bank of america merrill lynch insurance conferences2.q4cdn.com/240635966/files/doc_events/investor...
Post on 05-Jun-2018
214 Views
Preview:
TRANSCRIPT
Investor Materials February 2010 0
Bank of America Merrill Lynch
Insurance Conference
February 23, 2010
©2010 Genworth Financial, Inc. All rights reserved.
Investor Materials February 2010 1
Forward-Looking StatementsThis presentation contains certain “forward-looking statements”
within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,”
“anticipates,”
“intends,”
“plans,”
“believes,”
“seeks,”
“estimates,”
“will”
or words of similar meaning and include, but are not limited to, statements regarding the outlook for Genworth Financial, Inc.’s (Genworth) future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including those discussed in the Appendix, as well as in the risk factors section of Genworth’s Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission (SEC) on March 2, 2009 and Genworth’s Quarterly Report on Form 10-Q, filed with the SEC on November 2, 2009. Genworth undertakes no obligation to publicly
update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Selected Operating Performance MeasuresAll financial data as of December 31, 2009 unless otherwise noted. For additional information, please see Genworth’s Fourth Quarter of 2009 earnings release and financial supplement posted at genworth.com.
For important information regarding selected operating performance measures, see the Appendix.
Unless otherwise stated, all references in this presentation to operating income should be read as operating income available to Genworth’s common stockholders.
This presentation should be used in conjunction with the accompanying audio or call transcript from the Bank Of America/Merrill Lynch Insurance Conference.
Investor Materials February 2010 2
Genworth --
Specialist Positioning
HomeownershipInvest Protect RetireProtection And Retirement Mortgage Insurance
Life InsuranceLong Term Care InsuranceWealth ManagementAnnuities & Supplemental ProductsInternational Lifestyle Protection
United StatesAustraliaCanadaEuropeSelect New Markets
Investor Materials February 2010 3
Levers For Improved Earnings & Returns
New Business With Improved Profitability
Risk Management & Loss Mitigation
Investment Portfolio Performance Optimization
Effective Capital Management & Capital Deployment
Investor Materials February 2010 4
Attractive New Business Profitability
20%+
New Business Pricing ROE
High Teens
Mid/Low Teens
Actions Resulting In Improved
Earnings
Sound Earnings With Improving
Dynamics
Canada MIAustralia MI
U.S. MI
Good
Underlying
Performance
Life Insurance
Wealth Management
Fixed Annuities
New Business Pricing ROEs Increased As A Result Of Pricing Actions, Changes In Product Structure Or New Product Introductions
Lifestyle Protection
Variable Annuities
Long Term Care
Investor Materials February 2010 5
De-risk
Diversify
Reinvest Excess Cash
Decreased Exposure To Higher Risk SectorsDisciplined Asset-Liability Management Exited Selected Limited Partnerships
Reducing Larger ExposuresPurchasing In Select SectorsAdding High-Quality Names Where Exposure Low
Rates Accretive To Portfolio YieldReinvest An Additional $1.0B To $2.0B By Mid-2010Primarily In R&P With Some International
Optimize Investment Portfolio
Investor Materials February 2010 6
Risk Management & Loss MitigationPrice Increases/Contract Restructuring
AustraliaLifestyle ProtectionU.S. Mortgage Insurance
Loan Modifications & RescissionsU.S. Mortgage InsuranceInternational Mortgage Insurance
Capital OptimizationCapital Efficient New Products
XXX/AXXX In Force Reserve Funding
Investment StrategiesDerivatives & Hedging ProgramsSales & Repositioning
Investor Materials February 2010 7
Sound Capital & Liquidity PositionHolding Company
U.S. Retirement & Protection
International
No Long-Term Debt Maturing Until Mid-2011
Current Cash: $1.1B1
--
Increased Significantly In 2009
Statutory Earnings Build & Debt Market Opportunities
Flexibility With 57.5% Stake In GNW MI Canada --
No Current Plans To Monetize
U.S. Mortgage Insurance
RBC Ratio ~390%2
Dividend Source In ’11
Self-Contained Capital Plan
RTC Ratio 14.6:12
Stacking Options Available
Sound Capital Ratios
Excess Capital Build
Dividend Source In ’10
1As Of February 1, 20102As of December 31, 2009; Estimate Based On Timing Of Statutory Filings
Investor Materials February 2010 8
Targeting GNW 10%+ Operating ROE By ’12
Levels Perspectives On ROE Targets4Q091
International 12%Return To Mid Teens Steadily Through 2012High Teens Longer Term
Retirement & Protection 7%
Return To 10% ROE By 2012Low/Mid-Teens Longer Term
U.S. MI (22)%Qtrly. Op Income Positive By Mid ’1120%+ ROE Business Model Over Time
14Q09 Annualized
Investor Materials February 2010 9
The Case For GenworthWell Positioned For Sound Growth & Market Recovery
Strong Capital & Liquidity
Active Risk Management & Loss Mitigation
International Strength & Improving U.S. Retirement & Protection
U.S. MI Progression With Self-Contained Capital Plan
Optimizing Investment Portfolio & Cash Reinvestment
Clear Path For Earnings Expansion & ROE Growth
Investor Materials February 2010 10
2009Operating Income
Retirement & Protection Overview($MM)
Long Term Care
Solid New Block PerformanceOld Block Rate Increase Lifting ResultsNew Business Market RecoveryCombination Products
Differentiated Service Driving Strong Flows Annuities1 Targeted New Business Offerings
Life Insurance
424
Main Street FocusSuccessful New Product LaunchesDistribution PenetrationService Ease
Wealth Management
1Comprised Of Fee Based & Spread Based Retirement Income
Investor Materials February 2010 11
Source: SRI MacroMonitor 2007. Net Worth Excludes Primary Residence.
Affluent
Mass Affluent & Middle Mkt
Lower Incomes
Super Affluent Near Retirees
0.3%
3%
45%
51%
$50K-$250K Avg. Income
$285K Avg. Net Worth
All R&P Products
Wealth MgmtWorking Families
U.S. Households Target Consumer Segments
Main Street Market Focus
Consumers Desire BalanceProtection & CostAdvice & Control
Security & Growth
Investor Materials February 2010 12
Main Street Growth Opportunity Opportunity To Double LTC Mkt.
Adult Population
Low
Hig
hW
ealth
Current Addressable
Market
43MM
Goal: Expand Addressable
Market By 50MM
Buyers
7MM
Younger Older
Sources: U.S. Census, Insurance Advisory Board
% Ownership By Family Income
Median Coverage1.4X 2.1X 2.1X 2.0X
56%
84% 87% 90%
<$75K $200K+<$200<$99K
Industry Recommended Coverage: 5X-10X Income
“Main Street”
Life Under-Insured
Investor Materials February 2010 13
2 4 6 8 10 12 14 16 18 20
New Life Product Adoption
Weeks In Market
Competitive PlatformStrong Submitted Trends
Older ProductsNew Products
Total Policies Per Week
ColonySM
Term UL & GenGuardTM
UL
Submits Exceed Prior Launches
Good Agency Adoption
Key Driver Of 2010 Sales
Strong Brokerage General Agency Relationships --
500+
Consistent Mortality Experience
Cost Efficient Operating Platform~30% Less Than Industry Average
Service Support & Ease
Investor Materials February 2010 14
300,000
500,000
700,000
900,000
1,100,000
1,300,000
1995 1997 1999 2001 2003 2005 2007 2009
Long Term Care --
Leveraging ExpertiseStrong ExpertiseSizable In Force1
Distribution Leadership
35 Years Of Morbidity Experience
Pricing, Product Design & Underwriting Advantages
Forward Investing Disciplines
Care Coordination Benefits
Specialist Career Sales Force
Independent Channel Wholesaling
Affinity --
e.g., AARP
Growing Group Presence
Scale AdvantagesProcess More Business Than Six
Of Top 10 Carriers Combined
300+ Dedicated Claims Specialists
1Includes Majority Of LTC Individual Policies
In F
orce
Pol
icie
sLabel on chart thru 2009
Investor Materials February 2010 15
Independent Advisor Wealth Management
353Independent
Other Channels
1,391
12/31/08
1,038
Genworth Ranked #2 TAMP1
Source: Cerrulli Associates
Industry Assets Under ManagementManaged Account Market
Open Architecture Platform
Asset Allocation & Rebalancing
Marketing & Technology Services
Broad Value Proposition
How We Differentiate
“Sailing & Rowing”
Framework
Operational Ease & Support
Practice Management Services
Penetrate Advisor Value Chain
1Turnkey Asset Management Program
($B)
Investor Materials February 2010 16
R&P Product Portfolio Outlook
Sources: LIMRA, VARDS, Cerrulli & Management Estimates
Life
LTC
Managed
Accounts
Targ
eted
Bus
ines
ses
Lead
ersh
ipB
usin
esse
sTarget New Business Growth/Returns Vs. Market
Moderate
Growth
Challenged
Industry Growth
Good
Growth
Outperform
Outperform
Outperform
Variable
Annuities
Fixed
Annuities
Med Supp
Moderate
Growth
Lower
Growth
Steady Growth
Niche
In Line
Managing For ROE
In Line
12%-14% ROE
15%+ ROE
15%+ ROE
15%+ ROE
10%+ ROE
12%-14%+ ROE
Investor Materials February 2010 17
2009Operating Income
International Overview($MM) 385
Australia MIStable Performance & Recovered Housing Mkt~20% Price Increase In 3Q09 …
+17% In 2008
Lifestyle Protection Early Improvement From Price/Product ChangesOther Int’l MI Europe MI …
Small & Well Contained
Canada MI1Stable Performance & Recovered Housing MktRe-Capturing Share
1Canada MI Had An Additional $59MM Of Operating Income Attributable To Noncontrolling Interests In 2009
Investor Materials February 2010 18
Limited Reliance On Capital Markets
Active Regulatory Oversight
Strong Credit Culture
High Quality Borrowers
Mortgage Interest Not Tax Deductible
Lender-Friendly Legislation
Differentiated Housing Market Performance
U.S.1
4.76%
AUS1
0.48%
CAN1
0.43%1994 1997 2001 2005 3Q09
5%
0%
1%
2%
3%
1Loans In Arrears 90+ Days. For Australia, Only Includes Loans On Banks’ Balance Sheets Sources: Reserve Bank Of Australia (3Q09) & Management Estimates, Canadian Bankers Association (3Q09), U.S. Mortgage Bankers Association & Management Estimates For U.S.
Canada/Australia Characteristics Mortgage Delinquency Rate
Investor Materials February 2010 19
Home Price Appreciation Trends
Source: Canadian Real Estate Association; RP Data & Management Estimates1End Of Period Unemployment Rate
Observations
CanadaAustralia
300
350
400
450
500
550
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q093.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%Median Home PriceUnemployment Rate
Home Prices (AUS$K) Unemployment1
200
220
240
260
280
300
320
340
360
4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q095.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%Average Home PriceUnemployment Rate
Home Prices (CAN$K) Unemployment1
Home Prices Have RecoveredUnemployment Stabilized Government Stimulus Withdrawals
Investor Materials February 2010 20
Australia Mortgage Insurance
86.8($B)
2009
2008
2007
2006
2005
2004 &
Prior
Bulk
84%
80%
75%
66%
60%
~54%
~48%
Effective LTV1
1Book Year Risk In Force Based Upon Flow. Effective LTV Estimated Based On Accumulated Regional HPA.
PositioningRisk In Force By VintageDeep/Consolidating Lender Relationships
Eliminated >95% LTV Products In ’08
Strong Underwriting & Rate Buffers
~20% Price Increase 3Q09; +17% In ’08
Market Duopoly
12/31/09
Growth OpportunityCustomer Value Chain Penetration
Targeted Share Penetration
Slowing Originations As Government Withdraws Stimulus
Investor Materials February 2010 21
Canada Mortgage Insurance
74.7($B)
2009
2008
2007
2006
2005
2004 &
Prior
Bulk
92%
89%
87%
74%
64%
~49%
~51%
Effective LTV1
1Book Year Risk In Force Based Upon Flow. Effective LTV Estimated Based On Accumulated Regional HPA.
PositioningRisk In Force By VintageIntegrated In Lender Value Chain
Strong Underwriting
Eliminated >95% LTV & 40 Year Amortization In ’08
Increased Lender Training & QA
Optimize Capital
12/31/09
Growth Opportunity
Origination Market Normalizing
Deepen Lender Relationships
Differentiate On Service
Focus On Share Recapture
Investor Materials February 2010 22
Lifestyle Protection($MM)
Accident & Sickness Life Involuntary UnemploymentOther
Coverage Type (2009) Operating Income1
Good Early Results From Repricing & Modification Of Contract Terms
Rate Of Change In Unemployment Claims Slowing
Consumer Lending Remains Low
High Unemployment Pressures Claims Durations
Earned Premiums
20082009
152
56
($MM)
26%
30%
31%
13%
1Includes Operating Income Associated With Mexican Operations
Investor Materials February 2010 23
Actively Manage Through A Challenging Housing Market
Loss Mitigation Focus
Self-Contained Capital Management Basis
Grow Highly Profitable New Business
Active In Regulatory Reform
U.S. Mortgage Insurance Portfolio
($B)
12/31/09
31.7
Sub-Prime
Flow-Prime
Bulk
Primary Risk In Force
Investor Materials February 2010 24
15.8
19.1 20.5 21.523.1 22.9
20.0 18.9
U.S. MI Flow Delinquency TrendsAvg. Reserve Per Delinquency($K) (%)
1Q08
8.0
4Q083Q08
21.924.2 24.5
1Q09
10.0
2Q09
10.4
2Q08
2.8 8.4 11.3 14.2 7.2 8.2(Count, K)
3Q09
12.6
14.4
Change In Delinquencies
4Q09
7.3
7.3
Two Different Housing Cycles
1Q08 4Q083Q08 1Q09 2Q092Q08 3Q09 4Q09
Bad Products & OriginatorsSpecial Products & Sand States Drive DelinquenciesOn The Decline
Standard Products/National BasisUnemployment Drives DelinquenciesMore Predictable Characteristics
Investor Materials February 2010 25
Rising U.S. MI Benefits From Loss MitigationLoss Mitigation Experience Modifications Pipeline Building
Mix Shifting To Modifications $35MM HAMP Benefit In 4Q09
2009 2010E
847
2009 Level Or Above
Modifications1
Investigations/
Rescissions
($MM)
1Modifications Include Workouts & Claims Management2Home Affordable Modification Program
1Q09 2Q09 3Q09 4Q09
4,0004,500
HAMP2
Trial Period StartsHAMP Modifications CompletedNon Cure WorkoutsCure Workouts
4,600
6,600
10,800
9,100
(# Of Loans)
2,200
Investor Materials February 2010 26
U.S. Mortgage Insurance Loss TrendsBulk LossesFlow Losses
535484
385
219274
4Q08 1Q09 2Q09 3Q09 4Q09
1Q09
2Q09
3Q09
4Q09
Loss Mit.1
145
188
224
290
Reinsurance
120
77
49
39
Net Losses
364
308
170
235
($MM)
4Q08 1Q09 2Q09 3Q09 4Q09
176
3839 63 36
($MM)
1Includes Flow & Bulk
($MM) (RIF, $MM)
2
2Performing At <3% Delinquency Rate
3Q08
4Q09
1Q10E
Portfolio Bulk
493
-
-
GSE Alt-A
339
295
65
FHLB/Other
512
476
475
Total RIF
1,344
771
540
Investor Materials February 2010 27
12
14
16
U.S. MI Self-Contained Capital Plan
ContingencyReserves
1.0
($B)
Surplus0.8
1.8
9/30/09
15.1:1
1Q09
Current Operating Assumptions18% Peak-To-Trough Home Price Decline FHFA1
Index & 10.3% Unemployment
Ability To Absorb Home Price Declines Of 35% To 38% In FHFA Index Peak-To-
Trough & 14% Unemployment
Statutory Position Risk To Capital Ratio
14.8:1 14.6:1
13.8:1
2Q09 3Q09 4Q09E12/31/09
1Federal Housing Finance Agency
Investor Materials February 2010 28
Expect Industry To Regain Share From FHA In 2010
Traditional MI Strengths Demonstrated In Current Cycle
Anticipate Multiple Proposals For GSE Reform
0%
10%
20%
30%
40%
1Q04 1Q05 1Q06 1Q07 1Q08 1Q09
Industry View --
Increase MI OpportunityMarket Share Trends
FHA
Industry Flow MI
1Total Single Family First Lien Outstanding, Fannie Mae Economics & Mortgage Market Analysis, October 2009
4Q09
Investor Materials February 2010 29
U.S. Mortgage Insurance --
Looking Ahead
2008
Thru 1H09
2H09 Thru
2011
Capital & Liquidity
Loss Trends
Loss Mitigation
Growth & Margin
Defensive Positioning
Capital Ratio Flexibility
Losses Moderating From 2005 –
2007 Book
Expect Peak In Mid-2010
Internal Modifications
& Rescissions
Addition Of Federal
Modifications
Limiting MSAs
Low Production
Increasing
Share
35%+ Price Increase
20%+ Pricing ROE
Time Period
Pressure From
2005 –
2007 Book Years
Investor Materials February 2010 30
Investment Portfolio Overview$68.5B
12/31/09
Cash/Cash Equivalents & Short-Term Investments
Commercial Mortgage Loans
Investment Grade Structured Securities
Non Inv Grade Fixed Maturities
55%Investment Grade Corporate & Municipal Fixed Maturities
1Other Includes: Bank Loans, Trading Securities & Derivatives
Sec. Lend, Policy Loans, Other1
5%
12%
10%
1%
6%Ltd. Partnerships & Equities
11%
Key PerspectivesActively Reinvesting Cash
High Quality Portfolio
Strong Commercial Real Estate
Declining Loss Trends
Investor Materials February 2010 31
Declining Impairments & Losses
4Q094Q08 1Q09 2Q09($MM, After-Tax)
GAAP: Net Realized Gains (Losses)1
Structured Impairments
Realized Gains (Losses)
Corporate Impairments
Other Impairments
(538)
(410)
(117)
1Exclude Net Investment Gains (Losses) Related To Derivatives, Trading Securities, Bank Loans & Held-For-Sale Mortgage Loans2Include $26MM Loss From Sale Of Limited Partnerships
3Q09
(99) (69)2
Fourth Quarter TrendsLow Corporate Impairments Reflect Reduced RiskStructured Impairments Primarily Sub-Prime & Alt-A RMBS
Investor Materials February 2010 32
The Case For GenworthWell Positioned For Sound Growth & Market Recovery
Strong Capital & Liquidity
Active Risk Management & Loss Mitigation
International Strength & Improving U.S. Retirement & Protection
U.S. MI Progression With Self-Contained Capital Plan
Optimizing Investment Portfolio & Cash Reinvestment
Clear Path For Earnings Expansion & ROE Growth
Investor Materials February 2010 34
Commercial Mortgage Loan ComparisonMarket Concerns Portfolio Genworth Portfolio
Portfolio Diversified By Property Type, Geography & TenancyConcentrated Positions
Construction Loans No Construction Loans
Bullet Loans Amortizing Loans
Inflated Assumptions (Cap Rates, Vacancies, Rent Rolls)
Conservative Assumptions --
In Force Cash Flow Underwriting
LTV At Origination > 80%
Weak Amortization
Average Current LTV Of 63%
Amortizing Portfolio
High Rollover Risk Low Rollover Risk
Low Debt Service Coverage <1.2X High Debt Service Coverage 1.8X
Investor Materials February 2010 35
Total Commercial Real Estate Holdings
CommercialMortgage
Loans66%
CMBS32%
LimitedPartnerships
2% Office
27%
Industrial
26%
Retail
28%
Apartment
11%
Mixed Use/Other
8%
Total
100%
Property Type
Portfolio Diversified By Property Type, Geography & Tenancy
Low Commercial Real Estate Limited Partnership Exposure Of $201MM
Total Portfolio $11.3 Billion Commercial Mortgage Loans
Investor Materials February 2010 36
Commercial Mortgage Loan Portfolio
Annual Revaluation
On-Going Surveillance
Whole Loan 93%
B-Note 4% Mezzanine 3%Low Average Loan Size ~$4MM
Low 60-Day Delinquencies (<1.0%)
Average Occupancy 90%
Majority Fixed Rate Whole Loans Low Refinance Risk As Only 4% Matures In 2010 & 6% In 2011
Limited B-Note/Mezzanine HoldingsSupports Floating Rate LiabilitiesNo Maturities In 2010
Total Portfolio $7.5 Billion Comments
Surveillance Practices
Investor Materials February 2010 37
Commercial Mortgage Loan Exposure Detail
89% Fixed Rate Mortgages, 11% Floating Rate Mortgages
Retail 1.81X
DSCR2
Office 2.04X
Industrial 1.75X
Apartment 2.24X
Hotel 4.66X
Other 2.46X
Property Types
Apartment11%
Hotel6%
Industrial26%
Office27%
Other2% Retail
28%
Total 2.33X
1Loan-To-Value Based On Current Valuation.2Debt Service Coverage Ratios Include Both Fixed (1.8x) & Floating Loans (2.4).
63%
LTV1
65%
60%
60%
81%
51%
63%
Investor Materials February 2010 38
Commercial Mortgage Portfolio Indicators
<1.0 1-1.25 1.25-1.5 1.5-2 >2.0
2008 2009
1Chart Excludes Floating Rate Loans Which Have Higher (Better) Ratios
Debt Service Ratios Remain Strong, But Reflect Declines In Property Income
Strong Delinquency Performance
Bill
ions
Debt Service Ratios --
Fixed1 60+ Day Delinquency
0.5
1.0
1.5
2.0
2.5
3.0
0%1%2%3%4%5%6%7%
4Q08 1Q09 2Q09 3Q09 4Q09
CMBS (Trepp)
Genworth Mortgages
609bps
90bps
Investor Materials February 2010 39
Commercial Mortgage Loan-To-Value Detail
<50%
50-60%
>75%
60-70%
17%70-75% 17%
22%26%
18%
Positioned To Withstand Property Value Declines
Average LTV Of 63%High Debt Service Coverage Ratio Of 1.81X For Fixed Rate Loans; 2.33X For The Total Portfolio
Limited Interest Only Exposure
Loan ValuationPrimarily Direct Cap Valuation Based On Existing Cash FlowCompleted Annual Loan Revaluation In 3Q09Genworth Valuation At Origination On Avg 10% Below Appraised Value
Valuations Based On 2009 Property Values
Investor Materials February 2010 40
Market Value -
$3.6 Billion($MM)
AAA 1,943 338 336 120 20 2,757AA 52 63 85 127 -- 327A 69 36 54 54 -- 213BBB 50 12 41 33 -- 136<BB 57 10 54 63 -- 184Total
2,171
459
570
397
20
3,617BV
2,312
583
851
638
20
4,404
2004 &Prior
2005 2006 2007AAA
AA
A
<BB
BBB
Commercial Mortgage-Backed Securities
Note: Current Ratings As 12/31/09
2009
Highly Rated Portfolio• 85% AAA/AA• 95% Investment Grade
• 73% ’05 Vintage & Prior
• Majority CMBS Well Insulated From Stress Life-Time Loss Estimates; 59% Agency Or 4X Stress Loss Coverage
Total
4%5%
76%
9%6%
Investor Materials February 2010 41
CMBS Stress Testing
59% Of Portfolio Can Withstand ≥
4.0X Stress Lifetime Loss Estimates
Coverage Declining Due To Rising Stress Lifetime Loss Estimates
Subordination Levels Provide Loss Cushion
Stress Loss Estimates Expected To Stabilize1Over The Lifetime Of The Securities. Coverage: CMBS Subordination/Deal Stress Loss. Some Deals Are Not Covered By All Default Models; Only Property & Portfolio Research Data Used For Large Loan Deals. Charts Exclude Interest-Only & Rake Bonds.
2Q09 3Q09 4Q09Conduit Stress Loss Rate
Market Stress Loss Forecasts GNW CMBS Stress Test Results
Conclusions
Average
8.4%
10.4%
11.3%2007
12.9
16.1
17.72006
10.7
12.8
13.72005
6.7
8.5
9.4≤
2004
3.4
4.4
4.4
2Q09 3Q09 4Q09
GNW Portfolio %Stress Loss Coverage1
Agency & ≥
4.0X 71% 66% 59%<4.0X
29
34
41<2.0X
5
10
11<1.2X
1
3
4
42Investor Materials February 2010
0%
5%
10%
15%
20%
Dec-05 Dec-06 Dec-07 Dec-08 Dec-09
Outperformed U.S. MI Peers Through Cycle
1Data From 8Ks, 10Qs & Supplements Of Peers & Company Reported Through Feb. 18, 20102Based On Total RIF3As Of 1/1/2010 FHLB Is 71% Of Total Bulk RIF & Is Performing At <2% Delinquency Rate4Risk To Capital Estimate 5Pre-Tax Operating Basis6Excludes GNW; Radian Added December 2008
Industry6
Genworth
Delta
Key Performance Metrics1 Industry Primary Delq
Rates
Peers 1 2 3 4 GNW
ARM2
(< 5 Yrs)
13%
8%
9%
6%
3%
Alt-A2
12%
13%
17%
13%
4%
Bulk RIF
NA 12%
13%
9%
2%3
Geographic2
California
8%
12%
8%
7%
5%
Florida
8%
9%
10%
8%
8%
RTC4
19.4
16.1
22.0
23.1
14.6
Net Loss ($B)
(3.6)
(1.6)
(1.7) (1.4)5
(0.8)
(3Q07-4Q09)
43Investor Materials February 2010
Forecast U.S. MI Delinquency Peaks By Book2006-2007 Books Expected To Peak In 2010
0
5,00010,000
15,000
20,00025,000
30,000
35,00040,000
45,000
2007
2008
20062004
2005
2009
Tota
l Del
inqu
enci
es
Mid-2010Source: Management Estimates
Investor Materials February 2010 44
This presentation contains selected operating performance measures including ''sales," "assets under management" and "insurance in force" or "risk in force" which are commonly used in the insurance and investment industries as measures of operating performance.
Management regularly monitors and reports the sales metrics as a measure of volume of new and renewal business generated in a period. Sales refer to (1) annualized first-year premiums for term life insurance, long term care insurance and Medicare supplement insurance; (2) new and additional premiums/deposits for universal life insurance, linked-benefits, spread-based and variable products; (3) gross and net flows, which represent gross flows less redemptions, for the wealth management business; (4) written premiums and deposits, gross of ceded reinsurance and cancellations, and premium equivalents, where the company earns a fee for administrative services only business, for lifestyle protection insurance business; (5) new insurance written for mortgage insurance, which in each case reflects the amount of business the company generated during each period presented; and (6) written premiums, net of cancellations, for the Mexican insurance operations. Sales do not include renewal premiums on policies or contracts written during prior periods.
The company considers annualized first-year premiums, new premiums/deposits, gross and net flows, written premiums, premium equivalents and new insurance written to be measures of the company's operating performance because they represent a measure of new sales of insurance policies or contracts during a specified period, rather than measures of the company's revenues or profitability during that period.
Management regularly monitors and reports assets under management for the wealth management business, insurance in force and risk in force. Assets under management for the wealth management business represent third-party assets under management that are not consolidated in the company’s financial statements. Insurance in force for the life insurance, international and U.S. mortgage insurance businesses is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. Risk in force for the international and U.S. mortgage insurance businesses is a measure that recognizes that the loss on any particular mortgage loan will be reduced by the net proceeds received upon sale of the underlying property. The company considers assets under management for the wealth management business, insurance in force and risk in force to be measures of the company’s operating performance because they represent measures of the size of the business at a specific date, rather than measures of the company’s revenues or profitability during that period.
This presentation also includes a metric related to loss mitigation activities for the U.S. mortgage insurance business. The company defines loss mitigation activities as rescissions, cancellations borrower loan modifications, repayment plans, lender- and borrower-titled pre-sales and other loan workouts and claim mitigation actions. Estimated savings related to rescissions are the reduction in carried loss reserves, net of premium refunds and reinstatement of prior rescissions. Estimated savings related to loan modifications and other cure related loss mitigation actions represent the reduction in carried loss reserves. For non-cure related actions, including pre-sales, the estimated savings represent the difference between the full claim obligation and the actual amount paid. The company believes that this metric helps to enhance the understanding of the operating performance of the U.S. mortgage insurance business.
Definition Of Selected Operating Performance Measures
Investor Materials February 2010 45
This presentation 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 the company’s future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following:Risks relating to the company’s businesses, including downturns and volatility in equity and credit markets, downgrades in the company’s financial strength or credit ratings, interest rate fluctuations and levels, adverse capital and credit market conditions, the valuation of fixed maturity, equity and trading securities, defaults, downgrade or other events impacting the value of the company’s fixed maturity securities portfolio, defaults on the company’s commercial mortgage loans or investments in commercial mortgage-backed securities, goodwill impairments, the soundness of other financial institutions, inability to access the company’s credit facilities, an adverse change in risk-based capital and other regulatory requirements, insufficiency of reserves, legal constraints on dividend distributions by subsidiaries, competition, availability, affordability and adequacy of reinsurance, default by counterparties, loss of key distribution partners, regulatory restrictions on the company’s operations and changes in applicable laws and regulations, legal or regulatory investigations or actions, the failure or any compromise of the security of the company’s computer systems and the occurrence of natural or man-made disasters or a pandemic; Risks relating to the Retirement and Protection segment, including changes in morbidity and mortality, accelerated amortization of deferred acquisition costs and present value of future profits, reputational risks as a result of rate increases on certain in-force long-term care insurance products, medical advances such as genetic research and diagnostic imaging, and related legislation, unexpected changes in persistency rates, ability to continue to implement actions to mitigate the impact of statutory reserve requirements and the failure of demand for long-term care insurance to increase as the company expects; Risks relating to the International segment, including political and economic instability, foreign exchange rate fluctuations, unexpected changes in unemployment rates, unexpected increases in mortgage insurance default rates or severity of defaults, decreases in the volume of high loan-to-value international mortgage originations, competition with government-owned and government-sponsored enterprises offering mortgage insurance and changes in regulations; Risks relating to the U.S. Mortgage Insurance segment, including increases in mortgage insurance default rates or severity of defaults, continued investigations in insured U.S. mortgage loans and rescission of coverage, the extent to which loan modifications and other similar programs may provide benefits to the company, unexpected changes in unemployment rates, further deterioration in economic conditions or a decline in home prices, changes to the role or structure of Freddie Mac and Fannie Mae, competition with government-owned and government-sponsored enterprises offering mortgage insurance, changes in regulations that affect the U.S. mortgage insurance business, the influence of Fannie Mae, Freddie Mac and a small number of large mortgage lenders and investors, decreases in the volume of high loan-to-value mortgage originations or increases in mortgage insurance cancellations, increases in the use of alternatives to private mortgage insurance and reductions by lenders in the level of coverage they select, the impact of the use of reinsurance with reinsurance companies affiliated with mortgage lending customers, changes in legal actions under Real Estate Settlement Practices Act of 1974 and potential liabilities in connection with the company’s U.S. contract underwriting services; Other risks, including the possibility that in certain circumstances the company will be obligated to make payments to General Electric Company (GE) under the tax matters agreement with GE even if the company’s corresponding tax savings are never realized and payments could be accelerated in the event of certain changes in control and provisions of the certificate of incorporation and bylaws and the tax matters agreement with GE may discourage takeover attempts and business combinations that stockholders might consider in their best interests; andRisks relating to the company’s common stock, including the suspension of dividends and stock price fluctuation.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
Cautionary Note Regarding Forward-Looking Statements
top related