GENWORTH FINANCIAL INC
For the period ended May 23, 2024. Filed Apr 8, 2024.
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May 23, 2024 · Filed Apr 8, 2024
Contents
Key Compensation Program Elements
Our 2023 annual compensation program for continuing named executive officers consists of the following key elements: base salary, annual incentive, and annual long-term incentive grants (which includes PSUs for the CEO, and PSUs and RSUs for all other continuing NEOs). A significant portion of annual compensation of our continuing NEOs is completely at risk.
The charts below reflect the average target compensation mix for the CEO and other continuing NEOs. Additional details on their compensation elements are described on the following pages.
| 2023 CEO Target Compensation | 2023 Other NEO Target Compensation |
|---|
Base Salary
Base salaries are generally intended to reflect the scope of an executive officer’s responsibilities and level of experience, reward sustained performance over time and be market competitive. In February 2023, the Compensation Committee undertook its annual review of executive officer base salaries, while considering benchmarking data and advice provided by its compensation consultant. Mr. Upton, Mr. Karawan and Ms. Saltzgaber received a base salary increase as described below. The other continuing named executive officers did not receive any adjustments to their base salaries in 2023. The table below shows base salaries for our continuing NEOs in 2023 and describes the rationale for base salary increases:
| Named Executive Officer | 2023 Base Salary($) | Change from PriorBase Salary | Rationale |
|---|---|---|---|
| Mr. McInerney | $1,000,000 | 0% | No Change |
| Mr. Upton | $600,000 | 20% | Increased in connection withpromotion to CFO |
| Mr. Haendiges | $600,000 | 0% | No Change |
| Mr. Karawan | $600,000 | 9% | Increased after evaluatingmarket competitiveness |
| Ms. Saltzgaber | $500,000 | 32% | Increased in connection withpromotion to CIO |
| 68 | Genworth Financial, Inc. |
Executive Compensation
Annual Incentive
In our annual incentive program, we review performance against financial objectives, together with a qualitative assessment of operational objectives and other accomplishments toward non-financial priorities that are not necessarily reflected in annual financial results. We place a heavier weighting on the financial objectives, and the specific weightings for the financial and non-financial objectives are included in the individual scorecards for each continuing named executive officer below.
Each continuing named executive officer has an annual incentive target, expressed as a percentage of base salary. The 2023 target annual incentive opportunities for our continuing named executive officers ranged from 100% to 200% of base salary, and payout opportunities for 2023 ranged from zero to 200% of their individual target amount. Individual annual incentive targets are reported in the 2023 Grants of Plan-Based Awards Table. After review, the Compensation Committee determined to not make any adjustments to annual incentive target percentages for our continuing NEOs for 2023, as the existing targets were considered competitive within the marketplace for their roles.
Our annual incentive program is closely aligned with our annual business operating plan, which is reviewed by the Board of Directors. Generally, the Compensation Committee sets performance targets for the annual incentive program that align with achievement of certain performance measures contained in the business operating plan, with above target payouts for exceeding the plan and below target or no payouts for not meeting the plan. When setting the annual business operating plan, many factors and assumptions are considered, such as the competitive landscape, the global economic environment, market trends, interest rates, and regulatory considerations. As a result, performance targets within our annual incentive plan may not always increase on a yearly basis, and may even be set below the previous year’s targets or actual results.
Amounts earned and paid under our annual incentive program for 2023 are reported in the Non-Equity Incentive Plan Compensation column of the 2023 Summary Compensation Table.
How We Performed: Financial Objectives
The financial metrics chosen to measure 2023 performance, which are also disclosed in the individual continuing NEO scorecards below, were identified as key drivers of our business operating plans.
For example, with respect to financial objectives, Adjusted Operating Income and Operating Return on Equity continue to represent key measures of financial performance for Enact, while incremental premiums approved for LTC in-force rate actions and in-force premiums filed remain key priorities for our U.S. Life business.
| 2024 Proxy Statement | 69 |
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Executive Compensation
| Performance Unit | Key Financial Objective | Unit | Threshold | Target | Maximum | 2023Results |
|---|---|---|---|---|---|---|
| U.S. Life Insurance | LTC In-Force Rate Actions GrossIncremental Premium Approval(1) | $million | $225 | $275 | $350 | $354 |
| LTC In-Force Premiums Filed(2) | $million | $750 | $900 | $1,050 | $1,114 | |
| Core Pre-Tax Statutory Income(3) | $million | $215 | $270 | $325 | $296 | |
| Operational Excellence andCustomer Service | % | 50% | 100% | 200% | 125% | |
| Enact | Levered Operating Returnon Equity(4)(5) | % | 5.1% | 10.9% | 14.1% | 15.5% |
| Investments | Net Investment Income | $million | $2,763 | $3,070 | $3,377 | $3,183 |
| U.S. Life Purchase Yield v.External Benchmark(6) | % | 5.00% | 5.55% | 6.11% | 5.85% | |
| Enact Purchase Yield v. ExternalBenchmark(7) | % | 4.91% | 5.45% | 6.00% | 5.61% | |
| U.S. Life Statutory Impairmentsand Trading Gains / Losses andCapital/ Credit Migration Impact(8) | $million | ($165) | ($115) | ($65) | ($84) |
| (1) | The LTC in-force gross incremental premiums approved metric measures the weighted average increase on annualized LTC in-force premiums resulting from rate actions approved in 2023. |
| (2) | This metric measured the LTC in-force premiums rate action requests filed with the states in 2023. 2023 results include actuals plus a $125 million adjustment for filings that could not be pursued given positive approval outcomes or specific states' directives to delay submission. |
| (3) | Pre-Tax Statutory Income is based on Genworth Life Insurance Company (GLIC) and its consolidating life insurance subsidiaries that has been prepared on the basis of statutory accounting principles (SAP). Statutory Net Income is reflected in the “Summary of Operations” within the statutory filings of Genworth’s U.S. Life Insurance Companies. Due to differences in methodology between SAP and U.S. GAAP, the values for assets, liabilities and equity reflected in financial statements prepared in accordance with U.S. GAAP are materially different from those reflected in financial statements prepared under SAP. The Pre-Tax Statutory Income of $433 million in 2023 has been adjusted to "Core Pre-Tax Statutory Income" which excludes the impacts from in-force reserve changes from future period assumption changes, methodology changes, market impact to annuity products, conversion cost associated with third party outsourcing, impacts from COVID-19, court-driven impacts on IFA settlement timing, state-specific court or administrative ruling, model refinements, reinsurance transactions and regulatory changes. |
| (4) | Reflects Genworth ownership amount excluding noncontrolling interests. |
| (5) | Levered Operating Return on Equity for Enact equals adjusted levered operating income for the year divided by average equity for the most recent year. |
| (6) | Benchmark based on Barclays’ Intermediate Corporate Index. |
| (7) | Benchmark based on Barclays’ Long Corporate Index. |
| (8) | Investment impairments and trading losses are calculated in accordance with statutory accounting rules and the capital/credit migration impact represents statutory risk-based capital impact to U.S. life insurance companies primarily from changes in National Association of Insurance Commissioners rating of invested assets shown at a 150% multiple. |
| 70 | Genworth Financial, Inc. |
Executive Compensation
How We Performed: Non-Financial Objectives
The Compensation Committee also established key non-financial priorities for 2023 designed to have an impact on company financial performance and stockholder value.
The chart below outlines the non-financial priorities used in determining 2023 annual incentive program payouts for our continuing NEOs. For applicable use and weighting of these metrics for each continuing NEO, please see each continuing NEO’s individual scorecard later in this document.
During February 2024, the Compensation Committee reviewed overall performance results against the applicable objectives in the previously set scorecards and also considered the performance of each continuing NEO in their respective area of responsibility in determining the actual payouts of annual incentives.
| Key Non-Financial Priority | 2023 Accomplishments/Results |
|---|---|
| Corporate Non-Financial Priorities●Mr. McInerney ●Mr. Upton ●Mr. Karawan | ●Returned capital to stockholders through the repurchase of $295 million worth of our outstanding shares at an average price less than $5.70 per share under our share repurchase program in 2023. ●Expanded our existing share repurchase program by an additional $350 million reflecting the transformative progress the company has made in recent years. The total amount authorized under the share repurchase program is $700 million. ●Completed a successful consent solicitation from bondholders representing the majority in principal amount of our outstanding senior notes due 2034 to permit the repayment, redemption or repurchase of our outstanding fixed-to-floating rate junior subordinated notes due 2066, and opportunistically reduced outstanding holding company debt to $856 million. ●Advanced the development and implementation of CareScout Services business by launching the CareScout Quality Network in Texas and several other states. Network is differentiated from others in the long-term care industry by having quality credentialling standards and negotiated discounted rates. Work continues in developing insurance and funding solutions to help Americans pay for LTC. ●Strengthened and expanded the focus on human capital through enhancing employee engagement, talent and performance management, succession planning, and diversity, equity, and inclusion efforts. ●Received designation as a “Top Workplace” in Richmond, Virginia, and Stamford, Connecticut. ●The Compensation Committee determined above target funding was warranted. |
| U.S. Life Non-Financial Priorities●Mr. Haendiges | ●Continued with the successful implementation of LTC litigation settlements. Settlements have reduced our tail-risk associated with our LTC legacy book. Policyholders have elected to reduce their benefits in order to reduce or eliminate their premiums. ●Full implementation of the new U.S. GAAP accounting guidance related to the recognition and measurement of long-duration insurance contracts, commonly known as LDTI. ●The Compensation Committee determined target funding was warranted. |
| Investments Non-Financial Priorities●Ms. Saltzgaber | ●Executed $1.2B repositioning program to enhance income and improve Asset Liability Management (ALM). ●Executed $2B in interest rate hedges, improving ALM in historically attractive yield environment. ●Increased production in middle market loans given strong relative value. ●The Compensation Committee determined above target funding was warranted. |
| 2024 Proxy Statement | 71 |
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Executive Compensation
NEO 2023 Scorecard Results
Thomas J. McInerney Mr. McInerney’s annual incentive award could range from 0% of target to 200% of target based on results versus applicable performance targets. His 2023 target was $2,000,000 (or, 200% of base pay). Mr. McInerney’s approved annual incentive award for 2023 was $3,200,000, or approximately 160% of his targeted amount, based on the achievement of the financial and non-financial measures indicated below.
| ($ millions)Performance Unit · Key Financial Objective ($ Millions) · Weighting · 2023Target · 2023Results · Funding% | ||||||||
|---|---|---|---|---|---|---|---|---|
| Enact(1) | Adjusted Operating Return on Equity | 25% | 10.9% | 15.5% | 200% | |||
| U.S. Life Insurance | Core Pre-Tax Statutory Income ($MM) | 25% | $270 | $296 | 147% | |||
| LTC In-Force Rate Actions Gross Incremental Premium Approved | 20% | $275 | $354 | 200% | ||||
| Total Funding For Financial Objectives | 127% | |||||||
| Areas of Focus included: | ||
|---|---|---|
| ●Return Capital to Stockholders; ●CareScout Growth Initiatives; and ●Human Capital, Succession Planning and Talent Management | 33% | |
| Overall Funding % | 160% | |
| (1) | Reflects Genworth ownership amount excluding noncontrolling interests. |
| 72 | Genworth Financial, Inc. |
Executive Compensation
Jerome T. Upton Mr. Upton’s annual incentive award could range from 0% of target to 200% of target based on results versus applicable performance targets. His 2023 target was $750,000 (or, 125% of base pay). Mr. Upton’s approved annual incentive award for 2023 was $1,200,000, or approximately 160% of his targeted amount, based on the achievement of the financial and non-financial measures indicated below.
| ($ millions)Performance Unit · Key Financial Objective ($ Millions) · Weighting · 2023Target · 2023Results · Funding% | ||||||||
|---|---|---|---|---|---|---|---|---|
| Enact(1) | Adjusted Operating Return on Equity | 25% | 10.9% | 15.5% | 200% | |||
| U.S. Life Insurance | Core Pre-Tax Statutory Income ($MM) | 25% | $270 | $296 | 147% | |||
| LTC In-Force Rate Actions Gross Incremental Premium Approved | 20% | $275 | $354 | 200% | ||||
| Total Funding For Financial Objectives | 127% | |||||||
| Areas of Focus included: | ||
|---|---|---|
| ●Return Capital to Stockholders; ●CareScout Growth Initiatives; and ●Human Capital, Succession Planning and Talent Management | 33% | |
| Overall Funding % | 160% | |
| (1) | Reflects Genworth ownership amount excluding noncontrolling interests. |
| 2024 Proxy Statement | 73 |
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Executive Compensation
Gregory S. Karawan Mr. Karawan’s annual incentive award could range from 0% of target to 200% of target based on results versus applicable performance targets. His 2023 target was $600,000 (or, 100% of base pay). Mr. Karawan’s approved annual incentive award for 2023 was $960,000, or approximately 160% of his targeted amount, based on the achievement of the financial and non-financial measures indicated below.
| ($ millions)Performance Unit · Key Financial Objective ($ Millions) · Weighting · 2023Target · 2023Results · Funding% | ||||||||
|---|---|---|---|---|---|---|---|---|
| Enact(1) | Adjusted Operating Return on Equity | 25% | 10.9% | 15.5% | 200% | |||
| U.S. Life Insurance | Core Pre-Tax Statutory Income ($MM) | 25% | $270 | $296 | 147% | |||
| LTC In-Force Rate Actions Gross Incremental Premium Approved | 20% | $275 | $354 | 200% | ||||
| Total Funding For Financial Objectives | 127% | |||||||
| Areas of Focus included: | ||
|---|---|---|
| ●Return Capital to Stockholders; ●CareScout Growth Initiatives; and ●Human Capital, Succession Planning and Talent Management | 33% | |
| Overall Funding % | 160% | |
| (1) | Reflects Genworth ownership amount excluding noncontrolling interests. |
| 74 | Genworth Financial, Inc. |
Executive Compensation
Kelly A. Saltzgaber Ms. Saltzgaber’s annual incentive award could range from 0% of target to 200% of target based on results versus applicable performance. Her 2023 target was $625,000 (or, 125% of base pay). Ms. Saltzgaber’s approved annual incentive award for 2023 was $1,000,000, or approximately 160% of her targeted amount, based on the achievement of the following financial and non-financial measures:
| ($ millions)Performance Unit · Key Financial Objective ($ Millions) · Weighting · 2023Target · 2023Results · Funding% | ||||||
|---|---|---|---|---|---|---|
| Investments | Net Investment Income | 20% | $3,070 | $3,183 | 137% | |
| U.S. Life Purchase Yield v. External Benchmark | 15% | 5.55% | 5.85% | 154% | ||
| Enact Purchase Yield v. External Benchmark | 10% | 5.45% | 5.61% | 129% | ||
| U.S. Life Statutory Impairments and Trading Gains / Losses and Capital / Credit Migration Impact(1) | 25% | ($115) | ($84) | 163% | ||
| Total Funding For Financial Objectives | 104% | |||||
| Areas of Focus included: | ||
|---|---|---|
| ●Limited Partnership / Middle Market Loan Production; ●Portfolio Repositioning; and ●Derivatives – Forward Starting Swaps / Forward Treasuries | 56% | |
| Overall Funding % | 160% | |
| (1) | Investment impairments and trading losses are calculated in accordance with statutory accounting rules and the capital/credit migration impact represents statutory risk-based capital impact to U.S. life insurance companies primarily from changes in National Association of Insurance Commissioners rating of invested assets shown at a 150% multiple. |
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Executive Compensation
Brian K. HaendigesMr. Haendiges’ annual incentive award could range from 0% of target to 200% of target based on results versus applicable performance. His 2023 target was $600,000 (or, 100% of base pay). Mr. Haendiges’ approved annual incentive award for 2023 was $900,000, or approximately 150% of his targeted amount, based on the achievement of the following financial and non-financial measures:
| ($ millions)Performance Unit · Key Financial Objective ($ Millions) · Weighting · 2023Target · 2023Results · Funding% | ||||||
|---|---|---|---|---|---|---|
| U.S. Life Insurance | LTC In-Force Rate Actions Gross Incremental Premium Approved | 25% | $275 | $354 | 200% | |
| LTC In-Force Rate Action Premium Filed | 10% | $900 | $1,114 | 200% | ||
| Genworth Life Insurance Company Core Pre-Tax Statutory Income | 25% | $270 | $296 | 147% | ||
| Operational Excellence and Customer Service | 10% | 100% | 125% | 125% | ||
| Total Funding For Financial Objectives | 120% | |||||
| Areas of Focus included: | ||
|---|---|---|
| ●Execution Of In-Force Strategic Initiatives; ●Successfully Implementing LDTI; and ●Human Capital and Enhancing Engagement With Stakeholders | 30% | |
| Overall Funding % | 150% | |
Long-Term Incentives
We believe that the largest component of our annual compensation opportunities for continuing named executive officers should be in the form of longer-term incentives, including annual long-term equity grants.
Our long-term incentive program is closely aligned with a multi-year business plan, which is reviewed by the Board of Directors. The Compensation Committee sets performance targets for the performance-based awards in our long-term incentive program that align with achievement of certain components in our multi-year business plan, with above target payouts for exceeding the plan and below target or no payouts for not meeting the plan. When setting the multi-year business plan, many factors and assumptions are considered, such as the competitive landscape, the global economic environment, market trends, interest rates, and regulatory considerations. As a result, performance targets within our long-term incentive plan may not always increase on a yearly basis, and may even be set below the previous year’s targets or actual results.
To determine annual long-term equity grant awards for the CEO, the Compensation Committee works with its independent compensation consultant. To determine long-term equity grant awards to all other executive officers, the CEO prepares a recommendation for each such executive officer for the Compensation Committee’s consideration and approval. In addition, when determining long-term equity award values for each executive officer (including our CEO), the Compensation Committee considers competitive pay levels, alignment of total pay at risk with the individual’s ability to impact long-term company performance, the individual’s sustained performance over time, and long-term succession and retention needs.
| 76 | Genworth Financial, Inc. |
Executive Compensation
For the 2023-2025 PSUs and RSUs, our Compensation Committee reviewed the proposed compensation values for all executive officers, determined aggregate award sizes based on the approach described above using an estimated share value and granted the awards, including performance goals and targets for the PSUs, in February 2023.
NEO LTI Target Amounts
The 2023 target annual long-term incentive intended values for our continuing named executive officers average 53% of target compensation.
The intended value of the annual long-term incentive awards made in 2023 to our continuing NEOs were as follows:
| Named Executive Officer | ReportedYear | ApproximateCompensationValue Intendedto be Delivered(1) | # of RSUsAwarded | “Target”# of PSUsAwarded(2) |
|---|---|---|---|---|
| Mr. McInerney | 2023 | $5,000,000 | — | 783,028 |
| Mr. Upton | 2023 | $1,250,000 | 109,457 | 97,878 |
| Mr. Karawan | 2023 | $750,000 | 65,674 | 58,727 |
| Ms. Saltzgaber | 2023 | $750,000 | 65,674 | 58,727 |
| Mr. Haendiges | 2023 | $1,250,000 | 109,457 | 97,878 |
| (1) | Due to differences in how the grant-date fair value of awards is determined for accounting purposes, these amounts will differ from the amounts reflected as the grant date fair value of the awards for 2023 in the 2023 Summary Compensation Table. |
| (2) | Regarding the 2023 awards, although the continuing NEOs other than the CEO received their intended value split evenly between RSUs and PSUs, their awarded number of PSUs were lower than the awarded number of RSUs because the PSU valuation for 2023 contains an adjustment for stock price volatility based on TSR Monte Carlo valuation projections. |
Long-Term Incentive Award Design
Our long-term incentives awarded to executive officers have included, over time, different combinations of SARs, PSUs and RSUs.
For 2023, our continuing named executive officers’ long-term equity grants were awarded 100% in PSUs for our CEO and 50% PSUs and 50% RSUs for our other continuing named executive officers. Taken together, we believe our annual long-term incentive grants provide our named executive officers with effective retention value and appropriate incentives to achieve long-term company performance objectives, while aligning our executive officer compensation program with the long-term interests of our stockholders.
The 2023 PSU design incorporates relative Total Shareholder Return at 30%, Adjusted Operating Income (Enact Segment) at 20%, and Core Pre-Tax Statutory Net Income (USLI) at 50%. The relative Total Shareholder Return increased in 2023 from 20% in response to shareholder feedback.
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Executive Compensation
Additional Information Regarding Awards of Performance Stock Units
| ● | Payout for performance is interpolated on a straight-line basis between each of threshold and target payouts and between target and maximum payouts. |
|---|---|
| ● | No payout shall be earned for performance below threshold level for the performance measurement period. |
| ● | Notwithstanding the level of achievement of the performance goals for each outstanding award, the Compensation Committee may exercise negative discretion to pay out a lesser amount, or no amount at all, under the Performance Stock Unit Award, based on such considerations as the Compensation Committee deems appropriate. |
| ● | The target number of PSUs noted on page 77 was fixed for each participant at the time of grant. |
Additional Information Regarding Awards of Restricted Stock Units
| ● | RSUs vest 33% per year, beginning on the first anniversary of the grant date. |
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Additional Information Regarding Long-Term Incentive Awards
| ● | Net after-tax shares acquired by named executive officers through the grant or exercise of all company equity incentive awards are subject to a 50% retention ratio until stock ownership guidelines are met. |
|---|---|
| ● | Outstanding long-term incentive awards are generally forfeited upon termination of employment with the company prior to vesting, except for limited instances described in the Executive Compensation—Potential Payments upon Termination or Change of Control section below. |
| ● | The Compensation Committee approves a rounded number of shares based on the planned compensation value using the 20-day historical trading average price up to and including the date of grant. The use of a 20-day historical trading average price mitigates the impact of short-term fluctuations in stock price on award levels, allows for clear understanding of both share levels and approximate compensation values at the time of Compensation Committee approval, and facilitates delivering rounded award amounts. |
| 78 | Genworth Financial, Inc. |
Executive Compensation
Performance Stock Incentive Awards Status
| Performance Period and Measure | Performance Levels | Status |
| 2021-2023 (1)(2)(3)(4)(5)(6) | ●Results were certified in February 2024 ●Adjusted Operating Income and Total Shareholder Return both achieved maximum performance levels. Final payout was certified at 200% based on Company performance. | |
| 80% Adjusted OperatingIncome (Loss) - $M | ||
|---|---|---|
| 20% Total Shareholder Return(“TSR”) | ||
| 2022-2024 (5)(6)(7)(8)(9)(10) | ●As of December 31, 2023, payout was projected between Threshold and Target levels. ●Results will be certified in February 2025 based on Company performance. | |
| 60% U.S. Life - Statutory NetIncome - $M | ||
| 20% Enact - Adjusted OperatingIncome (Loss) - $M | ||
| 20% Total Shareholder Return(“TSR”) | ||
| 2023-2025 (6)(8)(10)(11)(12)(13) | ●As of December 31, 2023, payout was projected between Threshold and Target level. ●Results will be certified in February 2026 based on Company performance. | |
| 50% U.S. Life InsuranceCompanies - Core Pre-TaxStatutory Income - $M | ||
| 30% Total Shareholder Return(“TSR”) | ||
| 20% Enact - Adjusted OperatingIncome (Loss) - $M | ||
| (1) | “Adjusted Operating Income (Loss)” shall mean U.S. GAAP income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses)on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. Adjusted Operating Income (Loss) was adjusted for purposes of management performance evaluation to exclude the impacts from in-force reserve changes from future period assumption changes, methodology changes, changes in foreign exchange rates, tax changes based on updated regulations, guidance, assessments, or refinements related to technical areas of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), legal fees and settlement costs related to merger & acquisition litigation, any strategic deal-related expenses (e.g. 3rd party legal, actuarial or reinsurance support for negotiating or implementing a transaction), and professional fees related to the implementation of the Long Duration Targeted Improvements (“LDTI”) accounting standard. Adjustment to the 3-year cumulative measurement was applied based on strategic transactions in 2021, 2022 or 2023 that are not included in forecast assumptions. |
| (2) | Adjusted Operating Income (Loss) was measured as follows: for Enact and corporate and other activities, January 1, 2021 through December 31, 2023; for the U.S. Life and runoff segments, January 1, 2021 through December 31, 2022. New accounting guidance related to LDTI was effective for us on January 1, 2023 (with transition adjustments as of January 1, 2021), and this guidance was expected to have extensive changes primarily impacting U.S. Life Insurance. Accordingly, the 2023 Adjusted Operating Income (Loss) for U.S. Life Insurance has been excluded from the 2023 target. |
| (3) | In evaluating performance, the Compensation Committee excluded the impact, if any, on reported financial results of any of the following events that occurred during the performance period: a) acquisitions and divestitures, b) stockholder dividends or common stock repurchases and c) changes in accounting principles, including LDTI, or other laws or provisions. |
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Executive Compensation
| (4) | The payout that may be earned based on the TSR portion of this Award’s goal was determined based on the company’s Percentile Ranking relative to its Peer Group; provided, however, that in no event did the total dollar value of the Confirmed Units with respect to the TSR-goal portion of the Award exceed 800% of grant date fair value of the TSR-goal portion of the Award. |
| (5) | “Peer Group” shall mean the constituents of the S&P 400 Financials Sector on the Grant Date (each such constituent, a “Peer Company”). |
| (6) | TSR performance results were calculated as follows: (i)(a) the 20-trading day average closing price of the applicable entity’s common stock as of the last trading day of the performance period, minus (b) the 20-trading day average closing price of the applicable entity’s common stock as of the first day of the performance period, plus (c) the sum of all dividends and other distributions paid on such entity’s common stock during the performance period, on a per share basis, divided by (ii) the 20-trading day average closing price of the applicable entity’s common stock as of the first day of the performance period. |
| (7) | “Enact - Adjusted Operating Income (Loss)” shall mean U.S. GAAP income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), goodwill impairments, gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, gains (losses) on insurance block transactions, restructuring costs and other adjustments, net of taxes. Enact -Adjusted Operating Income (Loss) may be adjusted for purposes of management performance evaluation to exclude the impacts from in-force reserve changes from future period assumption changes (e.g. interest rate, expense, lapse), methodology changes (e.g. changes that would arise from a system conversion), changes in foreign exchange rates, tax changes based on updated regulations, guidance, assessments, or refinements related to technical areas of the Tax Cuts and Jobs Act, legal fees and settlement costs related to merger & acquisition litigation, any strategic deal-related expenses (e.g. 3rd party legal, actuarial or reinsurance support for negotiating or implementing a transaction). Adjustment to the 3-year cumulative measurement will be applied based on strategic transactions in 2022, 2023 or 2024 that are not included in forecast assumptions. |
| (8) | In evaluating performance, the Compensation Committee shall exclude the impact, if any, on reported financial results of any of the following events that occur during the performance period: a) acquisitions and divestitures, b) shareholder dividends or common stock repurchases and c) changes in accounting principles or other laws or provisions. |
| (9) | “U.S. Life - Statutory Net Income” shall mean Net Income based on Genworth Life Insurance Company (GLIC) and its consolidating life insurance subsidiaries that has been prepared on the basis of statutory accounting principles (SAP). Statutory Net Income is reflected in the “Summary of Operations” within the statutory filings of Genworth’s U.S. Life Insurance Companies. Due to differences in methodology between SAP and U.S. GAAP, the values for assets, liabilities and equity reflected in financial statements prepared in accordance with U.S. GAAP are materially different from those reflected in financial statements prepared under SAP. U.S. Life Insurance Companies Statutory Net Income may be adjusted for purposes of management performance evaluation to exclude the impacts from in-force reserve changes from future period assumption changes, methodology changes, changes in foreign exchange rates, tax changes based on updated regulations, guidance, assessments, or refinements related to technical areas of the Tax Cuts and Jobs Act, legal fees and settlement costs related to merger & acquisition litigation, any strategic deal-related expenses (e.g. 3rd party legal, actuarial or reinsurance support for negotiating or implementing a transaction), changes to variable annuity reserves related to changes in interest rates and equity markets and corresponding realized gains and losses on variable annuity hedges. Adjustment to the 3-year cumulative measurement will be applied based on strategic transactions in 2022, 2023 or 2024 that are not included in forecast assumptions. |
| (10) | The payout that may be earned based on the TSR portion of this Award’s goal will be determined based on the company’s Percentile Ranking relative to its Peer Group; provided, however, that in no event will the total dollar value of the Confirmed Units with respect to the TSR-goal portion of the Award exceed 800% of grant date fair value of the TSR-goal portion of the Award. |
| (11) | “Enact - Adjusted Operating Income (Loss)” shall mean U.S. GAAP income (loss) from continuing operations excluding the after-tax effects of income (loss) from continuing operations attributable to noncontrolling interests, net investment gains (losses), gains (losses) on the sale of businesses, gains (losses) on the early extinguishment of debt, initial gains (losses) on insurance block transactions, restructuring costs and infrequent or unusual non-operating items. Adjustments to reconcile net income (loss) to adjusted operating income (loss) assume a 21% tax rate and are net of the portion attributable to noncontrolling interests. Enact - Adjusted Operating Income (Loss) may be adjusted for purposes of management performance evaluation to exclude methodology changes (e.g. changes that would arise from a system conversion), changes in foreign exchange rates, tax changes based on updated regulations, guidance, assessments, or refinements related to technical areas of the Tax Cuts and Jobs Act, legal fees and settlement costs related to merger & acquisition litigation, any strategic deal-related expenses (e.g. 3rd party legal, actuarial or reinsurance support for negotiating or implementing a transaction). Adjustment to the 3-year cumulative measurement will be applied based on strategic transactions in 2023, 2024 or 2025 that are not included in forecast assumptions. |
| (12) | “U.S. Life Insurance Companies Core Pre-Tax Statutory Income” shall mean Pre-Tax Statutory Income based on Genworth Life Insurance Company (GLIC) and its consolidating life insurance subsidiaries that may be adjusted for purposes of management performance evaluation to exclude the impacts from in-force reserve changes from future period assumption changes, methodology changes, market impact to annuity products, conversion cost associated with third party outsourcing, impacts from COVID-19, court-driven impacts on IFA settlement timing, state-specific court or administrative ruling, model refinements, reinsurance transactions and regulatory changes. |
| (13) | “Peer Group” shall mean the constituents of the S&P 600 Insurance Index on the Grant Date (each such constituent, a “Peer Company”). |
| 80 | Genworth Financial, Inc. |
Executive Compensation
Other Benefit Programs
Severance Benefits—Involuntary Termination without a Change of Control
The company maintains the Amended and Restated Senior Executive Severance Plan (the “Senior Executive Severance Plan”), which is designed to offer competitive termination benefits, promote retention of a selected group of key employees (including our continuing named executive officers) and provide key protections to the company in the form of restrictive covenants. The Compensation Committee periodically reviews the plan provisions and participants in order to monitor competitiveness and appropriate levels of benefits to meet the plan objectives. The specific terms of the Senior Executive Severance Plan, and the potential payments and benefits upon a termination of employment without “cause” or by the executive for “good reason” for each of our continuing named executive officers are described more fully in theExecutive Compensation—Potential Payments upon Termination or Change of Controlsection below.
Severance Benefits—Involuntary Termination Following a Change of Control
The company maintains the 2014 Change of Control Plan (the “Change of Control Plan”), which is designed to provide change of control severance benefits for a select group of key executives, including our continuing named executive officers, in the event that the executive’s employment is terminated without “cause” or by the executive for “good reason” within two years following a change of control of the company (each a “Qualified Termination”).
The change of control severance benefits are intended to keep participating key leaders neutral to the possibility of corporate transactions in the best interests of stockholders by removing the fear of job loss and other distractions that may result from potential, rumored or actual changes of control of the company. All benefits under the Change of Control Plan are “double-trigger” benefits, meaning that no compensation will be paid to participants solely upon the occurrence of a change of control, so as to not create an unintended incentive. We believe that this structure is appropriate for executives whose jobs are in fact terminated in such a transaction, without providing a windfall to those who continue employment following the transaction.
The Compensation Committee periodically reviews the plan provisions and participants to monitor competitiveness and appropriate levels of benefits to meet plan objectives. The specific terms of the Change of Control Plan, and the potential payments and benefits upon a Qualified Termination for each of our continuing named executive officers are described more fully in theExecutive Compensation—Potential Payments upon Termination or Change of Controlsection below.
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Executive Compensation
Retirement Benefits
Retirement benefits also fulfill an important role within our overall executive compensation program because they provide a competitive financial security component that supports the attraction and retention of talent. We maintain the Genworth Financial, Inc. Retirement and Savings Plan (the “Retirement and Savings Plan”), a tax-qualified, defined contribution plan in which our U.S. employees, including our continuing named executive officers, are eligible to participate. The Retirement and Savings Plan has two features: the “401(k) Savings Feature,” in which participants can defer savings on a pre-tax or Roth (after-tax) basis and receive company matching contributions, subject to certain Internal Revenue Service limits, and a “Retirement Account Feature,” which includes only annual company non-elective contributions. In addition, we offer the following non-qualified retirement and deferred compensation plans:
| ● | Genworth Financial, Inc. Supplemental Executive Retirement Plan (the “SERP”), which is a defined benefit plan that was closed to new participants after December 31, 2009, and for which benefit accruals were frozen as of December 31, 2020; and |
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| ● | Genworth Financial, Inc. Retirement and Savings Restoration Plan (the “Restoration Plan”), which is a defined contribution plan. |
We continually assess our benefit offerings and seek to align them with competitive market levels. It is important to us to keep our benefit design and costs competitive with our peers so that we can continue to attract and retain talent while managing our expenses. Each of the SERP and Restoration Plan is described in more detail in theExecutive Compensation—Pension Benefits and Non-Qualified Deferred Compensationsections below.
Other Benefits and Perquisites
We regularly review the benefits and perquisites provided to our executive officers to ensure that our programs align with our overall principles of providing competitive compensation and benefits that maximize the interests of our stockholders. We provide executive officers with an individually-owned universal life insurance policy (the “Leadership Life Program”) that is available to all of our U.S.-based executives and an enhanced company-owned life insurance program (the “Executive Life Program”). During 2023, Mr. McInerney voluntarily ceased participation in the Leadership Life and Executive Life Programs while serving as President and CEO of the company. The decision to end participation in 2023 was made after the semi-annual premiums were assessed. There will be no premium or benefit in 2024 and beyond for the CEO.
We also provide a limited number of perquisites intended to keep executive officers healthy and focused on company business with minimal distraction, which include the opportunity to receive financial counseling and annual physical examinations.
In addition, we provide certain benefits in the event of death, total disability or sale of a business unit to a successor employer. Amounts payable to our continuing named executive officers under these circumstances are described in more detail in theExecutive Compensation—Potential Payments upon Termination or Change of Controlsection below.
| 82 | Genworth Financial, Inc. |
Executive Compensation
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.