce debt at Genworth Holdings to approximately $1.0 billion or less over time. As of March 31, 2022, we have approximately $1.1 billion of outstanding debt, see below for additional details. We may from time to time seek to repurchase or redeem outstanding notes for cash (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise. We currently seek to address our indebtedness over time through repurchases, redemptions and/or repayments at maturity. We also expect to provide capital, predominantly to CareScout, LLC (“CareScout”), to help advance Genworth’s long-term care growth initiatives. CareScout is an integral part of our new Global Care Solutions business that will seek to provide fee-based advice, consulting and other services related to the needs of elderly Americans, as well as their caregivers and families. While we have not made final decisions on the Global Care Solutions strategy and the set of products and services we will offer, it is likely that Genworth will initially focus on less capital-intensive long-term care advice and service offerings that help consumers navigate the complex caregiving challenges in the market.
Our BoardAs of DirectorsMarch 31, 2022, Genworth Holdings had $214 million of unrestricted cash, cash equivalents and liquid assets. In the first quarter of 2022, Genworth Holdings repurchased $82 million principal amount of its senior notes due in February 2024, leaving an outstanding principal balance of $200 million of senior notes due in February 2024 as of March 31, 2022. Thereafter, no debt maturities are due until June 2034. Genworth Holdings intends to retire early the remaining outstanding balance of its senior notes due in February 2024 with cash on hand, expected dividends from Enact Holdings and/or intercompany cash tax payments from its subsidiaries. Interest payments on Genworth Holdings’ remaining senior notes, including the February 2024 debt of $200 million that remains outstanding as of March 31, 2022, is forecasted to be approximately $55 million over the next 12 months. For further information about Genworth Holdings’ borrowings, refer to note 8 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.” In addition, in February 2022, Genworth Holdings paid AXA $30 million, which constitutes the majority of the remaining estimated unprocessed claims, and accordingly, we do not expect to pay AXA any significant amounts over the next twelve months.
We believe Genworth Holdings’ unrestricted cash, cash equivalents and liquid assets provide sufficient liquidity to meet its financial obligations over the next twelve months. Furthermore, we believe Genworth Holdings has suspendedadequate sources of liquidity to meet its future financial obligations in 2023 and thereafter; however, we do expect intercompany cash tax payments from Genworth Holdings’ subsidiaries to be lower over the payment of stockholder dividends on ournext few years as compared to the amounts received during 2021. We also expect Genworth Financial common stock indefinitely. The declarationHoldings’ liquidity to be significantly impacted by the amounts and paymenttiming of future dividends to holders of our common stockfrom Enact Holdings, which will be influenced by economic and other conditions that affect its business. We actively monitor our liquidity position (most notably at Genworth Holdings), liquidity generation options and the discretioncredit markets given changing market conditions. Genworth Holdings’ cash management target is to maintain a cash buffer of our Boardtwo times expected annual external debt interest payments. Genworth Holdings may move below or above this targeted cash buffer during any given quarter due to the timing of Directorscash outflows and inflows or from future actions. Management of Genworth Financial continues to evaluate Genworth Holdings’ target level of liquidity as circumstances warrant.
Enact Holdings continues to evaluate its capital allocation strategy to consistently support its existing policyholders, grow its mortgage insurance business, fund attractive new business opportunities and return capital to shareholders. To this end, on April 26, 2022, Enact Holdings’ board of directors approved the initiation of a quarterly dividend beginning with a dividend of $0.14 per share in the second quarter of 2022. Any future
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dividends will be subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial, and also be dependent on many factorsa variety of economic, market, and business conditions, including the receiptresolution of dividends from our operating subsidiaries, our financial condition and operating results, the capital requirements of our subsidiaries, legal requirements, regulatory constraints, our debt obligations, our credit and financial strength ratings and suchforbearance related delinquencies, among other factors as the Board of Directors deems relevant.considerations. In addition, our Boardany future dividends or other returns of Directors has suspended repurchases of our capital will include a proportionate distribution to minority shareholders.
Genworth Financial common stock under our stock repurchase program indefinitely. The resumption of our stock repurchase program will be at the discretion of our Board of Directors.Holdings—changes in liquidity
Genworth Holdings had $742$140 million and $1,078$331 million of cash, cash equivalents and restricted cash as of June 30, 2021March 31, 2022 and December 31, 2020, respectively, which included $46 million of restricted cash equivalents as of December 31, 2020.2021, respectively. Genworth Holdings also held $100$75 million and $25 million inof U.S. government securities as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, which included $19approximately $1 million and $25$3 million respectively, of restricted assets.assets, respectively. The decrease in Genworth Holdings’ cash, cash equivalents and restricted cash was principally driven by the repaymentrepurchase of Genworth Holdings’ 7.20%$82 million principal amount of its senior notes due in February 2021 for $3502024, $50 million comprised of the outstanding principal balancenet purchases of $338U.S. government securities and a $30 million and accrued interest of $12 million,payment to AXA.
Capital resources and financing activities
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Enact Holdings. The availability of additional capital resources will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit ratings and the repurchaseperformance of $146and outlook for Enact Holdings and the payment of dividends therefrom.
In the first quarter of 2022, Genworth Holdings repurchased $82 million principal amount of its 7.625%4.80% senior notes due in September 2021. In addition, on March 3, 2021, we completed the saleFebruary 2024 for a pre-tax loss of Genworth Australia$3 million and received net proceeds of approximately AUD483 million ($370 million). The sale of Genworth Australia resulted in a mandatory payment of approximately £178 million ($247 million) related to our outstanding secured promissory note issued to AXA, includingpaid accrued interest thereon. As of $2 million. For additional details on the decrease in cash, cash equivalents and restricted cash, see below under “—Capital resources and financing activities.”
On March 1, 2021,31, 2022, Genworth Holdings entered into a guarantee agreement with Genworth Financial International Holdings, LLC (“GFIH”) whereby Genworth Holdings agreed to contribute additional capital to GFIH related to certain of its liabilities, or otherwise satisfy or discharge those liabilities. The liabilities include but are not limited to, claims and financial obligations or other liabilities of GFIH that existed immediately prior to the distribution of the net proceeds from the Genworth Australia sale. Pursuant to the agreement, Genworth Holdings paid AXA approximately €15 million ($18 million) in the second quarter of 2021 to settle amounts owed related to underwriting losses on a product sold by a distributor in our former lifestyle protection insurance business.
In July 2021, Genworth Holdings early redeemed its 7.625%Holdings’ 4.80% senior notes originally due in September 2021 with a cash payment of approximately $532 million, comprised of theFebruary 2024 has an outstanding principal balance accrued interest and a make-whole premium.
During the six months ended June 30, 2021 and 2020, Genworth Holdings received cash dividends from its international subsidiaries of $370 million and $11 million, respectively. Dividends received in the current year include the net proceeds from the sale of Genworth Australia.$200 million.
Regulated insurance subsidiaries
The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities associated with their various insurance and investment products, operating costs and expenses, the payment of dividends to us, contributions to their subsidiaries, payment of principal and interest on their outstanding debt obligations and income taxes. Liabilities arising from insurance and investment products include the payment of benefits and claims, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements.
Our insurance subsidiaries have used cash flows from operations and investment activities to fund their liquidity requirements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived from premiums, annuity deposits and insurance and investment product fees and other income, including commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment management fees and dividends and distributions from their subsidiaries. The principal cash inflows from investment activities result from maturities and repayments of investments and, as necessary, sales of invested assets.
Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits without forced sales of investments. Products having liabilities with longer durations, such as certain life insurance and long-term care insurance policies, are matched with investments having similar duration such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are matched with fixed maturity securities that have short- and medium-term fixed maturities. In addition, our insurance subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of June 30, 2021,March 31, 2022, our total cash, cash equivalents, restricted cash and invested assets were $75.2$68.2 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, bank loans, limited partnership investments and select mortgage-backed and asset-backed securities are relatively illiquid. These
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asset classes represented approximately 38%41% of the carrying value of our total cash, cash equivalents, restricted cash and invested assets as of June 30, 2021.March 31, 2022.
Off-balance sheet commitments, guarantees and contractual obligations
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As of June 30, 2021, our Enact segment was compliant with the PMIERs capital requirements. On April 16, 2021, our Enact segment obtained approximately $303 million of fully collateralized excess of loss reinsurance coverage from Triangle Re
2021-2
Ltd. on a portfolio of existing mortgage insurance policies written from September 2020 through December 2020. Credit risk transfer transactions provided an aggregate of approximately $1,406 million of PMIERs capital credit as of June 30, 2021. Our Enact segment may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.
Capital resources and financing activities
Genworth Holdings paid its 7.20% senior notes with a principal balance of $338 million at maturity on February 16, 2021. Genworth Holdings’ 7.20% senior notes were fully redeemed with a cash payment of $350 million, comprised of the outstanding principal balance and accrued interest.
In March 2021, Genworth Holdings repurchased $146 million principal amount of its 7.625% senior notes due in September 2021 for a
pre-tax
loss of $4 million and paid accrued interest thereon. On July 21, 2021, Genworth Holdings early redeemed the remainder of its 7.625% senior notes originally scheduled to mature in September 2021. The senior notes were fully redeemed with a cash payment of $532 million, comprised of the outstanding principal balance of $513 million, accrued interest of approximately $13 million and a make-whole premium of approximately $6 million.
As of June 30,March 31, 2022, we were committed to fund $1,309 million in limited partnership investments, $108 million of bank loan investments which had not yet been drawn, $75 million in commercial mortgage loan investments and $20 million in private placement investments.
As of March 31, 2022 and December 31, 2021, Genworth Holdings has $823 million of unrestricted cash, cash equivalents and liquid assets.had an obligation with GE pursuant to a Tax Matters Agreement, which was recorded in other liabilities in our condensed consolidated balance sheets. On April 14, 2022, Genworth Holdings received net cash proceedssatisfied its remaining obligation of $370$55 million fromunder the saleTax Matters Agreement with GE.
As of March 31, 2022, there have been no material additions or changes to guarantees provided by Genworth Australia in March 2021, of which $247 million was used to prepay a portion of the AXA promissory note, including accrued interest. In addition, as discussed above, on July 21, 2021,Financial and Genworth Holdings early redeemed the remainder of its 7.625% senior notes originally scheduled to mature in September 2021. We believe Genworth Holdings’ unrestricted cash, cash equivalents and liquid assets provide sufficient liquidity to meet our financial obligations and maintain business operations for one year from the date the financial statements are issued based on relevant conditions and events that are known and reasonably estimable, including current cash and management actions in the normal course.
Under the settlement agreement with AXA, we issued a secured promissory note that was originally due in two installment payments in 2022. On March 3, 2021, as discussed above, we repaid the first installment payment to AXA and a portion of the second installment from cash proceeds received from the Genworth Australia sale. Until the secured promissory note issued to AXA is fully repaid, certain prepayment obligations thereunder place significant constraints on our ability to repay debt (other than the September 2021 debt maturity) with the proceeds of new debt financing, equity offerings, asset sales or dividends from subsidiaries.
The remaining AXA promissory note, including expected future claims, is estimated to be $344 million and is due in September 2022. In addition, Genworth Holdings has $400 million of senior notes due in both August 2023 and February 2024. To help address these debt obligations beyond the next year and reduce our overall indebtedness, we are actively taking additional steps toward raising capital by preparing for a potential partial sale of Enact Holdings, subject to market conditions, as well as the satisfaction of various conditions and approvals.
We actively monitor our liquidity position, liquidity generation options and the credit markets given changing market conditions. Our cash management target is to maintain a cash buffer of two times expected annual external debt interest payments. We may move below or above our targeted cash buffer during any given quarter duecompared to the timing of cash outflows and inflows or from future actions. We continue to evaluateamounts disclosed within our target level of liquidity as circumstances warrant. Additionally, we will continue to evaluate market influences on the valuation of our senior debt and may consider additional opportunities to repurchase our debt over time. We cannot predict with certainty the impact to us from future disruptions in the credit markets or any further future downgrades by one or more of the rating agencies of the financial strength ratings of our insurance company subsidiaries and/or the credit ratings of our holding company debt. The availability of additional funding,
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including through a potential partial sale of Enact Holdings or the issuance of debt, convertible or equity-linked securities, will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit ratings and the performance of and outlook for Enact Holdings and the payment of dividends therefrom. For a discussion of certain risks associated with our liquidity, see “Item 1A—Risk Factors—Our internal sources of liquidity may be insufficient to meet our needs and our access to capital may be limited or unavailable. Under such conditions, we may seek additional capital but may be unable to obtain it” in our 20202021 Annual Report on Form
10-K. 10-K filed on February 28, 2022.
These risks may be exacerbated by the economic impact of
COVID-19.
No references herein to any planned partial sale transaction constitute an offering of securities.
Contractual obligations and commercial commitments
Except as disclosed above, there have been no material additions or changes to our contractual obligations as compared to the amounts disclosed within our 20202021 Annual Report on Form
10-K
filed on February 26, 2021.28, 2022. For additional details related to our commitments, see note 11 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”
Supplemental Condensed Consolidating Financial Information
Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior and subordinated notes and the holders of the senior and subordinated notes, on an unsecured unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, each outstanding series of senior notes and outstanding subordinated notes, and the full and punctual payment of all other amounts payable by Genworth Holdings under the senior and subordinated notes indentures in respect of such senior and subordinated notes. Genworth Holdings is a direct, 100% owned subsidiary of Genworth Financial.
The following supplemental condensed consolidating financial information of Genworth Financial and its direct and indirect subsidiaries has been prepared pursuant to rules regarding the preparation of consolidating financial information of
Regulation S-X,S-X.
as amended by the SEC on March 2, 2020.
The supplemental condensed consolidating financial information presents the condensed consolidating balance sheet information as of June 30, 2021March 31, 2022 and December 31, 2020,2021, the condensed consolidating income statement information, the condensed consolidating comprehensive income statement information and the condensed consolidating cash flow statement information for the sixthree months ended June 30, 2021March 31, 2022 and for the year ended December 31, 2020.2021.
The supplemental condensed consolidating financial information reflects Genworth Financial (“Parent Guarantor”), Genworth Holdings (“Issuer”) and each of Genworth Financial’s other direct and indirect subsidiaries (the “All Other Subsidiaries”) on a combined basis, none of which guarantee the senior notes or subordinated notes, as well as the eliminations necessary to present Genworth Financial’s financial information on a consolidated basis and total consolidated amounts.
The accompanying supplemental condensed consolidating financial information is presented based on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the subsidiaries’ cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include consolidating and eliminating entries for investments in subsidiaries and intercompany activity.
 
141117
Table of Contents
The following table presents the condensed consolidating balance sheet information as of June 30, 2021:March 31, 2022:
 
(Amounts in millions)
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Assets
           
Investments:
           
Fixed maturity securities
available-for-sale,
at fair value (amortized cost of $53,111 and allowance for credit losses of $—)
  $—    $—    $61,649  $—    $61,649 
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,280 and allowance for credit losses of $—)
 $—    $—    $55,027  $—    $55,027 
Equity securities, at fair value
   —     —     147   —     147   —     —     230   —     230 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4)
   —     —     6,912   —     6,912   —     —     6,938   —     6,938 
Less: Allowance for credit losses
   —     —     (33)   —     (33)   —     —     (25)   —     (25) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Commercial mortgage loans, net
   —     —     6,879   —     6,879   —     —     6,913   —     6,913 
Policy loans
   —     —     2,083   —     2,083   —     —     2,028   —     2,028 
Limited partnerships
  —     —     2,007   —     2,007 
Other invested assets
   —     124   2,136   —     2,260   —     75   596   —     671 
Investments in subsidiaries
   15,176   16,087   —     (31,263)   —     14,419   14,621   —     (29,040)   —   
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total investments
   15,176   16,211   72,894   (31,263)   73,018   14,419   14,696   66,801   (29,040)   66,876 
Cash, cash equivalents and restricted cash
   —     742   1,472   —     2,214   —     140   1,151   —     1,291 
Accrued investment income
   —     —     573   —     573   —     —     696   —     696 
Deferred acquisition costs
   —     —     1,212   —     1,212   —     —     1,310   —     1,310 
Intangible assets
   —     —     151   —     151   —     —     159   —     159 
Reinsurance recoverable
   —     —     16,716   —     16,716   —     —     16,821   —     16,821 
Less: Allowance for credit losses
   —     —     (50)   —     (50)   —     —     (57)   —     (57) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable, net
   —     —     16,666   —     16,666   —     —     16,764   —     16,764 
Other assets
   5   137   261   —     403   1   147   292   —     440 
Intercompany notes receivable
   —     75   —     (75)   —     16   71   1   (88)   —   
Deferred tax assets
   —     640   (429)   —     211   1   514   (94)   —     421 
Separate account assets
   —     —     6,202   —     6,202   —     —     5,530   —     5,530 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total assets
  $15,181  $17,805  $99,002  $(31,338)  $100,650  $14,437  $15,568  $92,610  $(29,128)  $93,487 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Liabilities and equity
           
Liabilities:
           
Future policy benefits
  $—    $—    $42,165  $—    $42,165  $—    $—    $38,897  $—    $38,897 
Policyholder account balances
   —     —     19,944   —     19,944   —     —     18,197   —     18,197 
Liability for policy and contract claims
   —     —     11,546   —     11,546   —     —     11,833   —     11,833 
Unearned premiums
   —     —     695   —     695   —     —     639   —     639 
Other liabilities
   (1)   112   1,553   —     1,664   30   64   1,322   —     1,416 
Intercompany notes payable
   18   1   56   (75)   —     —     17   71   (88)   —   
Long-term borrowings
   —     2,185   739   —     2,924   —     1,078   741   —     1,819 
Separate account liabilities
   —     —     6,202   —     6,202   —     —     5,530   —     5,530 
Liabilities related to discontinued operations
   —     342   4   —     346   —     1   3   —     4 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities
   17   2,640   82,904   (75)   85,486   30   1,160   77,233   (88)   78,335 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity:
           
Common stock
   1   —     5   (5)   1   1   —     4   (4)   1 
Additional
paid-in
capital
   12,018   12,890   18,579   (31,469)   12,018   11,857   12,726   18,142   (30,868)   11,857 
Accumulated other comprehensive income (loss)
   3,834   3,834   3,879   (7,713)   3,834   2,610   2,610   2,654   (5,264)   2,610 
Retained earnings
   2,011   (1,559)   (6,665)   8,224   2,011   2,639   (928)   (6,468)   7,396   2,639 
Treasury stock, at cost
   (2,700)   —     —     —     (2,700)   (2,700)   —     —     —     (2,700) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
   15,164   15,165   15,798   (30,963)   15,164   14,407   14,408   14,332   (28,740)   14,407 
Noncontrolling interests
   —     —     300   (300)   —     —     —     1,045   (300)   745 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total equity
   15,164   15,165   16,098   (31,263)   15,164   14,407   14,408   15,377   (29,040)   15,152 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities and equity
  $15,181  $17,805  $99,002  $(31,338)  $100,650  $14,437  $15,568  $92,610  $(29,128)  $93,487 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
142118
Table of Contents
The following table presents the condensed consolidating balance sheet information as of December 31, 2020:2021:
 
(Amounts in millions)
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
 
Assets
           
Investments:
           
Fixed maturity securities
available-for-sale,
at fair value (amortized cost of $53,417 and allowance for credit losses of $4)
  $—    $—    $63,495  $—    $63,495 
Fixed maturity securities available-for-sale, at fair value (amortized cost of $52,611 and allowance for credit losses of $—)
 $—    $—    $60,480  $—    $60,480 
Equity securities, at fair value
   —     —     386   —     386   —     —     198   —     198 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4)
   —     —     6,774   —     6,774   —     —     6,856   —     6,856 
Less: Allowance for credit losses
   —     —     (31)   —     (31)   —     —     (26)   —     (26) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Commercial mortgage loans, net
   —     —     6,743   —     6,743   —     —     6,830   —     6,830 
Policy loans
   —     —     1,978   —     1,978   —     —     2,050   —     2,050 
Limited partnerships
  —     —     1,900   —     1,900 
Other invested assets
   —     67   2,032   —     2,099   —     27   793   —     820 
Investments in subsidiaries
   15,358   16,673   —     (32,031)   —     15,517   15,626   —     (31,143)   —   
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total investments
   15,358   16,740   74,634   (32,031)   74,701   15,517   15,653   72,251   (31,143)   72,278 
Cash, cash equivalents and restricted cash
   —     1,078   1,483   —     2,561   —     331   1,240   —     1,571 
Accrued investment income
   —     —     655   —     655   —     —     647   —     647 
Deferred acquisition costs
   —     —     1,487   —     1,487   —     —     1,146   —     1,146 
Intangible assets
   —     —     157   —     157   —     —     143   —     143 
Reinsurance recoverable
   —     —     16,864   —     16,864   —     —     16,868   —     16,868 
Less: Allowance for credit losses
   —     —     (45)   —     (45)   —     —     (55)   —     (55) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Reinsurance recoverable, net
   —     —     16,819   —     16,819   —     —     16,813   —     16,813 
Other assets
   2   146   256   —     404   5   207   176   —     388 
Intercompany notes receivable
   —     19   —     (19)   —     —     15   1   (16)   —   
Deferred tax assets
   13   767   (715)   —     65   4   555   (440)   —     119 
Separate account assets
   —     —     6,081   —     6,081   —     —     6,066   —     6,066 
Assets related to discontinued operations
   —     —     2,817   —     2,817 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total assets
  $15,373  $18,750  $103,674  $(32,050)  $105,747  $15,526  $16,761  $98,043  $(31,159)  $99,171 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Liabilities and equity
           
Liabilities:
           
Future policy benefits
  $—    $—    $42,695  $—    $42,695  $—    $—    $41,528  $—    $41,528 
Policyholder account balances
   —     —     21,503   —     21,503   —     —     19,354   —     19,354 
Liability for policy and contract claims
   —     —     11,486   —     11,486   —     —     11,841   —     11,841 
Unearned premiums
   —     —     775   —     775   —     —     672   —     672 
Other liabilities
   55   156   1,403   —     1,614   4   64   1,443   —     1,511 
Intercompany notes payable
   —     —     19   (19)   —     12   1   3   (16)   —   
Long-term borrowings
   —     2,665   738   —     3,403   —     1,159   740   —     1,899 
Separate account liabilities
   —     —     6,081   —     6,081   —     —     6,066   —     6,066 
Liabilities related to discontinued operations
   —     581   1,789   —     2,370   —     30   4   —     34 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities
   55   3,402   86,489   (19)   89,927   16   1,254   81,651   (16)   82,905 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Equity:
           
Common stock
   1   —     3   (3)   1   1   —     4   (4)   1 
Additional
paid-in
capital
   12,008   12,890   18,562   (31,452)   12,008   11,858   12,724   18,135   (30,859)   11,858 
Accumulated other comprehensive income (loss)
   4,425   4,426   4,499   (8,925)   4,425   3,861   3,861   3,906   (7,767)   3,861 
Retained earnings
   1,584   (1,968)   (6,681)   8,649   1,584   2,490   (1,078)   (6,709)   7,787   2,490 
Treasury stock, at cost
   (2,700)   —     —     —     (2,700)   (2,700)   —     —     —     (2,700) 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total Genworth Financial, Inc.’s stockholders’ equity
   15,318   15,348   16,383   (31,731)   15,318   15,510   15,507   15,336   (30,843)   15,510 
Noncontrolling interests
   —     —     802   (300)   502   —     —     1,056   (300)   756 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total equity
   15,318   15,348   17,185   (32,031)   15,820   15,510   15,507   16,392   (31,143)   16,266 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Total liabilities and equity
  $15,373  $18,750  $103,674  $(32,050)  $105,747  $15,526  $16,761  $98,043  $(31,159)  $99,171 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
143119
Table of Contents
The following table presents the condensed consolidating income statement information for the sixthree months ended June 30, 2021:March 31, 2022:
 
(Amounts in millions)
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
 
Eliminations
 
Consolidated
   
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
   
Eliminations
 
Consolidated
 
Revenues:
             
Premiums
  $—��   $—    $1,915  $—    $1,915   $—    $—    $931   $—    $931 
Net investment income
   (2)   —     1,647   —     1,645    (1)   —     765    —     764 
Net investment gains (losses)
   —     —     103   —     103    —     —     28    —     28 
Policy fees and other income
   —     (1)   363   1   363    —     —     169    —     169 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total revenues
   (2)   (1)   4,028   1   4,026    (1)   —     1,893    —     1,892 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Benefits and expenses:
             
Benefits and other changes in policy reserves
   —     —     2,379   —     2,379    —     —     1,139    —     1,139 
Interest credited
   —     —     258   —     258    —     —     125    —     125 
Acquisition and operating expenses, net of deferrals
   17   4   558   —     579    8   3   260    —     271 
Amortization of deferred acquisition costs and intangibles
   —     —     163   —     163    —     —     92    —     92 
Interest expense
   —     68   25   1   94    —     13   13    —     26 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total benefits and expenses
   17   72   3,383   1   3,473    8   16   1,629    —     1,653 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries
   (19)   (73)   645   —     553    (9)   (16)   264    —     239 
Provision (benefit) for income taxes
   (1)   (16)   151   —     134    (2)   (3)   63    —     58 
Equity in income of subsidiaries
   445   467   —     (912)   —      156   172   —      (328)   —   
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income from continuing operations
   427   410   494   (912)   419    149   159   201    (328)   181 
Income (loss) from discontinued operations, net of taxes
   —     36   (20)   —     16 
Loss from discontinued operations, net of taxes
   —     (2)   —      —     (2) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income
   427   446   474   (912)   435    149   157   201    (328)   179 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     —     —     —      —     —     30    —     30 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     —     8   —     8    —     —     —      —     —   
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $427  $446  $466  $(912)  $427   $149  $157  $171   $(328)  $149 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
   
 
  
 
 
 
144120
Table of Contents
The following table presents the condensed consolidating income statement information for the year ended December 31, 2020:2021:
 
(Amounts in millions)
  
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
   
Eliminations
 
Consolidated
   
Parent
Guarantor
 
Issuer
 
All Other
Subsidiaries
   
Eliminations
 
Consolidated
 
Revenues:
              
Premiums
  $—    $—    $3,836   $—    $3,836   $—    $—    $3,435   $—    $3,435 
Net investment income
   (3)   5   3,228    (3)   3,227    (3)   —     3,373    —     3,370 
Net investment gains (losses)
   —     6   486    —     492    —     —     323    —     323 
Policy fees and other income
   —     3   730    (4)   729    —     (1)   703    2   704 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total revenues
   (3)   14   8,280    (7)   8,284    (3)   (1)   7,834    2   7,832 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Benefits and expenses:
              
Benefits and other changes in policy reserves
   —     —     5,214    —     5,214    —     —     4,383    —     4,383 
Interest credited
   —     —     549    —     549    —     —     508    —     508 
Acquisition and operating expenses, net of deferrals
   31   6   898    —     935    25   44   1,154    —     1,223 
Amortization of deferred acquisition costs and intangibles
   —     —     463    —     463    —     —     377    —     377 
Interest expense
   1   175   26    (7)   195    (1)   109   50    2   160 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Total benefits and expenses
   32   181   7,150    (7)   7,356    24   153   6,472    2   6,651 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income (loss) from continuing operations before income taxes and equity in income of subsidiaries
   (35)   (167)   1,130    —     928    (27)   (154)   1,362    —     1,181 
Provision (benefit) for income taxes
   (2)   (41)   273    —     230    (1)   (33)   297    —     263 
Equity in income of subsidiaries
   210   912   —      (1,122)   —      930   1,041   —      (1,971)   —   
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Income from continuing operations
   177   786   857    (1,122)   698    904   920   1,065    (1,971)   918 
Income (loss) from discontinued operations, net of taxes
   1   (573)   86    —     (486) 
Income from discontinued operations, net of taxes
   —     13   14    —     27 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income
   178   213   943    (1,122)   212    904   933   1,079    (1,971)   945 
Less: net income from continuing operations attributable to noncontrolling interests
   —     —     —      —     —      —     —     33    —     33 
Less: net income from discontinued operations attributable to noncontrolling interests
   —     —     34    —     34    —     —     8    —     8 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $178  $213  $909   $(1,122)  $178   $904  $933  $1,038   $(1,971)  $904 
  
 
  
 
  
 
   
 
  
 
   
 
  
 
  
 
   
 
  
 
 
 
145121
Table of Contents
The following table presents the condensed consolidating comprehensive income statement information for the sixthree months ended June 30, 2021:March 31, 2022:
 
  
Parent
   
All Other
       
Parent
   
All Other
     
(Amounts in millions)
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
   
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
Net income
  $427  $446  $474  $(912)  $435   $149  $157  $201  $(328)  $179 
Other comprehensive income (loss), net of taxes:
            
Net unrealized gains (losses) on securities without an allowance for credit losses
   (355)   (356)   (381)   712   (380)    (1,010)   (1,010)   (1,051)   2,020   (1,051) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   6   6   6   (12)   6    —     —     —     —     —   
Derivatives qualifying as hedges
   (208)   (208)   (236)   444   (208)    (236)   (236)   (237)   473   (236) 
Foreign currency translation and other adjustments
   (34)   (34)   138   68   138    (5)   (5)   (5)   10   (5) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total other comprehensive income (loss)
   (591)   (592)   (473)   1,212   (444)    (1,251)   (1,251)   (1,293)   2,503   (1,292) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income (loss)
   (164)   (146)   1   300   (9) 
Less: comprehensive income attributable to noncontrolling interests
   —     —     155   —     155 
Total comprehensive loss
   (1,102)   (1,094)   (1,092)   2,175   (1,113) 
Less: comprehensive loss attributable to noncontrolling interests
   —     —     (11)   —     (11) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
  $(164)  $(146)  $(154)  $300  $(164)   $(1,102)  $(1,094)  $(1,081)  $2,175  $(1,102) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
The following table presents the condensed consolidating comprehensive income statement information for the year ended December 31, 2020:2021:
 
  
Parent
   
All Other
       
Parent
   
All Other
     
(Amounts in millions)
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
   
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
Net income
  $178  $213  $943  $(1,122)  $212   $904  $933  $1,079  $(1,971)  $945 
Other comprehensive income (loss), net of taxes:
            
Net unrealized gains (losses) on securities without an allowance for credit losses
   764   765   765   (1,530)   764    (334)   (335)   (371)   670   (370) 
Net unrealized gains (losses) on securities with an allowance for credit losses
   (6)   (6)   (6)   12   (6)    6   6   6   (12)   6 
Derivatives qualifying as hedges
   209   209   241   (450)   209    (186)   (186)   (215)   401   (186) 
Foreign currency translation and other adjustments
   25   25   55   (50)   55    (24)   (24)   149   47   148 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total other comprehensive income (loss)
   992   993   1,055   (2,018)   1,022    (538)   (539)   (431)   1,106   (402) 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income
   1,170   1,206   1,998   (3,140)   1,234    366   394   648   (865)   543 
Less: comprehensive income attributable to noncontrolling interests
   —     —     64   —     64    —     —     177   —     177 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders
  $1,170  $1,206  $1,934  $(3,140)  $1,170   $366  $394  $471  $(865)  $366 
  
 
  
 
  
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
 
146122
Table of Contents
The following table presents the condensed consolidating cash flow statement information for the sixthree months ended June 30, 2021:March 31, 2022:
 
 
Parent
   
All Other
      
Parent
   
All Other
     
(Amounts in millions)
 
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
Cash flows from (used by) operating activities:
          
Net income
 $427  $446  $474  $(912)  $435  $149  $157  $201  $(328)  $179 
Less (income) loss from discontinued operations, net of taxes
  —     (36)   20   —     (16) 
Less loss from discontinued operations, net of taxes
  —     2   —     —     2 
Adjustments to reconcile net income to net cash from (used by) operating activities:
          
Equity in income from subsidiaries
  (445)   (467)   —     912   —     (156)   (172)   —     328   —   
Dividends from subsidiaries
  —     370   (370)   —     —   
Amortization of fixed maturity securities discounts and premiums
  —     2   (82)   —     (80)   —     1   (35)   —     (34) 
Net investment (gains) losses
  —     —     (103)   —     (103)   —     —     (28)   —     (28) 
Charges assessed to policyholders
  —     —     (317)   —     (317)   —     —     (150)   —     (150) 
Acquisition costs deferred
  —     —     (3)   —     (3)   —     —     (2)   —     (2) 
Amortization of deferred acquisition costs and intangibles
  —     —     163   —     163   —     —     92   —     92 
Deferred income taxes
  3   148   (19)   —     132   1   44   12   —     57 
Derivative instruments, limited partnerships and other
  —     51   (240)   —     (189)   —     3   (108)   —     (105) 
Stock-based compensation expense
  25   —     —     —     25   7   —     3   —     10 
Change in certain assets and liabilities:
          
Accrued investment income and other assets
  (3)   10   (76)   —     (69)   5   2   (50)   —     (43) 
Insurance reserves
  —     —     507   —     507   —     —     249   —     249 
Current tax liabilities
  (6)   48   (46)   —     (4)   29   (20)   (9)   —     —   
Other liabilities, policy and contract claims and other policy-related balances
  (12)   (22)   (26)   —     (60)   3   —     (292)   —     (289) 
Cash from (used by) operating activities—discontinued operations
  —     (265)   73   —     (192) 
Cash used by operating activities—discontinued operations
  —     (30)   —     —     (30) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) operating activities
  (11)   285   (45)   —     229   38   (13)   (117)   —     (92) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) investing activities:
          
Proceeds from maturities and repayments of investments:
          
Fixed maturity securities
  —     —     2,220   —     2,220   —     —     730   —     730 
Commercial mortgage loans
  —     —     392   —     392   —     —     115   —     115 
Other invested assets
  —     —     107   —     107 
Limited partnerships and other invested assets
  —     —     51   —     51 
Proceeds from sales of investments:
          
Fixed maturity and equity securities
  —     —     1,306   —     1,306   —     —     581   —     581 
Purchases and originations of investments:
          
Fixed maturity and equity securities
  —     —     (2,868)   —     (2,868)   —     —     (969)   —     (969) 
Commercial mortgage loans
  —     —     (531)   —     (531)   —     —     (197)   —     (197) 
Other invested assets
  —     —     (240)   —     (240) 
Limited partnerships and other invested assets
  —     —     (137)   —     (137) 
Short-term investments, net
  —     (75)   (1)   —     (76)   —     (50)   —     —     (50) 
Policy loans, net
  —     —     28   —     28   —     —     14   —     14 
Intercompany notes receivable, net
  —     (56)   —     56   —     (16)   (56)   —     72   —   
Capital contributions to subsidiaries
  (2)   —     2   —     —     (2)   (6)   8   —     —   
Proceeds from sale of business, net of cash transferred
  —     —     270   —     270 
Cash used by investing activities—discontinued operations
  —     —     (67)   —     (67) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) investing activities
  (2)   (131)   618   56   541   (18)   (112)   196   72   138 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) financing activities:
          
Deposits to universal life and investment contracts
  —     —     349   —     349   —     —     159   —     159 
Withdrawals from universal life and investment contracts
  —     —     (1,143)   —     (1,143)   —     —     (418)   —     (418) 
Repayment and repurchase of long-term debt
  —     (484)   —     —     (484)   —     (82)   —     —     (82) 
Intercompany notes payable, net
  18   1   37   (56)   —     (12)   16   68   (72)   —   
Other, net
  (5)   (7)   77   —     65   (8)   —     23   —     15 
Cash used by financing activities—discontinued operations
  —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) financing activities
  13   (490)   (680)   (56)   (1,213) 
Net cash used by financing activities
  (20)   (66)   (168)   (72)   (326) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) related to discontinued operations)
  —     —     1   —     1 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
  —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net change in cash, cash equivalents and restricted cash
  —     (336)   (106)   —     (442)   —     (191)   (89)   —     (280) 
Cash, cash equivalents and restricted cash at beginning of period
  —    1,078  1,578   —    2,656   —     331   1,240   —     1,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash at end of period
  —     742   1,472   —     2,214   —     140   1,151   —     1,291 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
  —     —     —     —     —     —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
 $—    $742  $1,472  $—    $2,214  $—    $140  $1,151  $—    $1,291 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
147123
Table of Contents
The following table presents the condensed consolidating cash flow statement information for the year ended December 31, 2020:2021:
 
 
Parent
   
All Other
      
Parent
   
All Other
     
(Amounts in millions)
 
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
  
Guarantor
 
Issuer
 
Subsidiaries
 
Eliminations
 
Consolidated
 
Cash flows from operating activities:
     
Cash flows from (used by) operating activities:
     
Net income
 $178  $213  $943  $(1,122)  $212  $904  $933  $1,079  $(1,971)  $945 
Less (income) loss from discontinued operations, net of taxes
  (1)   573   (86)   —     486 
Adjustments to reconcile net income to net cash from operating activities:
     
Less income from discontinued operations, net of taxes
  —     (13)   (14)   —     (27) 
Adjustments to reconcile net income to net cash from (used by) operating activities:
     
Equity in income from subsidiaries
  (210)   (912)   —     1,122   —     (930)   (1,041)   —     1,971   —   
Dividends from subsidiaries
  —     437   (437)   —     —     —     552   (552)   —     —   
Amortization of fixed maturity securities discounts and premiums
  —     6   (163)   —     (157)   —     6   (182)   —     (176) 
Net investment (gains) losses
  —     (6)   (486)   —     (492)   —     —     (323)   —     (323) 
Charges assessed to policyholders
  —     —     (646)   —     (646)   —     —     (620)   —     (620) 
Acquisition costs deferred
  —     —     (3)   —     (3)   —     —     (8)   —     (8) 
Amortization of deferred acquisition costs and intangibles
  —     —     463   —     463   —     —     377   —     377 
Deferred income taxes
  (1)   212   17   —     228   —     341   (51)   —     290 
Derivative instruments, limited partnerships and other
  —     (70)   (42)   —     (112)   —     75   (434)   —     (359) 
Stock-based compensation expense
  39   —     —     —     39   40   —     —     —     40 
Change in certain assets and liabilities:
          
Accrued investment income and other assets
  2   16   (105)   (5)   (92)   (1)   9   (137)   —     (129) 
Insurance reserves
  —     —     1,217   —     1,217   —     —     642   —     642 
Current tax liabilities
  (1)   41   (34)   —     6   (5)   17   (46)   —     (34) 
Other liabilities, policy and contract claims and other policy-related balances
  11   30   784   5   830   (13)   (40)   363   —     310 
Cash from (used by) operating activities—discontinued operations
  —     (258)   239   —     (19)   —     (564)   73   —     (491) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from operating activities
  17   282   1,661   —     1,960 
Net cash from (used by) operating activities
  (5)   275   167   —     437 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows from (used by) investing activities:
          
Proceeds from maturities and repayments of investments:
          
Fixed maturity securities
  —     —     3,637   —     3,637   —     —     4,162   —     4,162 
Commercial mortgage loans
  —     —     744   —     744   —     —     874   —     874 
Other invested assets
  —     —     182   —     182 
Limited partnerships and other invested assets
  —     —     255   —     255 
Proceeds from sales of investments:
          
Fixed maturity and equity securities
  —     —     3,040   —     3,040   —     —     2,273   —     2,273 
Purchases and originations of investments:
          
Fixed maturity and equity securities
  —     —     (7,763)   —     (7,763)   —     —     (5,216)   —     (5,216) 
Commercial mortgage loans
  —     —     (547)   —     (547)   —     —     (963)   —     (963) 
Other invested assets
  —     —     (449)   —     (449) 
Limited partnerships and other invested assets
  —     —     (767)   —     (767) 
Short-term investments, net
  —     45   (10)   —     35   —     —     18   —     18 
Policy loans, net
  —     —     190   —     190   —     —     57   —     57 
Intercompany notes receivable, net
  (10)   (16)   200   (174)   —     —     4   (1)   (3)   —   
Capital contributions to subsidiaries
  (2)   —     2   —     —     (2)   —     2   —     —   
Proceeds from sale of business, net of cash transferred
  —     —     270   —     270 
Cash used by investing activities—discontinued operations
  —     —     (222)   —     (222)   —     —     (67)   —     (67) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash from (used by) investing activities
  (12)   29   (996)   (174)   (1,153)   (2)   4   897   (3)   896 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash flows used by financing activities:
     
Cash flows from (used by) financing activities:
     
Deposits to universal life and investment contracts
  —     —     862   —     862   —     —     669   —     669 
Withdrawals from universal life and investment contracts
  —     —     (2,282)   —     (2,282)   —     —     (2,071)   —     (2,071) 
Redemption of
non-recourse
funding obligations
  —     —     (315)   —     (315) 
Proceeds from the issuance of long-term debt
  —     —     738   —     738 
Repayment and repurchase of long-term debt
  —     (490)   —     —     (490)   —     (1,541)   —     —     (1,541) 
Intercompany notes payable, net
  —     (190)   16   174   —     12   1   (16)   3   —   
Proceeds from sale of subsidiary shares to noncontrolling interests
  —     529   —     —     529 
Dividends paid to noncontrolling interests
  —     —     (37)   —     (37) 
Other, net
  (5)   (14)   17   —     (2)   (5)   (15)   52   —     32 
Cash used by financing activities—discontinued operations
  —     —     (18)   —     (18) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net cash used by financing activities
  (5)   (694)   (982)   174   (1,507) 
Net cash from (used by) financing activities
  7   (1,026)   (1,403)   3   (2,419) 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $18 related to discontinued operations)
  —     —     15   —     15 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (includes $(1) related to discontinued operations)
  —     —     1   —     1 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Net change in cash, cash equivalents and restricted cash
  —     (383)   (302)   —     (685)   —     (747)   (338)   —     (1,085) 
Cash, cash equivalents and restricted cash at beginning of period
  —     1,461   1,880   —     3,341   —     1,078   1,578   —     2,656 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash at end of period
  —     1,078   1,578   —     2,656   —     331   1,240   —     1,571 
Less cash, cash equivalents and restricted cash of discontinued operations at end of period
  —     —     95   —     95   —     —     —     —     —   
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
Cash, cash equivalents and restricted cash of continuing operations at end of period
 $—    $1,078  $1,483  $—    $2,561  $—    $331  $1,240  $—    $1,571 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
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OurAs of March 31, 2022, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net assets of $14.3 billion and $14.6 billion, respectively. Genworth Financial’s and Genworth Holdings’ insurance company subsidiaries are restrictedsubject to oversight by stateapplicable insurance laws and regulations as to the amount of dividends they may pay to their parent without regulatory approval in any year, the purpose of which is to protect affected insurance policyholders and contractholders, not stockholders. AnyIn general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. Based on statutory results as of December 31, 2020,2021, in accordance with applicable dividend restrictions, our subsidiariesEnact Holdings could pay ordinary dividends of approximately $190$70 million to us in 2021,2022, and the remaining net assets are considered restricted. While the $190$70 million is considered unrestricted, our insurance subsidiariesEnact Holdings may not pay dividends to us in 2021 at this level as they mayduring 2022 for a variety of reasons, including the need to preserve capital for regulatory purposes, includingfuture growth and capital requirements. Although the business performance and financial results of our U.S. life insurance subsidiaries have improved significantly, as of December 31, 2021, they had negative unassigned surplus of approximately $1.0 billion under statutory accounting and as a result, we do not expect these subsidiaries to meet required capital requirements, and may need to retain capitalpay dividends for future growth. As of June 30, 2021, Genworth Financial’s and Genworth Holdings’ subsidiaries had restricted net assets of $15.0 billion and $15.9 billion, respectively.
In September 2020, the GSEs imposed certain restrictions with respect to capital on our Enact segment. See “Item 2—Enact segment—Trends and conditions” for additional details.
Securitization Entities
There were no
off-balance
sheet securitization transactions during the six months ended June 30, 2021 or 2020.
New Accounting Standards
foreseeable future.
For additional information on Genworth Financial’s capital management plans, including a discussion of recently adopted accounting standards,new share repurchase program, see note 2 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.2—Liquidity and Capital Resources.”
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of the loss of fair value resulting from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. There were no material changes in our market risks since December 31, 2020.2021. See “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of recent market conditions, including changes in interest rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of June 30, 2021,March 31, 2022, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.March 31, 2022.
Changes in Internal Control Over Financial Reporting During the Quarter Ended June 30, 2021March 31, 2022
During the three months ended June 30, 2021,March 31, 2022, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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PART II—OTHER INFORMATION
 
Item 1.
1. Legal Proceedings
See note 11 in our unaudited condensed consolidated financial statements under “Part 1—Item 1—Financial Statements” for a description of material pending litigation and regulatory matters affecting us.
 
Item 1A.
1A. Risk Factors
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 20202021 Annual Report on Form
10-K,
which together describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. There have been no material changes to the risk factors set forth in the above-referenced filing as of June 30, 2021.March 31, 2022.
 
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Item 6. Exhibits
 
Number
  
Description
3.2Amended and Restated Bylaws of Genworth Financial, Inc., dated as of May 20, 2021 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on May 21, 2021)
10.1§2021 Genworth Financial, Inc. Omnibus Incentive Plan (filed herewith)
10.2§Separation Agreement and Release, dated January 25, 2021, between Genworth Financial, Inc. and Kevin Schneider (filed herewith)
10.3Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 26, 2021)
31.1  Certification of Thomas J. McInerney (filed herewith)
31.2  Certification of Daniel J. Sheehan IV (filed herewith)
32.1  Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code— Thomas J. McInerney (filed herewith)
32.2  Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code— Daniel J. Sheehan IV (filed herewith)
101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema Document
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB  XBRL Taxonomy Extension Label Linkbase Document
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document
104  Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)
 
§
Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  
GENWORTH FINANCIAL, INC.
(Registrant)
Date: AugustMay 5, 2021
2022  
By:
/s/    Jerome T. Upton
  
By:
/s/ Matthew D. Farney
Matthew D. FarneyJerome T. Upton
Senior Vice President and Controller
(Principal Accounting Officer)
 
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