OneMain Holdings Inc

SOURCES AND USES OF FUNDS

We finance the majority of our operating liquidity and capital needs through a combination of cash flows from operations, secured debt, unsecured debt, borrowings from revolving conduit facilities and credit card revolving VFN facilities, whole loan sales, and equity. We may also utilize other sources in the future. As a holding company, all of the funds generated from our operations are earned by our operating subsidiaries. Our operating subsidiaries’ primary cash needs relate to funding our lending activities, our debt service obligations, our operating expenses, payment of insurance claims, and supporting strategic initiatives.

We have previously purchased portions of our unsecured indebtedness, and we may elect to purchase additional portions of our unsecured indebtedness or securitized borrowings in the future. Future purchases may be made through the open market, privately negotiated transactions with third parties, or pursuant to one or more tender or exchange offers, all of which are subject to terms, prices, and consideration we may determine at our discretion.

During the nine months ended September 30, 2024, OMH generated net income of $383 million. OMH’s net cash outflow from operating and investing activities totaled $291 million for the nine months ended September 30, 2024. At September 30, 2024, our scheduled interest payments for 2024 totaled $66 million and there were no scheduled principal payments for 2024 on our existing unsecured debt. As of September 30, 2024, we had $9.0 billion of unencumbered receivables.

Based on our estimates and considering the risks and uncertainties of our plans, we believe that we will have adequate liquidity to finance and operate our businesses and repay our obligations as they become due.

OMFC’s Issuances, Redemptions, and Repurchases of Unsecured Debt

On May 22, 2024, OMFC issued a total of $750 million aggregate principal amount of 7.500% Senior Notes due 2031 under the Base Indenture, as supplemented by the Seventeenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis.

On June 10, 2024, OMFC paid a net aggregate amount of $1.0 billion, inclusive of accrued interest and premium, to complete the redemption of its 6.875% Senior Notes due 2025.

On August 19, 2024, OMFC issued a Social Bond offering for a total of $750 million aggregate principal amount of 7.125% Senior Notes due 2031 under the Base Indenture, as supplemented by the Eighteenth Supplemental Indenture, pursuant to which OMH provided a guarantee on an unsecured basis. OMFC intends to allocate an amount equivalent to the net proceeds from the offering to finance or refinance, in part or in full, a portfolio of new or existing loans that meet the eligibility criteria of OneMain Financial’s Social Bond Framework.

From time to time we may purchase portions of our unsecured indebtedness through the open market. During the nine months ended September 30, 2024, we repurchased $267 million of our unsecured notes.

OMFC’s Unsecured Corporate Revolver

At September 30, 2024, the borrowing capacity of our corporate revolver was $1.1 billion.

Securitizations and Borrowings from Revolving Conduit Facilities and Credit Card Revolving VFN Facilities

During the nine months ended September 30, 2024, we completed one new consumer loan securitization (OMFIT 2024-1, see “Securitized Borrowings” below) and redeemed one consumer loan securitization (FCRT 2021-1, see “Securitized Borrowings” below). During the nine months ended September 30, 2024, we entered into three new revolving conduit facilities. At September 30, 2024, $176 million was drawn under our revolving conduit facilities, and the remaining borrowing capacity was $6.7 billion. At September 30, 2024, we had $13.8 billion of consumer loan gross finance receivables pledged as collateral for our securitizations, revolving conduit facilities, and private secured term funding.

During the nine months ended September 30, 2024, we entered into two credit card revolving VFN facilities. At September 30, 2024, the maximum capacity of our credit card revolving VFN facilities was $300 million. At September 30, 2024, we had $227 million of credit card principal balances held in OMFCT for our credit card revolving VFN facilities.

Private Secured Term Funding

At September 30, 2024, the maximum borrowing capacity of $350 million was outstanding under the private secured term funding collateralized by our consumer loans. No principal payments are required to be made until after April 25, 2025, followed by a subsequent one-year amortization period, which upon expiration the outstanding principal is due and payable.

See Notes 8 and 9 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on our long-term debt, securitization transactions, private secured term funding, revolving conduit facilities, and credit card revolving VFN facilities.

Credit Ratings

Our credit ratings impact our ability to access capital markets and our borrowing costs. Rating agencies base their ratings on numerous factors, including liquidity, capital adequacy, asset quality, quality of earnings, and the probability of systemic support. Significant changes in these factors could result in different ratings.

The table below outlines OMFC’s long-term corporate debt ratings and outlook by rating agencies:

Currently, no other entity has a corporate debt rating, though they may be rated in the future.

Stock Repurchased

During the nine months ended September 30, 2024, OMH repurchased 680,709 shares of its common stock through its stock repurchase program for an aggregate total of $32 million, including commissions and fees. As of September 30, 2024, OMH held a total of 16,006,456 shares of treasury stock. To provide funding for the OMH stock repurchases, the OMFC Board of Directors authorized dividend payments in the amount of $65 million.

For additional information regarding the shares repurchased, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Part II included in this report.

Cash Dividend to OMH’s Common Stockholders

As of September 30, 2024, the dividend declarations for the current year by the Board were as follows:

To provide funding for the dividend, OMFC paid dividends of $365 million to OMH during the nine months ended September 30, 2024.

On October 30, 2024, OMH declared a dividend of $1.04 per share payable on November 18, 2024 to record holders of OMH’s common stock as of the close of business on November 12, 2024. To provide funding for the OMH dividend, the OMFC Board of Directors authorized a dividend in the amount of up to $125 million payable on or after November 13, 2024.

While OMH intends to pay its minimum quarterly dividend, currently $1.04 per share, for the foreseeable future, all subsequent dividends will be reviewed and declared at the discretion of the Board and will depend on many factors, including our financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that the Board deems relevant. OMH’s dividend payments may change from time to time, and the Board may choose not to continue to declare dividends in the future. See our “Dividend Policy” in Part II - Item 5 included in our Annual Report for further information.

Whole Loan Sale Transactions

We have whole loan sale flow agreements with third parties, with current terms of less than one year, in which we agreed to sell a remaining total of $330 million gross receivables of newly originated unsecured personal loans along with any associated accrued interest.

During the three and nine months ended September 30, 2024, we sold a total of $124 million and $427 million of gross finance receivables, respectively, compared to $135 million and $450 million during the same periods in 2023. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this report for further information on the whole loan sale transactions.

LIQUIDITY

OMH’s Operating Activities

Net cash provided by operations of $1.9 billion for the nine months ended September 30, 2024 reflected net income of $383 million, the impact of non-cash items including provision for finance receivable losses of $1.5 billion, and an unfavorable change in working capital of $134 million. Net cash provided by operations of $1.8 billion for the nine months ended September 30, 2023 reflected net income of $476 million, the impact of non-cash items including provision for finance receivable losses of $1.3 billion, and an unfavorable change in working capital of $54 million.

OMH’s Investing Activities

Net cash used for investing activities of $2.2 billion for the nine months ended September 30, 2024 and 2023 was due to net principal originations and purchases of finance receivables and purchases of available-for-sale and other securities, partially offset by the proceeds from sales of finance receivables and calls, sales, and maturities of available-for-sale and other securities.

OMH’s Financing Activities

Net cash provided by financing activities of $13 million and $1.1 billion for the nine months ended September 30, 2024 and 2023, respectively, was due to the issuances and borrowings of long-term debt, partially offset by repayments and repurchases of long-term debt, cash dividends paid, and common stock repurchased.

OMH’s Cash and Investments

At September 30, 2024, we had $577 million of cash and cash equivalents, which included $266 million of cash and cash equivalents held at our regulated insurance subsidiaries or for other operating activities that is unavailable for general corporate purposes.

At September 30, 2024, we had $1.6 billion of investment securities, which are all held as part of our insurance operations and are unavailable for general corporate purposes.

Liquidity Risks and Strategies

OMFC’s credit ratings are non-investment grade, which has a significant impact on our cost and access to capital. This, in turn, can negatively affect our ability to manage our liquidity and our ability or cost to refinance our indebtedness. There are numerous risks to our financial results, liquidity, capital raising, and debt refinancing plans, some of which may not be quantified in our current liquidity forecasts. These risks are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report.

The principal factors that could decrease our liquidity are customer delinquencies and defaults, a decline in customer prepayments, rising interest rates, and a prolonged inability to adequately access capital market funding. We intend to support our liquidity position by utilizing strategies that are further described in our “Liquidity and Capital Resources” of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II - Item 7 included in our Annual Report. However, it is possible that the actual outcome of one or more of our plans could be materially different than expected or that one or more of our significant judgments or estimates could prove to be materially incorrect.

OUR INSURANCE SUBSIDIARIES

Our insurance subsidiaries are subject to state regulations that limit their ability to pay dividends. During the nine months ended September 30, 2024, AHL and Triton paid extraordinary dividends to OneMain Financial Holdings, LLC (“OMFH”) of $70 million and $30 million, respectively. During the nine months ended September 30, 2023, AHL and Triton paid ordinary dividends to OMFH of $98 million and $58 million, respectively, and paid extraordinary dividends to OMFH of $67 million and $2 million, respectively. See Note 10 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for further information on these state restrictions and the dividends paid by our insurance subsidiaries in 2023.

OUR DEBT AGREEMENTS

The debt agreements which OMFC and its subsidiaries are a party to include customary terms and conditions, including covenants and representations and warranties. See Note 8 of the Notes to the Consolidated Financial Statements in Part II - Item 8 included in our Annual Report for more information on the restrictive covenants under OMFC’s debt agreements, as well as the guarantees of OMFC’s long-term debt.

Securitized Borrowings

We execute private securitizations under Rule 144A of the Securities Act of 1933, as amended. As of September 30, 2024, our structured financings consisted of the following:

(a) Issue Amount includes the retained interest amounts as applicable and the Current Note Amounts Outstanding balances reflect pay-downs subsequent to note issuance and exclude retained interest amounts.

(b) Inclusive of in-process replenishments of collateral for securitized borrowings in a revolving status as of September 30, 2024.

(c) On April 1, 2024, we assumed the following securitizations as part of the Foursight Acquisition. See Note 2 for additional information.

Revolving Conduit Facilities

We had access to 19 revolving conduit facilities with a total borrowing capacity of $6.9 billion as of September 30, 2024:

Credit Card Revolving VFN Facilities

We also had access to two credit card revolving VFN facilities with a total borrowing capacity of $300 million as of September 30, 2024:

OFF-BALANCE SHEET ARRANGEMENTS

We have no material off-balance sheet arrangements as defined by SEC rules, and we had no material off-balance sheet exposure to losses associated with unconsolidated VIEs at September 30, 2024 or December 31, 2023.