☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
80-0873306
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
6620 West Broad Street
Richmond,
Virginia
|
23230
|
|
(Address of principal executive offices)
|
(Zip Code)
|
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
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
|||
Non-accelerated
filer
|
☐
|
Smaller reporting company
|
☐
|
|||
|
|
Emerging growth company
|
☐
|
|
|
Page
|
||||
3
|
||||||
Item 1.
|
3
|
|||||
3
|
||||||
4
|
||||||
5
|
||||||
6
|
||||||
8
|
||||||
9
|
||||||
Item 2.
|
85
|
|||||
Item 3.
|
163
|
|||||
Item 4.
|
164
|
|||||
164
|
||||||
Item 1.
|
164
|
|||||
Item 1A.
|
164
|
|||||
Item 6.
|
165
|
|||||
166
|
|
June 30,
|
December 31,
|
||||||
|
2019
|
2018
|
||||||
|
(Unaudited)
|
|
||||||
Assets
|
|
|
||||||
Investments:
|
|
|
||||||
Fixed maturity securities
available-for-sale,
at fair value
|
$
|
63,774
|
|
|
$
|
59,661
|
||
Equity securities, at fair value
|
|
644
|
|
|
|
655
|
||
Commercial mortgage loans ($56 and $62 are restricted as of June 30, 2019 and December 31, 2018, respectively, related to a securitization entity)
|
|
7,019
|
|
|
|
6,749
|
||
Policy loans
|
|
2,076
|
|
|
|
1,861
|
||
Other invested assets
|
|
1,535
|
|
|
|
1,188
|
||
|
|
|
|
|
|
|
|
|
Total investments
|
|
75,048
|
|
|
|
70,114
|
||
Cash, cash equivalents and restricted cash
|
|
1,938
|
|
|
|
2,177
|
||
Accrued investment income
|
|
626
|
|
|
|
675
|
||
Deferred acquisition costs
|
|
2,105
|
|
|
|
3,263
|
||
Intangible assets and goodwill
|
|
244
|
|
|
|
347
|
||
Reinsurance recoverable
|
|
17,211
|
|
|
|
17,278
|
||
Other assets
|
|
564
|
|
|
|
474
|
||
Deferred tax asset
|
|
383
|
|
|
|
736
|
||
Separate account assets
|
|
6,187
|
|
|
|
5,859
|
||
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
104,306
|
|
|
$
|
100,923
|
||
Liabilities and equity
|
|
|
|
|
|
|
||
Liabilities:
|
|
|
|
|
|
|
||
Future policy benefits
|
$
|
39,583
|
|
|
$
|
37,940
|
||
Policyholder account balances
|
|
22,673
|
|
|
|
22,968
|
||
Liability for policy and contract claims
|
|
10,677
|
|
|
|
10,379
|
||
Unearned premiums
|
|
3,488
|
|
|
|
3,546
|
||
Other liabilities
|
|
1,723
|
|
|
|
1,682
|
||
Non-recourse
funding obligations
|
|
311
|
|
|
|
311
|
||
Long-term borrowings
|
|
4,044
|
|
|
|
4,025
|
||
Deferred tax liability
|
|
28
|
|
|
|
24
|
||
Separate account liabilities
|
|
6,187
|
|
|
|
5,859
|
||
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
88,714
|
|
|
|
86,734
|
||
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
||||
Equity:
|
|
|
|
|
|
|
||
Class A common stock, $0.001 par value; 1.5 billion shares authorized; 592 million and 589 million shares issued as of June 30, 2019 and December 31, 2018, respectively; 504 million and 501 million shares outstanding as of June 30, 2019 and December 31, 2018, respectively
|
|
1
|
|
|
|
1
|
||
Additional
paid-in
capital
|
|
11,983
|
|
|
|
11,987
|
||
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
||
Net unrealized investment gains (losses):
|
|
|
|
|
|
|
||
Net unrealized gains (losses) on securities not other-than-temporarily impaired
|
|
1,294
|
|
|
|
585
|
||
Net unrealized gains (losses) on other-than-temporarily impaired securities
|
|
11
|
|
|
|
10
|
||
|
|
|
|
|
|
|
|
|
Net unrealized investment gains (losses)
|
|
1,305
|
|
|
|
595
|
||
|
|
|
|
|
|
|
|
|
Derivatives qualifying as hedges
|
|
1,983
|
|
|
|
1,781
|
||
Foreign currency translation and other adjustments
|
|
(275
|
)
|
|
|
(332
|
) | |
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income (loss)
|
|
3,013
|
|
|
|
2,044
|
||
Retained earnings
|
|
1,460
|
|
|
|
1,118
|
||
Treasury stock, at cost (88 million shares as of June 30, 2019 and December 31, 2018)
|
|
(2,700
|
)
|
|
|
(2,700
|
) | |
|
|
|
|
|
|
|
|
|
Total Genworth Financial, Inc.’s stockholders’ equity
|
|
13,757
|
|
|
|
12,450
|
||
Noncontrolling interests
|
|
1,835
|
|
|
|
1,739
|
||
|
|
|
|
|
|
|
|
|
Total equity
|
|
15,592
|
|
|
|
14,189
|
||
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
$
|
104,306
|
|
|
$
|
100,923
|
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
1,126
|
$ |
1,136
|
$ |
2,240
|
$ |
2,276
|
||||||||
Net investment income
|
852
|
828
|
1,681
|
1,632
|
||||||||||||
Net investment gains (losses)
|
(45
|
) |
(14
|
) |
29
|
(45
|
) | |||||||||
Policy fees and other income
|
223
|
209
|
410
|
411
|
||||||||||||
Total revenues
|
2,156
|
2,159
|
4,360
|
4,274
|
||||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
1,270
|
1,205
|
2,571
|
2,516
|
||||||||||||
Interest credited
|
146
|
152
|
293
|
308
|
||||||||||||
Acquisition and operating expenses, net of deferrals
|
247
|
253
|
498
|
493
|
||||||||||||
Amortization of deferred acquisition costs and intangibles
|
95
|
112
|
186
|
216
|
||||||||||||
Interest expense
|
73
|
77
|
145
|
153
|
||||||||||||
Total benefits and expenses
|
1,831
|
1,799
|
3,693
|
3,686
|
||||||||||||
Income before income taxes
|
325
|
360
|
667
|
588
|
||||||||||||
Provision for income taxes
|
107
|
111
|
219
|
174
|
||||||||||||
Net income
|
218
|
249
|
448
|
414
|
||||||||||||
Less: net income attributable to noncontrolling interests
|
50
|
59
|
106
|
112
|
||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
168
|
$ |
190
|
$ |
342
|
$ |
302
|
||||||||
Net income available to Genworth Financial, Inc.’s common stockholders per share:
|
|
|
|
|
||||||||||||
Basic
|
$ |
0.33
|
$ |
0.38
|
$ |
0.68
|
$ |
0.60
|
||||||||
Diluted
|
$ |
0.33
|
$ |
0.38
|
$ |
0.67
|
$ |
0.60
|
||||||||
Weighted-average common shares outstanding:
|
|
|
|
|
||||||||||||
Basic
|
503.4
|
500.6
|
502.3
|
500.1
|
||||||||||||
Diluted
|
508.7
|
502.6
|
508.7
|
502.6
|
||||||||||||
Supplemental disclosures:
|
|
|
|
|
||||||||||||
Total other-than-temporary impairments
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||
Portion of other-than-temporary impairments included in other comprehensive income (loss)
|
—
|
—
|
—
|
—
|
||||||||||||
Net other-than-temporary impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Other investments gains (losses)
|
(45
|
) |
(14
|
) |
29
|
(45
|
) | |||||||||
Total net investment gains (losses)
|
$ |
(45
|
) | $ |
(14
|
) | $ |
29
|
$ |
(45
|
) | |||||
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Net income
|
$ |
218
|
$ |
249
|
$ |
448
|
$ |
414
|
||||||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired
|
376
|
(185
|
) |
755
|
(526
|
) | ||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities
|
—
|
(2
|
) |
1
|
(2
|
) | ||||||||||
Derivatives qualifying as hedges
|
133
|
(64
|
) |
202
|
(216
|
) | ||||||||||
Foreign currency translation and other adjustments
|
43
|
(98
|
) |
97
|
(185
|
) | ||||||||||
Total other comprehensive income (loss)
|
552
|
(349
|
) |
1,055
|
(929
|
) | ||||||||||
Total comprehensive income (loss)
|
770
|
(100
|
) |
1,503
|
(515
|
) | ||||||||||
Less: comprehensive income attributable to noncontrolling interests
|
81
|
10
|
192
|
14
|
||||||||||||
Total comprehensive income (loss) available to Genworth Financial, Inc.’s common stockholders
|
$ |
689
|
$ |
(110
|
) | $ |
1,311
|
$ |
(529
|
) | ||||||
|
Three months ended June 30, 2019
|
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
||||||||||||||||||||||||
|
|
|
|
|
|
Genworth
|
|
|
||||||||||||||||||||||||
|
|
|
Accumulated
|
|
|
Financial,
|
|
|
||||||||||||||||||||||||
|
|
Additional
|
other
|
|
Treasury
|
Inc.’s
|
|
|
||||||||||||||||||||||||
|
Common
|
paid-in
|
comprehensive
|
Retained
|
stock, at
|
stockholders’
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||
|
stock
|
capital
|
income (loss)
|
earnings
|
cost
|
equity
|
interests
|
equity
|
||||||||||||||||||||||||
Balances as of March 31, 2019
|
$ |
1
|
$ |
11,989
|
$ |
2,492
|
$ |
1,292
|
$ |
(2,700
|
) | $ |
13,074
|
$ |
1,808
|
$ |
14,882
|
|||||||||||||||
Repurchase of subsidiary shares
|
—
|
—
|
—
|
—
|
—
|
—
|
(32
|
) |
(32
|
) | ||||||||||||||||||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
168
|
—
|
168
|
50
|
218
|
||||||||||||||||||||||||
Other comprehensive income, net of taxes
|
—
|
—
|
521
|
—
|
—
|
521
|
31
|
552
|
||||||||||||||||||||||||
Total comprehensive income
|
—
|
|
|
|
|
689
|
81
|
770
|
||||||||||||||||||||||||
Dividends to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
(25
|
) |
(25
|
) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other
|
—
|
(6
|
) |
—
|
—
|
—
|
(6
|
) |
3
|
(3
|
) | |||||||||||||||||||||
Balances as of June 30, 2019
|
$ |
1
|
$ |
11,983
|
$ |
3,013
|
$ |
1,460
|
$ |
(2,700
|
) | $ |
13,757
|
$ |
1,835
|
$ |
15,592
|
|||||||||||||||
|
Three months ended June 30, 2018
|
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
||||||||||||||||||||||||
|
|
|
|
|
|
Genworth
|
|
|
||||||||||||||||||||||||
|
|
|
Accumulated
|
|
|
Financial,
|
|
|
||||||||||||||||||||||||
|
|
Additional
|
other
|
|
Treasury
|
Inc.’s
|
|
|
||||||||||||||||||||||||
|
Common
|
paid-in
|
comprehensive
|
Retained
|
stock, at
|
stockholders’
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||
|
stock
|
capital
|
income (loss)
|
earnings
|
cost
|
equity
|
interests
|
equity
|
||||||||||||||||||||||||
Balances as of March 31, 2018
|
$ |
1
|
$ |
11,979
|
$ |
2,627
|
$ |
1,111
|
$ |
(2,700
|
) | $ |
13,018
|
$ |
1,844
|
$ |
14,862
|
|||||||||||||||
Repurchase of subsidiary shares
|
—
|
—
|
—
|
—
|
—
|
—
|
(13
|
) |
(13
|
) | ||||||||||||||||||||||
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
190
|
—
|
190
|
59
|
249
|
||||||||||||||||||||||||
Other comprehensive loss, net of taxes
|
—
|
—
|
(300
|
) |
—
|
—
|
(300
|
) |
(49
|
) |
(349
|
) | ||||||||||||||||||||
Total comprehensive income (loss)
|
|
|
|
|
|
(110
|
) |
10
|
(100
|
) | ||||||||||||||||||||||
Dividends to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
(14
|
) |
(14
|
) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other
|
—
|
2
|
—
|
—
|
—
|
2
|
4
|
6
|
||||||||||||||||||||||||
Balances as of June 30, 2018
|
$ |
1
|
$ |
11,981
|
$ |
2,327
|
$ |
1,301
|
$ |
(2,700
|
) | $ |
12,910
|
$ |
1,831
|
$ |
14,741
|
|||||||||||||||
Six months ended June 30, 2019
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
||||||||||||||||||||||||
|
|
|
|
|
|
Genworth
|
|
|
||||||||||||||||||||||||
|
|
|
Accumulated
|
|
|
Financial,
|
|
|
||||||||||||||||||||||||
|
|
Additional
|
other
|
|
Treasury
|
Inc.’s
|
|
|
||||||||||||||||||||||||
|
Common
|
paid-in
|
comprehensive
|
Retained
|
stock, at
|
stockholders’
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||
|
stock
|
capital
|
income (loss)
|
earnings
|
cost
|
equity
|
interests
|
equity
|
||||||||||||||||||||||||
Balances as of December 31, 2018
|
$ |
1
|
$ |
11,987
|
$ |
2,044
|
$ |
1,118
|
$ |
(2,700
|
) | $ |
12,450
|
$ |
1,739
|
$ |
14,189
|
|||||||||||||||
Repurchase of subsidiary shares
|
—
|
—
|
—
|
—
|
—
|
—
|
(44
|
) |
(44
|
) | ||||||||||||||||||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
342
|
—
|
342
|
106
|
448
|
||||||||||||||||||||||||
Other comprehensive income, net of taxes
|
—
|
—
|
969
|
—
|
—
|
969
|
86
|
1,055
|
||||||||||||||||||||||||
Total comprehensive income
|
|
|
|
|
|
1,311
|
192
|
1,503
|
||||||||||||||||||||||||
Dividends to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
(53
|
) |
(53
|
) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other
|
—
|
(4
|
) |
—
|
—
|
—
|
(4
|
) |
1
|
(3
|
) | |||||||||||||||||||||
Balances as of June 30, 2019
|
$ |
1
|
$ |
11,983
|
$ |
3,013
|
$ |
1,460
|
$ |
(2,700
|
) | $ |
13,757
|
$ |
1,835
|
$ |
15,592
|
|||||||||||||||
|
Six months ended June 30, 2018
|
|||||||||||||||||||||||||||||||
|
|
|
|
|
|
Total
|
|
|
||||||||||||||||||||||||
|
|
|
|
|
|
Genworth
|
|
|
||||||||||||||||||||||||
|
|
|
Accumulated
|
|
|
Financial,
|
|
|
||||||||||||||||||||||||
|
|
Additional
|
other
|
|
Treasury
|
Inc.’s
|
|
|
||||||||||||||||||||||||
|
Common
|
paid-in
|
comprehensive
|
Retained
|
stock, at
|
stockholders’
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||
|
stock
|
capital
|
income (loss)
|
earnings
|
cost
|
equity
|
interests
|
equity
|
||||||||||||||||||||||||
Balances as of December 31, 2017
|
$ |
1
|
$ |
11,977
|
$ |
3,027
|
$ |
1,113
|
$ |
(2,700
|
) | $ |
13,418
|
$ |
1,910
|
$ |
15,328
|
|||||||||||||||
Cumulative effect of change in accounting, net of taxes
|
—
|
—
|
131
|
(114
|
) |
—
|
17
|
—
|
17
|
|||||||||||||||||||||||
Repurchase of subsidiary shares
|
—
|
—
|
—
|
—
|
—
|
—
|
(49
|
) |
(49
|
) | ||||||||||||||||||||||
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
302
|
—
|
302
|
112
|
414
|
||||||||||||||||||||||||
Other comprehensive loss, net of taxes
|
—
|
—
|
(831
|
) |
—
|
—
|
(831
|
) |
(98
|
) |
(929
|
) | ||||||||||||||||||||
Total comprehensive income (loss)
|
|
|
|
|
|
(529
|
) |
14
|
(515
|
) | ||||||||||||||||||||||
Dividends to noncontrolling interests
|
—
|
—
|
—
|
—
|
—
|
—
|
(50
|
) |
(50
|
) | ||||||||||||||||||||||
Stock-based compensation expense and exercises and other
|
—
|
4
|
—
|
—
|
—
|
4
|
6
|
10
|
||||||||||||||||||||||||
Balances as of June 30, 2018
|
$ |
1
|
$ |
11,981
|
$ |
2,327
|
$ |
1,301
|
$ |
(2,700
|
) | $ |
12,910
|
$ |
1,831
|
$ |
14,741
|
|||||||||||||||
|
Six months ended
|
|||||||
|
June 30,
|
|||||||
|
2019
|
2018
|
||||||
Cash flows from operating activities:
|
|
|
||||||
Net income
|
$ |
448
|
$ |
414
|
||||
Adjustments to reconcile net income to net cash from operating activities:
|
|
|
||||||
Amortization of fixed maturity securities discounts and premiums
|
(54
|
) |
(62
|
) | ||||
Net investment (gains) losses
|
(29
|
) |
45
|
|||||
Charges assessed to policyholders
|
(364
|
) |
(359
|
) | ||||
Acquisition costs deferred
|
(35
|
) |
(40
|
) | ||||
Amortization of deferred acquisition costs and intangibles
|
186
|
216
|
||||||
Deferred income taxes
|
134
|
83
|
||||||
Derivative instruments and limited partnerships
|
22
|
(195
|
) | |||||
Stock-based compensation expense
|
12
|
16
|
||||||
Change in certain assets and liabilities:
|
|
|
||||||
Accrued investment income and other assets
|
(290
|
) |
(89
|
) | ||||
Insurance reserves
|
609
|
691
|
||||||
Current tax liabilities
|
27
|
(37
|
) | |||||
Other liabilities, policy and contract claims and other policy-related balances
|
129
|
(122
|
) | |||||
Net cash from operating activities
|
795
|
561
|
||||||
Cash flows used by investing activities:
|
|
|
||||||
Proceeds from maturities and repayments of investments:
|
|
|
||||||
Fixed maturity securities
|
1,929
|
1,979
|
||||||
Commercial mortgage loans
|
285
|
350
|
||||||
Restricted commercial mortgage loans related to a securitization entity
|
6
|
16
|
||||||
Proceeds from sales of investments:
|
|
|
||||||
Fixed maturity and equity securities
|
2,859
|
1,920
|
||||||
Purchases and originations of investments:
|
|
|
||||||
Fixed maturity and equity securities
|
(4,681
|
) |
(4,082
|
) | ||||
Commercial mortgage loans
|
(561
|
) |
(489
|
) | ||||
Other invested assets, net
|
(227
|
) |
93
|
|||||
Policy loans, net
|
39
|
15
|
||||||
Net cash used by investing activities
|
(351
|
) |
(198
|
) | ||||
Cash flows used by financing activities:
|
|
|
||||||
Deposits to universal life and investment contracts
|
444
|
503
|
||||||
Withdrawals from universal life and investment contracts
|
(1,096
|
) |
(1,177
|
) | ||||
Proceeds from issuance of long-term debt
|
77
|
441
|
||||||
Repayment and repurchase of long-term debt
|
(78
|
) |
(597
|
) | ||||
Repayment of borrowings related to a securitization entity
|
—
|
(12
|
) | |||||
Repurchase of subsidiary shares
|
(44
|
) |
(49
|
) | ||||
Dividends paid to noncontrolling interests
|
(53
|
) |
(50
|
) | ||||
Other, net
|
55
|
(2
|
) | |||||
Net cash used by financing activities
|
(695
|
) |
(943
|
) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
12
|
(52
|
) | |||||
Net change in cash, cash equivalents and restricted cash
|
(239
|
) |
(632
|
) | ||||
Cash, cash equivalents and restricted cash at beginning of period
|
2,177
|
2,875
|
||||||
Cash, cash equivalents and restricted cash at end of period
|
$ |
1,938
|
$ |
2,243
|
||||
• |
U.S. Mortgage Insurance.
|
• |
Canada Mortgage Insurance.
|
• |
Australia Mortgage Insurance.
|
• |
U.S. Life Insurance.
|
• |
Runoff.
non-strategic
products which are no longer actively sold but we continue to service our existing blocks of business. Our
non-strategic
products primarily include our variable annuity, variable life insurance, institutional, corporate-owned life insurance and other accident and health insurance products. Institutional products consist of funding agreements and funding agreements backing notes.
|
• |
assumptions will no longer be
locked-in
at contract inception and all cash flow assumptions used to estimate the liability for future policy benefits will be 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 (except the discount rate) will be recorded in net income (loss) using a retrospective approach with a cumulative
catch-up
adjustment by recalculating the net premium ratio (which will be capped at 100%) using actual historical and updated future cash flow assumptions;
|
• |
the discount rate used to determine the liability for future policy benefits will be a current upper-medium grade (low credit risk) fixed-income instrument yield, which is generally interpreted to mean a
single-A
rated bond rate for the same duration, and is required to be reviewed quarterly, with changes in the discount rate recorded in other comprehensive income (loss);
|
• | the provision for adverse deviation and the premium deficiency test will be eliminated; |
• | market risk benefits associated with deposit-type contracts will be measured at fair value with changes recorded in net income (loss); |
• | the amortization method for DAC will generally be on a straight-line basis over the expected contract term; and |
• | disclosures will be greatly expanded to include significant assumptions and product liability rollforwards. |
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions, except per share amounts)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Weighted-average shares used in basic earnings per share calculations
|
503.4
|
500.6
|
502.3
|
500.1
|
||||||||||||
Potentially dilutive securities:
|
|
|
|
|
||||||||||||
Stock options, restricted stock units and stock appreciation rights
|
5.3
|
2.0
|
6.4
|
2.5
|
||||||||||||
Weighted-average shares used in diluted earnings per share calculations
|
508.7
|
502.6
|
508.7
|
502.6
|
||||||||||||
Net income:
|
|
|
|
|
||||||||||||
Net income
|
$ |
218
|
$ |
249
|
$ |
448
|
$ |
414
|
||||||||
Less: net income attributable to noncontrolling interests
|
50
|
59
|
106
|
112
|
||||||||||||
|
||||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
168
|
$ |
190
|
$ |
342
|
$ |
302
|
||||||||
Basic earnings per share:
|
|
|
|
|
||||||||||||
Net income
|
$ |
0.44
|
$ |
0.50
|
$ |
0.89
|
$ |
0.83
|
||||||||
Less: net income attributable to noncontrolling interests
|
0.10
|
0.12
|
0.21
|
0.22
|
||||||||||||
|
||||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
(1)
|
$ |
0.33
|
$ |
0.38
|
$ |
0.68
|
$ |
0.60
|
||||||||
Diluted earnings per share:
|
|
|
|
|
||||||||||||
Net income
|
$ |
0.43
|
$ |
0.50
|
$ |
0.88
|
$ |
0.82
|
||||||||
Less: net income attributable to noncontrolling interests
|
0.10
|
0.12
|
0.21
|
0.22
|
||||||||||||
|
||||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
0.33
|
$ |
0.38
|
$ |
0.67
|
$ |
0.60
|
||||||||
(1)
|
May not total due to whole number calculation. |
|
Three months ended
June 30, |
Six months ended
June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Fixed maturity securities—taxable
|
$
|
665
|
$
|
651
|
$
|
1,308
|
$
|
1,286
|
||||||||
Fixed maturity
securities—non-taxable
|
2
|
3
|
4
|
6
|
||||||||||||
Equity securities
|
10
|
10
|
19
|
20
|
||||||||||||
Commercial mortgage loans
|
84
|
77
|
165
|
159
|
||||||||||||
Restricted commercial mortgage loans related to a securitization entity
|
1
|
2
|
2
|
4
|
||||||||||||
Policy loans
|
45
|
41
|
91
|
84
|
||||||||||||
Other invested assets
|
59
|
53
|
118
|
92
|
||||||||||||
Cash, cash equivalents, restricted cash and short-term investments
|
11
|
14
|
23
|
26
|
||||||||||||
Gross investment income before expenses and fees
|
877
|
851
|
1,730
|
1,677
|
||||||||||||
Expenses and fees
|
(25
|
) |
(23
|
) |
(49
|
) |
(45
|
) | ||||||||
Net investment income
|
$ |
852
|
$ |
828
|
$ |
1,681
|
$ |
1,632
|
||||||||
|
Three months ended
June 30, |
Six months ended
June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Available-for-sale
fixed maturity securities:
|
|
|
|
|
||||||||||||
Realized gains
|
$ |
5
|
$ |
13
|
$ |
86
|
$ |
20
|
||||||||
Realized losses
|
(6
|
) |
(21
|
) |
(28
|
) |
(37
|
) | ||||||||
Net realized gains (losses) on
available-for-sale
fixed maturity securities
|
(1
|
) |
(8
|
) |
58
|
(17
|
) | |||||||||
Impairments:
|
|
|
|
|
||||||||||||
Total other-than-temporary impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Portion of other-than-temporary impairments included inother comprehensive income (loss)
|
—
|
—
|
—
|
—
|
||||||||||||
Net other-than-temporary impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Net realized gains (losses) on equity securities sold
|
—
|
8
|
3
|
10
|
||||||||||||
Net unrealized gains (losses) on equity securities still held
|
(12
|
) |
3
|
(4
|
) |
(15
|
) | |||||||||
Limited partnerships
|
(11
|
) |
(2
|
) |
4
|
5
|
||||||||||
Commercial mortgage loans
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Derivative instruments
(1)
|
(22
|
) |
(15
|
) |
(32
|
) |
(28
|
) | ||||||||
Net investment gains (losses)
|
$ |
(45
|
) | $ |
(14
|
) | $ |
29
|
$ |
(45
|
) | |||||
(1)
|
See note 5 for additional information on the impact of derivative instruments included in net investment gains (losses). |
|
As of or for the
three months ended June 30, |
As of or for the
six months ended June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Beginning balance
|
$
|
23
|
$
|
28
|
$
|
24
|
$
|
32
|
||||||||
Reductions:
|
|
|
|
|
||||||||||||
Securities sold, paid down or disposed
|
—
|
(3
|
)
|
(1
|
)
|
(7
|
) | |||||||||
Ending balance
|
$
|
23
|
$
|
25
|
$
|
23
|
$
|
25
|
||||||||
(Amounts in millions)
|
June 30,
2019
|
December 31,
2018
|
||||||
Net unrealized gains (losses) on fixed maturity securities
(1)
|
$
|
5,673
|
$
|
1,775
|
||||
Adjustments to deferred acquisition costs, present value of future profits, salesinducements and benefit reserves
|
(3,879
|
) |
(952
|
) | ||||
Income taxes, net
|
(405
|
) |
(190
|
) | ||||
Net unrealized investment gains (losses)
|
1,389
|
633
|
||||||
Less: net unrealized investment gains (losses) attributable to noncontrolling interests
|
84
|
38
|
||||||
Net unrealized investment gains (losses) attributable to Genworth Financial, Inc.
|
$
|
1,305
|
$
|
595
|
||||
(1)
|
Excludes foreign exchange. |
|
As of or for the
three months ended June 30, |
|||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Beginning balance
|
$
|
943
|
$
|
917
|
||||
Unrealized gains (losses) arising during the period:
|
|
|
||||||
Unrealized gains (losses) on fixed maturity securities
|
1,957
|
(905
|
) | |||||
Adjustment to deferred acquisition costs
|
(52
|
) |
467
|
|||||
Adjustment to present value of future profits
|
(2
|
) |
20
|
|||||
Adjustment to sales inducements
|
(12
|
) |
9
|
|||||
Adjustment to benefit reserves
|
(1,412
|
) |
162
|
|||||
Provision for income taxes
|
(104
|
) |
54
|
|||||
Change in unrealized gains (losses) on investment securities
|
375
|
(193
|
) | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $(1) and $(2)
|
1
|
6
|
||||||
Change in net unrealized investment gains (losses)
|
376
|
(187
|
) | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
|
14
|
(6
|
) | |||||
Ending balance
|
$
|
1,305
|
$
|
736
|
||||
|
As of or for the
six months ended
June 30, |
|||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Beginning balance
|
$
|
595
|
$
|
1,085
|
||||
Cumulative effect of changes in accounting:
|
|
|
||||||
Stranded tax effects
|
—
|
189
|
||||||
Recognition and measurement of financial assets and liabilities, net of taxes of $— and $18
|
—
|
(25
|
) | |||||
Total cumulative effect of changes in accounting
|
—
|
164
|
||||||
Unrealized gains (losses) arising during the period:
|
|
|
||||||
Unrealized gains (losses) on fixed maturity securities
|
3,956
|
(2,586
|
) | |||||
Adjustment to deferred acquisition costs
|
(1,041
|
) |
909
|
|||||
Adjustment to present value of future profits
|
(55
|
) |
56
|
|||||
Adjustment to sales inducements
|
(31
|
) |
29
|
|||||
Adjustment to benefit reserves
|
(1,800
|
) |
902
|
|||||
Provision for income taxes
|
(227
|
) |
149
|
|||||
Change in unrealized gains (losses) on investment securities
|
802
|
(541
|
) | |||||
Reclassification adjustments to net investment (gains) losses, net of taxes of $12 and $(3)
|
(46
|
) |
13
|
|||||
Change in net unrealized investment gains (losses)
|
756
|
(528
|
) | |||||
Less: change in net unrealized investment gains (losses) attributable to noncontrolling interests
|
46
|
(15
|
) | |||||
Ending balance
|
$
|
1,305
|
$
|
736
|
||||
|
|
Gross unrealized gains
|
Gross unrealized losses
|
|
|||||||||||||||||||||
(Amounts in millions)
|
Amortized
cost or cost |
Not
other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Not
other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Fair
value |
|||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|||||||||||||||||||
U.S. government, agencies and government-
sponsored enterprises
|
$ |
4,151
|
$ |
837
|
$ |
—
|
$ |
(1
|
) | $ |
—
|
$ |
4,987
|
||||||||||||
State and political subdivisions
|
2,319
|
317
|
—
|
—
|
—
|
2,636
|
|||||||||||||||||||
Non-U.S.
government
|
2,496
|
155
|
—
|
(2
|
) |
—
|
2,649
|
||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|||||||||||||||||||
Utilities
|
4,327
|
565
|
—
|
(13
|
) |
—
|
4,879
|
||||||||||||||||||
Energy
|
2,468
|
255
|
—
|
(10
|
) |
—
|
2,713
|
||||||||||||||||||
Finance and insurance
|
6,974
|
633
|
—
|
(10
|
) |
—
|
7,597
|
||||||||||||||||||
Consumer—non-cyclical
|
4,954
|
616
|
—
|
(18
|
) |
—
|
5,552
|
||||||||||||||||||
Technology and communications
|
2,893
|
269
|
—
|
(6
|
) |
—
|
3,156
|
||||||||||||||||||
Industrial
|
1,242
|
98
|
—
|
(4
|
) |
—
|
1,336
|
||||||||||||||||||
Capital goods
|
2,323
|
303
|
—
|
(6
|
) |
—
|
2,620
|
||||||||||||||||||
Consumer—cyclical
|
1,619
|
127
|
—
|
(5
|
) |
—
|
1,741
|
||||||||||||||||||
Transportation
|
1,263
|
152
|
—
|
(4
|
) |
—
|
1,411
|
||||||||||||||||||
Other
|
356
|
40
|
—
|
—
|
—
|
396
|
|||||||||||||||||||
Total U.S. corporate
|
28,419
|
3,058
|
—
|
(76
|
) |
—
|
31,401
|
||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|||||||||||||||||||
Utilities
|
1,114
|
54
|
—
|
(3
|
) |
—
|
1,165
|
||||||||||||||||||
Energy
|
1,349
|
168
|
—
|
(1
|
) |
—
|
1,516
|
||||||||||||||||||
Finance and insurance
|
2,438
|
191
|
—
|
(1
|
) |
—
|
2,628
|
||||||||||||||||||
Consumer—non-cyclical
|
674
|
40
|
—
|
(4
|
) |
—
|
710
|
||||||||||||||||||
Technology and communications
|
1,179
|
94
|
—
|
—
|
—
|
1,273
|
|||||||||||||||||||
Industrial
|
936
|
81
|
—
|
—
|
—
|
1,017
|
|||||||||||||||||||
Capital goods
|
663
|
33
|
—
|
(1
|
) |
—
|
695
|
||||||||||||||||||
Consumer—cyclical
|
542
|
16
|
—
|
(1
|
) |
—
|
557
|
||||||||||||||||||
Transportation
|
761
|
82
|
—
|
(2
|
) |
—
|
841
|
||||||||||||||||||
Other
|
2,061
|
186
|
—
|
(2
|
) |
—
|
2,245
|
||||||||||||||||||
Total
non-U.S.
corporate
|
11,717
|
945
|
—
|
(15
|
) |
—
|
12,647
|
||||||||||||||||||
Residential mortgage-backed
|
2,511
|
215
|
14
|
(2
|
) |
—
|
2,738
|
||||||||||||||||||
Commercial mortgage-backed
|
2,882
|
121
|
—
|
(14
|
) |
—
|
2,989
|
||||||||||||||||||
Other asset-backed
|
3,699
|
38
|
—
|
(10
|
) |
—
|
3,727
|
||||||||||||||||||
Total
available-for-sale
fixed
maturity securities |
$ |
58,194
|
$ |
5,686
|
$ |
14
|
$ |
(120
|
) | $ |
—
|
$ |
63,774
|
||||||||||||
|
|
Gross unrealized gains
|
Gross unrealized losses
|
|
|||||||||||||||||||||
(Amounts in millions)
|
Amortized
cost or cost |
Not
other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Not
other-than-
temporarily impaired |
Other-than-
temporarily
impaired
|
Fair
value
|
|||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|||||||||||||||||||
U.S. government, agencies and government-sponsored enterprises
|
$ |
4,175
|
$ |
473
|
$ |
—
|
$ |
(17
|
) | $ |
—
|
$ |
4,631
|
||||||||||||
State and political subdivisions
|
2,406
|
168
|
—
|
(22
|
) |
—
|
2,552
|
||||||||||||||||||
Non-U.S.
government
|
2,345
|
72
|
—
|
(24
|
) |
—
|
2,393
|
||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|||||||||||||||||||
Utilities
|
4,439
|
331
|
—
|
(95
|
) |
—
|
4,675
|
||||||||||||||||||
Energy
|
2,382
|
101
|
—
|
(64
|
) |
—
|
2,419
|
||||||||||||||||||
Finance and insurance
|
6,705
|
249
|
—
|
(132
|
) |
—
|
6,822
|
||||||||||||||||||
Consumer—non-cyclical
|
4,891
|
294
|
—
|
(137
|
) |
—
|
5,048
|
||||||||||||||||||
Technology and communications
|
2,823
|
110
|
—
|
(78
|
) |
—
|
2,855
|
||||||||||||||||||
Industrial
|
1,230
|
41
|
—
|
(33
|
) |
—
|
1,238
|
||||||||||||||||||
Capital goods
|
2,277
|
165
|
—
|
(51
|
) |
—
|
2,391
|
||||||||||||||||||
Consumer—cyclical
|
1,592
|
53
|
—
|
(48
|
) |
—
|
1,597
|
||||||||||||||||||
Transportation
|
1,283
|
78
|
—
|
(41
|
) |
—
|
1,320
|
||||||||||||||||||
Other
|
376
|
24
|
—
|
(3
|
) |
—
|
397
|
||||||||||||||||||
Total U.S. corporate
|
27,998
|
1,446
|
—
|
(682
|
) |
—
|
28,762
|
||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|||||||||||||||||||
Utilities
|
1,056
|
17
|
—
|
(32
|
) |
—
|
1,041
|
||||||||||||||||||
Energy
|
1,320
|
72
|
—
|
(23
|
) |
—
|
1,369
|
||||||||||||||||||
Finance and insurance
|
2,391
|
72
|
—
|
(40
|
) |
—
|
2,423
|
||||||||||||||||||
Consumer—non-cyclical
|
756
|
8
|
—
|
(25
|
) |
—
|
739
|
||||||||||||||||||
Technology and communications
|
1,168
|
23
|
—
|
(26
|
) |
—
|
1,165
|
||||||||||||||||||
Industrial
|
926
|
36
|
—
|
(17
|
) |
—
|
945
|
||||||||||||||||||
Capital goods
|
615
|
10
|
—
|
(10
|
) |
—
|
615
|
||||||||||||||||||
Consumer—cyclical
|
532
|
1
|
—
|
(13
|
) |
—
|
520
|
||||||||||||||||||
Transportation
|
689
|
46
|
—
|
(15
|
) |
—
|
720
|
||||||||||||||||||
Other
|
2,218
|
105
|
—
|
(23
|
) |
—
|
2,300
|
||||||||||||||||||
Total
non-U.S.
corporate
|
11,671
|
390
|
—
|
(224
|
) |
—
|
11,837
|
||||||||||||||||||
Residential mortgage-backed
|
2,888
|
160
|
13
|
(17
|
) |
—
|
3,044
|
||||||||||||||||||
Commercial mortgage-backed
|
3,054
|
43
|
—
|
(81
|
) |
—
|
3,016
|
||||||||||||||||||
Other asset-backed
|
3,444
|
10
|
1
|
(29
|
) |
—
|
3,426
|
||||||||||||||||||
Total
available-for-sale
fixed maturity securities
|
$ |
57,981
|
$ |
2,762
|
$ |
14
|
$ |
(1,096
|
) | $ |
—
|
$ |
59,661
|
||||||||||||
|
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, agenciesand
government-sponsored enterprises
|
$ |
—
|
$ |
—
|
—
|
$ |
51
|
$ |
(1
|
) |
9
|
$ |
51
|
$ |
(1
|
) |
9
|
|||||||||||||||||||
Non-U.S. government
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
198
|
|
|
|
(2
|
) |
|
|
14
|
|
|
|
198 |
|
|
|
(2
|
)
|
|
|
14
|
|
U.S. corporate
|
372
|
(15
|
) |
33
|
1,907
|
(61
|
) |
256
|
2,279
|
(76
|
) |
289
|
||||||||||||||||||||||||
Non-U.S.
corporate
|
34
|
(2
|
) |
5
|
526
|
(13
|
) |
82
|
560
|
(15
|
) |
87
|
||||||||||||||||||||||||
Residential mortgage-backed
|
—
|
—
|
—
|
166
|
(2
|
) |
39
|
166
|
(2
|
) |
39
|
|||||||||||||||||||||||||
Commercial mortgage-backed
|
—
|
—
|
—
|
399
|
(14
|
) |
53
|
399
|
(14
|
) |
53
|
|||||||||||||||||||||||||
Other asset-backed
|
832
|
(5
|
) |
160
|
425
|
(5
|
) |
101
|
1,257
|
(10
|
) |
261
|
||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position
|
$ |
1,238
|
$ |
(22
|
) |
198
|
$ |
3,672
|
$ |
(98
|
) |
554
|
$ |
4,910
|
$ |
(120
|
) |
752
|
||||||||||||||||||
% Below cost:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
<20% Below cost
|
$ |
1,238
|
$ |
(22
|
) |
198
|
$ |
3,647
|
$ |
(88
|
) |
549
|
$ |
4,885
|
$ |
(110
|
) |
747
|
||||||||||||||||||
20%-50%
Below cost
|
—
|
—
|
—
|
22
|
(7
|
) |
3
|
22
|
(7
|
) |
3
|
|||||||||||||||||||||||||
>50% Below cost
|
—
|
—
|
—
|
3
|
(3
|
) |
2
|
3
|
(3
|
) |
2
|
|||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position
|
$ |
1,238
|
$ |
(22
|
) |
198
|
$ |
3,672
|
$ |
(98
|
) |
554
|
$ |
4,910
|
$ |
(120
|
) |
752
|
||||||||||||||||||
Investment grade
|
$ |
1,096
|
$ |
(11
|
) |
185
|
$ |
3,463
|
$ |
(83
|
) |
524
|
$ |
4,559
|
$ |
(94
|
) |
709
|
||||||||||||||||||
Below investment grade
|
142
|
(11
|
) |
13
|
209
|
(15
|
) |
30
|
351
|
(26
|
) |
43
|
||||||||||||||||||||||||
Total for fixed maturity securities inan unrealized loss position
|
$ |
1,238
|
$ |
(22
|
) |
198
|
$ |
3,672
|
$ |
(98
|
) |
554
|
$ |
4,910
|
$ |
(120
|
) |
752
|
||||||||||||||||||
|
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
|
$ |
46
|
$ |
(4
|
) |
4
|
$ |
326
|
$ |
(9
|
) |
50
|
$ |
372
|
$ |
(13
|
) |
54
|
||||||||||||||||||
Energy
|
60
|
(2
|
) |
11
|
143
|
(8
|
) |
17
|
203
|
(10
|
) |
28
|
||||||||||||||||||||||||
Finance and insurance
|
—
|
—
|
—
|
343
|
(10
|
) |
46
|
343
|
(10
|
) |
46
|
|||||||||||||||||||||||||
Consumer—non-cyclical
|
93
|
(7
|
) |
12
|
383
|
(11
|
) |
49
|
476
|
(18
|
) |
61
|
||||||||||||||||||||||||
Technology andcommunications
|
173
|
(2
|
) |
6
|
198
|
(4
|
) |
22
|
371
|
(6
|
) |
28
|
||||||||||||||||||||||||
Industrial
|
—
|
—
|
—
|
94
|
(4
|
) |
14
|
94
|
(4
|
) |
14
|
|||||||||||||||||||||||||
Capital goods
|
—
|
—
|
—
|
128
|
(6
|
) |
18
|
128
|
(6
|
) |
18
|
|||||||||||||||||||||||||
Consumer—cyclical
|
—
|
—
|
—
|
175
|
(5
|
) |
24
|
175
|
(5
|
) |
24
|
|||||||||||||||||||||||||
Transportation
|
—
|
—
|
—
|
117
|
(4
|
) |
16
|
117
|
(4
|
) |
16
|
|||||||||||||||||||||||||
Subtotal, U.S. corporate
|
372
|
(15
|
) |
33
|
1,907
|
(61
|
) |
256
|
2,279
|
(76
|
) |
289
|
||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Utilities
|
21
|
(1
|
) |
3
|
103
|
(2
|
) |
13
|
124
|
(3
|
) |
16
|
||||||||||||||||||||||||
Energy
|
13
|
(1
|
) |
2
|
—
|
—
|
—
|
13
|
(1
|
) |
2
|
|||||||||||||||||||||||||
Finance and insurance
|
—
|
—
|
—
|
113
|
(1
|
) |
23
|
113
|
(1
|
) |
23
|
|||||||||||||||||||||||||
Consumer—non-cyclical
|
—
|
—
|
—
|
72
|
(4
|
) |
10
|
72
|
(4
|
) |
10
|
|||||||||||||||||||||||||
Capital goods
|
—
|
—
|
—
|
44
|
(1
|
) |
5
|
44
|
(1
|
) |
5
|
|||||||||||||||||||||||||
Consumer—cyclical
|
—
|
—
|
—
|
64
|
(1
|
) |
10
|
64
|
(1
|
) |
10
|
|||||||||||||||||||||||||
Transportation
|
—
|
—
|
—
|
51
|
(2
|
) |
8
|
51
|
(2
|
) |
8
|
|||||||||||||||||||||||||
Other
|
—
|
—
|
—
|
79
|
(2
|
) |
13
|
79
|
(2
|
) |
13
|
|||||||||||||||||||||||||
Subtotal,
non-U.S.
corporate
|
34
|
(2
|
) |
5
|
526
|
(13
|
) |
82
|
560
|
(15
|
) |
87
|
||||||||||||||||||||||||
Total for corporate securities in anunrealized loss position
|
$ |
406
|
$ |
(17
|
) |
38
|
$ |
2,433
|
$ |
(74
|
) |
338
|
$ |
2,839
|
$ |
(91
|
) |
376
|
||||||||||||||||||
|
Less than 12 months
|
12 months or more
|
Total
|
|||||||||||||||||||||||||||||||||
|
|
Gross
|
Number
|
|
Gross
|
Number
|
|
Gross
|
Number
|
|||||||||||||||||||||||||||
|
Fair
|
unrealized
|
of
|
Fair
|
unrealized
|
of
|
Fair
|
unrealized
|
of
|
|||||||||||||||||||||||||||
(Dollar amounts in millions)
|
value
|
losses
|
securities
|
value
|
losses
|
securities
|
value
|
losses
|
securities
|
|||||||||||||||||||||||||||
Description of Securities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
U.S. government, agenciesand government-sponsored
|
$ |
545
|
$ |
(8
|
) |
17
|
$ |
161
|
$ |
(9
|
)
|
26
|
$ |
706
|
$ |
(17
|
)
|
43
|
||||||||||||||||||
State and political subdivisions
|
371
|
(10
|
) |
63
|
233
|
(12
|
)
|
57
|
604
|
(22
|
)
|
120
|
||||||||||||||||||||||||
Non-U.S.
government
|
261
|
(7
|
) |
51
|
508
|
(17
|
)
|
35
|
769
|
(24
|
)
|
86
|
||||||||||||||||||||||||
U.S. corporate
|
9,975
|
(472
|
) |
1,342
|
2,449
|
(210
|
)
|
365
|
12,424
|
(682
|
)
|
1,707
|
||||||||||||||||||||||||
Non-U.S.
corporate
|
4,172
|
(150
|
) |
614
|
1,274
|
(74
|
)
|
209
|
5,446
|
(224
|
)
|
823
|
||||||||||||||||||||||||
Residential mortgage-backed
|
363
|
(6
|
) |
57
|
579
|
(11
|
)
|
96
|
942
|
(17
|
)
|
153
|
||||||||||||||||||||||||
Commercial mortgage-backed
|
758
|
(19
|
) |
115
|
870
|
(62
|
)
|
130
|
1,628
|
(81
|
)
|
245
|
||||||||||||||||||||||||
Other asset-backed
|
1,597
|
(23
|
) |
326
|
604
|
(6
|
)
|
137
|
2,201
|
(29
|
)
|
463
|
||||||||||||||||||||||||
Total for fixed maturity securities in
|
$ |
18,042
|
$ |
(695
|
) |
2,585
|
$ |
6,678
|
$ |
(401
|
) |
1,055
|
$ |
24,720
|
$ |
(1,096
|
) |
3,640
|
||||||||||||||||||
% Below cost:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
<20% Below cost
|
$ |
18,008
|
$ |
(685
|
) |
2,581
|
$ |
6,624
|
$ |
(383
|
) |
1,045
|
$ |
24,632
|
$ |
(1,068
|
) |
3,626
|
||||||||||||||||||
20%-50%
Below cost
|
34
|
(10
|
) |
4
|
54
|
(18
|
)
|
10
|
88
|
(28
|
)
|
14
|
||||||||||||||||||||||||
Total for fixed maturity securities in
|
$ |
18,042
|
$ |
(695
|
) |
2,585
|
$ |
6,678
|
$ |
(401
|
) |
1,055
|
$ |
24,720
|
$ |
(1,096
|
) |
3,640
|
||||||||||||||||||
Investment grade
|
$ |
16,726
|
$ |
(615
|
) |
2,393
|
$ |
6,508
|
$ |
(379
|
) |
1,024
|
$ |
23,234
|
$ |
(994
|
)
|
3,417
|
||||||||||||||||||
Below investment grade
|
1,316
|
(80
|
) |
192
|
170
|
(22
|
)
|
31
|
1,486
|
(102
|
)
|
223
|
||||||||||||||||||||||||
Total for fixed maturity securities in
|
$ |
18,042
|
$ |
(695
|
) |
2,585
|
$ |
6,678
|
$ |
(401
|
) |
1,055
|
$ |
24,720
|
$ |
(1,096
|
) |
3,640
|
||||||||||||||||||
|
Less than 12 months
|
12 months or more
|
Total
|
|||||||||||||||||||||||||||||||||
|
|
Gross
|
Number
|
|
Gross
|
Number
|
|
Gross
|
Number
|
|||||||||||||||||||||||||||
|
Fair
|
unrealized
|
of
|
Fair
|
unrealized
|
of
|
Fair
|
unrealized
|
of
|
|||||||||||||||||||||||||||
(Dollar amounts in millions)
|
value
|
losses
|
securities
|
value
|
losses
|
securities
|
value
|
losses
|
securities
|
|||||||||||||||||||||||||||
Description of Securities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Utilities
|
$ |
1,246
|
$ |
(61
|
) |
173
|
$ |
343
|
$ |
(34
|
) |
60
|
$ |
1,589
|
$ |
(95
|
) |
233
|
||||||||||||||||||
Energy
|
944
|
(47
|
) |
135
|
152
|
(17
|
) |
23
|
1,096
|
(64
|
) |
158
|
||||||||||||||||||||||||
Finance and insurance
|
2,393
|
(92
|
) |
326
|
688
|
(40
|
) |
95
|
3,081
|
(132
|
) |
421
|
||||||||||||||||||||||||
Consumer—non-cyclical
|
1,826
|
(101
|
) |
203
|
389
|
(36
|
) |
55
|
2,215
|
(137
|
) |
258
|
||||||||||||||||||||||||
Technology andcommunications
|
1,135
|
(51
|
) |
152
|
263
|
(27
|
) |
34
|
1,398
|
(78
|
) |
186
|
||||||||||||||||||||||||
Industrial
|
506
|
(27
|
) |
63
|
74
|
(6
|
) |
13
|
580
|
(33
|
) |
76
|
||||||||||||||||||||||||
Capital goods
|
704
|
(31
|
) |
103
|
184
|
(20
|
) |
27
|
888
|
(51
|
) |
130
|
||||||||||||||||||||||||
Consumer—cyclical
|
738
|
(35
|
) |
123
|
162
|
(13
|
) |
26
|
900
|
(48
|
) |
149
|
||||||||||||||||||||||||
Transportation
|
435
|
(25
|
) |
60
|
179
|
(16
|
) |
31
|
614
|
(41
|
) |
91
|
||||||||||||||||||||||||
Other
|
48
|
(2
|
) |
4
|
15
|
(1
|
) |
1
|
63
|
(3
|
) |
5
|
||||||||||||||||||||||||
Subtotal, U.S. corporate
|
9,975
|
(472
|
) |
1,342
|
2,449
|
(210
|
) |
365
|
12,424
|
(682
|
) |
1,707
|
||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Utilities
|
404
|
(19
|
) |
58
|
173
|
(13
|
) |
24
|
577
|
(32
|
) |
82
|
||||||||||||||||||||||||
Energy
|
439
|
(15
|
) |
64
|
136
|
(8
|
) |
20
|
575
|
(23
|
) |
84
|
||||||||||||||||||||||||
Finance and insurance
|
899
|
(25
|
) |
151
|
294
|
(15
|
) |
52
|
1,193
|
(40
|
) |
203
|
||||||||||||||||||||||||
Consumer—non-cyclical
|
377
|
(16
|
) |
51
|
102
|
(9
|
) |
14
|
479
|
(25
|
) |
65
|
||||||||||||||||||||||||
Technology andcommunications
|
611
|
(24
|
) |
75
|
50
|
(2
|
) |
12
|
661
|
(26
|
) |
87
|
||||||||||||||||||||||||
Industrial
|
275
|
(11
|
) |
48
|
72
|
(6
|
) |
8
|
347
|
(17
|
) |
56
|
||||||||||||||||||||||||
Capital goods
|
226
|
(7
|
) |
27
|
69
|
(3
|
) |
13
|
295
|
(10
|
) |
40
|
||||||||||||||||||||||||
Consumer—cyclical
|
268
|
(11
|
) |
42
|
117
|
(2
|
) |
19
|
385
|
(13
|
) |
61
|
||||||||||||||||||||||||
Transportation
|
232
|
(7
|
) |
27
|
67
|
(8
|
) |
11
|
299
|
(15
|
) |
38
|
||||||||||||||||||||||||
Other
|
441
|
(15
|
) |
71
|
194
|
(8
|
) |
36
|
635
|
(23
|
) |
107
|
||||||||||||||||||||||||
Subtotal,
non-U.S.
corporate
|
4,172
|
(150
|
) |
614
|
1,274
|
(74
|
) |
209
|
5,446
|
(224
|
) |
823
|
||||||||||||||||||||||||
Total for corporate securities in anunrealized loss position
|
$ |
14,147
|
$ |
(622
|
) |
1,956
|
$ |
3,723
|
$ |
(284
|
) |
574
|
$ |
17,870
|
$ |
(906
|
) |
2,530
|
||||||||||||||||||
|
Amortized
|
|
||||||
|
cost or
|
Fair
|
||||||
(Amounts in millions)
|
cost
|
value
|
||||||
Due one year or less
|
$ |
1,957
|
$ |
1,973
|
||||
Due after one year through five years
|
11,198
|
11,602
|
||||||
Due after five years through ten years
|
12,300
|
13,197
|
||||||
Due after ten years
|
23,647
|
27,548
|
||||||
Subtotal
|
49,102
|
54,320
|
||||||
Residential mortgage-backed
|
2,511
|
2,738
|
||||||
Commercial mortgage-backed
|
2,882
|
2,989
|
||||||
Other asset-backed
|
3,699
|
3,727
|
||||||
Total
|
|
$
|
58,194
|
|
|
$
|
63,774
|
|
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||
|
Carrying
|
% of
|
Carrying
|
% of
|
||||||||||||
(Amounts in millions)
|
value
|
total
|
value
|
total
|
||||||||||||
Property type:
|
|
|
|
|
||||||||||||
Retail
|
$ |
2,581
|
37
|
% | $ |
2,463
|
37
|
% | ||||||||
Industrial
|
1,699
|
24
|
1,659
|
25
|
||||||||||||
Office
|
1,656
|
24
|
1,548
|
23
|
||||||||||||
Apartments
|
525
|
7
|
495
|
7
|
||||||||||||
Mixed use
|
247
|
4
|
254
|
4
|
||||||||||||
Other
|
270
|
4
|
281
|
4
|
||||||||||||
Subtotal
|
6,978
|
100
|
% |
6,700
|
100
|
% | ||||||||||
Unamortized balance of loan origination fees and costs
|
(4
|
) |
|
(4
|
) |
|
||||||||||
Allowance for credit losses
|
(11
|
) |
|
(9
|
) |
|
||||||||||
Total
|
$ |
6,963
|
|
$ |
6,687
|
|
||||||||||
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||
|
Carrying
|
% of
|
Carrying
|
% of
|
||||||||||||
(Amounts in millions)
|
value
|
total
|
value
|
total
|
||||||||||||
Geographic region:
|
|
|
|
|
||||||||||||
South Atlantic
|
$ |
1,747
|
25
|
% | $ |
1,709
|
26
|
% | ||||||||
Pacific
|
1,701
|
24
|
1,684
|
25
|
||||||||||||
Middle Atlantic
|
1,000
|
14
|
950
|
14
|
||||||||||||
Mountain
|
717
|
10
|
667
|
10
|
||||||||||||
West North Central
|
490
|
7
|
470
|
7
|
||||||||||||
East North Central
|
457
|
7
|
405
|
6
|
||||||||||||
West South Central
|
387
|
6
|
364
|
6
|
||||||||||||
New England
|
261
|
4
|
228
|
3
|
||||||||||||
East South Central
|
218
|
3
|
223
|
3
|
||||||||||||
Subtotal
|
6,978
|
100
|
% |
6,700
|
100
|
% | ||||||||||
Unamortized balance of loan origination fees and costs
|
(4
|
) |
|
(4
|
) |
|
||||||||||
Allowance for credit losses
|
(11
|
) |
|
(9
|
) |
|
||||||||||
Total
|
$ |
6,963
|
|
$ |
6,687
|
|
||||||||||
|
June 30, 2019
|
|||||||||||||||||||||||
|
|
|
Greater than
|
|
|
|
||||||||||||||||||
|
31 - 60 days
|
61 - 90 days
|
90 days past
|
Total
|
|
|
||||||||||||||||||
(Amounts in millions)
|
past due
|
past due
|
due
|
past due
|
Current
|
Total
|
||||||||||||||||||
Property type:
|
|
|
|
|
|
|
||||||||||||||||||
Retail
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
2,581
|
$ |
2,581
|
||||||||||||
Industrial
|
—
|
—
|
—
|
—
|
1,699
|
1,699
|
||||||||||||||||||
Office
|
—
|
—
|
—
|
—
|
1,656
|
1,656
|
||||||||||||||||||
Apartments
|
—
|
—
|
—
|
—
|
525
|
525
|
||||||||||||||||||
Mixed use
|
—
|
—
|
—
|
—
|
247
|
247
|
||||||||||||||||||
Other
|
—
|
—
|
—
|
—
|
270
|
270
|
||||||||||||||||||
Total recorded investment
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
6,978
|
$ |
6,978
|
||||||||||||
% of total commercial mortgage loans
|
—
|
% |
—
|
% |
—
|
% |
—
|
% |
100
|
% |
100
|
% | ||||||||||||
|
December 31, 2018
|
|||||||||||||||||||||||
|
|
|
Greater than
|
|
|
|
||||||||||||||||||
|
31 - 60 days
|
61 - 90 days
|
90 days past
|
Total
|
|
|
||||||||||||||||||
(Amounts in millions)
|
past due
|
past due
|
due
|
past due
|
Current
|
Total
|
||||||||||||||||||
Property type:
|
|
|
|
|
|
|
||||||||||||||||||
Retail
|
$ |
3
|
$ |
—
|
$ |
—
|
$ |
3
|
$ |
2,460
|
$ |
2,463
|
||||||||||||
Industrial
|
—
|
—
|
—
|
—
|
1,659
|
1,659
|
||||||||||||||||||
Office
|
—
|
—
|
3
|
3
|
1,545
|
1,548
|
||||||||||||||||||
Apartments
|
—
|
—
|
—
|
—
|
495
|
495
|
||||||||||||||||||
Mixed use
|
—
|
—
|
—
|
—
|
254
|
254
|
||||||||||||||||||
Other
|
—
|
—
|
—
|
—
|
281
|
281
|
||||||||||||||||||
Total recorded investment
|
$ |
3
|
$ |
—
|
$ |
3
|
$ |
6
|
$ |
6,694
|
$ |
6,700
|
||||||||||||
% of total commercial mortgage loans
|
—
|
% |
—
|
% |
—
|
% |
—
|
% |
100
|
% |
100
|
% | ||||||||||||
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Allowance for credit losses:
|
|
|
|
|
||||||||||||
Beginning balance
|
$ |
10
|
$ |
9
|
$ |
9
|
$ |
9
|
||||||||
Charge-offs
|
—
|
—
|
—
|
—
|
||||||||||||
Recoveries
|
—
|
—
|
—
|
—
|
||||||||||||
Provision
|
1
|
—
|
2
|
—
|
||||||||||||
Ending balance
|
$ |
11
|
$ |
9
|
$ |
11
|
$ |
9
|
||||||||
Ending allowance for individually impaired loans
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||
Ending allowance for loans not individually impaired that were evaluated collectively for impairment
|
$ |
11
|
$ |
9
|
$ |
11
|
$ |
9
|
||||||||
Recorded investment:
|
|
|
|
|
||||||||||||
Ending balance
|
$ |
6,978
|
$ |
6,492
|
$ |
6,978
|
$ |
6,492
|
||||||||
Ending balance of individually impaired loans
|
$ |
—
|
$ |
6
|
$ |
—
|
$ |
6
|
||||||||
Ending balance of loans not individually impaired that were evaluated collectively for impairment
|
$ |
6,978
|
$ |
6,486
|
$ |
6,978
|
$ |
6,486
|
||||||||
|
June 30, 2019
|
|||||||||||||||||||||||
(Amounts in millions)
|
0% - 50%
|
51% - 60%
|
61% - 75%
|
76% - 100%
|
Greater
than 100%
(1)
|
Total
|
||||||||||||||||||
Property type:
|
|
|
|
|
|
|
||||||||||||||||||
Retail
|
$ |
882
|
$ |
534
|
$ |
1,152
|
$ |
13
|
$ |
—
|
$ |
2,581
|
||||||||||||
Industrial
|
732
|
284
|
674
|
7
|
2
|
1,699
|
||||||||||||||||||
Office
|
587
|
378
|
691
|
—
|
—
|
1,656
|
||||||||||||||||||
Apartments
|
200
|
97
|
223
|
5
|
—
|
525
|
||||||||||||||||||
Mixed use
|
102
|
43
|
102
|
—
|
—
|
247
|
||||||||||||||||||
Other
|
47
|
63
|
160
|
—
|
—
|
270
|
||||||||||||||||||
Total recorded investment
|
$ |
2,550
|
$ |
1,399
|
$ |
3,002
|
$ |
25
|
$ |
2
|
$ |
6,978
|
||||||||||||
% of total
|
37
|
% |
20
|
% |
43
|
% |
—
|
% |
—
|
% |
100
|
% | ||||||||||||
Weighted-average debt service coverage ratio
|
2.39
|
1.84
|
1.57
|
1.34
|
0.88
|
1.92
|
||||||||||||||||||
(1)
|
Included a loan with a recorded investment of $2 million in good standing, where the borrower continued to make timely payments, with a
loan-to-value
of 103%. We evaluated this loan on an individual basis and as it is in good standing, the current recorded investment is expected to be recoverable.
|
|
December 31, 2018
|
|||||||||||||||||||||||
(Amounts in millions)
|
0% - 50%
|
51% - 60%
|
61% - 75%
|
76% - 100%
|
Greater
than 100%
(1)
|
Total
|
||||||||||||||||||
Property type:
|
|
|
|
|
|
|
||||||||||||||||||
Retail
|
$ |
866
|
$ |
565
|
$ |
1,017
|
$ |
15
|
$ |
—
|
$ |
2,463
|
||||||||||||
Industrial
|
749
|
279
|
615
|
14
|
2
|
1,659
|
||||||||||||||||||
Office
|
585
|
373
|
588
|
2
|
—
|
1,548
|
||||||||||||||||||
Apartments
|
206
|
95
|
189
|
5
|
—
|
495
|
||||||||||||||||||
Mixed use
|
105
|
36
|
113
|
—
|
—
|
254
|
||||||||||||||||||
Other
|
43
|
78
|
160
|
—
|
—
|
281
|
||||||||||||||||||
Total recorded investment
|
$ |
2,554
|
$ |
1,426
|
$ |
2,682
|
$ |
36
|
$ |
2
|
$ |
6,700
|
||||||||||||
% of total
|
38
|
% |
21
|
% |
40
|
% |
1
|
% |
—
|
% |
100
|
% | ||||||||||||
Weighted-average debt service coverage ratio
|
2.42
|
2.04
|
1.59
|
1.38
|
0.88
|
2.00
|
||||||||||||||||||
(1)
|
Included a loan with a recorded investment of $2 million in good standing, where the borrower continued to make timely payments, with a
loan-to-value
of 105%. We evaluated this loan on an individual basis and as it is in good standing, the current recorded investment is expected to be recoverable.
|
|
June 30, 2019
|
|||||||||||||||||||||||
(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
|
$ |
33
|
$ |
147
|
$ |
604
|
$ |
1,238
|
$ |
559
|
$ |
2,581
|
||||||||||||
Industrial
|
22
|
68
|
254
|
711
|
644
|
1,699
|
||||||||||||||||||
Office
|
51
|
47
|
213
|
833
|
512
|
1,656
|
||||||||||||||||||
Apartments
|
4
|
24
|
107
|
196
|
194
|
525
|
||||||||||||||||||
Mixed use
|
3
|
18
|
52
|
79
|
95
|
247
|
||||||||||||||||||
Other
|
12
|
132
|
52
|
40
|
34
|
270
|
||||||||||||||||||
Total recorded investment
|
$ |
125
|
$ |
436
|
$ |
1,282
|
$ |
3,097
|
$ |
2,038
|
$ |
6,978
|
||||||||||||
% of total
|
2
|
% |
6
|
% |
18
|
% |
45
|
% |
29
|
% |
100
|
% | ||||||||||||
Weighted-average
loan-to-value
|
55
|
% |
61
|
% |
64
|
% |
59
|
% |
42
|
% |
55
|
% | ||||||||||||
|
December 31, 2018
|
|||||||||||||||||||||||
(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
|
$ |
43
|
$ |
157
|
$ |
448
|
$ |
1,234
|
$ |
581
|
$ |
2,463
|
||||||||||||
Industrial
|
22
|
75
|
233
|
653
|
676
|
1,659
|
||||||||||||||||||
Office
|
57
|
56
|
156
|
765
|
514
|
1,548
|
||||||||||||||||||
Apartments
|
4
|
24
|
104
|
168
|
195
|
495
|
||||||||||||||||||
Mixed use
|
3
|
19
|
51
|
80
|
101
|
254
|
||||||||||||||||||
Other
|
13
|
134
|
50
|
50
|
34
|
281
|
||||||||||||||||||
Total recorded investment
|
$ |
142
|
$ |
465
|
$ |
1,042
|
$ |
2,950
|
$ |
2,101
|
$ |
6,700
|
||||||||||||
% of total
|
2
|
% |
7
|
% |
16
|
% |
44
|
% |
31
|
% |
100
|
% | ||||||||||||
Weighted-average
loan-to-value
|
57
|
% |
61
|
% |
62
|
% |
59
|
% |
42
|
% |
54
|
% | ||||||||||||
|
Derivative assets
|
Derivative liabilities
|
||||||||||||||||||
|
|
Fair value
|
|
Fair value
|
||||||||||||||||
(Amounts in millions)
|
Balance
sheet classification
|
June 30,
2019
|
December 31,
2018
|
Balance
sheet classification
|
June 30,
2019
|
December 31,
2018
|
||||||||||||||
Derivatives designated as
|
|
|
|
|
|
|
||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|
||||||||||||||
Interest rate swaps
|
Other invested assets
|
$ |
144
|
$ |
42
|
Other liabilities
|
$ |
10
|
$ |
102
|
||||||||||
Foreign currency swaps
|
Other invested assets
|
5
|
6
|
Other liabilities
|
1
|
—
|
||||||||||||||
Total cash flow hedges
|
|
149
|
48
|
|
11
|
102
|
||||||||||||||
Total derivatives
|
|
149
|
48
|
|
11
|
102
|
||||||||||||||
Derivatives not designated as
|
|
|
|
|
|
|
||||||||||||||
Interest rate swaps in aforeign currency
|
Other invested assets
|
35
|
74
|
Other liabilities
|
—
|
—
|
||||||||||||||
Interest rate caps and floors
|
Other invested assets
|
16
|
7
|
Other liabilities
|
—
|
—
|
||||||||||||||
Foreign currency swaps
|
Other invested assets
|
1
|
—
|
Other liabilities
|
7
|
23
|
||||||||||||||
Equity index options
|
Other invested assets
|
65
|
39
|
Other liabilities
|
—
|
—
|
||||||||||||||
Financial futures
|
Other invested assets
|
—
|
—
|
Other liabilities
|
—
|
—
|
||||||||||||||
Equity return swaps
|
Other invested assets
|
—
|
—
|
Other liabilities
|
—
|
1
|
||||||||||||||
Other foreign currency
|
Other invested assets
|
14
|
10
|
Other liabilities
|
25
|
42
|
||||||||||||||
GMWB embeddedderivatives
|
Reinsurance
recoverable
(1)
|
20
|
20
|
Policyholder
(2)
|
325
|
337
|
||||||||||||||
Fixed index annuity embedded
|
Other assets
|
—
|
—
|
Policyholder
(3)
|
438
|
389
|
||||||||||||||
Indexed universal lifeembedded
derivatives |
Reinsurance
|
—
|
—
|
Policyholder
(4)
|
15
|
12
|
||||||||||||||
Total derivatives not
|
|
151
|
150
|
|
810
|
804
|
||||||||||||||
Total derivatives
|
|
$ |
300
|
$ |
198
|
|
$ |
821
|
$ |
906
|
||||||||||
(1)
|
Represents embedded derivatives associated with the reinsured portion of our guaranteed minimum withdrawal benefits (“GMWB”) liabilities. |
(2)
|
Represents the embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
(3)
|
Represents the embedded derivatives associated with our fixed index annuity liabilities. |
(4)
|
Represents the embedded derivatives associated with our indexed universal life liabilities. |
(Notional in millions)
|
Measurement
|
December 31,
201
8
|
Additions
|
Maturities/
terminations
|
June 30,
2019
|
|||||||||||||||
Derivatives designated as hedges
|
|
|
|
|
|
|||||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|||||||||||||||
Interest rate swaps
|
Notional
|
$ |
9,924
|
$ |
469
|
$ |
( 1,338
|
) | $ |
9,055
|
||||||||||
Foreign currency swaps
|
Notional
|
80
|
52
|
(22
|
) |
110
|
||||||||||||||
Total cash flow hedges
|
|
10,004
|
521
|
(1,360
|
) |
9,165
|
||||||||||||||
Total derivatives designated as hedges
|
|
10,004
|
521
|
(1,360
|
) |
9,165
|
||||||||||||||
Derivatives not designated as hedges
|
|
|
|
|
|
|||||||||||||||
Interest rate swaps
|
Notional
|
4,674
|
—
|
—
|
4,674
|
|||||||||||||||
Interest rate swaps in a foreign currency
|
Notional
|
2,565
|
187
|
(77
|
) |
2,675
|
||||||||||||||
Interest rate caps and floors
|
Notional
|
2,624
|
160
|
(66
|
) |
2,718
|
||||||||||||||
Foreign currency swaps
|
Notional
|
453
|
—
|
(2
|
) |
451
|
||||||||||||||
Equity index options
|
Notional
|
2,628
|
939
|
(1,035
|
) |
2,532
|
||||||||||||||
Financial futures
|
Notional
|
1,415
|
3,029
|
(3,217
|
) |
1,227
|
||||||||||||||
Equity return swaps
|
Notional
|
17
|
2
|
(2
|
) |
17
|
||||||||||||||
Other foreign currency contracts
|
Notional
|
1,080
|
2,925
|
(2,704
|
) |
1,301
|
||||||||||||||
Total derivatives not designated as hedges
|
|
15,456
|
7,242
|
(7,103
|
) |
15,595
|
||||||||||||||
Total derivatives
|
|
$ |
25,460
|
$ |
7,763
|
$ |
( 8,463
|
) | $ |
24,760
|
||||||||||
(Number of policies)
|
Measurement
|
December 31,
2018
|
Additions
|
Maturities/
terminations
|
June 30,
2019
|
|||||||||||||||
Derivatives not designated as hedges
|
|
|
|
|
|
|||||||||||||||
GMWB embedded derivatives
|
Policies
|
27,886
|
—
|
(1,139
|
) |
26,747
|
||||||||||||||
Fixed index annuity embedded derivatives
|
Policies
|
16,464
|
—
|
(410
|
) |
16,054
|
||||||||||||||
Indexed universal life embedded derivatives
|
Policies
|
929
|
—
|
(21
|
) |
908
|
|
|
Gain (loss)
reclassified into
|
|
Classification of
gain
(loss)
|
|
Gain (loss)
|
|
Classification of
gain
(loss)
|
|
|||||||||||
|
Gain (loss)
|
net income
|
|
reclassified into
|
|
recognized in
|
|
recognized in
net
|
|
|||||||||||
(Amounts in millions)
|
recognized in OCI
|
from OCI
|
|
net income
|
|
net income
|
|
income
|
|
|||||||||||
Interest rate swaps hedging
assets |
$ |
216
|
$ |
42
|
|
Net investment income
|
|
$ |
—
|
|
Net investment gains (losses)
|
|
||||||||
Interest rate swaps hedging
assets |
—
|
(4
|
) |
|
Net investment gains (losses)
|
|
—
|
|
Net investment gains (losses)
|
|
||||||||||
Interest rate swaps hedging
liabilities |
(20
|
) |
—
|
|
Interest expense
|
|
—
|
|
Net investment gains (losses)
|
|
||||||||||
Foreign currency swaps
|
2
|
(1
|
) |
|
Net investment income
|
|
—
|
|
Net investment gains (losses)
|
|
||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ |
198
|
$ |
37
|
|
|
|
$ |
—
|
|
|
|
||||||||
|
|
|
|
|
|
Gain (loss)
reclassified into
|
|
Classification of
gain
(loss)
|
|
Gain (loss)
|
|
Classification of
gain
(loss)
|
|
|||||||||||
|
Gain (loss)
|
net income
|
|
reclassified into
|
|
recognized in
|
|
recognized in
net
|
|
|||||||||||
(Amounts in millions)
|
recognized in OCI
|
from OCI
|
|
net income
|
|
net income
|
|
income
|
|
|||||||||||
Interest rate swaps hedging
assets |
$ |
(54
|
) | $ |
39
|
|
Net investment income
|
|
$ |
—
|
|
Net investment gains (losses)
|
|
|||||||
Interest rate swaps hedging
liabilities |
5
|
—
|
|
Interest expense
|
|
—
|
|
Net investment gains (losses)
|
|
|||||||||||
Foreign currency swaps
|
1
|
—
|
|
Net investment income
|
|
—
|
|
Net investment gains (losses)
|
|
|||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ |
(48
|
) | $ |
39
|
|
|
|
$ |
—
|
|
|
|
|||||||
|
|
|
|
|
|
Gain (loss)
reclassified into
|
|
Classification of
gain
(loss)
|
|
Gain (loss)
|
|
Classification of
gain
(loss)
|
|
|||||||||||
|
Gain (loss)
|
net income
|
|
reclassified into
|
|
recognized in
|
|
recognized in
|
|
|||||||||||
(Amounts in millions)
|
recognized in OCI
|
from OCI
|
|
net income
|
|
net income
|
|
net income
|
|
|||||||||||
Interest rate swaps hedging
assets |
$ |
353
|
$ |
80
|
|
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 |
(32
|
) |
—
|
|
Interest expense
|
|
—
|
|
Net investment gains (losses)
|
|
||||||||||
Foreign currency swaps
|
(1
|
) |
(1
|
) |
|
Net investment income
|
|
—
|
|
Net investment gains (losses)
|
|
|||||||||
Foreign currency swaps
|
|
|
—
|
|
|
|
—
|
|
|
|
Net investment
gains (losses)
|
|
|
|
2
|
|
|
|
Net investment gains (losses)
|
|
|
|
|
|
|||||||||||||||||
Total
|
$ |
320
|
$ |
81
|
|
|
|
$ |
2
|
|
|
|
||||||||
|
|
|
|
|
|
Gain (loss)
reclassified into
|
|
Classification of
gain
(loss)
|
|
Gain (loss)
|
|
Classification of
gain
(loss)
|
|
|||||||||||
|
Gain (loss)
|
net income
|
|
reclassified into
|
|
recognized in
|
|
recognized in
|
|
|||||||||||
(Amounts in millions)
|
recognized in OCI
|
from OCI
|
|
net income
|
|
net income
|
|
net income
|
|
|||||||||||
Interest rate swaps hedging
assets |
$ |
(227
|
) | $ |
74
|
|
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 |
22
|
—
|
|
Interest expense
|
|
—
|
|
Net investment gains (losses)
|
|
|||||||||||
|
|
|
|
|||||||||||||||||
Total
|
$ |
(205
|
) | $ |
79
|
|
|
|
$ |
—
|
|
|
|
|||||||
|
|
|
|
|
Three months ended
June 30, |
|||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Derivatives qualifying as effective accounting hedges as of April 1
|
$
|
1,850
|
$
|
1,927
|
||||
Current period increases (decreases) in fair value, net of deferred taxes of $(41) and $9
|
157
|
(39
|
) | |||||
Reclassification to net (income), net of deferred taxes of $13 and $14
|
(24
|
) |
(25
|
) | ||||
Derivatives qualifying as effective accounting hedges as of June 30
|
$
|
1,983
|
$
|
1,863
|
||||
|
Six months ended
June 30, |
|||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Derivatives qualifying as effective accounting hedges as of January 1
|
$
|
1,781
|
$
|
2,065
|
||||
Cumulative effect of changes in accounting:
|
|
|
||||||
Stranded tax effects
|
—
|
12
|
||||||
Changes to the hedge accounting model, net of deferred taxes of $— and $(1)
|
—
|
2
|
||||||
Total cumulative effect of changes in accounting
|
—
|
14
|
||||||
Current period increases (decreases) in fair value, net of deferred taxes of $(66) and $43
|
254
|
(165
|
) | |||||
Reclassification to net (income), net of deferred taxes of $29 and $28
|
(52
|
) |
(51
|
) | ||||
Derivatives qualifying as effective accounting hedges as of June 30
|
$
|
1,983
|
$
|
1,863
|
||||
|
Three months ended
June 30,
|
Classification of gain (loss) recognized
|
|||||||||
(Amounts in millions)
|
2019
|
2018
|
in net income
|
||||||||
Interest rate swaps
|
$
|
(3
|
)
|
$
|
(2
|
) |
Net investment gains (losses)
|
||||
Interest rate swaps in a foreign currency
|
(6
|
) |
—
|
Net investment gains (losses)
|
|||||||
Interest rate caps and floors
|
3
|
—
|
Net investment gains (losses)
|
||||||||
Foreign currency swaps
|
6
|
(10
|
) |
Net investment gains (losses)
|
|||||||
Equity index options
|
10
|
8
|
Net investment gains (losses)
|
||||||||
Financial futures
|
17
|
(13
|
) |
Net investment gains (losses)
|
|||||||
Equity return swaps
|
1
|
1
|
Net investment gains (losses)
|
||||||||
Other foreign currency contracts
|
(3
|
) |
1
|
Net investment gains (losses)
|
|||||||
GMWB embedded derivatives
|
(22
|
) |
13
|
Net investment gains (losses)
|
|||||||
Fixed index annuity embedded derivatives
|
(20
|
) |
(15
|
) |
Net investment gains (losses)
|
||||||
Indexed universal life embedded derivatives
|
(1
|
) |
2
|
Net investment gains (losses)
|
|||||||
Total derivatives not designated as hedges
|
$
|
(18
|
)
|
$
|
(15
|
) |
|
||||
|
Six months ended
June 30,
|
Classification of gain (loss) recognized
|
|||||||||
(Amounts in millions)
|
2019
|
2018
|
in net income
|
||||||||
Interest rate swaps
|
$
|
(4
|
)
|
$
|
(3
|
) |
Net investment gains (losses)
|
||||
Interest rate swaps in a foreign currency
|
(29
|
) |
—
|
Net investment gains (losses)
|
|||||||
Interest rate caps and floors
|
9
|
—
|
Net investment gains (losses)
|
||||||||
Foreign currency swaps
|
16
|
(18
|
) |
Net investment gains (losses)
|
|||||||
Equity index options
|
27
|
(7
|
) |
Net investment gains (losses)
|
|||||||
Financial futures
|
(27
|
) |
(37
|
) |
Net investment gains (losses)
|
||||||
Equity return swaps
|
1
|
(4
|
) |
Net investment gains (losses)
|
|||||||
Other foreign currency contracts
|
6
|
9
|
Net investment gains (losses)
|
||||||||
GMWB embedded derivatives
|
23
|
27
|
Net investment gains (losses)
|
||||||||
Fixed index annuity embedded derivatives
|
(58
|
) |
(7
|
) |
Net investment gains (losses)
|
||||||
Indexed universal life embedded derivatives
|
—
|
7
|
Net investment gains (losses)
|
||||||||
Total derivatives not designated as hedges
|
$
|
(36
|
)
|
$
|
(33
|
) |
|
||||
|
June 30,
2019
|
December 31,
2018
|
||||||||||||||||||||||
(Amounts in millions)
|
|
Derivatives
assets
(1)
|
|
|
Derivatives
liabilities
(2)
|
|
|
Net
derivatives
|
|
|
Derivatives
assets
(1)
|
|
|
Derivatives
liabilities
(2)
|
|
|
Net
derivatives
|
|
||||||
Amounts presented in the balance sheet:
|
|
|
|
|
|
|
||||||||||||||||||
Gross amounts recognized
|
$ |
287
|
$ |
44
|
$ |
243
|
$ |
185
|
$ |
169
|
$ |
16
|
||||||||||||
Gross amounts offset in the balance sheet
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Net amounts presented in the balance sheet
|
287
|
44
|
243
|
185
|
169
|
16
|
||||||||||||||||||
Gross amounts not offset in the balance sheet:
|
|
|
|
|
|
|
||||||||||||||||||
Financial instruments
(3)
|
(35
|
) |
(35
|
) |
—
|
(66
|
)
|
(66
|
)
|
—
|
||||||||||||||
Collateral received
|
(77
|
) |
—
|
(77
|
) |
(84
|
)
|
—
|
(84
|
) | ||||||||||||||
Collateral pledged
|
—
|
(327
|
) |
327
|
—
|
(536
|
)
|
536
|
||||||||||||||||
Over collateralization
|
—
|
318
|
(318
|
) |
10
|
433
|
(423
|
) | ||||||||||||||||
Net amount
|
$ |
175
|
$ |
—
|
$ |
175
|
$ |
45
|
$ |
—
|
$ |
45
|
||||||||||||
(1)
|
Included $7 million and $6 million of accruals on derivatives classified as other assets and does not include amounts related to embedded derivatives as of June 30, 2019 and December 31, 2018, respectively. |
(2)
|
Included $1 million of accruals on derivatives included in other liabilities as of June 30, 2019 and does not include amounts related to embedded derivatives as of June 30, 2019 and December 31, 2018. |
(3)
|
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. |
|
June 30, 2019
|
|||||||||||||||||||||||
|
Notional
|
Carrying
|
Fair value
|
|||||||||||||||||||||
(Amounts in millions)
|
amount
|
amount
|
Total
|
Level
1
|
Level
2
|
Level
3
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
||||||||||||||||||
Commercial mortgage loans
|
(1
|
) | $ |
6,963
|
$ |
7,241
|
$ |
—
|
$ |
—
|
$ |
7,241
|
||||||||||||
Restricted commercial mortgage loans
|
( 1
|
)
|
56
|
61
|
—
|
—
|
61
|
|||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|||||||||||||||||
Bank loan investments
|
( 1
|
)
|
337
|
336
|
—
|
—
|
336
|
|||||||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|||||||||||||||||
Long-term borrowings
|
( 1
|
)
|
4,044
|
3,622
|
—
|
3,480
|
142
|
|||||||||||||||||
Non-recourse
funding obligations
|
( 1
|
)
|
311
|
215
|
—
|
—
|
215
|
|||||||||||||||||
Investment contracts
|
( 1
|
)
|
12,364
|
13,194
|
—
|
—
|
13,194
|
|||||||||||||||||
Other firm commitments:
|
|
|
|
|
|
|
||||||||||||||||||
Commitments to fund limited partnerships
|
903
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Commitments to fund bank loan investments
|
52
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Ordinary course of business lending
|
188
|
—
|
—
|
—
|
—
|
—
|
|
December 31, 2018
|
|||||||||||||||||||||||
|
Notional
|
Carrying
|
Fair value
|
|||||||||||||||||||||
(Amounts in millions)
|
amount
|
amount
|
Total
|
Level
1
|
Level
2
|
Level
3
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
||||||||||||||||||
Commercial mortgage loans
|
|
(1)
|
$ |
6,687
|
$ |
6,737
|
$ |
—
|
$ |
—
|
$ |
6,737
|
||||||||||||
Restricted commercial mortgage loans
|
|
(1)
|
62
|
66
|
—
|
—
|
66
|
|||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
||||||||||||||||||
Bank loan investments
|
|
(1)
|
248
|
248
|
—
|
—
|
248
|
|||||||||||||||||
Liabilities:
|
|
|
|
|
|
|
||||||||||||||||||
Long-term borrowings
|
|
(1)
|
4,025
|
3,577
|
—
|
3,434
|
143
|
|||||||||||||||||
Non-recourse
funding obligations
|
|
(1)
|
311
|
215
|
—
|
—
|
215
|
|||||||||||||||||
Investment contracts
|
|
(1)
|
13,105
|
13,052
|
—
|
—
|
13,052
|
|||||||||||||||||
Other firm commitments:
|
|
|
|
|
|
|
||||||||||||||||||
Commitments to fund limited partnerships
|
539
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Commitments to fund bank loan investments
|
33
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Ordinary course of business lending
|
73
|
—
|
—
|
—
|
—
|
—
|
(1)
|
These financial instruments do not have notional amounts. |
• |
Third-party pricing services:
91
% of our portfolio is priced using third-party pricing sources as of June 30, 2019. 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 third-party 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 third-party pricing services for the purpose of understanding the methodologies, techniques and inputs used by the third-party pricing providers.
|
(Amounts in millions)
|
Fair value
|
Primary methodologies
|
Significant inputs
|
|||||
U.S. government, agencies and government-sponsored enterprises
|
$ |
4,987
|
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
|
$ |
2,575
|
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
|
$ |
2,634
|
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
|
$ |
28,118
|
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
|
$ |
10,417
|
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
|
$ |
2,697
|
OAS-based models,single factor binomial models, internally priced
|
Prepayment and default assumptions, aggregation of bonds with similar characteristics, including collateral type, vintage, tranche type, weighted-average life, weighted-average loan age, issuer program and delinquency ratio, pay up and pay down factors, TRACE reports
|
||||
Commercial mortgage-backed
|
$ |
2,897
|
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
|
$ |
3,492
|
Multi-dimensional attribute-based modeling systems, spread matrix priced to swap curves, price quotes from market makers
|
Spreads to daily updated swaps 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
|
• |
Internal models:
A portion of our non-U.S. government, U.S. corporate and non-U.S. corporate securities are valued using internal models. The fair value of these fixed maturity securities were
|
$15 million, $1,056 million and $599 million, respectively, as of June 30, 2019. 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. |
• |
Internal models:
non-U.S.
corporate, residential mortgage-backed, commercial mortgage-backed and other asset-backed securities are valued using internal models. The primary inputs to the valuation of the bond population include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, duration, call provisions, issuer rating, benchmark yields and credit spreads. Certain private fixed maturity securities are valued using an internal model using market observable inputs such as the interest rate yield curve, as well as published credit spreads for similar securities, which includes significant unobservable inputs. Additionally, we may apply certain price caps and liquidity premiums in the valuation of private fixed maturity securities. Price caps are established using inputs from market participants. For structured securities, the primary inputs to the valuation include quoted prices for identical assets, or similar assets in markets that are not active, contractual cash flows, weighted-average coupon, weighted-average maturity, issuer rating, structure of the security, expected prepayment speeds and volumes, collateral type, current and forecasted loss severity, average delinquency rates, vintage of the loans, geographic region, debt service coverage ratios, payment priority with the tranche, benchmark yields and credit spreads. The fair value of our Level 3 fixed maturity securities priced using internal models was $3,806 million as of June 30, 2019.
|
• |
Broker quotes:
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 third-party 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 $481 million as of June 30, 2019.
|
(1)
|
Limited partnerships that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
(1)
|
Limited partnerships that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. |
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
(losses)
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized gains
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
(losses)
|
|
|
|
|
|
|
balance
|
net income
|
|||||||||||||||||||||||||||||||||||
|
as of
April 1,
|
Included
in
net
|
Included
|
|
|
|
|
Transfer
into
|
Transfer
out of
|
as of
June 30,
|
attributable
to assets
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
income
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level 3
(1)
|
Level 3
(1)
|
2019
|
still held
|
||||||||||||||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
State and political subdivisions
|
$
|
52
|
$
|
1
|
$
|
8
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
61
|
$
|
—
|
|||||||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
748
|
—
|
20
|
82
|
(13
|
)
|
—
|
(38
|
)
|
—
|
(10
|
)
|
789
|
—
|
|||||||||||||||||||||||||||||||
Energy
|
115
|
—
|
3
|
5
|
—
|
—
|
(1
|
)
|
—
|
—
|
122
|
—
|
|||||||||||||||||||||||||||||||||
Finance and insurance
|
590
|
—
|
15
|
10
|
—
|
—
|
(8
|
)
|
—
|
—
|
607
|
—
|
|||||||||||||||||||||||||||||||||
Consumer—
non-cyclical |
74
|
—
|
1
|
14
|
—
|
—
|
—
|
—
|
—
|
89
|
—
|
||||||||||||||||||||||||||||||||||
Technology and
|
52
|
—
|
3
|
—
|
—
|
—
|
—
|
—
|
(11
|
)
|
44
|
—
|
|||||||||||||||||||||||||||||||||
Industrial
|
40
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
40
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
95
|
—
|
3
|
—
|
—
|
—
|
—
|
—
|
—
|
98
|
—
|
||||||||||||||||||||||||||||||||||
Consumer—cyclical
|
195
|
—
|
3
|
—
|
—
|
—
|
(13
|
)
|
—
|
—
|
185
|
—
|
|||||||||||||||||||||||||||||||||
Transportation
|
54
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
54
|
—
|
||||||||||||||||||||||||||||||||||
Other
|
199
|
—
|
3
|
—
|
—
|
—
|
(3
|
)
|
—
|
—
|
199
|
—
|
|||||||||||||||||||||||||||||||||
Total U.S. corporate
|
2,162
|
—
|
51
|
111
|
(13
|
)
|
—
|
(63
|
)
|
—
|
(21
|
)
|
2,227
|
—
|
|||||||||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
435
|
—
|
7
|
—
|
(7
|
)
|
—
|
(17
|
)
|
—
|
(1
|
)
|
417
|
—
|
|||||||||||||||||||||||||||||||
Energy
|
221
|
—
|
5
|
15
|
—
|
—
|
—
|
—
|
—
|
241
|
—
|
||||||||||||||||||||||||||||||||||
Finance and insurance
|
182
|
1
|
7
|
2
|
—
|
—
|
(13
|
)
|
—
|
—
|
179
|
1
|
|||||||||||||||||||||||||||||||||
Consumer—
non-cyclical |
67
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
68
|
—
|
||||||||||||||||||||||||||||||||||
Technology and
|
27
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
27
|
—
|
||||||||||||||||||||||||||||||||||
Industrial
|
63
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
64
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
173
|
—
|
3
|
5
|
—
|
—
|
—
|
—
|
—
|
181
|
—
|
||||||||||||||||||||||||||||||||||
Consumer—cyclical
|
125
|
—
|
2
|
—
|
—
|
—
|
(1
|
)
|
—
|
—
|
126
|
—
|
|||||||||||||||||||||||||||||||||
Transportation
|
192
|
—
|
3
|
4
|
—
|
—
|
—
|
—
|
—
|
199
|
—
|
||||||||||||||||||||||||||||||||||
Other
|
90
|
—
|
4
|
35
|
—
|
—
|
—
|
—
|
—
|
129
|
—
|
||||||||||||||||||||||||||||||||||
Total
non-U.S.
corporate
|
1,575
|
1
|
33
|
61
|
(7
|
)
|
—
|
(31
|
)
|
—
|
(1
|
)
|
1,631
|
1
|
|||||||||||||||||||||||||||||||
Residential mortgage-backed
|
35
|
—
|
2
|
5
|
—
|
—
|
(1
|
)
|
—
|
—
|
41
|
—
|
|||||||||||||||||||||||||||||||||
Commercial mortgage-backed
|
98
|
—
|
7
|
1
|
—
|
—
|
—
|
—
|
(14
|
)
|
92
|
—
|
|||||||||||||||||||||||||||||||||
Other asset-backed
|
202
|
—
|
1
|
41
|
—
|
—
|
(28
|
)
|
27
|
(8
|
)
|
235
|
—
|
||||||||||||||||||||||||||||||||
Total fixed maturity securities
|
4,124
|
2
|
102
|
219
|
(20
|
)
|
—
|
(123
|
)
|
27
|
(44
|
)
|
4,287
|
1
|
|||||||||||||||||||||||||||||||
Equity securities
|
55
|
—
|
—
|
2
|
(1
|
)
|
—
|
—
|
—
|
—
|
56
|
—
|
|||||||||||||||||||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Equity index options
|
60
|
10
|
—
|
9
|
—
|
—
|
(14
|
)
|
—
|
—
|
65
|
7
|
|||||||||||||||||||||||||||||||||
Total derivative assets
|
60
|
10
|
—
|
9
|
—
|
—
|
(14
|
)
|
—
|
—
|
65
|
7
|
|||||||||||||||||||||||||||||||||
Total other invested assets
|
60
|
10
|
—
|
9
|
—
|
—
|
(14
|
)
|
—
|
—
|
65
|
7
|
|||||||||||||||||||||||||||||||||
Reinsurance recoverable
(2)
|
18
|
2
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
20
|
2
|
||||||||||||||||||||||||||||||||||
Total Level 3 assets
|
$
|
4,257
|
$
|
14
|
$
|
102
|
$
|
230
|
$
|
(21
|
)
|
$
|
—
|
$
|
(137
|
)
|
$
|
27
|
$
|
(44
|
)
|
$
|
4,428
|
$
|
10
|
||||||||||||||||||||
(1)
|
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
(losses)
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized gains
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
(losses)
|
|
|
|
|
|
|
balance
|
net income
|
|||||||||||||||||||||||||||||||||||
|
as of
|
Included
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
April 1,
2018
|
in net
income
|
Included
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
into
Level 3
(1)
|
out of
Level 3
(1)
|
June 30,
2018
|
to assets
still held
|
||||||||||||||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
State and political subdivisions
|
$
|
53
|
$
|
—
|
$
|
(1
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
52
|
$
|
—
|
||||||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
553
|
(1
|
)
|
(7
|
)
|
66
|
(12
|
)
|
—
|
(2
|
)
|
25
|
—
|
622
|
—
|
||||||||||||||||||||||||||||||
Energy
|
146
|
—
|
—
|
—
|
—
|
—
|
(1
|
)
|
—
|
(7
|
)
|
138
|
—
|
||||||||||||||||||||||||||||||||
Finance and insurance
|
580
|
—
|
(41
|
)
|
—
|
—
|
—
|
(74
|
)
|
—
|
(7
|
)
|
458
|
—
|
|||||||||||||||||||||||||||||||
Consumer—
non-cyclical |
79
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
79
|
—
|
||||||||||||||||||||||||||||||||||
Technology and
|
25
|
—
|
1
|
4
|
—
|
—
|
(18
|
)
|
—
|
—
|
12
|
—
|
|||||||||||||||||||||||||||||||||
Industrial
|
39
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
40
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
103
|
—
|
(1
|
)
|
24
|
—
|
—
|
—
|
—
|
(7
|
)
|
119
|
—
|
||||||||||||||||||||||||||||||||
Consumer—cyclical
|
252
|
—
|
(1
|
)
|
7
|
(3
|
)
|
—
|
(1
|
)
|
—
|
—
|
254
|
—
|
|||||||||||||||||||||||||||||||
Transportation
|
57
|
—
|
—
|
—
|
—
|
—
|
(1
|
)
|
—
|
—
|
56
|
—
|
|||||||||||||||||||||||||||||||||
Other
|
166
|
—
|
—
|
—
|
(10
|
)
|
—
|
(3
|
)
|
—
|
—
|
153
|
—
|
||||||||||||||||||||||||||||||||
Total U.S. corporate
|
2,000
|
(1
|
)
|
(48
|
)
|
101
|
(25
|
)
|
—
|
(100
|
)
|
25
|
(21
|
)
|
1,931
|
—
|
|||||||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
336
|
—
|
(4
|
)
|
—
|
—
|
—
|
—
|
15
|
(14
|
)
|
333
|
—
|
||||||||||||||||||||||||||||||||
Energy
|
195
|
—
|
(2
|
)
|
—
|
—
|
—
|
(18
|
)
|
—
|
—
|
175
|
—
|
||||||||||||||||||||||||||||||||
Finance and insurance
|
153
|
1
|
(3
|
)
|
1
|
—
|
—
|
(1
|
)
|
—
|
(1
|
)
|
150
|
1
|
|||||||||||||||||||||||||||||||
Consumer—
non-cyclical |
120
|
—
|
(1
|
)
|
—
|
—
|
—
|
(11
|
)
|
—
|
—
|
108
|
—
|
||||||||||||||||||||||||||||||||
Technology and
|
28
|
—
|
1
|
—
|
—
|
—
|
(13
|
)
|
—
|
—
|
16
|
—
|
|||||||||||||||||||||||||||||||||
Industrial
|
108
|
—
|
(1
|
)
|
3
|
—
|
—
|
(5
|
)
|
—
|
—
|
105
|
—
|
||||||||||||||||||||||||||||||||
Capital goods
|
186
|
1
|
—
|
—
|
—
|
—
|
(21
|
)
|
—
|
—
|
166
|
1
|
|||||||||||||||||||||||||||||||||
Consumer—cyclical
|
52
|
—
|
—
|
—
|
(1
|
)
|
—
|
(3
|
)
|
—
|
—
|
48
|
—
|
||||||||||||||||||||||||||||||||
Transportation
|
166
|
—
|
(2
|
)
|
22
|
—
|
—
|
—
|
17
|
—
|
203
|
—
|
|||||||||||||||||||||||||||||||||
Other
|
83
|
—
|
(1
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
82
|
—
|
|||||||||||||||||||||||||||||||||
Total
non-U.S.
corporate
|
1,427
|
2
|
(13
|
)
|
26
|
(1
|
)
|
—
|
(72
|
)
|
32
|
(15
|
)
|
1,386
|
2
|
||||||||||||||||||||||||||||||
Residential mortgage-backed
|
34
|
—
|
1
|
17
|
—
|
—
|
(1
|
)
|
—
|
(17
|
)
|
34
|
—
|
||||||||||||||||||||||||||||||||
Commercial mortgage-backed
|
6
|
—
|
—
|
28
|
—
|
—
|
—
|
13
|
(3
|
)
|
44
|
—
|
|||||||||||||||||||||||||||||||||
Other asset-backed
|
172
|
—
|
(1
|
)
|
6
|
—
|
—
|
(24
|
)
|
45
|
(32
|
)
|
166
|
—
|
|||||||||||||||||||||||||||||||
Total fixed maturity securities
|
3,692
|
1
|
(62
|
)
|
178
|
(26
|
)
|
—
|
(197
|
)
|
115
|
(88
|
)
|
3,613
|
2
|
||||||||||||||||||||||||||||||
Equity securities
|
45
|
—
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
46
|
—
|
||||||||||||||||||||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Equity index options
|
60
|
8
|
—
|
15
|
—
|
—
|
(13
|
)
|
—
|
—
|
70
|
8
|
|||||||||||||||||||||||||||||||||
Total derivative assets
|
60
|
8
|
—
|
15
|
—
|
—
|
(13
|
)
|
—
|
—
|
70
|
8
|
|||||||||||||||||||||||||||||||||
Total other invested assets
|
60
|
8
|
—
|
15
|
—
|
—
|
(13
|
)
|
—
|
—
|
70
|
8
|
|||||||||||||||||||||||||||||||||
Reinsurance recoverable
(2)
|
13
|
(1
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
12
|
(1
|
)
|
||||||||||||||||||||||||||||||||
Total Level 3 assets
|
$
|
3,810
|
$
|
8
|
$
|
(62
|
)
|
$
|
194
|
$
|
(26
|
)
|
$
|
—
|
$
|
(210
|
)
|
$
|
115
|
$
|
(88
|
)
|
$
|
3,741
|
$
|
9
|
|||||||||||||||||||
(1)
|
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
(losses)
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized gains
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
(losses)
|
|
|
|
|
|
|
balance
|
net income
|
|||||||||||||||||||||||||||||||||||
|
as of
|
Included
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
||||||||||||||||||||||||||||||||||
|
January 1,
|
in net
|
Included
|
|
|
|
|
into
|
out of
|
June 30,
|
to assets
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
income
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level
3
(1)
|
Level 3
(1)
|
2019
|
still held
|
||||||||||||||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
State and political subdivisions
|
$
|
51
|
$
|
2
|
$
|
8
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
61
|
$
|
1
|
|||||||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
643
|
—
|
42
|
96
|
(14
|
)
|
—
|
(40
|
)
|
72
|
(10
|
)
|
789
|
—
|
|||||||||||||||||||||||||||||||
Energy
|
121
|
—
|
7
|
5
|
—
|
—
|
(11
|
)
|
—
|
—
|
122
|
—
|
|||||||||||||||||||||||||||||||||
Finance and insurance
|
534
|
—
|
38
|
40
|
—
|
—
|
(12
|
)
|
7
|
—
|
607
|
—
|
|||||||||||||||||||||||||||||||||
Consumer—non-cyclical
|
73
|
—
|
3
|
14
|
—
|
—
|
(10
|
)
|
9
|
—
|
89
|
—
|
|||||||||||||||||||||||||||||||||
Technology and communications
|
50
|
—
|
5
|
—
|
—
|
—
|
—
|
—
|
(11
|
)
|
44
|
—
|
|||||||||||||||||||||||||||||||||
Industrial
|
39
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
40
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
92
|
—
|
6
|
—
|
—
|
—
|
—
|
—
|
—
|
98
|
—
|
||||||||||||||||||||||||||||||||||
Consumer—cyclical
|
211
|
—
|
10
|
—
|
(13
|
)
|
—
|
(14
|
)
|
—
|
(9
|
)
|
185
|
—
|
|||||||||||||||||||||||||||||||
Transportation
|
57
|
—
|
1
|
4
|
—
|
—
|
(8
|
)
|
—
|
—
|
54
|
—
|
|||||||||||||||||||||||||||||||||
Other
|
178
|
—
|
6
|
22
|
—
|
—
|
(15
|
)
|
8
|
—
|
199
|
—
|
|||||||||||||||||||||||||||||||||
Total U.S. corporate
|
1,998
|
—
|
119
|
181
|
(27
|
)
|
—
|
(110
|
)
|
96
|
(30
|
)
|
2,227
|
—
|
|||||||||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
404
|
—
|
23
|
30
|
(7
|
)
|
—
|
(17
|
)
|
—
|
(16
|
)
|
417
|
—
|
|||||||||||||||||||||||||||||||
Energy
|
217
|
—
|
12
|
16
|
—
|
—
|
(4
|
)
|
—
|
—
|
241
|
—
|
|||||||||||||||||||||||||||||||||
Finance and insurance
|
171
|
2
|
18
|
7
|
—
|
—
|
(13
|
)
|
—
|
(6
|
)
|
179
|
2
|
||||||||||||||||||||||||||||||||
Consumer—non-cyclical
|
106
|
2
|
4
|
—
|
—
|
—
|
(44
|
)
|
—
|
—
|
68
|
—
|
|||||||||||||||||||||||||||||||||
Technology and
|
26
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
27
|
—
|
||||||||||||||||||||||||||||||||||
Industrial
|
61
|
—
|
3
|
—
|
—
|
—
|
—
|
—
|
—
|
64
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
173
|
—
|
9
|
10
|
—
|
—
|
(11
|
)
|
—
|
—
|
181
|
—
|
|||||||||||||||||||||||||||||||||
Consumer—cyclical
|
122
|
—
|
8
|
—
|
—
|
—
|
(4
|
)
|
—
|
—
|
126
|
—
|
|||||||||||||||||||||||||||||||||
Transportation
|
171
|
—
|
9
|
19
|
—
|
—
|
—
|
—
|
—
|
199
|
—
|
||||||||||||||||||||||||||||||||||
Other
|
81
|
—
|
8
|
35
|
—
|
—
|
(1
|
)
|
6
|
—
|
129
|
—
|
|||||||||||||||||||||||||||||||||
Total
non-U.S.
corporate
|
1,532
|
4
|
95
|
117
|
(7
|
)
|
—
|
(94
|
)
|
6
|
(22
|
)
|
1,631
|
2
|
|||||||||||||||||||||||||||||||
Residential mortgage-backed
|
35
|
—
|
2
|
5
|
—
|
—
|
(1
|
)
|
—
|
—
|
41
|
—
|
|||||||||||||||||||||||||||||||||
Commercial mortgage-backed
|
95
|
—
|
9
|
2
|
—
|
—
|
—
|
—
|
(14
|
)
|
92
|
—
|
|||||||||||||||||||||||||||||||||
Other asset-backed
|
165
|
—
|
2
|
95
|
—
|
—
|
(41
|
)
|
28
|
(14
|
)
|
235
|
—
|
||||||||||||||||||||||||||||||||
Total fixed maturity securities
|
3,876
|
6
|
235
|
400
|
(34
|
)
|
—
|
(246
|
)
|
130
|
(80
|
)
|
4,287
|
3
|
|||||||||||||||||||||||||||||||
Equity securities
|
58
|
—
|
—
|
2
|
(4
|
)
|
—
|
—
|
—
|
—
|
56
|
—
|
|||||||||||||||||||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Equity index options
|
39
|
27
|
—
|
21
|
—
|
—
|
(22
|
)
|
—
|
—
|
65
|
11
|
|||||||||||||||||||||||||||||||||
Total derivative assets
|
39
|
27
|
—
|
21
|
—
|
—
|
(22
|
)
|
—
|
—
|
65
|
11
|
|||||||||||||||||||||||||||||||||
Total other invested assets
|
39
|
27
|
—
|
21
|
—
|
—
|
(22
|
)
|
—
|
—
|
65
|
11
|
|||||||||||||||||||||||||||||||||
Reinsurance recoverable
(2)
|
20
|
(1
|
)
|
—
|
—
|
—
|
1
|
—
|
—
|
—
|
20
|
(1
|
)
|
||||||||||||||||||||||||||||||||
Total Level 3 assets
|
$
|
3,993
|
$
|
32
|
$
|
235
|
$
|
423
|
$
|
(38
|
)
|
$
|
1
|
$
|
(268
|
)
|
$
|
130
|
$
|
(80
|
)
|
$
|
4,428
|
$
|
13
|
||||||||||||||||||||
(1)
|
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities.
|
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
(losses)
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized gains
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
(losses)
|
|
|
|
|
|
|
balance
|
net income
|
|||||||||||||||||||||||||||||||||||
|
as of
|
Included
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
||||||||||||||||||||||||||||||||||
|
January 1,
|
in net
|
Included
|
|
|
|
|
into
|
out of
|
June 30,
|
to assets
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2018
|
income
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level 3
(1)
|
Level 3
(1)
|
2018
|
still held
|
||||||||||||||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
U.S. government, agencies and government-sponsored
|
$
|
1
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
(1
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||||||||||
State and political subdivisions
|
37
|
1
|
(4
|
)
|
—
|
—
|
—
|
—
|
18
|
—
|
52
|
1
|
|||||||||||||||||||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
574
|
(1
|
)
|
(25
|
)
|
69
|
(12
|
)
|
—
|
(4
|
)
|
25
|
(4
|
)
|
622
|
—
|
|||||||||||||||||||||||||||||
Energy
|
147
|
—
|
(5
|
)
|
22
|
—
|
—
|
(19
|
)
|
—
|
(7
|
)
|
138
|
—
|
|||||||||||||||||||||||||||||||
Finance and insurance
|
626
|
1
|
(67
|
)
|
26
|
—
|
—
|
(110
|
)
|
—
|
(18
|
)
|
458
|
1
|
|||||||||||||||||||||||||||||||
Consumer—non-cyclical
|
81
|
—
|
(2
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
79
|
—
|
|||||||||||||||||||||||||||||||||
Technology and
|
73
|
—
|
(5
|
)
|
4
|
—
|
—
|
(60
|
)
|
—
|
—
|
12
|
—
|
||||||||||||||||||||||||||||||||
Industrial
|
39
|
—
|
1
|
—
|
—
|
—
|
—
|
—
|
—
|
40
|
—
|
||||||||||||||||||||||||||||||||||
Capital goods
|
121
|
—
|
(9
|
)
|
24
|
—
|
—
|
(10
|
)
|
—
|
(7
|
)
|
119
|
—
|
|||||||||||||||||||||||||||||||
Consumer—cyclical
|
262
|
—
|
(10
|
)
|
17
|
(3
|
)
|
—
|
(12
|
)
|
—
|
—
|
254
|
—
|
|||||||||||||||||||||||||||||||
Transportation
|
60
|
—
|
(1
|
)
|
—
|
—
|
—
|
(3
|
)
|
—
|
—
|
56
|
—
|
||||||||||||||||||||||||||||||||
Other
|
169
|
—
|
(1
|
)
|
—
|
(10
|
)
|
—
|
(5
|
)
|
—
|
—
|
153
|
—
|
|||||||||||||||||||||||||||||||
Total U.S. corporate
|
2,152
|
—
|
(124
|
)
|
162
|
(25
|
)
|
—
|
(223
|
)
|
25
|
(36
|
)
|
1,931
|
1
|
||||||||||||||||||||||||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Utilities
|
343
|
—
|
(13
|
)
|
22
|
—
|
—
|
(20
|
)
|
15
|
(14
|
)
|
333
|
—
|
|||||||||||||||||||||||||||||||
Energy
|
176
|
—
|
(6
|
)
|
23
|
—
|
—
|
(18
|
)
|
—
|
—
|
175
|
—
|
||||||||||||||||||||||||||||||||
Finance and insurance
|
161
|
2
|
(11
|
)
|
1
|
—
|
—
|
(2
|
)
|
—
|
(1
|
)
|
150
|
2
|
|||||||||||||||||||||||||||||||
Consumer—non-cyclical
|
124
|
—
|
(4
|
)
|
—
|
—
|
—
|
(12
|
)
|
—
|
—
|
108
|
—
|
||||||||||||||||||||||||||||||||
Technology and
|
29
|
—
|
—
|
—
|
—
|
—
|
(13
|
)
|
—
|
—
|
16
|
—
|
|||||||||||||||||||||||||||||||||
Industrial
|
116
|
—
|
(4
|
)
|
3
|
—
|
—
|
(10
|
)
|
—
|
—
|
105
|
—
|
||||||||||||||||||||||||||||||||
Capital goods
|
191
|
1
|
(5
|
)
|
—
|
—
|
—
|
(21
|
)
|
—
|
—
|
166
|
1
|
||||||||||||||||||||||||||||||||
Consumer—cyclical
|
54
|
—
|
(2
|
)
|
—
|
(1
|
)
|
—
|
(3
|
)
|
—
|
—
|
48
|
—
|
|||||||||||||||||||||||||||||||
Transportation
|
170
|
—
|
(6
|
)
|
22
|
—
|
—
|
—
|
17
|
—
|
203
|
—
|
|||||||||||||||||||||||||||||||||
Other
|
52
|
—
|
(3
|
)
|
33
|
—
|
—
|
—
|
—
|
—
|
82
|
—
|
|||||||||||||||||||||||||||||||||
Total
non-U.S.
corporate
|
1,416
|
3
|
(54
|
)
|
104
|
(1
|
)
|
—
|
(99
|
)
|
32
|
(15
|
)
|
1,386
|
3
|
||||||||||||||||||||||||||||||
Residential mortgage-backed
|
77
|
—
|
—
|
29
|
—
|
—
|
(1
|
)
|
—
|
(71
|
)
|
34
|
—
|
||||||||||||||||||||||||||||||||
Commercial mortgage-backed
|
30
|
—
|
(2
|
)
|
35
|
—
|
—
|
—
|
13
|
(32
|
)
|
44
|
—
|
||||||||||||||||||||||||||||||||
Other asset-backed
|
237
|
—
|
(3
|
)
|
61
|
—
|
—
|
(56
|
)
|
48
|
(121
|
)
|
166
|
—
|
|||||||||||||||||||||||||||||||
Total fixed maturity securities
|
3,950
|
4
|
(187
|
)
|
391
|
(26
|
)
|
—
|
(380
|
)
|
136
|
(275
|
)
|
3,613
|
5
|
||||||||||||||||||||||||||||||
Equity securities
|
44
|
—
|
—
|
5
|
(3
|
)
|
—
|
—
|
—
|
—
|
46
|
—
|
|||||||||||||||||||||||||||||||||
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Equity index options
|
80
|
(7
|
)
|
—
|
29
|
—
|
—
|
(32
|
)
|
—
|
—
|
70
|
(4
|
)
|
|||||||||||||||||||||||||||||||
Total derivative assets
|
80
|
(7
|
)
|
—
|
29
|
—
|
—
|
(32
|
)
|
—
|
—
|
70
|
(4
|
)
|
|||||||||||||||||||||||||||||||
Total other invested assets
|
80
|
(7
|
)
|
—
|
29
|
—
|
—
|
(32
|
)
|
—
|
—
|
70
|
(4
|
)
|
|||||||||||||||||||||||||||||||
Reinsurance recoverable
(2)
|
14
|
(3
|
)
|
—
|
—
|
—
|
1
|
—
|
—
|
—
|
12
|
(3
|
)
|
||||||||||||||||||||||||||||||||
Total Level 3 assets
|
$
|
4,088
|
$
|
(6
|
)
|
$
|
(187
|
)
|
$
|
425
|
$
|
(29
|
)
|
$
|
1
|
$
|
(412
|
)
|
$
|
136
|
$
|
(275
|
)
|
$
|
3,741
|
$
|
(2
|
)
|
|||||||||||||||||
(1)
|
The transfers into and out of Level 3 for fixed maturity securities were related to changes in the primary pricing source and changes in the observability of external information used in determining the fair value, such as external ratings or credit spreads, as well as changes in the industry sectors assigned to specific securities. |
(2)
|
Represents embedded derivatives associated with the reinsured portion of our GMWB liabilities. |
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Total realized and unrealized gains (losses) included in net income:
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
2
|
$ |
2
|
$ |
6
|
$ |
5
|
||||||||
Net investment gains (losses)
|
12
|
6
|
26
|
(11
|
) | |||||||||||
Total
|
$ |
14
|
$ |
8
|
$ |
32
|
$ |
(6
|
) | |||||||
Total gains (losses) included in net income attributable to assets still held:
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
1
|
$ |
2
|
$ |
3
|
$ |
5
|
||||||||
Net investment gains (losses)
|
9
|
7
|
10
|
(7
|
) | |||||||||||
Total
|
$ |
10
|
$ |
9
|
$ |
13
|
$ |
(2
|
) | |||||||
(Amounts in millions)
|
Valuation technique
|
Fair value
|
Unobservable input
|
Range
|
Weighted-average
|
|||||||||
Fixed maturity securities:
|
|
|
|
|
|
|||||||||
U.S. corporate:
|
|
|
|
|
|
|||||||||
Utilities
|
Internal models
|
$
|
719
|
Credit spreads
|
66bps - 326bps
|
146
bps
|
||||||||
Energy
|
Internal models
|
99
|
Credit spreads
|
82bps - 311bps
|
167
bps
|
|||||||||
Finance and insurance
|
Internal models
|
595
|
Credit spreads
|
68bps - 246bps
|
158
bps
|
|||||||||
Consumer—non-cyclical
|
Internal models
|
89
|
Credit spreads
|
93bps - 311bps
|
159
bps
|
|||||||||
Technology and
|
Internal models
|
44
|
Credit spreads
|
137bps - 311bps
|
217
bps
|
|||||||||
Industrial
|
Internal models
|
40
|
Credit spreads
|
118bps - 212bps
|
155
bps
|
|||||||||
Capital goods
|
Internal models
|
98
|
Credit spreads
|
103bps - 277bps
|
157
bps
|
|||||||||
Consumer—cyclical
|
Internal models
|
170
|
Credit spreads
|
70bps - 218bps
|
144
bps
|
|||||||||
Transportation
|
Internal models
|
54
|
Credit spreads
|
63bps - 215bps
|
109
bps
|
|||||||||
Other
|
Internal models
|
168
|
Credit spreads
|
68bps - 131bps
|
85
bps
|
|||||||||
Total U.S. corporate
|
Internal models
|
$
|
2,076
|
Credit spreads
|
63bps - 326bps
|
147
bps
|
||||||||
Non-U.S.
corporate:
|
|
|
|
|
|
|||||||||
Utilities
|
Internal models
|
$
|
417
|
Credit spreads
|
84bps - 215bps
|
140
bps
|
||||||||
Energy
|
Internal models
|
221
|
Credit spreads
|
103bps - 277bps
|
162
bps
|
|||||||||
Finance and insurance
|
Internal models
|
179
|
Credit spreads
|
70bps - 189bps
|
128
bps
|
|||||||||
Consumer—non-cyclical
|
Internal models
|
68
|
Credit spreads
|
70bps - 170bps
|
135
bps
|
|||||||||
Technology and
|
Internal models
|
27
|
Credit spreads
|
124bps - 150bps
|
141
bps
|
|||||||||
Industrial
|
Internal models
|
64
|
Credit spreads
|
99bps - 157bps
|
113
bps
|
|||||||||
Capital goods
|
Internal models
|
181
|
Credit spreads
|
93bps - 277bps
|
169
bps
|
|||||||||
Consumer—cyclical
|
Internal models
|
123
|
Credit spreads
|
81bps - 277bps
|
193
bps
|
|||||||||
Transportation
|
Internal models
|
198
|
Credit spreads
|
70bps - 218bps
|
134
bps
|
|||||||||
Other
|
Internal models
|
125
|
Credit spreads
|
109bps - 218bps
|
162
bps
|
|||||||||
Total
non-U.S.
corporate
|
Internal models
|
$
|
1,603
|
Credit spreads
|
70bps - 277bps
|
149
bps
|
||||||||
Derivative assets:
|
|
|
|
|
|
|||||||||
|
|
Discounted cash
|
|
|
|
|
|
Equity index
|
|
|
|
|
|
|
Equity index options
|
flows
|
$
|
65
|
volatility
|
6
% -
29
%
|
17%
|
|
June 30, 2019
|
|||||||||||||||
(Amounts in millions)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Liabilities
|
|
|
|
|
||||||||||||
Policyholder account balances:
|
|
|
|
|
||||||||||||
GMWB embedded derivatives
(1)
|
$ |
325
|
$ |
—
|
$ |
—
|
$ |
325
|
||||||||
Fixed index annuity embedded derivatives
|
438
|
—
|
—
|
438
|
||||||||||||
Indexed universal life embedded derivatives
|
15
|
—
|
—
|
15
|
||||||||||||
Total policyholder account balances
|
778
|
—
|
—
|
778
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
||||||||||||
Interest rate swaps
|
10
|
—
|
10
|
—
|
||||||||||||
Foreign currency swaps
|
8
|
—
|
8
|
—
|
||||||||||||
Other foreign currency contracts
|
25
|
—
|
25
|
—
|
||||||||||||
Total derivative liabilities
|
43
|
—
|
43
|
—
|
||||||||||||
Total liabilities
|
$ |
821
|
$ |
—
|
$ |
43
|
$ |
778
|
||||||||
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
December 31, 2018
|
|||||||||||||||
(Amounts in millions)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Liabilities
|
|
|
|
|
||||||||||||
Policyholder account balances:
|
|
|
|
|
||||||||||||
GMWB embedded derivatives
(1)
|
$ |
337
|
$ |
—
|
$ |
—
|
$ |
337
|
||||||||
Fixed index annuity embedded derivatives
|
389
|
—
|
—
|
389
|
||||||||||||
Indexed universal life embedded derivatives
|
12
|
—
|
—
|
12
|
||||||||||||
Total policyholder account balances
|
738
|
—
|
—
|
738
|
||||||||||||
Derivative liabilities:
|
|
|
|
|
||||||||||||
Interest rate swaps
|
102
|
—
|
102
|
—
|
||||||||||||
Foreign currency swaps
|
23
|
—
|
23
|
—
|
||||||||||||
Equity return swaps
|
1
|
—
|
1
|
—
|
||||||||||||
Other foreign currency contracts
|
42
|
—
|
42
|
—
|
||||||||||||
Total derivative liabilities
|
168
|
—
|
168
|
—
|
||||||||||||
Total liabilities
|
$ |
906
|
$ |
—
|
$ |
168
|
$ |
738
|
||||||||
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
|
|
|
|
|
|
|
|
|
|
Total (gains)
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
losses
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized (gains)
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
losses
|
|
|
|
|
|
|
balance
|
net (income)
|
|||||||||||||||||||||||||||||||||||
|
as of
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
|||||||||||||||||||||||||||||||||||
|
April 1,
|
Included in
|
Included
|
|
|
|
|
into
|
out of
|
June 30,
|
to liabilities
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
net (income)
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level 3
|
Level 3
|
2019
|
still held
|
||||||||||||||||||||||||||||||||||
Policyholder account balances:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
GMWB embedded
(1)
|
$
|
295
|
$
|
24
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
6
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
325
|
$
|
24
|
|||||||||||||||||||||||
Fixed index annuity
|
423
|
20
|
—
|
—
|
—
|
—
|
(5
|
)
|
—
|
—
|
438
|
20
|
|||||||||||||||||||||||||||||||||
Indexed universal life
|
13
|
1
|
—
|
—
|
—
|
1
|
—
|
—
|
—
|
15
|
1
|
||||||||||||||||||||||||||||||||||
Total policyholder account
|
731
|
45
|
—
|
—
|
—
|
7
|
(5
|
)
|
—
|
—
|
778
|
45
|
|||||||||||||||||||||||||||||||||
Total Level 3 liabilities
|
$
|
731
|
$
|
45
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
7
|
$
|
(5
|
)
|
$
|
—
|
$
|
—
|
$
|
778
|
$
|
45
|
||||||||||||||||||||||
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
|
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
|
|
|
|
|
|
|
|
|
|
|
|
Total (gains)
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
losses
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized (gains)
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
losses
|
|
|
|
|
|
|
balance
|
net
(income)
|
|||||||||||||||||||||||||||||||||||
|
as of
|
Included in
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
||||||||||||||||||||||||||||||||||
|
January 1,
|
net
|
Included
|
|
|
|
|
into
|
out of
|
June 30,
|
to liabilities
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
(income)
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level 3
|
Level 3
|
2019
|
still held
|
||||||||||||||||||||||||||||||||||
Policyholder account balances:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
GMWB embedded
(1)
|
$
|
337
|
$
|
(24
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
12
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
325
|
$
|
(20
|
)
|
|||||||||||||||||||||
Fixed index annuity embedded derivatives
|
389
|
58
|
—
|
—
|
—
|
—
|
(9
|
)
|
—
|
—
|
438
|
58
|
|||||||||||||||||||||||||||||||||
Indexed universal life
|
12
|
—
|
—
|
—
|
—
|
3
|
—
|
—
|
—
|
15
|
—
|
||||||||||||||||||||||||||||||||||
Total policyholder account
|
738
|
34
|
—
|
—
|
—
|
15
|
(9
|
)
|
—
|
—
|
778
|
38
|
|||||||||||||||||||||||||||||||||
Total Level 3 liabilities
|
$
|
738
|
$
|
34
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
15
|
$
|
(9
|
)
|
$
|
—
|
$
|
—
|
$
|
778
|
$
|
38
|
||||||||||||||||||||||
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
|
|
|
|
|
|
|
|
|
|
|
|
Total (gains)
|
||||||||||||||||||||||||||||||||||
|
|
Total realized and
|
|
|
|
|
|
|
|
losses
|
|||||||||||||||||||||||||||||||||||
|
Beginning
|
unrealized (gains)
|
|
|
|
|
|
|
Ending
|
included in
|
|||||||||||||||||||||||||||||||||||
|
balance
|
losses
|
|
|
|
|
|
|
balance
|
net (income)
|
|||||||||||||||||||||||||||||||||||
|
as of
|
Included in
|
|
|
|
|
|
Transfer
|
Transfer
|
as of
|
attributable
|
||||||||||||||||||||||||||||||||||
|
January 1,
|
net
|
Included
|
|
|
|
|
into
|
out of
|
June 30,
|
to liabilities
|
||||||||||||||||||||||||||||||||||
(Amounts in millions)
|
2018
|
(income)
|
in OCI
|
Purchases
|
Sales
|
Issuances
|
Settlements
|
Level 3
|
Level 3
|
2018
|
still held
|
||||||||||||||||||||||||||||||||||
Policyholder account balances:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
GMWB embedded
(1)
|
$
|
250
|
$
|
(30
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
15
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
235
|
$
|
(26
|
)
|
|||||||||||||||||||||
Fixed index annuity
|
419
|
7
|
—
|
—
|
—
|
—
|
(6
|
)
|
—
|
—
|
420
|
7
|
|||||||||||||||||||||||||||||||||
Indexed universal life
|
14
|
(7
|
)
|
—
|
—
|
—
|
6
|
—
|
—
|
—
|
13
|
(7
|
)
|
||||||||||||||||||||||||||||||||
Total policyholder account
|
683
|
(30
|
)
|
—
|
—
|
—
|
21
|
(6
|
)
|
—
|
—
|
668
|
(26
|
)
|
|||||||||||||||||||||||||||||||
Total Level 3 liabilities
|
$
|
683
|
$
|
(30
|
)
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
21
|
$
(6
|
)
|
$
|
—
|
$
|
—
|
$
|
668
|
$
|
(26
|
)
|
|||||||||||||||||||||
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance.
|
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Total realized and unrealized (gains) losses included in net (income):
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||
Net investment (gains) losses
|
45
|
(1
|
) |
34
|
(30
|
) | ||||||||||
Total
|
$ |
45
|
$ |
(1
|
) | $ |
34
|
$ |
(30
|
) | ||||||
Total (gains) losses included in net (income) attributable to liabilities still held:
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
—
|
$ |
—
|
$ |
—
|
$ |
—
|
||||||||
Net investment (gains) losses
|
45
|
(1
|
) |
38
|
(26
|
) | ||||||||||
Total
|
$ |
45
|
$ |
(1
|
) | $ |
38
|
$ |
(26
|
) |
(Amounts in millions)
|
Valuation technique
|
Fair value
|
Unobservable input
|
Range
|
Weighted-average
|
|||||||||||
Policyholder account balances:
|
|
|
|
|
|
|||||||||||
|
|
|
Withdrawal utilization rate
|
45
% -
88
%
|
70
|
% | ||||||||||
|
|
|
Lapse rate
|
2
% -
9
%
|
3
|
% | ||||||||||
|
|
|
Non-performance
risk
(credit spreads)
|
18
bps
-
83
bps
|
66
bps
|
|||||||||||
GMWB embedded
(1)
|
Stochastic cash flow model
|
$ |
325
|
Equity index volatility
|
13
23
|
20
|
% | |||||||||
Fixed index annuity embedded
|
Option budget method
|
$ |
438
|
Expected future interest credited
|
–
3
|
1
|
% | |||||||||
Indexed universal life embedded
|
Option budget method
|
$ |
15
|
Expected future interest credited
|
3
8
%
|
5
|
% | |||||||||
|
(1)
|
Represents embedded derivatives associated with our GMWB liabilities, excluding the impact of reinsurance. |
|
As of or for the six
|
|||||||
|
months ended
|
|||||||
|
June 30,
|
|||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Beginning balance
|
$
|
10,379
|
$
|
9,594
|
||||
Less reinsurance recoverables
|
(2,379
|
) |
(2,419
|
) | ||||
Net beginning balance
|
8,000
|
7,175
|
||||||
Incurred related to insured events of:
|
|
|
||||||
Current year
|
2,009
|
1,946
|
||||||
Prior years
|
(214
|
) |
(244
|
) | ||||
Total incurred
|
1,795
|
1,702
|
||||||
Paid related to insured events of:
|
|
|
||||||
Current year
|
(410
|
) |
(434
|
) | ||||
Prior years
|
(1,287
|
) |
(1,266
|
) | ||||
Total paid
|
(1,697
|
) |
(1,700
|
) | ||||
Interest on liability for policy and contract claims
|
188
|
163
|
||||||
Foreign currency translation
|
3
|
(16
|
) | |||||
Net ending balance
|
8,289
|
7,324
|
||||||
Add reinsurance recoverables
|
2,388
|
2,341
|
||||||
Ending balance
|
$ |
10,677
|
$ |
9,665
|
||||
|
June 30,
|
December 31,
|
||||||
(Amounts in millions)
|
2019
|
2018
|
||||||
Genworth Holdings
(1)
|
|
|
||||||
Floating Rate Senior Secured Term Loan Facility, due 2023
|
$ |
444
|
$ |
445
|
||||
7.70% Senior Notes, due 2020
|
397
|
397
|
||||||
7.20% Senior Notes, due 2021
|
381
|
381
|
||||||
7.625% Senior Notes, due 2021
|
703
|
703
|
||||||
4.90% Senior Notes, due 2023
|
399
|
399
|
||||||
4.80% Senior Notes, due 2024
|
400
|
400
|
||||||
6.50% Senior Notes, due 2034
|
297
|
297
|
||||||
Floating Rate Junior Subordinated Notes, due 2066
|
598
|
598
|
||||||
Subtotal
|
3,619
|
3,620
|
||||||
Bond consent fees
|
(29
|
) |
(32
|
) | ||||
Deferred borrowing charges
|
(19
|
) |
(21
|
) | ||||
Total Genworth Holdings
|
3,571
|
3,567
|
||||||
Canada
(2)
|
|
|
||||||
5.68% Senior Notes, due 2020
|
134
|
202
|
||||||
4.24% Senior Notes, due 2024
|
201
|
117
|
||||||
Subtotal
|
335
|
319
|
||||||
Deferred borrowing charges
|
(2
|
) |
(1
|
) | ||||
Total Canada
|
333
|
318
|
||||||
Australia
(3)
|
|
|
||||||
Floating Rate Junior Subordinated Notes, due 2025
|
141
|
141
|
||||||
Deferred borrowing charges
|
(1
|
) |
(1
|
) | ||||
Total Australia
|
140
|
140
|
||||||
Total
|
$
|
4,044
|
$
|
4,025
|
||||
(1)
|
We have the option to redeem all or a portion of the senior notes at any time with notice to the noteholders at a price equal to the greater of 100% of principal or the sum of the present value of the remaining scheduled payments of principal and interest discounted at the then-current treasury rate plus an applicable spread. |
(2)
|
Senior notes issued by Genworth MI Canada Inc. (“Genworth Canada”), our majority-owned subsidiary. |
(3)
|
Subordinated floating rate notes issued by Genworth Financial Mortgage Insurance Pty Limited, our indirect wholly-owned subsidiary. |
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Statutory U.S. federal income tax rate
|
21.0
|
%
|
21.0
|
%
|
21.0
|
%
|
21.0
|
%
|
||||||||
Increase (reduction) in rate resulting from:
|
|
|
|
|
||||||||||||
Effect of foreign operations
|
5.0
|
3.4
|
5.2
|
3.2
|
||||||||||||
U.S. shareholder tax on foreign operations
|
4.4
|
—
|
4.6
|
—
|
||||||||||||
Swaps terminated prior to the TCJA
|
2.1
|
3.9
|
2.4
|
3.2
|
||||||||||||
TCJA, impact from change in tax rate
|
—
|
5.4
|
—
|
3.3
|
||||||||||||
Valuation allowance
|
—
|
(2.0
|
)
|
—
|
(1.3
|
)
|
||||||||||
Provision to return adjustments
|
—
|
(1.6
|
)
|
—
|
(0.7
|
)
|
||||||||||
Other, net
|
0.4
|
0.7
|
(0.4
|
)
|
0.9
|
|||||||||||
Effective rate
|
32.9
|
%
|
30.8
|
%
|
32.8
|
%
|
29.6
|
%
|
||||||||
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
U.S. Mortgage Insurance segment
|
$ |
235
|
$ |
208
|
$ |
458
|
$ |
408
|
||||||||
Canada Mortgage Insurance segment
|
161
|
150
|
320
|
308
|
||||||||||||
Australia Mortgage Insurance segment
|
96
|
136
|
206
|
243
|
||||||||||||
U.S. Life Insurance segment:
|
|
|
|
|
||||||||||||
Long-term care insurance
|
1,055
|
1,035
|
2,169
|
2,055
|
||||||||||||
Life insurance
|
382
|
367
|
754
|
746
|
||||||||||||
Fixed annuities
|
151
|
176
|
310
|
358
|
||||||||||||
U.S. Life Insurance segment
|
1,588
|
1,578
|
3,233
|
3,159
|
||||||||||||
Runoff segment
|
78
|
80
|
160
|
148
|
||||||||||||
Corporate and Other activities
|
(2
|
) |
7
|
(17
|
) |
8
|
||||||||||
Total revenues
|
$ |
2,156
|
$ |
2,159
|
$ |
4,360
|
$ |
4,274
|
||||||||
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Net income
|
$ |
218
|
$ |
249
|
$ |
448
|
$ |
414
|
||||||||
Less: net income attributable to noncontrolling interests
|
50
|
59
|
106
|
112
|
||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
168
|
190
|
342
|
302
|
||||||||||||
Adjustments to net income available to Genworth Financial, Inc.’s
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(1)
|
43
|
12
|
(28
|
) |
29
|
|||||||||||
(Gains) losses on early extinguishment of debt, net
(2)
|
1
|
—
|
1
|
—
|
||||||||||||
Expenses related to restructuring
|
—
|
—
|
4
|
—
|
||||||||||||
Taxes on adjustments
|
(8
|
) |
(2
|
) |
6
|
(6
|
) | |||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
204
|
$ |
200
|
$ |
325
|
$ |
325
|
||||||||
(1)
|
For the three months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(3) million and $(1) million, respectively, and adjusted for net investment gains (losses) attributable to noncontrolling interests of $1 million and $(1) million, respectively. For the six months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(5) million and $(4) million, respectively, and adjusted for net investment gains (losses) attributable to noncontrolling interests of $6 million and $(12) million, respectively. |
(2)
|
For the three and six months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $
1
|
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
|
|
|
|
|
||||||||||||
U.S. Mortgage Insurance segment
|
$ |
147
|
$ |
137
|
$ |
271
|
$ |
248
|
||||||||
Canada Mortgage Insurance segment
|
41
|
46
|
82
|
95
|
||||||||||||
Australia Mortgage Insurance segment
|
13
|
22
|
27
|
41
|
||||||||||||
U.S. Life Insurance segment:
|
|
|
|
|
||||||||||||
Long-term care insurance
|
37
|
22
|
17
|
(10
|
) | |||||||||||
Life insurance
|
10
|
4
|
8
|
3
|
||||||||||||
Fixed annuities
|
19
|
31
|
36
|
59
|
||||||||||||
U.S. Life Insurance segment
|
66
|
57
|
61
|
52
|
||||||||||||
Runoff segment
|
9
|
13
|
29
|
23
|
||||||||||||
Corporate and Other activities
|
(72
|
) |
(75
|
) |
(145
|
) |
(134
|
) | ||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
204
|
$ |
200
|
$ |
325
|
$ |
325
|
||||||||
(Amounts in millions)
|
June 30,
2019 |
December 31,
2018 |
||||||
Assets:
|
|
|
||||||
U.S. Mortgage Insurance segment
|
$ |
3,977
|
$ |
3,583
|
||||
Canada Mortgage Insurance segment
|
5,272
|
5,038
|
||||||
Australia Mortgage Insurance segment
|
2,524
|
2,534
|
||||||
U.S. Life Insurance segment
|
81,002
|
79,799
|
||||||
Runoff segment
|
10,018
|
9,963
|
||||||
Corporate and Other activities
|
1,513
|
6
|
||||||
Total assets
|
$ |
104,306
|
$ |
100,923
|
||||
(Amounts in millions)
|
Net
unrealized investment gains (losses)
(1)
|
Derivatives
qualifying as hedges
(2)
|
Foreign
currency translation and other adjustments |
Total
|
||||||||||||
Balances as of April 1, 2019
|
$ |
943
|
$ |
1,850
|
$ |
(301
|
) | $ |
2,492
|
|||||||
OCI before reclassifications
|
375
|
157
|
43
|
575
|
||||||||||||
Amounts reclassified from (to) OCI
|
1
|
(24
|
) |
—
|
(23
|
) | ||||||||||
Current period OCI
|
376
|
133
|
43
|
552
|
||||||||||||
Balances as of June 30, 2019 before noncontrolling interests
|
1,319
|
1,983
|
(258
|
) |
3,044
|
|||||||||||
Less: change in OCI attributable to noncontrolling interests
|
14
|
—
|
17
|
31
|
||||||||||||
Balances as of June 30, 2019
|
$ |
1,305
|
$ |
1,983
|
$ |
(275
|
) | $ |
3,013
|
|||||||
(1)
|
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2)
|
See note 5 for additional information. |
(Amounts in millions)
|
Net
unrealized investment gains (losses)
(1)
|
Derivatives
qualifying as hedges
(2)
|
Foreign
currency translation and other adjustments |
Total
|
||||||||||||
Balances as of April 1, 2018
|
$ |
917
|
$ |
1,927
|
$ |
(217
|
) | $ |
2,627
|
|||||||
OCI before reclassifications
|
(193
|
)
|
(39
|
)
|
(98
|
) |
(330
|
) | ||||||||
Amounts reclassified from (to) OCI
|
6
|
(25
|
)
|
—
|
(19
|
) | ||||||||||
Current period OCI
|
(187
|
)
|
(64
|
)
|
(98
|
) |
(349
|
) | ||||||||
Balances as of June 30, 2018 before noncontrolling interests
|
730
|
1,863
|
(315
|
) |
2,278
|
|||||||||||
Less: change in OCI attributable to noncontrolling interests
|
(6
|
)
|
—
|
(43
|
) |
(49
|
) | |||||||||
Balances as of June 30, 2018
|
$ |
736
|
$ |
1,863
|
$ |
(272
|
) | $ |
2,327
|
|||||||
(1)
|
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2)
|
See note 5 for additional information. |
(Amounts in millions)
|
Net
unrealized investment gains
(losses)
(1)
|
Derivatives
qualifying as
hedges
(2)
|
Foreign
currency translation and other adjustments |
Total
|
||||||||||||
Balances as of January 1, 2019
|
$ |
595
|
$ |
1,781
|
$ |
(332
|
) | $ |
2,044
|
|||||||
OCI before reclassifications
|
802
|
254
|
97
|
1,153
|
||||||||||||
Amounts reclassified from (to) OCI
|
(46
|
)
|
(52
|
)
|
—
|
(98
|
) | |||||||||
Current period OCI
|
756
|
202
|
97
|
1,055
|
||||||||||||
Balances as of June 30, 2019 before noncontrolling interests
|
1,351
|
1,983
|
(235
|
) |
3,099
|
|||||||||||
Less: change in OCI attributable to noncontrolling interests
|
46
|
—
|
40
|
86
|
||||||||||||
Balances as of June 30, 2019
|
$ |
1,305
|
$ |
1,983
|
$ |
(275
|
) | $ |
3,013
|
|||||||
(1)
|
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2)
|
See note 5 for additional information. |
(Amounts in millions)
|
Net
unrealized investment gains (losses)
(1)
|
Derivatives
qualifying as hedges
(2)
|
Foreign
currency translation and other adjustments |
Total
|
||||||||||||
Balances as of January 1, 2018
|
$ |
1,085
|
$ |
2,065
|
$ |
(123
|
) | $ |
3,027
|
|||||||
Cumulative effect of changes in accounting
|
164
|
14
|
(47
|
) |
131
|
|||||||||||
OCI before reclassifications
|
(541
|
)
|
(165
|
)
|
(185
|
) |
(891
|
) | ||||||||
Amounts reclassified from (to) OCI
|
13
|
(51
|
)
|
—
|
(38
|
) | ||||||||||
Current period OCI
|
(528
|
)
|
(216
|
)
|
(185
|
) |
(929
|
) | ||||||||
Balances as of June 30, 2018 before noncontrolling interests
|
721
|
1,863
|
(355
|
) |
2,229
|
|||||||||||
Less: change in OCI attributable to noncontrolling interests
|
(15
|
)
|
—
|
(83
|
) |
(98
|
) | |||||||||
Balances as of June 30, 2018
|
$ |
736
|
$ |
1,863
|
$ |
(272
|
) | $ |
2,327
|
|||||||
(1)
|
Net of adjustments to DAC, present value of future profits, sales inducements and benefit reserves. See note 4 for additional information. |
(2)
|
See note 5 for additional information. |
|
Amount reclassified from accumulated
other comprehensive income (loss) |
Affected line item in the
consolidated statements
of income
|
|||||||||||||||||
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
|||||||||||||||
Net unrealized investment (gains) losses:
|
|
|
|
|
|
||||||||||||||
Unrealized (gains) losses on
(1)
|
$ |
2
|
$ |
8
|
$ |
(58
|
) | $ |
16
|
Net investment (gains) losses
|
|||||||||
(Provision) benefit for income taxes
|
(1
|
) |
(2
|
) |
12
|
(3
|
) |
Provision for income taxes
|
|||||||||||
Total
|
$ |
1
|
$ |
6
|
$ |
(46
|
) | $ |
13
|
|
|||||||||
Derivatives qualifying as hedges:
|
|
|
|
|
|
||||||||||||||
Interest rate swaps hedging assets
|
$ |
(42
|
) | $ |
(39
|
) | $ |
(80
|
) | $ |
(74
|
) |
Net investment income
|
||||||
Interest rate swaps hedging assets
|
4
|
—
|
(2
|
) |
(5
|
) |
Net investment (gains) losses
|
||||||||||||
Foreign currency swaps
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
Net investment income
|
|
Benefit for income taxes
|
13
|
14
|
29
|
28
|
Provision for income taxes
|
||||||||||||||
|
|||||||||||||||||||
Total
|
$ |
(24
|
) | $ |
(25
|
) | $ |
(52
|
) | $ |
(51
|
) |
|
||||||
(1)
|
Amounts exclude adjustments to DAC, present value of future profits, sales inducements and benefit reserves. |
(Amounts in millions)
|
|
Parent
Guarantor |
|
|
Issuer
|
|
|
All Other
Subsidiaries |
|
|
Eliminations
|
|
|
Consolidated
|
|
|||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities
available-for-sale,
at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,974
|
|
|
$
|
(200
|
)
|
|
$
|
63,774
|
|
Equity securities, at fair value
|
|
|
—
|
|
|
|
—
|
|
|
|
644
|
|
|
|
—
|
|
|
|
644
|
|
Commercial mortgage loans ($56 are restricted related to a securitization entity)
|
|
|
—
|
|
|
|
—
|
|
|
|
7,019
|
|
|
|
—
|
|
|
|
7,019
|
|
Policy loans
|
|
|
—
|
|
|
|
—
|
|
|
|
2,076
|
|
|
|
—
|
|
|
|
2,076
|
|
Other invested assets
|
|
|
—
|
|
|
|
49
|
|
|
|
1,493
|
|
|
|
(7
|
)
|
|
|
1,535
|
|
Investments in subsidiaries
|
|
|
13,938
|
|
|
|
12,439
|
|
|
|
—
|
|
|
|
(26,377
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
13,938
|
|
|
|
12,488
|
|
|
|
75,206
|
|
|
|
(26,584
|
)
|
|
|
75,048
|
|
Cash, cash equivalents and restricted cash
|
|
|
—
|
|
|
|
358
|
|
|
|
1,580
|
|
|
|
—
|
|
|
|
1,938
|
|
Accrued investment income
|
|
|
—
|
|
|
|
—
|
|
|
|
630
|
|
|
|
(4
|
)
|
|
|
626
|
|
Deferred acquisition costs
|
|
|
—
|
|
|
|
—
|
|
|
|
2,105
|
|
|
|
—
|
|
|
|
2,105
|
|
Intangible assets and goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
244
|
|
|
|
—
|
|
|
|
244
|
|
Reinsurance recoverable
|
|
|
—
|
|
|
|
—
|
|
|
|
17,211
|
|
|
|
—
|
|
|
|
17,211
|
|
Other assets
|
|
|
5
|
|
|
|
55
|
|
|
|
505
|
|
|
|
(1
|
)
|
|
|
564
|
|
Intercompany notes receivable
|
|
|
—
|
|
|
|
273
|
|
|
|
—
|
|
|
|
(273
|
)
|
|
|
—
|
|
Deferred tax assets
|
|
|
(35
|
)
|
|
|
841
|
|
|
|
(423
|
)
|
|
|
—
|
|
|
|
383
|
|
Separate account assets
|
|
|
—
|
|
|
|
—
|
|
|
|
6,187
|
|
|
|
—
|
|
|
|
6,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
13,908
|
|
|
$
|
14,015
|
|
|
$
|
103,245
|
|
|
$
|
(26,862
|
)
|
|
$
|
104,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future policy benefits
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,583
|
|
|
$
|
—
|
|
|
$
|
39,583
|
|
Policyholder account balances
|
|
|
—
|
|
|
|
—
|
|
|
|
22,673
|
|
|
|
—
|
|
|
|
22,673
|
|
Liability for policy and contract claims
|
|
|
—
|
|
|
|
—
|
|
|
|
10,677
|
|
|
|
—
|
|
|
|
10,677
|
|
Unearned premiums
|
|
|
—
|
|
|
|
—
|
|
|
|
3,488
|
|
|
|
—
|
|
|
|
3,488
|
|
Other liabilities
|
|
|
—
|
|
|
|
47
|
|
|
|
1,689
|
|
|
|
(13
|
)
|
|
|
1,723
|
|
Intercompany notes payable
|
|
|
151
|
|
|
|
200
|
|
|
|
122
|
|
|
|
(473
|
)
|
|
|
—
|
|
Non-recourse
funding obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
311
|
|
|
|
—
|
|
|
|
311
|
|
Long-term borrowings
|
|
|
—
|
|
|
|
3,571
|
|
|
|
473
|
|
|
|
—
|
|
|
|
4,044
|
|
Deferred tax liability
|
|
|
—
|
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
|
|
28
|
|
Separate account liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
6,187
|
|
|
|
—
|
|
|
|
6,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
151
|
|
|
|
3,818
|
|
|
|
85,231
|
|
|
|
(486
|
)
|
|
|
88,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
1
|
|
Additional
paid-in
capital
|
|
|
11,983
|
|
|
|
9,094
|
|
|
|
18,428
|
|
|
|
(27,522
|
)
|
|
|
11,983
|
|
Accumulated other comprehensive income (loss)
|
|
|
3,013
|
|
|
|
2,982
|
|
|
|
3,051
|
|
|
|
(6,033
|
)
|
|
|
3,013
|
|
Retained earnings
|
|
|
1,460
|
|
|
|
(1,879
|
)
|
|
|
(5,603
|
)
|
|
|
7,482
|
|
|
|
1,460
|
|
Treasury stock, at cost
|
|
|
(2,700
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Genworth Financial, Inc.’s stockholders’ equity
|
|
|
13,757
|
|
|
|
10,197
|
|
|
|
15,879
|
|
|
|
(26,076
|
)
|
|
|
13,757
|
|
Noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
2,135
|
|
|
|
(300
|
)
|
|
|
1,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
13,757
|
|
|
|
10,197
|
|
|
|
18,014
|
|
|
|
(26,376
|
)
|
|
|
15,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
13,908
|
|
|
$
|
14,015
|
|
|
$
|
103,245
|
|
|
$
|
(26,862
|
)
|
|
$
|
104,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in millions)
|
Parent
Guarantor |
Issuer
|
All Other
Subsidiaries |
Eliminations
|
Consolidated
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities
available-for-sale,
at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59,861
|
|
|
$
|
(200
|
)
|
|
$
|
59,661
|
|
Equity securities, at fair value
|
|
|
—
|
|
|
|
—
|
|
|
|
655
|
|
|
|
—
|
|
|
|
655
|
|
Commercial mortgage loans ($62 are restricted related to a securitization entity)
|
|
|
—
|
|
|
|
—
|
|
|
|
6,749
|
|
|
|
—
|
|
|
|
6,749
|
|
Policy loans
|
|
|
—
|
|
|
|
—
|
|
|
|
1,861
|
|
|
|
—
|
|
|
|
1,861
|
|
Other invested assets
|
|
|
—
|
|
|
|
86
|
|
|
|
1,104
|
|
|
|
(2
|
)
|
|
|
1,188
|
|
Investments in subsidiaries
|
|
|
12,570
|
|
|
|
11,462
|
|
|
|
—
|
|
|
|
(24,032
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
12,570
|
|
|
|
11,548
|
|
|
|
70,230
|
|
|
|
(24,234
|
)
|
|
|
70,114
|
|
Cash, cash equivalents and restricted cash
|
|
|
—
|
|
|
|
429
|
|
|
|
1,748
|
|
|
|
—
|
|
|
|
2,177
|
|
Accrued investment income
|
|
|
—
|
|
|
|
—
|
|
|
|
679
|
|
|
|
(4
|
)
|
|
|
675
|
|
Deferred acquisition costs
|
|
|
—
|
|
|
|
—
|
|
|
|
3,263
|
|
|
|
—
|
|
|
|
3,263
|
|
Intangible assets and goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
347
|
|
|
|
—
|
|
|
|
347
|
|
Reinsurance recoverable
|
|
|
—
|
|
|
|
—
|
|
|
|
17,278
|
|
|
|
—
|
|
|
|
17,278
|
|
Other assets
|
|
|
15
|
|
|
|
62
|
|
|
|
397
|
|
|
|
—
|
|
|
|
474
|
|
Intercompany notes receivable
|
|
|
—
|
|
|
|
180
|
|
|
|
6
|
|
|
|
(186
|
)
|
|
|
—
|
|
Deferred tax assets
|
|
|
14
|
|
|
|
907
|
|
|
|
(185
|
)
|
|
|
—
|
|
|
|
736
|
|
Separate account assets
|
|
|
—
|
|
|
|
—
|
|
|
|
5,859
|
|
|
|
—
|
|
|
|
5,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,599
|
|
|
$
|
13,126
|
|
|
$
|
99,622
|
|
|
$
|
(24,424
|
)
|
|
$
|
100,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future policy benefits
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
37,940
|
|
|
$
|
—
|
|
|
$
|
37,940
|
|
Policyholder account balances
|
|
|
—
|
|
|
|
—
|
|
|
|
22,968
|
|
|
|
—
|
|
|
|
22,968
|
|
Liability for policy and contract claims
|
|
|
—
|
|
|
|
—
|
|
|
|
10,379
|
|
|
|
—
|
|
|
|
10,379
|
|
Unearned premiums
|
|
|
—
|
|
|
|
—
|
|
|
|
3,546
|
|
|
|
—
|
|
|
|
3,546
|
|
Other liabilities
|
|
|
27
|
|
|
|
97
|
|
|
|
1,565
|
|
|
|
(7
|
)
|
|
|
1,682
|
|
Intercompany notes payable
|
|
|
122
|
|
|
|
207
|
|
|
|
57
|
|
|
|
(386
|
)
|
|
|
—
|
|
Non-recourse
funding obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
311
|
|
|
|
—
|
|
|
|
311
|
|
Long-term borrowings
|
|
|
—
|
|
|
|
3,567
|
|
|
|
458
|
|
|
|
—
|
|
|
|
4,025
|
|
Deferred tax liability
|
|
|
—
|
|
|
|
—
|
|
|
|
24
|
|
|
|
—
|
|
|
|
24
|
|
Separate account liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
5,859
|
|
|
|
—
|
|
|
|
5,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
149
|
|
|
|
3,871
|
|
|
|
83,107
|
|
|
|
(393
|
)
|
|
|
86,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1
|
|
|
|
—
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
1
|
|
Additional
paid-in
capital
|
|
|
11,987
|
|
|
|
9,095
|
|
|
|
18,425
|
|
|
|
(27,520
|
)
|
|
|
11,987
|
|
Accumulated other comprehensive income (loss)
|
|
|
2,044
|
|
|
|
2,144
|
|
|
|
2,060
|
|
|
|
(4,204
|
)
|
|
|
2,044
|
|
Retained earnings
|
|
|
1,118
|
|
|
|
(1,984
|
)
|
|
|
(6,012
|
)
|
|
|
7,996
|
|
|
|
1,118
|
|
Treasury stock, at cost
|
|
|
(2,700
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Genworth Financial, Inc.’s stockholders’ equity
|
|
|
12,450
|
|
|
|
9,255
|
|
|
|
14,476
|
|
|
|
(23,731
|
)
|
|
|
12,450
|
|
Noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
2,039
|
|
|
|
(300
|
)
|
|
|
1,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
12,450
|
|
|
|
9,255
|
|
|
|
16,515
|
|
|
|
(24,031
|
)
|
|
|
14,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
12,599
|
|
|
$
|
13,126
|
|
|
$
|
99,622
|
|
|
$
|
(24,424
|
)
|
|
$
|
100,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Revenues:
|
|
|
|
|
|
|||||||||||||||
Premiums
|
$ |
—
|
$ |
—
|
$ |
1,126
|
$ |
—
|
$ |
1,126
|
||||||||||
Net investment income
|
—
|
1
|
854
|
(3
|
) |
852
|
||||||||||||||
Net investment gains (losses)
|
—
|
(9
|
) |
(36
|
) |
—
|
(45
|
) | ||||||||||||
Policy fees and other income
|
—
|
2
|
223
|
(2
|
) |
223
|
||||||||||||||
Total revenues
|
—
|
(6
|
) |
2,167
|
(5
|
) |
2,156
|
|||||||||||||
Benefits and expenses:
|
|
|
|
|
|
|||||||||||||||
Benefits and other changes in policy reserves
|
—
|
—
|
1,270
|
—
|
1,270
|
|||||||||||||||
Interest credited
|
—
|
—
|
146
|
—
|
146
|
|||||||||||||||
Acquisition and operating expenses, net of deferrals
|
3
|
—
|
244
|
—
|
247
|
|||||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
95
|
—
|
95
|
|||||||||||||||
Interest expense
|
1
|
65
|
12
|
(5
|
) |
73
|
||||||||||||||
Total benefits and expenses
|
4
|
65
|
1,767
|
(5
|
) |
1,831
|
||||||||||||||
Income (loss) before income taxes and equity in income of subsidiaries
|
(4
|
) |
(71
|
) |
400
|
—
|
325
|
|||||||||||||
Provision (benefit) for income taxes
|
23
|
(14
|
) |
98
|
—
|
107
|
||||||||||||||
Equity in income of subsidiaries
|
195
|
93
|
—
|
(288
|
) |
—
|
||||||||||||||
Net income
|
168
|
36
|
302
|
(288
|
) |
218
|
||||||||||||||
Less: net income attributable to noncontrolling interests
|
—
|
—
|
50
|
—
|
50
|
|||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
168
|
$ |
36
|
$ |
252
|
$ |
(288
|
) | $ |
168
|
|||||||||
|
Parent
|
|
All Other
|
|
||||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Revenues:
|
|
|
|
|
|
|||||||||||||||
Premiums
|
$ |
—
|
$ |
—
|
$ |
1,136
|
$ |
—
|
$ |
1,136
|
||||||||||
Net investment income
|
—
|
4
|
828
|
(4
|
) |
828
|
||||||||||||||
Net investment gains (losses)
|
—
|
(8
|
) |
(6
|
) |
—
|
(14
|
) | ||||||||||||
Policy fees and other income
|
—
|
1
|
209
|
(1
|
) |
209
|
||||||||||||||
Total revenues
|
—
|
(3
|
) |
2,167
|
(5
|
) |
2,159
|
|||||||||||||
Benefits and expenses:
|
|
|
|
|
|
|||||||||||||||
Benefits and other changes in policy reserves
|
—
|
—
|
1,205
|
—
|
1,205
|
|||||||||||||||
Interest credited
|
—
|
—
|
152
|
—
|
152
|
|||||||||||||||
Acquisition and operating expenses, net of deferrals
|
7
|
—
|
246
|
—
|
253
|
|||||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
112
|
—
|
112
|
|||||||||||||||
Interest expense
|
1
|
70
|
11
|
(5
|
) |
77
|
||||||||||||||
Total benefits and expenses
|
8
|
70
|
1,726
|
(5
|
) |
1,799
|
||||||||||||||
Income (loss) before income taxes and equity in income of subsidiaries
|
(8
|
) |
(73
|
) |
441
|
—
|
360
|
|||||||||||||
Provision (benefit) for income taxes
|
32
|
(14
|
) |
93
|
—
|
111
|
||||||||||||||
Equity in income of subsidiaries
|
230
|
151
|
—
|
(381
|
) |
—
|
||||||||||||||
Net income
|
190
|
92
|
348
|
(381
|
) |
249
|
||||||||||||||
Less: net income attributable to noncontrolling interests
|
—
|
—
|
59
|
—
|
59
|
|||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
190
|
$ |
92
|
$ |
289
|
$ |
(381
|
) | $ |
190
|
|||||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Revenues:
|
|
|
|
|
|
|||||||||||||||
Premiums
|
$ |
—
|
$ |
—
|
$ |
2,240
|
$ |
—
|
$ |
2,240
|
||||||||||
Net investment income
|
(1
|
) |
4
|
1,685
|
(7
|
) |
1,681
|
|||||||||||||
Net investment gains (losses)
|
—
|
(12
|
) |
41
|
—
|
29
|
||||||||||||||
Policy fees and other income
|
—
|
2
|
411
|
(3
|
) |
410
|
||||||||||||||
Total revenues
|
(1
|
) |
(6
|
) |
4,377
|
(10
|
) |
4,360
|
||||||||||||
Benefits and expenses:
|
|
|
|
|
|
|||||||||||||||
Benefits and other changes in policy reserves
|
—
|
—
|
2,571
|
—
|
2,571
|
|||||||||||||||
Interest credited
|
—
|
—
|
293
|
—
|
293
|
|||||||||||||||
Acquisition and operating expenses, net of deferrals
|
7
|
(2
|
) |
493
|
—
|
498
|
||||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
186
|
—
|
186
|
|||||||||||||||
Interest expense
|
3
|
130
|
22
|
(10
|
) |
145
|
||||||||||||||
Total benefits and expenses
|
10
|
128
|
3,565
|
(10
|
) |
3,693
|
||||||||||||||
Income (loss) before income taxes and equity in income of subsidiaries
|
(11
|
) |
(134
|
) |
812
|
—
|
667
|
|||||||||||||
Provision (benefit) for income taxes
|
44
|
(26
|
) |
201
|
—
|
219
|
||||||||||||||
Equity in income of subsidiaries
|
397
|
213
|
—
|
(610
|
) |
—
|
||||||||||||||
Net income
|
342
|
105
|
611
|
(610
|
) |
448
|
||||||||||||||
Less: net income attributable to noncontrolling interests
|
—
|
—
|
106
|
—
|
106
|
|||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
342
|
$ |
105
|
$ |
505
|
$ |
(610
|
) | $ |
342
|
|||||||||
|
Parent
|
|
All Other
|
|
||||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Revenues:
|
|
|
|
|
|
|||||||||||||||
Premiums
|
$ |
—
|
$ |
—
|
$ |
2,276
|
$ |
—
|
$
|
2,276
|
||||||||||
Net investment income
|
(1
|
) |
7
|
1,633
|
(7
|
) |
1,632
|
|||||||||||||
Net investment gains (losses)
|
—
|
(2
|
) |
(43
|
) |
—
|
(45
|
) | ||||||||||||
Policy fees and other income
|
—
|
1
|
412
|
(2
|
) |
411
|
||||||||||||||
Total revenues
|
(1
|
) |
6
|
4,278
|
(9
|
) |
4,274
|
|||||||||||||
Benefits and expenses:
|
|
|
|
|
|
|||||||||||||||
Benefits and other changes in policy reserves
|
—
|
—
|
2,516
|
—
|
2,516
|
|||||||||||||||
Interest credited
|
—
|
—
|
308
|
—
|
308
|
|||||||||||||||
Acquisition and operating expenses, net of deferrals
|
14
|
—
|
479
|
—
|
493
|
|||||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
216
|
—
|
216
|
|||||||||||||||
Interest expense
|
1
|
138
|
23
|
(9
|
) |
153
|
||||||||||||||
Total benefits and expenses
|
15
|
138
|
3,542
|
(9
|
) |
3,686
|
||||||||||||||
Income (loss) before income taxes and equity in income of subsidiaries
|
(16
|
) |
(132
|
) |
736
|
—
|
588
|
|||||||||||||
Provision (benefit) for income taxes
|
38
|
(31
|
) |
167
|
—
|
174
|
||||||||||||||
Equity in income of subsidiaries
|
356
|
196
|
—
|
(552
|
) |
—
|
||||||||||||||
Net income
|
302
|
95
|
569
|
(552
|
) |
414
|
||||||||||||||
Less: net income attributable to noncontrolling interests
|
—
|
—
|
112
|
—
|
112
|
|||||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
302
|
$ |
95
|
$ |
457
|
$ |
(552
|
) | $ |
302
|
|||||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Net income
|
$ |
168
|
$ |
36
|
$ |
302
|
$ |
(288
|
) | $ |
218
|
|||||||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired
|
362
|
311
|
376
|
(673
|
) |
376
|
||||||||||||||
Derivatives qualifying as hedges
|
133
|
133
|
148
|
(281
|
) |
133
|
||||||||||||||
Foreign currency translation and other adjustments
|
26
|
17
|
43
|
(43
|
) |
43
|
||||||||||||||
Total other comprehensive income (loss)
|
521
|
461
|
567
|
(997
|
) |
552
|
||||||||||||||
Total comprehensive income
|
689
|
497
|
869
|
(1,285
|
) |
770
|
||||||||||||||
Less: comprehensive income attributable to noncontrolling interests
|
—
|
—
|
81
|
—
|
81
|
|||||||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s common stockholders
|
$ |
689
|
$ |
497
|
$ |
788
|
$ |
(1,285
|
) | $ |
689
|
|||||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Net income
|
$ |
190
|
$ |
92
|
$ |
348
|
$ |
(381
|
) | $ |
249
|
|||||||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired
|
(179
|
) |
(167
|
) |
(185
|
) |
346
|
(185
|
) | |||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities
|
(2
|
) |
(1
|
) |
(2
|
) |
3
|
(2
|
) | |||||||||||
Derivatives qualifying as hedges
|
(64
|
) |
(64
|
) |
(68
|
) |
132
|
(64
|
) | |||||||||||
Foreign currency translation and other adjustments
|
(55
|
) |
(46
|
) |
(97
|
) |
100
|
(98
|
) | |||||||||||
Total other comprehensive income (loss)
|
(300
|
) |
(278
|
) |
(352
|
) |
581
|
(349
|
) | |||||||||||
Total comprehensive loss
|
(110
|
) |
(186
|
) |
(4
|
) |
200
|
(100
|
) | |||||||||||
Less: comprehensive income attributable to noncontrolling interests
|
—
|
—
|
10
|
—
|
10
|
|||||||||||||||
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
|
$ |
(110
|
) | $ |
(186
|
) | $ |
(14
|
) | $ |
200
|
$ |
(110
|
) | ||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Net income
|
$ |
342
|
$ |
105
|
$ |
611
|
$ |
(610
|
) | $ |
448
|
|||||||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|||||||||||||||
Net unrealized gains (losses) on securities not other-than-
temporarily impaired |
709
|
594
|
755
|
(1,303
|
) |
755
|
||||||||||||||
Net unrealized gains (losses) on other-than-temporarily
impaired securities |
1
|
1
|
1
|
(2
|
) |
1
|
||||||||||||||
Derivatives qualifying as hedges
|
202
|
202
|
225
|
(427
|
) |
202
|
||||||||||||||
Foreign currency translation and other adjustments
|
57
|
41
|
96
|
(97
|
) |
97
|
||||||||||||||
Total other comprehensive income (loss)
|
969
|
838
|
1,077
|
(1,829
|
) |
1,055
|
||||||||||||||
Total comprehensive income
|
1,311
|
943
|
1,688
|
(2,439
|
) |
1,503
|
||||||||||||||
Less: comprehensive income attributable to noncontrolling interests
|
—
|
—
|
192
|
—
|
192
|
|||||||||||||||
Total comprehensive income available to Genworth Financial, Inc.’s
common stockholders |
$ |
1,311
|
$ |
943
|
$ |
1,496
|
$ |
(2,439
|
) | $ |
1,311
|
|||||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Net income
|
$ |
302
|
$ |
95
|
$ |
569
|
$ |
(552
|
) | $ |
414
|
|||||||||
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|||||||||||||||
Net unrealized gains (losses) on securities not other-than-temporarily impaired
|
(511
|
) |
(462
|
) |
(526
|
) |
973
|
(526
|
) | |||||||||||
Net unrealized gains (losses) on other-than-temporarily impaired securities
|
(2
|
) |
(1
|
) |
(2
|
) |
3
|
(2
|
) | |||||||||||
Derivatives qualifying as hedges
|
(216
|
) |
(217
|
) |
(233
|
) |
450
|
(216
|
) | |||||||||||
Foreign currency translation and other adjustments
|
(102
|
) |
(82
|
) |
(185
|
) |
184
|
(185
|
) | |||||||||||
Total other comprehensive income (loss)
|
(831
|
) |
(762
|
) |
(946
|
) |
1,610
|
(929
|
) | |||||||||||
Total comprehensive loss
|
(529
|
) |
(667
|
) |
(377
|
) |
1,058
|
(515
|
) | |||||||||||
Less: comprehensive income attributable to noncontrolling interests
|
—
|
—
|
14
|
—
|
14
|
|||||||||||||||
Total comprehensive loss available to Genworth Financial, Inc.’s common stockholders
|
$ |
(529
|
) | $ |
(667
|
) | $ |
(391
|
) | $ |
1,058
|
$ |
(529
|
) | ||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Cash flows from (used by) operating activities:
|
|
|
|
|
|
|||||||||||||||
Net income
|
$
|
342
|
$
|
105
|
$
|
611
|
$
|
(610
|
)
|
$
|
448
|
|||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities:
|
|
|
|
|
|
|||||||||||||||
Equity in income from subsidiaries
|
(397
|
)
|
(213
|
)
|
—
|
610
|
—
|
|||||||||||||
Dividends from subsidiaries
|
—
|
105
|
(105
|
)
|
—
|
—
|
||||||||||||||
Amortization of fixed maturity securities discounts and premiums
|
—
|
3
|
(57
|
)
|
—
|
(54
|
)
|
|||||||||||||
Net investment (gains) losses
|
—
|
12
|
(41
|
)
|
—
|
(29
|
)
|
|||||||||||||
Charges assessed to policyholders
|
—
|
—
|
(364
|
)
|
—
|
(364
|
)
|
|||||||||||||
Acquisition costs deferred
|
—
|
—
|
(35
|
)
|
—
|
(35
|
)
|
|||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
186
|
—
|
186
|
|||||||||||||||
Deferred income taxes
|
49
|
74
|
11
|
—
|
134
|
|||||||||||||||
Derivative instruments and limited partnerships
|
—
|
(30
|
)
|
52
|
—
|
22
|
||||||||||||||
Stock-based compensation expense
|
10
|
—
|
2
|
—
|
12
|
|||||||||||||||
Change in certain assets and liabilities:
|
|
|
|
|
|
|||||||||||||||
Accrued investment income and other assets
|
(1
|
)
|
—
|
(290
|
)
|
1
|
(290
|
)
|
||||||||||||
Insurance reserves
|
—
|
—
|
609
|
—
|
609
|
|||||||||||||||
Current tax liabilities
|
(4
|
)
|
(40
|
)
|
71
|
—
|
27
|
|||||||||||||
Other liabilities, policy and contract claims and other policy-related balances
|
(18
|
)
|
(3
|
)
|
156
|
(6
|
)
|
129
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used by) operating activities
|
(19
|
)
|
13
|
806
|
(5
|
)
|
795
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used by investing activities:
|
|
|
|
|
|
|||||||||||||||
Proceeds from maturities and repayments of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity securities
|
—
|
—
|
1,929
|
—
|
1,929
|
|||||||||||||||
Commercial mortgage loans
|
—
|
—
|
285
|
—
|
285
|
|||||||||||||||
Restricted commercial mortgage loans related to a securitization entity
|
—
|
—
|
6
|
—
|
6
|
|||||||||||||||
Proceeds from sales of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity and equity securities
|
—
|
—
|
2,859
|
—
|
2,859
|
|||||||||||||||
Purchases and originations of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity and equity securities
|
—
|
—
|
(4,681
|
)
|
—
|
(4,681
|
)
|
|||||||||||||
Commercial mortgage loans
|
—
|
—
|
(561
|
)
|
—
|
(561
|
)
|
|||||||||||||
Other invested assets, net
|
—
|
29
|
(261
|
)
|
5
|
(227
|
)
|
|||||||||||||
Policy loans, net
|
—
|
—
|
39
|
—
|
39
|
|||||||||||||||
Intercompany notes receivable
|
—
|
(93
|
)
|
6
|
87
|
—
|
||||||||||||||
Capital contributions to subsidiaries
|
(3
|
)
|
—
|
3
|
—
|
—
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
(3
|
)
|
(64
|
)
|
(376
|
)
|
92
|
(351
|
)
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from (used by) financing activities:
|
|
|
|
|
|
|||||||||||||||
Deposits to universal life and investment contracts
|
—
|
—
|
444
|
—
|
444
|
|||||||||||||||
Withdrawals from universal life and investment contracts
|
—
|
—
|
(1,096
|
)
|
—
|
(1,096
|
)
|
|||||||||||||
Proceeds from the issuance of long-term debt
|
|
|
—
|
|
|
|
—
|
|
|
|
77
|
|
|
|
—
|
|
|
|
77
|
|
Repayment and repurchase of long-term debt
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(77
|
)
|
|
|
—
|
|
|
|
(78
|
)
|
Repurchase of subsidiary shares
|
—
|
—
|
(44
|
)
|
—
|
(44
|
)
|
|||||||||||||
Dividends paid to noncontrolling interests
|
—
|
—
|
(53
|
)
|
—
|
(53
|
)
|
|||||||||||||
Intercompany notes payable
|
29
|
(7
|
)
|
65
|
(87
|
)
|
—
|
|||||||||||||
Other, net
|
(7
|
)
|
(12
|
)
|
74
|
—
|
55
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used by) financing activities
|
22
|
(20
|
)
|
(610
|
)
|
(87
|
)
|
(695
|
)
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
—
|
12
|
—
|
12
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash, cash equivalents and restricted cash
|
—
|
(71
|
)
|
(168
|
)
|
—
|
(239
|
)
|
||||||||||||
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
429
|
1,748
|
—
|
2,177
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
$
|
358
|
$
|
1,580
|
$
|
—
|
$
|
1,938
|
||||||||||
|
Parent
|
|
All Other
|
|
|
|||||||||||||||
(Amounts in millions)
|
Guarantor
|
Issuer
|
Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
Cash flows from (used by) operating activities:
|
|
|
|
|
|
|||||||||||||||
Net income
|
$
|
302
|
$
|
95
|
$
|
569
|
$
|
(552
|
)
|
$
|
414
|
|||||||||
Adjustments to reconcile net income to net cash from (used by) operating activities:
|
|
|
|
|
|
|||||||||||||||
Equity in income from subsidiaries
|
(356
|
)
|
(196
|
)
|
—
|
552
|
—
|
|||||||||||||
Dividends from subsidiaries
|
50
|
91
|
(141
|
)
|
—
|
—
|
||||||||||||||
Amortization of fixed maturity securities discounts and premiums
|
—
|
3
|
(65
|
)
|
—
|
(62
|
)
|
|||||||||||||
Net investment losses
|
—
|
2
|
43
|
—
|
45
|
|||||||||||||||
Charges assessed to policyholders
|
—
|
—
|
(359
|
)
|
—
|
(359
|
)
|
|||||||||||||
Acquisition costs deferred
|
—
|
—
|
(40
|
)
|
—
|
(40
|
)
|
|||||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
—
|
216
|
—
|
216
|
|||||||||||||||
Deferred income taxes
|
42
|
(117
|
)
|
158
|
—
|
83
|
||||||||||||||
Derivative instruments and limited partnerships
|
—
|
22
|
(217
|
)
|
—
|
(195
|
)
|
|||||||||||||
Stock-based compensation expense
|
15
|
—
|
1
|
—
|
16
|
|||||||||||||||
Change in certain assets and liabilities:
|
|
|
|
|
|
|||||||||||||||
Accrued investment income and other assets
|
(1
|
)
|
59
|
(147
|
)
|
—
|
(89
|
)
|
||||||||||||
Insurance reserves
|
—
|
—
|
691
|
—
|
691
|
|||||||||||||||
Current tax liabilities
|
(27
|
)
|
87
|
(97
|
)
|
—
|
(37
|
)
|
||||||||||||
Other liabilities, policy and contract claims and other policy-related balances
|
(15
|
)
|
(50
|
)
|
(49
|
)
|
(8
|
)
|
(122
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from (used by) operating activities
|
10
|
(4
|
)
|
563
|
(8
|
)
|
561
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used by investing activities:
|
|
|
|
|
|
|||||||||||||||
Proceeds from maturities and repayments of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity securities
|
—
|
—
|
1,979
|
—
|
1,979
|
|||||||||||||||
Commercial mortgage loans
|
—
|
—
|
350
|
—
|
350
|
|||||||||||||||
Restricted commercial mortgage loans related to a securitization entity
|
—
|
—
|
16
|
—
|
16
|
|||||||||||||||
Proceeds from sales of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity and equity securities
|
—
|
—
|
1,920
|
—
|
1,920
|
|||||||||||||||
Purchases and originations of investments:
|
|
|
|
|
|
|||||||||||||||
Fixed maturity and equity securities
|
—
|
—
|
(4,082
|
)
|
—
|
(4,082
|
)
|
|||||||||||||
Commercial mortgage loans
|
—
|
—
|
(489
|
)
|
—
|
(489
|
)
|
|||||||||||||
Other invested assets, net
|
—
|
—
|
85
|
8
|
93
|
|||||||||||||||
Policy loans, net
|
—
|
—
|
15
|
—
|
15
|
|||||||||||||||
Intercompany notes receivable
|
—
|
(10
|
)
|
58
|
(48
|
)
|
—
|
|||||||||||||
Capital contributions to subsidiaries
|
(1
|
)
|
—
|
1
|
—
|
—
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
(1
|
)
|
(10
|
)
|
(147
|
)
|
(40
|
)
|
(198
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used by financing activities:
|
|
|
|
|
|
|||||||||||||||
Deposits to universal life and investment contracts
|
—
|
—
|
503
|
—
|
503
|
|||||||||||||||
Withdrawals from universal life and investment contracts
|
—
|
—
|
(1,177
|
)
|
—
|
(1,177
|
)
|
|||||||||||||
Proceeds from the issuance of long-term debt
|
—
|
441
|
—
|
—
|
441
|
|||||||||||||||
Repayment and repurchase of long-term debt
|
—
|
(597
|
)
|
—
|
—
|
(597
|
)
|
|||||||||||||
Repayment of borrowings related to a securitization entity
|
—
|
—
|
(12
|
)
|
—
|
(12
|
)
|
|||||||||||||
Repurchase of subsidiary shares
|
—
|
—
|
(49
|
)
|
—
|
(49
|
)
|
|||||||||||||
Dividends paid to noncontrolling interests
|
—
|
—
|
(50
|
)
|
—
|
(50
|
)
|
|||||||||||||
Intercompany notes payable
|
(7
|
)
|
(59
|
)
|
18
|
48
|
—
|
|||||||||||||
Other, net
|
(2
|
)
|
(19
|
)
|
19
|
—
|
(2
|
)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities
|
(9
|
)
|
(234
|
)
|
(748
|
)
|
48
|
(943
|
)
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
—
|
—
|
(52
|
)
|
—
|
(52
|
)
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash, cash equivalents and restricted cash
|
—
|
(248
|
)
|
(384
|
)
|
—
|
(632
|
)
|
||||||||||||
Cash, cash equivalents and restricted cash at beginning of period
|
—
|
795
|
2,080
|
—
|
2,875
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
—
|
$
|
547
|
$
|
1,696
|
$
|
—
|
$
|
2,243
|
||||||||||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
• |
risks related to the proposed transaction with China Oceanwide
including: our inability to complete the transaction with China Oceanwide in a timely manner or at all; the parties’ inability to obtain regulatory approvals, clearances or extensions, or the possibility that such regulatory approvals may further delay the transaction with China Oceanwide or will not be received prior to November 30, 2019 (and either or both of the parties may not be willing to further waive their end date termination rights beyond November 30, 2019) or that materially burdensome or adverse regulatory conditions may be imposed or undesirable measures may be required in connection with any such regulatory approvals, clearances or extensions (including those conditions or measures that either or both of the parties may be unwilling to accept or undertake, as applicable) or that with continuing delays, circumstances may arise that make one or both parties unwilling to proceed with the transaction with China Oceanwide or unable to comply with the conditions to existing regulatory approvals; the risk that the parties will not be able to obtain other regulatory approvals, clearances or extensions, including in connection with a potential alternative funding structure or the current geo-political environment, or that one or more regulators may rescind or fail to extend existing approvals, or that the revocation by one regulator of approvals will lead to the revocation of approvals by other regulators; the parties’ inability to obtain any necessary regulatory approvals, clearances or extensions for the post-closing capital plan; the risk that a condition to the closing of the transaction with China Oceanwide may not be satisfied or that a condition to closing that is currently satisfied may not remain satisfied due to the delay in closing the transaction with China Oceanwide; risks relating to any potential disposition of Genworth Canada that are similar to the foregoing, including regulatory, legal or contractual restrictions that may impede Genworth’s ability to consummate a disposition of Genworth Canada, the right of China Oceanwide to reject the terms of any Genworth Canada sale, in which case the parties will each have the right to terminate the China Oceanwide transaction, as well as potential changes in market conditions generally or conditions relating to Genworth Canada’s industry or business that may impede any such sale; the risk that existing and potential legal proceedings may be instituted against us in connection with the transaction with China Oceanwide or the potential sale of Genworth Canada that may delay the transaction with China Oceanwide, make it more costly or ultimately preclude it; the risk that the proposed transactions disrupt our current plans and operations as a result of the announcement and consummation of the transactions; certain restrictions during the pendency of the transactions that may impact our ability to pursue certain business opportunities or strategic transactions; continued
|
availability of capital and financing to us before, or in the absence of, the consummation of the transactions; further rating agency actions and downgrades in our debt or financial strength ratings; changes in applicable laws or regulations; our ability to recognize the anticipated benefits of the transactions; the amount of the costs, fees, expenses and other charges related to the transactions, including costs and expenses related to conditions imposed in connection with regulatory approvals or clearances, which may be material; the risks related to diverting management’s attention from our ongoing business operations; the merger agreement may be terminated in circumstances that would require us to pay China Oceanwide a fee; our ability to attract, recruit, retain and motivate current and prospective employees may be adversely affected; and disruptions and uncertainty relating to the transaction, whether or not it is completed, may harm our relationships with our employees, customers, distributors, vendors or other business partners, and may result in a negative impact on our business; |
• |
strategic risks in the event the proposed transaction with China Oceanwide is not consummated
including: our inability to successfully execute alternative strategic plans to effectively address our current business challenges (including with respect to stabilizing our U.S. life insurance businesses, debt obligations, cost savings, ratings and capital); our inability to attract buyers for any businesses or other assets we may seek to sell, or securities we may seek to issue, in each case, in a timely manner and on anticipated terms; failure to obtain any required regulatory, stockholder and/or noteholder approvals or consents for such alternative strategic plans, or our challenges changing or being more costly or difficult to successfully address than currently anticipated or the benefits achieved being less than anticipated; inability to achieve anticipated cost-savings in a timely manner; adverse tax or accounting charges; and our ability to increase the capital needed in our mortgage insurance businesses in a timely manner and on anticipated terms, including through business performance, reinsurance or similar transactions, asset sales, securities offerings or otherwise, in each case as and when required;
|
• |
risks relating to estimates, assumptions and valuations
including: inadequate reserves and the need to increase reserves (including as a result of any changes we may make in the future to our assumptions, methodologies or otherwise in connection with periodic or other reviews); risks related to the impact of our annual review of assumptions and methodologies relating to our long-term care insurance claim reserves and margin, including risks that additional information obtained in the future or other changes to assumptions or methodologies materially affect our margins; inaccurate models; deviations from our estimates and actuarial assumptions or other reasons in our long-term care insurance, life insurance and/or annuity businesses; accelerated amortization of deferred acquisition costs (“DAC”) and present value of future profits (“PVFP”) (including as a result of any changes we may make to our assumptions, methodologies or otherwise in connection with periodic or other reviews); adverse impact on our financial results as a result of projected profits followed by projected losses (as is currently the case with our long-term care insurance business); adverse impact on our results of operations, including the outcome of our annual review of the premium earnings pattern for our mortgage insurance businesses; and changes in valuation of fixed maturity and equity securities;
|
• |
risks relating to economic, market and political conditions
including: downturns and volatility in global economies and equity and credit markets; interest rates and changes in rates have adversely impacted, and may continue to materially adversely impact, our business and profitability; deterioration in economic conditions or a decline in home prices that adversely affect our loss experience in mortgage insurance; political and economic instability or changes in government policies; and fluctuations in foreign currency exchange rates and international securities markets;
|
• |
regulatory and legal risks
including: extensive regulation of our businesses and changes in applicable laws and regulations (including changes to tax laws and regulations); litigation and regulatory investigations or other actions; dependence on dividends and other distributions from our subsidiaries (particularly our international subsidiaries) and the inability of any subsidiaries to pay dividends or make other distributions to us, including as a result of the performance of our subsidiaries and insurance, regulatory or corporate law restrictions; adverse change in regulatory requirements, including risk-based capital; changes in regulations adversely affecting our international operations;
|
inability to continue to maintain the private mortgage insurer eligibility requirements (“PMIERs”); inability of our U.S. mortgage insurance subsidiaries to meet minimum statutory capital requirements; the influence of Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and a small number of large mortgage lenders on the U.S. mortgage insurance market and adverse changes to the role or structure of Fannie Mae and Freddie Mac; adverse changes in regulations affecting our mortgage insurance businesses; inability to continue to implement actions to mitigate the impact of statutory reserve requirements; impact of additional regulations pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in tax laws; and changes in accounting and reporting standards; |
• |
liquidity, financial strength ratings, credit and counterparty risks
including: insufficient internal sources to meet liquidity needs and limited or no access to capital (including the ability to obtain further financing under an additional secured term loan or credit facility); future adverse rating agency actions, including with respect to rating downgrades or potential downgrades or being put on review for potential downgrade, all of which could have adverse implications for us, including with respect to key business relationships, product offerings, business results of operations, financial condition and capital needs, strategic plans, collateral obligations and availability and terms of hedging, reinsurance and borrowings; defaults by counterparties to reinsurance arrangements or derivative instruments; defaults or other events impacting the value of our fixed maturity securities portfolio; and defaults on our commercial mortgage loans or the mortgage loans underlying our investments in commercial mortgage-backed securities and volatility in performance;
|
• |
operational risks
including: inability to retain, attract and motivate qualified employees or senior management; ineffective or inadequate risk management in identifying, controlling or mitigating risks; reliance on, and loss of, key customer or distribution relationships; competition, including in our mortgage insurance businesses from government and government-owned and government-sponsored enterprises (“GSEs”) offering mortgage insurance; the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations; and failure or any compromise of the security of our computer systems, disaster recovery systems and business continuity plans and failures to safeguard, or breaches of, its confidential information;
|
• |
insurance and product-related risks
including: our inability to increase premiums and associated benefit reductions sufficiently, and in a timely manner, on our in-force long-term care insurance policies, and charge higher premiums on policies, in each case, as currently anticipated and as may be required from time to time in the future (including as a result of our failure to obtain any necessary regulatory approvals or unwillingness or inability of policyholders to pay increased premiums and/or accept reduced benefits), including to offset any impact on our long-term care insurance margins; availability, affordability and adequacy of reinsurance to protect us against losses; inability to realize anticipated benefits of our rescissions, curtailments, loan modifications or other similar programs in our mortgage insurance businesses; premiums for the significant portion of our mortgage insurance risk in-force with high loan-to-value ratios may not be sufficient to compensate us for the greater risks associated with those policies; decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations; increases in the use of alternatives to private mortgage insurance and reductions in the level of coverage selected; potential liabilities in connection with our U.S. contract underwriting services; and medical advances, such as genetic research and diagnostic imaging, and related legislation that impact policyholder behavior in ways adverse to us;
|
• |
other risks
including: impairments of or valuation allowances against our deferred tax assets; the possibility that in certain circumstances we will be obligated to make payments to General Electric Company (“GE”) under the tax matters agreement with GE even if our corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control; and provisions of our certificate of incorporation and bylaws and the tax matters agreement with GE may
|
discourage takeover attempts and business combinations that stockholders might consider in their best interests; and |
• |
risks relating to our common stock
including: the continued suspension of payment of dividends and stock price fluctuations.
|
• | We had net income available to Genworth Financial, Inc.’s common stockholders of $168 million and $190 million for the three months ended June 30, 2019 and 2018, respectively. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders was $204 million and $200 million for the three months ended June 30, 2019 and 2018, respectively. |
• | Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $147 million and $137 million for the three months ended June 30, 2019 and 2018, respectively. The increase was primarily attributable to higher insurance in-force and an increase in investment income in the current year. The current year also included an $8 million favorable reserve adjustment. Included in the prior year was a $22 million favorable reserve adjustment. These favorable reserve adjustments were mostly associated with lower expected claim rates. |
• | Our Canada Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $41 million and $46 million for the three months ended June 30, 2019 and 2018, respectively. The decrease was primarily driven by higher taxes and changes in foreign exchange rates in the current year. |
• | Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $13 million and $22 million for the three months ended June 30, 2019 and 2018, respectively. The decrease was predominantly attributable to lower premiums largely from higher policy cancellations in the prior year mostly due to an initiative implemented in the second quarter of 2018 to more promptly identify loans that were discharged or refinanced and from the seasoning of our smaller, more recent in-force books of business. The decrease was partially offset by lower contract fees amortization in the current year. |
• |
Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $66 million and $57 million for the three months ended June 30, 2019 and 2018, respectively. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our long-term care insurance business increased $15 million mainly attributable to $96 million of higher premiums and reduced benefits in the current year from in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. The increase was also due to lower utilization of available benefits compared to the prior year. These increases were partially offset by higher severity and frequency of new claims, lower claim terminations and an increase in incremental reserves of $39 million recorded in connection with an accrual for profits followed by losses in the current year. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our life insurance business increased $6 million mainly from a
reinsurance correction and refinement resulting in a net favorable impact of $17 million in the current year. This increase was partially offset by higher lapses primarily associated with our large
20-year
|
• | Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $9 million and $13 million for the three months ended June 30, 2019 and 2018, respectively. The decrease was predominantly from higher mortality and lower fee income driven mostly by a decline in the average account values in our variable annuity products, partially offset by favorable equity market performance in the current year. |
• |
Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $72 million and $75 million for the three months ended June 30, 2019 and 2018, respectively. The decrease in the loss was principally related to lower interest expense and provisional tax
expense of $19 million in the prior year that did not recur, partially offset by $11 million of higher taxes in the current year associated with the Global Intangible Low Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act (“TCJA”).
|
• | We had net income available to Genworth Financial, Inc.’s common stockholders of $342 million and $302 million for the six months ended June 30, 2019 and 2018, respectively. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders was $325 million for both the six months ended June 30, 2019 and 2018. |
• | Our U.S. Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $271 million and $248 million for the six months ended June 30, 2019 and 2018, respectively. The increase was primarily attributable to higher insurance in-force and an increase in investment income, partially offset by higher operating costs in the current year. The current year also included an $8 million favorable reserve adjustment. Included in the prior year was a $22 million favorable reserve adjustment. These favorable reserve adjustments were mostly associated with lower expected claim rates. |
• |
Our Canada Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $82 million and $95 million for the six months ended June 30, 2019 and 2018, respectively. The decrease was primarily driven by lower earned premiums largely from
changes in foreign exchange rates in the current year, refinements in premium recognition factors in the prior year that did not recur and from the seasoning of our smaller, more recent
in-force
books of business. The decrease was also attributable to higher operating costs in the current year.
|
• | Our Australia Mortgage Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $27 million and $41 million for the six months ended June 30, 2019 and 2018, respectively. The decrease was predominantly attributable to lower premiums largely from the seasoning of our smaller, more recent in-force books of business and from higher policy cancellations in the prior year. The decrease was partially offset by lower contract fees amortization in the current year. |
• |
Our U.S. Life Insurance segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $61 million and $52 million for the six months ended June 30, 2019 and 2018, respectively. Our long-term care insurance business had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $17 million for the six months ended June 30, 2019 compared to an adjusted operating loss of $10 million for the six months ended June 30, 2018. The increase to income in the current year from a loss in the prior year was predominantly attributable to $156 million of higher premiums and reduced benefits in the current year from in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. These increases were partially offset by higher severity and frequency of new claims, lower claim terminations and an increase in incremental reserves of $39 million recorded in connection with an accrual for profits followed by losses in the current year. Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our life insurance business increased $5 million mainly from a
reinsurance correction and refinement resulting in a net favorable impact of $17 million in the current year.
|
This increase was partially offset by higher lapses primarily associated with our large
20-year
|
• | Our Runoff segment had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $29 million and $23 million for the six months ended June 30, 2019 and 2018, respectively. The increase was predominantly from favorable equity market performance, partially offset by lower fee income driven mostly by a decline in the average account values in our variable annuity products in the current year. |
• |
Corporate and Other Activities had an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $145 million and $134 million for the six months ended June 30, 2019 and 2018, respectively. The increase in the loss was principally related to $23 million of higher taxes in the current year associated with the GILTI provision of the TCJA, partially offset by lower interest expense and operating costs in the current year and provisional tax
expense of $19 million in the prior year that did not recur.
|
• |
PMIERs Compliance
. Our U.S. mortgage insurance business has been compliant with the original requirements under the private mortgage insurer eligibility requirements (“PMIERs”) since its introduction into the private mortgage insurance industry in 2015. These requirements set forth operational and financial requirements that mortgage insurers must meet in order to remain eligible to offer private mortgage insurance. On March 31, 2019, revisions to the original PMIERs became effective for our U.S. mortgage insurance business. The major revisions include the elimination of any credit for future premiums that had previously been allowed on insurance policies written in 2008 and earlier. Our U.S. mortgage insurance business had available assets of approximately
123% of the required assets under PMIERs as of June 30, 2019. The PMIERs sufficiency ratio was in excess of $650 million of available assets above the requirements as of June 30, 2019.
|
• |
Market Share.
Our U.S. mortgage insurance business increased its estimated market share during the second quarter of 2019 compared to the first quarter of 2019. Market share of our U.S. mortgage insurance business is influenced by the execution of its go to market strategy, including, but not limited to, the ongoing rollout of its proprietary risk-based pricing engine, GenRATE, and its selective participation in forward commitment transactions.
|
• |
New Insurance Written.
Our U.S. mortgage insurance business continues to grow its insurance in-force through higher new insurance written, which increased 39% during the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This increase was primarily driven by the increase in the estimated market share and a larger private mortgage insurance available market.
|
• |
Regulatory Capital
. The Mortgage Insurer Capital Adequacy Test (“MICAT”) guideline was effective for our Canada mortgage insurance business on January 1, 2019. The MICAT guideline did not have a
|
material impact on our regulatory solvency as of June 30, 2019, as the impact of the elimination of the one-time credit score update for 2015 and prior books more than offset the 5% increase in the total asset requirement on existing insurance in-force. In addition, we expect these new requirements to permit our mortgage insurance business in Canada to more closely align its actual capital levels with its targeted operating range and allow for meaningful levels of capital redeployment in addition to regular quarterly dividends. In the second quarter of 2019, Genworth Canada returned additional capital to all shareholders via share repurchases of approximately CAD$68 million and a special dividend of CAD$0.40 per share or approximately CAD$34 million in aggregate. As of June 30, 2019, our MICAT ratio under the framework was approximately 169%, which was above the supervisory target. |
• |
In-force rate actions in our long-term care insurance business.
As part of our strategy for our long-term care insurance business, we have been implementing, and expect to continue to pursue, significant premium rate increases and associated benefit reductions on older generation blocks of business in order to bring those blocks closer to a break-even point over time and reduce the strain on earnings and capital. We are also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which may be significant, to help bring their loss ratios back towards their original pricing. For all of these in-force rate action filings, we received 56 filing approvals from 16 states during the six months ended June 30, 2019, representing a weighted-average increase of 49% on approximately $467 million in annualized in-force premiums, or approximately $228 million of incremental annual premiums. We also submitted 8 new filings in 4 states during the six months ended June 30, 2019 on approximately $79 million in annualized in-force premiums.
|
• |
Genworth Canada Debt Refinance.
On May 22, 2019, Genworth Canada issued at a premium, CAD$100 million fixed rate senior notes with an interest rate of 4.24% that matures in 2024. The offering represents a re-opening of the 4.24% senior notes originally issued in April 2014. In June 2019, the proceeds of the offering were used to early redeem approximately CAD$100 million of the 5.68% senior notes originally scheduled to mature in June 2020. As a result of the early redemption of Genworth Canada’s notes, we incurred a pre-tax loss of approximately $1 million, net of the portion attributable to noncontrolling interests.
|
• |
International Dividends.
During the six months ended June 30, 2019, our international subsidiaries paid $105 million of dividends to Genworth Holdings, which included $53 million of dividends attributable to share repurchases in our Canada and Australia mortgage insurance businesses. See “Item 2—Liquidity and Capital Resources” for additional details.
|
• |
Genworth Holdings Cash and Targeted Cash Buffer.
As of June 30, 2019, Genworth Holdings held $358 million of cash, cash equivalents and restricted cash and $45 million of unrestricted and restricted U.S. government securities. The $403 million combined cash and liquid assets is below our targeted cash buffer of two times expected annual external debt interest payments by approximately $100 million. See “Item 2—Liquidity and Capital Resources” for additional details.
|
• |
Intercompany Note Maturity.
Genworth Holdings currently has an intercompany note due to GLIC on March 31, 2020 with a principal amount of $200 million. In conjunction with the Merger with China Oceanwide and as discussed above, GLAIC will purchase from GLIC this intercompany note at fair value, but not less than $200 million.
|
|
Three months ended
June 30, |
Increase
(decrease) and
percentage
change
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
1,126
|
$ |
1,136
|
$ |
(10
|
) |
(1
|
)% | |||||||
Net investment income
|
852
|
828
|
24
|
3
|
%
|
|||||||||||
Net investment gains (losses)
|
(45
|
) |
(14
|
) |
(31
|
) |
NM
|
(1)
|
||||||||
Policy fees and other income
|
223
|
209
|
14
|
7
|
%
|
|||||||||||
Total revenues
|
2,156
|
2,159
|
(3
|
) |
—
|
% | ||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
1,270
|
1,205
|
65
|
5
|
%
|
|||||||||||
Interest credited
|
146
|
152
|
(6
|
) |
(4
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
247
|
253
|
(6
|
) |
(2
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
95
|
112
|
(17
|
) |
(15
|
)% | ||||||||||
Interest expense
|
73
|
77
|
(4
|
) |
(5
|
)% | ||||||||||
Total benefits and expenses
|
1,831
|
1,799
|
32
|
2
|
%
|
|||||||||||
Income before income taxes
|
325
|
360
|
(35
|
) |
(10
|
)% | ||||||||||
Provision for income taxes
|
107
|
111
|
(4
|
) |
(4
|
)% | ||||||||||
Net income
|
218
|
249
|
(31
|
) |
(12
|
)% | ||||||||||
Less: net income attributable to noncontrolling interests
|
50
|
59
|
(9
|
) |
(15
|
)% | ||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
168
|
$ |
190
|
$ |
(22
|
) |
(12
|
)% | |||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
• | Our Australia Mortgage Insurance segment decreased $26 million predominantly from higher policy cancellations in the prior year mostly due to an initiative implemented in the second quarter of 2018 to more promptly identify loans that were discharged or refinanced and from the seasoning of our smaller, more recent in-force books of business. The three months ended June 30, 2019 included a decrease of $7 million attributable to changes in foreign exchange rates. |
• | Our Canada Mortgage Insurance segment decreased $6 million primarily from changes attributable to foreign exchange rates in the current year. |
• | Our U.S. Mortgage Insurance segment increased $22 million mainly attributable to higher insurance in-force in the current year. |
• | Our U.S. Life Insurance segment increased $1 million. Our long-term care insurance business increased $8 million largely from $24 million of increased premiums in the current year from in-force rate actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in the current year. Our life insurance business decreased $7 million mainly attributable to the continued runoff of our term life insurance products. |
• |
Our U.S. Life Insurance segment increased $18 million mostly attributable to our life insurance business due to a $21 million favorable correction related to ceded premiums on
universal life insurance policies, partially offset by a favorable model refinement in the prior year that did not recur.
|
• | Our Runoff segment decreased $3 million principally from lower fee income driven mostly by a decline in the average account values in our variable annuity products in the current year. |
• | Our U.S. Life Insurance segment increased $48 million. Our long-term care insurance business increased $22 million principally related to the aging of the in-force block (including higher frequency of new claims), higher severity of new claims, lower claim terminations and an increase in incremental reserves of $49 million recorded in connection with an accrual for profits followed by losses in the current year. These increases were partially offset by a higher favorable impact of $100 million from reduced benefits in the current year related to in-force rate actions approved and implemented and from |
favorable development on prior year incurred but not reported claims. The current year also included favorable utilization of available benefits. Our life insurance business increased $19 million primarily attributable to a favorable model refinement in the prior year that did not recur and higher mortality in the current year compared to the prior year. Our fixed annuities business increased $7 million largely attributable to $5 million of higher reserves in connection with loss recognition testing in our fixed immediate annuity products primarily as a result of a decrease in interest rates in the current year. The increase was also due to lower mortality in the current year compared to the prior year. These increases were partially offset by lower interest credited in the current year due to block runoff. |
• | Our U.S. Mortgage Insurance segment increased $14 million. Benefits and other changes in policy reserves were zero in the current year but increased compared to the prior year. Lower net benefits from cures and aging of existing delinquencies were offset by a $10 million favorable reserve adjustment and a lower average reserve on new delinquencies in the current year. The prior year also included a $28 million favorable reserve adjustment. These favorable reserve adjustments were mostly associated with lower expected claim rates. |
• | Our Runoff segment increased $6 million primarily attributable to higher mortality in both our variable annuity and corporate-owned life insurance products in the current year. |
• | Our Australia Mortgage Insurance segment decreased $3 million largely from changes in foreign exchange rates in the current year. Excluding the effects of changes in foreign exchange rates, benefits and other changes in policy reserves were flat as higher reserves on new delinquencies were offset by higher reserve releases for cures in the current year. |
• | Our Canada Mortgage Insurance segment was flat as lower new delinquencies, net of cures, and modestly higher favorable development in our loss reserves were offset by a higher average reserve per delinquency, primarily attributable to increased losses in Alberta in the current year. |
• | Our U.S. Life Insurance segment decreased $10 million. Our life insurance and fixed annuities businesses decreased $2 million and $8 million, respectively, primarily driven by a decline in average account values and lower crediting rates in the current year. |
• | Our Runoff segment increased $4 million largely related to higher interest in our corporate-owned life insurance products in the current year. |
• |
Our U.S. Life Insurance segment decreased $11 million primarily related to our life insurance business principally from an unfavorable model refinement in the prior year that did not recur,
partially offset by higher lapses primarily associated with our large
20-year
|
• | Our Runoff segment decreased $4 million related to our variable annuity products mainly from favorable equity market performance in the current year. |
• | Our Australia Mortgage Insurance segment decreased $3 million primarily from lower contract fees amortization and from changes in foreign exchange rates in the current year. |
|
Six months ended
June 30, |
Increase
(decrease) and
percentage
change
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
2,240
|
$ |
2,276
|
$ |
(36
|
) |
(2
|
)% | |||||||
Net investment income
|
1,681
|
1,632
|
49
|
3
|
%
|
|||||||||||
Net investment gains (losses)
|
29
|
(45
|
) |
74
|
164
|
% | ||||||||||
Policy fees and other income
|
410
|
411
|
(1
|
) |
—
|
% | ||||||||||
Total revenues
|
4,360
|
4,274
|
86
|
2
|
%
|
|||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
2,571
|
2,516
|
55
|
2
|
%
|
|||||||||||
Interest credited
|
293
|
308
|
(15
|
) |
(5
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
498
|
493
|
5
|
1
|
%
|
|||||||||||
Amortization of deferred acquisition costs and intangibles
|
186
|
216
|
(30
|
) |
(14
|
)% | ||||||||||
Interest expense
|
145
|
153
|
(8
|
) |
(5
|
)% | ||||||||||
Total benefits and expenses
|
3,693
|
3,686
|
7
|
—
|
% | |||||||||||
Income before income taxes
|
667
|
588
|
79
|
13
|
% | |||||||||||
Provision for income taxes
|
219
|
174
|
45
|
26
|
% | |||||||||||
Net income
|
448
|
414
|
34
|
8
|
%
|
|||||||||||
Less: net income attributable to noncontrolling interests
|
106
|
112
|
(6
|
) |
(5
|
)% | ||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
$ |
342
|
$ |
302
|
$ |
40
|
13
|
% | ||||||||
• | Our Australia Mortgage Insurance segment decreased $41 million predominantly from the seasoning of our smaller, more recent in-force books of business and from higher policy cancellations in the prior year. The six months ended June 30, 2019 included a decrease of $15 million attributable to changes in foreign exchange rates. |
• | Our Canada Mortgage Insurance segment decreased $19 million primarily from $13 million of changes attributable to foreign exchange rates in the current year, refinements in premium recognition factors in the prior year that did not recur and from the seasoning of our smaller, more recent in-force books of business. |
• | Our U.S. Life Insurance segment decreased $12 million. Our long-term care insurance business increased $5 million. The increase was largely from $41 million of increased premiums in the current year from in-force rate actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in the current year. Our life insurance business decreased $17 million mainly attributable to the continued runoff of our term life insurance products and higher reinsurance rates in the current year. |
• | Our U.S. Mortgage Insurance segment increased $37 million mainly attributable to higher insurance in-force in the current year. |
• | Our Runoff segment decreased $8 million principally from lower fee income driven mostly by a decrease in the average account values in our variable annuity products in the current year. |
• |
Our U.S. Life Insurance segment increased $6 million mostly attributable to our life insurance business primarily driven by a $21 million favorable correction related to ceded premiums on
universal life insurance policies, partially offset by a favorable model refinement in the prior year that did not recur and a decline in our term universal and universal life insurance
in-force
|
• | Our U.S. Life Insurance segment increased $46 million. Our long-term care insurance business increased $21 million principally related to the aging of the in-force block (including higher frequency of new claims), higher severity of new claims, lower claim terminations and an increase in incremental reserves of $49 million recorded in connection with an accrual for profits followed by losses in the current year. These increases were partially offset by a higher favorable impact of $161 million from reduced benefits in the current year related to in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. Our life insurance business increased $14 million primarily attributable to a favorable model refinement in the prior year that did not recur. Our fixed annuities business increased $11 million largely attributable to $22 million of higher reserves in connection with loss recognition testing in our fixed immediate annuity products primarily as a result of portfolio management actions and from a decrease in the projected yield curve. This increase was partially offset by lower interest credited in the current year due to block runoff. |
• | Our U.S. Mortgage Insurance segment increased $14 million primarily from a lower favorable reserve adjustment in the current year. We recorded a $10 million favorable reserve adjustment in the current |
year compared to a $28 million favorable reserve adjustment in the prior year. These adjustments were mostly associated with lower expected claim rates. The increase was also attributable to lower net benefits from cures and aging of existing delinquencies, partially offset by a lower average reserve on new delinquencies in the current year. |
• | Our Canada Mortgage Insurance segment increased $1 million principally from a higher average reserve per delinquency, primarily attributable to increased losses in Alberta, mostly offset by lower new delinquencies, net of cures in the current year. |
• | Our Australia Mortgage Insurance segment decreased $5 million from changes attributable to foreign exchange rates in the current year. Excluding the effects of changes in foreign exchange rates, benefits and other changes in policy reserves were flat as higher reserves on new delinquencies were offset by higher reserve releases for cures in the current year. |
• | Our Runoff segment decreased $1 million primarily attributable to lower guaranteed minimum death benefit (“GMDB”) reserves in our variable annuity products due to favorable equity market performance, mostly offset by higher mortality in both our variable annuity and corporate-owned life insurance products in the current year. |
• | Our U.S. Life Insurance segment decreased $23 million. The decrease was due to our life insurance and fixed annuities businesses, which decreased $5 million and $18 million, respectively, primarily driven by a decline in average account values and lower crediting rates in the current year. |
• | Our Runoff segment increased $8 million largely related to higher interest in our corporate-owned life insurance products in the current year. |
• | Our U.S. Mortgage Insurance segment increased $6 million primarily attributable to higher operating costs driven mostly by increased sales in the current year. |
• |
Our Canada Mortgage Insurance segment increased $5 million mainly from higher operating costs
and from a $2 million early redemption fee related to the repayment of CAD$100 million of the 5.68% senior notes originally scheduled to mature in June 2020.
|
• | Corporate and Other activities decreased $6 million mainly driven by a decrease in employee related expenses and lower operating costs in the current year. |
• |
Our U.S. Life Insurance segment decreased $16 million driven mostly by our life insurance business principally from an unfavorable model refinement
in the prior year that did not recur, partially offset by higher lapses primarily associated with our large
20-year
|
• | Our Runoff segment decreased $9 million largely related to our variable annuity products mainly from favorable equity market performance in the current year. |
• | Our Australia Mortgage Insurance segment decreased $5 million largely from lower contract fees amortization and from changes in foreign exchange rates in the current year. |
|
Three months ended
June 30, |
Six months ended
June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Net income
|
$ |
218
|
$ |
249
|
$ |
448
|
$ |
414
|
||||||||
Less: net income attributable to noncontrolling interests
|
50
|
59
|
106
|
112
|
||||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
168
|
190
|
342
|
302
|
||||||||||||
Adjustments to net income available to Genworth Financial, Inc.’s
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(1)
|
43
|
12
|
(28
|
) |
29
|
|||||||||||
(Gains) losses on early extinguishment of debt, net
(2)
|
1
|
—
|
1
|
—
|
||||||||||||
Expenses related to restructuring
|
—
|
—
|
4
|
—
|
||||||||||||
Taxes on adjustments
|
(8
|
) |
(2
|
) |
6
|
(6
|
) | |||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
204
|
$ |
200
|
$ |
325
|
$ |
325
|
||||||||
(1)
|
For the three months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(3) million and $(1) million, respectively, and adjusted for net investment gains (losses) attributable to noncontrolling interests of $1 million and $(1)
million, respectively. For the six months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(5) million and $(4) million, respectively, and adjusted for net investment gains (losses) attributable to noncontrolling interests of $6 million and $(12) million, respectively.
|
(2)
|
For the three and six months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $1 million. |
|
Three months ended
|
Six months ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in millions, except per share amounts)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Net income available to Genworth Financial, Inc.’s common
|
|
|
|
|
||||||||||||
Basic
|
$ |
0.33
|
$ |
0.38
|
$ |
0.68
|
$ |
0.60
|
||||||||
Diluted
|
$ |
0.33
|
$ |
0.38
|
$ |
0.67
|
$ |
0.60
|
||||||||
Adjusted operating income available to Genworth Financial,
|
|
|
|
|
||||||||||||
Basic
|
$ |
0.40
|
$ |
0.40
|
$ |
0.65
|
$ |
0.65
|
||||||||
Diluted
|
$ |
0.40
|
$ |
0.40
|
$ |
0.64
|
$ |
0.65
|
||||||||
Weighted-average common shares outstanding:
|
|
|
|
|
||||||||||||
Basic
|
503.4
|
500.6
|
502.3
|
500.1
|
||||||||||||
Diluted
|
508.7
|
502.6
|
508.7
|
502.6
|
||||||||||||
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
206
|
$ |
184
|
$ |
22
|
12
|
% | ||||||||
Net investment income
|
28
|
23
|
5
|
22
|
% | |||||||||||
Net investment gains (losses)
|
—
|
—
|
—
|
—
|
% | |||||||||||
Policy fees and other income
|
1
|
1
|
—
|
—
|
% | |||||||||||
Total revenues
|
235
|
208
|
27
|
13
|
% | |||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
—
|
(14
|
) |
14
|
100
|
% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
44
|
45
|
(1
|
) |
(2
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
4
|
3
|
1
|
33
|
% | |||||||||||
Total benefits and expenses
|
48
|
34
|
14
|
41
|
% | |||||||||||
Income before income taxes
|
187
|
174
|
13
|
7
|
%
|
|||||||||||
Provision for income taxes
|
40
|
37
|
3
|
8
|
%
|
|||||||||||
Net income
|
147
|
137
|
10
|
7
|
%
|
|||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses
|
—
|
—
|
—
|
—
|
% | |||||||||||
Taxes on adjustments
|
—
|
—
|
—
|
—
|
% | |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
147
|
$ |
137
|
$ |
10
|
7
|
%
|
||||||||
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
400
|
$ |
363
|
$ |
37
|
10
|
% | ||||||||
Net investment income
|
56
|
44
|
12
|
27
|
% | |||||||||||
Net investment gains (losses)
|
—
|
—
|
—
|
—
|
% | |||||||||||
Policy fees and other income
|
2
|
1
|
1
|
100
|
% | |||||||||||
Total revenues
|
458
|
408
|
50
|
12
|
% | |||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
16
|
2
|
14
|
NM
|
(1)
|
|||||||||||
Acquisition and operating expenses, net of deferrals
|
90
|
84
|
6
|
7
|
%
|
|||||||||||
Amortization of deferred acquisition costs and intangibles
|
8
|
7
|
1
|
14
|
% | |||||||||||
Total benefits and expenses
|
114
|
93
|
21
|
23
|
% | |||||||||||
Income before income taxes
|
344
|
315
|
29
|
9
|
%
|
|||||||||||
Provision for income taxes
|
73
|
67
|
6
|
9
|
%
|
|||||||||||
Net income
|
271
|
248
|
23
|
9
|
%
|
|||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses
|
—
|
—
|
—
|
—
|
% | |||||||||||
Taxes on adjustments
|
—
|
—
|
—
|
—
|
% | |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
271
|
$ |
248
|
$ |
23
|
9
|
%
|
||||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
|
As of June 30,
|
Increase (decrease) and
percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Primary insurance in-force
(1)
|
$ |
178,500
|
$ |
159,500
|
$ |
19,000
|
12
|
% | ||||||||
Risk in-force
|
$ |
43,100
|
$ |
38,700
|
$ |
4,400
|
11
|
% |
(1)
|
Primary insurance in-force represents the aggregate original loan balance for outstanding insurance policies and is used to determine premiums. Original loan balances are presented for policies with level renewal premiums. Amortized loan balances are presented for policies with annual, amortizing renewal premiums. |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||||||||||
New insurance written
|
$ |
15,800
|
$ |
11,400
|
$ |
4,400
|
39
|
% | $ |
25,400
|
$ |
20,400
|
$ |
5,000
|
25
|
% | ||||||||||||||||
Net premiums written
|
$ |
204
|
$ |
191
|
$ |
13
|
7
|
% | $ |
397
|
$ |
376
|
$ |
21
|
6
|
% |
|
Three months ended
June 30, |
Increase (decrease)
|
Six months ended
June 30, |
Increase (decrease)
|
||||||||||||||||||||
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||
Loss ratio
|
—
|
% |
(8
|
)% |
8
|
% |
4
|
% |
—
|
% |
4
|
% | ||||||||||||
Expense ratio (net earned premiums)
|
24
|
% |
26
|
% |
(2
|
)% |
25
|
% |
25
|
% |
—
|
% | ||||||||||||
Expense ratio (net premiums written)
|
24
|
% |
25
|
% |
(1
|
)% |
25
|
% |
24
|
% |
1
|
% |
|
June 30,
2019 |
December 31,
2018 |
June 30,
2018 |
|||||||||
Primary insurance:
|
|
|
|
|||||||||
Insured loans in-force
|
818,358
|
783,288
|
762,727
|
|||||||||
Delinquent loans
|
15,482
|
17,159
|
18,051
|
|||||||||
Percentage of delinquent loans (delinquency rate)
|
1.89
|
% |
2.19
|
% |
2.37
|
% | ||||||
Flow loans in-force
|
806,739
|
770,657
|
748,497
|
|||||||||
Flow delinquent loans
|
15,070
|
16,670
|
17,505
|
|||||||||
Percentage of flow delinquent loans (delinquency rate)
|
1.87
|
% |
2.16
|
% |
2.34
|
% | ||||||
Bulk loans in-force
|
11,619
|
12,631
|
14,230
|
|||||||||
Bulk delinquent loans
(1)
|
412
|
489
|
546
|
|||||||||
Percentage of bulk delinquent loans (delinquency rate)
|
3.55
|
% |
3.87
|
% |
3.84
|
% | ||||||
A minus and sub-prime loans in-force
|
14,180
|
15,348
|
16,928
|
|||||||||
A minus and sub-prime delinquent loans
|
2,367
|
2,727
|
3,058
|
|||||||||
Percentage of A minus and sub-prime delinquent loans (delinquency rate)
|
16.69
|
% |
17.77
|
% |
18.06
|
% | ||||||
Pool insurance:
|
|
|
|
|||||||||
Insured loans in-force
|
4,331
|
4,535
|
4,774
|
|||||||||
Delinquent loans
|
177
|
220
|
204
|
|||||||||
Percentage of delinquent loans (delinquency rate)
|
4.09
|
% |
4.85
|
% |
4.27
|
% |
(1)
|
Included loans where we were in a secondary loss position for which no reserve was established due to an existing deductible. Excluding these loans, bulk delinquent loans were 347 as of June 30, 2019, 403 as of December 31, 2018 and 445 as of June 30, 2018. |
|
June 30, 2019
|
|||||||||||||||
(Dollar amounts in millions)
|
Delinquencies
|
Direct case
reserves
(1)
|
Risk
in-force |
Reserves as %
of risk in-force |
||||||||||||
Payments in default:
|
|
|
|
|
||||||||||||
3 payments or less
|
7,629
|
$ |
26
|
$ |
341
|
8
|
% | |||||||||
4 - 11 payments
|
4,162
|
75
|
190
|
39
|
% | |||||||||||
12 payments or more
|
3,279
|
121
|
167
|
72
|
% | |||||||||||
Total
|
15,070
|
$ |
222
|
$ |
698
|
32
|
% | |||||||||
(1)
|
Direct flow case reserves exclude loss adjustment expenses, incurred but not reported and reinsurance reserves. |
|
December 31, 2018
|
|||||||||||||||
(Dollar amounts in millions)
|
Delinquencies
|
Direct case
reserves
(1)
|
Risk
in-force |
Reserves as %
of risk in-force |
||||||||||||
Payments in default:
|
|
|
|
|
||||||||||||
3 payments or less
|
8,360
|
$ |
31
|
$ |
365
|
8
|
% | |||||||||
4 - 11 payments
|
4,591
|
88
|
208
|
42
|
% | |||||||||||
12 payments or more
|
3,719
|
142
|
188
|
76
|
% | |||||||||||
Total
|
16,670
|
$ |
261
|
$ |
761
|
34
|
% | |||||||||
(1)
|
Direct flow case reserves exclude loss adjustment expenses, incurred but not reported and reinsurance reserves. |
|
Percent of primary
|
Percent of total
|
Delinquency rate
|
|||||||||||||||||
risk in-force as of
June 30, 2019 |
reserves as of
June 30, 2019
(1)
|
June 30,
2019 |
December 31,
2018 |
June 30,
2018 |
||||||||||||||||
By Region:
|
|
|
|
|
|
|||||||||||||||
Southeast
(2)
|
18
|
% |
21
|
% |
2.18
|
% |
2.63
|
% |
3.15
|
% | ||||||||||
Pacific
(3)
|
17
|
10
|
1.22
|
% |
1.29
|
% |
1.30
|
% | ||||||||||||
South Central
(4)
|
16
|
11
|
1.79
|
% |
2.11
|
% |
2.30
|
% | ||||||||||||
Northeast
(5)
|
12
|
28
|
2.87
|
% |
3.43
|
% |
3.74
|
% | ||||||||||||
North Central
(6)
|
11
|
9
|
1.79
|
% |
1.98
|
% |
1.96
|
% | ||||||||||||
Great Lakes
(7)
|
11
|
7
|
1.56
|
% |
1.72
|
% |
1.72
|
% | ||||||||||||
Mid-Atlantic
(8)
|
6
|
5
|
1.81
|
% |
2.16
|
% |
2.19
|
% | ||||||||||||
New England
(9)
|
5
|
6
|
1.95
|
% |
2.23
|
% |
2.27
|
% | ||||||||||||
Plains
(10)
|
4
|
3
|
1.67
|
% |
1.87
|
% |
1.88
|
% | ||||||||||||
Total
|
100
|
% |
100
|
% |
1.89
|
% |
2.19
|
% |
2.37
|
% | ||||||||||
(1)
|
Total reserves were $254 million as of June 30, 2019. |
(2)
|
Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee. |
(3)
|
Alaska, California, Hawaii, Nevada, Oregon and Washington. |
(4)
|
Arizona, Colorado, Louisiana, New Mexico, Oklahoma, Texas and Utah. |
(5)
|
New Jersey, New York and Pennsylvania. |
(6)
|
Illinois, Minnesota, Missouri and Wisconsin. |
(7)
|
Indiana, Kentucky, Michigan and Ohio. |
(8)
|
Delaware, Maryland, Virginia, Washington D.C. and West Virginia. |
(9)
|
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. |
(10)
|
Idaho, Iowa, Kansas, Montana, Nebraska, North Dakota, South Dakota and Wyoming. |
|
Percent of primary
|
Percent of total
|
Delinquency rate
|
|||||||||||||||||
risk in-force as of
June 30, 2019 |
reserves as of
June 30, 2019
(1)
|
June 30,
2019 |
December 31,
2018 |
June 30,
2018 |
||||||||||||||||
By State:
|
|
|
|
|
|
|||||||||||||||
California
|
10
|
% |
5
|
% |
1.26
|
% |
1.28
|
% |
1.21
|
% | ||||||||||
Texas
|
7
|
% |
5
|
% |
1.86
|
% |
2.29
|
% |
2.77
|
% | ||||||||||
Florida
|
6
|
% |
12
|
% |
2.26
|
% |
2.91
|
% |
4.57
|
% | ||||||||||
Illinois
|
5
|
% |
6
|
% |
2.10
|
% |
2.26
|
% |
2.27
|
% | ||||||||||
New York
|
5
|
% |
16
|
% |
3.12
|
% |
3.64
|
% |
3.99
|
% | ||||||||||
Washington
|
5
|
% |
2
|
% |
0.90
|
% |
1.04
|
% |
1.05
|
% | ||||||||||
Michigan
|
4
|
% |
2
|
% |
1.28
|
% |
1.40
|
% |
1.26
|
% | ||||||||||
Pennsylvania
|
4
|
% |
4
|
% |
2.24
|
% |
2.79
|
% |
2.80
|
% | ||||||||||
North Carolina
|
4
|
% |
3
|
% |
1.82
|
% |
2.27
|
% |
2.15
|
% | ||||||||||
Ohio
|
3
|
% |
3
|
% |
1.69
|
% |
1.97
|
% |
1.98
|
% |
(1)
|
Total reserves were $254 million as of June 30, 2019. |
(Amounts in millions)
|
Average
rate |
Percent of total
reserves
(1)
|
Primary
insurance in-force |
Percent
of total |
Primary
risk in-force |
Percent
of total |
||||||||||||||||||
Policy Year
|
|
|
|
|
|
|
||||||||||||||||||
2004 and prior
|
6.10
|
% |
8.4
|
%
|
$ |
1,515
|
0.9
|
% | $ |
285
|
0.7
|
% | ||||||||||||
2005 - 2008
|
5.47
|
% |
58.2
|
17,576
|
9.8
|
4,037
|
9.4
|
|||||||||||||||||
2009 - 2012
|
4.29
|
% |
2.2
|
3,934
|
2.2
|
913
|
2.1
|
|||||||||||||||||
2013
|
4.11
|
% |
1.8
|
4,755
|
2.7
|
1,162
|
2.7
|
|||||||||||||||||
2014
|
4.45
|
% |
4.4
|
8,277
|
4.6
|
2,013
|
4.7
|
|||||||||||||||||
2015
|
4.15
|
% |
6.2
|
16,648
|
9.3
|
4,023
|
9.3
|
|||||||||||||||||
2016
|
3.89
|
% |
7.5
|
30,515
|
17.1
|
7,348
|
17.0
|
|||||||||||||||||
2017
|
4.25
|
% |
7.2
|
33,245
|
18.6
|
8,087
|
18.8
|
|||||||||||||||||
2018
|
4.77
|
% |
3.9
|
36,887
|
20.7
|
9,025
|
20.9
|
|||||||||||||||||
2019
|
4.75
|
% |
0.2
|
25,129
|
14.1
|
6,191
|
14.4
|
|||||||||||||||||
Total portfolio
|
4.53
|
% |
100.0
|
% | $ |
178,481
|
100.0
|
% | $ |
43,084
|
100.0
|
% | ||||||||||||
(1)
|
Total reserves were $254 million as of June 30, 2019. |
|
Three months ended
June 30, |
Increase
(decrease) and
percentage
change
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
125
|
$ |
131
|
$ |
(6
|
) |
(5
|
)% | |||||||
Net investment income
|
35
|
34
|
1
|
3
|
% | |||||||||||
Net investment gains (losses)
|
1
|
(15
|
) |
16
|
107
|
% | ||||||||||
Total revenues
|
161
|
150
|
11
|
7
|
% | |||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
19
|
19
|
—
|
—
|
% | |||||||||||
Acquisition and operating expenses, net of deferrals
|
22
|
20
|
2
|
10
|
% | |||||||||||
Amortization of deferred acquisition costs and intangibles
|
11
|
11
|
—
|
—
|
% | |||||||||||
Interest expense
|
5
|
4
|
1
|
25
|
% | |||||||||||
Total benefits and expenses
|
57
|
54
|
3
|
6
|
% | |||||||||||
Income before income taxes
|
104
|
96
|
8
|
8
|
% | |||||||||||
Provision for income taxes
|
29
|
24
|
5
|
21
|
% | |||||||||||
Net income
|
75
|
72
|
3
|
4
|
% | |||||||||||
Less: net income attributable to noncontrolling interests
|
35
|
32
|
3
|
9
|
% | |||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
40
|
40
|
—
|
—
|
% | |||||||||||
Adjustments to net income available to Genworth Financial, Inc.’s common stockholders:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
—
|
8
|
(8
|
) |
(100
|
)% | ||||||||||
(Gains) losses on early extinguishment of debt, net
(3)
|
1
|
—
|
1
|
NM
|
(1)
|
|||||||||||
Taxes on adjustments
|
—
|
(2
|
) |
2
|
100
|
% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
41
|
$ |
46
|
$ |
(5
|
) |
(11
|
)% | |||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the three months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $1 million and $(7) million, respectively. |
(3)
|
For the three months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $1 million. |
|
Six months ended
June 30, |
Increase
(decrease) and
percentage
change
|
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
251
|
$ |
270
|
$ |
(19
|
) |
(7
|
)% | |||||||
Net investment income
|
69
|
68
|
1
|
1
|
%
|
|||||||||||
Net investment gains (losses)
|
—
|
(30
|
) |
30
|
100
|
% | ||||||||||
Total revenues
|
320
|
308
|
12
|
4
|
%
|
|||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
38
|
37
|
1
|
3
|
%
|
|||||||||||
Acquisition and operating expenses, net of deferrals
|
42
|
37
|
5
|
14
|
% | |||||||||||
Amortization of deferred acquisition costs and intangibles
|
21
|
21
|
—
|
—
|
% | |||||||||||
Interest expense
|
9
|
9
|
—
|
—
|
% | |||||||||||
Total benefits and expenses
|
110
|
104
|
6
|
6
|
%
|
|||||||||||
Income before income taxes
|
210
|
204
|
6
|
3
|
%
|
|||||||||||
Provision for income taxes
|
58
|
54
|
4
|
7
|
%
|
|||||||||||
Net income
|
152
|
150
|
2
|
1
|
%
|
|||||||||||
Less: net income attributable to noncontrolling interests
|
71
|
68
|
3
|
4
|
%
|
|||||||||||
Net income available to Genworth Financial, Inc.’s common
|
81
|
82
|
(1
|
) |
(1
|
)% | ||||||||||
Adjustments to net income available to Genworth Financial, Inc.’s
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
—
|
17
|
(17
|
) |
(100
|
)% | ||||||||||
(Gains) losses on early extinguishment of debt, net
(3)
|
1
|
—
|
1
|
NM
|
(1)
|
|||||||||||
Taxes on adjustments
|
—
|
(4
|
) |
4
|
100
|
% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
82
|
$ |
95
|
$ |
(13
|
) |
(14
|
)% | |||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the six months ended June 30, 2018, net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $(13) million. |
(3)
|
For the six months ended June 30, 2019, (gains) losses on the early extinguishment of debt were adjusted for the portion attributable to noncontrolling interests of $1 million. |
|
As of June 30,
|
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Primary insurance in-force
|
$ |
395,700
|
$ |
380,200
|
$ |
15,500
|
4
|
% | ||||||||
Risk in-force
|
$ |
138,500
|
$ |
133,100
|
$ |
5,400
|
4
|
% |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
Six months ended
June 30, |
Increase
(decrease) and
percentage
change
|
||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||||||||||
New insurance written
|
$ |
5,800
|
$ |
4,600
|
$ |
1,200
|
26
|
% | $ |
8,700
|
$ |
8,000
|
$ |
700
|
9
|
% | ||||||||||||||||
Net premiums written
|
$ |
145
|
$ |
133
|
$ |
12
|
9
|
% | $ |
224
|
$ |
225
|
$ |
(1
|
) |
—
|
% |
|
June 30, 2019
|
December 31, 2018
|
June 30, 2018
|
|||||||||
Primary insured loans in-force
(1)
|
2,174,084
|
2,143,191
|
2,137,221
|
|||||||||
Delinquent loans
|
1,701
|
1,684
|
1,742
|
|||||||||
Percentage of delinquent loans (delinquency rate)
(1)
|
0.08
|
% |
0.08
|
% |
0.08
|
% | ||||||
Flow loans in-force
|
1,523,128
|
1,499,304
|
1,470,826
|
|||||||||
Flow delinquent loans
|
1,340
|
1,310
|
1,406
|
|||||||||
Percentage of flow delinquent loans (delinquency rate)
|
0.09
|
% |
0.09
|
% |
0.10
|
% | ||||||
Bulk loans in-force
|
650,956
|
643,887
|
666,395
|
|||||||||
Bulk delinquent loans
|
361
|
374
|
336
|
|||||||||
Percentage of bulk delinquent loans (delinquency rate)
|
0.06
|
% |
0.06
|
% |
0.05
|
% |
(1)
|
As part of an ongoing effort to improve the estimate of outstanding insurance exposure, we are receiving updated outstanding loans in-force in Canada from almost all of our customers. As a result, we estimate that the outstanding loans in-force were 901,000 as of June 30, 2019, 910, 000 as of December 31, 2018 and 935,000 as of June 30, 2018. This is based on the extrapolation of the amounts reported by lenders to the entire insured population. The corresponding insured delinquency rate was 0.19% as of June 30, 2019, 0.18% as of December 31, 2018 and 0.19% as of June 30, 2018. |
|
Percent of primary
risk in-force as of
June 30, 2019
|
Delinquency rate
|
||||||||||||||
|
June 30,
|
December 31,
|
June 30,
|
|||||||||||||
|
2019
|
2018
|
2018
|
|||||||||||||
By province and territory:
|
|
|
|
|
||||||||||||
Ontario
|
47
|
% |
0.03
|
% |
0.03
|
% |
0.03
|
% | ||||||||
Alberta
|
17
|
0.21
|
% |
0.18
|
% |
0.17
|
% | |||||||||
British Columbia
|
14
|
0.04
|
% |
0.04
|
% |
0.04
|
% | |||||||||
Quebec
|
13
|
0.07
|
% |
0.10
|
% |
0.10
|
% | |||||||||
Saskatchewan
|
3
|
0.27
|
% |
0.28
|
% |
0.28
|
% | |||||||||
Nova Scotia
|
2
|
0.13
|
% |
0.13
|
% |
0.15
|
% | |||||||||
Manitoba
|
2
|
0.09
|
% |
0.10
|
% |
0.10
|
% | |||||||||
New Brunswick
|
1
|
0.08
|
% |
0.10
|
% |
0.15
|
% | |||||||||
All other
|
1
|
0.20
|
% |
0.19
|
% |
0.20
|
% | |||||||||
Total
|
100
|
% |
0.08
|
% |
0.08
|
% |
0.08
|
% | ||||||||
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
80
|
$ |
106
|
$ |
(26
|
) |
(25
|
)% | |||||||
Net investment income
|
15
|
18
|
(3
|
) |
(17
|
)% | ||||||||||
Net investment gains (losses)
|
1
|
12
|
(11
|
) |
(92
|
)% | ||||||||||
Total revenues
|
96
|
136
|
(40
|
) |
(29
|
)% | ||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
26
|
29
|
(3
|
) |
(10
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
17
|
17
|
—
|
—
|
% | |||||||||||
Amortization of deferred acquisition costs and intangibles
|
9
|
12
|
(3
|
) |
(25
|
)% | ||||||||||
Interest expense
|
2
|
2
|
—
|
—
|
% | |||||||||||
Total benefits and expenses
|
54
|
60
|
(6
|
) |
(10
|
)% | ||||||||||
Income before income taxes
|
42
|
76
|
(34
|
) |
(45
|
)% | ||||||||||
Provision for income taxes
|
13
|
23
|
(10
|
) |
(43
|
)% | ||||||||||
Net income
|
29
|
53
|
(24
|
) |
(45
|
)% | ||||||||||
Less: net income attributable to noncontrolling interests
|
15
|
27
|
(12
|
) |
(44
|
)% | ||||||||||
Net income available to Genworth Financial, Inc.’s common stockholders
|
14
|
26
|
(12
|
) |
(46
|
)% | ||||||||||
Adjustments to net income available to Genworth Financial, Inc.’s
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(1)
|
(1
|
) |
(6
|
) |
5
|
83
|
% | |||||||||
Taxes on adjustments
|
—
|
2
|
(2
|
) |
(100
|
)% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’scommon stockholders
|
$ |
13
|
$ |
22
|
$ |
(9
|
) |
(41
|
)% | |||||||
(1)
|
For the three months ended June 30, 2018, net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $6 million. |
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
163
|
$ |
204
|
$ |
(41
|
) |
(20
|
)% | |||||||
Net investment income
|
31
|
35
|
(4
|
) |
(11
|
)% | ||||||||||
Net investment gains (losses)
|
13
|
3
|
10
|
NM
|
(1)
|
|||||||||||
Policy fees and other income
|
(1
|
) |
1
|
(2
|
) |
(200
|
)% | |||||||||
Total revenues
|
206
|
243
|
(37
|
) |
(15
|
)% | ||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
54
|
59
|
(5
|
) |
(8
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
34
|
34
|
—
|
—
|
% | |||||||||||
Amortization of deferred acquisition costs and intangibles
|
18
|
23
|
(5
|
) |
(22
|
)% | ||||||||||
Interest expense
|
4
|
4
|
—
|
—
|
% | |||||||||||
Total benefits and expenses
|
110
|
120
|
(10
|
) |
(8
|
)% | ||||||||||
Income before income taxes
|
96
|
123
|
(27
|
) |
(22
|
)% | ||||||||||
Provision for income taxes
|
29
|
37
|
(8
|
) |
(22
|
)% | ||||||||||
Net income
|
67
|
86
|
(19
|
) |
(22
|
)% | ||||||||||
Less: net income attributable to noncontrolling interests
|
35
|
44
|
(9
|
) |
(20
|
)% | ||||||||||
Net income available to Genworth Financial, Inc.’s
|
32
|
42
|
(10
|
) |
(24
|
)% | ||||||||||
Adjustments to net income available to GenworthFinancial, Inc.’s common stockholders:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
(7
|
) |
(2
|
) |
(5
|
) |
NM
|
(1)
|
||||||||
Taxes on adjustments
|
2
|
1
|
1
|
100
|
% | |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common
|
$ |
27
|
$ |
41
|
$ |
(14
|
) |
(34
|
)% | |||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the six months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for the portion of net investment gains (losses) attributable to noncontrolling interests of $6 million and $1 million, respectively. |
|
As of June 30,
|
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Primary insurance in-force
|
$ |
215,600
|
$ |
229,400
|
$ |
(13,800
|
) |
(6
|
)% | |||||||
Risk in-force
|
$ |
75,100
|
$ |
79,900
|
$ |
(4,800
|
) |
(6
|
)% |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||||||||||
New insurance written
|
$ |
4,900
|
$ |
4,600
|
$ |
300
|
7
|
% | $ |
8,800
|
$ |
8,000
|
$ |
800
|
10
|
% | ||||||||||||||||
Net premiums written
|
$ |
58
|
$ |
56
|
$ |
2
|
4
|
% | $ |
110
|
$ |
116
|
$ |
(6
|
) |
(5
|
)% |
|
Three months ended
June 30,
|
Increase (decrease)
|
Six months ended
June 30,
|
Increase (decrease)
|
||||||||||||||||||||
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||
Loss ratio
|
34
|
% |
28
|
% |
6
|
% |
34
|
% |
29
|
% |
5
|
% | ||||||||||||
Expense ratio (net earned premiums)
|
33
|
% |
27
|
% |
6
|
% |
32
|
% |
28
|
% |
4
|
% | ||||||||||||
Expense ratio (net premiums written)
|
44
|
% |
50
|
% |
(6
|
)% |
47
|
% |
48
|
% |
(1
|
)% |
|
June 30, 2019
|
December 31, 2018
|
June 30, 2018
|
|||||||||
Primary insured loans in-force
|
1,308,811
|
1,332,906
|
1,354,614
|
|||||||||
Delinquent loans
|
7,891
|
7,145
|
7,306
|
|||||||||
Percentage of delinquent loans (delinquency rate)
|
0.60
|
% |
0.54
|
% |
0.54
|
% | ||||||
Flow loans in-force
|
1,200,603
|
1,226,219
|
1,247,229
|
|||||||||
Flow delinquent loans
|
7,642
|
6,931
|
7,076
|
|||||||||
Percentage of flow delinquent loans (delinquency rate)
|
0.64
|
% |
0.57
|
% |
0.57
|
% | ||||||
Bulk loans in-force
|
108,208
|
106,687
|
107,385
|
|||||||||
Bulk delinquent loans
|
249
|
214
|
230
|
|||||||||
Percentage of bulk delinquent loans (delinquency rate)
|
0.23
|
% |
0.20
|
% |
0.21
|
% |
|
Percent of primary
risk in-force as of
June 30, 2019
|
Delinquency rate
|
||||||||||||||
|
June 30,
2019
|
December 31,
2018
|
June 30,
2018
|
|||||||||||||
|
||||||||||||||||
By state and territory:
|
|
|
|
|
||||||||||||
New South Wales
|
27
|
% |
0.45
|
% |
0.38
|
% |
0.37
|
% | ||||||||
Queensland
|
23
|
0.81
|
% |
0.70
|
% |
0.73
|
% | |||||||||
Victoria
|
23
|
0.45
|
% |
0.40
|
% |
0.42
|
% | |||||||||
Western Australia
|
13
|
1.10
|
% |
0.98
|
% |
0.99
|
% | |||||||||
South Australia
|
6
|
0.68
|
% |
0.68
|
% |
0.67
|
% | |||||||||
Australian Capital Territory
|
3
|
0.25
|
% |
0.17
|
% |
0.18
|
% | |||||||||
Tasmania
|
2
|
0.31
|
% |
0.31
|
% |
0.34
|
% | |||||||||
New Zealand
|
2
|
0.02
|
% |
0.05
|
% |
0.06
|
% | |||||||||
Northern Territory
|
1
|
0.83
|
% |
0.68
|
% |
0.61
|
% | |||||||||
Total
|
100
|
% |
0.60
|
% |
0.54
|
% |
0.54
|
% | ||||||||
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
713
|
$ |
712
|
$ |
1
|
—
|
% | ||||||||
Net investment income
|
724
|
707
|
17
|
2
|
%
|
|||||||||||
Net investment gains (losses)
|
(36
|
) |
(10
|
) |
(26
|
) |
NM
|
(1)
|
||||||||
Policy fees and other income
|
187
|
169
|
18
|
11
|
% | |||||||||||
Total revenues
|
1,588
|
1,578
|
10
|
1
|
%
|
|||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
1,211
|
1,163
|
48
|
4
|
%
|
|||||||||||
Interest credited
|
106
|
116
|
(10
|
) |
(9
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
142
|
146
|
(4
|
) |
(3
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
67
|
78
|
(11
|
) |
(14
|
)% | ||||||||||
Interest expense
|
4
|
4
|
—
|
—
|
% | |||||||||||
Total benefits and expenses
|
1,530
|
1,507
|
23
|
2
|
%
|
|||||||||||
Income before income taxes
|
58
|
71
|
(13
|
) |
(18
|
)% | ||||||||||
Provision for income taxes
|
19
|
21
|
(2
|
) |
(10
|
)% | ||||||||||
Net income
|
39
|
50
|
(11
|
) |
(22
|
)% | ||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
35
|
9
|
26
|
NM
|
(1)
|
|||||||||||
Expenses related to restructuring
|
(1
|
) |
—
|
(1
|
) |
NM
|
(1)
|
|||||||||
Taxes on adjustments
|
(7
|
) |
(2
|
) |
(5
|
) |
NM
|
(1)
|
||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
66
|
$ |
57
|
$ |
9
|
16
|
% | ||||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the three months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(1) million in each period. |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders:
|
|
|
|
|
||||||||||||
Long-term care insurance
|
$ |
37
|
$ |
22
|
$ |
15
|
68
|
% | ||||||||
Life insurance
|
10
|
4
|
6
|
150
|
% | |||||||||||
Fixed annuities
|
19
|
31
|
(12
|
) |
(39
|
)% | ||||||||||
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
66
|
$ |
57
|
$ |
9
|
16
|
% | ||||||||
• |
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our long-term care insurance business increased $15 million mainly attributable to $96 million of higher premiums and reduced benefits in the current year from
in-force
rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. The increase was also due to lower utilization of available benefits compared to the prior year. These increases were partially offset by higher severity and frequency of new claims, lower claim terminations and an increase in incremental reserves of $39 million recorded in connection with an accrual for profits followed by losses in the current year.
|
• |
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our life insurance business increased $6 million mainly from a reinsurance correction and refinement resulting in a net favorable impact of $17 million in the current year. This increase was partially offset by higher lapses primarily associated with our large
20-year
term life insurance block issued in 1999 entering its post-level premium period and the continued runoff of our term life insurance products in the current year.
|
• | Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased $12 million in our fixed annuities business predominantly attributable to lower mortality in the current year compared to the prior year and an unfavorable charge of $4 million in connection with loss recognition testing in our fixed immediate annuity products. |
• | Our long-term care insurance business increased $8 million largely from $24 million of increased premiums in the current year from in-force rate actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in the current year. |
• | Our life insurance business decreased $7 million mainly attributable to the continued runoff of our term life insurance products. |
• | Our long-term care insurance business increased $29 million largely from higher average invested assets in the current year. |
• | Our life insurance business increased $5 million principally related to higher favorable prepayment speed adjustments on mortgage-backed securities and higher yields and average invested assets in the current year. |
• | Our fixed annuities business decreased $17 million largely attributable to lower average invested assets in the current year due to block runoff. |
• | Our long-term care insurance business had net investment losses of $15 million in the current year compared to net investment gains of $3 million in the prior year. The change to net investment losses in the current year was mainly driven by derivative losses in the current year compared to gains in the prior year and from current year losses from the sale of investment securities compared to gains in the prior year. |
• | Net investment losses in our fixed annuities business increased $7 million primarily related to higher losses on embedded derivatives associated with our fixed indexed annuity products and higher unrealized losses from changes in the fair value of equity securities, partially offset by higher gains on derivatives in the current year. |
• | Our long-term care insurance business increased $22 million principally related to the aging of the in-force block (including higher frequency of new claims), higher severity of new claims, lower claim terminations and an increase in incremental reserves of $49 million recorded in connection with an accrual for profits followed by losses in the current year. These increases were partially offset by a higher favorable impact of $100 million from reduced benefits in the current year related to in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. The current year also included favorable utilization of available benefits. |
• | Our life insurance business increased $19 million primarily attributable to a favorable model refinement in the prior year that did not recur and higher mortality in the current year compared to the prior year. |
• | Our fixed annuities business increased $7 million largely attributable to $5 million of higher reserves in connection with loss recognition testing in our fixed immediate annuity products primarily as a result of a decrease in interest rates in the current year. The increase was also due to lower mortality in the current year compared to the prior year. These increases were partially offset by lower interest credited in the current year due to block runoff. |
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
1,422
|
$ |
1,434
|
$ |
(12
|
) |
(1
|
)% | |||||||
Net investment income
|
1,425
|
1,395
|
30
|
2
|
%
|
|||||||||||
Net investment gains (losses)
|
48
|
(2
|
) |
50
|
NM
|
(1)
|
||||||||||
Policy fees and other income
|
338
|
332
|
6
|
2
|
%
|
|||||||||||
Total revenues
|
3,233
|
3,159
|
74
|
2
|
%
|
|||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
2,447
|
2,401
|
46
|
2
|
%
|
|||||||||||
Interest credited
|
212
|
235
|
(23
|
) |
(10
|
)% | ||||||||||
Acquisition and operating expenses, net of deferrals
|
290
|
287
|
3
|
1
|
%
|
|||||||||||
Amortization of deferred acquisition costs and intangibles
|
133
|
149
|
(16
|
) |
(11
|
)% | ||||||||||
Interest expense
|
9
|
8
|
1
|
13
|
% | |||||||||||
Total benefits and expenses
|
3,091
|
3,080
|
11
|
—
|
% | |||||||||||
Income before income taxes
|
142
|
79
|
63
|
80
|
% | |||||||||||
Provision for income taxes
|
43
|
27
|
16
|
59
|
% | |||||||||||
Net income
|
99
|
52
|
47
|
90
|
% | |||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
(51
|
) |
—
|
(51
|
) |
NM
|
(1)
|
|||||||||
Expenses related to restructuring
|
3
|
—
|
3
|
NM
|
(1)
|
|||||||||||
Taxes on adjustments
|
10
|
—
|
10
|
NM
|
(1)
|
|||||||||||
Adjusted operating income available to Genworth Financial,
|
$ |
61
|
$ |
52
|
$ |
9
|
17
|
% | ||||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the six months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(3) million and $(2) million, respectively. |
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Adjusted operating income (loss) available to Genworth Financial, Inc.’s common stockholders:
|
|
|
|
|
||||||||||||
Long-term care insurance
|
$ |
17
|
$ |
(10
|
) | $ |
27
|
NM
|
(1)
|
|||||||
Life insurance
|
8
|
3
|
5
|
167
|
% | |||||||||||
Fixed annuities
|
36
|
59
|
(23
|
) |
(39
|
)% | ||||||||||
Total adjusted operating income available to Genworth Financial, Inc.’s common stockholders
|
$ |
61
|
$ |
52
|
$ |
9
|
17
|
% | ||||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
• | Our long-term care insurance business had adjusted operating income available to Genworth Financial, Inc.’s common stockholders of $17 million in the current year compared to an adjusted operating loss available to Genworth Financial, Inc.’s common stockholders of $10 million in the prior year. The increase to income in the current year from a loss in the prior year was predominantly attributable to $156 million of higher premiums and reduced benefits in the current year from in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. These increases were partially offset by higher severity and frequency of new claims, lower claim terminations and an increase in incremental reserves of $39 million recorded in connection with an accrual for profits followed by losses in the current year. |
• |
Adjusted operating income available to Genworth Financial, Inc.’s common stockholders for our life insurance business increased $5 million mainly from a
reinsurance correction and refinement resulting in a net favorable impact of $17 million in the current year. This increase was partially offset by higher lapses primarily associated with our large
20-year
|
• | Adjusted operating income available to Genworth Financial, Inc.’s common stockholders decreased $23 million in our fixed annuities business predominantly attributable to $17 million of unfavorable charges in connection with loss recognition testing in our fixed immediate annuity products and lower investment income, partially offset by lower interest credited in the current year. |
• | Our long-term care insurance business increased $5 million. The increase was largely from $41 million of increased premiums in the current year from in-force rate actions approved and implemented, partially offset by policy terminations and policies entering paid-up status in the current year. |
• | Our life insurance business decreased $17 million mainly attributable to the continued runoff of our term life insurance products and higher reinsurance rates in the current year. |
• | Our long-term care insurance business increased $53 million largely from higher average invested assets and higher gains from limited partnerships in the current year. |
• | Our life insurance business increased $14 million principally related to higher favorable prepayment speed adjustments on mortgage-backed securities and higher yields and average invested assets in the current year. |
• | Our fixed annuities business decreased $37 million largely attributable to lower average invested assets in the current year due to block runoff. |
• | Net investment gains in our long-term care insurance business increased $56 million primarily related to net gains from the sale of investment securities in the current year compared to net losses in the prior year and from higher unrealized gains from changes in the fair value of equity securities, partially offset by derivative losses in the current year compared to gains in the prior year. |
• | Net investment gains in our life insurance business increased $4 million primarily related to net gains from the sale of investment securities in the current year compared to net losses in the prior year, partially offset by lower gains on embedded derivatives associated with our indexed universal life insurance products. |
• | Net investment losses in our fixed annuities business increased $10 million primarily related to higher losses on embedded derivatives related to our fixed indexed annuity products and an increase in unrealized losses from changes in the fair value of equity securities, partially offset by gains on derivatives in the current year compared to losses in the prior year. |
• | Our long-term care insurance business increased $21 million principally related to the aging of the in-force block (including higher frequency of new claims), higher severity of new claims, lower claim terminations and an increase in incremental reserves of $49 million recorded in connection with an accrual for profits followed by losses in the current year. These increases were partially offset by a higher favorable impact of $161 million from reduced benefits in the current year related to in-force rate actions approved and implemented and from favorable development on prior year incurred but not reported claims. |
• | Our life insurance business increased $14 million primarily attributable to a favorable model refinement in the prior year that did not recur. |
• | Our fixed annuities business increased $11 million largely attributable to $22 million of higher reserves in connection with loss recognition testing in our fixed immediate annuity products primarily as a result of portfolio management actions and from a decrease in the projected yield curve. This increase was partially offset by lower interest credited in the current year due to block runoff. |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||||||||||
Net earned premiums:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Individual long-term care insurance
|
$ |
610
|
$ |
604
|
$ |
6
|
1
|
% | $ |
1,209
|
$ |
1,207
|
$ |
2
|
—
|
% | ||||||||||||||||
Group long-term care insurance
|
30
|
28
|
2
|
7
|
% |
59
|
56
|
3
|
5
|
% | ||||||||||||||||||||||
Total
|
$ |
640
|
$ |
632
|
$ |
8
|
1
|
% | $ |
1,268
|
$ |
1,263
|
$ |
5
|
—
|
% | ||||||||||||||||
Loss ratio
|
74
|
% |
75
|
% |
(1
|
)% |
|
78
|
% |
79
|
% |
(1
|
)% |
|
|
Three months
ended June 30, |
Increase
(decrease) and percentage change |
Six months
ended June 30, |
Increase
(decrease) and percentage change |
||||||||||||||||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
2019
|
2018
|
2019 vs. 2018
|
||||||||||||||||||||||||||
Term and whole life insurance
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net earned premiums
|
$ |
73
|
$ |
80
|
$ |
(7
|
) |
(9
|
)% | $ |
154
|
$ |
171
|
$ |
(17
|
) |
(10
|
)% | ||||||||||||||
Term universal life insurance
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net deposits
|
59
|
61
|
(2
|
) |
(3
|
)% |
117
|
122
|
(5
|
) |
(4
|
)% | ||||||||||||||||||||
Universal life insurance
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net deposits
|
141
|
126
|
15
|
12
|
% |
217
|
258
|
(41
|
) |
(16
|
)% | |||||||||||||||||||||
Total life insurance
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Net earned premiums and deposits
|
$ |
273
|
$ |
267
|
$ |
6
|
2
|
% | $ |
488
|
$ |
551
|
$ |
(63
|
) |
(11
|
)% | |||||||||||||||
|
As of June 30,
|
Percentage
change |
||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||
Term and whole life insurance
|
|
|
|
|||||||||
Life insurance in-force, net of reinsurance
|
$ |
91,386
|
$ |
100,475
|
(9
|
)% | ||||||
Life insurance in-force before reinsurance
|
$ |
419,246
|
$ |
447,429
|
(6
|
)% | ||||||
Term universal life insurance
|
|
|
|
|||||||||
Life insurance in-force, net of reinsurance
|
$ |
114,214
|
$ |
117,141
|
(2
|
)% | ||||||
Life insurance in-force before reinsurance
|
$ |
114,999
|
$ |
117,957
|
(3
|
)% | ||||||
Universal life insurance
|
|
|
|
|||||||||
Life insurance in-force, net of reinsurance
|
$ |
34,581
|
$ |
36,054
|
(4
|
)% | ||||||
Life insurance in-force before reinsurance
|
$ |
39,357
|
$ |
41,136
|
(4
|
)% | ||||||
Total life insurance
|
|
|
|
|||||||||
Life insurance in-force, net of reinsurance
|
$ |
240,181
|
$ |
253,670
|
(5
|
)% | ||||||
Life insurance in-force before reinsurance
|
$ |
573,602
|
$ |
606,522
|
(5
|
)% |
|
As of or for the three
months ended June 30, |
As of or for the six
months ended June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Account value, beginning of period
|
$ |
14,109
|
$ |
15,881
|
$ |
14,348
|
$ |
16,401
|
||||||||
Premiums and deposits
|
16
|
22
|
45
|
44
|
||||||||||||
Surrenders, benefits and product charges
|
(486
|
) |
(593
|
) |
(1,002
|
) |
(1,129
|
) | ||||||||
Net flows
|
(470
|
) |
(571
|
) |
(957
|
) |
(1,085
|
) | ||||||||
Interest credited and investment performance
|
119
|
128
|
261
|
234
|
||||||||||||
Effect of accumulated net unrealized investment gains (losses)
|
117
|
(66
|
) |
223
|
(178
|
) | ||||||||||
Account value, end of period
|
$ |
13,875
|
$ |
15,372
|
$ |
13,875
|
$ |
15,372
|
||||||||
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
47
|
$ |
43
|
$ |
4
|
9
|
%
|
||||||||
Net investment gains (losses)
|
(4
|
) |
(1
|
) |
(3
|
) |
NM
|
(1)
|
||||||||
Policy fees and other income
|
35
|
38
|
(3
|
) |
(8
|
)% | ||||||||||
Total revenues
|
78
|
80
|
(2
|
) |
(3
|
)% | ||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
13
|
7
|
6
|
86
|
% | |||||||||||
Interest credited
|
40
|
36
|
4
|
11
|
% | |||||||||||
Acquisition and operating expenses, net of deferrals
|
13
|
14
|
(1
|
) |
(7
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
4
|
8
|
(4
|
) |
(50
|
)% | ||||||||||
Total benefits and expenses
|
70
|
65
|
5
|
8
|
%
|
|||||||||||
Income before income taxes
|
8
|
15
|
(7
|
) |
(47
|
)% | ||||||||||
Provision for income taxes
|
1
|
3
|
(2
|
) |
(67
|
)% | ||||||||||
Net income
|
7
|
12
|
(5
|
) |
(42
|
)% | ||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(2)
|
2
|
1
|
1
|
100
|
% | |||||||||||
Taxes on adjustments
|
—
|
—
|
—
|
—
|
% | |||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
9
|
$ |
13
|
$ |
(4
|
) |
(31
|
)% | |||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
(2)
|
For the three months ended June 30, 2019, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million. |
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Net investment income
|
$ |
94
|
$ |
85
|
$ |
9
|
11
|
% | ||||||||
Net investment gains (losses)
|
(4
|
) |
(15
|
) |
11
|
73
|
% | |||||||||
Policy fees and other income
|
70
|
78
|
(8
|
) |
(10
|
)% | ||||||||||
Total revenues
|
160
|
148
|
12
|
8
|
% | |||||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
14
|
15
|
(1
|
) |
(7
|
)% | ||||||||||
Interest credited
|
81
|
73
|
8
|
11
|
% | |||||||||||
Acquisition and operating expenses, net of deferrals
|
26
|
29
|
(3
|
) |
(10
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
6
|
15
|
(9
|
) |
(60
|
)% | ||||||||||
Total benefits and expenses
|
127
|
132
|
(5
|
) |
(4
|
)% | ||||||||||
Income before income taxes
|
33
|
16
|
17
|
106
|
% | |||||||||||
Provision for income taxes
|
6
|
3
|
3
|
100
|
% | |||||||||||
Net income
|
27
|
13
|
14
|
108
|
% | |||||||||||
Adjustments to net income:
|
|
|
|
|
||||||||||||
Net investment (gains) losses, net
(1)
|
2
|
13
|
(11
|
) |
(85
|
)% | ||||||||||
Taxes on adjustments
|
—
|
(3
|
) |
3
|
100
|
% | ||||||||||
Adjusted operating income available to Genworth Financial, Inc.’s
|
$ |
29
|
$ |
23
|
$ |
6
|
26
|
% | ||||||||
(1)
|
For the six months ended June 30, 2019 and 2018, net investment (gains) losses were adjusted for DAC and other intangible amortization and certain benefit reserves of $(2) million in each period. |
|
As of or for the three
months ended June 30, |
As of or for the six
months ended June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Account value, beginning of period
|
$ |
5,113
|
$ |
5,619
|
$ |
4,918
|
$ |
5,884
|
||||||||
Deposits
|
6
|
5
|
13
|
12
|
||||||||||||
Surrenders, benefits and product charges
|
(158
|
) |
(203
|
) |
(319
|
) |
(411
|
) | ||||||||
Net flows
|
(152
|
) |
(198
|
) |
(306
|
) |
(399
|
) | ||||||||
Interest credited and investment performance
|
160
|
48
|
509
|
(16
|
) | |||||||||||
Account value, end of period
|
$ |
5,121
|
$ |
5,469
|
$ |
5,121
|
$ |
5,469
|
||||||||
|
As of or for the three
months ended June 30, |
As of or for the six
months ended June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
FABNs
(1)
and Funding Agreements
|
|
|
|
|
||||||||||||
Account value, beginning of period
|
$ |
305
|
$ |
185
|
$ |
381
|
$ |
260
|
||||||||
Surrenders and benefits
|
(2
|
) |
(6
|
) |
(80
|
) |
(82
|
) | ||||||||
Net flows
|
(2
|
) |
(6
|
) |
(80
|
) |
(82
|
) | ||||||||
Interest credited
|
2
|
1
|
4
|
2
|
||||||||||||
Account value, end of period
|
$ |
305
|
$ |
180
|
$ |
305
|
$ |
180
|
||||||||
(1)
|
Funding agreements backing notes |
|
Three months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
2
|
$ |
3
|
$ |
(1
|
) |
(33
|
)% | |||||||
Net investment income
|
3
|
3
|
—
|
—
|
% | |||||||||||
Net investment gains (losses)
|
(7
|
) |
—
|
(7
|
) |
NM
|
(1)
|
|||||||||
Policy fees and other income
|
—
|
1
|
(1
|
) |
(100
|
)% | ||||||||||
Total revenues
|
(2
|
) |
7
|
(9
|
) |
(129
|
)% | |||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
1
|
1
|
—
|
—
|
% | |||||||||||
Acquisition and operating expenses, net of deferrals
|
9
|
11
|
(2
|
) |
(18
|
)% | ||||||||||
Interest expense
|
62
|
67
|
(5
|
) |
(7
|
)% | ||||||||||
Total benefits and expenses
|
72
|
79
|
(7
|
) |
(9
|
)% | ||||||||||
Loss before income taxes
|
(74
|
) |
(72
|
) |
(2
|
) |
(3
|
)% | ||||||||
Provision for income taxes
|
5
|
3
|
2
|
67
|
% | |||||||||||
Net loss
|
(79
|
) |
(75
|
) |
(4
|
) |
(5
|
)% | ||||||||
Adjustments to net loss:
|
|
|
|
|
||||||||||||
Net investment (gains) losses
|
7
|
—
|
7
|
NM
|
(1)
|
|||||||||||
Expenses related to restructuring
|
1
|
—
|
1
|
NM
|
(1)
|
|||||||||||
Taxes on adjustments
|
(1
|
) |
—
|
(1
|
) |
NM
|
(1)
|
|||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
|
$ |
(72
|
) | $ |
(75
|
) | $ |
3
|
4
|
%
|
||||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
|
Six months ended
June 30, |
Increase
(decrease) and percentage change |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||
Revenues:
|
|
|
|
|
||||||||||||
Premiums
|
$ |
4
|
$ |
5
|
$ |
(1
|
) |
(20
|
)% | |||||||
Net investment income
|
6
|
5
|
1
|
20
|
% | |||||||||||
Net investment gains (losses)
|
(28
|
) |
(1
|
) |
(27
|
) |
NM
|
(1)
|
||||||||
Policy fees and other income
|
1
|
(1
|
) |
2
|
200
|
% | ||||||||||
Total revenues
|
(17
|
) |
8
|
(25
|
) |
NM
|
(1)
|
|||||||||
Benefits and expenses:
|
|
|
|
|
||||||||||||
Benefits and other changes in policy reserves
|
2
|
2
|
—
|
—
|
% | |||||||||||
Acquisition and operating expenses, net of deferrals
|
16
|
22
|
(6
|
) |
(27
|
)% | ||||||||||
Amortization of deferred acquisition costs and intangibles
|
—
|
1
|
(1
|
) |
(100
|
)% | ||||||||||
Interest expense
|
123
|
132
|
(9
|
) |
(7
|
)% | ||||||||||
Total benefits and expenses
|
141
|
157
|
(16
|
) |
(10
|
)% | ||||||||||
Loss before income taxes
|
(158
|
) |
(149
|
) |
(9
|
) |
(6
|
)% | ||||||||
Provision (benefit) for income taxes
|
10
|
(14
|
) |
24
|
171
|
% | ||||||||||
Net loss
|
(168
|
) |
(135
|
) |
(33
|
) |
(24
|
)% | ||||||||
Adjustments to net loss:
|
|
|
|
|
||||||||||||
Net investment (gains) losses
|
28
|
1
|
27
|
NM
|
(1)
|
|||||||||||
Expenses related to restructuring
|
1
|
—
|
1
|
NM
|
(1)
|
|||||||||||
Taxes on adjustments
|
(6
|
) |
—
|
(6
|
) |
NM
|
(1)
|
|||||||||
Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders
|
$ |
(145
|
) | $ |
(134
|
) | $ |
(11
|
) |
(8
|
)% | |||||
(1)
|
We define “NM” as not meaningful for increases or decreases greater than 200%. |
|
Three months ended June 30,
|
Increase (decrease)
|
||||||||||||||||||||||
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||||||||||
(Amounts in millions)
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
||||||||||||||||||
Fixed maturity securities—taxable
|
4.6
|
% | $ |
665
|
4.5
|
% | $ |
651
|
0.1
|
% | $ |
14
|
||||||||||||
Fixed maturity securities—non-taxable
|
6.1
|
% |
2
|
3.8
|
% |
3
|
2.3
|
% |
(1
|
) | ||||||||||||||
Equity securities
|
6.3
|
% |
10
|
5.1
|
% |
10
|
1.2
|
% |
—
|
|||||||||||||||
Commercial mortgage loans
|
4.8
|
% |
84
|
4.8
|
% |
77
|
—
|
% |
7
|
|||||||||||||||
Restricted commercial mortgage loans related to
|
7.0
|
% |
1
|
8.4
|
% |
2
|
(1.4
|
)% |
(1
|
) | ||||||||||||||
Policy loans
|
8.8
|
% |
45
|
9.0
|
% |
41
|
(0.2
|
)% |
4
|
|||||||||||||||
Other invested assets
(1)
|
28.7
|
% |
59
|
49.3
|
% |
53
|
(20.6
|
)% |
6
|
|||||||||||||||
Cash, cash equivalents, restricted cash and
|
1.9
|
% |
11
|
1.7
|
% |
14
|
0.2
|
% |
(3
|
) | ||||||||||||||
Gross investment income before expenses and fees
|
5.0
|
% |
877
|
4.8
|
% |
851
|
0.2
|
% |
26
|
|||||||||||||||
Expenses and fees
|
(0.2
|
)% |
(25
|
) |
(0.1
|
)% |
(23
|
) |
(0.1
|
)% |
(2
|
) | ||||||||||||
Net investment income
|
4.8
|
% | $ |
852
|
4.7
|
% | $ |
828
|
0.1
|
% | $ |
24
|
||||||||||||
Average invested assets and cash
|
|
$ |
70,752
|
|
$ |
70,466
|
|
$ |
286
|
|||||||||||||||
|
Six months ended June 30,
|
Increase (decrease)
|
||||||||||||||||||||||
|
2019
|
2018
|
2019 vs. 2018
|
|||||||||||||||||||||
(Amounts in millions)
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
||||||||||||||||||
Fixed maturity securities—taxable
|
4.5
|
% | $ |
1,308
|
4.5
|
% | $ |
1,286
|
—
|
% | $ |
22
|
||||||||||||
Fixed maturity securities—non-taxable
|
6.1
|
% |
4
|
3.8
|
% |
6
|
2.3
|
% |
(2
|
) | ||||||||||||||
Equity securities
|
5.9
|
% |
19
|
5.2
|
% |
20
|
0.7
|
% |
(1
|
) | ||||||||||||||
Commercial mortgage loans
|
4.8
|
% |
165
|
5.0
|
% |
159
|
(0.2
|
)% |
6
|
|||||||||||||||
Restricted commercial mortgage loans related to
|
6.8
|
% |
2
|
8.1
|
% |
4
|
(1.3
|
)% |
(2
|
) | ||||||||||||||
Policy loans
|
9.2
|
% |
91
|
9.3
|
% |
84
|
(0.1
|
)% |
7
|
|||||||||||||||
Other invested assets
(1)
|
31.1
|
% |
118
|
44.0
|
% |
92
|
(12.9
|
)% |
26
|
|||||||||||||||
Cash, cash equivalents, restricted cash and
|
2.0
|
% |
23
|
1.5
|
% |
26
|
0.5
|
% |
(3
|
) | ||||||||||||||
Gross investment income before expenses and fees
|
4.9
|
% |
1,730
|
4.8
|
% |
1,677
|
0.1
|
% |
53
|
|||||||||||||||
Expenses and fees
|
(0.1
|
)% |
(49
|
) |
(0.2
|
)% |
(45
|
) |
0.1
|
% |
(4
|
) | ||||||||||||
Net investment income
|
4.8
|
% | $ |
1,681
|
4.6
|
% | $ |
1,632
|
0.2
|
% | $ |
49
|
||||||||||||
Average invested assets and cash
|
|
$ |
70,598
|
|
$ |
70,529
|
|
$ |
69
|
|||||||||||||||
(1)
|
Investment income for other invested assets includes amortization of terminated cash flow hedges, which have no corresponding book value within the yield calculation and includes limited partnership investments, which are primarily equity-based and do not have fixed returns by period. |
|
Three months ended
June 30, |
Six months ended
June 30, |
||||||||||||||
(Amounts in millions)
|
2019
|
2018
|
2019
|
2018
|
||||||||||||
Available-for-sale fixed maturity securities:
|
|
|
|
|
||||||||||||
Realized gains
|
$ |
5
|
$ |
13
|
$ |
86
|
$ |
20
|
||||||||
Realized losses
|
(6
|
) |
(21
|
) |
(28
|
) |
(37
|
) | ||||||||
Net realized gains (losses) on available-for-sale fixed maturity securities
|
(1
|
) |
(8
|
) |
58
|
(17
|
) | |||||||||
Impairments:
|
|
|
|
|
||||||||||||
Total other-than-temporary impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Portion of other-than-temporary impairments included in other comprehensive income (loss)
|
—
|
—
|
—
|
—
|
||||||||||||
Net other-than-temporary impairments
|
—
|
—
|
—
|
—
|
||||||||||||
Net realized gains (losses) on equity securities sold
|
—
|
8
|
3
|
10
|
||||||||||||
Net unrealized gains (losses) on equity securities still held
|
(12
|
) |
3
|
(4
|
) |
(15
|
) | |||||||||
Limited partnerships
|
(11
|
) |
(2
|
) |
4
|
5
|
||||||||||
Commercial mortgage loans
|
1
|
—
|
—
|
—
|
||||||||||||
Derivative instruments
|
(22
|
) |
(15
|
) |
(32
|
) |
(28
|
) | ||||||||
Net investment gains (losses)
|
$ |
(45
|
) | $ |
(14
|
) | $ |
29
|
$ |
(45
|
) | |||||
• | We recorded net unrealized losses on equity securities during the three months ended June 30, 2019 largely related to our Canada Mortgage Insurance segment principally from losses on preferred equity securities whose values are influenced by Canadian bond yields, which saw a decrease in the second quarter of 2019. The three months ended June 30, 2019 also included mark to market adjustments resulting in higher net losses of $9 million on limited partnerships compared to the three months ended June 30, 2018. The three months ended June 30, 2018 included net unrealized gains from changes in the fair value of equity securities driven principally by favorable equity market performance. |
• | We recorded net realized gains of $58 million during the six months ended June 30, 2019 primarily from the sale of U.S. government, agencies and government-sponsored enterprises securities and cash tenders from merger and acquisition activity compared to $17 million of net realized losses during the six months ended June 30, 2018. |
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||
(Amounts in millions)
|
Carrying value
|
% of total
|
Carrying value
|
% of total
|
||||||||||||
Fixed maturity securities, available-for-sale:
|
|
|
|
|
||||||||||||
Public
|
$ |
44,013
|
57
|
% | $ |
41,857
|
58
|
% | ||||||||
Private
|
19,761
|
26
|
17,804
|
25
|
||||||||||||
Equity securities
|
644
|
1
|
655
|
1
|
||||||||||||
Commercial mortgage loans
|
6,963
|
9
|
6,687
|
8
|
||||||||||||
Restricted commercial mortgage loans related to a securitization entity
|
56
|
—
|
62
|
—
|
||||||||||||
Policy loans
|
2,076
|
3
|
1,861
|
3
|
||||||||||||
Other invested assets
|
1,535
|
2
|
1,188
|
2
|
||||||||||||
Cash, cash equivalents and restricted cash
|
1,938
|
2
|
2,177
|
3
|
||||||||||||
Total cash, cash equivalents, restricted cash and invested assets
|
$ |
76,986
|
100
|
% | $ |
72,291
|
100
|
% | ||||||||
|
|
Gross unrealized gains
|
Gross unrealized losses
|
|
||||||||||||||||||||
(Amounts in millions)
|
Amortized
cost or cost |
Not other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Not other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Fair
value |
||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
||||||||||||||||||
U.S. government, agencies and
|
$ |
4,151
|
$ |
837
|
$ |
—
|
$ |
(1
|
) | $ |
—
|
$ |
4,987
|
|||||||||||
State and political subdivisions
|
2,319
|
317
|
—
|
—
|
—
|
2,636
|
||||||||||||||||||
Non-U.S. government
|
2,496
|
155
|
—
|
(2
|
) |
—
|
2,649
|
|||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
||||||||||||||||||
Utilities
|
4,327
|
565
|
—
|
(13
|
) |
—
|
4,879
|
|||||||||||||||||
Energy
|
2,468
|
255
|
—
|
(10
|
) |
—
|
2,713
|
|||||||||||||||||
Finance and insurance
|
6,974
|
633
|
—
|
(10
|
) |
—
|
7,597
|
|||||||||||||||||
Consumer—non-cyclical
|
4,954
|
616
|
—
|
(18
|
) |
—
|
5,552
|
|||||||||||||||||
Technology and communications
|
2,893
|
269
|
—
|
(6
|
) |
—
|
3,156
|
|||||||||||||||||
Industrial
|
1,242
|
98
|
—
|
(4
|
) |
—
|
1,336
|
|||||||||||||||||
Capital goods
|
2,323
|
303
|
—
|
(6
|
) |
—
|
2,620
|
|||||||||||||||||
Consumer—cyclical
|
1,619
|
127
|
—
|
(5
|
) |
—
|
1,741
|
|||||||||||||||||
Transportation
|
1,263
|
152
|
—
|
(4
|
) |
—
|
1,411
|
|||||||||||||||||
Other
|
356
|
40
|
—
|
—
|
—
|
396
|
||||||||||||||||||
Total U.S. corporate
|
28,419
|
3,058
|
—
|
(76
|
) |
—
|
31,401
|
|||||||||||||||||
Non-U.S. corporate:
|
|
|
|
|
|
|
||||||||||||||||||
Utilities
|
1,114
|
54
|
—
|
(3
|
) |
—
|
1,165
|
|||||||||||||||||
Energy
|
1,349
|
168
|
—
|
(1
|
) |
—
|
1,516
|
|||||||||||||||||
Finance and insurance
|
2,438
|
191
|
—
|
(1
|
) |
—
|
2,628
|
|||||||||||||||||
Consumer—non-cyclical
|
674
|
40
|
—
|
(4
|
) |
—
|
710
|
|||||||||||||||||
Technology and communications
|
1,179
|
94
|
—
|
—
|
—
|
1,273
|
||||||||||||||||||
Industrial
|
936
|
81
|
—
|
—
|
—
|
1,017
|
||||||||||||||||||
Capital goods
|
663
|
33
|
—
|
(1
|
) |
—
|
695
|
|||||||||||||||||
Consumer—cyclical
|
542
|
16
|
—
|
(1
|
) |
—
|
557
|
|||||||||||||||||
Transportation
|
761
|
82
|
—
|
(2
|
) |
—
|
841
|
|||||||||||||||||
Other
|
2,061
|
186
|
—
|
(2
|
) |
—
|
2,245
|
|||||||||||||||||
Total non-U.S. corporate
|
11,717
|
945
|
—
|
(15
|
) |
—
|
12,647
|
|||||||||||||||||
Residential mortgage-backed
(1)
|
2,511
|
215
|
14
|
(2
|
) |
—
|
2,738
|
|||||||||||||||||
Commercial mortgage-backed
|
2,882
|
121
|
—
|
(14
|
) |
—
|
2,989
|
|||||||||||||||||
Other asset-backed
|
3,699
|
38
|
—
|
(10
|
) |
—
|
3,727
|
|||||||||||||||||
Total available-for-sale fixed
|
$ |
58,194
|
$ |
5,686
|
$ |
14
|
$ |
(120
|
) | $ |
—
|
$ |
63,774
|
|||||||||||
(1)
|
Fair value included $12 million collateralized by Alt-A residential mortgage loans and $22 million collateralized by sub-prime residential mortgage loans. |
|
|
Gross unrealized gains
|
Gross unrealized losses
|
|
||||||||||||||||||||
(Amounts in millions)
|
Amortized
cost or cost |
Not other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Not other-than-
temporarily impaired |
Other-than-
temporarily impaired |
Fair
value |
||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
||||||||||||||||||
U.S. government, agencies andgovernment-sponsoredenterprises
|
$ |
4,175
|
$ |
473
|
$ |
—
|
$ |
(17
|
) | $ |
—
|
$ |
4,631
|
|||||||||||
State and political subdivisions
|
2,406
|
168
|
—
|
(22
|
) |
—
|
2,552
|
|||||||||||||||||
Non-U.S. government
|
2,345
|
72
|
—
|
(24
|
) |
—
|
2,393
|
|||||||||||||||||
U.S. corporate:
|
|
|
|
|
|
|
||||||||||||||||||
Utilities
|
4,439
|
331
|
—
|
(95
|
) |
—
|
4,675
|
|||||||||||||||||
Energy
|
2,382
|
101
|
—
|
(64
|
) |
—
|
2,419
|
|||||||||||||||||
Finance and insurance
|
6,705
|
249
|
—
|
(132
|
) |
—
|
6,822
|
|||||||||||||||||
Consumer—non-cyclical
|
4,891
|
294
|
—
|
(137
|
) |
—
|
5,048
|
|||||||||||||||||
Technology and communications
|
2,823
|
110
|
—
|
(78
|
) |
—
|
2,855
|
|||||||||||||||||
Industrial
|
1,230
|
41
|
—
|
(33
|
) |
—
|
1,238
|
|||||||||||||||||
Capital goods
|
2,277
|
165
|
—
|
(51
|
) |
—
|
2,391
|
|||||||||||||||||
Consumer—cyclical
|
1,592
|
53
|
—
|
(48
|
) |
—
|
1,597
|
|||||||||||||||||
Transportation
|
1,283
|
78
|
—
|
(41
|
) |
—
|
1,320
|
|||||||||||||||||
Other
|
376
|
24
|
—
|
(3
|
) |
—
|
397
|
|||||||||||||||||
Total U.S. corporate
|
27,998
|
1,446
|
—
|
(682
|
) |
—
|
28,762
|
|||||||||||||||||
Non-U.S. corporate:
|
|
|
|
|
|
|
||||||||||||||||||
Utilities
|
1,056
|
17
|
—
|
(32
|
) |
—
|
1,041
|
|||||||||||||||||
Energy
|
1,320
|
72
|
—
|
(23
|
) |
—
|
1,369
|
|||||||||||||||||
Finance and insurance
|
2,391
|
72
|
—
|
(40
|
) |
—
|
2,423
|
|||||||||||||||||
Consumer—non-cyclical
|
756
|
8
|
—
|
(25
|
) |
—
|
739
|
|||||||||||||||||
Technology and communications
|
1,168
|
23
|
—
|
(26
|
) |
—
|
1,165
|
|||||||||||||||||
Industrial
|
926
|
36
|
—
|
(17
|
) |
—
|
945
|
|||||||||||||||||
Capital goods
|
615
|
10
|
—
|
(10
|
) |
—
|
615
|
|||||||||||||||||
Consumer—cyclical
|
532
|
1
|
—
|
(13
|
) |
—
|
520
|
|||||||||||||||||
Transportation
|
689
|
46
|
—
|
(15
|
) |
—
|
720
|
|||||||||||||||||
Other
|
2,218
|
105
|
—
|
(23
|
) |
—
|
2,300
|
|||||||||||||||||
Total non-U.S. corporate
|
11,671
|
390
|
—
|
(224
|
) |
—
|
11,837
|
|||||||||||||||||
Residential mortgage-backed
(1)
|
2,888
|
160
|
13
|
(17
|
) |
—
|
3,044
|
|||||||||||||||||
Commercial mortgage-backed
|
3,054
|
43
|
—
|
(81
|
) |
—
|
3,016
|
|||||||||||||||||
Other asset-backed
|
3,444
|
10
|
1
|
(29
|
) |
—
|
3,426
|
|||||||||||||||||
Total available-for-sale fixed
|
$ |
57,981
|
$ |
2,762
|
$ |
14
|
$ |
(1,096
|
) | $ |
—
|
$ |
59,661
|
|||||||||||
(1)
|
Fair value included $19 million collateralized by Alt-A residential mortgage loans and $22 million collateralized by sub-prime residential mortgage loans. |
|
June 30, 2019
|
|||||||||||||||||||
(Dollar amounts in millions)
|
Total recorded
investment |
Number of
loans |
Loan-to-value
(1)
|
Delinquent
principal balance |
Number of
delinquent
loans
|
|||||||||||||||
Loan Year
|
|
|
|
|
|
|||||||||||||||
2008 and prior
|
$ |
1,186
|
419
|
38
|
% | $ |
—
|
—
|
||||||||||||
2009
|
—
|
—
|
—
|
% |
—
|
—
|
||||||||||||||
2010
|
48
|
10
|
37
|
% |
—
|
—
|
||||||||||||||
2011
|
183
|
45
|
40
|
% |
—
|
—
|
||||||||||||||
2012
|
445
|
79
|
44
|
% |
—
|
—
|
||||||||||||||
2013
|
621
|
118
|
48
|
% |
—
|
—
|
||||||||||||||
2014
|
740
|
130
|
52
|
% |
—
|
—
|
||||||||||||||
2015
|
865
|
139
|
57
|
% |
—
|
—
|
||||||||||||||
2016
|
543
|
95
|
60
|
% |
—
|
—
|
||||||||||||||
2017
|
758
|
142
|
65
|
% |
—
|
—
|
||||||||||||||
2018
|
1,030
|
165
|
69
|
% |
—
|
—
|
||||||||||||||
2019
|
559
|
72
|
71
|
% |
—
|
—
|
||||||||||||||
Total
|
$ |
6,978
|
1,414
|
55
|
% | $ |
—
|
—
|
||||||||||||
(1)
|
Represents weighted-average loan-to-value as of June 30, 2019. |
|
December 31, 2018
|
|||||||||||||||||||
(Dollar amounts in millions)
|
Total recorded
investment |
Number of
loans |
Loan-to-value
(1)
|
Delinquent
principal balance |
Number of
delinquent loans |
|||||||||||||||
Loan Year
|
|
|
|
|
|
|||||||||||||||
2008 and prior
|
$ |
1,310
|
459
|
39
|
% | $ |
3
|
1
|
||||||||||||
2009
|
—
|
—
|
—
|
% |
—
|
—
|
||||||||||||||
2010
|
50
|
11
|
37
|
% |
—
|
—
|
||||||||||||||
2011
|
193
|
46
|
41
|
% |
—
|
—
|
||||||||||||||
2012
|
476
|
81
|
45
|
% |
—
|
—
|
||||||||||||||
2013
|
656
|
122
|
48
|
% |
3
|
1
|
||||||||||||||
2014
|
772
|
133
|
53
|
% |
—
|
—
|
||||||||||||||
2015
|
877
|
139
|
58
|
% |
—
|
—
|
||||||||||||||
2016
|
553
|
96
|
61
|
% |
—
|
—
|
||||||||||||||
2017
|
773
|
144
|
66
|
% |
—
|
—
|
||||||||||||||
2018
|
1,040
|
165
|
69
|
% |
—
|
—
|
||||||||||||||
Total
|
$ |
6,700
|
1,396
|
54
|
% | $ |
6
|
2
|
||||||||||||
(1)
|
Represents weighted-average loan-to-value as of December 31, 2018. |
|
June 30, 2019
|
December 31, 2018
|
||||||||||||||
(Amounts in millions)
|
Carrying value
|
% of total
|
Carrying value
|
% of total
|
||||||||||||
Limited partnerships
|
$ |
512
|
34
|
% | $ |
409
|
34
|
% | ||||||||
Bank loan investments
|
337
|
22
|
248
|
21
|
||||||||||||
Derivatives
|
280
|
18
|
178
|
15
|
||||||||||||
Short-term investments
|
273
|
18
|
230
|
19
|
||||||||||||
Securities lending collateral
|
113
|
7
|
102
|
9
|
||||||||||||
Other investments
|
20
|
1
|
21
|
2
|
||||||||||||
Total other invested assets
|
$ |
1,535
|
100
|
% | $ |
1,188
|
100
|
% | ||||||||
(Notional in millions)
|
Measurement
|
December 31,
2018 |
Additions
|
Maturities/
terminations |
June 30,
2019 |
|||||||||||||
Derivatives designated as hedges
|
|
|
|
|
|
|||||||||||||
Cash flow hedges:
|
|
|
|
|
|
|||||||||||||
Interest rate swaps
|
Notional
|
$ |
9,924
|
$ |
469
|
$ |
(1,338
|
) | $ |
9,055
|
||||||||
Foreign currency swaps
|
Notional
|
80
|
52
|
(22
|
) |
110
|
||||||||||||
Total cash flow hedges
|
|
10,004
|
521
|
(1,360
|
) |
9,165
|
||||||||||||
Total derivatives designated as hedges
|
|
10,004
|
521
|
(1,360
|
) |
9,165
|
||||||||||||
Derivatives not designated as hedges
|
|
|
|
|
|
|||||||||||||
Interest rate swaps
|
Notional
|
4,674
|
—
|
—
|
4,674
|
|||||||||||||
Interest rate swaps in a foreign currency
|
Notional
|
2,565
|
187
|
(77
|
) |
2,675
|
||||||||||||
Interest rate caps and floors
|
Notional
|
2,624
|
160
|
(66
|
) |
2,718
|
||||||||||||
Foreign currency swaps
|
Notional
|
453
|
—
|
(2
|
) |
451
|
||||||||||||
Equity index options
|
Notional
|
2,628
|
939
|
(1,035
|
) |
2,532
|
||||||||||||
Financial futures
|
Notional
|
1,415
|
3,029
|
(3,217
|
) |
1,227
|
||||||||||||
Equity return swaps
|
Notional
|
17
|
2
|
(2
|
) |
17
|
||||||||||||
Other foreign currency contracts
|
Notional
|
1,080
|
2,925
|
(2,704
|
) |
1,301
|
||||||||||||
Total derivatives not designated as hedges
|
|
15,456
|
7,242
|
(7,103
|
) |
15,595
|
||||||||||||
Total derivatives
|
|
$ |
25,460
|
$ |
7,763
|
$ |
(8,463
|
) | $ |
24,760
|
||||||||
(Number of policies)
|
Measurement
|
December 31,
2018 |
Additions
|
Maturities/
terminations |
June 30,
2019 |
|||||||||||||
Derivatives not designated as hedges
|
|
|
|
|
|
|||||||||||||
GMWB embedded derivatives
|
Policies
|
27,886
|
—
|
(1,139
|
) |
26,747
|
||||||||||||
Fixed index annuity embedded derivatives
|
Policies
|
16,464
|
—
|
(410
|
) |
16,054
|
||||||||||||
Indexed universal life embedded derivatives
|
Policies
|
929
|
—
|
(21
|
) |
908
|
• |
Cash, cash equivalents, restricted cash and invested assets increased $4,695 million primarily from increases of $4,113 million, $347 million, $276 million and $215 million in fixed maturity securities, other invested assets, commercial mortgage loans and policy loans, respectively. The increase in fixed maturity securities was predominantly related to higher unrealized gains principally from a decrease in interest rates, partially offset by net sales of fixed maturity securities in the current year. The increase in other invested assets was primarily from higher market values of derivative assets driven mostly by a decrease in interest rates and an increase in limited partnership and bank loan investments in the current year. Commercial mortgage loans increased from higher originations and lower prepayments in the current year. The increase in policy loans was principally driven by new loans offered through our corporate-owned life insurance policies collateralized by the cash surrender value of the policy. These increases were partially offset by a decrease in cash, cash equivalents and restricted cash of $239 million largely from higher net withdrawals on our universal life and investment contracts
and higher origination funding of commercial mortgage loans, along with an increase in funding of limited partnership and bank loan investments in the current year.
|
|
• | DAC decreased $1,158 million predominantly related to our U.S. Life Insurance segment. We are required to analyze the impacts from net unrealized investment gains and losses on our available-for-sale investment securities backing insurance assets and liabilities, as if those unrealized investment gains and losses were realized. These “shadow accounting” adjustments result in the recognition of unrealized gains and losses on related insurance assets and liabilities in a manner consistent with the recognition of the unrealized gains and losses on available-for-sale investment securities within the statements of comprehensive income and changes in equity. During the six months ended June 30, 2019, due primarily to a decrease in interest rates increasing unrealized investment gains, we decreased the DAC balance of our U.S. Life Insurance segment by $1,015 million, resulting in a cumulative decrease of $1,510 million to the DAC balance as of June 30, 2019, with an offsetting amount recorded in other comprehensive income (loss). The decrease was also attributable to amortization, net of interest and deferrals, in our U.S. Life Insurance segment in the current year. |
• | Deferred tax asset decreased $353 million primarily due to higher unrealized gains on investments and derivatives in the current year. |
• | Separate account assets increased $328 million primarily due to favorable equity market performance in the current year. |
• | Future policy benefits increased $1,643 million primarily driven by shadow accounting adjustments associated with the recognition of the higher unrealized gains. The shadow accounting adjustments increased future policy benefits by approximately $1,446 million, mostly in our long-term care |
insurance business, with an offsetting amount recorded in other comprehensive income (loss). The increase was also attributable to aging of our long-term care insurance in-force block in the current year. |
• | Policyholder account balances decreased $295 million largely as a result of surrenders and benefits in our fixed annuities business and from scheduled maturities of certain funding agreements in our institutional products in the current year. These decreases were partially offset by an increase associated with shadow accounting adjustments in connection with the recognition of the higher unrealized gains mostly in our universal life insurance products in the current year. |
• | Liability for policy and contract claims increased $298 million due principally to our long-term care insurance business primarily from aging of the in-force block (including higher frequency of new claims) and higher severity of new claims, partially offset by favorable development on prior year incurred but not reported claims and favorable claim terminations in the current year. These increases were partially offset by lower delinquencies in our U.S. mortgage insurance business in the current year. |
• | We reported net income available to Genworth Financial, Inc.’s common stockholders of $342 million for the six months ended June 30, 2019. |
• | Net unrealized gains and derivatives qualifying as hedges increased $710 million and $202 million, respectively, primarily from a decrease in interest rates in the current year. |
• | Noncontrolling interests increased $96 million predominantly related to total comprehensive income attributable to noncontrolling interests of $192 million, partially offset by dividends to noncontrolling interests of $53 million and the repurchase of shares of $44 million in the current year. |
(Amounts in millions)
|
2019
|
2018
|
||||||
Net cash from operating activities
|
$ |
795
|
$ |
561
|
||||
Net cash used by investing activities
|
(351
|
) |
(198
|
) | ||||
Net cash used by financing activities
|
(695
|
) |
(943
|
) | ||||
Net decrease in cash before foreign exchange effect
|
$ |
(251
|
) | $ |
(580
|
) | ||
Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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Item 6.
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Exhibits
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Number
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Description
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2.1
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10.1§
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10.2§
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10.3§
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10.4§
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10.5§
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10.6§
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31.1
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31.2
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32.1
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32.2
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101.INS
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XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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§ | Management contract or compensatory plan or arrangement. |
|
GENWORTH FINANCIAL, INC.
(Registrant)
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|||
Date: July 31, 2019
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|
|
||
|
By:
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/s/ Matthew D. Farney
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||
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Matthew D. Farney
Vice President and Controller
(Principal Accounting Officer)
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Exhibit 10.1
2018 Genworth Financial, Inc.
Omnibus Incentive Plan
Table of Contents
Article 1. |
Establishment, Purpose, Awards, Eligibility and Participation |
2 | ||||
Article 2. |
Definitions |
2 | ||||
Article 3. |
Administration |
5 | ||||
Article 4. |
Shares Subject to the Plan and Maximum Awards |
6 | ||||
Article 5. |
Stock Options |
9 | ||||
Article 6. |
Stock Appreciation Rights |
10 | ||||
Article 7. |
Restricted Stock and Restricted Stock Units |
11 | ||||
Article 8. |
Other Stock-Based Awards |
11 | ||||
Article 9. |
Dividend Equivalents |
12 | ||||
Article 10. |
Nonemployee Director Awards |
12 | ||||
Article 11. |
Cash-Based Awards |
12 | ||||
Article 12. |
Change of Control |
12 | ||||
Article 13. |
Duration, Rescission, Amendment, Modification, Suspension, and Termination |
14 | ||||
Article 14. |
General Provisions |
15 |
2018 Genworth Financial, Inc.
Omnibus Incentive Plan
Article 1. Establishment, Purpose, Awards, Eligibility and Participation
1.1 Establishment. Genworth Financial, Inc., a Delaware corporation (together with its successors, the Company), establishes the 2018 Genworth Financial, Inc. Omnibus Incentive Plan (the Plan), as set forth in this document.
The Plan shall become effective on the date that it is approved by the Companys stockholders (the date on which the Plan becomes effective being referred to herein as the Effective Date).
1.2 Purpose of the Plan. The purpose of the Plan is to promote the interests of the Company and its stockholders by strengthening the ability of the Company and its Affiliates to attract, motivate, reward, and retain qualified individuals upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend, and to provide an opportunity for such individuals to acquire stock ownership and other rights that promote and recognize the financial success and growth of the Company.
1.3 Awards. The Plan permits the grant of Stock Options, Stock Appreciation Rights, Restricted Stock (including Performance Shares), Restricted Stock Units (including Performance Units), Other-Stock Based Awards, Nonemployee Director Awards (including Deferred Stock Units), and Cash-Based Awards.
1.4 Eligibility and Participation. Any Employee (including a leased employee), Nonemployee Director, or Third Party Service Provider is eligible to be designated a Participant. An individual shall become a Participant upon the grant of an Award. Each Award shall be evidenced by an Award Certificate. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award. An Employee, Nonemployee Director, or Third Party Service Provider of an Affiliate may be granted Stock Options or Stock Appreciation Rights under this Plan only if the Affiliate qualifies as an eligible issuer of service recipient stock within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A. Incentive Stock Options may be granted only to Eligible Participants who are employees of the Company or a Parent or Subsidiary as defined in Section 424(e) and (f) of the Code.
Article 2. Definitions
In addition to the terms specifically defined elsewhere in the Plan, the following capitalized terms whenever used in the Plan shall have the meanings set forth below.
2.1 Awards.
(a) |
Award shall mean, individually or collectively, any Stock Option, Stock Appreciation Right, Restricted Stock (including any Performance Share), Restricted Stock Unit (including any Performance Unit), Cash-Based Award, Other Stock-Based Award or Nonemployee Director Award (including any Deferred Stock Unit) that is granted under the Plan. |
(b) |
Cash-Based Award shall mean any right granted under Article 11. |
(c) |
Deferred Stock Unit shall mean a type of Nonemployee Director Award, as described in Article 10. |
(d) |
Dividend Equivalent shall mean a right with respect to a Full-Value Award granted under Article 9. |
(e) |
Full-Value Award means an Award other than in the form of a Stock Option or Stock Appreciation Right, and which is settled by the issuance of Shares (or at the discretion of the Committee, settled in cash valued by reference to full Share value). |
(f) |
Incentive Stock Option shall mean a Stock Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto. |
(g) |
Nonemployee Director Award shall mean any Award granted to a Nonemployee Director under Article 10. |
(h) |
Nonstatutory Stock Option shall mean a Stock Option that is not an Incentive Stock Option. |
(i) |
Other Stock-Based Award shall mean any right, granted under Article 8, that relates to or is valued by reference to Shares or other Awards relating to Shares. |
(j) |
Performance Share shall mean a Share of Restricted Stock as described in Section 7.1(c). |
(k) |
Performance Unit shall mean a Restricted Stock Unit as described in Section 7.1(c). |
(l) |
Restricted Stock shall mean any Share granted under Article 7 that is subject to certain restrictions and to risk of forfeiture. |
(m) |
Restricted Stock Unit shall mean any right granted under Article 7 to receive Shares (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture. |
(n) |
Stock Appreciation Right or SAR shall mean any right granted under Article 6 to receive a payment (in Shares or cash) equal in value to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the grant price of the SAR. |
(o) |
Stock Option shall mean any right granted under Article 5 to purchase Shares at a specified price during specified time periods. A Stock Option may be an Incentive Stock Option or a Nonstatutory Stock Option. |
2.2 Other Defined Terms.
(a) |
Affiliate shall mean an entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including any Subsidiary. |
(b) |
Annual Award Limit shall have the meaning set forth in Section 4.3. |
(c) |
Automatic Exercise shall have the meaning set forth in Section 6.2. |
(d) |
Award Certificate shall mean a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Awards or series of Awards under the Plan. The Committee may provide for the use of electronic, internet or other non-paper Award Certificates, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant. |
(e) |
Board of Directors shall mean the board of directors of the Company. |
(f) |
Change of Control shall have the meaning set forth in Section 12.2. |
(g) |
Code shall mean the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder. |
(h) |
Committee shall mean a committee of the Board of Directors, whose members are intended to qualify as independent directors under the applicable rules of the stock exchange on which the Shares are listed, and, except as otherwise determined by the Board of Directors, non-employee directors under the requirements of Section 16 of the Exchange Act and the rules and regulations thereunder, or any successor requirement to any of the foregoing. Unless and until changed by the Board, the Management Development and Compensation Committee of the Board is designated as the Committee to administer the Plan. |
(i) |
Company shall have the meaning set forth in Section 1.1. |
(j) |
Effective Date shall have the meaning set forth in Section 1.1. |
(k) |
Employee shall mean any employee of the Company or any of its Affiliates. |
(l) |
Exchange Act shall mean the U.S. Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. |
(m) |
Fair Market Value shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. |
(n) |
Grant Date of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date as is determined and specified as part of that authorization process. Notice of the grant shall be provided to the grantee within a reasonable time after the Grant Date. |
(o) |
Nonemployee Director shall mean a director of the Company who is not a common law employee of the Company or an Affiliate. |
(p) |
Participant shall mean any eligible individual as set forth in Section 1.4 to whom an Award is granted under the Plan; provided that in the case of the death of a Participant, the term Participant refers to a beneficiary designated pursuant to Section 14.14 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision. |
(q) |
Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof. |
(r) |
Plan shall have the meaning set forth in Section 1.1. |
(s) |
Plan Year shall mean the calendar year. |
(t) |
Prior Plans shall mean the 2004 Genworth Financial, Inc. Omnibus Incentive Plan, as amended, and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan. |
(u) |
Share shall mean a share of Class A common stock, par value $.001, of the Company (as such may be reclassified or renamed), and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under Section 4.4. |
(v) |
Subsidiary shall mean, with respect to a Person, any corporation or other entity, whether domestic or foreign, in which such Person has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise. |
(w) |
Third Party Service Provider shall mean any consultant, agent, advisor, or independent contractor who renders services to the Company or any of its Affiliates, which services (a) are not performed in connection with the offer and sale of the Companys securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Companys securities. |
Article 3. Administration
3.1 General. The Committee shall be responsible for administering the Plan in accordance with this Article 3.
3.2 Authority of the Committee. The Committee shall have full and exclusive discretionary power to (a) interpret the terms and the intent of the Plan and any Award Certificate or other agreement or document ancillary to or in connection with the Plan; (b) determine eligibility for Awards; and (c) adopt such rules, forms, instruments, and guidelines for administering the Plan as the Committee deems necessary or proper; provided, however, that the Board of Directors is hereby authorized (in addition to any necessary action by the Committee) to grant or approve Awards as necessary to satisfy the requirements of Section 16 of the Exchange Act and the rules and regulations thereunder. The Committees authority shall include, but not be limited to, the following:
(a) |
To determine from time to time which of the persons eligible under the Plan shall be granted Awards; when and how each Award shall be granted; what type or combination of types of Award shall be granted; the provisions of each Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Shares pursuant to an Award; and the number of Shares with respect to which an Award shall be granted to each such person. |
(b) |
To determine whether Awards will be settled in Shares, cash, or in any combination thereof. |
(c) |
To construe and interpret the Plan and Awards granted under it, and to establish, amend, and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Certificate, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. |
(d) |
To amend the Plan or an Award as provided in the Plan. |
(e) |
Generally, to exercise such powers and to perform such acts as the Committee deems necessary, desirable, convenient, or expedient to promote the best interests of the Company that are not in conflict with the provisions of the Plan. |
(f) |
To adopt sub-plans and/or special provisions applicable to Awards regulated by the laws of a jurisdiction other than and outside of the United States. Such sub-plans and/or special provisions may take precedence over other provisions of the Plan, with the exception of the section of the plan governing Share reserves and counting, but unless otherwise superseded by the terms of such subplans and/or special provisions, the provisions of the Plan shall govern. |
(g) |
To authorize any person to execute on behalf of the Company any instrument required to affect the grant of an Award previously granted by the Committee. |
All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.
Notwithstanding the foregoing, grants of Awards to Nonemployee Directors shall be (i) subject to the applicable Annual Award Limits under Section 4.3(e), and (ii) made only in accordance with the terms, conditions and parameters of a plan, program or policy for the compensation of Nonemployee Directors as in effect from time to time, and the Committee may not make discretionary grants hereunder to Nonemployee Directors.
3.3 Actions and Interpretations by the Committee. For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary to carry out the intent of the Plan. The Committees interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Companys or an Affiliates independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee will be personally liable for any good faith determination, act or omission in connection with the Plan or any Award.
3.4 Advisors. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals.
3.5 Delegation. The Committee may delegate to one or more of its members, one or more officers of the Company or any of its Affiliates, and one or more agents or advisors such administrative duties or powers as it may deem advisable. The Committee may, by resolution, expressly delegate to one or more directors or officers of the Company, authority to do one or both of the following on the same basis as can the Committee: (a) designate Employees and Third Party Service Providers to be recipients of Awards, and (b) determine the terms and conditions of any such Awards; provided, however, that (i) the Committee shall not delegate such responsibilities to any such officer(s) or director(s) for Awards granted to an Employee that is considered an insider for purposes of Section 16 of the Exchange Act; (ii) the resolution providing for such authorization shall set forth the total number of Awards and the time period during which such officer(s) or director(s) may grant Awards; and (iii) the officer(s) or director(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.
3.6 Indemnification. Each person who is or shall have been a member of the Committee or of the Board, or an officer of the Company to whom authority was delegated in accordance with Section 3.5) shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Companys approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Companys articles of incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Awards. Subject to adjustment as provided in Sections 4.2 and 4.4, the maximum number of Shares available for issuance to Participants pursuant to Awards under the Plan shall be 25,000,000 Shares, plus a number of additional Shares (not to exceed 20,000,000) underlying
awards outstanding as of the Effective Date under the Prior Plans that thereafter terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 25,000,000. The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury Shares. From and after the Effective Date, no further awards shall be granted under the Prior Plans and the Prior Plans shall remain in effect only so long as awards granted thereunder shall remain outstanding.
4.2 Share Usage.
(a) |
Awards of Stock Options shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan as one Share for each Share covered by such Awards. The full number of Shares subject to a Stock Option shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, even if the exercise price of the Stock Option is satisfied in whole or in part through net-settlement or by delivering Shares to the Company (by either actual delivery or attestation). |
(b) |
Awards of Stock Appreciation Rights shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan as one Share for each Share covered by such Awards. Upon exercise of Stock Appreciation Rights that are settled in Shares, the full number of Shares subject to the Stock Appreciation Rights (rather than any lesser number based on the net number of Shares actually delivered upon exercise) shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan. |
(c) |
Full-Value Awards and Dividend Equivalents payable in Shares shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan as 1.25 Shares for each Share covered by such Awards. |
(d) |
Shares withheld or repurchased from an Award to satisfy tax withholding requirements shall count against the number of Shares remaining available for issuance pursuant to Awards granted under the Plan, and Shares delivered by a participant to satisfy tax withholding requirements shall not be added to the Plan share reserve. |
(e) |
To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares originally subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(f) |
Shares subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(g) |
To the extent that the full number of Shares subject to Full-Value Award is not issued for any reason, including by reason of failure to achieve maximum performance goals, the unissued Shares originally subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan. |
(h) |
Substitute Awards granted pursuant to Section 14.4 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 4.1. |
4.3 Annual Award Limits. The following limits (each an Annual Award Limit and collectively, Annual Award Limits) shall apply to grants of Awards under the Plan:
(a) |
Stock Options or Stock Appreciation Rights: The maximum number of Shares with respect to which Stock Options and/or Stock Appreciation Rights may be granted to any Participant in any Plan Year shall be ten million (10,000,000) Shares. |
(b) |
Restricted Stock or Restricted Stock Units: The maximum number of Shares with respect to which Restricted Stock and Restricted Stock Units (including any Performance Shares and Performance Units) may be granted (or allocated in the case of multi-year performance Awards) to any Participant in any Plan Year shall be five million (5,000,000) Shares. |
(c) |
Cash-Based Awards: The maximum amount of any Cash-Based Awards that may be paid, credited or vested to any Participant in any Plan Year shall be ten million dollars ($10,000,000). |
(d) |
Other Stock-Based Awards: The maximum number of Shares with respect to which Other Stock-Based Awards may be granted (or allocated in the case of multi-year performance Awards) to any Participant in any Plan Year shall be two million (2,000,000) Shares. |
(e) |
Nonemployee Director Awards: The maximum number of Shares subject to Nonemployee Director Awards that may be granted to any Nonemployee Director in any Plan Year shall be limited to a number that, combined with any cash fees or other compensation paid to such Nonemployee Director, shall not exceed $750,000 in total value, with the value of any such Nonemployee Director Awards based on the grant date fair value of such Awards for financial reporting purposes. |
4.4 Adjustments in Authorized Shares. In the event of any nonreciprocal transaction between the Company and its stockholders that causes the per-share value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the share authorization limits under Section 4.1 shall be adjusted proportionately, and the Committee shall, in order to prevent dilution or enlargement of Participants rights under the Plan as well as dilution or enlargement of the benefits or potential benefits intended to be made available, substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the exercise price or grant price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.
In the event of any corporate event or transaction involving the Company, such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee may, in its sole discretion, make such other appropriate adjustments to the terms of any Awards under the Plan to reflect, or related to, such changes or distributions to provide that (i) Awards will be settled in cash rather than Stock, (ii) Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iii) Awards, if not assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, will become immediately vested and non-forfeitable and exercisable (in whole or in part) and will expire after a designated period of time to the extent not then exercised, (iv) outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise or grant price of the Award, (v) performance targets and performance periods for Performance Shares or Performance Units will be modified, or (vi) any combination of the foregoing. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. Notwithstanding the foregoing, the Committee shall not make any adjustments to outstanding Options or Stock Appreciation Rights that would constitute a modification or substitution of the stock right under Treas. Reg. Sections 1.409A-1(b)(5)(v) that would be treated as the grant of a new stock right or change in the form of payment for purposes of Code Section 409A.
Without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under the Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate.
4.5 Minimum Vesting. Except in the case of substitute Awards granted pursuant to Section 14.4, Awards granted to an Employee under the Plan shall either (i) be subject to a minimum vesting period of one
year, or (ii) be granted solely in exchange for foregone cash compensation. Notwithstanding the foregoing, the Committee may (i) permit and authorize acceleration of vesting of any Awards in the event of the Participants termination of service, and (ii) grant Awards without the above-described minimum vesting requirements with respect to awards covering 5% or fewer of the total number of Shares authorized under the Plan.
Article 5. Stock Options
5.1 Grant of Stock Options. The Committee is hereby authorized to grant Stock Options to Participants. Each Stock Option shall permit a Participant to purchase from the Company a stated number of Shares from the Company at an exercise price established by the Committee, subject to the terms and conditions described in this Article 5 and to such additional terms and conditions, as established by the Committee, in its sole discretion, that are consistent with the provisions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
5.2 Exercise Price. The exercise price per Share under a Stock Option shall be determined by the Committee at the time of grant; provided, however, that such exercise price shall not be less than the Fair Market Value of a Share on the Grant Date of such Stock Option (except in the case of a Stock Option issued as a substitute Award pursuant to Section 14.4).
5.3 Prohibition on Repricing. Except as otherwise provided in Section 4.4, the exercise price of a Stock Option may not be reduced, directly or indirectly by cancellation and regrant, replacement, substitution, surrender or otherwise, without the prior approval of the stockholders of the Company. In addition, the Company may not, without the prior approval of stockholders of the Company, repurchase a Stock Option for value from a Participant if the current Fair Market Value of the Shares underlying the Stock Option is lower than the exercise price per share of the Stock Option.
5.4 Stock Option Term. The term of each Stock Option shall be determined by the Committee at the time of grant; provided, however, that no Stock Option shall be exercisable later than the tenth anniversary of the date of its grant. Notwithstanding the foregoing, for Stock Options granted to Participants outside the United States, the Committee has the authority to grant Stock Options that have a term greater than ten years to the extent required by the applicable local laws of the jurisdictions in which such Stock Options are granted.
5.5 Time of Exercise. Stock Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine at the time of grant.
5.6 Method of Exercise. Stock Options shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Stock Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which a Stock Option shall be exercised shall be the payment of the exercise price. As determined by the Committee in its sole discretion, the exercise price of any Stock Option shall be payable to the Company in full: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the exercise price; (c) through a net exercise, whereby the Company withholds from the Stock Option a number of Shares having a Fair Market Value on the date of exercise equal to some or all of the exercise price; (d) in a cashless (broker-assisted same-day sale) exercise; or (e) by a combination of (a), (b), (c) or (d), or any other method approved or accepted by the Committee in its sole discretion.
The Committee may provide in an Award Certificate that a Stock Option that is otherwise exercisable and has a per share exercise price that is less than the Fair Market Value of a Share on the last day of its term will be automatically exercised on such final date of the term by means of a net exercise, thus entitling the optionee to Shares equal to the intrinsic value of the Stock Option on such exercise date, less the number of Shares required for tax withholding.
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in U.S. dollars.
5.7 No Deferral Feature. No Stock Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Stock Option.
5.8 No Dividend Equivalents. No Stock Option shall provide for Dividend Equivalents.
5.9 Incentive Stock Options. The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Section 422 of the Code. If all of the requirements of Section 422 of the Code are not met, the Option shall automatically become a Nonstatutory Stock Option.
Article 6. Stock Appreciation Rights
6.1 Grant of Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants. Subject to the terms of the Plan and any applicable Award Certificate, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (a) the Fair Market Value of one Share on the date of exercise over (b) the grant price of the right as specified by the Committee, which shall not be less than the Fair Market Value of one Share on the Grant Date of the Stock Appreciation Right (except in the case of a Stock Appreciation Right issued as a substitute Award pursuant to Section 14.4).
Subject to the terms of the Plan and any applicable Award Certificate, the grant price, term, methods of exercise, methods of settlement, and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate, including a provision that a Stock Appreciation Right that is otherwise exercisable and has a per share grant price that is less than the Fair Market Value of a Share on the last day of its term will be automatically exercised on such final date of the term.
6.2 Prohibition on Repricing. Except as otherwise provided in Section 4.4, the exercise price of a Stock Appreciation Right may not be reduced, directly or indirectly by cancellation and regrant, replacement, substitution, surrender or otherwise, without the prior approval of the stockholders of the Company. In addition, the Company may not, without the prior approval of stockholders of the Company, repurchase a Stock Appreciation Right for value from a Participant if the current Fair Market Value of the Shares underlying the Stock Appreciation Right is lower than the grant price of the Stock Appreciation Right.
6.3 Stock Appreciation Right Term. The term of each Stock Appreciation Right shall be determined by the Committee at the time of grant; provided, however, that no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the date of its grant. Notwithstanding the foregoing, for Stock Appreciation Rights granted to Participants outside the United States, the Committee has the authority to grant Stock Appreciation Rights that have a term greater than ten years to the extent required by the applicable local laws of the jurisdictions in which such Stock Appreciation Rights are granted.
6.4 Time of Exercise. Stock Appreciation Rights shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine at the time of grant.
6.5 No Deferral Feature. No Stock Appreciation Right shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Stock Appreciation Right.
6.6 No Dividend Equivalents. No Stock Appreciation Right shall provide for Dividend Equivalents.
Article 7. Restricted Stock and Restricted Stock Units
7.1 Grant of Restricted Stock or Restricted Stock Units.
(a) |
General. The Committee is hereby authorized to grant Restricted Stock and Restricted Stock Units to Participants. Each Restricted Stock Unit shall represent the right to receive one Share (or the equivalent value payable in cash, as determined by the Committee) upon a specified future date or event. Restricted Stock Units shall be credited to a notional account maintained by the Company. No Shares are actually awarded to the Participant in respect of Restricted Stock Units on the Grant Date. Restricted Stock and Restricted Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose. These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. |
(b) |
Award Certificate. Each Award Certificate evidencing a Restricted Stock or Restricted Stock Unit grant shall specify the terms of the period(s) of restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, settlement dates and such other provisions as the Committee shall determine, subject to Section 4.5 herein. |
(c) |
Performance Shares; Performance Units. Restricted Stock and Restricted Stock Units, the grant of which or lapse of restrictions of which is based upon the achievement of performance goals over a performance period, shall be referred to as Performance Shares and Performance Units, respectively. |
7.2 Voting and Other Rights. Unless otherwise determined by the Committee and set forth in a Participants Award Certificate, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder shall have the right to exercise full voting rights with respect to those Shares during the period of restriction. Unless otherwise determined by the Committee and set forth in a Participants Award Certificate, a Participant shall have none of the rights of a stockholder with respect to any Restricted Stock Units granted hereunder until such time as Shares are paid in settlement of such Awards.
7.3 Dividends on Restricted Stock. Dividends accrued on Shares of Restricted Stock before they are vested shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be held by the Company under the same vesting provisions in an account allocated to the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with respect to forfeited Restricted Stock will also be forfeited.
7.4 Forfeiture. Subject to the terms of the Award Certificate and except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock or Restricted Stock Units that are at that time subject to restrictions shall be forfeited.
Article 8. Other Stock-Based Awards
The Committee is hereby authorized to grant other types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares) to Participants in such amounts and subject to such terms and conditions as the Committee shall determine, subject to Section 4.5 herein. Such Awards shall be referred to as Other Stock-Based Awards. Each such
Other Stock-Based Award may involve the transfer of actual Shares to Participants or payment in cash or otherwise of amounts based on the value of Shares, and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
Each Other Stock-Based Award shall be expressed in terms of Shares or units or an equivalent measurement based on Shares, as determined by the Committee. If the value of an Other Stock-Based Award will be based on the appreciation of Shares from an initial value determined as of the Grant Date, then such initial value shall not be less than the Fair Market Value of a Share on the Grant Date of such Other Stock-Based Award.
Article 9. Dividend Equivalents
The Committee is hereby authorized to grant to Participants Dividend Equivalents based on the dividends declared on Shares that are subject to any Full-Value Award. Dividend Equivalents shall be credited as of dividend payment dates during the period between the date the Full-Value Award is granted and the date the Full-Value Award is vested, paid or expired. Such Dividend Equivalents shall be converted to cash, Shares or additional Full-Value Awards by such formula and at such time and subject to such limitations as may be determined by the Committee. Dividend Equivalents accruing on unvested Full-Value Awards shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be held by the Company under the same vesting provisions in an account allocated to the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend Equivalents accrued with respect to forfeited Awards will also be forfeited.
Article 10. Nonemployee Director Awards
The Committee is hereby authorized to grant Awards to Nonemployee Directors, including, but not limited to, Awards of Deferred Stock Units. Each Deferred Stock Unit shall represent a vested right to receive one Share (or the equivalent value in cash or other property in the Committee so provides) at a designated future date and will be credited to a notional account maintained by the Company. Nonemployee Directors shall not be entitled to vote Shares represented by such Deferred Stock Units but shall receive Dividend Equivalents with respect to such Full-Value Awards, which shall be reinvested in additional Deferred Stock Units. Deferred Stock Units shall be converted and settled in Shares in accordance with an election made by the Nonemployee Director, which settlement date shall be no earlier than the first anniversary of the date the Nonemployee Director ceases to be a director of the Company.
Notwithstanding the foregoing, Awards to Nonemployee Directors shall be (i) subject to the applicable Annual Award Limits set forth in Section 4.3(e) hereof, and (ii) made only in accordance with the terms, conditions and parameters of a plan, program or policy for the compensation of Nonemployee Directors as in effect from time to time, and the Committee may not make discretionary grants hereunder to Nonemployee Directors.
Article 11. Cash-Based Awards
The Committee is hereby authorized to grant Awards to Participants denominated in cash in such amounts and subject to such terms and conditions as the Committee may determine. Such Awards shall be referred to as Cash-Based Awards. Each such Cash-Based Award shall specify a payment amount, payment range or a value determined with respect to the Fair Market Value of the Shares, as determined by the Committee.
Article 12. Change of Control
12.1 Change of Control of the Company. If the Successor Entity in a Change of Control Assumes and Maintains an Award, the Award will not automatically vest and pay out upon the Change of Control. Alternatively, unless the Committee shall determine otherwise in the Award Certificate, or unless
otherwise specifically prohibited under applicable laws or by the rules and regulations of any governing governmental agencies or stock exchange on which the Shares are listed, upon the occurrence of a Change of Control in which the Successor Entity fails to Assume and Maintain an Award as defined in Section 12.2:
(a) |
Time-Vested Awards. Awards, the vesting of which depends upon a participants continuation of service for a period of time, shall fully vest as of the effective date of the Change of Control; shall be distributed or paid to the participant within thirty (30) days following the date of the Change of Control in cash, Shares, other securities, or any combination, as determined by the Committee; and shall thereafter terminate; provided, however, that if the Award is denominated in Shares, the amount distributed or paid shall equal the difference between the Fair Market Value of the Shares on the date of the Change of Control and, if applicable, the exercise price, grant price or unpaid purchase price as of the date of the Change of Control; |
(b) |
Performance-Based Awards. Awards, the vesting of which is based on achievement of performance criteria, shall fully vest as of the effective date of the Change of Control; shall be deemed earned based on the target performance being attained for the performance period in which the Change of Control occurs; shall be distributed or paid to the participant within thirty (30) days following the date of the Change of Control, pro rata based on the portion of the performance period elapsed on the date of the Change of Control, in cash, Shares, other securities, or any combination, as determined by the Committee; and shall thereafter terminate; provided, however, that if the Award is denominated in Shares, the amount distributed or paid shall equal the difference between the Fair Market Value of the Shares on the date of the Change of Control and, if applicable, the exercise price of the Stock Option, grant price of the Stock Appreciation Right or unpaid purchase price of the Full-Value Award as of the date of the Change of Control. |
12.2 Change of Control Definitions.
(a) |
Assume and Maintain. A Successor Entity shall be deemed to have assumed and maintained an Award under this Plan if the Successor Entity substitutes an Award under this Plan or an award under a Successor Entity plan having equivalent value, terms and conditions as the original Award, or otherwise assumes the obligations under and/or equitably adjusts such original Award. The Committee shall have the sole authority to determine whether the proposed assumption of an award by a Successor Entity meets the requirements listed in this Section 12.2(a). |
(b) |
Beneficial Owner or Beneficial Ownership shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. |
(c) |
Change of Control shall mean the occurrence of any of the following events: |
(i) |
Any Person becomes the Beneficial Owner of thirty percent (30%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of its directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this Section 12.2(c), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities; (B) any acquisition by the Company or any of its Affiliates; (C) any acquisition by any employee benefit plan or related trust sponsored or maintained by the Company or any of its Affiliates; or (D) any acquisition by any corporation pursuant to a transaction which complies with Section 12.2(c)(iii); |
(ii) |
Individuals who constitute the Board of Directors as of the Effective Date (the Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director of the Company subsequent to the Effective Date whose election to the Board of Directors, or nomination for election by the Companys stockholders, was approved by a vote of (A) at least a majority of the directors then comprising the Incumbent Board, (B) a vote of at least a majority of any nominating committee of the Board of Directors, which nominating committee was designated by a vote of at least a majority of the directors then comprising the Incumbent Board, or (C) in the case of a director appointed to fill a vacancy in the Board of Directors, at least a majority of the directors entitled (under Section 6 of Article VII of the Amended and Restated Certificate of Incorporation of the Company) to elect such director (so long as at least a majority of such directors voting in favor of the director filling the vacancy are themselves members of (or considered to be pursuant to this definition members of) the Incumbent Board) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board of Directors; |
(iii) |
Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), unless, following such Business Combination, all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination are the Beneficial Owners, directly or indirectly, of more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) (the Successor Entity) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Voting Securities; or |
(iv) |
Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. |
Article 13. Duration, Rescission, Amendment, Modification, Suspension, and Termination
13.1 Duration of Plan. Unless sooner terminated as provided in Section 13.2, the Plan shall terminate on the tenth anniversary of the Effective Date or, if the stockholders approve an amendment to the Plan that increases the number of Shares subject to the Plan, the tenth anniversary of the date of such approval unless earlier terminated as provided herein. The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination, which shall continue to be governed by the applicable terms and conditions of the Plan. Notwithstanding the foregoing, no Incentive Stock Option may be granted more than ten years after the Effective Date.
13.2 Amendment, Modification, Suspension, and Termination of Plan. The Board of Directors may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan in whole or in part; provided, however, that, without the prior approval of the Companys stockholders, no action shall be taken that would (a) increase the total number of Shares available for issuance under the Plan or the Annual Award Limits, except as provided in Section 4.4; (b) permit the exercise price or grant price of any Stock Option, Stock Appreciation Right or Other Stock-Based Award the value of which is based on the appreciation of Shares from the Grant Date (i) to be less than Fair Market Value (except as may be permitted by Section 5.2, 6.1, or Article 8), or (ii) to be repriced, replaced, or regranted through cancellation (except as may be permitted by Section 14.4) or by lowering the exercise price or grant price; or (c) otherwise constitute a material change to the Plan under applicable stock exchange rules. No such action shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the Participant holding such Award. After the Plan is terminated in accordance with this Section 13.2, no Award may be granted but any Award previously granted shall remain outstanding in accordance with the terms and conditions of the Plan and the Award.
13.3 Amendment, Modification, Suspension, and Termination of Awards. The Committee shall have the authority at any time and from time to time, alter, amend, modify, suspend or terminate the terms and conditions of any Award; provided, however, that no such action shall adversely affect in any material way any Award previously granted under the Plan without the written consent of the Participant holding such Award.
Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or cancel outstanding Stock Options or Stock Appreciation Rights in exchange for cash, other Awards or Stock Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Options or Stock Appreciation Rights without stockholder approval
13.4 Compliance Amendments. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, the Board may amend the Plan or an Award Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or Award Certificate to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 13.4 to any Award granted under the Plan without further consideration or action.
Article 14. General Provisions
14.1 Settlement of Awards; No Fractional Shares. Each Award Certificate shall establish the form in which the Award shall be settled. Awards may be settled in cash, Shares, other securities, additional Awards or any combination, regardless of whether such Awards are originally denominated in cash or Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, other securities or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
14.2 Withholding. The Company and its Affiliates shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, in cash or Shares (including sell to cover arrangements), an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan. The obligations of the Company under the Plan will be conditioned on such payment or arrangements and the Company or such Affiliate will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.
14.3 Share Withholding. With respect to withholding required upon the exercise of Stock Options or Stock Appreciation Rights, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, upon the achievement of performance goals related to Performance Shares and Performance Units, or any other taxable event arising as a result of an Award granted hereunder, the Company may satisfy the withholding requirement, in whole or in part, by withholding Shares having a Fair Market Value on the date the tax is to be determined equal to the amount required to be withheld for tax purposes (or such greater amount up to the maximum individual statutory rate in the applicable jurisdiction as may be permitted under then-current accounting principles to qualify for equity classification).
14.4 Substitution of Share-Based Awards. The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.
14.5 Transferability of Awards. Except as otherwise provided in a Participants Award Certificate or otherwise at any time by the Committee, no Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent or distribution and any attempt to enforce such a purported sale, transfer, pledge, alienation or hypothecation shall be void. Should the Committee permit transferability of an Award (other than a transfer for value, which shall not be permitted), it may do so on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Unless transferability is permitted, Stock Options and Stock Appreciation Rights may be exercised by a Participant only during his or her lifetime. If the Committee permits any Stock Option or Stock Appreciation Right to be transferred, references in the Plan to the exercise of a Stock Option or Stock Appreciation Right by the Participant or payment of any amount to the Participant shall be deemed to include the Participants transferee.
14.6 Termination of Service; Forfeiture Events.
(a) |
Termination of Service. Awards under the Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to the Participant. In addition, each Award Certificate shall specify the effect of a Participants termination of service with the Company and any of its Affiliates, including specifically whether the Participants rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment, in addition to the effect on any otherwise applicable vesting or performance conditions of an Award. Such provisions shall be determined in the Committees sole discretion, need not be uniform and may reflect distinctions based on the reasons for termination. |
(b) |
Leave of Absence. Whether military, government or other service or other leave of absence shall constitute a Participants termination of service shall be determined in each case by the Committee at its discretion, and any determination by the Company shall be final and conclusive, provided, however, that for purposes of any Award that is subject to Code Section 409A, the determination of a leave of absence must comply with the requirements of a bona fide leave of absence as provided in Treas. Reg. Section 1.409A-1(h). |
(c) |
Forfeiture Events. An Award Certificate may also specify other events that may cause a Participants rights, payments and benefits with respect to an Award to be subject to reduction, cancellation, forfeiture, or recoupment, or which may affect any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of employment for cause, violation of material Company or Affiliate policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company or any Affiliate. |
14.7 Special Provisions Related to Section 409A of the Code.
(a) |
Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Code would otherwise be payable or distributable under the Plan or any Award Certificate by reason of the occurrence of a Change of Control, or the Participants disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change of Control, disability or separation from service meet any description or definition of change in control event, disability or separation from service, as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any Award. If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the next earliest payment or distribution date or event specified in the Award Certificate that is permissible under Section 409A. |
(b) |
Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Code would otherwise be payable or distributable under this Plan or any Award Certificate by reason of a Participants separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes): |
(i) |
if the payment or distribution is payable in a lump sum, the Participants right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participants death or the first day of the seventh month following the Participants separation from service; and |
(ii) |
if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participants separation from service will be accumulated and the Participants right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participants death or the first day of the seventh month following the Participants separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume. |
For purposes of this Plan, the term Specified Employee has the meaning given such term in Code Section 409A and the final regulations thereunder, provided, however, that, as permitted in such final regulations, the Companys Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.
(c) |
If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company shall determine which Awards or portions thereof will be subject to such exemptions. |
(d) |
Eligible Participants who are service providers to an Affiliate may be granted Stock Options or Stock Appreciation Rights under this Plan only if the Affiliate qualifies as an eligible issuer of service recipient stock within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A. |
(e) |
Notwithstanding any provision of the Plan or any Award Certificate to the contrary, if one or more of the payments or benefits to be received by a Participant pursuant to an Award would constitute deferred compensation subject to Section 409A of the Code, and would cause the Participant to incur any penalty tax or interest under Section 409A of the Code or any regulations or Treasury guidance promulgated thereunder, the Company may reform the Plan and Award to maintain to the maximum extent practicable the original intent of the Plan and Award without violating the requirements of Section 409A of the Code. |
(f) |
If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participants right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term series of installment payments has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto). |
(g) |
The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. section 1.409A-3(j)(4) to Participants of deferred amounts, provided that such distribution(s) meets the requirements of Treas. Reg. section 1.409A-3(j)(4). |
14.8 Share Certificates. If an Award provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be affected on an uncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange on which the Shares are listed. Shares issued in connection with Awards of Restricted Stock may, to the extent deemed appropriate by the Committee, be retained in the Companys possession until such time as all conditions or restrictions applicable to such Shares have been satisfied or lapse.
14.9 Electronic Delivery of Documents. The Company may deliver by email or other electronic means (including posting on a web site maintained by the Company or by a third party under contract with the Company) all documents relating to the Plan or any Award thereunder (including without limitation, Plan prospectuses) and all other documents that the Company is required to deliver to its stockholders (including without limitation, annual reports and proxy statements).
14.10 Compliance with Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or stock exchanges on which the Company is listed as may be required. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
(a) |
Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and |
(b) |
Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. |
The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Companys counsel to be necessary to the lawful issuance and sale of any Shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
14.11 Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
14.12 Awards to Non-U.S. Employees. To comply with the laws in other countries in which the Company or any of its Affiliates operates or has Employees, directors, or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a) |
Determine which Affiliates shall be covered by the Plan; |
(b) |
Determine which Employees, directors and Third Party Service Providers outside the United States are eligible to participate in the Plan; |
(c) |
Modify the terms and conditions of any Award granted to Employees, directors and Third Party Service Providers outside the United States to comply with applicable foreign laws; |
(d) |
Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; and |
(e) |
Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals. |
14.13 No Right to Continued Service. Nothing in the Plan or an Award Certificate shall interfere with or limit in any way the right of the Company or any of its Affiliates to terminate any Participants employment or service at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment or service for any specified period of time. Neither any Award nor any benefits arising under the Plan shall constitute an employment or consulting contract with the Company or any of its Affiliates and, accordingly, subject to Article 13, the Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board of Directors or Committee, as applicable, without giving rise to any liability on the part of the Company or any of its Affiliates.
14.14 Beneficiary Designation. Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit, subject to the terms and conditions of the Plan and any Award Agreement applicable to the Participant. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participants lifetime. In the absence of any such designation, amounts due under the Plan remaining unpaid at the Participants death shall be paid to the Participants estate.
14.15 Other Compensation Plans or Arrangements. The Committee shall have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.
14.16 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
14.17 Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
14.18 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or any of its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company or any of its Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company or an Affiliate, as the case may be, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not subject to the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time.
14.19 Nonexclusivity of the Plan. The adoption of the Plan shall not be construed as creating any limitations on the power of the Board of Directors or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
14.20 No Constraint on Corporate Action. Nothing in the Plan shall be construed to (a) limit, impair, or otherwise affect the Companys or its Affiliates right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets, or (b) limit the right or power of the Company or its Affiliate to take any action which such entity deems to be necessary or appropriate.
14.21 Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Company.
14.22 Governing Law. The Plan and each Award Certificate shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
Exhibit 10.2
2018 Genworth Financial, Inc. Omnibus Incentive Plan
2019-2021 Performance Stock Unit Award Agreement
Dear [Participant Name]:
You have been selected to receive a Performance Stock Unit Award (Award) under the 2018 Genworth Financial, Inc. Omnibus Incentive Plan (the Plan), on the terms and conditions set forth below. This Award Agreement and the Plan together govern your rights under this Award and set forth all of the conditions and limitations affecting such rights. Unless the context otherwise requires, capitalized terms used in this Award Agreement shall have the meanings ascribed to them in the Plan. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plans terms shall supersede and replace the conflicting terms of this Award Agreement.
1. |
Grant of Performance Stock Units. You are hereby granted performance stock units (Units), representing the right to earn, on a one-for-one basis, Shares of Genworth Financial, Inc. (together with its affiliates, the Company) Class A common stock (Shares), all in accordance with the terms of this Award Agreement, the Plan, and any rules and procedures adopted by the Management Development and Compensation Committee of the Genworth Financial, Inc. Board of Directors (the Committee). The Units represent the right to earn from 0% to 200% of the Target Award, based on (i) your continued future employment, and (ii) the Companys level of achievement of the Performance Goals during the Performance Period, in accordance with the terms of this Award Agreement. |
a. |
Grant Date. The Grant Date of your Units is [Grant Date]. |
b. |
Target Award. The Target Award of Shares subject to this Award is [Number of Shares Granted]. |
c. |
Performance Goals. The Performance Goals are described on Exhibit A. |
d. |
Performance Period. The Performance Period is set forth on Exhibit A.. |
2. |
Agreement to Participate. You have been provided with this Award Agreement, and you have the opportunity to accept this Award Agreement, by accessing and following the procedures set forth on the stock plan administrators website. The Plan is available for your reference on the stock plan administrators website. You may also request a copy of the Plan at any time by contacting Human Resources at the address or telephone number set forth below in Section 11(a). By agreeing to participate, you acknowledge that you have reviewed the Plan and this Award Agreement, and you fully understand all of your rights under the Plan and this Award Agreement, the Companys remedies if you violate the terms of this Award Agreement, and all of the terms and conditions which may limit your eligibility to retain and receive the Units and/or Shares issued pursuant to the Plan and this Award Agreement. |
If you do not wish to accept the Units and participate in the Plan and be subject to the provisions of the Plan and this Award Agreement, please contact the Human Resources Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or at (804) 281-6000, within thirty (30) days of receipt of this Award Agreement. If you do not respond within thirty (30) days of receipt of this Award Agreement, the Award Agreement is deemed accepted. If you choose to participate in the Plan, you agree to abide by all of the governing terms and provisions of the Plan and this Award Agreement
3. |
Earning and Vesting of Units. The Units shall not provide you with any rights or interests therein until the Units have been earned and vested. Not later than March 15 following the end of the Performance Period (the Vesting Date), the Committee shall determine and certify the level of achievement of the Performance Goals, and determine the number of Units earned and vested (Confirmed Units). Any Units that fail to vest in accordance with the terms of this Award Agreement will be forfeited and reconveyed to the Company without further consideration or any act or action by you. |
4. |
Conversion to Shares. The Confirmed Units shall automatically convert to Shares on the Vesting Date (the Conversion Date). These Shares will be registered on the books of the Company in your name as of the Conversion Date. |
If for any reason the Committee is unable to certify the level of achievement of the Performance Goals by March 15 following the end of the Performance Period, then the Vesting Date shall be March 15 following the end of the Performance Period, but the determination of the number of Confirmed Units and the Conversion Date shall be delayed, in the discretion of the Committee, for such period as may be required for the Committee to certify the level of achievement of the Performance Goals, but in no event shall the Conversion Date extend beyond December 31, 2022.
5. |
Treatment of Units Upon Termination of Employment. Subject to Section 6 below, the Units shall be immediately and automatically cancelled upon termination of your service with the Company prior to the Vesting Date, for any reason other than (i) a severance-benefit eligible Layoff as defined or described in the Genworth Layoff Payment Plan (a Layoff), (ii) your death or Total Disability, or (iii) Retirement on or after the first anniversary of the grant date. If your service with the Company terminates prior to the Vesting Date as a result of (i) a Layoff, (ii) your death or Total Disability, or (iii) Retirement on or after the first anniversary of the grant date, then the Award shall fully vest as of your termination date, and you (or your estate, in the event of your death) shall receive a pro rata payout on the regular Conversion Date, determined by multiplying the Confirmed Shares that otherwise would have paid out based on actual performance for the entire Performance Period, multiplied by a fraction, the numerator of which is the number of full months elapsed from January 1, 2019 until the date of your termination, and the denominator of which is 36. |
For purposes of this Award Agreement, the following terms shall have the following meanings:
Retirement shall mean your voluntary resignation on or after you have attained age sixty (60) and accumulated five (5) or more years of combined and continuous service with the Company.
Total Disability means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
6. |
Change of Control. In the event of a Change of Control of the Company (as defined in the Plan), the Units shall be treated as set forth in this Section 6. |
a. |
Qualifying Change of Control and Awards are Not Assumed. Upon the occurrence of a Qualifying Change of Control (as defined below) on or after the first anniversary of the Grant Date in which the Successor Entity fails to Assume and Maintain this Award of Units, the Units shall immediately vest as of the effective date of such Qualifying Change of Control; shall be deemed earned based on actual pro rata performance as of the date of such Qualifying Change of Control, to the extent such performance can be reasonably established in the sole discretion of the Committee, or otherwise based on an assumed achievement of all relevant performance goals at target levels, if actual pro rata performance cannot be reasonably established in the sole discretion of the Committee; shall be distributed or paid to you within thirty (30) days following the date of the Qualifying Change of Control pro rata based on the portion of the performance period elapsed on the date of the Qualifying Change of Control in cash, Shares (based on the value of the Shares as of the effective date of the Change of Control), other securities, or any combination, as determined by the Committee; and shall thereafter terminate, provided that the circumstances giving rise to such Qualifying Change of Control meet the definition of a change in control event under Code Section 409A. |
b. |
Employment Termination without Cause or for Good Reason within 12 Months of a Qualifying Change of Control. If a Qualifying Change of Control occurs and the Successor Entity |
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Assumes and Maintains this Award of Units, and if your service with the Successor Entity and its Affiliates is terminated on or after the first anniversary of the Grant Date by the Successor Entity or one of its Affiliates without Cause (other than such termination resulting from your death or Total Disability) or by you for Good Reason (as such terms are defined below) within twelve (12) months following the effective date of such Qualifying Change of Control, then the Units shall immediately vest as of the date of termination of your service with the Successor Entity and its Affiliates; shall be deemed earned based on actual pro rata performance as of the date of termination of your service with the Company, to the extent such performance can be reasonably established in the sole discretion of the Committee, or otherwise based on an assumed achievement of all relevant performance goals at target levels, if actual pro rata performance cannot be reasonably established in the sole discretion of the Committee; shall be distributed or paid to you within thirty (30) days following the date of termination of your service with the Successor Entity and its Affiliates pro rata based on the portion of the performance period elapsed as of the termination of your service with the Successor Entity and its Affiliates; and shall thereafter terminate. |
c. |
Employment Termination without Cause or for Good Reason within 12 Months of a Non-Qualifying Change of Control. If a Non-Qualifying Change of Control (as defined below) occurs and if your service with the Company is terminated on or after the first anniversary of the Grant Date by the Company without Cause (other than such termination resulting from your death or Total Disability) or by you for Good Reason within twelve (12) months following the effective date of the Non-Qualifying Change of Control, then the Units shall immediately vest as of the date of termination of your service with the Company; shall be deemed earned based on actual pro rata performance as of the date of termination of your service with the Company, to the extent such performance can be reasonably established in the sole discretion of the Committee, or otherwise based on an assumed achievement of all relevant performance goals at target levels, if actual pro rata performance cannot be reasonably established in the sole discretion of the Committee; shall be distributed or paid to you within thirty (30) days following the date of termination of your service with the Company pro rata based on the portion of the performance period elapsed on the date of the Change of Control; and shall thereafter terminate. |
d. |
Defined Terms. For purposes of this Award Agreement: |
(i) |
Business Unit Sale shall mean the Companys sale or disposition of all or any portion of a business unit. |
(ii) |
Cause shall mean (i) your willful and continued failure to substantially perform your duties with the Company (other than any such failure resulting from your Total Disability); (ii) your commission, conviction or pleading guilty or nolo contendere (or any similar plea or admission) to any felony or any act of fraud, misappropriation or embezzlement; (iii) your willful engagement in conduct (other than conduct covered under clause (i) above) which, in the good faith judgment of the Committee, is injurious to the Company, monetarily or otherwise; or (iv) your material violation or breach of any Company policy, or any noncompetition, confidentiality, or other restrictive covenant with respect to the Company, that applies to you; provided, however, that for purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on your part shall be deemed willful unless done, or omitted to be done, by you not in good faith and without reasonable belief that the act, or failure to act, was in the best interests of the Company. |
(iii) |
Good Reason shall mean any material reduction in the aggregate value of your compensation (including base salary and bonus), or a substantial reduction in the aggregate value of benefits provided to you; provided, however, that Company-initiated across-the-board reductions in compensation or benefits affecting substantially all employees shall alone not be considered Good Reason. |
(iv) |
Non-Qualifying Change of Control shall mean a Change of Control of the Company (as defined in the Plan) that results from a Business Unit Sale, provided that following such Change of Control (i) the Company remains in existence as a publicly-traded company |
3
(separate and apart from any Successor Entity resulting from the Change of Control, and regardless of whether the Company continues to use the name Genworth Financial, Inc. or a different name), (ii) your employment with the Company is not terminated by the Company without Cause in connection with the Change in Control, and (iii) the Units subject to this Award Agreement remain outstanding. |
(v) |
Qualifying Change of Control shall mean a Change of Control of the Company (as defined in the Plan) that is not a Non-Qualifying Change of Control. |
7. |
Restrictive Covenants. As a condition to receiving payment of the Award, you agree to the following: |
a. |
Non-Disparagement. Subject to any obligations you may have under applicable law, you will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its agents, officers, directors or employees. Nothing in this section shall limit your ability to provide truthful testimony or information in response to a subpoena, court order, or investigation by a government agency. |
b. |
Non-Solicitation of Customers or Clients. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company for any reason, directly or through another person, solicit or contact any of the customers or clients of the Company with whom you had material contact during your employment, regardless of the location of such customers or clients, for the purpose of engaging in, providing, marketing, or selling any services or products that are competitive with the services and products being offered by the Company. |
c. |
Non-Solicitation of Company Employees. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company, directly or through another person, solicit or encourage any director, agent or employee of the Company to terminate his or her employment or other engagement with the Company. |
8. |
Payment of Taxes. The Company has the authority and the right to deduct or withhold, or require you to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including your FICA obligation), domestic or foreign, required by law to be withheld with respect to any taxable event arising as a result of the vesting or payment of this Award. With respect to such withholding, the employer may satisfy the tax withholding requirement by withholding Shares having a Fair Market Value as of the date that the amount of tax to be withheld is to be determined equal to the amount required to be withheld in accordance with applicable tax requirements, all in accordance with such procedures as the Committee establishes. The obligations of the Company under this Award Agreement will be conditional on such payment or arrangements, and the Company will, to the extent permitted by law, have the right to deduct in cash or Shares any such taxes from any payment of any kind otherwise due to you. |
9. |
Nontransferability. This Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (Transfer), other than by will or by the laws of descent and distribution, except as provided in the Plan. If any prohibited Transfer, whether voluntary or involuntary, of the Award is attempted to be made, or if any attachment, execution, garnishment, or lien shall be attempted to be issued against or placed upon this Award, your right to receive any payment pursuant to the terms of this Award shall be immediately and automatically be forfeited, and this Award Agreement shall be null and void. |
10. |
Administration. This Award Agreement and your rights hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon you. The Committees interpretation of the Plan and this Award Agreement, and all decisions and determinations by the Committee with respect to the Plan and this Award Agreement, shall be final, binding, and conclusive on all parties. |
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11. |
Limitation of Rights. The Units do not confer to you or your beneficiary, executors or administrators any rights of a stockholder of the Company unless and until Shares are in fact issued to such person in connection with the Units. This Award Agreement shall not confer upon you any right to continuation of employment by the Company, nor shall this Award Agreement interfere in any way with the Companys right to terminate your employment at any time. |
12. |
Plan; Prospectus and Related Documents; Electronic Delivery. |
a. |
A copy of the Plan will be furnished upon written or oral request made to the Human Resources Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or telephone (804) 281-6000. |
b. |
As required by applicable securities laws, the Company is delivering to you a prospectus in connection with this Award, which delivery is being made electronically. A paper copy of the prospectus may also be obtained without charge by contacting the Human Resources Department at the address or telephone number listed above. By accepting this Award Agreement, you shall be deemed to have consented to receive the prospectus electronically. |
c. |
The Company will deliver to you electronically a copy of the Companys Annual Report to Stockholders for each fiscal year, as well as copies of all other reports, proxy statements and other communications distributed to the Companys stockholders. You will be provided notice regarding the availability of each of these documents, and such documents may be accessed by going to the Companys website at www.genworth.com and clicking on Investors and then SEC Filings & Financial Reports (or, if the Company changes its web site, by accessing such other web site address(es) containing investor information to which the Company may direct you in the future) and will be deemed delivered to you upon posting or filing by the Company. Upon written or oral request, paper copies of these documents (other than certain exhibits) may also be obtained by contacting the Companys Human Resources Department at the address or telephone number listed above or by contacting the Investor Relations Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or telephone (804) 281-6000. |
d. |
By accepting this Award, you agree and consent, to the fullest extent permitted by law, in lieu of receiving documents in paper format to accept electronic delivery of any documents that the Company may be required to deliver in connection with this Award and any other Awards granted to you under the Plan. Electronic delivery of a document may be via a Company e-mail or by reference to a location on a Company intranet or internet site to which you have access. |
13. |
Amendment, Modification, Suspension, and Termination. Subject to the terms of the Plan, this Award Agreement may be modified or amended by the Committee; provided that no such amendment shall materially and adversely affect your rights hereunder without your consent. Notwithstanding the foregoing, you hereby expressly agree to any amendment to the Plan and this Award Agreement to the extent necessary to comply with applicable law or changes to applicable law (including, but not limited to, Code Section 409A) and related regulations or other guidance and federal securities laws. |
14. |
Entire Agreement; Plan Controls. This Award Agreement, the Plan, and the rules and procedures adopted by the Committee contain all of the provisions applicable to the Award and no other statements, documents or practices may modify, waive or alter such provisions unless expressly set forth in writing, signed by an authorized officer of the Company and delivered to you. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Agreement, the provisions of the Plan shall be controlling and determinative. |
15. |
Compensation Recoupment Policy. This Award shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to you and to Awards of this type. |
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16. |
Successors. This Award Agreement shall be binding upon any successor of the Company, in accordance with the terms of this Award Agreement and the Plan. |
PLEASE REFER ANY QUESTIONS YOU MAY HAVE REGARDING YOUR PERFORMANCE STOCK UNIT AWARD TO THE EXECUTIVE VICE PRESIDENT OF HUMAN RESOURCES.
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Exhibit A
2019-2021 Performance Stock Unit Award Defined Terms
The Performance Goals and the Performance Period will be determined by Committee as soon as reasonably practicable following the Grant Date and will be communicated to you in writing in the form of a revised supplemental Exhibit A to this Award Agreement.
Special Rules for Pending Merger with China Oceanwide
The Company is party to an Agreement and Plan of Merger agreement with China Oceanwide Holdings Group Co., Ltd. dated October 21, 2016 (the Merger Agreement). The corporate merger contemplated by the Merger Agreement (the Merger) is currently expected to be completed during 2019, although this is not guaranteed (if and when completed, the Closing). The following provisions are contingent upon the Closing of the Merger.
(1) Conversion to Cash Award. Pursuant to the terms of the Merger Agreement, upon the Closing, the Units will convert into units the value of which is based on the merger consideration to be received for the Stock in the Merger, which is a cash amount equal to $5.43 per share. Thus, after the Closing your Unit will represent the right to receive the number or Units earned (depending upon the achievement of the applicable performance goals) multiplied by $5.43, and subject to the other terms and conditions of this Agreement and the Plan.
(2) Adjustment of Award. Pursuant to Section 4.4 of the Plan, the Committee may in its sole discretion make such adjustments to the Award to reflect the Merger or otherwise prevent dilution or enlargement of rights or benefits thereunder, as it deems appropriate. The Committee expects that it will make adjustments to the Award to reflect the expected impact of the Merger, which may include, without limitation, adjustments to the performance goals set forth on this Exhibit A for each of the performance measurement periods hereunder, adjustments deemed necessary or appropriate to properly reflect the conversion to purchase GAAP accounting and any other changes in accounting rules or tax laws, and adjustments related to any reorganization or restructuring plans programs. Any such adjustment will be communicated to you in writing, shall be binding on all persons and shall not constitute an amendment of this Award.
(3) Qualifying Change of Control. For purposes of this Agreement and the Plan, the Committee has determined that the Closing of the Merger pursuant to its current terms would be a Change of Control that constitutes a Qualifying Change of Control pursuant to which a Successor Entity will Assume and Maintain this Award of Units. Thus, the provisions of Section 6(b) of this Agreement, which provides special rules for the vesting of the Units upon certain terminations of employment within 12 months following a Change of Control, will apply following the Closing.
Exhibit 10.3
2018 Genworth Financial, Inc. Omnibus Incentive Plan
Restricted Stock Unit Award Agreement
Dear [Participant Name]:
This Award Agreement and the 2018 Genworth Financial, Inc. Omnibus Incentive Plan (the Plan) together govern your rights under this Award Agreement and set forth all of the conditions and limitations affecting such rights. Unless the context otherwise requires, capitalized terms used in this Award Agreement shall have the meanings ascribed to them in the Plan. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plans terms shall supersede and replace the conflicting terms of this Award Agreement.
1. |
Grant. You are hereby granted Restricted Stock Units (RSUs), which vest (become non-forfeitable) based on your continued future employment with the Company and/or certain other events, as set forth in Section 3 below. Each vested RSU entitles you to receive from Genworth Financial, Inc. (together with its Affiliates, the Company) one Share of the Companys Class A common stock (Share), as set forth in Section 6 below, all in accordance with the terms and conditions of this Award Agreement, the Plan, and any rules and procedures adopted by the Committee. |
a. |
Grant Date: [Grant Date] |
b. |
Number of RSUs: [Number of Awards Granted] |
c. |
Vesting Dates. The RSUs shall not provide you with any rights or interests therein until the RSUs vest. Unless vesting is accelerated as provided in Section 3 herein or otherwise in the discretion of the Committee as permitted under the Plan, one-third of the RSUs (rounded to a whole Share) shall vest (become non-forfeitable) on each of the first, second and third anniversaries of the grant date (each, a Vesting Date), provided that you have been continuously in the service of the Company or one through such dates. |
2. |
Agreement to Participate. You have been provided with this Award Agreement, and you have the opportunity to accept this Award Agreement, by accessing and following the procedures set forth on the stock plan administrators website. The Plan is available for your reference on the stock plan administrators website. You may also request a copy of the Plan at any time by contacting Human Resources at the address or telephone number set forth below in Section 14(a). By agreeing to participate, you acknowledge that you have reviewed the Plan and this Award Agreement, and you fully understand all of your rights under the Plan and this Award Agreement, the Companys remedies if you violate the terms of this Award Agreement, and all of the terms and conditions which may limit your eligibility to retain and receive the RSUs and/or Shares issued pursuant to the Plan and this Award Agreement. |
If you do not wish to accept the RSUs and participate in the Plan and be subject to the provisions of the Plan and this Award Agreement, please contact the Human Resources Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or at (804) 281-6000, within thirty (30) days of receipt of this Award Agreement. If you do not respond within thirty (30) days of receipt of this Award Agreement, the Award Agreement is deemed accepted. If you choose to participate in the Plan, you agree to abide by all of the governing terms and provisions of the Plan and this Award Agreement.
3. |
Vesting of RSUs. The RSUs have been credited to a bookkeeping account on your behalf. The RSUs will vest and become non-forfeitable as follows: |
a. |
Designated Vesting Dates. The RSUs will vest on the designated Vesting Dates provided in Section 1(c), provided that you have been continuously in the service of the Company through such dates. Unvested RSUs shall be immediately cancelled upon termination of your service with the Company, except as provided in Sections 3(b), (c), (d), (f) and (g) below. |
1
b. |
Employment Termination Due to Death or Total Disability. If your service with the Company terminates as a result of your death or Total Disability, then all of your unvested RSUs shall immediately vest. For purposes of this Award Agreement, Total Disability means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. |
c. |
Employment Termination for Retirement. If, on or after the first anniversary of the original grant date, your service with the Company terminates as a result of your voluntary resignation on or after you have attained age sixty (60) and accumulated five (5) or more years of combined and continuous service with the Company, then all of your unvested RSUs shall automatically vest. |
d. |
Employment Termination Due to Layoff. If your service with the Company terminates as a result of a severance-benefit eligible Layoff as defined or described in the Genworth Layoff Payment Plan, you shall continue to vest in any RSUs that vest after the Notice Date but before the Layoff Date (Notice Date and Layoff Date as defined in the Genworth Layoff Payment Plan). Additionally, the RSUs, if any, that are scheduled to vest on the next designated Vesting Date after the Layoff Date shall vest on that Vesting Date as provided in Section 1(c); all remaining and subsequently-vesting RSUs shall be forfeited as provided in Section 4 immediately on the Layoff Date. |
e. |
Qualifying Change of Control and Awards are Not Assumed. Upon the occurrence of a Qualifying Change of Control in which the Successor Entity fails to Assume and Maintain this Award of RSUs, all of your unvested RSUs shall immediately vest as of the effective date of the Qualifying Change of Control, provided that the circumstances giving rise to such Qualifying Change of Control meet the definition of a change in control event under Code Section 409A. |
f. |
Employment Termination without Cause or for Good Reason within 12 Months of a Qualifying Change of Control. If a Qualifying Change of Control occurs and the Successor Entity Assumes and Maintains this Award of RSUs, and if your service with the Successor Entity and its Affiliates is terminated by the Successor Entity or one of its Affiliates without Cause (other than such termination resulting from your death or Total Disability) or by you for Good Reason within twelve (12) months following the effective date of the Qualifying Change of Control, then all of your unvested RSUs shall immediately vest as of the date of such termination of service. |
g. |
Employment Termination without Cause or for Good Reason within 12 Months of a Non-Qualifying Change of Control. If a Non-Qualifying Change of Control occurs and if your service with the Company is terminated by the Company without Cause (other than such termination resulting from your death or Total Disability) or by you for Good Reason within twelve (12) months following the effective date of the Non-Qualifying Change of Control, then all of your unvested RSUs shall immediately vest as of the date of such termination of service. |
4. |
Forfeiture of RSUs Upon Termination of Employment. If your employment terminates prior to the designated Vesting Dates provided in Section 1(c) for any reason other than as described in Section 3 above, you shall forfeit all right, title and interest in and to the RSUs as of the date of such termination and the RSUs will be reconveyed to the Company without further consideration or any act or action by you. Any RSUs that fail to vest in accordance with the terms of this Award Agreement will be forfeited and reconveyed to the Company without further consideration or any act or action by you. |
5. |
For purposes of this Award Agreement: |
a. |
Business Unit Sale shall mean the Companys sale or disposition of all or any portion of a business unit. |
b. |
Cause shall mean (i) your willful and continued failure to substantially perform your duties with the Company (other than any such failure resulting from your Total Disability); (ii) your commission, conviction or pleading guilty or nolo contendere (or any similar plea or admission) to any felony or any act of fraud, misappropriation or embezzlement; (iii) your willful engagement in conduct (other than conduct covered under clause (i) above) which, in the good faith judgment of the Committee, is injurious to the Company, monetarily or otherwise; or (iv) your material violation or breach of any Company policy, or any noncompetition, confidentiality, or other restrictive covenant with respect to the Company, that applies to you; provided, however, that for purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on your part shall be deemed willful unless done, or omitted to be done, by you not in good faith and without reasonable belief that the act, or failure to act, was in the best interests of the Company. |
c. |
Good Reason shall mean any material reduction in the aggregate value of your compensation (including base salary and bonus), or a substantial reduction in the aggregate value of benefits provided to you; provided, however, that Company-initiated across-the-board reductions in compensation or benefits affecting substantially all employees shall alone not be considered Good Reason. |
d. |
Non-Qualifying Change of Control shall mean a Change of Control of the Company (as defined in the Plan) that results from a Business Unit Sale, provided that following such Change of Control (i) the Company remains in existence as a publicly-traded company (separate and apart from any Successor Entity resulting from the Change of Control, and regardless of whether the Company continues to use the name Genworth Financial, Inc. or a different name), (ii) your employment with the Company is not terminated by the Company without Cause in connection with the Change of Control, and (iii) the RSUs subject to this Award Agreement remain outstanding. |
e. |
Qualifying Change of Control shall mean a Change of Control of the Company (as defined in the Plan) that is not a Non-Qualifying Change of Control. |
6. |
Conversion to Stock. Unless the RSUs are forfeited as provided in Section 4 above, the RSUs will be converted to Shares on the designated Vesting Dates provided in Section 1(c), or earlier upon the occurrence of a Qualifying Change of Control in which the Successor Entity fails to Assume and Maintain this Award of RSUs as provided in Section 3(f) (the Conversion Date). Shares will be registered on the books of the Company in your name as of the Conversion Date and delivered to you as soon as practical thereafter, in certificated or uncertificated form, as you shall direct. |
For purposes of this Award Agreement, the term Specified Employee has the meaning given such term in Internal Revenue Code Section 409A and the final regulations thereunder (Final 409A Regulations), provided, however, that, as permitted in the Final 409A Regulations, the Companys Specified Employees and its application of the six-month delay rule of Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Companys Board of Directors or a committee thereof, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Award Agreement.
7. |
Dividend Equivalents. Until such time as the RSUs convert to Shares, or the RSUs are cancelled, whichever occurs first, the Company will establish an amount to be paid to the Participant (Dividend Equivalent) equal to the number of outstanding RSUs under this Award Agreement times the per share quarterly dividend payments made to shareholders of the Companys Class A common stock. The Company shall accumulate Dividend Equivalents and will, on the date that RSUs convert to Shares, pay to the Participant a cash amount equal to the Dividend Equivalents attributable to such RSUs. Notwithstanding the foregoing, any accumulated and unpaid Dividend Equivalents attributable to RSUs that are cancelled will not be paid and are immediately forfeited upon cancellation of the RSUs. |
8. |
Restrictive Covenants. As a condition to receiving payment of the Award, you agree to the following: |
a. |
Non-Disparagement. Subject to any obligations you may have under applicable law, you will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its agents, officers, directors or employees. Nothing in this section shall limit your ability to provide truthful testimony or information in response to a subpoena, court order, or investigation by a government agency. |
b. |
Non-Solicitation of Customers or Clients. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company for any reason, directly or through another person, solicit or contact any of the customers or clients of the Company with whom you had material contact during your employment, regardless of the location of such customers or clients, for the purpose of engaging in, providing, marketing, or selling any services or products that are competitive with the services and products being offered by the Company. |
c. |
Non-Solicitation of Company Employees. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company, directly or through another person, solicit or encourage any director, agent or employee of the Company to terminate his or her employment or other engagement with the Company. |
9. |
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require you or your beneficiary to remit to the Company, an amount in cash or Shares sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Award Agreement (including sell to cover arrangements whereby the company has the right to sell shares on your behalf to cover the taxes). With respect to such withholding, the employer may satisfy the tax withholding requirement by withholding Shares having a Fair Market Value as of the date that the amount of tax to be withheld is to be determined equal to the amount required to be withheld in accordance with applicable tax requirements, all in accordance with such procedures as the Committee establishes. The obligations of the Company under this Award Agreement will be conditional on such payment or arrangements, and the Company will, to the extent permitted by law, have the right to deduct in cash or Shares any such taxes from any payment of any kind otherwise due to you. |
10. |
Nontransferability. The RSUs awarded pursuant to this Award Agreement may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (Transfer), other than by will or by the laws of descent and distribution, except as provided in the Plan. If any prohibited Transfer, whether voluntary or involuntary, of the RSUs is attempted to be made, or if any attachment, execution, garnishment, or lien shall be attempted to be issued against or placed upon the RSUs, your right to such RSUs shall be immediately forfeited to the Company, and this Award Agreement shall be null and void. |
11. |
Requirements of Law. The granting of the RSUs and the issuance of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. The RSUs shall be null and void to the extent the grant, vesting or conversion of RSUs is prohibited under the laws of the country of your residence. |
12. |
Administration. This Award Agreement and your rights hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon you, the Participant. The Committees interpretation of the Plan and this Award Agreement, and all decisions and determinations by the Committee with respect to the Plan and this Award Agreement, shall be final, binding, and conclusive on all parties. |
13. |
No Guarantee of Employment. This Award Agreement shall not confer upon you any right to continuation of employment by the Company, nor shall this Award Agreement interfere in any way with the Companys right to terminate your employment at any time, for any lawful reason. |
14. |
Plan; Prospectus and Related Documents; Electronic Delivery. |
a. |
A copy of the Plan will be furnished upon written or oral request made to the Human Resources Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or telephone (804) 281-6000. |
b. |
As required by applicable securities laws, the Company is delivering to you a prospectus in connection with this Award, which delivery is being made electronically. A paper copy of the prospectus may also be obtained without charge by contacting the Human Resources Department at the address or telephone number listed above. By accepting this Award Agreement, you shall be deemed to have consented to receive the prospectus electronically. |
c. |
The Company will deliver to you electronically a copy of the Companys Annual Report to Stockholders for each fiscal year, as well as copies of all other reports, proxy statements and other communications distributed to the Companys stockholders. You will be provided notice regarding the availability of each of these documents, and such documents may be accessed by going to the Companys website at www.genworth.com and clicking on Investors and then SEC Filings & Financial Reports (or, if the Company changes its web site, by accessing such other web site address(es) containing investor information to which the Company may direct you in the future) and will be deemed delivered to you upon posting or filing by the Company. Upon written or oral request, paper copies of these documents (other than certain exhibits) may also be obtained by contacting the Companys Human Resources Department at the address or telephone number listed above or by contacting the Investor Relations Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or telephone (804) 281-6000. |
d. |
By accepting this Award, you agree and consent, to the fullest extent permitted by law, in lieu of receiving documents in paper format to accept electronic delivery of any documents that the Company may be required to deliver in connection with this Award and any other Awards granted to you under the Plan. Electronic delivery of a document may be via a Company e-mail or by reference to a location on a Company intranet or internet site to which you have access. |
15. |
Amendment, Modification, Suspension, and Termination. The Board of Directors shall have the right at any time in its sole discretion, subject to certain restrictions, to alter, amend, modify, suspend, or terminate the Plan in whole or in part, and the Committee shall have the right at any time in its sole discretion to alter, amend, modify, suspend or terminate the terms and conditions of any Award; provided, however, that no such action shall adversely affect in any material way your Award without your written consent. |
16. |
Entire Agreement. Except as set forth in Section 18 below, this Award Agreement, the Plan, and the rules and procedures adopted by the Committee contain all of the provisions applicable to the RSUs and no other statements, documents or practices may modify, waive or alter such provisions unless expressly set forth in writing, signed by an authorized officer of the Company and delivered to you. |
17. |
Compensation Recoupment Policy. Notwithstanding Section 17 above, this Award shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to you and to Awards of this type. |
18. |
Severability. The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
Please refer any questions you may have regarding your Restricted Stock Unit grant to your local Human Resources Manager.
Acceptance Date: Acceptance Date
Exhibit 10.4
2018 Genworth Financial, Inc. Omnibus Incentive Plan
Cash-Based Award Agreement
Dear [Participant Name]:
This Award Agreement and the 2018 Genworth Financial, Inc. Omnibus Incentive Plan (the Plan) together govern your rights under this Cash-Based Award (the Award) and set forth all of the conditions and limitations affecting such rights. Unless the context otherwise requires, capitalized terms used in this Award Agreement shall have the meanings ascribed to them in the Plan. If there is any inconsistency between the terms of this Award Agreement and the terms of the Plan, the Plans terms shall supersede and replace the conflicting terms of this Award Agreement.
1. |
Grant. You are hereby granted an Award under the Plan, effective as of [Grant Date] (the Grant Date). The Award entitles you to receive from Genworth Financial, Inc. (together with its Affiliates, the Company) an aggregate amount in cash equal to $[Amount of Award], payable in three equal annual installments, all in accordance with the terms and conditions of this Award Agreement, the Plan, and any rules and procedures adopted by the Management Development and Compensation Committee of the Genworth Financial, Inc. Board of Directors (the Committee). |
2. |
Vesting and Payment Dates: The Award shall not provide you with any rights or interests therein until the Award vests. Unless vesting is accelerated as provided in Section 3 herein or otherwise in the discretion of the Committee as permitted under the Plan, one-third of the Award will vest on each of March 15, 2020, March 15, 2021, and March 15, 2022 (each, a Vesting Date), and the vested portion will be paid within 30 days of the Vesting Date, provided you have continued in the service of the Company through such Vesting Date. |
3. |
Treatment of Award Upon Termination of Employment and Other Events. If your service with the Company terminates for any reason other than as set forth below, and you and the Company have not entered into a written agreement explicitly providing otherwise in accordance with rules and procedures adopted by the Committee, then the Award shall immediately expire upon such termination. |
a. |
Employment Termination Due to Death or Total Disability. If your service with the Company terminates as a result of your death or Total Disability, then the Award shall immediately vest and become payable on the regularly scheduled Vesting Dates. For purposes of this Award Agreement, Total Disability means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. |
b. |
Employment Termination for Retirement. If, on or after the first anniversary of the original grant date, your service with the Company terminates as a result of your voluntary resignation on or after you have attained age sixty (60) and accumulated five (5) or more years of combined and continuous service with the Company, then the Award shall immediately vest and become payable on the regularly scheduled Vesting Dates. |
c. |
Employment Termination Due to Layoff. If your service with the Company terminates as a result of a severance-benefit eligible Layoff as defined or described in the Genworth Layoff Payment Plan, you shall continue to vest in any portion of the Award that vests after the Notice Date but before the Layoff Date (Notice Date and Layoff Date as defined in the Genworth Layoff Payment Plan). Additionally, the portion of the Award, if any, that is scheduled to vest on the next designated Vesting Date after the Layoff Date shall vest on that Vesting Date as provided in Section 2; any remaining and subsequently-vesting portion of the Award shall be forfeited immediately on the Layoff Date. |
4. |
Restrictive Covenants. As a condition to receiving payment of the Award, you agree to the following: |
a. |
Non-Disparagement. Subject to any obligations you may have under applicable law, you will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its agents, officers, directors or employees. Nothing in this section shall limit a Participants ability to provide truthful testimony or information in response to a subpoena, court order, or investigation by a government agency. |
b. |
Non-Solicitation of Customers or Clients. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company for any reason, directly or through another person, solicit or contact any of the customers or clients of the Company with whom the you had material contact during your employment, regardless of the location of such customers or clients, for the purpose of engaging in, providing, marketing, or selling any services or products that are competitive with the services and products being offered by the Company. |
c. |
Non-Solicitation of Company Employees. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), you will not, during and for a period of 12 months following the cessation of your employment with the Company, directly or through another person, solicit or encourage any director, agent or employee of the Company to terminate his or her employment or other engagement with the Company. |
5. |
Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require you or your beneficiary to remit to the Company, an amount in cash sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Award Agreement. |
6. |
Nontransferability. This Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated (Transfer), other than by will or by the laws of descent and distribution, except as provided in the Plan. If any prohibited Transfer, whether voluntary or involuntary, of this Award is attempted to be made, or if any attachment, execution, garnishment, or lien shall be attempted to be issued against or placed upon the Award, your right to the Award shall be immediately forfeited to the Company, and this Award Agreement shall be null and void. |
7. |
Administration. This Award Agreement and your rights hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Award Agreement, all of which shall be binding upon you, the Participant. |
8. |
Continuation of Employment. This Award Agreement shall not confer upon you any right to continuation of employment by the Company, nor shall this Award Agreement interfere in any way with the Companys right to terminate your employment at any time, for any lawful reason. |
9. |
Amendment, Modification, Suspension, and Termination. The Board of Directors shall have the right at any time in its sole discretion, subject to certain restrictions, to alter, amend, modify, suspend, or terminate the Plan in whole or in part, and the Committee shall have the right at any time in its sole discretion to alter, amend, modify, suspend or terminate the terms and conditions of any Award; provided, however, that no such action shall adversely affect in any material way your Award without your written consent. |
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10. |
Entire Agreement. This Award Agreement, the Plan, and the rules and procedures adopted by the Committee contain all of the provisions applicable to this Award and no other statements, documents or practices may modify, waive or alter such provisions unless expressly set forth in writing, signed by an authorized officer of the Company and delivered to you. |
11. |
Compensation Recoupment Policy. Notwithstanding Section 10 above, this Award shall be subject to any compensation recoupment policy of the Company that is applicable by its terms to you and to Awards of this type. |
12. |
Agreement to Participate. |
You have been provided with this Award Agreement, and you have the opportunity to accept this Award Agreement, by accessing and following the procedures set forth on the stock plan administrators website. The Plan is available for your reference on the stock plan administrators website. You may also request a copy of the Plan at any time by contacting Human Resources at the address or telephone number set forth below in Section 11(a). By agreeing to participate, you acknowledge that you have reviewed the Plan and this Award Agreement, and you fully understand all of your rights under the Plan and this Award Agreement, the Companys remedies if you violate the terms of this Award Agreement, and all of the terms and conditions which may limit your eligibility to retain and receive the Units and/or Shares issued pursuant to the Plan and this Award Agreement.
If you do not wish to accept the Units and participate in the Plan and be subject to the provisions of the Plan and this Award Agreement, please contact the Human Resources Department, Genworth Financial, Inc., 6620 W. Broad Street, Richmond, VA 23230, or at (804) 281-6000, within thirty (30) days of receipt of this Award Agreement. If you do not respond within thirty (30) days of receipt of this Award Agreement, the Award Agreement is deemed accepted. If you choose to participate in the Plan, you agree to abide by all of the governing terms and provisions of the Plan and this Award Agreement
13. |
Assistance in Proceedings, Etc. You agree that you will, without additional compensation, during and after your employment with the Company, upon reasonable notice, furnish such information and reasonable and proper assistance to the Company as may reasonably be required by the Company in connection with any legal or quasi-legal proceeding, including any external or internal investigation, involving the Company. |
14. |
Cooperation. Following termination of your employment with the Company for any reason, you agree that you will reasonably cooperate with the Company, as reasonably requested by the Company, to effect a transition of your responsibilities and to ensure that the Company is aware of all matters being handled by you. |
15. |
Resolve. Any disagreement between you and the Company concerning anything covered by this Award Agreement or concerning the Award will be settled by final and binding arbitration pursuant to the Companys Resolve program. The Conditions of Employment document previously executed by you and the Resolve Guidelines are incorporated herein by reference as if set forth in full in this Award Agreement. |
Please refer any questions you may have regarding this Award to the Executive Vice President Human Resources.
ACCEPTANCE DATE: Acceptance Date
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Exhibit 10.5
Genworth Financial, Inc.
Amended and Restated
2014 Change of Control Plan
Amended and Restated as of May 15, 2019
1. Purpose. The purpose of the Plan is to enable the Company to offer certain protections to a selected group of key employees of the Company if their employment is terminated in connection with a Change of Control. Capitalized terms and phrases used herein shall have the meanings ascribed thereto in Section 2.
2. Definitions.
a. Affiliate shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
b. Base Salary shall mean the Participants annual base salary in effect on the date of termination of the Participants employment with the Company, including amounts not currently includible in gross income by reason the Participants election to defer such amounts under a cafeteria plan, 401(k) plan, or nonqualified deferred compensation plan of the Company or an Affiliate.
c. Beneficial Owner or Beneficial Ownership shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
d. Board shall mean the board of directors of the Company as constituted from time to time.
e. Bonus shall mean the Participants target annual cash bonus for the year in which the Participants employment is terminated.
f. Business Unit Sale shall mean the Companys sale or disposition of all or any portion of a business unit.
g. Cause shall mean (with regard to a Participants termination of employment with the Company, the removal of a Participant from being a Participant under the Plan, or the reduction in a Participants tier level under the Plan) the Committees good faith determination that: (i) the Participant has willfully and continually failed to substantially perform his or her duties with the Company and its Affiliates as determined by the Committee; (ii) the Participant has committed, been convicted of or pled guilty or nolo contendere (or any similar plea or admission) to any felony or any act of fraud, misappropriation or embezzlement; (iii) the Participant has willfully engaged in conduct (other than conduct covered under clause (i) above) which, in the good faith judgment of the Committee, is injurious to the Company and/or its Affiliates, monetarily or otherwise; or (iv) the Participant has materially violated or breached any policy of the Company or an Affiliate, the terms of this Plan, or any applicable noncompetition, confidentiality, or other restrictive covenant with respect to the Company or any of its Affiliates (including, without limitation, the restrictive covenants contained in Section 5 of this Plan).
h. Change of Control shall mean any of the following events:
i. Any Person becomes the Beneficial Owner of thirty percent (30%) or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of its directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this Section 2(h), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, including without limitation, a public offering of securities; (B) any acquisition by the Company or any of its Affiliates; (C) any acquisition by any employee benefit plan or related trust sponsored or maintained by the Company or any of its Affiliates; or (D) any acquisition by any corporation pursuant to a transaction which complies with Section 2(g)(iii);
ii. Individuals who constitute the Board of Directors as of the Effective Date (the Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director of the Company subsequent to the Effective Date whose election to the Board of Directors, or nomination for election by the Companys stockholders, was approved by a vote of (A) at least a majority of the directors then comprising the Incumbent Board, (B) a vote of at least a majority of any nominating committee of the Board of Directors, which nominating committee was designated by a vote of at least a majority of the directors then comprising the Incumbent Board, or (C) in the case of a director appointed to fill a vacancy in the Board of Directors, at least a majority of the directors entitled (under Section 6 of Article VII of the Amended and Restated Certificate of Incorporation of the Company) to elect such director (so long as at least a majority of such directors voting in favor of the director filling the vacancy are themselves members of (or considered to be pursuant to this definition members of) the Incumbent Board) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of the Company or other actual or threatened solicitation of proxies of consents by or on behalf of a Person other than the Board of Directors;
iii. Consummation of a reorganization, merger, or consolidation to which the Company is a party or a sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), unless, following such Business Combination, all or substantially all of the individuals and entities who were the Beneficial Owners of Outstanding Company Voting Securities immediately prior to such Business Combination are the Beneficial Owners, directly or indirectly, of more than fifty percent (50%) of the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) (the Successor Entity) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Voting Securities; or
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iv. Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
i. Change of Control Date shall mean the date on which the Change of Control occurs.
j. Code shall mean the Internal Revenue Code of 1986, as amended.
k. Committee shall mean the Management Development and Compensation Committee of the Board, or such other committee appointed or designated by the Board from time to time to administer the Plan. Notwithstanding the foregoing, if no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board, and all references herein to the Committee shall be deemed to be references to the Board.
l. Company shall mean Genworth Financial, Inc., a Delaware corporation, and any successor thereto as provided in Section 13.
m. Competitive Services shall mean the lines of business and services with which a Participant is actively involved in conducting business on behalf of the Company at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 5.
n. Director shall mean any individual who is a member of the Board.
o. Disability shall mean a permanent disability that would make a Participant eligible for benefits under the long-term disability program maintained by the Company or any of its Affiliates or in the absence of any such program, such meaning as the Committee shall determine.
p. Effective Date shall mean December 17, 2014.
q. ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor act thereto.
r. Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
s. Good Reason shall mean (i) relocation of the Participants principal business location to an area outside a 50 mile radius of its current location; (ii) any reduction in the Participants compensation (including Base Salary and Bonus), a substantial reduction in the benefits provided to the Participant, and/or any failure to timely pay any part of the Participants compensation when due (including Base Salary and Bonus) or any benefits due under any benefit plan, program or arrangement; provided, however, that Company-initiated across-the-board reductions in compensation or benefits affecting substantially all Company employees shall alone not
3
be considered Good Reason, unless the compensation reductions exceed fifteen percent (15%) of pay (Base Salary plus Bonus); or (iii) any significant and material diminution in the Participants duties or responsibilities from that which exists on the Change of Control Date, excluding for this purpose (1) isolated and inadvertent actions not taken in bad faith and remedied by the Company promptly after the Company receives notice from the Participant, and (2) any diminution in duties or responsibilities with respect to the Participants continuing employment with the Company relating to a Business Unit Sale; provided, however, that a change in title or reporting relationship alone shall not constitute Good Reason; provided, further, that any event described in clauses (i) through (iii) above shall constitute Good Reason only if the Company fails to rescind or remedy such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that Good Reason shall cease to exist for an event or condition described in clauses (i) through (iii) above on the 90th day following its occurrence, unless the Participant has given the Company written notice thereof prior to such date.
For purposes of determining the amount of any cash payment payable to the Participant in accordance with the provisions of Section 3(a), any reduction in compensation or benefits that would constitute Good Reason hereunder shall be deemed not to have occurred.
t. Non-Competition Period shall mean the 12-month period commencing upon a Qualified Termination.
u. Omnibus Plans shall mean the 2004 Genworth Financial, Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan, each as amended from time to time, or any successor plans providing for the grant or award of equity-based compensation to the Companys employees, officers and directors. With respect to a Participant in this Plan, the provisions of this Plan shall override the provisions of the Omnibus Plan and award agreements thereunder related to a Change of Control, except the provisions of the Omnibus Plan or related award agreements that apply when, pursuant to a Change of Control, a successor entity does not assume and maintain an award granted under the Omnibus Plan.
v. Participant shall mean each key employee of the Company or any of its Affiliates who has: (i) been selected by the Committee in its sole discretion and designated in writing as eligible for participation herein, and (ii) signed an acknowledgment and consent letter agreeing to the terms and conditions set forth in the Plan and the Participants designed Tier level. The Committee will review the list of Participants on a periodic basis, and may add or remove Participants at its discretion, provided, however, that any removal of a Participant shall not be effective within 180 days prior to a Change of Control.
w. Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof.
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x. Plan shall mean this Genworth Financial, Inc. 2014 Change of Control Plan, as may be amended from time to time.
y. Prohibited Competitor shall mean no greater than ten (10) specifically named entities, identified by the Company, that compete with the Company in the Restricted Territory with respect to the Competitive Services at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 5.
z. Qualified Termination shall mean, subject to Section 11 of this Plan, within 24 full calendar months after a Change of Control as defined in Section 2(h), a termination of the Participants employment by the Company without Cause (and not as a result of the Participants death or Disability), or by the Participant for Good Reason. Notwithstanding the preceding sentence, in no event shall a Participants termination of employment with the Company constitute a Qualified Termination if such termination occurs as a result of or in connection with a Business Unit Sale and either (i) the Participant is offered employment with a successor entity in connection with the Business Unit Sale and the terms of such employment offer would not constitute Good Reason, or (ii) the Participant accepts employment with a successor entity in connection with the Business Unit Sale.
aa. Restricted Period shall mean the 24-month period commencing upon a Qualified Termination.
bb. Restricted Territory shall mean the territory in which a Participant is conducting business on behalf of the Company at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 5.
cc. Severance Benefits shall mean the severance benefits described in Section 3(a).
dd. Tier I Executives shall mean the executives determined by the Committee in its sole discretion from time to time prior to the Change of Control Date to be Tier I Executives and identified as such in the records of the Plan maintained by the Company at any time during the period.
ee. Tier II Executives shall mean the executives determined by the Committee in its sole discretion from time to time prior to the Change of Control Date to be Tier II Executives and identified as such in the records of the Plan maintained by the Company at any time during the period.
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3. Benefits.
a. Severance Benefits. Subject to Sections 4, 5, 6 and 7, if the Participant has a Qualified Termination, the Participant shall be eligible to receive the following payments and benefits:
i. a lump sum cash payment (net of applicable taxes and withholdings) of accrued but unpaid salary and accrued but unused vacation as of the date of the Participants Qualified Termination (net of applicable taxes and withholdings), payable in accordance with the Companys normal payroll practices (typically within 15 days following the date of termination), or earlier if required by applicable law;
ii. a lump sum cash payment (net of applicable taxes and withholdings) based on the Participants annual bonus that would have been payable with respect to the fiscal year in which the Qualified Termination occurs (determined based on actual pro rata performance as of the date of the Participants Qualified Termination, to the extent such performance can be reasonably established in the sole discretion of the Committee, or otherwise based on the Participants target Bonus amount, if such performance cannot be reasonably established in the sole discretion of the Committee ), prorated to the nearest half-month to reflect the portion of the fiscal year that had elapsed prior to the Participants Qualified Termination;
iii. a lump sum cash payment (net of applicable taxes and withholdings) based on the Participants position as of the date of the Participants Qualified Termination, as follows:
A. |
Tier I Executives: 2.5 times Base Salary, plus 2.5 times Bonus; or |
B. |
Tier II Executives: 2.0 times Base Salary, plus 2.0 times Bonus; |
iv. subject to Section 11 of this Plan, all performance-based cash and equity awards granted to the Participant by the Company under the Omnibus Plans shall become vested and shall be deemed earned based on actual pro rata performance as of the date of the Participants Qualified Termination, to the extent such performance can be reasonably established in the sole discretion of the Committee, or otherwise based on an assumed achievement of all relevant performance goals at target levels, if actual pro rata performance cannot be reasonably established in the sole discretion of the Committee; and shall pay out pro rata (to the nearest half-month) based on the portion of the performance period elapsed on the effective date of the Qualified Termination;
v. subject to Section 11 of this Plan, all stock options, restricted stock units and other time-vesting cash and equity awards granted to the Participant by the Company under the Omnibus Plan shall immediately become vested and exercisable in full and/or all restrictions on all shares subject to awards shall lapse (regardless of whether such stock options, restricted stock units or other equity-based awards were vested and exercisable or subject to restrictions as of the date of the Participants Qualified Termination or the Change of Control), with any stock options or other equity-based awards remaining exercisable for the remainder of their stated term;
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vi. full and immediate vesting of any benefit under any funded or unfunded nonqualified pension, retirement or deferred compensation plan now or hereafter maintained by the Company in which the Participant participates, with payment to be made at such time and in accordance with the terms of such plan(s); and
vii. except to the extent the following violates section 2716 of the Public Health Service Act (as added by Section 1001 of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act) or any other applicable law, the following health and welfare benefits:
A. |
Continuation of the Participants coverage under the Companys Group Life Insurance Plan for up to 18 months following the Qualified Termination. The coverage continued in accordance with this Plan will be subject to the modifications made to the same coverage during the 18 month period that is maintained by similarly situated participants who have not terminated employment; and |
B. |
Payment of a lump sum cash payment (net of applicable taxes and withholdings), payable within 60 days following the Participants Qualified Termination, equal to the monthly cost to provide group medical, dental, vision and/or prescription drug plan benefits sponsored by the Company and maintained by the Participant as of the date of the Participants termination of employment, multiplied by 18. For purposes of this Section 3(a)(vii)(B), the cost of such benefits will be calculated based on the applicable premium determined in accordance with Code Section 4980B(f)(4) and the regulations issued thereunder (less the 2% administrative fee and less the active-employee rate for such coverage) for the year in which the termination of employment occurs. |
Subject to Section 11 of this Plan, Severance Benefits described in paragraphs (ii) through (iv) above shall be paid within sixty (60) days following the Participants Qualified Termination in accordance with the provisions of this Section 3(a). Consistent with Section 11, if a Participant becomes entitled to the Severance Benefits described in paragraphs (ii) through (v) above during a period in which he or she is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes), the payment of such benefits (but not the vesting of such benefits) shall be delayed until the earlier of the Participants death or the first business day of the seventh month following the Participants separation from service.
b. Death Benefits. If a Participant dies after becoming entitled to Severance Benefits hereunder but before receiving full payment, such remaining benefits will be paid to the Participants estate as soon as practicable after his or her death.
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c. Non-Duplication of Benefits. A Participant entitled to Severance Benefits under this Plan shall not be eligible to receive any severance, layoff or termination benefits provided under any other agreement, plan, program or arrangement maintained or sponsored by the Company, including, without limitation, the Companys Layoff Payment Plan and the Companys 2015 Key Employee Severance Plan. In addition, if any termination payments made to a Participant by the Company are related to an actual or potential liability under the Worker Adjustment and Retraining Notification Act (WARN) or similar law, such amounts shall reduce (offset) the Participants Severance Benefit under this Plan.
4. Mandatory Reduction of Payments in Certain Events.
a. Anything in this Plan to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of a Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise) (a Payment) would be subject to the excise tax imposed by Section 4999 of the Code (the Excise Tax), then, prior to the making of any Payment to the Participant, a calculation shall be made comparing (i) the net benefit to the Participant of the Payment after payment of the Excise Tax, to (ii) the net benefit to the Participant if the Payment had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payment shall be limited to the extent necessary to avoid being subject to the Excise Tax (the Reduced Amount). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the Change of Control, as determined by the Determination Firm (as defined in Section 4(b) below). For purposes of this Section 4, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 4, the Parachute Value of a Payment means the present value as of the date of the Change of Control of the portion of such Payment that constitutes a parachute payment under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
b. The determination of whether an Excise Tax would be imposed, the amount of such Excise Tax, and the calculation of the amounts referred to Section 4(a)(i) and (ii) above shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and the Participant (the Determination Firm) which shall provide detailed supporting calculations. Any determination by the Determination Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments which the Participant was entitled to, but did not receive pursuant to Section 4(a), could have been made without the imposition of the Excise Tax (Underpayment). In such event, the Determination Firm shall
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determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.
c. In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 4 shall be of no further force or effect.
5. Restrictive Covenants. Any amounts or benefits payable pursuant to this Plan (except for any payment pursuant to Section 3(a)(i) of the Plan) shall only be payable if the Participant executes, delivers to the Company and does not revoke a restrictive covenant agreement in a form acceptable to the Company (which may be contained in the same agreement as the full general release required by Section 7), which agreement will contain, at a minimum, provisions substantially similar to the following:
a. Confidential Information and Confidentiality. In connection with his or her employment with the Company, the Participant previously executed a Conditions of Employment acknowledgment obligating the Participant to comply with the terms of the Companys Proprietary Information and Inventions Agreement (PIIA), which is incorporated herein by reference. The Participant acknowledges and reaffirms his or her obligation to comply with the terms of the PIIA. This Plan is not intended to, and does not, alter either the Companys rights or the Participants obligations under the PIIA or any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, the Participant shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, the Participant shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by the Participant. Unless otherwise publicly disclosed by the Company, the Participant agrees to keep his or her participation in this Plan strictly confidential and agrees not to disclose it to any person at any time, other than the Participants family or legal and financial advisors, who shall be subject to the same confidentiality provisions.
b. Non-Disparagement. Subject to any obligations the Participant may have under applicable law, the Participant will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its affiliates, subsidiaries, agents, officers, directors or employees. In the event such a communication is made to anyone, including but not limited to the media, public interest groups and publishing companies, it will be considered a material breach of the terms of the Plan. Nothing in this section shall limit a Participants ability to provide truthful testimony or information in response to a subpoena, court order, or investigation by a government agency.
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c. Covenant Not to Compete. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall not, during the Non-Competition Period, (i) carry on or engage in Competitive Services on behalf of a Prohibited Competitor within the Restricted Territory on his or her own or on behalf of any other person or entity, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any Prohibited Competitor.
d. Solicitation of Customers or Clients by Participants. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall not, during the Restricted Period, directly or indirectly, solicit or contact any of the customers or clients of the Company with whom the Participant had material contact during his or her employment, regardless of the location of such customers or clients, for the purpose of engaging in, providing, marketing, or selling any services or products that are competitive with the services and products being offered by the Company.
e. Solicitation of Company Employees. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall will not, during the Restricted Period, directly or indirectly, solicit or encourage any director, agent or employee of the Company to terminate his or her employment or other engagement with the Company.
f. Return of Materials. Each Participant agrees that he or she will not retain or destroy (except as set forth below), and will immediately return to the Company on or prior to the termination of Participants employment with the Company, or at any other time the Company requests such return, any and all property of the Company that is in his or her possession or subject to his or her control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, access cards, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Developments (as defined in the PIIA) and all secret or confidential information covered by the PIIA, belonging to the Company or that a Participant received from or through his or her employment with the Company. Each Participant agrees not to make, distribute, or retain copies of any such information or property. To the extent that a Participant has electronic files or information in his or her possession or control that belong to the Company, contain secret or confidential information covered by the PIIA, or constitute Developments under the PIIA (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the termination of such Participants employment with the Company, or at any other time the Company requests, such Participant shall (a) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (b) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices,
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electronic media, cloud storage, or other media, devices, or equipment, such that such files and information are permanently deleted and irretrievable; and (c) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted. Each Participant agrees that he or she will reimburse the Company for all of its costs, including reasonable attorneys fees, of recovering the above materials and otherwise enforcing compliance with this provision if he or she does not return the materials to the Company or take the required steps with respect to electronic information or files on or prior to the termination of such Participants employment with the Company or at any other time the materials and/or electronic file actions are requested by the Company or if such Participant otherwise fails to comply with this provision.
g. Remedies. Participants specifically acknowledge and agree that the remedy at law for any breach of the provisions of this Section 5 (the Restrictive Covenants) will be inadequate, and that in the event a Participant breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, such Participant from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. Participants understand and agree that, if the Company and a Participant become involved in legal action regarding the enforcement of the Restrictive Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from such Participant its reasonable costs and attorneys fees incurred in enforcing such covenants. The Companys ability to enforce its rights under the Restrictive Covenants or applicable law against a Participant shall not be impaired in any way by the existence of a claim or cause of action on the part of such Participant based on, or arising out of, this Plan or any other agreement, event or transaction.
h. Severability and Modification of Covenants. Participants acknowledge and agree that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. Participants and the Company agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Plan or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Companys legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.
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6. No Duty to Mitigate/Set-off. No Participant entitled to receive Severance Benefits hereunder shall be required to seek other employment or to attempt in any way to reduce any amounts payable to him or her pursuant to this Plan. Further, the amount of Severance Benefits payable hereunder shall not be reduced by any compensation earned by the Participant as a result of employment by another employer or otherwise. Except as provided herein, the amounts payable hereunder shall not be subject to setoff, counterclaim, recoupment, defense or other right which the Company may have against the Participant or others.
7. Release Required. Any Severance Benefits payable pursuant to this Plan (except for any payment pursuant to Section 3(a)(i) of the Plan) shall only be payable if the Participant executes, delivers to the Company and does not revoke a full general release of all claims of any kind whatsoever that the Participant has or may have against the Company and its Affiliates and their officers, directors and employees, known or unknown, arising on or before the date on which the Participant executes such release (other than claims to payments specifically provided hereunder; claims to vested accrued benefits under the Companys tax-qualified employee benefit plans; claims for reimbursement under the Companys medical reimbursement program for any unreimbursed medical expenses incurred on or before the Participants date of termination; claims for unreimbursed business expenses in accordance with the Companys policy or rights of indemnification or contribution to which the Participant was entitled under the Companys By-laws, the Companys Certificate of Incorporation or otherwise with regard to the Participants service as an employee, officer or director of the Company; or claims that the Participant cannot by law release) in a form acceptable to the Company. Notwithstanding the foregoing, the Participant agrees to reasonably cooperate with the Company with respect to any claim, lawsuit, action, proceeding or governmental investigation relating to the Change of Control. The release will not limit a Participants ability to file a charge or complaint with the Equal Employment Opportunity Commission or any other federal, state or local governmental agency or commission (Government Agencies), nor will it limit a Participants ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies in connection with any charge or complaint, whether filed by such Participant, on his or her behalf, or by any other individual. Such release must be executed and all revocation periods shall have expired within 60 days after the Participants date of termination; failing which such amount or benefit shall be forfeited. If such payment or benefit constitutes non-exempt deferred compensation for purposes of Section 409A of the Code, and if such 60-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the release becomes irrevocable in the first such calendar year.
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8. Funding. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company and/or its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
9. Administration of the Plan.
a. Plan Administrator. The administrator of the Plan shall be the Committee.
b. Authority of the Committee. Subject to the terms of the Plan, the Committee shall have full discretion and authority to determine a Participants participation and benefits under the Plan and to interpret and construe the provisions of the Plan.
c. Delegation of Authority. The Committee may delegate any or all of its powers and responsibilities hereunder to other persons. Any such delegation shall not be effective until it is accepted by the persons designated by the Committee and may be rescinded at any time by written notice from the Committee to the person to whom the delegation is made. Notwithstanding the foregoing, the Committee may not delegate any of its powers or responsibilities with respect to any matters relating to or involving a Participant who has been designated by the Board as an executive officer of the Company.
d. Retention of Professional Assistance. The Committee may employ such legal counsel, accountants and other persons as may be required in carrying out its duties and responsibilities in connection with the Plan.
e. Claims/Disputes Procedure.
i. Prior to paying any benefit under the Plan, the Committee may require the Participant to provide such information or material as the Committee, in its sole discretion, shall deem necessary for it to make any determination it may be required to make under the Plan. The Committee may withhold payments of any benefit under the Plan until it receives all such information and material and is reasonably satisfied of its accuracy.
ii. Claims for benefits under the Plan should be forwarded to the Committee. The Committee shall provide adequate notice in writing to a Participant whose claim for benefits is denied, setting forth the specific reasons for such denial. In the event of the denial of a claim, the Participant has the right to file a written request for a review of the denial with the Committee within 90 days after the Participant receives
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written notice of the denial. If a Participant requests such a review, the Committee will conduct a full and fair review of the claim for benefits and will deliver to the Participant a written decision on that claim within 60 days after the receipt of the written request for review, unless there are special circumstances requiring an extension of the time for review, in which case the 60-day period may be extended by the Committee up to a period of 120 days after the receipt of the written request for review.
iii. All acts and decisions of the Committee shall be final and binding upon the Participant.
f. Indemnification. The Committee, its members and any person designated pursuant to Section 9(c) above shall not be liable for any action or determination made in good faith with respect to the Plan. The Company shall, to the extent permitted by law, by the purchase of insurance or otherwise, indemnify and hold harmless each member of the Committee and each director, officer and employee of the Company for liabilities or expenses they and each of them incur in carrying out their respective duties under this Plan, other than for any liabilities or expenses arising out of such individuals willful misconduct or fraud.
g. Fees and Expenses. The Company will pay or reimburse the Participant, on a current basis, for all costs and expenses, including without limitation court costs and reasonable attorneys fees, incurred by the Participant in seeking to obtain or enforce any right or benefit provided by this Plan, provided that the Participant is successful on at least one claim brought to obtain or enforce any such right.
10. Effect of Participants Breach. If a Participant breaches any of the provisions of this Plan, including but not limited to the Restrictive Covenants in Section 5, the Participant will be required to reimburse the Company for any and all Severance Benefits provided under the terms of the Plan (other than those that were already vested without respect to the Plan), and all obligations of the Company under the Plan to provide any additional payments or benefits to the Participant will cease immediately and be null and void.
11. Code Section 409A.
a. Notwithstanding anything in this Plan to the contrary, to the extent that any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the Code) would otherwise be payable or distributable hereunder by reason of a Participants termination of employment, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless (i) the circumstances giving rise to such termination of employment meet any description or definition of separation from service in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any amount upon a termination of employment, however defined. If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant separation from service.
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b. Notwithstanding anything in this Plan to the contrary, if any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Code would otherwise be payable or distributable under this Plan by reason of a Participants separation from service during a period in which he or she is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(i) if the payment or distribution is payable in a lump sum, the Participants right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participants death or the first business day of the seventh month following the Participants separation from service; and
(ii) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participants separation from service will be accumulated and the Participants right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participants death or the first day of the seventh month following the Participants separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.
For purposes of this Plan, the term Specified Employee has the meaning given such term in Code Section 409A and the final regulations thereunder (Final 409A Regulations), provided, however, that, as permitted in the Final 409A Regulations, the Companys Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Company, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.
12. Amendment and Termination. The Company reserves the right to amend or terminate, in whole or in part, any or all of the provisions of this Plan at any time, provided that in no event shall any amendment reducing the Severance Benefits provided hereunder be effective within 180 days prior to a Change of Control.
13. Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. In any such event, the term Company, as used in this Plan, shall mean the Company, as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Plan.
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14. Miscellaneous.
a. Rights of Participants. Nothing herein contained shall be held or construed to create any liability or obligation upon the Company to retain any Participant in its service. All Participants shall remain subject to discharge or discipline to the same extent as if this Plan had not been put into effect.
b. Governing Law. The Plan shall be governed by the laws of the Commonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
c. Withholding. The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to this Plan.
d. Severability. In case any provision of this Plan be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions of this Plan unless such determination shall render impossible or impracticable the functioning of this Plan, and in such case, an appropriate provision or provisions shall be adopted so that this Plan may continue to function properly.
e. Assignment and Alienation. The benefits payable to the Participant under the Plan shall not be subject to alienation, transfer, assignment, garnishment, execution or levy of any kind and any attempt to cause any benefits to be so subjected shall not be recognized.
f. Communications. All announcements, notices and other communications regarding this Plan will be made by the Company in writing.
g. ERISA Plan. The Plan is intended to be a top hat welfare benefit plan within the meaning of U.S. Department of Labor Regulation § 2520.104-24.
15. Entire Agreement. This Plan sets forth the entire understanding of the Company with respect to the subject matter hereof and, with the exception of the Companys Layoff Payment Plan and the Companys 2015 Key Employee Severance Plan, supersedes all existing severance and change of control plans, agreements and understandings (whether oral or written) between the Company and the Participants with respect to the subject matter herein. The Plan may only be amended as expressly set forth above in Section 12.
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Exhibit 10.6
Genworth Financial, Inc.
Amended and Restated
2015 Key Employee Severance Plan
Amended and Restated as of May 15, 2019
1. Purpose. The purpose of the Plan is to promote the retention of a selected group of key employees of the Company by enabling the Company to offer certain protections to such employees in the event their employment is involuntarily terminated under certain circumstances. Capitalized terms and phrases used herein shall have the meanings ascribed thereto in Section 2.
2. Definitions.
a. Affiliate shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
b. Base Salary shall mean the Participants annual base salary in effect on the date of termination of the Participants employment with the Company, including amounts not currently includible in gross income by reason the Participants election to defer such amounts under a cafeteria plan, 401(k) plan, or nonqualified deferred compensation plan of the Company or an Affiliate.
c. Board shall mean the board of directors of the Company as constituted from time to time.
d. Bonus shall mean the Participants target annual cash bonus for the year in which the Participants employment is terminated.
e. Business Unit Sale shall mean the Companys sale or disposition of all or any portion of a business unit.
f. Cause shall mean (with regard to a Participants termination of employment with the Company, the removal of a Participant from being a Participant under the Plan, or the reduction in a Participants tier level under the Plan) the Committees good faith determination that: (i) the Participant has failed to perform his or her duties with the Company and its Affiliates as determined by the Committee; (ii) the Participant has committed, been convicted of or pled guilty or nolo contendere (or any similar plea or admission) to any felony or any act of fraud, misappropriation or embezzlement; (iii) the Participant has engaged in conduct (other than conduct covered under clause (i) above) which, in the good faith judgment of the Committee, is injurious to the Company and/or its Affiliates, monetarily or otherwise; or (iv) the Participant has violated or breached any policy of the Company or an Affiliate, the terms of this Plan, or any applicable noncompetition, confidentiality, or other restrictive covenant with respect to the Company or any of its Affiliates.
g. Code shall mean the Internal Revenue Code of 1986, as amended.
h. Committee shall mean the Management Development and Compensation Committee of the Board, or such other committee appointed or designated by the Board from time to time to administer the Plan. Notwithstanding the foregoing, if no Committee exists which has the authority to administer the Plan, the functions of the Committee shall be exercised by the Board, and all references herein to the Committee shall be deemed to be references to the Board.
i. Company shall mean Genworth Financial, Inc., a Delaware corporation, and any successor thereto as provided in Section 13.
j. Competitive Services shall mean the lines of business and services with which a Participant is actively involved in conducting business on behalf of the Company at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 4.
k. Director shall mean any individual who is a member of the Board.
l. Disability shall mean a permanent disability that would make a Participant eligible for benefits under the long-term disability program maintained by the Company or any of its Affiliates or in the absence of any such program, such meaning as the Committee shall determine.
m. Effective Date shall mean January 1, 2015.
n. ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor act thereto.
o. Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
p. Executive Officer shall mean an individual designated by the Board as an executive officer of the Company.
q. Good Reason shall mean (i) relocation of the Participants principal business location to an area outside a 50 mile radius of its current location; or (ii) any material reduction in the Participants Base Salary or Bonus, and/or any failure to timely pay any part of the Participants compensation when due (including Base Salary and Bonus) or any benefits due under any benefit plan, program or arrangement; provided, however, that Company-initiated reductions in compensation affecting substantially all U.S.-based Company employees shall not alone be considered Good Reason, unless the compensation reductions exceed fifteen percent (15%) of pay (Base Salary plus Bonus); provided that any event described in clauses (i) or (ii) above shall constitute Good Reason only if the Company fails to rescind or remedy such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that Good Reason shall cease to exist for an event or condition described in clauses (i) or (ii) above on the 90th day following its occurrence, unless the Participant has given the Company written notice thereof prior to such date.
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For purposes of determining the amount of any cash payment payable to the Participant in accordance with the provisions of Section 3(a), any reduction in compensation or benefits that would constitute Good Reason hereunder shall be deemed not to have occurred.
r. Non-Competition Period shall mean (i) the 12-month period commencing upon a Qualified Termination in the case of a Tier I or Tier II Employee, and (ii) the 6-month period commencing upon a Qualified Termination in the case of a Tier III Employee.
s. Omnibus Plans shall mean the 2004 Genworth Financial, Inc. Omnibus Incentive Plan and the 2012 Genworth Financial, Inc. Omnibus Incentive Plan, each as amended from time to time, or any successor plans providing for the grant or award of equity-based compensation to the Companys employees, officers and directors.
t. Participant shall mean each key employee of the Company or any of its Affiliates who has: (i) been selected by the Committee in its sole discretion and designated in writing as eligible for participation herein, and (ii) signed an acknowledgment and consent letter agreeing to the terms and conditions set forth in the Plan. The Committee will review the list of Participants on a periodic basis, and may (i) add Participants at its discretion, and (ii) remove Participants, subject to Sections 11 and 12.
u. Plan shall mean this Genworth Financial, Inc. 2015 Key Employee Severance Plan, as may be amended from time to time.
v. Prohibited Competitor shall mean no greater than ten (10) specifically named entities, identified by the Company, that compete with the Company in the Restricted Territory with respect to the Competitive Services at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 4.
w. Qualified Termination shall mean a termination of the Participants employment by the Company (i) without Cause (including a job loss due to any reduction in the work force, but excluding termination of employment due to the Participants death or Disability), or (ii) by the Participant for Good Reason. Notwithstanding the preceding sentence, in no event shall a Participants termination of employment with the Company constitute a Qualified Termination if such termination occurs as a result of or in connection with a Business Unit Sale and either (i) the Participant is offered employment with a successor entity in connection with the Business Unit Sale and the terms of such employment offer would not constitute Good Reason, or (ii) the Participant accepts employment with a successor entity in connection with the Business Unit Sale.
x. Restricted Period shall mean the 24-month period commencing upon a Qualified Termination.
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y. Restricted Territory shall mean the territory in which a Participant is conducting business on behalf of the Company at the time of a Qualified Termination, to be stated with more specificity in the restrictive covenant agreement required by Section 4.
z. Severance Benefits shall mean the payments and benefits described in Section 3(a).
aa. Tier I Employees shall mean the employees determined by the Committee in its sole discretion from time to time to be Tier I Employees and identified as such in the records of the Plan maintained by the Company at any time during the term of the Plan.
bb. Tier II Employees shall mean the employees determined by the Committee in its sole discretion from time to time to be Tier II Employees and identified as such in the records of the Plan maintained by the Company at any time during the term of the Plan.
cc. Tier III Employees shall mean the employees determined by the Committee in its sole discretion from time to time to be Tier III Employees and identified as such in the records of the Plan maintained by the Company at any time during the term of the Plan.
3. Benefits.
a. Severance Benefits. Subject to Sections 4, 5, 6 and 10, if the Participant has a Qualified Termination, the Participant shall be eligible to receive the following payments and benefits:
i. a lump sum cash payment of accrued but unpaid salary and accrued but unused vacation as of the Participants date of termination (net of applicable taxes and withholdings), payable in accordance with the Companys normal payroll practices (typically within 15 days following the date of termination), or earlier if required by applicable law;
ii. a lump sum cash payment (net of applicable taxes and withholdings) based on the Participants annual bonus that would have been payable with respect to the fiscal year in which the Qualified Termination occurs (determined at the end of such year based on actual performance results through the end of such year), prorated to the nearest half-month to reflect the portion of the fiscal year that had elapsed prior to the Participants date of termination, and payable at the same time as annual bonuses are payable to other employees of the Company;
iii. a lump sum cash payment (net of applicable taxes and withholdings), payable within 60 days following the Participants date of termination, based on the Participants participation level under the Plan as of the Participants date of termination, as follows:
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A. |
Tier I Employees: 2.0 times Base Salary, plus 2.0 times Bonus; or |
B. |
Tier II Employees: 1.0 times Base Salary, plus 1.0 times Bonus; or |
C. |
Tier III Employees: 1.0 times Base Salary; |
iv. a lump sum cash payment (net of applicable taxes and withholdings), payable within 60 days following the Participants date of termination, equal to the monthly cost to provide group medical, dental, vision and/or prescription drug plan benefits sponsored by the Company and maintained by the Participant as of the date of the Participants termination of employment, multiplied by a number of months equal to (i) twelve (12), in the case of Tier I and Tier II Employees, or (ii) six (6), in the case of Tier III Employees. For purposes of this Section 3(a)(iv), the cost of such benefits will be calculated based on the applicable premium determined in accordance with Code Section 4980B(f)(4) and the regulations issued thereunder (less the 2% administrative fee and less the active-employee rate for such coverage) for the year in which the termination of employment occurs;
v. subject to Section 10 of this Plan, stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and other stock and cash awards with time-based vesting restrictions granted under the Omnibus Plans and held by a Participant who is an Executive Officer as of the date of such Participants Qualified Termination shall become immediately vested as of the date of such Participants Qualified Termination, but only with respect to the number of awards that otherwise would have become vested on the awards next regularly scheduled vesting date based on continued employment;
vi. subject to Section 10 of this Plan, performance-based stock and cash awards granted under the Omnibus Plans and held by a Participant who is an Executive Officer as of the date of such Participants Qualified Termination shall remain outstanding and shall be earned, if at all, based on actual performance through the end of the performance period, prorated to the nearest half-month to reflect the portion of the performance period that had elapsed prior to the Participants Qualified Termination, payable on the regular payment date for such awards.
vii. any stock options and SARs that are vested (or become vested) and unexercised as of the date of the Qualified Termination and are held by a Participant shall expire on the earlier of (i) the one-year anniversary of the Qualified Termination, or (ii) their regular termination date; provided, however, that if the Participant dies before the earlier of such dates, then the stock options and SARs that are vested and unexercised as of the Qualified Termination shall not expire until twenty-four (24) months after the date of the Participants death; and
viii. with respect to a Participant who is an Executive Officer as of the date of such Participants Qualified Termination and who has at least five years of Company-recognized service with the Company as of the Qualified Termination, full and
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immediate vesting of any benefit under any funded or unfunded nonqualified pension, retirement or deferred compensation plan now or hereafter maintained by the Company in which the Participant participates, with payment to be made at such time and in accordance with the terms of such plan(s).
b. Death Benefits. If a Participant has a Qualified Termination, but subsequently dies before receiving some or all of the Severance Benefits, such remaining benefits will be paid to the Participants estate as soon as practicable after his or her death.
c. Non-Duplication of Benefits. In the event that a Participant becomes entitled to receive Severance Benefits under this Plan and may also be eligible for benefits under any other Company plan, program, arrangement or agreement as a result of the Participants termination of employment, the Participant shall be entitled to receive the greater of the Severance Benefits available under this Plan, on the one hand, and the benefits available under such other plan, program, arrangement or agreement, on the other, but not both. For the avoidance of doubt, if a Participant is entitled to receive Severance Benefits under this Plan, he or she will not be eligible to receive any benefits under the Companys Layoff Payment Plan. Conversely, if a Participant is entitled to receive benefits under the Genworth Financial, Inc. 2014 Change of Control Plan, he or she will not be eligible to receive Severance Benefits under this Plan. In addition, if any termination payments made to a Participant by the Company are related to an actual or potential liability under the Worker Adjustment and Retraining Notification Act (WARN) or similar law, such amounts shall reduce (offset) the Participants Severance Benefit under this Plan.
4. Restrictive Covenants. Any Severance Benefits payable pursuant to this Plan (except for any payment pursuant to Section 3(a)(i) of the Plan) shall only be payable if the Participant executes, delivers to the Company and does not revoke a restrictive covenant agreement in a form acceptable to the Company (which may be contained in the same agreement as the full general release required by Section 6), which agreement will contain, at a minimum, provisions substantially similar to the following:
a. Confidential Information and Confidentiality. In connection with his or her employment with the Company, the Participant previously executed a Conditions of Employment acknowledgment obligating the Participant to comply with the terms of the Companys Proprietary Information and Inventions Agreement (PIIA), which is incorporated herein by reference. The Participant acknowledges and reaffirms his or her obligation to comply with the terms of the PIIA. This Plan is not intended to, and does not, alter either the Companys rights or the Participants obligations under the PIIA or any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, the Participant shall not be restricted from disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, the Participant shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by the Participant. Unless
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otherwise publicly disclosed by the Company, the Participant agrees to keep his or her participation in this Plan strictly confidential and agrees not to disclose it to any person at any time, other than the Participants family or legal and financial advisors, who shall be subject to the same confidentiality provisions.
b. Non-Disparagement. Subject to any obligations the Participant may have under applicable law, the Participant will not make or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its affiliates, subsidiaries, agents, officers, directors or employees. In the event such a communication is made to anyone, including but not limited to the media, public interest groups and publishing companies, it will be considered a material breach of the terms of the Plan. Nothing in this section shall limit a Participants ability to provide truthful testimony or information in response to a subpoena, court order, or investigation by a government agency.
c. Non-Competition. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall not, during the Non-Competition Period, (i) carry on or engage in Competitive Services on behalf of a Prohibited Competitor within the Restricted Territory on his or her own or on behalf of any other person or entity, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any Prohibited Competitor.
d. Non-Solicitation of Customers or Clients by Participants. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall not, during the Restricted Period, directly or indirectly, solicit or contact any of the customers or clients of the Company with whom the Participant had material contact during his or her employment, regardless of the location of such customers or clients, for the purpose of engaging in, providing, marketing, or selling any services or products that are competitive with the services and products being offered by the Company.
e. Non-Solicitation of Company Employees. Unless waived in writing by the most senior Human Resources officer of the Company (or his or her successor), the Participant shall will not, during the Restricted Period, directly or indirectly, solicit or encourage any director, agent or employee of the Company to terminate his or her employment or other engagement with the Company.
f. Return of Materials. Each Participant agrees that he or she will not retain or destroy (except as set forth below), and will immediately return to the Company on or prior to the termination of Participants employment with the Company, or at any other time the Company requests such return, any and all property of the Company that is in his or her possession or subject to his or her control, including, but not limited to, keys, credit and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, access cards, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the
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Company), together with all Developments (as defined in the PIIA) and all secret or confidential information covered by the PIIA, belonging to the Company or that a Participant received from or through his or her employment with the Company. Each Participant agrees not to make, distribute, or retain copies of any such information or property. To the extent that a Participant has electronic files or information in his or her possession or control that belong to the Company, contain secret or confidential information covered by the PIIA, or constitute Developments under the PIIA (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the termination of such Participants employment with the Company, or at any other time the Company requests, such Participant shall (a) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (b) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices, electronic media, cloud storage, or other media, devices, or equipment, such that such files and information are permanently deleted and irretrievable; and (c) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted. Each Participant agrees that he or she will reimburse the Company for all of its costs, including reasonable attorneys fees, of recovering the above materials and otherwise enforcing compliance with this provision if he or she does not return the materials to the Company or take the required steps with respect to electronic information or files on or prior to the termination of such Participants employment with the Company or at any other time the materials and/or electronic file actions are requested by the Company or if such Participant otherwise fails to comply with this provision.
g. Remedies. Participants specifically acknowledge and agree that the remedy at law for any breach of the provisions of this Section 4 (the Restrictive Covenants) will be inadequate, and that in the event a Participant breaches, or threatens to breach, any of the Restrictive Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, such Participant from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity. Participants understand and agree that, if the Company and a Participant become involved in legal action regarding the enforcement of the Restrictive Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from such Participant its reasonable costs and attorneys fees incurred in enforcing such covenants. The Companys ability to enforce its rights under the Restrictive Covenants or applicable law against a Participant shall not be impaired in any way by the existence of a claim or cause of action on the part of such Participant based on, or arising out of, this Plan or any other agreement, event or transaction.
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h. Severability and Modification of Covenants. Participants acknowledge and agree that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. Participants and the Company agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Plan or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Companys legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.
5. No Duty to Mitigate/Set-off. No Participant entitled to receive Severance Benefits hereunder shall be required to seek other employment or to attempt in any way to reduce any amounts payable to him or her pursuant to this Plan. Further, the amount of Severance Benefits payable hereunder shall not be reduced by any compensation earned by the Participant as a result of employment by another employer or otherwise. Except as provided herein, the amounts payable hereunder shall not be subject to setoff, counterclaim, recoupment, defense or other right which the Company may have against the Participant or others. In the event of the Participants breach of any provision hereunder, including without limitation, Sections 4, 5 or 6, the Company shall be entitled to recover any payments previously made to the Participant hereunder.
6. Release Required. Any Severance Benefits payable pursuant to this Plan (except for any payment pursuant to Section 3(a)(i) of the Plan) shall only be payable if the Participant executes, delivers to the Company and does not revoke a full general release of all claims of any kind whatsoever that the Participant has or may have against the Company and its Affiliates and their officers, directors and employees, known or unknown, arising on or before the date on which the Participant executes such release (other than claims to payments specifically provided hereunder; claims to vested accrued benefits under the Companys tax-qualified employee benefit plans; claims for reimbursement under the Companys medical reimbursement program for any unreimbursed medical expenses incurred on or before the Participants date of termination; claims for unreimbursed business expenses in accordance with the Companys policy or rights of indemnification or contribution to which the Participant was entitled under the Companys By-laws, the Companys Certificate of Incorporation or otherwise with regard to the Participants service as an employee, officer or director of the Company; or claims that the Participant cannot by law release) in a form acceptable to the Company. The release will not limit a Participants ability to file a charge or complaint with the Equal Employment Opportunity Commission or any other federal, state or local governmental agency or commission (Government Agencies), nor will it limit a
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Participants ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies in connection with any charge or complaint, whether filed by such Participant, on his or her behalf, or by any other individual. Such release must be executed and all revocation periods shall have expired within 60 days after the Participants date of termination; failing which all Severance Benefits shall be forfeited. If any payment or benefit hereunder constitutes non-exempt deferred compensation for purposes of Section 409A of the Code, and if such 60-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the release becomes irrevocable in the first such calendar year.
7. Funding. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company and/or its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
8. Administration of the Plan.
a. Plan Administrator. The administrator of the Plan shall be the Committee.
b. Authority of the Committee. Subject to the terms of the Plan, the Committee shall have full discretion and authority to determine a Participants participation and benefits under the Plan and to interpret and construe the provisions of the Plan.
c. Delegation of Authority. The Committee may delegate any or all of its powers and responsibilities hereunder to other persons. Any such delegation shall not be effective until it is accepted by the persons designated by the Committee and may be rescinded at any time by written notice from the Committee to the person to whom the delegation is made. Notwithstanding the foregoing, the Committee may not delegate any of its powers or responsibilities with respect to any matters relating to or involving an Executive Officer of the Company.
d. Retention of Professional Assistance. The Committee may employ such legal counsel, accountants and other persons as may be required in carrying out its duties and responsibilities in connection with the Plan.
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e. Claims/Disputes Procedure.
i. Prior to paying any benefit under the Plan, the Committee may require the Participant to provide such information or material as the Committee, in its sole discretion, shall deem necessary for it to make any determination it may be required to make under the Plan. The Committee may withhold payments of any benefit under the Plan until it receives all such information and material and is reasonably satisfied of its accuracy.
ii. Claims for benefits under the Plan should be forwarded to the Committee. The Committee shall provide adequate notice in writing to a Participant whose claim for benefits is denied, setting forth the specific reasons for such denial. In the event of the denial of a claim, the Participant has the right to file a written request for a review of the denial with the Committee within 90 days after the Participant receives written notice of the denial. If a Participant requests such a review, the Committee will conduct a full and fair review of the claim for benefits and will deliver to the Participant a written decision on that claim within 60 days after the receipt of the written request for review, unless there are special circumstances requiring an extension of the time for review, in which case the 60-day period may be extended by the Committee up to a period of 120 days after the receipt of the written request for review.
iii. All acts and decisions of the Committee shall be final and binding upon the Participant.
f. Indemnification. The Committee, its members and any person designated pursuant to Section 8(c) above shall not be liable for any action or determination made in good faith with respect to the Plan. The Company shall, to the extent permitted by law, by the purchase of insurance or otherwise, indemnify and hold harmless each member of the Committee and each director, officer and employee of the Company for liabilities or expenses they and each of them incur in carrying out their respective duties under this Plan, other than for any liabilities or expenses arising out of such individuals willful misconduct or fraud.
9. Effect of Participants Breach. If a Participant breaches any of the provisions of this Plan, including but not limited to the Restrictive Covenants in Section 4, the Participant will be required to reimburse the Company for any and all Severance Benefits provided under the terms of the Plan (other than those that were already vested without respect to the Plan), and all obligations of the Company under the Plan to provide any additional payments or benefits to the Participant will cease immediately and be null and void.
10. Code Section 409A.
a. Notwithstanding anything in this Plan to the contrary, to the extent that any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Code would otherwise be payable or distributable hereunder by reason of a Participants termination of employment, such amount or benefit will not be payable or distributable to the Participant by reason of such
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circumstance unless (i) the circumstances giving rise to such termination of employment meet any description or definition of separation from service in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any amount upon a termination of employment, however defined. If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant separation from service.
b. Notwithstanding anything in this Plan to the contrary, if any amount or benefit that would constitute non-exempt deferred compensation for purposes of Section 409A of the Code would otherwise be payable or distributable under this Plan by reason of a Participants separation from service during a period in which he or she is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(i) if the payment or distribution is payable in a lump sum, the Participants right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participants death or the first business day of the seventh month following the Participants separation from service; and
(ii) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participants separation from service will be accumulated and the Participants right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participants death or the first day of the seventh month following the Participants separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.
For purposes of this Plan, the term Specified Employee has the meaning given such term in Code Section 409A and the final regulations thereunder (Final 409A Regulations), provided, however, that, as permitted in the Final 409A Regulations, the Companys Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Company, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.
11. Duration. The Plan shall become effective as of the Effective Date, and shall continue in effect until terminated by the Board or the Committee. Subject to Section 12, the Committee or the Board may terminate the Plan as of any date that is at least 3
12
months after the date of the Committee or the Boards action. If any Participants become entitled to any payments or benefits hereunder during such 3-month period, this Plan shall continue in full force and effect and shall not terminate or expire with respect to such Participants until after all such Participants have received such payments and benefits in full.
12. Amendment and Termination. The Plan may be amended from time to time in any respect by the Committee or the Board; provided, however, that any amendment that would adversely affect the rights or potential rights of Participants shall not be effective for at least 3 months after the date of the Committee or the Boards action.
For the avoidance of doubt, removal of a Participant as a Participant (other than as a result of the Participant ceasing to be an employee under circumstances in which he or she would not be entitled to Severance Benefits under the terms of the Plan), a decrease in the Participants Tier level or any other reduction in payments or benefits shall be deemed to be an amendment of the Plan which adversely affects the rights of the Participant.
Notwithstanding anything contained in this Section 12 to the contrary, in the event the Committee determines in good faith that a Participant has engaged in conduct that constitutes Cause, the Committee may remove such Participant as a Participant under the Plan or decrease a Participants Tier level immediately upon such determination, and such individual shall thereafter have no further rights to participate in the Plan or receive any Severance Benefits under the Plan (if the Participant has been removed as a Participant in the Plan), or have only the rights associated with the decreased Tier level (if the Participants Tier level has been decreased).
13. Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. In any such event, the term Company, as used in this Plan, shall mean the Company, as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Plan.
14. Miscellaneous.
a. Rights of Participants. Nothing herein contained shall be held or construed to create any liability or obligation upon the Company to retain any Participant in its service. All Participants shall remain subject to discharge or discipline to the same extent as if this Plan had not been put into effect.
b. Governing Law. The Plan shall be governed by the laws of the Commonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction.
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c. Withholding. The Company shall have the right to make such provisions as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments pursuant to this Plan.
d. Severability. In case any provision of this Plan be deemed or held to be unlawful or invalid for any reason, such fact shall not adversely affect the other provisions of this Plan unless such determination shall render impossible or impracticable the functioning of this Plan, and in such case, an appropriate provision or provisions shall be adopted so that this Plan may continue to function properly.
e. Assignment and Alienation. The benefits payable to the Participant under the Plan shall not be subject to alienation, transfer, assignment, garnishment, execution or levy of any kind and any attempt to cause any benefits to be so subjected shall not be recognized.
f. Communications. All announcements, notices and other communications regarding this Plan will be made by the Company in writing.
g. ERISA Plan. The Plan is intended to be a top hat welfare benefit plan within the meaning of U.S. Department of Labor Regulation § 2520.104-24.
15. Entire Agreement. This Plan sets forth the entire understanding of the Company with respect to the subject matter hereof. The Plan may only be amended as expressly set forth above in Section 12.
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Exhibit 31.1
CERTIFICATIONS
I, Thomas J. McInerney, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genworth Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: July 31, 2019
/s/ Thomas J. McInerney |
Thomas J. McInerney President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Kelly L. Groh, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Genworth Financial, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: July 31, 2019
/s/ Kelly L. Groh |
Kelly L. Groh Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
I, Thomas J. McInerney, as President and Chief Executive Officer of Genworth Financial, Inc. (the Company), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
(1) |
the accompanying Quarterly Report on Form 10-Q of the Company for the six months ended June 30, 2019 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 31, 2019
/s/ Thomas J. McInerney |
Thomas J. McInerney President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
I, Kelly L. Groh, as Executive Vice President and Chief Financial Officer of Genworth Financial, Inc. (the Company), certify, pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), that to my knowledge:
(1) |
the accompanying Quarterly Report on Form 10-Q of the Company for the six months ended June 30, 2019 (the Report), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 31, 2019
/s/ Kelly L. Groh |
Kelly L. Groh Executive Vice President and Chief Financial Officer (Principal Financial Officer) |