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Genworth Financial’s Balanced Approach to Growth and Shareholder Value

Overview Genworth Financial is a leading provider of mortgage and long-term care insurance products in the United States. The company operates through three main segments: Enact (mortgage insurance), Long-Term Care Insurance, and Life and Annuities. Genworth also has a start-up business called CareScout that offers aging care services and products.

Genworth maintains control of its publicly traded mortgage insurance subsidiary, Enact Holdings, which provides the majority of the company’s revenue and profits. Genworth’s legacy life insurance and annuity businesses are managed on a standalone basis, relying on their own capital and reserves to meet policyholder obligations.

Strategic Priorities Genworth’s key strategic priorities are:

1. Creating Shareholder Value: Genworth is generating value for shareholders through Enact’s growing market position and capital returns. Enact provided $76 million to Genworth in the first quarter, which Genworth plans to use for strategic initiatives, share repurchases, and debt reduction.

2. Maintaining Self-Sustaining Legacy Businesses: Genworth is focused on making its long-term care insurance, life insurance, and annuity businesses self-sustaining through in-force rate actions and prudent management. The company estimates it has achieved $31.3 billion in cumulative economic benefit from long-term care insurance rate increases since 2012.

3. Driving Growth through CareScout: Genworth is investing in its CareScout business to develop innovative aging care services and insurance products. CareScout Services expanded its provider network by 10% in the first quarter and saw a 34% increase in customer matches. Genworth plans to invest $45-$50 million in CareScout Services in 2025. The company also plans to launch a new long-term care insurance product, CareScout Care Assurance, later this year, which it will capitalize with $75 million.

Financial Performance In the first quarter of 2025, Genworth reported net income of $54 million and adjusted operating income of $51 million, compared to $139 million and $85 million respectively in the prior year period. The decrease was primarily driven by the following:

Enact Segment

• Enact’s adjusted operating income increased slightly due to higher net investment income and premiums, partially offset by a lower reserve release compared to the prior year.
• Enact’s mortgage insurance portfolio remained strong, with a primary persistency rate of 84% and $9.8 billion of new insurance written, though this was down 7% from the prior year period.
• Enact’s loss ratio increased to 12% from 8% in the prior year due to a lower reserve release, though new delinquencies remained manageable.
• Enact maintained a robust capital position, with a PMIERs sufficiency ratio of 165% as of March 31, 2025.

Long-Term Care Insurance Segment

• The Long-Term Care Insurance segment swung to an adjusted operating loss of $30 million from income of $3 million in the prior year, primarily due to lower limited partnership income and lower renewal premiums.
• Genworth continues to execute on its multi-year long-term care insurance rate action plan, estimating a cumulative economic benefit of $31.3 billion from approved rate increases since 2012.

Life and Annuities Segment

• The Life and Annuities segment reported an adjusted operating loss of $33 million, compared to a loss of $15 million in the prior year period.
• The life insurance business saw a larger adjusted operating loss due to more unfavorable mortality experience.
• Fixed annuity adjusted operating income decreased primarily from lower net investment spreads as the block runs off.

Corporate and Other

• The adjusted operating loss in Corporate and Other improved to $23 million from $38 million in the prior year, primarily due to the timing of certain tax items.

Investments and Capital Genworth’s investment portfolio remained high quality, with 97% of fixed maturities investment grade as of March 31, 2025. Net investment income declined 5% in the quarter due to lower income from limited partnerships and policy loans.

Genworth Holdings, the parent company, had $211 million in unrestricted cash and cash equivalents as of March 31, 2025, including $98 million in advance cash payments from subsidiaries. Genworth Holdings received $76 million in capital returns from Enact Holdings during the quarter.

Genworth’s U.S. life insurance subsidiaries maintained a strong consolidated risk-based capital ratio of approximately 304% as of March 31, 2025. Enact’s PMIERs sufficiency ratio was 165% as of the same date.

Outlook and Risks Genworth faces several key risks and uncertainties going forward, including:

• Inability to successfully launch new CareScout products and services
• Failure to achieve desired long-term care insurance rate increases and/or benefit reductions
• Inaccurate assumptions or changes in estimates leading to inadequate reserves
• Liquidity challenges due to limited dividends from Enact Holdings
• Adverse changes to mortgage insurance industry requirements or government programs
• Macroeconomic volatility, including changes in interest rates, inflation, and trade policy
• Litigation, regulatory actions, and other operational risks

To mitigate these risks, Genworth will need to carefully manage its legacy insurance blocks, execute on its CareScout growth initiatives, and maintain a disciplined approach to capital allocation. Returning capital to shareholders through Enact dividends and share repurchases will also be an important part of the company’s strategy going forward.

Overall, Genworth appears to be taking a balanced approach, investing in new growth opportunities while also shoring up its legacy insurance businesses and returning capital to shareholders. The success of this strategy will depend on Genworth’s ability to navigate the various challenges facing its different business segments.