0001276520 gnw:PacificMember us-gaap:FairValueInputsLevel3Member us-gaap:FinancialServicesSectorMember us-gaap:FixedMaturitiesMember us-gaap:DomesticCorporateDebtSecuritiesMember 2023-06-30CommercialLoanMember 2022-12-31 0001276520 gnw:NetInvestmentIncomeMember 2023-04-01 2023-06-30srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember us-gaap:AccountingStandardsUpdate201812Member 2022-01-01 2022-09-30
Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
FORM 10-Q
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2023
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
 
 
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
(Zip Code)
(Address of principal executive offices)
 
(Zip Code)
(804)
281
-
(804) 281-6000600
0
(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  ☒
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 August 3,November
2
, 2023, 463,087,315451,004,727 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
  
Page
Item 1. 
Financial Statements
   3 
 
Condensed Consolidated Balance Sheets as of JuneSeptember 30, 2023 and December 31, 2022 (Unaudited)
   3 
 
Condensed Consolidated Statements of Income for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 (Unaudited)
   4 
 
Condensed Consolidated Statements of Comprehensive Income for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 (Unaudited)
   5 
 
Condensed Consolidated Statements of Changes in Equity for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 (Unaudited)
   6 
 
Condensed Consolidated Statements of Cash Flows for the sixnine months ended JuneSeptember 30, 2023 and 2022 (Unaudited)
   8 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
   9 
Item 2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   99 
Item 3. 
Quantitative and Qualitative Disclosures About Market Risk
   159161 
Item 4. 
Controls and Procedures
   160161 
PART II—OTHER INFORMATION
  
Item 1. 
Legal Proceedings
   161162 
Item 1A. 
Risk Factors
   161162 
Item 2. 
Unregistered Sales of Equity Securities and Use of Proceeds
   161162 
Item 5. 
Other Information
   161162 
Item 6. 
Exhibits
   162163 
Signatures   163164 
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)
 
   
June 30,
2023
  
December 31,
2022
 
      
(As adjusted)
 
Assets         
Investments:         
Fixed maturity securities available-for-sale, at fair value (amortized cost of $49,864 and $50,834, respectively, and allowance for credit losses of $4 and $—, respectively, as of June 30, 2023 and December 31, 2022)  $46,070  $46,583 
Equity securities, at fair value   378   319 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of June 30, 2023 and December 31, 2022)   6,876   7,032 
Less: Allowance for credit losses   (24)   (22) 
          
Commercial mortgage loans, net   6,852   7,010 
Policy loans   2,270   2,139 
Limited partnerships   2,585   2,331 
Other invested assets   648   566 
          
Total investments   58,803   58,948 
Cash, cash equivalents and restricted cash   2,173   1,799 
Accrued investment income   553   643 
Deferred acquisition costs   2,096   2,211 
Intangible assets   201   203 
Reinsurance recoverable   19,113   19,059 
Less: Allowance for credit losses   (64)   (63) 
          
Reinsurance recoverable, net   19,049   18,996 
Other assets   445   488 
Deferred tax asset   1,954   1,983 
Market risk benefit assets   37   26 
Separate account assets   4,533   4,417 
          
Total assets  $89,844  $89,714 
          
Liabilities and equity         
Liabilities:         
Future policy benefits  $56,443  $55,407 
Policyholder account balances   15,922   16,564 
Market risk benefit liabilities   666   748 
Liability for policy and contract claims   628   683 
Unearned premiums   175   203 
Other liabilities   1,607   1,687 
Long-term borrowings   1,601   1,611 
Separate account liabilities   4,533   4,417 
Liabilities related to discontinued operations   2   8 
          
Total liabilities   81,577   81,328 
          
Commitments and contingencies (Note 18)       
Equity:         
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 603 million and 600 million shares issued as of June 30, 2023 and December 31, 2022, respectively; 467 million and 495 million shares outstanding as of June 30, 2023 and December 31, 2022, respectively   1   1 
Additional paid-in capital   11,869   11,869 
Accumulated other comprehensive income (loss)   (2,861)   (2,614) 
Retained earnings   1,398   1,139 
Treasury stock, at cost (136 million and 105 million shares as of June 30, 2023 and December 31, 2022, respectively)   (2,947)   (2,764) 
          
Total Genworth Financial, Inc.’s stockholders’ equity   7,460   7,631 
Noncontrolling interests   807   755 
          
Total equity   8,267   8,386 
          
Total liabilities and equity  $89,844  $89,714 
          
   
September 30,
2023
  
December 31,
2022
 
      
(As adjusted)
 
Assets         
Investments:         
Fixed maturity securities
available-for-sale,
at fair value (amortized cost of $49,855 and $50,834, respectively, and allowance for credit losses of $6 and $—, respectively, as of September 30, 2023 and December 31, 2022)
  $43,968  $46,583 
Equity securities, at fair value   363   319 
Commercial mortgage loans (net of unamortized balance of loan origination fees and costs of $4 as of September 30, 2023 and December 31, 2022)   6,818   7,032 
Less: Allowance for credit losses   (25)   (22) 
          
Commercial mortgage loans, net   6,793   7,010 
Policy loans   2,233   2,139 
Limited partnerships   2,699   2,331 
Other invested assets   645   566 
          
Total investments   56,701   58,948 
Cash, cash equivalents and restricted cash   1,993   1,799 
Accrued investment income   620   643 
Deferred acquisition costs   2,042   2,211 
Intangible assets   199   203 
Reinsurance recoverable   17,623   19,059 
Less: Allowance for credit losses   (28)   (63) 
          
Reinsurance recoverable, net   17,595   18,996 
Other assets   453   488 
Deferred tax asset   1,580   1,983 
Market risk benefit assets   39   26 
Separate account assets   4,244   4,417 
          
Total assets  $85,466  $89,714 
          
Liabilities and equity         
Liabilities:         
Future policy benefits  $51,740  $55,407 
Policyholder account balances   15,590   16,564 
Market risk benefit liabilities   579   748 
Liability for policy and contract claims   631   683 
Unearned premiums   162   203 
Other liabilities   2,038   1,687 
Long-term borrowings   1,602   1,611 
Separate account liabilities   4,244   4,417 
Liabilities related to discontinued operations   2   8 
          
Total liabilities   76,588   81,328 
          
Commitments and contingencies (Note 19)       
Equity:         
Class A common stock, $0.001 par value; 1,500,000,000 shares authorized; 603,151,611 and 600,036,269 shares issued as of September 30, 2023 and December 31, 2022, respectively; 452,722,552 and 495,446,960 shares outstanding as of September 30, 2023 and December 31, 2022, respectively   1   1 
Additional
paid-in
capital
   11,877   11,869 
Accumulated other comprehensive income (loss)   (2,220)   (2,614) 
Retained earnings   1,426   1,139 
Treasury stock, at cost (150,429,059 and 104,589,309 shares as of September 30, 2023 and December 31, 2022, respectively)   (3,028)   (2,764) 
          
Total Genworth Financial, Inc.’s stockholders’ equity   8,056   7,631 
Noncontrolling interests   822   755 
          
Total equity   8,878   8,386 
          
Total liabilities and equity  $85,466  $89,714 
          
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,
 
 
 
2023
  
2022
  
2023
  
2022
 
     
(As Adjusted)
     
(As Adjusted)
 
Revenues:                
Premiums $902  $916  $1,817  $1,833 
Net investment income  785   787   1,572   1,551 
Net investment gains (losses)  39   19   28   61 
Policy fees and other income  166   165   329   335 
                 
Total revenues  1,892   1,887   3,746   3,780 
                 
Benefits and expenses:                
Benefits and other changes in policy reserves  1,175   768   2,351   1,935 
Liability remeasurement (gains) losses  70   24   55   (40) 
Changes in fair value of market risk benefits and associated hedges  (19)   20   (2)   (21) 
Interest credited  126   126   252   251 
Acquisition and operating expenses, net of deferrals  226   579   466   815 
Amortization of deferred acquisition costs and intangibles  64   84   136   172 
Interest expense  29   26   58   52 
                 
Total benefits and expenses  1,671   1,627   3,316   3,164 
                 
Income from continuing operations before income taxes  221   260   430   616 
Provision for income taxes  55   62   110   146 
                 
Income from continuing operations  166   198   320   470 
Income (loss) from discontinued operations, net of taxes  2   (1)   2   (3) 
                 
Net income  168   197   322   467 
Less: net income from continuing operations attributable to noncontrolling interests  31   38   63   68 
Less: net income from discontinued operations attributable to noncontrolling interests  —     —     —     —   
                 
Net income available to Genworth Financial, Inc.’s common stockholders $137  $159  $259  $399 
                 
Net income available to Genworth Financial, Inc.’s common stockholders:                
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders $135  $160  $257  $402 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders  2   (1)   2   (3) 
                 
Net income available to Genworth Financial, Inc.’s common stockholders $137  $159  $259  $399 
                 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:                
Basic $0.28  $0.32  $0.53  $0.79 
                 
Diluted $0.28  $0.31  $0.53  $0.78 
                 
Net income available to Genworth Financial, Inc.’s common stockholders per share:                
Basic $0.29  $0.31  $0.54  $0.79 
                 
Diluted $0.29  $0.31  $0.53  $0.77 
                 
Weighted-average common shares outstanding:                
Basic  473.2   508.9   482.7   508.6 
                 
Diluted  478.1   514.1   489.1   515.7 
                 
  
Three months ended
September 30,
  
Nine months ended
September 30,
 
  
2023
  
2022
  
2023
  
2022
 
     
(As Adjusted)
     
(As Adjusted)
 
Revenues:    
Premiums $915  $929  $2,732  $2,762 
Net investment income  801   808   2,373   2,359 
Net investment gains (losses)  (43)   (58)   (15)   3 
Policy fees and other income  158   169   487   504 
                
Total revenues  1,831   1,848   5,577   5,628 
                
Benefits and expenses:    
Benefits and other changes in policy reserves  1,199   1,159   3,550   3,094 
Liability remeasurement (gains) losses  116   17   171   (23) 
Changes in fair value of market risk benefits and associated hedges  (24)   (27)   (26)   (48) 
Interest credited  127   128   379   379 
Acquisition and operating expenses, net of deferrals  228   245   694   1,060 
Amortization of deferred acquisition costs and intangibles  65   80   201   252 
Interest expense  30   26   88   78 
                
Total benefits and expenses  1,741   1,628   5,057   4,792 
                
Income from continuing operations before income taxes  90   220   520   836 
Provision for income taxes  30   54   140   200 
                
Income from continuing operations  60   166   380   636 
Income from discontinued operations, net of taxes  —    5   2   2 
                
Net income  60   171   382   638 
Less: net income from continuing operations attributable to noncontrolling interests  31   35   94   103 
Less: net income from discontinued operations attributable to noncontrolling interests  —    —    —    —  
                
Net income available to Genworth Financial, Inc.’s common stockholders $29  $136  $288  $535 
                
Net income available to Genworth Financial, Inc.’s common stockholders:    
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders $29  $131  $286  $533 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders  —    5   2   2 
                
Net income available to Genworth Financial, Inc.’s common stockholders $29  $136  $288  $535 
                
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:    
Basic $0.06  $0.26  $0.60  $1.05 
                
Diluted $0.06  $0.26  $0.59  $1.04 
                
Net income available to Genworth Financial, Inc.’s common stockholders per share:    
Basic $0.06  $0.27  $0.61  $1.05 
                
Diluted $0.06  $0.27  $0.60  $1.04 
                
Weighted-average common shares outstanding:    
Basic  460.5   503.8   475.3   507.0 
                
Diluted  466.0   509.3   481.4   513.6 
                
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,
 
   
2023
  
2022
  
2023
  
2022
 
      
(As adjusted)
     
(As adjusted)
 
Net income  $168  $197  $322  $467 
Other comprehensive income (loss), net of taxes:                 
Net unrealized gains (losses) on securities without an allowance for credit losses   (567)   (3,697)   358   (7,664) 
Net unrealized gains (losses) on securities with an allowance for credit losses   6   —     —     —   
Derivatives qualifying as hedges   (120)   (344)   (46)   (580) 
Change in discount rate used to measure future policy benefits   664   5,280   (561)   10,751 
Change in instrument-specific credit risk of market risk benefits   —     1   1   3 
Foreign currency translation and other adjustments   4   (7)   8   (12) 
                  
Total other comprehensive income (loss)   (13)   1,233   (240)   2,498 
                  
Total comprehensive income   155   1,430   82   2,965 
Less: comprehensive income (loss) attributable to noncontrolling interests   26   10   70   (1) 
                  
Total comprehensive income available to Genworth Financial, Inc.’s common
stockholders		  $129  $1,420  $12  $2,966 
                  
   
Three months ended
September 30,
  
Nine months ended
September 30,
 
   
2023
  
2022
  
2023
  
2022
 
      
(As adjusted)
     
(As adjusted)
 
Net income  $60  $171  $382  $638 
Other comprehensive income (loss), net of taxes:     
Net unrealized gains (losses) on securities without an allowance for credit losses   (1,732)   (2,517)   (1,374)   (10,181) 
Net unrealized gains (losses) on securities with an allowance for credit losses   —    —    —    —  
Derivatives qualifying as hedges   (427)   (135)   (473)   (715) 
Change in discount rate used to measure future policy benefits   2,790   3,282   2,229   14,033 
Change in instrument-specific credit risk of market risk benefits   3   1   4   4 
Foreign currency translation and other adjustments   (3)   —    5   (12) 
                 
Total other comprehensive income (loss)   631   631   391   3,129 
                 
Total comprehensive income   691   802   773   3,767 
Less: comprehensive income attributable to noncontrolling interests   21   10   91   9 
                 
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders  $670  $792  $682  $3,758 
                 
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, 2023
 
  
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, 2023 $1  $11,863  $(2,853)  $1,261  $(2,833)  $7,439  $793  $8,232 
Repurchase of subsidiary shares  
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   (8)   (8) 
Comprehensive income (loss):                                
Net income  
—
  
   
—
  
   
—
  
   137   
—
  
   137   31   168 
Other comprehensive loss, net of taxes  
—
  
   
—
  
   (8)   
—
  
   
—
  
   (8)   (5)   (13) 
                                 
Total comprehensive income                      129   26   155 
Treasury stock acquired in connection with share repurchases  
—
  
   
—
  
   
—
  
   
—
  
   (114)   (114)   
—
  
   (114) 
Dividends to noncontrolling interests  
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   (5)   (5) 
Stock-based compensation expense and exercises and other  
—
  
   6   
—
  
   
—
  
   —   6   1   7 
                                 
Balances as of June 30, 2023 $1  $11,869  $(2,861)  $1,398  $(2,947)  $7,460  $807  $8,267 
                                 

  
Three months ended June 30, 2022
 
  
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, 2022 (as adjusted) $1  $11,857  $(4,549)  $465  $(2,700)  $5,074  $745  $5,819 
Comprehensive income (loss):                                
Net income  
—
  
   
—
  
   
—
  
   159   
—
  
   159   38   197 
Other comprehensive income (loss), net
of taxes		  
—
  
   
—
  
   1,261   
—
  
   
—
  
   1,261   (28)   1,233 
                                 
Total comprehensive income                      1,420   10   1,430 
Treasury stock acquired in connection with share repurchases  
—
  
   
—
  
   
—
  
   
—
  
   (15)   (15)   
—
  
   (15) 
Dividends to noncontrolling interests  
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   
—
  
   (4)   (4) 
Stock-based compensation expense and exercises and other  
—
  
   2   
—
  
   
—
  
   —   2   
—
  
   2 
                                 
Balances as of June 30, 2022 (as adjusted) $1  $11,859  $(3,288)  $624  $(2,715)  $6,481  $751  $7,232 
                                 
  
Three months ended September 30, 2023
 
  
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 June 30, 2023 $1  $11,869  $(2,861)  $1,398  $(2,947)  $7,460  $807  $8,267 
Repurchase of subsidiary shares  —    —    —    —    —    —    (1)   (1) 
Comprehensive income (loss):        
Net income  —    —    —    29   —    29   31   60 
Other comprehensive income (loss), net of taxes  —    —    641   —    —    641   (10)   631 
                 
Total comprehensive income       670   21   691 
Treasury stock acquired in connection with share repurchases  —    —    —    —    (81)   (81)   —    (81) 
Dividends to noncontrolling interests  —    —    —    —    —    —    (5)   (5) 
Stock-based compensation expense and exercises and other  —    8   —    (1)   —    7   —    7 
                                
Balances as of September 30, 2023 $1  $11,877  $(2,220)  $1,426  $(3,028)  $8,056  $822  $8,878 
                                
  
Three months ended September 30, 2022
 
  
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 June 30, 2022 (as adjusted) $1  $11,859  $(3,288)  $624  $(2,715)  $6,481  $751  $7,232 
Comprehensive income (loss):        
Net income  —    —    —    136   —    136   35   171 
Other comprehensive income (loss), net of taxes  —    —    656   —    —    656   (25)   631 
                 
Total comprehensive income       792   10   802 
Treasury stock acquired in connection with share repurchases  —    —    —    —    (19)   (19)   —    (19) 
Dividends to noncontrolling interests  —    —    —    —    —    —    (4)   (4) 
Stock-based compensation expense and exercises and other  —    6   —    —    —    6   1   7 
                                
Balances as of September 30, 2022 (as adjusted) $1  $11,865  $(2,632)  $760  $(2,734)  $7,260  $758  $8,018 
                                
 
6
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY, CONTINUED
(Amounts in millions)
(Unaudited)
 
  
Six months ended June 30, 2023
 
  
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, 2022 (as adjusted) $1  $11,869  $(2,614)  $1,139  $(2,764)  $7,631  $755  $8,386 
Repurchase of subsidiary shares  —     —     —     —     —     —     (12)   (12) 
Comprehensive income (loss):                                
Net income  —     —     —     259   —     259   63   322 
Other comprehensive income (loss), net of taxes  —     —     (247)   —     —     (247)   7   (240) 
                                 
Total comprehensive income                      12   70   82 
Treasury stock acquired in connection with share repurchases  —     —     —     —     (183)   (183)   —     (183) 
Dividends to noncontrolling interests  —     —     —     —     —     —     (9)   (9) 
Stock-based compensation expense and exercises and other  —     —     —     —     —     —     3   3 
                                 
Balances as of June 30, 2023 $1  $11,869  $(2,861)  $1,398  $(2,947)  $7,460  $807  $8,267 
                                 
  
Six months ended June 30, 2022
 
  
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, 2021 (as adjusted) $1  $11,858  $(5,855)  $225  $(2,700)  $3,529  $756  $4,285 
Comprehensive income (loss):                                
Net income  —     —     —     399   —     399   68   467 
Other comprehensive income (loss), net of taxes  —     —     2,567   —     —     2,567   (69)   2,498 
                       
Total comprehensive income (loss)                      2,966   (1)   2,965 
Treasury stock acquired in connection with share repurchases  —     —     —     —     (15)   (15)   —     (15) 
Dividends to noncontrolling interests  —     —     —     —     —     —     (4)   (4) 
Stock-based compensation expense and exercises and other  —     1   —     —     —   1   —     1 
                                 
Balances as of June 30, 2022 (as adjusted) $1  $11,859  $(3,288)  $624  $(2,715)  $6,481  $751  $7,232 
                                 
  
Nine months ended September 30, 2023
 
  
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, 2022 (as adjusted) $1  $11,869  $(2,614)  $1,139  $(2,764)  $7,631  $755  $8,386 
Repurchase of subsidiary shares  —    —    —    —    —    —    (13)   (13) 
Comprehensive income (loss):        
Net income  —    —    —    288   —    288   94   382 
Other comprehensive income (loss), net of taxes  —    —    394   —    —    394   (3)   391 
                 
Total comprehensive income       682   91   773 
Treasury stock acquired in connection with share repurchases  —    —    —    —    (264)   (264)   —    (264) 
Dividends to noncontrolling interests  —    —    —    —    —    —    (14)   (14) 
Stock-based compensation expense and exercises and other  —    8   —    (1)   —    7   3   10 
                                
Balances as of September 30, 2023 $1  $11,877  $(2,220)  $1,426  $(3,028)  $8,056  $822  $8,878 
                                
  
Nine months ended September 30, 2022
 
  
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, 2021 (as adjusted) $1  $11,858  $(5,855)  $225  $(2,700)  $3,529  $756  $4,285 
Comprehensive income (loss):        
Net income  —    —    —    535   —    535   103   638 
Other comprehensive income (loss), net of taxes  —    —    3,223   —    —    3,223   (94)   3,129 
                 
Total comprehensive income       3,758   9   3,767 
Treasury stock acquired in connection with share repurchases  —    —    —    —    (34)   (34)   —    (34) 
Dividends to noncontrolling interests  —    —    —    —    —    —    (8)   (8) 
Stock-based compensation expense and exercises and other  —    7   —    —    —    7   1   8 
                                
Balances as of September 30, 2022 (as adjusted) $1  $11,865  $(2,632)  $760  $(2,734)  $7,260  $758  $8,018 
                                
See Notes to Condensed Consolidated Financial Statements
 
7
Table of Contents
GENWORTH FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
 
   
Six months ended
June 30,
 
   
2023
  
2022
 
      
(As adjusted)
 
Cash flows from (used by) operating activities:         
Net income  $322  $467 
Less (income) loss from discontinued operations, net of taxes   (2)   3 
Adjustments to reconcile net income to net cash from operating activities:         
Amortization of fixed maturity securities discounts and premiums   (58)   (84) 
Net investment (gains) losses   (28)   (61) 
Changes in fair value of market risk benefits and associated hedges   (2)   (21) 
Charges assessed to policyholders   (291)   (289) 
Acquisition costs deferred   (4)   (7) 
Amortization of deferred acquisition costs and intangibles   136   172 
Deferred income taxes   107   143 
Derivative instruments, limited partnerships and other   (222)   (163) 
Stock-based compensation expense   25   20 
Change in certain assets and liabilities:         
Accrued investment income and other assets   (66)   (71) 
Insurance reserves   525   641 
Other liabilities, policy and contract claims and other policy-related balances   (165)   (382) 
Cash used by operating activities—discontinued operations   (2)   (31) 
          
Net cash from operating activities   275   337 
          
Cash flows from (used by) investing activities:         
Proceeds from maturities and repayments of investments:         
Fixed maturity securities   1,144   1,495 
Commercial mortgage loans   269   314 
Limited partnerships and other invested assets   67   99 
Proceeds from sales of investments:         
Fixed maturity and equity securities   1,289   1,302 
Purchases and originations of investments:         
Fixed maturity and equity securities   (1,443)   (1,800) 
Commercial mortgage loans   (113)   (568) 
Limited partnerships and other invested assets   (301)   (297) 
Short-term investments, net   (7)   (24) 
Policy loans, net   32   14 
Other   (20)   —   
          
Net cash from investing activities   917   535 
          
Cash flows from (used by) financing activities:         
Deposits to universal life and investment contracts   303   314 
Withdrawals from universal life and investment contracts   (893)   (779) 
Repayment and repurchase of long-term debt   (11)   (130) 
Repurchase of subsidiary shares   (12)   —   
Treasury stock acquired in connection with share repurchases   (181)   (15) 
Dividends paid to noncontrolling interests   (9)   (4) 
Other, net   (15)   (105) 
          
Net cash used by financing activities   (818)   (719) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash   —     —   
          
Net change in cash, cash equivalents and restricted cash   374   153 
Cash, cash equivalents and restricted cash at beginning of period   1,799   1,571 
          
Cash, cash equivalents and restricted cash at end of period   2,173   1,724 
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  $2,173  $1,724 
          
   
Nine months ended
September 30,
 
   
2023
  
2022
 
      
(As adjusted)
 
Cash flows from (used by) operating activities:   
Net income  $382  $638 
Less income from discontinued operations, net of taxes   (2)   (2) 
Adjustments to reconcile net income to net cash from operating activities:   
Amortization of fixed maturity securities discounts and premiums   (84)   (127) 
Net investment (gains) losses   15   (3) 
Changes in fair value of market risk benefits and associated hedges   (26)   (48) 
Charges assessed to policyholders   (430)   (438) 
Acquisition costs deferred   (6)   (10) 
Amortization of deferred acquisition costs and intangibles   201   252 
Deferred income taxes   135   200 
Derivative instruments, limited partnerships and other   (378)   (250) 
Stock-based compensation expense   37   29 
Change in certain assets and liabilities:   
Accrued investment income and other assets   (124)   (105) 
Insurance reserves   903   995 
Current tax liabilities   (5)   (4) 
Other liabilities, policy and contract claims and other policy-related balances   (166)   (451) 
Cash used by operating activities—discontinued operations   (2)   (31) 
         
Net cash from operating activities   450   645 
         
Cash flows from (used by) investing activities:   
Proceeds from maturities and repayments of investments:   
Fixed maturity securities   1,676   2,154 
Commercial mortgage loans   386   514 
Limited partnerships and other invested assets   102   146 
Proceeds from sales of investments:   
Fixed maturity and equity securities   1,533   2,061 
Purchases and originations of investments:   
Fixed maturity and equity securities   (2,187)   (3,222) 
Commercial mortgage loans   (178)   (765) 
Limited partnerships and other invested assets   (432)   (491) 
Short-term investments, net   (15)   24 
Policy loans, net   66   31 
Other   (38)   —  
         
Net cash from investing activities   913   452 
         
Cash flows from (used by) financing activities:   
Deposits to universal life and investment contracts   437   466 
Withdrawals from universal life and investment contracts   (1,308)   (1,190) 
Repayment and repurchase of long-term debt   (11)   (284) 
Repurchase of subsidiary shares   (13)   —  
Treasury stock acquired in connection with share repurchases   (261)   (34) 
Dividends paid to noncontrolling interests   (14)   (8) 
Other, net   —    (57) 
         
Net cash used by financing activities   (1,170)   (1,107) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash   1   —  
         
Net change in cash, cash equivalents and restricted cash   194   (10) 
Cash, cash equivalents and restricted cash at beginning of period   1,799   1,571 
         
Cash, cash equivalents and restricted cash at end of period   1,993   1,561 
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  $1,993  $1,561 
         
See Notes to Condensed Consolidated Financial Statements
 
8
Table of Contents
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 of its 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 its affiliate companies in which it holds a majority voting interest or power to direct activities of certain variable interest entities (“VIEs”), 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. References to “Genworth Financial” refer solely to Genworth Financial, Inc., and not to any of its consolidated subsidiaries.
Beginning in the first quarter of 2023, we changed our operating segments to better align with how we manage our business. The changes allow us to sharpen our focus on common aspects of products within each segment and enhance understanding of business performance. All prior period financial information has been
re-presented
to reflect the reorganized segment reporting structure. Under the new reporting structure, we operate our business through the following three operating segments:
 
Enact.
Our 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”). Enact Holdings also selectively enters into insurance transactions with lenders and investors, under which it insures a portfolio of loans at or after origination (“pool mortgage insurance”).
 
Long-Term Care Insurance.
Through our principal U.S. life insurance subsidiaries, we offer long-term care insurance products in the United States. Long-term care insurance products are intended to protect against the significant and escalating costs of long-term care services provided in the insured’s home or assisted living or nursing facilities.
 
Life and Annuities.
We service a variety of protection and retirement income products through our principal U.S. life insurance subsidiaries that are not actively marketed or sold. These products include traditional and
non-traditional
life insurance (term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities, which include variable life insurance.
In addition to our three operating segments, we also have Corporate and Other, which includes 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 reported outside of our operating segments, such as certain international businesses and discontinued operations. Corporate and Other also includes
start-up
results related to
fee-based
services, care support and advice, clinical assessments and consulting offered by CareScout LLC (“CareScout”) to advance our senior care growth initiatives.
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
 
9
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
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 2022 Annual Report on Form
10-K.
Certain prior year amounts have been reclassified to conform to the current year presentation.
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. On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under the existing share repurchase program. Pursuant to the program, during the sixnine months ended JuneSeptember 30, 2023, Genworth Financial repurchased 31,771,97245,839,750 shares of its common stock at an average price of $5.67$5.68 per share for a total cost of $183$264 million, including excise taxes and other costs paid in connection with acquiring the shares. The repurchased shares were recorded at cost and presented as treasury stock in a separate caption in equity in our condensed consolidated balance sheets. Genworth Financial also authorized share repurchases through a Rule
10b5-1
trading plan under which 3,703,0151,717,825 shares of its common stock were repurchased during JulyOctober 2023 at an average price of $5.40$5.82 per share for a total cost of $20$10 million before excise taxes. On
J
u
l
y
3
1
, 2023, Genworth Financial’s Board of Directors authorized an additional $350taxes, leaving approximately $366 million of share repurchases under the
existing share repurchase
program, increasing the remaining authorized amount remaining under
the
share repurchase program to approximately $436 million.as of October 31, 2023. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, including through Rule
10b5-1
trading plans. The timing and number of future shares repurchased under the share repurchase program will 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.
Immaterial Correction of Prior Period Financial Statements
In the second quarter of 2023, we corrected the measurement of the liability for future policy benefits for our long-term care insurance products under new accounting guidance for long-duration insurance contracts, commonly known as long-duration targeted improvements (“LDTI”), to include an estimate in our cash flow assumptions for cash payments made to policyholders who elect certain reduced benefit options in connection with legal settlements, referred to herein as settlement payments. The inclusion of an estimate for these settlement payments in the cash flow assumptions used to measure the liability for future policy benefits is consistent with our treatment of benefit reductions related to legal settlements, which are also included in our cash flow assumptions used to measure the liability for future policy benefits under LDTI. Under the revised accounting treatment, actual settlement payments will be reflected in benefits and other changes in policy reserves in our condensed consolidated statements of income. Changes in cash flow assumptions related to the estimate for settlement payments and the impact of actual versus expected experience will be reflected in liability remeasurement (gains) losses in our condensed consolidated statements of income. Estimated fees paid to the class action attorneys are accrued in other liabilities in our condensed consolidated balance sheets in the period the court settlement occurs and are recognized within acquisition and operating expenses, net of deferrals, in our condensed consolidated statements of income.
10
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We have evaluated the effects of the correction on our previously issued financial statements in accordance with accounting guidance issued by the Financial Accounting Standards Board (the “FASB”) related to accounting changes and error corrections and have concluded that the impact of the correction is not material to our condensed consolidated financial statements in any of the prior periods impacted. However, to improve consistency and comparability of the financial statements, we have revised previously reported financial statement line items and related disclosures included herein. Corrections were made to the comparative prior periods presented in our adjusted condensed consolidated financial statements within our March 31, 2023 Form 10-Q and are reflected in the six months ended June 30, 2023 and 2022 results included herein. In addition, comparative prior period amounts in the applicable notes to the condensed consolidated financial statements included herein have been corrected. As LDTI was adopted on January 1, 2023, this correction has no impact to the amounts reported in our previously issued 2022 Annual Report on Form 10-K.
The following table presents the impacted lines of the condensed consolidated balance sheets as of December 31, 2022 and January 1, 2021 (the “Transition Date” for applying LDTI) reflecting the impact of the correction:
   
December 31, 2022 (as adjusted)
  
January 1, 2021 (as adjusted)
 
(Amounts in millions)
  
Previously
reported
  
Correction
impacts
  
As
corrected
  
Previously
reported
  
Correction
impacts
  
As
corrected
 
Assets
       
Deferred tax asset
  $1,968  $15  $1,983  $3,765  $11  $3,776 
Total assets
   89,699   15   89,714   122,335   11   122,346 
Liabilities and equity
       
Liabilities:
       
Future policy benefits
   55,349   58   55,407   84,736   50   84,786 
Other liabilities
   1,675   12   1,687   1,618   —     1,618 
Total liabilities
   81,258   70   81,328   120,219   50   120,269 
Equity:
       
Accumulated other comprehensive income (loss)
   (2,617)   3   (2,614)   (7,126)   18   (7,108) 
Retained earnings
   1,197   (58)   1,139   (569)   (57)   (626) 
Total Genworth Financial, Inc.’s stockholders’ equity
   7,686   (55)   7,631   1,614   (39)   1,575 
Total equity
   8,441   (55)   8,386   2,116   (39)   2,077 
Total liabilities and equity
   89,699   15   89,714   122,335   11   122,346 
As of December 31, 2021, accumulated other comprehensive income (loss) increased to $(5,855) million and retained earnings increased to $225 million due the correction.

11
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the impacted lines and per share amounts in the condensed consolidated statements of income reflecting the impact of the correction for the three months ended March 31:
   
2023 (as adjusted)
  
2022 (as adjusted)
 
(Amounts in millions, except per share amounts)
  
Previously
reported
   
Correction
impacts
  
As
corrected
  
Previously
reported
  
Correction
impacts
  
As
corrected
 
Benefits and other changes in policy reserves
  $1,172   $4  $1,176  $1,165  $2  $1,167 
Liability remeasurement (gains) losses
   22    (37)   (15)   (41)   (23)   (64) 
Acquisition and operating expenses, net of deferrals
   283    (43)   240   280   (44)   236 
Total benefits and expenses
   1,721    (76)   1,645   1,602   (65)   1,537 
Income from continuing operations before income taxes
   133    76   209   291   65   356 
Provision for income taxes
   39    16   55   68   16   84 
Income from continuing operations
   94    60   154   223   49   272 
Net income
   94    60   154   221   49   270 
Net income available to Genworth Financial, Inc.’s common stockholders
   62    60   122   191   49   240 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
        
Basic
   0.13    0.12   0.25   0.38   0.10   0.48 
Diluted
   0.12    0.12   0.24   0.37   0.10   0.47 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
        
Basic
   0.13    0.12   0.25   0.38   0.09   0.47 
Diluted
   0.12    0.12   0.24   0.37   0.09   0.46 
As a result of the correction, adjusted
operating
income available to Genworth Financial, Inc.’s common stockholders for our Long-Term Care Insurance segment for the three months ended March 31, 2023 and 2022 increased to $23 million and $73 million, respectively.
(2) Accounting Changes
Accounting Pronouncements Recently Adopted
On January 1, 2023, we adopted LDTI, whichnew accounting guidance that significantly changed the recognition and
measurement
of long-duration insurance contracts.contracts, commonly known as long-duration targeted improvements (“LDTI”). This new accounting guidance directly impacted deferred acquisition costs (“DAC”), intangible assets and insurance assets and liabilities in our U.S. life insurance companies, and also significantly increased our disclosure requirements. While the new guidance has had a significant impact on existing U.S. GAAP financial statements and disclosures, it does not impact the cash flows or underlying economics of the business, business strategy, statutory net income (loss), risk-based capital of our U.S. life insurance companies, management of capital or our Enact segment and Corporate and Other.
We adopted this new accounting guidance using the modified retrospective transition method for all topics except for market risk benefits (“MRBs”), which was required to be applied using the retrospective transition method. The modified retrospective transition method generally results in applying the guidance to contracts on the basis of existing carrying values as of the Transition Date.January 1, 2021 (the “Transition Date”). The new accounting guidance, for all topics, was applied as of the Transition Date with an adjustment to beginning retained earnings and accumulated other comprehensive income (loss). In addition, prior period financial information has been
re-presented
in accordance
 
1
2
10
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
with the new accounting standard. As of the Transition Date, we decreased total stockholders’ equity by $$13.7 billion
after-tax.
13.7 billion after-tax. The total decrease to stockholders’ equity included a reduction to retained earnings of $2.2 billion and a reduction in accumulated other comprehensive income (loss) of $11.5 billion. Our long-term care insurance business was the most significantly impacted from the adoption due to the requirement to remeasure the liability for future policy benefits and related reinsurance recoverables at the
single-A
bond rate as of the Transition Date, which at that time was materially lower than the
locked-in
discount rate. Refer to note 3 for further information about the cumulative effect adjustment recorded upon adoption of this new accounting guidance.
As a result of adopting this new accounting guidance, our insurance assets and liabilities have been sensitive to movements in interest rates, which will likely result in continued volatility to our stockholders’ equity. Refer to note 1920 for additional detail related to the impact changes in interest rates have had on our accumulated other comprehensive income (loss) resulting from updating the discount rate used to measure the liability for future policy benefits and related reinsurance recoverables.
The key areas of change introduced by the adoption of LDTI and the related effect to our accounting policies are summarized in the table below. Less significant accounting policy changes from adopting LDTI are not included in the below table.
 
Key Area Impacted
  
Change to Accounting Policy
  
Policy Elections and Other Significant Matters
DAC and balances amortized on a basis consistent with DAC, including intangible assets and cost of reinsurance  DAC associated with long-duration insurance contracts is grouped into cohorts consistent with groupings used to estimate the related liability for future policy benefits and is amortized on a constant level basis over the expected contract term, which approximates straight-line. Assumptions used to amortize DAC are consistent with the assumptions used to estimate the liability for future policy benefits. Revised assumptions are recognized prospectively over the remaining term of the related contract. DAC and balances amortized on a basis consistent with DAC are no longer subject to impairment, shadow adjustments or recoverability testing; however, present value of future profits (“PVFP”) is still assessed for recoverability in connection with premium deficiency testing.  
The constant level basis we use to amortize DAC by product is as follows:
 
•  long-term care insurance—insurance – total life count
 
•  life insurance—insurance – face amount
 
•  fixed and variable annuities—annuities – policy count
We apply the amortization rate at the beginning of the current reporting period, which reflects assumption updates, if applicable, and actual experience through the end of the current reporting period.
 
We have elected to amortize intangible assets associated with investment contracts, such as PVFP, in a manner consistent with DAC.
 
Cost of reinsurance is deferred and amortized in a manner consistent with DAC over the terms of the related reinsurance treaties.
13
11
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Key Area Impacted
  
Change to Accounting Policy
  
Policy Elections and Other Significant Matters
MRBs, which include contracts or contract features that protect the policyholder’s account balance and expose the insurer to other-than-nominal capital market risk, such as guaranteed minimum death benefits (“GMDBs”), guaranteed minimum withdrawal benefits (“GMWBs”) and guaranteed payout annuity floor benefits (“GPAFs”)  MRBs are measured at fair value with changes related to instrument-specific credit risk recorded as a separate component in accumulated other comprehensive income (loss) and remaining changes recorded in net income (loss).  For additional details, see notes 7 and 13.
Liability for future policy benefits—benefits – level of aggregation  For the purpose of calculating the net premium ratio used to measure the liability for future policy benefits, long-duration insurance contracts are grouped into annual cohorts on the basis of original contract issue date. For acquired contracts, the acquisition date is considered the original contract issue date. The net premium ratio for long-duration traditional and limited paymentlimited-payment contracts is the ratio of expected benefits less the existing carrying value of reserves to gross premiums.  Traditional and limited-payment long-duration insurance contracts are generally grouped into annual calendar-year cohorts based on the contract issue date, product type and company. Limited-payment contracts are grouped into cohorts separately from other traditional products and riders are combined with the associated base policies. Certain products may also be grouped by acquisition date for acquired contracts and reinsurance treaty effective date for reinsurance recoverables.
14
12
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Key Area Impacted
  
Change to Accounting Policy
  
Policy Elections and Other Significant Matters
Liability for future policy benefits—benefits – cash flow assumptions  
All cash flow assumptions used to estimate the liability for future policy benefits (including health care experience, policyholder persistency or lapses (i.e., the probability that a policy or contract will remain
in-force
from one period to the next), insured mortality (i.e., life expectancy or longevity), insured morbidity (i.e., frequency and severity of claim, including claim termination rates and benefit utilization rates), and benefit reductions associated with our long-term care insurance
in-force
rate actions and legal settlements as well as cash payments made to policyholders electingwho elect certain reduced benefitsbenefit options in connection with legal settlements)settlements, referred to as settlement payments) are reviewed at least annually in the same period each year or more frequently if actual experience indicates a change is required. Changes in cash flow assumptions are recorded using a retrospective approach with a cumulative
catch-up
adjustment by recalculating the net premium ratio (which is capped at 100%) using actual historical and updated future cash flow assumptions. The liability for future policy benefits is recalculated using the revised net premium ratio and
locked-in
discount rate as of the beginning of the current reporting period and compared to the carrying amount as of the beginning of the current reporting period using the previous net premium ratio and
locked-in
discount rate, with any difference recorded as a remeasurement gain (loss).
 
Cash flow assumptions no longer reflect a provision for adverse deviation, and the premium deficiency test and shadow adjustments are eliminated.
  
We calculate a single liability for future policy benefits and therefore, all cash flows, including benefit payments (such as claims in course of settlement and incurred claims) are aggregated. As a result, our U.S. life insurance companies elected to combine their previously disclosed liability for policy and contract claims, excluding amounts related to certain life and annuity products not subject to the new accounting guidance, within the liability for future policy benefits and present the aggregate liability as one line item in our condensed consolidated balance sheets.
 
Cash flow assumptions will be formally reviewed and updated as necessary based on experience studies in the fourth quarter each year. We elected to update the net premium ratio quarterly for actual versus expected experience; therefore, during interim reporting periods we will replace forecasted cash flow assumptions with actual cash flows with any difference recorded in net income (loss).
 
We made an entity-wide election not to update our expense assumptions and therefore, these assumptions remain
locked-in
at the time of the Transition Date or if issued after the Transition Date, at the time of contract inception.
13
15
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Key Area Impacted
  
Change to Accounting Policy
  
Policy Elections and Other Significant Matters
Liability for future policy benefits—benefits – discount rate assumptions  
The liability for future policy benefits is measured using two different discount rates, a current discount rate and a
locked-in
discount rate.
 
The current discount rate is used to remeasure the liability for future policy benefits recorded in the condensed consolidated balance sheets and is a current upper-medium grade fixed-income instrument yield, commonly interpreted to be a
single-A
rated bond rate, with the same duration as the corresponding liability.
 
The
locked-in
discount rate is used to determine the amounts recorded to net income (loss) and is held constant for the purpose of calculating the net premium ratio and interest accretion. The difference between the liability measured using the
locked-in
rate and the liability measured using the current rate is recorded in accumulated other comprehensive income (loss).
 
For policies
in-force
prior to the Transition Date, the
locked-in
discount rate is equal to the discount rate in effect immediately before the Transition Date. For contracts issued on or after the Transition Date, the
locked-in
discount rate is a
single-A
rated bond rate identified at inception of the contract.
  
The methodology used to determine the current discount rate assumption maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. The current discount rate assumption is based on a
single-A
curve published by a market data service. For cash flows projected beyond the observable curve, we use estimation techniques consistent with Level 3 fair value measurements as defined in noteNote 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form
10-K
to interpolate from the last observable rate to an estimated ultimate long-term rate.
 
For contracts issued on or after the Transition Date, the
locked-in
discount rate for each issue-year cohort is determined as a single discount rate, using the weighted-average monthly
single-A
fixed-income forward curves over the current calendar year.
16
14
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Key Area Impacted
  
Change to Accounting Policy
  
Policy Elections and Other Significant Matters
Liability for future policy benefits—benefits – deferred profit liability  
A deferred profit liability is established for limited-payment products at the time of contract issuance for any amount of gross premiums received in excess of net premiums, which is amortized into net income (loss) in proportion to insurance
in-force
for life insurance products and expected future benefit payments for fixed annuity products. Cash flow assumptions related to the deferred profit liability are consistent with the assumptions used to estimate the related liability for future policy benefits and are updated at the same time.
 
The deferred profit liability is recalculated using updated cash flow assumptions as of the beginning of the current reporting period and compared to the current carrying amount as of the beginning of the current reporting period, with any difference recorded in net income (loss).
  
Policyholder account balances—balances – additional insurance liabilities  
Additional insurance liabilities are established for guarantees or certain product features not classified as MRBs or embedded derivatives. The remeasurement of additional insurance liabilities based on a revised benefit ratio is recorded as liability remeasurement (gains) losses in current period net income (loss).
The calculation of additional insurance liabilities also includes investment performance. Therefore, the impacts from net unrealized investment gains and losses on available
for-sale
investment securities backing additional insurance liabilities are required to be analyzed, as if those unrealized investment gains and losses were realized. These “shadow adjustments” result in the recognition of unrealized gains and losses on additional insurance liabilities in a manner consistent with unrealized gains and losses on
available-for-sale
investment securities, which are recorded in accumulated other comprehensive income (loss).
  Annual premium deficiency testing is still required to be performed for our universal and term universal life insurance products.
17
15
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the impacted lines of the condensed consolidated balance sheet as of December 31, 2022 reflecting the impact of adopting LDTI on January 1, 2023:
(Amounts in millions)
  
As originally
reported
   
Effect of
adopting LDTI
   
As adjusted
 
Assets               
Deferred acquisition costs  $2,200   $11   $2,211 
Intangible assets   241    (38)    203 
Reinsurance recoverable   16,495    2,564    19,059 
Less: Allowance for credit losses   (60)    (3)    (63) 
                
Reinsurance recoverable, net   16,435    2,561    18,996 
Other assets   415    73    488 
Deferred tax asset   1,344    639    1,983 
Market risk benefit assets   —      26    26 
Total assets   86,442    3,272    89,714 
Liabilities and equity               
Liabilities:               
Future policy benefits   38,064    17,343    55,407 
Policyholder account balances   17,113    (549)    16,564 
Market risk benefit liabilities   —      748    748 
Liability for policy and contract claims   12,234    (11,551)    683 
Unearned premiums   584    (381)    203 
Other liabilities   1,672    15    1,687 
Total liabilities   75,703    5,625    81,328 
Equity:               
Accumulated other comprehensive income
(loss)		   (2,220)    (394)    (2,614) 
Retained earnings   3,098    (1,959)    1,139 
Total Genworth Financial, Inc.’s stockholders’ equity   9,984    (2,353)    7,631 
Total equity   10,739    (2,353)    8,386 
Total liabilities and equity   86,442    3,272    89,714 
 
(Amounts in millions)
  
As originally
reported
   
Effect of
adopting LDTI
   
As adjusted
 
Assets      
Deferred acquisition costs  $2,200   $11   $2,211 
Intangible assets   241    (38)    203 
Reinsurance recoverable   16,495    2,564    19,059 
Less: Allowance for credit losses   (60)    (3)    (63) 
               
Reinsurance recoverable, net   16,435    2,561    18,996 
Other assets   415    73    488 
Deferred tax asset   1,344    639    1,983 
Market risk benefit assets   —     26    26 
Total assets   86,442    3,272    89,714 
Liabilities and equity      
Liabilities:      
Future policy benefits   38,064    17,343    55,407 
Policyholder account balances   17,113    (549)    16,564 
Market risk benefit liabilities   —     748    748 
Liability for policy and contract claims   12,234    (11,551)    683 
Unearned premiums   584    (381)    203 
Other liabilities   1,672    15    1,687 
Total liabilities   75,703    5,625    81,328 
Equity:      
Accumulated other comprehensive income (loss)   (2,220)    (394)    (2,614) 
Retained earnings   3,098    (1,959)    1,139 
Total Genworth Financial, Inc.’s stockholders’ equity   9,984    (2,353)    7,631 
Total equity   10,739    (2,353)    8,386 
Total liabilities and equity   86,442    3,272    89,714 
1
8
16
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the impacted lines of the condensed consolidated statements of income for the three and sixnine months ended JuneSeptember 30, 2022 reflecting the impact of adopting LDTI on January 1, 2023:

  
Three months ended June 30, 2022
  
Six months ended June 30, 2022
 
(Amounts in millions, except per share
amounts)
 
As originally
reported
  
Effect of
adopting LDTI
  
As adjusted
  
As originally
reported
  
Effect of
adopting LDTI
  
As adjusted
 
Revenues:
                        
Premiums
 $927  $(11)  $916  $1,858  $(25)  $1,833 
Net investment gains (losses)
  8   11   19   36   25   61 
Policy fees and other income
  159   6   165   328   7   335 
Total revenues
  1,881   6   1,887   3,773   7   3,780 
Benefits and expenses:
                        
Benefits and other changes in policy reserves
  764   4   768   1,903   32   1,935 
Liability remeasurement (gains) losses
  
—
  
   24   24   
—
  
   (40)   (40) 
Changes in fair value of market risk benefits and
associated hedges
  
—
  
   20   20   
—
  
   (21)   (21) 
Interest credited
  125   1   126   250   1   251 
Acquisition and operating expenses, net of deferrals
  589   (10)   579   860   (45)  815 
Amortization of deferred acquisition costs and
intangibles
  84   
—
  
   84   176   (4)   172 
Total benefits and expenses
  1,588   39   1,627   3,241   (77)   3,164 
Income from continuing operations before income
taxes
  293   (33)   260   532   84   616 
Provision for income taxes
  73   (11)   62   131   15   146 
Income from continuing operations
  220   (22)   198   401   69   470 
Net income
  219   (22)   197   398   69   467 
Net income available to Genworth Financial, Inc.’s
common stockholders
  181   (22)   159   330   69   399 
Income from continuing operations available to
Genworth Financial, Inc.’s common stockholders
  182   (22)   160   333   69   402 
Net income available to Genworth Financial, Inc.’s common stockholders
  181   (22)   159   330   69   399 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
                        
Basic
  0.36   (0.04)   0.32   0.65   0.14   0.79 
Diluted
  0.36   (0.05)   0.31   0.65   0.13   0.78 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
                        
Basic
  0.36   (0.05)   0.31   0.65   0.14   0.79 
Diluted
  0.35   (0.04)   0.31   0.64   0.13   0.77 
 
  
Three months ended September 30, 2022
  
Nine months ended September 30, 2022
 
(Amounts in millions, except per share amounts)
 
As originally
reported
  
Effect of
adopting LDTI
  
As adjusted
  
As originally
reported
  
Effect of
adopting LDTI
  
As adjusted
 
Revenues:      
Premiums $934  $(5)  $929  $2,792  $(30)  $2,762 
Net investment gains (losses)  (69)   11   (58)   (33)   36   3 
Policy fees and other income  166   3   169   494   10   504 
Total revenues  1,839   9   1,848   5,612   16   5,628 
Benefits and expenses:      
Benefits and other changes in policy reserves  1,180   (21)   1,159   3,083   11   3,094 
Liability remeasurement (gains) losses  —    17   17   —    (23)   (23) 
Changes in fair value of market risk benefits and associated hedges  —    (27)   (27)   —    (48)   (48) 
Interest credited  128   —    128   378   1   379 
Acquisition and operating expenses, net of deferrals  240   5   245   1,100   (40)   1,060 
Amortization of deferred acquisition costs and intangibles  79   1   80   255   (3)   252 
Total benefits and expenses  1,653   (25)   1,628   4,894   (102)   4,792 
Income from continuing operations before income taxes  186   34   220   718   118   836 
Provision for income taxes  52   2   54   183   17   200 
Income from continuing operations  134   32   166   535   101   636 
Net income  139   32   171   537   101   638 
Net income available to Genworth Financial, Inc.’s common stockholders  104   32   136   434   101   535 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders  99   32   131   432   101   533 
Net income available to Genworth Financial, Inc.’s common stockholders  104   32   136   434   101   535 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:      
Basic  0.20   0.06   0.26   0.85   0.20   1.05 
Diluted  0.19   0.07   0.26   0.84   0.20   1.04 
Net income available to Genworth Financial, Inc.’s common stockholders per share:      
Basic  0.21   0.06   0.27   0.86   0.19   1.05 
Diluted  0.20   0.07   0.27   0.85   0.19   1.04 
1
9
17
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table presents the impacted lines of the condensed consolidated statement of cash flows for the sixnine months ended JuneSeptember 30, 2022 reflecting the impact of adopting LDTI on January 1, 2023:

 
(Amounts in millions)
  
As
originally
reported
   
Effect of
adopting
LDTI
   
As
adjusted
   
As
originally
reported
 
Effect of
adopting
LDTI
 
As
adjusted
 
Cash flows from (used by) operating activities:             
Net income  $398   $69   $467   $537  $101  $638 
Adjustments to reconcile net income to net cash from operating activities:             
Net investment (gains) losses   (36)    (25)    (61)    33   (36)   (3) 
Changes in fair value of market risk benefits and associated hedges   —      (21)    (21)    —    (48)   (48) 
Charges assessed to policyholders   (292)    3    (289)    (444)   6   (438) 
Acquisition costs deferred   (1)    (6)    (7)    —    (10)   (10) 
Amortization of deferred acquisition costs and intangibles   176    (4)    172    255   (3)   252 
Deferred income taxes   128    15    143    183   17   200 
Change in certain assets and liabilities:             
Accrued investment income and other assets   (70)    (1)    (71)    (104)   (1)   (105) 
Insurance reserves   494    147    641    717   278   995 
Other liabilities, policy and contract claims and other policy-related balances   (205)    (177)    (382)    (147)   (304)   (451) 
Net cash from operating activities   337    —      337    645   —    645 
Accounting Pronouncements Not Yet Adopted
In June 2022, the FASB issued new accounting guidance related to the fair value measurement of equity securities subject to contractual sale restrictions. The guidance clarifies existing fair value guidance on measuring the fair value of an equity security subject to contractual sale restrictions and adds new disclosures related to these securities. This guidance is currently effective for us on January 1, 2024 using the prospective method, with early adoption permitted, which we do not intend to elect. We do not expect a significant impact from this guidance on our condensed consolidated financial statements and disclosures.
(3) Long-Duration Insurance Contracts Targeted Improvements
Transition Disclosures
On January 1, 2023, we adopted LDTI using the modified retrospective method for all topics except for MRBs, which was adopted using the retrospective method, as of January 1, 2021 or the Transition Date. When applying the new accounting guidance for MRBs, hindsight was applied where necessary to determine actuarial assumptions for MRBs primarily associated with variable annuities for certain older blocks of business issued before 2003 and certain small runoff blocks of business as observable data was not available. The modified retrospective approach for DAC and balances amortized on a basis consistent with DAC was applied before MRBs were retrospectively measured and, as a result, the historical DAC balances were carried over as of the Transition Date.
20
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In the year of adoption only, we have included rollforwards of activity for the year ended December 31, 2021 for DAC, PVFP, the liability for future policy benefits, policyholder account balances, additional insurance liabilities, MRBs and separate account liabilities in notes 8, 9, 10, 11, 12, 13 and 14, respectively, to provide additional information related to comparative post-transition impacts.
18
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the balances of and changes in the condensed consolidated balance sheet on January 1, 2021 from the adoption of LDTI:
 
  
Balances as of
December 31,
2020
(as reported)
  
Effect of adopting LDTI
  
Balances as of
January 1,
2021
(as adjusted)
 
(Amounts in millions)
 
Eliminate
shadow
adjustments
  
Changes in
measurement of
assets and
liabilities
  
Change in
discount rate
  
Recognize
MRBs
 
Assets
      
Total investments
 $74,701  $
—
  
  $
—
  
  $
—
  
  $
—
  
  $74,701 
Cash, cash equivalents and restricted cash
  2,561   
—
  
   
—
  
   
—
  
   
—
  
   2,561 
Accrued investment income
  655   
—
  
   
—
  
   
—
  
   
—
  
   655 
Deferred acquisition costs
  1,487   1,322   
—
  
   
—
  
   
—
  
   2,809 
Intangible assets
  157   114   
—
  
   
—
  
   
—
  
   271 
Reinsurance recoverable
  16,864   
—
  
   1,214   10,149   (92)   28,135 
Less: Allowance for credit losses
  (45)   
—
  
   
—
  
   
—
  
   
—
  
   (45) 
                         
Reinsurance recoverable, net
  16,819   
—
  
   1,214   10,149   (92)   28,090 
Other assets
  404   
—
  
   (89)   
—
  
   248   563 
Deferred tax asset
  65   (1,515)   497   4,624   105   3,776 
Market risk benefit assets
  
—
  
   
—
  
   
—
  
   
—
  
   22   22 
Separate account assets
  6,081   
—
  
   
—
  
   
—
  
   
—
  
   6,081 
Assets related to discontinued operations
  2,817   
—
  
   
—
  
   
—
  
   
—
  
   2,817 
                         
Total assets
 $105,747  $(79)  $1,622  $14,773  $283  $122,346 
                         
Liabilities and equity                        
Liabilities:
                        
Future policy benefits
 $42,695  $(4,456)  $14,654  $31,893  $
—
  
  $84,786 
Policyholder account balances
  21,503   (1,229)   
—
  
   
—
  
   (641)   19,633 
Market risk benefit liabilities
  
—
  
   
—
  
   
—
  
   
—
  
   1,310   1,310 
Liability for policy and contract claims
  11,486   
—
  
   (10,725)   
—
  
   
—
  
   761 
Unearned premiums
  775   
—
  
   (468)   
—
  
   
—
  
   307 
Other liabilities
  1,614   
—
  
   
—
  
   
—
  
   4   1,618 
Long-term borrowings
  3,403   
—
  
   
—
  
   
—
  
   
—
  
   3,403 
Separate account liabilities
  6,081   
—
  
   
—
  
   
—
  
   
—
  
   6,081 
Liabilities related to discontinued operations
  2,370   
—
  
   
—
  
   
—
  
   
—
  
   2,370 
                         
Total liabilities
  89,927   (5,685)   3,461   31,893   673   120,269 
                         
Commitments and contingencies
                  
Equity:
                        
Class A common stock
  1   
—
  
   
—
  
   
—
  
   
—
  
   1 
Additional paid-in capital
  12,008   
—
  
   
—
  
   
—
  
   
—
  
   12,008 
Accumulated other comprehensive income (loss)
  4,425   5,606   
—
  
   (17,120)   (19)   (7,108) 
Retained earnings
  1,584   
—
  
   (1,839)
 
  
—
  
   (371)   (626) 
Treasury stock, at cost
  (2,700)   
—
  
   
—
  
   
—
  
   
—
  
   (2,700) 
                         
Total Genworth Financial, Inc.’s stockholders’ equity
  15,318   5,606   (1,839)   (17,120)   (390)   1,575 
Noncontrolling interests
  502   
—
  
   
—
  
   
—
  
   
—
  
   502 
                         
Total equity
  15,820   5,606   (1,839)   (17,120)   (390)   2,077 
                         
Total liabilities and equity
 $105,747  $(79)  $1,622  $14,773  $283  $122,346 
                         
  
Balances as of
December 31,
2020
(as reported)
  
Effect of adopting LDTI
  
Balances as of
January 1,
2021
(as adjusted)
 
(Amounts in millions)
 
Eliminate
shadow
adjustments
  
Changes in
measurement of
assets and
liabilities
  
Change in
discount rate
  
Recognize
MRBs
 
Assets      
Total investments $74,701  $—   $—   $—   $—   $74,701 
Cash, cash equivalents and restricted cash  2,561   —    —    —    —    2,561 
Accrued investment income  655   —    —    —    —    655 
Deferred acquisition costs  1,487   1,322   —    —    —    2,809 
Intangible assets  157   114   —    —    —    271 
Reinsurance recoverable  16,864   —    1,214   10,149   (92)   28,135 
Less: Allowance for credit losses  (45)   —    —    —    —    (45) 
                        
Reinsurance recoverable, net  16,819   —    1,214   10,149   (92)   28,090 
Other assets  404   —    (89)   —    248   563 
Deferred tax asset  65   (1,515)   497   4,624   105   3,776 
Market risk benefit assets  —    —    —    —    22   22 
Separate account assets  6,081   —    —    —    —    6,081 
Assets related to discontinued operations  2,817   —    —    —    —    2,817 
                        
Total assets $105,747  $(79)  $1,622  $14,773  $283  $122,346 
                        
Liabilities and equity      
Liabilities:      
Future policy benefits $42,695  $(4,456)  $14,654  $31,893  $—   $84,786 
Policyholder account balances  21,503   (1,229)   —    —    (641)   19,633 
Market risk benefit liabilities  —    —    —    —    1,310   1,310 
Liability for policy and contract claims  11,486   —    (10,725)   —    —    761 
Unearned premiums  775   —    (468)   —    —    307 
Other liabilities  1,614   —    —    —    4   1,618 
Long-term borrowings  3,403   —    —    —    —    3,403 
Separate account liabilities  6,081   —    —    —    —    6,081 
Liabilities related to discontinued operations  2,370   —    —    —    —    2,370 
                        
Total liabilities  89,927   (5,685)   3,461   31,893   673   120,269 
                        
Commitments and contingencies      
Equity:      
Class A common stock  1   —    —    —    —    1 
Additional
paid-in
capital
  12,008   —    —    —    —    12,008 
Accumulated other comprehensive income (loss)  4,425   5,606   —    (17,120)   (19)   (7,108) 
Retained earnings  1,584   —    (1,839)   —    (371)   (626) 
Treasury stock, at cost  (2,700)   —    —    —    —    (2,700) 
                        
Total Genworth Financial, Inc.’s stockholders’ equity  15,318   5,606   (1,839)   (17,120)   (390)   1,575 
Noncontrolling interests  502   —    —    —    —    502 
                        
Total equity  15,820   5,606   (1,839)   (17,120)   (390)   2,077 
                        
Total liabilities and equity $105,747  $(79)  $1,622  $14,773  $283  $122,346 
                        
 
2
1
19
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table summarizes the components of the transition adjustments within stockholders’ equity as of January 1, 2021 from the adoption of LDTI:
 
(Amounts in millions)
  
Accumulated
other
comprehensive
income (loss)
   
Retained
earnings
   
Total
stockholders’
equity
 
Deferred acquisition costs  $1,322   $—    $1,322 
Intangible assets   114    —     114 
Reinsurance recoverable   10,149    1,201    11,350 
Other assets   —     156    156 
Future policy benefits   (27,437)    (3,537)    (30,974) 
Policyholder account balances   1,229    —     1,229 
Market risk benefits, net   (24)    (623)    (647) 
Other liabilities   —     (4)    (4) 
Deferred taxes   3,114    597    3,711 
               
Total  $(11,533)   $(2,210)   $(13,743) 
               
The cumulative effect adjustment recorded to accumulated other comprehensive income (loss) for DAC, intangible assets and the liability for policyholder account balances represents the elimination of previously recorded shadow adjustments related to unrealized gains and losses.
The cumulative effect adjustment recorded to accumulated other comprehensive income (loss) for the liability for future policy benefits and reinsurance recoverables relates to the higher discount rate in effect immediately prior to adoption compared to the lower
single-A
rated bond rate as of the Transition Date, partially offset by the elimination of previously recorded shadow adjustments related to unrealized gains and losses. The cumulative effect adjustment recorded to retained earnings for the liability for future policy benefits and reinsurance recoverables relates to cohorts with net premium ratios capped at 100% and single premium fixed payout annuity products with remeasured liability balances in excess of the carryover reserve. Net premium ratios are capped at 100% when gross premiums plus the existing carrying value of reserves are insufficient to cover actual or expected policy and contract benefits at the cohort level, as was the case immediately before the Transition Date for a significant number of issue-year cohorts in our long-term care insurance business. These cohorts are mostly comprised of older blocks, and due to the age of the policies, do not benefit from future
in-force
rate actions due to limited remaining premium paying periods. Additionally, due to the requirement to group policies by issue-year cohorts, future
in-force
rate actions related to policies issued in more profitable years cannot subsidize loss generating policies issued in earlier years.
The cumulative effect adjustment recorded to accumulated other comprehensive income (loss) for our net MRB liability relates to the cumulative effect of changes in the instrument-specific credit risk between the contract issue date and January 1, 2021. The difference between the fair value and the carrying amount of MRBs as of January 1, 2021, excluding the amounts recorded in accumulated other comprehensive income (loss), was recorded as a cumulative effect adjustment to retained earnings. Transition adjustments related to the recognition of reinsured MRBs are reflected as other assets and other liabilities.
 
2
2
20
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table summarizes the balances of and changes in deferred acquisition costs on January 1, 2021 from the adoption of LDTI:

 
(Amounts in millions)
  
Long-term

care
insurance
   
Life
insurance
   
Fixed
annuities
   
Variable
annuities
   
Total
 
Balances as of December 31, 2020  $—    $1,316   $3   $139   $1,458 
Adjustment for removal of related balances in accumulated other comprehensive income (loss)   1,043    185    82    12    1,322 
                         
Adjusted balances as of January 1, 2021  $1,043   $1,501   $85   $151    2,780 
                      
Enact segment           29 
             
Total deferred acquisition costs as of January 1, 2021          $2,809 
             
The following table summarizes the balances of and changes in intangible assets, including present value of future profits and deferred sales inducements, on January 1, 2021 from the adoption of LDTI:
 
(Amounts in millions)
  
Life
insurance
   
Fixed
annuities
   
Variable
annuities
   
Total
 
Balances as of December 31, 2020  $73   $7   $3   $83 
Adjustment for removal of related balances in accumulated other comprehensive income (loss)   81    33    —      114 
                     
Adjusted balances as of January 1, 2021  $154   $40   $3   $197 
                     
(Amounts in millions)
  
Life
insurance
   
Fixed
annuities
   
Variable
annuities
   
Total
 
Balances as of December 31, 2020  $73   $7   $3   $83 
Adjustment for removal of related balances in accumulated other comprehensive income (loss)   81    33    —     114 
                    
Adjusted balances as of January 1, 2021  $154   $40   $3   $197 
                    
The following table summarizes the balances of and changes in the liability for future policy benefits on January 1, 2021 from the adoption of LDTI:
 

(Amounts in millions)
  
Long-term

care
insurance
  
Life
insurance
  
Fixed
annuities
  
Total
 
Balances as of December 31, 2020  $28,770  $2,101  $11,824  $42,695 
Reclassify liability for policy and contract claims, unearned premiums and due premiums
(1)
   10,918   189   10   11,117 
Change in discount rate assumptions   24,253   361   7,279   31,893 
Change in cash flow assumptions
(2)
   3,319   (2)   264   3,581 
Change in cash flow assumptions, effect of increase (decrease) of the deferred profit liability
(2)
   (173)   —    129   (44) 
Adjustment for removal of related balances in accumulated other comprehensive income (loss)   (3,716)   —    (740)   (4,456) 
                 
Adjusted balances as of January 1, 2021   63,371   2,649   18,766   84,786 
Less: reinsurance recoverable   11,476   834   13,699   26,009 
                 
Adjusted balances as of January 1, 2021, net of reinsurance  $51,895  $1,815  $5,067  $58,777 
                 
(1)
(1)
Upon adopting LDTI, we elected to combine our previously disclosed liability for policy and contract claims, unearned premiums and due premiums, excluding amounts related to mortgage insurance and certain life and annuity products not subject to the new accounting guidance, within the liability for future policy benefits and present the aggregate liability as one line item in our condensed consolidated balance sheets.
(2)
(2)
For limited-payment contracts, if the remeasured liability for future policy benefits under LDTI is (less) greater than the carrying value immediately before the Transition Date, the deferred profit liability is increased (decreased) with a corresponding (decrease) increase to the liability for future policy benefits.
21
23
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table summarizes the balances of and changes in the net liability position for MRBs on January 1, 2021 from the adoption of LDTI:

 
(Amounts in millions)
  
Fixed indexed
annuities
   
Variable
annuities
   
Total
 
Balances as of December 31, 2020  $71   $570   $641 
Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit
risk		   39    584    623 
Adjustment for the cumulative effect of changes in the instrument-specific credit risk since issuance   5    19    24 
                
Total adjustment for the difference between carrying amount and fair
value		   44    603    647 
                
Adjusted balances as of January 1, 2021   115    1,173    1,288 
Less: reinsurance recoverable   —      244    244 
                
Adjusted balances as of January 1, 2021, net of reinsurance  $115   $929   $1,044 
                
(Amounts in millions)
 
Fixed indexed
annuities
  
Variable
annuities
  
Total
 
Balances as of December 31, 2020 $71  $570  $641 
Adjustment for the difference between carrying amount and fair value, except for the difference due to instrument-specific credit risk  39   584   623 
Adjustment for the cumulative effect of changes in the instrument-specific credit risk since issuance  5   19   24 
             
Total adjustment for the difference between carrying amount and fair value  44   603   647 
             
Adjusted balances as of January 1, 2021  115   1,173   1,288 
Less: reinsurance recoverable  —    244   244 
             
Adjusted balances as of January 1, 2021, net of reinsurance $115  $929  $1,044 
             
 
22
24
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(4) 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
June 30,
   
Six months ended
June 30,
  
Three months ended
September 30,
 
Nine months ended
September 30,
 
(Amounts in millions, except per share amounts)
  
2023
   
2022
   
2023
   
2022
  
    2023    
 
    2022    
 
    2023    
   
    2022    
 
Weighted-average common shares used in basic earnings (loss) per share calculations
   473.2    508.9    482.7    508.6 
Weighted-average common shares used in basic earnings per share calculations  460.5   503.8   475.3    507.0 
Potentially dilutive securities:
            
Stock options, restricted stock units and other equity-based awards
   4.9    5.2    6.4    7.1   5.5   5.5   6.1    6.6 
  
 
   
 
   
 
   
 
              
Weighted-average common shares used in diluted earnings (loss) per share calculations
   478.1    514.1    489.1    515.7 
Weighted-average common shares used in diluted earnings per share calculations  466.0   509.3   481.4    513.6 
  
 
   
 
   
 
   
 
              
Income from continuing operations:
            
Income from continuing operations
  $166   $198   $320   $470  $60  $166  $380   $636 
Less: net income from continuing operations attributable to noncontrolling interests
   31    38    63    68   31   35   94    103 
  
 
   
 
   
 
   
 
              
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $135   $160   $257   $402  $29  $131  $286   $533 
  
 
   
 
   
 
   
 
              
Basic per share
  $0.28   $0.32   $0.53   $0.79  $0.06  $0.26  $0.60   $1.05 
  
 
   
 
   
 
   
 
              
Diluted per share
  $0.28   $0.31   $0.53   $0.78  $0.06  $0.26  $0.59   $1.04 
  
 
   
 
   
 
   
 
              
Income (loss) from discontinued operations:
        
Income (loss) from discontinued operations, net of taxes
  $2   $(1)   $2   $(3) 
Income from discontinued operations:    
Income from discontinued operations, net of taxes $—   $5  $2   $2 
Less: net income from discontinued operations attributable to noncontrolling interests
   —      —      —      —     —    —    —     —  
  
 
   
 
   
 
   
 
              
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
  $2   $(1)   $2   $(3) 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders $—   $5  $2   $2 
  
 
   
 
   
 
   
 
              
Basic per share
  $0.01   $—     $0.01   $(0.01)  $—   $0.01  $—    $—  
  
 
   
 
   
 
   
 
              
Diluted per share
  $0.01   $—     $0.01   $(0.01)  $—   $0.01  $—    $—  
  
 
   
 
   
 
   
 
              
Net income:
            
Income from continuing operations
  $166   $198   $320   $470  $60  $166  $380   $636 
Income (loss) from discontinued operations, net of taxes
   2    (1)    2    (3) 
Income from discontinued operations, net of taxes  —    5   2    2 
  
 
   
 
   
 
   
 
              
Net income
   168    197    322    467   60   171   382    638 
Less: net income attributable to noncontrolling interests
   31    38    63    68   31   35   94    103 
  
 
   
 
   
 
   
 
              
Net income available to Genworth Financial, Inc.’s common stockholders
  $137   $159   $259   $399  $29  $136  $288   $535 
  
 
   
 
   
 
   
 
              
Basic per share
(1)
  $0.29   $0.31   $0.54   $0.79  $0.06  $0.27  $0.61   $1.05 
  
 
   
 
   
 
   
 
              
Diluted per share
(1)
  $0.29   $0.31   $0.53   $0.77  $0.06  $0.27  $0.60   $1.04 
  
 
   
 
   
 
   
 
              
(1)

(1)
May not total due to whole number calculation.
23
25
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(5) Investments
(a) Net Investment Income
Sources of net investment income were as follows for the periods indicated:

   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
 2023 
   
 2022 
   
 2023 
   
 2022 
 
Fixed maturity securities—taxable  $559   $576   $1,687   $1,734 
Fixed maturity
securities—non-taxable
   1    2    3    4 
Equity securities   1    3    6    7 
Commercial mortgage loans   76    81    227    240 
Policy loans   58    55    167    156 
Limited partnerships   31    38    76    77 
Other invested assets   69    67    207    196 
Cash, cash equivalents, restricted cash and short-term investments   28    7    68    8 
                    
Gross investment income before expenses and fees   823    829    2,441    2,422 
Expenses and fees   (22)    (21)    (68)    (63) 
                    
Net investment income  $801   $808   $2,373   $2,359 
                    
24
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   
Three months ended

June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
  2023
     
  2022
   
2023
     
2022
 
Fixed maturity securities—taxable  $567   $578   $1,128   $1,158 
Fixed maturity securities—non-taxable   1    1    2    2 
Equity securities   3    2    5    4 
Commercial mortgage loans   75    78    151    159 
Policy loans   54    51    109    101 
Limited partnerships   17    32    45    39 
Other invested assets   70    66    138    129 
Cash, cash equivalents, restricted cash and short-term investments   22    1    40    1 
                     
Gross investment income before expenses and fees   809    809    1,618    1,593 
Expenses and fees   (24)    (22)    (46)    (42) 
                     
Net investment income  $785   $787   $1,572   $1,551 
                     
(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,
 
(Amounts in millions)
  
  2023
     
  2022
   
2023
     
2022
 
Realized investment gains (losses):                    
Available-for-sale fixed maturity securities:                    
Realized gains  $18   $5   $21   $15 
Realized losses   (48)    (9)    (67)    (27) 
                     
Net realized gains (losses) on available-for-sale fixed maturity securities   (30)    (4)    (46)    (12) 
Net realized gains (losses) on equity securities sold   (1)    —      (1)    —   
Net realized gains (losses) on limited partnerships   —      —      —      —   
                     
Total net realized investment gains (losses)   (31)    (4)    (47)    (12) 
                     
Net change in allowance for credit losses on available-for-sale fixed maturity securities   11    —      (4)    —   
Write-down of available-for-sale fixed maturity securities
(1)
   (1)    —      (1)    (2) 
Net unrealized gains (losses) on equity securities still held   21    (26)    32    (32) 
Net unrealized gains (losses) on limited partnerships   40    24    40    59 
Commercial mortgage loans   —      2    (2)    3 
Derivative instruments
(2)
   (1)    18    11    37 
Other   —      5    (1)    8 
                     
Net investment gains (losses)  $39   $19   $28   $61 
                     
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
 2023 
   
 2022 
   
 2023 
   
 2022 
 
Realized investment gains (losses):        
Available-for-sale
fixed maturity securities:
        
Realized gains  $5   $11   $26   $26 
Realized losses   (16)    (38)    (83)    (65) 
                    
Net realized gains (losses) on
available-for-sale
fixed maturity securities
   (11)    (27)    (57)    (39) 
Net realized gains (losses) on equity securities sold   —     —     (1)    —  
Net realized gains (losses) on limited partnerships   —     —     —     —  
                    
Total net realized investment gains (losses)   (11)    (27)    (58)    (39) 
                    
Net change in allowance for credit losses on
available-for-sale
fixed maturity securities
   (2)    —     (6)    —  
Write-down of
available-for-sale
fixed maturity securities 
(1)
   —     —     (1)    (2) 
Net unrealized gains (losses) on equity securities still held   (12)    (14)    20    (46) 
Net unrealized gains (losses) on limited partnerships   14    (24)    54    35 
Commercial mortgage loans   (1)    —     (3)    3 
Derivative instruments
(2)
   (28)    7    (17)    44 
Other   (3)    —     (4)    8 
                    
Net investment gains (losses)  $(43)   $(58)   $(15)   $3 
                    
 
(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 6 for additional information on the impact of derivative instruments included in net investment gains (losses).
26
Table of Contents
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 2022 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 securities as of and for the three months ended June 30, 2023:

 
(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:                                
U.S. corporate $9  $—    $—    $(7)  $—    $(2)  $—    $—   
Commercial mortgage-backed  6   —     —     (2)   —         —     —     4 
                                 
Total available-for-sale fixed maturity securities $15  $—    $—    $(9)  $—    $(2)  $—    $4 
                                 
The following table represents the allowance for credit losses aggregated by security type for available-for-sale fixed maturity securities as of and for the six months ended June 30, 2023:

(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:                                
U.S. corporate $—    $9  $—    $(7)  $—    $(2)  $—    $—   
Commercial mortgage-backed  —     6   —     (2)   —         —     —     4 
                                 
Total available-for-sale fixed maturity securities $—    $15  $—    $(9)  $—    $(2)  $—    $4 
                                 
There
was no allowance for credit losses related to our available-for-sale fixed maturity securities as of and for the three and six months ended June 30, 2022.
25
27
Table of Contents
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 securities as of and for the three months ended September 30, 2023:
(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:        
Commercial mortgage-
backed		 $4  $1  $1  $—   $—   $—   $—   $6 
                                
Total
available-for-sale
fixed maturity securities
 $4  $1  $1  $—   $—   $—   $—   $6 
                                
The following table represents the allowance for credit losses aggregated by security type for
available-for-sale
fixed maturity securities as of and for the nine months ended September 30, 2023:
(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:        
U.S. corporate $—   $9  $—   $(7)  $—   $(2)  $—   $—  
Commercial mortgage-backed  —    7   1   (2)   —    —    —    6 
                                
Total
available-for-sale
fixed maturity securities
 $—   $16  $1  $(9)  $—   $(2)  $—   $6 
                                
There was no allowance for credit losses related to our
available-for-sale
fixed maturity securities as of and for the three and nine months ended September 30, 2022.
26
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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,

2023
  
December 31,

2022
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses  $(3,790)   $(4,251) 
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses   —      —   
Adjustments to policyholder contract balances   62    68 
Income taxes, net   608    705 
           
Net unrealized investment gains (losses)   (3,120)    (3,478) 
Less: net unrealized investment gains (losses) attributable to noncontrolling interests   (64)    (71) 
           
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.  $(3,056)   $(3,407) 
           
(Amounts in millions)
 
September 30,

2023
  
December 31,

2022
 
Net unrealized gains (losses) on fixed maturity securities without an allowance for credit losses $(5,881)  $(4,251) 
Net unrealized gains (losses) on fixed maturity securities with an allowance for credit losses  —    —  
Adjustments to policyholder contract balances  104   68 
Income taxes, net  925   705 
        
Net unrealized investment gains (losses)  (4,852)   (3,478) 
Less: net unrealized investment gains (losses) attributable to noncontrolling interests  (74)   (71) 
        
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc. $(4,778)  $(3,407) 
        
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
June 30,
   
Six months ended
June 30,
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Beginning balance  $(2,500)   $2,151   $(3,407)   $6,077   $(3,056)   $(1,518)   $(3,407)   $6,077 
Unrealized gains (losses) arising during the period:                    
Unrealized gains (losses) on fixed maturity securities   (755)    (4,713)    415    (9,843)    (2,102)    (3,098)    (1,687)    (12,941) 
Adjustments to policyholder contract balances   13    77    (6)    160    42    52    36    212 
Provision for income taxes   158    935    (87)    2,009    319    508    232    2,517 
                                
Change in unrealized gains (losses) on investment securities   (584)    (3,701)    322    (7,674)    (1,741)    (2,538)    (1,419)    (10,212) 
Reclassification adjustments to net investment (gains) losses, net of taxes of $(7), $—, $(10) and $(2)   23    4    36    10 
Reclassification adjustments to net investment (gains) losses, net of taxes of $(2), $(6), $(12) and $(8)   9    21    45    31 
                                
Change in net unrealized investment gains (losses)   (561)    (3,697)    358    (7,664)    (1,732)    (2,517)    (1,374)    (10,181) 
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests   (5)    (28)    7    (69)    (10)    (25)    (3)    (94) 
                                
Ending balance  $(3,056)   $(1,518)   $(3,056)   $(1,518)   $(4,778)   $(4,010)   $(4,778)   $(4,010) 
                                
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.
 
2
8
27
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(d) Fixed Maturity Securities
As of JuneSeptember 30, 2023, 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
   
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  $3,459   $97   $(167)  $—    $3,389   $3,498   $6   $(392)  $—   $3,112 
State and political subdivisions   2,611    21    (289)   —     2,343    2,566    5    (407)   —    2,164 
Non-U.S. government   708    15    (98)   —     625    699    9    (125)   —    583 
U.S. corporate:                 
Utilities   4,339    49    (424)   —     3,964    4,454    13    (611)   —    3,856 
Energy   2,414    36    (202)   —     2,248    2,454    18    (265)   —    2,207 
Finance and insurance   7,915    54    (843)   —     7,126    7,920    22    (1,069)   —    6,873 
Consumer—non-cyclical   4,663    94    (347)   —     4,410    4,632    32    (538)   —    4,126 
Technology and communications   3,196    49    (311)   —     2,934    3,212    26    (444)   —    2,794 
Industrial   1,326    15    (117)   —     1,224    1,309    8    (168)   —    1,149 
Capital goods   2,225    44    (162)   —     2,107    2,255    19    (235)   —    2,039 
Consumer—cyclical   1,737    16    (139)   —     1,614    1,736    6    (194)   —    1,548 
Transportation   1,171    33    (87)   —     1,117    1,181    16    (131)   —    1,066 
Other   311    4    (16)   —     299    320    1    (23)   —    298 
                                    
Total U.S. corporate   29,297    394    (2,648)   —     27,043    29,473    161    (3,678)   —    25,956 
                                    
Non-U.S. corporate:                 
Utilities   813    —      (78)   —     735    809    —     (90)   —    719 
Energy   1,043    21    (62)   —     1,002    1,054    10    (86)   —    978 
Finance and insurance   2,054    33    (188)   —     1,899    2,045    22    (223)   —    1,844 
Consumer—non-cyclical   666    3    (77)   —     592    688    1    (107)   —    582 
Technology and communications   977    7    (93)   —     891    974    1    (135)   —    840 
Industrial   838    9    (65)   —     782    853    2    (86)   —    769 
Capital goods   602    4    (51)   —     555    593    1    (70)   —    524 
Consumer—cyclical   239    1    (23)   —     217    241    —     (30)   —    211 
Transportation   360    12    (26)   —     346    359    7    (32)   —    334 
Other   859    13    (53)   —     819    819    3    (69)   —    753 
                                    
Total non-U.S. corporate   8,451    103    (716)   —     7,838    8,435    47    (928)   —    7,554 
                                    
Residential mortgage-backed   997    4    (67)   —     934    974    1    (84)   —    891 
Commercial mortgage-backed   1,990    1    (297)   (4)   1,690    1,868    1    (360)   (6)   1,503 
Other asset-backed   2,351    1    (144)   —     2,208    2,342    1    (138)   —    2,205 
                                    
Total available-for-sale fixed maturity securities  $49,864   $636   $(4,426)  $(4)  $46,070   $49,855   $231   $(6,112)  $(6)  $43,968 
                                    
 
2
9
28
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
As of December 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
  $3,446   $86   $(191)  $—     $3,341 
State and political subdivisions
   2,726    19    (346)   —      2,399 
Non-U.S. government
   731    15    (101)   —      645 
U.S. corporate:
                        
Utilities
   4,295    50    (447)   —      3,898 
Energy
   2,450    33    (221)   —      2,262 
Finance and insurance
   8,005    59    (871)   —      7,193 
Consumer—non-cyclical
   4,776    84    (403)   —      4,457 
Technology and communications
   3,265    43    (361)   —      2,947 
Industrial
   1,312    15    (130)   —      1,197 
Capital goods
   2,290    41    (193)   —      2,138 
Consumer—cyclical
   1,758    14    (155)   —      1,617 
Transportation
   1,165    32    (97)   —      1,100 
Other
   325    3    (18)   —      310 
                         
Total U.S. corporate
   29,641    374    (2,896)   —      27,119 
                         
Non-U.S. corporate:
                        
Utilities
   817    —      (77)   —      740 
Energy
   1,009    19    (68)   —      960 
Finance and insurance
   2,124    30    (208)   —      1,946 
Consumer—non-cyclical
   655    1    (90)   —      566 
Technology and communications
   997    4    (107)   —      894 
Industrial
   880    8    (70)   —      818 
Capital goods
   606    3    (63)   —      546 
Consumer—cyclical
   308    —      (32)   —      276 
Transportation
   392    12    (29)   —      375 
Other
   932    15    (58)   —      889 
                         
Total non-U.S. corporate
   8,720    92    (802)   —      8,010 
                         
Residential mortgage-backed
   1,059    7    (71)   —      995 
Commercial mortgage-backed
   2,183    2    (277)   —      1,908 
Other asset-backed
   2,328    1    (163)   —      2,166 
                         
Total available-for-sale fixed maturity securities
  $50,834   $596   $(4,847)  $—     $46,583 
                         
(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  $3,446   $86   $(191)  $—    $3,341 
State and political subdivisions   2,726    19    (346)   —     2,399 
Non-U.S.
government
   731    15    (101)   —     645 
U.S. corporate:         
Utilities   4,295    50    (447)   —     3,898 
Energy   2,450    33    (221)   —     2,262 
Finance and insurance   8,005    59    (871)   —     7,193 
Consumer—non-cyclical
   4,776    84    (403)   —     4,457 
Technology and communications   3,265    43    (361)   —     2,947 
Industrial   1,312    15    (130)   —     1,197 
Capital goods   2,290    41    (193)   —     2,138 
Consumer—cyclical   1,758    14    (155)   —     1,617 
Transportation   1,165    32    (97)   —     1,100 
Other   325    3    (18)   —     310 
                        
Total U.S. corporate   29,641    374    (2,896)   —     27,119 
                        
Non-U.S.
corporate:
         
Utilities   817    —     (77)   —     740 
Energy   1,009    19    (68)   —     960 
Finance and insurance   2,124    30    (208)   —     1,946 
Consumer—non-cyclical
   655    1    (90)   —     566 
Technology and communications   997    4    (107)   —     894 
Industrial   880    8    (70)   —     818 
Capital goods   606    3    (63)   —     546 
Consumer—cyclical   308    —     (32)   —     276 
Transportation   392    12    (29)   —     375 
Other   932    15    (58)   —     889 
                        
Total
non-U.S.
corporate
   8,720    92    (802)   —     8,010 
                        
Residential mortgage-backed   1,059    7    (71)   —     995 
Commercial mortgage-backed   2,183    2    (277)   —     1,908 
Other asset-backed   2,328    1    (163)   —     2,166 
                        
Total
available-for-sale
fixed maturity securities
  $50,834   $596   $(4,847)  $—    $46,583 
                        
 
30

29
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 JuneSeptember 30, 2023:
  
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 $1,254  $(47)   69  $1,337  $(345)   52  $2,591  $(392)   121 
State and political subdivisions  476   (23)   81   1,448   (384)   314   1,924   (407)   395 
Non-U.S.
government
  59   (3)   15   425   (122)   85   484   (125)   100 
U.S. corporate  5,898   (355)   894   16,088   (3,323)   2,663   21,986   (3,678)   3,557 
Non-U.S. corporate
  1,417   (66)   182   5,062   (862)   820   6,479   (928)   1,002 
Residential mortgage-backed  360   (12)   194   455   (72)   174   815   (84)   368 
Commercial mortgage-backed  48   (3)   13   1,425   (357)   283   1,473   (360)   296 
Other asset-backed  287   (5)   103   1,718   (133)   419   2,005   (138)   522 
                                    
Total for fixed maturity securities in an unrealized loss position $9,799  $(514)   1,551  $27,958  $(5,598)   4,810  $37,757  $(6,112)   6,361 
                                    
% Below cost:         
<20% Below cost $9,720  $(486)   1,537  $18,962  $(2,332)   3,283  $28,682  $(2,818)   4,820 
20%-50% Below cost
  79   (28)   14   8,995   (3,265)   1,526   9,074   (3,293)   1,540 
>50% Below cost  —    —    —    1   (1)   1   1   (1)   1 
                                    
Total for fixed maturity securities in an unrealized loss position $9,799  $(514)   1,551  $27,958  $(5,598)   4,810  $37,757  $(6,112)   6,361 
                                    
Investment grade $9,581  $(508)   1,525  $26,633  $(5,377)   4,547  $36,214  $(5,885)   6,072 
Below investment grade  218   (6)   26   1,325   (221)   263   1,543   (227)   289 
                                    
Total for fixed maturity securities in an unrealized loss position
 $9,799  $(514)   1,551  $27,958  $(5,598)   4,810  $37,757  $(6,112)   6,361 
                                    

  
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 $1,412  $(106)   42  $329  $(61)   36  $1,741  $(167)   78 
State and political subdivisions
  495   (25)   77   1,252   (264)   223   1,747   (289)   300 
Non-U.S. government
  123   (3)   22   387   (95)   60   510   (98)   82 
U.S. corporate
  6,257   (285)   878   13,764   (2,363)   1,768   20,021   (2,648)   2,646 
Non-U.S. corporate
  1,733   (55)   226   4,353   (661)   579   6,086   (716)   805 
Residential mortgage-backed
  391   (16)   160   323   (51)   98   714   (67)   258 
Commercial mortgage-backed
  227   (18)   32   1,430   (279)   230   1,657   (297)   262 
Other asset-backed
  524   (11)   147   1,550   (133)   305   2,074   (144)   452 
                                     
Total for fixed maturity securities in an unrealized loss position
 $11,162  $(519)   1,584  $23,388  $(3,907)   3,299  $34,550  $(4,426)   4,883 
                                     
% Below cost:
                                    
<20% Below cost
 $11,085  $(494)   1,576  $18,715  $(2,339)   2,671  $29,800  $(2,833)   4,247 
20%-50% Below cost
  77   (25)   8   4,673   (1,568)   628   4,750   (1,593)   636 
                                     
Total for fixed maturity securities in an unrealized loss position
 $11,162  $(519)   1,584  $23,388  $(3,907)   3,299  $34,550  $(4,426)   4,883 
                                     
Investment grade
 $10,912  $(514)   1,558  $22,108  $(3,713)   3,100  $33,020  $(4,227)   4,658 
Below investment grade
  250   (5)   26   1,280   (194)   199   1,530   (199)   225 
                                     
Total for fixed maturity securities in an unrealized loss position
 $11,162  $(519)   1,584  $23,388  $(3,907)   3,299  $34,550  $(4,426)   4,883 
                                     

3
1
30
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 JuneSeptember 30, 2023:

  
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
 
                            
U.S. corporate:
                                    
Utilities
 $883  $(34)   115  $1,817  $(390)   270  $2,700  $(424)   385 
Energy
  429   (21)   77   1,173   (181)   152   1,602   (202)   229 
Finance and insurance
  1,680   (82)   254   4,290   (761)   514   5,970   (843)   768 
Consumer—non-cyclical
  907   (51)   118   1,922   (296)   214   2,829   (347)   332 
Technology and communications
  910   (44)   117   1,489   (267)   214   2,399   (311)   331 
Industrial
  306   (7)   30   610   (110)   82   916   (117)   112 
Capital goods
  376   (13)   59   1,003   (149)   122   1,379   (162)   181 
Consumer—cyclical
  403   (15)   66   873   (124)   121   1,276   (139)   187 
Transportation
  280   (16)   30   473   (71)   66   753   (87)   96 
Other
  83   (2)   12   114   (14)   13   197   (16)   25 
                                     
Subtotal, U.S. corporate securities
  6,257   (285)   878   13,764   (2,363)   1,768   20,021   (2,648)   2,646 
                                     
Non-U.S. corporate:
                                    
Utilities
  233   (8)   21   498   (70)   55   731   (78)   76 
Energy
  267   (9)   32   373   (53)   42   640   (62)   74 
Finance and insurance
  376   (12)   67   1,162   (176)   167   1,538   (188)   234 
Consumer—non-cyclical
  133   (6)   16   386   (71)   47   519   (77)   63 
Technology and communications
  199   (6)   25   548   (87)   73   747   (93)   98 
Industrial
  118   (5)   23   419   (60)   56   537   (65)   79 
Capital goods
  104   (1)   11   349   (50)   47   453   (51)   58 
Consumer—cyclical
  61   (2)   4   140   (21)   25   201   (23)   29 
Transportation
  74   (3)   10   137   (23)   22   211   (26)   32 
Other
  168   (3)   17   341   (50)   45   509   (53)   62 
                                     
Subtotal, non-U.S. corporate securities
  1,733   (55)   226   4,353   (661)   579   6,086   (716)   805 
                                     
Total for corporate securities in an unrealized loss
position
 $7,990  $(340)   1,104  $18,117  $(3,024)   2,347  $26,107  $(3,364)   3,451 
                                     
3
2
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
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
         
U.S. corporate:         
Utilities $1,404  $(69)   188  $1,963  $(542)   356  $3,367  $(611)   544 
Energy  472   (30)   85   1,263   (235)   221   1,735   (265)   306 
Finance and insurance  1,318   (83)   194   4,920   (986)   753   6,238   (1,069)   947 
Consumer—non-cyclical
  917   (62)   119   2,326   (476)   372   3,243   (538)   491 
Technology and communications  486   (35)   98   2,011   (409)   337   2,497   (444)   435 
Industrial  270   (19)   34   695   (149)   139   965   (168)   173 
Capital goods  345   (16)   64   1,149   (219)   182   1,494   (235)   246 
Consumer—cyclical  340   (21)   58   1,044   (173)   177   1,384   (194)   235 
Transportation  218   (18)   40   586   (113)   101   804   (131)   141 
Other  128   (2)   14   131   (21)   25   259   (23)   39 
                                    
Subtotal, U.S. corporate securities  5,898   (355)   894   16,088   (3,323)   2,663   21,986   (3,678)   3,557 
                                    
Non-U.S.
corporate:
         
Utilities  102   (6)   8   616   (84)   80   718   (90)   88 
Energy  264   (13)   28   459   (73)   75   723   (86)   103 
Finance and insurance  262   (14)   35   1,328   (209)   237   1,590   (223)   272 
Consumer—non-cyclical
  81   (5)   14   463   (102)   72   544   (107)   86 
Technology and communications  161   (7)   20   622   (128)   98   783   (135)   118 
Industrial  209   (11)   40   437   (75)   74   646   (86)   114 
Capital goods  145   (5)   18   358   (65)   53   503   (70)   71 
Consumer—cyclical  —    —    —    184   (30)   35   184   (30)   35 
Transportation  —    —    —    205   (32)   33   205   (32)   33 
Other  193   (5)   19   390   (64)   63   583   (69)   82 
                                    
Subtotal,
non-U.S.
corporate securities
  1,417   (66)   182   5,062   (862)   820   6,479   (928)   1,002 
                                    
Total for corporate securities in an unrealized loss position
 $7,315  $(421)   1,076  $21,150  $(4,185)   3,483  $28,465  $(4,606)   4,559 
                                    
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 was largely due to increased interest rates and widening 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.
31
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 had not been recorded, aggregated by investment type and length of time that individual fixed maturity securities had been in a continuous unrealized loss position, as of December 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 $1,585  $(189)   55  $17  $(2)   6  $1,602  $(191)   61 
State and political subdivisions  1,559   (269)   258   261   (77)   66   1,820   (346)   324 
Non-U.S.
government
  351   (54)   59   152   (47)   23   503   (101)   82 
U.S. corporate  18,480   (2,344)   2,452   2,001   (552)   236   20,481   (2,896)   2,688 
Non-U.S.
corporate
  5,593   (599)   732   748   (203)   111   6,341   (802)   843 
Residential mortgage-backed  569   (51)   192   65   (20)   22   634   (71)   214 
Commercial mortgage-backed  1,765   (255)   265   88   (22)   16   1,853   (277)   281 
Other asset-backed  1,455   (83)   347   598   (80)   101   2,053   (163)   448 
                                    
Total for fixed maturity securities in an unrealized loss position $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                    
% Below cost:         
<20% Below cost $27,596  $(2,587)   3,835  $1,819  $(291)   310  $29,415  $(2,878)   4,145 
20%-50% Below cost
  3,757   (1,251)   523   2,111   (712)   271   5,868   (1,963)   794 
>50% Below cost  4   (6)   2   —    —    —    4   (6)   2 
                                    
Total for fixed maturity securities in an unrealized loss position $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                    
Investment grade $29,959  $(3,687)   4,158  $3,590  $(915)   537  $33,549  $(4,602)   4,695 
Below investment grade  1,398   (157)   202   340   (88)   44   1,738   (245)   246 
                                    
Total for fixed maturity securities in an unrealized loss position
 $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                    

  
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
 $1,585  $(189)   55  $17  $(2)   6  $1,602  $(191)   61 
State and political subdivisions
  1,559   (269)   258   261   (77)   66   1,820   (346)   324 
Non-U.S. government
  351   (54)   59   152   (47)   23   503   (101)   82 
U.S. corporate
  18,480   (2,344)   2,452   2,001   (552)   236   20,481   (2,896)   2,688 
Non-U.S. corporate
  5,593   (599)   732   748   (203)   111   6,341   (802)   843 
Residential mortgage-backed
  569   (51)   192   65   (20)   22   634   (71)   214 
Commercial mortgage-backed
  1,765   (255)   265   88   (22)   16   1,853   (277)   281 
Other asset-backed
  1,455   (83)   347   598   (80)   101   2,053   (163)   448 
                                     
Total for fixed maturity securities in an unrealized loss
position
 $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                     
% Below cost:
                                    
<20% Below cost
 $27,596  $(2,587)   3,835  $1,819  $(291)   310  $29,415  $(2,878)   4,145 
20%-50% Below cost
  3,757   (1,251)   523   2,111   (712)   271   5,868   (1,963)   794 
>50% Below cost
  4   (6)   2   
—
  
   
—
  
   
—
  
   4   (6)   2 
                                     
Total for fixed maturity securities in an unrealized loss
position
 $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                     
Investment grade
 $29,959  $(3,687)   4,158  $3,590  $(915)   537  $33,549  $(4,602)   4,695 
Below investment grade
  1,398   (157)   202   340   (88)   44   1,738   (245)   246 
                                     
Total for fixed maturity securities in an unrealized loss
position
 $31,357  $(3,844)   4,360  $3,930  $(1,003)   581  $35,287  $(4,847)   4,941 
                                     

3
3
32
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 had not been recorded, aggregated by investment type and length of time that individual investment securities had been in a continuous unrealized loss position, based on industry, as of December 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
         
U.S. corporate:         
Utilities $2,447  $(398)   345  $187  $(49)   37  $2,634  $(447)   382 
Energy  1,538   (187)   226   144   (34)   14   1,682   (221)   240 
Finance and insurance  5,250   (668)   696   706   (203)   74   5,956   (871)   770 
Consumer—non-cyclical
  2,805   (342)   317   201   (61)   22   3,006   (403)   339 
Technology and communications  2,259   (273)   304   271   (88)   32   2,530   (361)   336 
Industrial  829   (105)   104   110   (25)   13   939   (130)   117 
Capital goods  1,332   (153)   169   148   (40)   16   1,480   (193)   185 
Consumer—cyclical  1,138   (108)   173   194   (47)   22   1,332   (155)   195 
Transportation  746   (93)   95   21   (4)   5   767   (97)   100 
Other  136   (17)   23   19   (1)   1   155   (18)   24 
                                    
Subtotal, U.S. corporate securities  18,480   (2,344)   2,452   2,001   (552)   236   20,481   (2,896)   2,688 
                                    
Non-U.S.
corporate:
         
Utilities  640   (63)   66   57   (14)   9   697   (77)   75 
Energy  604   (61)   69   40   (7)   5   644   (68)   74 
Finance and insurance  1,310   (122)   204   296   (86)   42   1,606   (208)   246 
Consumer—non-cyclical
  491   (74)   56   54   (16)   11   545   (90)   67 
Technology and communications  740   (96)   93   39   (11)   8   779   (107)   101 
Industrial  480   (45)   71   105   (25)   13   585   (70)   84 
Capital goods  394   (46)   52   62   (17)   6   456   (63)   58 
Consumer—cyclical  241   (28)   31   23   (4)   6   264   (32)   37 
Transportation  180   (21)   26   29   (8)   5   209   (29)   31 
Other  513   (43)   64   43   (15)   6   556   (58)   70 
                                    
Subtotal,
non-U.S.
corporate securities
  5,593   (599)   732   748   (203)   111   6,341   (802)   843 
                                    
Total for corporate securities in an unrealized loss position
 $24,073  $(2,943)   3,184  $2,749  $(755)   347  $26,822  $(3,698)   3,531 
                                    

  
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
         
U.S. corporate:
         
Utilities
 $2,447  $(398)   345  $187  $(49)   37  $2,634  $(447)   382 
Energy
  1,538   (187)   226   144   (34)   14   1,682   (221)   240 
Finance and insurance
  5,250   (668)   696   706   (203)   74   5,956   (871)   770 
Consumer—non-cyclical
  2,805   (342)   317   201   (61)   22   3,006   (403)   339 
Technology and
                                 
 
 
 
communications
  2,259   (273)   304   271   (88)   32   2,530   (361)   336 
Industrial
  829   (105)   104   110   (25)   13   939   (130)   117 
Capital goods
  1,332   (153)   169   148   (40)   16   1,480   (193)   185 
Consumer—cyclical
  1,138   (108)   173   194   (47)   22   1,332   (155)   195 
Transportation
  746   (93)   95   21   (4)   5   767   (97)   100 
Other
  136   (17)   23   19   (1)   1   155   (18)   24 
                                     
Subtotal, U.S. corporate securities
  18,480   (2,344)   2,452   2,001   (552)   236   20,481   (2,896)   2,688 
                                     
Non-U.S. corporate:
                                    
Utilities
  640   (63)   66   57   (14)   9   697   (77)   75 
Energy
  604   (61)   69   40   (7)   5   644   (68)   74 
Finance and insurance
  1,310   (122)   204   296   (86)   42   1,606   (208)   246 
Consumer—non-cyclical
  491   (74)   56   54   (16)   11   545   (90)   67 
Technology and communications
  740   (96)   93   39   (11)   8   779   (107)   101 
Industrial
  480   (45)   71   105   (25)   13   585   (70)   84 
Capital goods
  394   (46)   52   62   (17)   6   456   (63)   58 
Consumer—cyclical
  241   (28)   31   23   (4)   6   264   (32)   37 
Transportation
  180   (21)   26   29   (8)   5   209   (29)   31 
Other
  513   (43)   64   43   (15)   6   556   (58)   70 
                                     
Subtotal, non-U.S. corporate securities
  5,593   (599)   732   748   (203)   111   6,341   (802)   843 
                                     
Total for corporate securities in an unrealized loss
position
 $24,073  $(2,943)   3,184  $2,749  $(755)   347  $26,822  $(3,698)   3,531 
                                     

3
4
33
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The scheduled maturity distribution of fixed maturity securities as of JuneSeptember 30, 2023 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  $1,389   $1,375 
Due after one year through five years   8,373    8,000 
Due after five years through ten years   12,727    11,662 
Due after ten years   22,037    20,201 
           
Subtotal   44,526    41,238 
Residential mortgage-backed   997    934 
Commercial mortgage-backed   1,990    1,690 
Other asset-backed   2,351    2,208 
           
Total  $49,864   $46,070 
           
(Amounts in millions)
  
Amortized
cost or
cost
   
Fair
value
 
Due one year or less  $1,443   $1,426 
Due after one year through five years   8,557    8,115 
Due after five years through ten years   12,791    11,368 
Due after ten years   21,880    18,460 
          
Subtotal   44,671    39,369 
Residential mortgage-backed   974    891 
Commercial mortgage-backed   1,868    1,503 
Other asset-backed   2,342    2,205 
          
Total  $49,855   $43,968 
          
As of JuneSeptember 30, 2023, securities issued by finance and insurance,
consumer—non-cyclical,
utilities and technology and communications industry groups represented approximately 26%, 14%, 14%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 JuneSeptember 30, 2023, 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.
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, 2023
  
December 31, 2022
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Property type:                   
Retail  $2,859    42%  $2,916    42% 
Office   1,516    22   1,579    22 
Industrial   1,441    21   1,456    21 
Apartments   534    8   561    8 
Mixed use   379    5   371    5 
Other   147    2   149    2 
                    
Subtotal   6,876    100%   7,032   100% 
                    
Allowance for credit losses   (24)        (22)      
                    
Total  $6,852       $7,010      
                    
   
September 30, 2023
  
December 31, 2022
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Property type:       
Retail  $2,839    42%  $2,916    42% 
Office   1,499    22   1,579    22 
Industrial   1,422    21   1,456    21 
Apartments   530    8   561    8 
Mixed use   370    5   371    5 
Other   158    2   149    2 
                   
Subtotal   6,818    100%   7,032    100% 
             
Allowance for credit losses   (25)     (22)   
             
Total  $6,793    $7,010   
             
 

3
5
34
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
   
June 30, 2023
  
December 31, 2022
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Geographic region:                   
South Atlantic  $1,782    26%  $1,809    26% 
Pacific   1,310    19   1,340    19 
Mountain   1,006    15   1,023    15 
Middle Atlantic   944    14   988    14 
West South Central   566    8   578    8 
East North Central   453    6   454    6 
West North Central   415    6   438    6 
East South Central   213    3   218    3 
New England   187    3   184    3 
                    
Subtotal   6,876    100%   7,032    100% 
                    
Allowance for credit losses   (24)        (22)      
                    
Total  $6,852       $7,010      
                    
   
September 30, 2023
  
December 31, 2022
 
(Amounts in millions)
  
Carrying
value
   
% of
total
  
Carrying
value
   
% of
total
 
Geographic region:       
South Atlantic  $1,795    26%  $1,809    26% 
Pacific   1,276    19   1,340    19 
Mountain   1,011    15   1,023    15 
Middle Atlantic   916    13   988    14 
West South Central   560    8   578    8 
East North Central   453    7   454    6 
West North Central   411    6   438    6 
East South Central   211    3   218    3 
New England   185    3   184    3 
                   
Subtotal   6,818    100%   7,032    100% 
             
Allowance for credit losses   (25)     (22)   
             
Total  $6,793    $7,010   
             
As of JuneSeptember 30, 2023 we had one commercial mortgage loan with an amortized cost of $6 million that was more than 90 days past due and on non-accrual status in the mixed use property type. The carrying value of this commercial mortgage loan was lower than the fair value of its collateral and this loan did not have an allowance for credit losses as of June 30, 2023. As of December 31, 2022, we had no commercial mortgage loans 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 2022 Annual Report on Form
10-K.
During the sixnine months ended JuneSeptember 30, 2023 and year ended December 31, 2022, we did not have any loan modifications or extensions associated with borrowers experiencing financial difficulty that resulted in the consideration of whether to establish a new loan or to continue accounting for the modification or extension under the existing loan.
The following table sets forth the allowance for credit losses related to commercial mortgage loans as of and for the periods indicated:
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
  2023
   
  2022
   
  2023
   
  2022
 
Allowance for credit losses:
                    
Beginning balance
  $24   $25   $22   $26 
Provision
   —      (3)    2    (4) 
Write-offs
   —      —      —      —   
Recoveries
   —      1    —      1 
                     
Ending balance
  $24   $23   $24   $23 
                     
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
 2023 
   
 2022 
   
 2023 
   
 2022 
 
Allowance for credit losses:        
Beginning balance  $24   $23   $22   $26 
Provision   1    —     3    (4) 
Write-offs   —     —     —     —  
Recoveries   —     —     —     1 
                    
Ending balance  $25   $23   $25   $23 
                    
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
3
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
35
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
default by the borrower. The average
debt-to-value
ratio is based on our most recent estimate of the fair value for 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 were 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 JuneSeptember 30, 2023:
 
(Amounts in millions)
  
2023
   
2022
   
2021
   
2020
   
2019
   
2018 and
prior
   
Total
   
2023
   
2022
   
2021
   
2020
   
2019
   
2018 and
prior
   
Total
 
Debt-to-value:                            
0% - 50%  $2   $41   $40   $98   $118   $2,107   $2,406   $2   $49   $86   $116   $121   $1,968   $2,342 
51% - 60%   16    57    131    103    148    887    1,342    23    110    222    86    150    843    1,434 
61% - 75%   94    841    746    285    427    693    3,086    152    775    603    277    402    782    2,991 
76% - 100%   —      —      —      —      8    34    42    —     —     —     4    23    24    51 
Greater than 100%   —      —      —      —      —      —      —      —     —     —     —     —     —     —  
                                                        
Total amortized cost  $112   $939   $917   $486   $701   $3,721   $6,876   $177   $934   $911   $483   $696   $3,617   $6,818 
                                                        
Debt service coverage ratio:                            
Less than 1.00  $—     $7   $10   $6   $46   $177   $246   $—    $17   $4   $18   $37   $207   $283 
1.00 - 1.25   14    17    —      16    19    198    264    14    56    9    19    36    155    289 
1.26 - 1.50   52    287    69    64    162    465    1,099    105    224    104    68    160    478    1,139 
1.51 - 2.00   44    575    607    202    266    1,373    3,067    56    372    424    206    263    1,288    2,609 
Greater than 2.00   2    53    231    198    208    1,508    2,200    2    265    370    172    200    1,489    2,498 
                                                        
Total amortized cost  $112   $939   $917   $486   $701   $3,721   $6,876   $177   $934   $911   $483   $696   $3,617   $6,818 
                                                        
 
3
7
36
Table of Contents
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, 2023
   
September 30, 2023
 
(Amounts in millions)
  
0% - 50%
 
51% - 60%
 
61% - 75%
 
76% - 100%
 
Greater
than 100%
 
Total
   
0% - 50%
 
51% - 60%
 
61% - 75%
 
76% - 100%
 
Greater
than 100%
 
Total
 
Property type:              
Retail  $902  $690  $1,239  $28  $—    $2,859   $918  $703  $1,218  $—   $—   $2,839 
Office   454   274   788   —     —     1,516    353   329   781   36   —    1,499 
Industrial   694   175   572   —     —     1,441    675   258   489   —    —    1,422 
Apartments   177   91   258   8   —     534    200   57   265   8   —    530 
Mixed use   93   103   177   6   —     379    107   76   180   7   —    370 
Other   86   9   52   —     —     147    89   11   58   —    —    158 
                                      
Total amortized cost  $2,406  $1,342  $3,086  $42  $—    $6,876   $2,342  $1,434  $2,991  $51  $—   $6,818 
                                      
% of total   35%   19%   45%   1%   —  %   100%    34%   21%   44%   1%   — %   100% 
                                      
Weighted-average debt service coverage ratio   2.34   1.91   1.62   1.59   —     1.93    2.42   1.87   1.66   0.87   —    1.96 
                                      
 
   
December 31, 2022
 
(Amounts in millions)
  
0% - 50%
  
51% - 60%
  
61% - 75%
  
76% - 100%
  
Greater
than 100%
  
Total
 
Property type:       
Retail  $907  $649  $1,332  $28  $—   $2,916 
Office   445   272   848   14   —    1,579 
Industrial   668   243   545   —    —    1,456 
Apartments   184   90   279   8   —    561 
Mixed use   93   79   199   —    —    371 
Other   88   9   52   —    —    149 
                         
Total amortized cost  $2,385  $1,342  $3,255  $50  $—   $7,032 
                         
% of total   34%   19%   46%   1%   — %   100% 
                         
Weighted-average debt service coverage ratio   2.35   1.95   1.63   1.34   —    1.93 
                         
 
3
8
37
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
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, 2023
 
(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  $87  $69  $557  $1,356  $790  $2,859 
Office   60   121   153   656   526   1,516 
Industrial   21   43   188   589   600   1,441 
Apartments   14   16   143   231   130   534 
Mixed use   23   13   49   203   91   379 
Other   41   2   9   32   63   147 
                          
Total amortized cost  $246  $264  $1,099  $3,067  $2,200  $6,876 
                          
% of total   4%   4%   16%   44%   32%   100% 
                          
Weighted-average debt-to-value   59%   61%   64%   60%   44%   55% 
                          
   
September 30, 2023
 
(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  $58  $107  $550  $1,156  $968  $2,839 
Office   111   53   247   624   464   1,499 
Industrial   50   31   155   461   725   1,422 
Apartments   12   51   84   192   191   530 
Mixed use   27   14   81   162   86   370 
Other   25   33   22   14   64   158 
                         
Total amortized cost  $283  $289  $1,139  $2,609  $2,498  $6,818 
                         
% of total   4%   4%   17%   38%   37%   100% 
                         
Weighted-average
debt-to-value
   64%   63%   64%   58%   47%   55% 
                         
 
   
December 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
 
Property type:
                         
Retail
  $88  $68  $560  $1,380  $820  $2,916 
Office
   81   131   155   666   546   1,579 
Industrial
   20   44   194   574   624   1,456 
Apartments
   14   11   150   242   144   561 
Mixed use
   25   16   50   190   90   371 
Other
   42   2   9   33   63   149 
                          
Total amortized cost
  $270  $272  $1,118  $3,085  $2,287  $7,032 
                          
% of total
   4%   4%   16%   44%   32%   100% 
                          
Weighted-average debt-to-value   61%   62%   63%   60%   44%   56% 
                          
   
December 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
 
Property type:       
Retail  $88  $68  $560  $1,380  $820  $2,916 
Office   81   131   155   666   546   1,579 
Industrial   20   44   194   574   624   1,456 
Apartments   14   11   150   242   144   561 
Mixed use   25   16   50   190   90   371 
Other   42   2   9   33   63   149 
                         
Total amortized cost  $270  $272  $1,118  $3,085  $2,287  $7,032 
                         
% of total   4%   4%   16%   44%   32%   100% 
                         
Weighted-average
debt-to-value
   61%   62%   63%   60%   44%   56% 
                         
(f) Limited Partnerships or Similar Entities
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 JuneSeptember 30, 2023 and December 31, 2022, the total carrying value of these investments was $2,454$2,554 million and $2,230 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.
 
3
9
38
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(6) 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.
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
  
Balance
sheet classification
 
Fair value
  
Balance
sheet classification
 
Fair value
 
(Amounts in millions)
 
June 30,
2023
 
December 31,
2022
 
June 30,
2023
 
December 31,
2022
  
September 30,
2023
 
December 31,
2022
 
September 30,
2023
 
December 31,
2022
 
Derivatives designated as hedges
               
Cash flow hedges:               
Interest rate swaps  Other invested assets  $30  $24   Other liabilities  $472  $522  Other invested assets $12  $24  Other liabilities $884  $522 
Foreign currency swaps  Other invested assets   16   20   Other liabilities   1   —    Other invested assets  15   20  Other liabilities  1   —  
Forward bond purchase commitments Other invested assets  —    —   Other liabilities  3   —  
                                 
Total cash flow hedges     46   44       473   522    27   44    888   522 
                                 
Total derivatives designated as hedges     46   44       473   522    27   44    888   522 
                                 
Derivatives not designated as hedges
               
Equity index options  Other invested assets   15   6   Other liabilities   —     —    Other invested assets  11   6  Other liabilities  —    —  
Financial futures
(1)
  Other invested assets   —     —     Other liabilities   —     —    Other invested assets  —    —   Other liabilities  —    —  
Forward bond purchase commitments  Other invested assets   —     —     Other liabilities   3   —    Other invested assets  —    —   Other liabilities  25   —  
Fixed indexed annuity embedded derivatives  Other assets   —     —     Policyholder
account balances
(2)
   180   202  Other assets  —    —   Policyholder account balances 
(2)
  174   202 
Indexed universal life embedded derivatives  Reinsurance
recoverable		   —     —     Policyholder
account balances
(3)
   15   15  Reinsurance recoverable  —    —   Policyholder account balances
(3)
  14   15 
                                 
Total derivatives not designated as hedges     15   6       198   217    11   6    213   217 
                                 
Total derivatives    $61  $50      $671  $739   $38  $50   $1,101  $739 
                                 
 
(1) The period end valuations of financial futures were zero as a result of settling the margins on these contracts on a daily basis.
(2) Represents the embedded derivatives associated with our fixed indexed annuity liabilities.
(3) Represents the embedded derivatives associated with our indexed universal life liabilities.
40

Table of Contents
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.
39
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for fixed indexed 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,
2022
   
Additions
   
Maturities/
terminations
  
June 30,
2023
 
Derivatives designated as hedges
                        
Cash flow hedges:                        
Interest rate swaps   Notional   $8,542   $927   $(115)  $9,354 
Foreign currency swaps   Notional    144    —      (13)   131 
                         
Total cash flow hedges        8,686    927    (128)   9,485 
                         
Total derivatives designated as hedges        8,686    927    (128)   9,485 
                         
Derivatives not designated as hedges
                        
Equity index options   Notional    936    339    (466)   809 
Financial futures   Notional    1,403    2,889    (2,916)   1,376 
Forward bond purchase commitments   Notional    —      275    —     275 
                         
Total derivatives not designated as hedges        2,339    3,503    (3,382)   2,460 
                         
Total derivatives       $11,025   $4,430   $(3,510)  $11,945 
                         
 
(Number of policies)
  
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
  
June 30,
2023
 
Derivatives not designated as hedges
                        
Fixed indexed annuity embedded derivatives   Policies    7,315    —      (848)   6,467 
Indexed universal life embedded derivatives   Policies    771    —      (15)   756 
(Notional in millions)
  
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
  
September 30,
2023
 
Derivatives designated as hedges
         
Cash flow hedges:         
Interest rate swaps   Notional   $8,542   $1,200   $(261)  $9,481 
Foreign currency swaps   Notional    144    —     (13)   131 
Forward bond purchase commitments   Notional    —     75    —    75 
                     
Total cash flow hedges     8,686    1,275    (274)   9,687 
                     
Total derivatives designated as hedges     8,686    1,275    (274)   9,687 
                     
Derivatives not designated as hedges
         
Equity index options   Notional    936    513    (682)   767 
Financial futures   Notional    1,403    4,216    (4,351)   1,268 
Forward bond purchase commitments   Notional    —     500    —    500 
                     
Total derivatives not designated as hedges     2,339    5,229    (5,033)   2,535 
                     
Total derivatives    $11,025   $6,504   $(5,307)  $12,222 
                     
(Number of policies)
  
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
  
September 30,
2023
 
Derivatives not designated as hedges
         
Fixed indexed annuity embedded derivatives   Policies    7,315    —     (1,177)   6,138 
Indexed universal life embedded derivatives   Policies    771    —     (22)   749 
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; (v) forward bond purchase commitments to hedge against the variability in the anticipated cash flows required to purchase future fixed rate bonds; and (v)(vi) other instruments to hedge the cash flows of various forecasted transactions.
 
4
1
40
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information about the
pre-tax
income effects of cash flow hedges for the three months ended JuneSeptember 30, 2023:

(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		  $(104)  $55    Net investment
income		   $—      Net investment
gains (losses)		 
Interest rate swaps hedging
assets		   —     3    Net investment
gains (losses)		    —      Net investment
gains (losses)		 
Foreign currency swaps   (2)   —      Net investment
income		    —      Net investment
gains (losses)		 
                         
Total  $(106)  $58        $—        
                         
(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 $(453)  $56  Net investment income $—   Net investment gains (losses)
Interest rate swaps hedging liabilities  —    (1)  Interest expense  —   Net investment gains (losses)
Forward bond purchase commitments  (3)   —   Net investment gains (losses)  —   Net investment gains (losses)
Foreign currency swaps  (1)   —   Net investment income  —   Net investment gains (losses)
              
Total $(457)  $55   $—   
              
The following table provides information about the
pre-tax
income effects of cash flow hedges for the three months ended JuneSeptember 30, 2022:
(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 $(125)  $55  Net investment income $—   Net investment gains (losses)
Interest rate swaps hedging assets  —    3  Net investment gains (losses)  —   Net investment gains (losses)
Foreign currency swaps  15   —   Net investment income  —   Net investment gains (losses)
              
Total $(110)  $58   $—   
              
 

(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		  $(405)  $57   Net investment
income		   $—      Net investment
gains (losses)		 
Interest rate swaps hedging
liabilities		   —     (1)   Interest expense    —      Net investment
gains (losses)		 
Foreign currency swaps   14   —     Net investment
income		    —      Net investment
gains (losses)		 
                        
Total  $(391)  $56       $—        
                        
41
42
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides information about the
pre-tax
income effects of cash flow hedges for the sixnine months ended June 
September 30,
,
2023
:

 2023:

(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		  $42  $109   Net investment
income		   $—      Net investment
gains (losses)		 
Interest rate swaps hedging
assets		   —     8   Net investment
gains (losses)		    —      Net investment
gains (losses)		 
Interest rate swaps hedging liabilities   —     (1)   Interest
expense		    —      Net investment
gains (losses)		 
Interest rate swaps hedging liabilities   —     1   Net investment
gains (losses)		    —      Net investment
gains (losses)		 
Foreign currency swaps   (3)   —     Net investment
income		    —      Net investment
gains (losses)		 
Foreign currency swaps   —     2   Net investment
gains (losses)		    —      Net investment
gains (losses)		 
                        
Total  $39  $119       $—        
                        

(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  $(411)  $165  Net investment income  $—    Net investment gains (losses)
Interest rate swaps hedging assets   —    8  Net investment gains (losses)   —    Net investment gains (losses)
Interest rate swaps hedging liabilities   —    (2)  Interest expense   —    Net investment gains (losses)
Interest rate swaps hedging liabilities   —    1  Net investment gains (losses)   —    Net investment gains (losses)
Forward bond purchase commitments   (3)   —   Net investment gains (losses)   —    Net investment gains (losses)
Foreign currency swaps   (4)   —   Net investment income   —    Net investment gains (losses)
Foreign currency swaps   —    2  Net investment gains (losses)   —    Net investment gains (losses)
                 
Total  $(418)  $174    $—    
                 
The following table provides information about the
pre-tax
income effects of cash flow hedges for the sixnine months ended JuneSeptember 30, 2022:

(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  $(655)  $112   Net investment
income		   $—      Net investment
gains (losses)		 
Interest rate swaps hedging assets   —     2   Net investment
gains (losses)		    —      Net investment
gains (losses)		 
Interest rate swaps hedging liabilities   —     (2)   Interest
expense		    —      Net investment
gains (losses)		 
Foreign currency swaps   12   1   Net investment
income		    —      Net investment
gains (losses)		 
                        
Total  $(643)  $113       $—        
                        
 
(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 $(780)  $167  Net investment income $—   Net investment gains (losses)
Interest rate swaps hedging assets  —    5  Net investment gains (losses)  —   Net investment gains (losses)
Interest rate swaps hedging liabilities  —    (2)  Interest expense  —   Net investment gains (losses)
Foreign currency swaps  27   1  Net investment income  —   Net investment gains (losses)
              
Total $(753)  $171   $—   
              
4342
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
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,” as of and for the periods indicated:

  
Three months ended
June 30,
   
Six months ended
June 30,
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Beginning balance  $1,274   $1,789   $1,200   $2,025   $1,154   $1,445   $1,200   $2,025 
Current period increases (decreases) in fair value, net of deferred taxes of
$23, $84, $(8) and $137		   (83)    (307)    31    (506) 
Reclassification to net (income), net of deferred taxes of $21, $19, $42 and
$39		   (37)    (37)    (77)    (74) 
Current period increases (decreases) in fair value, net of deferred taxes of $67, $12, $59 and $149   (390)    (98)    (359)    (604) 
Reclassification to net (income), net of deferred taxes of $18, $21, $60 and $60   (37)    (37)    (114)    (111) 
                                
Ending balance  $1,154   $1,445   $1,154   $1,445   $727   $1,310   $727   $1,310 
                                
The total of derivatives designated as cash flow hedges of $1,154$727 million, net of taxes, recorded in stockholders’ equity as of JuneSeptember 30, 2023 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, $141$138 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 sixnine months ended JuneSeptember 30, 2023 and 2022, we reclassified $7$9 million and $5$7 million, respectively, to net income in connection with forecasted transactions that were no longer considered probablereasonably possible of occurring.
Derivatives Not Designated As Hedges
We enter into certain
non-qualifying
derivative instruments such as equity index options and financial futures to mitigate the risks associated with liabilities that have guaranteed minimum benefits, fixed indexed annuities and indexed universal life. Our fixed indexed annuity and indexed universal life insurance products with certain features are required to be bifurcated as embedded derivatives. Additionally, we have forward bond purchase commitments to hedge against the variability in the anticipated cash flows required to purchase future fixed rate bonds.
 
4
4
43
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table provides the
pre-tax
gain (loss) recognized in net income for the effects of derivatives not designated as hedges for the periods indicated:

    Three months ended
June 30,		 Six months ended
June 30,		  
Classification of gain (loss) recognized
in net income
 
Three months ended
September 30,
 
Nine months ended
September 30,
  
Classification of gain (loss) recognized in
net income
(Amounts in millions)    2023     2022 2023   2022  
    2023    
 
    2022    
 
    2023    
 
    2022    
 
Equity index options    $5     $(1)  $6   $(7)  Net investment gains (losses) $(4)  $5  $2  $(2)  Net investment gains (losses)
Financial futures     (65)      17   (67)    (30)  Changes in fair value of market risk
benefits and associated hedges		  (50)   (34)   (117)   (64)  Changes in fair value of market risk benefits and associated hedges
Forward bond purchase commitments     (3)      —     (3)    —    Net investment gains (losses)  (22)   —    (25)   —   Net investment gains (losses)
Fixed indexed annuity embedded derivatives     (8)      11   (10)    23  Net investment gains (losses)  (6)   (5)   (16)   18  Net investment gains (losses)
Indexed universal life embedded derivatives     2      8   7    19  Net investment gains (losses)  4   4   11   23  Net investment gains (losses)
                                 
Total derivatives not designated as hedges    $(69)     $35  $(67)   $5   $(78)
 
 
 		 $(30)
 
 
 $(145)
 
 
 		 $(25)  
                                 
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, 2023
  
December 31, 2022
 
(Amounts in millions)
  
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 $61  $476  $(415)  $50  $522  $(472) 
Gross amounts offset in the balance sheet  —     —     —     —     —     —   
                         
Net amounts presented in the balance sheet  61   476   (415)   50   522   (472) 
Gross amounts not offset in the balance sheet:                        
Financial instruments
(2)
  (25)   (25)   —     (25)   (25)   —   
Collateral received  (25)   —     (25)   (21)   —     (21) 
Collateral pledged  —     (1,109)   1,109   —     (1,095)   1,095 
Over collateralization  —     658   (658)   —     598   (598) 
                         
Net amount $11  $—    $11  $4  $—    $4 
                         
   
September 30, 2023
  
December 31, 2022
 
(Amounts in millions)
  
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  $38  $913  $(875)  $50  $522  $(472) 
Gross amounts offset in the balance sheet   —    —    —    —    —    —  
                          
Net amounts presented in the balance sheet   38   913   (875)   50   522   (472) 
Gross amounts not offset in the balance sheet:                         
Financial instruments
(2)
   (15)   (15)   —    (25)   (25)   —  
Collateral received   (15)   —    (15)   (21)   —    (21) 
Collateral pledged   —    (1,516)   1,516   —    (1,095)   1,095 
Over collateralization   —    618   (618)   —    598   (598) 
                          
Net amount  $8  $—   $8  $4  $—   $4 
                          
 
(1)Does not include amounts related to embedded derivatives as of JuneSeptember 30, 2023 and December 31, 2022.
(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.
 
4
5
44
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(7) Fair Value of Financial Instruments
Recurring Fair Value Measurements
We have fixed maturity securities, equity securities, limited partnerships, derivatives, short-term investments, embedded derivatives, separate account assets, MRBs 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 securities, equity securities and short-term investments
The fair value of fixed maturity securities, equity securities and short-term investments is 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 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. 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
4
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
45
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 placements 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 JuneSeptember 30, 2023.
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.
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 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 financial instruments carried at fair value 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, 88% of our portfolio was priced using third-party pricing services as of JuneSeptember 30, 2023. 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.
 
4
7
46
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
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.
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 JuneSeptember 30, 2023:

(Amounts in millions)Fair valuePrimary methodologiesSignificant inputs
U.S. government, agencies and government-sponsored enterprises$3,389Price 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$2,283Multi-dimensional attribute-based modeling systems, third-party pricing vendorsTrade prices, material event notices, Municipal Market Data benchmark yields, broker quotes
Non-U.S. government$625Matrix 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$23,491Multi-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$6,232Multi-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$926OAS-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$1,679Multi-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$2,104Multi-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
 
(Amounts in millions)
  
Fair value
   
Primary methodologies
  
Significant inputs
U.S. government, agencies and government-sponsored enterprises  $3,112   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  $2,108   
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
  $582   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  $22,508   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
  $5,976   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		  $888   
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		  $1,493   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  $2,109   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
4
8
47
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
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 $1,536$1,479 million and $767$769 million, respectively, as of JuneSeptember 30, 2023. 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.
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 $259$239 million as of JuneSeptember 30, 2023.
 
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 $
2,779
$2,705 million as of JuneSeptember 30, 2023.
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.
 
4
9
48
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Short-term investments.
The primary inputs to the valuation 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 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 include significant unobservable inputs.
Net asset value
Limited partnerships.
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.
Market risk benefits
MRBs are contracts or contract features that provide protection to the contractholder from other-than-nominal capital market risk while exposing us to other-than-nominal capital market risk. MRBs include certain contract features on fixed and variable annuity products that provide minimum guarantees, in addition to the policyholder account balance, such as GMDBs, GMWBs and GPAFs. MRBs are measured at fair value using an income-based valuation model based on current net amounts at risk, market data, experience and other factors. See note 2 for a discussion of our policy for recording changes in fair value of MRBs.
MRB assets and liabilities for minimum guarantees are valued and presented separately from the related separate account and policyholder account balances.
Fixed indexed annuities
The valuation of fixed indexed annuities MRBs, which includes GMWB features, is based on an income approach that incorporates inputs such as policyholder behavior (GMWB withdrawal utilization, lapses and mortality), 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. Our discount rate used to determine fair value of our fixed indexed annuities MRBs includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the
non-performance
risk of the fixed indexed annuities MRBs. We determine fair value using an internal model based on the various inputs noted above. As a result of our assumptions for GMWB withdrawal utilization, expected future interest credited and
non-performance
risk being considered significant unobservable inputs, we classify these instruments as Level 3. As expected future interest credited decreases or GMWB withdrawal utilization increases, the value of our fixed indexed annuities MRB liability will increase. Any increase in
non-performance
risk would increase the discount rate and would decrease the fair value of the liability. As of JuneSeptember 30, 2023, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement. Refer to note 13 for additional details related to the changes in the fair value measurement of fixed indexed annuities MRBs as of JuneSeptember 30, 2023 and December 31, 2022.
Variable annuities
The valuation of our variable annuities MRBs, which includes GMWB, GMDB and GPAF features, is based on an income approach that incorporates inputs such as policyholder behavior (GMWB withdrawal utilization, lapses and mortality), equity index volatility, interest rates, equity index and fund correlation and an adjustment
49
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
to the discount rate to incorporate
non-performance
risk and risk margins. Our discount rate used to determine fair value of our variable annuities MRBs includes market credit spreads above U.S. Treasury rates to reflect an adjustment for the
non-performance
risk of the variable annuities MRBs. We determine fair value using an internal model based on the various inputs noted above. We classify the variable annuities MRBs valuation as Level 3 based on having significant unobservable inputs, with policyholder behavior (GMWB withdrawal
50

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
utilization and lapses), equity index volatility and
non-performance
risk being considered the more significant unobservable inputs. As equity index volatility increases, the fair value of the variable annuities MRBs will increase. An increase in our lapse assumption would decrease the fair value of the variable annuities MRBs, whereas an increase in our GMWB withdrawal utilization rate would increase the fair value. Any increase in
non-performance
risk would increase the discount rate and would decrease the fair value of the liability. As of JuneSeptember 30, 2023, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement. Refer to note 13 for additional details related to the changes in the fair value measurement of variable annuities MRBs as of JuneSeptember 30, 2023 and December 31, 2022.
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 JuneSeptember 30, 2023, 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 zero as a result of settling the margins on these contracts on a daily basis.
50
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Forward bond purchase commitments.
The valuation of forward bond purchase commitments is determined using an income approach. The primary inputs into the valuation represent current bond prices and interest rates, as well as an estimate of the cost of counterparty financing to acquire and carry the bond during the forward period. The estimated cost of counterparty financing is not readily observable and is developed based upon an assumed spread; accordingly, these derivatives are classified as Level 3.
51

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other foreign currency contracts.
We previously had certain foreign currency options classified as other foreign currency contracts. The valuation of foreign currency options was determined using an income approach. The primary inputs into the valuation represented 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 optionality in the derivative, which are generally considered observable inputs and resulted in the derivative being classified as Level 2. We also had foreign currency forward contracts where the valuation was determined using an income approach. The primary inputs into the valuation represented the forward foreign currency exchange rates, which are generally considered observable inputs and resulted in the derivative being classified as Level 2.
Fixed indexed annuity and indexed universal life embedded derivatives
We have fixed indexed annuity and 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 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 expected future interest credited being considered significant unobservable inputs, we classify these instruments as Level 3. As expected future interest credited decreases, the value of our embedded derivative liability will decrease. As of JuneSeptember 30, 2023, a significant change in the unobservable inputs discussed above would have resulted in a significantly lower or higher fair value measurement.
 
5251
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth our assets by class of instrument that are measured at fair value on a recurring basis as of the dates indicated:
 
   
June 30, 2023
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
(1)
 
Assets                         
Investments:                         
Fixed maturity securities:                         
U.S. government, agencies and government-sponsored enterprises  $3,389   $
—
  
   $3,389   $
—
  
   $
—
  
 
State and political subdivisions   2,343    
—
  
    2,283    60    
—
  
 
Non-U.S. government   625    
—
  
    625    
—
  
    
—
  
 
U.S. corporate:                         
Utilities   3,964    
—
  
    3,146    818    
—
  
 
Energy   2,248    
—
  
    2,189    59    
—
  
 
Finance and insurance   7,126    
—
  
    6,422    704    
—
  
 
Consumer—non-cyclical   4,410    
—
  
    4,342    68    
—
  
 
Technology and communications   2,934    
—
  
    2,923    11    
—
  
 
Industrial   1,224    
—
  
    1,202    22    
—
  
 
Capital goods   2,107    
—
  
    2,073    34    
—
  
 
Consumer—cyclical   1,614    
—
  
    1,490    124    
—
  
 
Transportation   1,117    
—
  
    1,094    23    
—
  
 
Other   299    
—
  
    146    153    
—
  
 
                          
Total U.S. corporate   27,043    
—
  
    25,027    2,016    
—
  
 
                          
Non-U.S. corporate:                         
Utilities   735    
—
  
    415    320    
—
  
 
Energy   1,002    
—
  
    885    117    
—
  
 
Finance and insurance   1,899    
—
  
    1,773    126    
—
  
 
Consumer—non-cyclical   592    
—
  
    519    73    
—
  
 
Technology and communications   891    
—
  
    865    26    
—
  
 
Industrial   782    
—
  
    707    75    
—
  
 
Capital goods   555    
—
  
    504    51    
—
  
 
Consumer—cyclical   217    
—
  
    208    9    
—
  
 
Transportation   346    
—
  
    325    21    
—
  
 
Other   819    
—
  
    798    21    
—
  
 
                          
Total non-U.S. corporate   7,838    
—
  
    6,999    839    
—
  
 
                          
Residential mortgage-backed   934    
—
  
    926    8    
—
  
 
Commercial mortgage-backed   1,690    
—
  
    1,679    11    
—
  
 
Other asset-backed   2,208    
—
  
    2,104    104    
—
  
 
                          
Total fixed maturity securities   46,070    
—
  
    43,032    3,038    
—
  
 
                          
Equity securities   378    307    41    30    
—
  
 
Limited partnerships   2,003    
—
  
    
—
  
    21    1,982 
Other invested assets:                         
Derivative assets:                         
Interest rate swaps   30    
—
  
    30    
—
  
    
—
  
 
Foreign currency swaps   16    
—
  
    16    
—
  
    
—
  
 
Equity index options   15    
—
  
    
—
  
    15    
—
  
 
                          
Total derivative assets   61    
—
  
    46    15    
—
  
 
                          
Short-term investments   23    
—
  
    16    7    
—
  
 
                          
Total other invested assets   84    
—
  
    62    22    
—
  
 
                          
Separate account assets   4,533    4,533    
—
  
    
—
  
    
—
  
 
                          
Total assets  $53,068   $4,840   $43,135   $3,111   $1,982 
                          
   
September 30, 2023
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV 
(1)
 
Assets          
Investments:          
Fixed maturity securities:          
U.S. government, agencies and government-sponsored enterprises  $3,112   $—    $3,112   $—    $—  
State and political subdivisions   2,164    —     2,108    56    —  
Non-U.S.
government
   583    —     582    1    —  
U.S. corporate:          
Utilities   3,856    —     3,068    788    —  
Energy   2,207    —     2,150    57    —  
Finance and insurance   6,873    —     6,171    702    —  
Consumer—non-cyclical
   4,126    —     4,060    66    —  
Technology and communications   2,794    —     2,783    11    —  
Industrial   1,149    —     1,127    22    —  
Capital goods   2,039    —     2,006    33    —  
Consumer—cyclical   1,548    —     1,428    120    —  
Transportation   1,066    —     1,044    22    —  
Other   298    —     150    148    —  
                         
Total U.S. corporate   25,956    —     23,987    1,969    —  
                         
Non-U.S.
corporate:
          
Utilities   719    —     413    306    —  
Energy   978    —     852    126    —  
Finance and insurance   1,844    —     1,722    122    —  
Consumer—non-cyclical
   582    —     510    72    —  
Technology and communications   840    —     817    23    —  
Industrial   769    —     711    58    —  
Capital goods   524    —     473    51    —  
Consumer—cyclical   211    —     202    9    —  
Transportation   334    —     313    21    —  
Other   753    —     732    21    —  
                         
Total
non-U.S.
corporate
   7,554    —     6,745    809    —  
                         
Residential mortgage-backed   891    —     888    3    —  
Commercial mortgage-backed   1,503    —     1,493    10    —  
Other asset-backed   2,205    —     2,109    96    —  
                         
Total fixed maturity securities   43,968    —     41,024    2,944    —  
                         
Equity securities   363    290    41    32    —  
Limited partnerships   2,096    —     —     20    2,076 
Other invested assets:          
Derivative assets:          
Interest rate swaps   12    —     12    —     —  
Foreign currency swaps   15    —     15    —     —  
Equity index options   11    —     —     11    —  
                         
Total derivative assets   38    —     27    11    —  
                         
Short-term investments   30    —     23    7    —  
                         
Total other invested assets   68    —     50    18    —  
                         
Separate account assets   4,244    4,244    —     —     —  
                         
Total assets  $50,739   $4,534   $41,115   $3,014   $2,076 
                         
 
(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.
 
5
3
52
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

   
December 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
(1)
 
Assets                         
Investments:                         
Fixed maturity securities:                         
U.S. government, agencies and government-sponsored enterprises  $3,341   $
—
  
   $3,341   $
—
  
   $
—
  
 
State and political subdivisions   2,399    
—
  
    2,344    55    
—
  
 
Non-U.S. government   645    
—
  
    645    
—
  
    
—
  
 
U.S. corporate:                         
Utilities   3,898    
—
  
    3,056    842    
—
  
 
Energy   2,262    
—
  
    2,146    116    
—
  
 
Finance and insurance   7,193    
—
  
    6,506    687    
—
  
 
Consumer—non-cyclical   4,457    
—
  
    4,375    82    
—
  
 
Technology and communications   2,947    
—
  
    2,923    24    
—
  
 
Industrial   1,197    
—
  
    1,175    22    
—
  
 
Capital goods   2,138    
—
  
    2,104    34    
—
  
 
Consumer—cyclical   1,617    
—
  
    1,504    113    
—
  
 
Transportation   1,100    
—
  
    1,057    43    
—
  
 
Other   310    
—
  
    151    159    
—
  
 
                          
Total U.S. corporate   27,119    
—
  
    24,997    2,122    
—
  
 
                          
Non-U.S. corporate:                         
Utilities
  
 
740
 
  
 
—
  
 
  
 
445
 
  
 
295
 
  
 
—
  
 
Energy
  
 
960
 
  
 
—
  
 
  
 
842
 
  
 
118
 
  
 
—
  
 
Finance and insurance   1,946    
—
  
    1,821    125    
—
  
 
Consumer—non-cyclical   566    
—
  
    493    73    
—
  
 
Technology and communications   894    
—
  
    868    26    
—
  
 
Industrial   818    
—
  
    770    48    
—
  
 
Capital goods   546    
—
  
    451    95    
—
  
 
Consumer—cyclical   276    
—
  
    212    64    
—
  
 
Transportation   375    
—
  
    355    20    
—
  
 
Other   889    
—
  
    868    21    
—
  
 
                          
Total non-U.S. corporate   8,010    
—
  
    7,125    885    
—
  
 
                          
Residential mortgage-backed   995    
—
  
    973    22    
—
  
 
Commercial mortgage-backed   1,908    
—
  
    1,896    12    
—
  
 
Other asset-backed   2,166    
—
  
    2,072    94    
—
  
 
                          
Total fixed maturity securities   46,583    
—
  
    43,393    3,190    
—
  
 
                          
Equity securities   319    239    46    34    
—
  
 
Limited partnerships   1,816    
—
  
    
—
  
    24    1,792 
Other invested assets:                         
Derivative assets:                         
Interest rate swaps   24    
—
  
    24    
—
  
    
—
  
 
Foreign currency swaps   20    
—
  
    20    
—
  
    
—
  
 
Equity index options   6    
—
  
    
—
  
    6    
—
  
 
                          
Total derivative assets   50    
—
  
    44    6    
—
  
 
                          
Short-term investments   3    
—
  
    3    
—
  
    
—
  
 
                          
Total other invested assets   53    
—
  
    47    6    
—
  
 
                          
Separate account assets   4,417    4,417    
—
  
    
—
  
    
—
  
 
                          
Total assets  $53,188   $4,656   $43,486   $3,254   $1,792 
                          
   
December 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
NAV
 (1)
 
Assets          
Investments:          
Fixed maturity securities:          
U.S. government, agencies and government-sponsored enterprises  $3,341   $—    $3,341   $—    $—  
State and political subdivisions   2,399    —     2,344    55    —  
Non-U.S.
government
   645    —     645    —     —  
U.S. corporate:          
Utilities   3,898    —     3,056    842    —  
Energy   2,262    —     2,146    116    —  
Finance and insurance   7,193    —     6,506    687    —  
Consumer—non-cyclical
   4,457    —     4,375    82    —  
Technology and communications   2,947    —     2,923    24    —  
Industrial   1,197    —     1,175    22    —  
Capital goods   2,138    —     2,104    34    —  
Consumer—cyclical   1,617    —     1,504    113    —  
Transportation   1,100    —     1,057    43    —  
Other   310    —     151    159    —  
                         
Total U.S. corporate   27,119    —     24,997    2,122    —  
                         
Non-U.S.
corporate:
          
Utilities   740    —     445    295    —  
Energy   960    —     842    118    —  
Finance and insurance   1,946    —     1,821    125    —  
Consumer—non-cyclical
   566    —     493    73    —  
Technology and communications   894    —     868    26    —  
Industrial   818    —     770    48    —  
Capital goods   546    —     451    95    —  
Consumer—cyclical   276    —     212    64    —  
Transportation   375    —     355    20    —  
Other   889    —     868    21    —  
                         
Total
non-U.S.
corporate
   8,010    —     7,125    885    —  
                         
Residential mortgage-backed   995    —     973    22    —  
Commercial mortgage-backed   1,908    —     1,896    12    —  
Other asset-backed   2,166    —     2,072    94    —  
                         
Total fixed maturity securities   46,583    —     43,393    3,190    —  
                         
Equity securities   319    239    46    34    —  
Limited partnerships   1,816    —     —     24    1,792 
Other invested assets:          
Derivative assets:          
Interest rate swaps   24    —     24    —     —  
Foreign currency swaps   20    —     20    —     —  
Equity index options   6    —     —     6    —  
                         
Total derivative assets   50    —     44    6    —  
                         
Short-term investments   3    —     3    —     —  
                         
Total other invested assets   53    —     47    6    —  
                         
Separate account assets   4,417    4,417    —     —     —  
                         
Total assets  $53,188   $4,656   $43,486   $3,254   $1,792 
                         
 
(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.
 
5
4
53
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 and for the dates indicated:
 
  
Beginning
balance

as of
April 1,

2023
  
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,

2023
  
Total gains
(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:                                                
State and political subdivisions
 $59  $1  $
—
  
  $
—
  
  $
—
  

 $
—
  
  $
—
  
  $
—
  
  $
—
  
  $60  $1
 $
—

 
U.S. corporate:                                                
Utilities  859   —     (11)   —     (31)   —     (10)   11   —     818   —     (18) 
Energy  115   —     —     —     —     —     (1)   —     (55)   59   —     (1) 
Finance and insurance  697   —     (6)   48   —     —     (30)   —     (5)   704   —     (10) 
Consumer—non-cyclical  69   —     (1)   —     —     —     —     —     —     68   —     (1) 
Technology and communications  12   —     (1)   —     —     —     —     —     —     11   —     —   
Industrial  22   —     —     —     —     —     —     —     —     22   —     —   
Capital goods  34   —     —     —     —     —     —     —     —     34   —     (1) 
Consumer—cyclical  127   —     (2)   1   —     —     (2)   —     —     124   —     (2) 
Transportation  24   —     (1)   —     —     —     —     —     —     23   —     —   
Other  156   —     1   —     —     —     (4)   —     —     153   —     1 
                                                 
Total U.S. corporate  2,115   —     (21)   49   (31)   —     (47)   11   (60)   2,016   —     (32) 
                                                 
Non-U.S. corporate:                                                
Utilities  298   —     (9)   1   —     —     —     30   —     320   —     (8) 
Energy  119   —     (2)   —     —     —     —     —     —     117   —     (2) 
Finance and insurance  131   2   (7)   —     —     —     —     —     —     126   2   (6) 
Consumer—non-cyclical  73   —     —     —     —     —     —     —     —     73   —     (1) 
Technology and communications  26   —     —     —     —     —     —     —     —     26   —     —   
Industrial  75   —     —     —     —     —     —     —     —     75   —     (1) 
Capital goods  52   —     (1)   —     —     —     —     —     —     51   —     —   
Consumer—cyclical  9   —     1   —     —     —     (1)   —     —     9   —     —   
Transportation  22   —     (1)   —     —     —     —     —     —     21   —     (1) 
Other  22   —     (1)   —     —     —     —     —     —     21   —     —   
                                                 
Total non-U.S. corporate  827   2   (20)   1   —     —     (1)   30   —     839   2   (19) 
                                                 
Residential mortgage-backed  8   —     1   —     —     —     (1)   —     —     8   —     —   
Commercial mortgage-backed  12   —     —     —     (1)   —     —     —     —     11   —     —   
Other asset-backed  95   —     (1)   10   —     —     —     —     —     104   —     (1) 
                                                 
Total fixed maturity securities  3,116   3   (41)   60   (32)   —     (49)   41   (60)   3,038   3   (52) 
                                                 
Equity securities  33   —     —     1   (4)   —     —     —     —     30   —     —   
Limited partnerships  22   (1)   —     —     —     —     —     —     —     21   (1)   —   
Other invested assets:                                                
Derivative assets:                                                
Equity index options  10   5   —     2   —     —     (2)   —     —     15   4   —   
                                                 
Total derivative assets  10   5   —     2   —     —     (2)   —     —     15   4   —   
Short-term investments  —     —     —     7   —     —     —     —     —     7   —     —   
                                                 
Total other invested assets  10   5   —     9   —     —     (2)   —     —     22   4   —   
                                                 
Total Level 3 assets $3,181  $7  $(41)  $70  $(36)  $—    $(51)  $41  $(60)  $3,111  $6  $(52) 
                                                 
  
Beginning
balance

as of
July 1,
2023
  
Total realized and
unrealized gains
(losses)
              
Transfer
into
Level 3 
(1)
  
Transfer
out of
Level 3 
(1)
  
Ending
balance

as of
September 30,
2023
  
Total gains (losses)
attributable to

assets still held
 
(Amounts in millions)
 
Included in
net income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included in
net income
  
Included
in OCI
 
Fixed maturity securities:            
State and political subdivisions $60  $1  $(5)  $—   $—   $—   $—   $—   $—   $56  $1  $(5) 
Non-U.S.
government
  —    —    —    —    —    —    —    1   —    1   —    —  
U.S. corporate:            
Utilities  818   —    (42)   23   —    —    —    —    (11)   788   —    (42) 
Energy  59   —    (1)   —    —    —    (1)   —    —    57   —    (1) 
Finance and insurance  704   —    (17)   29   —    —    (7)   —    (7)   702   —    (16) 
Consumer—non-cyclical
  68   —    (1)   —    —    —    (1)   —    —    66   —    (1) 
Technology and communications  11   —    —    —    —    —    —    —    —    11   —    —  
Industrial  22   —    —    —    —    —    —    —    —    22   —    —  
Capital goods  34   —    (1)   —    —    —    —    —    —    33   —    (1) 
Consumer—cyclical  124   —    (2)   —    —    —    (2)   —    —    120   —    (2) 
Transportation  23   —    —    —    —    —    (1)   —    —    22   —    —  
Other  153   —    (4)   —    —    —    (1)   —    —    148   —    (4) 
                                                
Total U.S. corporate  2,016   —    (68)   52   —    —    (13)   —    (18)   1,969   —    (67) 
                                                
Non-U.S.
corporate:
            
Utilities  320   —    (6)   —    —    —    —    —    (8)   306   —    (7) 
Energy  117   —    (2)   —    —    —    —    11   —    126   —    (3) 
Finance and insurance  126   1   (5)   —    —    —    —    —    —    122   1   (5) 
Consumer—non-cyclical
  73   —    (1)   —    —    —    —    —    —    72   —    (1) 
Technology and communications  26   —    —    —    —    —    (3)   —    —    23   —    —  
Industrial  75   —    (3)   —    —    —    (15)   1   —    58   —    (2) 
Capital goods  51   —    —    —    —    —    —    —    —    51   —    (1) 
Consumer—cyclical  9   —    —    —    —    —    —    —    —    9   —    1 
Transportation  21   —    —    —    —    —    —    —    —    21   —    —  
Other  21   —    —    —    —    —    —    —    —    21   —    —  
                                                
Total
non-U.S.
corporate
  839   1   (17)   —    —    —    (18)   12   (8)   809   1   (18) 
                                                
Residential mortgage-backed  8   —    (1)   —    —    —    —    —    (4)   3   —    —  
Commercial mortgage-backed  11   —    (1)   —    —    —    —    —    —    10   —    (1) 
Other asset-backed  104   —    (1)   4   —    —    (1)   —    (10)   96   —    (1) 
                                                
Total fixed maturity securities  3,038   2   (93)   56   —    —    (32)   13   (40)   2,944   2   (92) 
                                                
Equity securities  30   —    —    4   (2)   —    —    —    —    32   —    —  
Limited partnerships  21   —    —    —    —    —    (1)   —    —    20   —    —  
Other invested assets:            
Derivative assets:            
Equity index options  15   (4)   —    3   —    —    (3)   —    —    11   (4)   —  
                                                
Total derivative assets  15   (4)   —    3   —    —    (3)   —    —    11   (4)   —  
Short-term investments  7   —    —    —    —    —    —    —    —    7   —    —  
                                                
Total other invested assets  22   (4)   —    3   —    —    (3)   —    —    18   (4)   —  
                                                
Total Level 3 assets $3,111  $(2)  $(93)  $63  $(2)  $—   $(36)  $13  $(40)  $3,014  $(2)  $(92) 
                                                
 
(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.
 
5
5
54
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

  
Beginning
balance

as of
April 1,

2022
  
Total realized and
unrealized gains
(losses)
              
Transfer
into
Level 3
(1)
  
Transfer
out of
Level 3
(1)
  
Ending
balance
as of
June 30,

2022
  
Total gains
(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:                                                
State and political subdivisions $71  $1  $(9)  $—    $—    $—    $—    $—    $—    $63  $1  $(9) 
Non-U.S. government  1   —     —     2   —     —     —     —     —     3   —     —   
U.S. corporate:                                                
Utilities  912   —     (92)   —     —     —     (1)   2   (11)   810   —     (92) 
Energy  72   —     (11)   —     —     —     (7)   68   —     122   —     (11) 
Finance and insurance  676   —     (67)   85   —     —     (1)   —     (39)   654   —     (61) 
Consumer—non-cyclical  92   —     (6)   —     —     —     —     —     —     86   —     (5) 
Technology and communications  28   —     (3)   —     —     —     —     —     —     25   —     (3) 
Industrial  35   —     (2)   —     —     —     —     —     —     33   —     (2) 
Capital goods  41   —     (3)   —     —     —     —     —     —     38   —     (3) 
Consumer—cyclical  127   —     (7)   —     —     —     (1)   —     —     119   —     (7) 
Transportation  64   —     (3)   —     —     —     (1)   —     (4)   56   —     (3) 
Other  222   —     (12)   —     —     —     (3)   —     —     207   —     (12) 
                                                 
Total U.S. corporate  2,269   —     (206)   85   —     —     (14)   70   (54)   2,150   —     (199) 
                                                 
Non-U.S. corporate:                                                
Utilities  334   —     (25)   —     —     —     —     —     —     309   —     (24) 
Energy  138   —     (7)   3   —     —     (1)   —     —     133   —     (8) 
Finance and insurance  143   1   (12)   —     —     —     —     —     —     132   1   (12) 
Consumer—non-cyclical  60   —     (4)   —     —     —     —     11   —     67   —     (4) 
Technology and communications  27   —     (1)   —     —     —     —     —     —     26   —     (1) 
Industrial  74   —     (4)   —     —     —     —     —     (1)   69   —     (5) 
Capital goods  132   —     (7)   —     (10)   —     —     —     —     115   —     (7) 
Consumer—cyclical  86   —     (7)   —     —     —     —     —     —     79   —     (7) 
Transportation  22   —     (1)   —     —     —     —     —     —     21   —     (1) 
Other  24   —     (2)   —     —     —     —     —     —     22   —     (1) 
                                                 
Total non-U.S. corporate  1,040   1   (70)   3   (10)   —     (1)   11   (1)   973   1   (70) 
                                                 
Residential mortgage-backed  33   —     (2)   4   —     —     (1)   —     (4)   30   —     (2) 
Commercial mortgage-backed  15   —     (1)   —     —     —     —     —     —     14   —     (2) 
Other asset-backed  100   —     (5)   40   (6)   —     —     —     —     129   —     (5) 
                                                 
Total fixed maturity securities  3,529   2   (293)   134   (16)   —     (16)   81   (59)   3,362   2   (287) 
                                                 
Equity securities  36   —     —     —     (1)   —     —     —     —     35   —     —   
Limited partnerships  26   (3)   —     —     —     —     —     —     —     23   (3)   —   
Other invested assets:                                                
Derivative assets:                                                
Equity index options  30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
                                                 
Total derivative assets  30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
                                                 
Total other invested assets  30   (1)   —     3   —     —     (2)   —     —     30   (4)   —   
                                                 
Total Level 3 assets $3,621  $(2)  $(293)  $137  $(17)  $—    $(18)  $81  $(59)  $3,450  $(5)  $(287) 
                                                 
  
Beginning
balance

as of
July 1,
2022
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance

as of
September 30,
2022
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
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
 
Fixed maturity securities:            
State and political subdivisions $63  $—   $(7)  $—   $—   $—   $—   $—   $—   $56  $—   $(8) 
Non-U.S.
government
  3   —    —    —    (1)   —    —    —    —    2   —    —  
U.S. corporate:            
Utilities  810   —    (59)   23   —    —    (6)   —    —    768   —    (58) 
Energy  122   —    (6)   —    —    —    (1)   —    —    115   —    (6) 
Finance and insurance  654   —    (32)   16   —    —    (9)   —    —    629   —    (33) 
Consumer—non-cyclical
  86   —    (3)   —    —    —    (1)   —    —    82   —    (3) 
Technology and communications  25   —    (1)   —    —    —    —    —    —    24   —    (1) 
Industrial  33   —    (1)   —    —    —    —    —    —    32   —    —  
Capital goods  38   —    (1)   —    —    —    —    —    —    37   —    (2) 
Consumer—cyclical  119   —    (5)   —    —    —    (1)   —    —    113   —    (5) 
Transportation  56   —    (2)   —    —    —    (1)   —    —    53   —    (2) 
Other  207   —    (6)   —    (7)   —    (1)   —    —    193   —    (7) 
                                                
Total U.S. corporate  2,150   —    (116)   39   (7)   —    (20)   —    —    2,046   —    (117) 
                                                
Non-U.S.
corporate:
            
Utilities  309   —    (16)   —    —    —    (18)   —    —    275   —    (17) 
Energy  133   —    (4)   —    —    —    (7)   —    —    122   —    (3) 
Finance and insurance  132   2   (11)   —    —    —    —    —    —    123   2   (12) 
Consumer—non-cyclical
  67   —    (2)   9   —    —    —    —    —    74   —    (2) 
Technology and communications  26   —    (1)   —    —    —    —    —    —    25   —    (1) 
Industrial  69   —    (3)   —    —    —    (20)   —    —    46   —    (3) 
Capital goods  115   —    (4)   —    —    —    (19)   —    —    92   —    (3) 
Consumer—cyclical  79   —    (4)   —    —    —    —    —    —    75   —    (4) 
Transportation  21   —    —    —    —    —    —    —    —    21   —    (1) 
Other  22   —    (1)   —    —    —    —    —    —    21   —    (1) 
                                                
Total
non-U.S.
corporate
  973   2   (46)   9   —    —    (64)   —    —    874   2   (47) 
                                                
Residential mortgage-backed  30   —    (1)   —    —    —    —    —    (4)   25   —    —  
Commercial mortgage-backed  14   —    (3)   —    —    —    —    1   —    12   —    (2) 
Other asset-backed  129   —    (5)   26   —    —    (2)   —    (38)   110   —    (4) 
                                                
Total fixed maturity securities  3,362   2   (178)   74   (8)   —    (86)   1   (42)   3,125   2   (178) 
                                                
Equity securities  35   —    —    —    —    —    —    —    —    35   —    —  
Limited partnerships  23   1   —    —    —    —    —    —    —    24   1   —  
Other invested assets:            
Derivative assets:            
Equity index options  30   5   —    3   —    —    —    —    —    38   (5)   —  
                                                
Total derivative assets  30   5   —    3   —    —    —    —    —    38   (5)   —  
                                                
Total other invested assets  30   5   —    3   —    —    —    —    —    38   (5)   —  
                                                
Total Level 3 assets $3,450  $8  $(178)  $77  $(8)  $—   $(86)  $1  $(42)  $3,222  $(2)  $(178) 
                                                
 
(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.
 
5
6
55
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
  
Beginning
balance

as of
January 1,
2023
  
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,
2023
  
Total gains

(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:                                                
State and political subdivisions
 $55  $2  $3  $—    $—    $—    $—    $—    $—    $60  $2  $3 
U.S. corporate:                                                
Utilities  842   —     —     40   (40)   —     (10)   11   (25)   818   —     (8) 
Energy  116   —     1   —     (1)   —     (2)   —     (55)   59   —     1 
Finance and insurance  687   —     (3)   63   —     —     (35)   —     (8)   704   —     (6) 
Consumer—non-cyclical  82   —     —     —     —     —     (14)   —     —     68   —     —   
Technology and communications  24   —     —     —     —     —     —     —     (13)   11   —     —   
Industrial  22   —     —     —     —     —     —     —     —     22   —     —   
Capital goods  34   —     —     —     —     —     —     —     —     34   —     —   
Consumer—cyclical  113   —     —     1   —     —     (3)   13   —     124   —     —   
Transportation  43   —     —     —     —     —     (20)   —     —     23   —     —   
Other  159   —     1   —     —     —     (7)   —     —     153   —     1 
                                                 
Total U.S. corporate  2,122   —     (1)   104   (41)   —     (91)   24   (101)   2,016   —     (12) 
                                                 
Non-U.S. corporate:                                                
Utilities  295   —     (4)   4   —     —     (5)   30   —     320   —     (3) 
Energy  118   —     —     —     —     —     (1)   —     —     117   —     —   
Finance and insurance  125   3   (2)   —     —     —     —     —     —     126   3   (2) 
Consumer—non-cyclical  73   —     —     —     —     —     —     —     —     73   —     —   
Technology and communications  26   —     —     —     —     —     —     —     —     26   —     —   
Industrial  48   —     2   25   —     —     —     —     —     75   —     1 
Capital goods  95   1   3   —     (12)   —     (36)   —     —     51   —     2 
Consumer—cyclical  64   —     7   —     (6)   —     (56)   —     —     9   —     1 
Transportation  20   —     —     1   —     —     —     —     —     21   —     —   
Other  21   —     —     —     —     —     —     —     —     21   —     —   
                                                 
Total non-U.S. corporate  885   4   6   30   (18)   —     (98)   30   —     839   3   (1) 
                                                 
Residential mortgage-backed  22   —     2   —     —     —     (1)   —     (15)   8   —     —   
Commercial mortgage-backed  12   —     —     —     (1)   —     —     —     —     11   —     —   
Other asset-backed  94   —     1   12   —     —     (1)   —     (2)   104   —     1 
                                                 
Total fixed maturity securities  3,190   6   11   146   (60)   —     (191)   54   (118)   3,038   5   (9) 
                                                 
Equity securities  34   —     —     1   (5)   —     —     —     —     30   —     —   
Limited partnerships  24   (3)   —     —     —     —     —     —     —     21   (3)   —   
Other invested assets:                                                
Derivative assets:                                                
Equity index options  6   6   —     5   —     —     (2)   —     —     15   5   —   
                                                 
Total derivative assets  6   6   —     5   —     —     (2)   —     —     15   5   —   
Short-term investments  —     —     —     7   —     —     —     —     —     7   —     —   
                                                 
Total other invested assets  6   6   —     12   —     —     (2)   —     —     22   5   —   
                                                 
Total Level 3 assets $3,254  $9  $11  $159  $(65)  $—    $(193)  $54  $(118)  $3,111  $7  $(9) 
                                                 
  
Beginning
balance

as of
January 1,
2023
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance

as of
September 30,
2023
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
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
 
Fixed maturity securities:            
State and political subdivisions
 $55  $3  $(2)  $—   $—   $—   $—   $—   $—   $56  $3  $(2) 
Non-U.S.
government
  —    —    —    —    —    —    —    1   —    1   —    —  
U.S. corporate:            
Utilities  842   —    (42)   63   (40)   —    (10)   11   (36)   788   —    (50) 
Energy  116   —    —    —    (1)   —    (3)   —    (55)   57   —    —  
Finance and insurance  687   —    (20)   92   —    —    (42)   —    (15)   702   —    (22) 
Consumer—non-cyclical
  82   —    (1)   —    —    —    (15)   —    —    66   —    (1) 
Technology and communications  24   —    —    —    —    —    —    —    (13)   11   —    —  
Industrial  22   —    —    —    —    —    —    —    —    22   —    —  
Capital goods  34   —    (1)   —    —    —    —    —    —    33   —    (1) 
Consumer—cyclical  113   —    (2)   1   —    —    (5)   13   —    120   —    (2) 
Transportation  43   —    —    —    —    —    (21)   —    —    22   —    —  
Other  159   —    (3)   —    —    —    (8)   —    —    148   —    (3) 
                                                
Total U.S. corporate  2,122   —    (69)   156   (41)   —    (104)   24   (119)   1,969   —    (79) 
                                                
Non-U.S.
corporate:
            
Utilities  295   —    (10)   4   —    —    (5)   30   (8)   306   —    (10) 
Energy  118   —    (2)   —    —    —    (1)   11   —    126   —    (3) 
Finance and insurance  125   4   (7)   —    —    —    —    —    —    122   4   (7) 
Consumer—non-cyclical
  73   —    (1)   —    —    —    —    —    —    72   —    (1) 
Technology and communications  26   —    —    —    —    —    (3)   —    —    23   —    —  
Industrial  48   —    (1)   25   —    —    (15)   1   —    58   —    (1) 
Capital goods  95   1   3   —    (12)   —    (36)   —    —    51   —    1 
Consumer—cyclical  64   —    7   —    (6)   —    (56)   —    —    9   —    2 
Transportation  20   —    —    1   —    —    —    —    —    21   —    —  
Other  21   —    —    —    —    —    —    —    —    21   —    —  
                                                
Total
non-U.S.
corporate
  885   5   (11)   30   (18)   —    (116)   42   (8)   809   4   (19) 
                                                
Residential mortgage-backed  22   —    1   —    —    —    (1)   —    (19)   3   —    —  
Commercial mortgage-backed  12   —    (1)   —    (1)   —    —    —    —    10   —    (1) 
Other asset-backed  94   —    —    16   —    —    (2)   —    (12)   96   —    —  
                                                
Total fixed maturity securities  3,190   8   (82)   202   (60)   —    (223)   67   (158)   2,944   7   (101) 
                                                
Equity securities  34   —    —    5   (7)   —    —    —    —    32   —    —  
Limited partnerships  24   (3)   —    —    —    —    (1)   —    —    20   (3)   —  
Other invested assets:            
Derivative assets:            
Equity index options  6   2   —    8   —    —    (5)   —    —    11   —    —  
                                                
Total derivative assets  6   2   —    8   —    —    (5)   —    —    11   —    —  
Short-term investments  —    —    —    7   —    —    —    —    —    7   —    —  
                                                
Total other invested assets  6   2   —    15   —    —    (5)   —    —    18   —    —  
                                                
Total Level 3 assets $3,254  $7  $(82)  $222  $(67)  $—   $(229)  $67  $(158)  $3,014  $4  $(101) 
                                                
 
(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.
 
5
7
56
Table of Contents
GENWORTH
FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
  
Beginning
balance
as of
January 1,
2022
  
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,
2022
  
Total gains

(losses)
attributable to
assets still held
 
(Amounts in millions)
 
Included
in net
income
  
Included
in OCI
  
Included
in net
income
  
Included
in OCI
 
Fixed maturity securities:
                                                
State and political subdivisions $82  $2  $(21)  $—    $—    $—    $—    $—    $—    $63  $2  $(21) 
Non-U.S. government
  2   —     —     2   (1)   —     —     —     —     3   —     —   
U.S. corporate:                                                
Utilities  950   —     (165)   35   —     —     (1)   2   (11)   810   —     (165) 
Energy  76   —     (15)   —     —     —     (7)   68   —     122   —     (15) 
Finance and insurance  685   —     (123)   151   —     —     (3)   —     (56)   654   —     (116) 
Consumer—non-cyclical  104   —     (11)   —     —     —     (7)   —     —     86   —     (11) 
Technology and communications  29   —     (4)   —     —     —     —     —     —     25   —     (4) 
Industrial  37   —     (4)   —     —     —     —     —     —     33   —     (4) 
Capital goods  45   —     (7)   —     —     —     —     —     —     38   —     (6) 
Consumer—cyclical  137   —     (15)   —     —     —     (3)   —     —     119   —     (15) 
Transportation  64   —     (6)   5   —     —     (3)   —     (4)   56   —     (6) 
Other  254   —     (23)   —     —     —     (7)   —     (17)   207   —     (22) 
                                                 
Total U.S. corporate  2,381   —     (373)   191   —     —     (31)   70   (88)   2,150   —     (364) 
                                                 
Non-U.S. corporate:                                                
Utilities  345   —     (46)   10   —     —     —     —     —     309   —     (45) 
Energy  145   —     (14)   3   —     —     (1)   —     —     133   —     (15) 
Finance and insurance  160   2   (30)   —     —     —     —     —     —     132   2   (30) 
Consumer—non-cyclical  63   —     (7)   —     —     —     —     11   —     67   —     (7) 
Technology and communications  28   —     (2)   —     —     —     —     —     —     26   —     (2) 
Industrial  93   —     (10)   —     —     —     —     —     (14)   69   —     (9) 
Capital goods  173   —     (15)   —     (10)   —     (33)   —     —     115   —     (15) 
Consumer—cyclical  76   —     (14)   —     —     —     —     17   —     79   —     (14) 
Transportation  53   —     (3)   —     —     —     (29)   —     —     21   —     (3) 
Other  26   —     (4)   —     —     —     —     —     —     22   —     (3) 
                                                 
Total non-U.S. corporate  1,162   2   (145)   13   (10)   —     (63)   28   (14)   973   2   (143) 
                                                 
Residential mortgage-backed  27   —     (3)   13   —     —     (2)   4   (9)   30   —     (2) 
Commercial mortgage-backed  16   —     (2)   —     —     —     —     —     —     14   —     (3) 
Other asset-backed  138   —     (12)   46   (6)   —     (3)   —     (34)   129   —     (10) 
                                                 
Total fixed maturity securities  3,808   4   (556)   265   (17)   —     (99)   102   (145)   3,362   4   (543) 
                                                 
Equity securities  37   —     —     —     (1)   —     —     —     (1)   35   —     —   
Limited partnerships  26   (3)   —     —     —     —     —     —     —     23   (3)   —   
Other invested assets:                                                
Derivative assets:                                                
Equity index options  42   (7)   —     8   —     —     (13)   —     —     30   2   —   
                                                 
Total derivative assets  42   (7)   —     8   —     —     (13)   —     —     30   2   —   
                                                 
Total other invested assets  42   (7)   —     8   —     —     (13)   —     —     30   2   —   
                                                 
Total Level 3 assets $3,913  $(6)  $(556)  $273  $(18)  $—    $(112)  $102  $(146)  $3,450  $3  $(543) 
                                                 
  
Beginning
balance

as of
January 1,
2022
  
Total realized and
unrealized gains
(losses)
                    
Ending
balance

as of
September 30,
2022
  
Total gains (losses)
attributable to
assets still held
 
(Amounts in millions)
 
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
 
Fixed maturity securities:
            
State and political subdivisions $82  $2  $(28)  $—   $—   $—   $—   $—   $—   $56  $2  $(29) 
Non-U.S.
government
  2   —    —    2   (2)   —    —    —    —    2   —    —  
U.S. corporate:            
Utilities  950   —    (224)   58   —    —    (7)   2   (11)   768   —    (223) 
Energy  76   —    (21)   —    —    —    (8)   68   —    115   —    (21) 
Finance and insurance  685   —    (155)   167   —    —    (12)   —    (56)   629   —    (149) 
Consumer—non-cyclical
  104   —    (14)   —    —    —    (8)   —    —    82   —    (14) 
Technology and communications  29   —    (5)   —    —    —    —    —    —    24   —    (5) 
Industrial  37   —    (5)   —    —    —    —    —    —    32   —    (4) 
Capital goods  45   —    (8)   —    —    —    —    —    —    37   —    (8) 
Consumer—cyclical  137   —    (20)   —    —    —    (4)   —    —    113   —    (20) 
Transportation  64   —    (8)   5   —    —    (4)   —    (4)   53   —    (8) 
Other  254   —    (29)   —    (7)   —    (8)   —    (17)   193   —    (29) 
                                                
Total U.S. corporate  2,381   —    (489)   230   (7)   —    (51)   70   (88)   2,046   —    (481) 
                                                
Non-U.S.
corporate:
            
Utilities  345   —    (62)   10   —    —    (18)   —    —    275   —    (62) 
Energy  145   —    (18)   3   —    —    (8)   —    —    122   —    (18) 
Finance and insurance  160   4   (41)   —    —    —    —    —    —    123   4   (42) 
Consumer—non-cyclical
  63   —    (9)   9   —    —    —    11   —    74   —    (9) 
Technology and communications  28   —    (3)   —    —    —    —    —    —    25   —    (3) 
Industrial  93   —    (13)   —    —    —    (20)   —    (14)   46   —    (12) 
Capital goods  173   —    (19)   —    (10)   —    (52)   —    —    92   —    (18) 
Consumer—cyclical  76   —    (18)   —    —    —    —    17   —    75   —    (18) 
Transportation  53   —    (3)   —    —    —    (29)   —    —    21   —    (4) 
Other  26   —    (5)   —    —    —    —    —    —    21   —    (4) 
                                                
Total
non-U.S.
corporate
  1,162   4   (191)   22   (10)   —    (127)   28   (14)   874   4   (190) 
                                                
Residential mortgage-backed  27   —    (4)   13   —    —    (2)   4   (13)   25   —    (2) 
Commercial mortgage-backed  16   —    (5)   —    —    —    —    1   —    12   —    (5) 
Other asset-backed  138   —    (17)   72   (6)   —    (5)   —    (72)   110   —    (14) 
                                                
Total fixed maturity securities  3,808   6   (734)   339   (25)   —    (185)   103   (187)   3,125   6   (721) 
                                                
Equity securities  37   —    —    —    (1)   —    —    —    (1)   35   —    —  
Limited partnerships  26   (2)   —    —    —    —    —    —    —    24   (2)   —  
Other invested assets:            
Derivative assets:            
Equity index options  42   (2)   —    11   —    —    (13)   —    —    38   14   —  
                                                
Total derivative assets  42   (2)   —    11   —    —    (13)   —    —    38   14   —  
                                                
Total other invested assets  42   (2)   —    11   —    —    (13)   —    —    38   14   —  
                                                
Total Level 3 assets $3,913  $2  $(734)  $350  $(26)  $—   $(198)  $103  $(188)  $3,222  $18  $(721) 
                                                
 
(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.

5
8
57
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 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
June 30,
   
Six months ended
June 30,
   
Three months ended
September 30,
 
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
 
2022
 
2023
 
2022
 
Total realized and unrealized gains (losses) included in net income:
            
Total realized and unrealized gains (losses) included in net income:
     
Net investment income  $3   $2   $6   $4   $2  $2  $8  $6 
Net investment gains (losses)   4    (4)    3    (10)    (4)   6   (1)   (4) 
                             
Total  $7   $(2)   $9   $(6)   $(2)  $8  $7  $2 
                             
Total gains (losses) included in net income attributable to assets still held:
            
Total gains (losses) included in net income attributable to assets still held:
     
Net investment income  $3   $2   $5   $4   $2  $2  $7  $6 
Net investment gains (losses)   3    (7)    2    (1)    (4)   (4)   (3)   12 
                             
Total  $6   $(5)   $7   $3   $(2)  $(2)  $4  $18 
                             
The amount presented for realized and unrealized gains (losses) included in net investment income forrelates to fixed maturity securities and primarily represents amortization and accretion of premiums and discounts on certain fixed maturity securities.
 
5
9
58
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 JuneSeptember 30, 2023:
 
(Amounts in millions)
 
Valuation technique
 
Fair value
  
Unobservable input
 
Range
 
Weighted-average
(1)
Fixed maturity securities:            
U.S. corporate:            
Utilities Internal models $790  Credit spreads 70bps - 267bps 180bps
Energy Internal models  45  Credit spreads 134bps - 280bps 201bps
Finance and insurance Internal models  693  Credit spreads —bps - 343bps 217bps
Consumer—non-cyclical Internal models  68  Credit spreads 101bps - 280bps 168bps
Technology and communications Internal models  11  Credit spreads 72bps - 120bps 92bps
Industrial Internal models  22  Credit spreads 134bps - 235bps 162bps
Capital goods Internal models  34  Credit spreads 92bps - 204bps 164bps
Consumer—cyclical Internal models  124  Credit spreads 101bps - 220bps 152bps
Transportation Internal models  23  Credit spreads 51bps - 191bps 128bps
Other Internal models  103  Credit spreads 104bps - 151bps 115bps
             
Total U.S. corporate Internal models $1,913  Credit spreads —bps - 343bps 186bps
             
Non-U.S. corporate:            
Utilities Internal models $245  Credit spreads 95bps - 267bps 159bps
Energy Internal models  110  Credit spreads 109bps - 235bps 167bps
Finance and insurance Internal models  125  Credit spreads 141bps - 272bps 193bps
Consumer—non-cyclical Internal models  70  Credit spreads 72bps - 166bps 116bps
Technology and communications Internal models  26  Credit spreads 109bps - 134bps 119bps
Industrial Internal models  73  Credit spreads 92bps - 232bps 174bps
Capital goods Internal models  51  Credit spreads 72bps - 280bps 141bps
Transportation Internal models  20  Credit spreads 140bps - 195bps 151bps
Other Internal models  21  Credit spreads 70bps - 179bps 138bps
             
Total non-U.S. corporate Internal models $741  Credit spreads 70bps - 280bps 160bps
             
Derivative assets:            
Equity index options Discounted cash flows $15  Equity index volatility 6% - 27% 16%
        Lapse rate 2% - 10% 7%
        Non-performance risk (counterparty credit risk) 42bps - 83bps 69bps
Other assets
(2)
 Cash flow model $135  Equity index volatility 14% - 30% 22%
(Amounts in millions)
 
Valuation technique
  
Fair value
  
Unobservable input
 
Range
 
Weighted-average
(1)
Fixed maturity securities:     
U.S. corporate:     
Utilities  Internal models  $761  Credit spreads 77bps - 247bps 154bps
Energy  Internal models   43  Credit spreads 138bps - 250bps 184bps
Finance and insurance  Internal models   691  Credit spreads 14bps - 297bps 199bps
Consumer—non-cyclical
  Internal models   66  Credit spreads 91bps - 250bps 158bps
Technology and communications  Internal models   11  Credit spreads 78bps - 116bps 93bps
Industrial  Internal models   22  Credit spreads 138bps - 206bps 156bps
Capital goods  Internal models   33  Credit spreads 91bps - 193bps 150bps
Consumer—cyclical  Internal models   120  Credit spreads 101bps - 207bps 147bps
Transportation  Internal models   22  Credit spreads 51bps - 165bps 116bps
Other  Internal models   101  Credit spreads 91bps - 138bps 102bps
        
Total U.S. corporate  Internal models  $1,870  Credit spreads 14bps - 297bps 167bps
        
Non-U.S.
corporate:
     
Utilities  Internal models  $233  Credit spreads 96bps - 247bps 143bps
Energy  Internal models   119  Credit spreads 112bps - 221bps 155bps
Finance and insurance  Internal models   122  Credit spreads 140bps - 195bps 171bps
Consumer—non-cyclical
  Internal models   69  Credit spreads 78bps - 161bps 116bps
Technology and communications  Internal models   23  Credit spreads 112bps - 138bps 121bps
Industrial  Internal models   56  Credit spreads 133bps - 221bps 180bps
Capital goods  Internal models   51  Credit spreads 78bps - 250bps 137bps
Transportation  Internal models   20  Credit spreads 140bps - 182bps 148bps
Other  Internal models   21  Credit spreads 77bps - 152bps 123bps
        
Total non-U.S. corporate
  Internal models  $714  Credit spreads 77bps - 250bps 148bps
        
Derivative assets:     
Equity index options  Discounted cash
flows		 
 		 $11  Equity index volatility 6% - 33% 19%
   Lapse rate 2% - 10% 7%
   
Non-performance risk

(counterparty credit risk)
 42bps - 83bps 69bps
Other assets
(2)
  Cash flow model  $123  Equity index volatility 16% - 30% 23%
 
(1)
Unobservable inputs weighted by the relative fair value of the associated instrument for fixed maturity securities, notional for derivative assets and the policyholder account balances associated with the instrument for the net reinsured portion of our variable annuity MRBs.
(2)
Represents the net reinsured portion of our variable annuity MRBs.
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.
 
60

59
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, 2023
   
September 30, 2023
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities                    
Policyholder account balances:                    
Fixed indexed annuity embedded derivatives  $180   $—     $—     $180   $174   $—    $—    $174 
Indexed universal life embedded derivatives   15    —      —      15    14    —     —     14 
                                
Total policyholder account balances   195    —      —      195    188    —     —     188 
                                
Derivative liabilities:                    
Interest rate swaps   472    —      472    —      884    —     884    —  
Foreign currency swaps   1    —      1    —      1    —     1    —  
Forward bond purchase commitments   3    —      —      3    28    —     —     28 
                                
Total derivative liabilities   476    —      473    3    913    —     885    28 
                                
Total liabilities  $671   $—     $473   $198   $1,101   $—    $885   $216 
                                
 
   
December 31, 2022
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Liabilities        
Policyholder account balances:        
Fixed indexed annuity embedded derivatives  $202   $—    $—    $202 
Indexed universal life embedded derivatives   15    —     —     15 
                    
Total policyholder account balances   217    —     —     217 
                    
Derivative liabilities:        
Interest rate swaps   522    —     522    —  
                    
Total derivative liabilities   522    —     522    —  
                    
Total liabilities  $739   $—    $522   $217 
                    
 
61

60
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 and for the dates indicated:
  
Beginning
balance
as of
April 1,
2023
  
Total realized and
unrealized (gains)
losses
              
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Ending
balance
as of
June 30,
2023
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net

(income)
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net

(income)
  
Included
in OCI
 
Policyholder account balances:                                                
Fixed indexed annuity embedded derivatives $184  $8  $—    $—    $—    $—    $(11)  $—    $(1)  $180  $8  $—   
Indexed universal life embedded derivatives  15   (2)   —     —     —     2   —     —     —     15   (2)   —   
                                                 
Total policyholder account balances  199   6   —     —     —     2   (11)   —     (1)   195   6   —   
                                                 
Derivative liabilities:                                                
Forward bond purchase commitments  —   3   —     —     —     —     —     —     —   3   —     —   
                                                 
Total derivative liabilities  —   3   —     —     —     —     —     —     —   3   —     —   
                                                 
Total Level 3 liabilities $199  $9  $—    $—    $—    $2  $(11)  $—    $(1)  $198  $6  $—   
                                                 
  
Beginning
balance
as of
April 1,

2022
  
Total realized and
unrealized (gains)
losses
              
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Ending
balance
as of
June 30,

2022
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net
(income)
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net
(income)
  
Included
in OCI
 
Policyholder account balances:                                                
Fixed indexed annuity embedded derivatives $261  $(11)  $—    $—    $—    $—    $(17)  $—    $—    $233  $(11)  $—   
Indexed universal life embedded derivatives  21   (8)   —     —     —     3   —     —     —     16   (8)   —   
                                                 
Total policyholder account balances  282   (19)   —     —     —     3   (17)   —     —     249   (19)   —   
                                                 
Total Level 3 liabilities $282  $(19)  $—    $—    $—    $3  $(17)  $—    $—    $249  $(19)  $—   
                                                 
 
   
Beginning
balance
as of
July 1,
2023
  
Total realized and
unrealized (gains)
losses
                    
Ending
balance as of
September 30,
2023
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
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:             
Fixed indexed annuity embedded derivatives  $180  $6  $—   $—   $—   $—   $(11)  $—   $(1)  $174  $6  $—  
Indexed universal life embedded derivatives   15   (4)   —    —    —    3   —    —    —    14   (4)   —  
                                                 
Total policyholder account balances   195   2   —    —    —    3   (11)   —    (1)   188   2   —  
                                                 
Derivative liabilities:             
Forward bond purchase commitments   3   22   3   —    —    —    —    —    —    28   22   3 
                                                 
Total derivative liabilities   3   22   3   —    —    —    —    —    —    28   22   3 
                                                 
Total Level 3 liabilities  $198  $24  $3  $—   $—   $3  $(11)  $—   $(1)  $216  $24  $3 
                                                 
6
  
Beginning
balance
as of
July 1,
2022
  
Total realized and
unrealized (gains)
losses
                    
Ending
balance as of
September 30,
2022
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
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:            
Fixed indexed annuity embedded derivatives $233  $5  $—   $—   $—   $—   $(18)  $—   $(1)  $219  $5  $—  
Indexed universal life embedded derivatives  16   (4)   —    —    —    3   —    —    —    15   (4)   —  
                                                
Total policyholder account balances  249   1   —    —    —    3   (18)   —    (1)   234   1   —  
                                                
Total Level 3 liabilities $249  $1  $—   $—   $—   $3  $(18)  $—   $(1)  $234  $1  $—  
                                                
2
61
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
  
Beginning
balance
as of
January 1,
2023
  
Total realized and
unrealized (gains)
losses
                    
Ending
balance as of
September 30,
2023
  
Total (gains) losses
attributable to
liabilities still held
 
(Amounts in millions)
 
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:            
Fixed indexed annuity embedded derivatives $202  $16  $—   $—   $—   $—   $(41)  $—   $(3)  $174  $16  $—  
Indexed universal life embedded derivatives  15   (11)   —    —    —    10   —    —    —    14   (11)   —  
                                                
Total policyholder account balances  217   5   —    —    —    10   (41)   —    (3)   188   5   —  
                                                
Derivative liabilities:            
Forward bond purchase commitments  —    25   3   —    —    —    —    —    —    28   25   3 
                                                
Total derivative liabilities  —    25   3   —    —    —    —    —    —    28   25   3 
                                                
Total Level 3 liabilities $217  $30  $3  $—   $—   $10  $(41)  $—   $(3)  $216  $30  $3 
                                                
 
Beginning
balance

as of
January 1,
2023
  
Total realized and
unrealized (gains)
losses
          
Transfer
into
Level 3
 
Transfer
out of
Level 3
 
Ending
balance
as of
June 30,
2023
  
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
September 30,
2022
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net

(income)
 
Included
in OCI
 
Purchases
 
Sales
 
Issuances
 
Settlements
 
Included
in net

(income)
 
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:             
Fixed indexed annuity embedded derivatives $202  $10  $—    $—    $—    $—    $(30)  $—    $(2)  $180  $10  $—    $294  $(18)  $—   $—   $—   $—   $(55)  $—   $(2)  $219  $(18)  $—  
Indexed universal life embedded derivatives  15   (7)   —     —     —     7   —     —     —     15   (7)   —     25   (23)   —    —    —    13   —    —    —    15   (23)   —  
                                                                        
Total policyholder account balances  217   3   —     —     —     7   (30)   —     (2)   195   3   —     319   (41)   —    —    —    13   (55)   —    (2)   234   (41)   —  
                                                                        
Derivative liabilities: 
Forward bond purchase commitments  —   3   —     —     —     —     —     —     —   3   —     —   
                                    
Total derivative liabilities  —   3   —     —     —     —     —     —     —   3   —     —   
                                    
Total Level 3 liabilities $217  $6  $—    $—    $—    $7  $(30)  $—    $(2)  $198  $3  $—    $319  $(41)  $—   $—   $—   $13  $(55)  $—   $(2)  $234  $(41)  $—  
                                                                        

  
Beginning
balance
as of
January 1,
2022
  
Total realized and
unrealized (gains)
losses
              
Transfer
into
Level 3
  
Transfer
out of
Level 3
  
Ending
balance
as of
June 30,
2022
  
Total (gains)
losses attributable
to liabilities still
held
 
(Amounts in millions)
 
Included
in net
(income)
  
Included
in OCI
  
Purchases
  
Sales
  
Issuances
  
Settlements
  
Included
in net
(income)
  
Included
in OCI
 
Policyholder account balances:                                                
Fixed indexed annuity embedded
derivatives		 $294  $(23)  $—    $—    $—    $—    $(37)  $—    $(1)  $233  $(23)  $—   
Indexed universal life embedded derivatives  25   (19)   —     —     —     10   —     —     —     16   (19)   —   
                                                 
Total policyholder account balances  319   (42)   —     —     —     10   (37)   —     (1)   249   (42)   —   
                                                 
Total Level 3 liabilities $319  $(42)  $—    $—    $—    $10  $(37)  $—    $(1)  $249  $(42)  $—   
                                                 
62
63
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) 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
June 30,
   
Six months ended
June 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Total realized and unrealized (gains) losses included in net (income):                    
Net investment income
  $—     $—     $—     $—   
Net investment (gains) losses
   9    (19)    6    (42) 
                     
Total
  $9   $(19)   $6   $(42) 
                     
Total (gains) losses included in net (income) attributable to liabilities still
held:		                    
Net investment income
  $—     $—     $—     $—   
Net investment (gains) losses
   6    (19)    3    (42) 
                     
Total
  $6   $(19)   $3   $(42) 
                     
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Total realized and unrealized (gains) losses included in net (income):        
Net investment income
  $—    $—    $—    $—  
Net investment (gains) losses
   24    1    30    (41) 
                    
Total
  $24   $1   $30   $(41) 
                    
Total (gains) losses included in net (income) attributable to liabilities still held:        
Net investment income
  $—    $—    $—    $—  
Net investment (gains) losses
   24    1    30    (41) 
                    
Total
  $24   $1   $30   $(41) 
                    
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 for fixed indexed 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)” in the tables presented above.

 
6
4
63
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
inputsfor
used for certain liability fair value measurements that are based on internal models and classified as Level 3 as of JuneSeptember 30, 2023:
 
(Amounts in millions)
 
Valuation technique
 
Fair

value
  
Unobservable input
 
Range
  
Weighted-average
(1)
 
Policyholder account balances:                
Fixed
 
indexed
 
annuity
 
embedded
 
derivatives
 Option budget method $180  Expected future interest credited  —% - 3%   2% 
Indexed universal life embedded
 
derivatives
 Option budget method $15  Expected future interest credited  3% - 13%   5% 
Market risk benefits:
(2)
                
        GMWB withdrawal utilization rate  —% - 61%   49% 
        Non-performance risk (credit spreads)  42bps - 83bps   69bps 
Fixed indexed annuities Cash flow model $57  Expected future interest credited  1% - 3%   1% 
        Lapse rate  2% - 11%   5% 
        GMWB withdrawal utilization rate  61% -
 
89%		   78% 
        Non-performance risk (credit spreads)  42bps -
 
83bps		   69bps 
Variable annuities Cash flow model $572  Equity index volatility  14%
 
-
 
30%		   22% 
(Amounts in millions)
 
Valuation technique
 
Fair value
  
Unobservable input
 
Range
 
Weighted-average 
(1)
Policyholder account balances:            
Fixed indexed annuity embedded derivatives Option budget
method		 $174  Expected future
interest credited		 1% - 4% 2%
Indexed universal life embedded derivatives Option budget
method		 $14  Expected future
interest credited		 3% - 13% 5%
Market risk benefits:
(2)
            
        GMWB withdrawal
utilization rate		 
—
  %
- 63%
 51%
        
Non-performance

risk (credit spreads)		 42bps - 83bps 69bps
Fixed indexed annuities Cash flow
model		 $38  Expected future
interest credited		 1% - 4% 2%
        Lapse rate 2% - 11% 5%
        GMWB withdrawal
utilization rate		 62% - 89% 78%
        
Non-performance

risk (credit spreads)		 42bps - 83bps 69bps
Variable annuities Cash flow
model		 $502  Equity index
volatility		 16% - 30% 23%
Derivative liabilities:            
Forward bond purchase commitments Discounted
cash flows		 $28  Counterparty
financing spreads		 35bps Not applicable
 
(1)Unobservable inputs weighted by the policyholder account balances associated with the instrument.
(2)Refer to note 13 for additional details related to MRBs.
Certain immaterial classes of instruments classified as Level 3 are excluded from the table above.
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 and cash equivalents, short-term investments, investment securities, MRBs, separate accounts 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 internal 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.
 
6
5
64
Table of Contents
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, 2023
 
   
Notional

amount
  
Carrying

amount
  
Fair value
 
(Amounts in millions)
 
Total
  
Level 1
  
Level 2
  
Level 3
 
Assets:                             
Commercial mortgage loans, net    (1)  $6,852   $6,274   $—     $—     $6,274 
Bank loan investments    (1)   518    500    —      —      500 
Liabilities:                             
Long-term borrowings    (1)   1,601    1,358    —      1,358    —   
Investment contracts    (1)   6,093    6,027    —      —      6,027 
Other firm commitments:                             
Commitments to fund bank loan investments  $153   —      —      —      —      —   
Ordinary course of business lending commitments   17   —      —      —      —      —   
   
September 30, 2023
 
   
Notional

amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:                             
Commercial mortgage loans, net   (1 )  $6,793   $6,121   $—    $—    $6,121 
Bank loan investments   (1 )   530    517    —     —     517 
Liabilities:                             
Long-term borrowings   (1 )   1,602    1,359    —     1,359    —  
Investment contracts   (1 )   5,605    5,461    —     —     5,461 
Commitments to fund investments:                             
Bank loan investments  $136   —     —     —     —     —  
Private placement investments   12   —     —     —     —     —  
Commercial mortgage loans   9   —     —     —     —     —  
 
(1)These financial instruments do not have notional amounts.

   December 31, 2022 
   
Notional

amount
  
Carrying

amount
   Fair value 
(Amounts in millions)  Total   Level 1   Level 2   Level 3 
Assets:           
Commercial mortgage loans, net       (1)  $7,010   $6,345   $—     $—     $6,345 
Bank loan investments       (1)   467    474    —      —      474 
Liabilities:           
Long-term borrowings       (1)   1,611    1,346    —      1,346    —   
Investment contracts       (1)   6,794    7,171    —      —      7,171 
Other firm commitments:           
Commitments to fund bank loan investments  $70   —      —      —      —      —   
Ordinary course of business lending commitments   24   —      —      —      —      —   
   
December 31, 2022
 
   
Notional

amount
  
Carrying

amount
   
Fair value
 
(Amounts in millions)
  
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:                             
Commercial mortgage loans, net   (1 )  $7,010   $6,345   $—    $—    $6,345 
Bank loan investments   (1 )   467    474    —     —     474 
Liabilities:                             
Long-term borrowings   (1 )   1,611    1,346    —     1,346    —  
Investment contracts   (1 )   6,794    7,171    —     —     7,171 
Commitments to fund investments:                             
Bank loan investments  $70   —     —     —     —     —  
Private placement investments   19   —     —     —     —     —  
Commercial mortgage loans   5   —     —     —     —     —  
 
(1)These financial instruments do not have notional amounts.
As of JuneSeptember 30, 2023 and December 31, 2022, we also had $26 million
of
real estate owned assets included in other invested assets in our condensed consolidated balance sheets, which are initially recorded at fair value less estimated selling costs (the carrying value) and are subsequently valued at the lower of the carrying value or current fair value less estimated selling costs. As of December 31, 2022, these properties were adjusted to fair value less estimated selling costs, which was less than the carrying value. These amounts represented the fair value as of JuneSeptember 30, 2023 and December 31, 2022. The fair value of the real estate owned assets is classified as Level 2.
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
65
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
using NAV per share (or its equivalent) are generally not redeemable by the investees and generally cannot be
66
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
The following table presents the carrying value of limited partnerships and commitments to fund as of the dates indicated:
 
  
June 30, 2023
   
December 31, 2022
   
September 30, 2023
   
December 31, 2022
 
(Amounts in millions)
  
Carrying
value
   
Commitments
to fund
   
Carrying
value
   
Commitments
to fund
   
Carrying
value
   
Commitments
to fund
   
Carrying
value
   
Commitments
to fund
 
Limited partnerships accounted for at NAV:                        
Private equity funds
(1)
  $1,821   $1,166   $1,647   $1,107   $1,907   $1,156   $1,647   $1,107 
Real estate funds
(2)
   91    70    82    79    97    88    82    79 
Infrastructure funds
(3)
   70    22    63    29    72    19    63    29 
                                
Total limited partnerships accounted for at NAV   1,982    1,258    1,792    1,215    2,076    1,263    1,792    1,215 
                                
Limited partnerships accounted for at fair value   21    1    24    1    20    1    24    1 
Limited partnerships accounted for under equity method of accounting   582    140    515    149    603    144    515    149 
                                
Total  $2,585   $1,399   $2,331   $1,365   $2,699   $1,408   $2,331   $1,365 
                                
 
(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.
(8) Deferred Acquisition Costs
The following tables present the balances of and changes in deferred acquisition costs as of and for the periods indicated:
   
September 30, 2023
 
(Amounts in millions)
  
Long-
term care
insurance
  
Life
insurance
  
Fixed
annuities
  
Variable
annuities
  
Total
 
Balance as of January 1  $935  $1,080  $57  $113  $2,185 
Costs deferred   1   —    —    —    1 
Amortization   (43)   (106)   (9)   (12)   (170) 
                      
Balance as of September 30  $893  $974  $48  $101   2,016 
                      
Enact segment                   26 
                      
Total deferred acquisition costs                  $2,042 
                      
 
66
   
June 30, 2023
 
(Amounts in millions)
  
Long-term

care
insurance
  
Life
insurance
  
Fixed
annuities
  
Variable
annuities
  
Total
 
Balance as of January 1  $935  $1,080  $57  $113  $2,185 
Costs deferred   1   —     —     —     1 
Amortization   (29)   (73)   (6)   (8)   (116) 
                      
Balance as of June 30  $907  $1,007  $51  $105   2,070 
                      
Enact segment                   26 
                      
Total deferred acquisition costs                  $2,096 
                      
67
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
  
December 31, 2022
   
December 31, 2022
 
(Amounts in millions)
  
Long-term

care
insurance
 
Life
insurance
 
Fixed
annuities
 
Variable
annuities
 
Total
   
Long-
term care
insurance
 
Life
insurance
 
Fixed
annuities
 
Variable
annuities
 
Total
 
Balance as of January 1  $989  $1,271  $70  $131  $2,461   $989  $1,271  $70  $131  $2,461 
Costs deferred   6   —     —     —     6    6   —    —    —    6 
Amortization   (60)   (191)   (13)   (18)   (282)    (60)   (191)   (13)   (18)   (282) 
                                
Balance as of December 31  $935  $1,080  $57  $113   2,185   $935  $1,080  $57  $113   2,185 
                            
Enact segment    26     26 
          
Total deferred acquisition costs   $2,211    $2,211 
          
 
  
December 31, 2021
   
December 31, 2021
 
(Amounts in millions)
  
Long-term

care
insurance
 
Life
insurance
 
Fixed
annuities
 
Variable
annuities
 
Total
   
Long-
term care
insurance
 
Life
insurance
 
Fixed
annuities
 
Variable
annuities
 
Total
 
Balance as of January 1  $1,043  $1,501  $85  $151  $2,780   $1,043  $1,501  $85  $151  $2,780 
Costs deferred   9   —     —     —     9    9   —    —    —    9 
Amortization   (63)   (230)   (15)   (20)   (328)    (63)   (230)   (15)   (20)   (328) 
                                
Balance as of December 31  $989  $1,271  $70  $131   2,461   $989  $1,271  $70  $131   2,461 
                            
Enact segment    27     27 
          
Total deferred acquisition costs   $2,488    $2,488 
          
Amortization expense for our life insurance products was lower during the sixnine months ended JuneSeptember 30, 2023 principally due to lower lapses. See note 2 for a discussion of our DAC amortizationamo
rt
ization policy.
During the fourth quarters of 2022 and 2021, we completed our annual review of assumptions. Changes in assumptions as part of our review in the fourth quarter of 2022 did not have a significant impact on DAC or the amortization rate. As part of our review completed in the fourth quarter of 2021, we updated assumptions in our life insurance products primarily due to higher unfavorable
pre-coronavirus
pandemic
(“COVID-19”)
mortality, which resulted in higher amortization as compared to December 31, 2022.
(9) Intangible Assets
The following table presents our intangible assets as of the dates indicated:
   
September 30, 2023
   
December 31, 2022
 
(Amounts in millions)
  
Gross
carrying
amount
   
Accumulated
amortization
   
Gross
carrying
amount
   
Accumulated
amortization
 
PVFP  $2,146   $(2,035)   $2,146   $(2,026) 
Capitalized software   508    (444)    482    (427) 
Deferred sales inducements to contractholders   317    (295)    317    (291) 
Other   6    (4)    6    (4) 
                     
Total  $2,977   $(2,778)   $2,951   $(2,748) 
                     
 
   
June 30, 2023
   
December 31, 2022
 
(Amounts in millions)
  
Gross
carrying
amount
   
Accumulated
amortization
   
Gross
carrying
amount
   
Accumulated
amortization
 
PVFP  $2,146   $(2,032)  $2,146   $(2,026) 
Capitalized software   500    (438)   482    (427) 
Deferred sales inducements to contractholders   317    (294)   317    (291) 
Other   6    (4)   6    (4) 
                    
Total  $2,969   $(2,768)  $2,951   $(2,748) 
                    
67
68
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Amortization expense
related to PVFP and capitalized software was $8$9 million and $10 million for both the three months ended JuneSeptember 30, 2023 and 2022 respectively, and $17$
26
 million and $20$29 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. Amortization expense related to deferred sales inducements of $1 million and $2 million for the three months ended JuneSeptember 30, 2023 and 2022, respectively, and $3$4 million and $4$6 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively, was included in benefits and other changes in policy reserves.
Present Value of Future Profits
The following
table presents the balances of and changes in present value of future profits as of and for the periods indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
December 31,
2021
   
September 30,
2023
   
December 31,
2022
   
December 31,
2021
 
Beginning balance as of January 1  $120   $134   $154   $120   $134   $154 
Costs deferred   —      —      —      —     —     —  
Amortization   (6)    (14)    (20)    (9)    (14)    (20) 
                        
Ending balance  $114   $120   $134   $111   $120   $134 
                        
We test PVFP for recoverability in connection with annual premium deficiency testing. As of JuneSeptember 30, 2023, December 31, 2022 and December 31, 2021, all of our businesses had sufficient future income and therefore the related PVFP was deemed recoverable.
(10) Future Policy Benefits
The following table sets forth our liability for future policy benefits as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
September 30,
2023
   
December 31,
2022
 
Long-term care insurance  $42,661   $41,457   $38,928   $41,457 
Life insurance   1,675    1,820    1,645    1,820 
Fixed annuities   11,905    11,923    10,965    11,923 
                
Total long-duration insurance contracts   56,241    55,200    51,538    55,200 
                
Deferred profit liability   120    115    126    115 
Cost of reinsurance   82    92    76    92 
                
Total future policy benefits  $56,443   $55,407   $51,740   $55,407 
                
 
6
9
68
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present the balances of and changes in the liability for future policy benefits as of and for the periods indicated:
 

   
June 30, 2023
 
(Dollar amounts in millions)
  
Long-term

care
insurance
  
Life
insurance
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
    
Beginning balance as of January 1  $19,895  $4,083  $
—
  
 
Beginning balance, at original discount rate  $19,959  $3,922  $
—
  
 
Effect of changes in cash flow assumptions   (148)   
—
  
   
—
  
 
Effect of actual variances from expected experience   (79)
 
  45   
—
  
 
              
Adjusted beginning balance   19,732   3,967   
—
  
 
Issuances   1   
—
  
   22 
Interest accrual   507   110   
—
  
 
Net premiums collected
(2)
   (976)
 
  (223)   (22) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Other   
—
  
   
—
  
   
—
  
 
              
Ending balance, at original discount rate   19,264   3,854   
—
  
 
Effect of changes in discount rate assumptions   13   194   
—
  
 
              
Ending balance as of June 30  $19,277  $4,048  $
—
  
 
              
Present value of expected future policy benefits:
             
Beginning balance as of January 1  $61,352  $5,556  $11,923 
Beginning balance, at original discount rate  $61,148  $5,374  $10,300 
Effect of changes in cash flow assumptions   (165)   
—
  
   
—
  
 
Effect of actual variances from expected experience   (34
)		  62   (1) 
              
Adjusted beginning balance   60,949   5,436   10,299 
Issuances   1   
—
  
   17 
Interest accrual   1,667   143   334 
Benefit payments   (1,782)
 
  (476)   (505) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Other   
—
  
   (5)   1 
              
Ending balance, at original discount rate   60,835   5,098   10,146 
Effect of changes in discount rate assumptions   1,103   192   1,759 
              
Ending balance as of June 30  $61,938  $5,290  $11,905 
              
Net liability for future policy benefits, before flooring adjustments
  $42,661  $1,242  $11,905 
Flooring adjustments
(3)
   
—
  
   433   
—
  
 
              
Net liability for future policy benefits
   42,661   1,675   11,905 
Less: reinsurance recoverable
   7,408   787   9,012 
              
Net liability for future policy benefits, net of reinsurance recoverable
  $35,253  $888  $2,893 
              
Weighted-average liability duration (years)
   14.3   6.0   11.0 
  
September 30, 2023
 
(Dollar amounts in millions)
 
Long-term

care insurance
  
Life
insurance 
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
   
Beginning balance as of January 1 $19,895  $4,083  $—  
Beginning balance, at original discount rate $19,959  $3,922  $—  
Effect of changes in cash flow assumptions  (119)   —    —  
Effect of actual variances from expected experience  (156)   38   —  
            
Adjusted beginning balance  19,684   3,960   —  
Issuances  1   —    33 
Interest accrual  754   164   —  
Net premiums collected
(2)
  (1,470)   (330)   (33) 
Derecognition (lapses and withdrawals)  —    —    —  
Other  —    —    —  
            
Ending balance, at original discount rate  18,969   3,794   —  
Effect of changes in discount rate assumptions  (765)   (31)   —  
            
Ending balance as of September 30 $18,204  $3,763  $—  
            
Present value of expected future policy benefits:
   
Beginning balance as of January 1 $61,352  $5,556  $11,923 
Beginning balance, at original discount rate $61,148  $5,374  $10,300 
Effect of changes in cash flow assumptions  (141)   —    —  
Effect of actual variances from expected experience  8   56   (35) 
            
Adjusted beginning balance  61,015   5,430   10,265 
Issuances  2   —    26 
Interest accrual  2,498   212   500 
Benefit payments  (2,657)   (628)   (751) 
Derecognition (lapses and withdrawals)  —    —    —  
Other  (1)   (5)   5 
            
Ending balance, at original discount rate  60,857   5,009   10,045 
Effect of changes in discount rate assumptions  (3,725)   5   920 
            
Ending balance as of September 30 $57,132  $5,014  $10,965 
            
Net liability for future policy benefits, before flooring adjustments $38,928  $1,251  $10,965 
Flooring adjustments
(3)
  —    394   —  
            
Net liability for future policy benefits  38,928   1,645   10,965 
Less: reinsurance recoverable  6,780   772   8,280 
            
Net liability for future policy benefits, after reinsurance recoverable $32,148  $873  $2,685 
            
Weighted-average liability duration (years)  13.6   5.7   10.3 
 
(1)
The components of the life insurance rollforward exclude flooring.
(2)
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.
(3)
Flooring adjustments are necessary when a cohort’s present value of future net premiums exceeds the present value of future benefits. The flooring adjustment ensures that the liability for future policy benefits for each cohort is not less than zero. This adjustment is most prevalent in our term life insurance products due to their product design of a level premium period followed by annual premium rate increases.
 
70

69
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

   
December 31, 2022
 
(Dollar amounts in millions)
  
Long-term

care
insurance
  
Life
insurance
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
    
Beginning balance as of January 1  $25,247  $5,414  $
—
  
 
Beginning balance, at original discount rate  $20,717  $4,086  $
—
  
 
Effect of changes in cash flow assumptions   102   
—
  
   
—
  
 
Effect of actual variances from expected experience   82   69   
—
  
 
              
Adjusted beginning balance   20,901   4,155   
—
  
 
Issuances   8   
—
  
   50 
Interest accrual   1,061   226   
—
  
 
Net premiums collected
(2)
   (2,011)
 
  (459)   (50) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Other   
—
  
   
—
  
   
—
  
 
              
Ending balance, at original discount rate   19,959   3,922   
—
  
 
Effect of changes in discount rate assumptions   (64)
 
  161   
—
  
 
              
Ending balance as of December 31  $19,895  $4,083  $
—
  
 
              
Present value of expected future policy benefits:
             
Beginning balance as of January 1  $85,338  $7,157  $17,039 
Beginning balance, at original discount rate  $61,146  $5,814  $11,012 
Effect of changes in cash flow assumptions   (251)
 
  
—
  
   
—
  
 
Effect of actual variances from expected experience   (31
)		  106   (24) 
              
Adjusted beginning balance   60,864   5,920   10,988 
Issuances   10   
—
  
   43 
Interest accrual   3,364   304   690 
Benefit payments   (3,090)
 
  (851)   (1,072) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Reinsurance transactions
(3)
   
—
  
   
—
  
   (352) 
Other   
—
  
   1   3 
              
Ending balance, at original discount rate   61,148   5,374   10,300 
Effect of changes in discount rate assumptions   204   182   1,623 
              
Ending balance as of December 31  $61,352  $5,556  $11,923 
              
Net liability for future policy benefits, before flooring adjustments
  $41,457  $1,473  $11,923 
Flooring adjustments
(4)
   
—
  
   347   
—
  
 
              
Net liability for future policy benefits
   41,457   1,820   11,923 
Less: reinsurance recoverable
   7,270   873   8,957 
              
Net liability for future policy benefits, net of reinsurance recoverable
  $34,187  $947  $2,966 
              
Weighted-average liability duration (years)
   14.5   6.0   10.9 
  
December 31, 2022
 
(Dollar amounts in millions)
 
Long-term

care insurance
  
Life
insurance 
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
   
Beginning balance as of January 1 $25,247  $5,414  $—  
Beginning balance, at original discount rate $20,717  $4,086  $—  
Effect of changes in cash flow assumptions  102   —    —  
Effect of actual variances from expected experience  82   69   —  
            
Adjusted beginning balance  20,901   4,155   —  
Issuances  8   —    50 
Interest accrual  1,061   226   —  
Net premiums collected
(2)
  (2,011)   (459)   (50) 
Derecognition (lapses and withdrawals)  —    —    —  
Other  —    —    —  
            
Ending balance, at original discount rate  19,959   3,922   —  
Effect of changes in discount rate assumptions  (64)   161   —  
            
Ending balance as of December 31 $19,895  $4,083  $—  
            
Present value of expected future policy benefits:
   
Beginning balance as of January 1 $85,338  $7,157  $17,039 
Beginning balance, at original discount rate $61,146  $5,814  $11,012 
Effect of changes in cash flow assumptions  (251)   —    —  
Effect of actual variances from expected experience  (31)   106   (24) 
            
Adjusted beginning balance  60,864   5,920   10,988 
Issuances  10   —    43 
Interest accrual  3,364   304   690 
Benefit payments  (3,090)   (851)   (1,072) 
Derecognition (lapses and withdrawals)  —    —    —  
Reinsurance transactions
(3)
  —    —    (352) 
Other  —    1   3 
            
Ending balance, at original discount rate  61,148   5,374   10,300 
Effect of changes in discount rate assumptions  204   182   1,623 
            
Ending balance as of December 31 $61,352  $5,556  $11,923 
            
Net liability for future policy benefits, before flooring adjustments $41,457  $1,473  $11,923 
Flooring adjustments
(4)
  —    347   —  
            
Net liability for future policy benefits  41,457   1,820   11,923 
Less: reinsurance recoverable  7,270   873   8,957 
            
Net liability for future policy benefits, after reinsurance recoverable $34,187  $947  $2,966 
            
Weighted-average liability duration (years)  14.5   6.0   10.9 
 
(1)
The components of the life insurance rollforward exclude flooring.
(2)
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.
(3)
Related to a third-party recapture of certain single premium immediate annuity contracts in 2022.
(4)
Flooring adjustments are necessary when a cohort’s present value of future net premiums exceeds the present value of future benefits. The flooring adjustment ensures that the liability for future policy benefits for each cohort is not less than zero. This adjustment is most prevalent in our term life insurance
products
due to their product design of a level premium period followed by annual premium rate increases.
71

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


   
December 31, 2021
 
(Dollar amounts in millions)
  
Long-
term care
insurance
  
Life
insurance
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
             
Beginning balance as of January 1  $26,283  $5,451  $
—
  
 
Beginning balance, at original discount rate  $20,600  $3,916  $
—
  
 
Effect of changes in cash flow assumptions   1,615   228   
—
  
 
Effect of actual variances from expected experience   (444)
 
  165   
—
  
 
              
Adjusted beginning balance   21,771   4,309   
—
  
 
Issuances   23   
—
  
   47 
Interest accrual   1,053   221   
—
  
 
Net premiums collected
(2)
   (2,130)
 
  (444)   (47) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Other   
—
  
   
—
  
   
—
  
 
              
Ending balance, at original discount rate   20,717   4,086   
—
  
 
Effect of changes in discount rate assumptions   4,530   1,328   
—
  
 
              
Ending balance as of December 31  $25,247  $5,414  $
—
  
 
              
Present value of expected future policy benefits:
             
Beginning balance as of January 1  $89,645  $7,821  $18,637 
Beginning balance, at original discount rate  $59,709  $6,062  $11,358 
Effect of changes in cash flow assumptions   1,678   252   27 
Effect of actual variances from expected experience   (565)
 
  190   (24) 
              
Adjusted beginning balance   60,822   6,504   11,361 
Issuances   23   
—
  
   46 
Interest accrual   3,309   322   728 
Benefit payments   (3,006)
 
  (1,013)   (1,119) 
Derecognition (lapses and withdrawals)   
—
  
   
—
  
   
—
  
 
Other   (2)   1   (4) 
              
Ending balance, at original discount rate   61,146   5,814   11,012 
Effect of changes in discount rate assumptions   24,192   1,343   6,027 
              
Ending balance as of December 31  $85,338  $7,157  $17,039 
              
Net liability for future policy benefits, before flooring adjustments
  $60,091  $1,743  $17,039 
Flooring adjustments
(3)
   
—
  
   423   
—
  
 
              
Net liability for future policy benefits
   60,091   2,166   17,039 
Less: reinsurance recoverable
   10,557   1,040   12,583 
              
Net liability for future policy benefits, net of reinsurance recoverable
  $49,534  $1,126  $4,456 
              
Weighted-average liability duration (years)
   16.9   7.0   13.6 
(1)
The components of the life insurance rollforward exclude flooring.
(2)
Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.
(3)
Flooring adjustments are necessary when a cohort’s present value of future net premiums exceeds the present value of future benefits. The flooring adjustment ensures that the liability for future policy benefits for each cohort is not less than zero. This adjustment is most prevalent in our term life insurance products due to their product design of a level premium period followed by annual premium rate increases.
70
72

Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
December 31, 2021
 
(Dollar amounts in millions)
 
Long-term

care insurance
  
Life
insurance 
(1)
  
Fixed
annuities
 
Present value of expected net premiums:
   
Beginning balance as of January 1 $26,283  $5,451  $—  
Beginning balance, at original discount rate $20,600  $3,916  $—  
Effect of changes in cash flow assumptions  1,615   228   —  
Effect of actual variances from expected experience  (444)   165   —  
            
Adjusted beginning balance  21,771   4,309   —  
Issuances  23   —    47 
Interest accrual  1,053   221   —  
Net premiums collected
(2)
  (2,130)   (444)   (47) 
Derecognition (lapses and withdrawals)  —    —    —  
Other  —    —    —  
            
Ending balance, at original discount rate  20,717   4,086   —  
Effect of changes in discount rate assumptions  4,530   1,328   —  
            
Ending balance as of December 31 $25,247  $5,414  $—  
            
Present value of expected future policy benefits:
   
Beginning balance as of January 1 $89,645  $7,821  $18,637 
Beginning balance, at original discount rate $59,709  $6,062  $11,358 
Effect of changes in cash flow assumptions  1,678   252   27 
Effect of actual variances from expected experience  (565)   190   (24) 
            
Adjusted beginning balance  60,822   6,504   11,361 
Issuances  23   —    46 
Interest accrual  3,309   322   728 
Benefit payments  (3,006)   (1,013)   (1,119) 
Derecognition (lapses and withdrawals)  —    —    —  
Other  (2)   1   (4) 
            
Ending balance, at original discount rate  61,146   5,814   11,012 
Effect of changes in discount rate assumptions  24,192   1,343   6,027 
            
Ending balance as of December 31 $85,338  $7,157  $17,039 
            
Net liability for future policy benefits, before flooring adjustments $60,091  $1,743  $17,039 
Flooring adjustments
(3)
  —    423   —  
            
Net liability for future policy benefits  60,091   2,166   17,039 
Less: reinsurance recoverable  10,557   1,040   12,583 
            
Net liability for future policy benefits, after reinsurance recoverable $49,534  $1,126  $4,456 
            
Weighted-average liability duration (years)  16.9   7.0   13.6 
(1)The components of the life insurance rollforward exclude flooring.
(2)Net premiums collected represents the portion of gross premiums collected from policyholders that is used to fund expected benefit payments.
(3)Flooring adjustments are necessary when a cohort’s present value of future net premiums exceeds the present value of future benefits. The flooring adjustment ensures that the liability for future policy benefits for each cohort is not less than zero. This adjustment is most prevalent in our term life insurance products due to their product design of a level premium period followed by annual premium rate increases.
71
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We elected to complete athe required comprehensive annual review of our cash flow assumptions for the liability for future policy benefits for our long-term care insurance, life insurance and annuity products in the fourth quarter. However, we will update cash flow assumptions related to the implementation timing and approval amounts of in-force rate actions on a quarterly basis.quarter each year. We alsohave elected to update the net premium ratio quarterly for differences between actual versusand expected experience; therefore, during interim reporting periods, we replace forecasted cash flow assumptions with actual cash flows with any difference recorded in net income (loss). Cash flow assumptions are monitored quarterly and are updated if emerging experience indicates a change is necessary. As a result, we expect to update the cash flow assumptions related to the implementation timing and approval amounts of
in-force
rate actions on a quarterly basis. The impact from updating the net premium ratio for assumptions and actual versus expected experience is presented in our tabular rollforward disclosures within the line-items labeled “effect of changes in cash flow assumptions” and “effect of actual variances from expected experience,” respectively. The following provides a summary of our reviews.See note 2 for additional information on cash flow assumptions used to estimate the liability for future policy benefits.
Long-term care insurance
For the sixnine months ended JuneSeptember 30, 2023, the impact of actual versus expected experience resulted in an increase of $45 $164 
million in the liability for future policy benefits largely fromas a result of timing impacts related to
a
second legal settlement, higher claims and lower terminations and higher benefit utilization.terminations. This unfavorable actual versus expected experience was partially offset by favorable cash flow assumption updates related to implementation timing and approval amounts of our
in-force
rate action plan.
In the fourth quarter of 2022, we refined several assumptions, including reducing our lapse assumption in light of favorable experience from our long-term care insurance legal settlement elections and benefit reductions and updating our interest rate assumption to reflect the impact of the higher interest rate environment. The favorable impacts from both the effect of changes in cash flow assumptions and actual versus expected experience were mainly attributable to the inclusion of a second legal settlement. We also evaluated our assumptions regarding expectations of future premium rate increase approvals and benefit reductions and made no significant changes to our 2022 multi-year
in-force
rate action plan. However, we did increase the value of our assumption for future approvals and benefit reductions based on recent rate increase approval experience, regulatory support and legal settlement results.
In the fourth quarter of 2021, we reviewed our assumptions including expected claim incidence and terminations, expenses, interest rates, benefit utilization trend and
in-force
rate actions, among other assumptions. The most significant update to our long-term care insurance assumptions included an unfavorable update to the benefit utilization trend, which drove significant updates to our
in-force
rate action plan, and related assumptions. Given the expected future increases in cost of care, we expected our long-term benefit utilization to trend higher than previously assumed. Prior to this update, we had assumed that the long-term benefit utilization would improve over time. Based on our experience, it did not improve as much as we predicted, largely due to cost of care growth driven by both broad-based inflation and minimum wage increases in some large states, among other factors. Therefore, we increased the outlook for our future benefit utilization trend.
Life insurance
The impact of actual versus expected experience for the sixnine months ended JuneSeptember 30, 2023 resulted in an increase of $17 $18 
million in the liability for future policy benefits. The increase was primarily due to unfavorable mortality experience in certain level premium period term life insurance blocks.
There were no cash flow assumption changes for our life insurance products in the fourth quarter of 2022. The effect of actual versus expected experience in 2022 resulted in an increase of $37 million in the liability for future policy benefits. The increase was primarily driven by higher mortality from COVID-19 and elevated death claims in a single cohort in 2022.
 
7
3
72
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
future policy benefits. The increase was primarily driven by unfavorable mortality from
COVID-19
and elevated death claims in a single cohort in 2022.
In the fourth quarter of 2021, we completed our annual review of cash flow assumptions and recorded an increase to our liability for future policy benefits of $24
$
24
million principally due to higher unfavorable
pre-COVID-19
mortality. The effect of actual versus expected experience in 2021 resulted in an increase of $25
$
25
million to our liability for future policy benefits primarily from higherunfavorable mortality due to
COVID-19.
Fixed annuities
The impact of actual versus expected experience for the nine months ended September 30, 2023 and the year ended December 31, 2022 resulted in a decrease of $24
$
35
 million and $
24
million in the liability for future policy benefits, respectively, due principally to higherfavorable mortality.
Due to emerging experience on our structured settlements, we revised the mortality assumption to reflect lowerunfavorable mortality rates, resulting in an increase of $27
$
27
million, partially offset by a favorable actual to expected experience adjustment of $24
$
24
million in 2021.
The following table provides the weighted-average interest rates for the liability for future policy benefits as of the dates indicated:
 
  
June 30,
2023
 
December 31,
2022
 
December 31,
2021
   
September 30,
2023
 
December 31,
2022
 
December 31,
2021
 
Long-term care insurance
      
Interest accretion rate   5.8%   5.8%   5.8%    5.8%   5.8%   5.8% 
Current discount rate   5.2%   5.4%   2.8%    6.0%   5.4%   2.8% 
Life insurance
      
Interest accretion rate   5.8%   5.8%   5.8%    5.8%   5.8%   5.8% 
Current discount rate   5.1%   5.2%   2.4%    5.8%   5.2%   2.4% 
Fixed annuities
      
Interest accretion rate   6.7%   6.7%   6.7%    6.7%   6.7%   6.7% 
Current discount rate   5.2%   5.3%   2.8%    5.9%   5.3%   2.8% 
For contracts issued prior to the Transition Date, the
locked-in
discount rate (labeled “interest accretion rate” in the preceding table) for each issue-year cohort is equal to the
pre-LDTI
discount rate. For contracts issued on or after the Transition Date, the
locked-in
discount rate for each issue-year cohort is determined as a single discount rate, using the weighted-average monthly
single-A
fixed-income forward curves over the current calendar year.
The current discount rate assumption is based on a
single-A
curve, with durations that correspond with the insurance liabilities, published by a market data service. For cash flows projected beyond the observable curve, we use estimation techniques consistent with Level 3 fair value measurements as defined in Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form
10-K
to interpolate from the last observable rate to an estimated ultimate long-term rate. The current discount rate assumption is updated quarterly using this methodology. These updates include current information about the observable
single-A
curve as well as the long-term target rate assumption for
single-A
interest rates beyond the last observable date.
 
7
4
73
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table sets forth the amount of undiscounted and discounted expected future gross premiums and expected future benefit payments as of the dates indicated:
 
 
June 30, 2023
 
December 31, 2022
 
December 31, 2021
  
September 30, 2023
 
December 31, 2022
 
December 31, 2021
 
(Amounts in millions)
 
Undiscounted
 
Discounted
 
Undiscounted
 
Discounted
 
Undiscounted
 
Discounted
  
Undiscounted
 
Discounted
 
Undiscounted
 
Discounted
 
Undiscounted
 
Discounted
 
Long-term care insurance
  
Expected future gross premiums $40,968  $27,693  $42,329  $28,278  $45,334  $36,642  $39,880  $25,926  $42,329  $28,278  $45,334  $36,642 
Expected future benefit payments  128,048   61,938   130,315   61,352   133,974   85,338  $127,148  $57,132  $130,315  $61,352  $133,974  $85,338 
Life insurance
  
Expected future gross premiums  11,158   6,411   11,541   6,559   12,266   8,853  $10,993  $5,970  $11,541  $6,559  $12,266  $8,853 
Expected future benefit payments  7,516   5,290   7,924   5,556   8,652   7,157  $7,360  $5,014  $7,924  $5,556  $8,652  $7,157 
Fixed annuities
  
Expected future gross premiums  —     —     —     —     —     —    $—   $—   $—   $—   $—   $—  
Expected future benefit payments  24,453   11,905   24,924   11,923   26,473   17,039  $24,157  $10,965  $24,924  $11,923  $26,473  $17,039 
During the sixnine months ended JuneSeptember 30, 2023 and the year ended December 31, 2022, we recorded a charge of $5$6 million and $16 million, respectively, to net income due to net premiums exceeding gross premiums for our life insurance products primarily due to higher claim severity.
During the year ended December 31, 2021, we recorded a charge of $8 
million to net income due to net premiums exceeding gross premiums for our life insurance products principally from higher claim frequency due to elevatedunfavorable mortality attributable to
COVID-19.
The following table sets forth the amount of revenue and interest expense recognized in net income related to our liability for future policy benefits for the periods indicated:
  
Three months ended
September 30, 2023
  
Three months ended
September 30, 2022
  
Nine months ended
September 30, 2023
  
Nine months ended
September 30, 2022
  
Years ended December 31,
 
  
2022
  
2021
 
(Amounts in millions)
 
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
 
Long-term care insurance $685  $584  $707  $578  $2,031  $1,744  $2,059  $1,723  $2,769  $2,303  $2,847  $2,256 
Life insurance  168   15   178   19   521   48   550   60   725   78   759   101 
Fixed annuities  —    166   —    171   —    500   —    521   —    690   —    728 
                                                 
Total $853  $765  $885  $768  $2,552  $2,292  $2,609  $2,304  $3,494  $3,071  $3,606  $3,085 
                                                 
 
  
Three months ended

June 30, 2023
  
Three months ended

June 30, 2022
  
Six months ended

June 30, 2023
  
Six months ended

June 30, 2022
  
Years ended December 31,
 
  
2022
  
2021
 
(Amounts in millions)
 
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
  
Gross
premiums
  
Interest
expense
(1)
 
Long-term care insurance
 $671  $582  $681  $573  $1,346  $1,160  $1,352  $1,145  $2,769  $2,303  $2,847  $2,256 
Life insurance
  174   16   185   19   353   33   372   41   725   78   759   101 
Fixed annuities
  —     166   —     172   —     334   —     350   —     690   —     728 
                                                 
Total $845  $764  $866  $764  $1,699  $1,527  $1,724  $1,536  $3,494  $3,071  $3,606  $3,085 
                                                 
(1)
Amounts for interest accretion, labeled “interest expense” in the table above, are included in benefits and other changes in policy reserves in the condensed consolidated statements of income for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 and in the consolidated statements of income for the years ended December 31, 2022 and 2021.
7
5
74
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(11) Policyholder Account
Balances
The following table sets forth our liabilities for policyholder account balances as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
September 30,
2023
   
December 31,
2022
 
Life insurance  $7,595   $7,694   $7,502   $7,694 
Fixed annuities   4,922    5,477    4,700    5,477 
Variable annuities   567    610    549    610 
        
Total investment contracts   13,084    13,781 
Fixed indexed annuity embedded derivatives
(1)
   180    202    174    202 
Indexed universal life embedded derivatives
(1)
   15    15    14    15 
Additional insurance liabilities
(2)
   2,638    2,566    2,646    2,566 
Other   5    —      5    —  
                
Total policyholder account balances  $15,922   $16,564   $15,590   $16,564 
                
 
(1)See note 6 for additional information.
(2)Amount represents additional liabilities related to death or other insurance benefits that are recorded within policyholder account balances and are considered long-duration insurance contracts. See note 12 for additional information.
The contracts underlying the annuitization or other insurance benefits, such as GMWB and guaranteed annuitization benefits, are considered “in the money” if the present value of the contractholder’s benefits is greater than the account value, or commonly referred to as the net amount at risk. For GMWBs and guaranteed annuitization benefits, the only way the contractholder can monetize the excess of the benefits over the account value of the contract is through lifetime withdrawals or lifetime income payments after annuitization. For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.
7
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the balances of and changes in policyholder account balances as of and for the periods indicated:
 
  
June 30, 2023
   
September 30, 2023
 
(Dollar amounts in millions)
  
Life
insurance
 
Fixed
annuities
 
Variable
annuities
   
Life
insurance
 
Fixed
annuities
 
Variable
annuities
 
Beginning balance as of January 1  $7,694  $5,477  $610   $7,694  $5,477  $610 
Issuances   —     —     —      —    —    —  
Premiums received   264   13   7    384   17   11 
Policy charges   (311)   (3)   (2)    (464)   (4)   (4) 
Surrenders and withdrawals   (143)   (482)   (38)    (234)   (663)   (55) 
Benefit payments   (103)   (198)   (41)    (171)   (292)   (54) 
Net transfers from (to) separate accounts   —     —     1    —    —    1 
Interest credited   194   82   2    291   121   3 
Other   —     33   28    2   44   37 
                    
Ending balance as of June 30  $7,595  $4,922  $567 
Ending balance as of September 30  $7,502  $4,700  $549 
                    
Weighted-average crediting rate   3.9%   2.6%   3.3%    3.9%   2.8%   3.3% 
Net amount at risk
(1)
  $43,344  $23  $531   $43,456  $11  $535 
Cash surrender value  $4,284  $3,916  $567   $4,308  $3,714  $549 
 
(1)The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs.
   
December 31, 2022
 
(Dollar amounts in millions)
  
Life
insurance
  
Fixed
annuities
  
Variable
annuities
 
Beginning balance as of January 1  $7,835  $6,595  $652 
Issuances   —     —     —   
Premiums received   518   23   21 
Policy charges   (632)   (6)   (8) 
Surrenders and withdrawals   (177)   (908)   (48) 
Benefit payments   (210)   (475)   (69) 
Net transfers from (to) separate accounts   —     —     11 
Interest credited   381   173   4 
Other   (21)   75   47 
             
Ending balance as of December 31  $7,694  $5,477  $610 
             
Weighted-average crediting rate   3.9%   2.4%   3.3% 
Net amount at risk
(1)
  $44,113  $21  $661 
Cash surrender value  $4,415  $4,449  $610 
(1) The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs.
 
7
7
75
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   
December 31, 2022
 
(Dollar amounts in millions)
  
Life
insurance
  
Fixed
annuities
  
Variable
annuities
 
Beginning balance as of January 1  $7,835  $6,595  $652 
Issuances   —    —    —  
Premiums received   518   23   21 
Policy charges   (632)   (6)   (8) 
Surrenders and withdrawals   (177)   (908)   (48) 
Benefit payments   (210)   (475)   (69) 
Net transfers from (to) separate accounts   —    —    11 
Interest credited   381   173   4 
Other   (21)   75   47 
             
Ending balance as of December 31  $7,694  $5,477  $610 
             
Weighted-average crediting rate   3.9%   2.4%   3.3% 
Net amount at risk
(1)
  $44,113  $21  $661 
Cash surrender value  $4,415  $4,449  $610 
(1)The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs.
 
   
December 31, 2021
 
(Dollar amounts in millions)
  
Life
insurance
  
Fixed
annuities
  
Variable
annuities
 
Beginning balance as of January 1  $8,105  $7,892  $689 
Issuances   —    —    —  
Premiums received   558   36   24 
Policy charges   (644)   (7)   (8) 
Surrenders and withdrawals   (298)   (1,153)   (43) 
Benefit payments   (233)   (508)   (58) 
Net transfers from (to) separate accounts   —    —    5 
Interest credited   365   199   5 
Other   (18)   136   38 
             
Ending balance as of December 31  $7,835  $6,595  $652 
             
Weighted-average crediting rate   3.9%   2.3%   3.2% 
Net amount at risk
(1)
  $46,613  $98  $648 
Cash surrender value  $4,411  $5,471  $652 
 
(1)The net amount at risk presented for fixed and variable annuity products contains both general and separate accounts, including amounts related to annuitization and other insurance benefits classified as MRBs.
76
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables represent policyholder account balances by range of guaranteed minimum crediting rate and the related range of the difference between rates being credited to policyholders and the respective guaranteed minimums as of the dates indicated:
 
   
June 30, 2023
 
(Amounts in millions)
  
At guaranteed
minimum
   
1–50 basis
points
above
   
51–150 basis
points above
   
Greater than
150 basis
points above
   
Total
(1)
 
                          
Less than 2.00%  $618   $92   $5   $—     $715 
2.00%–2.99%   1,038    2    —      —      1,040 
3.00%–3.99%   1,826    728    1,177    5    3,736 
4.00% and greater   2,557    16    4    —      2,577 
                          
Total  $6,039   $838   $1,186   $5   $8,068 
                          
   
September 30, 2023
 
(Amounts in millions)
  
At guaranteed
minimum
   
1–50 basis
points above
   
51–150 basis
points above
   
Greater than
150 basis
points above
   
Total
(1)
 
Less than 2.00%  $336   $106   $9   $—    $451 
2.00%–2.99%   1,186    2    —     —     1,188 
3.00%–3.99%   1,780    717    1,167    19    3,683 
4.00% and greater   2,509    16    8    —     2,533 
                         
Total  $5,811   $841   $1,184   $19   $7,855 
                         
 
(1)Excludes universal life insurance and investment contracts of approximately $5,016$4,896 million that have a market component to their crediting strategy.
 
7
8
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

   
December 31, 2022
 
(Amounts in millions)
  
At guaranteed
minimum
   
1–50 basis
points
above
   
51–150 basis
points above
   
Greater than
150 basis
points above
   
Total
(1)
 
Less than 2.00%  $1,065   $42   $2   $—     $1,109 
2.00%–2.99%   947    2    —      —      949 
3.00%–3.99%   1,928    774    1,156    1    3,859 
4.00% and greater   2,649    12    1    —      2,662 
                          
Total  $6,589   $830   $1,159   $1   $8,579 
                          
   
December 31, 2022
 
(Amounts in millions)
  
At guaranteed
minimum
   
1–50 basis
points above
   
51–150 basis
points above
   
Greater than
150 basis
points above
   
Total
(1)
 
Less than
2.00
%
  $1,065   $42   $2   $—    $1,109 
2.00%–2.99%   947    2    —     —     949 
3.00%–3.99%   1,928    774    1,156    1    3,859 
4.00% and greater   2,649    12    1    —     2,662 
                         
Total  $6,589   $830   $1,159   $1   $8,579 
                         
 
(1)Excludes universal life insurance and investment contracts of approximately $5,202 million that have a market component to their crediting strategy.
77
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(12) Additional Insurance Liabilities
The following table presents the balances of and changes in additional liabilities related to death or other insurance benefits that are included within policyholder account balances related to universal and term universal life insurance products as of and for the periods indicated:
(Dollar amounts in millions)
 
September 30,
2023
  
December 31,
2022
  
December 31,
2021
(2)
 
Beginning balance as of January 1 $2,566  $2,656  $2,524 
Beginning balance before shadow accounting adjustments $2,634  $2,523  $2,341 
Effect of changes in cash flow assumptions  —    (37)   85 
Effect of actual variances from expected experience  30   33   40 
             
Adjusted beginning balance  2,664   2,519   2,466 
Issuances  —    —    —  
Interest accrual  66   85   77 
Assessments collected  181   245   253 
Benefit payments  (161)   (215)   (282) 
Derecognition (lapses and withdrawals)  —    —    —  
Other (flooring adjustment)  —    —    9 
             
Ending balance before shadow accounting adjustments  2,750   2,634   2,523 
Effect of shadow accounting adjustments  (104)   (68)   133 
             
Ending balance  2,646   2,566   2,656 
Less: reinsurance recoverable
(1)
  —    —    —  
             
Additional insurance liabilities, net of reinsurance recoverable $2,646  $2,566  $2,656 
             
Weighted-average liability duration (years)  19.8   20.8   22.6 
 
(Dollar amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
December 31,
2021
 
Beginning balance as of January 1
 $2,566  $2,656  $2,524 
Beginning balance before shadow accounting adjustments
  2,634   2,523   2,341 
Effect of changes in cash flow assumptions
  —     (37)   85 
Effect of actual variances from expected experience
  8   33   (4) 
             
Adjusted beginning balance
  2,642   2,519   2,422 
Issuances
  —     —     —   
Interest accrual
  44   85   84 
Assessments collected
  123   245   274 
Benefit payments
  (109)   (215)   (300) 
Derecognition (lapses and withdrawals)
  —     —     —   
Other (flooring adjustment)
  —     —     43 
             
Ending balance before shadow accounting adjustments
  2,700   2,634   2,523 
Effect of shadow accounting adjustments
  (62)   (68)   133 
             
Ending balance
  2,638   2,566   2,656 
Less: reinsurance recoverable
  375   377   407 
             
Additional insurance liabilities, net of reinsurance recoverable
 $2,263  $2,189  $2,249 
             
Weighted-average liability duration (years)
  20.2   20.8   22.6 
(1)
Reflects immaterial revisions to the presentation of reinsurance recoverable previously disclosed in our quarterly reports on Form
10-Q
for the first and second quarters of 2023 to correctly remove amounts associated with policyholder account balances.
(2)
Reflects immaterial revisions to the presentation of certain line items of the December 31, 2021 rollforward previously disclosed in our quarterly reports on Form 10-Q for the first and second quarters of 2023 to correctly reflect changes to flooring adjustments.
The effect of updating the benefit ratio for actual versus expected experience for the sixnine months ended JuneSeptember 30, 2023 and the yearyears ended December 31, 2022 and 2021 increased our additional insurance liabilities by $8$30 million, $33 million and $33$40 million, respectively.
The increases in both periods wereincrease for the nine months ended September 30, 2023 was principally due to unfavorable mortality experience and higher projected benefits as compared to prior expectations. The increase for the years ended December 31, 2022 and 2021 was primarily due to higher than expectedunfavorable mortality
experience.
79
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In
the fourth quarter of 2022, as part of our annual review of assumptions, we decreased our additional insurance liabilities by $
37
$37 million in our universal and term universal life insurance products primarily related to higher interest rates. In the fourth quarter of 2021, as part of our annual review of assumptions, we increased our additional insurance liabilities by $
85$85 
million in our term universal and universal life insurance products primarily driven by higher unfavorable
pre-COVID-19
mortality.
78
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides the weighted-average interest rates for our additional insurance liabilities as of the dates indicated:
 
  
June 30,
2023
 
December 31,
2022
 
December 31,
2021
   
September 30,
2023
 
December 31,
2022
 
December 31,
2021
 
Interest accretion rate
(1)
   3.3%   3.3%   3.2%    3.3%   3.3%   3.2% 
Projected crediting rate
(2)
   3.8%   3.8%   3.6%    3.8%   3.8%   3.6% 
 
(1)
The interest accretion rate is determined by using the weighted-average policyholder crediting rates for the underlying policies over the period
in-force,
and based on the adjusted beginning balance, is used to measure the amount of interest accrual.
(2)The projected crediting rate is determined by using a future crediting rate curve that utilizes a portfolio approach reflecting anticipated reinvestment activity and runoff of existing assets over the projection period. The projected crediting rate is used to discount future assessments and excess benefits.
The following table sets forth the amount of revenue and interest expense recognized in net income related to additional insurance liabilities for the periods indicated:
 
 
   
Three months ended
June 30,
   
Six months ended
June 30,
   
Years ended
December 31,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2022
   
2021
 
Gross assessments  $136   $144   $272   $291   $559   $592 
Interest expense
(1)
  $22   $21   $44   $41   $85   $84 
   
Three months ended
September 30,
   
Nine months ended
September 30,
   
Years ended
December 31,
 
(Amounts in millions)
  
  2023  
   
  2022  
   
  2023  
   
  2022  
   
  2022  
   
  2021  
 
Gross assessments  $134   $136   $406   $427   $559   $592 
Interest expense
(1)
  $22   $22   $66   $63   $85   $77 
 
(1)Amounts for interest accretion, labeled “interest expense” in the table above, are included in benefits and other changes in policy reserves in the condensed consolidated statements of income.
(13) Market Risk Benefits
The following table sets forth our market risk benefits by asset and liability position as of the dates indicated:
   
June 30, 2023
   
December 31, 2022
 
(Amounts in millions)
  
Asset
   
Liability
   
Net
liability
   
Asset
   
Liability
   
Net
liability
 
Fixed indexed annuities  $—     $57   $57   $—     $52   $52 
Variable annuities   37    609    572    26    696    670 
                               
Total market risk benefits  $37   $666   $629   $26   $748   $722 
                               
 
   
September 30, 2023
   
December 31, 2022
 
(Amounts in millions)
  
Asset
   
Liability
   
Net liability
   
Asset
   
Liability
   
Net liability
 
Fixed indexed annuities  $—    $38   $38   $—    $52   $52 
Variable annuities   39    541    502    26    696    670 
                               
Total market risk benefits  $39   $579   $540   $26   $748   $722 
                               
80
79
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present the balances of and changes in market risk benefits as of and for the periods indicated:

   
June 30, 2023
 
(Dollar amounts in millions)
  
Fixed
indexed
annuities
  
Variable
annuities
  
Reinsurance
recoverable
(1)
 
Beginning balance as of January 1  $52   $670   $158 
Beginning balance before effect of changes in instrument-specific credit risk  $50   $660   $158 
Issuances   —      —      —   
Interest accrual   1    18    4 
Attributed fees collected   3    19    5 
Benefit payments   —      (18)    (8) 
Effect of changes in interest rates   3    (7)    (4) 
Effect of changes in equity markets   (1)    (113)    (23) 
Actual policyholder behavior different from expected behavior   (1)    4    3 
Effect of changes in future expected policyholder behavior   —      —      —   
Effect of changes in other future expected assumptions   —      —      —   
                
Ending balance before effect of changes in instrument-specific credit risk   55    563    135 
Effect of changes in instrument-specific credit risk   2    9    —   
                
Ending balance as of June 30   57    572   $135 
                
Less: reinsurance recoverable   —      135      
                
Market risk benefits, net of reinsurance recoverable  $57   $437      
                
Weighted-average attained age of contractholders   72    76      
Net amount at risk
(2)
            
 
(1) Represents the net reinsured asset related to our variable annuity MRBs.
(2) See note 11 for additional information on the net amount at risk.
8
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

   
December 31, 2022
 
(Dollar amounts in millions)
  
Fixed

indexed
annuities
  
Variable
annuities
  
Reinsurance
recoverable
(1)
 
Beginning balance as of January 1  $94   $855   $193 
Beginning balance before effect of changes in instrument-specific credit risk  $90   $840   $193 
Issuances   —      6    —   
Interest accrual   1    18    4 
Attributed fees collected   5    42    9 
Benefit payments   —      (28)    (16) 
Effect of changes in interest rates   (51)    (513)    (74) 
Effect of changes in equity markets   5    286    39 
Actual policyholder behavior different from expected behavior   (2)    8    3 
Effect of changes in future expected policyholder behavior   —      —      —   
Effect of changes in other future expected assumptions   —      —   
 —   
Other   2    1    —   
                
Ending balance before effect of changes in instrument-specific credit risk   50    660    158 
Effect of changes in instrument-specific credit risk   2    10    —   
                
Ending balance as of December 31   52    670   $158 
                
Less: reinsurance recoverable   —      158      
                
Market risk benefits, net of reinsurance recoverable  $52   $512      
                
Weighted-average attained age of contractholders   72    76      
Net amount at risk
(2)
          
  
September 30, 2023
 
(Dollar amounts in millions)
 
Fixed indexed
annuities
  
Variable
annuities
  
Reinsurance
recoverable 
(1)
 
Beginning balance as of January 1 $52  $670  $158 
Beginning balance before effect of changes in instrument-specific credit risk $50  $660  $158 
Issuances  —    —    —  
Interest accrual  2   26   6 
Attributed fees collected  3   28   6 
Benefit payments  —    (26)   (11) 
Effect of changes in interest rates  (16)   (142)   (24) 
Effect of changes in equity markets  (1)   (54)   (15) 
Actual policyholder behavior different from expected behavior  (2)   4   3 
Effect of changes in future expected policyholder behavior  —    —    —  
Effect of changes in other future expected assumptions  —    —    —  
            
Ending balance before effect of changes in instrument-specific credit risk  36   496   123 
Effect of changes in instrument-specific credit risk  2   6   —  
            
Ending balance as of September 30  38   502  $123 
      
Less: reinsurance recoverable  —    123  
         
Market risk benefits, net of reinsurance recoverable $38  $379  
         
Weighted-average attained age of contractholders  72   76  
Net amount at risk
(2)
   
 
(1)Represents the net reinsured asset related to our variable annuity MRBs.
(2)See note 11 for additional information on the net amount at risk.
 
82
80
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

  
December 31, 2021
  
December 31, 2022
 
(Dollar amounts in millions)
  
Fixed
indexed
annuities
 
Variable
annuities
 
Reinsurance
recoverable
(1)
  
Fixed indexed
annuities
 
Variable
annuities
 
Reinsurance
recoverable 
(1)
 
Beginning balance as of January 1  $115   $1,173   $244  $94  $855  $193 
Beginning balance before effect of changes in instrument-specific credit risk  $110   $1,154   $244  $90  $840  $193 
Issuances   —      3    —     —    6   —  
Interest accrual   —      4    1   1   18   4 
Attributed fees collected   6    48    11   5   42   9 
Benefit payments   —      (23)    (13)   —    (28)   (16) 
Effect of changes in interest rates   (10)    (115)    (21)   (51)   (513)   (74) 
Effect of changes in equity markets   (7)    (267)    (42)   5   286   39 
Actual policyholder behavior different from expected behavior   (7)    36    13   (2)   8   3 
Effect of changes in future expected policyholder behavior   —      —      —     —    —    —  
Effect of changes in other future expected assumptions   —      —      —     —    —    —  
Other   (2)    —      —     2   1   —  
                     
Ending balance before effect of changes in instrument-specific credit risk   90    840    193   50   660   158 
Effect of changes in instrument-specific credit risk   4    15    —     2   10   —  
                     
Ending balance as of December 31   94    855   $193   52   670  $158 
               
Less: reinsurance recoverable   —      193      —    158  
                  
Market risk benefits, net of reinsurance recoverable  $94   $662     $52  $512  
                  
Weighted-average attained age of contractholders   71    75      72   76  
Net amount at risk
(2)
               
(1)Represents the net reinsured asset related to our variable annuity MRBs.
(2)See note 11 for additional information on the net amount at risk.
81
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  
December 31, 2021
 
(Dollar amounts in millions)
 
Fixed indexed
annuities
  
Variable
annuities
  
Reinsurance
recoverable 
(1)
 
Beginning balance as of January 1 $115  $1,173  $244 
Beginning balance before effect of changes in instrument-specific credit risk $110  $1,154  $244 
Issuances  —    3   —  
Interest accrual  —    4   1 
Attributed fees collected  6   48   11 
Benefit payments  —    (23)   (13) 
Effect of changes in interest rates  (10)   (115)   (21) 
Effect of changes in equity markets  (7)   (267)   (42) 
Actual policyholder behavior different from expected behavior  (7)   36   13 
Effect of changes in future expected policyholder behavior  —    —    —  
Effect of changes in other future expected assumptions  —    —    —  
Other  (2)   —    —  
            
Ending balance before effect of changes in instrument-specific credit risk  90   840   193 
Effect of changes in instrument-specific credit risk  4   15   —  
            
Ending balance as of December 31  94   855  $193 
      
Less: reinsurance recoverable  —    193  
         
Market risk benefits, net of reinsurance recoverable $94  $662  
         
Weighted-average attained age of contractholders  71   75  
Net amount at risk
(2)
   
 
(1)Represents the net reinsured asset related to our variable annuity MRBs.
(2)See note 11 for additional information on the net amount at risk.
During the year ended December 31, 2022, risk-free interest rates increased, resulting in a decrease in the net MRB liability of our fixed indexed and variable annuity products. In our variable annuity products, this was partially offset by unfavorable equity market performance, which increased our net MRB liability.
During the year ended December 31, 2021, equity market performance was favorable and risk-free interest rates increased, resulting in a decrease in our net MRB liability of our fixed indexed and variable annuity products.
 
8
3
82
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(14) Separate Accounts
The following table presents the balances of and changes in separate account liabilities related to variable annuity and variable universal life insurance products as of and for the periods indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
December 31,
2021
 
Beginning balance as of January 1  $4,417   $6,066   $6,081 
Premiums and deposits   20    48    47 
Policy charges   (53)    (115)    (136) 
Surrenders and withdrawals   (177)    (352)    (506) 
Benefit payments   (114)    (226)    (266) 
Investment performance   442    (991)    852 
Net transfers to general account   (1)    (11)    (5) 
Other charges   (1)    (2)    (1) 
                
Ending balance  $4,533   $4,417   $6,066 
                
Cash surrender value
(1)
  $4,531  $4,414  $6,065 
(Amounts in millions)
  
September 30,
2023
   
December 31,
2022
   
December 31,
2021
 
Beginning balance as of January 1  $4,417   $6,066   $6,081 
Premiums and deposits   27    48    47 
Policy charges   (79)    (115)    (136) 
Surrenders and withdrawals   (265)    (352)    (506) 
Benefit payments   (157)    (226)    (266) 
Investment performance   304    (991)    852 
Net transfers to general account   (1)    (11)    (5) 
Other charges   (2)    (2)    (1) 
               
Ending balance  $4,244   $4,417   $6,066 
               
Cash surrender value
(1)
  $4,241   $4,414   $6,065 
 
(1)Cash surrender value represents the amount of the contractholders’ account balances that was distributable as of JuneSeptember 30, 2023, December 31, 2022 and December 31, 2021 less certain surrender charges.
Separate Account Assets
The following table presents the aggregate fair value of assets, by major investment asset category, supporting separate accounts as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
September 30,
2023
   
December 31,
2022
 
Equity funds  $1,986   $1,866   $1,866   $1,866 
Balanced funds   1,976    1,962    1,831    1,962 
Bond funds   329    332    306    332 
Money market funds   242    257    241    257 
                
Total  $4,533   $4,417   $4,244   $4,417 
                
(15) Liability for Policy and Contract Claims
The following table presents the balances of our liability for policy and contract claims as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
September 30,
2023
   
December 31,
2022
 
Enact segment  $490   $519   $501   $519 
Life and Annuities segment
(1)
   131    158    123    158 
Other mortgage insurance business   7    6    7    6 
                
Total liability for policy and contract claims  $628   $683   $631   $683 
                
 
(1)Primarily includes balances related to our universal and term universal life insurance products.
 
8
4
83
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table sets forth changes in our liability for policy and contract claims as of and for the periods indicated:
 
  
Six months ended
June 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Beginning balance as of January 1  $683   $819   $683   $819 
Less reinsurance recoverables   (23)    (26)    (23)    (26) 
                
Net beginning balance   660    793    660    793 
                
Incurred related to insured events of:          
Current year   417    415    634    647 
Prior years   (120)    (136)    (185)    (245) 
                
Total incurred   297    279    449    402 
                
Paid related to insured events of:          
Current year   (257)    (277)    (393)    (439) 
Prior years   (90)    (97)    (102)    (111) 
                
Total paid   (347)    (374)    (495)    (550) 
                
Foreign currency translation   1    —      1    —  
                
Net ending balance   611    698    615    645 
Add reinsurance recoverables   17    35    16    24 
                
Ending balance as of June 30  $628   $733 
Ending balance as of September 30  $631   $669 
                
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, as well as the timing and severity of those payments. Given the extended period of time that may exist between the reporting of a delinquency and the claim payment, and changes in economic conditions and the real estate market, significant uncertainty and variability exist on amounts actually paid.
The favorable development related to insured events of prior years for the sixnine months ended JuneSeptember 30, 2023 was predominantly associated with $133$188 million of reserve releases in our Enact segment primarily related to favorable cure performance on delinquencies from 20212022 and earlier, including those related to
COVID-19. A portion of the reserve releases was also related to delinquencies from the first half of 2022, as uncertainty
Uncertainty in the economic environment has not negatively impacted cure performance ason 2022 delinquencies to the extent initially expected. The favorable development related to insured events of prior years for the sixnine months ended JuneSeptember 30, 2022 was largely attributable to $146$251 million of favorable reserve adjustments in our Enact segment primarily related to
COVID-19
delinquencies in 2020 curing at levels above original reserve expectations.
 
8
5
84
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(16) Reinsurance
Allowance for Credit Losses on Reinsurance Recoverables
The following table sets forth the changes in the allowance for credit losses related to reinsurance recoverables as of and for the periods indicated:
   
Three months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
 
Allowance for credit losses:    
Beginning balance  $64   $63 
Provision   33    1 
Write-offs   (69)    —  
Recoveries   —     —  
          
Ending balance  $28   $64 
          
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
 
Allowance for credit losses:    
Beginning balance  $63   $58 
Provision   34    6 
Write-offs   (69)    —  
Recoveries   —     —  
          
Ending balance  $28   $64 
          
As discussed in Note 2—Summary of Significant Accounting Policies included in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form
10-K,
our policy for evaluating and measuring the allowance for credit losses related to reinsurance recoverables utilizes the reinsurer’s credit rating, updated quarterly, to assess the credit quality of reinsurance recoverables.
85
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables set forth A.M. Best Company, Inc.’s credit ratings related to our reinsurance recoverables at the
(16)locked-in
discount rate, gross of the allowance for credit losses, as of the dates indicated:
   
September 30, 2023
 
(Amounts in millions)
  
Collateralized
   
Non-collateralized
   
Total
 
Credit rating:               
A++  $—    $660   $660 
A+   1,349    1,691    3,040 
A   34    346    380 
Not rated   13,198    15    13,213 
                
Total reinsurance recoverable  $14,581   $2,712   $17,293 
                
  
   
December 31, 2022
 
(Amounts in millions)
  
Collateralized
   
Non-collateralized
   
Total
 
Credit rating:               
A++  $—    $626   $626 
A+   1,268    2,050    3,318 
A   20    33    53 
Not rated   13,506    86    13,592 
                
Total reinsurance recoverable  $14,794   $2,795   $17,589 
                
Reinsurance recoverables are considered past due when contractual payments have not been received from the reinsurer by the required payment date. Claims submitted for payment are generally due in less than one year. As of September 30, 2023, we had no reinsurance recoverables past due. As of December 31, 2022, we did not have any reinsurance recoverables past due, except for Scottish Re US Inc. (“Scottish Re”), a reinsurance company domiciled in Delaware. On March 6, 2019, Scottish Re was ordered into receivership for the purposes of rehabilitation by the Court of Chancery of the State of Delaware. The proposed Plan of Rehabilitation of Scottish Re was filed on June 30, 2020. On March 16, 2021, the Receiver filed a draft Amended Plan of Rehabilitation and filed an outline of changes to the amended plan on July 27, 2021. In May 2023, the Receiver concluded that Scottish Re should be liquidated based upon adverse changes in its financial condition subsequent to the filing of the Amended Plan of Rehabilitation. In July 2023, Scottish Re’s board of directors consented to the liquidation order, which was made final by the Court shortly thereafter. In addition, the Court’s liquidation order mandated all reinsurance agreements
in-force
with Scottish Re be terminated (or expire) by no later than September 30, 2023.
We previously established an allowance for credit losses of $36 million related to the reinsurance recoverable due from Scottish Re. In the third quarter of 2023, we determined that the reinsurance recoverable was uncollectible. As a result, we recorded an additional credit loss of $33 million and wrote off the entire reinsurance recoverable of $69 million against the allowance for credit losses. As of September 30, 2023, we recaptured all of our life insurance policies from Scottish Re, which did not have a significant impact on our current period earnings, as the credit loss recognized in the third quarter of 2023 was offset by the derecognition of ceded premiums of approximately $33 million
where we have the right of offset for the amounts owed to us by Scottish Re.
86
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(17) 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,
   
Three months ended
September 30,
 
Nine months ended
September 30,
 
  
2023
 
2022
 
2023
 
2022
   
2023
 
2022
 
2023
 
2022
 
Statutory U.S. federal income tax rate   21.0%   21.0%   21.0%   21.0%    21.0%   21.0%   21.0%   21.0% 
Increase in rate resulting from:            
Tax on income from terminated swaps   3.4   2.4   3.6   2.2    8.4   2.7   4.4   2.4 
Non-deductible
expenses
   3.2   1.1   1.2   0.5 
Other, net   0.5   0.4   1.0   0.5    0.7   (0.3)   0.3   —  
                          
Effective rate   24.9%   23.8%   25.6%   23.7%    33.3%   24.5%   26.9%   23.9% 
                          
The effective tax rate for the three and sixnine months ended JuneSeptember 30, 2023 and 2022 was above the statutory U.S. federal income tax rate of 21% largely due to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35
%35% as they are amortized into net investment income.income, as well as
non-deductible
expenses. The increase in the effective tax rate for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 was primarily attributable to higher tax expense on certain forward starting swaps gains in relation to lower
pre-tax
income in the current 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 sixnine months ended JuneSeptember 30, 2023, we utilized the actual effective tax rate for the interim periods to record the provision for income taxes for our Long-Term Care Insurance and Life and Annuities segments and the annualized projected effective tax rate for our Enact segment and Corporate and Other. For the three and sixnine months ended JuneSeptember 30, 2022, we utilized the effective tax rate for the year ended December 31, 2022 in determining the
re-presented
provision for income taxes.
Our ability to realize our deferred tax assets is largely dependent upon generating sufficient taxable income and capital gains in future years. As of September 30, 2023 and December 31, 2022, our tax valuation allowance was $748 million and $583 million, respectively, of which $350 million and $200 million, respectively, were related to capital deferred tax assets. Given the increase in unrealized losses on our fixed maturity securities and forward starting swaps in the current year due to rising interest rates and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets, we recorded an additional valuation allowance of $150 million in the third quarter of 2023 through accumulated other comprehensive income (loss) related to deferred tax assets that would produce capital losses. The remainder of the total valuation allowance relates to foreign and state net operating loss carryforwards.
(17)
(18) Segment Information
We have the following three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional and
non-traditional
life insurance (term,
87
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities (which include variable life insurance), none of which are actively marketed or sold. In addition to our three operating segments, we also have Corporate and Other, which includes 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 reported outside of our operating segments, such as certain international businesses and discontinued operations. Corporate and Other also includes
start-up
results related to
fee-based
services, care support and advice, clinical assessments and consulting offered by CareScout to advance our senior care growth initiatives.
We tax our businesses at the U.S. corporate federal income tax rate of 21
%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.
8
6
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. 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. See note 1617 for a discussion of the effective tax rates used for our segments and Corporate and Other for the three and sixnine months ended JuneSeptember 30, 2023 and 2022.
We use the same accounting policies and procedures to measure segment income (loss) and assets as our consolidated net income and assets. Our President and Chief Executive Officer (Principal Executive Officer), who serves as 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), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items. 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. We exclude net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items from adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders because, in our opinion, they are not indicative of overall operating performance.
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, 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
88
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
Adjustments to reconcile net income (loss) available to Genworth Financial, Inc.’s common stockholders to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Changes in fair value of market risk benefits and associated hedges are adjusted to exclude changes in reserves, attributed fees and benefit payments.
8
7
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of revenues for our segments and Corporate and Other for the periods indicated:
 
  
Three months
ended June 30,
   
Six months ended
June 30,
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Revenues:                    
Enact segment  $277   $273   $558   $543   $299   $275   $857   $818 
Long-Term Care Insurance segment   1,143    1,108    2,241    2,203    1,082    1,087    3,323    3,290 
Life and Annuities segment:                    
Life insurance   350    359    708    740    347    352    1,055    1,092 
Fixed annuities   84    93    169    208    68    91    237    299 
Variable annuities   35    37    71    77    34    37    105    114 
                                
Life and Annuities segment   469    489    948    1,025    449    480    1,397    1,505 
                                
Corporate and Other   3    17    (1)    9    1    6    —     15 
                                
Total revenues  $1,892   $1,887   $3,746   $3,780   $1,831   $1,848   $5,577   $5,628 
                                
 
8
8
89
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following tables present the reconciliation of net income available to Genworth Financial, Inc.’s common stockholders to adjusted operating income 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 for the periods indicated:
 
   
Three months
ended June 30,
   
Six months
ended June 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Net income available to Genworth Financial, Inc.’s common stockholders  $137   $159   $259   $399 
Add: net income from continuing operations attributable to noncontrolling interests   31    38    63    68 
Add: net income from discontinued operations attributable to noncontrolling interests   —      —      —      —   
                     
Net income   168    197    322    467 
Less: income (loss) from discontinued operations, net of taxes   2    (1)    2    (3) 
                     
Income from continuing operations   166    198    320    470 
Less: net income from continuing operations attributable to noncontrolling interests   31    38    63    68 
                     
Income from continuing operations available to Genworth Financial, Inc.’s common
 
stockholders
   135    160    257    402 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:                    
Net investment (gains) losses, net
(1)
   (41)    (19)    (30)    (61) 
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges
(2)
   (23)    8    (9)    (46) 
(Gains) losses on early extinguishment of debt
(3)
   —      1    (1)    4 
Expenses related to restructuring   1    1    4    1 
Taxes on adjustments   13    2    8    22 
                     
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders  $85   $153   $229   $322 
                     
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Net income available to Genworth Financial, Inc.’s common stockholders  $29   $136   $288   $535 
Add: net income from continuing operations attributable to noncontrolling interests   31    35    94    103 
Add: net income from discontinued operations attributable to noncontrolling interests   —     —     —     —  
                     
Net income   60    171    382    638 
Less: income from discontinued operations, net of taxes   —     5    2    2 
                     
Income from continuing operations   60    166    380    636 
Less: net income from continuing operations attributable to noncontrolling interests   31    35    94    103 
                     
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders   29    131    286    533 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:                    
Net investment (gains) losses, net
(1)
   43    58    13    (3) 
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges
(2)
   (26)    (32)    (35)    (78) 
(Gains) losses on early extinguishment of debt
(3)
   —     3    (1)    7 
Expenses related to restructuring   —     —     4    1 
Pension plan termination costs   —     6    —     6 
Taxes on adjustments   (4)    (8)    4    14 
                     
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders  $42   $158   $271   $480 
                     
 
(1)For the three and sixnine months ended JuneSeptember 30, 2023, net investment (gains) losses were adjusted for the portion of net investment losses attributable to noncontrolling interests of $2 million.
(2)For the three months ended June 30, 2023 and 2022, changesChanges in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(4)$(2) million and $(12)$(5) million respectively. Forfor the sixthree months ended JuneSeptember 30, 2023 and 2022, changes in fair value of market risk benefitsrespectively, and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(7)$(9) million and $(25)$(30) million for the nine months ended September 30, 2023 and 2022, respectively.
(3)
During the sixnine months ended JuneSeptember 30, 2023, we repurchased $11 million principal amount of Genworth Holdings’ senior notes due in June 2034 for a
pre-tax
gain of $1 million. During the three and sixnine months ended JuneSeptember 30, 2022, we paid a
pre-tax
make-whole premium of $2 million and wrote off $1 million of bond consent fees and deferred borrowing costs related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in February 2024. Additionally, during the nine months ended September 30, 2022, we repurchased $48 million and $130 million respectively, principal amount of Genworth Holdings’ senior notes due in February 2024 for a
pre-tax
loss of $1 million and $4 million, respectively.million.
 
8
990
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
  
Three months
ended June 30,
   
Six months
ended June 30,
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:                        
Enact segment  $146   $167   $289   $302   $134   $156   $423   $458 
Long-Term Care Insurance segment   (43)    17    (20)    90    (71)    26    (91)    116 
Life and Annuities segment:                        
Life insurance   (17)    (37)    (44)    (84)    (25)    (28)    (69)    (112) 
Fixed annuities   10    20    24    33    17    15    41    48 
Variable annuities   9    2    18    6    5    7    23    13 
                                
Life and Annuities segment   2    (15)    (2)    (45)    (3)    (6)    (5)    (51) 
                                
Corporate and Other   (20)    (16)    (38)    (25)    (18)    (18)    (56)    (43) 
                                
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders  $85   $153   $229   $322   $42   $158   $271   $480 
                                
ThereOther than pension plan termination costs incurred in the third quarter of 2022 related to one of our defined benefit pension plans, there were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
The following is a summary of total assets for our segments and Corporate and Other as of the dates indicated:
 
(Amounts in millions)
  
June 30,
2023
   
December 31,
2022
   
September 30,
2023
   
December 31,
2022
 
Assets:            
Enact segment  $5,922   $5,712   $6,000   $5,712 
Long-Term Care Insurance segment   45,194    44,156    42,927    44,156 
Life and Annuities segment   37,168    37,975    35,111    37,975 
Corporate and Other   1,560    1,871    1,428    1,871 
                
Total assets  $89,844   $89,714   $85,466   $89,714 
                
(18)
(19) 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
91
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
mortgage insurance 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-
90
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
inducementanti-inducement laws, and mortgage insurance policy rescissions and curtailments, and breaching fiduciary or other duties to 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, including claims under the Employee Retirement Income Security Act of 1974, 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 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’splaintiff’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
92
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
9
1
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the United States Court of Appeals for the Eleventh Circuit. On June 22, 2022, we filed our opening brief in support of the appeal. Plaintiff filed its respondent’s brief on September 20, 2022, and we filed our reply brief on November 10, 2022. The appeal was orally argued on August 17, 2023, and we are awaiting a decision from the Eleventh Circuit. We intend to continue to vigorously defend 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, 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 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 as 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 May 10, 2022, the Court granted our motion to dismiss the three new causes of action. 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. On June 2, 2022, plaintiffs withdrew their motion for a preliminary injunction. We intend to continue to vigorously defend this action.
In January 2021, GLAIC 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 seekssought to represent life insurance policyholders, alleging that GLAIC impermissibly calculated cost of insurance rates to be higher than permitted by her policy. The complaint assertsasserted claims for breach of contract, conversion, and declaratory and
93
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
injunctive relief, and seekssought damages in excess of $
5$5 million. On February 10, 2023, the parties reached an agreement in principle to settle the action for an immaterial amount. On April 14, 2023, the action was dismissed on stipulation.
9
2
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On August 11, 2021, GLIC and Genworth Life Insurance Company of New York received a request for
pre-suit
mediation related to a potential class action lawsuit that may behave been brought by five long-term care insurance policyholders, seekingwho sought 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 assertsasserted claims for breach of contract, conversion, and declaratory and injunctive relief, and seekssought 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 commenced on November 17, 2022 and the Court entered judgment finally approving the settlement on February 15, 2023. Pursuant to its terms, the settlement became final on March 27, 2023. We began implementation of the settlement in the second quarter of 2023 and expect an overall net favorable economic impact to our long-term care insurance business from the settlement of this case.
On August 1, 2022, a putative class action was filed in the United States District Court for the Eastern District of Virginia by two former Genworth employees against Genworth Financial, its Board of Directors and the Fiduciary and Investments Committee of Genworth Financial’s Retirement and Savings Plan (“Savings Plan”). Plaintiffs purport to act on behalf of the Savings Plan and all similarly simulated participants and beneficiaries of the Savings Plan. The complaint asserts that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 by imprudently offering and inadequately monitoring a suite of BlackRock Target Date Funds as a retirement investment option for Genworth employees. Plaintiffs seek declaratory and injunctive relief, monetary damages, and attorney’s fees. By stipulation entered September 6, 2022, the complaint was dismissed, without prejudice, against the Board of Directors and the Fiduciary and Investments Committee of Genworth Financial’s Savings Plan. On October 17, 2022, we moved to dismiss the complaint against the sole remaining defendant, Genworth Financial. Plaintiffs filed opposition papers on November 10, 2022, and we filed our reply papers on November 16, 2022. By order dated January 20, 2023, the Court granted plaintiffs’ motion to serve an amended complaint, rendering our initial motion to dismiss moot. On January 20, 2023, plaintiffs filed an amended complaint, and on February 2, 2023, we filed a motion to dismiss the amended complaint. On March 16, 2023, the Court directed plaintiffs to file a second amended complaint and denied as moot our motion to dismiss the amended complaint. Plaintiffs filed the second amended complaint on April 17, 2023. On May 15, 2023, we answered and moved to dismiss the second amended complaint. ThatOn September 13, 2023, the Court granted in part and denied in part our motion to dismiss the second amended complaint. Discovery is now fully briefedongoing, and awaiting decision.trial is scheduled for May 20, 2024. We intend to continue to vigorously defend this action.
On December 16, 2022, Blue Cross Blue Shield of Nebraska (“BCBSNE”) served an arbitration demand on GLIC in relation to BCBSNE’s stated intent to recapture a block of long-term care insurance policies for which the risk was partly ceded to GLIC. In its arbitration demand, BCBSNE alleges that GLIC breached the governing reinsurance agreement by refusing to agree to transfer assets equal to the fair value of the liabilities being recaptured. BCBSNE asserts it has satisfied all of its obligations under the reinsurance agreement and is seeking
94
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
to recapture the ceded block of reinsurance. BCBSNE seeks damages equal to the fair value of the recaptured liabilities, plus interest and other damages, including attorneys’ fees and costs. The arbitration panel has been appointed and an organizational meeting was held on August 30, 2023. The trial is scheduled for August 30, 2023.September and October of 2024. We intend to vigorously defend this arbitration proceeding.
9
3
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
InStarting in June 2023, various Genworth entities (including Genworth Financial, wasGLIC and GLAIC) have been named as a defendantdefendants in acertain of ten putative class action lawsuit pendinglawsuits in the United States District CourtCourts for the Eastern District of Virginia and the District of Massachusetts. These cases are captioned as follows:
Delilah King individually, and on behalf of all others similarly situated v. Genworth Financial, Inc
.;
.Anastasio v. Genworth Financial, Inc. et al
;
Hauser v. Genworth Life Insurance Company
;
Smith v. Genworth Financial, Inc.
;
Behrens v. Genworth Life Insurance Company
;
Hale et al v. Genworth Financial, Inc.
;
Burkett, Jr. v. Genworth Life and Annuity Insurance Company
;
Manar v. Genworth Financial, Inc.
;
Kennedy v. Genworth Financial, Inc.
; and
Bailey v. Genworth Financial, Inc
. The action relatesactions relate to the data security events involving the MOVEit file transfer system (“MOVEit Cybersecurity Incident”), which PBI Research Services (“PBI”), a third-party vendor, uses in the performance of its services. Our life insurance companies use PBI to, among other things, satisfy applicable regulatory obligations to search various databases to identify the deaths of insured persons under life insurance policies, and to identify the deaths of long-term care insurance and annuity policies which can impact premium payment obligations and benefit eligibility. Plaintiff seeksPlaintiffs seek to represent a classvarious classes and subclasses of Genworth long-term care insurance policyholders and agents whose data was accessed or potentially accessed by the MOVEit Cybersecurity Incident, alleging that Genworth breached its purported duty to safeguard their sensitive data from cybercriminals. The complaint assertscomplaints assert claims for, inter alia, negligence, negligence per se, invasionbreach of privacy,contract, unjust enrichment, and violations of the Virginia Personal Information Breach Notification Actvarious consumer protection and the Virginia Consumer Protection Act,privacy statutes, and it seeksthey seek, inter alia, declaratory and injunctive relief, compensatory and punitive damages, restitution, attorneys’ fees and costs. We intendOn October 4, 2023, the Joint Panel on Multidistrict Litigation issued an order consolidating all actions relating to vigorously defend this action.
In July 2023, Genworth Financial was named asthe MOVEit Cybersecurity Incident before a defendant in a putative class action lawsuit pendingsingle federal judge in the United States District Court for the District of Massachusetts captioned
Robert Anastasio, individually and on behalf of all others similarly situated
v. Progress Software Corporation, Pension Benefit Information, LLC d/b/a PBI Research Services, and Genworth Financial, Inc
. This action also relates to the MOVEit Cybersecurity Incident. Plaintiff seeks to represent, among other groups, a subclass of persons whose Genworth data was accessed by the MOVEit Cybersecurity Incident, alleging, inter alia, that Genworth breached its purported duty to safeguard their sensitive data from cybercriminals. The complaint asserts claims against Genworth for negligence, negligence per se, breach of contract and unjust enrichment, and it seeks declaratory and injunctive relief, compensatory and punitive damages, restitution, attorneys’ fees and costs.Massachusetts. We intend to vigorously defend this action.
these actions.
In AugustOn October 20, 2023, GLIC was named as athe defendant in a putative class action lawsuit pending in the United States District Court for the Eastern District of Virginia captioned
Patrice Hauser,Martin Silverstein, on behalf of herselfhimself and all others similarly situated v. Genworth Life Insurance Company
. This action also relates to the MOVEit Cybersecurity Incident. Plaintiff seeks to represent a nationwide class and a Florida subclass of persons whose Genworth data was accessed by the MOVEit Cybersecurity Incident, alleging, inter alia, that Genworth breached its purported duty to safeguard their sensitive data from cybercriminals. The complaint asserts claims for negligence, negligence per se, breachalleges that GLIC subjected universal life insurance policyholders to impermissible increases in cost of implied contract, violationinsurance charges, thereby breaching the underlying contracts. The complaint seeks, among other things, monetary damages and reinstatement of the Florida Deceptive and Unfair Trade Practices Act, and unjust enrichment, and it seeks compensatory and punitive damages, attorneys’ fees, costs, and injunctive and declaratory relief.any lapsed policies. We intend 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. In addition, 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.
95
94
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(b) Commitments
As of JuneSeptember 30, 2023, we were committed to fund $1,399$1,408 million in limited partnership investments, $153$136 million of bank loan investments, and $17$12 million in private placement investments. We were not committed to fund anyinvestments and $9 million of commercial mortgage loan investments as of June 30, 2023.investments.
(19)(20) 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)
 
Derivatives
qualifying as
hedges
(1)
 
Change in the
discount rate
used to measure
future policy
benefits
 
Change in
instrument-
specific
credit risk
of market
risk benefits
 
Foreign
currency
translation
and other
adjustments
   
Total
  
Net
unrealized
investment
gains
(losses)
 
Derivatives
qualifying as
hedges 
(1)
 
Change in the
discount rate
used to
measure
future policy
benefits
 
Change in
instrument-
specific
credit risk
of market
risk benefits
 
Foreign
currency
translation
and other
adjustments
 
Total
 
Balances as of April 1, 2023  $(2,500)  $1,274  $(1,628)  $(9)  $10   $(2,853) 
Balances as of July 1, 2023 $(3,056)  $1,154  $(964)  $(9)  $14  $(2,861) 
OCI before reclassifications   (584)   (83)   664   —     4    1   (1,741)   (390)   2,790   3   (5)   657 
Amounts reclassified from (to) OCI   23   (37)   —     —     —      (14) 
Amounts reclassified from OCI  9   (37)   —    —    2   (26) 
                                      
Current period OCI   (561)   (120)   664   —     4    (13)   (1,732)   (427)   2,790   3   (3)   631 
Balances as of June 30, 2023 before noncontrolling interests   (3,061)   1,154   (964)   (9)   14    (2,866) 
Balances as of September 30, 2023 before noncontrolling interests  (4,788)   727   1,826   (6)   11   (2,230) 
                                      
Less: change in OCI attributable to noncontrolling interests   (5)   —     —     —     —      (5)   (10)   —    —    —    —    (10) 
                                      
Balances as of June 30, 2023  $(3,056)  $1,154  $(964)  $(9)  $14   $(2,861) 
Balances as of September 30, 2023 $(4,778)  $727  $1,826  $(6)  $11  $(2,220) 
                                      
 
(1)See note 6 for additional information.
95
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Amounts in millions)
  
Net
unrealized
investment
gains (losses)
  
Derivatives
qualifying
as hedges
(1)
  
Change in the
discount rate
used to measure
future policy
benefits
  
Change in
instrument-
specific
credit risk
of market
risk benefits
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of April 1, 2022  $2,151  $1,789  $(8,447)  $(13)  $(29)  $(4,549) 
OCI before reclassifications   (3,701)   (307)   5,280   1   (7)   1,266 
Amounts reclassified from (to) OCI   4   (37)   —     —     —     (33) 
                          
Current period OCI   (3,697)   (344)   5,280   1   (7)   1,233 
Balances as of June 30, 2022 before
noncontrolling interests		   (1,546)   1,445   (3,167)   (12)   (36)   (3,316)
                          
Less: change in OCI attributable to
 
noncontrolling interests
   (28)   —     —     —     —     (28) 
                          
Balances as of June 30, 2022  $(1,518)  $1,445  $(3,167)  $(12)  $(36)  $(3,288) 
                          
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
  
Derivatives
qualifying as
hedges 
(1)
  
Change in the
discount rate
used to
measure
future policy
benefits
  
Change in
instrument-
specific
credit risk
of market
risk benefits
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of July 1, 2022 $(1,518)  $1,445  $(3,167)  $(12)  $(36)  $(3,288) 
OCI before reclassifications  (2,538)   (98)   3,282   1   —    647 
Amounts reclassified from OCI  21   (37)   —    —    —    (16) 
                        
Current period OCI  (2,517)   (135)   3,282   1   —    631 
Balances as of September 30, 2022 before noncontrolling interests  (4,035)   1,310   115   (11)   (36)   (2,657) 
                        
Less: change in OCI attributable to noncontrolling interests  (25)   —    —    —    —    (25) 
                        
Balances as of September 30, 2022 $(4,010)  $1,310  $115  $(11)  $(36)  $(2,632) 
                        
 
(1)See note 6 for additional information.

(Amounts in millions)
  
Net
unrealized
investment
gains (losses)
  
Derivatives
qualifying
as hedges
(1)
  
Change in the
discount rate
used to measure
future policy
benefits
  
Change in
instrument-
specific
credit risk
of market
risk benefits
  
Foreign
currency
translation
and other
adjustments
   
Total
 
Balances as of January 1, 2023  $(3,407)  $1,200  $(403)  $(10)  $6   $(2,614) 
OCI before reclassifications   322   31   (561)   1   8    (199) 
Amounts reclassified from (to) OCI   36   (77)   —     —     —      (41) 
                           
Current period OCI   358   (46)   (561)   1   8    (240) 
Balances as of June 30, 2023 before
noncontrolling interests		   (3,049)   1,154   (964)   (9)   14    (2,854) 
                           
Less: change in OCI attributable to
noncontrolling
 
interests
   7   —     —     —     —      7 
                           
Balances as of June 30, 2023  $(3,056)  $1,154  $(964)  $(9)  $14   $(2,861) 
                           
(1) See note 6 for additional information.
96
Table of Contents
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
  
Derivatives
qualifying as
hedges 
(1)
  
Change in the
discount rate
used to
measure
future policy
benefits
  
Change in
instrument-
specific
credit risk
of market
risk benefits
  
Foreign
currency
translation
and other
adjustments
  
Total
 
Balances as of January 1, 2023 $(3,407)  $1,200  $(403)  $(10)  $6  $(2,614) 
OCI before reclassifications  (1,419)   (359)   2,229   4   3   458 
Amounts reclassified from OCI  45   (114)   —    —    2   (67) 
                        
Current period OCI  (1,374)   (473)   2,229   4   5   391 
Balances as of September 30, 2023 before noncontrolling interests  (4,781)   727   1,826   (6)   11   (2,223) 
                        
Less: change in OCI attributable to noncontrolling interests  (3)   —    —    —    —    (3) 
                        
Balances as of September 30, 2023 $(4,778)  $727  $1,826  $(6)  $11  $(2,220) 
                        
(1)See note 6 for additional information.
(Amounts in millions)
 
Net
unrealized
investment
gains
(losses)
 
Derivatives
qualifying
as hedges
(1)
 
Change in the
discount rate
used to measure
future policy
benefits
 
Change in
instrument-
specific
credit risk
of market
risk benefits
 
Foreign
currency
translation
and other
adjustments
 
Total
  
Net
unrealized
investment
gains
(losses)
 
Derivatives
qualifying as
hedges 
(1)
 
Change in the
discount rate
used to
measure
future policy
benefits
 
Change in
instrument-
specific
credit risk
of market
risk benefits
 
Foreign
currency
translation
and other
adjustments
 
Total
 
Balances as of January 1, 2022  $6,077  $2,025  $(13,918)  $(15)  $(24)  $(5,855)  $6,077  $2,025  $(13,918)  $(15)  $(24)  $(5,855) 
OCI before reclassifications   (7,674)   (506)   10,751   3   (12)   2,562   (10,212)   (604)   14,033   4   (12)   3,209 
Amounts reclassified from (to) OCI   10   (74)   —     —     —     (64) 
Amounts reclassified from OCI  31   (111)   —    —    —    (80) 
                                     
Current period OCI   (7,664)   (580)   10,751   3   (12)   2,498   (10,181)   (715)   14,033   4   (12)   3,129 
Balances as of June 30, 2022 before noncontrolling
interests		   (1,587)   1,445   (3,167)   (12)   (36)   (3,357) 
Balances as of September 30, 2022 before noncontrolling interests  (4,104)   1,310   115   (11)   (36)   (2,726) 
                                     
Less: change in OCI attributable to noncontrolling interests   (69)   —     —     —     —     (69)   (94)   —    —    —    —    (94) 
                                     
Balances as of June 30, 2022  $(1,518)  $1,445  $(3,167)  $(12)  $(36)  $(3,288) 
Balances as of September 30, 2022 $(4,010)  $1,310  $115  $(11)  $(36)  $(2,632) 
                                     
 
(1)See note 6 for additional information.
As of JuneSeptember 30, 2023 and 2022, the balances of the change in the discount rate used to measure future policy benefits were net of taxes of $255$(496) million and $855$(31) million, respectively, and the balances of the change in instrument-specific credit risk of MRBs were net of taxes of $2 million and $3 million, respectively. The foreign currency translation and other adjustments balances in the charts above included $34 million and $(4)$2 million, respectively, net of taxes of $(9) million and $1$(1) million, respectively, related to a net unrecognized
postretirement
benefit obligation as of June 
September 30,
,
2023
and
2022
. 2022. The balance also included taxes of $
1
$2 million and $
2
$4 million, respectively, related to foreign currency translation adjustments as of June September 30, 2023 and 2022.
30
,
2023
and
2022
.
 
97
GENWORTH FINANCIAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The following table shows reclassifications from 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
condensed consolidated
statements of income
 
Amount reclassified from accumulated other
comprehensive income (loss)
  
Affected line item in the

condensed consolidated

statements of income
  
Three months
ended June 30,
   
Six months
ended June 30,
  
Three months ended
September 30,
 
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
  
2023
 
2022
 
2023
 
2022
 
Net unrealized investment (gains) losses:
           
Unrealized (gains) losses on investments  $30  $4  $46  $12  Net investment (gains) losses $11  $27  $57  $39  Net investment (gains) losses
Income taxes   (7)   —     (10)   (2)  Provision for income taxes  (2)   (6)   (12)   (8)  Provision for income taxes
                           
Total  $23  $4  $36  $10   $9  $21  $45  $31  
                           
Derivatives qualifying as hedges:    
Interest rate swaps hedging assets  $(55)  $(57)  $(109)  $(112)  Net investment income $(56)  $(55)  $(165)  $(167)  Net investment income
Interest rate swaps hedging assets   (3)   —     (8)   (2)  Net investment (gains) losses  —    (3)   (8)   (5)  Net investment (gains) losses
Interest rate swaps hedging liabilities   —     1   1   2  Interest expense  1   —    2   2  Interest expense
Interest rate swaps hedging liabilities   —     —     (1)   —    Net investment (gains) losses  —    —    (1)   —   Net investment (gains) losses
Foreign currency swaps   —     —     —     (1)  Net investment income  —    —    —    (1)  Net investment income
Foreign currency swaps   —     —     (2)   —    Net investment (gains) losses  —    —    (2)   —   Net investment (gains) losses
Income taxes   21   19   42   39  Provision for income taxes  18   21   60   60  Provision for income taxes
                           
Total  $(37)  $(37)  $(77)  $(74)   $(37)  $(37)  $(114)  $(111)  
                           
 
9
8
98
Table of Contents
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 2022 Annual Report on Form
10-K.
Unless the context otherwise requires, references to “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” 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 potential dividends or share repurchases; future return of capital by Enact Holdings, Inc. (“Enact Holdings”), including share repurchases, and quarterly and special dividends; the cumulative amount of rate action benefits required for our long-term care insurance business to achieve economic break-even status; future financial performance and condition of our businesses; liquidity and future strategic investments, including new senior care services and products; future business and financial performance of CareScout LLC (“CareScout”); as well as statements we make regarding the potential of a recession.
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, inflation, business, competitive, market, regulatory and other factors and risks, including but not limited to, the following:
 
our inability to successfully execute our strategic plans;
 
our failure to achieve economic break-even on or stabilize our legacy long-term care insurance
in-force
block, including as a result of the inability to achieve desired levels of
in-force
rate actions and/or the timing of our future premium rate increases and associated benefit reductions taking longer to achieve than originally assumed; other regulatory actions negatively impacting our life insurance businesses and/or the inability to establish new long-term care insurance business;
 
inaccuracies or changes in estimates, assumptions, methodologies, valuations, projections and/or models, which result in inadequate reserves or other adverse results (including as a result of any changes in connection with quarterly, annual or other reviews)reviews, including reviews we expect to complete and carry out in the fourth quarter of 2023);
 
the impact on holding company liquidity caused by an inability to receive dividends or any other returns of capital from Enact Holdings, and limited sources of capital and financing;
 
adverse changes to the structure, or requirements of Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the U.S. mortgage insurance market; an increase in the number of loans insured through federal government mortgage insurance programs, including those offered by the Federal Housing Administration (“FHA”); the inability of Enact Holdings and/or its U.S. mortgage insurance subsidiaries to continue to meet the requirements mandated by the private mortgage insurer eligibility requirements (“PMIERs”) (or any adverse changes thereto), inability to meet minimum statutory capital requirements of applicable regulators or the mortgage insurer eligibility requirements of Fannie Mae or Freddie Mac;
 
changes in economic, market and political conditions including as a result of high inflation, supply chain disruptions, labor shortages, displacements related to the coronavirus pandemic
(“COVID-19”)
and elevated interest
99
Table of Contents
 
and elevated interest rates, including actions taken by the U.S. Federal Reserve to increase interest rates to combat inflation and slow economic growth, which could heighten the risk of a future recession; unanticipated financial events such as closures and disruptions experienced by the banking sector, which could lead to market-wide liquidity problems and other significant market disruption resulting in losses, defaults or credit rating downgrades of other financial institutions; deterioration in economic conditions, a recession or a decline in home prices, all of which could be driven by many potential factors, including inflation, may adversely affect Enact Holdings’ loss experience and/or business levels; political and economic instability or changes in government policies, and fluctuations in international securities markets;
 
rating downgrades or potential downgrades in liquidity, financial strength and credit ratings; counterparty credit risks; defaults by counterparties to reinsurance arrangements or derivative instruments; defaults or other events impacting the value of invested assets;
 
changes in tax rates or tax laws, or changes in accounting and reporting standards (including new accounting guidance we adopted on January 1, 2023 related to long-duration insurance contracts);
 
litigation and regulatory investigations or other actions, including commercial and contractual disputes with counterparties;
 
our inability to achieve anticipated business performance and financial results from CareScout and its senior care growth initiatives through
fee-based
services, advice, consulting and other products and services;
 
the inability to retain, attract and motivate qualified employees or senior management;
 
the occurrence of natural or
man-made
disasters, including geopolitical tensions and war (including the Russian invasion of Ukraine)Ukraine and the Hamas attack on Israel and ensuing response), a public health emergency, including pandemics, or climate change;
 
the inability to effectively manage information technology systems, cyber incidents or other failures, disruptions or security breaches to us or our third-party vendors such as the MOVEit cybersecurity incident described herein (the “MOVEit Cybersecurity Incident”); and
 
other factors described in the risk factors contained in Item 1A of our Annual Report on Form
10-K,
filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2023.
We provide additional information regarding these risks and uncertainties in our Annual Report on Form
Form 10-K.
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 principal U.S. life insurance subsidiaries offer long-term care insurance and also manage
in-force
blocks of life insurance and annuity products. We report our business results through three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional and
non-traditional
life insurance (term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities (which include variable life insurance), none of which are actively marketed or sold.
In addition to our three operating segments, we also have Corporate and Other, which includes debt financing expenses that are incurred at the Genworth Holdings, Inc. (“Genworth Holdings”) level, unallocated
 
100
Table of Contents
corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, such as certain international businesses and discontinued operations. Corporate and Other also includes
start-up
results related to
fee-based
services, care support and advice, clinical assessments and consulting offered by CareScout to advance our senior care growth initiatives.
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 SEC. 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.
Strategic Update
Genworth has advanced its strategy to drive shareholder value over the past several years, culminating in several major achievements in 2022 and through the secondthird quarter of 2023. We reduced Genworth Holdings’ debt to less than $1.0 billion, enhanced the value of Enact, received multiple upgrades from rating agencies, continued to make progress on our multi-year long-term care insurance
in-force
rate action plan and began returning capital to shareholders for the first time in over 13 years. In addition, the government-sponsored enterprises (“GSEs”) lifted the restrictions that had been imposed on Enact effective March 1, 2023. This was an important milestone as Enact is no longer subject to more stringent capital requirements as compared to its peers, putting it on a more level playing field with its competitors. Building on this progress and the transformative improvement in Genworth’s financial position over the past few years, we have refocused our priorities to three areas:
 
further strengthen our legacy long-term care insurance financial and operational capabilities to address customer needs;
 
allocate capital from Enact to drive Genworth Financial’s long-term shareholder value; and
 
leverage our unparalleled long-term care expertise to develop innovative aging care services and solutions.
Our long-term care insurance business continued to make progress on its multi-year long-term care insurance
in-force
rate action plan, receiving approvals of approximately $144$227 million of incremental annual premiums for the sixnine months ended JuneSeptember 30, 2023. In aggregate, we estimate that the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year
in-force
rate action plan through the secondthird quarter of 2023 was approximately $24.4$25 billion, on a net present value basis, of the total currently expectedestimated amount required of approximately $30.3 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.
Enact continues to be a significant driver of value for Genworth. As the majority shareholder, Genworth Holdings received $54$26 million of capital returns from Enact Holdings during the secondthird quarter of 2023. In addition, on August 1, 2023, Enact Holdings announced the authorization of a new share repurchase program under which Enact Holdings may repurchase up to an additional $100 million of its common stock. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. Capital returns from Enact have enabled us to achieve key milestones to date and will continue to benefit our shareholders by funding our strategic initiatives, including share repurchases.
Cumulative to date, Genworth Financial has repurchased approximately $264$334 million of its common shares under its share repurchase program that began in May 2022, including $112$80 million during the secondthird quarter of
 
101
Table of Contents
2023 and another $20$10 million in JulyOctober 2023. On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under the existing share repurchase program, increasingprogram. Including this additional authorization, the remaining authorized amount under the program toas of October 31, 2023 was approximately $436$366 million. The timing and number of future shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors.
In terms of our longer-term priorities, we are focused on advancing Genworth’s senior care growth initiatives, including through
fee-based
services, advice, consulting and other products and services offered by CareScout, an indirect subsidiary of Genworth Financial. We see meaningful opportunities to provide these services to address the needs of elderly Americans, as well as their caregivers and families. We launched the initial phase of our CareScout services business in March 2023. This business includes a digital platform, where we hope to curate a broad marketplace that matches consumers’ long-term care needs with a network of quality providers that we are building as part of the initial phase of the CareScout services launch. In addition to the digital platform and quality network offerings to consumers, employers and long-term care insurers, the discounts available through the network are expected to have the potential to further mitigate risk in our legacy long-term care insurance block by reducing claims costs. Our CareScout services business is currently focused on home care providers as the majority of our initial long-term care insurance claims begin with care in the home. While the initial focus for the quality network is with Genworth’s long-term care insurance policyholders in one state, we believe we can accelerate our efforts to build a national quality network of care providers, which we expect could allow a high-quality experience and discounted fees for more existing Genworth policyholders and broaden the scope of our CareScout services business to new consumer markets. As we expand the business, there may be other potential future growth opportunities, namely options that assist in funding long-term care needs and expanding CareScout’s products and services to international markets.
In October 2023, Genworth Holdings completed a bondholder consent solicitation that amended the Replacement Capital Covenant entered into for the benefit of the holders of its senior notes due in 2034 (“2034 Notes”) that limited its ability to repurchase its floating rate junior subordinated notes due in 2066 (“2066 Notes”). The amendment permits certain repayments, redemptions or repurchases of Genworth Holdings’ 2066 Notes. This transaction provides more flexibility in our capital management program as it gives us more optionality to make opportunistic debt repurchases while prioritizing growth investments and share repurchases. Genworth will strive to maintain a disciplined approach in its capital allocation strategy, balancing investments in growth initiatives with returning value to shareholders. We may also continue to opportunistically repurchase Genworth Holdings’ debt as part of our balanced capital allocation strategy.
Financial Strength and Credit Ratings
On August 1, 2023, A.M. Best Company, Inc. assigned an initial public financial strength rating of “A-
“A-”
to Enact Mortgage Insurance Corporation (“EMICO”), Enact Holdings’ principal U.S. mortgage insurance subsidiary, with an outlook of stable.
On April 25, 2023, Fitch Ratings, Inc. upgraded the financial strength rating of EMICO to “A-
“A-”
from “BBB+” with an outlook of stable.
On March 1, 2023, Moody’s Investors Service, Inc. upgraded the credit rating of Genworth Holdings to “Ba1” from “Ba2” and upgraded the financial strength rating of EMICO to “A3” from “Baa1.” The outlooks for the ratings are stable.
On February 16, 2023, S&P Global Ratings upgraded the credit rating of Genworth Financial and Genworth Holdings to “BB-
“BB-”
from “B+” with an outlook of stable and upgraded the financial strength rating of EMICO to “BBB+” from “BBB.”
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, 2023, the date we filed our
102
Table of Contents
2022 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 2022 Annual Report on Form
10-K.
102
Table of Contents
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. Benefits and other changes in policy reserves exclude the impact of liability remeasurement (gains) losses, which is separately presented as discussed below.
 
Liability remeasurement (gains) losses.
Liability remeasurement (gains) losses represent changes to the net premium ratio for actual versus expected experience and updates to cash flow assumptions used to measure long-duration and limited-payment insurance contracts.
 
Changes in fair value of market risk benefits and associated hedges.
Changes in fair value of market risk benefits and associated hedges consist of fair value changes of market risk benefits (other than changes attributable to instrument-specific credit risk), net of changes in the fair value of
non-qualified
derivative instruments associated with our market risk benefits.
 
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.
 
103
Table of Contents
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. We allocate corporate expenses to each of our operating segments using various methodologies.
Amortization of deferred acquisition costs and intangibles.
Amortization of deferred acquisition costs (“DAC”) and intangibles consists primarily of the amortization of acquisition costs that are capitalized, present value of future profits and capitalized software.
 
Interest expense.
Interest expense represents interest related to our borrowings that are incurred at Genworth Holdings or Enact Holdings, and certain reinsurance arrangements being accounted for as deposits.
 
Provision (benefit) for 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 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.
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. For a discussion of the effective tax rates used to record the provision for income taxes for our three operating segments and Corporate and Other for the three and nine months ended September 30, 2023 and 2022, see note 17 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”
 
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. 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, 2023, we utilized the actual effective tax rate for the interim periods to record the provision for income taxes for our Long-Term Care Insurance and Life and Annuities segments and the annualized projected effective tax rate for our Enact segment and Corporate and Other. We utilized the effective tax rate for the year ended December 31, 2022 in determining the re-presented provision for income taxes for the three and six months ended June 30, 2022.
We allocate corporate expenses to each of our operating segments using various methodologies.
 
104
Table of Contents
Consolidated Results of Operations
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
The following table sets forth the consolidated results of operations for the periods indicated:
 
  
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Revenues:
                
Premiums
  $902   $916   $(14)    (2)%   $915   $929   $(14)    (2)% 
Net investment income
   785    787    (2)    —  %    801    808    (7)    (1)%
 
Net investment gains (losses)
   39    19    20    105%    (43)    (58)    15    26%
 
Policy fees and other income
   166    165    1    1%    158    169    (11)    (7)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total revenues
   1,892    1,887    5    —  %    1,831    1,848    (17)    (1)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Benefits and expenses:
                
Benefits and other changes in policy reserves
   1,175    768    407    53%    1,199    1,159    40    3%
 
Liability remeasurement (gains) losses
   70    24    46    192%    116    17    99    NM(1) 
Changes in fair value of market risk benefits and associated hedges
   (19)    20    (39)    (195)%    (24)    (27)    3    11% 
Interest credited
   126    126    —      —  %    127    128    (1)    (1)%
 
Acquisition and operating expenses, net of deferrals
   226    579    (353)    (61)%    228    245    (17)    (7)%
 
Amortization of deferred acquisition costs and intangibles
   64    84    (20)    (24)%    65    80    (15)    (19)%
 
Interest expense
   29    26    3    12%    30    26    4    15%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total benefits and expenses
   1,671    1,627    44    3%    1,741    1,628    113    7%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations before income taxes
   221    260    (39)    (15)%    90    220    (130)    (59)%
 
Provision for income taxes
   55    62    (7)    (11)%    30    54    (24)    (44)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations
   166    198    (32)    (16)%    60    166    (106)    (64)%
 
Income (loss) from discontinued operations, net of taxes
   2    (1)    3    NM(1) 
Income from discontinued operations, net of taxes
   —      5    (5)    (100)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Net income
   168    197    (29)    (15)%    60    171    (111)    (65)%
 
Less: net income from continuing operations attributable to noncontrolling interests
   31    38    (7)    (18)%    31    35    (4)    (11)%
 
Less: net income from discontinued operations attributable to noncontrolling interests
   —      —      —      —  %    —      —      —      —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
Net income available to Genworth Financial, Inc.’s common stockholders
  $137   $159   $(22)    (14)%   $29   $136   $(107)    (79)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Net income available to Genworth Financial, Inc.’s common stockholders:
                
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $135   $160   $(25)    (16)%   $29   $131   $(102)    (78)%
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   2    (1)    3    NM(1) 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   —      5    (5)    (100)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
Net income available to Genworth Financial, Inc.’s common stockholders
  $137   $159   $(22)    (14)%   $29   $136   $(107)    (79)%
 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
 
105
Table of Contents
SixNine Months Ended JuneSeptember 30, 2023 Compared to SixNine Months Ended JuneSeptember 30, 2022
The following table sets forth the consolidated results of operations for the periods indicated:
 
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Nine months ended
September 30,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
  2023  
 
  2022  
 
  2023 vs. 2022  
 
Revenues:
             
Premiums
  $1,817   $1,833   $(16)    (1)%   $2,732  $2,762  $(30)   (1)%
 
Net investment income
   1,572    1,551    21    1%    2,373   2,359   14   1%
 
Net investment gains (losses)
   28    61    (33)    (54)%    (15)   3   (18)   NM(1) 
Policy fees and other income
   329    335    (6)    (2)%    487   504   (17)   (3)%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total revenues
   3,746    3,780    (34)    (1)%    5,577   5,628   (51)   (1)%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Benefits and expenses:
             
Benefits and other changes in policy reserves
   2,351    1,935    416    21%    3,550   3,094   456   15%
 
Liability remeasurement (gains) losses
   55    (40)    95    NM(1)    171   (23)   194   NM(1) 
Changes in fair value of market risk benefits and associated hedges
   (2)    (21)    19    90%    (26)   (48)   22   46%
 
Interest credited
   252    251    1    —  %    379   379   —     —  %
 
Acquisition and operating expenses, net of deferrals
   466    815    (349)    (43)%    694   1,060   (366)   (35)%
 
Amortization of deferred acquisition costs and intangibles
   136    172    (36)    (21)%    201   252   (51)   (20)%
 
Interest expense
   58    52    6    12%    88   78   10   13%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Total benefits and expenses
   3,316    3,164    152    5%    5,057   4,792   265   6%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Income from continuing operations before income taxes
   430    616    (186)    (30)%    520   836   (316)   (38)%
 
Provision for income taxes
   110    146    (36)    (25)%    140   200   (60)   (30)%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Income from continuing operations
   320    470    (150)    (32)%    380   636   (256)   (40)%
 
Income (loss) from discontinued operations, net of taxes
   2    (3)    5    167% 
Income from discontinued operations, net of taxes
   2   2   —     —  %
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Net income
   322    467    (145)    (31)%    382   638   (256)   (40)%
 
Less: net income from continuing operations attributable to noncontrolling interests
   63    68    (5)    (7)%    94   103   (9)   (9)% 
Less: net income from discontinued operations attributable to noncontrolling interests
   —      —      —      —  %    —     —     —     —  % 
  
 
   
 
   
 
     
 
  
 
  
 
  
Net income available to Genworth Financial, Inc.’s common stockholders
  $259   $399   $(140)    (35)%   $288  $535  $(247)   (46)%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Net income available to Genworth Financial, Inc.’s common stockholders:
             
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
  $257   $402   $(145)    (36)%   $286  $533  $(247)   (46)%
 
Income (loss) from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   2    (3)    5    167% 
Income from discontinued operations available to Genworth Financial, Inc.’s common stockholders
   2   2   —     —  %
 
  
 
   
 
   
 
     
 
  
 
  
 
  
Net income available to Genworth Financial, Inc.’s common stockholders
  $259   $399   $(140)    (35)%   $288  $535  $(247)   (46)%
 
  
 
   
 
   
 
     
 
  
 
  
 
  
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
106
Table of Contents
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
106
Table of Contents
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.
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 President and Chief Executive Officer (Principal Executive Officer), who serves as 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), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items. 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. We exclude net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual
non-operating
items from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating performance.
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. Changes in fair value of market risk benefits and associated hedges are adjusted to exclude changes in reserves, attributed fees and benefit payments.
 
107
Table of Contents
The following table presents a reconciliation of net income to adjusted operating income for the periods indicated:
 
  
Three months
ended June 30,
   
Six months ended
June 30,
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Net income available to Genworth Financial, Inc.’s common stockholders
  $137   $159   $259   $399   $29   $136   $288   $535 
Add: net income from continuing operations attributable to noncontrolling interests
   31    38    63    68    31    35    94    103 
Add: net income from discontinued operations attributable to noncontrolling interests
   —      —      —      —      —      —      —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Net income
   168    197    322    467    60    171    382    638 
Less: income (loss) from discontinued operations, net of taxes
   2    (1)    2    (3) 
Less: income from discontinued operations, net of taxes
   —      5    2    2 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Income from continuing operations
   166    198    320    470    60    166    380    636 
Less: net income from continuing operations attributable to noncontrolling interests
   31    38    63    68    31    35    94    103 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   135    160    257    402    29    131    286    533 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
                
Net investment (gains) losses, net
(1)
   (41)    (19)    (30)    (61)    43    58    13    (3) 
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges
(2)
   (23)    8    (9)    (46)    (26)    (32)    (35)    (78) 
(Gains) losses on early extinguishment of debt
(3)
   —      1    (1)    4    —      3    (1)    7 
Expenses related to restructuring
   1    1    4    1    —      —      4    1 
Pension plan termination costs
   —      6    —      6 
Taxes on adjustments
   13    2    8    22    (4)    (8)    4    14 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $85   $153   $229   $322   $42   $158   $271   $480 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
 
(1)
For the three and sixnine months ended JuneSeptember 30, 2023, net investment (gains) losses were adjusted for the portion of net investment losses attributable to noncontrolling interests of $2 million.
(2)
For the three months ended June 30, 2023 and 2022, changesChanges in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(4)$(2) million and $(12)$(5) million respectively. Forfor the sixthree months ended JuneSeptember 30, 2023 and 2022, changes in fair value of market risk benefitsrespectively, and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(7)$(9) million and $(25)$(30) million for the nine months ended September 30, 2023 and 2022, respectively.
(3)
During the sixnine months ended JuneSeptember 30, 2023, we repurchased $11 million principal amount of Genworth Holdings’ senior notes due in June 2034 Notes for a
pre-tax
gain of $1 million. During the three and sixnine months ended JuneSeptember 30, 2022, we repurchase $48paid a
pre-tax
make-whole premium of $2 million and wrote off $1 million of bond consent fees and deferred borrowing costs related to the early redemption of Genworth Holdings’ senior notes originally scheduled to mature in 2024 (“2024 Notes”). Additionally, during the nine months ended September 30, 2022, we repurchased $130 million respectively, principal amount of Genworth Holdings’ senior notes due in February 2024 Notes for a
pre-tax
loss of $1 million and $4 million, respectively.
million.
ThereOther than pension plan termination costs incurred in the third quarter of 2022 related to one of our defined benefit pension plans, there were no infrequent or unusual items excluded from adjusted operating income during the periods presented.
 
108
Table of Contents
Earnings per share
The following table provides basic and diluted earnings per common share for the periods indicated:
 
  
Three months
ended June 30,
   
Increase
(decrease) and
percentage
change
 
Six months
ended June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
Nine months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions, except per share amounts)
  
2023
   
2022
   
2023 vs. 2022
 
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
2023
   
2022
   
2023 vs. 2022
 
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders per share:
                          
Basic
  $0.28   $0.32   $(0.04)   (13)%  $0.53   $0.79   $(0.26)   (33)%   $0.06   $0.26   $(0.20)   (77)%  $0.60   $1.05   $(0.45)   (43)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
  $0.28   $0.31   $(0.03)   (10)%  $0.53   $0.78   $(0.25)   (32)%   $0.06   $0.26   $(0.20)   (77)%  $0.59   $1.04   $(0.45)   (43)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Net income available to Genworth Financial, Inc.’s common stockholders per share:
                          
Basic
  $0.29   $0.31   $(0.02)   (6)%  $0.54   $0.79   $(0.25)   (32)%   $0.06   $0.27   $(0.21)   (78)%  $0.61   $1.05   $(0.44)   (42)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
  $0.29   $0.31   $(0.02)   (6)%  $0.53   $0.77   $(0.24)   (31)%   $0.06   $0.27   $(0.21)   (78)%  $0.60   $1.04   $(0.44)   (42)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders per share:
                          
Basic
  $0.18   $0.30   $(0.12)   (40)%  $0.47   $0.63   $(0.16)   (25)%   $0.09   $0.31   $(0.22)   (71)%  $0.57   $0.95   $(0.38)   (40)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Diluted
  $0.18   $0.30   $(0.12)   (40)%  $0.47   $0.62   $(0.15)   (24)%   $0.09   $0.31   $(0.22)   (71)%  $0.56   $0.93   $(0.37)   (40)% 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
  
 
  
 
   
 
   
 
  
 
 
Weighted-average common shares outstanding:
                          
Basic
   473.2    508.9      482.7    508.6       460.5    503.8      475.3    507.0    
  
 
   
 
     
 
   
 
      
 
   
 
     
 
   
 
    
Diluted
   478.1    514.1      489.1    515.7       466.0    509.3      481.4    513.6    
  
 
   
 
     
 
   
 
      
 
   
 
     
 
   
 
    
Diluted weighted-average common shares outstanding reflect the effects of potentially dilutive securities including stock options, restricted stock units and other equity-based awards.
 
109
Table of Contents
The following table presents a summary of adjusted operating income (loss) for our segments and Corporate and Other for the periods indicated:
 
  
Three months
ended June 30,
 
Increase
(decrease) and
percentage
change
 
Six months
ended June 30,
 
Increase
(decrease) and
percentage
change
   
Three months ended
September 30,
 
Increase
(decrease) and
percentage
change
 
Nine months ended
September 30,
 
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
 
2022
 
2023 vs. 2022
 
2023
 
2022
 
2023 vs. 2022
   
2023
 
2022
 
2023 vs. 2022
 
2023
 
2022
 
2023 vs. 2022
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
                          
Enact segment
  $146  $167  $(21)   (13)%  $289  $302  $(13)   (4)%   $134  $156  $(22)   (14)%  $423  $458  $(35)   (8)% 
Long-Term Care Insurance segment
   (43)   17   (60)   NM(1)   (20)   90   (110)   (122)%    (71)   26   (97)   NM(1)   (91)   116   (207)   (178)% 
Life and Annuities Segment:
         
Life and Annuities segment:
                 
Life insurance
   (17)   (37)   20   54%   (44)   (84)   40   48%    (25)   (28)   3   11%   (69)   (112)   43   38% 
Fixed annuities
   10   20   (10)   (50)%   24   33   (9)   (27)%    17   15   2   13%   41   48   (7)   (15)% 
Variable annuities
   9   2   7   NM(1)   18   6   12   200%    5   7   (2)   (29)%   23   13   10   77% 
  
 
  
 
  
 
   
 
  
 
  
 
    
 
  
 
  
 
    
 
  
 
  
 
   
Life and Annuities segment
   2   (15)   17   113%   (2)   (45)   43   96%    (3)   (6)   3   50%   (5)   (51)   46   90% 
  
 
  
 
  
 
   
 
  
 
  
 
    
 
  
 
  
 
    
 
  
 
  
 
   
Corporate and Other
   (20)   (16)   (4)   (25)%   (38)   (25)   (13)   (52)%    (18)   (18)   —     —  %   (56)   (43)   (13)   (30)% 
  
 
  
 
  
 
   
 
  
 
  
 
    
 
  
 
  
 
    
 
  
 
  
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $85  $153  $(68)   (44)%  $229  $322  $(93)   (29)%   $42  $158  $(116)   (73)%  $271  $480  $(209)   (44)% 
  
 
  
 
  
 
   
 
  
 
  
 
    
 
  
 
  
 
    
 
  
 
  
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
Executive Summary of Consolidated Financial Results
Below is an executive summary of our condensed consolidated financial results for the periods indicated. Amounts within this “Executive Summary of Consolidated Financial Results” are net of taxes, unless otherwise indicated.
After-tax
amounts assume a tax rate of 21%.
For a discussion of selected financial information and detailed descriptions of operating performance measures see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment.”
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
 
Net income for the three months ended JuneSeptember 30, 2023 and 2022 was $137$29 million and $159$136 million, respectively, and adjusted operating income was $85$42 million and $153$158 million, respectively.
 
Our Enact segment reported adjusted operating income of $146$134 million and $167$156 million for the three months ended JuneSeptember 30, 2023 and 2022, respectively.
 
Adjusted operating income decreased primarily attributable to higher losses largely driven byon new delinquencies and a lower favorable reserve adjustment, and higher new delinquencies, partially offset by higher net investment income and lower operating costspremiums in the current year.
 
Our Long-Term Care Insurance segment reported adjusted operating income (loss) of $(43)$(71) million and $17$26 million for the three months ended June 30, 2023 and 2022, respectively.
The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was largely driven by lower terminations, elevated benefit utilization and higher new claims in the current year.
The adverse change was also attributable to lower net investment income in the current year.
Our Life and Annuities segment reported adjusted operating income (loss) of $2 million and $(15) million for the three months ended June 30, 2023 and 2022, respectively.
110
Table of Contents
Life insurance:
The adjusted operating loss in our life insurance products decreased $20 million primarily due to lower DAC amortization related to lower lapses and from lower mortality experience, partially offset by lower premiums reflecting runoff of our in-force blocks in the current year.
Fixed annuities:
Adjusted operating income in our fixed annuity products decreased $10 million mainly from lower net spreads primarily related to block runoff and from lower mortality in our single premium immediate annuity products in the current year.
Variable annuities:
Adjusted operating income in our variable annuity products increased $7 million predominantly due to aging of our in-force block in the current year.
Corporate and Other had an adjusted operating loss of $20 million and $16 million for the three months ended June 30, 2023 and 2022, respectively.
The increase in the loss was primarily driven by higher expenses related to CareScout growth initiatives in the current year.
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Net income for the six months ended June 30, 2023 and 2022 was $259 million and $399 million, respectively, and adjusted operating income was $229 million and $322 million, respectively.
Our Enact segment reported $289 million and $302 million of adjusted operating income for the six months ended June 30, 2023 and 2022.
Adjusted operating income decreased primarily attributable to higher losses largely driven by lower favorable reserve adjustments and higher new delinquencies, partially offset by higher net investment income and lower operating costs in the current year.
Our Long-Term Care Insurance segment reported adjusted operating income (loss) of $(20) million and $90 million for the six months ended JuneSeptember 30, 2023 and 2022, respectively.
 
The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was primarily from higher liability remeasurement losses largely driven by timing impacts related to a second legal settlement, higher claims and lower terminations elevated benefit utilization and higher new claims in the current year.
 
110
These
Table of Contents
The adverse developments were partially offset by higherchange was also attributable to lower net investment income in the current year.year, partially offset by an accrual for legal settlement costs of $16 million in the prior year that did not recur.
 
Our Life and Annuities segment reported an adjusted operating loss of $2$3 million and $45$6 million for the sixthree months ended JuneSeptember 30, 2023 and 2022, respectively.
 
Life insurance:
 
The adjusted operating loss in our life insurance products decreased $40$3 million largely attributableprimarily due to a $20 million legal settlement expense in the prior year that did not recurfavorable mortality experience and from lower DAC amortization, partially offset by higher liability remeasurement losses largely related to lower lapsesa voluntary recapture of previously ceded reinsurance in the current year.
Current year results also reflected lower mortality experience as the COVID-19 impacts subsided, partially offset by lower premiums reflecting runoff of our in-force blocks.
 
Fixed annuities:
 
Adjusted operating income in our fixed annuity products decreased $9increased $2 million mainly attributable tofrom favorable mortality in our fixed payout annuity products, partially offset by lower net spreads primarily related to block runoff in the current year.
 
111
Table of Contents
Variable annuities:
 
Adjusted operating income in our variable annuity products increased $12decreased $2 million predominantly due to aging of our in-force block, partially offset by a decreasedecline in fee income driven by lower account value in the current year.
 
Corporate and Other had an adjusted operating loss of $38$18 million for both the three months ended September 30, 2023 and 2022.
The adjusted operating loss was flat as a decrease in tax expense on certain forward starting swap gains was offset by higher expenses related to CareScout growth initiatives and higher interest expense in the current year.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Net income for the nine months ended September 30, 2023 and 2022 was $288 million and $25$535 million, respectively, and adjusted operating income was $271 million and $480 million, respectively.
Our Enact segment reported $423 million and $458 million of adjusted operating income for the nine months ended September 30, 2023 and 2022, respectively.
Adjusted operating income decreased primarily attributable to higher losses on new delinquencies and lower favorable reserve adjustments, partially offset by higher net investment income, lower operating costs and higher premiums in the current year.
Our Long-Term Care Insurance segment reported adjusted operating income (loss) of $(91) million and $116 million for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively.
The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was primarily from an unfavorable change in liability remeasurement (gains) losses largely driven by timing impacts related to legal settlements, higher claims and lower terminations in the current year.
The change was also attributable to less favorable cash flow assumption updates related to implementation timing and approval amounts of our
in-force
rate action plan and from higher operating costs in the current year.
Our Life and Annuities segment reported an adjusted operating loss of $5 million and $51 million for the nine months ended September 30, 2023 and 2022, respectively.
111
Table of Contents
Life insurance:
The adjusted operating loss in our life insurance products decreased $43 million largely attributable to lower DAC amortization related to higher lapse in the prior year and from favorable mortality experience in the current year as the
COVID-19
impacts subsided. In addition, the prior year included a $20 million legal settlement expense that did not recur.
These favorable developments were partially offset by lower premiums reflecting runoff of our
in-force
blocks in the current year.
Fixed annuities:
Adjusted operating income in our fixed annuity products decreased $7 million mainly attributable to lower net spreads primarily related to block runoff, partially offset by favorable mortality experience in the current year.
Variable annuities:
Adjusted operating income in our variable annuity products increased $10 million predominantly due to aging of our
in-force
block, partially offset by a decrease in fee income driven by lower account value in the current year.
Corporate and Other had an adjusted operating loss of $56 million and $43 million for the nine months ended September 30, 2023 and 2022, respectively.
 
The increase in the adjusted operating loss was primarily driven byfrom higher expenses related to CareScout growth initiatives and higher interest expense, partially offset by higher net investment income and lower tax expense on certain forward starting swap gains in the current year.
Significant Developments and Strategic Highlights
The periods under review include, among others, the following significant developments and steps taken in the execution of our strategic priorities.
Enact
 
Persistency, new insurance written and loss performance:
 
Enact’s primary persistency rate was 84% for the secondthird quarter of 2023 compared to 80%82% for the secondthird quarter of 2022. Elevated persistency continued to offset the decline in new insurance written.written, contributing to insurance
in-force
growth in 2023.
New insurance written decreased 4% in the third quarter of 2023 compared to the third quarter of 2022 mostly from a decline in originations due to elevated interest rates.
 
Enact recorded favorable
pre-tax
reserve adjustments of $133$188 million duringfor the first half ofnine months ended September 30, 2023, including $63$55 million in the secondthird quarter of 2023, primarily related to favorable cure performance on 20212022 and prior delinquencies, including those related to COVID-19, and delinquencies from the first half of 2022.
COVID-19.
Enact recorded $146$226 million of
pre-tax
net favorable reserve releases inadjustments for the first half ofnine months ended September 30, 2022, including $96$80 million in the secondthird quarter of 2022, primarily related to favorable cure performance on 2020
COVID-19
delinquencies.
New primary delinquencies in the third quarter of 2023 increased compared to the third quarter of 2022 primarily due to the aging of large, new books of business.
 
PMIERs compliance:
 
Effective March 1, 2023, the GSEs removed the capital restrictions that had been imposed on Enact.
 
112
Table of Contents
Enact’s PMIERs sufficiency ratio was 162% or $1,958$2,017 million above the PMIERs requirements as of JuneSeptember 30, 2023.
 
As of JuneSeptember 30, 2023, Enact had estimated available assets of $5,268 million against $3,251 million net required assets under PMIERs compared to available assets of $5,093 million against $3,135 million net required assets under PMIERs compared to available assets of $5,357 million against $3,259 million net required assets as of March 31,June 30, 2023.
 
Returns of capital:
 
On November 1, 2022, Enact Holdings announced the approval by its board of directors of a share repurchase program under which Enact Holdings may repurchase up to $75 million of its outstanding common stock. We agreed to participate in order to maintain our overall ownership at its current level.
Genworth Holdings received $54 million of capital returns from Enact Holdings during the second quarter of 2023.
 
On August 1, 2023, Enact Holdings announced the authorization of a new share repurchase program under which Enact Holdings may repurchase up to an additional $100 million of its common stock.
Genworth Holdings has agreed to participate in both programs in order to maintain its overall ownership at its current level.
 
112
Genworth Holdings received $26 million of capital returns from Enact Holdings during the third quarter of 2023.
Table
Based on Genworth Financial’s ownership of Contents81.6% of Enact Holdings, we expect to receive approximately $245 million from Enact Holdings for the full year 2023, consisting of quarterly dividends, share repurchases and a special dividend to be paid in the fourth quarter of 2023.
U.S. life insurance companies
 
As of JuneSeptember 30, 2023, the consolidated company action level risk-based capital ratio of our U.S. domiciled life insurance subsidiaries was estimated to be approximately 293%291%, which increased from 291% as offlat compared to December 31, 2022. The increase was primarily driven by favorable statutory earnings in our fixed and variable annuity products in the current year.
 
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 these blocks closer to their original pricing. We estimate that the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year
in-force
rate action plan through the secondthird quarter of 2023 was approximately $24.4$25 billion, on a net present value basis, of the total currently expectedestimated amount required of approximately $30.3 billion.
We expect higher paid claims in our long-term care insurance business as our blocks age with peak claim years over a decade away. Paid claims on newer products continue to increase as policyholders approach peak claim age, while claims on our older products decline as those policyholders are past peak claim age. We also expect overall claim costs to continue to increase as the approximately 630,000 insured individuals in our two largest blocks, Choice I and Choice II, with average attained ages of 76 and 73, respectively, reach their peak claim years, which are over age 85.
Under the new accounting guidance for long-duration insurance contracts, commonly known as long-duration targeted improvements (“LDTI”), we expect ongoing volatility in our quarterly U.S. GAAP results as we remeasure our actual experience versus our best estimate assumptions, which are now recorded at a granular policy cohort level. For example, in the third quarter of 2023, our long-term care insurance remeasurement loss was $104 million due to adverse actual versus expected experience largely driven by timing impacts related to a second legal settlement, higher claims and lower terminations in the current year compared to a remeasurement loss of $3 million in the prior year.
113
Table of Contents
In the fourth quarter of 2022, we updated our assumptions in our long-term care insurance business, which resulted in a favorable assumption update of $303 million largely from an update to legal settlement elections attributable to the inclusion of a second legal settlement. This settlement primarily impacts older, unprofitable capped cohorts; therefore, it had an immediate impact to the fourth quarter of 2022 earnings. While we have experienced and may continue to experience quarterly fluctuations in earnings due to deviations in actual versus expected experience associated with this legal settlement, we expect an overall net favorable economic impact to our long-term care insurance business, as this legal settlement reduces tail risk on our
long-duration
liabilities.
 
We were notified by PBI Research Services (“PBI”), a third-party vendor, that PBI was subject to the widely reported security events involving the MOVEit file transfer system, which PBI uses in the performance of its services. The MOVEit Cybersecurity Incident resulted in the unauthorized acquisition of data by a third party from PBI as well as several organizations and governmental agencies. Since receiving notification of the security event, we, together with PBI, promptly launched an investigation to determine the extent to what extentwhich personal information had been unlawfully accessed. We believe approximatelyApproximately 2.5 to 2.7 million of our policyholders’ or other customers’ personal information, including social security numbers, was exposed to and obtained by the threat actor as a result of the MOVEit Cybersecurity Incident. Individuals affected by this security event, as well as regulatoryRegulatory agencies have been or are in the process of beingwere notified and impacted individuals were mailed notices as required by federal and state law. In addition, impacted individuals have been or are in the process of being offered credit monitoring, fraud consultation and identity theft restoration services. To date, most of the regulatory notification costs have been incurred by PBI.
Liquidity and capital resources
 
Genworth Financial share repurchase program:
During the six months ended June 30, 2023, Genworth Financial repurchased 31,771,972 shares of its common stock at an average price of $5.67 per share for a total of $180 million, excluding excise taxes and other costs paid in connection with acquiring the shares.
Genworth Financial authorized share repurchases through a Rule 10b5-1 trading plan under which 3,703,015 shares of its common stock were repurchased in July 2023 at an average price of $5.40 per share for a total cost of $20 million before excise taxes.
 
On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under its existing share repurchase program, increasingprogram.
During the remainingnine months ended September 30, 2023, Genworth Financial repurchased 45,839,750 shares of its common stock at an average price of $5.68 per share for a total of $260 million, excluding excise taxes and other costs paid in connection with acquiring the shares.
Genworth Financial authorized share repurchases through a Rule
10b5-1
trading plan under which 1,717,825 shares of its common stock were repurchased in October 2023 at an average price of $5.82 per share for a total cost of $10 million before excise taxes, leaving approximately $366 million authorized amount remaining under the share repurchase program to approximately $436 million.
as of October 31, 2023.
 
Genworth Holdings’ debt:
 
During the sixnine months ended JuneSeptember 30, 2023, Genworth Holdings repurchased $11 million principal amount of its 6.50% senior notes due in June 2034 Notes for a
pre-tax
gain of $1 million and paid accrued interest thereon.
 
As of JuneSeptember 30, 2023, Genworth Holdings had outstanding principal of $876 million of long-term debt, with no debt maturities until June 2034.
 
113
On October 25, 2023, Genworth Holdings repurchased approximately $14 million of its 2034 Notes in connection with the completion of a bondholder consent solicitation that amended the Replacement Capital Covenant. The amendment permits certain repayments, redemptions or repurchases of Genworth Holdings’ 2066 Notes and provides greater flexibility in our capital management program.
114
Table of Contents
Results of Operations and Selected Financial and Operating Performance Measures by Segment
Our President and Chief Executive Officer (Principal Executive Officer), who serves as our chief operating decision maker, evaluates segment performance and allocates resources on the basis of adjusted operating income (loss).
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.
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 revenues or profitability during that period.
Management regularly monitors and reports insurance
in-force,
risk
in-force
and a loss ratio for our Enact segment. Insurance
in-force
is a measure of the aggregate unpaid principal balance as of the respective reporting date for loans 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 its business at a specific date which will generate revenues and profits in a future period, rather than measures of its revenues or profitability during that period. The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. We consider the loss ratio to be a measure of underwriting performance and helps to enhance the understanding of the operating performance of our Enact segment.
Management also regularly monitors and reports on
in-force
rate actions, including state filing approvals; impacted
in-force
premiums; weighted-average percentage rate increases approved; and gross incremental premiums approved in our Long-Term Care Insurance segment.
In-force
rate actions are critical to our strategy for our long-term care insurance business. We monitor these selected operating performance measures for
in-force
rate actions to track our progress on achieving economic break-even. We consider these
in-force
rate actions metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.
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.
Mortgage origination activity remained slow during the secondthird quarter of 2023 in response to elevated mortgage rates and sustained low housing supply. TheWe anticipate that the refinance market is likely to remain suppressed in the near to
mid-term.
Housing affordability remains challengedcontinues to deteriorate due to high interest rates and elevated home prices,
114
Table of Contents
modestly marginally offset by rising median family income, according to the National Association
115
Table of Contents
of Realtors Housing Affordability Index. After a sustained period of strong home price appreciation, national home prices began to decline in late 2022 but have recovered and continued to rise through the secondthird quarter of 2023, according to the Federal Housing Finance Agency (“FHFA”) Monthly Purchase-Only House Price Index.
The unemployment rate was 3.6%3.8% in JuneSeptember 2023, up slightly from MarchJune 2023. As of JuneSeptember 30, 2023, there were just over six million unemployed Americans, of which approximately one million were long term unemployed over 26 weeks. Both metrics areremain in line with
pre-pandemic
levels.
For mortgages insured by the federal government (including those purchased by Fannie Mae and Freddie Mac), forbearance allowshas allowed 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 for another six months if requested by the borrower to the mortgage servicer. However, the Biden Administration ended the national emergency for
COVID-19
in April 2023, so the deadline for requesting a
COVID-19
related forbearance under the Coronavirus Aid, Relief, and Economic Security Act will endended in August 2023. At present,During the GSEs’ third quarter of 2023, the GSEs announced that their
COVID-19 related
servicing-related policies with respect to forbearance remain in effect.
would end on November 1, 2023.
Further, inIn March 2023, the GSEs announced new loss mitigation programs that would allow
six-month
payment deferrals for borrowers facing financial hardship and encouraged servicers to start evaluating borrowers for these programs as early as July 1, 2023 but no later than October 1, 2023. Even though most foreclosure moratoriums expired at the end of 2021, federal 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 timeline, which could negatively impact the severity of loss on loans that go to claim.
Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of JuneSeptember 30, 2023, approximately 1.3%1.2% or 12,85412,135 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 31%30% were reported as delinquent compared with approximately 1.7%1.5% or 15,70214,231 of its active primary policies reported in forbearance with approximately 36%34% reported as delinquent as of JuneSeptember 30, 2022.
Total delinquencies decreasedincreased during the secondthird quarter of 2023 compared to the secondthird quarter of 2022 as a result of curesnew delinquencies outpacing new delinquencies.cures. The secondthird quarter 2023 new delinquency rate of 1.0%1.2% was slightly higher than the secondthird quarter 2022 new delinquency rate of 0.8%1.0%. The full impact of
COVID-19
and its adverse economic effects on Enact’s future business results continue to be 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 and delinquencies have declined, it is possible that
COVID-19
related forbearance programs could have an adverse impact on Enact’s future results of operations and financial condition.
Private mortgage insurance market penetration and overall 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 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 October 24, 2022, the FHFA announced targeted changes to the GSEs’ guarantee fee pricing by eliminating upfront fees for certain first-time home buyers with income at or below area median income and for certain GSE affordable mortgage products, while implementing targeted increases to the upfront fees for most
cash-out
refinance loans. The fee reductions went into effect in the fourth quarter of 2022 while the new fees on
cash-out
refinance loans began February 1, 2023. Enact expects these price changes to have a net positive impact to the private mortgage insurance market but believes the impact has been limited to date.
 
115116
Table of Contents
The FHFA also announced in October 2022 its validation and approval of certain credit score models for use by the GSEs and changed the required number of credit reports provided by lenders from all three nationwide consumer reporting agencies to only two. The validation of the new credit scores requires lenders to deliver both credit scores for each loan sold to the GSEs. The FHFA has announced preliminary implementation expectations, but this is expected to be a multiple year process that will require system and process updates.
In January 2023, the FHFA announced additional updates to its upfront fee structure and pricing matrix. The changes marked the third iteration of the FHFA’s ongoing pricing review since early last year2022 and impact purchase and rate-term refinance loans. Pricing grids are now broken out by loan purpose and are recalibrated to new credit score and
loan-to-value
ratio categories, along with associated loan attributes. The new pricing matrix initially included new upfront fees for loans with
debt-to-income
ratios greater than 40% but those fees were rescinded prior to implementation. The remaining changes became effective May 1, 2023.
In February 2023, the Department of Housing and Urban Development announced a
30-basis
point reduction of the annual insurance premium charged to borrowers with
FHA-insured
mortgages in an effort to reduce the cost of borrowing for eligible lower and middle class homebuyers. This price reduction, which went into effect on March 20, 2023, is expected to have a negative impact on the U.S. private mortgage insurance market but will be partially offset by the effects of the recent FHFA pricing changes referenced above. Enact does not expect thebelieve this net impact tohas been or will be material.
The U.S. private mortgage insurance industry is highly competitive. Enact Holdings’ market share is influenced by the execution of its go to market strategy, including but not limited to, pricing competitiveness relative to its peers and its selective participation in forward commitment transactions. Enact continues to manage the quality of new business through pricing and its underwriting guidelines, which are modified from time to time when circumstances warrant. The market and underwriting conditions, including the mortgage insurance pricing environment, are within Enact’s risk adjusted return appetite, enabling it to write new business at returns it views as attractive.
New insurance written of $15.1$14.4 billion in the secondthird quarter of 2023 decreased 14%4% compared to the secondthird quarter of 2022 mostly from a decline in originations due to elevated mortgage rates. Enact’s primary persistency rate was 84% during the secondthird quarter of 2023 compared to 80%82% during the secondthird quarter of 2022. The increase in persistency was primarily driven by a decline in the percentage of
in-force
policies with mortgage rates above current mortgage rates. Elevated persistency continued to offset the decline in new insurance written in the secondthird quarter of 2023, leading to an increase in primary insurance
in-force
of $5.3$4.2 billion as compared to March 31,June 30, 2023.
Net earned premiums increased slightly in the secondthird quarter of 2023 compared to the secondthird quarter of 2022 asprimarily driven by insurance
in-force
growth, was mostlypartially offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year. The total number of delinquent loans has declined from the
COVID-19
peak in the second quarter of 2020 as borrowers continued to 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, and Enact refunds the post-delinquent premiums to the insured party if the delinquent loan goes to claim. Enact records a liability and a reduction to net earned premiums for the post-delinquent premiums it expects to refund. The post-delinquent premium liability recorded since the beginning of
COVID-19
in the second quarter of 2020 through the secondthird quarter of 2023 was not significant to the change in earned premiums for those periods.
Enact’s loss ratio for the three months ended JuneSeptember 30, 2023 and 2022 was (2)%7% and (26)(17)%, respectively. Enact recorded a favorable reserve adjustment of $63$55 million during the secondthird quarter of 2023 primarily related to favorable cure performance on delinquencies from 20212022 and earlier, including those related to
COVID-19. A portion of the reserve release was also related to
Cure performance on delinquencies from the first half of 2022 ashas not been negatively impacted by uncertainty in the economic environment has not negatively impacted cure performance asto the extent initially expected. In addition, during the peak of
COVID-19,
Enact recorded a
experienced elevated new delinquencies subject to forbearance plans, and those delinquencies have been curing at levels
 
116117
Table of Contents
above Enact’s reserve release of $96 million duringexpectations. During the secondthird quarter of 2022, Enact released $105 million of reserves largely related to favorable cure performance on
COVID-19
delinquencies, from 2020. Duringpartially offset by reserve strengthening of $25 million related to 2022 delinquencies given uncertainty in the peak of COVID-19, Enact experienced elevated new delinquencies subject to forbearance plans. Those delinquencies have been curing at levels above Enact’s reserve expectations, which was a primary driver of the release of reserves in both the second quarters of 2023 and 2022.
economic environment.
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 continue to take advantage of available loss mitigation options, including forbearance programs, payment deferral options and other modifications. Loss reserves recorded on these delinquencies require a high degree of estimation due to the level of uncertainty regarding whether delinquencies in forbearance will ultimately cure or result in claim payments, as well as the timing and severity of those payments. The severity of loss on loans that do go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’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.
New primary delinquencies in the secondthird quarter of 2023 increased compared to the secondthird quarter of 2022.2022 primarily due to the aging of large, new books of business. New primary delinquencies of 9,20511,107 contributed $58$72 million of loss expense in the secondthird quarter of 2023, while Enact incurred $35$39 million of losses from 7,8479,121 new primary delinquencies in the secondthird quarter of 2022. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 14%12% of Enact’s primary new delinquencies in the secondthird quarter of 2023 were subject to a forbearance plan compared to 21%18% in the secondthird quarter of 2022. Due to the declining number of new delinquencies in forbearance, Enact no longer differentiates the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.
As of JuneSeptember 30, 2023, 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”), EMICO’s domestic insurance regulator, was approximately 11.9:11.6:1, compared with a
risk-to-capital
ratio of 12.7:11.9:1 and 12.9:1 as of March 31,June 30, 2023 and December 31, 2022, respectively. 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. EMICO’s ongoing
risk-to-capital
ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.
Under PMIERs, Enact 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. In addition, 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 would remain in effect until certain conditions (the “GSE Conditions”) were met. These conditions were met as of December 31, 2022 and in March 2023, the GSEs confirmed that Enact is no longer subject to the GSE Restrictions and the GSE Conditions.
As of JuneSeptember 30, 2023, Enact had estimated available assets of $5,268 million against $3,251 million net required assets under PMIERs compared to available assets of $5,093 million against $3,135 million net required assets under PMIERs compared to available assets of $5,357 million against $3,259 million net required assets as of March 31,June 30, 2023. The sufficiency ratio as of JuneSeptember 30, 2023 was 162% or $2,017 million above the PMIERs requirements, compared to 162% or $1,958 million above the PMIERs requirements compared to 164% or $2,098 million above the PMIERs requirements as of March 31,June 30, 2023. PMIERs sufficiency in the second quarter of 2023 decreased slightly primarily as a result of new insurance written, partially offset by lapse. Enact’s PMIERs required assets as of September 30, 2023 and June 30, 2023 and March 31, 2023
117
Table of Contents
benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain
non-performing
loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $107$86 million of benefit to
118
Table of Contents
Enact’s JuneSeptember 30, 2023 PMIERs required assets compared to $120$107 million of benefit as of March 31,June 30, 2023. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.
On June 30, 2023, Enact executed a quota share Enact’s third-party reinsurance contract with a panel of reinsurers. Under the agreement, Enact cedes 13.125% of a portion of current and expected new insurance written for the 2023 book year. Third-party credit risk transfer transactions provided an aggregate of approximately $1,505 million and $1,524 million of PMIERs capital credit as of JuneSeptember 30, 2023. 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 performance2023 and PMIERs requirements over time.
During the second quarter of 2023, EMICO contributed $250 million to Enact Re Ltd., its wholly owned Bermuda-based subsidiary. As of June 30, 2023, Enact Re Ltd. assumed reinsurance relating to GSE risk share and reinsures EMICO’s new and existing insurance in-force under quota share reinsurance agreements.respectively.
OnIn April 26, 2022,2023, EMICO completed a distribution to Enact Holdings’ board of directors approved the initiation ofHoldings that supports its ability to pay a quarterly dividend program. Pursuant to the program,dividend. Enact Holdings began payingintends to use these proceeds and future EMICO distributions to fund the quarterly dividends in the second quarter of 2022. In the second quarter of 2023, Genworth Holdings received $21 milliondividend as the majority shareholder.well as to bolster its financial flexibility and potentially return additional capital to shareholders. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition to Enact’s quarterly dividend program, in November 2022, Enact Holdings announced approval by its board of directors of a share repurchase program under which it may repurchase up to $75 million of its outstanding common stock. Enact Holdings began share repurchases under the program in the fourth quarter of 2022. Genworth Holdings agreed to participate in order to maintain its overall ownership at its current levelstock, and received $33 million as the majority shareholder in the second quarter of 2023.
EMICO completed a distribution to Enact Holdings in April 2023. Enact Holdings intends to use this and future EMICO distributions to fund the quarterly dividend as well as to bolster its financial flexibility and potentially return additional capital to shareholders.
Onon August 1, 2023, Enact Holdings announced the authorization of a new share repurchase program under which it may repurchase up to an additional $100 million of its common stock.stock repurchases under a new share repurchase program. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level. As the majority shareholder, Genworth Holdings received $26 million of capital returns from Enact Holdings during the third quarter of 2023. On November 1, 2023, Enact Holdings announced a special dividend of $113 million to be paid in the fourth quarter of 2023.
Returning capital to shareholders, balanced with growth and risk management priorities, remains a key commitment for Enact Holdings as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ 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 will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.
 
118119
Table of Contents
Segment results of operations
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
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
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
  2023  
   
  2022  
   
2023 vs. 2022
 
Revenues:
                
Premiums
  $239   $238   $1    —  %   $243   $235   $8    3% 
Net investment income
   50    36    14    39%    55    39    16    41% 
Net investment gains (losses)
   (13)    (1)    (12)    NM(1)    —      —      —      —  % 
Policy fees and other income
   1    —      1    NM(1)    1    1    —      —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total revenues
   277    273    4    1%    299    275    24    9% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Benefits and expenses:
                
Benefits and other changes in policy reserves
   (4)    (62)    58    94%    18    (40)    58    145% 
Acquisition and operating expenses, net of deferrals
   52    58    (6)    (10)%    52    55    (3)    (5)% 
Amortization of deferred acquisition costs and intangibles
   2    3    (1)    (33)%    3    4    (1)    (25)% 
Interest expense
   13    13    —      —  %    13    12    1    8% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total benefits and expenses
   63    12    51    NM(1)    86    31    55    177% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations before income taxes
   214    261    (47)    (18)%    213    244    (31)    (13)% 
Provision for income taxes
   46    57    (11)    (19)%    48    53    (5)    (9)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations
   168    204    (36)    (18)%    165    191    (26)    (14)% 
Less: net income from continuing operations attributable to noncontrolling interests
   31    38    (7)    (18)%    31    35    (4)    (11)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   137    166    (29)    (17)%    134    156    (22)    (14)% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
                
Net investment (gains) losses, net
(2)
   11    1    10    NM(1)    —      —      —      —  % 
Taxes on adjustments
   (2)    —      (2)    NM(1)    —      —      —      —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $146   $167   $(21)    (13)%   $134   $156   $(22)    (14)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income decreased primarily attributable to higher losses on new delinquencies and a lower favorable reserve adjustment, partially offset by higher net investment income and premiums in the current year.
Revenues
Premiums increased mostly from higher insurance
in-force,
partially offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year.
Net investment income increased primarily from higher investment yields and higher average invested assets in the current year.
Benefits and expenses
Benefits and other changes in policy reserves increased largely from higher losses on new delinquencies and a lower favorable reserve adjustment in the current year as discussed above in “—Trends and conditions.”
120
Table of Contents
Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower operating costs in the current year.
Provision for income taxes.
The effective tax rate was 23.0% and 21.9% for the three months ended September 30, 2023 and 2022, respectively, generally consistent with the U.S. corporate federal income tax rate.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
The following table sets forth the results of operations relating to our Enact segment for the periods indicated:
   
Nine months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
    2023    
   
    2022    
   
2023 vs. 2022
 
Revenues:
        
Premiums
  $717   $707   $10    1% 
Net investment income
   151    110    41    37% 
Net investment gains (losses)
   (13)    (1)    (12)    NM(1) 
Policy fees and other income
   2    2    —      —  % 
  
 
 
   
 
 
   
 
 
   
Total revenues
   857    818    39    5% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   3    (112)    115    103% 
Acquisition and operating expenses, net of deferrals
   156    167    (11)    (7)% 
Amortization of deferred acquisition costs and intangibles
   8    10    (2)    (20)% 
Interest expense
   39    38    1    3% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   206    103    103    100% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations before income taxes
   651    715    (64)    (9)% 
Provision for income taxes
   143    155    (12)    (8)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations
   508    560    (52)    (9)% 
Less: net income from continuing operations attributable to noncontrolling interests
   94    103    (9)    (9)% 
  
 
 
   
 
 
   
 
 
   
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   414    457    (43)    (9)% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
        
Net investment (gains) losses, net
(2)
   11    1    10    NM(1) 
Taxes on adjustments
   (2)    —      (2)    NM(1) 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $423   $458   $(35)    (8)% 
  
 
 
   
 
 
   
 
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the threenine months ended JuneSeptember 30, 2023, net investment (gains) losses were adjusted for the portion of net investment losses attributable to noncontrolling interests of $2 million.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income decreased primarily attributable to higher losses largely driven by aon new delinquencies and lower favorable reserve adjustment and higher new delinquencies,adjustments, partially offset by higher net investment income, and lower operating costs and higher premiums in the current year.
119
Table of Contents
Revenues
Premiums increased slightly asmostly from higher insurance
in-force, driven by increased persistency was mostly
partially offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year.
Net investment income increased primarily from higher investment yields and higher average invested assets.
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Benefits and other changes in policy reserves increased largely from a lower favorable reserve adjustment and higher new delinquencies in the current year. In the second quarter of 2023, Enact recorded a reserve release of $63 million primarily related to favorable cure performance on delinquencies from 2021 and earlier, including those related to COVID-19. A portion of the reserve release was also related to delinquencies from the first half of 2022, as uncertainty in the economic environment has not negatively impacted cure performance as initially expected. Enact recorded a $96 million reserve release in the second quarter of 2022 largely related to favorable cure performance on 2020 COVID-19 delinquencies.
Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower operating costs in the current year.
Provision for income taxes.
The effective tax rate was 21.5% for both the three months ended June 30, 2023 and 2022, consistent with the U.S. corporate federal income tax rate.
120
Table of Contents
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
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)
  
2023
   
2022
  
2023 vs. 2022
 
Revenues:
       
Premiums
  $474   $472  $2    —  % 
Net investment income
   96    71   25    35% 
Net investment gains (losses)
   (13)    (1)   (12)    NM(1) 
Policy fees and other income
   1    1   —      —  % 
  
 
 
   
 
 
  
 
 
   
Total revenues
   558    543   15    3% 
  
 
 
   
 
 
  
 
 
   
Benefits and expenses:
       
Benefits and other changes in policy reserves
   (15)    (72)   57    79% 
Acquisition and operating expenses, net of deferrals
   104    112   (8)    (7)% 
Amortization of deferred acquisition costs and intangibles
   5    6   (1)    (17)% 
Interest expense
   26    26   —      —% 
  
 
 
   
 
 
  
 
 
   
Total benefits and expenses
   120    72   48    67% 
  
 
 
   
 
 
  
 
 
   
Income from continuing operations before income taxes
   438    471   (33)    (7)% 
Provision for income taxes
   95    102   (7)    (7)% 
  
 
 
   
 
 
  
 
 
   
Income from continuing operations
   343    369   (26)    (7)% 
Less: net income from continuing operations attributable to noncontrolling interests
   63    68   (5)    (7)% 
  
 
 
   
 
 
  
 
 
   
Income from continuing operations available to Genworth Financial, Inc.’s common stockholders
   280    301   (21)    (7)% 
Adjustments to income from continuing operations available to Genworth Financial, Inc.’s common stockholders:
       
Net investment (gains) losses, net
(2)
   11    1   10    NM(1) 
Taxes on adjustments
   (2)    —     (2)    NM(1) 
  
 
 
   
 
 
  
 
 
   
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
  $289   $302  $(13)    (4)% 
  
 
 
   
 
 
  
 
 
   
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the six months ended June 30, 2023, net investment (gains) losses were adjusted for the portion of net investment losses attributable to noncontrolling interests of $2 million.
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
Adjusted operating income decreased primarily attributable to higher losses largely driven by lower favorable reserve adjustments and higher new delinquencies, partially offset by higher net investment income and lower operating costs in the current year.
Revenues
Premiums increased slightly as higher insurance in-force driven by increased persistency was mostly offset by the lapse of older, higher priced policies and lower single premium policy cancellations in the current year.
 
121
Table of Contents
Net investment income increased primarily from higher investment yields and higher average invested assets in the current year.
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Benefits and other changes in policy reserves increased largely from higher losses on new delinquencies and lower favorable reserve adjustments and higher new delinquencies in the current year. Enact recorded reserve releases of $133$188 million in the current year primarily related to favorable cure performance on delinquencies from 20212022 and earlier, including those related to
COVID-19. A portion of
During the reserve releases was also related to delinquencies from the first half of 2022, as uncertainty in the economic environment has not negatively impacted cure performance as initially expected.prior year, Enact recorded $146released $251 million of reserve releasesreserves largely related to favorable cure performance on 2020
COVID-19
delinquencies, partially offset by reserve strengthening of $25 million related to 2022 delinquencies given uncertainty in the prior year.
economic environment.
Acquisition and operating expenses, net of deferrals, decreased primarily attributable to lower operating costs in the current year.
Provision for income taxes.
The effective tax rate was 21.6%22.0% and 21.5%21.7% for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively, consistent with the U.S. corporate federal income tax rate.
Enact selected operating performance measures
Primary Mortgage Insurance
Substantially all of Enact’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 is typically delivered to Enact on a
loan-by-loan
basis. Primary mortgage insurance can also be delivered to Enact 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 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.
122
Table of Contents
The following tables set forth selected operating performance measures regarding Enact as of and for the dates indicated:
 
  
As of June 30,
   
Increase (decrease)
and percentage
change
   
September 30,
   
Increase (decrease)

and percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Primary insurance in-force
(1)
  $257,816   $237,563   $20,253    9%   $262,014   $241,813   $20,201    8% 
Risk in-force:
                
Primary
  $65,714   $59,911   $5,803    10%   $67,056   $61,124   $5,932    10% 
Pool
   73    89    (16)    (18)%    70    84    (14)    (17)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total risk in-force
  $65,787   $60,000   $5,787    10%   $67,126   $61,208   $5,918    10% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
(1)
Primary insurance
in-force
represents the aggregate unpaid principal balance for loans Enact insures.
 
   
Three months ended
June 30,
   
Increase
(decrease) and
percentage
change
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
  
2023
   
2022
   
2023 vs. 2022
 
New insurance written
  $15,083   $17,448   $(2,365)   (14)%  $28,237   $36,271   $(8,034)   (22)% 
122
Table of Contents
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
   
Nine months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
New insurance written
  $14,391   $15,069   $(678)   (4)%   $42,628   $51,340   $(8,712)   (17)% 
Primary insurance
in-force
and risk
in-force
Primary insurance
in-force
increased mainly from new insurance written. In addition, lower lapses and cancellations drove higher primary persistency, largely as a result of suppressed refinancing activity in the current year due to elevated interest rates. The primary persistency rate was 85%84% and 78%79% for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. Total risk
in-force
increased primarily as a result of higher primary insurance
in-force.
New insurance written
For the three and sixnine months ended JuneSeptember 30, 2023, new insurance written decreased principally from lower originations in the current year due to elevated interest rates.
Loss and expense ratios
The following table sets forth the loss and expense ratios for Enact for the dates indicated:
 
  
Three months ended
June 30,
 
Increase (decrease)
 
Six months ended
June 30,
 
Increase (decrease)
   
Three months ended
September 30,
 
Increase (decrease)
 
Nine months ended
September 30,
 
Increase (decrease)
 
  
2023
 
2022
 
2023 vs. 2022
 
2023
 
2022
 
2023 vs. 2022
   
2023
 
2022
 
2023 vs. 2022
 
2023
 
2022
 
2023 vs. 2022
 
Loss ratio
   (2)%   (26)%   24%   (3)%   (15)%   12%    7%   (17)%   24%   —  %   (16)%   16% 
Expense ratio
   23%   26%   (3)%   23%   25%   (2)%    23%   25%   (2)%   23%   25%   (2)% 
The loss ratio is the ratio of benefits and other changes in policy reserves to net earned premiums. The expense ratio is the ratio of general expenses to net earned premiums. In Enact, general expenses consist of acquisition and operating expenses, net of deferrals, and amortization of DAC and intangibles.
The loss ratio increased for the three and sixnine months ended JuneSeptember 30, 2023 largely from higher losses on new delinquencies and lower favorable reserve adjustments in the current year, as discussed above.
The expense ratio for the three and higher new delinquenciesnine months ended September 30, 2023 decreased primarily attributable to lower operating costs in the current year. During the three and six months ended June 30, 2023, Enact recorded favorable reserve adjustments of $63 million and $133 million, respectively, primarily related to favorable cure performance on delinquencies from 2021 and earlier, including those related to COVID-19. A portion of the reserve releases was also related to delinquencies from the first half of 2022, as uncertainty in the economic environment has not negatively impacted cure performance as initially expected.
 
123
Table of Contents
During the three and six months ended June 30, 2022, Enact recorded reserve releases of $96 million and $146 million, respectively, largely related to favorable cure performance on 2020 COVID-19 delinquencies.
The expense ratio for the three and six months ended June 30, 2023 decreased primarily attributable to lower operating costs in the current year.
Mortgage insurance loan portfolio
The following table sets forth selected financial information regarding Enact’s loan portfolio as of JuneSeptember 30:
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Primary insurance in-force by loan-to-value ratio at origination:
        
95.01% and above
  $42,459   $37,636   $44,071   $38,099 
90.01% to 95.00%
   107,448    99,303    109,019    101,164 
85.01% to 90.00%
   75,521    67,866    77,121    69,803 
85.00% and below
   32,388    32,758    31,803    32,747 
  
 
   
 
   
 
   
 
 
Total
  $257,816   $237,563   $262,014   $241,813 
  
 
   
 
   
 
   
 
 
Primary risk in-force by loan-to-value ratio at origination:
        
95.01% and above
  $12,086   $10,647   $12,595   $10,809 
90.01% to 95.00%
   31,220    28,838    31,696    29,379 
85.01% to 90.00%
   18,518    16,517    18,945    17,019 
85.00% and below
   3,890    3,909    3,820    3,917 
  
 
   
 
   
 
   
 
 
Total
  $65,714   $59,911   $67,056   $61,124 
  
 
   
 
   
 
   
 
 
Primary insurance in-force by FICO
(1)
score at origination:
        
Over 760
  $107,427   $96,625   $109,701   $99,177 
740-759
   42,074    37,853    42,899    38,731 
720-739
   36,324    33,263    36,889    33,874 
700-719
   29,514    28,136    29,818    28,384 
680-699
   21,908    21,221    21,993    21,294 
660-679
(2)
   11,188    10,822    11,351    10,842 
640-659
   6,133    6,154    6,166    6,115 
620-639
   2,576    2,725    2,548    2,663 
<620
   672    764    649    733 
  
 
   
 
   
 
   
 
 
Total
  $257,816   $237,563   $262,014   $241,813 
  
 
   
 
   
 
   
 
 
Primary risk in-force by FICO score at origination:
        
Over 760
  $27,305   $24,252   $28,014   $24,965 
740-759
   10,749    9,559    11,009    9,808 
720-739
   9,368    8,484    9,553    8,656 
700-719
   7,516    7,129    7,615    7,200 
680-699
   5,543    5,329    5,582    5,356 
660-679
(2)
   2,850    2,728    2,901    2,739 
640-659
   1,558    1,547    1,569    1,541 
620-639
   653    687    647    672 
<620
   172    196    166    187 
  
 
   
 
   
 
   
 
 
Total
  $65,714   $59,911   $67,056   $61,124 
  
 
   
 
   
 
   
 
 
 
(1)
Fair Isaac Company.
(2)
Loans with unknown FICO scores are included in the
660-679
category.
 
124
Table of Contents
Delinquent loans
The following table sets forth the number of loans insured, the number of delinquent loans and the delinquency rate for Enact’s loan portfolio as of the dates indicated:
 
  
June 30,
2023
 
December 31,
2022
 
June 30,
2022
   
September 30,
2023
 
December 31,
2022
 
September 30,
2022
 
Primary insurance:
        
Insured loans in-force
   973,280   960,306   946,891    977,832   960,306   949,052 
Delinquent loans
   18,065   19,943   19,513    19,241   19,943   18,856 
Percentage of delinquent loans (delinquency rate)
   1.86%   2.08%   2.06%    1.97%   2.08%   1.99% 
Delinquency rates have decreased compared to December 31, 2022 primarily from a decline in total delinquencies asmostly driven by paid claims and cures outpacedoutpacing new delinquencies.
The following tables set forth primary delinquencies, direct primary case reserves and risk
in-force
by aged missed payment status in Enact’s loan portfolio as of the dates indicated:
 
  
June 30, 2023
   
September 30, 2023
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
   
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
 
Payments in default:
                
3 payments or less
   8,162   $70   $488    14%    9,398   $80   $568    14% 
4 - 11 payments
   6,229    186    409    46%    6,381    192    426    45% 
12 payments or more
   3,674    196    205    95%    3,462    188    201    94% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   18,065   $452   $1,102    41%    19,241   $460   $1,195    38% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
  
December 31, 2022
   
December 31, 2022
 
(Dollar amounts in millions)
  
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
   
Delinquencies
   
Direct primary
case reserves
(1)
   
Risk
in-force
   
Reserves as %
of risk in-force
 
Payments in default:
                
3 payments or less
   8,920   $69   $509    14%    8,920   $69   $509    14% 
4 - 11 payments
   6,466    166    390    43%    6,466    166    390    43% 
12 payments or more
   4,557    244    248    98%    4,557    244    248    98% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total
   19,943   $479   $1,147    42%    19,943   $479   $1,147    42% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
(1)
Direct primary case reserves exclude loss adjustment expenses, pool, incurred but not reported (“IBNR”) and reinsurance reserves.
Reserves as a percentage of risk
in-force
as of JuneSeptember 30, 2023 remained relatively flatdecreased compared to December 31, 2022 as both delinquent risk in-force andlong-term delinquencies with higher reserves decreased. While thehave continued to cure. The number of loans that are delinquent for 12 months or more has decreased since December 31, 2022 it remains elevated compared to pre-COVID-19 levels dueand is more in large part to COVID-19 related forbearance options and the slowing of foreclosures.line with
pre-COVID-19
levels. Due to continued forbearance options, 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.
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 primary delinquency rates for the 10 largest states and the 10 largest Metropolitan Statistical Areas (“MSA”) or Metro Divisions (“MD”) by Enact’s primary risk
in-force
as of the
 
125
Table of Contents
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, 2023
 
Percent of direct primary

case reserves as of

June 30, 2023
(1)
  
Delinquency rate as of
 
 
June 30,

2023
 
December 31,

2022
 
June 30,

2022
   
Percent of primary

risk
in-force
as of
September 30, 2023
 
Percent of direct
primary case
reserves as of
September 30, 2023
(1)
  
Delinquency rate as of
 
 
September 30,
2023
 
December 31,
2022
 
September 30,
2022
 
By State:
            
California
   12%   12%   1.99%   2.09%   2.18%    13%   12%   2.10%   2.09%   2.02% 
Texas
   8%   7%   1.90%   2.12%   2.12%    8%   7%   2.12%   2.12%   2.10% 
Florida
(2)
   8%   8%   2.04%   2.54%   2.06%    8%   9%   2.16%   2.54%   1.93% 
New York
(2)
   5%   13%   2.73%   2.95%   3.17%    5%   12%   2.89%   2.95%   2.97% 
Illinois
(2)
   4%   6%   2.35%   2.54%   2.53%    4%   6%   2.40%   2.54%   2.53% 
Arizona
   4%   2%   1.60%   1.78%   1.71%    4%   2%   1.74%   1.78%   1.67% 
Michigan
   4%   3%   1.63%   1.79%   1.66%    4%   3%   1.72%   1.79%   1.69% 
Georgia
   3%   4%   2.08%   2.23%   2.21%    3%   3%   2.14%   2.23%   2.26% 
North Carolina
   3%   2%   1.37%   1.59%   1.67%    3%   2%   1.41%   1.59%   1.62% 
Washington
   3%   3%   1.63%   1.92%   2.11%    3%   2%   1.64%   1.92%   1.84% 
 
(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 completed.
 
  
Percent of primary

risk in-force as of

June 30, 2023
 
Percent of direct primary

case reserves as of

June 30, 2023
(1)
  
Delinquency rate as of
 
 
June 30,

2023
 
December 31,

2022
 
June 30,

2022
   
Percent of primary

risk
in-force
as of
September 30, 2023
 
Percent of direct
primary case
reserves as of
September 30, 2023
(1)
  
Delinquency rate as of
 
 
September 30,
2023
 
December 31,
2022
 
September 30,
2022
 
By MSA or MD:
            
Phoenix, AZ MSA
   3%   2%   1.69%   1.83%   1.71%    3%   2%   1.77%   1.83%   1.71% 
Chicago-Naperville, IL MD
   3%   4%   2.59%   2.84%   2.94%    3%   4%   2.67%   2.84%   2.85% 
Atlanta, GA MSA
   3%   3%   2.24%   2.42%   2.42%    3%   3%   2.32%   2.42%   2.47% 
New York, NY MD
   2%   8%   3.37%   3.75%   4.17%    2%   8%   3.62%   3.75%   3.88% 
Washington-Arlington, DC MD
   2%   2%   1.70%   1.85%   1.98%    2%   2%   1.75%   1.85%   1.79% 
Houston, TX MSA
   2%   2%   2.36%   2.60%   2.86%    2%   3%   2.69%   2.60%   2.74% 
Los Angeles-Long Beach, CA MD
   2%   2%   2.28%   2.18%   2.13% 
Riverside-San Bernardino, CA MSA
   2%   3%   2.56%   2.89%   2.72%    2%   3%   2.71%   2.89%   2.74% 
Los Angeles-Long Beach, CA MD
   2%   3%   2.29%   2.18%   2.35% 
Dallas, TX MD
   2%   2%   1.55%   1.86%   1.70%    2%   2%   1.69%   1.86%   1.78% 
Denver-Aurora-Lakewood, CO MSA
   2%   1%   0.85%   1.12%   1.18%    2%   1%   1.07%   1.12%   1.11% 
 
(1)
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
 
126
Table of Contents
The following table sets forth the dispersion of Enact’s direct primary case reserves, primary insurance
in-force
and risk
in-force
by year of policy origination, and delinquency rate as of JuneSeptember 30, 2023:
 
(Amounts in millions)
  
Percent of direct
primary case

reserves
(1)
 
Primary
insurance
in-force
   
Percent
of total
 
Primary
risk
in-force
   
Percent
of total
 
Delinquency
rate
   
Percent of direct
primary case reserves
(1)
 
Primary
insurance
in-force
   
Percent
of total
 
Primary
risk
in-force
   
Percent
of total
 
Delinquency
rate
 
Policy Year
Policy Year
 
               
2008 and prior
   22%  $6,135    2%  $1,581    2%   8.40%    20%  $5,859    2%  $1,510    2%   8.67% 
2009 to 2015
   6   4,296    2   1,138    2   3.90%    5   3,819    1   1,004    2   4.20% 
2016
   5   5,289    2   1,418    2   2.97%    4   4,948    2   1,327    2   3.07% 
2017
   6   5,878    2   1,549    2   3.40%    6   5,582    2   1,471    2   3.62% 
2018
   7   6,270    2   1,601    3   4.00%    6   5,993    2   1,535    2   4.18% 
2019
   10   15,026    6   3,831    6   2.47%    9   14,372    6   3,676    5   2.58% 
2020
   15   49,522    19   12,827    20   1.39%    15   46,881    18   12,228    18   1.53% 
2021
   19   76,381    30   19,245    29   1.27%    21   73,141    28   18,524    28   1.48% 
2022
   10   61,390    24   15,392    23   0.97%    13   60,258    23   15,129    23   1.28% 
2023
   —     27,629    11   7,132    11   0.12%    1   41,161    16   10,652    16   0.25% 
  
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
Total portfolio
   100%  $257,816    100%  $65,714    100%   1.86%    100%  $262,014    100%  $67,056    100%   1.97% 
  
 
  
 
   
 
  
 
   
 
    
 
  
 
   
 
  
 
   
 
  
 
(1)
Direct primary case reserves exclude loss adjustment expenses, pool, IBNR and reinsurance reserves.
Loss reserves in policy years 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 Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. Loss reserves have shifted to newer book years, largely 2020 and later, given their significant representation of risk
in-force.
As of JuneSeptember 30, 2023, Enact’s 2016 and newer policy years represented approximately 96% of its primary risk
in-force
and 72%75% of its total direct primary case reserves.
Long-Term Care Insurance segment
Trends and conditions
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
in-force
rate actions, morbidity, mortality and persistency. Estimates for
in-force
rate actions reflect certain simplifying assumptions that may vary materially from actual results, including but not limited to consistent policyholder behavior over time in addition to a uniform rate of coinsurance and premium taxes. Actual policyholder behavior may differ significantly from these assumptions. Results of our long-term care insurance business are also influenced by our ability to improve investment yields and manage expenses and reinsurance, among other factors. Changes in laws 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.
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 continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our long-term care insurance products. Any adverse change in our assumptions could have a negative impact on our reserve levels and results of operations in our long-term care insurance business. Even small changes in assumptions or small deviations of actual experience from assumptions cancould have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition.
Under the new accounting guidance for long-duration insurance contracts, commonly known as long-duration targeted improvements (“LDTI”),LDTI, the impacts of assumption updates and actual versus expected
127
Table of Contents
experience will continue to drive volatility in our long-term care insurance results. Under LDTI, approximately 50% of our cohorts currently
127
Table of Contents
have net premium ratios capped at 100%. The net premium ratio represents the portion of the gross premiums required to provide for all benefits and certain expenses in our long-term care insurance business. These capped cohorts are generally our older long-term care insurance policies, largely sold prior to 2003. The other 50% of our cohorts have a net premium ratio of less than 100% and are currently expected to be profitable. We currently expect the profitable uncapped cohorts to have a more modest earnings impact when we evaluate actual to expected experience, with a portion of the impact reflected in current period results, and the remaining majority of the impact recognized over the life of the cohort. Conversely, for the unprofitable capped policy cohorts, the full impact of the actual to expected variances will be recognized in current period earnings and will likely be more impactful on our results of operations. It is important to note that quarterly variations are typically expected to be immaterial compared to our liability for future policy benefits of $41.6$41.9 billion, at the
locked-in
discount rate, for our long-term care insurance business as of JuneSeptember 30, 2023 and do not change our overall viewimpact cash flows, the long-term economics of long-term reserve adequacy.the business or the way we manage the business. Under LDTI, we would also expect ongoing income statement impacts and volatility related to assumption updates in our older, unprofitable capped cohorts going forward.
We complete the required annual review of our cash flow assumptions, including mortality, benefit utilization, expected claim incidence and terminations, and benefit reductions related to
in-force
rate actions and legal settlements, among other assumptions, for our long-term care insurance products in the fourth quarter of each year. Cash flow assumptions related to legal settlements also include estimates for cash payments to policyholders who elect certain reduced benefit options in connection with the legal settlements, referred to herein as settlement payments. In the fourth quarter of 2022, we refined several assumptions, including reducing our lapse assumption in light of favorable experience from our long-term care insurance legal settlement elections and benefit reductions. The favorable impact from changes in cash flow assumptions was mainly attributable to the inclusion of a second legal settlement. We also evaluated our assumptions regarding expectations of future premium rate increase approvals and benefit reductions and made no significant changes to our 2022 multi-year
in-force
rate action plan. However, we did increase the value of our assumption for future approvals and benefit reductions based on recent rate increase approval experience, regulatory support and legal settlement results.
As part of our assumption updates in the fourth quarter of 2023, we will include assumptions related to a third legal settlement. While we expect the third legal settlement to result in a significant reduction in tail risk over the long term, any changes would have a muted income statement impact in the fourth quarter of 2023 because this settlement is primarily part of the profitable uncapped cohorts. The benefit to us will depend on the rate at which policyholders elect to reduce benefits, and the majority of the impact will be realized over the lifetime of these uncapped cohorts. In connection with our 2023 cash flow assumption update reviews, we are also reviewing our long-term assumptions for lapses, benefit utilization, mortality and in-force rate actions. We are also evaluating potential short-term impacts emerging after COVID-19 and aligning near-term projections with recent experience. While our reviews are still underway and not yet complete, the long-term care insurance assumption updates could be negative in the aggregate, as experience has been mixed, and would be reported immediately in earnings particularly for unprofitable capped cohorts.
We will also complete statutory cash flow testing for our life insurance companies in the fourth quarter. Under cash flow testing, changes to our claim reserve assumptions are reflected in statutory income. However, changes impacting active life reserves are included in our cash flow testing margin review, which only impacts statutory income if the margin falls below zero. While our statutory process is not yet complete and significant work remains, our early assessment is that the margin for Genworth Life Insurance Company, one of our principal life insurance subsidiaries, should remain positive.
Given the ongoing challenges in our long-term care insurance business, we continue to pursue initiatives to improve the risk and profitability profile of our business, including premium rate increases and associated benefit reductions on our
in-force
policies. 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 and Strategic Highlights—U.S. life insurance companies” and the selected operating performance measures below.
128
Table of Contents
In addition, we have reached certain legal settlements regarding alleged disclosure deficiencies in premium increases for long-term care insurance policies. The first legal settlement related to certain of our long-term care insurance policies, which represents approximately 20% of our block, was implemented beginning in 2021 and its implementation was materially completed in the second quarter of 2022. A second legal settlement on certain of our long-term care insurance policies, which represents 15% of our block, became final on July 29, 2022. We began implementation of this settlement on August 1, 2022.2022 and expect it to be materially complete at the end of 2023. On March 27, 2023, a third similar settlement on certain of our long-term care insurance policies, which represents 35% of our block, became final. We began implementation of this settlement induring the second quarter of 2023.
While the second and third legal settlements are similar to the first settlement, their ultimate impact will depend on the policyholder election rates and the types of reduced benefits elected. Given our experience with the first settlement, we expect the second and third legal settlements to result in an overall net favorable economic impact to our long-term care insurance business as they reduce tail risk on these long-duration liabilities. While we expect renewal premiums to decline over time, the settlements could accelerate that decline if policyholders continue to elect
non-forfeiture
and reduced benefit options, which have predominantly been the most prevalent policyholder elections for these legal settlements.
In our long-term care insurance products, we experienced higher than expected mortality during COVID-19 which had a favorable impact on reserves and our operating results.results related to mortality during COVID-19. Although it is not our practice to track cause of death for long-term care insurance policyholders and claimants, we believe the higherfavorable mortality in our long-term care insurance business in early 2022 was likely impacted by
COVID-19.
We expected the impacts to be temporary, and we saw mortality levels trending back to
pre-pandemic
levels in the latter half of 2022. However, inIn the first quarter of 2023, we experienced typical seasonally higherfavorable mortality, but mortality then declinedwas unfavorable in the second quarterand third quarters of 2023.2023, consistent with seasonal trends. We believe continue to evaluate the long-term impacts of
COVID-19 significantly increased mortality
on our most vulnerable claimants, which may reduce mortality rates in future periods.assumptions.
We also experienced lower than expected new claims incidence in our long-term care insurance business during
COVID-19.
However, we expected this to be a temporary reduction and that claims incidence experience would ultimately revert to
pre-pandemic
trends. We are seeing new claims incidence trending back to
pre-pandemic
levels. In addition, during the pandemic, a larger share of our claimants sought home care instead of
128
Table of Contents
facility-based care, and as the impacts of the pandemic subside, we have seen that trend reverse. Our long-term care insurance benefit utilization will be monitored forso that we can evaluate any long-term impact emerging from the pandemic, although it is too early to tell the magnitude and/or direction of that impact.
While the ongoing impactlonger-term impacts of
COVID-19 is
are very difficult to predict, the related outcomes and impact on our long-term care insurance business currently depend on the after-effects indirectly caused by the pandemic, including supply chain shortageselevated inflation, the associated impacts to the cost of care and high inflation, and the shape of the economic recovery.changes in policyholder behavior. We will continue to monitor
COVID-19
associated impacts and evaluate all of our assumptions that may need updating as a result of longer-term trends related to the pandemic.
For our 2023 assumption updates, we will generally not include data after 2019 in setting any long-term assumptions, as we do not have sufficient information around longer-term effects of the pandemic, which is consistent with the approach for our 2022 assumptions.
In addition, 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. Although new claim counts on our olderoldest 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 fully expect continued overall growth in new claims on these blocks as policyholders reach older attained ages with higher likelihood of going on claim.their peak claim years.
Results of our long-term care insurance business are also impacted by interest rates. Prior to the recent rise in interest rates beginning in 2022, historic low interest rates put pressure on the profitability and returns of our long-term care insurance business as higher-yielding investments matured and were replaced with lower-yielding investments. We have sought 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
129
Table of Contents
portion of our long-term care insurance product cash flows. In addition, rapidly rising interest rates have caused and may continue to cause increased unrealized losses on our investment portfolios and 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 claims obligations. In our long-term care insurance business, we also remeasure our liability for future policy benefits and related reinsurance recoverables at the
single-A
bond rate each quarter. As a result, our insurance liabilities are sensitive to movements in interest rates, which will likely result in continued volatility to our reserve balances and equity.
We believe that the MOVEit Cybersecurity Incident has not had any impact on any of our information systems, including our financial systems, and that there has not been any material interruption of our business operations. While we are continuing to measure the impact, including certain remediation expenses and other potential liabilities, we do not currently believe this incident will have a material adverse effect on our business, operations, or financial results. In addition, we do not use the MOVEit file transfer system, and PBI has informed us that it has rectified the vulnerability that allowed the incident.
129
Table of Contents
Segment results of operations
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
The following table sets forth the results of operations relating to our Long-Term Care Insurance segment for the periods indicated:
 
  
Three months ended
June 30,
   
Increase
(decrease)

and
percentage
change
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Revenues:
                
Premiums
  $611   $617   $(6)    (1)%   $621   $637   $(16)    (3)% 
Net investment income
   470    486    (16)    (3)%    482    497    (15)    (3)% 
Net investment gains (losses)
   62    5    57    NM(1)    (21)    (47)    26    55% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total revenues
   1,143    1,108    35    3%    1,082    1,087    (5)    —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
Benefits and expenses:
                
Benefits and other changes in policy reserves
   941    942    (1)    —  %    953    956    (3)    —  % 
Liability remeasurement (gains) losses
   61    23    38    165%    104    3    101    NM(1) 
Acquisition and operating expenses, net of deferrals
   108    95    13    14%    109    122    (13)    (11)% 
Amortization of deferred acquisition costs and intangibles
   18    18    —      —%    17    19    (2)    (11)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total benefits and expenses
   1,128    1,078    50    5%    1,183    1,100    83    8% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations before income taxes
   15    30    (15)    (50)% 
Provision for income taxes
   10    9    1    11% 
Loss from continuing operations before income taxes
   (101)    (13)    (88)    NM(1) 
Benefit for income taxes
   (13)    (1)    (12)    NM(1) 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations
   5    21    (16)    (76)% 
Adjustments to income from continuing operations:
        
Loss from continuing operations
   (88)    (12)    (76)    NM(1) 
Adjustments to loss from continuing operations:
        
Net investment (gains) losses
   (62)    (5)    (57)    NM(1)    21    47    (26)    (55)% 
Expenses related to restructuring
   1    1    —      —  % 
Taxes on adjustments
   13    —      13    NM(1)    (4)    (9)    5    56% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $(43)   $17   $(60)    NM(1)   $(71)   $26   $(97)    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
The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was primarily from higher liability remeasurement losses largely driven by timing impacts related to the second
130
Table of Contents
legal settlement, higher claims and lower terminations elevated benefit utilization and higher new claims in the current year. The adverse change was also attributable to lower net investment income in the current year.year, partially offset by an accrual for legal settlement costs of $16 million in the prior year that did not recur.
Revenues
Premiums decreased primarily driven by lower renewal premiums from policy terminations and policies entering
paid-up
status, partially offset by $19$11 million of higher premiums from newly implemented
in-force
rate actions in the current year.
Net investment income decreased largely from lower income from limited partnerships and U.S. Government Treasury Inflation Protected Securities (“TIPS”), partially offset by higher income from bank loans. The decrease was also and limited partnerships, partially offset by higher investment yields and higher average invested assets in the current year.
130
Table of Contents
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
The liability remeasurement loss increasedin the current year was primarily due to adverse actual versus expected experience largely driven by timing impacts related to the second legal settlement, higher claims and lower terminations, elevated benefit utilization and higher new claims in the current year.terminations.
Acquisition and operating expenses, net of deferrals, increaseddecreased principally from a $20 million accrual for legal settlement costs in the prior year that did not recur, partially offset by higher operating costs in the current year.
ProvisionBenefit for income taxes.
The effective tax rate was 69.2%14.0% and 28.3%6.6% for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in the effective tax rate was primarily attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income in relation to the
pre-tax income
loss in the current year.
Six131
Table of Contents
Nine Months Ended JuneSeptember 30, 2023 Compared to SixNine Months Ended JuneSeptember 30, 2022
The following table sets forth the results of operations relating to our Long-Term Care Insurance segment for the periods indicated:
 
  
Six months ended
June 30,
   
Increase
(decrease) and
percentage
change
   
Nine months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Revenues:
                
Premiums
  $1,227   $1,224   $3    —  %   $1,848   $1,861   $(13)    (1)% 
Net investment income
   943    933    10    1%    1,425    1,430    (5)    —  % 
Net investment gains (losses)
   71    46    25    54%    50    (1)    51    NM(1) 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total revenues
   2,241    2,203    38    2%    3,323    3,290    33    1% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Benefits and expenses:
                
Benefits and other changes in policy reserves
   1,885    1,867    18    1%    2,838    2,823    15    1% 
Liability remeasurement (gains) losses
   29    (65)    94    145%    133    (62)    195    NM(1) 
Acquisition and operating expenses, net of deferrals
   227    191    36    19%    336    313    23    7% 
Amortization of deferred acquisition costs and intangibles
   36    37    (1)    (3)%    53    56    (3)    (5)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total benefits and expenses
   2,177    2,030    147    7%    3,360    3,130    230    7% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations before income taxes
   64    173    (109)    (63)% 
Income (loss) from continuing operations before income taxes
   (37)    160    (197)    (123)% 
Provision for income taxes
   28    47    (19)    (40)%    15    46    (31)    (67)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Income from continuing operations
   36    126    (90)    (71)% 
Adjustments to income from continuing operations:
        
Income (loss) from continuing operations
   (52)    114    (166)    (146)% 
Adjustments to income (loss) from continuing operations:
        
Net investment (gains) losses
   (71)    (46)    (25)    (54)%    (50)    1    (51)    NM(1) 
Expenses related to restructuring
   —      1    (1)    (100)%    —      1    (1)    (100)% 
Taxes on adjustments
   15    9    6    67%    11    —      11    NM(1) 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $(20)   $90   $(110)    (122)%   $(91)   $116   $(207)    (178)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
 
131
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
Table of Contents
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
The change to an adjusted operating loss in the current year from adjusted operating income in the prior year was primarily from an unfavorable change in liability remeasurement (gains) losses largely driven by timing impacts related to legal settlements, higher claims and lower terminations elevated benefit utilization and higher new claims in the current year. These adverse developments were partially offset byThe change was also attributable to less favorable cash flow assumption updates related to implementation timing and approval amounts of our
in-force
rate action plan and from higher net investment incomeoperating costs in the current year.
Revenues
Premiums increaseddecreased primarily driven by $49 million of higher premiums from newly implemented in-force rate actions, partially offset by lower renewal premiums from policy terminations and policies entering
paid-up
status, partially offset by $60 million of higher premiums from newly implemented
in-force
rate actions in the current year.
Net investment income decreased largely due to lower income from TIPS, partially offset by higher income from bank loans and higher average invested assets in the current year.
Net investment income increased largely from higher income from bank loans and limited partnerships, as well as higher investment yields and higher average invested assets, partially offset by lower income related to TIPS in the current year.
132
Table of Contents
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Benefits and other changes in policy reserves increased primarily due to aging of the
in-force
block, including higher interest accretion, as well as higher loss adjustment expenses in the current year.
The change to a liability remeasurement loss of $133 million in the current year from a gain in the prior year was largely driven by adverse actual versus expected experience related to timing impacts from the second legal settlement, higher claims and lower terminations, elevated benefit utilization and higher new claims in the current year. The changeterminations. This was also attributable to lesspartially offset by a favorable cash flow assumption updates in the current yearupdate related to implementation timing and approval amountsof our in-force rate action plan. The liability remeasurement gain of $62 million in the prior year resulted from favorable actual versus expected experience related to higher terminations, lower claims and timing impacts from the first legal settlement. The remeasurement gain in the prior year also included a favorable cash flow assumption update related to implementation timing and approval of our in-force rate action plan.
Acquisition and operating expenses, net of deferrals, increased principally from higher operating costs, partially offset by a lower accrual for legal settlement costs in the current year.
Provision for income taxes.
The effective tax rate was 44.6%(39.2)% and 27.2%28.8% for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increasedecrease in the effective tax rate was primarily attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income in relation to a
pre-tax income
loss in the current year.
Long-Term Care Insurance selected operating performance measures
Upon adoption ofUnder LDTI, we included expectations for benefit reductions related to
in-force
rate actions and legal settlements as well as settlement payments in our assumptions for the liability for future policy benefits, which have impacted and will continue to impact our reported U.S. GAAP financial results. There was no change in how we recognize premiums related to
in-force
rate actions due to the adoption of LDTI. We have also included estimates for cash payments to policyholders who elect certain reduced benefit options in connection with legal settlements, referred to herein as settlement payments, in our assumptions for the liability for future policy benefits.
Generally, in the fourth quarter of each year, we will update our cash flow assumptions used to measure the liability for future policy benefits, including assumptions for benefit reductions related to in-force rate actions and legal settlements as well as settlement payments. In addition, we will update cash flow assumptions related to implementation timing and approval amounts of our in-force rate action plan quarterly.
132
Table of Contents
In the fourth quarter of 2022, we updated our assumptions to reflect an expected reserve reduction related to the second legal settlement that resulted in a significant benefit to our financial results consisting oflong-term care insurance business had a liability remeasurement gain of $255 million in our long-term care insurance business. The liability remeasurement gain primarily reflectedfrom favorable assumption updates of $303 million, largely fromwhich reflected an update to legalexpected reserve reduction, net of estimated settlement electionspayments, attributable to the inclusion of the second legal settlement. This settlement primarily impacts older, unprofitable capped cohorts and,cohorts; therefore, it had an immediate impact to the fourth quarter of 2022 earnings. In contrast to our second legal settlement, when we update our assumptions for theour third legal settlement later in the fourth quarter of 2023, any reserve and correspondingchanges would have a muted income statement impact is expected to be much less significant because this settlement impacts profitable uncapped cohorts. We have experienced and may continue to experience quarterly fluctuations in earnings related to the legal settlements to the extent actual experience deviates from our assumptions. However, we expect the legal settlements to result in an overall net favorable economic impact to our long-term care insurance business as they reduce tail risk on these long-duration liabilities.
We alsoUnder LDTI, we elected to update the net premium ratio quarterly for actual versus expected experience; therefore, forecasted cash flow assumptions will be replaced with actual cash flows each quarter with any difference recorded in net income (loss). As a result, variances between actual experience and our expectations for benefit reductions and settlement payments will be reflected in liability remeasurement (gains) losses in our operating results on a quarterly basis.
133
Table of Contents
Remeasurement (gains) losses
The following table sets forth the
pre-tax
components of the liability remeasurement (gains) losses for the periods indicated:
   
Three months ended
September 30,
  
(Increase)
decrease and
percentage
change
  
Nine months ended
September 30,
  
(Increase)
decrease and
percentage
change
 
(Amounts in millions)
  
2023
  
2022
  
2023 vs. 2022
  
  2023  
  
  2022  
  
2023 vs. 2022
 
Cash flow assumption updates
  $(6)  $(10)  $4    40%  $(9)  $(32)  $23    72% 
Actual to expected experience
   110   13   97    NM(1)   142   (30)   172    NM(1) 
  
 
 
  
 
 
  
 
 
    
 
 
  
 
 
  
 
 
   
Total liability remeasurement (gains) losses
  $104  $3  $101    NM(1)  $133  $(62)  $195    NM(1) 
  
 
 
  
 
 
  
 
 
    
 
 
  
 
 
  
 
 
   
 
   
Three months

ended
June 30,
  
(Increase)
decrease and
percentage
change
  
Six months

ended
June 30,
  
(Increase)
decrease
and
percentage
change
 
(Amounts in millions)
  
2023
  
2022
  
2023 vs. 2022
  
2023
  
2022
  
2023 vs. 2022
 
Cash flow assumption updates
  $(24)  $(20)  $(4)   (20)%  $(3)  $(22)  $19    86% 
Actual to expected experience
   85   43   42   98%   32   (43)   75    174% 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
   
Total liability remeasurement (gains) losses
  $61  $23  $38   165%  $29  $(65)  $94    145% 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
   
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
For a discussion of the three and six months ended June 30, 2023,change in liability remeasurement (gains) losses, see the unfavorable actual to expected experiencecomparison for this line item above in “—Segment results of $85 million and $32 million, respectively, resulted from lower terminations, elevated benefit utilization and higher new claims than expected.
For the three months ended June 30, 2022, unfavorable actual to expected experience of $43 million was due to lower terminations and higher new claims than expected. For the six months ended June 30, 2022, favorable actual to expected experience of $43 million was attributable to higher terminations and lower new claims than expected.operations.”
In-force
rate actions
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.
133
Table of Contents
The following table sets forth filing approvals as part of our multi-year
in-force
rate action plan for the periods indicated:
 
  
Three months
ended June 30,
 
Six months
ended June 30,
   
Three months ended
September 30,
 
Nine months ended
September 30,
 
(Dollar amounts in millions)
  
2023
 
2022
 
2023
 
2022
   
    2023    
 
    2022    
 
    2023    
 
    2022    
 
State filings approved
   38   33   61   71    27   24   88   95 
Impacted in-force premiums
  $300  $133  $378  $487   $150  $123  $528  $610 
Weighted-average percentage rate increase approved
   31%   39%   38%   31%    56%   38%   43%   33% 
Gross incremental premiums approved
  $94  $52  $144  $153   $83  $47  $227  $200 
During the sixnine months ended JuneSeptember 30, 2023, we also submitted 69104 new filings on approximately $432$705 million in annualized
in-force
premiums.
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 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.
We continue to work closely with the NAIC and state regulators to demonstrate the broad-based need for actuarially justified rate increases in order to pay future claims. 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.
134
Table of Contents
Life and Annuities segment
Trends and conditions
Many factors can affect the results of our life insurance and annuity products, as further discussed below. 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 continue to monitor our experience and assumptions closely and make changes to our assumptions and methodologies, as appropriate, for our life insurance and annuity products. Even small changes in assumptions or small deviations of actual experience from assumptions cancould have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition. Results of our life insurance and annuity products depend significantly upon the extent to which our actual future experience is consistent with assumptions and methodologies we have used in calculating our reserves. We no longer solicit sales of traditional life insurance and annuity products; however, we continue to service our existing retained and reinsured blocks of business.
We complete the required annual review of our cash flow assumptions, including mortality and lapse, among other assumptions, for our life insurance and annuity products in the fourth quarter of each year. Our 2023 assumption review will consider trends during the pandemic years, but any proposed updates to long-term assumptions will generally exclude or adjust experience data after 2019, as we do not have sufficient information around the long-term effects of COVID-19. However, we will assess near-term trends together with our review of long-term care insurance mortality as we continue to evaluate the long-term implications of COVID-19. Any materially adverse changes to our assumptions could have a materially negative impact on our results of operations, financial condition and business.
Results of our life insurance and annuity products are also impacted by interest rates. Prior to the recent rise in interest rates beginning in 2022, historic low interest rates put pressure on the profitability and returns of our life insurance and annuity products as higher-yielding investments matured and were replaced with lower-yielding investments. We have sought to manage the impact of low interest rates through asset-liability management. 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 have caused and may continue to cause increased unrealized losses on our investment portfolios, increased policy surrenders, withdrawals from life insurance policies and annuity contracts and
134
Table of Contents
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 life insurance and annuity products, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Annual Report on Form
10-K.
For a discussion of our assessment of the impacts of the MOVEit Cybersecurity Incident on our business, see “Long-Term Care Insurance segment—Trends and conditions.”
Life insurance
Results of our life insurance products are impacted primarily by mortality, persistency, investment yields, expenses, reinsurance and statutory reserve requirements, among other factors.
Mortality levels may deviate each period from historical trends. Overall mortality experience was lowerfavorable for the secondthird quarter of 2023 compared to the firstthird quarter of 2023 and2022 but was slightly less favorable than the second quarter of 2022.2023. In our life insurance products,
COVID-19
deaths also declinedhave continued to significantly indecline during 2023 from the first half of 2023 compared to the first half oflevels in 2022. We have experienced higherunfavorable mortality thancompared to our then-current and
priced-for
assumptions in recent years for our universal life insurance block. We have also been experiencing
135
Table of Contents
higher mortality related charges resulting fromin an increase in rates charged by our reinsurance partners reflecting natural block aging and higherunfavorable mortality compared to expectations.
Our mortality experience for older ages is emerging and we continue to monitor trends in mortality improvement. We will continue to regularly review our mortality and persistency assumptions as well as all of our other assumptions in light of emerging experience and trends. In the fourth quarter of 2022, we made favorable cash flow assumption updates of $37 million in our universal and term universal life insurance products primarily related to higher interest rates. In connection with our 2023 review of our cash flow assumptions, we are currently considering updates to lapses and mortality, including mortality improvement. We may be required to make adjustmentshave been monitoring lapse experience particularly in our universal life insurance products with secondary guarantees, consistent with others in the futureindustry. However, given the relatively small size and characteristics of our closed block, any impact would likely be smaller relative to others in the industry with larger blocks. Our mortality experience for older ages has also been emerging and we have continued to monitor trends in mortality improvement. While our assumptions which could impact ourreviews are still underway and not yet complete, the life insurance reserves. Any materially adverse changes to our assumptions, including mortality, persistency or interest rates,assumption updates we are considering in aggregate could have a materially negative impact onpressure our results in the fourth quarter of operations,2023.
Our universal life insurance products with secondary guarantees are subject to additional reserves on a statutory basis using a regulatory prescribed reinvestment rate. Given the increase in rates, we currently anticipate a favorable benefit from the reinvestment rate. From a statutory income perspective, we believe the favorable benefit from the reinvestment rate will help offset any potential negative assumption updates. Our statutory reviews are still underway and not yet complete, and we plan to report the outcome of these reviews in connection with our release of our fourth quarter of 2023 financial condition and business.results.
Fixed annuities
Results of our fixed annuity products 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 monitor and change crediting rates on fixed deferred annuities on a regular basis to maintain spreads and targeted returns, if applicable. However, we have seen and could continue to see declines in our fixed annuity spreads and margins as interest rates change, depending on the severity of the change.
As part of our fourth quarter of 2023 review of our cash flow assumptions, we are monitoring mortality and lapse assumptions in our fixed annuity products. Our lapse experience in the higher interest rate environment isand after the banking disruption in early 2023 has been emerging. We may be required to make adjustments in the future to our assumptions, including mortality and lapse rates, which could impact our fixed annuity reserves. Any materially adverse changes to our assumptions could have a materially negative impact on our results of operations, financial condition and business.
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.
Variable annuities
Results of our variable annuity products are affected primarily by investment performance, interest rate levels, the slope of the interest rate yield curve, net interest spreads, equity market conditions, mortality, surrenders and scheduled maturities. In addition, the results of our variable annuity products can significantly
135
Table of Contents
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 have used reinsurance to help mitigate volatility in our variable annuity results.
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.
136
Table of Contents
Segment results of operations
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
The following table sets forth the results of operations relating to our Life and Annuities segment for the periods indicated:
 
  
Three months
ended June 30,
 
Increase
(decrease) and
percentage
change
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
 
2022
 
2023 vs. 2022
   
    2023    
   
    2022    
   
2023 vs. 2022
 
Revenues:
             
Premiums
  $50  $60  $(10)   (17)%   $48   $55   $(7)    (13)% 
Net investment income
   261   265   (4)   (2)%    261    271    (10)    (4)% 
Net investment gains (losses)
   (7)   —     (7)   NM(1)    (18)    (15)    (3)    (20)% 
Policy fees and other income
   165   164   1   1%    158    169    (11)    (7)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   469   489   (20)   (4)%    449    480    (31)    (6)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   240   (108)   348   NM(1)    229    247    (18)    (7)% 
Liability remeasurement (gains) losses
   9   1   8   NM(1)    12    14    (2)    (14)% 
Changes in fair value of market risk benefits and associated hedges
   (19)   20   (39)   (195)%    (24)    (27)    3    11% 
Interest credited
   126   126   —     —  %    127    128    (1)    (1)% 
Acquisition and operating expenses, net of deferrals
   51   416   (365)   (88)%    54    57    (3)    (5)% 
Amortization of deferred acquisition costs and intangibles
   44   63   (19)   (30)%    45    57    (12)    (21)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   451   518   (67)   (13)%    443    476    (33)    (7)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations before income taxes
   18   (29)   47   162% 
Provision (benefit) for income taxes
   3   (7)   10   143% 
Income from continuing operations before income taxes
   6    4    2    50% 
Provision for income taxes
   1    —      1    NM(1) 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations
   15   (22)   37   168% 
Adjustments to income (loss) from continuing operations:
     
Income from continuing operations
   5    4    1    25% 
Adjustments to income from continuing operations:
        
Net investment (gains) losses
   7   —     7   NM(1)    18    15    3    20% 
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges
(2)
   (23)   8   (31)   NM(1)    (26)    (32)    6    19% 
Pension plan termination costs
   —      6    (6)    (100)% 
Taxes on adjustments
   3   (1)   4   NM(1)    —      1    (1)    (100)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $2  $(15)  $17   113% 
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(3)   $(6)   $3    50% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the three months ended JuneSeptember 30, 2023 and 2022, changes in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(4)$(2) million and $(12)$(5) million, respectively.
 
136137
Table of Contents
The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the products included in our Life and Annuities segment for the periods indicated:
 
   
Three months
ended
June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
  
2022
  
2023 vs. 2022
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
     
Life insurance
  $(17)  $(37)  $20   54% 
Fixed annuities
   10   20   (10)   (50)% 
Variable annuities
   9   2   7   NM(1) 
  
 
 
  
 
 
  
 
 
  
Total adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders
  $2  $(15)  $17   113% 
  
 
 
  
 
 
  
 
 
  
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
        
Life insurance
  $(25)   $(28)   $3    11% 
Fixed annuities
   17    15    2    13% 
Variable annuities
   5    7    (2)    (29)% 
  
 
 
   
 
 
   
 
 
   
Total adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(3)   $(6)   $3    50% 
  
 
 
   
 
 
   
 
 
   
Adjusted operating income (loss)loss available to Genworth Financial, Inc.’s common stockholders
 
The adjusted operating loss in our life insurance products decreased $20 million primarily due to favorable mortality experience and lower DAC amortization, related to lower lapses and from lower mortality experience, partially offset by lower premiums reflecting runoffhigher liability remeasurement losses largely related to a voluntary recapture of our in-force blockspreviously ceded reinsurance in the current year.
 
Adjusted operating income in our fixed annuity products decreased $10 millionincreased mainly from favorable mortality in our fixed payout annuity products, partially offset by lower net spreads primarily related to block runoff and from lower mortality in our single premium immediate annuity products in the current year.
 
Adjusted operating income in our variable annuity products increased $7 milliondecreased predominantly due to aging of our in-force blocka decline in fee income driven by lower account value in the current year.
Revenues
Premiums
.
The decrease was driven by our life insurance products largely due to the continued runoff of our
in-force
blocks, partially offset by lower ceded premiums in the current year.
Net investment income
.
.
The decrease in net investment income was primarily attributable to lower average invested assets driven mostly by block runoff in our fixed annuity products in the current year.
Net investment gains (losses)
. For a 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
.
The decrease was related to our life insurance products driven mostly by lower product charges due to the runoff of our
in-force
blocks and from lower fee income due mostly to a decline in average account value in our variable annuity products in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
 
Our fixed annuitylife insurance products increased $367decreased $13 million largelyprimarily from favorable mortality in our universal life insurance products, partially offset by lower assumed reserveslapses in our term life insurance products in the prior year as a result of a third-party recapture of $372 million of certain single premium immediate annuity contracts.current year.
 
Our life insurancefixed annuity products decreased $20$6 million primarilylargely from lowerfavorable mortality in the current year.
 
137138
Table of Contents
Liability remeasurement (gains) losses.losses
The increase in liability remeasurement losses was largely attributable togain in our fixed annuity products increased $8 million primarily driven by lowerdue to favorable mortality in our single premium immediate annuity productscompared to expectations in the current year.
The liability remeasurement loss in our life insurance products increased $6 million driven mostly by higher projected benefits as compared to prior expectations due largely to a voluntary recapture of previously ceded reinsurance, partially offset by favorable mortality in the current year.
Changes in fair value of market risk benefits and associated hedges
 
The favorable change of $47 million in ourOur variable annuity products washad an unfavorable variance of $6 million primarily attributable to higher derivative losses and a less favorable equity market impacts andimpact from lower attributed fees and higher benefit payments due to aging of our in-force block in the current year. These favorable changes wereinterest rate increases, partially offset by slower interest rate increases, as well as derivative lossesa less unfavorable equity market impact in the current year compared to gains in the prior year.
 
The unfavorable change of $8 million in ourOur fixed annuity products washad a favorable variance of $3 million primarily driven by slowerhigher interest rate increases, partially offset by favorable equity market impactsrates in the current year.
Acquisition and operating expenses, net of deferrals
. The decrease was driven by our fixed annuity products due to a payment of $365 million in the prior year related to the recapture of certain single premium immediate annuity contracts by a third party.
Amortization of deferred acquisition costs and intangibles.
The decrease was primarily related to our life insurance products largely due to lowerhigher lapses in the current year. Our prior year as our
20-year
level premium period business written in 2002 experienced higher lapses in the prior year as it entered its post-level premium period.
Provision (benefit) for income taxes.
The effective tax rate was 19.2%16.8% and 23.7%(8.4)% for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The decreaseincrease in the effective tax rate was primarily attributable to tax benefits from tax favored items in relation to a
pre-tax loss
income in the priorcurrent year.
 
138139
Table of Contents
SixNine Months Ended JuneSeptember 30, 2023 Compared to SixNine Months Ended JuneSeptember 30, 2022
The following table sets forth the results of operations relating to our Life and Annuities segment for the periods indicated:
 
  
Six months
ended June 30,
 
Increase
(decrease) and
percentage
change
   
Nine months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
 
2022
 
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Revenues:
             
Premiums
  $112  $134  $(22)   (16)%   $160   $189   $(29)    (15)% 
Net investment income
   525   544   (19)   (3)%    786    815    (29)    (4)% 
Net investment gains (losses)
   (17)   14   (31)   NM(1)    (35)    (1)    (34)    NM(1) 
Policy fees and other income
   328   333   (5)   (2)%    486    502    (16)    (3)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total revenues
   948   1,025   (77)   (8)%    1,397    1,505    (108)    (7)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Benefits and expenses:
             
Benefits and other changes in policy reserves
   486   147   339   NM(1)    715    394    321    81% 
Liability remeasurement (gains) losses
   26   25   1   4%    38    39    (1)    (3)% 
Changes in fair value of market risk benefits and associated hedges
   (2)   (21)   19   90%    (26)    (48)    22    46% 
Interest credited
   252   251   1   —  %    379    379    —      —  % 
Acquisition and operating expenses, net of deferrals
   104   493   (389)   (79)%    158    550    (392)    (71)% 
Amortization of deferred acquisition costs and intangibles
   95   129   (34)   (26)%    140    186    (46)    (25)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Total benefits and expenses
   961   1,024   (63)   (6)%    1,404    1,500    (96)    (6)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations before income taxes
   (13)   1   (14)   NM(1)    (7)    5    (12)    NM(1) 
Benefit for income taxes
   (4)   (1)   (3)   NM(1)    (3)    (1)    (2)    (200)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Income (loss) from continuing operations
   (9)   2   (11)   NM(1)    (4)    6    (10)    (167)% 
Adjustments to income (loss) from continuing operations:
             
Net investment (gains) losses
   17   (14)   31   NM(1)    35    1    34    NM(1) 
Changes in fair value of market risk benefits attributable to interest rates, equity markets and associated hedges
(2)
   (9)   (46)   37   80%    (35)    (78)    43    55% 
Pension plan termination costs
   —      6    (6)    (100)% 
Taxes on adjustments
   (1)   13   (14)   (108)%    (1)    14    (15)    (107)% 
  
 
  
 
  
 
    
 
   
 
   
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(2)  $(45)  $43   96%   $(5)   $(51)   $46    90% 
  
 
  
 
  
 
    
 
   
 
   
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
(2)
For the sixnine months ended JuneSeptember 30, 2023 and 2022, changes in fair value of market risk benefits and associated hedges were adjusted to exclude changes in reserves, attributed fees and benefit payments of $(7)$(9) million and $(25)$(30) million, respectively.
 
139140
Table of Contents
The following table sets forth adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders for the products included in our Life and Annuities segment for the periods indicated:
 
  
Six months
ended June 30,
   
Increase
(decrease) and
percentage
change
   
Nine months ended
September 30,
   
Increase
(decrease)
and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
    2023    
   
    2022    
   
    2023 vs. 2022    
 
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
                
Life insurance
  $(44)   $(84)   $40    48%   $(69)   $(112)   $43    38% 
Fixed annuities
   24    33    (9)    (27)%    41    48    (7)    (15)% 
Variable annuities
   18    6    12    200%    23    13    10    77% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(2)   $(45)   $43    96%   $(5)   $(51)   $46    90% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating income (loss)loss available to Genworth Financial, Inc.’s common stockholders
 
The adjusted operating loss in our life insurance products decreased $40 million largely attributablefrom lower DAC amortization related to higher lapse in the prior year and from favorable mortality experience in the current year as the
COVID-19
impacts subsided. In addition, the prior year included a $20 million legal settlement expense in the prior year that did not recur and from lower DAC amortization related to lower lapses in the current year. Current year results also reflected lower mortality experience as the COVID-19 impacts subsided,recur. These favorable developments were partially offset by lower premiums reflecting runoff of our
in-force blocks.
blocks in the current year.
 
Adjusted operating income in our fixed annuity products decreased $9 million mainly attributable to lower net spreads primarily related to block runoff, partially offset by favorable mortality experience in the current year.
 
Adjusted operating income in our variable annuity products increased $12 million predominantly due to aging of our
in-force
block, partially offset by a decrease in fee income driven by lower account value in the current year.
Revenues
Premiums
. The decrease was driven by our life insurance products largely due to the continued runoff of our
in-force
blocks in the current year.
Net investment income
.
The decrease in net investment income was primarily attributable to lower average invested assets driven mostly by block runoff in our fixed annuity products in the current year.
Net investment gains (losses)
. For a 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.
The decrease in policy fees and other income was principally from lower fee income due mostly to a decline in average account value in our variable annuity products and from lower product charges in our life insurance products due to the runoff of our
in-force
blocks in the current year.
Benefits and expenses
Benefits and other changes in policy reserves
 
Our fixed annuity products increased $360$354 million primarily from lower assumed reserves in the prior year as a result of a third-party recapture of $372 million of certain single premium immediate annuity contracts.
Our life insurance products decreased $24 million primarily from lowercontracts, partially offset by favorable mortality in the current year.
 
140141
Table of Contents
Our life insurance products decreased $37 million primarily from favorable mortality in the current year, partially offset by an unfavorable change in reserves reflecting prior year term lapse experience.
Changes in fair value of market risk benefits and associated hedges
 
The unfavorable change of $29 million in ourOur fixed annuity products washad an unfavorable variance of $26 million primarily attributable to lower interest rates, partially offset by favorable equity market impacts in the current year.
 
The favorable change of $10 million in ourOur variable annuity products was primarilyhad a favorable variance of $4 million principally driven by favorable equity market impacts and fromas well as lower attributed fees and higher benefit payments due to aging of our
in-force
block, partially offset by higher derivative losses in the current year.
Acquisition and operating expenses, net of deferrals
 
Our fixed annuity products decreased $366$364 million primarily due to a payment of $365 million in the prior year related to the recapture of certain single premium immediate annuity contracts by a third party.
 
Our life insurance products decreased $18$22 million primarily due to a $25 million legal settlement expense of $25 million and pension plan termination costs of $6 million in the prior year that did not recur,recur. These decreases were partially offset by higher operating expenses in the current year, including conversion costs associated with an outsourcing arrangement.
Amortization of deferred acquisition costs and intangibles.
The decrease was primarily related to our life insurance products largely due to lower lapses in the current year. Our 20-year level premium period business written in 2002 experienced higher lapses in the prior year as itour
20-year
level premium period business written in 2002 entered its post-level premium period.
Benefit for income taxes.
The effective tax rate was 27.0%35.6% and (72.3)(33.3)% for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in the effective tax rate was primarily attributable to tax benefits from tax favored items in relation to a
pre-tax
loss in the current year.
Life and Annuities selected operating performance measures
Life insurance
The following table sets forth selected operating performance measures regarding our life insurance products as of the dates indicated:
 
   
As of June 30,
   
Increase
(decrease) and
percentage change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
 
Term and whole life insurance
        
Life insurance in-force, net of reinsurance
  $45,460   $50,267   $(4,807)    (10)% 
Life insurance in-force before reinsurance
  $284,224   $316,649   $(32,425)    (10)% 
Term universal life insurance
        
Life insurance in-force, net of reinsurance
  $91,293   $95,941   $(4,648)    (5)% 
Life insurance in-force before reinsurance
  $91,904   $96,570   $(4,666)    (5)% 
Universal life insurance
        
Life insurance in-force, net of reinsurance
  $29,171   $30,434   $(1,263)    (4)% 
Life insurance in-force before reinsurance
  $32,900   $34,405   $(1,505)    (4)% 
   
September 30,
   
Increase
(decrease) and
percentage change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
 
Term and whole life insurance
        
Life insurance
in-force,
net of reinsurance
  $45,353   $50,916   $(5,563)    (11)% 
Life insurance
in-force,
before reinsurance
  $277,479   $308,153   $(30,674)    (10)% 
Term universal life insurance
        
Life insurance
in-force,
net of reinsurance
  $90,820   $94,151   $(3,331)    (4)% 
Life insurance
in-force,
before reinsurance
  $91,421   $94,773   $(3,352)    (4)% 
Universal life insurance
        
Life insurance
in-force,
net of reinsurance
  $29,299   $30,094   $(795)    (3)% 
Life insurance
in-force,
before reinsurance
  $32,572   $33,995   $(1,423)    (4)% 
We no longer solicit sales of our traditional life insurance products; however, we continue to service our existing blocks of business. The decrease in insurance
in-force
in our life insurance products reflects the continued runoff of our
in-force
blocks.
 
141142
Table of Contents
Corporate and Other
Results of operations
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:
 
  
Three months
ended June 30,
   
Increase
(decrease) and
percentage
change
   
Three months ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
   
2023
   
2022
   
2023 vs. 2022
 
Revenues:
                
Premiums
  $2   $1   $1    100%   $3   $2   $1    50% 
Net investment income
   4    —      4    NM(1)    3    1    2    200% 
Net investment gains (losses)
   (3)    15    (18)    (120)%    (4)    4    (8)    (200)% 
Policy fees and other income
   —      1    (1)    (100)%    (1)    (1)    —      —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total revenues
   3    17    (14)    (82)%    1    6    (5)    (83)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Benefits and expenses:
                
Benefits and other changes in policy reserves
   (2)    (4)    2    50%    (1)    (4)    3    75% 
Acquisition and operating expenses, net of deferrals
   15    10    5    50%    13    11    2    18% 
Interest expense
   16    13    3    23%    17    14    3    21% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Total benefits and expenses
   29    19    10    53%    29    21    8    38% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Loss from continuing operations before income taxes
   (26)    (2)    (24)    NM(1)    (28)    (15)    (13)    (87)% 
Provision (benefit) for income taxes
   (4)    3    (7)    NM(1)    (6)    2    (8)    NM(1) 
  
 
   
 
   
 
     
 
   
 
   
 
   
Loss from continuing operations
   (22)    (5)    (17)    NM(1)    (22)    (17)    (5)    (29)% 
Adjustments to loss from continuing operations:
                
Net investment (gains) losses
   3    (15)    18    120%    4    (4)    8    200% 
(Gains) losses on early extinguishment of debt
   —      1    (1)    (100)%    —      3    (3)    (100)% 
Taxes on adjustments
   (1)    3    (4)    (133)% 
  
 
   
 
   
 
     
 
   
 
   
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(20)   $(16)   $(4)    (25)%   $(18)   $(18)   $—      —  % 
  
 
   
 
   
 
     
 
   
 
   
 
   
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss was flat as a decrease in tax expense on certain forward starting swap gains was offset by higher expenses related to CareScout growth initiatives and higher interest expense in the current year.
Revenues
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Benefits and other changes in policy reserves increased primarily related to inter-segment transactions in the current year.
Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives and higher employee-related expenses in the current year, partially offset by a loss of $3 million in the prior year related to the early redemption of Genworth Holdings’ 2024 Notes that did not recur.
143
Table of Contents
Interest expense increased largely driven by a higher floating rate of interest on Genworth Holdings’ 2066 Notes in the current year, partially offset by the early redemption of Genworth Holdings’ 2024 Notes in the prior year.
The benefit for income taxes for the three months ended September 30, 2023 was primarily related to the
pre-tax
loss. The provision for income taxes for the three months ended September 30, 2022 was largely related to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income, partially offset by a tax benefit related to the
pre-tax
loss.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:
   
Nine months
ended
September 30,
   
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
   
2022
   
2023 vs. 2022
 
Revenues:
        
Premiums
  $7   $5   $2    40% 
Net investment income
   11    4    7    175% 
Net investment gains (losses)
   (17)    6    (23)    NM(1) 
Policy fees and other income
   (1)    —      (1)    NM(1) 
  
 
 
   
 
 
   
 
 
   
Total revenues
   —      15    (15)    (100)% 
  
 
 
   
 
 
   
 
 
   
Benefits and expenses:
        
Benefits and other changes in policy reserves
   (6)    (11)    5    45% 
Acquisition and operating expenses, net of deferrals
   44    30    14    47% 
Interest expense
   49    40    9    23% 
  
 
 
   
 
 
   
 
 
   
Total benefits and expenses
   87    59    28    47% 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations before income taxes
   (87)    (44)    (43)    (98)% 
Benefit for income taxes
   (15)    —      (15)    NM(1) 
  
 
 
   
 
 
   
 
 
   
Loss from continuing operations
   (72)    (44)    (28)    (64)% 
Adjustments to loss from continuing operations:
        
Net investment (gains) losses
   17    (6)    23    NM(1) 
(Gains) losses on early extinguishment of debt
   (1)    7    (8)    (114)% 
Expenses related to restructuring
   4    —      4    NM(1) 
Taxes on adjustments
   (4)    —      (4)    NM(1) 
  
 
 
   
 
 
   
 
 
   
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(56)   $(43)   $(13)    (30)% 
  
 
 
   
 
 
   
 
 
   
 
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives and higher interest expense, partially offset by higher net investment income and lower tax expense on certain forward starting swap gains in the current year.
144
Table of Contents
Revenues
Net investment income increased largely from higher investment yields and higher average invested assets in the current year.
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
142
Table of Contents
Benefits and expenses
AcquisitionBenefits and operating expenses, net of deferrals,other changes in policy reserves increased primarily from higher expenses related to CareScout growth initiativesinter-segment transactions in the current year.
Interest expense increased largely driven by a higher floating rate of interest on Genworth Holdings’ junior subordinated notes in the current year, partially offset by the early redemption of Genworth Holdings’ senior notes due in February 2024 in the prior year.
The benefit for income taxes for the three months ended June 30, 2023 was primarily related to the pre-tax loss, partially offset by non-deductible expenses. The provision for income taxes for the three months ended June 30, 2022 was largely attributable to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income.
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:
   
Six months
ended June 30,
  
Increase
(decrease) and
percentage
change
 
(Amounts in millions)
  
2023
  
2022
  
2023 vs. 2022
 
Revenues:
     
Premiums
  $4  $3  $1   33% 
Net investment income
   8   3   5   167% 
Net investment gains (losses)
   (13)   2   (15)   NM(1) 
Policy fees and other income
   —     1   (1)   (100)% 
  
 
 
  
 
 
  
 
 
  
Total revenues
   (1)   9   (10)   (111)% 
  
 
 
  
 
 
  
 
 
  
Benefits and expenses:
     
Benefits and other changes in policy reserves
   (5)   (7)   2   29% 
Acquisition and operating expenses, net of deferrals
   31   19   12   63% 
Interest expense
   32   26   6   23% 
  
 
 
  
 
 
  
 
 
  
Total benefits and expenses
   58   38   20   53% 
  
 
 
  
 
 
  
 
 
  
Loss from continuing operations before income taxes
   (59)   (29)   (30)   (103)% 
Benefit for income taxes
   (9)   (2)   (7)   NM(1) 
  
 
 
  
 
 
  
 
 
  
Loss from continuing operations
   (50)   (27)   (23)   (85)% 
Adjustments to loss from continuing operations:
     
Net investment (gains) losses
   13   (2)   15   NM(1) 
(Gains) losses on early extinguishment of debt
   (1)   4   (5)   (125)% 
Expenses related to restructuring
   4   —     4   NM(1) 
Taxes on adjustments
   (4)   —     (4)   NM(1) 
  
 
 
  
 
 
  
 
 
  
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
  $(38)  $(25)  $(13)   (52)% 
  
 
 
  
 
 
  
 
 
  
(1)
We define “NM” as not meaningful for increases or decreases greater than 200%.
143
Table of Contents
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives in the current year.
Revenues
Net investment income increased due to higher investment yields in the current year.
For a discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”
Benefits and expenses
Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives and higher employee-related expenses, including $4 million of restructuring costs in the current year. These increases were partially offset by a gain of $1 million in the current year compared to a losslosses of $4$7 million in the prior year related to the repurchase and early redemption of Genworth Holdings’ senior notes.
Interest expense increased largely driven by a higher floating rate of interest on Genworth Holdings’ junior subordinated notes2066 Notes in the current year, partially offset by the early redemption of Genworth Holdings’ senior notes due in February 2024 Notes in the prior year.
The benefit for income taxes for the sixnine months ended JuneSeptember 30, 2023 was primarily related to the
pre-tax
loss, partially offset by
non-deductible
expenses. The tax benefit for income taxesrelated to the
pre-tax
loss for the sixnine months ended JuneSeptember 30, 2022 was largely attributable to the pre-tax loss, partially offset by tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income as well as and
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, including monetary policy, global trade, regulatory and tax reforms, and other changes in market conditions, such as inflation and banking industry disruptions, 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. 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, government responses and displacements caused by
COVID-19, including supply-chain disruptions and shortages,
persistent highelevated inflation, monetary policies (such as the U.S. Federal Reserve’s quantitative tightening), the volatility and strength of the capital markets, changes in tax policy and/or in U.S. tax legislation, high commodity costs, 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 secondthird quarter of 2023, the U.S. Federal Reserve continued to address elevated inflation by increasing interest rates. The U.S. Federal Reserve increased interest rates by 25 basis points at its MayJuly 2023 meeting, bringing the upper end of the target range to the highest level since 2006.2001, but held rates steady at its September and November 2023 meetings as it continues to monitor economic activity and inflation. The U.S. Federal Reserve didconsumer price index increased from the second quarter of 2023 while core inflation, which excludes the food and energy sectors, continued to decline from the second quarter of 2023, although it remained at elevated levels
 
144145
Table of Contents
not increase interest rates at its June 2023 meeting, the first pause in its current rate increase cycle that began in March 2022. However, at its July 2023 meeting, it resumed its monetary tightening by increasing interest rates an additional 25 basis points and forecasted the possibility of one more rate increase before the end of 2023. The U.S. consumer price index decreased during the second quarter of 2023 compared to the first quarter of 2023, with inflation having fallen for twelve consecutive months. Core inflation, which excludes the food and energy sectors, also decreased from the first quarter of 2023 but remains at elevated levels compared to the U.S. Federal Reserve’s target inflation. Ainflation rate of 2%. Labor markets remained tight labor marketand contributed to the elevated inflation duringin the secondthird quarter of 2023 though the pace of job creation andwith real wage growth has slowed.continuing to decline but job creation exceeding market expectations.
TheDirect market pressures caused by the sudden disruption inof the banking sector in the first quarter of 2023 continued to impact markets duringease in the secondthird quarter of 2023. Silicon Valley Bank and Signature Bank, which were each taken into receivership by the Federal Deposit Insurance Corporation (“FDIC”), contributed to deposit outflows and pressure on share prices for other small regional banks in the United States. DuringStates in the first quarter of 2023. In the second quarter of 2023, these pressures contributed to First Republic Bank also being taken into receivership by the FDIC and subsequently sold to JPMorgan Chase & Co. Concerns have risen around tighter lending standards and capital requirements for regional banks and subsequent negative impactsWhile bank deposits began to commercial real estate financing conditions. Thestabilize in the third quarter of 2023, the long-term impacts of these banking sector disruptions on the broader economy are stillremain uncertain but direct pressures onand concerns remain elevated regarding tighter bank lending standards, increased capital requirements for regional banks and the market abated towards the end of the second quarter of 2023.subsequent negative impacts to commercial real estate financing conditions.
Although our overall exposure to recently closed financial institutions has been limited to date, to the extent banks and other financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, it could negatively affect the value of our investment portfolio or our liquidity if it hinders our ability to access or monetize our existing cash, cash equivalents or investment portfolio. While our business and balance sheet differ substantially from banking institutions that have been the focus of the greatest scrutiny, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of our common stock and potentially our results of operations.
Given the persistent elevated inflation, supply chain disruptions, evolving U.S. Federal Reserve monetary policy, uncertainty regarding the impacts of the disruption in the banking sector and prolonged geopolitical tensions, including escalating tensions and conflicts in the Middle East, it is possible the U.S. economy could fall into a recession in 2023 orearly 2024. Specific to Genworth, we continue to closely monitor the operating results and financial position of Enact Holdings, particularly related to emerging housing trends. If housing trends move in an unfavorable direction in contrast to our current projections, our liquidity, financial position and results of operations could be adversely impacted.
Trends and conditions
Investments
U.S. Treasury yields increasedcontinued to increase during the secondthird quarter of 2023 as the U.S. Federal Reserve maintained a restrictive monetary policy. The two-year
ten-year
U.S. Treasury yield rose back to levels prior to the recent banking sector disruption in March 2023, near theits highest levelslevel since 2007, and remains higher thanalthough the ten-year
two-year
U.S. Treasury yield byalso increased and remained above the largest
ten-year
U.S. Treasury yield, the differential between the
two-year
yield and the
ten-year
yield declined from the second quarter of 2023. Following strong performance in over forty years. Credit markets performed well during the second quarter of 2023, credit market performance remained resilient as regional banking sector fears subsided.macroeconomic data continued to support market optimism for a soft economic landing. Credit spreads decreased duringended the third quarter of 2023 flat compared to the second quarter of 2023 as optimism around avoiding a recession through a soft economic landing fueled positive market sentiment. This sentiment drove lower rated credits to outperform, with spreads decreasing more than higher rated credits during the second quarterand remained below first half of 2023.2023 levels. Corporate borrowers in both the investment grade and below investment grade markets hadmaintained consistent access to capital markets, with a significant increase in below investment grade issuance duringissuances through the secondend of the third quarter of 2023 comparedrelative to prior quarters.
the same period last year.
As of June 30, 2023, weWe continue to closely monitor our exposure to the regional banks and commercial real estate in our investment portfolio. We hadhave no exposure to Silicon Valley Bank or Signature Bank. Given the
145
Table of Contents
financial distress and significant credit deterioration of First Republic Bank that led to its receivership by the FDIC during the second quarter of 2023, we sold all of our U.S. corporate bond holdings in the troubled bank and recognized a net loss of $9 million in the second quarter of 2023. We also fully impaired our preferred stock position in First Republic Bank. At this time, we believe our investment portfolio is well positioned and any risks to valuations as a result of the pressures in the regional banking system and commercial real estate are manageable.
As of JuneSeptember 30, 2023, our fixed maturity securities portfolio, which was 96% investment grade, comprised 76%75% of our total invested assets and cash.
146
Table of Contents
Derivatives
As of JuneSeptember 30, 2023, $1.4$1.3 billion 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 JuneSeptember 30, 2023, we posted initial margin of $106$92 million to our clearing agents, which represented $53$46 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 JuneSeptember 30, 2023, $10.6$11.0 billion notional of our derivatives portfolio was in bilateral
over-the-counter
derivative transactions pursuant to which we have posted aggregate independent amounts of $475$477 million and are holding collateral from counterparties in the amount of $25$15 million.
In July 2017, the United Kingdom Financial Conduct Authority announced its intention to transition away from London Interbank Offered Rate (“LIBOR”), with its full elimination to occur after 2021. The LIBOR tenors, such as the three-month LIBOR, had various
phase-out
dates with the last committed publication date of June 30, 2023. In December 2022, the Board of Governors of the Federal Reserve System adopted a final rule, which became effective on February 27, 2023. The final rule establishesestablished benchmark rates, based on the Secured Overnight Financing Rate (“SOFR”), to replace LIBOR after its elimination on June 30, 2023. 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
one-,
three- or
six-month
rate available for LIBOR.
Since the initial announcement, we have terminated our LIBOR-based swaps and entered into alternative rate swaps. In addition, the designated SOFR benchmark rate will replacereplaced the current contractual three-month LIBOR rate applied to Genworth Holdings’ junior subordinated notes due in 2066 subsequent toNotes during the secondthird quarter of 2023. See “—Liquidity and Capital Resources—Capital resources and financing activities” for additional information. We do not expect a material adverse impact on our results of operations or financial condition from the transition away from LIBOR.
146
Table of Contents
Investment results
The following tables set 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)
 
   
2023
   
2022
   
2023 vs. 2022
 
(Amounts in millions)
  
Yield
  
Amount
   
Yield
  
Amount
   
Yield
  
Amount
 
Fixed maturity securities—taxable
   4.5%  $567    4.5%  $578    —  %  $(11) 
Fixed maturity securities—non-taxable
   4.9%   1    3.6%   1    1.3%   —   
Equity securities
   3.2%   3    3.4%   2    (0.2)%   1 
Commercial mortgage loans
   4.4%   75    4.5%   78    (0.1)%   (3) 
Policy loans
   9.8%   54    9.7%   51    0.1%   3 
Limited partnerships
(1)
   2.7%   17    6.2%   32    (3.5)%   (15) 
Other invested assets
(2)
   50.7%   70    62.6%   66    (11.9)%   4 
Cash, cash equivalents, restricted cash and short-term investments
   4.5%   22    0.3%   1    4.2%   21 
   
 
 
    
 
 
    
 
 
 
Gross investment income before expenses and fees
   5.0%   809    4.9%   809    0.1%   —   
Expenses and fees
   (0.1)%   (24)    (0.1)%   (22)    —  %   (2) 
   
 
 
    
 
 
    
 
 
 
Net investment income
   4.9%  $785    4.8%  $787    0.1%  $(2) 
   
 
 
    
 
 
    
 
 
 
Average invested assets and cash
 
 $64,646    $65,150    $(504) 
   
 
 
    
 
 
    
 
 
 
(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.
  
Six months ended June 30,
   
Increase (decrease)
   
Three months ended September 30,
 
Increase (decrease)
 
  
2023
   
2022
   
2023 vs. 2022
   
2023
 
2022
 
2023 vs. 2022
 
(Amounts in millions)
  
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
   
Yield
 
Amount
 
Yield
 
Amount
 
Yield
 
Amount
 
Fixed maturity securities—taxable
   4.5%  $1,128    4.5%  $1,158    —  %  $(30)    4.5%  $559   4.5%  $576   —  %  $(17) 
Fixed maturity securities—non-taxable
   4.8%   2    3.6%   2    1.2%   —      5.6%   1   7.1%   2   (1.5)%   (1) 
Equity securities
   2.8%   5    3.6%   4    (0.8)%   1    1.1%   1   4.6%   3   (3.5)%   (2) 
Commercial mortgage loans
   4.4%   151    4.6%   159    (0.2)%   (8)    4.5%   76   4.6%   81   (0.1)%   (5) 
Policy loans
   10.0%   109    9.7%   101    0.3%   8    10.3%   58   10.2%   55   0.1%   3 
Limited partnerships
(1)
   3.7%   45    3.9%   39    (0.2)%   6    4.7%   31   7.0%   38   (2.3)%   (7) 
Other invested assets
(2)
   51.2%   138    63.2%   129    (12.0)%   9    48.3%   69   57.0%   67   (8.7)%   2 
Cash, cash equivalents, restricted cash and short-term
         
investments
   4.2%   40    0.1%   1    4.1%   39 
Cash, cash equivalents, restricted cash and short-term investments
   5.3%   28   1.7%   7   3.6%   21 
   
 
    
 
    
 
    
 
   
 
   
 
 
Gross investment income before expenses and fees
   5.0%   1,618    4.9%   1,593    0.1%   25    5.1%   823   5.1%   829   —  %   (6) 
Expenses and fees
   (0.1)%   (46)    (0.1)%   (42)    —  %   (4)    (0.1)%   (22)   (0.1)%   (21)   —  %   (1) 
   
 
    
 
    
 
    
 
   
 
   
 
 
Net investment income
   4.9%  $1,572    4.8%  $1,551    0.1%  $21    5.0%  $801   5.0%  $808   —  %  $(7) 
   
 
    
 
    
 
    
 
   
 
   
 
 
Average invested assets and cash
Average invested assets and cash
 
 $64,747    $65,288    $(541)    $64,622   $65,033   $(411) 
   
 
    
 
    
 
    
 
   
 
   
 
 
 
(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.
 
147
Table of Contents
   
Nine months ended September 30,
  
Increase (decrease)
 
   
2023
  
2022
  
2023 vs. 2022
 
(Amounts in millions)
  
Yield
  
Amount
  
Yield
  
Amount
  
Yield
  
Amount
 
Fixed maturity securities—taxable
   4.5%  $1,687   4.5%  $1,734   —  %  $(47) 
Fixed maturity
securities—non-taxable
   5.1%   3   4.8%   4   0.3%   (1) 
Equity securities
   2.2%   6   3.9%   7   (1.7)%   (1) 
Commercial mortgage loans
   4.4%   227   4.6%   240   (0.2)%   (13) 
Policy loans
   10.1%   167   9.9%   156   0.2%   11 
Limited partnerships
(1)
   4.0%   76   5.0%   77   (1.0)%   (1) 
Other invested assets
(2)
   50.3%   207   60.9%   196   (10.6)%   11 
Cash, cash equivalents, restricted cash and short-term investments
   4.7%   68   0.7%   8   4.0%   60 
   
 
 
   
 
 
   
 
 
 
Gross investment income before expenses and fees
   5.0%   2,441   4.9%   2,422   0.1%   19 
Expenses and fees
   (0.1)%   (68)   (0.1)%   (63)   —  %   (5) 
   
 
 
   
 
 
   
 
 
 
Net investment income
   4.9%  $2,373   4.8%  $2,359   0.1%  $14 
   
 
 
   
 
 
   
 
 
 
Average invested assets and cash
   $64,695   $65,214   $(519) 
   
 
 
   
 
 
   
 
 
 
(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.
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 adjustments.
For the three months ended JuneSeptember 30, 2023, gross annualized weighted-average investment yields increased from relativelywere unchanged as lower investment income onwas offset by lower average invested assets. Net investment income included $15 million of lower limited partnership income, $13$16 million of lower income related to inflation-driven volatility on TIPS and $7 million of lower bond calls and commercial mortgage loan prepayments, partially offset by $7 million of higher income from bank loans in the current year.limited partnership income. We also experienced higher returns on our short-term investments mainly due to higher interest rates in the current year.
For the sixnine months ended JuneSeptember 30, 2023, gross annualized weighted-average investment yields increased from higher investment income on lower average invested assets. Net investment income included higher returns on our short-term investments mainly due to higher interest rates as well as $14and $15 million of higher income from bank loans, and $6 million of higher limited partnership income, partially offset by $25$41 million of lower income related to inflation-driven volatility on TIPS and $15$20 million of lower bond calls and commercial mortgage loan prepayments.
148
Table of 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
September 30,
   
Nine months ended
September 30,
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
   
2023
   
2022
   
2023
   
2022
 
Realized investment gains (losses):
                
Available-for-sale fixed maturity securities:
                
Realized gains
  $18   $5   $21   $15   $5   $11   $26   $26 
Realized losses
   (48)    (9)    (67)    (27)    (16)    (38)    (83)    (65) 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Net realized gains (losses) on available-for-sale fixed maturity securities
   (30)    (4)    (46)    (12)    (11)    (27)    (57)    (39) 
Net realized gains (losses) on equity securities sold
   (1)    —      (1)    —      —      —      (1)    —   
Net realized gains (losses) on limited partnerships
   —      —      —      —      —      —      —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Total net realized investment gains (losses)
   (31)    (4)    (47)    (12)    (11)    (27)    (58)    (39) 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Net change in allowance for credit losses on available-for-sale fixed maturity securities
   11    —      (4)    —      (2)    —      (6)    —   
Write-down of available-for-sale fixed maturity securities
   (1)    —      (1)    (2)    —      —      (1)    (2) 
Net unrealized gains (losses) on equity securities still held
   21    (26)    32    (32)    (12)    (14)    20    (46) 
Net unrealized gains (losses) on limited partnerships
   40    24    40    59    14    (24)    54    35 
Commercial mortgage loans
   —      2    (2)    3    (1)    —      (3)    3 
Derivative instruments
   (1)    18    11    37    (28)    7    (17)    44 
Other
   —      5    (1)    8    (3)    —      (4)    8 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Net investment gains (losses)
  $39   $19   $28   $61   $(43)   $(58)   $(15)   $3 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Three Months Ended JuneSeptember 30, 2023 Compared to Three Months Ended JuneSeptember 30, 2022
 
We recorded $26$16 million of higherlower net losses related to the sale of
available-for-sale
fixed maturity securities in the current year. The three months ended JuneSeptember 30, 20232022 included net$38 million of realized losses onprimarily driven by sales related to regional bank exposure management, including a $15 million realized loss related to the sale of the First Republic Bank U.S. corporate bonds, as well as portfolio repositioning. In connection with the
securities to manage asset exposure.
 
148
Table of Contents
sales, we recorded a reduction to the allowance for credit losses on the associated securities of $11 million, including $6 million related to First Republic Bank, during the three months ended June 30, 2023.
We recorded net unrealized gains on equity securities of $21 million during the three months ended June 30, 2023 compared to net unrealized losses of $26 million during the three months ended June 30, 2022 driven by favorable equity market performance in the current year compared to unfavorable performance in the prior year. The three months ended JuneSeptember 30, 2023 included $16$14 million of higher net unrealized gains on limited partnerships driven by morefrom favorable private equity market performance compared to $24 million of net unrealized losses during the three months ended September 30, 2022 from unfavorable private equity market performance.
 
Net investment losses related to derivatives of $28 million during the three months ended September 30, 2023 were primarily associated with losses from forward bond purchase commitments and on hedging programs that support our fixed indexed annuity products.
Net investment gains related to derivatives of $18$7 million induring the prior yearthree months ended September 30, 2022 were primarily associated with gains on derivatives used to protect statutory surplus from equity market fluctuations and gains on hedging programs that support our indexed universal life insurance products, partially offset by losses on hedging programs that support our fixed indexed annuity products.
SixNine Months Ended JuneSeptember 30, 2023 Compared to SixNine Months Ended JuneSeptember 30, 2022
 
We recorded $34$18 million of higher net losses related to the sale of
available-for-sale
fixed maturity securities in the current year. The sixnine months ended JuneSeptember 30, 2023 included net losses on sales related to portfolio repositioning and liquidity management, as well as regional bank exposure management, including a $15 million loss related to the sale of the First Republic Bank U.S. corporate bonds. Net losses for the sixThe nine months ended JuneSeptember 30, 2022 were principally related to U.S. corporate securities sold to optimize cash at Genworth Holdings.
included net losses primarily
 
149
Table of Contents
from sales of U.S. corporate securities to manage asset exposure and to optimize cash at Genworth Holdings.
We recorded net unrealized gains on equity securities of $32$20 million during the sixnine months ended JuneSeptember 30, 2023 compared to net unrealized losses of $32$46 million during the sixnine months ended JuneSeptember 30, 2022 driven by favorable equity market performance in the current year compared to unfavorable performance in the prior year. The sixnine months ended JuneSeptember 30, 2023 included $19 million of lowerhigher net unrealized gains on limited partnerships driven by lessmore favorable private equity market performance.performance in the current year. We also recorded an allowance for credit losses on
available-for-sale
fixed maturity securities of $4$6 million in the current year.
 
We had $26 million of lower net gainsNet investment losses related to derivatives of $17 million during the nine months ended September 30, 2023 were primarily associated with losses from forward bond purchase commitments and on hedging programs that support our fixed indexed annuity andproducts, partially offset by gains on hedging programs that support our indexed universal life insurance products inand forward starting interest rate swap gains.
Net investment gains related to derivatives of $44 million during the current year, as well as gains onnine months ended September 30, 2022 were primarily associated with derivatives used to protect statutory surplus from equity market fluctuations in the prior yearand hedging programs that did not recur, partially offset by higher forward starting swap gains.support our indexed universal life insurance products.
Investment portfolio
The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:
 
  
June 30, 2023
 
December 31,
2022
   
September 30, 2023
 
December 31, 2022
 
(Amounts in millions)
  
Carrying

value
   
% of

total
 
Carrying

value
   
% of

total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Available-for-sale fixed maturity securities:
              
Public
  $31,665    52%  $31,757    53%   $30,004    51%  $31,757    53% 
Private
   14,405    24   14,826    24    13,964    24   14,826    24 
Equity securities
   378    1   319    1    363    1   319    1 
Commercial mortgage loans, net
   6,852    11   7,010    11    6,793    11   7,010    11 
Policy loans
   2,270    4   2,139    3    2,233    4   2,139    3 
Limited partnerships
   2,585    4   2,331    4    2,699    5   2,331    4 
Other invested assets
   648    1   566    1    645    1   566    1 
Cash, cash equivalents and restricted cash
   2,173    3   1,799    3    1,993    3   1,799    3 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total cash, cash equivalents and invested assets
  $60,976    100%  $60,747    100%   $58,694    100%  $60,747    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
149
Table of Contents
For a discussion of the change in cash, cash equivalents and invested assets, see the comparison for thisthese line itemitems under “—Consolidated Balance Sheets.” See note 5 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, limited partnerships, derivatives, embedded derivatives 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 JuneSeptember 30, 2023, 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 7 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to fair value.
150
Table of Contents
Fixed maturity securities
As of JuneSeptember 30, 2023, 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
   
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
  $3,459   $97   $(167)  $—    $3,389   $3,498   $6   $(392)  $—    $3,112 
State and political subdivisions
   2,611    21    (289)   —     2,343    2,566    5    (407)   —     2,164 
Non-U.S. government
   708    15    (98)   —     625    699    9    (125)   —     583 
U.S. corporate:
                
Utilities
   4,339    49    (424)   —     3,964    4,454    13    (611)   —     3,856 
Energy
   2,414    36    (202)   —     2,248    2,454    18    (265)   —     2,207 
Finance and insurance
   7,915    54    (843)   —     7,126    7,920    22    (1,069)   —     6,873 
Consumer—non-cyclical
   4,663    94    (347)   —     4,410    4,632    32    (538)   —     4,126 
Technology and communications
   3,196    49    (311)   —     2,934    3,212    26    (444)   —     2,794 
Industrial
   1,326    15    (117)   —     1,224    1,309    8    (168)   —     1,149 
Capital goods
   2,225    44    (162)   —     2,107    2,255    19    (235)   —     2,039 
Consumer—cyclical
   1,737    16    (139)   —     1,614    1,736    6    (194)   —     1,548 
Transportation
   1,171    33    (87)   —     1,117    1,181    16    (131)   —     1,066 
Other
   311    4    (16)   —     299    320    1    (23)   —     298 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
Total U.S. corporate
   29,297    394    (2,648)   —     27,043    29,473    161    (3,678)   —     25,956 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
Non-U.S. corporate:
                
Utilities
   813    —      (78)   —     735    809    —      (90)   —     719 
Energy
   1,043    21    (62)   —     1,002    1,054    10    (86)   —     978 
Finance and insurance
   2,054    33    (188)   —     1,899    2,045    22    (223)   —     1,844 
Consumer—non-cyclical
   666    3    (77)   —     592    688    1    (107)   —     582 
Technology and communications
   977    7    (93)   —     891    974    1    (135)   —     840 
Industrial
   838    9    (65)   —     782    853    2    (86)   —     769 
Capital goods
   602    4    (51)   —     555    593    1    (70)   —     524 
Consumer—cyclical
   239    1    (23)   —     217    241    —      (30)   —     211 
Transportation
   360    12    (26)   —     346    359    7    (32)   —     334 
Other
   859    13    (53)   —     819    819    3    (69)   —     753 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
Total non-U.S. corporate
   8,451    103    (716)   —     7,838    8,435    47    (928)   —     7,554 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
Residential mortgage-backed
   997    4    (67)   —     934    974    1    (84)   —     891 
Commercial mortgage-backed
   1,990    1    (297)   (4)   1,690    1,868    1    (360)   (6)   1,503 
Other asset-backed
   2,351    1    (144)   —     2,208    2,342    1    (138)   —     2,205 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
Total available-for-sale fixed maturity securities
  $49,864   $636   $(4,426)  $(4)  $46,070   $49,855   $231   $(6,112)  $(6)  $43,968 
  
 
   
 
   
 
  
 
  
 
   
 
   
 
   
 
  
 
  
 
 
 
150151
Table of Contents
As of December 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
   
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
  $3,446   $86   $(191)  $—     $3,341   $3,446   $86   $(191)  $—     $3,341 
State and political subdivisions
   2,726    19    (346)   —      2,399    2,726    19    (346)   —      2,399 
Non-U.S. government
   731    15    (101)   —      645    731    15    (101)   —      645 
U.S. corporate:
                       
Utilities
   4,295    50    (447)   —      3,898    4,295    50    (447)   —      3,898 
Energy
   2,450    33    (221)   —      2,262    2,450    33    (221)   —      2,262 
Finance and insurance
   8,005    59    (871)   —      7,193    8,005    59    (871)   —      7,193 
Consumer—non-cyclical
   4,776    84    (403)   —      4,457    4,776    84    (403)   —      4,457 
Technology and communications
   3,265    43    (361)   —      2,947    3,265    43    (361)   —      2,947 
Industrial
   1,312    15    (130)   —      1,197    1,312    15    (130)   —      1,197 
Capital goods
   2,290    41    (193)   —      2,138    2,290    41    (193)   —      2,138 
Consumer—cyclical
   1,758    14    (155)   —      1,617    1,758    14    (155)   —      1,617 
Transportation
   1,165    32    (97)   —      1,100    1,165    32    (97)   —      1,100 
Other
   325    3    (18)   —      310    325    3    (18)   —      310 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total U.S. corporate
   29,641    374    (2,896)   —      27,119    29,641    374    (2,896)   —      27,119 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Non-U.S. corporate:
                       
Utilities
   817    —      (77)   —      740    817    —      (77)   —      740 
Energy
   1,009    19    (68)   —      960    1,009    19    (68)   —      960 
Finance and insurance
   2,124    30    (208)   —      1,946    2,124    30    (208)   —      1,946 
Consumer—non-cyclical
   655    1    (90)   —      566    655    1    (90)   —      566 
Technology and communications
   997    4    (107)   —      894    997    4    (107)   —      894 
Industrial
   880    8    (70)   —      818    880    8    (70)   —      818 
Capital goods
   606    3    (63)   —      546    606    3    (63)   —      546 
Consumer—cyclical
   308    —      (32)   —      276    308    —      (32)   —      276 
Transportation
   392    12    (29)   —      375    392    12    (29)   —      375 
Other
   932    15    (58)   —      889    932    15    (58)   —      889 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total non-U.S. corporate
   8,720    92    (802)   —      8,010    8,720    92    (802)   —      8,010 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Residential mortgage-backed
   1,059    7    (71)   —      995    1,059    7    (71)   —      995 
Commercial mortgage-backed
   2,183    2    (277)   —      1,908    2,183    2    (277)   —      1,908 
Other asset-backed
   2,328    1    (163)   —      2,166    2,328    1    (163)   —      2,166 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Total available-for-sale fixed maturity securities
  $50,834   $596   $(4,847)  $—     $46,583   $50,834   $596   $(4,847)  $—     $46,583 
  
 
   
 
   
 
  
 
   
 
   
 
   
 
   
 
  
 
   
 
 
Fixed maturity securities decreased $0.5$2.6 billion compared to December 31, 2022 primarily from net sales and maturities, partially offset by a decreasean increase in net unrealized losses related to a decreasean increase in long-term interest rates and from net sales and maturities in the current year.
 
151152
Table of Contents
Other invested assets
The following table sets forth the carrying values of our other invested assets as of the dates indicated:
 
  
June 30, 2023
 
December 31,
2022
   
September 30, 2023
 
December 31, 2022
 
(Amounts in millions)
  
Carrying

value
   
% of

total
 
Carrying

value
   
% of

total
   
Carrying value
   
% of total
 
Carrying value
   
% of total
 
Bank loan investments
  $518    80%  $467    82%   $530    82%  $467    82% 
Derivatives
   61    9   50    9    38    6   50    9 
Short-term investments
   23    4   3    1    30    5   3    1 
Other investments
   46    7   46    8    47    7   46    8 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total other invested assets
  $648    100%  $566    100%   $645    100%  $566    100% 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Bank loan investments increased from funding of additional investments, partially offset by principal repayments.payments. Short-term investments increased from net purchases.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 fixed indexed annuity 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,
2022
   
Additions
   
Maturities/
terminations
 
June 30,
2023
   
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
 
September 30,
2023
 
Derivatives designated as hedges
                  
Cash flow hedges:
                  
Interest rate swaps
   Notional   $8,542   $927   $(115)  $9,354    Notional   $8,542   $1,200   $(261)  $9,481 
Foreign currency swaps
   Notional    144    —      (13)   131    Notional    144    —      (13)   131 
Forward bond purchase commitments
   Notional    —      75    —     75 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total cash flow hedges
     8,686    927    (128)   9,485      8,686    1,275    (274)   9,687 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives designated as hedges
     8,686    927    (128)   9,485      8,686    1,275    (274)   9,687 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Derivatives not designated as hedges
                  
Equity index options
   Notional    936    339    (466)   809    Notional    936    513    (682)   767 
Financial futures
   Notional    1,403    2,889    (2,916)   1,376    Notional    1,403    4,216    (4,351)   1,268 
Forward bond purchase commitments
   Notional    —      275    —     275    Notional    —      500    —     500 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives not designated as hedges
     2,339    3,503    (3,382)   2,460      2,339    5,229    (5,033)   2,535 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
Total derivatives
    $11,025   $4,430   $(3,510)  $11,945     $11,025   $6,504   $(5,307)  $12,222 
    
 
   
 
   
 
  
 
     
 
   
 
   
 
  
 
 
(Number of policies)
  
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
 
June 30,
2023
   
Measurement
   
December 31,
2022
   
Additions
   
Maturities/
terminations
 
September 30,
2023
 
Derivatives not designated as hedges
                  
Fixed indexed annuity embedded derivatives
   Policies    7,315    —      (848)   6,467    Policies    7,315    —      (1,177)   6,138 
Indexed universal life embedded derivatives
   Policies    771    —      (15)   756    Policies    771    —      (22)   749 
The increase in the notional value of derivatives was primarily attributable to the addition of interest rate swaps and forward bond purchase commitments that support our long-term care insurance business, partially offset by a decrease in equity index options used to support our fixed indexed annuity products.
153
Table of Contents
The number of policies related to ourwith embedded derivatives decreased as these products are no longer being offered and continue to runoff.
152
Table of Contents
Critical Accounting Estimates
In applying our accounting policies in the preparation of financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect amounts reported in our unaudited condensed consolidated financial statements. As a result of the adoption of LDTI on January 1, 2023, we made significant updates to the estimates and assumptions used to measure our insurance assets and liabilities for long-duration insurance contracts. In accordance with the new guidance, these updates were applied as of January 1, 2021 and therefore the effects of adoption were applied for the years ended December 31, 2022 and 2021.
For a discussion of updates to significant accounting policies related to our insurance assets and liabilities associated with long-duration insurance contracts, see note 2 to our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.” The critical accounting estimates below have changed as a result of LDTI. Critical accounting estimates not impacted by the adoption of LDTI are described in Item 7 of our 2022 Annual Report on Form
10-K.
Future policy benefits.
The liability for future policy benefits is equal to the present value of expected future benefits and expenses, less the present value of expected future net premiums based on assumptions including projected interest rates, health care experience, policyholder persistency or lapses, insured mortality, insured morbidity and expenses. See notes 2 and 10 to our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to the impact of changes in inputs and assumptions on the measurement of the liability for future policy benefits.
Market risk benefits.
Market risk benefits are contracts or contract features that both provide protection to the contractholder from capital market risk while exposing the insurer to other-than-nominal capital market risk. Market risk benefits include certain contract features on fixed and variable annuity products that provide minimum guarantees, in addition to the policyholder account balance, such as guaranteed minimum death benefits, guaranteed minimum withdrawal benefits and guaranteed payout annuity floor benefits. See notes 7 and 13 to our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to the significant inputs, judgements,judgments, valuation methods and assumptions, as well as the effects of changes in inputs and assumptions on the measurement of our net market risk benefit liabilities.
Deferred acquisition costs
. As a result of the adoption of LDTI, we no longer consider DAC to be a critical accounting estimate. The measurement and amortization methodology related to DAC is no longer subject to the same degree of variability and DAC is no longer subject to recoverability testing.
Consolidated Balance Sheets
Total assets
. Total assets increased $130decreased $4,248 million from $89,714 million as of December 31, 2022 to $89,844$85,466 million as of JuneSeptember 30, 2023.
 
Invested assets decreased $145$2,247 million primarily attributable to a decreasedecreases of $513$2,615 million in fixed maturity securities and $217 million in commercial mortgage loans, partially offset by an increaseincreases of $254$368 million in limited partnerships and $94 million in policy loans in the current year. The decrease in fixed maturity securities was predominantly related to higher interest rates reducing the fair value of our fixed maturity investment portfolio and from net sales and maturities partially offset by an increase in the fair value due to lower interest rates in the current year. The decrease in commercial mortgage loans was mostly due to payments outpacing originations. Limited partnerships increased largely from capital calls in the current year. The decrease in invested assets was also driven by commercial mortgage loan payments outpacing originations, partially offset byyear, and policy loans increased as new policy loans outpacingoutpaced payoffs in our corporate-owned life insurance productproducts in the current year.
 
154
Table of Contents
Cash and cash equivalents increased $374$194 million primarily from net sales and maturities of fixed maturity securities and repaymentspayments of commercial mortgage loans outpacing originations, partially offset by net withdrawals from our investment contracts and repurchases of Genworth Financial’s common stock in the current year.
 
153
Table of Contents
Deferred acquisition costs decreased $115$169 million primarily attributable to amortization in our life insurancelong-term care and long-term carelife insurance products in the current year.
 
Reinsurance recoverable decreased $1,401 million largely due to an increase in the
single-A
interest rate used to discount the liability for future policy benefits and related reinsurance recoverables in the current year.
Deferred tax asset decreased $403 million principally from a reduction in insurance reserves due to an increase in the
single-A
interest rate, the utilization of foreign tax credits and the recognition of an incremental valuation allowance in the current year. Given the change in our unrealized gains (losses) on our fixed maturity securities and forward starting swaps due to rising interest rates and the corresponding reduction in the amount of unrealized capital gains expected to be available in the future to offset our capital loss carryforwards and other capital deferred tax assets, we recorded an additional valuation allowance of $150 million in the third quarter of 2023 through accumulated other comprehensive income (loss) related to deferred tax assets that would produce capital losses. These decreases were partially offset by the change in unrealized gains (losses) on investments and derivatives due to rising interest rates in the current year.
Separate account assets (and liabilities) increased $116decreased $173 million primarily due to surrenders, withdrawals and benefit payments, partially offset by favorable equity market performance partially offset by surrenders and withdrawals in the current year.
Total liabilities
. Total liabilities increased $249decreased $4,740 million from $81,328 million as of December 31, 2022 to $81,577$76,588 million as of JuneSeptember 30, 2023.
 
The liability for future policy benefits increased $1,036decreased $3,667 million primarily from a decreasean increase in the
single-A
interest rate used to discount the liability for future policy benefits and related reinsurance recoverables and from benefit payments outpacing collected premiums, partially offset by aging of our long-term care insurance
in-force
block, including higher interest accretion, partially offset by benefit payments outpacing collected premiums.accretion. Current year benefit payments were primarily driven by higher new claims and policyholder benefit utilization in our long-term care insurance products, as well as benefit payments in our term life insurance and single premium immediate annuity products.
 
Policyholder account balances decreased $642$974 million largely driven byprimarily from product charges, surrenders and benefit payments in our single premium deferred annuity products and our universal and term universal life insurance products in the current year.
 
Market risk benefit liabilities decreased $82$169 million mostly related to higher interest rates and favorable equity market performance, partially offset by attributed fees collected in our variable annuity products in the current year.
 
Other liabilities decreased $80increased $351 million largelymostly driven by lowerhigher derivative liability valuations due to a decreasean increase in interest rates, and frompartially offset by lower employee payroll accruals and from the derecognition of reinsurance payables recorded in connection with a recapture of certain reinsurance agreements in our life insurance products in the current year.
Total equity
. Total equity decreased $119increased $492 million from $8,386 million as of December 31, 2022 to $8,267$8,878 million as of JuneSeptember 30, 2023.
 
We reported net income available to Genworth Financial, Inc.’s common stockholders of $259$288 million for the sixnine months ended JuneSeptember 30, 2023.
 
155
Table of Contents
Unrealized gains (losses) on investments increased $351and derivatives qualifying as hedges decreased $1,371 million and $473 million, respectively, primarily from a decreasean increase in interest rates in the current year, resulting in an increase to total equity.
Change in the discount rate used to measure future policy benefits decreased $561 million largely attributable to a decrease in the single-A interest rate used to discount the liability for future policy benefits and related reinsurance recoverables in the current year, resulting in a decrease to total equity.
 
Change in the discount rate used to measure future policy benefits increased $2,229 million largely attributable to an increase in the
single-A
interest rate used to discount the liability for future policy benefits and related reinsurance recoverables (net of deferred taxes) in the current year, resulting in an increase to total equity.
Treasury stock increased $183$264 million primarily due to the repurchase of Genworth Financial’s common stock, at cost, including excise taxes and other costs paid in connection with acquiring the shares, resulting in a decrease to total equity in the current year.
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.
154
Table of Contents
Overview of cash flows—Genworth and subsidiaries
The following table sets forth our unaudited condensed consolidated cash flows for the sixnine months ended JuneSeptember 30:
 
(Amounts in millions)
  
2023
   
2022
   
2023
   
2022
 
Net cash from operating activities
  $275   $337   $450   $645 
Net cash from investing activities
   917    535    913    452 
Net cash used by financing activities
   (818)    (719)    (1,170)    (1,107) 
  
 
   
 
   
 
   
 
 
Net increase in cash and cash equivalents
  $374   $153 
Net increase (decrease) in cash and cash equivalents before foreign exchange effect
  $193   $(10) 
  
 
   
 
   
 
   
 
 
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 and claims 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, claims 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 deposits to, and redemptions and benefit payments on, universal life insurance and investment contracts; the issuance of debt and equity securities; the repayment or repurchase of borrowings; the repurchase of common stock presented as treasury stock; and other capital transactions.
We had lower cash inflows from operating activities in the current year primarily from higher benefit payments in our long-term care insurance business, partially offset by net cash disbursements in the prior year in connection with the return of cash collateral received from counterparties under our derivative contracts.
We had higher cash inflows from investing activities mainly due to repaymentspayments of commercial mortgage loans outpacing originations in the current year compared to originations outpacing repaymentspayments in the prior year, partially offset by lower returns of capital from limited partnerships in the current year.
We had higher cash outflows from financing activities in the current year principally from higher repurchases of Genworth Financial’s common stock and higher net withdrawals from our investment contracts,
156
Table of Contents
partially offset by lower repurchases of long-term debt and a prior year settlement payment related to a Tax Matters Agreement with General Electric Company that did not recur. In the current year, Genworth Holdings repurchased $11 million principal amount of its senior notes due in 2034 Notes compared to the repurchase of $130 million and early redemption of $152 million principal amount of its senior notes due in 2024 Notes in the prior year.
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. Accordingly, 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 and proceeds from borrowings or securities issuances. Our liquidity at the holding company level is
155
Table of Contents
highly dependent on the performance of Enact Holdings and its ability to pay timely dividends and other forms of capital returns to Genworth Holdings as anticipated. Although the business performance and financial resultsAs of December 31, 2022, our principal U.S. life insurance subsidiaries have improved significantly, as of December 31, 2022, they had negative unassigned surplus of approximately $849 million 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 subject to and may be limited by the interests of Enact Holdings, including but not limited to, its 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.
The primary uses of funds at Genworth Financial and Genworth Holdings include payment of principal, interest and other expenses on current and any future borrowings or other obligations, 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), payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities, repurchases of Genworth Financial’s common stock and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.
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. On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under its existing share repurchase program. Pursuant to the program, during the sixnine months ended JuneSeptember 30, 2023, Genworth Financial repurchased 31,771,97245,839,750 shares of its common stock at an average price of $5.67$5.68 per share for a total of $180$260 million, excluding excise taxes and other costs paid in connection with acquiring the shares. Genworth Financial also authorized share repurchases through a Rule
10b5-1
trading plan under which 3,703,0151,717,825 shares of its common stock were repurchased in JulyOctober 2023 at an average price of $5.40$5.82 per share for a total cost of $20$10 million before excise taxes. On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350taxes, leaving approximately $366 million of share repurchases under its existing share repurchase program, increasing the remaining authorized amount remaining under the program to approximately $436 million.program. Further repurchases under the authorized program will continue to be funded from holding company capital, as well as future cash flow generation, including expected future capital returns from Genworth Financial’s ownership in Enact Holdings. 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, including through
Rule 10b5-1
trading plans. The timing and number of future shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and
157
Table of Contents
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 future strategic investments in CareScout and returning capital to Genworth Financial’s shareholders through share repurchases (as discussed above). As of June 30, 2023, Genworth Holdings had outstanding $876 million principal of long-term debt. 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 expect to provide capital to CareScout to help advance our senior care growth initiatives through
fee-based
services, advice, consulting and other products and services related to the needs of elderly Americans, as well as their caregivers and families. Our initial focus is on care advice and service offerings that help consumers navigate the complex caregiving challenges in the market, which is less capital intensive than insurance product offerings.
As of JuneSeptember 30, 2023, Genworth Holdings had $222outstanding $876 million principal of long-term debt. On October 25, 2023, Genworth Holdings completed a bondholder consent solicitation that amended the Replacement Capital Covenant entered into for the benefit of the holders of its 2034 Notes that limited its ability to repurchase its 2066 Notes. The amendment permits certain repayments, redemptions or repurchases of Genworth Holdings’ 2066 Notes, as further described below. In connection with this transaction, Genworth Holdings repurchased approximately $14 million principal of its 2034 Notes. 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.
As of September 30, 2023, Genworth Holdings had $232 million of unrestricted cash and cash equivalents, with no debt maturities due until June 2034. We believe Genworth Holdings’ unrestricted cash and cash equivalents provide sufficient liquidity to meet its financial obligations over the next twelve months. However, in the third quarter of 2023, we anticipate
156
Tablemade a federal tax payment based on our projection of Contents
paying federal taxes likely starting later in 2023 due to our current projected taxable income and the utilization of our remaining foreign tax credits; therefore,credits, and we expect the amount of intercompany cash tax payments retained by Genworth Holdings from its subsidiaries to be lower starting in 2024 as compared to the amounts received during 2022 and 2023. We also expect Genworth Holdings’ liquidity to be significantly impacted by the amounts and timing of future dividends and other forms of capital returns from Enact Holdings, which will be influenced by economic, regulatory factors and other conditions that affect its business.
We actively monitor our liquidity position (most notably at Genworth Holdings), liquidity generation options and the credit markets given changing market conditions. For example, although interest rates rose dramatically during 2022 and 2023, we do not expect a significant impact on our liquidity given the reduction in Genworth Holdings’ debt which willand corresponding decrease our futurein debt service costs. However, we are considering different options to protect against rising interest rates, including entering into interest rate swaps that would hedge the floating rate portion of our 2066 debt. Although our overall exposure to banking sector disruptions has been limited to date, to the extent banks and other financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, including from higher interest rates and the corresponding negative impact on investment spreads, it could negatively affect our liquidity or our investment portfolio, particularly if it hinders our ability to access or monetize our existing cash, cash equivalents and investments. Genworth Holdings’ cash management target is to maintain a cash buffer of two 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 cash 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. In addition to its quarterly cash dividend program, on November 1, 2022, Enact Holdings announced the approval by its board of directors of a share repurchase program under which Enact Holdings may repurchase up to $75 million of its outstanding common stock, and on August 1, 2023, announced the authorization of an additional $100 million of common stock repurchases under a new share repurchase program. Genworth Holdings agreed to participate in order to maintain its overall ownership at its current level. As the majority shareholder, Genworth Holdings received $91$117 million of capital returns from Enact Holdings during the first half ofnine months ended September 30, 2023. On AugustNovember 1, 2023, Enact Holdings announced a special cash dividend of $113 million to be paid during the authorizationfourth quarter of a new share repurchase program under which Enact Holdings may repurchase up to an additional $100 million of its common stock. Genworth Holdings has agreed to participate in order to maintain its overall ownership at its current level.2023. The timing and number of future shares repurchased under the share repurchase programprograms will depend on a variety of factors, including Enact Holdings’ stock price and trading volume, and general business and market conditions, among other factors. Future dividends will be subject to quarterly
158
Table of Contents
review and approval by Enact Holdings’ board of directors and Genworth Financial and will also be dependent on a variety of economic, market and business conditions, among other considerations.
Genworth Holdings—changes in liquidity
Genworth Holdings had $222$232 million and $307 million of cash and cash equivalents as of JuneSeptember 30, 2023 and December 31, 2022, respectively. The decrease in Genworth Holdings’ cash and cash equivalents was principally driven by $180$260 million of Genworth Financial’s common stock repurchases and from debt interest payments, partially offset by $91intercompany cash tax payments received from its subsidiaries and $117 million of capital returns from Enact Holdings in the current year, as discussed above.year.
Capital resources and financing activities
Our current capital resource plans do not include any additional debt offerings or minority sales of 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 performance of and outlook for Enact Holdings and the payment of dividends and other returns of capital therefrom.
157
Table of Contents
During the sixnine months ended JuneSeptember 30, 2023, Genworth Holdings repurchased $11 million principal amount of its 6.50% senior notes due in June 2034 Notes for a
pre-tax
gain of $1 million and paid accrued interest thereon.
On October 25, 2023, Genworth Holdings completed a consent solicitation from bondholders representing a majority in principal amount of its 2034 Notes to amend the Replacement Capital Covenant, dated as of November 14, 2006. The amendment permits Genworth Holdings to repay, redeem or repurchase $2,000 principal amount of its 2066 Notes for each $1,000 principal amount of its 2034 Notes repaid, redeemed or repurchased. In connection with this transaction, Genworth Holdings repurchased approximately $14 million principal of its 2034 Notes at prices negotiated with the noteholders below par value.
In December 2022, the Board of Governors of the Federal Reserve System adopted a final rule that became effective on February 27, 2023. The final rule established benchmark rates, based on SOFR, that replaced LIBOR after its elimination on June 30, 2023. Pursuant to the final rule, Genworth Holdings’ floating rate junior subordinated notes due in 2066 Notes, which currently havehad an annual interest rate equal to three-month LIBOR plus 2.0025%, will transitiontransitioned in the third quarter of 2023 to an annual interest rate equal to the three-month Term SOFR Reference Rate, plus a tenor spread adjustment of 0.26161%, plus an additional spread of 2.0025%. We do not expect this change to have a material impact on our interest expense included in net income.results of operations or liquidity.
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. Given the challenging macroeconomic environment during 2022 and through the secondthird quarter of 2023, employee costs were higher driven in part by high wage inflation, the competitive labor market and low labor participation. Additionally, in our long-term care insurance business, we have observed an increase in the cost of care principally attributable to elevated inflation. These inflationary impacts have not had a significant impact on our liquidity to date; however, we have experienced elevated benefit utilization in our long-term care insurance business, which could have a material adverse impact on our liquidity, results of operations and financial condition if it persists. We will continue to monitor macroeconomic trends, including inflation, to help mitigate any potential adverse impacts to our liquidity.
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
159
Table of Contents
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, investment income 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 typically matched with investments having similar duration such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are typically 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 JuneSeptember 30, 2023, our total cash, cash equivalents and invested assets were $61.0$58.7 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 asset classes represented approximately 44%45% of the carrying value of our total cash, cash equivalents and invested assets as of JuneSeptember 30, 2023.
Although our overall exposure to banking sector disruptions has been limited to date, to the extent banks and other financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, including from higher interest rates and the corresponding negative impact on investment spreads, it could negatively affect our liquidity or our investment portfolio, particularly if it hinders our ability to access or monetize our existing cash, cash equivalents and investments.
Off-balance
sheet commitments, guarantees and contractual obligations
As of JuneSeptember 30, 2023, we were committed to fund $1,399$1,408 million in limited partnership investments, $153$136 million of bank loan investments, and $17$12 million in private placement investments. We were not committed to fund anyinvestments and $9 million in commercial mortgage loan investments as of June 30, 2023.
158investments.
Table of Contents
As of JuneSeptember 30, 2023, there have been no material additions or changes to guarantees provided by Genworth Financial and Genworth Holdings or to our contractual obligations as compared to the amounts disclosed within our 2022 Annual Report on Form
10-K
filed on February 28, 2023.
Supplemental Condensed Consolidating Financial Information
Genworth Financial provides a full and unconditional guarantee to the trustee of Genworth Holdings’ outstanding senior and subordinated notes (a registered security(registered securities under the Securities Act of 1933) 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.
Excluding investments in subsidiaries, the assets, liabilities and results of operations of Genworth Financial and Genworth Holdings, on a combined basis, are not material to the consolidated financial position or the consolidated results of operations of Genworth. In addition, none of Genworth Financial’s direct or indirect subsidiaries, other than Genworth Holdings, are issuers or guarantors of any guaranteed securities. Therefore, in accordance with Rule
13-01
of Regulation
S-X,
we are permitted, and we elected, to exclude the summarized financial information for both the issuer and guarantor of the registered securities.
160
Table of Contents
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, equity prices and foreign currency exchange rates. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. We may have additional financial impacts other than changes in estimated fair value, which are beyond the scope of this discussion. There have been no material changes to our market risk exposures since December 31, 2022, except as described below.
As a result of the adoption of new accounting guidance related to long-duration insurance contracts on January 1, 2023 as disclosed in note 2 of our unaudited condensed consolidated financial statements under “Item 1—Financial Statements,” we recognized market risk benefits in our condensed consolidated balance sheets, which are reported at fair value. As the contracts or contract features included in market risk benefits expose the insurer to other-than-nominal capital market risk, we updated our interest rate and equity market sensitivities as of December 31, 2022 to include these contracts. Note that all impacts noted below exclude any effects of deferred taxes.
Sensitivity Analysis
Interest Rate Risk
One means of assessing exposure to interest rate changes is to estimate the potential changes in fair value resulting from a hypothetical increase in interest rates of 100 basis points. We performed a sensitivity analysis on our variable annuity market risk benefits and noted that a 100 basis point increase in interest rates, with all other factors held constant, would result in a decrease in the fair value of the net liability after reinsurance of approximately $120 million as of December 31, 2022.
159
Table of Contents
Equity Market Risk
One means of assessing exposure to changes in equity market prices is to estimate the potential changes in fair value resulting from a hypothetical broad-based decline in equity market prices of 10%. We performed a sensitivity analysis on our variable annuity market risk benefits and noted that a 10% decline in equity market prices, with all other factors held constant, would result in an increase in the fair value of the net liability after reinsurance of approximately $80 million as of December 31, 2022.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of JuneSeptember 30, 2023, 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, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of JuneSeptember 30, 2023 solely because of a material weakness in controls with respect to the accounting for cash payments made to policyholders who elect certain reduced benefit options in connection with certain long-term care insurance legal settlements as part of the adoption of the new accounting guidance for long-duration insurance contracts.2023.
We have determined that, as of the date of this filing, we have fully remediated this material weakness in our internal control over financial reporting with respect to accounting for the legal settlement payments. The remedial actions included:
A review of the terms for the long-term care insurance legal settlements to ensure all elements with financial implications have been properly accounted for under LDTI for all periods presented; and
Execution of controls to validate the assumptions related to legal settlement payments were appropriately
included
in the model for the calculation of the liability for future policy benefits for all periods impacted.
In connection with this Form 10-Q, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as currently in effect, including the remedial actions discussed above, and we have concluded that, as of this date, our disclosure controls and procedures are effective.
In addition, at the time that our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 was filed on May 5, 2023, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2023. Based on the evaluation as of June 30, 2023 referred to above, our management, including our Chief Executive Officer and Chief Financial Officer, re-evaluated the effectiveness of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective as of March 31, 2023, solely for the reason noted above. However, we have concluded that the existence of this material weakness, which has now been remediated, did not result in a material misstatement of the financial statements included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, as initially filed on May 5, 2023.
Changes in Internal Control Over Financial Reporting During the Quarter Ended JuneSeptember 30, 2023
For
During the three months ended September 30, 2023, as previously disclosed in our Quarterly Report on Form 10-Q for the period ended June 30, 2023 (“Second Quarter 2023 Form 10-Q”), we implemented newfully remediated the material weakness in our internal controlscontrol over financial reporting, which arose solely from a change in the accounting treatment related to cash payments made to policyholders in connection with legal settlements under LDTI that we adopted on January 1, 2023 (for which no specific guidance had been published) that resulted in the immaterial correction to our financial statements as a result of the correction
disclosed
described in note 1 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” as discussed above.in our Second Quarter 2023 Form 10-Q.
There have been no other changes in our internal control over financial reporting during the three months ended JuneSeptember 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
160
161
Table of Contents
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
See note 1819 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. Risk Factors
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our 2022 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. ThereAs of September 30, 2023, there have been no material changes to the risk factors set forth in the above-referenced filing as of June 30, 2023. filing.
For additional information regarding the MOVEit Cybersecurity Incident, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Developments and Strategic Highlights.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Common Stock
The following table sets forth information regarding Genworth Financial’s share repurchases during the three months ended JuneSeptember 30, 2023:
 
(Dollar amounts in millions, except share amounts)
 
Total number of
shares purchased
  
Average price
paid per share
  
Total number of shares
purchased as part of
publicly announced
program
  
Approximate dollar
amount of shares
that may yet be
purchased under
the program
(1)
 
April 1, 2023 through April 30, 2023
  9,121,315  $5.48   9,121,315  $168 
May 1, 2023 through May 31, 2023
  11,084,291  $5.41   11,084,291  $108 
June 1, 2023 through June 30, 2023
  341,518  $5.86   341,518  $106 
 
 
 
   
 
 
  
Total
  20,547,124    20,547,124  
 
 
 
   
 
 
  
(Dollar amounts in millions, except share amounts)
 
Total number
of shares
purchased
  
Average price
paid per share
  
Total number
of shares
purchased as
part of publicly
announced
program
  
Approximate
dollar amount of
shares that
may yet be
purchased under
the program
(1)
 
July 1, 2023 through July 31, 2023
  3,703,015  $5.40   3,703,015  $436 
August 1, 2023 through August 31, 2023
  4,424,891  $5.79   4,424,891  $410 
September 1, 2023 through September 30, 2023
  5,939,872  $5.79   5,939,872  $376 
 
 
 
   
 
 
  
Total
  14,067,778    14,067,778  
 
 
 
   
 
 
  
 
(1)
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. On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under the existing program. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, including through Rule
10b5-1
trading plans. The timing and number of shares repurchased under the program will 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. For additional information on the share repurchase program, see “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
Item 5. Other Information
During the three months ended JuneSeptember 30, 2023,
no
directors or officers of Genworth adopted or terminated any contract, instruction or written plan for the purchase or sale of Genworth’s securities intended to satisfy the affirmative defense conditions of Rule
10b5-1(c) (a
(a “Rule
10b5-1
trading arrangement”) or any “non-Rule
“non-Rule
10b5-1
trading arrangement” as defined under the securities laws.
 
161
162
Table of Contents
Item 6. Exhibits
 
Number
  
Description
  10.1§Form of 2023 Director Restricted Stock Unit Award Agreement under the 2021 Genworth Financial, Inc. Omnibus Incentive Plan (filed herewith)
  31.1  
Certification of Thomas J. McInerney (filed herewith)
  31.2  
Certification of Jerome T. Upton (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— Jerome T. Upton (filed herewith)
101.INS  Inline XBRL Instance Document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF  Inline 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.
 
162
163
Table of Contents
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.
 
Date: November 9, 2023  
GENWORTH FINANCIAL, INC.
(Registrant)
Date: August 9, 2023
  By: /s/ Cristina E. Ahn
   
Cristina E. Ahn
Vice President and Controller
(Principal Accounting Officer)
163
164