GENWORTH FINANCIAL INC

The following table sets forth the results of operations relating to Corporate and Other for the periods indicated:

Adjusted operating loss available to Genworth Financial, Inc.’s common stockholders

The adjusted operating loss increased primarily from timing of certain tax related items in the current year and higher expenses related to CareScout growth initiatives.

Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives, as well as higher employee-related expenses in the current year.

The provision for income taxes for the three months ended March 31, 2024 was primarily related to timing of tax adjustments, partially offset by the tax benefit related to the pre-tax loss. The benefit for income taxes for the three months ended March 31, 2023 was largely from the pre-tax loss, partially offset by non-deductible expenses.

Investments and Derivative Instruments

Investments

During the three months ended March 31, 2024, our investment portfolio was impacted, and we believe will continue to be impacted, by the following macroeconomic trends:

Investment results

The following table sets forth information about investment income, excluding net investment gains (losses), for each component of our investment portfolio for the periods indicated:

Yields are based on net investment income as reported under U.S. GAAP and are consistent with how we measure our investment performance for management purposes. Yields are annualized, for interim periods, and are calculated as net investment income as a percentage of average quarterly asset carrying values except for fixed maturity securities, derivatives and derivative counterparty collateral, which exclude unrealized fair value adjustments.

Annualized weighted-average investment yields were unchanged; however, net investment income decreased slightly primarily due to lower average invested assets.

The following table sets forth net investment gains (losses) for the periods indicated:

Investment portfolio

The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:

For a discussion of the change in cash, cash equivalents and invested assets, see the comparison for these line items under “—Consolidated Balance Sheets.” See note 4 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to our investment portfolio.

We hold fixed maturity and equity securities, limited partnerships, derivatives, embedded derivatives and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. As of March 31, 2024, approximately 7% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 6 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements” for additional information related to fair value.

Other invested assets

The following table sets forth the carrying values of our other invested assets as of the dates indicated:

Derivatives decreased largely from an increase in interest rates in the current year. Short-term investments decreased from maturities and sales in the current year.

The activity associated with derivative instruments can generally be measured by the change in notional value over the periods presented. However, for fixed indexed annuity and indexed universal life embedded derivatives, the change between periods is best illustrated by the number of policies. The following tables represent activity associated with derivative instruments as of the dates indicated:

The increase in the notional value of derivatives was primarily attributable to the addition of forward bond purchase commitments and interest rate swaps that support our long-term care and universal life insurance businesses, partially offset by a decrease in financial futures that support our variable annuity products.

The number of policies with embedded derivatives decreased as these products are no longer being offered and continue to runoff.

Consolidated Balance Sheets

Total assets. Total assets decreased $1,625 million from $90,817 million as of December 31, 2023 to $89,192 million as of March 31, 2024.

Total liabilities. Total liabilities decreased $2,169 million from $82,482 million as of December 31, 2023 to $80,313 million as of March 31, 2024.

Total equity. Total equity increased $544 million from $8,335 million as of December 31, 2023 to $8,879 million as of March 31, 2024.

Liquidity and Capital Resources

Liquidity and capital resources represent our overall financial strength and our ability to generate cash flows from our businesses, borrow funds at competitive rates and raise new capital to meet our operating and growth needs.

Overview of cash flows—Genworth and subsidiaries

The following table sets forth our unaudited condensed consolidated cash flows for the three months ended March 31:

Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales of investments. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products and income received from our investments typically exceed policy acquisition costs, benefits and claims paid, redemptions and operating expenses. Our cash flows from operating activities are affected by the timing of premiums, fees and investment income received and benefits, claims and expenses paid. Positive cash flows from operating activities are then invested to support the obligations of our insurance and investment products and required capital supporting these products. In analyzing our cash flows, we focus on the change in the amount of cash available and used in investing activities. Changes in cash from financing activities primarily relate to deposits to, and redemptions and benefit payments on, universal life insurance and investment contracts; the issuance of debt and equity securities; the repayment or repurchase of borrowings; the repurchase of common stock presented as treasury stock; and other capital transactions.

We had net cash outflows related to operating activities in the current year compared to net inflows in the prior year primarily from settlements of derivatives that support our variable annuity products with guaranteed minimum benefits and lower premiums collected in our long-term care insurance business.

Net cash inflows from investing activities were lower in the current year mainly due to lower net sales and maturities of fixed maturity securities, partially offset by lower capital calls on limited partnerships.

Net cash outflows used by financing activities were lower in the current year primarily due to lower net withdrawals from our investment contracts.

Genworth—holding company liquidity

In consideration of our liquidity, it is important to separate the needs of our holding companies from the needs of their respective subsidiaries. Genworth Financial and Genworth Holdings each act as a holding company for their respective subsidiaries and do not have any significant operations of their own. Genworth Financial’s and Genworth Holdings’ principal sources of cash are derived from dividends and other returns of capital from Enact Holdings. Additional sources of cash have included subsidiary payments to them under tax sharing and expense reimbursement arrangements and proceeds from borrowings or securities issuances. The primary uses of funds at Genworth Financial and Genworth Holdings include payments of principal, interest and other expenses on borrowings or other obligations, payment of holding company general operating expenses (including employee benefits and taxes), payments under guarantees (including guarantees of certain subsidiary obligations), payments to subsidiaries (and, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, contributions to subsidiaries, repurchases of debt securities, repurchases of Genworth Financial’s common stock and, in the case of Genworth Holdings, loans, dividends or other distributions to Genworth Financial.

Management’s focus is predominantly on Genworth Holdings’ liquidity given it is the issuer of our outstanding public debt. We manage our U.S. life insurance subsidiaries on a standalone basis and accordingly, do not expect to receive any dividends or other returns of capital from them. Therefore, our liquidity at the holding company level is highly dependent on the performance of Enact Holdings, its capacity to maintain sufficient cash to pay its debt maturities and other obligations when due and its ability to pay timely dividends and other forms of capital returns to Genworth Holdings as anticipated. Genworth Financial has the right to appoint a majority of directors to the board of directors of Enact Holdings; however, actions taken by Enact Holdings and its board of directors are subject to and may be limited by the interests of Enact Holdings, including but not limited to, its use of capital for growth opportunities and regulatory requirements. Future dividends will be subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial and will also be dependent on a variety of economic, market and business conditions, among other considerations. In addition, insurance laws and regulations regulate the payment of dividends and other distributions to Genworth Financial and Genworth Holdings by their insurance subsidiaries.

On May 1, 2024, Enact Holdings announced an increase of its next quarterly dividend from $0.16 to $0.185 per share to be paid in June 2024. In addition to its quarterly cash dividend program, on August 1, 2023, Enact Holdings announced the approval by its board of directors of a share repurchase program under which Enact Holdings may repurchase up to $100 million of its outstanding common stock. On May 1, 2024, Enact Holdings announced a new share repurchase authorization of $250 million. Genworth Holdings has agreed to participate in order to maintain its overall ownership at approximately its current level. The timing and number of future shares repurchased under the share repurchase program will depend on a variety of factors, including Enact Holdings’ stock price and trading volume, and general business and market conditions, among other factors.

As the majority shareholder, Genworth Holdings received $61 million of capital returns from Enact Holdings in the first quarter of 2024. Enact Holdings’ capital allocation strategy includes supporting its existing policyholders, growing its mortgage insurance business, funding attractive new business opportunities and returning capital to its shareholders. Enact Holdings’ total return of capital will be based on this strategy as well as its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

On July 31, 2023, Genworth Financial’s Board of Directors authorized an additional $350 million of share repurchases under its existing share repurchase program that began in May 2022. Pursuant to the program, during the first quarter of 2024, Genworth Financial repurchased 10,240,670 shares of its common stock at an average price of $6.17 per share for a total of $63 million. Genworth Financial also authorized repurchases under its share repurchase program through a Rule 10b5-1 trading plan under which 1,933,444 shares of its common stock were repurchased in April 2024 for $12 million, leaving approximately $266 million remaining authorization under the share repurchase program as of April 30, 2024. Further repurchases under the program will continue to be funded from holding company capital, as well as future cash flow generation, including expected future capital returns from Enact Holdings. Under the program, share repurchases may be made at Genworth’s discretion from time to time in open market transactions, privately negotiated transactions, or by other means, including through

Rule 10b5-1 trading plans. The timing and number of future shares repurchased under the program will depend on a variety of factors, including Genworth Financial’s stock price and trading volume, and general business and market conditions, among other factors. The authorization has no expiration date and may be modified, suspended or terminated at any time.

Our future use of liquidity and capital will prioritize future strategic investments in CareScout and returning capital to Genworth Financial’s shareholders through share repurchases. We expect to continue to provide capital to CareScout to advance our strategic priority to develop innovative aging services and solutions. We may also from time to time seek to repurchase or redeem outstanding debt (with cash on hand, proceeds from the issuance of new debt and/or the proceeds from asset or stock sales) in open market purchases, tender offers, privately negotiated transactions or otherwise.

Genworth Holdings had $253 million and $350 million of unrestricted cash and cash equivalents as of March 31, 2024 and December 31, 2023, respectively. The decrease was principally driven by annual employee benefit payments that are expected to be offset by subsidiary expense arrangements during 2024, repurchases of Genworth Financial’s common stock and debt interest payments, partially offset by capital returns from Enact Holdings. We believe Genworth Holdings’ unrestricted cash and cash equivalents provide sufficient liquidity to meet its financial obligations over the next twelve months. However, we expect the amount of intercompany cash tax payments retained by Genworth Holdings from its subsidiaries to be lower starting in 2024 as compared to the amounts received during 2023. We also expect Genworth Holdings’ liquidity to continue to be impacted by the amounts and timing of Genworth Financial’s share repurchases as well as future dividends and other forms of capital returns from Enact Holdings.

We actively monitor our liquidity position (most notably at Genworth Holdings), liquidity generation options and the credit markets given changing market conditions. Genworth Holdings’ cash management target is to maintain a cash buffer of two times expected annual external debt interest payments. Genworth Holdings may move below or above this targeted cash buffer during any given quarter due to the timing of cash outflows and inflows or from future actions. Management of Genworth Financial continues to evaluate Genworth Holdings’ target level of liquidity as circumstances warrant.

Capital resources and financing activities

Our current capital resource plans do not include any additional debt offerings by Genworth Holdings or minority sales of Enact Holdings. The availability of additional capital resources will depend on a variety of factors such as market conditions, regulatory considerations, the general availability of credit, credit ratings and the performance of and outlook for Enact Holdings and the payment of dividends and other returns of capital therefrom.

During the first quarter of 2024, Genworth Holdings repurchased $6 million principal amount of its floating rate junior subordinated notes due in 2066 for a pre-tax gain of $1 million and paid accrued interest thereon. As of March 31, 2024, Genworth Holdings had $850 million principal of outstanding debt, with no maturities due until June 2034.

As of March 31, 2024, Enact Holdings had a credit facility that remained undrawn and $750 million principal amount of senior notes due in August 2025. Enact Holdings continually evaluates opportunities based upon market conditions to further increase its financial flexibility including through raising additional capital, restructuring or refinancing some or all of its outstanding debt or pursuing other options such as reinsurance or credit risk transfer transactions. There can be no guarantee that any such opportunities will be available on favorable terms or at all. Other than its senior notes due in August 2025, Enact Holdings has no material outstanding debt obligations that are expected to affect its liquidity over the next five years. We believe that the operating cash flows generated by Enact Holdings’ mortgage insurance subsidiaries will provide the funds necessary to satisfy its claim payments, operating expenses and taxes.

Regulated insurance subsidiaries

The liquidity requirements of our regulated insurance subsidiaries principally relate to the liabilities associated with their various insurance and investment products, operating costs and expenses, the payment of dividends to us, contributions to their subsidiaries, payments of principal and interest on their outstanding debt obligations and income taxes. Liabilities arising from insurance and investment products include the payment of benefits and claims, as well as cash payments in connection with policy surrenders and withdrawals, policy loans and obligations to redeem funding agreements. Our insurance subsidiaries’ principal cash inflows from operating activities are derived from premiums, annuity deposits and insurance and investment product fees and other income, including commissions, cost of insurance, mortality, expense and surrender charges, contract underwriting fees, investment management fees, investment income and dividends and distributions from their subsidiaries. We manage our U.S. life insurance subsidiaries on a standalone basis. Accordingly, the U.S. life insurance subsidiaries will continue to rely on their statutory capital, significant reserves, prudent management of the in-force blocks and long-term care insurance in-force rate actions to satisfy policyholder obligations.

Given the challenging macroeconomic environment in 2023 and through the first quarter of 2024, employee costs were higher driven in part by wage inflation, the competitive labor market and low labor participation. Additionally, in our long-term care insurance business, we have observed an increase in the cost of care due in part to elevated inflation. These inflationary pressures have not had a significant impact on our liquidity to date; however, if these conditions persist for a long period of time, they could have a material adverse impact on our liquidity, results of operations and financial condition. We will continue to monitor macroeconomic trends, including inflation, to help mitigate any potential adverse impacts to our liquidity. We also expect overall claim costs to continue to increase over time in our long-term care insurance business as our blocks age, with peak claim years over a decade away.

Our insurance subsidiaries maintain investment strategies intended to provide adequate funds to pay benefits without forced sales of investments. Products having liabilities with longer durations, such as certain life insurance and long-term care insurance policies, are typically matched with investments having similar duration such as long-term fixed maturity securities and commercial mortgage loans. Shorter-term liabilities are typically matched with fixed maturity securities that have short-and medium-term fixed maturities. In addition, our insurance subsidiaries hold highly liquid, high quality short-term investment securities and other liquid investment grade fixed maturity securities to fund anticipated operating expenses, surrenders and withdrawals. As of March 31, 2024, our total cash, cash equivalents and invested assets were $61.0 billion. Our investments in privately placed fixed maturity securities, commercial mortgage loans, policy loans, bank loans, limited partnership investments and select mortgage-backed and asset-backed securities are relatively illiquid. These asset classes represented approximately 44% of the carrying value of our total cash, cash equivalents and invested assets as of March 31, 2024.

Off-balance sheet commitments, guarantees and contractual obligations

As of March 31, 2024, we were committed to fund $1,449 million in limited partnership investments, $119 million of bank loan investments, $28 million in commercial mortgage loan investments and $21 million in private placement investments.

As of March 31, 2024, there have been no material additions or changes to guarantees provided by Genworth Financial and Genworth Holdings or to our contractual obligations as compared to the amounts disclosed within our 2023 Annual Report on Form 10-K filed on February 29, 2024.

Supplemental Condensed Consolidating Financial Information

Genworth Financial provides a full and unconditional guarantee to the trustee and holders of Genworth Holdings’ outstanding senior and subordinated notes (registered securities under the Securities Act of 1933), on an unsecured unsubordinated and subordinated basis, respectively, of the full and punctual payment of the principal of, premium, if any and interest on, and all other amounts payable under, the outstanding senior and subordinated notes and their respective indentures. Genworth Holdings is a direct, 100% owned subsidiary of Genworth Financial.

Excluding investments in subsidiaries, the assets, liabilities and results of operations of Genworth Financial and Genworth Holdings, on a combined basis, are not material to the consolidated financial position or the consolidated results of operations of Genworth. In addition, none of Genworth Financial’s direct or indirect subsidiaries, other than Genworth Holdings, are issuers or guarantors of any guaranteed securities. Therefore, in accordance with Rule 13-01 of Regulation S-X, we are permitted, and we elected, to exclude the summarized financial information for both the issuer and guarantor of the registered securities.