GENWORTH FINANCIAL INC

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

The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives in the current year.

Acquisition and operating expenses, net of deferrals, increased mainly due to higher expenses related to CareScout growth initiatives and higher employee-related expenses in the current year.

The benefit for income taxes in the current and prior year was primarily related to the respectivepre-tax loss.

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

The adjusted operating loss increased primarily from higher expenses related to CareScout growth initiatives, partially offset by higher net investment income and a higher benefit for income taxes in the current year.

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

Acquisition and operating expenses, net of deferrals, increased primarily from higher expenses related to CareScout growth initiatives and higher employee-related expenses in the current year. These increases were partially offset by $4 million of higher gains in the current year related to the repurchase of Genworth Holdings’ debt.

Amortization of DAC and intangibles in the current year primarily relates to amortization of software costs.

The benefit for income taxes in the current and prior year was largely related to the respectivepre-tax loss. The benefit for income taxes in the prior year was partially offset bynon-deductible expenses.

Investments and Derivative Instruments

Investments

During the three months ended September 30, 2024, our investment portfolio was impacted, and we believe will continue to be impacted, by the following macroeconomic trends:

Investment results

The following tables set 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.

For the three months ended September 30, 2024, gross annualized weighted-average investment yields decreased primarily driven by lower net investment income on lower average invested assets. Net investment income for the three months ended September 30, 2024 decreased largely from lower yields on a large block of policy loans in our corporate-owned life insurance products. For the nine months ended September 30, 2024, gross annualized weighted-average investment yields increased from 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 September 30, 2024, approximately 6% of our investment holdings recorded at fair value was based on significant inputs that were not market observable and were classified as Level 3 measurements. See note 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:

Bank loan investments increased from funding of additional investments, partially offset by principal repayments. Derivatives increased largely from a decrease in current market rates compared to contracted notional interest rates, as well as favorable equity market performance in the current year. Short-term investments decreased from net 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 that support our long-term care insurance business and universal life insurance products, partially offset by a decrease in interest rate swaps that support our long-term care insurance business.

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 $57 million from $90,817 million as of December 31, 2023 to $90,760 million as of September 30, 2024.

by a decrease of $270 million in commercial mortgage loans. The increase in fixed maturity securities was predominantly related to tightening credit spreads and lower interest rates increasing the fair value of our fixed maturity investment portfolio, partially offset by net sales and maturities in the current year. Limited partnerships increased largely from capital calls, and policy loans increased primarily due to loan advances outpacing payoffs in our corporate-owned life insurance products in the current year. Commercial mortgage loans decreased mostly due to payments outpacing originations.

Total liabilities. Total liabilities decreased $977 million from $82,482 million as of December 31, 2023 to $81,505 million as of September 30, 2024.

Total equity. Total equity increased $920 million from $8,335 million as of December 31, 2023 to $9,255 million as of September 30, 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

Our principal sources of cash include sales of our products and services, income from our investment portfolio and proceeds from sales and maturities of investments. Cash flows related to operating activities are affected by the timing of premiums, fees and investment income received and benefits, claims and expenses paid. Cash flows from operating activities have been 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.

The following table sets forth our unaudited condensed consolidated cash flows for the nine months ended September 30:

Net cash inflows from operating activities were lower in the current year primarily driven by higher benefit payments, including settlement payments, 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 and commercial mortgage loan payments outpacing originations at a higher pace.

Net cash outflows related to financing activities were lower in the current year primarily due to lower net withdrawals from our investment contracts and lower repurchases of Genworth Financial’s common stock, partially offset by higher repurchases of Genworth Holdings’ debt and expenses associated with Enact Holdings’ early debt redemption and issuance of new debt.

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 (or, in the case of Genworth Holdings, to Genworth Financial) under tax sharing agreements, investments in CareScout, 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 legacy 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 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.

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 could 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, capital availability, business and market conditions, regulatory requirements and debt covenant restrictions, among other factors.

As the majority shareholder, Genworth Holdings received $205 million of capital returns from Enact Holdings during the nine months ended September 30, 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. Based on Genworth Financial’s ownership of approximately 81% of Enact Holdings, we expect to receive capital returns from Enact Holdings at the higher end of our previously anticipated range of $245 million to $285 million for the full year 2024. The total amount and form of capital returns will be based on Enact Holdings’ capital allocation 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 nine months ended September 30, 2024, Genworth Financial repurchased 21,551,602 shares of its common stock at an average price of $6.26 per share for a total of $135 million before excise taxes and other costs. Genworth Financial also authorized repurchases under its share repurchase program through a Rule 10b5-1 trading plan under which 1,401,753 shares of its common stock were repurchased in October 2024 at an average price of $6.84 per share, leaving approximately $197 million available for repurchase under the program as of October 31, 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. In addition, we also expect to continue to repurchase or redeem outstanding debt from time to time (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 $369 million and $350 million of unrestricted cash and cash equivalents as of September 30, 2024 and December 31, 2023, respectively. The increase was principally driven by capital returns from Enact Holdings, partially offset by repurchases of Genworth Financial’s common stock and interest payments on Genworth Holdings’ debt. The $369 million of Genworth Holdings’ cash and cash equivalents includes approximately $162 million of advance cash payments from our subsidiaries held for future obligations. We do not consider this cash when evaluating holding company liquidity for the purposes of allocating capital or computing our cash position relative to the cash management target discussed below. We believe Genworth Holdings’ unrestricted cash and cash equivalents provide sufficient liquidity to meet its financial obligations over the next twelve months. We 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. In addition, the amount of intercompany cash tax payments retained by Genworth Holdings from its subsidiaries will be lower in 2024 and thereafter as compared to the amounts retained during recent prior years based on our projection of current taxable income and the utilization of our remaining foreign tax credits.

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 as a result of planned 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 nine months ended September 30, 2024, Genworth Holdings repurchased $6 million and $29 million principal of its 6.50% senior notes due in 2034 and its floating rate junior subordinated notes due in 2066 (“2066 Notes”), respectively, for apre-tax gain of $5 million and paid accrued interest thereon. As of September 30, 2024, Genworth Holdings had $821 million aggregate principal amount of outstanding debt, with no maturities due until June 2034.

Given the current interest rate environment, during the third quarter of 2024, Genworth Holdings entered into interest rate swaps designed to hedge the variable interest payments on $100 million aggregate principal amount of its 2066 Notes, locking in an approximate 5.5% fixed rate. In connection with the hedge agreement, Genworth Financial provided an unconditional guarantee to the counterparty, covering the obligations associated with the hedge transaction.

On May 28, 2024, Enact Holdings issued $750 million aggregate principal amount of unsecured senior notes, maturing on May 28, 2029 (“2029 Notes”). The 2029 Notes bear interest at an annual rate of 6.25%, payable semi-annually in arrears on May 28 and November 28 of each year, commencing on November 28, 2024. On June 3, 2024, Enact Holdings redeemed all of its $750 million 2025 Notes for apre-tax loss of $11 million. Enact Holdings funded the redemption primarily through the net proceeds from the issuance of its 2029 Notes. For additional information on Enact Holdings’ debt, see note 14 in our unaudited condensed consolidated financial statements under “Item 1—Financial Statements.”

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 legacy life insurance subsidiaries on a standalone basis. Accordingly, these subsidiaries will continue to rely on their statutory capital, significant reserves, prudent management of thein-force blocks and long-term care insurancein-force rate actions to satisfy policyholder obligations.

Given the challenging macroeconomic environment in 2023 and through the third quarter of 2024, employee costs have increased 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, 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 September 30, 2024, our total cash, cash equivalents and invested assets were $62.6 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 September 30, 2024.

Off-balance sheet commitments, guarantees and contractual obligations

As of September 30, 2024, we were committed to fund $1,638 million in limited partnership investments, $271 million in private placement investments and $131 million of bank loan investments.

Except as disclosed above, as of September 30, 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.