Genworth Financial Stock

Genworth Financial, Inc. (Genworth Financial), through its principal insurance subsidiaries, offers mortgage and long-term care insurance products.

Genworth Financial is the parent company of Enact Holdings, Inc. (Enact Holdings), a leading provider of private mortgage insurance in the United States through its mortgage insurance subsidiaries. Genworth Financial’s U.S. life insurance subsidiaries offer long-term care insurance and also manage in-force blocks of life insurance and annuity products that are no longer sold. Genworth Financial also has a start-up business whereby it offers fee-based services, advice, consulting and other products and services through CareScout, its indirect subsidiary.

Strategic Priorities

The company’s strategic priorities are to further strengthen the company’s legacy long-term care insurance financial and operational capabilities to address customer needs; and leverage the company’s unparalleled long-term care expertise to develop innovative aging care services and solutions.

The company is focused on advancing its senior care growth initiatives and sees meaningful opportunities to provide the products and services offered by CareScout to address the needs of elderly Americans, as well as their caregivers and families. The company launched the initial phase of the company’s CareScout services business in March 2023. This business includes a digital platform, where the company intends to curate a broad marketplace that matches consumers’ long-term care needs with a network of quality providers that the company is building. In addition to the digital platform and quality network offerings to consumers, employers and long-term care insurers, the discounts available through the network are expected to have the potential to further mitigate risk in the company’s legacy long-term care insurance block by reducing claims costs. The company’s CareScout services business is focused on home care providers as the majority of the company’s initial long-term care insurance claims begin with care in the home. The company is also working to build the foundation necessary to re-enter the long-term care insurance market through the company’s CareScout insurance business. As the company expands CareScout, there may be other potential future growth opportunities, such as expanding CareScout’s products and services to international markets.

Segments

The company operates through three operating segments: Enact; Long-Term Care Insurance; and Life and Annuities. In addition to the company’s three operating segments, the company reports certain of its results of operations in Corporate and Other.

Enact Segment

Through Enact Holdings and its mortgage insurance subsidiaries, the company provides private mortgage insurance products and services in the United States operates in all 50 states and the District of Columbia. Enact is engaged in the business of writing and assuming residential mortgage guaranty insurance. The insurance covers a portion of the unpaid principal balance of mortgage loans where the loan amount exceeds 80% of the value of the home (‘low down payment mortgages’ or ‘high loan-to-value mortgages’) and protects lenders and investors against certain losses resulting from nonpayment of loans secured by mortgages, deeds of trust or other instruments constituting a first lien on residential real estate. Private mortgage insurance facilitates the sale of mortgages to the secondary market, including to private investors, as well as the Federal National Mortgage Association (‘Fannie Mae’) and the Federal Home Loan Mortgage Corporation (‘Freddie Mac’). Fannie Mae and Freddie Mac are government-sponsored enterprises and are collectively referred to as the ‘GSEs.’ Credit protection and liquidity through secondary market sales allow mortgage lenders to increase their lending capacity, manage risk and expand financing access to prospective homeowners, many of whom are first time home buyers. At present, mortgage insurance products are primarily geared towards secondary market sales to the GSEs. Enact’s mortgage insurance products predominantly insure prime-based, individually underwritten residential mortgage loans.

Products and Services

Enact offers the following mortgage insurance products:

Primary Mortgage Insurance

Substantially all of Enact’s policies are primary mortgage insurance, which provides protection on individual loans at specified coverage percentages. Primary mortgage insurance is placed on individual loans at the time of origination and is typically delivered to Enact on a loan-by-loan basis. Primary mortgage insurance can also be delivered to Enact on an aggregated basis, whereby each mortgage in a given loan portfolio is insured in a single transaction after the point of origination.

Customers who purchase primary mortgage insurance select a specific coverage level for each insured loan. A customer may choose the coverage percentage established by a GSE in order to be eligible for purchase by that particular GSE or for loans not sold to the GSEs, the customer determines its desired coverage percentage.

Enact files premium rates, as required, with the insurance departments of the U.S. states and the District of Columbia. Premium rates cannot be changed after the issuance of coverage. Premium payments for primary mortgage insurance coverage are typically made by the borrower and are referred to as borrower-paid mortgage insurance. Loans for which premiums are paid by the lender are referred to as lender-paid mortgage insurance. In either case, the payment of premium to Enact is generally the responsibility of the insured. Premiums are generally calculated as a percentage of the original principal balance and may be paid on a monthly or annual basis, as a single premium paid at the time of mortgage origination or split, where an initial lump sum premium is paid at the time of mortgage origination in addition to subsequent monthly payments.

Pool Mortgage Insurance

Pool mortgage insurance transactions provide coverage on a finite set of individual loans identified by the pool policy. Pool policies contain coverage percentages and provisions limiting the insurer’s obligation to pay claims until a threshold amount is reached (known as a ‘deductible’) or capping the insurer’s potential aggregate liability for claims payments (known as a ‘stop loss’) or a combination of both provisions. Pool mortgage insurance is typically used to provide additional credit enhancement for certain secondary market mortgage transactions. Pool insurance generally covers the excess of the loss on a defaulted mortgage loan that exceeds the claim payment under the primary coverage, if such loan has primary coverage, as well as the total loss on a defaulted mortgage loan that did not have primary coverage. In another variation, generally referred to as modified pool insurance, policies are structured to include both an exposure limit for each individual loan, as well as an aggregate loss limit or a deductible for the entire pool. Enact has an insignificant amount of pool insurance in-force.

Enact also performs fee-based contract underwriting services for its customers. Contract underwriting services provide customers outsourced scalable capacity to underwrite mortgage loans. Enact’s underwriters can underwrite the loan on behalf of its customers for both investor compliance and mortgage insurance, thus reducing duplicative activities and increasing Enact’s ability to write mortgage insurance for these loans. Under contract underwriting agreement terms, Enact agrees to indemnify its customers against losses incurred in the event it makes material errors in determining whether loans underwritten by its contract underwriters meet specified underwriting or purchase criteria, subject to contractual limitations. As a result, Enact assumes credit and processing risk in connection with its contract underwriting services.

Distribution and Customers

Enact distributes its mortgage insurance products through a dedicated sales force located throughout the United States, including in-house sales representatives. Enact’s sales force utilizes a digital marketing program designed to expand its customer reach beyond traditional sales. Enact’s sales force primarily markets to financial institutions and mortgage originators that impose a requirement for mortgage insurance as part of the borrower’s financing.

Enact’s industry presence has enabled it to build active customer relationships with mortgage lenders across the United States. Enact’s customers are broadly diversified by size, type and geography and include large money center banks, non-bank lenders, national and local mortgage bankers, community banks and credit unions. Enact’s principal mortgage insurance customers are originators of residential mortgage loans who typically determine which mortgage insurer or insurers they will use for the placement of mortgage insurance written on loans they originate. For the year ended December 31, 2023, approximately 33% of Enact’s new insurance written was attributable to its largest five lender customers, of which 19% was attributable to its largest customer.

Competition

The U.S. Federal, State and Local Government Agencies

Enact and other private mortgage insurers compete for mortgage insurance business directly with the U.S. federal agencies, principally the Federal Housing Administration (‘FHA’) and the U.S. Department of Veterans Affairs (‘VA’), and to a lesser extent, state and local housing finance agencies.

Long-Term Care Insurance segment

The company’s Long-Term Care Insurance segment includes long-term care insurance products that are intended to protect against the significant and escalating costs of long-term care services provided in the insured’s home or assisted living or nursing facilities. The company offers individual long-term care insurance policies to customers who contact the company directly (subject to state availability); however, the company no longer accept applications for new group long-term care insurance policies but will accept new applications and issue new coverage certificates on current open group cases on certain group policy forms. The company established itself as a leader in long-term care insurance over 40 years ago and remain a leading insurer.

As part of the company’s strategy for its long-term care insurance business, and in connection with the company’s strategic priority to further strengthen the company’s legacy long-term care insurance business, the company has been implementing significant premium rate increases and associated benefit reductions on older generation blocks of business in order to ensure the continued self-sustainability of this business over time and reduce the strain on its earnings and capital. The company is also requesting premium rate increases and associated benefit reductions on newer blocks of business, as needed, some of which will be significant, to help bring these blocks closer to their original pricing.

Life and Annuities segment

The company services a variety of protection and retirement income products through the company’s principal U.S. life insurance subsidiaries. The company’s Life and Annuities segment includes traditional and non-traditional life insurance (term, universal and term universal life insurance, as well as corporate-owned life insurance and funding agreements), fixed annuities and variable annuities. The company has not actively sold its life insurance and fixed annuity products since 2016 and the company’s variable annuity products since 2011.

Corporate and Other

Corporate and Other includes startup results of the company’s CareScout business related to the company’s senior care growth initiatives.

On March 3, 2021, the company completed a sale of its entire ownership interest of approximately 52% in Genworth Mortgage Insurance Australia Limited, the company’s former Australian mortgage insurance business.

Operations and Technology

Service and support

Enact Holdings and its U.S. mortgage insurance subsidiaries have introduced technology enabled services to help their customers (lenders and servicers), as well as consumers (borrowers and homeowners). Enact Holdings heavily relies upon information technology, and a number of critical aspects are highly automated. The company’s U.S. life insurance subsidiaries heavily rely upon information technology to support and improve their overall operations. Enact Holdings and the company’s U.S. life insurance subsidiaries both accept insurance applications, issue approvals, process claims and reconcile premium remittance through electronic submissions. For Enact Holdings, in order to facilitate these processes, direct connections have been established with many of its customers’ and servicers’ systems to enable the selection of its mortgage insurance products and to allow for direct communication. Enact Holdings and the company’s U.S. life insurance subsidiaries also provide their customers secure access to their web-based portals to facilitate transactions and provide customers with access to their account information. Enact Holdings and the company’s U.S. life insurance subsidiaries regularly upgrade and enhance their systems and technology in an effort to achieve their goals of expanding their capabilities, improve productivity and enhance the customer experience.

Operating Centers

The company has established scalable, efficient operating centers for its U.S. life insurance subsidiaries in Virginia and for Enact Holdings in North Carolina. In addition, through an arrangement with an outsourcing provider, the company has a team of professionals in India and the Philippines who provide a variety of services primarily to the company’s U.S. life insurance subsidiaries and certain corporate functions, including data entry, transaction processing and functional support.

In June 2022, the company outsourced operational servicing of its life insurance and fixed annuity blocks to a third-party servicer. In connection with the outsourcing, the company will convert certain administrative systems to those used by the third-party servicer over the next few years, with a targeted completion date in 2026. There was no impact to the servicing of the company’s long-term care insurance products because they were not a part of the third-party outsourcing agreement.

Regulation

The company’s insurance operations are subject to a wide variety of laws and regulations. U.S. state insurance laws and regulations (‘Insurance Laws’) regulate most aspects of the company’s U.S. insurance businesses, and its U.S. insurers are regulated by the insurance departments of the states in which they are domiciled and licensed. The company’s non-U.S. insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are domiciled. The company’s insurance products and businesses are also affected by the U.S. federal, state and local tax laws, and the tax laws of non-U.S. jurisdictions. The company’s securities operations, including the company’s insurance products that are regulated as securities, such as variable annuities, are subject to the U.S. federal and state and non-U.S. securities laws and regulations. The U.S. Securities and Exchange Commission (‘SEC’), the U.S. Financial Industry Regulatory Authority, state securities authorities, and similar non-U.S. authorities regulate and supervise these products.

The Dodd-Frank Act established a framework of regulation of over-the-counter (‘OTC’) derivatives markets which requires the company to pledge highly liquid securities or cash to meet initial and variation margin requirements for most interest rate derivatives the company trades.

The New York State Department of Financial Services (‘NYDFS’) issued a circular letter in 2020 to New York domestic and foreign authorized insurers, which applies to certain of the company’s subsidiaries, stating that the NYDFS expects insurers to integrate financial risks related to climate change into their governance frameworks, risk management processes and business strategies, and that insurers should develop their approach to climate related financial disclosure. The company has initiated and continues to build upon a multi-phase climate risk management process.

The California Consumer Privacy Act of 2018 (the ‘CCPA’) is applicable to portions of the company’s business and was significantly amended by the California Privacy Rights Act of 2020 (‘CPRA’).

The company is required to file an annual certification of compliance with the NYDFS regarding the company’s cybersecurity program.

History

Genworth Financial, Inc. was founded in 1871. The company was incorporated in Delaware in 2003.