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GNW Genworth Financial

Participants
Tim Owens VP, IR
Tom McInerney President and CEO
Dan Sheehan CFO and Chief Investment Officer
Rohit Gupta CEO, Genworth Mortgage Insurance
Peter Troisi Barclays
Joshua Esterov CreditSights
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to Genworth Financial's First Quarter 2021 Earnings Conference. My name is [Shion] [Ph], and I will be your coordinator today. At this time, all participants are in a listen-only mode.

We will facilitate a question-and-answer session towards the end of this conference call.

As a reminder, the conference is being recorded for replay purposes [Operator Instructions] I would now like to turn the conference over to Tim Owens, Vice President of Investor Relations. Mr. proceed. may you Owens,

Tim Owens

Good XXXX thank earnings Operator. Genworth's for first quarter call. morning, you, you and joining Thank

Our speakers arise. are any sound remote this morning, or issues so technical that may quality please excuse

released you Our followed and of and by our and preparations McInerney, Sheehan, to our Chief our presentation our Due limited President our Officer will Tom and IPO posted press U.S. Executive was regarding Financial Dan review call. Chief be will will these to our and to Chief Officer, of and comments our business site an referenced for applicable financial were all publicity earnings Web release our Officer. mortgage to hear Investment be prepared this from security last supplement law We restrictions, remarks. morning Today, night, materials. during you encourage

we the Following open our for period. will prepared a question-and-answer comments, up call

Gupta, will take Officer, our to Executive Genworth Chief addition questions. Insurance, Mortgage your speakers, In to available Rohit be

During the may forward-looking call various we this morning, statements. make

Our the of have to from our on our filed been investors. the filing results read morning's actual now, risk to earnings Also, the well in our Tom In to on estimates We the statutory believe and forward-looking supplement, annual and regarding the recent non-GAAP also rules. related discussion financial GAAP, statements. materially over as turn non-GAAP reconciled in with CEO, release And statements. to timing McInerney. are President may statements earnings as investor where measures such differ to meaningful cautionary I'll that references notes includes be to SEC and presentation we statutory call the factors accordance you release, Form materials of as This advise due required, XX-K measures most report may results with our SEC. financial

Tom McInerney

Mortgage which and brief of incidents delivered reported reflecting by initiatives prior in strategic everyone, the I'm $XX strengthening by significant Results prior Tim. seasonally adjusted income in lower in strong low Good the COVID-XX. million quarter, the year. in saw claim to reserve in $XX to I operating since report of performance a and progress of operating Genworth's million million you will insurance much, very operating likely insurance compared in and prior reflected quarter compares our insurance compared driven for of in Insurance income Relative million, with quarter, XX% million $XXX strategic $XX Genworth well adjusted new strong making reported favorably Dan drivers million, ratio discuss Results a call. $XXX new few our a spend earned across the while against quarter, earnings lower progress will Life $XX a for as as new higher to morning, quarter, income driven in loss prior long-term driven quarter, business. due as the on year. net update. the premiums and that of by strategy. new the pleased quarter, delivered to fourth slightly in loss decrease the million plan. for I $XXX MI of delinquencies. U.S. also our growth, businesses, the Then XX%, a on were delinquencies. driven quarterly we've from of U.S. $XXX performance high income our made detail. our first first go-forward minutes last terminations, and with quarter will the million the overview Genworth losses claim Sheehan you quarter, in-force and Thank more performance million of operating provide and U.S. prior which reported operating the primarily higher written, insurance Today, prior LTC income well MI thank by very our care across as joining results U.S. $XXX

monitoring LTC in-force in the the federal prudent optimistic certainly to we and take developing policy in approach next from benefit and program, fiscal And from actions. a to for to and result stimulus recover years near-term remain over broad rate and U.S. managing Fed. accommodative a economic continuing however, about the continue the monetary We're are record still several as capital earnings Importantly, the expansion carefully rollout, vaccine the of experience. potential

quarter. excellent U.S. execution the past Overall, MI associated reserves I'm challenges teams from and a the with operating LTC by we COVID-XX. performance all our had year, encouraged with strong we've over to our as As very during our contend increased result, the and the

Genworth plans performance positions we move well forward unlock to Our value. as with shareholder

both of to termination the plan, extraordinary Turning from strategic this China our merger we sides Oceanwide. outcome. a was transactions, those earlier of with our announced this efforts After disappointing with four-and-a-half years month, agreement

I've better as stronger with earnings Genworth However, today, prospects. years prior significantly it on than shared four ago, is calls, much was

and of value good company. performance, we to progress debt, a reductions, standalone strategic through to operating as LTC actions result create multi-year excellent enhance I a a well-positioned further associated reduce believe insurance a and blocks As future reduce rate are action to with our benefit very liquidity and plan legacy

on holding options ongoing a its chart we pursuing growth. resources the obligations, financial provide ensure the can that debt, and laser-focused company We meet path to capital further and are to Genworth need strategic reduce

significant and through quarter are and the very holding We've Genworth's that us debt ownership We in stake generating reducing Australia, the Genworth $XXX first enable debt. of of decisive position made our financial obligations. liquidity million future confident in I'm and meet in will our sale of the retirement outstanding taking improved progress actions, company to

to steps plan. $XX U.S. additional quarter prepare also expect to our entered planned IPO. we generate liquidity annualized of from the million strong position, We and expense future with in We and the savings, implemented resulting for reductions MI liquidity continue first a under

its repay we in for obligation record Dan address and track AXA to year, the of debt, ability in the our balance Most obligations of seeking against of particulars, AXA the claims recover maturity will and retired, [Ph] more is initiated Santander priority U.K. Under year claim has have this The to by and more $X.X originally certain made And ahead or we [multiple] XX% address fully from forward as confident with path this clear also scheduled remaining to note action. XXXX. to to a it receive debt cover our a particulars our other Deleveraging execute payment I to Genworth want the payouts moving lawsuit Related also are the AXA than September during to plans in a in plan. recently, policyholders our our AXA, detail. obligation insurance. will maturity that billion company mis-sold recoveries September, may debt, protection our since to Santander. managing of our Genworth upcoming remain which reduced top AXA, over is day. to our on holding have AXA outline a summary documents will we agreement strategic filed entitled allegations After strong of a

numerous we mis-selling cannot And are this As examples for I've PPI past, remain further litigation. complaints. there we about paying for beyond comment on in optimistic the potential recoveries. the and of that, said banks the distributors But

as approvals. a in spend of as strategic we focused next to the offering well like I'd to U.S. With plan. of our conditions, in for minutes respect remain few outlining to our the market required steps conditions a portion and course, subject, of the of preparing various of MI, public receipt satisfaction Next, interest,

currently of applicable the discuss the provide We planned offering. cannot in marketing other SEC, and are timing registration any as a restrictions result with and the I about or details of

very our than comments quarterly today MI limited results. be will in We U.S. about its reviewing other

profile, MI stake process strong on have cash That's flow specifically of our about so obligations. no plan As part no our fed the now. we in And say option sufficient so the down distribute upcoming strategy, U.S. sell maintain and plans IPO ownership debt can to preference in have the meet as to need preserve current expected to in is do our to remainder all our based shareholders to MI. strong the for IPO, a to tax-free we future. After the U.S. to our spin-off reduction general I further of

refining our our As MI reduce IPO we are and debt sustainable more work care In committed a developing business long-term manageable Life are insurance we U.S. also and in level, we to business. chapter particular, the on U.S. the to next models. Insurance pursuing

of are to our approach this taking maximize our expertise LTC and a We the area. in monetize three-pronged to deep value business,

continue will rate action importantly, we to through are our downside risks. Both continuing most our reduce to of and mitigate benefit and those options. plan multi-year First reduce our LTC

quarter, increases and this achieving premium made of reductions, have through in the on LTC end first over We billion $XX present net effort exceptional progress value the XXXX. from since benefit

Second, also insurance Americans we for need XX well-regarded launch care to United in long-term partner aged in exploring are XX the U.S., third care parties a business huge opportunities new There to to with And States. older by There number severe from legacy long-term a is with the solutions million XXXX. market due LTC LTC the [XXXX] XX and are few to at [Ph]. financial expected the business. million arising very challenges insurance to in of players today with increase end that

the third expertise and the to own to potential property We believe design and to a parties risk. the new a partnership products number monetize are new lower while strong develop and partners LTC Genworth societal predictable be opportunities profitable more and from LTC with need. intellectual evaluating can The a of LTC with learn in this success our our and services. in to business in addressing past, a products key future services to is future

We the will regulatory risk. future timely LTC to LTC regulators with management change to NAIC also and the for allow working and model prudent be of state

to strategy working Oceanwide significant are develop with care in we long-term solutions to China. need the China address for Third, a

we on energized together The explore the and we move our and through years. strong plans We building and the potential overall continue respect, are to excited venture mutual plan. LTC with last business working opportunities as forward developed I team relationship, several joint over leadership have strategic trust,

nimble businesses. are decisive to taking variable actions and We remaining maximize the

remaining David exceptional compensation nine directors and wealth strategic Board and completion board The following Smith, provided Chair Riepe a are independent along new in with and contributions. and skills. Founder and We delighted excellent to Goodman, have do to committee addition the quarter would our in years. as New the over We of like strategy. execution to they right last Jim, Genworth of a Managing Genworth York service Foros our Board and former Director board were many grateful directors from CEO committee first we leadership years. board have our conjunction Jim with last Mills, the risk Genworth. and remain board the Ramsey intend the These contributions Advisors directors news, Jill announce the look that of on their of Moloney the that the for Moffett of to I the current and Tom, Tom members LLC; our respectively, on the in and ALEX.fyi. thank David with their three Insurance through initiatives forward to terms the bring the of this diverse willing retire challenges In David, to we superintendent chairs of right of Howard user them experience few Chair May. and during the and very team while to am Tom work his I Board department; refreshed place I Jim

new and in LTC future interest to prepared long executing our the build focus respect our recognize wavered. our to to and and the businesses the improve MI, the I U.S. our our Xst. our planet. making various advancing strategic its run Genworth on I our Dan. that, better progress And highly to April families for published time, focused go-forward a ever better the in refining same We highlight We bring. over help legacy LTC our on holding book, insurance before about linked in deleveraging to over At sustainability and would may company. In more a and XXXX. for society our tomorrow to stakeholders impact commitment sustainability we company, first on by our are China, I continue self-reliant, secure, has faced plans encourage success with call the U.S. Genworth on is But never for share April deliver the to like will you continuing help it caring turn to Finally, to businesses to turn our Dan, of in that challenges our priorities with a become financially and I including to areas that for people promise efforts our more summary, all over report what report. as of read

Dan Sheehan

action At Thanks, continue I to our am with company, during with ratios Tom, deleverage from rate amount a strong continued and fully good U.S. of the plan. the debate outstanding our reducing retiring quarter in our mortgage morning, including multi-year AXA obligation, and holding the prepaying earnings we and pleased maturity, made insurance maturities. everyone. business on the the material and February September LTC progress 'XX our capital portion results

of mark-to-market $XXX in cash. prior adjusted We $XXX The partially of insurance continues origination the from in income discontinued housing their initiatives, increasing for than quarter price million perform decrease market delinquencies primarily by peak. and reported to the positives lower a quarter. the to to net million. million severance view on $XX with stimulus divestures. income were for in previously net in was related in well income and of benefit shareholders million of were our of $XX mostly U.S. extensions, and our appreciation quarter home items ended development, We home and prior Included the These million driven MI again cost for quarter quarter financial offset large a continuation mortgage Overall very $XX in items by ultimate Genworth to also and We gains new and earlier announced U.S. forbearance compared in-force growth restructuring. claims. with strong related more the million operations to as delinquencies available levels in once the delinquency prices, tax holding the new first results in and operating in $XXX company market,

ratio For operating MI of XX%. of U.S. the adjusted loss quarter, reported $XXX million, income and the

private $XX.X was New quarter, in XX% originations written larger up higher U.S. by insurance insurance market. mortgage versus mortgage primarily the the prior-year, MI billion a in driven and

the environment offsetting of has most Although in in interest reported, market reflect to shifting by have increasing elevated, estimate cancellations and our NIW market quarter. of activity ways, from million growth portfolio from low accelerating benefiting premiums sequential of our low persistency to levels newer a insurance $XX fourth our continue concentration million, of we rate including Lower our and slightly The existing single book impacted and quarter the in the the share last reinsurance premium year. share Single drive each transactions, portfolio our cancellations, which modest business was resulting several overall levels amortization peers refinance not years. persistency in premium down gain $XX remain continue quarter third our will portfolio. during high the to partially

of transfer still million were the program reported credit expansion quarter our $XX In XX% by the million new pre-COVID given levels, credit addition, elevated quarter, higher forbearance transfer risk program, XX,XXX in during is XX% while which delinquencies our first $X plans. approximately ceded related with we was in versus of approximately they down of sequentially sequentially, premiums to the risk

prices. of XXXX XX,XXX least our approximately quarter mark-to-market borrower in New X.X%. new in ended the delinquencies in values and expected rate and down approximately ultimate with outpace December approximately total $XX of delinquencies delinquencies. have resulted home at continue X%. claim and quarter delinquency Cures sequentially, forbearance, reflecting loan delinquencies equity approximately expense XX% XX,XXX XX% to In XX% of loss the We rate total, were our or in using was million to XX% are

XXXX, forbearance policies forbearance approximately current. our the with with still and quarter trends in ended forbearance, continue those of peak levels of a servicer XX,XXX climb in as from in or active first reported X.X% Our May to reported XX% reported plan,

During modestly will best The have pre-COVID to adjusted income million for operating the reflects operating reserves million In the delinquencies million in $XXX U.S. the our quarter an pretax. by a $XX $XX rate we quarter, Life, in the prior increase pre-COVID prior-quarter, estimate, and the $XX adjusted million our compared loss these cures. of segment than increased of prior-year. reserve emergence the of claim given of company's operating adjusted the delinquencies that expectation slower higher reported income in primarily

attributable we terminations, were reductions. prior first prior-year. the to prior we benefit that LTC we businesses significant increases by Life the million $X this were require claim reserves quarter U.S. part primarily not assume continue continuing and to that In quarter operating the our likely for the results the the terminate reflect elevated is pretax the to pandemic. record eight-year of income claim our and LTC most to less than the believe during elevated driven remaining achieving is quarter, rate continue terminations by $XX temporary first Our pandemic did experience mortality in compared death of population million quarter, certificates the prior-year, versus believe our and are the approximately terminations our was million $XXX We impacted Claim vulnerable and in and the that premium quarter elevated but claim higher $XX terminations that cumulative We COVID-XX claimants. primarily care, adjusted to long-term average. million pre-pandemic Underlying have track this increased in benefits COVID-XX. view quarter our in in

for from We LTC, submissions temporary, pandemic ultimately believe have and previous is rate expected, $XX Shifting rate million remain actions in quarter. favorable benefits trends. actions resemble In currently in-force strong. the continue incidents our additional driving the than that of in-force will development addition, lower during pretax claim new that to remained experience the to incidents IBNR overall decrease driven

a XX% weighted approvals, reductions. billion and quarter, benefit $XXX XQ present increases rate with For million of approximately of value LTC a $XX.X cumulative premium basis on approval through we've received average approximately of from XXXX Genworth net premiums 'XX, achieved impacting the rate approved

approvals strong XXXX throughout based expect We XXXX. filings on during our

Insurance, versus Turning up mortality trends for overall and was be elevated quarter year. the the versus to quarter historical and Life to continued prior

earnings of due Rounding and quarter last quarter, favorable was mortality was segment, quarter the equity $XX expenses equity slightly higher higher operating related expense. included up with although year to an improve continue down these upon throughout was estimate received of Even pandemic. prior out remained based the million interest lapses, by impacted lessen elevated insurance this The to driven adjusted negatively for after-tax versus quarter, interest quarter by year. in the down and corporate for stack first by million quarter, from tax markets and related XXXX. to insurance year, $XX the to fixed interest mortality was others income first annuities, markets reduced $XX claims consistent continue the million compared in after death In versus quarter COVID-XX and observed million certificates absent, in the and after date. approximately results trends $XX products $XX prior COVID-XX from Total prior In million and life during rates. last impact million and the and amortization the life earnings to corporate year by will Term $XX the the prior claims, and quarter rates. the driven primarily short be $XX the term tax loss runoff adjusted through adjusted operating lower operating our million prior and prior

losses Our decrease quarters de-leveraging and this the segment ahead. the forward are efforts in the projected quarter moving to in

transactions, an loans, improvement PMIER have the The approximately the provide we or XXX% increased this billion which and XXXX versus of gave above insurance provided million are our estimated credit by an executed $X.X of to and of on quarter we part levels of requirements. $XXX PMIERs sufficiency assigned billion environments. link the cost-effective XXX% credit capital first primarily to effect seasoned portion PMIER completion to of transfer an no would PMIERs in ratio finished also driven which published risk in relief volatility. was or our our a quarter above Turning $X.X books, These of quarter, approximately of capital million prior sufficiency are PMIERs quarter sufficiency If $XXX the approximately on our to at of approximately credit. quarter with provide transaction USMI, the Subsequent end. the which PMIERs reduce transaction will XXXX, program, published the ILN we loss

in expect and to We rate and capital GLIC at from a percentage of U.S. be benefited trends XXX% first as incidents RBC Life Genworth life LTC termination up in-force XXX%, approximately as company from year-end. statutory quarter in actions. or the Company in level income from earnings Insurance from well as action

businesses. additional in discussed past, plans our the capital extract infuse we've we no life to capital or have As from into U.S. insurance

quarter, U.S. businesses life capital policy will and actuarially justified blocks, statutory forward, billion rate $X.X management the end of the prudent ALR on our actions the claim rely holders. of to of the as of in-force continue approximately significant Going and to insurance consolidated satisfy obligations first to reserves,

subsidiaries. we ended sale of This of income the $XXX prepayments $XXX during $XXX cash, million insurance million liquid quarter maturity interest of in includes position, and approximately intercompany business held our cash repurchases February $XXX activity sale market XX the our open $XXX million million including cash from presentation Genworth maturities. of the For Australia and $XX September approximately triggered quarter business a strong provides reduction of million payments tax XX at the and by of of or Australia in $XXX quarterly $XXX the The investor debt million, our acts proceeds from assets, the Inc. million taxable targeted U.S. underlying cash of debt in strong Holdings, GMHI, $XXX million the reflecting buffer. above million very paid of the of cash USMIs intermediate excludes holding the Mortgage company holding in the company,

This portion our $XXX balance, obligation and current of million, covered $XXX maturities, will include million, on by on the resumption XX million in remaining due As million of MI cash look our both leave to due with U.S. the holding XX dividends. cash company September XXXX, outstanding debt $XXX our February be of sale our remaining hand the and approximately August prepaying February XXXX of of and XX due AXA $XXX plans $XXX interest in in USMI, forward the million. is and XXXX in we maturity, the on hand a current the in After plan and XXXX.

With of contemplated. focused to As to given securities strength applicable expected our liquidity have benefits comments In of pleased tax preparations our position stakeholders. the or sell consolidation, final to steps improve on a Tim key will plans holding closing, that, law interest provided flexibility will providing MI prepared of numerous business position no line beyond a remarks. offering noted indicated, the of businesses. be we've Tom taken and the to regarding the cash our U.S. other further One to open planned and the our to we restrictions, earlier, the meaningful value by matters for company financial portion what in remain our related and with note, as all and due status is we limited financial of now of U.S. We're progress our our questions. mortgage our currently

Operator

we Troisi Instructions] ahead. question Barclays. So, Thank will take at from you. Please first our [Operator go Peter

Peter Troisi

debt. down existing or U.S. will debt? the are road, planning comments to large going and guess and effectively repay how I is if on much longer flow Hi, businesses repay it, own cash for existing good about you're come approaching cash the flow down. you or But, all paying to like cash from to it morning, use everyone. it debt the from MI very you my existing cash seems the the the where Thanks question have a in no stake flow

Tom McInerney

investment, be that's the a and said, good dividends. insurance we those we into those. a add partners, no Dad and the had able businesses U.S. pay pay question. you And MI we anything And to But the any only new be products but foreseeable future will clear plans to life in care with companies, U.S. and the opportunities would with able said, that will to companies, sharing as are at would we'll the so we coming joint hope that that? dividends. to companies, legacy not time we services, capital that China, to put ownership the the Peter, Dan, in hopeful do money that be have But it's venture U.S. would companies road legacy based of on dividends U.S. have the successful be down the some MI. long-term from point we'll not receive for in want our be over variety

Dan Sheehan

Tom. it pretty I No, think you covered well,

Tom McInerney

Peter, anything else?

Peter Troisi

debt. coming Yes. No, a will are follow-ups. flow repayment, forecasting, contemplating some cash to contemplating Is in of out debt then relates couple quick right? it It like the seems repay life as that that your cash you're you to businesses which be used

Tom McInerney

down expectations the from our forward go it's hope we be those. with I've able when I'll companies. we they that on would ventures there's pay We but depending profitable days any joint profitability life now companies, early right would the call whether still required dividends that legacy which future, dividends, no -- current In don't they the No, on briefly discussed, reach expect the be those of road. And level to would the

Dan Sheehan

Yes, add, the as same pay through debt taxable used payments cash the MI, both we long process to has USMI our service in as corporate matters. fact, I the would income just the other consolidation, that as ask just create Life debt And service sorry, Tom. losses well. while do will company although U.S. Peter, will -- life income with will and for at that and from benefit flow be we that offset the U.S. and would we as from I -- companies that

Peter Troisi5

for Yes, that way makes the past cash time? and frequency company quarters. to cash there those benefit And to size those over payments of holding we've tax tax payments few us over a the cash holding sense. the gauge Is seen company

Tom McInerney

that give I to Dan. one

Dan Sheehan

Tom. Thanks, Okay.

terms Life guidance so positive have And other is do out we bit a and business out little say say lot. and model. we So, through as not left provide coming have debt it's I to we service of of do in long but earnings. of on But a in corporate, what math your simple costs payments, sort of earnings just we would don't USMI, and math that, of earnings flow what full it have positive the coming

Peter Troisi

the much very Thanks Okay. answers. for

Dan Sheehan

Peter. Thanks,

Operator

Thank you.

from So, CreditSights. take we'll Please ahead. go Joshua now question next our Esterov,

Joshua Esterov

morning, hear me good taking question. Can Thanks right? my you guys. Hey, for all folks

Tom McInerney

We can.

Joshua Esterov

Yes.

might with able had to, update start mortgage intend Okay, when companies? quick they with great. us you distribution operating capital allowing with Can a GSEs the to the extent you're the of regards to GSEs regards from to or conversations insurance have heard you out any you anything give to

Tom McInerney

start will with We Dan. Rohit, then and

Rohit Gupta

Tom. Thanks, Sure. Joshua. Hi,

So, operating we by operating requirements companies GSE. the June preservation under where pre-approved same my are GSE capital XX. any of the all dividends requirements, companies to under from through are And currently be have

We decision, are any ongoing they how discussions about the about a we guidance dividends recovery. they provide thinking are thinking have FHFA make about how until they're GSEs don't to But in final with they're how in the or pandemic future. about all further time and on forbearance, thinking capital

Joshua Esterov

Understood, I it. appreciate

Tom McInerney

that? to add anything Dan, to

Dan Sheehan

that I pretty Thanks, No, Rohit. think was comprehensive.

Joshua Esterov

guys. Thanks,

Operator

call further the turn back no Mr. as and I'll questions, to Ladies for gentlemen, are comments. McInerney closing over there now

Tom McInerney

thank call And the much, you of joining you very Shion. Thank all to you for today.

inability USMI, forward. SEC. with beyond and given today appreciate the on filing registration more I to we Having we're S-X the plans call there While the our next forward my chapter, I'll everyone planned we questions relating of respected and execute from the turn Thank look are many interest discuss got really and IPO remarks, to you that, over again you going our we And you hope continuing Genworth. as our to Shion. your that remarks, our to with for as certain prepared are excited to that, call said Genworth's update Dan about we support and of IPO back the

Operator

financials at will your first And gentlemen, Ladies concludes this time quarter and call. this Thank conference participation. end. call you for the Genworth