GENWORTH FINANCIAL INC

Previous wording

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Examples of forward-looking statements include statements we make relating to potential dividends or share repurchases; future return of capital by Enact Holdings, Inc. (“Enact Holdings”), including share repurchases, and quarterly and special dividends; refinancing Enact Holdings’ debt maturities through debt offerings or other capital transactions; the cumulative economic benefit of approved and future rate actions contemplated in our long-term care insurance multi-year in-force rate action plan; future financial performance, including the expectation that adverse quarterly variances between actual and expected experience could persist resulting in future remeasurement losses in our long-term care insurance business; future financial condition of our businesses; liquidity and new lines of business or new products and services, such as those we are pursuing with our CareScout business (“CareScout”); as well as statements we make regarding the potential occurrence of a recession.

Current wording

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Examples of forward-looking statements include statements we make relating to potential dividends or share repurchases; future return of capital by Enact Holdings, Inc. (“Enact Holdings”), including share repurchases, and quarterly and special dividends; the cumulative economic benefit of approved and future rate actions contemplated in our long-term care insurance multi-year in-force rate action plan; future financial performance, including the expectation that adverse quarterly variances between actual and expected experience could persist resulting in future remeasurement losses in our long-term care insurance business; future financial condition of our businesses; liquidity and new lines of business or new products and services, such as those we are pursuing with our CareScout business (“CareScout”); as well as statements we make regarding the potential occurrence of a recession.

Previous wording

We provide additional information regarding these risks and uncertainties in our Annual Report on Form 10-K. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Accordingly, for the foregoing reasons, we caution you against relying on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required under applicable securities laws.

Current wording

We provide additional information regarding these risks and uncertainties in our Annual Report on Form 10-K. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Accordingly, for the foregoing reasons, we caution the reader against relying on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required under applicable securities laws.

Previous wording

Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s principal U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products. Genworth Financial also has a start-up business whereby it offers fee-based services, advice, consulting and other products and services through CareScout.

Current wording

Genworth Financial, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. Genworth Financial is the parent company of Enact Holdings, a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s principal U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products. Genworth Financial also has a start-up business whereby it offers fee-based services, advice, consulting and other aging care products and services through CareScout.

Previous wording

We report our business results through three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional and non-traditional life insurance (term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), and fixed and variable annuities, none of which are actively marketed or sold.

Current wording

We report our business results through three segments: Enact; Long-Term Care Insurance; and Life and Annuities. The products in the Life and Annuities segment include traditional and non-traditional life insurance (term, universal and term universal life insurance as well as corporate-owned life insurance and funding agreements), and fixed and variable annuities, none of which are actively marketed or sold.

Previous wording

In addition to our three operating segments, we also have Corporate and Other, which includes debt financing expenses that are incurred at the Genworth Holdings, Inc. (“Genworth Holdings”) level, unallocated corporate income and expenses, eliminations of inter-segment transactions and the results of other businesses that are reported outside of our operating segments, such as certain international businesses and CareScout start-up results related to our senior care growth initiatives.

Current wording

In addition to our three reportable segments, we also have Corporate and Other, which includes debt financing expenses that are incurred at the Genworth Holdings, Inc. (“Genworth Holdings”) level, unallocated corporate income and expenses, and eliminations of inter-segment transactions. Corporate and Other also includes the results of other businesses that are not individually reportable, such as certain international businesses and CareScout start-up results.

Previous wording

Enact continues to be a significant driver of value for Genworth, providing $61 million of capital returns to Genworth Holdings in the first quarter of 2024. We believe capital returns from Enact will continue to benefit our shareholders by funding our strategic initiatives, including new CareScout products and services, as well as share repurchases and opportunistic debt reduction. On May 1, 2024, Enact Holdings announced an increase of its next quarterly dividend to $0.185 per share to be paid in June 2024 and a new share repurchase authorization of $250 million. Since the initial authorization of Genworth Financial’s share repurchase program in May 2022 and through April 30, 2024, we have repurchased $434 million worth of shares of Genworth Financial’s common stock. For additional information on our share repurchase program, see “—Liquidity and Capital Resources.” We strive to maintain a disciplined approach in our capital allocation strategy, balancing investments in CareScout growth initiatives with returning value to shareholders.

Current wording

We continue to create shareholder value through Enact’s growing market value and capital returns. Enact Holdings provided $63 million of capital returns to Genworth Holdings in the second quarter of 2024 and on May 1, 2024, announced a new share repurchase authorization of $250 million. Based on Genworth Financial’s ownership of approximately 81% of Enact Holdings, we expect to receive between $245 million to $285 million in capital returns from Enact Holdings for the full year 2024. The final amount and form of capital returns will ultimately depend on business performance, market conditions and regulatory approvals. We believe capital returns from Enact will continue to benefit our shareholders by funding our strategic initiatives, including new CareScout products and services, as well as share repurchases and opportunistic debt reduction. Since the initial authorization of Genworth Financial’s share repurchase program in May 2022 and through July 2024, we have repurchased $470 million worth of shares of Genworth Financial’s common stock. For additional information on our share repurchase program, see “—Liquidity and Capital Resources.”

Previous wording

We continue to further strengthen the financial and operational capabilities of our legacy long-term care insurance business primarily through our multi-year in-force rate action plan, achieving an estimated cumulative economic benefit of approximately $28.3 billion, on a net present value basis, of approved rate actions since 2012 through the first quarter of 2024. 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. For additional information regarding our in-force rate actions, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment” and “—Long-Term Care Insurance segment.”

Current wording

We continue to make progress on our strategic priority to maintain self-sustaining, customer-centric legacy U.S. life insurance companies, including our long-term care insurance, life insurance and annuity businesses. Our long-term care insurance multi-year in-force rate action plan continues to be our most effective tool in supporting this strategic priority. We achieved an estimated cumulative economic benefit of approximately $29.2 billion, on a net present value basis, of approved rate actions since 2012 through the second quarter of 2024. As we manage our legacy life insurance subsidiaries on a standalone basis, these entities 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. For additional information regarding our in-force rate actions, see “—Results of Operations and Selected Financial and Operating Performance Measures by Segment” and “—Long-Term Care Insurance segment.”

Previous wording

We continue to make progress on our strategic priority to develop innovative aging services and solutions through our CareScout services business with the build-out of our network of long-term care providers (“CareScout Quality Network”), which is currently available in over 30 states. We plan to continue to add providers to the network that meet our quality credentialing standards and agree to negotiated preferred rates. While the initial focus has been with our long-term care insurance policyholders, we believe that over time and with national coverage of the CareScout Quality Network, we can expand the scope of our CareScout services business to additional consumer markets. In addition to the benefits to consumers, the discounts available through the network are expected to potentially further mitigate risk in our legacy long-term care insurance block by reducing claims costs. We aim to prudently scale and diversify our CareScout services business in a way that will leverage our intellectual property, drive claim savings in our legacy long-term care insurance block and drive long-term growth. We are also working to build the foundation necessary to re-enter the long-term care insurance market through our CareScout insurance business.

Current wording

We plan to drive future growth through CareScout with innovative, consumer-focused aging care services and funding solutions. During the second quarter of 2024, we continued to expand our network of long-term care providers (“CareScout Quality Network”) to over 40 states and more than 300 high-quality, person-centered home care providers. Substantially all of these providers have agreed to hourly rates below the median cost of care in their respective zip codes (as determined by Genworth’s Cost of Care Survey conducted in 2023), while meeting our quality credentialing standards. We have received positive feedback from both providers and policyholders, and we plan to continue to add these types of providers to the network. While the initial focus has been with our long-term care insurance policyholders, we believe that over time and with national coverage of the CareScout Quality Network, we can expand the scope of our CareScout services business to additional consumer markets. In addition to the benefits to consumers, the discounts available through the network are expected to potentially further mitigate risk in our legacy long-term care insurance block by reducing claims costs. We aim to prudently scale and diversify our CareScout services business and expect to contribute approximately $35 million of capital to our CareScout services business for the full year 2024.

Previous wording

The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers. The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year. For a discussion of the effective tax rates used to record the provision for income taxes for our three operating segments and Corporate and Other, see note 14 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”

Current wording

The effective tax rates disclosed herein are calculated using whole numbers. As a result, the percentages shown may differ from an effective tax rate calculated using rounded numbers. The annually-determined tax rates and adjustments to each segment’s provision for income taxes are estimates which are subject to review and could change from year to year. For a discussion of the effective tax rates used to record the provision for income taxes for our three reportable segments and Corporate and Other, see note 15 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”

Previous wording

(losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. We exclude net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual non-operating items from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating performance.

Current wording

Management uses non-GAAP financial measures entitled “adjusted operating income (loss)” and “adjusted operating income (loss) per share” to evaluate performance and allocate resources. Adjusted operating income (loss) per share is derived from adjusted operating income (loss). We define adjusted operating income (loss) as income (loss) from continuing operations excluding the after-tax effects of income (loss) attributable to noncontrolling interests, net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual non-operating items. A component of our net investment gains (losses) is the result of estimated future credit losses, the size and timing of which can vary significantly depending on market credit cycles. In addition, the size and timing of other investment gains (losses) can be subject to our discretion and are influenced by market opportunities, as well as asset-liability matching considerations. We exclude net investment gains (losses), changes in fair value of market risk benefits and associated hedges, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, restructuring costs and infrequent or unusual non-operating items from adjusted operating income (loss) because, in our opinion, they are not indicative of overall operating performance.

Previous wording

Management regularly monitors and reports on in-force rate actions, including state filing approvals; impacted in-force premiums; weighted-average percentage rate increases approved; and gross incremental premiums approved in our Long-Term Care Insurance segment. We also estimate the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year in-force rate action plan on a net present value basis, discounted at our investment portfolio yield. This is defined as the net present value of historical and future expected premium increases and benefit reductions based on current assumptions as a result of rate increases approved on individual and group long-term care insurance policies. It also includes the net present value of reserve reductions related to legal settlements less cash payments made to policyholders who elect certain reduced benefit options in connection with the legal settlements, referred to as settlement payments. We monitor these selected operating performance measures for in-force rate actions to track our progress on ensuring the continued self-sustainability of our legacy life insurance subsidiaries over time. We consider these in-force rate action metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.

Current wording

Management regularly monitors and reports on in-force rate actions, including state filing approvals; impacted in-force premiums; weighted-average percentage rate increases approved; and gross incremental premiums approved in our Long-Term Care Insurance segment. We also estimate the cumulative economic benefit of approved rate actions in our long-term care insurance multi-year in-force rate action plan on a net present value basis, discounted at our investment portfolio yield. This is defined as the net present value of historical and future expected premium increases and benefit reductions based on current assumptions as a result of rate increases approved on individual and group long-term care insurance policies. It also includes the net present value of reserve reductions related to legal settlements less cash payments made to policyholders who elect certain reduced benefit options in connection with the legal settlements, referred to as settlement payments. We monitor these selected operating performance measures for in-force rate actions to track our progress on maintaining the self-sustainability of our legacy life insurance subsidiaries. We consider these in-force rate action metrics to be measures of financial performance and help to enhance the understanding of the operating performance of our Long-Term Care Insurance segment.

Previous wording

During the first quarter of 2024, the U.S. economy faced uncertainty due to continued inflationary pressure, the geopolitical environment and lingering concerns around a possible recession. Mortgage origination activity remained slow during the first quarter of 2024 in response to elevated mortgage rates and sustained low housing supply. Over the past few years, housing affordability has deteriorated due to high interest rates and elevated home prices, only marginally offset by rising median family income, according to the National Association of Realtors Housing Affordability Index. National home prices rose modestly throughout 2023 but remained relatively flat during the first quarter of 2024, according to the Federal Housing Finance Agency (“FHFA”) Monthly Purchase-Only House Price Index.

Current wording

While the U.S. economy showed positive signs during the second quarter of 2024, it faces continued but lessening uncertainty due to inflationary pressure, the geopolitical environment and lingering macroeconomic concerns. Mortgage origination activity remained relatively slow during the second quarter of 2024 in response to elevated mortgage rates and sustained low housing supply. Over the past few years, housing affordability has deteriorated as elevated mortgage rates and home price appreciation outpaced median family income, according to the National Association of Realtors Housing Affordability Index. National home prices continued to rise into 2024, according to the Federal Housing Finance Agency (“FHFA”) Monthly Purchase-Only House Price Index.

Previous wording

The unemployment rate was 3.8% in March 2024, compared to 3.7% in December 2023. As of March 31, 2024, the number of unemployed Americans was approximately 6.4 million, and the number of long term unemployed over 26 weeks was approximately 1.2 million.

Current wording

The unemployment rate was 4.1% in June 2024, compared to 3.8% in March 2024. As of June 30, 2024, the number of unemployed Americans was approximately 6.8 million, and the number of long term unemployed over 26 weeks was approximately 1.5 million.

Previous wording

In response to COVID-19, borrowers were allowed extended forbearance options to temporarily suspend mortgage payments up to 18 months subject to certain limits. Extended forbearance timelines permitted through the Coronavirus Aid Relief and Economic Security Act and government-sponsored enterprises (“GSEs”)COVID-19 servicing-related policies were retired in 2023. Borrowers that meet general hardship and program guidelines continue to have access to standard forbearance policies as a loss mitigation option. In addition, in March 2023, the GSEs announced new loss mitigation programs that allow six-month payment deferrals for borrowers facing financial hardship.

Current wording

Borrowers’ ability to utilize extended forbearance timelines permitted through the Coronavirus Aid Relief and Economic Security Act and the government-sponsored enterprises’ (“GSEs”) coronavirus pandemic (“COVID-19”) servicing-related policies ended in 2023. Borrowers that meet general hardship and program guidelines continue to have access to standard forbearance policies as a loss mitigation option. In addition, in March 2023, the GSEs announced new loss mitigation programs that allow six-month payment deferrals for borrowers facing financial hardship.

Previous wording

Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of March 31, 2024, approximately 1.1% or 10,479 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 26% were reported as delinquent.

Current wording

Although it is difficult to predict the future level of reported forbearance and how many of the loans in a forbearance plan that remain current on their monthly mortgage payment will go delinquent, servicer reported forbearances have generally declined. As of June 30, 2024, approximately 1% or 9,931 of Enact’s active primary policies were reported in a forbearance plan, of which approximately 25% were reported as delinquent. Approximately 7% of Enact’s primary new delinquencies in the second quarter of 2024 were subject to a forbearance plan compared to 14% in the second quarter of 2023.

Previous wording

New insurance written of $10.5 billion in the first quarter of 2024 decreased 20% compared to the first quarter of 2023 mostly due to a smaller estimated mortgage insurance market and lower estimated market share. Enact’s primary persistency rate was 85% during both the first quarters of 2024 and 2023. Elevated persistency, driven by a large percentage of Enact’s in-force policies with mortgage rates below current rates, continued to offset the decline in new insurance written, leading to an increase in primary insurance in-force of $0.7 billion as compared to December 31, 2023.

Current wording

New insurance written of $13.6 billion in the second quarter of 2024 decreased 10% compared to the second quarter of 2023. Changes in new insurance written are primarily impacted by the size of the mortgage insurance market and Enact’s market share. Enact’s primary persistency rate was 83% during the second quarter of 2024 compared to 84% in the second quarter of 2023. Elevated persistency, driven by a large percentage of Enact’s in-force policies with mortgage rates below current rates, continued to offset the decline in new insurance written, leading to an increase in primary insurance in-force of $2.4 billion as compared to March 31, 2024.

Previous wording

Net earned premiums increased in the first quarter of 2024 compared to the first quarter of 2023 primarily driven by insurance in-force growth, partially offset by higher ceded premiums.

Current wording

Net earned premiums increased in the second quarter of 2024 compared to the second quarter of 2023 primarily driven by insurance in-force growth, partially offset by higher ceded premiums.

Previous wording

Enact’s loss ratio for the three months ended March 31, 2024 and 2023 was 8% and (5)%, respectively. Enact released reserves of $54 million during the first quarter of 2024 primarily related to delinquencies from early 2023 and prior as recent uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. During the first quarter of 2023, Enact recorded a reserve release of $70 million largely related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021.

Current wording

Enact’s loss ratio for the three months ended June 30, 2024 and 2023 was (7)% and (2)%, respectively. Enact released reserves of $77 million during the second quarter of 2024 primarily related to favorable cure performance on early 2023 and prior delinquencies. As part of the reserve release, Enact also decreased its claim rate assumptions largely as a result of sustained favorable cure performance and lessening uncertainty in the economic environment, impacting both current and prior year delinquencies. Enact recorded a reserve release of $63 million during the second quarter of 2023 primarily related to favorable cure performance on delinquencies from 2021 and earlier, including those related to COVID-19.

Previous wording

The severity of loss on loans that go to claim may be negatively impacted by the extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of the recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

Current wording

The severity of loss on loans that go to claim may be negatively impacted by extended forbearance and foreclosure timelines, the associated elevated expenses and the higher loan amount of recent new delinquencies. These negative influences on loss severity could be mitigated in part by embedded home price appreciation. For loans insured on or after October 1, 2014, Enact’s mortgage insurance policies limit the number of months of unpaid interest and associated expenses that are included in the mortgage insurance claim amount to a maximum of 36 months.

Previous wording

New primary delinquencies in the first quarter of 2024 increased compared to the first quarter of 2023 primarily due to the aging of large, newer books of business. New primary delinquencies of 11,395 contributed $74 million of loss expense in the first quarter of 2024, while Enact incurred $58 million of losses from 9,599 new primary delinquencies in the first quarter of 2023. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions. Approximately 8% of Enact’s primary new delinquencies in the first quarter of 2024 were subject to a forbearance plan compared to 17% in the first quarter of 2023. Due to the declining number of new delinquencies in forbearance, Enact no longer differentiates the expected claim rates applied to new delinquencies in forbearance versus those not in forbearance.

Current wording

New primary delinquencies in the second quarter of 2024 increased compared to the second quarter of 2023 primarily due to the normal loss development pattern of Enact’s portfolio. New primary delinquencies of 10,461 contributed $60 million of loss expense in the second quarter of 2024, while Enact incurred $58 million of losses from 9,205 new primary delinquencies in the second quarter of 2023. In determining the loss expense estimate, considerations were given to recent cure and claim experience and the prevailing and prospective economic conditions.

Previous wording

As of March 31, 2024, EMICO’s risk-to-capital ratio under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), EMICO’s domestic insurance regulator, was approximately 11.2:1, compared with a risk-to-capital ratio of 11.6:1 as of December 31, 2023. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Current wording

As of June 30, 2024, EMICO’s risk-to-capital ratio under North Carolina law and enforced by the North Carolina Department of Insurance (“NCDOI”), EMICO’s domestic insurance regulator, was approximately 10.8:1, compared with a risk-to-capital ratio of 11.2:1 and 11.6:1 as of March 31, 2024 and December 31, 2023, respectively. EMICO’s risk-to-capital ratio remains below the NCDOI’s maximum risk-to-capital ratio of 25:1. North Carolina’s calculation of risk-to-capital excludes the risk in-force for delinquent loans given the established loss reserves against all delinquencies. EMICO’s ongoing risk-to-capital ratio will depend principally on the magnitude of future losses incurred by EMICO, the effectiveness of ongoing loss mitigation activities, new business volume and profitability, the impact of quota share reinsurance, the amount of policy lapses and the amount of additional capital that is generated or distributed by the business.

Previous wording

Under PMIERs, Enact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. As of March 31, 2024, Enact had estimated available assets of $4,853 million against $2,970 million net required assets under PMIERs compared to available assets of $5,006 million against $3,119 million net required assets as of December 31, 2023. The sufficiency ratio as of March 31, 2024 was 163% or $1,883 million above the PMIERs requirements, compared to 161% or $1,887 million above the PMIERs requirements as of December 31, 2023. Enact’s PMIERs required assets as of March 31, 2024 and December 31, 2023 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $48 million and $73 million, respectively, of benefit to Enact’s March 31, 2024 and December 31, 2023 PMIERs required assets. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.

Current wording

Under PMIERs, Enact is subject to operational and financial requirements that private mortgage insurers must meet in order to remain eligible to insure loans that are purchased by the GSEs. As of June 30, 2024, Enact had estimated available assets of $5,024 million against $2,967 million net required assets under PMIERs compared to available assets of $4,853 million against $2,970 million net required assets as of March 31, 2024. The sufficiency ratio as of June 30, 2024 was 169% or $2,057 million above the PMIERs requirements, compared to 163% or $1,883 million above the PMIERs requirements as of March 31, 2024. Enact’s PMIERs required assets as of June 30, 2024 and March 31, 2024 benefited from the application of a 0.30 multiplier applied to the risk-based required asset amount factor for certain non-performing loans as defined under PMIERs. The application of the 0.30 multiplier to all eligible delinquencies provided $31 million and $48 million, respectively, of benefit to Enact’s June 30, 2024 and March 31, 2024 PMIERs required assets. These amounts are gross of any incremental reinsurance benefit from the elimination of the 0.30 multiplier.

Previous wording

On January 3, 2024, Enact entered into a quota share reinsurance agreement under which it will cede approximately 21% of a portion of its new insurance written in the 2024 book year. On January 30, 2024, Enact executed an excess of loss reinsurance transaction which provides up to $255 million of reinsurance coverage on a portion of current and expected new insurance written for the 2024 book year, effective January 1, 2024. Enact’s third-party reinsurance transactions provided an aggregate of approximately $1,722 million and $1,714 million of PMIERs capital credit as of March 31, 2024 and December 31, 2023, respectively. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.

Current wording

On June 25, 2024, Enact executed an excess of loss reinsurance transaction with a panel of reinsurers, which provides approximately $90 million of reinsurance coverage on a portion of existing mortgage insurance written from July 1, 2023 through December 31, 2023, effective June 1, 2024. Enact’s third-party reinsurance transactions provided an aggregate of approximately $1,756 million and $1,722 million of PMIERs capital credit as of June 30, 2024 and March 31, 2024, respectively. Enact may execute future credit risk transfer transactions to maintain a prudent level of financial flexibility in excess of the PMIERs capital requirements in response to potential changes in performance and PMIERs requirements over time.

Previous wording

In March 2024, EMICO completed a distribution to Enact Holdings that supports its ability to pay a quarterly dividend. 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. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition to Enact’s quarterly dividend program, Enact Holdings announced approval by its board of directors on August 1, 2023 of a share repurchase program which allows for the repurchase of up to an additional $100 million of its common stock, and on May 1, 2024, Enact Holdings announced a new share repurchase authorization of $250 million. Genworth Holdings has agreed to participate in share repurchases in order to maintain its overall ownership at approximately its current level. As the majority shareholder, Genworth Holdings received $61 million of capital returns from Enact Holdings during the first quarter of 2024 comprised of $21 million of quarterly dividends and $40 million of share repurchases.

Current wording

In March 2024, EMICO completed a distribution to Enact Holdings that supports its ability to pay a quarterly dividend. Future dividend payments are subject to quarterly review and approval by Enact Holdings’ board of directors and Genworth Financial. In addition to Enact’s quarterly dividend program, Enact Holdings announced approval by its board of directors on August 1, 2023 of a share repurchase program which allowed for the repurchase of up to an additional $100 million of its common stock. On May 1, 2024, Enact Holdings announced a new share repurchase authorization of $250 million. Genworth Holdings has agreed to participate in share repurchases in order to maintain its overall ownership at approximately its current level. As the majority shareholder, Genworth Holdings received $63 million of capital returns from Enact Holdings during the second quarter of 2024 comprised of $24 million of quarterly dividends and $39 million of share repurchases.

Previous wording

Returning capital to shareholders, balanced with growth and risk management priorities, remains a priority for Enact Holdings as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ capital prioritization framework, including supporting its existing policyholders, growing its mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

Current wording

Returning capital to shareholders, balanced with growth and risk management priorities, remains a priority for Enact Holdings as it looks to enhance shareholder value through time. Future return of capital will be shaped by Enact Holdings’ capital prioritization framework, which sets the following priorities: supporting its existing policyholders, growing its mortgage insurance business, funding attractive new business opportunities and returning capital to shareholders. Enact Holdings’ total return of capital will also be based on its view of the prevailing and prospective macroeconomic conditions, regulatory landscape and business performance.

Previous wording

Benefits and other changes in policy reserves increased largely from a lower reserve release and higher new delinquencies in the current year. Enact released reserves of $54 million during the first quarter of 2024 primarily related to delinquencies from early 2023 and prior as recent uncertainty in the economic environment has not negatively impacted cure performance to the extent initially expected. During the first quarter of 2023, Enact recorded a reserve release of $70 million largely related to favorable cure performance on COVID-19 delinquencies from 2020 and 2021.

Current wording

Benefits and other changes in policy reserves decreased largely from a higher reserve release, partially offset by higher new delinquencies in the current year. Enact released reserves of $77 million during the second quarter of 2024 primarily related to favorable cure performance on early 2023 and prior delinquencies. As part of the reserve release, Enact decreased its claim rate assumptions largely as a result of sustained favorable cure performance and lessening uncertainty in the economic environment, impacting both current and prior year delinquencies. Enact recorded a reserve release of $63 million during the second quarter of 2023 primarily related to favorable cure performance on delinquencies from 2021 and earlier, including those related to COVID-19.

Previous wording

Provision for income taxes. The effective tax rate was 21.8% and 21.6% for the three months ended March 31, 2024 and 2023, respectively, generally consistent with the U.S. corporate federal income tax rate.

Current wording

Provision for income taxes. The effective tax rate was 21.8% and 21.5% for the three months ended June 30, 2024 and 2023, respectively, generally consistent with the U.S. corporate federal income tax rate.

Previous wording

Adjusted operating income decreased primarily attributable to a lower reserve release and higher new delinquencies, partially offset by higher net investment income and premiums in the current year.

Current wording

Adjusted operating income increased primarily attributable to higher net investment income and premiums, partially offset by higher new delinquencies in the current year.

Previous wording

The following table sets forth selected operating performance measures regarding Enact as of and for the dates indicated:

Current wording

The following tables set forth selected operating performance measures regarding Enact as of and for the dates indicated:

Previous wording

Primary insurance in-force increased mainly from new insurance written. In addition, primary persistency remained elevated largely as a result of suppressed refinancing activity in the current year due to a large percentage of in-force policies with mortgage rates below current rates. The primary persistency rate was 85% for both the three months ended March 31, 2024 and 2023. Total risk in-force increased largely from higher primary insurance in-force.

Current wording

Primary insurance in-force increased mainly from new insurance written. In addition, primary persistency remained elevated largely as a result of suppressed refinancing activity in the current year due to a large percentage of in-force policies with mortgage rates below current rates. The primary persistency rate was 84% and 85% for the six months ended June 30, 2024 and 2023, respectively. Total risk in-force increased primarily as a result of higher primary insurance in-force.

Previous wording

Delinquency rates decreased compared to December 31, 2023 primarily from a decrease in total delinquencies mostly driven by cures and paid claims outpacing new delinquencies.

Current wording

The delinquency rate decreased compared to December 31, 2023 primarily from a decrease in total delinquencies mostly driven by cures and paid claims outpacing new delinquencies, but increased compared to June 30, 2023 largely due to new delinquencies exceeding cures and paid claims.

Previous wording

Reserves as a percentage of risk in-force as of March 31, 2024 remained relatively consistent with December 31, 2023 as long-term delinquencies with higher reserves have continued to cure. The number of loans that are delinquent for 12 months or more has decreased since December 31, 2023 and is more in line with pre-COVID-19 levels. Due to continued forbearance options, foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.

Current wording

Reserves as a percentage of risk in-force as of June 30, 2024 remained consistent with December 31, 2023 as long-term delinquencies with higher reserves have continued to cure. The number of loans that are delinquent for 12 months or more has decreased since December 31, 2023 and is more in line with pre-COVID-19 levels. Due to continued forbearance options, foreclosure moratoriums and the uncertainty around the lack of progression through the foreclosure process, there is still uncertainty around the likelihood and timing of delinquencies going to claim.

Previous wording

Loss reserves in policy years 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. The concentration of loss reserves has shifted to newer book years in line with changes in risk in-force. As of March 31, 2024, Enact’s 2017 and newer policy years represented approximately 95% of its primary risk in-force and 78% of its total direct primary case reserves.

Current wording

Loss reserves in policy years 2008 and prior are outsized compared to their representation of risk in-force. The size of these policy years at origination combined with the significant decline in home prices led to significant losses in policy years prior to 2009. Although uncertainty remains with respect to the ultimate losses Enact will experience on these policy years, they have become a smaller percentage of its total mortgage insurance portfolio. The concentration of loss reserves has shifted to newer book years in line with changes in risk in-force. As of June 30, 2024, Enact’s 2017 and newer policy years represented approximately 96% of its primary risk in-force and 79% of its total direct primary case reserves.

Previous wording

The long-term profitability of our long-term care insurance business depends upon how our actual experience compares with our valuation assumptions, including but not limited to in-force rate actions, morbidity, mortality and persistency. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual results, including but not limited to consistent policyholder behavior over time in addition to a uniform rate of coinsurance and premium taxes. Actual policyholder behavior may differ significantly from these assumptions. Results of our long-term care insurance business are also influenced by our ability to improve investment yields and manage expenses and reinsurance, among other factors. Changes in laws or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.

Current wording

The results of our long-term care insurance business depend upon how our actual experience compares with our valuation assumptions, including but not limited to in-force rate actions, morbidity, mortality and persistency. Estimates for in-force rate actions reflect certain simplifying assumptions that may vary materially from actual results, including but not limited to consistent policyholder behavior over time in addition to a uniform rate of coinsurance and premium taxes. Actual policyholder behavior may differ significantly from these assumptions. Results of our long-term care insurance business are also influenced by our ability to improve investment yields and manage expenses and reinsurance, among other factors. Changes in laws or government programs, including long-term care insurance rate action legislation, regulation and/or practices, could also impact our long-term care insurance business either positively or negatively.

Previous wording

Additionally, in our long-term care insurance business, we have observed an increase in the cost of care in part due to elevated inflation. Increases in cost of care have resulted in higher claim payments in our long-term care insurance business, which could have a material adverse impact on our liquidity, results of operations and financial condition if it persists. We will continue to monitor our experience and make changes to our assumptions and methodologies, as appropriate, for our long-term care insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions could have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition.

Current wording

Additionally, we have observed an increase in the cost of care in our long-term care insurance business, due in part to elevated inflation. Increases in cost of care have resulted in higher claim payments in our long-term care insurance business, which could have a material adverse impact on our liquidity, results of operations and financial condition if it persists. We will continue to monitor our experience and make changes to our assumptions and methodologies, as appropriate, for our long-term care insurance products. Even small changes in assumptions or small deviations of actual experience from assumptions could have, and in the past have had, material impacts on our reserve levels, results of operations and financial condition.

Previous wording

Net investment income decreased largely from lower income from limited partnerships in the current year.

Current wording

Net investment income increased largely from higher income from limited partnerships in the current year.

Previous wording

Benefits and other changes in policy reserves decreased primarily from policy terminations, partially offset by aging of the in-force block, including higher interest accretion in the current year.

Current wording

Benefits and other changes in policy reserves decreased primarily from policy terminations, partially offset by aging of the in-force block, including higher interest accretion, as well as higher loss adjustment expenses in the current year.

Previous wording

Provision for income taxes. The effective tax rate was 21.0% and 37.1% for the three months ended March 31, 2024 and 2023, respectively. The decrease in the effective tax rate was primarily attributable to differing levels of ordinary income in relation to tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income.

Current wording

Provision for income taxes. The decrease in the tax provision was primarily attributable to the change from pre-tax income in the prior year to a pre-tax loss in the current year, partially offset by higher tax expense on certain forward starting swap gains that are tax effected at the previously enacted federal income tax rate of 35% as they are amortized into net investment income.

Previous wording

The liability remeasurement gain decreased mainly due to less favorable mortality in the current year, partially offset by an unfavorable cash flow assumption update related to implementation timing of our in-force rate action plan in the prior year.

Current wording

The liability remeasurement loss decreased driven by higher favorable cash flow assumption updates related to implementation timing of our in-force rate action plan, partially offset by more adverse actual versus expected experience, including favorable impacts in the prior year from the second legal settlement and higher benefit utilization in the current year.

Previous wording

Acquisition and operating expenses, net of deferrals, decreased principally from a $13 million accrual for legal settlement costs in the prior year that did not recur.

Current wording

Acquisition and operating expenses, net of deferrals, decreased principally from $28 million of net insurance recoveries in the current year related to previously incurred legal settlement expenses. The decrease was also attributable to a $13 million accrual for legal settlement costs in the prior year that did not recur.